Avantor Inc.
10/29/2025 | Press release | Distributed by Public on 10/29/2025 07:02
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's discussion and analysis of financial condition and results of operations
This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those contained in or implied by any forward-looking statements. See "Cautionary factors regarding forward-looking statements."
Basis of presentation
This discussion should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and notes. Pursuant to SEC rules for reports covering interim periods, we have prepared this discussion and analysis to enable you to assess material changes in our financial condition and results of operations since December 31, 2024, the date of our Annual Report. Therefore, we encourage you to read this discussion and analysis in conjunction with our Annual Report.
Overview
During the three months ended September 30, 2025, we recorded net sales of $1,623.8 million, net loss of $711.8 million, Adjusted EBITDA of $267.9 million and Adjusted Operating Income of $237.3 million. Net sales declined 5.3%, which included a 4.7% organic net sales decrease compared to the same period in 2024. See "Reconciliations of non-GAAP measures" for reconciliations of net (loss) income to Adjusted EBITDA and Adjusted Operating Income, and net (loss) income margin to Adjusted EBITDA margin and Adjusted Operating Income margin. See "Results of operations" for a reconciliation and explanation of changes of net sales growth (decline) to organic net sales growth (decline).
Factors and current trends affecting our business and results of operations
The following updates the factors and current trends disclosed in our Annual Report. These updates may affect our performance and financial condition in future periods.
Our results are impacted by a divestiture to further refine our business model
We completed the sale of our Clinical Services business, a component of the Company's Laboratory Solutions reportable segment, on October 17, 2024. The Clinical Services business was not classified as a discontinued operation as it did not represent a strategic shift that will have a major effect on the Company's operations and financial results.
We have been impacted by inflationary pressures
We have experienced inflationary pressures across all of our cost categories. While we have implemented pricing and productivity measures to combat these pressures, they may continue to adversely impact our results.
We continue to invest in a differentiated innovation model
We are engaging with our customers early in their product development cycles to advance their programs from research and discovery through development and commercialization. These projects include enhancing product purity and performance characteristics, improving product packaging and streamlining workflows. We are also developing new products in emerging areas of science such as cell and gene therapy.
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We continue to advance our cost transformation initiative to reduce our expenses
We are advancing a global cost transformation initiative to further enhance productivity through increased organizational efficiency, footprint optimization, reduced cost-to-serve and procurement savings that are expected to generate approximately $300 million in run rate gross cost savings by the end of 2026.
We have expanded this initiative and now expect to generate approximately $400 million in run rate gross savings by the end of 2027.
Fluctuations in foreign currency rates impact our results
Our consolidated results of operations are comprised of many different functional currencies that translate into our U.S. dollar reporting currency. The movement of the U.S. dollar against those functional currencies, particularly the Euro, has caused significant variability in our results and may continue to do so in the future.
Our results may be impacted by changes in trade policy
The imposition of tariffs and other trade restrictions by the U.S., as well as reciprocal trade restrictions imposed by other countries, could adversely affect global economies, financial markets and the overall environment in which we do business.
Key indicators of performance and financial condition
To evaluate our performance, we monitor a number of key indicators. As appropriate, we supplement our results of operations determined in accordance with GAAP with certain non-GAAP financial measurements that we believe are useful to investors, creditors and others in assessing our performance. These measures should not be considered in isolation or as a substitute for reported GAAP results because they may include or exclude certain items as compared to similar GAAP-based measures, and such measures may not be comparable to similarly titled measures reported by other companies. Rather, these measures should be considered as an additional way of viewing aspects of our operations that provide a more complete understanding of our business.
