ATRC - Earnings call transcript Q2 2018

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Operator

Good afternoon, and welcome to AtriCure’s Second Quarter 2018 Earnings Conference Call. [Operator Instructions] 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

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

received to please you. not have XXX-XXX-XXXX have e-mailed one you a call copy, to If

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

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

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

Mike Carrel

thank second $XX Total everyone, us. you year. afternoon, joining Good growth reflecting quarter million was Lynn. quarter the of of XX.X% last and Thanks, second for over the just for revenue under

largely and was our and top-line to traction significant appendage our that franchise by and driven the continuing demonstrate strength performance meaningful both in management MIS Our procedures. products, opened of with

XXXX are year. $XXX million approximately We for our revenue $XXX updating the to expectations million to

first now to Turning the area of science. clinical

the needed. for XXX next a patients effort CONVERGE multidisciplinary as the get PMA of And will total be trial. anticipate today, enrollment close approach. our XXX the in We major in very have out enrollment label our This conversion are of completing to we’ll to month. we milestone over We complete

submission we subsequent year the one- be XXXX half the in will expect PMA FDA. and second then milestone patient probe, of next which the to Our

the discussed are past June, years also Analyst top several emphasized the as are clinical But Day progressing during in trial priority which clinically. CONVERGE is our We and programs, underway. our our with

the in quarter. operational the to second Moving performance

driving product and this FLEX they portfolio. franchise. our the launches clinicians. accounts solid U.S. the particularly new appendage are to pipeline to they reported seeing and is Since pricing platforms value build and in launch traction. additive of PRO We quarter into out management This device our V V we are product incremental continuing are highly and AtriClip have evident maintained results AtriClip and the Recent bring through last continues its strong V products expansion to to be PRO our year, importantly, the

V delivery then fact, accounts PRO using AtriClip the our FLEX immediate many March The results. of open trigger-release contribution contaminant AtriClip XXXX use realized device, and AtriClip and is profile and leverages launched easier convergent now developed are device chest a the ablations. to the V the the of the AtriClip in We In deployment FLEX same PRO our V next-generation mechanism. technology to implant QX V. which lower in This includes a an for system

product management launches, perspective dedicated recent to and first quarter, increasingly the XXXX reduced AtriClip now greatly small we XXX,XXX focus seven then, device In expanded X,XXX We Switching to have selling date. management. approximately grow offering More appendage the second appendage in us opportunity the we of few thoracic pain FLEX help select – gears sold will briefly introduced open established that the Since V are that markets. AtriClip procedures. franchise management our left portfolio appendage atrial on to year. on AtriClip this confident team and a devices management we devices in adoption AtriClip and AtriClips a and over the in

complete our to and on development track evidenced FROST address study. our We studies to are continue clinical enrollment in to

our procedures. The the XX% QX products new with is maybe quarter. we optimized real and way We up help. in one for year, this cryoprobe epidemic later in a cryoanalgesia launch revenues to result which dedicated intercostal had will is Internationally, also strong opioid

partnership a Group Baheal for replaces our new distributor formed Pharmaceutical our AtriCure an in recently previous exclusive as we This China with agreement to devices Baheal Importantly, multiyear distribute establishes in surgical China. and oblation distributor.

had a leading and We have presence China for AtriCure have the XX adopted in several time, past of the that during China’s years hospitals devices.

We and market. process to surgical approvals next bring left additional devices pursuing product the atrial our the the are in appendage portfolio ablation part of eventually years of over management several into

to Baheal. and years We combined reputation, They with solid China and size for well are with in when bring a market-leading position us excited to scale come. our many partner devices

we many I’ve our programs. to are training advancing committed As times before, highlighted and educational

training several the throughout second U.S. sessions and XXXX, have half in Europe. the of planned We both

to our and professionals. grow now expanded fellows healthcare and with clinicians just nurses, programs have We go beyond other

