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 third
quarter, ended June 30, 2017.
Third Quarter Fiscal 2017 Highlights
- FDA approves 446 patient SurVeil® DCB
Pivotal Study
- Total Revenue of $17.8 Million
- EPS of $0.05, Non-GAAP EPS of
$0.09
- Increases financial outlook for fiscal
2017
“We are pleased with our third quarter revenue and earnings
performance which reflects continued execution toward our strategic
objectives aimed at driving our R&D initiatives forward while
simultaneously delivering strong operational results,” said Gary
Maharaj, President and CEO of Surmodics. “We are also thrilled that
we have recently received FDA approval to begin our SurVeil DCB
pivotal study, TRANSCEND. This marks a significant milestone in the
development of our drug-coated balloon program, and we expect to
begin enrollment by the end of calendar 2017.”
Third Quarter Fiscal 2017 Financial Results
Total revenue for the third quarter of fiscal 2017 was $17.8
million, as compared with $20.0 million in the prior-year period,
which included hydrophilic royalty catch-up payments that netted to
a $2.6 million benefit. Excluding these items, revenue increased
2.5% in the current-year quarter as compared with the year-ago
period.
Medical Device revenue was $12.8 million in the third quarter of
fiscal 2017, as compared with $15.7 million the year-ago period.
The decrease in revenue reflects the aforementioned net catch-up
royalty payments in the prior-year quarter. In Vitro Diagnostics
revenue was $5.0 million for the third quarter of fiscal 2017, an
increase of 16.1% from the year-ago period.
Diluted GAAP earnings per share in the third quarter of fiscal
2017 were $0.05 as compared with $0.30 in the year-ago period. On a
non-GAAP basis, earnings per share were $0.09 in the third quarter
of fiscal 2017 versus $0.41 last year. The change in earnings per
share in the current quarter period reflects planned increased
investments in research, development and other operating expenses
to support the Company’s whole-product strategy, including the
SurVeil DCB and other proprietary products, and lower hydrophilic
royalty revenue, partially offset by a net gain from adjusting
contingent consideration obligations to fair value.
As of June 30, 2017, cash and investments were $43.7 million.
Surmodics generated cash from operating activities of $7.7 million
in the first nine months of fiscal 2017. Surmodics repurchased
169,868 common shares for $4.0 million during the current quarter
under the Company’s share repurchase program. Capital expenditures
totaled $4.9 million for the first nine months of fiscal 2017.
Fiscal 2017 Outlook
As a result of revenue performance in the first nine-months of
fiscal 2017, Surmodics increased its fiscal 2017 revenue and
earning guidance. Surmodics expects fiscal year 2017 revenue to
range from $70.0 million to $72.0 million, up from previous
expectations in the range of $65.0 million to $68.0 million. The
Company expects diluted earnings (loss) in the range of $0.15 to
$0.25 per share as compared with the prior guidance of $(0.02) to
$0.08 per share. Non-GAAP diluted earnings per share guidance range
is now $0.29 to $0.39 as compared with prior guidance of $0.15 to
$0.25 per share.
Conference Call
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 3371788. The
audio replay will be available beginning at 10:30 a.m. CT on
Thursday, August 3, 2017, until 10:30 a.m. CT on
Thursday, August 10, 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 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 2017, and our
SurVeil DCB and other proprietary products, including the timing,
impact and success of the TRANSCEND clinical trial, 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 Information
