AngioDynamics, Inc.

Good morning and welcome to the NGO Dynamics Fiscal Year 2025 Third Quarter Earnings Call. At this time, all participants are in a 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 on your telephone keypad. As a reminder, this conference call is being recorded. The news release detailing NGO Dynamics Fiscal 2025 third quarter results crossed the wire earlier this morning and is available on the company's website. This conference call is also being broadcast live over the internet at the investor section of the company's website at www.angiodynamics.com. A webcast replay of the call will be available at the same site approximately one hour after the end of today's call. Before we begin, I'd like to caution listeners that during the course of this conference call, the company will make projections or forward-looking statements regarding future events, including statements about expected revenue, adjusted earnings, and gross margins for fiscal year 2025, 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 and pro forma 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 and proforma measures in addition to, not as a substitute for, or as superior to financial reporting measures prepared in accordance with GAAP. A slide package offering insight into the company's financial results is also available in the investor section of the company's website under events and presentations. This presentation should be read in conjunction with a press release discussing the company's operating results and financial performance during this morning's conference call. Now I'd like to turn the call over to Jim Clemmer, AngioDynamics President and Chief Executive Officer. Mr. Clemmer?

Thank you, operator. Good morning, everyone, and thank you for joining us for AngioDynamics Fiscal 2025 Third Quarter Earnings Call. Joining me on today's call is Steve Trowbridge, AngioDynamics Executive Vice President and Chief Financial Officer. I will begin today's call by providing an overview of our recent performance. Steve will then provide a detailed analysis of our third quarter financial performance, including our increased guidance, and I will conclude with our outlook for the balance of the year before opening the line for questions. Unless otherwise noted, all financial results and growth rates mentioned during today's call are on a pro forma basis, which exclude the results of the dialysis and biocentric businesses that we divested in June 2023, the PIC and midline products that we divested in February 2024, and the radiofrequency and Syntrax support catheter products that we discontinued in February 2024. Our third quarter was very strong. As momentum we developed during the first half of the year continued, total worldwide revenue was $72 million, representing growth of over 9% year over year. Our MedTech segment had yet another excellent quarter, growing 22%, led by growth across all of our platforms. Beyond the top line, we continued to show strong results respect to profitability, reporting yet another quarter of improving gross margins and positive adjusted EBITDA. Our performance continues to highlight that our strategy to drive profitable growth in our high-margin, large MedTech markets is tracking ahead of plan, resulting in our decision to increase guidance for the year for total revenue, MedTech growth, gross margin, adjusted EBITDA, and adjusted EPS, which Steve will touch upon shortly. Now with an update on our MedTech business. Arion continued its sustained delivery of solid results, growing approximately 17% over the prior year. We have consistently driven revenue growth by leveraging our superior technology to take shares including increase in penetration in the hospital market. Turning to our mechanical thrombectomy business, we are very encouraged by the performance of both AlphaVac and AngioVac, which in combination grew approximately 47% over the second quarter of last year. And we believe it further validates the strength of this broad, innovative portfolio. AngioVac and AlphaVac together provide angiodynamics with an unparalleled product portfolio option, and we continue to realize commercial adoption synergies between these two product lines. Beginning with AlphaVac, we saw solid performance in the quarter, with revenue increasing by over 160%. For the fourth quarter in a row, AlphaVac has seen sequential growth highlighting its accelerating adoption for treating PE. We continue to see positive utilization trends within existing customer accounts, and just as importantly, we have made significant strides in growing the number of new customers reviewing AlphaVac within their hospital value analysis committees. Turning to AngioVac, we maintained the strength that we exhibited in our second fiscal quarter. AngioVac contributed revenue of $6.8 million, representing 23% growth over the prior year period. AngioVac is a unique product with a compelling value proposition. In addition, as we noted last quarter, AlphaVac's PE indication has proven to become a positive catalyst for AngioVac and our combined mechanical thrombectomy portfolio. We expect to see continued increasing adoption going forward, helping to drive sustained growth throughout this portfolio. With Aurion and our mechanical thrombectomy product offerings taken together, we believe that we have one of the most innovative cardiovascular portfolios available today. We are excited to provide a deeper dive into that portfolio and our plans for the future during our virtual cardiovascular technology event following this earnings call. Lastly, within our MedTech segment is NanoKnife. With all of the progress made in calendar year 2024, we are in a tremendous position to drive more widespread adoption, particularly within the urology community, as NanoKnife represents a meaningful advancement in prostate cancer treatment. In the quarter, We continue to be encouraged by trends in the adoption and utilization of NanoLife, evidenced by over 16% growth in probe revenue during the quarter. Having received an expanded indication for the NanoLife system for prostate tissue ablation