Good morning, and welcome to AngioDynamics' Fourth Quarter and Fiscal Year 2022 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 our fourth quarter and fiscal year 2022 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 one 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 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 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 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 thank you for joining us for AngioDynamics' fiscal '22 fourth 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 fourth quarter financial performance and our FY ‘23 guidance.

We had a strong end to fiscal 2022 as we delivered solid revenue growth in the face of significant supply chain and operation headwinds, as well as challenges that our customers are facing in delivering care to patients. We ended the quarter with revenue of $87 million, representing growth of more than 13% year-over-year.

Net sales from our Med Tech platforms were $22.6 million, representing growth of 40% over the fourth quarter of last year. Revenue for the full fiscal year was $316.2 million, representing growth of almost 9% over the previous year.

Our Med Tech platforms grew more than 41% compared to fiscal 2021 and comprised approximately 25% of our overall revenue base for the full year, up from 19% a year ago. As we've highlighted in the past, as part of our corporate strategy, we expect this percentage to grow over time.

Fiscal 2022 once again presented a unique challenge with historically high inflation rates, staffing and procedure headwinds and supply chain disruptions persisting throughout the year with varying intensity.

Throughout all of this, we continue to prioritize the growth of our Auryon, NanoKnife and thrombectomy platforms while keeping a focus on our cash position and profitability.

Through our R&D programs, we launched innovative new products, including two sizes of our AlphaVac mechanical thrombectomy device that will help round out physicians’ arsenal to treat venous thromboembolism and advance our position in this exciting market in fiscal 2023 and beyond.

We also launched two studies, including our PRESERVE clinical study for the use of NanoKnife as a focal treatment option for men with prostate cancer that we believe can provide significant quality of life benefits over other treatment options.

I am very proud of our team's dedication and ability to remain focused and deliver for customers and patients in this difficult macroeconomic climate. We continue to drive impressive performance in our Auryon atherectomy business with revenue of $9.6 million for the quarter, up sequentially from $7.3 million in our third quarter.

For the year, Auryon revenue was $29.1 million, exceeding the top end of our guidance range. In the fourth quarter, Auryon procedure volume and market adoption continued to gain momentum. We are excited about the steady trajectory of this business having treated more than 21,000 people since we launched this platform approximately 21 months ago.

We believe our differentiated offering with demonstrated clinical benefits, continues to gain traction with new and existing customers based on its efficiency, efficacy, and ability to treat any lesion type or length anywhere in the peripheral vasculature. For fiscal 2023, we expect Auryon sales in the range of $40 million to $45 million.

Our mechanical thrombectomy business comprising AngioVac and AlphaVac grew 10% year-over-year in the fourth quarter. When including Uni-Fuse, this business grew 11% in the quarter. For the year, mechanical thrombectomy grew 16%; and when including Uni-Fuse, it grew 12%.

While total growth in thrombectomy was below our expectations due in part to the procedural volume challenges impacting the DVT space, we are pleased with the overall performance of this business and remain bullish on the growth trajectory into FY ‘23 and beyond, as we continue to work towards expanding our product offerings to open up additional total addressable markets in the VTE space.

Specifically, we are excited about the early performance of our AlphaVac system. During FY ‘22, we launched the 22 French AlphaVac and completed the limited market release of our 18 French AlphaVac and are now in full market release. Total AlphaVac revenue for the year was $2.2 million.

AngioVac sales declined 4% in the quarter against a strong comparable, and due to the headwinds I just mentioned. For the full year, AngioVac sales grew 7%. On June 1, at the start of our fiscal year, we reorganized our thrombus management sales bag, shifting responsibility for our core angiographic catheter business to our vascular access team.

This move facilitates a dedicated focus on our thrombus business and increases our effective sales efforts by roughly 10% to 15% without adding any additional head counts.

This dedicated sales structure is similar to the proven approach that we took with Auryon and will allow our thrombus team to better serve our customers and communicate the clinical value of AngioVac and AlphaVac in treating different types of VTE in this highly competitive market.

Moving core into vascular access will allow that team to leverage its deep relationships with interventional radiologists and its strong experience with GPO and IDN contracts. We believe this team is well suited to drive these synergistic businesses efficiently. Turning to NanoKnife, disposable sales grew 16% during the quarter.

