ALPHARETTA, Ga., May 3, 2023
/PRNewswire/ -- Avanos Medical, Inc. (NYSE: AVNS) today reported
first quarter 2023 financial results.
"Our first quarter results were mixed, with our digestive health
portfolio continuing to outperform, strong adjusted earnings per
share and continued margin improvement partially offset by our
results in our pain portfolio," stated Joe
Woody, Avanos's chief executive officer. Woody continued,
"Separately, we made considerable progress on our transformation
initiative during the first quarter. We look forward to sharing
further details about these initiatives at our upcoming Investor
Day."
First Quarter 2023 Financial Highlights
- Net sales totaled $191.7 million,
a 2.9% decrease from the comparable prior year period. Excluding
previously announced product exits, net sales decreased 1% compared
to the prior year period.
- Both gross margin and adjusted gross margin improved 50 basis
points for the quarter compared to the prior year period.
- Net loss for the quarter was $0.5
million, compared to net income of $5.4 million a year ago.
- Adjusted net income totaled $12.7
million, compared to $11.9
million a year ago.
- Diluted loss per share was $0.01,
compared to diluted earnings per share of $0.11 per share a year ago.
- Adjusted diluted earnings per share was $0.27, compared to $0.25 a year ago.
Operational and Business Highlights
In January, we announced a three-year transformation initiative
that will be focused on four key priorities: optimizing the
commercial organization; transforming the product portfolio;
implementing cost management initiatives to enhance operating
profitability; and continuing to efficiently deploy capital while
maintaining a focused and disciplined approach to M&A (the
"Transformation Process"). We anticipate that by 2025, this plan
will ultimately result in savings of between $45 million and $55
million compared to 2022.
First Quarter 2023 Operating Results
For the three months ended March 31,
2023, net sales totaled $191.7
million, a decrease of 2.9% compared to the prior year
period, primarily due to lower volume in pain management and
respiratory health products, offset by higher volume in digestive
health products. In addition to volume, 1% of favorable pricing was
offset by 1% of unfavorable foreign currency translation
effects.
Gross margin was 54.5%, compared to 54.0% in the prior year
period. Adjusted gross margin increased by 50 basis points compared
to last year. Gross margin improved primarily due to manufacturing
efficiencies and improvements in the overall supply chain
environment.
Selling and general expenses as a percentage of net sales
was 48.4% for the first quarter of 2023, compared to 45.6% for the
first quarter of 2022 primarily due to expenses associated with our
ongoing Transformation Process.
Operating profit was $2.6 million,
compared to $8.6 million in the prior
year period, primarily due to overall lower sales volume along with
an increase in expenses related to the Transformation Process. On
an adjusted basis, operating profit totaled $20.4 million, compared to $17.6 million a year ago.
Adjusted EBITDA for the first quarter was $26.2 million, compared to $23.0 million in the prior year period.
Cash Flow and Balance Sheet
Cash from operations less capital expenditures - or free cash
flow - for the first quarter was an outflow of $10.8 million, compared to an outflow of
$3.2 million a year ago. The
Company's cash balance at March 31, 2023 was $95.7 million, compared to $127.7 million at year-end 2022.
Total debt outstanding, net of unamortized discounts, was
$210.9 million at March 31,
2023, compared to $232.5 million
at December 31, 2022.
2023 Outlook
The Company affirms previous guidance for 2023 and anticipates
low single-digit organic growth. Additionally, the Company expects
operating profit margin and EBITDA margin expansion of
approximately 100 basis points and adjusted diluted earnings per
share of between $1.60 and
$1.80.
Non-GAAP Financial Measures
This press release and the accompanying tables include the
following financial measures that have not been calculated in
accordance with accounting principles generally accepted in the
U.S., or GAAP, and are therefore referred to as non-GAAP financial
measures:
- Adjusted net income
- Adjusted diluted earnings per share
- Adjusted gross and operating profit
- Adjusted effective tax rate
- Adjusted EBITDA
- Free cash flow
These non-GAAP financial measures exclude the following items,
as applicable, for the relevant time periods as indicated in the
accompanying non-GAAP reconciliations to the comparable GAAP
financial measures:
- Certain acquisition and integration charges related to
acquisitions.
- Expenses associated with restructuring and transformation
activities.
- Expenses associated with European Union Medical Device
Regulation ("EU MDR") compliance.