The key indicators that we monitor are as follows:
•Net sales, gross margin, operating income, operating income margin, net income or loss and net income or loss margin. These measures are discussed in the section entitled "Results of operations";
•Organic net sales growth (decline),which is a non-GAAP measure discussed in the section entitled "Results of operations." Organic net sales growth (decline) eliminates from our reported net sales change the impacts of revenues from acquisitions and divestitures that occurred in the last year (as applicable) and changes in foreign currency exchange rates. We believe that this measurement is useful to investors as a way to measure and evaluate our underlying commercial operating performance consistently across our segments and the periods presented. This measurement is used by our management for the same reason. Reconciliations to the change in reported net sales, the most directly comparable GAAP financial measure, are included in the section entitled "Results of operations";
•Adjusted EBITDA and Adjusted EBITDA margin, which are non-GAAP measures discussed in the section entitled "Results of operations." Adjusted EBITDA is our net income or loss adjusted
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for the following items: (i) interest expense, (ii) income tax expense, (iii) amortization of acquired intangible assets, (iv) depreciation expense, (v) losses on extinguishment of debt, (vi) charges associated with the impairment of certain assets, (vii) gain on sale of business, and (viii) certain other adjustments. Adjusted EBITDA margin is Adjusted EBITDA divided by net sales as determined under GAAP. We believe that these measurements are useful to investors as ways to analyze the underlying trends in our business consistently across the periods presented. These measurements are used by our management for the same reason. A reconciliation of net income or loss and net income or loss margin, the most directly comparable GAAP financial measures, to Adjusted EBITDA and Adjusted EBITDA margin, respectively, are included in the section entitled "Reconciliations of non-GAAP measures";
•Adjusted Operating Income and Adjusted Operating Income margin, which are non-GAAP measures discussed in the section entitled "Results of operations." Adjusted Operating Income is our net income or loss adjusted for the following items: (i) interest expense, (ii) income tax expense, (iii) amortization of acquired intangible assets, (iv) losses on extinguishment of debt, (v) charges associated with the impairment of certain assets, (vi) gain on sale of business, and (vii) certain other adjustments. This measurement is our segment reporting profitability measure under GAAP. Adjusted Operating Income margin is Adjusted Operating Income divided by net sales as determined under GAAP. We believe that these measurements are useful to investors as ways to analyze the underlying trends in our business consistently across the periods presented. These measurements are used by our management for the same reason. A reconciliation of net income or loss and net income or loss margin, the most directly comparable GAAP financial measures, to Adjusted Operating Income and Adjusted Operating Income margin, respectively, are included in the section entitled "Reconciliations of non-GAAP measures";
•Cash flows from operating activities, which we discuss in the section entitled "Liquidity and capital resources-Historical cash flows";
•Free cash flow, which is a non-GAAP measure, is equal to our cash flows from operating activities, less capital expenditures, plus direct transaction costs and income taxes paid related to acquisitions and divestitures (as applicable) in the period. We believe that this measurement is useful to investors as it provides a view on the Company's ability to generate cash for use in financing or investing activities. This measurement is used by management for the same reason. A reconciliation of cash flows from operating activities, the most directly comparable GAAP financial measure, to free cash flow, is included in the section entitled "Liquidity and capital resources-Historical cash flows."
Results of operations
We present results of operations in the same way that we manage our business, evaluate our performance and allocate our resources. We also provide discussion of net sales and Adjusted Operating Income by segment: Laboratory Solutions and Bioscience Production. Corporate costs are managed on a standalone basis, certain of which are allocated to our reportable segments.
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Executive summary
|
(dollars in millions)
|
Three months ended September 30, | Change | |||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| Net sales | $ | 1,623.8 | $ | 1,714.4 | $ | (90.6) | |||||||||||
| Gross margin | 32.4 | % | 32.9 | % | (50) bps | ||||||||||||
|
Operating (loss) income
|
$ | (648.8) | $ | 124.6 | $ | (773.4) | |||||||||||
|
Operating (loss) income margin
|
(40.0) | % | 7.3 | % | (4,730) bps | ||||||||||||
|
Net (loss) income
|
$ | (711.8) | $ | 57.8 | $ | (769.6) | |||||||||||
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Net (loss) income margin
|
(43.8) | % | 3.4 | % | (4,720) bps | ||||||||||||
| Adjusted EBITDA | $ | 267.9 | $ | 302.5 | $ | (34.6) | |||||||||||
| Adjusted EBITDA margin | 16.5 | % | 17.6 | % | (110) bps | ||||||||||||
| Adjusted Operating Income | $ | 237.3 | $ | 274.8 | $ | (37.5) | |||||||||||
| Adjusted Operating Income margin | 14.6 | % | 16.0 | % | (140) bps | ||||||||||||
The third quarter net sales decline was primarily driven by the divestiture of our Clinical Services business within our Advanced Lab Services business, and by reduced customer demand within our Total Science Solutions business, both impacting the Laboratory Solutions segment. These factors contributed to a contraction in gross profit. The decrease in operating income was caused primarily by a non-cash goodwill impairment charge in our Distribution reporting unit, as described in note 7. Lower gross profit resulted in reduced Adjusted Operating Income and Adjusted EBITDA, partially offset by a reduction in SG&A expenses.