For the year, NanoKnife disposables grew 17% compared to fiscal 2021. Growth during the fourth quarter was driven by strength in the United States, with U.S. disposable sales growing 64% over the prior year. International markets, most notably in China and Europe, remain impacted by the continuing global COVID headwinds and resulting disruption.

NanoKnife performance in the United States has been fueled by more than 130 prostate procedures performed in FY ’22, representing growth of more than 500% in this disease states. These results and the progress of our PRESERVE trial for the treatment of prostate cancer have us very excited about the opportunities for NanoKnife.

During the fourth quarter, our Med Device businesses, which include the remainder of our portfolio, grew approximately 6% over the prior year. For FY ’22, our Med Device businesses grew 1%. When adjusting for the one-time $5 million order from NHS during the prior year period, our Med Device business grew 3% year-over-year.

As we stated during our Investor and Technology Day last summer, we expect our Med Device business to grow 1% to 3% over our three-year strategic plan period. We are very pleased with this performance, particularly given the challenging macro environment.

On our third quarter fiscal call, we discussed the tight labor market, the impact on our manufacturing capacity, and our response plans. As we anticipated, the backlog at the end of Q3 did rise during the beginning of our fourth quarter.

However, our manufacturing teams did an excellent job executing on our response plans, increasing manufacturing capacity through our Costa Rican partnership and stabilizing our employee base. I'm pleased to tell you that as we exited Q4, our production hours were up by more than 40% relative to this December-January timeframe.

As was the case last quarter, the demand environment for our Med Device products remained strong, while our response plans enabled us to work through a portion of the backlog. At the end of May, backlog was approximately $8.4 million compared to $11 million at the end of March.

While we're pleased with our progress, with respect to our supply chain stabilization and manufacturing capacity, given the macroeconomic challenges, we expect to see some variability in these areas. These productivity gains had a positive impact on our gross margins sequentially from our second and third quarters.

Gross margin for the fourth fiscal quarter was 53.4% resulting in a full year gross margin of 52.4%, in line with our revised guidance. Turning to earnings, we generated an EPS of $0.01 in the quarter. Adjusted EPS for the year was breakeven.

As a reminder, this includes a positive impact of about $0.08 from the CARES Act on our fiscal third quarter adjusted EPS.

As mentioned on our third quarter earnings call, while we didn't contemplate this relief in our original earnings guidance, it allowed us to maintain and even accelerate certain investments across a number of areas of our business while offsetting a portion of the COVID-related headwinds that we faced during the year.

Regarding our investments during the quarter, we continue to focus on our key strategic priorities, which are to support our existing platforms to facilitate physician adoption and improve patient outcomes and also to continue the development of new products to expand into larger, faster growing addressable markets.

These investment initiatives include clinical research, product development, selling and marketing, and regulatory pathway expansion as we prepare to introduce these new products into the market and work towards expanding indications and geographies.

Our teams continue to execute on our clinical trials, including our two new IDE studies, our PRESERVE study for the treatment of prostate cancer with NanoKnife and the recently launched APEX study for the treatment of pulmonary embolism with our AlphaVac F18, as well as our DIRECT study for the treatment of pancreatic cancer with NanoKnife.

We believe that PRESERVE will demonstrate that NanoKnife can be an effective focal treatment option for men with intermediate risk disease and provide superior quality of life outcomes when compared to other focal treatment options for surgery.

We estimate that the total potential market for focal treatment of prostate cancer that can be addressed by NanoKnife may exceed $700 million.

We believe that our APEX study for pulmonary embolism will prove that our unique AlphaVac products can be an effective treatment for PE providing ease-of-use and another treatment option while also unlocking an opportunity in a large addressable market that we estimate to be in excess of $1.5 billion.

I'd also like to provide you with an update on our legal action against Becton, Dickinson's C.R. Bard business as it relates to our VA business. We were scheduled for trial to begin on July 5th. The court recently rescheduled our trial date to September 9th, excuse me, September 19th, 2022.

We have waited a long time to get our day in court and are looking forward to the opportunity to present our antitrust case. Before turning the call over to Steve, I would like to once again thank our team here at AngioDynamics for their continued persistence and commitment to achieving our goals, regardless of what challenges lie in front of them.

Without their tireless effort, AngioDynamics would not be the company it is today. 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. Good morning everybody. 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.

Revenue for the fourth quarter of FY ‘22 increased 13.2% year-over-year to $87 million, driven by continued strength in our Med Tech platforms, including Auryon, NanoKnife and thrombectomy. Med Tech revenue was $22.6 million, 40% year-over-year increase, while Med Device revenue was $64.4 million growing 6.1% compared to the fourth quarter of FY ’21.

