Good day. And welcome to the Avanos Fourth Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Scott Galovan, Senior Vice President, Strategy and M&A. Please go ahead.

Good morning, everyone, and thanks for joining us. It’s my pleasure to welcome you to Avanos 2022 fourth quarter and full year 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 quarter and the current business environment and provide an assessment of our execution against our key objectives for 2022. Then Michael will discuss additional detail regarding our fourth quarter and full year and share our 2023 planning assumptions. We will finish the call with Q&A. A presentation for today’s call is available on the Investors section of our website. 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. 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 will be referring to adjusted results and outlook. The press release has information on these adjustments and reconciliations to comparable GAAP financial measures. Now I will turn the call over to Joe.

Thanks, Scott. Good morning, everyone. Thank you for joining us to review our operational and financial results for the fourth quarter and full year 2022. We are very pleased with our fourth quarter results, which built on solid execution from both our operational and commercial teams during the first nine months of 2022. Although the macro environment remained disruptive and dynamic, we focused on what we could control and manage. The demand for our products remained strong, and although supply chain disruptions persisted, we executed well, minimizing impacts to our financial results. We anticipate that 2023 will continue to present supply chain challenges, cost pressures, and issues with product availability. As always, our primary focus is on getting patients back to what matters while meeting the needs of our customers. For the quarter, we achieved sales of $217 million, representing over 14% total growth and 4.7% organic growth, both excluding the negative impact of foreign exchange. We generated $0.60 of adjusted diluted earnings per share and $29 million of free cash flow. For the full year, we grew 12%, including the impact of our acquisition of OrthogenRx and delivered adjusted diluted earnings per share of $1.65. Additionally, our gross margin for the year was 56.8%, a 450-basis-point improvement compared to the prior year, and we ended the year with a leverage ratio of under 1 times. These results position us to confidently execute against the transformation priorities we laid out at the JPMorgan conference in January. Michael and I will address these priorities later in the presentation. Now I will discuss our results at the product category level. On a constant currency basis, our adjusted portfolio again grew by double digits, exceeding 10%, with NeoMed growing nearly 40%. The positive trends across our Digestive Health franchise continued as second-half supply improvements allowed us to maximize North American ENFit conversions. Our legacy enteral feeding product line maintained its global mid-single-digit growth with robust double-digit year-over-year growth in North America as supply constraints eased in the latter part of the fourth quarter. Although our respiratory business declined by 4% overall, our closed suction catheters grew over 8% compared to last year. In our third quarter call, we noted improved ordering patterns for our closed suction catheter systems throughout the fourth quarter, especially due to trends with pediatric viral cases like RSV and the early flu season uptick. Overall, our Chronic Care business grew just under 6% in the fourth quarter and 2.6% for the full year, excluding the negative impact of foreign exchange. Turning to the Pain portfolio, for the quarter, we experienced low single-digit growth in acute pain, paired with mid-single-digit growth in our interventional pain compared to the previous year. The demand for our products and solutions remains strong, as demonstrated by double-digit growth in both Game Ready and COOLIEF sales during the quarter. As anticipated, we continue to face supply challenges, particularly within our surgical pain category, and we expect these conditions to persist throughout the early part of 2023. Despite ongoing pressures from supply chain issues and hospital staff shortages that have kept elective procedure levels low, our team's resilience has ensured that our Pain solutions are available to meet customer needs. Separately, OrthogenRx exceeded expectations in 2022 by executing our key marketing strategies. Their unique patient access program, along with a strong focus on service and support, allowed us to expand our portfolio to self-pay patients and differentiate our brands to providers. Additionally, our strategic pricing initiatives positively affected the three-injection product and helped maintain five-injection customers within our portfolio. In 2023, we will enhance our OrthogenRx patient access program for five-injection customers to engage the growing self-pay market. We also expect stable growth with the three-injection self-pay program. There will be ongoing reimbursement volatility in 2023, and maintaining pricing discipline and accurate average sales price reporting will be priorities for OrthogenRx to ensure stability for our customers. Overall, our pain management business increased by 2.6% in the fourth quarter and 2% for the full year, excluding the negative impacts of foreign exchange and contributions from our OrthogenRx acquisition. We continued to meet our gross margin and SG&A commitments in the fourth quarter. Gross margin was 55.6% in the fourth quarter and 56.8% for the full year, driven by a favorable product mix, including OrthogenRx, and our plants making incremental improvements in manufacturing efficiency as outlined at the end of last year. We ended the year with back orders around $8 million, slightly higher than we anticipated after the third quarter. Current back orders have increased to just under $10 million, and we are cautiously optimistic that we can significantly reduce these back orders throughout 2023. Regarding SG&A, our fourth quarter and full year SG&A as a percentage of revenue were 34.2% and 38.9%, respectively, exceeding our commitment to keep SG&A under 40% for the year. We remain dedicated to this financial metric as we enter 2023, and Michael will provide more insights during his discussion of our 2023 planning assumptions. Our last two priorities for 2022 focused on demonstrating our ability to deliver consistent free cash flow and executing capital deployment through M&A. In the fourth quarter, we generated $29 million of free cash flow despite ongoing inventory and supply chain challenges. Our ability to consistently deliver free cash flow is crucial to support other strategic growth and capital allocation initiatives, which are priorities for 2023 and beyond. While we are disappointed not to announce another acquisition since OrthogenRx in early 2022, we are actively engaging in discussions with potential tuck-in targets to leverage our existing commercial infrastructure, create synergies, and enhance our top-line growth. We have maintained discipline in our strategic fit evaluations and due diligence, which we believe is essential for long-term return on investment. Additionally, it is noteworthy that our recent acquisitions of NeoMed, Game Ready, and Summit Medical, alongside our ambIT device, averaged double-digit growth in 2022. In summary, our primary objectives in 2022 focused on consistent organic growth, fulfilling our OrthogenRx strategy, improving our gross margin profile, and demonstrating the capacity to generate meaningful free cash flow. With organic growth in the middle of our target range, excluding unusual foreign exchange impacts, OrthogenRx surpassed internal expectations. Gross margin improved by 450 basis points, and we achieved free cash flow of $72 million, approximately $50 million more than last year’s free cash flow, excluding CARES Act refunds. We effectively accomplished our primary objectives, laying the foundation for our longer-term transformation efforts. We outlined these efforts in our JPMorgan presentation in January, where I described four key priorities over the next three years aimed at optimizing our market opportunities and enhancing our financial profile. These priorities include strategically optimizing our organization, transforming our portfolio to focus on profitable categories, implementing cost management measures to improve operating profitability, and continuing efficient capital allocation to significantly enhance our return on investment. Now I will turn the call over to Michael, who will lead these efforts in his expanded role as Chief Transformation Officer and outline both the near-term and long-term goals of these initiatives.

