- GAAP Revenue of $15.3 Million and
GAAP EPS of $0.18, with non-GAAP EPS of $0.26 from Continuing
Operations
- Design Freeze on Paclitaxel Drug
Coated Balloon Development
- Strong Cash Flow from
Operations
- $30 Million Share Repurchase Program
Authorized
- Fiscal 2015 Revenue, EPS and Cash
Flow Guidance Outlined
SurModics, Inc. (NASDAQ: SRDX), a leading provider of surface
modification and in vitro diagnostic technologies to the healthcare
industries, today announced results for its fiscal 2014 fourth
quarter.
Commenting on the Company’s performance, SurModics’ President
and Chief Executive Officer Gary Maharaj said, “Our Medical Device
segment performed very well with a 9% increase in revenue including
a 7% gain in hydrophilic coating royalty revenue, as the coronary
category returned to growth. We are pleased with this segment’s
performance in our fourth quarter given the industry headwinds. We
also achieved a significant milestone in the fourth quarter as our
team froze the design of our paclitaxel drug coated balloon,
leading us to proceed with plans for a first-in-human clinical
study, which we anticipate will occur in fiscal 2015. Further, as
we expected, SurModics’ In Vitro Diagnostics segment continued to
grow in the fourth quarter.”
Maharaj continued, “A primary goal of ours in fiscal 2014 was to
grow our existing business while concurrently advancing our
drug-coated balloon platform for future success. We are pleased
with our progress in both areas. Revenue rose 3% excluding a
special item that benefited fiscal 2013’s results. Operating margin
for the full 2014 fiscal year was a strong 32% despite significant
R&D investments. Non-GAAP earnings per share from continuing
operations rose 13% in fiscal 2014.”
Fourth Quarter Revenue and Earnings Summary
GAAP revenue for the fiscal 2014 fourth quarter totaled $15.3
million, up 7% from $14.3 million in the fiscal 2013 fourth
quarter.
Diluted earnings per share from continuing operations in the
fourth quarter of fiscal 2014 were $0.18 compared with $0.26 in the
prior-year period. The fiscal 2014 quarter included an $0.08 per
share strategic investment other-than-temporary impairment charge.
The prior-year quarter benefited from a $1.0 million, or $0.04 per
diluted share, recovery of legal fees associated with the SRI
litigation, partially offset by a $0.5 million, or $0.02 per
diluted share, restructuring charge. Non-GAAP earnings per share
from continuing operations increased 8% to $0.26 per share in
fourth quarter of fiscal 2014.
Medical Device Summary
The Medical Device business unit accounts for approximately
three-quarters of SurModics’ total revenue. This unit, which
includes hydrophilic coatings and device drug delivery
technologies, posted revenue of $11.2 million in the fourth quarter
of fiscal 2014, increasing 9% from the year-ago period. Fourth
quarter 2014 hydrophilic coating royalty revenue was $7.9 million,
up 7% from the prior-year period. Revenue growth in the fourth
quarter exceeded the 5% increase for Medical Device in fiscal 2014.
This segment generated $6.2 million of operating income during the
fourth quarter, a 16% increase from the year-ago period, primarily
reflecting revenue gains and the timing of drug coated balloon
R&D investments.
Additional fourth quarter highlights include:
- Three medical device customers launched
new products utilizing SurModics hydrophilic coatings;
- Coronary hydrophilic coatings royalty
revenue returned to growth with a 2% increase; and
- We froze the design on our paclitaxel
drug coated balloon program.
In Vitro Diagnostics Summary
The In Vitro Diagnostics (IVD) business unit accounts for
approximately one-quarter of SurModics’ total revenue. Revenue for
the fourth quarter of fiscal 2014 totaled $4.1 million, up 3%
from the year-ago period. The IVD business unit generated $1.2
million of operating income in the fourth quarter of fiscal 2014,
compared with $1.3 million in the year-ago period.
Corporate
The fourth quarter of fiscal 2014 included a $1.2 million,
or $0.08 per share, other-than-temporary impairment of the full
carrying value of our strategic investment in ThermopeutiX,
Inc.