Net Sales
Three months ended
| (in millions) |
Three months ended September 30,
|
Reconciliation of net sales growth (decline) to organic net sales growth (decline) | |||||||||||||||||||||||||||||||||
| Net sales growth (decline) | Foreign currency impact | Divestiture impact | Organic net sales growth (decline) | ||||||||||||||||||||||||||||||||
|
2025
|
2024
|
||||||||||||||||||||||||||||||||||
| Laboratory Solutions | $ | 1,096.5 | $ | 1,171.5 | $ | (75.0) | $ | 31.0 | $ | (48.4) | $ | (57.6) | |||||||||||||||||||||||
| Bioscience Production | 527.3 | 542.9 | (15.6) | 7.7 | - | (23.3) | |||||||||||||||||||||||||||||
| Total | $ | 1,623.8 | $ | 1,714.4 | $ | (90.6) | $ | 38.7 | $ | (48.4) | $ | (80.9) | |||||||||||||||||||||||
Net sales decreased $90.6 million or 5.3%, which included $38.7 million or 2.2% of favorable foreign currency impact and $48.4 million or 2.8% of impact related to our Clinical Services divestiture. Organic net sales decreased by $80.9 million or 4.7%.
In the Laboratory Solutions segment, net sales decreased by $75.0 million or 6.4%, which included $31.0 million or 2.6% of favorable foreign currency impact and $48.4 million or 4.1% of impact related to our Clinical Services divestiture. Organic net sales decreased by $57.6 million or 4.9%. The sales decrease was primarily driven by lower demand for consumables and equipment & instrumentation in our Total Science Solutions business within the Laboratory Solutions segment due to the uncertainty around funding and increased competitive intensity.
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In the Bioscience Production segment, net sales decreased by $15.6 million or 2.9%, which included $7.7 million or 1.4% of favorable foreign currency impact. Organic net sales decreased by $23.3 million or 4.3%. The sales decrease was primarily driven by lower sales volume in Silicones, partially offset by higher demand for our formulated offerings to customers in the semiconductor industry.
Nine months ended
| (in millions) |
Nine months ended September 30,
|
Reconciliation of net sales growth (decline) to organic net sales growth (decline) | |||||||||||||||||||||||||||||||||
| Net sales growth (decline) | Foreign currency impact | Divestiture impact | Organic net sales growth (decline) | ||||||||||||||||||||||||||||||||
|
2025
|
2024
|
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| Laboratory Solutions | $ | 3,283.6 | $ | 3,484.3 | $ | (200.7) | $ | 42.1 | $ | (140.6) | $ | (102.2) | |||||||||||||||||||||||
| Bioscience Production | 1,605.0 | 1,612.7 | (7.7) | 9.0 | - | (16.7) | |||||||||||||||||||||||||||||
| Total | $ | 4,888.6 | $ | 5,097.0 | $ | (208.4) | $ | 51.1 | $ | (140.6) | $ | (118.9) | |||||||||||||||||||||||
Net sales decreased $208.4 million or 4.1%, which included $51.1 million or 1.0% of favorable foreign currency impact and $140.6 million or 2.8% of impact related to our Clinical Services divestiture. Organic decline in net sales was $118.9 million or 2.3%.
In the Laboratory Solutions segment, net sales decreased $200.7 million or 5.8%, which included $42.1 million or 1.1% of favorable foreign currency impact and $140.6 million or 4.0% of impact related to our Clinical Services divestiture. Organic net sales decreased $102.2 million or 2.9%. The sales decline was primarily driven by decreased demand for consumables and equipment and instrumentation from our Total Science Solutions business due to the uncertainty around funding and increased competitive intensity.
In the Bioscience Production segment, net sales decreased $7.7 million or 0.5%, which included $9.0 million or 0.5% of favorable foreign currency impact. Organic net sales decreased by $16.7 million or 1.0%. The sales decrease was primarily driven by lower demand for third party clean room consumables due to lower usage, and by declines in our proprietary clinical and industrial chemicals offerings. These decreases were partially offset by growth in process ingredients and excipients and single-use solutions in our bioprocessing business.
Gross margin
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Three months ended September 30,
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Change |
Nine months ended September 30,
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Change | ||||||||||||||||||||||||||||||||
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2025
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2024
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2025
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2024
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| Gross margin | 32.4 | % | 32.9 | % | (50) bps | 33.0 | % | 33.7 | % | (70) bps | |||||||||||||||||||||||||
Three and nine months ended
Gross margin for the three months ended September 30, 2025 contracted by 50 basis points due to inflationary pressures and unfavorable manufacturing variances, partially offset by improved product mix. For the nine months ended September 30, 2025, margin contracted 70 basis points driven by inflationary pressures, unfavorable manufacturing variances and the divestiture of our Clinical Services business, partially offset by lower inventory reserves.
