AVNS - Earnings call transcript Q2 2019

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Operator

Good day and welcome to the Avanos Second Quarter Earnings Conference Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference call over to Mr. of President Vice Crawford, Investor Relations. Dave Mr. floor the is yours sir. Crawford,

Dave Crawford

for conference and Good the us. earnings provide this an thanks priorities Joe It’s our transformation XXXX. offer Woody, today’s our everyone, Q&A. financial performance is Avanos our With Joe morning then my review quarter I on overview with on to available our will joining is website, call outlook will call you for second morning, CEO. We’ll for the me details A welcome of the quarter pleasure second presentation results and section finish performance, of and Investors avanos.com. call. and to

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

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

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

Now call Joe. over I’ll to the turn

Joe Woody

pleased to our in delivered we’ve the against progress with in and initiatives your Dave. our that made, discuss transitioning company. more to say to and Thanks, everyone, you in recapping provide results financial I’m you medical second before quarter’s successfully priorities thank pure-play and going on detail morning, Today growth quarter, a Avanos. our update I’m the walk for XXXX executed we plan. our the Good through in you interest results, franchises line device an with

longer-term towards to initiatives our growth strategic and continue made achieving progress also in objectives. invest We our

diluted capital August we business. with I deployed took process step delivered that significant two performance this $X.XX. on quarter broaden our strengthen also earnings our of transformation our growth acquisitions Overall, per Our with and X% new franchises we to am excited share IT adjusted recently system for announce designed top-line of the successful to X. forward and launch solid a

We the in our industry-wide accelerate to expect continuing year. the back year, impacting despite the Acute results, including half Pain throughout organic of business growth, headwinds the

full earnings guidance we to and adjusted headwinds, $X.XX. are per to XXXX year share between diluted $X.XX from narrowing those our $X.XX Given $X.XX

Moving Chronic business digestive to solid our businesses. single-digit across and franchises, our respiratory our health marketing Care leading delivered growth mid

and leader and build strong To upon we ENFit manufacturer Health quality the of space acquired this specialized devices, products. neonatal-focused in strengthened remaining developer this NeoMed. product our a the been has momentum, XX% including Digestive feeding The of NeoMed offering.

Chronic of As in prior we digits cycled this you year. international are year. accelerate to we fast-growing a plan, results growth line against XX% to high component Care our delivered from business, up know, X% with is track Overall, see which on of also international the as significant growth our single

Having America. team, we growth next into year. in double-digits our double-digit Pain, within strengthened Interventional had in of moving Coolief Meanwhile, another quarter North anticipate sales the

the codes our for undervalue rules and the and proposed knee included In both week, joint. XXXX released new CPT CMS anticipated, proposed were for knee as procedures. view, last sacroiliac specific reimbursement rules

well. are to support response and period, leaders a responses opinion to teams comment Our preparing key Economic reaching during and the Affairs, to CMS societies XX-day Health Government are medical and their Reimbursement as out

aim properly valued rules key to XXXX the knee for final QX. released in have procedures reimbursement be when Our will are

year. the continuing shortage ropivacaine the factors performance: performance fewer from themselves; fillers will the second, Pain are As pump mentioned, affected the of will of bupivacaine filling pumps year. represents pressure in continues. This pump impact Three the our full the business pain First, continue our the prefiller balance impact likely largest using Acute previously customers as point drug through for and industry-wide pressure now disruption

Finally, the in by trialing when occur, other customers. of dislocations common this solutions increase is an it see to like

and based what seeing confident, back on hearing and are win we business. we However, be today, are this experience able we to will

pumps disruption current are believe in therapies. infusion the this from take markets immediately, in our year minimize products longer pumps. market effective address While longer-term the line Products. our to profitability, agreed challenges. immediate non-opioid These supply-chain for in and an electronic offering ambulatory designed recovering return quickly we we’ve and impacting Most anticipated, are actions they impact. growth, a portfolio enhancing to Also, than and our business’ to growth will of business Acute the have pharmacy, need this filled will leadership the a Summit from and accelerate to To the in pain fundamentals the we Pain of gap acquire Medical infusion further taking ability

with ability the we Leiters sequentially. and customers, In million, We $X our continues for customers option. our we of Summit grew quickly benefit anticipate Leiters to innovate this the to partnership and our double-digits product to are even Also move to through this quarter sales further. had close later month. XXXX, to encouraging this Sales expect

highlighting simplify and to and distribution signed shelf-stable address open with exclusive will we delivery longer-term, Pharma, solution an supply-chain a our commitment agreement Together, to for our supply BioQ concerns. drugs. market And ready-to-use customer’s to bring innovation, have infusible systems which pharmacists’ we designs proprietary

as be of excited of pipeline move to relief we by the pain our electronic Finally, innovation, own with internal forward solutions. continue development we

to in we Acute frustrated returning the growth goal. achieve market we in we While and priority, place that top believe have the by the right initiatives is disruption, Pain our XXXX to are business

clinical are made marketing investments we perspective. growth initiatives, in Pain, from our substantial evidence progress. Moving now Coolief significant and making In Interventional have we to

