AVNS - Earnings call transcript Q3 2020

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Operator

Good day, and welcome to the Avanos Third Quarter Conference Call. 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, today's event is being recorded. I would now like to turn the conference over to Dave Crawford, Vice President, Investor Relations. ahead. go Please

Dave Crawford

CEO; presentation and to everyone, earnings joining It's will Joe us. call. President Senior Good CFO. and you thanks to pleasure Joe Woody, are morning welcome me with quarter Michael the my Greiner, With Vice an morning, begin this for and Avanos conference third Michael is the and third quarter our on business our made call on of at review Q&A. progress we’ve our call against avanos.com. We'll will finish for our Investors section update the XXXX available with A priorities. today's Then website results.

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

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

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

the Joe. over to I'll turn Now call

Joe Woody

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

our the has getting to patients I to back our our executing resilience to facing we in demonstrated the to mission our to team highest finish to to matter. adapting extraordinary deliver the be our this that their the XXXX, time execution strategic rising As challenges things business a in pandemic, standards. this period, Throughout roles look pleased strong and momentum living out during upon build with challenging team's commitment continue and of and

previously steadfast we on of uncertainty our highlighted. three persists, the As I priorities virus remain this

their employees safety of First, maintaining the our families. and and health

we're COVID-XX available our products the for third, clinically-proven well-positioned needs meet used customers. Second, ensuring of future financial strong to Health And ensuring position while growth to patients and Respiratory continuing remain treat preserving our customers. to our

areas. past two in each these of well the During performed quarters, we've

office our environment a from have We continue and work field home for to staff.

of while high protocols employees produce enhanced safe. spending increased we to codes at discretionary sites has reduced our savings to Also the new our financial us of the preserve priorities million target The teams strong cost address to savings the ensuring facility our implemented we the to investment in in manufacturing We realize Respiratory volume really enabled year. products continue remain remain Tucson in position. containment line through savings of and to Additionally, the preferred identified caused of clinically approximately third our efforts have start the find pandemic. by our our cost to supply Meanwhile, growth on our accelerate backorder begin $XX we quarter, during our during manage planned double close and the year, while that our produced our position. amount Health to production we lower revenue the

costs year decreased our $XX nine the a Finally, nearly healthy maintain unusual us enabling the for million sheet. have first balance months to prior of to the year, compared

post-COVID this As additional to environment. our position discipline support financial find look we the savings cost XXXX, strong maintain in toward we cost and

we remain against executing business the will We priorities focused factors can on managing and these control.

of grew year. third And performance compared per our top-line our earned share. across sales adjusted favorable both to we as million earnings Turning saw Overall, franchises. performance, the prior both and to diluted we delivered earnings quarter sales of to strong we X% $X.XX $XXX

suction Care growth are of in catheters, again deliver clinically-proven Chronic to continue we closed essential for demand strong Respiratory our franchise. across our We treating which Health, COVID-XX robust patients. sales saw portfolio In

saw as demand we the sequential normalized and backorder. NeoMed to as was procedures Highlighting MIC-KEY quarter increase well CORPAK U.S. capacity double-digit In in both across more in growth and Pain. slowed, of to levels. last both Interventional quarter, additional Although, Similar Health our has Acute monthly Digestive our a the returned feeding to use ventilation our treat elective portfolios. legacy sales for patients tubes reduced aided

of For rebounding COOLIEF levels. and XX% are ON-Q, pre-COVID-XX which are primarily their used setting, hospital in almost to the procedures

further be to fourth positioned build in and returns of to continue some our confident to quarter, the both we across XXXX in board While the with in I'm volume believe U.S. to in pleased it sometime coming franchises strengthening pre-COVID team's year. momentum procedure levels. we the expect the see I'm hospital before execution we're will

impact year. of the moving our we mind, the equally Our the of responding start presented top long-term at remain forward focused is that and we the on to strategy of pandemic priorities

Let our progress. me some highlight of

and across remain we committed our franchise, have more new to the years across steps The execution. and the hired of our MedTech maximize and To various in to growth Pain. necessary leadership knowledge experience lead M&A, strategy First, our than to Interventional brings and beneficial full and Bill we we our transformation to Pain innovation, Haydon Pain franchise healthcare Bill Acute commercialization, as in Interventional combines will Management experience, momentum XX implementing franchises. of build deep spearhead has global strategy, held Acute positions prove Pain that support development sales our One and strategy teams. potential marketing,

sales growth forward, envision operational create portfolios move we drive leveraging As and these we to two efficiencies. consistent

