Avanos Medical Inc (AVNS) 2023 Q3 法說會逐字稿

Good morning, and welcome to Avanos' Third Quarter 2023 Earnings Conference Call. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to Scott Galovan, Senior Vice President of Strategy and Corporate Development. Please go ahead.

早安，歡迎參加 Avanos 2023 年第三季財報電話會議。 （操作員說明）請注意，正在記錄此事件。我現在想將會議交給策略和企業發展高級副總裁 Scott Galovan。請繼續。

Good morning, everyone, and thanks for joining us. It's my pleasure to welcome you to Avanos 2023 third quarter earnings conference call. Presenting today will be Joe Woody, CEO; and Michael Greiner, Senior Vice President, CFO and Chief Transformation Officer. Joe will review our third quarter expectations for the remainder of 2023 and provide an update on our transformation efforts. Michael will share additional detail regarding these topics. We will finish the call with Q&A.

大家早安，感謝您加入我們。我很高興歡迎您參加 Avanos 2023 年第三季財報電話會議。今天的演講嘉賓是執行長喬·伍迪 (Joe Woody)；以及資深副總裁、財務長兼首席轉型長 Michael Greiner。 Joe 將回顧我們對 2023 年剩餘時間的第三季預期，並提供有關我們轉型工作的最新資訊。邁克爾將分享有關這些主題的更多詳細資訊。我們將以問答形式結束通話。

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, current economic conditions and our industry. No assurance can be given as to future financial results. Actual results could differ materially from those in the forward-looking statements.

今天電話會議的簡報可在我們網站 avanos.com 的投資者部分查看。提醒一下，我們今天的評論包含與公司、我們的預期業績、當前經濟狀況和我們的行業相關的前瞻性陳述。無法保證未來的財務表現。實際結果可能與前瞻性陳述中的結果有重大差異。

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

有關前瞻性陳述以及可能影響未來結果的風險因素的更多信息，請參閱今天的新聞稿以及我們向 SEC 提交的文件中描述的風險因素。此外，我們將提及調整後的結果和前景。新聞稿提供了有關這些調整以及與可比較公認會計準則財務指標的調節的資訊。

Now I'll turn the call over to Joe.

現在我將把電話轉給喬。

Thanks, Scott. Good morning, everyone, and thank you for joining us to review our operational and financial results for the third quarter of 2023. We are pleased with our third quarter results, which align with the expectations outlined during our second quarter earnings call. We anticipate a continued reduction in supply chain disruptions and strong demand for our products.

謝謝，斯科特。大家早安，感謝您與我們一起回顧我們 2023 年第三季的營運和財務業績。我們對第三季的業績感到滿意，這與我們在第二季財報電話會議上概述的預期相符。我們預期供應鏈中斷的情況將持續減少，對我們產品的需求將會強勁。

Last quarter, we indicated that our year-end back order would be around $3 million, down from over $10 million at the beginning of the year, and we are making steady progress toward achieving this target by the end of December. Additionally, we continue to make steady progress against each of our transformation priorities, which I will further comment on in a few minutes.

上個季度，我們表示年終延期交貨訂單約為 300 萬美元，低於年初的 1000 萬美元以上，我們正​​在穩步推進，爭取在 12 月底實現這一目標。此外，我們繼續在每個轉型優先事項上取得穩步進展，我將在幾分鐘內進一步評論。

As always, our primary focus is on getting patients back to the things that matter as we meet the needs of our customers. For the quarter, our sales from continuing operations were $171 million adjusted for the adverse effects of foreign exchange and the impact of our earlier decision to discontinue revenue that didn't meet our return criteria. In addition, we generated $0.30 of adjusted diluted earnings per share and almost $28 million of adjusted EBITDA from continuing operations during the quarter.

一如既往，我們的首要重點是在滿足客戶需求的同時讓患者回歸到重要的事情上。本季度，我們持續經營業務的銷售額為 1.71 億美元，根據外匯的不利影響以及我們先前決定停止不符合回報標準的收入的影響進行了調整。此外，本季我們還透過持續經營業務產生了 0.30 美元的調整後稀釋每股收益和近 2,800 萬美元的調整後 EBITDA。

Our adjusted gross margin exceeded 58% and our SG&A as a percentage of revenue stood at approximately 42%. Now I'll spend the next few minutes discussing our results at the product category level. On a constant currency basis, our Digestive Health portfolio showed robust growth exceeding 10.5%. This growth was bolstered by our NeoMed product line, which delivered another strong quarter compared to the previous year, as we continue to take advantage of the demand for ENFit conversions in North America.

