Avanos Medical (AVNS) Q3 2024 earnings summary

Executive summary

• Q3 2024 net sales were $170.4M, down 0.5% year-over-year, with CEO Joe Woody retiring and Michael Greiner named interim CEO, and Warren Machan as interim CFO.

• Transformation plan and restructuring initiatives continued, but mid single-digit organic growth target was missed due to underperformance in pain management, partially offset by strong Digestive Health and Game Ready sales.

• Digestive Health sales grew, offsetting declines in Pain Management and Recovery; over one million patients assisted year-to-date.

• Operating profit improved to $12.0M in Q3 2024 from $1.2M in Q3 2023.

• Acquisition of Diros Technology contributed $4.6M in Q3 net sales.

Financial highlights

• Q3 2024 sales: $170.4M, down 0.5% year-over-year; adjusted EBITDA: $31M, up 11%; adjusted EPS: $0.36, up 20%.

• Adjusted gross margin: 58.0% (vs. 58.2% prior year); adjusted SG&A margin improved to 39.8% from 41.6%.

• Free cash flow for Q3 was $20M; cash and cash equivalents stood at $89M as of September 30, 2024; total debt was $162M.

• Net income for Q3 2024 was $4.3M, reversing a $3.7M loss in Q3 2023; adjusted net income from continuing operations was $16.7M.

• Interest expense decreased to $3.2M in Q3 2024 from $4.7M in Q3 2023.

Outlook and guidance

• Q4 2024 revenue expected between $175M and $180M, representing low- to mid-single-digit organic growth.

• Adjusted gross margin projected at approximately 59% for Q4; adjusted SG&A expected to be about 40% of revenue.

• Adjusted diluted EPS guidance of $0.38–$0.43 for Q4; full-year adjusted EPS: $1.30–$1.35.

• 2024 revenue from continuing operations expected between $683M and $688M.

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