AtriCure, Inc. (ATRC)
Q2 2010 Earnings Call Transcript
August 4, 2010 10:00 am ET
David Drachman – President and CEO
Julie Piton – VP, Finance & Administration and CFO
Charley Jones – Barrington Research
Jason Mills – Canaccord Genuity
Tim Lee – Piper Jaffray
Vivian Cervantes – Maxim Group
Matt Dolan – Roth Capital
Joanne Wuensch – BMO Capital Markets
Good morning and welcome to AtriCure second quarter 2010 earnings conference call. My name is Kathlyn and I will be your coordinator for the call today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today's call. (Operator Instructions) 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.
Thank you, Kathlyn. Good afternoon 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.
Thank you, Dave and good morning, everyone. By now you should have received a copy of the second quarter earnings press release. If you have not received a copy, please call Sarah Luken [ph] at 513-755-4136 and she will fax or email 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 in the call today. A reconciliation of these non-GAAP measures is included in our press release, which is also 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 for the surgical treatment of AF or train doctors to use the products for the surgical treatment of AF.
These restrictions, however, do prevent doctors from choosing to use the products with the treatment of AF for stroke reduction or prevent AtriCure from engaging in sales and marketing efforts that focus only on the general attributes of the products for the current cleared uses. AtriCure has provided research grants to institutions for the purposes of conducting certain studies that may be referred to on this call. The primary authors of the papers referred to on this call may be consultants to AtriCure. With that, I would like to turn the call back to Dave.
Thank you, Julie and welcome to members of the investment community who have joined us today for our second quarter earnings call. We’ve been highly productive during the past three months.
Business is strengthening and we have made significant progress with FDA on several critical projects. We’re moving full speed ahead with our strategic plan. We will begin with opening remarks and a brief summary of our second quarter financial performance. Then we will review our AtriCure platform and opportunity.
Next time, we will provide an update regarding regulatory clinical reimbursement and product pipeline initiatives. Following my remarks, Julie will present a detail review of our financial performance. I will then comment on our outlook and open the call up for questions.
All med tech companies are currently facing uncertainties associated with an intending healthcare reform, more challenging FDA enforcement and approvals and broad economic uncertainty. Despite these circumstances, the global demand for cardiac medical devices is extremely strong which can be partially explained by the fact that people are living longer.
According to a survey of 450 U.S. hospitals from the Marwood Advisory Group, hospitals are focused on growing cardiovascular and orthopedic procedure volumes and in effort to increase revenue over the next three years by capitalizing earnings trend.
This survey also indicates that the devices to treat cardiac arrhythmias are not a target for hospital cost-cutting programs and that evidence-based medicine and peer-review literature will become more integrated into purchasing decisions. We expect that these trends will benefit AtriCure and like companies that provide physicians and patients with cost effective treatments supported with convincing clinical silence.
Further, it is well established that there is a large and growing demand for effective atrial fibrillation treatment alternatives and safer and more effective message to exclude the left atrial appendage. We believe our devices provide an important alternative for patients, physicians, hospitals and payers to help satisfy this demand.
Worldwide revenue of $14.2 million was up 3% or 4% on a constant currency basis. U.S. revenue of $11.8 million was up 6%. U.S. revenue was positively impacted by an increase in sales from both open heart and minimally invasive products, while international sales were unfavorably impacted by the transition of a larger PN market from a stocking distributor to direct AtriCure’s cells representation.
The unfavorable impact of this transition on the quarter was $400,000 which represents a 3% reduction of our worldwide second quarter reported revenue growth. This transition was completed during July and we expect that the transition will begin to have a positive effect during the second half of this year and throughout 2011.
Helping to drive growth was a strong performance from our trial of ablation products where we estimate that we’ve gained approximately 25% U.S. market share since we launched our Cryo 1 system in June of 2009.