Good morning, everyone, and welcome to Avanos Fourth Quarter 2025 Earnings Conference Call. This call is being recorded on February 24, 2026. I would now like to turn the conference over to Jason Pickett, Vice President, Corporate Finance and Treasurer.

Good morning, everyone, and thanks for joining us. It's my pleasure to welcome you to Avanos' 2025 Fourth Quarter and Full Year Earnings Conference Call. Presenting today will be Dave Pacitti, CEO; and Scott Galovan, Senior Vice President and CFO. Dave will review our fourth quarter and full year results and the current business environment. Scott will share additional details regarding these topics and provide our 2026 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, avanos.com. As a reminder, our comments today contain forward-looking statements related to the company, our expected performance and current economic conditions, including risks relating to ongoing tariff negotiations 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'll turn the call over to Dave.

Thanks, Jason, and good morning, everyone. I'm pleased to report that we delivered solid fourth quarter and full year results driven by the excellent progress we made advancing our strategic priorities. Fueled by the strong execution of our commercial teams, we delivered full year net sales of $701 million, exceeding the range that we revised following Q3. Additionally, we finished at the high end of our earnings guidance range, which was also revised upwards following Q3 and generated $0.94 of adjusted diluted earnings per share during the year. While the impact of tariffs in 2025 obscured the profitability of the company, our team took steps to mitigate their impact, and we will see the benefits of those measures starting this year. Moreover, we are closely evaluating the potential impact of the recent Supreme Court rulings on tariffs and monitoring subsequent actions by the administration. Once there is more clarity on how that ruling may impact our financial outlook, we will pass that information along to the investment community in subsequent updates. In the meantime, and as you will hear on the call today, please note that our tariff mitigation initiatives are firmly on track. 2025 represents an important period in the continued evolution of Avanos. Over the past several years, we have taken deliberate steps to reshape the company into a more focused medical technology organization centered on categories where we have strong clinical value propositions and the ability to compete effectively. As you will hear today, those efforts combined with driving cost efficiencies have put Avanos in a better position to drive shareholder value going forward. Let's spend a few minutes reviewing key recent trends and developments in our business. Our Specialty Nutrition Systems portfolio delivered strong above-market full year results growing over 8% organically versus prior year, reaffirming our market-leading positions in long-term, short-term and neonatal enteral feeding. Demand for our long-term enteral feeding products remains strong, and our underlying growth continues to exceed market levels, both domestically as well as internationally, supported by our go-direct transition in the United Kingdom executed in the third quarter of 2025. Our short-term enteral feeding portfolio thrived this year, posting double-digit organic growth globally compared to full year 2024. These results were fueled by the continued expansion of our U.S. CORTRAK standard of care offering. Furthermore, adoption of the CORGRIP 2 retention system launched in late 2024 and designed to reduce the risk of migration and dislodgement has delivered higher-than-anticipated sales results and contributed to the momentum in short-term feeding. Finally, our neonatal solutions business delivered above-market full year performance. Now turning to our Pain Management and Recovery portfolio. Normalized organic sales for 2025 were up 2.3%. Excluding the impact of foreign exchange and our previously announced strategic decision to withdraw from certain low-growth, low-margin products. Our radiofrequency ablation or RFA business continues to deliver outstanding results, posting full year double-digit organic growth compared to 2024. We experienced sustained growth in our RFA generator capital sales this year, enabling us to capture higher procedural volumes and to expand the installed base of capital units that we expect will continue to contribute to above-market growth in this business. In particular, we are seeing strong growth within our ESENTEC and TRIDENT product lines. Additionally, we are encouraged by the progress of our COOLIEF offering internationally, leveraging reimbursement tailwinds in several geographies, including the United Kingdom and Japan. Our surgical pain business was down year-over-year. While the implementation of the reimbursement afforded by the NOPAIN Act is taking longer than anticipated, the value proposition of the NOPAIN Act is clear as it provides hospitals, ASCs and caregivers with improved options to administer non-opioid postsurgical pain relief. I would point out that we offer some of the few devices approved under this legislation. We're excited to support better patient care through our ON-Q and ambIT product line offerings and are encouraged by the growing number of claims submitted since the implementation of the NOPAIN Act. Finally, our GAME READY portfolio, while down year-over-year, posted similar revenue levels throughout 2025. We have enhanced our go-to-market model in GAME READY by transitioning the U.S. rental portion of the business to WRS Group and by realigning our selling efforts to focus more strategically on our core sports and rehab channels. Importantly, we expect this structure will enhance our profitability. Moving on, I would like to take a moment to remind you of our five strategic imperatives, which guide us in how we manage the business. They are as follows: to accelerate organic growth in our strategic business segments, manage and mitigate the impact of tariffs, realize operating efficiencies, improve or divest underperforming assets and acquire businesses that are synergistic with our portfolio with a particular emphasis on Specialty Nutrition Systems or SNS segment. Let's take a few minutes to address these imperatives in a bit more detail, starting with our financial performance. For the quarter, we achieved net sales of approximately $181 million. Adjusted for the effects of foreign exchange and the impact of our strategic decision to withdraw from revenue streams that did not meet our return criteria, organic sales for our strategic segments were up 3.4% compared to a year ago. Additionally, we generated $0.29 of adjusted diluted earnings per share and $28 million of adjusted EBITDA during the quarter, with adjusted gross margin of 53.4% and adjusted SG&A as a percentage of revenue of 39.1%. For the full year, adjusted organic sales for our strategic segments were up 6% compared to a year ago and provide good momentum heading into 2026. This growth reflects continued strength in Specialty Nutrition Systems and improving trend in Pain Management and Recovery. Adjusted EBITDA for the year was $87 million with adjusted gross margin of 54.6% and adjusted SG&A as a percentage of revenue of 42%. Moving to our second imperative. We are executing on a range of solutions to mitigate the impact of tariffs on our business and gross margin profile. These efforts include internal cost containment measures, pricing actions, extending previously issued temporary tariff exemptions for portions of our portfolio and lobbying efforts with AdvaMed and other third parties that have interactions with the administration. I am pleased to report that we are successfully executing on our China exit strategy, and we are very confident in our plan to have all syringe manufacturing operations and sourcing out of China by June of this year. Regarding our third imperative, the team is doing a great job driving operating efficiencies. We expect the initiatives put in place in late 2025 will drive ongoing cost improvements for the business in 2026 and beyond. Finally, with respect to our fourth and fifth imperatives during the year, we completed several important portfolio-shaping actions. We divested our hyaluronic acid business, exited the rental portion of our GAME READY business, acquired Nexus Medical into our neonatal portfolio and announced the exit of our IV therapy business, which is scheduled to be completed in the first quarter of 2026. The integration of Nexus is going very well. And our sales pipeline is robust, thanks to the effective execution of our commercial and supply chain teams. Our ability to leverage our sales teams in the NICU is working as planned, and we are continuing to look for growth-accretive transactions that can achieve similar results. With that, I'll turn the call over to Scott for a more detailed review of our financial results.