Balance Sheet and Cash Flow
As of September 30, 2014, we had $63.4 million of cash and
investments and no outstanding debt. SurModics generated cash from
operating activities of $18.5 million in fiscal 2014, compared with
$17.8 million in the prior year. Capital expenditures and share
repurchases totaled $2.3 million and $12.5 million,
respectively, for the year ended September 30, 2014.
Stock Repurchase Program
SurModics also announced today that its Board of Directors has
authorized the repurchase of up to $30 million of its outstanding
common stock. Repurchases may be effected through open market
purchases, privately negotiated transactions, block trades,
accelerated share repurchase transactions, tender offers or by any
combination of these methods. The number of shares to be
repurchased and the timing of any repurchases will depend on
factors such as our stock price, economic and market conditions,
the relative attractiveness of corporate development opportunities
and other alternative uses of capital, and corporate and regulatory
requirements. The share repurchase authorization does not have a
fixed expiration date.
“We continue to generate strong cash flow from operations which,
combined with our current cash and investment balances, a $20
million line of credit and $175 million shelf registration, gives
us appropriate capacity to support corporate strategic growth
initiatives,” said Maharaj. “The $30 million share repurchase
authorization demonstrates our confidence in our strong cash
generation capabilities and our ongoing commitment to return excess
capital to our shareholders while enhancing value. It also provides
further financial flexibility for us to opportunistically buy back
shares.”
Fiscal 2015 Outlook
Maharaj concluded, “Based on the foundation we’ve set the past
couple of years, we enter fiscal 2015 with two clear priorities:
move ahead with a drug coated balloon clinical trial and continue
to promote our medical device and in vitro diagnostics businesses
to current and prospective customers. We bring considerable
strengths and experiences to both endeavors.”
We estimate GAAP revenue for fiscal 2015 to be in the range of
$57.0 to $60.0 million, essentially flat to up 4% over fiscal 2014.
While SurModics’ fourth quarter 2014 revenue growth was more robust
at 7%, we do not expect that kind of increase for fiscal 2015.
SurModics anticipates diluted GAAP earnings to be in the range of
$0.85 to $0.95 per share. The fiscal 2015 earnings per share
guidance includes an increase of approximately 5% to 7% in research
and development investment over fiscal 2014 levels primarily
related to drug coated balloon activities, similar SG&A
expenses to fiscal 2014 levels and a 33.0% to 35.0% income tax
rate. Our earnings per share and income tax rate guidance exclude
the impact of any investment gains or losses. GAAP cash flow from
operating activities is expected to range between $16.5 and $18.0
million for fiscal 2015. Capital expenditures for fiscal 2015 are
projected to range between $2.2 and $2.5 million. While dependent
on market conditions and business development initiatives, we may
repurchase common shares under the $30.0 million announced
repurchase authorization.
Live Webcast
SurModics will host a webcast at 4 p.m. CT (5 p.m. ET) today to
discuss fourth quarter results. To access the webcast, go to the
investor relations portion of our website at www.surmodics.com and
click on the webcast icon. A replay of the fourth quarter
conference call will be available by dialing 888-203-1112 and
entering conference call ID passcode 5965883. The audio replay will
be available beginning at 7 p.m. CT on Thursday November 6, 2014,
until 7 p.m. CT on Thursday, November 13, 2014.
About SurModics, Inc.
SurModics’ mission is to exceed our customers’ expectations and
enhance the well-being of patients by providing the world’s
foremost, innovative surface modification technologies and in vitro
diagnostic chemical components. We partner with the world’s leading
and emerging medical device, diagnostic and life science companies
to develop and commercialize innovative products designed to
improve lives by enabling the detection and treatment of disease.
Core offerings include surface modification coating technologies
that impart lubricity, prohealing, and biocompatibility
capabilities; and components for in vitro diagnostic test kits and
microarrays. SurModics is headquartered in Eden Prairie, Minnesota.
For more information about SurModics, visit www.surmodics.com. The
content of SurModics’ website is not part of this press release or
part of any filings that we make with the SEC.
