Surmodics (SRDX) Q1 Earnings Top Estimates, Revises FY24 View
Surmodics, Inc. SRDX delivered break-even adjusted earnings per share (EPS) in the first quarter of fiscal 2024 against the year-ago quarter’s loss of 50 cents per share. The metric compared with the Zacks Consensus Estimate of a loss of 35 cents per share.
GAAP loss per share for the quarter was 6 cents, narrower than the year-earlier loss of 56 cents per share.
Revenues in Detail
Surmodics registered revenues of $30.6 million in the fiscal first quarter, up 22.5% year over year. The figure surpassed the Zacks Consensus Estimate by 3.2%.
The top line was boosted by solid year-over-year product sales growth from both the Medical Device and In Vitro Diagnostics (IVD) businesses.
Excluding SurVeil drug-coated balloon (DCB) license fee revenues, total revenues increased 25.4% year over year to $29.6 million.
Segmental Analysis
Surmodics operates via two reportable segments — Medical Device and IVD.
In the reported quarter, sales in the Medical Device segment summed $23.5 million, up 23.8% from the year-ago quarter. Excluding SurVeil DCB license fee revenues, Medical Device revenues increased 27.7% to $22.6 million year over year. This figure compares to our Medical Device fiscal first-quarter revenue projection of $23.1 million.
Medical Device revenue growth was primarily driven by product sales of $12 million, up 42.9% year over year. Product sales growth was driven primarily by fulfillment of the initial stocking order for the SurVeil DCB from Abbott (Surmodics’ exclusive distribution partner for the product) and continued sales growth from the Pounce thrombectomy device platform.
In the quarter under review, IVD sales improved 18.5% to $7 million, primarily driven by strong customer demand and favorable order timing for distributed antigen and microarray slide/surface products. This figure compares to our IVD fiscal first-quarter revenue projection of $6.5 million.
The company also derives revenues from three primary sources — Product sales, Royalties and license fees and Research, development and other fees.
In the quarter under review, Product sales were $18.8 million, up 32.3% from the prior-year quarter. This figure compares to our fiscal first-quarter revenue projection of $16.1 million.
Royalties and license fees revenues totaled $9.2 million, up 4.7% from the prior-year quarter. This figure compares to our fiscal first-quarter revenue projection of $8.9 million.
Research, development and other revenues were $2.5 million, up 31.6% year over year. This figure compares to our fiscal first-quarter revenue projection of $4.6 million.
Surmodics, Inc. Price, Consensus and EPS Surprise
Surmodics, Inc. price-consensus-eps-surprise-chart | Surmodics, Inc. Quote
Margin Trend
In the quarter under review, Surmodics’ gross profit increased 10.6% to $21.7 million. However, the gross margin contracted 769 basis points to 71.2%. We had projected 74.9% of gross margin for the fiscal first quarter.
Selling, general & administrative expenses declined 5.3% to $12.5 million. Research and development expenses declined 32% year over year to $8.7 million. Adjusted operating expenses of $21.2 million declined 18.4% year over year.
Adjusted operating profit totaled $0.5 million against the prior-year quarter’s adjusted operating loss of $6.3 million.
Financial Position
Surmodics exited first-quarter fiscal 2024 with cash and cash equivalents of $23.4 million compared with $41.4 million at the end of fiscal 2023. Total long-term debt at the end of first-quarter fiscal 2024 was $29.4 million, flat compared with that at the fiscal 2023-end.
Net cash used in operating activities at the end of first-quarter fiscal 2024 was $8.8 million compared with $10.8 million a year ago.
Fiscal 2024 Guidance
Surmodics has revised its financial outlook for fiscal 2024.
The company now projects fiscal year 2024 revenues in the range of $117 million-$121 million, representing a decrease of 12-9% over the comparable prior-year period. This is narrowed from the earlier projection of $116 million-$121 million, representing a decrease of 13-9% over the comparable prior-year period. The Zacks Consensus Estimate currently stands at $120.7 million.
Excluding SurVeil DCB license fee revenues, Surmodics now expects fiscal 2024 total revenues between $113 million and $117 million, representing an increase of 10-14% compared with fiscal 2023. This is narrowed from the prior outlook of revenues between $112 million and $117 million, representing an increase of 9-14% compared to fiscal 2023.
Adjusted loss per share for fiscal 2024 is now expected to be in the range of $1.17-87 cents. This compares with the earlier provided projections of a loss per share of $1.32-97 cents. The Zacks Consensus Estimate currently stands at a loss of $1.01 per share.
Our Take
Surmodics exited the first quarter of fiscal 2024 with better-than-expected results. The solid uptick in the overall top line and bottom line was impressive. The company registered robust revenues from both segments and its primary sources, which was encouraging.
In November 2023, Surmodics announced favorable 36-month data from its TRANSCEND clinical trial of the company’s SurVeil DCB and 24-month data from its SWING trial (a first-in-human study of the company’s Sundance Sirolimus DCB). This looks promising for the stock.
In October, Surmodics launched its Preside medical device coating technology, providing improved lubricity and durability to a broader range of complex device applications. This raises our optimism about the stock.
However, the gross margin contraction does not bode well for Surmodics. Continued adverse impacts due to supply-chain challenges also raise our apprehension.
Zacks Rank and Key Picks
Surmodics currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Elevance Health, Inc. ELV, HCA Healthcare, Inc. HCA and Stryker Corporation SYK.
Elevance Health, carrying a Zacks Rank of 2 (Buy), reported fourth-quarter 2023 adjusted EPS of $5.62, beating the Zacks Consensus Estimate by 1.3%. Revenues of $42.45 billion outpaced the consensus mark by 1.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Elevance Health has a long-term estimated growth rate of 12%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 3.1%.
HCA Healthcare reported fourth-quarter 2023 adjusted EPS of $5.90, beating the Zacks Consensus Estimate by 16.8%. Revenues of $17.30 billion surpassed the Zacks Consensus Estimate by 4.5%. It currently sports a Zacks Rank #1.
HCA Healthcare has a long-term estimated growth rate of 9.7%. HCA’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 9.8%.
Stryker reported fourth-quarter 2023 adjusted EPS of $3.46, beating the Zacks Consensus Estimate by 5.8%. Revenues of $5.82 billion surpassed the Zacks Consensus Estimate by 3.8%. It currently carries a Zacks Rank #2.
Stryker has a long-term estimated growth rate of 10.3%. SYK’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 5.1%.
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