Surmodics Reports Fourth Quarter Fiscal 2016 Results
- GAAP Revenue of $18.2 Million, up 5%
- GAAP EPS of $0.20, Non-GAAP EPS of $0.26
- Core Business Performs Well as Key Strategic Growth Priorities Advance
- Fiscal 2017 Revenue and EPS Guidance Outlined
Surmodics, Inc. (Nasdaq: SRDX), a leading provider of medical device and in vitro diagnostic technologies to the healthcare
industry, today announced results for its fiscal 2016 fourth quarter, ended September 30, 2016.
“The fourth quarter marked the continuation of the outstanding execution by the Surmodics team in fiscal 2016. I am proud of our
accomplishments as we surpassed our fiscal 2016 financial goals and successfully integrated the Creagh Medical and NorMedix teams
with Surmodics. We have also made significant progress on all key strategic growth priorities,” said Gary Maharaj, president and
chief executive officer. “Most notably, we have frozen the design of our first 510(k) product and completed an interim look at the
data from the investigational device exemption (IDE) study of our SurVeil® drug-coated balloon platform.”
Fourth Quarter Revenue and Earnings Summary
GAAP revenue for the fiscal 2016 fourth quarter totaled $18.2 million, compared with $17.4 million a year earlier. Fourth
quarter fiscal 2016 revenue included $1.3 million from Surmodics’ fiscal 2016 acquisitions.
Diluted GAAP earnings per share in the fourth quarter of fiscal 2016 were $0.20 compared with $0.10 a year ago. GAAP earnings
per share were impacted by increased research and development investments, accretion and amortization from acquisitions, and
included a $0.04 per share tax benefit related to the adoption of a new accounting standard related to accounting for income taxes
associated with stock-based compensation. On a non-GAAP basis, earnings per share were $0.26 in the fourth quarter of fiscal 2016
versus $0.34 last year.
Medical Device Segment
This segment, which includes hydrophilic coatings, device drug delivery technologies and balloon catheter products, posted
revenue of $13.7 million in the fourth quarter of fiscal 2016, an increase of 5% compared to the year-ago period. The gain stems
from higher reagent product sales and revenue from our fiscal 2016 acquisitions. Fiscal fourth quarter 2016 hydrophilic coating
royalty and license fee revenue totaled $8.0 million, a decrease of 13% percent compared to the year-earlier period,
reflecting the impact of the November 2015 expiration of U.S. patents covering Surmodics’ third-generation hydrophilic coatings.
The Medical Device business unit generated $4.2 million of operating income in the fourth quarter compared to $4.7 million in
the prior-year quarter. Planned increases in research and development expense, as well as acquisition-related amortization and
accretion expenses partly offset by higher revenue, accounted for the change in operating income.
Update on SurVeil Drug-Coated Balloon
Surmodics has completed an interim look at the data from its early feasibility study of the SurVeil drug-coated balloon.
This study is part of the Company’s strategy to move its medical device business from being solely a provider of coatings to
offering differentiated whole-product solutions to leading medical device customers. "The SurVeil drug-coated balloon is performing
well in the early feasibility study,” said Kenneth Rosenfield, M.D., M.H.C.D.S., at Massachusetts General Hospital in Boston, Mass.
and Chairman of the Surmodics Clinical Advisory Board, “I look forward to the next steps as Surmodics advances this important
technology on behalf of patients."
In Vitro Diagnostics Segment
Revenue for the fourth quarter of fiscal 2016 grew 5% to $4.5 million compared to the year-ago period. The IVD business unit
operating income increased to $1.8 million versus $1.3 million in the prior-year quarter. Operating income benefited from
improved operating leverage due to higher revenue and lower expenses.
Balance Sheet, Cash Flow, EBITDA and Capital Allocation
As of September 30, 2016, the Company had $46.9 million of cash and investments. Cash flows from operating activities aggregated
$25.2 million in fiscal 2016. Earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted for certain
discrete or non-operations items, totaled $26.5 million for fiscal 2016, an increase of 4.0% from fiscal 2015. Capital expenditures
totaled $8.2 million for fiscal 2016. In addition, the Company used $25.9 million of net cash to acquire Creagh Medical and
NorMedix in fiscal 2016.