We continue after courses strong and to our years, by many are encouraged even innovate interest. we the

patients we the medical in data and care We is our from with institutions and awareness community benefits and and the remain surgical leading clinician marketed The procedural growing of increasingly talents. ablation well take expect positioned support to these improve downside that volumes. of for societies, of will ultimately recognized non-treatment, the coupled education and advantage

atrial trial possible their treatment clinicians education. many physicians: to on and the in the comments Clinic; Dr. Emory on market of the tools treatment from come What I Dr. from we the and and paradigm from solutions heard Gillinov desire CONVERGE fibrillation we St. innovative open want management, Such training to a that make which a for about opportunity Gerdisch few the shared from of held the New Health, AtriCure. treat our importance York Lastly, atrial specific an June. perspectives using Three and DeLurgio with from overwhelming Francis late Day Analyst Dr. was is appendage leading Cleveland and procedures, left focus appendage. manage

importance our of mindset future. education in a which for and to behavior of now into We also our about is a critical drive heard the the and customers, change part approach

education. here focused strategy pillars: clinical our we about at AtriCure, science three our think on we As are and Innovation,

through V recently. introduced provide products improvements the are new product to as reach and expanding that we’ve innovative V We solutions effective that are our and such FLEX AtriClip, constantly PRO

clinical making are the on are return I With support evidence-based as with that, turn call will return we we now with over comments. adoption programs finally, consistent professional products – our Wade, talk programs data closing Officer, about societies. to We in will our the Financial will who collaborations to to driving our Chief CONVERGE. and progress Andy I our And and for educational

Andy Wade

Mike. Thanks,

For million, chest of was representing increase $XX.X the $X.X of from of U.S. XX.X% in Revenue an revenue on the revenue a XX.X% $XX.X constant in cryo increased related basis, sales XXXX. in ablation the the open X.X%, to basis procedures, sales. million, from X.X%. quarter U.S. million minimally million of currency XX.X%. second to the from increased worldwide product second GAAP $X.X invasive chiefly U.S. a approximately million. by On in of second quarter, XXXX, was quarter Revenue by growth up products sales the used increased driven products $XX.X product

decline mixed U.S. lines were MIS the of was purchasing during was in by of an products versions quarter the This EPi-Sense, results million and driven MIS our prices primarily higher XXXX lines, both legacy selling driven which small prior pricing boosted product sales products, strong second than across V accounts quarter second growth from quarter reflects fusion increase sales by of carry a which FLEX offset ablation $X.X with $XX.X increase of as product. and to the XX.X%. both across of The our appendage in number for the volume V of product average compared management XXXX, AtriClips, of AtriClip by volume by and impact the PRO incrementally technology. million strong

We confident XXXX. grew continue the XX.X% MIS to open basis compared on $XX management million, and and GAAP currency on and for robust International appendage a both revenue to products. second quarter of as growth to a remain basis and constant X.X% rates sustained up

As happy we order to report we are that solid had from distributor China. a initial Mike new earlier, for our mentioned

performances U.S. products XX% our of Europe. driven markets In second was in included second of appendage XXXX XXXX sold capital led gross high mix, in UK, our products as some for markets. our of in and XXXX. this to quarter quarter, in management increase the a from Italy for with had solid XX.X% international product volume the margin The as addition, results growth the smaller Germany, Gross in was Similar by equipment margin international compared of primarily the quarter we markets.

EBITDA and for the than had Additionally, adjusted gross second AtriClip XXXX launched of to products. positive late quarter higher approximately We quarter this a early products $XXX,XXX XXXX of in loss adjusted legacy XXXX. EBITDA are $XXX,XXX realizing AtriClip margin compared

$X.X operating quarter $XXX,XXX operating million. an of for loss of was the to Our quarter compared for second the income XXXX

$X.XX to net of $X.XX the credit, credit we expenses an for liability. consideration this quarter $X.X $X.XX Without of share Our quarter operating quarter to change that and related note in to contingent per for XXXX. second non-cash of quarter this compared approximately the was Please of the a loss loss million. had XXXX recorded was was per $X XXXX second a the second million operating share loss

due the XXXX. $XXX,XXX from second the activity XXXX, equivalents Excluding for and impact $XX services. tradeshows adjustment additions approximately a first quarter expenses second million and in in regulatory of for of decrease million million to $X.X investments, quarter organizations million $X.X cash, the sales, the $XX.X and as cash non-cash from increased million of other to for quarter up which primarily of quarter consideration the activities, sales quarter. or the and of approximately contingent of or the our approximately and were slight We million XX% ended G&A quarter was the cost, second SG&A XXXX in expenses the with headcount, $X million training or increases personnel development as professional $X.X well total with increased of $XX.X decreases of expenses, include approximately quarter XX.X% from $XX to to million XXXX liability, domestic legal sales. clinical a increase second in second XXXX. international from The Research the and XX% of operating

