Evan Smith - Investor Relations Jim Clemmer - Chief Executive Officer Michael Greiner - Chief Financial Officer Stephen Trowbridge - General Counsel and the Head of our Clinical Affairs Group.

Matthew Mishan - Keybanc Ian Mahmud - Barclays Cecilia Furlong - Cannacord Genuity Charles Haff - Craig-Hallum Jayson Bedford - Raymond James.

Good day and welcome to the AngioDynamics 2018 Fiscal Year First Quarter Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Evan Smith. Please go ahead, sir..

Good morning and thank you for joining our conference call as we provide an update on AngioDynamics’ business, as well as review financial results for 2018 fiscal first quarter ended on August 31, 2017. The news release detailing the first quarter crossed the wire earlier this morning and is available on the company’s website.

A replay of this call will also be archived on the company’s website. During the course of this conference call, the company will make projections or forward-looking statements regarding future events, including statements about expected revenue, earnings, and free cash flow for the fiscal year 2018 first quarter.

We encourage 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.

A slide package offering insight into the company’s financial results is available on the company’s website under presentations. This presentation should be read in conjunction with the press release discussing the company’s operating results and financial performance released during this morning’s conference call.

This morning, we’re joined by Jim Clemmer, Chief Executive Officer; and Michael Greiner, Chief Financial Officer of AngioDynamics. With that, I’ll turn the call over to Jim, who will offer insights into the quarter.

Jim?.

Thanks, Evan. Good morning, and thank you joining us today. Our first quarter 2018 results reflect our continued commitment to strengthen our business through disciplined execution, a focus on strategic commercial initiatives, and continued operational improvements. This was a solid quarter in which we met our expectations.

Now let’s talk about a couple of highlights. First, last quarter we announced the recall and voluntary withdrawal of our Acculis Microwave Tissue Ablation System; that action led to an acceleration of our planned commercialization efforts or Solero, our Microwave Ablation Device that received FDA clearance in May.

We have been pleased with Solero’s performance and our ability to execute and drive sales globally. Our team worked tirelessly to transition Acculis customers over to Solero and feedback from physicians has been really positive.

You can see from the press release we issued this morning that Solero was the primary driver behind an 11% year-over-year sales increase in our oncology surgery business. As we mentioned in the last quarter, we took a revenue reserve of $2.6 million. Some of this quarter’s year-over-year growth is attributable to that reserve.

Second, during the first quarter of last year we were in the midst of responding to Cook’s recall of their Angiographic Catheters. At that time, we indicated that about $4 million in sales of our core business was largely attributed to customers stocking the shelves as a result of the Cook recall.

Now that we are a full-year beyond that point, we have a better understanding of the market demands and our position. While by comparison, revenue in our core angiographic catheter business was down during the first quarter of this year, compared to last year.

It is on par with quarter-over-quarter revenue indicating that demand has normalized and we are maintaining a significant amount of the business we earned as a result of the high quality of our products and our steadfast commitment to serving our customers. We have worked hard to maintain the business we gained and earned the trust of our customers.

Revenue for this business is now maintaining a run rate approximately 30% higher than we were prior to the recall. For the balance of our remaining portfolio, we see execution initiatives taking root. Our fluid management business is up.

The team has built a strategic business plan that includes a focused salesforce, streamlined product offerings, and pricing strategies. The team has executed well against the strategy and has driven sales in a slow growth market. While Vascular Access was down as we expected, the good news is that sales of the BioFlo family of products is up.

We are continuing to focus on the clinic and economic benefits of BioFlo across the Vascular Access continuing with care. And our NanoKnife utilization is up, at the same time that we drove sales of our new Ablation Technology in the marketplace. We still have a lot of work to do and we know where we need to focus.

The main thing that I’m concerned about is our Venous business, which is down more than I expected. Venous was liked for a few reasons and we understand them. We are working on putting together the right strategy in place to get this business back on track.

