Avantor 2026 Q2 Earnings Call

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

Thank you, Operator. Good morning, everyone, and thank you for joining us. Our speakers today are Emmanuel Ligner, President and Chief Executive Officer, and Steve Eck, Senior Vice President, Interim Chief Financial Officer, and Chief Accounting Officer. The press release and a presentation accompanying this call are available on our investor relations website at ir.avantoursciences.com. Following our prepared remarks, we'll open the call for questions. A replay of the call will be made available on our website later today. During this call, we will make forward-looking statements within the meaning of the U.S. federal securities laws, including statements regarding events or developments that we believe or anticipate may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings. Actual results may differ materially from any forward-looking statements that we make today. These forward-looking statements speak only as of the date they are made. We do not assume any obligation to update these forward-looking statements as a result of new information, future events, or other developments. This call will include a discussion of non-GAAP measures. A reconciliation of these non-GAAP measures can be found in the press release and in a supplemental disclosures package on our Investment Relations website. I will now turn the call over to Emmanuel.

Thank you, Chris, and good morning, everyone. Thank you for joining our call today. I will begin with a high-level update on our second quarter performance. I will then reflect on the actions we've taken since I came into this role nearly 12 months ago and discuss the progress we are making in executing revival our comprehensive program to sharpen strategic focus and improve execution turning to slide four let me highlight a few key messages first we remain highly focused on executing Revival and I am very happy with the progress we made to date. Revival delivered measurable results and put us on a path to sustainable growth. Second, I'm pleased that our second quarter results exceeded expectations across several key financial metrics. Those results were driven by improved performance in our VWR distribution and service segments, which return to positive organic revenue growth during the quarter. Our bioscience and medtech product segments performed near the high end of our expectation and is positioned to return to growth in the second half. Third, we delivered excellent free cash flow, enabling us to invest in the business while also paying down debt. We remain committed to reduce our adjusted net leverage ratio below three times. Finally, we raise our 2026 organic revenue growth and adjusted EPS guidance. Our updated outlook reflects both our second quarter performance as well as higher expectation for the second half of the year. Please turn to slide 5, where I will review our Q2 performance highlights. In Q2, we generated $1.69 billion of revenue, which declined 0.4% on organic basis and was up 0.5% on a reported basis. Revenue was stronger than we had anticipated, driven primarily by VWR, which grew 1.7% organically in the quarter. VWR returned to growth earlier than we anticipated, reflecting the deliberate action taken by segment president Corey Walker and his team to strengthen the business. The segment entered the second half of 2026 with broad-based momentum, and we continue to expect growth to accelerate through the remainder of the year. I will talk more about the driver of VWR return to growth later in my remarks. Turning to BNP, revenue was near the high end of our expectation, driven by solid execution across the segments. On a year-over-year basis, revenue declined 5.6% organically, reflecting the impact of the discrete factors we had discussed previously. Importantly, BMP delivered sequential revenue growth from Q1 to Q2 and, as anticipated, demonstrated a stable trend. In BMP, we saw strong order intake and improving operations in the second quarter. Those leading indicators provide evidence that our revival initiatives are gaining traction and, when combined with reduced comparison headwinds from discrete factors, give us confidence that BNP will return to organic growth during the second half of 2026. I will discuss revival impact on BNP shortly. Moving down the P&L, adjusted EBITDA grew more than 15% sequentially from Q1, driven by increased volumes in both segments. Adjusted earning per share was 21 cents above our expectations for the quarter. Finally, one of Avento's key strengths is our ability to consistently generate strong free cash flow. In the second quarter, excluding cash restructuring costs, we generated $152 million of free cash flow. This reflected strong conversion of adjusted net income and keep us on track to achieve our full-year free cash flow guidance. We use this strong cash generation to repay $112 million of debt during the quarter, further strengthening our balance sheet and underscoring our commitment to reduce our adjusted net leverage ratio to below three times. Please turn to slide six. Last year, we launched Avento Revival, our comprehensive program to sharpen strategic focus and improve execution across the enterprise. Revival is built on five pillars, commercial excellence, operation performance, portfolio optimization, simplification, and talent. Guided by insights from customers, suppliers, and associates at GEMBA, we have launched initiatives across each pillar that are producing measurable results. Some examples are on slide 7. We have made important go-to-market changes. We are resegmented at Ventor into VWR and BMP to sharpen our focus, simplify the organization, and better serve customers. We revived the VWR brand and accelerated our digital roadmap, including the relaunch of VWR.com, which has driven stronger customer engagement and e-commerce performance. Across both segments, we are extremely focused on commercial excellence to drive every product and service in a way that delights customers. In BNP, our commercial teams are executed with greater consistency and focus, resulting in stronger customers' engagement and a higher ring rate. This translates into double-digit order growth for BNP and a book-to-bill ratio of 1.1 during the second quarter, while also expanding our funnel of future growth opportunities. Those go-to-market FO are