Q4 2022 AngioDynamics Inc Earnings Call
Speaker 1: The.
Speaker 2: Good morning. Welcome to angioodynamics. Fourth quarter and fiscal year 2022: earnings call.
Speaker 2: At this time a participants arenan illenally mode.
Speaker 2: A question-and-answer session will follow the formal presentation.
Speaker 2: If anyone should require operator system during the conference, please press star zero from your telephone keypad.
Speaker 2: As a reminder, this conference call is being recorded.
Speaker 2: The news release detailing our fourth quarter and fiscal year 2022 results crossed the wire earlier this morning and is available on the company's website.
Speaker 2: This conference call is also being broadcast live over the Internet at the Investors section of the company's website at W? ngooddynamics com, and the webcast replay of the call will be available at the same site proximately one hour after the end of today's call.
Speaker 2: Before we begin, i'would like to caution listeners. During the course of this conference call, the company will make projections or forward-looking statements regarding future events, including statements about.
Speaker 2: Expected revenue, adjusted earnings and gross margins for fiscal year 2023, as well as trends that may continue.
Speaker 2: 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 identifies specific factors that may cause the actual results or events to differ materially from those described in the forward-looking statements.
Speaker 2: The company will also discuss certain non-GAAP financial measures during this call.
Speaker 2: 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.
Speaker 2: 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.
Speaker 2: A slide package offering insight into the company's financial results is also available on the Investors sections the company's website under events and presentations.
Speaker 2: This presentation should be read in conjunction with the press release discussing the company's operating results and financial performance during this morning's call.
Speaker 2: I'd now like to turn the call over to Jim Clemmer, angioodynamics President and Chief Executive Officer. Mr Clemmer.
Speaker 3: Thank you, Rob. Good morning everyone and thank you for joining us for angodynamics fiscal 2022 fourth quarter earnings call. Joining me on today's call is Steve trobridge, angrooddynamics Executive Vice President and Chief Financial Officer.
Speaker 4: Who will provide a detailed analysis of our fourth quarter financial performance and our FY 23 guidance.
Speaker 4: We had a strong end to fiscal 2022 as we delivered solid revenue growth in the Phase of significant supply chain and operations headwinds.
Speaker 4: As well as challenges that our customers are facing in delivering care to patients.
Speaker 4: We ended the quarter with revenue of $87 million.
Speaker 4: Representing growth of more than 13% year-over-year.
Speaker 4: Net sales from our medtech platforms.
Speaker 4: Were $22.6 million, representing growth of 40% over the fourth quarter of last year.
Speaker 4: Revenue for the full fiscal year was $316.2 million, representing growth of almost 9% over the previous year. Our medtech platforms grew more than 41%.
Speaker 4: Compared to fiscal 2021 and comprised approximately 25% of our overall revenue base for the full year, up from 19% the year ago.
Speaker 4: As we've highlighted in the past as part of our corporate strategy, we expect this percentage to grow over time.
Speaker 4: Fiscal 2022 once again presented a unique challenge, with historically high inflation rates, staffing and procedure headwinds.
Speaker 4: And supply chain disruptions persisting throughout the year with varying intensity.
Speaker 4: Throughout all of this, we continue to prioritize the growth of our arion, NanoKnife and through becammete platforms.
Speaker 4: We're all keeping a focus on our cash position and profitability.
Speaker 4: Through our RND programs we launched innovative new products including two sizes of our alphaac and mechanical from befectamy device that will help roundout physicians arsenal to treat vanous stromboyemboism and advance our position in this exciting market in fiscal 2020 -three and beyond.
Speaker 4: We also launched two studies, including our preserved clinical study for the use of nanomnife.
Speaker 4: As a focal treatment option for men with prostate cancer.
Speaker 4: That we believe can provide significant quality of life benefits over other treatment options.
Speaker 4: I am very proud of our team's dedication and ability to remain focused and deliver for customers and patients in this difficult macroeconomic climate.
Speaker 4: We continue to drive impressive performance in our reion abdirectity business.
Speaker 3: With revenue of nine point six million for the quarter.
Speaker 3: upsequentially from seven point three million in our third quarter.
Speaker 4: For the year, aryion revenue was $29.1 million.
Speaker 3: Exceeding the top end of our guidance range.
Speaker 5: In the fourth quarter, arion procedure volume and market adoption continued to gain momentum.
Speaker 3: We are excited about the steady trajectory of this business, having treated more than 21 thousand people since we launched this platform approximately 21 months ago.
Speaker 4: We believe our differentiated offering with demonstrated clinical benefits continues to gain traction with new and existing customers.
Speaker 3: Based on its efficiency, efficacy and ability to treat any lesion type or length anywhere in the peripheral vcure.
Speaker 4: For fiscal 2023, we expect arion sales in the range of 40 to $45 million.
Speaker 3: Our mechanical from beckthany business.
Speaker 3: Comprising AngioVac and alphabeac, grew 10% year-over-year in the fourth quarter.
Speaker 4: When including unif vies, this business grew 11% in the quarter.
Speaker 3: For the year. Mechanical frt back to me grew 16% and when including itviews it grew 12%.
Speaker 3: While total growth in from beckthany was below our expectations due in part to the procedural volume challenges impacting the DVT space.
Speaker 3: We are pleased with the overall performance of this business.