Last demonstrating demonstrating with steroid injection. quarter, several compared cost-effective and value of highly when economics was studies a treatment therapy. a patients We the publication innovation osteoarthritis-related is expect Coolief treatment knee single of with to published for health model pain a a

some after Coolief of half data can, year, six A separate in when cases, that acid. single relief We’re in second also demonstrated trial months a following XX hyaluronic key including extend compared to relief several of the to the months. showing anticipating the Coolief pain that pain greater publication trials clinical treatment demonstrates

Additionally, and have been in several presentation the industry-leading both at preclinical data clinical year. the of accepted half second conferences outcomes for

also that help teams of Our holding conferences this reach a are will broader data audience. a key at number symposium

extended to direct-to-patient Our ran over May, television advertising visits to website, February which mid this resulted XXX,XXX mycoolief.com. year from campaign, earlier in our

sought a XX% importantly, of them. located those physician find More visitors near to

visits, following We’re even see weekly of several continuing campaign. to the the weeks end XX thousand

we We of X%. Coolief XX% campaign these with the targeted and contact both XXXX. and That cities rose leading also to patient at field into majority weekly of XX% to the in with a calls measured figure the awareness of markets only that saw continue to Prior hundreds to XXXX campaign, center Coolief call in the in physician.

we result, sales accelerate year. a As in to these expect the through of cities end the

evolution our we will implementation system. our milestone our major our huge team undertaking catalyst the been company’s with cost transformation, efficiency our of a of increased be transformation, new a IT significant and savings over for in time. cost in achieved terms In global This has a and generating

our that reflect and improved than take Dave, I short In focus less business since call gross on we a and on began strategy execution. innovation years transformed a Before executing made a to commercial two incredible a have growth to moment to medical we’ve to that margin period, become with pure-play over into turning ago. the device potential, we progress want company the higher

balance divested ourselves with we accretive strong up set Specifically, M&A. and S&IP a sheet for

Medical, fit and three an We Summit Health. acquisitions, and outstanding opportunities continue which leverage pain landscape in Digestive NeoMed, points within completed for the Game strategic management; to evaluate Ready attractive our call M&A and

maintained cost-reduction a with our IT company plan also and a implemented portfolio. capacity new We system. cost for our phase to a we align size, further three announced additional bolster To structure

productivity, Government ago. were with have non-opioid the place on our breakthrough for rewarded management dialogue spending reimbursement our We pain new and innovation accelerating established opioid in R&D we tech of not capabilities team In to to in of of manage of channel. and pain and transition recognized company, therapies. We increased two established encourage to innovation we med focus as investment members improved that entirely as FDA’s to sparing a a on invested saw advocating a alternatives opioid the Affairs part Congress adoption were years

health a therapies. growing generate significantly expansion increased the were our Coolief including and investment support capabilities data to of increased show other reimbursement of economic externally, clinical to internally have compendium to and Our team. outcomes and differentiation And for reduction we pain

is Unfortunately, coverage Pain X% has and taking more in our business double-digit have our trends, past resolve this time growth. a line organically and achieved by challenging Pain solid momentum, reimbursement to other headwinds top Despite two years. environment growing over businesses but unexpected the industry-wide payer Interventional arose Acute

this time the to work and growth from a mid-single-digit acquisition. the team and steady Chronic incredible see NeoMed organization exciting these Care has lead is across very done delivered benefit the milestones. will significant It to achieve being

We becoming the well divestiture. way be. on out confident we we are want our in to the strategy S&IP company remain we the when We initiated to laid

line position top a accelerate in We’re to time. over growth

cost balance sheet to flexibility savings size complementary pursue efficiency. we steward structure M&A have disciplined acting areas a as continue to And our buyer of look and responsible We in our right capital. of while and for and

long In to there summary, work we way a be done. come is more but know we’ve

of objectives solid to are year. achieve making progress our and We’re remainder well positioned through the the

financials. call over to Dave the turn now the will to through walk you I

Dave Crawford

and morning, everyone. good Joe Thanks,

also forward. structural information new wanted significant congratulate The gathering the enhance to global new acquisitions of the milestone. go-live will I IT reduce First, system costs going and on team system, entire from efficiency the integrating a and our our

the one system. to need year timing and in back of initial work to the transition. will as the with be to the we sales size As adjustments of be potential scope, will short-term we half the for the next implementation through new as the made any from There quarter adjust adjustments to

with of quarter of X% million, offset increase rates delivered prices I’ll shift and X% our sales of was contributed mix X% X% we partially our X%. our of lower Organic selling by review to sales of also an Unfavorable line results. sales. impacted Game currency volume $XXX now and of growth of in Ready Overall, product growth. expectations. unfavorable second

which contracts delivered strong and Joe and accounts, double-digit Coolief new in mid-single-digit a Care we our year. in second expect discussed, feeding oral resulted lower legacy began on half sales Corpak saw converting demand growth see consistent our business. business, quarter In North care pediatric experienced Pain another Digestive of Microcuff volumes for enteral And we The saw products. be Acute share continued we gained through the team mid-single-digit continues in Health the We growth Health, Overall, trend growth. to Respiratory in a Chronic to America. as

mix, product of results ON-Q attributed primarily gross was compared the were last ago, was as XX% $XX quarter, to totaled a for pricing by margin changes adjusted $X by even $XX to Performance profit million impacted operating the year from million impacted in discontinued prior allocated lower million unfavorable operations. Adjusted costs to the compared For sales. and of year year. quarter,

