Core Insights - Avanos Medical, Inc. reported a third-quarter 2025 adjusted EPS of 22 cents, a decline of 38.9% year over year, but exceeded the Zacks Consensus Estimate of 16 cents by 37.5% [1] - Revenues for the quarter reached $177.8 million, reflecting a year-over-year increase of 4.3% and surpassing the Zacks Consensus Estimate by 6.9% [2] - The company raised its 2025 sales guidance to a range of $690-$700 million, up from a previous estimate of $665-$685 million, and increased the lower end of its EPS forecast to between 85 and 95 cents [14] Revenue Breakdown - The Specialty Nutrition Systems (SNS) segment generated revenues of $114 million, up 16.1% year over year, driven by strong demand in enteral feeding and neonatal solutions [8] - The Pain Management and Recovery (PM&R) segment reported revenues of $59 million, a 2.1% increase year over year, with net sales of Radio Frequency Ablation (RFA) products growing 10.5% to $34.6 million [4][5] - The Corporate and Other segment's revenues fell to $4.8 million, down 66.7% year over year, following the divestiture of the Hyaluronic Acid product line [9][10] Margin and Expense Analysis - Adjusted gross profit decreased by 4.7% year over year to $97.4 million, with the adjusted gross margin contracting by 390 basis points to 55.7% [11] - Selling and general expenses rose by 3.2% to $83.5 million, while research and development expenses decreased by 7.9% to $5.8 million [11] - Adjusted operating profit fell 44% to $12.2 million, with the adjusted operating margin contracting by 580 basis points to 6.9% [12] Financial Position - At the end of the third quarter, the company had cash and cash equivalents of $70.5 million, down from $90.3 million at the end of the second quarter, while total debt decreased to $102.8 million [13] - Cumulative net cash provided by operating activities increased to $46.5 million compared to $42.8 million in the prior-year period [13] Strategic Initiatives - The company is focusing on strategic portfolio actions, including divesting non-core assets and acquiring Nexus Medical to enhance its neonatal and pediatric offerings [18] - Cost-transformation initiatives are underway, aimed at achieving significant savings and improving operational efficiency through 2026 [18] - Despite challenges such as tariffs impacting margins, the company is implementing mitigation strategies, including supply-chain relocation and internal cost controls [19]

Core Insights - Avanos Medical, Inc. reported strong third-quarter earnings with an EPS of $0.22, exceeding estimates of $0.12 and the Zacks Consensus Estimate of $0.16, marking a 37.5% earnings surprise [1][2] - The company's revenue for the quarter was $177.8 million, a 4.3% increase from $170.4 million a year ago, surpassing the estimated $164.5 million [1][3] Financial Performance - The reported EPS of $0.22 represents a decrease from the previous year's EPS of $0.36, indicating challenges in maintaining earnings growth [2] - Revenue exceeded the Zacks Consensus Estimate by 6.88%, demonstrating consistent outperformance over the past four quarters [3] Segment Performance - The Specialty Nutrition Systems segment experienced double-digit growth, bolstered by the acquisition of Nexus Medical, which is expected to enhance care in NICU and PICU settings [4][6] - The Pain Management and Recovery segment also showed strong performance despite a challenging tariff environment [4][6] Financial Ratios - The company has a price-to-earnings (P/E) ratio of approximately -1.05, indicating negative earnings, while the price-to-sales ratio is about 0.71 [5] - The enterprise value to sales ratio is approximately 0.80, and the debt-to-equity ratio is low at 0.17, suggesting conservative debt use [5] - A current ratio of 2.38 indicates strong liquidity, allowing the company to effectively cover its short-term liabilities [5]

Financial Performance - For the three months ended September 30, 2025, the net loss was $1.4 million compared to a net income of $4.3 million for the same period in 2024[14]. - For the nine months ended September 30, 2025, the net loss increased to $71.6 million from a net income of $5.2 million in 2024[14]. - The company reported comprehensive loss of $2.0 million for the three months ended September 30, 2025, compared to a comprehensive income of $4.9 million in 2024[14]. - The company reported a net loss of $0.8 million for the three months ended September 30, 2025, compared to a net income of $3.8 million in 2024[47]. - The company reported a net loss from continuing operations of $1.4 million for the three months ended September 30, 2025, compared to a net income of $5.9 million in the same period of 2024[88]. Assets and