Meanwhile, excited in Acute regional customers. focus new a medical to continues with sequential solutions. us again with we further growth double-digit a In and channel and as similar scale our Surgery prevalent of enables Pain’s the as Pain, with and and expand Recently, distribution knee osteoarthritis. into by InnovaSurgical, Acute saw the partnership bolster as clinical orthopedic this to the partnership partners. Joint with when connections through randomized we published our leading in innovative of compendium we and scope look large dividends we multi-center The by partnership in entered hyaluronic once capabilities its quarter advantages pay as on servicing well tremendous to the for the about superiority the Interventional customers I'm to sales Additionally, COOLIEF. Leiters from sales results it force partnerships demonstrate ON-Q force sales into our organization the future, building data published Journal economic highest other enlarge entering showed a of research caused other the response and of to a COOLIEF pain In compared had trial demonstrating consistency to management market. trial continue Pain, recently previously in Leiters. acid of differentiated for Bone clinical COOLIEF on efficacy therapies of

Management the efforts develops FUSMobile high non-invasive past compliments mobile as This leverage utilizing in increased minority investment novel, have procedures, few I'm technology. we a franchise, ablation Pain focused innovation ultrasound made FUSMobile. and we to Additionally, intensity announce open excited into to years, our our

recent in that are make efforts, opportunities flow see and With to cost we key our acquisitions gaining are we nearing cost and from the completion cash I and to end. financial we're facility Also, to help system. to benefits two And the examining to planned for savings beginning efficiencies are our acquisitions results. our integration Thanks year mentioned, IT complete as improve new last end At of containment other other closed end on these there the permanent. related integrating approaching, target our of ways the we year priorities team's our October, of quarter. strategic to the by measures our the our continue implement

as solid positioned momentum as As our near confident strengthening an year pleased post well and I'm growth our quarter we a and we're the year. balance in In and expectations already exceeded end, we're building for delivered a margin COVID-XX closing, sheet we solid a environment. I'm result, expansion we that close

Now call over I'll turn the to Michael.

Michael Greiner

Joe. Thanks,

again seeing am United the I and with remains, of commitment Let once number increase strong in challenging healthy and unpredictability times. our we me infections the also coronavirus The team's across during as an the these in shut Europe. execution stay downs continuous States of as are

financial Given full to this will provide uncertainty, XXXX continue not guidance. continued we year

mentioned, ability initial as anticipated. back maintain this scenario I spending. as at two the the we focus of our strengthen our execute in the cash efficiencies to further year to far the And We look we steadfast remain XXXX. out looked And performed that originally flow. more However, capital actions we position. implemented in than we've are and quarter, liquidity strong necessarily the we Since drive our April, working will end and confident capital had momentum Joe planning discipline has cost March favorably savings, to turned maintain in into our back exercise

to First, generate of utilize refunds we refunds These plan us U.S. act our excess filings. prior in to federal XXXX filed tax and these year's return in enable filings We will XXXX. CARES receive throughout the provisions currently million. $XX the amended combined to

our revolver refinanced our X.XX% Second, million positive in using October, senior by portion due a drawing cash on $XXX redeemed that were in October, we available unsecured given our down cash. We momentum, this debt our XXXX. of and notes

strong position, reinforce health, sales our to we our $XXX our significant Chronic efficiencies actions, notes flow last generating These in quarter and both our health I'll along and $XX XXXX. treat with again with sales million savings, a than savings. a execute digestive capital that million catheters patients. enhanced closed remaining annual October. As third these revolver demand more result, respiratory in to for maintain is tuck-in across in cash flexibility results. redeeming compared respiratory demand financial we quarter suction also strong million a to care COVID-XX now by saw our our remains review over capacity to increased But products driven interest oral In which anticipate the and expense current $XXX acquisitions and meaningful after backdrop, XX% brands. free XX% operating with unsecured working on Overall, expense we the confidence $XXX million used interest year. Along grew cash to care for

as growth been digestive with legacy initial MIC-KEY saw replacement postponed capacity efforts continued seen enabled As during placement that the products, products for normalize backlog our during to As of in anticipate patients continue extent returning have to along we of we lesser the fourth quarter, in but the the health, second driven down the by normal increasing our standardized to returned Joe quarter, backlog regimen. products, that to we early branded mentioned, quarters, than a return tube related accumulated months we looked the to In manufacturing two levels. a the we more had pandemic, work pandemic procedures last our work our to demand to us

saw in pandemic double-digit from portfolio we growth our related demand. CORPAK resulting Additionally,

also as ENFit conversions double-digit NeoMed, accelerated We we to technology. our saw in growth

grew elective quarter. to continued Moving procedures the recover to pain throughout management, sales as sequentially

