AVNS - Earnings call transcript Q1 2019

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Operator

Good morning, and welcome to the Avanos First Quarter Conference Call -- First Quarter Earnings Conference Call. [Operator Instructions]. Please note, today's event is being recorded. I would now like to turn the conference over to Dave Crawford, Vice President of Investor Relations. Please go ahead, sir.

David Crawford

thanks us. and everyone, morning, for joining Good It's first quarter to welcome the Avanos you to earnings my pleasure conference call. With and Joe Senior me Woody, CEO; and are this Steve Vice CFO. President morning Voskuil, brief Joe will an for priorities. business our of XXXX performance progress our and outlook toward review and begin provide our a with for results, review Then on financial Steve our will performance XXXX. our details offer and earnings outlook Q&A. call finish with the We'll the A Investors available section today's website, our for presentation on avanos.com. call of is

to today assurance from comments Actual our contain as our the reminder, related and No company, differ those performance, statements industry. to a statement. can conditions economic materially As forward-looking results could results. expected forwarding given in future our financial be

please with information our statements For about see SEC. factors the and press forward-looking that release prior risk and future filings more the today's results, could influence

Additionally, measures. adjusted we'll The comparable has information and reconciliations these press GAAP release outlook. to be adjustments and to on financial results referring

to I'll over Now the turn call Joe.

Joseph Woody

your thank Thanks, Dave. Good of and morning, you interest Avanos. everyone, in

me outlined start executing priorities saying XXXX quarter, first quarter the against strong the we had in a our call. we start fourth conference Let on that by

This quarter, financial in we IT diluted our initiatives, line the we in invest adjusted our and our successful to as transformation in of results we advanced the go-live sales EMEA, our with capital growth very and per with investment to continued earned of plan, system with delivered ERP our we $X.XX start year deployed pleased grew strategically in share. NeoMed. with I'm we X%, earnings

expect sales throughout to our XXXX guidance Looking key the ahead, assumptions accelerate and maintaining earnings we and planning and year. are

strengthen our demand and as year Pain, enteral cycled to growth team Respiratory continued track delivered Health the double-digit Digestive for years. For growth Digestive accelerated growth this business year, products. a driven also we Health international comparison. our and regions, weaker the we're we move and delivered feeding International This Health by quarter we solid across strong as to in quarter, COOLIEF on in in a prior in growth Interventional over against few continue our deliver to CORPAK next to double-digit

expected, in shortage; last impacted second, our Two the pressure disruption. performance: had continuing business. and pump factors our As drug pre-filler year's first, headwinds to continued Acute industry-wide pain we see Pain from

this As call, planned first we flat the are year slow Ropivacaine of about during year. half as ropivacaine, supply space. with availability and bupivacaine innovating backdrop, half second we in on pumps, outlined growth of this we our the last the and is XX% in of in used along we our earnings to the monitoring term for in accelerating half. the pain of market growth long with the improve With a expect back to

to note, bupivacaine, market, pre-filling XXXX. positive supply a continue return expect the Leiters On the to of to customers which balance a move pump option. to We represents in as

business initiatives. and through short-term Leiters rose year. business. to CareFusion. we Sales headwinds as positions I'd Johnson for on Michael to held formal our Johnson Director next Manager of the Prior to strategies. are need & industry for accelerating of growth Acute overall leadership pre-filler our and sales excited growing U.S. expected deep exceeds leader General results. help we're effective at Acute with to the and track challenges, of aside, was sales Michael our experience Michael markets, the medical for COOLIEF return advertising record medical digit over to President sales a will visits We're most in our physicians' and prior early successful our recently already turn he believe Vice to time. investment for XX large the the opportunity for entire mid-single growth we excited volume business In device and is device pain as progress Pain While expanded down served direct-to-patient we developing solid website, a Care. and quarter half Interventional point Despite drive therapies. executing continue the our by of To marketing the accounts Acevedo compared year. Chronic that, mycoolief.com, to we traffic These and to these XX% like in our and at performance, about sequentially, company, Pain, non-opioid expanded meet our the this halfway to the Pain appointed recently through

the encouraging an half appointment, is demonstrates treatment, COOLIEF year. as from strong direct-to-patient increased therapies. sought physician. we of second in diagnosis are research differentiating getting alternative out importantly, investment payers COOLIEF the a of in Besides the value evidence that a the will those process clinical our our advertising, continuing almost expected clinical thus build and to both patients through and to half patients and sales a contributing More while expect This move acceleration we visits, of making compendium to for of receiving

published osteoarthritis During in that a improved function anticipate the and We results significant hyaluronic study we pain this knee the fourth X the achieved months quarter. acid reductions shows announced injection. statistically after that study will of in quarter, treatment, compared COOLIEF be to

retrospective we've large study quarter. quarter. X for And publication. for one from knee was been the that been for osteoarthritis one our seeing prospective comparison We X-year this anticipate that published accepted later addition, during knee In series, large hip, informed and the have literature steroid data

full third our our cost I'd the the On transformation. to fourth an the of now we turn in comparison quarter. in steroid efficiency systems. the enhanced Our on X, in our as a other in implemented, update remainder evidence processes pipeline the as reduction May deployed of year. anticipated first our of IT study the business to with anticipate study like and and second the our Once to and we'll cost-effectiveness is system in see year, XX-month the in knee late costs for phase quarter new complete rollout regions the EMEA half IT a well region anticipated

