Good morning, and welcome to the AngioDynamics Fourth Quarter and Fiscal Year 2019 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference call is being recorded. The news release detailing the fourth quarter and fiscal year 2019 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 2020. 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. 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 & 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. Good morning everyone and thank you for joining us today for AngioDynamics 2019 fiscal fourth quarter and our full year earnings call. Joining me today on the call is Michael Greiner, AngioDynamics’ Executive Vice President and Chief Financial Officer who will provide a detailed analysis of our fiscal fourth quarter and our full-year financial performance. But first, I'd like to begin by providing an overview of our operating and execution highlights for the year, and further describe our vision for what lies ahead for AngioDynamics. Shortly after arriving at AngioDynamics, I defined a near-term focus for the company that included improving operational efficiency, increasing gross margins, and optimizing working capital as well as developing a robust R&D process. Those shorter term objectives were critical to establishing a framework and foundation upon which we could build our longer term vision and strategy. As we exited fiscal year 2018, we were energized by the significant progress we have made against those operational goals positioning us to begin formulating a more defined strategy for our portfolio. Specifically, we identified the products that we believe were both differentiated and positioned for growth and that we could complement with M&A and our improved R&D processes. We also identified those products for which we may not be the most effective long-term owners. As you saw throughout fiscal year 2019, we have taken the first meaningful steps towards optimizing our portfolios with a specific focus on oncology and thrombus management. In the early part of the fiscal year, we completed the acquisitions of BioSentry and RadiaDyne, adding three exciting technologies from these acquisitions. The BioSentry Tract Sealant, the Alatus, and ImmobiLoc balloon stabilizing products and the OARtrac radiation dose monitoring technology, all of which will contribute meaningfully within our oncology portfolio. The second half…

Thanks, Jim, and good morning. Before I begin, please remember that we post a presentation on our Investor Relations website summarizing the key items associated with our quarterly and year end results as well as our financial guidance. This year end, we have also provided slides to support the NAMIC divestiture including showing pro forma financials for fiscal year 2019 which exclude the contribution from the NAMIC assets that we divested on May 31, 2019. Unless otherwise noted, all results discussed on this call are on actuals basis and include the contribution of our NAMIC fluid management business for full-year fiscal 2019. Our net sales for the fourth quarter of fiscal 2019 were $96.3 million representing year-over-year growth of 9% when including our RadiaDyne and BioSentry acquisitions and 5.2% on an organic basis. The 12 months ended May 31, 2019, net sales were $359.5 million representing total year-over-year growth of 4.4% and organic growth of 1.6%. At the product level, our Solero dialysis catheter ports fluid management and edge of that products exhibited solid growth during the quarter. The soft set lowered [indiscernible] capital sales and continued slower sales of our radio frequency ablation products has market adoption shifts through our microwave ablation technology. Our VIT business grew 6.9% year-over-year, a strong growth in the AngioVac and fluid management product lines along with continued strength in our core business were partially offset by anticipated decline in the venous insufficiency business. We continue to see signs that our venous insufficiency business is stabilizing and currently anticipate that we will return to modest growth this year. Also related to our venous insufficiency business, we noted the discontinuance of our Solero product line we announced the divestiture of the NAMIC assets in April. The revenue associated with that product in fiscal year 2019…

Thank you. We’ll now be conducting the question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of Jason Mills with Canaccord Genuity. Please proceed with your question.

Hi Jim and Brent, can you hear me okay?

Hi Jason. Good morning.

Good morning. So a couple of look back questions Jim and Mike, and maybe a couple of look forward questions, and then I'll get back in queue. Just looking back at the quarter and thanks for the pro forma information Mike, it's helpful to compare against your guidance. But I guess the question ultimately is, in which areas do you expect or you factor in an acceleration, because when we back out fluid management and the acquisitions in the fourth quarter, the growth was fairly flattish not maybe a little bit negative and you're calling for mid-single digit growth, some of which is not organic with the acquisitions, but maybe you could hash that out a little bit where you're expecting to see acceleration in growth and your confidence in that. And then looking forward, I'll just ask my questions all at once here, and then shut up. From a cash flow perspective, maybe talk about you didn’t give cash flow guidance as you usually do, understanding that you've sold the Fluid Management business, so a lot of cash flow came in from that, but do you have anything to say there? And then lastly is on the AngioVac business, huge opportunity. I agree completely with the opportunity there. I'm just personally of the mind that I think new randomized data will be necessary ultimately to change the paradigm within treating thrombus in the venous system. And I'm just wondering sort of what your plans are, commitments are with respect to investing in the clinical side of the AngioVac franchise? Thanks a lot for taking the questions.

