Surmodics (SRDX) Q3 Earnings Top Estimates, FY23 View Up
Surmodics, Inc. SRDX delivered adjusted earnings per share (EPS) of 52 cents in the third quarter of fiscal 2023, against the year-ago quarter’s loss of 34 cents and the Zacks Consensus Estimate of a loss of 46 cents per share.
GAAP EPS for the quarter was 52 cents, against the year-earlier loss of 41 cents per share.
Revenues in Detail
Surmodics registered revenues of $52.5 million in the fiscal third quarter, up 111.2% year over year. The figure surpassed the Zacks Consensus Estimate by 96.6%.
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 at the Medical Device segment summed $46 million, up 162.5% from the year-ago quarter on the back of a $27 million milestone payment for SurVeil drug-coated balloon (DCB) and strong underlying performance (including product sales growth of 38% year over year driven primarily by sales of Pounce and Sublime products). This figure compares to our Medical Device fiscal third-quarter revenue projections of $18.6 million.
In the quarter under review, IVD sales declined by 11.7% to $6.5 million, primarily resulting from active management of inventory levels by certain customers. This figure compares to our IVD fiscal third-quarter revenue projections of $8.1 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 $15.7 million, up 12.6% from the prior-year quarter. This figure compares to our fiscal third-quarter revenue projections of $15.9 million.
Royalties and license fees revenues totaled $34.2 million, up 288.3% from the prior-year quarter. This figure compares to our fiscal third-quarter revenue projections of $9.5 million.
Research, development and other revenues were $2.7 million, up 24.4% year over year. This figure compares to our fiscal third-quarter revenue projections of $1.3 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 surged 131.1% to $45.6 million. Gross margin expanded 750 basis points to 86.8%.
Selling, general & administrative expenses rose 0.2% to $12.9 million. Research and development expenses declined 13.4% year over year to $11.2 million. Adjusted operating expenses of $24.1 million declined 6.7% year over year.
Adjusted operating profit totaled $21.5 million against the prior-year quarter’s adjusted operating loss of $6.1 million.
Financial Position
Surmodics exited third-quarter fiscal 2023 with cash and cash equivalents of $44.6 million compared with $19.2 million at the fiscal second-quarter end. The company ended third-quarter fiscal 2023 with total debt of $29.4 million compared with $29.3 million at the fiscal second-quarter end.
Cumulative net cash provided by operating activities at the end of third-quarter fiscal 2023 was $9.3 million compared with net cash used in operating activities of $14.7 million a year ago.
Fiscal 2023 Guidance
Surmodics has upped its full-year financial outlook.
The company now projects fiscal year revenues to be in the range of $130 million-$132 million, representing an increase of 30-32% over the comparable prior-year period. This is up from the previous outlook of $103 million-$106 million, representing an increase of 3-6% over the comparable prior-year period.
Adjusted loss per share for fiscal 2023 is now expected within the range of 29 cents-14 cents, narrowed from the prior outlook of $1.98-$1.68.
Our Take
Surmodics exited the third quarter of fiscal 2023 with better-than-expected results. The solid uptick in the overall top line and bottom line was impressive. The company registered robust revenues from its Medical Device segment and its primary sources, which was encouraging. 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. Gross margin expansion bodes well for Surmodics.
In April, Surmodics announced the first successful patient use of the Sublime radial access microcatheter. The same month, the company announced the enrolment of the first patient in PROWL, the Pounce Thrombectomy System Retrospective Registry.
In June, Surmodics received the FDA’s 510(k) clearance for its Pounce LP (Low Profile) Thrombectomy System and the FDA premarket approval for its SurVeil DCB. These raise our optimism about the stock.
However, the company’s lower revenues from the IVD segment were discouraging. Surmodics’ operation in a competitive and evolving field and reliance on third parties also raise our apprehension.
Zacks Rank and Other Key Picks
Surmodics currently sports a Zacks Rank #1 (Strong Buy).
A few other top-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories ABT, Integer Holdings Corporation ITGR and Intuitive Surgical, Inc. ISRG.
Abbott, carrying a Zacks Rank of 2 (Buy), reported second-quarter 2023 adjusted EPS of $1.08, beating the Zacks Consensus Estimate by 3.8%. Revenues of $9.98 billion outpaced the consensus mark by 2.9%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 12.4%.
Integer Holdings reported second-quarter 2023 adjusted EPS of $1.14, beating the Zacks Consensus Estimate by 15.2%. Revenues of $400 million surpassed the Zacks Consensus Estimate by 8.9%. It currently carries a Zacks Rank #2.
Integer Holdings has a long-term estimated growth rate of 12.1%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 8.4%.
Intuitive Surgical reported second-quarter 2023 adjusted EPS of $1.42, beating the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the Zacks Consensus Estimate by 1.4%. It currently carries a Zacks Rank #2.
Intuitive Surgical has a long-term estimated growth rate of 15.7%. ISRG’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 4.2%.
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Integer Holdings Corporation (ITGR) : Free Stock Analysis Report