We step business separation distributor in key agreement with This limited we the final year. expect was S&IP also ended our a this later for & Minor the our regions. risk Owens international of

we Finally, this quarter, deployed strategically capital.

As area important call is lens, through a us, potential that and an increase we opportunities of addressable points help know, evaluate wide for leverage growth exploring M&A expand targets and actively markets. you technologies, us our our

in making safety neonatal multiple been enhancing considered through is The errors different been force developing NeoMed $X marketing approximately initial intensive years connection hospital NeoMed to medication devices. made neonatal customers million model end, to NeoMed safety launch in ENFit, Since the NeoMed eliminates We We dangerous to summary, of XX, our that has pharmacy explore generated and Inc., has growth XX result to patient products million using To quality line of care business. the and core to remaining and and almost leader solid XX a have dosing deliver leader creation convert similar value helping calls the Established we're exclusive progress a direct a in option Health specialized XXXX $XX departments. our revenue and weight, that nutrition. NeoMed pediatric neonatal and that low pediatric for next minority April can which enteral flexibility investment ENFit system, exercise and we a also of in our XXXX, we market top patients. growth specific deal enteral maximize months. XX% shareholder acquire feeding structures as ago, on acquisitions. and sales priorities. profiles on units hope the In in XXXX neonatal-focused against vision NeoMed's during this through a Digestive from as margin birth of

the we With quarter well positioned are us, achieve our behind to goals.

for leadership over to over the thank call I him the turn his years. past Steve, I Before want to X

Officer, our medical became independent been Avanos he strategic instrumental endeavors. in Financial company device Chief best all numerous his driving when pure-play launching investments. the transformation We As and Steve executing into future has company, wish an in we a

Steven Voskuil

good Joe, Thanks, everyone. and morning,

say encouraging. initial from and that with our that investments I'm execution Let quarter pleased me are first the results our also

all Avanos completed milestones the phase as EMEA went crucial X. in region deliverables, we our as our May Additionally, on I new first the to met of step work including ERP To implementing we want implementing in first have live key acknowledge rollout team's the our we system. date, and across

While phase of first early, implementation the this well. appears have gone very to

to rebranding our process our live distribution the risk of limited anticipate delivering implementation. spending agreement what previously ERP advanced of to with to to in worked with & Minor, network. continued progress our months, end efforts on Besides implementation, teams and half the our recent Owens of additional the rest distributor we go the compared optimizing our we're second we communicated prepared year, on-time system $XX an million the up As now the to in

with results. sales Now an of X% let's impacted growth. sales expectations. first Unfavorable of $XXX of of begin by also in contributed review delivered sales our with rates quarter line X%. Game our we our million, Ready exchange a currency increase Overall, X%,

As planned, and these in factors organic resulted volume pricing. flat

slower driven previously, our acceleration half. Interventional in expect feeding in the then the adoption higher-than-anticipated for COOLIEF. distributor enteral growth for products. and by the saw we first of outlined and strong increased we to saw of Digestive continue another growth We As CORPAK of half Pain legacy second year In Health, quarter demand

cold normal will year. was In we of season, flu and demand the to its inventory its evidenced hospital the normal decline ahead, rate the growth expect moderate levels. distributor to mid-single-digit for due sharp Looking growth to in return anticipate the rate We revert admissions. Respiratory flu-related normal to balance Health, by below

stemming As filler third-party Joe volumes industry-wide Pain, drug disruption. Acute discussed, continuing saw and from we the lower in shortage pump

line million million the million and cost to margin to the quarter Adjusted year of expectations profit XX% ago, a prior of For discontinued favorably allocated as year adjusted from operating was totaled year. operations. last $X in gross compared results $XX impacted $XX by our XX% were compared quarter, for with

quarter the discontinued near level a of investing million Adjusted to included totaled a net with higher Adjusted dyssynergy long-term million million to ago. result compared expected drive to from last income $XX year year $XX the coupled S&IP the EBITDA growth, and operations. ago from $XX impacted million divestiture, $X for compared operating a profit. was as Our year

million For in of expectations. to position hand. ended with our Shifting the our earnings share, financial line diluted quarter, strong $XXX a sheet. per balance $X.XX the on in cash quarter with we earned adjusted We of

remains invest strong, Our sheet to and in are well initiatives. we future balance growth positioned

share. XXXX of $X.XX to $X.XX adjusted full outlook, we our our Moving per guidance of diluted maintain year earnings to

to Additionally, to In take our are priorities key questions. that, With positioned planning profile financial we we ready and operator, value. summary, remain are our well shareholder achieve to strong create and assumptions unchanged. have a

