Avantor, Inc.

followed by the number one on your telephone keypad. I'll now turn the call over to Alison Hosack, Senior Vice President of Global Communications. Ms. Hosack, you may begin the conference.

Good morning, and thank you for joining us. Our speakers today are Emmanuel Ligner, President and Chief Executive Officer, and Brent Jones, Executive Vice President and Chief Financial Officer. The press release and a presentation accompanying this call are available on our investor relations website at ir.avantoursciences.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 filings. Actual results might differ materially from any forward-looking statements that we make today. 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 the 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 Emmanuel.

Thank you, Ali, and good morning, everyone. I appreciate you joining us today. As you know, I joined Aventor a little more than two months ago. I came on board because I believe this company has a tremendous potential. I have spent my entire career in pharma and lab science industries, spending meaningful time on three different continents. I was fortunate to spend two decades at GE Lab Sciences and Danaher, where I built out the Cytiva business, significantly accelerated the growth trajectory of the platform, and led its integration with PAL Lab Sciences. During that time, I had a front row seat to Aventor Trajectories, as a customer and supplier. I believe this experience enabled me to step into this role 10 weeks ago with a unique perspective on the company's strengths and area for improvement. Throughout my career, the primary lessons I've learned is that there is no substitute for going to Gemba. This concept literally means visiting the place where work is done and value is created. to learn and determine how to best improve our organization. And for the past two months, this is exactly what I have been doing. I have dedicated my time toward visiting our sites, meeting our people, speaking with dozens of our customers and suppliers across Asia, Europe and North America. This not only sharpened my initial instincts, but also provided invaluable insights as we map out our strategy moving forward. I want to personally thank all the stakeholders for the warm welcome, open dialogue, and trust they demonstrated for my first day in the role. Here are some of the important learnings. First, this is a great industry with strong secular tailwinds. scientific collaboration is more important than ever. If you talk to any pharma or biotech company right now, you will hear about the multitude of ways in which they are harnessing the power of technology and AI to accelerate the next breakthrough discovery. That gives us a tremendous amount of confidence in the long-term trajectory of the hand markets we serve and reinforces the importance of our positioning within the industry. Our recent announcement with Blue Whale Bio is a perfect demonstration of how Aventor is advancing innovation through collaboration, and we are committed to continue to do our part to facilitate the research, development, manufacturing, and delivery of next-generation therapies. Second, Aventor has a solid portfolio, a committed global team, and an incredible customer reach, serving more than 300,000 customers location across approximately 180 countries. As someone that has spent considerable time in recent years working to scale life science businesses, those attributes will be the envy of most companies. We have significant untapped potential and numerous opportunities in front of us, and we need to capitalize on those opportunities. Third, and most importantly, there are many things we can and should do better, and we are taking immediate action to turn the business around and hold ourselves accountable for rewarding the trust our investors place in Avento. Starting from a commercial perspective, I believe our business is overly complex, with unnecessary centralization, which inhibits frontline staff from most effectively meeting our customers' and suppliers' needs and expectations. Customers buy from Aventor because of the quality and service heritage of our incredible brands. VWR, JT Baker, Masterflex, Nusil. Those are some of the best-known names in the industry, and our commercial team are not being sufficiently empowered to leverage the equity of those brands. On the operation and supply chain side, I believe we need to make some investment and process enhancement to improve our ability to consistently serve our customers. Overall, I believe those challenges are generally self-inflicted. And the good news is that they are fixable with determination, focus, and time. At the conclusion of this call, I will share my preliminary thoughts on our plan for doing just that, which we are calling Aventor Revival. With those initial findings in mind, we strongly believe that our current share price does not reflect the long-term value of our platform. To demonstrate our long-term conviction in the prospect of this business, our board of directors has authorized a $500 million share repurchase program with immediate effect. which we will pursue opportunistically moving forward, while also delivering on our commitment to decrease net leverage. Now, I would like to turn over to Brent for a more detailed overview of our third quarter financial results and our updated full-year guidance.

