EDEN PRAIRIE - Surmodics, Inc. (Nasdaq: SRDX), a leading provider of medical device and in vitro diagnostic technologies to the healthcare industry, today reported financial results for its first quarter ended December 31, 2023, and updated its financial guidance for fiscal year ending September 30, 2024.
First Quarter Fiscal 2024 Financial Summary
Total Revenue of $30.6 million, an increase of 23% year-over-year
Total Revenue excluding SurVeil drug-coated balloon ('DCB') license fee revenue(1) of $29.6 million, an increase of 25% year-over-year
GAAP net loss of $(0.8) million, compared to $(7.8) million in the prior-year period
Adjusted EBITDA(2) of $3.9 million, compared to $(3.3) million in the prior-year period
First Quarter and Recent Business Highlights
On October 31, 2023, Surmodics announced the launch of its Preside medical device coating technology providing industry-leading lubricity and durability to a broader range of complex device applications.
On November 16, 2023, Surmodics announced that 36-month data from its TRANSCEND clinical trial of the company's SurVeil DCB was presented at the Symposium on Vascular and Endovascular Issues ('VEITHsymposium') in New York, NY, with the SurVeil DCB demonstrating sustained durability of the trial's safety and efficacy endpoints.
On November 16, 2023, Surmodics announced that 24-month data from its SWING trial, a first-in-human study of the company's Sundance Sirolimus DCB, was presented at the VEITHsymposium, with a per protocol analysis demonstrating that primary patency was maintained in the target lesion in 71% of patients at 24-months, with an excellent safety profile.
On January 22, 2024, Surmodics announced the successful early clinical use of the Pounce LP (Low Profile) Thrombectomy System, designed to address a critical, unmet need by facilitating removal of thrombi and emboli below the knee.
'We delivered total revenue growth in the first quarter that exceeded our expectations, increasing 23% year-over-year - 25% excluding SurVeil DCB license fees(1) - with impressive performance in both our Medical Device and In Vitro Diagnostics business segments,' said Gary Maharaj, President and CEO of Surmodics, Inc. 'Our Medical Device segment revenue benefited from record product sales, which increased 43% year-over-year fueled by sales of our vascular interventions portfolio, including strong contributions from both our SurVeil DCB and Pounce thrombectomy products. Importantly, we were pleased to complement our revenue performance in the quarter with notable year-over-year improvements in our GAAP net loss and Adjusted EBITDA,(2) as well as significant operational progress with respect to each of our three strategic objectives for fiscal 2024.'
Mr. Maharaj continued, 'We are raising our fiscal 2024 total revenue and EPS guidance today to reflect our financial and operational performance in the first quarter, which supports our conviction in our ability to generate total revenue growth of 10% or higher for the full year, excluding SurVeil DCB license fees.(1) We look forward to building on our recent progress by continuing to execute efficiently on our stated strategic objectives in order to foster strong, sustainable, long-term growth and value creation.'
Total revenue increased $5.6 million, or 23%, to $30.6 million, compared to $24.9 million in the first quarter of fiscal 2023. Excluding SurVeil DCB license fee revenue,(1) total revenue increased $5.9 million, or 25%, to $29.6 million, compared to $23.6 million in the first quarter of fiscal 2023.
Medical Device revenue increased $4.5 million, or 24%, to $23.5 million, compared to $19.0 million in the first quarter of fiscal 2023. Excluding SurVeil DCB license fee revenue,(1) Medical Device revenue increased $4.9 million, or 27% to $22.6 million, compared to $17.7 million in the first quarter of fiscal 2023. Medical Device revenue growth was driven primarily by product sales of $12.0 million, an increase of 43%, compared to $8.4 million in the first quarter of fiscal 2023. Product sales growth was driven primarily by fulfillment of the initial stocking order for the SurVeil DCB from Abbott Vascular, Inc. ('Abbott'), the company's exclusive distribution partner for the product, and continued sales growth from the Pounce thrombectomy device platform. IVD revenue increased $1.1 million, or 18%, to $7.0 million, compared to $5.9 million in the first quarter of fiscal 2023, driven primarily by strong customer demand and favorable order timing for distributed antigen and microarray slide/surface products.
Product gross profit(3) increased $1.1 million, or 12%, to $10.0 million, compared to $9.0 million in the first quarter of fiscal 2023. Product gross margin(3) was 53.2%, compared to 63.0% in the first quarter of fiscal 2023. The decrease in product gross margin was primarily driven by increased sales of SurVeil DCB, Pounce thrombectomy and Sublime radial access products as a proportion of total product sales, as these devices were not at scale, and product gross margins reflected the associated under-absorption and production inefficiencies. Product gross margin was also impacted by increased sales of relatively lower margin IVD distributed antigen products, as well as by increased absorption of fixed costs from a timing-related decline in production volumes.
Operating costs and expenses, excluding product costs, decreased $4.8 million, or 18%, to $22.1 million, compared to $26.9 million in the first quarter of fiscal 2023. The decrease was driven by lower research and development and selling, general and administrative expenses primarily as the result of lower SurVeil DCB R&D expenses due to the transition to commercialization, the spending reduction plan implemented in the second quarter of fiscal 2023, and the timing of certain investments.
GAAP net loss was $(0.8) million, or $(0.06) per diluted share, compared to GAAP net loss of $(7.8) million, or $(0.56) per diluted share in the first quarter of fiscal 2023. Non-GAAP net income(4) was $0.0 million, or $0.00 per diluted share,(4) compared to Non-GAAP net loss(4) of $(7.0) million, or $(0.50) per diluted share(4) in the first quarter of fiscal 2023.
Adjusted EBITDA(2) was $3.9 million, compared to Adjusted EBITDA(2) loss of $(3.3) million in the first quarter of fiscal 2023.
