Avantor (AVTR) Q3 2026 Earnings Call Transcript

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DATE

Wed, Oct. 28, 2026

CALL PARTICIPANTS

• President and Chief Executive Officer - Emmanuel Ligner
• Executive Vice President and Chief Financial Officer - Todd Garner
• Senior Vice President and Chief Accounting Officer - Steven W. Eck
• Vice President, Investor Relations - Chris Fidyk

TAKEAWAYS

• Net Sales -- $1,698.3 million, representing 5.2% organic growth driven by improved execution and stronger end markets.
• VWR Distribution & Services Net Sales -- $1,233.8 million, reflecting 5.8% organic growth due to higher volumes from large pharmaceutical and biotechnology customers.
• Bioscience & Medtech Products Net Sales -- $464.5 million, growing 3.6% organically despite a 150 basis point headwind from unusual customer ordering patterns.
• Adjusted EBITDA -- $256.9 million, resulting in a 15.1% margin as operational performance helped absorb inflation and targeted growth investments.
• Adjusted EPS -- $0.22, exceeding management prior expectations for the quarter.
• Free Cash Flow -- $156.2 million, which reached $169 million when excluding cash restructuring costs, reflecting the company strong cash generation profile.
• Adjusted Net Leverage -- 3.1 times, down from 3.3 times in the prior quarter following a $173 million reduction in net debt.
• Full Year Organic Revenue Guidance -- 0.75% to 1.25%, raised from a prior range of negative 0.5% to positive 0.5% based on third quarter outperformance.
• Full Year Adjusted EPS Guidance -- $0.81 to $0.83, increased from the previous outlook of $0.80 to $0.83.
• Full Year Free Cash Flow Guidance -- $525 million to $550 million, reflecting the company updated financial assumptions and consistent cash generation.
• Q4 Organic Revenue Outlook -- 2.5% to 4.5% growth, with the VWR segment expected to grow in the mid-single digits.
• BMP Q4 Headwind -- 400 basis points, stemming from discrete comparisons and timing of order patterns in the electronic materials business.
• Process Chemicals Growth -- High-single digits, supported by healthy end-market conditions and strong order performance.
• NuSil Growth -- Low-teens rate, driven by effective execution against a healthy order book.
• Fluid Handling Revenue -- Down low-single digits, reflecting normalization of customer ordering patterns in the serum business.
• Pricing Impact -- 1% to 2% year to date, which management noted remains below the rate of inflation.
• Foreign Exchange Impact -- 75 basis points tailwind for the full year, although expected to be a 150 basis point headwind in the fourth quarter.
• Debt Balance -- $3,648.8 million, net of current portion, as of Sept. 30, 2026.
• Effective Tax Rate Guidance -- 22% to 22.5% for the full year.
• Capital Expenditures -- $38.9 million for the quarter, focused on enhancing customer service and improving execution.
• VWR Adjusted Operating Margin -- 9.7%, a decline from 11.2% in the prior-year period due to product mix, inflation, and growth investments.
• BMP Adjusted Operating Margin -- 26.6%, remaining flat year over year as higher volumes and commercial excellence offset increased selling, general, and administrative expenses.
• Book-to-Bill Ratio -- Remained positive for the third consecutive quarter within the BMP segment, indicating healthy demand trends.
• Reported Revenue Guidance -- Projected at 1.5% to 2% for the full year, incorporating foreign exchange assumptions.

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RISKS

• Ligner stated, "The market recovery in Europe lagging that of the America and Asia," citing macro headwinds such as high energy costs and government funding pressure.
• Eck warned that inflationary pressures persist across the business, specifically citing the ongoing conflict in the Middle East as a contributing factor.
• Garner noted that BMP faces a 400 basis point headwind in the fourth quarter due to discrete comparisons in the electronic materials business.
• Eck reported that pricing gains of 1% to 2% year to date have been less than the costs seen from inflation.

SUMMARY

Avantor, Inc. (NYSE:AVTR) reported a return to organic revenue growth during the third quarter, which management identified as a milestone in the one-year Revival program. The company increased its full-year guidance for organic revenue, earnings, and free cash flow based on improving end-market demand and operational execution. Management reported that growth was particularly strong in the distribution segment, driven by increased activity among large pharmaceutical and biotechnology customers. The company continues to prioritize debt reduction, targeting an adjusted net leverage ratio below three times by the end of the year. Strategic investments remain focused on digital capabilities and manufacturing efficiency to support sustainable growth objectives.

• Management reported that approximately half of VWR organic growth was driven by commercial initiatives, including large contract renewals and small-customer expansion.
• CEO Ligner stated, "A key North America manufacturing line produced more than 25,000 kilograms of product a single week," achieving a 99% overall equipment effectiveness ratio.
• The company appointed Mikey Santiago as chief information officer, completing the executive leadership team refresh under the Revival program.
• VWR is deploying AI through its Internal Sales Assistant (ISA) tool to combine customer and product data for lead generation and meeting preparation.
• Management noted green shoots of recovery in demand from higher education and early-stage biotech customers in North America.
• The company recently renewed a contract with Elaphos, extending a relationship of more than 10 years through 2031.

INDUSTRY GLOSSARY

• BMP: Bioscience & Medtech Products segment, which includes proprietary materials and consumables for production environments.
• ISA: Internal Sales Assistant, an AI-driven tool used by the VWR sales team to prioritize customer opportunities and simplify administrative tasks.
• NuSil: Avantor brand specializing in high-purity, custom-formulated silicone materials for healthcare and advanced technology.
• OEE: Overall Equipment Effectiveness, a standard for measuring manufacturing productivity by comparing actual output to design capacity.
• Revival: Avantor comprehensive strategic program focused on simplifying operations, reinvesting in growth, and enhancing execution.
• S&OP: Sales and Operations Planning, a process used to align supply chain and manufacturing throughput with customer demand.
• VWR: Distribution & Services segment, providing laboratory supplies, chemicals, and equipment to scientific researchers globally.

