Core Insights - Surmodics, Inc. (SRDX) reported adjusted earnings per share (EPS) of 6 cents for Q3 fiscal 2025, a significant improvement from a loss of 27 cents in the same quarter last year and better than the Zacks Consensus Estimate of a loss of 21 cents [1] - The company’s total revenues for the quarter were $29.6 million, reflecting a year-over-year decline of 2.6%, but exceeding the Zacks Consensus Estimate by 4.3% [2][4] - Surmodics has revised its fiscal 2025 revenue guidance, now expecting total revenues between $116.5 million and $118.5 million, which indicates a decrease of 8-6% compared to the previous fiscal year [12][13] Revenue Analysis - Total revenues included $0.0 million from SurVeil drug-coated balloon (DCB) license fees, down from $1.1 million in Q3 fiscal 2024, attributed to the completion of the TRANSCEND clinical trial [2][4] - Excluding SurVeil DCB license fees, total revenues increased by 1% year-over-year to $29.6 million [3] - The Medical Device segment reported sales of $22.2 million, a decrease of 4.9% from the previous year, while In Vitro Diagnostics (IVD) sales improved by 5.7% to $7.4 million [5][6] Segment Performance - Product sales were $16.8 million, down 4.6% year-over-year, while royalties and license fees totaled $9.7 million, a decline of 7.7% [7] - Research, development, and other revenues increased by 35.7% to $3.1 million [8] - The decrease in SurVeil DCB product sales revenues was $1.7 million year-over-year, primarily due to lower demand from Abbott, Surmodics' exclusive distribution partner [4] Margin and Expense Trends - Gross profit decreased by 4.1% year-over-year to $20.9 million, with a gross margin contraction of 116 basis points to 70.9% [9] - Selling, general, and administrative expenses rose by 6.8% to $17.8 million, while research and development expenses fell by 22.4% to $7.6 million [10] Financial Position - Surmodics ended Q3 fiscal 2025 with cash and cash equivalents of $26.3 million, down from $29.2 million at the end of the previous quarter [11] - Total long-term debt slightly increased to $29.67 million from $29.63 million [11] Future Guidance - The company anticipates a decrease of $3.6 million in SurVeil DCB license fee revenues for fiscal 2025, with no further recognition of these revenues after March 31, 2025 [14] - Adjusted loss per share for fiscal 2025 is now projected to be between 35 and 20 cents, an improvement from the previous outlook of 62 to 42 cents [15]

Core Insights - SurModics reported revenue of $29.57 million for the quarter ended June 2025, a decrease of 2.6% year-over-year, but exceeded the Zacks Consensus Estimate by 4.29% [1] - The company achieved an EPS of $0.06, a significant improvement from -$0.27 in the same quarter last year, resulting in an EPS surprise of 128.57% compared to the consensus estimate of -$0.21 [1] Revenue Breakdown - Product sales amounted to $16.76 million, surpassing the average estimate of $15.69 million, but reflecting a year-over-year decline of 4.6% [4] - Revenue from research, development, and other sources was $3.15 million, exceeding the average estimate of $2.37 million, marking a year-over-year increase of 35.7% [4] - Royalties and license fees generated $9.66 million, slightly below the estimated $10.2 million, representing a year-over-year decrease of 7.7% [4] Stock Performance - SurModics shares have returned +12.9% over the past month, outperforming the Zacks S&P 500 composite's +1.9% change [3] - The stock currently holds a Zacks Rank 5 (Strong Sell), indicating potential underperformance relative to the broader market in the near term [3]

Company Performance - SurModics reported quarterly earnings of $0.06 per share, exceeding the Zacks Consensus Estimate of a loss of $0.21 per share, and improved from a loss of $0.27 per share a year ago, representing an earnings surprise of +128.57% [1] - The company posted revenues of $29.57 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 4.29%, although this is a decline from year-ago revenues of $30.34 million [2] - Over the last four quarters, SurModics has surpassed consensus EPS estimates three times and topped consensus revenue estimates two times [2] Stock Outlook - SurModics shares have declined approximately 11.6% since the beginning of the year, contrasting with the S&P 500's gain of 7.8% [3] - The current consensus EPS estimate for the upcoming quarter is -$0.18 on revenues of $29.98 million, and