AVNS - Earnings call transcript Q2 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 Medical Q2 2024 Earnings Call. [Operator Instructions] This call is being recorded on Wednesday, July 31, 2024.

I would now like to turn the conference over to Scott Galovan, Senior Vice President, Strategy and Corporate Development. Please go ahead.

Scott Galovan

Good morning, everyone, and thanks for joining us. welcome Avanos to Earnings Second 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 current our quarter provide review update transformation our on as will Joe an results and well business second as efforts. environment affirm will and these share assumptions. planning regarding details XXXX Michael additional topics our

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

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

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

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

Joe. the call Now over I'll turn to

Joseph Woody

thank experienced Scott. off our our the delivered Building in performance, Health morning, XXXX. Thanks, continued as Good results quarter quarter Pain quarter Recovery shifts we second its you everyone, results, second and and for financial a and business. operational we first to additional Digestive for review positive us joining strong our solid and Management

XX remain above improve past in in to eliminating the our prior and effectively will progresses. we commercial noted normal months. the strategy, as our is our strong, backlog experienced XXXX earnings organization our for year products we demand quarterly our As calls this significant supply the performance year, support executing The chain for

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

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

transformation X-year our we execution to that provided Day. quarter can evidence ranges year continue Investor our Our deliver of last the within priorities financial drive XXXX and our further the we second established during targets results

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

double reaffirming portfolio versus growing Digestive almost This excellent continues bolstered NeoMed in feeding. was of line, North demand and our organically NeoMed to results, in prior Our terrific versus position Health strong long X% continue short performance the America. deliver year, our to prior we the quarter, digits as which conversions term, year by take posted another #X advantage ENFit for term product growing

the late growth growth While still the the have as next we we over stages we we solid adoption. as but of product the few and enter line are lower anticipate experiencing currently signaled, above NeoMed double-digit previously quarters market infant for

strong business single digits the also quarter, year. a to legacy neutropenic Our compared posted growing previous high

opportunities. of innovations launch attractive during call, noted into growth the global supported to for back additional actionable planning launched the completion low-growth our markets year, Digestive of last are expansion growth we anticipate and portfolio As above-market continued with M&A year, quarter this product we our during rationalization this by and the Health half prospects, have

acquisition. related Management sales excluding to Pain to Normalized Recovery quarter this turning portfolio. our inorganic Now for our Diros and HA were X%, up and sales organic approximately

revenue, the which point down same grew less period, and performance the of digits testament with for business On-Q portfolio positive surgical portfolio portfolio year-over-year, strategy While enhanced pain we Even ON-Q quarter portfolio, growing to our without the for Diros previous of digits renewed combined impact pleased our the frequency combined compared the focus go-to-market this was by returned ambIT. on IVP mid-single our a than ambIT with to year. ablation our our overall and radio and X growth by to this were mid-single

the We are procedural encouraged generator seen sales IVP by capturing continued in momentum by volumes. higher our accompanied

new strategy these fully our productivity credit structure outcomes. our We ASC supporting Further meaning strategy, and of line our ASC the supporting to deliver, acquired Diros and internal new expectations. transaction sales our renewed increasing Trident deployed product our continues the growth

having U.S. accounts converted market over to launch We with technology. successful are Trident on our XXX capitalizing our

strong Our lower also We slightly in the growth in Game to consecutive of Ready especially the Game profile year, quarter particularly had the we half XXXX. compared growth is double-digit back Ready year. the strong second a given from anticipate demonstrating portfolio fourth momentum a posting quarter prior

