Surmodics (SRDX) Q2 Earnings Top Estimates, FY23 View Revised
Surmodics, Inc. SRDX delivered an adjusted loss per share of 40 cents in the second quarter of fiscal 2023, which is wider than the year-ago quarter’s loss of 22 cents per share. However, the figure was narrower than the Zacks Consensus Estimate of a loss of 49 cents per share.
Our projection of loss per share was 53 cents.
GAAP loss per share for the quarter was 55 cents, wider than the year-earlier loss of 29 cents per share.
Revenues in Detail
Surmodics registered revenues of $27.2 million in the fiscal second quarter, up 4.2% year over year. The figure surpassed the Zacks Consensus Estimate by 4.6%.
The fiscal second-quarter revenue compares to our estimate of $26 million.
The top line was boosted by solid year-over-year product sales growth from the Medical Device business. However, this was partially offset by a decrease in Surmodics’ In Vitro Diagnostics (IVD) revenues.
Segmental Analysis
Surmodics operates via two reportable segments — Medical Device and IVD.
In the reported quarter, sales in the Medical Device segment summed $19.7 million, up 6.8% from the year-ago quarter on the back of commercial progress for Surmodics’ innovative thrombectomy and radial access platforms. Per management, a 23% year-over-year increase in Medical Device product sales, with significant contributions from the vascular intervention products (Pounce arterial thrombectomy and Sublime radial access platforms), and Surmodics’ performance coding region drove the segmental revenues.
This figure compares to our Medical Device fiscal second-quarter revenue projection of $18.7 million.
In the quarter under review, IVD sales declined by 2.1% to $7.5 million, primarily resulting from lower sales of protein stabilization products.
This figure compares to our IVD fiscal second-quarter revenue projection of $7.4 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 $15.4 million, up 9.9% from the prior-year quarter. Royalties and license fees revenues totaled $9.4 million, down 4.2% from the prior-year quarter. Research, development and other revenues were $2.4 million, up 5.3% year over year.
This figure compares to our fiscal second-quarter revenue projections of $15 million, $9.4 million and $1.6 million, respectively.
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 rose 2.2% to $21.5 million. Gross margin contracted 153 basis points to 78.9%.
Selling, general & administrative expenses rose 16.7% to $12.9 million. Research and development expenses declined 5.7% year over year to $12.9 million. Adjusted operating expenses of $25.9 million rose 4.3% year over year.
Adjusted operating loss totaled $4.4 million compared with the prior-year quarter’s adjusted operating loss of $3.8 million.
Financial Position
Surmodics exited second-quarter fiscal 2023 with cash and cash equivalents of $19.2 million compared with $26.4 million at the fiscal first-quarter end. The company ended second-quarter fiscal 2023 with total debt of $29.3 million compared with $29.5 million at the fiscal first-quarter end.
Cumulative net cash used in operating activities at the end of second-quarter fiscal 2023 was $16.6 million compared with net cash used in operating activities of $11.2 million a year ago.
Fiscal 2023 Guidance
Surmodics has revised its full-year financial outlook.
The company now projects fiscal year revenues to be within the range of $103 million-$106 million, representing an increase of 3-6% over the comparable prior-year period. This is narrower than the previous outlook of $102 million-$106 million, representing an increase of 2-6% over the comparable prior-year period. The Zacks Consensus Estimate for the same is currently pegged at $105.6 million.
Adjusted diluted loss per share for fiscal 2023 is now expected within the range of $1.98-$1.68, compared with the prior outlook of adjusted diluted loss per share of $2.09-$1.69. The Zacks Consensus Estimate for the same is currently pegged at a loss of $1.93 per share.
Our Take
Surmodics exited the second quarter of fiscal 2023 with better-than-expected results. The solid uptick in the overall top line was impressive. The company registered robust revenues from its Medical Device segment, as well as from its Product sales, and Research, development and other revenues. During the quarter, Surmodics witnessed strong contributions from sales of its Pounce and Sublime products, indicating their continued solid demand. This looks promising for the stock.
In March, Surmodics announced its receipt of a positive, formal feedback from the FDA related to the company’s proposed approach to submit an amended premarket approval application for the SurVeil drug-coated balloon. In April, the company announced the first successful patient use of the Sublime radial access microcatheter. These raise our optimism about the stock.
However, the company’s dismal year-over-year bottom-line results in the fiscal second quarter are concerning. Lower revenues from the IVD segment and a decline in Royalties and license fee revenues are discouraging. The gross margin contraction also does not bode well for the stock. Surmodics continued to incur operating losses in the reported quarter, which further raised 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 Edwards Lifesciences Corporation EW, Intuitive Surgical, Inc. ISRG and Johnson & Johnson JNJ.
Edwards Lifesciences, carrying a Zacks Rank #2 (Buy), reported first-quarter 2023 adjusted earnings per share (EPS) of 62 cents, beating the Zacks Consensus Estimate by 1.6%. Revenues of $1.46 billion outpaced the consensus mark by 4.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Edwards Lifesciences has a long-term estimated growth rate of 6.8%. EW’s earnings surpassed estimates in two of the trailing four quarters, missed the same in one and broke even in the other, the average being 1.2%.
Intuitive Surgical, having a Zacks Rank #2, reported first-quarter 2023 adjusted EPS of $1.23, which beat the Zacks Consensus Estimate by 3.4%. Revenues of $1.70 billion outpaced the consensus mark by 6.9%.
Intuitive Surgical has a long-term estimated growth rate of 13%. ISRG’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 1.9%.
Johnson & Johnson reported first-quarter 2023 adjusted earnings of $2.68 per share, beating the Zacks Consensus Estimate by 6.8%. Revenues of $24.75 billion surpassed the Zacks Consensus Estimate by 5%. It currently carries a Zacks Rank #2.
Johnson & Johnson has a long-term estimated growth rate of 5.5%. JNJ’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 3.9%.
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Surmodics, Inc. (SRDX) : Free Stock Analysis Report
