AVNS - Earnings call transcript Q2 2022

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Operator

Good day, and welcome to Avanos Second Quarter 2020 Earnings 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, this event is being recorded. I would now like to turn the conference over to Scott Galovan. ahead. go Please

Scott Galovan

CEO; and to everyone, Quarter assumptions. will joining It's Joe us. quarter Conference President our Senior will Good CFO. Michael planning and business you thanks our to pleasure Woody, be will welcome Presenting Second discuss details Michael regarding the my Greiner, and Joe quarter Call. Vice environment morning, today for and Avanos Earnings provide and as XXXX Then well review for on update XXXX. our second review an our current as key objectives additional XXXX

call We will our finish for Q&A. the section avanos.com. on website, with available call the of Investors today's is presentation A

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

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

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

Joe. turn over I'll call to the Now

Joe Woody

us Thanks, of for and you Scott. to financial thank Good and review the for morning, operational XXXX. joining our quarter everyone, results second

we remain as operational on matter getting to teams range to the execute we things continue challenges, our and customers. that and focused commercial of patients Our well needs against macroeconomic a the of back meet

and which will as continue consistent dynamics portfolio the the objectives our confident and our macroeconomic year are demand updating and we fell our financial short full EPS, to our second improve. estimates to of Michael revenue quarter for throughout longer-term we ability consensus execute chain and further, in supply experience product for other against Although revenue remain discuss guidance also adjusted

of of cash foreign we diluted share growth XX.X% of $X.XX excluding exchange. actual impact adjusted achieved $XX or $XXX We million, earnings sales growth, free For million the flow. the than greater negative generated quarter, of per representing X% and

exchange, grew through Care respiratory of had contraction portfolio the impact distributor to just later sold accumulated being channel experienced foreign X% of Excluding during a negative that the pandemic. under our XX% inventory in our our business despite Chronic due by phases

Our prior with digestive solid excluding franchise delivered quarter than greater growth another X% versus FX. year

pain pain tough staffing shortages Excluding the X% versus was pain a with to X% our prior growing procedures and a Interventional preferences. lower over The slower by franchise OrthogenRx exchange, comparison Pain acute to had foreign down and a year impact due product of little our franchise patient X% and portfolio elective to continues portfolio year. last our return and experience

QX Our June. regimen injection strong hyaluronic in offerings a our with acid beginning posted sales TriVisc, HA through three of adoption rapid orthogenerics

Given our competitors, account from the the reimbursement to demands. five will continue new in -- patient position transitions, one see we to market favorable capturing tailwinds injection share both compared with in meeting account segments and acquisitions and TriVisc,

strategy. the and driven continuing streamline us gross and to plan OrthogenRx mix confident have for We will in offerings. sales adjusted patient million our We new manufacturing of just customer portal efficiency forward. in Harmony, differentiators delivered enhance business from capturing the of are in online we direct we remain program Additionally, generating product help an actual incrementally quarter, than via deliver to margin experience. by the net fiscal on $XX differentiators we these believe greater of favorable inclusive XXXX our XX%, OrthogenRx Separately, our moving year to under purchase service our retain

inflation headwinds the first related for the across year, optimistic second availability, margin inputs duration the our all with half, We but manufacturing are continued shipping elevated. results remain material and of pleased that distribution costs cautiously gross for are given and quarter to and raw very

and first worsened the throughout in second progress are making $XX backorders our after in quarter the Additionally, excess currently of quarter million.

resins, product for Tyvek and and of with we materials annual XX% XXXX the some expectation associated not Given this are assessing access and margin, our uncertainty XX%. raw chain, continued surrounding maintaining gross these including offerings, our year key costs to for silicone supply increasing full but certain our margin are our gross between expectation confidently

