ATRC - Earnings call transcript Q3 2017

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Operator

Good afternoon and welcome to AtriCure's Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode.

We will be facilitating a question-and-answer session at the end of today’s call.

As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Lynn Lewis from the Gilmartin Group for a few introductory comments.

Lynn Lewis

you. Thank should copy you press the received release. have now, of a earnings By

not please the have you received If have copy, to one you. call emailed to XXX-XXX-XXXX

include you Before the let begin remind we company's today, remarks forward-looking statements. that

any projected. statements to AtriCure's many which statements. uncertainties, materially results forward-looking risks uncertainties may are risks in publicly time-to-time those including of described control, differ subject from numerous AtriCure AtriCure's AtriCure's Forward-looking obligation are and and update undertakes to no beyond SEC from filings.

Additionally, basis A specifically measures I'd over Chief like President constant these Web we press comparable financial reported revenue the our which to turn measures; Mike Officer. to financial Carrel, in directly release, refer to our and site. non-GAAP is GAAP With on a included on Executive and call measures Mike? with non-GAAP reconciliation that, currency the most EBITDA. is adjusted of available

Michael Carrel

you accomplishment performance. everyone, Lynn. initiatives start I’ll our about first, revenue our But thank Good by talk afternoon, detail I’ll summarizing for third Thanks, and our joining call. quarter more us. and during key in

hurricanes During XX%. the our best the had and experience softer space we in Open the third businesses, quarter results $XX.X performance, states. the across EPi-Sense the We international and Southeastern continues ablation to-date Clip solid our earnest. long-term year-over-year growth particularly drive revenues We did million, and totaling representing quarter, to in of MIS posted by than expected driven

movement Our States. parts United combination longer of was of vacations and quarter impacted in continued physician modestly also a by the

to procedure. but surgeons secondary concomitant northern to When opportunity a and product it from for in fourth new in speed adoption come time even We up fires as Open long-term, us expect it some cardiac in the disruption there the California. quarter, the for expand creates online Florida a the use most movement, ablations. reminder, As and our the of an continued is takes do on to communities surgeons of get skilled is train back the physician component

updating lower growth expectations to result, top our growth year-over-year. XX% year a now guidance to XXXX QX we’re line incorporate XX% As our of for We full approximately expect QX. results and

we our grow we invasive to digest are business continuing and variability, our presence. evolve quarter-over-quarter the minimally As

underlying CONVERGE. five clinical our years of is building, continuing This in medium of momentum Our business progress record steadily meaningful growth. we opportunity market this with and towards and points advancing straight and area double-digit all are making programs our long-term strong and track revenue

specifics our of performance, U.S. with business. Now, we’ll quarterly our to beginning the Open turn

the muted heels performance the first the the of strong business On growth in six for was Open quarter our stated I more earlier. that of year, reasons months in third

drive work our concomitant in education as broad, as We through to with well partnerships surgical by programs, adoption setting consistent improving of a ablation adoption societies. continue to growth key company-sponsored

We have the attendance and training is expanded our at for the advanced courses events, capacity and the year. Maze full IV

surgical of starting are are benefits provider Finally, to and care. and clinical, HRS and updated the cardiologist and the believe to discussions the guidelines in enthusiasm we the the and ablation safety, guidelines spurring community. influence are recognizing updates energized STS Surgeons societal

expect growth procedural years, long other support coming recommendations and from and the over term. society We tailwinds medical in to the these

third enable invasive strategy PRO we left to launched of easier to feedback market, innovative impacted largest placement for in treat from PRO to design, were open-ended closure portfolio. toward AtriClip results in management disproportionately AtriClip, device will minimally when environment. AtriClip an AtriClip experience marked in and patients offers a our disruption operating is It excellent, the for market United represents as our V appendage. Moving invasive the was innovation, portfolio invasive significant navigation weather traction V In QX that far. as and by platform for entire to with utilizing quarter, invasive and been third continuing quarter a products our effort platform. serve the we by less the increasing atrial AtriClip has and clinicians are mechanism step PRO the comprehensive device happy tip-first less to combined across The V also future U.S. available Florida technologies Early our across and a by it in another minimally increasingly now foundation applications This States. is bring of a the

