Avantor, Inc. Q2 2026 Earnings Call

Good morning. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to Avantor's second quarter 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, simply press star then the number 1 on your telephone keypad. If you'd like to withdraw your question, again, press star 1. Thank you. I will now like to turn the conference over to Chris Fiduk, Vice President of Investor Relations. Chris, you may begin. Thank you, operator.

Good morning, everyone, and thank you for joining us. Our speakers today are Emmanuel Ligner, President and Chief Executive Officer, and Steven Eck, Senior Vice President, Interim Chief Financial Officer, and Chief Accounting Officer. The press release and our presentation accompanying this call are available on our investor relations website at ir.avantorsciences.com. Following our prepared remarks, we'll open the call for questions. A replay of the call will be made available on our website later today. During this call, we will make forward-looking statements within the meaning of the U.S. Federal securities laws, including statements regarding events or developments that we believe or anticipate may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings. Actual results may differ materially from any forward-looking statements that we make today.

These forward-looking statements speak only as of the date they are made. We do not assume any obligation to update these forward-looking statements as a result of new information, future events, or other developments. This call will include a discussion of non-GAAP measures. A reconciliation of these non-GAAP measures can be found in the press release and in the supplemental disclosures package on our investor relations website. I will now turn the call over to Emmanuel.

Thank you, Chris, and good morning, everyone. Thank you for joining our call today. I will begin with a high-level update on our second quarter performance. I will then reflect on the actions we've taken since I came into this role nearly 12 months ago and discuss the progress we are making in executing Revival, our comprehensive program to sharpen strategic focus and improve execution. Turning to slide four, let me highlight a few key messages. First, we remain highly focused on executing Revival, and I'm very happy with the progress we made to date. Revival deliver measurable results and put us on a path to sustainable growth. Second, I'm pleased that our second quarter results exceeded expectation across several key financial metrics. Those results were driven by improved performance in our VWR Distribution & Services segments, which returned to positive organic revenue growth during the quarter.

Our Bioscience & Medtech Products segments performed near the high end of our expectation and is positioned to return to growth in the second half. Third, we delivered excellent free cash flow, enabling us to invest in the business while also paying down debt. We remain committed to reduce our adjusted net leverage ratio below 3 times. We raised our 2026 organic revenue growth and Adjusted EPS guidance. Our updated outlook reflect both our second quarter performance as well as higher expectation for the second half of the year. Please turn to slide five, where I will review our Q2 performance highlights. In Q2, we generated $1.69 billion of revenue, which declined 0.4% on organic basis and was up 0.5% on a reported basis. Revenue was stronger than we had anticipated, driven primarily by VWR, which grew 1.7% organically in the quarter.

VWR returned to growth earlier than we anticipated, reflecting the deliberate action taken by segment President Corey Walker and his team to strengthen the business. The segment enter the second half of 2026 with broad-based momentum, and we continue to expect growth to accelerate through the remainder of the year. I will talk more about the driver of VWR return to growth later in my remarks. Turning to BMP. Revenue was near the high end of our expectation, driven by solid execution across the segments. On a year-over-year basis, revenue declined 5.6% organically, reflecting the impact of the discrete factors we had discussed previously. Importantly, BMP delivered sequential revenue growth from Q1 to Q2 and, as anticipated, demonstrated a stable trend. In BMP, we saw stronger order intake and improving operations in the second quarter.

Those leading indicators provide evidence that our Revival initiatives are gaining traction and, when combined with reduced comparison headwinds from discrete factors, give us confidence that BMP will return to organic growth during the second half of 2026. I will discuss Revival impact on BMP shortly. Moving down the P&L, Adjusted EBITDA grew more than 15% sequentially from Q1, driven by increased volumes in both segments. Adjusted earning per share was $0.21 above our expectations for the quarter. One of Avantor key strengths is our ability to consistently generate strong free cash flow. In the second quarter, excluding cash restructuring costs, we generated $152 million of free cash flow. This reflected strong conversion of adjusted net income and keep us on track to achieve our full-year free cash flow guidance.

We used this strong cash generation to repay $112 million of debt during the quarter, further strengthening our balance sheets and underscoring our commitment to reduce our adjusted net leverage ratio to below 3 times. Please turn to slide six. Last year, we launched Avantor Revival, our comprehensive program to sharpen strategic focus and improve execution across the enterprise. Revival is built on five pillars: commercial excellence, operation performance, portfolio optimization, simplification, and talent. Guided by insights from customers, suppliers, and associates at Gemba, we have launched initiatives across each pillar that are producing measurable results. Some examples are on slide seven. We have made important go-to-market changes. We have resegmented Avantor into VWR and BMP to sharpen our focus, simplify the organization, and better serve customers.