For FY ‘22 our Med Tech platform grew 41.2%. Our Med Device business grew 0.9% compared to the prior year period and grew 3.2% year-over-year when excluding last year's NHS order. For our fourth fiscal quarter, our Med Tech platforms comprised 26% of our total revenue.

In FY ‘22 our Med Tech platforms comprised 25% of our total revenue compared to 19% in fiscal 2021. Overall demand during the quarter remained strong. As I will discuss in more detail a little later, we ended May with an $8.4 million backlog, which represents a meaningful reduction in the total backlog from the levels we reported for March.

When taken with our fourth fiscal quarter revenue result of $87 million the $8.4 million backlog provides clear evidence of both our improving manufacturing capacity and a continued strong demand environment.

Revenue in our Endovascular Therapies business increased 18.5% year-over-year during the fourth quarter to $45.1 million benefiting from the continued growth of Auryon and our thrombectomy portfolio. Auryon contributed $9.6 million in revenue during the fourth quarter, continuing the momentum we built since our launch in FY ’21.

As of today, our installed base is 306 lasers with 31 lasers placed during the fourth quarter. We're very pleased with the growth that our Auryon teams have achieved and new laser placements along with increased penetration with respect to prior placements were significant driver of that growth.

Total lasers placed since launch have utilized approximately $19 million of cash consequently adding quarterly depreciation expense to our gross margins. As we’ve previously discussed, we do not expect to place lasers at new accounts in FY ‘23 at the same pace we did in FY ’22.

In FY ‘23, our teams will absolutely continue to open new accounts, but will be highly focused on increasing penetration in existing accounts. As Jim stated earlier, we expect Auryon to generate revenue in the range of $40 million to $45 million in fiscal 2023.

Mechanical thrombectomy revenue, which includes AngioVac and AlphaVac sales grew 10% over the fourth quarter of FY ’21. When including Uni-Fuse, thrombectomy revenue grew 11.4% year-over-year.

Procedure volume for AngioVac during the fourth fiscal quarter was slightly behind last year and we believe that staffing challenges at hospitals have continued to have an outsized impact on AngioVac procedure volume due to the complexity of AngioVac procedures, which require profusionists and typically an ICU bed.

We're very encouraged by the results of the limited market release for our AlphaVac F18. Physician feedback has been very positive and we moved to a full market release for AlphaVac F18 in June, and are encouraged by the large number of hospital value analysis committees currently assessing the AlphaVac platform.

For FY ‘22 mechanical thrombectomy grew 16% and when including Uni-Fuse grew 12.1%. Mechanical thrombectomy growth fell short of our expectations for the year due to COVID disruptions to the complex AngioVac procedures.

For fiscal 2023, we expect mechanical thrombectomy to grow 30% to 35%, AlphaVac revenue from both the F22 and F18 LMR was $2.2 million in FY ’22. For FY ’23, we expect AngioVac revenue to be in the range of $27 million to $29 million and AlphaVac revenue to be in the range of $7 million to $9 million.

We continue to expect our mechanical thrombectomy platform to be a significant contributor to our overall growth and we plan to continue to invest in the platform as a key driver of our transformation. Vascular Access revenue in our fourth quarter increased 9.3% versus the prior year period.

Vascular Access is one of the three businesses along with our core angiographic catheter business and our EVLT business that felt the most impact of the supply chain headwinds and tight labor market through our first three fiscal quarters.

Our fourth quarter results in Vascular Access were positively impacted by a reduction in the overall backlog for VA products during the quarter while demand remained strong. For FY ‘22, our VA business is down 1.1%, but when accounting for the one-time $5 million NHS order last year, this business is up 4%.

Revenue from our Oncology business grew 5.8% during the quarter as compared to prior year. NanoKnife disposable revenue increased 16% driven by 64% growth in the United States. NanoKnife growth was driven by increased awareness from our clinical studies, continued increasing adoption from urologists, and a growing installed base.

For the year NanoKnife disposable probe sales were up 17% driven by 43% growth in the United States.

Now moving down the income statement, as illustrated in the gross margin bridge included in the earnings presentation posted this morning, our gross margin for the fourth quarter of FY ‘22 was 53.4%, a decrease of 170 basis points compared to a year ago, but an increase of 120 basis points sequentially as our capacity improvement initiatives yielded benefits for us in the fourth quarter.