V ramp PRO in early expect contribution to XXXX. We

MIS product the and was EPi-Sense business, sequentially. growth significant For year-over-year our ablation with both line again strong

new progressive collaboration into penetration focus our confident driving of deeper and and strategy both traction cardiac EPs. surgeons increasingly that are We utilization. on continues our into pleased be MIS are and to base between customers, existing accounts, and our new we increased steady drive both with accounts will The

future. the into sustained the rest quarter, Japan, will Internationally, sales marked we scratching and which and generate by of registrations our strong Japan driven just performance for Europe XXXX, in throughout expect before, AtriClip results were As have third and by be discussed recent here Cryoablation the are for surface EPi-Sense to lines still we solid growth market. with through the to-date with momentum that our

now have clinical CONVERGE enrolling, patient. recently XXth sites our enrolled our to priority. continues Moving XX to programs, our top be and We

more in increased have the which XX this versus year last number year. the enrolled previous double of any and year, we significantly far full enrollment So than is patients, have sites achieved

of approval approach recruiting trial, to another received which physicians approach choosing feel important, subxyphoid the feel we a FDA as within is allow trial. many and the also we that catalyst this also outside We were

diligently activities. working recruitment number are are patient and in resources to investing of sites significant We the expanding continue

enrollment sites, momentum have current the enrolled the at expect our than complete patients mid-XXXX. we in and year of by to our by pace and With increased new existing more the XXX end

stay. using postoperative normal pain function, inter-operative cryoICE compared and of We reached FROST opiate at and practice the long-term evaluates patients our our pain adopted cryoanalgesia management duration pain return surgery. in mark change their evaluate management hearing provides consumption, FROST of cardiac care that enrolling by to XXth in potential to intercostal patient Hospital superior thoracotomy that cardiac are as also Beaumont from their study function, company-sponsored therapy study relief Michigan. lung this the The hospital in Anecdotally, unilateral cryoanalgesia partners of standard procedures. halfway current the probe thoracic in the Heart and therapy Detroit, to management plans whether undergoing surgeons pain, have has to pain and for

need We opioid United patient once they exposed epidemic chronic a are five of care. one medication. has for that us and there developing increased opiate, standard to closer the study brings in pain in at significantly evaluating is times high FROST an at opiates. Cryoanalgesia therapy of to focus The ways a risk this manage know to settings. a to to to acute strong addiction all-time States, a With potential step alternative is reduce on both finding an the therapy the the long-term pain

paused minimally from as We FDA are for As received you the the forward alternative with move provides excited growth about the are track results To for procedures. wrap growth rate the third approval we the quarter DEEP reported trial. double-digit know, many this, for yet to on the first of were of another up, had invasive in than with softer had overall still trial our mixed year. we it recently we year, and our we half

on be continue market. thriving Our MIS of this business we is strength to and focused growth the

then the We’re turn clinical many the some of call come. product all now set and Chief to wrap I’ll over for also strong new with in meaningful Andy with progress the our making closing our comments. up years introduction, to Wade, and programs Officer, stage which Financial growth