Full Conference Call Transcript

Operator: Ladies and gentlemen, this is the operator. Todd's conference is scheduled to begin momentarily. Until that time, your lines will be placed back on a music hold. Thank you for your patience. Morning. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the Avantor's Third Quarter 26 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question at that time, simply press star followed by the number 1 on your telephone keypad.

And if you would like to withdraw your question, again, star 1. Thank you. I would now like to turn the conference over to Chris Fidyk, Chris, you may begin your conference.

Chris Fidyk: Thank you, operator. Good morning, everyone, and thank you for joining us. Our speakers today are Emmanuel Ligner, President and Chief Executive Officer; Todd Garner, executive vice president and chief financial officer; and Steven W. Eck, senior vice president and chief accounting officer. The press release, and a presentation accompanying this call are available on our Investor Relations website at ir.avantorsciences.com. Following our prepared remarks, we will open the call for questions. A replay of the call will be made available on our website later today. During this call, we will make forward-looking statements within the meaning of the U.S. 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 may differ materially from any forward-looking statements that we make today. These forward-looking statements speak only as of the date 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 development. This call will include a discussion of non GAAP measures. A reconciliation of these non GAAP measures can be found in the press release and in the supplemental disclosures package on our Investor Relations website. I will now turn the call over to Emmanuel.

Emmanuel Ligner: Thank you, Chris. And good morning, everyone. A special welcome to Todd on his first earning call with Avantor. Todd will introduce himself shortly, and you will hear much more from him at Investors Day on December 8. Todd, I will begin with a high level update on our third quarter performance. I will then take a closer look at Avantor, returns to revenue growth, including the progress we are making with Revival, our comprehensive program to sharpen strategic focus and enhance execution. On slide 4, we have the key messages from the quarter. Our third quarter results make a return to organics revenue growth for Avantor. This is an important milestone on our revival journey.

We have more work to do, but the quarter demonstrates why we believe the action we are taking through revivals are putting us on a path to sustainable growth. Third quarter results exceeded our expectation across revenue and adjusted EPS. Those results were driven by strong performance in our VWR services segments. which accelerated meaningfully after returning to growth last quarter. Organic revenue growth in our bioscience and med tech products segments, turned positive this quarter, as anticipated with performance stronger than we expected. We once again generated robust free cash flow which allow us to invest in the business and strengthen our balance sheet.

We remain committed to reducing our adjusted net leverage ratio to below 3x and we expect to achieve this objective by year end. Finally, we are raising our full year 2026 organic revenue adjusted EPS and free cash flow guidance, reflecting our third quarter outperformance as well as the momentum we see across the business and in our end markets. Please turn to slide 5. Where I will review our Q3 performance highlights. In Q3, we generated $1.698 billion of revenue, representing year over year organic growth of 5.2% and reported growth of 4.6%, exceeding our expectations. VWR organic growth accelerate to 5.8% in the quarter. This reflects continued executions against our revival priorities, as well as stronger end markets.

I will discuss VWR positive momentum, in a few moments. Turning to BMP. We were pleased to see the segments returning to revenue growth in the quarter. As we had anticipated on our last earnings call. On a year over year basis, BNP revenue grew 3.6% organically, ahead of our expectations, despite a 150 basis point headwind from the unusual customer ordering and shipment patterns that we have discussed on prior calls. We saw strong performance from process chemicals and NuSil in the quarter. Importantly, our revival initiative to enhance commercial and operation execution continue to gain traction across BMP.

Revival is helping the segment delivering more consistent and predictable performance and as a result, we believe BMP is well positioned to grow in 2027 and beyond. Moving down the P&L, adjusted EBITDA margin increased modestly on the sequential basis, as operational outperformance and cost discipline helped us absorb headwinds from mix, inflation, and targeted growth investments. Adjusted EPS of $0.22 was above our expectation. 1 of Avantor's key strengths is robust cash generation. In the third quarter, excluding cash restructuring costs, we generated $169 million of free cash flow representing strong conversion of adjusted net income.

We use this strong cash generation to further strengthen our balance sheet and we ended the quarter with an adjusted net leverage ratio of 3.1x. On slide 6, we take a closer look at our return to growth. In Q3, Avantor delivered positive organic revenue growth driven by 2 forces. Improving execution and stronger end markets. When we launched our revival program 1 year ago, we identified 5 key pillars and began a series of initiative to sharpen our strategy focused on improved execution. Those action are increasingly embedded in our operating model and in Q3, show up in our results.

In VWR, the actions we are taking to enhance customer relationship boost commercial execution, and expand our digital capabilities continue to gain traction. We estimate that approx. Approximately has of VWR growth in Q3 was driven by our commercial initiatives. We see progress in the same area we highlighted last quarter. We are expanding our relationships with large customers, We are performing well in small and mid sized accounts, and our ecommerce platform continued to show positive trends. PWR growth acceleration in Q3 reinforce our confidence in our competitive position in the global distribution market. In BNP, we are making steady progress on our revival initiatives to strengthen operations and enhance our supply chain.

