10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

_____________________________________________

FORM 10-Q

_____________________________________________

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

For the quarterly period ended June 30, 2018

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)

_____________________________________________

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 ☒ 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 ☒ 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	☒	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 ☒

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 July30, 2018
Common Stock, $.001 par value	35,361,743

Table of Contents

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2018 and 2017	4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2018 and 2017	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 6.	Exhibits	25
Signatures		26

2

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,
	2018		2017
Assets
Current assets:
Cash and cash equivalents	$	13,866	$	21,809
Short-term investments		23,202		12,642
Accounts receivable, less allowance for doubtful accounts of $32 and $32		24,895		23,083
Inventories		21,682		22,451
Other current assets		3,120		2,273
Total current assets		86,765		82,258
Property and equipment, net		28,126		28,749
Intangible assets, net		50,080		50,764
Goodwill		105,257		105,257
Other noncurrent assets		619		676
Total Assets	$	270,847	$	267,704
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	9,670	$	12,431
Accrued liabilities		17,161		18,911
Other current liabilities and current maturities of capital leases		589		561
Total current liabilities		27,420		31,903
Capital leases		12,492		12,761
Long-term debt		39,399		24,100
Other noncurrent liabilities		31,849		37,774
Total Liabilities		111,160		106,538
Commitments and contingencies (Note 7)
Stockholders’ Equity:
Common stock, $0.001 par value, 90,000 shares authorized and 35,313 and 34,586issued and outstanding		35		35
Additional paid-in capital		396,088		386,963
Accumulated other comprehensive (loss) income		(98)		34
Accumulated deficit		(236,338)		(225,866)
Total Stockholders’ Equity		159,687		161,166
Total Liabilities and Stockholders’ Equity	$	270,847	$	267,704

See accompanying notes to condensed consolidated financial statements.

3

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,
	2018		2017		2018		2017
Revenue	$	51,802	$	45,231	$	98,796	$	86,504
Cost of revenue		13,723		12,677		26,214		23,942
Gross profit		38,079		32,554		72,582		62,562
Operating expenses:
Research and development expenses		8,655		8,907		17,712		18,457
Selling, general and administrative expenses		28,466		30,002		63,342		60,102
Total operating expenses		37,121		38,909		81,054		78,559
Income (loss) from operations		958		(6,355)		(8,472)		(15,997)
Other income (expense):
Interest expense		(1,221)		(564)		(2,041)		(1,118)
Interest income		123		48		199		102
Other		(150)		5		(62)		(13)
Loss before income tax expense		(290)		(6,866)		(10,376)		(17,026)
Income tax expense		48		17		96		40
Net loss	$	(338)	$	(6,883)	$	(10,472)	$	(17,066)
Basic and diluted net loss per share	$	(0.01)	$	(0.21)	$	(0.32)	$	(0.53)
Weighted average shares outstanding—basic and diluted		33,252		32,288		33,117		32,154
Comprehensive loss:
Unrealized gain (loss) on investments	$	1	$	4	$	(7)	$	6
Foreign currency translation adjustment		(211)		342		(125)		415
Other comprehensive (loss) income		(210)		346		(132)		421
Net loss		(338)		(6,883)		(10,472)		(17,066)
Comprehensive loss, net of tax	$	(548)	$	(6,537)	$	(10,604)	$	(16,645)

See accompanying notes to condensed consolidated financial statements.

4

ATRICURE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In  Thousands)

(Unaudited)

	Six Months Ended
	June 30,
	2018		2017
Cash flows from operating activities:
Net loss	$	(10,472)	$	(17,066)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation expense		7,424		7,325
Depreciation		3,719		3,906
Amortization of intangible assets		684		684
Amortization of deferred financing costs		217		132
Loss on disposal of property and equipment		97		88
Realized (gain) loss from foreign exchange on intercompany transactions		56		(10)
(Accretion) amortization of investments		(56)		59
Change in allowance for doubtful accounts		58		(134)
Change in value of contingent consideration		(5,916)		—
Changes in operating assets and liabilities:
Accounts receivable		(1,946)		(1,673)
Inventories		703		(2,094)
Other current assets		(877)		(26)
Accounts payable		(2,432)		565
Accrued liabilities		(1,697)		(1,891)
Other noncurrent assets and liabilities		69		(468)
Net cash used in operating activities		(10,369)		(10,603)
Cash flows from investing activities:
Purchases of available-for-sale securities		(23,510)		(7,567)
Sales and maturities of available-for-sale securities		13,000		16,350
Purchases of property and equipment		(3,473)		(3,488)
Proceeds from sale of property and equipment		6		—
Net cash (used in) provided by investing activities		(13,977)		5,295
Cash flows from financing activities:
Proceeds from debt borrowings		17,381		—
Payments on debt and capital leases		(1,469)		(241)
Payment of debt fees		(1,136)		(50)
Shares repurchased for payment of taxes on stock awards		(3,724)		(1,901)
Proceeds from exercise of stock options and employee stock purchase plan		5,425		4,279
Net cash provided by financing activities		16,477		2,087
Effect of exchange rate changes on cash and cash equivalents		(74)		26
Net decrease in cash and cash equivalents		(7,943)		(3,195)
Cash and cash equivalents—beginning of period		21,809		24,208
Cash and cash equivalents—end of period	$	13,866	$	21,013
Supplemental cash flow information:
Cash paid for interest	$	1,210	$	985
Cash paid for income taxes		45		—
Non-cash investing and financing activities:
Accrued purchases of property and equipment		366		703
Assets acquired through capital lease		24		—
Capital lease asset early termination		(6)		—

See accompanying notes to condensed consolidated financial statements.

5

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” consists of AtriCure, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. 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 audited financial statements of the Company included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC.

Cash Equivalents—The Company considers highly liquid investments with maturities of three months or less at the date of purchase as cash equivalents in the accompanying Condensed Consolidated Financial Statements.

Investments—The Company invests primarily in U.S. Government securities, corporate bonds, commercial paper and asset-backed securities and classifies all investments as available-for-sale. Investments with maturities of 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. Gains and losses are recognized using the specific identification method when securities are sold and are included in interest income or expense in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

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 products shipped in error and invoice adjustments. The Company adjusts the provision through consideration of a combination of specific identification and historical experience. Increases to the provision result in a reduction of revenue. The provision is included in accrued liabilities in the Condensed Consolidated Balance Sheets.

Allowance for Doubtful Accounts Receivable—The Company evaluates the collectability of accounts receivable to determine the appropriate allowance for doubtful accounts considering the aging of accounts, historical credit losses, customer-specific information and other relevant factors. Increases to the allowance result in an increase in selling, general and administrative expenses. The Company adjusts the allowance based on current circumstances and charges off uncollectible receivables against the allowance when all attempts to collect the receivable have failed. The Company’s history of write-offs against the allowance 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). The Company’s industry is characterized by rapid product development and frequent new product introductions. Uncertain timing of regulatory approval, variability in product launch strategies and variation in product use cause the Company to maintain reserves for excess, obsolete and expired products. Increases to inventory reserves result in an increase in cost of revenue. Inventories are written off against reserves when they are physically disposed.

6

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,
	2018		2017
Raw materials	$	8,729	$	7,755
Work in process		1,549		1,299
Finished goods		11,404		13,397
Inventories	$	21,682	$	22,451

Property and Equipment—Property and equipment is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of assets. The estimated useful life by major asset category is the following:

	Estimated Useful Life
Generators and related equipment	1 - 3 years
Building under capital lease	15 years
Computers, software and office equipment	3 years
Machinery and equipment	3 - 7 years
Furniture and fixtures	3 - 7 years
Leasehold improvements	5 - 15 years
Equipment under capital leases	3 - 5 years

The Company reassesses the useful lives of property and equipment at least annually and retires assets if they are no longer in service. Maintenance and repair costs are expensed as incurred.

The Company’s radiofrequency (RF) and cryo generators are generally placed with customers that use the Company’s disposable products. The estimated useful lives of generators are based on anticipated usage by customers and may change in future periods with changes in usage or introduction of new technologies. Depreciation related to generators and related equipment, which is recorded in cost of revenue in the Condensed Consolidated Statements of Operations and Comprehensive Loss, was $814 and $909 for the three months ended June 30, 2018 and 2017 and $1,641 and $1,825 for the six months ended June 30, 2018 and 2017. As of June 30, 2018 and December 31, 2017, the net carrying value of generators and related equipment included in net property and equipment in the Condensed Consolidated Balance Sheets was $4,717 and $4,656.

The Company reviews property and equipment for impairment at least annually using its best estimates based on reasonable and supportable assumptions and expected future cash flows. Property and equipment impairments recorded by the Company have not been significant.

Intangible Assets—Intangible assets with determinable useful lives are amortized on a straight-line basis over the estimated periods benefited.

Intangible assets include In-Process Research and Development (IPR&D), which represents the value of technology acquired in business combinations that has not yet reached technological feasibility. The primary basis for determining technological feasibility is obtaining specific regulatory approval. IPR&D is accounted for as an indefinite-lived intangible asset until completion or abandonment of the IPR&D project. Upon completion of the development project, IPR&D will be amortized over its estimated useful life. If the IPR&D project is abandoned, the IPR&D would be written off. IPR&D represents an estimate of the fair value of the pre-market approval (PMA) that may result from the CONVERGE IDE clinical trial.

The Company reviews intangible assets for impairment at least annually using its best estimates based on reasonable and supportable assumptions and projections. The Company has historically tested IPR&D for impairment annually on November 30.

Goodwill—Goodwill represents the excess of purchase price over the fair value of the net assets acquired in business combinations. The Company has historically tested goodwill for impairment annually on November 30, or more often if impairment indicators are present. The Company’s goodwill is accounted for in a single reporting unit representing the Company’s consolidated operations.

Other Noncurrent Liabilities—Other noncurrent liabilities consist of acquisition-related contingent consideration and other contractual obligations. Although the Company expects to settle a portion of the contingent consideration liability in 2018, the balance

7

ATRICURE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

is included in noncurrent liabilities as such settlement is both required and expected to be made in shares of the Company’s common stock pursuant to the nContact Surgical, Inc. (nContact) merger agreement.

Other Income (Expense)—Other income (expense) consists primarily of foreign currency transaction gains and losses generated by settlements of intercompany balances denominated in Euros and customer invoicing in British Pounds.

Taxes—Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities from a change in tax rates is recognized in the period that includes the enactment date.

The Company’s estimate of the valuation allowance for deferred income tax assets requires significant estimates and judgments about future operating results. Deferred income tax assets are reduced by valuation allowances if, based on the consideration of all available evidence, it is more-likely-than-not that the deferred income tax asset will not be realized. Significant weight is given to evidence that can be objectively verified. The Company evaluates deferred income tax assets on an annual basis to determine if valuation allowances are required. Deferred income tax assets are realized by having sufficient future taxable income to allow the related tax benefits to reduce taxes otherwise payable. The sources of taxable income that may be available to realize the benefit of deferred income tax assets are future reversals of existing taxable temporary differences, future taxable income, exclusive of reversing temporary differences and carryforwards, taxable income in carry-back years and tax planning strategies that are both prudent and feasible. In evaluating the need for a valuation allowance, the existence of cumulative losses in recent years is significant objectively verifiable negative evidence that must be overcome by objectively verifiable positive evidence to avoid the need to record a valuation allowance. The Company has recorded a full valuation allowance against substantially all net deferred income tax assets as it is more-likely-than-not that the benefit of the deferred income tax assets will not be recognized in future periods.

Net Loss Per Share—Basic and diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Since the Company has experienced net losses for all periods presented, net loss per share excludes the effect of 4,063 and 4,349 stock options, restricted stock shares, restricted stock units and performance award shares as of June 30, 2018 and 2017 because they are anti-dilutive. Therefore, the number of shares calculated for basic net loss per share is also used for the diluted net loss per share calculation.

Comprehensive Loss and Accumulated Other Comprehensive Income—In addition to net losses, the comprehensive loss includes foreign currency translation adjustments and unrealized losses on investments.

Accumulated other comprehensive income (loss) consisted of the following (net of tax):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Total accumulated other comprehensive income (loss) at beginning of period	$	112	$	(393)	$	34	$	(468)
Unrealized Losses on Investments
Balance at beginning of period	$	(14)	$	(19)	$	(6)	$	(21)
Other comprehensive income (loss) before reclassifications		1		4		(7)		6
Balance at end of period	$	(13)	$	(15)	$	(13)	$	(15)
Foreign Currency Translation Adjustment
Balance at beginning of period	$	126	$	(374)	$	40	$	(447)
Other comprehensive (loss) income before reclassifications		(349)		373		(181)		425
Amounts reclassified from accumulated other comprehensive income (loss) to other income (loss)		138		(31)		56		(10)
Balance at end of period	$	(85)	$	(32)	$	(85)	$	(32)
Total accumulated other comprehensive loss at end of period	$	(98)	$	(47)	$	(98)	$	(47)

Research and Development Costs—Research and development costs are expensed as incurred. These costs include compensation and other costs associated with the development of and research related to new and existing products or concepts, preclinical studies, clinical trials and regulatory affairs.

