Avanos Medical, Inc. · NYSE:AVNS
Avanos Medical — Q2 2023 Earnings Presentation
29 slides from Avanos Medical's earnings presentation, Aug 9, 2023
Slide 1: Q2 2023 Earnings Presentation
Q2 2023 Earnings Presentation August 9th, 2023 Getting patients back to the things that matter.
Slide 2: Presenters and agenda
Joe Woody Michael Greiner Chief Executive Officer Senior Vice President, CFO & Chief Transformation Officer Business Progress Q2 Results & 2023 Against 2023 Priorities Planning Environment 2
Slide 3: Forward-Looking Information; Non-GAAP Financial Measures
FORWARD-LOOKING INFORMATION Certain matters in this presentation, including expectations and planning assumptions, any comments about our expected performance, and any estimates, projections, or statements relating to our business plans, objectives, acquisitions and transformation initiatives, const
Slide 4: Reflections on Performance
Reflections on Performance • Overall results exceeded our expectations • Continue to experience strong demand in our Digestive Health product portfolio • Improving supply chain environment • Remain focused on getting patients back to the things that matter as we meet customer needs 4
Slide 5: Second Quarter Performance
Continuing Operations Second Quarter Performance • Achieved net sales of $169 million. Excluding currency and the impact of products no longer sold, organic growth was favorable 2.6% • Generated $0.24 of adjusted diluted EPS and almost $23 million of adjusted EBITDA • Adjusted gross margins at 59.9%
Slide 6: Strong Quarter for Digestive Health
Continuing Operations Strong Quarter for Digestive Health Digestive Health Sales Millions • Digestive Health revenue up close to 17% $93 (constant currency sales) • Strong NeoMed execution contributed nearly $80 50% of total growth • Above market growth from CORTRAK guided tube placement; record qua
Slide 7: Pain portfolio remains challenged
Continuing Operations Pain portfolio remains challenged Pain Management & Recovery Sales * • Pain Management down 11% Millions (constant currency / normalized sales) $86 • Surgical pain pump businesses flat $76 • Supply challenges persist and will continue through 2023 • HA 3-shot (TriVisc) sales in
Slide 8: Priorities for Reimagining Our Business
Priorities for Reimagining Our Business Cost Capital 1 Optimization 2 Portfolio 3 4 Management Allocation Strategic & Transform the Additional Cost Continued Efficient Commercial Product Portfolio Management Capital Allocation Optimization Initiatives to Strategies to Enhance Operating Expand Return
Slide 9: Priorities for Reimagining Our Business
Priorities for Reimagining Our Business • Transformation agenda remains on track • Improved Pain Management & Recovery go-to-market strategy • Capital allocation priorities toward tuck-in M&A and share repurchase 9
Slide 10: Q2 2023 Results
Q2 2023 Results Michael Greiner Senior Vice President, CFO & Chief Transformation Officer
Slide 11: Second Quarter Performance
Second Quarter Performance TOTAL CONTINUING OPERATIONS Sales Adj. EBITDA Sales Adj. EBITDA Millions Millions Millions Millions $203 $35 $171 $23 $23 $200 $169 $32 17.1% 15.9% 13.4% 13.5% Q2 2022 Q2 2023 Q2 2022 Q2 2023 Q2 2022 Q2 2023 Q2 2022 Q2 2023 11
Slide 12: Adjusted Gross Profit and SG&A
Total Adjusted Gross Profit and SG&A Adjusted Gross Profit Adjusted gross margin 270 bps lower compared Millions $121 to second quarter of 2022 • Unfavorable impact of currency and unfavorable $113 product mix 59.4% 56.7% margin margin • Sequential improvement of 30 bps compared to first quarter of
Slide 13: EBITDA Margin in line with 2022
Continuing Operations EBITDA Margin in line with 2022 Adjusted Gross Profit Adjusted gross margin 200 bps lower compared Millions $106 to second quarter of 2022 $102 • Unfavorable impact of currency and unfavorable product mix 61.9% 59.9% margin margin • Anticipate gross margin at approximately 60%
Slide 14: Discontinued Operations Impact
Discontinued Operations Discontinued Operations Impact STRANDED COSTS MITIGATION IMPACT TO OUR 2023 ADJUSTED EBITDA • On a non-burdened basis, Respiratory Health is estimated to contribute approximately $40 million of adjusted $19 EBITDA for 2023 ~$21 • Stranded costs partially offset by TSA ~$140 ~
