[Financial Performance Overview](index=1&type=section&id=Financial%20Performance%20Overview) Surmodics reported a **12% revenue decrease** and a **GAAP net loss** in Q2 FY2025, while advancing product launches and facing an FTC challenge to its pending acquisition [Second Quarter Fiscal 2025 Financial & Business Highlights](index=1&type=section&id=Second%20Quarter%20Fiscal%2025%20Financial%20%26%20Business%20Highlights) Surmodics reported a **12% revenue decrease** to **$28.1 million** in Q2 FY2025, resulting in a **$5.2 million GAAP net loss**, amidst a pending acquisition challenge from the FTC Financial Highlights | Financial Metric | Q2 FY2025 | Q2 FY2024 | | :--- | :--- | :--- | | Total Revenue | $28.1 million | $32.0 million | | GAAP Net (Loss) Income | $(5.2) million | $0.2 million | | Adjusted EBITDA | $1.9 million | $4.8 million | - The company announced the successful early clinical use and subsequent commercial release of the Pounce™ XL Thrombectomy System for removing clots in larger peripheral arteries[4](index=4&type=chunk) - The U.S. Federal Trade Commission (FTC) issued an administrative complaint to block the pending acquisition of Surmodics by an affiliate of GTCR LLC[4](index=4&type=chunk) - The TRANSCEND clinical trial results were published, demonstrating the SurVeil™ drug-coated balloon (DCB) is non-inferior for safety and efficacy compared to the IN.PACT™ Admiral™ DCB[4](index=4&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management attributed the anticipated Q2 revenue decline to specific factors, while highlighting strong growth in the Pounce Thrombectomy Platform and ongoing efforts to manage expenses and address the FTC acquisition challenge - The year-over-year revenue performance was challenged by two anticipated factors: **$3.3 million lower revenue** from the SurVeil DCB and **$1.4 million** in performance coating royalty and license fee catch-up payments received in the prior-year period[3](index=3&type=chunk) - The Pounce Thrombectomy Platform sales grew almost **25% year-over-year**, and the company launched the Pounce XL to expand the platform[3](index=3&type=chunk) - Operating expenses, excluding product costs, remained flat year-over-year, even with the inclusion of **$2.5 million** in merger-related expenses[3](index=3&type=chunk) - Management remains confident in the long-term prospects of its business segments, citing the commercial scale and profitability of its performance coating and IVD products, combined with its differentiated medical device portfolio[6](index=6&type=chunk) [Detailed Financial Results](index=2&type=section&id=Detailed%20Financial%20Results) Q2 FY2025 saw a **12% total revenue decline** driven by the Medical Device segment, a significant **product gross margin contraction**, and a **GAAP net loss**, influenced by lower sales and merger-related charges [Second Quarter Fiscal 2025 Financial Results](index=2&type=section&id=Second%20Quarter%20Fiscal%202025%20Financial%20Results) For Q2 FY2025, total revenue fell **12%** to **$28.1 million**, driven by a **17% decline** in the Medical Device segment, leading to a **GAAP net loss of $5.2 million** [Revenue Analysis](index=2&type=section&id=Revenue%20Analysis) Total revenue declined **12%** due to a **17% decrease** in the Medical Device segment, primarily from lower SurVeil DCB sales and license fees, partially offset by **3% growth** in In Vitro Diagnostics Revenue by Segment | Revenue by Segment | Q2 2025 (in thousands) | Q2 2024 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Medical Device | $20,709 | $24,826 | (17)% | | In Vitro Diagnostics | $7,376 | $7,132 | 3% | | **Total Revenue** | **$28,085** | **$31,958** | **(12)%** | - The decrease in total revenue was primarily driven by lower SurVeil DCB license fee revenue (**$0.8 million decrease**) and lower SurVeil DCB product sales revenue (**$2.4 million decrease**)[7](index=7&type=chunk) - Medical Device product sales decreased by **31%** to **$7.7 million**, mainly due to the decline in SurVeil DCB product sales and, to a lesser extent, lower sales of performance coating reagents[9](index=9&type=chunk) - In Vitro Diagnostics (IVD) revenue increased by **3%** to **$7.4 million**, driven by favorable order timing for distributed antigen and colorimetric substrate products[11](index=11&type=chunk) [Profitability Analysis](index=2&type=section&id=Profitability%20Analysis) Product gross margin significantly declined to **47.8%** due to SurVeil DCB production issues, leading to a **GAAP net loss** and a substantial decrease in **Adjusted EBITDA**, despite flat operating expenses inclusive of merger charges - Product gross margin decreased to **47.8%** from **60.8%** in Q2 2024, primarily driven by a **$2.8 million decline** in SurVeil DCB product gross profit due to under-absorption, production inefficiencies, and raw material inventory expirations[12](index=12&type=chunk) - Operating costs and expenses (excluding product costs) increased by only **$0.1 million**, but this figure includes **$2.5 million** of merger-related charges associated with the pending GTCR acquisition[14](index=14&type=chunk) Profitability Metric | Profitability Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | GAAP Net (Loss) Income | $(5.2) million | $0.2 million | | GAAP Diluted (Loss) EPS | $(0.36) | $0.02 | | Non-GAAP Net (Loss) Income | $(1.9) million | $1.1 million | | Non-GAAP Diluted (Loss) EPS | $(0.13) | $0.07 | - Adjusted EBITDA for the quarter was **$1.9 million**, a significant decrease from **$4.8 million** in the second quarter of fiscal 2024[16](index=16&type=chunk) [Balance Sheet and Cash Flow](index=3&type=section&id=Balance%20Sheet%20and%20Cash%20Flow) As of March 31, 2025, Surmodics maintained **$31.1 million in cash and investments**, with **$30.0 million in total debt**, and generated **$0.9 million in cash from operating activities** during the quarter - As of March 31, 2025, the company reported **$31.1 million** in cash and investments[17](index=17&type=chunk) - Total debt outstanding includes **$5.0 million** on its revolving credit facility and **$25.0 million** on its term loan facility[17](index=17&type=chunk) - In the second quarter of fiscal 2025, Surmodics reported **$0.9 million** in cash provided by operating activities and **$0.3 million** in capital expenditures[18](index=18&type=chunk) [Fiscal Year 2025 Financial Guidance](index=3&type=section&id=Fiscal%20Year%202025%20Financial%20Guidance) Surmodics projects **FY2025 total revenue** between **$114 million and $117 million**, a **7% to 10% decrease** primarily due to lower SurVeil DCB revenue, anticipating a **GAAP net loss per share** of **$(1.60) to $(1.40)**, including significant merger-related charges FY 2025 Guidance | FY 2025 Guidance | Low Estimate | High Estimate | % Change vs FY24 | | :--- | :--- | :--- | :--- | | Total Revenue | $114.0 M | $117.0 M | (10)% to (7)% | | Total Revenue (ex-SurVeil) | $112.5 M | $115.5 M | (7)% to (5)% | - The company expects SurVeil DCB license fee revenue to decrease by **$3.6 million** and product revenue to decrease by approximately **$7.0 million** in fiscal 2025[20](index=20&type=chunk) FY 2025 EPS Guidance | FY 2025 EPS Guidance | Low Estimate | High Estimate | | :--- | :--- | :--- | | GAAP Net Loss per Share | $(1.60) | $(1.40) | | Non-GAAP Net Loss per Share | $(0.62) | $(0.42) | - The fiscal 2025 EPS guidance assumes approximately **$10.8 million** of merger-related charges[21](index=21&type=chunk) [Corporate Developments and Other Information](index=4&type=section&id=Corporate%20Developments%20and%20Other%20Information) This section covers the pending acquisition of Surmodics by GTCR and the company's disclosures regarding forward-looking statements and non-GAAP financial measures [Pending Acquisition by GTCR](index=4&type=section&id=Pending%20Acquisition%20by%20GTCR) Surmodics' definitive agreement to be acquired by GTCR for **$43.00 per share**, valuing the company at **$627 million**, faces a significant challenge from an administrative complaint issued by the U.S. Federal Trade Commission (FTC) - Surmodics entered a definitive agreement to be acquired by GTCR for **$43.00 per share** in cash, for a total equity valuation of approximately **$627 million**[25](index=25&type=chunk) - The merger was approved by Surmodics' shareholders at a special meeting on August 13, 2024[26](index=26&type=chunk) - On March 6, 2025, the FTC voted to issue an administrative complaint to block the merger, and the transaction's closing is subject to the successful resolution of this litigation[26](index=26&type=chunk) [Safe Harbor and Non-GAAP Measures](index=4&type=section&id=Safe%20Harbor%20and%20Non-GAAP%20Measures) The company provides a safe harbor statement detailing risks, particularly those related to the pending GTCR merger, and explains its use of non-GAAP financial measures for assessing operating performance by excluding specific items - The press release contains forward-looking statements with inherent risks, including significant risks related to the consummation of the proposed merger with GTCR, such as failure to secure regulatory approval and potential termination of the agreement[28](index=28&type=chunk) - The company reports non-GAAP financial results, including Adjusted EBITDA and non-GAAP net income, which it believes provide meaningful insight into operating performance by excluding event-specific matters like merger costs[31](index=31&type=chunk) [Financial