AngioDynamics Beats, Tweaks View - Analyst Blog


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Therapeutic and diagnostic devices maker AngioDynamics ( ANGO ) reported second-quarter fiscal 2012 (ended November 30) adjusted (excluding one-time charges) earnings of 13 cents per share, beating the Zacks Consensus Estimate by a penny while matching the year-ago earnings.

The New York-based company's profit (as reported) slid 29% year over year to $2.3 million (or 9 cents a share), hurt by charges associated with the CEO transition and the transfer of laser manufacturing from the company's U.K. plant to its Queensbury facility.

Revenue Analysis

Revenues spiked 9% year over year to $58.1 million, also ahead of the Zacks Consensus Estimate of $56 million. While currency exchange negatively impacted growth, the company benefited from an additional selling day in the quarter.

Geographically, U.S. revenues rose 6% year over year to $49.7 million and accounted for roughly 85% of total sales. International sales spurted 27% to $8.4 million, backed by healthy growth across Europe and Asia and sustained strong adoption of the company's popular tumor-zapping NanoKnife system.

Oncology/Surgery sales cruised 25% year over year to $19.8 million buoyed by solid NanoKnife sales, which doubled year over year to $3.2 million in the quarter.

NanoKnife continues to gain healthy traction both in the U.S. and overseas markets. More than 1,000 patients have been already treated with the system, including 158 patients in the second quarter. AngioDynamics is seeking regulatory approval for the NanoKnife system in additional indications including pancreatic cancer.

The company's larger Vascular business remains somewhat soft with revenues growing just 2% (in line with the previous quarter) to $38.3 million. This was, however, an improvement from a 6% decline registered a year ago. The division remains affected by competition and sustained pricing pressure. Within Vascular, revenues from Peripheral Vascular rose 5% to $23.1 million while Access sales declined 2% to $15.2 million.

The company noted that revenues from VenaCure EVLT laser vein therapy system climbed at a double-digit bracket on the back of the recently launched VenaCure 1470 nanometer (nm) laser for treating varicose veins (abnormally swollen veins) and the 90 centimeter (cm) procedure kit.

Margins and Expenses

Gross margin fell to 57.2% from 59.1% a year ago, hit by costs (of $1.5 million) associated with the voluntary recall of NeverTouch procedure kits. Excluding this impact, gross margin came in at 59.8%. Operating expenses jumped 12% year over year to $29.3 million, partly attributable to the costs associated with the CEO transition and the closure of the U.K. facility.

Financial Health

AngioDynamics ended the quarter with cash and cash equivalents and marketable securities of $136.3 million, up 23% year over year. Total long-term debt was $6.4 million, flat year over year. The company generated cash from operations of $2.7 million in the quarter, down 73% year over year.

Share Repurchase

During the quarter AngioDynamics bought back 142,000 shares worth $2.1 million. The company has $17.9million remaining under the e xisting repurchase authorization.

Guidance and Recommendation

AngioDynamics has tweaked its guidance for fiscal 2012 in light of its second quarter results and outlook for the remainder of the year. The revised guidance assumes the impact of recent product recalls, expiration (on December 31, 2011) of the company's distribution contract for LC Beads and restructuring charges.  

The company now expects revenues for fiscal 2012 in the band of $218 million $222 million (prior view was $217 million to $225 million) with a projected growth of 1%-3% (versus 0%-4% earlier). Operating income forecast, on a reported basis, has been revised to a range of $13.9 million to $15.9 million from $14.4 million to $18.4 million.

EBITDA for fiscal 2012 is now forecast between $27.5 million to $29.5 million (versus $28.4 million and $32.4 million earlier). Gross margin target has been altered to a range of 58.5%-59.5% from 59%-60%.

EPS (on a reported basis) forecast for fiscal 2012 has been revised to a range of 32-37 cents from 33-41 cents. Adjusted EPS is now projected between 41 cents and 45 cents (versus prior forecast of 41 cents and 49 cents).

Adjusted operating income is now expected to be $17.4 million to $19.4 million compared with the earlier view of $17 million to $21 million. EBITDA, on an adjusted basis, have been forecast in the range of $31 million to $33 million (versus $31 million to $35 million earlier). The adjusted estimates exclude expenses associated with the CEO departure and the U.K. facility closure.

The current Zacks Consensus Estimates for revenues and earnings per share for fiscal 2012 are $219 million and 44 cents, respectively.

AngioDynamics' focus on interventional peripherals should help drive future growth. Moreover, the company should continue to benefit from the ongoing shift from open surgery to less invasive interventional procedures.

However, AngioDynamics is exposed to pricing headwinds, stemming from lower selling prices of some access and peripheral vascular products. Moreover, its product lines face strong challenges from the competitive offerings of its larger rivals such as Boston Scientific ( BSX ) and C.R. Bard ( BCR ). We are currently Neutral on AngioDynamics, supported by a short-term Zacks #3 Rank (Hold).

ANGIODYNAMICS ( ANGO ): Free Stock Analysis Report
BARD C R INC ( BCR ): Free Stock Analysis Report
BOSTON SCIENTIF ( BSX ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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