ANGO - NASDAQ

Good morning, and welcome to the AngioDynamics Fiscal Year 2023 Second Quarter Earnings Call. At this time all participants are in 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 our fiscal 2023 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 Investors 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 1 hour after the end of today's call. 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 2023 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 identify 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 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 as 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 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. I'd now like to turn the call over to Jim Clemmer, AngioDynamics' President and Chief Executive Officer. Mr. Clemmer?

Thank you, Rob, and good morning, everyone, and thanks for joining us today for AngioDynamics' Fiscal 2023 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. Turning to our results. We ended the quarter with revenue of $85.4 million, representing growth of over 9% year-over-year led by growth of about 30% from our Med Tech segment over the second quarter of last year. I am pleased with our second quarter performance as we generated strong financial results and continued to make meaningful progress in our clinical initiatives that support our long-term goals. Our Med Tech segment continues to drive strong year-over-year growth, led by Auryon, AlphaVac and NanoKnife, reflecting our ongoing investment and commitment to building out leading technology platforms in attractive end markets. During the second fiscal quarter, we generated over $5 million of net cash and delivered adjusting earnings per share of $0.01, continuing to illustrate solid execution of our strategy to invest for the long-term growth of the company. As has been the trend in recent quarters, hospitals and care locations are managing through staffing issues that continue to impact procedural volumes. As expected, we are seeing hospitals become more adept at managing through these issues, and we anticipate that this trend will continue to slowly but steadily improve. Auryon continued its impressive performance during the quarter, growing approximately 61% over the prior year and growing $1.3 million sequentially over our Q1. To date, we have treated more than 25,000 patients since launch. During the quarter, we initiated a limited market release of our hydrophilic coated catheters in the quarter which provide for improved steerability and deliverability and we plan for a full market release in the second half of this fiscal year. This launch further demonstrates our commitment to innovation in the PAD market and our ability to deliver these innovations to our customers. We believe that the hydrophilic coating will be an additional driver of continued share growth for Auryon. Our mechanical thrombectomy business, comprising AngioVac and AlphaVac, declined 1% during the quarter. AlphaVac revenue for the quarter was $1.6 million. We are very pleased with this performance following the full market release of our F18 product last quarter. Our launch is progressing according to plan and we are on track to meet our AlphaVac revenue expectations for the full year. With respect to AngioVac, there are two key dynamics at work. First, AngioVac treats complex situations and requires perfusion, anesthesia and nursing support. Staffing challenges during this period have led some customers to choose alternative treatment options. And second, we are still evolving our commercial use case approach with AngioVac and AlphaVac now on the same sales bag. Our NanoKnife disposable sales grew approximately 45% during the quarter with strong growth globally. We saw strong performance from prostate in the U.S. driven by increasing visibility within urology practices stemming from the PRESERVE trial. During Q2, physicians completed 111 prostate cases with our NanoKnife, up from 100 prostate cases treated in the first quarter and an increase of more than 80 cases over Q2 of last year. I'm also thrilled to announce that we have surpassed the halfway mark in enrollment of our PRESERVE clinical trial during the quarter which I will discuss in more detail later in my remarks. Our Med Device segment grew 3% and remains an important part of our business. We have solid product platforms and excellent business teams that enable us to be successful while also leveraging this segment to fund other investments, including our key Med Tech platforms. International