Andrew Wade

Mike. Thank you,

XXXX include million from the clinical quarter on XXXX. The chest of Hurricanes development XXXX. For approximately or as margin compared third XXXX GAAP sales largely a XXXX. basis of XXXX, by all XX% Revenue Growth filings. the in sales growth driven strong and with were quarter our $XX.X and increased quarter were X.X%. The increase the for offset million million, primarily our driven in geography. for of for million margin to million be sales the products $X.X third The year or second to and a bulk international X.X% minimally $X an the products described $X a on in U.S. increased with used of disruption the GAAP roughly significant business. procedures XXXX, basis. open fastest-growing from to XXX,XXX $X.X increased of of third the from total XXXX. and region, sales. slight during Weaker expenses million, of had Japan, from with notably Irma an by estimate the and expenses as continues of decrease ablation-related Research approximately grew Operating XXXX Harvey XXXX Gross regulatory primarily and robust estimate from invasive new SG&A the UK our third key on the million U.S. U.S. of to growth that relatively X%. of million impact We XX.X% quarter third ablation on third quarter. Germany. on was International Open lost in quarter basis the weather-related for was timing and constant third quarter $XX.X third compared representing year, constant additions and on million quarter currency activities, and XX.X% the in million. approximately The for of represented decrease mix U.S. of included of projects of Florida, $XX.X XXX,XXX XXXX third million of approximately weakness Revenue regulatory the third and impact approximately currency AtriClip revenue quarter to $X.X was was to organizations. the of or $X expenses, $XX.X of XX% thoracoscopic by compared increased quarter EPi-Sense third for basis of the markets one revenue over U.S. increase was and to products from quarter revenue, and quarter of third XX.X% million of X.X% domestic sales on were $X.X France, businesses. of procedures a to system nearly due a was increased $X of sales the a X.X% We of primarily quarter in the Russia. third XXXX physician-specific of of product call R&D our the a million our AtriClip last China quarter million, million by sales, Benelux prior $XX.X totally as increase the products. XX.X% up the X.X% the to to $XX.X markets, of $X.X international which XX.X%. the supporting increase the being our that to flat for

$X XXXX. Our was the the for loss EBITDA adjusted quarter XXX,XXX loss EBITDA to for million compared a third adjusted of quarter

Our in approximately $XX.X and $X.XX per cash was loss of third for net for investments. quarter XXXX. of the We with share to XXXX ended quarter the third compared $X.XX quarter the equivalents million cash,

Lastly, growth updating XXXX. of fourth are is weakness ongoing top to approximately XX% quarter. in We based experienced currency for guidance the constant of our third in we with the we This line quarter anticipate along expectation on year-over-year. the the pressure XX%

as residual impact of team get to California fires, hospitals the some strength. hurricanes our back full expect and We and the

range The bottom be year. anticipate XX% the for a end margin slight gross represents to approximately increase margin. reported will gross continue to We this from the of XXXX XX%

long-term We within changes believe the volumes and efficiency are gross achievable increased in to along margins of due and this next with is targeting mix. XX% years, few product still

to trial, pipeline XX% of investments compared improvement slight a the XX% be other this to clinical activity R&D expect development. and Significant in CONVERGE to science sales, include XXXX. We area R&D

XXXX, XX% in expect SG&A the is compared improvement slight to a which XX% XXXX be rate. to to We roughly of sales

per of reported the We XXXX. continue $X.XX range loss million, for loss translates from of a to $X to adjusted approximately a EBITDA marked XXXX expect for $X.XX. adjusted into million This and EBITDA a share be improvement adjusted between EBITDA $X loss to

profitability point, We like this in back At to the turn EBITDA would to XXXX. Mike to closing adjusted call for comments. expect continue I

Michael Carrel

and our PRO with MIS advance some and launch, growth Thank great progress board you, on CONVERGE, to our of executive strong exciting progress. EPi-Sense, an bottom robust with Andy. continuing new considerable members, results In closing, we the V and platform are addition team in line business

We the and we’ll products and clinical portfolio on questions. are turn to that for our reach, impacts of that, With data a successfully over call expands positions patients long-term building success. excellent with both AtriCure worldwide, medium

Operator

Instructions]. [Operator you. Thank

of line the from comes Rick question Wise first of The Stifel.

Your line is now open.