XXXX. updating revenues million our anticipate now of $XXX basis. to We Lastly, we on in range million are $XXX GAAP the guidance a for

to gross to the slight XX.X% growth. We anticipate gross The reported end be and margin. this current investments represents range margin based to support trends continue XXXX a on XX.X% to the from increase for approximately of bottom year

XX%. We of are gross margins still long-term targeting

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

SG&A We the the expect XX% second liability in adjustment to XX% to recorded of contingent includes quarter. consideration which non-cash to sales in XXXX, be roughly the

with along XX% expenses investments is team expenses heavier worldwide SG&A along SG&A adjustment, non-cash legal training in increase and overall education of to this expenses sales expenses. driven The represent approximately our sales. the XX% Excluding by XXXX in – heavier with and

approximately EBITDA a This may improvement expect per a to XXXX adjusted of be goal largely $X.X positive, for to A item translates We EBITDA adjusted for loss cost, adjusted watch continues share EBITDA to million ability into the of be our $X.XX related loss that achieve marked from DOJ XXXX. our to reported $X.XX. legal influence to key the investigation.

legal spend ethical expenses from commitment the of business be compliance we the sure the to to cannot throughout quarter, While as our first our be of and remain confident incurred timing that XXXX. decreased in We may rest practices. exact programs the

to approximately would adjusted $X.XX to comments. $X.XX turn back like loss a this expect in which positive loss per I call then of EBITDA to to QX. $X for share we expect translates $X an in QX, EBITDA Mike the million and in closing range point, At the to million of adjusted We

Mike Carrel

positioning half we our in pleased In Thank with for and closing, and both second the of are our quarter long-term. second the you, Andy. XXXX performance

is simple. Our mission

We lives are global intent healing affected. on and Afib epidemic decreasing of those the the

expands benefits We portfolio And I'll to and Operator. of with patients you. Thank the open that products clinical successfully worldwide. are data the up it a with excellent that, building reach our

Operator

Instructions]. [Operator our Danielle question first Partners. Leerink from Thank you. Antalffy And comes from

open. is line Your

Rebecca Wang

actually for taking Rebecca guys for Can This Danielle. guys questions. you you me? is hear the Thank Hi.

Mike Carrel

Yes.

Rebecca Wang

the about Can price the on feel you. for in you you Okay, increases just versus AtriClip guidance? see forward, just going also, what – do you congrats you business? split volume the thank And strong pretty the business that business. that how well, Can do

Mike Carrel

is growth the most the – the on So, business. growth the of the of volume the of majority actually

the growth pricing are clips. talked -- the seeing one. good and We just is pure about maintaining on good getting but the volume, We of you're number margin from coming the V majority and that actually

the on at with that going really by there. In franchise the gave of of it's built this terms number, We're focused giving guidance overall not growth our feel into forward, comfortable overall kind out We're we point. guidance we the guidance. and

Operator

you. Thank

Jason from question Canaccord from Our next comes Genuity. Mills

Your line is open.

Dave Rescott

hear right? Jason. on you Rescott me guys for Dave Can it’s Hey, all

Mike Carrel

Yes.

Andy Wade

Yes.

Dave Rescott

the on quarter, management. appendage Congrats especially in

going forward, commenting kind easiest of was that growth segment And third first maybe that start comp within factors be, as appendage with as you're if your given far think, the as account management. that especially on, the year, quarter to respective comp? that utilization I given kind for seeing going to maybe far especially been of, has accounts? year current toughest as you kind the Can last openings we there, of, within of is and maybe how this growth versus talk quarter new are contributing about

Mike Carrel

out. one rolled getting is part We've is in I’ll out of concomitant last new the traction when for you treatment the them. two procedure. PRO variety business that clips: Number of new rolled technology a that Sure. V give great on we've year doing is reasons. the Both are the some growing you conversion That perspective

And our expectation simple, loved definitely it's that we easy really really so relative to invasive. – use, that. minimally It's very outstripped to clip. People

