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  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 or Investor Relations Contact Westwicke Partners Lynn Pieper, 415-202-5678  
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