Updates Fiscal 2019 Guidance
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 2019 first quarter
ended December 31, 2018 and updated its financial outlook for
fiscal 2019.
Summary of First Quarter Fiscal 2019 Highlights
- Revenue of $22.2 million, an increase
of 31% year-over-year
- GAAP EPS of $0.09, non-GAAP EPS of
$0.12
- Updating fiscal 2019 revenue and EPS
guidance
- Initial patient treated in first
in-human study for Avess™ arteriovenous (AV) access drug coated
balloon (DCB)
“During the first quarter of our fiscal year we demonstrated
strong operational performance in our Medical Device and IVD
businesses, producing excellent top and bottom line results,” said
Gary Maharaj, President & CEO of Surmodics. “We are making
meaningful progress on our fiscal 2019 strategic initiatives,
notably treating the first patient using our Avess DCB and
continuing enrollment in our TRANSCEND clinical trial. We are
looking forward to continued momentum across our business
throughout 2019.”
First Quarter Fiscal 2019 Financial Results
Total revenue for the first quarter of fiscal 2019 was $22.2
million, as compared with $17.0 million in the prior-year period.
Medical Device revenue was $17.3 million in the first quarter of
fiscal 2019, as compared with $12.8 million in the year-ago period,
an increase of 35%, and includes $2.4 million from our SurVeil®
agreement with Abbott. In Vitro Diagnostics revenue was $5.0
million for the first quarter of fiscal 2019 as compared with $4.2
million in the same prior-year quarter, an increase of 18%.
Diluted GAAP earnings per share in the first quarter of fiscal
2019 was $0.09 as compared with diluted GAAP loss per share of
$(0.12) in the year-ago period. On a non-GAAP basis, earnings per
share were $0.12 in the first quarter of fiscal 2019, as compared
with $0.10 in the year-ago period.
As of December 31, 2018, cash and investments were $45.9
million. Surmodics used $5.4 million of cash in operating
activities in the first three months of fiscal 2019, which included
$2.0 million of the $11.0 million settlement of contingent
consideration obligations from the fiscal 2016 Creagh Medical
acquisition. Capital expenditures totaled $2.1 million for the
first three months fiscal 2019.
Fiscal 2019 Guidance Revised
As a result of revenue performance in the first quarter of
fiscal 2019, Surmodics is increasing the lower end of its fiscal
2019 revenue expectations to $94 million from $92 million, while
maintaining the upper end of the fiscal 2019 revenue expectations
of $97 million. In addition, the Company now expects a fiscal 2019
diluted GAAP loss in the range of ($0.22) to ($0.02) per share,
compared with previous expectations of a loss ranging from ($0.32)
to ($0.02) per share. Non-GAAP diluted EPS is now expected to be in
the range of $0.02 to $0.22 per share compared with previous
expectations of a loss of ($0.07) to earnings of $0.23 per
share.
Conference Call
Surmodics will host a webcast at 4 p.m. CT (5 p.m. ET) today to
discuss first quarter results. To access the webcast, go to the
investor relations portion of the Company’s website at
https://surmodics.gcs-web.com and click on the webcast icon. The
webcast will be archived on the Company’s website for 90 days. A
replay of the first quarter conference call will be available by
dialing 888-203-1112 and entering conference call ID passcode
1070221. The audio replay will be available beginning at
7 p.m. CT on Wednesday, January 30, 2019, until
7 p.m. CT on Wednesday, February 6, 2019.
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)
immunoassay tests and microarrays. Surmodics is pursuing highly
differentiated whole-product solutions that are designed to address
unmet clinical needs for its medical device customers and
engineered to the most demanding requirements. This key growth
strategy leverages the combination of the Company’s expertise in
proprietary surface technologies, along with enhanced device
design, development and manufacturing capabilities. The Company
mission remains to improve the detection and treatment of disease.
