AVANOS MEDICAL, INC. (AVNS)

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

Avanos is a medical technology company focused on delivering clinically superior medical device solutions that help patients get back to the things that matter. We are committed to addressing some of today’s most important healthcare needs, including providing a vital lifeline for nutrition to patients from hospital to home, and reducing the use of opioids while helping patients move from surgery to recovery. We develop, manufacture and market our recognized brands globally and hold leading market positions in multiple categories across our portfolio.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide investors with an understanding of our recent performance, and should be read in conjunction with the condensed consolidated financial statements contained in Item 1, “Financial Statements” in this Form 10-Q and our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “Form 10-K”). This MD&A contains forward-looking statements. Refer to “Information Concerning Forward-Looking Statements” at the beginning of this Form 10-Q for an explanation of these types of statements.

The following will be discussed and analyzed:

•Pending Merger;

•Restructuring Activities;

•Business Acquisition;

•Risks Related to Tariffs;

•Results of Operations and Related Information;

•Liquidity and Capital Resources; and

•Critical Accounting Policies and Use of Estimates.

Pending Merger

On April 13, 2026, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, A-AV Holdco I, Inc., a Delaware corporation (“Parent”), and A-AV MergerSub, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (“Merger Sub”). Upon the terms and conditions set forth in the Merger Agreement, Merger Subsidiary will be merged with and into Avanos (the “Merger”), with Avanos surviving the Merger as a wholly-owned subsidiary of Parent. Parent and Merger Sub are affiliates of American Industrial Partners (“AIP”), an operationally oriented industrials investor.

At the effective time of the Merger, each issued and outstanding share of our common stock (other than certain excluded shares and shares held by stockholders who properly exercise appraisal rights) will be cancelled and converted into the right to receive $25.00 per share in cash, without interest. In addition, at or immediately prior to the effective time, our outstanding equity awards, including stock options and restricted stock units, will be cancelled and converted into the right to receive cash payments based on the Merger consideration, subject to the terms of the Merger Agreement.

A copy of the Merger Agreement is attached as Exhibit 2.1 to our Current Report on Form 8-K dated April 14, 2026. The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement.

See Note 14, “Subsequent Event” in Item 1 of this Form 10-Q for further details regarding the pending Merger.

Restructuring Activities

Post-RH Divestiture Plan

During 2024, following the sale of our Respiratory Health business to SunMed Group Holdings in October 2023 (the “RH Divestiture”), we initiated restructuring activities aimed at aligning our organizational structure, our manufacturing and distribution activities, and our operational footprint with our remaining business (the “Plan”). In the first six months of 2025, the Plan was expanded to accommodate additional manufacturing and operational initiatives.

In the fourth quarter of 2025, the assessment of our organization performed in conjunction with the appointment of our new Chief Executive Officer in April 2025 was completed and the Plan was expanded to align our organizational structure with our business needs. As a result, we expect to incur up to $10.0 million of incremental expenses consisting primarily of employee

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severance and benefits. We anticipate annualized savings from these initiatives to be between $15.0 million and $20.0 million. The initiatives associated with the expansion of the Plan are expected to run through 2026.

In the three months ended March 31, 2026, we incurred $1.8 million of costs related to the Plan, compared to $3.1 million in the three months ended March 31, 2025. These costs were included in “Cost of products sold” and “Selling and general expenses” in the accompanying condensed consolidated income statements.

Business Acquisition

On September 11, 2025 we entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Nexus Merger Sub, LLC, a newly formed wholly owned subsidiary of the Company (“Merger Sub”), Nexus Medical, LLC, a Kansas limited liability company (“Nexus”), and Edward Kuklenski, as representative of Nexus’ members. The transaction contemplated by the Merger Agreement (the “Merger”) closed concurrently with the execution of the Merger Agreement. Pursuant to the Merger Agreement, Nexus merged with and into Merger Sub, with Nexus surviving the merger as a wholly owned subsidiary of the Company (the “Nexus Acquisition”). The total purchase price payable by the Company in the Merger was $27.0 million (subject to certain working capital and other adjustments), with up to an additional $20.0 million payable in contingent cash consideration based on the increase in net sales of certain Nexus products during the first three years following the acquisition. The purchase price was funded by available cash on hand.

