Avanos Medical (AVNS) Q3 2025 Earnings Transcript

Motley Fool Transcribing11-07

Image source: The Motley Fool. DateWednesday, November 5, 2025 at 9:00 a.m. ETCall participantsChief Executive Officer — David C. PacittiChief Financial Officer — Scott GalovanChief Operating Officer...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2581018083?lang=en_US&edition=fundamental","thumbnail":"","is_english":true,"pubTime":"2025-11-07 00:44","share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","id":"2581018083","market":"us","top_or_hot":-1,"title":"Avanos Medical (AVNS) Q3 2025 Earnings Transcript","media":"Motley Fool Transcribing","content":"<div>\n<p>Image source: The Motley Fool.\n\nDateWednesday, November 5, 2025 at 9:00 a.m. ETCall participantsChief Executive Officer — David C. PacittiChief Financial Officer — Scott GalovanChief Operating Officer...</p>\n\n<a href=\"https://www.fool.com/earnings/call-transcripts/2025/11/06/avanos-medical-avns-q3-2025-earnings-transcript/\">Source Link</a>\n\n</div>\n","source":"stock_motley_transcript","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Avanos Medical (AVNS) Q3 2025 Earnings Transcript</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAvanos Medical (AVNS) Q3 2025 Earnings Transcript\n</h2>\n\n<h4 class=\"meta\">\n\n\n2025-11-07 00:44 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.fool.com/earnings/call-transcripts/2025/11/06/avanos-medical-avns-q3-2025-earnings-transcript/><strong>Motley Fool Transcribing</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Image source: The Motley Fool.\n\nDateWednesday, November 5, 2025 at 9:00 a.m. ETCall participantsChief Executive Officer — David C. PacittiChief Financial Officer — Scott GalovanChief Operating Officer...</p>\n\n<a href=\"https://www.fool.com/earnings/call-transcripts/2025/11/06/avanos-medical-avns-q3-2025-earnings-transcript/\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"AVNS","symbol_name":"AVANOS MEDICAL","start_time":0,"source_url":"https://www.fool.com/earnings/call-transcripts/2025/11/06/avanos-medical-avns-q3-2025-earnings-transcript/","article_id":"2581018083","we_media_id":null,"thumbnails":[],"rights":{"source":"stock_motley_transcript","url":"https://www.fool.com/earnings/call-transcripts/2025/11/06/avanos-medical-avns-q3-2025-earnings-transcript/","rn_cache_url":null,"directOrigin":true},"url":"https://stock-news.laohu8.com/highlight/detail?id=2581018083","pubTimestamp":1762447481,"columns":[],"sourceInfo":{"source_id":"stock_motley_transcript","name":"Motley Fool Transcribing"},"weMediaInfo":null,"summary":"DateWednesday, November 5, 2025 at 9:00 a.m. ETCall participantsChief Executive Officer — David C. PacittiChief Financial Officer — Scott GalovanChief Operating Officer — Jason PickettNeed a quote from a Motley Fool analyst?","collect":0,"end_time":0,"defaultTopTitle":"fool.com","property":["earning"],"viewcount":null,"language":"en","relate_stocks":{"AVNS":"AVANOS MEDICAL"},"translate_title":"Avanos Medical(AVNS)2025年第三季度收益记录","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"AVNS":1.5},"content_text":"Image source: The Motley Fool.\n\nDateWednesday, November 5, 2025 at 9:00 a.m. ETCall participantsChief Executive Officer — David C. PacittiChief Financial Officer — Scott GalovanChief Operating Officer — Jason PickettNeed a quote from a Motley Fool analyst? Email [email protected]RisksScott Galovan stated, \"We currently estimate the P&L impact of incremental tariff-related manufacturing costs, primarily for products originating from Mexico and China, to be approximately $18 million, partly due to higher sales.\" This estimate is for 2025.David C. Pacitti said, \"some of the progress is being obscured by the impact of tariffs,\" signaling uncertainty in reported results due to external pressures.Scott Galovan noted a \"decline of over 20%\" in hyaluronic acid injections and intravenous infusion product lines in fiscal Q3 2025 (period ended September 30, 2025), following the divestiture and planned category exit in early 2026.TakeawaysNet sales -- $178 million, adjusted for foreign exchange effects and strategic revenue withdrawals not meeting return criteria.Organic sales growth in strategic segments -- 10% year-over-year, reflecting targeted business focus and operational execution.Adjusted diluted earnings per share -- $0.22 of adjusted diluted earnings per share.Adjusted EBITDA -- $20 million of adjusted EBITDA, demonstrating profitability at the operating level.Adjusted gross margin -- Adjusted gross margin was 52.8%.Adjusted SG&A as % of revenue -- 40.6%, signaling disciplined spending relative to revenue generation.Specialty Nutrition Systems organic growth -- 14.5% organic