for the current fiscal year, it is -$0.57 on revenues of $116.33 million [7] - The estimate revisions trend for SurModics was unfavorable prior to the earnings release, resulting in a Zacks Rank 5 (Strong Sell) for the stock, indicating expected underperformance in the near future [6] Industry Context - The Medical - Products industry, to which SurModics belongs, is currently ranked in the bottom 39% of over 250 Zacks industries, suggesting that the outlook for the industry can significantly impact stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Unaudited Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Unaudited financial statements for Q3 2025 show decreased assets, increased net loss to **$14.2 million**, and higher cash usage [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to **$169.8 million** by June 30, 2025, driven by lower cash and equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 (Unaudited) | September 30, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $26,281 | $36,115 | | Total Current Assets | $75,994 | $81,304 | | Total Assets | $169,822 | $178,562 | | **Liabilities & Equity** | | | | Total Current Liabilities | $19,441 | $20,543 | | Long-term debt, net | $29,666 | $29,554 | | Total Liabilities | $58,513 | $59,665 | | Total Stockholders' Equity | $111,309 | $118,897 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q3 revenue slightly decreased to **$29.6 million**, with a **$5.3 million** net loss; nine-month net loss widened to **$14.2 million** Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $29,567 | $30,341 | $87,574 | $92,851 | | Operating (loss) income | $(5,242) | $(5,369) | $(11,733) | $(5,032) | | Net (loss) income | $(5,318) | $(7,554) | $(14,178) | $(8,093) | | Diluted net (loss) per share | $(0.37) | $(0.53) | $(0.99) | $(0.57) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Nine-month operating cash usage increased to **$5.5 million**; cash and equivalents ended at **$26.3 million** Cash Flow Summary (Nine Months Ended June 30, in thousands) | Cash Flow Activity | 2025 (Unaudited) | 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(5,540) | $(3,410) | | Net cash (used in) provided by investing activities | $(3,515) | $(12,395) | | Net cash (used in) provided by financing activities | $(1,184) | $(1,388) | | Net change in cash and cash equivalents | $(9,834) | $(17,118) | | Cash and Cash Equivalents, End of period | $26,281 | $24,301 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail pending merger, FTC litigation, cyber incident costs, and deferred tax asset valuation allowance - On May 28, 2024, Surmodics entered into a merger agreement to be acquired by BCE Parent, LLC for **$43.00 per share** in cash. The merger is subject to litigation by the Federal Trade Commission (FTC)[17](index=17&type=chunk)[77](index=77&type=chunk)[81](index=81&type=chunk) - The company's SurVeil™ drug-coated balloon (DCB) received FDA premarket approval in June 2023 and is marketed in the U.S. by Abbott. Revenue from this collaborative arrangement includes product sales and a share of net profits[28](index=28&type=chunk)[32](index=32&type=chunk) - In June 2025, the company experienced a cyber incident involving unauthorized access to its IT systems. It incurred **$1.9 million** in response costs, of which **$1.7 million** is expected to be recovered under its insurance policy[69](index=69&type=chunk)[70](index=70&type=chunk) - The company maintains a full valuation allowance against its U.S. net deferred tax assets as of June 30, 2025, determining it is more likely than not that these assets will not be realized[62](index=62&type=chunk)[117](index=117&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q3 revenue decline, lower Medical Device sales, **$5.3 million** merger charges, and sufficient liquidity [Results of Operations](index=27&type=section&id=Results%20of%20Operations) Q3 revenue decreased **3%** to **$29.6 million**, driven by lower Medical Device sales; gross margin declined to **48.8%** Revenue by Segment (in thousands) | Segment | Q3 2025 | Q3 2024 | % Change | YTD 2025 | YTD 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Medical Device | $22,214 | $23,383 | (5)% | $66,204 | $71,754 | (8)% | | In Vitro Diagnostics | $7,353 | $6,958 | 6% | $21,370 | $21,097 | 1% | | **Total Revenue** | **$29,567** | **$30,341** | **(3)%** | **$87,574** | **$92,851** | **(6)%** | - Medical Device product sales