AtriCure Reports Second Quarter 2015 Financial Results and Updates 2015 Outlook

Revenue of $32.6 million – up 22.9% as reported, 26.5% constant currency
U.S. sales of $25.7 million – up 29.3%
International sales of $6.8 million – up 3.5% as reported, 17.9% constant currency

WEST CHESTER, Ohio--- AtriCure, Inc. (Nasdaq: ATRC), a leading innovator in technologies for the surgical treatment of atrial fibrillation and left atrial appendage management, today announced second quarter 2015 financial results.

“We are pleased by our results this quarter which reflect continued stability in our business and the solid foundation AtriCure is building for future growth,” said Mike Carrel, President and Chief Executive Officer of AtriCure. “With our long term investments in clinical trials, innovation, and physician training and education, we look forward to continuing to advance the treatment of atrial fibrillation.”

Second Quarter 2015 Financial Results
Revenue for the second quarter of 2015 was $32.6 million, an increase of $6.1 million or 22.9% (26.5% on a constant currency basis), compared to second quarter 2014 revenue. Domestic revenue increased 29.3% to $25.7 million, driven by strong sales of ablation-related open-heart products, ablation-related minimally invasive products, and AtriClip products. International revenue was $6.8 million, an increase of $0.2 million or 3.5% (17.9% on a constant currency basis) compared to $6.6 million for the second quarter of 2014. International revenue growth was driven primarily by increases in product sales in Asia, the United Kingdom, Germany and France which offset the decline in the Euro-Dollar exchange rate between quarters.

Gross profit for the second quarter of 2015 was $23.1 million compared to $18.8 million for the second quarter of 2014. Gross margin for the second quarter of 2015 and 2014 was 70.9% and 70.8%, respectively.

Operating expenses for the second quarter of 2015 increased 29.1%, or $6.3 million, compared to the second quarter of 2014. The increase in operating expenses was driven primarily by an increase in selling, clinical, marketing, and training expenses and the favorable impact of the fair value adjustment of Estech contingent consideration recorded during the three months ended June 30, 2014, partially offset by transaction, transition and severance expense related to the acquisition of Estech recorded during the three months ended June 30, 2014.

Loss from operations for the second quarter of 2015 was $4.8 million, compared to $2.9 million for the second quarter of 2014. Adjusted EBITDA, a non-GAAP measure, was a loss of $1.0 million for the second quarter of 2015, compared to a $2.5 million loss for the second quarter of 2014. Net loss per share was $0.18 for the second quarter of 2015 and $0.10 for the second quarter of 2014.

2015 Guidance
Management projects that 2015 revenue will be in the range of $127 million to $129 million, which represents an increase of 18% to 20% over 2014 (21% to 23% on a constant currency basis). This compares to previous expectations of 2015 revenue in the range of $123.5 million to $125.5 million.

Management projects adjusted EBITDA, a non-GAAP measure, to be a loss in the range of $7 million to $8 million for 2015 in order to continue making strategic investments to drive the long-term growth plan.

Conference Call
AtriCure will host a conference call at 4:30 p.m. Eastern Time on Tuesday, July 28, 2015 to discuss its second quarter 2015 financial results. A live webcast of the conference call will be available online on the Investor page of AtriCure’s corporate website at www.atricure.com. You may also access this call through an operator by calling (855) 307-9214 for domestic callers and (330) 863-3275 for international callers using participant passcode 80628026.

The webcast will be available on AtriCure’s website and a telephonic replay of the call will be available through August 4, 2015. The replay dial-in numbers are (855) 859-2056 for domestic callers and (404) 537-3406 for international callers. The participant passcode is 80628026.

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 management (LAAM) exclusion device is the most widely sold device worldwide that’s indicated for the occlusion of the left atrial appendage. The company believes cardiothoracic surgeons are adopting its ablation and LAAM devices for the treatment of Afib and reduction of Afib related complications such as stroke. Afib affects more than 33 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, AtriCure’s ability to retain and attract key employees, 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 continue to be in compliance with applicable U.S. federal and state and foreign government laws and regulations, 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, including the development of drug or catheter-based technologies, 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, fluctuations in exchange rates for future sales denominated in foreign currency, which represent a majority of AtriCure’s sales outside of the United States, 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 accounting principles generally accepted in the United States of America, 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,
	2015			2014			2015			2014

Domestic Revenue:
Open-heart ablation	$	13,648		$	10,856		$	26,002		$	21,233
Minimally invasive ablation		5,057			4,393			9,404			7,841
AtriClip		6,286			3,951			11,789			7,571
Total ablation and AtriClip		24,991			19,200			47,195			36,645
Valve tools		753			703			1,472			1,401
Total domestic		25,744			19,903			48,667			38,046

International Revenue:
Open-heart ablation		4,088			4,054			8,304			8,025
Minimally invasive ablation		1,858			1,966			3,826			3,969
AtriClip		789			404			1,460			847
Total ablation and AtriClip		6,735			6,424			13,590			12,841
Valve tools		104			187			212			474
Total international		6,839			6,611			13,802			13,315

Total revenue		32,583			26,514			62,469			51,361
Cost of revenue		9,466			7,733			17,617			14,923
Gross profit		23,117			18,781			44,852			36,438

Operating expenses:
Research and development expenses		5,862			4,569			11,471			8,570
Selling, general and administrative expenses		22,074			17,065			43,344			38,646
Total operating expenses		27,936			21,634			54,815			47,216

Loss from operations		(4,819	)		(2,853	)		(9,963	)		(10,778	)