markets had a strong quarter, growing 7% year-over-year, primarily driven by strong NanoKnife capital and disposable sales. We expect our international business to be a positive growth contributor in FY '23 as our team continues to strengthen our sales network and expand our global scientific presence. During the quarter, our team hosted our second life science symposium which brought together global thought leaders who are exploring and supporting the use of our technologies. Generating clinical data plays a key role in our ability to effectively develop our Med Tech platform technologies and expand into larger, faster growing, higher margin addressable markets. Our teams continue to execute on our clinical trials, including our 3 IDE studies, our PRESERVE study for the treatment of prostate cancer with NanoKnife, our APEX study for the treatment of pulmonary embolism with our AlphaVac F18 and our DIRECT study for the treatment of pancreatic cancer with NanoKnife. As I noted earlier, we achieved an important milestone in our PRESERVE study during the quarter, surpassing the midpoint of our enrollment goals. We believe PRESERVE will demonstrate that NanoKnife can be an effective focal treatment option for men with intermediate risk disease and provide favorable quality-of-life outcomes when compared to other focal treatment options or radical prostatectomy. We estimate that the total potential market for focal treatment of prostate cancer that can be addressed by NanoKnife may exceed $700 million in the U.S. alone. With respect to our APEX study, we are pleased with the pace of enrollment and are particularly encouraged by the feedback we are receiving about our technology from the treating physicians. We believe that our APEX study will prove that our unique AlphaVac products can be an effective treatment for PE, providing ease of use while unlocking an opportunity in a large addressable market that we estimate to be in excess of $1.5 billion in the U.S. alone. When discussing our PRESERVE and APEX studies, I highlighted the total addressable markets that our technologies and associated solutions are targeting. We believe that this is a clear illustration of our strategy of leveraging our proprietary technology platforms to deliver disease state solutions in attractive markets. Our robust R&D pipeline is a further illustration of this. For example, Auryon has proven to be a disruptive technology entrant into the PAD market. Auryon is the only atherectomy device that can treat hard and soft calcifications above and below the knee and can be used to treat in-stent restenosis. We believe that this versatility has the potential to be equally effective on the venous side. Our AngioVac and AlphaVac portfolio currently provides clinicians with versatile options to treat large vessel DVTs and complex right atrium cases utilizing various cannula sizes as well as on-circuit and off-circuit options. Because of what we and our physician partners have learned about the effectiveness of Auryon, we believe that the technology can complement this offering with the potential to provide a solution for small vessel DVT that takes advantage of Auryon's precision and aspiration capabilities. Given those advantages and the versatility of the Auryon platform, we've shifted development efforts to Auryon from the 14 French [ph] AlphaVac because we see a compelling opportunity to drive better patient outcomes in small vessel DVT. We are currently targeting a commercial launch by the end of calendar year 2024 which would give us a portfolio of three platform solutions with different modalities for the treatment of VTE [ph]. Let me share another example of our robust R&D pipeline and platform opportunities with you. We believe that the unique mechanism of action of AngioVac that makes it safe and effective in complex right atrium cases has the potential to be a disruptive technology solution for left atrium interventions. We estimate that this addressable market makes c [ph] $400 million, and we are targeting entering this market by the end of calendar year 2023. Before turning the call over to Steve, I'd like to thank our team here at AngioDynamics for their continued persistence and commitment to achieving our goals. Their hard work is essential to the success of AngioDynamics as we continue to build leading medical technology platforms that improve patients' quality of life. With that, I'd like to turn the call over to Steve Trowbridge, our Executive Vice President and Chief Financial Officer, to review the quarter in more detail.