Slide 15: 2023 Guidance adjusted for divestiture
Continuing Operations 2023 Guidance adjusted for divestiture Revenue Adj. Gross Adj. EBITDA Adj. Diluted 2023 GUIDANCE (in millions) Margin SG&A % (in millions) EPS Q1 $159 59.6% 47.9% $16 $0.13 Sales Low single-digit organic growth Q2 $169 59.9% 45.1% $23 $0.24 Margins EBITDA margin expansion ~100
Slide 16: 2024 Preliminary Outlook & 2025 Targets
Continuing Operations 2024 Preliminary Outlook & 2025 Targets 2024 OUTLOOK Revenue Adj. Gross Adj. EBITDA Adj. Diluted Sales Mid single-digit organic growth (in millions) Margin SG&A % (in millions) EPS 23FY $675 - $685 59.5 – 60.0% 43 – 44% $100 - $110 $1.05 - $1.15 Margins EBITDA margin expansion
Slide 17: Building Value Creation into 2025 and Beyond
Building Value Creation into 2025 and Beyond Increased FCF ROIC generation From 5.8% Margin to >8% ROIC >$100M FCF expansion ~60% FCF conversion +400-500 bps MSD EBITDA margin organic growth 17
Slide 18: Thank You
Thank You
Slide 19: Appendices: Non-GAAP Reconciliations
APPENDICES Non-GAAP Reconciliations
Slide 20: Non-GAAP Reconciliations: Gross Profit
NON-GAAP RECONCILIATIONS In millions Gross Profit Three Months Ended June 30, 2023 Three Months Ended June 30, 2022 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ 97.8 $ 11.8 $ 109.6 $ 101.6 $ 14.8 $ 116.4 Acquisition and integra
Slide 21: Non-GAAP Reconciliations: Operating Profit
NON-GAAP RECONCILIATIONS In millions Operating (Loss) Profit Three Months Ended June 30, 2023 Three Months Ended June 30, 2022 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ (2.1) $ 7.7 $ 5.6 $ 10.1 $ 10.4 $ 20.5 Acquisition and
Slide 22: Non-GAAP Reconciliations: Income Before Taxes
NON-GAAP RECONCILIATIONS In millions (Loss) Income Before Taxes Three Months Ended June 30, 2023 Three Months Ended June 30, 2022 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ (5.1) $ (64.6) $ (69.7) $ 7.6 $ 10.4 $ 18.0 Acquisit
Slide 23: Non-GAAP Reconciliations: Tax Provision
NON-GAAP RECONCILIATIONS In millions Tax Provision Three Months Ended June 30, 2023 Three Months Ended June 30, 2022 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ 0.8 $ 0.8 $ 1.6 $ (2.8) $ (2.7) $ (5.5) Tax effects of adjusting
Slide 24: Non-GAAP Reconciliations: Net Income, Three Months
NON-GAAP RECONCILIATIONS In millions, except per share amounts Net (Loss) Income Three Months Ended June 30, 2023 Three Months Ended June 30, 2022 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ (4.3) $ (63.8) $ (68.1) $ 4.8 $ 7.7
Slide 25: Non-GAAP Reconciliations: Net Income, Six Months
NON-GAAP RECONCILIATIONS In millions, except per share amounts Net (Loss) Income Six Months Ended June 30, 2023 Six Months Ended June 30, 2022 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ (12.1) $ (56.5) $ (68.6) $ 0.8 $ 17.1 $
Slide 26: Non-GAAP Reconciliations: SG&A
NON-GAAP RECONCILIATIONS In millions, except per share amounts Selling, General and Administrative Expense Three Months Ended June 30, 2023 Three Months Ended June 30, 2022 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ 93.0 $ 3.
Slide 27: Non-GAAP Reconciliations: EBITDA, Three Months
NON-GAAP RECONCILIATIONS In millions, except per share amounts EBITDA Three Months Ended June 30, 2023 Three Months Ended June 30, 2022 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total Net (loss) income $ (4.3) $ (63.8) $ (68.1) $ 4.8 $ 7.7 $ 12
Slide 28: Non-GAAP Reconciliations: EBITDA, Six Months
NON-GAAP RECONCILIATIONS In millions, except per share amounts EBITDA Six Months Ended June 30, 2023 Six Months Ended June 30, 2022 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total Net (loss) income $ (12.1) $ (56.5) $ (68.6) $ 0.8 $ 17.1 $ 17.9
Slide 29: Non-GAAP Reconciliations: Free Cash Flow and 2023 Outlook
Continuing Operations NON-GAAP RECONCILIATIONS In millions, except per share amounts Free Cash Flow Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Cash provided by (used in) operating activities $ (2.6) $ 27.0 $ (9.4) $ 28.8 Capital expenditures (4.0) (4.1) (8.0) (9.1) Fre