And we have driven sequential increase in manufacturing throughput during 2026. Let me share a few examples of the progress we are with Revival across the organization. On Monday, we announced that Mikey Santiago, will join us from Danaher to serve as our chief information officer. With Mikey joining, and Todd now on board, our executive leadership team is complete. I am excited to work with this exceptional group of leaders to execute revival, and create shareholder value. In BNP, our manufacturing teams have increased output across critical product lines.

In early September, a key North America manufacturing line produced more than 25 thousand kilograms of product a single week exceeding its original design capacity target and achieving nearly 99% overall equipment effectiveness ratio for that week. This is a good example of the operational improvement we are making across BMP. We have advanced our digital manufacturing strategy including the development of digital workflow and electronic batch records at 2 key manufacturing sites. Those capability improve quality, reduce deviation, and enhance delivery performance, supporting a more efficient manufacturing network over time. Across our supply chain network, S and OP and other process improvement initiated are taking hold. Contributing to improve customer service and on time delivery across certain product categories.

While I am pleased with our progress, we will continue to invest in our operation. In VWR, we are deploying AI to improve productivity and enhance the customer experience. 1 example is VWR internal sales assistant. Or ISA. Which use AI to combine customer sales, and product data to help sales team prepare for meetings. Generate leads, prioritize opportunities, and act on recommendation. ISA also simplified administrative tasks. Since its launch last year, ISA had been widely adopted and we have received positive feedback from our sales team, our customers, our supplier. We plan to expand ISA and add new functionality.

VWR is also enhancing our internal cross reference platform with AI, to allow our teams to proactively identify product substitutes that offer sustainability advantage or cost saving opportunity to customers. The key takeaway is that revival impact is broad from leadership and operation to digital capabilities and customer facing tools. Revival is helping us improve execution and better serve our customers and ultimately translate to the growth acceleration we see in Q3. That is the execution side of the equation. I will now turn to end markets, where we are also seeing positive signs. 2 points of context. Are important to note. First, our segment respond differently to end market condition.

VWR is more sensitive to market fluctuation given its significant exposure to research spending while BNP is more heavily weighted towards production environment. Second, we have a unique perspective on the end market. Through VWR, we serve a daily need of scientists across more than 300 thousand customer sites around the world. We see lab activity as it happens. In daily order rates and in consumption of everyday consumables, which give us a clear view into the health of the scientific ecosystem. What we see is encouraging. The recovery that began in Q2 continue to build in Q3 and importantly has broadened. Last quarter, we highlighted a pickup in activity on large pharma and biotech customers.

That momentum has continued in Q3. Our large pharma and biotech customers continue to invest in their r and d pipeline, many of which have been supplemented by business development. We also saw green shoots of recovery in demand in higher education and early stage biotech customers in North America this quarter. For some of those customers, a more positive funding environment is translating into greater research activity. We also see strength in certain industrial subsectors, such as mining. From a geographical perspective, our demand is performing very well. We are also seeing good activity in Asia, which remains a smaller region for us. We continue to see the market recovery in Europe lagging that of the America and Asia.

On average, Europe faces more challenging macro conditions, including high energy cost, and government funding pressure. Any improvement in this important geography will represent a tailwind to our business. Overall, we are encouraged by the improving tone across our end market and believe that the demand environment is the most constructive we have seen in several years. Stronger end market are providing a tailwind, and improving execution is converting this tailwind into growth. We believe this provides us a foundation of sustained revenue growth and we remain focused on execution to build on our positive momentum. Before we walk through the financials, I want to welcome Todd W. Garner. Who joined us as a chief financial officer on September 21.

Todd brings 30 years of finance, operational, and public company leadership experience. He most recently served as CFO of Commed. In his first weeks, Todd has been meeting our teams around the world and getting to know our operations. As Todd continued to deepens his engagement in our business, Steven will walk through today's results. But first, I would like to give Todd a chance to introduce himself.

Todd W. Garner: Thank you, Emmanuel, and good morning, everyone. I am delighted to be here. When I decided to join Avantor, I was drawn to the opportunity to join a strong management team leading a high quality cash generative business with trusted brands and leading positions in attractive markets. I believe my experience in other transformations throughout my career can directly support the execution of the revival program and help drive meaningful long term value creation for our shareholders. In these first few weeks, I have immersed myself in the business going around the world to listen and learn, traveling with sales reps, visiting with customers and suppliers, and touring our facilities. Everything I have learned has reinforced my decision to join.

I have been struck by the quality and depth of our teams, their commitment to serving customers, and the rigor with which they operate. Through Revival, we are strengthening processes and building operating discipline that creates greater consistency and predictability. I am excited to help drive Revival forward. My priorities are to continue building a deep understanding of the business and its key drivers. While bringing the transparency, financial rigor, and execution discipline that I have emphasized throughout my career. I look forward to engaging with all of you in the months ahead including at our Investor Day on December 8.

Finally, I want to recognize Steven for his leadership as our interim chief financial officer and thank him for helping make my transition seamless. I will now hand the call over to Steven to walk you through the financials.

Steven W. Eck: Steven? Thank you, Todd, and good morning, everyone. Please turn to slide 9 where I will review our consolidated financial results. In Q3, we generated $1.698 billion of revenue which grew 5.2% on an organic basis and it was up 4.6% on a reported basis. Adjusted EBITDA was $257 million resulting in a margin of 15.1%, and adjusted EPS was $0.22. We were pleased to see our adjusted EBITDA margin expand sequentially. As strong execution and expense discipline allowed us to absorb mix and inflationary pressures while also making targeted growth investments. Free cash flow for the quarter was $156 million. Excluding cash restructuring costs, free cash flow was $169 million.