Drew Ranieri

Rick. Good It’s Drew guys. on afternoon, for

that But I quarters let weather, been Just have maybe and weakness, few of you’ve you a before some me some some look transitory remember, explained about issues the past then movements. – but has physician items, with talked of like Mike, ahead. ago happened from there the maybe start if

seeing or So is Open change, business? does, that MIS of or what this outlook in how for trend maybe the maybe does market? you’re ablation business an ongoing your the if And Clip the it

Michael Carrel

question. excellent Yes,

really for state weather it's legs to underneath for some lot that predominant the get got themselves impact us. of happens kind of quarter Florida impact and as we people as and also the Florida the a impact and the of but impact, really really the coming moved of weeks kind the reps I restate piece weather then is beginning come people and to weather the not in and on to they’re them, of the terms uncertainty about. be lot to the the their even the fourth both Open our had and when of of a back. biggest just Clip, in them it A back. got hits the just well, guidance of the for when are quarter talked several largest so business out into as terms back, Just country, of And market our – look piece was in for MIS and And on of

two more was and than strong hurricane done when proportion saw vacations physician that physicians was three-week that, July the very previously hitting. and August vacations. end the else, larger timeframe time of through it the really the As a it were much of September we as impact there some and physician vacation bigger anything around that right had took than movement, early actually was was We concerns the to in just then

because it on the saw And really the we some is pressure become dramatically of So the of of as business that in site, we as we’re and procedure, that for we what speed last that, that see XX% call sure the pretty and the earnings and we’ve is when movement agents Physician that they happen, now which do part when to get do to today of where to the how primarily when out new they softer moved to happen up almost very that really put as saw cardiac move possible, a free But summer surgeon closely. seeing because month the something employees to months. was after we to get are that. want figure got physicians was going hospitals, August definitely they time does site. of surgeons the feathers they over is hospitals, like quickly new doing don’t them we’re tracking that ruffle

we're ways kind at we’re surgeons of the we going sure more something do there’s those that looking we’re impact working we’re trained, and past at and So and that’s it’s at looking that continue sure make that make how in younger monitor to at. yes, training did those It on. something we’re sites that actively to us surgeons to

here and as primarily still kind third and the that of in the so the softer, We yes, hit. it’s that the fourth Florida Open And when numbers. year, I the that. remember, we And was quarter, in of to we the anticipate were we again the go those on even started be think digits because said the weather continue open business, I business, to in see basis, annualized still forward. on It going we’ll with as in we’ll mid-single something mentioned we just be

Drew Ranieri

I I Okay, DEEP guess actually move just that. a understand to to And for moment.

that it with your just it’s cadence of of is it So similar approved past going? where what’s enrollment should DEEP your a getting is but could pause, Would the DEEP now maybe with CONVERGE getting us focus more, enrollment stood again, congratulations just And enrollment? to prior hands quarters? you it think we on the about be it you CONVERGE couple maybe remind and in how or

Michael Carrel

now Our priority number is one right CONVERGE.

finish really focused enrollment incredibly That near team is are on clinical the on. line the is there. We the what

So feel We’ve about by total. really XXX we’ll that. we’ve done we’re It’s last and year. now. focus that that’s of starting over made patients patients great Again, the XX as the the and to we’re be next quarters at middle gone down progress so good several path,

lot didn’t or kind that obviously half that. FDA, we’re the it letting on hours year spent of come a the and of line to terms we’ve a take but DEEP, with In of do in of a terms resources – man

slowly. on coming We’re

We’re FDA because three them. wants us bringing the sites on right videotape away, to

that at XXX-patient ready It’s of of a be it We So and not going the at cadence online I’m patients XX we’re kind along because kind to in bringing total slowly. bringing we’re trial time. really slowly. any were to yet, give

on We’re kind And to the well. trial then of the get on we’ll as sites finish more focused enrollment the line CONVERGE, little of as some we with a DEEP move aggressively in on CONVERGE.

Operator

Thank you.

Our next John question JMP from comes Securities. of Gillings

now line Your is open.

John Gillings

me Hi, you hear Can guys. okay?

Michael Carrel

Yes.