As we move into our FY ‘23 in accordance with our strategy, we expect our gross margin to expand as sales in our higher margin Med Tech platforms grow. As Jim said, while we're pleased with our progress on manufacturing, we expect to continue to see some variability in FY ‘23 as a result of supply chain and other macroeconomic headwinds.

And the fourth quarter on a year-over-year basis the impact on gross margins from product mix was a net benefit of approximately 70 basis points, which was partially impacted by the timing of Med Device business sales as we reduced the backlog.

The increase in production capacity from our initiatives provided a benefit of approximately 100 basis points.

Now, these tailwinds were offset by the continuation of the headwinds we discussed during our third quarter call, including the ongoing COVID impact, increases in labor and manufacturing costs, staffing challenges, inflationary pressures, and freight costs.

For our fourth quarter, gross margin was negatively impacted by approximately 125 basis points versus the prior year period due to increased labor and manufacturing costs. Inflationary pressures on raw material prices resulted in another approximately 135 basis point negative impact.

Higher freight costs had an approximately 10 basis point negative impact. Auryon and AlphaVac accounted for approximately 40 basis point negative impact. Gross margin for the full year was 52.4%, a 150 basis point decrease compared to the previous year driven by the same headwinds that I just mentioned.

Our research and development expense during the fourth quarter of FY ‘22 was $7.9 million or 9% of sales compared to $9.1 million or 11.8% of sales a year ago. R&D expense for the year was $30.7 million or 9.7% of sales compared to $36.4 million or 12.5% of sales in the previous year.

And we continue our disciplined investment in R&D focused on driving our key technology platforms, including clinical spend for our Med Tech portfolio. For FY ‘23, we anticipate R&D spend to target 10% to 12% of sales.

SG&A expense for the fourth quarter of FY ‘22 was $37.9 million representing 43.6% of sales compared to $33 million representing 42.9% of sales a year ago. For the year SG&A expense was $133.8 million representing 42.3% of sales compared to $117.2 million representing 40.3% of sales in FY ‘21.

The increase in SG&A spending for our FY ‘22 was primarily driven by investments in our sales teams, particularly Auryon. For FY ’23 we anticipate SG&A spend to target 40% to 45% of revenue.

Our adjusted net income for the fourth quarter of FY ‘22 was $0.3 million or adjusted earnings per share of $0.01 compared to an adjusted net loss of $0.1 million or roughly breakeven adjusted earnings per share in the fourth quarter of last year.

For the full year FY ‘22 adjusted net loss was $0.2 million, which led to roughly breakeven adjusted earnings per share. Adjusted EBITDA in the fourth quarter of FY ‘22 was $6.2 million compared to $4.5 million in the fourth quarter of FY ’21. For the year adjusted EBITDA was $20.9 million compared to $19.5 million in FY ‘21.

In the fourth quarter of FY ‘22, we generated $8.6 million in operating cash at capital expenditures of $1 million in additions to Auryon placement and evaluation units of $2.7 million. As of May 31, 2022, we had $28.8 million in cash and cash equivalents compared to $23.9 million in cash and cash equivalents on February 28, 2022.

Our debt outstanding remained consistent at $25 million. As we stated, our strategic plan contemplates funding development of our growth initiatives with internally generated cash. We began FY ‘22 with $48.2 million in cash and ended FY ‘22 with $28.8 million in cash resulting in a net reduction of cash of about $19.3 million.

The earnings presentation posted this morning includes a cash walk for our FY ‘22. As illustrated in that walk, there were a number of factors during our FY ‘22 that impacted cash that we don't anticipate will recur at those same levels during FY .23. For FY ‘23, we expect net operating cash generation to be breakeven to slightly positive.

Now to provide some additional color, during FY ‘22 Auryon laser placements used $11.4 million of cash. As I mentioned, we do not expect to place as many Auryon lasers in the field in FY ‘23 as we did in FY ’22. The net increase in accounts receivables for the year exceeded the net increase in accounts payables by $11.9 million.

This was primarily driven by timing of sales related to the backlog and strong demand in the fourth quarter, driving AR balances up late in the year. As this reverses, we expect it will become a source of cash in FY ’23.

