- GAAP Revenue Anticipated to Range
from $60.0 Million to $64.0 Million
- Expects GAAP Earnings Per Share of
$0.38 to $0.43 per share
- Expects Non-GAAP EPS of $0.66 to
$0.75 per share
SurModics, Inc. (Nasdaq:SRDX), a leading provider of medical
device and in vitro diagnostic technologies to the healthcare
industry, today announced updated guidance for the year ending
September 30, 2016. The revenue and earnings per share ranges
incorporate the acquisition of Creagh Medical, a developer and
manufacturer of percutaneous transluminal angioplasty (PTA) balloon
catheters.
According to Gary Maharaj, SurModics president and chief
executive officer, “Our recent acquisition provides the key
foundation to accelerate our transformation into a whole products
solutions medical device company. With the Creagh Medical
acquisition, SurModics plans to develop a robust pipeline of
interventional cardiology devices. Integrating Creagh Medical is a
top priority for us in fiscal 2016. Moreover, we will advance our
drug-coated balloon platform with a first-in-human clinical trial,
as we also continue to drive our core medical device and in vitro
diagnostics businesses. Our objective is to generate consistent
revenue growth in the mid-teens, on a constant currency basis, and
EBITDA margins greater than 30% within three years.”
SurModics now estimates GAAP revenue for fiscal 2016 to be in
the range of $60.0 million to $64.0 million. This includes an
aggregate of $3.5 million to $4.5 million from the acquisition of
Creagh Medical. Diluted GAAP earnings are expected to range from
$0.38 to $0.43 per share, which includes $4.4 million to $5.0
million, or $0.27 to $0.31 per share, of integration costs, as well
as amortization and contingent consideration accretion expenses
associated with the acquisition. Because the final purchase
accounting for the Creagh Medical acquisition has not been
completed, the amount of amortization and contingent consideration
accretion expenses may vary materially from preliminary
estimates.
Non-GAAP earnings are expected to range from $0.66 to $0.75 per
share. SurModics has provided a reconciliation of GAAP to non-GAAP
measures in the schedules attached to this press release. The
fiscal 2015 and 2014 results have been updated to reflect
acquisition-related amortization in a manner consistent with the
fiscal 2016 non-GAAP guidance.
Assumptions in the Company’s 2016 guidance include:
- No substantial changes in the US Dollar
and Euro exchange range in fiscal 2016 from current rates.
- SurModics anticipates research and
development expenses to be approximately mid-thirty percent of
revenue.
- Selling, general and administrative
expenses are projected to be approximately mid-twenty percent of
revenue.
- The income tax rate is expected to be
between 39.0% and 42.0%. This includes the benefit of the
re-enactment of the Federal R&D tax credit, offset by on-tax
benefited items including contingent consideration accretion and
transaction costs.
- SurModics estimates capital
expenditures to be between $4.5 million and $5.0 million, including
investments in Creagh Medical’s Irish facility.
Concluded Maharaj, “We expect fiscal 2016 to be a pivotal year
for us, and we enter it with enthusiasm about SurModics’ prospects
and initiatives. Our team is intently focused on evolving into a
highly relevant and valued provider of whole product medical device
solutions, as well as continuing to grow our global medical device
and in vitro diagnostic customer base.”
Live Webcast
SurModics will host a webcast at 7:30 a.m. CT (8:30 a.m. ET)
today to provide updated financial guidance for full fiscal year
2016 and to discuss the recent company acquisition of Creagh
Medical. 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 conference call will be available
by dialing 888-203-1112 and entering conference call ID passcode
2845259. The audio replay will be available beginning at 10:30 a.m.
CT on Friday, January 8, 2016, until 10:30 a.m. CT on Friday,
January 15, 2016.
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 2016, 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, 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 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 Estimated
Non-GAAP Net Income per Common Share Reconciliation For the
Fiscal Year Ended September 30, 2016 Full
Fiscal Year Estimate Low High
GAAP results $ 0.38 $ 0.43 Estimated due diligence and
integration costs (1) 0.18 0.20 Estimated amortization expense (2)
0.12 0.14 Federal research and development discrete tax item (3)
(0.02 ) (0.02 )
Adjusted results $ 0.66
$ 0.75 (1) These adjustments consist of (a)
due diligence and integration fees and (b) the contingent
consideration adjustments represent accounting adjustments to state
contingent consideration liabilities at their estimated fair value.
