AngioDynamics, Inc. — Form 10-Q Summary
Reporting period: Fiscal first quarter 2023, the three months ended August 31, 2022; comparisons are with the three months ended August 31, 2021 unless stated otherwise. AngioDynamics develops and sells medical devices for vascular access, peripheral vascular disease, oncology and surgical applications. The company began reporting two operating segments, Med Tech and Med Device, in this quarter.
Key financial results
| Metric | Q1 FY2023 | Q1 FY2022 |
|---|---|---|
| Net sales | $81.5 million | $77.0 million |
| Gross profit / margin | $42.3 million / 51.9% | $40.1 million / 52.1% |
| Operating loss | $13.3 million | $8.1 million |
| Net loss | $13.0 million | $7.0 million |
| Diluted loss per share | $0.33 | $0.18 |
| Cash used in operating activities | $24.7 million | $8.9 million |
- Sales grew 5.9%. Med Tech sales rose 29.6% to $22.8 million; Med Device sales declined 1.1% to $58.7 million. U.S. sales increased 7.1% to $69.0 million, while international sales were essentially flat at $12.5 million.
- Med Tech gross margin fell to 63.2% from 65.4%; Med Device gross margin fell to 47.5% from 48.2%. Consolidated gross margin decreased 0.2 percentage points.
- Cash and cash equivalents were $24.6 million at August 31, down from $28.8 million at May 31, 2022. Current assets were $151.4 million and current liabilities $66.4 million.
- Long-term debt was $49.8 million net of financing costs ($50.0 million principal outstanding), versus $25.0 million at May 31. The company had a $75 million revolving facility and a $30 million delayed-draw term loan; $25 million was drawn on each. The stated interest rate was 4.06% at quarter-end.
- Investing activities used $3.6 million; financing activities provided $24.4 million. The company reported $17.2 million of contingent consideration liabilities at quarter-end.
Changes, outlook and notable items
- Med Tech growth was led by Auryon and thrombus-management products, including AngioVac and AlphaVac. Med Device performance reflected vascular-access backlog and lower oncology procedure volumes. Backlog was $7.1 million at quarter-end, down $1.3 million from May 31.
- Gross profit benefited from higher sales volume and productivity, but inflation in materials, labor and freight, along with depreciation on placement units, pressured margins. Management also cited labor shortages, supply-chain constraints, inflation and continuing COVID-related disruption.
- Operating expenses increased, including research and development, sales and marketing, and general and administrative costs. Acquisition, restructuring and other items rose to $5.6 million, including a $3.5 million payment to the Israeli Innovation Authority that fully settled an obligation related to pre-acquisition Auryon development grants.
- Operating cash use increased year over year, reflecting the larger net loss and working-capital use, including increases in inventory and prepaid expenses and payments of accrued liabilities, primarily annual incentive compensation.
- Management said cash on hand and credit availability were expected to meet anticipated capital needs for at least 12 months. The company was in compliance with its new credit-agreement covenants at August 31. The agreement includes a maximum leverage ratio of 3.00:1.00 and minimum fixed-charge coverage ratio of 1.25:1.00.
- No specific financial guidance was provided in the supplied filing text. Management described a strategic shift toward a more focused medical-technology company and expects growth from new products, market penetration and geographic expansion.
- Several Bard patent cases remain pending or stayed; the company said it had not accrued losses because outcomes were not probable and reasonably estimable. A separate antitrust case against Bard resulted in an adverse jury verdict on October 6, 2022, after quarter-end; the filing reports no related accrual. The filing also says no material changes were made to previously disclosed risk factors.
Important facts for investors to verify
- Whether Med Tech growth can continue and whether Med Device backlog and procedure-volume pressures ease.
- How inflation, labor availability, supply constraints and product placement-unit costs affect gross margins and cash conversion.
- Debt use, variable interest-rate exposure, covenant headroom and the planned use of the delayed-draw loan for Auryon equipment.
- Potential financial effects and developments in Bard litigation, including the post-quarter antitrust verdict and unresolved patent matters.
- The assumptions behind contingent consideration, goodwill impairment assessments and the valuation allowance on deferred tax assets; management reported no goodwill impairment in its interim assessment.