Avantor Inc.
02/11/2026 | Press release | Distributed by Public on 02/11/2026 06:36
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
Management's discussion and analysis of financial condition and results of operations
This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those contained in or implied by any forward-looking statements. See "Cautionary factors regarding forward-looking statements."
Overview
For the fiscal year ended December 31, 2025, we recorded net sales of $6,552.2 million, net loss of $530.2 million, Adjusted EBITDA of $1,069.4 million and Adjusted Operating Income of $957.8 million. Net sales declined 3.4% which included 2.8% organic net sales decrease compared to the same period in 2024. See "Reconciliations of non-GAAP measures" for reconciliations of net (loss) income to Adjusted EBITDA and Adjusted Operating Income, and net (loss) income margin to Adjusted EBITDA margin and Adjusted Operating Income margin. See "Results of operations" for a reconciliation and explanation of changes of net sales growth (decline) to organic net sales growth (decline).
Segment change
Effective January 1, 2024, we changed our operating model and reporting segment structure from three reportable segments to two reportable segments, Laboratory Solutions and Bioscience Production. This structure aligns with how our Chief Executive Officer, who is our CODM, measures segment operating performance and allocates resources across our operating segments. This reportable segment change has no impact on our consolidated operating results.
In connection with the operating model and reporting structure change, our CODM changed the measure used to evaluate segment profitability from Adjusted EBITDA to Adjusted Operating Income. All disclosures relating to segment profitability, including those for comparative periods, have been revised as a result of this change.
Trends affecting our business and results of operations
The following trends have affected our recent operating results, and they may also continue to affect our performance and financial condition in future periods.
Our results are impacted by a divestiture to further refine our business model
We completed the sale of our Clinical Services business, a component of the Company's Laboratory Solutions reportable segment, on October 17, 2024. The Clinical Services business was not classified as a discontinued operation as it did not represent a strategic shift that will have a major effect on the Company's operations and financial results.
We have been impacted by inflationary pressures
We have experienced inflationary pressures across all of our cost categories. While we have implemented pricing and productivity measures to combat these pressures, they may continue to adversely impact our results.
We continue to invest in a differentiated innovation model
We are engaging with our customers early in their product development cycles to advance their programs from research and discovery through development and commercialization. These projects include enhancing product purity and performance characteristics, improving product packaging and streamlining workflows. We are also developing new products in emerging areas of science such as cell and gene therapy.
We continue to advance our cost transformation initiative to reduce our expenses
We are advancing a global cost transformation initiative to further enhance productivity through increased organizational efficiency, footprint optimization, reduced cost-to-serve and procurement savings that are expected to generate approximately $300 million in run rate gross cost savings by the end of 2026.
We have expanded this initiative and now expect to generate approximately $400 million in run rate gross savings by the end of 2027.
We refinanced our debt and increased our liquidity
In the fourth quarter of 2025, we issued €400.0 million and €550.0 million of senior secured term loans, maturing in October 2030 and October 2032, respectively. These loans bear interest at EURIBOR plus 150 basis points and EURIBOR plus 250 basis points, respectively. The proceeds from these issuances, along with cash on hand, were used to repay our outstanding U.S. dollar term loans B-6, Euro term loans B-4, Euro term loans B-5, the remaining 2.625% secured notes, and the receivables facility.
In connection with the refinancing, we amended our revolving credit facility to obtain an additional $425.0 million in available funding, increasing the total availability under the facility to $1,400.0 million.
Changes in foreign currency exchange rates are impacting our financial condition and results of operations
Our consolidated results of operations are comprised of many different functional currencies that translate into our U.S. dollar reporting currency. The movement of the U.S. dollar against those functional currencies, particularly the Euro, has caused significant variability in our results and may continue to do so in the future. See Part I, Item 7A, "Quantitative and qualitative disclosures about market risk."
Our results may be impacted by changes in trade policy
The imposition of tariffs and other trade restrictions by the U.S., as well as reciprocal trade restrictions imposed by other countries, could adversely affect global economies, financial markets and the overall environment in which we do business.
Goodwill impairment related to our Distribution reporting unit
In the third quarter of 2025, we recorded a goodwill impairment charge of $785.0 million related to our Distribution reporting unit, formerly referred to as our Buy Sell reporting unit. This impairment was primarily driven by sustained decreases in our publicly quoted share price and market capitalization, as well as changes in operating results. While the impairment is a non-cash charge, it reflects underlying business conditions that may continue to affect our future results. We are actively implementing initiatives and evaluating strategic actions to mitigate these pressures.
Key indicators of performance and financial condition
To evaluate our performance, we monitor a number of key indicators. As appropriate, we supplement our results of operations determined in accordance with 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.