Brent? Thank you, Emmanuel, and good morning, everyone. I'm starting with slide four. For the quarter, reported revenue was $1.62 billion, which was down 5% year-over-year on an organic basis. This reflects weaker-than-expected top-line performance, primarily in lab. Adjusted EBITDA margin was 16.5%, and adjusted EPS for the quarter was 22 cents. Free cash flow was $172 million, with adjusted conversion at 124%. Turning to slide five. Adjusted gross profit for the quarter was $527 million, representing a 32.4% adjusted gross margin. This is a decline of 100 basis points year over year, driven mainly by price actions in lab to protect and grow market share. We had another quarter of solid cost control with adjusted SG&A expense better than planned and prior year. Our results also benefit from reductions in incentive compensation accruals. We remain on track with our cost transformation program and continue to expect $400 million in run rate savings by the end of 2027. Adjusted EBITDA was $268 million in the quarter, representing a 16.5% margin, better than our expectations. adjusted operating income was $237 million at a 14.6% margin. Interest and tax expense were in line with our expectations. As a result, adjusted earnings per share were 22 cents for the quarter, a 4 cent year-over-year decline. Our adjusted EPS performance in the quarter reflects the flow through of our adjusted EBITDA results. Our cash generation was particularly strong with $172 million in free cash flow in the quarter. When adjusted for transformation-related payments, our free cash flow conversion was 124% of adjusted net income for the quarter. In terms of our GAAP results, we took a $785 million impairment to the goodwill associated with our lab distribution business. This non-cash charge was necessitated in large part by the continued weakness in our share price as well as the margin headwinds this business is facing. Our adjusted net leverage ended the quarter at 3.1 times adjusted EBITDA, down 0.1 times from Q2 as our strong cash generation enabled us to reduce net debt. Finally, we recently affected a very attractive refinancing of our near-term maturities and upsized our revolving credit facility to $1.4 billion and extended its maturity to 2030. Other than modest required term loan amortization, we now do not have any debt maturities before 2028 and all of our debt is either prepayable at par or at very modest call premium. Our debt is approximately 75% fixed rate, and our current weighted average cost of debt is just over 4%. Let's now take a closer look at each of our segments on slide six. In laboratory solutions, revenue was $1.1 billion. On an organic basis, we declined 5% versus prior year below our expectations of negative 2% to negative 4%. The market backdrop in Lab is largely stable, and Corey Walker and his team have done a great job defending and expanding business at our largest accounts. The share losses we mentioned on our Q1 call have been phasing in over the past several quarters. The good news is that since Corey joined us in late March, we haven't lost any key customer accounts, And in fact, we have won about a hundred million in business at two top 15 global pharma customers, which will start phasing in in 2026. With that said, customer activity continues to be at lower levels than our original expectations for the year, driven by ongoing and market uncertainty related to basic research funding. Each of our lab businesses face similar mid single digit headwinds on a year over year basis. Our distribution channel, which accounts for approximately two-thirds of segment revenue, was primarily impacted by weakness in consumables and equipment and instrumentation, while our chemicals and reagents were essentially flat. Our services business, approximately 20% of segment revenue, saw greater than expected headwinds due to the aforementioned share loss. And our proprietary business, the balance of labs revenue, was significantly impacted by our science education business, however, our attractive proprietary lab chemicals grew mid single digits in the quarter and similarly year to date. The primary drivers of our missed to expectations were headwinds and services and higher education and K through 12. While market softness is a key factor in the quarter's performance, we also continue to navigate competitive pressures. These need to be better mitigated by improved commercial and operational execution, which, as Emmanuel noted at the outset, is one of our key priorities as part of Avantor Revival. Adjusted operating income for lab solutions was $124 million for the quarter with an 11.3% margin. The softer demand environment has pressured our ability to get price, which has meaningfully impacted margins year over year on a sequential basis, the primary driver of the margin decline was lower volumes and related absorption. Turning to bioscience production revenue was $527 million in Q3 down 4% organically on a year over year basis and at the low end of expectations. Bioprocessing was down low single digits year over year versus our expectation of flat. Within bioprocessing, processed chemicals was up low single digits but was lower than expectations. The planned maintenance downtime that impacted Q2 was remedied during the quarter, but as Emmanuel mentioned, we continue to face other operational headwinds that are impacting our throughput, including raw material availability and equipment uptime. As an example, Downtime at several of our plants prevented us from shipping several orders that were due for delivery in Q3. Absent these issues, we would have delivered our bioprocessing guide for the quarter. Single use largely performed as expected and CEC was somewhat weaker than expected down mid single digits due to commercial execution and competitive dynamics. Year to date and in Q3, Our book to bill is 1.0 for bioprocessing, with particularly strong performance in processed chemicals, where order rates were up high single digits in Q3 and year-to-date, while billings are only up low single digits, indicating a solid trend. Our bioprocessing order backlog reduced modestly from Q2 to Q3, but still is too high. The team is working hard to reduce this as much as possible by the end of the year. For the balance of the segment silicones performed as expected and applied solutions had a stronger than expected quarter up low single digits on significant strength and electronic materials that we expect to continue in Q4. Adjusted operating income for bioscience production was 128 million for the quarter representing a 24.2% margin. Margin was down year over year largely due to lower volumes and related under absorption as well as higher expense related to our operational challenges. On a sequential basis, volume was the primary headwind, only partially offset by price and lower operating expense. Slide 7 shows our full-year 2025 guidance. This has been updated to reflect Q3 performance, as well as our best assessment of the current environment. We now expect full-year organic revenue growth of negative 3.5% to negative 2.5%. Based on current FX rates, we expect a modest tailwind from FX of approximately 1.5%. Along with the 2% headwind from the clinical services divestiture, this leads to reported revenue growth of negative 4% to negative 3%. On a segment basis, we expect laboratory solutions full-year revenue growth to be minus mid-single digits to minus low single digits organically, down modestly from previous expectations of minus low single digits. This implies Q4 organic performance of down mid-single digits. This change is due to the impact of Q3 performance as well as expectations for continued softness in consumables and in our lab services business. We also expect additional headwinds due to the impact of the U.S. federal government shutdown. We expect bioscience production's full-year revenue growth to be minus low single digits organically, down from previous expectations of approximately flat. This implies Q4 organic performance of down mid-single digits to down high single digits. This change is largely due to reductions in our outlook for bioprocessing, as well as customer pushouts in our silicones business. Bioprocessing is expected to be down low single digits for the year organically, down from previous expectations of flat to plus low single digits. This implies Q4 organic performance of down high single digits to low double digits. Recognizing this is a meaningful change, I want to break down our expectations across bioprocessing in a bit more detail. We believe processed chemicals in Q4 will be flat sequentially versus Q3 and down double digits year over year, despite solid year-to-date order book performance. We previously expected a mid-single-digit contraction in Q4 for processed chemicals. This change is largely due to higher-than-expected backlogs as a result of the ongoing challenges previously discussed. Q4 is also a particularly tough comparable as processed chemicals grew meaningfully in the double digits in Q4 last year. We anticipate single use to be up low single digits both sequentially and year over year in the fourth quarter. We previously anticipated high single digit growth in Q4 for single use. Controlled environment consumables are expected to be flat sequentially and down low single digits year over year. We previously anticipated this business to grow modestly in Q4. This business is being impacted by the competitive pressures and the general demand weakness we are seeing in consumables. Moving to profitability, we expect our strong cost controls and favorable compensation accrual impact to continue into Q4. As such, we expect full-year adjusted EBITDA margins in the mid-16s. we have reduced our adjusted EPS guidance range to between 88 and 92 cents. We still expect free cash flow performance of 550 to 600 million dollars before any one-time cash expenses associated with our cost savings initiative. The reduction in earnings from our previous guidance should be offset with strong working capital performance, and we now expect about half of the pre-paid payments anticipated for the fourth quarter to push into fiscal year 26. I also want to address near-term capital allocation. Much of our debt complex is prepayable at par, and we will continue to reduce outstanding debt as we generate cash. At the same time, with our new share repurchase authorization, we intend to buy shares opportunistically without increasing leverage. We ended the quarter at 3.1 times adjusted net leverage and will continue to move towards our leverage target of sustainably below three times. With that, I will turn the call back to Emmanuel.

