AtriCure, Inc. (ATRC)

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AtriCure, Inc. (ATRC)

Q4 2010 Earnings Call

February 16, 2011 10:00 a.m. ET


David Drachman – President and CEO

Julie Piton – Vice President of Finance and Administration, CFO


Tim Lee – Piper Jaffray

Jason Mills – Canaccord Genuity

Matt Dolan – Roth Capital Partners

Charley Jones – Barrington Research

Jose Haresco - JMP Securities



Good day ladies and gentlemen and welcome to the fourth quarter 2010 AtriCure, Incorporated earnings conference call. My name is Towanda and I will be your coordinator for today. At this time all participants are in listen only mode. Later we will be facilitating a question and answer session.

If at any time during the call you require operator assistance please press star followed by 0 and a coordinator will be happy to assist you. As a reminder, this conference is being recorded for replay purposes. I would now like to turn this presentation over to Mr. David Drachman, President and CEO. Please proceed sir.

David Drachman

Thank you Towanda. Good morning and welcome to our fourth 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 fax or email you a copy. Before we begin today let me remind you that the company’s remarks 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 AtriCure’s SEC filings. AtriCure’s results may differ materially from those projected on today’s call and AtriCure 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. A reconciliation of these non-GAAP measures is included in our press release, which is available on our Web site. 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 or transactors for the surgical treatment of AF or stoke reduction.

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. Fourth quarter 2011 revenue was $16.4 million, which represents AtriCure’s highest quarterly revenue in constant currency revenue growth of 20%. Domestic revenue was $13.1 million, up 21% and international revenue was $3.3 million, up 18% on a constant currency basis. These results reflect our team’s successful execution of our 2010 strategic priorities.

In terms of profitability and operating leverage we reported positive quarterly net income for the first time and fourth quarter adjusted EBITDA was a record $1 million. These results reflect our continued focus on cost control and high gross margins while investing in innovation, sales force expansion and obtaining regulatory approvals. Turning to an update on our US sales force realignment and expansion activities and highlights of revenue results by sector, we have completed the realignment and expansion of our sales organization, which resulted in an increase from 30 to 39 sales territories.

We currently have 64 sales and sales support professionals in the US representing a 20% increase since the beginning of 2010. Our open heart business grew $2 million or 30% over the fourth quarter of 2009, which reflects growth in both our radio frequency and cryo-ablation products, which grew 11% as well as $1.3 million in sales from the AtriClip system during our first full quarter of sales.

Fourth quarter 2010 sales of minimally invasive products were $4.3 million including approximately $300,000 in sales from capital equipment. Adjusting for capital equipment sales, minimally invasive product sales were flat with the fourth quarter of 2009 and increased sequentially. Fourth quarter international revenue of $3.3 million was up 18% on a constant currency basis and accounted for 20% of total revenue. We are encouraged by these results which primarily reflect our investments in the expansion of direct sales in Europe.

Now turning to our investments in FDA approvals in clinical science, we have made significant progress toward our FDA initiative during the quarter. In December we filed the fourth and final P&A module in support of our ablate clinical trial. The clinical module was filed during December ahead of our previously communicated schedule. We continue to believe that an atrial fibrillation approval for our open heart products during mid-2012 is achievable.

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