Q2 2025 Avantor Inc Earnings Call

Emily: Good morning. My name is Emily, and I'll be your conference operator today. At this time, I would like to welcome everyone to Avantor's second quarter 2025 earnings results conference call. After the presentation, you'll have the opportunity to ask any questions, which you can do so by pressing START, followed by the number 1 on your telephone keypad. I will now turn the call over to Allison Hosak, Senior Vice President of Global Communications. Ms. Hosak, you may begin the conference.

Good morning. My name is Emily, and I'll be your conference operator. Today, at this time, I would like to welcome everyone to Avantor's second quarter 2025 earnings results conference call.

After the presentation, you'll have the opportunity to ask any questions, which you can do by pressing star, followed by the number 1 on your telephone keypad.

I will now turn the call over to Allison Hosak, Senior Vice President of Global Communications.

Allison Hosak: Good morning, and thank you for joining us. Our speakers today are Michael Stubblefield, President and Chief Executive Officer, and R. Brent Jones, Executive Vice President and Chief Financial Officer. The press release, as well as a presentation and supplemental disclosure package accompanying this call, are available on our investor relations website at ir.avantorsciences.com. A replay of this webcast will also be made available on our website after the call. Following our prepared remarks, we will open the line for questions. During this call, we will be making 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 filing. Actual results might differ materially from any forward-looking statements that we make today.

Miss hosak, you may begin the conference.

Good morning, and thank you for joining us. Our speakers today are Michael Stubblefield, President and Chief Executive Officer, and Brent Jones, Executive Vice President and Chief Financial Officer. The press release, as well as a presentation and supplemental disclosure package accompanying this call, are available on our investor relations website at ir.avantorsciences.com.

A replay of this webcast will also be made available on our website after the call.

Following our prepared remarks, we will open the line for questions.

During this call, we will be making 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 that are detailed in our SEC filings.

Actual results may differ materially from any forward-looking statements that we make today.

Allison Hosak: These forward-looking statements speak only as of the date that 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 disclosure package on our investor relations website. With that, I will now turn the call over to Michael.

These forward-looking statements speak only as of the date that 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 disclosure package on our investor relations website.

With that, I will now turn the call over to Michael.

Michael Stubblefield: Thank you, Allie, and good morning, everyone. I appreciate you joining us today. Before we discuss our second quarter results, I want to briefly address the leadership transition we announced last week. As many of you saw, Emmanuel Liggner has been appointed Avantor's next CEO, effective August 18th. Emmanuel brings over 30 years of deep experience in the life sciences industry and is eager to hit the ground running. While I will continue to serve as CEO until his official start date, today marks my final earnings call with Avantor. It has been an honor to lead this organization for the past 11 years, and I want to sincerely thank all of you on the call today for your partnership and support. Let's now move on to our second quarter results, beginning on slide three.

Thank you, Ally. And good morning, everyone. I appreciate you joining us today.

Before we discuss our second quarter results, I want to briefly address the leadership transition we announced last week.

Saw Emmanuel legner has been appointed of entorse next, CEO, effective, August 18th.

Emmanuel brings over 30 years of deep experience in the Life Sciences industry and is eager to hit the ground running.

While I will continue to serve as CEO until his official start date, today marks my final earnings call with Avantor.

It has been an honor to lead this organization for the past 11 years and I want to sincerely. Thank all of you on the call today for your partnership and support.

Let's now move on to our second quarter results. Beginning on slide 3,

Michael Stubblefield: Despite ongoing challenges in the operating environment, we remain laser-focused on executing the strategic initiatives we outlined last quarter, driving growth, improving operating efficiency, strengthening execution, and delivering long-term value. For the quarter, organic revenue growth improved sequentially by 200 basis points and was flat year over year. Adjusted EBITDA margin contracted to 16.6%. Adjusted EPS for the quarter was $0.24, and free cash flow was $125 million, with adjusted conversion at 100%. We remain on track with our cost transformation program and continue to expect $400 million in run-rate savings by the end of 2027. In Laboratory Solutions, which makes up roughly two-thirds of our business, organic revenue growth was in line with expectations, increasing sequentially compared to Q1 and finishing modestly down year over year. As previously shared, Cory Walker joined us in late March as President of the segment.

Despite ongoing challenges in the operating environment, we remain laser focused on executing the Strategic initiatives. We outlined last quarter driving growth improving operating efficiency strengthening execution and delivering long-term value.

For the quarter organic Revenue growth, improves sequentially by 200 basis points, and was flat year-over-year.

In contracted to 16.6%.

Adjusted EPS for the quarter was $0.24, and free cash flow was $125 million.

With adjusted conversion at 100%.

We remain on track with our cost transformation program and continue to expect $400 million in run rate savings by the end of 2027.

In laboratory solutions, which makes up roughly two-thirds of our business.

Our organic revenue growth was in line with expectations.

Increasing sequentially compared to q1 and finishing modestly down year-over-year.

As previously, shared.

Michael Stubblefield: His early focus has been a comprehensive review of the business, assessing strategy, execution, and opportunities to grow and retain key accounts, while aggressively pursuing new ones in partnership with the commercial team. I'd like to highlight a few of the findings and action plans from Cory's early efforts. Cory has spent significant time with customers and heard consistently about the power of our channel. Customers recognize our unique scope, reach, and engagement, and most importantly, they value the solutions we deliver and enjoy doing business with us. At the same time, these conversations revealed opportunities for improvement and ways we can strengthen our offerings for our customers. Cory and team are fully focused on executing an action plan to implement these initiatives while continuing their comprehensive review.

Corey Walker joined us in late March as president of the segment.

His early Focus has been a comprehensive review of the business. Assessing strategy, execution, and opportunities to grow, and retain key accounts.

While aggressively pursuing new ones, in partnership with the commercial team.

I'd like to highlight a few of the findings and action plans from Corey's early efforts.

Corey has spent significant time with customers and heard consistently about the power of our Channel.

Customers recognize our unique scope reach and engagement. And most importantly, they value the solutions we deliver and enjoy doing business with us.

At the same time, these conversations revealed opportunities for improvement and ways we can strengthen our offerings for our customers.

Corey and the team are fully focused on executing an action plan to implement these initiatives while continuing their comprehensive review.

Michael Stubblefield: For example, service levels are an essential part of our value proposition. We have driven substantial improvements in recent quarters, and the team is executing an aggressive plan to further differentiate our delivery performance going forward. Cory's deep dive into the business also validated the investments we are making to enhance our digital platform. As we discussed last quarter, we are focused on empowering self-service, simplifying ordering, and providing greater visibility into order status and fulfillment, enhancing every step of the customer journey. One of the tools being rolled out is Avantor Navigator, our first AI application developed completely in-house, which helps customers discover products and services matched to their research needs. Another is a digital buying experience platform designed to unify customer intelligence and provide a seamless, personalized experience across web and mobile channels.

For example, service levels are an essential part of our value proposition.

We've driven substantial improvements in recent quarters, and the team is executing an aggressive plan to further differentiate our delivery performance going forward.

Corey's deep, dive into the business. Also validated the Investments. We are making to enhance our digital platform.

As we discussed last quarter, we are focused on empowering self-service, simplifying ordering, and providing greater visibility into order status and fulfillment.

Enhancing every step of the customer journey.

1 of the tools being rolled out is our Navigator.

Our first AI application developed completely in-house.

Which helps customers discover products and services matched to their research needs.

Another is a digital buying experience platform designed to unify customer intelligence and provide a seamless personalized experience across web and mobile channels.

Michael Stubblefield: We also made significant progress with pricing optimization, including the development of a new pricing tool that increases agility, speed, and competitiveness. At its core, it ensures our customers see market-relevant list prices when they engage with us through our digital sales channel, which not only makes their buying experience more efficient but also reduces abandonment rates and significantly increases conversion. These efforts are already driving results. In a competitive market, we were awarded contract extensions with several top 15 global pharma accounts in the quarter. These awards will result in more than $100 million in share gains, which we expect to realize once fully commercialized. We also executed a five-year extension of our contract with BioBusiness Solutions, the largest cost-savings purchasing program for the life sciences industry. Over 10,000 companies have access to purchase Avantor's laboratory and production products and services through this agreement.

We also made significant progress with pricing optimization, including the development of a new pricing tool that increases agility speed and competitiveness.

At its core, it ensures our customers see market-relevant list prices when they engage with us through our digital sales channel.

Which not only makes their buying experience more efficient, but also reduces abandonment rates and significantly increases conversion.

These efforts are already driving results.

In a competitive market, we were awarded contract extensions with several top 15, Global Pharma accounts in the quarter.

These Awards will result in more than 100 million dollars in share gains which we expect to realize once fully commercialized.

We also executed a 5-year extension of our contract with bio Business Solutions. The largest cost savings purchasing program for the life sciences industry.

Over 10,000 companies have access to purchase Entourage laboratory and production products and services through this agreement.

Michael Stubblefield: Collectively, bio is our largest customer, and this extension ensures we are uniquely positioned to benefit when funding levels return to historical norms across the biotech industry. These are significant wins, particularly as competitive intensity remains high across our industry. Our priority in this environment is to protect and grow share while preserving absolute profitability as volumes recover and the benefits of our delivery, digital, and pricing initiatives take hold. As a result, our full-year outlook contemplates pressured margin rate assumptions through the balance of the year. However, we remain confident in our ability to expand margins over time. Turning to bioscience production, our bioprocessing performance fell short of our expectations this quarter. While demand for our core monoclonal antibody platform remains strong, results were negatively affected by two discrete headwinds.

Collectively, Bio is our largest customer, and this extension ensures we are uniquely positioned to benefit when funding levels return to historical norms across the biotech industry.

These are significant wins.

Particularly as competitive intensity remains High across our industry.

Gross share, while preserving absolute profitability as volumes recover and the benefits of our delivery digital and pricing initiatives. Take hold

As a result, our full-year outlook contemplates pressured margin rates and assumptions through the balance of the year.

However, we remain confident in our ability to expand margins over time.

Turning to bioscience production, where our bioprocessing performance fell short of our expectations this quarter.

