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 fourth
quarter, ended September 30, 2017 and financial outlook for fiscal
2018.
Recent Highlights
- First Patient Enrolled in TRANSCEND
Pivotal Clinical Trial for SurVeil® Drug-Coated Balloon
- Global Approvals of
.014" Low-Profile
PTA Balloon Dilation Catheter
- Q4 2017 Revenue of $20.1 Million, up
10.5%
- EPS of $0.03, Non-GAAP EPS of
$0.18
“We are pleased with the execution of our whole-product
solutions strategy with the recently announced first patient
enrolled in TRANSCEND, the pivotal clinical trial for the SurVeil®
drug-coated balloon (DCB), and global approvals of our
.014" Low-Profile
PTA Balloon Dilation Catheter,” said Gary Maharaj,
President & CEO of Surmodics. “We have made meaningful
advancements on several key development and clinical initiatives
through our fiscal 2017 and look forward to expanding on those
achievements in fiscal 2018. Further, our fourth fiscal quarter was
marked by strong revenue growth and operational execution across
our business.”
Fourth Quarter Fiscal 2017 Financial ResultsTotal revenue
for the fourth quarter of fiscal 2017 was $20.1 million, as
compared with $18.2 million in the prior-year period.
Medical Device revenue was $14.7 million in the fourth quarter
of fiscal 2017, as compared with $13.7 million the year-ago period,
an increase of 7.5%. In Vitro Diagnostics revenue was $5.3 million
for the fourth quarter of fiscal 2017 as compared with $4.5 million
in the same prior-year quarter, an increase of 19.8%.
Diluted GAAP earnings per share in the fourth quarter of fiscal
2017 were $0.03 as compared with $0.20 in the year-ago period. On a
non-GAAP basis, earnings per share were $0.18 in the fourth quarter
of fiscal 2017 versus $0.26 last year. The decrease in earnings per
share in the current quarter period reflects previously announced
increased investments in research, development and other operating
expenses to support the Company’s whole-product solutions strategy,
including the SurVeil DCB and other proprietary products as well as
lower hydrophilic royalty revenue, partially offset by a $1.1
million license fee earned in the fourth quarter of fiscal
2017.
As of September 30, 2017, cash and investments were $48.3
million. Surmodics generated cash from operating activities of
$14.1 million in fiscal 2017. Capital expenditures totaled $6.4
million for fiscal 2017.
Fiscal 2018 OutlookSurmodics expects fiscal year 2018
revenue to range from $72.0 million to $75.0 million. The Company
expects diluted loss in the range of $0.50 to $0.75 per share,
which reflects the Company’s commitment to accelerate execution of
its whole-product solutions strategy with increased research and
development investments. Non-GAAP diluted loss is expected to be in
the range of $0.16 to $0.41 per share.
Conference CallSurmodics will host a webcast at 7:30 a.m.
CT (8:30 a.m. ET) today to discuss fourth 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 fourth quarter conference call will be
available by dialing 888-203-1112 and entering conference call ID
passcode 1387738. The audio replay will be available beginning at
10:30 a.m. CT on Wednesday, November 8, 2017, until
10:30 a.m. CT on Wednesday, November 15, 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 and earnings expectations for
fiscal 2018, 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 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)(Unaudited)
Three Months Ended Years Ended September
30, September 30, 2017 2016
2017 2016 (Unaudited)
(Unaudited) Revenue: Product sales $ 8,826 $ 8,133 $ 32,790
