- GAAP Revenue of $16.7 Million, up
16%, Third Consecutive Quarter of Double-Digit Growth
- GAAP EPS of $0.06, Non-GAAP EPS of
$0.20
- SurVeil™ Drug-Coated Balloon
Commences IDE Study
- Raises Revenue and Non-GAAP EPS
Guidance Ranges
SurModics, Inc. (Nasdaq: SRDX), a leading provider of medical
device and in vitro diagnostic technologies to the healthcare
industry, today announced results for its fiscal 2016 second
quarter, ended March 31, 2016.
“For the third consecutive quarter, we posted double-digit GAAP
revenue growth. We are delivering strong performance and, based on
SurModics’ first-half results, we are raising our non-GAAP earnings
guidance for fiscal 2016. Simultaneously, we are advancing our
longer-term strategic agenda to be a whole products solution
provider,” said Gary Maharaj, president and chief executive
officer. “A key recent milestone is commencement of enrollment in
the investigational device exemption (IDE) study of our SurVeil™
drug-coated balloon platform.”
Second Quarter Revenue and Earnings Summary
GAAP revenue for the fiscal 2016 second quarter totaled $16.7
million, compared with $14.4 million a year earlier. Second quarter
fiscal 2016 revenue included $1.1 million from SurModics’ recent
fiscal 2016 acquisitions. GAAP revenue for the second quarter of
fiscal 2016 also includes an estimated $1.1 million out-of-period
adjustment to correct a cumulative overstatement of royalty
revenue, of which $1.0 million related to years prior to fiscal
2016. The overstatement was not material to any prior periods.
Diluted GAAP earnings per share from continuing operations in
the second quarter of fiscal 2016 were $0.06 compared with $0.23 a
year ago. On a non-GAAP basis, earnings per share were $0.20 in the
second quarters of fiscal 2016 and fiscal 2015. Fiscal 2016 second
quarter non-GAAP earnings exclude $0.16 per share from
acquisition-related transaction costs, including integration,
contingent consideration accretion, amortization, foreign currency
transaction and other expenses.
Medical Device Segment
This segment, which includes hydrophilic coatings, device drug
delivery technologies and balloon catheter products, posted revenue
of $11.6 million in the second quarter of fiscal 2016, an increase
of 10 percent compared to the prior-year period. The gain stems
from higher reagent product sales and acquisition revenue. Fiscal
second quarter 2016 hydrophilic coating royalty and license fee
revenue was $6.7 million, a decrease of 9 percent compared to
the prior-year period. Second quarter hydrophilic royalties are net
of the previously mentioned out-of-period royalty adjustment. The
Medical Device business segment generated $2.3 million of
operating income in the second quarter compared to $4.7 million in
the prior-year quarter. Creagh Medical and NorMedix
transaction-related expenses, which include transaction costs,
intangible amortization and contingent consideration accretion, and
foreign currency transaction loss costs of $2.1 million, and sales
mix, accounted for the change in operating income.
In Vitro Diagnostics Segment
Revenue for the second quarter of fiscal 2016 totaled $5.1
million, an increase of 32 percent compared to the year-ago period.
The IVD business segment operating income in the second quarter of
fiscal 2016 more than doubled to $2.0 million from the prior-year
quarter. Operating income benefited from improved operating
leverage due to higher revenue and lower legal costs.
Update on SurVeil Drug-Coated Balloon
As previously disclosed, SurModics has commenced its IDE study
of the SurVeil drug-coated balloon. This study is part of the
Company’s strategy to expand to offer intravascular product
solutions to its medical device customers. Three clinical sites
have been identified to participate in the SurVeil early
feasibility study and up to 15 patients can be enrolled.
Balance Sheet and Cash Flow
As of March 31, 2016, the Company had $39.0 million of cash and
investments. SurModics generated cash from operating activities of
$9.4 million in the first half of fiscal 2016. Capital expenditures
totaled $1.0 million for the first half of fiscal 2016. In
addition, the Company used $25.1 million of net cash to acquire
Creagh Medical and NorMedix in the first half of fiscal 2016.
Fiscal 2016 Outlook
According to Maharaj, “Our core Medical Device and IVD
businesses had a strong first half, and we are pleased with the
contributions from our recent acquisitions, giving us confidence to
adjust our guidance.”
SurModics now expects full-year revenue to be in the range of
$63.0 million to $66.0 million, an increase in the previous range
of $62.0 million to $66.0 million. The fiscal 2016 revenue, GAAP
earnings per share and non-GAAP earnings per share guidance ranges
exclude the impacts of a $2.9 million, or $0.14 per share
after-tax, royalty payment from a customer for the period from
fiscal 2009 through fiscal 2016, that was reported to the Company
subsequent to March 31, 2016. This royalty revenue will be
recognized in the third quarter of fiscal 2016, when collectibility
is reasonably assured and completion of the earnings process
occurs, consistent with the Company’s revenue recognition policy.