We revived the VWR brand and accelerated our digital roadmap, including the relaunch of vwr.com, which has driven stronger customer engagement and e-commerce performance. Across both segments, we are extremely focused on commercial excellence to drive every product and service in a way that delights customers. In BMP, our commercial teams are executing with greater consistency and focus, resulting in stronger customer engagement and higher win rates. This translate into double-digit order growth for BMP and a book-to-bill ratio of 1.1 during the second quarter, while also expanding our funnel of future growth opportunities. Those go-to-market effort are reflected not just in BMP's order momentum, but also in VWR's return to growth. In the manufacturing pillar, we have invested across our supply chain to improve productivity and strengthen customer service. Those investments, combined with the ongoing implementation of a new sales and operation planning process, are driving execution improvements.

For example, during the quarter, we increased the throughput of certain key product lines at a large manufacturing site by more than 25% on average versus the first quarter. This progress is the direct result of Revival initiatives, including the use of Lean and Six Sigma tools to enhance equipment uptime, reliability, and overall productivity. The Simplify How We Work pillar delivers benefits both inside and outside the organization. One example is the recent redesign of our customers onboarding process. Drawing on insights from multiple Gemba walks and a cross-functional Kaizen event, we redesigned the process from end to end, reducing onboarding from 14 steps to just eight, and cutting completion time from up to four days to as little as two days for complex accounts or to just minutes for simple accounts. Finally, as I have said before, Revival begins and ends with people.

We move quickly to complement our strong internal talent with experienced external leaders, refreshing approximately 25% of our senior leadership team and we are driving a culture transformation across Avantor. We are communicating more effectively, collaborating more closely in the field, holding ourselves more accountable through a disciplined focus and measurable outcomes, and putting customer at the center of all what we do. The positive impact of Revival is evident not only in our improved second quarter results, but also in leading indicators such as the strength of our order book and the expansion of our commercial funnels that will ultimately lead to sustainable profitable growth. Please turn to slide eight. VWR return to growth in Q2 marks an important milestone for the segment. While the growth inflection itself is encouraging, the underlying drivers are broad-based, as I will describe, giving us confidence that we are building sustainable momentum.

The leadership team Corey has built over the past year has implemented meaningful changes to VWR organization structure and operating model, setting the stage for segment's improved performance. With the team structure and operating model in place, we made deliberate decision to strengthen our capabilities, operation, brand, and commercial excellence. Together, those action have laid the foundation for the stronger performance we are seeing today. Customers turn to VWR for our global scale, the depth and breadth of our product agnostic catalog, strong supplier relationship, and excellent service. Combined with the changes we have taken over the past year, our strengths are translated into stronger financial results, including stronger growth across key customer segments. Let me review the key factor driving VWR's return to growth in Q2. The first factor was stronger performance with large global customers.

As a reminder, revenue from new business win is realized gradually due to the complexity of customer implementation processes, it can take time before the benefit of strong commercial performance are reflected in our results. Previously, we discussed several elements impacting our large global customer segments, including recontracting activity and other industry dynamics. While our commercial focus and execution has improved significantly over the past year, those historical pressures phased in over the course of 2025, with the cumulative impact moderating in the first quarter of this year. While they continue to represent a headwind in 2026, their impact is diminishing as we move forward, offsetting action have been successful in driving stronger than anticipated results in this segment. Accordingly, year-over-year comparison will become increasingly favorable as the year progress, allowing our result to more fully reflect our underlying commercial momentum.

Our growth rate in the second quarter benefited modestly from this improving comparison dynamic. Over the past year, VWR team has taken thoughtful and deliberate steps to expand our relationship with large global customers. The team focused on retaining and expanding large global customer relationship, strategically developing our new customers pipeline, and accelerating the onboarding process for new contracts. We have executed well against the growth opportunity that our efforts have generated, this new business is contributing to our results sooner and more meaningful than we anticipated. Another important driver of VWR performance is improving growth in our small and mid-sized customer segments, with better e-commerce outcome playing an important role. On our last earnings calls, we highlighted early sign of improving trends following multiple upgrade to our platform, as well as successful relaunch of vwr.com.

We advanced our digital roadmap in the second quarter, customers have responded positively to those enhancements, driving direct traffic, higher conversion, and improved daily sales, particularly among smaller customers who tend to have higher margin. As a result, e-commerce growth accelerated as the quarter progress and was accretive to the segment growth for the quarter. Although our recent progress is encouraging, our digital transformation remains in the early stages. We continue to see substantial opportunity to enhance the customer's experience, deepen engagement, and drive sustained growth in the channel, particularly in Europe. Finally, while deliberate action drove the majority of VWR improved performance, an increase in pharma and biotech customer activity provided a modest tailwind during the quarter, reinforcing our decision last year to focus significantly commercial resources on those customers groups.