Inflation and increased labor and freight costs stemming from COVID disruptions, as well as costs associated with ramping up our Costa Rican manufacturing strategy used $8.5 million of cash during the year. We do expect inflationary pressures to persist throughout our FY ‘23, but we do not expect them to be as pronounced as during our FY ’22.

Our current outlook on inflation and labor costs, as well as the timing of certain inventory purchases is reflected in our expectation that FY ‘23 net operating cash generation is breakeven to slightly positive.

As is typical, we expect cash utilization to be higher in the early part of our fiscal year with increasing cash balances in the later part of the year. During the back half of our FY ‘23, we currently expect to achieve the aggregate revenue milestone target for Auryon, which would trigger a contingent consideration payment of $10 million.

Now this contingent consideration payment is excluded from our operating cash expectations. In the face of unprecedented market challenges, still stemming from the global COVID-19 pandemic, we’re pleased with our ability to utilize internally generated cash to remain in investment mode to drive our growth targets in our Med Tech platforms.

We will continue to balance making the investments necessary to drive growth with prudent cash management and profitability. Turning now to guidance.

We anticipate that FY ‘23 revenue will be in the range of $342 million to $348 million and we expect full year adjusted earnings per share to be in the range of $0.01 to $0.06 as we continue to invest in driving sustainable growth in our key Med Tech platforms, while also managing continued headwinds.

While the macroeconomic environment has improved in certain areas, it remains uncertain due to inflation, supply chain disruptions, the tight labor market, and pressures facing our customers. We expect FY ‘23 gross margins to be in the range of $52.5 million to $54.5 million.

As we move into FY ‘23, we are providing you with increased visibility into the gross margin profiles for our higher growth Med Tech platform and our Med Device businesses. So for FY ‘23, we expect Med Tech gross margins to be in the range of 65% to 68% and Med Device gross margins to be in the range of 45% to 48%.

I'm proud of our team's ability to continue working towards our goals despite a very challenging operating environment. We look forward to continuing this progress in fiscal 2023. With that I’ll turn it back to Jim..

Thank you, Steve. I am very proud of our performance over the past year as we work to overcome a host of macro challenges while continuing our transformation into an innovative growth oriented medical technology company. We delivered on the strategic objectives for FY ‘22 that we laid out for you in last year's Investor and Technology Day.

We provided revenue guidance last summer, and we were able to raise that guidance after Q1 and we finished the year $1 million above that increased guidance range.

We were able to report full year EPS that was within the range of original guidance despite facing macroeconomic headwinds, as well as labor and supply chain disruptions that pressured profitability and required us to lower our expectations around gross margins during the year.

As we've maintained, we remain in investment mode, prioritizing investments in our people and capabilities, both of which are foundational to our transformation. The results of these investments bore out over the course of the year and included the launch of our AlphaVac F22 and our AngioVac and AlphaVac F18 products.

We have also focused our investment on clinical trials to generate data that we believe will drive physicians and patients to our platforms. We are excited about our AlphaVac APEX pulmonary embolism study and our PRESERVE NanoKnife prostate study.

We remain on track to meet the long-term financial goals that we laid out for you last July, as evidenced by an increase to our FY 2023 revenue range and the ongoing mix shift toward our higher growth and higher margin Med Tech platforms and products.

We believe that these goals contemplate the investment needed to transform the company and introduce new products in higher growth markets while expanding indications for existing products, setting us up for sustainable growth.

Slide 12 of our earnings presentation is a great example of this, showing the incremental pipeline and platform opportunities. During our Investor and Technology Day, we described how we were transforming our company and our product portfolio to increase the aggregate total addressable markets in which we compete.

In our FY 2018 our aggregate total addressable markets were less than $1.5 billion. Through portfolio optimization, R&D and clinical initiatives, and regulatory pathway expansion our aggregate total addressable markets for FY 2023 exceeds $6 billion and we are on track to expand that to more than $8 billion in 2025.

In addition, our three Med Tech platforms offer opportunities to leverage their unique science and capabilities to expand into future market potentials that are in access of $8 million market goal that we articulated at the beginning of our strategic transformation.

Future opportunities for Auryon platform include applications in coronary procedures and thrombectomy.

Potential future applications for our thrombectomy platforms include applications in the left heart and all of our Med Tech platforms, including NanoKnife have significant growth potential in European markets, which we feel are under penetrated today.

While we believe that it is vital to serve larger, faster growing markets, our ability to compete and win is equally as important and we are building out those capabilities as evidenced by the growth of our Med Tech portfolio.