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

our and favorable of sales adjusted given diluted reduced quarter, commissions slightly share, driven and management expenses earnings ahead For by $X.XX SG&A sales ON-Q controlling of from earned lower the incentives. per the we expectations

our sheet, well balance system. $XXX in cost a Free we Overall, the financial to the we separation of hand. remains an primarily sheet million due to balance position our strong, $XX to quarter flow outflow Shifting new cash in growth expenditures initiatives. with was capital on cash invest of million ended to are IT future strong related our positioned in and

includes year which full mentioned, now, NeoMed. Ready and Game Joe our revised As we XXXX outlook,

reminder, a of $XX digits. NeoMed sales mid-single As growing year and had last is at million

$X.XX XX% performance the to expect acquisition adjusted growth to accelerating per currency, in We earnings we in earnings accretive slightly and second X% year. of now We half $X.XX. year. to expect to In share expect the revenue continue summary, be diluted constant this the of of to our

shareholder in We track and solid financial our a are create to position on and priorities achieve value. XXXX

With ready take that, are we questions. to operator,

Operator

question from Wise sir. ahead. will begin Yes, have Stifel. now go first of [Operator question-and-answer We’ll The Instructions] come session. Rick Please the we

Rick Wise

into more, that in A the Joe. just start controversial supply that persist let’s couple issues that things, little largely Is going company hopeful, the resolved it’s color balance And persistence doesn’t, just the thing, one what the us you morning, maybe, could that – can suggests last what’s resolved going gets through just with and you’re ropivacaine or saying? that commented, you how But to that then. you’re it be Good it this the all comments your year. period? the off Maybe of on to update optimistic – a implies setup bupivacaine, maybe this talk will more past by this that of move any XXXX. and so or

Joe Woody

Thanks for the into business business ultimately, about question. the am Rick. going optimistic, Sure, XXXX. the I and

feel of have with us the supply as now of been are the particularly the remain the We have we this aware the accustomed around XX% drug weathered of like business. ropivacaine, year, chain will end is the customers We do which through issues. bottom of supply though to

PharMEDium, of and Leiters, that is Leiters. the really team only market, put we at customers strategic the that relationship a more sequential to partnership XXXB Leiters with happy that’s about with really and in I’m moving and and now was quarter-to-quarter. have seen and Avella now volume together X/X improvement We’re the But

to Summit going drug to addition going at that is XXXB, to programmable a of Bolus allow the going us ability electronic it’s way without XXXX and into create intermittent This business against to our think, and supply have improve us, position. the with important a I that scale pump and to forward. a going The be for

of can in year think this like do And business I some close us addition, XXXX. it that’s that In will as going will that I we for trialing a on, feel is grow dissipate out. the

week and the innovation this we’ll way of the to with us. get think we issues. that’s into like but pump supply more believe if drug or QX QX into some be only is, QX call, about might the going and more really about that And a Essentially, electronic it – the later that, outlined, time that feeling the with time also had the remembers at behind at that everyone QX. the Pfizer was And the last we QX to reporting QX,

moved about would overarching two we’re in seen improvement we’ve that. though, will to rebound, we business. business say of and sort there was have happy So quarter-to-quarter in into that from an quarters that the the liked have In total, I the

Rick Wise

could to the And catalyst for? Great. highlighted what maybe, in you’re obviously, two you time. Officer? fully And your update And what just more. IT should of to investments that from Thanks. maybe, Financial think it when? for individual is we synergies there? yield And are significant little And us should some new And on us a What and and that? thoughts could efficiency timing One, Chief new cost maybe, we cost the about kind the and Dave get a about over of search looking systems about efficiency But here could left place? required kind savings you in talk see? bit last,

Joe Woody

this me our candidates, remind Got and for really interviewing serving it. about CFO one Machan CFO three And attracted just we’ve same what Interim has business. over the Look, Currently, the Warren next he Thanks, been to is we years. The can business the story. as five CFO. to divisional everyone, compelling a was Rick. so have become

So has good we’re the knowledge who with in business. extensive hands someone in

certain. As these fact, things we’ll be we in a and that some CFO in middle the for we are of we, announcing the But have go, this anticipate fall interviews, week. in

accomplished I certainly, there. And like schedule Rick, of assistant, then enough X. the about And feel and on their schedule we’re say for on we what can’t the IT, be August ahead team to

completely a brand-new on running system. new and up IT – We’re

That’s the a – factories. through gone important, it. That’s company’s and many watch very this producing having as important of We’re orders. we’re through taking go know, you or

to have, several for we do us there’s synergies, think will months to like $XX for can talked to that than couple have things plant, these that, distribution we and Or us in we million we of does into in the it take the to a after things about settling But we’re there. quarters, do for things example, system. efficiency close the get $XX efficiencies allow the and to and times importantly Now stabilize. more but more we’ve operations as the may for manual months million

as So we’re high-level about generally, complete now. And talking closes. and year excited that the have been about the that excited a investments very more at about

Dave Crawford

globally, And will to to could system get IT managing one Rick, IT, you where think all about is. think systems which the about we find you will I not very would piece office, add back This important. only in then previously. we be three When were us savings, but

assets. You’re to an When Ready Corpak. to with different we did going then from we’ll three Summit Game IT it along to once. we NeoMed, that see to had and when it comes do times benefits do have We these integrating integrate when perspective. Recall, only

be that’ll So process. more a efficient

very had are about levels and three get to as gathering. when well. be spreadsheets. a way things That’s around information potentially It’s in then to you say, I’d more when managing you a more something and that financially have, And clear the seeing systems information to just to for going able unique think different be just we efficient standpoint have will regions. It’s inventory not manipulate lastly, things us different having we tough back-office from and that in realtime trying in

Rick Wise

so Thank much. you

Joe Woody

Thank Rick. you,

Operator

Misra Markets. Berenberg next, have of Ravi And we Capital

Ravi Misra

you hear Thank for me, Great. questions. you taking okay? the Can

Joe Woody

We can hear you, Ravi.

