AVNS - Earnings call transcript Q1 2020

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Operator

Good morning, and welcome to Avanos First Quarter 2020 Earnings Conference Call. [Operator Instructions]

I'd now like to turn the conference over to Mr. Dave Crawford, Vice President of Investor Relations. Please go ahead.

Dave 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 Michael Vice CFO. President morning Greiner, impact Joe will our followed against an by COVID-XX made our on progress XXXX business response, the of update our begin and on the with priorities. will address our by presented and review the first provide results. the of actions the details Michael challenges Then we're to quarter taking pandemic with Q&A. We'll finish the call

on available the section presentation for is A call website, our Investors avanos.com. today's of

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

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

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

Now I'll to Joe. over the call turn

Joe Woody

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

I'm pandemic COVID-XX the of demonstrated of As the global with needs by products. up to proud and clear together, of meet urgent the we patients critical our our has confront made team The resilience stepping healthcare. importance

to was on system reduce pneumonia when the Health suction assisted Organization World patients deliver solutions suspected. to for most on, Early a incidence improve ventilated medical closed the mission clinically Our device ventilator to proves published proven today. quality COVID-XX of of relevant life mechanically using help guidelines

nasogastric helps outside and used as COVID-XX caregiver. CORTRAK the nutrition. the also therapy providing patients maintains only of cross-contamination to of early ventilation placement exposure suctioning WHO tubes being to system oxygen pathogen market-leading Our suction risk Ballard is the procedure, confirmation also but patient closed and recommends throughout the in Further, reduce not and

expand provide that respiratory result accelerating Additionally, care the we're of help as of a future. can exploration in and this innovations the pandemic, global

we're Medicine instance, to currently a the in at Niklason treating partnering to the of role on Avanos, that for and vision getting School at be Dr. evaluate of her respiratory to Across with solutions being patients team executing University matter. our best and pleased leadership patients. things For novel we're patients playing the back Yale COVID-XX ventilated

pandemic, and As we strong of of support and face respiratory financial return. safety we in the families; focused sufficient our three position our of elected employees positioned used their the have maintaining third, and challenges priorities; when preserving are well the customers first, procedures health on we ensuring products COVID-XX and patients; our ensuring we supply treating to second, health remain

remotely across answer priority Board this of and updates navigating our leadership the with safety remain virus. minimize protect resources, At almost Directors. teams. Medical to working be them nonmanufacturing to employees the employees. employees While to our have and challenging been connected mid-March, the been exposure with our communications their provide challenge and This Since we hasn't continues but environment, through frequent top COVID-XX. health easy, our with measures implemented sessions our providing of daily to their are I the the senior to questions team organization our The Officer including information Chief frequent onset, meet and team precautionary leadership about to our

environment. China. challenges third manufacturing the availability our employees party which early pandemic the products global quarter rigorous safe and is working which to The managing on placed nature The a our of manufactured our we've work organization additional is of to to infected. in critical treat NeoMed, of the inventory in us ensure in those instituted for a facilities, protect safety operate, At to precautions manufacturing to ensure continue our by

environment, to us remained our products implemented they've the resilience I'm anticipated demonstrated customers, and digit. and the while grow The to Avanos employees dynamic dedication the by strength testament have the demonstrated Across a available of the responsibilities our this employees double new team. mitigation plan, challenges our standards. team executing ensuring for to adapting rising what is in Our facing proud enabling to work a and risk organization, highest new our of to the business the of their

purchase Also, donated much our with involvement, of to doing of $XXX,XXX thank for workers who so to community all And we want direct the of we keeping are healthcare frontline culture relief for us. the PPE.

donation. a are supporting employees our can program in charities to local frontline whereby directly cash nominate initiated we who Additionally, communities receive workers our

to proven our respiratory Moving clinically available second patients We're our suffering remain health and products priority. customers to ensuring COVID-XX. from

we pandemic our core business the this supply disruption for our an of in products. on demand, increased In spreads, respiratory continuity As increase and of employees. production anticipation minimize executed chain to ensuring we plans safety health our demand and the while and saw health

feeding Health We supply who We're in ensure of added tubes. ways help a operating clinically for customers COVID-XX our Digestive suction preferred time available patients. training CORTRACK using essential team hoarding found are back minimize shifts products to process need Moreover, has and are of this allocation our we to seven week, treating is ensure Magdalena closed place and of implemented and formed products innovative proud prevent our they during deliver Digestive to portfolio virtual patients. caregivers is orders. Respiratory Health for plant, XX to receive days which cross-functional the catheters now an to Meanwhile, hours, teams to our

a steps priority. our strategic so post-COVID-XX meeting third financial to solid to taking position Moving that preserve needs continue on our we can environment. focusing We're customers' in

expenditures, taking allow cash to disruption other preserve requiring by market existing our We're capital without that spending to discretionary cash disciplined our planned global us strategically reducing cutting our resources. suspending our liquidity confident merit steps position the navigate increases. will and are We XXXX

the to cost use and will operating Michael of details Security net provide These million we measures. Relief, announced provisions to Economic cash previously enhance Aid, the relief specific Act Coronavirus delivering million the $XX Also, coming or flow quarters. in plan to steps the addition to additional mitigation Act in actions. about provided are carrybacks CARES loss over our our our savings $XX to tax