Nexus is a leading manufacturer of anti-reflux needleless connectors. Its proprietary TKO® anti-reflux needleless connector technology, designed to support safer, more consistent nutrition and medication delivery in high-acuity settings, including Neonatal and Pediatric Intensive Care Units (NICUs and PICUs). We expect the acquisition of Nexus will enhance our Specialty Nutrition Systems (“SNS”) portfolio of products.

See Note 3, “Business Acquisition” in Item 1 of this Form 10-Q for further details regarding the Nexus acquisition.

Risks Related to Tariffs

The tariffs imposed to date, and the imposition of new and increased U.S. tariffs and retaliatory trade measures by other countries pose significant risks to our global operations, particularly given our reliance on manufacturing facilities in Mexico and Canada, and on raw materials and components sourced from foreign suppliers, including suppliers in China and Mexico. In addition, we distribute and sell our products globally. The tariffs imposed to date have increased the cost of the products and components we import and may disrupt our established supply chains. Additional tariffs have been threatened by the U.S. administration. We have taken action to mitigate the impact of tariffs, including through cost containment measures, pricing actions where appropriate, supply chain adjustments and reliance on international agreements that allow for reduced or duty-free importation of products. However, tariff rates continue to fluctuate and the rates that may ultimately be in effect for the near and long term are uncertain. Our inability to offset increased costs of, or a drop in demand for, our products as a result of tariffs could materially negatively affect our financial performance. See Part I, Item 1A, “Risk Factors” in our most recent Form 10-K for the year ended December 31, 2025 for a more detailed description of the risks related to the imposition of new and retaliatory tariffs.

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Results of Operations and Related Information

Use of Non-GAAP Measures

In this section, we present “Adjusted operating income,” which is a profitability measure that is not calculated in accordance with accounting principles generally accepted in the United States (“GAAP”) and is therefore referred to as a non-GAAP financial measure. We provide this non-GAAP measure because we use it to measure our operational performance and provide greater insight into our ongoing business operations. This measure is not intended to be, and should not be, considered separately from, or an alternative to, the most directly comparable GAAP financial measures. A reconciliation of the non-GAAP measure to the most directly comparable GAAP financial measures is provided below under “Adjusted operating profit.”

Net Sales

Our net sales are summarized in the following table for the three months ended March 31, 2026 and 2025 (in millions):

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(a)Other includes the effects of our withdrawal from certain revenue streams that did not meet our return criteria and rounding.

Segment and Product Category Descriptions

Specialty Nutrition Systems, or SNS, is a portfolio of products including:

•Enteral feeding, which includes products such as our MIC-KEY enteral feeding tubes and Corpak patient feeding solutions; and

•Neonate solutions, which includes NeoMed neonatal and pediatric feeding solutions and Nexus’ TKO® anti-reflux needleless connectors.

Pain Management and Recovery, or PM&R, is a portfolio of products including:

•Surgical pain and recovery products such as ON-Q and ambIT surgical pain pumps and Game Ready cold and compression therapy systems; and

•Radiofrequency Ablation (“RFA”) solutions, which provide minimally invasive pain relief therapies, such as our COOLIEF pain therapy and our Trident and ESENTEC RFA products used to treat chronic pain conditions.

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Net Sales by Segment - First Three Months of 2026 Compared to the First Three Months of 2025

Specialty Nutrition Systems

For the three months ended March 31, 2026, SNS net sales were $124.0 million, an increase of 22.7% compared to the prior year period. Volume growth was 19.0%, primarily driven by continued strong demand across both our enteral feeding and neonate solutions.

Pain Management and Recovery

For the three months ended March 31, 2026, PM&R net sales were $56.3 million. Overall net sales growth was relatively flat compared to the prior year period. RFA solutions net sales grew 8.8%, while surgical pain and recovery net sales decreased by 11.0%, primarily driven by lower volume.

