- GAAP Revenue Growth of 9% to $15.9
Million and GAAP EPS of $0.30 versus $0.26
- Medical Device Business Revenue up
8%; IVD up 13%
- Continued Progress Developing Our
Drug Coated Balloon Platform
- Raises Fiscal 2015 Revenue and EPS
Guidance
SurModics, Inc. (Nasdaq: SRDX), a leading provider of surface
modification and in vitro diagnostic technologies to the healthcare
industry, today announced results for its fiscal 2015 third
quarter, ended June 30, 2015.
According to SurModics’ President and Chief Executive Officer
Gary Maharaj, “SurModics delivered solid revenue and earnings gains
for quarter. Both of our segments contributed, with the In Vitro
Diagnostics business continuing its strong growth trajectory with a
13% revenue increase. Even while advancing our drug coated balloon
program, non-GAAP operating margins reached 34%.”
Third Quarter Revenue and Earnings Summary
GAAP revenue for the fiscal 2015 third quarter totaled $15.9
million, compared with $14.6 million in the fiscal 2014 third
quarter. Fiscal 2015 third quarter revenue included a $0.7 million
one-time catch up royalty payment.
Diluted GAAP earnings per share in the third quarter of fiscal
2015 were $0.30 compared with $0.26 a year ago. The third quarter
fiscal 2015 earnings include a $0.04 per share benefit from the
one-time customer royalty payment. On a non-GAAP comparative basis,
quarterly earnings per share were flat year over year. Higher
revenue was primarily offset by planned research and development
expenses as well as increased legal and professional services
costs.
Medical Device Segment
The Medical Device business unit accounts for approximately
three-quarters of the Company’s revenue. This unit, which includes
hydrophilic coatings and device drug delivery technologies, posted
revenue of $11.6 million in the third quarter of fiscal 2015,
increasing 8% from the year-ago period. Third quarter 2015
hydrophilic coating royalty revenue was $7.7 million, a 6%
rise from the year-earlier period. Excluding the one-time catch up
royalty payment, hydrophilic royalty revenue decreased by 4%.
Medical Device generated $6.3 million of operating income during
the third quarter, an 8% gain from the year-ago period; operating
income benefited from the one-time royalty payment, which was
offset by higher planned costs for drug coated balloon
development.
Drug Coated Balloon Update
Maharaj said, “Our transformative strategy is to increase our
relevance to our customers by providing whole product solutions.
Our first initiative is the SurVeil Drug Coated Balloon product. We
continued our GLP study during the third quarter of fiscal 2015 and
have submitted our data and started the filings with the required
regulatory body. Based on our current assessment of the regulatory
timeline, we are targeting our first patient enrollment in the
first quarter of fiscal 2016.”
In Vitro Diagnostics Segment
The In Vitro Diagnostics (IVD) business unit accounts for
approximately one-quarter of the Company’s revenue. Revenue for the
third quarter of fiscal 2015 totaled $4.3 million, increasing
13% from the year-ago period. The IVD business unit generated $1.2
million of operating income in the third quarter of fiscal 2015,
which reflects a 22% improvement from a year ago. Operating income
benefited from higher revenue partially offset by increased legal
costs. The increase in legal costs was attributable to a lawsuit
brought by the IVD business against one of its competitors. This
lawsuit had been pending since the third quarter of fiscal 2014 and
was favorably resolved in July 2015 for a nominal amount.
Balance Sheet and Cash Flow
As of June 30, 2015, the Company had $54.1 million of cash and
investments and no outstanding debt. SurModics generated cash from
operating activities of $12.1 million in the first nine months of
fiscal 2015, compared with $12.5 million in the prior-year
nine-month period. Capital expenditures and share repurchases
totaled $0.4 million and $20.0 million, respectively, for the
fiscal 2015 nine-month period. The $20.0 million of share
repurchases resulted from the first quarter fiscal 2015 accelerated
share repurchase program that was announced in SurModics’ fourth
quarter fiscal 2014 earnings release. The accelerated share
repurchase program was finalized in July 2015 with the retirement
of an additional 89,721 common shares. In the aggregate, SurModics
repurchased 847,864 common shares under this program in fiscal
2015.
