Avantor 2026 Q3 Earnings Call - AVANTOR INC

Good morning. My name is Krista and I will be your conference operator today. At this time, I would like to welcome everyone to the Avantours Third Quarter 2026 Earnings Results 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 ask a question at that time, simply press star followed by the number 1 on your telephone keypad. And if you would like to withdraw your question, again, press star 1. Thank you. I would now like to turn the conference over to Chris Fiedich. Chris, you may begin your conference. Thank you, Operator. Good morning, everyone, and thank you for joining us. Our speakers today are Emmanuel Ligner, President and Chief Executive Officer, Todd Garner, Executive Vice President and chief financial officer, and Steve Eck, Senior Vice President 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 your 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-GAP measures can be found in the press release and in the supplemental disclosures package on our Investor Relations website. I will now turn the call over to Emmanuel. Thank you, Chris, and good morning, everyone. A special welcome to Todd on his first earning call with Aventor. Todd will introduce himself shortly, and you will hear much more from him at Investors' Day on December 8th. Today, I will begin with a high-level update on our third quarter performance. I will then take a closer look at Aventor's returns to revenue growth, including the progress we are making with Revival, our comprehensive program to sharpen strategic focus and enhance execution. On slide 4, we have the key messages from the quarter. Our third quarter results make a return to organic revenue growth for Avento. This is an important milestone on our revival journey. We have more work to do, but the quarter demonstrates why we believe the action we are taking through revivals are putting us on a path to sustainable growth. Third quarter results exceeded our expectations across revenue and adjusted EPS. Those results were driven by strong performance in our VWR distribution and services segments, which accelerated meaningfully after returning to growth last quarter. Organic revenue growth in our bioscience and medtech products segments turned positive this quarter, as anticipated, with performance stronger than we had expected. We once again generated robust free cash flow, which allowed us to invest in the business and strengthen our balance sheet. We remain committed to reducing our adjusted net leverage ratio to below three times, and we expect it to achieve this objective by year end. Finally, we are raising our 2026 organic revenue, adjusted EPS, and free cash flow guidance reflected our third quarter outperformance, as well as the momentum we see across the business and in our end markets. Please turn to slide five, where I will review our Q3 performance highlights. In Q3, we generated $1,698,000,000 of revenue, representing year-over-year organic growth of 5.2% and reported growth of 4.6% exceeded our expectations. VWR organic growth accelerated to 5.8% in the quarter. This reflects continued executions against our revival priorities as well as stronger end markets. I will discuss VWRPositive Momentum in a few moments. Turning to BNP, we were pleased to see the segments returning to revenue growth in the in the quarter, as we had anticipated on our last earning call. On a year-over-year basis, BNP revenue grew 3.6% organically, ahead of our expectation, despite a 150 basis point headwind from the unusual customers ordering and shipment patterns that we have discussed on prior calls. We saw strong performance from Process Chemical and NuSeal in the Quarter. Importantly, our Revival initiative to enhance commercial and operation execution continue to gain traction across BMP. Revival is helping the segments, delivering more consistent and predictable performance. And as a result, we believe BMP is well positioned to grow in 2027 and beyond. Moving down the P&L, adjusted EBITDA margin increased modestly on the sequential basis as operational outperformance and cost discipline help us absorb headwinds from mixed inflation and targeted growth investments. Adjusted EPS of 22 cents was above our expectations. One of Aventor's key strengths is robust cash generation. In the third quarter, excluding cash restructuring costs, we generated $169 million of free cash flow, represented strong conversion of adjusted net income. We use this strong cash generation to further strengthen our balance sheet, and we ended the quarter with an adjusted net leverage ratio of 3.1 times. On slide six, we take a closer look at our return to growth. In Q3, Avanto delivered positive organic revenue growth driven by two forces, improving execution, and stronger end market. When we launched our revival program one year ago, we identified five key pillars and began a series of initiatives to sharpen our strategy focus on improved execution. Those actions are increasingly embedded in our operating model and in Q3, show up in our results. In VWR, the actions we are taking to enhance customer relationships, boost commercial execution, and expand our digital capabilities continue to gain traction. We estimate that approximately half of VWR growth in Q3 was driven by our commercial initiatives. We see progress in the same area we highlighted last quarter. We are expanding our relationships with large customers, we are performing well in small and mid-sized accounts, and our e-commerce platform continue to show positive trends. BWR growth acceleration in Q3 reinforced our confidence in our competitive position in the global distribution market. In BNP, we are making steady progress on our revival initiatives to strengthen operations and enhance our supply chain. And we have driven sequential increase in manufacturing throughput during 2026. Let me share a few examples of the progress we