AngioDynamics(US:ANGO)2021-03-30 16:00Part I: Financial Information Financial Statements The unaudited consolidated financial statements for the period ended February 28, 2021, show a 2.0% increase in net sales for the third quarter and a 4.1% increase for the nine-month period year-over-year. However, the company reported a net loss of $3.5 million for the quarter and $12.1 million for the nine-month period. The balance sheet indicates total assets of $582.2 million and total liabilities of $127.3 million. Cash flow from operations turned positive for the nine-month period at $11.9 million, a significant improvement from a use of $18.4 million in the prior year Consolidated Statements of Operations For the third quarter ended February 28, 2021, net sales increased to $71.2 million from $69.8 million in the prior-year period. Gross profit slightly decreased to $38.5 million. The company recorded a net loss of $3.5 million, an improvement from the $5.7 million loss in the same quarter last year. For the nine-month period, net sales grew to $214.2 million, but the net loss widened to $12.1 million from $9.7 million year-over-year Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended Feb 28, 2021 | Three Months Ended Feb 29, 2020 | Nine Months Ended Feb 28, 2021 | Nine Months Ended Feb 29, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $71,182 | $69,780 | $214,168 | $205,825 | | Gross profit | $38,530 | $40,299 | $114,468 | $120,060 | | Operating loss | $(3,738) | $(6,236) | $(13,696) | $(10,487) | | Net loss | $(3,544) | $(5,709) | $(12,080) | $(9,720) | | Diluted loss per share | $(0.09) | $(0.15) | $(0.32) | $(0.26) | Consolidated Balance Sheets As of February 28, 2021, the company's total assets were $582.2 million, a slight decrease from $594.2 million at May 31, 2020. Total liabilities decreased to $127.3 million from $139.3 million over the same period, primarily due to a reduction in long-term debt. Cash and cash equivalents remained stable at approximately $54.5 million Consolidated Balance Sheet Highlights (in thousands) | Account | Feb 28, 2021 | May 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $54,469 | $54,435 | | Inventories | $49,006 | $59,905 | | Total current assets | $145,657 | $152,913 | | Goodwill | $201,102 | $200,515 | | Total assets | $582,245 | $594,214 | | Total current liabilities | $50,256 | $51,445 | | Long-term debt, net | $30,000 | $40,000 | | Total liabilities | $127,309 | $139,342 | | Total Stockholders' Equity | $454,936 | $454,872 | Consolidated Statements of Cash Flows For the nine months ended February 28, 2021, net cash provided by operating activities was $11.9 million, a significant turnaround from the $18.4 million used in the prior-year period. This improvement was mainly driven by better working capital management, particularly a decrease in inventories. Net cash used in investing activities was $4.6 million, significantly lower than the prior year's $61.9 million which included cash paid for acquisitions. Net cash used in financing activities was $7.5 million, primarily for debt repayment Cash Flow Summary (in thousands) | Activity | Nine Months Ended Feb 28, 2021 | Nine Months Ended Feb 29, 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $11,894 | $(18,434) | | Net cash used in investing activities | $(4,567) | $(61,866) | | Net cash used in financing activities | $(7,541) | $(120,189) | | Net change in cash and cash equivalents | $34 | $(200,481) | Notes to Consolidated Financial Statements The notes detail the company's accounting policies and provide further information on financial statement items, including acquisitions, revenue disaggregation, goodwill, intangible assets, debt structure, and legal contingencies - In fiscal year 2020, the company acquired the C3 Wave tip location asset from MedComp for $10.0 million upfront with $5.0 million in potential contingent consideration39 - The company acquired Eximo Medical, Ltd. for an aggregate price of $60.7 million, including a $45.8 million upfront payment and $14.9 million in contingent consideration, to expand its Vascular Interventions and Therapies portfolio40 Net Sales by Global Business Unit (in thousands) | Global Business Unit | Nine Months Ended Feb 28, 2021 | Nine Months Ended Feb 29, 2020 | | :--- | :--- | :--- | | Vascular Interventions & Therapies | $97,008 | $90,616 | | Vascular Access | $76,848 | $70,585 | | Oncology | $40,312 | $44,624 | | Total | $214,168 | $205,825 | - As of February 28, 2021, the company had a $30.0 million outstanding balance on its $125.0 million secured revolving credit facility and was in compliance with all covenants75 - The company is involved in multiple patent infringement lawsuits with C.R. Bard, Inc. Management believes Bard's claims are without merit and has not recorded an expense as a potential loss is not yet probable or reasonably estimable106107108 Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 2.0% Q3 revenue growth to strong performance in the Vascular Interventions & Therapies segment, partially offset by a 10.1% decline in the Oncology business, while maintaining sufficient liquidity Results of Operations (Three Months) Net sales for Q3 FY2021 increased 2.0% to $71.2 million, driven by 8.8% growth in Vascular Interventions & Therapies, while gross margin decreased by 370 basis points due to manufacturing under-absorption and Auryon launch costs Q3 Net Sales by Global Business Unit (in thousands) | Global Business Unit | Feb 28, 2021 | Feb 29, 2020 | % Change | | :--- | :--- | :--- | :--- | | Vascular Interventions & Therapies | $33,251 | $30,552 | 8.8% | | Vascular Access | $24,813 | $24,642 | 0.7% | | Oncology | $13,118 | $14,586 | (10.1)% | | Total | $71,182 | $69,780 | 2.0% | - The 8.8% growth in Vascular Interventions & Therapies was driven by $3.3 million in sales from the recently acquired Auryon product