Surmodics (SRDX) Q4 Earnings Top Estimates, Revenues Up Y/Y
Surmodics, Inc. SRDX delivered adjusted earnings per share (EPS) of 53 cents in the fourth quarter of fiscal 2023 against the year-ago quarter’s loss of 26 cents per share. The metric topped the Zacks Consensus Estimate by a huge 231.3%.
GAAP EPS for the quarter was 47 cents against the year-earlier loss of $1.06 per share.
Full-year adjusted EPS was 16 cents against the loss of 95 cents per share at the end of the comparable fiscal 2022 period and the Zacks Consensus Estimate of a loss of 22 cents per share.
Revenues in Detail
Surmodics registered revenues of $27.9 million in the fiscal fourth quarter, up 7.6% year over year. The figure surpassed the Zacks Consensus Estimate by 7.6%.
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 12.6% year over year to $26.9 million.
Full-year revenues were $132.6 million, reflecting a 32.6% improvement from the comparable fiscal 2022 period. The figure surpassed the Zacks Consensus Estimate by 1.5%.
Segmental Analysis
Surmodics operates via two reportable segments — Medical Device and IVD.
In the reported quarter, sales in the Medical Device segment summed $21 million, up 7.9% from the year-ago quarter. Excluding SurVeil DCB license fee revenues, Medical Device revenues increased 14.9% to $20 million year over year.
Medical Device revenue growth was primarily driven by increased performance coating royalties and significant contributions to product sales from the Pounce thrombectomy device platform. However, this was partly offset by a decrease in proprietary specialty catheter product sales due to the completion of a customer development program. This figure compares to our Medical Device fiscal fourth-quarter revenue projection of $19.7 million.
In the quarter under review, IVD sales improved 6.8% to $6.9 million, primarily driven by strong customer demand for microarray slide/surface products and favorable order timing for distributed antigen products. This figure compares to our IVD fiscal fourth-quarter revenue projection of $6.3 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 6.7% from the prior-year quarter. This figure compares to our fiscal fourth-quarter revenue projection of $14.9 million.
Royalties and license fees revenues totaled $10.1 million, up 5.7% from the prior-year quarter. This figure compares to our fiscal fourth-quarter revenue projection of $11.1 million.
Research, development and other revenues were $2.6 million, up 22.6% year over year.
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 2.6% to $20.9 million. However, the gross margin contracted 363 basis points to 74.8%.
We had projected 80.0% of gross margin for the fiscal fourth quarter.
Selling, general & administrative expenses declined 7.1% to $12.8 million. Research and development expenses declined 20.9% year over year to $9.7 million. Adjusted operating expenses of $22.5 million declined 13.6% year over year.
Adjusted operating loss totaled $1.6 million compared with the prior-year quarter’s adjusted operating loss of $5.6 million.
Financial Position
Surmodics exited fiscal 2023 with cash and cash equivalents of $41.4 million compared with $18.9 million at the end of fiscal 2022. Total debt (including short-term debt) at the end of fiscal 2023 was $29.4 million compared with $10 million at the fiscal 2022-end.
Cumulative net cash provided by operating activities at the end of fiscal 2023 was $10.5 million against cumulative net cash used in operating activities of $17.2 million a year ago.
Fiscal 2024 Guidance
Surmodics has initiated its financial outlook for fiscal 2024.
The company projects fiscal year 2024 revenues in the range of $116 million-$121 million, representing a decrease of 13-9% over the comparable prior-year period. The Zacks Consensus Estimate currently stands at $121.2 million.
Excluding SurVeil DCB license fee revenues, Surmodics expects fiscal 2024 total 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 expected to be in the range of $1.32-97 cents. The Zacks Consensus Estimate currently stands at a loss of 67 cents per share.
Our Take
Surmodics exited the fourth 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 both segments and its primary sources, which was encouraging. During the quarter, Surmodics advanced the initial commercialization of its Pounce arterial thrombectomy and Sublime radial access platforms. 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. Its 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, DexCom, Inc. DXCM and Integer Holdings Corporation ITGR.
Abbott, carrying a Zacks Rank of 2 (Buy), reported third-quarter 2023 adjusted EPS of $1.14, beating the Zacks Consensus Estimate by 3.6%. Revenues of $10.14 billion outpaced the consensus mark by 3.6%. 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 6.8%.
DexCom reported third-quarter 2023 adjusted EPS of 50 cents, beating the Zacks Consensus Estimate by 47.1%. Revenues of $975 million surpassed the Zacks Consensus Estimate by 4%. It currently carries a Zacks Rank #2.
DexCom has a long-term estimated growth rate of 33.6%. DXCM’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 36.4%.
Integer Holdings reported third-quarter 2023 adjusted EPS of $1.27, beating the Zacks Consensus Estimate by 20.9%. Revenues of $404.7 million surpassed the Zacks Consensus Estimate by 8.7%. It currently carries a Zacks Rank #2.
Integer Holdings has a long-term estimated growth rate of 15.8%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 11.9%.
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