Michael Stubblefield: First, quarterly throughput was impacted by planned maintenance efforts at one of our manufacturing facilities that extended longer than planned and led to an increase in backorders. Second, and more significantly, a few of our large customers faced major unexpected headwinds during the quarter, which slowed the rate of recovery in controlled environment consumables and impacted demand in other elements of our offering. Specifically, a leading gene therapy platform encountered regulatory and patient safety setbacks, a key mRNA platform scaled back their outlook, and one of our longstanding MABS customers had a negative phase 3 readout and other commercial challenges. We expect these headwinds to persist through the balance of the year. R. Brent Jones will discuss the impact to our guidance. Benoit Gourier and the bioprocessing team are taking decisive action to offset these headwinds and strengthen our market-leading platform.

While demand for our core monoclonal antibody platform remains strong, results were negatively affected by two discrete headwinds.

During the first quarter, throughput was impacted by planned maintenance efforts at one of our manufacturing facilities that extended longer than planned and led to an increase in back orders.

Second and more significantly. A few of our large customers faced major unexpected headwinds, during the quarter, which slowed the rate of recovery and controlled environment, consumables, and impacted demand in other elements of our offering.

Specifically, a leading gene therapy platform encountered regulatory and patient safety setbacks. A key mRNA platform scaled back their outlook, and one of our long-standing mAbs faced a negative Phase 3 readout along with other commercial challenges.

We expect these headwinds to persist through the balance of the Year. Brent will discuss the impact to our guidance.

Michael Stubblefield: Emmanuel's expertise will be additive here when he joins the company later this month. The team's efforts are centered on three priorities: optimizing our supply chain to enhance delivery performance and improve operational efficiency across our manufacturing and planning functions, increasing field intensity through new sales leadership and sharper execution discipline, and expanding our product offering through ongoing innovation and customer-focused development. Outside of bioprocessing, the other key components of the bioscience production segment performed in line with expectations. We delivered particularly strong performance in our NuCell-branded silicones platform, which grew low double digits. Year-to-date growth of the medical platform is running well ahead of patient procedure counts, so we expect demand in our NuCell platform to moderate in the second half of the year. With that, I will now turn it over to R.

Benoa jeer and the B processing team are taking decisive action to offset these headwinds and strengthen our Market leading platform.

And emanuel's expertise will be additive here when he joins the company later this month.

The team's efforts are centered on 3, priorities.

Optimizing our supply chain to enhance delivery performance and improve operational efficiency across our manufacturing and planning functions.

Increasing field intensity through new sales leadership and sharper execution, discipline, and expanding our product offering through ongoing innovation and customer-focused development outside of bioprocessing. The other key components of the bioscience production segment performed in line with expectations.

We delivered, particularly strong performance in our new still branded silicon's platform.

Which grew low double digits.

Year to date. Growth of the medical platform is running. Well ahead of patient procedure counts. So we expect demand and our new cell platform to moderate in the second half of the year.

Michael Stubblefield: Brent Jones to discuss the second quarter results in more detail and to walk through our outlook for the second half and full year.

With that. I'll now turn it over to Brent to discuss the second quarter results in more detail and to walk through our outlook for the second half and full year

R. Brent Jones: Thank you, Michael, and good morning, everyone. I'm starting with the numbers on slide four. Second quarter reported revenue was $1.68 billion, which was flat year over year on an organic basis. Adjusted gross profit for the quarter was $554 million, representing a 32.9% adjusted gross margin. This is a decline of 130 basis points year over year, driven primarily by price actions in lab to protect and grow market share, unfavorable product mix, and increased supply chain expense in the form of higher than expected freight expense and fixed cost under absorption. As expected, we were able to fully offset the dollar impact of tariffs on cost of goods sold through targeted pricing actions and sourcing agility.

Thank you, Michael, and good morning everyone. I'm starting with the numbers on slide 4.

Second quarter, reported Revenue was 1.68 billion which was flat year-over-year on an organic basis.

Adjusted gross profit for the quarter was $554 million, representing a 32.9% adjusted gross margin.

This is a decline of 130 basis points. Year-over-year, driven primarily by Price actions and lab to protect and grow market. Share unfavorable product, mix and increase supply chain expense in the form of higher than expected Freight expense and fixed costs under absorption.

R. Brent Jones: We had another quarter of solid cost control with adjusted SG&A expense better than planned and prior year, and we continue to identify meaningful additional cost opportunities to help offset the margin pressure we are facing. Adjusted EBITDA was $280 million in the quarter, representing a 16.6% margin. Our shortfall in adjusted EBITDA margin was driven by the headwinds to gross profit and margin and only modestly offset by SG&A savings. Our multi-year cost transformation initiative continues ahead of plan, and we remain on track to deliver in excess of our commitments for 2025 and the entire $400 million program. Adjusted operating income was $252 million at a 15% margin. Interest and tax expenses were in line with our expectations. As a result, adjusted earnings per share were $0.24 for the quarter, a $0.01 year over year decline.

As expected, we were able to fully offset the dollar impact of tariffs on cost of goods. Sold through targeted pricing actions and sourcing agility.

We had another quarter of solid cost control, with adjusted SG&A expense better than planned and prior year. We continue to identify meaningful additional cost opportunities to help offset the margin pressure. We are facing.

Adjusted IBAA was $280 million in the quarter, representing a 16.6% margin.

Our shortfall in adjusted EVA margin was driven by the headwinds to gross profit and margin, and only modestly offset by SG&A savings.

Our multi-year cost transformation initiative continues ahead of plan and we remain on track to deliver in excess of our commitments for 2025 and the entire 400 million program.

Adjusted operating income was $252 million, with a 15% margin.

R. Brent Jones: Our adjusted EPS performance in the quarter reflects the flow-through of our adjusted EBITDA results, as well as continued reductions in net interest expense. Our cash generation was strong, with $125 million in free cash flow in the quarter. When adjusted for cash costs related to the transformation initiative, our free cash flow conversion was 100% of adjusted net income for the quarter. Our adjusted net leverage ended the quarter at 3.2 times adjusted EBITDA, unchanged from Q1, as cash generation was largely offset by FX impacts on our euro-denominated debt. Deleveraging remains our top capital allocation priority, and we continue to target adjusted net leverage sustainably below three times. Let's now take a closer look at each of our segments on slide five. Lab solutions revenue was in line with our expectations at $1.122 billion.

Interest in tax expenses were in line with our expectations, as a result adjusted earnings per share were 24 cents for the quarter, a 1 cent year-over-year decline, our adjusted EPS performance in the quarter, reflects the flow through of our adjusted, EBA results as well as continued. Reductions in net, interest expense.

Adjusted for cash costs related to the transformation initiative, free cash flow conversion was 100% of adjusted. Net income for the quarter, our adjusted net leverage ended the quarter at 3.2 times adjusted EBITDA, unchanged from Q1, as cash generation was largely offset by FX impacts on our Euro-denominated debt.

Deleveraging remains our top Capital, allocation priority, and we continue to Target adjusted net. Leverage sustainably below 3 times.

Let's now take a closer look at each of our segments on Slide 5.

R. Brent Jones: On an organic basis, we declined 1% versus prior year but grew 2% on a sequential basis. As Michael noted, we continue to navigate increased competitive intensity as a result of funding and policy-related headwinds many of our customers are facing. In this environment, we are focused on not just retaining but growing share. A particular bright spot was our self-manufactured lab chemicals, which continued its track record of growth. On a regional basis, our European business was nearly flat, outperforming the Americas and Asia, which felt the greater brunt of policy headwinds. Adjusted operating income for lab solutions was $133 million for the quarter, with an 11.9% margin. Although we were able to implement pricing and sourcing actions to offset tariff cost headwinds, the competitive actions to drive share have come at the cost of margin. Mix was also a negative contributor to margin.

Lab Solutions Revenue was in line with our expectations at 1.122 billion dollars on an organic basis. We declined 1% versus prior year but grew 2% on a sequential basis.

As Michael noted, we continue to navigate increased competitive intensity as a result of funding and policy-related headwinds. Many of our customers are facing challenges in this environment. We are focused on not just retaining but growing our share.

A particular bright spot was our self-manufactured lab chemicals, which continued its track record of growth on a regional basis. Our European business was nearly flat, outperforming the Americas and Asia, which felt the greater brunt of policy headwinds.

Adjusted operating income for lab Solutions, was 133 million for the quarter with an 11.9% margin although we were able to implement pricing and sourcing actions to offset tariff cost headwinds the competitive actions to drive. Share have come at the cost of margin. Mix was also a negative contributor to margin.

R. Brent Jones: Bioscience production revenue was $561 million in Q2, up 2% organically on a year-over-year basis and up 7% sequentially. Silicones had another strong quarter, up low double digits, and our applied solutions business was down low single digits, both in line with expectations. The key disappointment in the quarter was bioprocessing, which, as a reminder, comprises roughly two-thirds of our revenues in bioscience production. Although bioprocessing grew 5% sequentially, it was flat year over year, with declines across the business driven by the customer headwinds and the longer than expected maintenance at our manufacturing facility. Within bioprocessing, CEC was down mid-single digits year over year but grew sequentially, benefiting from commercial actions taken by the team. Single use also grew sequentially but was flat year over year after increasing high teens in the first quarter.

Bioscience production revenue was $561 million in Q2, up 2% organically on a year-over-year basis and up 7% sequentially. Silicons had another strong quarter, up double digits, and our Applied Solutions business was down low single digits, both in line with expectations. The key disappointment in the quarter was bioprocessing, which, as a reminder, comprises roughly two-thirds of our revenues in bioscience production.

Although bioprocessing grew 5% sequentially, it was flat year-over-year with declines across the business driven by the customer headwinds and the longer than expected maintenance at our manufacturing facility.

Within bioprocessing, CEC was down mid single digits year-over-year, but grew sequentially benefiting from commercial actions taken by the team.

R. Brent Jones: Lastly, process ingredients and excipients grew high single digits sequentially and low single digits year over year. While we have limited control over the customer headwinds, the team is actioning on the initiatives Michael outlined to improve execution and performance. Adjusted operating income for bioscience production was $140 million for the quarter, representing a 24.9% margin. While this represents a 100 basis point sequential improvement, margin was down year over year, largely due to underabsorption and manufacturing-related expense. Given our first half performance and current visibility to the business, we are reducing our full-year organic revenue growth expectation to negative 2% to flat versus prior guidance of negative 1% to plus 1%. Year to date, our organic growth is negative 1%, so this updated midpoint reflects a continuation of current trends.