Liabilities - Total assets decreased to $1,067.7 million as of September 30, 2025, down from $1,154.2 million as of December 31, 2024[16]. - Cash and cash equivalents decreased to $70.5 million as of September 30, 2025, compared to $107.7 million at the end of 2024[16]. - Total liabilities decreased to $289.7 million as of September 30, 2025, from $325.7 million as of December 31, 2024[16]. - The accumulated deficit increased to $778.6 million as of September 30, 2025, compared to $707.0 million at the end of 2024[16]. - Total accrued expenses decreased to $74.8 million as of September 30, 2025, from $91.3 million as of December 31, 2024, a reduction of 18.0%[58]. - The Term Loan Facility balance was $103.1 million as of September 30, 2025, down from $110.2 million as of December 31, 2024, a decrease of 6.4%[69]. Goodwill and Impairment - The company incurred a goodwill impairment of $77.0 million during the nine months ended September 30, 2025[19]. - The company recorded a goodwill impairment of $77.0 million in the second quarter of 2025 due to the fair value of its Pain Management and Recovery reporting unit falling below its carrying value[38]. - As of September 30, 2025, the total balance of goodwill was $394.4 million, with $341.6 million attributed to the SNS segment and $52.8 million to the PM&R segment[39]. - The company’s market capitalization decreased in the second quarter of 2025, prompting an interim goodwill impairment test[38]. Restructuring and Expenses - The company initiated a three-year restructuring initiative in January 2023, incurring net expenses of $27.4 million related to organizational design and business process efficiencies[41]. - In the first six months of 2025, the company incurred $10.3 million in costs related to its restructuring plan, compared to $2.3 million in the same period of 2024[42]. - The company expects to incur up to $10.0 million in incremental expenses due to the expansion of its restructuring plan, anticipating annualized savings between $15.0 million and $20.0 million[43]. - The company’s restructuring liability as of September 30, 2025, was $2.0 million, down from $3.8 million at the end of 2024[44]. Sales and Revenue - Pro forma net sales for the three months ended September 30, 2025, were $180.8 million, compared to $174.0 million in 2024, reflecting a 4.5% increase[47]. - For the nine months ended September 30, 2025, pro forma net sales were $531.7 million, up from $519.0 million in 2024, a 2.6% increase[47]. - Total consolidated net sales for the three months ended September 30, 2025, were $177.8 million, compared to $170.4 million in 2024, a 2.5% increase[49]. - Total consolidated net sales for the nine months ended September 30, 2025, reached $520.3 million, compared to $508.2 million in 2024, a 2.6% increase[50]. - Specialty Nutrition Systems segment reported net sales of $114.0 million for the three months ended September 30, 2025, compared to $98.2 million in 2024, a 16.5% increase[49]. - Specialty Nutrition Systems segment sales increased to $317.8 million for the nine months ended September 30, 2025, compared to $290.5 million in 2024[90]. Stock and Share Repurchase - The company has a share repurchase program approved for $25.0 million, which began on July 28, 2023[92]. - The Board of Directors approved a new one-year share repurchase program allowing up to $25.0 million in common stock repurchases[93]. - No common stock repurchases occurred in the nine months ended September 30, 2025[95]. - For the nine months ended September 30, 2024, a total of 1,085,333 shares were repurchased at an aggregate purchase price of $6.7 million, averaging $19.45 per share[96]. - Additionally, 211,566 shares were withheld for $3.0 million in taxes related to stock-based compensation transactions for the nine months ended September 30, 2025[96]. Other Financial Information - The company’s financial statements are prepared in accordance with GAAP, and the interim financial statements contain all necessary material adjustments[22]. - The company incurred $0.4 million in costs related to the Nexus acquisition for both the three and nine months ended September 30, 2025[46]. - Nexus acquisition contributed $0.9 million in net sales since the acquisition date[46]. - The estimated amortization expense for the remainder of 2025 is projected to be $4.5 million[57]. - The derivative asset for foreign exchange contracts was $1.2 million as of September 30, 2025[85]. - The effective portion of the gain or loss on derivative instruments was not material for the three and nine months ended September 30, 2025[86]. - There have been no material changes in the company's market risk position since the last disclosure[151].

