Angiodynamics (ANGO) Q1 2027 earnings call transcript

Thank you, Operator. Good morning, everyone, and thank you for joining us for ANGIODYNAMICS Fiscal 2027 First Quarter Earnings Call. Joining me today is Steve Trowbridge, ANGIODYNAMICS Executive Vice President and Chief Financial Officer.

Before I get into our results, I want to start with an important update. Our board has completed a comprehensive search for my successor. I am pleased to share that Eric Honrath will be joining us as President and Chief Executive Officer, effective November 2nd. Eric brings more than 20 years of leadership experience in medical devices and life sciences.

He most recently served as global president, life science, at Gettin. And before that, he led Gettin's $1.2 billion North American business, where he accelerated growth, delivered sustained revenue gains, and strengthened operational performance. His career spans the cardiovascular, endovascular, urology, and oncology markets with senior leadership roles at Abbott Vascular, Beckton Dickinson, Carefusion, and Boston Scientific. That combination is exactly what our board was looking for, someone who's driven real growth and profitability in large, complex organizations, and who knows our markets firsthand.

I am confident that he's the right person to build upon the foundation that we've put in place, and I'll remain closely involved to make sure that we have a smooth transition. I want to thank our board, our search committee, and everyone across this organization who helped make this happen.

Now, moving on to results. We grew total revenue by approximately 7%, led by strength in our medtech segment, which grew more than 13%. But that's clear evidence that the strategy guiding our transformation over the past several years keeps paying off. As a result, MedTech now represents approximately 49% of our total revenue, and that mix shift is only gaining momentum as we move through the year. Starting with Arian, which remains one of the most consistent growth engines in this business, this quarter marked our 21st consecutive quarter of double-digit year-over-year growth.

We're taking share across both the hospital and office-based laboratory settings, with international adoption building as well. We're also advancing enrollment in our Ambition BTK study, which we believe will support the long-term clinical case for Arion below the knee.

Turning to mechanical thrombectomy, we're also growing above market in this business, and the reason is simple. We have the most versatile product on the market and a commercial team that is executing at a high level, and we're taking share from our competitors. AlphaVac is building real momentum as more hospitals continue to adopt it. In addition, we're really pleased with the progression of our AlphaReturn blood management system IDE trial to further strengthen our position. AngioVac is working through a tougher comp right now, but the underlying demand for the product remains strong, and we expect it to return for more normal growth as the year progresses.

Finally, NanoLife continues to fundamentally change the landscape of men's healthcare by improving outcomes and preserving quality of life through an innovative procedure for men with intermediate-risk prostate cancer.

Reimbursement progress remains a key driver, including the positive MAC coverage decision that we received last quarter. And we're now working with additional regions with the goal of building towards consistent nationwide coverage.

Physician interest and procedure volumes in prostate care remain strong. We also received FDA approval for our relief study, which is evaluating nanonife for the treatment of BPH, A condition affecting millions of men, and a market opportunity we estimate at approximately $1.9 billion, an important step in expanding where this technology can help patients. Our Med device segment grew approximately 1%. This business remains a steady, reliable performer, providing the consistent cash flow that funds our investment in MedTech platforms.

Before I turn things over to Steve, I really want to thank our team. The work happening across the company is reflected in this quarter's results and is driving future growth ahead. We compete in large, fast-growing markets, and we are positioned to win.

Looking ahead, we have real catalysts in front of us, continued progress in alpha return, expanding reimbursement coverage for NanoLife, and ongoing enrollment in our Ambition BT case study, each of which will create new opportunities. This all comes back to patients first. We believe people living with some of society's most challenging diseases deserve trusted solutions that deliver real care and better outcomes. When we deliver on that, we deliver value for everyone we serve, from patients and physicians to our shareholders.

Now I'll turn it over to Steve to review the financials for the quarter.

Thanks, Jim, and good morning, everybody. As always, 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. Unless otherwise noted, all comparisons will be the first fiscal quarter of 2027 versus the first fiscal quarter of 2026. Company top-line revenue performance was strong again in the quarter. Revenue increased 6.9% to $80.9 million, driven by growth across our MedTech segments. MedTech revenue was $39.9 million, a 13.2% increase.

For the first fiscal quarter our MedTech platforms comprised 49 of our total revenue compared to 47 of total revenue a year ago reflecting the ongoing shift in our business mix We remain on track for our MedTech segment to comprise a majority of our overall revenue base during this fiscal year Within our MedTech segment, our Arian platform contributed $18.9 million in revenue, growing 14.7% compared to last year.