Thanks, Joe. As you noted, we are very excited to embark on our transformation journey and believe our execution over the past 18 months has created a solid foundation to build upon. Before diving deeper into these transformation efforts, I will provide additional color to our fourth quarter and full year results. Total reported sales for the fourth quarter and full year were $217 million and $820 million, increases of 12.4% and 10.1%, respectively. Adjusted diluted EPS for the quarter was $0.60 and $1.65 for the full year. Additionally, as Joe already noted, we delivered on both our gross margin and SG&A as a percentage of revenue commitments, with full year gross margin at 56.8% and SG&A as a percentage of revenue for the full year at 38.9%. We also successfully executed on our OrthogenRx strategy during the year and generated over $70 million of free cash flow ending the year with $128 million of cash on hand and a leverage ratio of less than 1. Excluding the negative impact of foreign exchange, Chronic Care sales grew by almost 6% for the quarter, with Digestive Health growing over 10% and our closed suction catheter systems growth exceeding 8%. Within our Digestive Health portfolio, NeoMed grew nearly 4% globally, again fueled by strong execution of customer conversions to our ENFit technology. Although our closed suction catheter business should return to healthy growth, as we noted what happened during our third quarter conference call, our Oral Care sales were down almost 27%, as we intentionally walked away from contracts with unattractive margin profiles. Within Pain management, we grew 2.6% for the quarter, excluding the contribution of OrthogenRx and the negative impact of foreign exchange. Our interventional pain business grew 6% with our acute pain products growing a little under 1%. As Joe summarized earlier, we had another solid revenue quarter and overall positive financial contributions from OrthogenRx. Game Ready and our COOLIEF water-cooled RF system both grew double digits for the quarter, partially offset by a decline in our surgical pain products. Adjusted EBITDA totaled $45 million, compared to $33 million last year and adjusted net income totaled $28 million, compared to $24 million a year ago, translating to $0.60 of adjusted diluted earnings per share versus $0.50 a year ago. In summary, 2022 was a strong year for the company, with adjusted gross margin improving 450 basis points compared to last year while adjusted EBITDA margin exceeded 20% in the fourth quarter. Additionally, we delivered on our internal EBITDA, operating profit and adjusted diluted EPS targets while further strengthening our balance sheet, even after allocating over $170 million towards M&A and share repurchases. As Joe noted earlier, our recent execution has positioned us to embark on the transformation efforts we outlined at the JPMorgan conference. Our transformation priorities are designed to shift our product portfolio over time into a higher growth portfolio, leveraging our cornerstone product families in Digestive Health and interventional pain. Additionally, these priorities are aimed at rightsizing our cost structure and enhancing our operating profitability with EBITDA margins ultimately exceeding 22%, while generating annual free cash flow of $100 million. Our three-year transformation assumes primarily organic efforts that we have visibility against and strategies that are in our control. While still early, we have made some impactful decisions already, including leadership changes. Kerr Holbrook was promoted to Chief Commercial Officer, leading our combined Chronic Care and Pain franchises with a focus on realizing efficiencies and synergies within our commercial teams. Additionally, my role was expanded to include senior leadership oversight over this critical initiative through the transformation management office. We also announced that internationally, we would cease selling certain products in our acute pain category and smaller product categories with insufficient profitability. As noted earlier, we have also walked away from customer contracts with low margins as we exited 2022. While these strategic decisions will result in an annualized revenue loss of approximately $35 million, we were not set up to win or grow profitably in these markets or categories over the long run. Our cost savings initiatives will primarily offset stranded costs associated with these product categories. In total, we expect to realize approximately $10 million of savings in 2023, anticipate $45 million to $55 million of gross cost savings by 2025, most of which will be achieved in 2024. We will present a refined view of our transformation program at our Investor Day on June 20th to be held at the Convene 101 Park Avenue location in New York City. Although 2023 will be an uneven transition year, given the product portfolio rationalization and cost management initiatives, we anticipate improving our operating and EBITDA margins by at least 100 basis points. Separately, we expect to earn between $1.60 and $1.80 of adjusted diluted earnings per share for 2023, while delivering at least $60 million in free cash flow, excluding the one-time cash costs associated with the restructuring efforts expected to total between $20 million and $25 million. Finally, including the in-year impact of the approximately $35 million annualized product portfolio rationalization decisions, the company anticipates comparable organic revenue growth to be low single digits. As I mentioned earlier, we are excited to embark on our transformation journey, and I am confident we will improve on each of these metrics as the year progresses with the first quarter starting off slow and accelerating into the back half of the year, similar pacing to what we experienced in 2022. In summary, given our consistent execution over the back half of 2021 and throughout 2022, and considering this current global macro and industry-specific environment remains uneven, we believe this is the appropriate time to proactively and strategically optimize our commercial organization, portfolio and cost structure.

