ANGO Beats on Earnings, Loss Narrows - Analyst Blog

AngioDynamics' (ANGO) adjusted earnings of 7 cents per share for the fourth quarter of fiscal 2013 surpassed the Zacks Consensus Estimate by 2 cents and increased more than twofold year over year. Adjusted earnings in the reported quarter exclude one-time expenses such as product recalls, Quality Call to Action program expenses, LC Beads, acquisition and restructuring charges.

The N.Y.-based therapeutic and diagnostic devices maker reported a net loss of $0.9 million (or 2 cents per share) compared with a net loss of $7.0 million (or 27 cents per share) in the year-ago quarter.

For fiscal 2013, adjusted earnings of 35 cents per share (up 66.7% year over year) beat the Zacks Consensus Estimate of 34 cents. Results achieved the higher end of the company's guidance. AngioDynamics reported a net loss of $0.6 million (or 2 cents per share) in fiscal 2013 versus a net loss of $5.1 million (or 21 cents per share) in fiscal 2012.

Revenue Analysis

Revenues declined 2% to $90.0 million on a pro forma basis, exceeding the Zacks Consensus Estimate of $89 million. Pro forma results include the Navilyst acquisition and exclude the LC Beads sales. Results were lower due to difficult year-over-year comparisons. However, management is upbeat with the increased adoption of the company's latest offering, AngioVac.

Geographically, U.S. revenues dropped 6% on a pro-forma basis to $71.3 million and accounted for roughly 79% of total sales. International sales increased 14% to $18.8 million, led by strong results in Fluid Management, Vascular Access across the board and microwave performance.

For fiscal 2013, adjusted revenues edged down 0.8% to $342 million below the Zacks Consensus Estimate of $346 million. Results surpassed the guidance provided by the company.

Segment Results

The company's larger Vascular business continues to disappoint with revenues dipping 4% on a pro forma basis to $75 million in the quarter. Within Vascular, revenues from the Periph! eral Vascular unit inched down 1% year over year to $48.0 million due to soft Fluid Management and Venacure EVLT sales, partially offset by solid AngioVac sales. Vascular Access revenues dropped 10% on a pro forma basis to $27 million in the quarter, as the lack of a tip location capability continues to affect the business.

Revenues from the Oncology/Surgery division (15% of total revenue) surged 18% to $13.5 million on a pro forma basis. Growth was driven by strong sales of microwave offerings and lower RF cannibalization along with impressive sale of NanoKnife in the U.S. (up 30%).

Supply Agreement revenues were $1.6 million in the reported quarter, down 31% on a pro forma basis.

Margins

Gross margin fell to 49.1% from 53.3% a year ago, primarily due to negative capacity variances driven by tempered demand in the latter half of the fiscal. Management does not expect cost reduction until the second and third quarter of fiscal 2014, despite efforts to reduce overhead structure.

Selling and marketing along with general and administrative expenses, as a percentage of sales, was 29.6% versus 37.3% in the prior year quarter. Research and development expenses (as a percentage of sales) edged down to 7.1% from 9.1%. Adjusted operating margin in the quarter was 16.2% versus 16.3% in the year-ago quarter.

Financial Health

AngioDynamics ended the quarter with cash and cash equivalents and marketable securities of $24.0 million, down 36.3% from the year-ago level. Total long-term debt (including current portion) was $142.5 million, down 5%. The company generated healthy cash from operations of $10.8 million and $7 million of free cash flow in the fourth quarter.

Guidance

AngioDynamics divulged its fiscal 2014 guidance. Revenues for fiscal 2014 are expected in the range of $346–$352 million, up 3% at the top range from the previous guidance. This represents a 0.6% increase from the Zacks Consensus Estimate of $347 million.

Adjusted ear! nings per! share are expected in the range of 31–35 cents for the fiscal, taking into account the impact from the medical device tax. The current Zacks Consensus Estimate falls at the lower end of the said band. Excluding amortization, adjusted earnings per share are expected in the band of 61−65 cents.

For the first quarter of fiscal 2014, management expects to generate revenues in the range of $81 million–$84 million, flat year over year at the top end. Adjusted earnings per share are anticipated between 2−4 cents. Excluding amortization, adjusted earnings per share are expected in the range of 10 cents and 12 cents.

The current Zacks Consensus Estimate for revenues and earnings per share for the first quarter of fiscal 2014 of $85 million and 7 cents, respectively exceed the guided range.

Recent Developments

AngioDynamics has won regulatory approval for two of its port offerings, which came in as a major boost to its vascular access franchise. The U.S. Food and Drug Administration (FDA) have cleared the company's Xcela Plus Port family, with Pressure Activated Safety Valve (PASV) technology. Similarly, Health Canada provided the Medical Device License for its Smart Port CT family of power-injectable ports, featuring Vortex port technology.

The U.S. FDA has also cleared an Investigational Device Exemption (IDE) to begin a clinical trial of the NanoKnife System for the ablation of focal prostate cancer. The company plans to start patient enrollment in the second quarter of fiscal 2014.

The BioFlo peripherally inserted central catheter (PICC) was displayed at the Premier healthcare alliance's 2013 Breakthroughs Conference and Exhibition in Jun 2013.

Our Take

We are encouraged with AngioDynamics' better-than-expected fourth-quarter results. We take note of the gains in the Oncology, Peripheral Vascular and international businesses. The company is poised to grow on the back of new products, innovative pipeline, acquisitions as well as managem! ent's e! fforts to leverage operational activities. Shares of this therapeutic and diagnostic devices maker increased 3.4% to $12.34 on Thursday, Jul 11.

However, pressure on the Vascular Access product category is a cause of concern. Moreover, the company expects headwinds in its core business in fiscal 2014. We are cognizant regarding the ongoing macroeconomic difficulties in the medical device industry.

The company currently carries a Zacks Rank #3 (Hold). While we prefer to remain on the sidelines on AngioDyanmics, other medical instrument companies such as Cepheid (CPHD), Globus Medical (GMED) and MAKO Surgical (MAKO) warrant a look. All these stocks carry a Zacks Rank #2 (Buy).