Finally, we have spoken about operational levers, which we are strengthening to help with our long-term growth, including the R&D process, the consolidation of our operations, continuous improvements to our supply chain, and the implementation of a global business unit sales structure and strategy.

All of these initiatives are continuing as planned and have begun to show positive momentum as we pivot our focus towards growth. Overall, the first quarter demonstrated our commitment to continuous operational improvements, while investing in long-term sustainable positive outcomes.

We remain confident that the strategy we are implementing across our businesses will support both topline growth and improved profitability for the company in the long term. With that, I’ll turn the call over to Michael..

Net sales to be in the range of $352 million to $359 million, adjusted EPS to be in the range of $0.64 to $0.68, and free cash flow generation to be in excess of $35 million.

Before I turn the call back over to Jim, I want to offer some insights into our plans for the maintain and invest portfolios, which we introduced during our investor day in April. During the quarter, our focus on commercial execution across our maintain portfolio began to bear some fruit.

As a reminder, these are the products that we are focused on maintaining share, while driving operational efficiencies and generating cash for the business. One example of this was Solero. The markets response to the product gives us confidence that we will be able to hold on to our position within the Microwave Ablation market.

While returning that product line to average or above average market growth. In addition, we saw growth in food management and sustain sales in the Core business. Both achieved through disciplined sales execution.

Continuing to implement aggressive operational efficiencies across the entire maintain portfolio in order to unlock funds for investment in our growth areas.

We will continue to rationalize SKUs as appropriate, complete our operational consolidation by the end of the fiscal third quarter, align our salesforce and implement strategic pricing and sales initiatives. Our invest portfolio includes product families where we see significant market opportunity as we outlined at Investor Day.

We see growth in this portfolio accelerating in fiscal 2019 and beyond. First, for NanoKnife, we are continuing discussion with regulatory and reimbursement bodies regarding indications and payment. We feel confident these discussions will yield positive outcomes.

In addition, our R&D initiatives upgrade NanoKnife's hardware and software is expected to be submitted to the FDA for approval in the coming months. These long term efforts are in addition to our near-term activities to drive utilization in this space.

Our Venous Insufficiency business continues to be in area facing significant marketplace headwind as Jim noted earlier, but we remain committed to becoming a comprehensive provider of making solutions to our customers.

We saw growth in the first quarter and promise management as a result of growth in our thrombolytic products, while maintaining share, revenue and AngioVac. We continue to assess opportunities provide new options to patients in both of these phases Venous Insufficiency and Thrombus Management and to round out these portfolios.

Finally, growth for our BioFlo family of products will be driven by generating clinical and economic outcome data.

Currently there is six studies underway looking at the benefits of BioFlow and we are pleased to announce the publication of a study, which included that in a nurse led program low rates of major PICC-associated complications were partly attributed to BioFlow. Data like this supports our commercial execution efforts in the BioFlo family.

With that, I will turn the call back over to Jim for some closing remarks..

Thanks Michael. To summarize, we had a solid first quarter and we remain confident in our annual plan and we are very bullish on our future. We know that there is still much work to be done and we are confident in the ability of our business. And our business is to grow in their overall markets.

Our efforts and focus and execution will create value for our stakeholders.

Overall, we continue to focus on improving our company, aiming to launch new products at a much faster pace than our historical average, we want to expand our growth internationally through our new aligned global business unit strategies, and by utilizing our financial strengths to opportunistically acquire external assets of strategic and financial value.

We are very confident on the strength of our business going forward. Thank you for joining us this morning. We will now open up to some questions..

Thank you, sir. [Operator Instructions] And we will take our first question from Matthew Mishan with Keybanc..

Hi, good morning Jim, Michael, thank you for taking the questions..

Good morning..

Thanks Matt..

I am not quite sure I fully understand the decline in the gross margin; could you walk from where you were in 3Q and 4Q, which is the mid-50s to where you came in this quarter? I don't believe there was a significant change in sales between the quarters..

