AVNS - Earnings call transcript Q1 2024

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, ladies and gentlemen, and welcome to the Avanos First Quarter 2024 Earnings Conference. At this time, all lines are in a listen-only mode.

Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Thursday, May 2, 2024. I would now like to turn the conference over to Scott Galovan. ahead. go Please

Scott Galovan

and to everyone, Earnings joining It's us. Call. Good you thanks to pleasure welcome Quarter Avanos my morning, for XXXX Conference First

our Vice CEO; Presenting transformation will Joe efforts. planning on additional well first XXXX current share Michael Joe as will the our and detail Woody, Michael results, topics environment, today Greiner, Transformation will be review and Senior regarding our business President, quarter Officer. provide CFO Chief update affirm and assumptions. these as an

We the with Q&A. will call finish

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

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

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

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

Now I'll to over turn call the Joe.

Joseph Woody

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

business. First Health additional performance, Recovery expectations and Management were positive Pain line we shifts as quarter results continued with our our and experienced in Digestive its consistent in our

will improve years. year noted year-end past quarterly the XXXX earnings for our as As XXXX in following our cadence we a call, progresses, to similar performance

about of end. first over a strategy executing million. year's with quarter improvement remain $X our at is chain $X our and supply last back-order commercial strong, to The our backlog quarter significant effectively levels This at million products over demand for is organization our support

as transformation we matter to getting are needs Michael which meet focus our of both I our to things further steady our of that priorities, customers. as make the on patients progress and continuing back will about. always, each talk primary And against We is the

million, streams adjusted and of Organic meet that the from For year ago. portfolio revenue our our priority. effects up exchange sales sales our by a quarter, the impact to X.X% were for were approximately compared specified strategic discontinue transformation decision did not of $XXX criteria return foreign continuing to operations the

$X.XX generated above operations. share We continuing adjusted million for adjusted diluted of earnings and per EBITDA $XX of

X-year our drive to our during continue Investor execution financial ability our year Our provide last transformation to ranges the quarter targets the confidence Day. in within first and established results of XXXX our priorities be we

at minutes Now spend the the next I'll our discussing level. few results product category

Digestive Health year. portfolio digits line, which performance in versus year, versus of continue prior X% Our prior advantage results North posted growth the quarter, This excellent continues growing for deliver ENFit by our conversions NeoMed organic bolstered we the strong to over terrific as was take double product with another to America. demand

are the late growth, next solid as ENFit we the anticipate over the adoption. growth slower While enter we experiencing quarters we stages currently few of double-digit

digits compared mid-single the feeding posted to growing a ENFit strong year. legacy Our previous also quarter, business

global the plan As noted growth above-market our markets to growth be to anticipate call, and growth low-growth Health of by during rationalization Digestive will half single-digit attractive expansion mid prospects, supported this opportunities. year, ability deliver into and our the with we innovations actionable high last M&A product our launch year, organically portfolio we during back for to additional

low-growth, previously to approximately the announced DRS foreign down certain Pain strategic and discontinue Now, X%, this exchange portfolio, low-margin Recovery sales, [ were turning and of for ] decision to -related benefit of quarter excluding the our products. Management sales impact our

performances line with are overall ON-Q/ambIT XXXX. indicators was same our past quarter portfolio surgical combined flat part support and this new expectations period, expectations. portfolio for single-digit of our our the low our year-over-year, structure portfolio our growth patent that for go-to-market in strategy While The down for was our

year-over-year primarily due a radiofrequency product of strategic slight low-margin within business, low-growth, portfolio The decline ablation digits. to in was performance Diros impact by revenue, our category. The rationalization positive excluding mid-single our IVP the combined grew of

support exceed of in including market the in our strategy, to Diros first sales encouraged momentum to deployed launch. strategy by We our were We're capture our ASC our upside growth Further capacity line, Toronto expectations. the continued generator quarter sales, by increasing new our the ASC Trident in in our and to on product continue our objectives, structure. the scale-up seen driven IDP supporting capitalizing able manufacturing transaction, opportunities and renewed U.S. acquired our facility fully productivity continues new to our promising

Our Game off solid another our results with quarter together compared Ready prior year. this portfolio quarter growth to fourth double-digit put quarter coming

revenue aligns confident portfolio and anticipated a of Finally, while year. HA HA leveling forecast level revenue in strategies leveraging our our full of consistent our was in was fourth and with in This ability performance portfolio flat off with this quarter remain XX% opportunities. We maintain of decrease and our long-term results. the HA year-over-year for our to

where I each our we first and to just solid we're pain indicators it noted. excluding progress are of we're HA of these the the XXXX, our Management growth revenue for to encouraged believe across the not seeing businesses, decline our While I performance and quarter deliver in Recovery mid-single-digit want XX% portfolio by ability in Pain is be, yet

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

momentum our accelerating with against made against priorities We've priorities. these progress substantial transformation