Turning impact our we in first XXXX. range during margin year-end profile call, identified as earnings would of expenses we the half our to noted of a SG&A, SG&A that

over although revert constraints digits, the our for to a inventory will positive end trends growth from of growth legacy across versus of maintaining quarter as we our let's XXXX, a for respiratory less a as benefit quarter some duration disruptions as levels full growing of pandemic, XX% strong further With in anticipate despite be second XX% rates enteral year points the this Many distributors as products we historical feeding health versus for the impeding anticipate XXXX both with business second repeat expectations, supply their SG&A revenue growth approach continue year, portfolio the further to we expenses our chain continued product even first product the category. The flu the on supply our our than mid-single categories. NeoMed half of for soft the SG&A and the as was to to assuming We Separately, that a quarter we should tail review XX.X%. these and stronger indicated, anticipate season. of on of half rebalance percentage as no in Our XXXX. had revenue our Health product growing not by XXX still basis detail percentage previously background, improved sequentially portfolio. our franchise Digestive second second

portfolio. Turning to pain our

within grew Although we to XX%. ambIT Interventional we over experienced a growth weaker-than-anticipated Pain overall second and continue also deliver by mid-single-digit quarter,

a half tough our indicated expected for prior to return in is of due noted driver our year quarter, we for further call, we the capital predicted a second future the interventional pain of for COOLIEF single-digit comparison Throughout second year. growth we second have earnings the and key low to double-digit in the quarter adoption. quarter strong a and As seen we portfolio pain, first that demand growth units and growth which

acute portfolio momentum issue year pain supply a third With ambIT optimistic the the challenges program, the forward. backlog that will fourth while the some ongoing we been key which increased the are double-digit impact demand and across a side, an growth our this engine we to cautiously some products to able mitigate growth have critical continuing drive pain On been to pain chain can have underlying return the moving our by of reusable quarters. present, of portfolio improving pathway products, we still pockets in of and affecting to the remain

XXXX demonstrate flow. consistent, our for priority Our to ability generate next repeatable to is cash

noted you impacts, recall, number I As and generating a that of as quarter. excluding million cash of previously million million generated approximately we XXXX. year for second of generated full of may $XX flow free We free $XX onetime our anticipated flow free we XXXX, $XX in normalized flow earlier, communicated the cash in cash

managing inventory $XX to pressures operating expense on higher payments, our materials our now a to flow and result backlog, growing be cash and earnings lower of free due inflationary we anticipate balances closer However, million. interest to slightly raw as

M&A. for final priority Our deployment is capital XXXX via focused on

close tuck-in active new cost pursue generate optimized with $XXX on dialogue our a as and due top capital which are closed engaged That goals, ROIC our remains a acquisition potential quarter. incumbent pipeline second diligence our that the to million our ability potential is ensures would we And in capital. to allocation stated, existing upon To enhance capital valuation and line of our that of above healthy. targets we meaningfully previously targets, each availability during facility of our credit M&A growth. synergies is number Our disciplined leverage footprint, ensure is said,

primary the with I not various but of the we're has noted offerings performance exceeded with and expectations. our even initial product through earlier, headwinds, In OrthogenRx, acquisition As summary, date macroeconomic expansion and to of including very to flow for its supply our pleased execution, growth, on had improvement solid limited objectives to and relating half XXXX inflation, currency gross first focused cash organic free material we achieving chain, remain and our generation. a margin OrthogenRx

Michael. the call turn to I'll Now over

Michael Greiner

Thanks, Joe.

