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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

_____________________________________________

FORM 10-Q

_____________________________________________

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

or

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from_____________to_____________

Commission File Number 000-51470

_____________________________________________

AtriCure, Inc.

(Exact name of Registrant as specified in its charter)

_____________________________________________

 

Delaware

34-1940305

(State

or other jurisdiction

of incorporation)

(IRS Employer

Identification No.)

7555 Innovation Way

Mason, OH 45040

(Address of principal executive offices)

(513) 755-4100

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

_____________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $.001 par value

ATRC

NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: YES x NO ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES x NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer

x

Accelerated Filer

¨

Non-Accelerated Filer

¨ 

Smaller reporting company

¨

Emerging growth company

¨ 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act: ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): YES ¨ NO x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

Outstanding at August 3, 2021

Common Stock, $.001 par value

45,882,449

 

 


Table of Contents

 

 

Page

PART I. FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

 

 

Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020

3

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2021 and 2020

4

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2021 and 2020

5

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020

6

 

Notes to Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

25

Item 4.

Controls and Procedures

25

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 6.

Exhibits

28

Signatures

29

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ATRICURE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Per Share Amounts)

(Unaudited)

June 30,

December 31,

2021

2020

Assets

Current assets:

Cash and cash equivalents

$

67,619

$

41,944

Short-term investments

92,246

202,274

Accounts receivable, less allowance for credit losses of $1,121 and $1,096

33,835

23,146

Inventories

37,608

35,026

Prepaid and other current assets

4,636

4,347

Total current assets

235,944

306,737

Property and equipment, net

30,175

28,290

Operating lease right-of-use assets

2,683

1,914

Long-term investments

69,770

14,178

Intangible assets, net

127,234

128,199

Goodwill

234,781

234,781

Other noncurrent assets

488

440

Total Assets

$

701,075

$

714,539

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

16,496

$

12,736

Accrued liabilities

32,444

27,984

Other current liabilities and current maturities of debt and leases

18,493

8,417

Total current liabilities

67,433

49,137

Long-term debt

43,669

53,435

Finance lease liabilities

10,540

10,969

Operating lease liabilities

1,833

1,180

Contingent consideration and other noncurrent liabilities

192,517

187,424

Total Liabilities

315,992

302,145

Commitments and contingencies (Note 7)

 

 

Stockholders’ Equity:

Common stock, $0.001 par value, 90,000 shares authorized and 45,881 and 45,346 issued and

outstanding

46

45

Additional paid-in capital

748,644

742,389

Accumulated other comprehensive (loss) income

(87)

312

Accumulated deficit

(363,520)

(330,352)

Total Stockholders’ Equity

385,083

412,394

Total Liabilities and Stockholders’ Equity

$

701,075

$

714,539

See accompanying notes to condensed consolidated financial statements.

ATRICURE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In Thousands, Except Per Share Amounts)

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

Revenue

$

71,376

$

40,824

$

130,651

$

94,049

Cost of revenue

17,298

13,170

32,033

27,511

Gross profit

54,078

27,654

98,618

66,538

Operating expenses:

Research and development expenses

12,197

10,036

23,414

21,623

Selling, general and administrative expenses

56,958

24,903

106,166

67,654

Total operating expenses

69,155

34,939

129,580

89,277

Loss from operations

(15,077)

(7,285)

(30,962)

(22,739)

Other income (expense):

Interest expense

(1,197)

(1,231)

(2,386)

(2,459)

Interest income

103

263

237

668

Other

(14)

29

40

(94)

Loss before income tax expense

(16,185)

(8,224)

(33,071)

(24,624)

Income tax expense

66

12

97

20

Net loss

$

(16,251)

$

(8,236)

$

(33,168)

$

(24,644)

Basic and diluted net loss per share

$

(0.36)

$

(0.20)

$

(0.74)

$

(0.61)

Weighted average shares outstanding—basic and diluted

45,035

41,649

44,834

40,160

Comprehensive loss:

Unrealized (loss) gain on investments

$

(132)

$

174

$

(163)

$

111

Foreign currency translation adjustment

63

101

(236)

(49)

Other comprehensive (loss) income

(69)

275

(399)

62

Net loss

(16,251)

(8,236)

(33,168)

(24,644)

Comprehensive loss, net of tax

$

(16,320)

$

(7,961)

$

(33,567)

$

(24,582)

See accompanying notes to condensed consolidated financial statements.


