AtriCure Reports Second Quarter 2018 Financial Results

Aug 01, 2018 04:01 pm
MASON, Ohio -- 

AtriCure, Inc. (Nasdaq: ATRC), a leading innovator in treatments for atrial fibrillation (Afib) and left atrial appendage (LAA) management, today announced second quarter 2018 financial results.

“Our second quarter results reflect strong revenue growth, solid operational performance and continued execution on our strategic priorities,” said Mike Carrel, President and Chief Executive Officer of AtriCure. “We are pleased to be reporting positive adjusted EBITDA for the second quarter as well as raising our revenue expectations for the year.”

Second Quarter 2018 Financial Results

Revenue for the second quarter of 2018 was $51.8 million, an increase of $6.6 million or 14.5% (13.5% on a constant currency basis), compared to second quarter 2017 revenue. U.S. revenue increased 14.9% to $40.8 million, driven by increased sales of ablation-related open-heart products and appendage management products. International revenue was $11.0 million, an increase of $1.3 million or 13.1% (8.3% on a constant currency basis), compared to second quarter 2017 revenue, driven primarily by increased sales in Asia and certain European markets.

Gross profit for the second quarter of 2018 was $38.1 million compared to $32.6 million for the second quarter of 2017. Gross margin for the second quarter of 2018 increased to 73.5% compared to 72.0% in the second quarter of 2017, driven primarily by product mix.

Operating expenses for the second quarter of 2018 decreased 4.6%, or $1.8 million, compared to the second quarter of 2017. The decrease in operating expenses was primarily due to a contingent consideration adjustment of $5.9 million recorded in the second quarter of 2018.

Income from operations for the second quarter of 2018 was $1.0 million, compared to a loss of $6.4 million for the second quarter of 2017. Net loss per share was $0.01 for the second quarter of 2018 compared to $0.21 for the second quarter of 2017. The adjusted loss per share for the second quarter of 2018, which excludes the contingent consideration adjustment, was $0.19.

Adjusted EBITDA, a non-GAAP measure, was positive $0.8 million for the second quarter of 2018 and a loss of $0.4 million for the second quarter of 2017 (see reconciliation of GAAP results to non-GAAP results in the table accompanying this release).

2018 Financial Guidance

Management is raising its 2018 revenue guidance. Revenue for 2018 is projected to be approximately $193 million to $197 million. Management continues to expect positive full-year adjusted EBITDA, a non-GAAP measure, with legal fees continuing to be a watch item.

Conference Call

AtriCure will host a conference call at 4:30 p.m. Eastern Time on Wednesday, August 1, 2018 to discuss its second quarter 2018 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 1519128. A live audio webcast of the presentation may be accessed by visiting the Investors page of AtriCure’s corporate website at ir.atricure.com. A replay of the presentation will be available for 90 days following the presentation.

About AtriCure

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 150,000 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.

Revenue reported on a constant currency basis is a non-GAAP measure and is calculated by applying previous period foreign currency exchange rates to each of the comparable periods. Management analyzes revenue on a constant currency basis to better measure the comparability of results between periods. Because changes in foreign currency exchange rates have a non-operating impact on revenue, the Company believes that evaluating growth in revenue on a constant currency basis provides an additional and meaningful assessment of revenue to both management and the company’s investors.

Adjusted EBITDA provides 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 adjusted EBITDA for its strategic planning. A reconciliation of adjusted EBITDA reported in this release to the most comparable GAAP measure for the respective periods can be found in a table later in this release.

Adjusted loss per share is a non-GAAP measure which calculates the net loss per share before non-cash adjustments to expenses related to the adjustment in value of the contingent consideration liability. Management believes this metric provides a better measure of comparability of results between periods, as such adjustments are not frequent in nature or similar in value, and can be significant.

The non-GAAP financial measures used by AtriCure may not be the same or calculated the same as those used by other companies. 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,
2018 2017 2018 2017
United States Revenue:
Open-heart ablation $ 18,073 $ 16,790 $ 35,652 $ 32,495
Minimally invasive ablation 9,114 8,725 17,727 17,007
Appendage management   13,101     9,463     24,898     18,165  
Total ablation and appendage management 40,288 34,978 78,277 67,667
Valve tools   546     556     993     1,135  
Total United States 40,834 35,534 79,270 68,802
International Revenue:
Open-heart ablation 5,836 5,674 10,745 10,264
Minimally invasive ablation 2,660 2,135 4,452 4,093
Appendage management   2,424     1,777     4,222     3,172  
Total ablation and appendage management 10,920 9,586 19,419 17,529
Valve tools   48     111     107     173  
Total international 10,968 9,697 19,526 17,702
Total revenue 51,802 45,231 98,796 86,504
Cost of revenue   13,723     12,677     26,214     23,942  
Gross profit 38,079 32,554 72,582 62,562
Operating expenses:
Research and development expenses 8,655 8,907 17,712 18,457
Selling, general and administrative expenses   28,466     30,002     63,342     60,102  
Total operating expenses   37,121     38,909     81,054     78,559  
Income (loss) from operations 958 (6,355 ) (8,472 ) (15,997 )
Other expense, net   (1,248 )   (511 )   (1,904 )   (1,029 )
Loss before income tax expense (290 ) (6,866 ) (10,376 ) (17,026 )
Income tax expense 48 17 96 40
Net loss $ (338 ) $ (6,883 ) $ (10,472 ) $ (17,066 )
Basic and diluted net loss per share $ (0.01 ) $ (0.21 ) $ (0.32 ) $ (0.53 )
Weighted average shares used in computing net loss per share:
Basic and diluted   33,252     32,288     33,117     32,154  
 
