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 2017 second
quarter, ended March 31, 2017.
Second Quarter Fiscal 2017 Financial Highlights
- Total Revenue of $17.5 Million, up 5%
year over year; Medical Device revenue increases 10%
- EPS of $0.04, Non-GAAP EPS of
$0.05
- Narrows financial outlook for fiscal
2017
"This was an excellent quarter, both in terms of our revenue
performance above expectations and the progress on our strategic
initiatives,” said Gary Maharaj, President and CEO of Surmodics.
"We made headway in our R&D pipeline for both our drug-coated
balloon programs and catheter and peripheral balloon devices. These
investments, we believe, will drive long-term shareholder value,”
concluded Maharaj.
Second Quarter Fiscal 2017 Financial ResultsTotal revenue
for the second quarter of fiscal 2017 was $17.5 million, compared
with $16.7 million in the prior year period, driven by strength in
the Medical Device segment.
Medical Device revenue was $12.7 million in the second quarter
of fiscal 2017, an increase of 9.7% compared to the year-ago
period. The growth stems from higher royalties as well as research,
development and other revenue. In Vitro Diagnostics revenue was
$4.8 million for the second quarter of fiscal 2017, a decrease of
6.3% from the year-ago period.
Diluted GAAP earnings per share in the second quarter of fiscal
2017 were $0.04 compared with $0.06 in the year ago period. On a
non-GAAP comparative basis, earnings per share were $0.05 in the
second quarter of fiscal 2017 versus $0.20 last year. Fiscal 2017
results include planned increased investments in research,
development and other operating expenses to support the company’s
whole-product strategy, including the SurVeil DCB.
As of March 31, 2017, Cash and Investments were $46.3 million.
Surmodics generated cash from operating activities of $4.3 million
in the first six months of fiscal 2017. Capital expenditures
totaled $2.9 million for the first six months of fiscal 2017.
Fiscal 2017 OutlookSurmodics narrowed its revenue and
earnings guidance to reflect the strength of revenue in the first
half of fiscal 2017, the expected increased research and
development expenses in the second half of fiscal 2017 to support
the Company’s whole-product solutions strategy and the contingent
consideration adjustments recorded in the second quarter of fiscal
2017. Surmodics now expects fiscal year 2017 revenue to range from
$65.0 million to $68.0 million, up from previous expectations in
the range of $64.0 million to $68.0 million. The Company now
expects diluted earnings (loss) in the range of $(0.02) to $0.08
per share as compared with the prior guidance of $(0.07) to $0.08
per share. Non-GAAP earnings per share guidance range is now $0.15
to $0.25 as compared with prior guidance of $0.18 to $0.33 per
share.
Conference CallSurmodics will host a webcast at 7:30 a.m.
CT (8:30 a.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 dialing 888-203-1112 and entering conference call ID
passcode 6030657. The audio replay will be available beginning at
10:30 a.m. CT on Thursday, April 27, 2017, until
10:30 a.m. CT on Thursday, May 4, 2017.
About Surmodics, Inc.Surmodics is 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 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 meet the most
demanding requirements. With this focus on offering total
solutions, Surmodics’ mission remains to improve the detection and
treatment of disease. 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 StatementsThis 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 2017, and our SurVeil drug-coated balloon
and other proprietary products, 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 DCB, and other proprietary products;
(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, 2016, 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 InformationIn addition to
reporting financial results in accordance with U.S. 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, EBITDA
and non-GAAP diluted net income per share, and the non-GAAP
effective tax rate. We believe that these non-GAAP measures, when
read in conjunction with the Company’s GAAP financial statements,
