AVNS - Earnings call 3 2023 | Avanos Medical, Inc.

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Operator

Good morning, and welcome to Avanos' Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Scott Galovan, Senior Vice President of Strategy and Corporate Development. Please go ahead.

Scott Galovan

Good morning, everyone, and thanks for joining us. welcome Avanos to earnings third pleasure call. conference my you XXXX to quarter It's be CEO; Joe Senior will today Presenting Woody, CFO Chief Vice and and Transformation Officer. President, Greiner, Michael the our quarter an review on efforts. transformation our XXXX will Joe update expectations for and remainder third provide of Michael will topics. regarding detail share additional these

Q&A. We with finish will call the

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

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

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

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

over Now Joe. the turn call I'll to

Joseph Woody

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

achieving demand indicated target down of million toward around we pleased at making by year-end third the are December. order in outlined call. our the quarter the expectations align the quarter of year, with second and our $X quarter, that during anticipate our are disruptions this our from would strong progress chain be steady beginning a back products. Last continued end We with supply million, results, over reduction $XX which and we We for earnings

comment minutes. our will against steady to priorities, transformation which on make a further continue in we of few progress Additionally, I each

patients as that needs meet always, of our primary we getting back the to things is matter As our focus the customers. on

impact for return operations didn't our sales were our of meet that exchange our the earlier criteria. the and from adjusted quarter, the effects to decision revenue of For discontinue foreign adverse million $XXX continuing

continuing EBITDA million quarter. operations almost In generated earnings per and share adjusted diluted we of addition, adjusted from $XX during $X.XX of the

XX%. our of margin as Our adjusted at a and exceeded percentage XX% gross SG&A approximately revenue stood

spend portfolio product delivered minutes a exceeding I'll demand strong NeoMed year, showed as the our by conversions next for bolstered we few in of our which product Digestive quarter was advantage our compared Health level. On America. discussing North the growth at line, the results Now robust growth to the constant ENFit This XX.X%. another to currency basis, continue category take previous

double U.S. continued our feeding Our performance legacy Health CORTRAK digits grew our the Digestive enteral just of expansion of primarily legacy of standard care product the with coupled of line behind offering. shy globally, portfolio

continue to launch ability we Our to low product and months; be expansion deliver the by that supported next to Digestive in M&A actionable large attractive and rationalization; leadership in targets global markets will adjacencies. core over growth XX innovations growth into high-potential above-market our markets; Health plan

Pain to portfolio. Turning our and Management Recovery

This certain quarter our negative revenue, of products. impact sales were discontinue low-margin of and low-growth, to the down approximately DIros exchange announced decision XX%, excluding previously the foreign benefit

prior Game to categories, which year. down XX% and were than product continue across the of both softness greater the versus see We Ready HA

to Pain X% an year previous Interventional Our compared portfolio due supply experienced the to decline challenges.

with that We our results. previously revenue will delivered structure. In of we withdrawals quarter strategy current low-margin we're be Separately, several for supply consecutive the year, is new our executing market our QX prior third impact of our Pain excluding portfolio low making versus the growth our least at largely business in products. Given flat the growth, anticipate and quarter, DIros of low Surgical improvements, quarter improvement. After our to showing fourth go-to-market progress excluding business and certain we anticipate be chain revenue. positive Surgical IVP single-digit described quarters our consistent decline, Pain

year, met prior HA though versus Our down internal portfolio, our expectations.

to continue market quarterly volatility we we shot but volatility last experience Nevertheless, the and environment. As of the largely pricing have our we to call, X declines. opportunities and strategies HA over on near-term in to dynamics term, competitive continue offering, long right the anticipate the X and place capitalize discussed to our believe due during quarter's in sequential

Finally, acquired product and excited early off line solid, launch, the we has performance been of are yesterday. newly our about kicked market U.S. Trident which

efforts. XXXX Now transformational update moving an to on our priorities and

management X right financial will efficient As focus years our on capital enhance opportunities cost operating optimize have to ROIC. portfolio taking the a improve categories to we priorities our profitability; X where our are: we that additional and margin and and meaningfully profiles the organization; allocation meaningfully to win; transforming commercially Strategically and to our optimizing profile. These for continuing reminder, go-to-market of next measures priorities have attractive key our our path enhance