The key indicators that we monitor are as follows:
•Net sales, gross margin, operating income, operating income margin, net income or loss and net income or loss margin. These measures are discussed in the section entitled "Results of operations";
•Organic net sales growth (decline), which is a non-GAAP measure discussed in the section entitled "Results of operations." Organic net sales growth (decline) eliminates from our reported net sales change the impacts of revenues from acquisitions and divestitures that occurred in the last year (as applicable) and changes in foreign currency exchange rates. We believe that this measurement is useful to investors as a way to measure and evaluate our underlying commercial operating performance consistently across our segments and the periods presented. This measurement is used by our management for the same reason. Reconciliations to the change in reported net sales, the most directly comparable GAAP financial measure, are included in the section entitled "Results of operations";
•Adjusted EBITDA and Adjusted EBITDA margin, which are non-GAAP measures discussed in the section entitled "Results of operations." Adjusted EBITDA is our net income or loss adjusted for the following items: (i) interest expense, (ii) income tax expense, (iii) amortization of acquired intangible assets, (iv) depreciation expense, (v) losses on extinguishment of debt, (vi) charges associated with the impairment of certain assets, (vii) gain on sale of business, and (viii) certain other adjustments. Adjusted EBITDA margin is Adjusted EBITDA divided by net sales as determined under GAAP. We believe that these measurements are useful to investors as ways to analyze the underlying trends in our business consistently across the periods presented. These measurements are used by our management for the same reason. A reconciliation of net income or loss and net income or loss margin, the most directly comparable GAAP financial measures, to Adjusted EBITDA and Adjusted EBITDA margin, respectively, are included in the section entitled "Reconciliations of non-GAAP measures";
•Adjusted Operating Income and Adjusted Operating Income margin, which are non-GAAP measures discussed in the section entitled "Results of operations." Adjusted Operating Income is our net income or loss adjusted for the following items: (i) interest expense, (ii) income tax expense, (iii) amortization of acquired intangible assets, (iv) losses on extinguishment of debt, (v) charges associated with the impairment of certain assets, (vi) gain on sale of business, and (vii) certain other adjustments. This measurement is our segment reporting profitability measure under GAAP. Adjusted Operating Income margin is Adjusted Operating Income divided by net sales as determined under GAAP. We believe that these measurements are useful to investors as ways to analyze the underlying trends in our business consistently across the periods presented. These
measurements are used by our management for the same reason. A reconciliation of net income or loss and net income or loss margin, the most directly comparable GAAP financial measures, to Adjusted Operating Income and Adjusted Operating Income margin, respectively, are included in the section entitled "Reconciliations of non-GAAP measures";
•Cash flows from operating activities, which we discuss in the section entitled "Liquidity and capital resources-Historical cash flows";
•Free cash flow, which is a non-GAAP measure, is equal to our cash flows from operating activities, less capital expenditures, plus direct transaction costs and income taxes paid related to acquisitions and divestitures (as applicable) in the period. We believe that this measurement is useful to investors as it provides a view on the Company's ability to generate cash for use in financing or investing activities. This measurement is used by management for the same reason. A reconciliation of cash flows from operating activities, the most directly comparable GAAP financial measure, to free cash flow, is included in the section entitled "Liquidity and capital resources-Historical cash flows."
Results of operations
We present results of operations in the same way that we manage our business, evaluate our performance and allocate our resources. We also provide discussion of net sales and Adjusted Operating Income by segment: Laboratory Solutions and Bioscience Production. Corporate costs are managed on a standalone basis, certain of which are allocated to our reportable segments.
Years ended December 31, 2025 and 2024
Executive summary
|
(dollars in millions)
|
Year ended December 31,
|
Change | |||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| Net sales | $ | 6,552.2 | $ | 6,783.6 | $ | (231.4) | |||||||||||
| Gross margin | 32.7 | % | 33.6 | % | (90) bps | ||||||||||||
|
Operating (loss) income
|
$ | (246.2) | $ | 1,084.8 | $ | (1,331.0) | |||||||||||
|
Operating (loss) income margin
|
(3.8) | % | 16.0 | % | (1,980) bps | ||||||||||||
|
Net (loss) income
|
$ | (530.2) | $ | 711.5 | $ | (1,241.7) | |||||||||||
|
Net (loss) income margin
|
(8.1) | % | 10.5 | % | (1,860) bps | ||||||||||||
| Adjusted EBITDA | $ | 1,069.4 | $ | 1,198.8 | $ | (129.4) | |||||||||||
| Adjusted EBITDA margin | 16.3 | % | 17.7 | % | (140) bps | ||||||||||||
| Adjusted Operating Income | $ | 957.8 | $ | 1,089.8 | $ | (132.0) | |||||||||||
| Adjusted Operating Income margin | 14.6 | % | 16.1 | % | (150) bps | ||||||||||||
For the year ended December 31, 2025, net sales declined primarily due to the divestiture of our Clinical Services business within our Advanced Lab Services business and reduced customer demand in the Total Science Solutions business, both of which impacted the Laboratory Solutions segment. Gross margin and gross profit decreased, reflecting lower sales volume, inflationary pressures, the divestiture of our Clinical Services business and higher freight costs. Operating income declined largely due to a non-cash goodwill impairment charge recorded in the Distribution reporting unit in the current year and the absence of the
gain on sale of the Clinical Services business recognized in the prior year. The reduction in gross profit, partially offset by lower SG&A expenses, resulted in contraction of Adjusted EBITDA and Adjusted Operating Income margins.