Ravi Misra

Thanks. Great.

on can said So period. couple you just of One, you’re Joe, the with comment start responding a commentary off questions. the if Coolief. I to

the Just follow-ups. And not? kind of for? have looking you growth number you levels reimbursement argument? about your one without few what number the two, – then or they guys how at a get formalized help I And can like accept possibilities, a, CPT think handicap Whether if Thanks. are us you code a that it

Joe Woody

to rules. code slightly ACS He think, to we’ve proposed effect final the got CMS a they November went Ravi is remind what got XXXX though things, XXXX, there’s X, Schedule. to SIJ. physician And that also announced, for referring down. comment with there. of Fee So and XXXX Physician go back that code The went outpatient. All until knee announced January new in rules XX, facility really just to fees new we fees everyone, referred hospital the was fact and September last into the the and couple of a for a OPP And I XXXX. period up And CMS,

we’re And have for SIJ, where we’re – sort in going to in of an be this areas and have joint the versus increase was positive. able we code that where very in discussion, code we a because so existing operate. – by to the a off-set that’s the new Ravi, the And positives CMS the we injection encouraged a category actually the we like categorized like procedural spine comment feel the good – procedure for

And the procedure. it’s same really

is a about We there for seek different And participation, talked have possibility so including technology. our innovation own can to, cost multiple our also valuation and move to on probes all at potentially, ways up. our address I think Nonetheless, components obviously, we’ve of as we that calls, code.

international In where talked the even addition pay still are continuing the we’ve we today. lot a and of for both potential an there’s the SIJ also and area, we’ve with business knees about to our a that, lot runway facet area in about frankly, in and cash talked on level fact but

were everyone, about position, studies, of are action great economic really as to as even – duration talking years, around way come I lot to that the innovation our not good mid- around this what alongside is, from just complete, not and long of was and of the well a two have, and hyaluronic accelerating as aren’t knows, stories, I’d these that up we we’ve and really very this was are growth maintain outcomes away on started term it double-digit this. fruition. to double-digit. comparison remind of And good and that So acid of health to think just take We sort things everybody a mechanism to going

code. And even now we’re game have a really the we didn’t in so where

meeting. to how time strategically project to be we’ll term that. lot able really this, long now, happens. And but we’ll detail foresee and probably and now November, Probably laying around more positive, are we’ll the see of tackle the what us in mid- too JPMorgan So I out early do a

Ravi Misra

Great. just And Thanks, Joe. on guidance. then follow-up

to the it accelerate said like back the You’re in sounded year. half expecting – you you’re of organic growth

currency help quarters? versus looks mid-single-digit what least constant kind are you million XXXX of half then there basis? your in of And mean Thanks. the math understand just you Chronic numbers, couple still if should the increased Can flowing us at do expectations are it of Is there? of NeoMed? than growth. What of drivers the just has with through with Care, forecast last contribution We we You kind can – of better kind then getting and last that back in to growth at kind in kind the kind what right, that year come looking of taking mean, just are that, our guidance. drivers for the year? of be I put that I mid-single-digit I that of $XX half like

Joe Woody

slightly So our organic which, the two one obviously, of at the digit years of of at frustrating XX% X% above. that things. sometimes will, if has XX% Chronic mid-single the remind want in our When Coolief, Care Acute business couple things and of it nice represents with past everybody Pain. combine roughly is growing you over the dislodgment, about supply and grown about you to at tick, business, a that level, I around

now to Ravi, and their position. direct-to-patient. way to a are in driven sale XXX,XXX outlined We acceleration the Coolief in that’s queue come HX, there’s really that in finding prepared comments in patients the just right, the by over you’re But

these because a procedures along a general seeing of with delay electrical seasonality. deductible a be in the we are just there uptick there’ll So And changes.

We in QX we an increase growth international acceleration. had for patients XX% expect an will see we So there. will There international. in be additionally

a XX% And and is year. comparator double-digit was into year, momentum put had international in a feel X% end full only like single-digit the Although, go we over reach in on of year. high QX, and strong the to number a it the then last we at

There other talk is well. about as spend to highest side, being QX with ON-Q. in always ON-Q and EPS, helpful on efforts that a things some see And We also on then, of to our in just and be QX, talking from lift we’ve you in about to savings kick will did primarily obviously, more got that this to component a more seasonality we we Chronic around Coolief, picture, each our want running and bring nice of begin that been away, to just a step quarter the engine. and Care, big the like really you table. a But

seeing trajectory in We’re happy Coolief, we and we’re with what are international. with of very right pleased now the