It is important to note that activity level in several important end markets, such as education and in certain geographies, particularly Europe, remain stable, but at lower level than we would like to see. An improvement in those end markets could represent an additional tailwind to our growth. Overall, we are pleased by VWR improved results, remain focused on execution to sustain and build the positive momentum. I will now turn the call over to Steve to discuss the number. Steve? Thank you, Emmanuel, and good morning, everyone.

Please turn to slide 10, where I will review our consolidated financial results. In Q2, we generated $1.69 billion of revenue, which declined -0.4% on an organic basis and was up +0.5% on a reported basis. Adjusted EBITDA was $254 million, resulting in a margin of 15%, and adjusted earnings per share of $0.21. Free cash flow for the quarter was $143 million. Excluding cash restructuring costs, free cash flow was $152 million. Both figures were ahead of expectations and underscore Avantor's strong cash flow profile. During the quarter, we repaid approximately $112 million of debt and ended the period with an adjusted net leverage ratio of 3.3 times adjusted EBITDA. Leverage was flat sequentially. Please turn to slide 11.

Revenue for the VWR Distribution & Services segment was $1.24 billion in the second quarter, up 1.7% organically versus the prior year. The primary driver of sequential and year-over-year organic revenue growth was increased volumes from strong commercial execution. Adjusted operating income for VWR was $126 million in Q2, representing an adjusted operating margin of 10.2%. The year-over-year decline in margin is due primarily to mix and inflationary pressures. Sequentially, margins increased approximately 100 basis points from the first quarter due to increased volumes and improved mix. There are two key takeaways from the VWR quarter. First, VWR returned to growth ahead of our expectations, and the majority of this improved performance reflects steps that we have taken to grow the segment. Second, VWR demonstrated stable sequential trends, with revenue increasing from the first quarter primarily due to strong commercial execution.

Let me now discuss the performance in the Bioscience & Medtech Products segment, or BMP. I am on slide 12. In the second quarter, BMP revenue was $452 million, down 5.6% organically versus the prior year. This was near the high end of our expectations, driven by solid performance across product lines. Production chemicals grew faster than expectations, driven by healthy end market conditions, improving operations, and strong order performance. Fluid handling and NuSil were down mid-teens in the quarter, as anticipated, while research and specialty chemicals declined mid-single digits organically, primarily reflecting the anticipated growth headwinds from serum and electronic materials. Last quarter, we indicated that NuSil and the serum and electronic materials businesses within research and specialty chemicals would be headwinds to our quarterly growth rate due to the normalization of discrete customer ordering patterns and shipments in 2025.

We also indicated that we faced a difficult comparison in fluid handling. Collectively, these factors were a headwind of roughly 600 basis points to BMP organic revenue growth in the second quarter. Adjusted operating income for BMP was $118 million in the quarter, representing an adjusted operating margin of 26%. The year-over-year decline in margin was primarily driven by lower volumes. Margins increased sequentially due to increased volumes and mix. There are two key takeaways from the BMP quarter. First, commercial performance was strong as evidenced by our order trends. During the quarter, BMP delivered double-digit order growth and a book-to-bill ratio of 1.1. Order trends were healthy across all business units, and we saw particular strength in our production chemicals and fluid handling order books. Second, BMP demonstrates stable sequential trends with performance near the high end of our expectations. Please turn to slide 13.

Our ability to consistently generate strong free cash flow is a key strength of Avantor. In the second quarter, excluding cash restructuring costs, we generated $152 million of free cash flow, reflecting strong conversion of adjusted net income. Our capital allocation priorities support Revival and our intention to create sustainable shareholder value over the long term. First, we are focused on purposeful investments in the business to enhance customer service and drive top-line organic growth. Next, we are focused on strengthening our balance sheet by prioritizing excess free cash flow towards debt repayment. During the quarter, we repaid $112 million of debt and ended the period with net debt of $3.4 billion. Over the trailing 12 months, we have repaid nearly $500 million of debt. Our adjusted net leverage ratio was 3.3 times at the end of the quarter.

We have made significant progress in strengthening our balance sheet, that momentum was recognized by Moody's, which revised our ratings outlook to positive. In addition, we recently capitalized on favorable market conditions and demand for our credit to reprice one of our term loans on attractive terms in July. We remain committed to reducing our adjusted net leverage ratio to below three times, driven both by continued debt paydown and a return to positive adjusted EBITDA growth as performance improves. Our objective is to finish the fiscal year at or below this target. Please turn to slide 14, where I will discuss our increased 2026 guidance. For 2026, we have raised our organic revenue growth outlook to a range of -0.5% to +0.5%. This increase reflects our Q2 revenue outperformance, as well as higher growth expectations for VWR in the second half of the year.