Thank you, Brent. Clearly, we are disappointed with those results, and I am not here to make excuses of our underperformance. My focus is on addressing the root cause of those persisting challenges and implementing appropriate course correction quickly. At the beginning of this call, I introduced the concept of eventual revival. Our board and management team are fully aligned with this effort, which will initially focus on five key pillars. First, our go-to-market strategy. We need to evolve our approach to ensure customers and suppliers clearly understand our value proposition, and complete product and servicing offering. As I mentioned in my opening remarks, we have an incredible roster of brands. Embracing VWR Heritage as a leading distributor and a company heritage as a leading provider of fine chemicals and specialty materials, for example, is essential to drive growth. So we are carefully evaluating our brand architecture and we are going to give more prominence to key product and channel brands moving forward. We also intend to refocus attention to our distribution business and our value proposition to supplier and customers. We also have worked on the way to analyze and evolve our customer service and commercial organization. This work is really focused on empowering our sales representatives to better serve our customers however and wherever they want to be served. This includes enhancing our e-commerce platform. Second, we need to invest strategically in our manufacturing and supply chain organization. Brent noted the operational issue we are having. In bioprocessing chemicals, the demand is there, and we need to be better positioned to meet that demand at all times. The current state of our manufacturing and supply chain organization varies, with some facilities that are world-class, while others are in need of investment. Third, we will be carefully scrutinizing our portfolio to ensure a focus on our core business. we are going to hold each of our businesses accountable for delivering clear growth, profitability, and return on investment targets. We are approaching this process with an open mind, but if any of those businesses are not capable of delivering those targets in a reasonable time frame, we are going to scrutinize whether we are the right owner for them. Fourth, we need to drive net cost saving and simplify processes across the organization. We are committed to being a business that generates strong operating leverage, even as we invest in accelerating growth. And our ongoing 400 million cost transformation program is an important step in that direction. However, we recognize that those savings today are not adequately falling through to the bottom line. Part of this is because we are still operating with far too much complexity today. We need to simplify our operating processes to remove barriers that prevent us from executing efficiently. Gaps in sales and operating processes are contributed to inventory and forecasting challenges, preventing us from serving our customers at the on-time rates they expect. To address this, we are focused on improving leadership accountability across the businesses. We are establishing new operating norms and cadence that will ensure the leaders across our organization are aligned and focused on top business priorities. Finally, to help to do this, we must strengthen our talent and improve accountability in a few key areas. Very encouragingly, most of the associates I've met are deeply engaged and passionate about the work they do each day. They want the company to succeed. They are prepared to work hard and be part of the solution. They are looking for leadership and guidance on how to do that. To support those efforts and accelerate improvement, we will be bringing on new talent in a few key areas. A new chief operating officer, a critical role that will report to me and help reinforce consistent manufacturing, supply chain excellence, and lean operations across the organization. A new executive leadership position dedicated to the quality and regulatory function reporting directly to me. A strategic move reflecting the critical role quality and regulatory play in safeguarding patient safety, ensuring regulatory compliance and driving operational integrity across our global business. We are also hiring a new Chief Digital Officer to help strengthen digital commerce capabilities with our laboratory solution segments. Avanto Revival will initially be targeted toward addressing each of those focus areas. So the important action will help us drive meaningful changes and improvement across our organization over the next several quarters. But we are not stopping here. It is important to stress that those initial steps are based on my observation following about two months in the role. I'm committed to continue to meet with and learn from all our stakeholders. And as I do, REST reassures those plans will continue to evolve with a renewed focus on getting our performance back on track and creating value for our shareholders. Clearly, turning business performance around will take some time, but we are confident the action we are taking will have an impact that will continue to grow over time. It's about driving simplification, process improvement, and accountability across the organization. As I noted a moment ago, Our board and management team are 100% behind this effort. The recently announced addition of Greg Lusser to our board and the elevation of Greg Sumi as our next board chairman are demonstrative of our board's active oversight and engagement in this project. I know we must rebuild our credibility with the investment community, and accountability will be my North Star. you can expect regular updates on our progress against those objectives. With that, I will now turn the call over to the operator to begin the Q&A session.