Fiscal 2017 Outlook
“In fiscal 2016 we completed our three priorities: complete an acquisition to accelerate our transformation to providing
whole-product solutions to our medical device customers, move ahead with a drug-coated balloon first-in-human clinical trial, and
continue to deliver differentiated innovation and service in our core medical device and in vitro diagnostics businesses for
current and prospective customers,” said Maharaj. “We are very excited about the current status of our whole-product solutions
strategy and will build on this foundation in fiscal 2017 to make Surmodics a more valuable and relevant partner to our customers,
thereby delivering long-term shareholder value. Our capital allocation in fiscal 2017 to invest in research and development is a
well-thought-through execution of our whole-product solutions strategy.”
The Company estimates GAAP revenue for fiscal 2017 to be in the range of $63.0 million to $67.0 million. Surmodics anticipates
diluted GAAP earnings (loss) to be in the range of ($0.15) to $0.05 per share. The Non-GAAP earnings range is expected to
be from $0.15 to $0.35 per share. The Company’s earnings per share guidance includes an increase of approximately 50% in
research and development investment over fiscal 2016 levels, primarily to accelerate whole-product solutions development
initiatives. This investment in growth will likely be more heavily weighted to the second half of fiscal 2017 and reflects the
expected continued funding of the SurVeil drug-coated balloon technology for above-the-knee clinical studies.
Surmodics’ GAAP earnings per share guidance excludes the impact of gains and losses from strategic investment and foreign
currency translation adjustments related to the Company’s Euro denominated contingent consideration associated with the fiscal 2016
Creagh Medical acquisition. Capital expenditures for fiscal 2017 are projected to range between $7.0 million and $8.0 million
versus $8.2 million in fiscal 2016. The outlook assumes 13.5 million diluted shares outstanding and income tax expense of $2.0
million to $3.0 million. While dependent on market conditions and corporate development initiatives, the Company may buy back
common shares under its $30.0 million repurchase authorization; the guidance excludes any shares Surmodics may repurchase.
Live Webcast
Surmodics will host a webcast at 7:30 a.m. CT (8:30 a.m. ET) today to discuss fourth quarter results. To access the webcast, go
to the investor relations portion of the Company’s website at www.surmodics.com and click on the webcast icon. A replay of the fourth quarter conference call will be
available by dialing 888-203-1112 and entering conference call ID passcode 8067923. The audio replay will be available beginning at
10:30 a.m. CT today until 10:30 a.m. CT on Wednesday, November 23, 2016. In addition, the conference call audio and
transcript will be archived on the Company’s website following the call.
About Surmodics SurVeil Drug-Coated Balloon
The SurVeil drug-coated balloon incorporates Surmodics’ decades of experience as a leading supplier of surface
modification technologies to the medical device industry. It includes a Surmodics-proprietary drug-excipient formulation for the
balloon coating, and a new and proprietary manufacturing process for the coating applications. It also includes the Surmodics
Serene™ low-friction, low-particulate hydrophilic coating on the catheter shaft. The SurVeil drug-coated balloon is not
available for sale in the US and is for investigational use only. We completed an interim look at the data from the first-in-human
clinical trial using Surmodics SurVeil drug-coated balloon in the quarter ended September 30, 2016.
About Surmodics, Inc.
Surmodics is the global leader in surface modification technologies for intravascular medical devices and a leading provider of
chemical components for in vitro diagnostic (IVD) tests and microarrays. Following two recent acquisitions of Creagh Medical
and NorMedix, the Company is executing a key growth strategy for its medical device business by expanding to offer total
intravascular product solutions to its medical device customers. The combination of proprietary surface technologies, along with
enhanced device design, development and manufacturing capabilities, enables Surmodics to significantly increase the value it offers
with highly differentiated intravascular solutions designed and engineered to meet the most demanding requirements. With this focus
on offering total product solutions, Surmodics’ mission remains to improve the detection and treatment of disease by using its
technology to provide solutions to difficult medical device and diagnostic challenges. Surmodics is headquartered in Eden Prairie,
Minnesota. For more information about the Company, visit www.surmodics.com. The content of Surmodics’ website is not part of this press release or part of any filings
that the Company makes with the SEC.
