Avanos Medical (AVNS 0.81%), a medical technology firm specializing in digestive health and pain management devices, shared its financial results for Q2 2025 on August 5, 2025. The company delivered GAAP revenue and adjusted earnings surpassed Wall Street estimates, reporting $175.0 million in GAAP revenue (analyst estimate: $165.5 million) and $0.17 in adjusted EPS (non-GAAP) (analyst estimate: $0.15). Despite this outperformance, profitability fell sharply from the prior year due to margin compression tied to global tariffs, lower pricing in some product lines, and a significant $77.0 million goodwill impairment in the Pain Management & Recovery segment. Management described "steady progress" against key transformation priorities and maintained its full-year 2025 guidance, though the quarter reflected persistent operating and regulatory pressures.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $0.17 | $0.15 | $0.34 | (50.0%) |
| Revenue (GAAP) | $175.0 million | $165.5 million | $171.7 million | 1.9% |
| Adjusted EBITDA | $17.0 million | $26.8 million | (36.6%) | |
| Gross Margin (Non-GAAP) | 55.7% | 59.6% | (3.9 pp) | |
| Free Cash Flow | ($4.2 million) | $21.9 million | N.M. |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Business Overview and Key Focus Areas
Avanos Medical develops and markets a range of devices for digestive health and pain management. The company’s product family includes MIC-KEY enteral feeding tubes, used for long-term nutritional support, and ON-Q pain pumps, devices that enable post-surgical non-opioid pain management. Additional portfolio highlights include the Corpak and NeoMed families, which serve neonatal and enteral feeding needs, and the radiofrequency ablation (RFA) systems sold under brand names like ESENTEC and TRIDENT, designed to manage chronic pain.
In recent years, Avanos has focused on a transformation strategy aimed at honing its core product lines and streamlining the company for better profitability and growth. Major success factors now rest on product portfolio strength, innovation in specialty nutrition and pain management, successful execution of acquisitions or divestitures, and navigating a complex regulatory environment. Relationships with large distributors and compliance with evolving standards from the Food and Drug Administration (FDA) and European Union Medical Device Regulation (EU MDR) remain crucial for ongoing market access.
Second Quarter Performance: Segment Review and Key Developments
Specialty Nutrition Systems (SNS) continued as Avanos’s leading segment. Sales rose to $102.7 million, up 5.1% from the prior year, powered by 4.4% volume growth in enteral feeding devices and neonatal solutions. Enteral feeding products, including MIC-KEY low-profile tubes, generated $74.5 million in GAAP revenue, a 2.5% increase. Neonate solutions, such as NeoMed offerings for infants, grew even faster at 12.8%. Operating income in SNS dropped to $18.0 million (18% margin), reflecting a year-over-year decline as margin pressure weighed on profits.
The Pain Management & Recovery (PM&R) segment delivered $61.0 million in GAAP sales, a 2.9% rise. Growth came mainly from RFA products like ESENTEC and TRIDENT, which saw 13.7% revenue gains as sales of RF generators accelerated. However, the surgical pain and recovery subsegment, anchored by ON-Q pain pumps, decreased 9.4%, aligning with management expectations. Despite segment growth, overall profitability remained muted, with reported operating profit at $1.8 million, up from $0.1 million in the prior year.
Significant nonrecurring items shaped the period. The quarter included a $77.0 million goodwill impairment tied to the Pain Management & Recovery segment, resulting in a GAAP operating loss of $74.5 million. Additionally, Avanos announced the sale of its hyaluronic acid (HA) injection product line on July 31, 2025, in a move to narrow focus to core growth areas. Lower sales and pricing in HA products, along with tariff-driven cost increases, led to further gross margin pressure. HA divestiture costs and restructuring expenses affected reported margins and operating profit (GAAP), but are expected to help sharpen strategy for the remainder of the year.
Gross margin (GAAP) dropped to 52.6%, with an adjusted (non-GAAP) figure of 55.7%, both reflecting ongoing challenges. Tariffs on products manufactured in China and Mexico, as well as lower pricing on HA products, increased cost of goods sold and squeezed profit margins. The company estimates approximately $15 million in incremental tariff costs for FY2025. Compliance expenses related to regulations and the costs of transformation activities also dragged on profitability, as referenced in the company's non-GAAP financial measures disclosures. Despite these pressures, Avanos reduced net debt, ending the quarter with $90.3 million in cash and $105.1 million in debt as of June 30, 2025, showing some improvement in its capital structure.
Looking Forward: Outlook and Guidance
Management reaffirmed its full-year 2025 outlook, projecting revenue in the range of $665–$685 million and adjusted diluted EPS between $0.75 and $0.95. The 2025 guidance includes the effects of the HA divestiture and anticipated tariff costs. Free cash flow before the impact of tariffs is forecast at $65 million for FY2025. No changes were made to the existing guidance, and there was no announcement of new dividend payments.
Looking ahead, Avanos expects mid-single-digit organic growth from its SNS portfolio in 2025, driven by demand for enteral feeding and neonatal products. The company cited risks from future tariff or regulatory changes, as well as the need for continued cost management and successful strategic execution. Investors will likely focus on the remainder of the year.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