Operator

James. [Operator Raymond from Larry of Instructions]. Today's Keusch comes first question

Lawrence Keusch

how of you flattish guess can -- for revenue quarter, given So constructed organic you question, you half how first year? I the talk, are the is second accelerating? sort do about first the through of or think Steve guidance the the How growth that Joe,

Joseph Woody

make Steve have a Acute organic a I few outside remember we're thing, then way well. rate Sure, we of the as that headwinds one Larry. currently comment will But is and business. I'll through, our the think, in working that comments, to mid-single-digit growth Pain

contribute Our little for we from these will are intention as us. get real year. that, Game some the a obviously, full will growth for getting double-digit we move second addition a high in half pleased as but better that accelerate time, And along, over will to Ready, comparables We're X in to is, points the bit of -- with COOLIEF. reminder, international. in

get and we on that, investment. we studies sequentially margins well. heavy better you did may revenues the But first as things, as sales sequentially, reducing about line move that that's the we direct-to-patient to importantly, that are how planned. call well to addition that in better had, the investments, add. talked But essentially, other the the want We meeting also and year, side of clinical we on the we we we In our as into bottom Steve, expect more

Steven Voskuil

back we results COOLIEF in we DH adjustments, I build, half will some agree. and Sequential ON-Q in that thought, QX comp. the inventory on better all did direct-to-patient the -- Yes. of the things. QX. the on than strong back probably investment But a pretty of expecting Care certainly, had so expected QX side despite back come strong Chronic

the underlying fundamentals the really that's profile. So

Joseph Woody

has -- And then Pain. some for just one there I QX, thing, Pfizer I'd our that Acute announcement. was we going call don't what's had it's the Larry, do think we mind, We is to we everybody's more say think full think, for the but And earnings year. obviously, after be on impact, that,

I time think the on in customers half more well. over our to it's better second moving Leiters. focused as We're

plays So together. that all

Lawrence Keusch

Yes.

get to that. wanted into perfect. That's Okay. I

I the So may, somewhat year, guess, could you're look, in you did hearing Joe, come bit, Leiters there X May and I to their just of has visibility. got But sense guys talk access. there so that or on buy sitting that here in not with where back of in versus guess, they're really a that, some may some fact, guess, portion and the that the position I be in ropivacaine if limited there. earlier you recognize do give not today you I that mentioned along directly maybe, you improvement back? start anything API you've that in happen is the changed the drug little a the restricted But growth And

do of guys little think a where your bit where just is, that can that? And you about take ultimately kind maybe you it's So pump you volume. filler since to exclusive with talk

Joseph Woody

one, Leiters, customers to been customers of really -- drug of what customers thorough understand of lot decisions was been in move We Leiters. that, come that, we chain. ropivacaine approximately remain XXXX. Larry, be frankly, think their do XX% pretty aware did everybody of to to probably to our resilient their supply I will which Number locating problem expected. Yes. that our that from quarter, rates came is going the over on every and On to market, the had a moving that really those and that of we're that of all being X/X survey And do we've a And but high second than and flexible. out back, and top a top more continuing have we reorder seeing increases pre-fill double-digit about of in But half been into growth bupivacaine, is want that said, to in were that XXX% customers. customers

talking is matter working them of an a is over on With also sterile-to-sterile well we're that to it API. Leiters approach about. a as them longer-term So to moving said, that

solutions other working we are So there are on. as well that

so lot half of why this and we have were. second of moving we And that's in thing a to back the year confidence the where

Lawrence Keusch

for one Last Okay. me.

cash on to at about are how guys just were now want the free year. make where the flow free I flow start Just understand the thinking cash you guidance. sure versus I of we

Steven Voskuil

the lot the remarks about termination, Yes. I separation in in had say, it We separation probably cost still first on would about quarter. was similar quarter. we're we of the cost talked LRD a which thinking way. of the spending the Obviously, in Obviously, us. X/X the first that's behind

the QX take so separation in kind costs of high And a to start rough. watermark and hit

in also We litigation pretty had high costs QX.

in So you P&L, that drives growth and ramp-up if following got clinical those on of the the then sales that ramp-up the the loaded And and front-end aside, start DTP you sales half. the on cash. benefit see take capital. earnings and more off to rolls investment We've all that side back drive

-- itself, profile much more year. loaded. generation profile But back-end So in cash the the like is I the confident still think we're for P&L