No, thanks Matt. I am not sure we are in the mid-50s in those quarters. I think we are more in the 51%, 52% range, but I can - I will walk you from the 51% 52%. So we had about 0.5% headwind on a ASP, we had 0.9% and 90 basis points related to the Solero generators that we have got up to the market at no charge. And then mix was unfavorable by 1.2%.

So when you look at the solid quarter food management had, we had some mix in there because of the food management floor market..

And just following up on that, it doesn't seem like a lot of that is one time or non-recurring, how confident are you that you are going to be able to hit that 52% plus, I think that is underlying your guidance for this year?.

Yes, so very confident. So Solero was a one-time as we get to the back half of this year. ASP we had a couple of things happen that we have built into our expectations around 0.2% for the full-year. So it is a little bit higher in the first quarter, but we don't expect to see that trend continue.

And then next we expect to see much more favorable in the back half of the year. So we feel very good about the 52% less. We also will start to see some of the positive outcomes from the consolidation in the plant in the back half of the year as we get down with those in the December to January timeframe..

And Matt this is Jim. Some of the activity we did Matt in the Solero, back it was the Solero program, some of those are one timers. Some of our customers have different programs or on that led to us, but entirely discounted or no charge hardware in place in the field. So, once we get those things behind us that will help.

Also the fluid management team did a really great job. We’ve got a great selling and marketing team there supported by our operations team, but that still is a dilutive business on a margin basis overall to us.

Now the work they have done with tremendous SKU reductions, more focused pricing initiatives, and better field execution have led that to go up in margin, but still that is dilutive overall to our gross margins..

Okay great, and then just one last one on the Angiographic Catheters and Cook, can you give us an update on where Cook is, are they back in the market or is this inventory situation stabilized with - and your run rate stabilized with them still out?.

So Matt we have people in the field every day. We are here with different pieces, but no, to our knowledge they have not yet come back in the market. We were very close to the market as you know being a major player. So we expect them to probably return, but we don't know.

The point is now we’re taking real charge of this business, we have done really great job supporting our base customers that we had prior to this Cook issue, and now supporting a lot of the new customers that have come over. We’ve also responded with some new products that some of these new customers have access for to benefit their needs.

So, we are doing a really good job there Matt. We will be clear and transparent.

I think if you go back to a year ago, we were very clear in calling out the revenue that we gained the last year and how we responded and took time for our supply chain to respond, our selling and marketing teams did a great job responding, but today we feel really strong about the position we are in, but we can't predict what they will do..

All right. Thank you very much..

We will take our next question from Matt Taylor with Barclays..

Hi this is actually Ian Mahmud on for Matt, can you hear me okay?.

Good morning Ian, thanks..

Great. Good morning.

One of the bright spots this quarter was Solero obviously, can you size the market and maybe give some commentary on the ramp for that product based on your latest thinking?.

So, Ian good morning. So we have been a major player in the Microwave business for a long time with our Acculis products, but we also knew the Acculis product needed to be upgraded. So, here at Angio we had an R&D project to come out with the Solero product.

So, we identified this market for a while, we have been a major player for a while, and today with Solero we feel better about our ability to compete against other market players like J&J and Medtronic's in this phase.

So today, we are not ready to put out market sizing or potential growth rates in this space, but we have talked about our ability to service these customers, and you take a step back. I have been in this industry for a long time and you see what we had to do this past quarter.

When we voluntarily pulled the product from the market that’s trusted by physicians to give care, replaced it with another one that could be very, very disruptive to care.

And when we’ve got good competitors that we compete against, the fact that Solero is being widely accepted is a good bullish sign for us going forward, but we’ve got a lot of work to do maintain or grow our market share in that place, but we like that space and we will compete hard..

Understood, helpful. Okay.

You also alluded to in the script the regulatory and reimbursement discussions around NanoKnife, you mentioned that you felt confident about the outcomes of that, of those discussions, can you comment on what gives you that confidence?.

Ian good question, what I will do is, we have Stephen Trowbridge here today, who is our General Counsel and also runs our Clinical Affairs Group, I will have Steve comment for you..