ATRICURE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In Thousands)

(Unaudited)

Three-Month Period Ended June 30, 2020

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Accumulated

Comprehensive

Stockholders’

Shares

Amount

Capital

Deficit

Income (Loss)

Equity

Balance—March 31, 2020

40,077 

$

40 

$

526,302 

$

(298,605)

$

(371)

$

227,366 

Issuance of common stock through public offering

4,574 

5 

188,953 

188,958 

Impact of equity compensation plans

288 

8,499 

8,499 

Other comprehensive income

275 

275 

Net loss

(8,236)

(8,236)

Balance—June 30, 2020

44,939 

$

45 

$

723,754 

$

(306,841)

$

(96)

$

416,862 

Three-Month Period Ended June 30, 2021

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Accumulated

Comprehensive

Stockholders’

Shares

Amount

Capital

Deficit

Income (Loss)

Equity

Balance—March 31, 2021

45,623 

$

46 

$

738,484 

$

(347,269)

$

(18)

$

391,243 

Impact of equity compensation plans

258 

10,160 

10,160 

Other comprehensive loss

(69)

(69)

Net loss

(16,251)

(16,251)

Balance—June 30, 2021

45,881 

$

46 

$

748,644 

$

(363,520)

$

(87)

$

385,083

Six-Month Period Ended June 30, 2020

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Accumulated

Comprehensive

Stockholders’

Shares

Amount

Capital

Deficit

Income (Loss)

Equity

Balance—December 31, 2019

39,655 

$

40 

$

529,658 

$

(282,197)

$

(158)

$

247,343 

Issuance of common stock through public offering

4,574 

5 

188,953 

188,958 

Impact of equity compensation plans

710 

5,143 

5,143 

Other comprehensive income

62 

62 

Net loss

(24,644)

(24,644)

Balance—June 30, 2020

44,939 

$

45 

$

723,754 

$

(306,841)

$

(96)

$

416,862 

Six-Month Period Ended June 30, 2021

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Accumulated

Comprehensive

Stockholders’

Shares

Amount

Capital

Deficit

Income (Loss)

Equity

Balance—December 31, 2020

45,346 

$

45 

$

742,389 

$

(330,352)

$

312 

$

412,394 

Impact of equity compensation plans

535 

1 

6,255 

6,256 

Other comprehensive loss

(399)

(399)

Net loss

(33,168)

(33,168)

Balance—June 30, 2021

45,881 

$

46 

$

748,644 

$

(363,520)

$

(87)

$

385,083

See accompanying notes to condensed consolidated financial statements.

ATRICURE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

Six Months Ended

June 30,

2021

2020

Cash flows from operating activities:

Net loss

$

(33,168)

$

(24,644)

Adjustments to reconcile net loss to net cash used in operating activities:

Share-based compensation expense

13,745

10,577

Depreciation

3,815

3,925

Amortization of intangible assets

965

977

Amortization of deferred financing costs

249

282

Loss on disposal of property and equipment

52

97

Amortization of investments

1,206

127

Change in value of contingent consideration

5,100

(5,046)

Other non-cash adjustments to income

472

656

Changes in operating assets and liabilities:

Accounts receivable

(10,799)

5,127

Inventories

(2,707)

(3,402)

Other current assets

(308)

(7)

Accounts payable

3,571

(1,970)

Accrued liabilities

4,529

(14,841)

Other noncurrent assets and liabilities

(571)

507

Net cash used in operating activities

(13,849)

(27,635)

Cash flows from investing activities:

Purchases of available-for-sale securities

(94,817)

(127,069)

Sales and maturities of available-for-sale securities

147,884

33,732

Purchases of property and equipment

(5,539)

(2,944)

Proceeds from capital grant

800

Net cash provided by (used in) investing activities

47,528

(95,481)

Cash flows from financing activities:

Proceeds from sale of stock, net of offering costs of $0 and $218

188,958

Payments on debt and leases

(399)

(280)

Payments of debt fees

(4)

Proceeds from stock option exercises and employee stock purchase plan

9,010

6,889

Shares repurchased for payment of taxes on stock awards

(16,500)

(12,323)

Net cash (used in) provided by financing activities

(7,889)

183,240

Effect of exchange rate changes on cash and cash equivalents

(115)

(85)

Net increase in cash and cash equivalents

25,675

60,039

Cash and cash equivalents—beginning of period

41,944

28,483

Cash and cash equivalents—end of period

$

67,619

$

88,522

Supplemental cash flow information:

Cash paid for interest

$

2,147

$

2,195

Cash paid for income taxes, net of refunds

128

282

Non-cash investing and financing activities:

Accrued purchases of property and equipment

529

525

See accompanying notes to condensed consolidated financial statements.

6


Table of Contents

ATRICURE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except per share amounts)

(Unaudited)

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of the Business—The “Company” or “AtriCure” consists of AtriCure, Inc. and its wholly-owned subsidiaries. The Company is a leading innovator in treatments for atrial fibrillation (Afib) and left atrial appendage (LAA) management and sells its products to medical centers globally through its direct sales force and distributors.

Basis of Presentation—The accompanying interim financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (SEC). The accompanying interim financial statements are unaudited, but in the opinion of the Company’s management, contain all normal, recurring adjustments considered necessary to present fairly the financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America (GAAP) applicable to interim periods. Certain information and footnote disclosures included in annual financial statements prepared in accordance with GAAP have been omitted or condensed. The Company believes the disclosures herein are adequate to make the information presented not misleading. Results of operations are not necessarily indicative of the results expected for the full year or for any future period.

The accompanying Condensed Consolidated Financial Statements should be read in conjunction with the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC. All intercompany accounts and transactions have been eliminated in consolidation.

Cash and Cash Equivalents—The Company considers highly liquid investments with maturities of three months or less at the date of purchase as cash equivalents. Cash equivalents include demand deposits, money market funds and repurchase agreements on deposit with financial institutions.

Investments—The Company invests primarily in government and agency obligations, corporate bonds, commercial paper and asset-backed securities and classifies all investments as available-for-sale. Investments maturing in less than one year are classified as short-term investments. Investments are recorded at fair value, with unrealized gains and losses recorded as accumulated other comprehensive income (loss). Gains and losses are recognized using the specific identification method when securities are sold and are included in interest income.

Revenue Recognition—The Company recognizes revenue when control of promised goods is transferred to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods. This generally occurs upon shipment of goods to customers. See Note 8 for further discussion on revenue.

Sales Returns and Allowances—The Company maintains a provision for potential returns of defective or damaged products and invoice adjustments. The Company adjusts the provision using the expected value method based on historical experience. Increases to the provision reduce revenue, and the provision is included in accrued liabilities.

Allowance for Credit Losses on Accounts Receivable—The Company evaluates the expected credit losses of accounts receivable, considering historical credit losses, current customer-specific information and other relevant factors when determining the allowance. An increase to the allowance for credit losses results in a corresponding increase in selling, general and administrative expenses. The Company charges off uncollectible receivables against the allowance when all attempts to collect the receivable have failed. The Company’s history of write-offs has not been significant.

Inventories—Inventories are stated at the lower of cost or net realizable value based on the first-in, first-out cost method (FIFO) and consist of raw materials, work in process and finished goods. The Company’s industry is characterized by rapid product development and frequent new product introductions. Uncertain timing of regulatory approvals, variability in product launch strategies and variation in product use all impact inventory reserves for excess, obsolete and expired products. An increase to inventory reserves results in a corresponding increase in cost of revenue. Inventories are written off against the reserve when they are physically disposed.

7


Table of Contents

ATRICURE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except per share amounts)

(Unaudited)

Inventories consist of the following:

June 30,

December 31,

2021

2020

Raw materials

$

12,381

$

11,966

Work in process

3,599

2,424

Finished goods

21,628

20,636

Inventories

$

37,608