with even execute pressures, we globally half gross or of improvement margin the met exceeded our free macro well on generation OrthogenRx most on economy in and the industry-wide that first strategy. noted, flow and to cash uncertainty you As successfully as persists our continue objectives. the We delivered as our

anticipate guidance EPS lower and back quarter, adjusted impact to we second higher $XXX the delivering operating million well percentage primarily on prudent interest lower as XXXX as significantly net margins Additionally, the now the revenue due foreign between EPS $X.XX interest year negative committed and update ensuring below believe projective Even million the increased spend remain sequentially and built slightly gross revenue currency and as these $X.XX to $X.XX, to headwinds further a totaling between exchange good expense is $XXX our sales expense. remains momentum continuing and macroeconomic as in and year pressures, approximately for half due SG&A have our percentage year. We we fiscal across though and in earnings of we of spend a to revenue. adjusted XX% of objectives, it reduced full based

versus organic the with second the removing impact of sales Baxter in Maxter-generated compared our to $X coming $X.XX. a million from were exited prior our $XXX up results. the in EPS second quarter year sales Care currency quarter facility. last X.X% down Total This sales basis, reported excluding the as On were Chronic contribution the was quarter. from growth flat. year at excludes prior from by well Now let's sales year actual constant million review revenue of $XXX quarter, year million, last adjusted as OrthogenRx second

second the over growth to of growth. constraints supply further ENFit our health their technology. with see domestically strong primarily health the contraction the Separately, distributors disruptions. combined from to globally even with we continuation business this some business conversions NeoMed in almost quarter, through XX% our X.X% Joe Within XX% XX% a continue respiratory selling noted second impeding grew due exit pandemic, growth as quarter supply in of digestive to as and our experienced despite We portfolio, inventory earlier,

Moving pain to management.

elective Pain ongoing $XX contribution million side business Interventional of million Excluding we sales, the a chain driven behind challenges. of by saw OrthogenRx, of year, delivered and the $X actual prior The tough comparable supply the reported by grew orders On-Q. as growth as lagging in and whereas as acute by driven quarter quarter X% well in utilize the X% Park, declined and pain Lance that back procedures that the

Joe we specifically XXXX. the through present from the remainder TriVisc, high contributions continuing are our adoption upside and into OrthogenRx, capitalize positive we the will HA regimen of X-shot of level be a on noted, as to that see As of opportunity year

points basis XXX Moving XX.X% year. down than to the income improved Adjusted gross margin versus statement. last more

As indicated shipping earlier, progress better we are the than with OrthogenRx, mix, gross a plant performance margins of and improved combination product on forecasted pleased with including lower cost.

higher last costs the NeoMed capture conversion year, we you the shipping business, to recall, If incurred products opportunity. support for to significantly ENFit our

second across challenge the work and Although disrupted. we are are regard to first half, environment certain pressures back supply our encouraged material very with the chain a Inflationary margin of order. our remains quarter availability presents through with elevated existing as global we gross and raw results components the

totaled and between stated by to to resulting adjusted and share. As earnings year. with partially million quarter. XX%. $X.XX in compared with gross million as compared profit for in these Adjusted confident operating our ago, $XX adjusted operating totaled gross compared of million Adjusted discussed ability last sales diluted previously margins margins year prior and we adjusted noted, $XX of translating of the $XX per spend the are even full offset Higher $XX objective $XX million across year, XX% to margins million million Joe income already year a were in $XX headwinds, additional totaled achieve improved earlier, net SG&A, EBITDA our XX% to

liquidity. Now financial turning and our position to

closing strength repurchase of Our cash million currently over share outstanding with on programs. strategic and continues debt of have balance $XXX and as sheet the remains hand, of our post OrthogenRx to a completion million acquisition flexibility of we $XXX provide the with us

pro acquisition, post our we approximately at are Given one forma EBITDA, levered times.

external slightly million generated Additionally, cash second more million, capital priorities. for meet of of which our year million of for generation and includes have although $XX than approximately we anticipating quarter. cash to the free $XX now $XX each allocation the are of expenditures, capacity And flow lower we sufficient we internal full capital