Single-use also, grew sequentially, but was flat year-over-year after increasing High Teens in the first quarter. Lastly process ingredients and acip grew High, single digit sequentially and low single digits year-over-year.

While we have limited control over the customer headwinds, the team is actioning the initiatives. Michael outlined plans to improve execution and performance.

Adjusted operating income. For bioscience production was 140 million for the quarter representing a 24.9% margin, while this represents a 100 basis points sequential Improvement, margin was down year-over-year, largely due to under absorption and Manufacturing related expense.

Given our first half performance and current visibility to the business, we are reducing our full-year organic revenue growth expectation to negative 2% to flat, versus prior guidance of negative 1% to positive 1%.

Year to date. Our organic growth is negative - 1%. So this updated midpoint reflects a continuation of current trends.

R. Brent Jones: To bridge to actuals, there is a 2% headwind due to the clinical services divestiture and approximately 1% tailwind due to FX, resulting in reported revenue growth at the midpoint of negative 2%. This assumes a euro-dollar rate of 1.15 for the back half of the year and a 1.12 blended rate for the entire year. On a segment basis, we now expect lab solutions growth to be minus low single digits, down from minus low single digits to flat. This assumes a continuation of first half performance in the back half of the year. Conversion associated with the recent share gains described earlier will be a tailwind to our outlook as they are implemented. Consistent with our Q2 performance, we are assuming no material top-line impact from tariffs.

To bridge to actuals, there is a 2% headwind due to the Clinical Services to Vestige and approximately a 1% tailwind due to FX, resulting in reported revenue growth at the midpoint of -2%. This assumes a euro-dollar rate of 1.15 for the back half of the year and a 1.12 blended rate for the entire year.

On the segment basis. We now expect lab Solutions growth to be minus low, single digits down from minus low, single digits to flat.

This assumes a continuation of first-half performance in the back half of the year.

Conversion associated with the recent share gains described earlier will be a tailwind to our outlook as they are implemented consistent with our Q2 performance. We are assuming no material topline impact from terrorists.

R. Brent Jones: We now expect bioscience production to be flat, down from up mid-single digits, driven by our performance in the first half and headwinds in both bioprocessing and in our medical-grade silicones platform. We expect bioprocessing to be flat to up low single digits, down from up mid-single digits. This reflects our expectation that despite continued strong underlying demand for our core monoclonal antibody platform, we will continue to face the headwinds we described earlier. Single use is expected to increase mid-single digits for the second half and the year, and we expect process ingredients to be up low single digits for the second half and the year. In CEC, we expect performance to continue to improve modestly on a sequential basis as we move through the second half of the year, translating to a low single digit decline for the year.

Performance in the first half and headwinds in both bioprocessing, and in our medical grade silicon platform.

We expect bioprocessing to be flat to up low single digits down from up mid single digits. This reflects our expectation that despite continued strong underlying demand for our core, monoclonal antibody platform. We will continue to face the headwinds we described earlier

Single-use is expected to increase mid-single digits for the second half of the year.

And we expect process ingredients to be up low single digits for the second half and the year.

CEC, we expect performance to continue to improve modestly on a sequential basis. As we move through the second half of the year, translating to a low single-digit decline for the year.

R. Brent Jones: After mid-teens growth in the first half of the year, our medical-grade silicones platform will take a step back in the second half of the year as customers rebalance inventory to bring full-year growth in line with patient procedure count. Accordingly, we expect mid-single digit decline in the second half, resulting in modest growth for the full year. We are updating our adjusted EBITDA margin expectations to between 16.5% and 17%, and our adjusted EPS guidance range to between $0.94 and $0.98. We are also reducing our free cash flow expectations to $550 million to $600 million before transformation expenses. The reduction in free cash flow is a result of the significant contract extensions in the lab business that Michael discussed earlier. While we are excited about these awards, some come with meaningful prepaid rebates, which are accounted for in our updated guidance.

After mid teens growth, in the first half of the year are metal code grade. Silicon's platform, will take a step back in the second half of the year as customers rebalance, inventory to bring full year growth in line. With patient procedure count accordingly. We expect mid single digit to decline in the second, half resulting in modest growth for the full year.

R. Brent Jones: In terms of Q3, we expect organic revenue growth of minus 4% to minus 2%, with both segments down similarly. Our clinical services divestiture represents a 3% headwind, and based on current spot rates, we expect a 2% tailwind from FX. This leads to reported revenue growth of negative 4% year over year at the midpoint. We expect adjusted EBITDA margins to be somewhat lower than Q2 in the low 16% range. With that, I will turn the call back to Michael.

We are updating our adjusted ebit down margin expectations to between 16.5% and 17%, and our adjusted EPS guidance range to between 94 cents and 98 cents. We are also reducing our free cash flow, expectations to 550 million to 600 million before transformation expenses. The reduction in free cash flow is a result of the significant contract extensions in the lab business. The Michael discussed earlier, while we are excited about these Awards, some come with meaningful prepaid, rebates which are accounted for in our updated guidance.

In terms of Q3, we expect organic Revenue growth of minus 4%, to minus 2% with both segments, down similarly, our Clinical Services, devest at your represents, a 3% headwind. And based on current spot rates, we expect a 2% Tailwind from FX. This leads to reported Revenue growth of -4% year-over-year at the midpoint. We expect adjusted Eva down margins to be somewhat lower than Q2 in the low 16% range. With that. I will turn the call back to Michael

Michael Stubblefield: Thank you, R. Brent Jones. Before we move into Q&A, I would like to briefly recap today's key takeaways and reiterate our priorities moving forward. In a challenging operating environment, we are successfully executing the strategic initiatives we outlined last quarter. In our lab solutions segment, we are pleased to deliver sequential revenue growth, and we are committed to protecting key accounts and competing hard to win market share. These efforts resulted in several significant contract extensions in the quarter. Our bioprocessing performance fell short of our expectations this quarter, primarily due to discrete customer headwinds. We are taking action to offset the impact, and demand for our core monoclonal antibody platform remains strong.

Thank you, Brent.

Before we move into Q&A, I would like to briefly recap, today's key takeaways and reiterate our priorities moving forward.

In a challenging operating environment, we are successfully executing the strategic initiatives we outlined last quarter.

In our Lab Solutions segment, we are pleased to deliver sequential revenue growth.

And we are committed to protecting key accounts and competing hard to win market share.

These efforts resulted in several significant contract extensions in the quarter.

Our bio processing performance, fell short of our expectations, this quarter.

Primarily due to discrete customer headwinds.

We are taking action to offset the impact and demand for our core. Monoclonal antibody platform remains strong

Michael Stubblefield: As I reflect on 11 years leading this business, I am incredibly proud of all that we have achieved, including the acquisition of VWR, a successful IPO, navigating the COVID-19 pandemic and its aftermath, and the implementation of a new operating model. Despite recent performance headwinds, I could not be more confident in the strength of our platform and Avantor's future success under Emmanuel's leadership. You will hear more from Emmanuel at the Q3 earnings call, where I expect he will share some of his early observations and priorities for the business. With that, I will now turn the call over to the operator to begin the Q&A session.

as I reflect on 11 years leading this business, I am incredibly proud of all that we have achieved including the acquisition of vwr

a successful IPO navigating the COVID-19 pandemic and its aftermath.

And the implementation of a new operating model.

Despite recent performance headwinds, I could not be more confident in the strength of our platform and avantage future success under emanuel's leadership.

You'll hear more from Emmanuel at the Q3 earnings call, where I expect he will share some of his early observations and priorities for the business.

With that, I'll now turn the call over to the operator to begin the Q&A session.

Emily: Thank you. We will now begin the question and answer session. As a reminder, if you would like to ask a question today, please do so now by pressing START, followed by the number one on your telephone keypad. If you change your mind or you feel like your question has already been answered, you can press START, followed by two to withdraw yourself from the queue. Our first question today comes from the line of Vijay Kumar with Evercore. Please go ahead.

Thank you.

For now, by pressing start, followed by the number 1 on your telephone keypad.

If you change your mind or you feel like your question has already been answered, you can press Start followed by 2 to withdraw yourself from the key.

Our first question today comes from the line of Vijay Kumar with evercore.

Please go ahead.

Vijay Kumar: Hey, guys. Thanks for taking my question. Michael, wishing you the best as you transition here. On the guidance here, your third quarter, organic of minus 3%. What is it resuming for the segments? I particularly in bioprocessing, it feels like it should step down, both bioprocessing and lab. It worsens from second quarter trends. Maybe talk about what changed versus Q2.

Hey guys. Uh, thanks for taking my question. Michael, uh, wishing you the best with your transition. Here I meant maybe on the guidance here. Um, your third quarter, you know, organic of minus 3%. What is it assuming for, uh, this segment? And, um, you know, pretty clearly at, in a bioprocessing, it feels like a future step down. Um,

R. Brent Jones: Yeah, thanks for the question. It is R. Brent Jones here. We see about ratable performance in each segment along with the full company. The dynamic there is really consistency in lab, by and large, with what we have seen in Q2 in the first half of the year. There is some seasonality with the vacation times and in Q2. In bioprocess and bioscience, we still have the recovery on the headwinds due to the manufacturing. There is some timing slowness in silicones there. That is really how you tie that math together.

Yes, that. Thanks for the question. It's Brandt here. So, we we see about routable performance in each segment, uh, along with the, with the full company there. The dynamic there is really consistency and lab by and large with what we've seen in Q2 and the first half of the Year there. You know, there there is some seasonality with the, uh, vacation times and then Q2, and then in, in, in bioprocess, we and, and bioscience we still have the recovery on the, uh, you know, on the headwinds due to the manufacturing and that, and there is some, uh, some timing slowness in silicones there. So that's, that's really how you tie that math together.

Vijay Kumar: Understood. I will let others jump on the segments, but maybe on margin share, R. Brent Jones. EBITDA margins came down 125 basis points. How much of this was a mix sort of volume impact versus, you know, some of the pricing commentary you made on initiatives to gain share within lab?

Understood. Um I'll let others jump on on, on the segments but maybe on margins here brand. Um, even dumb margins came down 125 basis points. How much of this was uh, mixed uh, sort of volume, uh, Impact versus um, you know, some of the pricing commentary you you made on on, on initiatives to gain sharing within lab.