Surmodics is headquartered in Eden Prairie, Minnesota. For more
information, 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 and
earnings expectations for fiscal 2019, and our SurVeil DCB 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 (including realization of the
full potential benefits of our agreement with Abbott), 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) possible
adverse market conditions and possible adverse impacts on our cash
flows, and (4) 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, 2018, and updated in our subsequent
reports filed with the SEC. These reports are available in the
Investors section of our website at https://surmodics.gcs-web.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 EBITDA and
Adjusted EBITDA, non-GAAP operating (loss) income, non-GAAP income
before income taxes, non-GAAP net income, and non-GAAP diluted
earnings per share, and the non-GAAP effective income 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
Operations
(in thousands, except per share data)
(Unaudited)
Three Months Ended December 31, 2018
2017 (Unaudited) Revenue:
Product sales $ 9,751 $ 8,088 Royalties and license fees 10,096
7,076 Research, development and other 2,394
1,849
Total revenue
22,241 17,013 Operating costs and
expenses: Product costs 3,523 2,891 Research and development 11,486
7,831 Selling, general and administrative 5,949 5,188 Acquired
intangible asset amortization 606 618 Contingent consideration
(gain) expense (35 ) 1,118
Total operating costs and expenses
21,529 17,646 Operating income (loss)
712 (633 ) Other income, net 422 112
Income (loss) before income taxes 1,134 (521 ) Income tax benefit
(provision) 176 (1,035 ) Net income (loss) $
1,310 $ (1,556 ) Basic income (loss) per share: $
0.10 $ (0.12 ) Diluted income (loss) per share: $ 0.09 $
(0.12 ) Weighted average number of shares outstanding: Basic
13,367 13,064 Diluted 13,827 13,064
Surmodics, Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
(in thousands)
(Unaudited)
December 31, September 30, 2018
2018 Assets
(Unaudited) Current Assets: Cash and cash
equivalents $ 14,402 $ 23,318 Restricted cash — 350
Available-for-sale securities 31,453 41,352 Accounts receivable,
net 9,761 8,877 Contract assets - royalties and license fees 6,707
— Inventories, net 4,168 4,016 Prepaids and other 4,185
3,614 Total Current Assets 70,676 81,527 Property and
equipment, net 29,898 30,143 Deferred tax assets 4,778 6,304
Intangible assets, net 16,874 17,683 Goodwill 26,834 27,032 Other
assets 1,602 1,446 Total Assets $ 150,662 $ 164,135
Liabilities and Stockholders’ Equity Current Liabilities:
Contingent consideration, current portion 3,326 11,041 Deferred
revenue 7,391 9,646 Other current liabilities 9,699
14,446 Total Current Liabilities 20,416 35,133 Contingent
consideration, less current portion — 3,425 Deferred revenue, less
current portion 10,913 11,247 Other long-term liabilities
5,712 5,720 Total Liabilities 37,041 55,525 Total
Stockholders’ Equity 113,621 108,610 Total
Liabilities and Stockholders’ Equity $ 150,662 $ 164,135
Surmodics, Inc. and
Subsidiaries
Supplemental Segment
Information
(in thousands)
(Unaudited)
Three Months Ended December 31, 2018
2017 Revenue:
% of Total
% of Total % Change Medical Device $
17,258 77.6% $ 12,774 75.1% 35.1% In Vitro Diagnostics 4,983
22.4% 4,239 24.9% 17.6% Total revenue $ 22,241
$ 17,013 30.7%
Three Months Ended December
31, 2018 2017 Operating income (loss): Medical
Device $ 357 $ (389 ) In Vitro Diagnostics 2,455
1,670 Total segment operating income 2,812 1,281
Corporate (2,100 ) (1,914 ) Total operating income
(loss) $ 712 $ (633 )
Surmodics, Inc. and
Subsidiaries
Reconciliation of GAAP Measures to
Non-GAAP Amounts
Schedule of EBITDA, Adjusted EBITDA and
Cash Flows from Operations
(in thousands)