Safe Harbor for Forward-Looking Statements
This press release contains forward-looking statements.
Statements that are not historical or current facts, including
statements about beliefs and expectations regarding our drug coated
balloon program, our ability to repurchase shares on terms and in
circumstances we believe to be appropriate, our cash generation
capabilities, our commitment to return excess capital to our
shareholders while enhancing value, our capital needs and
performance in the near- and long-term, including our revenue,
earnings per share and cash flow expectations for fiscal 2015, are
forward-looking statements. Forward-looking statements involve
inherent risks and uncertainties, and important factors could cause
actual results to differ materially from those anticipated,
including (1) our reliance on third parties (including our
customers and licensees) and their failure to successfully develop,
obtain regulatory approval for, market and sell products
incorporating our technologies; (2) our ability to realize the full
potential of our pipeline (including our drug coated balloon
initiatives); (3) our ability to achieve our corporate goals; (4)
possible adverse market conditions and possible adverse impacts on
our cash flows, (5) the manner, timing and other terms of share
repurchases, if any, that we may complete, and (6) the factors
identified under “Risk Factors” in Part I, Item 1A of our Annual
Report on Form 10-K for the fiscal year ended September 30, 2013,
and updated in our subsequent reports filed with the SEC. These
reports are available in the Investors section of our website at
www.surmodics.com and at the SEC website at www.sec.gov.
Forward-looking statements speak only as of the date they are made,
and we undertake no obligation to update them in light of new
information or future events.
Use of Non-GAAP Financial Information
In addition to reporting financial results in accordance with
generally accepted accounting principles, or GAAP, SurModics is
reporting non-GAAP financial results including non-GAAP net income
and non-GAAP diluted net income per share. We believe that these
non-GAAP measures provide meaningful insight into our operating
performance excluding certain event-specific matters, and provide
an alternative perspective of our results of operations. We use
non-GAAP measures, including those set forth in this release, to
assess our operating performance and to determine payout under our
executive compensation programs. We believe that presentation of
certain non-GAAP measures allows investors to review our results of
operations from the same perspective as management and our board of
directors and facilitates comparisons of our current results of
operations. The method we use to produce non-GAAP results is not in
accordance with GAAP and may differ from the methods used by other
companies. Non-GAAP results should not be regarded as a substitute
for corresponding GAAP measures but instead should be utilized as a
supplemental measure of operating performance in evaluating our
business. Non-GAAP measures do have limitations in that they do not
reflect certain items that may have a material impact on our
reported financial results. As such, these non-GAAP measures should
be viewed in conjunction with both our financial statements
prepared in accordance with GAAP and the reconciliation of the
supplemental non-GAAP financial measures to the comparable GAAP
results provided for the specific periods presented, which are
attached to this release.
SurModics, Inc. and Subsidiaries Condensed
Consolidated Statements of Income
(in thousands, except per share data)
Three Months Ended Year
Ended September 30, September 30, 2014
2013 2014 2013
(Unaudited) (Unaudited) Revenue: Royalties and license fees $ 8,098
$ 7,480 $ 30,277 $ 29,774 Product sales 6,166 5,818 22,798 22,506
