Good morning. My name is Emily, and I will be your conference operator today. At this time, I would like to welcome everyone to Avantor's Fourth Quarter and Full Year 2022 Earnings Results Conference Call. [Operator Instructions] I would now like to turn the call over to Christina Jones, Vice President of Investor Relations. Mrs. Jones, you may begin the conference.

Good morning. Thank you for joining us. Our speakers today are Michael Stubblefield, President and Chief Executive Officer; and Tom Szlosek, Executive Vice President and Chief Financial Officer. The press release and a presentation accompanying this call are available on our Investor Relations website at ir.avantorsciences.com. A replay of this webcast will also be made available on our website after the call. Following our prepared remarks, we will open the line for questions. During this call, we will be making some forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe or anticipate may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings. Actual results might differ materially from any forward-looking statement that we make today. These forward-looking statements speak only as of the date that they are made. We do not assume any obligation to update these forward-looking statements as a result of new information, future events or other developments. This call will include a discussion of non-GAAP measures. A reconciliation of these non-GAAP measures can be found in the supplemental disclosures package on our IR website. With that, I will now turn the call over to Michael.

Thank you, CJ, and good morning, everyone. I appreciate you joining us today. I'm starting on Slide 3. Fourth quarter results were in line with the guidance provided during our Q3 call. Our business grew 2.7% on a core organic basis, and we expanded adjusted EBITDA margin by over 60 basis points as customer demand and supply chains continue to normalize, as we transition from the COVID-19 pandemic, the temporary headwinds we have faced largely played out as expected. For the full year, we delivered core organic revenue growth of 6% at the high end of our long-term target of 4% to 6%, with growth across all geographies and product groups. We expanded adjusted EBITDA margin by 110 basis points, above our long-term target of 50 to 100 basis points and delivered $1.41 of adjusted EPS, outpacing our updated guidance of $1.38 to $1.40. We continue to execute on our long-term strategy and growth drivers, including advancing a robust innovation pipeline, expanding our manufacturing and distribution capacity, enhancing our digital capabilities and leveraging the Avantor business system to drive operational rigor. More than 70% of our revenue is in Life Sciences. And over the course of the year, we introduced a number of new products to support our customers in growing biologics platforms, including monoclonal antibodies, cell and gene therapy and mRNA. We enhanced our proprietary consumable offering with the extension of our precision plastics portfolio under our J.T. Baker brand. We also introduced innovative kits and flow cells from Oxford Nanopore, which helped generate next-generation sequencing data at the highest consensus accuracy. During the fourth quarter, we further augmented our global footprint and strengthened our ability to provide essential products and services to local biopharma customers as we opened our new CGMP distribution center in Dublin, Ireland, and produced…

Thank you, Michael, and good morning, everyone. I'm starting on Slide 4. Starting from the top of the page, reported revenue was $1.795 billion for the quarter at the midpoint of guidance provided on our Q3 results call. Our core organic growth for the quarter was 2.7%, reflecting ongoing strength in our core business, partially offset by inventory destocking in liquid handling and single-use tubing that we flagged in our third quarter call, a weaker-than-expected year-end budget flush and approximately 170 basis points of headwind as a result of fewer selling days in the fourth quarter of 2022. For the full year, reported revenue was approximately $7.5 billion, and core organic growth was 6%, driven by over 20% core organic growth in bioproduction and double-digit growth in Advanced Technologies and Applied Materials, offset by approximately 70 basis points of headwind as a result of fewer selling days in 2022. Adjusted gross profit for the quarter was 34.3% and 34.8% for the full year, an expansion of almost 90 basis points compared to 2021. This expansion was driven by the favorable impact of our 2021 acquisitions, double digit growth in sales of proprietary products and ongoing commercial excellence, partially offset by increased cost of materials and freight. Adjusted EBITDA was approximately $360 million in the quarter and $1.571 billion for the year, representing approximately 60 basis points and 110 basis points of margin expansion, respectively. The expansion was driven by our gross margin performance and our ongoing focus on productivity, while we continue to invest in growth. Adjusted earnings per share came in at $0.32 for the quarter and $1.41 for the year, driven by adjusted EBITDA performance, partially offset by higher interest expense and FX translation headwinds. Adjusted net income grew double digits for the year on a constant currency…

