Good morning and welcome to the AngioDynamics Fiscal Year 2022 Second Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference call is being recorded. The news release detailing the fiscal 2022 second quarter results crossed the wire earlier this morning and is available on the company’s website. This conference call is also being broadcast live over the Internet at the Investor section of the company’s website at www.angiodynamics.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. Before we begin, I’d 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 2022, as well as trends that may continue. 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. The company will also discuss certain non-GAAP financial measures during this call. 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. Investors should consider these non-GAAP measures in addition to not as a substitute for or are superior to financial reporting measures prepared in accordance with GAAP. A slide 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. This presentation should be read in conjunction with the press release discussing the company’s operational results and financial performance during this morning’s conference call. I'd now like to turn the call over to Jim Clemmer, AngioDynamics’ President and Chief Executive Officer. Mr. Clemmer?

Thank you, Rob. Good morning, everyone and thank you for joining us for AngioDynamics’ fiscal 2022 second quarter earnings call. Joining me on today’s call is Steve Trowbridge, AngioDynamics’ Executive Vice President and Chief Financial Officer who will provide a detailed analysis of our second quarter financial performance and our revised FY 2022 guidance. I am pleased with our second quarter performance, as we have continued to progress along our strategic transformation. And we have delivered strong revenue growth despite the ongoing challenges related to the COVID-19 global pandemic and other macro related headwinds. These results are a direct reflection of our team's commitment to and our execution of our long-term strategic plan to transform AngioDynamics into a high growth med tech company. We ended the quarter with revenue of $78.3 million, representing growth of 7.6% year-over-year. Net sales from our Med Tech business, which as a reminder includes Auryon, NanoKnife, and our Thrombectomy platform were $18.9 million, a 36% increase over the previous year. Our Med Device business, which includes the remainder of our portfolio, grew approximately 1% year-over-year, despite a $4 million backlog. The ongoing disruptions from the COVID pandemic and resulting supply chain headwinds lead to this backlog and naturally also had an impact on gross margin and earnings during the second quarter. We ended the quarter with adjusted EPS of negative $0.02, and gross margin of 51.8%. Before I go into the more specific results across our businesses, I'd like to talk through the current macro environment, the resulting disruptions and how we are addressing those in a little more detail. As we have discussed during previous quarters, we have been impacted by and we are working through supply chain disruptions stemming from COVID. Specifically, we have discussed the tight labor market, increasing labor costs, raw…

Thanks Jim. Good morning everyone. 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. Our revenue for the second quarter of fiscal year 2022 increased 7.6% year-over-year to $78.3 million driven by continued strength in our Med Tech businesses, including Auryon, NanoKnife and AngioVac. Med Tech revenue was $18.9 million, a 36.4% year-over-year increase. Our Med Device revenue was $59.4 million, growing approximately 1% over the second quarter of fiscal year 2021. For the first six months of the year, Med Tech grew 50%. Med Device was flat compared to the prior year period, but grew roughly 5% year-over-year when excluding last year's NHS order. Year-to-date through the end of the second quarter, our Med Tech platform comprised 24% of our total revenue compared to 17% at this time last year. Revenue in our endovascular therapies business increased 17% year-over-year to $39.7 million, benefiting from the continued adoption of Auryon in our thrombectomy portfolio. Auryon contributed $6.3 million in revenue during the second quarter, continuing the momentum that we've been building since last year's launch. We did see some impact from the ongoing COVID pandemic on Auryon hospital procedure volume during the quarter. Despite this challenging market environment, we continued to place new lasers during the quarter. And as of today, our installed base is 242 lasers with 35 lasers placed during the second quarter. We view Auryon as a key growth driver going forward, and we continue to invest in the platform, building out our commercial infrastructure and generating clinical evidence to drive further adoption. As Jim stated earlier, we continue to expect Auryon to generate revenue in the range of $24 million to $26 million for the year. Mechanical Thrombectomy revenue, which includes…

Thanks Steve. This is an incredibly exciting time at AngioDynamics. Despite all of the challenges in today's operating environment, we are dedicated to transforming AngioDynamics into an innovative medical technology company, with solutions that address some of the most dynamic opportunities in healthcare. We can improve patient outcomes and drive high physician satisfaction. Our second quarter results are evidence of our progress towards that goal. And we've planned to continue to deliver on our strategic plan initiatives in the coming quarters. I want to thank everyone here to AngioDynamics for their dedication and commitment to serving our customers during these challenging times. Our employees face the same challenges that the world faces with COVID. Many of them have family members who have contracted COVID and they work through this with a commitment to our customers and supporting their work to help patients in need. With that, I'd like the turn the call back to you, Rob, for questions.

