Avanos Medical, Inc. · NYSE:AVNS
Avanos Medical — Q1 2022 Earnings Presentation
29 slides from Avanos Medical's earnings presentation, May 4, 2022
Slide 1: First Quarter 2022 Earnings Call
FIRST QUARTER 2022 EARNINGS CALL MAY 4TH, 2022 1
Slide 2: Agenda and Speakers
∆GEND∆ ∆ND SPE∆KERS Joe Woody Michael Greiner Chief Executive Officer Senior Vice President and Chief Financial Officer Update on Business Q&A Review First Quarter Results Progress Against 2022 Priorities Discuss 2022 Planning Environment 2
Slide 3: Forward-Looking Information
OVERVIEW FORWARD-LOOKING INFORMATION 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, acqui
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 4
Slide 5: First Quarter Performance: Solid Start
FIRST QUARTER PERFORMANCE: SOLID START • Net Sales increased 9% to $197 million (including OrthogenRx sales), 3% organic growth in constant currency • Earned $0.26 of adjusted diluted EPS • Delivered strong results in Interventional Pain (high single- digit growth), Digestive Health and Acute Pain (
Slide 6: Expanding Gross Margin
EXPANDING GROSS MARGIN • Adjusted gross margin improved 410 basis points compared to first quarter 2021 and 340 basis points compared to fourth quarter 2021 • Favorable product mix, cost savings and manufacturing efficiencies • Raw material availability, inflation and transportation challenges remai
Slide 7: Operating Expense Profile
OPERATING EXPENSE PROFILE • Our SG&A margin profile shows an increased investment in the first half of the year to support 2022 growth • Commitment remains to deliver SG&A as percent of revenue less than 40% on annualized go-forward basis 7
Slide 8: Momentum Across Pain Products
MOMENTUM ACROSS PAIN PRODUCTS • Return of elective procedures • On-Q returned to growth; Coolief mid single-digit growth • Expecting low single-digit growth in Q2 and double-digit in H2 • Building on the momentum and product enhancements made in 2021: −On-Q and ambIT: Continued adoption of PainBlock
Slide 9: Chronic Care Growth Driven by Digestive Health
CHRONIC CARE GROWTH DRIVEN BY DIGESTIVE HEALTH • Positive trend in Digestive Health continues • Maintained double-digit growth in NeoMed • Soft performance in Respiratory Health due to product availability. We expect growth to revert to historical rates in Q2 and beyond 9
Slide 10: Free Cash Flow Generation
FREE CASH FLOW GENERATION • Ability to generate consistent and repeatable cash flow • Excluding one-time tax and legal settlements, generated $26 million of normalized free cash flow in 2021 • Continue to focus on generating improved operating results and disciplined working capital management • Ant
Slide 11: Deploying Capital Towards M&A
DEPLOYING CAPITAL TOWARDS M&A • M&A pipeline remains healthy • Opportunity to 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 generation of strong re
Slide 12: Avanos: Solid Start for the Year
∆V∆NOS: SOLID START FOR THE YEAR • Product portfolio resilience • Macro environment uncertainties remain • Our 2022 priorities: − Deliver solid organic growth − Improve gross margin profile − Generate free cash flow • Will build quarter-over-quarter momentum throughout 2022 12
Slide 13: First Quarter 2022 Results
First Quarter 2022 Results Michael Greiner Senior Vice President and Chief Financial Officer 13
Slide 14: Maintaining Focus on Execution
MAINTAINING FOCUS ON EXECUTION • Solid organic growth, OrthogenRx execution and gross margin improvement • Additional SG&A spending in our first quarter related to selling and marketing investments planned later in the year and inflationary costs on compensation and outside services 14
Slide 15: Maintaining Focus on Execution
MAINTAINING FOCUS ON EXECUTION • Total sales of $197 million increased 9% versus prior year −10% increase in volume, 7% OrthogenRx acquisition and 3% organic −1% favorable impact from price −1% unfavorable impact from currency • Adjusted EPS of $0.26 15
Slide 16: Chronic Care First Quarter Net Sales
CHRONIC CARE FIRST QUARTER NET SALES Consolidated net sales totaled $197 million Chronic Care Sales * • Chronic Care sales, excluding Maxter, flat to PY at $119 million Millions • Mid single-digit growth in Digestive Health $119 $119 − NeoMed grew 32% from continued conversion to ENFit • Respiratory
Slide 17: Pain Management First Quarter Net Sales
PAIN MANAGEMENT FIRST QUARTER NET SALES Consolidated net sales totaled $197 million • Pain Management sales, excluding OrthogenRx, of $63 million, Pain Management Sales * Millions more than 6% above prior year • Return to growth for ON-Q as hospitalizations declined and $63 elective procedure volume
Slide 18: First Quarter Performance
FIRST QUARTER PERFORMANCE Gross Margin improvement Adjusted Gross Profit and Margin Adjusted Operating Profit and Margin Millions Millions $111 $94 $18 $16 52% 56% 6% 9% 9% Q1 2021 Q1 2022 Q1 2021 Q1 2022 18
Slide 19: First Quarter Performance
FIRST QUARTER PERFORMANCE Earned $0.26 of Adjusted Diluted EPS Adjusted EBITDA Adjusted Net Income Millions Millions $24 $22 $12 $11 12% 12% 6% Q1 2021 Q1 2022 Q1 2021 Q1 2022 19
Slide 20: Balance Sheet and Cash Flow
BALANCE SHEET AND CASH FLOW • Keeping a healthy balance sheet and generating meaningful cash flow remain key go-forward priorities • Ended quarter with $104 million of cash on hand • $255 million debt outstanding • Free cash flow was an outflow of $3 million 20
Slide 21: 2022 Outlook
2022 OUTLOOK • Product supply challenges, global environment uncertainties and inflation remain • Re-affirm external guidance – Organic sales growth of 3% to 6% on a constant currency basis versus prior year – Adjusted gross margin of 55% to 57% – Continued SG&A spend control, below 40% of sales for
Slide 22: Avanos: Strong Start to the Year
∆V∆NOS: STRONG START TO THE YEAR • Meaningful progress towards value creation goals • Confident in ability to execute strategy • Will take necessary steps to drive gross and operating margin improvement and deliver significant free cash flow 22
Slide 23: The best at getting patients back to the things that matter
The best at getting patients back to the things that matter 23
Slide 24: Appendices: Non-GAAP Reconciliations
APPENDICES Non-GAAP Reconciliations 24
Slide 25: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS In millions 25
Slide 26: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS In millions 26
Slide 27: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS In millions, except per share amounts 27
Slide 28: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS In millions, except per share amounts 28
Slide 29: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS In millions, except per share amounts 29