Thanks, Dave. I'll spend the next few minutes discussing our full year's results at the segment level. In 2025, our Specialty Nutrition Systems segment grew over 8% organically, led by our short-term enteral feeding portfolio, which posted double-digit growth globally compared to full year 2024. Long-term feeding grew high single digits and was supported by continued strong execution and our U.K. Go-Direct. Finally, our Neonatal Solutions business delivered another above-market full-year performance, growing over 6% compared to the prior year. As we have previously signaled, we anticipated lower but still above-market growth for our NEOMED product line as we have entered the late stages of the ENFit adoption cycle in North America. Further, as Dave noted, the integration of Nexus has been very successful, and we are confident in the ability of our sales team to drive continued adoption and deliver double-digit organic growth in 2026. From a profitability standpoint, operating profit for our Specialty Nutrition Systems segment for the full year was 19%, down 100 basis points compared to a year ago as margin improvements from higher sales volume were offset by unfavorable tariff impacts. Now turning to our Pain Management and Recovery portfolio. Normalized organic sales for 2025 were up 2.3%, excluding the impact of foreign exchange and our previously announced strategic decision to withdraw from certain low-growth, low-margin products. Our radiofrequency ablation, or RFA, business continues to deliver outstanding results, posting full year double-digit organic growth compared to 2024. Our Surgical Pain business was down year-over-year as the potential impact from the NOPAIN Act is taking longer than anticipated. Finally, our GAME READY portfolio, while slightly down year-over-year, posted similar revenue levels throughout 2025. I'm pleased to report our operating profit for our Pain Management and Recovery segment was 4%, a 270-basis point improvement compared to a year ago, which demonstrates our recent top line and cost management execution that enabled us to expand segment profitability, notwithstanding unfavorable tariff costs. Finally, our hyaluronic acid injections and IV therapy product lines reported in Corporate and Other declined over 35% compared to prior year, primarily due to the divestiture of the HA business at the end of July. As previously shared, we will continue to manage the IV therapy product line for cash and anticipate fully exiting this product category in the first quarter of 2026. Moving to our financial position and liquidity. Our balance sheet remains strong and continues to provide us with strategic flexibility with $90 million of cash on hand and $100 million of debt outstanding as of December 31. We have maintained leverage levels meaningfully below 1 turn for several quarters and will continue to be good stewards of our balance sheet. As illustrated by our recent Nexus Medical acquisition, we can continue to maintain healthy liquidity levels and balance sheet strength while also deploying capital towards strategic acquisitions that can bring accretive revenue growth and operating margin accretion. Free cash flow for the quarter was $21 million. Cash generated from operations was partially offset by higher capital expenditures supporting our strategic supply chain initiatives, as highlighted earlier by Dave. For the full year, we generated $43 million of free cash flow, higher than anticipated, primarily due to timing of one-time cash charges related to our aforementioned cost transformation efforts and timing of tax payments. Now turning to our 2026 outlook. Our 2026 guidance reflects continued mid-single-digit organic sales growth in our strategic segments and operating margin improvement, notwithstanding the incremental unfavorable tariff expense we will incur during the year and its impact on gross margin. While we expect a pause in gross margin improvement this year due to tariffs, we expect favorable gross margin momentum beginning in the second half and continuing into 2027, given our progress on our tariff mitigation strategy. Accordingly, we expect net sales in the range of $700 million to $720 million, with our SNS segment growing mid- to high single digits organically and our PM&R segment growing low to mid-single digits organically. Additionally, revenue within Corporate and Other will be approximately $1 million as we fully exit the IV therapy business in Q1. Finally, we expect foreign exchange rates in 2026 to be near current levels. These top line results will support adjusted diluted earnings per share of $0.90 to $1.10. This guidance reflects full year tariff P&L costs of approximately $30 million, a $12 million increase from 2025, with the majority of this cost incurred by our neonatal products sourced from China. As a reminder, we remain very confident in our plan to be fully exited from China for our syringe portfolio by June. Additionally, we expect capital expenditures in the range of $25 million, approximately $7 million lower than 2025, but still slightly higher than our normalized CapEx needs to support our accelerated China exit plan that will result in neonatal syringe production in our manufacturing facility in Tijuana, Mexico and from our supply partners in Southeast Asia. Finally, we anticipate an annual effective tax rate of about 29%. In summary, we delivered results at the high end of our revised estimates in 2025. As we move into 2026, our resources and priorities remain focused on our strategic imperatives related to growth, cost discipline, portfolio management and capital deployment. I'll now turn the call back to Dave for his closing comments.