Given the recent strength of the U.S. dollar, foreign exchange is expected to be a headwind to the reported revenue in the second half. As a result, we now expect FX to contribute about 50 basis points to full-year revenue. In terms of segment performance, we continue to expect VWR's growth rate to improve sequentially through the balance of the year. We expect BMP to return to growth during the second half, driven by improved execution and more favorable discrete comparisons. BMP growth is expected to be stronger in Q3 than in Q4 due to more favorable year-over-year comparisons. Moving to profitability, our adjusted EBITDA margin guidance remains unchanged, as operational outperformance enables us to absorb macro inflationary pressures while also making targeted growth investments. We remain highly focused on cost discipline, as reflected in our overall headcount, which has declined by approximately 3% this year.

Looking ahead, our objective is to deliver a more leveraged P&L. Moving down the income statement, we now expect that net interest expense will decline modestly versus 2025. We also assume a weighted average diluted share count for the year of 677 million shares. All other modeling assumptions are unchanged. Taken together, this translates to an adjusted EPS outlook that has been raised to $0.80-$0.83 for 2026. Finally, we continue to expect free cash flow between $500 million and $550 million in 2026, reflecting Avantor's strong cash generation profile. In terms of phasing, in Q3, we expect to generate adjusted EPS between $0.20 and $0.21 per share. The midpoint of our Q3 guidance assumes total company organic revenue growth of about 250 basis points in the third quarter. We expect FX to be a headwind of about 125 basis points to Q3 reported revenue.

We assume that BMP reported revenue in Q3 will be about flat sequentially and year-over-year, with year-over-year organic revenue growth largely offset by FX headwinds. For BMP, the impact of discrete customer ordering patterns and shipments will represent a headwind of about 150 basis points to organic growth in Q3. Finally, we expect the underlying operating margin drivers in both segments to remain relatively stable sequentially, with volumes, mix, and inflationary pressures expected to be the primary factors influencing any sequential changes in segment margins. I'll turn the call back over to Emmanuel.

Thank you, Steve. In closing, on slide 15, I would like to leave you with three key takeaways. First, nine months into Revival, the operational changes we have implemented are delivering measurable results. Those improvements are increasingly evident in our operating and financial performance and reinforce the positive trajectory of the business. Second, our growth outlook has improved. The VWR team is executing extremely well, and the investment and strategic initiatives taken over the past year are translating into growth. We also expect BMP will return to growth in the second half, underpinned by a stronger book, improving operations, and more favorable comparisons. Third, we continue to generate strong free cash flow, enabling us to invest in the business while supporting our commitment to reduce debt and strengthen our balance sheets. Let me thank our Avantor associates around the world for their dedication to serving our customers.

Thank you for embracing Revival and our new ways of working. I am very pleased with the progress we've made together this year. Finally, I am excited to share an important announcement. We plan to host our Investors Day on Tuesday, December 8th in New York City. We're looking forward to sharing a comprehensive overview of our business, strategy, and financial objectives while providing an opportunity for investors to engage more broadly with our leadership team. Operator, we're happy to take questions.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw that question, again, press star one. We do ask that you limit yourself to one question and one follow-up. For any additional questions, please re-queue. Your first question comes from Eve Burstein with Bernstein. Please go ahead. Great. Thank you so much.

Good morning. I appreciate the opportunity to ask a question. Let's start with VWR. You said that the growth there was driven primarily by actions that you took to strengthen the franchise. How do you assess whether it really was your actions versus broader market recovery and improvement? Your guidance raise was attributed to improved expectations for VWR in the year. Is that due to expectation for broader market recovery, or is it due to the actions you've been able to take?

Good morning, Eve, thank you for your question. Indeed, we evaluate it. Okay. Let me start saying by the fact that we are super pleased with VWR performance and the very strong execution by the team. Indeed, more than half of the growth that we delivered in Q2 comes from deliberated action that we're taking. Maybe let me share a few things, splitting the market in large global customers account and mid-size and smaller customers, if you don't mind. For the large global customers account, in the past, we talked about some headwind that we had in contract renewal. Well, we begin to lap those headwinds from the history. This is point number one. Point number two, we also shared with you that we have, over the past year, really won many large contracts.