are Pain our these portfolio and portfolio accretive our growth pleased health with Interventional runs execution We very closing as our priorities by DIros the divesting against which acquisition, with enhancing business; our evidenced respiratory outlook; margin our now to strong strategy, noted; throughout pain portfolio; products; DH million savings, margin XXXX. expect in just our we and performance go-to-market which $XX accelerating our I cost growth continuing transformation exceed as and progressing

transformation have I our M&A the organization, execution portfolio other transformation plan The our consistently presented since JPMorgan communicated, conference and be realignment year bit in of given activities. to this at uneven our As first a priorities. would commercial optimization the January, we

the solidly and our in on Day. serve which blocks XXXX June execute financial building we each the XXXX of the We as outlined these Investor achieving priorities, for metrics to XXXX continue

results. continues quarter the as turn who over our to further efforts and Michael, I'll Transformation lead Now Chief these Officer to third provide into will call financial insights

Michael Greiner

standpoint, net favorable year. From for per translating more adjusted earnings the Joe. almost was operations income prior $X.XX of to EBITDA margin net $XX was the Adjusted million a diluted adjusted quarter sales for totaled than XX.X%; million, gross adjusted and million; million, $XX versus share. quarter Thanks, were $X.X $XXX.X continuing

sale end, and our our RH portfolio. generated For most of flow we business down used despite Recovery Management of proceeds facility. the portion credit chain a and to in the continued over of our Pain quarter $XX the supply quarter, million closed to pay cash successfully free revolving of Subsequent headwinds in we

hand have ratio currently million of million $XXX less we giving result, outstanding a debt, and a of of cash on turn. As than leverage X.X us $XXX

noted, decline, As quarter. coupled gross I to will a the was margin negatively a XX% previous basis XXX point sequential on mainly anticipate a of absorption, improvement due and as the inventory, electronic fourth was however, gain SG&A, versus marking impacted components. We of quarter. This margin XXX compared pressure notable which the exceed our prior for was percentage revenue, inflationary XX.X%, year the to down XX.X%, quarter gross in which fixed points. basis adjusted is cost just reduce with ongoing to efforts

from our in XXXX among to Looking reduced continuing continued XX.X% revenue our to of with per goal ahead, diluted for leading operations year of share from approximately These profile XXXX, savings journey were $X.XX improvements earnings adjusted is by compared part a in to to business $X.XX as further XX% standpoint. This XX%. a between we process versus SG&A are with improvements of XX% optimizations, margin driven XXXX. cost others. Adjusted anticipate XX.X% ultimately XX% headcount, fourth to enhance financial and percentage quarter to third-party the EBITDA ongoing of our a ago range

$X.XX; low our which EPS adjusted year $X.XX presented adjusted full of gross our to earnings stated effects account diluted reaffirming to approximately resulting year and approximately was guidance, operations product annualized an previously than of during continuing are margin EBITDA to company comparable range XX%; quarter single the the guidance portfolio of the $XX for margin call. into second We impact flat greater be the XX%. Taking includes current revenue anticipates This from million rationalization, year organic digits.

As XXXX. generate previously savings is $XX management our the track between on by of gross million shared, $XX transformation million and cost component program to

portfolio management remain are noted and our maintaining for conjunction adjusted greater XXXX. execution XX%; the of transformation mid-single-digit adjusted of flow gross margins sharp efforts, with transformation health to other our revenue these approximately growth; and committed successful free earlier, margins $XXX a organic on implementation to EBITDA XX%; strategies, generation and enable we our than in and surpassing recovery million of both The will achieve in business Joe businesses. As focus us our pain strategies priorities, cash

Investor horizon year. X% please by our for than this at Operator, questions. Day June, in greater anticipate this of ROIC outlined ROIC end line the the X% generating as open exceeding over with Finally, we

Operator

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

Frederick Wise

Gentlemen, Nice quarter. solid the see to

gross with margins. start me Let

to Michael, than Joe, you Are margins gross it. could out maybe say expand were we full Maybe indicated talk efforts that to that a in I inventory. can your Yes, that to Just bit. you in were softer you with you reduce cutting third back quarter through whole -- is that bit XX%, through year deliberate did I little you And on in specific fourth hear still Michael, did a it know to was you inventory range. just anticipating. you your -- to What heard quarter I guide is XX% I goal say get process? you the think that XX.X% on? came

expand all would. Just that, on if you

Michael Greiner

Yes.