XX% $XX lower still sales the However, of year. prior were compared million to

the the canceled accelerating, when the potentially virus efficiency hesitation are and virus. have substitute procedure procedural Moreover, around or from transmission protocols patient, decreased to procedures patient have to infected reduced a While preventing procedures. infected elective the after there a patients with remains flexibility of some the new becoming

been traditionally pain management quarter strongest has quarter the Looking for fourth ahead, the franchise. our

However, factors the this year due anticipating seasonal are three typical uplift not the pandemic. to we from external arising

offices continue patients procedures. have medical undergo to go unwillingness into some to doctor's and an First, hospitals to

leaving for Second, effective sparing, more factors, third, growth committed and to high higher improving U.S. reach patients management in patients we potential this meet continue need and uninsured. unemployment patient’s its to insurance to profitability. franchise the inability is deductibles. these therapies returning are to By their opioid pain And

by Moving aided related prior comparison. was to international, we a year favorable from and delivered strong demand, benefited double-digit that growth COVID-XX

as trajectory While forward. benefit is from we and excellent the strong business moved two comparisons our factors, clearly international of underlying sales growth had these execution an we

costs to inventory of to franchise, were third management to continued gained $XX being respiratory sales in compared our to margin year. margins and see the is we operating the last portfolio a gross over was gross the time pandemic the related the and slower down raw for XX% believe by Adjusted to unfavorable primarily higher adjusted partially margin. health adjusted now impacted portfolio of our and our limit our materials totaled year. gross momentum the incurred compared will adjusted income adjusted upward write due to mix, two as With gross which by the was accelerate. said, that time of mix margin potential lower shift The Contraction lower statement, quarter. million, in was prior Performance XX% sales in sales. pain obsolete and profit decreased latter mainly margin, Moving $XX we will in moving million transitory offset to

had net been $XX income offset $XX anticipate to million million our pandemic grow year and adjusted and cost planned last measures. partially we ability to next year to of $XX operating by that our presented investment earlier level has procedures and team's that this totaled sequentially will into some year, accelerated Adjusted by being been compared elective additional compared challenges million costs we EBITDA $XX containment total million resumed of as improved, Our ago. a the results alleviate navigate the have delayed our investments encouraging as year,

earned reduction the we of closing, on of As needs. a expenses. elective challenging have by our of $X.XX of and and continued navigating driven customer's ahead share, acceleration environment, proud excellent operating In several per delivered earnings on adjusted meeting of occupations team's we execution quarters, the procedures and focus we are effectively

credibility with through consistent our position. which and delivery build building our of allows our and outcomes meeting needs, are We to constituents strong each customers results of financial upon in financial us high quality patients

We XXXX line beyond. drive strong operating efficiencies questions. we enter growth sales, please as free the for cash well positioned open into to deliver are grow flow and and Operator,

Operator

Thank you.

from comes We Larry with will Instructions] begin James. [Operator Keusch ahead. go Raymond question first the question-and-answer now Please session. Today’s

Larry Keusch

everyone. you wanted morning of alluded growth, to of we about for thoughts. but I to Hey pandemic? at just the updated some throws thinking you Joe, maybe the off, get past COVID to sort algorithm How the – here are start after you could just Good this, your Thanks. get

Joe Woody

still that, obviously have And some growth. all wants basis. things growth in break to get a that, Hey said we I is morning. with organic last who X% Larry, normal, for with think good quarter, point we somebody situation and that not confident believe X% on pandemic organic X% we're it there elements that down consistent we're are where seeing a to feel to in call X% a I'm pretty on the and We've we'll sure this a of at business but into like

Michael Greiner

anticipate to X% that our line do we accelerate free all Larry, expansion, growth, that far our our flow margin margins top cash X% EBITDA growth. will

Larry Keusch

again, get I understand, for was Joe, on of Okay. you. bit what then just Got here. wondering dig us talked as back the Again, to if be opportunities within about sort business, could drivers for you sounds that all quarter? third team you like other of leadership leadership you quick with one franchise little guess a revenues commentary, there? as based little think for then we you could it there. synergies kind about you, how leverage in a the new that the about Michael, talk the or And And there. on quarter. some It flat-ish do you your have just in And the you bit and sequential should two fourth see the I just ones pain more help in the could of

Joe Woody

Yes.

question with first as really we work the area within Bill. lot some and Bill will that serve strategic portfolio the an business. a efficiencies our management take innovation, of portfolio some there primarily that believe we've joins marketing, with Generally and together amount be KOLs as I'll strategic Haydon innovation the well in the our you of can but cardiac he space, the franchises So think sort enhance great on that well, a of that us despite challenges the experience, in in of And both development. if he acceleration past and had growth bring the office organization. we that there both organizations, and areas of as of back will of businesses can of

as strategic the and Michael get we're marketing QX. in And about I him kind well some you enhance actually on very of after the business. question development essentially, and strategic So ultimately then his think ability excited to that and had efficiencies