Net sales
|
(in millions)
|
Year ended December 31,
|
Reconciliation of net sales growth (decline) to organic net sales growth (decline) | |||||||||||||||||||||||||||||||||
| Net sales growth (decline) | Foreign currency impact |
Divestiture impact
|
Organic net sales growth (decline) | ||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Laboratory Solutions | $ | 4,399.7 | $ | 4,610.1 | $ | (210.4) | $ | 86.0 | $ | (147.9) | $ | (148.5) | |||||||||||||||||||||||
| Bioscience Production | 2,152.5 | 2,173.5 | (21.0) | 18.7 | - | (39.7) | |||||||||||||||||||||||||||||
| Total | $ | 6,552.2 | $ | 6,783.6 | $ | (231.4) | $ | 104.7 | $ | (147.9) | $ | (188.2) | |||||||||||||||||||||||
Net sales decreased $231.4 million or 3.4%, which included $104.7 million or 1.6% of favorable foreign currency translation impact and $147.9 million or 2.2% of impact related to our Clinical Services divestiture. Organic net sales decreased by $188.2 million or 2.8% which is discussed below.
In the Laboratory Solutions segment, net sales decreased $210.4 million or 4.6% which included $86.0 million or 1.8% of favorable foreign currency translation impact and $147.9 million or 3.2% of impact related to our Clinical Services divestiture. Organic net sales decreased by $148.5 million or 3.2%. The sales decline was primarily driven by decreased demand for consumables and equipment and instrumentation from our Total Science Solutions business due to the uncertainty around funding and increased competitive intensity.
In the Bioscience Production segment, net sales decreased $21.0 million or 1.0%, which included $18.7 million or 0.8% of favorable foreign currency translation impact. Organic net sales decreased $39.7 million or 1.8%. The sales decrease was primarily driven by lower demand for third party clean room consumables due to reduced usage and decreased volume in our proprietary clinical and industrial chemicals offerings. These decreases were partially offset by increased volume of our formulated offerings to customers in the semiconductor industry.
Gross margin
|
Year ended December 31,
|
Change | ||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| Gross margin | 32.7 | % | 33.6 | % | (90) bps | ||||||||||||
Gross margin decreased 90 basis points primarily due to inflationary pressures, higher freight costs, unfavorable manufacturing variances, unfavorable product mix and the divestiture of our Clinical Services business, partially offset by lower inventory reserves.
Operating (loss) income
| (in millions) |
Year ended December 31,
|
Change | |||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| Gross profit | $ | 2,139.4 | $ | 2,279.3 | $ | (139.9) | |||||||||||
| Operating expenses (excluding impairment charges & gain on sale of business) | 1,595.5 | 1,641.1 | (45.6) | ||||||||||||||
| Impairment charges | 785.0 | - | 785.0 | ||||||||||||||
| Gain on sale of business | 5.1 | (446.6) | 451.7 | ||||||||||||||
|
Operating (loss) income
|
$ | (246.2) | $ | 1,084.8 | $ | (1,331.0) | |||||||||||
Operating (loss) income decreased primarily due to a non-cash impairment charge recorded in our Distribution reporting unit, the absence of the gain on sale of our Clinical Services business recognized in the prior year, and lower gross profit, as previously discussed. These impacts were partially offset by a reduction in SG&A expenses. The decrease in SG&A expenses resulted from lower restructuring and severance charges, reduced annual incentive compensation expense, savings from our cost transformation initiative and the divestiture of our Clinical Services business, partially offset by inflationary pressures.
Net (loss) income
| (in millions) |
Year ended December 31,
|
Change | |||||||||||||||
| 2025 | 2024 | ||||||||||||||||
|
Operating (loss) income
|
$ | (246.2) | $ | 1,084.8 | $ | (1,331.0) | |||||||||||
| Interest expense, net | (169.8) | (218.8) | 49.0 | ||||||||||||||
| Loss on extinguishment of debt | (4.6) | (10.9) | 6.3 | ||||||||||||||
|
Other (expense) income, net
|
(20.7) | (1.2) | (19.5) | ||||||||||||||
|
Income tax expense
|
(88.9) | (142.4) | 53.5 | ||||||||||||||
|
Net (loss) income
|
$ | (530.2) | $ | 711.5 | $ | (1,241.7) | |||||||||||
Net (loss) income decreased primarily due to lower operating income, as previously discussed, and pension termination charges, partially offset by lower interest expense resulting from debt repayments made over the last twelve months and lower income tax expense driven by reduced income before income taxes.
Adjusted EBITDA and Adjusted EBITDA margin
For reconciliations of Adjusted EBITDA and Adjusted EBITDA margin to net (loss) income and net (loss) income margin, respectively, the most directly comparable measures under GAAP, see "Reconciliations of non-GAAP financial measures."
| (dollars in millions) |
Year ended December 31,
|
Change | |||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| Adjusted EBITDA | $ | 1,069.4 | $ | 1,198.8 | $ | (129.4) | |||||||||||
| Adjusted EBITDA margin | 16.3 | % | 17.7 | % | (140) bps | ||||||||||||
Adjusted EBITDA decreased $129.4 million or 10.8%, which included a favorable foreign currency translation impact of $16.4 million or 1.3%. The remaining decline of $145.8 million or 12.1% was primarily driven by the divestiture of our Clinical Services business and lower gross profit, as previously discussed, partially offset by savings from our cost transformation initiative and lower annual incentive compensation expense.