flow. elective continued in range, inflation our free payments expected are including gross unevenness debt. ability in already To range costs. free we summarize, cash return XXXX capturing balances meaningful a end procedures to As profile the objectives with drive to Total XX%, greater raw low growth primary delivering our target million, $XX OrthogenRx material margin flu $XXX in impactful million. approximately the cash less between of of elevated expansion, million in deliver shared, our demonstrating and higher delivering our center continued challenges net materials, $XXX sales are is continued consistent and flow around the margins partially of our and XX% offset range and by distribution strategy, we expected And on of as than that outstanding to gross organic to margin factors, of improvements assumes interest million Annual impact end this OrthogenRx The be currency, season. inventory of and sales with sales unfavorable $XX other with on be our and lower making accessing

the our are operating to of significant execute position we strategy and industry-specific and improvement maintain for we the our macro and and questions. environment during global to financial confident that gross free open the line this Operator, drive margin necessary uncertain ability flow Although environment. both please and priorities solid remains difficult, economic delivery current against cash a in steps remain ensuring taking

Operator

comes from Stifel. [Operator first Please Instructions] ahead. question go Wise The Rick with

Rick Wise

Lots some the through it. industry more of supply little think starters. the to just just dealing a us help unpack in the detail everybody facing yes, is in for chain, second challenges here. with The half Maybe

How Where resolvable through backlog the Just that's well. it? therefore, in new prelude your are us You're understand help working assume better is like, -- dealing finding and do it. suppliers? feel you with I to you, as

Joe Woody

start add Woody. would like. correct, Rick. he Mike That's of that anything can It's Joe I'll and then course,

Digestive we For chip affected the business. resins dissipating also first some that in what of be the seeing In the And in half, Health And that HX. saw ON-Q and have problems business, international turn, silicone. that, in business. us, been affects to a COOLIEF mainly generators the we range all looks and affects of

just now, goes time, up, as that. pathways around the any Now, as a that in upside. the and right it chain as clears we're potential different imagine, in emerge, the list given on you items supply be from working to But to the extent can do that and in other or packaging things whether there. simple that, at There's we're for companies, ink other also like million

get is in HX, try And going with of for kind we to see we're material medical around released think major with to be equally Tyvek. issue I our raw Avamed device can working to other more companies how products.

So what add better. much change. obviously, the opportunity. you there's if guidance in to an that But improve, want see that's does in range know, if And equally, you Michael, and the I to do essentially, that? we don't But

Michael Greiner

sight, the then end of first those half would higher then $XXX the estimating than mentioned, as back we year. $XXX up, towards is in revenue, at getting in lower line have of I us $X clear half we're would least possible. range back the that end $X $XXX Yes, realistic that, not impact, add has a of meaningful able secure very orders the be million million million of needed, just the that's midpoint, although just the of to the those million and If more the if raw Joe materials, to back year, that on orders that FX, to million to we're which

Joe Woody

maybe nature in portfolio this certainly absolutely a challenge. size just bad chain others different done seen as the think of of would But the some and quarter. of the the type way, of quarter I the is even the not our impacted there. our have We our absolutely hit but I that demand could without have, size And of of clarify we more it for portfolio as company company I've the the sort and supply

Michael Greiner

North of these first with year, through -- America even of back Yes. the year I first half the look the mean if right, organically X.X% orders. grew at half you with the

plus back have on order half of obviously the first FX international So of total for much And had a more issue, our had issue then been it the year. revenue the would impact substantial. more the which

Rick Wise

terrific And OrthogenRx. quarter. a to Obviously, turning

that But said $XX more part just you're quarter, a the do generate to and change it. expected how the year, than you've should help what's think had be be -- and like sort sales now, HA you're excess And thinking will into in reimbursement reiterating You for on And given two about looming it us it think first how about wanted was like sounds case. do own feeling appreciate dialed seems confident. in to Maybe of It what halfway next? just of you're you that that. doing sure that we I others. the my a I million, why continue that in question make projection? we the could, understand mind better that -- now about outlook clear through I'd sense, how you're and to we're

Joe Woody

Joe. is that. get I'll to This do

more faster year We outlook. a migration more quickly in TriVisc. we the the with definitely be than lot a knew from full five there the We new That confident shots. would are anticipated allowables, happens