Safe Harbor for Forward-Looking Statements
This press release contains forward-looking statements. Statements that are not historical or current facts, including
statements about beliefs and expectations regarding the Company’s performance in the near- and long-term, including our revenue,
earnings and cash flow expectations for fiscal 2017, our fiscal 2017 priorities, our strategy to become a provider of whole-product
solutions, such as those relating to our SurVeil drug-coated balloon and other proprietary products being developed, 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 (1) our ability to successfully develop, obtain
regulatory approval for, and commercialize our SurVeil drug-coated balloon product; (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) our ability to successfully identify, acquire, and integrate target companies, and
achieve expected benefits from acquisitions that are consummated; (4) possible adverse market conditions and possible adverse
impacts on our cash flows, and (5) 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, 2015, and updated in our subsequent reports filed with the SEC. These reports are available
in the Investors section of our website at www.surmodics.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 generally accepted accounting principles, or GAAP, Surmodics is
reporting non-GAAP financial results including adjusted EBITDA, non-GAAP operating income, non-GAAP income before income taxes,
non-GAAP net income, and non-GAAP diluted net income per share, and the non-GAAP effective tax rate. 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 payout under our
executive compensation programs. 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.
|
Surmodics, Inc. and Subsidiaries |
Condensed Consolidated Statements of Income |
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Years Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
|
|
(Unaudited) |
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
|
$ |
8,133 |
|
|
$ |
6,844 |
|
|
|
$ |
30,999 |
|
|
$ |
24,925 |
|
Royalties and license fees |
|
|
|
7,996 |
|
|
|
9,197 |
|
|
|
|
33,203 |
|
|
|
31,763 |
|
Research, development and other |
|
|
|
2,025 |
|
|
|
1,323 |
|
|
|
|
7,164 |
|
|
|
5,210 |
|
Total revenue |
|
|
|
18,154 |
|
|
|
17,364 |
|
|
|
|
71,366 |
|
|
|
61,898 |
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Product costs |
|
|
|
2,839 |
|
|
|
2,588 |
|
|
|
|
10,908 |
|
|
|
8,619 |
|
Research and development |
|
|
|
5,303 |
|
|
|
4,326 |
|
|
|
|
18,498 |
|
|
|
16,165 |
|
Selling, general and administrative |
|
|
|
5,011 |
|
|
|
3,519 |
|
|
|
|
18,000 |
|
|
|
14,906 |
|
Acquisition transaction, integration and other costs |
|
|
― |
|
|
― |
|
|
|
3,187 |
|
|
|
— |
|
Acquired intangible asset amortization |
|
|
|
482 |
|
|
|
165 |
|
|
|
|
2,422 |
|
|
|
619 |
|
Contingent consideration accretion expense |
|
|
|
436 |
|
|
― |
|
|
|
1,492 |
|
|
|
— |
|
Claim settlement |
|
|
― |
|
|
|
2,500 |
|
|
|
|
— |
|
|
|
2,500 |
|
Total operating costs and expenses |
|
|
|
14,071 |
|
|
|
13,098 |
|
|
|
|
54,507 |
|
|
|
42,809 |
|
Operating income |
|
|
|
4,083 |
|
|
|
4,266 |
|
|
|
|
16,859 |
|
|
|
19,089 |
|