Statements and Reconciliations](index=6&type=section&id=Financial%20Statements%20and%20Reconciliations) This section presents the company's condensed consolidated financial statements, including statements of operations, balance sheets, cash flows, and reconciliations of GAAP to non-GAAP measures [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q2 2025, Surmodics reported **$28.1 million in total revenue**, an **operating loss of $4.0 million**, and a **net loss of $5.2 million**, a decline from the prior year's positive results | (in thousands, except per share data) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total revenue | $28,085 | $31,958 | | Total operating costs and expenses | $32,095 | $31,299 | | Operating (loss) income | $(4,010) | $659 | | Net (loss) income | $(5,209) | $247 | | Diluted net (loss) income per share | $(0.36) | $0.02 | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, the balance sheet shows **total assets of $163.2 million**, **total liabilities of $53.0 million**, and **total stockholders' equity of $110.2 million**, reflecting a decrease in assets from September 2024 | (in thousands) | March 31, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Total Current Assets | $71,747 | $81,304 | | **Total Assets** | **$163,214** | **$178,562** | | Total Current Liabilities | $13,950 | $20,543 | | **Total Liabilities** | **$52,968** | **$59,665** | | **Total Stockholders' Equity** | **$110,246** | **$118,897** | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended March 31, 2025, **net cash used in operating activities was $6.9 million**, with **$1.4 million provided by investing activities**, resulting in **$29.2 million in cash and cash equivalents** at period end | (in thousands) | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(6,945) | $(1,377) | | Net cash (used in) provided by investing activities | $1,418 | $(5,673) | | Net cash (used in) provided by financing activities | $(1,155) | $(1,454) | | **Net change in cash and cash equivalents** | **$(6,932)** | **$(8,389)** | | **Cash and Cash Equivalents, End of period** | **$29,183** | **$33,030** | [Supplemental Revenue and Segment Information](index=9&type=section&id=Supplemental%20Revenue%20and%20Segment%20Information) Supplemental data details Q2 2025 segment performance, showing the Medical Device segment with **$20.7 million in revenue** and an **operating loss of $1.9 million**, while In Vitro Diagnostics generated **$7.4 million in revenue** and **$3.3 million in operating income** Q2 2025 vs Q2 2024 Revenue Breakdown (in thousands) | Revenue Line | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | **Medical Device** | **$20,709** | **$24,826** | **(17)%** | | - Product sales | $7,714 | $11,100 | (31)% | | - License fees – SurVeil DCB | $265 | $1,088 | (76)% | | **In Vitro Diagnostics** | **$7,376** | **$7,132** | **3%** | Q2 2025 vs Q2 2024 Operating Income (Loss) by Segment (in thousands) | Segment | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Medical Device | $(1,865) | $302 | | In Vitro Diagnostics | $3,337 | $3,356 | | Corporate | $(5,482) | $(2,999) | | **Total Operating (Loss) Income** | **$(4,010)** | **$659** | [GAAP to Non-GAAP Reconciliations](index=11&type=section&id=GAAP%20to%20Non-GAAP%20Reconciliations) Reconciliation tables bridge GAAP to non-GAAP results for Q2 2025, adjusting the **GAAP net loss of $5.2 million** to an **Adjusted EBITDA of $1.9 million**, and also reconcile the **FY2025 guidance** to reflect non-GAAP adjustments Q2 2025 GAAP to Adjusted EBITDA Reconciliation (in thousands) | Line Item | Amount | | :--- | :--- | | Net loss (GAAP) | $(5,209) | | Adjustments (Taxes, D&A, Interest) | $3,268 | | **EBITDA** | **$(1,941)** | | Stock-based compensation expense | $1,364 | | Merger-related charges | $2,512 | | **Adjusted EBITDA** | **$1,935** | Q2 2025 GAAP to Non-GAAP Net Loss & EPS Reconciliation | Metric | GAAP | Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | Net Loss (in thousands) | $(5,209) | $3,301 | $(1,908) | | Diluted EPS | $(0.36) | $0.23 | $(0.13) | FY 2025 Guidance Reconciliation: Non-GAAP Diluted EPS | Metric | Low Estimate | High Estimate | | :--- | :--- | :--- | | GAAP Diluted EPS | $(1.60) | $(1.40) | | Amortization of acquired intangibles | $0.22 | $0.22 | | Merger related charges | $0.76 | $0.76 | | **Non-GAAP Diluted EPS** | **$(0.62)** | **$(0.42)** |