The first question today comes from Rick Wise with Stifel. Please go ahead.

Good morning, Joe. Hi, Michael. There's a lot to discuss here. I will begin with the transformation commentary. Michael, could you clarify if I heard you correctly? Is it a $10 million cost reduction this year and a significant portion for next year? I apologize for moving through that quickly. Could you help us understand better where these cost reductions will come from, what they involve, how quickly they can be achieved, and to what extent, particularly in the early stages, this will be a net positive to offset other costs and inflation pressures? I apologize for the lengthy introduction.

Yeah. No. No. That’s okay. Hi, Rick. So, yes, approximately $10 million in 2023, a majority of the remainder amount, of between $45 million and $55 million in 2024. So just to answer that first part of your question. Where a majority of these savings are coming from is a mix of things. We will be outsourcing some opportunities. We will be rebidding on a lot of third-party contracts. We will be eliminating third-party resources as we announced through the reorganization of naming Kerr Holbrook, the Chief Commercial Officer. There was a duplication of roles. Some of those roles have already been eliminated. We will also just continue on the path that we have done in the last couple of years with looking at trimming T&E and other areas as well. Some of those things like outsourcing will take into the back half of this year to figure out the right partner to figure out the right way to do that without being disruptive and so a majority of those savings won’t take place until 2024.

Thank you. It's really exciting to see how everything is developing. Can you provide more details about your supply chain back order situation? What caused the higher than expected back orders in the fourth quarter and the rise at the beginning of this year? Is it due to specific product shortages? Also, what is your outlook on resolving these issues?

