[Management View]
Net sales for the fiscal second quarter ended June 30, 2025, were $175 million, adjusted for foreign exchange and portfolio transformation withdrawals. Organic sales growth was up 2% year-over-year. Adjusted EPS was $0.17, and adjusted EBITDA was $17 million. Specialty Nutrition Systems saw 5% organic growth year-over-year, with strong performance in neonatal solutions and short-term internal feeding portfolios. Pain Management & Recovery segment demonstrated 13.8% organic growth in radiofrequency ablation.

[Outlook]
The company reaffirmed its full-year revenue estimate of $665 million to $685 million for fiscal 2025, including the impact of the hyaluronic acid divestiture. Adjusted EPS guidance for fiscal 2025 is maintained at $0.75 to $0.95. Incremental tariff costs are estimated at $15 million for fiscal 2025, with ongoing mitigation efforts focused on supply chain relocation and advocacy.

[Financial Performance]
Net sales for Q2 2025 were $175 million, adjusted for foreign exchange and portfolio transformation withdrawals. Organic sales growth was up 2% YoY. Adjusted EPS was $0.17, and adjusted EBITDA was $17 million. Specialty Nutrition Systems saw 5% organic growth YoY, with strong performance in neonatal solutions and short-term internal feeding portfolios. Pain Management & Recovery segment demonstrated 13.8% organic growth in radiofrequency ablation.

[Q&A Highlights]
Question 1: You reaffirmed full year on the sales line, and that's inclusive of the divestiture. Can you give us more high-level color on what you had previously assumed for in '25 and what that implies for SNS and pain management as we model out the back half of the year? (Line breaks here)
Answer: We are pleased to affirm the year inclusive of the impact of the divestiture. There's five months of revenue that we won't recognize due to the sale. We are comfortable reaffirming guidance for the top line and bottom line. Currency headwinds are not as material as anticipated, allowing us to follow up with growth in strategic segments.

Question 2: On the RF ablation business, really strong quarter. Can you give more color on what's driving growth there and how sustainable do you feel this is in the second half of '25 and into '26? (Line breaks here)
Answer: Customers see us as an RF solution company dedicated to the space. We have a three-tiered offering, which is complementary to what physicians are trying to do. The momentum in RF ablation is strong, and we see it continuing. The sales team is executing well, and the portfolio is making solid gains. We are seeing material pull-through with generator sales leading to higher price and margin probes.

Question 3: On the divestiture, how should we think about how this impacts the income statement longer term specifically on the gross and operating margin lines? (Line breaks here)
Answer: Running the business more from a cash perspective, we were potentially lowering sales prices to make the business work. Not a material impact on the bottom line when it comes to the divestiture. The challenge was more price than volumes, so the impact on EPS and EBITDA is limited.

[Sentiment Analysis]
Analysts expressed positive sentiment regarding the reaffirmed guidance and strong segment performance. Management maintained a confident tone, emphasizing strategic execution and mitigation efforts.

[Quarterly Comparison]
| Key Metrics | Q2 2025 | Q2 2024 |
|-------------|---------|---------|
| Net Sales | $175M | $171M |
| Organic Sales Growth | 2% YoY | 1.5% YoY |
| Adjusted EPS | $0.17 | $0.15 |
| Adjusted EBITDA | $17M | $16M |
| Adjusted Gross Margin | 55.7% | 54.5% |
| SG&A as % of Revenue | 45.2% | 44.8% |

[Risks and Concerns]
The company assessed goodwill for impairment and recorded a $77 million noncash impairment charge in the pain management and recovery reporting unit. Free cash flow for Q2 2025 was negative $4 million, reflecting the timing of tax payments and higher capital expenditures. Uncertainty remains on the full impact of tariffs on profitability and free cash flow.

[Final Takeaway]
Avanos Medical, Inc. demonstrated strong performance in its Specialty Nutrition Systems and Pain Management & Recovery segments, reaffirming its full-year revenue and adjusted EPS guidance despite the divestiture of the hyaluronic acid business. The company continues to face challenges from tariffs but is actively pursuing mitigation strategies. Leadership changes and strategic focus on core segments are expected to drive future growth and profitability.