AngioDynamics, Inc.

Good morning and welcome to the NGO Dynamics fourth quarter and fiscal year 2021 earnings call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. As a reminder, this conference is being recorded. The news release detailing our fourth quarter and fiscal year 2021 results crossed the wire earlier this morning and is available on the company's website. Thank you for joining us. including statements about expected revenue, adjusted earnings, and gross margins for fiscal year 2022, 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 10-Q and 10-K, 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 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 measures in addition to, not as a substitute for, or as superior to, financial reporting measures prepared in accordance with GAAP. The 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?

Thank you, Rob, and good morning, everyone, and thank you for joining us today for AngioDynamics' fiscal 2021 fourth 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 detailed analysis of our fourth quarter and full year financial performance and our FY22 guidance. Fiscal 2021 was a unique year that presented a number of external challenges, and I could not be more proud of the entire Andrew Dynamics team for their continued demonstration of perseverance, passion, dedication and performance. During a year that was continually disrupted by the COVID-19 pandemic, we made significant progress in our transformation into a customer-focused, technology-driven, growth-oriented company. From the onset of the COVID-19 pandemic, we were determined to maintain our focus on disciplined investments in our people and the technologies that will drive revenue growth for our company in large, fast-growing, highly profitable markets. Despite the disruption from COVID-19, we ended FY21 with more people employed in the angiodynamics family than we had pre-COVID. During the year, we initiated and executed on strategic research and development and sales and marketing investments in our growth platforms. These investments drove growth in FY21 and are poised to facilitate accelerating top-line growth into FY22 and beyond. Before I get into our performance, I'd like to remind you that year-over-year comparisons of our results are significantly impacted by the COVID-19 pandemic. Thank you for joining us. We will be referring to our key growth platforms, Arion, Mechanical Thrombectomy, and NanoKnife, as our med tech businesses, and the remainder of our portfolio as our med device businesses. With that in mind, strong performance from our med tech platforms, as well as our more mature med tech businesses, drove solid fourth quarter and full year results. We ended FY21 with full-year revenue of $291 million, representing growth of 10.2% year over year. We completed our fourth quarter with revenue of $76.8 million, representing sequential growth of 8% over the third quarter, reflecting the momentum we are building as we head into FY22. I am encouraged by the continued improvements in our end markets and believe our results demonstrate that we are well positioned to drive further adoption of our differentiated platforms as procedural volumes normalize coming out of the COVID pandemic. We broke even on an adjusted EPS basis during the quarter as we prioritized certain strategic investments in research and development and sales and marketing, including investments in preparation for our anticipated launch of the AlphaVac mechanical thrombectomy system while continuing to balance near-term cash and expense management. For FY21, we generated $0.05 of adjusted EPS as we made purposeful and strategic investments throughout the year in research and development and sales and marketing focused on supporting our MedTech platforms and generating future growth. Diving deeper into our performance in the quarter, the positive trend within our Arion business continued into the first quarter with revenue of $4.6 million, bringing total FY20 Arion revenue to $11.1 million. Arion continued its sequential growth as well, coming off $3.3 million of revenue in the fiscal third quarter. For FY22, we expect Arion to continue to grow meaningfully and generate revenue in the range of $18 to $22 million. We continue to see strong growth from our AngioVac platform, as evidenced by the record number of procedures performed in both fiscal 4Q21 and for the full year. AngioVac platform revenue increased 14% sequentially in the fourth quarter with year-over-year growth of 47% in FY21. Additionally, we are thrilled about the recent 510 clearance of AlphaVac, our new multi-purpose mechanical thrombectomy device. This device expands the breadth of our AngioVac platform and will allow us to serve a much larger segment of the venous thromboembolism market. which we will discuss in