Net Sales by Geogr

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

Avanos is a medical technology company focused on delivering clinically superior medical device solutions that help patients get back to the things that matter. We are committed to addressing some of today’s most important healthcare needs, including providing a vital lifeline for nutrition to patients from hospital to home, and reducing the use of opioids while helping patients move from surgery to recovery. We develop, manufacture and market our recognized brands globally and hold leading market positions in multiple categories across our portfolio.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide investors with an understanding of our recent performance, financial condition and prospects and should be read in conjunction with the consolidated financial statements contained in Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. The following will be discussed and analyzed:

•Goodwill and Intangibles Impairment;

•Restructuring Activities;

•Business Acquisitions;

•Sales of Assets;

•Discontinued Operations;

•Risks Related to Tariffs

•Results of Operations and Related Information;

•Liquidity and Capital Resources;

•Critical Accounting Policies and Use of Estimates; and

•Legal Matters.

Goodwill and Intangibles Impairment

In the second quarter of 2025, our market capitalization decreased to the extent that we determined that it was more likely than not that the fair value of one of our two reporting units was below its carrying value. Accordingly, we completed an interim goodwill impairment test as of June 30, 2025, using a combination of income and market approaches to determine the fair value of the reporting units. Consequently, we concluded that the fair value of the Pain Management and Recovery (“PM&R”) reporting unit was below its carrying value. As a result, we recorded a $77.0 million impairment to goodwill, which is included in “Goodwill and intangibles impairment” in the accompanying consolidated income statements. In our most recent goodwill impairment test on July 1, 2025, we determined that the fair value of our reporting units equaled or exceeded the net carrying amount of our reporting units.

In the fourth quarter of 2024, we assessed the recoverability of a certain asset group which resulted in an impairment loss of $100.2 million. This impairment loss is included in “Goodwill and intangibles impairment” in the accompanying consolidated income statements. A roll-forward of our intangible assets is presented in Note 6, “Supplemental Balance Sheet Information”.

In the fourth quarter of 2024, we determined it was more likely than not that the fair value of our medical devices reporting unit may be below its carrying value. Accordingly, we completed an interim goodwill impairment test as of December 1, 2024, and recorded a $336.5 million impairment to goodwill, which is included in “Goodwill and intangibles impairment” in the accompanying consolidated income statements.

Restructuring Activities

In January 2023, we initiated the Transformation Process, a three-year restructuring initiative pursuant to which we have: (i) combined our Chronic Care and Pain Management franchises into a single commercial organization focused on the SNS and PM&R product categories; (ii) rationalized our product portfolio, including certain low-margin, low-growth product categories, through targeted divestitures (such as the RH Divestiture and the sale of our HA assets); (iii) undertaken additional cost management activities aimed at enhancing the Company’s operating profitability; and (iv) pursued efficient capital allocation strategies, including through acquisitions that meet the Company’s strategic and financial criteria (such as the Nexus Acquisition and the Diros Acquisition).

The initial restructuring activities in the Transformation Process related primarily to organizational design and the implementation of business process efficiencies. These initial restructuring activities and related costs were substantially

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complete at the end of 2024. The accompanying consolidated income statement for the year ended December 31, 2024 includes a net benefit of $0.8 million due to a gain on lease modification for our Alpharetta headquarters. Costs incurred in connection with the Transformation Process are in “Cost of products sold,” “Research and development,” “Selling and general expenses” and “Other expense, net”.

During 2024, following the RH Divestiture, we initiated the final phase of the Transformation Process, which is aimed at aligning our organizational structure, our manufacturing and distribution activities, and our operational footprint with our remaining business (the “Plan”). In the first six months of 2025, the Plan was expanded to accommodate additional manufacturing and operational initiatives.

In the fourth quarter of 2025, the assessment of our organization performed in conjunction with the appointment of our new Chief Executive Officer was completed and the Plan was expanded to align our organizational structure with our business needs. As a result, we expect to incur up to $10.0 million of incremental expenses consisting primarily of employee severance and benefits. We anticipate annualized savings from these initiatives to be between $15.0 million and $20.0 million. The initiatives associated with the expansion of the Plan are expected to run through 2026.

In the year ended December 31, 2025, we incurred $32.4 million of costs related to the Plan, compared to $8.9 million in the year ended December 31, 2024. These costs are included in “Cost of products sold” and “Selling and general expenses” in the accompanying consolidated income statements.