are making with Revival across the organization. On Monday, we announced that Mikey Santiago will join us from Danaher to serve as our chief information officer. With Mikey joining and Todd now on board, our executive leadership team is complete. I'm excited to work with this exceptional group of leaders to execute revival and create shareholder value. In BNP, our manufacturing teams have increased output across critical product lines. In early September, a key North American manufacturing line produced more than 25,000 kilograms of product in a single week, exceeding its original design capacity target and achieving nearly 99% overall equipment effectiveness ratio for that week. This is a good example of the operational improvement we are making across BMP. We have advanced our digital manufacturing strategy, including the development of digital workflow and electronic batch records at two key manufacturing sites. Those capabilities improve quality, reduce deviation, and enhance delivery performance, supporting a more efficient manufacturing network over time. Across our supply chain network, SNOP and other process improvement initiated are taking hold, contributing to improve customer service and on-time delivery across certain product categories. While I am pleased with our progress, we will continue to invest in our operation. In VWR, we are deploying AI to improve productivity and enhance the customer experience. One example is VWO Internal Sales Assistant, or ISA, which use AI to combine customer, sales, and product data to help sales team prepare for meetings, generate leads, prioritize opportunities, and act on recommendation. ISA also simplified administrative tasks. Since its launch last year, ISA has been widely adopted and we have received positive feedback from our sales team, our customers, and our suppliers. We plan to expand ISA and add new functionality. VWR is also enhancing our internal cross-reference platform with ai to allow our teams to proactively identify product substitutes that offer sustainability advantage or cost saving opportunity to customers the key takeaway is that revival impact is broad from leadership and operation to digital capabilities and customer facing tools revival is helping us improve execution and better serve our customers and ultimately translate to the growth acceleration we see in q3 that is the execution side of the equation i will now turn to end markets where we are also seeing positive signs two points of context are important to note First, our segment responds differently to end market conditions. VWR is more sensitive to market fluctuation given its significant exposure to research spending, while BMP is more heavily weighted towards production environments. Second, we have a unique perspective on the end market. market. Through VWR, we serve a daily need of scientists across more than 300,000 customer sites around the world. We see lab activity as it happens in daily order rates and in consumption of everyday consumables, which give us a clear view into the health of the scientific ecosystem. What we see is encouraging. The recovery that began in Q2 continues to build into free and importantly has broadened. Last quarter, we highlighted a pickup in activity among large pharma and biotech customers. That momentum has continued in Q3. Our large pharma and biotic customers continue to invest in their R&D pipeline, many of which have been supplemented by business development. We also saw green shoots of recovery demand in higher education and early-stage biotech customers in North America this quarter. For some of those customers, a more positive funding environment is translated into greater research activity. We also see strengths in certain industrial subsectors, such as mining. From a geographical perspective, our America's demand is performing very well. We are also seeing good activity in Asia, which remains a smaller region for us. We continue to see the market recovery in Europe lagging that of the Americas and Asia. On average, Europe faces more challenging macro conditions, including high energy costs and government funding pressure. Any improvement in this important geography will represent a tailwind to our business. Overall, we are encouraged by the improving tone across our end market and believe that the demand environment is the most constructive we have seen in several years. Stronger end markets are providing a tail wing, and improving execution is converting this tail wing into growth. We leave these providers a foundation of sustained revenue growth, and we remain focused on execution to build on our positive momentum. Before we walk through the financials, I want to welcome Todd Gardner, who joined us as a Chief Financial Officer on September 21st. Todd brings 30 years of finance, operational, and public company leadership experience. He most recently served as CFO of ComEd. In his first weeks, Todd has been meeting our teams around the world and getting to know our operations. As Todd continues to deepen his engagement in our business, Steve Eck will walk through today's results. But first, I would like to give Todd a chance to introduce himself. Todd? Thank you, Emmanuel, and good morning, everyone. I'm delighted to be here. When I decided to join Avantor, I was drawn to the opportunity to join a strong management team leading a high-quality, cash-generative business with trusted brands and leading positions in attractive markets. I believe my experience and other transformations throughout my career can directly support the execution of the Revival program and help drive meaningful long-term value creation for our shareholders. In these first few weeks, I've immersed myself in the business, going around the world to listen and learn, traveling with sales reps, visiting with customers and suppliers and touring our facilities. Everything I have learned has reinforced