Sure, this is Joe and Michael can weigh in too. We made significant progress at the end of the quarter in reducing our backlog, which was reflected in our revenue, but it increased again and is now close to $10 million. However, we anticipate a decrease quarter by quarter, especially in the second half of the year. Currently, our backlog is largely concentrated in the health sector, primarily due to the tieback issue. As many are aware, DuPont is constructing a new plant in Europe that won't be operational until the fourth quarter. In addition, we have a supplier of catheters for ON-Q and ambIT, where we could generate more revenue given the existing demand, but that will remain an issue through the third quarter. There are also ongoing problems with electronic components affecting COOLIEF. Nevertheless, we expect that by the time we reach Q3, most of these challenges will be behind us, which is why Michael has mentioned a progression resembling this year. As I listened to Michael, he emphasized the transformation involved in streamlining our SKUs and making further changes within our portfolio. We believe this will position us for consistent mid-single-digit growth as we move into 2024, and certainly, we expect stronger performance in the second half compared to the first.

Got you. Just last for me. Joe, I heard your M&A comments that you were disappointed that something hadn’t happened by now and as I think back to chatting here with you and Michael in mid-November at the Stifel Healthcare Conference, you had said you would hoped, you thought the potential was there to see two potential bolt-ons sometime in the first half. How are you thinking about those timelines today? Is that the track on your mind or should I imagine, given the timing of the Investor Day that, no, it’s been pushed out longer? Just what’s going on out there and just where are you now? Thank you.

Yeah. Yeah. So very robust pipeline, it’s even built further since we last were together, I think, at the New York in November. We do think that we will have a transaction in place prior to the Investor Day in the near-term. And I do think that we will likely have a second bolt-on in the second half of the year, so maybe not two in the first half of the year. We are orienting a lot of our focus on the Digestive Health area, but we still have a couple of Pain items that we want to do, again, being more focused on orthopedic pain and recovery than we have been in the past. So we feel really good about this. We obviously have a lot on with the transformation. So we are carefully also looking at phasing and not wanting any missteps in execution because a lot of this, as you can imagine, requires a lot of work. But that said, we are going to be in an excellent position for M&A and I think we have demonstrated a good track record. We have plenty of powder at one time to go out and conduct these and they are going to enhance that growth profile as well, especially given that to the extent we did two and that’s going to give us an even better outlook for 2024 and parts of the end of the year.

Thank you very much.

The next question comes from Matthew Mishan with KeyBanc. Please go ahead.

Hi. Good morning, Joe. Good morning, Michael.

Good morning.

Could you help quantify the product exits between Chronic Care and Pain, where the $35 million is coming from? Does that also replace potential spins or divestitures, or is that something you are still considering?

So two points. Matt, we will get more into details at Investor Day as to where these exits are coming from, partially because we have relationships that we are still in place right now, which is why we are giving a range of what the full-year impact would be. So some of these we may hand over to an existing distributor relationship. Some we may just get out of altogether due to product availability. Some we may get out of just due to other relationships. So we are not going to get the details into the split of that yet, but we will have more clarity in detail on Investor Day around that first question. To the second question, it’s a mix. So some of the stuff we are deciding to get out of would be a little bit of the spend in getting out of products that just aren’t worth the effort of trying to sell because we just wouldn’t get value for them. So it just makes sense to exit those, but it doesn’t necessarily take place out of other product categories where we do believe there’s real value there, and we would consider divesting of those product categories.

Okay. Excellent. And then for 2023, I think, well, just taking a step back, it looks like OrthogenRx, including an extra week or two, that pulls over from that inorganic for 2022 would be coming out about $80 million for a full year on an annualized basis. Just what are the expectations for that in kind of 2023 as some of the dynamics change?

Yeah. Joe will talk in a second about the strategic aspect of what we are doing there. The $80 million, I think it’s a little south of the $80 million, but you are directionally right.