more detail during our investor and technology day later this morning. We also believe that our current on-circuit angioVac system will continue to drive strong growth in the complex right atrium focused market. Together, angioVac and alphaVac comprise our mechanical thrombectomy platform which we anticipate will grow approximately 30% year over year and FY22, inclusive of AlphaVac revenue following its anticipated launch toward the end of calendar year 2021. NanoKnife probe sales were strong in the fourth quarter, growing 14% sequentially worldwide and 19% sequentially in the United States. As anticipated, capital sales in the quarter declined 77% year over year, as we were coming off a strong prior year quarter due to the launch of our NanoKnife 3.0 generator as well as a challenging capital environment. NanoKnife probe sales for FY21 grew 13% year-over-year worldwide and 38% in the U.S. The continued positive momentum in the U.S. is a direct result of two main drivers. Our increased capital base that we established last year. And second, increased awareness fostered by the direct study. We remain focused on investing in the NanoLife platform as we progress toward expanding potential for new indications and improving OUS environment in the future. We anticipate continued strong probe sales growth in FY22. On the internal R&D investment front, we continued to strategically invest in growth initiatives during the fourth quarter as we supported our MedTech platforms already in the market as well as products in our development pipeline. It's worth noting that over the past three years, we have grown R&D spend at a greater than 10% CAGR and are now starting to clearly see the results of that investment. throughout FY22. We plan to continue to strategically invest to further advance our current portfolio and expand into larger, faster-growing addressable markets. M&A remained on the back burner during the fourth quarter as we continued to focus on balancing growth and profitability in the face of COVID-related challenges. However, strategic and tuck-in M&A remains a key piece of our long-term growth strategy, and we continuously monitor the landscape for these opportunities. In the near term, we anticipate maintaining our disciplined approach to capital allocation and expense management. Turning to our clinical progress, subsequent to the end of the fiscal year, we received approval from the FDA for our 100-patient nanomife prostate IDE study Preserve. We're excited to begin this study as we seek to prove the clinical benefits of NanoKnife for patients suffering from prostate cancer and look forward to updating you on our progress as we pursue this expanded indication. Consistent with where we were at the end of our fiscal third quarter, we currently have 26 active sites in our direct study and are encouraged by the overall execution of the study With that, I'd like to turn the call over to Steve Trowbridge, our Executive Vice President and Chief Financial Officer, to review the quarter in more detail. Steve?

Thanks, Jim, and good morning, everyone. Before I begin, I'd like to point you to the presentation on our Investor Relations website summarizing the key items associated with our quarterly results. As Jim mentioned, our year-over-year comparisons for our FY21, particularly our fourth-quarter results, are significantly impacted by the COVID-19 pandemic-related disruption. Our net sales for the fourth quarter of FY21 increased 31.7% year-over-year to $76.8 million. Our growth was driven by continued sequential growth in our Arion atherectomy business, strong angioVac performance, nanoknife probe growth, and solid performance from our med device businesses. During the fourth quarter, we saw continued sequential improvements in case volumes, and we are encouraged that we're trending towards a more normalized run rate as we enter fiscal 2022. Our total endovascular therapies business, which was formerly named our VIT business, increased 72.3% year-over-year to 38.1 million. This increase was driven by the greater impact of COVID-19 on the prior year period and the continued strength of two important growth products, AngioVac which grew 108% year over year, and Arion. Arion contributed $4.6 million in revenue during the fourth quarter, building upon the momentum that we saw following the product's official commercial launch in the second quarter and strong performance in the third quarter. Total fiscal year 2021 revenue for Arion was $11.1 million. Arion remains a key growth driver as we continue to invest in the platform, build out our commercial infrastructure, and generate clinical evidence. As Jim mentioned, for FY22, we expect Aurion to generate revenue in the range of $18 to $22 million. Vascular access revenue increased 3.2% versus the prior year period, driven by growth in