Avanos Medical Inc (AVNS) Reports Mixed 2023 Financial Results Amid Transformation Initiative
Net Sales: Full-year net sales from continuing operations decreased by 1.6% to $673.3 million.
Earnings Per Share: Diluted earnings per share from continuing operations for Q4 were $0.24, up from $0.21 year-over-year; full-year diluted loss per share was $0.21.
Free Cash Flow: 2023 full-year free cash flow was $14.6 million, a significant decrease from $71.6 million in 2022.
Adjusted EBITDA: Adjusted EBITDA for the full year increased to $98.9 million from $91.2 million in the previous year.
Strategic Moves: Completed the sale of the respiratory health business and acquired Diros Technology, Inc., enhancing pain management portfolio.
2024 Outlook: Expects net sales between $685 and $705 million with adjusted diluted earnings per share between $1.30 to $1.45.
On February 20, 2024, Avanos Medical Inc (NYSE:AVNS) released its 8-K filing, announcing its fourth quarter and full-year 2023 results. The company, known for its medical devices and services in pain management, IV therapy, and respiratory and digestive health, has been actively engaged in a transformation initiative aimed at optimizing its commercial organization, transforming its product portfolio, and enhancing operating profitability.
Company Overview
Avanos Medical Inc operates primarily in the medical devices sector, with a focus on non-opioid pain management and chronic care solutions. The company's Pain Management franchise offers products for acute and interventional pain, including cold and compression therapy, while its Chronic Care franchise addresses digestive and respiratory issues with feeding tubes and catheters. Avanos generates the majority of its revenue from the Chronic Care franchise and its operations in North America.
Performance and Challenges
The company's financial performance in 2023 reflects the challenges and strategic decisions made during the year. Net sales from continuing operations saw a slight decrease, attributed mainly to lower sales in the Pain Management and Recovery portfolio, particularly hyaluronic acid (HA) pain relief products. This was partially offset by strong demand for Digestive Health products and favorable foreign currency translation effects.
Despite the sales dip, Avanos achieved a modest increase in adjusted EBITDA and maintained a focus on strategic growth through the acquisition of Diros Technology, Inc., which is expected to enhance its Pain Management and Recovery offerings. The divestiture of the respiratory health business is also a significant step in streamlining the company's focus on its core competencies.
Financial Achievements and Importance
Avanos Medical Inc's financial achievements in 2023, particularly the increase in adjusted EBITDA, are crucial indicators of the company's ability to manage its operations efficiently despite revenue challenges. The strategic divestitures and acquisitions underscore the company's commitment to focusing on high-growth areas and improving its product portfolio, which is vital for long-term success in the competitive medical devices industry.
Key Financial Metrics
Avanos reported a gross margin of 56.4% for the full year, down from 57.6% in the previous year. Adjusted gross margin also saw a slight decrease, primarily due to unfavorable product mix, although this was partially mitigated by improved manufacturing efficiencies. Selling and general expenses as a percentage of net sales increased, driven by higher selling costs and non-recurring expenses related to the company's transformation initiative and compliance costs associated with the EU Medical Device Regulation.
Free cash flow for the year was significantly lower than in 2022, highlighting the impact of strategic investments and the transformation process on the company's liquidity. The balance sheet shows a decrease in cash balance year-over-year, with total debt at the end of the fourth quarter amounting to $168.0 million.
Analysis of Performance
Avanos Medical Inc's performance in 2023 reflects a transitional period as the company restructures its operations and focuses on strategic growth areas. While net sales have decreased slightly, the company's ability to increase its adjusted EBITDA suggests effective cost management and operational efficiency. The strategic divestiture and acquisition activities indicate a clear focus on strengthening the company's position in the pain management market.
The outlook for 2024 is cautiously optimistic, with expected organic growth and an increase in adjusted diluted earnings per share. Avanos Medical Inc's commitment to its transformation initiative and strategic focus on profitable growth areas is poised to position the company for success in the coming years.
Investors and stakeholders will be watching closely to see how the company's strategic initiatives unfold and whether they will translate into improved financial performance and shareholder value.
Explore the complete 8-K earnings release (here) from Avanos Medical Inc for further details.
This article first appeared on GuruFocus.
