Avanos Medical (AVNS) Q1 2025 Earnings Call May 06, 2025 09:00 AM ET Speaker0 Good morning, ladies and gentlemen, and welcome to the Avanus Medical Avanus First Quarter twenty twenty five Earnings Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call, This call is being recorded on Tuesday, 05/06/2025. I would now like to turn the conference over to Scott Gullivan. Please go ahead. Speaker1 Good morni ...

Summary of Key Points from the Conference Call on China Healthcare Equities Industry Overview - The conference focused on the **China Healthcare sector**, particularly the impact of US tariffs on the pharmaceutical supply chain and related industries [2][21]. Core Insights - **Tariff Impact Ranking**: The impact of tariffs is expected to be highest on medical consumables, followed by devices and drugs [2]. - **Timeline for Tariffs**: Tariffs on US pharmaceutical imports may commence within one to two months due to ongoing investigations [2]. - **Impact on Exporters**: Small and medium-sized exporters of low-end medical consumables are anticipated to be most affected, with major CDMOs like Wuxi AppTec, Pharmaron, and Genscript facing 30-50% revenue exposure to the US [2][21]. - **Risk Management**: Large companies are managing risks through planned production capacity shifts to ASEAN/Europe and maintaining high inventory levels (two to three years) [2]. - **API Exporters**: The risk for API exporters is considered manageable in the short term due to China's established supply chain role, despite having double-digit US revenue exposure [2]. Financial Projections - **Revenue and Profit Margin Erosion**: Scenario analysis indicates potential revenue and net profit margin erosion of approximately 5% and 1 percentage point across sub-sectors due to tariffs [3]. - **CDMO Impact**: CDMOs could see up to a 6% revenue impact and a 5-10% decrease in net profit margins [3]. - **Cost Inflation**: Import-dependent segments, such as IVD reagents, may experience around 1% cost inflation, slightly squeezing margins [3]. Market Dynamics - **Global Supply Chain Shifts**: The global supply chain is shifting, but short-term offsets are expected due to stockpiling [2]. - **Domestic Substitution**: There is an expectation of accelerating domestic substitution in the MedTech sector due to import weaknesses caused by tariffs [9]. - **Market Concentration**: A higher level of market concentration is anticipated in the MedTech subsector [9]. Company-Specific Insights - **Limited US Exposure**: Chinese innovative drugs are forecasted to have almost no sales exposure to the US, with limited impact from R&D cost increases due to higher export prices [7]. - **CDMO Resilience**: CDMOs are expected to manage tariff impacts effectively, with 80% of tariff expenses potentially passed through to US clients [8]. - **MedTech Companies**: Companies like Mindray and United Imaging are expected to face low single-digit cost impacts due to their low US exposure [9]. Export Data - **China Healthcare Exports**: Total exports from the China Healthcare sector reached **USD 107.99 billion** in 2024, marking a **5.8% year-on-year increase** [15]. - **Export Composition**: APIs accounted for approximately **40%** of total exports, while IVDs made up **21%** [15][18]. Conclusion - The China Healthcare sector is navigating potential tariff impacts with strategic adjustments and risk management practices. While certain sub-sectors may face challenges, the overall resilience of the industry, particularly in API production and innovative drug development, is expected to mitigate significant adverse effects.

