AngioDynamics Reports Fiscal 2018 Second Quarter Financial Results

January 4, 2018

Fiscal 2018 Second Quarter Highlights

  • Net sales of $86.7 million, a decrease of 2.6% year over year
  • U.S. GAAP EPS of $0.01; Adjusted EPS of $0.16 per share
  • Operating cash flow of $10.2 million; free cash flow of $9.4 million

LATHAM, N.Y.--(BUSINESS WIRE)-- AngioDynamics, Inc. (NASDAQ:ANGO), a leading provider of innovative, minimally invasive medical devices for vascular access, peripheral vascular disease, surgery and oncology, today announced financial results for the second quarter of fiscal year 2018, which ended November 30, 2017.

"Our top-line performance during the quarter did not meet our expectations and resulted in a reduction to our full-year net sales and free cash flow guidance. While we continue to improve our operating efficiencies and generate significant cash flow, we recognize that revenue growth is key to accomplishing our strategic goals. Our focus on financial discipline and building a high-quality capital structure will allow us to continue making investments in our innovative product portfolio while also pursuing strategic acquisitions, both of which will ensure that we meet our longer-term revenue and strategic expectations," commented Jim Clemmer, President and Chief Executive Officer of AngioDynamics, Inc.

Second Quarter 2018 Financial Results

Net sales for the second quarter of fiscal 2018 were $86.7 million, a decrease of 2.6%, compared to $89.0 million a year ago, primarily related to declines in the Venous Insufficiency and Core businesses, as well as declines across the majority of the Company's Vascular Access non-BioFlo products. During the same period of fiscal year 2017, the Company reported a $1.0 million increase in sales attributable to inventory build by its customers for these Angiographic Catheter products as a result of a previously disclosed recall by a competitor. Currency did not have a significant impact on the Company's sales in the quarter.

Peripheral Vascular net sales in the second quarter of fiscal 2018 were $51.4 million, a decrease of 4.3% from $53.7 million a year ago, as growth in the Fluid and Thrombus Management product lines was offset by declines in the Venous Insufficiency and Angiographic Catheter businesses, as well as the continued winding down of the Company's supply agreement with Boston Scientific Corporation. Vascular Access net sales were $22.6 million, a decrease of 4.2% from $23.6 million a year ago, as growth in BioFlo related products was more than offset by declines in the remainder of the product lines. Oncology/Surgery net sales were $12.8 million, an increase of 8.4% from $11.8 million a year ago, driven primarily by incremental sales of the recently launched Solero Microwave Tissue Ablation System.

U.S. net sales in the second quarter of fiscal 2018 were $68.3 million, a decrease of 4.4% from $71.4 million a year ago, primarily due to declines in the Venous, Core, and PICCs businesses, partially offset by growth in the Oncology/Surgery portfolio. International net sales in the second quarter of fiscal 2018 were $18.4 million, an increase of 4.6% from $17.6 million a year ago, due to robust sales within the Oncology/Surgery business across several key markets.

Gross margin for the second quarter of fiscal 2018 declined 130 basis points to 49.3% from 50.6% a year ago, primarily driven by an inventory write-off related to VOLTA, the Company's radio frequency ablation product previously sold in Japan. Excluding this inventory write-off, gross margin would have been 51.2%, an increase of 60 basis points year over year.

The Company recorded net income of approximately $0.3 million, or $0.01 per share, in the second quarter of fiscal 2018. This compares to net income of $13.7 million, or $0.37 per share, a year ago, which included adjustments to contingent liabilities from revised sales projections, resulting in a gain of $16.5 million as well as operational improvements, partially offset by a decision to discontinue investments in both EmboMedics and the Company's TiLo product equaling $5.6 million.

Excluding the items shown in the non-GAAP reconciliation table below, adjusted net income for the second quarter of fiscal 2018 was $5.8 million, or $0.16 per share, compared to adjusted net income of $6.9 million, or $0.19 per share, in the second quarter of fiscal 2017.

Adjusted EBITDAS in the second quarter of fiscal 2018, excluding the items shown in the reconciliation table below, was $13.3 million, compared to $15.2 million in the second quarter of fiscal 2017.

In the second quarter of fiscal 2018, the Company generated $10.2 million in operating cash flow and $9.4 million in free cash flow. As of November 30, 2017, the Company had $51.1 million in cash and cash equivalents and $95.0 million in debt, excluding the impact of deferred financing costs.

