AngioDynamics Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
January 5, 2024

There are 8 speakers on the call.

Operator

Good morning, and welcome to the AngioDynamics Fiscal Year 20 24 Second Quarter Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference call is being recorded. The news release detailing AngioDynamics' fiscal 2024 Second Quarter Results Crossed the wire earlier this morning and is available on the company's website.

Operator

This conference call is also being broadcast live over the Internet At the Investors section of the company's website at www.angiodynamics.com, Before we begin, I would like to caution listeners that during the course of this conference call, the company will make projections or forward looking statements regarding future events, including statements about expected revenue, adjusted earnings and gross margins for fiscal year 2024 as well as trends that may continue. Management encourages you to review the company's past and future filings with the SEC, including without limitation, The company's forms 10Q and 10 ks, which identify specific factors that may cause the actual results or events to differ materially from those described in the forward looking statements. The company will also discuss certain non GAAP and pro form a financial measures during this call. Management uses these measures to establish operational goals and review operational performance and believes that these measures may assist investors in analyzing the underlying trends in the company's business over time. Investors should consider these non GAAP and pro form a measures in addition to, not as a substitute for or as superior to Financial reporting measures are prepared in accordance with GAAP.

Operator

A slide package offering insight into the company's financial results is also available On the Investors section of the company's website, under Events and Presentations, this presentation should be read in conjunction with the press release Discussing the company's operating results and financial performance during this morning's conference call. I'd now like to turn the call over to Jim Clemmer, AngioDynamics' President and Chief Executive Officer. Mr. Clemmer?

Speaker 1

Thank you, Rob, and good morning, everyone, and thanks for joining us today For our fiscal 2024 Second Quarter Earnings Call. Joining me on today's call is Steve Trowbridge, Andrew Dynamics, Executive Vice President and Chief Financial Officer, who will provide a more detailed analysis of our Q2 financial performance as well as the manufacturing and restructuring that we announced this morning. Unless otherwise noted, all financial metrics and growth rates Provided during the call today with respect to our results will be on a pro form a basis, which excludes the impact of our divested dialysis and BioSentry businesses. Before digging into our quarterly results, We are announcing significant steps in our long term strategic transformation. During the Q2, We continue to actively pursue portfolio optimization opportunities and we made progress on that front.

Speaker 1

In addition, this morning we announced a planned restructuring of our manufacturing footprint By moving to a fully outsourced model. With these moves, we will remain focused on generating continued growth Importantly, when the dust settles from our initiatives at the end of our 2 year plan, we expect to achieve full year profitability In FY 2027, both Steve and I will go into additional details later in the call. But now let me get back to Q2. Our Q2 of fiscal 2024 saw year over year growth, But we also faced headwinds, particularly in our thrombectomy business. We ended the 2nd quarter With revenue of $79,100,000 representing growth of approximately 3% over year, led by growth of approximately 4% from our MedTech segment.

Speaker 1

While growth of the MedTech segment was a bit behind our expectations, Particularly in mechanical thrombectomy, our adjusted EPS was a loss of $0.05 as we remained focused Our mechanical thrombectomy business, which includes AngioVac and Alphavac declined 4.7% year over year. We are disappointed by these results as clearly the growth trajectory of this business is taking longer to inflect than we had expected. We attribute some of the softness to slightly weaker than anticipated procedural volumes late in our quarter, But we also believe the steps we are taking to drive this business are gaining positive traction. For example, Following on the heels of receiving the breakthrough designation for the use of AngioVac to remove right heart vegetation, We continue working diligently with the FDA toward receiving final approval to begin our IDE study. While Alphavac revenues were softer than we would have liked this quarter, what we've learned over the past 18 months It's that physicians value their steerability, simplicity and safety of the device.