I he that. Dave. to add wants Go something Dave’s And to saying, think so ahead,

Dave Crawford

level, you really of do the business years they of those been ago Ravi businesses, think market thing we well a about us. add continued business into of mid-single-digit you for share it’s to the a mid-single-digit winning were due then more about We to winning to clearly a when on Joe’s was in year turned portfolio. it’s decent strains position. growth, about only capacity us that the strong It’s where Corpak That’s there something the comments, the then to to in some the negative of on earlier but back positive have half The back think accretive for growth and us. a when talked Chronic and really year oral today couple for drivers size Care, call couple care the And and back. that

in NeoMed, closer bit to overall, or a think So your for the Remember least off come look give and to we’re so around perspective. growth growth. week it that’ll points that But three It’ or year To as about on going lost of the so you it. we little then America at take it’s of add very excited back in question $XX a it. here good us, us, that we million about or acquisition business consistent and be pretty about half. North that for last so, as about sales, for of a for international the

Joe Woody

we thanks, right. see And that a grower NeoMed, as Yes, improve but Ravi. it to scale, to and try look obviously, with Dave’s we position our mid-single-digit

Ravi Misra

you. Thank

Operator

Next we of have Larry Keusch James. Raymond

Larry Keusch

come you’ve got Obviously, Joe, lot just to in want ON-Q, obviously, the and level. this, some balls this I for shortages there from and right Coolief to the I I of addressed a at activity there’s are on air you’re – now, the high a search, so morning. the that of just of but wanted you’ve Good drug shaping, supply reimbursement portfolio going through, a CFO lot a got on the working you’ve, know CEO.

back your really as And year? end of are right curious – so priorities I’m the of of this where just the the day, top half at now you sort think that about

Joe Woody

Thanks, Larry.

Woody good. we’re pretty Joe ticking the think list, if So away to-do I about

started more be able to, to rate now Obviously, number stabilize, be that. there. component driving to sets on IT going we separation growth. at the outlined And really so Delivering to move You stage of accelerated we’re with that’s really a for the of things S&IP. a costs it going important EPS once further the with time

in the the and channel. I’m absolutely our M&A adding are be dropped ability pleased put to place strategic and with value into acquisitions very can that

growth The Summit. X% acquisition is that a that about say this started that of Pain outside have good is around we I’m with the growth and very turning of and we other for plan thing Acute would happy I organically,

these later utilization. turnaround now also and main would’ve Pain two customers business to is bringing priority the the albeit a pathway, supply we seen, growth, than get into primarily and Acute really So because right of that quarters we back of to see

organic you of say into people to back that old these I good the strong and But to which second pumps, line XXXX think going and help HX can a interesting going has desire it Pain involved that. our that feel rolled rollover then was to and tenure, added the really the we’re have in to growth. there. we directly portfolio to very that in be building turn are the for to Acute still and a customers about business and use And want, made got XXXX, There we’re is will that put just our good with days, of story place or a like our they HX real if and growth excited days sort us good half old I’m in But short are to be was broadest the be story in stock. I two-year getting a and the acquisitions

Larry Keusch

helpful. Thank for you Okay. that. That’s

Just here. two other quick ones

a make so fits business, help at us was just how that pump, I looking into say, now understanding acquired so gap. did you sure turn correctly, this – just electronic portfolio? help a you’ve the You Acute understand, Pain So I’m the to it want me this – can

right, fill sure the in And without dynamics you to this if sounds other those or also, I’m from on future want rely API as like understanding around relationship with So just kind – pump product ON-Q. fill you I having again, getting of this to make can that I’m from with in manufacturers?

pump doing it I question And the about other think think, then is, point. volume said, XX% I like the you filling part the at to me about of this Leiters sounds is if what of

the XX% have that PharMEDium peak, think little at be sounds same static. bit to the right, XX% to higher. was that a expected if at I would I closer but that time is

understanding dynamic that to So as well. that make I sure just I’m want

Joe Woody

sequentially with of also to that fact of But customers working is we and a are is lot now sort satisfaction customers, other sterile patients. we’re outcomes have seeing higher. the sterile solution the have place. good in be a would them, with Leiters on thing And and with the utilization we end that around the of progression by with good Leiters year Yes. bit that a pretty the

feel bullish we pretty So there.

On cartridge the on example, think electronic But bolus. very a for in state ultimately, example, BioQ pretty fill XXXB pump. academic that for going team in to help really pump, of doesn’t innovation. can, more rapid pumps fashion the to to is we you accelerate would a or in project really a that bag improve they’re also it I – electronic us there. our use lot, driving the the require art this with with But intermittent centers programmable the position electronic innovation now where can pump And really – focused importantly, this our we think for

enhance see So will, to of supply we’re chain. the doing what management, you the if you customer can

say the that just that or despite The certain five surgeons for people fact be still an to quickly to example, There use to a – there is coming I other that talk able days On-Q the is I to patient pump desire they thing times use would knee. market, want the up Heron pain Exparel on and the do because total intense fact want when manage are stand and, the the ropivacaine with despite we to that customers. visit as our customers,

more there of need we’re end with we which a probably that doing managing albeit out profitable back to So completely Pain. that’s of And what Larry, the But have you – we is to in and have even mid-single-digit what way. is it’s grow, believe can EPS Acute is then, to the year really the deliver same plan of digit a as additive business that from imagine, and certainly we build our toward appropriately structure our OpEx so that that level. low-single yet XXXX to generally, better, achievable than we along business at time feeling the

Larry Keusch

Terrific. Thanks Appreciated. for those comments.