decreased **11%** in Q3 and **19%** in the first nine months of fiscal 2025, primarily due to a **$1.7 million** (Q3) and **$6.4 million** (YTD) decrease in SurVeil DCB product sales[100](index=100&type=chunk) - SG&A expenses increased by **7%** in Q3 and **14%** YTD, largely driven by merger-related charges of **$5.3 million** and **$10.1 million** for the respective periods[110](index=110&type=chunk) - R&D expenses decreased by **22%** in Q3 and **13%** YTD, partly due to a **$1.1 million** refund for costs associated with the TRANSCEND clinical trial and reduced development costs for the Pounce platform[109](index=109&type=chunk) [Segment Operating Results](index=32&type=section&id=Segment%20Operating%20Results) Medical Device operating loss narrowed to **$0.2 million**; Corporate segment loss widened to **$8.3 million** due to merger charges Operating (Loss) Income by Segment (in thousands) | Segment | Q3 2025 | Q3 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Medical Device | $(211) | $(2,288) | $(1,915) | $(2,210) | | In Vitro Diagnostics | $3,295 | $3,153 | $9,554 | $9,633 | | Corporate | $(8,326) | $(6,234) | $(19,372) | $(12,455) | | **Total Operating (Loss) Income** | **$(5,242)** | **$(5,369)** | **$(11,733)** | **$(5,032)** | [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and investments totaled **$32.7 million**; company has a **$25 million** term loan and revolver, with sufficient liquidity - Cash and available-for-sale investments totaled **$32.7 million** as of June 30, 2025[122](index=122&type=chunk) - The company has a **$25 million** term loan and a **$25 million** revolving credit facility, with **$5 million** drawn on the revolver as of June 30, 2025[123](index=123&type=chunk)[125](index=125&type=chunk) - Management anticipates that existing cash, cash flow from operations, and the revolving credit facility will provide sufficient liquidity for fiscal 2025[126](index=126&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risks are interest rate and foreign currency, with a swap mitigating term loan interest rate risk - The company entered into a five-year interest rate swap to fix the interest rate on its **$25.0 million** term loan at **10.205%** through maturity, mitigating exposure to floating rates tied to Term SOFR[136](index=136&type=chunk) - The company is exposed to Euro currency risk from its Irish manufacturing operations and from the SurVeil DCB transfer price, which is denominated in Euros[138](index=138&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls - The company's Certifying Officers concluded that as of June 30, 2025, disclosure controls and procedures were effective[139](index=139&type=chunk) - No material changes were made to the internal control over financial reporting during the three months ended June 30, 2025[140](index=140&type=chunk) [PART II. OTHER INFORMATION](index=40&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in FTC litigation regarding its pending acquisition, which the FTC seeks to block - The company is involved in litigation with the Federal Trade Commission (FTC) regarding the pending acquisition by an affiliate of GTCR LLC[141](index=141&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) A new risk factor highlights a June 2025 cyber incident, causing system unavailability and potential future liabilities - A new risk factor has been identified related to a cyber incident on June 5, 2025, where a threat actor gained unauthorized access to the company's IT systems[144](index=144&type=chunk) - The company remains subject to various risks from the incident, including potential litigation, changes in customer behavior, and regulatory scrutiny[144](index=144&type=chunk)[145](index=145&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Repurchased **1,018 shares** for tax obligations; **$25.3 million** authorized for buybacks, but credit agreement restricts activity - In Q3 FY2025, **1,018 shares** were repurchased to satisfy employee tax withholding obligations on vested restricted stock[148](index=148&type=chunk) - The company has **$25.3 million** remaining under its stock repurchase authorization, but its ability to repurchase is restricted by its credit agreement[149](index=149&type=chunk)

