Category: Medical Devices

AtriCure Inc ( ATRC )

Published: 28 October 2016
Written by Editor
Nasdaq   Financial Results   Up on News  

AtriCure Reports Third Quarter 2016 Financial Results

MASON, Ohio-- AtriCure, Inc. (ATRC), a leading innovator in treatments for atrial fibrillation (Afib) and left atrial appendage (LAA) management, today announced third quarter 2016 financial results.
 
“We are pleased to report solid third quarter results led by sales in the U.S. and driven by all areas of our business,” said Mike Carrel, President and Chief Executive Officer of AtriCure. “Our focus on improving patient outcomes continues to guide our clinical and commercial efforts, and we are well-positioned to reach EBITDA profitability in 2018 and for sustainable success.”
 
Third Quarter 2016 Financial Results
Revenue for the third quarter of 2016 was $38.3 million, an increase of $6.9 million or 22.0% (22.0% on a constant currency basis), compared to third quarter 2015 revenue. U.S. revenue increased 24.0% to $30.6 million, driven by strong sales of ablation-related open-heart products, ablation-related minimally invasive products, and AtriClip® products. International revenue was $7.8 million, an increase of $1.0 million or 14.9% (14.7% on a constant currency basis). International revenue growth was driven primarily by increases in product sales in Japan, Italy, Russia and France.
Gross profit for the third quarter of 2016 was $27.5 million compared to $22.5 million for the third quarter of 2015. Gross margin for the third quarter of 2016 increased to 71.7%, compared to 71.5% in the third quarter of 2015.
 
Operating expenses for the third quarter of 2016 increased 18.0%, or $5.2 million, compared to the third quarter of 2015. The increase in operating expenses was driven primarily by an increase in selling, clinical, product development, marketing and training expenses, with most of these areas impacted by the changes in our operating structure to support our acquisition of nContact in late 2015.
 
Loss from operations for the third quarter of 2016 was $6.3 million, compared to $6.1 million for the third quarter of 2015. Net loss per share was $0.21 for the third quarter of 2016 and $0.22 for the third quarter of 2015. Adjusted EBITDA, a non-GAAP measure, was a loss of $1.0 million for the third quarter of 2016, compared to a $2.2 million loss for the third quarter of 2015.
 
2016 Financial Guidance
 
Management projects 2016 revenue growth of approximately 20% to 22% over full year 2015 revenue, which is a range of approximately $156 million to $158 million.
 
Adjusted EBITDA, a non-GAAP measure, is projected to be a loss in the range of $12 to $14 million for 2016 as the Company continues to make strategic investments to drive the long-term growth plan, including several clinical trials, modest expansion of the U.S. field sales team, and ongoing product development efforts. This adjusted EBITDA range translates into an EPS loss of between $1.10 and $1.16. Significant improvements in the adjusted EBITDA loss are expected for 2017, turning to a positive adjusted EBITDA for 2018.
 
Conference Call
 
AtriCure will host a conference call at 4:30 p.m. Eastern Time on Thursday, October 27, 2016 to discuss its third quarter 2016 financial results. The call may be accessed through an operator by calling (844) 884-9951 for domestic callers and (661) 378-9661 for international callers using conference ID number 91346855. A live webcast of the conference call will be available online on the Investors page of AtriCure’s corporate website at www.atricure.com. A replay of the webcast will be available for 90 days following the call.
 
About AtriCure, Inc.
 
AtriCure, Inc. provides innovative technologies for the treatment of Afib and related conditions. Afib affects more than 33 million people worldwide. Electrophysiologists and cardiothoracic surgeons around the globe use AtriCure technologies for the treatment of Afib and reduction of Afib related complications. AtriCure’s Isolator® Synergy™ Ablation System is the first and only medical device to receive FDA approval for the treatment of persistent Afib. AtriCure’s AtriClip Left Atrial Appendage Exclusion System products are the most widely sold LAA management devices worldwide, with more than 75,000 implanted to date. For more information, visit AtriCure.com or follow us on Twitter @AtriCure.
 
Forward-Looking Statements
 
This press release contains “forward-looking statements”–that is, statements related to future events that by their nature address matters that are uncertain. For details on the uncertainties that may cause our actual results to be materially different than those expressed in our forward-looking statements, visit http://www.atricure.com/fls as well as our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q which contain risk factors. We do not undertake to update our forward-looking statements. This document also includes forward-looking projected financial information that is based on current estimates and forecasts. Actual results could differ materially.
 
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. 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 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 September 30,     Nine Months Ended September 30,
    2016   2015     2016   2015
Domestic Revenue:                          
Open-heart ablation   $ 14,766     $ 13,041       $ 43,455     $ 39,043  
Minimally invasive ablation     7,517       5,011         22,232       14,415  
AtriClip     7,721       5,927         21,917       17,716  
Total ablation and AtriClip     30,004       23,979         87,604       71,174  
Valve tools     571       686         2,115       2,158  
Total domestic     30,575       24,665         89,719       73,332  
International Revenue:                          
Open-heart ablation     5,152       4,092         15,062       12,396  
Minimally invasive ablation     1,533       1,945         5,883       5,771  
AtriClip     994       598         2,883       2,058  
Total ablation and AtriClip     7,679       6,635         23,828       20,225  
Valve tools     86       123         405       335  
Total international     7,765       6,758         24,233       20,560  
Total revenue     38,340       31,423         113,952       93,892  
Cost of revenue     10,868       8,945         31,748       26,562  
Gross profit     27,472       22,478         82,204       67,330  
Operating expenses:                          
Research and development expenses     8,271       6,504         25,958       17,975  
Selling, general and administrative expenses     25,487       22,101         79,689       65,445  
Total operating expenses     33,758       28,605         105,647       83,420  
Loss from operations     (6,286 )     (6,127 )       (23,443 )     (16,090 )
Other expense, net     (495 )     (8 )       (1,246 )     (188 )
Loss before income tax expense     (6,781 )     (6,135 )       (24,689 )     (16,278 )
Income tax expense     2       6         24       20  
Net loss   $ (6,783 )   $ (6,141 )     $ (24,713 )   $ (16,298 )
Basic and diluted net loss per share   $ (0.21 )   $ (0.22 )     $ (0.78 )   $ (0.60 )
Weighted average shares used in computing net loss per share:                          
Basic and diluted     31,706       27,462         31,547       27,190  
               