Arian has now delivered double-digit year-over-year growth for 21 consecutive quarters. This above-market growth continues to be supported by our strategy to shift more of our atherectomy business towards the hospital side of care, while we keep growing our customer base across both the hospital and OBL settings, along with ongoing international adoption following RCE Mark approval.

We're confident in the long-term opportunity for our mechanical thrombectomy portfolio. Combined ANGIVEC and ALPHAVEC sales were $12 million, an increase of 6.7% year-over-year. In the quarter, ALPHAVEC continued its strong trajectory, generating revenue of $4.5 million, representing a 37.4% year-over-year increase, as well as growth of 6.4% sequentially. We're also pleased with the trajectory of ANGIODYNAMICS, which generated a revenue of $7.5 million.

And while this represented a 5.9% year-over-year decrease, ANGIODYNAMICS grew 9.1% sequentially. On the clinical front, we are encouraged by the ongoing progress in our alpha return and ANGIODYNAMICS right-sided infective endocarditis IDE studies, both of which are seeing strong enrollment.

Turning to NanoKnife, total revenue was $8.3 million, an increase of 29%, with probes growing 24.1% and capital sales growing 53.5%. Probe sales are primarily driven by demand for NanoKnife in prostate care, and we hit record procedure volumes during the quarter. Additionally, as systems are placed and new physicians and providers experience the improved patient outcomes our technology enables, We expect them to drive continued increases in probe utilization going forward.

I will note that capital sales are always lumpy quarter to quarter, so we would not expect capital to grow at this rate going forward. Continue to view disposables as the bellwether for this business.

In the first quarter, our MedDevice segment increased 1.4% year over year with revenue of $41 million. This business generates consistent cash and profitability, allowing us to continue to invest in the growth of our MedTech platforms.

Now, moving down the income statement, our gross margin for the first quarter of FY27 was 59.4%, a 410 basis point increase from the first quarter of FY26. Driven primarily by favorable pricing and the ongoing revenue mix shift towards MedTech, which is partially offset by the manufacturing transition and global inflation, all of which were in line with the company's expectations.

Gross margin also benefited from tariff refunds received during the quarter. Now, absent that benefit, gross margin would have been 57.8%. We expect gross margin to be higher in the first half of fiscal 2027 than in the second half, and we remain on track for full-year gross margins to be within our guided range of 54% to 55%. Total operating expenses, which include R&D, SG&A, amortization, and non-recurring items, in the quarter were $55.3 million, representing 68.4% of sales, compared to $52.5 million, or 69.4% of sales last year.

Turning to R&D, our research and development expense was $8 million, or 9.9% of sales, compared to $6.4 million, or 8.5% of sales, a year ago. We remain committed to investing in R&D initiatives to support the long-term growth of our med tech segment, and we're targeting approximately 10% of sales going forward. SG&A expense for the first quarter of FY27 was $42.5 million, representing 52.5% of sales, compared to $40.7 million, or 53.7% of sales, a year ago. On a GAAP basis, our net loss for the first quarter was $7.1 million, or a loss per share of $0.17, compared to a net loss of $10.9 million, or a loss per share of $0.26 a year ago.

Our adjusted net loss for the first quarter of FY27 was $1.8 million, or an adjusted loss per share of $0.04, compared to an adjusted net loss of $4.2 million, or an adjusted loss per share of $0.10 in the first quarter of last year. The adjusted EBITDA in the first quarter of FY27 was $5 million, compared to adjusted EBITDA of $2.2 million in the first quarter of 26.

Touching briefly on tariffs, tariff-laid expenses were $0.9 million during the quarter, compared to $1.7 million for the prior year quarter. This is in line with our expectations. Additionally, we did receive $1.2 million of tariff refunds during the quarter, resulting in a net tariff benefit of about $400,000.

Turning to cash, in the first quarter, the company used $15.3 million of cash from operations in line with our expectations. We ended the quarter with $34 million in cash, and we maintain a strong debt-free balance sheet. We also remain on track to generate positive cash flow from operations for the full fiscal year.

Turning to guidance, for fiscal 27, we continue to anticipate net sales to be in the range of $336 to $341 million, We will now turn the call over to management for a year. We expect the impact from tariffs to be broadly similar to fiscal 26 based on our current view of the tariff situation, but this remains dynamic and clearly subject to change.

So with that, I'll turn it back to Jim.

Thanks, Steve. Before we close, I'd like to say a word about our leadership transition. Leading ANGIODYNAMICS has been the privilege of my career, and I'm incredibly proud of what our team has built together over the past 10 years. Together, we set a clear direction, built a strategy to transform this company, and created a robust product portfolio that competes and wins in large, important markets.