Other (expense) income, net		(64	)		166			(180	)		409

Loss before income tax expense		(4,883	)		(2,687	)		(10,143	)		(10,369	)

Income tax expense		8			5			14			32

Net loss	$	(4,891	)	$	(2,692	)	$	(10,157	)	$	(10,401	)

Basic and diluted net loss per share	$	(0.18	)	$	(0.10	)	$	(0.37	)	$	(0.40	)

Weighted average shares used in computing net loss per share:
Basic and diluted		27,304			26,849			27,187			25,813


ATRICURE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Per Share Amounts)
(Unaudited)

	June 30,			December 31,
	2015			2014
Assets

Current assets:
Cash, cash equivalents and short-term investments	$	54,479		$	59,649
Accounts receivable, net		17,590			17,558
Inventories		16,073			14,257
Other current assets		2,597			2,044
Total current assets		90,739			93,508

Property and equipment, net		19,352			11,552
Long-term investments		5,209			8,894
Goodwill and intangible assets, net		43,658			44,264
Other noncurrent assets		351			186
Total assets	$	159,309		$	158,404

Liabilities and Stockholders' Equity

Current liabilities:
Accounts payable and accrued liabilities	$	20,904		$	21,662
Other current liabilities and current maturities of capital leases		9,237			3,981
Total current liabilities		30,141			25,643

Capital leases		68			74
Other noncurrent liabilities		409			149
Total liabilities		30,618			25,866

Stockholders' equity:
Common stock		28			28
Additional paid-in capital		277,787			271,282
Accumulated other comprehensive loss		(543	)		(348	)
Accumulated deficit		(148,581	)		(138,424	)
Total stockholders' equity		128,691			132,538

Total liabilities and stockholders' equity	$	159,309		$	158,404


ATRICURE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)

	Six Months Ended June 30,
	2015			2014

Cash flows from operating activities:
Net loss	$	(10,157	)	$	(10,401	)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation expense		4,141			3,988
Depreciation and amortization of intangible assets		2,693			2,217
Amortization of deferred financing costs		31			80
Loss on disposal of property and equipment		63			14
Realized loss from foreign exchange on intercompany transactions		302			-
Amortization/accretion on investments		339			163
Change in allowance for doubtful accounts		117			32
Change in value of contingent consideration		-			(2,662	)
Other		-			95
Changes in operating assets and liabilities
Accounts receivable		(468	)		(1,448	)
Inventories		(1,977	)		(2,457	)
Other current assets		(538	)		572
Accounts payable and accrued liabilities		(1,068	)		(7,640	)
Other non-current assets and liabilities		128			(926	)
Net cash used in operating activities		(6,394	)		(18,373	)

Cash flows from investing activities:
Purchases of available-for-sale securities		(10,302	)		(27,322	)
Sales and maturities of available-for-sale securities		20,460			13,749
Purchases of property and equipment		(4,077	)		(2,475	)
Increases in property under build-to-suit obligation		(4,806	)		-
Net cash provided by (used in) investing activities		1,275			(16,048	)

Cash flows from financing activities:
Net proceeds from sale of stock		-			65,830
Payments on debt and capital leases		(25	)		(6,352	)
Increases in build-to-suit obligation		4,806			-
Payment of debt fees and premium on retirement of debt		(62	)		(169	)
Proceeds from stock option exercises		1,854			1,637
Shares repurchased for payment of taxes on stock awards		(572	)		(153	)
Proceeds from issuance of common stock under employee stock purchase plan		906			708
Net cash provided by financing activities		6,907			61,501

Effect of exchange rate changes on cash and cash equivalents		(185	)		6

Net (decrease) increase in cash and cash equivalents		1,603			27,086
Cash and cash equivalents - beginning of period		28,384			14,892
Cash and cash equivalents - end of period	$	29,987		$	41,978

Supplemental cash flow information:
Cash paid for interest	$	3		$	109
Cash paid for income taxes		20			146
Noncash investing and financing activities:
Accrued purchases of property and equipment		1,652			137
Assets acquired through capital lease		36			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,
	2015			2014			2015			2014

Net loss, as reported	$	(4,891	)	$	(2,692	)	$	(10,157	)	$	(10,401	)
Income tax expense		8			5			14			32
Other expense (income), net (a)		64			(166	)		180			(409	)
Depreciation and amortization expense		1,382			1,132			2,693			2,217
Share-based compensation expense		2,417			1,846			4,141			3,988
Change in fair value of contingent consideration		-			(2,662	)		-			(2,662	)
Non-GAAP adjusted loss (adjusted EBITDA)	$	(1,020	)	$	(2,537	)	$	(3,129	)	$	(7,235	)


	Three Months Ended June 30,						Six Months Ended June 30,
(a) Other includes:	2015			2014			2015			2014

Net interest income (expense)	$	26		$	(6	)	$	51		$	(229	)
Grant income		-			137			35			500
(Loss) gain due to exchange rate fluctuation		(46	)		16			(209	)		21
Non-employee stock option (expense) income		(44	)		19			(57	)		117
Other (expense) income, net	$	(64	)	$	166		$	(180	)	$	409

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Contact:

AtriCure, Inc.
Andy Wade, Senior Vice President and Chief Financial Officer, 513-755-4564
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Investor Relations Contact
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Lynn Pieper, 415-202-5678
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AtriCure Inc ( ATRC )

AtriCure Reports Second Quarter 2015 Financial Results and Updates 2015 Outlook