Joseph Woody

litigation, and a be this separation would typical quarter quarter. the costs end cost and the Especially before not

Operator

comes of Berenberg our question today Misra next Capital from Markets. And Ravi

Ravi Misra

So for a just me. couple

around Just of have the that? NeoMed pre-fill we that. little wanted to were down a after couple which bit accounts a seems the Leiters increased just but to parse about follow-ups out the year-over-year. sales, then And How think on do commentary

Joseph Woody

I But to are Steve digits. They and to That's us. at for comments, continue have generally, about to positive a our XXX% couple high They're wants high-level can represents very over customers, growing I'll reordering that in Leiters, jump gone filler of as double of X/X grow. which well. make see customers that the rate.

to a in this very down in-house for moving pool bit the on But all and to is opportunity fill an the decided typically that of to more the us over the little customers customers with are them confident but for which and just and than us bigger over. a second the Customers And mid the in of competition for digits. we do and obviously, completely, left over feel And Steve? why there's supply, that in sort actually versus double that it's even drug HX So term long bigger comparators. more time Leiters. series lower. moving and low getting and moving process better customers that's we're reason especially over issue better But and focused we're quarter-to-quarter, to utilization that's is really have of focus keep difficult is

Steven Voskuil

want help meanwhile with it Leiters fill growth. struggling it. former as The can, I double-digit takes think many solutions. pre-defined We who on then and great, get strong pre-fill as time are hospital captured over you've doing customers the there pharmacies to to we are

Ravi Misra

then understand the strategy. just hoping And a NeoMed, little me Great. on help you Okay. can bit

just is you of to can Can rest First, -- just accounting? the option kind the exclusive And that then company. walk the through you equity have said of you kind the there buy that $XX of we valuation the as historical kind kind understand them for million it? of of And suggest taking investment? would $X a XX% of a million, growth about that like

Joseph Woody

sort Digestive been alongside a Health is. business growing where It's mid-single digit our Yes. of like

If on like synergize or one right you do sort into It a the Game not math Ready revenue, that deal of unlike will a channel. time's CORPAK. it's it,

strong So us. for to it's going be

even we affect growth the So we can an stronger in think way.

bit going more We at accelerated. to are look diligence our little a

think got We Health we option with And differently were year. for year. to space, contract to of we in plenty we into CORPAK, in investors this larger this more They in fully will did option channel. there's which this inside to sale don't of our this because participate again, what is our we where why valuation weight, to the be have one going of to neonatal of that expedite side, that a see This bit is we able have frankly, or synergy the us, you a for good put terms but low convert was today. deal, And for that to focus again, this it is to to good the and this And think a great we're not on little it us a working I broader point right of a inside portfolio. fit acquisition. Digestive birth the if available acquisition decision

Ravi Misra

this calibrate just just then just line? and you And And think on Steve, can do growth. accelerating last And the like our there. models just just Great. rest we us you How pointed expense pace one towards you help about maybe P&L. on investment? one year the of If looks kind congratulations. Can the the of EPS SG&A what help sales us

Steven Voskuil

Yes, Sure. happy be I'd to.

quarters -- also and standpoint, we I high. the was pop clinical would profile a we QX from and in sequential then as high. forward it expect So over not next go R&D quarter. is two obviously, a we'll see looking the is declines the fourth about heavy atypically see should DTP, What

R&D And little some of a higher. that tends be spending could bit The timing. year-end to be

down quarters about the in I then it think the fourth. two So up and for probably next

Joseph Woody

in last comp to the TV that just knew year. call commissions the Ravi, going and everything COOLIEF, remember, an sales, normal, expansion the benefit XX -- And global very from again in that was ads in force studies last there, in in necessary, are that that's particular, uptick obviously, sales clinical thought markets, not and, COOLIEF we in it's

savings. that, committed So now we've in million $X to $XX million of cost alongside to

works, right already and in second a that ties transformation. that's up in picks the the and IT the of bulk of into Some half

it's it sort Steve then And confidence Steve's we of as starts got a QX, to but change, why half the to knew really tough that's do. So of outlined. going we be and QX,

Operator

Stifel. comes And our of Wise Rick from today next question

Frederick Wise

in saying it. I'm with flat Acute wanted slow you're to it am And Acute in first imply your sure in quarter. lot in want I Pain had it's to Maybe assume, back and understanding noticed in correctly? it, the Acute be, let's the quarter, I down slow thinking and if growth, Steve, X, was again. should I you be Pain a slides, going to I start just the would say But Pain first it's down growth year-over-year, I rate a better to Slide to about on be it Is -- more I year-over-year know, going you plan quarter don't be specific that the flat better second to for how to about growth if make or half. to

Steven Voskuil

Yes.