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 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 remove yourself from the queue. To allow everyone a chance to ask a question during Q&A, we request that you please limit yourself to one question and one follow-up. Our first question today comes from Vijay Kumar with Evercore ISI. Vijay, please go ahead.

Hi, guys. Thank you for taking my question, Emmanuel. Welcome to your inaugural earnings call. Maybe high level, as you've reviewed the business, and you've come with bioprocessing background, when you look at these declines, what is your confidence that these are fixable, solvable issues? And I'm curious on how the quarter played out. It was relatively a prior expectation, so was the quarter expected. Did progress in line and did things worsen in September, October? I'm curious when did these issues crop up?

Thanks, Vijay. Thanks for the kind, welcoming word. Look, first of all, I am confident that it's flexible. Over the last two months, I really spent a lot of time on the field with the people, with our customers, dozens of customers and suppliers. And I think the first thing which I was really, really super pleased about is the conviction by the people that, you know, they have the passion about the brand. They have the passion about the product. They have the passion about the customers. What the team need is really leadership. And I think on the quarter, look, it is a very disappointed number. There's absolutely no doubt about this. And there's no excuses about the fact that – you know, we just dropped the ball on a couple of areas. And again, I think I share that around the SNOP. It's really about a better communication. It's about visibility. It's about execution. It's about accountability. And that's why Brent and myself are putting new norms, new cadence to make sure that the team is really working together. I think, again, it is fixable. Those are just the five pillars that I just identified in my first eight weeks. Then, of course, we'll continue to learn, we'll continue to speak with the key shareholder, and this plan will evolve without any doubt.

Understood. And then, Brent, maybe one for you on... you know, when you look at 26, some of your peers have given outlooks right in the low single-digit range. Can the business grow in 2026? You know, you mentioned $100 million of lab contribution. On paper, it looks like labs should grow. In bioprocessing, it feels like some of these were unique customer situations. It was largely tied to fiscal 25, and it should grow. But can the business grow at a high level in 26?

Hey, Vijay, Emmanuel again. Look, I'm taking a fresh look at all the numbers, all right, because I want accuracy. And so let me look at those numbers again, and then we'll come back to you when we have a good understanding of 2026.

Understood. Thanks, guys.

Thank you. Our next question comes from Michael Riskin with Bank of America. Michael, please go ahead.

Great. Thanks for taking the question, and I appreciate all the candid color during the prepared remarks. You touched on share losses and competitive dynamics briefly in the prepared remarks, but just talking about, you know, 1Q, 2Q dynamics. Can you talk about that a little bit deeper? I mean, I think it's pretty evident based on the results over the last couple years. especially in the lab solution segment, but also by size. There's been pretty deep share losses to your competitors. Appreciate all your color on, you know, operational steps to fix that. But given the portfolio and given the markets you play in, how do you plan to stem that tide of share loss and just give us some confidence in visibility to correct that? Because that seems to be sort of the biggest structural challenge you're facing.

