• Fourth Quarter Sales: Approximately $180 million from continuing operations.
• Organic Sales Growth: 5% increase compared to the previous year.
• Adjusted Diluted Earnings Per Share (Q4): $0.43.
• Adjusted EBITDA (Q4): Nearly $29 million from continuing operations.
• Adjusted Gross Margin (Q4): Just shy of 59%.
• SG&A as Percentage of Revenue (Q4): 41.6%.
• Non-Cash Impairment Charge (Q4): Approximately $437 million.
• Full Year Sales: Approximately $688 million from continuing operations.
• Full Year Organic Sales Growth: 3.3% increase compared to the previous year.
• Adjusted Diluted Earnings Per Share (Full Year): $1.35, a 31% increase compared to the prior year.
• Adjusted EBITDA (Full Year): Approximately $108 million.
• Adjusted Gross Margin (Full Year): 59%, flat with the prior year.
• SG&A as Percentage of Revenue (Full Year): 42.5%, an improvement of 80 basis points.
• Cash on Hand (End of 2024): $108 million.
• Debt Outstanding (End of 2024): $135 million.
• Free Cash Flow (2024): $83 million, an increase of almost $70 million compared to the previous year.
• Enteral Feeding Portfolio Growth (Q4): Almost 12% organically versus prior year.
• Pain Management and Recovery Portfolio Sales (Q4): Down approximately 3% excluding certain impacts.
• ON-Q ambIT Portfolio Growth (Sequential Q4): 13% increase.
• ambIT Product Growth (2024): More than 30% in each quarter.
• Interventional Pain Business Growth (Q4): High single-digit growth compared to the previous year.
• Game Ready Portfolio Revenue (Q4): In line with the first three quarters of 2024.
• HA Portfolio Revenue (2024): Anticipated 20% decrease for the full year.
• 2025 Net Sales Guidance: $665 million to $685 million.
• 2025 Adjusted Diluted Earnings Per Share Guidance: $1.05 to $1.25.
• Expected Currency Headwinds (2025): Approximately 100 basis points impact on reported revenue.
• Annual Effective Tax Rate (2025): About 27%.

• Warning! GuruFocus has detected 3 Warning Signs with AVNS.

Release Date: February 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Avanos Medical Inc (NYSE:AVNS) delivered a strong fourth quarter with solid performance in its enteral feeding franchise, achieving organic sales growth of 5% compared to the previous year.
• The company successfully completed its obligations related to the sale of its respiratory health business, marking a key milestone in its three-year transformation process.
• Avanos Medical Inc (NYSE:AVNS) served over 2 million patients in 2024 through its enteral feeding portfolio and pain management solutions, highlighting its impact in providing essential healthcare services.
• The company reported a 31% increase in adjusted diluted earnings per share for the full year, demonstrating significant financial improvement.
• Avanos Medical Inc (NYSE:AVNS) maintained a strong balance sheet with $108 million of cash on hand and $135 million of debt outstanding, providing strategic flexibility for future growth opportunities.

Negative Points

• The company recorded a non-cash impairment charge of approximately $437 million due to the fair value of its single company reporting unit being below its carrying value.
• Avanos Medical Inc (NYSE:AVNS) experienced uneven performance in its pain management and recovery portfolio, with normalized organic sales down approximately 3% for the quarter.
• The HA portfolio faced pricing pressure, leading to a forecasted 20% decrease in HA revenue for the full year, impacting overall financial performance.
• The company anticipates a temporary pause in margin improvement for 2025 due to challenging market conditions, currency headwinds, and other global macroeconomic factors.
• Avanos Medical Inc (NYSE:AVNS) expects its Corporate and Other segment to decline over 20% in 2025, reflecting ongoing challenges in certain product categories.

Q & A Highlights

Q: Could you provide more color on the 2025 margin improvement pause and the expectation for flat to down operating margins? A: Michael Greiner, Interim CEO, explained that the 2025 margin outlook is somewhat conservative due to macroeconomic uncertainties. Despite executing cost takeouts and meeting targets for total OpEx, the decline in high-margin HA revenue has impacted overall margins. However, he expressed confidence in reigniting margin expansion in 2026 as global uncertainties subside and additional cost management opportunities are executed.

Q: What progress has been made regarding the HA business, especially in light of the impairment charge and updated expectations? A: Michael Greiner noted that the HA portfolio faces headwinds due to pricing dynamics, particularly as it is only in the Medicaid market. The company is deemphasizing the HA and intravenous product lines, placing them in the Corporate and Other segment, and will focus on cash optimization over the next 12 to 18 months.

Q: Can you elaborate on the guidance for 2025, particularly the factors influencing the high and low ends of the range? A: Michael Greiner highlighted that upside potential could come from tariff certainty, FX stability, competitor backorder opportunities, and successful product innovations. Downside risks are primarily macroeconomic factors. The guidance is considered conservative, reflecting current product and economic conditions.

Q: What are the focus areas for potential transactions, and how should we think about cash flow in 2025? A: The focus for M&A is on the Specialty Nutrition Systems segment, aiming to build a comprehensive ecosystem. Free cash flow for 2025 is expected to be similar to 2024, excluding a tax receivable. The company plans to manage working capital and expects higher CapEx due to NeoMed production relocation.

Q: Could you provide details on the product innovations planned for 2025? A: Michael Greiner mentioned that all near-term product innovations are within the Specialty Nutrition Systems segment, with one to two launches expected in the back half of 2025. These innovations aim to maintain leadership in the feeding portfolio and respond to patient needs, although they are not expected to significantly impact revenue.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.