Speaker 3: And remain bullish on the growth trajectory into FY 23 and beyond.
Speaker 4: As we continue to work towards expanding our product offerings to open up additional total addressable markets in the VTE space.
Speaker 3: Specifically.
Speaker 4: We are excited about the early performance of our alphaaac system.
Speaker 4: During FY 22 we launched a 22 French alpha AC and completed the limited market release of our 18 French alpha and are now in full market release.
Speaker 4: Total alphaac revenue for the year was $2.2 million.
Speaker 4: Angiovac sales declined 4% in the quarter against a strong comparable and due to the headwinds I just mentioned.
Speaker 4: For the full year, AngioVac sales grew 7%.
Speaker 3: On June . First, at the start of our fiscal year, we reorganized our throngbus management sales bag.
Speaker 3: Shifting responsibility for our core, anG ographic capita business.
Speaker 4: To our vasdoorular access team.
Speaker 4: This move facilitates a dedicated focus on our thrombus business.
Speaker 4: And increases our effective sales efforts by roughly 10% to 15% without adding any additional headcount.
Speaker 4: This dedicated sales structure is similar to the proven approach that we took with ream and will allow our thrombus team to better serve our customers and communicate the clinical value of AngioVac and alphaac in treating different types of VTE in this highly competitive market.
Speaker 3: Moving core and toabvascular access.
Speaker 3: Will allow vaccteam to leverage its deep relationships with interventional radiologists.
Speaker 3: And its strong experience with GPO and IDN contracts.
Speaker 3: We believe this team is well suited to drive these synergistic businesses efficiently.
Speaker 3: Turning to nanomite.
Speaker 4: Disposable sales grew 16% during the quarter.
Speaker 4: For the year, nofike disposals grew 17% compared to fiscal 2021.
Speaker 4: Growth during the fourth quarter was driven by strength in the United States.
Speaker 4: With U's disposable sales growing 64% over the prior year.
Speaker 3: International markets, most notably in China and Europe , remain impacted by the continuing global COVID-19 headwinds and resulting disruption.
Speaker 3: ninlife performance in the United States has been fueled by more than 130 proxstate procedures performed in FY twenty-two.
Speaker 3: Representing growth of more than 500% in this disease states.
Speaker 3: These results and the progress of our preserved trial for the treatment of prostate cancer.
Speaker 4: Have was very excited about the opportunities for an airrowlife.
Speaker 5: During the fourth quarter, our met device businesses.
Speaker 3: Which include the remainder of our portfolio, grew approximately 6% over the prior year.
Speaker 3: For FY 22, our medid device, businesses grew 1%.
Speaker 3: When adjusting for the onetime $5 million order from NHS during the prior year period.
Speaker 4: Our mid device business grew 3% year-over-year.
Speaker 4: As we stated during our Investor and technology Day last summer, we expect our mid-device business to grow 1% to 3% over our three -year strategic plan period.
Speaker 4: We are very pleased with this performance, particularly given the challenging macro environment.
Speaker 5: On our third quarter fiscal call. We discussed the tight labor market.
Speaker 3: The impact on our manufacturing capacity and our response plans.
Speaker 4: As we anticipated, the backlog at the end of Q3 did rise during the beginning of our fourth quarter.
Speaker 3: However our manufacturing teams did an excellent job executing on our response plans, increasing manufacturing capacity through our Costa rican partnership and stabilizing our employee base.
Speaker 4: I'm pleased to tell you that, as we exited Q4, our production hours were up by more than 40% relative to the December January time frame.
Speaker 4: As was the case last quarter, the demand environment for our mid-device products remained strong, while our response plans enabled us to work through a portion of the backlog.
Speaker 3: At the end of May, backlog was approximately $8.4 million.
Speaker 3: compareding to 11 lien at the end of March.
Speaker 5: While we're pleased with our progress with respect to our supply chain stabilization and manufacturing capacity.
Speaker 3: Given the macroeconomic challenges, we expect to see some variability in these areas.
Speaker 3: These productivity gains has had a positive impact on our gross margins, sequentially from our second and third quarters.
Speaker 5: Gross margin for the fourth fiscal quarter was 53%.
Speaker 5: Resulting in a full year gross margin of 52%, in line with our revised guidance.
Speaker 3: Turning to earnings.
Speaker 5: We generated an EPS of one cent in the quarter.
Speaker 5: Adjusted EPS for the year was breakeven.
Speaker 5: As a reminder, This includes a positive impact of about eight cents from the cars act on our fiscal third quarter adjusted EPS.
Speaker 5: As mentioned on our third quarter earnings call, while we didn't contemplate this relief in our original earnings guidance.
Speaker 4: It allowed us to maintain and even accelerate certain investments.
Speaker 4: Across a number of areas of our business, while offsetting a portion.
Speaker 4: Of the COVID-related headwinds that we faced during the year.
Speaker 5: Now regarding our investments during the quarter. We continued to focus on our key strategic priorities.
Speaker 5: Which are to support our existing platforms to facilitate physician adoption and improve patient outcomes.
Speaker 6: And also.
Speaker 5: To continue the development of new products to expand into larger, facter-growing addressable markets.
Speaker 4: These investment initiatives include clinical research, product development.
