Surmodics, Inc.
SRDX
delivered adjusted loss per share of 22 cents in the fiscal second quarter of 2022 against the year-ago quarter’s adjusted earnings per share (“EPS”) of 62 cents. The figure was narrower than the Zacks Consensus Estimate of a loss of 32 cents per share.
GAAP loss per share for the quarter was 29 cents against the year-earlier EPS of 58 cents per share.
Revenues in Detail
Surmodics registered revenues of $26.1 million in the fiscal second quarter, down 25.4% year over year. The figure surpassed the Zacks Consensus Estimate by 6.9%.
On a sequential basis, the top line improved 13%.
The top line was boosted by solid year-over-year product sales growth from both the Medical Device and In-Vitro Diagnostics (“IVD”) businesses.
Segmental Analysis
Surmodics operates via two reportable segments — Medical Device and IVD.
In the reported quarter, sales at the Medical Device segment summed $18.5 million, down 33.9% from the year-ago quarter. Per management, despite the year-over-year fall in revenues, it exceeded Surmodics expectations due to the strength of its product and royalty revenue performance.
In the quarter under review, IVD sales improved by 7.9% to $ 7.7 million on the back of broad-based year-over-year growth across its entire portfolio of product offerings.
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 $13.9 million, up 18.5% from the prior-year quarter. Royalties and license fees revenues totaled $9.8 million, down 50.9% from the prior-year quarter. Research, development and other revenues were $2.3 million, down 27.3% year over year.
Surmodics, Inc. Price, Consensus and EPS Surprise
Surmodics, Inc. price-consensus-eps-surprise-chart
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Surmodics, Inc. Quote
Margin Trend
In the quarter under review, Surmodics’ gross profit fell 31.9% to $20.9 million. Gross margin contracted 765 basis points (bps) to 80.4%.
Selling, general & administrative expenses rose 40.6% to $11.1 million. Research and development expenses went up 6.5% year over year to $13.7 million. Adjusted operating expenses of $24.8 million rose 19.5% year over year.
Adjusted operating loss totaled $3.8 million against the prior-year quarter’s adjusted operating income of $10 million.
Financial Position
Surmodics exited the fiscal 2022 second quarter with cash and cash equivalents of $24.7 million compared with $26.7 million at the end of fiscal 2022 first quarter. The company ended the quarter with no debt on its balance sheet.
Cumulative net cash used in operating activities at the end of the fiscal second quarter was $11.2 million against net cash provided by operating activities of $11.7 million a year ago.
Fiscal 2022 Guidance
Surmodics has revised its full-year financial outlook.
The company now projects current fiscal year revenues to be within the range of $98 million-$101 million, narrowed down from the earlier-projected range of $97 million-$101 million. The Zacks Consensus Estimate for the same is currently pegged at $99 million.
Adjusted diluted loss per share for fiscal 2022 is now expected within the range of $1.42-$1.07, compared with the earlier-provided projection of a loss of $1.75-$1.25. The Zacks Consensus Estimate for the same is currently pegged at a loss of $1.10 per share.
Our Take
Surmodics exited the second quarter of fiscal 2022 with better-than-expected results. The company registered robust revenues from its IVD segment, as well as from Product sales. Surmodics confirmed making crucial progress on its SurVeil drug-coated balloon premarket approval submission. Strong potential in the company’s Sublime Radial Access device and Pounce Arterial Thrombectomy platform raise our optimism about the stock.
However, the company reported dismal year-over-year top and bottom-line results, which are concerning. Lower revenues from the Medical Device segment, as well as lower royalties and license fees, and research, development and other revenues, are discouraging. Gross margin contraction also does not bode well for the stock. Surmodics incurred operating loss in the reported quarter, which further raises our apprehension.
Zacks Rank and Key Picks
Surmodics currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are
Qiagen N.V.
QGEN
,
UnitedHealth Group Incorporated
UNH
and
Alkermes plc
ALKS
.
Qiagen, carrying a Zacks Rank #2 (Buy), reported first-quarter 2022 adjusted EPS of 80 cents, which beat the Zacks Consensus Estimate by 12.7%. Revenues of $628.4 million outpaced the consensus mark by 6.5%. You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Qiagen has an estimated long-term growth rate of 11.5%. QGEN’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 11.7%.
UnitedHealth, having a Zacks Rank #2, reported first-quarter 2022 adjusted EPS of $5.49, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $80.1 billion outpaced the consensus mark by 1.9%.
UnitedHealth has an estimated long-term growth rate of 14.8%. UNH’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%.
Alkermes reported first-quarter 2022 adjusted EPS of 12 cents, which surpassed the Zacks Consensus Estimate of a penny. First-quarter revenues of $278.6 million outpaced the Zacks Consensus Estimate by 6.2%. It currently sports a Zacks Rank #1.
Alkermes has an estimated long-term growth rate of 25.1%. ALKS’s earnings surpassed estimates in the trailing four quarters, the average surprise being 350.5%.
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