reflected not just in BNP's order momentum, but also in VWR's return to growth. In the manufacturing pillar, we have invested across our supply chain to improve productivity and strengthen customer service. Those investments, combined with the ongoing implementation of a new sales and operation planning process, are driving execution improvements. For example, during the quarter, we increased the throughput of certain key product lines at a large manufacturing site by more than 25% on average versus the first quarter. This progress is the direct result of revival initiatives, including the use of lean and six-sigma tools to enhance equipment uptime, reliability, and overall productivity. The Simplify How We Work pillar delivers benefits both inside and outside the organization. One example is the recent redesign of our customers' onboarding process. Drawing on insights from multiple Gamba works and a cross-functional Kaizen event, we redesigned the process from end to end, reducing onboarding from 14 steps to just 8, and cutting completion time from up to 4 days to as little as 2 days for complex accounts or to just minutes for simple accounts. Finally, as I have said before, revival begins and ends with people. We move quickly to complement our strong internal talent with experienced external leaders, refreshing approximately 25% of our senior leadership team, and we are driving a cultural transformation across Adventor. We are communicating more effectively, collaborating more closely in the field, holding ourselves more accountable through a disciplined focus and measurable outcomes, and putting customers at the center of all what we do. the positive impact of revival is evident not only in our improved second quarter results but also in leading indicators such as the strength of our order book and the expansion of our commercial funnels that will ultimately lead to sustainable profitable growth please turn to slide VWR return to growth in Q2 marks an important milestone for the segments. While the growth inflection itself is encouraging, the underlying drivers are broad-based, as I will describe, giving us confidence that we are building sustainable momentum. The leadership team Cori has built over the past year has implemented meaningful changes to VWR organization structure and operating model, setting the stage for segments improved performance. With the team structure and operating model in place, we made deliberated decision to strengthen our capabilities, operation, brand, and commercial excellence. Together, those actions have led the foundation for the stronger performance are seeing today. customers turn to vwr for our global scale the depth and breadth of our product agnostic catalog strong supplier relationship and excellent service combined with the changes we have taken over the past year our strengths are translated into stronger financial results including stronger growth across key customer segments let me review the key factor driving vwr's return to growth in q2 the first factor was stronger performance with large global customers as a reminder revenue from new business win is realized gradually due to the complexity of customer implementation processes so we can take time before the benefit of strong commercial performance are reflected in our results. Previously, we discussed several elements impacting our large global customer segments, including re-contracting activity and other industry dynamics. While our commercial focus and execution has improved significantly over the past year, those historical pressured phased in of the course of 2025, with the accumulative impact moderating in the first quarter of this year. While they continue to represent a headwind in 2026, their impact is diminishing as we move forward, and offsetting action have been successful in driving stronger-than-anticipated results in this segment. Accordingly, year-over-year comparison will become increasingly favorable as the year progresses, allowing our results to more fully reflect our underlying commercial momentum. Our growth rate in the second quarter benefited modestly from this improving comparison dynamic. Over the past year, the PWR team has taken thoughtful and deliberative steps to expand our relationship with large global customers the team focused on retaining and expanding large global customer relationship strategically developing our new customers pipeline and accelerating the onboarding process for new contracts we have executed well again the growth opportunity that our efforts have generated and this new business is contributing to our results sooner and more meaningful than we anticipated another important driver of ewr performance is improving growth in our small and mid-sized customer segments with better e-commerce outcome playing an important role on our last earning calls we highlighted early sign of improving trends following multiple upgrade to our platform as well as successful relaunch of VWR.com. We advanced our digital roadmap in the second quarter, and customers have responded positively to those announcements, driving direct traffic, higher conversion, and improved daily sales, particularly among smaller customers who tend to have higher margin. As a result, e-commerce growth accelerated as the quarter progressed and was accretive to the segment growth for the quarter. Although our recent progress is encouraging, our digital transformation remains in the early stages. We continue to see substantial opportunity to enhance the customer's experience, deepen engagement, and drive sustained growth in the channel, particularly in Europe. Finally, while deliberate action drove the majority of VWR improved performance, an increase in pharma and biotech customer activity provided a modest tailwind during the quarter, reinforcing our decision last year to focus significantly commercial resources on those customers' groups. It is important to note that activity level in several important end markets, such as education and in certain geographies, particularly Europe, remain stable but at a lower level than we would like to see. An improvement in those hand markets could represent an additional tailoring to our growth. Overall, we are pleased by VWR improved results but remain focused on execution to sustain and build the positive momentum. I will now turn the call over to Steve to discuss the number.