my decision to join. I've been struck by the quality and depth of our teams, their commitment to serving customers, and the rigor with which they operate. Through Revival, we are strengthening processes and building operating disciplines that support greater consistency and predictability. I'm excited to help drive Revival forward. My priorities are to continue building a deep understanding of the business and its key drivers, while bringing the transparency, financial rigor, and execution discipline that I have emphasized throughout my career. I look forward to engaging with all of you in the months ahead, including at our Investor Day on December 8th. Finally, I want to recognize Steve Eck for his leadership as our Interim Chief Financial Officer and thank him for helping make my transition seamless. I'll now hand the called over to Steve to walk you through the financials. Steve? Thank you, Todd, and good morning, everyone. Please turn to slide 9, where I will review our consolidated financial results. In Q3, we generated $1.698 billion of revenue, which grew 5.2% on an organic basis, and it was up 4.6% on a reported basis. Adjusted EBITDA was $257 million, resulting in a margin of 15.1%, and adjusted EPS was $0.22. We were pleased to see our adjusted EBITDA margin expand sequentially as strong execution and expense discipline allowed us to absorb mixed and inflationary pressures while also making targeted growth investments. Free cash flow for the quarter was $156 million. Excluding cash restructuring costs, free cash flow was $169 million. Both figures were in line with expectations and underscore Avantour's strong cash generation profile. WE STRENGTHENED OUR BALANCE SHEET IN THE QUARTER AND ENDED THE PERIOD WITH AN ADJUSTED NET LEVERAGE RATIO OF 3.1 TIMES, DOWN FROM 3.3 TIMES LAST QUARтер. PLEASE TURN TO SLIDE 10. REVENUE FOR THE VWR DISTRIBUTION AND SERVICES SEGMENT WAS $1.23 BILLION IN THE THIRD QUAR TER, UP 5.8 PERCENT ORGANICALLY VERSUS THE PRIOR YEAR. THE PRIMARY DRIVERS OF BOTH SEQUENTIAL AND YEAR OVER YEAR GROWTH WERE HIGHER VOLUMES, REFLECTING BOTH IMPROVING COMMERCIAL EXECUTION and stronger end markets. Adjusted operating income for VWR was $119 million in Q3, representing an adjusted operating margin of 9.7%. The year-over-year and sequential declines in operating margin primarily reflected mix, inflationary pressures, and growth investments. The key takeaway from the VW quarter is that our commercial execution continues to improve, allowing us to benefit from a stronger demand environment across many end markets, as Emmanuel MENTIONED EARLIER, VWR'S GROWTH ACCELERATION REINFORCES OUR CONFIDENCE IN VWRS COMPETITIVE POSITION IN THE GLOBAL DISTRIBUTION MARKET. LET ME NOW DISCUSS PERFORMANCE IN THE BIOSCIENCE AND MEDTEX PRODUCT SEGMENT, OR BMP. I'M ON SLIDE 11. IN THE THIRD QUARTER, BMP REVENUE WAS $465 MILLION, REPRESENTING ORGANIC GROWth OF 3.6% VERSUS THE PRIOR YEAR, EXCEEDING OUR EXPECTATIONS. PROCESSED CHEMICALS GREW HIGH SINGLE DIGITS IN THE QUARTER DRIVEN BY IMPROVING OPERATIONS, HEALTHY END MARKET CONDITIONS, AND STRONG ORDER PERFORMANCE. NEWSTILL GREW AT A LOW TEENS RATE IN THE QUARтер AS WE EXECUTED EFFECTIVELY AGAINST THE HEALTY ORDER BOOK. FLUID HANDLING AND RESEARCH AND SPECIALTY CHEMICALS WERE DOWN LOW SINGLE DIGITS IN THE QUARter. LAST QUARters WE INDICATED THAT THE SERUM BUSINESS WITHIN RESEAARCH SPECIALLY CHEMIICAL WOULD BE A HEADWIND TO OUR GROWTH RATE DUE TO THE NORMALIZATION OF DISCRETE CUSTOMER ORDERING PATTERNS IN SHIPMENTS IN 2025. FACTOR WAS A HEADWIND OF ROUGHLY 150 BASIS POINTS TO BMP ORGANIC REVENUE GROWTH IN THE THIRD QUARTER, AS EXPECTED. BMP SAW HEALTHY ORDER TRENDS ACROSS ALL BUSINESS UNITS IN Q3, WITH PARTICULAR STRENGTH IN NEW SILL ORDERS. ADJUSTED OPERATING INCOME FOR BMP WAS $123 MILLION IN THE QUARтер, REPRESENTING AN ADJUSTEED OPERATEING MARGIN OF 26.6%. MARGINS WERE FLAT YEAR-OVER-YEAR DESPITE INFLATIONARY pressures and margins increase sequentially versus the second quarter due to increased volumes and mix. There are two key takeaways from the BMP quarter. First, BMP returned to growth as we expected, and the segment's consistency and predictability are improving. Second, we are making steady progress with our revival actions to increase operational throughput and improve customer service, and this progress is reflected in BMP's sequential growth and margin improvement versus the second quarter. Please turn to slide 12. Our ability to consistently generate strong free cash flow is a key strength of Avantor. In the third quarter, excluding cash restructuring costs, we generated $169 million of free cashflow, reflecting strong conversion of adjusted net income. Our capital allocation priorities support revival and our intention to create sustainable shareholder value over the long term. First, we are making targeted investments in the business to enhance customer service improve execution and drive organic growth second we are focused on strengthening our balance sheet during the quarter we reduced our net debt balance by 173 million dollars and ended the period with net debt of 3.235 billion dollars our adjusted net leverage ratio was 3.1 times at the end of q3 and we expect to reduce our adjusted nut leverage ratio to below THREE TIMES BY YEAR END. PLEASE TURN TO SLIDE 13 WHERE WE'LL DISCUSS OUR INCREASED 2026 GUIDANCE. FOR 2026, WE HAVE RAISED OUR ORGANIC REVENUE GROWTH OUTLOOK TO A RANGE OF .75 TO 1.25%, WHICH REFLECTS OUR Q3 REVENUAL OUTPERFORMANCE AS WELL AS MODESTLY HIGHER GROWth ASSUMPTIONS FOR Q4. OUR GUIDANCES IMPLIES Q4 ORGANic REVENEW GROWT OF 2.5 TO 4.5%. exchange is expected to be a headwind of 150 basis points to reported revenue in the fourth quarter. As a result, we now expect foreign exchange to contribute approximately 75 basis points to full-year reported revenue growth. In terms of segment performance, we expect VWR will grow mid-single digits in 4Q. This is modestly