EDEN PRAIRIE, Minn.--(BUSINESS WIRE)--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 2018 fourth quarter ended September 30, 2018, and provided its financial outlook for fiscal 2019.
Summary of Fourth Quarter Fiscal 2018 Highlights and Fiscal 2019 Guidance
- Revenue of $23.0 million, an increase of 15% year-over-year
- GAAP EPS of ($0.13), non-GAAP EPS of $0.05
- Submitted application for first in-human study for arteriovenous (AV) access drug coated balloon (DCB)
- Fiscal 2019 revenue outlook of $92.0 to $97.0 million, GAAP EPS outlook of ($0.32) to ($0.02)
“We continue to drive strong revenue growth and solid operational performance as we execute on our strategic objectives,” said Gary Maharaj, President & CEO of Surmodics. “The positive twelve-month data recently presented from PREVEIL, the early feasibility study of our SurVeil® DCB and the recent submission for first in-human study for our AV access DCB, AVess™, demonstrate meaningful progress towards our whole-products solutions initiatives.”
Fourth Quarter Fiscal 2018 Financial Results
Total revenue
for the fourth quarter of fiscal 2018 was $23.0 million, as compared
with $20.1 million in the prior-year period. Medical Device revenue was
$17.0 million in the fourth quarter of fiscal 2018, as compared with
$14.7 million in the year-ago period, an increase of 15.4%, and includes
$2.2 million from our SurVeil agreement with Abbott. In Vitro
Diagnostics revenue was $6.1 million for the fourth quarter of fiscal
2018 as compared with $5.3 million in the same prior-year quarter, an
increase of 13.4%.
Diluted GAAP loss per share in the fourth quarter of fiscal 2018 was $(0.13) as compared with diluted GAAP earnings per share of $0.03 in the year-ago period. On a non-GAAP basis, earnings per share were $0.05 in the fourth quarter of fiscal 2018, as compared with $0.18 in the year-ago period.
As of September 30, 2018, cash and investments were $65.0 million. Surmodics generated cash from operating activities of $34.1 million in fiscal 2018. Capital expenditures totaled $9.0 million for fiscal 2018.
Fiscal 2019 Outlook
Surmodics expects fiscal year 2019
revenue to range from $92 million to $97 million. The Company expects
diluted EPS in the range of ($0.32) to ($0.02) per share, which reflects
the Company’s continued investment in research and development to
further its whole-product solutions strategy. Non-GAAP diluted EPS is
expected to be in the range of ($0.07) to $0.23 per share.
Conference Call
Surmodics 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 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 fourth quarter conference
call will be available by dialing 888-203-1112 and entering conference
call ID passcode 1123199. The audio replay will be available beginning
at 10:30 a.m. CT on Friday, November 9, 2018, until 10:30 a.m. CT on
Friday, November 16, 2018.
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, 2017, 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 |
||||||||||||||||
| Three Months Ended | Years Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Revenue: | ||||||||||||||||
| Product sales | $ | 10,704 | $ | 8,826 | $ | 37,953 | $ | 32,790 | ||||||||
| Royalties and license fees | 10,323 | 9,223 | 35,424 | 31,787 | ||||||||||||
| Research, development and other | 2,011 | 2,009 | 7,959 | 8,535 | ||||||||||||
| Total revenue | 23,038 | 20,058 | 81,336 | 73,112 | ||||||||||||
| Operating costs and expenses: | ||||||||||||||||
| Product costs | 4,089 | 3,317 | 13,997 | 11,422 | ||||||||||||
| Research and development | 12,591 | 9,713 | 40,973 | 31,817 | ||||||||||||