[Q3 FY2025 Financial & Business Highlights](index=1&type=section&id=Q3%20FY2025%20Financial%20%26%20Business%20Highlights) Surmodics reported a 3% year-over-year revenue decrease to $29.6 million in Q3 FY2025, but improved GAAP net loss and more than doubled Adjusted EBITDA [Financial Summary](index=1&type=section&id=Financial%20Summary) Surmodics' Q3 FY2025 revenue decreased 3% to $29.6 million, but profitability improved with a narrower GAAP net loss and significantly higher Adjusted EBITDA Q3 FY2025 Financial Metrics | Metric | Q3 FY2025 | Q3 FY2024 | Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | $29.6 million | $30.3 million | -3% YoY | | **Total Revenue (ex-SurVeil DCB license fee)** | $29.6 million | $29.2 million | +1% YoY | | **GAAP Net Loss** | $(5.3) million | $(7.6) million | Improved | | **Adjusted EBITDA** | $3.4 million | $1.6 million | +112% YoY | [Business & Strategic Highlights](index=1&type=section&id=Business%20%26%20Strategic%20Highlights) Despite a decline in SurVeil DCB revenue, Surmodics achieved growth in Pounce Thrombectomy and IVD, focusing on product growth, expense control, and the pending GTCR acquisition - The Pounce Thrombectomy Platform sales grew **35% year-over-year**, while the In Vitro Diagnostics (IVD) segment revenue increased by **6%**[3](index=3&type=chunk) - The company's strategic priorities are facilitating long-term product growth, controlling expenses, and completing the pending acquisition by GTCR[3](index=3&type=chunk) - Surmodics announced the full commercial release of the Pounce XL Thrombectomy System for clot removal in iliac and femoral arteries[4](index=4&type=chunk) - The company is actively working to respond to the FTC's administrative complaint and federal court action challenging the proposed merger with an affiliate of GTCR[3](index=3&type=chunk) [Detailed Financial Performance](index=2&type=section&id=Detailed%20Financial%20Performance) This section provides an in-depth analysis of Surmodics' Q3 FY2025 revenue, profitability, balance sheet, and cash flow performance [Revenue Analysis](index=2&type=section&id=Revenue%20Analysis) Q3 FY2025 total revenue decreased 3% to $29.6 million, driven by a 5% decline in Medical Device, partially offset by 6% growth in In Vitro Diagnostics Q3 FY2025 Revenue by Segment | Revenue Segment | Q3 FY2025 (in thousands) | Q3 FY2024 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Medical Device | $22,214 | $23,383 | -5% | | In Vitro Diagnostics | $7,353 | $6,958 | +6% | | **Total Revenue** | **$29,567** | **$30,341** | **-3%** | - The total revenue decline was caused by a **$1.1 million decrease** in SurVeil DCB license fee revenue and a **$1.7 million decrease** in SurVeil DCB product sales revenue[5](index=5&type=chunk) - Within the Medical Device segment, product sales fell **11% to $9.5 million**, while performance coating royalties and license fees grew **4% to $9.7 million**[7](index=7&type=chunk)[8](index=8&type=chunk) [Profitability Analysis](index=2&type=section&id=Profitability%20Analysis) Surmodics improved profitability in Q3 FY2025, narrowing GAAP net loss to $(5.3) million, despite a lower product gross margin, due to reduced R&D expenses Q3 FY2025 Profitability Metrics | Profitability Metric | Q3 FY2025 | Q3 FY2024 | | :--- | :--- | :--- | | **GAAP Net Loss** | $(5.3) million | $(7.6) million | | **GAAP Diluted EPS** | $(0.37) | $(0.53) | | **Non-GAAP Net Income (Loss)** | $0.8 million | $(3.9) million | | **Non-GAAP Diluted EPS** | $0.06 | $(0.27) | | **Adjusted EBITDA** | $3.4 million | $1.6 million | - Product gross margin declined to **48.8% from 51.9%** in the prior year, primarily due to a **$1.0 million drop** in SurVeil DCB product gross profit[9](index=9&type=chunk) - Operating costs and expenses decreased by **$1.0 million**, as a **$2.2 million reduction** in R&D expense more than offset a **$2.5 million increase** in merger-related charges[10](index=10&type=chunk)[3](index=3&type=chunk) [Balance Sheet and Cash Flow](index=3&type=section&id=Balance%20Sheet%20and%20Cash%20Flow) As of June 30, 2025, Surmodics maintained **$32.7 million** in cash and investments, with **$30.0 million** in total debt, generating **$1.4 million** in operating cash flow for the quarter - The company reported **$32.7 million** in cash and investments as of June 30, 2025[12](index=12&type=chunk) - Total outstanding debt was **$30.0 million**, with an additional **$13.9 million** available under the revolving credit facility[12](index=12&type=chunk) - In Q3 FY2025, Surmodics generated **$1.4 million** in cash from operating activities[13](index=13&type=chunk) [Fiscal