Avanos Medical (AVNS) Q2 2024 earnings summary

Executive summary

• Q2 2024 delivered strong results, with Digestive Health showing robust growth and Pain Management & Recovery gaining momentum, supported by transformation priorities and cost discipline.

• Net sales from continuing operations rose 1.4% year-over-year to $171.7 million, driven by Digestive Health and Game Ready products, partially offset by lower HA product demand and pricing.

• Operating profit improved to $6.3 million in Q2 2024 from a loss of $2.1 million in Q2 2023, with net income at $1.8 million and adjusted net income at $15.8 million.

• Transformation initiatives, including portfolio optimization and cost management, are on track to meet 2025 financial targets.

• Completed the divestiture of the Respiratory Health business in October 2023, focusing on core markets and ongoing transformation.

Financial highlights

• Q2 2024 net sales from continuing operations were $171.7 million; organic sales increased 2.6% year-over-year, adjusted for FX and discontinued revenue streams.

• Adjusted EBITDA was $26.8 million, up 17% year-over-year; adjusted diluted EPS was $0.34, up 42% year-over-year.

• Adjusted gross margin was 59.6%, stable versus prior periods; reported gross margin declined to 55.7% due to transformation and plant separation costs.

• Free cash flow for Q2 was $21.9 million, including a $15 million tax refund.

• Cash and cash equivalents were $92.2 million as of June 30, 2024; total debt outstanding was $175.1 million.

Outlook and guidance

• Reaffirmed 2024 guidance: revenue of $685–$705 million (mid-single digit organic growth), adjusted gross margin 59.5%–60.5%, SG&A 41%–42% of revenue, and adjusted diluted EPS of $1.30–$1.45.

• Free cash flow for 2024 anticipated at ~$70 million due to higher one-time charges and inventory.

• Transformation Process expected to deliver $45–$55 million in gross savings by 2025, with most savings realized in 2024.

• 2025 targets: ~$730 million organic revenue, >60% gross margin, SG&A 38%–39% of revenue, ~$100 million free cash flow.