Other income (loss), net |
|
|
|
17 |
|
|
|
(1,493 |
) |
|
|
|
89 |
|
|
|
(848 |
) |
Income from operations before income taxes |
|
|
|
4,100 |
|
|
|
2,773 |
|
|
|
|
16,948 |
|
|
|
18,241 |
|
Income tax provision |
|
|
|
(1,456 |
) |
|
|
(1,415 |
) |
|
|
|
(6,963 |
) |
|
|
(6,294 |
) |
Net income |
|
|
$ |
2,644 |
|
|
$ |
1,358 |
|
|
|
$ |
9,985 |
|
|
$ |
11,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per share: |
|
|
$ |
0.20 |
|
|
$ |
0.10 |
|
|
|
$ |
0.77 |
|
|
$ |
0.92 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per share: |
|
|
$ |
0.20 |
|
|
$ |
0.10 |
|
|
|
$ |
0.76 |
|
|
$ |
0.90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
13,088 |
|
|
|
12,934 |
|
|
|
|
12,998 |
|
|
|
13,029 |
|
Diluted |
|
|
|
13,408 |
|
|
|
13,190 |
|
|
|
|
13,219 |
|
|
|
13,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Surmodics, Inc. and Subsidiaries |
Condensed Consolidated Balance Sheets |
(in thousands)
|
|
|
|
|
|
|
|
September 30, |
|
|
|
2016 |
|
|
2015 |
Assets |
|
|
(Unaudited) |
Current Assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
|
$ |
24,987 |
|
|
$ |
55,588 |
Available-for-sale securities |
|
|
|
21,954 |
|
|
|
— |
Accounts receivable, net |
|
|
|
6,869 |
|
|
|
7,478 |
Inventories |
|
|
|
3,579 |
|
|
|
2,979 |
Prepaids and other |
|
|
|
1,169 |
|
|
|
1,744 |
Total Current Assets |
|
|
|
58,558 |
|
|
|
67,789 |
Property and equipment, net |
|
|
|
19,601 |
|
|
|
12,968 |
Deferred tax assets |
|
|
|
5,027 |
|
|
|
6,704 |
Intangible assets, net |
|
|
|
22,525 |
|
|
|
2,760 |
Goodwill |
|
|
|
26,555 |
|
|
|
8,010 |
Other assets |
|
|
|
628 |
|
|
|
479 |
Total Assets |
|
|
$ |
132,894 |
|
|
$ |
98,710 |
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
Current Liabilities |
|
|
|
10,135 |
|
|
|
4,700 |
Contingent consideration, less current portion |
|
|
|
13,592 |
|
|
|
— |
Other long-term liabilities |
|
|
|
2,334 |
|
|
|
2,137 |
Total Liabilities |
|
|
|
26,061 |
|
|
|
6,837 |
Total Stockholders’ Equity |
|
|
|
106,833 |
|
|
|
91,873 |
Total Liabilities and Stockholders’ Equity |
|
|
$ |
132,894 |
|
|
$ |
98,710 |
|
|
|
|
|
|
|
|
|
|
Surmodics, Inc. and Subsidiaries |
Supplemental Segment Information |
(in thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
|
2016 |
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
%
|
Revenue: |
|
|
|
|
|
% of Total |
|
|
|
|
|
% of Total |
|
|
Change
|
Medical Device |
|
|
$ |
13,702 |
|
|
|
75.5 |
% |
|
|
$ |
13,118 |
|
|
|
|
75.5 |
% |
|
|
4.5 |
% |
In Vitro Diagnostics |
|
|
|
4,452 |
|
|
|
24.5 |
% |
|
|
|
4,246 |
|
|
|
|
24.5 |
% |
|
|
4.9 |
% |
Total revenue |
|
|
$ |
18,154 |
|
|
|
|
|
$ |
17,364 |
|
|
|
|
|
|
4.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended September 30, |
|
|
|
2016 |
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
%
|
Revenue: |
|
|
|
|
|
% of Total |
|
|
|
|
|
% of Total |
|
|
Change
|
Medical Device |
|
|
$ |
53,202 |
|
|
|
74.5 |
% |
|
|
$ |
45,944 |
|
|
|
|
74.2 |
% |
|
|
15.8 |
% |
In Vitro Diagnostics |
|
|
|
18,164 |
|
|
|
25.5 |
% |
|
|
|
15,954 |
|
|
|
|
25.8 |
% |
|
|
13.9 |
% |
Total revenue |
|
|
$ |
71,366 |
|
|
|
|
|
$ |
61,898 |
|
|
|
|
|
|
15.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Years Ended |