8

ATRICURE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

Advertising Costs—The Company expenses advertising costs as incurred. Advertising costs were not significant during the three and six months ended June 30, 2018 and 2017.

Share-Based Compensation—The Company records share-based compensation for all employee share-based payment awards, including stock options, restricted stock, restricted stock units, performance shares and stock purchases related to an employee stock purchase plan, based on estimated fair values. The value of the portion of an award that is ultimately expected to vest, net of estimated forfeitures, is recognized as expense over the service period in the Company’s Condensed Consolidated Statements of Operations and Comprehensive Loss. The Company estimates forfeitures at the time of grant and adjusts them in subsequent periods if actual forfeitures differ from those estimates. The Company recognized share-based compensation expense of $3,534 and $3,697 for the three months ended June 30, 2018 and 2017 and $7,424 and $7,325 for the six months ended June 30, 2018 and 2017.

The Company estimates the fair value of time-based options on the date of grant using the Black-Scholes option-pricing model (Black-Scholes model). The Company’s determination of fair value is affected by the Company’s stock price, as well as subjective variables including, but not limited to, the Company’s expected stock price volatility over the term of the awards and actual and projected employee stock option exercise behaviors. The Company estimates the fair value of restricted stock, restricted stock units and performance shares based upon the grant date closing market price of the Company’s common stock.

The Company also has an employee stock purchase plan (ESPP) which is available to all eligible employees as defined by the plan document. Under the ESPP, shares of the Company’s common stock may be purchased at a discount. At the beginning of each purchase period, the Company estimates the number of shares to be purchased in the period and the fair value of the shares based upon the Company’s stock price on the first day of the purchase period using the Black-Scholes model. Estimated compensation expense is recorded during the purchase period and is trued up to actual at the time of stock purchase.

Use of Estimates—The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingencies in the financial statements. Actual results could differ from those estimates.

2. RECENT ACCOUNTING PRONOUNCEMENTS

In February 2016, the FASB issued ASU 2016-02, “Leases”(ASU 2016-02), codified as ASC 842, which requires lessees to record most leases onto their balance sheet but recognize expenses on their income statement in a manner similar to today’s accounting. The guidance is effective for interim and annual reporting periods beginning within 2019.  An entity is required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. Full retrospective application is prohibited. The Company intends to adopt ASU 2016-02 on the effective date of January 1, 2019 and is currently evaluating the provisions of ASU 2016-02 to determine the impact on its consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment” (ASU 2017-04). The guidance removes the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. Under ASU 2017-04, a goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance becomes effective for annual reporting periods beginning after December 15, 2019 and interim periods within those fiscal years, with early adoption permitted, and applied prospectively. The Company is evaluating the provisions of ASU 2017-04 to determine the impact on its consolidated financial statements and related disclosures.

In February 2018, the FASB issued ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (AOCI)”(ASU 2018-02) to address industry concerns related to the application of ASC 740, “Income Taxes” to certain provisions of the new tax reform legislation. Upon adopting ASU 2018-02, an entity is required to disclose (1) its accounting policy related to releasing income tax effects from AOCI, (2) whether it has elected to reclassify, to retained earnings in the statement of stockholders’ equity, the stranded tax effects in AOCI related to the new tax reform legislation and (3) if it has elected to reclassify to retained earnings the stranded tax effects in AOCI related to the new tax reform legislation, what the reclassification encompasses. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. An entity will apply this guidance to each period in which the effect of the new tax reform legislation (or portion thereof) is recorded and may apply it either (1) retrospectively as of the date of enactment or (2) as of the beginning of the period of adoption. The Company has evaluated the impact of the provisions of ASU 2018-02 on its consolidated financial position, results of operations and related disclosures and determinedthat the new guidance will not have a material impact on its financial reporting upon adoption.

9

ATRICURE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

In March 2018, the FASB issued ASU 2018-05, “Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 118” (ASU 2018-05) to amend SEC paragraphs in ASC 740, “Income Taxes,”to reflect SAB 118, which provides guidance for companies that are not able to complete their accounting for the income tax effects of the Tax Cuts and Jobs Act in the period of enactment. The Company is applying the guidance in SAB 118 when accounting for the enactment-date effects of the Act. See Note 9 for further discussion.

In July 2018, the FASB issued ASU 2018-10, “Codification Improvements to Topic 842, Leases” (ASU 2018-10). The amendments in this ASU address the rate implicit in the lease, impairment of the net investment in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain transition adjustments, among other things. The amendments have the same effective date as ASU 2016-02, which is effective for interim and annual reporting periods beginning within 2019.  The Company is evaluating the provisions of ASU 2018-10 to determine the impact on its consolidated financial statements and related disclosures.

3. FAIR VALUE

Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy defines a three-level valuation hierarchy for classification and disclosure of fair value measurements as follows:  

· Level 1—Quoted prices in active markets for identical assets or liabilities.

· Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

· Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company classifies cash, investments in U.S. government securities, accounts receivable, short-term other assets, accounts payable and accrued liabilities as Level 1 within the fair value hierarchy. The carrying amounts of these assets and liabilities approximate their fair value due to their relatively short-term nature. Cash equivalents and investments in corporate bonds, commercial paper and asset-backed securities are classified as Level 2 within the fair value hierarchy. The fair value of fixed term debt is estimated by calculating the net present value of future debt payments at current market interest rates and is classified as Level 2. The book value of the Company’s fixed term debt approximates its fair value because the interest rate varies with market rates.  

The following table represents the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2018:  

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Total
Assets:
Money market funds	$	—	$	2,603	$	—	$	2,603
Commercial paper		—		8,541		—		8,541
U.S. government securities		2,584		—		—		2,584
Corporate bonds		—		8,099		—		8,099
Asset-backed securities		—		3,978		—		3,978
Total assets	$	2,584	$	23,221	$	—	$	25,805
Liabilities:
Acquisition-related contingent consideration		—		—		31,182		31,182
Total liabilities	$	—	$	—	$	31,182	$	31,182

There were no changes in the levels or methodology of measurement of financial assets and liabilities during the three and six months ended June 30, 2018.

10

ATRICURE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

The following table represents the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2017:

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Total
Assets:
Money market funds	$	—	$	12,774	$	—	$	12,774
Commercial paper		—		7,472		—		7,472
U.S. government agencies and securities		2,999		—		—		2,999
Corporate bonds		—		2,920		—		2,920
Total assets	$	2,999	$	23,166	$	—	$	26,165
Liabilities:
Acquisition-related contingent consideration		—		—		37,098		37,098
Total liabilities	$	—	$	—	$	37,098	$	37,098

Acquisition-Related Contingent Consideration. Contingent consideration arrangements under the nContact merger agreement obligate the Company to pay certain defined amounts to former shareholders of nContact if specified milestones are met related to trial enrollment, regulatory approval and revenue targets. The Company measures contingent consideration liabilities using unobservable inputs by applying an income approach, such as the discounted cash flow technique or the probability-weighted scenario method. Various key assumptions, such as the probability of achievement of the agreed milestones, projected revenues from acquisitions and the discount rate, are used in the determination of fair value of contingent consideration arrangements and are not observable in the market, thus representing a Level 3 measurement within the fair value hierarchy. Subsequent revisions to key assumptions, which impact the estimated fair value of contingent consideration liabilities, are reflected in the Condensed Consolidated Statements of Operations and Comprehensive Loss. Acquisition-related contingent consideration is recorded in other noncurrent liabilities in the Condensed Consolidated Balance Sheets.

The fair value of the nContact contingent consideration was remeasured as of June 30, 2018, resulting in a decrease in fair value of $5,916. This decrease is primarily due to changes in estimates related to the timing of achievement of the regulatory milestone as a result of enrollment in the CONVERGE IDE clinical trial in 2018, a decrease in forecasted revenues under the commercial milestone payment and a higher discount rate, reflecting increases in market interest rates and changes to the Company’s debt structure.  The adjustment to fair value is recorded in selling, general and administrative expenses in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Loss.

The following table represents the Company’s Level 3 fair value measurements using significant other unobservable inputs for acquisition-related contingent consideration:

	Six Months Ended		Twelve Months Ended
	June 30,		December 31, 2017
Beginning Balance	$	37,098	$	41,176
Amounts acquired		—		—
Changes in fair value included in earnings		(5,916)		(4,078)
Ending Balance	$	31,182	$	37,098

11

ATRICURE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

4. INTANGIBLE ASSETS

The following table provides a summary of the Company’s intangible assets:

		June 30, 2018				December 31, 2017
	Estimated Useful Life	Cost		Accumulated Amortization		Cost		Accumulated Amortization
Fusion technology	10 years	$	9,242	$	4,159	$	9,242	$	3,697
SUBTLE access technology	5 years		2,179		1,203		2,179		981
IPR&D			44,021		—		44,021		—
Total		$	55,442	$	5,362	$	55,442	$	4,678

Amortization expense of intangible assets with definite lives, which excludes IPR&D, was $342 for both the three months ended June 30, 2018 and 2017 and $684 for both the six months ended June 30, 2018 and 2017.

Amortization expense of intangible assets with definite lives is projected as follows:

2018	$	683	July 1, 2018 through December 31, 2018
2019		1,367
2020		1,235
2021		924
2022		925
2023 and thereafter		925
Total	$	6,059

5. ACCRUED LIABILITIES

Accrued liabilities consisted of the following:

	June 30,		December 31,
	2018		2017
Accrued commissions	$	5,416	$	6,964
Accrued payroll and employee-related expenses		4,370		4,097
Accrued bonus		4,163		4,726
Sales returns and allowances		1,319		1,169
Other accrued liabilities		701		695
Accrued royalties		669		626
Accrued taxes		523		634
Total	$	17,161	$	18,911

6. INDEBTEDNESS

Credit Facility. The Company has a Loan and Security Agreement (Loan Agreement) with Silicon Valley Bank (SVB). The Loan Agreement, as amended and restated effective February 23, 2018, includes a $40,000 term loan and a $20,000 revolving line of credit, with an option to increase the revolving line of credit by up to an additional $20,000. The term loan and revolving line of credit each have a five-year term,  maturing or expiring, as applicable, in February 2023.  

Principal payments of the term loan are to be made ratably commencing eighteen months after the inception of the loan (September 2019) through the loan’s maturity date. If the Company meets certain conditions, as specified by the Loan Agreement, the commencement of term loan principal payments may be deferred by an additional six months. The term loan accrues interest at the greater of the Prime Rate plus 3.75%, or 8.25%,  and is subject to an additional 3.5% fee on the original $40,000 term loan principal

12

ATRICURE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

payable at maturity or upon acceleration or prepayment of the term loan. The Company is accruing the 3.5% fee over the term of the Loan Agreement. As of June 30, 2018, the Company accrued $93 of this fee, reflected in the outstanding loan balance in the Condensed Consolidated Balance Sheets. The refinancing was treated as a debt modification. Financing costs related to the term loan of $744are netted against the outstanding loan balance in the Condensed Consolidated Balance Sheets and amortized ratably over the term of the Loan Agreement.

The revolving line of credit is subject to an annual facility fee of 0.33% of the revolving line of credit, and any borrowings bear interest at the greater of the Prime Rate or4.50%.  Borrowing availability under the revolving credit facility is based on the lesser of $20,000 or a borrowing base calculation as defined by the Loan Agreement. As of June 30, 2018, the Company had no borrowings under the revolving credit facility and had borrowing availability of $18,750. Financing costs related to the revolving line of credit are included in other assets in the Condensed Consolidated Balance Sheets and amortized ratably over the twelve-month period of the annual fee.  

The Loan Agreement contains prepayment and early termination fees and establishes a financial covenant related to sales growth, along with other customary terms and conditions.Specified assets have been pledged as collateral.

Capital Lease Obligations. As of June 30, 2018, the Company had capital leases for its corporate headquarters building and certain equipment that expire at various terms through 2030.  Capital lease assets are depreciated over their estimated useful lives. As of June 30, 2018, the cost of the leased assets, both building and equipment, was $14,462, and related accumulated amortization was $2,699.  

In connection with the terms of the Company’s corporate headquarters lease, a letter of credit in the amount of $1,250 was issued to the building lessor in October 2015. The letter of credit is renewed annually and remained outstanding as of June 30, 2018.

Future maturities of long-term debt, including the term loan fee payable at maturity, and capital lease obligations are projected as follows:

2018	$	736	July 1, 2018 through December 31, 2018
2019		5,303
2020		12,943
2021		12,947
2022		12,968
2023 and thereafter		16,260
Total payments	$	61,157
Imputed interest		(6,676)
Net long-term debt and capital lease obligations, of which $589 is current and $53,892 is noncurrent	$	54,481

7. COMMITMENTS AND CONTINGENCIES

Lease Commitments. The Company leases certain office and warehouse facilities under noncancelable operating leases with various terms that expire through 2022.  