In 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 Subsidiaries Condensed
Consolidated Statements of Income
(in thousands, except per share data)
(Unaudited)
Three Months Ended
Nine Months Ended
June 30, June 30, 2017
2016 2017 2016 Revenue: Product
sales $ 8,327 $ 7,512 $ 23,964 $ 22,866 Royalties and license fees
7,244 10,556 22,564 25,207 Research, development and other
2,219 1,904 6,526 5,139
Total revenue 17,790 19,972
53,054 53,212 Operating costs and
expenses: Product costs 2,914 2,777 8,104 8,069 Research and
development 7,927 4,693 22,105 13,195 Selling, general and
administrative 5,232 4,483 15,170 12,984 Acquired intangible asset
amortization 603 806 1,790 1,940 Contingent consideration accretion
expense (gain) (629 ) 555 (803 ) 1,056 Acquisition transaction,
integration and other costs — 61
— 3,192 Total operating costs and expenses
16,047 13,375
46,366 40,436 Operating income 1,743
6,597 6,688 12,776 Other income (loss), net (490 )
263 153 72 Income from
operations before income taxes 1,253 6,860 6,841 12,848 Income tax
provision (533 ) (2,926 ) (3,315 )
(5,440 ) Net income $ 720 $ 3,934 $ 3,526 $
7,408 Basic income per share: $ 0.05 $ 0.30 $ 0.27 $
0.57 Diluted income per share: $ 0.05 $ 0.30 $ 0.26 $ 0.56
Weighted average number of shares outstanding: Basic 13,155
12,995 13,190 12,969 Diluted 13,385 13,284 13,410 13,203
Surmodics, Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
(in thousands)
(Unaudited)
June 30,
September 30, 2017 2016
Assets
Current Assets: Cash and cash equivalents $ 11,350 $ 24,987
Available-for-sale securities 32,360 21,954 Accounts receivable,
net 6,994 6,869 Inventories, net 3,505 3,579 Prepaids and other
3,460 1,169 Total Current Assets 57,669 58,558
Property and equipment, net 22,250 19,601 Deferred tax assets 3,073
5,027 Intangible assets, net 21,230 22,525 Goodwill 26,791 26,555
Other assets 877 628 Total Assets $ 131,890 $ 132,894
Liabilities and Stockholders’ Equity Current Liabilities 7,544
10,135 Contingent consideration, less current portion 12,916 13,592
Other long-term liabilities 2,081 2,334 Total
Liabilities 22,541 26,061 Total Stockholders’ Equity 109,349
106,833 Total Liabilities and Stockholders’ Equity $ 131,890
$ 132,894
Surmodics, Inc. and
Subsidiaries
Supplemental Segment Information
(in thousands)
(Unaudited)
Three Months Ended June 30,
2017 2016 Revenue:
% of Total % of Total %
Change Medical Device $ 12,778 71.8 % $ 15,654 78.4 % -18.4 %
In Vitro Diagnostics 5,012 28.2 % 4,318
21.6 % 16.1 % Total revenue $ 17,790 $ 19,972 -10.9 %
Nine Months Ended June 30, 2017 2016
Revenue:
% of Total % of Total % Change
Medical Device $ 39,260 74.0 % $ 39,500 74.2 % -0.6 % In Vitro
Diagnostics 13,794 26.0 % 13,712 25.8 %
0.6 % Total revenue $ 53,054 $ 53,212 -0.3 %
Three Months Ended Nine Months Ended June 30,
June 30, 2017 2016 2017 2016
Operating income: Medical Device $ 1,403 $ 6,673 $ 6,627 $ 12,825
In Vitro Diagnostics 2,230 1,673
5,922 5,298 Total segment operating income
3,633 8,346 12,549 18,123 Corporate (1,890 ) (1,749
)
(5,861 )
(5,347
)
Total income from operations $ 1,743 $ 6,597 $ 6,688
$ 12,776
Surmodics, Inc. and
Subsidiaries Reconciliation of GAAP Measures to Non-GAAP
Amounts Schedule of Adjusted EBITDA and Cash Flows from
Operations
(in thousands)
(Unaudited)
Three Months Ended
Nine Months Ended June 30, June 30,
2017 2016 2017
2016 Net Income $ 720 $ 3,934 $ 3,526 $ 7,408 Income tax
provision 533 2,926 3,315 5,440 Depreciation and amortization
1,405 1,388 4,006
2,297 EBITDA 2,658 8,248
10,847 15,145 Adjustments: Contingent
consideration (gain) loss (1) (629 ) 555 (803 ) 1,056 Foreign
exchange loss (2) 594 135 121 569 Acquisition transaction,
integration and other costs (4) — 61 — 3,192 Gain on strategic
investment (5) — (361 ) —
(361 ) Adjusted EBITDA $ 2,623 $ 8,638 $ 10,165
