Slide 1: Avanos Second Quarter 2022 Earnings Call
AVANOS SECOND QUARTER 2022 EARNINGS CALL
Slide 2: Agenda and Speakers
AGENDA AND SPEAKERS Joe Woody Michael Greiner Chief Executive Officer Senior Vice President and Chief Financial Officer Q&A Update on Business Progress Against 2022 Priorities Review Second Quarter Results Discuss 2022 Planning and Guidance AVANOS 2
Slide 3: Overview
OVERVIEW Certain matters in this presentation and conference call, including expectations and planning assumptions, including any comments about our expected 2022 performance, and any estimates, projections, and statements relating to our business plans, objectives, acquisitions and transformation i
Slide 4: Reflection on Performance
REFLECTION ON PERFORMANCE ® Operational and commercial execution against a range of challenging macro-economic dynamics © Remain focused on getting patients back to the things that matter as we meet needs of customers © Continue to experience consistent demand throughout our product portfolio » Upda
Slide 5: Second Quarter Performance
SECOND QUARTER PERFORMANCE © Net Sales increased 9% to $203 million (including OrthogenRx sales) © Earned $0.41 of adjusted diluted EPS © Generated $23 million of free cash flow © Excluding currency, Digestive Health and Interventional Pain grew mid-single digit while Respiratory Health and Acute Pa
Slide 6: Expanding Gross Margin
EXPANDING GROSS MARGIN © Achieved 58.7% of adjusted gross margin for the quarter © Adjusted gross margin improved 740 basis points compared to second quarter 2021 and 250 basis points compared to first quarter 2022 © Favorable product mix, cost savings and manufacturing efficiencies © Raw material a
Slide 7: Operating Expense Profile
OPERATING EXPENSE PROFILE ® Increased investment across our SG&A profile in the first half of the year to support range of growth initiatives © Our second quarter SG&A as a percentage of revenue improved 240 basis points versus our first quarter 2022 © Commitment remains to deliver SG&A as percent o
Slide 8: Chronic Care Growth Driven by Digestive Health
CHRONIC CARE GROWTH DRIVEN BY DIGESTIVE HEALTH © Positive trend in Digesti inues © Maintained double-digit growtt eoMed © Soft performance in Respiratory Health primarily related to inventory reductions at our distributors. Anticipate growth to revert to historical rates in Q3 and beyond a AVANOS 8
Slide 9: Demand for Our Pain Products
DEMAND FOR OUR PAIN PRODUCTS © As expected previously, limited Q2 growth for our Pain =~ e a demand for capital units in Interventional Pain sabe pply challenges in Acute Pain partially mitigated by ambrr able pump “ag 4 © Driving return to double-digit growth in the second half of 2022 ‘on AVANOS 9
Slide 10: Free Cash Flow Generation
FREE CASH FLOW GENERATION © Ability to generate consistent and repeatable cash flow © Continue to focus on improved operating results and disciplined working capital management © Free cash flow generation of $23 million in the second quarter 2022 © Anticipate generating approximately $80 million in
Slide 11: Deploying Capital Towards M&A
DEPLOYING CAPITAL TOWARDS M&A ~ M&A pipeline remains healthy ~ Most attractive opportunities leverage existing footprint, generate synergies, and enhance top-line growth profile ® Remain disciplined in identifying targets that meet strategic initiatives and exceed financial hurdles ® Ensure focus on
Slide 12: Avanos: Solid First Half
AVANOS: SOLID FIRST HALF © Macro environment uncertainties remain © Our 2022 priorities: — Deliver consistent organic growth ~— Execute on our OrthogenRx strategy ~~ Improve gross margin profile ~~ Generate free cash flow AVANOS
Slide 13: Second Quarter 2022 Results
Second Quarter 2022 Results Michael Greiner Senior Vice President and Chief Financial Officer
Slide 14: Most First Half Objectives Achieved
MOST FIRST HALF OBJECTIVES ACHIEVED ® Gross margin improvement, Free Cash Flow generation, SG&A % realignment and OrthogenRx execution © Continuing industry specific macro-economic pressures © Update to our revenue and adjusted EPS guidance ~~ Net Sales between $815 and $835 million ~~ Adjusted EPS