R. Brent Jones: The dynamic in the quarter was really a combination of price and mix, price being the most significant piece of that, and largely in the lab business there. When you somewhat underperform in bioprocessing, that is also diluted to margin as well. But it is largely a price and then mix dynamic.

Yes, to the, the dynamic in the core was really a combination of price and mix. Uh, price being the most significant piece of that and largely in the lab business there when you, when you somewhat underperform in bioprocessing, that's also uh, uh, the that that's also delivered to margin as well. But it's, it's largely a price and then mixed dynamic.

Vijay Kumar: Sorry. Are these expected to continue in fiscal 2026? Should pricing actions annualize? Any thoughts on the margin cadence here, how we should think about it for fiscal 2026?

All right. Now, are these expected to continue in a fiscal? 26, uh, should pricing actions annualized, any thoughts and, uh, Martian Cadence here. Um, how we should think about for fiscal 26,

R. Brent Jones: Yeah, I think, you know, that is probably a bit in the future there. What I, you know, going to some of Michael's comments on the intensity, winning the contracts, incremental revenue that comes from that. Once we get on those contracts, we always show, or extend them in these instances, we show the ability to create margin as well as we absorb better with volume there. So probably would not get ahead of ourselves on 2026 here, but certainly we are going to see impacts through the balance of the year.

Yeah, I think um you know it's it's that's probably a bid in the future there. What I you know going to some of Michael's comments on the intensity. Winning the contracts incremental Revenue that that comes from that. Once we get on those contracts we always show or or extend them in these instances, we show the ability to create margin as well as we absorb better with volume there. So

Probably wouldn't get ahead of ourselves on on 26 here, but certainly, we're going to see impacts through the balance of the year.

Vijay Kumar: All right. Thank you, guys.

All right, thank you guys.

Emily: Thank you. Our next question comes from Michael Ryskin with Bank of America. Please go ahead, Michael.

Thank you. Our next question comes from Michael Riskin with Bank of America.

Please go ahead, Michael.

Vijay Kumar: Great, thanks. I want to dig into bioprocess first. You have had a couple of really sort of idiosyncratic challenges this year, the controlled room consumables, the site shutdown running long, some of the customer-specific in gene and cell therapy, but certainly a much more disappointing bioprocess number for the year than what we had previously talked about and what we are seeing elsewhere in the market. I just want to get your thoughts on that business longer term. Do you still feel like bioprocess is a high single-digit long-term grower? Just sort of a number of one-off issues that keep popping up that kind of point to maybe some underlying problems. I just want to gauge your confidence that these are one-time and that, once you resolve these, the business is as strong as we previously thought it was.

Great, thanks. Um, I want to dig into the bioprocess. First, you've had a couple of really sort of idiosyncratic challenges this year, the control room consumables. Um, the site shut down running along with some of the customer-specific engine in cell therapy. But, um, certainly, it's a much more disappointing bioprocess number for the year than what we had previously talked about and what we're seeing around the market. I just want to get your thoughts on that business longer term. Do you still feel like bioprocess is a high single-digit long-term grower? Um, are these just a number of one-off issues that keep propping up that kind of points to, um, maybe some underlying problems? And I just want to gauge your confidence that these are one-time issues and that, you know, once you resolve these, um, the business is as strong as we previously thought it was.

Michael Stubblefield: Good morning, Michael. This is Michael. A couple of thoughts on that. Firstly, when you look into Q2, absent a couple of these discrete headwinds, the business really did want to perform in that mid to high single-digit range in line with the rest of the market. I would underscore that the demand for our MABS platform, which is the biggest part of our bioprocessing business, remains incredibly strong and certainly in line with what we see in a recovering end market. No doubt it fell short of expectations in the quarter. With this facility maintenance, this is something you do periodically every few years. As we got into the turnaround, it went a bit longer than we had anticipated. The plant came back online before we ended the quarter, and the team is working hard to restore normal backlog levels.

Good morning, Michael. This is Michael, uh, a couple of thoughts on that, uh, you know, firstly when you look into the the second quarter uh absent, you know, a couple of these discrete headwinds, the, the business really did want to, you know, perform in that mid to high single-digit range and in line with the rest of the market and would underscore that the demand for our Maps platform which is the biggest part of our bio processing business remains incredibly strong. And, and certainly in line with, you know what we see in a, in a recovering and Market

Michael Stubblefield: These customer headwinds that we encountered in the quarter were certainly unexpected and developed as we got into the quarter or very specific discrete customer-related headwinds, particularly in these emerging modalities, which I do not know that it is all that surprising that the industry itself is going through the normal growing pains of launching new technologies. The FDA processes and some of the concerns around patient safety that are top of mind certainly have to be a consideration there. As demand fell off for some of our key customers in that space, it impacted the quarter. Fortunately, it was contained to just two or three customers overall. When we look at the broader platform that we run there, the platform is incredibly well positioned. We have got a great pipeline, long-standing customer relationships.

Uh, no doubt, fell short of expectations in the quarter. You know, with this facility maintenance, this is something you do periodically every every few years, uh, you know, as we got into the turnaround went a bit longer than we had anticipated. Um, you know, the plan came back online before we ended the the quarter and you know, the teams working hard to restore normal backlog levels. Uh these you know customer uh headwinds that we encountered in the quarter were certainly unexpected and developed as we got into the quarter, uh, for very, you know, specific discrete, you know, customer related. Um,

you know, headwinds you know

Michael Stubblefield: I would expect, particularly as Emmanuel comes in with his background in this space, this business will, as we work through some of these headwinds, continue to grow at or above market over the long term.

First overall. And when we look at the broader, uh, platform that we run their, uh, you know, the platform is incredibly well positioned. Um, you know, we've got a great, you know, pipeline long-standing customer relationships. And um, you know, I would, I would expect particularly as the manual comes in, with his, with his background in this space. Um, you know, this business will, you know, as we work through some of these headwinds is, you know, we'll continue to grow, uh, at or above Market over the long term.

Vijay Kumar: Okay. I want to follow up on an earlier point in terms of the guide for the second half. Brent, you called it out. It looks like you are assuming pretty much very consistent numbers, 1H versus 2H, both on organic and on margins. The Q3 to Q4 split really surprised us. Down 2% to down 4% organic in Q3 implies plus 1% or better in the fourth quarter. Just both on a percentage basis and on a dollar basis, really big step up. Can you talk about the extent of conservatism in Q3? Is there anything you are seeing a month into the quarter or just any incremental things to just keep in mind in Q4 that will give us confidence in that ramp?

R. Brent Jones: Yeah, no.

Vijay Kumar: Absolutely. Thanks.

Okay, and then, uh, I want to follow up on earlier points from the, the guide for, for the second half. Uh, Brent you called it out. Looks like you're assuming pretty much very consistent numbers. 1 each versus 2 h, both on organic and on margins. But the 3 key to Fork you split really surprised this um you know, down to to down 4 organic and 3 Q implies plus 1 or better in the fourth quarter. So just both on a percentage basis and on a dollar basis really big step up. Um just can you talk about you know extensive conservatism and 3 Q is there anything you're seeing a month into the quarter or just any incremental things just keep in mind and 4 q that will give us confidence in that ramp. Um just

R. Brent Jones: Yeah, no. No, absolutely fair observation, Michael. I would say we are being careful in Q3 there. I mean, we are assuming a continuation of the trends in lab. There is some timing in silicones, which if you were to relatively smooth that out, that would make that step up look less as much there. And frankly, just the timing of what we know on the seasonality in the order books and the expectations. If we meet or beat in Q3, that will certainly make the ramp on Q4 much lower there.

Yeah. No. No, absolutely. Yeah. No, no, absolutely Fair observation Michael. Um, it uh, you know, the I would say we're being careful on Q3 there. I mean, we are assuming a continuation of the trends in lab. There is some timing in silicones which if you were to relatively smooth that out, that would make that step up.

Look, um, uh, look left, left as much there. And, uh,

You know, frankly just the time of what we know, on the seasonality in the order books and the expectations. Um, you know, if we, uh, you know, we meet or beat in Q3 that'll certainly make the the ramp on, on Q4 much lower. Their

Vijay Kumar: Great. Thank you.

Great. Thank you.

Michael Stubblefield: Yep.

Yep.

Emily: Thank you. Our next question comes from Daniel Brennan with TD Cowen. Please go ahead, Daniel.

Thank you. Our next question.

Brennan with TG.

Daniel Brennan: Great. Thank you. Thanks for the questions, and Michael, obviously, all the best to you. Maybe just on the pricing environment, which, you guys called out competitive intensity throughout the prepared remarks. Obviously, you are taking down the free cash flow guide as you lock in some of these contracts. I am just wondering, could you give us a sense of: A, just how much worth this is right now? B, any color kind of within your lab business, what volume and price looks at? C, is this kind of a new directive? We understand you guys are trying to be competitive, and you have called out some pricing headwinds in the past, but it just seems like things have accelerated here. I am just trying to get our arms around what has changed.

Great. Thank you. Uh, thanks for the questions and Michael, obviously, all the best to you. Um, maybe just on the pricing environment, which, you know, you guys called out competitive intensity throughout.

The prepared remarks. And, you know, obviously, you’re taking down the free cash flow guide.

As you look at some of these contracts, I'm just wondering, could you give us a sense of a ...

Just how much worse this is right now, um, be any color, kind of within your lab business, kind of what volume and price looks at and see.

Is this kind of a new directive? I mean, we understand you guys are, you know, trying to be competitive and you've called out some pricing headwinds in the past. But it just seems like things have accelerated here. I'm just trying to get our arms around kind of, you know, kind of what changed.

Michael Stubblefield: Yeah, thanks, Dan. I think it is important to acknowledge it is a dynamic environment. In the choppiness of the macro environment, we have seen a step up in competitive intensity, particularly in our lab business. Not necessarily broad-based across all customer segments. We probably see it most pronounced with our larger biopharma accounts. We have seen that kind of intensifying as we have moved through the year. I would just underscore our strategy here is to protect and grow our share. We have a differentiated platform. The work that Cory and his team have done as he has leaned in here certainly has validated the strengths of the platform and how much our customers want to do business with us.

Yeah. Thanks Dan. I think it's important to acknowledge.