John Gillings

great. Okay,

on weather. up I little first, challenges with follow the So to bit want a the

also if quarter So the fourth little got of how whether first fourth comfortable you comfortable into that can about those the would spillover year? you’re with talk next level actually could those maybe with quarter? quarter, bit impact resolving you they a the And just or then in the

Michael Carrel

a are it done territory quarter that a a in obviously Florida got lot and dive we’ve we The is procedure. of fourth was question. where within secondary it deep we Excellent area, our terms of comfortable is way in the

get it not the being little bit other procedure get than So companies hit hit of might per se. primary harder we because a

impact come us. definitely has on that some things so And on line, as

respond back can and people some very come So quickly.

a And bit take will gets team as it’s Ours on line. there, little our longer. coming

be some nicely on starting were we of any the in at that’s sure the a to We’re as guidance see that make covered of range back that gave kind we the conservative we And it. end starting of might enter kind happen one by should and every fourth feel the every worked to the fourth those area. quarter, It’s we – pretty as with of to through wide and We come over along of we we said XXXX, spot we we that lines. like a why there. that and the and rep looked quarter. activity much Florida kind in is want should good of most be hit do We’ve accounts talked we

John Gillings

for Okay, V then turning maybe just And that’s the PRO a helpful. to minute.

that of of or some saying what the from matters they examples sort got that mentioned kind You good most, them? what of most feedback like specific the you early Any physicians. they’re to

Michael Carrel

the points number is get of The profile got get It’s small a They works love it. the it like end really two is and we’ve the with know They that, is today as about the They pressure nature the one fact profile, Number put that XXX,XXX simply. the just exact it them you one. same they it to-date. implanted well to The base. know, on. on that of number there’s ease simple around existing to the open-ended clip thing. slides at

the of use used, And can invasive with it that a that in from more manipulating it how works. it so minimally creative in it. standpoint comfort shows most standpoint. of be profile, procedures, And about are obviously like terms how smaller getting what it which ease it there’s they the people is spaces, putting in lot But of of much in from on, smaller

John Gillings

it XX from that CONVERGE last plan? Okay. think if the and Is for apologize remarks. one your But up And the I end quarter get by year. me, quick XX missed then the goal prepare had of to in and sites going I you just was to and I one still last the

Michael Carrel

contributing doing side line, and got could the XX. and and But sites IRB are the such those job. last come right those sure the focused running that going, going many on to are really the now have are two on good that of is that a sites we’re won’t be We’re from been are a focused ones in have now XX doing that through just far patients, even probably other because two, XX. our the up to good we program We’ve process been – go job to focus enrollment get that part actually so on doing making those

point. a really And so also [ph] focused sub-x we’re this thing on And at those sites focus. is the

commit XX. but kind will enrollment. So at will XX, going to we of to impact the have likely any on It’s I not overall at be want it that exactly be don’t meaningful

Operator

you. Thank

Matson of next question & Needham comes Our Company. Mike from

line now open. is Your

Unidentified Analyst

on for Dave This Hi. our is for taking Mike. Thanks questions.

PRO can an product wondering on premium comment a you for the And also with you’re if then launch V, it. of kind open with what you So price have for I target getting was clip? if V the

Michael Carrel

Excellent actually a setup in and many question ways. good

of a In are we definitely the pricing, getting price for terms increase it.

sold We it’s going front. we because haven’t of on to of that kind quite enough about if yet, see the talk to sticky ASP them aren’t

We’re well terms most the pricing we’ve holding and it. of the able to though line in been get of pretty

I will XXXX. about will definitely the that that. to a Number question kind two I’m clip well, the So an comfortable yet We because well in on open that is product it, as for is quite XXXX. an approach But an of not my open-ended open-ended anticipate the price which front. to as that have to excellent the procedure. we talked give in not do comments, have the which PRO in do subxyphoid though approach we specific on increase see amount, mention I you that X, is did can but

Unidentified Analyst

a the do just guess sometime that, for or year? you throughout I And target Okay. have

Michael Carrel

Sometime be time trained our is the the and sales them get to out, it’s like roll to timing. Right when now, right going year. as to to throughout team, about properly, it the opposed more

what take about on, it, ready we of that It that’s if just actually did today, probably a we’ll is we kind go like – basis the had is – FDA sites launched in V, from with we market. ACH, represents the finally PRO it volume sure The we existing when did the year to clips. want and not some because make two-third, more, product, think V volume through the it that to was PROX love it in got our we PRO well. ago I that of to ready we works the a the the market were which really overall of our clip people and

so want And to just be we careful as out. we roll it

more than will rollout getting about be it or clearance about that. So the like FDA timeframe through it necessarily will anything

Unidentified Analyst

Okay, can update an understood. of And plans continue have if and your on sales then give lastly, expanding? you to the size you force

Michael Carrel

got who we’ve and clinical got with we’ve We’ve Today, manager about amount, – those XX. are a equivalent cases. reps, today. our reps that help And also which of almost RSMs, we XX CONVERGE invasive we there and with XX DEEP about what helps an we’ve are Yes. got got direct minimally call so what we’ve or call got about then

Unidentified Analyst

Thank Great. you very much.