Steve? Thank you, Emmanuel, and good morning, everyone. Please turn to slide 10, where I will review our consolidated financial results. In Q2, we generated $1.69 billion of revenue, which declined negative 0.4% on an organic basis and was up positive 0.5% on a reported basis. Adjusted EBITDA was $254 million, resulting in a margin of 15%, and adjusted earnings per share of $0.21. Free cash flow for the quarter was $143 million. Excluding cash restructuring costs, free cash flow was $152 million. Both figures were ahead of expectations and underscore Avantor's strong cash flow profile. During the quarter, we repaid approximately $112 million of debt and ended the period with an adjusted net leverage ratio of 3.3 times adjusted EBITDA. Leverage was flat sequentially. Please turn to slide 11. Revenue for the VWR distribution and services segment was $1.24 billion in the second quarter, up 1.7% organically versus the prior year. The primary driver of sequential and year-over-year organic revenue growth was increased volumes from strong commercial execution. Adjusted operating income for VWR was $126 million in Q2, representing an adjusted operating margin of 10.2%. The year-over-year decline in margin is due primarily to mix and inflationary pressures. Sequentially, margins increased approximately 100 basis points from the first quarter due to increased volumes and improved mix. There are two key takeaways from the VWR quarter. First, VWR returned to growth ahead of our expectations, and the majority of this improved performance reflects steps that we have taken to grow the segment. Second, VWR demonstrated stable sequential trends with revenue increasing from the first quarter primarily due to strong commercial execution. Let me now discuss the performance in the Bioscience and MedTechs product segment, or BMP. I'm on slide 12. In the second quarter, BMP revenue was $452 million, down 5.6% organically versus the prior year. This was near the high end of our expectations, driven by solid performance across product lines. Processed chemicals grew faster than expectations, driven by healthy end-market conditions, improving operations, and strong order performance. Fluid handling and new sil were down mid-teens in the quarter, as anticipated, while research and specialty chemicals declined mid-single digits organically, primarily reflecting the anticipated growth headwinds from serum and electronic materials. Last quarter, we indicated that NewSill and the Serum and Electronic Materials businesses within Research and Specialty Chemicals would be headwinds to our quarterly growth rate due to the normalization of discrete customer ordering patterns and shipments in 2025. We also indicated that we faced a difficult comparison in fluid handling. Collectively, these factors were a headwind of roughly 600 basis points to BMP organic revenue growth in the second quarter. Adjusted operating income for BNP was $118 million in the quarter, representing an adjusted operating margin of 26%. The year-over-year decline in margin was primarily driven by lower volumes. Margins increased sequentially due to increased volumes and mix. There are two key takeaways from the BNP quarter. First, commercial performance was strong, as evidenced by our order trends. During the quarter, BNP delivered double-digit order growth and a book-to-bill ratio of 1.1. Order trends were healthy across all business units, and we saw particular strength in our processed chemicals and fluid handling order books. Second, BMP demonstrated stable sequential trends with performance near the high end of our expectations. Please turn to slide 13. Our ability to consistently generate strong free cash flow is a key strength of Avantor. In the second quarter, excluding cash restructuring costs, we generated $152 million of free cash flow, reflecting strong conversion of adjusted net income. Our capital allocation