Avantor® Reports Third Quarter 2023 Results
27 Oct 2023
Financial Statement
Net sales of $1.72 billion, decrease of 7.3%; core organic decline of 7.9%
Net income of $108.4 million; Adjusted EBITDA of $317.8 million
Diluted GAAP EPS of $0.16; adjusted EPS of $0.25
Operating cash flow of $230.7 million; free cash flow of $193.0 million
Adjusted net leverage of 3.9X; repaid more than $650 million of debt year to date
RADNOR, Pa., Oct. 27, 2023 /PRNewswire/ -- Avantor, Inc. (NYSE: AVTR), a leading global provider of mission-critical products and services to customers in the life sciences, education and government, advanced technologies and applied materials industries, today reported financial results for the third quarter ended September 30, 2023.
"We delivered third quarter business results in line with our guidance for the quarter and end market conditions remained stable, as anticipated. Disciplined execution, driven by the Avantor Business System, resulted in more than 110% free cash flow conversion and enabled ongoing debt paydown. Enhanced commercial intensity drove notable customer wins and contract renewals in biopharma as well as momentum across our biomaterials and education platforms," said Michael Stubblefield, President and Chief Executive Officer.
"We are confident in our long-term outlook. Our focus on productivity and operational excellence, balanced with investments in our growth strategy, including proprietary product innovation and the formation of our Scientific Advisory Board, has positioned Avantor to emerge stronger from the current environment," Stubblefield concluded.
Third Quarter 2023
For the three months ended September 30, 2023, net sales were $1.72 billion, a decrease of 7.3% compared to the third quarter of 2022. Foreign currency translation had a favorable impact of 2.3% resulting in an organic sales decline of 9.6% and core organic sales (excluding COVID-19 headwinds) decline of 7.9%. Adjusted EBITDA was $317.8 million and adjusted EBITDA margin was 18.5%. Net income decreased to $108.4 million from $167.0 million in the third quarter of 2022 and adjusted net income was $171.6 million as compared to $231.2 million in the comparable prior period.
Diluted earnings per share on a GAAP basis was $0.16, while adjusted EPS was $0.25.
Operating cash flow in the quarter was $230.7 million, while free cash flow was $193.0 million.
Adjusted net leverage was 3.9X as of September 30, 2023, and we have repaid more than $650 million of total debt in the first three quarters of 2023.
Third Quarter 2023 – Segment Results
Management uses Adjusted EBITDA to measure and evaluate the internal operating performance of our Company's business segments. Adjusted EBITDA is also our segment reporting profitability measure under generally accepted accounting principles.
Americas
Net sales were $1,019.2 million, a reported decrease of 9.3%, as compared to $1,123.2 million in the third quarter of 2022. Core organic sales decreased 7.9%.
Adjusted EBITDA margin decreased approximately 140 basis points to 22.0%.
Europe
Net sales were $579.8 million, a reported decrease of 2.6%, as compared to $595.1 million in the third quarter of 2022. Core organic sales decreased 8.6%.
Adjusted EBITDA margin decreased approximately 420 basis points to 17.7%.
Net sales were $121.2 million, a reported decrease of 12.3%, as compared to $138.2 million in the third quarter of 2022. Core organic sales decreased 5.4%.
Adjusted EBITDA margin increased approximately 210 basis points to 27.9%.
Conference Call
We will host a conference call to discuss our results today, October 27, 2023, at 8:00 a.m. Eastern Time. The live webcast and presentation as well as a replay will be available on the investor section of Avantor's website.
About Avantor
Avantor®, a Fortune 500 company, is a leading global provider of mission-critical products and services to customers in the biopharma, healthcare, education & government, and advanced technologies & applied materials industries. Our portfolio is used in virtually every stage of the most important research, development and production activities in the industries we serve. Our global footprint enables us to serve more than 300,000 customer locations and gives us extensive access to research laboratories and scientists in more than 180 countries. We set science in motion to create a better world. For more information, please visit www.avantorsciences.com.
