Avanos Medical, Inc. (NYSE:AVNS) Q3 2019 Earnings Conference Call Transcript

Nov 05, 2019 • 09:00 am ET

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Avanos Medical, Inc. (NYSE:AVNS) Q3 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good morning and welcome to the Avanos Third Quarter Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to Mr. Dave Crawford Vice President of Investor Relations. Please go ahead.

Executive
Dave Crawford

Good morning everyone and thanks for joining us. My pleasure to welcome you to the Avenos Third Quarter Earnings Conference Call. With me this morning is Joe Woody CEO. Joe will begin with a brief review of our business performance and then give an update on our priorities for Q4 and 2020. Then I will review our business unit results and offer details in our financial performance and earnings outlook for 2019. We'll finish the call with Q&A. A presentation for today's call is available on the Investors section of our website avanos.com. As a reminder our comments today contain forward-looking statements related to the company our expected performance economic conditions and our industry. No assurance can be given as to the future financial results.

Actual results could differ materially from those in forward-looking statement. For more information about forward-looking statements and the risk factors that could influence future results please see today's press release and the risk factors described in our filings with the SEC. Additionally we will be referring to adjusted results and outlook. The press release has information on these adjustments and reconciliations to compare GAAP financial measures.

Now I'll turn the call over to Joe.

Executive
Joseph F. Woody

Thanks Dave. Good morning everyone and thank you for your interest in Avanos. In the third quarter we continued to execute against our priorities including double-digit growth in COOLIEF and positive results from CMS related to reimbursement for knee procedures. That said we faced specific challenges that resulted in under delivering relative to our expectations and which could continue to pressure results in the fourth quarter. While we were disappointed by our third quarter underperformance we remain confident that we have the right plan in place to address the gaps accelerate growth and deliver shareholder value. Overall net sales for the quarter were $171 million and adjusted diluted earnings per share was $0.30.

The majority of revenue shortfall for the quarter was primarily driven by approximately $5 million of backorders across our domestic and international regions associated with the implementation of our new IT system. Last quarter we flagged that fully implementing this system could create challenges and disruption to the business. Introducing the new IT system was crucial for the long-term benefit of the company and value creation. We have experienced temporary customer and supply issues in the implementation that have required manual workarounds resulting in decreased efficiency. Our internal team is remediating the challenges and we are working on returning sales to normal levels though it is possible some backorders may continue into the first quarter of 2020. That said we are fully focused on resolving these issues in the most efficient way possible. In addition to the supply chain and customer challenges I mentioned we were impacted by lower Chronic Care order volumes from