It has not been easy, but this team has done it, and I'm very confident that our strength will carry forward. I have full confidence in ERIC and in our organization's ability to keep executing at a high level through this transition.

With that, operator, let's open the line for questions.

Hey, good morning, Frank. This is Steve. Thanks for the question. And so I think capital placement is a good way to think about driving nanonife, but we think that the better way to think about it is disposable growth. As we've talked about before, we've got a number of different placement models with nanonife, particularly in the prostate space. We're continuing to sell systems. We're also placing systems during the quarter, getting them in the hands of urologists. As we've said in the past, we don't want access to capital to be a governor on whether or not a urologist chooses nanonife for their practice. So we've been very pleased with the pace of capital sales that we've seen over the course of the last six, eight quarters, as we've talked about.

You're right, Q4 was a very strong capital quarter. Q1 was another strong capital sales quarter. But we think that the right way to look at this business is the disposable sales. And we've been really pleased with the trajectory of the disposable sale growth that we've seen sequentially as well as year over year. So, yes, utilization is a good way to think about it, but utilization is going to be variable from system to system, depending upon where we place it, if it's going into a system that has had experience with nanonite in the past. As Jim talked about, there's variability in the pace of adoption based upon reimbursement in that particular area. We been very pleased with what we seen since we got the CPT1 code and certainly with the Palmetto decision that we talked about last quarter So all of that is trending in the right direction We think they all showing very healthy signs for NanoKnife starting with capital sales but more importantly looking at those disposable sales Very helpful.

Yeah, Frank, we expect mechanical thrombectomy to continue to grow. As we've talked about coming into this year, we're really excited about the combined ANGIOVAC-ALPHAVAC business together. We think ANGIOVAC is a little bit more niche right now. We expect that to be kind of in the single-digit growth, and we expect Alphavac to really be driving that growth. We're definitely seeing the contributions from some of those changes that we made in the commercial organization. I expect those to continue. We're also just seeing continued enthusiasm for physicians who have got their hands on our product. As Jim said in the past, we really believe we've got the best product out there, and the more that we can get that product in the hands of physicians, they're going to choose Alphavac for PE.

They're going to choose Angiovac for those cases where Angiovac is the right product line. So, yeah, I expect to see continued benefits coming from all of the changes we're making in the commercial organization. But as we continue to just get more products in the hands of physicians, we expect that to also be a catalyst for growth. We mentioned in the prepared remarks, we're really excited about the pace of our alpha return IDE enrollment to add blood return as another option to this product line. So the continued development of the products, the line extensions, getting more people time in the sales organization, and just getting more products in the hands of physicians are all going to continue to contribute to that growth over the course of this year.

Yeah, in general, I wouldn't say that there was a very big difference in this quarter versus where we've been historically. Absolutely. Q1 is always the largest utilization of cash quarter for us, and that comes from things like incentive compensation, sales compensation that gets paid in the quarter, tariffs, or something new that's been added the last two years. So in general, you should think of cash utilization as being pretty consistent historically. So what that means is expect Q1 to be the largest utilization, expect Q2 and Q3 to not have that level of utilization. Sometimes we generate a little bit of cash. Maybe it's flat Q2 and Q3, with then Q4 being the largest generation of quarter moving forward.

I would expect that same cadence to continue this year. And then, as we mentioned, we expect to be generating positive cash flow from operations for this full fiscal year.

Thanks, Frank.

Yeah, hi, John. Good question. So we measure new business through different angles here in this space, through new competitive conversions, through doctors who have come online to use it, how they go up, kind of the same source sales approach. We measure how many hospitals put us through their value analysis process and get us into stock as well, on the shelf, next to maybe competitive products. So each of those are trending in the right direction.

The Salesforce additions we talked to you about we made earlier this year, the people are now trained up to speed, and they're contributing to each of those things. So we have more doctors coming on using our device, more doctors using it in the same accounts, and then more people who have it in stock on the shelves. So we're really pleased. We measure each of those very carefully and building up to what we hope will be the alpha return project getting on label early next calendar year. As Steve mentioned earlier, we're pleased with the pace of enrollment, and we expect that to come on. That will just take down one more hurdle that some marketplace has for us.

But we're managing our company, John. We watch the market really carefully. We've got good competitors in the space, as you know, and there's been disruption at those competitors. That we can't control. We watch. But we want to make sure we're the best NGO that we can be. So we continually build upon how we make our company better, what we bring to the physicians as a value prop better, And we'll monitor the disruption in other places, but we think we're going to win on our game as well, irrespective of our competitors.