from the FDA in early December of 2024, we are able to more proactively market, educate, and train for the procedure in ways that we have been previously unable to do so. A key component of our marketing and educational efforts is leveraging the high-quality data generated during our Preserve clinical study. Preserve met its primary effectiveness endpoint, demonstrating the performance of the NanoLife system for the ablation of prostate tissue in patients with intermediate-risk prostate cancer. And just as importantly, the study demonstrated extremely compelling quality of life outcomes. We are very encouraged by the interest we have seen for Nanonife post-FDA clearance. It is important to highlight that the expanded indication was contemplated in our guidance for fiscal 2025 and that we don't expect to see a material inflection in a projected performance or in the adoption and utilization until our recently approved CPT-1 code goes into effect and payers adopt coverage. The new codes will be effective on January 1 of next calendar year. As you are aware, reimbursement and coverage is a highly complex process encompassing many stakeholders. We will continue to work diligently with our market access team on coverage coding, and payment initiatives, striving to ensure that reimbursement will be widely available across both commercial and private payers in advance of that effective date. Now turning to our MedDevice segment. Revenue was $40.7 million, an increase of approximately 1% over last year. We were very pleased with the execution of this team returning MedDevice segment to growth. Beyond our commercial execution, we completed another illustration of our sustained profitability. We reported adjusted EBITDA of $1.3 million during the third quarter, compared to a loss of $3.6 million during the third quarter of fiscal 2024. In the quarter, adjusted EPS was a loss of $0.08 per share, improving from a loss of $0.16 per share in fiscal 2024. Before turning the call over to Steve for a financial review, I want to highlight the tremendous work being done by our clinical and regulatory teams to generate high-quality clinical data supporting broader adoption of our technologies. With Arion, in January, we launched our Ambition BTK trial and registry with the BTK standing for below the knee. As a reminder, the Arian laser can be used to treat all lower extremity lesion types, including below the knee, above the knee, and instant restenosis. This trial will evaluate clinical outcomes when treating patients suffering from critical limb ischemia below their knee using Arion in combination with standard balloon angioplasty. We believe this rigorous trial, which builds upon our earlier Arion BTK study, could demonstrate an important advancement in the evidence supporting the benefits of Arion's laser arthrectomy in achieving acute and long-term procedural success in a U.S. market where there is an unmet need, potentially driving increased adoption of Ariane. Additionally, we're very pleased with the publication of the APEX-AV trial results in J-SKY, which validated the safety, efficacy, and efficiency of our AlphaVac F1885 system for pulmonary embolism treatment. We are very excited about our performance during the third quarter and throughout fiscal 2025. Through a combination of continued investment in top-line growth and operational efficiency initiatives, we have accelerated our march to profitability. We remain in a fantastic position to drive widespread adoption of our portfolio to meet the evolving demands of healthcare providers and patients, while at the same time creating value for our shareholders. With that, I'll turn the call over to Steve Trowbridge our Executive Vice President and Chief Financial Officer, to review the quarter.

Thanks, Jim. Good morning, everybody. Before I begin, I'd like to direct everyone to the presentation on our investor relations website summarizing the key items from our quarterly results. As Jim mentioned, unless otherwise noted, all metrics and growth rates mentioned during today's call are on a pro forma basis, which exclude the results of the dialysis and biocentury businesses that we divested in June 2023, the PIC and MIDLINE products that we divested in February 2024, and the radiofrequency and SYNTREX support catheter products that we discontinued in February 2024. Additionally, unless otherwise noted, all comparisons will be the third fiscal quarter of 2025 versus the third fiscal quarter of 2024. Revenue increased 9.2% to $72 million, driven by growth in both our MedTech and US MedDevice platforms. MedTech revenue was $31.3 million, a 22.2% increase, while MedDevice revenue was $40.7 million, a 0.9% increase. For the third quarter, our MedTech platforms comprised 44% of our total revenue compared to 39% of total revenue a year ago, illustrating sustained execution on our strategy of increasing the percentage of our overall revenue base coming from our MedTech segment. Our Arion platform contributed $13.9 million in revenue, growing 17.3% compared to last year. Arion has now delivered double-digit year-over-year growth in each of the 15 consecutive quarters following the anniversary of its launch. Mechanical thrombectomy revenue, which includes AlphaVac and AngioVac sales, increased 46.7% year-over-year. AlphaVac revenue was $3 million, an increase of 161.4% year-over-year, and a 20% sequential increase over the second quarter of 2025, resulting from the continued adoption of AlphaVac for PE. And we're also pleased to see the sustained strong performance of AngioVac during the quarter, which generated $6.8 million of revenue, an increase of 23.1%. As Jim mentioned, we're continuing to see synergies between the two product offerings, demonstrating our ability to take share in a highly competitive market. Total NanoKnife revenue was $6.3 million, an increase of 5.3%. NanoKnife's disposable revenue during the quarter increased 16.2%. As we've discussed throughout the year, we expected capital sales during this year to be approximately half of what they were in 2024. The capital sales are performing better than