the affirming fourth So still of we range and margins XX.X% north that of year. kind gross XX% full plus quarter, anticipate for

the that Investor We other accurate XX% working that's then had the is about XX% term part in profile also around working So -- were Day. And gross RH read, quarter, XX% Rick. third we parts at talked to of our on down. of margin were annualized longer that which portfolio, we goal still we've

inventory reduce sure, balance will that if happy there for So to is with. you sheet. efforts we're look the That our be still not inventory levels at some

get plans currently be moving that doing we However, will as plans two RH the that smaller of are to footprint. a out we

impact to on helpful, in of you reduction longer not what's cadence, will X.Xx our working absorption necessarily support from better point well right negative inventory with the per kind much And be, the quarters, increasing we returns not is done gross X.Xx margins we're we but after be so of year. because per third is XXX-plus And margin that north have quarters. the going going through up also get to right helpful showing gross saw the That is on producing efforts. at year absorption basis term to capital, inventory in to of X.X, future going ultimately, a -- all but obviously, currently couple quarter

Frederick Wise

I'm we returning understanding the what talked you through couple as a mid-single-digit to the you make the and supply we of for Yes. very really entered top feel little is said it's a which The sure surgical the were more chain, to us are Pain, 'XX. I Interventional about growth past, where just growth. single-digit You the saying track take there? pain that Maybe clearly setup. Joe want line pain? you've quite again, detail second on about quickly business wasn't just sure talking through, in low I I aspects key gets question, And pain how story. And back like were a of just

Just through take again. us

Joseph Woody

got don't improvement. really Rick. You to at see We pain We're worsen seeing continuing it, point. this

bullish orders New back We outlined And to sequential still improvement and and things also very as the in in expect what end by outlined are York Day. at we're are of QX, QX, a down the be about you growth coming happening. XXXX mid-single-digit standing completely we the area, down Investment gone. and of which is really, the in One, couple be they'll feel going

about category. we We tough we're getting Pain are sort in the Even as growth going now infield the catalyst. mean QX, year-over-year. quarter, Game Same well, to in maybe in as have supply in here, of business addition Interventional because strong that arena example QX. that for in we're it, low to X% to we highlighted back have the the Ready, automatically you DIros. into around if comparators the But feel Surgical of the growth. It in fourth all feeling behind from way DIros with Pain growth, that the go the the business And a mid-single-digit like we that growth see you chain with doesn't

the XXXX. even changes with the HA, pricing so we'll in achieve we reimbursement growth And is still believe decline, CMS experiencing which mid-single-digit and do

their there place in that the is we've new thing it place, about team months in the the in really. X new think structure So got about other in that to

of growth in, much So dollars it. much, and part that, high this feeling we are double-digit great and really click in the range definitely of sort we that about year. we're and feel of help Obviously, kind product as to like of $XX Nothing too, XXXX. discontinued needed, some us millions in well to about remember, that But we'll growth million-ish -- was that's didn't had in starting things frankly, that that better effort. be the HA back we

Michael Greiner

a of Surgical in QX. point, bit little Joe's has a to tough Directed Pain comp

absolute an to on basis, QX expect quarter-over-quarter, However, QX dollar grow. to we Surgical Pain

Game pickup has QX then nice had also past strategic to Joe supply here. do Ready growth As issues to the chain QX a Game for well. as noted, had We in a anticipate some have Ready

feel pockets been then overall are which the continue starting have see to and growth some back holding we in us So We'll opening QX that there like shoots, mid-single-digit see that some that should more about saw question, very before in green that we're to pain of talked we business the your to we've 'XX. support QX. in in

Joseph Woody

And to your the for mix in also be margin, question an should us, on pain with DIros too. that improvement of as some addition comes gross first back, ] the [ and areas

Frederick Wise

Technology do in I And the you. contribution And third it, I shouldn't Got I'll the ask to DIros quarter. then but stop. meant

Joseph Woody

$X we is year million. I know full the about

Michael Greiner

not that until $X.X in was just did about Yes, We remember, million in United the $X.X I States international. it's launch QX. million today.

exciting. they Europe acquisition been have in that Canada has upon super had mostly. international that's growth the only But So and

we in is So here, -- super here launching very U.S. are shortly the which exciting.

Operator

The comes Kristen next Stewart question with CL from King.

