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 Results
Total 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 Outlook
Surmodics 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 Call
Surmodics 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 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 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 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 | ||||||||||||||||
| 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 Subsidiaries | |||||||
| 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 Subsidiaries | |||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||
| 2017 | 2016 | ||||||||||||||||||
| Revenue: | % of Total | % of Total | % | ||||||||||||||||
| 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 | % | ||||||||||||||||
| 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 Subsidiaries | ||||||||||||||||
| 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 Reconciliation | ||||||||
| 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 Subsidiaries | ||||||||||||||||||||||||||
| For the Three Months Ended March 31, 2017 | ||||||||||||||||||||||||||
Total | Operating | Operating | Income | Net | Diluted | Effective | ||||||||||||||||||||
| 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 | ||||||||||||||||||||||||||
Total | Operating | Operating | Income | Net | Diluted | Effective | ||||||||||||||||||||
| 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 Subsidiaries | ||||||||||||||||||||||||||
| For the Six Months Ended March 31, 2017 | ||||||||||||||||||||||||||
Total | Operating | Operating | Income | Net | Diluted | Effective | ||||||||||||||||||||
| 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 | ||||||||||||||||||||||||||
Total | Operating | Operating | Income | Net | Diluted | Effective | ||||||||||||||||||||
| 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/
Contacts:
Andy LaFrence, 952-500-7000
ir@surmodics.com