Thank you. We now will be conducting a question-and-answer session. [Operator Instructions] Thank you. And our first question today comes from the line of Bill Plovanic with Canaccord. Please proceed with your question.

Great. Thanks. Good morning. Can you hear me okay?

Hi, Bill. Good morning.

Hey, good morning. So, the first question is, the current wave of COVID is feels like it's very different from anything else. And you have the dubious honor of being the first company to really present some numbers. Maybe your last quarter didn't really get hit as much by Omicron, but as we sit here in the middle, as we're getting into January, and this is hitting into full swing, might be helpful if you could maybe compare and contrast how this wave of COVID is different versus the prior and impact on your business? And then, that you've seen thus far. And then secondly, you talk about the $4 million backlog, kind of was that any specific product line and what product lines what is did that relate to and then have you fulfilled and shipped those products? Thank you.

Okay. Thanks for the questions, Bill. It’s Jim. A couple of things, Bill, back to the Omicron variant or the variant we're all facing, we've seen increased activity, obviously with the variant -- I'll talk externally and then internally. So externally, our customers are under increasing pressure, similar to what it was like early on in the pandemic. Now the benefit is that our customers and the healthcare networks have gotten better and learnt how to deal with this, but they are facing staffing challenges probably at a higher level today than they were then as many of their employees are faced with COVID restrictions. So, we've seen higher levels of breakout with a lot of our customers. So consequently, a lot of the large healthcare delivery networks are asking us again and probably other companies to stand down a little bit, slow down as some cases of them canceling elective procedures are occurring. Even this week we got word from a couple of the large delivery networks that they're going to put a hold on elective “procedures” which was done as you know last year. So, we're watching this very closely. As you know, our people are very close to our customers. We're watching it globally as well. Our teams around the globe are finding similar spots. Now the good news is there's some spots around the globe that are kind of bent the curve already, are getting a little bit better, but here in the U.S. the acuity is still high as far as the customer disruption factor. That being said, I think you saw we still have strong demand for our products through the cycle. So, we've had less of a COVID impact on our demand. Now, flipping to the internal side, as you saw earlier, back…

And Bill, just to follow up on the last piece you'd asked about that $4 million backlog and has it cleared. So, it was $4 million at the end of our second quarter. It's actually gotten a little higher and talked about. We expect it to plateau this quarter and then start to get better through the year, as we continue to also focus the consistent, kind of run rate demand that we're seeing.

And then, if I could, just as we think about the impact of Omicron in the quarter and you've reiterated the revenue guidance of $310 million to $315 million. But should we think that this is going to have a pretty significant impact on the February ended quarter? And maybe we'll see -- I think historically you're down maybe one to two percentage points sequentially at least last fiscal year. I mean, could we see in more pronounced effect this year, given Omicron as we think about just the February quarter?

Yeah. It's a good question, Bill. It's something that we're obviously focused and we're very keenly keeping an eye on. I think the seasonality that you mentioned is fair and we expect to see -- continue to see that same pattern. Really the issue that we're seeing most is not as much as on the demand side that Jim announced -- Jim was discussing, but more on our ability to kind of clear the backlog and get the labor into our plant. So, as we continue to execute and finalize these plans, we do expect that our third quarter may be a little bit choppy. I don't think it's going to be tremendously different than some of the seasonality that you had mentioned before when you think about sequential quarter-over-quarter, that's what we're seeing now that that's kind of our expectation as we move through this. There's no doubt, it'll be a little bit choppier. We're seeing some of those Omicron effects. But as we're working through this and finalizing and then getting into the running -- running up those plans, you'll start to see that recovery come out as you head into the end of our Q3 and into Q4.

Thank you.

Our next question is from the line of Matthew Mishan with KeyBanc. Please proceed with your question.

Hey, good morning guys. So, just on Auryon, I think you mentioned that you are at 5% share at this point. I'm just trying to understand like what your installed base, kind of what percentage penetration of the office-based labs or the hospital systems that are actually performing these procedures you're at, are you -- have you -- are you at more than 5% penetration of the people, majority of people that have that are performing these procedures, or do you still have a lot of room to go as far as placements go?

