J.P. MORGAN HEALTHCARE CONFERENCE JANUARY 2020 JOE WOODY CHIEF EXECUTIVE OFFICER 1
FORWARD-LOOKING INFORMATION Certain matters in this presentation and webcast, including our expectations and planning assumptions, and any estimates, projections, and statements relating to our business plans, objectives, acquisitions and transformation initiatives, constitute forward-looking statements and are based upon management’s expectations and beliefs concerning future events impacting the Company. These statements are subject to risks and uncertainties, including currency exchange risks, cost savings and reductions, raw material, energy and other input costs, competition, market demand, economic conditions, S&IP separation execution and IT implementation, availability of drugs used in our Acute Pain products, other supply chain disruptions, and legislative and regulatory actions. There can be no assurance that these future events will occur as anticipated or that the Company’s results will be as estimated. Forward -looking statements speak only as of the date they were made, and we undertake no obligation to publicly update them. For a more complete listing and description of other factors that could cause t he Company’s future results to differ materially from those expressed in any forward- looking statements, see the Company’s most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. NON-GAAP FINANCIAL MEASURES Management believes that non- GAAP financial measures enhance investors’ understanding and analysis of the Company’s performance. As such, results and outlook have been adjusted to exclude certain items for relevant time periods as indicated in the non-GAAP reconciliations to the comparable GAAP financial measures included in this presentation and posted on our website (www.avanos.com/investors). 2
WHO WE ARE Business operations in 90+ countries $650M+ Creating Global Revenue* Shareholder Value International Organic growth Pain Management acceleration Chronic U.S. Care Optimized cost structure *2018 figure M&A execution ~$10B Diversified portfolio with and integration Addressable 8 market-leading products in the U.S. Market Our Vision: To be the best at getting patients back to what matters 3
CHRONIC CARE Leading market positions enhanced by recent bolt-on acquisitions Addressable Market Product Portfolio Digestive Health Respiratory Health ~$400M Respiratory Health Long-term Feeding Nasogastric Feeding Neonatal Feeding Closed Suction Enhances Respiratory ~$1B Continued market Avanos enters into the Demonstrated capability Health portfolio and Digestive leadership with launch neonatal market, a with leading position in leverages existing sales Health of MIC-KEY* SF leading organic growth nasogastric feeding and marketing in 2020 opportunity infrastructure Mic-Key (legacy) Corpak (2016) NeoMed (2019) endOclear (2019) 4
PAIN MANAGEMENT Opportunity to deliver much-needed non-opioid pain relief therapies Addressable Market Product Portfolio >$4B Interventional Pain ON-Q (Legacy) GameReady (2018) Summit Medical (2019) Clinically proven non-opioid Market-leading provider of cold therapy to reduce and compression therapy Electronic ambulatory pumps post-surgical pain systems >$4B Acute Pain >20M 100M COOLIEF* (Legacy) COOLIEF* Technology Innovation Americans in Target U.S. surgical chronic pain procedures Only FDA-cleared RF treatment Cooled and standard Next generation COOLIEF* probe for OA knee pain radiofrequency generator 5
REMOVING OBSTACLES FOR VALUE CREATION 2019 CHALLENGES 2020 PRIORITIES Build momentum in Acute Pain Top line impacted by industry-wide drug shortage into 2021 to return Avanos to MSD growth and pump filler shutdown IT stabilization IT implementation caused 3Q 2019 disruption M&A integration Increased cash cost for transformation Positive free cash flow 6
CATALYSTS FOR LONG-TERM VALUE CREATION 7
INVESTING FOR THE FUTURE Expanded direct-to-patient advertising ▪ Significantly grew sales force ▪ 2019 CMS reimbursement decision finalized ▪ Published 6 studies that demonstrate the efficacy of COOLIEF* ▪ Continue educating private payors on clinical evidence ▪ and economic advantages of COOLIEF* 2020 Roll out new COOLIEF* products, including a next generation ▪ RF generator and probes Publish study on COOLIEF* vs. hyaluronic acid ▪ Publish study on COOLIEF* vs. standard RF ▪ 2021 Work with CMS to improve reimbursement levels ▪ & Beyond for procedures performed in ASC settings Investments that generate breakthrough growth CLINICAL AWARENESS COVERAGE EXPERTISE 8
SURGICAL PAIN: SETTING THE STAGE FOR RETURN TO GROWTH Leiters Summit Internal Legacy Portfolio Partnership Medical BioQ Project ON-Q ON-Q Electronic Drug + Pump Electronic Fixed Flow Rate Select-a-Flow Pump Combination Device Nerve Block Pump “Short” Shots “Short” Shots “Short” Shots “Short” Shots “Short” Shots Taking action to bolster portfolio, win back sales and simplify the process for customers and patients 9
DRIVING INTERNATIONAL GROWTH Enhanced leadership and focus on commercial excellence Geographic Go-to-Market Market Expansion Execution Development Developed markets Improve distributor Disease state awareness ▪ ▪ ▪ management capability & referral pathway Emerging markets ▪ Physician education ▪ Targeted go-direct ▪ Incorporate recently ▪ sales model Reimbursement and ▪ acquired acquisitions healthcare economics Define Standard of Care ▪ 10
DELIVERING POSITIVE CASH FLOW IN 2020 Bolsters already strong balance sheet Fewer unusual or non-recurring expenses Return to normal Repeatable free capital spending cash flow acceleration Recapture prior year working capital inefficiencies 11
FRAMEWORK FOR VALUE CREATION Gain earnings leverage to accelerate margins 2021 Continue to right-size cost & Beyond structure and M&A integration Bring innovation to market via M&A and organic pipeline Invested in priority 2020 areas to enhance growth Accelerate sales internationally and stabilize ON-Q 2019 Disciplined pursuit of complementary M&A 12
The best at getting patients back to the things that matter 13
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