We remain committed to improving patient care and physician satisfaction through the solutions that address some of the most dynamic opportunities in healthcare and we are supporting data collection initiatives and research studies to demonstrate the clinical efficacy of our technologies.

I would like to thank everyone on the AngioDynamics team for all of their hard work during the quarter and their ongoing commitment to our mission. I'd also like to recognize global caregivers and acknowledge the challenges that they face in delivering patient care. With that I'd like to turn the call back to Rob for more questions.

Rob?.

Thank you. We'll now be conducting in the question-and-answer session. [Operator Instructions] Thank you. Our first question is coming from the line of Jayson Bedford with Raymond James. Please proceed with your questions..

Hi, good morning and thanks for all the detail. I guess, just a few from me to start.

On the fiscal 2023 guide, do you assume that the backlog gets exhausted during the year?.

Hey Jason, good morning. So I think it's similar to how we thought about FY 2024. We're going into FY or I'm sorry, Q4 of FY 2022. We're going into FY 2023 with respect to the backlog. So as we worked through the backlog in Q4, we saw some of that come down and that was beneficial to our results.

We're not fully banking on a 100% of that in our FY 2023 guide. Now, as Jim and I have talked in the past, we think that there's probably some double ordering in there as we work through this. We don't know exactly how much. So we're going to be thoughtful as we work through that backlog.

Sure, it provides a little bit of a safety net, but a lot of our FY 2023 guidance was really built from the bottom-up.

So I do expect that we're going to continue to work through that backlog over the course of the first two quarters of FY 2023, but it's not like all of what's left of that backlog we consider to be incremental to where our results were heading. We really did build it up from the bottom-up..

Okay.

And, and just thinking through the revenue bridge, is there an expectation contemplated in the guide that Oncology and Vascular Access grow year-over-year in fiscal 2023?.

Yes. As we've talked about, when you think about our Med Device businesses, we have the same view of that business that we had when we came out with our Investor and Technology Day in July.

We see that business as a 1% to 3% grower oncology, other than NanoKnife is included in that device business category, along with VA and our core angiographic catheter business. We do expect NanoKnife is going to continue to be a strong double-digit grower on top of that.

So, you could use that 1% to 3% range for all of devices and then some of the other detail that we gave you in our Med Tech products together to get to that guide that we gave you of $342 million to $348 million..

Okay.

And not to get two granular here, but when you say double-digit NanoKnife growth is that total NanoKnife or is just procedure growth?.

It's procedures. It -- primarily we're talking disposables, right? So that, solid double-digit growth primarily coming from disposables, well all coming from disposables..

Okay, helpful. Just on the thrombectomy category, you mentioned volume, the procedure challenges impacting the space.

Is this largely in reference to the staff shortage dynamic at hospitals, or are there other factors here that are impacting -- that are impacting growth?.

We do think it's largely coming from those staffing challenges at hospitals. We've talked about AngioVac in the past as being a complex procedure.

It can do things that other competitive technologies cannot do, but it does require additional staffing at the hospital when you have to bring in the perfusionist and you're working through the anesthesia and then a lot of times moving into an ICU bed.

And we think that that did weigh on procedure volume for AngioVac, as hospitals were dealing with their staffing challenges..

Okay. And then just last question and I'll get back in queue.

Just on AngioVac and the softness there, are you seeing any, and I know it’s tough here, but any AlphaVac cannibalization of AngioVac in any way?.

Jason, we're watching it. It's Jim. We expect it to be some, we built it into our models because we think the AlphaVac is so strong and powerful, it may do some things where AngioVac may have been utilized before. So we modeled that. We learned some of that in our limited market release. So we'll watch it over time, Jason.

There will be a gap between or crossover between where AlphaVac can serve and AngioVac can serve, but we're being real close with our customers. We think it's far offset by the open markets it helps us to get into, and the new patients we think AlphaVac can treat..

Okay. Thank you..

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

Great. Thanks. Good morning. Just to drill down a little more, the Auryon has, I mean, far exceeded our expectations and just curious is, looking you've been taking share, originally I think you said in the laser market, now that's moving into the other more mechanical type of devices.

But as you think about the future with less placements and increased utilization, I mean, how much utilization do you think you can see per system? How many procedures are you kind of getting with a given customer versus what you could penetrate with that customer? I was wondering if you could give us a little more flavor maybe on how - what we should expect.