   
ATRICURE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
 
June 30, December 31,
2018 2017
Assets
Current assets:
Cash, cash equivalents, and short-term investments $ 37,068 $ 34,451
Accounts receivable, net 24,895 23,083
Inventories 21,682 22,451
Other current assets   3,120     2,273  
Total current assets 86,765 82,258
Property and equipment, net 28,126 28,749
Goodwill and intangible assets, net 155,337 156,021
Other noncurrent assets   619     676  
Total assets $ 270,847   $ 267,704  
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 26,831 $ 31,342
Other current liabilities and current maturities of capital leases   589     561  
Total current liabilities 27,420 31,903
Capital leases 12,492 12,761
Long-term debt 39,399 24,100
Other noncurrent liabilities   31,849     37,774  
Total liabilities 111,160 106,538
Stockholders' equity:
Common stock 35 35
Additional paid-in capital 396,088 386,963
Accumulated other comprehensive (loss) income (98 ) 34
Accumulated deficit   (236,338 )   (225,866 )
Total stockholders' equity   159,687     161,166  
Total liabilities and stockholders' equity $ 270,847   $ 267,704  
 
   
ATRICURE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
 
Six Months Ended June 30,
2018 2017
Cash flows from operating activities:
Net loss $ (10,472 ) $ (17,066 )
Adjustments to reconcile net loss to net cash used in

operating activities:

Share-based compensation expense 7,424 7,325
Depreciation and amortization of intangible assets 4,403 4,590
Amortization of deferred financing costs 217 132
Loss on disposal of property and equipment 97 88
Realized loss (gain) from foreign exchange on intercompany transactions 56 (10 )
(Accretion) amortization of investments (56 ) 59
Change in allowance for doubtful accounts 58 (134 )
Change in fair value of contingent consideration (5,916 ) —
Changes in operating assets and liabilities
Accounts receivable (1,946 ) (1,673 )
Inventories 703 (2,094 )
Other current assets (877 ) (26 )
Accounts payable and accrued liabilities (4,129 ) (1,326 )
Other noncurrent assets and liabilities   69     (468 )
Net cash used in operating activities (10,369 ) (10,603 )
Cash flows from investing activities:
Purchases of available-for-sale securities (23,510 ) (7,567 )
Sales and maturities of available-for-sale securities 13,000 16,350
Purchases of property and equipment (3,473 ) (3,488 )
Proceeds from sale of property and equipment 6   —  
Net cash (used in) provided by investing activities (13,977 ) 5,295
Cash flows from financing activities:
Proceeds from debt borrowings 17,381 —
Payments on debt and capital leases (1,469 ) (241 )
Payment of debt fees (1,136 ) (50 )
Shares repurchased for payment of taxes on stock awards (3,724 ) (1,901 )
Proceeds from exercise of stock options and employee stock purchase plan 5,425   4,279  
Net cash provided by financing activities 16,477 2,087
Effect of exchange rate changes on cash and cash equivalents   (74 )   26  
Net decrease in cash and cash equivalents (7,943 ) (3,195 )
Cash and cash equivalents - beginning of period   21,809     24,208  
Cash and cash equivalents - end of period $ 13,866   $ 21,013  
 
Supplemental cash flow information:
Cash paid for interest $ 1,210 $ 985
Cash paid for income taxes 45 —
Non-cash investing and financing activities:
Accrued purchases of property and equipment 366 703
Assets acquired through capital lease 24 —
Capital lease asset early termination (6 ) —
 
     
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,
2018 2017 2018 2017
Net loss, as reported $ (338 ) $ (6,883 ) $ (10,472 ) $ (17,066 )
Income tax expense 48 17 96 40
Other expense, net (a) 1,248 511 1,904 1,029
Depreciation and amortization expense 2,204 2,286 4,403 4,590
Share-based compensation expense 3,534 3,697 7,424 7,325
Change in fair value of contingent consideration   (5,916 )   —     (5,916 )   —  
Non-GAAP adjusted income (loss) (adjusted EBITDA) $ 780   $ (372 ) $ (2,561 ) $ (4,082 )
 
 
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
(a) Other includes:
Net interest expense $ 1,098 $ 516 $ 1,842 $ 1,016
Loss (gain) due to exchange rate fluctuation   150     (5 )   62     13  
Other expense, net $ 1,248   $ 511   $ 1,904   $ 1,029  
 

AtriCure, Inc.
Andy Wade, 513-755-4564
Senior Vice President and Chief Financial Officer
[email protected]
or
Gilmartin Group
Lynn Pieper Lewis, 415-937-5402
Investor Relations
[email protected]