We our people on market open have some on beginning much because business. using core use, in uncomfortable growth FLEX actually clip just we to out actually and to It’s not concomitant traction put so side that March. That right And cannibalizing at the into been away. getting is V, the in great on largest market. of just the our the It's before easier particular saw so we're all a actually getting business. it's AtriClip CABG on they're may them rolled

open uncomfortable or implanted. is as is have, guidelines they doing it our the to one smaller that's out of just two want growing either well. that with business profile enabling do Number coming just see you of So driven technology nicely. portion new device The they obviously, before a them is procedures that were

managing definitely guidelines patients the having appendage You a positive get the There talked of better at conference these the FDS was through recent through appendage data that's other treat if It's a then putting clip clip of been coming on. data effect managing were products these that to and overall cardiac five patients year at than impacting no but market, business about speeches that JAMA that that been them benefits you a about and And in article the has There do the awareness on also The and treat fewer and different the a with importance behind the appendage the as time those. specific the out. the surgeries. importance managing market that earlier part at and the the of of about created of the congress it. in the well. in talking the just it specifically live managing

knows that is that of very everybody works kind in tailwind behind product to just have of market, kind a So and all really that of particular, we happened that's great a well.

I the of recall second of – the In question. portion terms can't

covered that. it with most think of I I

Dave Rescott

Yes.

utilization portion of around with business. that second openings just is new versus The of account line kind

Mike Carrel

of Yes. the the within We we – those. sell overall – cardiac in We mean, in a on saw then AtriClips the it's in but And side, U.S. don't majority we're business. over of lot specific centers there, in utilization give X,XXX I the in surgery the we of accounts.

Dave Rescott

Okay, to then – that. and maybe a follow-up

XX% penetration as than lines? open, out you've as far within buckets I kind up far across break past, MIS – been of are as or past the those And mentioned, looking you're larger portion – those Thank of around know know CABG, Can broke in penetration. what revenues you. you a Just has I be. less the could as CABG in what you've the

Mike Carrel

that on No. We we a The numbers we an from databases CMS quarterly usually and can't to do that report basis. gather basis. annualized information that on it refer are other

see much really What a is because market. back you to within say we're So of but XXXX I and growth looking incidents. the market, leader can can think, those pretty little all in looking the data it. be about And that's nothing's changed bit that we'd of to a I rates relative we're barometer at

Dave Rescott

back Okay. Thanks. I’ll queue. hop in

Mike Carrel

Yes.

Operator

Thank you.

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

line is Your open.

David Saxon

on taking Hi. Mike. for for This our is David questions. Thanks Saxon

Just management? what favorable given and of a just given questions, gross U.S. one will previous safe the Would improvement margin mix it follow-up assume on appendage mix? to you’re the for the kind of favorable expecting there be continued this that be

Mike Carrel

XX% mix. product favorable, and very kind continue forward step longer-term reaffirmed was range XX.X% XX.X% the wiggle we is We've into obviously, I to to trying our the quarter goal to guidance feel on based it – is. and but to – it This No. always mean, what there's but going particular comfortable to we with. be of the

David Saxon

Do if And train just track training. comment around doctors you kind so, after utilization on of you comments the on Okay. of then And that? you them? can

Mike Carrel

from We a the people as do now go see the the increase class to and consistent training specific, again, clinicians. treatment do training. watch, and lot of it's all of a refresh advanced standpoint. come Nothing years than our We for some more use the to of, afterwards. before, used consistent that tend kind they track been that that more see adoption to And do actually They we course. ablations. surgeons a Maybe it's want the get and but in repeat that an kind been see came to lot actually we the

see well. that as we so definitely And

David Saxon

have legal impact? in it mean, Was EPS And quarter. was Or this just lastly, the I I there negligible? last any Great. then can decreased appreciate expenses

Andy Wade

million $X the around We somewhat in second the For quarter. about quarter, was it negligible. talked first

document pretty quiet very at in QX. then all And it’s this about but review. right of the QX now, for was while down most as takes that it’s talked we point to early the DOJ prep work production, So of into come dramatically,

David Saxon

very Excellent. Great. Thank you much.

Operator

Matthew you. Piper our And O’Brien from Jaffray. comes Thank next from question

open. line Your is

Matthew O’Brien

questions. for Good the taking Thanks afternoon.