Financial Data and Key Metrics Changes - JBT Morell's first quarter revenue exceeded guidance by $19 million, driven by better-than-expected equipment shipments and strong recurring revenue [17] - Adjusted EBITDA margin was 13.1%, outperforming guidance by 60 basis points, attributed to volume flow-through, favorable mix, and good expense control [17] - Free cash flow for the quarter was $18 million, including approximately $42 million in one-time M&A related payments [19] Business Line Data and Key Metrics Changes - JBT segment revenue increased by 4% year over year, or 5.6% on a constant currency basis, with adjusted EBITDA of $61 million, a 6% increase [18] - MRL segment revenue was flat year over year but grew by 2% on a constant currency basis, with adjusted EBITDA increasing by 19% to $51 million [19] Market Data and Key Metrics Changes - Demand from the poultry industry continued to recover, contributing to a 12% year-over-year increase in orders [6] - The company experienced broad-based strength across global regions, with healthy orders in meat, beverage, pharma, and pet food [6] Company Strategy and Development Direction - The company is focused on integrating its operations to enhance service capabilities and product offerings, positioning itself as a leader in sustainable food solutions [15] - JBT Morell is taking actions to mitigate tariff impacts, including securing concessions from suppliers and implementing selective pricing actions [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to manage near-term impacts from tariffs and macroeconomic uncertainty, highlighting the resilience of recurring revenue [11][23] - The company has temporarily suspended full-year financial guidance due to uncertainty but provided second-quarter guidance, expecting revenue of $885 million to $915 million [22] Other Important Information - The estimated annualized cost impact from tariffs is approximately $50 million to $60 million, with efforts underway to mitigate these costs [10] - The company is on track to achieve targeted cost synergies of $150 million by the end of 2027 [20] Q&A Session Summary Question: Update on guidance and customer behavior - Management indicated that the decision to pull full-year guidance was due to lack of clarity in the environment, with no significant changes in customer behavior noted [26][28] Question: Backlog and order delays - Management clarified that the backlog was affected by foreign exchange and adjustments during the integration of the two businesses, with no cancellations reported [45] Question: Recurring revenue and digital offerings - The increase in recurring revenue above 50% was primarily due to seasonality in equipment revenue recognition, with ongoing efforts to integrate digital offerings [66] Question: Cost mitigation strategies - Management discussed various strategies to mitigate tariff impacts, including reallocating demand to domestic suppliers and adjusting purchasing strategies [78][80] Question: Integration progress and potential demand changes - Management expressed confidence in managing costs and achieving synergies, but noted that lower demand could impact material purchasing and synergy savings [92]

Financial Data and Key Metrics Changes - JBT Morell's first quarter revenue exceeded guidance by $19 million, driven by better-than-expected equipment shipments and strong recurring revenue [17] - Adjusted EBITDA margin was 13.1%, outperforming guidance by 60 basis points, attributed to volume flow-through, favorable mix, and good expense control [17] - Free cash flow for the quarter was $18 million, including approximately $42 million in one-time M&A related payments [19] Business Line Data and Key Metrics Changes - JBT segment revenue increased by 4% year over year, or 5.6% on a constant currency basis, with adjusted EBITDA of $61 million, a 6% increase [18] - MRL segment revenue was flat year over year but grew 2% on a constant currency basis, with adjusted EBITDA of $51 million, a 19% increase [19] Market Data and Key Metrics Changes - Demand from the poultry industry continued to recover, contributing to a 12% year-over-year increase in orders [6] - The company experienced broad-based strength across global regions, with healthy orders in meat, beverage, pharma, and pet food [6] Company Strategy and Development Direction - The company is focused on integrating its operations to enhance service capabilities and product offerings, positioning itself as a leader in sustainable food solutions [15] - JBT Morell aims to leverage its global footprint and available capacity to manage tariff impacts and maintain competitive positioning [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate macroeconomic uncertainties and tariff impacts, noting that approximately half of the revenue comes from resilient recurring sources [11] - The company has temporarily suspended full-year financial guidance due to uncertainties but provided second-quarter guidance reflecting strong competitive positioning [21] Other Important Information - The estimated annualized cost impact from tariffs is approximately $50 million to $60 million, with efforts underway to mitigate these costs [10] - The company is on track to achieve targeted cost synergies of $150 million by the end of 2027 [20] Q&A Session Summary Question: Thoughts on guidance and customer behavior changes - Management indicated that the decision to pull full-year guidance was due to lack of clarity in the environment, with no significant changes in customer behavior noted [26][28] Question: Differences in customer behavior between U.S. and international markets - Management noted ongoing conversations regarding equipment pricing and potential shifts in manufacturing locations due to tariffs, but demand remains strong [30][33] Question: Impact of tariffs on recurring revenue - Management believes that recurring revenue will remain strong, with no significant pullback observed in parts orders [35] Question: Details on backlog and order delays - Management clarified that backlog figures may differ due to foreign exchange impacts and adjustments during the integration process, with no cancellations reported [45] Question: Insights on fish market performance - Management noted challenges in the white fish market but highlighted improvements in the salmon industry, indicating a positive outlook for production growth [62][65]