Thanks Jim. Thanks again for the question. So, as we said in the past calls, we do feel very confident on the outcome of these discussions. As we said in the last call, when you look at the proliferation of clinical data that we’ve had coming out recently, but really over the last several years it tells us a very consistent story.

We are going to be leveraging that data in these ongoing conversations that we're having with both the FDA, as well as payers, private payers and public players.

As you know this is a long iterative process, so you have conversations with the FDA you will get feedback, you will go back, work on it, resubmit, had to wait sometime before you can get back in front of them in a sustained way with the payers as well.

So, we are continuing these discussions, we are moving forward, we do feel that they are progressing appropriately and we are as bullish as we ever have been that we will get to the right outcome, it just takes some time..

Understood. Thanks..

We will take our next question from Jason Mills with Cannacord Genuity..

Hi good morning. This is actually Cecilia Furlong on for Jason.

I wanted to just touch on the Solero transition again and really what you see is left at this point in terms of transitioning customers and how we should think about it through the balance of the year?.

So Cecilia good morning, it is Jim, and I'm sorry just to get your question right, did you ask what we see is loss, I couldn't hear what you had asked for?.

I am sorry, just what’s left in terms of transitioning additional customers over?.

Okay. Sure, thank you. So, two ways we look at that. So as you recall, we took a reserve, which we noted in our prepared remarks at the end of the fourth quarter that was for Acculis product that will be coming back to us. Part of how that reserve gets relieved is people turn over to Solero products.

We anticipate that that reserve won't be completed, as far as being cleaned up of the balance sheet by the end of the calendar year. So that’s one way to answer that.

The other way to answer that is that we also anticipate in the back half of the year the expectations we have with our Acculis product initially for back half of the year before we launch Solero, we will have probes at the same levels of volume or hopefully based on some of the upsides we see in the first quarter, maybe even greater than what we anticipated.

By the end of the year as we exit our fiscal year, we expect all of that Salerno transition to be completed..

Okay, great, thank you.

And then also you just highlighted your Venous business and weakness below what you are expecting in the quarter, what’s your strategy going forward to kind of turn this business around?.

So, going back to our Investor Day, we highlighted the Venous business, as most folks know, we are the market leader in the laser ablation space, and we like our laser position, but we also identified other areas and there are some moments in new levels of care and how care is delivered.

So today we have our laser, and we have a drug product that we distributed. But there are other sports that we are interested in, in delivering care and supporting our customers that they deliver care in this space.

So two things, we think the product portfolio growth is an enabler and we also mentioned at the time that there is still such a small percentage of people seeking or receiving treatment in this space.

So we are going to work hard again on the portfolio enhancements and work hard on education defined access, people that need care to come to our partners..

Great. Thank you for taking our questions..

Thank you..

And we will go next to Charles Haff with Craig Hallum..

Hi, thanks for taking my questions. Good morning.

So, a couple here, in terms of NanoKnife placements, what were your NanoKnife placements this quarter and do you think that presented any gross margin headwind when you look at the year-over-year comparison?.

Charles this is Michael, thanks for the question. We are giving out NanoKnife placements, but what I can, what I will provide is that placements were up year-over-year and we had units that were little down year-over-year.

So, we don't expect that mix to remain the same throughout the duration of the year, and we don't expect to see any headwinds year-over-year comparison from a margin standpoint specific to NanoKnife..

Okay.

And just to remind me, the NanoKnife's capital equipment has much higher than corporate average gross margin right?.

That’s correct. As do the pro’s..

Okay.

And then on the Venous business, you mentioned that you saw some marketplace headwinds on the Venous business, do you think you are losing market share in the Venous business to Boston Scientific or some other players this quarter?.

So Charles it is Jim. A couple of things.

There is still, there is still kind of wild west going on right now between laser RF to kind of the folks that we play in the thermal space has been trusted for years as the best care delivery mechanism, and as we all know, too, there is some new products coming out in the NTNT, or non-thermal, non-tumescent space.