priorities support revival and our intention to create sustainable shareholder value over the long term. First, we're focused on purposeful investments in the business to enhance customer service and drive top-line organic growth. Next, we are focused on strengthening our balance sheet by prioritizing excess free cash flow towards debt repayment. During the quarter, we repaid $112 million of debt and ended the period with net debt of $3.4 billion. And over the trailing 12 months, we've repaid nearly $500 million of debt. Our adjusted net leverage ratio was 3.3 times at the end of the quarter. We've made significant progress in strengthening our balance sheet, and that momentum was recognized by Moody's, which revised our Ratings Outlook to positives. In addition, we recently capitalized on favorable market conditions and demand for our credit to reprice one of our term loans on attractive terms in July. We remain committed to reducing our adjusted net leverage ratio to below three times, driven both by continued debt paydown and a return to positive adjusted EBITDA growth as performance improves. Our objective is to finish the fiscal year at or below this target. Please turn to slide 14, where I will discuss our increased 2026 guidance. For 2026, we have raised our organic revenue growth outlook to a range of negative 0.5% to positive 0.5%. This increase reflects our Q2 revenue outperformance, as well as higher growth expectations for VWR in the second half of the year. Given the recent strength of the U.S. dollar, foreign exchange is expected to be a headwind to the reported revenue in the second half. As a result, we now expect FX to contribute about 50 basis points to full-year revenue. In terms of segment performance, we continue to expect VWR's growth rate to improve sequentially through the balance of the year. We expect BMP to return to growth during the second half, driven by improved execution and more favorable discrete comparisons. BMP growth is expected to be stronger in Q3 than in Q4 due to more favorable year-over-year comparisons. Moving to profitability. Our adjusted EBITDA margin guidance remains unchanged, as operational outperformance enables us to absorb macro-inflationary pressures while also making targeted growth investments. We remain highly focused on cost discipline, as reflected in our overall headcount, which has declined by approximately 3% this year. Looking ahead, our objective is to deliver a more leveraged P&O. Moving down the income statement, we now expect that net interest expense will decline modestly versus 2025, and we also assume a weighted average diluted share count for the year of 677 million shares. All other modeling assumptions are unchanged. Taken together, this translates to an adjusted EPS outlook that has been raised to $0.80 to $0.83 for 2026. Finally, we continue to expect free cash flow between $500 and $550 million in 2026, reflecting Avantor's strong cash generation profile. In terms of phasing, in Q3, we expect to generate adjusted EPS between $0.20 and $0.21 per share. The midpoint of our Q3 guidance assumes total company organic revenue growth of about 250 basis points in the third quarter, and we expect FX to be a headwind of about 125 basis points to Q3 reported revenue. We assume that BMP reported revenue in Q3 will be about flat sequentially and year-over-year, with year-over-year organic revenue growth largely offset by FX headwinds. For BMP, the impact of discrete customer ordering patterns and shipments will represent a headwind of about 150 basis points to organic growth in Q3. Finally, we expect the underlying operating margin drivers in both segments to remain relatively stable sequentially, with volumes, mix, and inflationary pressures expected to be the primary factors influencing any sequential changes in segment margins. I'll turn the call back over to Emmanuel. Thank you, Steve.