above our prior expectations and assumes the growth drivers we saw in Q3 continue in the 4th quarter, while also reflecting a range of outcomes related to year-end customer spending patterns as well as a more difficult comparison than q3 on the bmp side we expect year-over-year organic growth to be flat to slightly positive in q4 reflecting approximately 400 basis points of headwind from discrete comparisons as well with a more challenging comparison in process chemicals we expect bmp to have modest sequential growth from q3 to q4 Moving to profitability, our adjusted EBITDA margin guidance remains unchanged as improved execution and operational outperformance enable us to absorb mix and inflationary pressures while continuing to invest for growth. We anticipate that our adjusted EBT margin will expand modestly from Q3 to Q4. We remain highly focused on our cost discipline and our objective is to deliver a leveraged P&L in the future as we seek to simplify, reinvest, and grow. Moving down the income statement, in 2026, we now expect an adjusted effective tax rate between 22% and 22.5% and a weighted average diluted share count of 679 million shares. Taken together, these assumptions result in an adjusted EPS outlook that has been raised to $0.81 to $.83 for the year. Finally, we have increased our free cash flow guidance. WE NOW EXPECT FREE CASH FLOW BETWEEN 525 AND $550 MILLION IN 2026, REFLECTING OUR YEAR-TO-DATE FINANCIAL PERFORMANCE AND THE STRENGTH AND CONSISTENCY OF AVANTOUR'S CASH GENERATION PROFILE. I'LL NOW TURN THE CALL BACK TO EMMANUEL. THANK YOU STEVE. LET ME ECHO TODD'S COMMENTS AND EXPRESS MY APPRECIATION FOR YOUR EXCELLENT LEADERSHIP AS INTERIM CFO. ON SLIDE 14, I WOULD LIKE TO LEAVE YOU WITH THREE KEY POINTS. from our results first the action we are taking as part of revival are delivering the intended results and our third quarter performance provide tangible evidence of that progress we remain focused on executing our initiative to simplify reinvest and grow eventual second we have returned to growth bwr continued to execute well against the backdrop of strengthening and markets nbmp deliver positive revenue growth in the quarter reflecting the operational improvements the team is making third we continue to generate robust free cash flow enabling us to invest for growth while keeping us on track to reduce our adjusted net leverage ratio to below three times by year end our associates around the world are committed to our customers and deserve a note of thanks we have made excellent progress so far this year and i'm excited about the future our investor day will take place on december 8th at investor day we will take a deeper look at our segments our strategy our capital allocation priorities and how revival is strengthening Aventos Foundation for sustainable growth. We will also provide a long-term financial framework and outline our roadmap for value creation. The return to growth we reported today is an important milestone, but we believe it is only the beginning. We look forward to sharing our vision of Avento's future. And now Operator, we are happy to take questions. Thank you. Webcast attendees who would like to view the slide deck please click the materials button on the left side of your screen to download the slide. 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 withdraw your question again press star one. We kindly ask that you limit yourself to one question in one follow-up for any additional questions please re-queue and your first question comes from casey woodring with jp morgan please go ahead great thank you for taking my questions and congrats on the quarter um i guess my first one on the strong vwr performance here you said half the growth was driven by commercial initiatives maybe can you just elaborate on that how much of the vwr beat was driven by previously disclosed large contract wins versus some of the other commercial initiatives you have going on maybe just talk about the sustainability of that moving into 4q sure thanks guys um and uh thank you for asking the question look i think we we share about half half and and when we think about the half about the action we we uh we have taken yes large contracts that we have renewed we talk about license to hunt we talk about the fact that the team was uh doing very well on growing our share of wallet there but it's not the only bucket of uh positive uh outcome we saw you know i think the team is doing very well with small and mid-sized customers which is definitely a very important segment for us and then e-commerce is also demonstrated better performance so overall team is executing well and And we are happy about where we stand right now. And so in that sense, when we look at the market dynamic and the action taken by the team, I think, yeah, we believe that those results are sustainable and that we look at our guide for Q4, and that implied about the same, you know, a mid-single-digit growth for VWR in Q4. Got it. That's helpful. And then I guess as a follow-up, you know, just on the margin line, do you think you can expand margins next year? The reason I ask is just, you've been clear that part of Revival has been focused on investing in areas of the business that have historically seen underinvestment. And there's also been price concessions to protect share in VWR that you've talked about. So just curious in 2027, you knows, a year where you can normalize pricing and some of the investments in the business and start to see some of that benefit here from volume starting to flow through. Thank you. Yeah, and look, Cathay, we are right in the middle for our planning and budget process, so I think we'll talk much more about our guide and what we think for 2027 in those details during our Q4 earning course in February. But let me make something very clear. We are very, very pleased with the team performance, the team embracing and executing