Just from housekeeping International how you a your question. much quantify quick mentioned was? that bigger order stocking, a distributor, Chinese you can

Mike Carrel

was order. Actually, international not stocking an it

we’re demand for market back kind of It orders they at So if it to that, on with you in that zero back China. signed out point with today, demand and coming from the were our time was of the so recall this the first We sub- into out a we order we of distributors was typical they time. seek them. agreement in market. China normal was in a QX, that real track anticipate had It

Matthew O’Brien

Excellent .

Mike Carrel

We don’t get specific by numbers. country

more to what previous have So order. expected distributor, but this is would otherwise previous typical stocking no we under quarters big in our

Matthew O’Brien

Okay.

look million as So first rest year. in $XXX of guidance for I half mean, of year, just done I at the under the then you’ve the the

You’re your $XX million, going you be for the of first million half everybody half of the sales about half the of the Typically, it’s telling $XX do to in XX% year. the versus back year. back

half So just we business? be Is guidance the should management specific why of the for, the for looking given that there appendage in momentum the back all year? something

Mike Carrel

specific. nothing No,

we MIS in think year. business to make this we’re the seen particularly the expectations legacy past – portion disruptions mixed the to the just want portion our far of results that surprises. we’ve And sure our on I side. We’ve and the and clip in – exceeded had growth has obviously, the in of

to an kind just, be things think, those warrant, so outlook I And of, specific.

of and the ourselves. get don’t through far too want we halfway year, We’re ahead that to

Matthew O’Brien

last me, And Mike. for fair. that’s then Okay,

Mike Carrel

[Indiscernible].

Matthew O’Brien

ourselves market Okay, it how front built broadly team into the I you XXXX? frame And get you can you side think even you’ve of more about management want that talk or us that explore about but as don’t there? things, know up of tuned that’s to to the fair. pain on it in

Mike Carrel

working product – group cities mean that intend running that piloting right We a that who for got I of so pain we’re that’s surgeons, we’ve now. set is right kind management. director to now. joined. up it’s thoracic and That four Top out four of, on Sure. use a a, this kind kind people in of rolled unit calling with

getting XXXX that from double next standpoint. year. it’s as at great expand and new but We some definitely quite growth, driving that now accounts feedback. it as wouldn’t results more revenue course good the group is at it and to four revenue The that right getting likely I substantially look in early view least do We And lever we is from will driving say on for we’re and some likely XXXX we team sure. next than a expand for as year. yet, that

Matthew O’Brien

Thank it. you. Got

Operator

you. Thank

Our from Suraj next question Kalia comes Northland Markets. Capital from

Your open. line is

Unidentified Analyst

my [ph] this for Hi, taking Suraj. for Megan questions. Thanks

maybe full XX,XXX how on give were implement and idea you we’re many year? during track us implemented or Can to the in quarter AtriClips. still the First, an XX,XXX on

Mike Carrel

the Yes, you to yes. we hit talked number give a on about, numbers we specific for didn’t quarter, that are but the track

Unidentified Analyst

that Got MIS internationally. slowing it. be looking U.S. be a And specific seems on ablation, both should bit to Any then in and we there down just dynamics at?

Mike Carrel

Can you repeat that?

Unidentified Analyst

Yes.

ablation and Is on dynamics Just with the we at? be invasive. the of on little looking that minimally slowdown internationally there there bit should U.S. any

Mike Carrel

international the had feel I by in, China on of results didn’t actually but we came well. specifically dynamics about that out really consistent good country, about the front. a talked We China, get We did country number. before. actually And growth overall. we No mean, we

a good side of traction just it’s look to in sometimes in very like MIS, have the at things, feel – you bit have there But we some in we traction for see the a and heavy the same other some legacy that, true than United had in pressure of in actually is CONVERGE had we’re might of States We business that, general, and have. little UK. that And Italy. as growth. the Japan Germany European beginning So on the the we just users

Unidentified Analyst

Great.

Operator

to And from like questions would back any conference closing Carrel lines. further no to our you. showing Mike I phone the I’m remarks. for Thank over turn

Mike Carrel

a this over the everyone, much good joining us so again, the Well, to Great. you course for we to look thank Have talking quarter. you evening. evening, of forward

Operator

all participation conclude your does you thank today’s day. a have may in gentlemen, the for Everyone, disconnect. program, conference. Ladies wonderful and you This and

AtriCure (ATRC) 1 Aug 182018 Q2 Earnings call transcript