AngioDynamics, Inc. — Form 10-Q Summary
Reporting period: First quarter of fiscal 2022, the three months ended August 31, 2021; comparisons are to the three months ended August 31, 2020. Amounts below are in U.S. dollars and rounded to millions unless noted.
Business context and results
AngioDynamics develops and sells medical devices for vascular access, peripheral vascular disease, oncology and surgical procedures. Management describes a strategic shift toward higher-technology products, including Auryon, Mechanical Thrombectomy and NanoKnife.
- Net sales were $77.0 million, up 9.6%. Med Tech sales rose 68.0% to $17.6 million; Med Device sales were nearly flat at $59.4 million.
- By business unit, Endovascular Therapies sales increased 27.5% to $38.1 million, Vascular Access declined 11.2% to $25.0 million, and Oncology increased 13.9% to $14.0 million. U.S. sales rose 19.1% to $64.5 million; international sales fell 22.4% to $12.5 million.
- Gross profit increased 12.2% to $40.1 million, and gross margin improved to 52.1% from 50.9%.
- Operating expenses increased to $48.2 million from $40.9 million. Sales and marketing rose 38.1% to $24.4 million, partly reflecting Auryon commercial-team expansion and resumed travel; R&D declined 17.9% to $7.4 million.
- Operating loss widened to $8.1 million from $5.1 million. Net loss was $7.0 million, or $0.18 per diluted share, compared with $4.3 million, or $0.11 per share. The tax benefit was $1.6 million.
- Operating cash outflow was $8.9 million versus $5.4 million. Investing cash outflow was $9.1 million, including $4.5 million for placement and evaluation units and $3.6 million for an acquisition. Financing provided $5.4 million, including a $5.0 million revolver draw. Cash decreased $12.7 million to $35.5 million.
Financial position and liquidity
- At August 31, 2021, current assets were $131.3 million and current liabilities were $52.1 million. Total assets were $555.8 million and stockholders’ equity was $436.0 million.
- Debt outstanding under the secured revolving facility was $25.0 million, up from $20.0 million at May 31, 2021; the reported interest rate was 1.34%. The facility provides up to $125 million, subject to its terms, and the company reported compliance with its financial covenants.
- Management said cash on hand, expected operating cash flows and revolver availability should cover anticipated capital needs for at least 12 months. The company noted that future cash acquisitions may require external financing.
Material changes, outlook and risks
- Med Tech growth was led by Auryon, whose sales increased $4.8 million year over year. Management attributed improvement to procedure volumes recovering from prior-year COVID-19 effects. Med Device sales increased $4.8 million excluding a large prior-year UK order, while Oncology continued to face procedure-volume pressure.
- Gross margin benefited from higher volume and product mix, but was pressured by $1.0 million of Auryon start-up costs and $1.4 million of inflationary raw-material, labor and freight costs.
- Sales and marketing expense increased $6.7 million, primarily from $4.3 million of added compensation and benefits and $2.5 million of travel and other costs. Acquisition, restructuring and other items rose to $2.4 million, including $2.1 million of non-routine litigation expense.
- On July 27, 2021, the company acquired QX Medical’s Camaro support catheter assets for $4.0 million, including $3.6 million paid at closing, $0.4 million in holdbacks and up to $1.0 million of revenue-milestone consideration. The acquisition supports the Auryon product family.
- No specific financial guidance was provided in the supplied filing text. Management cited COVID-19-related uncertainty affecting demand, hospital workflows, manufacturing, supply-chain reliability and inflation. Other disclosed risks include foreign-exchange exposure, competition, regulatory and clinical outcomes, and litigation.
- Several C.R. Bard patent cases remained pending. The company had not recorded litigation expense for the cases where a potential loss was not considered both probable and reasonably estimable. The company also maintained a valuation allowance on certain deferred tax assets because it had not achieved sustained profitability.
Important facts for investors to verify
- Whether Med Tech growth, particularly Auryon, continues and translates into improved operating profitability and cash generation.
- Whether procedure volumes, international sales and Vascular Access performance recover, and how much growth depends on comparison effects from the prior-year UK order.
- Whether higher selling costs, inflation and Auryon placement-unit investments continue to pressure margins and cash flows.
- Developments in the Bard litigation, the QX Medical acquisition milestones and the company’s ability to meet credit-facility covenants.
- The basis for management’s 12-month liquidity assessment, given quarterly operating cash use and the increase in revolver borrowings.