Speaker 5: Selling and marketing and regulatory pathway expansion as we prepare to introduce these new products into the market and work towards expanding indications and geographies.
Speaker 5: Our teams continue to execute on our clinical trials.
Speaker 5: Including our two new IDE studies.
Speaker 4: Our preserved study for the treatment of proofstate cancer with NAN andknife.
Speaker 4: In the recently launched Apex study.
Speaker 4: For the treatment of pulmonary emboism with our alphaac F eighteen.
Speaker 4: As well as our direct study.
Speaker 4: For the treatment of pancreatic cancer with nanomnife. We believe that preserve will demonstrate that nanomife can be an effective focal treatment option for men with intermediate risk disease.
Speaker 5: And provides superior quality of life outcomes when compared to other focal treatment options or surgery.
Speaker 4: We estimate that the total potential market for focal treatment of profstate cancer that can be addressed by nanomife may exceed sevenver hundred million dollars.
Speaker 4: We believe that our Apex study for pulmonary embolism will prove that our unique alphaac products can be an effective treatment for PE.
Speaker 5: Providing ease of use and another treatment option, while also unlocking an opportunity in a large addressable market that we estimate to be an excessive of $1.5 billion.
Speaker 7: I'd also like to provide you with an update on our legal action.
Speaker 4: Against bectam Dickinson's CR barard business.
Speaker 4: As it relates to our VA business. We were scheduled for trial to begin on July fifth.
Speaker 5: The court recently rescheduled our trial date to September ninth- excuse me, September nineteenth, 2020 -two.
Speaker 4: We have waited a long time to get our day in court and are looking forward to the opportunity to present our antitrust case.
Speaker 7: Before turning the call over to Steve.
Speaker 4: I would like to once again thank our team here in engdodynamics for their continued persistence and commitment to achieving our goals, the regardless of what challenges lie in front of them. Without their tireless effort, engdodynamics would not be the company it is today.
Speaker 7: With that, I'd like to turn the call over to Steve trobridge, our Executive Vice President and Chief Financial Officer, to review the quarter in more detail.
Speaker 8: Thanks Jim. Good morning everybody.
Speaker 8: Before we begin, I'd like to direct everyone to the presentation on our Investor Relations website summarizing the key items from our quarterly results.
Speaker 8: Our revenue for the fourth quarter of FY 22 increased 13% year-over-year to 87 million, driven by continued strength in our medtech platforms, including reion NanoKnife, and thrown back to me.
Speaker 8: Med tech revenue was 22.6 million of 40% year-over-year increase. Omid device revenue was 64.4 million, growing 6% compared to the fourth quarter of FY twenty-one.
Speaker 8: wherefy 22, our medtech platform, grew 41%.
Speaker 8: Our med device business grew 1% compared to the prior year period and grew 3% year-over-year when excluding last year's NHS order.
Speaker 8: For our fourth fiscal quarter. Our medtech platforms comprised 26% of our total revenue.
Speaker 8: In FY 22, our medtech platforms comprised 25% of our total revenue, compared to 19% in fiscal 2021.
Speaker 8: Overall demand during the quarter remained strong.
Speaker 8: So I will discuss in more detail a little later. We ended may with an $8.4 million backlog, which represents a meaningful reduction in the total backlog from the level we reported for March.
Speaker 8: When taking with our fourth fiscal quarter revenue result of 87 million, the $8.4 million backlog provides clear evidence of both our improving manufacturing capacity and a continued strong demand environment.
Speaker 8: Revenue in our enindovascular therapies business increased 18% year-over-year during the fourth quarter to 45.1 million, benefiting from the continued growth of arion and ourrbeckthany portfolio.
Speaker 8: arion contributed nine point six million in revenue during the fourth quarter, continuing momentum we built since our launch in FY twenty-one.
Speaker 8: As of today, our installed base is 306 lasers, with 31 lasers placed during the fourth quarter. We're very pleased with the growth that ouron teams have achieved, and new laser replacements, along with increased penetration with respect to prior placements, were a significant driver of that growth.
Speaker 8: Total lasers placed sense launch have utilized approximately 19 million of cash.
Speaker 8: Consequently adding quarterly depreciation expense to our gross margins.
Speaker 8: As we've previously discussed, we do not expect the place lasers at new accounts in FY' 23 at the same pace we did in FY' twenty-two.
Speaker 8: In FY 23. our teams will absolutely continue to open new accounts but will be highly focused on increasing penetration and existing accounts.
Speaker 8: As Jim stated earlier, we expect Aron to generate revenue in the range of 40 to 45 million in fiscal 2020. -three.
Speaker 8: Mechanical thro bectoamme revenue, which includes anggovac and alphax sales, grew 10% over the fourth quarter of FY twenty-one.
Speaker 8: When including unit views thro back to me. Revenue grew 11% year-over-year.
Speaker 8: Procedure volume for AngioVac during the fourth fiscal quarter was slightly behind last year and we believe that staffing challenges at hospitals have continued to have an outsized impact on angiovacic procedure volume due to the complexity of angiovacic procedures which require profusionist and typically in ICU BID.
Speaker 8: We're very encouraged by the results of the limited market release for our alphaac F eighteen.
Speaker 8: Physician feedback has been very positive.
Speaker 8: And we moved to a full market release for alphabet F 18 in June and are encouraged by the large number of hospital value analysis committees currently assessing the alphabet platform.