Michael Greiner

Yes.

much a through. Southern the flu Hemisphere. a that right. lot little anticipate into a off, will what think as of bit season, maybe RH past third QX second Larry, to talked QX of on flattish headwinds we work we than given we so about we be backlog then of that We And down the fulfilled read in bit, pandemic quarter season sequentially seen RH, bit I to a less have given little little and some flu backlog, we've really the being had being around took the So is your that in

sorry to to sometime side be in about sequentially well results, Pain improved. second quarter that flattish And we we the until so of But as as back. – XXXX. back any to seeing that are XXX%, think I improve, a that a continues on anticipate in back about others may now talked the bit little don't sequentially elective

So although pain to go improve, going we will continue to from to we see XX-ish it's where not now XXX. are

So positives we'll there. see some

we put around got QX. we've that So takes puts where all in some us in all, are and

Joe Woody

other One would typically pains sort we Larry uplift and that you that the was see I actually this in the thing call about is talked it that earnings just add last is also XX% don't and of in years, year, some we'll unemployment. We we this a some it, may coverage see of in extent. see but insurance that based we'll see think think full that like upon we don't that

Larry Keusch

Very it. Appreciate Okay. good. Thank you guys.

Joe Woody

you. Thank

Operator

question next today Markets. from our Please Capital Misra ahead. go Berenberg And Ravi comes with

Ravi Misra

Hi, can okay? hear you me

Joe Woody

Ravi, Yes, you. hear Good morning. can we

Ravi Misra

Hi Hi morning. Joe, good hi Dave, Hi, Mike.

business. on quickly the ON-Q Just

curious to parse maybe the I've some better, don't sequential may and bit Can significantly through. business one, margin came flow out takes upfront. help gross just I of if the we puts in some margin impact, least in didn't And then had guess better procedures there of number correct? think to a the that second at modeled, model, this a have impacted? had my coming if at I than was the you little pain but I but kind two, there have asked my this know business management least step how that And calibrated think for right, is it business does I compared Just look up about number one, XQ, of as volume back? the been like

modeled, lot we SG&A control a the least. had better is than at think I here

restructuring and the normalizes? through much come are us help could Thanks. once much just the COVID If maybe the benefits how of how you're seeing can kind of understand, you “permanent” of

Joe Woody

improvement. sequential sequential I'll and And Yes, definitely this, think well very but it. pain and think businesses we raised severity saw we do more But remember better ON-Q since expect on you've is on together margin gross said procedures of may talk no of essentially still that to I forecast. with ON-Q seen as that, QX. right, problem, to that anticipated, of just what we take it's to continue, improvement level QX, some that, we've XX%, and what at the more then I Michael is, in QX, and improvement Ravi. a What we've complex we've you're terms I'll XX% the business so I little bit both and on SG&A to move again in about the in Michael we were a better, from nicely, do than seen those we that electric and longevity both outlined with the extent think pandemic But I that's, benefit happened we with and

with say a catheters that what the business suction wants oral respect with closed gross we're to care. is Michael generally I couple Just in things, make two and margin to comment experiencing respiratory health know its and But that. on a I'd or overall, then really the mix and

as and protecting essentially vulnerable manufacturing associated comment actually things on where those, SG&A wants you're Michael some talk it's So our with and that in in if of and we're sort he'll place other organization we maintaining both well. seeing employees probably period, during will costs I have there's that to Mexican of supply where payroll think the chain you subs, the about,

Michael Greiner

Great, absolutely. Yes.

that's as remarks business. until happy that Joe piece mix as continue are XXXX, headwind the in suffering fulfill prepared we that our get a orders respiratory see in of we biggest going all pandemic. and and management a very our to those we're the just So able pain But that we why of that help being mentioned, said is we're the respiratory and better said, balance through to that

plant to meet there There's now. folks great expenses. COVID And also demands. as And then related defined because But within we're sets in there's our feel the those healthcare manufacturing those then pieces work bodies protection ability to one, a just in employees to labor meet paying we not they mentioned the are coming as And requirements. there, Joe Mexico from is extra itself. about also considered two vulnerable the right mentioned, So order that local Joe government. by of bringing standpoint, both are we're in the

So over foreseeable with down probably transitory believe protection And and in the that'll finally time had the we obviously then is some write-offs. things work COVID that plan of for some remaining future.

