Q2 2024 AngioDynamics Inc Earnings Call

Good morning, and welcome to the answers isn't that makes fiscal year 2024 second quarter earnings call.

Good morning and welcome to the end of your dynamics fiscal year 2024 second quarter earnings call at the time of participants are in listening only mode. The question and answers.

At this time, all participants are in listen only mode.

Question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero from your telephone keypad.

If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. As a reminder of this conference call,

As a reminder, this conference call is being recorded.

The news release detailing and your dynamics as fiscal 2024 second quarter results crossed the wire earlier. This morning and is available on the company's website.

The news released detailing Angelina Amix's fiscal 2024 second-quarter results crossed the wire earlier this morning and is available on the company's website.

conference call is also being broadcast live over the internet at the Investor section of the company's website at www.antiodynamics.com and the webcast replay of the call will be available at the same site approximately one hour after the end of today's call.

This conference call is also being broadcast live over the Internet at the investors section of the company's website at Www dot and sheer dynamics dot com and the webcast replay of the call will be available at the same site approximately one hour after the end of today's call.

Speaker Change: Before we begin, I would 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 2024, as well as trends that may continue.

Before we begin I would 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 2024.

As well as trends that May continue.

Speaker Change: Management encourages you to review the company's past and future filings with the SEC, including without limitation, the company's forms 10Q and 10K, which identify specific factors that may cause the actual results or events to differ materially from those described in the following statement.

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.

Speaker Change: The company will also discuss certain non-GAP and pro forma financial measures during this call.

The company will also discuss certain non-GAAP and pro forma financial measures during this call.

Speaker Change: 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.

Management uses these measures to establish operational goals and review of operational performance and believes that these measures may assist investors in analyzing the underlying trends in the company's business overtime.

Speaker Change: Vector should consider these non-GAP and pro forma measures in addition to, not as a substitute for or a superior to financial reporting measures prepared in accordance with GAP.

Investors should consider these non-GAAP and pro forma measures. In addition to that this is substituting for or superior to financial reporting measures prepared in accordance with GAAP.

Speaker Change: A flight package offering insight into the company's financial results is also available on the investor section of the company's website under events and presentations.

A slide package offering insight into the company's financial results is also available on the investors section of the company's website under events and presentations.

This presentation should be read in conjunction with the press release discussing the company's operating results and financial performance. During this morning's conference call.

Speaker Change: This presentation should be read in conjunction with the press release discussing the company's operating results and financial performance during this morning's conference call.

Speaker Change: I'd now like to turn the call over to Jim Clemer and your dynamics president and chief executive officer.

I'd now like to turn the call over to Jim Clemmer, and your dynamics, President and Chief Executive Officer, Mr. Clemmer.

Jim Clemer: Thank you, Rob. Good morning, everyone, and thanks for joining us today for our fiscal 2024 second quarter earnings call. Joining me on today's call is Steve Trobridge, interdynamics executive vice president and chief financial officer who will provide a more detailed analysis of our second quarter financial performance as well as the manufacturing and restructuring that we announced this morning.

Thank you, Rob and good morning, everyone and thanks for joining us today for our fiscal 2024 second quarter earnings call joining.

Joining me on today's call is Steve Trowbridge, Andrew dynamics, Executive Vice President and Chief Financial Officer, who will provide a more detailed analysis of our second quarter financial performance as well as the manufacturing restructuring that we announced this morning.

Steve Trobridge: Unless otherwise noted, all financial metrics and growth rates provided during the call today with respect to our results will be on a pro forma basis, which excludes the impact of our devastated dialysis and biosensory business.

Unless otherwise noted all financial metrics and growth rates provided during the call today with respect to our results will be on a pro forma basis, which excludes the impact of our divested dialysis and bio century businesses.

Before digging into our quarterly results, we are announcing significant steps in our long term strategic transformation.

Steve Trobridge: before digging into our quarterly results. We are announcing significant steps in our long-term strategic transformation.

Steve Trobridge: During the second quarter, we continued to actively pursue portfolio optimization opportunities and we made progress on that front.

During the second quarter, we continued to actively pursue portfolio optimization opportunities and we made progress on that front.

Steve Trobridge: In addition, this morning we announced a planned restructuring of our manufacturing footprint by moving to a fully-outro.

In addition, this morning, we announced a planned restructuring of our manufacturing footprint.

Moving to a fully outsourced model.

Steve Trobridge: With these moves, we will remain focused on generating continued growth across both our Medtech and MedDevice businesses, while simultaneously driving margin

With these moves we will remain focused on generating continued growth across both our med tech and med device businesses, while simultaneously driving margin expansion.

Steve Trobridge: importantly, when the dust settles from our initiatives at the end of our two-year plan.

Importantly, when the dust settles from our initiatives at the end of our two year plan we.

Steve Trobridge: We expect to achieve full-year profitability in FY 2027.

We expect to achieve full year profitability in FY 'twenty 'twenty seven.

Steve Trobridge: Both Steve and I will go into additional details later in the call, but now let me get back to Q2.

Both Steve and I will go into additional details later in the call.

But now let me get back to Q2.

Steve Trobridge: Our second quarter of fiscal 24, so year-over-year growth, but we also faced headwinds, particularly in our thrombectomy business.

Our second quarter of fiscal 'twenty four saw year over year growth, but we also faced headwinds, particularly in our thrombectomy business we.

Steve Trobridge: We ended the second quarter with revenue of $79.1 million, representing growth of approximately 3% over a year, led by growth of approximately 4% from our mid-tech segment.

We ended the second quarter with revenue of $79.1 million representing growth of approximately 3% over a year.

Led by growth of approximately 4%.

From our med tech segments.

Steve Trobridge: While growth of the Matex segment was bit behind our expectations, particularly in mechanical thrombectomy. Our adjusted EPS was a long time ago.

While growth of the Med Tech segment was behind our expectations, particularly in mechanical thrombectomy. Our adjusted EPS was a loss of five cents as we remained focused on our spending and managing operating expenses, while still investing in long term growth.

Steve Trobridge: as we remain focused on our spending in managing operating expenses while still investing in long-term growth.

Our mechanical thrombectomy business, which includes angio vac and alphabet declined four 7% year over year.

Steve Trobridge: are mechanical from Bectomy Business, which includes Andrew Vack and AlphaVack, declined 4.7% year-over-year.

Steve Trobridge: We are disappointed by these results as clearly the growth trajectory of this business is taking longer to inflect than we had expected.

We are disappointed by these results as clearly the growth trajectory of this business is taking longer to inflect than we had expected.

Steve Trobridge: We attribute some of the softness to slightly weaker than anticipated procedural volumes late in our quarters.

We attribute some of the softness just slightly weaker than anticipated procedural volumes late in our quarter.

Steve Trobridge: But we also believe the steps we are taking to drive this business are gaining positive traction.

But we also believe the steps we are taking to drive this business are gaining positive traction.

Steve Trobridge: For example, following on the heels of receiving the breakthrough designation for the use of ANGIVAC to remove right-heart vegetation, we continue working diligently with the FDA toward receiving final approval to begin our IDE study.

For example, <unk>.

Following on the heels of receiving the breakthrough designation for the use of angio back to remove right heart vegetation. We.

We continue working diligently with the FDA toward receiving final approval to begin our I D E study.

Steve Trobridge: while AlphaVac revenues were softer than we would have liked this quarter, what we've learned over the past 18 months is that positions value their sterability, simplicity, and safety of the device. And we look forward to the introduction of two new second generation design enhancements that will make the product even more appealing later in calendar 2024.

While alpha backed revenues were softer than we would have liked this quarter, what we've learned over the past 18 months is that physicians value. This durability simplicity and safety of the device and we look forward to the introduction of two new second generation design enhancements.