I know you gave us the numbers, but how that kind of plays out executionally in the accounts?.

Yes, hi, Bill, good question. Again, we're really pleased with the Auryon business. As you know, a couple of years ago, we were attracted to this asset due to the way it operates, how it treats, and also the market potential that we saw for disruptive technology such as this, and now that's proving to be what's happening.

So back to your question, as you know, we identified over 300 lasers already placed in less than two years from our full launch. It will still continue to occur, but we'll bend it a little bit. We want to make sure now we're focused on the efficacy of each account. As you said, we have internal metrics that we track and trace.

We know by the end of every month, how many hospital customers or OBLs treated, how many patients with our product. We don't release all that information publicly, but we do have goals we’ve set there to expand that.

The reasons why Bill that's important to us, because we find that when customers get access to the technology, after a few months, they gain increase in confidence, not just in the safety profile of how our product works and keeping the vessel wall protection, integrity, and safety, our profile up to their standards, but also the power that it delivers to treat above, below the knee, and to in-stent restenosis.

And as we're now learning other things, over time as we identified on our pipeline chart.

So we'll probably not release the exact detail, Bill, as to how many procedures we do monthly by each customer, but we're really confident we’re getting not just more procedures by each customer, we're finding new and larger customers get attracted to this technology and come on board.

So that's why as Steve identified, we're not going to hold back on putting more lasers in the field. There's a strong demand, but we also want to, make sure that we can affix and see in current customers..

Okay. And then on AlphaVac, $2.2 million in the year go into $7 million to $9 million going into full market launch with the 18-French.

And just as you think about that step up from year one to year two, how much of that is with the existing 22-French or is it mostly incremental with the 18-French and just getting into different parts of the body?.

Yes, Bill good question. We're excited. The 18-French we think will be integral to get us into more areas of the body, more treatment potential for us. So the 22 is very powerful and that was our first device. But as you saw in our strategy, the 18 is really, really important to us and we thought that was the perfect device for the APEX study.

That's why we launched the APEX study. We feel the 18 can be a really important tool to treat PE. And as you know, over time Bill, we have in our plans to launch a smaller size to round out the AlphaVac potential. But again, each time we open up a smaller size, we expect that market to expand for us over time..

And just to kind of wrap it up for me with financial, just as we think of the August quarter in guidance you gave the year, but given all the puts and takes, just wondering if you give us maybe a little more granularity on how that will look sequentially from May to August? And then on the tax rate, just, I don't think you gave tax rate guidance, but if you could help us out, I think you'd been averaging in the low 12%, 13% historically on a GAAP and is that what we should kind of model going forward? Thanks..

Yes. Hey Bill, this is Steve. So, we give annual guidance, we don't give the quarterly guidance, but what I would say is we've had pretty identifiable seasonality patterns in the past. You typically see Q4 being our highest quarter, Q1 sequentially down two, up from one, three down from two, and then back to four being the highest quarter.

I would expect that you're going to see similar patterns. Now we've seen a little bit of a smoothing of that in our growth trajectory, coming from the launch of our new products. And so you may see some tempering, but all in all, I think it's a good idea to continue to expect to see some of that same seasonality as we move forward..

NOL:.

Great, thanks..

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

Hey, good morning guys. Thank you for taking the questions. I think I'll just start off with NanoKnife. You guys spent a lot of time on the call talking about prostate, more than usual.

What do you think is driving the increase in the number of prostate procedures? Is it specifically the PRESERVE study?.

Hi, Matt, thanks for the question. It's a few things going on at once. We think PRESERVE is highlighting now our commitment to the space to become a focal treatment option, but it probably goes back a little before that. I think doctors still understand the mechanism of action of NanoKnife, how it does what it does is vitally important.

And we've seen other work being published by physicians globally who've done really important work in collective data. The efficacy and the safety profile has been generated by utilizing NanoKnife and prostate outside of the U.S. So I think some of the physicians here have seen that data.

It helped encourage us to pursue the IDE that we did with the FDA. And now I have this kind of a halo effect, and I've talked to a lot of these physicians to understand it, myself and physicians believe that focal treatment needs a better option.

And they want to give patients that option for a really effective focal treatment and it hasn't really existed with the other two main platforms in the focal arena. So we're really encouraged Matt. We're seeing really big facilities come online, seeing a lot of enthusiasm around our product as it's used. It's simple to use. It's easy.

