AngioDynamics, Inc. (NASDAQ:ANGO) Q2 2023 Earnings Conference Call January 5, 2023 8:00 AM ET Company Participants Jim Clemmer - President and CEO Steve Trowbridge - Executive Vice President and CFO Conference Call Participants Jayson Bedford - Raymond James Bill Plovanic - Canaccord Genuity Steve Lichtman - Oppenheimer Matthew Mishan - KeyBanc Capital Markets Operator Good morning, and welcome to the AngioDynamics Fiscal Year 2023 Second Quarter Earnings Call. At this time all participants are in listen-on ...

Financial Performance - Net sales for the three months ended November 30, 2022, were $85,429 thousand, an increase of 9.3% compared to $78,280 thousand for the same period in 2021[19] - Gross profit for the six months ended November 30, 2022, was $87,383 thousand, up from $80,694 thousand for the same period in 2021, reflecting a gross margin improvement[19] - Operating loss for the three months ended November 30, 2022, was $(8,115) thousand, slightly improved from $(8,679) thousand in the prior year[19] - Net loss for the six months ended November 30, 2022, was $(21,490) thousand, compared to $(15,323) thousand for the same period in 2021, indicating a worsening financial performance[21] - The net loss for the three months ended November 30, 2022, was $8.5 million, consistent with a loss per share of $0.21[130] - The net loss for the six months ended November 30, 2022, increased by $6.2 million to $21.5 million, with a loss per share of $0.55[127] Cash and Assets - Cash and cash equivalents at the end of the period were $29,857 thousand, an increase from $28,825 thousand at the beginning of the period[28] - Total assets as of November 30, 2022, were $558,207 thousand, a slight increase from $552,751 thousand as of May 31, 2022[25] - The company had total debt outstanding of $50.0 million as of November 30, 2022, related to the Credit Agreement[149] - Cash used in operating activities was $17.2 million for the six months ended November 30, 2022, compared to $7.0 million for the same period in the prior year[150] Debt and Liabilities - Long-term debt increased to $49,796 thousand from $25,000 thousand, indicating a significant rise in leverage[25] - The company entered into a new Credit Agreement providing for a $75.0 million secured revolving credit facility and a $30.0 million delayed draw term loan[67] - As of November 30, 2022, the company had $25.0 million outstanding on the Revolving Facility and $25.0 million on the Delayed Draw Term Loan, with an interest rate of 5.59%[70] - The total lease liabilities decreased from $7,263,000 on May 31, 2022, to $5,981,000 on November 30, 2022, indicating a reduction in lease obligations[95] Revenue Segments - The Med Tech segment generated $24,502,000 in net sales for the three months ended November 30, 2022, compared to $18,886,000 in the prior year, indicating a growth of 30%[43] - The Med Device segment reported net sales of $60,927,000 for the three months ended November 30, 2022, up from $59,394,000 in the same period of 2021, reflecting a growth of 3%[43] - Med Tech segment net sales increased by $5.6 million for the three months and $10.8 million for the six months ended November 30, 2022, primarily driven by increased Auryon sales[134] - Med Device segment net sales increased by $1.5 million for the three months and $0.9 million for the six months ended November 30, 2022, despite backlog impacts[135] Expenses - Research and development expenses for the three months ended November 30, 2022, were $6,838 thousand, down from $8,199 thousand in the prior year, reflecting cost management efforts[19] - Share-based compensation expense for the six months ended November 30, 2022, was $6,400,000, compared to $5,400,000 for the same period in 2021, reflecting an increase of 18.5%[77] - Sales and marketing expense increased by $2.4 million and $4.5 million for the three and six months ended November 30, 2022, compared to the same periods in the prior year[141] - General and administrative expense increased by $1.2 million and $2.3 million for the three and six months ended November 30, 2022, compared to the same periods in the prior year[142] Stockholder Equity - Total stockholders' equity decreased to $407,958 thousand as of November 30, 2022, from $424,489 thousand as of May 31, 2022, indicating a decline in shareholder value[26] - The total balance of treasury stock was $407,958,000, with a net loss of $8,486,000 recorded during the period[31] - The total balance of treasury stock increased from $424,489,000 on May 31, 2022, to $414,041,000 by August 31, 2022[31] Legal and Compliance - The company is involved in various legal proceedings, but has not recorded an expense related to the outcome of ongoing litigation as it cannot determine if a potential loss is probable or reasonably estimable[101] - The company reported legal expenses of $2,422,000 for the three months ended November 30, 2022, compared to $2,072,000 for the same period in 2021, reflecting an increase of 16.9%[108] - The company has not recorded an expense related to ongoing litigation as it is not yet possible to determine if a potential loss is probable nor reasonably estimable[104] Market and Strategic Focus - The company is focused on transforming its portfolio to target larger and faster-growing markets, which is expected to drive near to mid-term growth[41] - The company aims to grow sales and profitability by expanding geographically and introducing new products, with a focus on research and development investments[123] - The company’s business operations are influenced by market dynamics such as value-based purchasing, healthcare provider consolidation, and an aging population[122] Tax and Valuation - The estimated annual effective tax rate prior to discrete items was 5.8% for the second quarter of fiscal year 2023, down from 12.3% for the same period in fiscal year 2022[72] - The Company has provided a valuation allowance on its deferred tax assets due to not attaining a sustained level of profitability as of November 30, 2022[74]