Royalty Agreements. The Company has certain royalty agreements in place with terms that include payment of royalties of 3% to 5% of specified product sales. The royalty agreements have effective dates as early as 2003 and terms ranging from eighteen to at least twenty years, unless terminated earlier. Royalty expense of $695 and $602 is included in cost of revenue for the three months ended June 30, 2018 and 2017. Royalty expense of $1,367 and $1,136 is included in cost of revenue for the six months ended June 30, 2018 and 2017.

Purchase Agreements. The Company enters into standard purchase agreements with various suppliers in the ordinary course of business. Outstanding commitments outside of the ordinary course of business were not significant at June 30, 2018.

Legal. The Company may, from time to time, become a party to legal proceedings and receive inquiries from regulators. Such matters are subject to many uncertainties and to outcomes of which the financial impacts are not predictable with assurance and that may not be known for extended periods of time. When the Company has assessed that a loss is probable and an amount can be reasonably estimated, it records a liability in the Condensed Consolidated Financial Statements. Costs associated with legal

13

ATRICURE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

proceedings could have a material adverse effect on the Company’s future consolidated results of operations, financial position, or cash flows. 

The Company received a Civil Investigative Demand (CID) from the U.S. Department of Justice in December 2017 stating that it is investigating the Company to determine whether the Company has violated the False Claims Act, relating to the promotion of certain medical devices related to the treatment of atrial fibrillation for off-label use and submitted or caused to be submitted false claims to certain federal and state health care programs for medically unnecessary healthcare services related to the treatment of atrial fibrillation. The CID covers the period from January 2010 to December 2017 and requires the production of documents and answers to written interrogatories. The Company had no knowledge of the investigation prior to receipt of the CID. The Company maintains rigorous policies and procedures to promote compliance with the False Claims Act and other applicable regulatory requirements, and it is working with the U.S. Department of Justice to promptly respond to the CID. However, the Company cannot predict when the investigation will be resolved, the outcome of the investigation or its potential impact on the Company. 

The Company acquired nContact Surgical, Inc. pursuant to a merger agreement dated October 4, 2015. The merger agreement provides for contingent consideration or "earnout" to be paid upon attaining specified regulatory approvals and clinical and revenue milestones. The merger agreement’s earnout provisions require the Company to deliver periodic earnout reports to a designated representative of former nContact stockholders. In response to the report delivered in February 2018, the Company received a letter from the representative on March 16, 2018. The letter purports to serve as an “earnout objection statement” (as that term is defined in the merger agreement) and claims that for purposes of determining the commercial milestone payment, the Company should be including revenues of certain additional items and products that the Company has not previously included in its earnout statements. The Company has disputed the basis of the representative’s claims, and has corresponded with the representative regarding the earnout objection statement.

8. REVENUE

The Company adopted FASB ASC 606, “Revenue from Contracts with Customers” (ASC 606) using the modified retrospective method effective January 1, 2018. The adoption of ASC 606 did not have a material impact on the amount and timing of revenue recognized in the Condensed Consolidated Financial Statements.

Revenue is generated primarily from the sale of disposable surgical devices. The Company recognizes revenue in an amount that reflects the consideration the Company expects to be entitled to in exchange for those devices when control of promised devices is transferred to customers. At contract inception, the Company assesses the products promised in its contracts with customers and identifies a performance obligation for each promise to transfer to the customer a product that is distinct. The Company’s disposable surgical devices are distinct and represent performance obligations. These performance obligations are satisfied and revenue is recognized at a point in time upon shipment or delivery of products. Sales of devices are categorized as follows: open-heart ablation, minimally invasive ablation (MIS), appendage management and valve tools. Shipping and handling activities performed after control over products transfers to customers are considered activities to fulfill the promise to transfer the products rather than as separate promises to customers.

Products are sold primarily through a direct sales force and through distributors in select international markets. Terms of sale are generally consistent for both end-users and distributors except that payment terms are generally net 30 days for end-users and net 60 days for distributors, with limited exceptions. The Company does not maintain any post-shipping obligations to customers. No installation, calibration or testing of products is performed by the Company subsequent to shipment in order to render products operational.

Significant judgments and estimates involved in the Company’s recognition of revenue include the determination of the timing of transfer of control of products to customers and the estimation of a provision for returns. The Company considers the following indicators when determining when the control of products transfers to customers: (i) the Company has a right to payment in accordance with the shipping terms set forth in its contracts with customers; (ii) customers have legal title to products in accordance with shipping terms; (iii) the Company transfers physical possession of products either when the Company presents the products to a third party carrier for delivery to a customer (FOB shipping point) or when a customer receives the delivered goods (FOB destination); (iv) customers have the significant risks and rewards of ownership of products; and (v) customers have accepted products in connection with contractual shipping terms.

In the normal course of business, the Company does not accept product returns unless a product is defective as manufactured. The Company establishes estimated provisions for returns based on historical experience. The Company does not provide customers with the right to a refund.

14

ATRICURE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

The Company expects to be entitled to the total consideration for the products ordered by customers as product pricing is fixed according to the terms of customer contracts and payment terms are short. Payment terms fall within the one-year guidance for the practical expedient which allows the Company to forgo adjustment of the promised amount of consideration for the effects of a significant financing component. The Company excludes taxes assessed by governmental authorities on revenue-producing transactions from the measurement of the transaction price.

Costs associated with product sales include commissions and royalties. Considering that product sales are performance obligations in contracts that are satisfied at a point in time, commission expense associated with product sales and royalties paid based on sales of certain products is incurred at that point in time rather than over time. Therefore, the Company applies the practical expedient and recognizes commissions and royalties as expense when incurred because the expense is incurred at a point in time and the amortization period is less than one year. Commissions are recorded as selling expense and royalties are recorded as cost of revenue in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

See Note 11 for disaggregated revenue by geographic area and by product category.

9. INCOME TAX PROVISION

The Company files federal, state, and foreign income tax returns in jurisdictions with varying statutes of limitations. The Company uses the asset and liability method to determine its provision for income taxes. The Company’s provision for income taxes in interim periods is computed by applying its estimated annual effective rate against its pre-tax results for the period. Non-recurring items are recorded during the period in which they occur. The effective tax rate for the three months ended June 30, 2018 and 2017 was (16.64%) and (0.25%).  The effective tax rate for the six months ended June 30, 2018 and 2017 was (0.92%) and (0.23%).

The Tax Cuts and Jobs Act (TCJA) was enacted on December 22, 2017. The TCJA reduces the United States federal corporate income tax rate from 35% to 21%, along with other changes to tax law.As a result of the Company’s valuation allowance on its net U.S. deferred tax assets, the TCJA did not have an impact on the effective tax rate for the three and six months ended June 30, 2018 as compared to June 30, 2017.

The Company is applying the guidance in Staff Accounting Bulletin No. 118, “Income Tax Accounting Implications of the Tax Cut and Jobs Act” (SAB 118) when accounting for the enactment-date effects of the TCJA. As of June 30, 2018, the Company has not adjusted the provisional amounts recognized as of December 31, 2017. The provisional amounts recorded may be affected as the Company completes additional analysis of the tax law provisions. These changes are not anticipated to be material to the Company’s Condensed Consolidated Financial Statements as a result of a full valuation allowance against the Company’s net U.S. deferred tax assets.

Federal, state and local tax returns of the Company are routinely subject to review by various taxing authorities.The Company has not accrued any interest and penalties related to unrecognized income tax benefits as a result of offsetting of net operating losses. However, if the situation occurs, the Company will recognize interest and penalties within income tax expense in the Condensed Consolidated Statements of Operations and Comprehensive Loss and within the related tax liability in the Condensed Consolidated Balance Sheets. 

10. EQUITY COMPENSATION PLANS

The Company has two share-based incentive plans: the 2014 Stock Incentive Plan (2014 Plan) and the 2018 Employee Stock Purchase Plan (ESPP).

Stock Incentive Plan

Under the 2014 Plan, the Board of Directors may grant incentive stock options to employees and may grant nonstatutory stock options, restricted stock, restricted stock units, performance shares or stock appreciation rights to employees, directors and consultants. The administrator (the Compensation Committee of the Board of Directors) has the authority to determine the terms of any awards, including the number of shares subject to each award, the exercisability of the awards and the form of consideration. As of June 30, 2018,  10,249 shares of common stock had been reserved for issuance under the 2014 Plan, and 513 shares were available for future grants.  An additional 850 shares were approved by stockholders at the Company’s 2018 Annual Meeting of Stockholders in May 2018 which will be registered during the third quarter of 2018.

15

ATRICURE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

Effective March 1, 2018, the Compensation Committee of the Board approved the grant of performance share awards (2018 PSAs) to the Company’s named executive officers and certain other executive employees pursuant to the Company’s 2014 Stock Incentive Plan.The form of award agreement for the 2018 PSAs (2018 PSA Grant Form) provides, among other things, that (i) each 2018 PSA that vests represents the right to receive one share of the Company’s common stock; (ii) the 2018 PSAs vest based on the Company achieving specified performance measurements over a performance period of three years, beginning January 1, 2018; (iii) the performance measurements include revenue CAGR as defined in the 2018 PSA Grant Form; (iv) threshold, target and maximum payout opportunities established for the 2018 PSAs will be used to calculate the number of shares that will be issuable when the award vests, which may range from 0% to 200% of the target amount; (v) any 2018 PSAs that are earned are scheduled to vest and be settled in shares of the Company’s common stock at the end of the performance period; and  (vi) all or a portion of the 2018 PSAs may vest following a change of control or a termination of service by reason of death or disability (each as described in greater detail in the 2018 PSA Grant Form).

With respect to the 2018 PSAs, the number of shares that vest and are issued to the recipient is based upon the Company’s performance as measured against the specified targets at the end of the three-year performance period as determined by the Compensation Committee of the Board. The Company estimated the fair value of the 2018 PSAs based on its closing stock price on the grant date and will adjust compensation expense over the performance period based on its estimate of performance target achievement.

Stock options granted prior to 2018 under the 2014 Plan generally expire ten years from the date of grant and generally vest at a rate of 25% on the first anniversarydate of the grant and ratably each month thereafter over the following three years. Restricted stock awards granted prior to 2018 generally vest between one and four years from the date of grant.Beginning in 2018, stock options granted generally vest in one-third increments on the first, second and third anniversaries of the grant date, and restricted stock awards generally vest on the grant date anniversaries between one and three years from the date of grant. Restricted stock units vest in one-third increments on the first, second and third anniversaries of the grant date.

Employee Stock Purchase Plan

The ESPP is available to eligible employees as defined in the plan document. Under the ESPP, shares of the Company’s common stock may be purchased at a discount (15%) of the lesser of the closing price of the Company’s common stock on the first trading day or the last trading day of the offering period. The offering period (currently six months) and the offering price are subject to change. Participants may not purchase a value of more than $25 of the Company’s common stock in a calendar year and may not purchase more than 3 shares during an offering period. The ESPP was approved by stockholders at the Company’s 2018 Annual Meeting of Stockholders in May 2018, resulting in an increase of 500 shares available for sale under the ESPP which will be registered during the third quarter of 2018.  As ofJune 30, 2018, there were 136 shares available for future issuance under the ESPP.

Expense Information Under FASB ASC 718

The following table summarizes the allocation of share-based compensation expense:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Cost of revenue	$	239	$	138	$	476	$	269
Research and development expenses		361		502		952		1,003
Selling, general and administrative expenses		2,934		3,057		5,996		6,053
Total	$	3,534	$	3,697	$	7,424	$	7,325

11. SEGMENT AND GEOGRAPHIC INFORMATION

The Company develops, manufactures, and sells devices designed primarily for the surgical ablation of cardiac tissue and systems designed for the exclusion of the left atrial appendage. These devices are developed and marketed to a broad base of medical centers globally. Management considers all such sales to be part of a single operating segment. Revenue attributed to geographic areas, based on the location of customers, was as follows:

16

ATRICURE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
United States	$	40,834	$	35,534	$	79,270	$	68,802
Europe		6,694		5,688		12,565		10,877
Asia		4,049		3,785		6,488		6,436
Other international		225		224		473		389
Total international		10,968		9,697		19,526		17,702
Total revenue	$	51,802	$	45,231	$	98,796	$	86,504

United States revenue by product type was as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Open-heart ablation	$	18,073	$	16,790	$	35,652	$	32,495
Minimally invasive ablation		9,114		8,725		17,727		17,007
Appendage management		13,101		9,463		24,898		18,165
Total ablation and appendage management		40,288		34,978		78,277		67,667
Valve tools		546		556		993		1,135
Total United States	$	40,834	$	35,534	$	79,270	$	68,802

International revenue by product type was as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Open-heart ablation	$	5,836	$	5,674	$	10,745	$	10,264
Minimally invasive ablation		2,660		2,135		4,452		4,093
Appendage management		2,424		1,777		4,222		3,172
Total ablation and appendage management		10,920		9,586		19,419		17,529
Valve tools		48		111		107		173
Total international	$	10,968	$	9,697	$	19,526	$	17,702

The Company’s long-lived assets are located primarily in the United States, except for $1,006 as of June 30, 2018 and $957 as of December 31, 2017, which are located primarily in Europe.

