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Avanos Medical (AVNS) Q2 Earnings call transcript Jul 31, 2024

AInvestWednesday, Jul 31, 2024 9:22 pm ET
2min read

Avanos Medical's second quarter earnings call for 2024 provided insights into the company's operational and financial performance, highlighting its strategic priorities and transformation efforts. The call, led by CEO Joe Woody and Senior Vice President Michael Greiner, revealed a company that is making steady progress in various areas, particularly in its Digestive Health and Pain Management businesses.

Strong Second Quarter Performance and Transformation Efforts

Avanos Medical reported a strong second quarter, with sales from continuing operations at approximately $172 million. Adjusted for foreign exchange and strategic decisions, organic sales were up 2.6% compared to a year ago, reflecting the company's focus on executing its commercial strategy and reducing significant backlog. The company generated $0.34 of adjusted diluted earnings per share and approximately $27 million of adjusted EBITDA from continuing operations.

The company's 3-year transformation priorities, including strategically and commercially optimizing its organization, transforming its product portfolio, and enhancing cost management, are driving its execution and results. These efforts are aimed at improving the company's financial profile and meeting its 2025 financial targets.

Digestive Health: A Bright Spot

Avanos Medical's Digestive Health portfolio continues to shine, with sales growing almost 9% organically versus prior year. The NeoMed product line, a significant contributor to this growth, posted double-digit growth, highlighting the company's ability to capitalize on the strong demand for ENFit conversions in North America. The legacy neutropenic business also showed strong growth, indicating the company's focus on innovation and expansion.

Pain Management: Moving Forward

The Pain Management and Recovery portfolio, while experiencing a slight dip, showed signs of renewed focus and growth. The combined On-Q and ambIT portfolio grew by mid-single digits, demonstrating the success of the company's enhanced go-to-market strategy. The IVP business, including its radio frequency ablation portfolio, also showed growth, supported by the company's successful U.S. market launch and capitalization on its ASC strategy.

Looking Ahead: Mid- to High Single-Digit Growth

Avanos Medical's management expressed optimism about the future, with mid- to high single-digit growth expected for the Pain Management business in the coming years. The company's strategic focus on product launches, international expansion, and bolt-on M&A opportunities is expected to fuel this growth.

Financial Highlights and Liquidity

The company's financial performance was marked by mid- to high single-digit growth in its digestive health portfolio and low single-digit growth in its Pain Management and Recovery portfolio. Adjusted EBITDA grew by 17% compared to a year ago, reflecting the company's focus on top line growth, effective manufacturing and operations execution, and cost savings efforts. The balance sheet remains strong, with $92 million of cash on hand and $175 million of debt outstanding as of June 30, 2024.

Trends and Insights from the Earnings Call

The earnings call provided valuable insights into Avanos Medical's strategic focus, operational performance, and financial health. The company's transformation efforts, particularly in its Digestive Health and Pain Management businesses, are yielding positive results. The successful execution of product exits, acquisitions, and strategic divestitures underscore the company's commitment to optimizing its portfolio and enhancing its financial profile.

Looking ahead, Avanos Medical appears well-positioned for mid- to high single-digit growth in the coming years, supported by its market-leading portfolio and strategic priorities. The company's focus on innovation, operational efficiency, and strategic M&A opportunities is expected to drive its growth trajectory.

Key Takeaways

- Avanos Medical reported a strong second quarter performance, with sales from continuing operations at approximately $172 million and adjusted EBITDA at $26.8 million. - The company's transformation efforts, including strategic optimization, product portfolio transformation, and cost management, are driving its execution and results. - The Digestive Health portfolio continues to perform well, with sales growing almost 9% organically versus prior year. - The Pain Management and Recovery portfolio showed signs of renewed growth, with the combined On-Q and ambIT portfolio growing by mid-single digits. - The company expects mid- to high single-digit growth for the Pain Management business in the coming years, supported by strategic product launches and international expansion. - The balance sheet remains strong, with $92 million of cash on hand and $175 million of debt outstanding as of June 30, 2024. - Avanos Medical is well-positioned for mid- to high single-digit growth in the coming years, driven by its market-leading portfolio and strategic priorities.

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