Both figures were in line with expectations and underscore Avantor's strong cash generation profile. We strengthened our balance sheet in the quarter and ended the period with an adjusted net leverage ratio of 3.1x, down from 3.3x last quarter. Please turn to slide 10. Revenue for the VWR distribution and services segment was $1.23 billion in the third quarter, up 5.8% organically versus the prior year. The primary drivers of both sequential and year over year growth were higher volumes, reflecting both improving commercial execution and stronger end markets. Adjusted operating income for VWR was $119 million in the quarter representing an adjusted operating margin of 9.7%.

The year over year and sequential declines in operating margin primarily reflected mix, inflationary pressures, and growth investments. The key takeaway from the VWR quarter is that our commercial execution continues to improve allowing us to benefit from a stronger demand environment across many end markets. As Emmanuel mentioned earlier, VWR's growth acceleration reinforces our confidence in VWR's competitive position in the global distribution market. Let me now discuss performance in the bioscience and Medtech Products segment or BMP. I am on slide 11. In the third quarter, BMP revenue was $465 million, representing organic growth of 3.6% versus the prior year, exceeding our expectations.

Process chemicals grew high-single-digits in the quarter, driven by improving operations, healthy end market conditions and strong order performance. NuSil grew at a low-teens rate in the quarter as we executed effectively against a healthy order book. Fluid handling and research and specialty chemicals were down low-single-digits in the quarter. Last quarter, we indicated that the serum business within research and specialty chemicals would be a headwind to our growth rate due to the normalization of discrete customer ordering patterns and shipments in 2025. This factor was a headwind of roughly 150 basis points to BMP organic revenue growth in the third quarter, as expected.

BMP saw healthy order trends across all business units in Q3 with particular strength in NuSil orders. Adjusted operating income for BNP was $123 million, representing a margin of 26.6%. Margins were flat year over year despite inflationary pressures. And margins increased sequentially versus the second quarter due to increased volumes and mix. There are 2 key takeaways from the BMP quarter. First, BMP returned to growth as we expected, and the segment's consistency and predictability are improving. Second, we are making steady progress with our revival actions to increase operational throughput and improve customer service and this progress is reflected in BMP's sequential growth and margin improvement versus the second quarter. Please turn to Slide 12.

Our ability to consistently generate strong free cash flow is a key strength of Avantor. In the third quarter, excluding cash restructuring costs, we generated $169 million of free cash flow reflecting strong conversion of adjusted net income. Our capital allocation priorities support Revival and our intention to create sustainable shareholder value over the long term. First, we are making targeted investments in the business to enhance customer service, improve execution, and drive organic growth. Second, we are focused on strengthening our balance sheet. During the quarter, we reduced our net debt balance by $173 million and ended the period with net debt of $3.235 billion.

Our adjusted net leverage ratio was 3.1 times at the end of Q3, and we expect to reduce our adjusted net leverage ratio to below 3x by year end. Please turn to slide 13, where I will discuss our increased full year 2026 guidance. For the full year 2026, we have raised our organic revenue growth outlook to a range of 0.75 to 1.25%, which reflects our Q3 revenue outperformance as well as modestly higher growth assumptions for Q4. Our guidance implies Q4 organic revenue growth of 2.5 to 4.5%. Foreign exchange is expected to be a headwind of 150 basis points to reported revenue in the fourth quarter.

As a result, we now expect foreign exchange to contribute approximately 75 basis points to full year reported revenue growth. In terms of segment performance, we expect VWR will grow mid single digits in Q4. This is modestly above our prior expectations and assumes the growth drivers we saw in Q3 continue in the fourth quarter, while also reflecting a range of outcomes related to year end customer spending patterns as well as a more difficult comparison than Q3. On the BMP side, we expect year over year organic growth to be flat to slightly positive in Q4, reflecting approximately 400 basis points of headwind from discrete comparisons as well as a more challenging comparison in process chemicals.

We expect BMP to have modest sequential growth from Q3 to Q4. Moving to profitability. Our adjusted EBITDA margin guidance remains unchanged, as improved execution and operational outperformance enable us to absorb mix and inflationary pressures while continuing to invest for growth. We anticipate that our adjusted EBITDA margin will expand modestly from Q3 to Q4. We remain highly focused on our cost discipline and our objective is to deliver a leveraged P&L in the future as we seek to simplify, reinvest, and grow. Moving down the income statement. In 2026, we now expect an adjusted effective tax rate between 22% and 22.5% and a weighted average diluted share count of 679 million shares.

Taken together, these assumptions result in an adjusted EPS outlook that has been raised to $0.81 to $0.83 for the year. Finally, we have increased our free cash flow guidance. We now expect free cash flow between $520 million and $550 million in 2026, reflecting our year to date financial performance, and the strength and consistency of Avantor's cash generation profile. I will now turn the call back to Emmanuel.

Emmanuel Ligner: Thank you, Steven. Let me echo Todd's comments and express my appreciation for your excellent leadership as interim CFO. On slide 14, I would like to leave you with 3 key points from our results. First, the action we are taking as part of Revival are delivering the intended results and our third quarter performance provide tangible evidence of that progress. We remain focused on executing our initiative to simplify, reinvest, and grow Avantor. Second, we have returned to growth. VWR continued to execute well against the backdrop of strengthening end market, and BMP delivered positive revenue growth in the quarter. Reflecting the operational improvements the team is making.

