AngioDynamics, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended November 30, 2020 (fiscal 2021 second quarter). The company develops and sells medical devices for vascular access, vascular interventions and therapies, and oncology.
Key financial results
| Metric | Three months ended Nov. 30, 2020 | Six months ended Nov. 30, 2020 |
|---|---|---|
| Net sales | $72.8 million; up 4.0% | $143.0 million; up 5.1% |
| Gross profit / margin | $40.2 million / 55.2%, down from 59.3% | $75.9 million / 53.1%, down from 58.6% |
| Operating loss | $4.8 million, versus $3.4 million | $10.0 million, versus $4.3 million |
| Net loss | $4.3 million, or $0.11 per diluted share | $8.5 million, or $0.22 per diluted share |
| Operating cash flow | Not provided for the quarter | $6.0 million, versus $0.6 million used |
At November 30, 2020, cash and cash equivalents were $58.0 million, current assets $149.7 million, and current liabilities $45.8 million. Long-term debt was $40.0 million under a $125.0 million secured revolving facility; the interest rate was 1.65%, and the company reported compliance with its covenants. In December 2020, it made a $10.0 million payment on the facility. Six-month capital expenditures were $3.2 million. Contingent consideration liabilities were $15.2 million.
Period comparisons and operating drivers
- Quarter sales increased in Vascular Interventions & Therapies (8.8%) and Vascular Access (5.0%), but fell in Oncology (7.0%). U.S. sales rose 9.2%; international sales declined 16.3%.
- For the six-month period, Vascular Interventions & Therapies sales rose 6.2% and Vascular Access 13.3%, while Oncology fell 9.5%. A $5.2 million United Kingdom Vascular Access order related to COVID-19 contributed to first-half growth.
- Management attributed lower gross margin to manufacturing under-absorption, Auryon launch start-up costs, product mix, and a $0.5 million recalled-product reserve. Revenue volume supported gross profit, but did not offset these pressures.
- Research and development expense rose 33.2% for the six months, including investment in AngioVac, NanoKnife studies, and Auryon. Sales and marketing and general and administrative expenses declined, partly reflecting reduced travel and events during the pandemic.
- Six-month operating cash flow improved mainly with a $10.5 million inventory reduction; receivables increased $2.3 million and accounts payable, accrued and other liabilities declined $3.8 million.
Outlook, risks and unusual items
The filing provides no specific revenue or earnings guidance. Management said it expects growth over time from geographic expansion, market penetration, new products, and greater international direct presence, and identified AngioVac, Auryon, and NanoKnife as key growth platforms. It also said procedure volumes had recovered from pandemic lows but remained below pre-pandemic levels; Oncology continued to face procedure and capital-spending pressure. Management believed cash, operating cash generation, and revolving-facility access would be sufficient for anticipated needs for at least 12 months, while noting that significant cash acquisitions could require external financing.
- COVID-19 may disrupt demand, hospital procedures, manufacturing, and supply chains; management said the full fiscal-year impact could not yet be quantified.
- Two Bard patent disputes remain material uncertainties. In one, the Federal Circuit partially reversed and remanded prior favorable judgments; the company’s rehearing petition was pending. The other case was transferred to Delaware. The company recorded no litigation accrual because a probable, reasonably estimable loss could not be determined.
- The company’s separate antitrust case against Bard had completed summary-judgment briefing and was expected to proceed to trial. The filing does not provide a clear estimate of potential recovery or exposure in these cases.
- Fiscal 2020 included a $158.6 million goodwill impairment charge. No goodwill adjustments other than foreign-currency translation were reported for the current six-month period.
- The company maintained a valuation allowance on certain deferred tax assets because it had not achieved sustained profitability. A future release could materially affect results.
Important facts for investors to verify
- Whether procedure volumes, especially in Oncology, and international sales recover as pandemic conditions change.
- Whether the United Kingdom order and other pandemic-related demand are repeatable, and the resulting effect on Vascular Access growth and product mix.
- Whether gross margins improve as Auryon launch costs and manufacturing under-absorption abate.
- Developments in the Bard patent and antitrust proceedings, including any changes to potential financial exposure.
- Revolving-facility borrowings after the December $10.0 million repayment, covenant headroom, and liquidity if operating cash flow weakens.