Executive Summary

Q3 FY2024 revenue was $30.3M, down 42% YoY due to the prior-year SurVeil PMA milestone license fee; ex-license fees, total revenue grew 10% YoY to $29.2M, with strength in Medical Device product sales (SurVeil DCB, Pounce) and coating royalties; GAAP diluted EPS was $(0.53) vs $0.52 YoY; Non-GAAP EPS $(0.27) .
Results aligned with management’s prior Q2 guide for Q3 revenue of ~$29.5–$30.5M; actual $30.341M came in at the high end, with guidance subsequently suspended for FY24 due to the pending GTCR acquisition .
Mix shift toward newly launched devices pressured product gross margin to 51.9% (vs 55.8% YoY; 60.8% in Q2) as SurVeil, Pounce and Sublime were not yet at scale, leading to under-absorption, inefficiencies and some inventory expiration .
Strategic catalysts: (1) SurVeil U.S. commercialization via Abbott; (2) full launches of Pounce Venous and Pounce LP; (3) Premier GPO agreement broadening hospital access; and (4) the $43/share GTCR take-private proposal pending shareholder/regulatory approvals .

What Went Well and What Went Wrong

What Went Well
- Broad-based growth ex-license fees (+10% YoY) driven by Medical Device product revenue (+15% YoY) and Performance Coating royalties (+13% YoY) as SurVeil DCB shipments to Abbott and Pounce adoption accelerated; CEO: “strong contributions from growth in both Medical Device product revenue… and performance coating royalties” .
- IVD segment grew 8% YoY to $7.0M in Q3 on broad-based product sales growth, contributing to ex-license revenue expansion .
- Strategic distribution tailwinds: Premier GPO thrombectomy agreement effective June 1 expected to expand national reach for Pounce/Pounce Venous .
What Went Wrong
- Year-ago compare: Q3 FY2023 included $24.6M SurVeil PMA milestone revenue; absence this year drove headline revenue down 42% YoY and swung to GAAP net loss $(7.6)M vs income $7.3M YoY .
- Product gross margin compressed to 51.9% (from 55.8% YoY; 60.8% in Q2) due to early-scale under-absorption and inefficiencies, including inventory expiration on newer devices (SurVeil, Pounce, Sublime) .
- Operating expenses ex-product costs rose 13% YoY to $27.3M, primarily on $2.9M merger-related charges; GAAP to Non-GAAP adjustments reflect this, with Non-GAAP EPS $(0.27) vs $0.52 YoY .

Financial Results

Metric	Q3 2023	Q1 2024	Q2 2024	Q3 2024
Total Revenue ($M)	$52.483	$30.552	$31.958	$30.341
GAAP Diluted EPS	$0.52	$(0.06)	$0.02	$(0.53)
Non-GAAP Diluted EPS	$0.52	$0.00	$0.07	$(0.27)
Product Gross Margin %	55.8%	53.2%	60.8%	51.9%

Segment revenue ($M):

Segment	Q3 2023	Q1 2024	Q2 2024	Q3 2024
Medical Device	$46.014	$23.545	$24.826	$23.383
In Vitro Diagnostics	$6.469	$7.007	$7.132	$6.958

KPI detail ($M):

KPI	Q3 2023	Q1 2024	Q2 2024	Q3 2024
Product Sales	$15.667	$18.827	$18.099	$17.562
Royalties & License Fees	$34.153	$9.179	$11.411	$10.458
SurVeil DCB License Fees	$25.867	$0.971	$1.088	$1.134
R&D and Other	$2.663	$2.546	$2.448	$2.321
Adjusted EBITDA	$24.588	$3.934	$4.809	$1.614

Balance sheet/cash flow highlights:

Cash & investments: $35.2M (Q1), $40.9M (Q2), $38.2M (Q3) .
Debt: $5.0M revolver, $25.0M term loan outstanding at Q3; ~$65M additional debt capacity available under facilities .
Q3 operating cash flow used: $(2.0)M; capex $1.0M .

Estimate comparison: S&P Global consensus for Q3 FY2024 revenue and EPS was unavailable at time of query; we attempted to retrieve (“Daily Request Limit Exceeded”). As a proxy, management Q2 call guided Q3 revenue to ~$29.5–$30.5M; actual $30.341M fell at the high end of that range .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Total Revenue	FY2024	$122–$124M (down 8% to 6% YoY); ex-SurVeil license: $118–$120M (+15% to +17%)	Suspended	Suspended
GAAP Diluted EPS	FY2024	$(0.90) to $(0.70)	Suspended	Suspended
Non-GAAP Diluted EPS	FY2024	$(0.67) to $(0.47)	Suspended	Suspended
Product Gross Margin	FY2024	Mid-to-high 50s% (modeling consideration)	Suspended	Suspended
Q3 Revenue Guide	Q3 2024	~$29.5–$30.5M	Actual $30.341M	In-line/high end
Cash & Investments YE	FY2024	~$35–$38M	Suspended	Suspended