Third, we continue to generate robust free cash flow, enabling us to invest for growth while keeping us on track to reduce our adjusted net leverage ratio to below 3x by year end. Our associates around the world are committed to our customers, and deserve a note of thanks. We have made excellent progress so far this year, and I am excited about the future. Our investor day will take place on December 8. At investor day, we will take a deeper look at our segments, our strategy, our capital allocation priorities, and how Revival is strengthening Avantor's foundation for sustainable growth. We will also provide a long term financial framework and outline our roadmap for value creation.

The return to growth we reported today is an important milestone but we believe it is only the beginning. We look forward to sharing our vision of Avantor's future. And now, operator, we are happy to take questions.

Operator: Thank you. Webcast attendees who would like to view the slide deck, please click the materials button on the left side of your screen to download the slide deck. We will now begin the question and answer session. We kindly ask that you limit yourself to 1 question and 1 follow-up. For any additional questions, please re queue. And your first question comes from Casey Woodring with JPMorgan. Please go ahead.

Casey Woodring: Great. Thank you for taking my questions and congrats on the quarter. I guess my first 1 on the strong VWR performance here, you said half the growth was driven by commercial initiatives. Maybe can you just elaborate on that? How much of the DWR beat was driven by previously disclosed large contract wins versus some of the other commercial initiatives you have going on? Just talk about the sustainability of that moving into 4Q.

Emmanuel Ligner: Sure. Thanks, Casey. And thank you for asking the question. Look. I think we share about a half. And when we think about the half about the action we have taken, Yes. Large contract that we have renewed. We talked about the license to hunt. We talk about the fact that the team was doing very well on growing our share of wallet there. But it is not the only bucket of positive outcome we saw. You know, I think the team is doing very well with small and midsized customers. Which is definitely a very important segment for us. And then ecommerce is also a better performance.

So overall, team is executing well, and we are happy about where we stand right now. So in that sense, when we look at the market dynamic, and the action taken by the team, I think, yeah, we believe that those results are sustainable and that we look at our life for Q4 and that implied about the same, you know, a mid-single-digit growth for VWR in Q4.

Casey Woodring: Got it. that is helpful. And then I guess as a follow-up, you know, just on the margin line, do you think you can expand margins next year? The reason I ask is just you have been clear that part of Revival has been focused on investing in areas of the business that, you know, have historically seen underinvestment and there is also been price concessions to protect share in VWR that you have talked about. So just curious if 2027, you know, is a year where you can normalize pricing and some of the investments in the business and start to see some of the benefits here from volumes starting to flow through Thank you.

Emmanuel Ligner: Yeah. And, Luke, as I said we are right in the middle for our planning and budget process. So I think we will talk about much more about our guide and what we think for 2027 in those detailed right, during our Q4 earning course in February. But let me make something very clear. We are very, very pleased with the team performance the team on brazing and executing Revival. We have definitely improving our execution, The market is getting stronger. So we will end up 2026 with strong momentum. Alright? And which means that, you know, month after month, my confidence level is definitely increasing for next year.

So more to come, more detail in our Q4 earnings calls in February.

Casey Woodring: Understood. Thank you.

Operator: Your next question comes from the line of Vijay Kumar with Evercore ISI. Please go ahead.

Daniel: Hey, guys. This is Daniel on for Vijay. Thank you for taking our questions. I wanted to ask on the Q4 implied guide about 3.5% organic at the midpoint. I am curious what is embedded in the assumption that implies that the organic growth is going to moderate from 5% in 3Q. I look at the comps at the corporate level, and they seem pretty similar.

Todd W. Garner: Thank you, Daniel. This is Todd. Nice to meet you. The Q4 guide really assumes the continued momentum we saw in Q3. So I will take it business by business here in a minute. VWR grew 5.8% and we are pro. We are forecasting mid single digit growth in Q4. So that consistent level in Q4 for VWR. BMP on the last call. On the Q2 call, Steven called out that there is a 400 basis point headwind on the BMP side in Q4 due to the timing of order patterns, specifically in lower in the electronic materials business.

So with that 400 basis point headwind hitting Q4, the continued momentum that we saw in Q3, if you carry that over into Q4 with that you know, discrete issue, we get to Q4 itself for BMP is gonna look like flat to slightly positive although organically, it is consistent with Q3. So that is what puts the Q4 revenue guide in that 2.5 to 4.5 percent range. But we see really good, momentum in the business, as Emmanuel said. We do not see things slowing down but there is that timing issue in Q4 on the BMP side.

Daniel: Understood. And then just my follow-up. A lot of players in the life science tool space are starting to talk more about AI benefit. I am curious how Avantor is thinking about the AI opportunity and what that could potentially mean for growth.

Emmanuel Ligner: Hey. it is Emmanuel. Think there is there. there is definitely a consensus, in the industry about AI being a tailwind for us. I think I think it is all about productivity in the pharma. AI is here to help. So any increase of productivity in the money spent by pharma in developing new molecules is good for us. Okay? If you have more molecules that need research, development, and manufacturing, the research part we are serving them with VWR. And in the manufacturing part, we research we serving them from BNP.

So, yes, indeed, we are very exciting about AI and the impact it has potentially on the business and we see that as a tailwind like the rest of the industry.

Daniel: Understood. Thank you for taking the questions.

Operator: Your next question comes from the line of Luke Sergott with Barclays. Please go ahead.

Luke Sergott: Thanks for the question, guys. I think just starting off here, going back to the margin commentary. So margins kind of stuck around this 25.5% level. On the growth side. You had big pickup there in VWR, mid single digit volume growth. Off of 2Q. So just wondering how much of this is due to the contract renewals that you had over the last you know, like, 6 to 12 months And the discounting that might have gone into that versus the timing impact of the investments you made to improve your COGS and manufacturing still waiting to flow through?