|
|
|
|
|
|
September 30, |
|
|
September 30, |
|
|
|
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
|
|
Operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical Device |
|
|
$ |
4,150 |
|
|
$ |
4,687 |
|
|
|
$ |
16,975 |
|
|
|
$ |
21,192 |
|
|
|
|
In Vitro Diagnostics |
|
|
|
1,817 |
|
|
|
1,264 |
|
|
|
|
7,115 |
|
|
|
|
4,484 |
|
|
|
|
Total segment operating income |
|
|
|
5,967 |
|
|
|
5,951 |
|
|
|
|
24,090 |
|
|
|
|
25,676 |
|
|
|
|
Corporate |
|
|
|
(1,884 |
) |
|
|
(1,685 |
) |
|
|
|
(7,231 |
) |
|
|
|
(6,587 |
) |
|
|
|
Total income from operations |
|
|
$ |
4,083 |
|
|
$ |
4,266 |
|
|
|
$ |
16,859 |
|
|
|
$ |
19,089 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Surmodics, Inc. and Subsidiaries |
Reconciliation of GAAP Measures to Non-GAAP Amounts |
Schedule of Adjusted EBITDA |
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Years Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
|
|
(Unaudited) |
|
|
(Unaudited) |
Net Income |
|
|
$ |
2,644 |
|
|
|
$ |
1,358 |
|
|
$ |
9,985 |
|
|
|
$ |
11,947 |
|
Income tax provision |
|
|
|
1,456 |
|
|
|
|
1,415 |
|
|
|
6,963 |
|
|
|
|
6,294 |
|
Depreciation and Amortization |
|
|
|
1,170 |
|
|
|
|
723 |
|
|
|
4,875 |
|
|
|
|
2,805 |
|
EBITDA |
|
|
|
5,270 |
|
|
|
|
3,496 |
|
|
|
21,823 |
|
|
|
|
21,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition transaction, integration and other costs (1) |
|
|
|
— |
|
|
|
― |
|
|
|
3,187 |
|
|
|
― |
Contingent consideration expense (2) |
|
|
|
436 |
|
|
|
― |
|
|
|
1,492 |
|
|
|
― |
Foreign exchange loss (3) |
|
|
|
146 |
|
|
|
― |
|
|
|
481 |
|
|
|
― |
Impairment charge (4) |
|
|
― |
|
|
|
1,500 |
|
|
― |
|
|
|
1,500 |
|
Claim settlement (5) |
|
|
― |
|
|
|
2,500 |
|
|
― |
|
|
|
2,500 |
|
Gain on strategic investments (6) |
|
|
|
(136 |
) |
|
|
― |
|
|
|
(497 |
) |
|
|
|
(523 |
) |
Adjusted EBITDA |
|
|
$ |
5,716 |
|
|
|
$ |
7,496 |
|
|
$ |
26,486 |
|
|
|
$ |
25,523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities
|
|
|
$
|
6,671
|
|
|
|
$
|
2,990
|
|
|
$
|
25,166
|
|
|
|
$
|
15,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Estimated GAAP to Non-GAAP |
Net Income (Loss) per Common Share |
Fiscal 2017 Guidance
|
|
|
|
|
|
|
|
Year ending |
|
|
|
September 30, 2017 |
|
|
|
Estimated Diluted EPS |
|
|
|
Low |
|
|
High |
GAAP results |
|
|
$ |
(0.15 |
) |
|
|
$ |
0.05 |
Contingent consideration expense (2) |
|
|
|
0.15 |
|
|
|
|
0.15 |
Amortization of acquired intangibles (7) |
|
|
|
0.15 |
|
|
|
|
0.15 |
Non-GAAP results |
|
|
$ |
0.15 |
|
|
|
$ |
0.35 |
|
|
|
|
|
|
|
(1) |
|
|
Represents acquisition-related costs, including due diligence and integration
expenses. Due diligence and other fees include legal, tax, investment banker and other expenses associated with acquisitions
that can be highly variable and not representative of on-going operations. |
(2) |
|
|
Contingent consideration expense represents accounting adjustments to state
acquisition related contingent consideration liabilities at their estimated fair value. There is no impact for taxes in the net
income (loss) per share reconciliation as this expense is not deductible for income tax purposes. |
(3) |
|
|
