Therapeutic and diagnostic devices maker AngioDynamics (ANGO) announced first-quarter fiscal 2011 results after the closing bell on Oct 7, 2010, with earnings of 8 cents a share matching the Zacks Consensus Estimate while trailing the year-ago earnings of 9 cents. Net income dipped 9.5% year-over-year to $1.9 million, impacted by a soft vascular business, higher cost of sale, losses on interest rate swap and unfavorable foreign exchange swings.
Revenue
Revenues budged up 3% year over year to $51.5 million, narrowly missing the Zacks Consensus Estimate of $52 million. Oncology/Surgery sales leapt 22% year over year to $15.6 million, boosted by higher demand for the company’s popular NanoKnife system (for treating tumors) as evident by sustained healthy growth in the number of patients treated with the device. Oncology revenues include $1.1 million in NanoKnife sales.
AngioDynamics has sealed commercial agreements with four hospitals for NanoKnife in the quarter. Clinical trials are underway to evaluate the potential of NanoKnife in additional tumor types.
Peripheral Vascular sales fell 2% year over year to $20.7 million, impacted by the restructuring of its sales force which hurt revenues of certain products. Revenues from the Vascular Access dipped 6% to $15.2 million. Peripheral Vascular and Access business were affected by pricing pressure and a slowdown in procedure volume in specific U.S. markets.
AngioDynamics continues to face margin pressure. Gross margin fell to 58.3% from 60.2% a year ago, attributable mainly to lower selling prices of some Access and Peripheral Vascular products due to intense price competition.
Balance Sheet & Cash Flow
AngioDynamics exited the quarter with a healthy balance sheet. Cash and investments increased 48% year-over-year to $102 million. Total debt declined 3.5% year-over-year to $6.7 million. AngioDynamics generated cash from operations of $1.7 million in the quarter, up 53% year over year.
Outlook
AngioDynamics has trimmed its outlook for fiscal 2011. Net sales forecast has been cut to a range between $220 and $225 million (up 2%-4% year over year) from the earlier projection of $230 million and $235 million. Operating income is now projected between $20.5 million and $22 million, down from $22.5 million to $23.5 million.
EBITDA forecast has been also reduced to between $33 million and $34.5 million from $35 million and $36 million. EPS (GAAP) is now expected in the range of 47 cents to 50 cents (down from 53 cents to 56 cents). However, gross margin is still expected between 58% and 59%.
Queensbury, New York-based AngioDynamics is a leading provider of therapeutic and diagnostic devices for treating peripheral vascular and other non-coronary diseases. The company has market leading positions in several of its operating segments including angiographic products and thrombolytic catheters and products.
AngioDynamics continues to broaden its product portfolio while it is actively pursuing cost management to offset margin erosion due to intense price competition. During the first quarter the company broadened its Smart Port CT family of power-injectable ports with the addition of mini and low-profile models of the device. Moreover, AngioDynamics expanded its VenaCure EVLT laser vein treatment with the launch of a new access kit which reduces both procedure time and steps for physicians.
We expect AngioDynamics’ focus on interventional peripherals to help drive future growth. The company should continue to benefit from the ongoing shift from open surgery to less invasive interventional procedures. However, 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 currently have a Neutral recommendation on AngioDynamics.
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