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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