Year 2025 Financial Guidance](index=3&type=section&id=Fiscal%20Year%202025%20Financial%20Guidance) Surmodics updated its FY2025 financial guidance, raising revenue expectations while adjusting EPS projections to reflect increased merger-related charges [Updated Revenue Guidance](index=3&type=section&id=Updated%20Revenue%20Guidance) Surmodics raised its FY2025 total revenue guidance to **$116.5 million to $118.5 million**, despite anticipated headwinds from SurVeil DCB FY2025 Revenue Guidance | FY2025 Revenue Guidance | Previous Range (in millions) | Updated Range (in millions) | YoY Change (Updated) | | :--- | :--- | :--- | :--- | | **Total Revenue** | $114.0 - $117.0 | $116.5 - $118.5 | -8% to -6% | | **Total Revenue (ex-SurVeil DCB license fee)** | $112.5 - $115.5 | $115.0 - $117.0 | -5% to -3% | - The company expects SurVeil DCB product revenue to decrease by approximately **$7.5 million** in fiscal 2025 due to lower demand from its distribution partner, Abbott[15](index=15&type=chunk) [Updated Earnings Per Share (EPS) Guidance](index=3&type=section&id=Updated%20Earnings%20Per%20Share%20%28EPS%29%20Guidance) The company adjusted its FY2025 EPS guidance, projecting a wider GAAP net loss but an improved Non-GAAP net loss, incorporating **$16.0 million** in merger-related charges FY2025 EPS Guidance | FY2025 EPS Guidance | Previous Range | Updated Range | | :--- | :--- | :--- | | **GAAP Net Loss per Share** | $(1.60) to $(1.40) | $(1.70) to $(1.55) | | **Non-GAAP Net Loss per Share** | $(0.62) to $(0.42) | $(0.35) to $(0.20) | - The updated guidance assumes approximately **$16.0 million** of merger-related charges in fiscal 2025, a significant increase from **$3.7 million** in fiscal 2024[15](index=15&type=chunk) [Pending Acquisition by GTCR](index=4&type=section&id=Pending%20Acquisition%20by%20GTCR) Surmodics' **$627 million** acquisition by GTCR, approved by shareholders, faces a significant challenge from the FTC, making its completion contingent on litigation resolution - Surmodics agreed to be acquired by an affiliate of GTCR for **$43.00 per share in cash**, for a total equity valuation of approximately **$627 million**[19](index=19&type=chunk) - The merger was approved by Surmodics' shareholders on August 13, 2024[20](index=20&type=chunk) - On March 6, 2025, the FTC initiated legal action to block the merger, making the transaction's closing subject to the successful resolution of this litigation[21](index=21&type=chunk) [Appendix: Financial Statements and Reconciliations](index=6&type=section&id=Appendix%3A%20Financial%20Statements%20and%20Reconciliations) This appendix provides detailed financial statements including consolidated statements of operations, balance sheets, cash flows, supplemental revenue, and GAAP to non-GAAP reconciliations [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) This statement details the company's revenues, operating costs, and expenses, leading to the net loss for the three and nine months ended June 30, 2025, with a comparison to 2024 Consolidated Statements of Operations | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | **Total revenue** | $29,567 | $30,341 | | **Total operating costs and expenses** | $34,809 | $35,710 | | **Operating (loss) income** | $(5,242) | $(5,369) | | **Net (loss) income** | $(5,318) | $(7,554) | | **Diluted net (loss) income per share** | $(0.37) | $(0.53) | [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) This statement presents a snapshot of the company's financial health, detailing its assets, liabilities, and stockholders' equity as of June 30, 2025, compared to September 30, 2024 Consolidated Balance Sheets | (in thousands) | June 30, 2025 | September 30, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $75,994 | $81,304 | | **Total Assets** | $169,822 | $178,562 | | **Total Current Liabilities** | $19,441 | $20,543 | | **Total Liabilities** | $58,513 | $59,665 | | **Total Stockholders' Equity** | $111,309 | $118,897 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement outlines the movement of cash through operating, investing, and financing activities for the nine months ended June 30, 2025, showing a net cash usage of **$5.5 million** from operations Consolidated Statements of Cash Flows | (in thousands) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--- | :--- | :--- | | **Net cash (used in) provided by operating activities** | $(5,540) | $(3,410) | | **Net cash (used in) provided by investing activities** | $(3,515) | $(12,395) | | **Net cash (used in) provided by financing activities** | $(1,184) | $(1,388) | | **Net change in cash and cash equivalents** | $(9,834) | $(17,118) | | **Cash and Cash Equivalents, End of period** | $26,281 | $24,301 | [Supplemental Revenue and Segment Information](index=9&type=section&id=Supplemental%20Revenue%20and%20Segment%20Information) This section provides a detailed breakdown of revenue sources within the Medical Device and IVD segments, highlighting the **100% decline** in SurVeil DCB license fees and segment-level operating income Q3 2025 Revenue | Q3 2025 Revenue (in thousands) | Amount | % Change YoY | | :--- | :--- | :--- | | **Medical Device Product Sales** | $9,540 | -11% | | **Medical Device Royalties & License Fees** | $9,657 | +4% | | **Medical Device R&D and Other** | $3,017 | +37% | | **IVD Product Sales** | $7,221 | +6% | Q3 Operating Income (Loss) | Q3 Operating Income (Loss) (in thousands) | Q3 2025 | Q3 2024 | | :--- | :--- | :--- | | **Medical Device** | $(211) | $(2,288) | | **In Vitro Diagnostics** | $3,295 | $3,153 | | **Corporate** | $(8,326) | $(6,234) | | **Total Operating Loss** | $(5,242) | $(5,369) | [GAAP to Non-GAAP Reconciliations](index=11&type=section&id=GAAP%20to%20Non-GAAP%20Reconciliations) These tables reconcile reported GAAP figures to non-GAAP metrics by adjusting for specific items like stock-based compensation, merger-related charges, and amortization of acquired intangible assets - For Q3 FY2025, GAAP Net Loss of **$(5.3) million** was adjusted for items including **$5.3 million** in merger-related charges and **$1.3 million** in stock-based compensation to arrive at an Adjusted EBITDA of **$3.4 million**[37](index=37&type=chunk) - The reconciliation from GAAP Diluted EPS of **$(0.37)** to Non-GAAP Diluted EPS of **$0.06** for Q3 FY2025 includes adjustments for merger-related charges (**$0.37 per share**) and amortization of acquired intangibles (**$0.06 per share**)[40](index=40&type=chunk) - The full-year FY2025 GAAP Diluted EPS guidance of **$(1.70) to $(1.55)** is reconciled to the Non-GAAP range of **$(0.35) to $(0.20)** by excluding estimated merger-related charges (**$1.13 per share**) and amortization (**$0.22 per share**)[44](index=44&type=chunk)

Company Overview - SurModics (SRDX) shares have increased by approximately 6% over the past month, outperforming the S&P 500 index [1] - The most recent earnings report is crucial for understanding the key drivers affecting the stock [1] Earnings Estimates - Estimates for SurModics have trended downward in the past month, with a consensus estimate shift of -2050% [2] VGM Scores - SurModics has a strong Growth Score of A but a low Momentum Score of F, and a Value Score of D, placing it in the bottom 40% for value investment strategy [3] - The aggregate VGM Score for SurModics is C, which is relevant for investors not focused on a single strategy [3] Outlook - The downward trend in estimates suggests a negative outlook for SurModics, reflected in its Zacks Rank of 4 (Sell) [4] - A below-average return is expected from the stock in the upcoming months [4] Industry Comparison - SurModics is part of the Zacks Medical - Products industry, where Boston Scientific (BSX) has seen a 1.3% gain over the past month [5] - Boston Scientific reported revenues of $4.66 billion for the last quarter, marking a year-over-year increase of +20.9% [5] - For the current quarter, Boston Scientific is projected to post earnings of $0.72 per share, reflecting a +16.1% change from the previous year [6] - Boston Scientific holds a Zacks Rank of 3 (Hold) based on estimate revisions [6]

Core Viewpoint - Surmodics, Inc. reported a wider-than-expected adjusted loss per share and lower-than-expected revenues for the second quarter of fiscal 2025, indicating challenges in its Medical Device segment and overall financial performance [1][14]. Revenue Performance - Surmodics generated revenues of $28.1 million in the fiscal second quarter, a decrease of 12.1% year over year, missing the Zacks Consensus Estimate by 8.7% [2]. - Total revenues included $0.3 million from SurVeil drug-coated balloon (DCB) license fees, down from $1.1 million in the same quarter of the previous year, attributed to lower expenses related to the TRANSCEND clinical trial [3]. - Product sales were $14.9 million, down 17.2% from the prior-year quarter, and royalties and