Surmodics Reports Second Quarter Fiscal 2020 Results and Provides COVID-19 Pandemic Update

Summary of Second Quarter and Recent Highlights

• Revenue of $22.8 million, an increase of 1% year-over-year
• GAAP EPS of $0.11, non-GAAP EPS of $0.04
• Cash and short-term investments of $48.4 million
• CE Mark clearance received for Telemark™ coronary/peripheral support microcatheter
• Partnership announced with Cook Medical for commercialization of .014” and .018” low-profile PTA balloon catheters

“Our customers depend on Surmodics as a critical supplier, with thousands of vital medical device procedures and in vitro diagnostic tests relying on our products every day. The health and safety of our employees is our top priority, and I want to thank our team for their courage and commitment through this COVID-19 health crisis,” said Gary Maharaj, President and CEO of Surmodics, Inc. “While we are operating in an evolving and uncertain environment, our healthy balance sheet, strength of our supply chain, and dedicated team will enable us to continue to effectively operate during these challenging times.”

Response to COVID-19 Pandemic

Since the emergence of COVID-19 in the U.S. and Europe, Surmodics has responded with preparation and action to mitigate the impact of this outbreak on our employees, our community and our mission. In response to directives and recommendations from federal and local government and health agencies, many of the Company’s U.S. and Ireland-based employees have been enabled to work from home. Consistent with applicable government guidance, Surmodics is maintaining its U.S. and Ireland manufacturing operations in order to ensure the uninterrupted supply of our medical device and in vitro diagnostic products and technologies, which are essential for our customers to provide often life-saving care to patients. With workplace health and safety a top priority, Surmodics has implemented recommended best practices to protect our employees. While great uncertainty remains about the duration and impacts of the COVID-19 pandemic, Surmodics management remains confident in the long-term underlying strength of the Company’s customer base, innovation pipeline, business model and balance sheet.

Second Quarter Fiscal 2020 Financial Results

Total revenue for the second quarter of fiscal 2020 was $22.8 million, as compared with $22.7 million in the prior-year period. Medical Device revenue was $16.3 million in the second quarter of fiscal 2020, as compared with $17.3 million in the year-ago period, a decrease of 6%. Medical Device revenue was significantly impacted both by the expiration of the Company’s fourth generation hydrophilic coating patents and by postponement of non-essential procedures as a result of the COVID-19 pandemic. In Vitro Diagnostics revenue was $6.5 million for the second quarter of fiscal 2020, as compared with $5.4 million in the same prior-year quarter, an increase of 21%.

Diluted GAAP earnings per share in the second quarter of fiscal 2020 was $0.11, as compared with $0.09 in the year-ago period. On a non-GAAP basis, earnings per share was $0.04 in the second quarter of fiscal 2020, as compared with $0.07 in the year-ago period.

As of March 31, 2020, cash and short-term investments totaled $48.4 million. Surmodics generated $2.2 million of cash from operating activities in the second quarter of fiscal 2020. Capital expenditures totaled $0.6 million for the second quarter of fiscal 2020. In response to COVID-19, Surmodics has taken prudent measures including targeted delays in capital expenditures and hiring and reductions in discretionary operating expenses, without sacrificing investments in our key strategic initiatives.

Fiscal 2020 Guidance

Due to the uncertainty surrounding the duration and magnitude of the COVID-19 pandemic, Surmodics is suspending the previously issued financial guidance for fiscal year 2020.

Conference Call Today at 4 p.m. CT (5 p.m. ET)

Surmodics will host a webcast at 4 p.m. CT (5 p.m. ET) today to discuss second quarter results. To access the webcast, go to the investor relations portion of the Company’s website at https://surmodics.gcs-web.com and click on the webcast icon. The webcast will be archived on the Company’s website for 90 days. A replay of the second quarter conference call will be available by dialing 888-203-1112 and entering conference call ID passcode 2200822. The audio replay will be available beginning at 7 p.m. CT on Wednesday, April 29, 2020, until 7 p.m. CT on Wednesday, May 6, 2020.

About Surmodics, Inc.

Surmodics is the global leader in surface modification technologies for intravascular medical devices and a leading provider of chemical components for in vitro diagnostic (IVD) immunoassay tests and microarrays. Surmodics is pursuing highly differentiated medical devices that are designed to address unmet clinical needs and engineered to the most demanding requirements. This key growth strategy leverages the combination of the Company’s expertise in proprietary surface technologies, along with enhanced device design, development and manufacturing capabilities. The Company mission remains to improve the detection and treatment of disease. Surmodics is headquartered in Eden Prairie, Minnesota. For more information, visit www.surmodics.com. The content of Surmodics’ website is not part of this press release or part of any filings that the company makes with the Securities and Exchange Commission(“SEC”).

Safe Harbor for Forward-looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical or current facts, including statements about beliefs and expectations regarding the Company’s ability to continue to operate effectively during COVID-19 challenges, expectations about the impact of delayed elective procedures on our medical device business, expectations about clinical trial data, and statements about initiating future clinical trials, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated, including, without limitation: (1) our ability to successfully develop and commercialize our SurVeil^TM DCB (including realization of the full potential benefits of our agreement with Abbott), Avess^TM DCB, Sundance^TM DCB and other proprietary products; (2) our reliance on third parties (including our customers and licensees) and their failure to successfully develop, obtain regulatory approval for, market and sell products incorporating our technologies; (3) possible adverse market conditions and possible adverse impacts on our cash flows; (4) the impacts, duration and severity of the global COVID-19 pandemic and the effects of responses to it on healthcare systems, the general economy, our business partners, and our operations; and (5) the factors identified under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2019, and updated in our subsequent reports filed with the SEC. These reports are available in the Investors section of our website at https://surmodics.gcs-web.com and at the SEC website at www.sec.gov. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them in light of new information or future events.

Use of Non-GAAP Financial Information

In addition to reporting financial results in accordance with U.S. generally accepted accounting principles, or GAAP, Surmodics is reporting non-GAAP financial results including EBITDA and Adjusted EBITDA, non-GAAP operating income, non-GAAP operating income percentage, non-GAAP income before income taxes, non-GAAP net income, and non-GAAP diluted earnings per share, and the non-GAAP effective income tax rate. We believe that these non-GAAP measures, when read in conjunction with the Company’s GAAP financial statements, provide meaningful insight into our operating performance excluding certain event-specific matters, and provide an alternative perspective of our results of operations. We use non-GAAP measures, including those set forth in this release, to assess our operating performance and to determine payouts under our executive compensation programs. We believe that presentation of certain non-GAAP measures allows investors to review our results of operations from the same perspective as management and our board of directors and facilitates comparisons of our current results of operations. The method we use to produce non-GAAP results is not in accordance with GAAP and may differ from the methods used by other companies. Non-GAAP results should not be regarded as a substitute for corresponding GAAP measures but instead should be utilized as a supplemental measure of operating performance in evaluating our business. Non-GAAP measures do have limitations in that they do not reflect certain items that may have a material impact on our reported financial results. As such, these non-GAAP measures should be viewed in conjunction with both our financial statements prepared in accordance with GAAP and the reconciliation of the supplemental non-GAAP financial measures to the comparable GAAP results provided for the specific periods presented, which are attached to this release.