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
SubsidiariesCondensed Consolidated Statements of
Income(in thousands, except per share data)
Three Months Ended Six Months Ended
March 31, March 31, 2017 2016
2017 2016 (Unaudited)
(Unaudited) Revenue: Product sales $ 7,936 $ 8,173 $ 15,637
$ 15,354 Royalties and license fees 7,319 6,697 15,320 14,651
Research, development and other 2,248 1,829
4,307 3,235 Total revenue 17,503 16,699
35,264 33,240 Operating costs and expenses: Product costs
2,562 2,926 5,190 5,292 Research and development 8,208 4,868 14,178
8,502 Selling, general and administrative 5,076 4,853 9,938 8,501
Acquired intangible asset amortization 591 780 1,187 1,134
Contingent consideration accretion expense (gain) (611 ) 392 (174 )
501 Acquisition transaction, integration and other costs —
640 — 3,131 Total operating costs and expenses
15,826 14,459 30,319 27,061 Operating
income 1,677 2,240 4,945 6,179 Other income (loss), net (116
) (57 ) 643 (191 ) Income from operations
before income taxes 1,561 2,183 5,588 5,988 Income tax provision
(1,055 ) (1,362 ) (2,782 ) (2,514 ) Net
income $ 506 $ 821 $ 2,806 $ 3,474 Basic income per share: $
0.04 $ 0.06 $ 0.21 $ 0.27 Diluted income per share: $ 0.04 $
0.06 $ 0.21 $ 0.26 Weighted average number of shares
outstanding: Basic 13,220 12,969 13,207 12,956 Diluted 13,428
13,190 13,415 13,187
Surmodics, Inc. and
SubsidiariesCondensed Consolidated Balance Sheets(in
thousands)
March 31, September 30, 2017
2016 Assets
(Unaudited) Current Assets: Cash and cash
equivalents $ 11,259 $ 24,987 Available-for-sale securities 35,062
21,954 Accounts receivable, net 7,021 6,869 Inventories, net 3,347
3,579 Prepaids and other 1,679 1,169 Total Current
Assets 58,368 58,558 Property and equipment, net 20,629 19,601
Deferred tax assets 4,502 5,027 Intangible assets, net 21,118
22,525 Goodwill 25,945 26,555 Other assets 731 628
Total Assets $ 131,293 $ 132,894 Liabilities and Stockholders’
Equity Current Liabilities 6,738 10,135 Contingent consideration,
less current portion 12,945 13,592 Other long-term liabilities
2,198 2,334 Total Liabilities 21,881 26,061 Total
Stockholders’ Equity 109,412 106,833 Total
Liabilities and Stockholders’ Equity $ 131,293 $ 132,894
Surmodics, Inc. and
SubsidiariesSupplemental Segment Information(in
thousands)(Unaudited)
Three Months Ended March 31, 2017
2016 Revenue:
% of Total % of
Total
%Change
Medical Device $ 12,726 72.7% $ 11,599 69.5% 9.7 % In Vitro
Diagnostics 4,777 27.3% 5,100 30.5% -6.3 % Total
revenue $ 17,503 $ 16,699 4.8 %
Six Months Ended March
31, 2017 2016 Revenue:
% of Total % of
Total
%Change
Medical Device $ 26,482 75.1% $ 23,846 71.7% 11.1 % In Vitro
Diagnostics 8,782 24.9% 9,394 28.3% -6.5 % Total
revenue $ 35,264 $ 33,240 6.1 %
Three Months Ended
Six Months Ended March 31, March 31,
2017 2016 2017 2016 Operating income:
Medical Device $ 1,504 $ 2,322 $ 5,223 $ 6,152 In Vitro Diagnostics
2,236 1,982 3,692 3,625 Total segment
operating income 3,740 4,304 8,915 9,777 Corporate (2,063 )
(2,064 ) (3,970 ) (3,598 ) Total income from
operations $ 1,677 $ 2,240 $ 4,945 $ 6,179
Surmodics, Inc. and
SubsidiariesReconciliation of GAAP Measures to Non-GAAP
AmountsSchedule of Adjusted EBITDA and Cash Flows from
Operations(in thousands)
Three Months Ended Six Months Ended March
31, March 31, 2017 2016 2017
2016 (Unaudited) (Unaudited) Net Income
$ 506 $ 821 $ 2,806 $ 3,474 Income tax provision 1,055 1,362 2,782
2,514
Depreciation and amortization 1,328 1,388
2,610 2,297 EBITDA 2,889 3,571 8,198
8,285 Adjustments: Contingent consideration (gain)
accretion expense (1) (611 ) 392 (174 ) 501 Foreign exchange loss
(gain) (2) 201 434 (473 ) 569 Acquisition transaction, integration
and other costs (4) — 640 — 3,131 Gain on strategic investment (5)
— (361 ) — (361 ) Adjusted EBITDA $
2,479 $ 4,676 $ 7,551 $ 12,125 Net Cash Provided by
Operating Activities $ 2,312 $ 3,302 $ 4,263 $ 9,580
Estimated Non-GAAP Net Income per
Common Share ReconciliationFor the Fiscal Year Ended
September 30, 2017(Unaudited)
Full Fiscal Year Estimate Low
High GAAP results $ (0.02 ) $ 0.08 Contingent
consideration adjustments (1) 0.06 0.06 Foreign exchange gain (2)