Yeah. So Jason, this is Jim, I'll start and then Michael can go to the cash flow pieces. So for 2020 and we have -- we gave investors a three-year look at our three-year CAGR back when we announced the NAMIC divestiture. But I'll speak primarily about 2020. So we expected all three of our GBUs to grow this year. Look at oncology, which will have the largest growth for us. Our two new acquisitions, RadiaDyne and BioSentry will also grow and are growing above the base that we bought them with. So we have good growth on top of there. And remember we announced in January we expanded our sales force, did a full sales force training for this group, but now they have the full bag to carry. We'll also see Solero and NanoKnife grow this year about equally. We expect they have got really good momentum in Solero, our Microwave, doing a really good job. And we know it's very effective, again competing against Medtronic and J&J. If our Microwave wasn't as good we wouldn't have a chance. It's got to be better and it is. So now we're doing a better job with our selling and the marketing programs getting in front of the right key clinicians and we're getting in front of big hospitals, Jason. Before, AngioDynamics used to play on the sidelines, now we're not. The selling and marketing teams are sitting there with the Medtronic and J&J reps, talking to physicians about the quality are sitting there with the Medtronic and J&J reps talking to physicians about the quality of our Solero and why it's different why it should be used. So again, oncology will grow in those four areas about equally. NanoKnife, Solero, BioSentry and RadiaDyne all four will drive growth. Secondarily…

Yeah. So you want to use EBITDAs as a proxy, we had $30 million in a pro forma basis as we talked about back in April that was about 50% of our EBITDA. So you can assume that the target further we had internally is somewhere in that $30 million range, just a little south of that $30 million. And then on free cash flow, we will be free cash flow positive, but as we move out of our Glens Falls facility in Queensbury that we know, we're going to have some inventory build to make sure that that move is goes well, and we have some other things that we just weren't comfortable forecasting. So we didn't put out free cash flow forecast. But we will be free cash flow positive. We will be able to fund all of our internal objectives and our CapEx as it has been in the past few years will be in that $3 million to $4 million range.

Okay. Thank you for all the detail. I’ll get back in queue.

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

Hi. Good morning. And I apologize if some of these questions are a little redundant on this part of the call, but I guess just to start, if you backed out products that you've sold Fluids Management and then, or distinction you’ve done at Solero, what was pro forma growth ex-deals in the fourth quarter?

One second Jason. The fourth quarter, the fourth quarter was out VIT Asclera in was 7.5% and without Asclera watch your back again in a moment.

Okay. I'm just looking for kind of pro forma growth as we look at the implied guidance for 2020, how does that compare to what you did in the fourth quarter. So can I get a number I'll ask my next question and maybe get back to this. In terms of NanoKnife probes I think you mentioned they were down year-over-year and realized the direct trial has just started and maybe the comp issue, but why we are not seeing growth in procedures?

So the quarter was down for the year, they were up station on probes. So procedure growth right now has been kind of flat because in the U.S. we just redid our sales force as I mentioned, we're selling the products differently as you know for year the AngioDynamics placed a high kind of bar of selling in our NanoKnife machines, the generators. We've sold over 300 worldwide and over 100 in the U.S. and we have very low compliance though to the usage of those generators. The reason is because we have no indications to support the training and used by physicians to treat people in these spaces. So as we talk to you about that we revamped how we're treating this product, the NanoKnife pancreatic cancer ID was the most important first step, where we put our money where our mouth is supporting the clinical programs necessary to get the IBE approval for this direct study. So Jason, we're just marketing and the product differently. We're not worried about selling machines. We want to get adoption of the machines that are used and do in a way that we can support the physicians to treat patients who have specific cancer indications. So as we talk to you Panc is number one, the pancreatic cancer patients needa standard of care that doesn't exist today, we think we have it. We want to prove that with our study. Number two, we talked about prostate. Again we think there are some significant side effects that we can take away with the use of Nanoknife to treat those men that face prostate cancer. Then we'll talk to you about other indications. So right now Jason, we've not put a high push on selling either NanoKnife units, the generators or even pushing problems. We're trying to get ourselves aligned, treat these cancers in the right way because the market opportunities are very dynamic when we do that properly.