That will make the product even more appealing later in calendar 'twenty 'twenty four.

Steve Trobridge: As announced in early December , we enrolled our final patient in our APEX-AV study, which is designed to assess the performance of the AlphaVoc F-18 system in reducing thrombus burden and improving right ventricular function.

As announced in early December we enrolled our final patient in our apex a be study.

Which is designed to assess the performance of the alphabet F 18 system.

Reducing thrombus burden and improving right ventricular function.

Steve Trobridge: We look forward to collecting data from this study at the 30-day follow-up stage.

We look forward to collecting data from this study at the 30 day follow up stage.

Steve Trobridge: then submitting our data to the FDA in the early part of calendar 2024.

And submitting our data to the FDA and the <unk>.

Early part of calendar year 'twenty 'twenty four.

Steve Trobridge: and expanded indication for Alphavac F-18 to treat pulmonary emblaid.

To support an expanded indication for Alpha Vac F 18 to treat pulmonary embolism.

We believe the softer than anticipated Alpha vac sales during the quarter, partially stemmed from a wind down at many of our sites as we approach the completion of enrollment in the apex P E trial.

Steve Trobridge: We believe the softer than anticipated alpha vac sales during the quarter partially stem from a wind down at many of our sites as we approach the completion enrollment in the Apex PE trial. And we expect some continued softness between the completion of the trial and the FDA approval of the PE indication as the device does not have a specific PE clearance and is competing against two existing products that do.

And we expect some continued softness between the completion of the trial and the FDA approval of the Pea indication as the device does not have a specific b E clearance and it's competing against two existing products that do we.

Steve Trobridge: We fully expect that once we receive our anticipated approval letter later this calendar year.

We fully expect that once we receive our anticipated approval letter later this calendar year.

Steve Trobridge: We will have a highly competitive and differentiated product in what remains a large, under penetrated, high growth market.

We will have a highly competitive and differentiated product in what remains a large underpenetrated high growth market.

Because of the tremendous interest from the physician community, we were able to complete our study as quickly as we did in a time that outpaced the previous competitive studies and we are excited about the path ahead.

Steve Trobridge: Because of the tremendous interest from the physician community, we were able to complete our study as quickly as we did in a time that outpaced the previous competitive studies and we are excited about the path ahead.

Turning to our nano night fitness, we saw sales grow approximately 2.8% during the second quarter with sales of probes declining three 6%.

Steve Trobridge: We saw sales grow approximately 2.8% during the second quarter, with sales of probes declining 3.6%.

Steve Trobridge: Probe sales grew in the US, but declined internationally due to timing of both bringing on new distributors during the previous year's quarter and distributor orders during this year's quarter.

From sales grew in the U S, but declined internationally due to timing of both bringing on new distributors during the previous years quarter in distributor orders during this year's quarter.

Steve Trobridge: stronger international capital sales during the quarter, offset the decline in probes, and will drive additional progress in future periods as those units come online.

Stronger international capital sales during the quarter offset the decline in probes and will drive additional progress and future periods.

Those units come online.

Steve Trobridge: year-to-date Nanonife probes are up 12.9% and total night-of-life sales are up at 16.7%

Year to date and a knife probes were up 12, 9% and total later life sales are up 16, 7%. We continue to expect strong growth from this business on an annual basis, while anticipating quarter to quarter fluctuations in both probes in capital sales as historically has been the key.

Steve Trobridge: We continue to expect strong growth from this business on an annual basis while anticipating quarter to quarter fluctuations in both probes and capital sales as historically has been the case.

Yes.

Steve Trobridge: During the second quarter, we saw solid growth of our Ariane platform, up 12.9% year over year. And we're excited to tell you that in November , we reached an important milestone having achieved $100 million in cumulative revenue since we launched this product in September of 2020.

During the second quarter, we saw solid growth of our Oregon platform.

12, 9% year over year, and we're excited to tell you that in November we reached an important milestone having achieved $100 million in cumulative revenue since we launched this product in September of 'twenty 'twenty.

Steve Trobridge: We did experience some delays in sales related to the recent increased attention around pre-authorization.

We did experience some delays in sales related to the recent increased attention around pre authorizations.

Steve Trobridge: But we believe that over the long term, the unique way that we deliver laser energy and safely treat disease vessels will continue to drive increased share and provide the foundation for continued strong growth.

But we believe that over the long term unique way that we deliver laser energy and safely treat diseased vessels will continue to drive increased share and provide the foundation for continued strong growth.

Steve Trobridge: Growth of approximately 2% in our mid-device segment was primarily driven by angiographic catheter products and our ports, which grew 8% and 5.5% respect.

Growth of approximately 2% and our med device segment was primarily driven by angiographic catheter products, and our ports, which grew 8% and five 5% respectively.

In the second quarter of FY 'twenty 'twenty four.

Steve Trobridge: in the second quarter of FY 2024. Our international business grew 12.6% year-over-year with double-digit growth from both our MedTech and our MedDevice segment.

Our international business grew 12, 6% year over year with double digit growth from both our med Tech and med device segments.

Steve Trobridge: We also hosted our third international clinical life symposium, which has led to increased interest in our MedTech products, and we have generated a meaningful pipeline of global physicians who are excited to utilize our products in caring for their patients.

We also hosted our third international clinical life Symposium, which has led to increased interest in our med Tech products and we have generated a meaningful pipeline of global physicians, who are excited to utilize our products and caring for their patients.

Steve Trobridge: Now turning to our strategic initiatives that I mentioned earlier.

Now turning to our strategic initiatives that I mentioned earlier.

Steve Trobridge: We told you over the past sub-recorders that we were further evaluating the products in our MedDevice portfolio, and we remain engaged in active discussions to do just that.

We told you over the past several quarters that we were further evaluating the products in our med device portfolio and.

And we remain engaged in active discussions to do just that.

Steve Trobridge: We advance this initiative during the second quarter, and we look forward to providing you with additional sales soon when we are able to.

We advanced this initiative during the second quarter, and we look forward to providing you with additional details soon when we are able to.

Steve Trobridge: in addition to our continued portfolio optimization effort.

In addition to our continued portfolio optimization efforts. We are also increasing our focus on reducing structural costs within our manufacturing footprint and transitioning our upstate New York manufacturing operations to fully outsourced model over the next two years.

Steve Trobridge: We are also increasing our focus on reducing structural costs within our manufacturing footprint and transitioning our upstate New York manufacturing operations to fully outsource the model over the next two years.

As a reminder, rough.

Steve Trobridge: roughly 80% of a mid-tech revenue is already leveraging this third-party manufacturing model.

Roughly 80% of our Med Tech revenue is already leveraging this third party manufacturing model.

Steve Trobridge: As many of you already know, we began moving some of our med device manufacturing capacity to Costa Rica over the past couple of years as we began to see labor shortages in our upstate New York facility.

As many of you already know we began moving some of our med device manufacturing capacity to Costa Rica over the past couple of years as we began to see labor shortages and our upstate New York facilities.

Steve Trobridge: fully moving, both MedTech and MedDevice to this model will drive an annualized savings of roughly $15 million by our efforts.

Fully moving both med Tech and med device to this model will drive an annualized savings of roughly $15 million.

By our FY 'twenty, seven driving significant gross margin improvement and equally as important giving us a pathway to full year profitability by FY 'twenty seven.

Steve Trobridge: driving significant gross margin improvement and equally as important, giving us a pathway to full-year profitability by FY27.

Steve Trobridge: Steve will cover this in more detail, but we believe this is a significant advancement of our long-term strategy that simplifies our operations while allowing us to invest in the long-term growth of our mid-tech portfolio and the overall business while still driving profitability.

