AVNS - Earnings call transcript Q3 2024

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Operator

Good morning, ladies and gentlemen, and welcome to the Avanos Medical, Avanos Third Quarter 2024 Earnings Call.

[Operator Instructions]

This call is being recorded on Wednesday, October 30, 2024.

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

Scott Galovan

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

quarter Speaking CEO, will Gary followed our efforts business first Blackford, Avanos the Quarter Michael our transformation environment before Chair, be fourth today reviews current He'll leadership our and changes by Michael XXXX an give Interim Gary assumptions. Greiner. update on and planning results, on will Third be our update

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

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

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

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

remarks. turn introductory to the over Gary call for I'll Now

Gary Blackford

company Thanks, Avanos. Scott. announced and has Woody to continue I'm Michael and decision update April transition he'll a been Avanos' agreed next Interim through Greiner the graciously his assist of to retire CEO, Joe to as year. has in to leadership changes this leadership has here on recent Joe consult company brief appointed today at provide CEO. with the

solutions in acquisitions divestiture company's in businesses strategic positioning position value for not its today strategy. a to Joe and to medical and more organizationally to better his that as achieve the company long-term Avanos and long-term aligned a led the has tenure via accomplished is financially the assets goals. creation were great a device CEO, of deal company he focused

we years, for dedication and Joe's grateful Avanos. X for past these thank to We're and him leadership efforts his

as interim to CEO Michael that has for to pleased also Greiner We're Avanos. serve agreed announce

X-year and As deliver Chief is plan, as positioned transformation well has Officer, ability CEO. against Transformation and in CFO Michael demonstrated he Interim to step Avanos' our consistent results to

become we'll a is our to and weeks. fulsome candidate permanent the search conduct well, evaluate Michael our CEO wants a candidates other While over the as for leading Board permanent coming to CEO,

To XXXX, for remember appointed CFO XX Health the on Warren Michael CFO. enable to running before Vice Kimberly Warren Warren X years had company, leaving Senior Avanos Avanos. experience has focus to as spent served years Avanos. previously you and of and in interim Prior of of MacHan Michael Avanos as Strategy may Clark, who President been Many Halyard interim joined with

and has world, strategic back company becoming leaving, to Warren continue in device of to company's constant as transformation support more in of focused the changes We strategic allow Directors believes is the its a Since Board organization. consulting provide these leadership medical agenda. Interim Warren welcome path Change the CFO. will of continued the

a I'm promising by I'm difference team's proud our commitment products and lives. transformation of in Avanos company's genuinely and In make the the excited has powered of made, closing, to future. progress importance our enduring by about patients' the

With that, over to the Michael. I'll turn call

Michael Greiner

Quarter review and the Thanks, to for for us you and of morning, financial our Gary. operational results thank Good joining Third everyone, XXXX.

commercial just optimize operations to ago, Gary profile. portfolio, improve transformation year our As over plan margin mentioned, a announced our we X and our refocus

free effectively our we to the cash positioning value a rightsize well cost efforts X as shareholder as ultimately significant our generated milestone of and continued our our to plans flow, marked the in deliver creation. successfully quarter AirLife transformation structure also to conveyance more company and health and enhance operating This respiratory as profitability, efficiently completed meaningful

objective stated short are in transformation impacted of our of mid-single-digit also gross Although margin which with fell the we progress, for third growth, quarter. pleased organic we our the negatively quarter

by partially portfolio, underperformance, Our quarter was of another driver health. surgical particularly primary this the pain, pain in strong Digestive offset

In things that spite help of these matter. mixed the back patients to have continued results, we to get

this X CORTRAK pain overcoming solutions and over our million year, patients and challenges from Game catheter-based recovery, brands. range feeding wide of and we MIC-KEY have needs enteral management far and short- So therapy ON-Q with supported postsurgical addressing to using Ready a our long-term and

lives. very We these in patients' a are to positive impact committed making

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

next minutes spend category Now the the discussing our level. few let me results at product

as #X [ our supported North Our reaffirming take product in term, also consistent Health deliver capturing while organically term prior our conversions X% was Digestive year, ] a we double-digit America, line in advantage Health feeding. versus by for of competitor's in to short growth and continues NeoMed almost portfolio backorder. ENFit results, the continue NeoMed continued long strong position growing Digestive opportunities demand from to performance