Foreign exchange loss related to marking non-U.S. dollar contingent consideration to
period end exchange rates. |
(4) |
|
|
To exclude an impairment charge associated with a strategic investment in CeloNova
BioSciences, Inc. |
(5) |
|
|
To exclude the settlement of a customer claim. |
(6) |
|
|
Represents the gain recognized on the sale of a strategic investment. |
(7) |
|
|
Amortization of acquisition-related intangible assets, net of applicable tax. |
|
|
|
|
|
Surmodics, Inc., and Subsidiaries
|
|
Net Income and Diluted EPS GAAP to Non-GAAP Reconciliation
|
|
(in thousands, except per share data) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
Before
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Operating
|
|
|
Income
|
|
|
Income
|
|
|
Net |
|
|
Diluted
|
|
|
Effective
|
|
|
|
Revenue
|
|
|
Income
|
|
|
Percentage
|
|
|
Taxes
|
|
|
Income (7) |
|
|
EPS
|
|
|
tax rate
|
GAAP |
|
|
$ |
18,154 |
|
|
$ |
4,083 |
|
|
22.5 |
% |
|
|
$ |
4,100 |
|
|
|
$ |
2,644 |
|
|
|
$ |
0.20
|
|
|
|
35.5 |
% |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration accretion expense (1) |
|
|
― |
|
|
|
436 |
|
|
2.4 |
|
|
|
|
436 |
|
|
|
|
436 |
|
|
|
|
0.03 |
|
|
|
(3.4 |
) |
Foreign exchange loss (2) |
|
|
― |
|
|
― |
|
|
― |
|
|
|
|
146 |
|
|
|
|
146 |
|
|
|
|
0.01 |
|
|
|
(1.0 |
) |
Amortization of acquired intangible assets (3) |
|
|
― |
|
|
|
482 |
|
|
2.7 |
|
|
|
|
482 |
|
|
|
|
392 |
|
|
|
|
0.03 |
|
|
|
(1.2 |
) |
Gain on strategic investments (4) |
|
|
― |
|
|
― |
|
|
― |
|
|
|
|
(136 |
) |
|
|
|
(136 |
) |
|
|
|
(0.01 |
) |
|
|
0.8 |
|
Non-GAAP |
|
|
$ |
18,154 |
|
|
$ |
5,001 |
|
|
27.6 |
% |
|
|
$ |
5,028 |
|
|
|
$ |
3,482 |
|
|
|
$ |
0.26 |
|
|
|
30.7 |
% |
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
Before
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Operating
|
|
|
Income
|
|
|
Income
|
|
|
Net |
|
|
Diluted
|
|
|
Effective
|
|
|
|
Revenue
|
|
|
Income
|
|
|
Percentage
|
|
|
Taxes
|
|
|
Income (7) |
|
|
EPS
|
|
|
tax rate
|
GAAP |
|
|
$ |
17,364 |
|
|
$ |
4,266 |
|
|
24.6 |
% |
|
|
$ |
2,773 |
|
|
|
$ |
1,358 |
|
|
|
$ |
0.10
|
|
|
|
51.0
|
% |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets (3) |
|
|
― |
|
|
|
165 |
|
|
0.9 |
|
|
|
|
165 |
|
|
|
|
107 |
|
|
|
|
0.01 |
|
|
|
(1.3 |
) |
Impairment loss on strategic investment (5) |
|
|
― |
|
|
|
— |
|
|
— |
|
|
|
|
1,500 |
|
|
|
|
1,500 |
|
|
|
|
0.11 |
|
|
|
(16.5 |
) |
Claim settlement (6) |
|
|
― |
|
|
|
2,500 |
|
|
14.4 |
|
|
|
|
2,500 |
|
|
|
|
1,617 |
|
|
|
|
0.12 |
|
|
|
0.8 |
|
Non-GAAP |
|
|
$ |
17,364 |
|
|
$ |
6,931 |
|
|
39.9 |
% |
|
|
$ |
6,938 |
|
|
|
$ |
4,582 |
|
|
|
$ |
0.34 |
|
|
|
34.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
|
Represents accounting adjustments to state acquisition-related contingent
consideration liabilities at their estimated fair value. No income tax deductions were generated from these expenses as they
are considered a part of purchase price for income tax purposes. |
(2) |
|
|
Foreign exchange loss related to marking non-U.S. dollar contingent consideration
liabilities to period-end exchange rates. These losses are not deductible for income tax purposes. |
(3) |
|
|
Amortization of acquisition-related intangible assets and associated tax impact. No