Six Months Financial Results

For the six months ended November 30, 2017, net sales were $172.1 million, a decrease of 2.8%, compared to $177.1 million for the same period a year ago. The Company's net income was $0.2 million, or $0.01 per share, compared to net income of $15.0 million, or $0.41 per share, a year ago. Excluding the items shown in the non-GAAP reconciliation table below, adjusted net income for the six months ended November 30, 2017 was $10.4 million, or $0.28 per share, compared to an adjusted net income of $13.3 million, or $0.36 per share, a year ago. Adjusted EBITDAS, excluding the items shown in the reconciliation table below, was $24.6 million, compared to $29.5 million for the same period a year ago.

Fiscal Year 2018 Financial Guidance

Based on year-to-date business trends, the Company is reducing its previously announced net sales and free cash flow guidance. The Company now expects its fiscal year 2018 net sales in the range of $345 to $350 million, compared to the previous range of $352 to $359 million, and free cash flow in the range of $30 to $35 million down from greater than $35 million, excluding the potential cash payment related to the previously disclosed legal matters for the Department of Justice subpoenas. The Company reaffirms its previously issued adjusted earnings per share guidance range of $0.64 to $0.68, excluding any impact from the recently enacted 2017 Tax Reform Act.

Conference Call

The Company's management will host a conference call today at 8:00 a.m. ET to discuss its second quarter 2018 results.

To participate in the conference call, dial 877-407-0784 (domestic) or 201-689-8560 (international) and refer to the passcode 13674426.

This conference call will also be webcast and can be accessed from the "Investors" section of the Company's website at www.angiodynamics.com. The webcast replay of the call will be available at the same site approximately one hour after the end of the call.

A recording of the call will also be available from 11:00 a.m. ET on Thursday, January 4, 2018, until 11:59 p.m. ET on Thursday, January 11, 2018. To hear this recording, dial 844-512-2921 (domestic) or 412-317-6671 (international) and enter the passcode 13674426.

Use of Non-GAAP Measures

Management uses non-GAAP measures to establish operational goals and believes that non-GAAP measures may assist investors in analyzing the underlying trends in AngioDynamics' business over time. Investors should consider these non-GAAP measures in addition to, not as a substitute for or as superior to, financial reporting measures prepared in accordance with GAAP. In this news release, AngioDynamics has reported adjusted EBITDAS, adjusted gross margin, adjusted net income, adjusted earnings per share and free cash flow. Management uses these measures in its internal analysis and review of operational performance. Management believes that these measures provide investors with useful information in comparing AngioDynamics' performance over different periods. By using these non-GAAP measures, management believes that investors get a better picture of the performance of AngioDynamics' underlying business. Management encourages investors to review AngioDynamics' financial results prepared in accordance with GAAP to understand AngioDynamics' performance taking into account all relevant factors, including those that may only occur from time to time but have a material impact on AngioDynamics' financial results. Please see the tables that follow for a reconciliation of non-GAAP measures to measures prepared in accordance with GAAP.

About AngioDynamics, Inc.

AngioDynamics, Inc. is a leading provider of innovative, minimally invasive medical devices used by professional healthcare providers for vascular access, surgery, peripheral vascular disease and oncology. AngioDynamics' diverse product lines include market-leading ablation systems, fluid management systems, vascular access products, angiographic products and accessories drainage products, thrombolytic products and venous products. For more information, visit www.angiodynamics.com.

