Avantor(AVTR) - 2025 Q2 - Quarterly Report

Glossary Provides definitions for key terms used throughout the financial report Cautionary factors regarding forward-looking statements Highlights inherent risks and uncertainties associated with forward-looking statements in the report - The report contains forward-looking statements subject to risks, uncertainties, and assumptions, which are not guarantees of performance[7][8] - Key factors that could affect future results include disruptions, competition, ability to implement strategies, changing industry trends, adverse spending trends, dependence on limited sources, integration of acquired businesses, product quality, customer and distributor relationships, and regulatory changes[9][10] PART I — FINANCIAL INFORMATION Presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial statements This section presents the unaudited condensed consolidated financial statements for Avantor, Inc. and its subsidiaries, including balance sheets, statements of operations, comprehensive income or loss, stockholders' equity, and cash flows, along with detailed notes explaining the nature of operations, accounting policies, segment information, debt, and other financial instruments Unaudited condensed consolidated balance sheets Presents the company's financial position, including assets, liabilities, and equity, at specific reporting dates Balance Sheet Highlights | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------------- | :-------------------------- | :-------------------------- | | Total assets | $12,776.9 | $12,114.5 | | Total liabilities | $6,491.0 | $6,157.8 | | Total stockholders' equity | $6,285.9 | $5,956.7 | | Cash and cash equivalents | $449.4 | $261.9 | | Current portion of debt | $1,254.3 | $821.1 | Unaudited condensed consolidated statements of operations Details the company's revenues, expenses, and net income or loss over specific periods Statements of Operations Highlights | Metric | Three months ended June 30, 2025 (in millions) | Three months ended June 30, 2024 (in millions) | Six months ended June 30, 2025 (in millions) | Six months ended June 30, 2024 (in millions) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net sales | $1,683.4 | $1,702.8 | $3,264.8 | $3,382.6 | | Net income | $64.7 | $92.9 | $129.2 | $153.3 | | Basic EPS | $0.09 | $0.14 | $0.19 | $0.23 | | Diluted EPS | $0.09 | $0.14 | $0.19 | $0.22 | Unaudited condensed consolidated statements of comprehensive income or loss Reports net income and other comprehensive income or loss components, reflecting total changes in equity from non-owner sources Comprehensive Income Highlights | Metric | Three months ended June 30, 2025 (in millions) | Three months ended June 30, 2024 (in millions) | Six months ended June 30, 2025 (in millions) | Six months ended June 30, 2024 (in millions) | | :-------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net income | $64.7 | $92.9 | $129.2 | $153.3 | | Other comprehensive income (loss) | $107.3 | $(10.3) | $173.6 | $(38.3) | | Comprehensive income | $172.0 | $82.6 | $302.8 | $115.0 | - Comprehensive income significantly increased for both the three and six months ended June 30, 2025, primarily driven by unrealized gains from foreign currency translation[19] Unaudited condensed consolidated statements of stockholders' equity Outlines changes in the company's equity accounts, including retained earnings and accumulated other comprehensive income Stockholders' Equity Highlights | Metric | Balance at Dec 31, 2024 (in millions) | Balance at Jun 30, 2025 (in millions) | | :-------------------------- | :------------------------------------ | :------------------------------------ | | Total stockholders' equity | $5,956.7 | $6,285.9 | | Accumulated earnings | $2,203.0 | $2,332.2 | | Accumulated other comprehensive loss | $(184.0) | $(10.4) | - Total stockholders' equity increased by $329.2 million from December 31, 2024, to June 30, 2025, largely due to comprehensive income and stock-based compensation[23] Unaudited condensed consolidated statements of cash flows Summarizes cash inflows and outflows from operating, investing, and financing activities over specific periods Cash Flow Summary | Cash Flow Activity | Six months ended June 30, 2025 (in millions) | Six months ended June 30, 2024 (in millions) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net cash provided by operating activities | $263.7 | $422.7 | | Net cash used in investing activities | $(57.5) | $(79.1) | | Net cash used in financing activities | $(40.5) | $(327.3) | | Net change in cash, cash equivalents and restricted cash | $187.5 | $9.0 | - Net cash provided by operating activities decreased by $159.0 million YoY, while net cash used in investing activities improved by $21.6 million due to lower capital expenditures. Net cash used in financing activities significantly decreased by $286.8 million, primarily due to the absence of term loan prepayments[25][157][158] Notes to unaudited condensed consolidated financial statements This section provides detailed explanations and disclosures for the unaudited condensed consolidated financial statements, covering the company's operations, new accounting standards, earnings per share calculations, segment performance, cash flow details, inventory, intangible assets, commitments, debt structure, accumulated other comprehensive income, stock-based compensation, other income/expense, income taxes, derivative and hedging activities, and fair value measurements of financial instruments 1. Nature of operations and presentation of financial statements Describes the company's business activities and the basis for preparing its unaudited condensed consolidated financial statements - Avantor, Inc. is a global manufacturer and distributor serving biopharmaceutical, healthcare, education & government, and advanced technologies & applied materials industries[26] - The unaudited condensed consolidated financial statements are prepared pursuant to SEC regulations, reflecting normal, recurring adjustments, and are not necessarily indicative of full-year results[27] 2. New accounting standards Discusses recently issued accounting pronouncements and their potential impact on the company's financial reporting - ASU 2023-09 (Improvements to Income Tax Disclosures) is effective for annual periods beginning after December 15, 2024, and will result in additional disclosures for the year ending December 31, 2025[31][32] - ASU 2024-03 (Disaggregation of Income Statement Expenses) is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027; the company is currently evaluating its impact[33][34] 3. Earnings per share Provides details on basic and diluted earnings per share calculations for the reporting periods Earnings Per Share Data | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic EPS | $0.09 | $0.14 | $0.19 | $0.23 | | Diluted EPS | $0.09 | $0.14 | $0.19 | $0.22 | | Basic weighted average shares outstanding (millions) | 681.5 | 679.4 | 681.3 | 678.7 | | Diluted weighted average shares outstanding (millions) | 681.8 | 682.6 | 682.0 | 681.9 | - Anti-dilutive shares not included in diluted EPS were 16.7 million for the three months and 14.7 million for the six months ended June 30, 2025[36] 4. Segment financial information Presents financial data for the company's operating segments, including net sales and adjusted operating income - The company's reporting structure consists of two segments: Laboratory Solutions and Bioscience Production, with Adjusted Operating Income used to evaluate segment profitability[37][38] Segment Performance Data | Segment | Period | Net Sales (2025, in millions) | Net Sales (2024, in millions) | Change (YoY) | Adjusted Operating Income (2025, in millions) | Adjusted Operating Income (2024, in millions) | Change (YoY) | | :-------------------- | :-------------------- | :---------------------------- | :---------------------------- | :----------- | :-------------------------------------------- | :-------------------------------------------- | :----------- | | Laboratory Solutions | Three months ended Jun 30 | $1,122.1 | $1,155.7 | (2.9%) | $133.3 | $150.9 | (11.7%) | | Bioscience Production | Three months ended Jun 30 | $561.3 | $547.1 | 2.6% | $139.7 | $144.0 | (3.0%) | | Total | Three months ended Jun 30 | $1,683.4 | $1,702.8 | (1.1%) | $252.2 | $277.2 | (9.0%) | | Laboratory Solutions | Six months ended Jun 30 | $2,187.1 | $2,312.8 | (5.4%) | $272.3 | $299.1 | (9.0%) | | Bioscience Production | Six months ended Jun 30 | $1,077.7 | $1,069.8 | 0.7% | $263.1 | $270.9 | (2.9%) | | Total | Six months ended Jun 30 | $3,264.8 | $3,382.6 | (3.5%) | $495.0 | $535.6 | (7.6%) | Product Category Data | Product Category | Period | 2025 (in millions) | 2024 (in millions) | | :--------------- | :-------------------- | :----------------- | :----------------- | | Proprietary | Three months ended Jun 30 | $893.8 | $914.0 | | Third-party | Three months ended Jun 30 | $789.6 | $788.8 | | Total | Three months ended Jun 30 | $1,683.4 | $1,702.8 | | Proprietary | Six months ended Jun 30 | $1,723.5 | $1,797.5 | | Third-party | Six months ended Jun 30 | $1,541.3 | $1,585.1 | | Total | Six months ended Jun 30 | $3,264.8 | $3,382.6 | 5. Supplemental disclosures of cash flow information Offers additional details on cash and restricted cash balances and non-cash investing and financing activities Cash and Restricted Cash Balances | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------------- | :-------------------------- | :-------------------------- | | Cash and cash equivalents | $449.4 | $261.9 | | Restricted cash | $2.8 | $2.8 | | Total cash, cash equivalents and restricted cash | $452.2 | $264.7 | Cash Paid For | Cash Paid For | Six months ended June 30, 2025 (in millions) | Six months ended June 30, 2024 (in millions) | | :-------------------------- | :------------------------------------------- | :------------------------------------------- | | Income taxes, net | $93.8 | $86.5 | | Interest, net (excluding financing leases) | $79.3 | $116.1 | 6. Inventory Details the composition and changes in the company's inventory balances Inventory Composition | Inventory Component | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :------------------ | :-------------------------- | :-------------------------- | | Merchandise inventory | $451.6 | $416.0 | | Finished goods | $114.4 | $101.2 | | Raw materials | $150.1 | $149.3 | | Work in process | $63.7 | $65.0 | | Total | $779.8 | $731.5 | - Total inventory increased by $48.3 million from December 31, 2024, to June 30, 2025[16][48] 7. Other intangible assets Provides information on the carrying values and impairment of the company's finite-lived and indefinite-lived intangible assets Intangible Assets Carrying Values | Intangible Asset | June 30, 2025 (Carrying Value, in millions) | December 31, 2024 (Carrying Value, in millions) | | :--------------------- | :------------------------------------------ | :------------------------------------------ | | Customer relationships | $2,871.1 | $2,857.1 | | Trade names | $103.5 | $111.2 | | Other | $283.3 | $299.6 | | Total finite-lived | $3,257.9 | $3,267.9 | | Indefinite-lived | $92.3 | $92.3 | | Total | $3,350.2 | $3,360.2 | - Accumulated impairment losses on Customer relationships and Other intangible assets totaled $106.4 million as of June 30, 2025[50] 8. Commitments and contingencies Discloses the company's environmental liabilities, legal proceedings, and other potential obligations - The company has an accrued obligation of $2.3 million for groundwater remediation in Phillipsburg, New Jersey, which is indemnified[52] - A liability of $1.1 million is recorded for soil and groundwater contamination remediation and monitoring at a site in Gliwice, Poland, which is not covered by indemnification[53] - As of June 30, 2025, there was no outstanding litigation believed to result in material losses[58] 9. Debt Outlines the company's debt structure, including outstanding balances, interest rates, and credit facilities Debt Structure and Facilities | Debt Instrument | June 30, 2025 (Amount, in millions) | December 31, 2024 (Amount, in millions) | | :-------------------------- | :---------------------------------- | :---------------------------------- | | Total debt, gross | $4,261.0 | $4,077.8 | | Current portion of debt | $1,254.3 | $821.1 | | Debt, net of current portion | $2,988.2 | $3,234.7 | - Interest expense, net, for the six months ended June 30, 2025, was $(85.6) million, an improvement from $(125.2) million in 2024, primarily due to debt repayments[17][60] - The U.S. Dollar term loan interest rate was repriced from SOFR plus 2.25% to SOFR plus 2.00% per annum on April 2, 2024[64] Credit Facility Details | Credit Facility | Capacity (in millions) | Undrawn letters of credit outstanding (in millions) | Outstanding borrowings (in millions) | Unused availability (in millions) | | :-------------------- | :--------------------- | :---------------------------------------- | :--------------------------------- | :-------------------------------- | | Receivables facility | $272.8 | $(15.0) | $(100.0) | $157.8 | | Revolving credit facility | $975.0 | $(3.4) | $0.0 | $971.6 | | Total | $1,247.8 | $(18.4) | $(100.0) | $1,129.4 | 10. Accumulated other comprehensive income (loss) Details the components and changes in accumulated other comprehensive income or loss Accumulated Other Comprehensive Income (Loss) Components | Component | Balance at Dec 31, 2024 (in millions) | Balance at Jun 30, 2025 (in millions) | | :-------------------------- | :------------------------------------ | :------------------------------------ | | Foreign currency translation | $(177.4) | $(23.8) | | Derivative instruments | $0.2 | $0.1 | | Defined benefit plans | $(6.8) | $13.3 | | Total AOCI | $(184.0) | $(10.4) | - AOCI improved significantly from a loss of $184.0 million at December 31, 2024, to a loss of $10.4 million at June 30, 2025, primarily due to unrealized gains from foreign currency translation[16][67] 11. Stock-based compensation Provides information on stock-based compensation expense, unvested awards, and grants Stock-Based Compensation Expense | Compensation Type | Three months ended June 30, 2025 (in millions) | Three months ended June 30, 2024 (in millions) | Six months ended June 30, 2025 (in millions) | Six months ended June 30, 2024 (in millions) | | :-------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Stock options | $2.4 | $2.6 | $4.8 | $5.7 | | RSUs | $13.1 | $8.8 | $23.4 | $17.6 | | Other | $0.0 | $(0.3) | $(0.3) | $0.5 | | Total | $15.5 | $11.1 | $27.9 | $23.8 | - Unvested awards have a remaining expense of $114.9 million to be recognized over a weighted average period of 1.7 years as of June 30, 2025[69] - During the six months ended June 30, 2025, the company granted 0.9 million stock options and 4.4 million RSUs[70][71] 12. Other income or expense, net Reports non-operating income and expenses, including foreign currency impacts and pension-related charges Other Income/Expense Breakdown | Component | Three months ended June 30, 2025 (in millions) | Three months ended June 30, 2024 (in millions) | Six months ended June 30, 2025 (in millions) | Six months ended June 30, 2024 (in millions) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net foreign currency (loss) gain from financing activities | $(3.9) | $1.0 | $(7.1) | $1.8 | | (Expense) income related to defined benefit plans | $(0.3) | $0.6 | $(17.8) | $0.9 | | Other (expense) income, net | $(3.7) | $1.6 | $(23.2) | $2.7 | - Other (expense) income, net, for the six months ended June 30, 2025, was a $(23.2) million expense, primarily due to $18.1 million in pension termination costs recorded in the first quarter of 2025[72][74] 13. Income taxes Details income before taxes, income tax expense, and the effective income tax rate, along with recent tax law changes Income Tax Metrics | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income before income taxes | $81.7 | $114.6 | $167.4 | $195.2 | | Income tax expense | $(17.0) | $(21.7) | $(38.2) | $(41.9) | | Effective income tax rate | 20.8% | 18.9% | 22.8% | 21.5% | - The change in the effective tax rate for the three and six months ended June 30, 2025, is primarily due to a year-to-date shortfall in the tax deduction from stock option exercises[78] - The U.S. enacted H.R. 1 (One Big Beautiful Bill Act) on July 4, 2025, which is anticipated to reduce current and ongoing cash tax obligations due to provisions like immediate expensing for R&D and 100% bonus depreciation[79] 14. Derivative and hedging activities Describes the company's use of interest rate and cross-currency swaps to manage financial risks - The company uses interest rate swaps as cash flow hedges to manage interest rate risk, with an immaterial amount estimated to be reclassified as an increase to interest expense in the next twelve months[82][83] - Cross-currency swaps are used to hedge net investments in foreign entities, with a total notional amount of $750.0 million at June 30, 2025, maturing in April 2027, 2028, and 2029[90][91] - A €400.0 million senior unsecured note previously designated as a net investment hedge was de-designated in October 2024, with no impact on earnings[95][96] 15. Financial instruments and fair value measurements Presents the fair value measurements of the company's financial instruments, particularly debt Fair Value of Debt Instruments | Debt Instrument | June 30, 2025 (Gross Amount, in millions) | June 30, 2025 (Fair Value, in millions) | | :-------------------------- | :---------------------------------------- | :-------------------------------------- | | Receivables facility | $100.0 | $100.0 | | Senior secured credit facilities | $538.5 | $540.1 | | Secured notes | $763.9 | $763.6 | | Unsecured notes | $2,820.1 | $2,750.8 | | Finance lease liabilities | $29.9 | $29.9 | | Other | $8.6 | $8.6 | | Total | $4,261.0 | $4,193.0 | - The fair values of debt instruments are based on standard pricing models and private trading data, classified as Level 2 measurements[102] Item 2. Management's discussion and analysis of financial condition and results of operations This section provides management's perspective on Avantor's financial condition and results of operations for the quarter and six months ended June 30, 2025. It discusses key financial performance indicators, factors influencing the business, and a detailed analysis of net sales, gross margin, operating income, net income, and non-GAAP measures like Adjusted EBITDA and Adjusted Operating Income, concluding with an overview of liquidity and capital resources Basis of presentation Explains the context for management's discussion and analysis, emphasizing material changes since the last annual report - This discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes, focusing on material changes since December 31, 2024[103] Overview Summarizes the company's key financial performance indicators for the reporting period, including net sales and net income Quarterly Performance Overview | Metric | Three months ended June 30, 2025 (in millions) | | :-------------------------- | :--------------------------------------------- | | Net sales | $1,683.4 | | Net income | $64.7 | | Adjusted EBITDA | $279.8 | | Adjusted Operating Income | $252.2 | - Net sales for Q2 2025 declined 1.1%, including a 0.2% organic net sales decrease compared to Q2 2024[104] Factors and current trends affecting our business and results of operations Discusses significant internal and external factors influencing the company's financial performance and strategic direction - The sale of the Clinical Services business on October 17, 2024, impacts results but was not classified as a discontinued operation[106] - The company continues to experience inflationary pressures across all cost categories, which may adversely impact results despite mitigation efforts[107] - The global cost transformation initiative has expanded, now targeting approximately $400 million in run rate gross savings by the end of 2027, up from the previous target of $300 million by the end of 2026[109][110] - Fluctuations in foreign currency rates, particularly the Euro, have caused significant variability in consolidated results[111] Key indicators of performance and financial condition Identifies the primary GAAP and non-GAAP metrics used by management to assess the company's operational and financial health - The company monitors GAAP measures (Net sales, gross margin, operating income, net income) and non-GAAP measures (Organic net sales growth, Adjusted EBITDA, Adjusted Operating Income, Free cash flow) to evaluate performance[114][117] - Organic net sales growth (decline) is a non-GAAP measure that eliminates impacts from acquisitions, divestitures, and foreign currency exchange rates to assess underlying commercial operating performance[114] - Adjusted EBITDA and Adjusted Operating Income are non-GAAP measures used to analyze underlying business trends and segment profitability, respectively[114] Results of operations This section details the financial performance for the three and six months ended June 30, 2025, highlighting declines in net sales, gross margin, operating income, and net income, primarily due to reduced customer demand, the Clinical Services divestiture, and inflationary pressures, partially offset by cost transformation savings. It also provides segment-specific performance for Laboratory Solutions and Bioscience Production Executive summary Provides a high-level overview of the company's financial results, highlighting key changes in sales, margins, and profitability Executive Summary Financials | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change | | :-------------------------- | :------------------------------- | :------------------------------- | :------- | | Net sales | $1,683.4M | $1,702.8M | $(19.4)M | | Gross margin | 32.9% | 34.1% | (120) bps | | Operating income | $128.8M | $175.8M | $(47.0)M | | Net income | $64.7M | $92.9M | $(28.2)M | | Adjusted EBITDA | $279.8M | $305.6M | $(25.8)M | | Adjusted Operating Income | $252.2M | $277.2M | $(25.0)M | - The Q2 net sales decline was primarily driven by reduced customer demand in the Laboratory Solutions segment and the divestiture of the Clinical Services business[116] - Lower gross profit, partially offset by savings from the cost transformation