The patients get benefit pretty much immediately. So we're really excited to track the PRESERVE study. As I identified in our call, we think the intermediate risk patients are about 40%, about a 100,000 of the quarter million patients identified in the U.S.

annually that we think those folks could be potential treatment options for this focal treatment over time. And that's why we also shared with you a market in excess of maybe $700 million over time. So we're going to work towards that map. That's why we're excited. We think it gives patients that option..

And Matt, what I would add to that is, we've talked about this in the past. We really like and are excited about the opportunity of NanoKnife as a focal treatment option. And we think the timing is actually working really well today.

So as Jim mentioned, urologists are looking for a focal treatment option, something that can fit in between watchful waiting or active surveillance and going to a radical prostatectomy given all of the side effects that are typical when you go to surgery. So you've got the industry looking for a focal treatment option.

Over the last handful of years there's been significant advancements in imaging technology, which are giving those urologists the opportunity to pinpoint the lesions and maybe go after those areas with a focal treatment option that they're looking for a little bit more so than they could have in the past.

And as we've also talked about in the past, the regulatory environment has shifted where it's more conducive to going and getting an indication to go after prostate tissue, whereas in the past, if you couldn't bifurcate the difference between oncology outcomes and overall survival between that versus the efficacy of just treating tissue, getting an indication probably would have been cost as well as time prohibitive.

So all three of those things are coming together at the right time and we also think we've got the right technology given all of the experience that Jim talked about. We know that we can preserve some really good quality of life for those intermediate risk patients and so we think the timing is right..

And the docs that are doing these procedures in the prostate, are they utilizing the existing bases, the existing installed base of NanoKnife that's already placed in multiple hospital systems, are the consumables fairly interchangeable between those two procedures? And then how are you thinking about potentially differentiating between price of prostate versus a pancreas procedure?.

So the disposables are absolutely transferable. So the disposables that are out in the market today are perfectly suitable for the prostate procedures. The installed base is growing with urologists.

I mean our historical base where we have been focusing on the liver and pancreatic market were usually those hepatobiliary [ph] surgeons in the hospital, now it could be in the same hospital, but it is a little bit of a different call point with urologists.

So we see an opportunity to really expand that installed base as we drive our prostate procedures. And then the question around timing as well as pricing, there will be some differences, especially as we get through our trial and we get to the point that we have a specific indication for prostate.

Absolutely, there's going to be market-specific pricing that makes it the most appropriate for the use of those physicians as well as the patients that differentiates between an in-surgery setting versus the prostate setting..

Okay. On moving to AlphaVac, I think you said the total sales for the year were about $2.2 million.

What is implied in the FY 2023 guidance for AlphaVac F18 and F22?.

Yes, so we are got -- we said about $7 million to $9 million is what you should expect for AlphaVac in FY 2023..

Okay. And last question on the Med Tech gross margins in the 65% to 68% range, I'm assuming that's currently with supply chain and ramping.

Where does that -- where do you think that can go over the next several years as sales reps that you think they can?.

Yes. We think those high 60s is a good way to think about this business. Now there's some puts and takes. We've talked about some of the startup costs as it relates to installing the Auryon lasers are there, although that's been abating over the last year.

I talked about the depreciation expense that you're going to have running through gross margins based upon the lasers that we place, so that's going to be one factor. We had some pickups in margin with moving manufacturing of the AlphaVac lines from a third party supplier to in-house.

So we'll do all those things that you would expect us to do for kind of typical gross margin improvement over time as we see appropriate, but in the level that we gave you, we think you can model the idea of our Med Tech business at being at that level of a gross margin, you can see the difference between tech and device..

Thank you very much, guys..

Thanks, Matt..

Thank you. At this time, we've reached the end of our question-and-answer session. I'll hand the floor back to Mr. Clemmer for closing remarks..

Thanks, Rob. And thanks for those who joined us. Again we’re really proud of our company and really from our people that serve our customers who serve patients in need. We hope you'll see that we're creating value for those patients. They can get better faster through the use of our technology.

We think you'll also see we're giving our employees a place where they can shine and engage them with their talents and do what they do best here at Angio and they have a place to thrive.

And finally, for our investors, we hope you'll see we're creating a company that we think is more interesting and more valuable over time as we continue our transformation to be a high-tech, high growth profitable Med Tech company. Thanks for joining us today..

This will conclude today’s conference. Thank you for your participation. You may now disconnect your lines at this time..