Speaker 1

And we look forward to the introduction As announced in early December, we enrolled our final patient in our APeX AV study, which is designed to assess the performance of the ALPHAVAC F-eighteen system in reducing thrombus burden and improving right ventricular function. We look forward to collecting data from this study at the 30 day follow-up stage, Then submitting our data to the FDA in the early part of calendar year 2024 to support an expanded indication For Alphavac F-eighteen to treat pulmonary embolism. We believe the softer than anticipated Alphavac sales during the quarter Partially stem from a wind down at many of our sites as we approach the completion enrollment in the APeXPE trial. And we expect some continued softness between the completion of the trial and the FDA approval of the PE indication As the device does not have a specific PE clearance and is competing against 2 existing products that do, We fully expect that once we receive our anticipated approval letter later this calendar year, We will have a highly competitive and differentiated product in what remains a large, underpenetrated, high growth market. Because of the tremendous interest from the physician community, we were able to complete our study as quickly as we did In a time that outpaced the previous competitive studies and we are excited about the path ahead.

Speaker 1

Turning to our NanoKnife business. We saw sales grow approximately 2.8% during the 2nd quarter, With sales of probes declining 3.6%. Probe sales grew in the U. S. But declined internationally due to timing Both bringing on new distributors during the previous year's quarter and distributor orders during this year's quarter.

Speaker 1

Stronger international capital sales during the quarter Offset the decline in probes and will drive additional probe growth in future periods as those units come online. Year to date, NanoKnife probes were up 12.9 percent and total NanoKnife sales are up 16.7%. We continue to expect strong growth From this business on an annual basis, while anticipating quarter to quarter fluctuations in both probes and capital sales As historically has been the case. During the Q2, we saw solid growth of our Aireon platform, Up 12.9% year over year. And we're excited to tell you that in November, we reached an important milestone Having achieved $100,000,000 in cumulative revenue since we launched this product in September of 2020, We did experience some delays in sales related to the recent increased attention around pre authorizations.

Speaker 1

But we believe that over the long term, the unique way that we deliver laser energy and safely treat disease vessels We'll continue to drive increased share and provide the foundation for continued strong growth. Growth of approximately 2% in our med device segment was primarily driven by angiographic catheter products and our ports, which grew 8% and 5.5% respectively. In the Q2 of FY 2024, Our international business grew 12.6% year over year with double digit growth from both our medtech and our med device segments. We also hosted our 3rd International Clinical Life Symposium, which has led to increased interest in our medtech products, And we have generated a meaningful pipeline of global physicians who are excited to utilize our products in caring for their patients. Now turning to our strategic initiatives that I mentioned earlier.

Speaker 1

We told you over the past several quarters That we were further evaluating the products in our med device portfolio, and we remain engaged in active discussions to do just that. We advanced this initiative during the Q2, and we look forward to providing you with additional sales soon when we are able to. In addition to our continued portfolio optimization efforts, we are also increasing our focus on reducing structural costs Within our manufacturing footprint and transitioning our upstate New York manufacturing operations So we fully outsourced model over the next 2 years. As a reminder, roughly 80% Our MedTech revenue is already leveraging this 3rd party manufacturing model. As many of you already know, We began moving some of our med device manufacturing capacity to Costa Rica over the past couple of years as we began to see labor shortages Fully moving both medtech and med device to this model We'll drive an annualized savings of roughly $15,000,000 by our FY 'twenty seven, driving significant gross margin improvement And equally as important, giving us a pathway to full year profitability by FY 2027.

Speaker 1

Steve will cover this in more detail, but we believe this is a significant advancement of our long term strategy That simplifies our operations while allowing us to invest in the long term growth of our MedTech portfolio and the overall business while still driving profitability. Shifting back to the near term, We're excited for what lies ahead in calendar 2024. This month, we will commence the limited market release of our Aireon radial catheter, which will provide physicians an access point at the wrist, enabling faster, less invasive procedures. This release will be the first of 6 planned product releases for ARIAD during calendar year 2024. In the second half of calendar year twenty twenty four, we will launch 2 new design enhancements for Alphavac, Designed around physician feedback we've received and we'll provide more details on those as we get closer to launch.

Speaker 1

We've also got an exciting schedule of regulatory clearance On the horizon, we are projecting EU approval of Aireon and Alphavac PE In the first half of calendar year twenty twenty four. Next, we also expect U. S. Approval of Alphavac PE Mid calendar year. And then finally in July, the preserved 12 month follow-up will be complete, putting us on track for potential FDA approval in late calendar 2024 or early calendar 2025.

