Avanos Medical, Inc. · NYSE:AVNS
Avanos Medical — Halyard Health — Q3 2016 Earnings Presentation
31 slides from Avanos Medical's earnings presentation, Nov 2, 2016
Slide 1: Third Quarter 2016 Earnings Call
THIRD QUARTER 2016 EARNINGS CALL November 2, 2016
Slide 2: Third Quarter Earnings Call Agenda
THIRD QUARTER EARNINGS CALL AGENDA 2 Third Quarter 2016 Earnings Call Third Quarter Update – Robert Abernathy, Chairman and Chief Executive Officer Third Quarter Results and 2016 Outlook – Steve Voskuil, Chief Financial Officer
Slide 3: Conference Call Reminders
CONFERENCE CALL REMINDERS 3 Third Quarter 2016 Earnings Call FORWARD-LOOKING INFORMATION Certain matters in this presentation and conference call, including our 2016 outlook, expectations and planning assumptions, and any estimates, projections, and statements relating to our business plans or objec
Slide 4: Third Quarter Update
THIRD QUARTER UPDATE ROBERT ABERNATHY, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Slide 5: Second Anniversary
SECOND ANNIVERSARY 5 • Established Halyard and introduced our long- term strategy: - Transform Halyard into leading medical devices company • Made meaningful advances against goals Third Quarter 2016 Earnings Call
Slide 6: Second Anniversary Achievements
SECOND ANNIVERSARY ACHIEVEMENTS 6 Third Quarter 2016 Earnings Call 30 % 70 % 37 % 63 % Adjusted Gross Margin 34% [VALUE ] Sales Mix Medical Devices Research & Development Free Cash Flow $27 $122 Q4 2014 Q3 2016 Q1 2015 Q3 2016 FY 2015 YTD 2016 $ in Millions Q3 2016 Q4 2014 Medical Devices S&IP
Slide 7: Executing Our Two Priorities
EXECUTING OUR TWO PRIORITIES 7 Third Quarter 2016 Earnings Call Delivering our 2016 plan Fueling our growth pipeline
Slide 8: Fueling Growth Pipeline: CORPAK Acquisition
FUELING GROWTH PIPELINE 8 Third Quarter 2016 Earnings Call • CORPAK results better than expected - Accelerated synergies in our headquarters and sales teams - Effective integration • Largely driven by CORPAK, raising full-year adjusted diluted EPS to $1.87 to $1.97 • Leveraging Digestive Health port
Slide 9: Fueling Growth Pipeline: Research and Development
FUELING GROWTH PIPELINE 9 Third Quarter 2016 Earnings Call • Differentiate portfolio through innovation - On track to deliver new product launches • Launched ON-Q Trac, a mobile app - Enables healthcare providers access to real-time patient generated data - Improves patient engagement, outcomes and
Slide 10: Fueling Pipeline Growth
FUELING PIPELINE GROWTH 10 Third Quarter 2016 Earnings Call • Fund growth investments with our strong balance sheet and ability to generate cash • Capital deployment - Repay CORPAK related borrowing - Build capacity to fund additional investments
Slide 11: Delivering Our 2016 Plan
DELIVERING OUR 2016 PLAN 11 Third Quarter 2016 Earnings Call • Delivered another solid quarter • Reported adjusted diluted EPS of $0.48 • Net sales of $398 million - Up 2 percent over last year
Slide 12: Delivering Our 2016 Plan
DELIVERING OUR 2016 PLAN 12 Third Quarter 2016 Earnings Call • Medical Devices sales increased 15 percent - Bolstered by CORPAK - Organic growth at the mid-point of guidance • S&IP sales declined 4 percent, constant currency - 3 percent price erosion in line with expectations • Recently launched S&I
Slide 13: Summary
SUMMARY 13 Third Quarter 2016 Earnings Call • Encouraged by progress year-to-date • Advanced our transformation • Three solid quarters • Poised to achieve 2016 objectives
Slide 14: Third Quarter 2016 Results
THIRD QUARTER 2016 RESULTS STEVE VOSKUIL, CHIEF FINANCIAL OFFICER
Slide 15: Third Quarter Summary
THIRD QUARTER SUMMARY 15 Third Quarter 2016 Earnings Call • Exceeded adjusted diluted EPS expectations • On track to meet planning assumptions
Slide 16: Third Quarter Consolidated Performance
THIRD QUARTER CONSOLIDATED PERFORMANCE 16 Third Quarter 2016 Earnings Call $390 $398 Q3 2015 Q3 2016 Total Net Sales 36% 15% • Sales increased 2 percent • CORPAK contributed 3 percent • Gross margin driven by portfolio shift to Medical Devices and favorable currency exchange rates • Benefits partial