Steve will cover this in more detail, but we believe this is a significant advancement of our long term strategy that simplifies our operations, while allowing us to invest in the long term growth of our.

Med tech portfolio and the overall business, while still driving profitability.

Steve Trobridge: shifting back to the near term. We're excited for what lies ahead in calendar 2024.

Shifting back to the near term we're excited for what lies ahead in calendar 'twenty 'twenty four.

Steve Trobridge: This month, we will commence the limited market release of our Arion radio capitol, which will provide physicians an access point at the risk, enabling faster, less invasive procedures.

This month, we will commenced a limited market release of our Orion radio catheter, which will provide physicians and access point at the wrist, enabling faster less invasive procedures.

Steve Trobridge: This release will be the first of six planned product releases for Arion during calendar year 2024.

This release will be the first of six planned product releases for our yacht during calendar year 'twenty 'twenty four.

In the second half of your calendar year 'twenty 'twenty four we will launch two new design enhancements for Alphatec designed around physician feedback we've received and we will provide more details on those as we get closer to watch.

Steve Trobridge: In the second half of year of calendar year 2024, we will launch two new design enhancements for Alphabet designed around physician feedback we've received and we'll provide more details on those as we get closer to launch.

Steve Trobridge: We've also got an exciting schedule of regulatory clearances on the horizon.

We've also got an exciting schedule of regulatory clearances on the horizon.

Steve Trobridge: We are projecting EU approval of Arion and Alpavak PE in the first half of calendar year 2024.

We are projecting EU approval of our yarn and Alpha Vac P E. In the first half of calendar year 'twenty 'twenty four.

Steve Trobridge: Next, we also expect U.S. approval of AlphaVac PE mid-county year.

Next we also expect U S approval of Alpha Vac P mid calendar year.

Steve Trobridge: And then finally in July , the preserved 12-month follow-up will be complete, putting us on track for potential FDA approval in late calendar 2024 for early calendar 2025.

And then finally in July the preserve 12 month follow up will be complete putting us on track for potential FDA approval in late calendar 'twenty 'twenty four for early calendar 2025.

These introductions and regulatory clearances are critical parts of our strategy that we laid out for you.

Steve Trobridge: these introductions and regulatory clearances are critical parts of a strategy that we laid out for you in our July 2021 investor and technology

In our July 2021, Investor Technology day.

Steve Trobridge: these open up significantly larger, higher growth addressable mark.

These open up significantly larger higher growth addressable markets.

Steve Trobridge: We are excited about the strategic initiatives that we've shared with you this morning and about the future of our portfolio.

We are excited about the strategic initiatives that we've shared with you. This morning.

And about the future of our portfolio.

And we hope the impact of our strategic transformation, becoming more apparent each quarter.

Steve Trobridge: And we hope the impacts of our strategic transformation of becoming more apparent each quarter. With that, I'll turn the call over to Steve Groveridge to review the quarter in more detail.

With that I'll turn the call over to Steve Trowbridge.

Review of the quarter in more detail.

Steve.

Thanks, Jim Good morning, everyone.

Steve Groveridge: 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.

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.

Steve Groveridge: As Jim mentioned, unless otherwise noted, all metrics and growth rates mentioned during today's call are on a pro-forma basis and exclude the results of the dialysis and biocentric businesses that we divested in mid-June.

As Jim mentioned, unless otherwise noted all metrics and growth rates mentioned during todays call are on a pro forma basis and exclude the results of the dialysis and biosurgery businesses that we divested in mid June.

Speaker Change: Similar to Jim, I'll start with the second quarter before shifting to today's strategic announcement.

A similar to Jim I'll start with the second quarter before shifting to today's strategic announcements.

Speaker Change: Our revenue for the second quarter of FY24 increased 2.7% euro per year to $79.1 million. Driven by growth in both our MedTech and MedDevice plaques,

Our revenue for the second quarter FY 'twenty four increased two 7% year over year to $79 1 million driven by growth in both our med Tech and med device platforms.

Speaker Change: Medtech revenue was $25.4 million, a 3.5% year-over-yearing.

Med Tech revenue was $25 4 million or three 5% year over year increase while med device revenue was $53 7 million growing two 3% compared to the second quarter, but that's like 23.

Speaker Change: While that device revenue was 53.7 million, growing 2.3% compared to the second quarter of FY23.

Year to date, our overall revenue was up four 2% year over year with our Med Tech segment of eight 3% and our med device segment up two 3%.

Speaker Change: Year-to-date, our overall revenue was up 4.2% year-over-year with our mid-tech segment of 8.3% and our mid-device segment of 2.3%.

Speaker Change: So the second fiscal quarter are mid-tech platforms comprised 32.1% of our total revenue compared to 31.8% of total revenue a year ago.

For the second fiscal quarter, our med Tech platforms comprised 32, 1% of our total revenue compared to 31, 8% of total revenue a year ago for.

Speaker Change: For the six months ended in November 30th of 2023, our med tech segment comprised 32.6% of our total revenue base versus 31.4% as of one year ago.

For the six months ended November 32023, our Med Tech segment comprise 32, 6% of our total revenue base versus 31, 4% as of one year ago.

Our Oregon platform contributed $11 4 million in revenue during the second quarter growing 12, 9% compared to last year.

Speaker Change: Our REM platform contributes 11.4 million in revenue during a second quarter, growing 12.9% compared to last year.

Speaker Change: year-to-date or RREON platform is up 18.9%

Year to date are already on the platform is up 18, 9% year over year.

Mechanical thrombectomy revenue, which includes angio vacuum alphatec sales declined four 7% over the second quarter of FY2023.

Speaker Change: You can't go from beck to me revenue, which includes Angie Evac and AlphaVac sale.

Speaker Change: declined 4.7% over the second quarter of FY23.

Speaker Change: Alpavak revenue for the second quarter was 1.9 million.

<unk> revenue for the second quarter was $1 9 million.

<unk> revenue was $5 4 million in the quarter, representing a decline of 10, 8% over the prior year and.

Speaker Change: Angiobac revenue was 5.4 million in the quarter, representing a decline of 10.8% over the prior

Speaker Change: We did not see the rebound in angiobac revenues that we had anticipated as procedure volumes came in lighter than expected.

We did not see the rebound in angio back revenues that we had anticipated as procedure volumes came in lighter than expected, particularly late in the quarter.

Speaker Change: We remain confident that mechanical thrombectomy will be a strategic contributor to our long-term growth strategy, and we are excited about the new product introductions that Jim mentioned as well as our clinical initiatives, such as the APEC's pulmonary embolism.

We remain confident that mechanical thrombectomy will be a strategic contributor to our long term growth strategy and we are excited about the new product introductions that Jim mentioned as well as our clinical initiatives such as the apex pulmonary embolism study.

Speaker Change: Nanonite disposable revenue during the quarter decreased 3.6% year-over-year.

They don't have disposable revenue during the quarter decreased three 6% year over year.

Speaker Change: The total growth of 4% in the US was offset by a year over your decline in international

Well, a little growth of 4% in the U S was offset by a year over year decline in international markets.

Speaker Change: As Jim said, the year-over-year quarterly decline in international markets was primarily driven by timing of distributor orders, although procedure volume remained very strong during

As Jim said the year over year quarterly decline in international markets was primarily driven by timing of distributor orders, although procedure volume remained very strong during the quarter.

Speaker Change: Capital sales were robust in the quarter, growing 22.8% and this is a strong driver of few

Capital sales were robust in the quarter growing 22, 8% and this is a strong driver of future disposable sales year.

Speaker Change: Year-to-day Nanonite Disposable Sales are up 12.9% in total Nanonite Sales are up

Year to date nano nice disposable sales are up 12, 9% in total nano nice sales are up 16, 7%.