Fiscal 2015 Outlook
According to Maharaj, “We were successful in profitably growing
the business through the first nine months of fiscal 2015 while
making significant investments in our future. As a result, we are
raising our full-year 2015 revenue and earnings per share
outlook.”
SurModics now expects full-year revenue to be in the range of
$58.0 million to $60.0 million, an increase from the previous
range of $57.0 million to $60.0 million. Diluted GAAP earnings
are anticipated to be in the range of $0.95 per share to $1.00 per
share, up from the previous range of $0.85 per share to
$0.95 per share. GAAP cash flow from operating activities is
expected to range between $17.0 million and $18.0 million for
fiscal 2015, with capital expenditures estimated to range between
$1.7 million and $2.0 million.
Live Webcast
SurModics will host a webcast at 7:30 a.m. CT (8:30 a.m. ET)
today to discuss third quarter results. To access the webcast, go
to the investor relations portion of the Company’s website at
www.surmodics.com and click on the webcast icon. A replay of the
third quarter conference call will be available by dialing
888-203-1112 and entering conference call ID passcode 2926806. The
audio replay will be available beginning at 10:30 a.m. CT on
Wednesday, August 5, 2015, until 10:30 a.m. CT on
Wednesday, August 12, 2015.
About SurModics SurVeil™ Drug Coated Balloon
SurModics SurVeil Drug Coated Balloon is a product designed to
treat peripheral arterial disease. SurModics SurVeil Drug Coated
Balloon is a development stage product and is currently not
approved for sale in any country. We plan to seek regulatory
approval to initiate a first-in-human clinical trial using
SurModics SurVeil Drug Coated Balloon in late 2015.
About SurModics, Inc.
SurModics partners 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. Our mission is to
be a trusted partner to our customers by providing the most
advanced surface modification technologies and in vitro diagnostic
chemical components that help enhance the well-being of patients.
The company’s core offerings include surface modification coating
technologies that impart lubricity, prohealing, and
biocompatibility characteristics and components for in vitro
diagnostic test kits and microarrays. SurModics’ strategy is to
build on the product and technical leadership within these fields,
and expand the core offerings to generate opportunities for longer
term sustained growth. SurModics is headquartered in Eden Prairie,
Minnesota. For more information about the Company, visit
www.surmodics.com. The content of SurModics’ website is not part of
this press release or part of any filings that the Company makes
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 the Company’s
performance in the near- and long-term, including our revenue,
earnings and cash flow expectations for fiscal 2015, and our
SurVeil Drug Coated Balloon, 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 ability
to successfully develop, obtain regulatory approval for, and
commercialize our SurVeil Drug Coated Balloon product; (2) 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; (3) our ability to achieve our corporate goals; (4)
our ability to successfully identify and acquire target companies
or achieve expected benefits from acquisitions that are
consummated; (5) possible adverse market conditions and possible
adverse impacts on our cash flows, 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, 2014, 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,
non-GAAP diluted net income per share, and EBITDA. 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 Nine
Months Ended June 30, June 30, 2015
2014 2015 2014
(Unaudited) (Unaudited) Revenue: Royalties and license fees $ 7,908
$ 7,385 $ 22,566 $ 22,179 Product sales 6,583 6,067 18,082 16,632
Research and development 1,423 1,164
3,887 3,292 Total revenue 15,914
14,616 44,535 42,103
Operating costs and expenses: Product costs 2,174 2,037
6,031 5,737 Research and development 3,860 3,655 11,839 11,488
Selling, general and administrative 4,023
3,591 11,841 11,736 Total
operating costs and expenses 10,057 9,283
29,711 28,961 Operating income
5,857 5,333 14,824
13,142 Other income: Investment income, net 36 42 149 194
Other income (loss), net (40 ) 28 496
834 Other income (loss) (4 ) 70
645 1,028 Income from continuing
operations before income taxes 5,853 5,403 15,469 14,170 Income tax
provision (1,929 ) (1,729 ) (4,879 )
(4,407 ) Income from continuing operations 3,924
3,674 10,590 9,763 Loss
from discontinued operations, net of taxes ― (76 ) ―
(76 ) Net income $ 3,924 $ 3,598 $
10,590 $ 9,687 Basic income (loss) per share:
Continuing operations $ 0.30 $ 0.27 $ 0.81 $ 0.72 Discontinued
operations 0.00 (0.01 ) 0.00 (0.01 ) Net income $ 0.30 $ 0.26 $
0.81 $ 0.71 Diluted net income (loss) per share: Continuing
operations $ 0.30 $ 0.27 $ 0.79 $ 0.70 Discontinued operations 0.00
(0.01 ) 0.00 (0.01 ) Net income $ 0.30 $ 0.26 $ 0.79 $ 0.70
Weighted average number of shares outstanding: Basic 13,002
13,585 13,057 13,639 Diluted 13,279 13,813 13,324 13,891
SurModics, Inc. and Subsidiaries Condensed
Consolidated Balance Sheets
(in thousands)
June 30, September 30,
2015 2014 (Unaudited) Assets Cash and short-term
investments $ 54,108 $ 46,551 Accounts receivable 5,995 4,751
Inventories 3,464 2,817 Other current assets 1,743 1,145 Current
assets of discontinued operations ― 16 Total current assets
65,310 55,280 Property and equipment, net 12,102 13,133
Long-term investments ― 16,823 Other assets 18,575
19,653 Total assets $ 95,987 $ 104,889 Liabilities and
Stockholders’ Equity Current liabilities $ 4,254 $ 4,022 Current
liabilities of discontinued operations ― 45 Total current
liabilities 4,254 4,067 Other liabilities 2,005 2,071 Total
stockholders’ equity 89,728 98,751 Total liabilities
and stockholders’ equity $ 95,987 $ 104,889
SurModics, Inc. and Subsidiaries Condensed Consolidated
Statements of Cash Flows
(in thousands)
Nine Months Ended June 30, 2015
2014 (Unaudited) Operating Activities: Net
income $ 10,590 $ 9,687 Income from discontinued operations ― 76
Depreciation and amortization 2,083 2,054 Stock-based compensation
1,841 3,043 Gains on sales of available-for-sale securities and
strategic investments (496 ) (835 ) Net other operating activities
(28 ) (550 ) Change in operating assets and liabilities: Accounts
receivable (1,244 ) 156 Accounts payable and accrued liabilities
132 (919 ) Income taxes (221 ) (560 ) Net change in other operating
assets and liabilities (581 ) 314 Net cash
provided by operating activities from continuing operations
12,076 12,466 Investing Activities:
Purchases of property and equipment (396 ) (1,165 ) Cash
transferred to discontinued operations (45 ) (239 ) Net other
investing activities 18,885 26,030 Net
cash provided by investing activities from continuing operations
18,444 24,626 Financing
Activities: Repurchase of common stock (20,000 ) (12,544 )
Purchases of common stock to pay employee taxes (810 ) (1,114 ) Net
other financing activities 887 800 Net
cash used in financing activities from continuing operations
(19,923 ) (12,858 ) Net cash provided by continuing
operations 10,597 24,234
Discontinued operations: Net cash used in operating activities (45
) (239 ) Net cash provided by financing activities 45
239 Net cash used in discontinued operations ―
― Net change in cash and cash equivalents 10,597
24,234 Cash and Cash Equivalents: Beginning of period 43,511
15,495 End of period $ 54,108 $ 39,729
SurModics, Inc. and Subsidiaries
Supplemental Segment Information
(in thousands)
(Unaudited)
Three Months Ended June 30,
2015 2014 % Change
Revenue % of Total %
of Total Medical Device $ 11,629 73.1 % $ 10,821 74.0 % 7.5 %
In Vitro Diagnostics 4,285 26.9 3,795 26.0
12.9 Total revenue $ 15,914 100.0 % $ 14,616 100.0 % 8.9 %
Nine Months Ended June 30, 2015 2014
% Change Revenue % of Total % of Total
Medical Device $ 32,827 73.7 % $ 31,852 75.7 % 3.1 % In Vitro
Diagnostics 11,708 26.3 10,251 24.3
14.2 Total revenue $ 44,535 100.0 % $ 42,103 100.0 % 5.8 %
Three Months Ended Nine
Months Ended June 30, June 30, 2015
2014 2015 2014
Operating Income Medical Device $ 6,294 $ 5,855 $ 16,507 $
16,466 In Vitro Diagnostics 1,191 974 3,220 2,277 Corporate
(1,628 ) (1,496 ) (4,903 ) (5,601 ) Total
operating income $ 5,857 $ 5,333 $ 14,824 $
13,142
SurModics, Inc. and Subsidiaries
Supplemental Non-GAAP Information For the Three Months
Ended June 30, 2015
(In thousands, except per share data)
(Unaudited)
As Reported
Adjusted Non-
GAAP(1)
Adjustments
GAAP(2)
Revenue Royalties and license fees $ 7,908 $ (698 ) $
7,210 Product sales 6,583 6,583 Research and development
1,423 1,423 Total revenue $ 15,914 $ (698 ) $ 15,216
Operating income $ 5,857 (698 )
$ 5,159
Net income $ 3,924 $ (447 )
(3)
$ 3,477
Diluted net income per share(4) $ 0.30 $ 0.26
(1) Reflects operating results in accordance
with U.S. generally accepted accounting principles (GAAP). (2)
Adjusted Non-GAAP reflects adjustments to reduce revenue by $698
for the portion of a one-time customer royalty payment related to
periods prior to the third quarter of fiscal 2015 and as offset by
a related tax benefit of $251. (3) Reflects the impact of the
adjustments noted in (2) above. (4) Diluted net income per share is
calculated using the diluted weighted average shares outstanding
for the period presented.
