Avanos Medical, Inc. (NYSE:AVNS) Q2 2023 Earnings Call Transcript

We’re going to be entangled with Air life for the better part of the year post closing as they do some manufacturing for us, we do some manufacturing for them. The two plants that they will take over, we get out of and condense our footprint, which is what we shared on Investor Day. So it’s a combination of both. I think the point you’re making there, Matt, which you totally agree on is all of that, we have control over. Now do we have exact control over whether it’s the second quarter or third quarter next year, I mean, that’s tough to tell, right? And this is why these are very preliminary 2024 numbers. As we get to the back half of this year, as we get beyond the close date, which we hope is going to be the early part of the fourth quarter, we’re on track for that.

We will have — for fourth quarter earnings, we will have a much better defined runway of how quick we can get at each of these costs and what next year looks like. But yes, we feel good about these ranges because to your point, a majority of what’s in there for next year and in the ’25 is very much in our control, assuming we execute on the pain strategy.

Matthew Mishan: All right. Excellent. And then last question, just on the HA market. As you think about the ASPs coming closer to parity, between orthogen and some of the competition. Kind of where is that in getting closer to parity? And kind of when do you expect that to converge completely?

Joe Woody: Matt, this is Joe Woody. I think we have several quarters, I maybe even said in the prepared remarks, but I can’t remember exactly, but I think it’s about several quarters. You move into ’24, we’re going to settle out a different base. And then we’re very confident that we can get a low single-digit growth out of that business on a go forward.

Operator: The next question comes from Kristen Stewart with CL King. Please go ahead.

Kristen Stewart: Congratulations on a good quarter when you look at the numbers in totality. I was just wondering if you could go through the Digestive Health business. You had a really strong quarter there. How should we just think about the sustainability of that franchise?

Joe Woody: Yes. So Kristen, thanks for your comments on the quarter. I think that we had a very strong NEOMED performance at very high double-digit good core track, really good in our legacy business. We think NEOMED has the type of growth that we’ve been experiencing double-digit anyway, at least in the next 12 months. And we’ve got some great global opportunity in the legacy side of our business. But that said, obviously, we’ll have tough comparators next year. Nonetheless, we still see it as a fairly rock solid mid-single-digit grower across the board. And then, of course, as we said at the Investor Day, we’re going to be additive with M&A bolt-ons there, too.

Kristen Stewart: And just on the M&A environment, is there anything that you can share with us in terms of anything proceeding?

Joe Woody: No. As you can imagine, our heads down on execution right now on integration. And all the things that you saw in the release, but we do think that as we move into ’24, we’ll start to open our aperture again there.

Michael Greiner: Yes. The only thing I would add, Kristen, to that, obviously, we just have a lot to absorb right now and we really want to execute on what we just laid out today over 24, 25 and it ties back to what we shared on Investor Day. We are very focused going forward though. We’re not adding a third leg. We’ll be very focused primarily in the DH space. We’ve done a couple of nice things, we believe, in the pain space. We’ve got to go execute organically there. So should we do anything actionable over the next 12 months, you most likely would see that come from the DH space.