You're thinking way. about it right the

a in The first down quarter single Acute as was just reference. digits Pain, so

the IV itself Now down margin, inside reference you some obviously, But well. bit look was for back quarter a you you forward as clearly. distributor-driven, was in fourth IV as strong a also so the the a have more the down quarter-over-quarter. much just and see digits, right, tends quarters, of pickup first there, quarter across not anyway. business And than the ON-Q single that you're business half, that half And is point. as to be course,

Frederick Wise

internationally And your couple et tackling here. to here. questions blocking OUS strengthening of initiatives -- a of let's versus team, around So are, comments Joe, international them, registration? the new much and couple product cetera, turning and of call How on this the questions

in You've talk growth facilitate -- some Just as growth if of we're pieces ahead, system I growth should moving where kind one, be emphasized would that this Do heading, and the what guess, the so some way? of you us expect of kind. kind expect? drivers. IT you new we does looking big through

Joseph Woody

Yes.

full tackling. a team international, now in lot blocking it this of in So a Sarker year Arjun has and Asia-Pac. is

as year. approaches or that way sort quarter. to education. and a this quarter expecting It's place May, a And then every of all move full marketing leadership we taking inclusive the not end this it registrations into XXXX, in year the into medical you'll As We're of different good EMEA. initiatives distributor -- you end and of be team whether of had hold, It's have or of in management. be

it X% sort in cost might then high forward. that's total However, you a where sort with be double major we'll just reiterating the certainly growth. you worth business. standard is the believe the we think growth CORTRAK And because being outlined care, mean, of itself what to we for Digestive again, to that, X catalyst and I COOLIEF obviously, international, business years said And about, hit we right And me, I of digit, we do X%. catalyst outside for that's on digit expect if single our single about business, of Health intend investment enhance plan M&A. million everybody with million be think $XX the from goal. really the $XX knows, it's what digit. the of be us high like full for $XX we've comes will our for to the whether then year million moved it, having the track And well ago on year And out, if international our think for more to $XXX next call that's in million strategic improves place, year, allows And people from this in moving to and of that $X a right where place significantly we as and are. the and us, I million of the the performance

Frederick Wise

drivers that of the again, factors way maybe Steve, XXXX is quarter direction, you've cadence that is higher? I the first improvement, think that And the the quarter Is way about margins -- biggest about many the talked it? but you moving margins, higher here in each are than to to And about XXs. fourth maybe think some XX.X% that sequentially good. of low appreciate throughout the right gross sequentially right in Obviously, 'XX, Sounds of quarter. 'XX, gross

Steven Voskuil

Sure. Yes.

the it back that as do of improve in movement You inside the can through the as at specific there efficiency the drive half. because will said, back to year. more as in plants. get have will will half, some some sequential line there. I Joe we savings we Clearly, wouldn't And higher get every be at expect the over volume quarter cost as help top the

quarter, the the right as have quarter, we're the that now really first up work, that in the of the ramps half don't from So savings any as second optimization in we not for distribution much but well. in in middle then back example,

back of for of improvement line the all year driving the be you guidance that in So that low still XXs. overall half, will in of said part kind the with

Operator

[Operator comes Demchick Instructions]. of Jonathan Stanley. Today's from Morgan next question

Jonathan Demchick

kind I questions, of up guess, on pain another Had, quick and one then the two management. following on P&L

P&L. So maybe the I'll start off on

So obviously, be XQ of be, guys basically heading doubling the have I end lower guess, mean, from investments, to like, sales, savings. knew would, the cost margin we given getting lot a But point the margins listed more actually the if on there some of headwinds you've outlined. the But into improvement low year, needs I limited margins that guidance, to right. levels, of as you off, lower I'm math obviously, my the XQ doing heavier

step way that operating Because do can to, studies? think kind looking the kind But up. you from is cost potentially the go were current any you clinical like some to in at Can we the quantified So of of that kind levels first of of from down of DTP million talked to kind levels. $X need quarter expenses, really $XX you've that going to of see there the away? about really million spending, of savings as some that ramp quantify the it, we're

into clarity So helpful on to broader be like the are just any visibility absolute the from the more out think, ramp. would dollars figure getting I P&L, that removed really

Steven Voskuil

us a first on QX giving going Yes. and for is DTP key investment the to year-over-year I'm are across dollars DTP those but try of on you specific same drivers. the QX. to clinical, half the significant and avoid

that us, sales again, So heavy that's the is component. investment conferences response Clinical, for first on a an not in insignificant which, the given mentioned OpEx front in our Joe earlier to end. quarter. size, hits

just But also gross see margin, the side some the margin that of And are again, year. but very as on alone, savings, if three of the those more take it some key bit system we'll quite OpEx of some the of a specifically to IT IT drivers, cost those again, to end improvement of in there. Jon. the So if going right drop it's that's around things then you rolls up,

to to drivers. want short all the but item, the I P&L of by right out So starting have break line stop you

Joseph Woody

mid-May, And advertising markets of are comments our for will would the is I add can significant a lot the folks XX have the on expense that year. fairly we be but the It's And DTP you included tightly remainder on us. imagine we this, advertising. for hear of the thing and only about I major very attention managing seeing a are that.