initiative, resulted in lower Adjusted Operating Income and Adjusted EBITDA[116] Net Sales Analyzes the drivers of net sales performance, including organic growth, foreign currency impacts, and divestitures, across segments Net Sales Growth by Segment | Segment | Period | Net sales growth (decline) | Foreign currency impact | Divestiture impact | Organic net sales growth (decline) | | :-------------------- | :-------------------- | :------------------------- | :---------------------- | :----------------- | :--------------------------------- | | Laboratory Solutions | Three months ended Jun 30 | $(33.6)M | $25.6M | $(48.1)M | $(11.1)M | | Bioscience Production | Three months ended Jun 30 | $14.2M | $5.8M | $0.0M | $8.4M | | Total | Three months ended Jun 30 | $(19.4)M | $31.4M | $(48.1)M | $(2.7)M | | Laboratory Solutions | Six months ended Jun 30 | $(125.7)M | $11.1M | $(92.2)M | $(44.6)M | | Bioscience Production | Six months ended Jun 30 | $7.9M | $1.3M | $0.0M | $6.6M | | Total | Six months ended Jun 30 | $(117.8)M | $12.4M | $(92.2)M | $(38.0)M | - Laboratory Solutions organic net sales decreased due to lower demand for consumables in Total Science Solutions, while Bioscience Production organic net sales increased due to higher sales volume in Silicones and improved sales of process ingredients and excipients[119][120][122][123] Gross margin Examines the factors influencing the company's gross margin, such as pricing, costs, and product mix Gross Margin Trends | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Change | | :----------- | :------------------------------- | :------------------------------- | :----- | :----------------------------- | :----------------------------- | :----- | | Gross margin | 32.9% | 34.1% | (120) bps | 33.4% | 34.1% | (70) bps | - Gross margin contracted due to inflationary pressures, the divestiture of the Clinical Services business, and unfavorable manufacturing variances[125] Operating income Details the components affecting operating income, including gross profit, operating expenses, and strategic initiatives Operating Income Breakdown | Metric | Three months ended June 30, 2025 (in millions) | Three months ended June 30, 2024 (in millions) | Change (in millions) | Six months ended June 30, 2025 (in millions) | Six months ended June 30, 2024 (in millions) | Change (in millions) | | :--------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------- | :------------------------------------------ | :------------------------------------------ | :------------------- | | Gross profit | $554.1 | $581.5 | $(27.4) | $1,089.0 | $1,152.0 | $(63.0) | | Operating expenses | $425.3 | $405.7 | $19.6 | $812.8 | $829.9 | $(17.1) | | Operating income | $128.8 | $175.8 | $(47.0) | $276.2 | $322.1 | $(45.9) | - Operating income decreased primarily due to lower gross profit and higher SG&A expenses (driven by restructuring, transformation expenses, and inflationary compensation), partially offset by cost transformation savings and the Clinical Services divestiture[127][128] Net income Explains the changes in net income, considering operating performance, interest expense, and other non-operating items Net Income Trends | Metric | Three months ended June 30, 2025 (in millions) | Three months ended June 30, 2024 (in millions) | Change (in millions) | Six months ended June 30, 2025 (in millions) | Six months ended June 30, 2024 (in millions) | Change (in millions) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------- | :------------------------------------------ | :------------------------------------------ | :------------------- | | Operating income | $128.8 | $175.8 | $(47.0) | $276.2 | $322.1 | $(45.9) | | Net income | $64.7 | $92.9 | $(28.2) | $129.2 | $153.3 | $(24.1) | - Net income decreased primarily due to lower operating income and pension termination charges, partially offset by lower interest expense resulting from debt repayments[130][131] Adjusted EBITDA and Adjusted EBITDA margin Discusses the company's non-GAAP Adjusted EBITDA and its margin, highlighting adjustments for non-recurring items Adjusted EBITDA and Margin | Metric | Three months ended June 30, 2025 (in millions) | Three months ended June 30, 2024 (in millions) | Change (in millions) | Six months ended June 30, 2025 (in millions) | Six months ended June 30, 2024 (in millions) | Change (in millions) | | :-------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------- | :------------------------------------------ | :------------------------------------------ | :------------------- | | Adjusted EBITDA | $279.8 | $305.6 | $(25.8) | $549.3 | $588.6 | $(39.3) | | Adjusted EBITDA margin | 16.6% | 17.9% | (130) bps | 16.8% | 17.4% | (60) bps | - The decline in Adjusted EBITDA was primarily driven by the divestiture of the Clinical Services business, lower gross profit, and inflationary pressures on compensation expense, partially offset by savings from the cost transformation initiative[133][134] Adjusted Operating Income and Adjusted Operating Income margin Analyzes segment-level profitability using non-GAAP Adjusted Operating Income and its margin Adjusted Operating Income by Segment | Segment | Period | Adjusted Operating Income (2025, in millions) | Adjusted Operating Income (2024, in millions) | Change (in millions) | | :-------------------- | :-------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------- | | Laboratory Solutions | Three months ended Jun 30 | $133.3 | $150.9 | $(17.6) | | Bioscience Production | Three months ended Jun 30 | $139.7 | $144.0 | $(4.3) | | Corporate | Three months ended Jun 30 | $(20.8) | $(17.7) | $(3.1) | | Total | Three months ended Jun 30 | $252.2 | $277.2 | $(25.0) | | Adjusted Operating Income margin | Three months ended Jun 30 | 15.0% | 16.3% | (130) bps | - Laboratory Solutions Adjusted Operating Income declined due to the Clinical Services divestiture, inflationary pressures, and unfavorable product mix, while Bioscience Production declined due to unfavorable manufacturing variances and inflationary compensation[137][138][140][141][142] Adjusted Operating Income by Segment (Six Months) | Segment | Period | Adjusted Operating Income (2025, in millions) | Adjusted Operating Income (2024, in millions) | Change (in millions) | | :-------------------- | :-------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------- | | Laboratory Solutions | Six months ended Jun 30 | $272.3 | $299.1 | $(26.8) | | Bioscience Production | Six months ended Jun 30 | $263.1 | $270.9 | $(7.8) | | Corporate | Six months ended Jun 30 | $(40.4) | $(34.4) | $(6.0) | | Total | Six months ended Jun 30 | $495.0 | $535.6 | $(40.6) | | Adjusted Operating Income margin | Six months ended Jun 30 | 15.2% | 15.8% | (60) bps | Reconciliations of non-GAAP measures Provides detailed reconciliations from GAAP net income to non-GAAP financial measures like Adjusted EBITDA and Adjusted Operating Income Non-GAAP Adjustments | Adjustment | Three months ended June 30, 2025 (in millions) | Six months ended June 30, 2025 (in millions) | | :-------------------------- | :--------------------------------------------- | :------------------------------------------ | | Restructuring and severance charges | $21.4 | $25.8 | | Transformation expenses | $20.4 | $35.8 | | Reserve for certain legal matters, net | $3.6 | $3.6 | | Pension termination charges | $0.0 | $18.1 | - The reconciliation tables provide detailed adjustments from GAAP net income to non-GAAP Adjusted EBITDA and Adjusted Operating Income, including items like amortization, restructuring, and transformation expenses[144][148] Liquidity and capital resources This section outlines Avantor's liquidity position, sources of funding, historical cash flow performance, and debt structure. It highlights a decrease in cash from operating activities but an improvement in cash used in investing and financing activities, resulting in lower free cash flow for the six months ended June 30, 2025 Liquidity Assesses the company's short-term financial health, including available cash and credit facilities Liquidity Position | Metric | June 30, 2025 (in millions) | | :-------------------------------- | :-------------------------- | | Unused availability under credit facilities | $1,129.4 | | Cash and cash equivalents | $449.4 | | Total liquidity | $1,578.8 | - The company has $1,254.3 million in current portion of debt due in the next twelve months[16][151] - $291.4 million (64.8%) of cash and cash equivalents was held by non-U.S. subsidiaries, which may be subject to certain taxes upon repatriation[154] Historical cash flows Reviews the company's cash generation and usage from operating, investing, and financing activities over time Historical Cash Flow Activities | Cash Flow Activity | Six months ended June 30, 2025 (in millions) | Six months ended June 30, 2024 (in millions) | Change (in millions) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | :------------------- | | Net cash