AngioDynamics, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended May 31, 2023. Although the request metadata says “2022 Q4,” this filing is an annual report for FY2023; it does not provide clear standalone fourth-quarter financial results. Amounts below are in U.S. dollars.
Business context
AngioDynamics develops and sells medical devices used in vascular access, peripheral vascular procedures, thrombectomy and cancer treatment. Beginning in FY2023, it reported two segments: Med Tech and Med Device. Management is shifting the portfolio toward higher-growth technology products, including Auryon, mechanical thrombectomy and NanoKnife.
Financial results and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $338.8 million | $316.2 million |
| Gross profit / margin | $174.2 million / 51.4% | $165.7 million / 52.4% |
| Operating loss | $51.2 million | $28.5 million |
| Net loss | $52.4 million | $26.5 million |
| Diluted loss per share | $1.33 | $0.68 |
| Cash from operating activities | $0.1 million | Cash used: $7.2 million |
| Cash and cash equivalents at year-end | $44.6 million | $28.8 million |
| Debt at year-end | $50.0 million | $25.0 million |
- Revenue rose 7.1%. Med Tech revenue increased 22.8% to $96.7 million; Med Device revenue increased 1.9% to $242.1 million.
- U.S. revenue was $282.7 million and international revenue was $56.0 million. International sales represented 17% of total sales.
- Gross margin declined 100 basis points. Management cited pricing and product mix, inflation in materials, labor and freight, and depreciation on customer placement units, partly offset by higher sales and production volumes.
- Operating expenses included a $14.5 million non-cash goodwill impairment, $15.6 million of acquisition, restructuring and other costs, and $2.7 million of net interest expense. The impairment followed the planned sale of businesses in the Med Device reporting unit.
- Working capital absorbed cash, notably a $8.2 million increase in inventory. Operating cash flow was nearly break-even despite the larger reported net loss.
- At May 31, 2023, the company had $50.0 million drawn under a $75.0 million revolving facility and a $30.0 million delayed-draw term loan. The reported interest rate was 6.73%; the debt carried financial covenants, which the company said it met at year-end.
Material changes and unusual items
- On June 8, 2023, after fiscal year-end, AngioDynamics sold its dialysis product portfolio and BioSentry biopsy business to Merit Medical for $100.0 million in cash, subject to the agreement’s terms. The company used part of the proceeds to repay all amounts under its credit agreement, extinguishing the facility.
- The sale was not classified as discontinued operations. Management said the divestiture supports a more focused, higher-growth and higher-profitability business, but it will reduce revenue, earnings and cash flow that must be replaced over time.
- FY2023 included a $3.5 million payment to the Israeli Innovation Authority to settle grant-related obligations associated with Auryon, and increased legal costs related to litigation outside the ordinary course.
- Backlog fell to $2.7 million at May 31, 2023 from $8.4 million a year earlier. Manufacturing constraints, supply-chain reliability, labor shortages and inflation had affected operations and deliveries.
Outlook, risks and contingencies
- No specific numerical revenue, earnings or margin guidance is provided. Management expects near- to mid-term growth to be driven by Auryon, mechanical thrombectomy and NanoKnife, alongside product development and international expansion.
- Management stated that cash on hand, operating cash generation and access to the revolving facility were expected to cover anticipated capital needs for at least 12 months as of the filing’s reporting period. This assessment predates the post-year-end sale and debt repayment.
- Key risks include competition and pricing pressure; product acceptance, clinical-trial outcomes and regulatory clearances; supplier concentration and production capacity; inflation and labor availability; reimbursement changes; reliance on international distributors; and foreign-exchange and floating-rate debt exposure.
- Clinical programs identified as important include NanoKnife DIRECT and PRESERVE, AlphaVac APEX-AV, and AngioVac studies. Delays, inconclusive results or adverse findings could affect product development and growth.
- Patent litigation with C.R. Bard remains material to monitor. In one case, a June 2023 court judgment favored AngioDynamics after a jury infringement verdict, and Bard appealed. Other Bard patent cases remained pending, including trials scheduled for 2024 and 2025. The company recorded no litigation expense for potential losses because it said loss probability and amount were not reasonably estimable.
- The company recorded a 3.7% effective tax benefit rate and maintained a valuation allowance against certain deferred tax assets, citing its history of losses and lack of sustained profitability. Future tax-asset realization remains uncertain.
- Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting. Management also concluded disclosure controls and internal control over financial reporting were effective as of May 31, 2023.
Important facts for investors to verify
- Confirm the post-year-end Merit sale’s final proceeds, adjustments, transition costs and impact on the company’s ongoing revenue and cash generation.
- Track whether growth in Auryon, AlphaVac and NanoKnife can offset the divested businesses and sustain improved Med Tech performance.
- Assess gross-margin recovery amid inflation, labor constraints, price pressure and changing product mix.
- Review cash conversion and inventory levels, as inventory growth was a significant operating cash use.
- Monitor clinical-trial milestones, regulatory progress and the status and potential exposure of Bard litigation.
- Check the company’s post-sale debt, liquidity and covenant position; the year-end debt and liquidity figures precede the June 2023 repayment.