Steven W. Eck: Good morning, Luke. This is Steven. Yeah, Luke, we said in the prepared remarks, we are very pleased with another quarter of sequential EBITDA margin expansion. That we did see pressure on margins coming from a couple specific places which I am happy to detail for you. The first is mix. This is the most significant driver in quarter and is primarily coming from VWR. As you know, VWR is about 70% of our revenues and it did grow faster than BMP in the quarter. With its lower gross margin profile that had a meaningful impact on total company gross margins.

Secondly, within VWR, while we saw growth across the segment, we saw more strength coming from product categories and customer segments that carry a lower gross margin profile. So higher mix of VWR revenues versus BNP as well as some mix dynamics within VWR that affected VWR's gross margins. The next biggest factor that I would point you to is inflationary pressures. We continue to see the impacts of inflation across our business including from the ongoing conflict in The Middle East, But, you know, really pleased with the development of the EBITDA margin expansion throughout the year, and, we expect to see that trend continue into the fourth quarter. So appreciate your question.

Emmanuel Ligner: Hey. Let me jump in here and I would like to maybe step back for a few minutes. 1 year ago, when we launched Revival, we really focused on the 5 pillars that talent, go to market, supply chain service level, with a very, very clear goal in mind: return Avantor to growth. And today, we are ahead of our. Of expectations. Now I have shared that in the past. We push a mindset of culture internally through the organization, of simplifying to reinvest for growth which means self funding. So the team is working to generate efficiency, productivity, to fund investment. With a clear mindset, which is profitable growth and constant operating leverage. So revival is not done.

We will and we are continuing to work really hard to position Avantor for sustainable growth expand margin, and create shareholder value. So we are right in the middle of that. Alright.

Luke Sergott: I guess just a quick follow-up on that. You talked about kind of these investments you made in the couple of facilities. Any kind of color because you are not rolling them out. All wholesale. So just talk about kind of as we think about the rest of the you know, distribution and manufacturing organization, like, what are some early wins or improvements you have seen on those couple facilities as we about rolling those forward through 2027, 2028, and 2029?

Emmanuel Ligner: Sure. I think let I think it is, you know, I think the unusual comps this year, I think, mask what the BMP underlying strength and the performance of the team is. Okay. We just talked about this on the Q4 guide. We see really good progress in the implementation of the S&OP, Mary Blen, our COO, has driven many Kaizen to make sure that the plants are producing more. I share some example this quarter. Last quarter as well. You know, Ludovic Brellier is really pushing the customer centricity across the team, and just 2 KPIs for you. For the third quarter in a row, our book to bill in the BMP is positive.

And if we just look at the processed chemicals, year to date, high single digit, orders and high-single-digit sales performance. So we really see that now we have really a stronger alignment. It is down to every effort with that team is doing on the revival pillar of commercial side go to market, but also supply chain service level, which is definitely improving.

Operator: Your next question comes from the line of Douglas Schenkel with UBS. Please go ahead.

Douglas Schenkel: Good morning, guys, and thank you for taking my questions. Actually, I am I know this has come up a lot, but I kinda wanna take a different angle. On margins and also just Q4 guidance just to follow ups to the previous questions. So the first 1, it actually looks to me as I play with the model that VWR margin could be down under 50 basis points year over year in the fourth quarter or something in that neighborhood, just playing with the model. I actually would. You know, that would actually be a huge step in the right direction. Given what you have had to manage through in terms of strategic price actions?

And the inflationary pressures that you faced, especially in that business. I guess my question is, am I with the model right? And then I think the follow-up, to some of the other questions is, as you guided Q4, it seems like you essentially maintained what you were expecting for Q4 and updated guidance largely for the magnitude of the Q3 beat. I did not hear anything that suggested there were timing dynamics. It really sounds like pacing is a function of the year over year comps. I just wanna make sure I have that right as well.

Todd W. Garner: Sure, Douglas. Nice to meet you. I will. I will just start out by saying while we do not guide specific margins by the segments, we do not see deterioration either. So we do expect margins to expand You know, I would put the word modestly on it between Q3 and Q4. But we do expect margin expansion. So there might be a little model tweaking there. And, you know, as Emmanuel said, we are right in the middle of revival. With the focus on the long term of developing sustainable, predictable, positive profitability and growth. So right in the middle of that. We Q3 was a really good sign of progress.

Think Q4 will be another sign of progress and an improvement there. And so that is where we are now, and we can help you a little more with the model offline.

Douglas Schenkel: Okay. That sounds good. And if I can ask 1 more, The last couple of quarters, talked about book to bill of over 1. You know, I think you talked about 1.1 times for BMP a couple of quarters. You talked about solid order trends this quarter. You have talked about lead times of 30 to 90 days for many products in the portfolio. Just keeping in mind the momentum seemingly that you have heading into year end there, and thinking about the order book, is that conversion period still the right way to think about things, 30 to 90 days? Or are there instances where things are stretching a little bit? Thank you.

Emmanuel Ligner: No. 3 to 6 months, depending on the product line is the right way to look at it. No necessary change on our lead times. The team is really working to make sure that continue through the S&OP to have a really good ratio with the customer. So, look. As I said, the unusual comp this year, I think, is masking the BNP underlying performance. But you know, we look at the business also on a quarter after quarter, and we have, we have sequential increase, you know, all the years so far, and we are looking at a modest sequential increase as well in Q4. So I really like the BNP direction of travel right now.

Douglas Schenkel: Okay. Thank you, guys, and nice to meet you. Talk soon.

