8-K: AngioDynamics Reports Q3 Fiscal 2024 Results, Updates Guidance After Divestitures

AngioDynamics announced its third quarter fiscal year 2024 results, highlighting revenue growth in its Med Tech and Med Device segments and updating its full-year guidance to reflect recent divestitures.

Summary

• AngioDynamics reported a net sales of $66.0 million for the third quarter of fiscal year 2024, an 8.0% increase compared to the prior-year quarter on a pro forma basis.
• Med Tech net sales increased by 12.6% to $25.7 million, driven by Auryon and NanoKnife sales, while Med Device net sales grew by 5.2% to $40.3 million.
• The company's GAAP net loss was $190.4 million, which includes a $159.5 million goodwill impairment and a $22.0 million settlement charge related to IP litigation.
• Adjusted net loss for the quarter was $6.5 million, or $0.16 per share.
• Gross margin was 51.1% on a pro forma basis, a decrease of 290 basis points compared to the prior year.
• For the nine months ended February 29, 2024, net sales were $199.6 million, a 6.5% increase year-over-year on a pro forma basis.
• The company updated its fiscal year 2024 net sales guidance to $270 to $275 million, reflecting recent divestitures and discontinuations.
• The company expects a full year gross margin of 52.0% to 54.0% and an adjusted loss per share in the range of $0.54 to $0.58.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to the significant GAAP net loss and declining gross margins, despite positive revenue growth and strategic divestitures. The company is facing challenges in its transition and is not yet profitable.

Positives

• The company saw strong growth in both Med Tech and Med Device portfolios during the quarter.
• The settlement with BD/Bard provides clarity and certainty going forward.
• The FDA 510(k) clearance for AlphaVac in the treatment of pulmonary embolism came ahead of expectations.
• The company has a strong cash position with $78.5 million and no debt.
• International net sales increased by 20.8% in Q3 and 24.6% for the nine months ended February 29, 2024.

Negatives

• The company reported a significant GAAP net loss of $190.4 million, primarily due to a $159.5 million goodwill impairment.
• Gross margin declined by 290 basis points on a pro forma basis in Q3 and 150 basis points for the nine months ended February 29, 2024.
• The decline in gross margin for the Med Tech business was driven primarily by product and geographic mix.
• The decline in gross margin for the Med Device business was driven primarily by a supplier recall and costs associated with the transition to outsourced manufacturing.
• Adjusted EBITDA was negative $3.6 million in Q3 2024, compared to negative $1.5 million in Q3 2023.
• Cash flow during the third quarter was significantly impacted by timing and extraordinary items related to both the divestiture transaction and manufacturing restructuring.

Risks

• The company's future performance is subject to risks and uncertainties, including the ability to develop new products, competition, regulatory actions, and economic conditions.
• The goodwill impairment charge is preliminary and may be adjusted prior to the filing of the quarterly report on Form 10-Q.
• The company is undergoing a transition to outsourced manufacturing, which may present challenges.
• The company is exposed to risks related to product recalls and product liability claims.
• The company's financial results are subject to fluctuations in foreign currency exchange rates.

Future Outlook

The company expects its fiscal year 2024 net sales to be in the range of $270 to $275 million, with a gross margin of approximately 52.0% to 54.0% and an adjusted loss per share in the range of $0.54 to $0.58.

Management Comments

• Jim Clemmer, President and Chief Executive Officer, stated that the divestiture of the PICC and Midline product portfolios further strengthened the balance sheet and provided an opportunity to enhance focus on the growth of the Med Tech portfolio.
• Mr. Clemmer also noted a strong pick up in growth from both the Med Tech and Med Device portfolios during the quarter and continued efforts to drive margin expansion and profitability.
• He highlighted the settlement agreement with BD/Bard, which provides clarity and certainty going forward, and the FDA 510(k) clearance for AlphaVac in the treatment of pulmonary embolism.

Industry Context

This announcement reflects a strategic shift for AngioDynamics, focusing on its core Med Tech and Med Device businesses while divesting non-core assets. The FDA clearance for AlphaVac is a significant development in the competitive landscape of pulmonary embolism treatment. The company is also navigating challenges related to supply chain and manufacturing transitions, which are common in the medical device industry.

Comparison to Industry Standards

• AngioDynamics' revenue growth of 8.0% in Q3 is a positive sign, but the decline in gross margin to 51.1% is a concern compared to industry leaders such as Medtronic and Boston Scientific, which typically maintain gross margins above 70%.
• The company's adjusted loss per share of $0.16 is not unusual for a company undergoing restructuring and divestitures, but it is worse than some of its peers who are profitable.
• The FDA clearance for AlphaVac is a positive development, but it will need to compete with established products from companies like Penumbra and Inari Medical.
• The company's cash position of $78.5 million is relatively strong, but it will need to manage its cash flow carefully as it continues to invest in its core businesses and navigate the transition to outsourced manufacturing.
• Compared to companies like Stryker and Johnson & Johnson, AngioDynamics is smaller and has less financial resources, which makes its strategic decisions and execution even more critical.

Legal Proceedings

• The company entered into a settlement agreement with Becton, Dickinson and Company to resolve all patent litigation with C.R. Bard, Inc., an affiliate of BD.

Stakeholder Impact

• Shareholders will be impacted by the significant GAAP net loss and the updated financial guidance.
• Employees may be affected by the ongoing restructuring and transition to outsourced manufacturing.
• Customers will benefit from the company's focus on its core businesses and the development of new products like AlphaVac.
• Suppliers may be impacted by the transition to outsourced manufacturing.
• Creditors will be impacted by the company's debt-free status and cash position.

Next Steps

• The company will continue to focus on the growth of its Med Tech portfolio.
• AngioDynamics will continue to execute on its strategic initiatives.
• The company will continue to transition to outsourced manufacturing.
• The company will file its quarterly report on Form 10-Q, which may include adjustments to the goodwill impairment.

Key Dates

Keywords

AngioDynamics, Medical Technology, Med Tech, Med Device, Financial Results, Divestiture, PICC, Midline, Auryon, NanoKnife, AlphaVac, Pulmonary Embolism, FDA Clearance, Goodwill Impairment, Gross Margin, EBITDA, Net Sales, Restructuring, Outsourcing, Settlement