AngioDynamics(ANGO) - 2025 Q4 - Annual Report

Part I Business AngioDynamics is a diversified medical technology company focusing on cardiovascular and cancer treatments, with products in Med Tech and Med Device segments - The company operates through two segments: Med Tech (Auryon, Thrombectomy, NanoKnife) and Med Device (peripheral products, ports, venous insufficiency treatments)[21] - Recent strategic moves include the sale of dialysis, BioSentry, PICC, and Midline businesses in June 2023 and February 2024 to focus on higher-growth areas[19] - Products are sold primarily through a direct sales force in the U.S. and a combination of direct sales and distributors internationally[58] - A manufacturing restructuring plan, announced in January 2024, aims to optimize efficiency by shifting production to third-party manufacturers, with completion expected in Q3 fiscal 2026[62] Products The company's product portfolio spans Med Tech, featuring high-growth platforms like Auryon and NanoKnife, and Med Device, offering a broad range of interventional products - The Med Tech segment includes the Auryon Atherectomy System for peripheral artery disease, Thrombectomy systems (AlphaVac, AngioVac) for thrombi removal, and the NanoKnife IRE Ablation System for soft tissue ablation, with recent expanded FDA clearance for prostate tissue[22][23][31] - The Med Device segment offers a broad portfolio including angiographic catheters, guidewires, drainage products, implantable ports (SmartPort, BioFlo), the VenaCure EVLT laser system for varicose veins, and the Solero Microwave Ablation System[32][38][43] Competition The company faces intense competition from large, well-resourced manufacturers and specialized companies, primarily based on product quality, clinical outcomes, and price - The company faces significant competition from large, well-resourced manufacturers and smaller, specialized companies[55] - Primary competitors include Boston Scientific, Medtronic, Johnson & Johnson, Cook Medical, and Becton Dickinson[56] - Competition is based on product quality, clinical outcomes, ease of use, and increasingly on price due to healthcare provider consolidation and declining reimbursement rates[57] Government Regulation The company's products are subject to extensive regulation by the FDA in the U.S. and require CE Mark for sales in the European Union - Products are regulated by the FDA in the U.S., typically requiring 510(k) clearance before marketing, a process historically used for the company's products[69][72] - Manufacturing facilities are subject to FDA's Quality System Regulation (QSR) and periodic inspections to ensure compliance[74] - For sales in the European Union, a CE Mark is required, with new products subject to the more stringent Medical Device Regulation (MDR) and transition periods for existing products ending in 2027 or 2028[77] Risk Factors The company faces significant business, regulatory, and intellectual property risks, including intense competition, supply chain dependence, and cybersecurity threats - The company faces intense competition from larger competitors and increasing pressure to compete on price due to the purchasing power of GPOs and IDNs[102][104] - Dependence on single-source suppliers and a strategic shift to third-party manufacturing in Costa Rica, Israel, and China expose the company to supply chain interruptions, quality control issues, and geopolitical risks[116][119] - The business is subject to extensive government regulation, including FDA's Quality System Regulation (QSR) and the EU's new Medical Device Regulation (MDR), requiring significant compliance resources[169][173] - Product liability is an inherent risk, with the company currently defending numerous claims related to its port products consolidated into a multidistrict litigation[132] - Cybersecurity threats to the company's or partners' IT systems could result in unauthorized data access, intellectual property theft, and operational disruptions[156][157] Cyber Security AngioDynamics implements a cybersecurity risk management program based on NIST Cyber Security Framework 2.0, with oversight from the Board and Audit Committee - The company's cybersecurity program is based on the NIST Cyber Security Framework 2.0 and integrated into its enterprise risk management (ERM) program[192] - Governance is led by the Senior Vice President of Information Technology, with oversight from the CEO, Board of Directors, and Audit Committee[194][195] Properties The company leases all primary facilities, including corporate headquarters, manufacturing sites, and R&D centers