Yes, Michael. Look, here's my understanding. I think we've lost some share without any doubt in the lab services business. Here's why I'm super encouraged is, you know, we have Corey that took the lead of this business six, seven months ago. And what he and the team is doing is really having, I will say, a fighting spirit back. And what we've observed over the last six to seven months is that we have not lost any new renewal of any large key account contract. And I think this is really important for us. And on the contrary, we have the opportunity to grow our share of wallet in those accounts. Now, we have some barriers that we need to fix and some challenges. I mean, e-commerce is one of them, and this is why we're taking really a quick action to recruit a digital officer to help us to really get this e-commerce platform to engage with our customers in a much more leaner way to provide not only product but really workflow, which is so important for the customers. On bioprocessing, My view is the following, you know, really our key product line in the bioprocessing is our bioprocessing chemicals. And when we look at our order intake year to date, our order intake is on a high single digit level. So we're there. You know, I met customers that clearly said to us, we want to work with you. We want to do better. We can give you more businesses. We need to fix a couple of things like our service level, in particular our on-time delivery. And this is why it's so important to work on the SNOP, to look on the different plants that need upgrade. And that's what we're doing, and we are doing as fast as possible on this.

Okay. Thanks. And if I can have a follow up, um, on the event or revival, um, dynamic, um, I mean, I think that certainly resonates. You call it out a couple of times that you believe the business is overly complex, unnecessary centralization. Um, we've heard that from a number of our channel checks as well. Um, what, what are the steps to fixing that? Right. I mean, it's amazing. It's a huge organization. There's a lot of levels. Um, seems like there's going to be some deep changes there. But from an operational perspective, that seems to be the easiest six. But could you talk us through the process to get there and how long that could take?

It's really early days for me, I remember. So look, we're going to start to really work on the go-to-market, really understand how we can decentralize more of the decision-making closer to the customers. And as you know, there's different regions with different dynamics. And so we really need to empower the local team to really drive the decision. I think the other thing is, Look, we have two really important businesses. One is our lab services. It's VWR. It's a distribution business. We have a very strong brand there. And then the other one is a bioscience business with a brand like JT Baker. I think we need to make sure that those brands are more, I would say, front at the customer's level to make sure that we engage with the customers with the brand they want to work with. The observation that I have, Michael, is many customers told me, we love VWR, we want to continue to work with VWR. Some even say, well, we didn't know that VWR was part of Avantor. And that's why I'm talking about brand revival and really making sure that we are improving our engagement with the customers. Service level is very, very important. And this is why we are looking at What do we need to do in the plants which are in need of investment to make sure that we raise our service level on the bioprocessing? Again, as we said earlier, the demand is there. It's for us to really make sure we operate better.

Great. Thank you.

Thank you. Our next question comes from Dan Brennan with TD Cohen. Dan, please go ahead.

Great. Thank you. Thanks for the questions. Maybe just to start on the lab side of the business, could you just describe, I know you discussed pricing in the opening remarks, just give us a sense in 3Q and kind of 4Q how we think about that price-value mix, if you will, and then kind of any thoughts. I know you're not ready to talk about 26, but is the assumption that price gets better, just any visibility on that. And then maybe the second part would just be more strategically as you've looked at, you know, since you've been on board, you've looked at the lab market obviously you've talked about share loss but you studied that now recently any way to characterize in that context like how much share you think vwr has lost over the last two or three years just to give us a framework for if you're able to kind of regain that or stabilize it what the opportunity might be okay so hey on uh

On the price volume dynamic, I mean, certainly in connection with the comments and share on that, you know, there is some down volume. We are getting price, not exactly the levels we'd like to see, but we're certainly seeing price coming through and, you know, and we expect a similar dynamic in Q4 on that. So, and when you look at Q3 performance sequentially to Q4, You know, the main dynamic in lab is a modest increase really related to number of days and seasonality in Europe there. So what you're really hearing from us is stability through to Q4, and that dynamic will continue on the pricing side as well.

On the market share, look, I think we've lost a couple of large accounts, and we know them, and that's something which is tracking. And I think what is important to understand is, When you lose a key account, contract, you know, the time that it takes to lose this account, as there is many, many different sites around the world, it takes time. And the same way when you renew a contract and then you have an opportunity to grow your share of wallet, it also takes time to ramp up. You know, this is where the commercial effectiveness is very important because you go at every single lab, convert the customers. So either from a loss standpoint or for a gain standpoint, you know, the dynamic drag on, on several quarters. And I think that that's where we are. So this is sometimes where it's difficult to really evaluate the amount of market share that we've lost, but we know the contract that we've lost in the past.