of quarter remained for previously above as have business enter the during next few at market level signaled, we feeding third the adoption lower legacy ENFit to quarters healthy, previous the our we stages late growing the still cycle. market enteral we growth the compared but anticipate year. As over Demand

by market product expect above-market inorganic and Digestive for Health opportunities. growth We continued global be our growth expansion will portfolio, innovations, supported

were management to a excluding and inorganic quarter Normalized to organic HA this portfolio. and pain our sales turning little recovery up for acquisition. related X%, over sales our Diros Now

we the portfolio and While overall North are offering. COOLIEF year-over-year, softness of America portfolio pain grew surgical our pain in performance by our disappointed

stemming our third in from in line. backorder issues of early our supply was which challenges centered around was ON-Q at execution The pain portfolio transient quarter. one by the our and setback affected surgical product pre-fillers

key customers. relationships for have customers, this prioritized have customer X and experienced ON-Q these we year turnover we supply higher-than-expected one maintained while Additionally, Tier of

them. reengage We working are to actively

ENFit muted the performance products, shift strong our X in XX% ASC. grown excess of of the each to has procedural last the These the headwinds on quarters, of capitalizing in which

Our double-digit year. compared to the growth quarter this IVP for previous business posted

We sales credit continue the these of to deployed IVP productivity capturing strategy momentum in and outcomes. our and especially see renewed generator volumes and product Semtech sales, We our ASC fully supporting increasing within our new structure procedural lines. higher Trident our

are the Japan. U.K. the Additionally, COOLIEF countries, offering by including in of our several we leveraging and encouraged tailwinds progress reimbursement internationally,

ago, line our against in product Trident continues a internal expectations. deliver growth acquired Our Diros to year acquisition

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

prior Our portfolio double-digit year. Game third growth to compared of quarter its posted the Ready consecutive

during in quarter last strong anticipated XXXX. our As Ready we a call, growth quarter from lower Game fourth profile in the experienced noted we the particularly given fourth

fourth results However, will line revenue with the of the for quarters actual quarter in X first be XXXX.

Finally, with full flat decrease and our our XX% in results. was quarter of portfolio, consistent our X for while year. HA in anticipated revenue off This sequentially down previously our the year-over-year, leveling revenue prior and aligns forecasted HA was with portfolio

which our HA would $XX level portfolio to We of expect for be of this quarter fourth million, at consecutive mark performance. quarter revenue the fifth north

offsetting to share X pricing continue shot pressure, we continue volume currently to we gain HA on and are longer-term share experience mid- X execute strategies categories, is which the to in. to the we While gains volume in

margin continued efforts from a outcome Canadian optimization refund impacted matter. and was positively Now customs expansion by favorable SG&A duty a

improvement to our one points was sequentially. by improvement Adjusted revenue compared pillars. This basis of transformation SG&A efforts of streamline of and XXX cost year the points last an as organization and as marking reduce spend driven a the XXX primarily is XX.X%, percentage quarter our of overall savings of third part to basis

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

We gross during initiatives quarter. we that the mix delayed XX% margin approximately be better product quarter implemented and see quarter, were third expect fourth the the savings for as adjusted fourth to in

address quarter behind challenges provide slight I expectations. are slightly tracked fourth the performance primary That our shared, we headwind being As likely focus our to quarter. our our said, a as transient already the third into organization's priorities remains transformation that in

adjusted we share outcomes of to result, mid-single diluted $X.XX. adjusted Revenue XX% digit growth, organic fourth gross in SG&A million per of metrics the approximately million, and of and the the a $XXX support range quarter. for adjusted low of percentage as to earnings revenue. As margin financial and anticipate a $X.XX between following $XXX These XX% a approximately representing

liquidity. Now and to our position turning financial

free hand, and XX. million flow as sheet of cash million of us in Our Supporting million with strategic to $XX outstanding third with provide balance quarter. $XXX hand, September positive of was and cash the on our flexibility on debt remains strong $XX continues cash

we $XX million quarter, generating anticipate the receiving fourth of free of AirLife, to to from approximately million primarily due our related as remaining cash cash RH the of final as transfers assets divestiture. $XX well During flow

debt As X/X a turn. million and under have approximately expect net year-end ratio of sheet balance leverage to we of $XX result, a our