It is a dynamic, uh, environment in the in the choppiness of the, of the macro environment. You know, we have seen a step up in competitive intensity particularly in our lab business. Uh, not necessarily, you know broad-based across all, uh, customer segments. Uh, we probably see it most pronounced with our larger, um, you know, biofarma accounts.

Michael Stubblefield: We are being reactive to the environment and ensuring that we have got a strong platform and basis to grow from as these end markets recover and as the actions that Cory and his team are taking begin to take hold. We had a terrific quarter, really a terrific quarter with a number of really meaningful account awards where we were able to not only protect our share but also grab substantial market share. As we discussed, more than $100 million of incremental revenues will flow into this business in the coming quarters on the back of those efforts. That will do a lot of good things for absorption. We have got a long track record of expanding margins. Of course, you cannot do that if you do not have the account to begin with.

And, you know, we've seen that, you know, kind of intensifying as we've moved through the year and we're just underscore, you know, our strategy here is, you know, to protect and and grow our share. We have a differentiated uh platform. Uh, you know, the work that Corey and his team have done is is he's leaned in here, certainly have validated um, you know, the strengths of the, the platform and the, you know, the how much our, our customers, you know, want uh, to do business with us. And so, you know, we're being reactive to to the environment and ensuring that, you know, we've got a strong, you know, platform and invasives to grow from as these end markets, uh, you know, recover and you know as the actions that Corey and Steve are taking you know begin to to take hold we had you know a terrific quarter uh really a terrific quarter with uh a number of really meaningful uh account Awards um where you know we were able to not only you know protect our our share but also grab you know substantial market share as we discussed more than hundred million dollars of incremental revenues will flow into this business.

Michael Stubblefield: We think we are as well positioned as anybody out there to compete aggressively for this business. You see that playing through in the quarter.

In the coming quarters uh on the back of those, those efforts. Uh, that'll do a lot of good things for for absorption and we've got a long uh track record of expanding margins. And of course, you can't do that if you don't have the account to begin with. But we think you know, we're well positioned as anybody out there to to compete aggressively for uh for this business and you see that playing through in the quarter.

Daniel Brennan: Is there any color just on volume price or just in the lab business? I mean, is that something you guys can break out? Then, just as a follow-up beyond that, just wondering, you guys typically give end market color. There is a lot of focus on what the academic environment is like in the U.S. and also pharma. So, would you be willing to share kind of how trends performed versus expectations there? Thank you.

Also Pharma. So would you be willing to share kind of how Trends, uh, performed versus expectations there? Thank you.

Michael Stubblefield: Let me take the last part of that question, and R. Brent Jones can give you some color on price volume, Daniel Brennan. From an end market perspective, I would say, as we've moved through the year, we see the end market conditions largely stable as we sit here today, particularly in academia and government following the big step down in February. We've seen that end market perform relatively stable. The funding headwinds for biotech persist, and our large pharma customers continue to be pressured by inflation and other policy-related headwinds. We haven't really seen what I would say a pronounced change here in the quarter. When we look at the second half, we're assuming that those conditions persist. One, maybe additional commentary on our performance relative to those end market trends.

Michael Stubblefield: If you look into our supplemental disclosure, you'll see a particularly strong quarter for us in academia and government. Consistent with the action plan that we outlined for Cory and his team, I think that's a great data point on the benefits, the early benefits that we're seeing of a step up in commercial intensity as well as just the relevance of our platform. We grew that business mid-single digit in an end market that probably was down mid to high single digits. You're starting to see some of these benefits that Cory and his team are driving. For me, it just underscores the strength of our platform.

Uh, let me take the, the last part of that question. And then Brent can, can give you some color on, you know, price volume down from an End Market perspective. I would say, you know, as we've moved through the year, we see the the end market conditions largely stable as we sit here today, you know, particularly in, like, Academia and government following the big step down in in February, you know, we've seen, uh, you know, that in market performance, you know, relatively, uh, you know, stable the funding had winds for biotech persist and, you know, our large, you know, Pharma customers, you know, continue to be pressured by inflation and other policy related, uh, headwinds. So we haven't really seen what I would say, a pronounced change here, in, in, in, in a quarter. And when, uh, we look at the second half, you know, we're we're assuming that those conditions persist 1, you know, uh, maybe additional, you know, commentary on our performance relative to those, uh, end market trends. Uh, if you look into our supplemental disclosure, you'll see particularly strong quarter for us in Academia.

And government, um, and, you know, consistent with the action plan that we outlined for Corey and his team. Uh, you know, I think that's a great data point on, um, you know, the benefits, uh, the early benefits that we're seeing of, you know, a step up in commercial intensity, as well as just the relevance of our platform. You know, we grew that business mid-single digits in an...

Market that, you know, probably was down, you know, mid to high single digits. So, um, you're starting to see, you know, some of these benefits that that Corey and his team are are driving. And, you know, for me, it just underscores the strength of our platform

R. Brent Jones: Following up on the price volume comment there, maybe rewind to where we entered the year. Just frankly, think of the enterprise and lab in particular for flattish volumes and then a modest amount of price. Fast forward to here, certainly due to the end market challenges, there has been some pressure on volume, but that is not most of the story. It is primarily on the price side there. So when you look at our attainment, a little bit of pressure on volume, and then the price headwind is the main drop-through. That goes directly to the margin story.

it following up on the price volume comment there. So maybe rewind to where we entered the year. Just frankly think of the Enterprise and lab in particular for flattish volumes and then a modest amount of price fast forward to here, certainly due to the End Market Channel, which is, you know, there has been some pressure on volume but that, that is not most of the story. It's primarily it's primarily on the price side there. So when you look at our team at, you know, a little bit of pressure on volume and then the price had 1 is the main drop through.

And and that, that goes directly to the margin story.

Emily: Thank you. Our next question comes from Rachel Vatnsdal with J.P. Morgan. Please go ahead, Rachel.

Thank you. Our next question comes from Rachel Varton, Style with JP Morgan.

Please go ahead. Rachel.

Rachel Vatnsdal: Thanks. Good morning. First up, I just wanted to ask on the lab solutions comments. You noted that those were in line with expectations, but you chose to take down guidance for the full year for lab solutions by a few points. Can you walk us through what drove the decision to take down the guide there if it truly did play out as expected? Is this just a function of conservatism? Is it underpinned by trends that you've seen throughout July so far? Are you assuming that the competitive intensity stepped up even further in the back half for lab solutions?

Thanks, good morning. Um, so first up, I just wanted to ask on the lab Solutions comments. So you noted that those were in line with expectations but you chose to take down guidance for the full year for lab solutions, by a few points. So can you walk us through what drove the decision to take down the guide there? If it truly did play out as expected, is this, just a function of conservatism, is it underpinned by trends that you've seen throughout July so far? Or are you assuming that the competitive intensity steps up even?

Further in the back half for lab Solutions.

R. Brent Jones: No, good note of the detail there, Rachel. Look, when we look at the lab performance, minus low single digits for the first half of the year, somewhat better performance in Q2. We just don't see the environment changing. The prior guide was minus LSC to flat. Just under that conservatism, I would probably just call it prudence or a very realistic outlook on that. We don't see the environment changing materially there. We just extended that for the year. Two other comments on bridging it, it makes the math make the most sense.

No good. Uh, good note of the detail there, Rachel and and uh, look we when you when we look at the lab performance, um, you know, minus low single digits for the first half of the Year, some would better performance in Q2, we just don't see the environment changing. So the prior guide was minus LSC to Flats so just I don't know that. I conservatism I would probably just call it Prudence or very realistic outlook on that, we don't see the environment changing materially there. So we just extended that for the year and you know, 2 other comments on bridging it, it makes the math, make the most sense.

Rachel Vatnsdal: Great. Then maybe shifting over to bioprocessing. You called out the planned maintenance took a little bit longer than expected and created this backorder dynamic with some customers. Can you quantify for us how much of a headwind those backorders were within the quarter? Is the plant fully back up and running at this point? If that issue is resolved, when should we expect to see a tailwind from those backorders coming back into the model?

Great then maybe shifting over to bio processing. So you called out the plan. Maintenance took a little bit longer than expected and created this back order Dynamic with some customers. So can you quantify for us how much of the headwind is back orders were within the quarter and then is the plan fully back up and running at this point. And if that issue is resolved resolved, when should we expect to see a toe in from those back orders, coming back into the model.

R. Brent Jones: Rachel, when I think of the bioprocessing underperformance in Q2, one to two points of growth were related to the increase in the backorder and the timing of the maintenance completion. The balance was related to the customer headwinds that Michael cited there. That sort of walked that essentially walked you from the mid-single digit guide to the flat where we ended up there. The operational recovery, the plant is absolutely back where it needs to be. That operational recovery and driving down that backlog does take time. We expect that will feather in through the rest of the year. I would not, you noticed per Michael's questions, we are being careful about timing of that for Q3. We are just feathering that in through the second half of the year.

Yeah. Rachel when when I think of the the the bio processing underperforming in Q2 for 1 to 2 points of growth were related to the increase in the back order and the the timing of the maintenance completion. The balance was related to the customer headwinds and Michael cited there. So that sort of walked that

Century walks you from the mid single digit Guide to the flat where we ended up there. Um, you know, the operational recovery. You know, the plant is absolutely back where it needs to be that operational recovery and driving down that backlog does take time. So we expect that'll feather in through the rest of the year. So I would not you notice for Michael's questions, you know, we're we're being careful about timing of that for Q3 and I would we're just Feathering that in through the second half of the year.

Emily: Thank you. Our next question comes from Luke Sergott with Barclays. Please go ahead, Luke.

Thank you. Our next question comes from, Luke sergot with Barclays.

Please go ahead. Luke.

Luke Sergott: All right. Thanks for the questions. I was just hoping you could size the different headwinds. I'm not going to the specific customer exposure, but really just kind of, you know, from the headwinds you saw in Q2 and then from what's baked into the guide cut for biosciences, really just trying to figure out what was in your control. So if you could help size what, you know, those related due to the extended site maintenance costs versus the, you know, the issues you had with the customers.

Hey, thanks for the questions. Um, I was just hoping you could size the different headwinds. I'm not going to the specific customer exposure, but really just kind of.