These adjustments can be highly variable depending on the assessed
likelihood and amount of future contingent consideration payments.
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)
Amortization expense is a non-cash expense and does not impact our
liquidity or compliance with the financial covenants included in
our credit facility agreement. Management removes the impact of
amortization from our operating performance to assist in assessing
our cash generated from operations. We believe this is a critical
metric for measuring our ability to generate cash and invest in our
growth. Therefore, amortization expense for the Creagh Medical and
other prior acquisitions is excluded from management's assessment
of operating performance and is also excluded from our operating
segments' measures of profit and loss used for making operating
decisions and assessing performance. Accordingly, management has
excluded amortization expense for purposes of calculating these
non-GAAP financial measures to facilitate an evaluation of our
current operating performance, particularly in terms of liquidity.
(3) 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.
SurModics, Inc.,
and Subsidiaries Net Income and Diluted EPS GAAP to Non-GAAP
Reconciliation For the Fiscal Year Ended September 30,
2015
(in thousands, except per share data)
(Unaudited)
TotalRevenue
OperatingIncome
OperatingIncomePercentage
Income
fromOperationsBeforeIncomeTaxes
NetIncome
DilutedEPS
GAAP $ 61,898 $ 19,089 30.8 % $ 18,241 $ 11,947 $
0.90 Adjustments: One-time royalty catch-up payments (1) (560 )
(560 ) (0.5 ) (560 ) (362 ) (0.03 ) Claim settlement (2) - 2,500
4.0 2,500 1,617 0.12 Impairment loss on strategic investment (3) -
- - 1,500 1,500 0.11 Gain on investment (4) - - - (523 ) (523 )
(0.04 ) Research and development tax credit (5) - - - - (201 )
(0.01 ) Amortization of intangible assets (6) -
619 1.0 619 400
0.03
Non-GAAP $ 61,338 $ 21,648
35.3 % $ 21,777 $ 14,378 $ 1.08 (1)
Represents a reduction in revenue for the portion of a
one-time customer royalty payment related to periods prior to
fiscal 2015 and the associated tax impact. (2) Reflects the
settlement of a customer claim and associated tax impact. (3) An
impairment charge associated with a strategic investment in
CeloNova BioSciences, Inc. (4) Reduction in net investment income
associated with the sale of Intersect ENT shares. There is no
income tax benefit as there was an offsetting release of capital
loss valuation allowance. (5) 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. (6) To
exclude amortization of acquisition related intangible assets and
associated tax impact.
SurModics, Inc., and
Subsidiaries
Income from Continuing Operations and Diluted EPS GAAP to
Non-GAAP Reconciliation For the Fiscal Year Ended September
30, 2014
(in thousands, except per share data)
(Unaudited)
TotalRevenue
OperatingIncome
OperatingIncomePercentage
Income
fromOperationsBeforeIncomeTaxes
NetIncome
DilutedEPS
GAAP $ 57,439 $ 18,576 32.3 % $ 18,472 $ 12,207 $
0.88 Adjustments: Board of Directors stock vesting acceleration (1)
- 914 1.6 914 580 0.04 Contingent milestone income (2) - - - (709 )
(709 ) (0.05 ) Impairment loss on strategic investment (3) - - -
1,184 1,184 0.09 Amortization of intangible assets (4) -
606 1.1 606 385
0.03
Non-GAAP $ 57,439 $ 20,096 35.0 % $ 20,467
$ 13,647 $ 0.99 (1) Adjusted to
reduce operating expenses associated with the acceleration of Board
of Director stock-based compensation awards and associated tax
impact. (2) Reflects a reduction in net investment income
associated with contingent milestone payments related to the sale
of Vessix Vascular shares which were sold in fiscal 2014. (3)
Represents net investment income associated with an investment
impairment charge associated with the strategic investment in
ThermopeutiX. (4) To exclude amortization of acquisition related
intangible assets and associated tax impact.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160108005161/en/
SurModics, Inc.Andy LaFrence, 952-500-7000Vice President of
Finance and Chief Financial Officer
SurModics (NASDAQ:SRDX)
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