income tax deductions were generated from a significant portion of fiscal 2016 amortization expense as it was offset by a net
operating loss carryforward valuation allowance. |
(4) |
|
|
Represents the gain recognized on the sale of strategic investments. The strategic
investment gains did not generate an income tax expense as there was an offsetting release of a capital loss valuation
allowance. |
(5) |
|
|
Represents an impairment charge associated with a strategic investment in CeloNova
BioSciences, Inc. This loss was not deductible for income tax purposes as the Company is in a capital loss carryforwards
position. |
(6) |
|
|
Represents a customer claim settlement. |
(7) |
|
|
Net income includes the effect of the above adjustments on the income tax provision,
taking into account deferred taxes and non-deductible items. An effective rate between 34-35% was used to estimate the income
tax impact of the adjustments. |
|
|
|
|
|
Surmodics, Inc., and Subsidiaries |
Net Income and Diluted EPS GAAP to Non-GAAP Reconciliation |
|
(in thousands, except per share data)
|
|
(unaudited)
|
|
|
|
|
|
|
|
For the Year Ended September 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
Before
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Operating |
|
|
Income
|
|
|
Income
|
|
|
Income
|
|
|
Diluted |
|
|
Effective
|
|
|
|
Revenue |
|
|
Income |
|
|
Percentage |
|
|
Taxes
|
|
|
(10)
|
|
|
EPS |
|
|
tax rate
|
GAAP |
|
|
$ |
71,366 |
|
|
$ |
16,859 |
|
|
23.6 |
% |
|
|
$ |
16,948 |
|
|
|
$ |
9,985 |
|
|
|
$ |
0.76 |
|
|
|
41.1 |
% |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition transaction, integration and other costs (1) |
|
|
― |
|
|
|
3,187 |
|
|
4.5 |
|
|
|
|
3,187 |
|
|
|
|
2,860 |
|
|
|
|
0.22 |
|
|
|
(4.9 |
) |
Contingent consideration expense (2) |
|
|
― |
|
|
|
1,492 |
|
|
2.1 |
|
|
|
|
1,492 |
|
|
|
|
1,492 |
|
|
|
|
0.11 |
|
|
|
(2.5 |
) |
Foreign exchange loss (3) |
|
|
― |
|
|
― |
|
|
— |
|
|
|
|
481 |
|
|
|
|
481 |
|
|
|
|
0.03 |
|
|
|
(0.7 |
) |
Research and development tax credit (4) |
|
|
― |
|
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
(222 |
) |
|
|
|
(0.02 |
) |
|
|
1.0 |
|
Amortization of acquired intangible assets (5) |
|
|
― |
|
|
|
2,422 |
|
|
3.4 |
|
|
|
|
2,422 |
|
|
|
|
2,047 |
|
|
|
|
0.15 |
|
|
|
(1.9 |
) |
Gain on strategic investment (6) |
|
|
― |
|
|
|
— |
|
|
— |
|
|
|
|
(497 |
) |
|
|
|
(497 |
) |
|
|
|
(0.04 |
) |
|
|
0.7 |
|
Non-GAAP |
|
|
$ |
71,366 |
|
|
$ |
23,960 |
|
|
33.6 |
% |
|
|
$ |
24,033 |
|
|
|
$ |
16,146 |
|
|
|
$ |
1.21 |
|
|
|
32.8 |
% |
|
|
|
|
|
|
|
For the Year Ended September 30, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
Before
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Operating |
|
|
Income
|
|
|
Income
|
|
|
Income
|
|
|
Diluted |
|
|
Effective
|
|
|
|
Revenue |
|
|
Income |
|
|
Percentage
|
|
|
Taxes
|
|
|
(10)
|
|
|
EPS |
|
|
tax rate
|
GAAP |
|
|
$ |
61,898 |
|
|
$ |
19,089 |
|
|
30.8 |
% |
|
|
$ |
18,241 |
|
|
|
$ |
11,947 |
|
|
|
$ |
0.90 |
|
|
|
34.5 |
% |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets (5) |
|
|
― |
|
|
|
619 |
|
|
1.1 |
|
|
|
|
619 |
|
|
|
|
401 |
|
|
|
|
0.02 |
|
|
|
(0.0 |
) |