Speaker 8: four FY 22 mechanical front me grew sixteenone percent and when including unit views grew 12%.
Speaker 8: Chemical throbackme growth fell short of our expectations for the year due to COVID-19 disruptions to the complex angivic procedures.
Speaker 8: For fiscal 2023 we pect mechanceical thbback to meet to grow 30% to 35%.
Speaker 8: alphaac revenue from both the FY 22 and F 18 lamr was two point two million in FY 22. for FY 23, we expect AngioVac revenue to be in the range of 27 to 29 million and alphaac revenue to be in the range of seven to nine million.
Speaker 8: We continue to expect our mechanical frbackmeat platform to be a significant contributor to our overall growth and we plan to continue to invest in the platform as a key driver of our transformation.
Speaker 8: That your excess revenue in our fourth quarter increased 9% versus the prior year period.
Speaker 8: fer access is one of the three businesses, along with our core anggeographic capita business and our et business, that felt the most impact of the supply chain headwinds and tight labor market through our first three fiscal quarters.
Speaker 8: Our fourth quarter results in vascular access were positively impacted by a reduction in the overall backlog for VA products during the quarter, while demand remained strong.
Speaker 8: For FY 22, our BA business is down 1%. But when accounting for the onetime $5 million NHS order last year, this business is up 4%.
Speaker 8: Revenue from our oncology business grew 6% during the quarter as compared to prior year.
Speaker 8: manonact disposable revenue increased 16%, driven by 64% growth in the United States.
Speaker 8: nonigact growth was driven by increased awareness from our clinical studies, continued increasing adoption from urologists and a growing installed base.
Speaker 8: For the year, nanmeac probe sales were up 17%, driven by 43% growth in the United States.
Speaker 8: Now moving down the income statement. As illustrated in the gross margin bridge included in the earnings presentation posted this morning, our gross margin for the fourth quarter of FY 22 was 53%.
Speaker 5: A decrease of 170 basis points compared to a year ago, but an increase of 120 basis points sequentially as our capacity improvement initiatives yielded benefits for us in the fourth quarter.
Speaker 8: As we move into our FY' 23. in accordance with our strategy, we expect our gross margin to expand as sales in our higher-margin tech platforms grow. As Jim said, while we're pleased with our progress on manufacturing, we expect to continue to see some variability in FY' 23 as a result of supply chain and other macroeconomic headwinds.
Speaker 5: And the fourth quarter. On a year-over-year basis, the impact on gross margins from product mix was a net benefit of approximately 70 basis points.
Speaker 8: Which was partially impacted by the timing of met device business sales as we reduce the backlog.
Speaker 5: The increase in production capacity from our initiatives provided a benefit of approximately 100 basis points.
Speaker 8: Now these tailwinds were offset by the continuation of the headwinds we discussed during our third quarter call, including the ongoing COVID-19 impact increases in labor and manufacturing costs, staffing challenges, inflationary pressures and freight costs.
Speaker 5: For our fourth quarter. Gross margin was negatively impacted by approximately 125 basis points versus the prior year period, due to increased labor and manufacturing costs.
Speaker 8: Inflationary pressures on raw material prices resulted in another approximately 135 basis point negative impact.
Speaker 8: Higher freight costs had an approximately 10 basis like negative impact.
Speaker 8: Are on enough of XR cost. The accounted for approximately 40 basis point negative impact.
Speaker 8: Gross margin for the full year was 52%, a 150 basis point decrease compared to the previous year, driven by the same headwinds that I just mentioned.
Speaker 8: Our research and development expense during the fourth quarter of FY 22 was seven point nine million, or 9% of sales, compared to nine point one million, or 12% of sales, a year ago.
Speaker 5: Our indd expense for the year was 30.7 million, or 10% of sales, compared to 36.4 million, or 12% of sales, in the previous year.
Speaker 5: And we continue our disciplined investment in RND, focused on driving our key technology platforms, including clinical spend for our medtech portfolio.
Speaker 5: For FY 23, we anticipate RND spend to target 10% to 12% of sales.
Speaker 5: sscna expense for the fourth quarter of FY 22 was ty-seven nine thousand, representing 44% of sales, compared to 33 million, representing 43% of sales, a year ago.
Speaker 8: For the year, SGNA expense was 133.8 million, representing 42% of sales, compared to 117.2 million, representing 40% of sales in FY twenty-one.
Speaker 8: The increase in stna spending for our FY' 22 was primarily driven by investments in our sales team is particularly aryon.
Speaker 8: For FY 23, we anticipate SGNA spend to target 40% to 45% of revenue.
Speaker 8: Our adjusted net income for the fourth quarter of FY 22 was ero three million, or adjusted earnings per share of one cent, compared to an adjusted net loss of zero one million, or roughly breakeven adjusted earnings per share in the fourth quarter of last year.
Speaker 5: For the full year FY 22 adjusted net loss was zero two million, which led to a roughly breakeven adjusted earnings per share.
Speaker 5: Adjusted EBITDA in the fourth quarter of FY 22 was six point two million, compared to four point five million in the fourth quarter of FY twenty-one.
Speaker 5: For the year, adjusted EBITDA was 20.9 million compared to 19.5 million in FY twenty-one.