and a 38% increase in AngioVac case volumes135 - Gross profit was negatively impacted by $2.9 million from net productivity issues, including $1.5 million in under-absorption and $1.4 million in start-up costs for the Auryon launch140 - Sales and marketing expenses decreased by $1.3 million, primarily due to a $1.2 million reduction in travel expenses and a $1.1 million decrease in tradeshow costs, partially offset by a $2.0 million investment in the Auryon sales team build-out142 Results of Operations (Nine Months) For the nine months ended February 28, 2021, net sales increased 4.1% to $214.2 million, with gross margin falling 490 basis points due to productivity issues and Auryon launch costs, while R&D expenses increased 21.5% due to platform investments Nine-Month Net Sales by Global Business Unit (in thousands) | Global Business Unit | Feb 28, 2021 | Feb 29, 2020 | % Change | | :--- | :--- | :--- | :--- | | Vascular Interventions & Therapies | $97,008 | $90,616 | 7.1% | | Vascular Access | $76,848 | $70,585 | 8.9% | | Oncology | $40,312 | $44,624 | (9.7)% | | Total | $214,168 | $205,825 | 4.1% | - Vascular Access sales growth was significantly impacted by a large, one-time order of $5.2 million in the United Kingdom related to the COVID-19 pandemic154 - Gross profit for the nine-month period was negatively impacted by $8.9 million from net productivity, including $6.1 million in under-absorption and $2.8 million in Auryon launch costs157 - R&D expenses increased by $4.8 million (21.5%), driven by a $4.6 million increase in spending on the AngioVac platform expansion, NanoKnife DIRECT© study, and Pathfinder study, plus $1.7 million for Auryon159 Liquidity and Capital Resources The company's liquidity is sufficient for the next 12 months, with $54.5 million in cash and $30.0 million in outstanding debt, supported by a $30.3 million positive swing in operating cash flow driven by inventory reduction - As of February 28, 2021, the company had cash and cash equivalents of $54.5 million and $30.0 million of debt outstanding on its Revolving Facility169 Cash Flow Summary (in thousands) | Activity | Nine Months Ended Feb 28, 2021 | Nine Months Ended Feb 29, 2020 | | :--- | :--- | :--- | | Operating activities | $11,894 | $(18,434) | | Investing activities | $(4,567) | $(61,866) | | Financing activities | $(7,541) | $(120,189) | - The significant improvement in operating cash flow in fiscal 2021 was favorably impacted by a $11.1 million decrease in inventory172 - In the third quarter of fiscal 2021, the company made a $10.0 million payment on its Revolving Facility174 Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from foreign currency fluctuations, interest rate changes on its variable-rate debt, and credit concentration, with 7% of sales in foreign currencies and $30.0 million outstanding on its $125 million revolving credit facility at 1.63% - The company is exposed to foreign currency risk as approximately 7% of its sales for the nine months ended February 28, 2021, were denominated in foreign currencies, primarily the Euro, British pound, and Canadian dollar181 - The company is exposed to interest rate risk on its $125 million Revolving Facility. As of February 28, 2021, there was $30.0 million outstanding with a variable interest rate of 1.63%182 - Concentration of credit risk is considered limited as no single customer represents more than 10% of total sales184 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of February 28, 2021, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report186 - There were no material changes to the company's internal control over financial reporting during the fiscal quarter ended February 28, 2021187 Part II: Other Information Legal Proceedings The company is involved in multiple patent infringement lawsuits with C.R. Bard, Inc., maintaining that claims are without merit, and has filed an antitrust lawsuit against Bard, while a breach of contract case with Merz North America was settled for $2.5 million - The company is defending against three separate patent infringement lawsuits filed by C.R. Bard, Inc. related to its implantable port products. The company believes the claims are without merit and has not recorded an expense for potential loss191192193 - The company has an ongoing antitrust lawsuit against C.R. Bard, Inc., alleging that Bard illegally ties the sales of its tip location systems to its PICCs194 - A breach of contract lawsuit from Merz North America, Inc. was settled in June 2019 with a lump-sum payment of $2.5 million from AngioDynamics196 Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended May 31, 2020 - There have been no material changes to the risk factors previously disclosed in the company's annual report on Form 10-K for the fiscal year ended May 31, 2020198 Unregistered Sales of Equity Securities and Use of Proceeds During the three months ended February 28, 2021, the company repurchased a total of 2,241 shares of its common stock at an average price of $18.48 per share from employees to satisfy tax withholding requirements - For the three months ended February 28, 2021, the company repurchased 2,241 shares from employees to satisfy tax withholding requirements on vested equity awards. The company does not have a share repurchase program in effect201 Defaults on Senior Securities None - None202 Mine Safety Disclosures None - None202 Other Information None - None202 Exhibits The report lists several exhibits filed, including amended change in control agreements and certifications by the CEO and CFO pursuant to the Sarbanes-Oxley Act of 2002, along with XBRL interactive data files - Exhibits filed include amended and restated change in control agreements205206 - Certifications by the CEO and CFO pursuant to Rule 13a-14(a) and Section 1350 of the Sarbanes-Oxley Act of 2002 were filed as exhibits207208209210