Each time we did that, we negotiated opportunity, the team has worked really hard to grab those opportunity to turn around those opportunity into growth. It's a license to hunt, basically what the team is actually doing and executing is actually gaining share of wallet inside those large accounts. It's working well. We are a bit of advance versus we thought we will be, and this is sustainable. The second thing is on medium small customers. E-commerce is really the highlight of Q2 for us. It's part of the Revival. It's part of the go-to market. It is working. We've relaunched vwr.com, and the customers have reacted very well from that. We see some really positive momentum in that segment as well. The remainder of the growth, of course, is coming from better pharma, better biotech end market, primarily in the U.S.

It's a broad-based momentum that we see. The team is completely focused on customers, focused on execution, finding the opportunity, grabbing those opportunities, turning those opportunities into growth. This is why we're confident that VWR growth will actually accelerate in H2.

Great, thank you. That's really helpful. Maybe just to clarify one of your points in follow-up. Obviously you've talked quite a lot about the recontracting with those large global customers, and how you're mostly done with that process, we'll start to see more of the underlying strength of the business as we move past that. If you had to quantify, how much of a headwind has that been to overall growth? Even without an underlying improvement in the market, or in other elements of your execution, how much of a tailwind are you now going to start seeing from moving past those pricing actions and just growing off a lower base?

Yeah, I think, Eva, this is a very good question. Look, I think we quantified it as more than half. We don't go into those customers by customers detail just by practice.

Okay. Thanks very much. Thank you.

Your next question comes from the line of Kallum Titchmarsh with Morgan Stanley. Please go ahead. Hey, guys.

Thanks a lot for taking the questions. Maybe just following up on the previous one. On the channel specifically, good to see the organic growth coming through, those growth rates are still below peer. Maybe just help us to better understand the market share dynamics you're seeing there and any KPIs you could perhaps give us to show that that's shifting back in your favor.

Sure. Look, we have many KPIs that we are looking at. We are looking at the number of new account, we are looking at what happened, for example, in the e-commerce platform around numbers of click, number of basket which is set up, numbers of conversion this. Of course, we measure a lot of those things on a daily basis. Look, here's what we're doing to regain market share. We've relaunched VWR brand, we've relaunched vwr.com, we made significant upgrade on the platform. We're not done. We have a whole program in place, and we are continuing to invest there. We have really good structure funnel review that really drive the customer focus by region, by segment. We really take care of when we renew a contract, what are the opportunity, what are the size of the opportunity, how those opportunities are actually being converted.

We track many things. One important thing that we've implemented recently is the pricing tools. We have a much more robust pricing review, again, on a monthly basis. The entire executive team is part of this. Corey is leading this initiative with his team. I think we shared last call that we have a new pricing leaders. We work also very closely with our supplier and partners. This is very important. This is a multiple relationship. This is all part of Revival go-to-market. We are just really extremely pleased that VWR is back to growth at 1.7% growth on lift versus previous year. We are absolutely committed to continue to grow and to accelerate this growth. I think this is where we are today.

We know that the majority of the growth is coming from the action that we are taking, that the team has implemented and is really focused on delivering, and that will accelerate in H2.

Good morning, Kallum. This is Dave. I'd like to just maybe just add a little bit to what Emmanuel said and highlight a little bit. While the 1.7% growth is not quite yet market, just want to highlight that we moved from -4.8% in 1Q to positive 1.7% in 2Q. We expect that growth rate to continue to accelerate here as we get into the second half. Part of that is those sustainable improvements we've made. Part of it is the comparisons from last year, so really nice development of the growth rate.

Totally. Understood. Emmanuel, nearly a year now since you took over here. Maybe just as we think about the kind of areas for investment you identified in 2026 with Revival, I guess as we've worked our way through the year, how comfortable are you that those commitments are sufficient to address the issues you had as we think about potential costs remaining elevated into 2027? Thanks a lot. That's a very good question, Kallum.

I think it's very important to understand that Revival is constantly evolving. When we arrived, we did a thorough listening to the market, the suppliers, our associates. We identified the, I would say, really high priority that we had. Mary in supply chain is here. We have invested in supply chain. We've grown talents, and we've brought more talent in the organization, like in the e-commerce platform with our new digital leader that came from Medline. All those things are reviewed on a monthly basis, Ludovic Brellier will join us as the head of BMP segments, but also the transformation leaders has a really clear operating plan for the Revival programs. We take project by project, I would say, and then we deliver them, we tick the box, and we move on into another one.

There's still a lot to do. We shared many of those. The last one that we share in this call was the onboarding process, which is very important for our customers, simplifying the process, accelerating their capabilities to create an account. This is done, we move on to the other one. I think we continue to invest. This is something very important for us. We simplify, we save, we reinvest for growth. This is the formula that we are applying.

Thanks, guys. Thanks, Eric. Your next question comes from the line of Dan Brennan with TD Cowen.