And when you look at the extreme growth in 2020 from NanoKnife, is the growth…

Yeah.

…more from capital or probes?

It’ll be a piece of both, but it's about two thirds probes, one-third capital the growth we expect.

Right. And then maybe just finishing off on oncology, Solero up 9, Micro down 1. Do you think this is a good proxy for market growth or do you feel like you're gaining or losing share in this market?

No. Don't forget too Solero is little messy with the comparables over the course of the full year because of the Solero. We’re growing [indiscernible] with Solero right now. We’re growing our business. We feel we’re taking share in the market. We’re very confident of that. Michael…

Yeah. I got the numbers that you're looking for. So, Solero was actually down in the fourth quarter from last year. So excluding fluid management and Solero, we grew at 9.3% in the fourth quarter and 3.9% from full year. So that gives you a run [indiscernible] speculation probably in the next year.

Okay. But Michael, if I back out the acquired businesses that 9% goes to where? I'm just looking for I guess a pro forma organic growth in the fourth quarter. I apologize if it’s too much there.

We’ll have to give you that number, Jason.

Yeah. That’s fine. Okay. Okay. I'll get back in the queue. Thank you.

Sure.

The next question is from the line of Matthew Hewitt with Craig-Hallum. Please proceed with your question.

Good morning. I guess just a couple, first off, on the gross margin side. How much of that improvement is going to be from a mix perspective with the Fluid Management divested versus how much of it is based upon some of the improvements and enhancements as you’ve spent the past year or so on? And then the second question I have, as you look at the dramatically improved balance sheet, how should we be thinking about how much of that cash you're going to deploy by investing in existing platforms internal projects and whatnot versus maybe some small tuck-in type acquisitions? That's it for me. Thank you.

Great. Two great questions. The M&A standpoint or the balance sheet positioning, we are in a position from an operating cash flow standpoint that all internal funding needs whether that be selling and marketing or R&D are generated by our own cash flow, so there will be no balance sheet requirements, so to speak to fund our internal investments. So all of that dry power is available for tuck-in M&A. On the gross margin side, if you look at the Slides 6 and 7 in the supplemental deck you'll see that the pro forma gross margin for full year 2018 was 55% and fully year 2019 was 57.6%. So there is significant growth in gross margin due to efficiencies from the plant efforts. When you look at the fourth quarter pro forma results you'll see we had 58.1% for 2019. So when you look at a full year 58% to 59% for gross margin for FY 2020, which we just discussed for our guidance. You'll see that we have currently a run rate of 58%, and we believe there's additional productivity gains to be had in FY 2020 that'll get that hopefully somewhere in the middle of that 58% to 59% guidance target that we have.

That's great. Thank you.

[Operator Instructions] The next question comes from the line of Matthew Mishan with KeyBanc. Please proceed with your questions.

Okay. Great. Thank you for taking the questions.

Good morning, Matt.

Morning. What are you guys – what are you with execution on the M&A you've completed, specifically are you at or above or below expectations you thought for BioSentry and RadiaDyne at this point versus when you bought them?

Yeah. We're right in consistent from the performance standpoint on our overall results for BioSentry and RadiaDyne. The mix of which products are contributing to that is a little bit different than we thought in our modeling. But we do have a nice run rate going into fiscal year 2020, and as we discussed in the prepared remarks that would indicate that we’ll have approximately a 50% increase in our revenue associated with both of those acquisitions which again was – is very consistent with the model that we put up when we first did the acquisition, internal model.

Is it fair to say that [indiscernible] is the product that that's slightly below expectations at this point, and what can change that, because that's the product that had the most upside from the deals?

