AngioDynamics could take leverage above 3x for the right acquisition

By Devika Patel

Knoxville, Tenn., Jan. 4 – AngioDynamics Inc. is in a good position for any potential acquisitions that might come along and management is willing to take leverage above 3x to fund possible deals.

The company recently completed two acquisitions and management feels “good” about the process and believes that the balance sheet can handle another deal.

“We’ve built a company with a really strong balance sheet,” president and chief executive officer James C. Clemmer said on the company’s second quarter and six months ended Nov. 30 earnings conference call on Friday.

“We have the capability, due to the combination of free cash flow and a good debt ratio to do other [mergers and acquisitions] in the space.

“We have the financial capability to do so,” Clemmer said.

The company would be comfortable taking its leverage over 3x for the right acquisition but would look to pay down its debt over time to keep within its “comfortable zone” of about 2.5x net debt to adjusted EBITDAS.

“We’ve got two acquisitions under our belt now,” executive vice president and chief financial officer Michael C. Greiner said on the call.

“We feel really good about the process.

“We don’t have anything currently to announce in the near term.

“That being said, for the right opportunity, our current facility allows us to go up to 3.75x from a net debt to EBITDAS ratio.

“I think our comfortable zone and one that makes sense for us from a capital structure standpoint is somewhere in the 2.5x [range], but we’d be willing to go over 3x and then pay that down over an appropriate period of time,” Greiner said.

Adjusted EBITDAS in the second quarter of fiscal 2019 was $16.3 million, compared to $13.3 million in the second quarter of fiscal 2018.

Adjusted EBITDAS was $28.9 million for the six months ended Nov. 30, compared to $24.6 million for the same period a year ago.

In the second quarter, the company generated $12.2 million of free cash flow.

As of Nov. 30, the company had $42.82 million in cash and cash equivalents, compared to $74,096,000 of cash and cash equivalents as of May 31, and $145 million of debt.

The company’s net debt to adjusted EBITDAS ratio is currently 1.67x.

AngioDynamics is a Latham, N.Y.-based provider of medical devices for vascular access, surgery, peripheral vascular disease and oncology.

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