On frankly, a we the of a nice the as did at talked much job that We we as sold quite back raw would we pandemic, that ago. way didn't the sell and of are quarters are of this supply some And we couple of our looking materials need. about what more. we others chain, thought some would cusp skews we there

inventory so QX wrote-off And million in this year. year versus about we in $X more QX last

well what of things some cost which execute as with and we're able time. as as some On very of will result transitory, again, still we've about to really for the couple gross an to both $XX some years. the a COVID. work our savings on, the will So additional I organization profile over of the good on grow SG&A, we be next into us as stay we've these period margin we've But removed plus cost coming think feel million into are side, pleased continued plans year the with done savings of

not and human make have bit we postponing, merit and we're obviously more capital, Other of like a so traveling, little things easy, backfills around the those things expenses. choices Some fairly to those things. were don't increases difficult

looking permanently as those forward savings we’re We process companies going into costs in XXXX. as to have place much as the are now, in possible. planning most other going right And

run believe those wants by to se and XXXX we into new cost taking going costs that this out of we today those and right we throughout beyond. make things some make feel than don't did on business other permanent but the looked to savings also so we pandemic, that to And news year ways from the have per at any a

Ravi Misra

I'll Thanks. back get in queue.

Joe Woody

you. Thank

Operator

next Rick Please Stifel. go our comes today ahead. from And Wise with question

Rick Wise

Hi, good morning, everybody.

Joe Woody

Good morning, Rick.

Rick Wise

the cetera. Good to stabilization/improvement, see et

in rate? directionally, of roughly, you figure half point a in products, you're Am to on the or rates next thinking plus double-digits, for the numbers, you've right? you're and starting second Let the Is about, as when backlog. awkward a that year, and out I point we you're healthy I a that this tough think what over per I a all new these after pieces range did XXXX it. Thank of question second to the about you’re partnerships, bottom it. thinking a even XXXX Why to of But approximately in growing launching And and myself, things any running it, better, appreciate gradually there. over, started quarter at uncertainties And But with reflect apologize we i.e., XXX about XXXX. you've minus shouldn't starting think third run reason different advance. about correctly? me there. sort – about this quarter truing we Help – just I in international could to do you appreciate just up there middle just grow is take time that know executing I know got know it run put an us is – rate, this XXX, get moving start going seeing – I just sort on take saying been fourth quarter. as I I Again, line you. we XXX half I wouldn't in as

Joe Woody

in think obviously even I guidance for not QX. see I'll what rise, longevity with, on XXXX, Rick. myself, even through that this looked And all is I can the giving see And rise now you kind complexity, could seeing not direction, dealing pandemic. it's and as I U.S. we're keeping – give our right, I duration to we're of we're Europe. of peeled of All really we're also the do the the I then eyes now for And which the transcripts, but sort some the what if in

that does you three in And still impact, what a the down maybe summer, they the – a normal so how in versus just phase that there week give it's of to specific – hospitals basis, are on even hard procedures, five sort late a do example, do or don't gate. six to the and days as

to of reason make is, organic the said really X% a may and Now circumstances And of we a by it's business way that have then, that himself believe we've only pandemic. really to Michael growth X% want the that about I we currently because said, here. the it. affected June it think the And comment

high is business looking single-digit, sort As you can international think million the get it. definitely we mid had managing pain example, and going But done on single-digit back business COVID for really single-digits. can an it job a of where to quarter have remain stand as should like a total we to mid great form a we've $X we the with health million a year, respiratory, this Digestive I health. believe in alone, respiratory to $X to benefit from then

to to add a look the that? like, because want to forecast may give uncertainties. we but really many unable so So that what Michael, of business, confident you are in do

Michael Greiner

Yes. I was Joe. with really all that

would is, The single-digit other that mentioned yes, thing I grow add will we in XXXX XXXX, range. you against meaningfully Rick mid absolutely

attractive cash flow importantly, margins expansion look XXXX, around More and at operating margin see margins, free generation. particularly you'll you when EBITDA

from negative And just the expected great million going cash that, read in XX going you we're free around next add you excluding the and a to flow. the growth flow. so above a free demonstrate of metrics If to top and in we're millions of have really year negative XXXX, top million act’s the have then about of $XX XXXX. year, had line could lot for CARES refunds, the to meaningful cash CARES year on that remember of act, $XXX This we going beyond we're

Rick Wise

help Yes. I'm very all That's great. just addition looking me cash. could the $XXX to cash. of And your for the end understand at tackling the I Impossible did you comments want quarter, thank you Michael, encouraging. sounds about subtraction? it. That not understand and questions, better in better like So but And million

going so free You back. months, paid now notes, you're next have cash. million, millions understand in down going a XXs get to correctly $XXX the to you're the greater XX XX, you generate of over than Did the I

