Avanos Medical(AVNS) - 2025 Q1 - Quarterly Results

Avanos Medical, Inc. First Quarter 2025 Results Executive Summary and Financial Highlights Avanos Medical Q1 2025 net sales $167.5 million (+0.8%), net income $6.6 million, adjusted diluted EPS $0.26, showing improved profitability - The new CEO, David Pacitti, noted that transformation efforts in portfolio, structure, and cost management have positioned Avanos for accelerated growth, improved execution, and enhanced margin profiles[3] Q1 2025 Financial Highlights vs. Q1 2024 | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $167.5M | $166.1M | +0.8% | | Net Income (from continuing ops) | $6.6M | $0.5M | +1220% | | Adjusted Net Income | $12.0M | $10.1M | +18.8% | | Diluted EPS | $0.14 | $0.01 | +1300% | | Adjusted Diluted EPS | $0.26 | $0.22 | +18.2% | | Adjusted EBITDA | $21.6M | $21.6M | 0.0% | Consolidated Operating Results Q1 2025 net sales rose 0.8% to $167.5 million, organic sales up 2.8%; gross margin fell to 53.6%, but operating income doubled to $10.3 million from reduced expenses - Organic net sales grew 2.8% year-over-year, adjusted for foreign currency effects and the decision to exit certain low-return revenue streams[5] - Adjusted gross margin fell to 56.7% from 59.8% in the prior year, impacted by unfavorable pricing for hyaluronic acid ("HA") products[6] - Selling and general expenses as a percentage of net sales decreased to 45.2% from 50.3% a year ago, mainly due to lower costs from restructuring and divestiture activities[6] - Operating income increased to $10.3 million compared to $4.0 million in the prior year period. On an adjusted basis, operating income was $17.1 million, up from $16.3 million[8] Business Segment Performance SNS sales grew 6.9% to $101.1 million with 37% operating income rise; PM&R sales flat at $56.2 million, swinging to $0.2 million operating profit Q1 2025 Net Sales by Segment (in millions) | Segment | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Specialty Nutrition Systems | $101.1 | $94.6 | +6.9% | | Pain Management and Recovery | $56.2 | $56.3 | -0.2% | | Corporate and Other | $10.2 | $15.2 | -32.9% | | Total Net Sales | $167.5 | $166.1 | +0.8% | Q1 2025 Operating Income (Loss) by Segment (in millions) | Segment | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Specialty Nutrition Systems | $21.1 | $15.4 | +37.0% | | Pain Management and Recovery | $0.2 | $(2.1) | N/A | | Corporate and Other | $(11.0) | $(9.3) | +18.3% | | Total Operating Income | $10.3 | $4.0 | +157.5% | Specialty Nutrition Systems (SNS) SNS net sales reached $101.1 million (+6.9%), driven by 8.7% volume growth, with operating income rising to $21.1 million (20.9% margin) from higher volume and lower SG&A - SNS net sales reached $101.1 million, with strong 8.7% volume growth driven by continued demand in both enteral feeding and neonate solutions categories[10] - Operating income for the SNS segment was $21.1 million, or 20.9% of its net sales, due to higher volume and reduced selling, general and administrative expenses[10] Pain Management and Recovery (PM&R) PM&R net sales were $56.2 million; 8.2% RFA growth offset by 9.3% surgical pain decline and currency, resulting in $0.2 million operating profit from reduced SG&A - Net sales of radiofrequency ablation (RFA) products grew 8.2%, driven by momentum in generator sales (ESENTEC and TRIDENT lines)[11] - Surgical pain and recovery net sales declined 9.3%, which was in line with company expectations[11] - The segment achieved an operating profit of $0.2 million, compared to a loss of $2.1 million last year, due to lower SG&A expenses[11] Cash Flow and Balance Sheet As of March 31, 2025, cash was $97.0 million; operating cash flow was a $25.7 million inflow, reversing an $8.0 million outflow, leading to $19.0 million free cash flow, with total debt reduced to $107.4 million - Cash on hand was $97.0 million as of March 31, 2025, down from $107.7 million at year-end 2024[12] - Total debt outstanding was reduced by $27.3 million during the quarter, from $134.7 million to $107.4 million[12] Cash Flow Summary (in millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Cash