In closing, and on slide 15, I would like to leave you with three key takeaways. ways first nine months into revival the operational changes we have implemented are delivering measurable results those improvements are increasingly evident in our operating and financial performance and reinforce the positive trajectory of the business second our growth outlook has improved. The VWR team is executing extremely well and the investment and strategic initiatives taken over the past year are translating into growth. We also expect BMP will return to growth in the second half underpin by a stronger the book, improving operations and more favorable comparisons. Third, we continue to generate strong free cash flow, enabling us to invest in the business while supporting our commitment to reduce debt and strengthen our balance sheets. Let me thank our Avento associate around the world for their dedication to serving our customers. Thank you for embracing Revival and our new ways of working. I am very pleased with the progress we've made together this year. And finally, I am excited to share an important announcement. We plan to host our Investors' Day on Tuesday, December 8th in New York City. We're looking forward to sharing a comprehensive overview of our business, strategy, and financial objectives while providing an opportunity for investors to engage more broadly with our leadership team. Operator, we're happy to take questions.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. And if you would like to withdraw that question, again, press star 1. We do ask that you limit yourself to one question and one follow-up. For any additional questions, please re-queue. And your first question comes from Eve Bernstein with Bernstein. Please go ahead.

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

Good morning, Eva, and thank you for your question. Indeed, we evaluate it. Okay, and let me start saying by the fact that we are super pleased with VWR performance and the very strong execution by the team. So, indeed, more than half of the growth that we deliberated in Q2 comes from deliberated action that we're taking. Maybe let me share a few things. Splitting the market in large global customers' accounts and mid-sized and smaller customers, if you don't mind. So for the large global customer's account, in the past, we talked about some headwind that we had in contract renewal. Well, we began to lack those headwinds from the history. So this is point number one. Point number two, we also shared with you that we have, over the past year, really won many large contracts. And each time we did that, we negotiated opportunity. And the team has worked really, really hard to grab those opportunity, to turn around those opportunity into growth. And, you know, it's a license to hunt. And basically what the team is actually doing and executing is actually gaining share of wallet inside those large accounts. So it's working well. We are a bit advanced versus we thought we would be, and this is sustainable. The second thing is on made and small customers. You know, e-commerce is really the highlight of Q2 for us. It's part of the revival. It's part of the go-to market. It is working. We've relaunched VWR.com, and the customers have reacted very, very well from that. So, you know, we see some really positive momentum in that segment as well. The remainder of the growth, of course, is coming from better pharma, better biotech hand markets, primarily in the U.S. So it's a broad-based momentum that we see. The team is completely focused on customers, focused on execution, finding the opportunity, grabbing those opportunities, turning those opportunities to growth. And this is why we're confident that VWR growth will actually accelerate in H2.

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

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

Thanks very much.

Your next question comes from the line of Callum Titchmarsh with Morgan Stanley. Please go ahead.

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

Sure. Look, we have many KPIs that we are looking at, okay? We are looking at the number of a new account. We are looking at what happened, for example, in the e-commerce platform around, you know, numbers of click, number of buskets, which is set up, numbers of conversions. And, of course, we measure a lot of those things on a daily basis. Look, here's what we're doing to regain market share. We've re-launched VWR brand. We've re-launched VWR.com. We made significant upgrade on the platform. We're not done. We have a whole program in place, and we are continuing to invest there. We have really good structure, funnel review that really drive the customer focus by region, by segment. You know, we really take care of when we renew a contract, what are the opportunities, what are the size of the opportunity, how those opportunities are actually being converted. We track many things. And one important thing that we've implemented recently is the pricing tools, all right? We have a much more robust pricing review, again, on a monthly basis. The entire executive team is part of this. Corey is leading this initiative with this team. I think we shared last call that we have a new pricing leader. And we work also very closely with our supplier and partners. This is very important. This is a multiple relationship. And this is all part of revival growth market. And we are just really extremely pleased that VWR is back to growth at 1.7% growth on lift versus previous year. And we are absolutely committed to continue to grow and to accelerate this growth. So I think this is where we are today. We know that the majority of the growth is coming from the action that we are taking, that the team is implemented and is really focused on delivering, and that will accelerate in health too.

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

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

That's a good question, Callum. I think it's very important to understand that revival is constantly evolving. So when we arrived, we did a thorough listening to the market, the suppliers, our associates. We identified the, I would say, really high priority that we had. Mary in supply chain is here. We have invested in supply chain. We've grown talents and we've brought more talent in the organization, like in the e-commerce platform with our new digital leader that came from Metline. All those things are reviewed on a monthly basis. Ludovic Breulier will join us as the head of BMP segments, but also the transformation leaders has a really clear operating plan for the revival programs. And so we take project by project, I would say, and then we deliver them, we tick the box, and we move on into another one. So there's still a lot to do. We shared many of those. I mean, the last one that we shared in this call was the onboarding process, which is very important for our customers, simplifying the process, accelerating their capabilities to create an account. This is done. And then we move on to the other one. So I think we continue to invest. This is something very important for us. You know, we simplify, we save, and then we reinvest for growth. This is the formula that we are applying.

Thanks, guys. Thanks, Eric.