Thanks, Tom. As we conclude, I want to emphasize our conviction in our long-term financial algorithm. We view the current headwinds and supply chain normalization as short-term dynamics that will subside in the second half of the year, as supported by internal analysis, ongoing customer interactions and industry trends. We are confident in our plan for 2023 and are well positioned to execute on our growth strategy. I am encouraged by the strong fundamentals in our end markets, the deep relationships we have with customers and the positive returns we are generating from our investments in innovation and capacity expansions. Our strong free cash flow enables rapid deleveraging and capital allocation flexibility as we continue to actively build our M&A pipeline. Thank you for your interest in Avantor and for your continued support. I will now turn it over to the operator to begin the question-and-answer portion of our call.

Hey, guys. Good morning. Thanks for taking the questions. Michael, maybe just on a couple of those variables as we enter '23 here. It seems like European - industrial demand, you guys were pretty cautious last quarter going out some risks in the macro. It seems like you're feeling a little bit better about that. And then the second one, obviously, some of that excess inventory in the system on the lab business, particularly in the liquid handling. Can you maybe just talk about those two? What they look like in terms of variability in the guidance? And then the visibility, particularly on that excess inventory, what you're hearing from customers visibility into that normalizing? And when we should expect that to kind of get back to kind of growth and a little bit more normal? Thank you.

Thanks for the question, Patrick. And good morning, everyone. Yeah, I think that's a great place to start. When you point out the dynamics that we saw in the fourth quarter on Europe certainly played out a bit better than we expected, and we're certainly pleased with more than 6% core organic revenue growth there in the quarter. It really continues a strong year that we had there in the region. Entering the quarter, I think we were trying to reflect just some of the uncertainty associated with the energy situation in Europe. Certainly, the conflict in Ukraine, as well as just overall recessionary concerns and it certainly played out a bit better than we had anticipated. And as we look ahead into the year, I think we're encouraged by the trends that we see there, although we remain a little bit cautious. From a destocking perspective, I think the quarter played out as we had anticipated, both in liquid handling consumables, as well as in the single-use consumables within our bioprocessing offering and transitioning into 2023, I think the picture for us remains largely unchanged. As we engage with our customers, as we triangulate a number of reports and analytics that we have, I think our view here is that it's probably something that will be with us throughout the first half of the year, which will lead to a dynamic here that Tom referenced with the second half of the year being stronger than the first half. So we'll expect ongoing destocking here in the first quarter should start to improve a bit as we move through the second quarter, and we would expect that to hopefully be behind us as we get into the second half of the year.

Our next question comes from Rachel Vatnsdal with JPMorgan. Please go ahead, Rachel.

Great. Thanks, guys. So my question is just around margins. You guys exited 4Q at roughly 19.5% EBITDA margin. You're guiding to down 25 - to 25 basis points for the year. So can you just talk about some of the puts and takes, very similar to Patrick's question, given some of these headwinds in the start of the year, how should we think about that EBITDA margin expansion or contraction on a quarterly basis? And then is that mainly driven by price or volume? Or kind of how should we see that rolling through the P&L? Thank you.

Thanks for the question, Rachel. I think I'd start by just reiterating our confidence in our ability to continue to expand margins. And I would point to the fourth quarter as a good proof point of that. The environment we saw in the fourth quarter is probably pretty similar to what we're anticipating as we move into the new year here, and we're coming off a quarter here where we did expand 60 basis points. So certainly, a strong track record of being able to do that. When you look at our margin expansion algorithm, there's probably two or three variables that we really focus on, certainly starting with managing price versus COGS. A big part of that process plays out in the fourth quarter and early days of the first quarter. We're pretty well through that. And I think we're pretty confident that although pricing is going to be above our long-term algorithm and similar to what we delivered last year, we do think it's going to be sufficient to contribute at a level that we would historically see. You then get into things like mix, and we've talked openly about the roll-off of the COVID headwinds that are pretty margin rich. We're working against us, as we move through the year. That's going to be more pronounced in the first and second quarter than it would be in the second half of the year. And then the last variable I mentioned is just around the productivity aspects of our program here. We've got a pretty full [ph] pipeline of opportunities that we're driving to help mitigate the impacts of inflation. So I would say largely the algorithm is intact. We'll - we tried to reflect some of the headwinds associated with the mix, as well as just the volume impact and as destocking and COVID come down and the impact that, that has on absorption. But I think we're cautiously optimistic here out of the gates as we look ahead to margins and look to build on our strong track record.

