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AtriCure Reports Second Quarter 2014 Financial Results and Updates 2014 Outlook

  AtriCure Reports Second Quarter 2014 Financial Results and Updates 2014   Outlook    *Revenue of $26.5 million – up 29.8%   *U.S. sales of $19.9 million – up 28.8%   *International sales of $6.6 million – up 32.9%; 29.1% constant currency  Business Wire  WEST CHESTER, Ohio -- July 24, 2014  AtriCure, Inc. (Nasdaq: ATRC), a leading atrial fibrillation (“Afib”) medical device provider, today announced financial results for the second quarter of 2014.  “We are pleased with our performance in the second quarter in which we delivered solid revenue growth while integrating Estech that further positions us as a leader in the treatment of Afib. We also continued to execute on our clinical trials and deliver data that prove the benefit of our innovative products to patients,” said Mike Carrel, President and Chief Executive Officer of AtriCure. “Our goal is unchanged - to drive sustainable growth by simultaneously investing in training and education, clinical trials and innovative products.”  Second Quarter 2014 Financial Results  Revenue for the second quarter of 2014 was $26.5 million, an increase of $6.1 million or 29.8% (28.9% on a constant currency basis) compared to second quarter 2013 revenue. Domestic revenue increased 28.8% to $19.9 million, driven by strong sales of ablation-related open-heart, ablation-related minimally invasive, and AtriClip products. International revenue was $6.6 million, an increase of $1.6 million or 32.9% (29.1% on a constant currency basis) when compared to $5.0 million for the second quarter of 2013. International revenue growth was driven primarily by increases in product sales in Europe and Asia.  Gross profit for the second quarter of 2014 was $18.8 million, compared to $15.1 million for the second quarter of 2013. Gross margin for the second quarter of 2014 and 2013 was 70.8% and 74.0%, respectively. The decrease in gross margin was primarily due to lower product margins on the acquired Estech products, along with increased mix of international sales and heavier placement of loaned equipment.  Operating expenses for the second quarter of 2014 increased 29.1%, or $4.9 million, compared to the second quarter of 2013. The increase in operating expenses was driven primarily by an increase in selling, marketing, clinical, product development and training expenses.  Loss from operations for the second quarter of 2014 was $2.9 million, compared to $1.6 million for the second quarter of 2013. Adjusted EBITDA, a non-GAAP measure, was a loss of $2.5 million for the second quarter of 2014, compared to a $0.3 million loss for the second quarter of 2013. Net loss per share was $0.10 for the second quarter of 2014 and $0.09 for the second quarter of 2013.  2014 Guidance  Management projects that 2014 revenue will be in the range of $103 million to $105 million, which represents an increase of 26% to 28% over 2013. This compares to previous expectations of 2014 revenue in the range of $101 million to $104 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, July 24, 2014 to discuss its second 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 (877) 703-6106 for domestic callers and (857) 244-7305 for international callers at least 15 minutes prior to the call start time using reservation code 59442407.  The webcast will be available on AtriCure’s website and a telephonic replay of the call will be available through August 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 56506328.  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 surgical 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 sold device worldwide that is indicated for the occlusion of the LAA.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 June 30,   Six Months Ended June 30,                        2014             2013         2014           2013                                                                      Domestic Revenue: Open-heart ablation    $  10,856        $ 9,154      $  21,233      $ 18,275 Minimally invasive        4,393           3,511         7,841         6,643 ablation AtriClip                 3,951         2,789       7,571       5,175   Total ablation and        19,200          15,454        36,645        30,093 AtriClip Valve tools              703           -           1,401       -       Total domestic            19,903          15,454        38,046        30,093                                                                      International Revenue: Open-heart ablation       4,054           3,379         8,025         6,637 Minimally invasive        1,966           1,253         3,969         2,587 ablation AtriClip                 404           343         847         542     Total ablation and        6,424           4,975         12,841        9,766 AtriClip Valve tools              187           -           474         -       Total international       6,611           4,975         13,315        9,766                                                                      Total revenue             26,514          20,429        51,361        39,859 Cost of revenue          7,733         5,306       14,923      10,650  Gross profit              18,781          15,123        36,438        29,209                                                                      Operating expenses: Research and              4,569           3,049         8,570         6,555 development expenses Selling, general and administrative           17,065        13,713      38,646      26,093  expenses Total operating          21,634        16,762      47,216      32,648  expenses                                                                      Loss from operations      (2,853  )       (1,639 )      (10,778 )     (3,439 )                                                                      Other income             166           (147   )     409         (285   ) (expense), net                                                                      Loss before income        (2,687  )       (1,786 )      (10,369 )     (3,724 ) tax expense                                                                      Income tax expense       (5      )      (5     )     (32     )    (10    )                                                                      Net loss               $  (2,692  )     $ (1,791 )   $  (10,401 )   $ (3,734 )                                                                      Basic and diluted      $  (0.10   )     $ (0.09  )   $  (0.40   )   $ (0.19  ) net loss per share                                                                      Weighted average shares used in computing net loss per share: Basic and diluted        26,849        20,652      25,813      20,101                                                                                                                                                 ATRICURE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands, Except Per Share Amounts) (Unaudited)                                                                                                                       June 30,       December 31,                                                    2014           2013 Assets                                                                    Current assets: Cash, cash equivalents and short-term              $ 63,201       $ 26,211 investments Accounts receivable, net                             15,058         13,652 Inventories                                          12,666         10,214 