Speaker 8: In the fourth quarter of FY 22 we generated eight point six million in operating cash, have capital expenditures of one million in additition to re placement and evaluation units of two point seven million.
Speaker 8: As of May 30, first twent thousand and 22, we had 28.8 million in cash and cash equivalents, compared to 23.9 million in cash and cash equivalents on February twent-eigh thousand and 22.
Speaker 5: Our debt outstanding remained consistent with twenty-five million.
Speaker 5: As we stated, our strategic plan contemplates funding development of our growth initiatives with internally generated cash.
Speaker 8: We began FY 22 with 48.2 million in cash and ended FY 22 with 28.8 million in cash, resulting in a net reduction of cash of about 19.3 million.
Speaker 5: The earnings presentation posted this morning includes a cash walk for our FY' twenty-two.
Speaker 5: As illustrated that walk, there were a number of factors during our FY 'twenty-two that impacted the cash that we don't anticipate will recur at those same levels during FY' twenty-three.
Speaker 5: For FY 23, we expect net operating cash generation to be breakeven to slightly positive.
Speaker 8: That to provides some additional color during FY 22 M laser placements used 11.4 million of cash.
Speaker 5: As I mentioned, we do not expect the place as many irion lasers in the field in FY' 23 as we did in FY' twenty-two.
Speaker 5: The net increase in accounts receivables for the year exceed the net increase in accounts payables by 11.9 million.
Speaker 8: This was primarily driven by timing of sales related to the backlog and strong demand in the fourth quarter, driving AR balances up late in the year.
Speaker 8: As this reverses, we expect it will become a source of cash in FY twenty-three.
Speaker 5: Inflation and increased labor and freight cost stemming from coverage disruptions, as well as costs associated with ramping up. Our Costa rican manufacturing strategy used eight point five million of cash during the year.
Speaker 5: We do expect inflationary pressures to persist throughout our FY' 23, but we do not expect them to be as pronounced as during our FY' twenty-two.
Speaker 5: Our current outlook on inflation and labor costs, as well as the timing of certain inventory purchases, is reflected in our expectation that FY 23 net operating cash generation is breakeven to slightly positive. As is typical, we expect cash utilization to be higher in the early part of our fiscal year, with increasing cash balances in the later part of the year.
Speaker 8: During the back half of our FY 23. we currently expect to achieve the aggregate revenue milestone target for arion, which would trigger a contingent consideration payment of one million. Now, this contingent consideration payment is excluded from our operating cash expectations.
Speaker 8: In the face of unprecedented market challenges, still stemming from the global COVID-19 pandemic, we're pleased with our ability to utilize internally generated cash to remain in investment mode to drive our growth targets on our medtech platforms.
Speaker 5: We'll continue to balance making the investments necessary to drive growth with prudent cash management and profitability.
Speaker 8: Turning now to guidance, we anticipate that FY 23 revenue will be in the range of 342 to 348 million, and we expect full year adjusted earnings per share to be in the range of one to six cents, as we continue to invest in driving sustainable growth in our key med tech platforms.
Speaker 8: Of guidance, we anticipate that FY 23 revenue will be in the range of 342 to 348 million, and we expect full year adjusted earnings per share to be in the range of one to six cents, as we continue to invest in driving sustainable growth in our key med tech platforms, while also managing continued headwinds.
Speaker 8: While the macroeconomic environment has improved in certain areas, it remains uncertain due to inflation, supply chain disruptions, the tight labor market and pressures facing our customers.
Speaker 8: We expect FY 23 gross margins to be in the range of 52.5 to fifty-four. Point five and.
Speaker 8: As we move into FY 23, we are providing you with increased visibility into the gross margin profiles for our higher growth med tech platform and our med device businesses.
Speaker 8: So for FY 23, we expect med tech gross margins to be in the range of tosixty-five percent, tosixty-eight percent.
Speaker 5: And led device growth margins to be in the range of forty-fivepercent to 48%.
Speaker 5: I'm proud of our team's ability to continue working towards our goals despite a very challenging operating environment. We look forward to continuing this progress in fiscal 2020 -three.
Speaker 5: With that. I'll turn it back to Jim. Thank you, Steve. I am very proud of our performance over the past year, as we work to overcome a host of macro challenges while continuing our transformation into an innovative, growth-oriented medical technology company.
Speaker 4: We delivered on the strategic objectives for FY' 22 that we laid out for you in last year's Investor in technology day.
Speaker 4: We provided revenue guidance last summer and we were able to raise that guidance afterctor Q1 and we finished the year one million dollars above that increased guidance range.
Speaker 4: We re able to report full year EPS that was within the range of original guidance, despite facing macroeconomic headwinds.
Speaker 4: As well as labor and supply chain disruptions. That pressured profitability and required us to lower expectations around gross margins during the year.
Speaker 4: As we've maintained, we remain in investment mode, prioritizing investments in our people and capabilities.
Speaker 4: Both of which are foundational to our transformation. The results of these investments bore out over the course of the year and included the launch of our alphabeac F 22 and our AngioVac and alphabeac F 18 products.
Speaker 4: We have also focused our investment on clinical trials to generate data that we believe will drive physicians and patients to our platforms.
Speaker 4: We are excited about our alpha-ac Apex pulmonary embolism study and our preserve nannife prostate study.
