[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].

[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]