Company Overview - Surmodics (SRDX) has launched the Pounce XL Thrombectomy System, enhancing its vascular intervention solutions portfolio aimed at efficient clot removal in larger vessels [1][4] - The Pounce XL is designed for arteries ranging from 5.5 to 10 mm in diameter, expanding the capabilities of the existing Pounce Thrombectomy Platform [6][8] Product Details - The Pounce XL Thrombectomy System utilizes proprietary dual-basket technology for clot removal, minimizing blood loss and reducing risks associated with traditional methods [9][10] - Clinical data indicates an average procedural time of 20.3 minutes and a high success rate of 79.7% for patients requiring no additional clot removal treatment [10] Market Position and Financials - Following the announcement, SRDX shares fell by 2.1%, closing at $30.11, with a year-to-date decline of 24% compared to the industry’s growth of 7.1% [3] - SRDX currently has a market capitalization of $439.7 million and reported an earnings surprise of 50% in the last quarter [5] Industry Trends - The global thrombectomy devices market is projected to grow from $1.52 billion in 2023 to approximately $3.09 billion by 2033, with a CAGR of 7.33% from 2024 to 2033 [11] - The increasing prevalence of cardiovascular diseases is driving demand for thrombectomy procedures, highlighting the need for effective clot removal solutions [12]

Core Insights - Surmodics, Inc. (SRDX) reported a strong performance in the last quarter, with a loss per share that was 51.9% narrower than market estimates and sales exceeding estimates by 8.3%, driven by solid prospects in the thrombectomy business [1][3] - The company is likely to be acquired by GTCR for an estimated total equity valuation of $627 million, with the deal expected to close by the end of March, potentially offering double-digit returns for investors [2][5] - Surmodics has a market capitalization of $404.58 million and projects a remarkable 162.5% growth for fiscal 2025, maintaining a strong performance trajectory [3] Acquisition Details - Surmodics entered into a definitive agreement in May 2024 to be acquired by GTCR, with shareholders set to receive $43.00 per share in cash [5] - The acquisition faces challenges as the FTC has blocked the deal due to anti-competitive concerns, prompting Surmodics to consider legal action against the FTC [5][11] Financial Performance - Surmodics demonstrated solid improvement in both top and bottom lines for Q1 of fiscal 2025, with notable increases in performance coatings royalty revenues and sales from the Pounce thrombectomy device platforms [8] - The gross margin expansion is a positive indicator for the stock, despite some segmental sales declines attributed to unfavorable order timing [10] Thrombectomy Business Prospects - The company aims to leverage its proprietary Pounce thrombectomy platform technology, with early results from a study presented at the TCT Symposium and FDA clearance for the Pounce XL Thrombectomy System [7] - Limited market evaluations of the product are expected to generate additional revenues during fiscal 2025 [7] Estimate Trends - Surmodics is experiencing a positive estimate revision trend for fiscal 2025, with the Zacks Consensus Estimate for earnings per share improving by 1 cent to 19 cents [13] - The consensus estimate for Q2 fiscal 2025 revenues is projected at $33 million, indicating a 3.3% increase from the previous year [13]

Core Viewpoint - The U.S. Federal Trade Commission (FTC) has blocked the proposed acquisition of Surmodics, Inc. by GTCR LLC due to anti-competitive concerns, particularly regarding market control in hydrophilic coatings, a vital component in medical devices [2][6]. Company Summary - Surmodics' acquisition by GTCR was valued at approximately $627 million, or $43.00 per share, representing a significant premium over the company's market value [2]. - The company has expressed strong opposition to the FTC's decision, arguing that the merger would be pro-competitive and beneficial for stakeholders, including customers and patients [3]. - Surmodics intends to challenge the FTC's ruling in court, asserting that the acquisition aligns with long-term industry trends and growth objectives [3][8]. - In the first quarter of fiscal 2025, Surmodics reported total revenues of $29.9 million, a decrease of 2% year-over-year, and a loss per share of 60 cents, which is a 20% improvement from the previous year's loss [9]. Industry Summary - The FTC's decision reflects a broader regulatory trend towards stricter scrutiny of private equity acquisitions in the healthcare sector, aiming to prevent monopolistic behavior and rising healthcare costs [7]. - The merger's blockage could set a precedent for future transactions, making it more challenging for private equity firms to consolidate within the medical technology space [7][8]. - The FTC's unanimous decision indicates a strong commitment to maintaining competition in the medical coatings sector, which has historically benefited from rivalry between companies like Surmodics and Biocoat [6].