So sort down. territory, you where XX I the about prepaying – end could things you Am months could the net-net, now all notes back it? in were thinking equal, be approximate they're you really of

Michael Greiner

Yes.

next back year, Assuming we refunds timely. get those we filed as everything anticipate, we

we that to reason would a little no not agency, range those any $XX your your sort a right million of back, math get on but which there absolutely We you're million you're be those with – working with bit cash out there IRS, assuming obviously cash from to there. end year. in position from $XX next government But be would total, of have when the get where to believe push

Joe Woody

well And which to for about I of of the that similar good think business the M&A pandemic. eventually Rick and the as us its coming that back performance feel out puts capacity we level with

Michael Greiner

debt of why things, And callable. we to we point, a felt just at was variety of do – one one Joe's things to the as different the of the looked coming reasons

have in on year cash for cash be been at the was thing to balance not on prudent M&A extra down execution the with in And as the the to sheet reasons up we with paying we year, something, that. are larger the landscape, And we're capacity the the up that this to be sufficient finished at look revolver integrating down bolt-on moment more still as active the want and the is the We we right the our done, to looking still why down we're this we build is We're we our which available interest much more do why the landscape in we'll we get do at. expense we right then more EBITDA expansion on we radar referenced. the able felt them debt margins obviously but again, paying using tuck-in, build strongly do acquisitions just remaining the be now, tuck-in. able of the things was the an systems great, in which very have up of it time. has as saving and just and that's very about M&A road, felt we've on One to looking to focused the screen now,

Rick Wise

Great. I have one last quicker one.

Just but think that's Michael milestone – installed or going end system, I help I for mean. year, going operationally, by just really of obviously. it's and feel all help to impact you IT financially. to chime major what mean, The the the it appreciate executionally, difference. make may in new great to and measure us us have through free that's it's Joe, both to this that is a concretely that

Michael Greiner

a through support right, do way On reduce ability our quantitative a way to and integrations acquisitions level which the able is them, measure like Ready to us it needs. SG&A our to do NeoMed, to needs, allows be Game our in

come savings $X that that. so And from just there's

way. quantitative one that's So

our our the about talked which a then impact definitely we thing, think you ability one other better is And little if about. is has to is approach. system on, seamless within way quantitative two an just your One a bit those analysis. is put but other Pain franchise The fairly a Combining tougher do franchises to that

get this ones you savings any The moment. are around that allow ultimately we do a it's overall about that all growth an be think easily. customer can get gross as to system. needs to continue is XX-month we make the immediately SAP hard given to How put we Those single-digit ability fairly about things to, are How integrate with Over So the we to meaningful us efficient, acquisitions we pricing opportunities? mid questions, within better. because we within a Those allow contracting think ask leverage dollars time, at quantify how which more about are Salesforce.com whether But what do us those sustain think given have environment? things don't to have do that should leverage opportunities? we our us how that can dollars margins we what get period. do better

Rick Wise

Thanks so much.

Joe Woody

Rick. Thanks,

Operator

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

Joe Woody

Hey, morning. Chris, good

Chris Cooley

Hey, for a good quarter. really questions. Congratulations the taking morning. on And solid thanks

Joe Woody

you. Thank

Chris Cooley

but the little are new initiative. finer the desperate focus, those you from One points. could I Pain heightened and – bead the bit put hoping the there Appreciate call Just management on a was

convey I maybe sure what in So There's trying consolidation just you're and fully here. office. understand want some I to administrative maybe to make back

a Maybe but a and as on drive from quick sales So well? the think where the a growth synergy, One that's I'm from side synergies perspective the follow-up. then system, are understand uplifts and see better there approach you it cost when a got I've both you Pain trying just from to you

Joe Woody

call working to Yes, you're the Chris. some what and in are the noted to business and management also as of the in is we you right. synergy into chain, opportunities more the get about we about certainly like of And They there ultimately talked are functional our element. want up Generally on we them separate way strategic I do and that InnovaSurgical the back office the remarks points. Nonetheless, areas go channels side, prepared there expansion type think franchises think with is of for their the businesses. and

there's opportunity well there the so on And side. synergy as an

that BD things component sort I areas. strategy all functional whole really And like that things. business in up two and two going end of are that to leaders think disparate of with managing So it's do instead big

prepared it's talk opportunities I later And over to follow-up. that a we'll to you a accelerate date sure growth had think there for And be synergistic time, I think us. think for also I that will be about. going at

