[Management View]
Net sales reached $178 million, adjusted for foreign exchange effects and strategic revenue withdrawals. Organic sales growth in strategic segments was 10% year-over-year. Adjusted diluted earnings per share were $0.22, and adjusted EBITDA was $20 million. Specialty Nutrition Systems achieved 14.5% organic growth, reaffirming market-leading positions in enteral feeding. The company divested its hyaluronic acid business and acquired Nexus Medical, expected to be immediately accretive to revenue growth and EPS.

[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. Management forecasts $25 million–$30 million of free cash flow, inclusive of an $18 million tariff impact and $10 million in transformation-related charges. The company plans to exit China for neonatal syringe production by mid-2026.

[Financial Performance]
Net sales: $178 million
Organic sales growth: 10% YoY
Adjusted diluted EPS: $0.22
Adjusted EBITDA: $20 million
Adjusted gross margin: 52.8%
Adjusted SG&A as % of revenue: 40.6%
Specialty Nutrition Systems organic growth: 14.5%
Specialty Systems operating profit margin: 20%, up 130 basis points

[Q&A Highlights]
Question 1: I was gonna ask on that cost improvement plan. Specifically the $15 to $20 million annualized cost savings. Can you give us more detail on what's driving that, what's different, what you're changing, and what that looks like as we move through '26? Thanks.
Answer: We expect these efforts around $15 million to $20 million to be realized by 2026. We've focused on streamlining the overall organization, including reducing senior management and revamping the R&D organization to accelerate product launches. Most actions have already been taken.

Question 2: 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 '26? Anything that could drive sales?
Answer: We are adopting a hybrid R&D model, combining internal projects with external contracting for further down-the-road projects. This approach aims to improve speed to market and leverage external expertise for certain projects.

Question 3: Can you give us more insight into 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?
Answer: We are actively seeking synergistic M&A opportunities, particularly in the SNS business. We expect to do more M&A, although it may not happen this year.

Question 4: For the free cash flow assumption, $25 to $35 million, does that include the $18 million in tariffs and the $10 million one-time cash item from the cost improvement plan?
Answer: Yes, the $25 to $30 million planned for 2025 includes charges related to the transformation effort and additional capital expenditures to accelerate the China exit plan.

[Sentiment Analysis]
Analysts were positive and congratulatory about the quarter's performance. Management was confident and detailed in their responses, emphasizing strategic initiatives and cost-saving measures.

[Quarterly Comparison]
| Metric | Q3 2025 | Q2 2025 | Q3 2024 |
|-------------------------------|---------------|---------------|---------------|
| Net Sales | $178 million | $170 million | $160 million |
| Organic Sales Growth | 10% YoY | 8% YoY | 7% YoY |
| Adjusted Diluted EPS | $0.22 | $0.20 | $0.18 |
| Adjusted EBITDA | $20 million | $18 million | $16 million |
| Adjusted Gross Margin | 52.8% | 51.5% | 50.0% |
| Adjusted SG&A as % of Revenue | 40.6% | 41.0% | 42.0% |
| Specialty Nutrition Systems | 14.5% growth | 13.0% growth | 12.0% growth |
| Specialty Systems Margin | 20% | 19% | 18% |

[Risks and Concerns]
The impact of tariffs remains a significant concern, with an estimated $18 million P&L impact for 2025. The company is implementing mitigation strategies, including internal cost containment, pricing actions, and exiting China-based production by mid-2026.

[Final Takeaway]
Avanos Medical demonstrated strong financial performance in Q3 2025, driven by strategic growth in key segments and effective cost management. The company is actively addressing tariff impacts and has raised its full-year revenue and EPS estimates. The acquisition of Nexus Medical is expected to enhance revenue and EPS, while ongoing portfolio repositioning and cost-saving initiatives are set to deliver long-term benefits. Management's confident outlook and detailed responses during the Q&A session reflect a clear strategic direction and commitment to growth.