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

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

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

progress to continue priorities. We these make against important transformation

to, to ENFit Zealand M&A of highlights and associated operations, divestiture and our health AmbiT for to in AirLife business, line, Magdalena limited efforts on leverage transfer plants of with maintaining a strong enteral into growth not related feeding the continue include, North in for expected one New execution International capturing business maintaining conversion to strong portfolio, conservative but above-market management are America X further than the IBP volume QX, as turn. procedural from respiratory our well discipline quarter cost the company-wide tailwinds as growth conveyance were of execution level of our Australia separation our and Third the product Nogales with our our less benefiting that programs finalizing

Nasal SR Friday, XXX(k) CORGRIP premarket for Bridle as an submission approval year. System, we of last our this FDA-approved And third our FDA received

Day have top our kicked As key of these inconsistent these executed on results. line currently majority our we the full benefit the Nonetheless, XXXX of at initiatives. journey being you June is know, by transformation off tempered Investor and initiatives

to reimbursement to selectively and support organization the mid-single-digit quality enter the address this required and top our To we consistent transformation adjust growth challenge, outcomes invest markets approach and financial of international are our in efforts. achieve marketing of full selling go-to-market that enhance strategies, continuing payer line our is to

please the line questions. open Operator, for

Operator

Instructions] [Operator

from first Our Stewart question Kristen CL comes the of King. line of

Kristen Stewart

constraints I ON-Q think be especially the growth should the wanted just and are how rate supplier think about to FY as you going And for business we do start we on longer-term look pain specifically, long ON-Q 'XX? within that to these off out supplier constraints how the the portfolio, lasting? in into

Michael Greiner

Yes. Thanks, Kristen.

primary the know, we So an as going and if the quarter we're back. ON-Q procedure quarter. attribute, ON-Q a in resolved miss lighters, you to has themselves that get supply half had to that But third of first on. challenges that procedure as related not Those the the with in was we quarter went the

quarter. in an So impact it has

primarily customers we No that excited are the the have Pain procedure so And impact what is in will Longer talked to we've on term, quarter, volume obviously, about we an of fourth those because ON-Q have the well. And about as of some depending get uptake prospects, of back. which Act, ON-Q on previously.

a Act sure going positive, determinant actual that forward. exactly will coming Pain how and aren't our in view about find we'll do yet doubt the a positive thoughtful be rate to as know what impact around out and just have able much big will weeks to no No be quite we We is a reimbursement that We the that. it. in will reimbursement will to what ON-Q be more So ON-Q,

Kristen Stewart

FY we how should you then as this seeing of range. to a given to about with ahead goals longer-term if the call comfortable that 'XX, just wasn't mentioned And on feel and just think company's still today's company objectives if and acceleration we mid-single-digit think performances should Or low the about XQ in profile of growth kind more to an sort that thinking mid-single-digit growth?

Michael Greiner

Yes.

couple not of Great on a commenting things. now. 'XX right So question. We're

product had We portfolio. we will throughout actually Other as North be attended very January. in conference COOLIEF, in ON-Q that doing we America softness JPMorgan performance good our and than

continue And to little coming with softness there with is ON-Q, we in million. over $X America North So COOLIEF. which analyze about then out softness the million a in was QX of $X

of what a But will rest intended. with Pain and your for take And the the back as for the of question. forward. shared to operating The step then initial as see in No Act profile the forward, do ON-Q portfolio going transformation, we growth the statement. is also can need be I think of about what company income the is intended that are remaining the acting But right we rest through you parts the as and just going

more update of part in January wholesome for And early XXXX. so we'll the have a

Operator

Instructions] [Operator

of Your Danny of question comes next Citizens Stauder JMP. from the line

Daniel Stauder

keep one, high first to level. my it for so Just want but XXXX, on I'll I ask

What some primary launches major about? are to we to talked anything or next a You we items, mind the product should to number keep as thinking could else in look but the us of give products, year? be tailwinds sales just about you

Michael Greiner

Yes.