Hey, Matt. No. So, it's interesting. We feel that we've got about 5% of the stated market as we've talked about it when we launched this product and what our goal was to get to that 10% by the end of year three. What's really driving that is the versatility of the technology. And as Jim mentioned, and we've been very pleased to see the breakdown of procedures with roughly half being above and roughly half being below the knee, which is something that the other technologies really can't do. So, that's what's driving our estimation of the share gain there. We still have plenty of room we think in terms of getting to the share of the market that's out there. We are, of course, as we said much more heavily weighted in our product in OBLs than hospitals, given the dynamics that would have been in the macro environment from when we launched the product. So, we're heavier in the OBL, started to see some nice momentum in the hospitals. I think you're going to see that be a little bit challenged given the current environment, just as they're dealing with the Omicron uptake over the last month or two, and then maybe the next couple months. But we still think there's runway in terms of getting into new customers. And that's going to go along with the plans that we have to continue to place lasers. You saw that we placed 35 this quarter and we placed 52 last quarter. We said we probably weren't going to be at that pace is that we saw some opportunities to get into some of those accounts earlier, but we want to continue to support those accounts and drive utilization. And we'll continue to place new lasers as we go through our Q3 and Q4, as we continue to add those new customers in moving into market share that way. So, we've liked the flexibility that this product has shown to really drive that market share through the first eight months or so of our launch.

Excellent. And then on AlphaVac, just your thoughts on how Omicron and this surge had could impact the commercial release, the full commercial release of the products.

Sure. And Matt, we did mention that -- Steve mentioned that we saw a little softness in December in our AngioVac cases and some of the procedures a little softer there. So -- but I don't think it's going to affect AlphaVac much Matt, because we're just launching it. And if you look back on the information we put out in our public guidance in our Investor Day, remember this first version of the 22 French AlphaVac is still limited in the DVT potential market that it serves. So, right now, I don't think the Omicron push now will affect that a whole lot. Like anything, it may affect a little. There are value analysis committees that may be postponed or canceled. It may drag us out from getting approvals a little bit, and it may hold back on some of the conversations that we'd like to have with physicians, but over time, what will open up for us the larger markets are later in this calendar year when we launched the 18 French, and then work towards our PE indication work and then launching another smaller device. So, Matt, sure, it's going to affect that. I don't know if it's a whole lot right now, because we have so much work on our plate independent of the Omicron variant.

Yeah. And then I would add a little bit more color to that. I think Jim hit on the value analysis committee -- value analysis committees, which I think is an important point. So, we don't see Omicron as being something that's derailing to our plans for AlphaVac. As Jim mentioned, we've got a lot of activity going and we're very pleased with the feedback we're getting from our physicians and the results that they're getting when they're using AlphaVac in the LMR. You may see a little bit of an extended period of that ramp, because there might be some slight delays in those value analysis committees, given the hospital activity, but it's not derailing at all to our current plans. We've been really pleased with the way the process has been moving.

All right. Excellent. And then last question, just then -- just give me an update on the timeline around the DIRECT study where you're at with that. And thanks very much.

Thanks. Sure, Matt. So with DIRECT, this is clearly a challenging environment with hospitals and how they're handling clinical trials and getting patients in there. With that said on the registry side, which is the side that we've talked about, we've been very pleased with the current environment with the pace that we've seen. And so, we're continuing to treat and enroll patients in that registry side. There's no doubt that it's a little bit challenged given the current environment and the hospital staffing challenges that Jim mentioned, which is what really is different this time versus maybe earlier on in the pandemic. It's hitting the hospital workers. And the second challenges that hospitals have is they're trying to treat their patients. But we're still pretty pleased with the clip that we're seeing a patients being enrolled. Now that being said, as we mentioned, the RCT, we expect this to be more challenged. That's absolutely been the case. And I think that's even been more the case in the current environment with COVID. So, we're continuing to focus on what we're seeing we can get through, which is enrolling patients in that registry side. We'll continue to post -- keep you updated on conversations as we address the fact that we always knew the RCT was going to be a bit harder.

Okay. Thank you.

Thank you. The next question is from the line of Jayson Bedford with Raymond James. Please proceed with your question.

Good morning and happy New Year. So, I have a few questions here. Just on the backlog, the $4 million. What is a normal backlog at quarter-end? I'm just curious if the $4 million mentioned is, can be viewed as excess backlog beyond the amount that you typically carry into a new quarter.

Hi, Jayson. It’s Jim. It is, Jayson. We target -- kind of a soft target of about half day sales. What's so, you go, that would be look at our average run rate, so call it 600,000 to 700,000 in that range across -- we think that's -- where are we going to have a back order with this many SKU is in a complex business. So, Jayson, this is significantly higher. That's why we wanted to call it out, because it is significantly higher than what we try to target for a workable run rate with our customers. So, this built during the quarter, and that's why we implemented those plans. And I mentioned really the -- some of the reasons why. It's mostly labor related, and in some cases -- as I mentioned, some of our material suppliers are having challenges, getting us some of the materials, but our operations quality of logistics teams are working through. I gave one or two examples earlier, but they have many other planes they're working on to bring this down by the end of our fiscal year.