Speaker Change: In addition, as a reminder, earlier this year, we announced that enrollment in preserve is now 100% complete. And as this data starts to be made public over the course of this year, we look forward to sharing.

In addition, as a reminder, earlier this year, we announced that enrollment and preserve is now 100% complete and is this data starts to be made public over the course of this year.

Look forward to sharing with you.

Speaker Change: In the second quarter, our med-device segment grew 2.3% year-over-year, led by strength in our angiographic capital and port product.

In the second quarter, our med device segment grew two 3% year over year led by strength in our angiographic catheter and pork products.

Speaker Change: Moving down the income statement, our gross margin for the second quarter of FY24 was 50.9% a decrease of 80 basis points compared to the year ago period.

Moving down the income statement, our gross margin for the second quarter of FY 'twenty four was 59% a decrease of 80 basis points compared to the year ago period.

Speaker Change: The second fiscal quarter made tech gross margin was 62.4%, a decrease of 130 bases.

For the second fiscal quarter Med Tech gross margin was 62, 4% a decrease of 130 basis points.

Speaker Change: and mid-device gross margin was 45.5% a decrease of 60 basis points, e-twin compared to the second point.

And med device gross margin was 45, 5% a decrease of 60 basis points, each when compared to the second quarter of last year.

Speaker Change: A year-to-date gross margin for FY24 was 50.8%, a decrease of 60 basis points versus prior a year, with mid-tech gross margins of 63.5%, and mid-device gross margins of 44.7%.

Year to date gross margin for FY 'twenty four was 58% a decrease of 60 basis points versus prior year with Med Tech gross margins of 63, 5% and med device gross margins of 44, 7%.

Speaker Change: Year-over-year gross margins for both the quarter and year-to-date were positively impacted by sales volume, production volume, and reduced cost for both freight expenses and direct labor retention payments.

Year over year gross margins for both the quarter and year to date.

Were positively impacted by sales volume production volume and reduce costs for both freight expenses and direct labor retention payments, but were offset by sales mix hardware placements and continued albeit reduced material and labor inflation.

Speaker Change: but we're offset by sales mix, hardware placements, and continue albeit reduced material and labor inflation.

As we discussed our strategic business model contemplates gross margin expansion as our higher margin Med Tech segment continues to become a larger portion of our overall revenue base.

Speaker Change: As we've discussed, our strategic business model contemplates gross margin expansion as our higher margin med tech segment continues to become a larger portion of our overall revenue.

Speaker Change: As mentioned last quarter, the next phase of our transformation is to address the scale and structural limitations of our operating footprint in a capital-efficient manner.

As mentioned last quarter. The next phase of our transformation is to address the scale and structural limitation of our operating footprint in a capital efficient manner.

Speaker Change: This morning's announcement regarding restructuring our manufacturing footprint and transitioning our upstate New York manufacturing operations to a fully outsourced model will address these stressful cost limitations.

This mornings announcement regarding restructuring our manufacturing footprint and transitioning our upstate New York manufacturing operations to a fully outsourced model will address these stress world class limitation meaningfully improve gross margins and lead to full year adjusted EPS profitability in FY 'twenty seven.

Speaker Change: meaningfully improved gross margins and lead to full-year adjusted EPS profitability in FY27.

Speaker Change: We expect that our manufacturing restructuring will result in annualized savings of roughly 15 million with the full annualized impact being realized in FY27.

We expect that our manufacturing restructuring will result in annualized savings of roughly $15 million with the full annualized impact being realized in FY 'twenty seven.

Speaker Change: In addition, as we previously discussed, we're continuing to have productive conversations around further optimizing our portfolio, and we will provide you with more details when appropriate.

In addition, as we previously discussed we're continuing to have productive conversations around further optimizing our portfolio and we will provide you with more details when appropriate.

Speaker Change: Turning to R&D, our research and development expense during the second quarter of FY24 was 8.7 million or 10.9% of sales compared to 6.8 million or 8.8% of sales a year ago.

Turning to R&D, our research and development expense during the second quarter of FY 'twenty four was $8 7 million or 10, 9% of sales compared to $6 8 million or eight 8% of sales a year ago spend.

Speaker Change: spending on clinical programs was 18.8 percent of total R&D spend during the second quarter of fiscal 24 compared to 14.1 percent during the second quarter of last year and 18.6 percent for the full fiscal year 2023.

Spending on clinical programs was 18, 8% of total R&D spend during the second quarter of fiscal 'twenty for <unk>.

Impaired to 14, 1% during the second quarter of last year and 18, 6% for the full fiscal year 2023.

Speaker Change: This mix shift within our R&D spending is well aligned with our long-term strategy to support increased physician adoption of our MedTech platform technologies through the generation of data and clinical evidence.

This mix shift within our R&D spending is well aligned with our long term strategy to support increased physician adoption of our med Tech platform technologies through the generation of data and clinical evidence.

Speaker Change: SGNA expense for the second quarter of FY24 was 34.8 million representing 44% of sales compared to 36.8 million or 47.8% of sales a year ago.

SG&A expense for the second quarter of FY 'twenty, four was $34 8 million, representing 44% of sales compared to $36 8 million or 47, 8% of sales a year ago.

Speaker Change: Our adjusted net loss for the second quarter of FY24 was $2 million, or adjusted loss per share of $5.

Our adjusted net loss for the second quarter of FY 'twenty four it was $2 million or adjusted loss per share of <unk> compared to an adjusted net loss of $3 6 million or adjusted loss per share of <unk> in the second quarter of last year.

Speaker Change: to an adjusted net loss of 3.6 million or adjusted loss per share of 9 cents in the second quarter last

Speaker Change: Adjusted EBITDA in the second quarter of FY24 was $1.8 million compared to adjusted EBITDA of $2.3 million in the second quarter of FY23.

Adjusted EBITDA in the second quarter of FY 'twenty, four was $1 8 million compared to adjusted EBITDA of $2 3 million in the second quarter of FY2023.

The second quarter of fiscal 'twenty, four we generated $5 3 million in operating cash and capital expenditures of $26 million and additions to our AD placement and evaluation units of $1 2 million.

Speaker Change: In the second quarter of fiscal 24, we generated 5.3 million in operating cash, had capital expenditures of 0.6 million, and additions to Ari on placement and evaluation units of 1.2 million.

Speaker Change: And on November 30th, 2023, we had 60.9 million in cash and cash equivalents compared to 44.6 million in cash and cash equivalents at May 31, 2023. And as a reminder, we have zero debt on the balance.

At November 32023, we had $69 million in cash and cash equivalents compared to $44 6 million in cash and cash equivalents at May 31 2023.

And as a reminder, we have zero debt on the balance sheet.

Turning now to guidance, we now anticipate that FY 'twenty four revenue will be in the range of $320 million to $325 million below our prior guidance of $3 28 to $3 33.

Speaker Change: Turning now to guidance, we now anticipate that FY24 revenue will be in the range of $320 to $325 million, below our prior guidance of $328 to $333.

Speaker Change: This accounts primarily for the softer thrombectomy sales during the fiscal second quarter, which we now expect will continue throughout the back half of the year, as well as certain SKU rationalization and other impacts associated with the manufacturing, restructuring we announced this morning.

This accounts primarily for the softer thrombectomy sales during the fiscal second quarter, which we now expect will continue throughout the back half of the year as well as certain SKU rationalization and other impacts associated with the manufacturing restructuring we announced this morning.

We now expect full year adjusted loss per share to be in the range of 35 to 42 cents.

Speaker Change: We now expect a full year adjusted loss per share to be in the range of 35 cents to 40 cents.

Speaker Change: We expect FY24 gross margin to be in the range of 49% to 51%, compared to Proforma FY23 gross margin of 50.5%.