Research and development 1,072 999
4,364 3,852 Total revenue 15,336
14,297 57,439 56,132
Operating costs and expenses: Product costs 2,279 2,004
8,016 7,898 Research and development 4,062 3,934 15,550 15,079
Selling, general and administrative 3,561 2,307 15,297 13,859
Restructuring charges ― 476 ― 476 Total
operating costs and expenses 9,902 8,721
38,863 37,312 Operating income
from continuing operations 5,434 5,576 18,576 18,820 Other
(loss) income: Investment income 44 81 238 268 Other income (loss)
8 (30 ) 842 1,430 Impairment loss on investments (1,184 )
(29 ) (1,184 ) (158 ) Other (loss) income, net
(1,132 ) 22 (104 ) 1,540
Income from continuing operations before income taxes 4,302 5,598
18,472 20,360 Income tax provision (1,858 )
(1,865 ) (6,265 ) (5,781 ) Income from continuing
operations 2,444 3,733 12,207 14,579 (Loss) income from
discontinued operations, net of taxes (100 ) (47 )
(176 ) 588 Net income $ 2,344 $ 3,686
$ 12,031 $ 15,167 Basic income (loss)
per share: Continuing operations $ 0.18 $ 0.26 $ 0.90 $ 1.01
Discontinued operations (0.01 ) 0.00 (0.01 ) 0.04 Net income $ 0.17
$ 0.26 $ 0.88 $ 1.05 Diluted income (loss) per share:
Continuing operations $ 0.18 $ 0.26 $ 0.88 $ 0.99 Discontinued
operations (0.01 ) 0.00 (0.01 ) 0.04 Net income $ 0.17 $ 0.26 $
0.87 $ 1.03 Weighted average number of shares outstanding:
Basic 13,593 14,169 13,632 14,464 Diluted 13,829 14,446 13,876
14,731
SurModics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
September 30, September
30, 2014 2013 (Unaudited) Assets Cash and
short-term investments $ 46,551 $ 25,707 Accounts receivable 4,751
5,332 Inventories 2,817 3,328 Other current assets 1,145 1,366
Current assets of discontinued operations 16 46 Total
current assets 55,280 35,779 Property and equipment, net
13,133 12,845 Long-term investments 16,823 32,397 Other assets
19,653 20,902 Total assets $ 104,889 $ 101,923
Liabilities and Stockholders’ Equity Current liabilities $ 4,022 $
5,837 Current liabilities of discontinued operations 45
139 Total current liabilities 4,067 5,976 Other
liabilities 2,071 2,130 Total stockholders’ equity 98,751
93,817 Total liabilities and stockholders’ equity $ 104,889
$ 101,923
SurModics, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
Year Ended September 30, 2014
2013 (Unaudited) Operating Activities: Net
income $ 12,031 $ 15,167 Loss (income) from discontinued operations
176 (588 ) Depreciation and amortization 2,715 2,886 Stock-based
compensation 3,337 2,552 Gains on sale of available-for-sale
securities and strategic investments (842 ) (1,430 ) Impairment
losses on strategic investments 1,184 158 Net other operating
activities (648 ) (77 ) Change in operating assets and liabilities:
Accounts receivable 581 (262 ) Accounts payable and accrued
liabilities (738 ) 238 Income taxes 178 (989 ) Net change in other
operating assets and liabilities 565 126
Net cash provided by operating activities from continuing
operations 18,539 17,781
Investing Activities: Net purchases of property and equipment
(2,278 ) (1,919 ) Cash transferred to discontinued operations (354
) (116 ) Net other investing activities 25,018
2,113 Net cash provided by investing activities from
continuing operations 22,386 78
Financing Activities: Purchase of common stock to fund employee
taxes (1,114 ) (39 ) Repurchase of common stock (12,544 ) (17,805 )
Net other financing activities 749 (60 ) Net
cash used in financing activities from continuing operations
(12,909 ) (17,904 ) Net cash provided by (used in)
continuing operations 28,016 (45 )
Discontinued operations: Net cash used in operating activities (354
) (116 ) Net cash provided by financing activities 354
116 Net cash provided by discontinued
operations ― ― Net change in cash and cash equivalents
28,016 (45 ) Cash and Cash Equivalents: Beginning of year
15,495 15,540 End of year $ 43,511 $
15,495