the current the near-term remain of environment challenges, long-term our Although strong. business presents fundamentals

leadership us attractive preserve have We market. in solid with strategic financial instituting to to combined position the cash, position, market meet customers' These factors, portfolio post-COVID-XX across our we're in and a actions environment. operate needs a

plans let's Sales first Respiratory tailwind per March. catheters suction saw $XXX with in delivered mid-March result. Health we COVID-XX quarter We in from adjusted diluted products. to line were Now closed our of turn our and earnings related impacted and franchises Sales million $X.XX half were orders our totaled when of share. a of until by second the broadly increased

and and momentum the year. of franchise. the volumes compared impacted This Offsetting was has our second the quarter prior procedures of of continued the this which the to second electric with year. year, significantly continue postponement believe ON-Q lesser quarter pain second headwind into We extent, into this to this will down COOLIEF management the a impact into half

environment continued time, the our Given scope pandemic we the of the the this on impact of XXXX results. quantify of duration full guidance. cannot rapidly surrounding evolving and the At financial uncertainty the financial year we withdrawing previously fully and COVID-XX, impact announced our are

detailed more providing later updates anticipate we this However, year.

remain progress our and the strategy of focused we mind, long-term pandemic XXXX continuing our Although top on priorities. on is

by Our evidence of to pain. COOLIEF RF knee the favorably The introduction COOLIEF quarter, of and to the launch momentum. future article art generator our use new the treatment the an published new first of demonstrating our COOLIEF, XX-Watt state priority the clinical drive OA demonstrates robust with opinion of is of during reviews clinical that is a in growth. Also literature generator, efficacy recent coupled that been to our build supports of our expected The increasing the key innovation. received physicians has sales commitment leader

Second, integration. of procedures. integrating the Summit we Ready, in and acquisitions expect the from and growth quarter, NeoMed's the the Game expectations them our for remain elective gain impacted mostly quarter to end from the NeoMed decline exceeded on Game while post Summit sales in and Ready to synergies were at continue track

generating Third, for free on current longer given the environment impact flow cash year. anticipate positive we our business, and the no

as However, position and help outflow. implementing our the strong maintain Act and we the us opportunities mitigation to in are I minimize cash actions liquidity use earlier, mentioned CARES planning to

progress the realize of its stabilization new our system to and IT continue efficiencies. we Finally,

the enter pandemic, half of we year us. behind the challenges to second expected IT Before the with our

continue goal. position to given to of to post a strategic position with the coupled fundamentals maintain long-term our COVID-XX actions cash financial focus work year. to our strong summary, current that challenges remain committed this weather and taking strong. we remain now the and But a the storm In and that preserve of prudent environment. environment restrictions, few This in us we're confident we the a these with remain manage We second into half travel to work areas expect continue

the call to over turn Michael. I'll Now

Michael Greiner

is safety and that our Thank team's grateful you, me let well-being the execute And our I'm this priority to on amid their unwavering of employees our for family. Joe. pandemic, and in priorities commitment environment. reiterate this our

we XXXX Joe guidance. prudent to full uncertainty our COVID-XX, resulting As financial from believe it's the given mentioned, year withdraw

capital As outcomes, collection, have including throughout repeatedly disruption past surfaced, accounts This scenarios, work the all flow covenant. been few so first needs. our various pessimistic, began lengthening months needs debt working impacts sufficient updated we sensitivity signs of to of to compliance maintain core other test and a investment potential modeling and potential stress with we identifying and the meet factoring liquidity cash and spending receivable revenue across opportunities has demonstrated most discretionary in the our our analyses, multiple cash

facility. scenarios current credit None us of our the to revolving access would require

the no minimal million on with bearish under maturities until scenario. currently hand, In have most leverage year ending hand, fact, cash million more $XXX cash even of $XXX XXXX. we the on anticipate and We debt than of

years, accelerate in CARES refund anticipate use we we changes XXXX loss carry XXXX. payroll early will or stated, to Also, Joe XXXX in our plan that the the plan back to tax XXXX receiving to late to which Act we law payments. defer prior tax our As a

focused become positioned financial start cash to disruption normalize. to ensure our our revenue want to on conditions as be business position, opportunistic as less and has predictable and during are are with solid Even we preservation this well cash we we flow

company. steps expenses across Let me highlight taking five strategic to and prudent we're the lower

suspend we a for made salaried, to increases planned XXXX our decision nonmanufacturing employee. difficult all First, merit

leaving Second, processes noncritical vacant. we're positions while streamlining

postponed like R&D and in can investment spending areas identified be marketing, we've projects. trials clinical that Third,

we're and of the are and ensuring capacity increasing eliminating Health are we the finally, Fourth, CapEx for year the travel capital overall And additional our in while entertainment to decreasing products. year. supply our for expenses we Respiratory reducing, some expenditures, our related for balance cases, selectively

that react that help as initiatives to a while continue strategic quarter $XXX now for already or With continuing Overall, situation ever XX% first evaluate financial grew meet million. We other evolving when results. the will I'll strengthen and to necessary our position backdrop, quickly this customers' cost our sales review containment to additional needs. solid quarter

results a X%, unfavorable X% while Organic sales sales impacted increased and price mix X%. by by increase, driven volume