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Financial Data and Key Metrics Changes - The company achieved net sales of approximately $178 million for Q3 2025, with organic sales for strategic segments up 10% year-over-year [5][6] - Adjusted diluted earnings per share were $0.22, with adjusted EBITDA of $20 million and an adjusted gross margin of 52.8% [6][18] - Full-year revenue estimates have been raised to $690-$700 million, and adjusted EPS estimates have been raised to $0.85-$0.95 per share [6][19] Business Line Data and Key Metrics Changes - The Specialty Nutrition Systems (SNS) segment grew organically by 14.5% year-over-year, driven by strong demand for enteral feeding products [11] - The Pain Management and Recovery segment saw normalized organic sales increase by 2.4%, with double-digit growth in the radio frequency ablation business [13][16] - The hyaluronic acid injections and intravenous infusion product lines declined over 20% due to the divestiture of the HA business [16] Market Data and Key Metrics Changes - The SNS segment's operating profit improved to 20%, reflecting higher sales volume despite tariff impacts [12] - The Pain Management and Recovery segment's operating profit was 3%, a 200 basis point improvement year-over-year [16] Company Strategy and Development Direction - The company aims to accelerate growth in strategic segments, manage tariff impacts, improve operational efficiencies, divest underperforming assets, and pursue synergistic acquisitions [4][6] - The acquisition of Nexus Medical is expected to be immediately accretive to revenue growth and earnings per share, expanding the company's presence in a $70 million market [7][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in addressing tariff impacts and enhancing the company's growth profile despite challenges [21] - The company anticipates generating approximately $25-$30 million of free cash flow for the year, factoring in one-time charges related to transformation efforts [18][30] Other Important Information - The company is prioritizing supply chain investments to exit China by mid-2026, which will result in higher-than-anticipated capital expenditures in 2025 [10] - The company has maintained a strong balance sheet with $70 million in cash and $103 million in debt, keeping leverage levels below one turn [17] Q&A Session Summary Question: Details on the cost improvement plan and annualized cost savings - Management explained that the $15 million-$20 million in annualized cost savings will be realized by the end of 2026 through streamlining the organization and improving decision-making [24][25] Question: Insights on the product development pipeline - Management indicated a shift to a hybrid model for product development, combining internal projects with external contracting to improve speed to market [26][27] Question: Appetite for more M&A deals - Management confirmed an appetite for more synergistic M&A opportunities, particularly in the Specialty Nutrition Systems business, while actively seeking such opportunities [28][29] Question: Clarification on free cash flow assumptions - Management clarified that the $25 million-$30 million free cash flow estimate includes charges related to transformation efforts and higher capital expenditures for the China exit plan [30]

Core Insights - Avanos Medical reported quarterly earnings of $0.22 per share, exceeding the Zacks Consensus Estimate of $0.16 per share, but down from $0.36 per share a year ago, representing an earnings surprise of +37.50% [1] - The company achieved revenues of $177.8 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 6.88% and up from $170.4 million year-over-year [2] Financial Performance - Over the last four quarters, Avanos Medical has surpassed consensus EPS estimates three times and topped consensus revenue estimates four times [2] - The current consensus EPS estimate for the upcoming quarter is $0.29 on revenues of $176.14 million, and for the current fiscal year, it is $0.92 on revenues of $684.98 million [7] Market Position - Avanos Medical shares have declined approximately 29% since the beginning of the year, contrasting with the S&P 500's gain of 15.1% [3] - The Zacks Industry Rank places the Medical - Instruments sector in the top 37% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] Future Outlook - The sustainability of the stock's price movement will depend on management's commentary during the earnings call and the trends in earnings estimate revisions [3][4] - The current Zacks Rank for Avanos Medical is 3 (Hold), suggesting that the shares are expected to perform in line with the market in the near future [6]

