Avanos Medical’s Earnings Call: Growth Amid Challenges

Avanos Medical, Inc. ((AVNS)) has held its Q3 earnings call. Read on for the main highlights of the call.

Avanos Medical, Inc. recently held its earnings call, revealing a generally positive sentiment marked by strong performance in the Specialty Nutrition Systems segment and strategic acquisitions like Nexus Medical. Despite these successes, the company faces challenges with tariffs, flat growth in certain segments, and increased capital expenditures.

Specialty Nutrition Systems Segment Growth

The Specialty Nutrition Systems (SNS) segment demonstrated robust growth, with each business unit achieving double-digit and above-market growth. Organic sales rose by 10% compared to the previous year, highlighting the segment’s strong market performance.

Successful Divestiture and Acquisition

Avanos successfully divested its hyaluronic acid business and acquired Nexus Medical, a strategic move that expands its footprint in neonatal and pediatric settings. This acquisition is anticipated to be immediately accretive to both revenue growth and earnings per share.

Improved Financial Metrics

The company reported net sales of approximately $178 million, with an adjusted EBITDA of $20 million. The adjusted gross margin stood at 52.8%, while adjusted SG&A as a percentage of revenue was 40.6%, reflecting improved financial health.

Cost Improvement Initiatives

Avanos is focused on cost improvement, expecting to deliver $15 million to $20 million in run-rate annualized incremental cost savings by the end of 2026, which will bolster its financial efficiency.

Raised Full-Year Financial Guidance

Avanos raised and narrowed its full-year revenue estimates to a range of $690 million to $700 million, with an adjusted EPS estimate of $0.85 to $0.95 per share, indicating strong sales momentum and effective cost management.

Impact of Tariffs

The ongoing tariff environment is projected to continue impacting Avanos, with an estimated $18 million in incremental tariff-related manufacturing costs expected in 2026.

Challenges in Pain Management and Recovery Segment

The Pain Management and Recovery segment faced challenges, with flat growth in the surgical pain business and a year-over-year decline in the Game Ready portfolio.

Increased Capital Expenditures

Avanos anticipates higher-than-expected capital expenditures in 2025 due to strategic supply chain investments aimed at exiting China.

Forward-Looking Guidance

During the earnings call, Avanos provided updated guidance for the full year, revising revenue and EPS forecasts upwards. The company expects to achieve $690 million to $700 million in revenue and an adjusted EPS of $0.85 to $0.95 per share. Strategic acquisitions and divestitures are expected to further enhance revenue growth and profitability.

In summary, Avanos Medical’s earnings call reflected a positive outlook with strong growth in key segments and strategic moves to enhance its market position. Despite facing challenges such as tariffs and flat growth in certain areas, the company remains optimistic about its financial trajectory, supported by improved financial metrics and cost-saving initiatives.