AtriCure, Inc. (ATRC)

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AtriCure, Inc. (ATRC)

Q1 2011 Earnings Call

May 4, 2011 10:00 am ET


David Drachman – President and CEO

Julie Piton – VP, Finance and Administration and CFO


Tom Gunderson – Piper Jaffray

Matt Dolan – Roth Capital Partners

Jason Mills – Canaccord Genuity

Charlie Jones – Barrington Research

Larry Haimovitch – HMTC



Good morning and welcome to the AtriCure First Quarter 2011 Earnings Conference Call. My name is Kerris [ph], and I will be your coordinator for the call today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of today’s call. (Operator Instructions) As a reminder, this call is being recorded for replay purposes.

And 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, Kerris. Good morning and welcome to our first 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 e-mail you a copy.

Before we begin, 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 AtriCure’s SEC filings.

AtriCure’s results may differ materially from those projected on today’s call and AtriCure undertakes 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 website.

I would 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 train doctors for the surgical treatment of AF or stroke reduction.

With that, I would like to turn the call back to Dave.

David Drachman

Thank you, Julie. First quarter 2011 revenue was $15.6 million, an increase of $1.7 million or 12% over the first quarter 2010. U.S. revenue was $12.1 million, up 10% and international revenue was a record $3.5 million, up 21%.

In addition, we continue to demonstrate operating leverage. As adjusted EBITDA improved by approximately $500,000 to $250,000. These results reflect the impact of our growing product portfolio, investments in our sales and marketing structure, our commitment to profitability, and the execution of our strategic priorities.

During the quarter, we implemented the realignment and expansion of our U.S. sales organization from 30 to 39 sales territories which included transitioning customer accounts and increased trading activities for newer sales representatives. As a result, our U.S. sales force is well positioned to increase adoption in existing accounts and penetrate competitive accounts.

The AtriClip system opens new doors and creates cross selling opportunities for a series of new ablation products. We believe the strength of our product portfolio combined with our best in class U.S. sales organization and the increasing opportunities and momentum from our international markets will enhance our market leadership and result in new growth opportunities.

When reviewing the quarter in more detail, we are pleased with the continuous success and execution of our launch strategy for AtriClip in the U.S. U.S. sales of the AtriClip system were $1.5 million and during the quarter 20 additional accounts began stocking the system.

The U.S. ablation revenues decreased approximately $400,000 or 4% compared to the first quarter of 2010, which reflects the reduction and sales of products used in minimally invasive procedures. This was primarily offset by an increase in sales from open-heart ablation products.

The reduction in revenue from products used in minimally invasive procedures is partially a result of our plan to focus our U.S. sales organization and capitalizing on our first mover advantage with the AtriClip system which is resulting in opportunities to increase adoption and share gains from open-heart ablation products.

More significantly, however, we made a proactive decision to limit our training to new physicians to FDA regulated clinical trials which we anticipate will have an impact on sales from products used in minimally invasive and hybrid procedures. As previously noted, we anticipate decline in revenues from products used in minimally invasive procedures during 2011, but expect a return to growth with the initiation of our DEEP AF pivotal trials during 2012 as we move from six to approximately 35 investigational sites using our product.

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