Avanos Medical, Inc. · NYSE:AVNS
Avanos Medical — Q1 2024 Earnings Presentation
27 slides from Avanos Medical's earnings presentation, May 2, 2024
Slide 1: Q1 2024 Earnings Presentation
Q1 2024 Earnings Presentation May 2nd, 2024 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 Q1 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 • Overall results in line with our expectations • Continue to experience strong 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 matter as we meet cus
Slide 5: First Quarter Performance: Start as Expected
First Quarter Performance: Start as Expected • Achieved net sales of $166 million. Excluding currency and the impact of products no longer sold, organic sales were favorable 4.7% versus prior year • Generated $0.22 of adjusted diluted EPS and greater than $21 million of adjusted EBITDA • Improved ad
Slide 6: Solid quarter for Digestive Health
Solid quarter for Digestive Health Digestive Health Sales * Millions $95 • Digestive Health revenue grew more than 9% for $86 the quarter (constant currency / normalized sales) • Sequential sales increase and double-digit Q1 2023 Q1 2024 growth for NeoMed versus prior year • Above market growth for
Slide 7: Pain Portfolio Showing Signs of Turnaround
Pain Portfolio Showing Signs of Turnaround Pain Management & Recovery Sales * • Pain Management & Recovery down 1% for the Millions quarter (constant currency / normalized sales) $70 $66 • On-Q/ambIT products flat versus prior year • Strategic product rationalization in our IVP business Q1 2023 Q1 2
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: First Quarter Progress Toward our Transformation
First Quarter Progress Toward our Transformation Strategic & • Stabilized and made progress across our Pain Management & Recovery portfolio 1 Commercial • Finalized our commercial and marketing organization to support MSD growth in the second half of 2024 Optimization Transform • Continued efforts t
Slide 10: Q1 2024 Results
Q1 2024 Results Michael Greiner Senior Vice President, CFO & Chief Transformation Officer
Slide 11: First Quarter Performance – Topline growth
First Quarter Performance – Topline growth Strategic & • Stabilized and made progress across our Pain Management & Recovery portfolio 1 Commercial • Finalized our commercial and marketing organization to support MSD growth in the second half of 2024 Optimization • Continued growth in Digestive Healt
Slide 12: First Quarter Performance – Margin Expansion
First Quarter Performance – Margin Expansion Sales Adj. EBITDA Adj. EPS Millions Millions $22 $166 $159 $0.22 $16 $0.13 0.5% 4.7% 10.1% 13.0% organic organic margin margin growth growth Q1 2023 Q1 2024 Q1 2023 Q1 2024 Q1 2023 Q1 2024 +4% +34% +69% Numbers include rounding 12
Slide 13: First Quarter Performance – Margin Expansion
First Quarter Performance – Margin Expansion Adj. Gross Profit Millions $99 Adjusted gross margin 20 bps favorable to prior year $95 • Unfavorable HA price volatility offset by saving Gross programs Margin • Anticipate gross margin to be approximately 60% 59.6% 59.8% margin margin for the second qua
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 03/31/24 accretive deals ~3.5% annually Returns above Cash $88 $76 cost of capital Term Debt (118) (117) M&A R&D SHARE- HOLDER Revolver (50) (60) VALUE CREATION SHARE CAPEX Net (Debt) ($80) ($101) REPURCHASE Adjusted 122 115 EBITDA
Slide 16: Transformation Year 2 – Priorities
Transformation Year 2 – Priorities Strategic & • Continue to invest behind and grow Digestive Health above market globally 1 Commercial Optimization • Realize MSD growth and profitability in Pain Management & Recovery Transform • Additional strategic and adjacent M&A targets 2 the Product Portfolio
Slide 17: 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 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 March 31, 2024 Three Months Ended March 31, 2023 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ 94.8 $ 1.0 $ 95.8 $ 91.4 $ 13.1 $ 104.5 Restructuring and transf
Slide 21: Non-GAAP Reconciliations: Operating Profit
NON-GAAP RECONCILIATIONS In millions Operating Profit (Loss) Three Months Ended March 31, 2024 Three Months Ended March 31, 2023 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ 4.0 $ (1.9) $ 2.1 $ (6.1) $ 8.7 $ 2.6 Acquisition and
Slide 22: Non-GAAP Reconciliations: Income Before Taxes
NON-GAAP RECONCILIATIONS In millions Income (Loss) Before Taxes Three Months Ended March 31, 2024 Three Months Ended March 31, 2023 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ 1.5 $ (1.9) $ (0.4) $ (9.1) $ 8.7 $ (0.4) Acquisit
Slide 23: Non-GAAP Reconciliations: Tax
NON-GAAP RECONCILIATIONS In millions Tax (Provision) Benefit Three Months Ended March 31, 2024 Three Months Ended March 31, 2023 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ (1.0) $ 0.5 $ (0.5) $ 1.3 $ (1.4) $ (0.1) Tax effects
Slide 24: Non-GAAP Reconciliations: Net Income
NON-GAAP RECONCILIATIONS In millions Net Income (Loss) Three Months Ended March 31, 2024 Three Months Ended March 31, 2023 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ 0.5 $ (1.4) $ (0.9) $ (7.8) $ 7.3 $ (0.5) Acquisition and i
Slide 25: Non-GAAP Reconciliations: SG&A
NON-GAAP RECONCILIATIONS In millions Selling, General and Administrative Expense Three Months Ended March 31, 2024 Three Months Ended March 31, 2023 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total As reported $ 83.6 $ — $ 83.6 $ 88.8 $ 3.9 $ 92
Slide 26: Non-GAAP Reconciliations: EBITDA
NON-GAAP RECONCILIATIONS In millions EBITDA Three Months Ended March 31, 2024 Three Months Ended March 31, 2023 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total Net income (loss) $ 0.5 $ (1.4) $ (0.9) $ (7.8) $ 7.3 $ (0.5) Interest expense, net
Slide 27: Non-GAAP Reconciliations: Free Cash Flow and 2024 Outlook
NON-GAAP RECONCILIATIONS In millions Free Cash Flow Three Months Ended March 31, 2024 2023 Cash used in operating activities $ (8.0) $ (6.8) Capital expenditures (4.1) (4.0) Free Cash Flow $ (12.1) $ (10.8) 2024 Outlook Estimated Range Diluted earnings per share (GAAP) $ 0.63 to $ 0.87 Intangibles a