Thanks, Scott. Overall, I'm pleased with the team's performance in 2025 and sincerely thank everyone for their important contributions and dedication over the past year. We believe the best way to create value for Avanos, and its shareholders is the continued focus and execution on our strategic imperatives as that mindset led us to exit 2025 a more focused and cost-efficient organization. I am particularly pleased with our strong performance in SNS as we outpaced market growth, and we expect the trend to continue. We're also pleased with the early performance of our Nexus acquisition and continue to evaluate other attractive acquisition targets. Moreover, the team did a great job improving our long-term cost profile and executing on our tariff mitigation plan. As a result, we believe that we enter 2026 well positioned for continued growth and are confident about our future prospects. With that, I'll now ask the operator to open up the call to take your questions.

And your first question will be from Danny Stauder at Citizens JMP.

Yes. So first, just on tariffs. We appreciate all the commentary here, but I was hoping you can give us a little bit more color on what 2026 could look like. You mentioned the recent Supreme Court ruling, and it sounds like you are still on track with your previous plans. But are there any milestones that we should be looking for in terms of the transition of China, potential USMCA exemption or anything around the Nairobi protocol exemption? There's a lot in that, but I'm just really trying to frame what a best-case or less than best case scenario could look like for the year ahead.

Thank you for the question. For 2026, we estimate an impact of about $30 million. As noted in previous calls, we've implemented cost measures and taken out costs, along with several price increases. Therefore, when comparing year-over-year, we anticipate the impact will be quite similar to 2025. A key date to remember is June, which we have discussed before. However, we now have a higher level of confidence that this plan will be executed by then, enabling us to deliver products from Mexico and our other site in Cambodia.