Thanks, Jim, and 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 FY '23 increased 9.1% year-over-year to $85.4 million, driven by continued strength in our Med Tech platforms, including Auryon, NanoKnife and Thrombus Management. Med Tech revenue was $24.5 million, a 29.7% year-over-year increase, while Med Device revenue was $60.9 million, an increase of 2.6% compared to the second quarter of FY '22. For the quarter, our Med Tech segment composed 29% of our total revenue compared to 24% of total revenue a year ago. Year-to-date, for the first half of our FY '23, our revenue increased 7.5% year-over-year driven by Med Tech segment revenue growth of 29.7% and Med Device segment growth of 0.7%. Our Auryon platform contributed $10.1 million in revenue during the second quarter, a 60.6% increase compared to last year. We're very pleased with the continued growth of the Auryon platform, and we remain on track to generate full year revenue in the range of $40 million to $45 million. As of today, our installed base is approximately 370 lasers. Mechanical thrombectomy revenue, which includes AngioVac and AlphaVac sales declined 1.1% over the second quarter of FY '22. When including Unifuse, thrombus management revenue declined 0.3% year-over-year. AlphaVac revenue for the second quarter was $1.6 million. We remain very pleased with the performance of our AlphaVac products, including the F22 and F18 versions. Physician feedback continues to be very positive with respect to usability, features and outcomes. Year-to-date revenue for AlphaVac is $3.4 million, and we remain on track to generate AlphaVac revenue for the full fiscal year of $7 million to $9 million. AngioVac revenue was $6 million in the quarter, representing a decline of 16.2% over the prior year as a result of the two dynamics that Jim mentioned earlier. Year-to-date, AngioVac revenue was $12.9 million, a decline of 4.6%. As I stated previously, we expect mechanical thrombectomy to be a significant contributor to our growth strategy and we will continue to prioritize investments in this platform. We currently anticipate our mechanical thrombectomy platform, led by growth in AlphaVac, to grow 25% to 30% in fiscal 2023, below our prior expectation of 30% to 35%. NanoKnife disposable revenue increased 45.4% year-over-year as our clinical studies continue to drive enrollment and increase awareness of the platform. Year-to-date, sales of NanoKnife disposables grew 28.9%. U.S. NanoKnife disposable sales grew 44.2% during the second quarter and are up 24.3% year-to-date. International NanoKnife disposable sales grew 46.8% during the second quarter and are up 35.8% year-to-date. Turning to our Med Device segment. Our angiographic products, ports, dialysis and microwave all achieved solid growth in the quarter. This growth was partially offset by modest declines in other areas of the segment, resulting in an increase of 2.6% for the segment overall. During the quarter, we reduced our backlog from $7.1 million to $5 million as operational capacity and supply chain strategies continue to provide positive results. Year-to-date, our Med Device segment has grown 0.7%. Moving down the income statement. Our gross margin for the second quarter of FY '23 was 52.8%, an increase of 100 basis points compared to the year ago period and up sequentially from Q1 by 90 basis points. Gross margin for our Med Tech segment was 63.7%, a decrease of 290 basis points compared to the year ago period but an increase of 50 basis points sequentially over Q1. The year-over-year decrease was primarily driven by increased depreciation costs from growing Auryon installed base. Gross margin for our Med Device segment was 48.4%, a 130 basis point increase compared to the year ago period, driven by improved operational capacity and our supply chain strategies as we've managed through the ongoing inflationary environment. Med Device gross margins were up 90 basis points sequentially over Q1. Our consolidated corporate gross margin in the quarter was positively impacted by increased efficiency in our manufacturing operations and product sales mix. These improvements were partially offset by headwinds from costs associated with the continued tight labor market, raw material inflation and increase in freight costs. In the second quarter, on a year-over-year basis, the increase in production capacity from our initiatives and increased efficiencies provided a benefit of approximately 465 basis points. The impact on gross margin from product mix was a benefit of approximately 35 basis points. These benefits were offset by approximately 140 basis points versus the prior year period due to increased labor and manufacturing costs. Inflationary pressures on raw material prices resulted in approximately 120 basis point negative impact and higher freight costs had an approximately 35 basis point negative impact. Foreign currency fluctuations and hardware depreciation reached roughly 50 basis points of headwind. Our research and development expense during the second quarter of FY '23 was $6.8 million or 8% of sales compared to $8.2 million or 10.5% of sales a year ago. We continue our disciplined investment in R&D focused on driving our key technology platforms, including the clinical and product development spend for our Med Tech portfolio. For the full year FY '23, we still anticipate R&D spend to target 10% to 12% of sales. SG&A expense for the second quarter of FY '23 was $36.8 million, representing 43.1% of sales compared to $33.3 million or 42.5% of sales a year ago. The year-over-year increase in SG&A spending was primarily driven by the annualization of investments in our sales teams, particularly Auryon. For FY '23, we continue to anticipate SG&A spend to target 40% to 45% of revenue. Our adjusted net income for the second quarter of FY '23 was $356,000 or adjusted earnings per share of $0.01 compared to an adjusted net loss of $856,000 or adjusted loss per share of $0.02 in the second quarter of last year. Adjusted EBITDA in the second quarter of FY '23 was $7.5 million compared to $4.4 million in the second quarter of FY '22. In the second quarter of FY '23, we generated $7.5 million in cash from operating activities and our net cash position increased by $5.3 million from the end of Q1. Capital expenditures were $1.3 million and additions [ph] to Auryon's placement and evaluation units totaled $1.2 million for the quarter. As of November 30, 2022, we had $29.9 million in cash and cash equivalents compared to $28.8 million in cash and cash equivalents on May 31st, 2022. We continue to expect our net cash position, which is cash net of debt, by the end of our FY '23 to be flat to slightly up from where we exited FY '22. As a reminder, during the back half of our FY '23, we expect to achieve the aggregate revenue milestone target for Auryon which would trigger a contingent consideration payment of $10 million. This contingent consideration payment is excluded from our operating cash expectations. Turning to our FY '23 outlook. We are reiterating our full year revenue guidance in the range of $342 million to $348 million as well as our FY '23 adjusted earnings guidance in the range of $0.01 to $0.06 and as we continue to invest in driving sustainable growth in our key Med Tech platforms while also managing cash and profitability. I want to wrap up my comments by thanking the entire AngioDynamics team for all of their hard work and commitment as we continue our growth as a platform-focused medical technology company. With that, I'll turn it back to Jim.