- The amortization of intangible assets associated with prior
business acquisitions.
- The tax effects of certain adjusting items.
- The benefit associated with the tax effects of the CARES
Act.
- The positive or negative effect of changes in currency exchange
rates during the year.
The Company provides these non-GAAP financial measures as
supplemental information to its GAAP financial measures. Management
and the Company's board of directors use net sales on a constant
currency basis, adjusted net income, adjusted diluted earnings per
share, adjusted operating profit, adjusted EBITDA, and free cash
flow to: (a) evaluate the Company's historical and prospective
financial performance and its performance relative to its
competitors, (b) allocate resources and (c) measure the operational
performance of the Company's business units and their managers.
Management also believes that the use of an adjusted effective tax
rate provides improved insight into the tax effects of the
Company's ongoing business operations.
Additionally, the compensation committee of the Company's board
of directors will use certain of the non-GAAP financial measures
when setting and assessing achievement of incentive compensation
goals. These goals are based, in part, on the Company's net sales
on a constant currency basis and adjusted EBITDA, which will be
determined by excluding certain items that are used in calculating
these non-GAAP financial measures.
Our competitors may define these non-GAAP financial measures
differently, and as a result, our measure of these non-GAAP
financial measures may not be directly comparable to those of other
companies. Items excluded from these non-GAAP financial measures
are significant components in understanding and assessing financial
performance. These non-GAAP financial measures are supplemental
measures of operating performance that do not represent, and should
not be considered in isolation or as an alternative to, or
substitute for, the financial statement data presented in the
Company's consolidated financial statements as indicators of
financial performance. These non-GAAP financial measures have
limitations as analytical tools, and should not be considered in
isolation, or as a substitute for analysis of the Company's results
as reported under GAAP. We compensate for these limitations by
relying primarily on our GAAP results and using these non-GAAP
financial measures as supplemental information.
Reconciliations of these non-GAAP financial measures to the most
directly comparable GAAP financial measures are included in the
attached financial tables.
Conference Call Webcast
Avanos Medical, Inc. will host a conference call today at
9 a.m. ET. The conference call can be
accessed live over the internet at https://avanos.investorroom.com
or via telephone by dialing 877-240-5772 in the United States. A replay of the call will
be available at noon ET today by
calling 877-344-7529 in the United
States and entering passcode 9722195. A webcast of the
call will also be archived in the Investors section on the Avanos
website.
About Avanos Medical, Inc.
Avanos Medical (NYSE: AVNS) is a medical technology company
focused on delivering clinically superior solutions that will help
patients get back to the things that matter. Headquartered in
Alpharetta, Georgia, Avanos is
committed to addressing some of today's most important healthcare
needs, including providing a vital lifeline for nutrition to
patients from hospital to home, and reducing the use of opioids
while helping patients move from surgery to recovery. Avanos
develops, manufactures and markets its recognized brands globally
and holds leading market positions in multiple categories across
its portfolio. For more information, visit www.avanos.com and
follow Avanos Medical on Twitter (@AvanosMedical), LinkedIn and
Facebook.
Forward-Looking Statements
This press release contains
information that includes or is based on "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements are based on the
current plans and expectations of management and are subject to
various risks and uncertainties that could cause our actual results
to differ materially from those expressed or implied in such
statements. Forward-looking statements include all statements that
do not relate solely to historical or current facts, and can
generally be identified by the use of words such as "may,"
"believe," "will," "expect," "project," "estimate," "anticipate,"
"plan" or "continue" and similar expressions. Such factors include,
but are not limited to: weakening of economic conditions that could
adversely affect the level of demand for our products; pricing
pressures generally, including cost-containment measures that could
adversely affect the price of or demand for our products; risks
related to the ongoing COVID-19 pandemic; shortage in drugs used in
our Acute Pain products or other disruptions in our supply chain;
the ongoing conflict between Russia and Ukraine; our ability to successfully execute
on or achieve the expected benefits of the Transformation Process;
inflationary pressures; the effects of the recent financial
conditions affecting the banking system and the potential threats
to the solvency of commercial banks; changes in foreign exchange
markets; legislative and regulatory actions; unanticipated issues
arising in connection with clinical studies and otherwise that
affect U.S. Food and Drug Administration approval of new products;
changes in reimbursement levels from third-party payors; a
significant increase in product liability claims; the impact of
investigative and legal proceedings and compliance risks; the
impact of the federal legislation to reform the United States healthcare system; changes
in financial markets; and changes in the competitive environment.