Our acquisitions first to two related by the Summit pandemic. X% of months. and slowly our Respiratory started enhanced than the lower Care NeoMed Overall, growth. sales sales Chronic Health, as expected NeoMed grew year saw Digestive and distributor XX%, Health orders driven Coronavirus the In of we contributed over

loss tracing our no indicates level. end of volume user However, at the data

and As fewer to unfolded, hospitals This products limited business, feeding sales slight an CORPAK COVID-XX access likely headwind our saw force a enteral procedures. related to to demand from the is offset legacy uptick the treating opportunity the in for given elective quarter has we to impacts our patients.

saw we growth move NeoMed potential in excited as to as we the growth forward. be about earlier, we continue and Finally, mentioned double-digit

$XX and first Management than the Pain was our sales XX% solid by for to more growth quarter. and term, mid-single-digit studies. to by the Similar Pain investments a two in impacted Interventional from innovation other seeing million. view quarter, increased continue companies, in our delay procedures. performer the COOLIEF elective COOLIEF's benefits clinical months are X% March performance the of growth for increased we and as Long delivered to the double-digit

to to continue executing on in business were to growth. as target our expected, through plans and plans and performed Pain this return stabilize on primarily we down Sales mid-March. our Acute ON-Q

to Leiters. double-digit as growth sequentially a in customers We volume move saw continue through to prefill alternative a Leiters number and of continued sourcing customers

is expectations Our year in the COVID-XX. growth, organic by International full strong our to growth business increase with delivered Respiratory a Health long-term catalyst. remains response driven a business in Overall, and X% performing line in

gross for sales Looking compared the Adjusting the to and lower at compared the offset a of were totaled margin partially operating contraction $XX the activities. by remainder March last year. to million last gross result COVID-related million savings sales driven XX% Margin Adjusted distribution P&L. $XX by was profit mix to higher higher of cost, due was quarter unfavorable end quarter and as primarily of margin. for XX% cost that product year,

to In net earned ago. $XX ago, per of first a and as compared share position year Adjusted and from million while EBITDA prudent conclusion, million compared our earnings totaled and a $X $X adjusted million, quarter through to and we had liquidity $XX manage we the a million to standpoint, $X.XX income and remains compared ensure also necessary near-term disruption. adjusted year taking financial totaled we operational an diluted solid strong steps to this $X.XX execution

of focused need that two I'm products we and have during resilient While by are supplied the that time required this year additional timely highest months the impacted balance for of confident on strong a monitor ensure will any ensuring the we particularly this Avanos are pandemic, situation our post been we for in most COVID-XX. and may remain quality. actions our past that as with that over financial profile the be actions the taken

Operator, we're questions. ready for

Operator

Instructions] Kristen from Barclays. of question [Operator Stewart Please go comes ahead. First

that Larry of from go Keusch Let's comes to ahead. next Please the James. move on question Raymond

Larry Keusch

on orthopedics? everyone's Thanks, us come I to And remind into percentage you just Glad from two sales do off guess Maybe surgeries? ON-Q the fitting you of where questions. safe. elective to good of Joe, morning see hear what procedures can resumption those start everyone. ON-Q.

Joe Woody

that procedures are roughly XX% for why it's orthopedics. but in is alongside which bit to about decline Thanks has a on are nonelective, of of procedures some of the COOLIEF, of Roughly than the it XX% There is Larry. some XX% Yes, a smaller XX% little are base elective ON-Q. ON-Q question. the surgeries, to declining albeit

Larry Keusch

to just that And finish question there.

resume, into into that you As that? insights thinking that surgeries Do guys Is at this you where any are orthopedics of about earlier? Later? elective how have sort fits point?

Joe Woody

there's obviously mean the way ON-Q get at of that would see to think part quarter I elective of we quarter, the there'll think expected we a then quarter, normal obviously, end QX. thought performance I we play the the on in of an a but second And we're level the second orthopedics in as the to at in to what have into sort place about elective will Generally, prior think don't much in side, COVID-XX. changing back opportunity a almost we recovery. of second the where QX be surgery been

but of the be not course, for severity ON-Q. return elective depends of the Of all on orthopedic back surgery that alongside and comes some the duration something of or could certainly fall, virus and alignment in there the whether

Larry Keusch

Great. to how And what going you on on ask if again, curious I'm April just And should of Respiratory significantly. what's two dynamic guess And some of just Okay. Maybe moves. trying give we've I had this March up I'll from question. picked Maybe sort transitioned just the where of there has destocking last just about or sort think could you quickly you've COVID upfront. businesses. stocking to, the your sense side, then across relative into then is

thinking to Hopefully, and here it's going fall. start again about to dwindle the then

we get So think consumed of get sense out rest Do the any think you fall? you just Just through trying how to about really that thoughts year. of much as you inventory guys, we of gets think the to some the is sort from before gating do the there?

