Avantor Inc

Previous wording

This discussion should be read in conjunction with the accompanying 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, 2023, the date of our Annual Report. Therefore, we encourage you to read this discussion and analysis in conjunction with our Annual Report.

Current wording

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.

Previous wording

During the three months ended September 30, 2024, we recorded net sales of $1,714.4 million, net income of $57.8 million, Adjusted EBITDA of $302.5 million and Adjusted Operating Income of $274.8 million. Net sales decreased by 0.3%, which included a 0.7% decline in organic sales 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 of net sales growth (decline) to organic net sales growth (decline).

Current wording

During the three months ended March 31, 2025, we recorded net sales of $1,581.4 million, net income of $64.5 million, Adjusted EBITDA of $269.5 million and Adjusted Operating Income of $242.8 million. Net sales declined 5.9%, which included a 2.2% organic net sales decrease compared to the same period in 2024. See “Reconciliations of non-GAAP measures” for reconciliations of net income to Adjusted

Previous wording

We have been impacted by supply chain constraints and inflationary pressures

Current wording

We have been impacted by inflationary pressures

Previous wording

We have experienced inventory fluctuations and build up at customers as a result of global supply chain disruptions and 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.

Current wording

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.

Previous wording

We are implementing a cost transformation initiative to reduce our expenses

Current wording

We continue to advance our cost transformation initiative to reduce our expenses

Previous wording

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 cost savings by the end of 2026.

Current wording

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.

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 U.S. generally accepted accounting principles (“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.

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 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

•Organic net sales growth, 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 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 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) 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 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”;

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, 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”;

Previous wording

•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) and certain other adjustments. This measurement is our segment reporting profitability measure under generally accepted accounting principles. 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”;

Current wording

•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”;

Previous wording

•Free cash flow, which is a non-GAAP measure, is equal to our cash flows from operating activities, less capital expenditures, plus the direct costs to close acquisitions and divestitures (including income tax effects, if any) 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.”

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

In the Bioscience Production segment, net sales decreased by $18.2 million or 3.2%, which included $1.9 million or 0.3% of favorable foreign currency impact. Organic net sales decreased by $20.1 million or 3.5%. The sales decline was primarily driven by decreased demand for our proprietary silicones offerings to customers in the healthcare end market and by decreased sales of formulated solutions offerings to customers in the semiconductor industry.

Current wording

In the Bioscience Production segment, net sales decreased by $6.3 million or 1.2%, which included $4.5 million or 0.9% of unfavorable foreign currency impact. Organic net sales decreased by $1.8 million or 0.3%. The sales decline was primarily driven by decreased demand for our formulated solutions offerings to customers in the semiconductor industry and by lower demand for third party clean room consumables due to lower usage.

Previous wording

Operating income for the three months and nine months ended September 30, 2024, decreased primarily from lower gross profit, as previously discussed, higher operating expenses driven by restructuring and severance charges, transformation expenses, and higher accruals related to incentive compensation.

Current wording

Operating income for the three months ended March 31, 2025, increased primarily due to lower SG&A expenses, driven by reduced restructuring and severance charges and the divestiture of our Clinical Services business, partially offset by lower gross profit as previously discussed.

Previous wording

Net income decreased primarily due to lower operating income, as previously discussed, partially offset by lower interest expense due to debt repayments made over the last twelve months and lower income tax expense due to lower income before income taxes.

Current wording

Net income increased primarily due to higher operating income, as previously discussed, and lower interest expense resulting from debt repayments made over the last twelve months, partially offset by pension termination charges.

Previous wording

For a reconciliation 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 financial 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 financial measures.”

Previous wording

For the three months ended September 30, 2024, Adjusted EBITDA decreased by $15.3 million or 4.8%, which included a favorable foreign currency translation impact of $1.3 million or 0.4%. The remaining decline was $16.6 million or 5.2% primarily driven by lower gross profit and the reset of annual incentive compensation, partially offset by savings from our cost transformation initiative.

Current wording

For the three months ended March 31, 2025, Adjusted EBITDA decreased by $13.5 million or 4.8%, which included an unfavorable foreign currency translation impact of $3.2 million or 1.1%. The remaining decline of $10.3 million or 3.7% was primarily driven by the divestiture of our Clinical Services business, partially offset by savings from our cost transformation initiative.