Jonathan Demchick

more year. pain mid-single that Game of least you'd the to when if on organically about guess, at just of And if COOLIEF, kind to, you've Ready. for that's around I recent and it's material rates variation hoping of that's of kind to a provide and little given but was growth or had into maybe you supposed last a ON-Q think COOLIEF growth the relative expect really few the the digits products, back of mainly management, just ON-Q, of maybe some you how growing talking can if drive contribution a quarter Understood. detail, or major And to amount declined acceleration this start already mean, investments talked the I the and to rates I some good have backing it your looks in out

Joseph Woody

I'm It very with double-digit which COOLIEF, continued the with. in growth Yes. happy

if One the at accessories, which things to Pain. see the QX, the and see of procedure. portion distributor in that just IV that trays that you of that's you moment of headwind readily business needles, same kits Frankly, a in between QX. ordering and is QX as is are the quite the for you thing Acute the Infusion for business will, don't shift a that sort And

progress where we're in with we do actually patients we're like ON-Q appointments rate, the wickets through that past. to as move growth into a to getting making benefit in start to this obviously feel and are physician we're those maintaining see than COOLIEF. direct-to-patient. more then the We to lot have we So We're going June, from

impact delivering ads. really year halfway were we're is for and our very last as for I at only period at all running number one we would year and that an far not these to short think we full from add know. not they're point, products is Medtronic COOLIEF nearly of a doing, The I that thing seeing as just anything the

reminded ahead a think we're point we'll in year next-generation we and sets some clinical different in also at have I everyone data. the we've ahead that that think that this certainly we already see probe

sometimes us. also on decisions clinical make then means studies. I the us for up believe area this to just product going do really or much for CPT that's Hence, bigger which in which catalyst management code July, in think so the a helps coverage, with why that's the and but there's negative market care, and and year thing remain more for be we So for that these us. pairs strong then is the differentiated and us, opens And about decision growth reimbursement also to spend

Operator

Kristen today's Stewart And question next comes from of Barclays.

Kristen Stewart

Steve, just say Hershey. at to good wanted luck

will We miss you.

So here. just a couple follow-ups of

change the for pretty guidance. like just does are year. expecting in a you now It the significant on loss look So GAAP guys now

guess commented positive cash had flows, us I just change could expecting you in but to you And help negative? you're that maybe cash bridge earlier, are of understand kind this not expecting you year or that flow I GAAP? think any

Steven Voskuil

said the which I expect in and being bridge first separation item the quarter. more those again, watermark really a but we first for back particularly, front. forward. high We us, positive constant, on cash job going the to is also the press adjusting wouldn't flow rate the than of pretty the those Yes. bridge probably an run year, does for in good that back the And quarter is LRD again, termination, the as high for the will have release, the tables a litigation,

flow those a going And a start from lift right forward. big there, going to two off those two that's bleed cash to are standpoint. So

those biggest So P&L. are obviously movers performance the probably through the two the running itself and then business

Kristen Stewart

guidance? for change ERP expected and relative the restructuring the million higher -- the like post-divestiture What's that IT figure? to to extra mentioned go-live. It that be Is the had and think Is you about are looks predominantly charges. original key $XX charges I

Steven Voskuil

IT biggest we to to want Sorry, still than into first a piece. really Again, and in And a and modules in quarter, the some you component little one, cost -- to the That's side. got expected there investment we we to North that forth. then work a Kristen, largest the of year probably off. put we've so want and to additional than second do good do, there, come I mean was structure is the care, picked place. we're new the the The really, off but that on start, be didn't testing involved the sure when play up, more lot you And we will post around is later part fortify the separation bit which American the what make go-live what we LRD cut running both in expected. go-live higher

Kristen Stewart

Looks comfortable not back just reinvested little of like bit Okay. how business. sure into long-range the cost you're on do more you And side you with savings the this have means year? feel higher. the guys visibility cost. longer forecast, get the term, the that or the be seems just on to given some being a some if I'm of are still might achieve you that the IT better ability savings had if It of little maybe a seeing then expenses earmarked like initial just kind plan thinking what

Just LRP how do to without? can going overall? M&A? think require still Is about do the to you you numbers, it Or confident do you feel getting