Health with line, highlights our first Some separation continued our and execution portfolio, progress of Trident our across business, meaningful sales efforts pain exceeding stability support our divestiture share and finalizing quarter organizations adjusted of the product margin program. latest new expectations X%, strong approaching second to completing Respiratory gross associated our early marketing commercial XX%, repurchase and growth half with include delivery our our

the While are targets. continued priorities, we're in our results pleased the quarter quarters delivering to our meet of coming consistent with focused XXXX results and against transformation our first financial progress over we order each on

insight will Now I'll turn further the on financial transformation results provide over Michael, who and to our platform. call

Michael Greiner

Thanks, Joe.

are results, progress continued in quarter transformation against Digestive delivered year we results that first portfolio our pleased targets. and high full delivering As growth our XXXX, and you been quarter. our mid- first shared, single-digit show of to the again have that our performance level we support Health with in Since

Ready And kicked this market prior our of line year, to year. quarter results in off expectations, last newly produced in grew capitalizing has portfolio Game momentum and digits launch, on Trident compared acquired double markets. our product which November U.S. Our above our international continued

HA As price in our volatility expected, continue see we to business.

have price in impacts. believe set unfavorable we place mitigate largely we strategies to right the However,

fourth HA This sales in quarter through quarter, line year our our volumes. and with sales are higher prior

strategic impact Adjusted of adjusted specified generated decision sales of efforts, were ago. exchange did by sales and X.X% during discontinue year revenue meet the our a not transformation to were return that up to our streams portfolio criteria organic adjusted standpoint, compared diluted the a per quarter. the of continuing foreign million for share We $XXX.X $X.XX operations earnings EBITDA million. From effects net of $XX.X and

XXX adjusted basis Our to XX% year EBITDA adjusted grew expansion points. with by ago margin compared of a EBITDA

adjusted execution optimization per Our share and grew by continued SG&A manufacturing diluted impacted efforts. ago. a positively expansion operations by XX% year margin compared was growth, and This line top earnings to

margin last operations the which to For gross sequentially through our results inflation first fourth We and year. level. price to quarter able offset is versus at was XXXX and plant quarter, were favorable adjusted HA of our transformation our volatility and the initiatives the quarter XX.X%,

We be gross XX% adjusted approximately as to next margin quarter expect well.

the basis points streamline at quarter primarily compared our to external our improvement last as of of reduce SG&A reflecting organization an XX.X%, profile. related stood to a efforts savings of revenue and percentage first cost the XXX spend to year,

is this continued improvements enhance goal XXXX, to financial throughout ultimately our with to leading further journey to profile our XXXX know, our of you As ongoing XX%. of part between XX%

quarter the tracking which remains our in the the performance success focus. is first for reflecting transformation with our Our primary year, our expectations strategy, of organization's

of as our As between year guidance earnings of such, XXX $XXX million with diluted of be in well we full gross XX.X% growth, support mid-single-digit million, a to between range percentage margin between $X.XX EBITDA range adjusted and and metrics adjusted the points. adjusted to $XXX for organic as to SG&A financial and at XX%. $X.XX XX.X% representing reaffirming the are and margin revenue revenue These XXXX per share as least basis improvement XX% year an

Now, liquidity, with to $XXX and XX. position and of our $XX outstanding provide sheet flexibility turning remains as of financial us strong on strategic hand balance to of our March million million continues cash and with debt

We meaningfully sheet. good continue our X to quarters will X stewards levels have over be of and maintained below bank balance debt leverage turn past the

pursue as While we returns we intend align opportunistic leverage maintain strategic repurchases. with conservative opportunities share M&A will actively well criteria to levels, as that our

cash driven flow to roughly by in million cash our with associated of cash ability XXXX. compensation the year-end Finally, accelerating improvement negative transformation We costs $XX confident and quarter $XX and the as in free free remain variable efforts. million cash anticipate profile payouts approximately free flow our for onetime in was marked flow generate second quarter, in anticipated, certain first

specific business Now, cost initiatives, in our business, some organizational seeking product divestiture and Recovery journey XXXX, management Digestive implementing and cost portfolio share repurchases, on our transformation management initiatives actively further and acquisition remain to Diros, allocation highlights of process opportunities focused of return Health and began optimize and on that the Pain strategies, Respiratory efficiency that we capital rationalization, our our turning Management capital. Health to changes the invested business meaningful to addition in additional

achieving second to gross organic include financial is operational mid-single-digit consistent million SG&A financial to surpassing these million consistent of Day, objectives XX%, in growth improvement free margins The XX% supported flow year meaningful Investor in between being which XXXX, outlined working crucial by XXXX, drive as and revenue well and we this journey generation revenue of $XXX capital. our for that approximately of XXXX transformation CapEx metrics, on percentage would the approximately $XXX as cash spend as in XX%, a

open questions. please Operator, the line for

Operator

you. now Instructions] session. and Your from Stewart gentlemen, first [Operator Ladies at begin CLK. question-and-answer question Kristen the comes we Thank will

Kristen Stewart

balance the if what you kind going upon the that and Pain business expand see And just improved could results you your further for you're of I Management wondering confidence was of the around gives commentary the year. to

Joseph Woody

for the thanks Kristen, question.