growth, reaffirming market-leading positions in enteral feeding.Specialty Systems operating profit margin -- 20% operating profit for the Specialty Systems segment, up 130 basis points, driven by volume gains partially offset by negative tariff impacts.Radiofrequency ablation (RFA) business -- Double-digit growth, with capital equipment sales driving procedural volumes.Game Ready portfolio -- The U.S. Rental segment transitioned to a distribution arrangement with WRS Group to improve profitability.Cash and debt as of September 30, 2025 -- $70 million in cash, $103 million in debt, and leverage maintained well below one turn.Cost improvement plan -- Expected $15 million to $20 million run-rate annualized cost savings by 2026, with $10 million in one-time charges—most to be incurred in 2025.Portfolio actions -- Hyaluronic acid business divested on July 31, 2025; ongoing exit from IV infusion category planned for early 2026.Acquisition -- Nexus Medical acquired; management expects it to be \"immediately accretive to both revenue growth and earnings per share\" and to provide access to a $70 million market segment.Raised outlook -- Full-year revenue estimate increased to $690 million–$700 million, and full-year adjusted EPS estimate raised to $0.85–$0.95 per share, including all recent M&A and divestitures.Tariff mitigation -- Ongoing actions include internal cost containment, pricing strategies, temporary exemptions, and a plan to exit China for neonatal syringe production by mid-2026, leading to higher 2025 capital expenditures.Projected free cash flow -- Management forecasts $25 million–$30 million of free cash flow, inclusive of an $18 million tariff impact and $10 million in transformation-related charges.SummaryManagement confirmed that the Specialty Nutrition Systems segment achieved 14.5% organic growth, with sustained market leadership and higher-than-expected distributor orders, and anticipated normalization in the fourth quarter. Avanos Medical (AVNS +5.82%) highlighted RFA business growth, the transition of the Game Ready rental segment to a WRS Group partnership, and the completed divestiture of the hyaluronic acid line coupled with an announced exit from IV infusion products. The $15 million–$20 million cost savings initiative, enabled by streamlined management and revamped R&D, is underway, with most actions impacting 2025. The company expects these annualized incremental cost savings to be realized by 2026; resulting one-time costs and ongoing tariffs are specifically acknowledged in financial guidance. The company finalized the acquisition of Nexus Medical, targeting the neonatal and pediatric care markets, and emphasized that this will be accretive to revenue and earnings per share (EPS), while the increased full-year targets for revenue ($690 million to $700 million) and adjusted EPS ($0.85 to $0.95 per share, non-GAAP) directly incorporate these portfolio moves and active mitigation of external headwinds.Scott Galovan reiterated a focus on \"maintain healthy liquidity levels and balance sheet strength while also deploying capital towards strategic acquisitions.\"Management disclosed an anticipated $25 million–$30 million in free cash flow, clarifying that it accounts for elevated capital investment and transformation charges.David C. Pacitti outlined adoption of a hybrid R&D model combining internal and outsourced development to accelerate product launches and discipline capital deployment.The company noted ongoing lobbying efforts and strategic supply chain investments to further reduce tariff exposure by exiting China-based production by mid-2026.Portfolio repositioning was underscored by the exit from lower-return businesses and immediate reinvestment into segments aligned with long-term growth strategy.Industry glossarySNS (Specialty Nutrition Systems): The company’s core business segment providing enteral feeding systems and related products for chronic and neonatal care.Radiofrequency ablation (RFA): A minimally invasive procedure using heat generated by radio waves to disrupt pain signals, featured prominently in the company’s pain management portfolio.CoreGrip tube retention system: The company’s proprietary medical device to reduce feeding tube migration and dislodgment, referenced as a recent sales driver.Go Direct transition: The company’s process of selling directly to end customers/distributors, as highlighted in the UK segment discussion.No Pain Act: U.S. federal legislation supporting the use of non-opioid pain management options, through which some company products have gained reimbursement access.Full Conference Call TranscriptDavid C. Pacitti: Thanks, Jason, and good morning, everyone. I'm pleased to report