Avantor, Inc. (AVTR) Earnings

Management highlights

- Overall Q2 2026 Performance - Total company revenue was $1.69 billion, down 0.4% organically year-over-year and up 0.5% on a reported basis. Adjusted EBITDA was $254 million (15% margin), adjusted EPS was 21 cents, exceeding analyst expectations. - Excluding cash restructuring costs, Q2 free cash flow was $152 million, beating expectations. The company repaid $112 million of debt during the quarter, ending with an adjusted net leverage ratio of 3.3x adjusted EBITDA. - Revival Transformation Program Progress - Revival is a 5-pillar enterprise-wide transformation (commercial excellence, operational performance, portfolio optimization, simplification, talent) launched 12 months prior to the call. - Key completed initiatives include: resegmenting the business into VWR and BMP to sharpen customer focus; relaunching the VWR.com e-commerce platform, which has driven higher customer engagement and conversion; implementing Lean/Six Sigma improvements that increased throughput at a key manufacturing site by more than 25% sequentially from Q1; redesigning customer onboarding to cut steps from 14 to 8 and reduce completion time from a maximum of 4 days to 2 days for complex accounts and minutes for simple accounts; refreshing approximately 25% of the senior leadership team to drive cultural change focused on accountability and customer-centricity. - VWR Segment Specific Operational Highlights - VWR returned to organic growth earlier than expected, driven by internal actions: the segment gained share of wallet with newly renewed large global customer contracts, with headwinds from historical recontracting diminishing through 2026. E-commerce upgrades drove accelerating growth among small and mid-sized customers, which carry higher margins. A modest tailwind came from increased pharma and biotech customer activity, primarily in the U.S., while education end markets and European demand remain stable at lower-than-desired levels.

Guidance

- **Consolidated organic revenue growth guidance** was raised from prior levels to a range of -0.5% to +0.5% for full-year 2026, driven by Q2 outperformance and raised expectations for VWR in the second half. Adjusted EPS guidance was raised to $0.80 to $0.83 for full-year 2026, driven by lower expected net interest expense and a lower diluted share count. - Full-year adjusted EBITDA margin guidance remains unchanged, as operational cost discipline offsets inflationary pressures. Full-year 2026 free cash flow guidance is maintained at $500 million to $550 million. - Management expects VWR's organic growth rate to accelerate sequentially through the second half of 2026. BMP is expected to return to organic growth in the second half, with stronger growth in Q3 than Q4 due to more favorable year-over-year comparisons. Discrete comparison headwinds will be 150 basis points for BMP in Q3 and 400 basis points in Q4, with all headwinds fully lapped by 2027. - Q3 2026 adjusted EPS is guided to $0.20 to $0.21 per share, with consolidated organic revenue growth expected to be approximately 250 basis points. Foreign exchange is expected to be a 125 basis point headwind to Q3 reported revenue. - Management reaffirmed the target to reduce adjusted net leverage to below 3.0x by the end of 2026, and expects 2027 will be a growth year for the company. An Investor Day is scheduled for December 8, 2026 in New York City to share full long-term strategy and financial objectives.

Segment performance

1. VWR Distribution and Services Segment: Q2 2026 revenue was $1.24 billion, growing 1.7% organically year-over-year. Adjusted operating income was $126 million, with an adjusted operating margin of 10.2%. This segment contributed 73.4% of total company revenue in the quarter. Year-over-year margin declined due to product mix and inflationary pressures, but margins increased 100 basis points sequentially from Q1 2026 on higher volumes and improved mix. 2. Bioscience and Medtech Product (BMP) Segment: Q2 2026 revenue was $452 million, declining 5.6% organically year-over-year, near the high end of management expectations. Adjusted operating income was $118 million, with an adjusted operating margin of 26%. This segment contributed 26.6% of total company revenue in the quarter. Year-over-year margin declined due to lower volumes, but margins increased sequentially from Q1 2026 on higher volumes and improved mix. Discrete comparison headwinds pulled BMP organic growth down by 600 basis points in Q2.

Risks & headwinds

- Foreign exchange headwinds from the strengthening U.S. dollar are expected to weigh on reported revenue in the second half of 2026, with an expected 50 basis point headwind for the full year. - Ongoing inflationary pressures, including sustained elevated freight costs, continue to pressure margins, requiring ongoing cost discipline to offset. - Demand in education end markets and European geographies remains stable at lower-than-desired levels, creating an ongoing drag on growth if conditions do not improve. - Revival program initiatives and forward-looking growth targets are subject to execution risk, and actual results may differ materially from expectations due to unforeseen operational or market changes.

Analyst Q&A

• Q: How much of VWR's Q2 growth is from management's internal actions versus broader market recovery, and what is driving the raised full-year guidance for the segment? /

  A: Management estimates that more than half of VWR's Q2 growth comes from deliberate Revival initiatives. For large global customers, historical headwinds from contract renewals have largely lapded, and new contracts won over the past year are now driving gains in share of wallet, ahead of the company's original timeline. For small and mid-sized customers, the relaunch of VWR.com has driven stronger e-commerce conversion and growth. The remaining portion of growth comes from a modest broad-based market improvement, primarily among U.S. pharma and biotech customers, and management is confident this growth momentum will accelerate in the second half.

• Q: VWR's growth rate is still below peer levels; what KPIs show that market share trends are shifting in your favor, and how are you driving share gains? /

  A: Management tracks multiple leading indicators including new customer acquisition, e-commerce click-through, conversion and basket growth, monthly contract opportunity conversion, and pricing execution. Key actions to regain share include the VWR brand and website relaunch, ongoing digital platform investments, structured funnel reviews by region and segment, improved monthly pricing governance, and closer collaboration with supplier partners. VWR's organic growth improved from -4.8% in Q1 to +1.7% in Q2, and management expects this acceleration to continue through the second half.

• Q: What is the timing of discrete BMP headwinds beyond Q3, and when will these headwinds fully clear to support durable growth? /

  A: Discrete comparison headwinds from 2025 customer ordering patterns were 600 basis points in Q2 2026, will be 150 basis points in Q3, and 400 basis points in Q4 2026, driven primarily by the electronic materials business. All headwinds will be fully lapped in 2027. BMP has delivered low double-digit order growth for the first half of 2026 with a book-to-bill ratio of 1.1 across all sub-segments, creating a strong backlog that will translate into revenue growth as headwinds clear. Management expressed increasing confidence that 2027 will be a full year of growth for the company.

• Q: What is your strategic posture on self-manufacturing versus expanding third-party vendor relationships for VWR? /

  A: Management views a mixed model as optimal for the business. For VWR, a product-agnostic value proposition with broad third-party supplier relationships and a wide catalog is a key competitive advantage that offers customers optionality, which management intends to maintain. In-house self-manufacturing is also a valuable capability that serves OEM customers with high-quality products, and this business is currently growing, so the company will continue to invest in both models.