ports, which offset a decline in PICs. As we previously discussed, the fourth quarter of FY20 included approximately $1 million of sales related to a one-time order from NHS through our distribution partner. Additionally, PICs and midlines were two of the few product groups That did not suffer significant disruption during our fourth quarter of FY20 due to COVID, hence the lower year-over-year growth relative to our other businesses. Revenue from our oncology business increased 14.2% during the quarter as compared to prior year, driven by a 42% year-over-year increase in nanonife disposable sales, as well as strong results in both biocentury and microwave disposables. Oncology revenue growth was partially offset by the tough comp and continued weakness in capital end markets, as well as a challenging APAC region where many of our businesses continue to be impacted by the COVID-19 pandemic. Moving down the income statement, our gross margin for the fourth quarter of FY21 was 55.1%, an increase of 330 basis points compared to a year ago, and an increase of 100 basis points sequentially from our third fiscal quarter. The improvement was largely due to sales mix, though this was partially offset by continued staffing pressures and anticipated Arion startup costs. We continued to reduce inventory during the fourth quarter, ending at 48.6 million. We do expect that gross margin will expand over time as we continue to execute on our strategy of driving growth in our high-tech, high-margin platforms of Arion, Mechanical Thrombectomy, and NanoKnife. However, during the back half of FY21, A number of external pressures resulted in gross margin headwinds that we anticipate could extend through the next several quarters. Many companies have discussed staffing challenges during the first half of calendar year 2021, and we have faced and continue to face challenges in fully staffing our Queensberry, New York facility. This tight labor market has resulted in higher labor and manufacturing costs. In addition, we've experienced significant freight cost pressures, and we've observed what we believe to be the beginning of raw material inflationary pressures. We have a talented and dedicated operations team that is focused on labor and service efficiency, material pricing opportunities, and make versus buy analysis. However, the external factors I mentioned and the Arian pricing dynamics stemming from the increased OBL mix that we previously discussed will impact the pace at which our sales mix drives gross margin leverage through FY22. The net result is that for FY22, we expect gross margin of approximately 55%. Our research and development expense during the fourth quarter of FY21 was $9.1 million or 11.8% of sales compared to $7.2 million or 12.4% of sales a year ago. We continue our strategy of disciplined investment in R&D focused on driving our key technology platforms. For the fiscal year, R&D expense was $36.4 million or 12.5% of sales. For fiscal year 2022, We anticipate R&D spend to similarly target 10% to 13% of sales. SG&A expense for the fourth quarter of FY21 increased to $33 million, representing 42.9% of sales, compared to $26.4 million, representing 45.3% of sales a year ago. For the fiscal year, SG&A expense was $117.2 million, or 40.3% of sales. Thank you for joining us today. was positively impacted by reduced travel associated with the ongoing COVID-19 pandemic. We do expect travel costs, along with our ongoing investments in our sales organizations, to increase in FY22 as the global environment improves and restrictions ease. Our adjusted net loss for the fourth quarter of FY21 was $100,000, or break-even on a per-share basis, compared to an adjusted net loss of $2.1 million, or $0.06 per share, in the fourth quarter of last year. For the fiscal year, adjusted net income was $1.9 million or income of $0.05 per share compared to adjusted net income of $3.5 million or $0.09 per share a year ago. As a reminder, our third quarter of FY21 included a benefit from the CARES Act. Adjusted EBITDA in the fourth quarter of FY21 was $4.5 million compared to $0.6 million in the fourth quarter of FY20. For the fiscal year, adjusted EBITDA was $19.5 million and many more. We anticipate that FY22 net sales will be in the range of $305 to $310 million, and full-year adjusted earnings per share will be in the range of $0 to $0.05 as we continue to invest in research and development and sales and marketing for our key medtech platforms. Our guidance range contemplates top-line growth of 5% to 7% over FY21, which included approximately $5 million of revenue related to that one-time sale to the NHS through our distribution partners. We look forward to providing you with our longer-term financial outlook as part of our Investor in Technology Day later this morning. With that, I'll turn it back to Jim.