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Operating (loss) income
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(in millions)
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Three months ended September 30,
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Change |
Nine months ended September 30,
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Change | |||||||||||||||||||||||||||||||
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2025
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2024
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2025
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2024
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| Gross profit | $ | 526.5 | $ | 564.4 | $ | (37.9) | $ | 1,615.5 | $ | 1,716.4 | $ | (100.9) | |||||||||||||||||||||||
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Operating expenses (excluding impairment
charges)
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390.3 | 439.8 | (49.5) | 1,203.1 | 1,269.7 | (66.6) | |||||||||||||||||||||||||||||
| Impairment charges | 785.0 | - | 785.0 | 785.0 | - | 785.0 | |||||||||||||||||||||||||||||
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Operating (loss) income
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$ | (648.8) | $ | 124.6 | $ | (773.4) | $ | (372.6) | $ | 446.7 | $ | (819.3) | |||||||||||||||||||||||
Three and nine months ended
Operating (loss) income for the three months ended September 30, 2025 decreased primarily due to a non-cash impairment charge in our Distribution reporting unit and lower gross profit, as previously discussed, partially offset by a reduction of SG&A expenses. The reduction in SG&A expenses was driven by lower restructuring and severance charges, savings from our cost transformation initiative and the divestiture of our Clinical Services business.
Operating (loss) income for the nine months ended September 30, 2025 decreased primarily due to a non-cash impairment charge in our Distribution Lab reporting unit and lower gross profit, as previously discussed, partially offset by a reduction of SG&A expenses. The reduction in SG&A expenses was driven by lower restructuring and severance charges, savings from our cost transformation initiative and the divestiture of our Clinical Services business.
Net (loss) income
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(in millions)
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Three months ended September 30,
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Change |
Nine months ended September 30,
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Change | |||||||||||||||||||||||||||||||
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2025
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2024
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2025
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2024
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Operating (loss) income
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$ | (648.8) | $ | 124.6 | $ | (773.4) | $ | (372.6) | $ | 446.7 | $ | (819.3) | |||||||||||||||||||||||
| Interest expense, net | (44.2) | (48.7) | 4.5 | (129.8) | (173.9) | 44.1 | |||||||||||||||||||||||||||||
| Loss on extinguishment of debt | (0.2) | (2.1) | 1.9 | (0.2) | (6.5) | 6.3 | |||||||||||||||||||||||||||||
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Other income (expense), net
|
3.7 | 0.7 | 3.0 | (19.5) | 3.4 | (22.9) | |||||||||||||||||||||||||||||
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Income tax expense
|
(22.3) | (16.7) | (5.6) | (60.5) | (58.6) | (1.9) | |||||||||||||||||||||||||||||
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Net (loss) income
|
$ | (711.8) | $ | 57.8 | $ | (769.6) | $ | (582.6) | $ | 211.1 | $ | (793.7) | |||||||||||||||||||||||
Three and nine months ended
Net (loss) income for the three months ended September 30, 2025 decreased primarily due to lower operating (loss) income, as previously discussed, and higher income tax expense, partially offset by lower interest expense resulting from debt repayments made over the last twelve months.
Net (loss) income for the nine months ended September 30, 2025 decreased primarily due to lower operating (loss) income, as previously discussed, and pension termination charges, partially offset by lower interest expense resulting from debt repayments made over the last twelve months.
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Adjusted EBITDA and Adjusted EBITDA margin
For reconciliations of Adjusted EBITDA and Adjusted EBITDA margin to net (loss) income and net (loss) income margin, respectively, the most directly comparable measures under GAAP, see "Reconciliations of non-GAAP financial measures."
| (dollars in millions) |
Three months ended September 30,
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Change |
Nine months ended September 30,
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Change | |||||||||||||||||||||||||||||||
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2025
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2024
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2025
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2024
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Adjusted EBITDA
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$ | 267.9 | $ | 302.5 | $ | (34.6) | $ | 817.3 | $ | 891.1 | $ | (73.8) | |||||||||||||||||||||||
| Adjusted EBITDA margin | 16.5 | % | 17.6 | % | (110) bps | 16.7 | % | 17.5 | % | (80) bps | |||||||||||||||||||||||||
Three and nine months ended
For the three months ended September 30, 2025, Adjusted EBITDA decreased by $34.6 million or 11.4%, which included a favorable foreign currency translation impact of $6.4 million or 2.2%. The remaining decline of $41.0 million or 13.6% was primarily driven by the divestiture of our Clinical Services business and lower gross profit, partially offset by savings from our cost transformation initiative.