$ 19,601 Net Cash Provided by Operating
Activities $ 3,393 $ 3,302 $ 7,656 $ 18,567
Estimated Non-GAAP Net Income per Common
Share Reconciliation For the Fiscal Year Ended September 30,
2017
(Unaudited)
Full Fiscal Year Estimate
Low High GAAP results $ 0.15 $
0.25 Contingent consideration adjustments (1) (0.03 ) (0.03 )
Foreign exchange loss (2) 0.01 0.01 Amortization of acquired
intangibles (3) 0.16 0.16
Non-GAAP
results $ 0.29 $ 0.39
Surmodics,
Inc., and Subsidiaries Net Income and Diluted EPS GAAP to
Non-GAAP Reconciliation
(in thousands, except per share data)
(Unaudited)
For the Three Months Ended June 30,
2016
TotalRevenue
OperatingIncome
OperatingIncomePercentage
IncomeBeforeIncomeTaxes
NetIncome(7)
DilutedEPS
Effectivetax rate
GAAP $ 17,790 $ 1,743 9.8 % $ 1,253 $ 720 $ 0.05 42.5 %
Adjustments: Contingent consideration gain (1) ― (629 ) (3.5 ) (629
) (629 )
(0.05
)
42.9
Foreign exchange loss (2) ― — — 594 594
0.05
(41.7
)
Amortization of acquired intangible assets (3) ― 603
3.4 603 524 0.04
(10.2 )
Non-GAAP $ 17,790 $ 1,717 9.7 % $ 1,821
$ 1,209 $ 0.09 33.6 %
For the Three
Months Ended June 30, 2016
TotalRevenue
OperatingIncome
OperatingIncomePercentage
IncomeBeforeIncomeTaxes
NetIncome(7)
DilutedEPS
Effectivetax rate
GAAP $ 19,972 $ 6,597 33.0 % $ 6,860 $ 3,934 $ 0.30 42.7 %
Adjustments: Contingent consideration accretion expense (1) ― 555
2.8 555 555 0.03 (3.2 ) Foreign exchange gain (2) ― — —
(234
)
(234
)
0.03
1.3 Amortization of acquired intangible assets (3) ― 806
4.0 806 667 0.05
(2.4 )
Non-GAAP $ 19,972 $ 7,958 39.8 % $
7,987 $ 4,922 $ 0.41 38.4 %
Surmodics, Inc., and Subsidiaries Net Income and Diluted
EPS GAAP to Non-GAAP Reconciliation – continued
(in thousands, except per share data)
(Unaudited)
For the Nine Months Ended June 30,
2017
TotalRevenue
OperatingIncome
OperatingIncomePercentage
IncomeBeforeIncomeTaxes
NetIncome(7)
DilutedEPS
Effectivetax rate
GAAP $ 53,054 $ 6,688 12.6 % $ 6,841 $ 3,526 $ 0.26 48.5 %
Adjustments: Contingent consideration gain (1) ―
(803
)
(1.5
)
(803 ) (803 ) (0.06 ) 6.4 Foreign exchange loss (2) ― — — 121 121
0.01 (1.1 ) Amortization of acquired intangible assets (3) ―
1,790 3.4 1,790 1,554
0.12 (9.1 )
Non-GAAP $ 53,054 $ 7,675
14.5 % $ 7,949 $ 4,398 $ 0.33 44.7 %
For the Nine Months Ended June 30, 2016
TotalRevenue
OperatingIncome
OperatingIncomePercentage
IncomeBeforeIncomeTaxes
NetIncome(7)
DilutedEPS
Effectivetax rate
GAAP $ 53,212 $ 12,776 24.0 % $ 12,848 $ 7,408 $ 0.56 42.3 %
Adjustments: Contingent consideration accretion expense (1) ― 1,056
2.0 1,056 1,056 0.04 (3.2 ) Foreign exchange loss (2) ― ― — 569 569
0.04 (1.5 ) Amortization of acquired intangible assets (3) ― 1,940
3.6 1,940 967 0.07 1.5 Acquisition transaction, integration and
other costs (4) ― 3,192 6.0 3,192 2,825 0.22 (4.5 ) Gain on
strategic investment (5) — — — (361 ) (361 ) (0.03 ) 0.6 Research
and development tax credit (6) ― ― — ― (222 )
(0.02 ) 1.2
Non-GAAP $ 53,212 $ 18,964 35.6 %
$ 19,244 $ 12,242 $ 0.88 36.4 %
(1) Represents accounting adjustments to state
acquisition-related contingent consideration liabilities at their
estimated fair value, including accretion for the passage of time
as well as adjustments to the liabilities’ fair values related to
changes in the timing and/or probability of achieving milestones
which trigger payment. The tables include contingent consideration
liability adjustments in each respective historical period and do
not include in future-period fair value changes, other than
estimated accretion expense determined at the end of the current
quarter. (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 historical 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/20170803005409/en/
Surmodics, Inc.Andy LaFrence, 952-500-7000ir@surmodics.com
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