The information contained herein speaks only as of the date of this
release and we undertake no obligation to update forward-looking
statements, except as may be required by the securities laws.
Additional information concerning these and other factors that
may impact future results is contained in our filings with the U.S.
Securities and Exchange Commission, including our most recent Form
10-Q.
AVANOS MEDICAL,
INC.
CONDENSED
CONSOLIDATED INCOME STATEMENTS
(unaudited)
(in millions, except
per share amounts)
|
|
|
Three Months Ended
March 31,
|
|
2023
|
|
2022
|
Net
Sales
|
$
191.7
|
|
$
197.4
|
Cost of products
sold
|
87.2
|
|
90.8
|
Gross
Profit
|
104.5
|
|
106.6
|
Research and
development expenses
|
7.9
|
|
7.8
|
Selling and general
expenses
|
92.7
|
|
90.1
|
Other expense,
net
|
1.3
|
|
0.1
|
Operating
Income
|
2.6
|
|
8.6
|
Interest
income
|
0.5
|
|
—
|
Interest
expense
|
(3.5)
|
|
(1.3)
|
(Loss) Income Before
Income Taxes
|
(0.4)
|
|
7.3
|
Income tax
provision
|
(0.1)
|
|
(1.9)
|
Net (Loss)
Income
|
$
(0.5)
|
|
$
5.4
|
|
|
|
|
Interest expense,
net
|
$
3.0
|
|
$
1.3
|
Income tax
provision
|
0.1
|
|
1.9
|
Depreciation and
amortization
|
12.1
|
|
11.1
|
EBITDA
|
$
14.7
|
|
$
19.7
|
|
|
|
|
(Loss) Earnings Per
Share
|
|
|
|
Basic
|
$
(0.01)
|
|
$
0.11
|
Diluted
|
(0.01)
|
|
0.11
|
|
|
|
|
Common Shares
Outstanding
|
|
|
|
Basic
|
46.6
|
|
47.4
|
Diluted
|
47.2
|
|
47.8
|
AVANOS MEDICAL,
INC.
NON-GAAP
RECONCILIATIONS
(unaudited)
(in
millions)
|
|
|
Gross
Profit
|
|
Three Months Ended
March 31,
|
|
2023
|
|
2022
|
As reported
|
$
104.5
|
|
$
106.6
|
Acquisition and
integration-related charges
|
—
|
|
0.7
|
Intangibles
amortization
|
3.6
|
|
3.1
|
As adjusted
non-GAAP
|
$
108.1
|
|
$
110.4
|
Gross profit margin, as
reported
|
54.5 %
|
|
54.0 %
|
Gross profit margin, as
adjusted
|
56.4 %
|
|
55.9 %
|
|
Operating
Profit
|
|
Three Months Ended
March 31,
|
|
2023
|
|
2022
|
As reported
|
$
2.6
|
|
$
8.6
|
Acquisition and
integration-related charges
|
1.5
|
|
1.7
|
Restructuring and
transformation charges(a)
|
8.9
|
|
—
|
EU MDR Compliance
(b)
|
1.1
|
|
1.6
|
Intangibles
amortization
|
6.3
|
|
5.7
|
As adjusted
non-GAAP
|
$
20.4
|
|
$
17.6
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Expenses incurred for
the Transformation Process are included in "Selling and general
expenses".
|
(b)
|
In the three months
ended March 31, 2023 and 2022, EU MDR Compliance related charges
are included in "Selling and general expenses".
|
AVANOS MEDICAL,
INC.