Speaker 1

These introductions and regulatory clearances are critical parts of the strategy that we laid out for you In our July 2021 Investor and Technology Day, these open up significantly larger, higher growth addressable markets. We are excited about the strategic initiatives that we've shared with you this morning and about the future of our portfolio. And we hope the impacts of our strategic transformation are becoming more apparent each quarter. With that, I'll turn the call over to Steve Drogridge to review the quarter in more detail. Steve?

Speaker 2

Thanks, Jim. Good morning, everyone. Before I begin, I'd like to direct everyone to the presentation on our Investor Relations website summarizing the key items from our quarterly results. As Jim mentioned, unless otherwise noted, all metrics and growth rates mentioned during today's call are on a pro form a basis and exclude the results of the dialysis BioSentry businesses that we divested in mid June. Similar to Jim, I'll start with the Q2 before shifting to today's strategic announcements.

Speaker 2

Our revenue for the Q2 of FY 2024 increased 2.7% year over year to $79,100,000 Driven by growth in both our medtech and med device platforms. Medtech revenue was $25,400,000 a 3.5% year over year increase, Almed device revenue was $53,700,000 growing 2.3% compared to the Q2 of FY 2023. Year to date, our overall revenue was up 4.2% year over year with our MedTech segment up 8.3% And our Med Device segment up 2.3%. For the 2nd fiscal quarter, our Med Tech platforms comprised 32.1% of our total revenue compared to 31.8 percent of total revenue a year ago. For the 6 months ended November 30, 2023, Our MedTech segment comprised 32.6 percent of our total revenue base versus 31.4% as of 1 year ago.

Speaker 2

Our Aeryon platform contributed $11,400,000 in revenue during the Q2, growing 12.9% compared to last year. Year to date, our Aireon platform is up 18.9% year over year. Mechanical thrombectomy revenue, Alphavac revenue for the Q2 was $1,900,000 AngioVac revenue was $5,400,000 in the quarter, Representing a decline of 10.8% over the prior year. But we did not see the rebound in AngioVac revenues that we had anticipated as procedure volumes Came in lighter than expected, particularly late in the quarter. We remain confident that mechanical thrombectomy will be a strategic such as the APeX pulmonary embolism study.

Speaker 2

NanoKnife disposable revenue during the quarter decreased 3.6% year over year. Disposable growth of 4% in the U. S. Was offset by a year over year decline in international markets. As Jim said, the year over year quarterly decline in international markets was primarily driven by timing of distributor orders, although procedure volume remained very strong during the quarter.

Speaker 2

Capital sales were robust in the quarter growing 22.8% and this is a strong driver of future disposable sales. Year to date, NanoKnife disposables sales are up 12.9% and total NanoKnife sales are up 16.7%. In addition, as a reminder, earlier this year, we announced that enrollment in PRESERV is now 100% complete. And as this data starts to be made public over the course of this year, We look forward to sharing it with you. In the Q2, our med device segment grew 2.3% year over year, led by strength in our angiographic catheter and port products.

Speaker 2

Moving down the income statement, our gross margin for the Q2 of FY 2024 50.9%, a decrease of 80 basis points compared to the year ago period. For the 2nd fiscal quarter, MedTech gross margin was 62.4%, a decrease of 130 basis points and med device gross margin was 45.5%, decrease of 60 basis points each when compared to the Q2 of last year. The year to date gross margin for FY 2024 was 50.8%, A decrease of 60 basis points versus prior year with MedTech gross margins of 63.5% and Med Device gross margins of 44.7%. Year over year gross margins for both the quarter and year to date were positively impacted by sales volume, production volume and reduced cost for both freight expenses and direct labor retention payments, but were offset by sales mix, Hardware placements and continued albeit reduced material and labor inflation. As we've discussed, our strategic business model contemplates gross margin expansion as our higher margin medtech segment continues to become a larger portion of our overall revenue base.