We expect FY 'twenty four gross margin to be in the range of 49% to 51% compared to pro forma FY2023 gross margin of 55%.

Speaker Change: as a result of the mix shift occurred due to the lower expected mid-tech revenue.

As a result of the mix shift occurred due to the lower expected med Tech revenue.

Speaker Change: For FY-24, we now expect Med Tech revenue growth in the range of 10 to 15 percent, down from 20 to 25 percent, to account for the thrombectomy weakness we saw during the second quarter, persisting through the remainder of this year.

For FY 'twenty four we now expect med tech revenue growth in the range of 10% to 15% down from $20 to 25% to account for the thrombectomy weakness we saw during the second quarter persisting through the remainder of this year.

Speaker Change: continue to expect med-device revenue growth in the range of one to three.

We continue to expect med device revenue growth in the range of 1% to 3%.

Speaker Change: We now expect mid-tech gross margins in the range of 61 to 63 percent and mid-device gross margins in the range of 43 to 45 percent.

We now expect med tech gross margins in the range of 61% to 63% and med device gross margins in the range of 43% to 45%.

Speaker Change: As we mentioned earlier, we expect the manufacturing restructuring to have a meaningful impact on our margin structure over the coming years and look forward to providing you with more details as that work gets underway in the coming month.

As we mentioned earlier, we expect the manufacturing restructuring to have a meaningful impact on our margin structure over the coming years and look forward to providing you with more details as that work is underway in the coming months.

Speaker Change: Today's announcement is a significant step in our strategic transformation that gets us closer to the company we strive to

Today's announcement is a significant step in our strategic transformation that gets us closer to the company, we strive to be profitable business focused on unique medical technology platforms that improve patient outcomes in large underpenetrated high growth markets.

Speaker Change: profitable business focused on unique medical technology platforms that improve patient outcomes in large under penetrated high growth markets.

Speaker Change: Finally, I would like to thank our team here at AngioDynamics for their hard work and commitment, and we're looking forward to sharing more about these initiatives with you in the coming months while executing further on our strategy and delivering a strong second half for Fiscal 24.

Finally, I would like to thank our team here at Angio dynamics for their hard work and commitment and we're looking forward to sharing more about these initiatives with you in the coming months, while executing further on our strategy and delivering a strong second half for fiscal 'twenty four.

With that I'll turn it back to Jim.

Speaker Change: Thanks, Steve, and for those joining, thank you for your time this morning. What you see is a company in transformation, looking to do the balance today of making sure our investments and costs that we spend are aligned to the outcomes that we want to see in the markets we serve and the markets we seek to grow in.

Thanks, Stephen for those joining thank you for your time. This morning, what you see as a company in transformation looking to do the balance today of making sure our investments and costs that we spend are aligned to the outcomes that we want to see in the markets. We serve the markets we seek to grow in taking out significant structural cost they don't.

Speaker Change: taking out significant structural costs. They don't have a lot of product or cost to have benefit or important steps.

A lot of a lot of product or customer benefits are important steps and that will continue to do that with an eye to the bottom line, but also maintaining investments to optimize the opportunity that we've set forth in front of US we have unique opportunities in large and fast growing markets. We wanted to make sure we can maximize the opportunity to treat cardio.

Speaker Change: We'll continue to do that with an eye to the bottom line, but also maintaining investments to optimize the opportunity that we've set forth in front of us. We have unique opportunities in large and fast growing markets. We want to make sure we can maximize the opportunity to treat cardiovascular disease, primarily in Venus or in arterial needs. We also know that our unique nanolife can treat solid tumors in areas like prostate cancer.

Vascular disease, primarily in venous are now cereal needs. We also know that our unique nano life can treat solid tumors in areas like prostate cancer, we look forward to following our customers where they seek to grow with our products. Thanks for joining us today, Rob I'll turn it back to you.

Speaker Change: We look forward to following our customers to where they seek to grow with our products. Thanks for joining us today. Rob, I'll turn it back to you. Thank you.

Thank you.

Well now be conducting a question and answer session.

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To ask a question at this time, please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

You May press Star two if you like to remove your question from the queue.

Speaker Change: distance using speaker equipment and maybe necessary to pick up your handset before pressing the star keys. One moment please, will we pull for questions? One's going to star one. Thank you.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment, please while we poll for questions once again star one thank you.

Thank you once again the star one to ask a question at this time.

Yeah.

Thank you and we have we have our first question coming from the line of.

Speaker Change: Thank you. And we have our first question coming from the line of Yi Chen with HC Wainwright. Please proceed with your question.

E Chen with H C. Wainwright. Please proceed with your question.

Alright, Thank you for taking my questions.

Just wanted to clarify the gross margin will continue to decrease until you complete the chip.

I just want to clarify, the gross margin will continue to decrease until you complete the shift to a third-party manufacturer.

Chip to a third.

Third party manufacturer.

Okay.

Youll see some back and forth you. Thanks for the thanks for the question.

You'll see some back and forth, thanks for the question. There are going to be costs that are going to be taken out through this process. You're going to see the most impactful benefit come when we are able to finally close the doors and do that full shift to the manufacturing. As we head into giving you guidance for future years as we move into 25 and 26, we'll give you a little bit more clarity around the cadence from that.

There are going to be costs that are going to be taken out through this process youre going to see the most.

Impactful benefit come when we are able to finally.

Closed the doors and do that full shifted the manufacturing as we head into giving you guidance for future years as we move into 'twenty five 'twenty six will give you a little bit more clarity around the cadence from that.

So I would expect you're going to see a little bit of movements but with that most significant movement coming at the end of the two-year period and then certainly being there for the full year at FY20.

So I would expect you're going to see a little bit of movements, but with that most significant moving coming at the end of the two year period, and then certainly being there for the full year FY 'twenty seven.

and you during that two year period as well. The product mixed shift as the MedTech products that have a higher gross margin than our corporate and gross margin average will become a faster growing piece. So as long as the Steve said, as we take those costs out of the back end, we also expect to see a mixed shift that's positive throughout that two year cycle and far beyond. Thanks.

During that two year period as well.

Mix shift as the med tech products that have a higher gross margin than our corporate gross margin average will become a faster growing piece. So as long as Steve said as we take those costs out of the backend. We also expect to see a mix shift that's positive throughout that two year cycle and far beyond.

Yes.

Thank you. And regarding the cells for thrombectomy, are there any factors that you expect to drive the cells, to increase the cells?

Thank you and regarding the sales for back.

Back to me I'll do any sectors that you expect to drive increased.

Increased it snows in the coming years.

There are first of all with angio back again announcing the breakthrough designation that we received from the FDA a few months back and then getting that I E. A line to our expectations the graph to the right heart vegetation opportunities that we think are significant for angio back by larger than that alphabet.

There are, first of all, with ANGIOVAC, again announcing the breakthrough designation that we received from the FDA a few months back, and then getting that IDE aligned to our expectations to graph to the right heart vegetation opportunity that we think is significant for ANGIOVAC. But larger than that, AlphaVAC.

we mentioned on the call earlier that we look forward to have our CE mark in the first half of calendar, 2024, opens up a significant market for us. And it's timed almost in the same series that we'll get, we believe, our FDA indication for our PE for the F-18 here in the U.S.

We mentioned on the call earlier that we look forward to have our CE mark in the first half of calendar year 2024 opens up a significant market for us and it's timed almost on the same the same series that will get we believe our FDA indication for our P. E for the F 18 here in the U S. So over the next six months, we will work hard.

So over the next six months, we'll work hard to educate and train our sales and clinical teams and get ready to go to the markets that we can serve. These are really large markets. What we've learned during the APEX study.