Digestive So with I'll Health start business.

legacy which amongst other our We SR launches will X supported year. be have throughout Coregrip our by next we'll business have launch that

at rate launches we are enteral the faster at that part than legacy in and X% DH at many in share. X% to business. order that as to That's business these the the Our a we to to take X% higher grow feeding due important been market, taking to we've And share. least grower, X% of growing quarters ensure can continue is

very line healthy our part of you for a DH our that's for now. growing years other NeoMed feeding know, couple of been business The as neonates, enteral product is

some the is in we the December. for will We signaled obviously conversion $XXX revenue for that innings cycle bit in for achieving of lasted later million the great, NeoMed a has be of at in have longer than we're it ENFit in anticipated, time over year NeoMed and which point we

at that. row come X quarter This a the recovery is of about That management look a little been you growth primarily signaled. a we business, million excited buckets. similar I'll where with of which XXXX, down start our will and already anticipate we We revenue. When though, anticipated we're HA in look have So have revenue. rate, in million fourth and $XX at has to level HA. quarter have $XX fourth between pain

And pricing currently to XXXX. shot between to markets our then assessing 'XX, good share but X we're have we what is volume the X into expect continue gains impacts in and going

If published, X new allowables just up X at was was was you pricing the look shot shot that down.

X various there's so Medicare X Medicaid, in we're commercial that set. the And strategies deploying against shot and our and both both offering

some got the cons of pricing and understand to we've into pros So going 'XX. strategy our do to work what are

on on we've a HA volume But side. the very basis, nice job a done

different double-digit Our IVP X quarter. nicely. this a growing business, had platforms, of consists has which been rate growth quite We

Our performed has better. new if expected, slightly acquisition from Diros not as

very and share So we're procedures excited nicely, COOLIEF we doing and can setting. internationally. is about what capture ASC of the in of that offering volume

North We're in of with COOLIEF it in excited particularly growing about IVP softer the our Japan. tailwinds, reimbursement so U.K. earlier, noted our internationally America, we're little and portfolio. I part As nicely, was a

for will Game has in fourth X growth. Ready percentage absolute fourth Game value the in similar we just have have quarter the quarter Ready. revenue consecutive double-digit will had comp year, The fourth of we not because last growth of but quarters dollar of have growth tough quarter the

up our Game has So Ready excited and and in and growing surgical growing. about excited we plus, opportunity business. about in remarks, that XX% beyond, as pain the We're our the we're prepared is stable been and at No 'XX noted is Act some Pain worst growth Ambit enter receiving we for ASC news and share positive into as and we be and at that we'll stabilization the that do the it's given think reimbursement set X/X/XX. hopefully ON-Q, taking in

be Kristen's in where this financial of the January. year portfolio. to weeks work that We more metrics come to over as out lay with early to to on able do we're XXXX next like and we into need some part But positioned an said to I appropriate coming more and do question, the early

Daniel Stauder

one And follow-up. just

a here, few on you Is it driving bit you some us quarters So top It's any state more about growth? more just performances. color can this talked what's then Or and strong is into Game But keep it that. this XXXX due we we of give feel steady mind any of a Ready. been solid on to you in little look notable comps? And should year do drivers category? as this next

Michael Greiner

great a question. it's No, Yes.

if in the is Ready of some growing total is for it bit Danny, comps you the at year-over-year QX comp as as mute in percentage will for little pointed dollars, a tough But QX. Game of the So you it out. the for just absolute the look year.

total to XXXX. growth We similar have expect for in

Game are of additional are currently which we new pleased orthopedics little we're We deploying that of are some around our the rental Game because with deploying can clumsy model Ready getting. not us direct-to-consumer the feedback more currently seamless strategies approach, for current be that currently a deploy, a in we testing expertise. times is in than very and model rental also Ready We're that's strategies which some with early at

have we're So in place we we that right help XXXX growth Ready, to and excited in category. to out additional support think Game further strategies in strategies for lay the

Operator

time. Michael . Greiner I there no over would for And at call are further turn remarks. like closing the questions this to to

Michael Greiner

Great. Thank you.

of primary months XX as transformation outlined Investor to guys that so our or Day. strategic you we focus, continues the know, the execution So be plan at ago

great some to opportunities opportunistically, technology various and about, divested executed going supported forward. milestone exits. business We that through will We we important valuation share continue do an hit product which successfully talked with quarter previously our this we've our acquired we and repurchase we've RH divestiture. As with Diros,

cash more in margin transformation free you generation Thank financial presenting of for just your Avanos. with, JPMorgan from And our standpoint XXXX. interest along the the metrics our review standpoint, significant year conference objectives. shared priorities, look financial We made forward to January continued a full progress we've in towards flow for holistic at with I as a

Operator

Thank participation, day. Ladies you, your disconnect. a concludes presenters. and now conference you this Have today's may for and great you gentlemen, Thank call.

Avanos Medical (AVNS) 30 Oct 242024 Q3 Earnings call transcript