Operator

of have The we next question come from KeyBanc. will Mishan Matthew

Matthew Mishan

questions. Great. you for And thank taking

that for if I Just coming growth still Joe is to – distinctly is it to acquisition. a to to being X% X%, currency from assume it Dave, assume XXX safe the it from fair in constant- FX points supply down of neutral, points organic increasing guidance. – and bupivacaine? NeoMed basis the is out and contribution goes X% it X% Is the to and assume to to ropivacaine basis push the and you’re incremental guess rate X% is XXX the and fair up, and X% follow chains XX% X% from on

Joe Woody

right. mean quarter, of at down, end Acute because the part range You or end got the at primarily, it component. sort of – biggest coming QX, of the beginning accurate all not the mainly the growth I of the Pain organic springing the completely of the fourth of that’s on supply just with back

Matthew Mishan

XXXX And generally, give that coming guidance start for what constraints? are the indicating you for completely X confidence back? you Pfizer to would you chain Have de-risked they, supply I Q that guess they

Joe Woody

looks sales from optimistic We’ve looked and we return And pump sort Dave about with weathered and say can can at supply I growth, storm, the we we’re, a daily only think why more – against risk it take average our but – there – building we into a we’re we looked now couple the of look moving I see, we an we’ve hands obviously, much would with say and bit that. not of the then electronic when we you the people with and made that? had, to that’s and that, at more the coming way like how – that Leiters, sort sales, in XXXX. too change to wants say force a to Dave that cannot what move in this also why we’ve back affects of things at we to larger having customers much, maybe, I and put bottom the little want but

Dave Crawford

just I talk their you it’s supply just know and drug and math, well. not Yes, Pfizer as also

maybe, the within to They of they all not don’t Avella things impact specifically and the the filling last customers. the the those haven’t Leiters is from they but constraints the and pump still as be have and some they’ve using be moved SKUs quarters we’ve where but several of seen moved One may PharMEDium former Leiters biggest to using pharmacy probably, many over that moved or sales the to there. because those, really maybe

them growth well. pumps as return as start But that reaching the hold And a each we use have using that that get as perspective low just decline that’s will group We then than we’ve to indicated, slow. a from of that as we continue Joe can that to seen feel to standpoint rate And we better start people point, where to move quarter, Leiters. thing help is who a that, others. more more more seen decline, growth are well as from and big the to really people a

Joe Woody

to want underclub – Yes, that that customers fact stopped I things the down is PharMEDium as we affect to right, the of where of do can now easier Avella that don’t see we one bit with the partner Dave’s because want using I utilization gone or and it’s the do to are a have little in can customers it business that a safe, fantastic. good it side for works, outcomes and Leiters, good and place basis it’s business has quality

convert is And them encouraging, bit taken They that’s back, They come those ability the little a of with want the so some of want to us. to thing that’s other to business wait-and-see. do have over.

business so you at using that the it quarter to obviously, fractures just we feeling we And are ON-Q, and when want the to and are made together, rib that worth us see looking and sort just C-sections and the bring be of there seeing more bottom that first can knees doing XXXX. that the are bring folks toward we total where you acquisition that and and altogether, of move

Matthew Mishan

talk the a and in sequential then that’s or And not that you about the was helpful. little whether the the bit And in pricing mix margin? gross decline quarter? independent Okay, of can

Joe Woody

I’ll say a overall. a change of feel fundamental I couple really Yes. don’t things. there’s a

it protect that to this did do I pricing QX rebate downturn, with a necessary experience was it’s term, we and were even. unfavorable. issue between a in remember during little to long had There contracts. some bit and accruals OMI. some create in feel ON-Q to And kind business with to see year full longer the bouncing X% XXXX, For comparison We and in X% favorable we of

low-margin the KITS bit business, you if tightly. that. TRAYS is I and want managing there the don’t In little which was Interventional than Pain Dave, anything and to add a know price. We’re of more NEEDLES

Dave Crawford

issue business and Joe last for two about, if point, and due last quarter. that, year. the when the To price up accruals up points split to quarter rebate a had talked second allocated that Yes. we distributor device trued on had in we we the that you was that of benefit the some – about Part commingled comparison of we remember, fourth

a bit at seen because expect have would for the So, of all that’s change something different analysis actually franchises, there’s tough of when some comparison of loss a to Chronic Care see, the the never of we we little in look we categories. price especially

we to areas of expectations. bit price Joe comparison a to a couple year. are think there last relative I a temporary what But so And had this is given think the down as is indicated, where

Matthew Mishan

should Okay, free I’ll that’s out. cash – lastly from track and here? How And fair. flow jump

Dave Crawford

Yes.

clearly, the some think to costs, those who third the I consultants in live us we have some implementing Matt, quarter, the have still as the out of all going onetime doesn’t but we get this. through home, we of gone in that here mean helping system with are that went are

stabilized that to be some us. tell so, place get then that over here the as and that hopefully, first them be thank remediation nice it’ll it next the through that so the get had to of lot things you. month a have half behind big year, though, we’ve of taking That of is we or will We cost, get of in a piece