Adjusted Operating Income and Adjusted Operating Income margin
For reconciliations of Adjusted Operating Income and Adjusted Operating Income margin to net (loss) income and net (loss) income margin, respectively, the most directly comparable measures under GAAP, see "Reconciliations of non-GAAP financial measures."
| (dollars in millions) |
Year ended December 31,
|
Change | |||||||||||||||
| 2025 | 2024 | ||||||||||||||||
|
Adjusted Operating Income:
|
|||||||||||||||||
| Laboratory Solutions | $ | 510.4 | $ | 598.0 | $ | (87.6) | |||||||||||
| Bioscience Production | 517.8 | 558.2 | (40.4) | ||||||||||||||
| Corporate | (70.4) | (66.4) | (4.0) | ||||||||||||||
| Total | $ | 957.8 | $ | 1,089.8 | $ | (132.0) | |||||||||||
| Adjusted Operating Income margin | 14.6 | % | 16.1 | % | (150) bps | ||||||||||||
Adjusted Operating Income decreased $132.0 million or 12.1%, which included a favorable foreign currency translation impact of $13.5 million or 1.2%. The remaining decline of $145.5 million or 13.3% is discussed below.
In the Laboratory Solutions segment, Adjusted Operating Income declined $87.6 million or 14.6%, or 16.2% when adjusted for favorable foreign currency translation impact. The decrease was primarily driven by the divestiture of our Clinical Services business, lower sales volume and inflationary pressures, partially offset by savings from our cost transformation initiative and lower annual incentive compensation expense.
In the Bioscience Production segment, Adjusted Operating Income declined $40.4 million or 7.2% or 8.0% when adjusted for favorable foreign currency translation impact. The decrease was primarily driven by lower sales volume, unfavorable manufacturing variances and higher freight costs, partially offset by commercial excellence, savings from our cost transformation initiative and lower annual incentive compensation expense.
In Corporate, Adjusted Operating Income decreased $4.0 million due to various immaterial factors.
Year ended December 31, 2023
A discussion and analysis covering the year ended December 31, 2023 is included in Item 7 of our 2024 10-K.
Reconciliations of non-GAAP measures
The following table presents the reconciliation of net (loss) income and net (loss) income margin to Adjusted EBITDA and Adjusted EBITDA margin, respectively:
| (dollars in millions, % based on net sales) | Year ended December 31, | ||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| $ | % | $ | % | ||||||||||||||||||||
|
Net (loss) income
|
$ | (530.2) | (8.1) | % | $ | 711.5 | 10.5 | % | |||||||||||||||
| Interest expense, net | 169.8 | 2.5 | % | 218.8 | 3.2 | % | |||||||||||||||||
|
Income tax expense
|
88.9 | 1.3 | % | 142.4 | 2.1 | % | |||||||||||||||||
| Depreciation and amortization | 410.2 | 6.3 | % | 405.5 | 6.0 | % | |||||||||||||||||
| Loss on extinguishment of debt | 4.6 | 0.1 | % | 10.9 | 0.2 | % | |||||||||||||||||
|
Restructuring and severance charges1
|
29.8 | 0.5 | % | 82.8 | 1.2 | % | |||||||||||||||||
|
Transformation expenses2
|
61.7 | 1.0 | % | 58.9 | 0.9 | % | |||||||||||||||||
|
Reserve for certain legal matters, net3
|
7.3 | 0.1 | % | 9.2 | 0.2 | % | |||||||||||||||||
|
Other4
|
20.9 | 0.3 | % | (3.9) | (0.2) | % | |||||||||||||||||
|
Impairment charges5
|
785.0 | 12.0 | % | - | - | % | |||||||||||||||||
|
Gain on sale of business6
|
5.1 | 0.1 | % | (446.6) | (6.6) | % | |||||||||||||||||
|
Pension termination charges7
|
16.3 | 0.2 | % | 9.3 | 0.2 | % | |||||||||||||||||
| Adjusted EBITDA | $ | 1,069.4 | 16.3 | % | $ | 1,198.8 | 17.7 | % | |||||||||||||||
1.Reflects the incremental expenses incurred in the period related to restructuring initiatives to increase profitability and productivity. Costs included in this caption are specific to employee severance, site-related exit costs, and contract termination costs. These expenses recognized in 2024 & 2025 represent costs incurred to achieve the Company's publicly-announced cost transformation initiative.
2.Represents incremental expenses directly associated with the Company's publicly-announced cost transformation initiative, primarily related to the cost of external advisors.
3.Represents charges and legal costs, net of recoveries, in connection with certain litigation and other contingencies that are unrelated to our core operations and not reflective of on-going business and operating results.
4.Represents net foreign currency (gain) loss from financing activities, other stock-based compensation expense (benefit), $6.7 million of severance and transition costs associated with the replacement of our Chief Executive Officer in 2025, and other costs.
5.As described in notes 10 and 11 to our consolidated financial statements beginning on F-1 of this report.
6.The amount reported in 2024 reflects the gain on the sale of our Clinical Services business. The amount reported in 2025 reflects post-closing purchase price adjustments related to that sale. The sale of the Clinical Services business is further described in note 4 to our consolidated financial statements beginning on page F-1 of this report.
