AngioDynamics Inc. (ANGO) posted adjusted earnings of 6 cents per share for the second quarter of fiscal 2014 that not only ebbed sharply by 40% from 10 cents in the year-ago quarter but also missed the Zacks Consensus Estimate by a penny. Net adjusted earnings fell 34.5% to $2.3 million from $3.5 million a year ago.
Revenues inched up 2% to $88.6 million, marginally exceeding the Zacks Consensus Estimate of $88 million. Excluding the planned termination of the supply agreement with Boston Scientific Corp. (BSX), sales grew 3% to $87.0 million from $84.5 million in last year's quarter.
Revenues from Peripheral Vascular business rose 7% to $48.9 million; Vascular Access business dipped 4% to $25.6 million; Oncology/Surgery business went up 5% to $12.6 million; and Supply Agreement business plunged 35.5% to $1.6 million from the year ago quarter.
Revenues in the U.S. edged up 3% to $69.5 million while international revenues rose marginally by 1% at $17.5 million compared to the fiscal 2013 quarter.
Gross profit was almost flat at $44.9 million compared with $44.1 million in the year-ago quarter. Consequently, gross margin was flat at 50.7% in the quarter.
Adjusted operating income dipped 29.8% to $5.3 million from $7.5 million a year ago. Consequently, adjusted operating margin decreased 270 basis points (bps) to 5.9% from 8.6% a year ago.
EBITDA in the quarter was $7.8 million, down 31.6% from $11.4 million in the second quarter of fiscal 2013. Adjusted EBITDA fell 16.9% to $11.5 million from $13.8 million a year ago.
ANGO had cash and cash equivalents of $15.2 million as of Nov 30, 2013, down 30.4% from $21.8 million as of May 31, 2013. Long-term debt declined to $140.2 million as of Nov 30, 2013 compared with $142.5 million as of May 31, 2013. As a result, long-term debt-to-capitalization ratio decreased 40 bps to 20.9% from 21.3% as of May 31, 2013.
In the first six months of fiscal 2014, AngioDynamics’ cash flow from operating activities nearly tripled to $15.8 million from $5.5 million in the same period of fiscal 2013, mainly driven by lower inventories and higher accounts payable and accrued liabilities. Capital expenditure rose significantly by 50.2% to $7.2 million compared with $4.8 million a year ago.
Due to the stronger-than-expected first half results, ANGO upgraded the low-end of its revenue guidance to $349 to $353 million for fiscal 2014 from the prior level of $347–$353 million. However, the company retained its adjusted EPS guidance in the range of 63 to 67 cents, excluding amortization for the year.
For the third quarter of fiscal 2014, AngioDynamics expects revenues to lie between $85 and $88 million, reflecting a 4–8% increase at the top end compared with the prior-year quarter. Adjusted EPS (excluding amortization) for the quarter is expected in the range of 15 to 18 cents.
ANGO launched an operational excellence program in the quarter aimed at saving $15 to $18 million for the next three years through greater efficiencies and improved business performance with the help of product rationalization, lean initiatives, supply chain optimization, ERP implementation and changes to its New York footprint.
We are discouraged with AngioDynamics’ earnings miss in the fiscal second quarter. However, we are optimistic about its promising guidance as the company is poised to grow on the back of new products, an innovative pipeline, acquisitions as well as management’s efforts to leverage operational activities.
ANGO currently carries a Zacks Rank #2 (Buy). Other medical instrument companies that worth a look include CryoLife Inc. (CRY) and Natus Medical Inc. (BABY). Both of them carry a Zacks Rank #1 (Strong Buy).
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