Safe Harbor

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements regarding AngioDynamics' expected future financial position, results of operations, cash flows, business strategy, budgets, projected costs, capital expenditures, products, competitive positions, growth opportunities, plans and objectives of management for future operations, as well as statements that include the words such as "expects," "reaffirms," "intends," "anticipates," "plans," "believes," "seeks," "estimates," "optimistic," or variations of such words and similar expressions, are forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. Investors are cautioned that actual events or results may differ from AngioDynamics' expectations. Factors that may affect the actual results achieved by AngioDynamics include, without limitation, the ability of AngioDynamics to develop its existing and new products, technological advances and patents attained by competitors, infringement of AngioDynamics' technology or assertions that AngioDynamics' technology infringes the technology of fourth parties, the ability of AngioDynamics to effectively compete against competitors that have substantially greater resources, future actions by the FDA or other regulatory agencies, domestic and foreign health care reforms and government regulations, results of pending or future clinical trials, overall economic conditions, the results of on-going litigation, challenges with respect to fourth-party distributors or joint venture partners or collaborators, the results of sales efforts, the effects of product recalls and product liability claims, changes in key personnel, the ability of AngioDynamics to execute on strategic initiatives, the effects of economic, credit and capital market conditions, general market conditions, market acceptance, foreign currency exchange rate fluctuations, the effects on pricing from group purchasing organizations and competition, the ability of AngioDynamics to integrate purchased businesses, as well as the risk factors listed from time to time in AngioDynamics' SEC filings, including but not limited to its Annual Report on Form 10-K for the year ended May 31, 2017. AngioDynamics does not assume any obligation to publicly update or revise any forward-looking statements for any reason.

In the United States, the NanoKnife System has received a 510(k) clearance by the Food and Drug Administration for use in the surgical ablation of soft tissue, and is similarly approved for commercialization in Canada, the European Union and Australia. The NanoKnife System has not been cleared for the treatment or therapy of a specific disease or condition.

 
 
ANGIODYNAMICS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(in thousands, except per share data)
           
Three months ended Six months ended
November 30, November 30, November 30, November 30,
2017 2016 2017 2016
(unaudited) (unaudited)
 
Net sales $ 86,706 $ 89,029 $ 172,117 $ 177,127
Cost of sales (exclusive of intangible amortization)   43,975   44,019   88,157   87,085
Gross profit   42,731   45,010   83,960   90,042
% of net sales 49.3% 50.6% 48.8% 50.8%
 
Operating expenses
Research and development 6,107 5,913 12,548 12,622
Sales and marketing 18,967 19,469 38,369 38,924
General and administrative 7,540 7,839 15,596 16,040
Amortization of intangibles 4,146 4,291 8,242 8,526
Change in fair value of contingent consideration 82 (15,951) 187 (15,508)
Acquisition, restructuring and other items, net   4,766   7,861   7,755   10,278
Total operating expenses   41,608   29,422   82,697   70,882
Operating income 1,123 15,588 1,263 19,160
Interest expense, net (760) (810) (1,483) (1,529)
Other (expense), net   (280)   (363)   287   (313)
Total other expense, net (1,040) (1,173) (1,196) (1,842)
Income (loss) before income taxes 83 14,415 67 17,318
Income tax expense   (166)   681   (147)   2,284
Net income (loss) $ 249 $ 13,734 $ 214 $ 15,034
 
Earnings (loss) per share
Basic $ 0.01 $ 0.37 $ 0.01 $ 0.41
Diluted $ 0.01 $ 0.37 $ 0.01 $ 0.41
 
Weighted average shares outstanding
Basic 37,066 36,807 36,983 36,606
Diluted 37,383 37,146 37,322 37,000
 
 
ANGIODYNAMICS, INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
(in thousands, except per share data)
           
Reconciliation of Gross Profit to non-GAAP Adjusted Gross Profit
 
Three months ended Six months ended
November 30, November 30, November 30, November 30,
2017 2016 2017 2016
(unaudited) (unaudited)
 
Gross profit $ 42,731 $ 45,010 $ 83,960 $ 90,042
 
Inventory charge included in cost of sales   -     202     -     201  
Adjusted gross profit $ 42,731   $ 45,212   $ 83,960   $ 90,243  
Adjusted gross profit % of sales 49.3 % 50.8 % 48.8 % 50.9 %
 
Reconciliation of Net Income to non-GAAP Adjusted Net Income:
 
Three months ended Six months ended
November 30, November 30, November 30, November 30,
2017 2016 2017 2016
(unaudited) (unaudited)
 
Net income (loss) $ 249 $ 13,734 $ 214 $ 15,034
 
Inventory charge included in cost of sales - 202 - 201
Amortization of intangibles 4,146 4,291 8,242 8,526
Change in fair value of contingent consideration 82 (15,951 ) 187 (15,508 )
Acquisition, restructuring and other items, net (1) 4,766 7,861 7,755 10,278
Tax effect of non-GAAP items (2)   (3,434 )   (3,213 )   (5,997 )   (5,209 )
Adjusted net income $ 5,809   $ 6,924   $ 10,401   $ 13,322  
 
