Avantor, Inc. (NYSE: AVTR), a leading global provider of mission critical products and services to customers in the life sciences and advanced technologies & applied materials industries, today reported financial results for the quarter ended June 30, 2019.

"Following our outstanding performance in 2018 and a great start to 2019, our momentum continued into the second quarter," said Michael Stubblefield, Chief Executive Officer of Avantor. "Enabled by the Avantor Business System, we delivered another excellent quarter with 6.1% organic revenue growth, a 140-basis point expansion of adjusted EBITDA margin and 8% increase in unlevered free cash flow. Each of our regional segments realized strong top-line growth, led by double-digit growth in biopharma and services.

"Our robust operational performance, including execution of our synergy program, together with the proceeds realized from our successful IPO in May, enabled us to significantly deleverage our balance sheet," Stubblefield continued. "Following an upgrade in our corporate credit rating by all three rating agencies, we were successful in lowering the interest rates on our debt. Collectively, these actions reduced our ongoing interest expense by approximately 25%, giving us additional flexibility to execute our long-term growth strategy."

Stubblefield concluded "Our guidance for the rest of the year reflects our confidence in our business model and our role as a trusted partner to customers in the life sciences and advanced technologies & applied materials industries."

Second Quarter 2019

For the three months ended June 30, 2019, net sales were $1.532 billion, an increase of 3.7% compared to the second quarter of 2018. Organic revenue growth was 6.1%, reflecting volume growth and improved pricing across most major customer and product groups. Foreign currency translation negatively impacted revenue by 2.4%. Adjusted EBITDA increased 13% to $268.8 million.

Avantor completed its initial public offering in May, selling a total of 238 million shares of common stock at $14 per share and 20.7 million shares of its 6.250% Series A Mandatory Convertible Preferred Stock at a price of $50 per share. The Company received proceeds of $4.4 billion from the offering, of which $2.6 billion was used to redeem all outstanding shares of its Series A Preferred Stock, with the remainder used to repay a portion of its debt. As a result of this debt repayment and the Company's continued growth in profitability and cash generation, its net leverage improved to 5.0x adjusted EBITDA (excluding stock-based compensation and including run-rate synergies). The Company also received credit rating upgrades from Standard & Poor's, Moody's and Fitch.

Second Quarter 2019 - Segment Results

Management uses Management EBITDA (as highlighted below) to measure and evaluate the internal operating performance of the Company's business segments. Management EBITDA is also our segment reporting profitability measure under generally accepted accounting principles.

Americas

In the Americas, net sales were $925.5 million, up 4.9% from the second quarter of 2018 and up 5.2% on an organic basis. The increase in net sales was driven by growth in most customer groups and most product categories and reflected improved pricing and volume, partly offset by a 0.3% unfavorable foreign currency impact.

Management EBITDA was $198.9 million, up 18.7% from the second quarter of 2018, which reflected net sales growth, gross margin improvement and reductions in SG&A expenses, primarily from the realization of cost synergies and overall operating efficiency.

Europe

In Europe, net sales were $518.6 million, flat versus the second quarter of 2018 and up 6.1% on an organic basis. Unfavorable foreign currency translation offset growth in each of the customer groups.

Management EBITDA was $83.4 million, up 5.0% from the second quarter of 2018. This growth reflects net sales growth, gross margin improvements and reductions in SG&A expenses, primarily from the realization of cost synergies and overall operating efficiency, and more than offset the negative impacts from foreign currency.

AMEA

In AMEA, net sales were $88.3 million, up 14.4% from the second quarter of 2018 and up 16.6% on an organic basis. The increase in net sales was primarily due to volume growth, particularly in biopharma, partially offset by an adverse foreign currency impact.

Management EBITDA was $17.8 million, down 5.8% from the second quarter of 2018, reflecting an increase in SG&A expense associated with additional sales and marketing personnel and other investments in infrastructure as we continue to expand our footprint in AMEA, partially offset by the favorable impact from net sales growth and gross margin improvements.

Outlook

For the full year 2019, the Company expects net sales in the range of $6.08-6.14 billion, representing growth of 3.7-4.7% (5.6-6.6% on an organic basis) and Adjusted EBITDA in the range of $1.04-1.06 billion, or an increase of 10.0-12.1%. Full year Adjusted EPS is expected to be in the range of $0.55-0.58.

Our outlook assumes:

• Current foreign exchange rates
• Adjusted shares outstanding of 642.7 million
• Annual effective tax rate of 30-31%

A quantitative reconciliation of adjusted EBITDA and adjusted EPS outlook to the corresponding GAAP information is not provided because the GAAP measures that are excluded from such outlook are difficult to predict and are primarily dependent on future uncertainties. Items with future uncertainties include the timing and cost of future restructuring activities, charges related to the early retirement of debt, changes in tax rates and other non-recurring items.

About Avantor

Avantor is a leading global provider of mission critical products and services to customers in the life sciences and advanced technologies & applied materials industries. We operate in more than 30 countries and deliver an extensive portfolio of products and services. We set science in motion to create a better world.