We’ve LRD treasury us costs from is costs the out normalized as onetime the bit we quarter more fourth in standpoint nice was we’ve. and move as for forward. variability. That now a we of on quarter, to the even getting think we expectations had the elevated have higher relationship well. should behind then we that and a aspect, probably from given the some sales earnings go that with very flow, of that a And cash also for OMI,

as the capital go a working have we into more back So normalized of year. the forward we

Matthew Mishan

guys. thanks Alright,

Operator

And Stanley. Lewis we have David Morgan next of

David Lewis

position. this recent are Joe, a of a about dominant thinking had just a revising reimbursement kind kind the thanks. in can’t, couple does to that a you How year? you in then guess, related kind the of How investments next of does thinking Coolief, the product, you’ve impact? cooled if Great, net you’re in investment first if RF investments And about unsuccessful of thing that, rule. – of you. is, final about you’re kind for impact how questions you into I had thinking for of kind

that? with in just about think you thermal You’ve cool with do How to got one some coming And implications then follow-up that? a product. quick competitors

Joe Woody

and we are the thanks. were around obviously, The hyaluronic in positive. finished course was really play that David, acid, the study which steroids investments clinical we problem, that started of No the

mechanism two to of a have years show might as think well cases we We the of which pain action relief. some play up in in duration, as

in big So we’ve we’re and investment. of acceleration – a articulated sort a not anticipating

we’re in over Now our but current upon sort improving manage can a that to that of I great now that code relations time. effort with government drive and we think position that keep we CPT a have

not investing. overly So

right now to We’re that. handle in good a position

In handful been terms of Medtronic, we – a installs. maybe there’s of

type We’re all we the experiencing technology which related, some utilizing. the problems they’re of it anticipated technical, quality the some of pros knowing what that takes with systems,

and a with is well. even or what So market, positioned a said really position think impact market probably competitors such near we’re I’ve could midterm, innovation billion-dollar an not people effect like strong fix leadership two coming all. that have rising I term, three, four big boats several is have we’ll we out but most and at that new do, Long a kind all this of huge

David Lewis

Joe.

XX how are Just last it’s lastly of sense of your on larger? here Thanks kind see willing a to tech sort of the you M&A an size give changed as And of sort months? so M&A of relative over story, of you Are you kind views six evaluations? much. reflect of, the and go component obviously, us on the where net important to growth-oriented in M&A,

Joe Woody

us where the front that drop the Summit bring right are larger Cortrak and synergies of one transactions we’ve into think Game Corpak, in Yes, values aren’t transact the us, fact able – two our we’re hanging revenue revenue of time and David, and Ready, in you times that our NeoMed sorry, the for some about because participating around to of – when of they in to because us, channel. most to areas companies been tremendous the

us, So they’re a big be was. a lot for value-creators real Corpak to like think going I

at value. obviously, the of That now time create change, track from to it opportunities, now can generate larger we’re looked still look have we it. and continue down wouldn’t as that right current overtime about generate lot time more a EBITDA of, at will that say range. capacity over and we sort think $XXX We right time. We do we million call let’s not $XXX cash have to million better We to

we’ve So, of the don’t that – get been extent we that talking yes, to now, is out I sort which from another year thing about. a

For strategy us, million larger either in to something might mean our tied a enhancing dollar Care Chronic be hundred business. or couple would that of pain deal or the

our important think but part call we’re markets for an on bit more scale. that at it’s size size think growth, our and think story of least, that, that’s the in, I Without at a everybody knows be our difficult and to I positioned little the we’re well. as I organic to able maintain

Operator

next we have Cooley Stephens. And of Chris

Chris Cooley

appreciate I at the this point. from taking two Maybe just me morning. questions. Good

talk that unfolding touched you now see that of out quarter, have you You guidance hurdling go there the you XXXX, I into the in challenging to the growth much key have international saw system And then quick a giving, obviously, yet, the Could system? direct? follow-up. kind on about to more during how opportunities without just And XXXX you just IT one an that new comp. points

Joe Woody

call kind on with of Korea our the at doing are these new business, the international focused we’re that it some entering, and Europe, drivers and put markets that in business, good like growth the is introducing on education, driving PAC that in certainly because expansion, the of around markets. on let’s into people lot India with in and So X% we a the that Asia they’re of really And examples products, Germany. team trajectory things the the market new with the position we’re of and a place half, products

just into an terms the really of these pay markets growth commercial underlying management to products, there’s have in starting been and driving for that’s like element Cortrak of distributor off. Some introduced and deployment of not existing market example, in

see. we we like trajectory that the So

you obviously, we IT in areas. then to Chronic is and for enter the could pillar think particular, we in And make sort the for. primarily seeds Coolief the Our aim of track we’re business, number want driver’s business it’s that in at to which business, And to at Care an product getting business, will are the growth, question then be that front? the single-digit a able year on XXXX full for pain for high growth which – I just be although, of double-digit repeat your important our place in the have on

Chris Cooley

that I Yes, addressed switch No it. you that If sorry, I’m – just could gears. – maybe

strategic M&A. on return the Just should about additional we provided partnerships think more a that a better following way today we or acquisition just capital but think for absolute is so that on than and additional out appreciate you about acquisition. for just being to investment, maybe color opportunities out of get I should still faster use primarily

about, opportunities thinking the Pain Thanks. maybe, Acute in-licensing Just on side.