Yeah, John, thanks for the question. We're really excited about the trajectory we're seeing with NanoKnife. And, you know, this business is a little bit more mature than some of the other growth businesses. So there is seasonality that you're going to see. Q4 for us is always our highest quarter. It's pretty typical in the med device business you see that. So we weren't expecting that we were going to see growth off of where we ended Q4. And with your question to was there stocking and the throughput, I don't think that that's a material piece that we're seeing here. There's always going to be fluctuations in terms of selling and using. In a growth business, we want to be selling ahead of the curve.

We want to make sure that those products are on the shelf for physicians so that they can use it when those patients come in. We track the procedure volume every month, and we've been seeing consistent records that we're setting in terms of prostate procedures. Every month, Q1, we had larger procedure volume than what we saw in Q4, so you see those procedures upticking. I think that's the right way to think about the business. So there is going to be a little bit of seasonality, Q4 being the highest quarter, usually Q1 a little bit down from Q4. Usually Q2 is a step up from Q1, with Q3 being our softest quarter because structurally that includes December, January, and February.

So it's kind of a tough structural quarter there. Put that aside, we're really excited about what we're seeing with Nan and I've continued procedure growth, new physicians that are coming on, adopting this technology, physicians that have already adopted it, continuing to lean in and use it more, good decisions that we're seeing on the reimbursement front. Of course, it's not mission accomplished there yet. There's a lot of work for us to do to continue to make sure that there's consistent, reliable reimbursement across the country. But what we've seen so far have all been very positive.

Yeah, so gross margin. We were pleased with what we saw in Q1, and you'd mentioned the tariffs. I do think the right way to think about gross margin is to probably take out that tariff refund that we saw in the quarter. We expect to continue to get more tariff refunds going forward. I just don't know when they're going to come in. So that 57.8 as opposed to the 59, I think that's the right way to think about it as a baseline. You know, one of the things that we talked about historically is we do have a little bit of a structural impact on gross margin, where the first half of the year is going to be a little bit higher than the back half.

That's just the way that you account for the rising cost environment. So that's why we said, you know, we still expect guidance for gross margin to come in the full year in that 55 to 56. But really, to get to your question, yeah, the underlying gross margin trajectory is very strong. We're seeing the benefit from price that we talked about, particularly in the device business, and then that mix shift. So as the med tech higher margin products become a larger portion of our overall revenue base, we're seeing that continue to build in and drive gross margins. The benefit of Costa Rica is in what we're seeing. We've talked about the fact that we were able to accelerate some of those cost savings over the course of the last six quarters or so.

So you've seen that kind of starting to get into the base, and that can be a nice catalyst as we continue to move forward. So we like what we're seeing in gross margin, definitely. It's all part of the strategy that we put in place. The long-term driver is going to be that mixed shift that we're seeing the benefit for. You've got noise with tariffs. You've got noise with some of the rising cost environment. But as you eliminate that, that gross margin accretion story is really taking hold.

Yeah, in terms of relief and using NanoKnife to treat BPH, we're excited about that opportunity. You know, one of the things that we've always talked about is the fact that our MedTech product portfolio is made up of three legs to a stool there, and every one of those legs is a platform opportunity. So we're really excited about the opportunity to take Angiovac and Alphavac to go into PE, and then maybe take Angiovac onto the left side where we think we've got a right to win and can really address an unmet clinical need. We're excited about ARION and how it can work in the peripheral, and we've talked about taking the steps to now take ARION and go into a coronary space.

NanoKnife BPH is that potential platform opportunity for us. We're still in the early stages. I think it's important for us to do the work to understand how does NanoKnife impact the tissue when it comes to BPH. You know, durability that you mentioned is going to be a question for us. I don't think our pilot study is going to answer the durability, But it's something that we're going to continue to be focused on as we build out the business case here.

So relief is really an opportunity for us to do the early stage work, take NanoKnife, start to build out that business case of moving into that longer-term platform opportunity into BPH.

Sorry, just to answer your question on the R&D, we've talked about targeting around 10% of sales for R&D going forward. And that's inclusive of the growth that we expect to see, particularly driven by MedTech over the course of our strategic planning horizon. So I don't look right now as BPH is something that's going to dramatically change our overall P&L. We're looking to take all of our opportunities and kind of fit it within that 10% target that we have for R&D going forward.

Sure. Sure.

