Avanos Medical, Inc. · NYSE:AVNS
Avanos Medical — Q2 2024 Earnings Presentation
31 slides from Avanos Medical's earnings presentation, Jul 31, 2024
Slide 1: Q2 2024 Earnings Presentation
Q2 2024 Earnings Presentation July 31st, 2024 Getting patients back to the things that matter.
Slide 2: Speakers and agenda
Joe Woody Michael Greiner Chief Executive Officer Senior Vice President, CFO & Chief Transformation Officer Business Progress Q2 Results & 2024 Against 2024 Priorities Planning Assumptions 2
Slide 3: Disclaimer Regarding Forward-Looking Statements; Non-GAAP Financial Measures
DISCLAIMER REGARDING FORWARD-LOOKING STATEMENTS 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 transformatio
Slide 4: Reflections on Performance
Reflections on Performance • Strong second quarter building off the first quarter results • Continue to experience sustained demand in our Digestive Health product portfolio and see progress in our Pain Management and Recovery business • Remain focused on getting patients back to the things that mat
Slide 5: Second Quarter Performance
Second Quarter Performance • Organic sales were favorable 2.6% versus prior year excluding currency and the impact of products no longer sold, with total net sales of $172 million • Generated $0.34 of adjusted diluted EPS and approximately $27 million of adjusted EBITDA • Adjusted gross margins of 5
Slide 6: Another Strong Quarter for Digestive Health
Another Strong Quarter for Digestive Health Digestive Health Sales * Millions • Digestive Health revenue grew nearly 9% for the $98 quarter (constant currency / normalized sales) $90 • NeoMed sales grew double-digit versus prior year • Above market growth for legacy Enteral Feeding products Q2 2023
Slide 7: Progress in our Pain Businesses
Progress in our Pain Businesses Pain Management & Recovery Sales * • Excluding HA and Diros, normalized organic sales Millions $72 $73 were up 2% • Mid single-digit growth in On-Q/ambIT products • Return to growth in our IVP business Q2 2023 Q2 2024 • Double-digit growth in Game Ready +1% • Trident
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: Second Quarter Progress Toward our Transformation
Second Quarter Progress Toward our Transformation Strategic & 1 Commercial • Stabilized and made progress across our Pain Management & Recovery portfolio Optimization Transform • Continued efforts to support the divestiture of Respiratory Health 2 the Product Portfolio • Continued execution on our n
Slide 10: Q2 2024 Results
Q2 2024 Results Michael Greiner Senior Vice President, CFO & Chief Transformation Officer
Slide 11: Second Quarter Performance – Topline growth
Second Quarter Performance – Topline growth Strategic & 1 Commercial • Stabilized and made progress across our Pain Management & Recovery portfolio Optimization • Sustained growth in Digestive Health, including double-digit for NeoMed • Continued progress in our PM&R portfolio with low single-digit
Slide 12: Second Quarter Performance – Margin Expansion
Second Quarter Performance – Margin Expansion Sales Adj. EBITDA Adj. EPS Millions Millions $169 $172 $27 $0.34 $23 $0.24 2.6% 2.6% 13.5% 15.6% organic organic margin margin growth growth Q2 2023 Q2 2024 Q2 2023 Q2 2024 Q2 2023 Q2 2024 +1% +17% +42% Numbers include rounding 12
Slide 13: Second Quarter Performance – Margin Expansion
Second Quarter Performance – Margin Expansion Adj. Gross Profit Millions Gross margin comparable to prior year $102 $102 Adj. • HA price volatility offset by saving programs Gross • Anticipate gross margin to be ~60% next 59.9% 59.6% Margin quarter margin margin Q2 2023 Q2 2024 Adj. SG&A Millions SG
Slide 14: 2024 Full Year: Re-Affirming Guidance
2024 Full Year: Re-Affirming Guidance $685 million to $705 million Sales 3% to 6% Organic growth Gross Margin 59.5% to 60.5% Adjusted SG&A as a % of Revenue 41.0% to 42.0% Margins EBITDA margin improvement by at least 200 bps Adjusted $1.30 - $1.45 Diluted EPS 14
Slide 15: Capital Allocation and Net Debt
Capital Allocation and Net Debt Target margin $ in millions 12/31/23 06/30/24 accretive deals ~3.5% annually Cash $88 $92 Returns above cost of capital Term Debt (118) (115) M&A R&D SHARE- HOLDER Revolver (50) (60) VALUE CREATION SHARE CAPEX Net (Debt) ($80) ($83) REPURCHASE TTM Adjusted 99 108 EBIT