Revival. we we have we are definitely improving our execution um the market is getting stronger so we will end up 26 with strong momentum all right and which means that you know months after months my confidence level is is definitely increasing for for next year so more to come more detail in you know, to support earning goals in February. Understood. Thank you. Your next question comes from the line of Vijay Kumar with Evercore ISI. Please go ahead. Hey, guys. This is Daniel on for Vijay. Thank you for taking our questions. I wanted to ask on the 4Q implied guide about 3.5% organic at the midpoint. I'm curious, what's embedded in the assumption that implies that the organic growth is going to moderate from 5% in 3Q. I look at the comps at the corporate level and they seem pretty similar. Thank you, Daniel. This is Todd. Nice to meet you. The Q4 guide really assumes the continued momentum we saw in Q3. So I'll take it business by business here in a minute. VWR just grew 5.8%, and we are forecasting mid-single-digit growth in Q4. So that consistent level in Q5 for VWIR. VMP, on the last quarter, on Q2 call, Steve called out that there's a 400 basis point headwind on the VMP side in Q3 due to the timing of order patterns, specifically in the electronic materials business. So with that 400 basis point headwind hitting Q4, the continued momentum that we saw in Q3, if you carry that over into Q4 with that discrete issue, we get to Q4 itself for BMP is going to look like flat to slightly positive, although organically it's consistent with Q3. So that's what puts the Q4 revenue guide in that 2.5% to 4.5 % range. But we see really good momentum in the business, as Emmanuel said. We don't see things slowing down, but there is that timing issue in Q4 on the BMP side. understood thank you and then just my follow-up um a lot of players in the in the life science tool space are starting to talk more about ai benefit i'm curious how avantor is thinking about the ai opportunity and and what that could potentially mean for growth yeah it's a manual i think there is there there's definitely a consensus in the industry about AI being a tailwind for us. I think it's all about productivity in the pharma. AI is here to help. So any increase of productivity in the money spent by pharma in developing new molecules is good for us, OK? If you have more molecules that need research, development, and manufacturing, the research part, we're serving them with BWR, and in the manufacturing part, We're serving from BMP. So yes, indeed, we are very excited about AI and the impact it has potentially on the business, and we see that as a tailwind like the rest of the industry. Understood. Thank you for taking the questions. Your next question comes from the line of Luke Sergoit with Barclays. go ahead thanks for the question guys um i think just starting off here going back to the the margin commentary so the margins kind of they stuck around this 25.5 level uh on the growth side you had big pick up there in vwr mid single digit volume growth off of 2q so just wondering how much of this is due to the contract renewals that you had over the last you know like six to six to 12 months and the discounting that might have gone into that versus the timing and impact of the investments you've made to improve your your cogs and manufacturing still waiting to flow through yeah good morning luke uh this is steve um yeah like we said in the prepared marks we're very pleased with another quarter of sequential even though margin expansion uh that we did see pressure on margins coming from a couple specific places which i'm happy to detail for you The first is MEX. This is the most significant driver in the quarter and is primarily coming from VWR. As you know, VWL is about 70 percent of our revenues, and it did grow faster than BMP in the quarter with its lower gross margin profile that had a meaningful impact on total company gross margins. Secondly, within VWLR, while we saw growth across the segment, we saw more strength coming from product categories and customer segments that carry a lower gross margin profile so a higher mix of vwr revenues versus bmp as well as some mixed dynamics within vwr that affected vwr's gross margins the next biggest factor that i'd point you to is inflationary pressures we continue to see the impacts of inflation across our business including from the ongoing conflict in the middle east but you know really pleased with the development of the ebitda margin expansion throughout the year and uh we expect to see that trend continue into the fourth quarter so appreciate your question hey um let me jump in here and then i'd like to um maybe step back for a few minutes one year ago when we launched revival we really focused on the five pillars but talent go-to market supply chain service level with a very very clear goal in mind return eventual to growth and today we are ahead of our of expectations now i've shared that in the past we we push a mindset of culture internally through the organization of simplifying to reinvest for growth, which means self-funding. So the team is working to generate efficiency, productivity, to form investment with a clear mindset, which is profitable growth and constant operating leverage. So revival is not done. We will and we are continuing to work really hard to position Aventor to sustainable growth, expand margining, and create shareholder value. So we are right in the middle of that. All right, I guess just a quick follow-up on that. You talked about kind of these investments you made in a couple of facilities. Any kind of color, because you're rolling them out all wholesale. So just talk about kindof as we think about the rest of the distribution and manufacturing organization, like what are some early wins or improvements you've seen on those couple of facilities as we think about rolling those forward through 27, 28, and 