Your next question comes from the line of Dan Brennan with TD Cowan. Please go ahead.

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

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

Okay. Okay. Maybe zooming out just on the B&P segment then for a moment, you know, book-to-bill has been above one in the last couple of quarters. Obviously, growth has been challenged, but you have the idiosyncratic factors. Just can you speak a little bit about, like, the backlog there, kind of, you know, how much of that business is backlog-driven, kind of how we translate that strong book-to-bill into the outlook, whether it be in the back half, and then in 27, and then any specific color just on NewSill, which I know, you know, you guys have, you know, kind of a market leadership there. Just wondering kind of, you know, volume and price on NewSeal and kind of what the outlet that's baked in on that front. Thank you.

Let me maybe start with the market. So the NPS is really across diverse set of end market, electronic materials. You just talked about NewSeal and MedTech, of course. Our bioprocessing market with our biochemicals. Look, overall, we are very pleased against with the go-to-market activity that we're doing with the commercial team. So we talked early on on Q2 on the order intake, double-digit, and the book-to-build being positive. But I can tell you that from the first half, it's the same. It's low-double-digit order book for the entire first half, which is, I think, very encouraging. and all the sub-segments are in growth as well in the entire BNP. So we're super encouraged by that. The market is solid for all of those sub-segments. We have those discrete things that you talked about that give us a comparison, but, again, the team is really focusing on finding the opportunity, converting the opportunity, bringing the order in, And then the supply chain team is working really hard to make sure that we supply the customers the best we can. And this is working well. We continue to invest. Again, you know, this is something that takes time, but we are happy where we are right now. So just a bit on NewSeal. NewSeal is doing good. Good order intake on NewSeal's, you know, price, but nothing crazy. a good price list, but nothing crazy, some good volume as well, some good activity not only in the implants, but in the new market that we are pushing, like aerial space. And that's something that we can give you a bit more colors when we are together at the Investors Day.

Great. Thank you.

Your next question comes from the line of Vijay Kumar with Evercore ISI. Please go ahead.

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

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

Yeah, thanks, Emmanuel, and good morning, Mackenzie. I'm happy to step you through our assumptions around the full-year guidance, which we've updated. Starting with Topline, as you know, we updated the guide for the consolidated full-year organic revenue growth, and that's really driven by the flow through of VWR's outperformance in TQ as well as our raised expectations for the business in the second half. The outlook related to BMP is generally unchanged from our initial guidance. The business continues to perform very well and in line with our plan. We reaffirmed our adjusted EBITDA margin guidance for the full year despite the continued inflationary pressure we're absorbing. For example, we continue to see significant pressure on freight costs for both segments. A couple other housekeeping items, non-operational in nature. We expect FX to be a headwind for the second half. We also have slightly lower assumptions for our share count and interest expense. And if you put all that together, these are the important factors driving the updated guide of $0.80 to $0.83 for adjusted EPS for the full year.

That's super helpful. And then follow-up just on your end markets here. You know, advanced tech was pretty strong, and education and government also grew off of a slightly tougher comp, whereas biopharma and health care declined a little bit. I'm just wondering if you can talk about the puts and takes here, what kind of drove each of these end markets and how we should be thinking about them into the second half.

All right. I think, McKinsey, it's probably because of B&T here. Generally speaking, in VWR, you know, we see more pharma, more biotech activity, I would say, especially in USA, in America. Other markets, we see it more or less on change, right? Education and Europe are probably at a stable level or at a level that we were kind of expecting. So a bit low levels, we wish it was a bit better. And on BMP, I think, you know, all diverse set of markets are healthy. And that is reflecting our order book, process chemical order book, in particular, double digits for the quarter.

Your next question comes from the line of Matt LaRue with William Blair. Please go ahead.

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

Thanks, Matt. Yeah, I think you're right. We're working hard on all the pillars. Okay. And for that, the portfolio is ongoing. It's really an important part of our pillar, okay? And we are, of course, looking at every business, assessing any product line, any market position, the financial profile. And we are always asking ourselves, you know, are we the best owners? So we're working out on that part, and, yes, we hope that we can give you some update at the Investors Day. But what I want to say, Matt, as well is revival is really a program which is constantly evolving. So we're going through a lot right now. But I'm sure because it's a culture as well that we want to bring to the organization of continuous improvement. So it's not because we will have made some very good progress that we will finish the year with momentum, that we will still not have things that we want to do and we want to improve and we want to progress. So, you know, it's going to evolve.