Operator: Thank you. Your next question comes from the line of Tycho Peterson with Jefferies. Please go ahead.

Tycho Peterson: Hey, thanks. Appreciate you have had a number of questions on margins. Want to maybe just ask on OpEx, higher SG&A, you called that out as an offset to profitability. Just talk a little bit about where those investments are going and when you expect to generate a return from some of that?

Steven W. Eck: Tycho, this is Steven. Actually, you know, we are pleased with the performance from an adjusted SG&A perspective this quarter. it is down modestly from the first half of 26 levels. I think is noteworthy because, you know, we are in the setting of significant investment in the business for our future growth. We are in the midst of revival, as, you know, Emmanuel said, but, you know, we are still displaying that cost discipline and capitalizing on opportunities to drive productivity. So we think, you know, that is heading in the right direction and is part of that story of, you know, gradual sequential EBITDA margin expansion.

Emmanuel Ligner: And maybe I. Tycho, let me give you a few example of where we want to continue to invest. I mean, definitely AI We share a couple of tools during our opening remarks, which I think is important. We will continue to double down on this. Supply chain, definitely, there is there is still a lot to do there, and Mary is taking the lead. We also want to double down on our ecommerce Right? We really see some good performers there. We have happy of where we are, but we know that we can do more So I will give you a couple of example of where we want to continue to invest Okay.

Tycho Peterson: And then can you talk more on the strength in NuSil, you know, low-teens, strong orders? I guess, how durable is the demand you are seeing now? Are there kind of any onetime items in there?

Emmanuel Ligner: Yeah. No. Yeah. Look, NuSil is--you see, it is an excellent business. it is a strong brand, great customer relationship, the quality is outstanding and phenomenal reputation. Again, we had some unusual order and shipment patterns in the past, especially on the first half. But Q3, we saw double digit revenue growth. In. And an order is strong as well. it is turning to revenue. The team is executing well. I think you may have seen there were also some of our customers that are publicly shared the fact that we have renewed a contract, ELAP's, alright, which is an customer of us. We have a very long relationship, more than 10 years.

And we renew that contract up to 31. And so we are really happy of where we are. So, you know, Q4 is looking good as well for NuSil.

Tycho Peterson: Okay. And if I could ask 1 last quick 1, is there anything back to margin structurally that would prevent VWR to get back to the historical 10% to 11% range longer term. Understanding, obviously, in the near term, have inflationary pressures and other factors, but anything structurally that would prevent you from getting back to the historical range?

Emmanuel Ligner: It was just a great question. I think why do not we talk about that in Investor Day? We will give you a we will give you a framework for the future. Okay.

Tycho Peterson: Fair enough. Thanks.

Operator: Your next question comes from the line of Yves Birstein with Bernstein. Please go ahead.

Yves Birstein: Great. Good morning. Congrats on the quarter and thanks so much for taking the question. You said you saw stronger end markets in Americas and Asia, but Europe is still lagging because of more challenging macro conditions. Can you unpack this a little bit? How much of that is weakness due to academic and government specifically versus other end markets? I would argue that there probably is not as good a line of sight to macro improvement in Europe and the timing to expect that. Versus what we had on the Americas a few quarters ago. Is that fair to say? What do you think it takes to get the end market going?

And then finally, VWR has a real position of strength in Europe versus the largest global distributor competitor. You imagine this exposure being a drag on growth in the midterm?

Emmanuel Ligner: No. that is a that is a great question. Look. Europe is a very important market for us as you said, we have a leadership position there. Look. The macro environment is we are following it closely. there is types spend on budget, in academy. there is also some industrial suffering. Right? Germany, I think we highlight that. And I think what is important is the recovery is really yet to be seen. What I think is important is that in our guide, we are we are looking at a static call. So any recovery will give us a tailwind.

So I think this is where we stand. it is it is difficult to anticipate, Therefore, we take the static 1 and say, okay. We will put that in the guide.

Yves Birstein: Okay. Great. Thank you.

Emmanuel Ligner: And then ecommerce has been a big focus for you and just this week, you appointed a new chief information officer. Can you talk a little bit about an ecommerce specifically, what sort of quantitative impact of the improvements that you have been making have they been having this year? What do you expect for next year? And then for your digital transformation more broadly, which you said is still in early stages, what is the next set of digital priorities and how are you in the. How are you viewing investment as a priority for excess capital? Sure. Look. It is a very important tool.

Because it is a tool that serves a very, very large broad based customers, and we want to make sure that the interface with those customers is the best we can. So the first really important step for us was to relaunch vwr.com, which we did at the end of Q1, early Q2, and we had really good feedback on this is just the beginning. What we really want is to bring a tool which is extremely easy to deal with, which provide a much more information, which is much more modern than it was. So I think this is why we are continuing to invest in this. And we have a huge amount of KPI. You know?

Number of people that visit, number of people that build a cart, number of, you know, people that actually order the cart, and what do they look at, and we really want to bring AI into this. So, brought we brought a great chief digital officer a couple of months ago. Now we are that with Mikey as a CIO and the team is really building a strong plan that we will support with investment. So I think I think, again, we want to give you more information during investor's day, so that would be a deep dive for us at the at the day in December 8.

Yves Birstein: Great. Thanks a lot.

Operator: Your next question comes from the line of Justin Bowers with Deutsche Bank. Please go ahead.

Justin Bowers: Hi, good morning, and thank you for taking the question. So can you refresh us on the revival program, the various phases, and how you. And the duration of the program as you see it now?