X remain in portfolio, revenue of anticipated ability the Finally, on price as HA in to This HA with to HA categories stabilizes. portfolio strategies longer-term in mid- year. previously quarter this the our level decrease our prior XX% was execute off while full We confident we gain to flat X than revenue shot our as with consistent leveling down in X our year-over-year, performance and maintain and for and share of was aligns results. sequentially XX% our more forecasted HA

by these momentum deliver excluding to XXXX, the the decline just of seeing growth mid-single-digit noted. are indicators I revenue progress in our we solid each encouraged are We ability the XX% across and for are businesses of HA pain and believe

moving Now XXXX transformation to our to efforts. XXXX and priorities

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

our substantial transformation continue We make against priorities. to progress

progress the Respiratory to towards full our related our and conservative management execution a highlights line, efforts and and Further office Health of portfolio, certain across optimization new our business. execution pain of leverage product discipline with of continued associated separation finalizing divestiture strong than the our Trident Second include quarter our manufacturing of level maintaining Xx. company-wide programs, M&A footprint cost less continuing with

order Our over second progress results results to against testament the coming and of our to priorities, a transformation delivering quarters continued meet quarter on are we XXXX focused our financial consistent remain targets. the in each

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

Michael Greiner

Thanks, Joe.

further targets. level Since XXXX, transformation full showed have health year quarter our high support our and you been second against this As shared, and in results our performance mid- quarter. growth again we to that of continued digestive delivering delivered portfolio our progress priorities single-digit

in by portfolio from year, IVP our to and the during foreign up a In Ready pump Excluding our grew Organic single and were continued the HA million. . From Game demonstrating operations standpoint, category. X.X% business, adjusted the products, results double-digit while portfolio low our sales criteria of of products discontinue did business, $XXX.X up by was effects and for Management the and our ago. strategic Pain Adjusted digits, transformation by Adjusted continuing comparison net our portfolio $X.XX decision earnings year were was and diluted share to of million exchange $XX.X momentum this EBITDA revenue ON-Q low our our previous Recovery that Separately, mid-single growth per growth compared including our ambIT to digits. a overall. the single-digit saw streams, sales not impact efforts. specified meet return quarter. experienced

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

which the the quarter, our comparable was to our and We offset year. margin to adjusted For results. volatility initiatives inflation operations price XX.X%, HA and transformation the through last at quarter achieve were plant to gross these and level able prior is

points approximately This XXX be sequentially. quarter our is well. our to due cost improvement We an of to efforts next savings last XX% revenue XXX points external marking SG&A quarter basis as XX%, to spending. second and expect streamline as margin was improvement primarily compared of percentage a adjusted organization reduce gross basis of year to the and

part this our XXXX and journey know, enhance profile you with of is further financial expected ongoing improvements As our into to throughout continued XXXX.

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

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

and to turning financial Now our position liquidity.

cash debt continues million flexibility provide of strategic June and us hand remains to sheet balance million strong $XX with and on Our with of of XX. outstanding $XXX as

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

capital to have repurchases. continue returns we for our strategic with deploy criteria, actively M&A and also we align share As that previously pursue opportunities shared, we'll opportunistic

approximately positive which $XX in of receivable. for the related was was to Finally, free $XX improvement an had which million $XX flow This to a recorded cash year million compared we a refund of ago. second previously quarter a tax tax million almost

second charges flow improvement approximately than we of anticipate continued free onetime in We million year, XXXX anticipated. and to half due for will but anticipate free the cash we the cash profile inventory flow higher $XX previously of in our now generate that

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

the Operator, for line please open questions.

Operator

from [Operator Instructions] First CL question Stewart comes with King. Kristen

Kristen Stewart

some focus side It management on if the wondering a seems green just was shoots the pain we little bit showing of I can there. to be nice business.

that's and HA been how sounds of expectations. with terms in like progressing, line that's it in Just your

double that. of to longer-term business beyond Management this want the see as And we out look for as growth Pain overall check outlook you what a kind do Just year?

Joseph Woody

Kristen, thanks Woody. Joe questions, for your

I mid-single-digit level the growth Pain the 'XX as global you for think I've business. at move possible before into and is said that

business. infusion the that and ON-Q. a pain positive. we held ambIT growth double-digit mid-single-digit growth. between business, definitely We bit surgical quarters Ready, things by the obviously, momentum happened Some IV business, back positive And growth has see Game is have IVP, inside see which X did we business saw that there, of good in little

obviously is And up so second standing the in step-up we're a those to half, and which businesses. we're happy,