Thanks, Steve. We are a company with a diverse portfolio and we will continue to try to communicate with you in a transparent and clear manner. I hope that this call gave you insight to our performance and our future opportunities for value creation. We are a company that has continued evolving our platform technologies. We will continue to develop pathways to prove that our products make a difference in the lives of patients around the world. We have worked hard to earn the trust of caregivers who choose us as their care delivery partner. We have built upon a foundation that are centered by our products and our people, they are the source of our strength. We are a really good company. I'm proud of our teams and how they deliver to the patients and customers that we serve. I thank them for their steadfast commitment to our mission. Thank you for joining our call today. With that, Rob, I'll turn it back to you.

Good morning and Happy New Year, guys.

Morning, Jayson.

Maybe just a couple of questions here. First on AngioVac, the down 16. You mentioned staffing challenges, competitive inroads. Do you expect these dynamics to improve? And then just how are you thinking about AngioVac growth from here?

So Jayson, it's Jim. Thanks for the call. A couple of things. The dynamics are improving, as we sit and we talked about that. Dynamics are proving with our customers that will affect AngioVac. And as you noted, it is a complex product. It's really, really vital for removing clot in severe cases and the burden remains high but to use it requires, again, a little larger team. So sometimes hospitals in this environment have looked for other alternatives, which include continued lytics. Sometimes a patient may get released or their status may change before we can treat them. So that's part one. Number two, we're also learning how we're selling now AlphaVac and AngioVac in the same bag, some of the same call points and some different call points. So we'll get better at what we do. The dynamics are improving in our customers. So we expect the second half to be stronger than the first half for AngioVac.

Okay. On NanoKnife, I haven't worked through the math here, but I'm assuming that the strong growth that you're generating in NanoKnife is more than just contribution from the ongoing study. So the question is, what seems to be driving this renewed growth on NanoKnife?

So a couple of things. The study and the excitement around PRESERVE and how we can hopefully become an effective focal treatment is real. We see that now with what's happening with our urology partners coming and joining. That's great. Let me put that aside for a minute. So our international team has done a really good job getting us back into China. So we've got some business out coming up and running again in China where it's been soft for the last period, Jayson, as well as in the Central Europe again where we have a lot of folks that really believe in what NanoKnife does and how it works. And they are able to sell and treat prostate in parts of Europe today, in the U.K. and other places as well as their commitment to using Nano for a lot of liver treatments. So we're seeing the strong kind of rebounds across the board globally again but also drive - I think the excitement around PRESERVE is really creating a halo effect around what we can do with NanoKnife globally.

And Jayson, I think just to add to what Jim said, that halo effect, as we've always said, we were listening to the marketplace and it was our clinicians that were telling us that there was an unmet need in prostate and that NanoKnife had a role to play in that. So that was the driving force for us to getting into PRESERVE was the market was telling us that there was a role for Nano to play. And that's what we're seeing. So when we talk about the halo effect, it's really that continued push of the market saying there's an unmet need. NanoKnife has a role play. We think this is good. Our study is there to continue to support that. But it's really a full market shift that we're continuing to see of adopting NanoKnife as a focal treatment option in prostate.

Okay. Just two quick follow-ups, and then I'll jump back in queue. On PRESERVE, when do you expect to complete enrollment in that study? And then second, can we just assume that you're allocating more resources towards funding NanoKnife in that sales initiative?