NON-GAAP
RECONCILIATIONS
(unaudited)
|
|
|
(Loss) Income Before
Taxes
|
|
Three Months Ended
March 31,
|
|
2023
|
|
2022
|
As reported
|
$
(0.4)
|
|
$
7.3
|
Acquisition and
integration-related charges
|
1.5
|
|
1.7
|
Restructuring and
transformation charges
|
8.9
|
|
—
|
EU MDR
Compliance
|
1.1
|
|
1.6
|
Intangibles
amortization
|
6.3
|
|
5.7
|
As adjusted
non-GAAP
|
$
17.4
|
|
$
16.3
|
|
Tax
Provision
|
|
Three Months Ended
March 31,
|
|
2023
|
|
2022
|
As reported
|
$
(0.1)
|
|
$
(1.9)
|
Tax effects of
adjusting items
|
(4.6)
|
|
(2.5)
|
As adjusted
non-GAAP
|
$
(4.7)
|
|
$
(4.4)
|
Effective tax rate, as
reported
|
25.0 %
|
|
26.0 %
|
Effective tax rate, as
adjusted
|
27.0 %
|
|
27.0 %
|
AVANOS MEDICAL,
INC.
NON-GAAP
RECONCILIATIONS
(unaudited)
(in millions, except
per share amounts)
|
|
|
Net (Loss)
Income
|
|
Three Months Ended
March 31,
|
|
2023
|
|
2022
|
As reported
|
$
(0.5)
|
|
$
5.4
|
Acquisition and
integration-related charges
|
1.5
|
|
1.7
|
Restructuring and
transformation charges
|
8.9
|
|
—
|
EU MDR
Compliance
|
1.1
|
|
1.6
|
Intangibles
amortization
|
6.3
|
|
5.7
|
Tax effects of
adjusting items
|
(4.6)
|
|
(2.5)
|
As adjusted
non-GAAP
|
$
12.7
|
|
$
11.9
|
Diluted (loss) earnings
per share, as reported
|
$
(0.01)
|
|
$
0.11
|
Diluted earnings per
share, as adjusted
|
$
0.27
|
|
$
0.25
|
|
EBITDA
|
|
Three Months Ended
March 31,
|
|
2023
|
|
2022
|
EBITDA, as
reported
|
$
14.7
|
|
$
19.7
|
Acquisition and
integration-related charges
|
1.5
|
|
1.7
|
Restructuring and
transformation charges
|
8.9
|
|
—
|
EU MDR
Compliance
|
1.1
|
|
1.6
|
Adjusted
EBITDA
|
$
26.2
|
|
$
23.0
|
AVANOS MEDICAL,
INC.
NON-GAAP
RECONCILIATIONS
(unaudited)
(in
millions)
|
|
|
Free Cash
Flow
|
|
Three Months Ended
March 31,
|
|
2023
|
|
2022
|
Cash (used in) provided
by operating activities
|
$
(6.8)
|
|
$
1.8
|
Capital
expenditures
|
(4.0)
|
|
(5.0)
|
Free Cash
Flow
|
$
(10.8)
|
|
$
(3.2)
|
2023 OUTLOOK
|
|
|
Estimated
Range
|
Diluted earnings per
share (GAAP)
|
$
0.71
|
to
|
$
1.00
|
Intangibles
amortization
|
0.39
|
to
|
0.39
|
Restructuring and
transformation charges
|
0.34
|
to
|
0.28
|
EU Medical Device
Regulation
|
0.16
|
to
|
0.13
|
Adjusted diluted
earnings per share (non-GAAP)
|
$
1.60
|
to
|
$
1.80
|
AVANOS MEDICAL,
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in
millions)
|
|
|
March 31,
2023
|
|
December 31,
2022
|
ASSETS
|
|
|
|
Current
Assets
|
|
|
|
Cash and cash
equivalents
|
$
95.7
|
|
$
127.7
|
Accounts receivable,
net
|
142.7
|
|
167.9
|
Inventories
|
200.0
|
|
190.3
|
Prepaid and other
current assets
|
15.4
|
|
13.9
|
Total Current
Assets
|
453.8
|
|
499.8
|
Property, Plant and
Equipment, net
|
163.5
|
|
163.9
|
Operating Lease
Right-of-Use Assets
|
28.3
|
|
30.6
|
Goodwill
|
821.5
|
|
819.4
|
Other Intangible
Assets, net
|
244.7
|
|
251.0
|
Deferred Tax
Assets
|
4.5
|
|
4.6
|
Other
Assets
|
18.6
|
|
17.6
|
TOTAL
ASSETS
|
$
1,734.9
|
|
$
1,786.9
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
Liabilities
|
|
|
|
Current portion of
long-term debt
|
$
6.2
|
|
$
6.2
|
Current portion of
operating lease liabilities
|
12.1
|
|
12.8
|
Trade accounts
payable
|
59.6
|
|
67.9
|
Accrued
expenses
|
80.6
|
|
98.9
|
Total Current
Liabilities
|
158.5
|
|
185.8
|
Long-Term
Debt
|
204.7
|
|
226.3
|
Operating Lease
Liabilities
|
32.4
|
|
34.7
|
Deferred Tax
Liabilities
|
25.1
|
|
25.4
|
Other Long-Term
Liabilities
|
15.5
|
|
23.5
|
TOTAL
LIABILITIES
|
436.2
|
|
495.7
|
Stockholders'
Equity
|
1,298.7
|
|
1,291.2
|
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY
|
$
1,734.9
|
|
$
1,786.9
|
AVANOS MEDICAL,
INC.