expected, declining 21.6% during the quarter and down 26.5% year-to-date. We're particularly pleased with the trajectory of prostate cases in the quarter and are on track for our projections for NanoKnife for the full year. As a reminder, while we expect to see increasing contribution from NanoKnife following the positive reimbursement decision and prostate indication received towards the end of calendar 24, these milestones were built into our expectations for FY25 and are already reflected in our guidance for the year. Moving down the income statement, Gross margin was 54%, an increase of 290 basis points compared to the year-ago period and ahead of our expectations for the quarter. MedTech gross margin was 62.5%, an increase of 100 basis points, primarily driven by mix associated with increased angioVac revenue and Arion's increasing penetration into the hospital side of care. MedDevice gross margin was 47.4%. In a moment, I will discuss our increased guidance for the balance of our fiscal year, including our increased expectations for gross margins. I do want to take a quick moment to discuss the macro environment and potential tariffs. We're keeping a close eye on the ever-evolving tariff situation, and like most of you, we don't have a concrete projection on where this will all end. While we do have a small amount of subcomponent suppliers that may become subject to tariffs, we do not believe today that tariffs will materially impact our business. We've historically manufactured the vast majority of our products in the U.S., and most of our suppliers are also U.S.-based. We're currently executing on our manufacturing transition plan, but this plan has never included moves to areas such as Mexico or China. We'll continue to monitor this dynamic situation and provide appropriate updates as they develop with any clarity. Turning to R&D, our research and development expense was $6.9 million, or 9.6% of sales, compared to 8.1 million, or 12.2% of sales a year ago. The year-over-year decrease is primarily related to timing, including the completion of our Preserve and Apex clinical studies. We remain committed to investing in R&D initiatives to support the long-term growth of our med tech segment, and are targeting approximately 10% of sales going forward. SG&A expense was 36 million, representing 50% of sales, compared to 34.2 million, or 51.9% of sales a year ago. Our adjusted net loss was $3.1 million, or an adjusted loss per share of $0.08 compared to an adjusted net loss of $6.5 million, or adjusted loss per share of $0.16 in the third quarter of last year. The year-over-year improvement is largely attributable to higher revenue and improving operating leverage during the third quarter of this year. Adjusted EBITDA was $1.3 million, compared to a loss of $3.6 million in the prior year. Turning now to an update on our balance sheet, at February 28, 2025, we had $44.8 million in cash and cash equivalents. In the quarter, we used $13.2 million in operating cash, had capital expenditures of $1.8 million, and additions to ARION placement and evaluation units of $1.4 million. As expected, we utilized total cash on the balance sheet of approximately $10 million, largely driven by scheduled payments associated with the settlement of our patent litigation with BD Bard that we executed last year and working capital usage connected with our transition manufacturing arrangement with Spectrum Vascular, the company we sold our pick and bid line business to in February of last year. In the fourth quarter, we expect to generate cash and end the year with approximately $55 million in cash and cash equivalents. The primary variable associated with our cash projection is related to the transition manufacturing arrangement I just mentioned. As we discussed on our last earnings call, subsequent to our third quarter end, we secured a commitment from JPMorgan to provide us with a revolving line of credit agreement. We expect to close this facility in the next few weeks, which will give us the ability to draw up to $25 million in cash at our discretion. While we are very comfortable with the amount of cash we have on the balance sheet, we view the addition of a revolver as a matter of prudent financial housekeeping and a good safety net to ensure that any short-term working capital fluctuations associated with the spectrum transition manufacturing agreement doesn't impact our execution on our strategy. We believe that this revolver will further bolster our balance sheet and provides for increased flexibility and optionality at a relatively low cost of capital and zero dilution. Finally, we remain on track with our stated goal of being cash flow positive for the full fiscal year 2026. We're very pleased with our execution in managing our balance sheet through our strategic transition in a dynamic macro environment. We're in a very strong position, driving double-digit growth in our MedTech segment with sufficient net cash position on our balance sheet, a P&L that is delivering positive adjusted EBITDA each quarter, and an overall business model that will generate positive cash for the upcoming year and beyond. But turning now to guidance, For fiscal 2025, we now expect revenue will be in the range of $285 million to $288 million, representing growth of between 5.3% and 6.4% over fiscal year 2024. Within each of our businesses, we now expect MedTech net sales to grow in the range of 14% to 16% ahead of our previously updated guidance of 12% to 15%. And we continue to expect MedDevice net sales to be flat. From a quarterly cadence perspective, we expect the fourth quarter to be the strongest of the fiscal year. For fiscal 2025, we now expect gross margin to be in the range of 53 to 54%, up from the previous guidance of 52 to 53%. We now expect adjusted EBITDA in the range of 4 million to 5 million, up from the previously updated guidance of 1 to 3 million. And finally, we now expect an adjusted loss per share in the range of 31 to 34 cents, and improvement from our previously updated guidance of a loss per share of 34 to 38 cents. With that, I'll turn it back to Jim.