7.As described in note 17 to our consolidated financial statements beginning on F-1 of this report.
The following table presents the reconciliation of net (loss) income and net (loss) income margin to Adjusted Operating Income and Adjusted Operating Income margin, respectively:
| (dollars in millions, % based on net sales) | Year ended December 31, | ||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| $ | % | $ | % | ||||||||||||||||||||
|
Net (loss) income
|
$ | (530.2) | (8.1) | % | $ | 711.5 | 10.5 | % | |||||||||||||||
| Interest expense, net | 169.8 | 2.5 | % | 218.8 | 3.2 | % | |||||||||||||||||
|
Income tax expense
|
88.9 | 1.3 | % | 142.4 | 2.1 | % | |||||||||||||||||
| Loss on extinguishment of debt | 4.6 | 0.1 | % | 10.9 | 0.2 | % | |||||||||||||||||
|
Other (expense) income, net
|
20.7 | 0.4 | % | 1.2 | - | % | |||||||||||||||||
|
Operating (loss) income
|
(246.2) | (3.8) | % | 1,084.8 | 16.0 | % | |||||||||||||||||
| Amortization | 301.1 | 4.6 | % | 299.8 | 4.4 | % | |||||||||||||||||
|
Restructuring and severance charges1
|
29.8 | 0.5 | % | 82.8 | 1.2 | % | |||||||||||||||||
|
Transformation expenses2
|
61.7 | 1.0 | % | 58.9 | 0.9 | % | |||||||||||||||||
|
Reserve for certain legal matters, net3
|
7.3 | 0.1 | % | 9.2 | 0.2 | % | |||||||||||||||||
|
Other4
|
14.0 | 0.1 | % | 0.9 | - | % | |||||||||||||||||
|
Impairment charges5
|
785.0 | 12.0 | % | - | - | % | |||||||||||||||||
|
Gain on sale of business6
|
5.1 | 0.1 | % | (446.6) | (6.6) | % | |||||||||||||||||
| Adjusted Operating Income | $ | 957.8 | 14.6 | % | $ | 1,089.8 | 16.1 | % | |||||||||||||||
1.Reflects the incremental expenses incurred in the period related to restructuring initiatives to increase profitability and productivity. Costs included in this caption are specific to employee severance, site-related exit costs, and contract termination costs. These expenses recognized in 2024 & 2025 represent costs incurred to achieve the Company's publicly-announced cost transformation initiative.
2.Represents incremental expenses directly associated with the Company's publicly-announced cost transformation initiative, primarily related to the cost of external advisors.
3.Represents charges and legal costs, net of recoveries, in connection with certain litigation and other contingencies that are unrelated to our core operations and not reflective of on-going business and operating results.
4.Represents other stock-based compensation expense (benefit), $6.7 million of severance and transition costs associated with the replacement of our Chief Executive Officer in 2025, and other costs.
5.As described in notes 10 and 11 to our consolidated financial statements beginning on F-1 of this report.
6.The amount reported in 2024 reflects the gain on the sale of our Clinical Services business. The amount reported in 2025 reflects post-closing purchase price adjustments related to that sale. The sale of the Clinical Services business is further described in note 4 to our consolidated financial statements beginning on page F-1 of this report.
Liquidity and capital resources
We fund short-term cash requirements primarily from operating cash flows and credit facilities. The majority of our long-term financing is from indebtedness.
Our most significant contractual obligations are scheduled principal and interest payments for indebtedness. We also have obligations to make payments under operating leases, to purchase certain products and services and to fund defined benefit plan obligations, primarily outside of the United States.
In addition to contractual obligations, we use cash to fund capital expenditures and taxes. Changes in working capital may be a source or a use of cash depending on our operations during the period.
We expect to fund our short-term and long-term capital needs with cash generated by operations and availability under our credit facilities. Although we believe that these sources will provide sufficient liquidity for us to meet our long-term capital needs, our ability to fund these needs will depend to a significant extent on our future financial performance, which will be subject in part to general economic, competitive, financial, regulatory and other factors that are beyond our control.
We believe that cash generated by operations, together with available liquidity under our credit facilities, will be adequate to meet our current and expected needs for cash prior to the maturity of our debt, although no assurance can be given in this regard.
In October 2025, our Board of Directors authorized the repurchase of up to $500.0 million of our common stock. Repurchases may be funded through available cash, borrowings under existing credit facilities, or other financing arrangements. The program may be modified, suspended, or terminated at any time.
In November 2025, we repurchased $75.0 million of our common stock. As of December 31, 2025, $425.0 million remained available for repurchase under the program. Refer to Note 15 to the Consolidated Financial Statements included in this Annual Report for additional discussion of our common stock repurchase program.
Liquidity
The following table presents our primary sources of liquidity:
| (in millions) | |||||
| December 31, 2025 | |||||
| Unused availability under our revolving credit facility: | |||||
| Capacity | $ | 1,400.0 | |||
| Undrawn letters of credit outstanding | (19.5) | ||||
| Unused availability | $ | 1,380.5 | |||
| Cash and cash equivalents | 365.4 | ||||
| Total liquidity | $ | 1,745.9 | |||
At December 31, 2025, $243.1 million or 67% of our cash and cash equivalents was held by our non-U.S. subsidiaries and may be subject to certain taxes upon repatriation, primarily where foreign withholding taxes apply. We ordinarily generate significant cash flows in the U.S. and deploy U.S. cash flows promptly toward debt principal repayment. Our U.S. operations also benefit from substantial liquidity available under our credit facilities, which support our day-to-day operating cash needs.