CONDENSED
CONSOLIDATED CASH FLOW STATEMENTS
(unaudited)
(in
millions)
|
|
|
Three Months Ended
March 31,
|
|
2023
|
|
2022
|
Operating
Activities
|
|
|
|
Net (loss)
income
|
$
(0.5)
|
|
$
5.4
|
Depreciation and
amortization
|
12.1
|
|
11.1
|
Changes in operating
assets and liabilities, net of acquisition
|
(19.3)
|
|
(18.1)
|
Deferred income taxes
and other
|
0.9
|
|
3.4
|
Cash (Used in)
Provided by Operating Activities
|
(6.8)
|
|
1.8
|
Investing
Activities
|
|
|
|
Capital
expenditures
|
(4.0)
|
|
(5.0)
|
Acquisition of assets
and investments in businesses
|
—
|
|
(116.7)
|
Cash Used in
Investing Activities
|
(4.0)
|
|
(121.7)
|
Financing
Activities
|
|
|
|
Proceeds from issuance
of secured debt
|
—
|
|
125.0
|
Secured debt
repayments
|
(1.6)
|
|
—
|
Revolving credit
facility proceeds
|
—
|
|
20.0
|
Revolving credit
facility repayments
|
(20.0)
|
|
(20.0)
|
Payments of debt
issuance costs
|
—
|
|
(0.6)
|
Purchase of treasury
stock
|
(1.1)
|
|
(19.4)
|
Proceeds from the
exercise of stock options
|
0.6
|
|
0.7
|
Cash (Used in)
Provided by Financing Activities
|
(22.1)
|
|
105.7
|
Effect of Exchange Rate
Changes on Cash and Cash Equivalents
|
0.9
|
|
—
|
Decrease in Cash and
Cash Equivalents
|
(32.0)
|
|
(14.2)
|
Cash and Cash
Equivalents - Beginning of Period
|
127.7
|
|
118.5
|
Cash and Cash
Equivalents - End of Period
|
$
95.7
|
|
$
104.3
|
AVANOS MEDICAL,
INC.
SELECTED BUSINESS
AND PRODUCTS DATA
(unaudited)
(in
millions)
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
|
|
|
2023
|
|
2022
|
|
Change
|
Chronic
Care:
|
|
|
|
|
|
|
|
|
|
Digestive
health
|
|
|
|
|
$
88.8
|
|
$
81.4
|
|
9.1 %
|
Respiratory
health
|
|
|
|
|
32.4
|
|
38.0
|
|
(14.7) %
|
Total Chronic
Care
|
|
|
|
|
121.2
|
|
119.4
|
|
1.5 %
|
Pain
Management:
|
|
|
|
|
|
|
|
|
|
Acute pain
|
|
|
|
|
$
34.7
|
|
$
38.7
|
|
(10.3) %
|
Interventional
pain
|
|
|
|
|
35.8
|
|
39.3
|
|
(8.9) %
|
Total Pain
Management
|
|
|
|
|
70.5
|
|
78.0
|
|
(9.6) %
|
Total Net
Sales
|
|
|
|
|
$
191.7
|
|
$
197.4
|
|
(2.9) %
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Volume
|
|
Pricing/Mix
|
|
Currency
|
|
Other
|
Net sales - percentage
change 2023 vs. 2022
|
(2.9) %
|
|
(2.8) %
|
|
1.0 %
|
|
(1.1) %
|
|
— %
|
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multimedia:https://www.prnewswire.com/news-releases/avanos-medical-inc-announces-first-quarter-2023-results-301814209.html
SOURCE Avanos Medical, Inc.