Financial Data and Key Metrics Changes - For Q1 2025, the company achieved revenue of $19.5 million, an 11% increase from $17.6 million in Q1 2024 [4][11] - Gross profit margin was reported at 76.1%, consistent with Q1 2024 [12] - GAAP diluted earnings per share increased by 16% to $0.37 from $0.32 in Q1 2024 [13] - Non-GAAP adjusted net income was $5.3 million or $0.42 per diluted share, up 17% from $4.6 million or $0.36 per diluted share in Q1 2024 [14] Business Line Data and Key Metrics Changes - Revenue from IV infusion pump systems grew 16% to $6 million, while disposable revenue increased 23% to $4.9 million [11][12] - Patient vital signs monitoring systems revenue remained steady at $6.5 million [12] - Domestic sales accounted for 82% of total revenue, up from 76% in Q1 2024, with domestic revenue increasing 19% to $16 million [12] Market Data and Key Metrics Changes - International sales declined 15% to $3.5 million [12] - Device revenue increased 9% to $13 million, driven by pump revenue and FMD systems [12] Company Strategy and Development Direction - The company is focused on increasing monitoring sales in 2025, anticipating a decline in pump revenues later in the year [21] - The new 3,870 MRIV pump is expected to be a revenue driver in 2026, with clearance anticipated in mid-2025 [9][10] - The company is nearing completion of a new facility, with full operations expected by July 2025 [10] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the impact of tariffs, noting that only 3% of revenue is connected to high tariff sources [6][7] - The FDA's responsiveness has been positive, with ongoing interactions indicating progress towards device clearance [25][27] - The company expects Q2 2025 revenue guidance of $19.7 million to $19.9 million, reiterating full-year revenue guidance of $78 million to $82 million [10] Other Important Information - Operating expenses were $9.4 million, or 48% of revenue, down from 49% in Q1 2024 [12] - Cash flow from operations was $4.3 million, up 10% from $3.9 million in Q1 2024 [14] Q&A Session Summary Question: Any anomalies in disposable revenue growth? - Management indicated that some backlog was worked down in Q1, contributing to the growth, but expects future growth to align with capital growth [17][18] Question: Confidence in monitoring sales recovery? - Management emphasized efforts to boost monitoring sales through adjusted compensation structures, with strong bookings already seen in Q2 [20][22] Question: Status of FDA interactions and clearance timeline? - Management noted ongoing interactive questions from the FDA, suggesting a positive sign, with expectations for clarity in the next three to four weeks [24][27]

Financial Data and Key Metrics Changes - The company reported revenue of $193 million and EBITDA of $20 million for the first quarter, meeting expectations [16] - Orders increased by 6% to $201 million, resulting in a book-to-bill ratio of 104% [16] - Free cash flow generated in the first quarter was $7 million, three times higher than the same period last year, marking the seventh consecutive quarter of positive free cash flow generation [22] Business Line Data and Key Metrics Changes - The Drilling and Completion segment saw a revenue increase of $5 million, driven by a rebound in sales of consumables and capital equipment [17] - The artificial lift and downhole segment experienced a decline in revenues due to unfavorable product mix and timing of shipments [18] - The Valve Solutions product line faced negative headwinds due to tariffs impacting demand, leading to a buyer strike [20] Market Data and Key Metrics Changes - Oil prices have declined significantly, hovering near four-year lows, which may lead to a reduction in rig counts and revenue starting in the third quarter if prices do not rebound [8] - The company anticipates a modest 2% to 5% decline in global drilling and completions activity for the year, with North America rig count expected to soften [13] Company Strategy and Development Direction - The company is focusing on mitigating tariff impacts, optimizing the supply chain, and reducing costs and inventory [9] - Plans include increasing assembly activities in Saudi Arabia and Canada to serve global markets more efficiently [11] - The company aims to utilize 50% of free cash flow for debt reduction and the remaining for strategic investments, including share repurchases [24] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about economic uncertainty due to trade policies and commodity price pressures, indicating a potential decline in revenue if oil prices do not recover [7][8] - The company remains confident in its ability to generate free cash flow and maintain a strong balance sheet, with no debt maturities until 2028 [23] - Long-term growth is expected to be driven by increasing energy demand due to population growth and economic expansion [29] Other Important Information - The company has strategically de-risked its supply chain to minimize dependence on specific countries and provide sourcing flexibility [11] - The balance sheet has improved significantly, with a net debt of $146 million and a net leverage ratio of 1.56 times [23] Q&A Session Summary Question: Can you elaborate on the strength in the Subsea side despite a slowdown in rig counts? - Management highlighted strong bookings in Subsea due to customer adoption of new products and a significant market share in remote-operated vehicles [35][36] Question: What products saw strength in the drilling completion segment? - Management noted a rebound in sales of frac pump power ends and wireline products, indicating increased activity despite fewer crews [38][40] Question: How are share repurchases managed in relation to leverage ratios? - Management explained that share repurchases are timed based on net debt measurements within 30 days of buying back shares, allowing flexibility in execution [46][47] Question: What is the impact of tariffs on pricing and demand? - Management acknowledged that tariffs have led to a buyer strike in the valve product line, affecting demand and pricing strategies [54][82] Question: How does the company plan to manage cash and debt reduction? - The company plans to use half of its free cash flow for net debt reduction and will continue to monitor market conditions for share repurchases [84][85] Question: What is the outlook for the Veraperm product line in Canada? - Management indicated that the recent performance was temporary and attributed to customer and product mix, with expectations for improvement in the second half of the year [63][65]

