AngioDynamics(ANGO) - 2025 Q1 - Quarterly Report

Part I: Financial Information Financial Statements Net sales decreased to $67.5 million, resulting in a $12.8 million net loss, driven by divestitures and a prior-year asset sale gain Consolidated Statements of Operations Net sales decreased 14.2% to $67.5 million, leading to a $13.1 million operating loss and a $12.8 million net loss, contrasting with prior-year's $47.8 million asset sale gain Consolidated Statements of Operations (unaudited) | Metric | Three Months Ended Aug 31, 2024 (in thousands) | Three Months Ended Aug 31, 2023 (in thousands) | | :--- | :--- | :--- | | Net sales | $67,491 | $78,679 | | Gross profit | $36,724 | $40,060 | | Total operating expenses | $49,822 | $52,872 | | Gain on sale of assets | $0 | $47,842 | | Operating income (loss) | $(13,098) | $35,030 | | Net income (loss) | $(12,798) | $45,884 | | Diluted earnings (loss) per share | $(0.31) | $1.15 | Consolidated Balance Sheets Cash and cash equivalents decreased to $55.0 million, with total assets declining to $293.6 million and total liabilities to $97.0 million as of August 31, 2024 Key Balance Sheet Items (unaudited) | Metric | Aug 31, 2024 (in thousands) | May 31, 2024 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $55,005 | $76,056 | | Total current assets | $172,594 | $193,253 | | Total assets | $293,628 | $317,671 | | Total current liabilities | $76,699 | $91,155 | | Total liabilities | $97,046 | $112,085 | | Total Stockholders' Equity | $196,582 | $205,586 | Consolidated Statements of Cash Flows Net cash used in operating activities was $18.3 million, leading to a $21.1 million net decrease in cash and cash equivalents for the quarter Cash Flow Summary (unaudited) | Activity | Three Months Ended Aug 31, 2024 (in thousands) | Three Months Ended Aug 31, 2023 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | $(18,253) | $(25,899) | | Net cash (used in) provided by investing activities | $(2,405) | $98,442 | | Net cash used in financing activities | $(509) | $(59,590) | | Increase (decrease) in cash | $(21,051) | $12,966 | Notes to Consolidated Financial Statements Key notes detail two major divestitures, revenue disaggregation, a Becton Dickinson legal settlement, a manufacturing restructuring plan, and a new share repurchase program - The company completed the sale of its Dialysis and BioSentry businesses to Merit Medical for $100.0 million in cash in Q1 FY2024, resulting in a pre-tax gain of $47.8 million[42] - The company completed the sale of its PICC and Midline businesses to Spectrum Vascular in Q3 FY2024 for $34.5 million in cash, plus potential earn-outs and milestone payments[39] - On January 5, 2024, the company announced a restructuring of its manufacturing footprint to an outsourced model, expected to be completed in Q3 FY2026 with total estimated costs of $38.5 million to $53.5 million. Restructuring charges of $3.6 million were recorded in the quarter[100][101] - A settlement was reached with Becton, Dickinson and Company (BD) to resolve ongoing patent litigation, involving a one-time payment of $7.0 million, six minimum annual payments of $2.5 million, and potential additional payments[96] Management's Discussion and Analysis (MD&A) Quarterly revenue decreased 14.2% to $67.5 million due to divestitures, despite Med Tech growth, resulting in a $12.8 million net loss and a $21.1 million decrease in cash Results of Operations Net sales decreased by $11.2 million due to Med Device divestitures, partially offset by Med Tech growth, while gross margin improved to 54.4% despite a fall in gross profit Net Sales by Segment (in thousands) | Segment | Q1 FY2025 (Aug 31, 2024) | Q1 FY2024 (Aug 31, 2023) | $ Change | | :--- | :--- | :--- | :--- | | Med Tech | $27,969 | $25,860 | $2,109 | | Med Device | $39,522 | $52,819 | $(13,297) | | Total | $67,491 | $78,679 | $(11,188) | Gross Profit by Segment (in thousands) | Segment | Q1 FY2025 (Aug 31, 2024) | Q1 FY2024 (Aug 31, 2023) | Gross Margin % (Q1 FY25 vs Q1 FY24) | | :--- | :--- | :--- | :--- | | Med Tech | $17,697 | $16,727 | 63.3% vs 64.7% | | Med Device | $19,027 | $23,333 | 48.1% vs 44.2% | | Total | $36,724 | $40,060 | 54.4% vs 50.9% | - The decrease in Med Device sales was primarily driven by the divestiture of PICCs and Midline products ($10.2 million impact) and dialysis and BioSentry products ($0.8 million impact)[122] - Acquisition, restructuring and other items increased by $1.1 million, mainly due to a $3.6 million increase in plant closure expenses related to the manufacturing restructuring plan[133] Liquidity and Capital Resources Cash and cash equivalents decreased to $55.0 million due to $18.3 million cash used in operations, with no outstanding debt, and sufficient liquidity for 12 months Cash and Debt Position (in millions) | Metric | Aug 31, 2024 | May 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $55.0 | $76.1 | | Outstanding Debt | $0.0 | $0.0 | - Cash used in operating activities was $18.3 million, an improvement from the $25.9 million used in the prior-year period[137][138] - In the prior-year quarter (Q1 FY2024), investing activities provided $98.4 million cash from the divestiture of the dialysis and BioSentry businesses, while financing activities used $59.6 million for debt repayment and contingent consideration[137][140] Quantitative and Qualitative Disclosures About Market Risk The company faces foreign currency exchange rate risk on 3.4% of sales and limited credit risk due to a diversified customer base - Approximately 3.4% of sales in the quarter were denominated in foreign currencies, exposing the company to exchange rate fluctuations[145] - Credit risk is mitigated as no single customer represents more than 10% of total sales[147] Controls and Procedures Disclosure controls and procedures were effective as of August 31, 2024, with no material changes in internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective as of the end of the period[149] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[150] Part II: Other Information Legal Proceedings This section refers to Note 14 of the financial statements for detailed information on commitments and contingencies, including litigation updates - For details on legal proceedings, the report directs readers to Note 14, "Commitments and Contingencies," in the consolidated financial statements[153] Risk Factors The company highlights a potential risk related to future financing needs, having extinguished its Credit Agreement and requiring new external financing for growth or changing circumstances - The company repaid all amounts under its Credit Agreement in June 2023, which was then extinguished. This could pose a risk if additional financing is needed for future growth initiatives or acquisitions[155] Issuer Purchases of Equity Securities The company repurchased 72,141 shares under a new $15.0 million program, with approximately $14.4 million remaining for future repurchases Share Repurchase Activity (Three Months Ended Aug 31, 2024) | Period | Total Shares Purchased as Part of Program (shares) | Average Price Paid per Share (USD) | Maximum Value Remaining for Repurchase (USD) | | :--- | :--- | :--- | :--- | | July 1 - July 31, 2024 | 72,141 | $6.68 | $14,448,871 | - A new share repurchase program authorizing up to $15.0 million was approved and announced on July 16, 2024[157] Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No directors or officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter[159]