For the nine months ended September 30, 2025, Adjusted EBITDA decreased by $73.8 million or 8.3%, which included a favorable foreign currency translation impact of $8.4 million or 0.9%. The remaining decline of $82.2 million or 9.2% was primarily driven by the divestiture of our Clinical Services business and lower gross profit, partially offset by savings from our cost transformation initiative.
Adjusted Operating Income and Adjusted Operating Income margin
For reconciliations of Adjusted Operating Income and Adjusted Operating Income margin to net (loss) income and net (loss) income margin, respectively, the most directly comparable measures under GAAP, see "Reconciliations of non-GAAP financial measures."
| (dollars in millions) |
Three months ended September 30,
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2024
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2024
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Adjusted Operating Income:
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| Laboratory Solutions | $ | 123.6 | $ | 151.5 | $ | (27.9) | $ | 395.9 | $ | 450.7 | $ | (54.8) | |||||||||||||||||||||||
| Bioscience Production | 127.7 | 138.1 | (10.4) | 390.8 | 409.0 | (18.2) | |||||||||||||||||||||||||||||
| Corporate | (14.0) | (14.8) | 0.8 | (54.4) | (49.2) | (5.2) | |||||||||||||||||||||||||||||
| Total | $ | 237.3 | $ | 274.8 | $ | (37.5) | $ | 732.3 | $ | 810.5 | $ | (78.2) | |||||||||||||||||||||||
| Adjusted Operating Income margin | 14.6 | % | 16.0 | % | (140) bps | 15.0 | % | 15.9 | % | (90) bps | |||||||||||||||||||||||||
Three months ended
Adjusted Operating Income decreased $37.5 million or 13.6%, which included a favorable foreign currency translation impact of $5.4 million or 2.0%. The remaining decline of $42.9 million or 15.6% is further discussed below.
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In the Laboratory Solutions segment, Adjusted Operating Income declined $27.9 million or 18.4%, or 20.7% when adjusted for favorable foreign currency translation impact. The decrease was primarily due to the divestiture of our Clinical Services business, lower sales volume and inflationary pressures, partially offset by savings from our cost transformation initiative.
In the Bioscience Production segment, Adjusted Operating Income declined $10.4 million or 7.5%, or 8.9% when adjusted for favorable foreign currency translation impact. The decrease was primarily driven by lower sales volume, partially offset by commercial excellence.
In Corporate, Adjusted Operating Income decreased $0.8 million due to various immaterial factors.
Nine months ended
Adjusted Operating Income decreased $78.2 million or 9.6%, which included a favorable foreign currency translation impact of $6.8 million or 0.9%. The remaining decline was $85.0 million or 10.5%, which is further discussed below.
In the Laboratory Solutions segment, Adjusted Operating Income declined $54.8 million or 12.2%, or 13.2% when adjusted for favorable foreign currency translation impact. The decrease was primarily due to the divestiture of our Clinical Services business, lower sales volumes and inflationary pressures, partially offset by savings from our cost transformation initiative.
In the Bioscience Production segment, Adjusted Operating Income declined $18.2 million or 4.4%, or 5.0% when adjusted for favorable foreign currency translation impact. The decrease was primarily driven by lower sales volume and unfavorable manufacturing variances, partially offset by commercial excellence and savings from our cost transformation initiative.
In Corporate, Adjusted Operating Income decreased $5.2 million due to immaterial offsetting factors.
