AVANOS MEDICAL, INC. (AVNS) Q3 2025 Earnings Summary

Executive Summary

Q3 delivered top-line growth and an estimates beat: revenue $177.8M (+4.3% y/y) and adjusted EPS $0.22, both above S&P Global consensus of $164.5M and $0.12, respectively; gross margin compressed on tariffs and mix, but SNS posted double‑digit growth while PM&R improved modestly . Consensus: Revenue $164.5M*, EPS $0.12* (1 estimate) (S&P Global).
Management raised and narrowed FY25 guidance: revenue to $690–$700M (from $665–$685M) and adjusted EPS to $0.85–$0.95 (from $0.75–$0.95); GAAP EPS range to $0.43–$0.56 (low-end raised) .
Key positives: double‑digit SNS (enteral + neonate) growth; RFA up ~10.5%; Nexus Medical acquisition closed (immediate revenue/EPS accretion); tariff mitigation and a $15–$20M run‑rate cost‑savings program by end‑2026 .
Watch items: tariff headwinds; Q4 normalization after UK distributor order pull-forward in Q3; Game Ready rental transition to WRS Group; adjusted margins below prior year .

What Went Well and What Went Wrong

What Went Well
- SNS momentum: “delivered double-digit growth” with enteral feeding and neonate solutions up 14.9% and 19.5% y/y; SNS operating margin ~20% (+130 bps y/y) .
- RFA strength: PM&R’s RFA grew 10.5% y/y on generator placements driving higher procedure volumes; COOLIEF gaining internationally .
- Strategic M&A: Closed Nexus Medical adding TKO anti‑reflux connectors; management expects immediate accretion to revenue and EPS and value in NICU/PICU care .
- Quote: “We are excited about the recently completed acquisition of Nexus Medical… expected to deliver immediate value in NICU and PICU care.” — CEO David Pacitti .
What Went Wrong
- Margin pressure: Gross margin (reported) fell to 48.4% (vs 54.5% y/y) as tariffs and mix weighed; adjusted gross margin 52.8% (vs 58.0% y/y) .
- PM&R mixed: Surgical pain & recovery net sales −7.9% y/y; Game Ready weaker; NOPAIN Act benefits slower than expected; PM&R op margin ~3% (low) despite improvement .
- Inventory timing: Higher‑than‑expected UK distributor orders boosted Q3 SNS; management expects Q4 normalization (a short‑term headwind) .

Financial Results

Consolidated performance vs prior periods and estimates

Metric	Q3 2024	Q1 2025	Q2 2025	Q3 2025
Revenue ($M)	$170.4	$167.5	$175.0	$177.8
GAAP Diluted EPS ($)	$0.12	$0.14	$(1.66)	$(0.03)
Adjusted Diluted EPS ($)	$0.36	$0.26	$0.17	$0.22
Adjusted EBITDA ($M)	$30.6	$21.6	$17.0	$20.2
Gross Margin % (reported)	54.5%	53.6%	52.6%	48.4%
Gross Margin % (adj)	58.0%	56.7%	55.7%	52.8%

Actual vs S&P Global consensus (Q3 2025)

Metric	Actual	Consensus*	Surprise
Revenue ($M)	$177.8	$164.5*	+$13.3 (+8.1%)
Adjusted EPS ($)	$0.22	$0.12*	+$0.10

Coverage: EPS and Revenue counts = 1 estimate* (S&P Global).
Note: Adjusted EPS aligns with “Primary EPS Consensus Mean” convention.

Segment breakdown (Q3 2025 vs Q3 2024)

Segment / Product	Q3 2024 ($M)	Q3 2025 ($M)	y/y %
SNS – Enteral Feeding	72.0	82.7	14.9%
SNS – Neonate Solutions	26.2	31.3	19.5%
Total Specialty Nutrition Systems	98.2	114.0	16.1%
PM&R – Surgical Pain & Recovery	26.5	24.4	(7.9%)
PM&R – Radiofrequency Ablation	31.3	34.6	10.5%
Total Pain Management & Recovery	57.8	59.0	2.1%
Corporate & Other	14.4	4.8	(66.7%)
Total Net Sales	170.4	177.8	4.3%

KPIs and cash metrics

KPI	Q1 2025	Q2 2025	Q3 2025
Free Cash Flow ($M)	19.0	(4.2)	7.0
Cash & Equivalents ($M)	97.0	90.3	70.5
Total Debt Outstanding, net ($M)	107.4	105.1	102.8

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY 2025	$665–$685M (Q2)	$690–$700M	Raised & narrowed
Adjusted Diluted EPS	FY 2025	$0.75–$0.95 (Q2)	$0.85–$0.95	Raised & narrowed
GAAP Diluted EPS	FY 2025	$0.33–$0.56 (Q2)	$0.43–$0.56	Low-end raised
Free Cash Flow	FY 2025	≈$40M (Q2 call)	≈$25–$30M (Q3 call)	Lowered
Tariff P&L impact (est.)	FY 2025	≈$15M (Q2 call)	≈$18M (Q3 call)	Higher
Nexus contribution	FY 2025	N/A	≈$5M revenue (included in guide)	New