Speaker 3: We remain on track to meet the long-term financial goals that we laid out for you last July .
Speaker 3: As evidenced by an increase.
Speaker 3: To our FY 23 revenue range and the ongoing mix shift.
Speaker 3: Toward our highergrowth and higher margin. med-tac platforms and products.
Speaker 3: We believe that these goals contemplate the investment needed to transform the company.
Speaker 3: And introduce new products and higher growth markets, while expanding indications for existing products.
Speaker 3: Setting us up for sustainable growth.
Speaker 3: Slide 12 of our earnings presentation is a great example of this, showing the incremental pipeline and platform opportunities.
Speaker 3: During our Investor and technology day, we described how we were transforming our company and our product portfolio to increase the aggregate total addressable markets in which we compete.
Speaker 3: In our FY 2018, our aggregate total addressable markets were less than one point a half billion dollars.
Speaker 3: Through portfolio optimization rnda, clinical initiatives and regulatory pathway expansion. Our aggregate total addressable markets for FY 23 exceed $6 billion.
Speaker 4: And we are on track to expand that to more than $8 billion in 2020. -five.
Speaker 3: In addition, our three medtech platforms offer opportunities to leverage their unique science and capabilities to expand into future market potentials that are in access of 8- nine -dollars market goal that we articulated at the beginning of our strategic transformation.
Speaker 4: Future opportunities for our arion platform include applications in caron, aryic procedures and from becamme.
Speaker 4: Potential future applications for our THR becamy platforms include applications in the left heart.
Speaker 4: And all of our medtech platforms, including nanoi, have significant growth potential in urinpan markets.
Speaker 4: Which we feel are under penetrated today, while we believe that it is vital to serve larger factor-growing markets.
Speaker 4: Our ability to compete and win is equally as important, and we are building out those capabilities, as evidenced by the growth of our medtech portfolio.
Speaker 4: We remain committed to improving patient care and physician satisfaction through the solutions that address some of the most dynamic opportunities in healthcare.
Speaker 3: And we are supporting data collection initiatives and research studies to demonstrate the clinical efficacy of our technologies.
Speaker 3: I would like to thank everyone on the angerodynamics team for all of their hard work during the quarter and their ongoing commitment to our mission.
Speaker 3: I'd also like to recognize global caregivers that acknowledge the challenges that they face in delivering patient care.
Speaker 7: With that, I'd like to turn the call back to Rob for more questions Rob.
Speaker 7: With that, I'd like to turn the call back to Rob for more questions. Rob, Thank you.
Speaker 2: We'll now be conducting the question-and-answer session. If you have to ask a question, Please firstress Star one from your telephone key PAD and the confirmation tone indicate. Your line is in the question Q.
Speaker 2: You may press start two if you like to move your question from the queue for distance shooing speaker equipment. It may be necessary to pick up your handset before person, the starkeys.
Speaker 2: If first start to. If you like to move your question from the queue for distance shooing speaker equipment, may be necessary to pick up your handset before person. The starkkeys one moment, Please will we pull for questions. Thank you.
Speaker 9: Our first question is coming from the line of Jason Bedford with Raymond James. Please shoot their question.
Speaker 10: I good morning and thanks for all the detail, like itesss. Just a few for me to start.
Speaker 10: On the fiscal' 23 guide. Do we assume that the backlog gets exhausted during year?
Speaker 9: A Jason. Good morning soy.
Speaker 8: I think it's similar to how we thought about FY 24. we're going in F IM sor Q4 of Y 22're going in FY 23 with respect to the backlog. So as we worked through the backlog in Q4 we we saw some of that come down and that was beneficial to our results. We're not fully banking on 100% of that in our FY 23 guide now, as Jim and I have talked in the past and we think that there's probably some double ordering and there, as we work through this, we don't know exactly how much.
Speaker 5: So we're going to be thoughtful as we work through that backlog. Sure it provides a little bit of a safety net, but a lot of our FY 23 guidance was really built from the bottom up. So I do expect that we're going to continue to work through that backlog over the course of the first two quarters of FY' 23. but it's not like all of what's left of that backlog we consider to be incremental to where our results were heading. We really did build it up from the bottom up.
Speaker 10: okayand just thinking through the revenue bridge.
Speaker 10: Is there an expectation contemplated in the guide that oncology and Vascular access grow year-over-year in fiscal twenty-three?
Speaker 8: Yes as we've talked about. When you think about our med device businesses, we have the same view of that business that we had when we came out with our Investor and technology day in July . We see that business as a onepercent to 3% grower. Oncology other than nanoyi is included in that device business category along with VA and our core engineographic captheinter business. We do expect nany is going to continue to be a strong double-dig grower on top of that, So you could use that 1% to 3% range for all of devices.
Speaker 11: And then some of the other detail that we gave you in our med tech product together to get to that, that guy that we avegave hundred and 42 to three and 48 OK, and you have to get two gramular. You say double digit NAN, that growth is a total land on Ni. Just procedure grow, it's procedures, it primarily. We're talking disposabals, right So that. But you know, solid double ble dig growth primarily coming from disposles. We all coming disposals OK, helpful. Just on the from that me category you mentioned.
Speaker 10: Volume the procedure challenges impacting the space. Is this largely in reference to this PAP shortage dynamic at hospitals? Are there other factors here that are impacting, their re impacting growth?