But we'll give you more update on the portfolio. okay that's great uh and then the discrete headwinds in bmp reference 600 basis points in q2 i think he said 150 and q3 um maybe what is that in the fourth quarter and then and i assume that's out of the numbers for the most part next year and thus setting up uh essentially a path to return to more durable growth uh on that side of business yeah good morning matt this is steve uh happy to share there.

So as you already pointed out, 2Q was the most challenging quarter. You already referenced the 3Q headwind we expect to see. The only other point to make would be related to the fourth quarter, which will also be a pretty difficult comparison of about 400 basis points related to our electronic materials business. We do think it's also useful to reflect on the sequential performance of the business, which presents, you know, a little more consistent picture of the improvements and the progress we've made. Over the course of the year, we expect to see, you know, gradual strengthening in the volumes over the course of the year. And this is really the result of two major things, you know, and we talked about them in the prepared remarks. First, the operational improvements that the team has been driving and continue to focus on, and the development of that really strong order book. We're really excited for the building and sustainable momentum, and I think the profile within 2026, over the course of 2026, is really gradual and improving and really strong.

So maybe I can add, because I can sense behind your question, is your strong interest about 2027, which, by the way, it's the same for me, all right? So as you know, we may be a bit too early to give guidance there, but let me share a few thoughts here. I mean, both VWR and the BMP team are really executing super well. We are really happy about the fact the team has embraced revival and a new way of working. We will exit 26th with momentum. There's no doubt about this. We will not be completely done, for sure, and we'll continue to push more initiatives to continue to improve the business. But we will leave the year with momentum. So, 2027, you know, every day, every month, you know, the last 90 days, my confidence is increasing, and I'm confident and optimistic that 2027 will be a growth year.

Okay, that's great to hear. Thanks.

Our next question comes from the line of Casey Woodring with J.P. Morgan. Please go ahead.

Great. Thank you for taking my questions. Yeah, just wanted to push on the margin piece, right? You reiterated adjusted EBITDA margins for the year. Maybe just talk a little bit about gross margin expectations for the back half. I know you have some easier comps in VWR given last year's reset, but you talked a little bit about inflationary pressure ramping here. So maybe just you could quantify that piece and maybe walk through the moving pieces and levers you can pull, whether that's productivity, pricing, or elsewhere on gross margins.

Good morning, Casey. This is Steve. Thanks for your question. Yeah, consolidated gross margin, the rate was essentially flat from 1.2 to 2.0 this year. We do expect that rate to stay steady through the end of the year. While stability is good, obviously, we were looking for a margin expansion. So, you know, what are our priorities in this regard? First, you know, we're looking to drive as much volume as we can. You know, we also want to successfully navigate inflationary pressures with our customers and suppliers constructively. You know, we prefer and, you know, want to drive a strong product sales mix. And I want to also highlight, you know, our focus on digital investment. You know, and we mentioned it in the prepared remarks. You know, the digital capabilities really help us connect better with our smaller customers, which tend to be better margin sales for us. So, you know, we're very focused on that. So, excellent job, you know, by our teams to this point in the year, you know, in driving these things. And those are going to be the key levers as we move forward.

Okay, that's helpful. and then you know i guess i appreciate the uh the commentary on 27 but um just how are you balancing kind of investment into the business that you've kind of talked about here today versus margin expansion for next year and um you know can you grow eps next year thank you hey kathy uh emmanuel here uh look i'll go back to the philosophy that we are pushing simplifying saving reinvesting for growth all right i mean i think last quarter we share that um our head count is down about minus two percent that was last quarter at the end of this quarter the head count is down minus three percent and basically our objective and what we are thriving as a culture is to drive for lever hp now understood thank you guys thank you your next question go comes from the line of michael Ryskin with Bank of America.

Please go ahead.