across multiple locations | Location | Purpose | Approx. Sq. Ft. | Property Type | | :--- | :--- | :--- | :--- | | Latham, NY | Corporate headquarters | 39,000 | Lease | | Glens Falls, NY | Manufacturing | 21,000 | Lease | | Queensbury, NY | Manufacturing | 135,000 | Lease | | Queensbury, NY | Distribution | 58,000 | Lease | | Marlborough, MA | Research and development | 8,400 | Lease | | Rehovot, IL | Research and development | 4,300 | Lease | Legal Proceedings The company is involved in various legal proceedings, including settled patent litigation and ongoing product liability claims related to its port products - Information regarding legal proceedings is included in Note 17 to the consolidated financial statements[198] Part II Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities AngioDynamics' common stock trades on NASDAQ under "ANGO", with no cash dividends paid in the last three fiscal years or anticipated in the foreseeable future - The company's common stock trades on the NASDAQ Global Select Market under the symbol "ANGO"[201] - No cash dividends were declared in the last three fiscal years, and none are anticipated for the foreseeable future[203] Common Stock Sale Prices (Fiscal Year 2025) | Fiscal Year 2025 | High Sale Price | Low Sale Price | | :--- | :--- | :--- | | Fourth Quarter | $10.86 | $8.37 | | Third Quarter | $12.94 | $7.00 | | Second Quarter | $7.78 | $5.88 | | First Quarter | $7.84 | $5.51 | Management's Discussion and Analysis of Financial Condition and Results of Operations FY2025 revenue decreased 3.8% to $292.5 million due to divestitures, while Med Tech grew 19.0% and gross margin improved to 53.9% Financial Highlights | Metric | FY 2025 | Change from FY 2024 | | :--- | :--- | :--- | | Revenue | $292.5 million | -3.8% | | Med Tech Revenue Growth | 19.0% | N/A | | Med Device Revenue Decline | -16.0% | N/A | | Gross Margin | 53.9% | +300 bps | | Net Loss | $34.0 million | Decreased by $150.4 million | | Loss per Share | ($0.83) | Decreased by $3.76 | | Cash Flow from Operations | ($10.1 million) | Improved by $18.0 million | - The decrease in total revenue was primarily due to the divestiture of PICC, Midline, dialysis, and BioSentry businesses, impacting sales by $33.4 million compared to the prior year[219] - A manufacturing restructuring plan is expected to generate $15.0 million in annual cost savings starting in fiscal year 2027[214] - On July 16, 2024, the Board approved a $15.0 million share repurchase program, with 243,847 shares repurchased for $1.7 million during FY2025[215] Results of Operations (FY2025 vs. FY2024) In FY2025, total net sales decreased to $292.5 million, driven by a 19.0% growth in Med Tech sales offset by a 16.0% decline in Med Device sales due to divestitures Net Sales by Segment (in thousands) | (in thousands) | 2025 | 2024 | $ Change | | :--- | :--- | :--- | :--- | | Net Sales | | | | | Med Tech | $126,653 | $106,403 | $20,250 | | Med Device | $165,845 | $197,511 | ($31,666) | | Total | $292,498 | $303,914 | ($11,416) | - Med Tech sales growth was driven by a $9.8 million increase in Auryon sales and a $10.9 million increase in the thrombus management platform[241] - Med Device sales decrease was primarily due to the divestiture of PICCs and Midline products ($30.1 million decrease)[241] - Total gross margin increased to 53.9% from 50.9%, driven by favorable sales volume, price, and product mix, positively impacting gross margin by $19.9 million, offsetting a $9.2 million negative impact from divestitures[242][243] - Operating expenses decreased significantly, primarily due to a $159.5 million non-cash goodwill impairment charge in FY2024 not present in FY2025[246] Liquidity and Capital Resources The company's cash and cash equivalents decreased to $55.9 million in FY2025, with an improved operating cash flow and a new $25.0 million revolving credit facility Liquidity Highlights (in thousands) | (in thousands) | May 31, 2025 | May 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $55,893 | $76,056 | | Working Capital (Current Assets - Current Liabilities) | $92,127 | $102,098 | - Cash used in operating activities was $10.1 million in FY2025, an improvement from $28.2 million used in FY2024[255][256] - On May 28, 2025, the company entered into a new two-year, $25.0 million secured revolving credit facility, with no outstanding balance as of May 31, 2025[218][257] - Total contractual obligations as of May 31, 2025, are $41.7 million, including operating leases, finance leases, and royalties[259] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from foreign currency exchange