 
Reconciliation of Diluted Earnings Per Share to non-GAAP Adjusted Diluted Earnings Per Share:
 
Three months ended Six months ended
November 30, November 30, November 30, November 30,
2017 2016 2017 2016
(unaudited) (unaudited)
 
Diluted earnings (loss) per share $ 0.01 $ 0.37 $ 0.01 $ 0.41
 
Inventory charge included in cost of sales - 0.01 - 0.01
Amortization of intangibles 0.11 0.12 0.22 0.23
Change in fair value of contingent consideration 0.00 (0.43 ) 0.01 (0.42 )
Acquisition, restructuring and other items, net (1) 0.13 0.21 0.21 0.27
Tax effect of non-GAAP items (2)   (0.09 )   (0.09 )   (0.17 )   (0.14 )
Adjusted diluted earnings per share $ 0.16   $ 0.19   $ 0.28   $ 0.36  
 
 
Adjusted diluted sharecount 37,383 37,146 37,322 37,000
 
(1) Includes costs related to mergers and acquisition activities, integrations, restructurings, asset impairments and write-offs, litigation, and other items.
(2) Represents the net tax effect of non-GAAP adjustments. Based on our historical non-GAAP earnings, our tax effect of non-GAAP items has been calculated assuming no valuation allowance on our deferred tax assets and an effective tax rate of 36%.
 
 
ANGIODYNAMICS, INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION (Continued)
(in thousands, except per share data)
             
Reconciliation of Net Income to EBITDAS and Adjusted EBITDAS:
 
Three months ended Six months ended
November 30, November 30, November 30, November 30,
2017 2016 2017 2016
(unaudited) (unaudited)
 
Net income (loss) $ 249 $ 13,734 $ 214 $ 15,034
 
Income tax expense (166 ) 681 (147 ) 2,284
Interest expense, net 760 810 1,483 1,529
Depreciation and amortization 5,884 6,133 11,677 12,286
Stock-based compensation   1,966     1,701     3,763     3,385  
EBITDAS $ 8,693   $ 23,059     16,990     34,518  
 
Inventory charge included in cost of sales - 202 - 201
Change in fair value of contingent consideration 82 (15,951 ) 187 (15,508 )
Acquisition, restructuring and other items, net (1,2)   4,560     7,861     7,441     10,278  
Adjusted EBITDAS $ 13,335   $ 15,171   $ 24,618   $ 29,489  
 
Per diluted share:
EBITDAS $ 0.23 $ 0.62 $ 0.46 $ 0.93
Adjusted EBITDAS $ 0.36 $ 0.41 $ 0.66 $ 0.80
 
(1) Includes costs related to mergers and acquisition activities, integrations, restructurings, asset impairments and write-offs, litigation, and other items.
(2) Excludes depreciation expense captured in the depreciation and amortization component of the reconciliation.
 
 
ANGIODYNAMICS, INC. AND SUBSIDIARIES
NET SALES BY PRODUCT CATEGORY AND BY GEOGRAPHY
(unaudited in thousands)
                       
Three months ended Six months ended
Currency Constant Currency Constant
November 30, November 30, % Impact Currency November 30, November 30, % Impact Currency
2017 2016 Growth (Pos) Neg Growth 2017 2016 Growth (Pos) Neg Growth
 
Net Sales by Product Category
Peripheral Vascular $ 51,368 $ 53,696 -4% $ 101,234 $ 105,725 -4%
Vascular Access 22,574 23,553 -4% 45,812 48,558 -6%
Oncology/Surgery   12,764   11,780 8%   25,071   22,844 10%
Total $ 86,706 $ 89,029 -3% 1% -2% $ 172,117 $ 177,127 -3% 0% -3%
 
Net Sales by Geography
United States $ 68,301 $ 71,431 -4% 0% -4% $ 137,232 $ 143,638 -4% 0% -4%
International $ 18,405 $ 17,598 5% 2% 7%   34,885   33,489 4% 2% 6%
Total $ 86,706 $ 89,029 -3% 1% -2% $ 172,117 $ 177,127 -3% 0% -3%
     
 
ANGIODYNAMICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
         
November 30, May 31,
2017 2017
(unaudited)
Assets
Current Assets
Cash and cash equivalents $ 49,856 $ 47,544
Marketable securities   1,260   1,215
Total cash and investments 51,116 48,759
 