我們的調整後毛利率超過 58%，SG&A 佔營收的百分比約為 42%。現在，我將在接下來的幾分鐘內討論我們在產品類別層級的結果。以固定匯率計算，我們的消化健康產品組合呈現超過 10.5% 的強勁成長。這一增長得益於我們的 NeoMed 產品線，由於我們繼續利用北美對 ENFit 轉換的需求，該產品線與去年相比又實現了強勁的季度業績。

Our legacy Digestive Health product line grew just shy of double digits globally, primarily behind the performance of our legacy enteral feeding portfolio coupled with the continued expansion of our U.S. CORTRAK standard of care offering. Our ability to continue to deliver above-market growth and leadership in our core Digestive Health markets will be supported by innovations that we plan to launch over the next 12 months; expansion into high-potential global markets; low growth product rationalization; and actionable M&A targets in large attractive adjacencies.

我們的傳統消化健康產品線在全球範圍內的增長略低於兩位數，這主要得益於我們傳統腸內餵養產品組合的表現以及我們美國 CORTRAK 標準護理服務的持續擴展。我們計劃在未來 12 個月內推出的創新將支持我們繼續在核心消化健康市場實現高於市場的成長和領導地位；拓展至高潛力的全球市場；低成長產品合理化；以及在大型有吸引力的鄰近地區的可行的併購目標。

Turning to our Pain Management and Recovery portfolio. This quarter sales were down approximately 10%, excluding the benefit of DIros revenue, the negative impact of foreign exchange and our previously announced decision to discontinue certain low-growth, low-margin products. We continue to see softness across the Game Ready and HA product categories, both of which were down greater than 10% versus the prior year.

轉向我們的疼痛管理和恢復產品組合。本季銷售額下降了約 10%，不包括 DIros 收入帶來的好處、外匯的負面影響以及我們先前宣布的停止某些低成長、低利潤產品的決定。我們繼續看到 Game Ready 和 HA 產品類別表現疲軟，這兩個類別都比前一年下降了 10% 以上。

Our Interventional Pain portfolio experienced an 8% decline compared to the previous year due to supply challenges. Given our Q4 supply chain improvements, we anticipate our IVP portfolio to be at least flat versus prior year, excluding the positive impact of DIros revenue. Separately, our Surgical Pain business is showing improvement. After several consecutive quarters of decline, we're making progress in executing our new go-to-market strategy and structure.

由於供應挑戰，我們的介入性疼痛產品組合與前一年相比下降了 8%。鑑於我們第四季度供應鏈的改善，我們預計我們的 IVP 投資組合至少與去年持平，不包括 DIros 收入的正面影響。另外，我們的手術疼痛業務也出現了改善。經過連續幾季的下滑後，我們在執行新的上市策略和結構方面正在取得進展。

In the current quarter, we delivered low single-digit growth, excluding the previously described market withdrawals of certain low growth and low-margin products. We anticipate that our fourth quarter revenue for our Surgical Pain business will be largely consistent with our third quarter results. Our HA portfolio, though down versus prior year, met our internal expectations.

在本季度，我們實現了低個位數成長，不包括先前描述的某些低成長和低利潤產品的市場退出。我們預計第四季度手術疼痛業務的收入將與第三季的業績基本一致。我們的 HA 投資組合雖然比去年有所下降，但仍達到了我們的內部預期。

As discussed during last quarter's call, we continue to experience volatility in our 3 and 5 shot offering, largely due to the competitive pricing and dynamics of the market environment. Nevertheless, we believe we have the right strategies in place to capitalize on our HA opportunities over the long term, but continue to anticipate near-term volatility and sequential quarterly declines.

如同上季電話會議所討論的，我們的 3 和 5 次產品持續經歷波動，這主要是由於競爭性定價和市場環境的動態。儘管如此，我們相信我們已經制定了正確的策略來長期利用我們的 HA 機會，但繼續預計近期波動和連續季度下降。

Finally, early performance of our newly acquired Trident product line has been solid, and we are excited about the U.S. market launch, which kicked off yesterday. Now moving to an update on our 2023 transformational priorities and efforts. As a reminder, we have 4 key priorities for the next 3 years that will optimize our go-to-market opportunities and meaningfully enhance our financial profile.

最後，我們新收購的 Trident 產品線的早期表現一直很穩定，我們對昨天開始的美國市場推出感到興奮。現在介紹我們 2023 年轉型優先事項和努力的最新情況。提醒一下，我們在未來 3 年有 4 個關鍵優先事項，這將優化我們的市場機會並顯著改善我們的財務狀況。

These priorities are: Strategically and commercially optimizing our organization; transforming our portfolio to focus on categories where we have attractive margin profiles and the right to win; taking additional cost management measures to enhance operating profitability; and continuing our path of efficient capital allocation to meaningfully improve our ROIC.