provided by operating activities | $263.7 | $422.7 | $(159.0) | | Net cash used in investing activities | $(57.5) | $(79.1) | $21.6 | | Financing activities | $(40.5) | $(327.3) | $286.8 | - The decrease in operating cash flow was primarily due to higher net working capital requirements, higher incentive compensation payments, and lower income before income taxes[157] - The significant decrease in cash used in financing activities was primarily due to the absence of term loan prepayments in the current year[158] Free cash flow Analyzes the company's ability to generate cash after capital expenditures, a key measure of financial flexibility Free Cash Flow Analysis | Metric | Six months ended June 30, 2025 (in millions) | Six months ended June 30, 2024 (in millions) | Change (in millions) | | :-------------------------- | :------------------------------------------- | :------------------------------------------- | :------------------- | | Net cash provided by operating activities | $263.7 | $422.7 | $(159.0) | | Capital expenditures | $(57.6) | $(80.5) | $22.9 | | Divestiture-related transaction expenses and taxes paid | $1.4 | $0.0 | $1.4 | | Free cash flow | $207.5 | $342.2 | $(134.7) | - Free cash flow decreased by $134.7 million, primarily due to lower cash flow from operating activities, partially offset by a decrease in capital expenditures[159] Indebtedness Refers to detailed information on the company's debt structure and obligations - For detailed information about indebtedness, refer to Note 9 to the unaudited condensed consolidated financial statements[160] Item 3. Quantitative and qualitative disclosures about market risk States that there were no material changes to the company's market risk disclosures during the quarter ended June 30, 2025 - There were no material changes to the quantitative and qualitative disclosures about market risk during the quarter ended June 30, 2025, as reported in the Annual Report[160] Item 4. Controls and procedures Confirms the effectiveness of the company's disclosure controls and internal control over financial reporting - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[161] - No material changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2025[162] PART II — OTHER INFORMATION Contains disclosures on legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits Item 1. Legal proceedings Refers to Note 8 of the financial statements for information on legal proceedings, confirming no material outstanding litigation - For additional information regarding legal proceedings, refer to Note 8 of the unaudited condensed consolidated financial statements[163] - As of June 30, 2025, there was no outstanding litigation believed to result in material losses[58] Item 1A. Risk factors Confirms no material changes to previously disclosed risk factors - No material changes to the risk factors disclosed in the Annual Report for the year ended December 31, 2024, or the Quarterly Report on Form 10-Q for the period ended March 31, 2025, were reported[164] Item 2. Unregistered sales of equity securities and use of proceeds States that no unregistered sales of equity securities or use of proceeds occurred during the period - None reported[165] Item 3. Defaults upon senior securities No defaults upon senior securities were reported during the period - None reported[166] Item 4. Mine safety disclosures This item is not applicable to the company - Not applicable[167] Item 5. Other information This section discloses that Michael Stubblefield, Director, President, and CEO, adopted a Rule 10b5-1 trading plan on May 6, 2025, to sell up to 906,204 shares through stock option exercises. No other directors or officers adopted or terminated such plans during the quarter - Michael Stubblefield, Director, President, and Chief Executive Officer, adopted a Rule 10b5-1 trading plan on May 6, 2025, to sell up to 906,204 shares through the exercise of stock options[168] - No other directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[169] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including transition agreements, severance plans, RSU grant notices, certifications, and XBRL exhibits - Exhibits include the Transition Agreement for Michael Stubblefield, the Avantor, Inc. Executive Severance and Change in Control Plan, Form of 2025 Restricted Stock Unit Grant Notice, and certifications required by the Sarbanes-Oxley Act[173] Signature Confirms the official signing and submission of the report