license fees totaled $9.9 million, down 13.2% [7]. Segment Analysis - The Medical Device segment reported sales of $20.7 million, a decline of 16.6% year over year, with revenues excluding SurVeil DCB license fees decreasing 14% [5]. - In Vitro Diagnostics (IVD) sales improved by 3.4% year over year to $7.4 million, driven by favorable order timing, although this was offset by a decline in microarray slide/surface revenues [6]. Margin and Expenses - Gross profit decreased by 18.5% year over year to $20.3 million, with gross margin contracting 566 basis points to 72.1% [9]. - Selling, general & administrative expenses increased by 14.9% year over year to $15 million, while research and development expenses declined by 18.2% to $8.4 million [9]. Financial Position - Surmodics ended the second quarter with cash and cash equivalents of $29.2 million, a slight decrease from $30.1 million at the end of the previous quarter [11]. - Total long-term debt was $29.63 million, marginally up from $29.59 million in the prior quarter [11]. Fiscal Guidance - The company expects total revenues for fiscal 2025 to be in the range of $114 million to $117 million, reflecting a decrease of 10-7% compared to fiscal 2024 [12]. - Surmodics anticipates a decrease of $3.6 million in SurVeil DCB license fee revenues and a $7 million decrease in SurVeil DCB product revenues for fiscal 2025 [13]. Market Reaction - Shares of Surmodics fell nearly 9.4% at the end of the trading session following the earnings report [4].

Core Insights - SurModics reported a revenue of $28.09 million for the quarter ended March 2025, reflecting a decline of 12.1% year-over-year and an earnings per share (EPS) of -$0.13, compared to $0.07 in the same quarter last year [1] - The revenue fell short of the Zacks Consensus Estimate of $30.77 million by 8.73%, and the EPS was significantly below the consensus estimate of -$0.06, resulting in an EPS surprise of -116.67% [1] Revenue Breakdown - Product sales amounted to $14.99 million, which is a decrease of 17.2% year-over-year and below the average estimate of $17.46 million from two analysts [4] - Revenue from research, development, and other sources was $3.19 million, exceeding the two-analyst average estimate of $2.41 million, marking a year-over-year increase of 30.1% [4] - Royalties and license fees generated $9.91 million, slightly below the average estimate of $10.37 million from two analysts, representing a year-over-year decline of 13.2% [4] Stock Performance - Over the past month, shares of SurModics have returned +0.1%, contrasting with a -0.2% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Company Performance - SurModics reported a quarterly loss of $0.13 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.06, and a decline from earnings of $0.07 per share a year ago, resulting in an earnings surprise of -116.67% [1] - The company posted revenues of $28.09 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 8.73%, and down from $31.96 million in the same quarter last year [2] - SurModics has surpassed consensus EPS estimates three times over the last four quarters and topped consensus revenue estimates two times in the same period [2] Stock Performance - SurModics shares have declined approximately 21.9% since the beginning of the year, compared to a decline of 5.5% for the S&P 500 [3] - The current Zacks Rank for SurModics is 3 (Hold), indicating that the shares are expected to perform in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.01 on revenues of $30.47 million, and for the current fiscal year, it is -$0.01 on revenues of $124.01 million [7] - The estimate revisions trend for SurModics is mixed, and changes in earnings expectations may occur following the recent earnings report [6] Industry Context - The Medical - Products industry, to which SurModics belongs, is currently ranked in the bottom 28% of over 250 Zacks industries, suggesting potential challenges for stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact SurModics' stock performance [5]