So we momentum. do the see

We place, but are the at with through and strategy. going year is pricing the added low type obviously it bit our with little the a We've generally grower increasing. each volume for to part in make as double-digit single-digit a that It's again, and a gross we stabilizing, we've of through strong are over of of growth the seeing really quarter. same HA margin. comparators time, XXXXs of business, see all And end us the at the said all volume type

improvements. way our we grower there. more the longer to a mid-single-digit And of working we're in see We've as do term. just definitely made that the So reiterate,

Michael Greiner

us quarters, Kristen, $XX this QX, Joe's in generally But would $XX range in that we year that year the through for will million We're QX down anticipate all HA. QX then thing. about doing and $XX down are to million news. seeing of quarter, in in consecutive be start level, have QX starting what growing point, forward, is we just single against of final point, last X out the between with all Joe's million that laid year, of digits will allowables, this execute level we in as I and the annualized which low somewhere good going allowables, X We year. kind million of to QX in this price quarters and And we think that kind off last make it million in quarterly $XX million did that should XX% can $XX.X And stabilizes, that X we which, would with per $XX of flattish. around just

Kristen Stewart

think some to that just then could what provide out a was And had thoughts Perfect. for CMS could you ON-Q. the reimbursement come with wondering business. if break on proposal do there you I out for

Joseph Woody

the the worked part on both about of of Yes, years, house, being we've that's think, product. jeez, I talking sides something about that on some for, a X ON-Q

outpatient actual -- unique Xth the a what until comments our this will prospective making assigned payment will understand That were So we're payment January up September then for year. payment, And code we ON-Q. of X, on the be. we'll

I think ultimately a a impact where working of But with business. us a be sort and for levels. there's DRG early for adoption predict It's us at be immediate get where positive. been think it's may term, a to that us. But having significant longer tech company. a for It positive little for the you've business at that to us reimbursement the the it that's not larger and the was peak, potential over the for back for med I a should its to hospital only

Operator

Rick Wise Stifel. comes Your next with question from

Frederick Wise

off I think despite a Obviously, solid phases and said, the recent being your to starting in NeoMed's Digestive Maybe about in ENFit continued as comments conversion. NeoMed. double-digit later you quarters, with Health deliver growth of

And remind is Health left? thinking growth off? it single-digit product how could all seen -- that think excellent. is do you or do NeoMed we that start Just conversion comment tails high trajectory without how work upcoming we math runway so much we've as we mid- on When And sustain us 'XX it Digestive can launches? think ENFit more maybe being conversion to about think

Joseph Woody

not portion going year NeoMed drop for like high to a XXXX. a think, We see I this tremendously early off remain the Yes. though. it's for single-digit we into It's mean it as of runway can level double-digit, throughout grower and us. foreseeable

converting an a of if you for accounts, example, year, as similar something that's maybe year. positive next So that, will, I less the slightly we're, business. mean to XXX-ish this

there. high grower a single-digit again, So

to and big as long we that. of We mid-single-digit high that -- of a the the single business a portion term to on our XX% was have And solid which continuing enhance business. for grow. getting grew quarter legacy see We're DH, it that too, international note, could launches the is depending digit, a quarter, do

see we've have, we a M&A pipeline We about that large and enhancing also obviously, do bolt-on talked that. that

in So the the mid-single digit digit to high in long given term single quarter.

Michael Greiner

Yes.

the We growth provide some for are Joe's in short business. question preparing help your for to midterm CORTRAK we here. To to launches about mid- to that both are point, the launches fuel -- that CORPAK single-digit will legacy to and over high extra

Frederick Wise

the Got Joe, things couple you. And of pipeline you mentioned, A again, M&A in so many words. here.

M&A, do You not what high? you're that too around both financial finding that? the to continue understand How your highlighted right Or prices fits. does that we discipline be Does mean? just mean

Health? Is just Or time might be lightly the is of I'm year M&A but buyback? tucked couple possibility that to share tuck-in, M&A.? a of and an speaking you're even prioritizing is there first in for . tuck-in questions hearing So the still just of here. on in theoretical later this opportunity I a this it But likely Digestive touch is be And wrong, you notion

Joseph Woody

real $XX million, Yes, buyback. share share buyback done just not but quick. we've announced any on We've new

Michael Greiner

done mentioned $XX it over $XX last last we've We've We the over X.X So years. done year. million million.