To educate and train our sales and clinical teams and get ready to go into the markets that we can serve these are really large markets. What we've learned during the apex study from alphabet. The physicians really like the novel design features in the product. The study would not have been completed as fast as it was if people didn't see the novel design Ella.

that physicians really like the novel design features in the product.

The study would not have been completed as fast as it was if people didn't see the novel design elements that led to what we think are really positive patient outcomes.

That led to what we think are really positive patient outcomes. So you really got to sit tight for a bit and make sure. We're prepared for a full global launch.

So you really would've got to sit tight for a bit and make sure we're prepared for a full global launch later in calendar 2024.

Later in calendar 2024.

That's very helpful. Thank you very much.

Yeah.

Thank you and our next question comes from the line of John Young with Canaccord Genuity. Please proceed with your questions.

Hey, Jim can you hear me okay. Thanks.

Thanks, John and good morning.

Good morning, Thanks for taking our question just maybe on Andrew back to start can you go a bit more detail.

The headwinds that you're talking about.

Now in the past you've put new sales leadership and training there.

<unk> recently got that breakthrough device designation Reinhard presentation, what isn't working there and what are you gonna due to Remy.

John for Angel back it's been a challenge we've mentioned before that we serve a smaller market opportunity with anda back than we do with alphabet. So opening up that right heart vegetation opportunity that we're working with the FDA on is important for us, but again Asia back is only going to serve a limited market.

What we've done since we've talked to you last summer a brand new sales leader, who has terrific built a new sales team around some be some people that were here already that new the products wanted to work in this environment. When we open up these new markets and alphabet P. Being the largest we have also fully realized now a new training module and we fully staffed our sales force for the first.

So we're really ready we're in a phase now where we're training and developing their capabilities getting them educated and the markets will serve both for <unk>. As you mentioned, which is complex as you know and limited and there are larger less limited market that is open to us in the future when the alphabet P/e becomes granted so we're doing our work in the backend training edge.

<unk> our teams are clinical and sales teams to open up these markets.

Great. Thanks, Tim and then just shifting to alphabet.

Great. Thanks, Jim. And then just on shipping to Alphabat too, you mentioned the 2.0 that's going to launch this calendar year. Can you talk about the improvements and are you going to seek any ASP increases with that? And can you maybe just talk about today the pricing versus the market and your pricing on par or above or below?

You mentioned that you pointed out thats in our launch their calendar year can you talk about the bad debt improve.

Movements and seek any ESP increases with that and can you maybe just talk about today the pricing reversed it.

The market pricing on par or above or below the market. Thank you.

a good question, John . So, out of the back is really a unique novel device, and again, I'll let the study speak for itself. Hopefully, you'll see some data being published this calendar year with study results when they become available.

Good questions. John So I'll go back is really a unique and novel device and again.

I'll, let the study speaks for itself I, hopefully, you'll see some data being published this calendar year with study results.

When they come become available, but there are some design elements that are unique for instance, you know physicians are so used to placing wires when you're treating as part of the anatomy and guiding catheters through the anatomy, which is torturous with usually guide wires and so forth. We designed the alphabet with one of the unique design elements is that you don't need to drop wire place a wire.

But there's some design elements that are unique. For instance, physicians are so used to placing wires when you're treating this part of the anatomy and guiding catheters through the anatomy, which is torturous.

with usually guide wires and so forth. We designed the AlphaVAC with one of the unique design elements is that you don't need to drop a wire place a wire. Most presentations look at us like, why wait a minute? You can't do that. And they still can do that if they choose. But over time we found they get confident and comfortable to design elements of the device.

Physicians looking at why wait a minute you can't do that and they still can do that if they choose but over time, we found they get confident and comfortable with the design elements of the device. They don't need to do that it allows them to steer ability options. We built in to go back and forth between the different.

They don't need to do that, it allows them the sterability options we built in to go back and forth between the different parts of the atrium and to really treat the body in a different way. It's faster and safer, we believe. So some really unique design elements that are already built in the product that we've heard great feedback on.

Parts of the atrium and to to really treat the body in a different way, it's faster and safer. We believe so some really unique design elements that are already built and the product that we've heard great feedback on it.

And we've collected other feedback from some design enhancements they'd like to see. And that's what we'll offer later this calendar year when we come out with our second-gen product, which is timed really well with what we think will be our PE indication expansion.

Selected other feedback from some design enhancements they'd like to see and Thats. What we will offer later this calendar year when we come out with our second Gen product, which is time is really well with what we think will be RFP indication expansion.

Today, John , we talked about the pricing in the market is in the $8,000 mark. In that range, we think it's uniquely priced right to be competitive with the other products out there.

John we've talked about the pricing in the market is in the $8000 Mark in that range, we think is uniquely.

Right to be competitive with the other products out there and the value that our customers receive a we think has been really high.

And the value that our customers receive, we think, has been really high. They've really shown a willingness to adapt that price point. It's a good price point for us in this market. I can't speak to the other companies. You know, we know where they price their products. Some do it differently.

You've really shown a willingness to adapt that price point.

It's a good price point for us in this market I can't speak to other companies, we know where they price their products some do it differently, but.

but we think we're in a good spot there. The product will have a high gross margin at that range and we look to grow in that range of pricing for years to come.

But we think we're in a good spot there the product will have a high gross margin at that range and we look to grow in that range of pricing for years to come.

Great. Thank you so much.

Yeah.

Our next question is from the line of Jason Bedford with Raymond James. Please proceed with your questions.

Our next question is from the line of Jason Bedford with Raymond James. Please proceed with your questions.

Good morning.

Happy new year here.

Just a few questions. On the AlphaVac improvements, just from a regulatory standpoint, do they require an additional 510K, or can you launch them without anything?

Just a few questions.

On on the Alpha back improvements just from a rigorous regulatory standpoint, because they require an additional five 10-K or can they can you can you launch them without any new regulatory approvals.

Hi, Jason. So the regulatory team is working with the R&D team. So I think that one of the enhancements actually requires a new F510K, one does not. So these are design changes that were planned in with the R&D and the regulatory teams. So that's why we're looking at that second half of this calendar year. It's a cycle that our regulatory teams, quality teams, and R&D teams have targeted. We feel confident we'll hit those.

Hi, Jason So the regulatory team is working with the R&D team. So I think that one of the enhancements actually requires a new FERC NK. One does not so theres ease of design changes that were planned in a with the R&D and regulatory teams. So that's why we're looking at that second half of this calendar year the cycle that they are our regulatory teams quality team.

<unk> and R&D teams have targeted we feel confident we'll hit those cycles.

And then just on thrombectomy, you mentioned some procedural softness late in the quarter. I'm just wondering, what do you...

And then just on Thrombectomy, you mentioned some procedural softness late in the quarter I was just wondering.

What do you attribute the softness to.

Jason, we obviously measure this very closely with our customers, and we saw that softness occur in that November time frame, and we talked to our customers. We had two things happening, there was actually a wind down, we're getting very close to the end of the apex study, and our study sites knew that, so some were finishing up, some were winding down, so we're kind of careful how we measure this, but we also had a lot of conversations with our customers.

Yes, Jason.

We obviously measure this very closely with our customers and we saw that softness occur.

You know in that November time frame and we talk to our customers. We had two things happening there was actually a you know a wind down we're getting very close to the end of the apex study and our study sites knew that so some were finishing up some are winding down so were kind of careful how we measure this but we also had a lot of conversations with our customers.

You know, we quote-unquote same-store sales, people who use a certain amount of the product. Their usage went down, we spoke to them, and a couple almost shrugged their shoulders a bit, said, hey, we haven't seen the patients come through lately at the rate they normally do, a little less control they had or we had over that marketplace. It was not huge, but enough for us, that it's still a small business for us off of that getting growing. So it's impactful for us, we watch it closely. So there's a couple factors there. We don't want to put our arms around any one in particular.