Our next question comes from Luke Sergott with Barclays. Please go ahead, Luke.

Great. Good morning, everyone. So two for me. So just quickly on Masterflex came in a little light versus your guide for the year. Any kind of commentary there, what you guys are seeing in the fourth quarter? And any signs that this is troughed and starting to get better from a destocking perspective and the various headwinds there? And then secondly, can you talk about - I mean, you guys have talked about the investments you made in the customers. And you just came out with the master service agreement with - or the service agreement with Catalent. Can you give us any other color that you're around the future or current deals that you guys are working on that kind of underlie the improving outlook here?

Good morning, Luke. Thanks for the questions. Starting with Masterflex. As Tom mentioned in his remarks, we continue to be incredibly optimistic about that business, not only from a growth standpoint, but also margin standpoint. It's one of the leading franchises in the single-use space and gives us one of the only end-to-end aseptic fluid management solutions in the industry. Really great traction, strong brand recognition, and we're thrilled to have it as part of the portfolio. The inventory destocking that we talked about related to particularly the tubing offering associated with that, continues to play out as expected. It might have been a little bit stronger in Q4 than maybe what we had anticipated, but not far off of that. We expect to see that to be through the first half of the year, as I mentioned. I imagine as we work through the first quarter and sort of transition to the second quarter, we would anticipate things to start to incrementally improve and would anticipate having that behind us, as we move into the second half of the year. The other headwind that we faced in Masterflex is just the ongoing chip and component shortages for - peristaltic [ph] pumping technology. We've got a great order book there and a backlog that continues to build. So I think we certainly draw confidence from the strong demand and positioning of that technology. And the supply chain continues to improve. We do still have certain components that we're struggling to get on time, but we're starting to see incremental improvements there. And as Tom mentioned, I think as we get to the second half of the year, we're expecting double-digit core organic growth for that business. Really appreciate your second question as well. We continue to have really great traction…

The next question today comes from Vijay Kumar of Evercore ISI. Vijay, please go ahead.

Hey, guys. Thanks for taking my question and I had a two-part, Michael, maybe I'll start with you. The guidance here, when I look at the midpoint core organic, 3.5 for the year, that's 150 basis points below your LRP. And when I look at Q1, I think that number is 750 basis points. So one, is all of this inventory destocking you know, macro industrial slowdown? Is that happening in Q1? Is that the bridge between your 5 to 3.5 for the annual, and I thought, for some reason, Q4, those headwinds were around 300 basis points. So why is it accelerating here in Q1? And one for Tom on - on margins here, Tom, I thought you said pricing was positive. Can you clarify what the pricing assumption is for fiscal '23 and why shouldn't pricing aid your margins here in '23?

Yes. Good morning, Vijay. Thanks for the questions. I'll take the first one. The midpoint of our 2023 core organic guide of 3.5% contemplates roughly 250 basis points of macro impact, and that would include certainly the impact of destocking. It would include our view on kind of just the general macro environment and the impacts on our applied markets, perhaps most notably in the semiconductor market, as we mentioned in the prepared remarks. And so that gets on that basis to the high end of our long-term guide of roughly 6%. So very much in line with what we've been doing over the last several years. As you think about then the phasing within 2023, I think the headwinds that we've talked about are certainly most pronounced in Q1. We'll have a - destocking effects in Q1 are certainly most pronounced there, as well as just our view of the macro impacts on some of our applied markets. I'd also note in Q1, kind of relative to where we're at in Q4. Q1 is one of our most difficult comps of the year. I think we're running into a comp that's probably 300 basis points plus in Q1 compared to where we were at in Q4. So it's certainly going to be a situation here where the second half will be stronger than the first half, as we work through some of these destocking events.

