Avanos Medical, Inc. ((AVNS)) has held its Q4 earnings call. Read on for the main highlights of the call.
Avanos Medical, Inc. recently held its earnings call, revealing a mixed sentiment among stakeholders. While the company celebrated strong performance in its enteral feeding portfolio and notable improvements in its financial standing, these positives were overshadowed by a significant non-cash impairment charge and persistent challenges in its pain management and recovery portfolio. The outlook for 2025 suggests a pause in margin improvement and anticipates flat sales, adding to the cautious sentiment.
Strong Fourth Quarter Performance
During the fourth quarter, Avanos Medical reported sales from continuing operations of approximately $180 million, marking a 5% organic sales increase compared to the previous year. The company achieved an adjusted diluted earnings per share of $0.43 and an adjusted EBITDA of nearly $29 million, highlighting a robust financial performance.
Enteral Feeding Portfolio Growth
The enteral feeding portfolio demonstrated impressive growth, expanding almost 12% organically from the prior year. This growth reaffirms Avanos’s leading position in short-term, long-term, and neonatal feeding markets, showcasing the strength of this segment.
Improved Financial Position and Liquidity
Avanos Medical significantly improved its financial position by the end of the year, with $108 million in cash and $135 million in debt outstanding. The company generated $83 million in free cash flow, a substantial increase of nearly $70 million from the previous year, reflecting enhanced liquidity.
Successful Transformation Initiatives
The company marked significant milestones in its transformation journey by completing the divestiture of its respiratory health business and exiting the deferred prosecution agreement with the DOJ. These steps are pivotal in Avanos’s three-year transformation process.
Non-Cash Impairment Charge
Avanos’s fourth-quarter GAAP results were impacted by a non-cash impairment charge of approximately $437 million. This charge was due to the fair value of its single company reporting unit being below its carrying value, posing a challenge to the company’s financials.
Pain Management and Recovery Portfolio Challenges
The pain management and recovery portfolio faced hurdles, with normalized organic sales down approximately 3% in the fourth quarter. Pricing pressure in the three-shot offering continues to present challenges for this segment.
Flat Sales and Margin Expectations for 2025
Looking ahead, Avanos Medical forecasts net sales between $665 million and $685 million for 2025. The Specialty Nutrition Systems segment is expected to grow mid-single digits, while the Pain Management and Recovery segment anticipates flat to low single-digit growth. The company projects adjusted diluted earnings per share to range from $1.05 to $1.25.
Forward-Looking Guidance
Avanos Medical’s forward-looking guidance for 2025 includes anticipated net sales between $665 million and $685 million. The company expects the Specialty Nutrition Systems segment to grow mid-single digits, while the Pain Management and Recovery segment is projected to achieve flat to low single-digit growth. Adjusted diluted earnings per share are forecasted to range from $1.05 to $1.25, with an effective tax rate of about 27%.
In summary, Avanos Medical’s earnings call presented a mixed picture. While the company boasts strong performance in certain segments and improved financial health, challenges in other areas and a cautious outlook for 2025 temper the overall sentiment. Stakeholders will be closely watching how Avanos navigates these challenges and capitalizes on its strengths moving forward.