AngioDynamics, Inc. — Form 10-Q Summary
Reporting period: Fiscal third quarter and nine months ended February 28, 2023; comparable periods ended February 28, 2022. The filing was signed March 31, 2023. AngioDynamics develops and sells medical devices for vascular access, peripheral vascular disease, oncology, and surgical applications. Beginning in fiscal 2023, it reported two segments: Med Tech and Med Device.
Financial performance
| Metric | Three months ended Feb. 28, 2023 | Three months ended Feb. 28, 2022 | Nine months ended Feb. 28, 2023 | Nine months ended Feb. 28, 2022 |
|---|---|---|---|---|
| Net sales | $80.7 million | $74.0 million | $247.7 million | $229.2 million |
| Gross profit / margin | $40.5 million / 50.2% | $38.6 million / 52.2% | $127.9 million / 51.6% | $119.3 million / 52.0% |
| Operating loss | $8.9 million | $5.3 million | $30.3 million | $22.1 million |
| Net loss | $9.5 million | $5.0 million | $31.0 million | $20.3 million |
| Diluted loss per share | $0.24 | $0.13 | $0.79 | $0.52 |
- Segment sales: Q3 Med Tech revenue grew 16.6% to $22.9 million; Med Device grew 6.4% to $57.8 million. Nine-month growth was 25.1% for Med Tech and 2.5% for Med Device.
- Segment gross margins: Q3 Med Tech was 64.6% versus 66.1% a year earlier; Med Device was 44.5% versus 47.1%. Nine-month margins were 63.8% and 46.8%, respectively, down from 66.1% and 47.5%.
- Cash flow: Operating activities used $15.9 million in the first nine months, similar to $15.8 million used a year earlier. Investing activities used $8.2 million; financing provided $25.4 million. Cash increased $1.3 million to $30.1 million.
- Balance sheet and debt: At February 28, cash was $30.1 million, current assets $152.6 million, current liabilities $69.6 million, and long-term debt carrying value $49.8 million ($50.0 million outstanding before debt issuance costs). Debt was $25.0 million on each of the revolving facility and delayed-draw term loan, at a 6.15% interest rate.
- Other items: The company recorded $12.0 million of acquisition, restructuring and other costs year to date, including $6.9 million in non-routine legal expense and a $3.5 million payment to the Israeli Innovation Authority. Contingent consideration liabilities totaled $19.1 million.
Changes, outlook, and risks
- Revenue rose 9.1% in Q3 and 8.1% year to date, but losses widened and gross margin declined. Management attributed margin pressure to pricing and mix, inflation in materials, labor and freight, and depreciation on placement units; the prior-year comparison also included employee retention credit benefits.
- Med Tech growth reflected Auryon, AlphaVac, and NanoKnife, partly offset by continued AngioVac softness. Management cited growth in Core, Ports, Dialysis, Microwave and other products in Med Device, while some Venous, PICC, Midline and other product sales declined. Backlog was $5.4 million at quarter-end, up $0.4 million from November 30, 2022.
- Management said cash on hand and credit availability should meet anticipated capital needs for at least 12 months. The new five-year credit agreement provides a $75 million revolving facility and a $30 million delayed-draw term loan, plus an uncommitted expansion feature. The company reported compliance with its financial covenants at quarter-end.
- No specific financial forecast or numerical guidance is provided in the filing. Management cited ongoing risks from supply-chain disruption, inflation, labor shortages, hospital workflow and demand trends, foreign exchange, competition, regulatory requirements, product acceptance, and litigation.
- Legal contingency: A November 2022 jury found certain implantable-port products infringed Bard patent claims; damages and other issues remained unresolved, and the company said it had not accrued a loss because probability and amount could not yet be reasonably determined. Other Bard patent cases were active or scheduled for trial. Separately, a jury found against AngioDynamics in its antitrust case against Bard in October 2022.
- The company maintained a valuation allowance against certain deferred tax assets, citing a lack of sustained profitability. It stated there were no material changes to previously disclosed risk factors and that disclosure controls were effective.
Key facts for investors to verify
- Whether Med Tech growth can continue and whether the declining segment gross margins stabilize as inflation, pricing and product mix evolve.
- Operating cash use, inventory growth (to $63.5 million from $51.4 million at May 31, 2022), and the company’s ability to fund investment and reduce reliance on borrowings.
- Availability and cost of credit, covenant headroom, and the effect of variable interest rates on the $50.0 million of debt outstanding.
- Developments in the Bard patent litigation, including damages exposure and the timing and outcome of pending proceedings; no loss estimate is recorded for the cited cases.
- Whether the $5.4 million backlog converts to sales and whether supply-chain, labor, regulatory, foreign-currency and market risks affect results.