AtriCure(ATRC) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Presents AtriCure's unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Financial Statements (Unaudited) Presents AtriCure's unaudited condensed consolidated financial statements for Q2 and H1 2022 Condensed Consolidated Balance Sheets Total assets decreased to $587.4 million by June 30, 2022, from $615.3 million at year-end 2021 Condensed Consolidated Balance Sheet Highlights (In Thousands) | Metric | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $54,556 | $43,654 | | Total current assets | $206,166 | $196,076 | | Total Assets | $587,389 | $615,312 | | Total current liabilities | $56,316 | $56,445 | | Total Liabilities | $130,679 | $131,556 | | Total Stockholders' Equity | $456,710 | $483,756 | Condensed Consolidated Statements of Operations and Comprehensive Loss Q2 2022 revenue grew to $84.5 million with net loss narrowing, while H1 revenue reached $159.1 million Statement of Operations Highlights (In Thousands, Except Per Share Amounts) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $84,529 | $71,376 | $159,105 | $130,651 | | Gross Profit | $63,519 | $54,078 | $119,114 | $98,618 | | Loss from operations | $(13,660) | $(15,077) | $(27,810) | $(30,962) | | Net loss | $(14,841) | $(16,251) | $(30,024) | $(33,168) | | Basic and diluted net loss per share | $(0.32) | $(0.36) | $(0.66) | $(0.74) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased to $20.4 million in H1 2022, with cash and equivalents at $54.6 million Cash Flow Summary (In Thousands) | Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(20,403) | $(13,849) | | Net cash provided by investing activities | $40,243 | $47,528 | | Net cash used in financing activities | $(8,636) | $(7,889) | | Net increase in cash and cash equivalents | $10,902 | $25,675 | | Cash and cash equivalents—end of period | $54,556 | $67,619 | Notes to Condensed Consolidated Financial Statements Detailed notes cover accounting policies, revenue breakdown, credit facility terms, and ongoing legal proceedings - The company operates as a single operating segment, developing and selling products for atrial fibrillation (Afib), left atrial appendage (LAA) management, and post-operative pain management globally[18][22] U.S. Revenue by Product Type (In Thousands) | Product Type | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Open ablation | $22,070 | $41,044 | | Minimally invasive ablation | $10,154 | $18,769 | | Pain management | $10,210 | $18,224 | | Appendage management | $28,831 | $55,500 | | Total United States | $71,265 | $133,537 | Revenue by Geography (In Thousands) | Geography | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | United States | $71,265 | $133,537 | | Europe | $7,783 | $15,020 | | Asia | $4,933 | $9,490 | | Other International | $548 | $1,058 | | Total Revenue | $84,529 | $159,105 | - The company has a Loan Agreement with Silicon Valley Bank including a $60 million term loan and a $30 million revolving line of credit, expiring in November 2026[36][38] - The company is involved in a legal proceeding initiated by a Civil Investigative Demand from the U.S. Department of Justice in 2017 concerning potential violations of the False Claims Act[52] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, including 21.8% revenue growth for H1 2022, liquidity, and strategic initiatives - Despite pandemic-related variability, worldwide revenue for the first six months of 2022 increased by 21.8% to $159.1 million, driven by growing adoption across key product lines[77] - Strategic initiatives include product innovation with the launch of the ENCOMPASS clamp, and continued investment in clinical science with FDA approval for the HEAL-IST and LeAAPS clinical trial protocols[78][79][80] Results of Operations Q2 2022 revenue grew 18.4% to $84.5 million, driven by key product lines, with H1 revenue up 21.8% Revenue Growth by Product (Three Months Ended June 30, 2022 vs 2021) | Product Line | 2022 Revenue (in thousands) | 2021 Revenue (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Pain management | $10,210 | $5,709 | 78.8% | | Appendage management | $28,831 | $25,156 | 14.6% | | Open ablation | $22,070 | $19,503 | 13.2% | | Total revenue | $84,529 | $71,376 | 18.4% | - For Q2 2022, gross margin decreased by approximately 70 basis points due to changes in U.S. product mix and cost increases from inflation and supply chain pressures[86] - R&D expenses for Q2 2022 increased 21.3% to $14.8 million, driven by higher personnel costs and EU Medical Device Regulation (EU MDR) compliance expenses[87] - SG&A expenses for Q2 2022 increased 9.5% to $62.4 million, primarily due to increased headcount, travel, marketing, and training activities[88] Revenue Growth by Product (Six Months Ended June 30, 2022 vs 2021) | Product Line | 2022 Revenue (in thousands) | 2021 Revenue (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Pain management | $18,224 | $9,607 | 89.7% | | Appendage management | $55,500 | $45,743 | 21.3% | | Open ablation | $41,044 | $36,942 | 11.1% | | Total revenue | $159,105 | $130,651 | 21.8% | Liquidity and Capital Resources As of June 30, 2022, the company held $182.7 million in cash and investments, with $60 million debt outstanding - The company has a $60 million term loan and a $30 million revolving line of credit, with $28.75 million of unused borrowing capacity as of June 30, 2022[96][100] - Net cash used in operating activities increased by $6.6 million in H1 2022 compared to H1 2021, driven by a $9.7 million reduction in accrued liabilities[97][98] - Net cash provided by investing activities decreased by $7.3 million, reflecting lower net sales of securities and increased purchases of property and equipment[98] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes occurred in quantitative and qualitative market risk disclosures from the prior year's Form 10-K - As of June 30, 2022, there were no material changes to the market risk disclosures previously reported in the Company's Form 10-K for the year ended December 31, 2021[105] Item 4. Controls and Procedures Management concluded disclosure controls were effective as of June 30, 2022, with no material changes in internal control - Based on an evaluation as of the end of the period, the company's management concluded that disclosure controls and procedures were effective in providing reasonable assurance that required information is recorded, processed, and reported in a timely manner[106] - No changes occurred in the company's internal control over financial reporting during the three months ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, these controls[108] PART II. OTHER INFORMATION This section includes information on legal proceedings, risk factors, and exhibits filed with the report Item 1. Legal Proceedings Information on legal proceedings, including a False Claims Act lawsuit, is detailed in Note 8 to the financial statements - Information regarding legal proceedings is detailed in Note 8 to the Condensed Consolidated Financial Statements[109] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021 - There have been no material changes with respect to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021[110] Item 6. Exhibits Lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL interactive data files - Exhibits filed with this report include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, and XBRL data files[112]