AngioDynamics Inc. ANGO reported adjusted earnings of 16 cents per share in the second quarter of fiscal 2018. Earnings missed the Zacks Consensus Estimate by a penny and declined 15.8% on a year-over-year basis.
Meanwhile, net sales fell almost 2.6% year over year to $86.7 million, missing the Zacks Consensus Estimate of $88 million.
U.S. net sales were $68.3 million, down 4.4%, due to decline in Venous, Core and PICCs businesses. International net sales were $18.4 million, up 4.6% on a year-over-year basis, owing to robust sales in the Oncology/Surgery business.
Declines in Venus Insufficiency, Core Businesses and across the majority of the company’s Vascular Access non-BioFlo products are the primary reasons for the downside in overall revenues.
No significant impact of currency has been observed in the reported quarter.
AngioDynamics, Inc. Price, Consensus and EPS Surprise
Segment Details
Peripheral Vascular (PV) business: Sales at this segment totaled $51.4 million in the reported quarter, down 4.3% from the year-ago quarter.
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 persistent winding down of the company’s supply agreement with Boston Scientific Corp. BSX.
Notably, AngioDynamics is a leading player in the thrombolytic catheters space (catheter directed thrombolysis). The company boasts highly unique catheters like Uni-Fuse, SpeedLyser and Pulse Spray under the thrombus portfolio.
Vascular Access (VA) business: Sales at this segment were $22.6 million, down 4.2% from $23.6 million on a year-over-year basis. The segment witnessed solid sales in BioFlo related products. However, it was offset by declines in the remaining product lines within the segment.
Oncology/Surgery business: AngioDynamics witnessed sales of $12.8 million in the second quarter, an increase of 8.4% from $11.8 million on a year-over-year basis. The upside was primarily driven by additional sales of the recently launched Solero Microwave Tissue Ablation System.
Margin Details
As a percentage of revenues, adjusted gross margin contracted 130 basis points (bps) to 49.3% in the second quarter of fiscal 2018, from 50.6% in the year–ago quarter. The decline in gross margin was primarily because of an inventory write-off related to VOLTA, the company’s radio frequency ablation product, that was previously sold in Japan.
Adjusted EBITDAS in the second quarter of fiscal 2018 was $13.3 million compared with $15.2 million in the second quarter of fiscal 2017.
Financial Condition
AngioDynamics had a strong cash flow balance in the second quarter. Per management, the company generated $10.2 million in operating cash flow and $9.4 million in free cash flow.
Additionally, AngioDynamics ended the quarter with $51.5 million in cash and cash equivalents and debt of $95 million.
FY18 View Lacks Luster
AngioDynamics reduced its guidance for fiscal 2018. For fiscal 2018, the company expects net sales in the range of $345-$350 million compared with the previous range of $352-$359 million.
Free cash flow is expected in the range of $30-$35 million.
However, the company has reaffirmed previously announced adjusted earnings per share guidance range of 64-68 cents, excluding any impact from the recently legislated 2017 Tax Reform Act.
Our Take
AngioDynamics reported a dismal second quarter of fiscal 2018, wherein adjusted earnings and revenues missed the Zacks Consensus Estimate.
The company also reiterated guidance for fiscal 2018. AngioDynamicis rides on the market’s solid response to Solero, especially within the Microwave Ablation space. Per management, AngioDynamics’ consistent focus on financial discipline and building a high-quality capital structure will boost investments toward innovative product portfolio and pursue strategic acquisitions.
On the flipside, a drop in the core Angiographic Catheter business has affected the Peripheral Vascular Business segment. The company also has a high outstanding debt level. Higher debts impose certain operating and financial restrictions which might limit the execution of the company’s core business strategies.
Price Performance
AngioDynamics has been performing below the industry. Over the last 6 months, the stock has lost 0.8% against the industry’s gain of 7.8%.
Zacks Rank & Key Picks
AngioDynamics holds a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader medical space are ABIOMED Inc. ABMD and Integer Holdings Corp. ITGR, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank Stocks Here.
ABIOMED has an impressive long-term growth rate of 31.5%. In the last 6 months, the stock has rallied 42.4% compared with industry’s gain of 7.8%.
Integer Holdings expects to grow by 85.4% in the next quarter. Over the last year, the company’s shares have gained 48% surpassing its industry’s rally of 25.3%.
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