Financial Data and Key Metrics Changes - The company reported revenue of $81.5 million for Q1 FY 2023, representing a year-over-year growth of approximately 6% [7][17] - Adjusted net loss for Q1 FY 2023 was $2.5 million, compared to an adjusted net loss of $900,000 in the same quarter last year [27] - Gross margin for Q1 FY 2023 was 51.9%, a decrease of 20 basis points compared to the previous year [22] Business Line Data and Key Metrics Changes - Med Tech revenue was $22.8 million, a 29.6% year-over-year increase, while Med Device revenue was $58.7 million, declining 1.1% compared to the first quarter of FY 2022 [17] - Auryon platform revenue grew 50% year-over-year to $8.8 million [18] - Mechanical thrombectomy revenue, including AngioVac and AlphaVac, grew 36% year-over-year [19] - NanoKnife disposable revenue increased 12.3%, driven by 21.8% growth in international markets [21] Market Data and Key Metrics Changes - International markets, particularly in Europe, had a strong quarter, contributing to the growth of NanoKnife [13] - The company faced significant staffing challenges in hospitals, impacting procedural volumes [9] Company Strategy and Development Direction - The company is focused on utilizing proprietary technology in Med Tech platforms to enter large, fast-growing markets and drive beneficial patient outcomes [8] - Strategic investments include geographic expansion, clinical research, product development, and regulatory pathway expansion [14] - The company aims to continue growing its Med Tech segment, which is expected to represent a larger portion of total sales [22] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing macro challenges, including inflationary pressures and staffing issues in hospitals, but expressed confidence in the company's ability to navigate these challenges [9][23] - The company expects to see continued growth in its Med Tech segment and anticipates revenue for FY 2023 in the range of $342 million to $348 million [37] Other Important Information - The company is currently involved in an antitrust suit against Becton, Dickinson's C.R. Bard business related to its Vascular Access business [16] - The company refinanced its credit facility to extend maturity to 2027 and align cash usage with revenue generation profiles [31][34] Q&A Session Summary Question: Ongoing hospital challenges and their impact on product lines - Management noted that staffing challenges have particularly affected AngioVac, with hospitals struggling to manage procedural volumes due to staffing shortages [43][44] Question: Utilization of Auryon systems - Management confirmed that they are tracking utilization per system and are seeing increased usage as customers become more familiar with the product [54][55] Question: Guidance for revenue and cash usage - Management provided guidance for FY 2023 revenue and indicated that Q1 typically sees the highest cash utilization, with expectations for cash balances to build throughout the year [67][70]

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