Speaker 2

As mentioned last quarter, the next phase of our transformation is to address the scale and structural limitations of our operating footprint In a capital efficient manner, this morning's announcement regarding restructuring our manufacturing footprint and transitioning our upstate New York manufacturing operations To a fully outsourced model, we'll address these structural cost limitations, meaningfully improve gross margins and lead the full year adjusted EPS profitability in FY 2027. We expect that our manufacturing restructuring will result in annualized savings Roughly $15,000,000 with the full annualized impact being realized in FY 20 27. In addition, as we previously discussed, We're continuing to have productive conversations around further optimizing our portfolio and we will provide you with more details when appropriate. Turning to R and D, our research and development expense during the Q2 of FY 2024 was $8,700,000 or 10.9 percent of sales Compared to $6,800,000 or 8.8 percent of sales a year ago, spending on clinical programs was 18.8 percent of total R and D during the Q2 of fiscal 2024 compared to 14.1% during the Q2 of last year and 18.6% for the full fiscal year 2023. This mix shift within our R and D spending is well aligned with our long term strategy SG and A expense for the Q2 of FY 2024 was $34,800,000 representing 44 percent of sales Compared to $36,800,000 or 47.8 percent of sales a year ago, our adjusted net loss for the Q2 of FY 2024 was 2,000,000 or adjusted loss per share of $0.05 compared to an adjusted net loss of $3,600,000 or adjusted loss per share of $0.09 in the Q2 of last year.

Speaker 2

Adjusted EBITDA in the Q2 of FY 2024 was $1,800,000 compared to adjusted EBITDA of $2,300,000 in the Q2 of FY 2020 3. In the Q2 of fiscal 2024, we generated $5,300,000 in operating cash, had capital expenditures of 600,000 In addition to Aeryon placement and evaluation units of $1,200,000 at November 30, 2023, we had $60,900,000 in cash and cash compared to $44,600,000 in cash and cash equivalents at May 31, 2023. And as a reminder, we have 0 debt on the balance sheet. Turning now to guidance. We now anticipate that FY 2024 revenue will be in the range of $320,000,000 to $325,000,000 below our prior guidance of $3.28 to $3.33 This accounts primarily for the softer thrombectomy sales during the fiscal second quarter, which we now expect will continue throughout the back half of the year as well as certain SKU rationalization and other impacts associated With the manufacturing restructuring we announced this morning.

Speaker 2

We now expect full year adjusted loss per share to be in the range of $0.35 to $0.42 We expect FY 2020 4 gross margin to be in the range of 49% to 51% compared to pro form a FY 2020 3 gross margin of 50.5%. As a result of the mix shift occurred due to lower expected medtech revenue. For FY 2024, we now expect Tech revenue growth in the range of 10% to 15%, down from 20% to 25% to account for the thrombectomy weakness we saw during the 2nd quarter persisting through the remainder of this year. We continue to expect med device revenue growth in the range of 1% to 3%. We now expect MedTech gross margins in the range of 61% to 63% and Med Device gross margins in the range of 43% to 45%.

Speaker 2

As we mentioned earlier, we expect the manufacturing restructuring to have a meaningful impact on our margin structure over the coming years and look forward to providing you with more details as that work is underway in the coming months. Today's announcement is a significant step in our strategic transformation that gets us closer to the company we strive to be, a profitable business focused on unique medical technology platforms that improve patient outcomes In large, underpenetrated, high growth markets. Finally, I would like to thank our team here at AngioDynamics for their hard work and commitment. We're looking forward to sharing more about these initiatives with you in the coming months while executing further on our strategy and delivering a strong second half for fiscal 2024. With that, I'll turn it back to Jim.

Speaker 1

Thanks, Steve. And for those joining, thank you for your time this morning. What you see is a company in transformation, Looking to do the balance today of making sure our investments and costs that we spend are aligned to the outcomes that we want to see In the markets we serve and the markets we seek to grow in, taking out significant structural costs that don't have a lot of product For customer benefit are important steps in that. We'll continue to do that with an eye to the bottom line, but also maintaining investments To optimize the opportunity that we've set forth in front of us, we have unique opportunities in large and fast growing markets. We want to make sure we can maximize the opportunity to treat cardiovascular disease, primarily in venous or in arterial needs.

Speaker 1

We also know that our unique NanoLife Can treat solid tumors in areas like prostate cancer. We look forward to following our customers to where they seek to grow with our products. Thanks for joining us today. Rob, I'll turn it back to you.