So we expect to complete enrollment during the first half of this calendar year in 2023. So we expect the next 6 months, Jayson, we should be able to complete that study, there's good momentum there. And then second, we've not yet talked to you guys about our commercial plan beyond that. I'll remind folks on the call, PRESERVE has a 12-month follow-up. It requires us to do a 12-month follow-up and then work with the FDA for clearance. We expect some point by the end of 2024 to have that clearance. And by that point, we'd probably - we'll talk to you in more detail about commercial investments that we'll make to bring that product to market, we think, with that indication that we'll receive.

Okay. Thank you.

Thanks.

Our next question is from the line of Bill Plovanic with Canaccord Genuity. Please proceed with your question.

Great, thanks. Good morning and thanks for taking my questions. I don't think you addressed with the litigation with Bard. I was just - what are the next steps? How is that going to impact the P&L and cash flow? And any timing for any events or news that we should expect?

Hey, Bill, this is Steve. I can take that one. So we have put out the 8-K earlier during the quarter indicating the decision on the litigation. As we said at the time and as we've talked about at conferences then, this is a long ongoing war. We don't see this as the end, and it's going to continue. So it's really business as usual, it's not anything that's going to be materially impacting how we're running our business. It's been ongoing for a long time. So when you're asking about the P&L implications, for the most part, they've kind of been baked in there and so I wouldn't see any material deviations going forward from what you've seen in the past. As we've said, timing, there's appeals on our case, there's appeals on other cases that are very similar. They may come up within the course of our Q3. For the other case, we're still waiting for some scheduling on the other questions that have to be answered in our case. So still ongoing. As any material things happen, we'll certainly be telling you. But for the most part, it's not something that's impacting how we run our business day to day.

Okay. Thank you for that. And then just on the Auryon that was pretty strong in the quarter. You mentioned that you launched the hydrophilic coating. How much of the quarter was sell-through versus maybe initial purchases on the limited market release?

So Bill, not a lot of limited - not a lot of purchases on the limited market release. Really, that was just confirming what we'll use the LMR process for, to confirm that the product meets our customers' expectations. So - and now we're ramping up our production shifting from the non-coated to the new hydrophilic process, that's why I mentioned the second half of this fiscal year when we make that flip over. So it's really just - we're meeting demand, Bill. Really strong demand still for the product just by how it performs. And we're pleased with the customer contacts we have, hearing stories every day of how much confidence they gain when they use it. We know there'll be a lot of data presentations during the course of this calendar year where physicians will present data on how well Auryon works and treats safely and effectively in the anatomy. So continued confidence in the platform, Bill, and it's really just normal organic growth.

Okay. And then last question for me if I may. Just you mentioned that the backlog went from $7 million to $5 million. Is it - should we expect that to go down further? Or are you kind of now at a steady state kind of normal business? How should we think about that as you move forward? That's it for me. Thanks.

Good question, Bill. So yes, we're going to continue to work to get it down to what we would call a normal operating back order level, which is far below that $5 million level here. We're pleased with our teams and how they've done it. We've got better participation and our labor force is now stabilized, our labor forces and our operations teams here in the U.S. And as you're aware, we opened up our Costa Rican operation about a year ago. So now we've got a calendar event, we're cycling back and we're expanding capacity there and efficiencies are growing. So we're pleased there. We'll get the back order backlog back to a normal operating level. And even from there, Bill, we're even doing things like speaking to our customers who had some products in order for a long time, double checking that they want them and they need it and it's clear. So we're going to clean it up. The pandemic has thrown a lot of curveballs at everybody in our industry and we work hard with our customers to make sure we're serving them to the best of our ability. We learned a lot here and our teams responded and we'll get that backlog down, hopefully close to normal, by the end of this fiscal year.

And just for clarification purposes, normal would be the remaining $5 million would be cleared out?

No, we always have a backlog, Bill. We try to target about half -day sales is a target we do. So if you look at that, you call that you know, three quarters [ph] $1 million in that range is what we kind of target as a normal backlog, back order. So we'll probably - you never get it to zero. We have a complex diverse portfolio, as you know, with over 1,000 SKUs. So we get into that half day sales and a target that we feel comfortable with our customers.

Thank you.

The next question is from the line of Steve Lichtman with Oppenheimer. Please proceed with your questions.

Thank you. Good morning, guys. Clemmer if I could follow up on small vessel DVT. So I guess a couple of things. Should we assume that 14 French [ph] AlphaVac is not going to come to market now and the shift that's been completed toward Auryon? Or is that perhaps just pushed later? And what else do you need to do regulatory wise or data wise on Auryon to go after small vessel DVT with that platform?