Kristen Stewart

could And then business to and was what little wondering extent have rate a bit if sustainable? just I a this more think I Digestive expand growth follow-up. the is on Health you you

Joseph Woody

to Yes. the NeoMed high The globally growth deliver but growth, the performance, whole Digestive QX. single-digit delivered of continues in DH mid-single-digit Health itself even excluding market is the sort business --

was [ that by percent business. lot roughly driven it of category, think ] X-ish I around in in the growth core MIC-KEY a

the bolt-on M&A we between that X% deliver So we're we can higher growth. to market confident the X%, market the than do that growth innovation, even was though

it will digit from sort single digit, mid-singleish Although of double off taper to quarter. could a be the high it given in

a with behind runway good business stable around well. and as an international M&A good pipeline a very a that and So opportunity it

Kristen Stewart

my And for follow-up Perfect. then Michael.

feel numbers preliminary in wondering still given You I those? some ability was to last quarter XXXX. the if just confident had around you achieve

Michael Greiner

those And Yes, targets update yes. at you Thank 'XX. those for conference are 'XX. January our Kristen. color provide that in and further Yes, will for JPMorgan question, the around we

Operator

from with comes question next JMP The Daniel Instructions] [Operator Stauder Securities.

Daniel Stauder

that, few benefit. quarters So noted question. row. A we And just by of in Health, double-digit growth to sustainable a of follow-up the good as here a again, growth Digestive driven convergence

space have business any rest the So how sounds conversions more growth I sustainable ask along but that do for it the there? on white is continued are these moving much And just to just want you how commentary many of how here, but more the space is like and for great, of conversions.

Joseph Woody

be digit. in a them, international 'XX, another Yes. that think bolt-ons 'XX past, it business of that number Danny, it the into help that. We've great of We base us true. semi I'll about an single ENFit rather and can and we've we that us growing But the year to along is I Team's said innovation again, bolster benefit call did got have as large, high it deals -- opportunity NeoMed. benefiting and a for for with really have a goes believe conversion sort we an job M&A the half probably and really of there.

digit, feel we very the half So business any high us. of forth a second stable the given it be very consistent, year, it's mid-single quarter, very, back digit but single a that's for yes, and sustainable, might in in

Michael Greiner

questions. and numbers And the being Yes. very just your to Kristen here Danny, with specific

of in QX we for chain the building last had of QX had We remember, X -- backlog supply you year If from big had the Digestive Digestive. last year, really a we a first year, year standpoint. months last

not $X where be solved because to going digit, year or anywhere like because this anything low last the that So environment QX it's But We quarter. million growth, of continue going is a had QX that. QX, showed is we mid-single-digit fourth be Investor just in because is such gained worsening had on year, grower. the a we double-digit growth It we had year we had of X%, that $X that of X% Digestive near macro big a finally a up -- product that. revenue single Day. QX but for This to any not be of backorder Digestive for to to will heads million in

So just mathematically be that. of aware

Daniel Stauder

operating specifically, one different especially side. that up, as think we But ramp SG&A XXXX? line. we but in And the the more other should investment just about you as a XQ. you quarter, to some going for further you'll we think know for [indiscernible], in start as expense And you operating launch Then especially have your in about progress follow-up DIros how setting Great. ablation Made guidance on the products? that little this we look might a thank some how out, to directional more the how should take U.S., expenses than much --

Michael Greiner

in I'd QX. think question Yes, well. our last talked numbers, as but R&D, launch new in on wise savings, great it's to what through to I about areas. And on those I point efforts, XXXX, discipline the just through that call, Kristen's earnings target just transformation much on also very would we for I those other good in on a where question. cost the We're with we numbers a which product, script spend, shared OpEx be whether the expectations point our confidence to both

the So of that very indicating those. there's XX% on we term XX% revenue are off to still percentage target of as should nothing much and are targets, SG&A on we all and focused come a

Operator

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

Joseph Woody

that divested program DIros we RH, and of Day. successfully and definitely financial everybody, approved our the think an product delivered in understands is outlined technology we valuable execution focus most exits, in and repurchase share precise at primary additional acquired Avanos, executed plan interest your on for objectives. We've Investor everybody So our our thanks, strategic I deliver as

we're really with that expansion meaningful generation. margin priorities, markets have and market-leading We to these coupled midterm deliver financial well will our our on flow believe for results the growth, and our cash and sales foundation commitments, transformation attractive the free established position confident us portfolio

we again, appreciate, Avanos. So everyone's you. very in Thank much. interest you Thank

Operator

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

You may now disconnect.

Avanos Medical (AVNS) 1 Nov 232023 Q3 Earnings call transcript