Chris Cooley

in kind so there you our here want maybe the maybe timing accelerate don't to of in go bit, there terms how little traditional just environment just COVID-XX much. Thank in efforts maybe help versus us you. you the could us if cloud an [indiscernible] but patients on then just COOLIEF this you're delayed can more doing to do setting. appreciate traditional RF. and thinking And terms of your reassess of I some that that update in Thanks I when what and specifically, interim growth know a color. give to

Joe Woody

pretty We're Yes. that pleased with the in business. return seen that we've

hospital. I duration we the anticipated. in of clinical HOPD ahead think OA doing focusing talked We obviously what accounts of our we earlier of about on that the capability. at months studies just the the really the got of looking the about What moment pain-free. relief HA published and COOLIEF the the existing talking are that longer believe is Joint, of And expansion in Bone is six technology versus holds a heavily we're on that being doing at what new how our Most sites have And clinical that we runway believe the on pain in partner there. good had and study little in we're and throughput. part spine, to we've and pain-free. course, the studies, And the pain better a call, of across scale of coming with really we their increasing there's

that The is working a only a I center new longer knee doing which payer now private think but coverage, spine catalyst not is other the day-to-day even we're the thing coverage. the a reimbursement, of for ambulatory of and on treatment term, OA being surgical

the maintain double-digit. runway thing to that another that's of us that ability So we're on that allows working

Chris Cooley

you. Thank

Michael Greiner

would top the beyond. this, you referenced include in X% think guys we looking doesn't that be what to that positive outcomes given look even I Chris, X% any beyond happen that Those growth things aware and things as quick, a situation. are COOLIEF we're real and and would Joe M&A, would those currently horizon that then believe be, Just but be above we at. not X% That I favorable does include to planning XXXX at be, the and X% to could line they are like of generally reimbursement obviously the those will and extent

Chris Cooley

good a point. Yes. It’s

Operator

question Matthew KeyBanc. Mishan Thank go our from next today with you. And Please comes ahead.

Joe Woody

Hey, Matt.

Matthew Mishan

of Pain recovery quarter. start and off just in to want guys morning, trajectory Management. good Hi, really I nice the with the

indicating last early guys back back July think you pre-COVID in about were XX% it to August, I was levels. quarter, or

where – quarter you imply that really moved how would that would be the think improvement from I significant improvement kind how there into finished of helpful. of and up kind October,

Joe Woody

Yes.

though, – pleased to clearly extent quarter. with couple of was We it the of we to that would say were XX% Generally benefits the And Pain pandemic. parts we're about more Europe improved in somewhat COOLIEF XX% just of sort on about did, did we sales a XX% in largest we've we're initially the we progression elective during progression. the October, Leiters, So a start I with then sort the that seen with of benefit. things, further and side. unknown And we the like the in That the of And procedures greater seeing overarching October. was even earlier the COOLIEF in seeing said, in and we in in than of U.S. terms we things QX. Acute watching And the more online pain talking are business educations did recovery faster, just like our in of cases, the ever the some were

Matthew Mishan

Michael. Go Okay. ahead,

Michael Greiner

say going take finish We bit going in case XXX%. XXXX. just the I'd believe a believe again, scenario, – just that's time QX we're to best at we of even in to don't little

progression good QX, XXX%. that exit Joe's the we XX% but even like So as not talking feels with about, maybe that more

Joe Woody

And is. it equally where it could stay

everybody that, the Everyone think with our point, dealing the is we've complexity happy but progression. of I been with generally, mean, right. I So, unknown, dealing with Michael's to

Matthew Mishan

Okay.

anything changing aren't in So seeing environment. underlying basically, the you

broader around cautious uncertainty? macro which makes the all just given You're the sense, and

Michael Greiner

Correct.

Matthew Mishan

Okay.

Joe Woody

second quarter us we're the for we of all In capture. like to feel range, what capturing is appropriate

quarter Our relevant differ back different in percentages could come think that are peers, we procedures. was second may maybe to but missing And be for than an other It procedures a products the still back out have don't of didn't that we cadence coming with then. indication our anything. in it we're seem some just our

Matthew Mishan

Summit, quarters and on the early had now I how a of just had progressing you? of kind Excellent. you've right. mean, curious, where couple take that's All Summit for you’ve

Joe Woody

of the issue is our innovating and element Over so out have what filler about rounds for. does get some we takes can Summit data pump an portfolio. that Yes, us and too, other for the transfer been asking of talked electronic think things customers it we've I out. Obviously, time,

we then believe and we it's really there. continued alternative between segment a customers. gives have innovation in broader pump that would anybody for certainly base our install – in So us another plan our the the It portfolio that we

into And the moment, of smaller distributor and at the system to our so relationships. about a has getting really business changing of out can of overarching and the help the but business be real into IT initial It's the our portion the part some growth. integration been time business over that