Slide 15: Maintaining Focus on Execution
MAINTAINING FOCUS ON EXECUTION © Total sales of $203 million increased 9% versus prior year —~ 10% increase in volume ~~ 1% favorable impact from price —~ 2% unfavorable impact from currency © Adjusted EPS of $0.41 AVANOS
Slide 16: Chronic Care Second Quarter Sales
CHRONIC CARE SECOND QUARTER SALES Consolidated net sales totaled $203 million 4 § i * © Chronic Care sales, excluding Maxter, Chromie Cake sie unfavorable $2 million to prior year at $112 million $114 $112 © Mid single-digit growth in Digestive Health ~~NeoMed grew 27% from continued conversion to E
Slide 17: Pain Management Second Quarter Sales
PAIN MANAGEMENT SECOND QUARTER SALES Consetidated net Sales totaled $203 million ~ Pain Management sales, excluding OrthogenRx, ‘oe — unfavorable $1 million to prior year at $69 ~ Pru million * — ane single-digit growth in Interventional Pain set by decrease in Acute Pain, as indicated during our la
Slide 18: Second Quarter Performance
SECOND QUARTER PERFORMANCE Gross margin and Operating margin improvement Adjusted Gross Profit and Margin Adjusted Operating Profit and Margin Millions $ 1 19 Millions $ 28 Q2 2021 Q2 2022 Q2.2024 Q2 2022 AVANOS
Slide 19: Second Quarter Performance
SECOND QUARTER PERFORMANCE Adjusted EBITDA jjusted Net Income Millions a > Gus $20 — | $10 Q2 2021 Q2 2022 Q2 2021 Q2 2022
Slide 20: Balance Sheet and Cash Flow
BALANCE SHEET AND CASH FLOW © Maintaining healthy balance sheet and generating meaningful cash flow remain key go-forward priorities © Currently with $100 million of cash on hand © $255 million of debt outstanding © Free cash flow was $23 million © Internal and external capital allocation goals rema
Slide 21: 2022 Outlook
2022 OUTLOOK ® Current external guidance ~ Total sales between $815 million and $835 million ~ Adjusted gross margin of 55% to 57% ~~ Continued SG&A spend control, below 40% of sales for the year ~~ Free cash flow approximately $80 million ~~ Expect to earn $1.45 to $1.65 adjusted diluted EPS © High
Slide 22: Avanos: Strong Start to 2022
VANOS: STRONG START TO gross and operating margin improvement and deliver significant free cash y™ y flow AVANOS
Slide 23: AVANOS
AVANOS
Slide 24: Appendices
APPENDICES Non-GAAP Reconciliations
Slide 25: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS lions Gross Profit Three Months Ended June 30, ‘Six Months Ended June 30, 2022 2021 2022 2021 As reported s 1149 ¢ a7 $ 222.1 $ 177.0 2020 Restructuring charges - 2.8 - 3.0 Post divestiture restructuring charges - 17 - 2.6 Post divestiture transition charges - 3.7 - 3.8 Acqu
Slide 26: Non-GAAP Reconciliations
AVANOS NON-GAAP RECONCILIATIONS lions As reported COVID-19 related expenses 2020 Restructuring charges Post divestiture restructuring charges Post divestiture transition charges Acquisition and integration-related charges EU MDR Compliance Litigation and legal Intangibles amortization Loss on exting
Slide 27: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS In millions, except per share amounts Net (Loss) Income Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 As reported $ 114 $ 37.9 $ 17.2 $ 30.3 COVID-19 related expenses - 0.2 - 0.2 2020 Restructuring charges = 8.5 = 8.7 Post divestiture restructurin
Slide 28: Non-GAAP Reconciliations
AVANOS NON-GAAP RECONCILIATIONS lions EBITDA, as reported COVID-19 related expenses 2020 Restructuring charges Post divestiture restructuring charges Post divestiture transition charges Acquisition and integration-related charges EU MDR Compliance Litigation and legal Adjusted EBITDA Cash provided b
Slide 29: Non-GAAP Reconciliations
AVANOS NON-GAAP RECONCILIATIONS In millions, except per share amounts 2022 Outlook Estimated Range Diluted earnings per share (GAAP) $ 0.95 to$ 1.25 Intangibles amortization 0.25 to 0.25 ‘Other 0.25 to 0.15 Adjusted diluted earnings per share (non-GAAP) $ 1.45 to $ 1.65