| Selling, general and administrative | 6,505 | 5,307 | 24,111 | 20,478 | ||||||||||||
| Acquired in-process research and development | — | — | 7,888 | — | ||||||||||||
| Acquired intangible asset amortization | 613 | 629 | 2,491 | 2,419 | ||||||||||||
| Contingent consideration expense (gain) | 1,681 | 676 | 675 | (127 | ) | |||||||||||
| Total operating costs and expenses | 25,479 | 19,642 | 90,135 | 66,009 | ||||||||||||
| Operating (loss) income | (2,441 | ) | 416 | (8,799 | ) | 7,103 | ||||||||||
| Other income (loss), net | 411 | (224 | ) | 1,267 | (70 | ) | ||||||||||
| (Loss) income from operations before income taxes | (2,030 | ) | 192 | (7,532 | ) | 7,033 | ||||||||||
| Income tax benefit (provision) | 277 | 208 | 3,075 |
|
(3,107 | ) | ||||||||||
| Net (loss) income | $ | (1,753 | ) | $ | 400 | $ | (4,457 | ) | $ | 3,926 | ||||||
| Basic (loss) income per share: | $ | (0.13 | ) | $ | 0.03 | $ | (0.34 | ) | $ | 0.30 | ||||||
| Diluted (loss) income per share: | $ | (0.13 | ) | $ | 0.03 | $ | (0.34 | ) | $ | 0.29 | ||||||
| Weighted average number of shares outstanding: | ||||||||||||||||
| Basic | 13,279 | 13,041 | 13,157 | 13,153 | ||||||||||||
| Diluted | 13,279 | 13,365 | 13,157 | 13,389 | ||||||||||||
|
Surmodics, Inc. and Subsidiaries |
||||||
| September 30, | ||||||
| 2018 | 2017 | |||||
| Assets | (Unaudited) | |||||
| Current Assets: | ||||||
| Cash and cash equivalents | $ | 23,318 | $ | 16,534 | ||
| Restricted cash | 350 | — | ||||
| Available-for-sale securities | 41,352 | 31,802 | ||||
| Accounts receivable, net | 8,877 | 7,211 | ||||
| Inventories, net | 4,016 | 3,516 | ||||
| Prepaids and other | 3,614 | 1,820 | ||||
| Total Current Assets | 81,527 | 60,883 | ||||
| Property and equipment, net | 30,143 | 22,942 | ||||
| Deferred tax assets | 6,304 | 4,027 | ||||
| Intangible assets, net | 17,683 | 20,562 | ||||
| Goodwill | 27,032 | 27,282 | ||||
| Other assets | 1,446 | 897 | ||||
| Total Assets | $ | 164,135 | $ | 136,593 | ||
| Liabilities and Stockholders’ Equity | ||||||
| Current Liabilities: | ||||||
| Contingent consideration, current portion | 11,041 | 1,750 | ||||
| Deferred revenue | 9,646 | 62 | ||||
| Other current liabilities | 14,446 | 7,991 | ||||
| Total Current Liabilities | 35,133 | 9,803 | ||||
| Contingent consideration, less current portion | 3,425 | 13,114 | ||||
| Deferred revenue | 11,247 | 181 | ||||
| Other long-term liabilities | 5,720 | 1,938 | ||||
| Total Liabilities | 55,525 | 25,036 | ||||
| Total Stockholders’ Equity | 108,610 | 111,557 | ||||
| Total Liabilities and Stockholders’ Equity | $ | 164,135 | $ | 136,593 | ||
|
Surmodics, Inc. and Subsidiaries |
||||||||||||||||||
| Three Months Ended September 30 | ||||||||||||||||||
| 2018 | 2017 | |||||||||||||||||
| Revenue: | % of Total | % of Total |
% |
|||||||||||||||
| Medical Device | $ | 16,986 | 73.7% | $ | 14,723 |
73.4% |
|
15.4% | ||||||||||
| In Vitro Diagnostics | 6,052 | 26.3% | 5,335 |
26.6% |
|
13.4% | ||||||||||||
| Total revenue | $ | 23,038 | $ | 20,058 | 14.9% | |||||||||||||
| Years Ended September 30, | ||||||||||||||||||
| 2018 | 2017 | |||||||||||||||||
| Revenue: | % of Total | % of Total |
% |
|||||||||||||||
| Medical Device | $ | 60,513 | 74.4% | $ | 53,983 |
73.8% |
|
12.1% | ||||||||||
| In Vitro Diagnostics | 20,823 |
25.6% |
|
19,129 |
26.2% |
|
8.9% | |||||||||||
| Total revenue | $ | 81,336 | $ | 73,112 | 11.2% | |||||||||||||
| Three Months Ended |
Years Ended |
|||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||
| Operating (loss) income: | ||||||||||||||||||
| Medical Device | $ | (2,127 | ) | $ | 276 | $ | (8,478 | ) | $ | 6,902 | ||||||||
