AngioDynamics Inc. (ANGO - Analyst Report) reported second-quarter fiscal 2015 earnings of 17 cents per share, which beat the Zacks Consensus Estimate by a penny. Earnings per share (EPS) also surged 21.4% from the year-ago quarter.

Angiodynamics, Inc - Earnings Surprise | FindTheBest

Quarter Details

Sales increased 4% year over year to $92.1 million, better than the Zacks Consensus Estimate of $91 million. The year-over-year upside was primarily driven by robust performance from Vascular Access and Oncology/Surgery segments.

Sales at the Peripheral Vascular business were up 1.3% to $49.4 million, while Vascular Access revenues improved 9.4% to approximately $28 million. Sales at the Oncology/Surgery business augmented 8.6% to $13.6 million. However, sales at the Supply Agreement business plunged 32% year over year to $1.1 million.

AngioVac sales surged 46% on higher penetration in the thromboembolism market. The strong growth in Vascular Access was driven by solid sales of BioFlo, which now represents approximately 60% of the total PICC volume. Notably, the share of BioFlo products in the ports and dialysis market increased in the quarter.

In the Oncology/Surgery business, thermal ablation sales increased 7% to $8.1 million. NanoKnife sales were up 13% driven by 16% growth in NanoKnife disposable sales.

Excluding the planned termination of the supply agreement with Boston Scientific, sales were up 4.7% to $91 million. Not including the supply agreement, sales in the U.S. increased 3.7% to $72.1 million, while international sales spiked 8.7% to almost $19 million.

Gross margin expanded 100 basis points (bps) from the year-ago quarter to 51.7% on the back of favorable product mix and stringent cost control.

Adjusted EBITDA, as a percentage of revenues, increased 200 bps to 17.3%.

Operating expenses including medical device tax ($1.1 million), as a percentage of revenues, decreased 90 bps to 39.2%. The year-over-year decrease in operating expenses can be attributed to 130 bps decline in research & development expenses and 100 bps plunge in sales & marketing expenses, partially offset by a 140 bps increase in general & administrative expenses.

Meanwhile, operating margin expanded 190 bps on a year-over-year basis to 12.5% in the quarter.

As of Nov 30, 2014, AngioDynamics’ cash and cash equivalents totaled $16.6 million, up from $13.8 million as of Aug 31, 2014. Cash outflow from operating activities was $2.1 million.

Guidance

For the third quarter, AngioDynamics expects adjusted earnings in the range of 14–17 cents per share on revenues of $88–$91 million. For fiscal 2015, earnings are forecasted in the range of 66–72 cents per share (previous guidance 65–71 cents) on revenues of $362–$368 million, which reflects 3%–5% year-over-year growth.

Management expects the Vascular Access business to grow at double-digit through the end of 2015, driven by an innovative product portfolio.

Our Take

AngioDynamics reported an impressive second quarter of 2015. The company also provided a positive outlook for the third quarter and fiscal 2015.

Although a sluggish spending environment and the recent warning from the U.S. Food and Drug Administration (FDA) related to its Navilyst Medical facilities are headwinds, we believe that an expanding product portfolio that includes AngioVac, Bioflo, NanoKnife and Celerity significantly enhances its market opportunities.

AngioDynamics recently received FDA approval for its second generation AngioVac, which is a major positive. The company expects to launch this product in March this year, which will further boost procedure penetration and customer base in 2015 and beyond.

Improving operating efficiency is expected to result in almost $15 to $18 million in cost savings, which will in turn boost gross margin.

Nevertheless, intensifying competition from the likes of Boston Scientific (BSX -Analyst Report), C.R. Bard (BCR - Analyst Report) and Merit Medical Systems (MMSI -Snapshot Report) remains a major concern.

Currently, AngioDynamics carries a Zacks Rank #3 (Hold).

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