we had a successful third quarter as we made great progress on our key strategic and operational goals in Q3. I would like to share with you our strategic imperatives which guide us in how we operate the business. Our strategic imperatives are to accelerate growth in our strategic business segments, manage and mitigate the impact of tariffs, realize more operating efficiencies, improve or divest underperforming assets, and acquire businesses that are synergistic with our specialty nutrition systems and pain management and recovery strategic segments. Let's take a few minutes to address each of those imperatives in a bit more detail, starting with our financial performance.Driven by the great execution of our commercial team, we achieved strong growth in our life-sustaining specialty nutrition systems or SNS segment, with each of our SNS businesses delivering double-digit and above-market growth in the quarter. We also showed continued progress in our opioid-sparing pain management and recovery segment, which posted positive year-over-year growth in the quarter, led by double-digit above-market growth in our radiofrequency ablation business. For the quarter, we achieved net sales of approximately $178 million adjusted for the effects of foreign exchange and the impact of our strategic decision to withdraw from revenue streams that did not meet our return criteria. Organic sales for our strategic segments were up 10% compared to a year ago.Additionally, we generated $0.22 of adjusted diluted earnings per share and $20 million of adjusted EBITDA, with an adjusted gross margin of 52.8% and adjusted SG&A as a percentage of revenue of 40.6%. Given the strong sales momentum and effective cost discipline measures delivered during the first three quarters of the year, we are raising and narrowing our full-year revenue estimates to $690 million to $700 million. Furthermore, we are raising and narrowing our full-year adjusted EPS estimate to $0.85 to $0.95 per share. Moving on to portfolio management, we made solid progress on that front.As you may recall, we divested our hyaluronic acid business on July 31 as the returns and growth outlook for that business fell well below acceptable thresholds. This divestiture represents an important step towards our goal of enhancing the future sales growth and profitability profile of our company. Following the sale, I am pleased to report that we acquired Nexus Medical, a privately held medical device company based in Lenexa, Kansas. This acquisition expands our presence in the neonatal and pediatric settings and provides entry into a growing $70 million market. As indicated in our press release, we expect that the acquisition to be immediately accretive to both revenue growth and earnings per share.I want to thank all those in the company who were involved in the transaction. It is already proving to be a great addition to our company. Moving on to our cost improvement efforts, I also have good news to share on that front. As I noted during our last earnings call, I tasked the team with identifying opportunities to optimize costs without impacting our commercial effectiveness. With this backdrop, we have recently taken steps to accelerate our decision-making, improve our new product development process, and realize long-term cost-saving opportunities. We expect those efforts will deliver $15 million to $20 million of run-rate annualized incremental cost savings by 2026.We anticipate one-time cash charges related to those expanded programs of approximately $10 million, with the majority to be incurred in 2025. Now on to the tariff front. We are executing on solutions to mitigate the impact of tariffs on our business and gross margin profile. We expect the current tariff environment will continue to impact the company in 2026. Our team is hard at work on implementing a range of strategies focused on tariff mitigation actions, including internal cost containment measures, pricing actions, leveraging previously issued temporary tariff exemptions for portions of our portfolio, and lobbying efforts with Abimed and other third parties that have interactions with the administration.Lastly, we have prioritized supply chain investments to accelerate our exit from China, which will result in slightly higher than anticipated capital expenditures in 2025. With this additional strategic investment, we expect to be out of China for our neonatal syringe production by mid-year 2026. And with that, I'll turn now the call over to Scott Galovan for a more detailed review of our financial results.Scott Galovan: Thanks, David C. Pacitti. I'll spend the next few minutes discussing our strong third quarter results at the segment