AtriCure, Inc. (ATRC)

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AtriCure, Inc. (ATRC)

Q3 2010 Earnings Conference Call

November 2, 2010 10:00 AM ET


David Drachman – President and CEO

Julie Piton – VP, Finance & Administration and CFO


Matt Dolan – Roth Capital Partners

Tim Lee – Piper Jaffray

Vivian Cervantes – Maxim Group

Jason Mills – Canaccord Genuity

Charley Jones – Barrington Research

Larry Haimovitch – HMTC



Good morning and welcome to AtriCure third quarter 2010 earnings conference call. My name is (Michelle) and I will be your coordinator for the call today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today’s call.

(Operator Instructions)

I would now like to turn the call over to Mr. David Drachman, President and Chief Executive Officer of AtriCure. Mr. Drachman, please proceed.

David Drachman

Thank you, (Michelle). Good morning and welcome to our third quarter earnings conference call. Joining me on the call today is Julie Piton, Vice President of Finance and Administration and Chief Financial Officer. At this time, I would like to turn the call over to Julie for a few introductory comments.

Julie Piton

Thank you Dave and good morning everyone. By now you should have received a copy of the earnings press release. If you have not received a copy, please call (Sarah Luken) at 513-755-4136 and she will be happy to fax or e-mail you a copy.

Before we begin today, let me remind you that the company’s remarks today may include forward-looking statements. These statements include but are not limited to those that address activities, events or developments that AtriCure expects, believes or anticipates will or may occur in the future, such as revenue and earnings estimates, other predictions of financial performance, launches of new products and market acceptance of new products.

Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond AtriCure’s control, including but not limited to the rate and degree of market acceptance of AtriCure’s products, governmental approvals and other risks and uncertainties described from time to time in our SEC filings.

Our results may differ materially from those projected on today’s call and we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additionally, we will refer to non-GAAP financial metrics on the call today. A reconciliation of these non-GAAP measures is included in our press release, which is available on our website.

I would also like to remind everyone on the call today that the Food and Drug Administration, or FDA has not cleared our products for the treatment of atrial fibrillation or AF or for stroke reduction. The company and others acting on its behalf may not promote any of its products for the surgical treatment of AF or train doctors to use the products for the surgical treatment of AF.

These restrictions do not prevent doctors from choosing to use the products for the treatment of AF or stroke reduction or prevent AtriCure from engaging in sales and marketing efforts that focus only on the general attributes of the products for the current cleared uses. AtriCure educates and trains doctors in the proper use of its products and related technologies. With that, I would like to turn the call back to Dave.

David Drachman

Thank you (Julie). We are pleased to report revenue of $14.5 million for the third quarter representing constant currency revenue growth of 10%. Domestic revenue was $11.6 million, up 8% and international revenue was $2.9 million reflecting 19% year-over-year growth on a constant currency basis.

The AtriClip system in its first full quarter of commercial release contributed $1 million to US revenue. For the quarter, we achieved adjusted EBITDA of $400,000 or $1 million year-to-date, which reflects our focus on profitability while still investing in growth, innovation and regulatory approvals.

Turning to business trends and highlights during the quarter. Our open-heart business grew $1.4 million or 22% in the third quarter which includes $1 million in sales from the AtriClip system. We are highly encouraged by the initial adoption trends and physician feedback for the AtriClip system. In the third quarter, the AtriClip system was sold into and subsequently reordered by 80 U.S. Medical Centers and we are encouraged by the initial average selling prices which were approximately $1000.

Open-heart sales further supported by continued share gains in the cryoablation markets. We estimate that our domestic cryoablation market after only one full year of commercial release of our Cryo1 ablation probe, a first generation product is approximately 25%.

Minimally invasive revenue was $3.7 million as compared with $4.2 million for the prior year, which we believe was driven primarily by an overall slowdown in hospital admissions particularly for elective procedures as a result of the continued softness of the US economy.

Additionally, during the quarter our sales and marketing activities were primarily focused on the launch of the AtriClip system, which is in open-heart offering.

Our third quarter revenue growth in the international markets which now accounts for approximately 20% of our total revenue was up 19% on a constant currency basis. We are very pleased with these results, which reflect our investments in direct sales and marketing infrastructure in the European markets during 2010, the benefits of transitioning the Benelux region to a direct selling effort during the third quarter, solid contributions from new products and geographic expansion. We believe that we are well positioned to continue market share gains and deliver strong growth in our international markets.

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