Balance Sheet Summary
As of December 31, 2023, Surmodics reported $35.2 million in cash and investments, $5.0 million in outstanding borrowings on its revolving credit facility, and $25.0 million in outstanding borrowings on its term loan facility. The company had access to approximately $64.0 million in additional debt capital as of December 31, 2023 under its revolving credit and term loan facilities. Surmodics reported $8.8 million of cash used in operating activities and $0.7 million in capital expenditures in the first quarter of fiscal 2024. In the first quarter of fiscal 2024, total cash used was $10.2 million, which consisted of the change in the combined balance of cash and cash equivalents and investments in available-for-sale securities from September 30, 2023 to December 31, 2023.
Fiscal Year 2024 Financial Guidance
Surmodics now expects fiscal 2024 total revenue to range from $117 million to $121 million, representing a decrease of (12)% to (9)% compared to fiscal 2023. Excluding SurVeil DCB license fee revenue,(1) Surmodics expects fiscal 2024 total revenue to range from $113 million to $117 million, representing an increase of 10% to 14% compared to fiscal 2023. The company's prior guidance called for fiscal 2024 total revenue of $116 to $121 million, representing a decrease of (13)% to (9)% compared to fiscal 2023, and total revenue excluding SurVeil DCB license fee revenue(1) of $112 million to $117 million, representing an increase of 9% to 14% compared to fiscal 2023.
The company now expects fiscal 2024 GAAP diluted loss per share to range from $(1.40) to $(1.10). The company's prior guidance called for fiscal 2024 GAAP diluted loss per share to range from $(1.55) to $(1.20).
Non-GAAP diluted loss per share(4) in fiscal 2024 is now expected to range from $(1.17) to $(0.87). The company's prior guidance called for fiscal 2024 Non-GAAP diluted loss per share(4) of $(1.32) to $(0.97).
About Surmodics, Inc.
Surmodics, Inc. is a leading provider of performance coating technologies for intravascular medical devices and chemical and biological components for in vitro diagnostic immunoassay tests and microarrays. Surmodics also develops and commercializes highly differentiated vascular intervention medical devices that are designed to address unmet clinical needs and engineered to the most demanding requirements. This key growth strategy leverages the combination of the company's expertise in proprietary surface modification and drug-delivery coating technologies, along with its device design, development and manufacturing capabilities. The company's mission is to improve the detection and treatment of disease. Surmodics is headquartered in Eden Prairie, Minnesota.
Safe Harbor for Forward-looking Statements
This press release, and disclosures related to it, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical or current facts, including statements regarding: future success; our ability to execute our stated strategic objectives while continuing to focus on cash efficiency; our access to additional borrowings under our existing credit agreement; the potential of the SurVeil DCB products, Pounce thrombectomy products, and Sublime radial access products to be growth catalysts; the SurVeil DCB being positioned as the next generation of drug-coated balloons; our commitment to addressing Abbott's future demand for SurVeil DCB products; our belief that two digital supplements in Endovascular Today will serve as an important resource for potential customers that our sales team can continue to leverage going forward; laying the foundation for our future, long-term growth by advancing our pipeline of new products and line extensions; supporting customers' efforts as they integrate our Preside coating technology into their next-generation devices and pursue regulatory clearance; our expectations related to completing the limited market evaluation cases for our Pounce venous thrombectomy system and its limited and full commercial launches; that our Pounce Arterial LP product represents a promising enhancement to our product offerings and its potential to be a game-changer; expected full-year fiscal 2024 growth rates for our core performance coatings and IVD products; our fiscal 2024 financial guidance and related statements and assumptions, including statements regarding our ability to generate total revenue growth for the full fiscal 2024 year, excluding SurVeil DCB license fees, our ability to accelerate our total revenue growth profile in fiscal 2024, assumptions in our revenue guidance provided for modeling purposes, expected revenue associated with our Medical Device performance coatings offerings and IVD business, expected license fee revenue related to the SurVeil DCB, expected product revenue as a percent of total revenue, expected product revenue from our SurVeil, Pounce, and Sublime products, expected product gross margins for fiscal 2024, expected operating expenses, expected interest expense, and expected tax expense; the range of revenue we expect in the second quarter of fiscal 2024; our expected cash balance at the end of fiscal 2024 and expected sources and uses of cash in fiscal 2024; expectations related to further borrowings during fiscal 2024 under our credit agreement; our fiscal 2024 strategic objectives and our efficient execution of them; fostering and achieving strong, sustainable, long-term growth and value creation; our key growth strategy and cash efficiency being a top priority in fiscal 2024, our focus on disciplined expense management, and our focus on optimization of working capital, 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, without limitation: (1) our ability to successfully commercialize our SurVeil DCB (including realization of the full potential benefits of our agreement with Abbott), Sundance DCB, 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; (4) our ability to successfully and profitably produce and commercialize our vascular intervention products; (5) supply chain constraints; (6) whether our operating expenses are effective in generating profitable revenues; (7) disruptions to our business from our plan to reduce our use of cash announced in the second quarter of fiscal 2023, the failure of such plan to achieve its objectives, or cost and expenses associated with such plan and (8) 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, 2023 and subsequent SEC filings. 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 total revenue excluding SurVeil DCB license fee revenue, Medical Device revenue excluding SurVeil DCB license fee revenue, EBITDA and Adjusted EBITDA, non-GAAP operating income (loss), non-GAAP operating income (loss) percentage, non-GAAP income (loss) before income taxes, non-GAAP net income (loss), and non-GAAP income (loss) per diluted share. 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 payouts under our executive compensation programs. We also are providing guidance on a range of non-GAAP revenue and loss per diluted share for fiscal 2024. 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.
Contact:
Jack Powell
Email: ir@surmodics.com
SURMODICS, INC. 