$ 30,999 Royalties and license fees 9,223 7,996 31,787 33,203
Research, development and other 2,009 2,025
8,535 7,164 Total revenue 20,058 18,154
73,112 71,366 Operating costs and expenses: Product costs
3,317 2,839 11,422 10,908 Research and development 9,713 5,303
31,817 18,498 Selling, general and administrative 5,307 5,011
20,478 18,000 Acquisition transaction, integration and other costs
— — — 3,187 Acquired intangible asset amortization 629 482 2,419
2,422 Contingent consideration expense (gain) 676 436
(127 ) 1,492 Total operating costs and expenses
19,642 14,071 66,009 54,507
Operating income 416 4,083 7,103 16,859 Other income (loss), net
(224 ) 17 (70 ) 89 Income from
operations before income taxes 192 4,100 7,033 16,948 Income tax
benefit (provision) 208 (1,456 ) (3,107 )
(6,963 ) Net income $ 400 $ 2,644 $ 3,926 $ 9,985
Basic income per share: $ 0.03 $ 0.20 $ 0.30 $ 0.77 Diluted
income per share: $ 0.03 $ 0.20 $ 0.29 $ 0.76 Weighted
average number of shares outstanding: Basic 13,041 13,088 13,153
12,998 Diluted 13,365 13,408 13,389 13,219
Surmodics, Inc. and
SubsidiariesCondensed Consolidated Balance Sheets(in
thousands)(Unaudited)
September 30, 2017 2016
Assets
(Unaudited) Current Assets: Cash and cash equivalents
$ 16,534 $ 24,987 Available-for-sale securities 31,802 21,954
Accounts receivable, net 7,211 6,869 Inventories, net 3,516 3,579
Prepaids and other 1,820 1,169 Total Current Assets
60,883 58,558 Property and equipment, net 22,942 19,601 Deferred
tax assets 4,027 5,027 Intangible assets, net 20,562 22,525
Goodwill 27,282 26,555 Other assets 897 628 Total
Assets $ 136,593 $ 132,894 Liabilities and Stockholders’ Equity
Current Liabilities 9,803 10,135 Contingent consideration, less
current portion 13,114 13,592 Other long-term liabilities
2,119 2,334 Total Liabilities 25,036 26,061 Total
Stockholders’ Equity 111,557 106,833 Total
Liabilities and Stockholders’ Equity $ 136,593 $ 132,894
Surmodics, Inc. and
SubsidiariesSupplemental Segment Information(in
thousands)(Unaudited)
Three Months Ended September 30 2017
2016 Revenue:
% of Total % of
Total
%Change
Medical Device $ 14,723 73.4% $ 13,702 75.5% 7.5% In Vitro
Diagnostics 5,335 26.6% 4,452 24.5% 19.8% Total
revenue $ 20,058 $ 18,154 10.5%
Years Ended September
30, 2017 2016 Revenue:
% of Total % of
Total
%Change
Medical Device $ 53,983 73.8% $ 53,202 74.5% 1.5% In Vitro
Diagnostics 19,129 26.2% 18,164 25.5% 5.3% Total
revenue $ 73,112 $ 71,366 2.4%
Three Months Ended
Years Ended
September 30, September 30, 2017 2016
2017 2016 Operating income: Medical Device $ 276 $
4,150 $ 6,902 $ 16,975 In Vitro Diagnostics 2,371
1,817 8,293 $ 7,115 Total segment operating income 2,647
5,967 15,195 24,090 Corporate (2,231 ) (1,884 )
(8,092 ) $ (7,231 ) Total income from operations $ 416 $
4,083 $ 7,103 $ 16,859
Surmodics, Inc. and
SubsidiariesReconciliation of GAAP Measures to Non-GAAP
AmountsSchedule of Adjusted EBITDA and Cash Flows from
Operations(in thousands)(Unaudited)
Three Months Ended Years Ended September
30, September 30, 2017 2016
2017 2016 Net Income $ 400 $ 2,644 $ 3,926 $
9,985 Income tax (benefit) provision (208 ) 1,456 3,107 6,963
Depreciation and amortization 1,549 1,170
5,555 4,875 EBITDA 1,742 5,270 12,588
21,823 Adjustments: Contingent consideration (gain)
loss (1) 676 436 (127 ) 1,492 Foreign exchange loss (2) 347 146 474
481 Gain on strategic investment (4) (43 ) (136 ) (43 ) (497 )
Asset impairment (5) 427 — 427 — Acquisition transaction,
integration and other costs (7) — — —
3,187 Adjusted EBITDA $ 3,149 $ 5,716 $ 13,319 $ 26,486
Net Cash Provided by Operating Activities $ 6,397 $ 6,671 $
14,053 $ 25,166