Great. Thanks for taking the question. I want to follow up on BMP, sort of like pacing through the rest of the year. You kind of talked about, you know, improving third quarter up a little bit, fourth quarter, then the fourth quarter just based on timing and comps. You know, it's fair to think that 4Q BMP should be roughly flat, organic, or maybe just down a little bit. And then when you were talking about sort of like exit rates and going into next year, you kind of alluded to the headwinds and some of the idiosyncratic things being past us and really just focusing on sequential growth. So maybe I'll ask it that way. If we look at 4Q for both VWR and BMP, from a sequential perspective, is that the right jumping-off point for 27 as we model out next year? Thanks.

Good morning, Michael. This is Steve. Happy to answer that. I'll start with organic growth for BMP. We expect modest organic growth in 3Q. We do expect the organic growth in 4Q to be a little more muted because of the more difficult comp that I already described. Sequentially, you know, on a reported basis, BNP, we expect for Q3 to be about flat sequentially with a modest uptick in the fourth quarter.

Okay. And then going back to, I think, Mackenzie's question earlier on some of the end market trends, you know, if we look through what you kind of gave us today, It looked like the biggest step up in 2Q relative to 1Q was actually that advanced technologies. So I'd just love to go in a little bit deeper into, you know, where in advanced technologies you sell to increase, either by customer type or product you sell, just sort of what led that uptake. Was it more on the equipment side or on the consumable side, just, you know, any sense of lumpiness there, or just sort of what drove that? Sure, Michael.

Just let's go maybe through and I guess your question was more a bit about VWR, isn't it?

Yeah.

So on VWR, as we said, so large global customers, especially the large global customers where we had renewed contracts with good opportunity. And there it's the mix. It's it's a mix also in depending of where the customers of large customer and larger can are investing but generally speaking we see we see a good momentum span in large pharma also biotech actually all right the funding is is coming back to biotech and we see them spending money it's a mix of equipment a mix of consumables and and I would say geographically speaking it's USA and America is is really driving it okay for the rest something I think it's it's a bit unchanged and and smaller customers that we see through e-commerce platform where we really see again the impact of what we've done with pwr.com it's very very broad it's very distinct those customers are usually not buying equipment through the e-commerce platform but so it's a more mix of consumables and it's across many different applications thanks your next question comes from the line of Paul Knight with KeyBank please go ahead hi Emmanuel now that you've been in charge for a while what's your view on self-manufacturing do you want to increase the level of self-manufacturing or do you think expanding vendor relationships is really the way to go in

the future being kind of a non-competitor what's what's your walk away and views on self-manufacturing at this time?

It's a great question, Paul. I think we have a lot of opportunities on self-manufacturing. It's a good service that we're providing to many, many people. In terms of VWR, you know, I really like the fact that we are product agnostic. I really like the fact that we are differentiating ourselves, offering the broadest catalog that we can, and offer optionality to the customers. You know, really top product, very famous brand that actually wants to work with us. And I think this is very important, a really good relationship with supplier. And then we have also the VWR brand. So product agnostic for VWR, I think, is a really good positioning. It's a very good value proposition. And self-manufacturing, I mean, for us internally, it's a business that we have. It's a service that we provide to people because we have really good capabilities and capacities, and we are capable to offer really high-quality product to the many different customers as an OEM, and it's a very good service, and it's growing, actually. So I think a bit of both. is very important for us and then regarding uh bmp obviously a great build out over the years um what's the what's the next steps in your view for bmp well i think the next step from bmp for us is just making sure that we continue to drive operational excellence the snop process that we put in, which is very important to have a very good visibility of the demand and the supply and really continue to invest in, you know, reducing lead times, improving on time delivery, making sure that we continue to serve the customers the best we can. And, you know, in Process Chemical in particular, we really see the impact of what the team has been driving commercially and supply chain. I mean, we talked to you in the preamble about, you know, those particular product lines where we are invested, where Mary and the team has done a really good job to take the output up by 25%. This is really important for us to continue to do so, reduce lead times, increase on time delivery, and not measured on our premise date, but really measure on what the customer deserves and what the customers want. So, improving service level is really important. Quality is really good. Jerry that joined us last quarter is doing a really good job as well. And those are the areas that we will continue to invest and continue to continue to improve the service level is really important. Thank you.

And, ladies and gentlemen, that does conclude our question and answer session. I would now like to turn the conference back over to Emmanuel for closing comments.

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

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