level. Our Specialty Nutrition Systems portfolio delivered outstanding above-market results, growing 14.5% organically versus the prior year, reaffirming our market-leading positions in long-term, short-term, and neonatal enteral feeding. Demand for our enteral feeding products remains strong, and our underlying growth continues to exceed market levels. Please note that we benefited from higher-than-expected distributor orders during the third quarter resulting from our Go Direct transition in The United Kingdom. While trends are expected to remain solid going forward, we anticipate the fourth quarter will reflect normalization of inventory levels.Our short-term enteral feeding portfolio posted another robust quarter of double-digit growth globally during the quarter. These results were fueled by the continued expansion of our U.S. Core track standard of care offering. Furthermore, adoption of our recently launched CoreGrip tube retention system designed to reduce the risk of tube migration and dislodgment has delivered higher-than-anticipated sales results. Finally, our Neonatal Solutions business delivered another excellent quarter, growing by double digits compared to the prior year. As we have previously signaled, we anticipate lower but still above-market growth for our NeoMed product line over the next few quarters.Nonetheless, we expect lower year-over-year growth in the fourth quarter as in 2024, we benefited from an unusually large international order from an existing OEM partner and also capitalized on sales opportunities that arose from a competitor's backorder challenges during the quarter. From a profitability standpoint, operating profit for our Specialty Systems segment for the third quarter was 20%, a 130 basis point improvement compared to a year ago, reflecting a higher volume of sales partially offset by unfavorable tariff impacts. Now turning to our 2.4% excluding the impact of foreign exchange, our previously announced strategic decision to withdraw from certain low-growth, low-margin products.Our radiofrequency ablation or RFA business continues to deliver outstanding results, posting double-digit growth this quarter compared to the previous year. We experienced sustained growth in our RFA generator capital sales in the third quarter, capturing higher procedural volumes, particularly within our AscendTech and Trident product lines. Additionally, we are encouraged by the progress of COOLIEF offering internationally, leveraging reimbursement tailwinds in several geographies, including The United Kingdom and Japan. Our surgical pain business was flat in the third quarter compared to the prior year.While the implementation of the reimbursement decision afforded by the No Pain Act is taking longer than anticipated, the No Pain Act provides hospitals, ASCs, and caregivers with improved options to administer non-opioid postsurgical pain relief. I would point out that we offer some of the few devices approved under this legislation. We are excited to support better patient care through our ON-Q and AMBIT product line offerings. Finally, our Game Ready portfolio, while down year over year, posted similar revenue levels as the first two quarters of the year. As David C. Pacitti noted on our Q2 call, we are in the process of enhancing our go-to-market model for this business.As part of the strategic assessment, we made the decision to transition The U.S. Rental portion of this business to WRS Group. This transaction structure encompasses a strategic partnership in which WRS will manage the rental business through a distribution arrangement with Avanos Medical, Inc. We believe this structure enables our team to focus on our core sports and rehab channels. Importantly, we expect this structure will enhance our profitability. Operating profit for our 3% a 200 basis point improvement compared to a year ago, which demonstrates our recent top-line and cost management execution.Finally, our hyaluronic acid injections and intravenous infusion product lines reported in corporate and other declined over 20% during the third quarter, primarily due to the divestiture of the business in July. As previously shared, we will continue to manage the IV infusion product line for cash and anticipate fully exiting this product category in early 2026. Moving on to our financial position and liquidity, our balance sheet remains strong and continues to provide us with strategic flexibility with $70 million of cash on hand and $103 million of debt outstanding as of September 30. We have maintained leverage levels meaningfully below one turn for several quarters and will continue to be good stewards of our balance sheet.As illustrated with our recent Nexus