Joe Woody

Chronic plays But it look Michael say bit into would April We I'll the the want full that do bit kind little because around see the at consider looks we for few kind about And levels as for chronic way a pre-COVID-XX, little our like of we we obviously, expected Respiratory more Yes. see in to April. of at year. we a base have to couple us say Care, be. what and things things actually, a of well a may Health.

we that million probably sort smaller little down QX. about offset will in $X ahead million, by of In but saw maybe fact, form quarter, back in we first surgeries of And get normalcy COOLIEF, to QX some the if and a you $X pick Respiratory again, Health, similar, ON-Q think in the up base. bit elective on think and of a

in of inventory the want of reasons. upon a based and to if One number look can situation, the for you of don't situation these hotspots, is in or respiratory you On that kind suction a have the stocked we're very be situations, that. imagine, of at year a trying We up of allocation as side inventory, we get six bad able Also deliver the the to orders to products will. with large lot we're being future. for the careful severity see and some to we're of a months you

those I the bit numbers just investing different suction preparedness, to Chronic periods be flu deliver capacity for see We're although are looking and of and and a ultimately a we as come with of would out would of because positive in ventilators WHO time, our happening flow natural think the at that being able recommendation and a we and patient little for the Health could Respiratory these over products. a expanding Care products this season view

have ones, patients, anything if on is know I families, question as what empathy of happening the well. but about for say emerging sympathy obviously out losing toward especially a don't want lot Mike, with April. more We're loved and Larry's that they the you the And this of is to are

Michael Greiner

No.

covered you I it. think That was great.

Joe Woody

thanks, Larry. Okay,

Larry Keusch

thanks. Guys,

Operator

go Rick comes next Stifel. of ahead. Wise The from Please you. Thank question

Rick Wise

fix and high your Maybe understand better resolution to do help start of with at system with left what's level, challenges. us just IT a to

us a XX% Is Is second XX% left of you're You list done? better done, maybe it half? business? is to impact as reflecting now appreciate, to it And done? work in in be thinking it were few have the our about half, does on should how the help we areas clear second fully there's what the And expecting and very it do. that

Joe Woody

working is IT he improvements. to talk from lot but I'm let which months, a couple of accomplished you are and see going Michael, with But want pleased and Michael last the way, very with to to probably system what up team them home we that about and I'll bit. this tee hint, very I'm this have of a then are the effectively over starting

Michael Greiner

Yes. question, Joe's have the IT reality stood to point, very to been. did file would with worked today The our what Great. going and from Thanks, Rick. as it home, Thanks up Q of Joe. our system, the for well closing, we our expectations or in tomorrow, line we're

not filers has of like line for SEC advantage we're of So extended any time provided taking the the that ourselves.

a system Rick, is day so debits and speak, intended credits, working to from as day, to the now. So

so you complete. And to put want XX%

data M&A, where analytic Well, are about provide the satisfied that opportunities integrate around to itself, that speaks asked some as things corners You appropriate. as year salesforce.com, with this into how is would to we look bolt-on to of back analytic the integrated a not normalize. do quickly yet things next on our year for that as more we're we're to half percentage tools, with us resumes, be system system hopefully, how the

and accuracy this we credits where around testament the and debits like we I us things to quite the position are quarter closed, close, to, kind and that make to more really tool. the But for that good yet able getting not this on where look of tools reporting, at to provide a organization. marketing of as feel financial That's us be stands with standpoint, data frontline that SAP efficient a corners, make about a that us point. first it said, it's put sales in So insights

Rick Wise

months. to is In X, next compelling, prioritizing there deals M&A hospitals you centers and You've part my Are last out-of-hospital conversations of about I are now? obviously there are And And perhaps given ties about into a more my that, a or doctor's the opportunities with like clinics Okay. a sort you it general, question. there? doctors X-part are hearing But of thinking office, surgical over thinking or we're likely how how maybe my question XX, really opportunities? done you about ambulatory now? don't that B Are greater of know. And number Avanos' M&A. XX settings how now? interesting accelerated what positioning shift

perspective an it's in your there. studio Just interesting

Joe Woody

couple A Yes. things. of

value strategy get front, date accretive point, creating you where intact. your in us plan of is M&A and get the channel we can acquisitions thank the a has to synergy. And On our that for to really continue. M&A lot remains to the recognizing And the for been

very a have full We pipeline.

they think companies are some I you're some that And and at even seeking right. technology have liquidity that issues, really companies acquisition. there may looking smaller are

our doesn't couple company we through crisis we're severity transact stated position before prepared until liquidity, back focused point end always but and past still we year, think, what of is our going there. we're obviously, COVID-XX. the by protecting get we've as couldn't I mean a that And of to what the our own with the the in at some of the of the something the good on completely years and it in along remarks, we of duration done I lines size, and in cash preserving

healthcare various regional. COOLIEF, and has outpatient come will that as be do regionally, systems in the performed as the hospital an think to life back basic We department. and example, I very

And that up that we're ready, there pick so and will shift as happens, over time.