And Vijay, on the second question. Thanks for the question on the margins and in particular, on pricing. Just to reiterate what's behind our guidance. I think it's helpful to remind ourselves, since the IPO, we've been tracking to the high end of our margin expansion long range plan of 50 to 100 basis points, nearly at 100 basis points or so when you each of those years. So the drivers are not much different than they've been in the past. And we like to think of it, as Michael said earlier, it has three components. The first being, the pricing and overall, what we call commercial excellence and in other words, balancing pricing against inflationary pressures on COGS inputs and other inputs. I think the - this has really proven to be a core capability of Avantor. We've got fairly sophisticated approach, a lot of data, really strong talent and systems and software to drive us a little long in the process for 2023. It's a big annual exercise starts in early November and really culminates right around now and working with suppliers and customers. So we're well along. We have a high degree of confidence in our ability to drive the price to offset inflationary pressures and be accretive to margins, as Michael had said. So that's definitely a positive factor for us. When you're considering the range that we've given I certainly think the COVID headwinds need to be taken into account when you see roughly $200 million of revenue coming out of the plan from '22 actuals to '23. That's pretty margin-rich content. And since it's mostly in biopharma production, vaccines and other kinds of content that go into -- bio production vaccines. We're reflecting that in the guide as well. And then I think overall, the third aspect in addition to mix is just productivity for margins. And we have plans in place, as we always do, that address material productivity, that address performance of our factories, performance of our distribution centers. And we'll continue to be pretty vigilant on costs and know that will contribute to some potential movement to the higher end of the guide. So I wouldn't look at our guide as reflecting anything materially different than what we talked about in Q3 and Q4 in our various meetings. I think we're setting up in a way that I think as we look ahead, we feel that it's pretty prudent start for the year in terms of expansion margin.

Your next question comes from Michael Ryskin with Bank of America. Please go ahead, Michael.

Great. Thanks for taking the question, guys. I got a couple of parts, but it's just one question. And I kind of wanted to touch on debt levels, interest expense and M&A. So could you just walk us through again the interest expense coming in higher year-over-year if the deleveraging remains a top priority. We thought it would kind of come down a little bit despite where rates ended at the end of the year? And then on 3Q, along those lines, previously on 3Q, you said we're concentrating near-term M&A efforts on improving performance of recent acquisitions - and yes, using available free cash to reduce debt. Today, I think you had a comment about actively building a pipeline of M&A opportunities. So definitely noticing a tone change there. Could you talk us through what's going on? And is that something you're referring towards the end of the year? Is there a certain leverage target you want to hit before you're back to being in a hunt for more M&A? Just clarify the difference there.

Yes. Thanks, Mike. And I'll answer the first question, and I'll let Michael answer the second. In terms of our leverage and debt levels, things are playing out as we kind of articulated in our planning. We started out the year north of 4 times leverage in 2022. We ended at 3.7 times. And when you look at the impacts on interest expense and so forth, they're also playing out as we expected. So we expect to continue on that delevering path. We'll probably be - when we execute our plan in '23, we expect to be in the low 3s, if not at 3, and we're encouraged by momentum. When you look at the key drivers of the delevering for us, it certainly is free cash flow. And while 2022 didn't exactly hit the mark on free cash, we were pretty pleased with how the interest itself was managed. We had articulated at the beginning of the year roughly $260 million of interest expense. We came in roughly 266. And that's with over 400 basis points of increases in various reference rates that impact our weighted average borrowing cost. So when you look at how we manage that, we did a few things to basically convert variable rate debt to fixed. We also, right before all the interest rate increases had taken place, we had a good portion of basically refinancing our entire portfolio. So over the course of 2021, we had significantly lowered our overall weighted average cost of borrowing. And the combination of those two things, that is the repricing, as well as some of the things we did in '22 on swapping variable to - sorry, fixed to variable and the euro swap that we did. We ended up improving the mix of our variable versus fixed rate where about 30% of our debt is variable rate, most of that is exposed to the euro. And as we look to 2023 interest expense, you've got two components there. Certainly, that 30% of the debt that's variable. We do have some impacts, as I talked about and quantified in the past, certainly close to $50 million or $60 million of pressure on interest expense from that. But the delevering impact largely offsets most of that. And so if we deliver at the midpoint of our guidance range at 700 to 800 in free cash flow, I think we'll be in pretty good shape. So we're - we've called that interest expense roughly 270 to 290 million in the guide. So it's relative to 266 in '22 and considering the interest rate environment, pretty pleased with how that looks to come in. And the more cash we can generate, the better we'll do on interest expense.