Medical acquisition, we can continue to maintain healthy liquidity levels and balance sheet strength while also deploying capital towards strategic acquisitions that can bring accretive revenue growth and operating margin accretion. Free cash flow for the quarter was $7 million. Cash generated by operations was partially offset by higher capital expenditures supporting our strategic supply chain initiatives as highlighted earlier by David C. Pacitti. We anticipate generating approximately $25 million to $30 million of free cash flow for the year, including the one-time charges related to our transformation efforts and the impact of tariffs, which I'll address in a few minutes. Now turning to our 2025 outlook.Given our robust sales performance during the first three quarters of the year, along with favorable currency positions, we are raising and narrowing our full-year revenue estimate to $690 million to $700 million. This projection is inclusive of the impact of our hyaluronic acid divestiture and Nexus Medical acquisition, which will contribute approximately $5 million to 2025 revenue. We remain confident in our ability to deliver on our originally communicated full-year mid-single-digit growth target across our strategic segments despite anticipated headwinds in the fourth quarter, primarily in our Specialty Nutrition Systems segment due to one-off tailwinds in the prior year. Now regarding tariffs, the environment remains dynamic.We currently estimate the P&L impact of incremental tariff-related manufacturing costs, primarily related to products with country of origin from Mexico and China, to be approximately $18 million due in part to the impact of higher sales. As we noted in our first quarter earnings call, we entered 2025 with challenges in our product portfolio as well as uncertainties related to tariffs. We made progress reshaping our portfolio with the divestiture of the product line and the Game Ready rental transition. We have put in place mitigation strategies that will address tariffs on a longer-term basis and are pleased with our overall commercial progress thus far this year.As a result, the company is raising and narrowing its 2025 full-year adjusted EPS estimate to $0.85 to $0.95 per share, inclusive of the impact of our hyaluronic acid divestiture and Nexus Medical acquisition. I'll now turn the call back to David C. Pacitti for his closing comments.David C. Pacitti: Thanks, Scott. As you've heard today, we are in the midst of a successful transformation of the company. I'm proud to be part of this dedicated and skilled team who has a clear understanding of our goals and objectives, and Avanos Medical, Inc. has the financial strength to execute on them. Our underlying business trends are steadily improving. Nonetheless, some of the progress is being obscured by the impact of tariffs. We are confident in the steps we are taking to address tariffs, and we believe we can enhance the value of Avanos Medical, Inc. by delivering a more attractive growth profile. I would like to thank all those at the company who contributed to this successful quarter.The work you do makes a positive difference and helps patients get back to things that matter. With that, we are now ready to take your questions. Operator, please open the line.Operator: Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. If you'd like to ask a question, please press star followed by the number one on your telephone keypad. If your question has been answered and you would like to withdraw from the queue, please press star followed by the number two. And if you're using a speakerphone, please lift your hands before pressing any keys. One moment, please, while we compile the roster. Your first question comes from Daniel Stauder with Citizens. Please go ahead.Daniel Stauder: Yes, great. Thanks. Congrats on the quarter, thanks for the questions. So I guess first, I was gonna ask on that cost improvement plan. That you know, specifically the $15 to $20 million annualized cost savings. You mentioned a few different things there, a few different levers. So I was hoping you could go into that a little bit more in detail and give us a little bit more color on what's driving that, what's different, what you're changing, and what that looks like as we move through '26. Thanks.David C. Pacitti: Daniel Stauder, thanks for the question. So as we stated on the call, we expect these efforts around $15 million to $20 million to be realized by 2026. We've been really focused on streamlining the overall organization, the management structure that we have, really trying to make it a much more effective and improve decision-making and also accelerate things within the organization. So