You know, from the head when you saw on Q2 and then from what's baked into the guidance for biosciences, I'm really just trying to figure out what was in your control. So if you could help size what um,

You know, those related due to the the extended site maintenance costs or um versus the you know the issues you have with the customers.

Michael Stubblefield: Luke, we cited a couple of discrete headwinds for the quarter. Brent just sized for you the impact of the extended maintenance outage. Think about that as 1 to 2 points in the quarter, which leaves 2 to 3 points for the 2 to 3 customers that encountered significant challenges as we progressed through the quarter. The plant is fully online, and we do not expect that maintenance headwind to impact the second half. So when we look into the outlook for the last couple of quarters here, what you are really seeing reflected here is a full quarter's impact of these discrete customer headwinds, both in Q3 and Q4, as our current assumption is that those headwinds do not unwind as we move through the year.

Uh, look, we started a couple of discrete headwinds for the quarter, um, you know, Brent, just sized for you the impact of the expended, uh, you know, maintenance outage, think about that, as, as 1 to 2 points in the in the quarter, which leaves kind of 2 to 3 points for um, you know, the the 2 to 3 customers. That um, you know encountered significant challenges we progressed through the the quarter uh you know, the plants play online and we don't expect that to maintenance headwind, um, you know, to impact the the second half. So when we look into the outlook for the the, you know, the last couple of quarters here, what you're really seeing reflected here is uh a full quarters impact of these, you know, discrete customer headwinds both in

Michael Stubblefield: We do not necessarily comment on specific customer detail there, but of the 2 or 3 accounts, they all kind of contributed roughly equal to the headwind there. The other dynamic impacting the bps outlook for the second half was our NuCell platform. We are off to an incredibly strong start, particularly in our medical implant part of that business, growing mid-teens year to date, which is well ahead of procedure count. It is not unusual for that business. You see that the customer is normalizing inventories to bring full-year purchases more in line with, in this case, patient procedure count. That creates a little bit of a headwind for us in the second half of the year. But that end market is incredibly strong, and our value proposition there remains fully intact.

Q3 and Q4 as our current assumption is that, uh, you know, those, those headwinds don't unwind. As we as we move through the year, um, and, you know, we don't necessarily comment on on specific customer details there. But, you know, of the 2 or 3 accounts, you know, they all kind of contributed, you know, roughly equal to uh, the the headwind there, the other Dynamic, uh, impacting the BPS.

Outlook for the second half was, you know, our our new cell platform. Um,

We've off to an incredibly, you know, strong start, particularly in our medical implant part of that business growing mid teens, you know, year to date, which is well ahead of, uh, procedure count. And so, not on Not Unusual for for that business. You see that the customers normalizing inventories, you know, to bring, you know, full year purchases, you know, more in line with, uh, you know, in this case, patient procedure count.

Michael Stubblefield: We are going to have a great year overall, and the setup into 2026 will be very favorable.

And so that creates a little bit of a headwind for us in the second half of the year. But that end Market is incredibly strong. And, uh, you know, our our value proposition, there remains, you know, fully intact. We're going to have a great year overall in the, the setup into 26 full. Um, you'll be very favorable.

Luke Sergott: Great. Sorry for the doubling up on that question. I missed it was asked earlier. I guess just sort of a follow-up here, thinking about the business overall, how integrated are the two segments when you think about, like, your, I understand from a channel perspective, you get a lot of third-party, but you also have a lot of proprietary and white-label stuff that goes in there. So, how integrated are the two manufacturing facilities or the manufacturing between the two segments? I will just leave it with that.

Great, sorry. Sorry for the the the doubling up on that question, I missed. It was asked earlier, um, and I guess just sort of a follow-up here, you know, thinking about the business overall. Um, how integrated are the 2? Um, segments. When you think about like, you know, your I understand from a channel perspective.

You got a lot of third party, but you also have a lot of proprietary and white label stuff that goes in there. So, um, you know, how integrated are the 2 manufacturing, uh facilities or, or the the, the manufacturing between the 2 segments and

Um, you know, I'll just leave it with that.

Michael Stubblefield: Yeah, thanks, Luke. When we put these platforms together, more than seven, eight years ago now, there were a pretty significant number of synergies that were implemented and recognized at that time. Obviously, full integration of the back offices and particularly the IT infrastructure and such. The manufacturing facilities, particularly for our proprietary content, are fully integrated. One of the important value elements of our offering, particularly in a GMP environment, is being able to supply research-grade quantities of product coming from a GMP line. As those programs scale up to commercial scale, the customer is not having to requalify a new production line. It is all produced on the same line. There are quite some nice synergies there. We have an integrated account structure, and both segments leverage the common channel here. There are certainly some synergies that are important to the business.

Yeah, thanks. Look, you know, we when we put these uh platforms together uh you know, more than you know, 7 8 years ago. Now you know there were a a pretty significant number of of synergies that were um, you know, implemented in in recognized that at that time. You know, obviously full in a integration of the, of the back offices and the, um, you know, the particularly the, it infrastructure and, and such, um, the manufacturing facilities, particularly for our proprietary, uh, contents, uh, are fully integrated, um, 1 of the important, you know, value elements of our of our offering particularly in the GMP environment is being able to supply research, grade quantities of product. Um, you know, coming from a GMP line and then as those programs scale up to commercial scale, um, the customer isn't having to re-qualify a new production line, it's all produced on the on the same line. So there's there's quite some nice synergies there and then we we have an integrated account, uh, you know, structure and you know both

Michael Stubblefield: As we think about running the businesses, as you can see, both segment leaders are squarely focused on accelerating the growth of each segment independently.

Segments, you know, leverage the common channel here. So, um, yeah, there’s certainly some, uh, you know, some synergies that are important to the business. But, you know, as we think about running the businesses, um, as you can see, you know, both segment leaders are, you know, squarely focused on accelerating, uh, you know, the growth of each segment independently.

Daniel Brennan: Great. Thanks.

Great, thanks.

Emily: Thank you. Our next question comes from Tycho Peterson with Jeffries. Please go ahead, Tycho.

Thank you. Our next question comes from, Tau Peterson with Jeffrey's

Please go ahead Tao.

Daniel Brennan: Hey, thanks. I appreciate you had a number of questions on kind of the lab dynamics and pricing, but can you help us bridge the free cash flow cut? How is that tied to the $100 million a wins on the lab side? Are there mechanics around the rebates here? Should we be worried about channel stuffing, effectively giving away some inventory here? What really is the path to margin bottoming in lab? I think that's the key question people are trying to get a handle on. Obviously, there's some new initiatives by Cory, but then you've got these new pricing headwinds. I also didn't hear you kind of quantify anything around pricing, so any color there would be helpful too.

Hey thanks. Um you know appreciate you that number of questions on on kind of the lab Dynamics and pricing. But can you help us Bridge? The free, cash flow cut? You know, how is that tied to the hundred million dollar, you know, of wins on the lab side? You know, other mechanics around the rebates here. Should we be worried about Channel stuffing? You know, effectively giving away some inventory here, and then, you know what? What really is the path to margins bottoming and lab? I think that's a key question. People are trying to get a handle on, you know, obviously there's some new initiatives by Corey. Um, but then you've got these new pricing headwinds and, and I also didn't hear you kind of quantifying anything around pricing, so any color there would be helpful, too.

R. Brent Jones: Tycho, let me start, then Michael will add some other color on that. The significant piece of the free cash flow range was related to that rebate dynamic. There is a piece of it that is the lower EBITDA dynamic. We are working all the harder on working capital to try and mitigate pieces of that, but that is how I would click that together. I do not exactly follow your channel stuffing notion there.

Daniel Brennan: You talked about $100 million in benefits from new wins. You talked about the $100 million in benefits from new wins. Are you giving away inventory upfront, I guess, is the question?

Yeah, total. Let me let me start and then Michael Michael will add some other color on that. So the significant piece of the free free cash flow range was related to those the preb dynamic. Um, there is a piece of it. That's the lower IBA Dynamic. Now, we're we're working all the harder on working capital to try and mitigate pieces of that. But that that's how I would, that's how I would look at that together. Um, I don't exactly follow your channel stuffing notion there, but when you talked about 100 million benefits to new wins, you know, are you, you talked about the 100 million in benefits from new wins? You know, are, are you giving away inventory up front? I guess it's a question.

R. Brent Jones: Oh, absolutely not. These are.

Michael Stubblefield: What I would say about that, Tycho, is those are share gains. That's incremental business that will transfer from our competitors to us on top of the business that we have been able to retain. The contracts that go around that will incorporate significant upfront rebate payments. I think that's all R. Brent Jones is reflecting there in the outlook, is just the timing of those that will get paid here in the second half of those contracts are implemented, need to be taken into account. But the demand dynamics associated with, there's nothing unusual associated with that, Tycho.

Oh. Oh, absolutely not. These are...

Yeah, what I would say about that, uh, you know, tau is those are those are share games. Those are that's, you know, incremental business, uh, that'll transfer from, you know, our competitors to, to us on top of the, the business that we, you know, have been able to, to retain, um, the contracts that go around that, you know, will uh, incorporate, you know, significant upfront, you know, rebate payments. And I think that's all Brent's reflecting their in the in the Outlook is just the the timing of those that'll get paid here in the second. Half of those contracts are are implemented. You need to be taken into account, but the demand uh, Dynamics associated with. There's there's nothing unusual associated with that psycho.

Daniel Brennan: To click on the path to margins bottoming in the lab, between some of the initiatives, Cory has identified, and then anything around pricing, numbers you can give us. We have not heard anything about quantifying the pricing headwind.

And then just the question on the path to margins bottoming in lab, you know, between, you know, some of the initiatives. Corey's, you know, identified, and then again, anything around, you know, pricing, um, you know, uh numbers, you can give us, you know, we haven't heard anything about kind of um, you know, to quantify the pricing headwind.

Michael Stubblefield: When we look at the gross margin performance in Q2, Tycho, being down 140 basis points wherever it landed there, there is a price and mixed component to that. But most of that is price that we see living through into the second half. In an environment where volume growth is relatively muted, of course, absorption becomes an issue. One of the things that we are excited about is we do not have it built into the outlook and will be a tailwind to the prints going forward. But as these share gains materialize, those will fall through disproportionately, and you will see some nice things happening there due to better absorption. I think it is important to note and kind of go back to, look, this business has a longstanding track record of margin expansion.