severity facilities actually prioritizing I procedures the emergency think how versus are various Although, back. procedures and come also they

there working and are on ON-Q that We be elastomeric and think the shift there. for a pump, pumps, both center the will reimbursement COOLIEF ambulatory for surgical do even

specific one move might faster we'll It orthopedic, which to it a might my now for for review, example, make ASC. in my move, is, just think view example, I asked you take personal the

there some the about offerings and and think I lot to oriented having why that. services talking orthopedic related to that's a see so more companies of And patient pump and throughput you the ASC economics

in will mean be And in some the us. in related. around at think and that actually particular, what And and doing are that Pain we that companies opportunities segment, outpatient Pain in we're smaller the so are would technologies for looking I do

So you're generally, saying. I agree with what

Michael Greiner

technology add real I most is in little that think looking only people the just quick a level, thing I of now theory, valuations seeing have of into as aren't weakness. come types bit. bolt-on at, transient that right companies a we're on model our But are Rick, type temporal this looking the valuation private down sell hopefully are would this necessarily fulfill and and to

or looking right if that don't Now liquidity have in term. we some near M&A or a do other it's of to may now concerns valuations on may continue something Joe's like cash type be the to versus, instruct part that. to focus that, cash to PE-backed would see capital to that firm preservation raise a of in act us point, the But

Rick Wise

pace it. would second I'm the to together that half get to to the can't way one How maybe times recovery does think quarter? do important in volumes? What the more, it? to going several that? Is COOLIEF, by that And COOLIEF the is color right you've help XX% Okay. Any generator sneak and that highlighted you be And I appreciated. fourth second-gen to to XX-Watt back about that launch.

Joe Woody

know mean, obviously, this. hard predict really I it's you Sure. Rick, to

we better, do well. do part faster technology competitors that to I console delivering type that gives our then performance the we'll And back us for were jump a of as I the it's And March. of heading throughput, year. patient Now double-digit new there's sort into that other releases procedure get and that think over possible that actually, of think us the to throughout last for have the another

COOLIEF, obviously in or It between But surge major the sure. for the many studies we for in fall how as we're in double-digit clinical generally, there's installed that we lead areas see near come base will in whether of the for all us that a be a back. the the doing dependent and and sure and grower sustainable that not have upon technology, metropolitan the mid-future

Rick Wise

again. Thanks

Operator

you. Thank

ahead. Barclays. Stewart comes next Kristen go of from Our question Please

Kristen Stewart

hear me Can you now? guys, Hey

Joe Woody

We can hear you now.

Kristen Stewart

wondering maybe maybe little maybe saw I broader relative the business I the benefit But missed sorry to of to plan. offsets So to bit net within probably health, little for kind just obviously, quantify bit it's some Did impact that? within this the thought a quantify difficult of but you early any I within COVID? was what if Respiratory Chronic do, probably guys way you know benefit, to quarter you was Pain. a on. I estimated the or know

Joe Woody

Yes.

So a Obviously, the couple you we is the that. elective call and call of on into of that was about bullish One change were first two the we things. our surgeries. I heard plan comfortably with were quarter. feeling for that March coming certainly happy close weeks, probably last on after

last So million generally, weeks. Respiratory of the Health two in is of about ahead $X a sort expectations

kind of we and elective that those procedure with more propane And pre-COVID-XX we start elective we ON-Q, to to COOLIEF where QX. similar there, quarter. why into is million, still about normal QX getting $X actually come volume hospital, kind to performed profile feel possibility QX of like Generally, we've on back in which said of continue procedures so on offsetting in of surgery thereabouts sort that, on is the of that in our outpatient going department was were back the behind

Kristen Stewart

there there as year, guys But there think physician I'm Okay. hard. the disparity as maybe you to standpoint? moment is any just for some And some guys use centers, identify well of this surgery to patients with of as you into improved tried were from reimbursement now with on going kind sure and then trying last more Medicare I maybe center. just opportunity use you just ambulatory in to get to do opportunity maybe surgery real those and very guess, COVID hoping, an ambulatory are this for you think or hope? what's just office Do a to COOLIEF had this an push push of any changes is say, should to kind the payment I

office and the next that potentially if when and ambulatory for would maybe for reimbursement raised physician surgery be change update that COOLIEF, guess we see particularly center be could knee? the I could the in

Joe Woody

I think sure. an opportunity it's for

multipronged clinical I it. a around One that's part tone reimbursement with bit they've have the for a ON-Q, been it's is slowed but of regular for center Obviously, also dialogue We on COOLIEF do the currently but right? ambulatory basis in We're a world, studies. the think a different approach. product. COVID-XX, surgical

ago. The is X, X, have So for that, just is people it things FDA months would many with CMS have completely right way the changed. and different now five than example, working been

sure. I half think maybe on successes That's update but And the bit a fall that of could little definitely, after into So second there's the going strongly. probably, opportunity, there. But when the further to for extremely forecast. year, we're is difficult we

Kristen Stewart

to just process? I'm in going about something are opportunity front. a perspective are But this have holistically bigger efforts and be guys cost making one on Any early downsizing management Okay. and restructuring this thinking like cost is you the and perspective? more. some broader from It Rick from the just too a sounds at you greedy Or stage? like guys

Joe Woody

do be that ready Michael, we dollars to. this the and we're about we're that have talking of on in early would that future, continually It's would now up would the talk you're above the talked about a just to about But But Mike, beyond I because would that we component? even after nothing little pick major that any more certainly And you would and planned structural a we've do that. want general cost now. And highlight it's if cost kind definitely efforts like but right be we to of But you bit working do announcing we on just to too that. program. certainly some when want efficiency,

Michael Greiner

Yes.