SurModics, Inc. and
Subsidiaries Supplemental Non-GAAP Information For
the Nine Months Ended June 30, 2015
(In thousands, except per share data)
(Unaudited)
As Reported
Adjusted Non-
GAAP(1)
Adjustments
GAAP(2)
Revenue Royalties and license fees $ 22,566 $ (560 )
$ 22,006 Product sales 18,082 18,082 Research and development
3,887 3,887 Total revenue $ 44,535 $ (560 ) $
43,975
Operating income $ 14,824 (560 ) $
14,264
Net income $ 10,590 $ (1,082 ) (3) $ 9,508
Diluted net income per share(4) $ 0.79 $ 0.71
(1) Reflects operating results in accordance with
U.S. generally accepted accounting principles (GAAP). (2) Adjusted
Non-GAAP amount considers adjustments to royalties, net investment
income and the income tax provision for a discrete income tax
benefit in the period presented as noted in (3) below. (3) Adjusted
to reflect a reduction in revenue by $560 for the portion of a
one-time customer royalty payment related to periods prior to
fiscal 2015 and a $523 reduction in net investment income
associated with the sale of Intersect ENT shares. The adjustment to
reduce revenue reflects an income tax benefit of $202. The
reduction for net investment income did not generate a tax benefit
as there was an offsetting establishment of a capital loss
valuation reserve. Finally, the income tax provision is increased
to reflect a discrete income tax benefits of $201 associated with
the December 2014 signing of the Tax Increase Prevention Act of
2014 which retroactively reinstated federal R&D income tax
credits for calendar 2014. (4) Diluted net income per share is
calculated using the diluted weighted average shares outstanding
for the period presented.
SurModics, Inc. and
Subsidiaries Supplemental Non-GAAP Information For
the Nine Months Ended June 30, 2014
(In thousands, except per share data)
(Unaudited)
As Reported
Adjusted Non-
GAAP(1)
Adjustments
GAAP(2)
Revenue Royalties and license fees $ 22,179 $ 22,179
Product sales 16,632 16,632 Research and development 3,292
3,292 Total revenue $ 42,103 $ 42,103
Operating
income $ 13,142 $ 914 (3) $ 14,056
Income from
continuing operations $ 9,763 $ (129 ) (4) $ 9,634
Diluted net income per share from continuing operations (5)
$ 0.70 $ 0.69 (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 and a $709
reduction in net investment income associated with a contingent
milestone payment related to the sale of Vessix Vascular shares in
fiscal 2013. The income tax provision includes an adjustment
associated with the stock-based compensation awards utilizing a
36.5% incremental effective tax rate. The net investment income
adjustment did not generate a tax benefit as there was an
offsetting establishment of a capital loss valuation reserve. (3)
Reflects the pre-tax impact of the operating expense adjustment
noted in (2) above. (4) Adjusted to reflect the adjustments noted
in (2) above. (5) Diluted net income per share from continuing
operations is calculated using the diluted weighted average shares
outstanding for the period presented.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150805005339/en/
SurModics, Inc.Andy LaFrence, 952-500-7000Vice President of
Finance and Chief Financial Officer
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