AtriCure Reports Third Quarter 2016 Financial Results

October 27, 2016 at 4:02 PM EDT

Revenue of $38.3 million – up 22.0%
U.S. sales of $30.6 million – up 24.0%
International sales of $7.8 million – up 14.9%

MASON, Ohio--(BUSINESS WIRE)--Oct. 27, 2016-- AtriCure, Inc. (Nasdaq: 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

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Source: AtriCure, Inc.

AtriCure, Inc.
Andy Wade, 513-755-4564
Senior Vice President and Chief Financial Officer
awade@atricure.com
or
Investor Relations Contact
Gilmartin Group
Lynn Pieper Lewis, 415-937-5402
lynn@gilmartinir.com