這些優先事項是： 從策略和商業角度優化我們的組織；轉變我們的投資組合，重點關注我們擁有有吸引力的利潤狀況和獲勝權利的類別；採取額外的成本管理措施以提高營運利潤；繼續我們有效的資本配置之路，以有意義地提高我們的投資報酬率。

We are very pleased with our execution against these priorities as evidenced by divesting our respiratory health business; enhancing our portfolio growth and margin outlook; closing the DIros acquisition, which runs our Interventional Pain portfolio with accretive growth and margin products; continuing strong performance throughout our DH portfolio; progressing our pain go-to-market strategy, as I just noted; and accelerating our transformation cost savings, which we now expect to exceed $20 million in 2023.

我們對我們對這些優先事項的執行感到非常滿意，剝離我們的呼吸健康業務證明了這一點；提高我們的投資組合成長和利潤前景；完成對 DIros 的收購，該公司經營我們的介入疼痛產品組合，並提供增值成長和利潤產品；我們的 DH 產品組合持續維持強勁表現；正如我剛才指出的，推進我們的痛苦上市策略；並加速我們的轉型成本節約，我們現在預計 2023 年將超過 2,000 萬美元。

As we have consistently communicated, since I first presented our transformation plan at the JPMorgan conference in January, this year would be a bit uneven given to the transformation priorities. The realignment of our commercial organization, M&A execution and our other portfolio optimization activities.

正如我們一直以來所傳達的那樣，自從我在一月份的摩根大通會議上首次提出我們的轉型計劃以來，考慮到轉型優先事項，今年的情況會有些不平衡。我們的商業組織、併購執行和其他投資組合優化活動的重組。

We continue to execute solidly on each of these priorities, which serve as the building blocks for achieving the 2024 and the 2025 financial metrics we outlined in our June 2023 Investor Day. Now I'll turn the call over to Michael, who continues to lead these efforts as Chief Transformation Officer and will provide further insights into our third quarter financial results.

我們將繼續堅定地執行每項優先事項，這些優先事項是實現我們在 2023 年 6 月投資者日中概述的 2024 年和 2025 年財務指標的基石。現在我將把電話轉給邁克爾，他將繼續作為首席轉型官領導這些工作，並將提供有關我們第三季財務業績的進一步見解。

Thanks, Joe. From a continuing operations standpoint, net sales were $171.3 million; adjusted gross margin was 58.2%; and adjusted net income for the quarter totaled $14 million, translating to $0.30 of adjusted diluted earnings per share. Adjusted EBITDA for the quarter was almost $28 million, favorable more than $2.5 million versus prior year.

謝謝，喬。從持續經營的角度來看，淨銷售額為 1.713 億美元；調整後毛利率為58.2%；該季度調整後淨利潤總計 1400 萬美元，相當於調整後稀釋每股收益 0.30 美元。本季調整後 EBITDA 接近 2,800 萬美元，比去年同期有利超過 250 萬美元。

For the quarter, we generated over $25 million of free cash flow despite continued headwinds in supply chain in our Pain Management and Recovery portfolio. Subsequent to quarter end, we successfully closed the sale of our RH business and used most of the proceeds to pay down a portion of our revolving credit facility.

儘管我們的疼痛管理和復健產品組合的供應鏈持續面臨阻力，但本季我們仍產生了超過 2500 萬美元的自由現金流。季度末後，我們成功完成了 RH 業務的出售，並將大部分收益用於償還部分循環信貸額度。

As a result, we currently have $105 million of cash on hand and $169 million of outstanding debt, giving us a leverage ratio of less than 0.5 turn. As I just noted, adjusted gross margin for the quarter was 58.2%, which is down compared to the previous quarter. This decline, however, was mainly due to our efforts to reduce inventory, which negatively impacted fixed cost absorption, coupled with ongoing inflationary pressure on electronic components.

因此，我們目前手頭現金為 1.05 億美元，未償債務為 1.69 億美元，槓桿率低於 0.5 倍。正如我剛才提到的，本季調整後毛利率為 58.2%，比上一季下降。然而，這種下降主要是由於我們努力減少庫存，這對固定成本吸收產生了負面影響，再加上電子元件持續的通膨壓力。

We anticipate gross margin will exceed 60% in the fourth quarter. SG&A, as a percentage of revenue, was 41.6%, marking a 140 basis point improvement versus the prior year and a notable sequential gain of 350 basis points. Looking ahead, we anticipate SG&A as a percentage of revenue to range from approximately 40% to 41% for the fourth quarter from a continuing operations standpoint.