Quaker Chemical (KWR) Q1 2025 Earnings Call May 02, 2025 08:30 AM ET Company Participants Jeffrey Schnell - Vice President, Investor RelationsJoseph Berquist - President and Chief Executive OfficerTom Coler - Executive Vice President & Chief Financial OfficerKevin Estok - Equity Research Senior AssociateJon Tanwanteng - Managing Director Conference Call Participants Mike Harrison - Managing Director and Senior Chemicals AnalystArun Viswanathan - Senior Equity Analyst Operator As a reminder, this conference ...

Quaker Chemical (KWR) Q1 2025 Earnings Call May 02, 2025 08:30 AM ET Speaker0 As a reminder, this conference is being recorded. I would now like to turn the call over to Jeffrey Snell, Vice President, Investor Relations. Mr. Snell, you may begin. Speaker1 Thank you. Good morning, and welcome to our first quarter twenty twenty five earnings conference call. On the call today are Joe Burkwist, our President and Chief Executive Officer Tom Kohler, our Executive Vice President and Chief Financial Officer and Ro ...

Financial Data and Key Metrics Changes - Net sales for Q3 FY2025 decreased by 4% to $260.9 million compared to $271.9 million in Q3 FY2024, driven by a 7.9% decrease in sales volume, partially offset by a 4.2% increase in the weighted average sales price per pound [12][19] - Gross profit increased by $6.7 million or 13.7% to $55.9 million, with gross profit margin rising to 21.4% from 18.1% in the prior year [15][17] - Net income for Q3 FY2025 was $20.2 million or $1.72 per diluted share, compared to $13.5 million or $1.15 per diluted share in Q3 FY2024 [18] Business Line Data and Key Metrics Changes - Sales volume decreased by 9.2% in the consumer distribution channel, primarily due to an 8.3% decrease in private brand volume, with significant declines in bars volume [13] - Sales volume for branded products decreased by 12.9%, mainly due to a 33.8% reduction in Orchard Valley Harvest sales [14] - Sales volume increased by 6% in the contract manufacturing distribution channel, driven by increased granola volume processed [14] Market Data and Key Metrics Changes - The snack, nut, and trail mix category saw a 2% decline in pounds but a 2% increase in dollars, indicating rising prices [24] - Fisher snack and trail mix performed worse than the category with pound shipments down 17%, while Southern Style Nut Brand saw a 10% increase in pound shipments [25][26] - The recipe nut category was down 1% in pounds but up 10% in dollars, reflecting increased prices for walnuts and pecans [27] Company Strategy and Development Direction - The company plans to invest approximately $90 million in equipment to expand domestic production capabilities and improve infrastructure by the end of FY2026 [5][6] - The focus remains on adapting strategies to meet evolving customer needs and managing costs amid rising commodity prices and tariffs [5][10] - The company is committed to innovation and cost-saving opportunities to mitigate commodity pressures [26] Management Comments on Operating Environment and Future Outlook - Management acknowledged a challenging macroeconomic environment impacting demand for nuts and snacks, emphasizing the need for strategic adaptations [5][7] - There is confidence in the strategic investments made in production and infrastructure to drive efficiencies and deliver innovation [6][30] - Management anticipates potential decreases in commodity prices due to demand destruction from high retail prices [55] Other Important Information - The total value of inventories increased by $47.1 million or 22.4% year-over-year, primarily due to higher quantities and costs of finished goods and raw materials [18] - The weighted average cost per pound of raw nuts and dried fruit increased by 33.9% year-over-year [18] Q&A Session Summary Question: Regarding tariff exposure and passing costs to customers - Management indicated that discussions are ongoing with key customers to pass on tariff-related cost increases, particularly for high-value commodities [33][34] Question: On the profitability of the cashew and mixed nuts segment - Management confirmed that the cashew and mixed nuts segment remains profitable, although higher tariffs could impact consumer demand [36][37] Question: Expectations for gross margin levels in the next quarter - Management suggested that gross profit per pound should be assessed by excluding the impact of inventory valuation adjustments [44] Question: Details on the $90 million capital expenditure - The investment will support growth in the bar category and expand production capacity across various business segments [45][46] Question: Strategy for upcoming quarters and market volatility - Management is focused on promotional programs and pricing strategies to navigate market volatility and ensure the right product mix is available [62]