SurModics, Inc. and
Subsidiaries
Supplemental Segment Information
(in thousands)
(Unaudited)
Three Months Ended September 30,
2014 2013 % Change
Revenue % of Total %
of Total Medical Device $ 11,216 73.1 % $ 10,296 72.0 % 8.9 %
In Vitro Diagnostics 4,120 26.9 4,001
28.0 3.0 Total revenue $ 15,336 100.0 %
$ 14,297 100.0 % 7.3 %
Year Ended September
30, 2014 2013 % Change Revenue %
of Total % of Total Medical Device $ 43,068 75.0 % $
41,153 73.3 % 4.7 % In Vitro Diagnostics 14,371 25.0
14,979 26.7 (4.1 ) Total revenue
$ 57,439 100.0 % $ 56,132 100.0 % 2.3 %
Three Months Ended Year Ended September 30,
September 30, 2014 2013 2014
2013 Operating Income Medical Device $ 6,170 $ 5,316
$ 22,636 $ 21,164 In Vitro Diagnostics 1,182 1,289 3,459 4,222
Corporate (1,918 ) (1,029 ) (7,519 )
(6,566 ) Total operating income $ 5,434 $ 5,576 $
18,576 $ 18,820
SurModics, Inc. and
Subsidiaries Supplemental Non-GAAP Information For
the Three Months Ended September 30, 2014
(in thousands, except per share data)
(Unaudited)
As Reported
Adjusted Non-
GAAP(1)
Adjustments
GAAP(2)
Revenue Royalties and license fees $ 8,098 $ 8,098
Product sales 6,166 6,166 Research and development 1,072
1,072 Total revenue $ 15,336 $ 15,336
Operating
income from continuing operations $ 5,434 $ 5,434
Income from continuing operations $ 2,444 $ 1,184 (3)
$ 3,628
Diluted earnings per share from continuing
operations(4) $ 0.18 $ 0.26 (1) Reflects
operating results in accordance with U.S. generally accepted
accounting principles (GAAP). (2) Adjusted Non-GAAP amounts
consider an adjustment to increase net investment income by $1,184
associated with an impairment charge associated with our investment
in ThermopeutiX. The adjustment to increase net investment income
did not generate an income tax expense as there was an offsetting
release of a capital loss valuation allowance. (3) Reflects the
adjustment discussed in note (2) above. (4) Diluted earnings per
share from continuing operations is calculated using the diluted
weighted average shares outstanding for the period presented.
SurModics, Inc. and
Subsidiaries
Supplemental Non-GAAP
Information
For the Three Months Ended September
30, 2013
(in thousands, except per share data)
(Unaudited)
As Reported
Adjusted
GAAP(1)
Adjustments
Non-GAAP(2)
Revenue Royalties and license fees $ 7,480 $ 7,480
Product sales 5,818 5,818 Research and development 999
999 Total revenue $ 14,297 $ 14,297
Operating
income from continuing operations $ 5,576 $ (509 ) (3) $
5,067
Income from continuing operations $ 3,733 $
(294 ) (4) $ 3,439
Diluted earnings per share from
continuing operations(5) $ 0.26 $ 0.24 (1)
Reflects operating results in accordance with U.S. generally
accepted accounting principles (GAAP). (2) Adjusted Non-GAAP
amounts consider adjustments to reflect a $985 increase to
operating expenses as a result of the recovery of legal fees
associated with the SRI litigation (this amount represents the
recovery of costs incurred in periods prior to the fourth quarter
of fiscal 2013) and a $476 decrease to operating expenses
associated with fiscal 2013 fourth quarter restructuring charges
and an increase in net investment income of $28 associated with the
impairment loss on our investment in Nexeon. The income tax
provision has been adjusted for these items utilizing a 36.5%
incremental effective tax rate, excluding the net investment income
adjustment which did not generate a tax expense as there was an
offsetting release of a capital loss valuation allowance. (3)
Reflects the pre-tax impact of the operating expense adjustments
discussed in note (2) above. (4) Adjusted to reflect the items
discussed in note (2) above utilizing a 36.5% incremental effective
tax rate. (5) Diluted earnings per share from continuing operations
is calculated using the diluted weighted average shares outstanding
for the period presented.