Kristen, getting that but we're we've far we're is initial the sure way the COVID-XX prudent, and being ensuring think, length depth this I also So phase about thought out it ahead that on making of that the not the too situation. of depending

right M&A, sure scenario, So elective in be that. the questions things coming after we be structure on. sure, we can ambulatory and of make to very can whether we the want that surgeries and getting back there's we a dollars your we in that do right around want to active active make to And to the have available lot

that to we beyond third the obviously that cost At some go that a things we get base savings a also bit the larger token, restructuring trigger wave itself to into and second be, initiatives little deeper opportunity above lend if we of and where would talking already about. would our not a to have currently plan or that we're a estimate fact numbed additional been same types would wave, the

Kristen Stewart

much Thanks guys. so

Operator

you. Thank

Ravi Our Please next Misra, ahead. Capital question Berenberg from go Markets. comes

Ravi Misra

everyone like to hope talked Thanks taking have Joe, saying. question good sales International for due else it question. if OK, Hi, is comes morning. COVID. about that as a is business the on to Respiratory. in I I everyone strength you

be of pandemic products a maybe some that portfolio maybe as seeing strength awareness may that and the how and global your how of international wondering markets the result. Just increasing weaknesses you're is this given a in or the

or kind your your And of pretty we one for you That $XXX from cash maybe say expectation right, would around flow that today. is then are second, significant cash million? where decrease a position I If you be did Mike. heard

just walk for would through cash on the drains us be That if you could the year. So rest the great. just of

Joe Woody

Thanks, us, high certainly, digit. cash of should low have of guidelines use with that Joe suction Michael the Woody. follow type the international single the from is helping we then and will published the a is we with start share. closed see Ravi. question. mid-single-digit closed of grower and these suction, as do I'll and healthcare has moving using ventilators WHO systems be generally, But awareness This And the for

So become of a I probably as well of also the level, awareness there's adoption for products what's for because and these replacement deaths. It's these COVID-XX obviously products, CORPAK feeding has then the happening the but there's tubes CORPAK patients with opportunity all our lot internationally do patients. in unfortunate think of

get look But has us created addressing awareness an for as it we'll this. to that we through

of internationally, mid-single-digit turn think to With essentially us Mike, for plan. that key overall for a it growth which is longer-term I'll what that, our really So some I just cash in view we the it have you over discussion. bolsters is driver of growth does that it

Michael Greiner

anywhere chance so a into would the clarify even needing measures. on back thanks is The to see not of that $XXX demonstration be have Great. point question it the not that. which we would only in Kristen's be of to bearish near cases reality restructuring and go of was revolver. most is enacting we needing the And the case, most we we cost though would that was point, Ravi, of savings other to that for number point, bearish in million, a The that

plans for liquidity to of most just other that it because under most sort in the revolver the doing savings put well meaningful initiatives, our necessarily real not bearish was $XXX But we will yet, and is other go by ready million necessarily we half have but and demonstrate any containment would the that not to enact be and the be of all $XXX would of case we north bearish million $XXX cost need no million the would us a restructuring number even the the that tap measures any us enact there cost not to back would scenario. So year case.

Ravi Misra

Great. And issues. on ON-Q one last one then supply maybe and

can Just that us be of on may there? are take you anything you your latest seen give kind

Joe Woody

our with improvement with some of pump. with on mean some to well. with see positive accounts acquisition was over. the coming happy of continue and what And initial the the with larger we side, customers do seeing converted Leiters I which Summit, electric we're We've as opportunities sequential we're

Obviously that strategy profile course But with in pump a up as and year. the of has little be build business and over we're and remains there we earlier then will elective to bit the surgeries come our call, the significantly enhancing intact. then breakthrough to our of talked internal electric our down R&D about moving now, with stabilizing going

Operator

Thank you.

for question caller of the next Our is Please Matthew go ahead. Mishan KeyBanc.

Matthew Mishan

Great. here while. Great, like the free that for right. I might all you this having We thank all in And really a for All for be we're taking Q&A. questions.

Joe Woody

do, got Matt. to We something have to

You're right.

Matthew Mishan

able other of like. kind been looked off. of the first companies Most just have So April to give of us volumes have what sense a

ON-Q Chronic we get bottom? here that said sense that give Care of you Can where of versus think Management we COOLIEF, the base you a assuming normal. of and so a sense what kind can were the us Pain go fairly April I volumes from is of was

Joe Woody

And in So Most is smaller a But bit what with because we've similar in Michael in chance really the talk profile too Respiratory much have. but forecast the there's baseline a that in as ON-Q. as to much base we of him expected, in jump want a to with on base obviously, April pretty couple of about for to for aligned the last same Pain more, the which things, as our for a may Care, some XX%-ish this of April forecast. Health. seen of weeks Chronic two March business, COOLIEF, off

of more to projection to sort back, a but a in serving about but really customers electives. and of be low talk a bounce directly, But the normalized to we somewhat the as can you a bit. you discussion in now quite what to expecting see June, get difference all the some Is and back, or April coming a our is then close imagine, been quarter normalized was where we've for May them early numbers fourth may

two to base about a But things good for or one you opportunity your Michael, it's probably say scenario.