The quote unquote same store salespeople, who use a certain amount of the product their usage went down we spoke to them in a couple of you almost shrug their shoulders, a bit said, hey, we haven't seen the patients come through lately at the rate. They normally do little less less control they had or we had over that marketplace. It was not huge but enough for us is it's still a small business for us.

Without getting growing so it's impactful for us we watch it closely so theres a couple of factors there we don't want to put our arms around any one in particular.

Again, the opportunity that we have with training and education of our team getting them ready for the PE launch later this calendar year, we think is most impactful. Whether there's a bit of softness back and forth won't really matter then because the upside opportunity, we believe, is significant for us.

Again, the opportunity that we have with training education of our team and getting them ready for the <unk> launch later this calendar year. We think is most impactful whether theres a bit of softness back and forth won't really matter then because the upside opportunity. We believe there are significant for us.

And.

Have you seen a bit of a rebound in December.

Yeah, a little bit step back a little bit not a whole lot again as I said, we're measuring it definitely and also Jason we have the other factor where it was the first couple of days in December with the final patients were enrolled so we completed the study. The first couple of days of December which really enabled us to shut down the study and then pull back obviously on the education of the study we can't.

Yeah, little bits come back a little bit, not a whole lot. Again, as I said, we're measuring it differently. And also, Jason, we have the other factor where there's the first couple of days in December where the final patients were enrolled. So we completed the study, the first couple of days of December , which really enabled us to shut down the study. And then pull back, obviously, on the education of the study, we can't sell a market to products outside of the study terms until we get the PE market. So there's a couple moving parts having at the same time. Just want to make you aware of that. So we're watching all those elements together.

Seller market the product outside of the study terms until we get the fee market. So there's a couple moving parts having at the same time I just want to make you aware of that so we're watching all those elements together.

Okay, and just what's the logistical process of moving to a fully outsourced model or how is this going to work.

And just what's the logistical process of moving to a fully outsourced model? How's this

Yeah, so we have, you know, sites here in upstate New York that were started almost when our company was founded 35 years ago in upstate New York. We've got two manufacturing sites, distribution sites as well. So what we'll do is a two-year wind down Jason. And after that, we made yesterday, starts that two-year process.

Yeah, So we have.

Sites here in upstate New York that was started almost when our company was founded 35 years ago in upstate New York we.

We've got two manufacturing sites distribution sites as well so what we'll do is a two year wind down Jason the announcement, we made yesterday starts at two year process. So we talked to our people at the site yesterday. This has been planned for for as you can imagine nine to 12 months the planning phase and you've also seen a couple of years ago, We started moving some of the opera.

So we talked to our people at the sites yesterday. This has been planned for, as you can imagine, 9 to 12 months.

planning phase. And you've also seen a couple years ago we started moving some of the operations to Costa Rica because we needed capacity during the pandemic period. We had less availability of new employees and operators. So we started some of those moves for a med device products during that period. So we now have established protocols for some good supplier partners. We have quality validation metrics already set up. They're part of our supply chain that works well.

Mr. Costa Rica, because we needed capacity during the pandemic period, we had less availability.

New employees and operators. So we were we started some of those moves for our med device products during that period. So we now have established protocols for some good supplier partners, we have quality validation metrics already set up they are part of our supply chain. It works well. So it gave us the confidence we can move more things and do more if we couldnt get the capacity.

So the game is the confidence we can move more things and do more if we couldn't get the capacity and cost levels to where we need to be. And over time we couldn't. So we had this plan B in our pocket.

And cost levels to where we need to be and over time, we couldnt. We had this plan b in our pocket and as I said earlier as you see the bulk of our revenue today in our Med Tech segment comes from suppliers that are partners in our supply chain today, So back to logistics, we've got a wind down around each of those product segments that are still manufactured in our <unk>.

And as I said earlier, as you see, the bulk of our revenue today and our met tech segment comes from suppliers that are partners in our supply chain today. So back to logistics, we've got to wind down.

around each of those product segments that are still manufactured in our sites here and a plan around each of those to move those.

Sites here and are playing around each of those to move those to a supplier partner and make sure that the quality operations already the validation and all the regulatory processes are in place. That's why we have really a two year window, Jason to complete that cycle.

to a supplier partner and make sure that the quality operations are ready, the validations and all the regulatory processes are in place. That's what we have really a two-year window, Jason, to complete.

Okay.

Um, just maybe last one for me for now, uh, cash flow.

Just maybe last one for me for now a cash flow.

I think you had had a goal out there 65, 70 million cash exiting the year. Is that still on the table?

I think you had had a goal out there 65 70 million cash exiting the year is that still on the table.

Jason it'll be a little bit of moving parts. When you think about the manufacturing transfer that we just talked about for example, there's probably going to be some cash that's going to move from one spot on the asset of the balance sheet to another site right, we're going to build up a little inventory as we prepare for some of these movements.

Jason, it will be a little bit of moving parts when you think about the manufacturing transfer that we just talked about. You know, for example, there's probably going to be some cash that's going to move from one spot on the asset of the balance sheet to another spot, right? We're going to build up a little inventory as we prepare for some of these movements. That being said, as Jim said, this is a plan that we've been working on for a very long time. There may be some shifts in the balance sheet, but it's not going to fundamentally change our expectations of where we're going to end up.

That being said as Jim said this is a plan that <unk> been working on for a very long time, there may be some shifts in the balance sheet, but it's not going to fundamentally change our expectations of where we're going to end up.

So.

Sorry, still 65 to 70 or towards the low end.

I wouldn't expect it would be a little bit below that but like I said expect that theres going to be some shifting as you had cash that might move into inventory buildup as we prepare right. So that'll be a little bit less cash, but maybe not terribly different when you think about current assets.

I would expect it would be a little bit below that, but like I said expect that there's going to be some shifting, you know, as you have cash that might move into inventory buildup as we prepare, right? So that'll be a little bit less cash, but maybe not terribly different when you think

Got it okay. Thank you.

Our next question is from the line of Steven Lichtman with Oppenheimer. Please proceed with your question.

Our next question is from the line of Stephen Lickman with Oppenheimer. Please visit your questions.

Thank you good morning, guys.

Thank you. Good morning guys. I guess just first a couple of cleanup questions on the manufacturing shift. What percent of my device is outsourced currently and what anticipated cash costs of the transition, you know, should we, should we assume?

I guess, just first a couple of cleanup questions on the manufacturing shift.

What percent of May device is outsourced currently and what do you anticipate a cash cost of the transition should we should we assume.

So Steve, with respect to your first question, you know, roughly 20% of the current device portfolio was already made by third party manufacturing partners. You know, Jim mentioned that we'd started this process a number of quarters ago as we were building up capacity with our Costa Rica partnership. So we're going to continue doing that. I think it's important to understand that this process that we're talking about is really a continuation of something that was started over the last, you know, 24 months

So Steve with respect to your first question you know roughly 20% of the current device portfolio was already made by third party manufacturing partners.

Jim mentioned that we had started this process a number of quarters ago. As we were building up capacity with our Costa Rica partnership. So we're going to continue doing that I think it's important to understand that this process that we're talking about is really a continuation of something that was started over the last 24 months or so.

Jim talked about it taking the full 24 months. That's to the point where we can get there and it's fully outsourced. And the benefit that that gives us is, as opposed to today, where we have to have a management structure that supports both this hybrid company-owned manufacturing structure as well as managing the outsourced structure, we're gonna move to one, which is really gonna be one of the fundamental drivers of that $15 million annual savings that we talked about once we can finish this two-year process. And then you're gonna see that fully roll into FY20.