我們預計第四季毛利率將超過60%。 SG&A 佔營收的百分比為 41.6%，比前一年提高了 140 個基點，季比顯著提高了 350 個基點。展望未來，從持續營運的角度來看，我們預期第四季的銷售及管理費用將佔營收的比例約為 40% 至 41%。

This is part of our ongoing journey to further enhance our financial profile with continued improvements in 2024, ultimately leading to our 2025 goal of between 38% to 39%. These improvements are driven by reduced headcount, third-party cost savings and business process optimizations, among others.

這是我們持續前進的一部分，我們將在 2024 年繼續改善財務狀況，最終實現 2025 年 38% 至 39% 的目標。這些改進是由人員減少、第三方成本節省和業務流程優化等推動的。

Adjusted diluted earnings per share were $0.30 versus $0.24 a year ago with adjusted EBITDA margin of 16.2% compared to 14.6% in 2022. We are reaffirming our previously stated full year continuing operations guidance, which was presented during our second quarter earnings call. This guidance includes an adjusted diluted EPS range of $1.05 to $1.15; gross margin greater than 59%; and adjusted EBITDA margin of approximately 15%.

調整後的稀釋每股收益為0.30 美元，而去年同期為0.24 美元，調整後的EBITDA 利潤率為16.2%，而2022 年為14.6%。我們重申先前在第二季財報電話會議上提出的全年持續經營指引。該指引包括調整後的稀釋每股收益範圍為 1.05 美元至 1.15 美元；毛利率大於59%；調整後的 EBITDA 利潤率約為 15%。

Taking into account the current year effects of the approximately $17 million annualized impact resulting from product portfolio rationalization, the company anticipates comparable organic revenue for the year to be flat to low single digits. As previously shared, the cost management component of our transformation program is on track to generate gross savings between $45 million and $55 million by 2025.

考慮到產品組合合理化帶來的約 1700 萬美元的年化影響對今年的影響，該公司預計今年的可比有機收入將持平至低個位數。如同先前所分享的，我們轉型計畫的成本管理部分預計在 2025 年之前實現 4,500 萬至 5,500 萬美元的總節省。

As Joe noted earlier, we remain committed to the execution of our transformation priorities, and are maintaining a sharp focus on our business strategies for both our adjusted health and pain management and recovery businesses. The successful implementation of these portfolio strategies, in conjunction with our other transformation efforts, will enable us to achieve mid-single-digit organic revenue growth; gross margins surpassing 60%; adjusted EBITDA margins greater than 20%; and free cash flow generation of approximately $100 million in 2025.

正如喬早些時候指出的那樣，我們仍然致力於執行我們的轉型優先事項，並繼續高度關注調整後的健康和疼痛管理以及恢復業務的業務策略。這些投資組合策略的成功實施，再加上我們的其他轉型努力，將使我們能夠實現中個位數的有機收入成長；毛利率超過60%；調整後的 EBITDA 利潤率超過 20%；到 2025 年，自由現金流量將達到約 1 億美元。

Finally, as outlined at our Investor Day in June, we anticipate generating ROIC greater than 8% over this horizon with ROIC exceeding 6% by the end of this year. Operator, please open the line for questions.

最後，正如我們在 6 月的投資者日所概述的那樣，我們預計在此期間的投資回報率將超過 8%，到今年年底，投資回報率將超過 6%。接線員，請開通提問線。

(Operator Instructions) The first question comes from Rick Wise with Stifel.

（操作員說明）第一個問題來自 Stifel 的 Rick Wise。

Gentlemen, Nice to see the solid quarter. Let me start with gross margins. Just maybe Joe, Michael, you could expand on it. Yes, third quarter gross margins came in a bit softer than we were anticipating. Michael, you indicated that it was through specific deliberate efforts to reduce inventory. Maybe you can just talk that out a little bit. Are you through with that whole process? What inventory did you -- were you cutting back on? And I think I heard you say that your goal is to -- did I hear you say in the fourth quarter to get to 60%, I know your full year guide is still in that 59.5% to 60% range. Just expand on all that, if you would.