Michael Greiner

Yes.

a Health quarter. the May second the orders is accumulated Just would of from deep But deepest to June. although to show two themselves that with add be business noted, anticipate and to deep, the internationally both One, have we've of domestically, fronts. starting also some you April, hopefully quarter. May as then on that, come get But and we Respiratory as June fulfilling with large be and Matt, our that elective Joe's point, back to the some improvement orders in, part that do of and into hopefully increasing the to quarter we fairly is

matter It's the you with trends slice line line estimated. to But some going The and into April. out of what saw point, no that to in coming continued how cases we Joe's quarter in with in be it. down first we accelerated

that any how like from done starting to quarter sort a is standpoint second shakes job And decent for looking be at weeks see could at going six, So they great we seven that a like, some feel what look from areas been down consecutively. not to number worsen. had and looking of those standpoint, a we've in May optimistically, trends June five, but improvement total we're

Matthew Mishan

it or size on help to percentage you Respiratory sales would And that General be the like today, making then Okay. suction everyone And what any of is ventilators seems as as Philips. percentage just Tesla and That's actually catheter, closed very you way a of for helpful. kind could us also, from of guys? Motors, a

ventilators lower may of of solution a ventilators So are out lot emerging across kind Is transition there. and of some markets? that your also there potentially work across would solution the made that a those work universal cost being solutions with the into

Joe Woody

Health thought we about $X of backlog. significant QX, and ahead what was million that Matt, we was expectations, in say, fairly a we that So have did Respiratory

tell the recognition ventilators. work and It can so think that do the positivity be the I all to it's about the what a there's little early for think of this does guidelines ventilators, of kind some one of the across each used I of although, importance. have, long-term may effect to product the

Michael Greiner

And Matt, Health the thirds closed Respiratory two overall about suction of is business.

Matthew Mishan

Yes.

Okay. Is then And hesitant who last orthopedics come like, patients all. they be who total awareness wait a and until back on more the kind to solution for want hesitant patient? can resolves good you there COOLIEF Excellent. this I procedures to enough the situation situation knee? potentially to there won't orthopedics the may you point go I among it to one, in where year They of do somebody want and until evolves. COOLIEF awareness free the enough Is around where some potentially a a consider should for get to put the say, off have may listen, say, is itself, doing well, for

Joe Woody

longer and total working for patients view technology hyaluronic will, if what surgeons see academy, will point, in reimbursement. you need for folks been term think definitely And that they way. and/or are we're the state, using a COOLIEF they acid of I a but catchment, outcome. do ultimately with lot repair, would the We've different it knee and better they a acid Yes. they're it orthopedic a on a doing of hyaluronic with the as that instead your a use they as And to involved

Matthew Mishan

you much. Thank very

Operator

you. Thank

Stephens from go next Cooley of comes Please Chris ahead. Inc. Our question

Chris Cooley

just Good taking morning for everyone X, thanks my on just ask questions. I I'll hour guess. here, and the

Joe Woody

Okay.

Chris Cooley

For point, ask, just me be out. two then I'll at this I'll

some get I wanted clarification. So to just

then And think, not think couple now doctor's an get Digestive as starting a maybe just that want rough year. calls I it near about nonessential in I calendar but just the the again of expectations all on anywhere hospital. of mentioned but offshoot we're of was here a back sense hearing was better personnel franchise that, that You baseline we and we're slow, through flow Health the this quarter as I these to being different of morning, of the office of asked, allowed June started ways kind or kind ramping. that various where of the

force. with We're seeing improved productivity No travel. sales

the not bit you will there curious, round changes much business? P&L, but to from for a changes Just so fundamental realize morning. just that might of you to opine cost And that anything the be would little picture this I early, I us but seeing go market guess hour. further way structurally middle in initiative, perspective, the from just out to a the the a that enhance cutting you think are big And it's just here on able you

Joe Woody

not the build would thing in distributor I January fundamental we seeing sales the what about with mid-single-digit see we global to variability different there's other grower. are some expect in quarter-to-quarter. been We definitely be. And and have mapping underlying really any February, categories. and Chris, lot Digestive companies of of change as and you and talking trace trace Okay. it think be that really a Health, One may a were them

would do change any in added if bounce in we been where And a also but QX we IT in backlog think continue bit I the feel we there's a ordered think to dealing and NeoMed. on in you're year-over-year, the in, don't the like quarter of folks over QX, little something the with that's think more back NeoMed why acquisitions are future we total. in level-ish fundamental bit like interactions. from situation be sales we make really onto I that business,

It's regionally. very different obviously been

do testing in are seen the that PPE, virtual lot Some interaction. in we're type course of OR procedure toward over group systems Others you requiring in healthcare of education, focused. cases some a the weeks of to of want and the with opportunity We've them. are and areas remote reaching they physicians more couple moving past a of broader

