Avantor Inc

Previous wording

For the fiscal year ended December 31, 2023, we recorded net sales of $6,967.2 million, net income of $321.1 million and Adjusted EBITDA of $1,309.1 million. Net sales declined 7.3% which included 7.8% organic decrease compared to the same period in 2022. See “Reconciliations of non-GAAP measures” for a reconciliation of net income to Adjusted EBITDA and “Results of operations” for a reconciliation of net sales growth to organic net sales growth.

Current wording

For the fiscal year ended December 31, 2024, we recorded net sales of $6,783.6 million, net income of $711.5 million, Adjusted EBITDA of $1,198.8 million and Adjusted Operating Income of $1,089.8 million. Net sales declined 2.6% which included 2.1% organic net sales decrease compared to the same period in 2023. See “Reconciliations of non-GAAP measures” for reconciliations of net income to Adjusted EBITDA and Adjusted Operating Income, and net 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).

Previous wording

Our results are being impacted by the transition from the global coronavirus outbreak

Current wording

Our business continues to be impacted by the transition from the global COVID-19 pandemic

Previous wording

Customer demand and required inventory levels continue to normalize in the transition from the COVID-19 pandemic. The transition from the outbreak continued to impact the full year results of our three segments, as described further in the “Results of operations” section.

Current wording

Customer demand and required inventory levels continue to normalize in the transition from the COVID-19 pandemic. The transition from the outbreak continued to impact the full year results of our two segments, as described further in the “Results of operations” section.

Previous wording

Our results are impacted by our recent acquisitions to further enhance our business model

Current wording

Our results are impacted by a divestiture to further refine our business model

Previous wording

We increased our liquidity and mitigated the impact of rising rates

Current wording

We increased our liquidity and mitigated the impact of interest rate volatility

Previous wording

In June 2023, we amended the revolving credit facility to increase its funding limit up to $975.0 million and extended the term to June 29, 2028. We capitalized $2.3 million of fees in connection with this transaction. We also amended our U.S. dollar term loan B-5 from LIBOR based variable-rate rate interest to SOFR based variable-rate rate interest. We made prepayments of $680.0 million and $21.5 million on U.S. dollar term loan B-5 and Euro term loan B-4, which reduced our variable-rate debt. To further protect against rising interest rates, in April 2023, we entered into an interest rate swap to convert payments on $100.0 million of our U.S. dollar debt from SOFR based variable rate interest to fixed rate interest.

Current wording

In June 2023, we amended the revolving credit facility to increase its funding limit up to $975.0 million and extended the term to June 29, 2028.

Previous wording

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. See Item 7A, “Quantitative and qualitative disclosures about market risk.”

Current wording

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. See Part I, Item 7A, “Quantitative and qualitative disclosures about market risk.”

Previous wording

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 measures that we believe are useful to investors, creditors and others in assessing our performance. These measurements 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 measurements, and such measurements may not be comparable to similarly-titled measurements reported by other companies. Rather, these measurements should be considered as an additional way of viewing aspects of our operations that provide a more complete understanding of our business.

Current wording

To evaluate our performance, we monitor a number of key indicators. As appropriate, we supplement our results of operations determined in accordance with U.S. 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.

Previous wording

•Net sales, gross margin, operating income andnet income or loss. These measures are discussed in the section entitled “Results of operations”;

Current wording

•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”;

Previous wording

•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 earnings from any acquired or disposed businesses 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”;

Current wording

•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”;

Previous wording

•Adjusted EBITDA and Adjusted EBITDA margin, which are non-GAAP measures discussed in the section entitled “Results of operations.” Adjusted EBITDA is used by investors to measure and evaluate our operating performance exclusive of interest expense, income tax expense, depreciation, amortization and 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 a way to analyze the underlying trends in our business consistently across the periods presented. A reconciliation of net income or loss, the most directly comparable GAAP financial measure, to Adjusted EBITDA is included in the section entitled “Reconciliations of non-GAAP measures”;

Current wording

•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 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, (viii) and 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”;

Previous wording

•Cash flows from operating activities, which is discussed in the section entitled “Liquidity and capital resources—Historical cash flows”; and

Current wording

•Cash flows from operating activities, which we discuss in the section entitled “Liquidity and capital resources—Historical cash flows”;

Previous wording

•Free cash flow, which is a non-GAAP measure, is equal to our cash flow from operating activities, plus acquisition-related costs paid in the period, less capital expenditures. 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 flows, is included in the section entitled “Liquidity and capital resources—Historical cash flows.”