Hi, Steve. Thanks for the question. So a couple of things. You're right, so we've suspended really the development efforts on our 14 French AlphaVac because we've just seen such a kind of demand and interest from our physician partners who've used Auryon that have really told us the power of how it works, how our 355-nanometer wavelength delivers energy and protect the vessel wall. The reason why it's safe and effective in the arterial parts of the body, we believe now can offer the same benefits in the venous structure. So we're now shifting that development for that small vessel DVT. Whereas we thought the 14 French AlphaVac would have been our best option a couple of years ago, now the learnings that we've gained and the conversations with our partners made us believe that Auryon can really fill that gap better because of how it can deliver the energy, also the aspiration capabilities which are mechanical here with Auryon. So we'll get back to you with a little further time lines. But we think, as we said earlier, we've got a potential plan to launch technology by the end of calendar 2024 which also obviously includes the regulatory pathway clearances that we need.

Okay. And we should expect in the interim some additional data around the efficacy of Auryon in small vessel DVT, so we'll get some visibility on that in the coming periods?

Yeah. We're not currently marketing the Auryon to small vessel DVT today. We're going to make some changes. You'll see some stuff. As we get closer to launch, we'll share with you some design iterations we'll make, different products, different sizes that we'll offer to fit the venous structure. So you won't see much in data there. I can't predict what a physician may do on their own, but we're targeting really today Auryon to be used in the arterial component targeting PAD. That's still where our main targets are outside of the development efforts now for the venous option.

Got it. Okay. And then shifting to APEX underway here. Can you give us any sort of color in terms of sort of the pace of enrollment? Any thoughts in terms of timing relative to completing enrollment in that trial?

Yeah. So we haven't given specifics in terms of the enrollment number on APEX. We're pleased with the pace that we're seeing. As far as these clinical studies go 12 to 18 months kind of from now is when we expect to finalize the enrollment and move forward. So we've been pretty pleased with the pace that we're seeing there, particularly in the current environment.

Okay. Got it. And then lastly on Auryon, is the expectation for this year that you will continue - I mean the continued expectation that you'll see a bit of a slowdown in terms of new placements and really trying to drive utilization within the current base? Has anything changed with respect to your thoughts on how that will play out in fiscal '23?

Steve, back what we said back in July when we kind of kicked off this fiscal year, we mentioned to each of our investors that our plan was to shift slow down a bit of the new placements because we want to make sure we're also maximizing our efficiencies in the ratio of the patients that we serve and the cases that we receive where we already have Auryon lasers placed. So it's really a combination then we're still going to place lasers. Don't expect as many places this year as last year, as we've already said, because we want to manage our capital base as well. It's a really great product, but it's an expensive base, as you know. We want to make sure that we're getting the efficiencies that we need from our customers who use it. They're working on that. We think the hydrophilic coating will be a real big enabler of that as more physicians now have confidence in the product, how they can steer it deliver to the lesion, get it to where they want in a really cool fashion. So we're really excited hearing the comments that they've given us. So we'll work with each quarter, Steve. But that balance will continue, and we will place less lasers this year. Doesn't mean there's less interest or demand, but we're going to manage the business. Still going to grow dynamically, but we're just shifting the business as well in a normal maturation phase.

Right, right. And just a clarification, did you guys increase the selling reps for Auryon this quarter sequentially? And what are your thoughts in terms of adding there through this fiscal year?

There was maybe one that was - one head that was added during this quarter. So as we've talked about, we're being very thoughtful about how we continue to invest in that business. We felt that we had a pretty well staffed team for the rest of this fiscal year. And as we move into the next fiscal year, we'll assess continued investments to support the overall trajectory.

Got it. Thanks, Jim. Thanks, Steve.

Thanks, Steve.

The next question is from the line of Matthew Mishan with KeyBanc Capital Markets. Please proceed with your question.

Good morning. Thank you. Good morning. To start off, it seems like Mechanical Thrombectomy and AngioVac are a little bit below expectations for this year. I just want to fully understand kind of what is the offset to that in guidance?