So I think customers are looking right now to decide, hey, do I want to use a laser, and people trust Angio as the laser choice, another company has an RF, and then there is a couple of folks out there with this new device. So we think there is a lot of things happening in the marketplace. Did we grow our share? No. Do we have a soft quarter? Yes.

But again as I said earlier, we remain confident and our ability to grow this business overall, probably with the additions to our laser platform as we talked about. So today, again one quarter is hard to read trends in it, we watch it very closely. I think you know too Charles we bought a new leader for this division in, in February.

Who now has his arms around it, has good knowledge of the space and is providing us a good strategy that we support going forward?.

Okay thanks.

And then last question on inventories, I saw your inventories ticked up a little bit quarter-over-quarter was there any stocking that you were doing in Puerto Rico or anything to get in front of the anticipation of the hurricanes coming?.

No. Two things, we don't have any manufacturing in Puerto Rico, but secondarily most of that was just due to preparing for the closure of the two plants, one in Manchester, Georgia and one in Denmead, U.K.

So we obviously have to get stock available in upstate New York that we'll be selling as we move the registrations up to our upstate New York plant. .

Okay.

And just to clarify, the Puerto Rico I thought you were doing some operations for Boston scientific down there, is that not the case?.

No. As you know we have a small business that we do, we have a small OEM business to Boston Scientific but the Puerto Rico doesn’t affect it..

Okay. Great, thanks for the clarification..

Thank you, Charles..

Thanks Charles..

We will go next to Jayson Bedford with Raymond James..

Good morning. Thanks for taking the question.

So just a few, bigger picture, I realize that the first quarter comp was a tough one, but outside of easing comps what would you identify here as the drivers of the implied growth in your revenue for the year?.

So Jayson, a couple of things we talked to you about Solero out of the gate. And again, that will normalize, we won't get to see that over the course of this year, but we are very pleased with how Solero came out. Second, NanoKnife, our probes or utilization of our products are up, which is great.

Third, our international sales as a percent of our sales is moving in a direction that we've told it needs to move, which is up and I have created a few things there. Some really good people that we bought on globally. We are really close to their market opportunities.

It is half of it and the other half is by moving to the GBU structure that we announced last spring, and getting our decision-makers closer to the global market is definitely helping.

So these are still things in process, and then finally, areas like Fluid Management, which is our largest overall business we compete with a really good competitor, but we have a really strong team and they executed very well there. So those are some of the enablers we see now.

When we get the Venous business straightened out, and BioFlo becomes a larger percentage of our Vascular Access business we think those businesses will stabilize and help the growth shown in other areas..

Okay. That’s helpful.

A few follow-ups on that, just in access, BioFlo was a percent of the overall access mix, where is it?.

So it is up to nearly 50 right now, almost 50% this quarter..

Okay.

And then in oncology on the net basis, what percent of Acculis customers have converted over to Solero?.

We don't know the exact number, but a very high percentage and we were very pleased with the execution in the deal, and very pleased to hear that customers like the Acculis products and we are thrilled to have the Solero opportunity..

Jason the hard part is, globally, we know where all of our Acculis hardware systems are placed and we are working to get people now the new Solero's, but our initial supply chain projections had us, as we talked to you about a launch that was on more of a stable basis.

This when we updated the launch to replace Acculis out of the gate, it did not allow us to have a supply chain ready to support every customer globally. So, we still know there is some more transitions to occur this next quarter..

So, you still have Acculis owners that aren't using the device that hopefully will be converted to Solero over the next few quarters?.

Exactly. We have finished the transition and we will have Solero in their hands now. So we have some utilization as we said that can't occur that maybe some of our competitors are getting access to those procedures..

Got you.

Okay and then last one from me within oncology, NanoKnife, so probes were up, placements were up, but my impression was that NanoKnife revenue was not up year-over-year is that correct?.

Right. Placements were down and so that has the impact on the outcome..

Okay. Thank you..

Thanks Jason..