ATRICURE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
               
    September 30,     December 31,
    2016     2015
Assets              
Current assets:              
Cash, cash equivalents, and short-term investments   $ 41,343       $ 34,578  
Accounts receivable, net     21,066         19,409  
Inventories     18,985         17,659  
Other current assets     3,016         3,106  
Total current assets     84,410         74,752  
Property and equipment, net     30,742         31,279  
Long-term investments     6,017         7,706  
Goodwill and intangible assets, net     157,799         159,032  
Other noncurrent assets     348         323  
Total assets   $ 279,316       $ 273,092  
Liabilities and Stockholders' Equity              
Current liabilities:              
Accounts payable and accrued liabilities   $ 25,998       $ 31,138  
Other current liabilities and current maturities of capital leases     492         450  
Total current liabilities     26,490         31,588  
Capital leases     13,423         13,710  
Long-term debt     25,023         —  
Other noncurrent liabilities     40,946         41,109  
Total liabilities     105,882         86,407  
Stockholders' equity:              
Common stock     33         32  
Additional paid-in capital     364,199         352,900  
Accumulated other comprehensive loss     (449 )       (611 )
Accumulated deficit     (190,349 )       (165,636 )
Total stockholders' equity     173,434         186,685  
Total liabilities and stockholders' equity   $ 279,316       $ 273,092  
               
ATRICURE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
               
    Nine Months Ended September 30,
    2016     2015
Cash flows from operating activities:              
Net loss   $ (24,713 )     $ (16,298 )

Adjustments to reconcile net loss to net cash used in operating activities:

              
Share-based compensation expense     8,796         6,533  
Depreciation and amortization of intangible assets     6,858         4,212  
Amortization of deferred financing costs     152         46  
Loss on disposal of property and equipment     107         83  
Realized (gain) loss from foreign exchange on intercompany transactions     (23 )       333  
Amortization/accretion on investments     96         472  
Change in allowance for doubtful accounts     142         55  
Changes in operating assets and liabilities              
Accounts receivable     (1,777 )       571  
Inventories     (1,234 )       (2,461 )
Other current assets     136         (449 )
Accounts payable and accrued liabilities     (4,228 )       2,738  
Other non-current assets and liabilities     (192 )       403  
Net cash used in operating activities     (15,880 )       (3,762 )
Cash flows from investing activities:              
Purchases of available-for-sale securities     (27,395 )       (19,525 )
Sales and maturities of available-for-sale securities     14,602         29,174  
Purchases of property and equipment     (6,102 )       (8,287 )
Proceeds from sale of property and equipment     3         —  
Increases in property under build-to-suit obligation     —         (9,128 )
Net cash used in investing activities     (18,892 )       (7,766 )
Cash flows from financing activities:              
Proceeds from debt borrowings     25,000         —  
Payments on capital leases     (343 )       (36 )
Increases in build-to-suit obligation     —         9,128  
Proceeds from tax incentive loan     —         340  
Payment of debt fees     (120 )       (62 )
Proceeds from stock option exercises     2,595         2,421  
Shares repurchased for payment of taxes on stock awards     (1,078 )       (650 )

Proceeds from issuance of common stock under employee stock purchase plan

     987         906  
Net cash provided by financing activities     27,041         12,047  
Effect of exchange rate changes on cash and cash equivalents     74         (189 )
Net (decrease) increase in cash and cash equivalents     (7,657 )       330  
Cash and cash equivalents - beginning of period     23,764         28,384  
Cash and cash equivalents - end of period   $ 16,107       $ 28,714  
               
Supplemental cash flow information:              
Cash paid for interest   $ 1,043       $ 4  
Cash paid for income taxes     30         20  
Noncash investing and financing activities:              
Accrued purchases of property and equipment     243         2,442  
Assets acquired through capital lease     125         50  
Capital lease asset early termination     28         —  
                           
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 September 30,     Nine Months Ended September 30,
    2016   2015     2016   2015
Net loss, as reported   $ (6,783 )   $ (6,141 )     $ (24,713 )   $ (16,298 )
Income tax expense     2       6         24       20  
Other expense, net (a)     495       8         1,246       188  
Depreciation and amortization expense     2,358       1,519         6,858       4,212  
Share-based compensation expense     2,927       2,392         8,796       6,533  
Non-GAAP adjusted loss (adjusted EBITDA)   $ (1,001 )   $ (2,216 )     $ (7,789 )   $ (5,345 )
                           
                           
    Three Months Ended September 30,     Nine Months Ended September 30,
    2016   2015     2016   2015
(a) Other includes:                          
Net interest expense (income)   $ 463     $ (40 )     $ 1,100     $ (91 )
Grant income     —       —         —       (35 )
Loss due to exchange rate fluctuation     32       48         146       257  
Non-employee stock option expense     —       —         —       57  
Other expense, net   $ 495     $ 8       $ 1,246     $ 188