AtriCure, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. AtriCure develops and sells surgical products for atrial fibrillation ablation, left atrial appendage management, and post-operative pain management. Unless otherwise noted, amounts below are in millions of U.S. dollars.
Financial performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $108.9 | $93.5 |
| Gross profit / gross margin | $81.3 / 74.7% | $69.6 / 74.5% |
| Operating expenses | $92.2 | $75.4 |
| Operating loss | $(10.9) | $(5.8) |
| Net loss | $(13.3) | $(6.5) |
| Net loss per share, diluted | $(0.28) | $(0.14) |
| Cash used in operating activities | $(21.0) | $(4.1) |
Revenue grew 16.4% (16.3% on a constant-currency basis). U.S. revenue increased 15.4% to $90.2 million; international revenue rose 21.5% to $18.6 million. By product, minimally invasive ablation grew 27.8%, open ablation 16.5%, pain management 15.1%, and appendage management 11.0%.
Gross margin improved 21 basis points, primarily from product and geographic mix. Research and development expense rose 29.5%, reflecting higher personnel costs, LeAAPS trial enrollment, and product development. Selling, general and administrative expense rose 20.4%, including higher personnel and travel costs; the comparison also reflects a $4.0 million legal-settlement gain recorded in Q1 2023. Q1 2024 included a $1.4 million loss on extinguishment of the prior debt facility. The prior-period royalty expense of $0.9 million did not recur.
Liquidity and debt
At March 31, 2024, cash and cash equivalents were $65.0 million and short-term investments were $41.0 million, totaling $106.0 million. Net working capital was $184.0 million. Cash and cash equivalents declined $19.3 million during the quarter. Operating cash use increased, partly due to working-capital outflows, higher variable compensation payments, and inventory investment.
Long-term debt was $61.9 million. Under a new asset-based revolving facility, the company reported $61.9 million of unused borrowing availability at quarter-end. The facility has a $125 million commitment, with an option to increase it by $40 million, and matures January 5, 2027. Borrowings are secured by company assets and are subject to covenants, including minimum liquidity and excess-availability requirements. The company had $10.0 million of lease liabilities in addition to debt.
Developments, outlook, and risks
- Management reported strong global growth and continued investment in product innovation, clinical research, and physician education. The cryoSPHERE+ pain-management probe was in an extended limited U.S. launch; full launch was expected by the end of Q2 2024.
- The LeAAPS clinical trial had enrolled more than 2,000 patients by quarter-end; enrollment and site initiation were ongoing. The planned trial may enroll up to 6,500 subjects and includes at least five years of efficacy follow-up.
- The filing provides no specific revenue or earnings guidance. Management noted that increased competition may make 2024 results more variable, and identified inflation, rising interest rates, and currency fluctuations as factors that could affect liquidity and operations.
- A relator continues to pursue a False Claims Act case alleging kickbacks to healthcare providers. The company contests the allegations and says timing and potential financial impact cannot be predicted.
- Management stated that previously disclosed risk factors had not materially changed. Disclosure controls were assessed as effective; no material change in internal control over financial reporting was reported.
Investor facts to verify
- Whether revenue growth can be sustained while operating expenses and net losses remain elevated.
- Drivers of operating cash use and whether inventory and working-capital investment convert into sales and cash generation.
- Actual launch progress and commercial adoption of cryoSPHERE+, and continued LeAAPS enrollment and costs.
- Available borrowing capacity, borrowing-base terms, interest costs, and compliance with facility covenants.
- Developments and potential exposure in the unresolved False Claims Act litigation.