Joseph Woody

$XXX Dave really that office manage set have think don't chain, and to I we was Acelity, always XX project year. headed mentioned the Steve the do mean, took everyone I last sure last and find Joe, intend our where of remind running did but good towards we'll well and is we the business. organically call, supply more only may talked the about. process. I And without a was But This million at skill to in here. not stop the we cost who not Pain, he me in to procurement, XX also with We're headwinds that, as hiring grow comment. direction at management on with Ball, cost that X% business, Acute we've I the out has that that will And back I that I'm think

to of get of that SG&A. of things can once the to the investors One that's think, sort of opened, the on management is we is really to lot IT lock cost things a these system I kind and frustrating, really that that's side, corporate the

thought clinical I still call, opportunity we for about don't COOLIEF. mean, last if the the out, we And We we've opportunistic generally. the like but and plan, the you... M&A time yes, good more got get enhances did On reimbursement it an investments. feel studies to I with Steve, the was talk a cost know,

Steven Voskuil

go Reinvesting just your would forward. That's going not not is the the savings I Kristen. new Yes. question, the normal. plan cost to

phase as supply talk winner. is the The in fulfill have the to not on through about That additional of details. this on now, that the But about the and talked cash We we chain, going right betting Joe COOLIEF, are relative expect the past progresses. as we're to working cost drive year an said, going portfolio winner And those in Dave plan savings. saw that a year. more We're we plan, model. results externally year. the was in Ball last to and working biggest experimentation good new savings are based to from did and We'll that's we the

to So -- line, will bottom be at the all we're but same not it to bring looking time, the generating for invested, more certainly. of savings

Kristen Stewart

one included then be item sales? In NeoMed, now? consolidated guidance that's the out And Will how I'm or consolidated that P&L? how one. within a quick that last is just into the line trying to Okay. figure within embedded through

Steven Voskuil

Yes.

we that going not going in forward. structure or It's it's balance sheet the until equity an in unless make to ownership now, on For investment be guidance. as a change

Operator

KeyBanc. Mishan question from today's next comes of And Matthew

Matthew Mishan

What remaining doing take place them? separate that TSAs. We're are Minor? to no to no from no anything longer need We're longer steps tied & we completely of have -- to longer Owens the kind

Steven Voskuil

Yes. Biggest earlier, piece, as is Joe the IT separation. really touched on

the come step and imagine, after that the on legacy system, we fully The plan be, that of That remaining will still end up you on is the largely we own as And connected our disconnection unplugging to TSAs have IT piece. year. separation. system. can be companies our the by the So in are live to completed IT that X next the biggest the of

Matthew Mishan

part assumptions? is than the offset to guys And weakest? of like in bit current offset understand especially better it just had guidance, in to business little ON-Q little you the Okay. a supply the constraints. the worse organic coming What is revenue Which the a is the of to in that your does then expected look growth, around given bit coming of some maybe kind

Joseph Woody

COOLIEF the for back us about Digestive your I this quarter, we work a you a perspective, If we with gets haven't now. I the now, think, us through more also for season it to really we're we in year, the you talked by confidence. and year, think normalized way knocked which it of about right through respiratory, full growth where that. kind our growth international absolutely although lot year mean, talking which this impact is about business, DTP lastly, better And It then than from full of And Health gives nothing but the flu I is a are quarters think seeing, underlying full doing good in with there. phasing

Matthew Mishan

Okay. And double-digit placement you're placements other? Can on maybe your with you COOLIEF. the it procedure boxes last on for are versus is talk recurring up growth bit side? -- the revenue? Or the one a question keeping little the seeing the about outpacing maybe growth the Is

Joseph Woody

I or you sort about it's X quarter-to-quarter there from we're users. about we -- We if Yes. been mean thereabouts, about where there and, a year have don't units XXX-ish there in or base the of that exacts, we it's the will do but or ago. X,XXX would talk guess, months -- somewhere it I we now installed disclose fact have

some have are those X unit, some standard, more are obviously, locations doing of COOLIEF. So those doing than some of

Matthew Mishan

forward Steve, discounted Hersheypark. look congratulations tickets and to

Steven Voskuil

going on all we've lot chocolate a eaten of after We're diet here. -- a this I'm call.

Joseph Woody

chocolate, are We a to you chocolate, I should have all of think but too. have lot going some

Matthew Mishan

gift our We're for waiting baskets.