Jim talked about it taking the full 24 months is to the point, where we can get there and it's fully outsourced and the benefit that that gives us is as opposed to today, where we have to have a management structure that supports both this hybrid.

Company owned manufacturing structure as well as managing the outsource structure, we're going to move to one which is really going to be one of the fundamental drivers of that $15 million annual savings that we talked about once we can finish this two year process and then youre going to see that fully roll into FY 'twenty seven in terms of the investment there is going to be investment that's something that as Jim said, we've been planning for the last nine.

In terms of the investment, there's going to be investment. That's something, as Jim said, we've been planning for the last nine months. It's something that is well within our plans, and the payback for these types of procedures are always very good, just what you'd expect.

It's something that is well within our plans.

And the payback for these types of procedures are always very good.

Just what you'd expect to see.

guys. They're shifting to Arianne. Can you provide some more color on the pre-off head when you mention and what you're seeing on that front sort of as we went into as we've gone into this fiscal court?

Okay got it.

We're sticking to our ion can you provide some more color on the pre op headwinds you mentioned in and what Youre seeing on that front and sort of as we went into as we've gone into this fiscal quarter.

Yeah. Thanks, Steve Yeah, we did touch upon it in our last our Q1 call we touched upon it but we've seen it out there I think one or two other companies in the meantime, I've talked about it in more detail than we have.

Yeah, thanks Steve. You know, we did touch upon it in our last or Q1 call. We touched upon it.

We've seen it out there. I think one or two other companies in the meantime have talked about it in more detail than we have

We've got a balancing thing here. We've got still really strong demand being created by Ari on and how it works and the data is generating and the excitement in the marketplace. So we've got this.

We got a balancing thing here, we've got still really strong demand being created by Ari on it how it works and the data is generating and the excitement in the marketplace. So we've got this cool tailwind of interest in Oregon, you know I was at our global Symposium, a month and a half ago overseas watching new doctors be trained and taught about the capability of Oregon, So you've got that cool.

cool tailwind of interest in ARIAN. I was at our global symposium a month and a half ago overseas watching new doctors be trained and taught about the capability.

We've got that cool tailwind of interest. But yeah, there is a headwind that's been created. We've seen it in the field.

Tailwind of interest, but yes, there is a headwind thats been created we've seen it in the field. So the pre authorizations, which are always kind of been a part of the cycle have tightened up and more players are in on it. So it has slowed down procedures, we are working with industry groups and our customers to go through that process.

So the pre-authorizations which have always kind of been a part of the cycle have tightened up and more players are

So it has slowed down procedures. We are working with industry groups and our customers.

to go through that process. We haven't come out and said it's stopped our procedures or slowed them down significantly, but it has made an impact, there's no doubt. You still saw growth in a strong quarter. We think the quarter would have been stronger and more procedures would have been done without this headwind. We're doing all we can to work with our customers to minimize it.

We haven't come out and said stopped our procedures are slowed them down significantly, but it has made an impact there's no doubt you still saw growth and a strong quarter. We think the quarter would have been stronger and more procedures would have been done without this headwind. We're doing all we can to work with our customers to minimize it but it is there.

Thanks Jim. And then I guess just just lastly, I don't think you mentioned anything today about indication expansion for Orion, including this all that's a little the key and potentially coronary any update on those.

Thanks, Jim and then I guess, just lastly, I don't think you mentioned anything today about indication expansion for Ari on.

Including the small therefore, the key and potentially coronary.

Any update on those.

Yeah, a couple of things. So with Arion, again, we have it in our cycle, now our regulatory cycle of MDR.

Yeah, a couple of things so with Oregon again, we have it in our cycle now a regulatory cycle with MTR.

For European CE approval in the first half of calendar year, we're always a big cost that says, you know, our industry, the MDR process has been a challenge for all of us for the past couple of years. But a regulatory team has a good aspect of control. We think we'll have Ari on approved.

For our European CE approval in the first half of calendar year, we're always a bit cautious as you know our industry. The MTR process has been a challenge for all of US the past couple of years, but our regulatory team is a good aspect of control. We think we'll have already an approved overseas in the first half of the calendar year second here, we won't expand already on two ways in the U S. Some of which is part of those.

overseas in the first half of the calendar. Second here, we want to expand our on two ways in the US.

some of which is part of those six product launches I told you about earlier in the call, one of which happens almost immediately here, our new radial cap.

Six product launches I told you about earlier on the call one of which happens almost immediately here our new radial catheter gets launched as we speak that's really exciting.

gets launched as we speak. That's really exciting. There's some other things happening with Arion, beyond just those two things, as clinicians see what it can do.

Theres some other things happening with Oregon beyond just those two things as you know clinicians see what it can do.

You know, there's been a study called Pharoah that was completed in Europe last summer. And it's being published showing how it can be used safely and effectively for coronary applications.

Theres been a study called thorough that was completed in Europe last summer and its being published showing how it can be used safely and effectively for coronary applications. We look forward to understanding that study working with the thought leaders that produced it and looking with the FDA working with them on a study protocol and design, we will talk more about soon.

We look forward to understanding that study working with the thought leaders that produced it. And looking with the FDA working with them on a study protocol and design, we'll talk more about soon about how we can also embark on a study here in the U.S. to open up a coronary expansion. So we think that's the next natural move for our ion as we know it will be safe and effective in that market.

About how we can also embarked on a study here in the us to open up a coronary expansion. So we think thats. The next next natural move for Oregon, as we know it will be safe and effective in that market.

And that's nothing new on small best bill. That's all I'm back to you. DBK. No new news there follows the schedule we put forward. We're doing the work on our process now, our R&D teams and regulatory teams are working on that pathway we laid out before. So there's really no new news. Steve on that front. Okay. Got it. Thanks, Jim. Thanks. Thank you, Steve.

Nothing new on small vessel.

Tom back to Ms Debbie Kaye.

No New news there follows the schedule, we put forward were doing the work on our process now our R&D teams and regulatory teams are working on that pathway. We laid out before so there's really no new news Steve on that Frank.

Okay got it thanks, Tim Thanks, Steve Thank you Steven.

Thank you.

At this time, I'll turn the call over to Mr. Clemmer for any closing remarks.

At this time I'll turn the call over to Mr. Clemmer for any closing remarks, Mr. Clemmer.

Thank you for joining us today, we appreciate the hard work and commitment of the Andrew dynamics employees, it's very difficult to work in an environment as fast pace as the med Tech environment, especially when your company is transforming itself through our portfolio first and second into how we do what we do so today's announcement of our manufacturing construction is.

Thank you for joining us today. We appreciate the hardworking commitment of the Anger Dynamics employees. It's very difficult to work in an environment as fast-paced as the MedTech environment, especially when your company is transforming itself. Through our portfolio first and second, into how we do what we do. So today's announcement of our manufacturing instruction is significant for our company.

Significant for our company, we think we can better utilize some of those stranded costs that are there that don't drive product customer.

We think we can better utilize some of those stranded costs that are there that don't drive product, customer, or company benefit. We're going to reallocate those costs over the next few years. Some will go to the bottom line, and some will be allocated to investments, opening up expansion opportunities that exist in these new technologies we're launching.

Our company benefit we're going to re allocate those costs over the next three years. Some will go to the bottom line and some will be allocated to investments opening up expansion opportunities that exist in these new technologies. We're launching we're a company in transformation, but we're a strong company with a direction thats clear to make our company more valuable for our.

We're a company transformation, but we're a strong company with a direction that's clear to make our company more valuable for our customers, for our employees, and our investors.

Customers for our employees and our investors. Thank you for joining us today.

Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.

Thank you. This concludes today's conference. Let me disconnect your lines this time. Thank you for your participation.