Note: Guidance suspended due to pending GTCR acquisition; company did not host a Q3 call .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1–Q2 FY2024)	Current Period (Q3 FY2024)	Trend
SurVeil U.S. commercialization via Abbott	Initial stocking order (Q1), monthly orders; positive early physician feedback; profit-share estimated conservatively pending Abbott reporting	Continued monthly orders cited in Q2; Q3 commentary highlights demand via Abbott; no Q3 call	Ongoing adoption; early commercial phase
Thrombectomy launches (Pounce Venous, Pounce LP)	LME completed; full commercial launches in March (Venous) and April (LP); strong physician feedback and below-the-knee need	Premier GPO agreement expected to expand reach; Q3 notes growth in Pounce platform sales	Broadening access and adoption
Product gross margin scaling	Q1: 53.2%; Q2: 60.8%; expectation mid-to-high 50s as scale/efficiencies improve	Q3: 51.9% due to under-absorption and inefficiencies, including inventory expiration	Mixed; early-scale pressures persist
R&D and OpEx discipline	R&D trending down with SurVeil commercialization; 2024 R&D $39.5–$40.5M in Q2 outlook; SG&A modest growth for commercial investment	Q3 SG&A up YoY on $2.9M merger charges; R&D down YoY	R&D moderation continues; one-time merger costs
Capital/cash	Q2 OPS cash +$7.4M; ending cash/investments $40.9M; no new borrowings assumed	Q3 cash/investments $38.2M; ~$65M additional debt capacity	Stable liquidity

Management Commentary

“Our team’s focus and execution in the third quarter enabled us to deliver total revenue results consistent with the expectations shared on our most recent earnings call, benefiting from strength across multiple areas of our business.” — Gary Maharaj, President & CEO .
On drivers: “Strong contributions from growth in both Medical Device product revenue – driven primarily by demand for our SurVeil DCB and Pounce thrombectomy products – and performance coating royalties and license fees, along with broad-based growth in sales of our In Vitro Diagnostics products” .
On Q2 profitability and momentum: “We achieved net income profitability in the second quarter… generated over $7 million in cash flow from operations… [and] are well-positioned to deliver strong, sustained revenue performance” .

Q&A Highlights

SurVeil TAM and Abbott progress: Management cited ~500k U.S. above-the-knee cases annually and >$1B TAM with 1.3+ balloons/procedure; emphasized very early launch phase but consistent monthly orders from Abbott .
Profit sharing accounting: Profit share is estimated upon shipment using conservative assumptions (pricing, units used/expired); first Abbott report pending as of Q2 call .
Gross margin trajectory: Q2 product gross margin 60.8% and guide to mid–high 50s; scaling and manufacturing efficiency expected to drive improvement over time, with potential medtech-like margins in a couple of years depending on growth .
Commercial expansion: U.S. sales force curated and selective expansion approach; international expansion deferred pending capital discipline; Pounce Venous high ASP could support territory economics .

Note: No Q3 earnings call due to pending GTCR acquisition .

Estimates Context

S&P Global consensus estimates for Q3 FY2024 revenue and EPS were unavailable at query time (attempt returned an error). We attempted to retrieve “Revenue Consensus Mean” and “Primary EPS Consensus Mean” for SRDX Q3 FY2024; data was unavailable due to S&P daily request limits. In lieu of sell-side consensus, management’s prior intra-quarter guidance called for Q3 revenue of ~$29.5–$30.5M; reported $30.341M was within/at the high end of that range .
Where estimates may need to adjust: With FY24 guidance suspended and the transaction pending, near-term sell-side models may shift focus to deal closure probabilities/timing rather than standalone FY24 trajectories .

Key Takeaways for Investors

Underlying momentum intact ex-license fees: Total ex-license revenue +10% YoY with Medical Device product growth (+15% YoY) and coating royalties (+13% YoY) demonstrating demand for SurVeil and Pounce despite early-scale margin pressure .
Q3 landed at the high end of intra-quarter revenue guidance; lack of an earnings call and suspended FY24 guidance reflect M&A backdrop, not operational backpedaling .
Mix-driven margin compression is transitory: Management continues to expect scaling and efficiency improvements as volumes grow and products stabilize; watch product gross margin progression in subsequent quarters (if reported) .
Distribution/access catalysts: Premier GPO agreement can accelerate Pounce adoption across an alliance of >4,350 U.S. hospitals; this could be a near-term revenue tailwind for thrombectomy .
Liquidity adequate into deal close: $38.2M cash/investments at Q3, modest borrowings, ~$65M additional debt capacity; cash usage controlled absent large one-offs .
Transaction lens dominates: The $43/share GTCR proposal (41.1% VWAP premium) is the primary stock driver pending shareholder/regulatory approvals; operational updates serve as secondary catalysts .
Watchlist: Abbott’s SurVeil sell-through/profit-share reporting cadence, thrombectomy adoption slope under Premier, any regulatory/antitrust developments affecting the GTCR deal .

SURMODICS INC (SRDX)·Q3 2024 Earnings Summary