Surmodics, Inc (SRDX) Q1 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals mixed signals: strong growth in R&D revenue and a significant reduction in net loss are positive, but declining gross margins and cautious guidance for upcoming quarters are concerning. The Q&A highlights early optimism but lacks concrete data on new product impacts, with management avoiding specifics. No strong catalysts like new partnerships or record revenues were mentioned, and guidance suggests a sequential revenue decline. Without market cap data, a neutral prediction is prudent, given the balance of positive and negative factors.
Key Financial Performance
Total Revenue $30.6 million, a 23% increase year-over-year. Excluding SurVeil DCB license fee revenue, total revenue increased 25% year-over-year.
Medical Device Segment Revenue $23.5 million, a 24% increase year-over-year. Including the headwind from SurVeil DCB license fee revenue, it increased 27%.
IVD Segment Revenue $7 million, an 18% increase year-over-year.
Product Revenue $18.8 million, a 32% increase year-over-year.
Medical Device Product Revenue $12 million, a 43% increase year-over-year, driven by initial SurVeil DCB stocking order and increased sales of Pounce thrombectomy.
IVD Product Revenue $6.9 million, a 17% increase year-over-year, benefiting from flu season demand and normalized purchasing patterns.
Royalty and License Fee Revenue $9.2 million, a 5% increase year-over-year.
Performance Coating Royalty and License Fee Revenue $8.2 million, a 10% increase year-over-year, driven by customer utilization of Serene coating.
SurVeil DCB License Fee Revenue $1 million, a 25% decrease year-over-year, corresponding to decreased clinical trial costs.
R&D Services Revenue $2.5 million, a 32% increase year-over-year, due to increased customer demand.
Product Gross Margin 53.2%, down from 63% year-over-year, impacted by product mix and production inefficiencies.
R&D Expense $8.7 million, a 32% decrease year-over-year, reflecting lower clinical costs and spending reduction plan.
SG&A Expense $12.5 million, a 5% decrease year-over-year, due to lower headcount and timing of investments.
Operating Loss (Medical Device Business) $220,000, improved from a loss of $7.2 million year-over-year, due to expense savings and revenue growth.
Operating Income (IVD Business) $3.1 million, or 45% of IVD revenue, compared to $2.9 million or 50% of IVD revenue in the prior year.
GAAP Net Loss $790,000, or a loss of $0.06 per diluted share, improved from a net loss of $7.8 million or a loss of $0.56 per diluted share year-over-year.
Non-GAAP Adjusted EBITDA $3.9 million, compared to an adjusted EBITDA loss of $3.3 million in the prior year.
Cash and Cash Equivalents at End of Quarter $35.2 million, down from $45.4 million at the beginning of the quarter.
Total Cash Used in First Quarter $10.2 million, with cash used in operating activities of $8.8 million and capital expenditures of $720,000.
Long-term Debt $29.4 million, unchanged during the first quarter.
Operating Highlights
SurVeil DCB: Generated first commercial revenue as shipments began in October to Abbott, with a January launch.
Pounce Thrombectomy: Sales contributed significantly to the 43% growth in the medical device segment.
Preside Hydrophilic Coatings: Secured first 510(k) clearance and initiated commercial launch, designed for neurovascular and vascular devices.
Pounce Arterial LP: Initiated limited market evaluation, designed for smaller diameter vessels, with positive initial clinical feedback.
Market Positioning of SurVeil DCB: Positioned as the next generation of drug-coated balloons, supported by clinical data presented at the VEITHsymposium.
Market Awareness Initiatives: Sponsored supplements in Endovascular Today to raise awareness of Sublime and Pounce products.
Revenue Growth: Total revenue grew 23% year-over-year to $30.6 million, driven by strong performance in both medical device and IVD segments.
Adjusted EBITDA: Improved to $3.9 million, a $7.2 million increase compared to the previous year.
Strategic Objectives for FY 2024: Focus on growth in vascular interventions, durable revenue growth in core businesses, and development of new products.
Risk or Challenges
Competitive Pressures: Surmodics faces significant competition in the vascular interventions market, particularly with the introduction of their SurVeil DCB product, which competes against established products like the IN.PACT Admiral DCB.
Regulatory Issues: The company is navigating regulatory challenges associated with the commercialization of new products, including the SurVeil DCB and Pounce systems, which require ongoing clinical evaluations and compliance with FDA regulations.
Supply Chain Challenges: The company previously experienced supply chain challenges that impacted their R&D services revenue, although they reported improvements in the current quarter.
Economic Factors: The company is affected by broader economic conditions, including fluctuations in demand for their products, which can be influenced by seasonal factors such as flu season and the return to normalized purchasing patterns post-COVID.
Cash Utilization: Surmodics anticipates a decrease in cash and investments for fiscal 2024, reflecting ongoing cash utilization for working capital needs and investments in product development.
Product Gross Margin: The product gross margin has been adversely impacted due to the sales mix, with newer products like SurVeil DCB and Pounce not yet achieving scale, leading to production inefficiencies.
Guidance & Outlook
Strategic Objective 1: Capitalize on key near-term growth catalysts in vascular interventions portfolio, including SurVeil DCB, Pounce thrombectomy, and Sublime radial access products.
Strategic Objective 2: Drive durable revenue growth and cash flow generation across core medical device performance coatings and IVD business.
Strategic Objective 3: Facilitate long-term growth by developing and introducing new products and line extensions.
Fiscal 2024 Total Revenue Guidance: Expected to range from $117 million to $121 million, a decrease of 12% to 9%.
Fiscal 2024 Revenue Excluding SurVeil DCB License Fees: Expected to range from $113 million to $117 million, representing an increase of 10% to 14%.
Fiscal 2024 GAAP Loss Per Diluted Share Guidance: Expected to range from a loss of $1.40 to a loss of $1.10.
Fiscal 2024 Non-GAAP Loss Per Diluted Share Guidance: Expected to range from a loss of $1.17 to a loss of $0.87.
Second Quarter Revenue Guidance: Expected to range from approximately $28.5 million to $29.5 million, representing an increase of approximately 5% to 8%.
Fiscal 2024 Cash Utilization: Expected year-over-year decrease in cash and investments to range from approximately $17 million to $13 million.
Shareholder Return Plan
Shareholder Return Plan: Surmodics has not announced any share buyback program or dividend program during the earnings call.
Key Q&A
Earnings Word Cloud
SRDX Transcript
The earnings call summary indicates strong product sales growth, particularly in the Vascular Interventions portfolio, and a positive response to new product launches. Despite a decrease in IVD revenue, overall financial guidance for fiscal 2024 remains optimistic, with expected revenue growth and cash flow improvements. The partnership with Abbott and consistent demand for SurVeil DCB further support a positive outlook. However, management's reluctance to provide specific details and guidance on international sales may temper expectations slightly, resulting in a 'Positive' sentiment rating.
The earnings call reveals mixed signals: strong growth in R&D revenue and a significant reduction in net loss are positive, but declining gross margins and cautious guidance for upcoming quarters are concerning. The Q&A highlights early optimism but lacks concrete data on new product impacts, with management avoiding specifics. No strong catalysts like new partnerships or record revenues were mentioned, and guidance suggests a sequential revenue decline. Without market cap data, a neutral prediction is prudent, given the balance of positive and negative factors.
SRDX Report
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