Other current assets                                1,840        2,410     Total current assets                                 92,765         52,487                                                                    Property and equipment, net                          6,462          5,643 Long-term investments                                11,387         7,914 Goodwill and intangible assets, net                  44,974         45,685 Other noncurrent assets                             345          218       Total assets                                       $ 155,933     $ 111,947                                                                      Liabilities and Stockholders' Equity                                                                    Current liabilities: Accounts payable and accrued liabilities           $ 16,839       $ 24,675 Current maturities of debt and capital leases       41           2,038     Total current liabilities                            16,880         26,713                                                                    Long-term debt and capital leases                    65             4,412 Other noncurrent liabilities                        4,768        8,218     Total liabilities                                    21,713         39,343                                                                    Stockholders' equity: Common stock                                         27             23 Additional paid-in capital                           266,985        194,933 Accumulated other comprehensive loss                 (178     )     (139     ) Accumulated deficit                                 (132,614 )    (122,213 ) Total stockholders' equity                           134,220        72,604                                                                   Total liabilities and stockholders' equity         $ 155,933     $ 111,947                                                                                   ATRICURE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited)                                                                                                                        Six Months Ended June 30,                                                      2014           2013                                                                      Cash flows from operating activities: Net loss                                             $  (10,401 )   $ (3,734 ) Adjustments to reconcile net loss to net cash used in operating activities: Share-based compensation expense                        3,988         1,338 Depreciation and amortization of intangible assets      2,217         957 Amortization of deferred financing costs                80            46 Loss on disposal of equipment                           14            29 Amortization/accretion on investments                   163           (6     ) Change in allowance for doubtful accounts               32            2 Change in fair value of contingent consideration        (2,662  )     - Other                                                   95            - Changes in operating assets and liabilities Accounts receivable                                     (1,448  )     (1,463 ) Inventories                                             (2,457  )     (320   ) Other current assets                                    572           (240   ) Accounts payable and accrued liabilities                (7,640  )     420 Other non-current assets and liabilities               (926    )    139     Net cash used in operating activities                   (18,373 )     (2,832 )                                                                      Cash flows from investing activities: Purchases of available-for-sale securities              (27,322 )     (2,544 ) Maturities of available-for-sale securities             5,400         2,900 Sales of available-for-sale securities                  8,349         - Purchases of property and equipment                    (2,475  )    (1,191 ) Net cash (used in) investing activities                 (16,048 )     (835   )                                                                      Cash flows from financing activities: Net proceeds from sale of stock                         65,830        26,872 Payments on debt and capital leases                     (6,352  )     (1,014 ) Payment of debt fees and premium on retirement of       (169    )     (98    ) debt Proceeds from stock option exercises                    1,637         1,240 Shares repurchased for payment of taxes on stock        (153    )     (269   ) awards Proceeds from issuance of common stock under           708         326     employee stock purchase plan Net cash provided by financing activities               61,501        27,057                                                                      Effect of exchange rate changes on cash and cash       6           (99    ) equivalents                                                                      Net increase in cash and cash equivalents               27,086        23,291 Cash and cash equivalents - beginning of period        14,892      7,753   Cash and cash equivalents - end of period            $  41,978     $ 31,044                                                                       Supplemental cash flow information: Cash paid for interest                               $  109         $ 279 Cash paid for income taxes                              146           30 Noncash investing and financing activities: Accrued purchases of property and equipment             137           63 Assets acquired through capital lease                   8             -                                                                                                                                       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 June 30,   Six Months Ended June 30,                        2014             2013         2014           2013                                                                      Net loss, as           $  (2,692  )     $ (1,791 )   $  (10,401 )   $ (3,734 ) reported Income tax expense        5               5             32            10 Other (income)            (166    )       147           (409    )     285 expense, net (a) Depreciation and          1,132           496           2,217         957 amortization expense Share-based               1,846           820           3,988         1,338 compensation expense Change in fair value of contingent            (2,662  )      -           (2,662  )    -       consideration Non-GAAP adjusted loss (adjusted         $  (2,537  )     $ (323   )   $  (7,235  )   $ (1,144 ) EBITDA)                                                                                                                                                                  Three Months Ended June 30,   Six Months Ended June 30, (a) Other includes:    2014             2013         2014           2013                                                                      Net interest expense   $  (6      )     $ (130   )   $  (229    )   $ (299   ) Grant income              137             -             500           - Gain due to exchange      16              11            21            56 rate fluctuation Non-employee stock option income            19            (28    )     117         (42    ) (expense) Other income           $  166          $ (147   )   $  409        $ (285   ) (expense), net  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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