Joseph Woody

But I'm again, Michael. Right. saying,

Michael Greiner

Yes. our done to We're deploy repurchases. we of We authorization. if for all always capital looking opportunistic are with to currently see share have

board authorization and this get the in go at time. point to So we'd to have back a new

Joseph Woody

predict than sheet, we to into off these has a that can look Yes, cautious the that, would robust we've it's on and there's And for a a not less you it's the diligence to conservative, balance be in really and working but that us we been a you Health taken number think, there pick a to the and technology us the about do oriented. on from them to levered, for some Rick. up it's Xx Digestive that on paid little could been of with back. And we're of timing more then do do be other us. it's on environment bolt-on, we of in have cause get And pipeline still. bit see that possible would at issues, more something terms year I pull this the price, when been but couple us it But pass a this we've never

Operator

Your comes next [Operator with from question Instructions] Daniel Citizens Stauder JMP.

Daniel Stauder

Great.

And what give in first just to So was on up more back a which imply the in color Game related this a you're of expect is first, the is digit X noted come on Ready driving little half just Pain it should basis? year this to do that seeing? Or you full could Management. ease bit a of comps? trends year year. prior on And again, just growth? it great to double bit? a does Then Is the you you But see. is something rate why little growth factor what

Joseph Woody

for the Daniel, question. thanks

think little have business, I a like Ready we're but selling of the as benefit quarter is the from things single a we're international bit to you a good and of at program business adoption the a with see everything. say level. bit I a changing given high what digit, our of getting double would a I But looking little a and in DH adding structure type the growth, Game And number digit rental our organization. at international and doing sometimes consistent,

comparator given So double single of over high on And benefit longer to seeing digit a quarter. But the term, some that. issue. from there's some you're yes, the depending digit

Daniel Stauder

Management, just Great. Pain for with that. then staying And

Turning to COOLIEF.

as some about benefits of as cross-selling out mid-single could RF you're that the just excluding rolled believe updates was and products? new noted you've You I within cross-channel digits, far the as seeing talk you what grew or But Diros.

Joseph Woody

lot and off in a center to mean be issues just sort on come in back from surgical to strength the of next I leveling shift of we'll in COOLIEF quite chain the quarter IVP even that but RF quarter move some standard back gave to are starting really selling sold out the actually because we've more X talking number we're generators. is we and longer which the customers, as -- quarters year. new X more about And that come That move of COOLIEF, term tells that Diros generators. and up speed me are -- and strong structure seeing general, to this every every of ambulatory along. of disappointment X, the supply Yes. is that they're COOLIEF of starting the coming our record a the for

So a while can It and running. that takes XXX be up means get That to XX days days. to coming. it those is

you'll that so see across. all And

longer we've a single-digit to consistent And high term, business. overarching then the digit said, mid-single that's

discontinued area, the So space kits well. a is down procedure what's But number products a and very commoditized. too, the is supplies, as is supply business, we're when way the and at did or IVP exit bit kind as look of pulling little NKT of the NKT, the which working in we trays needles, that through the used which our and the you

you'll see increase to the because for the second definitely standing the half, -- sequentially. we're So up that fact the of numbers

Operator

to the time. are call I at no remarks. back [Operator further And Woody Instructions] this closing Mr. for there Joe turn now over to would questions like

Joseph Woody

results think with the with transformation acquired lot you midterm focus valuable technology we market-leading executed our financial and transformation today progress and attractive successfully made divested with well for we're product of and shareholdings increasing thank and commitments portfolio plan. RH our established foundation markets. positioned on the and 'XX. that meet Diros, we're repurchase believe want execution precise to is everybody. We've sharing these our Obviously, We our priorities, our Just the a the to have a of program exits,

interest you. So Avanos, we forward to and talking to thank in you all for more. Thank look your you

Operator

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

Avanos Medical (AVNS) 31 Jul 242024 Q2 Earnings call transcript