A Not-So-Dynamic Quarter for AngioDynamics
Medical-equipment maker AngioDynamics (NAS: ANGO) recently announced a 6% first-quarter revenue increase to $54.4 million, and the company's board approved a $20 million stock-repurchase plan. Let's take a closer look and see what's up with AngioDynamics.
Knifing its way through cancer
Although its vascular products still make up the bulk of its revenue, AngioDynamics' real growth potential comes from its cancer-killing NanoKnife, which applies minor electrical jolts to cancer cells that prompt them to self-destruct. This focus separates the company from peers Boston Scientific (NYS: BSX) and C.R. Bard (NYS: BCR) , but the NanoKnife has also received its share of detractors who claim the procedure is unsafe since it hasn't gone through sufficiently large clinical trials. The company is still developing the treatment.
AngioDynamics' gross profits rose by 7% to $32.1 million, with a slight improvement in gross profit margins to 59.1%. The company reduced material costs and improved manufacturing productivity in spite of pricing pressures from the vascular business segment.
But AngioDynamics also disappointed with a 27% drop in net income to $1.4 million, which was mainly due to a severance payment of almost $1 million to its former CEO. Another one-time expense of $295,000 was attributed to the shift of laser manufacturing from the U.K. plant to the Queensbury, N.Y., manufacturing facility. Even though the total cost for this shift is estimated at $1.6 million, it's a good step that could result in an approximate annual savings of $1 million.
U.S. revenues rose by a modest 4%, while international revenues climbed 18% on the back of improved direct-sales operations in the Netherlands.
Sales in the company's Vascular segment increased by a tepid 1.8%. In the Oncology division, on the other hand, sales leapt by 15%, primarily on the back of doubling sales of its NanoKnife offering.
A healthy balance sheet
A look at the company's books reveals a relatively small long-term-debt footprint of just $7.7 million. In addition, total cash and equivalents have grown at a phenomenal rate to $137 million, thanks to a steady stream of free cash flow since 2008.
Loaded with all the extra dough, management has decided to approve a $20 million share buyback, which will consume 66% of the total cash the company expects to generate in the current fiscal year.
The Foolish bottom line
AngioDynamics did suffer from continued high unemployment and higher co-pays, both of which made people think twice before paying a visit to the doctor. But the company's plans to use its war chest to acquire other companies and technologies may well augment top- and bottom-line growth and complement its own product-development efforts. And its NanoKnife sounds like a promising alternative to chemotherapy and radiation, which have a lot of negative side effects. On the whole, I am moderately bullish on AngioDynamics.
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At the time this article was published Fool contributor Keki Fatakia holds no shares in any of the companies mentioned in this article. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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