We're five our a way can In customers favorability strategically around there good -- moves Short customers want is seeing to the shot into to ours. on competitive pricing, of get them because that fact, reimbursement of we X-shot the portion some are experience over focusing a our term, market. went of wholesale. the

to reps healthy add to reps. direct intend We have we ASP. a and nine So maintain

model, think, I where positive in that and So that that bodes business that, think internal a meeting be that some or of sort you this six is of then said strategy tailwind we're I and and we we And will also what just year working. see the with helpful. if two months, We're upside going have for nine well to to this definitely we of the window, sort business. beyond think will, pretty of about

and other out So all, us business of our in like all ON-Q. strategic, COOLIEF things it's and areas orthopedic for that's obviously, in alongside excellent we're an to acquisition be turned one doing that other

Rick Wise

Thanks you. again. Got

Operator

with question comes go Matthew from Mishan ahead. next The Please KeyBanc.

Joe Woody

may think there. I we Matt lost have

line. You question. back Maybe the into we may take come another

Matthew Mishan

position question. peers better the follow-up than the What to have of the TriVisc allows TriVisc on a reimbursement space. some specifically Just you about a in

Joe Woody

at Well, a primarily, specialty in that way strategically business, priced not we focus of lot wholesale of pharmacies kind the the that our level, business. it's that rebating we and the a our way product was

we So more other ended products. up injection reimbursement with than three favorable the all

the will a about and over have differentiator script be the the similar. you on the to And different Going customers we in technology come some we've is we forward, ambulatory and do terms be have, in of sites that now or business. centers service we we about talked as much intend make Ultimately, of selling think portfolio working we differentiator where the a And to as we're places again, easier surgical can we conversations the alternate with that will the then in syringe to differentiate we time, expand reimbursement a to way in think have way differentiators from or servicing, that year I it a around sites that are on mean, COOLIEF. other portal very I as that that do have later channel our going the well. ultimately, bit we're really, like got

Matthew Mishan

Okay.

industry the together to of of the you of of reimbursement through rest year? come as half kind the get change to with So second favorable you're position sort expecting your this

Joe Woody

three like favorable second we're half the think the through to area. of year, year next injection feel in I going be Next we

Matthew Mishan

be feel next and the you favorable through then year it like middle Do you'll will of

Joe Woody

differentiator with where then that Correct. through at It innovation we're could have extend It we field and basically have and standpoint if kind the a our point, because go into a doing syringe -- a you little or way our base bit service, your could at to differentiating that portfolio think a be a other from level. some of eventually I more of have customers, little things reimbursement we're I an you level

Michael Greiner

these in few few is what's as into is we will we them over customers, the key, service gain the the dynamic maintain of once developed a that pricing last in have this and market, so And prepared Joe well. less we remarks market quarters. all next we weeks additional mentioned And share the

Matthew Mishan

NeoMed Okay. NeoMed, and I is of then is from remember And is understand as like guys. Digestive Digestive. larger from that that -- a of a Or a question I And base you around contracting? larger now. sales being Outside this NeoMed It growing. still growing well? seems

Joe Woody

silicon staffing the we But we one HX. Digestive Health upside mid-single-digit with still No. you the -- area, focus we where better bit amount I a can level. ICU in where America It's areas global which us franchise. even right CORTRAK, materials, for on of grower on see Digestive see slowed There's do a Tyvek also still a inside MIC-KEY that, the affected of We in if it the Health our and primarily product. get those all census. that's as grower good It's by, think can is North raw a of shortages that believe, absolutely an and we in

with mid-single-digit it's the EBITDA. back, good a globally future all good it peel good for us margins you a and cash grower our contributor very to for and actually business, solid big a So runway

Matthew Mishan

into in from quarter? it. it, And number the million. it's on just the that contribution then that Got this about just back quarter, number Is the the you $XX OrthogenRx, correct acquisition