And just on a strategic level, I do think in the first half of this year Q1 and Q2, we are still going to see benefit on the reimbursement level really in the TriVisc and the GenVisc categories and that starts to level off in the second half and we see that more as a level. And we call a level year-over-year and that’s where we are and that’s a good outcome for us for the business. And just as a reminder, we didn’t really make the acquisition based upon thinking it was going to be north of our mid-single-digit on a consistent basis after this year. We do think it’s a low single-digit grower, but excellent contribution to the margins. And more importantly, a fit for our focus going forward in pain is going to be more around the ambulatory surgical center, orthopedic office and in that setting, so you can see it pairing well, obviously, with COOLIEF pairing with Game Ready and just getting total knees of the patients back to recovery faster and leading up to that, obviously, in the case of HA.

Okay. And then on SG&A, last year you started at a high point in the first quarter and then sequentially decelerated through the course of the year. How should we be thinking about SG&A through the course of 2023? Is the fourth quarter a good starting point or does it ramp again and then come down through the course of the year?

Yeah. The pacing will feel very similar. That being said, the $10 million of in-year cost, there may be some movement between Q2 to Q4 as to when some of these costs come out, but the pacing will feel very similar. And that, to your point, Matt, will have a high point and it will come down on actual dollars as the year goes on, whereas revenue will be a low point in Q1 and will be even-ish in Q2, Q3, but higher than Q1 and then will have a solid Q4. And therefore, you have that, obviously, you have your high 30s, low 40s, starting in 2023, Q1 for SG&A as percentage of net sales going down into the mid-ish percentage in Q4. Some of it’s just math, some of it is the pacing of the savings that we just talked about the $10 million.

Okay. And then last one, maybe I just missed it. Just what are your expectations for gross margin in 2023? I know you kind of put out the 100 basis points of operating margin, EBITDA margin improvement in kind of 2023.

Yes, that was intentional. While we're not exactly sure where the 100 basis points will come from, we do anticipate that gross margin should remain around 57% or even higher, and we expect SG&A to be slightly below 38.9%, likely within that range. Ultimately, the specific source of those 100 basis points will depend on how and when we achieve savings and move away from some of the lower gross margin product categories. Our focus is not on being clever with the 100 basis points at operating EBITDA; we are being deliberate in our approach. We expect to provide more information at Investor Day in June.

Got it. Thanks, Michael. Thanks, Joe.

You got it.

The next question comes from Drew Ranieri with Morgan Stanley. Please go ahead.

Hi, Joe. Hi, Michael. Thanks for taking the questions. Just maybe on the cost transformation side for a moment and I understand that there’s a lot going on that we will eventually get details with. But just kind of looking back at the company, it’s been kind of a few years of talking of right-sizing the business and getting the expense structure in place. But I was just kind of curious how you can or if you can really kind of give more details about the growth side of the equation and really what you are thinking on that side, because it just feels like Avanos has kind of been a low single-digit grower. So I’d like to hear more about how you are thinking about growth improving and accelerating over the next 12 months, 18 months, 24 months.

Maybe I could start with a little bit of growth and I think Michael will pick up on some more of the costs. But obviously, we want to set that foundation so that we get the drop-through and leverage. And if you go around and look at what’s going on in Chronic Care, you do see a lot of spots of double-digit growth. I mean, NeoMed almost hitting 40% consistent mid-single-digit growth really and the rest of it just to help the portfolio on a global basis. We are starting to see Pain come back. It’s limited right now by some of the supply chain issues. There’s probably still another $2 million or so a quarter going to be this year that would be backlog each quarter that we could sell through. And also, we know we have a line of sight to some strong acquisitions and good valuations like we have been doing before in the areas where we compete, so orthopedic pain and recovery, management, and then, obviously, we said, we are going to an emphasis on Digestive Health. So we think that’s going to be enhancing it. And if you pull all that back in a normalized situation, we feel like we do have a mid-single-digit growing organic business, not going to show through, obviously, in the first half, but starting to show through in the second half, but really being powerful as we move into 2024 coupled with the balance sheet that we have as the size of the company. So I think putting that together is where we see a lot of strong value creation and when you see the cash flow now increasing, it gives us also medium-term opportunity to do some, what we would call, bigger things for us, not like the pharma kind of a scenario like you see in the market, but larger than the deals that we have been doing, and generally being, in many cases anyway, complementary to EBITDA and accretive growth. So with that, I will let Michael maybe hit some of the costs.

I would say, Drew, this is not a cost-cutting initiative. Rather, it's about optimizing our portfolio. Additionally, if we do identify some cost opportunities, we must address restructuring and other related matters due to reporting requirements. However, all of our internal messaging indicates that this effort is not aimed at cost reductions. Those outcomes are merely a beneficial side effect of our portfolio strategy.