Michael, I'll pick up the second part of your question there around M&A. Maybe just a couple of comments. Firstly, I would just reiterate that M&A has been and will continue to be an important part of our playbook, and we've been actively investing and enhancing our capabilities. You'll recall, we announced a new Head of Strategy and Corporate Development, Kitty Sahin, who joined the team late last summer. And she's been busy in building out her team to put us in a better position going forward. When I think about the environment for M&A in 2022 and where we're at here in the first half of the year, certainly, we're cognizant of our own leverage, as well as the status of the debt markets. And consequently, have been and will continue to prioritize deleveraging in this environment. I think there's still some disconnect between buyer and seller expectations and I think there's a reasonable amount of just market uncertainty associated with transactions. So it makes sense for us to focus on delivering the commercial synergies of the deals that we closed in '21 and continue to give ourselves more flexibility by deleveraging. But I think it's prudent to continue to be active in building a pipeline, which we have been doing throughout '22. And we'll certainly remain focused on that as we move here into 2023. Just to ensure that we're positioned as opportunities open up in market - markets start to normalize, perhaps later this year as we move into 2024. So I don't think our position has really changed here in terms of our view of the priority of M&A or just - the status of the current market conditions, but we'll continue to invest in this area and make sure that we are prepared if and when things open up again.

Our next question comes from Dan Brennan with Cowen. Please go ahead, Dan.

Great. Thank you. Thanks for the question, guys. Maybe just one on bioproduction, so 4Q, I think you said it grew high single digits. Just give us a little color kind of maybe unpack that number a bit. It was a bit slower than the trend, but obviously, there's a lot going on within that. So I would love to get color on kind of how you executed the year on bioproduction. And then I know you talked about the '23 strong growth. Maybe a little color on what you're assuming for '23 in terms of the growth rate and included in that, how does some of the new capacity that you're bringing online impact your growth outlook across that business? Thanks.

Yes. Thanks for the question, Dan. I think at a high level, probably important to reflect on just the strength of the overall bioproduction space. 2022 was a great year for novel drug approvals. I think there are 18 large molecules that were approved, including some pretty big ones in the area of Alzheimer's, for example. I'm sure you all saw the news earlier this week around biosimilar approval in the HUMIRA space. So there continues to be, I would say, a very favorable backdrop in the core monoclonal antibody space. There are 6 CAR-T therapies that are available in the U.S. and Europe, and there's a big year ahead here in '23 of candidates that are up for approval. So backdrop for the space, I would say, is incredibly strong, and we remain quite bullish about not only the space, but certainly our position and long-standing track record of outgrowing the broader market by 200 to 300 basis points. We concluded 2022 with more than 20% bioproduction core organic revenue growth, so another really, really terrific year. Q4 was certainly the lightest quarter of the year for us in that space, really reflecting the impacts of destocking, particularly in the single-use consumables area. We obviously have a very broad portfolio that touches nearly every step of that process from upstream, downstream to fill and finish. And I think we had pretty good performance across the space with the exception of these liquid handling consumables. And we saw it both in Masterflex as well as in our legacy business. I think the quarter played [ph] out largely as we had anticipated. I think Tom referenced, we did have a pretty meaningful order in our RIM Bio business of nearly $10 that slipped from our plan in December into the early part of this year due to a supplier constraint. So absent that, I think it was another double-digit quarter and a really strong finish to the year. As we think about 2023, again, we'll deal with these destocking events through the first half of the year. And overall, we expect another year of double-digit organic revenue growth in bioproduction.