Operator

Thank you. We'll now be conducting our question and answer Thank you. Thank you. We have our first question coming from the line of Yi Chen with H. C.

Operator

Wainwright. Please proceed with your question.

Speaker 3

Hi. Thank you for taking my question. Just want to clarify, the gross margin, will it continue to decrease until you complete the To our third party manufacturer.

Speaker 2

You'll see some back and forth Yi thanks for the question. There are going to be costs that are going to be taken out through this process. You're going to see the most impactful benefit come when we are able to finally Close the doors and do that full shift to the manufacturing. As we head into giving you guidance to for future years we move into 2025 and 2026, we'll give you a little bit more clarity around the cadence from that. So I would expect you're going to see a little bit of movements, but with that most significant movement Coming at the end of the 2 year period and then certainly being there for the full year of FY 2027.

Speaker 1

And Yi, during that 2 year period as well, The product mix shift as the MedTech products that have a higher gross margin than our corporate gross margin average will become a faster growing piece. So as long as what Steve said, as we take those costs out of the back end, we also expect to see a mix shift that's positive throughout that 2 year cycle and far beyond. Thanks.

Speaker 3

Thank you. And regarding the sales for thrombectomy, are there any factors that you Back to drive the sales, to increase the sales in the coming years.

Speaker 1

There are Yi. First of all, AngioVac, Again, announcing the breakthrough designation that we received from the FDA a few months back and then getting that IDE aligned to our expectations to graft to the right heart vegetation opportunity we think is significant for AngioVac, but larger than that Alphavac. Yi, we mentioned on the call earlier that we look forward to have our CE mark in the first half of calendar year 2024 opens up a significant market for us and it's timed almost in the same series that will get, we believe, our FDA indication For our PE for the F-eighteen here in the U. S. So over the next 6 months, we'll work hard to educate and train our sales and clinical teams And get ready to go to the markets that we can serve.

Speaker 1

These are really large markets. What we've learned during the APeX study from Alphavac The physicians really like the novel design features in the product. The study would not have been completed as fast as it was If people didn't see the novel design elements that led to what we think are really positive patient outcomes. So Yi, really, we've got to sit tight for a bit And make sure we're prepared for a full global launch later in calendar 2024.

Speaker 3

That's very helpful. Thank you very much.

Operator

Thank you. And our next question comes from the line of John Young with Canaccord Genuity. Please proceed with your questions.

Speaker 4

Hey, Jim and Steve, can you hear me okay?

Speaker 1

Thanks, John. Good morning.

Speaker 4

Good morning. Thanks for taking our question. Just maybe on Can you just go a little bit more in detail about the headwinds that you're talking about? I know in the past you put new sales leadership and training there And you recently got that breakthrough device designation to Bright Heart vegetation. What isn't working there and what are you going to do to remedy this?

Speaker 1

John, for AngioVac, it's been a challenge. We mentioned before that we serve a smaller market opportunity with AngioVac than we do with Alphavac. So opening up that right heart vegetation opportunity that we're working with the FDA on is important for us. But again, AngioVax is only going to serve a limited market. What we've done since we talked to you last summer, a brand new sales leader who's terrific built a new sales team around some people that were here already that knew the products Wanted to work in this environment when we open up these new markets and Alphavac PE being the largest.

Speaker 1

We've also fully realized Now, a new training module and we fully staffed our sales force for the first time. So we're really ready. We're in a phase now where we're training and developing their capabilities, Getting them educated on the markets we'll serve, both for angioVac as you mentioned, which is complex as you know and limited and the larger less limited market That is open to us in the future when the Alphavac PE becomes granted. So we're doing our work in the back end, training, educating our teams,

Speaker 4

And then just on shifting to ALFAVAC2, You mentioned the 2.0 that's going to launch this calendar year. Can you talk about the improvements? And are you going to seek any ASP And can you maybe just talk about today the pricing versus the market and your pricing on par or above or below market? Thank you.

Speaker 1

Good questions, John. So, Alphavac is really a unique and novel device. And again, I'll let the study speak for itself. Hopefully, you'll see some data being published this calendar year with study results when they become available. But there's some design elements that are unique.