Speaker 5: We do think it's largely coming from those stafing allenges at hospals. We've talked about anggovac in the past as being a complex procedure. We can do things that other competitive technologies cannot do, but it does require additional staffing at the hospitalswhen you have to bring intheperfusion, working through the anesthesiia and a lot of times moving into an ICU bed, and we think that that did weigh on procedure volume for anggovac. As hospitalals we're dealing with their stafing challenges. Okay, and then just last question, I'll get back and Q on anggovacuand the talk with there.
Speaker 10: Are you seeing any FF fear, but any alpha, alpha cannibalization of angg, ofvback and anyway Jason, re washing stit.ch Jim, we expect to be some. We built it into our models because we think the alphaac is so strong and powerful it may do some things. Or angeac may have been utilized before, So we modeled that. We learned some of that in our limited market release So we'll wash it over time. Jason, there will be a gap between crossover between alphabet can serve.
Speaker 3: In angego back and serve but we're being realed close to our customers. We think it's far offset but euroopen marketts that helps us to get into and the new patients. We think alpha back can tre.
Speaker 3: But we're being realed close to our customers. We think it's far offset, but euroopen marketts that helps us to get into. And the new patients we think alpha AC can treat okay, Thank you.
Speaker 2: mynext question comes to a line of Bill: planetics and mechanicalicallyy your a your questionsgreat thanks, good morning. Just to drill down a little more, the arion has, I mean, far exceed our expectations.
Speaker 11: And just curious is looking, you've been taking share. Originally, I think you said, in the laser market, now that's moving into the, the other more mechanical type of devices. But as you think about the future with less placements and increase utilization, I mean how, how much utilization do you think you can see per system? How many procedures are you kind of getting with a given customer, versus what you could penetrate with that customer? I was wondering.
Speaker 11: If you could give us a little more flavor maybe on what we should expect, then may give us some numbers but how that kind of plays out executionally in the accounts.
Speaker 12: Yes good question again. We're really pleased with the iron business, as you know a couple of years ago. We are attracted to this asset due to the way it operates, how it treats and also the market potential that we sawve for disruptive technology such of this, and now that's proving to be what's happening. So back to your question. As you know, we identified over 300 lagers already placed in less than two years from our full launch. We'll still continue to occur, but we'll bend it a little bit. We want to make sure now we're focused on the efficacy of each account, as you said.
Speaker 7: We have internal metrics that we track and trace. We know by the end of every month how many hosp customers are OBL is treated, how many patients with our product. We don't release all that information publicly but we do have goals we've set there to expand that. The reasons why bill that's important to us because we find that when customers get access and technology after a few months they gain increasing confidence not just in the safety profile- how our product works and keeping the vessel W protection- integrity is safety profile to their standards- but also the power that it delivers.
Speaker 7: To treat above, below the a and do stagretoosis and as we're now learning other things over time as we identified on our pipeline chart, So we'll probably not release exact detail Bill as to how many procedures we do monthly by each customer. But we're really confident we're getting not just more procedures by each customer. We're finding new and larger customers get attracted to this technology and come on boardso that's why we was Steve identified. We're not going to hold back and putting more lages in the field. There's a strong demand.
Speaker 3: But we also want to make sure that we gain the fixency in current customersokay. And then on alpha AC, two point two million in the year, going into seven to nine million, going into full market launch with the 18 French and, just as you think about that, step up from year one to year to how much of that is with the existing 22 French, or is it mostly incremental with the 18 French and just getting into different parts of the body?
Speaker 12: The E build-good question. We're excited the 18 frrench we think will be integral to get us into more areas of the body, more treatment potential for us. So the 22 is very powerful and that was our first device. But, as you saw when our strategy, the 18 is really, really important to us and we thought that was the perfect device for the eightpex study. That's why we launched the Apex study. We feel the' 18 can be a really important tool to treat TE and, as you over time bill, we have in our plan to launch a smaller size around out the alpha-ac potential.
Speaker 7: But again each time we open up a smaller size. We expect that market to expand for us over time and just kind of wrap it up for me with financial. Just as we think of the August quarter in guidance. You gave the year but given all that puts and takes just wondering if you gave this. Maybe Tim omore granularity on how that look sequentially from me to August and then on the tax rate. Just I don't think you gave tax rate guidance but if you could help us out.
Speaker 13: three down from two and then back to 4, being the highest quarteryears. I would expect that you're going to see similar patterns now. We've seen a little bit of a smoothing of that in our growth trajectory coming from the launch of our new products, and so you may see some tempering. But all in all, I think it's a good idea to continue to expect to see some of that same seasonality as we move forward. And you're right, we identified there're still moving parts. We're not out of COVID-19 yet as much as we'd like to be. There's still some lingering disruptive effects that are out there that we continue to manage through, and we'll manage through the way that we have the last couple of.
Speaker 13: On tax rate I the to do do is continue to model the way that you'vemodeled and the consistent with what we've done going forward. The one point I want to reiterate is that's a GAAP rate. We're not a cash taxpayer. We still have a lot of NOLs coming from historical transactions. So that is not a use of cash as we go forward and we're able to offset any taxable income from an NOL basis for several years going forward. So.