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Reconciliations of non-GAAP measures
The following table presents the reconciliation of net (loss) income and net (loss) income margin to Adjusted EBITDA and Adjusted EBITDA margin, respectively:
| (dollars in millions, % based on net sales) |
Three months ended September 30,
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Nine months ended September 30,
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2025
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2024
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2025
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2024
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| $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||||||||||||
|
Net (loss) income
|
$ | (711.8) | (43.8) | % | $ | 57.8 | 3.4 | % | $ | (582.6) | (11.9) | % | $ | 211.1 | 4.1 | % | |||||||||||||||||||||||||||||||
| Interest expense, net | 44.2 | 2.7 | % | 48.7 | 2.8 | % | 129.8 | 2.7 | % | 173.9 | 3.4 | % | |||||||||||||||||||||||||||||||||||
|
Income tax expense
|
22.3 | 1.4 | % | 16.7 | 1.0 | % | 60.5 | 1.1 | % | 58.6 | 1.2 | % | |||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 104.5 | 6.5 | % | 102.4 | 5.9 | % | 306.9 | 6.3 | % | 304.6 | 5.9 | % | |||||||||||||||||||||||||||||||||||
| Loss on extinguishment of debt | 0.2 | - | % | 2.1 | 0.1 | % | 0.2 | - | % | 6.5 | 0.1 | % | |||||||||||||||||||||||||||||||||||
|
Restructuring and severance charges1
|
2.2 | 0.1 | % | 49.4 | 2.9 | % | 28.0 | 0.6 | % | 82.3 | 1.7 | % | |||||||||||||||||||||||||||||||||||
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Transformation expenses2
|
13.7 | 0.8 | % | 17.1 | 1.0 | % | 49.5 | 1.0 | % | 46.6 | 0.9 | % | |||||||||||||||||||||||||||||||||||
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Reserve for certain legal matters, net3
|
1.6 | 0.1 | % | 7.9 | 0.5 | % | 5.2 | 0.1 | % | 7.9 | 0.2 | % | |||||||||||||||||||||||||||||||||||
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Other4
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7.8 | 0.5 | % | 0.4 | - | % | 18.5 | 0.4 | % | (0.4) | - | % | |||||||||||||||||||||||||||||||||||
|
Pension termination charges5
|
(1.8) | (0.1) | % | - | - | % | 16.3 | 0.3 | % | - | - | % | |||||||||||||||||||||||||||||||||||
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Impairment charges6
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785.0 | 48.3 | % | - | - | % | 785.0 | 16.1 | % | - | - | % | |||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 267.9 | 16.5 | % | $ | 302.5 | 17.6 | % | $ | 817.3 | 16.7 | % | $ | 891.1 | 17.5 | % | |||||||||||||||||||||||||||||||
━━━━━━━━━
1.Reflects the incremental expenses incurred in the period related to restructuring initiatives to increase profitability and productivity. Costs included in this caption are specific to employee severance, site-related exit costs, and contract termination costs. These expenses represent costs incurred to achieve the Company's publicly-announced cost transformation initiative.
2.Represents incremental expenses directly associated with the Company's publicly-announced cost transformation initiative, primarily related to the cost of external advisors.
3.Represents charges and legal costs, net of recoveries, in connection with certain litigation and other contingencies that are unrelated to our core operations and not reflective of on-going business and operating results.
4.Represents net foreign currency (gain) loss from financing activities, other stock-based compensation expense (benefit), a purchase price adjustment related to the sale of our Clinical Services business in 2024, and $6.1 million of severance and transition costs associated with the replacement of our Chief Executive Officer.
5.As described in note 13 to our unaudited condensed consolidated financial statements.
6.As described in note 7to our unaudited condensed consolidated financial statements.
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The following table presents the reconciliation of net (loss) income and net (loss) income margin to Adjusted Operating Income and Adjusted Operating Income margin, respectively:
| (dollars in millions, % based on net sales) |
Three months ended September 30,
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Nine months ended September 30,
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2025
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2024
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2025
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2024
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| $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||||||||||||
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Net (loss) income
|
$ | (711.8) | (43.8) | % | $ | 57.8 | 3.4 | % | $ | (582.6) | (11.9) | % | $ | 211.1 | 4.1 | % | |||||||||||||||||||||||||||||||
| Interest expense, net | 44.2 | 2.7 | % | 48.7 | 2.8 | % | 129.8 | 2.7 | % | 173.9 | 3.4 | % | |||||||||||||||||||||||||||||||||||
|
Income tax expense
|
22.3 | 1.4 | % | 16.7 | 1.0 | % | 60.5 | 1.1 | % | 58.6 | 1.2 | % | |||||||||||||||||||||||||||||||||||
| Loss on extinguishment of debt | 0.2 | - | % | 2.1 | 0.1 | % | 0.2 | - | % | 6.5 | 0.1 | % | |||||||||||||||||||||||||||||||||||
|
Other income (expense), net
|
(3.7) | (0.3) | % | (0.7) | - | % | 19.5 | 0.5 | % | (3.4) | (0.1) | % | |||||||||||||||||||||||||||||||||||
|