Speaker 1

For instance, physicians are so used to placing wires when you're treating this part of the anatomy and guiding catheters through the anatomy, which is torturous With UC guide wires and so forth, we designed the Alphavac with one of the unique design elements is that you don't need to drop a wire or place a wire. Most physicians look at us like, why wait a minute, you can't do that. And they still can do that if they choose. But over time, we found they get confident and comfortable with the design elements of the device. They don't need to do that.

Speaker 1

It allows them the steerability options we've built in to go back and forth between the different parts of the atrium And to really treat the body in a different way, it's faster and safer, we believe. So some really unique design elements that are already built in the product that we've heard great feedback on We've collected other feedback from some design enhancements they'd like to see. And that's what we'll offer later this calendar year when we come out with our 2nd gen product, which is timed really well with Today, John, we talked about the pricing in the market is in the $8,000 mark. In that range, we think is uniquely priced right to be competitive with the other products out there. And the value that our customers receive, we think has been really high.

Speaker 1

They've really shown a willingness to adapt that price point. It's a good price point for us in this market. I can't speak to the other companies. We know where They price the product, some do it differently, but we think we're in a good spot there. The product will have a high gross margin at that range and we look to grow in that range of pricing For years to come.

Speaker 4

Great. Thank you so much.

Operator

Our next question is from the line of Jayson Bedford with Raymond James. Please proceed with your questions.

Speaker 5

Good morning, Guys and happy New Year here. Just a few questions. On the AlfaVac improvements, Just from a regulatory standpoint, do they require an additional 510 or can you launch them without Any new regulatory approvals?

Speaker 1

Hi, Jason. So the regulatory team is working with the R and D team. So I think that one of the enhancements actually requires A new F-five ten, one does not. So these are design changes that were planned in with the R and D and the regulatory teams. That's why we're looking at that second half of this calendar year is a cycle that the regulatory teams, quality teams and R and D teams have targeted.

Speaker 1

We feel confident we'll hit those cycles.

Speaker 5

Okay. And then just on thrombectomy, you mentioned some procedural softness late in the quarter. I'm just wondering, What do you attribute the softness to?

Speaker 1

Yes, Jason, we obviously measure this very closely with our customers. And we saw that softness occur In that November timeframe, and we talked to our customers. We had 2 things happening. There was actually a wind down. We're getting very close to the end of the APeX study And our study sites knew that.

Speaker 1

So some were finishing up, some were winding down. So we're kind of careful how we measure this. But we also had a lot of conversations with our customers. We quote unquote same store sales, people who use a certain amount of the product, their usage went down. We spoke to them and a couple shrugged their shoulders a bit and said, hey, we haven't seen the patients come through Lately at the rate they normally do, little less control they had or we had over that marketplace.

Speaker 1

It was not Huge, but enough for us as it's still a small business for us, off of that getting growing. So it's impactful for us. We watch it closely. So there's a couple of factors there. We don't want to put our arms around any one in particular.

Speaker 1

Again, the opportunity that we have with training and education Of our team getting them ready for the PE launch later this calendar year, we think is most impactful. Whether there's a bit of softness back and forth won't really matter then because the upside opportunity We believe it's significant for us.

Speaker 5

And have you seen a bit of a rebound in December?

Speaker 1

Yes, a little bit, go back a little bit, not a whole lot. Again, as I said, we're measuring it differently. And also, Jason, we have the other factor where The first couple of days in December where the final patients were enrolled. So we completed the study in the 1st couple of days of December, which really enabled us to shut down the study And then pull back, obviously, on the education of the study, we can't sell or market the product outside of the study terms until we get the PE market. There's a couple of moving parts happening at the same time.

Speaker 1

Just want to make you aware of that. So we're watching all those elements together.

Speaker 5

Okay. And just What's the logistical process of moving to a fully outsourced model? Like how is this going to work?

Speaker 1

Yes. So we have Sites here in upstate New York that was started almost when our company was founded 35 years ago in upstate New York. We've got 2 manufacturing sites, distribution sites as well. So what we'll do is a 2 year wind down, Jason. The announcement we made yesterday starts at 2 year process.