Historical cash flows
The following table presents a summary of cash provided by (used in) various activities:
|
(in millions)
|
Year ended December 31, | Change | |||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| Operating activities: | |||||||||||||||||
|
Net (loss) income
|
$ | (530.2) | $ | 711.5 | $ | (1,241.7) | |||||||||||
|
Non-cash items1
|
1,354.2 | 81.9 | 1,272.3 | ||||||||||||||
|
Working capital changes2
|
(53.0) | 89.9 | (142.9) | ||||||||||||||
| All other | (147.2) | (42.5) | (104.7) | ||||||||||||||
| Total | $ | 623.8 | $ | 840.8 | $ | (217.0) | |||||||||||
| Investing activities: | |||||||||||||||||
| Capital expenditures | $ | (128.8) | $ | (148.8) | $ | 20.0 | |||||||||||
| Cash proceeds from sale of disposal group, net | - | 585.2 | (585.2) | ||||||||||||||
| Other | (1.7) | 2.5 | (4.2) | ||||||||||||||
| Total | $ | (130.5) | $ | 438.9 | $ | (569.4) | |||||||||||
| Financing activities | (409.4) | (1,281.2) | 871.8 | ||||||||||||||
1.Consists of non-cash charges including depreciation and amortization, impairment charges, stock-based compensation expense, deferred income tax expense, non-cash restructuring charges, pension termination charges, gain on sale of business and others.
2.Includes changes to our accounts receivable, inventory, contract assets and accounts payable.
Cash flows from operating activities provided $217.0 million less cash in 2025. The change was primarily due to higher net working capital requirements, increased customer rebate payments and higher incentive compensation payments made in 2025 related to fiscal year 2024.
Investing activities provided $569.4 million less cash in 2025, primarily due to the absence of proceeds from the sale of our Clinical Services business, which were received in the prior year.
Financing activities provided $871.8 million more cash in 2025, primarily due to lower net debt repayments during the year, partially offset by payments for the repurchase of common stock in 2025 and a decrease in proceeds from stock option exercises compared to the prior year.
Free cash flow
| (in millions) | Year ended December 31, | Change | |||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| Net cash provided by operating activities | $ | 623.8 | $ | 840.8 | $ | (217.0) | |||||||||||
| Capital expenditures | (128.8) | (148.8) | 20.0 | ||||||||||||||
|
Divestiture-related transaction expenses and taxes paid
|
1.4 | 76.3 | (74.9) | ||||||||||||||
| Free cash flow | $ | 496.4 | $ | 768.3 | $ | (271.9) | |||||||||||
Free cash flow was $271.9 million lower in 2025 driven by changes in cash flows from operating activities noted above, partially offset by a decrease in capital expenditures.
A discussion and analysis of historical cash flows covering the year ended December 31, 2023 is included in Item 7 of the 2024 Form 10-K.
Indebtedness
A significant portion of our long-term financing is from indebtedness. The purpose of this section is to disclose how certain features of our indebtedness influence our liquidity and capital resources. Additional detail about the terms of our indebtedness may be found in note 14 to our consolidated financial statements beginning on page F-1 of this report.
Our credit facilities provide us access to up to $1,400.0 million of borrowing capacity.
We have entered into a revolving credit facility that provide us access to cash to fund short-term business needs. See the section entitled "Liquidity" for additional information.
Our indebtedness restricts us from paying dividends to common stockholders.
Certain of the debt agreements entered into by our wholly-owned subsidiary, Avantor Funding, Inc., prevent it from paying dividends or making other payments to Avantor, Inc., subject to limited exceptions. At December 31, 2025 and 2024, substantially all of Avantor, Inc.'s net assets were subject to those restrictions.
Our senior secured credit facilities require or may require us to make certain principal repayments prior to maturity
We are required to make quarterly payments on our senior secured credit facilities, with the balance due on the maturity date. We have generated sufficient cash flows to make all required historical payments, and we expect that our cash flows will continue to be sufficient to make future payments.
To the extent our net leverage ratios, as defined in our credit agreement, reach certain levels, we are required to make additional prepayments if: (i) we generate excess cash flows, as defined in our credit agreement, at specified percentages that decline if certain net leverage ratios are achieved; or (ii) we receive cash proceeds from certain types of asset sales or debt issuances. We are required to make a prepayment of 50% of our excess cash flows if our first lien net leverage ratio, as defined in our credit agreement, exceeds 4.50:1.00, a prepayment of 25% of our excess cash flows if our first lien net leverage ratio is less than or equal to 4.50:1.00 but greater than 3.75:1.00, and no prepayment if our first lien net
leverage ratio is less than or equal to 3.75:1.00. As our first lien net leverage ratio was below 3.75:1.00 at December 31, 2025, no additional prepayments were required and no such prepayments have become due since the inception of the credit facilities.