Current wording

•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.”

Previous wording

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 EBITDA by geographic segment based on customer location: the Americas, Europe and AMEA. Corporate costs are managed on a standalone basis and not allocated to segments.

Current wording

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.

Previous wording

Net sales decline was driven by decreases in all three regions primarily due to declines in customer demand, the impact of customer destocking, and COVID-19 related headwinds. Unfavorable product mix and inflationary factors contributed to contraction in gross margin. Softness in sales volumes along with unfavorable product mix drove Adjusted EBITDA margin contraction.

Current wording

In 2023, the net sales decline was driven primarily by reduced customer demand, the impact of customer destocking, and COVID-19 related headwinds. Unfavorable product mix and inflationary pressures contributed to contraction in gross margin. Operating income was driven primarily by asset impairment charges recorded in 2023. Lower sales volumes along with unfavorable product mix drove Adjusted EBITDA margin contraction and Adjusted Operating Income margin contraction.

Previous wording

Gross margin decreased (70) basis points resulting primarily from unfavorable product mix and the impact of inflationary pressures, partially offset by lower distribution costs.

Current wording

In 2023, gross margin decreased 70 basis points resulting primarily from unfavorable product mix and the impact of inflationary pressures, partially offset by lower distribution costs.

Previous wording

Operating income decreased primarily from lower gross profit, as previously discussed, as well as higher operating expenses driven by asset impairment charges recorded in the second quarter of 2023, accrual of a long-term retention incentive, inflation and investments made to grow the business, partially offset by lower accruals related to incentive compensation.

Current wording

In 2023, operating income decreased primarily from lower gross profit, as previously discussed, as well as higher operating expenses driven by asset impairment charges recorded in 2023, accrual of a long-term retention incentive, inflation and investments made to grow the business, partially offset by lower accruals related to incentive compensation.

Previous wording

Net income decreased primarily due to lower operating income, as previously discussed, as well as higher interest expense from rising interest rates on our variable-rate term loans, partially offset by lower income tax expense due to lower income before income taxes.

Current wording

In 2023, net income decreased primarily due to lower operating income, as previously discussed, as well as higher interest expense from rising interest rates on our variable-rate term loans, partially offset by lower income tax expense due to lower income before income taxes.

Previous wording

For reconciliations of Adjusted EBITDA to net income, see “Reconciliations of non-GAAP measures.”

Current wording

For reconciliations of Adjusted EBITDA and Adjusted EBITDA margin to net income and net income margin, respectively, the most directly comparable measures under GAAP, see “Reconciliations of non-GAAP measures.”

Previous wording

Adjusted EBITDA decreased $261.6 million or 16.7%, which included a favorable foreign currency translation impact of $5.3 million or 0.3%. The remaining decrease was $266.9 million or 17.0%.

Current wording

In 2023, Adjusted EBITDA decreased $261.6 million or 16.7%, which included a favorable foreign currency translation impact of $5.3 million or 0.3%. The remaining decline of $266.9 million or 17.0% was driven primarily by lower gross profit, partially offset by reduced operating expenses and lower distribution costs.

Previous wording

In AMEA, Adjusted EBITDA declined $16.2 million or 11.4%, or 10.4% when adjusted for unfavorable foreign currency translation impact. The decrease was driven by lower sales volume and inflationary pressures, partially offset by lower distribution costs.

Current wording

In the Laboratory Solutions segment, Adjusted Operating Income declined $70.3 million or 10.5%, or 10.2% when adjusted for unfavorable foreign currency translation impact. The decrease was driven primarily by lower sales volume and higher annual incentive compensation expenses, partially offset by savings from our cost transformation initiative.