Our next question comes from Tejas Sevant with Morgan Stanley. Please go ahead. Tejas, your line is open. Please proceed with your question.

Hey, guys. Sorry about that. I was on mute. Just a few follow-ups there, Michael. Starting with bioproduction, can you give us just what your open order growth was in terms of the order book at year-end '22 versus year-end '21? And second, in terms of the guide itself, would you be willing to break out what you're assuming for Masterflex, Ritter and RIM versus the $393 million that you did in '22? And then finally, Tom, on your comments on free cash flow. Could you elaborate a little bit on some of those working capital improvements that you referenced that you expect to provide an offset to the growth investments here in '23? Thank you.

Thanks, Tejas, for the questions. Appreciate you joining us today. On bioproduction, I think the setup for that space, as I just mentioned, is quite strong heading into the year. We have a really terrific order book that reflects I think the strong underlying market fundamentals as well as, I think, the investments that we've made in capacity to improve service levels and bring down lead times. We were fortunate even in the fourth quarter to reduce the lead times on several hundred GMP materials, which will support our customers' growth, as we move into the year. So a great backdrop from an order book standpoint to start the year. Relative to our acquisitions in terms of how we think about those shaping up in 2023, we expect Masterflex tubing headwinds side by midyear and would return to double-digit core organic growth in the back half of '23. Ritter business has certainly stabilized. I think if you look at the outperformance relative to plan in the second half of the year, finishing above the high end of our guide, certainly gives us a little bit of momentum heading into the year. And the way I would think about Ritter is a sequential improvement, as we move quarter-to-quarter here as the effects of all the work that we're doing around end customer conversion through our channel, as well as, and importantly, the impacts of all of the NPIs that will be launched as part of our technology road map. We had some pretty meaningful launches in the fourth quarter and another four or so launches planned for the first half of the year that will put us in position to continue to improve the trajectory of that business. And I would say, in aggregate, we do expect on a full year basis growth for our - for these acquisitions.

Yes, Tejas. And just to answer the question on working capital. I mean I think the important backdrop here is that business continues to generate a strong amount of cash and has since the IPO. We're a low CapEx model and our conversion relative to our net income is generally pretty strong relative to our peers. 2022 was a unique year in many ways, and I think our supply chain was probably the most impacted by the events that we've seen unfold over the course of the last couple of years. We've made a fair amount of investment in our inventory to cushion and manage the availability of inventory and also to protect our customers, their supply chains. So no secret when you look at our statement of cash flows that inventory has been an area of build for us in both '21 and '22. Michael referenced lead times when he's talking about open orders, that certainly has an impact on inventory levels as well. And we are starting to see significant improvements as a result of the actions that our supply chain teams have taken on reducing lead times, both from our suppliers as well as within our own four walls of our distribution manufacturing. So we're encouraged by that. We think we can take a few days out of inventory over the course of 2023. The other aspect is that '22 was unique for the pricing environment that we're in as well. They were probably an unprecedented level of number of pricing changes. And that makes it challenging to stay synchronized with your customers on individual invoices and at times, there can be confusion. We've worked through most of that. I think on the receivables side, we're pretty confident that we'll be able to take a couple of days out of that as well over the course of the year. So things [ph] are looking up. And I think the working capital investments we've made have paid off, but I think we do see some opportunity there, and that's reflected in our free cash flow guidance. Thank you.

The next question comes from Dan Leonard of Credit Suisse. Please go ahead, Dan.

Thank you. Tom, you mentioned that customer contract renewals pressured free cash flow in the quarter. Could you circle back to that? What types of investments are associated with a contract renewal? And was there anything abnormal in the fourth quarter? Or was this just normal course of business?