Yeah. Jayson, Jim is exactly right. That -- typically we target that that's 600,000 to 700,000 backlog, getting to the $4 million. And we really saw that accelerate in November. As Jim mentioned, we saw this quarter a bigger impact for our employees being impacted by COVID. A great example of that is we had an entire line of products in our facility that we couldn't make for over a week in November, because everybody that was on that line ended up coming down with COVID. Tough scenario. As Jim has mentioned through the beginning of this pandemic, we're doing everything we can to support the health and safety of our employees. But that's a good example and a good kind of anecdote of how some of these things can accelerate and hit. And that's what we saw in November, which led to that increase in the backlog.

Okay. And you mentioned, I think, increasing capacity, improving efficiency and an adjustment to pricing and shipping as initiatives to help the supply chain dynamic. I am a little unclear, what's the specific factor that allows the supply constraints to ease in this $4 million to get a shift?

Yeah. Good question, Jayson. I'll give you a few. One is, first, the additional capacity that we're bringing online with our new Costa Rica partner just gives us more capacity, gives us really access to more labor. So, we can reassign some of the labor in our internal operations that are making those processes to other things. That's number one. Number two, we're talking about efficiencies, increase efficiencies, quote unquote, that's a few -- that's a bucket to count a few things. And one of those that we decided to also to reduce SKUs. We have a lot of SKS here and we reduced a bunch of SKUs. When you do that, that makes our operations team complexity a little easier, so less changeovers. Every time we build products, we're building less, less for you. So, we build more of the same products hopefully. Now, there's always a little customer disruption when that occurs, but it streamlines our operations. And Jayson, we've also seen in some of our products in the device area, some of the old geographic catheters and areas we've seen some of our competitors have severe back order problems and customers have turned to us. They used to buy other companies products, and it's almost led to this. That's why we've had really strong demand across our board, not just from that, it's a small piece, but the demand has stayed high. So, things like those, Jayson, that we're doing internally to streamline our operations increased capacity to deal with this back order in different ways. Again, some of the labor component, we hadn't seen it come to this level before and then hit again with the COVID effect. And as Steve mentioned, we have many of our employees affected by it. We have to follow the protocols internally, which led to a decrease of our ability to produce.

Okay. In answering one of the earlier questions, you talked about your IDN asking you to kind of hold down on electric procedures. Just how would you characterize your portfolio as a kind of percent of your portfolio that's exposed to quote unquote elective procedures?

Yeah. I mean, the good news, bad news with that, Jayson, it's a smaller percent. If you look at really -- as we're growing our Med Tech portfolio as you see become a larger portion of our business, that's really strong and that's our future, but those are the ones we're seeing that could be more effective. And the example that Steve gave earlier was we saw softness in our AngioVac business a little bit in December. We saw some physicians treat patients in different means. And we're seeing that a little bit now as well. So, as far as our portfolio goes, it's only a percentage of what we do. You look at our Vascular Access business where treating patients still on a routine basis who need access to getting medication in their bodies. So that hasn't really slowed. Anything that pick up in some cases and offset some of the other slowness. So, it's a challenge. I think, Jayson, we have great intel from our customers through our salespeople that talk to them every day and our clinical teams, they're in the field globally. And we balance that and that's why we've also reiterated the revenue guidance we gave today with a lot of thought on the pro and con that we're all facing these challenges, but the demand remains strong overall for our products.

Okay. And then a couple of AlphaVac questions. The timing on the 18 French launch, I think you said later this calendar year, is that still -- is that the right interpretation?

It is. I guess, there's a little unfair being it's only January 6th to say later in the calendar here. So, I'll tell you that up, it'll be in the first half of this calendar year. It would be fair.

Okay.

Yeah.

Okay. And then, is there any way to kind of frame the scope of the LMR versus a full market release?

There's a couple of ways, Jayson. A couple of simple ways to frame it, we only give access to a limited portion of our sales team, that's specially trained to kind of be an advanced team to get out in front of this, because our initial goal isn't to sell as many as we can, is to gain as much info as we can, and to engage with our customers to get their feedback. We want to confirm our assumptions on the product design and development and our launch and training procedures. So, that's what we did. We only gave it to a limited piece of the Salesforce, and they can only take it to pre-approved customers that we knew would give us the feedback that we were seeking. So, that process went very well. We've enabled this process. Now, this is the fourth product we've launched at AngioDynamics in last couple of years with this process, we put in place and it worked very well. And that gave us the confidence in early December to go to the full launch now. So all of our sales reps now can engage with customers of their choice.

Okay. Thank you.

Yeah. Thank you.