(0.04 ) (0.04 ) Amortization of acquired intangibles (3)
0.15 0.15
Non-GAAP results $ 0.15 $ 0.25
Surmodics, Inc., and
SubsidiariesNet Income and Diluted EPS GAAP to Non-GAAP
Reconciliation(in thousands, except per share
data)(Unaudited)
For the Three Months Ended March 31, 2017
TotalRevenue
OperatingIncome
OperatingIncomePercentage
IncomeBeforeIncomeTaxes
NetIncome (7)
DilutedEPS
Effectivetax rate
GAAP $ 17,503 $ 1,677 9.6 % $ 1,561 $ 506 $ 0.04 67.6 %
Adjustments: Contingent consideration gain (1) ― (611 ) (3.5 ) (611
) (611 ) $ (0.05 ) 43.5 Foreign exchange loss (2) ― — — 201 201 $
0.02 (19.4 ) Amortization of acquired intangible assets (3) ―
591 3.4 591 512 $ 0.04 (26.6 )
Non-GAAP
$ 17,503 $ 1,657 9.5 % $ 1,742 $ 608 $ 0.05 65.1 %
For
the Three Months Ended March 31, 2016
TotalRevenue
OperatingIncome
OperatingIncomePercentage
IncomeBeforeIncomeTaxes
NetIncome (7)
DilutedEPS
Effectivetax rate
GAAP $ 16,699 $ 2,240 13.4 % $ 2,183 $ 821 $ 0.06 62.4 %
Adjustments: Contingent consideration accretion expense (1) ― 392
2.3 392 392 0.03 (9.5 ) Foreign exchange loss (2) ― — — 434 434
0.03 (7.6 ) Amortization of acquired intangible assets (3) ― 780
4.7 780 667 0.05 (6.3 ) Acquisition transaction, integration and
other costs (4) ― 640 3.8 640 640 0.05 (5.6 ) Gain on strategic
investment (5) ― — —
(361
)
(361
)
(0.02
)
3.0
Non-GAAP $ 16,699 $ 4,052 24.2 % $ 4,068 $ 2,593 $ 0.20
36.3 %
Surmodics, Inc., and
SubsidiariesNet Income and Diluted EPS GAAP to Non-GAAP
Reconciliation – continued(in thousands, except per share
data)(Unaudited)
For the Six Months Ended March 31, 2017
TotalRevenue
OperatingIncome
OperatingIncomePercentage
IncomeBeforeIncomeTaxes
NetIncome (7)
DilutedEPS
Effectivetax rate
GAAP $ 35,264 $ 4,945 14.0 % $ 5,588 $ 2,806 $ 0.21 49.8 %
Adjustments: Contingent consideration gain (1) ― (174 ) (0.5 ) (174
) (174 ) (0.01 ) 1.6 Foreign exchange (gain) (2) ― — — (473 ) (473
) (0.04 ) 4.9 Amortization of acquired intangible assets (3) ―
1,187 3.4 1,187 1,030 0.08 (8.3 )
Non-GAAP $ 35,264 $ 5,958 16.9 % $ 6,128 $ 3,189 $ 0.24 48.0
%
For the Six Months Ended March 31, 2016
TotalRevenue
OperatingIncome
OperatingIncomePercentage
IncomeBeforeIncomeTaxes
NetIncome (7)
DilutedEPS
Effectivetax rate
GAAP $ 33,240 $ 6,179 18.6 % $ 5,988 $ 3,474 $ 0.26 42.0 %
Adjustments: Contingent consideration accretion expense (1) ― 501
1.5 501 501 0.04 (3.3 ) Foreign exchange loss (2) ― ― — 566 566
0.04 (3.1 ) Amortization of acquired intangible assets (3) ― 1,134
3.4 1,134 967 0.07 (2.9 ) Acquisition transaction, integration and
other costs (4) ― 3,131 9.4 3,131 2,825 0.22 (6.4 ) Gain on
strategic investment (5) — — — (361 ) (361 ) (0.03 ) 0.9 Research
and development tax credit (6) ― ― — ― (222 ) (0.02 )
2.0
Non-GAAP $ 33,240 $ 10,945 32.9 % $ 10,959 $ 7,750 $
0.58 29.3 %
(1) Represents accounting adjustments to state
acquisition-related contingent consideration liabilities at their
estimated fair value.
(2) Foreign exchange gain and loss are related to marking
non-U.S. dollar contingent consideration to period end exchange
rates. The tables include foreign currency exchange loss or gain
recorded in each respective period and do not include forecasted
currency fluctuations in future periods.
(3) Amortization of acquisition-related intangible assets and
associated tax impact.
(4) 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. Most of these costs were not
deductible for income tax purposes.
(5) Represents the gain recognized on the sale of a strategic
investment.
(6) Represents a 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.
(7) Net income includes the effect of the above adjustments on
the income tax provision, taking into account deferred taxes and
non-deductible items. An effective rate between 34-35% was used to
estimate the income tax impact of the adjustments, except that
expenses occurring in Ireland have not been tax-affected as all tax
benefits are offset by a full valuation allowance.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170427005374/en/
Surmodics, Inc.Andy LaFrence, 952-500-7000ir@surmodics.com
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