Speaker 1

So we talked to our people at the sites yesterday. This has been planned for, for as you can imagine 9 to 12 months, the planning phase. And you've also seen a couple of years ago, we started moving Some of the operations to Costa Rica because we needed capacity during the pandemic period, we had less availability of new employees and operators. So we started some of those moves for our med device products during that period. So we now have established protocols with some good supplier partners.

Speaker 1

We have quality validation metrics already set up. They're part of our supply chain and works well. So it gave us the confidence we can move more things and do more If we couldn't get the capacity and cost levels to where we need to be, and over time we couldn't. So we had this plan B in our pocket. And as I said earlier, As you see, the bulk of our revenue today in our MedTech segment comes from suppliers that are partners in our supply chain today.

Speaker 1

So back to logistics, We've got a wind down around each of those product segments that are still manufactured in our sites here and a plan around each of those to move those To a supplier partner and make sure that the quality operations are ready, the validations and all the regulatory processes are in place. That's why we have really a 2 year window, Jason, to complete that cycle.

Speaker 5

Okay. Just maybe last one For me for now. Cash flow, I think you had had a goal out there, dollars 65,000,000 to $70,000,000 cash Exiting the year, is that still on the table?

Speaker 2

Jason, it will be a little bit of moving parts when you think about the manufacturing that we just talked about. For example, there's probably going to be some cash that's going to move from one spot on the asset of the balance sheet to another spot, right? We're going to build up a little inventory As we prepare for some of these movements, that being said, as Jim said, this is a plan that we've been working on for a very long time. There may be some shifts in the balance sheet, but it's not going to fundamentally change our expectations of where we're going to end up.

Speaker 5

So sorry, still $65,000,000 to $70,000,000 or towards the low end?

Speaker 2

I would expect it would be a little bit below that, but like I said, expect that going to be some shifting as you have cash that might move into inventory buildup as we prepare, right? So that will be a little bit less cash, but maybe not terribly different when you think about current assets.

Speaker 6

Got it.

Speaker 5

Okay. Thank you.

Operator

Our next question is from the line of Steven Lichtman with Oppenheimer. Please proceed with your question.

Speaker 7

Thank you. Good morning, guys. I guess just first a couple of cleanup questions on the manufacturing shift. What percent of made device is outsourced currently? And what anticipated cash costs of the transition should we assume?

Speaker 2

So Steve, with respect to your first question, roughly 20% of the current device portfolio was already made by 3rd party manufacturing partners. Jim mentioned that we had started this process a number of quarters ago as we were building up capacity with our Costa Rica partnership. So we're going to continue doing that. I think it's important to understand that this process that we're talking about is really a continuation of something that was started over the last 24 months or so. Jim talked about it taking the full 24 months as to the point where we can get there and it's fully outsourced.

Speaker 2

And the benefit that that gives us is as opposed to Today, where we have to have a management structure that supports both this hybrid company owned manufacturing structure as well as managing the outsource structure, We're going to move to 1, which is really going to be one of the fundamental drivers of that $15,000,000 annual savings that we talked about once we can finish this 2 year process. Then you're going to see that fully roll into FY 'twenty seven. In terms of the investment, there's going to be investment that's something as Jim said we've been planning for the last 9 months. It's That is well within our plans and the payback for these types of procedures are always very good, just what you'd expect to see.

Speaker 7

Okay, got it. Just shifting to Arian, can you provide some more color on the pre auth headwinds you mentioned And what you're seeing on that front sort of as we went into as we've gone into this fiscal quarter?

Speaker 1

Yes. Thanks, Steve. We did touch upon it in our last Our Q1 call, we touched upon it. We've seen it out there. I think 1 or 2 other companies in the meantime have talked about it in more detail than we have.

Speaker 1

We've got a balancing thing here. We've got still really strong demand being created by Auryan and how it works and the data It's generating and the excitement in the marketplace. We've got this cool tailwind of interest in Aireon. I was at our global symposium A month and a half ago overseas watching new doctors be trained and taught about the capability of Aireon. So we've got that cool tailwind of interest.

Speaker 1

Yes, there is a headwind that's been created. We've seen it in the field. So the pre authorizations, which have always kind of been a part of the cycle, have tightened up And more players are in on it. So it has slowed down procedures. We are working with industry groups and our customers to go through that process.

