Surmodics(US:SRDX)2022-07-27 19:36Financial Performance and Key Metrics - Revenue for Q3 2022 grew 4% to $24.9 million compared to $23.9 million in the prior year quarter, driven by solid performance from both Medical Device and IVD businesses [4][19] - GAAP diluted loss per share was $0.41, while non-GAAP diluted loss per share was $0.34 [4][27] - The company lowered its revenue guidance for the full year but raised EPS guidance based on Q3 performance [4] Business Line Performance - Revenue from the Medical Device business grew 5% year-over-year to $17.5 million, driven by strong product sales [19] - IVD business revenue grew 3% to $7.3 million, with product revenue increasing 15% to $13.9 million [19][20] - Medical Device product revenue grew 23% to $6.7 million, with significant contributions from Pounce and Sublime products [20] Market Data and Key Metrics - The company experienced a greater than 100% increase in the number of hospital value analysis committees considering Sublime and Pounce products [12] - Royalty revenue was flat at $7.8 million, impacted by macro factors affecting procedure volumes and supply chain disruptions [22][23] Company Strategy and Industry Competition - The company is focused on achieving strategic objectives, including supporting Abbott's commercialization efforts for SurVeil and building a commercial pipeline for Pounce and Sublime [5][11] - The partnership with Abbott is seen as crucial for the commercialization of SurVeil, with expectations for a US launch following PMA approval [8][40] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in lab testing partners for timely completion of SurVeil's PMA submission, emphasizing the importance of quality data [35][36] - The company anticipates continued double-digit growth in the Medical Device business for Q4, despite delays in the commercialization of Pounce Venous [21][30] - Management is assessing financing options to strengthen the balance sheet amid macroeconomic uncertainties [18][29] Other Important Information - The company reported an operating loss of $7.3 million in the Medical Device business, while the IVD business reported operating income of $3.4 million [26] - Cash and investments totaled $22 million as of June 30, 2022, with an anticipated year-end cash balance of approximately $17 million [28] Q&A Session Summary Question: Confidence in lab testing partners for SurVeil - Management expressed high confidence in lab partners, emphasizing the importance of quality over speed in the PMA submission process [35][36] Question: Abbott's inventory ordering timeline - Management indicated that Abbott intends to launch SurVeil following PMA approval, with discussions ongoing about commercialization plans [37][40] Question: Comparison of direct selling model vs. partnership model - Management highlighted the benefits of a direct sales team focused solely on new products, allowing for better feedback and control [41][42] Question: Future R&D spending as revenue grows - Management expects R&D spending as a percentage of revenue to decline as revenue increases, but will depend on ongoing projects [43][44] Question: Inventory increase and supply chain challenges - Management confirmed that inventory growth is primarily due to increased raw materials and work in process to mitigate supply chain risks [47][48] Question: Risk of losing coatings customers due to competition - Management reassured that there have been no indications of customers wanting to terminate agreements, emphasizing established trust [55][57] Question: Revenue expectations from product solutions strategy - Management expects 2023 to show significant revenue growth from the product solutions strategy, with ongoing efforts to build a customer base [59][60]