We are subject to certain financial covenants that, if not met, could put us in default of our debt agreements
The revolving credit facility and our senior secured credit facilities contain certain customary covenants, including financial covenants. We may not have total borrowings and total interest expense in excess of a pro forma net leverage ratio and pro forma consolidated interest coverage ratio, as defined, respectively. At December 31, 2025, our net leverage and consolidated interest coverage ratio has been within the covenant requirement.
Contractual obligations
The following table presents our contractual obligations at December 31, 2025:
|
(in millions)
|
Payments due by period | ||||||||||||||||
| Total | Short-Term | Long-Term | |||||||||||||||
| Debt: | |||||||||||||||||
|
Principal(1)(2)
|
$ | 3,967.9 | $ | 30.8 | $ | 3,937.1 | |||||||||||
|
Interest(1)
|
602.9 | 166.7 | 436.2 | ||||||||||||||
| Operating leases | 245.7 | 43.0 | 202.7 | ||||||||||||||
|
Purchase obligations(3)
|
223.4 | 113.0 | 110.4 | ||||||||||||||
| Other liabilities: | |||||||||||||||||
|
Underfunded defined benefit plans(4)
|
94.2 | 6.7 | 87.5 | ||||||||||||||
| Other | 4.7 | 1.2 | 3.5 | ||||||||||||||
| Total | $ | 5,138.8 | $ | 361.4 | $ | 4,777.4 | |||||||||||
(1)Includes finance lease liabilities. To calculate payments for principal and interest, we assumed that variable interest rates, foreign currency exchange rates and outstanding borrowings under credit facilities were unchanged from December 31, 2025 through maturity. For the variable interest rates and principal amounts used, see note 14 to our consolidated financial statements beginning on page F-1 of this report.
(2)Our senior secured credit facilities would require us to accelerate our principal repayments should we generate excess cash flows, as defined, in future periods.
(3)Purchase obligations for certain products and services are made in the normal course of business to meet operating needs.
(4)Represents our obligation to fund defined benefit plans with obligations in excess of plan assets. The total obligation is equal to the aggregate excess of the discounted benefit obligation over the fair value of plan assets for all underfunded plans. The payments due in less than one year are estimated using actuarial methods. The payments due for all other years are estimated by distributing the remaining funding status to future periods in the same way as benefit payments are expected to be made by the plans following actuarial methods.
Critical accounting policies and estimates
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported throughout the financial statements. Those estimates and
assumptions are based on our best estimates and judgment. We evaluate our estimates and assumptions on an ongoing basis using historical experience and known facts and circumstances. We adjust our estimates and assumptions when we believe the facts and circumstances warrant an adjustment. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates.
We consider the policies and estimates discussed below to be critical to an understanding of our financial statements because their application places the most significant demands on our judgment. Specific risks for these critical accounting policies are described in the following sections. For all of these policies, we caution that future events rarely develop exactly as forecasted, and such estimates naturally require adjustment.
Our discussion of critical accounting policies and estimates is intended to supplement, not duplicate, our summary of significant accounting policies so that readers will have greater insight into the uncertainties involved in these areas. For a summary of all of our significant accounting policies, see note 2 to our consolidated financial statements beginning on page F-1 of this report.
Testing goodwill and other intangible assets for impairment
We carry significant amounts of goodwill and other intangible assets on our consolidated balance sheet. At December 31, 2025, the combined carrying value of goodwill and other intangible assets, net of accumulated amortization and impairment charges, was $8,180.7 million or 69% of our total assets.
Required annual assessment
On October 1 of each year, we perform annual impairment testing of our goodwill and indefinite-lived intangible assets, or more frequently if an event or change in circumstance occurs that would require reassessment of the recoverability of those assets. The impairment analysis for goodwill and indefinite-lived intangible assets consists of an optional qualitative test potentially followed by a quantitative analysis. These measurements rely upon significant judgment from management described as follows:
•The qualitative analysis for goodwill and indefinite-lived intangible assets requires us to identify potential factors that may result in an impairment and estimate whether they would warrant performance of a quantitative test;
•The quantitative impairment test requires us to estimate the fair value of our reporting units and indefinite-lived intangible assets. We estimate the fair value of each reporting unit using a weighted average of two valuation methods based on a discounted cash flows method and a guideline public company method. These valuation methods require management to make various assumptions, including, but not limited to, future profitability, cash flows, including revenues, gross margin, SG&A expenses, capital expenditures, and investments in debt free net working capital, current market assumptions for the discount rates, weighting of valuation methods and the selection of comparable publicly traded companies. Variations in any of these assumptions could result in materially different calculations of fair value.
Our estimates are based on historical trends, management's knowledge and experience and overall economic factors, including projections of future earnings potential. Developing future cash flows in applying the income approach requires us to evaluate our intermediate to longer-term strategies, including, but not limited to, estimates about net sales growth, operating margins, capital requirements, inflation and working capital management. The development of appropriate rates to discount the
estimated future cash flows requires the selection of risk premiums, which can materially impact the present value of future cash flows. Selection of an appropriate peer group under the market approach involves judgment, and an alternative selection of guideline companies could yield materially different market multiples. Weighing the different value indications involves judgment about their relative usefulness and comparability to the reporting unit.