Please go ahead. Great. Thank you.

I thought I would just, if you don't mind, just go back to VWR Distribution and the investments that you made there to stabilize share with the price. I know there was a question asked earlier, but can you just remind us, in the back half of the year, is that fully comped out, that investment? Because it looks like it might have been like a three-point benefit like you're saying in Q2. I'm just wondering what's baked in for the back half of the year on that investment.

Look, I think, in the VWR area, the majority of the investment is on the e-commerce platform, the relaunch of the vwr.com, and we'll continue to do so. I think all our investment are baked into our guidance today.

Okay. Maybe zooming out just on the BMP segment then for a moment. book-to-bill has been above one the last couple of quarters. Obviously, growth has been challenged, but you had the idiosyncratic factors. Just, can you speak a little bit about the backlog there, how much of that business is backlog driven? How we translate that strong book-to-bill into the outlook, whether it be in the back half and then in 2027, and then any specific color just on NuSil, which I know you guys have a market leadership there. Just wondering volume and price on NuSil and what the outlook that's baked in on that front. Thank you. Sure. Let me maybe start with the market.

BMP is really across diverse set of end markets, electronic materials, you just talked about NuSil and med tech, of course, our bioprocessing market with our biochemicals. Look, overall, we are very pleased again with the go-to-market activity that we're doing with the commercial team. We talked early on on Q2 on the order intake double-digit and the book-to-bill being positive. I can tell you that from the first half, it's the same. It's low double-digit order book for the entire first half, which is I think very encouraging and all the sub-segments are in growth as well in the entire BMP. We're super encouraged by that. The market is solid for all of those sub-segments.

We have those discrete things that you talk about that give us a comparison. Again, the team is really focusing on finding the opportunity, converting the opportunity, bringing the order in, and then the supply chain team is working really hard to make sure that we supply the customers the best we can. This is working well. We continue to invest. Again, this is something that takes time, but we are happy where we are right now. Just a bit on NuSil. NuSil is doing good. Good order intake on NuSil. Nothing crazy. A good price list, but nothing crazy. Some good volume as well. Some good activity, not only in the implant, but in the new market that we are pushing, like aerospace.

That's something that we can give you a bit more color when we are together at the Investors Day.

Great. Thank you. Your next question comes from the line of Vijay Kumar with Evercore ISI.

Please go ahead. Hey, guys.

This is Mackenzie on for Vijay. Thanks for taking our questions. First one from us. I was wondering if you could talk a little bit more about the guide cadence in the second half. Specifically, I know you've talked a few times about expecting VWR to accelerate, could you give us any color on sort of the size of the ramp or some of the levers to the upside or downside and how we might think about the exit rates in fourth quarter?

Sure, Mackenzie. I thought that Vijay has changed voice. I'm glad. Welcome to the call. I'm going to pass it to Steve.

Thanks, Emmanuel, and good morning, Mackenzie. Happy to step you through our assumptions around the full year guidance, which we've updated. Starting with top line. As you know, we updated the guide for the consolidated full year organic revenue growth, that's really driven by the flow through of VWR's outperformance in 2Q, as well as our raised expectations for the business in the second half. The outlook related to BMP is generally unchanged from our initial guidance. The business continues to perform very well and in line with our plan. We reaffirmed our adjusted EBITDA margin guidance for the full year, despite the continued inflationary pressure we're absorbing. For example, we continue to see significant pressure on freight costs for both segments. A couple other housekeeping items non-operational in nature. We expect FX to be a headwind for the second half.

We also have slightly lower assumptions for our share count interest expense. If you put all that together, these are the important factors driving the updated guide of $0.80 to $0.83 for adjusted EPS for the full year.

Great. That's super helpful. A follow-up just on your end markets here. Advanced tech was pretty strong, and education and government also grew off of a slightly tougher comp, whereas biopharma and healthcare declined a little bit. I'm just wondering if you can talk about the puts and takes here, what kind of drove each of these end markets, and how we should be thinking about them into the second half. Thank you. All right. I think, making that probably because of BMP here.

Generally speaking, in VWR, we see more pharma, more biotech activity, I would say especially in U.S., in America. Other market, we see it more or less unchanged. Education and Europe are probably a stable level or at a level that we were kind of expecting, so a bit low levels. We wish it was a bit better. On BMP, I think all diverse set of market are healthy, and that is reflecting our order book, production chemical order book, in particular, double digits for the quarter.

Your next question comes from the line of Matt Larew with William Blair. Please go ahead. Hi, good morning, everyone.