29? Sure. I think, look, I think it's, you know, I think the unusual condition of what the BMP underlying strength and the performance of the TM is, okay? We just talked about this on the Q4 guide. if we we see really good progress in the implementation of the snop mary blaine our coo has drive many kaizen to make sure that the plants are producing more i share some example this quarter last quarter as well um you know ludovic is really pushing the customer centricity across the team and and and just two kpis for you for the third quarter in a row our book to build in the bmp is positive and and if we just look at the process chemicals um year to date high single digit order and i single digit sales performance so we really see that now we have really a stronger alignment it is down to every effort with that the team is doing on on the revival pillar of um commercial side go to market but also supply chain service level which is definitely improving your next question comes from the line of doug schenkel with ubs please go ahead good morning guys and thank you for taking my questions um actually i'm i know this has come up a lot but i i kind of want to take a different angle on um margins and also just q4 guidance just as follow-ups to the previous questions so the first one it actually looks to me as i play with the model that vwr margin could be down you know under 50 basis points year over year in the fourth quarter or something in that neighborhood just playing with the model i actually would you know that that would actually be a huge step in the right direction given what you've had to manage through in terms of strategic price actions and the inflationary pressures that you faced especially in that business i guess my question is am i am i playing with the model right and then i think the follow-up just to some of the other questions is you know as as you guided q4 it seems like you essentially maintained you know what you were expecting for q4 and updated guidance largely for the magnitude of the q3b i didn't hear anything that suggested there were timing dynamics it really sounds like pacing is a function of the year-over-year comps i just want to make sure i have that right as well sure doug nice to meet you I'll just start out by saying, while we don't guide specific margins by the segments, we don't see deterioration either. So we do expect margins to expand modestly. I would put the word modestly on it between Q3 and Q4, but we do except margin expansion. So there might be a little model tweaking there. And, you know, as Emanuel said, we are right in the middle of revival with the focus on the long term of developing sustainable, predictable, positive profitability and growth. So we're right inthe middle of that. Q3 was a really good sign of progress. We think Q4 will be another sign of process and an improvement there. And so that's where we are now. and we can help you a little more with the model offline. Okay, that sounds good. And if I could ask one more, the last couple of quarters you talked about booked a bill of over one. You know, I think you talked about 1.1 times for BMP, a couple of corners. You talked about solid order trends this quarter. You know you've talked about lead times of 30 to 90 days for many products in the portfolio. just keeping in mind the momentum seemingly that you have heading into your end there and thinking about the order book is that conversion period still the right way to think about things 30 to 90 days or you know are there instances where things are stretching a little bit thank you no three to six months depends on the product line is the right way to look at it. No necessary change on our lead times. The team is really working to make sure that we continue through the S&OP to have a really good say-do ratio with the customers. So, look, as I said, the unusual calm this year, I think, is masking the BMP underlying performance. But, you know, we look at the business also on the quarter after quarter, and we have uh we have sequential increase um you know all the year so far and we're looking at a modest sequential increase as well in two four so i really like the bmp direction of travel right now okay thank you guys and nice to meet you talk soon thank you your next question comes from the line of tycho peterson with jeffries please go ahead hey thanks um appreciate you've had a number of questions on margins want to maybe just ask on OPEX, you know, higher SG&A, you call that as an offset to profitability. Just talk a little bit about where those investments are going and when you expect to generate a return from some of that. Good morning, Tycho. This is Steve. Actually, we're pleased with the performance from an adjusted SG&I perspective this quarter. It's down modestly from the first half of 2026 levels, which I think is noteworthy because we're in the setting of significant investment in the business for our future growth we're in the midst of revival as you know emmanuel said but you know we're still displaying that cost discipline and capitalizing on opportunities to drive productivity uh so we think you know that's that's heading in the right direction as part of that story of you know gradual sequential ebitda margin expansion and maybe i tyco let me give you a few examples of where we want to uh to continue to invest i I mean, definitely AI. We share a couple of tools during our opening remarks, which I think is important. We'll continue to double down on this. Supply chain, definitely. There's still a lot to do there, and Mary is taking the lead. We also want to double-down on our e-commerce platform. We really see some good performance there. We are happy with where we are, but we know that we can do more. So those give you a couple example of uh where we want to continue to invest okay and then can you talk more on the strength in new seal you know upload team strong orders