And we will take a follow-up question from Matthew Mishan, Keybanc..

Hi thanks for taking the follow-up guys.

On the non-BioFlo portfolio in Vascular Access that is still 50% of that, what is the strategy for maintaining that portfolio where it is, so it is not necessarily a headwind as it has been over the last couple of quarters?.

So Matt, going back to our April Investor Day when Chad Campbell laid out some of his thoughts about the transition, and I think the point at that time Chad showed where our business was today, BioFlo versus Non and where it will be in this three-year plan.

So, really what we will do is we are going to support and help the transition of some of our customers today that don't use our BioFlo products over and we also think we will probably lose in the pick area, especially. We have lost market share in the pick area for a while.

So, we will continue to probably lose it in the non-BioFlo, but we maintain at a much higher rate in the BioFlo area. So it is just a tricky process. I think we lay out to you very transparently, back in April, we stick to that that we will shift people over, but it is hard to see when you jump quarter-to-quarter as well Matt.

It is a tricky one, but it is going according to the plan that Chad and his team laid out..

Okay and then the EPS guidance, you laid out some moving pieces of that back at the Investor Day as well, and we are able to quantify and walk the guidance with gross margin expansion, the device tax investments in R&D, stock-based compensation, have any of the moving pieces underlying that EPS guidance changed materially?.

No, not at all Matt. Some timing from the quarter R&D as you see in the results are a little behind where we thought we will be spending in the first quarter. That was just because we weren't ready to put certain dollars into place.

So we anticipate throughout the income statement what we laid out in the Investor Day and for this year we will remain intact..

Okay.

And for NanoKnife in the UK, now that you have the nice recommendation behind you, have you seen an uptick in demand in the UK or an uptick in conversations with physicians, what’s been the general activity following that recommendation?.

Good question Matt. And maybe we can give you more detail in the future. Couple of things, as we went through our GBU structure in the spring, in the summer, so we have a new leadership team in place in Europe to sell our Nano and our oncology business, and actually put a leader in the UK that will become our European leader.

So a lot of activity is occurring. I don't think I can report to you today Matt. There has been significant uptick yet due to NICE. We will keep an eye on that, we can look at that in the future if that is of interest..

Okay, excellent. And I promise that this is going to be my last question.

Now that we have somewhat of a tax reform package on the table, can you comment how your first take is on it and what you think would be the impact to Angio and your tax rate if the corporate goes down and into the low 20s in the US?.

Yes, great question, thanks Matt. For us in the near-term, near-term being 3 to 5 years, it will have very little impact because of our NOL situation.

So from a cash tax situation we have international taxes, we have some state multiple taxes, but from our federal domestic standpoint I would say very little; that being said, after we've worked through the NOLs having the lower tax rate available is going to be beneficial because right now with our mix of call it 80/20 domestic international, and not having any international manufacturing operations where you would get something in that price arbitrage that will have a very positive impact on us in the out years, but we haven't scheduled that at this point because, again, that is 3 to 5 years out, where we start to consider the direct impact of the new tax structure..

Okay, thank you. That’s helpful..

Thank you. It appears we have no further questions at this time. I will now hand it back to our speakers for any additional or closing remarks..

Thank you folks for joining us today. I think what you saw in our first quarter is even with some choppiness in the revenue comparable to last year with the Cook situation and now the Acculis to Solero transition, I think what you see is the underlying strength of our company.

Things that we talked about in April at our Investor Day, we are working on actively. We talked to you about our plan this year to take $5 million that last year was in our profit line and invested back in our business.

Most of that in our research and development process to make sure we can hit or exceed the expectations that we have to grow our company in the future.

We also talked to you about the ability that we have due to the strength of our balance sheet and our strong debt to cash position, and how we can use our strength financially as an enabler to bring external assets in play over time. So again, those places we identified, we’re working on in the background.

We look forward to sharing more of those details with you in the future. Thank you for joining us today..

And again that does conclude our call. Thank you for your participation. You may disconnect at this time..