先生們，很高興看到穩定的季度。讓我從毛利率開始。也許喬、邁克爾，你們可以對此進行擴展。是的，第三季的毛利率比我們預期的要低。邁克爾，您表示這是透過專門的、刻意的努力來減少庫存的。也許你可以稍微說一下。整個過程你都完成了嗎？您削減了哪些庫存？我想我聽到你說你的目標是——我聽到你說在第四季度達到 60% 嗎？我知道你的全年目標仍然在 59.5% 到 60% 的範圍內。如果你願意的話，就可以擴展所有這些。

Yes. So fourth quarter, we anticipate gross margins north of 60% and still affirming that kind of 59.5% plus range for the full year. So that's accurate read, Rick. And then in the third quarter, we still had RH that we were working down. We were also working on other parts of our portfolio, which is part of the longer term goal around 61% -- 60% to 61% annualized gross margin profile that we've talked about at Investor Day. So there will still be some efforts to reduce inventory for sure, if you look at our balance sheet. That is not the inventory levels that we're happy with. However, we will be doing that as we get out of the two plans that are currently RH plans moving to a smaller footprint. And so the kind of 100-plus basis point impact we saw in the third quarter is not going to necessarily be showing up in future quarters, but we're not done with our inventory reduction efforts. That longer term is going to support much better gross margins because we will have producing the right inventory at the right cadence, increasing returns from what's currently 1.3, 1.4x per year to well north of 2.5x per year. And that is all going to be, obviously, helpful on working capital, but also helpful, ultimately, on gross margin after you get through a couple of absorption -- negative absorption quarters.

是的。因此，我們預計第四季度的毛利率將超過 60%，並且全年仍維持在 59.5% 以上的範圍。所以這是準確的解讀，瑞克。然後在第三季度，我們仍然有 RH 需要我們繼續努力。我們也正在研究投資組合的其他部分，這是我們在投資者日討論過的 61% 左右的長期目標的一部分 - 60% 至 61% 的年化毛利率。因此，如果你看看我們的資產負債表，肯定還會採取一些措施來減少庫存。這不是我們滿意的庫存水準。然而，當我們擺脫目前 RH 計劃的兩個計劃並轉向更小的佔地面積時，我們將這樣做。因此，我們在第三季度看到的 100 多個基點的影響不一定會在未來幾季出現，但我們的庫存削減工作還沒有結束。從長遠來看，這將支持更好的毛利率，因為我們將以正確的節奏生產正確的庫存，將回報率從目前的每年 1.3 倍、1.4 倍提高到每年 2.5 倍以上。顯然，這一切都將對營運資本有所幫助，而且最終在經歷幾個吸收（負吸收季度）後對毛利率也有幫助。

Yes. And just for a second question, Joe you were talking very quickly through a couple of key aspects of the pain story. And I just want to make sure I'm understanding really clearly how that business gets back on track and the setup. I feel like you've talked about pain in the past, returning to mid-single-digit top line growth as we entered '24. Maybe just take us through, again, a little more detail the Interventional Pain, which is supply chain, where are we there? The surgical pain? You were saying it's I wasn't quite sure what you said about the low single-digit growth. Just take us through again.

是的。對於第二個問題，喬，您很快就講述了這個痛苦故事的幾個關鍵方面。我只是想確保我真正清楚地了解該業務如何重回正軌和設定。我覺得你過去談論過痛苦，當我們進入 24 世紀時，收入恢復到中個位數成長。也許只是再次帶我們了解更多介入性疼痛的細節，即供應鏈，我們在哪裡？手術痛嗎？你說的是我不太確定你所說的低個位數成長。就帶我們再過一次吧。

You got it, Rick. We don't really see pain continuing to worsen at this point. We're seeing improvement. We expect sequential improvement in Q4, and we're still standing by and feel very bullish about 2024 growth as you outlined in the mid-single-digit area, which is also what we outlined in the New York Investment Day. And a couple of things are happening. One, the back orders are coming down and going to be down completely at the end of Q4, really, they'll be gone. We have DIros in the business now as a catalyst. And the example that you highlighted as well, Surgical Pain 2% growth in that category. It doesn't mean that we're automatically back to growth because in Q4, we have sort of tough comparators from year-over-year. But we are feeling strong about that business getting into growth. Same with the Interventional Pain with the supply chain behind it, the addition of DIros. Even in the fourth quarter, if you go all the way around the infield here, we're going to see growth, we feel like in Game Ready, maybe in the low to mid-single-digit arena for Q4. And so even with HA, which is still experiencing the CMS reimbursement changes and the pricing decline, we do believe we'll achieve mid-single-digit growth in 2024. So the other thing to think about in that is that we've got the new team in place, the new structure in place there about it in their 6 months really. So things are starting to click in, and we're feeling much, much better about it. Nothing really great about this year. Obviously, remember, too, that HA was kind of high double-digit dollars -- millions of part of that, and we had some product that we discontinued sort of in the $15 million-ish range as well that didn't help us in that effort. But we feel like we'll be definitely back to growth and the growth that's needed, frankly, in 2024.