Accounts receivable, net 42,073 44,523
Inventories 54,032 54,506
Prepaid income taxes 432 336
Prepaid expenses and other   4,842   5,790
Total current assets 152,495 153,914
 
Property, plant and equipment, net 43,767 45,234
Other non-current assets 2,855 1,886
Intangible assets, net 137,437 145,675
Goodwill   361,252   361,252
Total Assets $ 697,806 $ 707,961
 
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 21,800 $ 18,087
Accrued liabilities 30,800 38,804
Current portion of long-term debt 5,000 5,000
Current portion of contingent consideration   2,060   9,625
Total current liabilities 59,660 71,516
Long-term debt, net of current portion 88,973 91,320
Deferred income taxes, long-term 26,006 26,112
Contingent consideration, net of current portion 1,138 3,136
Other long-term liabilities   809   850
Total Liabilities 176,586 192,934
 
Stockholders' equity   521,220   515,027
Total Liabilities and Stockholders' Equity $ 697,806 $ 707,961
 
 
ANGIODYNAMICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
           
Three months ended Six months ended
November 30, November 30, November 30, November 30,
2017 2016 2017 2016
(unaudited) (unaudited) (unaudited)
 
Cash flows from operating activities:
Net income (loss) $ 249 $ 13,734 $ 214 $ 15,034
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 5,884 6,133 11,677 12,286
Stock-based compensation 1,966 1,701 3,763 3,385
Change in fair value of contingent consideration 82 (15,951 ) 187 (15,508 )
Deferred income taxes (24 ) 505 (106 ) 2,070
Change in accounts receivable allowance 2 (413 ) 280 (610 )
Loss on disposal of long-term assets 8 3,744 8 3,744
Write-off of other assets - 2,640 - 2,685
Other 10 (594 ) (557 ) (576 )
Changes in operating assets and liabilities, net of acquisitions: - -
Receivables (804 ) 221 2,299 3,043
Inventories 1,379 1,491 598 (1,558 )
Prepaid and other assets (1,323 ) 401 (703 ) (468 )
Accounts payable and accrued liabilities   2,736     1,335     (4,459 )   (1,140 )
Net cash provided by operating activities   10,165     14,947     13,201     22,387  
 
Cash flows from investing activities:
Additions to property, plant and equipment (721 ) (1,365 ) (1,222 ) (1,846 )
Proceeds from sale or maturity of marketable securities   -     450     -     450  
Net cash used in investing activities   (721 )   (915 )   (1,222 )   (1,396 )
 
Cash flows from financing activities:
Proceeds from issuance of long-term debt and revolver borrowings - 116,471 - 116,471
Repayment of long-term debt (1,250 ) (118,910 ) (2,500 ) (121,410 )
Deferred financing costs on long-term debt - (1,177 ) - (1,177 )
Payment of contingent consideration (7,400 ) (7,750 ) (9,500 ) (9,850 )
Repurchase of shares - (7,840 ) - (7,840 )
Proceeds from exercise of stock options and ESPP   926     3,601     1,738     6,404  
Net cash provided by (used in) financing activities   (7,724 )   (15,605 )   (10,262 )   (17,402 )
 
Effect of exchange rate changes on cash   (64 )   (174 )   595     (258 )
Increase in cash and cash equivalents 1,656 (1,747 ) 2,312 3,331
 
Cash and cash equivalents
Beginning of period   48,200     37,411     47,544     32,333  
End of period $ 49,856   $ 35,664   $ 49,856   $ 35,664  
 
 
ANGIODYNAMICS, INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
(in thousands)
           
Reconciliation of Free Cash Flows:
 
Three months ended Six months ended
November 30, November 30, November 30, November 30,
2017 2016 2017 2016
(unaudited) (unaudited)
 
Net cash provided by operating activities $ 10,165 $ 14,947 $ 13,201 $ 22,387
Additions to property, plant and equipment   (721 )   (1,365 )   (1,222 )   (1,846 )
Free Cash Flow $ 9,444   $ 13,582   $ 11,979   $ 20,541  

Investor Contact:
AngioDynamics, Inc.
Michael Greiner, 518-795-1821
Executive Vice President & CFO

Source: AngioDynamics, Inc.

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