Matthew Mishan

And what see but larger, recently. you pipeline look? happy going Are guys pull wait of acquisitions on with that It potential what does kind you're for sense other something the targets? triggers a to companies Right. are bit in you seeing build then lastly, your you some little makes of pipeline

Joe Woody

Yes.

course have of second that little think to XXXX deal, if in of it call. right that we'll contact looked side that our the pick work will we’re feel in now did, get said folks again, we're of that FUSMobile we've of to, of attractive uptick say I'll a there means a landscape, like we've half with up the strong And absolutely this going definitely is a in environment evaluation, second it's transaction, think the past little you're second we I'll watching virtual going up to do a a if forward. anyway last a the move the personally, M&A to active, we're kind not active market out with more just of start the of the would actually industry start a I be of think doing sort really bit And are half still and over But XXXX. a world. that this half going XXXX. what see note, also with the but available the – I two We work in bit to and years contact we that done lot that we and And still the we do in then was of need something because conduct don't them. targets. that we and pipeline stand I that lost to. became our think sort in We're could still not

Michael Greiner

Valuations mentioned in have stuff Joe us remained to to about plenty valuation. incredibly hone But Just at. thing for talked is, want of one look on there's you buoyant.

where And so remain. wrapping something valuations around difficult on little heads a it's our just executing made actually because us of bit

like that like We pipeline. remain are we there, in have past. being patient we technologies disciplined but as So around out we're going to effective our the

Matthew Mishan

Thank you guys. very much,

Joe Woody

Matt. Thank you,

Operator

Stanley. comes today Morgan Instructions] David question go Our ahead. Lewis with from next Please [Operator

David Lewis

Hi, thanks taking for the question.

I sort to a described think that new that Joe, Just you a that of of still broader the the one Joe, you Management, where you've on of, quick area wonder margins. think wants both in or the Are changes that it's you, Acute maybe But the way if business, so Pain do platform in thinking sort an and of me, business? comfortable kind side. I Interventional the for franchise that's have management with intra-quarter portfolio of in ones you that products strategically, to strategic question just sort for and two of you made Michael, and you then were take today, think of need that about sort compete

Joe Woody

Interventional we into of that they're put starting we lower products to can why points, sort different Pain. where call and that's way investment a add And back. our with believe around are a we in is Yes, the the in we approach FUSMobile, so which expansion,

time definitely or bolt-ons over strategically put So in you can see other acquisitions that us business.

Pain thinking move Pain, really think Pain looking expanding made but about either from to bring there's Acute Interventional Ready, that In portfolio everything foray feel definitely in what the out is terms with much on kind more now we're approach focus of acquisition. business as the of a that of their we or happens of orthopedic a we bit we the into Bill's Game a And at of like end, patient everything on is approach orthopedic, from with you this it's terms of little to the that you're because to kind and could so So Management beginning heavier a that. to is work going aware starting probably we're inside been that that customer. in

David Lewis

of think think it versus basically going margins of near benefit? XXXX but lot the to for think over better mix-driven as want do bluntly about is based Okay. think down term, and you into sort you sort oriented XXXX, XXXX so commentary about on give in mix-driven margins more this much. as to asking, extend XXXX? here here come how to gross And these margins you cost Thanks are about on XXXX to just XXXX a XXXX just back plans, Can about And margins being operating I of intermediate on Michael, they a dynamics, second.

Michael Greiner

reduction in XXXX best down. going The will margins to gross we'll to XXXX in operating improvements be point, and are see flat at because margins from SG&A likely your to come spend from sequential

And very so your is math there accurate.

David Lewis

much. so right, All thanks

Joe Woody

Thank you, David.

Operator

remarks. And I'd question-and-answer concludes turn our the to conference everyone, Joe to like over session. Woody this for final back

Joe Woody

Fall strategic I like in I'd strengthen thank your our in interest Avanos. Investor can the cash with we we and XX these operate XXXX confident Information think access market-leading portfolio avanos.com. position of Thank for face to to flow continued the the in website, while obviously taking Conference. our markets the business on continue everyone at in Stephens Virtual November combined of to steps at margin will you you. following And sales Conference Thank I'm that. free of near-term and how steps execute and Also for Relations also challenges, heard these the and that found and presentations the well we're day, Healthcare are foundation the present growth, and attractive present the positive on Michael I beyond. in Virtual Stifel will you. be expansion, the us section

Operator

for conference We concludes this attending call. today's gentlemen, presentation. today's thank and Ladies you all

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

Avanos Medical (AVNS) 3 Nov 202020 Q3 Earnings call transcript