Q3 2025 Financial Performance - Net sales reached $178 million, reflecting 10% organic growth[18] - Adjusted EPS stood at $0.36[18] - Adjusted EBITDA amounted to $20 million with an 11% margin[18] Segment Performance - Specialty Nutrition Systems experienced 14.5% organic growth, with net sales of $114 million[20] - Specialty Nutrition Systems operating profit was $23 million, representing a 20% margin[21] - Pain Management & Recovery saw 2.4% organic growth, with net sales of $59 million[26] 2025 Outlook - Net sales are estimated to be between $690 million and $700 million[16, 33] - Adjusted EPS is projected to be between $0.85 and $0.95 per share[16, 33] Financial Position - Cash balance was $70 million as of September 30, 2025[31] - Net debt was $(33) million, with a net debt to EBITDA ratio of approximately 0.4x[31] Strategic Initiatives - Expanded transformation initiatives are expected to deliver $15 to $20 million of incremental annualized savings by the end of 2026[16]

Financial Performance - Net sales for Q3 2025 totaled $177.8 million, a 4.3% increase compared to the prior year period, driven by higher volume in both Specialty Nutrition Systems and Pain Management and Recovery segments [5]. - Adjusted net income for Q3 2025 was $10.1 million, down from $16.7 million a year ago, while adjusted diluted earnings per share decreased to $0.22 from $0.36 [8]. - The company reported a net loss of $1.4 million for Q3 2025, compared to net income of $5.9 million in the same period last year [8]. - Operating profit for Q3 2025 was $0.1 million, significantly lower than the $12.0 million reported in the prior year, with adjusted operating profit at $15.2 million compared to $25.3 million last year [6]. - For the nine months ended September 30, 2025, net sales were $520.3 million, an increase from $508.2 million in the same period of 2024 [34]. - The total net income for the nine months ended September 30, 2025, was $5.2 million, with a reported loss of $71.6 million [46]. - The company reported a basic loss per share of $0.03 for the three months ended September 30, 2025, compared to earnings of $0.10 per share in the same period of 2024 [34]. - The diluted earnings per share, as adjusted, for the three months ended September 30, 2025, was $0.33 [46]. Segment Performance - Specialty Nutrition Systems segment achieved net sales of $114.0 million, reflecting a $15.8 million increase and 14.0% volume growth due to strong demand in enteral feeding and neonate solutions [9]. - Pain Management & Recovery segment net sales were $59.0 million, a $1.2 million increase, with Radio Frequency Ablation products growing 10.5% [11]. - Specialty Nutrition Systems reported total net sales of $114.0 million for the three months ended September 30, 2025, a 16.1% increase compared to $98.2 million in the same period of 2024 [60]. - Enteral feeding sales increased by 14.9% to $82.7 million in Q3 2025, while neonate solutions grew by 19.5% to $31.3 million [60]. - Pain Management & Recovery segment saw total net sales of $59.0 million, a slight increase of 2.1% from $57.8 million in Q3 2024 [60]. - Surgical pain and recovery sales decreased by 7.9% to $24.4 million, while Radiofrequency Ablation sales increased by 10.5% to $34.6 million [60]. - Year-to-date net sales for Specialty Nutrition Systems increased by 9.4%, driven by a 9.1% volume increase [60]. - The Pain Management & Recovery segment experienced a year-to-date sales growth of 1.6%, with a volume increase of 2.4% [60]. - Corporate and other segment's year-to-date sales