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
Tariffs & mitigation	Estimated ~$15M incremental costs; leveraging USMCA/exemptions; capitalized $1.5M in Q1; Q2 incurred >$8M, later expensed; plan China exit by 1H26	P&L impact now ≈$18M for 2025; continued mitigation via cost, pricing, exemptions, lobbying	Tariff drag larger; mitigation ongoing
Supply chain / China exit	Exit China for neonatal syringes by 1H26	Remains priority; capex higher in 2025 to accelerate exit	Execution progressing; near-term capex up
SNS demand & distributor timing	Q1 boosted by UK go-direct order timing; expected Q2 normalization	Q3 benefited from higher UK distributor orders; expect Q4 normalization	One-offs shift between quarters
RFA growth	~8–14% growth; generator pull‑through; ASC strategy	+10.5% y/y; international COOLIEF momentum (UK/Japan)	Sustained double-digit
Surgical pain & Game Ready	Down y/y; optimizing go‑to‑market; rental transition contemplated	Surgical −7.9% y/y; rental business moving to WRS partnership	Reshaping portfolio
Portfolio actions	HA divestiture (7/31)	Nexus acquisition closed (9/15); WRS rental deal (10/23)	Focus on core, accretive bolt‑ons
Cost savings	Focus on operating model/costs	$15–$20M run-rate savings by end‑2026; ≈$10M one‑time cash charges, mostly Q4’25	Defined target & timing

Management Commentary

Strategy and growth: “Avanos delivered double-digit growth in our life-sustaining Specialty Nutrition Systems segment and made continued progress in our opioid-sparing Pain Management and Recovery segment…” — CEO David Pacitti .
Cost actions: “We expect… $15–$20 million of run-rate annualized incremental cost savings by the end of 2026… one-time cash charges of approximately $10 million, majority in Q4 2025.” — CEO .
Tariff mitigation: “We are executing on solutions to mitigate the impact of tariffs… cost containment, pricing actions… tariff exemptions… supply chain investments to accelerate our exit from China.” — CEO .
SNS profitability: “Operating profit… 20%, a 130 basis point improvement compared to a year ago, reflecting a higher volume of sales, partially offset by unfavorable tariff impacts.” — CFO .
Liquidity and FCF: “Balance sheet remains strong… $70M of cash… $103M of debt… anticipate generating approximately $25–$30M of free cash flow for the year.” — CFO .
Nexus: “Expected to be immediately accretive to both revenue growth and earnings per share.” — Company on acquisition .

Q&A Highlights

Cost program details: Management is simplifying org structure, revamping R&D with a hybrid internal/outsourcing model to accelerate product development; most actions already taken to realize 2026 benefits .
M&A appetite: Continued focus on synergistic bolt‑ons, near‑term emphasis on SNS; active pipeline beyond Nexus .
Free cash flow framing: FY25 FCF $25–$30M includes one‑time transformation charges and higher capex to accelerate China exit .
Segment color: Q3 SNS aided by UK distributor orders; normalization expected in Q4; PM&R improving, with RFA momentum despite surgical pain softness .

Estimates Context

Q3 2025 results vs S&P Global consensus: Revenue $177.8M vs $164.5M*; Adjusted EPS $0.22 vs $0.12*; coverage limited (1 estimate for each metric)*. This likely prompts upward revisions to FY25 revenue assumptions (now guided $690–$700M) and could support the top half of the adjusted EPS range if tariff mitigation executes and Q4 normalization is modest .
Note: Consensus values marked with an asterisk are retrieved from S&P Global (limited estimate count).*

Key Takeaways for Investors

Beat with raise: Strong top-line and adjusted EPS beat, plus raised/narrowed FY25 guidance, are positive near‑term catalysts; gross margin remains pressured by tariffs .
SNS is the engine: Sustained double‑digit growth with improving margins underscores durable share gains and product breadth (enteral, neonate), though Q4 may normalize from Q3 distributor timing .
RFA momentum: Double‑digit growth with generator pull‑through and international reimbursement tailwinds offers continued mix support inside PM&R .
Tariff overhang, but path to relief: 2025 P&L impact now ≈$18M; mitigation levers plus China exit by mid‑2026 and cost program ($15–$20M run‑rate savings) can restore margin trajectory into 2026 .
Portfolio focus: HA divestiture executed; Nexus closed with immediate accretion; Game Ready rental business moving to WRS partnership to enhance profitability and focus .
FCF outlook reduced: FY25 FCF now ~$25–$30M given tariffs and higher capex to accelerate supply chain shifts; balance sheet remains strong for selective M&A .
Watch Q4 setup: Expect SNS normalization after UK pull-forward; investors should focus on tariff progress, cost‑savings execution, and sustained RFA growth cadence into 2026 .

Footnote: Items marked with an asterisk (*) are values retrieved from S&P Global.

Sources: Q3 2025 8‑K/press release with non‑GAAP reconciliations and outlook ; Q3 2025 earnings press release ; Q3 2025 earnings call transcript ; Q2 2025 press release/call ; Q1 2025 press release/call ; Nexus acquisition PR (9/15) ; WRS Group agreement PR (10/23) .