17

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Dollar amounts referenced in this Item 2 are in thousands, except per share amounts.)

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and notes thereto contained in Item 1 of Part I of this Form 10-Q and our audited financial statements and notes thereto as of and for the year ended December 31, 2017 included in our Form 10-K filed with the Securities and Exchange Commission (SEC) to provide an understanding of our results of operations, financial condition and cash flows.

Forward-Looking Statements

This Form 10-Q, including the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors,” contains forward-looking statements regarding our future performance. All forward-looking information is inherently uncertain and actual results may differ materially from assumptions, estimates or expectations reflected or contained in the forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this quarterly report on Form 10-Q, and in our annual report on Form 10-K for the year ended December 31, 2017. Forward-looking statements address our expected future business, financial performance, financial condition and results of operations, and often contain words such as “intends,” “estimates,” “anticipates,” “hopes,” “projects,” “plans,” “expects,” “seek,”“believes,” "see," “should,” “will,” “would,” “target,” and similar expressions and the negative versions thereof. Such statements are based only upon current expectations of AtriCure. Any forward-looking statement speaks only as of the date made. Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to differ materially from those expressed or implied. Forward-looking statements include statements that address activities, events or developments that AtriCure expects, believes or anticipates will or may occur in the future. Forward-looking statements are based on AtriCure’s experience and perception of current conditions, trends, expected future developments and other factors it believes are appropriate under the circumstances and are subject to numerous risks and uncertainties, many of which are beyond AtriCure’s control. With respect to the forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. These forward-looking statements speak only as of the date of this Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statements to reflect new information or future events or otherwise unless required by law.

Overview

We are a leading innovator in treatments for atrial fibrillation (Afib) and left atrial appendage (LAA) management. We have several product lines for the ablation of cardiac tissue, including our Isolator®Synergy™ Ablation System, the first and only surgical device approved by the United States Food and Drug Administration (FDA) for the treatment of persistent and longstanding persistent forms of Afib in patients undergoing certain open concomitant procedures. We also offer a variety of minimally invasive ablation devices and access tools to facilitate the growing trend in less invasive cardiac and thoracic surgery. Our cryoICE® cryosurgery product line offers a variety of cryoablation devices for use in various types of cardiothoracic surgery.  Our AtriClip® Left Atrial Appendage Exclusion System is a device specifically designed to occlude the heart’s left atrial appendage.

Physicians have adopted our radiofrequency (RF) ablation and cryoablation systems to treat Afib, and we believe that we are currently the market leader in the surgical treatment of Afib. Our products are used by physicians during both open-heart and minimally invasive surgical procedures, either on a concomitant or standalone basis. During a concomitant procedure, the physician ablates cardiac tissue and/or occludes the LAA, secondary, or concomitant, to a primary structural heart procedure such as a valve repair or replacement or coronary artery bypass graft (CABG). Our Isolator Synergy System is approvedby FDA for the treatment of persistent and long-standing persistent Afib concomitant to other open-heart surgical procedures. All of our other ablation devices are cleared for sale in the United States under FDA 510(k) clearances, including our other RF and cryoablation products, which are indicated for the ablation of cardiac tissue and/or treatment of cardiac arrhythmias. In addition, our cryoICE probe is cleared for managing pain by temporarily ablating peripheral nerves. Our AtriClip products are 510(k)-cleared with an indication for the occlusion of the heart’s LAA, performed under direct visualization and in conjunction with other cardiac surgical procedures. Direct visualization, in this context, requires that the surgeon is able to see the heart directly, with or without assistance from a camera, endoscope or other appropriate viewing technologies.We also have a line of reusable surgical instruments typically used for cardiac valve replacement or repair. Our Isolator Synergy clamps, Isolator Synergy pens, Coolrail linear pen, cryosurgery devices, AtriClip LAA Exclusion System, COBRA Fusion Ablation System, Numeris System and the EPi-Sense Guided Coagulation System with VisiTrax technology bear the CE mark and may be commercially distributed throughout the member states of the European Union and other countries that comply with or mirror the medical device directives.We anticipate that substantially all of our revenue for the foreseeable future will relate to products we currently sell, or are in the process of developing.

We sell our products to medical centers through our direct sales force in the United States and in certain international markets, such as Germany, France, the United Kingdom and the Benelux region.We also sell our products to distributors who in turn sell our

18

products to medical centers in other international markets. Our business is transacted in U.S. Dollars with the exception of transactions with our European subsidiaries, which are transacted in Euros or British Pounds.

Recent Developments

FDA conducted a periodic quality system inspection at our Cincinnati, Ohio facility in February and March 2018. The audit resulted in the issuance of a Form FDA 483, Inspectional Observations, which outlined certain non-conformances within our Process Validation, Corrective and Preventative Action (CAPA) and Device History Record processes as observed by the FDA inspector. We responded to the observations and have taken corrective actions where appropriate without a material impact on our financial results.

Clinical trials are required to support a pre-market approval (PMA) and are sometimes required for 510(k) clearance. In the United States, clinical trials for a significant risk device require the prior submission of an application for an Investigational Device Exemption (IDE) to FDA for approval. An IDE application must be submitted before initiating a new clinical trial. Some trials require a feasibility study followed by a pivotal trial. An IDE supplement is requested as a means of obtaining approval to initiate a pivotal trial following the conclusion of a feasibility trial. We are conducting several clinical trials to validate the long-term results of procedures using our products and to support applications to regulatory agencies for expanded indications. In addition, we also conduct various studies to gather clinical data regarding our products. Key trials and studies are:

CONVERGE.  We are conducting the CONVERGE IDE clinical trial to evaluate the safety and efficacy of the EPi-Sense® Guided Coagulation System with VisiTrax®technology to treat symptomatic persistent Afib patients who are refractory or intolerant to at least one Class I and/or III anti-arrhythmic drug. The trial provides for enrollment of up to 153 patients at 27 domestic medical centers and three international medical centers.  Enrollment began in 2014 and is expected to end in 2018.

ATLAS.The ATLAS studyis a non-IDE randomized pilot study evaluating outcomes of patients with risk factors for developing postoperative Afib as well as risk of bleeding on oral anticoagulation. There are two types of patients subject to this study:  those with a postoperative Afib diagnosis and receiving prophylactic exclusion of the left atrial appendage with the AtriClip device concomitant to cardiac surgery and those with a postoperative Afib diagnosis who are medically managed. Enrollment began in February 2016 and ended in the second quarter of 2018.

FROST.We are conducting a cryoanalgesia study, which is a non-IDE randomized pilot study evaluating whether intraoperative intercostal cryoanalgesia in conjunction with standard of care provides improved analgesic efficacy in patients undergoing unilateral thoracotomy cardiac procedures as compared to the current standard of care. The study involves treatment arm patients who receive intercostal cryoanalgesia in conjunction with standard post-operative pain management and control arm patients who receive standard post-operative pain management only. The study provides for enrollment of up to 100 patients at five medical centers. Enrollment began in June 2016 and remains ongoing.

DEEP AF Pivotal Study.The DEEP AF pivotal trial evaluates the safety and efficacy of the Isolator Synergy System when used in a staged approach, where a minimally invasive surgical ablation procedure is first performed and the patient undergoes the intracardiac catheter procedure approximately 90-120 days later. The trial provides for enrollment of up to 220 patients at 23 U.S. medical centers and two international medical centers. The trial was paused during 2016-2017 due to our work to mitigate the risk related to esophageal injury during the procedure. We are committed to patient safety, and we are working collaboratively with FDA to obtain final clearance to move toward full enrollment of the trial.

CEASE AF.  We are also pursuing a non-IDE trial in Europe to compare staged hybrid ablation treatment (minimally invasive surgical ablation procedure is first performed and the patient undergoes the intracardiac catheter procedure approximately 91-180 days later) versus catheter ablation alone.  The study protocol provides for enrollment of approximately 210 patients at twelve sites. Enrollment began in November 2015 and remains ongoing.

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Results of Operations

Three months ended June 30, 2018 compared to three months ended June 30, 2017

The following table sets forth, for the periods indicated, our results of operations expressed as dollar amounts and as percentages of revenue:

	Three Months Ended
	June 30,
	2018				2017
	Amount		% of Revenues		Amount		% of Revenues
Revenue	$	51,802	100.0	%	$	45,231	100.0	%
Cost of revenue		13,723	26.5	%		12,677	28.0	%
Gross profit		38,079	73.5	%		32,554	72.0	%
Operating expenses:
Research and development expenses		8,655	16.7	%		8,907	19.7	%
Selling, general and administrative expenses		28,466	55.0	%		30,002	66.3	%
Total operating expenses		37,121	71.7	%		38,909	86.0	%
Income (loss) from operations		958	1.8	%		(6,355)	(14.1)	%
Other income (expense):
Interest expense		(1,221)	(2.4)	%		(564)	(1.2)	%
Interest income		123	0.2	%		48	0.1	%
Other		(150)	(0.3)	%		5	0.0	%
Total other expense		(1,248)	(2.4)	%		(511)	(1.1)	%
Loss before income tax expense		(290)	(0.6)	%		(6,866)	(15.2)	%
Income tax expense		48	0.1	%		17	0.0	%
Net loss	$	(338)	(0.7)	%	$	(6,883)	(15.2)	%

Revenue. Revenue increased 14.5%(13.5% on a constant currency basis). Revenue from customers in the United States increased $5,300, or 14.9%, and revenue from international customers increased $1,271,  or 13.1%(8.3% on a constant currency basis). Sales in the United States grew across key product categories. Ablation-related open-heart salesincreased$1,283, or 7.6%, primarily due to volume growth in our cryo products line.  Ablation-related minimally invasive (MIS) sales increased $389, or 4.5%, reflecting volume growth in our EPi-Sense product line which was partially offset by a decline in legacy MIS products. Appendage managementsales increased$3,638, or 38.4%, due to increased volume across product lines. Appendage management sales reflect the positive impact of the AtriClip PRO·V LAA Exclusion System device, which launched in the third quarter of 2017, and the AtriClip FLEX•V LAA Exclusion System, which launched in the first quarter of 2018. International revenue grew primarily in Germany, China, Japan, the United Kingdom and Italy, as a result of increased volumes in MIS, appendage management and cryo products.

Revenue reported on a constant currency basis is a non-GAAP measure and is calculated by applying previous period foreign currency (Euro) exchange rates to each of the comparable periods. Revenue is analyzed on a constant currency basis to better measure the comparability of results between periods. Because changes in foreign currency exchange rates have a non-operating impact on revenue, we believe that evaluating revenue growth on a constant currency basis provides additional and meaningful assessment of revenue to both management and our investors.

Cost of revenue and gross margin. Cost of revenue increased $1,046, and gross margin increased 1.5%, from 72.0% in 2017 to 73.5% in 2018. The increase in gross margin was driven by product mix, as products sold in 2017 included a high volume of lower-margin capital equipment. Additionally, appendage management products launched in late 2017 and early 2018 are realizing a higher gross margin than legacy appendage management products.

Research and development expenses. Research and development expenses decreased $252,  or 2.8%, primarily due to $121lower expense related to reduced compliance-related consulting, a decrease of $141 in expense related to share-based compensation, $84 lower expense related to regulatory filings and $89 lower expense related to clinical trials and grants. These decreases were partially offset by $267 higher expense from increased headcount for product development, regulatory and clinical activities.

Selling, general and administrative expenses. Selling, general and administrative expenses decreased $1,536, or 5.1% primarily due to $5,916 reduction in expense related to the contingent consideration adjustment (see Note 3 for further discussion), $123 lower expense related to share-based compensation and $234 lower expense related to marketing and tradeshows. These decreases were partially offset by $3,475higher personnel and related expenses, such as travel costs, resulting from increased headcount; $334increase in legal expenses;$328 increase in professional education training expenses and increases in various other operating costs, including software maintenance and facilities costs.

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Net interest expense. Net interest expense includes interest costs associated with our term loan and capital lease obligations, as well as the amortization of financing costs and interest income from investments, including gains and losses on investments sold during the period.Net interest expense increased $582, from $516 to $1,098, driven by our debt refinancing effective February 2018, which increased our borrowing rate on the term loan from the Prime Rate to the greater of the Prime Rate plus 3.75% or 8.25%.

Other income and expense. Other income and expense consists primarily of foreign currency transaction gains and losses.