declined by 40.6%, primarily due to the withdrawal from certain revenue streams [61]. Guidance and Future Outlook - The company raised and narrowed its 2025 estimated revenue guidance to between $690 million and $700 million, and adjusted diluted earnings per share guidance to a range of $0.85 to $0.95 [21]. - The company plans to continue focusing on restructuring and transformation charges, with an estimated range of $0.10 to $0.12 for post RH-Divestiture restructuring charges in 2025 [54]. Cash Flow and Debt - Cash flow from operations for the nine months ended September 30, 2025, was $46.5 million, an increase from $42.8 million a year ago [19]. - Total debt outstanding as of September 30, 2025, was $102.8 million, down from $134.7 million at the end of 2024 [19]. - Free cash flow for the three months ended September 30, 2025, was $7.0 million, a decrease from $20.0 million in the same period of 2024 [52]. - Cash provided by operating activities for the nine months ended September 30, 2025, was $46.5 million, compared to $42.8 million in the same period of 2024 [52]. Expenses and Impairments - Selling, General and Administrative (SG&A) expenses for the three months ended September 30, 2025, were $74.3 million, representing 43.6% of revenue [48]. - The company incurred a goodwill impairment of $77.0 million for the nine months ended September 30, 2025 [34]. - The corporate and other segment reported a significant operating loss of $24.9 million in Q3 2025, compared to a loss of $7.4 million in Q3 2024, largely due to a $77.0 million goodwill impairment [60]. - The effective tax rate for the nine months ended September 30, 2025, as reported was 46.4% [44]. - Acquisition and integration-related charges for the three months ended September 30, 2025, amounted to $1.6 million [46]. - Research and development expenses for the three months ended September 30, 2025, were $6.0 million, a decrease of 16.7% from $7.2 million in the same period of 2024 [34]. - Capital expenditures for the three months ended September 30, 2025, were $7.0 million, compared to $3.0 million in the same period of 2024 [52]. Profitability Metrics - Gross profit for the three months ended September 30, 2025, was $86.0 million, resulting in a gross profit margin of 48.4%, down from 54.5% in the same period of 2024 [34][38]. - EBITDA for the three months ended September 30, 2025, was $9.5 million, down from $21.5 million in the same period of 2024 [34]. - The adjusted non-GAAP operating income for the three months ended September 30, 2025, was $15.2 million, compared to $25.3 million for the same period in 2024 [40]. - For the three months ended September 30, 2025, the adjusted non-GAAP income before taxes was $20.6 million, compared to a loss of $1.2 million as reported [42]. - The company reported total assets of $1,067.7 million as of September 30, 2025, down from $1,154.2 million at the end of 2024 [56]. - The SG&A expenses as a percentage of revenue, as adjusted, for the nine months ended September 30, 2025, was 39.7% [48]. - Adjusted EBITDA for the nine months ended September 30, 2025, was $71.5 million, up from $58.8 million in the same period of 2024, reflecting a growth of approximately 21.5% [50].

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Core Insights - Avanos Medical, Inc. will host a conference call on November 5, 2025, at 9 a.m. ET to discuss its financial results and business highlights for the second quarter of 2025 [1] - The call will be led by CEO Dave Pacitti and CFO Scott Galovan, with a news release detailing the results issued before the market opens on the same day [1] Company Overview - Avanos Medical is a medical technology company headquartered in Alpharetta, Georgia, focused on delivering clinically superior medical device solutions [4] - The company addresses critical healthcare needs, including providing nutrition solutions for patients transitioning from hospital to home and reducing opioid use during recovery [4] - Avanos develops, manufactures, and markets recognized brands globally, holding leading market positions in multiple product categories [4]