AtriCure Reports First Quarter 2014 Financial Results and Updates 2014 Outlook

  AtriCure Reports First Quarter 2014 Financial Results and Updates 2014
  Outlook

  *Revenue of $24.8 million – up 27.9%
  *U.S. sales of $18.1 million – up 23.9%
  *International sales of $6.7 million – up 39.9%; 36.4% constant currency

Business Wire

WEST CHESTER, Ohio -- April 24, 2014

AtriCure, Inc. (Nasdaq: ATRC), a leading atrial fibrillation (“Afib”) medical
device provider, today announced financial results for the first quarter of
2014.

“We are off to a strong start in 2014, as our commitment to training and
education, clinical trial support and innovation continue to pay dividends.We
are seeing increasing physician interest in treating patients with challenging
Afib conditions, and the belief that management of the left atrial appendage
is necessary is becoming increasingly widespread,” said Mike Carrel, President
and Chief Executive Officer of AtriCure. “We are also pleased with the
integration of the Estech products into our portfolio and the ongoing
combination of our sales forces. These accomplishments, combined with our
successful financing, give us a solid foundation for future growth.”

First Quarter 2014 Financial Results
Revenue for the first quarter of 2014 was $24.8 million, an increase of $5.4
million or 27.9% (27.0% on a constant currency basis), compared to first
quarter 2013 revenue. Domestic revenue increased 23.9% to $18.1 million,
driven by strong sales of ablation-related open-heart and AtriClip products.
International revenue was $6.7 million, an increase of $1.9 million or 39.9%
(36.4% on a constant currency basis) when compared to $4.8 million for the
first quarter of 2013. International revenue growth was driven primarily by
increases in product sales in Europe and Asia.

Gross profit for the first quarter of 2014 was $17.7 million, compared to
$14.1 million for the first quarter of 2013. Gross margin for the first
quarter of 2014 and 2013 was 71.1% and 72.5%, respectively. The decrease in
gross margin was primarily due to an increased mix of international sales,
which carry lower gross margins, and an increase in costs related to
recently-acquired Estech products.

Operating expenses for the first quarter of 2014 increased 61.0%, or $9.7
million, compared to the first quarter of 2013. The increase in operating
expenses was driven primarily by an increase in selling, marketing, product
development and training expenses.

Loss from operations for the first quarter of 2014 was $7.9 million, compared
to $1.8 million for the first quarter of 2013. Adjusted EBITDA, a non-GAAP
measure, was a loss of $4.7 million for the first quarter of 2014. This
included $2.6 million, or $0.10 per share, of costs related to transitioning
the Estech business into AtriCure. Net loss per share was $0.31 for the first
quarter of 2014 and $0.10 for the first quarter of 2013.

“The integration of our December 31, 2013 acquisition of Estech has been
successful to date. While overall operating expenses were higher in the first
quarter of 2014 compared to 2013, they are in line with our expectations and
investments in our operating structure, and we are maintaining our adjusted
EBITDA guidance for the year,” said Andy Wade, Vice President and Chief
Financial Officer.

2014 Guidance
Management projects that 2014 revenue will be in the range of $101 million to
$104 million, which represents an increase of 23% to 27% over 2013. This
compares to previous expectations of 2014 revenue in the range of $100 million
to $103 million.

Consistent with the guidance provided in February, adjusted EBITDA, a non-GAAP
measure, is projected to be a loss in the range of $9 million to $10 million
for 2014, of which approximately $3.5 million of expense will be related to
the Estech transaction. AtriCure expects the Estech transaction to be dilutive
to earnings in 2014 and accretive in 2015 and beyond.

Conference Call
AtriCure will host a conference call at 4:30 p.m. Eastern Time on Thursday,
April 24, 2014 to discuss its first quarter 2014 financial results. A live
webcast of the conference call will be available online from the investor
relations page of AtriCure’s corporate website at www.atricure.com.

You may also access this call through an operator by calling (866) 271-6130
for domestic callers and (617) 213-8894 for international callers at least 15
minutes prior to the call start time using reservation code 59610347.

The webcast will be available on AtriCure’s website and a telephonic replay of
the call will be available through May 24, 2014. The replay dial-in numbers
are (888) 286-8010 for domestic callers and (617) 801-6888 for international
callers. The reservation code is 43871865.

About AtriCure, Inc.
AtriCure, Inc. is a medical device company providing innovative atrial
fibrillation (Afib) solutions designed to produce superior outcomes that
reduce the economic and social burden of atrial fibrillation. AtriCure’s
Synergy Ablation System is the first and only device approved for the
treatment of Persistent and Longstanding Persistent forms of Afib in patients
undergoing certain open concomitant procedures. AtriCure’s AtriClip Left
Atrial Appendage (LAA) exclusion device is the most widely implanted device
for LAA management worldwide.The company believes cardiothoracic surgeons are
adopting its ablation and LAA management devices for the treatment of Afib and
reduction of Afib related complications such as stroke. Afib affects more than
5.5 million people worldwide.

Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of
the Private Securities Litigation Reform Act of 1995. Forward-looking
statements include statements that address activities, events or developments
that AtriCure expects, believes or anticipates will or may occur in the
future, such as earnings estimates (including projections and guidance), other
predictions of financial performance, launches by AtriCure of new products and
market acceptance of AtriCure’s products. Forward-looking statements are based
on AtriCure’s experience and perception of current conditions, trends,
expected future developments and other factors it believes are appropriate
under the circumstances and are subject to numerous risks and uncertainties,
many of which are beyond AtriCure’s control. These risks and uncertainties
include the rate and degree of market acceptance of AtriCure’s products,
AtriCure’s ability to develop and market new and enhanced products, the timing
of and ability to obtain and maintain regulatory clearances and approvals for
its products, the timing of and ability to obtain reimbursement of procedures
utilizing AtriCure’s products, AtriCure’s ability to consummate acquisitions
or, if consummated, to successfully integrate acquired businesses into
AtriCure’s operations, AtriCure’s ability to recognize the benefits of
acquisitions, including potential synergies and cost savings, failure of an
acquisition or acquired company to achieve its plans and objectives generally,
risk that proposed or consummated acquisitions may disrupt operations or pose
difficulties in employee retention or otherwise affect financial or operating
results, competition from existing and new products and procedures or
AtriCure’s ability to effectively react to other risks and uncertainties
described from time to time in AtriCure’s SEC filings, such as fluctuation of
quarterly financial results, reliance on third party manufacturers and
suppliers, litigation or other proceedings, government regulation and stock
price volatility. AtriCure does not guarantee any forward-looking statement,
and actual results may differ materially from those projected. AtriCure
undertakes no obligation to publicly update any forward-looking statement,
whether as a result of new information, future events or otherwise. A further
list and description of risks, uncertainties and other matters can be found in
our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q.

Use of Non-GAAP Financial Measures
To supplement AtriCure’s condensed consolidated financial statements prepared
in accordance with U.S. generally accepted accounting principles, or GAAP,
AtriCure uses certain non-GAAP financial measures in this release as
supplemental financial metrics. Non-GAAP financial measures provide an
indication of performance excluding certain items. Our management believes
that in order to properly understand short-term and long-term financial
trends, investors may wish to consider the impact of these excluded items in
addition to GAAP measures. The excluded items vary in frequency and/or impact
on our continuing operations and our management believes that the excluded
items are typically not reflective of our ongoing core business operations.
Further, management uses results of operations before these excluded items as
a basis for its strategic planning. The non-GAAP financial measures used by
AtriCure may not be the same or calculated the same as those used by other
companies. Reconciliations of the non-GAAP financial measures used in this
release to the most comparable GAAP measures for the respective periods can be
found in tables later in this release. Non-GAAP financial measures have
limitations as analytical tools and should not be considered in isolation or
as a substitute for AtriCure’s financial results prepared and reported in
accordance with GAAP.


ATRICURE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
                                                               
                                                                    
                                                  Three Months Ended March 31,
                                                  2014              2013
                                                                    
Domestic Revenue:
Open-heart ablation                               $  10,377         $ 9,121
Minimally invasive ablation                          3,448            3,132
AtriClip                                            3,620          2,386  
Total ablation and AtriClip                          17,445           14,639
Valve tools                                         698            -      
Total domestic                                       18,143           14,639
                                                                    
International Revenue:
Open-heart ablation                                  3,971            3,258
Minimally invasive ablation                          2,003            1,334
AtriClip                                            443            199    
Total ablation and AtriClip                          6,417            4,791
Valve tools                                         287            -      
Total international                                  6,704            4,791
                                                                    
Total revenue                                        24,847           19,430
Cost of revenue                                     7,190          5,344  
Gross profit                                         17,657           14,086
                                                                    
Operating expenses:
Research and development expenses                    4,001            3,506
Selling, general and administrative expenses        21,581         12,380 
Total operating expenses                            25,582         15,886 
                                                                    
Loss from operations                                 (7,925  )        (1,800 )
                                                                    
Other income (expense), net                         243            (138   )
                                                                    
Loss before income tax expense                       (7,682  )        (1,938 )
                                                                    
Income tax expense                                  (27     )       (5     )
                                                                    
Net loss                                          $  (7,709  )      $ (1,943 )
                                                                    
Basic and diluted net loss per share              $  (0.31   )      $ (0.10  )
                                                                    
Weighted average shares used in computing net
loss per share:
Basic and diluted                                   24,766         19,544 
                                                                             


ATRICURE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Per Share Amounts)
(Unaudited)
                                                             
                                                 March 31,        December 31,
                                                 2014             2013
Assets
                                                                  