Joe Woody

BioQ for is of a think, open I good no, example innovation our Yes, example, plan.

market deployment channel we all that’s in really only – have partnerships, looking agreements uptick think been we’re good and on especially in our –you We those way, a but capital innovation technology that and so develop the we of of could to think announce technology at that’s XXXB Leiters our that one ones country. business – sort we which now where or some us our see and of of in partner get another and got have of into our we well, those an a the to major to rapidly might can evidence, also I enhance something a running putting run buy those got speed and that sorts and to as definitely bring similar solution I larger there, as quickly, at another deal a and really we’re that’s develop, sales running part much quickly about our the

you of got could think see right I some So it you that those.

Chris Cooley

Thank you.

Operator

we next Stewart of And Kristen have Barclays.

Kristen Stewart

morning and guys. after. question then I’ve clarification one Hey, good follow-up

X% acquisition reconcile remarks. kind the contribution in it It the in just just I’m press two. those Ready and release, give the just in Game curious us your the mentioned you on FX of dollar a had Is if on or rounding impact presentation, you basis. Just can X% maybe, contribution. could

Dave Crawford

Yes, over million, $X just it’s Kristen.

Kristen Stewart

guidance, the was now have additional think asked points from on basis as it basis. around Okay. you Will think running about NeoMed. from And XXX think I as mentioned then $X acquisitions was I annual you from Summit million well; an we about contribution that revenues

XXX from closer full the Summit to NeoMed and basis contribution points revenue so XXX closer embedded to year is is So your points? organic basis XXX points, basis in guidance to actually the

Dave Crawford

So the guidance have include Summit. only it we NeoMed, doesn’t includes

to points basis deal have when basis be to there if that If XX closes, what probably points currently. incremental would XX for want to that you more and include Summit, we

Kristen Stewart

level the NeoMed. line in Okay. from Great. guidance And us I wondering just bottom just was the then the could through of help terms you if on parse what is. accretion

deal I that mentioned accretive was you EPS. think to

Dave Crawford

It’ll that doing got year. We won’t But this next one-time do that we for year. Yes, integration of really until transaction. sales. further be it to will time slightly as the place some just take get from the accretion dis-synergies accretive that take

Kristen Stewart

you. And Perfect. bigger Joe, Okay. question then picture for just

the to acute of headwinds about on you get think about of about And of been, just the talked had of the disappointing maybe, you control front, your to company thinking last long-range some pain profile growth that As the potentially, within year? really, longer forecast you that just term? acute-care outside have the and business some the – news reimbursement are overall from CMS. the How ability the then

Joe Woody

talked the being better lot international, for the in to-do opening that today there’s am we go find is spine on sort way which reimbursement not remain market, the for I creates I still we that even list knees if the that always was my for just to the growth of pathway service a to both they in where to could simplicity IT, – the about still this big meant in where up attitude earlier and a things of we but meant think also the business, we business, of milestone a one are. be channel is a convinced and things actually So business about and need growth the yet new and won’t are a U.S. runway and

of the and we’ll all up Pain, what business really get it that and appropriately, set Acute of I now of the we and year-ish goals, it’s put away ourselves that. part, Pain maybe, is in and the frustrating Summit, all low On just XXXB some I drug the have us, the on – need supply both can we from manage issue a addition still has Acute to peak single-digit growth, to that think of is of Kristen, probably

clearly, the hasn’t changed. thesis But really

strong can’t out drive a just because We that IT bit the our but about then taken get still really earnings as and good it’s we disappointed in being that going see by I do longer think in say enough to and cost a get we’re can system markets other like able are you this better through get little we’re characterized would be to story. like that after – I drop of growth to, it so and getting, place to this

Kristen Stewart

the out maybe, for target set achievable the Pain business. Acute a the So still, if but, correctly, given I’m the it out outside are hearing certainly, just control challenges within bit, LRP little that your of you pushed maybe just

Joe Woody

EBITDA that yes, very made be the in profile. margins those gross are We a of still in the XX’s we $XXX million low acquisitions correct. set of operating profit in business million in mid-ish sort enhance quarter to couple for or capacity still have achievable $XXX we and to and mid additive and ‘XXs, That’s but XX’s really this

Kristen Stewart

much. very Thanks

Joe Woody

Okay.

Operator

sir? session. like We’ll would questions. back for our remarks, over So Woody the any call closing no further ahead now I Mr. conclude to to turn and go question-and-answer conference Joe

Joe Woody

Listen, Yes, for always in thankful the I’m as very you. thank interest Avanos.

leader. lot, heard business incredible have been several divestitures, in And device think medical recognized becoming And you have think we It’s a an this IT and I acquisitions transformation. the time accomplished outlook. two the I as years. our confidence a now over we

just of seeing of well you Lastly, forward we fundamentals I a look reiterate, for value fall. you to the to long-term throughout And the Thank to solid. number very are think positioned business much. shareholders, are and create

Operator

also today, you lines. and we and again, management time you, team everyone the of your take disconnect thank this rest wonderful now call day. again, is conference you concluded. your Right, At sir, the the to may for time, care have Thank a

Avanos Medical (AVNS) 7 Aug 192019 Q2 Earnings call transcript