你明白了，瑞克。目前我們並沒有真正看到疼痛繼續惡化。我們看到了進步。我們預計第四季度將出現環比改善，並且我們仍然對2024 年的成長持觀望態度，並且對2024 年的成長感到非常樂觀，正如您在中個位數區域中概述的那樣，這也是我們在紐約投資日中概述的。有幾件事正在發生。第一，延期交貨的訂單正在下降，並將在第四季末完全下降，實際上，它們將會消失。我們現在有 DIros 作為催化劑。您也強調了這個例子，手術疼痛在該類別中增加了 2%。這並不意味著我們會自動恢復成長，因為在第四季度，我們有一些嚴格的同比比較。但我們對該業務的成長感到很強烈。與介入疼痛相同，背後有供應鏈，增加了 DIros。即使在第四季度，如果你在內場一路走下去，我們也會看到成長，我們感覺就像在遊戲準備中，也許在第四季度的低至中個位數競技場中。因此，即使 HA 仍在經歷 CMS 報銷變化和定價下降，我們也相信我們將在 2024 年實現中個位數增長。因此，要考慮的另一件事是我們已經新團隊就位，新結構就位，這實際上是在他們的6 個月內完成的。所以事情開始變得順利，我們感覺好多了。今年沒有什麼特別好的事情。顯然，還要記住，HA 是一種高兩位數的美元——其中有數百萬美元，而且我們也有一些產品在 1500 萬美元左右的範圍內停產，這對我們沒有幫助。那種努力。但坦白說，我們覺得我們肯定會在 2024 年恢復成長和所需的成長。

Directed to Joe's point, Surgical Pain has a little bit of a tough comp in Q4. However, quarter-over-quarter, Q3 to Q4 on an absolute dollar basis, we expect Surgical Pain to grow. As Joe noted, Game Ready has had in the past some supply chain issues then had a strategic pickup here. We do anticipate Q3 to Q4 for Game Ready to also have a nice growth as well. So there are pockets that have been holding us back that we feel like we're starting to see some green shoots, some of which we saw in Q3. We'll continue to see more in Q4 and then to your very opening question, that should support the mid-single-digit growth that we've talked about before in the pain business overall in '24.

針對 Joe 的觀點，Surgical Pain 在第四季度的比賽有些艱難。然而，以絕對美元計算，從第三季度到第四季度，我們預計手術疼痛將會成長。正如 Joe 指出的那樣，Game Ready 過去曾遇到一些供應鏈問題，但後來在策略上得到了解決。我們確實預計 Game Ready 第三季到第四季也會有不錯的成長。因此，有些地方一直在阻礙我們，我們感覺我們開始看到一些萌芽，其中一些我們在第三季度就看到了。我們將在第四季度繼續看到更多，然後回答您最開放的問題，這應該會支持我們之前討論過的 24 年整體疼痛業務的中個位數成長。

And to your first question on gross margin, also with the addition of DIros and as the pain comes back, that should be an improvement in some [mix] areas for us, too.

關於你關於毛利率的第一個問題，隨著 DIros 的增加，隨著痛苦的回來，這對我們來說也應該是在某些[混合]領域的改進。

Got you. And I shouldn't do it, but I meant to ask the DIros Technology contribution in the third quarter. And then I'll stop.

明白你了。而且我不應該這樣做，但我想問DIros Technology在第三季的貢獻。然後我就停下來。

I know the full year is we about $6 million.

我知道我們全年的收入約為 600 萬美元。

Yes, it's about $2.5 million in Q3. I remember, that $2.5 million was just international. We did not launch in the United States until today. So that's super exciting. But the growth that they have had upon acquisition has been international only in Canada and Europe mostly. So we are launching in the U.S. here -- very shortly here, which is super exciting.

是的，第三季約為 250 萬美元。我記得那 250 萬美元只是國際費。直到今天我們才在美國推出。所以這非常令人興奮。但他們在收購後實現的成長僅在加拿大和歐洲實現了國際化。所以我們很快就會在美國推出，這是非常令人興奮的。

The next question comes from Kristen Stewart with CL King.

下一個問題來自克里斯汀·史都華 (Kristen Stewart) 和 CL King。

I was wondering if you could just expand a little bit more on the Digestive Health business and to what extent you think this growth rate is sustainable? And then I have a follow-up.