Emmanuel, obviously over the last year, a number of initiatives you've laid out within Revival have moved from evaluation phase to execution phase. Acknowledging you mentioned it's been an ongoing process. By the time we get through to the December annual stage, you feel like you'll largely be set in terms of the management team changes, the implementation of kind of the big items you identified last year. I guess as part of that one thing is the portfolio review. Is that something you expect to sort of be complete by the Investor Day as well?

Thanks, Matt. Yeah, I think you're right. We're working hard on all the pillar. Okay. For that, the portfolio it's ongoing. It's really an important part of our pillar, okay. We are, of course, looking at every businesses, assessing any product line, any market position, the financial profile. We are always asking ourselves, are we the best owner? We're working hard on that part, and yes, we hope that we can give you some update at the Investors Day. What I want to say, Matt, as well, is Revival is really a program which is constantly evolving. We're going through a lot right now, but I'm sure because it's a culture as well that we want to bring to the organization of continuous improvement.

It's not because we will have made some very good progress that we will finish the year with momentum, that we will still not have things that we want to do and we want to improve and we want to progress. It's going to evolve, but, we'll give you more update on the portfolio.

Okay, that's great. Then the discrete headwinds in BMP referenced 600 basis points in Q2. I think you said 150 in Q3. Maybe what is that in the fourth quarter? I assume that's out of the numbers for the most part next year, and thus setting up potentially a path to return to more durable growth on that side of the business.

Yeah. Good morning, Matt. This is Steve. Happy to share there. As you already pointed out, 2Q was the most challenging quarter. You already referenced the 3Q headwind we may expect to see. The only other point to make would be related to the fourth quarter, which will also be a pretty difficult comparison of about 400 basis points related to our electronic materials business. We do think it's also useful to reflect on the sequential performance of the business, which presents a little more consistent picture of the improvements and the progress we've made. Over the course of the year, we expect to see gradual strengthening in the volumes over the course of the year, and this is really the result of two major things, and we talked about them in the prepared remarks.

First, the operational improvements that the team has been driving and continue to focus on and the development of that really strong order book. We're really excited for the building and sustainable momentum and think the profile within 2026, over the course of 2026, is really gradual and improving and really strong.

Maybe I can add, because I can sense behind your question is your strong interest about 2027, which by the way, it's the same for me. You're right. As you know, we may be a bit too early to give guidance there, but let me share a few thoughts there. Both VWR and the BMP team are really executing super well. We are really happy about the fact the team has embraced Revival and the new way of working. We will exit 2026 with momentum. There's no doubt about this. We will not be completely done for sure, and we'll continue to push more initiative to continuously improve the business. We will leave the year with momentum. 2027, every day, every month, the last 90 days, my confidence is increasing, and I'm confident and optimistic that 2027 will be a growth year.

Okay, that's great to hear. Thanks. Your next question comes from the line of Casey Woodring with JPMorgan.

Please go ahead. Thank you for taking my questions.

Just wanted to push on the margin piece. You reiterated adjusted EBITDA margins for the year. Maybe just talk a little bit about gross margin expectations for the back half. Know you have some easier comps than VWR given last year's reset, but you talked a little bit about inflationary pressure ramping here, so maybe just if you could quantify that piece and maybe walk through the moving pieces and levers you can pull, whether that's productivity, pricing, or elsewhere on gross margins?

Good morning, Casey. This is Steve. Thanks for your question. Consolidated gross margin, the rate was essentially flat from Q1, Q2 to Q2 this year. We do expect that rate to stay steady through the end of the year. While stability is good, obviously, we were looking for margin expansion. What are our priorities in this regard? First, we're looking to drive as much volume as we can. We also want to successfully navigate inflationary pressures with our customers and suppliers constructively. We prefer and want to drive a strong product sales mix. Want to also highlight our focus on digital investment. We mentioned it in the prepared remarks. The digital capabilities really help us connect better with our smaller customers, which tend to be better margin sales for us. We're very focused on that.

Excellent job by our teams to this point in the year in driving these things, those are going to be the key levers as we move forward.

That's helpful. I guess, appreciate the commentary on 2027, just how are you balancing investment into the business that you've talked about here today versus margin expansion for next year, can you grow EPS next year? Thank you. Hey, Casey. Emmanuel here.

Look, I'll go back to the feet of the fee that we are pushing, simplifying, saving, reinvesting for growth. All right. I think last quarter we shared that our headcount is down about -2%. That was last quarter. At the end of this quarter, the headcount is down -3%. Basically, our objective and what we are driving as a culture is to drive for leveraged P&L.

Understood. Thank you, guys. Thank you, Casey.

Your next question comes from the line of Michael Ryskin with Bank of America. Please go ahead. Great. Thanks for taking the question.