rates, interest rates, and credit concentration, with foreign currency sales at 3.4% in FY2025 - The company is exposed to foreign currency exchange rate risk, with approximately 3.4% of fiscal year 2025 sales denominated in foreign currencies like the Euro, British pound, and Canadian dollar[263] - Interest rate risk is limited with no outstanding debt as of May 31, 2025, though the new revolving facility carries a variable interest rate based on SOFR[264][265] - Concentration of credit risk is limited due to a large and diverse customer base, with no single customer representing more than 10% of total sales[267] Controls and Procedures As of May 31, 2025, management and independent auditors concluded that the company's disclosure controls and internal control over financial reporting were effective - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of May 31, 2025[271] - Based on the COSO framework, management concluded that internal control over financial reporting was effective as of May 31, 2025[274] - The independent auditor, Deloitte & Touche LLP, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of May 31, 2025[275][279] Part III Directors, Executive Officers, Corporate Governance, Executive Compensation, and Other Matters Information for Part III of the Form 10-K, including directors, executive compensation, and corporate governance, is incorporated by reference from the upcoming proxy statement - Information for Items 10 through 14 is incorporated by reference from the registrant's Proxy Statement for its 2025 Annual Meeting of Stockholders[7][290] Part IV Exhibits, Financial Statement Schedules This section includes the company's consolidated financial statements, the independent auditor's report, financial schedules, and a list of all exhibits filed with the Form 10-K Report of Independent Registered Public Accounting Firm Deloitte & Touche LLP issued an unqualified opinion on the financial statements, identifying the reserve for excess and obsolete inventory as a critical audit matter - Auditor Deloitte & Touche LLP issued an unqualified opinion, stating financial statements are presented fairly in all material respects in conformity with U.S. GAAP[299] - The audit identified the reserve for excess quantities and obsolete inventory as a critical audit matter due to significant management estimates and judgments in determining expected demand[303][305] Consolidated Financial Statements This section presents the company's consolidated statements of operations, balance sheets, and cash flows for the fiscal years ended May 31, 2025, 2024, and 2023 Consolidated Statement of Operations Highlights (in thousands) | | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | Net sales | $292,498 | $303,914 | $338,752 | | Gross margin | $157,705 | $154,698 | $174,246 | | Operating loss | ($39,954) | ($192,435) | ($51,181) | | Net loss | ($33,993) | ($184,349) | ($52,442) | | Loss per share (diluted) | ($0.83) | ($4.59) | ($1.33) | Consolidated Balance Sheet Highlights (in thousands) | | May 31, 2025 | May 31, 2024 | | :--- | :--- | :--- | | Total current assets | $168,324 | $193,253 | | Total Assets | $280,144 | $317,671 | | Total current liabilities | $76,197 | $91,155 | | Total Liabilities | $97,174 | $112,085 | | Total Stockholders' Equity | $182,970 | $205,586 | Consolidated Statement of Cash Flows Highlights (in thousands) | | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($10,128) | ($28,158) | $78 | | Net cash (used in) provided by investing activities | ($10,178) | $123,717 | ($9,746) | | Net cash (used in) provided by financing activities | ($255) | ($64,248) | $25,420 | Notes to Consolidated Financial Statements This section provides detailed notes to the consolidated financial statements, covering significant accounting policies, divestitures, commitments, contingencies, and restructuring plans - Note 2 (Divestitures): The company completed the sale of its PICC and Midline businesses for $34.5 million in cash in Feb 2024, and its Dialysis and BioSentry businesses for $100 million in cash in June 2023[352][355] - Note 17 (Commitments and Contingencies): The company settled patent litigation with BD for a $7.0 million one-time payment, six minimum annual payments of $2.5 million, and potential future royalties, while defending approximately 162 product liability claims related to its port products[448][449] - Note 19 (Restructuring): A manufacturing restructuring plan announced in Jan 2024 is estimated to cost between $33.4 million and $38.4 million, with $23.2 million in total charges recorded as of May 31, 2025[459][461][462]