The next question comes from the line of Steven Lichtman with Oppenheimer. Please proceed with your question.

Hi. Good morning. This is actually David on for Steve. I had a few questions. Want to start off with the COVID impact on the AngioVac and the quarter since to have been less of headwinds sequentially with a pickup in growth. Could you just talk about what you're seeing on the ground now, as it relates to COVID impact on the AngioVac business?

Yeah. Hi, David. Good morning. It’s Jim. As we said earlier, we're very close to our customers. And unfortunately this is kind of a gray area where it falls into an elective procedure, quote unquote, unfortunately it's not everybody looks at it that way, but it's definitely when -- the root cause is the staffing challenges in the healthcare centers I believe. So, when they have such stress on their systems, they have large swaths of nurses being out with COVID in their own hospitals, putting pressure on the ICU beds and their capacity to serve their patients in the ICUs, so when you do that, it kind of backtracks backwards to procedures that they don't want to do a procedure that may have a patient then go to an ICU that's under challenged. So, we're in that kind of care continuum piece where we watch that very closely. So when a doctor can say, well, I'd love to do an AngioVac pay on this patient, but I could treat them with the lytic maybe a little longer and watch it, then have my ICU free up. That's kind of the effect. So, it's really, really hard to measure that exactly. But I'm trying to give you a real world situation as to what's happening. So, we're very engaged with our customers. And we're also working as a partner with them we're -- during this process to be at their side when they're ready for us.

Yeah. David -- and the little extra color on that one. So, as you mentioned, sequentially from Q1, we definitely saw an uptick in terms of the market demand for AngioVac. You'll recall in our Q1, we said that there were some softness that we saw in the summer, but that we saw procedure volumes pickup in September. We definitely saw that through most of our Q2. We're kind of highlighting again today. We're seeing a little bit of that softness in December. And as Jim mentioned, a lot of what's come -- what's driving this in our estimation is that those hospitals staffing pressures. And so when you've got the ICU nurses, as you know AngioVac has a very complicated procedure, you bringing in perfusionists, you have a number of different specialties that are working through that. And so, when there's these acute hits of staffing pressures, because the healthcare providers are sick, we start to see some of those blips, but then they tend to reverse. As you look at our cadence that we saw a little bit of softness in the summer, we expected that to pick up, it did. We saw that we're not seeing a little softness in December. We expect that to pick up through the rest of our fiscal year kind of in a very similar fashion.

Okay. Great. That's helpful. And then just looking at the Auryon, are you able to talk about how many reps you ended the quarter with and what are your expectations in terms of your year-end target?

Yeah. So, we talked about before having about 40 based -- field-based salespeople, including our territory managers, regional managers, that's kind of where we ended the second quarter. To support that we also have clinical specialists and per diems, another 30 field-based reps that are supporting the -- are field-based people that are supporting our reps too. So, all in all, we've got about 74 field-based Auryon employees today. That'll probably be a little bit more as we head in the back half of the year, but I think we've done a good job preparing that team for the growth that we're expecting for this year.

Yeah. David, it’s Jim. A question was asked earlier. I think Bill asked as well about Auryon, and how we'll grow it. Again, we'll grow it as we've shown you by increased demand, increased interest in our product that people would want us to place lasers. That's one way we'll grow. But really number two, we're watching. We measure -- every time we place a laser, we are measuring how many procedures they do on a monthly basis. We're watching that go up, as you see people get confidence when they see the outcomes of what our product delivers. So, we see a lot of upside potential in the current base of lasers we have, as our clients get more and more confidence in the product develop great outcomes. So, we're going to see demand come in again from new laser placements and also more use in current lasers. So -- and we'll have -- we'll make sure we have the field people to support that growth.

Got it. And just last one for me. Are you expecting the release of the PATHFINDER registry data near-term? Thanks.

And we've started to see publications come out from PATHFINDER. You've already seen a handful of those over the last few trade shows and expect to see a few more coming. So, yeah, the data is coming out of PATHFINDER as we speak and we expect it to continue.

Okay. Thanks.

Thank you. I'd now like to turn the call back over to Mr. Clemmer for any closing remarks. Mr. Clemmer?

Thanks, Rob and thanks for joining us on our call today. Again, AngioDynamics is a company in transformation to becoming a high growth innovation-driven med tech company. I think what we delivered today is really solid results. You can see the revenue growth that we exhibited. That's really driven by the demand of our customers. The demand that our customers are having our products and the interest they have in our technologies. So, we're working through these difficult headwinds and challenges like other companies are. And I want to, again, thank our people for the resilience and their commitment to our business. Thanks again for joining us today. Talk to you soon.

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