我想知道您是否可以在消化健康業務上再擴大一點，您認為這種成長率在多大程度上是可持續的？然後我有一個後續行動。

Yes. The whole DH business globally continues to deliver -- the market itself is sort of mid-single-digit growth, but excluding even the NeoMed performance, the Digestive Health delivered high single-digit growth in Q3. I think it was roughly around 8-ish percent in that category, driven by a lot of growth in the core [MIC-KEY] business. So even though the market growth was 4% to 5%, we're confident between the innovation, bolt-on M&A that we do that we can deliver higher than the market growth. Although it will taper off from the double digit, sort of mid-singleish it could be to high single digit in a given quarter. So a very stable business with a good runway and a good M&A pipeline behind it and an international opportunity around that as well.

是的。全球範圍內的整個 DH 業務繼續實現增長——市場本身呈中等個位數增長，但即使不包括 NeoMed 的業績，消化健康業務在第三季度也實現了高個位數增長。我認為，在核心 [MIC-KEY] 業務大幅成長的推動下，該類別的銷售額約佔 8% 左右。因此，即使市場成長率為 4% 到 5%，我們仍然有信心透過創新、補強併購實現高於市場成長的水平。儘管它將從兩位數逐漸減少，但在給定季度內可能會達到高個位數。因此，這是一項非常穩定的業務，擁有良好的跑道和良好的併購管道，以及與之相關的國際機會。

Perfect. And then my follow-up for Michael. You had given last quarter some preliminary numbers around 2024. I was just wondering if you still feel confident in the ability to achieve those?

完美的。然後是我對邁克爾的後續報導。您在上個季度給出了 2024 年左右的一些初步數字。我只是想知道您是否仍然對實現這些目標的能力充滿信心？

Yes, yes. Thank you for that question, Kristen. Yes, those are our targets for '24. And we will further update those and provide color at the JPMorgan conference in January around '24.

是的是的。謝謝你提出這個問題，克里斯汀。是的，這些都是我們 24 世紀的目標。我們將在 1 月 24 日左右的摩根大通會議上進一步更新這些內容並提供顏色。

(Operator Instructions) The next question comes from Daniel Stauder with JMP Securities.

（操作員指示）下一個問題來自 JMP 證券的 Daniel Stauder。

So just as a follow-up to that, Digestive Health, the sustainable growth question. A few good quarters of double-digit growth here in a row. And again, we noted driven by convergence of benefit. So I just want to ask how many more of these conversions are there? And how sustainable is that and how much more space for growth do you have here, but it sounds like the rest of the business is moving along great, but any commentary on just the white space for continued conversions.

作為消化健康可持續成長問題的後續問題。連續幾季實現兩位數成長。我們再次注意到利益趨同的驅動。那我只想問一下，這樣的轉化還有多少？這有多可持續，還有多少成長空間，但聽起來其他業務進展順利，但任何關於持續轉換的空白的評論。

Yes. Danny, we've said it in the past, and I really believe it to be true. We probably have about another half a year of the ENFit conversion benefiting -- benefit rather for NeoMed. But again, we have an international opportunity there. Team's did a great job and the base business is growing high single digit. We've got a number of bolt-ons and sort of semi large, I'll call them, M&A deals for us that we think along with that an innovation as it goes into '24 and '25, that can really help us bolster that. So we feel that's a very consistent, sustainable, mid-single digit, yes, it might be high single digit in the second half of the year, back and forth in any given quarter, but it's a very, very stable business for us.

是的。丹尼，我們過去已經說過了，我真的相信這是真的。我們可能還有大約半年的 ENFit 轉換受益——而不是 NeoMed 受益。但同樣，我們在那裡有一個國際機會。團隊做得很好，基礎業務正在以高個位數成長。我們有很多附加項目和半大型項目，我稱之為併購交易，我們認為，隨著進入 24 和 25 年，這是一項創新，這確實可以幫助我們加強那。因此，我們認為這是一個非常一致、可持續的中個位數，是的，在今年下半年，在任何給定的季度中，它可能會是高個位數，但這對我們來說是一項非常非常穩定的業務。

Yes. And just being very specific with the numbers here to Kristen and Danny, your questions. If you remember, Q4 of last year, we had -- for the first 9 months of the year last year, we had Digestive backlog building from a supply chain standpoint. We had a really big Q4 last year in Digestive. So Digestive for Q4 this year is not going to be anywhere near double-digit growth, but that is not a product of any worsening macro environment for Digestive or anything like that. This is a 7%, 8% grower. We showed on Investor Day. It will continue to be that. But just heads up that in Q4, it's going to be a low single digit, mid-single-digit growth in Q4 because of the year -- because of the Q4 we had last year, where we had $4 million to $5 million of revenue gained because we finally had backorder solved that we had such a big fourth quarter. So just mathematically be aware of that.