I want to follow up on BMP, pacing through the rest of the year. You talked about improving the third quarter up a little bit. The fourth quarter is just based on timing and comps. Is it fair to think that 4Q BMP should be roughly flat organic or maybe just down a little bit? When you were talking about exit rates and going into next year, you kind of alluded to the headwinds and some of the idiosyncratic things being past us and really just focusing on sequential growth. Maybe I will ask it that way. If we look at 4Q for both VWR and BMP from a sequential perspective, is that the right jumping-off point for 2027 as we model out next year? Thanks. Good morning, Michael. This is Steve.

Happy to answer that. I will start with organic growth for BMP. We expect modest organic growth in Q3. We do expect the organic growth in 4Q to be a little more muted because of the more difficult comp that I already described. Sequentially, on a reported basis, BMP, we expect for Q3 to be about flat sequentially with a modest uptick in the fourth quarter.

Okay. Going back to, I think, Mackenzie's question earlier on some of the end market trends. If we look through what you gave us today, it looks like the biggest step up in Q2 relative to 1Q was actually that Advanced Technologies. Just love to go in a little bit deeper into where in Advanced Technologies you saw the increase, either by customer type or product you sell. Just sort of what led that uptake. Was it more on the equipment side or on the consumable side? Just any sense of lumpiness there or just sort of what drove that? Thanks. Sure, Michael. Let's go maybe through I guess your question was more a bit about VWR, isn't it?

Yeah. Yeah. On VWR, as we said, large global customers, especially the large global customers where we had renewed contracts with good opportunity.

There, it's a mix of what the customers really need. It's a mix also in depending of where the customers, those large customer and large account are investing. Generally speaking, we see a good momentum in spend in large pharma. Also biotech, actually. The funding is coming back to biotech, and we see them spending money. It's a mix of equipment, a mix of consumables. I would say geographically speaking, it's U.S.A. and America is really driving it. Okay. For the rest, I think it's a bit unchanged. Smaller customers that we see through e-commerce platform where we really see again the impact of what we've done with vwr.com, it's very broad. It's very distinct. Those customers are usually not buying equipment through the e-commerce platform, but so it's a more mix of consumables, and it's across many different applications.

Okay, thanks. Your next question comes from the line of Paul Knight with KeyBank.

Please go ahead. Hi, Emmanuel.

Now that you've been in charge for a while, what's your view on self-manufacturing? Do you want to increase the level of self-manufacturing, or do you think expanding vendor relationships is really the way to go in the future, being kind of a non-competitor? What's your walk away and views on self-manufacturing at this time?

It's a great question, Paul. Thank you. I think we have a lot of opportunities on self-manufacturing. It's a good service that we're providing to many people. In terms of VWR, I really like the fact that we are product-agnostic. I really like the fact that we are differentiating ourselves, offering the broadest catalog that we can, and offer optionality to the customers. Really top products, very famous brand that actually wants to work with us, and I think this is very important, a really good relationship with supplier. We have also the VWR brand. Product-agnostic for VWR, I think it's a really good positioning. It's a very good value proposition. Self-manufacturing, I mean, for us internally, it's a business that we have.

It's a service that we provide to people because we have really good capabilities and capacities, and we are capable to offer really high-quality product to the many different customers as an OEM, and it's a very good service, and it's growing actually. I think a bit of both is very important for us.

Regarding BMP, obviously a great build-out over the years. What's the next steps in your view for BMP?

I think the next step from BMP for us is just making sure that we continue to drive operational excellence. The S&OP process that we put in, which is very important to have a very good visibility of the demand and the supply, really continue to invest in reducing lead times, improving on-time delivery, making sure that we continue to serve the customers the best we can. In production chemicals in particular, we really see the impact of what the team has been driving commercially and supply chain. We talked to you in the preamble about those vascular product line where we are invested, where Marion, the team has done a really good job to take the output up by 25%.

This is really important for us to continue to do so, reduce lead times, increase on-time delivery, not measured on our premise date, really measure on what the customer deserve and what the customers want. Improving service level is really important. Quality is really good. Jerry, that joined us last quarter, is doing a really good job as well. Those are the areas that we'll continue to invest and continue to improve the service level is really important.

Thank you. Ladies and gentlemen, that does conclude our question and answer session.

I would now like to turn the conference back over to Emmanuel for closing comments.

Thank you, Christelle. Let me conclude the call with a reminder of the key takeaway for Q2. First, Revival is working and the team is committed to continue to improve. Second, our growth trajectory is improving. And third, we continue to generate excellent free cash flow. Thank you for joining the call, and have a great day.

Ladies and gentlemen, that does conclude today's conference call. Thank you for your participation, and you may now disconnect.