Hi, Matt, it's Jim. So we can both answer. But again, we gave you a little - the walk-through. AlphaVac's been terrific off the expectations that we have. AngioVac slightly under. I mentioned a couple of reasons why and what we're doing about that, A, working very close with our customers. And then B, number two, always looking at our sales approach. We've learned a lot since June 1 when we launched AlphaVac AngioVac together in a combined exclusive sales bag. So we'll get better at how we go to market. And we brought down slightly the number, as you saw, in that category, but we're well within the comfort of our guidance range. We've seen some other things. We didn't talk about NanoKnife a lot here, but you saw that's already outperforming the guidance range expectations that we gave there. So you can look at expectations we have. Our international business has done a terrific job. We have some new exclusive distribution partners that are helping us with clinical pull-through, the customer level. So other things we've talked about a little bit, we haven't given a lot of detail on, but we're really confident still in that range we gave you for total guidance.

Okay. And does the reaffirmation of guidance sort - is it a sign that you are more confident in the stability of the current environment? You're halfway through a year. Like is the macro - you're unique and one of the first companies to kind of report after November and December. Are you seeing the level of steadiness like in the marketplace?

Good point, Matt. And we mentioned on the prepared remarks, we have seen a slow gradual uptick and kind of confidence at that delivery level. But I talk every day, as you do, to hospital CEOs and customers, they still aren't clear in all cases. There's some regional effect, but there's clearly a shortage of some staff levels, nursing being the most appropriate that we see. But it's gotten better. It's baked into kind of the confidence I just talked to you about why we're confident in the guidance range that we have with one [ph] piece of that confidence. Others are our products are being received, the good work our team has done to bring the backlog down. Still the great work on our Med Device platform, getting that back to growth, our teams there are doing a great job. All those are together, Matt. But yes, back to answer your question, our confidence that our customers are getting a bit more stable is part of that.

Yeah. And Matt, in Jim's remarks, he talked about the ongoing staffing pressures that hospitals are facing but that, as expected, our experience has been that hospitals are finding ways to manage through that. I think that is really the theme, both hospitals as well as businesses, and we fall into that, too, are understanding the current environment, we're managing through it. So there isn't an expectation in the back half to hit our guidance that things have to completely change from where they are or snap back to pre-pandemic or pre-disruption levels. Our expectations are that we're going to continue to manage through the environment as we see it. And as Jim said, we've got the confidence in our guidance range based upon that.

Okay. Thank you for that. And then a follow-up on the shift in development from the F14 to Auryon. Are those the same doctors in office based labs? Or does that require you to make a bigger push in Auryon into the hospital?

Yeah. Great call. And we'll give you guys more kind of a commercial plan look over the coming quarters and months. But we're going to say, we think there's a lot of care that's going to be delivered in OBLs. We already know other centers outside the hospital over time and being thrombectomy maybe one of those things that gets care delivery more in OBL like setting. Today, it's not driving this though, Matt. It's really because this technology is so special in Auryon. We believe so deeply in the science and how it performs. So we're going to make the commercial shifts necessary to make sure we can also accommodate the use of it to be really successful for small vessel DVT treatment, the bulk of which we believe will occur in a hospital setting at this point.

And then just a last question. Maybe I missed it over like the last quarter or two. Just what happened to - what's happening with pancreas with NanoKnife? Is there any update on where enrollment is in those DIRECT trials?

So we haven't given any specific updates on where the enrollment is. It's moving forward. It's continuing to go. As we've talked about, that was a trial that had the two arms, the registry side as well as the RCT. The RCT is going to be very difficult. That's proven to be true in terms of the enrollment there. The other thing that we said is that given the structure of the PRESERVE trial, we expected that PRESERVE would outpace DIRECT even though it started later. We're seeing that as well, that enrollment is really outpacing it. So we're still focused on DIRECT. We're still pretty happy with what we're seeing given all of the contextual things that are going on in today's environment and moving forward. And then as we continue to get more - hit milestones and things like that, we'll let you know.

All right. Thank you very much.

Thanks, Matt.

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 investors. Thanks for joining us today. And as I said earlier, we're a company committed to our platform technologies and to ensuring that we can be a care delivery partner with our customers and the physicians that trust us. Thanks again to our AngioDynamics team for working in a really challenging environment and delivering for our customers. Have a great day.