Emmanuel Ligner: Sure. Look. it is a 1 year program now. But as I said, we are just in the middle of it. I am super happy the leadership team is now completed. Alright. With Todd joining us couple of weeks ago, Mikey starts next week. Very exciting. Build a very strong team. Very diverse with a great life science and med tech experience expertise. So this is this is really, really good. Remember, we also implemented a leadership team with many people below. I think we talked about 65% of the entire n minus 2 being refreshed. We are operating in a much greater discipline right now. The culture is a stronger accountability, We are much more customer centric.

We have simplified a lot But, again, we are not done. Right? We simplified, for example, the onboarding process for customers. We talked about that last quarter. Our production level, as we talked about it, especially in the BNP, production and service level are definitely improving. But I think more importantly, is our ratio. You know, we spoke about that at the very beginning when I joined We want to regain our credibility. And the trust of all the stakeholders. So you know, in April, we said that VWR will return to growth. In our last call, we said that BNP will return to growth.

And so it is very important that we continue to build on that credibility to continue to build the trust with the shareholder, you know, including investors, it is extremely important for us. So, but if we look at the overall where we are, we are really happy, but we are absolutely not satisfied. Okay? And so we are in the middle of it. We will continue to amplify simplification of processes to amplify, our structure, infrastructure systems example, especially as Mikey is coming in. I want to really continue to strengthen our culture of execution. And, really, as I said earlier, just really position the company for sustainable growth. And so we are not done. Thank you.

Justin Bowers: And you are answering my question on leadership. So the 1 follow-up would be just on the investments that you are making on the BMP side. I know you called some of those out. Earlier in the year. Just trying to understand where we are in that process. And, you know, it does sound like the sales and the order book is filling up nicely and lead times are getting back to normal. So any additional color there would be helpful.

Emmanuel Ligner: Yeah. Sure. We will we will continue, Mary has put an overall supply chain, strategy which, of course, is a long term strategy. Okay? When we develop those manufacturing strategy, we do not look at next quarter. We look at the next 10 years and what could be the demand. And, also, we engage with our customers. You know, this is an industry where our security of supply is very important. And, and we have the strength to be able to manufacture in Asia, in Europe, and in The US.

So this is about this. it is about making sure that we make the product at the right place closer to customers for sustainability, but also for security of supply and redundancy. So that is where we are on right now. We are we are finalizing those plan, and then I think this is another thing that we can talk at Investor Day.

Operator: Thank you. Your next question comes from the line of Daniel Arias with Stifel. Line is open.

Daniel Arias: Good morning, guys. Thank you. Todd, where will pricing come in for the year? What would the net effect be for 2026?

Steven W. Eck: This is Steven. I am happy to take that 1. You know, we are very pleased with the execution of our pricing strategy this year. You know, to give you some perspective, you know, last year, you know, we saw a significantly greater cost coming from suppliers and having to absorb that than we were able to necessarily pass on to customers. But through you know, better governance, implementation of tools, these kinds of things, you know, stronger commercial operations execution. We have been able to recover much better, this year than last. You know? So it is had a significantly you know, noteworthy impact on our margins.

Emmanuel Ligner: Yeah. And I can jump in as well here. You know? Our number 1 objective is pricing to offset inflation right now. Okay. And this is very important. I think we have made a lot of progress If we look at the different metrics, like price of a COGS, we have improved We definitely have better tools. I think I spoke last quarter. The fact that we have hired a price leaders. We have we have a team which is in place. So we have better tools. We have better visibility. We have reviewed that every month. And, basically, we have a greater discipline in the commercial team.

So, of course, you know, cost rise in real time and sometimes pricing recover with a lag. But I think it is. We are in a very, very important timing right now because we are end of the year. Some of the very large customers contract give us the opportunity to take the price up at the end of the year for the following years, and that is what we are. Really working hard right now. So yeah, margin, some have been a bit of a headwind on the pricing lag, but I think what is important is very good execution, cost discipline as well for us, but I really.

I am happy what we have done this year versus where we were last year, and I think there is more to come.

Daniel Arias: Okay. Appreciate the qualitative commentary there. Will you be in a position to talk about what 2020 pricing is at the Investor Day? And you know, I certainly appreciate the competitive element to all of this. But pricing is also a pretty, pretty major part of the situation and thinking about what it is that will be different about 2027 versus 2026 and 2027 versus 2026 and 2026 versus 2025? So when can we expect to have some numbers as far as what price will mean to growth this year or next year?

Todd W. Garner: Yeah. Daniel, to be specific to a number you know, our data shows that it is our pricing is between 1% and 2% in the year-to-date 2020 period. So that is the pricing we have been able to get to Steven Emmanuel's point. That is less than we have seen from inflation. Right? So we are chasing it a little bit. We are getting better at getting closer and reducing that lag between cost increases and price. But the quantification of 2026 appears to us between. To be between that 12%. Okay.

Daniel Arias: Very much appreciated. Thank you.

Operator: And that is all the time we have today for questions. Emmanuel, I would like to turn it back to you.

Emmanuel Ligner: Thank you. And thank you all for joining us. and thanks for your questions. Our third quarter results mark a return to organic growth for Avantor. And we are encouraged by the momentum across the business. We believe that improving execution and stronger end market provide a foundation for sustained revenue growth. And we remain focused on execution to build on our positive momentum. Finally, we are looking forward to hosting you in our Investor Day on December 8 where we will share our vision for the Avantor's future. We hope that you will join us And, again, thank you very much for your time and interest in Avantor.

Operator: Thank you. Thank you. Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation. And you may now disconnect.

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