| In Vitro Diagnostics | 2,350 | 2,371 | 8,619 | 8,293 | ||||||||||||||
| Total segment operating income | 223 | 2,647 | 141 | 15,195 | ||||||||||||||
| Corporate | (2,664 | ) | (2,231 | ) | (8,940 | ) | (8,092 | ) | ||||||||||
| Total (loss) income from operations | $ | (2,441 | ) | $ | 416 | $ | (8,799 | ) | $ | 7,103 | ||||||||
|
Surmodics, Inc. and Subsidiaries |
||||||||||||||||
| Three Months Ended | Years Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Net (loss) income | $ | (1,753 | ) | $ | 400 | $ | (4,457 | ) | $ | 3,926 | ||||||
| Income tax (benefit) provision | (277 | ) | (208 | ) | (3,075 | ) | 3,107 | |||||||||
| Depreciation and amortization | 1,720 | 1,549 | 6,431 | 5,555 | ||||||||||||
| Investment income, net | (285 | ) | (116 | ) | (851 | ) | (390 | ) | ||||||||
| EBITDA | (595 | ) | 1,625 | (1,952 | ) | 12,198 | ||||||||||
| Adjustments: | ||||||||||||||||
| Contingent consideration expense (gain) (1) | 1,681 | 676 | 675 | (127 | ) | |||||||||||
| Foreign exchange (gain) loss (2) | (74 | ) | 347 | (148 | ) | 474 | ||||||||||
| Gain on strategic investment (4) | — | (43 | ) | (177 | ) | (43 | ) | |||||||||
| Claim settlement accrual (6) | — | — | 1,000 | — | ||||||||||||
| Acquired in-process research and development (7) | — | — | 7,888 | — | ||||||||||||
| Asset impairment (8) | — | 427 | — | 427 | ||||||||||||
| Adjusted EBITDA | $ | 1,012 | $ | 3,032 | $ | 7,286 | $ | 12,929 | ||||||||
| Net Cash Provided by Operating Activities | $ | 4,830 | $ | 6,397 | $ | 34,052 | $ | 14,053 | ||||||||
|
Estimated Non-GAAP Net Earnings per Common Share Guidance
Reconciliation |
||||||||
| Fiscal 2019 Full-Year Estimate | ||||||||
| Low | High | |||||||
| GAAP results | $ | (0.32 | ) | $ | (0.02 | ) | ||
| Contingent consideration adjustments (1) | 0.08 | 0.08 | ||||||
| Amortization of acquired intangibles (3) | 0.17 | 0.17 | ||||||
| Non-GAAP results | $ | (0.07 | ) | $ | 0.23 | |||
|
Surmodics, Inc., and Subsidiaries |
||||||||||||||||||||||||||
| For the Three Months Ended September 30, 2018 | ||||||||||||||||||||||||||
|
Total |
Operating |
Operating |
(Loss) Income |
Net |
Diluted |
Effective |
||||||||||||||||||||
| GAAP | $ | 23,038 | $ | (2,441 | ) | (10.6 | )% | $ | (2,030 | ) | $ | (1,753 | ) | $ | (0.13 | ) | 13.6 | % | ||||||||
| Adjustments: | ||||||||||||||||||||||||||
| Contingent consideration expense (1) | ― | 1,681 | 7.3 | 1,681 | 1,681 | 0.13 | ||||||||||||||||||||
| Foreign exchange gain (2) | ― | — | — | (74 | ) | (74 | ) | (0.01 | ) | |||||||||||||||||
| Amortization of acquired intangible assets (3) | ― | 613 | 2.7 | 613 | 561 | 0.04 | ||||||||||||||||||||
| Tax reform impact (5) | ― | — | — | — | 327 | 0.02 | ||||||||||||||||||||
| Dilutive effect of outstanding stock awards (9) | ― | — | — | — | — | (0.01 | ) | |||||||||||||||||||
| Non-GAAP | $ | 23,038 | $ | (147 | ) | (0.6 | )% | $ | 190 | $ | 742 | $ | 0.05 | (290.5 | )% | |||||||||||
| For the Three Months Ended September 30, 2017 | ||||||||||||||||||||||||||
|
Total |
Operating |
Operating |
Income Before |
Net |
Diluted |
Effective |
||||||||||||||||||||
| GAAP | $ | 20,058 | $ | 416 | 2.1 | % | $ | 192 | $ | 400 | $ | 0.03 | (108.3 | )% | ||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
| Contingent consideration expense (1) | ― | 676 | 3.4 | 676 | 676 | 0.05 | ||||||||||||||||||||
| Foreign exchange loss (2) | ― | — | — | 347 | 347 | 0.03 | ||||||||||||||||||||
| Amortization of acquired intangible assets (3) | ― | 629 | 3.1 | 629 | 550 | 0.04 | ||||||||||||||||||||
| Gain on strategic investment (4) | ― | — | — |
(43 |
) |
