AtriCure Reports Third Quarter 2019 Financial Results

Oct 30, 2019 04:02 pm
MASON, Ohio -- 

AtriCure, Inc. (Nasdaq: ATRC), a leading innovator in treatments for atrial fibrillation (Afib) and left atrial appendage (LAA) management, today announced third quarter 2019 financial results.

“We successfully executed across our initiatives and continued our strong momentum of top line growth in the third quarter,” said Mike Carrel, President and Chief Executive Officer of AtriCure. “This quarter was highlighted by our strategic acquisition of SentreHEART, which deepens our commitment to the electrophysiology space and meaningfully expands our market opportunities over the long term.”

Third Quarter 2019 Financial Results

Revenue for the third quarter of 2019 was $56.6 million, an increase of $6.7 million or 13.4% (14.0% on a constant currency basis), compared to third quarter 2018 revenue. U.S. revenue was $46.1 million, an increase of $6.4 million or 16.0%, compared to third quarter 2018 revenue. U.S. revenue growth was driven by increased sales across key products within open ablation, minimally invasive ablation and appendage management categories. International revenue increased 3.1% (an increase of 6.0% on a constant currency basis) to $10.5 million, as a result of increased sales of open ablation and appendage management products and offsetting a decline in minimally invasive product revenue.

Gross profit for the third quarter of 2019 was $41.8 million compared to $35.9 million for the third quarter of 2018. Gross margin for the third quarter of 2019 increased to 73.8% from 72.0% in the third quarter of 2018, driven by product and geographic mix as well as operational improvements to lower production costs. Additionally, share-based compensation decreased as a result of a one-time charge for the acceleration of vesting of restricted stock awards in 2018.

Loss from operations for the third quarter of 2019 was $8.6 million, compared to $6.0 million for the third quarter of 2018. Net loss per share was $0.25 for the third quarter of 2019 compared to a net loss per share of $0.22 for the third quarter of 2018.

Adjusted EBITDA was a loss of $2.2 million for the third quarter of 2019 compared to a loss of $0.5 million for the third quarter of 2018. Adjusted loss per share for the third quarter of 2019 was $0.33 compared to $0.24 for the third quarter of 2018. Adjusted EBITDA and adjusted loss per share are non-GAAP measures. During the third quarter of 2019, we modified the definition of adjusted EBITDA to exclude acquisition costs due to their nonrecurring nature. This modified definition of adjusted EBITDA has been applied to all periods presented within this press release for comparability. A discussion of non-GAAP measures, including the modification of the adjusted EBITDA calculation, and reconciliations regarding non-GAAP financial measures to their respective GAAP financial measures is provided later in this press release.

2019 Financial Guidance

Management is updating revenue guidance for 2019 to a range of $227 million to $229 million, corresponding to growth of 13% to 14% for the year, and maintaining expectations for a full-year adjusted EBITDA loss between $7 million and $9 million.

Conference Call

AtriCure will host a conference call at 4:30 p.m. Eastern Time on Wednesday, October 30, 2019 to discuss its third quarter 2019 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 7039247. 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. 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, which are determined by the average daily Euro to Dollar exchange rate, 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 is calculated as Net loss before other income/expense (including interest), income tax expense, depreciation and amortization expense, share-based compensation expense, acquisition costs, and change in fair value of contingent consideration liabilities. Due to the nonrecurring nature of acquisition costs, the Company has modified the calculation of adjusted EBITDA to exclude acquisition costs. Acquisition costs are expenses incurred to effect a business combination and include advisory, legal, accounting, valuation and other professional fees; finder fees; and costs of registering and issuing debt and equity securities. Prior to the SentreHEART transaction, the Company’s most recent acquisition occurred in October 2015 and acquisition costs related to the transactions were included in the calculation of adjusted EBITDA at that time. The Company believes it is now appropriate to modify the calculation of adjusted EBITDA to exclude acquisition costs because the Company has concluded that acquisition costs are generally nonrecurring and are not reflective of the operational results of the Company’s core business, and the Company believes this approach is more comparable to peer company reporting. Management believes in order to properly understand the 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 results of operations and management believes that the excluded items are typically not reflective of our ongoing core business operations and financial condition. Further, management uses adjusted EBITDA for both strategic and annual operating planning, and previously used adjusted EBITDA as a performance metric in the annual incentive plan. A reconciliation of adjusted EBITDA reported in this release to the most comparable GAAP measure for the respective periods can be found in the table captioned “Reconciliation of Non-GAAP Adjusted Loss (Adjusted EBITDA)” 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 contingent consideration liabilities. 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. A reconciliation of adjusted loss per share reported in this release to the most comparable GAAP measure for the respective periods can be found in the table captioned “Reconciliation of Non-GAAP Adjusted Loss Per Share” later in this release.

