Avanos Medical's Q4 2024: Navigating Contradictions in Margin Expectations and HA Strategy

These are the key contradictions discussed in Avanos Medical's latest 2024Q4 earnings call, specifically including: Margin Improvement Expectations, Strategic Focus on the HA Business, Product Innovations Timeline, and Market Strategy for HA:



Strong Financial Performance and Transformation Progress:
- Avanos delivered adjusted diluted earnings per share of $0.43 and $1.35 for Q4 and FY2024, respectively, and generated $83 million in free cash flow, up almost $70 million from the previous year.
- The growth was driven by solid performance in the enteral feeding franchise, completion of the respiratory health business divestiture, and meeting commitments under a deferred prosecution agreement with the DOJ.

Enteral Feeding Portfolio Growth:
- The enteral feeding portfolio grew nearly 12% organically in Q4 and served over 2 million patients in 2024.
- This growth was supported by strong ENFit conversions in North America, capturing opportunities from a competitor's backorder, and international orders through OEM partners.

Pain Management and Recovery Segment Challenges:
- The pain management and recovery segment experienced a 3% decline in normalized organic sales in Q4, excluding foreign exchange impacts.
- The decline was due to pricing pressures in the HA portfolio, which saw a 20% decrease in revenue for the full year, despite volume gains.

2025 Outlook and Strategic Changes:
- Avanos anticipates net sales in the range of $665 million to $685 million for 2025, with expected adjusted diluted earnings per share between $1.05 and $1.25.
- The company will begin segment reporting in 3 operating segments, reflecting a strategic focus on specialty nutrition systems, pain management and recovery, and corporate and other activities.