Six months ended June 30, 2018 compared to six months ended June 30, 2017

The following table sets forth, for the periods indicated, our results of operations expressed as dollar amounts and as percentages of revenue:

	Six Months Ended
	June 30,
	2018				2017
	Amount		% of Revenues		Amount		% of Revenues
Revenue	$	98,796	100.0	%	$	86,504	100.0	%
Cost of revenue		26,214	26.5	%		23,942	27.7	%
Gross profit		72,582	73.5	%		62,562	72.3	%
Operating expenses:
Research and development expenses		17,712	17.9	%		18,457	21.3	%
Selling, general and administrative expenses		63,342	64.1	%		60,102	69.5	%
Total operating expenses		81,054	82.0	%		78,559	90.8	%
Loss from operations		(8,472)	(8.6)	%		(15,997)	(18.5)	%
Other income (expense):
Interest expense		(2,041)	(2.1)	%		(1,118)	(1.3)	%
Interest income		199	0.2	%		102	0.1	%
Other		(62)	(0.1)	%		(13)	(0.0)	%
Total other expense		(1,904)	(1.9)	%		(1,029)	(1.2)	%
Loss before income tax expense		(10,376)	(10.5)	%		(17,026)	(19.7)	%
Income tax expense		96	0.1	%		40	0.0	%
Net loss	$	(10,472)	(10.6)	%	$	(17,066)	(19.7)	%

Revenue. Revenue increased 14.2%(12.8% on a constant currency basis). Revenue from customers in the United States increased $10,468, or 15.2%, and revenue from international customers increased $1,824,  or 10.3%(3.4% on a constant currency basis). Sales in the United States grew across many key product categories. Ablation-related open-heart salesincreased$3,157, or 9.7%, primarily due to volume growth in our cryo products line.  Ablation-related minimally invasive (MIS) sales increased $720, or 4.2%, reflecting volume growth in our Epi-Sense product line which was offset partially by a decline in legacy MIS products. Appendage managementsales increased$6,733, or 37.1%, due to increased volume across product lines. Appendage management sales reflect the positive impact of the AtriClip PRO·V LAA Exclusion System device, which launched in the third quarter of 2017, and the AtriClip FLEX•V LAA Exclusion System, which launched in the first quarter of 2018. International revenue grew primarily in Japan, Germany, the United Kingdom and Italy, offset partially by decreased revenue in China and the Benelux region.The overall increase in international revenue is a result ofincreased volumes in appendage management, cryo and MIS products.  

Revenue reported on a constant currency basis is a non-GAAP measure and is calculated by applying previous period foreign currency (Euro) exchange rates to each of the comparable periods. Revenue is analyzed on a constant currency basis to better measure the comparability of results between periods. Because changes in foreign currency exchange rates have a non-operating impact on revenue, we believe that evaluating revenue growth on a constant currency basis provides additional and meaningful assessment of revenue to both management and our investors.

Cost of revenue and gross margin. Cost of revenue increased $2,272, and gross margin increased 1.2%, from 72.3% in 2017 to 73.5% in 2018. The overall increase in gross margin was driven by both product and geographic mix.Sales in 2018 reflect a higher concentration of higher-margin sales in the United States and a lower percentage of lower-margin sales to Asia and other distributor markets, and sales in 2017 included a higher volume of lower-margin capital equipment. Additionally, appendage management products launched in late 2017 and early 2018 are realizing a higher gross margin than legacy appendage management products.

Research and development expenses. Research and development expenses decreased $745,  or 4.0%, primarily due to $205lower expense related to the timing of product development project activities, reduced compliance-related consulting of$600 and

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lower expense of $169 related to clinical trials and grants. These decreases were partially offset by $610 higher expense from increased headcount for product development, regulatory and clinical activities.

Selling, general and administrative expenses. Selling, general and administrative expenses increased $3,240, or 5.4%, primarily due to $6,117higher personnel and related expenses, such as travel costs, resulting from increased headcount; $1,413increase in legal expenses;  $473increase in sales training meeting and product sample expense;$337 increase in professional education expenses; and increases in various other operating costs, including software maintenance and facilities costs. These increases were partially offset by $5,916 reduction in expense related to the contingent consideration adjustment (see Note 3 for further discussion) and $293 lower expense related to marketing and tradeshows.

Net interest expense. Net interest expense increased $826, from$1,016 to $1,842.The increase in interest expense was driven by our debt refinancing effective February 2018, which increased our borrowing rate on the term loan from the Prime Rate to the greater of the Prime Rate plus 3.75% or 8.25%.

Other income and expense. Other income and expense consists primarily of foreign currency transaction gains and losses.

Liquidity and Capital Resources

As of June 30, 2018,we had cash, cash equivalents and investments of $37,068 and outstanding debt of $40,000. We had unused borrowing capacity of $18,750 under our revolving credit facility. Most of our operating cash and all cash equivalents and investments are held by United States financial institutions. We had net working capital of $59,345 and an accumulated deficit of $236,338 as of June 30, 2018.

Cash flows used in operating activities. Net cash used in operating activities was $10,369. The primary net uses of cash for operating activities were as follows:

· Net loss of $10,472, offset by $6,283 of non-cash expenses, including $7,424of share-based compensation and$4,403of depreciation and amortization offset by a change in fair value of contingent consideration of $5,916; and

· Net decrease in cash used related to changes in operating assets and liabilities of $6,180, due primarily to the following:

· Decrease in accounts payable and accrued liabilities of $4,129 due to payment of variable compensation and decreasing accounts payable balance as a result of both timing and taking discount terms on payments to certain key vendors;

· Decrease in inventories of $703 due to a strong sales volume in the second quarter;

· Increase inother current assets of $877,  due primarily to the timing of insurance premium and annual subscription payments; and

· Increase in accounts receivable of $1,946 due to strong sales volume in the second quarter and the timing of collections.

Cash flows used in investing activities. Net cash used in investing activities was $13,977 during the six months ended June 30, 2018.  Cash provided by investing activities included$13,000of maturities of available-for-sale securities to fund operations. This source of cash was more than offset by $3,473of purchases of property and equipment, which included placement of our RF and cryo generators with customers, and $23,510 of purchases of available-for-sale securities.

Cash flows provided by financing activities. Net cash provided by financing activities during the six months ended June 30, 2018 was $16,477, which includedproceeds from debt borrowings of $17,381 related to the amendment and restatement of our credit facility with SVB and proceeds from the exercise of stock options and the employee stock purchase plan of $5,425. These cash inflows were partially offset by shares repurchased for payment of taxes on stock awards of $3,724, debt and capital lease payments of $1,469 and payment of debt fees of $1,136.

Credit facility.Our Loan and Security Agreement with Silicon Valley Bank (SVB), as amended and restatedeffective February 23, 2018 (Loan Agreement), provides for a $40,000 term loan and a $20,000 revolving line of credit, with an option to increase the revolving line of credit by up to an additional $20,000. Such term loan and revolving line of credit each have a five-year term, maturing or expiring, as applicable, in February 2023. Principal payments of the term loan are to be made ratably commencing eighteen months after the inception of the loan (September 2019) through the loan’s maturity date. If we meet certain conditions, as specified by the Loan Agreement, the commencement of term loan principal payments may be deferred by an additional six months. The term loan accrues interest at the greater of the Prime Rate plus 3.75% or 8.25% and is subject to an additional 3.5% fee on the original $40,000 term loan principal amount at maturity or upon acceleration or prepayment of the term loan. The revolving line of credit is subject to an annual facility fee of 0.33% of the revolving line of credit, and any borrowings bear interest at the greater of the

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Prime Rate or 4.50%. Borrowing availability under the revolving credit facility is based on the lesser of the line of credit or a borrowing base calculation as defined by the Loan Agreement. As of June 30, 2018 we had no borrowings under the revolving credit facility, and we had borrowing availability of $18,750.The Loan Agreement also contains prepayment and early termination fees and establishes a financial covenant related to sales growth, along with other customary terms and conditions.

In connection with the terms of our corporate headquarters lease agreement, a letter of credit in the amount of $1,250 was issued to the lessor in October 2015. The letter of credit is renewed annually and remained outstanding as of June 30, 2018.

Uses of liquidity and capital resources. Our future capital requirements depend on a number of factors, including market acceptance of our current and future products; resources to develop and support our products; future resources to expand and support our sales and marketing efforts; costs relating to changes in regulatory policies or laws; costs associated with clinical trials and securing regulatory approval for new products; costs associated with acquiring and integrating businesses; costs associated with prosecuting, defending and enforcing our intellectual property rights, as well as other legal matters; and possible acquisitions and joint ventures. Global economic turmoil may adversely impact our revenue, access to the capital markets or future demand for our products.

We have on file with the SEC a shelf registration statement which allows us to sell any combination of senior or subordinated debt securities, common stock, preferred stock, warrants, depository shares and units in one or more offerings should we choose to do so in the future. We expect to maintain the effectiveness of this shelf registration statement for the foreseeable future.

We believe that our current cash, cash equivalents and investments, along with the cash we expect to generate or use for operations or access via our revolving line of credit, will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next twelve months. The nContact transaction provides for contingent consideration to be paid upon attaining specified regulatory approvals and clinical and revenue milestones over the next three years. Subject to the terms and conditions of the nContact merger agreement, such contingent consideration will be paid in AtriCure common stock and cash, with a requirement to make payments in AtriCure common stock first, up to a specified maximum number of shares. Over the next twelve months, we do not expect our cash requirements to include significant payments of contingent consideration based on terms of the merger agreement and related milestones. However, we expect to issue shares of approximately $7,500 as payment of contingent consideration related to the completion of the trial enrollment milestone. See the heading “Legal” in Note 7 for a description of an earnout objection statement received from the nContact shareholder representative.

If our sources of cash are insufficient to satisfy our liquidity requirements, we may seek to sell additional equity or debt securities or obtain a revised or additional credit facility. The sale of additional equity or convertible debt securities could result in dilution to our stockholders. If additional funds are raised through the issuance of debt securities, these securities could have rights senior to those associated with our common stock and could contain covenants that would restrict our operations. Finally, our term loan agreement and revolving line of credit require compliance with certain financial and other covenants. If we are unable to maintain these financing arrangements, we may be required to reduce the scope of our planned research and development, clinical activities and selling, training, education and marketing efforts.

Seasonality

During the third quarter, we typically experience a moderate decline in revenue that we attribute primarily to the elective nature of certain procedures in which our products are used. We believe this is due to fewer people choosing to undergo elective procedures during the summer months.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenue and expenses and disclosures of contingent assets and liabilities at the date of the financial statements. On a periodic basis, we evaluate our estimates, including those related to sales returns and allowances, accounts receivable, inventories, intangible assets including goodwill, contingent liabilities and share-based compensation. We use authoritative pronouncements, historical experience and other assumptions as the basis for making estimates. Actual results could differ from those estimates under different assumptions or conditions. Our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 includes additional information about the Company, our operations, our financial position and our critical accounting policies and estimates and should be read in conjunction with this Quarterly Report on Form 10-Q.

Recent Accounting Pronouncements

See Note 2 in the Notes to the Condensed Consolidated Financial Statements for a discussion of recent accounting pronouncements.

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk

As of June 30, 2018 there were no material changes to the information provided under Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in the Company’s Form 10-K for the year ended December 31, 2017.

Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As defined in Rules 13(a)-15(e) and 15(d) -15(e) of the Securities Exchange Act of 1934 (Exchange Act), the Company’s management, with the participation of the President and Chief Executive Officer (the Principal Executive Officer) and Senior Vice President and Chief Financial Officer (the Principal Accounting and Financial Officer), has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, we concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in providing reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s forms and rules, and the material information relating to the Company is accumulated and communicated to management, including the President and Chief Executive Officer and the Senior Vice President and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Control systems, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that control objectives are met. Because of inherent limitations in all control systems, no evaluation of controls can provide assurance that all control issues and instances of fraud, if any, within a company will be detected. Additionally, controls can be circumvented by individuals, by collusion of two or more people or by management override. Over time, controls can become inadequate because of changes in conditions or the degree of compliance may deteriorate. Further, the design of any system of controls is based in part upon assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all future conditions. Because of the inherent limitations in any cost-effective control system, misstatements due to errors or fraud may occur and not be detected.

Changes in Internal Control Over Financial Reporting

In the ordinary course of business, we routinely enhance our information systems by either upgrading current systems or implementing new ones. There were no changes in our internal control over financial reporting that occurred during the three months ended June 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

Information with respect to legal proceedings can be found under the heading “Legal” in Note 7 – Commitments and Contingencies to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, and is incorporated herein by reference.

Item 1A.  Risk Factors

In addition to the other information set forth in this report, careful consideration should be given to the factors discussed in Item 1A, “Risk Factors” in our Form 10-K for the year ended December 31, 2017, all of which could materially affect our business, financial condition or future results. The risks described herein and therein are not the only risks facing us. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, also may adversely affect our business, financial condition and/or operating results. There have been no material changes with respect to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2017.