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
September 30,

 

Nine Months Ended
September 30,

 

 

2019

 

2018

 

2019

 

2018

United States Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Open ablation

 

$

19,754

 

 

$

17,948

 

 

$

59,311

 

 

$

53,600

 

Minimally invasive ablation

 

 

9,006

 

 

 

7,877

 

 

 

25,860

 

 

 

25,604

 

Appendage management

 

 

16,907

 

 

 

13,487

 

 

 

49,075

 

 

 

38,385

 

Total ablation and appendage management

 

 

45,667

 

 

 

39,312

 

 

 

134,246

 

 

 

117,589

 

Valve tools

 

 

456

 

 

 

452

 

 

 

2,046

 

 

 

1,445

 

Total United States

 

 

46,123

 

 

 

39,764

 

 

 

136,292

 

 

 

119,034

 

International Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Open ablation

 

 

5,850

 

 

 

5,437

 

 

 

18,942

 

 

 

16,182

 

Minimally invasive ablation

 

 

2,058

 

 

 

2,355

 

 

 

6,122

 

 

 

6,807

 

Appendage management

 

 

2,532

 

 

 

2,318

 

 

 

7,963

 

 

 

6,540

 

Total ablation and appendage management

 

 

10,440

 

 

 

10,110

 

 

 

33,027

 

 

 

29,529

 

Valve tools

 

 

51

 

 

 

67

 

 

 

167

 

 

 

174

 

Total international

 

 

10,491

 

 

 

10,177

 

 

 

33,194

 

 

 

29,703

 

Total revenue

 

 

56,614

 

 

 

49,941

 

 

 

169,486

 

 

 

148,737

 

Cost of revenue

 

 

14,817

 

 

 

13,993

 

 

 

43,925

 

 

 

40,207

 

Gross profit

 

 

41,797

 

 

 

35,948

 

 

 

125,561

 

 

 

108,530

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

 

10,154

 

 

 

8,556

 

 

 

28,134

 

 

 

26,268

 

Selling, general and administrative expenses

 

 

40,280

 

 

 

33,440

 

 

 

115,223

 

 

 

96,782

 

Total operating expenses

 

 

50,434

 

 

 

41,996

 

 

 

143,357

 

 

 

123,050

 

Loss from operations

 

 

(8,637

)

 

 

(6,048

)

 

 

(17,796

)

 

 

(14,520

)

Other expense, net

 

 

(650

)

 

 

(1,136

)

 

 

(1,151

)

 

 

(3,040

)

Loss before income tax expense

 

 

(9,287

)

 

 

(7,184

)

 

 

(18,947

)

 

 

(17,560

)

Income tax expense

 

 

75

 

 

 

51

 

 

 

151

 

 

 

147

 

Net loss

 

$

(9,362

)

 

$

(7,235

)

 

$

(19,098

)

 

$

(17,707

)

Basic and diluted net loss per share

 

$

(0.25

)

 

$

(0.22

)

 

$

(0.51

)

 

$

0.53

 

Weighted average shares used in computing net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

37,842

 

 

 

33,601

 

 

 

37,387

 

 

 

33,280

 

ATRICURE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands)

(Unaudited)

 

 

 

 

 

 

 

September 30,

 

December 31,

 

2019

 

2018

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash, cash equivalents, and short-term investments

$

79,739

 

 

$

124,402

 

Accounts receivable, net

 

26,798

 

 

 

25,195

 

Inventories

 

27,789

 

 

 

22,484

 

Prepaid and other current assets

 

3,527

 

 

 

2,592

 

Total current assets

 

137,853

 

 

 

174,673

 

Property and equipment, net

 

30,788

 

 

 

27,080

 

Operating lease right-of-use assets

 

4,313

 

 

 

—

 

Long-term investments

 

20,354

 

 

 

—

 

Goodwill and intangible assets, net

 

366,686

 

 

 

154,511

 

Other noncurrent assets

 

762

 

 

 

495

 

Total assets

$

560,756

 

 

$

356,759

 

Liabilities and Stockholders' Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable and accrued liabilities

$

42,124

 

 

$

35,499

 

Other current liabilities and current maturities of debt and leases

 

2,158

 

 

 

4,717

 

Total current liabilities

 

44,282

 

 

 

40,216

 

Finance lease liabilities

 

11,662

 

 

 

12,172

 

Long-term debt

 

59,517

 

 

 

35,571

 

Operating lease liabilities

 

3,076

 

 

 

—

 

Other noncurrent liabilities

 

183,998

 

 

 

19,419

 

Total liabilities

 

302,535

 

 

 

107,378

 

Stockholders' equity:

 

 

 

 

 

Common stock

 

40

 

 

 

39

 

Additional paid-in capital

 

524,658

 

 

 

496,544

 

Accumulated other comprehensive loss

 

(376

)

 

 

(199

)

Accumulated deficit

 

(266,101

)

 

 

(247,003

)

Total stockholders' equity

 

258,221

 

 

 

249,381

 

Total liabilities and stockholders' equity

$

560,756

 

 

$

356,759

 

ATRICURE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

 

 

 

 

 

 

 

Nine Months Ended
September 30,

 

2019

 

2018

Cash flows from operating activities:

 

 

 

 

 

Net loss

$

(19,098

)

 

$

(17,707

)

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

 

 

 

 

 

Share-based compensation expense

 

12,816

 

 

 