Michael Greiner

That's directionally yes. correct,

Operator

from question Stephens. Cooley ahead. Please comes Next Chris go with

Chris Cooley

maybe did you're just call you guidance, there the question if a line then remarks, the in headwind incremental the prepared assuming start what I terms you out perspective of me could your for or top apologize alternatively, a FX continued of published major point. products, another currencies coming were a quarter? we just When the as HA just for point of end there way your us headwinds. I from markers out in being pricing from a rebates give your and picture a missed your kind I but competitors, assuming mentioned make When you follow-up. this I'm that into maybe maybe additional basis then continues. understanding just clarifying assume pricing did look bit you're There's want versus, of regards little kind no to at to added. gets some correctly. say, just for clarifying at the it bigger we Michael, And sure there, in -- offshoot the lower Just the to where this of look discount

So you to quite bit price on the be that's one the I've will follow-up. next of quick bigger just in continue at this Then the going time. because just got kind year that of to HA players picture differential midpoint of think three of until terms a published across then pricing offerings calendar four there's here disparity

Joe Woody

Do or currency with the... to want you the to you do start want

Michael Greiner

Start with that.

Joe Woody

of So is discounted business I pharmacy really rebate We're haven't so think to type you've structured got and specialty area payers the lot forth. HA not or big a us focus. not please to -- right. of a The for we really

business also, keep So from And And that's fairly cash it we'll it's think for question a us And also a on we're I to didn't competitors that with we've and that the benefited gain significantly going want I the we share building continue yes, the into middle the robust. should wholesale next innovation pretty go side prior after. think period. in and one that to as was that mention well that's opportunity we playing servicing it price with then allow thing model during of we've us. for year, got things the that from like looks to that got about

Michael Greiner

other Chris. your And then on question,

headwind half probably million the we FX second to our we're that half a $XX We is planning So seven just had in $XX million related we'll to reason $X well. half. increase more that anticipate do for versus to million, as the going second model. in in first five revenue the the The about across see

a bigger obviously impact. So has that FX

were back our orders of related. portions good addition, international In

ramp So additional in of we half back year. impact orders. back a of to have half related bigger the in the the the year hence, international FX the

Chris Cooley

picture I then just appreciate the a And additional bigger color. follow-up there.

alluded here periods. the management quantify the as a way prior can to pain we of side us about in incremental where bit you're side for the COOLIEF that franchise. demand service demands terms stronger you relative on seeing capital of Any maybe little You to think

to get more demand seeing versus little a of just there better levels granularity much around trying you're how bit -- granular kind Just relative incremental there.

Joe Woody

Yes, actually of a took an is was accounts connect Chris. first I customers back. half, Sure, bringing in one think, in the with channel there's for get benefit, or things the opportunity hold active the the shortage chip there as the that existing and penetration

second last certainly last that year quantifying then as we have big comparatives see and of for us. the of the the that in think definitely into with there's QX is other in teens I they the we that thing sites quantification just but QX out, strong OA. that the that's better out in a coming came we're as some study the that grower in also treating everybody first aspect this think published. that also for in comparator there's as continued drives tough of OA the in for we again terms are the But for double-digit, now, get back And a us capital. are as procedures, a is space, bounced we those We knows, and growth really we think demand half, for I QX, quarter when so year, all COVID and definitely

And the capital. backlog so units. we doing And for a nice have I job these think selling the a team is

from. it's coming where all So that's

Operator

Please [Operator ahead. Stanley. Instructions] with question from Next go comes Drew Morgan Ranieri

Drew Ranieri

product was the first struck know be I kind more on can kind it But the you're as And like single more cash coming. the innovation service by you go a of little model? keep what some to the -- injection about the there the behind bit a that just about putting me. also one. into that Maybe topic eventually I'd detail But my and pay, precisely of, product. of Joe, mean curious you HA innovation hear for

Just I work in kind had would curious And market? how then HA a the of follow-up. that