SurModics, Inc. and
Subsidiaries Supplemental Non-GAAP Information For
the Year Ended September 30, 2014
(in thousands, except per share data)
(Unaudited)
As Reported
Adjusted
GAAP(1)
Adjustments
Non-GAAP(2)
Revenue Royalties and license fees $ 30,277 $ 30,277
Product sales 22,798 22,798 Research and development 4,364
4,364 Total revenue $ 57,439 $ 57,439
Operating
income $ 18,576 $ 914 (3) $ 19,490
Income from
continuing operations $ 12,207 $ 1,055 (4) $ 13,262
Diluted earnings per share from continuing
operations(5) $ 0.88 $ 0.96 (1) Reflects
operating results in accordance with U.S. generally accepted
accounting principles (GAAP). (2) Adjusted Non-GAAP amounts
consider adjustments to reduce operating expenses by $914
associated with acceleration of Board of Director stock-based
compensation awards, a $709 reduction in net investment income
associated with contingent milestone payments related to the sale
of Vessix Vascular shares which were sold in fiscal 2013 and a
$1,184 increase in net investment income associated with the
impairment loss on our investment in ThermopeutiX. The income tax
provision includes an adjustment associated with the stock-based
compensation awards utilizing a 36.5% incremental effective tax
rate. The adjustments to increase net investment income by $475 did
not generate an income tax expense as there was an offsetting
release of a capital loss valuation allowance. (3) Reflects the
pre-tax impact of the operating expense adjustment discussed in
note (2) above. (4) Adjusted to reflect the adjustments discussed
in note in (2) above. (5) Diluted earnings per share from
continuing operations is calculated using the diluted weighted
average shares outstanding for the period presented.
SurModics, Inc. and Subsidiaries Supplemental Non-GAAP
Information For the Year Ended September 30, 2013
(in thousands, except per share data)
(Unaudited)
As Reported
Adjusted
GAAP(1)
Adjustments
Non-GAAP(2)
Revenue Royalties and license fees $ 29,774 $ (570 )
(3) $ 29,204 Product sales 22,506 22,506 Research and development
3,852 3,852 Total revenue $ 56,132 $
(570 ) (3) $ 55,562
Operating income $ 18,820
$ (691 ) (4) $ 18,129
Income from continuing
operations $ 14,579 $ (1,987 ) (5) $ 12,592
Diluted earnings per share from continuing operations(6) $
0.99 $ 0.85 (1) Reflects operating results in
accordance with U.S. generally accepted accounting principles
(GAAP). (2) Adjusted Non-GAAP amounts consider adjustments to
reduce royalty revenue associated with a one-time $570 catch up
payment received in the first quarter of fiscal 2013; a $597
increase to operating expenses as a result of the recovery of legal
fees associated with the SRI litigation (this amount represents the
recovery of costs incurred in periods prior to fiscal 2013); a $476
decrease to operating expenses associated with fiscal 2013 fourth
quarter restructuring charges; a reduction in net investment income
of $1,136 associated with the sale of Vessix Vascular and OctoPlus
shares which aggregated $1,294, offset by impairment losses on our
investments in ViaCyte and Nexeon, which aggregated $158;
adjustment to the income tax provision for these items, excluding
the net investment gain which did not generate a tax benefit, as a
capital loss carryforward valuation allowance was recorded,
utilizing a 36.5% incremental effective tax rate as well as
adjustments to increase the income tax provision for $412 of
discrete income tax benefits recognized for the period as discussed
in detail in note (5) below. (3) Reflects the pre-tax impact of the
$570 one-time royalty revenue catch up payment discussed in note in
(2) above. (4) Reflects the pre-tax impact of the $570 one-time
royalty revenue catch up payment, the $597 recovery of legal fees
and the $476 of restructuring charges discussed in note (2) above.
(5) Adjusted to reflect the items discussed in note (2) above as
well as non-recurring discrete income tax benefits of $261
associated with the realization of capital loss carrybacks and $151
from the January 2013 signing of the American Taxpayer Relief Act
of 2012 which retroactively reinstated federal R&D tax credits
for calendar 2012. (6) Diluted earnings per share from continuing
operations is calculated using the diluted weighted average shares
outstanding for the period presented.
SurModics, Inc.Andy LaFrence, 952-500-7000Vice President of
Finance and Chief Financial Officer
SurModics (NASDAQ:SRDX)
Historical Stock Chart
From Aug 2024 to Sep 2024
SurModics (NASDAQ:SRDX)
Historical Stock Chart
From Sep 2023 to Sep 2024