i guess how durable is the demand you're seeing now or they're kind of um any one-time you know items in there yeah no local seal is uh new series an excellent business it's a strong brand great customer relationship the quality is outstanding and phenomenal reputation um again we had some unusual order and shipping shipping patterns in the past especially on the first half but um q3 we saw uh double digits revenue growth um in an order is uh is strong as well it's turning to revenue the team is executing well um i think you you may have seen there are also some of our customers that have publicly shared the fact that we have renewed contract elapsed, which is an important customer of us. We have a very long relationship, more than 10 years. And we renewed that contract up to 2031. And so we're really happy of where we are. So Q4 is looking good as well for New Zealand. Okay. And if I could ask one last quick one, is there anything back to margins structurally that would prevent VWR to get back to the historical 12% to 13% range longer term? Understanding, obviously, in the near term, you have inflationary pressures and other factors, but anything structurally that would preventing you from getting back to the historical range? This is a great question. I think why don't we talk about that in Investors Day? Well, we'll give you a framework for the future. Okay, fair enough. Thanks. Your next question comes from the line of Eve Burstein. with Bernstein, please go ahead. Great. Good morning. Congrats on the quarter and thanks so much for taking the question. You said you saw stronger end markets in America as in Asia, but Europe is still lagging because of more challenging macro conditions. Can you unpack this a little bit? How much of that is weakness due to academic and government specifically versus other end markets. I'd argue that there probably isn't as good line of sight to macro improvement in Europe and the timing to expect that versus what we had on the Americas a few quarters ago. Is that fair to say? What do you think it takes to get the end market going? And then finally, VWR has a real position of strength in Europe versus the largest global distributor competitor. Can you imagine this exposure being a drag on growth in the mid-term? No, that's a great question. Look, Europe is a very important market for us. As you said, we have a leadership position there. Look at the macro environment is we're following it closely, there's tight span on budget in academy. There's also some industrial suffering, right? Germany, I think we highlight that. And I think what is important is the recovery is really yet to be seen. What I think is important in that in our guide, we are looking at a static wall. So any recovery will give us a tailwind. So I think this is where we stand is difficult to anticipate therefore we take the static one say okay we'll put that in the guide okay great thank you um and then e-commerce has has been a big focus for you and just this week you appointed a new chief information officer can you talk a little bit about uh in e- commerce specifically what sort of quantitative impacts of the improvements that you've been making this year? What do you expect for next year? And then for your digital transformation more broadly, which you said is still in early stages, what's the next set of digital priorities? And how are you viewing investment as a priority for excess capital? Sure. Look, it is a very important tool because it is tools that serve very, very large, broad-based customers and we want to make sure that the interface with those customers is the best we can so the first really important step for us was to relaunch vwr.com which we did um at the end of q1 early q2 and we had really good feedback on this but this is just the beginning what we really want is to bring a tool which is extremely easy to deal with which provide a much more information uh which is much more modern in the sense okay so i think this is where we are continuing to uh to invest in this and we have a huge amount of kpi you know number of people that visit number of people that build a cart number of you know people that actually order the cart and and what do they look at and and we really want to bring ai into this so um we brought a great chief digital officer a couple of months ago. Now we are complementing that with Mikey as a CIO and the team is really building a strong plan that we will support with investment. So I think, again, we want to give you more information during Investor's Day, so that will be a deep dive area for us at the day of December 8th. Great. Thanks a lot. Your next question comes from the line of Justin Bowers with Deutsche Bank. Please go ahead. Hi. Good morning, and thank you for taking the question. So can you refresh us on the revival program, the various phases, and the duration of the program as you see it now? Sure. it's a one-year program now, but as I said, we're just in the middle of it. I'm super happy the leadership team is now completed. All right, we started joining us a couple of weeks ago. Mikey started next week. Very exciting, built a very strong team, very diverse, with a great life science and med tech experience and expertise. So this is really, really good. Remember, we also complement the leadership team with many people below. I think we talked about 65% of the entire N-2 being refreshed. We are operating in a much greater discipline right now. The culture is a stronger accountability. We're much more customer-centric. We have simplified a lot. But again, we're not done, right? We simplified, for example, the onboarding process for customers we talked about that last quarter our production level as we talk about it especially in the bmp uh production and service level are definitely improving but i think more importantly is our say-do ratio you know we we spoke about that at the very