Let me just on bioprocess manual, since you've got such significant domain experience there, just kind of, how would you characterize the Avanto portfolio today? I mean, You know, when you think about this market recovering consumables that they've been growing double digits, equipment still under pressure from a market basis. How do you think of Avantor's position with their current portfolio? You know, as we look ahead into, you know, say the next 12 to 24 months, can they get back to market growth above or below? Just what are the key variables there? Thank you.

Yeah, it's a great question. Look, I'm super excited about the portfolio we have, in particular around the chemicals, you know, acid-based. We have adjuvants. We have also, you know, viral inactivation products, which are proprietary. So we have a really good portfolio, and I think we have a good commercial team. And again, as I said, our order intake year-to-date is high single digits. So basically it gave me the confidence that the demand is there. It's for us to make sure that we serve the customers better and all the customers that I've met are super satisfied with that part of the portfolio. So I'm confident that the portfolio is good. And also the recent announcement we've made like Blue Whale is very encouraging about the fact that we will continue to collaborate with, you know, strategic innovation that will give us a differentiated portfolio in the future. So quite exciting about the bioprocessing portfolio.

Great. Thank you.

Thank you. Our next question comes from Luke Sergot with Barclays. Luke, please go ahead.

Hey, guys. Thanks for the question here. Appreciate all the updates and everything you're thinking about. But as you think about You know, when you're looking at 26 and the overall market rate, you know, just relation to how you guys are going to grow, what's your outlook for the market, I guess, given that the underlying demand that you've seen, especially across what your peers have said, too?

I think on the peers' comment, you know, we need to look at apples to apples. And again, I think what is important for me is to make sure that I remind everybody that our portfolio on bioprocessing is really primarily around chemicals. So it's a unique, differentiated portfolio, especially from the company that I'm coming from. And so I think it's very important that we think that as of today, the direction is other intakes, high single digits. What I need to do is I really need to take a fresh look at the 2026 numbers, the market, what do we think we can do, what's going to be the impact of the five pillar of revival plan, how fast we can get some impact on this. Some will have an impact quickly, some will take more time, and I'll come back to you as soon as I have a better view.

Okay. I was just trying to figure out what your overall outlook for your particular market looked like. And then we can kind of make the assumption there on what you guys can do from a growth perspective. That's fine. I guess just from a follow-up here, you talked about the bioprocessing plant, the downtime there. What does this do to? Is this just like a planned regular maintenance downtime that you guys had? And You know, do you need, you talked a little bit about kind of building some redundancy. Is this, is this what you're kind of referring to so that you don't, you don't like, uh, miss out on, you know, the quality and the, the, the reliability that, that, that market completely relies on as number one. Okay.

I visited several of our chemicals plants. We have really world-class plants, uh, super modern, very well run, you know, with a very, I would say, dedicated team. Some are just in need of upgrade, okay? And so some of the tools are a bit old, and so therefore they break down. So they give us a bit of unreliability of on-time delivery. So service level for some plants are excellent. Some are not where we should be. And this is what I'm talking about, strategic investment. There is some investment that are needed. We need to be very surgical about this. And that's just, I will say, on the plant themselves. The second thing is about the processes. You know, it's about how do we give visibility to the plant of what's going to be the demand, having a good understanding that the plant are putting in place, the planning to make sure that the product will be delivered as the customers requested. And then, of course, at the quality which is requested. So it's really around the processes that today are not as simple as they should be, not as smooth as they should be, and with a bit also of lack of accountability. So strategic investment on one side, and I think it's also about talent. One of my remarks was about the fact that the team is super passionate and want to do well and they want to fix the issue and they want to do better. They need direction. They need someone which is going to help them to focus, and they need leadership. And this is also why we are far advanced into a recruit of a chief operating officer, someone which has a global experience, a long-term experience of leading different types of plants, including chemistry plants. someone which is a black bear, someone that have a lean mindset, a productivity mindset. And we're on the final stage of that recruitment. That will really help as well the team to drive and improve plant's performance. Great, thanks.

Thank you. Our next question comes from Tycho Peterson with Jefferies. Tycho, please go ahead.

Hey, thanks. I want to go back to the pricing question earlier because I think it's an important point. You know, I think the message coming out of last quarter, and admittedly, Emmanuel, it was before, you know, you started, was that, you know, Vontore was willing to trade price to hold share. That's not what we heard from Brandon a minute ago. So I guess, are you committing to actually taking price in the lab market next year? And can you maybe quantify what you're expecting there? Because I think that was a very different message than we heard coming out of 2Q.