SurModics is reaffirming its previous diluted GAAP earnings range
of $0.30 to $0.35 per share. Non-GAAP earnings per share is
expected to be in the range of $0.75 to $0.85, up from a range of
$0.66 to $0.75 per share. SurModics expects capital expenditures to
range from $8.0 million to $9.0 million, an increase from $4.5
million to $5.0 million, driven largely by investments in Ireland
in the second half fiscal 2016.
Live Webcast
SurModics will host a webcast at 4 p.m. CT (5 p.m. ET) today to
discuss second 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
second quarter conference call will be available by registering for
the replay at https://jsp.premiereglobal.com/webrsvp using replay
passcode 8501461. The audio replay will be available beginning at 7
p.m. CT on Monday, May 2, 2016, until 7 p.m. CT on Monday, May
9, 2016. In addition, the conference call audio and transcript will
be archived on the Company’s website following the call.
About SurModics SurVeil™ Drug-Coated Balloon
The SurVeil drug-coated balloon incorporates SurModics’ decades
of experience as a leading supplier of surface modification
technologies to the medical device industry. It includes a
SurModics-proprietary drug-excipient formulation for the balloon
coating, and a new and proprietary manufacturing process for the
coating applications. It also includes the SurModics Serene™
low-friction, low-particulate hydrophilic coating on the catheter
shaft. The SurVeil DCB is not available for sale in the U.S. and is
for investigational use only. The Company initiated a
first-in-human clinical trial using SurModics SurVeil drug-coated
balloon on April 5, 2016.
About SurModics, Inc.
SurModics is known as the global leader in surface modification
technologies for intravascular medical devices and a leading
provider of chemical components for in vitro diagnostic (IVD) tests
and microarrays. Following two recent acquisitions of Creagh
Medical and NorMedix, the Company is executing on a key growth
strategy for its medical device business by expanding to offer
total intravascular product solutions to its medical device
customers. The combination of proprietary surface technologies,
along with enhanced device design, development and manufacturing
capabilities, enables SurModics to significantly increase the value
it offers with highly differentiated intravascular solutions
designed and engineered to the most demanding requirements. With
this focus on offering total solutions, SurModics’ mission remains:
to improve the detection and treatment of disease by using our
technology to provide solutions to difficult medical device and
diagnostic challenges. 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 2016, our fiscal
2016 priorities, 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, including the timing associated with the
initiation of our first-in-human clinical trial; (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 successfully identify, acquire, and integrate target
companies, and achieve expected benefits from acquisitions that are
consummated; (4) possible adverse market conditions and possible
adverse impacts on our cash flows, and (5) 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, 2015, 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 operating
income, non-GAAP income before income taxes, 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 Six Months Ended
March 31, March 31, 2016 2015
2016 2015 (Unaudited) (Unaudited) Revenue:
Royalties and license fees $ 6,697 $ 7,383 $ 14,651 $ 14,658
Product sales 8,173 5,651 15,354 11,498 Research, development and
other 1,829 1,381 3,235
2,464 Total revenue 16,699
14,415 33,240 28,620 Operating
costs and expenses: Product costs 2,926 1,955 5,292 3,857 Research
and development 4,868 4,403 8,502 7,979 Selling, general and
administrative 4,853 3,974 8,501 7,515 Acquisition transaction,
integration and other costs 640 ― 3,131 ― Intangible asset
amortization 780 151 1,134 303 Contingent consideration accretion
expense 392 ― 501 ― Total
operating costs and expenses 14,459 10,483
27,061 19,654 Operating income
2,240 3,932 6,179
8,966 Other (loss) income, net (57 ) 599
(191 ) 649 Income before income taxes
2,183 4,531 5,988 9,615 Income tax provision (1,358 )
(1,480 ) (2,650 ) (2,950 ) Net income $ 825 $
3,051 $ 3,338 $ 6,665 Basic net income
per share $ 0.06 $ 0.24 $ 0.26 $ 0.51
Diluted net income per share $ 0.06 $ 0.23 $
0.25 $ 0.50 Weighted average number of shares
outstanding: Basic 12,969 12,944 12,956 13,092 Diluted 13,190
13,207 13,187 13,365
SurModics, Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
(in thousands)
March 31, September 30, 2016
2015 (Unaudited) Assets Cash and short-term investments $