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Item 6.  Exhibits

Exhibit     No.	Description
31.1	Rule 13a-14(a) Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Rule 13a-14(a) Certification of Principal Accounting and Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification pursuant to 18 U.S.C. Section 1350 by the Principal Executive Officer, as adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification pursuant to 18 U.S.C. Section 1350 by the Principal Accounting and Financial Officer, as adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

25

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	AtriCure, Inc.
	(REGISTRANT)
Date: August 2, 2018	/s/ Michael H. Carrel
	Michael H. Carrel
	President and Chief Executive Officer (Principal Executive Officer)
Date: August 2, 2018	/s/ M. Andrew Wade
	M. Andrew Wade
	Senior Vice President and Chief Financial Officer (Principal Accounting and Financial Officer)

26

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO

SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael H. Carrel, certify that:

1. I have reviewed this quarterly report on Form 10-Q of AtriCure, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 2, 2018

By:	/s/MichaelH.Carrel
	MichaelH.Carrel
	PresidentandChiefExecutiveOfficer
	(PrincipalExecutiveOfficer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL ACCOUNTING AND FINANCIAL OFFICER

PURSUANT TO

SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, M. Andrew Wade, certify that:

1. I have reviewed this quarterly report on Form 10-Q of AtriCure, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 2, 2018

By:	/s/ M. Andrew Wade
	M.AndrewWade
	SeniorVicePresidentandChiefFinancialOfficer
	(PrincipalAccountingandFinancialOfficer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of AtriCure, Inc. (Company) on Form 10-Q for the quarter ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (Report), I, Michael H. Carrel, President and Chief Executive Officer and Principal Executive Officer of the Company, certify, pursuant to Rule 13a–14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 2, 2018

By:	/s/MichaelH.Carrel
	MichaelH.Carrel
	PresidentandChiefExecutiveOfficer
	(PrincipalExecutiveOfficer)

A signed original of this written statement or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to AtriCure, Inc. and will be retained by AtriCure, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the report or as a separate disclosure document.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of AtriCure, Inc. (Company) on Form 10-Q for the quarter ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (Report), I, M. Andrew Wade, Vice President and Chief Financial Officer and Principal Accounting and Financial Officer of the Company, certify, pursuant to Rule 13a–14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 2, 2018

By:	/s/ M. Andrew Wade
	M.AndrewWade
	SeniorVicePresidentandChiefFinancialOfficer
	(PrincipalAccountingandFinancialOfficer)

A signed original of this written statement or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to AtriCure, Inc. and will be retained by AtriCure, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the report or as a separate disclosure document.

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Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Jul. 30, 2018
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2
Trading Symbol	ATRC
Entity Registrant Name	AtriCure, Inc.
Entity Central Index Key	0001323885
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		35,361,743

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 13,866	$ 21,809
Short-term investments	23,202	12,642
Accounts receivable, less allowance for doubtful accounts of $32 and $32	24,895	23,083
Inventories	21,682	22,451
Other current assets	3,120	2,273
Total current assets	86,765	82,258
Property and equipment, net	28,126	28,749
Intangible assets, net	50,080	50,764
Goodwill	105,257	105,257
Other noncurrent assets	619	676
Total Assets	270,847	267,704
Current liabilities:
Accounts payable	9,670	12,431
Accrued liabilities	17,161	18,911
Other current liabilities and current maturities of capital leases	589	561
Total current liabilities	27,420	31,903
Capital leases	12,492	12,761
Long-term debt	39,399	24,100
Other noncurrent liabilities	31,849	37,774
Total Liabilities	111,160	106,538
Commitments and contingencies (Note 7)
Stockholders' Equity:
Common stock, $0.001 par value, 90,000 shares authorized and 35,313 and 34,586 issued and outstanding	35	35
Additional paid-in capital	396,088	386,963
Accumulated other comprehensive (loss) income	(98)	34
Accumulated deficit	(236,338)	(225,866)
Total Stockholders' Equity	159,687	161,166
Total Liabilities and Stockholders' Equity	$ 270,847	$ 267,704

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Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Condensed Consolidated Balance Sheets [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 32	$ 32
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	90,000,000	90,000,000
Common stock, shares issued	35,313,000	34,586,000
Common stock, shares outstanding	35,313,000	34,586,000

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Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Condensed Consolidated Statements of Operations and Comprehensive Loss [Abstract]
Revenue	$ 51,802	$ 45,231	$ 98,796	$ 86,504
Cost of revenue	13,723	12,677	26,214	23,942
Gross profit	38,079	32,554	72,582	62,562
Operating expenses:
Research and development expenses	8,655	8,907	17,712	18,457
Selling, general and administrative expenses	28,466	30,002	63,342	60,102
Total operating expenses	37,121	38,909	81,054	78,559
Income (Loss) from operations	958	(6,355)	(8,472)	(15,997)
Other income (expense):
Interest expense	(1,221)	(564)	(2,041)	(1,118)
Interest income	123	48	199	102
Other	(150)	5	(62)	(13)
Loss before income tax expense	(290)	(6,866)	(10,376)	(17,026)
Income tax expense	48	17	96	40
Net loss	$ (338)	$ (6,883)	$ (10,472)	$ (17,066)
Basic and diluted net loss per share	$ (0.01)	$ (0.21)	$ (0.32)	$ (0.53)
Weighted average shares outstanding — basic and diluted	33,252	32,288	33,117	32,154
Comprehensive loss:
Unrealized gain (loss) gain on investments	$ 1	$ 4	$ (7)	$ 6
Foreign currency translation adjustment	(211)	342	(125)	415
Other comprehensive (loss) income	(210)	346	(132)	421
Net loss	(338)	(6,883)	(10,472)	(17,066)
Comprehensive loss, net of tax	$ (548)	$ (6,537)	$ (10,604)	$ (16,645)

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Cash flows from operating activities:
Net loss	$ (10,472)	$ (17,066)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation expense	7,424	7,325
Depreciation	3,719	3,906
Amortization of intangible assets	684	684
Amortization of deferred financing costs	217	132
Loss on disposal of property and equipment	97	88
Realized (gain) loss from foreign exchange on intercompany transactions	56	(10)
(Accretion) amortization of investments	(56)	59
Change in allowance for doubtful accounts	58	(134)
Change in value of contingent consideration	(5,916)
Changes in operating assets and liabilities:
Accounts receivable	(1,946)	(1,673)
Inventories	703	(2,094)
Other current assets	(877)	(26)
Accounts payable	(2,432)	565
Accrued liabilities	(1,697)	(1,891)
Other noncurrent assets and liabilities	69	(468)
Net cash used in operating activities	(10,369)	(10,603)
Cash flows from investing activities:
Purchases of available-for-sale securities	(23,510)	(7,567)
Sales and maturities of available-for-sale securities	13,000	16,350
Purchases of property and equipment	(3,473)	(3,488)
Proceeds from sale of property and equipment	6
Net cash (used in) provided by investing activities	(13,977)	5,295
Cash flows from financing activities:
Proceeds from debt borrowings	17,381
Payments on debt and capital leases	(1,469)	(241)
Payment of debt fees	(1,136)	(50)
Shares repurchased for payment of taxes on stock awards	(3,724)	(1,901)
Proceeds from exercise of stock options and employee stock purchase plan	5,425	4,279
Net cash provided by financing activities	16,477	2,087
Effect of exchange rate changes on cash and cash equivalents	(74)	26
Net decrease in cash and cash equivalents	(7,943)	(3,195)
Cash and cash equivalents-beginning of period	21,809	24,208
Cash and cash equivalents-end of period	13,866	21,013
Supplemental cash flow information:
Cash paid for interest	1,210	985
Cash paid for income taxes	45
Non-cash investing and financing activities:
Accrued purchases of property and equipment	366	703
Assets acquired through capital lease	24
Capital lease asset early termination	$ (6)

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Description of Business and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2018

Description of Business and Summary of Significant Accounting Policies [Abstract]

Description of Business and Summary of Significant Accounting Policies

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of the Business—The “Company” consists of AtriCure, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. 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 audited financial statements of the Company included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC.

Cash Equivalents—The Company considers highly liquid investments with maturities of three months or less at the date of purchase as cash equivalents in the accompanying Condensed Consolidated Financial Statements.

Investments—The Company invests primarily in U.S. Government securities, corporate bonds, commercial paper and asset-backed securities and classifies all investments as available-for-sale. Investments with maturities of 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. Gains and losses are recognized using the specific identification method when securities are sold and are included in interest income or expense in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

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 products shipped in error and invoice adjustments. The Company adjusts the provision through consideration of a combination of specific identification and historical experience. Increases to the provision result in a reduction of revenue. The provision is included in accrued liabilities in the Condensed Consolidated Balance Sheets.

Allowance for Doubtful Accounts Receivable—The Company evaluates the collectability of accounts receivable to determine the appropriate allowance for doubtful accounts considering the aging of accounts, historical credit losses, customer-specific information and other relevant factors. Increases to the allowance result in an increase in selling, general and administrative expenses. The Company adjusts the allowance based on current circumstances and charges off uncollectible receivables against the allowance when all attempts to collect the receivable have failed. The Company’s history of write-offs against the allowance 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). The Company’s industry is characterized by rapid product development and frequent new product introductions. Uncertain timing of regulatory approval, variability in product launch strategies and variation in product use cause the Company to maintain reserves for excess, obsolete and expired products. Increases to inventory reserves result in an increase in cost of revenue. Inventories are written off against reserves when they are physically disposed.

Inventories consist of the following:

	June 30,		December 31,
	2018		2017
Raw materials	$	8,729	$	7,755
Work in process		1,549		1,299
Finished goods		11,404		13,397
Inventories	$	21,682	$	22,451

Property and Equipment—Property and equipment is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of assets. The estimated useful life by major asset category is the following:

	Estimated Useful Life
Generators and related equipment	1 - 3 years
Building under capital lease	15 years
Computers, software and office equipment	3 years
Machinery and equipment	3 - 7 years
Furniture and fixtures	3 - 7 years
Leasehold improvements	5 - 15 years
Equipment under capital leases	3 - 5 years

The Company reassesses the useful lives of property and equipment at least annually and retires assets if they are no longer in service. Maintenance and repair costs are expensed as incurred.

The Company’s radiofrequency (RF) and cryo generators are generally placed with customers that use the Company’s disposable products. The estimated useful lives of generators are based on anticipated usage by customers and may change in future periods with changes in usage or introduction of new technologies. Depreciation related to generators and related equipment, which is recorded in cost of revenue in the Condensed Consolidated Statements of Operations and Comprehensive Loss, was $814 and $909for the three months ended June 30, 2018 and 2017 and $1,641 and $1,825 for the six months ended June 30, 2018 and 2017. As of June 30, 2018 and December 31, 2017, the net carrying value of generators and related equipment included in net property and equipment in the Condensed Consolidated Balance Sheets was $4,717 and $4,656.

The Company reviews property and equipment for impairment at least annually using its best estimates based on reasonable and supportable assumptions and expected future cash flows. Property and equipment impairments recorded by the Company have not been significant.

Intangible Assets—Intangible assets with determinable useful lives are amortized on a straight-line basis over the estimated periods benefited.

Intangible assets include In-Process Research and Development (IPR&D), which represents the value of technology acquired in business combinations that has not yet reached technological feasibility. The primary basis for determining technological feasibility is obtaining specific regulatory approval. IPR&D is accounted for as an indefinite-lived intangible asset until completion or abandonment of the IPR&D project. Upon completion of the development project, IPR&D will be amortized over its estimated useful life. If the IPR&D project is abandoned, the IPR&D would be written off. IPR&D represents an estimate of the fair value of the pre-market approval (PMA) that may result from the CONVERGE IDE clinical trial.

The Company reviews intangible assets for impairment at least annually using its best estimates based on reasonable and supportable assumptions and projections. The Company has historically tested IPR&D for impairment annually on November 30.

Goodwill—Goodwill represents the excess of purchase price over the fair value of the net assets acquired in business combinations. The Company has historically tested goodwill for impairment annually on November 30, or more often if impairment indicators are present. The Company’s goodwill is accounted for in a single reporting unit representing the Company’s consolidated operations.

Other Noncurrent Liabilities—Other noncurrent liabilities consist of acquisition-related contingent consideration and other contractual obligations. Although the Company expects to settle a portion of the contingent consideration liability in 2018, the balance is included in noncurrent liabilities as such settlement is both required and expected to be made in shares of the Company’s common stock pursuant to the nContact Surgical, Inc. (nContact) merger agreement.

Other Income (Expense)—Other income (expense) consists primarily of foreign currency transaction gains and losses generated by settlements of intercompany balances denominated in Euros and customer invoicing in British Pounds.

Taxes—Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities from a change in tax rates is recognized in the period that includes the enactment date.

The Company’s estimate of the valuation allowance for deferred income tax assets requires significant estimates and judgments about future operating results. Deferred income tax assets are reduced by valuation allowances if, based on the consideration of all available evidence, it is more-likely-than-not that the deferred income tax asset will not be realized. Significant weight is given to evidence that can be objectively verified. The Company evaluates deferred income tax assets on an annual basis to determine if valuation allowances are required. Deferred income tax assets are realized by having sufficient future taxable income to allow the related tax benefits to reduce taxes otherwise payable. The sources of taxable income that may be available to realize the benefit of deferred income tax assets are future reversals of existing taxable temporary differences, future taxable income, exclusive of reversing temporary differences and carryforwards, taxable income in carry-back years and tax planning strategies that are both prudent and feasible. In evaluating the need for a valuation allowance, the existence of cumulative losses in recent years is significant objectively verifiable negative evidence that must be overcome by objectively verifiable positive evidence to avoid the need to record a valuation allowance. The Company has recorded a full valuation allowance against substantially all net deferred income tax assets as it is more-likely-than-not that the benefit of the deferred income tax assets will not be recognized in future periods.