Yeah, Tycho, just to be clear there, I mean, we, I mean, you know, there are raw materials and there are, there's inflation in the channel. We are getting priced against that. The margin pressure you're seeing is differential from the price to the COGS. I mean, there, so when we've talked about also giving price to drive share and that it's relative to the inflation against the, against the products we're selling. So it actually is the same message, but I take your point on the nuance. And look, it's, In the lab, we've continued to say that we're about creating operating income there, and we absolutely are doing the actions to drive volume, to drive share in that connection. The new contracts, which, as Emmanuel made the comments, you know, we're seeing the impact of the contract losses on share there. It will take time, both on the defense and the new contract wins, to see those come in there. But we, you know, we absolutely are looking to create operating income and then, obviously, over time, margin.

Okay. And then a capital deployment question. I mean, given everything going on and it's still early days, Emmanuel, why is this the right time to be buying back stock? You know, it's a little bit confusing given that you're just kind of stepping in here. There's a lot of moving pieces. It's still a volatile backdrop. Maybe talk to the rationale of the buyback right now.

Well, look, Tycho, we believe our current share price really does not reflect the long-term value of the company, especially in the turnaround. So, you know, the program is just basically to make sure that we demonstrate our commitment to the long-term value of the company, okay? And our confidence to the business, our confidence about the fact that we can turn around the performance with revival plan. We look in terms of capital allocation. M&A is always an opportunity, but when you bring M&A, you need to make sure that you're going to bring the company into a company which is operating really, really well. Integration of an acquisition needs to be done with a team which have simple processes, which have really great talent in that are going to be able to execute the acquisition and the integration super well. And so I think right now, you know, it's just a conviction that the business is going to do better, that we are going to turn it around. And I think it was the right message and the right thing to do.

Okay. And then the last one on bioscience, you quoted a number of kind of shipping timing issues. Are you assuming those come back in the fourth quarter? It was a little bit unclear what's actually baked into guidance from a kind of timing and recapture perspective.

Yes, I think the team has already started to do some good job in Q3, but not enough and will continue to do so. So yes, we're going to see some improvement in Q4. But as I said as well, some of the plants need some equipment investment and you know those things sometimes take some time. We're working as fast as possible. You have my commitment to really focus on executing the demand as much as possible and as fast as possible.

Okay, thanks.

Thank you. Our next question comes from Patrick Donnelly with Citi. Patrick, please go ahead.

Hey, guys. Thank you for taking the question. Brent, maybe a follow-up on the pricing side. You certainly understand some of the cadence there. Can you just talk about, I guess, the moving pieces on margins, just high level as we get into next year in terms of what pricing rolls through next year and has to annualize and pressures margins versus some of the offsets? What leverage do you guys have to pull on if you've done some cost-out initiatives over the last couple of years? How much more room is there on Matron versus some of the pricing pressures, maybe just a high level of a piece on margins would be helpful.

Well, a important question, Patrick, and I, you know, per other comments here, probably won't make significant comment into 26, but, you know, when you think about our margin dynamics broadly here, you know, gross margin down year over year, largely driven, you know, and following on the type of question, We are getting modest price against it, but we're absorbing more inflation. So that's been the primary driver, the lab pricing into the gross margin. Now, on a sequential basis, you saw pressure in gross margin. That was more just a mix of the relative businesses because we didn't have the same level of growth in bioscience as well as primarily there on the business basis and continuing on that. Look, Emmanuel made the comments that we need to continue to drive at cost broadly and get net cost out rather than offset inflation and offset FX. But when you think about key drivers here, obviously getting price and getting price against COGS are really important in the business. The differential segment mix is really, really important. And that hurt us in Q3. And then finally, productivity, which to Avanto Revival, Chief Operating Officer, driving better productivity at plants. Those will be key parts of it. And

when we come with the views on 26 that will certainly be wrapped in our commentary can i just add something um i'm absolutely committed to really improve not only the top line but also the bottom line all right we we need to be an operation which is leverage um and so this is what we're going to do so part of the revival of course we talked about Emmanuel A. You know, simplification processes, it also means you know productivity gain that is going to be very, very important, and I think that we will make sure that the entire leadership is really focused behind it.

Mark Barrett- Understood thanks manual and maybe just a quick one on the academic government side you touched a little bit on the prepared remarks. You know, what are the expectations there? Obviously, we had the government shutdown. You guys have some exposure there. Maybe just talk about what you're seeing on that front and what the expectations are going forward for that market. A lot of noise there. I appreciate it.

Yeah, Patrick, you know, you saw we were down in academic and government in Q1. We had a nice up mid-single digits in Q2 and then down double digits in Q3. And I think, frankly, we saw some of the pent-up concerns come through in Q3. Significant impact was K through twelve before the school season started there as well as other softness that we saw through consumables. In the form of higher ed there, we, you know, the US government shutdown is certainly going to exacerbate that. That is. really a key driver of the reduction of the lab guidance for Q4 and for the year down to the mid single digits, that differential, as well as the headwinds to consumables. But we're certainly forecasting that that can continue to be somewhat challenged. Got it.