Yes. Just to size it up a little bit more, Danny, about 2/3 of that $30 million is China related. So there will be a good, nice impact when we fully exit China. That doesn't all go away because that does go to still some tariff countries. But that's a big piece of that $30 million is China.

And then, Danny, regarding Nairobi, we have secured a tariff exemption for our long-term feeding tubes, which will be produced in Mexico. Additionally, we have USMCA coverage for about 60% to 70% of the products being manufactured in Mexico. As we transfer the syringes, they will also be included under USMCA in Mexico, which clarifies the other part of your question.

I was going to say, as we shared in our prepared remarks, in terms of just as you think about phasing, we do expect in the second half, we'll see improved gross margin that will continue into '27 due to just the weight of the tariff impact in the first half.

And then I think lastly, the goalpost is moving a little bit with the latest news from the Supreme Court and the latest news from the administration. So we'll evaluate all that. But we feel good about the position we have in Mexico with USMCA for the majority of our products.

Great. I appreciate it. Then just next one on revenue guidance. Again, I appreciate all the color, especially on the segment's commentary. But just with some of the moving pieces such as the HA divestiture, the addition of Nexus and some of the other product rationalization, what's an organic normalized growth rate that we should be considering for the full year for the full company and then as well as on a segment basis, just to kind of get a high-level look at it.

Yes, the organic growth rate is around 5% at the consolidated level. By segment, it's in the mid- to high single digits for SNS and low to mid-single digits for PM&R on an organic basis.

Great. And I guess just shifting to operating leverage that had some great progress in the fourth quarter, and it seems like guidance implies that should continue. You've talked about some of the efforts in making the company more efficient, including the cost-saving initiatives that you announced last quarter. But could you give us just any more commentary on how confident you are in continuing to drive this in 2026, both on an R&D front as well as on the SG&A line?

We are very confident in the new plans we have established from an R&D perspective. As I mentioned, we will conduct some projects internally and outsource others. Additionally, we will continue with our usual M&A activities. We anticipate launching a next-generation product in the fourth quarter, and that plan is looking solid. We will also maintain efficient operations and manage costs closely. We are continuously evaluating our business performance, and if we identify any underperforming segments, we will either work to enhance them or divest as necessary.

Yes. Even with our updated approach to R&D, you won't notice a significant change in the percentage of sales allocated to R&D. We will maintain our spending but will shift more of it to external sources compared to what we've done in the past. Regarding other expenditures, as our guidance suggests, we anticipate earnings expansion that will outpace our top line growth. This does include an additional $12 million in tariff expenses and other investments in the business; however, these costs will largely be balanced or more than compensated by increased sales volume and the advantages gained from cost containment measures implemented in the fourth quarter.

Okay. Great. And I'll try to squeeze one more in here. But just on Specialty Nutrition, really nice quarter, especially considering the benefit you saw in 3Q from going direct in the U.K. And it looks like that segment was the majority of the beat to the top line versus what we had modeled. But could you talk just a little bit more about what's going well here? You pointed to a number of things, but is there anything more incremental on how Nexus is performing early days? Or what has surprised you thus far? And remind us what we should be looking for in 2026 in terms of product launches or any other drivers there?

Yes. First of all, demand remains very high for our SNS portfolio, and the team is doing a great job from an execution standpoint, which is great to see. We're very focused on penetrating the market further with CORTRAK and then if you look at our neonatal business, it continues to be very strong as well. Really across the board, it's been great performance, and the demand remains very strong. I think Nexus, I would say, is doing better than expected. We feel very good about the performance. It was a really nice tuck-in. It fits very well with our team is doing already with the existing sales channel we have. And we're really pleased with the results to date so far. I don't know, Scott, if you want to add.

Yes, I would just say we shared last year that it would contribute $5 million of revenue, and we saw that, and we expect that business to be a double-digit grower in '26 and likely beyond that. So we're really pleased with the performance of Nexus.

And at this time, gentlemen, we have no other questions registered. Please proceed.

Well, thank you for your continued interest in Avanos and the questions. As a reminder, we'll be participating in the Citizens Bank Investor Conference in March, and we'll also be hosting our Investor Day in New York on June 23. We look forward to seeing you there, and thanks again.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Enjoy the rest of your day.