AngioDynamics(ANGO) - 2024 Q2 - Quarterly Report

Part I: Financial Information Financial Statements This section presents the unaudited consolidated financial statements for the quarterly period ended November 30, 2023 - On June 8, 2023, the company completed the sale of its dialysis and BioSentry businesses for $100.0 million in cash, resulting in a pre-tax book gain of $47.8 million[37] - On January 5, 2024, the company announced a plan to shift its New York manufacturing operations to a fully outsourced model, expected to be completed in Q3 FY2026[106] Consolidated Statements of Operations The company reported a Q2 net loss of $29.0 million, a significant increase from the prior-year period's $8.5 million loss Consolidated Statements of Operations Highlights (unaudited, in thousands) | Metric | Three Months Ended Nov 30, 2023 | Three Months Ended Nov 30, 2022 | Six Months Ended Nov 30, 2023 | Six Months Ended Nov 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $79,073 | $85,429 | $157,752 | $166,966 | | Gross profit | $40,262 | $45,078 | $80,322 | $87,383 | | Operating income (loss) | $(13,120) | $(8,115) | $21,910 | $(21,416) | | Net income (loss) | $(29,048) | $(8,486) | $16,836 | $(21,490) | | Diluted EPS | $(0.72) | $(0.21) | $0.42 | $(0.55) | Consolidated Balance Sheets Total assets decreased to $499.6 million while total liabilities were significantly reduced due to debt extinguishment Balance Sheet Summary (unaudited, in thousands) | Metric | Nov 30, 2023 | May 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $60,896 | $44,620 | | Total current assets | $185,468 | $163,542 | | Total assets | $499,623 | $532,637 | | Total current liabilities | $78,037 | $83,825 | | Long-term debt | $0 | $49,818 | | Total liabilities | $98,397 | $154,341 | | Total Stockholders' Equity | $401,226 | $378,296 | Consolidated Statements of Cash Flows Investing activities provided $96.6 million from an asset sale, while financing activities used $59.9 million for debt repayment Cash Flow Summary (unaudited, in thousands) | Activity | Six Months Ended Nov 30, 2023 | Six Months Ended Nov 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(20,633) | $(17,246) | | Net cash provided by (used in) investing activities | $96,649 | $(6,072) | | Net cash (used in) provided by financing activities | $(59,942) | $24,479 | | Net increase in cash and cash equivalents | $16,276 | $1,032 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 7.4% revenue decrease in Q2 FY2024, driven by divestitures, and an improved liquidity position Results of Operations Q2 FY2024 net sales decreased by $6.4 million year-over-year, primarily due to the impact of business divestitures Net Sales by Segment (in thousands) | Segment | Three Months Ended Nov 30, 2023 | Three Months Ended Nov 30, 2022 | $ Change | | :--- | :--- | :--- | :--- | | Med Tech | $25,363 | $24,502 | $861 | | Med Device | $53,710 | $60,927 | $(7,217) | | Total | $79,073 | $85,429 | $(6,356) | Gross Profit by Segment (in thousands) | Segment | Three Months Ended Nov 30, 2023 | Three Months Ended Nov 30, 2022 | Gross Margin % (2023) | Gross Margin % (2022) | | :--- | :--- | :--- | :--- | :--- | | Med Tech | $15,816 | $15,614 | 62.4% | 63.7% | | Med Device | $24,446 | $29,464 | 45.5% | 48.4% | | Total | $40,262 | $45,078 | 50.9% | 52.8% | - R&D expense increased by $1.8 million for the three months ended Nov 30, 2023, primarily due to the timing of projects and clinical spend[129] - General and administrative expense decreased by $1.5 million for the three months ended Nov 30, 2023, driven by lower compensation and benefits expenses[130] Liquidity and Capital Resources The company's liquidity strengthened with cash rising to $60.9 million after repaying its entire $50.0 million debt - Cash and cash equivalents totaled $60.9 million as of November 30, 2023, an increase from $44.6 million as of May 31, 2023[137] - The company had no outstanding debt as of November 30, 2023, as the Credit Agreement was extinguished in connection with the divestiture[137] - Key financing activities in the first six months of FY2024 included a $50.0 million repayment of the Credit Agreement and a $10.0 million contingent consideration payment[141] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks include foreign currency fluctuations and a limited concentration of credit risk - The company is exposed to market risk from changes in currency exchange rates, particularly the Euro, British Pound, and Canadian Dollar[146][147] - Concentration of credit risk is limited as no single customer represents more than 10% of total sales[149] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of November 30, 2023 - 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 report[151] - There were no material changes in internal control over financial reporting during the fiscal quarter ended November 30, 2023[152] Part II: Other Information Legal Proceedings The company is involved in ongoing patent litigation, but a potential loss is not yet considered probable or estimable - The company is involved in multiple patent infringement lawsuits with C.R. Bard, Inc. regarding its implantable port products, with a jury trial scheduled for April 29, 2024[96][97] - For the ongoing legal proceedings, the company has not recorded an expense because a potential loss is not yet probable or reasonably estimable[97][98][99] Risk Factors A key future risk involves the potential need for additional financing for growth, which may not be available on favorable terms - Following the sale of businesses and repayment of debt, the company may require additional financing for future growth, which may not be available on favorable terms[157] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased a small number of shares from employees to satisfy tax withholding obligations on vested equity awards Issuer Purchases of Equity Securities (Q2 FY2024) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Sep 2023 | 0 | $7.26 | | Oct 2023 | 1,802 | $6.81 | | Nov 2023 | 733 | $6.65 | | Total | 2,535 | $6.76 | - The shares were purchased from employees to satisfy tax withholding requirements and not as part of a publicly announced repurchase program[159] Other Information No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the quarter - No directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" during the quarter[161]