Thanks, Matt. Yep. Thank you. Our next question comes from Doug Schenkel with Wolf Research. Doug, please go ahead.

Thank you, and good morning, everybody. A few questions. Emmanuel, you know, it's only been eight weeks. There's a lot going on here. Is it reasonable to expect you to outline your full assessment and strategic framework by early Q1, or is that too aggressive? So that's my first question. My second is really for Brent. Emmanuel talked a lot about new hires and investments. Revenue growth is likely to remain challenging for the next several quarters. Margin comparisons are notably tough in the first half of next year. So when I just look at that fact pattern, my word's not yours given you don't want to talk too much about 2026, but it just seems hard to see a scenario where we would get meaningful EBITDA expansion in 2026, maybe no expansion at all given those three observations. Is there anything you think I'm missing? And then really the last one is for both of you. Recognizing it's been a tough period for tools in terms of downward estimate revisions, I think the challenges, to be fair, have lingered a bit more for Avantour than for most of the group. Clearly, visibility and forecasting has been a challenge for you guys the past few quarters. Do you think this is systems and requires more investment, or is this more a function of just competitive dynamics maybe evolving in a way that you didn't anticipate? Thank you.

Hey, Doug, good morning. Thanks for your question. Look, I think in terms of timing, when I came, I spoke with the board, I spoke with the team, and I said I needed 100 days to really learn the business, meet everybody that I could, all the stakeholders, our people, the customers, and a few people. main investors. And look, after 60 days, I already need to be in action because first of all, there are some few things which are absolutely obvious, some challenges that we need to fix. And that's what I shared with you. And indeed, in Q1, I'll come back with you with further thoughts and with further strategic vision. Absolutely. I'll let Brett answer the question, then we'll come back to the other part.

Yeah, look, Derek, you're absolutely there. On the facts, and those are the harder comparators, if you look at the trend of this year, I would just go back to one. We don't want to signal a lot about 26 now because there's more work to do there. But again, it's about driving revival and not just how it impacts operations, but also purely on the cost to serve and getting to the top line and the conversion. And beyond that, we'll update you when we talk about 26th.

And dog on the market, my sense is the following. I think production is solid. I think in the R&D aspect, from an academy standpoint, and even from a pharma, there is some uncertainty, and uncertainty is never good. So I would say it's a mixed market dynamic.

Thank you. Our next question comes from Dan Leonard with UBS. Please go ahead.

Thank you. My first question is on the revival program. Emmanuel, can you frame the cost impacts of that program? It seems like there's a lot of extra money to be spent on e-commerce, on investment needs in manufacturing, on new hires. And I'm just trying to think about how to balance that with, you know, margin objectives.

Dan, thanks for your question. Look, I think it's early days for me to really put a number to it. We're really pushing the program as soon as possible and making sure we make a plan. I don't want also to rush on giving you a number, which is not accurate. Look, I really want to gain accuracy about numbers, any numbers that we're going to put in front of you. So let us put the plan together. Let's review the plan. Let's make sure that the plan will have an impact. And I think it's back to a further question earlier. You know, I really want to give you answers about how much, when, what we will see by when. It will take several quarters without any doubt, but it's early days for me. So let me come back to you when we have a precise plan and accurate numbers.

Understood. And then a follow up, you referenced the couple of large clients you lost from a share loss perspective. How would you characterize the risk of further big share loss? I can't imagine you have large contracts that turn over every year. Are we in a period of stability now for some time or are there further, you know, just big opportunities ahead in either direction?

It's a great question, Dan. What I've discussed with Corey and what we've discussed with the team is that most of our very large key account contract has been renewed. We've kept them. And on the contrary, we have opportunity to gain share of wallet in those accounts. So I think we are in a much more stable position right now. However, as I explained earlier, the loss that we've seen in the past, they're still having an impact on us. It takes time for those large contracts to switch over in the same way that it takes time for us to ramp up the share of wallet gains. So I think we are in a much more stable area. I think Currie is a very good leader that is bringing a lot of rigor in the business. And from that standpoint, I'm confident about the future of the lab business.

Got it. Thank you.

Thank you. Those are all the questions we have time for today. And so I would now turn the call back over to Emmanuel for closing remarks.

Thank you, Emily, and thank you, everybody, for joining us. Today, we just outlined the beginning of our, I would say, next chapter called Avento Revival. I want you guys to remember and to know that we are moving with urgency to improve our performance. I want to regain your trust. I want to be accurate. I want us to be accurate. And I'm looking forward to give you further updates on our progress in the next quarter. Be well, everybody. Thank you.

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