Current assets:
Cash, cash equivalents and short-term            $ 79,355         $ 26,211
investments
Accounts receivable, net                           14,713           13,652
Inventories                                        11,082           10,214
Other current assets                              2,098          2,410    
Total current assets                               107,248          52,487
                                                                  
Property and equipment, net                        5,769            5,643
Long-term investments                              -                7,914
Goodwill and intangible assets, net                45,330           45,685
Other noncurrent assets                           207            218      
Total assets                                     $ 158,554       $ 111,947  
                                                                  
Liabilities and Stockholders' Equity
                                                                  
Current liabilities:
Accounts payable and accrued liabilities         $ 15,975         $ 24,675
Current maturities of debt and capital            38             2,038    
leases
Total current liabilities                          16,013           26,713
                                                                  
Long-term debt and capital leases                  69               4,412
Other noncurrent liabilities                      8,209          8,218    
Total liabilities                                  24,291           39,343
                                                                  
Stockholders' equity:
Common stock                                       27               23
Additional paid-in capital                         264,297          194,933
Accumulated other comprehensive loss               (139     )       (139     )
Accumulated deficit                               (129,922 )      (122,213 )
Total stockholders' equity                        134,263        72,604   
                                                                  
Total liabilities and stockholders' equity       $ 158,554       $ 111,947  
                                                                             


ATRICURE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
                                                               
                                                  Three Months Ended March 31,
                                                  2014              2013
                                                                    
Cash flows from operating activities:
Net loss                                          $  (7,709   )     $ (1,943 )
Adjustments to reconcile net loss to net cash
used in operating activities:
Share-based compensation expense                     2,142            518
Depreciation and amortization of intangible          1,085            461
assets
Amortization of deferred financing costs             59               21
Loss on disposal of equipment                        14               15
Amortization/accretion on investments                83               (3     )
Change in allowance for doubtful accounts            (17      )       8
Other                                                95               -
Changes in operating assets and liabilities
Accounts receivable                                  (1,045   )       (1,231 )
Inventories                                          (862     )       (1     )
Other current assets                                 312              (634   )
Accounts payable and accrued liabilities             (8,500   )       88
Other non-current assets and liabilities            (55      )      127    
Net cash used in operating activities                (14,398  )       (2,574 )
                                                                    
Cash flows from investing activities:
Purchases of available-for-sale securities           -                (2,549 )
Maturities of available-for-sale securities          2,550            1,555
Sales of available-for-sale securities               5,884            -
Purchases of property and equipment                 (1,020   )      (455   )
Net cash provided by (used in) investing             7,414            (1,449 )
activities
                                                                    
Cash flows from financing activities:
Net proceeds from sale of stock                      65,872           26,912
Payments on debt and capital leases                  (6,343   )       (507   )
Payment of debt fees and premium on                  (100     )       (25    )
retirement of debt
Proceeds from stock option exercises                 1,395            1,002
Shares repurchased for payment of taxes on          (88      )      (245   )
stock awards
Net cash provided by financing activities            60,736           27,137
                                                                    
Effect of exchange rate changes on cash and         (5       )      (83    )
cash equivalents
                                                                    
Net increase in cash and cash equivalents            53,747           23,031
Cash and cash equivalents - beginning of            14,892         7,753  
period
Cash and cash equivalents - end of period         $  68,639        $ 30,784 
                                                                    
Supplemental cash flow information:
Cash paid for interest                            $  102            $ 140
Cash paid for income taxes                           146              30
Noncash investing and financing activities:
Accrued purchases of property and equipment          124              72
                                                                    


ATRICURE, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS
(In Thousands)
(Unaudited)
                                                            
                                                                 
Reconciliation of Non-GAAP Adjusted Loss (Adjusted EBITDA)
                                                                 
                                               Three Months Ended March 31,
                                               2014              2013
                                                                 
Net loss, as reported                          $  (7,709  )      $ (1,943 )
Income tax expense                                27               5
Other (income) expense, net (a)                   (243    )        138
Depreciation and amortization expense             1,085            461
Share-based compensation expense                 2,142          518    
Non-GAAP adjusted loss (adjusted EBITDA)       $  (4,698  )      $ (821   )
                                                                 
                                                                 
                                               Three Months Ended March 31,
(a) Other includes:                            2014              2013
                                                                 
Net interest expense                           $  (223    )      $ (169   )
Grant income                                      363              -
Gain due to exchange rate fluctuation             5                45
Non-employee stock option income (expense)       98             (14    )
Other income (expense), net                    $  243           $ (138   )

Contact:

AtriCure, Inc.
Andy Wade, Vice President and Chief Financial Officer, 513-755-4564
awade@atricure.com
or
Investor Relations Contact
Westwicke Partners
Lynn Pieper, 415-202-5678
lynn.pieper@westwicke.com
 
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