Avanos Medical(US:AVNS)2024-07-31 17:35Financial Data and Key Metrics Changes - For Q2 2024, the company reported sales from continuing operations of approximately $172 million, with organic sales up 2.6% year-over-year [7][17] - Adjusted diluted earnings per share were $0.34, and adjusted EBITDA from continuing operations was approximately $27 million [7][17] - Adjusted EBITDA grew by 17% compared to the previous year, with an adjusted EBITDA margin expansion of 210 basis points [17][18] Business Line Data and Key Metrics Changes - The Digestive Health portfolio grew almost 9% organically compared to the prior year, driven by strong demand for the NeoMed product line [8][9] - The Pain Management and Recovery portfolio saw normalized organic sales up approximately 2%, with the On-Q/ambIT portfolio growing by mid single-digits [10][12] - The Game Ready portfolio demonstrated strong momentum with double-digit growth for two consecutive quarters [11][12] Market Data and Key Metrics Changes - The international business for Digestive Health grew 11% for the quarter, indicating strong global demand [32] - The HA portfolio experienced a decline of more than 30% year-over-year but is expected to stabilize around $42 million annualized [12][27] Company Strategy and Development Direction - The company is focused on four key transformation priorities: optimizing the organization, transforming the product portfolio, enhancing operating profitability, and efficient capital allocation [13][14] - The company aims for consistent mid single-digit growth, targeting organic revenue of approximately $730 million by 2025, with gross margins surpassing 60% [20][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving mid single-digit growth for the Pain Management business in the long term, despite current challenges [25][26] - The company anticipates continued improvement in free cash flow, projecting approximately $70 million for 2024 [21] Other Important Information - The company maintains a strong balance sheet with $92 million in cash and $175 million in debt, keeping leverage levels below one turn [20] - Free cash flow was positive at $22 million for the quarter, with expectations for continued improvement in the second half of the year [21] Q&A Session Summary Question: Pain Management growth outlook and HA progress - Management indicated mid single-digit growth is possible for the Pain business moving into 2025, with positive momentum in the Surgical Pain business and Game Ready [25][26] Question: Reimbursement for On-Q - Management noted that a unique code for On-Q could potentially restore the business to previous peak levels, though immediate impacts are uncertain [29] Question: Digestive Health and NeoMed conversion - Management expects NeoMed to remain a high single-digit grower, with upcoming product launches expected to enhance growth [32][33] Question: M&A strategy and share buyback - Management confirmed ongoing financial discipline in M&A, with a robust pipeline focused on Digestive Health, and mentioned past share buybacks without announcing new programs [36][39]