(Unaudited)
Three Months Ended December 31, 2018
2017 Net income (loss) $ 1,310 $ (1,556
) Income tax (benefit) provision (176 ) 1,035 Depreciation and
amortization 1,756 1,520 Investment income, net (316 ) (121 )
Interest expense 37 — EBITDA
2,611 878 Adjustments: Contingent
consideration (gain) expense (1) (35 ) 1,118 Foreign exchange
(gain) loss (2) (126 ) 186 Gain on strategic investment (4)
(7 ) (177 ) Adjusted EBITDA $ 2,443 $ 2,005
Net Cash (Used in) Provided by Operating Activities $
(5,405 ) $ 614
Estimated Non-GAAP Net Earnings per
Common Share Guidance Reconciliation
For the Fiscal Year Ended September 30,
2019
(Unaudited)
Full Fiscal Year Estimate
Low High GAAP results $ (0.22 )
$ (0.02 ) Contingent consideration adjustments (1) 0.08 0.08
Foreign exchange gain on contingent consideration (2) (0.01 ) (0.01
) Amortization of acquired intangibles (3) 0.17
0.17
Non-GAAP results $ 0.02 $ 0.22
Surmodics, Inc., and
Subsidiaries
Net Income (Loss) and Diluted EPS GAAP
to Non-GAAP Reconciliation
(in thousands, except per share
data)
(Unaudited)
For the Three Months Ended December 31, 2018 Total
Revenue Operating Income
Operating Income Percentage
Income Before
Income Taxes
Net
Income
(6)
Diluted EPS Effective tax
rate GAAP $ 22,241 $ 712 3.2
%
$
1,134
$ 1,310 $ 0.09 (15.5 )% Adjustments: Contingent consideration gain
(1) ― (35 ) (0.2
)
(35
)
(35 ) (0.00 ) Foreign exchange gain on contingent consideration (2)
― — — (126 ) (126 ) (0.01 ) Amortization of acquired intangible
assets (3) ― 606 2.7 606 561 0.04 Gain on strategic investment (4)
— — — (7 ) (7
)
(0.00 )
Non-GAAP $ 22,241 $ 1,283 5.7
%
$
1,572
$ 1,703 $ 0.12 (8.3 )%
For the Three
Months Ended December 31, 2017 Total Revenue
Operating (Loss) Income
Operating (Loss) Income
Percentage
(Loss) Income
Before Income Taxes
Net (Loss)
Income (6)
Diluted EPS Effective tax rate GAAP $ 17,013 $
(633 ) (3.7 )% $ (521 ) $ (1,556 ) $ (0.12 ) (198.7 )% Adjustments:
Contingent consideration expense (1) ― 1,118 6.6 1,118 1,118 0.08
Foreign exchange loss on contingent consideration (2) ― — — 180 180
0.01 Amortization of acquired intangible assets (3) ― 618 3.6 618
567 0.04 Gain on strategic investment (4) ― — — (177 ) (177 ) (0.01
) Tax reform impact (5) ― — — —
1,246 0.09
Non-GAAP $
17,013 $ 1,103 6.5 % $ 1,218 $ 1,378 $ 0.10
(13.1 )% (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. 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 as determined at
the end of the current quarter. These amounts are not taxable or
tax deductible. (2) Foreign exchange gains and losses are related
to marking non-U.S. dollar contingent consideration to period-end
or settlement date 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. These gains and losses are not
taxable or tax deductible. (3) Amortization of acquisition-related
intangible assets and associated tax impact. A significant portion
of the acquisition-related amortization is not tax deductible. (4)
Represents the gain recognized on the sale of a strategic
investment which was not tax-affected as it was offset by
previously recognized capital losses. (5) Income tax expense from
the re-measurement of net deferred tax assets recognized after the
enactment of the Tax Cuts and Jobs Act in December 2017. (6) Net
income (loss) includes the effect of the above adjustments on the
income tax provision, taking into account deferred taxes and
non-deductible items. Effective rates of 21% (fiscal 2019) and
24.5% (fiscal 2018) were 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 and acquired in-process research and
development, which will be deductible at a 21% statutory tax rate.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190130005772/en/
Surmodics, Inc.Tim Arens, 952-500-7000ir@surmodics.com
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