Gain on strategic investment (6) |
|
|
― |
|
|
― |
|
|
― |
|
|
|
|
(523 |
) |
|
|
|
(523 |
)
|
|
|
|
(0.04 |
)
|
|
|
1.0 |
|
Impairment loss on strategic investment (7) |
|
|
― |
|
|
― |
|
|
― |
|
|
|
|
1,500 |
|
|
|
|
1,500 |
|
|
|
|
0.11 |
|
|
|
(2.7 |
) |
Claim settlement (8) |
|
|
― |
|
|
|
2,500 |
|
|
4.0 |
|
|
|
|
2,500 |
|
|
|
|
1,617 |
|
|
|
|
0.12 |
|
|
|
0.3 |
|
Research and development tax credit (9) |
|
|
― |
|
|
― |
|
|
― |
|
|
|
― |
|
|
|
|
(201
|
)
|
|
|
|
(0.02 |
)
|
|
|
0.9 |
|
Non-GAAP |
|
|
$ |
61,898 |
|
|
$ |
22,208 |
|
|
35.9 |
% |
|
|
$ |
22,337 |
|
|
|
$ |
14,741 |
|
|
|
$ |
1.09 |
|
|
|
34.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
|
Represents acquisition-related costs, including due diligence and integration
expenses. Due diligence and other fees include legal, tax, investment banker and other expenses associated with acquisitions
that can be highly variable and not representative of on-going operations. |
(2) |
|
|
Represents accounting adjustments to state acquisition-related contingent
consideration liabilities at their estimated fair value. No income tax deductions were generated from these expenses as they
are considered a part of purchase price for income tax purposes. |
(3) |
|
|
Foreign exchange loss related to marking non-U.S. dollar contingent consideration to
period end exchange rates. These losses are not deductible for income tax purposes. |
(4) |
|
|
Represents a discrete income tax benefit associated with the December 2015 signing of
the Protecting Americans from Tax Hikes Act of 2015, which retroactively reinstated federal R&D income tax credits for
calendar 2015. |
(5) |
|
|
Amortization of acquisition-related intangible assets and associated tax impact. No
income tax deductions were generated from a significant portion of fiscal 2016 amortization expense as it was offset by a net
operating loss carryforward valuation allowance. |
(6) |
|
|
Represents the gain recognized on the sale and contingent consideration received from
strategic investments. The strategic investment gains did not generate an income tax expense as there was an offsetting release
of a capital loss valuation allowance. |
(7) |
|
|
Represents a fourth-quarter impairment charge associated with a strategic investment
in CeloNova BioSciences, Inc. This loss was not deductible for income tax purposes as the Company is in a capital loss
carryforwards position. |
(8) |
|
|
Represents a fourth-quarter customer claim settlement. |
(9) |
|
|
Represents a discrete income tax benefit associated with the December 2014 signing of
the Tax Increase Prevention Act of 2014, which retroactively reinstated federal R&D income tax credits for calendar
2014. |
(10) |
|
|
Net income includes the effect of the above adjustments on the income tax provision,
taking into account deferred taxes and non-deductible items. An effective rate between 34-35% was used to estimate the income
tax impact of the adjustments. |
|
|
|
|
Surmodics, Inc.
Andy LaFrence, 952-500-7000
Vice President of Finance
and Information Systems and
Chief Financial Officer
View source version on businesswire.com: http://www.businesswire.com/news/home/20161116005504/en/