Previous wording

In the Americas, Adjusted EBITDA decreased $164.7 million or 15.2%. There was no material foreign currency translation impact to Adjusted EBITDA. The decrease was driven by lower sales volumes and unfavorable product mix, partially offset by reduced operating expenses and lower distribution costs.

Current wording

In the Laboratory Solutions segment, Adjusted Operating Income declined $96.4 million or 12.6%, or 13.1% when adjusted for favorable foreign currency translation impact. The decrease was driven by lower sales volume and unfavorable product mix, partially offset by reduced operating expenses and distribution costs.

Previous wording

In Europe, Adjusted EBITDA declined $74.6 million or 14.2%, or 15.7% when adjusted for favorable foreign currency translation impact. The decrease was driven by lower sales volume and unfavorable product mix, partially offset by reduced operating expenses, distribution costs and favorable manufacturing variances.

Current wording

In the Bioscience Production segment, Adjusted Operating Income declined $177.0 million or 22.7%, or 22.9% when adjusted for favorable foreign currency translation impact. The decrease was driven by lower sales volume and unfavorable product mix, partially offset by reduced operating expenses, distribution costs and favorable manufacturing variances.

Previous wording

The following table presents the reconciliation of net income or loss to Adjusted EBITDA:

Current wording

The following table presents the reconciliation of net income and net income margin to Adjusted EBITDA and Adjusted EBITDA margin, respectively:

Previous wording

Represents non-recurring direct costs incurred with third parties and the accrual of a long-term retention incentive to integrate acquired companies. These expenses represent incremental costs and are unrelated to normal operations of our business. Integration expenses are incurred over a pre-defined integration period specific to each acquisition.

Current wording

Represents direct costs incurred with third parties and the accrual of a long-term retention incentive to integrate acquired companies. These expenses represent incremental costs and are unrelated to normal operations of our business. Integration expenses are incurred over a pre-defined integration period specific to each acquisition.

Previous wording

Represents the non-cash reduction of contingent consideration related to the Ritter acquisition and the amortization of the purchase accounting adjustment to record Masterflex and Ritter inventory at fair value.

Current wording

Represents the non-cash reduction of contingent consideration related to the Ritter acquisition and the amortization of the purchase accounting adjustment to record Masterflex inventory at fair value.

Previous wording

Reflects the incremental expenses incurred in the period related to initiatives to increase profitability and productivity. Typical costs included in this caption are employee severance, site-related exit costs, and contract termination costs.

Current wording

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. The expenses recognized in 2024 represent costs incurred to achieve the Company’s publicly-announced cost transformation initiative.

Previous wording

Represents charges and legal costs 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.

Current wording

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.

Previous wording

At December 31, 2023, $249.2 million or 95% of our 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. We ordinarily generate significant cash flows in the U.S. and deploy U.S. cash flows promptly toward debt principal repayment. Our U.S. business has significant liquidity via our undrawn working capital facilities and therefore management has been comfortable operating with minimal cash balances in the U.S.

Current wording

At December 31, 2024, $217.7 million or 83% of our 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. We ordinarily generate significant cash flows in the U.S. and deploy U.S. cash flows promptly toward debt principal repayment. Our U.S. business has significant liquidity via our unused working capital facilities, which satisfy our day-to-day cash operating needs.

Previous wording

Consists of non-cash charges including depreciation and amortization, impairment charges, stock based compensation expense, deferred income tax expense and others.

Current wording

Consists of non-cash charges including depreciation and amortization, impairment charges, stock-based compensation expense, deferred income tax expense, non-cash restructuring charges, pension termination charges, gain on sale of business and others.

Previous wording

Free cash flow was $13.4 million higher in 2023 due to changes in cash flows from operating activities noted above, partially offset by an increase in capital spending in 2023, principally reflecting growth-related expansions in our global supply chain.

Current wording

Free cash flow was $44.7 million higher in 2024 driven by changes in cash flows from operating activities noted above.

