Core Insights - Avanos Medical, Inc. reported a significant decline in adjusted earnings per share (EPS) for Q2 2025, with a 50% year-over-year drop to 17 cents, missing the Zacks Consensus Estimate by 5.6% [1][6] - The company's revenues increased by 1.9% year-over-year to $175 million, surpassing the Zacks Consensus Estimate by 4.7%, driven by strong demand in the Specialty Nutrition Systems (SNS) and radiofrequency ablation (RFA) segments [2][6] Revenue Analysis - Revenues for the SNS segment reached $102.7 million, up 5.1% year-over-year, with volume growth of 4.4% attributed to strong demand in enteral feeding and neonate solutions [9] - The Pain Management and Recovery (PM&R) segment reported revenues of $61 million, down 2.9% year-over-year, affected by unfavorable currency effects and strategic decisions to forgo certain revenue streams [7][8] - Corporate and Other segment revenues fell by 23.1% year-over-year to $11.3 million, primarily due to pricing pressures in the Hyaluronic Acid (HA) product lines [10] Margin and Profitability - 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% [12] - Selling and general expenses rose by 3.2% year-over-year to $83.5 million, while adjusted operating profit fell by 44% to $12.2 million, leading to an adjusted operating margin contraction of 580 basis points to 6.9% [12][13] Financial Position - At the end of Q2 2025, the company had cash and cash equivalents of $90.3 million, down from $97 million at the end of Q1 2025, with total debt slightly reduced to $105.1 million [14] - Cumulative net cash provided by operating activities increased to $32.5 million compared to $19.8 million in the prior-year period [14] Guidance and Outlook - Avanos has reiterated its 2025 outlook, estimating net sales between $665 million and $685 million, with a Zacks Consensus Estimate of $677.1 million [15] - The company anticipates adjusted EPS for 2025 to be between 75 and 95 cents, with the current consensus at 92 cents [15] Strategic Developments - In July, Avanos announced the divestiture of its HA product line to Channel-Markers Medical, aligning with its strategic focus on enhancing its PM&R and SNS segments [11] - The company is facing a volatile tariff environment, estimating an additional $15 million in manufacturing costs for 2025, primarily due to tariffs on products sourced from Mexico and China [18]

Core Insights - Avanos Medical, Inc. reported first-quarter 2025 adjusted earnings per share (EPS) of 26 cents, an 18.2% increase year over year, surpassing the Zacks Consensus Estimate by 36.8% [1] - Revenues for the quarter reached $167.5 million, a 0.8% year-over-year increase, beating the Zacks Consensus Estimate by 2% [2] - The company has revised its 2025 outlook, estimating net sales between $665 million and $685 million and adjusted EPS between 75 and 95 cents, down from previous estimates [11] Revenue Performance - The Specialty Nutrition Systems (SNS) segment generated revenues of $101.1 million, up 6.9% year over year, driven by strong demand in enteral feeding and neonate solutions [5] - The Pain Management and Recovery (PM&R) segment reported revenues of $56.2 million, down 0.2% year over year, affected by unfavorable currency effects and strategic decisions to forgo certain revenue streams [3][4] - Organic sales increased by 2.8% year over year, indicating overall growth despite segment weaknesses [2] Margin and Expense Analysis - Gross profit declined by 5.3% year over year to $89.8 million, with a gross margin contraction of 346 basis points to 53.6% [7] - Selling and general expenses decreased by 9.4% year over year to $75.7 million, while research and development expenses fell by 22.9% to $5.4 million [7] - Adjusted operating profit increased by 107.1% year over year to $8.7 million, with an adjusted operating margin expansion of 267 basis points to 5.2% [8] Financial Position - At the end of the first quarter 2025, cash and cash equivalents totaled $97 million, down from $107.7 million at the end of 2024 [10] - Total debt decreased to $107.4 million from $134.7 million at the end of 2024 [10] - Net cash provided by operating activities was $25.7 million, compared to net cash used of $8 million in the prior-year period [10] Market Reaction and Guidance - Shares of Avanos gained nearly 5.4% following the earnings report [2] - The company expressed caution regarding potential impacts from tariffs on profitability and cash flow, alongside expectations of a softer second quarter for the SNS segment [13]