Core Viewpoint - SurModics (SRDX) has experienced a significant downtrend, with a 13.9% decline over the past four weeks, but it is now in oversold territory, suggesting a potential turnaround due to analysts' positive earnings outlook [1] Group 1: Technical Indicators - The Relative Strength Index (RSI) is a key technical indicator used to determine if a stock is oversold, with a reading below 30 typically indicating this condition [2] - SRDX's current RSI reading is 25.01, indicating that the heavy selling pressure may be exhausting, and a trend reversal could be imminent [5] Group 2: Fundamental Indicators - Analysts covering SRDX have raised their earnings estimates for the current year, resulting in a 2.7% increase in the consensus EPS estimate over the last 30 days, which often correlates with price appreciation [6] - SRDX holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate revisions and EPS surprises, further supporting the potential for a near-term turnaround [7]

Core Viewpoint - Surmodics, Inc. reported a narrower-than-expected adjusted loss per share of 4 cents for the first quarter of fiscal 2025, compared to breakeven in the same quarter last year, and better than the Zacks Consensus Estimate of a loss of 8 cents per share [1][14]. Financial Performance - The company registered revenues of $29.9 million in the fiscal first quarter, a decrease of 2.1% year over year, missing the Zacks Consensus Estimate by 10.6% [3][14]. - GAAP loss per share for the quarter was 26 cents, wider than the loss of 6 cents per share in the prior year [2]. - Surmodics' gross profit increased by 3.4% year over year to $22.5 million, with a gross margin expansion of 400 basis points to 75.2% [10][14]. - Selling, general & administrative expenses rose by 21% year over year to $15.2 million, while research and development expenses increased by 3.2% to $8.9 million [11]. Segment Analysis - Surmodics operates through two segments: Medical Device and In Vitro Diagnostics (IVD) [5]. - Medical Device segment sales were $23.3 million, down 1.1% year over year, with a notable decline in product sales of 15% to $10.1 million [5][6]. - IVD sales declined by 5.2% year over year to $6.6 million, primarily due to unfavorable order timing [7]. Revenue Sources - Product sales totaled $16.5 million, down 12.1% from the prior year [8]. - Royalties and license fees revenues increased by 15.9% to $10.6 million [8]. - Research, development, and other revenues rose by 7.6% to $2.7 million [9]. Financial Position - At the end of the first quarter of fiscal 2025, Surmodics had cash and cash equivalents of $30.1 million, down from $36.1 million at the end of fiscal 2024 [12]. - Total long-term debt was $29.59 million, slightly up from $29.55 million at the end of fiscal 2024 [12]. Future Outlook - Surmodics did not provide guidance on the pending acquisition by GTCR LLC [13]. - The company received FDA's 510(k) clearance for its Pounce XL Thrombectomy System, which is expected to expand its market potential [15].