11,666

 

Depreciation and amortization of intangible assets

 

6,983

 

 

 

6,531

 

Amortization of deferred financing costs

 

233

 

 

 

341

 

Non-cash lease expense

 

466

 

 

 

—

 

Loss on disposal of property and equipment and impairment of assets

 

433

 

 

 

106

 

Realized loss from foreign exchange on intercompany transactions

 

227

 

 

 

94

 

Accretion of investments

 

(882

)

 

 

(121

)

Provision for doubtful accounts

 

580

 

 

 

419

 

Change in fair value of contingent consideration

 

(6,934

)

 

 

(6,696

)

Payment of nContact contingent consideration in excess of purchase accounting amount

 

—

 

 

 

(96

)

Changes in operating assets and liabilities, net of amounts acquired:

 

 

 

 

 

Accounts receivable

 

(2,045

)

 

 

(727

)

Inventories

 

(3,643

)

 

 

110

 

Other current assets

 

(934

)

 

 

(425

)

Accounts payable and accrued liabilities

 

202

 

 

 

1,262

 

Other noncurrent assets and liabilities

 

(686

)

 

 

87

 

Net cash used in operating activities

 

(12,282

)

 

 

(5,156

)

Cash flows from investing activities:

 

 

 

 

 

Purchases of available-for-sale securities

 

(66,726

)

 

 

(29,995

)

Sales and maturities of available-for-sale securities

 

92,985

 

 

 

20,539

 

Purchases of property and equipment

 

(7,825

)

 

 

(5,128

)

Proceeds from sale of property and equipment

 

28

 

 

 

6

 

Cash paid for SentreHEART business combination

 

(18,008

)

 

 

—

 

Net cash provided by (used in) investing activities

 

454

 

 

 

(14,578

)

Cash flows from financing activities:

 

 

 

 

 

Proceeds from debt borrowings

 

20,000

 

 

 

17,381

 

Payments on debt and finance leases

 

(459

)

 

 

(1,608

)

Payment of debt fees

 

(329

)

 

 

(1,136

)

Proceeds from exercise of stock options and employee stock purchase plan

 

2,283

 

 

 

6,957

 

Shares repurchased for payment of taxes on stock awards

 

(8,976

)

 

 

(4,422

)

Proceeds from economic incentive loan

 

500

 

 

 

—

 

Payments of nContact contingent consideration liability previously established in purchase accounting

 

—

 

 

 

(1,125

)

Net cash provided by financing activities

 

13,019

 

 

 

16,047

 

Effect of exchange rate changes on cash and cash equivalents

 

(240

)

 

 

(123

)

Net increase (decrease) in cash and cash equivalents

 

951

 

 

 

(3,810

)

Cash and cash equivalents - beginning of period

 

32,231

 

 

 

21,809

 

Cash and cash equivalents - end of period

$

33,182

 

 

$

17,999

 

Reconciliation of Non-GAAP Adjusted Loss (Adjusted EBITDA)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2019

 

2018

 

2019

 

2018

Net loss, as reported

 

$

(9,362

)

 

$

(7,235

)

 

$

(19,098

)

 

$

(17,707

)

Income tax expense

 

 

75

 

 

 

51

 

 

 

151

 

 

 

147

 

Other expense, net

 

 

650

 

 

 

1,136

 

 

 

1,151

 

 

 

3,040

 

Depreciation and amortization expense

 

 

2,393

 

 

 

2,128

 

 

 

6,983

 

 

 

6,531

 

Share-based compensation expense

 

 

4,287

 

 

 

4,242

 

 

 

12,816

 

 

 

11,666

 

Contingent consideration adjustment

 

 

(3,062

)

 

 

(780

)

 

 

(6,934

)

 

 

(6,696

)

Acquisition costs

 

 

2,819

 

 

 

—

 

 

 

3,645

 

 

 

—

 

Non-GAAP adjusted loss (adjusted EBITDA)

 

$

(2,200

)

 

$

(458

)

 

$

(1,286

)

 

$

(3,019

)

Reconciliation of Non-GAAP Adjusted Loss Per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2019

 

2018

 

2019

 

2018

Net loss, as reported

 

$

(9,362

)

 

$

(7,235

)

 

$

(19,098

)

 

$

(17,707

)

Contingent consideration adjustment

 

 

(3,062

)

 

 

(780

)

 

 

(6,934

)

 

 

(6,696

)

Net loss excluding contingent consideration adjustment

 

$

(12,424

)

 

$

(8,015

)

 

$

(26,032

)

 

$

(24,403

)

Basic and diluted adjusted net loss per share

 

$

(0.33

)

 

$

(0.24

)

 

$

(0.70

)

 

$

(0.73

)

Weighted average shares used in computing adjusted net loss per share

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

37,842

 

 

 

33,601

 

 

 

37,387

 

 

 

33,280

 

 

Andy Wade
AtriCure, Inc.
Senior Vice President and Chief Financial Officer
(513) 755-4564
[email protected]

Lynn Pieper Lewis
Gilmartin Group
Investor Relations
(415) 937-5402
[email protected]