As when we look at the, you know, gross margin performance in the second quarter tyo. You know, being you know, down 100 140 basis points, wherever it it landed there, you know there's a there's a price to mix components to that. Um but most of that is is is priced that we see living through into the into the second half.

Michael Stubblefield: We have a very disciplined approach to offsetting inflation, and you see the actions we are taking on cost. Cory and his team, as you noted, are driving some aggressive actions to continue to lean in to accelerate the growth of the business and improve the operating leverage in the business. The strategy we are deploying in this environment is to protect and grow our shares so that we have the opportunity to expand these margins as we move forward. I do not think our view on kind-of long-term margins for this business are impacted by the outlook we have here for the second half.

Um, you know, in an an environment where volume growth is relatively, you know, muted, you know, of course, absorption, you know, becomes an issue 1 of the things that, you know, that we're excited about is we don't have a, you know, built into the Outlook and will be a Tailwind to the, um, you know, to the to the prints going forward. But as this, these share gains, you know, materialize, you know, those will fall through, you know, disproportionately and you know you'll see you know some nice things happening there due to to better uh absorption. I think it's important to note and kind of go back to look. This business has a a long-standing track record of of margin expansion. Uh you know, we have a very, you know, disciplined approach to you know offsetting you know inflation and you see the actions we're taking on on cost, you know Corey and his team as you noted are are you know, driving some aggressive actions to, you know, continue to lean in um, you know, to accelerate the, the growth of the business and and improve the operating, you know, leverage in the, in the business.

And, um, you know, the strategy, we're we're deploying in this in this environment is, you know, to protect and grow our share so that we have the opportunity to expand these margins. As we, as we move forward, I don't think our view on kind of long-term margins for this business. Uh, uh, you know, are impacted by, you know, the the Outlook we have here for the second half.

Daniel Brennan: Okay. Then just a last note on bioprocessing. I want to make sure I understand the dynamics. The Regeneron headline was in March. You guys guided late April. MRA demand has been kind of falling off, really a lot this year and end of last year as well. So I guess, did this come kind of, as a surprise to you post-guidance? Also, what action specifically are you taking? You flagged, you are taking actions in bioprocessing. What are you actually doing here to improve visibility?

Okay, and then just lastly, on bioprocessing I, I want to make sure I understand the Dynamics. I mean, the surround the headline was in March. You guys guided late April, uh, MRA demand has been kind of falling off, you know? Really a lot this year and and uh end of last year as well. So I I guess did some kind of you know as a surprise to you post guidance and and then also, what action specifically are you taking? You flagged, you know, you are taking actions in BIO processing, what are you actually doing here to improve visibility?

Michael Stubblefield: Yeah, a couple of things on that, Tycho. Firstly, the headwinds that impact us in the quarter certainly were unexpected and materialized probably halfway through the quarter. Given that we're talking just really a couple of customers there, we had, given the relationships that we have there, we have a pretty tight connections to our team. They came to us middle of the quarter and substantially cut their outlooks to us at that time. We benefit from being in a heavily regulated environment where we're specced in. The downside to that, of course, is trying to offset unexpected headwinds in the near term can be a bit of a challenge. Nevertheless, consistent with our theme of controlling the things that we can control, Benoit and his team really are leaning in aggressively on the things that they can action. Three specific things I pointed to, Tycho.

You know, in uh we we benefit uh from being in a heavily regulated environment where we're where we're stacked in. Um the the downside to that of course is you know, trying to offset you know, unexpected headwinds in the near term can be you know a bit of a a challenge but you know nevertheless.

Michael Stubblefield: Firstly, both for lab as well as bioprocessing, our delivery performance is one of the key differentiators of the platform. Benoit and his team have some really aggressive actions that they're taking there to continue to push us towards best in class. Similar to the actions that Cory have taken on ramping commercial intensity, particularly in certain segments, we see Benoit and his team doing that as well. Think about areas like biosimilars, some of the newer modalities, antibody drug conjugates, for example. So really doubling down in some of the more attractive growth opportunities. Lastly, this is an innovation-driven business. Incredible focus on continuing to extend the technology and make sure that we have relevant content to offer our customers. So those are probably the three most important areas that Benoit and his team are focused on here in the near term.

Consistent with our, our theme of, you know, controlling the things that we can control, you know, Benoit and his team. Uh really are leaning in aggressively on the things that they can that they can action uh you know 3 specific things. I pointed to Tau you know firstly both for lab as well as bio processing. Uh our you know delivery performance is 1 of the key, differentiators of the of the platform and I've been wanting his team have some you know uh really aggressive actions that they're taking their to to continue to to push us towards best-in-class. Um

You know, similar to the actions that Corey have taken on, you know, ramping commercial intensity particular in, you know, certain segments, we see, you know, Ben Juan and his team doing that, uh, as well think about, you know, areas, like, you know, biosimilars, um, some of the newer modalities and antibody drug conjugates. For example. So really doubling down in, you know, some of the, um,

You know, more attractive growth opportunities. Uh, and then, you know, lastly, uh, this is an innovation driven business, uh, incredible focus on, you know, continuing to extend the technology and make sure that we have relevant content to offer our our customers. So those are the probably the 3 most important areas, that bennu and his team are focused on here in the near term.

Daniel Brennan: Okay. Thank you.

Okay, thank you.

Emily: Thank you. Our next question comes from Patrick Donnelly with Citi. Please go ahead.

Thank you. Our next question comes from Patrick Donnelly with City.

Please go ahead.

Vijay Kumar: Hey, guys. Thanks for taking the question. Michael, maybe just on the bioprocessing business, obviously, you certainly understand the company or the customer-specific issues there. Can you just talk broadly on the business in terms of what you saw on the order side, maybe if you can kind of a little bit X some of the one-time issues, where lead times are? Just curious what you are seeing in that business outside some of the near-term noise here.

Hey guys, thanks for taking the questions. Um Michael maybe just on the on the B processing business. Obviously, certainly understand the the company or the customer specific issues there. Can you just talk broadly on the business in terms of what you saw on the order side? Maybe if you can kind of a little bit X, some of the 1 time issues, um, you know, where lead times are just curious what, what you're seeing in that business outside of some of the, uh, some of the near-term noise here.

Michael Stubblefield: Yeah, our perspective on the bioprocessing business is that we continue to be extremely encouraged by the ongoing recovery and strengthening of the end market. Consistent with the industry or end market exposure here, most of the revenue is coming from monoclonals. The demand for our solutions for that platform remains incredibly strong. I would just reiterate that had we not run into these couple of discrete headwinds, our platform would have performed very much in line with the end market as well as some of the other prints that you have seen here. One of the things that we have been doing over the last number of years is leaning in on some of these new modalities. Our revenue exposure there would be probably consistent with the number of approvals you see overall in that end market relative to the MABS.

Yeah, our perspective on, on the bio processing businesses that we continue to be, uh, extremely encouraged by, you know, the ongoing recovery recovery and strengthening of of the, the End Market, you know, consistent with the, you know, the industry or End Market exposure here most of the revenue is is coming from monoclonals and you know, the demand for our our, our, you know, solutions for that platform, you know, remaining incredibly strong. And you know, we're just reiterate that, you know, how do we not run into these couple of discrete headwinds, you know, our our platform would have performed you know very much in line with the End Market as as well as you know some of the other prints that you've uh, you know seen here. Uh you know 1 of the things that uh we have been doing over the last. You know, number of years is, is leaning in on some of these new new

Michael Stubblefield: It is just to say it is probably less than 10% of our total platform. One of the attributes of developing technology set like that is there is not a lot of approvals out there. We have benefited from putting more content on those new modalities than say we have historically, just given some of the strengths of our platform and innovation model. When you have a customer or two encounter some challenges, some growing pains, if you will, it does have a bit of an outsized impact on us. So I would not use the prints in the quarter or the outlook for the back half of the year to read through our, A, the strength and relevance of our platform, nor our view on the end market. We remain incredibly bullish about the ongoing recovery. You asked a little bit about lead times there.

Modalities, you know, our Revenue exposure. There would be you know, probably consistent with the number of approvals. You see overall in that in that end Market relative to the mabs. It's, you know, it's just to say it's, you know probably less than 10% of our total uh platform. But uh, you know, 1 of the 1 of the attributes of uh, of developing uh, you know, technology stuff like that is. You know, there's not a lot of approvals out there. Uh, and we have, you know, benefited from putting, you know, more content on those new modalities and say we have historically just, you know, given you know, some of the the strengths of our of our platform and Innovation model. And so when you have you know, a customer or 2, you know, encounter some, some challenges, some Growing Pains, if you will, it does, you know, have a bit of an outsized, uh, impact on on us. So, uh, wouldn't uh, you know, use the, the print in the quarter, or the outlook, for the back, half of the year to, to read through our a, the strength, and, and relevance of our platform, nor our view on the The End Market. We, we, we, we remain incredibly bullish, uh, about.

Michael Stubblefield: Our supply chain has been transacting normally now for quite a number of quarters, which for us means we probably have a two to three month lag from order to delivery on average.

The ongoing recovery. And, you know, the you asked a little bit about lead times there, you know, our supply chain has been, you know, transacting normally. Now for, you know, quite a number of quarters, which, you know, for us means, you know, we probably have a 2 to 3, um, you know, month, uh, you know, lag from from order to delivery on average.

Vijay Kumar: Okay. That is helpful. That is obviously a new CEO coming in. We will wait to hear from him directly, obviously. Just in terms of the hiring process, what attracted you guys to him? Again, any changes we should expect, whether it is capital allocation, the approach to the business? Curious, just the overall view on that front would be helpful. Thanks, guys.

Okay, that's helpful. Um, and then obviously, you know, a new CEO is coming in. We'll wait to hear from him directly, but just in terms of the hiring process.

What attracted you guys to him? And then, and again, any changes we can expect whether its capital allocation, you know, the approach to the business uh Curious just just the overall view on that front would be helpful. Thanks guys.

Michael Stubblefield: I would reiterate, Emmanuel will start here in a couple of weeks, August 18th. As we have indicated, I will continue to stay fully engaged and direct the business up until then. The board led a very thorough process, and I think Emmanuel's background speaks for itself. He is an industry veteran with over 30 years' experience in this space and with a particular strength in bioprocessing, given the work that he did at first GE and then ultimately over at Cytiva within Danaher. I know that he is incredibly excited to get started. With his experience and familiarity with the space, he will no doubt hit the ground running. We do have a very good process in place, I am sure a smooth transition, and I am confident that that will indeed occur.