As a result of sustained decreases in our publicly quoted share price and market capitalization as well as changes in the operating results of our Distribution reporting unit, we conducted an interim test of our goodwill as of September 30, 2025.
Based on the results of the impairment test, the carrying amount of our Distribution reporting unit exceeded its fair value, resulting in a non-deductible, non-cash goodwill impairment charge of $785.0 million, which was recorded in the consolidated statement of operations for the three months ended September 30, 2025. We did not identify impairment of any other long-lived assets in this reporting unit. The remaining reporting units tested were not impaired, as their estimated fair values exceeded their respective carrying amounts as of the interim testing date.
Following the impairment charge, the carrying value of the Distribution reporting unit is equal to its estimated fair value. Recognition of additional impairment charges may be required in future periods if market conditions, projected results, or other valuation assumptions deteriorate further.
Since October 1, 2025 is our designated annual impairment testing date, management performed the required procedures to reassess impairment as of that date, including a review of key assumptions, market indicators, and other relevant factors. No conditions were identified that differed materially from those considered in the September 30, 2025 interim analysis. Accordingly, the conclusions reached in that interim test remained appropriate, and no additional impairment was recorded as of October 1, 2025.
Estimating valuation allowances on deferred tax assets
We are required to estimate the degree to which tax assets and loss carryforwards will result in a future income tax benefit, based on our expectations of future profitability by tax jurisdiction. We provide a valuation allowance for deferred tax assets that we believe will more likely than not go unutilized. If it becomes more likely than not that a deferred tax asset will be realized, we reverse the related valuation allowance and recognize an income tax benefit for the amount of the reversal. At December 31, 2025, our valuation allowance on deferred tax assets was $190.1 million, $132.1 million of which relates to foreign net operating loss carry forwards that are not expected to be realized.
We must make assumptions and judgments to estimate the amount of valuation allowance to be recorded against our deferred tax assets, which take into account current tax laws and estimates of the amount of future taxable income, if any. Changes to any of the assumptions or judgments could cause our actual income tax obligations to differ from our estimates.
Accounting for uncertain tax positions
In the ordinary course of business, there is inherent uncertainty in quantifying our income tax positions. We assess income tax positions for all years subject to examination based upon our evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, we have recorded an amount having greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority assumed to have full knowledge of all relevant information. For those income tax positions where it is not more likely than not
that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. Our reserve for uncertain tax positions was $106.9 million at December 31, 2025, exclusive of penalties and interest. Where applicable, associated interest expense has also been recognized as a component of interest expense.
We operate in numerous countries under many legal forms and, as a result, we are subject to the jurisdiction of numerous domestic and non-U.S. tax authorities, as well as to tax agreements and treaties among these governments. Our tax positions may be scrutinized by local tax authorities upon examination. Determination of taxable income in any jurisdiction requires the interpretation of the related tax laws and regulations, including transfer pricing guidelines, and the use of estimates and assumptions regarding significant future events, such as the amount, timing and character of deductions and the sources and character of income and tax credits. Changes in tax laws, regulations, agreements and treaties, currency exchange restrictions or our level of operations or profitability in each taxing jurisdiction could have an impact upon the amount of current and deferred tax balances and hence our net income.
We file tax returns in each tax jurisdiction that requires us to do so. Should tax return positions not be sustained upon audit, we could be required to record an income tax provision. Should previously unrecognized tax benefits ultimately be sustained, we could be required to record an income tax benefit.
Calculating expense for long-term compensation arrangements
Our employees receive various long-term compensation awards, including stock options, RSUs, performance stock units and cash-based awards. We calculate expense for some of those awards using fair value estimates based on unobservable inputs. Additionally, some of those awards contain performance or market conditions. We assess the probability of achieving those performance conditions, and in cases where partial or exceptional performance affects the size of the award, we also estimate the projected achievement level. We determine the fair value of awards with market conditions on their grant date using a Monte Carlo model, which incorporates the probability of achieving the market condition in the awards' fair value. We recognize the expense for such awards ratably over their vesting term.
Expense for stock options without performance or market conditions is determined on the grant date and recognized ratably over their vesting term. We estimate the grant date fair value of stock options using the Black-Scholes model. This model requires us to make various assumptions, with the most significant assumption currently being the volatility of our stock price. Through the year ended December 31, 2024, due to limited trading history, we estimated volatility using a peer group approach. Beginning in 2025, after sufficient trading history became available, we adopted a blended volatility methodology that combines Avantor's historical volatility with that of a peer group to provide a more stable and representative input. This approach is consistent with ASC 718 and SEC guidance for companies with evolving trading history. The fair value of our awards would have differed had we selected different peer companies or used a different technique to estimate volatility. Increasing our expected volatility assumption by 5 percentage points for all stock options at the date of grant would have increased our 2025 stock-based compensation expense by $0.9 million.
Estimating the net realizable value of inventories
We value our inventories at the lower of cost or net realizable value. We regularly review quantities of inventories on hand and compare these amounts to the expected use of each product or product line, which can require us to make significant judgments. If our judgments prove to be incorrect, we may be
required to record a charge to cost of sales to reduce the carrying amount of inventory on hand to net realizable value. As with any significant estimate, we cannot be certain of future events which may cause us to change our judgments.
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