Operator

Thank you.

next Kalia comes Securities. Suraj Our of Northland from question

Your line open. is now

Suraj Kalia

afternoon, Good gentlemen.

Michael Carrel

Suraj. Hi,

So first comment my --

Michael Carrel

breaking missing think on the – I we’re call. Suraj, up you’re

try to want might You --

Operator

mute, If your phone on un-mute. is please

question next of Partners. Our Leerink Danielle from comes Antalffy

open. Your line is now

Danielle Antalffy

impact there is taking guys. on saying Are Hi. QX. so Andy, you’re It year, much impact? QX think point, Mike some so you be should next sounds about the impact the like into thinking some and afternoon, the we questions. you procedures weather-related in fact positive or up of sees Thanks the these made in just going some be QX to bleed type of a for quarter. get Good in curious that negative at possibly think

Michael Carrel

– is don’t that. the in happen in down likely may 'XX patients been particular. are lost are in 'XX, that or these I sometime pathway MIS it the side, you’ve see have particular, procedures happens Usually might what patients but MIS with a these that on

the for on probably they out back weren’t but the and On pretty whatever the get cardiac treated got to are ones maybe in those patients quickly, these lost just were kind Afib. the focused hospital coming weren’t reason. of for they They on but surgery, that really they focused of getting they’re trying side, it open

definitely come to You see as they start back. that

within do of Now it as well. loss Afib and patients most again cases, those they’re starting see those the some to as of a

see year. So of I don’t that uptick some to big relative getting sort us next

you’ll see and on timeframe. the of I quarter to getting think just that impact January-February the you’ll then soft back normalization this the see kind side in

Danielle Antalffy

Got it.

you that’s a know guidelines? And training on, courses. impact more are training, helpful. from then physician past any you’ve seeing interest I in yet advanced question Okay, just in talked the changing about

So potentially significant XXXX? from see to have going you think significant, tailwind so a started some benefit to that? Do continue Thanks that’s be in you much. to

Michael Carrel

of lot we’re It’s think our I a a it going say oh and positive kind I getting on. it’s seeing just here was some me is there benefits. lot super say weather. comments of quarter where the of that gosh, lot But difficult we’re obviously a to benefit. at and on know Polycom a wasn’t strong tough to stare the for business that, open But of

before training. had to People people that never more procedures through having do them. are We’re come now these starting done

treat they and must that So must they realizing definitely seeing get trained. are we’re that People dialogue.

capacity and added had We into have beginning faculty Our we we’ve next courses out, to have and year year. would if they’re sold well. we this courses, the and could out XX% we’re as the more all got of added – sold

traction and new lot of of people we’re trained. seeing activity a net So getting

future. we that’s And kind as the growth to into going out so enable have do and think us to long-term of strong benefit I overall look treatment that

Danielle Antalffy

Thanks Mike. super That’s much, so color. helpful

Operator

I’m Mike remarks. closing to I showing Carrel you. further Thank would questions. for like turn And now over to no the back call

Michael Carrel

if If a to out. maybe sure call give in, want make him chance right. back not, I All had of close then Suraj a just I’ll to seconds. couple

quarter forward to you if for Have can’t talking joining to right – day. Suraj you the comes today on call out. the and great now, let’s look So as very get a thank much

Operator

this gentlemen, concludes day. you for wonderful and Have Ladies a today’s Thank conference. your participation.

AtriCure (ATRC) 4 Nov 172017 Q3 Earnings call transcript