Revenue Performance - Revenue for Q2 fiscal 2025 was $28.1 million, a decrease of $3.9 million or 12% compared to the prior-year quarter[96]. - Total revenue for the first six months of fiscal 2025 was $58.0 million, a decrease of $4.5 million or 7% compared to the same prior-year period[96]. - IVD segment revenue was $7.4 million in Q2 fiscal 2025, a 3% increase from $7.1 million in the prior-year quarter, but a 1% decrease to $14.0 million for the first six months[98]. - Product sales decreased 17% to $14.993 million in Q2 fiscal 2025 and 15% to $31.541 million for the first six months compared to the prior-year periods[99]. Medical Device Segment - Medical Device segment revenue was $20.7 million in Q2 fiscal 2025, down $4.1 million or 17% from $24.8 million in the prior-year quarter[96]. - Product sales in the Medical Device segment decreased 31% to $7.7 million in Q2 fiscal 2025, compared to $11.1 million in the prior-year quarter[96]. - Medical Device R&D and other revenue increased 33% to $3.1 million in Q2 fiscal 2025, and 19% to $5.6 million for the first six months compared to the prior-year period[98]. - Medical Device segment reported an operating loss of $1.865 million in Q2 fiscal 2025, compared to an operating income of $0.302 million in the prior-year quarter[110]. - Medical Device product gross profit decreased by $3.9 million to $2.6 million in Q2 fiscal 2025, with gross margins dropping from 58.0% to 33.5% year-over-year[113]. Expenses and Charges - The company incurred $2.5 million in merger-related charges during the three months ended March 31, 2025[83]. - SG&A expense increased 15% to $15.045 million in Q2 fiscal 2025 and 18% to $30.219 million for the first six months compared to the prior-year periods, primarily due to merger-related charges[106]. - R&D expense declined 18% to $8.367 million in Q2 fiscal 2025 and 8% to $17.308 million for the first six months compared to the prior-year periods[105]. Cash Flow and Liquidity - Cash used in operating activities was $(6.9) million for the six months ended March 31, 2025, compared to $(1.4) million in the same prior-year period[114]. - As of March 31, 2025, working capital totaled $57.8 million, a decrease of $(3.0) million from $60.8 million as of September 30, 2024[117]. - The company has access to a revolving credit facility with a maximum availability of $25 million, with an outstanding balance of $5 million as of March 31, 2025[121]. - As of March 31, 2025, cash and cash equivalents totaled $31.1 million, a decrease of $(9.0) million from $40.1 million as of September 30, 2024[117]. Future Expectations - Surmodics expects a decline of approximately $7.0 million in SurVeil DCB product revenue for fiscal 2025 compared to fiscal 2024 levels[96]. - SurVeil DCB license fee revenue is expected to decline by $3.6 million in fiscal 2025 compared to fiscal 2024, with no further recognition after March 31, 2025[98]. - The company anticipates significant SG&A and R&D expenses in fiscal 2025, primarily related to medical device sales and product development[122]. - The company expects total interest expense under the credit agreement with MidCap to be approximately $3.5 million in fiscal 2025[118]. - The company anticipates a decline in SurVeil DCB license fee revenue from fiscal 2024 to 2025[127]. - The company expects future gross profits and gross margins to decline from fiscal 2024 to fiscal 2025[127]. Mergers and Acquisitions - Surmodics entered into a Merger Agreement to be acquired for $43.00 per share, subject to regulatory approval and litigation resolution[82]. - The company has a termination fee of $20,380,000 if the Merger Agreement is terminated[128]. Product Developments - The SurVeil DCB received FDA premarket approval in June 2023 and is now marketed by Abbott under an exclusive distribution agreement[86]. - The Pounce LP Thrombectomy System received FDA 510(k) clearance in fiscal 2023 and was commercially launched in Q3 fiscal 2024[89]. - The company launched its advanced hydrophilic coating technology, Preside, in October 2023, enhancing performance for neurovascular applications[93]. Customer Concentration - Abbott and Medtronic comprised 13% and 9% of consolidated revenue, respectively, for the six months ended March 31, 2025[124]. - The company relies on significant customers, including Abbott and Medtronic, which impacts financial results and stock price[130]. Currency and Interest Rate Risks - The company is exposed to Euro currency risk due to manufacturing operations in Ireland and sales denominated in Euros[134]. - The company has not entered into any foreign currency forward exchange contracts to hedge against currency fluctuations[134]. - The company entered into a five-year interest rate swap transaction fixing the interest rate on $25.0 million of term loans at 10.205%[132].