Speaker 1

We haven't come out and said it stopped our procedures or slowed them down significantly, but it has made an There's no doubt you still saw growth in a strong quarter. We think the quarter would have been stronger and more procedures would have been done Without this headwind, we're doing all we can to work with our customers to minimize it, but it is there.

Speaker 7

And then I guess just lastly, I don't think you mentioned anything today about indication expansion for AURION, Including the small vessel of the BT and potentially coronary, any update on those?

Speaker 6

Yes, a couple of things. So with Orion, again, we have it in

Speaker 1

our Couple of things. So with Arianne, again, we have it in our cycle now, our regulatory cycle of MDR for European CE approval in the first half of calendar year. We're always a bit cautious as you know our industry, the MDR process has been a challenge for all of us for the past couple of years, but our regulatory team has a good aspect of control. We think we'll have AURION approved overseas in the first half of the calendar year. 2nd here, we want to expand AURION 2 ways in the U.

Speaker 1

S, Some of which is part of those 6 product launches I told you about earlier in the call, one of which happens almost immediately here. Our new radial catheter gets launched as we speak. That's really exciting. There's some other things happening with Orion beyond just those two things as clinicians see what it can do. There's been a study called FARO that was completed in Europe last summer.

Speaker 1

It's being published showing how it can be used safely and effectively for coronary applications. We look forward to understanding that study working with the thought leaders that produced it and looking with the FDA, working with them On a study protocol and design, we'll talk more about soon about how we can also embark on the study here in the U. S. To open up a coronary expansion. We think that's the next natural move for Aireon as we know it will be safe and effective in that market.

Speaker 7

And nothing new on small vessel on the trombectomy side, BBK?

Speaker 1

No new news there follows the We put forward, we're doing the work on our process now. Our R and D teams and regulatory teams are working on that pathway we laid out before. So there's really no new news, Steve, on that front.

Speaker 4

Okay, got it. Thanks, Jim. Thanks, Steve.

Speaker 1

Thank you, Stephen.

Operator

Thank you. At this time, I'll turn the call over to Mr. Clummer for any closing remarks. Mr. Clummer?

Speaker 1

Thank you for joining us today. We appreciate the hard work and commitment of the AngioDynamics employees. It's very difficult to work in an environment as fast paced as the medtech environment, Especially when your company is transforming itself through our portfolio first and second into how we do what we do. So today's announcement of our manufacturing instruction is significant for our company. We think we can better utilize some of those stranded costs that are there that don't drive product, Customer or company benefit.

Speaker 1

We're going to reallocate those costs over the next few years. Some will go to the bottom line and some will be allocated to investments, Opening up expansion opportunities that exist in these new technologies we're launching. We're a company of transformation, but we're a strong company with a direction that's clear to make our company more valuable for our customers, for our employees and our investors. Thank you for joining us today.

Operator

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Powered by Quartr

Key Takeaways

  • AngioDynamics announced a two-year plan to shift to a fully outsourced manufacturing model, aiming to capture roughly $15 million in annualized savings and reach full-year profitability by FY 2027.
  • In Q2 FY 2024, revenue rose 3% year-over-year to $79.1 million, driven by a 4% increase in the MedTech segment, while adjusted EPS reflected a $0.05 loss as the company balanced growth investments.
  • The mechanical thrombectomy business declined 4.7%, with Alphavac sales softening ahead of APeX PE study completion; an expanded pulmonary embolism indication is expected in late 2024/early 2025 to unlock a larger market.
  • NanoKnife saw Q2 probe sales down 3.6% but capital equipment up 22.8%—with probes up 12.9% year-to-date—and the Aireon platform grew 12.9% in the quarter, surpassing $100 million in cumulative revenue since launch.
  • Full-year FY 2024 guidance was lowered to $320 million–$325 million in revenue, with MedTech growth revised to 10%–15%, MedDevice to 1%–3%, and an expected adjusted loss per share of $0.35–$0.42.
AI Generated. May Contain Errors.
Earnings Conference Call
AngioDynamics Q2 2024
00:00 / 00:00