38,989 $ 55,588 Restricted Cash 822 ― Accounts receivable 6,932
7,478 Inventories 3,335 2,979 Other current assets 1,643
1,744 Total current assets 51,721 67,789 Property and
equipment, net 13,881 12,968 Intangible assets, net 24,059 2,760
Goodwill 26,965 8,010 Other assets 5,859 7,183 Total
assets $ 122,485 $ 98,710 Liabilities and Stockholders’
Equity Current liabilities 8,309 4,700 Total current
liabilities 8,309 4,700 Contingent consideration 13,246 ―
Other liabilities 2,099 2,137 Total stockholders’ equity
98,831 91,873 Total liabilities and stockholders’ equity $
122,485 $ 98,710
SurModics, Inc. and
Subsidiaries
Condensed Consolidated Statements of
Cash Flows
(in thousands)
Six Months Ended March 31, 2016
2015 (Unaudited) Operating Activities: Net income $ 3,338 $
6,665 Depreciation and amortization 2,297 1,389 Stock-based
compensation 1,899 1,211 Contingent consideration accretion and
foreign currency transaction loss expenses 1,065 ― Deferred taxes
367 795 Gain on sales of available-for-sale securities and
strategic investments (361 ) (515 ) Net other operating activities
(154 ) (482 ) Change in operating assets and liabilities: Accounts
receivable 874 (176 ) Accounts payable and accrued liabilities 429
(609 ) Income taxes (232 ) (825 ) Net change in other operating
assets and liabilities (88 ) (623 ) Net cash provided
by operating activities from continuing operations 9,434
6,830 Investing Activities: Payments
for acquisitions, net of cash acquired (25,139 ) ― Net purchases of
property and equipment (968 ) (121 ) Cash received from sale of
strategic assets 361 ― Cash transferred to discontinued operations
― (45 ) Net other investing activities ― (209 ) Net
cash used in investing activities from continuing operations
(25,746 ) (375 ) Financing Activities: Purchase of
common stock to fund employee taxes (366 ) (741 ) Repurchase of
common stock ― (20,000 ) Net other financing activities 56
790 Net cash used in financing activities from
continuing operations (310 ) (19,951 ) Net cash used
in continuing operations (16,622 ) (13,496 )
Discontinued operations: Net cash used in operating activities ―
(45 ) Net cash provided by financing activities ― 45
Net cash provided by discontinued operations ― ―
Effect of exchange rate changes on cash 23 ― Net
change in cash and cash equivalents (16,599 ) (13,496 ) Cash and
Cash Equivalents: Beginning of period 55,588
43,511 End of period $ 38,989 $ 30,015
SurModics, Inc. and
Subsidiaries
Supplemental Segment
Information
(in thousands)
(Unaudited)
Three Months Ended March 31, 2016
2015 % Change Revenue % of Total
% of Total Medical Device $ 11,599 69.5 % $ 10,562
73.3 % 9.8 % In Vitro Diagnostics 5,100 30.5
3,853 26.7 32.4 Total revenue $ 16,699 100.0 % $ 14,415
100.0 % 15.8 %
Six Months Ended March 31, 2016
2015 % Change Revenue % of Total %
of Total Medical Device $ 23,846 71.7 % $ 21,198 74.1 % 12.5 %
In Vitro Diagnostics 9,394 28.3 7,422 25.9
26.6 Total revenue $ 33,240 100.0 % $ 28,620 100.0 % 16.1 %
Three Months Ended March 31, Six
Months Ended March 31, 2016 2015
2016 2015 Operating Income Medical
Device $ 2,322 $ 4,696 $ 6,152 $ 10,212 In Vitro Diagnostics 1,982
931 3,625 2,028 Corporate (2,064 ) (1,695 )
(3,598 ) (3,274 ) Total operating income $ 2,240 $
3,932 $ 6,179 $ 8,966
SurModics, Inc., and
Subsidiaries
Net Income and Diluted EPS GAAP to
Non-GAAP Reconciliation
For the Three Months Ended March 31,
2016
(in thousands, except per share data)
(Unaudited)
Operating
Total Operating Income Income Before
Revenue Income Percentage Income Taxes
Net Income Diluted EPS GAAP $ 16,699 $ 2,240
13.4 % $ 2,183 $ 825 $ 0.06 Adjustments: Acquisition transaction,
integration and other costs (1) ― 640 3.8 640 640 0.05 Contingent
consideration accretion expense (2) ― 392 2.3 392 392 0.03 Foreign
exchange loss (3) ― ― ― 431 431 0.03 Amortization of intangible
assets (4) ― 780 4.7 780 666 0.05 Gain on strategic investment (5)
― ― ― (361 ) (361 ) (0.03 )
Non-GAAP $ 16,699 $ 4,052 24.3 % $ 4,065 $ 2,594
$ 0.20 (1) Represents acquisition
related costs, including due diligence and integration expenses.
Due diligence and other fees include legal, tax, investment banker
and other expenses associated with acquisitions that can be highly
variable and not representative of on-going operations. (2) The
contingent consideration accretion adjustment represents accounting
adjustments to state contingent consideration liabilities at their
estimated fair value. (3) Foreign exchange loss related to marking
Euro denominated contingent consideration to market. (4) To exclude
amortization of acquisition related intangible assets and
associated tax impact. (5) Represents the gain recognized on the
sale of a strategic investment.