Previous wording

Our credit facilities provide us access to up to $1,310.0 million of borrowing capacity.

Current wording

Our credit facilities provide us access to up to $1,222.6 million of borrowing capacity.

Previous wording

We carry significant amounts of goodwill and other intangible assets on our consolidated balance sheet. At December 31, 2023, the combined carrying value of goodwill and other intangible assets, net of accumulated amortization and impairment charges, was $9,492.0 million or 73% of our total assets.

Current wording

We carry significant amounts of goodwill and other intangible assets on our consolidated balance sheet. At December 31, 2024, the combined carrying value of goodwill and other intangible assets, net of accumulated amortization and impairment charges, was $8,899.4 million or 73% of our total assets.

Previous wording

We are required to estimate the degree to which tax assets and loss carryforwards will result in a future income tax benefit, based on our expectations of future profitability by tax jurisdiction. We provide a valuation allowance for deferred tax assets that we believe will more likely than not go unutilized. If it becomes more likely than not that a deferred tax asset will be realized, we reverse the related valuation allowance and recognize an income tax benefit for the amount of the reversal. At December 31, 2023, our valuation allowance on deferred tax assets was $206.1 million, $159.6 million of which relates to foreign net operating loss carry forwards that are not expected to be realized.

Current wording

We are required to estimate the degree to which tax assets and loss carryforwards will result in a future income tax benefit, based on our expectations of future profitability by tax jurisdiction. We provide a valuation allowance for deferred tax assets that we believe will more likely than not go unutilized. If it becomes more likely than not that a deferred tax asset will be realized, we reverse the related valuation allowance and recognize an income tax benefit for the amount of the reversal. At December 31, 2024, our valuation allowance on deferred tax assets was $214.1 million, $149.2 million of which relates to foreign net operating loss carry forwards that are not expected to be realized.

Previous wording

In the ordinary course of business, there is inherent uncertainty in quantifying our income tax positions. We assess income tax positions for all years subject to examination based upon our evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, we have recorded an amount having greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority assumed to have full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. Our reserve for uncertain tax positions was $106.9 million at December 31, 2023, exclusive of penalties and interest. Where applicable, associated interest expense has also been recognized as a component of interest expense.

Current wording

In the ordinary course of business, there is inherent uncertainty in quantifying our income tax positions. We assess income tax positions for all years subject to examination based upon our evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, we have recorded an amount having greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority assumed to have full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. Our reserve for uncertain tax positions was $83.3 million at December 31, 2024, exclusive of penalties and interest. Where applicable, associated interest expense has also been recognized as a component of interest expense.

Previous wording

Expense for stock options without performance or market conditions is determined on the grant date and recognized ratably over their vesting term. We estimate the grant date fair value of stock options using the Black-Scholes model. This model requires us to make various assumptions, with the most significant assumption currently being the volatility of our stock price. A public quotation was first established for our common stock in May 2019, which does not provide adequate historical basis to reasonably estimate the expected volatility of our common stock over their more than six-year expected life. Instead, we estimate volatility based on historical stock price trends of a peer company set. The fair value of our awards would have differed had we selected different peer companies or used a different technique to estimate volatility. Increasing our expected volatility assumption by 5 percentage points for all stock options at the date of grant would have increased our 2023 stock-based compensation expense by $1.6 million.

Current wording

Expense for stock options without performance or market conditions is determined on the grant date and recognized ratably over their vesting term. We estimate the grant date fair value of stock options using the Black-Scholes model. This model requires us to make various assumptions, with the most significant assumption currently being the volatility of our stock price. A public quotation was first established for our common stock in May 2019, which does not provide adequate historical basis to reasonably estimate the expected volatility of our common stock over their more than six-year expected life. Instead, we estimate volatility based on historical stock price trends of a peer company set. The fair value of our awards would have differed had we selected different peer companies or used a different technique to estimate volatility. Increasing our expected volatility assumption by 5 percentage points for all stock options at the date of grant would have increased our 2024 stock-based compensation expense by $1.1 million.