Operating (loss) income
|
(648.8) | (40.0) | % | 124.6 | 7.3 | % | (372.6) | (7.6) | % | 446.7 | 8.7 | % | |||||||||||||||||||||||||||||||||||
| Amortization | 76.1 | 4.7 | % | 75.4 | 4.3 | % | 225.5 | 4.6 | % | 225.6 | 4.4 | % | |||||||||||||||||||||||||||||||||||
|
Restructuring and severance charges1
|
2.2 | 0.1 | % | 49.4 | 2.9 | % | 28.0 | 0.6 | % | 82.3 | 1.7 | % | |||||||||||||||||||||||||||||||||||
|
Transformation expenses2
|
13.7 | 0.8 | % | 17.1 | 1.0 | % | 49.5 | 1.0 | % | 46.6 | 0.9 | % | |||||||||||||||||||||||||||||||||||
|
Reserve for certain legal matters, net3
|
1.6 | 0.1 | % | 7.9 | 0.5 | % | 5.2 | 0.1 | % | 7.9 | 0.2 | % | |||||||||||||||||||||||||||||||||||
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Other4
|
7.5 | 0.6 | % | 0.4 | - | % | 11.7 | 0.2 | % | 1.4 | - | % | |||||||||||||||||||||||||||||||||||
|
Impairment charges5
|
785.0 | 48.3 | % | - | - | % | 785.0 | 16.1 | % | - | - | % | |||||||||||||||||||||||||||||||||||
| Adjusted Operating Income | $ | 237.3 | 14.6 | % | $ | 274.8 | 16.0 | % | $ | 732.3 | 15.0 | % | $ | 810.5 | 15.9 | % | |||||||||||||||||||||||||||||||
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1.Reflects the incremental expenses incurred in the period related to restructuring initiatives to increase profitability and productivity. Costs included in this caption are specific to employee severance, site-related exit costs, and contract termination costs. These expenses represent costs incurred to achieve the Company's publicly-announced cost transformation initiative.
2.Represents incremental expenses directly associated with the Company's publicly-announced cost transformation initiative, primarily related to the cost of external advisors.
3.Represents charges and legal costs, net of recoveries, in connection with certain litigation and other contingencies that are unrelated to our core operations and not reflective of on-going business and operating results.
4.Represents other stock-based compensation expense (benefit), a purchase price adjustment related to the sale of our Clinical Services business in 2024, and $6.1 million of severance and transition costs associated with the replacement of our Chief Executive Officer.
5.As described in note 7to our unaudited condensed consolidated financial statements.
Liquidity and capital resources
We fund short-term cash requirements primarily from operating cash flows and credit facilities. Most of our long-term financing is from indebtedness. For the three and nine months ended September 30, 2025, we generated $207.4 million and $471.1 million of cash from operating activities, respectively, ended the quarter with $251.9 million of cash and cash equivalents and our availability under our credit facilities was $1,009.4 million.
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As disclosed in Note 10, in connection with the October 2025 refinancing, we amended our revolving credit facility to obtain an additional $425.0 million in available funding, increasing the total availability under the facility to $1,400.0 million.
In accordance with ASC 470-10-45-14 and ASC 855, we reclassified the 2.625% secured notes and Euro term loans B-5 from current liabilities to noncurrent liabilities in the accompanying balance sheet as of September 30, 2025. As a result of the refinancing, we have no debt repayments due in the next twelve months other than required term loan payments of $20.8 million and repayment of receivables facility borrowings of $192.7 million as of September 30, 2025.
In October 2025, we repaid the outstanding borrowings and terminated our receivables facility.
In October 2025, our Board of Directors authorized the repurchase of up to $500.0 million of our common stock, exclusive of fees, commissions and related transaction expenses. Repurchases may be funded through our available cash, borrowings under existing credit facilities or other financing arrangements approved by the Board of Directors. Management is authorized to repurchase our common stock on the open market or in privately negotiated transactions, through one or more Rule 10b5-1 trading plans, Rule 10b-18 repurchase programs, accelerated share repurchase programs, including any collateral arrangements, or a combination thereof. The timing, manner, price and amount of repurchases will be determined by management depending upon economic, market and other conditions. The repurchase program may be modified, suspended, or terminated at any time. Repurchases under the program will be held as treasury shares.
Liquidity
The following table presents our primary sources of liquidity:
|
(in millions)
|
September 30, 2025 | ||||||||||||||||
| Receivables facility | Revolving credit facility | Total | |||||||||||||||
| Unused availability under credit facilities: | |||||||||||||||||
| Capacity | $ | 238.2 | $ | 975.0 | $ | 1,213.2 | |||||||||||
| Undrawn letters of credit outstanding | (3.6) | (7.5) | (11.1) | ||||||||||||||
| Outstanding borrowings | (192.7) | - | (192.7) | ||||||||||||||
| Unused availability | $ | 41.9 | $ | 967.5 | $ | 1,009.4 | |||||||||||
| Cash and cash equivalents | 251.9 | ||||||||||||||||
| Total liquidity | $ | 1,261.3 | |||||||||||||||
As of September 30, 2025, some of our credit line availability depends upon maintaining a sufficient borrowing base of eligible accounts receivable. We believe that we have sufficient capital resources to meet our liquidity needs.
