Avanos Medical 2025 Q2 Earnings Sharp Net Loss Amid Revenue Growth

Avanos Medical (AVNS) reported mixed second-quarter 2025 results, with revenue growth but a significant net loss. The company maintained its revenue guidance while navigating challenges like a goodwill impairment and tariff pressures.

Revenue
Avanos Medical reported total revenue of $175 million for 2025 Q2, a 1.9% increase from $171.70 million in 2024 Q2. The Specialty Nutrition Systems segment led with $102.70 million in revenue, driven by strong performance in enteral feeding ($74.50 million) and neonate solutions ($28.20 million). The Pain Management and Recovery segment contributed $61 million in total revenue, with radiofrequency ablation at $35.80 million and surgical pain and recovery at $25.20 million. The Corporate and Other segment added $11.30 million to the total.

Earnings/Net Income
The company swung to a net loss of $76.80 million, or $1.66 per share, compared to a net income of $1.80 million, or $0.04 per share, in the prior-year period. This represents a 4366.7% deterioration in net income and a 4250.0% negative change in EPS. The results were significantly impacted by a $77 million goodwill impairment charge. Adjusted net income was $7.90 million compared to $15.80 million in 2024 Q2, and adjusted diluted earnings per share declined to $0.17 from $0.34. These figures highlight the challenging operating environment the company faces.

Price Action
Shares of Avanos Medical have experienced significant volatility, with a 12.17% drop in the latest trading day, a 16.54% decline over the past week, and a 19.92% decrease month-to-date. This reflects investor concern over the company's earnings performance and broader market challenges.

Post Earnings Price Action Review
The investment strategy of buying Avanos shares following a revenue increase quarter-over-quarter on the earnings report date and holding for 30 days performed poorly. It yielded a return of -54.67%, significantly underperforming the benchmark return of 48.58%. The strategy’s CAGR was -23.90% over three years, indicating a substantial loss. The Sharpe ratio of -0.67 and volatility of 35.75% further underscore the high-risk nature of the strategy. Despite these metrics, the maximum drawdown of 0.00% suggests that the strategy did not experience a major decline in value during the period.

CEO Commentary
David Pacitti, Avanos Medical's CEO, highlighted the company's strong performance in the Specialty Nutrition Systems segment and progress in the Pain Management & Recovery segment. He emphasized the importance of mitigating tariff impacts through cost containment, pricing, and supply chain adjustments. Pacitti acknowledged the $77 million goodwill impairment charge but remained optimistic about the company's ability to achieve its 2025 financial guidance. He also noted the strategic importance of divesting non-core businesses like the HA product line to focus on core growth areas.

Guidance
Avanos Medical maintained its 2025 revenue guidance of $665 million to $685 million and adjusted diluted earnings per share guidance of $0.75 to $0.95. The company expects to mitigate the impact of tariffs through pricing actions, cost containment, and supply chain optimization, but it cautioned that higher-than-anticipated tariffs could negatively affect results. The guidance includes the impact of the HA product line divestiture and assumes continued progress in core segments like Specialty Nutrition Systems and Pain Management & Recovery.

Additional News
On July 31, 2025, Avanos Medical announced the divestiture of its HA product line to Channel-Markers Medical, LLC, a privately held company. This move is part of the company’s ongoing transformation strategy, focusing on advancing its core segments in Pain Management & Recovery and Specialty Nutrition Systems. The transaction aligns with Avanos Medical’s broader strategy to streamline operations and concentrate on high-growth areas. The company also reported cash on hand of $90.3 million as of June 30, 2025, compared to $107.7 million at the end of 2024. Free cash flow for the second quarter was negative $4.2 million, a shift from an inflow of $21.9 million in the same period the previous year. For the first half of 2025, free cash flow was $14.8 million, compared to $9.8 million in 2024. Total debt outstanding was $105.1 million as of June 30, 2025, down from $134.7 million at the end of 2024.