Speaker 5: I think the thingto do is continue to model the way that you modeled it and you be consistent with what we've done, going forward. The one point I want to reiterate is that' that's a gap rate. We're not a cash taxpayer. We still have a lot of NOLs coming from historical transactions, So that is not a use of cash. As we go forward and we're able to offset any taxable income from a an NOL basis for several years, going forward, still great, Thank.
Speaker 2: Next question is from the line of Matthew mission with keybank. Please re you your questionsygood morning guys. Thank you ve taking questions, or I think I? To start off with na.nda, TE. You get spent a lot of time on the all talking about prostate, a little more than more than usual. What do you think is driving the increase in the number of prostate procedures? Is specifically the preserved study.
Speaker 3: T thanks to the question. It's a few things only that it once. We think preserve is highlighting now our commitment to the space to become a focal treatment option, but it probably goes back a little before that. I think doctors still understand the mechanism of action of nanolife, how it does, what it does is vitally important and we've seen other work being published by physicians globally who've done really important work collect.ed data on the efficacy in the safety profile has been generated by utilizing nanolife and prostate outside of the U's, So I think some of the physicians here have seen that data. It helped encourage us.
Speaker 3: To pursue the idea that we did with the fdaand now my. There's kind of a halo effact and- and I've talked to a lot of these phicians to understand it myself- the physicians believe that focal treatment needs a better option and they want to give patients that option for really, really effective focal treatment, and it hasn't really existed with the other two main platforms in the focal arena. So we're really encouraged, Matt. We're seeing really big facilities come online, seeing a lot of enthusiasm around our product as it's used. It's simple to use.
Speaker 4: It's easy to patients get benefit pretty much immediately. So we're really excited to track the preserve study. As I identified in our call, we think the intermediate risk patients are about 40% by one thousand of the quarterly and patients identified in the? U's annually.
Speaker 7: thatwe think those, those folks could be potential treatment options for this focal treatment over time and that's why we also share with you a market in excess- maybe $7 million over time. So we're going to work towards that map. That's why we're excited. We think gives patients that option and Matt. What I would add to that is- we've talked about this in the past- we really like and are excited about the opportunity of nanoife as a focal treatment option and we think the timing is actually working really well today.
Speaker 13: So as Jim mentioned yoururologists are looking for a focal treatment option something that can fit in between wasatchful waiting or active surveillance and going to a radical process etomy given all of the side effects that are typical when you go to surgery. So you've got the industry looking for a focal treatment option over the last handful of years. There's been significant advancements and imaging technology which are giving those urologist the opportunity to pinpoint the lesions and maybe go after those areas with a focal treatment option that.
Speaker 13: So all three of those things are coming together at the right time, and we also think we've got the right technology. Given all of the experience that Jim talked about, we know that we can preserve some really good quality of life of those intermediate risk patients, and so I think the timing is right.
Speaker 14: And the docs that are that are doing these procedures in the prostate? Are they utilizing the existing BIS using installed base of manorknife that's already placed in multiple haultiable systems? Are the consumables fairly in interchangeable between those two procedures? And then, how are you thinking about potentially differentiating between price of prostate versus versus pank strcedure?
Speaker 14: The disposables are absolutely transferable, So the disposals that are out in the market today are perfectly suitable for the prostate procedures. The installed base is growing with urologists. I mean our historical base when we have been focusing on the liver and pancreatic market. We re usually those patibillary surgeons in the hospital. Now it could be in the same hospital but it is a little bit of a different call point with urologist. So we see an opportunity to really expand that installed base as we drive our prostate procedures.
Speaker 13: And then the question around the timing as well as as pricing. There will be some differences, especially as we get through a trial and we get to the point that we have aspecific indication for prostate. Absolutely, there's going to be market specific pricing that makes it the most appropriate for the use of those physicians as well as the patients. That differentiates between an in surgery setting versus the prostate settingok. On movement to outha back, I think you some total sales for the G or about two point two million. What is implied in?
Speaker 15: F 23. guidance for alpha AC SA een in net 22. yes, So we are got. We said about seseven, nine million that you should pectfor alphaac in FY twenty-three.
Speaker 16: Okay and the last question on the med tech gross margins in the sixty-fivepercent to 68% range. I'm assuming that that's currently with supply chain and ramping. Where is that? Where do you think that can go over the next several years if sales Raf, as you think it again?
Speaker 8: We think those high sixty's is a good way to think about this business. Now there's some puts and takes. We've talked about some of the startup costs as it relates toyesinstalling. The AR on lasers are there, although that's been abating over the last year. I talked about the depreciation expense that you're going to have running through gross margins based upon the lasers that we place. So that's going to be one factor. We had some pickups in margin with moving manufacturing of the alphabet lines from a third-party supplier to in-house. So we'll do all those things that you would expect us to do for.
Speaker 17: Proud of oura company, really from our people that serve our customers who serve patients in needwe hope you'll see that we're creating value for those patients. They can get better faster through the use of our technology. We, HO you'll also see we're giving our employees a place, way they can shine and engage them with their talents and do what they do best here at anggo and have a place to thrive. And finally, for our investors. We hope you'll see we're creating a companythat we think is more interesting and more valuable over time as we continue our transformation to be a high tech, high growth, profitable meg tech company.
Speaker 18: Thanks for joining us today. This will conclude today's conference. Thank you for your participation. You may disconnect your lines at this time.