Previous wording

For a reconciliation of Adjusted Operating Income and Adjusted Operating Income margin to net income and net income margin, respectively, the most directly comparable measures under GAAP, see “Reconciliations of non-GAAP financial measures.”

Current wording

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

Previous wording

Adjusted Operating Income decreased $126.5 million or 13.5%, which included an unfavorable foreign currency translation impact of $0.4 million or 0.0%. The remaining decline was $126.1 million or 13.5% which is further discussed below.

Current wording

Adjusted Operating Income decreased $15.6 million or 6.0%, which included an unfavorable foreign currency translation impact of $3.0 million or 1.2%. The remaining decline of $12.6 million or 4.8% is further discussed below.

Previous wording

In the Laboratory Solutions segment, Adjusted Operating Income declined $60.3 million or 11.8%, or 11.5% when adjusted for unfavorable foreign currency translation impact. The decrease was due to increased operating expenses primarily driven by lower sales volume and higher accruals related to incentive compensation, partially offset by savings from our cost transformation initiative.

Current wording

In the Laboratory Solutions segment, Adjusted Operating Income declined $9.2 million or 6.2%, or 4.9% when adjusted for unfavorable foreign currency translation impact. The decrease was primarily due to the divestiture of our Clinical Services business and lower sales volume, partially offset by savings from our cost transformation initiative.

Previous wording

In Corporate, Adjusted Operating Income decreased $2.5 million due to immaterial offsetting factors.

Current wording

In Corporate, Adjusted Operating Income decreased $2.9 million due to various immaterial factors.

Previous 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.

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. These expenses represent costs incurred to achieve the Company’s publicly-announced cost transformation initiative.

Previous wording

Represents net foreign currency (gain) loss from financing activities and other stock-based compensation expense (benefit).

Current wording

Represents net foreign currency (gain) loss from financing activities, other stock-based compensation expense (benefit) and a purchase price adjustment related to the sale of our Clinical Services business in 2024.

Previous 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.

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. These expenses represent costs incurred to achieve the Company’s publicly-announced cost transformation initiative.

Previous wording

Represents other stock-based compensation expense (benefit).

Current wording

Represents other stock-based compensation expense (benefit) and a purchase price adjustment related to the sale of our Clinical Services business in 2024.

Previous wording

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, 2024, we generated $244.8 million and $667.5 million of cash from operating activities, respectively, ended the quarter with $285.3 million of cash and cash equivalents and our availability under our credit facilities was $1,066.3 million. We have no debt repayments due in the next twelve months other than required term loan payments of $20.1 million and receivables facility borrowing of $205.1 million.

Current wording

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 months ended March 31, 2025, we generated $109.3 million of cash from operating activities, ended the quarter with $315.7 million of cash and cash equivalents and our availability under our credit facilities was $1,126.4 million. In the next twelve months, we have coming due a $702.0 million debt repayment related to 2.625% secured notes, required term loan payments of $19.8 million and repayment of receivables facility borrowings of $100.0 million.

Previous wording

At September 30, 2024, $257.2 million or 90.2% of our $285.3 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.

Current wording

At March 31, 2025, $230.9 million or 73.1% of our $315.7 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.

Previous wording

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

Current wording

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

Previous wording

Investing activities used $25.9 million more cash in 2024. The change was primarily attributable to an increase in capital expenditures compared to the prior year.

Current wording

Investing activities used $5.3 million less cash in 2025. The change was primarily attributable to a decrease in capital expenditures compared to the prior year.

Previous wording

Financing activities used $133.7 million less cash in 2024 primarily due to the lower repayments of term loans in 2024 compared to 2023 and higher proceeds received from stock options exercises in 2024 compared to the prior year.

Current wording

Financing activities used $96.6 million less cash in 2025, primarily due to the absence of term loan prepayments in the current year, partially offset by a decrease in proceeds received from stock option exercises compared to the prior year.

Previous wording

Free cash flow was $23.6 million higher in 2024 primarily due to higher cash flow from operating activities as previously discussed, partially offset by an increase in capital spending across the Company in 2024 as noted above.

Current wording

Free cash flow was $24.8 million lower in 2025, primarily due to lower cash flow from operating activities as previously discussed, partially offset by a decrease in capital expenditures.