Business Acquisitions

On September 11, 2025, we entered into the Nexus Acquisition pursuant to which Nexus, a privately held medical device company, became a wholly owned subsidiary of the Company. The total purchase price paid by the Company in the Nexus Acquisition was $27.0 million (subject to certain working capital and other adjustments), with up to an additional $20.0 million payable in contingent cash consideration based on the increase in net sales of certain Nexus product during the first three years following the acquisition. The purchase price in the Nexus Acquisition was funded by available cash on hand.

On July 24, 2023, we closed our acquisition of Diros, a leading manufacturer of innovative RFA products used to treat chronic pain conditions. The purchase price was approximately $53.0 million, consisting of $2.5 million cash paid upon entry into the definitive agreement and $50.5 million in cash at closing less working capital and other adjustments, with up to an additional $7.0 million payable in contingent cash consideration based on achievement of certain performance objectives defined in the purchase agreement. The purchase price for the Diros Acquisition was funded by proceeds from our Revolving Credit Facility.

Sales of Assets

On July 31, 2025, we sold substantially all the assets associated with our HA product line to CMM, a privately held company. In the fourth quarter of 2025, we sold the assets associated with our Game Ready rental business. These transactions align with our ongoing transformation initiative, which is focused on advancing our strategic SNS and PM&R segments.

Discontinued Operations

On October 2, 2023, we closed the sale of our Respiratory Health (“RH”) business to SunMed Group Holdings, LLC (“Buyer”) (the “RH Divestiture”). The total purchase price for our RH business was $110.0 million in cash, subject to certain adjustments based on the indebtedness and inventory transferred to Buyer at the closing and the chargebacks assumed by Buyer but that would otherwise have been payable by the Company and its subsidiaries on or after October 2, 2023 to distributors of the Company’s RH products located in the United States.

In conjunction with the RH Divestiture, we and Buyer entered into various transition services agreements pursuant to which we, Buyer and each company’s respective affiliates provide to each other various transitional services, including, but not limited to, product manufacturing and distribution, facilities, order fulfillment, invoicing, quality assurance, regulatory support, audit support and other services. The remaining limited support services being performed will terminate no later than three years following the closing.

Finally, as a result of the RH Divestiture, the results of operations from our RH business are reported as “Loss from discontinued operations, net of tax” in the condensed consolidated income statements. We did not have Net sales from discontinued operations for the year ended December 31, 2025. Net sales from discontinued operations were $54.6 million and $100.9 million in the years ended December 31, 2024 and 2023, respectively.

Risks Related to Tariffs

The tariffs imposed to date, and the imposition of new and increased U.S. tariffs and retaliatory trade measures by other countries pose significant risks to our global operations, particularly given our reliance on manufacturing facilities in Mexico and Canada, and on raw materials and components sourced from foreign suppliers, including suppliers in China and Mexico. In addition, we distribute and sell our products globally. The tariffs imposed to date have increased the cost of the products and components we import and may disrupt our established supply chains. Additional tariffs have been threatened by the U.S.

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administration. We have taken action to mitigate the impact of tariffs, including through cost containment measures, pricing actions where appropriate, supply chain adjustments and reliance on international agreements that allow for reduced or duty-free importation of products. However, tariff rates continue to fluctuate and the rates that may ultimately be in effect for the near and long term are uncertain. Our inability to offset increased costs of, or a drop in demand for, our products as a result of tariffs could materially negatively affect our financial performance. See Part I, Item 1A, “Risk Factors” for a more detailed description of the risks related to the imposition of new and retaliatory tariffs.

Results of Operations and Related Information

Use of Non-GAAP Measures

In this section, we present “Adjusted Operating Profit (Loss),” which is a profitability measure that is not calculated in accordance with accounting principles generally accepted in the United States (“GAAP”), is referred to as a non-GAAP financial measure. We provide this non-GAAP measure because we use it to measure our operational performance and provide greater insight into our ongoing business operations. This measure is not intended to be, and should not be, considered separately from, or an alternative to, the most directly comparable GAAP financial measures. A reconciliation of the non-GAAP measure to the most directly comparable GAAP financial measures is provided under “Adjusted Operating Profit (Loss).”

Net Sales

Our net sales are summarized in the following table for the years ended December 31, 2025, 2024 and 2023 (in millions):

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