(43 |
) |
(0.00 |
) | |||||||||||||||||
| Asset impairment (8) | ― | 427 | 2.1 | 427 | 427 | 0.03 | ||||||||||||||||||||
| Non-GAAP | $ | 20,058 | $ | 2,148 | 10.7 | % | $ | 2,228 | $ | 2,357 | $ | 0.18 | (5.8 | )% | ||||||||||||
| For the Year Ended September 30, 2018 | |||||||||||||||||||||||||
|
Total |
Operating |
Operating |
(Loss) Income |
Net |
Diluted |
Effective |
|||||||||||||||||||
| GAAP | $ | 81,336 | $ | (8,799 | ) | (10.8 | )% | $ | (7,532 | ) | $ | (4,457 | ) | $ | (0.34 | ) | 40.8 | % | |||||||
| Adjustments: | |||||||||||||||||||||||||
| Contingent consideration expense (1) | ― | 675 | 0.8 | 675 | 675 | 0.05 | |||||||||||||||||||
| Foreign exchange gain (2) | ― | — | — | (148 | ) | (148 | ) | (0.01 | ) | ||||||||||||||||
| Amortization of acquired intangible assets (3) | ― | 2,491 | 3.1 | 2,491 | 2,282 | 0.17 | |||||||||||||||||||
| Gain on strategic investment (4) | ― | — | — | (177 | ) | (177 | ) |
(0.01 |
) |
||||||||||||||||
| Tax reform impact (5) | ― | — | — | — | 1,573 | 0.12 | |||||||||||||||||||
| Claim settlement accrual (6) | ― | 1,000 | 1.2 | 1,000 | 755 | 0.06 | |||||||||||||||||||
|
Acquired in-process research and development (7) |
― | 7,888 | 9.7 | 7,888 | 6,232 | 0.47 | |||||||||||||||||||
| Dilutive effect of outstanding stock awards (9) | ― | — | — | — | — | (0.02 | ) | ||||||||||||||||||
| Non-GAAP | $ | 81,336 | $ | 3,255 | 4.0 | % | $ | 4,197 | $ | 6,735 | $ | 0.49 | (60.5 | )% | |||||||||||
| For the Year Ended September 30, 2017 | |||||||||||||||||||||||||
|
Total |
Operating |
Operating |
Income |
Net |
Diluted |
Effective |
|||||||||||||||||||
| 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 | ) | ||||||||||||||
| Foreign exchange loss (2) | ― | — | — | 474 | 474 | 0.04 | |||||||||||||||||||
| Amortization of acquired intangible assets (3) | — | 2,419 | 3.3 | 2,419 | 2,105 | 0.16 | |||||||||||||||||||
| Gain on strategic investment (4) | ― | — | — | (43 | ) | (43 | ) | (0.00 | ) | ||||||||||||||||
| Asset impairment (8) | ― | 427 | 0.6 | 427 | 427 | 0.03 | |||||||||||||||||||
| Non-GAAP | $ | 73,112 | $ | 9,822 | 13.4 | % | $ | 10,183 | $ | 6,762 | $ | 0.51 | 33.6 | % | |||||||||||
| (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 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) | Represents an estimated royalty-related customer claim settlement accrued in the second quarter of fiscal 2018 and associated tax impact. | |
| (7) | Represents the acquisition of the Embolitech in-process research and development assets during the third quarter of fiscal 2018 and associated tax impact. | |
| (8) | Impairment of indefinite-lived intangible assets which were not tax deductible. | |
| (9) | Options to purchase common stock as well as unvested restricted stock and performance stock units are considered to be potentially dilutive common shares but have been excluded from the calculation of GAAP net loss per share as their effect is anti-dilutive for three months and year ended September 30, 2018 as a result of the net loss for those periods on a GAAP basis. However, as the Non-GAAP adjustments result in Non-GAAP net income, the dilutive effect of these options and other outstanding stock awards have been included in the calculation of Non-GAAP earnings per share. Accordingly, Diluted EPS includes these adjustments. | |
| (10) | Net (loss) income includes the effect of the above adjustments on the income tax provision, taking into account deferred taxes and non-deductible items. Effective rates of 24.5% (fiscal 2018) and between 34-35% (fiscal 2017) 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. |