During the period ended September 30, 2025, our debt agreements included representations and covenants that we considered usual and customary, and our receivables facility and senior secured credit facilities included a financial covenant that would become applicable for periods in which we have drawn more than 35% of our revolving credit facility under the senior secured credit facilities. In that circumstance, we would not have been permitted to have combined borrowings on our senior secured credit facilities and secured notes in excess of a pro forma net leverage ratio, as defined in our credit agreements (as in effect during the quarter ended September 30, 2025). As we had not drawn more than
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35% of our revolving credit facility in this period, this covenant was not applicable at September 30, 2025. As disclosed in note 10, both the newly issued senior secured term loans and the amended revolving credit facility include covenants that we consider to be usual and customary. As part of the refinancing and addition of the new €400.0 million term loan, (i) the leverage-based financial covenant in the credit facility agreement became a full-time financial maintenance covenant, whereas previously it had been a "springing covenant", and (ii) a new consolidated interest coverage ratio financial maintenance covenant was added to the credit facilities agreement, in both cases on usual and customary terms for facility agreements governing these types of senior secured term loan and revolving credit facilities.
At September 30, 2025, $224.2 million or 89.0% of our $251.9 million in cash and cash equivalents was held by our non-U.S. subsidiaries and may be subject to certain taxes upon repatriation, primarily where foreign withholding taxes apply.
Historical cash flows
The following table presents a summary of cash provided by (used in) various activities:
|
(in millions)
|
Nine months ended September 30,
|
Change
|
|||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| Operating activities: | |||||||||||||||||
|
Net (loss) income
|
$ | (582.6) | $ | 211.1 | $ | (793.7) | |||||||||||
|
Non-cash items1
|
1,154.1 | 355.3 | 798.8 | ||||||||||||||
|
Working capital changes2
|
(49.5) | 62.3 | (111.8) | ||||||||||||||
| All other | (50.9) | 38.8 | (89.7) | ||||||||||||||
| Total | $ | 471.1 | $ | 667.5 | $ | (196.4) | |||||||||||
| Investing activities: | |||||||||||||||||
| Capital expenditures | (93.3) | (121.3) | 28.0 | ||||||||||||||
| Other | 2.5 | 1.7 | 0.8 | ||||||||||||||
| Total | $ | (90.8) | $ | (119.6) | $ | 28.8 | |||||||||||
| Financing activities | (410.1) | (525.9) | 115.8 | ||||||||||||||
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1.Consists of typical non-cash charges including depreciation and amortization, stock-based compensation expense, deferred income tax expense, impairment charges, non-cash restructuring charges and others.
2.Includes changes to our accounts receivable, inventory, contract assets and accounts payable.
Cash flows from operating activities provided $196.4 million less cash in 2025, primarily due to a reduction in net income, as previously discussed, higher net working capital requirements and higher incentive compensation payments made in 2025 related to fiscal year 2024.
Investing activities used $28.8 million less cash in 2025. The change was primarily attributable to a decrease in capital expenditures compared to the prior year.
Financing activities used $115.8 million less cash in 2025, primarily due to the lower prepayments of term loans and increased borrowings from our receivables facility in the current year, partially offset by a decrease in proceeds from stock option exercises compared to the prior year.
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Free cash flow
| (in millions) |
Nine months ended September 30,
|
Change | |||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| Net cash provided by operating activities | $ | 471.1 | $ | 667.5 | $ | (196.4) | |||||||||||
| Capital expenditures | (93.3) | (121.3) | 28.0 | ||||||||||||||
|
Divestiture-related transaction expenses and taxes paid
|
1.4 | - | 1.4 | ||||||||||||||
| Free cash flow | $ | 379.2 | $ | 546.2 | $ | (167.0) | |||||||||||
Free cash flow was $167.0 million lower in 2025, primarily due to lower cash flow from operating activities as previously discussed, partially offset by a decrease in capital expenditures.
Indebtedness
For information about our indebtedness, refer to the section entitled "Liquidity" and note 10 to our unaudited condensed consolidated financial statements included in Part I, Item 1 -"Financial statements."
Avantor Inc. published this content on October 29, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on October 29, 2025 at 13:02 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]