AngioDynamics, Inc. — Form 10-Q Summary
Business context and reporting period
Reports the second quarter and first six months of fiscal 2022, ended November 30, 2021. AngioDynamics develops and sells medical devices for vascular access, peripheral vascular disease, oncology and surgical applications. It reports one operating segment and describes a strategic shift toward differentiated, higher-growth Med Tech products, including Auryon, thrombectomy products and NanoKnife.
Financial performance and liquidity
- Quarter revenue: $78.3 million, up 7.6% year over year. Med Tech revenue rose 36.4% to $18.9 million; Med Device revenue increased 0.8% to $59.4 million.
- Six-month revenue: $155.3 million, up 8.6%. Med Tech revenue rose 50.0% to $36.5 million, while Med Device revenue was essentially flat at $118.7 million.
- Business-unit trends: Quarterly Endovascular Therapies revenue increased 17.0%; Vascular Access rose 4.8%; Oncology declined 9.3%. For six months, Vascular Access fell 3.9%, while Endovascular Therapies increased 21.9% and Oncology rose 1.2%.
- Profitability: Quarterly gross profit was $40.6 million, with gross margin of 51.8%, down from 55.2%. Operating loss widened to $8.7 million from $4.8 million; net loss widened to $8.4 million from $4.3 million. Diluted loss per share was $0.21 versus $0.11.
- Six-month profitability: Gross profit was $80.7 million and gross margin was 52.0%, down from 53.1%. Operating loss was $16.8 million versus $10.0 million; net loss was $15.3 million versus $8.5 million. Diluted loss per share was $0.39 versus $0.22.
- Cash flow: Six-month operating cash use was $7.0 million, compared with $6.0 million provided a year earlier. Investing used $12.9 million, including $7.2 million for placement and evaluation units and $3.6 million for an acquisition. Financing provided $6.4 million, including a $5.0 million revolver draw. Cash declined $13.9 million to $34.3 million.
- Balance sheet and liquidity: At November 30, cash was $34.3 million; current assets were $132.2 million and current liabilities were $54.5 million. Revolver borrowings were $25.0 million under a $125.0 million secured facility. The company reported compliance with debt covenants and believes available cash and revolving credit provide sufficient liquidity for at least 12 months.
- Other obligations: Contingent consideration was $16.5 million; expected undiscounted future payments on completed acquisitions were approximately $20.0 million. Backlog was $4.0 million, primarily Med Device products.
Material changes, outlook and risks
- Management attributed Med Tech growth mainly to Auryon and thrombectomy sales, including higher AngioVac case volumes and the limited AlphaVac market launch. Oncology remained pressured by lower procedure volumes associated with COVID-19 challenges.
- Gross margin faced labor shortages, inflation in raw materials and freight, and Auryon/AlphaVac start-up costs. Quarterly gross profit benefited from sales volume, but these cost pressures and product mix weighed on margin.
- Sales and marketing expense increased 17.0% for the quarter and 26.9% for six months, largely from building Auryon commercial teams and higher travel and trade-show activity. R&D expense declined, partly due to project timing and open positions.
- The July 2021 Camaro support catheter asset acquisition, rebranded Syntrax, had a $4.0 million purchase price, including $3.6 million paid at closing, plus up to $1.0 million of contingent consideration.
- No specific financial guidance was provided in the supplied filing text. Management expects growth through geographic expansion, new products and market penetration, while cautioning that forward-looking statements are uncertain.
- Risks cited include COVID-19 and procedure disruptions, supply-chain reliability, labor shortages, inflation, product and regulatory outcomes, clinical trials, competition, foreign exchange and litigation. The company stated there were no material changes to previously disclosed risk factors.
- Several Bard patent disputes remained unresolved; related cases were stayed pending an appeal, and another trial was scheduled for May 2022. AngioDynamics’ antitrust case against Bard was scheduled for trial in July 2022. The company said it had not accrued litigation expense for these matters because a probable, reasonably estimable loss could not be determined.
- The company maintained a valuation allowance on certain deferred tax assets, citing the absence of sustained profitability. Management noted a future release could materially affect results.
Important facts for investors to verify
- Whether Med Tech growth, particularly Auryon and thrombectomy, can continue to offset flat Med Device sales and weakness in Oncology.
- Whether gross-margin pressure from inflation, labor, freight and product start-up costs persists or eases.
- Cash use, placement-unit investment and revolver borrowings, along with covenant compliance and actual borrowing availability.
- Potential financial exposure and timing of the Bard litigation, contingent acquisition payments and deferred-tax valuation allowance.