Yeah, Matt, you did right. So [indiscernible] wasn't as ready as we thought it might have been. So we've taken a step backwards a little bit just to make sure that we have the supply chain security, the robustness of the design, ready to do what it can do in the marketplace, number one. The number two, retraining the sales force to sell the product. It's a unique disruptive product. We truly believe it's going to change how physicians can diagnose and treat when they're getting radiation therapy treatments to people. They need and they seek real time dose monitoring information. It's not available in any other source. We think the work that was done by RadiaDyne is very, very impressive. They did development and design product was impressive. So we had to do a couple of things to get ready for prime time that's what we've done here from the operational side. So soon coming into next couple of months, we'll have really the line ready for the commercial launch that we expect and we need. So to answer your first question you're right we've had revenue we thought OARtrac would have contributed already and it hasn't. We still think it is the largest opportunity of the three products that we bought in these two deals. But today it's been a little slower, but on the BioSentry side and the RadiaDyne balloons bit a little above expectations. So right out of the gate we're in good shape and we have high growth as Michael said, expectations for fiscal 2020 and we believe will achieve that.

And sticking with oncology, it's been a couple of years since you guys talked about that the NICE recommendation. Where are you in the UK? Where are you at in that process? I mean, are they at the point of reevaluating anything around that recommendation?

So, Steve -- Matt we have Steve Trowbridge here to join us, and Steve can give an answer for you.

So we continue to work with NICE. They are in the process of assessing all of the data that we do have and we expect over the course of the next couple of years to really get a full throated endorsement from NICE. If you remember they have been moving the ball forward and we've been continuing to gain additional data and uptick in our procedures in the UK, but they're still looking for the results of a trial and really our DIRECT study will provide that randomized controlled data that that NICE has been looking forward for the final full throated endorsement.

Okay. It’s fair. And then Michael on the gross margin side, when you gave the FY 2020 gross margin guidance, your base 2019 was 54% to 55%. You ended up coming somewhere around like 53.7% to 53.8% for the year. Why should FY 2020 not be moving down by 70 basis points as well?

Yeah. No, great question. So when you look at our pro forma's math in the slide deck, you'll see that our fourth quarter pro forma gross margin was 58.1%. So excluding them, we’re already at 58%. Now obviously different quarters have different mix, and so you can't just use that as a proxy run rate per se. But we do think with some of the productivity programs that we have as well as what we believe will be our mix when you think about NanoKnife and AngioVac and some of those product families and the growth that we believe we'll have in 2020. We comfortably feel that 58% to 59% as well and for the full year next year.

Okay. Can you talk about the mix driving the lower gross margin, just talk about pricing and I'm sorry if I missed it. But what particulars are you seeing price deterioration or decline, sorry?

So, we’re seeing a little bit around the portfolio, we saw some in core some of our VA products, none of them was significant, it was against our expectation. So, as we thought about our 54% to 55% and what we thought we would end in the fourth quarter, a little bit – 0.5% a half percent here, 0.75% three quarters percent there add up across the quarter and across the portfolio but there’s no significant headwind as we enter in the FY 2020 on price but we did have an impact in quarter. And then obviously we – management which is our lowest family from a gross margin standpoint in the low 40syou know had a very nice quarter on the heels of our FM sale announcement and that had obviously an impact in the quarter and obviously had some impact for the full year as well.

Okay. So congratulations on all the things you guys accomplished this year.

Thanks, Matt.

Thank you. At this time, I'll turn the floor back to Mr. Jim Clemmer for closing remarks.

Thanks, Rob, and I want to thank our employees again. AngioDynamics is going through a transformation and we've transformed our portfolio this year. We spent time prior to this working on our operational improvements, building the R&D process, adding talented members to our team and now we know where we need to go from a portfolio perspective. This past year was unique as we're able to divest one large asset, buy two others really upgrade who we are. We know that we can't play in the commodity or supply types of business nearly as well as we can play with differentiated special technologies. When you look at what we can do with [ph] Solero with NanoKnife, with AngioVac, we can make a measurable difference in the outcomes of patients who need care. We can also drive value in our company and that's what we're focused on doing. So here the AngioDynamics, we think we had a really good year in 2019. We're able to hit the metrics we put forth to our investors about how to grow our company and change our company, all the while working on those FDA expansions that we're looking for, getting the IDE approvals now two of them under our belt. So we've really worked hard to transform our company. We look forward now to working hard to prove to you that we can become a growth company going forward and support our indications and support our direction with performance and numbers. We look forward to doing that. Thank you for joining us on the call today.

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