AtriCure Reports Third Quarter 2019 Financial Results

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.

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