Slide 16: Building Value Creation into 2025 and Beyond
Building Value Creation into 2025 and Beyond Increased FCF generation ROIC >$100 million FCF ~8% ROIC Margin ~60% FCF conversion expansion +400-500 bps MSD EBITDA margin organic growth 16
Slide 17: Thank You
Thank You
Slide 18: Appendices: Non-GAAP Reconciliations
APPENDICES Non-GAAP Reconciliations
Slide 19: Non-GAAP Reconciliations: Gross Profit
NON-GAAP RECONCILIATIONS In millions Gross Profit Three Months Ended June 30, 2024 Three Months Ended June 30, 2023 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ 95.6 $ (2.0) $ 93.6 $ 97.8 $ 11.8 $ 109.6 Acquisition and integrat
Slide 20: Non-GAAP Reconciliations: Operating Profit (Loss)
NON-GAAP RECONCILIATIONS In millions Operating Profit (Loss) Three Months Ended June 30, 2024 Three Months Ended June 30, 2023 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ 6.3 $ (3.4) $ 2.9 $ (2.1) $ 7.7 $ 5.6 Acquisition and i
Slide 21: Non-GAAP Reconciliations: Operating Profit (Loss)
NON-GAAP RECONCILIATIONS In millions Operating Profit (Loss) Six Months Ended June 30, 2024 Six Months Ended June 30, 2023 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ 10.3 $ (5.3) $ 5.0 $ (8.2) $ 16.4 $ 8.2 Acquisition and int
Slide 22: Non-GAAP Reconciliations: Income (Loss) Before Taxes
NON-GAAP RECONCILIATIONS In millions Income (Loss) Before Taxes Three Months Ended June 30, 2024 Three Months Ended June 30, 2023 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ 6.2 $ (3.4) $ 2.8 $ (5.1) $ (64.6) $ (69.7) Acquisit
Slide 23: Non-GAAP Reconciliations: Income (Loss) Before Taxes
NON-GAAP RECONCILIATIONS In millions Income (Loss) Before Taxes Six Months Ended June 30, 2024 Six Months Ended June 30, 2023 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ 7.7 $ (5.3) $ 2.4 $ (14.2) $ (55.9) $ (70.1) Acquisition
Slide 24: Non-GAAP Reconciliations: Tax (Provision) Benefit
NON-GAAP RECONCILIATIONS In millions Tax (Provision) Benefit Three Months Ended June 30, 2024 Three Months Ended June 30, 2023 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ (1.9) $ 0.9 $ (1.0) $ 0.8 $ 0.8 $ 1.6 Tax effects of ad
Slide 25: Non-GAAP Reconciliations: Net Income (Loss)
NON-GAAP RECONCILIATIONS In millions Net Income (Loss) Three Months Ended June 30, 2024 Three Months Ended June 30, 2023 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ 4.3 $ (2.5) $ 1.8 $ (4.3) $ (63.8) $ (68.1) Acquisition and i
Slide 26: Non-GAAP Reconciliations: Net Income (Loss)
NON-GAAP RECONCILIATIONS In millions Net Income (Loss) Six Months Ended June 30, 2024 Six Months Ended June 30, 2023 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ 4.8 $ (3.9) $ 0.9 $ (12.1) $ (56.5) $ (68.6) Acquisition and inte
Slide 27: Non-GAAP Reconciliations: SG&A Expense
NON-GAAP RECONCILIATIONS In millions Selling, General and Administrative Expense Three Months Ended June 30, 2024 Three Months Ended June 30, 2023 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ 80.9 $ — $ 80.9 $ 93.0 $ 3.8 $ 96.8
Slide 28: Non-GAAP Reconciliations: SG&A Expense
NON-GAAP RECONCILIATIONS In millions Selling, General and Administrative Expense Six Months Ended June 30, 2024 Six Months Ended June 30, 2023 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ 164.5 $ — $ 164.5 $ 181.8 $ 7.7 $ 189.5
Slide 29: Non-GAAP Reconciliations: EBITDA
NON-GAAP RECONCILIATIONS In millions EBITDA Three Months Ended June 30, 2024 Three Months Ended June 30, 2023 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total Net income (loss) $ 4.3 $ (2.5) $ 1.8 $ (4.3) $ (63.8) $ (68.1) Interest expense, net
Slide 30: Non-GAAP Reconciliations: EBITDA
NON-GAAP RECONCILIATIONS In millions EBITDA Six Months Ended June 30, 2024 Six Months Ended June 30, 2023 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total Net income (loss) $ 4.8 $ (3.9) $ 0.9 $ (12.1) $ (56.5) $ (68.6) Interest expense, net 2.6
Slide 31: Non-GAAP Reconciliations: Free Cash Flow and 2024 Outlook
NON-GAAP RECONCILIATIONS In millions Free Cash Flow Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Cash provided by (used in) operating activities $ 27.8 $ (2.6) $ 19.8 $ (9.4) Capital expenditures (5.9) (4.0) (10.0) (8.0) Free Cash Flow $ 21.9 $ (6.6) $ 9.8 $ (17.4) 2024