there has been a reduction in our senior management organization. We also are looking at our R&D organization much differently than we had in the past. A lot of that is to improve getting new products out the door faster. So we've streamlined and revamped that organization as well.And that was probably the biggest part of the reduction. And we've taken the majority of those actions that we expect to realize next year already.Daniel Stauder: Okay, great. I guess just to follow-up on that. You mentioned R&D. Just as far as the product development pipeline, is there anything they can call out that we should be looking forward to as we move into '25 or into '26? Or is it a little further out than that? Anything that you think is worthy of calling out there that could drive sales?David C. Pacitti: Yes. So as we've looked at the model that we had, the one thing we wanted to do, Daniel Stauder, was go to a hybrid model, which was, and when I say hybrid, I mean some of the projects that we'll do are going to be internal projects, especially those that are much closer to completion. But as we look at some of the further down the road projects, we'll definitely go to a hybrid model. We'll do outside contracting with other companies to do the work for it. We believe that this will allow us, number one, to help somebody extremely accountable.We think that there are institutions that could probably do some of this better than we can do it. We can focus on the products that we can make that we know we have the skill set for. But as we continue to grow the portfolio, there are probably other entities that can do it better than us. So with this hybrid model, we'll still have an internal R&D organization, and we're committed to that organization. But they'll be focused on certain projects. But other projects where before we took everything on, now we will contract out some of these other projects. Our belief is it will improve our speed to market with products.So we're not just relying on acquisitions, but we're bringing out new products as well.Daniel Stauder: Okay, great. Thanks for that. And then I just want to move to M&A. It's nice to see you close on the Nexus Medical acquisition. I know you called out previously two other bolt-ons earlier in the year. So I was hoping you could give us a little more insight into how you're thinking about this. Your appetite for more deals. Do you feel like this is enough for the near term or for now, and would you consider something larger? Just any more color on that front would be great.David C. Pacitti: Yes, absolutely, Daniel Stauder. And thanks for the question. So again, a big focus for us is continuing to find synergistic M&A opportunities. And we said that we would do that both in SNS and in pain management recovery. I think there'll be you'll see more focus on that in the short term on the SNS business. And yes, we have an appetite to do more. And as we stated previously, we expect to do more. Can't say it will happen this year, but we expect to do more M&A and we're actively seeking those opportunities.Daniel Stauder: Okay, great. And then just one final one. More housekeeping. I just want to make sure. So for the free cash flow assumption, $25 to $35 million, just want to be clear, that includesJason Pickett: the $18 million in tariffs and the $10 million one-time cash item from theDavid C. Pacitti: cost improvement plan. Is that the right way to think about it?Scott Galovan: Yeah. So it's $25 to $30 million planned for 2025. It does include the charges related to this recent transformation effort that we've executed on. It also includes a little bit more cap than we had originally planned, and that's in order to accelerate our China exit plan. So we think that's good investment dollars to accelerate and reduce the impact of tariffs in 2026.Daniel Stauder: Okay. Great. Thank you. I appreciate the questions. Thanks, guys.Operator: Thank you, Daniel Stauder. There are no further questions on the phone line. I will turn the call back over to Mr. David C. Pacitti for some closing remarks.David C. Pacitti: Well, thanks for the questions and congratulations to the organization for a really strong quarter. We appreciate it. We look forward to continuing the dialogue and thank you very much. Appreciate the continued interest in Avanos Medical, Inc. Thank you.Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.","kind":"news","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0,"need_auth":false,"code":"91000000","status":"200"},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.35.11","shortVersion":"4.35.11","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2581018083","isCrawlerRequest":true}