The above table is a summary of the pro
forma adjustments to GAAP earnings and EPS, columns may not foot
due to rounding.
SurModics, Inc., and
Subsidiaries
Net Income and Diluted EPS GAAP to
Non-GAAP Reconciliation
For the Three Months Ended March 31,
2015
(in thousands, except per share data)
(Unaudited)
Income
Operating Before Total Operating
Income Income Net Diluted
Revenue Income Percentage Taxes
Income EPS GAAP $ 14,415 $ 3,932 27.3 % $
4,531 $ 3,051 $ 0.23 Adjustments: Investment income gain on sale of
shares (1) ― ― ― (523 ) (523 ) (0.04 ) Amortization of intangible
assets (2) ― 151 1.0 151 100
0.01
Non-GAAP $ 14,415 $ 4,083 28.3 % $
4,159 $ 2,628 $ 0.20 (1)
Represents the gain recognized on the sale of a strategic
investment. (2) To exclude amortization of acquisition related
intangible assets and associated tax impact. The above table
is a summary of the pro forma adjustments to GAAP earnings and EPS,
columns may not foot due to rounding.
SurModics, Inc., and
Subsidiaries
Net Income and Diluted EPS GAAP to
Non-GAAP Reconciliation
For the Six Months Ended March 31,
2016
(in thousands, except per share data)
(Unaudited)
Operating
Total Operating Income Income Before
Revenue Income Percentage Income Taxes
Net Income Diluted EPS GAAP $ 33,240 $
6,179 18.6 % $ 5,988 $ 3,338 $ 0.25 Adjustments: Acquisition
transaction, integration and other costs (1)
―
3,131 9.4 3,131 2,825 0.22 Contingent consideration accretion
expense (2) ― 501 1.5 501 501 0.04 Foreign exchange loss (3) ― ― ―
566 566 0.04 Research and development tax credit (4) ― ― ― ― (222 )
(0.02 ) Amortization of intangible assets (5) ― 1,134 3.4 1,134 967
0.07 Gain on strategic investment (6) ― ― ― (361 )
(361 ) (0.03 )
Non-GAAP $ 33,240 $ 10,945 32.9
% $ 10,959 $ 7,614 $ 0.58 (1)
Represents acquisition related costs, including due diligence and
integration expenses. Due diligence and other fees include legal,
tax, investment banker and other expenses associated with
acquisitions that can be highly variable and not representative of
on-going operations. (2) The contingent consideration accretion
adjustment represents accounting adjustments to state contingent
consideration liabilities at their estimated fair value. (3)
Foreign exchange loss related to marking Euro denominated
contingent consideration to market. (4) Represents the estimated
discrete income tax benefit associated with the December 2015
signing of the Protecting Americans from Tax Hikes Act of 2015—
which retroactively reinstated federal R&D income tax credits
for calendar 2015. (5) To exclude amortization of acquisition
related intangible assets and associated tax impact. (6) Represents
the gain recognized on the sale of a strategic investment.
The above table is a summary of the pro forma adjustments to GAAP
earnings and EPS, columns may not foot due to rounding.
SurModics, Inc., and
Subsidiaries
Net Income and Diluted EPS GAAP to
Non-GAAP Reconciliation
For the Six Months Ended March 31,
2015
(in thousands, except per share data)
(Unaudited)
Income
Operating Before Total Operating
Income Income Net Diluted
Revenue Income Percentage Taxes
Income EPS GAAP $ 28,620 $ 8,966 31.3 % $
9,615 $ 6,665 $ 0.50 Adjustments: Research and development tax
credit (1) ― ― ― ― (201 ) (0.02 ) Investment income gain on sale of
shares (2) ― ― ― (523 ) (523 ) (0.04 ) Amortization of intangible
assets (3) ― 303 1.1 303 200
0.02
Non-GAAP $ 28,620 $ 9,269 32.4 % $
9,395 $ 6,141 $ 0.46 (1)
Represents a discrete income tax benefit 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. (2) Represents the gain recognized on the sale
of a strategic investment. (3) To exclude amortization of
acquisition related intangible assets and associated tax impact.
The above table is a summary of the pro forma adjustments to
GAAP earnings and EPS, columns may not foot due to rounding.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160502006258/en/
SurModics, Inc.Andy LaFrence, 952-500-7000Vice President of
Finance and Chief Financial Officer
SurModics (NASDAQ:SRDX)
Historical Stock Chart
From Mar 2024 to Apr 2024
SurModics (NASDAQ:SRDX)
Historical Stock Chart
From Apr 2023 to Apr 2024