Use of Non-GAAP Financial Measures
To evaluate our performance, we monitor a number of key indicators. As appropriate, we supplement our results of operations determined in accordance with U.S. generally accepted accounting principles ("GAAP") with certain non-GAAP financial measurements that we believe are useful to investors, creditors and others in assessing our performance. These measures should not be considered in isolation or as a substitute for reported GAAP results because they may include or exclude certain items as compared to similar GAAP-based measures, and such measures may not be comparable to similarly titled measures reported by other companies. Rather, these measures should be considered as an additional way of viewing aspects of our operations that provide a more complete understanding of our business. We strongly encourage investors to review our consolidated financial statements included in reports filed with the SEC in their entirety and not rely solely on any one, single financial measurement or communication.
The non-GAAP financial measures used in this press release are sales growth (decline) on an organic basis, sales growth (decline) on a core organic basis, Adjusted EBITDA, adjusted net income, adjusted EPS, adjusted net leverage and free cash flow.
Sales growth (decline) on an organic basis eliminates from our reported net sales growth (decline) the impacts of earnings from any acquired or disposed businesses that have been owned for less than one year and changes in foreign currency exchange rates. Sales growth (decline) on a core organic basis eliminates from our organic growth (decline) the impacts of any COVID-19 related net sales. We believe that these measurements are useful as a way to measure and evaluate our underlying commercial operating performance consistently across our segments and the periods presented.
Adjusted EBITDA is to measure and evaluate our operating performance exclusive of interest expense, income tax expense, depreciation, amortization and certain other adjustments. We believe that this measurement is useful as a way to analyze the underlying trends in our business consistently across the periods presented.
Adjusted net income is our net income or loss first adjusted for the following items: (i) amortization of acquired intangible assets, (ii) net foreign currency remeasurement gains or losses relating to financing activities, (iii) losses on extinguishment of debt, (iv) charges associated with the impairment of certain assets, (v) other costs or credits that are either isolated or cannot be expected to recur with any regularity or predictability. From this amount, we then add or subtract an assumed incremental income tax impact on the above noted pre-tax adjustments, using estimated tax rates, to arrive at Adjusted Net Income. We believe that this measurement is useful as a way to analyze the business consistently across the periods presented.
Adjusted EPS is our adjusted net income divided by our diluted GAAP weighted average share count adjusted for anti-dilutive instruments. We believe that this measurement is an additional way to analyze the underlying trends in our business consistently across the periods presented.
Adjusted net leverage is equal to our gross debt, reduced by our cash and cash equivalents, divided by our trailing 12-month Adjusted EBITDA (excluding stock-based compensation expense and including the expected run-rate effect of cost synergies and the incremental results of completed acquisitions as if those acquisitions had occurred on the first day of the trailing 12-month period). We believe that this measurement is a useful way to evaluate and measure the Company's capital allocation strategies and the underlying trends in the business.
Free cash flow is equal to our cash flow from operating activities, excluding acquisition-related costs paid in the period, less capital expenditures. We believe that this measurement is useful as it provides a view on the Company's ability to generate cash for use in financing or investment activities.
Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the tables accompanying this release.
Forward-Looking and Cautionary Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and are subject to the safe harbor created thereby under the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this press release are forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. These statements may be preceded by, followed by or include the words "aim," "anticipate," "assumption," "believe," "continue," "estimate," "expect," "forecast," "goal," "guidance," "intend," "likely," "long-term," "near-term," "objective," "opportunity," "outlook," "plan," "potential," "project," "projection," "prospects," "seek," "target," "trend," "can," "could," "may," "should," "would," "will," the negatives thereof and other words and terms of similar meaning.
Forward-looking statements are inherently subject to risks, uncertainties and assumptions; they are not guarantees of performance. You should not place undue reliance on these statements. We have based these forward-looking statements on our current expectations and projections about future events. Although we believe that our assumptions made in connection with the forward-looking statements are reasonable, we cannot assure you that the assumptions and expectations will prove to be correct. Factors that could contribute to these risks, uncertainties and assumptions include, but are not limited to, the factors described in "Risk Factors" in our most recent Annual Report on Form 10-K and subsequent quarterly reports on Form 10-Q, as such risk factors may be updated from time to time in our periodic filings with the SEC.
All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. In addition, all forward-looking statements speak only as of the date of this press release. We undertake no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise other than as required under the federal securities laws.
Investor Relations Contact
Christina Jones
Vice President, Investor Relations
+1 805-617-5297
[email protected]
Media Contact
Emily Collins
Vice President, External Communications
+1 332-239-3910
[email protected]
SOURCE Avantor and Financial News
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