beginning when i joined um we we we want to regain our credibility and the trust of of all the stakeholder so you know in april we said that vwr will return to growth in our last call we said that bmp will return the growth and so it's very important that we continue to to build on that credibility to continue to build the trust with the shareholder you know including investors it is extremely important for us so um but if we look at the overall where we are we're really happy but we are absolutely not satisfied okay and so we're in the middle of it uh we will continue to amplify simplification of processes to amplify um our our structure um infrastructure systems for example especially as mikey is coming in i want to really continue to strengthen our culture of execution and and really as i said earlier just really position the company for sustainable growth. And so we're not done. Thank you. And you asked my question on leadership. So the one follow-up would be just on the investments that you're making on the BNP side. I know you called some of those out earlier in the year, just trying to understand where we are in that process. And it does sound like the sales and order book is filling up nicely and lead times are getting back to normal so any additional color there would be helpful yeah sure uh we'll we'll continue mary has um has put um an overall supply chain uh strategy uh which of course is a long-term strategy okay when when we develop those manufacturing strategy we we do not look at next quarter we look at the next 10 years and what could be the demand And also, we engage with our customers. You know, this is an industry where security of supply is very important. And we have the strength to be able to manufacture in Asia, in Europe, and in the U.S. So this is about this. It's about making sure that we make the product at the right place, closer to customers for sustainability, but also for security of supplier redundancy. So that's where we are right now. We are finalizing those plans, and then I think this is another thing that we can talk at Investors Day. Thank you. Your next question comes from the line of Dan Arias with TISL. Your line is open. Morning, guys. Thank you, Todd. Where will pricing come in for the year? What will the net effect be for 2026? Good morning. This is Steve. I'm happy to take that one. We're very pleased with the execution of our pricing strategy this year. To give you some perspective, last year we saw a significantly greater cost coming from suppliers and having to absorb that than we were able to necessarily pass on to customers. But through better governance, implementation of tools, these kinds of things, stronger commercial operations execution we've been able to recover uh much better uh this year than last you know so it's had a significantly uh you know noteworthy impact on our margins yeah i i can jump in uh as well here you know um our number one objective is pricing to offset inflation right now okay and this is very important i think we've made a lot of progress um if we look at the different metrics like price over cost we we have improved uh with definitely a better tools i think i spoke uh last quarter the fact that we have hired a pricing leaders we have we have a team which is in place so we have better tools with better visibility we review that every month and basically we have greater discipline in the commercial team so of course you know costs rise in real time and sometimes pricing recover with a lag um but i think it's uh we are in a very very important timing right now because we are end of the year um some of the very large customers contract give us the opportunity to take the price up at the end of year for the following years and that's what we're really working hard right now so um yeah margin some some seen a bit of a headwind on the pricing lag but i think what is important is very good execution um cost discipline as well for us but um i really um i'm super happy of what we have done this year versus where we were last year and i think there's more to come okay appreciate the qualitative commentary there will you be in the position to talk about what 2026 pricing is at the investor day and you know i certainly appreciate the competitive element to all this but pricing is also a pretty pretty major part of the situation and thinking about what it is that will be different about 27 versus 26 and 26 versus 25 so you know when when can we expect to have some numbers as far as what price will mean to growth this year or next year yeah dan to to be specific to a number you know our data shows that it's our pricing is between one and two percent in 2026. so that's the price that we've been able to get to to stephen emmanuel's point um that is less than we've seen from inflation right so we're chasing it a little bit we're getting better at getting closer and reducing that lag between cost increases in price but the quantification of 26 appears to us between to be between that one and two percent okay very much appreciated thank you and that's all the time we have today for questions emmanuel i'd like to turn it back to you thank you and uh thank you all for joining us today and thanks for your questions uh our third quarter results mark a return to organic growth for Aventor and we are encouraged by the momentum across the business we believe that improving execution and stronger end markets provide a foundation for sustained revenue growth and we remain focused on execution to build on our positive momentum finally we are looking forward to hosting you in our investors day on december 8 where we will share our vision for the event of future we hope that will join us and again thank you very much for your time and interest in advento thank you thank you ladies and gentlemen this does conclude today's conference call thank you for your participation and you may now disconnect.