Estimated Non-GAAP Net Loss per Common
Share ReconciliationFor the Fiscal Year Ended September 30,
2018(Unaudited)
Fiscal 2018 Full-Year Estimate Low
High GAAP results $ (0.75 ) $ (0.50 ) Contingent
consideration adjustments (1) 0.18 0.18 Amortization of acquired
intangibles (3) 0.16 0.16
Non-GAAP results $
(0.41 ) $ (0.16 )
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 September 30, 2017
TotalRevenue
OperatingIncome
OperatingIncomePercentage
IncomeBeforeIncomeTaxes
NetIncome(8)
DilutedEPS
Effectivetax rate
GAAP $ 20,058 $ 416 2.1 % $ 192 $ 400 $ 0.03 (108.3 )%
Adjustments: Contingent consideration expense (1) ― 676 3.4 676 676
0.05 83.9 Foreign exchange loss (2) ― — — 347 347 0.03 6.8
Amortization of acquired intangible assets (3) ― 629 3.1 629 550
0.04 10.1 Gain on strategic investment (4) ― — — (43 ) (43 ) (0.00
) (0.2 ) Asset impairment (5) ― 427 2.1 427
427 0.03 1.4
Non-GAAP $ 20,058 $ 2,148 10.7 % $ 2,228
$ 2,357 $ 0.18 (5.8 )%
For the Three Months Ended
September 30, 2016
TotalRevenue
OperatingIncome
OperatingIncomePercentage
IncomeBeforeIncomeTaxes
NetIncome(8)
DilutedEPS
Effectivetax rate
GAAP $ 18,154 $ 4,083 22.5 % $ 4,100 $ 2,644 $ 0.20 35.5 %
Adjustments: Contingent consideration accretion expense (1) ― 436
2.4 436 436 0.03 (3.4 ) Foreign exchange loss (2) ― — — 146 146
0.01 (1.0 ) Amortization of acquired intangible assets (3) ― 482
2.7 482 392 0.03 (1.2 ) Gain on strategic investment (4) ― —
— (136 ) (136 ) (0.01 ) 0.8
Non-GAAP $
18,154 $ 5,001 27.6 % $ 5,028 $ 3,482 $ 0.26 30.7 %
Surmodics, Inc., and
SubsidiariesNet Income and Diluted EPS GAAP to Non-GAAP
Reconciliation – continued(in thousands, except per share
data)(Unaudited)
For the Year Ended September 30, 2017
TotalRevenue
OperatingIncome
OperatingIncomePercentage
IncomeBeforeIncomeTaxes
NetIncome(8)
DilutedEPS
Effectivetax rate
GAAP $ 73,112 $ 7,103 9.7 % $ 7,033 $ 3,926 $ 0.29 44.2 %
Adjustments: Contingent consideration gain (1) ― (127 ) (0.2 ) (127
) (127 ) (0.01 ) 0.8 Foreign exchange loss (2) ― — — 474 474 0.04
(2.9 ) Amortization of acquired intangible assets (3) ― 2,419 3.3
2,419 2,105 0.16 (7.2 ) Gain on strategic investment (4) ― — — (43
) (43 ) (0.00 ) 0.2 Asset impairments (5) ― 427 0.6
427 427 0.03 (1.5 )
Non-GAAP $ 73,112 $ 9,822
13.4 % $ 10,183 $ 6,762 $ 0.51 33.6 %
For the Year Ended
September 30, 2016
TotalRevenue
OperatingIncome
OperatingIncomePercentage
IncomeBeforeIncomeTaxes
NetIncome(8)
DilutedEPS
Effectivetax rate
GAAP $ 71,366 $ 16,859 23.6 % $ 16,948 $ 9,985 $ 0.76 41.1 %
Adjustments: Contingent consideration expense (1) ― 1,492 2.1 1,492
1,492 0.11 (3.3 ) Foreign exchange loss (2) ― — — 481 481 0.03 (1.0
) Amortization of acquired intangible assets (3) — 2,422 3.4 2,422
2,047 0.15 (2.4 ) Gain on strategic investment (4) ― — — (497 )
(497 ) (0.04 ) 0.8 Research and development tax credit (6) ― — — —
(222 ) (0.02 ) 1.1 Acquisition transaction, integration and other
costs (7) ― 3,187 4.5 3,187 2,860 0.22
(3.4 )
Non-GAAP $ 71,366 $ 23,960 33.6 % $ 24,033 $ 16,146 $
1.21 32.8 % (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 the gain recognized on the
sale of strategic investments. (5) Impairment of indefinite-lived
intangible assets. (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) 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. (8) 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.
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version on businesswire.com: http://www.businesswire.com/news/home/20171108005573/en/
Surmodics, Inc.Andy LaFrence, 952-500-7000ir@surmodics.com
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