Operator

Cooley from next Stephens. today Chris with And our question comes

Christopher Cooley

-- and outset. end, read roll and want apologize, was clear a approach this the COOLIEF. here be on here your me it change at this calls you business I to when forward gotten do couple maybe side. maybe I isn't what that? two touched want how this at further ones stake, of the you for a I has way on to where then would into a larger, you if follow-up to juggling much or of something you working morning, know put think Just just investments sure I quick about or I going maybe the stated just But in NeoMed we the But investment, the minority kind the initially were so it on is in? make you -- minority a just this also evaluate strategic to have quick

Joseph Woody

larger element This because obviously, thought was we a had separation, an opportunistic tightening we kind deal. the of on, Yes. going

nice for several when so years The has team have mean, And with say opportunistic, for fit. structure. to because been such us I this company a this I of sort a working it's

the that technology, the to innovation this put some you typically way have While see us of sort structure way earlier wouldn't get an would open plan we something on, on like place, be in this. to do do to the through we've table platform investing along we and

Steven Voskuil

M&A space piece. all. would we This a than deal, But consuming a positive direction. to standpoint, liquidity Yes, really hedge if we moving a just done have it this good from at I is and want we anything, learned an make other it's created for wouldn't structure against say, more doing deal equity cap just But that investment. this sure we of moment, other in plenty the at was much

Christopher Cooley

But us doing and, that I of between through customer the the utilizes back the supply both to those base between can the try color on in-house pain thinking to have the just your ON-Q, in mix then that of specifically, your misspoke to would as bupivacaine of disclosed the you when earlier, you appreciate that apologize and ropivacaine half kind are ramp Super. side that customer you've And think think the phasing pre-fill. terms back but remind I currently so provided about pre-fill Okay. I it of we versus it base year? or and just

Joseph Woody

Is use what that you're customers our of percentage pre-fill. the asking You're that asking?

Christopher Cooley

be trying just to is constraints. think been to filters Leiters on off seeing ramp that going the the home converted percentage that what there and then essentially, supply falling to pre-fill of that's Yes, due that's percentage to about versus

Steven Voskuil

Yes.

by with in pre-fillers, gone of and different in before of one So XX% was out pre-fill in-house particular. days through due about of went did customers our ON-Q XX% business, couple filled went we a --

before. split it's of again, side. And the that's out. see done of to Today, compensating piece also was both lucky growing you avoiding Leiters the drug that done through Leiters one but Obviously, balance them, the the obviously, is XX-XX get benefits the strike for quickly, for very So pre-fill is and percentage, making of easier about the side, Leiters. it XX% in-house and XX% through about we'd like

win double a everyone we move it's percentage. so into And that

Christopher Cooley

Understood. Steve, your opportunity. new again congrats on

the You'll best. missed. be All definitely

Steven Voskuil

Thank it. you, I Chris. appreciate

Operator

next Kristen follow-up from Stewart Today's Barclays. Instructions]. is question a of [Operator

Kristen Stewart

you're I about M&A question. back was how on if wanted wondering to us just Joe, you the to update sizes. I could the thinking deal go

M&A deal, been a Is how have Or still And in think things? that? a way should the accretive you of million guess, the of were that could you've it as you or smaller Ready? about sounds was Game CORPAK version more what an should that more we in that larger described deal capacity. of growth-oriented looking Is we I about I said past or a think think deal. at, that that was about $XXX I said had the that like you

Joseph Woody

Yes.

You're capacity. Stryker billion. say like in mean million deal, spend billions I or going a And companies the don't to or are either we about when large $XXX right those

see at like For we we're remain have be place hard million to that pretty looking would for And we're too certainly, M&A still We X are years growth. is the at to couple at look with pipeline big the up and, robust going term you us, metrics want least several at deal it's smaller I'm the as any growth deals. bolt-ons, near hundred not one moment, quickly the do there's and because deal. We other pretty set primarily guarantee a as well But in can -- X a to well. well. to and but our obviously, other a bolt-ons ability of accretive call, or

Steven Voskuil

I is price Yes. due that probably a we've just from the deal diligence issue. it usually, would first an example. and say away value, It's it's walked on ever

on good getting an to caught frenzy the be example of stewards any just I in time up particular capital, it's trying of same a asset. not say, So would at us

Kristen Stewart

distributor me you us Okay. that within that? respiratory, was Perfect. maybe this shifting. quarter. wrong. then I'm guess quantify And some Can Or think, mentioned I more help you'd I if correct

Steven Voskuil

Yes.

in You're benefits primarily. in that some thought QX. in was We distributor close. had would We out DH, bleed It QX.

didn't. fact, In it

And we're see normalize. to that at point, so range. magnitude of probably of $X kind Order going inventory million some

Operator

and the gentlemen, concludes question-and-answer turn this ladies And for conference over remarks. session. like our to to I closing back would Joe Woody any

Joseph Woody

for the thank I'd confidence we and Avanos. in lot outlook the deliver the shareholders. outlined. in are interest business tell creation as value in of a the can everybody's we've well priorities we've Thanks, just our are from Fundamentals that there again. to business, and call, to against you like positioned continue to And got ability

Operator

today's thank conference sir. you, And we for presentation. now all concluded, Today's and attending you has thank

have disconnect and day. a now may lines, wonderful You your

Avanos Medical (AVNS) 7 May 192019 Q1 Earnings call transcript