I device segment procedure have more with might or be to with have think an and it the it in medical opportunity procedure that do will be conferencing. versus the you need can a where through the where or on to future is telephone or video a FaceTime adept that conversations you with deal in educated person company the account well really

be models take to beyond that different a adoption So market. some can think do get efficiencies ways different media, product and social in in you there'll I

as so And we're at looking that well.

with agree you. I So

will in future there I opportunity think be there. the

Michael Greiner

And kind that moves supply, making Phase the are questions. initial our about from business of looking our was really at And couple disease. to bit, especially little goes over be back of But suffering solvency, last summarize attempt product earlier Respiratory ensure liquidity, just around Chris, just at to weeks to we near-term a a that the our should of those handful X. that this for was

organization are as can These procedures will open because be seen not questions looking where it X, strategy. do we be or are we marketing weeks. new of last six sales definitely to see, the get other we've up, just whether we at, what around elective we're over And how how areas or as those back around strategies, that things there go-to-market things in new sales done those with productive market, start procedures other make and the

company the overall, and embarked Management last device we've learned business, in as upon this we broken into what a med But as Pain just X.X pure-play years have Chronic Care.

learnings weeks. there's And that a six in learnings developed. been great And of heightened we've by last those lot we've so the

absolutely ensuring going we're we to we're position these the good be so half as point, weeks year. there been the in of are that handful first of Joe's analyzing. has be to offensive here back few to about enter And a things But in

two this Just different we thought to clarify about on. early the ways

Chris Cooley

And I could squeeze if question one clarifying in. last just

we trying quarter I'm is the With do here that retroactive? when the just forward of how model we think well. payroll about about the I deferral to think basis rolling in on that going taxes? CARES Act, treat that implemented Or a as to as see June

Joe Woody

ahead, payroll tax. go the on Michael, You

Michael Greiner

Sorry, repeat that question again.

Chris Cooley

Certainly. Yes.

I'm of Or tax of is just model in payroll terms it Just in rolling on XXXX trying forward. is the that basis? a XQ to retroactive collectively in how to kicking think and the second the deferral in now quarter? payment. about that that the Does maybe

Michael Greiner

Yes.

So pay may our million for full to don't it's want $X determinant be and when year, would back filings, we during of be being that we lose of that the would deductibility have to and That XXXX back our we or said, any XXXX. upon available. determination pay tax sort

taxes. It be to about defer So will totally deduct is of XXXX going our the we determinant XXXX. 'XX And $X duration of upon and of then be to permanent determination payback million. in those ability will some through

Operator

David of question Stanley. The Morgan Lewis Please you. Thank go next ahead. is from

Marissa Bych

procedures care early questions. few versus that I shifts you May coming procedures Any then the by still that five you And if taking would you're region? too to curious the be Bych elective color to geographic for Thanks in my Marissa June, setting the be any or by really Hi, if weeks. whether David. additional want saying you've great. seeing confident to This for and I'm in is in that's you gave secondly, on seen just for are would trough procedures conclusion. past commentary on it's make you six us into that or what back a thank seeing for may be

Joe Woody

are that sales about what early customers, Marissa, fall. the will plans But I and I changing. moment, some to happens come is with they're back, of regionalized. the And things to it's unknown at we And say channels, your talk our dynamic with starting more on bit of to think the in point, these seeing it's our discussion further surges do to that. a or predict the because

the areas and example, some for to southeast and Texas the as So Northeast. of like California opposed

But types looks healthcare And sooner still surgical looking how to work the get procedures, be at they hospital. of if it's then are what needing the like some systems, can center generally, more revenue done the there back sort to to the focused ambulatory on coming stack where those. certainly, urgent the procedure of the in are back they're surgeons and just and areas not big and it they're type same. or a are though, They're on for sources of going themselves, all obviously, hospitals surgeries

Marissa Bych

follow-up. Okay. know we're Great. on just I hour. And a then quick coming up the

QX you that OpEx? cost comments into But if the you detail on savings it ask for the as touched in could I the discussed the You remainder want any earlier. to just greater that's we quantify any me. this think or and modeling Just versus of about other year earlier, of

Joe Woody

and you'd to. Michael, cover some I'll that go let ahead you like if Okay. of

Michael Greiner

because lay right we year and them specifics to those goes We're not adding out we adjusting Yes. going as on the cost savings may them. to on be be may now

may primary dollars The focus they are meaningful preservation. of though. be support They relevant. on And still is cash again, are categories shifting. the support So the their

Operator

Mr. like conference Executive question-and-answer concludes turn would This Woody, our back you. I ahead. Thank Chief session. to Joe go to the over Officer. Please

Joe Woody

and thanks, your interest for in Nick, continued you, Thank everybody, Avanos.

continue While team our I'm rise unexpected pandemic has the challenges that as going to presented a COVID-XX to the to challenge. is business, confident to

maintain preserve and you down the financial We're actions prudent heard cash strong our position. taking, call, to as

our with coupled that in, me strong. gives proven I a position think remaining confidence financial this, clinically our portfolio the of lot markets about and we're

everybody wish a safe. you. week, good healthy and stay So Thank

Operator

The for conference concluded. now Thank attending you presentation. has today's

disconnect. now may You

Avanos Medical (AVNS) 9 May 202020 Q1 Earnings call transcript