Financial Data and Key Metrics Changes - The company reported a revenue growth of 16% in Q1, significantly exceeding expectations, primarily due to favorable timing of material receipts [21][28] - Adjusted EBITDA for the quarter was $82 million, representing a 17% increase year-over-year, with an adjusted EBITDA margin of 10.3%, reflecting a slight margin expansion of 10 basis points [23][24] - Net earnings for Q1 were $50 million, with diluted EPS of $0.19, marking a 7273% increase, while adjusted net earnings were $54 million, with adjusted diluted EPS of $0.20, up 42% [26][27] Business Line Data and Key Metrics Changes - The Advanced Sensing and Computing (ASC) segment saw an 18% revenue growth, while the Integrated Mission Systems (IMS) segment's revenue increased by 11% [22][24] - ASC adjusted EBITDA increased by 2%, but the margin declined by 130 basis points due to negative contract adjustments and increased costs from a sole source supplier [24][26] - IMS adjusted EBITDA rose by 38%, with margin expansion of 260 basis points, driven by favorable contract adjustments and increased volume from the Columbia Class program [25][26] Market Data and Key Metrics Changes - The company secured nearly $1 billion in bookings during the quarter, resulting in a book-to-bill ratio of 1.2, marking the thirteenth consecutive quarter with a book-to-bill above one [6][7] - The backlog increased to $8.6 billion, reflecting growth on both a year-over-year and sequential basis [7][28] - Domestic growth was highlighted, while international growth faced headwinds due to timing issues related to deliveries supporting Ukraine [35] Company Strategy and Development Direction - The company is focused on enhancing its capabilities in layered air defense, counter UAS, and shipbuilding, aligning with national defense initiatives [10][11] - The company is investing in AI technologies and electric propulsion systems, aiming to capture significant demand in these areas [18][19] - The strategic emphasis is on maintaining a strong position in defense priorities while ensuring efficient program execution and innovation [20][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the durability of demand despite a dynamic operating environment, with expectations for continued growth in defense spending [9][10] - The company anticipates a revenue range of $3.425 billion to $3.525 billion for the full year, implying a 6% to 9% year-over-year growth [28][29] - Management noted that the operating environment is more dynamic compared to the previous year, requiring agility to navigate complexities [20] Other Important Information - The company initiated a dividend payment and stock repurchase program, reflecting a commitment to returning capital to shareholders [8] - The management is actively engaged in M&A opportunities, viewing it as a top priority for capital allocation [76] Q&A Session Summary Question: Can you discuss the impact of material receipts on revenue? - The material acceleration impacted revenue holistically across the board, with improved supplier deliveries contributing positively [33][34] Question: What are the expectations for ASC margins going forward? - The adjustments made in Q1 are expected to reset the backlog, leading to a lower gross margin prospectively, but a recovery is anticipated [38] Question: How does the company view the potential defense budget increase? - The company is well-positioned to grow ahead of the defense budget, aligning with core markets in shipbuilding and force protection [55] Question: What is the company's strategy regarding international opportunities? - There is a substantial near-term opportunity in Europe, particularly in counter-drone and advanced sensing programs [63] Question: How is the company addressing supply chain challenges? - The company is including economic price adjustment clauses in future contracts to mitigate risks associated with price volatility [78]