Core Insights - SurModics reported revenue of $29.92 million for the quarter ended December 2024, reflecting a year-over-year decline of 2.1% and an EPS of -$0.04 compared to $0.00 a year ago [1] - The reported revenue fell short of the Zacks Consensus Estimate of $33.45 million, resulting in a surprise of -10.55%, while the EPS exceeded expectations with a surprise of +50.00% against a consensus estimate of -$0.08 [1] Revenue Breakdown - Product sales amounted to $16.55 million, which is below the estimated $20.33 million, representing a year-over-year decline of 12.1% [4] - Revenue from research, development, and other sources was $2.74 million, slightly above the estimated $2.69 million, showing a year-over-year increase of 7.6% [4] - Royalties and license fees generated $10.63 million, surpassing the average estimate of $10.46 million, with a year-over-year growth of 15.9% [4] Stock Performance - Over the past month, SurModics shares have returned -9.7%, contrasting with the Zacks S&P 500 composite's increase of +1.2% [3] - The stock currently holds a Zacks Rank 1 (Strong Buy), suggesting potential for outperformance in the near term [3]

Company Performance - SurModics reported a quarterly loss of $0.04 per share, better than the Zacks Consensus Estimate of a loss of $0.08, and compared to break-even earnings per share a year ago, representing an earnings surprise of 50% [1] - The company posted revenues of $29.92 million for the quarter ended December 2024, missing the Zacks Consensus Estimate by 10.55%, and down from $30.55 million year-over-year [2] - SurModics has surpassed consensus EPS estimates four times over the last four quarters and topped consensus revenue estimates three times during the same period [2] Stock Outlook - SurModics shares have declined approximately 9.7% since the beginning of the year, while the S&P 500 has gained 2.7% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the coming quarter is -$0.04 on revenues of $34.65 million, and $0.19 on revenues of $142.88 million for the current fiscal year [7] Industry Context - The Medical - Products industry, to which SurModics belongs, is currently ranked in the bottom 48% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors or through tools like the Zacks Rank [5][6]

Revenue Performance - Surmodics reported total revenue of $29.9 million for the first quarter of fiscal 2025, a decrease of $0.6 million or 2% compared to the prior-year quarter[96]. - Medical Device segment revenue was $23.3 million, reflecting a 1% decrease from $23.5 million in the prior-year quarter[96]. - Product sales in the Medical Device segment decreased by 15% to $10.1 million, primarily due to a decline in SurVeil commercial revenue[96]. - Product sales decreased by $2.3 million, or 12%, to $16.5 million in Q1 fiscal 2025 compared to $18.8 million in Q1 fiscal 2024[100]. - IVD product sales decreased by 6% to $6.4 million in Q1 fiscal 2025, primarily due to unfavorable order timing[106]. Revenue Growth Areas - SurVeil DCB license fee revenue was $1.3 million in the first quarter of fiscal 2025, compared to $1.0 million in the same quarter of fiscal 2024, marking a 29% increase[98]. - Performance coating royalties and license fee revenue increased by 14% to $9.4 million, driven by growth in customer utilization of Serene™ hydrophilic coating[98]. - The Pounce thrombectomy device platform continues to show growth, partially offsetting declines in SurVeil revenue[97]. Expenses and Financial Performance - R&D expenses increased by 3%, or $0.3 million, to $8.9 million, representing 30% of total revenue in Q1 fiscal 2025[104]. - SG&A expenses rose by 21%, or $2.6 million, to $15.2 million, accounting for 51% of total revenue in Q1 fiscal 2025[105]. - Product gross profit fell by $0.9 million, or 9%, to $9.1 million, with product gross margins increasing to 55.1% from 53.2% year-over-year[102]. - Total segment operating income increased by $0.2 million to $3.1 million, with the Medical Device segment reporting an operating income of $0.2 million[109]. Cash Flow and Liquidity - Cash used in operating activities was $(7.9) million in Q1 fiscal 2025, an improvement from $(8.8) million in the prior-year period[112]. - Working capital decreased by $2.1 million to $58.7 million as of December 31, 2024[116]. - As of December 31, 2024, the company had cash and cash equivalents totaling $30.1 million, with expectations for sufficient liquidity to meet cash needs and fund operations in fiscal 2025[119]. - The company generated $0.1 million from the sale of common stock related to stock-based compensation plans in the first three months of fiscal 2025, compared to $0.0 million in the same period of fiscal 2024[119]. Debt and Financing - The company expects total interest expense under its credit agreement to be approximately $3.5 million in fiscal 2025[117]. - The company has a revolving credit facility with a maximum availability of $25 million, with an outstanding balance of $5 million as of December 31, 2024[120]. - The term loan outstanding principal was $25 million as of December 31, 2024, with an interest rate fixed at 10.205% per annum for five years[120]. - The company may seek additional liquidity sources, including borrowing or equity financing, to support future cash flow needs[121]. Future Outlook - The company expects a decline of approximately $6.0 million in SurVeil DCB product revenue for fiscal 2025 compared to fiscal 2024[97]. - Future cash requirements will depend on the market introduction and acceptance of products, including the SurVeil DCB distributed by Abbott[121]. - The company anticipates significant SG&A and R&D expenses related to medical device sales and product development in fiscal 2025[119]. - The TRANSCEND pivotal clinical trial is anticipated to be completed in the second quarter of fiscal 2025[98]. Legal and Compliance - The Company maintains effective disclosure controls and procedures as of December 31, 2024, ensuring timely reporting and decision-making regarding required disclosures[133]. - There were no changes in internal control over financial reporting during the three months ended December 31, 2024, that materially affected the internal control[134]. - The Company is involved in various legal actions related to its operations, products, and technologies, including intellectual property and employment disputes[136]. Currency and Market Risks - The company has not entered into any foreign currency forward exchange contracts to hedge against currency fluctuations, exposing it to Euro currency risk[131]. - The company expects ongoing operating losses and interest expenses, which could impact growth initiatives and cash flow generation[125]. Customer Concentration - Abbott and Medtronic are the largest customers, accounting for 16% and 12% of consolidated revenue for fiscal 2024, respectively[122].

Financial Performance - Total revenue for Q1 FY2025 was $29.9 million, a decrease of 2% year-over-year from $30.6 million in Q1 FY2024[4] - Medical Device revenue decreased by $0.3 million, or 1%, to $23.3 million, while In Vitro Diagnostics revenue decreased by $0.4 million, or 5%, to $6.6 million[5][6] - GAAP net loss was $(3.7) million, or $(0.26) per diluted share, compared to a net loss of $(0.8) million, or $(0.06) per diluted share in the prior-year period[9] - Adjusted EBITDA for Q1 FY2025 was $3.6 million, down from $3.9 million in Q1 FY2024[10] - Product sales decreased by 12% to $16,548,000 in Q1 2025 from $18,827,000 in Q1 2024[22] - Net loss for the quarter was $3,651,000, compared to a net loss of $786,000 in the prior year[22] - Adjusted EBITDA for the quarter was $3,641,000, a decrease of 7% from $3,934,000 in Q1 2024[31] - The company reported a basic net loss per share of $0.26, compared to a loss of $0.06 per share in the prior year[22] Cash and Assets - The company reported $30.1 million in cash and investments as of December 31, 2024, with a decrease of $10.0 million in cash and investments during the quarter[11] - Cash and cash equivalents decreased to $30,145,000 from $36,115,000 at the end of the previous quarter[24] - Total assets decreased to $163,740,000 from $178,562,000 at the end of the previous quarter[24] - Total liabilities decreased to $51,971,000 from $59,665,000 at the end of the previous quarter[24] Operating Costs - Operating costs increased by $2.9 million, or 13%, primarily due to merger-related charges[8] - Total operating costs and expenses increased to $32,403,000, up from $30,874,000 in the same quarter last year[22] - The company reported merger-related charges of $2,264 million for the three months ended December 31, 2024, which were not tax deductible[34] Merger and Acquisition - The company is engaged with the FTC regarding the pending acquisition by GTCR, with the goal of completing the merger by the end of Q2 FY2025[4][15] - Merger agreement with GTCR values Surmodics at approximately $627 million, with shareholders set to receive $43.00 per share in cash[4][14] - The company is undergoing a proposed acquisition by GTCR, which has resulted in specific merger-related expenses[36] Product Performance - Product gross margin improved to 55.1%, up from 53.2% in the prior-year period, driven by a favorable product mix[7] - Medical Device revenue, excluding SurVeil DCB license fees, was $22,030,000, down 2% from $22,574,000 year-over-year[28] - The company recognized revenue from SurVeil DCB license fee under the Development and Distribution Agreement with Abbott[36] Shareholder Information - The diluted weighted average shares outstanding for the three months ended December 31, 2024, were 14,231 million[34]