Net Loss Per Share—Basic and diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Since the Company has experienced net losses for all periods presented, net loss per share excludes the effect of 4,063 and 4,349 stock options, restricted stock shares, restricted stock units and performance award shares as of June 30, 2018 and 2017 because they are anti-dilutive. Therefore, the number of shares calculated for basic net loss per share is also used for the diluted net loss per share calculation.

Comprehensive Loss and Accumulated Other Comprehensive Income—In addition to net losses, the comprehensive loss includes foreign currency translation adjustments and unrealized losses on investments.

Accumulated other comprehensive income (loss) consisted of the following (net of tax):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Total accumulated other comprehensive income (loss) at beginning of period	$	112	$	(393)	$	34	$	(468)
Unrealized Losses on Investments
Balance at beginning of period	$	(14)	$	(19)	$	(6)	$	(21)
Other comprehensive income (loss) before reclassifications		1		4		(7)		6
Balance at end of period	$	(13)	$	(15)	$	(13)	$	(15)
Foreign Currency Translation Adjustment
Balance at beginning of period	$	126	$	(374)	$	40	$	(447)
Other comprehensive (loss) income before reclassifications		(349)		373		(181)		425
Amounts reclassified from accumulated other comprehensive income (loss) to other income (loss)		138		(31)		56		(10)
Balance at end of period	$	(85)	$	(32)	$	(85)	$	(32)
Total accumulated other comprehensive loss at end of period	$	(98)	$	(47)	$	(98)	$	(47)

Research and Development Costs—Research and development costs are expensed as incurred. These costs include compensation and other costs associated with the development of and research related to new and existing products or concepts, preclinical studies, clinical trials and regulatory affairs.

Advertising Costs—The Company expenses advertising costs as incurred. Advertising costs were not significant during the three and six months ended June 30, 2018 and 2017.

Share-Based Compensation—The Company records share-based compensation for all employee share-based payment awards, including stock options, restricted stock, restricted stock units, performance shares and stock purchases related to an employee stock purchase plan, based on estimated fair values. The value of the portion of an award that is ultimately expected to vest, net of estimated forfeitures, is recognized as expense over the service period in the Company’s Condensed Consolidated Statements of Operations and Comprehensive Loss. The Company estimates forfeitures at the time of grant and adjusts them in subsequent periods if actual forfeitures differ from those estimates. The Company recognized share-based compensation expense of $3,534 and $3,697 for the three months ended June 30, 2018 and 2017 and $7,424 and $7,325 for the six months ended June 30, 2018 and 2017.

The Company estimates the fair value of time-based options on the date of grant using the Black-Scholes option-pricing model (Black-Scholes model). The Company’s determination of fair value is affected by the Company’s stock price, as well as subjective variables including, but not limited to, the Company’s expected stock price volatility over the term of the awards and actual and projected employee stock option exercise behaviors. The Company estimates the fair value of restricted stock, restricted stock units and performance shares based upon the grant date closing market price of the Company’s common stock.

The Company also has an employee stock purchase plan (ESPP) which is available to all eligible employees as defined by the plan document. Under the ESPP, shares of the Company’s common stock may be purchased at a discount. At the beginning of each purchase period, the Company estimates the number of shares to be purchased in the period and the fair value of the shares based upon the Company’s stock price on the first day of the purchase period using the Black-Scholes model. Estimated compensation expense is recorded during the purchase period and is trued up to actual at the time of stock purchase.

Use of Estimates—The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingencies in the financial statements. Actual results could differ from those estimates.

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2018

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

2. RECENT ACCOUNTING PRONOUNCEMENTS

In February 2016, the FASB issued ASU 2016-02, “Leases”(ASU 2016-02), codified as ASC 842, which requires lessees to record most leases onto their balance sheet but recognize expenses on their income statement in a manner similar to today’s accounting. The guidance is effective for interim and annual reporting periods beginning within 2019.  An entity is required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. Full retrospective application is prohibited. The Company intends to adopt ASU 2016-02 on the effective date of January 1, 2019 and is currently evaluating the provisions of ASU 2016-02 to determine the impact on its consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment” (ASU 2017-04). The guidance removes the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. Under ASU 2017-04, a goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance becomes effective for annual reporting periods beginning after December 15, 2019 and interim periods within those fiscal years, with early adoption permitted, and applied prospectively. The Company is evaluating the provisions of ASU 2017-04 to determine the impact on its consolidated financial statements and related disclosures.

In February 2018, the FASB issued ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (AOCI)”(ASU 2018-02) to address industry concerns related to the application of ASC 740, “Income Taxes” to certain provisions of the new tax reform legislation. Upon adopting ASU 2018-02, an entity is required to disclose (1) its accounting policy related to releasing income tax effects from AOCI, (2) whether it has elected to reclassify, to retained earnings in the statement of stockholders’ equity, the stranded tax effects in AOCI related to the new tax reform legislation and (3) if it has elected to reclassify to retained earnings the stranded tax effects in AOCI related to the new tax reform legislation, what the reclassification encompasses. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. An entity will apply this guidance to each period in which the effect of the new tax reform legislation (or portion thereof) is recorded and may apply it either (1) retrospectively as of the date of enactment or (2) as of the beginning of the period of adoption. The Company has evaluated the impact of the provisions of ASU 2018-02 on its consolidated financial position, results of operations and related disclosures and determinedthat the new guidance will not have a material impact on its financial reporting upon adoption.

In March 2018, the FASB issued ASU 2018-05, “Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 118” (ASU 2018-05) to amend SEC paragraphs in ASC 740, “Income Taxes,”to reflect SAB 118, which provides guidance for companies that are not able to complete their accounting for the income tax effects of the Tax Cuts and Jobs Act in the period of enactment. The Company is applying the guidance in SAB 118 when accounting for the enactment-date effects of the Act. See Note 9 for further discussion.

In July 2018, the FASB issued ASU 2018-10, “Codification Improvements to Topic 842, Leases” (ASU 2018-10). The amendments in this ASU address the rate implicit in the lease, impairment of the net investment in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain transition adjustments, among other things. The amendments have the same effective date as ASU 2016-02, which is effective for interim and annual reporting periods beginning within 2019.  The Company is evaluating the provisions of ASU 2018-10 to determine the impact on its consolidated financial statements and related disclosures.

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Fair Value

6 Months Ended

Jun. 30, 2018

Fair Value [Abstract]

Fair Value

3. FAIR VALUE

Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy defines a three-level valuation hierarchy for classification and disclosure of fair value measurements as follows:  

· Level 1—Quoted prices in active markets for identical assets or liabilities.

· Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

· Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company classifies cash, investments in U.S. government securities, accounts receivable, short-term other assets, accounts payable and accrued liabilities as Level 1 within the fair value hierarchy. The carrying amounts of these assets and liabilities approximate their fair value due to their relatively short-term nature. Cash equivalents and investments in corporate bonds, commercial paper and asset-backed securities are classified as Level 2 within the fair value hierarchy. The fair value of fixed term debt is estimated by calculating the net present value of future debt payments at current market interest rates and is classified as Level 2. The book value of the Company’s fixed term debt approximates its fair value because the interest rate varies with market rates.  

The following table represents the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2018:  

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Total
Assets:
Money market funds	$	—	$	2,603	$	—	$	2,603
Commercial paper		—		8,541		—		8,541
U.S. government securities		2,584		—		—		2,584
Corporate bonds		—		8,099		—		8,099
Asset-backed securities		—		3,978		—		3,978
Total assets	$	2,584	$	23,221	$	—	$	25,805
Liabilities:
Acquisition-related contingent consideration		—		—		31,182		31,182
Total liabilities	$	—	$	—	$	31,182	$	31,182

There were no changes in the levels or methodology of measurement of financial assets and liabilities during the three and six months ended June 30, 2018.

The following table represents the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2017:  

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Total
Assets:
Money market funds	$	—	$	12,774	$	—	$	12,774
Commercial paper		—		7,472		—		7,472
U.S. government agencies and securities		2,999		—		—		2,999
Corporate bonds		—		2,920		—		2,920
Total assets	$	2,999	$	23,166	$	—	$	26,165
Liabilities:
Acquisition-related contingent consideration		—		—		37,098		37,098
Total liabilities	$	—	$	—	$	37,098	$	37,098

Acquisition-Related Contingent Consideration. Contingent consideration arrangements under the nContact merger agreement obligate the Company to pay certain defined amounts to former shareholders of nContact if specified milestones are met related to trial enrollment, regulatory approval and revenue targets. The Company measures contingent consideration liabilities using unobservable inputs by applying an income approach, such as the discounted cash flow technique or the probability-weighted scenario method. Various key assumptions, such as the probability of achievement of the agreed milestones, projected revenues from acquisitions and the discount rate, are used in the determination of fair value of contingent consideration arrangements and are not observable in the market, thus representing a Level 3 measurement within the fair value hierarchy. Subsequent revisions to key assumptions, which impact the estimated fair value of contingent consideration liabilities, are reflected in the Condensed Consolidated Statements of Operations and Comprehensive Loss. Acquisition-related contingent consideration is recorded in other noncurrent liabilities in the Condensed Consolidated Balance Sheets.

The fair value of the nContact contingent consideration was remeasured as of June 30, 2018, resulting in a decrease in fair value of $5,916. This decrease is primarily due to changes in estimates related to the timing of achievement of the regulatory milestone as a result of enrollment in the CONVERGE IDE clinical trial in 2018, a decrease in forecasted revenues under the commercial milestone payment and a higher discount rate, reflecting increases in market interest rates and changes to the Company’s debt structure.  The adjustment to fair value is recorded in selling, general and administrative expenses in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Loss.

The following table represents the Company’s Level 3 fair value measurements using significant other unobservable inputs for acquisition-related contingent consideration:

	Six Months Ended		Twelve Months Ended
	June 30,		December 31, 2017
Beginning Balance	$	37,098	$	41,176
Amounts acquired		—		—
Changes in fair value included in earnings		(5,916)		(4,078)
Ending Balance	$	31,182	$	37,098

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Intangible Assets

6 Months Ended

Jun. 30, 2018

Intangible Assets [Abstract]

Intangible Assets

4. INTANGIBLE ASSETS

The following table provides a summary of the Company’s intangible assets:

		June 30, 2018				December 31, 2017
	Estimated Useful Life	Cost		Accumulated Amortization		Cost		Accumulated Amortization
Fusion technology	10 years	$	9,242	$	4,159	$	9,242	$	3,697
SUBTLE access technology	5 years		2,179		1,203		2,179		981
IPR&D			44,021		—		44,021		—
Total		$	55,442	$	5,362	$	55,442	$	4,678

Amortization expense of intangible assets with definite lives, which excludes IPR&D, was $342 for both the three months ended June 30, 2018 and 2017 and $684 for both the six months ended June 30, 2018 and 2017.

Amortization expense of intangible assets with definite lives is projected as follows:

2018	$	683	July 1, 2018 through December 31, 2018
2019		1,367
2020		1,235
2021		924
2022		925
2023 and thereafter		925
Total	$	6,059

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Accrued Liabilities

6 Months Ended

Jun. 30, 2018

Accrued Liabilities [Abstract]

Accrued Liabilities

5. ACCRUED LIABILITIES

Accrued liabilities consisted of the following:

	June 30,		December 31,
	2018		2017
Accrued commissions	$	5,416	$	6,964
Accrued payroll and employee-related expenses		4,370		4,097
Accrued bonus		4,163		4,726
Sales returns and allowances		1,319		1,169
Other accrued liabilities		701		695
Accrued royalties		669		626
Accrued taxes		523		634
Total	$	17,161	$	18,911

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Indebtedness

6 Months Ended

Jun. 30, 2018

Indebtedness [Abstract]

Indebtedness

6. INDEBTEDNESS

Credit Facility. The Company has a Loan and Security Agreement (Loan Agreement) with Silicon Valley Bank (SVB). The Loan Agreement, as amended and restated effective February 23, 2018, includes a $40,000 term loan and a $20,000 revolving line of credit, with an option to increase the revolving line of credit by up to an additional $20,000. The term loan and revolving line of credit each have a five-year term,  maturing or expiring, as applicable, in February 2023.  

Principal payments of the term loan are to be made ratably commencing eighteen months after the inception of the loan (September 2019) through the loan’s maturity date. If the Company meets certain conditions, as specified by the Loan Agreement, the commencement of term loan principal payments may be deferred by an additional six months. The term loan accrues interest at the greater of the Prime Rate plus 3.75%, or 8.25%,  and is subject to an additional 3.5% fee on the original $40,000term loan principal payable at maturity or upon acceleration or prepayment of the term loan. The Company is accruing the 3.5% fee over the term of the Loan Agreement. As of June 30, 2018, the Company accrued $93 of this fee, reflected in the outstanding loan balance in the Condensed Consolidated Balance Sheets. The refinancing was treated as a debt modification. Financing costs related to the term loan of $744are netted against the outstanding loan balance in the Condensed Consolidated Balance Sheets and amortized ratably over the term of the Loan Agreement.

