AngioDynamics, Inc. — Form 10-Q Summary
Reporting period: Quarter ended February 28, 2021, with nine-month results compared with the periods ended February 29, 2020. Although the request metadata says “2020 Q3,” this filing covers AngioDynamics’ third quarter of fiscal 2021.
Financial performance
| Metric | Quarter ended Feb. 28, 2021 | Quarter ended Feb. 29, 2020 | Nine months ended Feb. 28, 2021 | Nine months ended Feb. 29, 2020 |
|---|---|---|---|---|
| Net sales | $71.2 million | $69.8 million | $214.2 million | $205.8 million |
| Gross profit / margin | $38.5 million / 54.1% | $40.3 million / 57.8% | $114.5 million / 53.4% | $120.1 million / 58.3% |
| Operating loss | $3.7 million | $6.2 million | $13.7 million | $10.5 million |
| Net loss | $3.5 million | $5.7 million | $12.1 million | $9.7 million |
| Diluted loss per share | $0.09 | $0.15 | $0.32 | $0.26 |
| Cash from operations | Not separately stated for the quarter | Not separately stated for the quarter | $11.9 million | $(18.4) million |
- Quarterly sales rose 2.0%; nine-month sales rose 4.1%. U.S. sales increased, while international sales declined 15.9% in the quarter and 4.1% year to date.
- Quarterly operating loss narrowed by $2.5 million, but nine-month operating loss widened by $3.2 million. Nine-month net loss increased by $2.4 million.
- Gross margin declined 370 basis points for the quarter and 490 basis points for the nine months. Management cited manufacturing under-absorption and Auryon launch costs, among other factors.
- At February 28, 2021, cash and equivalents were $54.5 million; current assets were $145.7 million and current liabilities $50.3 million. Debt outstanding was $30.0 million, down from $40.0 million at May 31, 2020. The company made another $10.0 million debt payment in March 2021.
- Nine-month investing cash outflow was $4.6 million, primarily capital expenditures; financing cash outflow was $7.5 million. Cash increased by $0.03 million over the nine-month period.
Business trends and material changes
- Quarterly Vascular Interventions & Therapies sales increased 8.8%, supported by Auryon sales of $3.3 million and AngioVac growth; Vascular Access increased 0.7%; Oncology declined 10.1%.
- For the nine months, Vascular Interventions & Therapies increased 7.1% and Vascular Access increased 8.9%, while Oncology declined 9.7%. Oncology was affected by lower procedure volumes, COVID-related pressure and a prior-year large NanoKnife distributor order.
- Management said procedure volumes had improved from pandemic lows but remained below pre-COVID levels. Oncology continued to face procedure-volume and capital-spending pressure.
- R&D expense increased 21.5% year to date, reflecting AngioVac platform expansion, NanoKnife studies and Auryon investment. Sales and marketing and G&A expenses declined, partly due to lower travel and event spending.
- Inventory fell to $49.0 million from $59.9 million at May 31, 2020. Operating cash flow improved year over year, helped by an $11.1 million inventory reduction.
Outlook, risks and unusual items
- Management stated that cash on hand, operating cash generation and revolving-facility availability were expected to provide sufficient liquidity for at least the next 12 months. No specific revenue or earnings guidance was provided in the supplied filing text.
- The company recorded a $1.9 million employee retention credit benefit under the CARES Act in the quarter, allocated across cost and operating expense categories.
- COVID-19 remained a source of uncertainty, with potential effects on demand, hospital procedures, manufacturing and supply-chain reliability. The filing also identifies product development, regulatory actions, clinical trials, competition, pricing, foreign exchange and litigation as risks.
- Several patent disputes with C.R. Bard remained pending, including claims concerning implantable ports and a newly filed March 2021 patent suit. The company said potential losses were not then probable or reasonably estimable and recorded no related expense.
- Contingent consideration liabilities were $15.4 million, measured using Level 3 inputs; the company estimated potential undiscounted future payments of $20.0 million. The company was in compliance with credit-facility covenants at quarter end.
- Management reported no material changes to previously disclosed risk factors and stated that disclosure controls were effective.
Important facts for investors to verify
- Whether procedure volumes and international sales recover, particularly in Oncology, and whether growth platforms AngioVac, Auryon and NanoKnife scale as expected.
- Whether gross margins improve as Auryon launch costs and manufacturing under-absorption moderate.
- The sustainability of operating cash flow, including the contribution from inventory reductions and working-capital movements.
- Debt levels, available revolver capacity and covenant headroom after the March 2021 repayment; the filing does not state the remaining borrowing availability clearly.
- Developments in Bard litigation and any resulting financial exposure, as well as progress toward sustained profitability and possible changes to deferred-tax valuation allowances.