Our intention to make further portfolio moves and maybe by the time we get to New York in June, there are some other things that help enhance the profile of our growth that are related there. So we are pretty excited about it.

Got it. Thank you. And maybe just a little bit more clarity on how we should think about the product exit for 2023, if there’s any way to think about the weighting of what you are going to be doing? I know you don’t want to get into specifics of kind of Chronic Care or Pain, but can you at least help us with understanding the cadence for 2023? And just with 2023 with your guidance, the low single-digit growth rate, we should be thinking around like $790 million to $810 million for reported revenue for 2023, is that the right range? Thank you.

I believe we might actually be a bit higher than $790 million, considering the timing of some exits. However, a range of $795 million to $810 million seems appropriate. You calculated that correctly.

You got it.

The next question comes from Dave Turkaly with JMP Securities. Please go ahead.

Thanks for that. You talked about the new CCO position and the potential synergies created by combining the Chronic and Pain areas under one organization. It may not seem entirely obvious that such opportunities exist, but could you share some insights into where you see these opportunities and why this approach makes the most sense?

Yeah, there are a lot of areas where we are seeing headcount opportunity and strategic marketing, areas like customer service. Really, Kerr’s taking also a look at the way he spends and the returns in various areas of the business, and so that’s been actually a strong piece for us. He’s also looking at his channels right now. There’s opportunity to deploy our channels somewhat differently and in some cases utilize 1099s to help expand our business and it also addresses sometimes some of the cost of sales. So all those areas are built into Michael’s plans.

Got it. And then the comments you made on the EBITDA north of 22%, free cash flow above $100 million, is that what you expect to do at the end of the three years? So, like, say, exiting 2025, is that the timeline for that?

Yeah. That’s correct. At the end of 2025. Yes.

Great. Thank you.

Dave, regarding your question, we will provide more details about the pacing soon. One indication we have today is that we ended the fourth quarter with a 20.8% EBITDA margin. Last year, we finished the fourth quarter at 16%, and this year we achieved a full-year margin of 16.8%. We will not reach 21% in 2023. This outlines how our pacing will operate. As we manage portfolio optimization in Q4 and look at cost offsets, these numbers reflect our annual performance, not just for Q4.

Got it.

Thank you.

The next question comes from Matthew Mishan with KeyBanc. Please go ahead.

Thank you. I have a follow-up question. Can you provide some insights on NeoMed and ENFit? I'm curious about the growth you've experienced over the past couple of years, especially whether you're seeing a 40% growth again. Where do you currently stand in the conversion process? How much potential growth do you still anticipate? Additionally, will any of your initiatives contribute to improving the profitability of this product?

I agree with everything mentioned. We noted in our script the double-digit growth from our acquisitions, and we anticipate another strong year for NeoMed with continued ENFit conversions globally. Ultimately, we expect this to lead to a robust high single-digit growth for us. This focus on Digestive Health and NeoMed targets allows us to create strong synergies and achieve good gross margins where we can effectively compete and secure deals at fair prices. The NeoMed acquisition has been exceptionally successful for us. Additionally, CORTRAK has performed well, and we are benefiting from ambIT's transition into the Ambulatory Surgical Center, taking over from ON-Q. There are opportunities everywhere, especially with NeoMed, including improvements in manufacturing efficiencies and transportation as we go to market. I don't know if you want to add anything, Michael, but I appreciate you bringing this up, Matt.

And what inning do you think you are in that conversion, like how much is kind of...

I like transitioning from the seventh to the eighth inning, but then just remember, we still think we will be north of our mid-single-digit for quite some time beyond that. It’s just that you can’t grow at 30%, 40% forever.

Okay. All right. Thank you.

Thank you.

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

I’d like to just basically thank everybody for the continued interest in Avanos, and as you are hearing from us, the demand for our products does remain strong. The fundamentals across the business are strong. We are focused on what we can control and manage and we think 2022 results have built the foundation, as we said back in January to deliver on the commitment that we are confident priorities we detailed in this transformation program, combined with our market-leading portfolio and the markets we are in to position us for sales growth, margin expansion, and meaningful free cash flow generation in 2023. We look forward to sharing a lot more detail about the transformation program at our June 20 Investor Day in New York City. Thanks for your time today.

The conference is concluded. Thank you for attending today’s presentation. You may now disconnect.