Yes. The business model with most of our customers is to drive volumes and to drive growth. And you typically enter into long-term agreements with the customers, could be anywhere from 3 to 7 years, and they're often extended. And so it's a natural part of the business that either you have a contract coming up that you extend or in the case of some of the ones that Michael has mentioned, we actually can expand the services in those. But embedded in the business model are incentives to drive volume growth for the customers. And it's pretty formula in terms of the milestones that they achieve on growth - cumulative growth relative in particular product categories and whatnot. And so when you enter into new agreements or extended agreements, there typically is an upfront type of pre-date [ph] as well that gets factored into the equation. And we deal with those all the time. It's just the size and magnitude of the customers we've talked about in the fourth quarter, took more out of our free cash flow than is normal. But we're quite excited by the investments we think they're going to drive - continue to drive really strong growth for us, as we go forward in those customers, so that's the mark.

The next question comes from Brandon Couillard with Jefferies. Please go ahead, Brandon.

Thanks, good morning. Mike just on the Service and Specialty segment was down low single digits in the fourth quarter. Can you unpack that a bit? And Tom, are there any selling day variances to be aware of that you'd like to call out for this year looking forward?

Yes. Thanks for the question, Brandon. Overall, the Services and Specialty procurement part of our offering is an important aspect of kind of the customer intimacy model that we do have and gives us a pretty privileged position with our customers. I would say a couple of factors that drove kind of the underperformance in that part of the offering in the fourth quarter. Certainly, the specialty procurement nature of that reflects, I would say, just the overall macro environment and the level of activity in our customers labs, as well as probably a muted year-end budget flush. Part of the offering there is to support procurement of materials that aren't necessarily a core part of our portfolio. And we saw a somewhat muted finish to the year, particularly in the Americas. So I don't think anything that particularly caught our attention there other than just a reflection of the environment activity levels. Here in the early days of the first quarter have been strong, and we're certainly encouraged by the trajectory that we've got here out of the gates, but really just related to, I would say, the overall macro environment and destocking and a more muted year-end budget flush.

Thanks, Brandon. On the selling days, I assume you mean going forward. And for 2023, overall for the full year, the number of selling days is the same as 2022, roughly. You'll have a little bit of favorability in the first quarter, and we end up giving that back in the third quarter. I think the second and fourth quarters selling days are roughly equal year-over-year. Thank you.

Our next question comes from Josh Waldman of Cleveland Research. Please go ahead, Josh.

Good morning. Thanks for taking my questions. A two-parter for you. First, would be helpful to hear your thoughts on just how prudent you view the flat to up to organic guide to be. When you consider moving pieces like inventory destocking price, and I guess, underlying demand do you think the 2% assumes a base case scenario for these variables? Do you think the first quarter guide, for example, captures the base case?

Yes. Thanks for the question, Josh. What I would say about our guidance is that it certainly does reflect the number of variables that we see and certainly is underpinned by our view of really strong end market fundamentals, particularly in the life sciences space. The 250 basis points of kind of macro headwinds that we've categorized certainly reflects our view today of destocking, as well as I would say, a step down in our applied growth rates from '22 into '23. We ran well ahead of our long-term algorithm in '22 in that part of the market. Most quarters were high single digit, low double digits, in an end market that more classically for us grows mid-single digits. So within that 250 basis points also reflects a normalization of growth in that part of the business and a pretty meaningful step down in the semiconductor end market, for example. On the other side, we do see continued strong contribution from price in the year ahead, maybe not quite as strong as in '22, but certainly above our long-term algorithm. So we're closely monitoring the dynamics that are at play here. We're certainly working hard to identify opportunities to offset some of the headwinds in other parts of our portfolio like in bio materials. We recognize there's a sequential ramp in growth rates throughout the year to achieve the guidance that we've put out there. But we have certainly confidence in the shape of the plan, given the demand signals that we see today, as well as a moderation in comparables in the back half of the year. So when we put all that together, I think we're confident in the plan. I think it's a prudent place to start.

Those are all the questions we have time for today. So I'll now turn the call back to Michael for the conclusion remarks.

Yes. Thank you, and thank you all for participating in our call today. Certainly appreciate your support and look forward to updating you when we meet next. And until then, take care and be well, everyone. Thank you.

Thank you, everyone, for joining us today. This concludes our call, and you may now disconnect your lines.