是的。請非常具體地向克里斯汀和丹尼提出您的問題。如果你還記得，去年第四季度，我們在去年的前 9 個月裡，從供應鏈的角度來看，我們有消化積壓的情況。去年第四季我們在消化領域取得了非常大的成就。因此，今年第四季的消化業務不會出現接近兩位數的成長，但這並不是消化業務宏觀環境惡化或類似情況的結果。這是一個 7%、8% 的種植者。我們在投資者日展示了。它將繼續如此。但請注意，在第四季度，由於這一年的原因，第四季度的成長將是低個位數、中個位數——因為去年第四季我們的收入為 400 萬至 500 萬美元之所以能獲得收益，是因為我們終於解決了缺貨問題，從而使我們的第四季業績如此之大。因此，只需從數學上註意這一點即可。

Great. Then just one follow-up on the operating expense side. Made some progress this quarter, especially in the SG&A line. And thank you for the directional guidance for 4Q. But as we look a little further out, how should we think about -- we know you'll have some (inaudible), but how should we think about operating expenses going to 2024? And more specifically, as you launch DIros in the U.S., how much more investment might that take as you start to ramp that up, especially in a different setting than your other ablation products?

偉大的。然後是營運費用方面的一項後續行動。本季度取得了一些進展，特別是在銷售、管理和行政費用方面。感謝您對第四季的方向指導。但當我們看得更遠一點時，我們應該如何考慮——我們知道你會有一些（聽不清楚），但是我們應該如何考慮到 2024 年的營運費用？更具體地說，當您在美國推出 DIros 時，當您開始加強時，可能需要多少投資，尤其是在與其他消融產品不同的環境中？

Yes, I think it's a great question. I'd point to what I just shared in the script on our expectations for Q4. And to Kristen's question on our confidence in 2024, which we talked about in the last earnings call, I would point to those numbers as well. We're very much on target OpEx wise with those numbers, both through the cost savings, transformation efforts, but also just through good discipline on where we spend, whether that be a new launch product, R&D, other areas. So we still very much are on target and are focused on the 38% to 39% all term SG&A as a percentage of revenue targets, and there's nothing indicating that we should come off of those.

是的，我認為這是一個很好的問題。我想指出我剛剛在腳本中分享的關於我們對第四季度的期望的內容。對於克莉絲汀關於我們對 2024 年信心的問題，我們在上次財報電話會議中談到了這個問題，我也會指出這些數字。我們在營運支出方面非常符合這些數字，既透過成本節約、轉型努力，也透過對支出的良好紀律，無論是新推出的產品、研發或其他領域。因此，我們仍然在很大程度上實現了目標，並將重點放在 38% 至 39% 的長期 SG&A 佔收入目標的百分比上，沒有任何跡象表明我們應該放棄這些目標。

This concludes our question-and-answer session. I would like to turn the conference back over to Joe Woody for any closing remarks.

我們的問答環節到此結束。我想將會議轉回給喬·伍迪發表閉幕詞。

So thanks, everybody, for your interest in Avanos, and I think everybody understands our primary focus is on precise execution as we deliver the strategic plan that we outlined at our Investor Day. We've definitely successfully executed product exits, divested RH, acquired valuable technology in DIros and approved an additional share repurchase program and delivered most of our financial objectives.

因此，感謝大家對 Avanos 的興趣，我想大家都明白，我們的首要重點是精確執行，因為我們交付了我們在投資者日概述的戰略計劃。我們確實成功地執行了產品退出、剝離了 RH、獲得了 DIros 的寶貴技術、批准了額外的股票回購計劃並實現了我們的大部分財務目標。

We really believe these results have established the foundation to deliver on our midterm financial commitments, and we're confident that our transformation priorities, coupled with our market-leading portfolio and the attractive markets will position us well for sales growth, margin expansion and meaningful free cash flow generation. So we appreciate, again, everyone's interest in Avanos. Thank you. Thank you very much.

我們堅信，這些結果為實現我們的中期財務承諾奠定了基礎，我們相信，我們的轉型優先事項，加上我們市場領先的產品組合和有吸引力的市場，將為我們的銷售成長、利潤率擴張和有意義的目標奠定良好的基礎。自由現金流的產生。因此，我們再次感謝大家對 Avanos 的興趣。謝謝。非常感謝。

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

會議現已結束。感謝您參加今天的演講。您現在可以斷開連線。