Surmodics, Inc. (NASDAQ:SRDX), a leading provider of performance coating technologies for intravascular medical devices and chemical and biological components for in vitro diagnostic (IVD) immunoassay tests and microarrays, has reported its financial results for the third quarter of fiscal year 2024, showcasing impressive growth and raising its full-year guidance.

Financials

In the third quarter of fiscal 2024, Surmodics reported revenue of $30.3 million, a 42% decrease compared to the prior-year quarter. This decline was primarily driven by a $27.0 million premarket approval (PMA) milestone payment from Abbott received in the third quarter of fiscal 2023, $24.6 million of which was recognized as SurVeil drug-coated balloon (DCB) license fee revenue.

For the first nine months of fiscal 2024, Surmodics reported revenue of $92.9 million, an 11% decrease compared to the same prior-year period. Excluding the SurVeil DCB license fee revenue, the company's revenue increased by 15% year-over-year to $92.9 million.

Medical Device Segment

The company's Medical Device segment reported revenue of $23.4 million in the third quarter, a 49% decrease from $46.0 million in the prior-year quarter. This decline was primarily driven by the decrease in SurVeil DCB license fee revenue. However, Medical Device product sales increased 15% to $10.7 million, and performance coating royalties and license fee revenue increased 13% to $9.3 million.

In Vitro Diagnostics Segment

Surmodics' In Vitro Diagnostics (IVD) segment reported revenue of $7.0 million in the third quarter, an 8% increase from $6.5 million in the prior-year quarter. IVD product sales increased 7% to $6.8 million, driven by broad-based growth in sales of colorimetric substrate, microarray slide/surface, and protein stabilization products.

Net Income and EBITDA

The company's GAAP net loss for the third quarter of fiscal 2024 was $7.6 million, compared to a net income of $7.3 million in the prior-year quarter. This was primarily due to the decrease in SurVeil DCB license fee revenue. Surmodics' adjusted EBITDA for the third quarter was $4.8 million, compared to an adjusted EBITDA loss of $1.5 million in the prior-year quarter.

For the first nine months of fiscal 2024, Surmodics reported a GAAP net loss of $8.1 million, compared to a net loss of $8.2 million in the same prior-year period. The company's annual net income for fiscal 2023 was -$1.5 million, and its annual revenue was $132.6 million. Surmodics' annual operating cash flow for fiscal 2023 was $10.5 million, and its annual free cash flow was $7.6 million.

Liquidity

Surmodics' balance sheet remains strong, with $38.2 million in cash and cash equivalents and available-for-sale investments as of June 30, 2024. The company also has access to approximately $65 million in additional borrowing capacity under its existing credit agreement.

Outlook

Looking ahead, Surmodics has raised its full-year fiscal 2024 guidance. The company now expects total revenue to range from $122 million to $124 million, representing a decrease of 8% to 6% compared to fiscal 2023. Excluding the SurVeil DCB license fee revenue, the company expects revenue to range from $118 million to $120 million, representing an increase of 15% to 17% over the prior year.

Surmodics' updated guidance for fiscal 2024 GAAP loss per diluted share is now expected to range from a loss of $0.90 to a loss of $0.70, compared to the prior range of a loss of $1.40 to a loss of $1.10. The company's non-GAAP loss per diluted share is expected to range from a loss of $0.67 to $0.47 per share, compared to the prior range of a loss of $1.17 to a loss of $0.87 per share.

The company's improved guidance reflects its strong performance in the second quarter, as well as its increased outlook for the remainder of the fiscal year. Surmodics expects its product revenue to be approximately 60% of total revenue in fiscal 2024, driven largely by contributions from its SurVeil DCB, Pounce thrombectomy, and Sublime radial access products.

Business Overview

Surmodics' Medical Device segment has been a key driver of the company's growth, with product sales increasing 32% year-over-year in the first nine months of fiscal 2024. This growth was primarily driven by the successful commercialization of the SurVeil DCB through the company's partnership with Abbott, as well as the strong performance of its Pounce thrombectomy and Sublime radial access product platforms.

In the IVD segment, Surmodics reported a 6% increase in revenue for the first nine months of fiscal 2024, driven by growth in IVD product sales. The company's performance coating royalties and license fee revenue also contributed to the overall revenue growth, increasing 17% year-over-year in the first nine months of fiscal 2024.

Surmodics' focus on developing and commercializing innovative medical devices and performance coating technologies has been a key part of its growth strategy. The company's recent launches of the Pounce Venous thrombectomy system and the Pounce Low Profile thrombectomy system have further expanded its vascular interventions portfolio, addressing large and underserved markets.

Risks and Challenges

The company's strong balance sheet and access to additional borrowing capacity provide it with the financial flexibility to continue investing in its growth initiatives and product development efforts. Surmodics' commitment to disciplined expense management and optimization of working capital has also contributed to its improved cash flow performance.

Conclusion

Overall, Surmodics' impressive third-quarter results and raised full-year guidance demonstrate the company's ability to execute on its strategic objectives and capitalize on the growth opportunities in the medical device and IVD markets. The company's diversified product portfolio, strong partnerships, and focus on innovation position it well for continued success in the years ahead.