It's a great question. So I'll remind you, we launched Arian in the marketplace in September of 2020. If you look back, that was six months after the COVID interruption and all of our lives affected. So launching Arian then required us to spend most of our initial launch with the Office Space Lab customers, because many hospitals were kind of closed for business for new products. They had to deal with the pandemic challenges they had internally. So we got a lot of experience out of the gate building our business around the office space lab customer, learned what's important to them, and how we grew that business very rapidly. So we understand that marketplace. A lot of the clinical needs are the same in the hospital or in the OBLs.

Economically, it's a little different story. So a couple years ago when the hospitals more or less reopened for business again, we talked to you about our shift and our intention to have our sales reps focus on that business, And you've seen what we've done since then, seeing a really great growth in the hospital business. So over time, what you should expect from us is a good balance between both. Both are important to us. There's different economics in both. We understand both. Clinically, again, we win in both. And we're taking share from the other five players in this space in both of those settings due to what Arian brings, scientifically, clinically, how it works, the safety, the effectiveness, the only product that can do instant restenosis treatment, We can work above the knee and below the knee, so we're really, really versatile for our customers.

That's really important to office space labs, especially when they have economic challenges, space challenges, and can't have a lot of other products on the shelf. And we're finding also some of those correlate in the hospital as well. So great question. Continue to follow us. You'll see growth continue in both of those care settings.

Yeah, so starting on the first question, what's driving nano knife results these days is prostate. So it's urologists and it's choosing nano knife to treat prostate. Prostate is by far the highest organ that is being treated. That flipped maybe a handful of quarters ago. And there is a difference between when we used to be focused in the hepatobiliary side for pancreatic cancer, liver cancer, and what we're seeing with physicians who are treating prostate cancer.

The prostate cancer treatment is not something that is concentrated in the university settings. It is something that is being done in a lot of those regional hospitals and the other hospital setting. It's one of the reasons why we think it's a better business opportunity for us. There's an opportunity for us to get more systems out there, to have more physicians doing it, as opposed to being concentrated in some of those university settings. So we're seeing that through the prostate movement. That's what's driving Nanonife as we go forward, and that's where our focus is going to be. We want to continue to drive nanonife utilization, particularly in the United States, in prostate. Now, in international markets, it's a little bit more balanced.

We're seeing growth within prostate, but then there's also a lot of growth in utilization coming from folks who, you know, had done some of those liver and pancreatic treatments. Nanonife is a great technology. There's opportunities for us in almost any solid tumor basis. But you think about our strategy, we're focusing primarily in the U. S. on prostate and then supporting the use of nanonife as we think globally. And so, you know, we're excited about what we're seeing there. That's where the growth is coming from. On your question about, you know, what stops someone from really getting up utilization, it is a little bit specific to each individual physician. You know, for folks who are buying the system, that's a great sign that they're very committed to NanoKnife as part of their practice.

You know, one of the things we've also talked about, particularly in that urology setting, is making sure that we've got alternative placement models so that we can get capital into the hands of physicians so they can start doing those procedures. I think what we're seeing is it's a lot of factors that go into physicians who are building up their business, starts with getting access to the capital, starts with what's best for the patient, right? And they're choosing Nanonize because they know that Nanonize can avoid quality of life side effects and get to really good outcomes for their patients. Last quarter, we talked about putting out our two-year follow-up data coming out of Preserve, being really excited about the fact that there was zero additional incidence of recurrence coming out of Nanonize.

So we know it's good for patients. They can get access to the capital, they can treat their patients, and then get reimbursement. And that's why we've talked a lot about the work that we've done on reimbursement to provide that foundation for physicians. So all those things working together are what helps drive a physician to really build their practice, and we like what we're seeing.

Thank you.

Thank you again for joining our call. We are really pleased with the start of our fiscal year for ANGIODYNAMICS. What you heard here today is not an accident, and it is not random. It is a well-planned idea that we could transform our company, starting with our portfolio changes we started to make five and six years ago. We were deliberate. We were intentional. We also tried to be very transparent with you on our journey, and you could see what we have today. So today we have a company built upon the strength of a medical device platform that gives us the capital and the strength and the background to invest in our medtech platform that will be the growth engine for years to come.

Today what we showed, I think, is that our products are winning in each of the markets that we serve, winning against really good companies and good competitors, but winning because we're getting confidence in the physicians that choose to use us to treat the patients they serve, and the outcomes stand alone. So we've got a really great company. We've got new people who've joined us, brought their talents to our company, and their ambition, driven by their belief in what our mission is. I'm excited to welcome Eric to our company, and hopefully you'll stay with our journey or continue to deliver great results. Thank you again for all of my teammates and our company. Talk to you soon.