Up until then you know the the board led a a very thorough process. Uh and I think, you know, emanuel's background, you know, speaks for for itself, he's an industry veteran with over 30 years experience in this space. And, you know, with a particular, you know, strength in in bioprocessing, you know, given the work that he did at, uh, you know, first GE and then ultimately over at uh, you know, sativa within within danaher. I know that he's, uh, incredibly excited to to get started and

Michael Stubblefield: I certainly would not want to get ahead of the work he will do here in setting his agenda for him. I know in the early days, he will be very focused on engaging with our customers, with our team, with our board. You will hear from him at least in the Q3 call. As his agenda and priorities develop, I am sure he will be anxious to share those with you all.

Uh, you know, with his, with his experience and familiarity with the space, he'll no doubt, hit the ground running. We do have a, a, very good process in place to ensure. Uh, uh, ah, a smooth transition and, you know, I'm confident that that will indeed occur.

You know, certainly wouldn't want to get ahead of the the work he'll do here and and setting his agenda for him. I know in the early days, he'll be, you know, very focused on engaging, with our customers, with our, with our team, with our, with our board and uh, you know, you'll you'll hear from him, you know, at least, uh, in the, in the third quarter call and, you know, as his um, you know, agenda and priorities, you know, develop, I'm sure he'll he'll be anxious to share those with with you all.

Emily: Thank you. Our next question comes from Douglas Schenkel with Wolfe Research. Please go ahead, Doug.

Thank you. Our next question comes from Doug, Genco, with wolf research. Please go ahead. Doug.

Douglas Schenkel: Good morning, and thank you for taking my questions. A couple on VWR. First, I believe you mentioned a major contract extension, as you talked about future share gains. I just want to better understand why are those share gains, if they are extensions? Are you getting commitments from some existing customers to spend more, or are these becoming exclusives? Again, I just want to better understand the link between those comments. That's the first thing. Second, it sounds like you're using price as part of a share gain strategy. That's obviously come up a lot this morning. How does this impact near and long-term margin targets? I guess kind of cutting to the chase, does that mean that LSS margin should stay in the low double digits for the foreseeable future? Those are the two questions on VWR.

Uh, good morning and thank you for taking my question.

So, um, a couple on ZWR, uh, first.

I believe you mentioned a major contract extension. Um, as you talked about future share gains, I just want to better. Understand why are those share gains? If they are extensions, are you getting commitments from some existing customers to spend more and, or are these becoming exclusive again? I just I just want to better understand the link between those comments.

So that's the first thing.

Douglas Schenkel: Last one, and then I'll move back into the Q and listen. On margins, your fiscal year and Q3 guidance implies around an 18% EBITDA number, margin number in the fourth quarter. Given the bioprocessing challenges and what we just ran through on the VWR side, I'm just wondering what gives you conviction in getting back to that level, just given how many headwinds you're facing right now. Thank you.

Second. It sounds like you're using price as part of a share game strategy. That's obviously come up a lot this morning. How does this impact near and long term margin targets? Um, and I, I guess kind of cutting to the chase, does that mean that LSS margin should stay in the low double digits for the foreseeable future? So those are the 2 questions on pwr. Uh last 1 and then I'll I'll go back into the queue and listen um on margins your fiscal year and Q3 guidance, implies around an 18%. Evita number uh March and number in the fourth quarter.

Get in the bio processing challenges and what, what? We just ran through, on the vwr side. I I'm just wondering what gives you conviction and getting back to that level of just giving how many headwinds you're facing right now. Thank you.

Michael Stubblefield: I'll be happy to give you some color on the account wins and share gains in the quarter. R. Brent Jones can weigh in on your questions around margin. A couple of things on the account wins there. We do have a very clear strategy here of protecting and growing share. That was part of the agenda that we outlined for Cory as he stepped in and leaned in aggressively with our commercial team to protect our business. In the quarter, we had a number of large pharma accounts, several, in fact, where the business was being competitively up for bid. We were able to retain the existing business that we had, as well as grab some of the business at those accounts that we didn't have.

Michael Stubblefield: The net impact of the success we had in the quarter was a net increase as the conversion occurs over the next couple of quarters of more than $100 million. Substantial share gains there. I'd also note, I think we probably drove some of my share gains into the academia market, given the mid-single growth there that we printed. We also announced that we extended prematurely our relationship with Bio, which is the largest purchasing consortium serving biopharma and biotech with more than 10,000 customers collectively making it our largest account. I think you put all that together, and you see a couple of things. One, we are eager to invest and continue to grow our business and ensure that we have a customer base to do that off of.

I'll be happy to give you some color on the um, account, uh, wins and and share gains in the quarter in Brent, uh, can weigh in on on your questions around margin. So a couple of things on the, uh, you know, account wins there, you know, we do have a very clear strategy here of of protecting in in growing share. And you know, that was part of the agenda that we allow outline for Corey as he, you know, stepped in and, you know, leaned in aggressively with our commercial team to to protect our business. And, you know, in the quarter, you know, we had a number of, uh, you know, large uh, form accounts, you know, several, in fact, you know, where, you know, they, the business was being, you know, competitively, you know, up for bid and, you know, we were able to, you know, retain the existing business that we had as well as, you know, grab, you know, some of the business that those accounts that we that we didn't have. And, you know, the net, you know, impact of uh, you know, the success we had in the quarter was, um, and, and, and that increase as

Michael Stubblefield: I think more importantly, you see just the relevance and strength of the platform and customers voting to do business with us. We offer a lot of efficiency, a lot of optionality, certainly a broad portfolio, and a best-in-class supply chain here. Really pleased to see the differentiation of the platform coming through. We'll continue to execute on that strategy. Of course, it is coming at the expense of margin rate, but we're keenly focused on preserving absolute margin dollars overall. Over the long term, I'm no doubt we'll have an opportunity to improve the margins as we execute our playbook here.

The the the conversion occurs over the next couple of quarters of more than 100 million dollars, so substantial, share, gains there. And, you know, I would also note, I think we probably drove some nice share gains in the Academia Market, you know, given the mid single growth there that we that we printed. We also announced that we extended, you know, prematurely our, you know, relationship with with bio, which is the largest purchasing Consortium uh you know, serving bio Pharma and biotech with more than 10,000, you know, customers collectively, making it our our largest account. And so I think you put all that together and you see a couple of things, you know, 1 we are, you know, eager to to, you know, invest and continue to to grow our our business and ensure that we have, um, you know, a, a customer base to do that off of, uh, but I think more importantly, you, you see, just the relevance and strength of the, of the platform and customers voting, um, you know, to do business with us. Uh, we offer, um, you know, a lot of efficiency, a lot of optionality certainly a broad portfolio. And, you know, about,

R. Brent Jones: Hey, Doug. Jumping off Michael's comments there, I mean, I think your observation in the near term on lab solutions' segment operating margin is correct. We need to play through these contract extensions. We need the absorption from the additional volume here. There absolutely is a price share dynamic here, but I think this share is super important to us. So that is a necessary consequence of it. We will get volume. We will continue to be vigilant on our own cost. Then we will have a path to creating that. We will talk more about that when Emmanuel is here and in future quarters, looking into 2026. Look, we are not excited about the margin piece of it, but we are excited about the wins and what they mean for the prospects of that business.

Uh, to to execute on that strategy, of course it it is coming at the expense of, of margin rate, but, you know, we're, we're keenly focused on, you know, preserving, you know, absolute margin dollars overall and, you know, over the long term, you know, I'm, uh, no doubt. We'll, we'll have an opportunity to, uh, improve the margins as we, as we execute our Playbook here. Um, he'd uh, jumping off Michael's comments there. I mean, you're I think your observation in the near term on left Solutions. Uh, segment. Operating margin is correct. You know, we we we need to play through these contract extensions. We need the absorption from the additional volume here. Um there are absolutely is a price share Dynamic here but um I think this year is super important to us so that that is a necessary consequence of it. We get volume. We'll continue to be vigilant on our own cost and then we'll have a path to creating that and we'll talk more about that when a manual is here and in future quarters looking into 26. But I look what we we are not excited about the margin.

R. Brent Jones: Your comments to Q4, that observation is true if you get to the very high end of it. When I sort of think about organic growth and on a margin basis, if we are at the low end, it is sort of very consistent with where we are tracking. This goes back to Michael Ryskin's question as well. Where we would be tracking you not have dissimilar growth in the mid, you need some of that in Q4. The important point there is that we expect more silicones in Q4, as well as some additional bioprocessing there. So you get that in the mix-up. Then at the high end, you would approach margin rates that you were citing. Also happy to follow up on any of the arithmetic for alignment there. Thank you.

A piece of it. But we are excited about the wins and what they mean for the prospects of that business. Your comments to Q4, that observation is true if you get to the very high end of it. When I sort of think of both organic growth.

And on a margin basis, you know, if if we're at the low end, it's sort of very consistent with where we're tracking. This is, this goes back to micro risk and the question as well. Um, you know, where we would be tracking, you not have to similar growth. And in the mid you, you need some of that in Q4, and the important point there that we expect more silicones and Q4, as well as some, uh, some additional bioprocessing there. So you get that in a mix up and then at the high end, you'd approach, uh, margin rates that you were citing, but also happy to follow up on on any of the arithmetic for alignment there. So thank you.

Emily: Thank you. Those are all the questions we have time for today. I will turn the call back over to Michael for closing remarks.

Thank you. Those are all the questions we have time for today, so I'll turn the call back over to Michael for closing remarks.

Michael Stubblefield: Yeah, thank you, everyone, for joining us today. Thank you for your partnership and support over the years. That will conclude our call today. Hope you all have a great day and be well, everyone. Thank you.

Uh, yeah, thank you everyone for, uh, for joining us today. Thank you for your your partnership and support over the years. Um, that'll conclude our call today. Um, hope you all have a great day and be well, everyone, thank you.

Emily: Thank you, everyone, for joining us today. This concludes our call, and you may now disconnect your line.

Thank you everyone for joining us today. This concludes our call and you may now disconnect your line.