Slide 17: Third Quarter Consolidated Performance
THIRD QUARTER CONSOLIDATED PERFORMANCE 17 Third Quarter 2016 Earnings Call $46 $43 Q3 2015 Q3 2016 Adjusted Operating Profit 12% 11% 36% 15% • Adjusted operating profit excludes: - $7 million post-spin related charges - $4 million acquisition-related charges - $5 million for litigation matters - $6
Slide 18: Third Quarter Summary
18 Third Quarter 2016 Earnings Call • Adjusted EBITDA of $53 million • Reported adjusted diluted EPS of $0.48 • Performance strengthened by: - Accelerated CORPAK synergies Anticipate slightly smaller year-over- year CORPAK earnings increase in 2017 - Shift in timing of some SG&A expenses to the fo
Slide 19: Third Quarter Medical Devices
$29 $32 Q3 2015 Q3 2016 Operating Profit 22% 23% THIRD QUARTER MEDICAL DEVICES 19 Third Quarter 2016 Earnings Call $126 $145 Q3 2015 Q3 2016 Devices Net Sales 36% 15% • Delivered another solid quarter • Four percent organic growth and 11 percent from CORPAK • Higher operating profit driven by higher
Slide 20: Third Quarter S&IP
THIRD QUARTER S&IP 20 Third Quarter 2016 Earnings Call $257 $249 Q3 2015 Q3 2016 S&IP Net Sales 36% 15% $26 $22 Q3 2015 Q3 2016 Operating Profit 9% • Exam Glove volume growth driven by our focus and higher than anticipated sales to Kimberly-Clark • Surgical Drapes and Gowns volume lower, as anticipa
Slide 21: Balance Sheet and Cash Flow
BALANCE SHEET AND CASH FLOW 21 Third Quarter 2016 Earnings Call • Ended the quarter with $87 million of cash • Generated free cash flow of $42 million for the quarter and $122 million YTD • Rebuilding acquisition capacity faster than anticipated
Slide 22: 2016 Outlook
2016 Outlook 22 Third Quarter 2016 Earnings Call February August November Adjusted diluted EPS $1.50 to $1.70¹ $1.70 to $1.90 $1.87 to $1.97 Net sales, excluding CORPAK -2 to -5 percent -2 to -4 percent -2 to -4 percent Medical Devices, excluding CORPAK 3 to 5 percent 3 to 5 percent 3 to 5 percent S
Slide 23: Third Quarter Summary
23 Third Quarter 2016 Earnings Call • We have made progress on transformation objectives • Strong balance sheet • Well-positioned to advance our strategic plan THIRD QUARTER SUMMARY
Slide 24: Q&A
Q&A
Slide 25: Appendices
APPENDICES
Slide 26: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS In millions Third Quarter 2016 Earnings Call 26 Gross Profit Operating Profit Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2016 2015 2016 2015 2016 2015 2016 2015 As reported $ 138.0 $ 131.0
Slide 27: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS In millions Third Quarter 2016 Earnings Call 27 Income Before Taxes Income Tax Provision Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2016 2015 2016 2015 2016 2015 2016 2015 As reported $ 12
Slide 28: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS In millions Third Quarter 2016 Earnings Call 28 Net Income Three Months Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 As reported $ 9.1 $ (470.5) $ 29.8 $ (440.8) Diluted EPS, as reported $ 0.19 $ (10.10) $ 0.63 $ (9.46) Spin-related transition char
Slide 29: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS In millions Third Quarter 2016 Earnings Call 29 EBITDA Three Months Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Net income $ 9.1 $ (470.5) $ 29.8 $ (440.8) Interest expense, net 8.2 7.8 24.2 24.8 Income tax provision 3.6 1.5 17.6 17.8 Depreciation
Slide 30: Non-GAAP Reconciliations
30 NON-GAAP RECONCILIATIONS In millions Gross Profit Three Months Ended Three Months Ended September 30, March 31, 2016 2015 As reported $ 138.0 $ 132.1 Spin-related transition charges 4.5 2.0 Manufacturing strategic changes — 0.3 Acquisition-related charges 1.5 — Goodwill impairment — — Litigation
Slide 31: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS In millions Third Quarter 2016 Earnings Call 31 2016 Outlook Estimated Range Adjusted diluted earnings per share $ 1.87 to $ 1.97 Amortization (0.30) to (0.30) Spin-related transition expenses (0.20) to (0.16) Acquisition related charges (0.23) to (0.18) Other (0.31) to (0.2