flow from operations | $25.7 | $(8.0) | | Free cash flow | $19.0 | $(12.1) | 2025 Outlook Avanos maintains 2025 revenue guidance of $665 million-$685 million but lowered adjusted diluted EPS forecast to $0.75-$0.95 due to anticipated negative tariff impacts - The company is maintaining its 2025 estimated revenue of between $665 million and $685 million[13] - The estimated adjusted diluted earnings per share range for 2025 has been lowered to between $0.75 and $0.95, primarily due to the impact of recently announced tariffs[13] - The ultimate impact from tariffs remains uncertain and depends on factors like final tariff rates on China-origin goods, mitigation efforts, and the level of imports from China and Mexico[14] 2025 Adjusted Diluted EPS Outlook Reconciliation | Metric | Estimated Range | | :--- | :--- | | Diluted earnings per share (GAAP) | $0.33 to $0.56 | | Intangibles amortization | $0.25 to $0.24 | | Post RH-Divestiture transition charges | $0.12 to $0.10 | | Other | $0.05 to $0.05 | | Adjusted diluted earnings per share (non-GAAP) | $0.75 to $0.95 | Financial Statements and Supplemental Data Condensed Consolidated Income Statements Details revenues, costs, expenses, net income, and EPS for Q1 2025 compared to Q1 2024 Condensed Consolidated Income Statement (in millions, except per share) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Sales | $167.5 | $166.1 | | Gross Profit | $89.8 | $94.8 | | Operating Income | $10.3 | $4.0 | | Income from Continuing Operations | $6.6 | $0.5 | | Net Income (Loss) | $6.6 | $(0.9) | | Diluted EPS (Continuing ops) | $0.14 | $0.01 | Condensed Consolidated Balance Sheets Presents the company's financial position, detailing assets, liabilities, and equity as of March 31, 2025, compared to December 31, 2024 Condensed Consolidated Balance Sheet (in millions) | Metric | Mar 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | ASSETS | | | | Cash and cash equivalents | $97.0 | $107.7 | | Total Current Assets | $352.4 | $393.4 | | TOTAL ASSETS | $1,107.8 | $1,154.2 | | LIABILITIES & EQUITY | | | | Total Current Liabilities | $137.2 | $165.9 | | Long-Term Debt | $98.0 | $125.3 | | TOTAL LIABILITIES | $268.4 | $325.7 | | Stockholders' Equity | $839.4 | $828.5 | | TOTAL LIABILITIES AND EQUITY | $1,107.8 | $1,154.2 | Condensed Consolidated Cash Flow Statements Details cash inflows and outflows from operating, investing, and financing activities for Q1 2025 and Q1 2024 Condensed Consolidated Cash Flow Statement (in millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Cash Provided by (Used in) Operating Activities | $25.7 | $(8.0) | | Cash Used in Investing Activities | $(9.1) | $(2.0) | | Cash Used in Financing Activities | $(29.1) | $(0.7) | | Decrease in Cash and Cash Equivalents | $(10.7) | $(11.9) | | Cash and Cash Equivalents - End of Period | $97.0 | $75.8 | Non-GAAP Reconciliations Provides detailed reconciliations of GAAP to non-GAAP financial measures, including adjusted gross profit, operating income, net income, EPS, EBITDA, and free cash flow, for a clearer view of ongoing operational performance - The company uses non-GAAP measures to evaluate historical and prospective financial performance, allocate resources, and measure operational performance of business units. These measures are also used for setting incentive compensation goals[16][17] Reconciliation of Net Income to Adjusted EBITDA (in millions) | Metric | Q1 2025 | Q1 2024 (Continuing Ops) | | :--- | :--- | :--- | | Net income (loss) | $6.6 | $0.5 | | Interest expense, net | $0.6 | $2.5 | | Income tax provision | $3.1 | $1.0 | | Depreciation & Amortization | $9.6 | $11.4 | | EBITDA | $19.9 | $15.4 | | Restructuring & Divestiture Charges | $3.1 | $4.6 | | Other Adjustments (EU MDR, Legal, etc.) | $(1.4) | $1.6 | | Adjusted EBITDA | $21.6 | $21.6 | Reconciliation of GAAP to Non-GAAP Diluted EPS | Metric | Q1 2025 | Q1 2024 (Continuing Ops) | | :--- | :--- | :--- | | Diluted EPS, as reported (GAAP) | $0.14 | $0.01 | | Adjustments (Restructuring, Amortization, etc.) | $0.12 | $0.21 | | Diluted EPS, as adjusted (Non-GAAP) | $0.26 | $0.22 |