Joe Woody

we're sort to a and business little to us thing guided the making to to that of the the reimbursement of innovation So for I we've the that that's precisely thing. about do customers with it talked going easier portal mean side doing changes for to technology bit effect. need areas differential allow the on one Harmony get after more script injection into best the to in the is the the next be get just reimbursement assistance, order

And so if relief an sort impact, I may or when less think the you experience two weeks, make a it's space of for why sometimes of not that this of what be relief. injection, which more pain others just no is you're patients experienced in of months pain couple get known right you

have are want HA have be is relief. sites. lot to folks think and of to I will think a pay cash come And and the the we in going can the that access differentiator. a just So I think that thing ability want And of to the in patients that go where are want to I believers with then some other that then that relief for

But where little sort sites the really there the bit where for opportunities end it about the that unfolds of year. there's so are on all And a in are that's of we towards talking that. we'll And be we that. more as most of

Drew Ranieri

there? for injector Is accuracy. improving to and the needle, or just just kind this else going around of on ultrasound the And injection the like be maybe using Okay. anything

Joe Woody

related the more guidance to a It's needle. of

Drew Ranieri

relief on be specific But back it's kind I maybe is couple second be of between macro of And to organic you're can just maybe and this of some from Can just reduction. first also FX, of prior there guidance get I it guidance, that macro uncertainty? how at looking that And Okay. But when is the flat there. year-over-year the what maybe maybe here. the some where guidance, could control your for gross you're I area is you half of give maybe And versus talk through half looks Michael, organic bridge that margins, change a this at then X-point EPS. how about the questions the the us of about we a for flows Could mean kind half. a interest. thinking EPS look when going change the like you and like factors? in mean, you just into

Michael Greiner

Yes, fair questions.

the those EPS the on So bit reason for a primarily through little side, earnings impacts earnings. in the And the half. then the expense, biggest gross are higher lower lower operating operating lower the the margin on FX was call the and down second interest

just referenced. the offset will revenue We you that organically lower

OpEx We and through OpEx will that savings. offset challenging

on So side, more revenue by down offset favorable organic the OpEx.

gross is piece little lower the Does guidance that then the to of interest question, Drew? were other relates that The FX bit of expense, the margin. a and with EPS part change ultimate higher that help

Drew Ranieri

does. it Yes,

Michael Greiner

when inflationary from then think second first the you is that the And march margin, about of half half factors. biggest gross to piece

has than an we anticipated. if we we balance know raw noticed million. but that that as to in inventory That That's sheet, pockets free have obviously we flow about doing cash we're more our concerns. materials, dating on have impact don't buy well, opportunities as on So you our -- $XX up is

of been inventory impact priced So are the in goods now of we've in going on that. in -- the the through cost that to we we're That's the -- that's higher capitalized. back therefore, margin and the releasing is back as of half bit we going our inventory, that and work the be sold, half on to going have a sell to gross also year. But order a back year, looser big little

that, have a as drag work Now obviously that's capitalized XXXX. balance not reverses enter we into more we purchasing raw material sheet, meaningfully. bit we on normalized and our to That little start as through

Operator

question-and-answer our remarks. turn I would concludes over This the to session. like to Joe closing any Woody for back conference

Joe Woody

want expansion the as the half meaningful you very value markets of just our market-leading back in free for their deliver to Avanos. growth, that I cash shareholder to and our combined the everybody margin generation detailed sales of Thanks. execution position we lot interest given And building priorities that in XXXX, we've that consistent pleased creating commitment. we'll a we see enter on confident I'm and while our with to fall believe flow foundation results the environment, overall in quarter, the this meeting. and are continued with for us significant XXXX and this we're are committed thank portfolio probably attractive uncertainty investor

you very So Bye-bye. much. thank

Operator

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

You may disconnect. now

Avanos Medical (AVNS) 13 Aug 222022 Q2 Earnings call transcript