XX us So got the sort shows trending of we a We're mid-single-digit during quarter, at part that seeing mean we saw couple Game smaller but good that talked growth. in in that, of RF right of see things. about generators adoption the it's Ready the hurt of of also double-digit did growth. business positive at of It from sort the I RF albeit direction. We Triton we group, which inside portfolio business. of we're Diros. a also some sold international purposely that technology by exits that We business, and a the some in things the

for surgical that thing ambIT first long time. in for low potential and And this between a that, On-Q, see would the is I say real growth single-digit leveling year, is which the time pain off, we other

that, pointing and So HA, QX, in we'll of we've which like feel the by a grower kind mid-single-digit outside we're runs to standing to be that everything We further some pain full in for through year. the by direction. point now perspective in right the evidence business QX, got is of able

Kristen Stewart

switch wondering talk was could gears bit and for just I then a little appetite And perfect. about That's we your M&A. if

kind out transactions ratio You look over to we potential firepower next plenty do as mentioned thinking of the XX the low months? leverage deals. of be about and XX we should to How

Joseph Woody

that we bit perspectives of they businesses, feel there. execution, didn't laid parties stage be. on passed of this seem a out But a our be is also likely not were we've been around where want And we from itself pipeline of the We've focused that's in actually growth again, we -- robust things bolt-ons X that we the thought looked of where digestive, like, types really were and to of been at to us. see doing. really digestive. probably when third through in transactions something and, We've That's coming some we but high, primarily first couple the you'd internally the really, as that multiples

Operator

at The Citizen comes from question Stauder Danny JMP. Instructions] next [Operator

Daniel Stauder

So And gross rest to It's then the quarter. for think some another gross able nice that in been the about question gave you to margin. baked offset the the HA. And how see good is what to points we also the noted of from But to end of should have stabilization year? some the commentary margin higher on the first that you as just year? of XQ gets what improvement. is You in But what range? guidance your impacts HA or as half you far assumed back of is the

Joseph Woody

margin So the or to To basis year, take back XXX give the point, we anticipate above of fairly year, gross the be stable, gross quarter-over-quarter, half the XX%. for margin be in Danny, will points points. your do

half of the back another is the back half continuation in little the a is for few doing and year of year And other we're months mix and us year favorable. initiatives third, it the our know, revenue you cost the at the our plant. of a more bit savings part gives heavier the As of

today, quarter few I the the we we year the first confidence, north of we on half XQ, in somewhere we into call mentioned. should So things around XX%. as be XX% as where in then heading the back the around just very pleased And with be of based on get should announced

in doing things we're plants. all So right the the

going doing to earnings year-end between the stable negative per lines we Mix had XX% $X that is quarter, each and your obviously somewhere very through million be is the HA be up call. We'll million HA, year. and quarter, in $XX with point, helpful. the to indicated that on decline

Daniel Stauder

give as any and then follow-up, be color bit your strong you would a growth on focusing to another you're just is what just then, Or far quarter, Ready mid-single-digit could trends, color more great. what's And as this still this expectations? us could And think Great. you a but seeing be just the double-digit any growth given the that on it Game quarter, quarter what above year? there in driving do as little growth be

Joseph Woody

by sports medicine Game orthopedic driven Sure. No, obviously Ready and procedures.

that, the international of strides well Game the had But our and making of some I think Ready, we've on you're been force earlier, bit at doing mid-single-digit a year. the more more Ready pay saying and out as business grower. mid-single-digit We off. some on Game for relationships work little HA to he if out top distributors with take seeing the direct the been of with of in of a some as until I passive confident And of the we're starting where element before. equation in on range, the Management and probably see pricing you that markets the Recovery as the QX-ish we're on settle mid-single-digit Pain then growth full was growth we more definitely

Michael Greiner

and historically. be add, the product which the on are grouping. quarter that is surgical That us trays is kits pain is a anticipate families. standpoint, will that that less grouping, we things refocus the to and first quarter able we question, do of strategies business, infusion IV Those first add the to Kristen what Pain some categories, total. we there. in - do some our pain obviously, don't But energies there in the in our as year, which in Stewart's those needles, enter half in focused earlier infusion, throughout in Danny, X hurt Pain but growth kits Pain to back hurt which total trays, year one it the the IV further We of the were and further primarily be the in and needles, supportive back to the with is we'll on, have our year and case and from to the just tying us supportive interventional of half thing on One in thing to of

Operator

are you. no further There Thank questions.

proceed with comments. may You closing

Joseph Woody

Good.

been on execution. has focus Our

and things, Diros We successfully our our the have exits, lot repurchase done program. RH, shareholdings the acquisition a divesting of product increasing making on executing through

midterm foundation priorities and think meet think established our are market. we've we our portfolio, now commitments, which financial I the to our in an transformation shaping attractive

that free well in sales confident accelerating outlined we're meaningful we script, expansion cash growth, flow as positioned, we're through for 'XX. So and 'XX and the in margin generation that

So I the Avanos. of and appreciate your everyone's call. attendance on following Thank continued you

Operator

and conference for concludes please that this your you and you participating, We ask thank disconnect Ladies lines. gentlemen, today. your we for

Avanos Medical (AVNS) 2 May 242024 Q1 Earnings call transcript