The revolving line of credit is subject to an annual facility fee of 0.33% of the revolving line of credit, and any borrowings bear interest at the greater of the Prime Rate or4.50%.  Borrowing availability under the revolving credit facility is based on the lesser of $20,000 or a borrowing base calculation as defined by the Loan Agreement. As of June 30, 2018, the Company had no borrowings under the revolving credit facility and had borrowing availability of $18,750. Financing costs related to the revolving line of credit are included in other assets in the Condensed Consolidated Balance Sheets and amortized ratably over the twelve-month period of the annual fee.  

The Loan Agreement contains prepayment and early termination fees and establishes a financial covenant related to sales growth, along with other customary terms and conditions.Specified assets have been pledged as collateral.

Capital Lease Obligations. As of June 30, 2018, the Company had capital leases for its corporate headquarters building and certain equipment that expire at various terms through 2030.  Capital lease assets are depreciated over their estimated useful lives. As of June 30, 2018, the cost of the leased assets, both building and equipment, was $14,462, and related accumulated amortization was $2,699.  

In connection with the terms of the Company’s corporate headquarters lease, a letter of credit in the amount of $1,250 was issued to the building lessor in October 2015. The letter of credit is renewed annually and remained outstanding as of June 30, 2018.

Future maturities of long-term debt, including the term loan fee payable at maturity, and capital lease obligations are projected as follows:

2018	$	736	July 1, 2018 through December 31, 2018
2019		5,303
2020		12,943
2021		12,947
2022		12,968
2023 and thereafter		16,260
Total payments	$	61,157
Imputed interest		(6,676)
Net long-term debt and capital lease obligations, of which $589 is current and $53,892 is noncurrent	$	54,481

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2018

Commitments and Contingencies [Abstract]

Commitments and Contingencies

7. COMMITMENTS AND CONTINGENCIES

Lease Commitments. The Company leases certain office and warehouse facilities under noncancelable operating leases with various terms that expire through 2022.  

Royalty Agreements. The Company has certain royalty agreements in place with terms that include payment of royalties of 3% to 5% of specified product sales. The royalty agreements have effective dates as early as 2003 and terms ranging from eighteen to at least twenty years, unless terminated earlier. Royalty expense of $695 and $602 is included in cost of revenue for the three months ended June 30, 2018 and 2017. Royalty expense of $1,367 and $1,136 is included in cost of revenue for the six months ended June 30, 2018 and 2017.

Purchase Agreements. The Company enters into standard purchase agreements with various suppliers in the ordinary course of business. Outstanding commitments outside of the ordinary course of business were not significant at June 30, 2018.

Legal. The Company may, from time to time, become a party to legal proceedings and receive inquiries from regulators. Such matters are subject to many uncertainties and to outcomes of which the financial impacts are not predictable with assurance and that may not be known for extended periods of time. When the Company has assessed that a loss is probable and an amount can be reasonably estimated, it records a liability in the Condensed Consolidated Financial Statements. Costs associated with legal proceedings could have a material adverse effect on the Company’s future consolidated results of operations, financial position, or cash flows. 

The Company received a Civil Investigative Demand (CID) from the U.S. Department of Justice in December 2017 stating that it is investigating the Company to determine whether the Company has violated the False Claims Act, relating to the promotion of certain medical devices related to the treatment of atrial fibrillation for off-label use and submitted or caused to be submitted false claims to certain federal and state health care programs for medically unnecessary healthcare services related to the treatment of atrial fibrillation. The CID covers the period from January 2010 to December 2017 and requires the production of documents and answers to written interrogatories. The Company had no knowledge of the investigation prior to receipt of the CID. The Company maintains rigorous policies and procedures to promote compliance with the False Claims Act and other applicable regulatory requirements, and it is working with the U.S. Department of Justice to promptly respond to the CID. However, the Company cannot predict when the investigation will be resolved, the outcome of the investigation or its potential impact on the Company. 

The Company acquired nContact Surgical, Inc. pursuant to a merger agreement dated October 4, 2015. The merger agreement provides for contingent consideration or "earnout" to be paid upon attaining specified regulatory approvals and clinical and revenue milestones. The merger agreement’s earnout provisions require the Company to deliver periodic earnout reports to a designated representative of former nContact stockholders. In response to the report delivered in February 2018, the Company received a letter from the representative on March 16, 2018. The letter purports to serve as an “earnout objection statement” (as that term is defined in the merger agreement) and claims that for purposes of determining the commercial milestone payment, the Company should be including revenues of certain additional items and products that the Company has not previously included in its earnout statements. The Company has disputed the basis of the representative’s claims, and has corresponded with the representative regarding the earnout objection statement.

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Revenue

6 Months Ended

Jun. 30, 2018

Revenue [Abstract]

Revenue

8. REVENUE

The Company adopted FASB ASC 606, “Revenue from Contracts with Customers” (ASC 606) using the modified retrospective method effective January 1, 2018. The adoption of ASC 606 did not have a material impact on the amount and timing of revenue recognized in the Condensed Consolidated Financial Statements.

Revenue is generated primarily from the sale of disposable surgical devices. The Company recognizes revenue in an amount that reflects the consideration the Company expects to be entitled to in exchange for those devices when control of promised devices is transferred to customers. At contract inception, the Company assesses the products promised in its contracts with customers and identifies a performance obligation for each promise to transfer to the customer a product that is distinct. The Company’s disposable surgical devices are distinct and represent performance obligations. These performance obligations are satisfied and revenue is recognized at a point in time upon shipment or delivery of products. Sales of devices are categorized as follows: open-heart ablation, minimally invasive ablation (MIS), appendage management and valve tools. Shipping and handling activities performed after control over products transfers to customers are considered activities to fulfill the promise to transfer the products rather than as separate promises to customers.

Products are sold primarily through a direct sales force and through distributors in select international markets. Terms of sale are generally consistent for both end-users and distributors except that payment terms are generally net 30 days for end-users and net 60 days for distributors, with limited exceptions. The Company does not maintain any post-shipping obligations to customers. No installation, calibration or testing of products is performed by the Company subsequent to shipment in order to render products operational.

Significant judgments and estimates involved in the Company’s recognition of revenue include the determination of the timing of transfer of control of products to customers and the estimation of a provision for returns. The Company considers the following indicators when determining when the control of products transfers to customers: (i) the Company has a right to payment in accordance with the shipping terms set forth in its contracts with customers; (ii) customers have legal title to products in accordance with shipping terms; (iii) the Company transfers physical possession of products either when the Company presents the products to a third party carrier for delivery to a customer (FOB shipping point) or when a customer receives the delivered goods (FOB destination); (iv) customers have the significant risks and rewards of ownership of products; and (v) customers have accepted products in connection with contractual shipping terms.

In the normal course of business, the Company does not accept product returns unless a product is defective as manufactured. The Company establishes estimated provisions for returns based on historical experience. The Company does not provide customers with the right to a refund.

The Company expects to be entitled to the total consideration for the products ordered by customers as product pricing is fixed according to the terms of customer contracts and payment terms are short. Payment terms fall within the one-year guidance for the practical expedient which allows the Company to forgo adjustment of the promised amount of consideration for the effects of a significant financing component. The Company excludes taxes assessed by governmental authorities on revenue-producing transactions from the measurement of the transaction price.

Costs associated with product sales include commissions and royalties. Considering that product sales are performance obligations in contracts that are satisfied at a point in time, commission expense associated with product sales and royalties paid based on sales of certain products is incurred at that point in time rather than over time. Therefore, the Company applies the practical expedient and recognizes commissions and royalties as expense when incurred because the expense is incurred at a point in time and the amortization period is less than one year. Commissions are recorded as selling expense and royalties are recorded as cost of revenue in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

See Note 11 for disaggregated revenue by geographic area and by product category.

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Income Tax Provision

6 Months Ended

Jun. 30, 2018

Income Tax Provision [Abstract]

Income Tax Provision

9. INCOME TAX PROVISION

The Company files federal, state, and foreign income tax returns in jurisdictions with varying statutes of limitations. The Company uses the asset and liability method to determine its provision for income taxes. The Company’s provision for income taxes in interim periods is computed by applying its estimated annual effective rate against its pre-tax results for the period. Non-recurring items are recorded during the period in which they occur. The effective tax rate for the three months ended June 30, 2018 and 2017 was (16.64%) and (0.25%).  The effective tax rate for the six months ended June 30, 2018 and 2017 was(0.92%) and(0.23%).

The Tax Cuts and Jobs Act (TCJA) was enacted on December 22, 2017. The TCJA reduces the United States federal corporate income tax rate from 35% to 21%, along with other changes to tax law.As a result of the Company’s valuation allowance on its net U.S. deferred tax assets, the TCJA did not have an impact on the effective tax rate for the three and six months ended June 30, 2018as compared to June 30, 2017.

The Company is applying the guidance in Staff Accounting Bulletin No. 118, “Income Tax Accounting Implications of the Tax Cut and Jobs Act” (SAB 118) when accounting for the enactment-date effects of the TCJA. As of June 30, 2018, the Company has not adjusted the provisional amounts recognized as of December 31, 2017. The provisional amounts recorded may be affected as the Company completes additional analysis of the tax law provisions. These changes are not anticipated to be material to the Company’s Condensed Consolidated Financial Statements as a result of a full valuation allowance against the Company’s net U.S. deferred tax assets.

Federal, state and local tax returns of the Company are routinely subject to review by various taxing authorities.The Company has not accrued any interest and penalties related to unrecognized income tax benefits as a result of offsetting of net operating losses. However, if the situation occurs, the Company will recognize interest and penalties within income tax expense in the Condensed Consolidated Statements of Operations and Comprehensive Loss and within the related tax liability in the Condensed Consolidated Balance Sheets. 

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Equity Compensation Plans

6 Months Ended

Jun. 30, 2018

Equity Compensation Plans [Abstract]

Equity Compensation Plans

10. EQUITY COMPENSATION PLANS

The Company has two share-based incentive plans: the 2014 Stock Incentive Plan (2014 Plan) and the 2018 Employee Stock Purchase Plan (ESPP).

Stock Incentive Plan

Under the 2014 Plan, the Board of Directors may grant incentive stock options to employees and may grant nonstatutory stock options, restricted stock, restricted stock units, performance shares or stock appreciation rights to employees, directors and consultants. The administrator (the Compensation Committee of the Board of Directors) has the authority to determine the terms of any awards, including the number of shares subject to each award, the exercisability of the awards and the form of consideration. As of June 30, 2018,10,249 shares of common stock had been reserved for issuance under the 2014 Plan, and 513 shares were available for future grants.  An additional 850 shares were approved by stockholders at the Company’s 2018 Annual Meeting of Stockholders in May 2018 which will be registered during the third quarter of 2018.

Effective March 1, 2018, the Compensation Committee of the Board approved the grant of performance share awards (2018 PSAs) to the Company’s named executive officers and certain other executive employees pursuant to the Company’s 2014 Stock Incentive Plan.The form of award agreement for the 2018 PSAs (2018 PSA Grant Form) provides, among other things, that (i) each 2018 PSA that vests represents the right to receive one share of the Company’s common stock; (ii) the 2018 PSAs vest based on the Company achieving specified performance measurements over a performance period of three years, beginning January 1, 2018; (iii) the performance measurements include revenue CAGR as defined in the 2018 PSA Grant Form; (iv) threshold, target and maximum payout opportunities established for the 2018 PSAs will be used to calculate the number of shares that will be issuable when the award vests, which may range from 0% to 200% of the target amount; (v) any 2018 PSAs that are earned are scheduled to vest and be settled in shares of the Company’s common stock at the end of the performance period; and  (vi) all or a portion of the 2018 PSAs may vest following a change of control or a termination of service by reason of death or disability (each as described in greater detail in the 2018 PSA Grant Form).

With respect to the 2018 PSAs, the number of shares that vest and are issued to the recipient is based upon the Company’s performance as measured against the specified targets at the end of the three-year performance period as determined by the Compensation Committee of the Board. The Company estimated the fair value of the 2018 PSAs based on its closing stock price on the grant date and will adjust compensation expense over the performance period based on its estimate of performance target achievement.

Stock options granted prior to 2018 under the 2014 Plan generally expire ten years from the date of grant and generally vest at a rate of 25% on the first anniversarydate of the grant and ratably each month thereafter over the following three years. Restricted stock awards granted prior to 2018 generally vest between one and four years from the date of grant.Beginning in 2018, stock options granted generally vest in one-third increments on the first, second and third anniversaries of the grant date, and restricted stock awards generally vest on the grant date anniversaries between one and three years from the date of grant. Restricted stock units vest in one-third increments on the first, second and third anniversaries of the grant date.

Employee Stock Purchase Plan

The ESPP is available to eligible employees as defined in the plan document. Under the ESPP, shares of the Company’s common stock may be purchased at a discount (15%) of the lesser of the closing price of the Company’s common stock on the first trading day or the last trading day of the offering period. The offering period (currently six months) and the offering price are subject to change. Participants may not purchase a value of more than $25 of the Company’s common stock in a calendar year and may not purchase more than 3 shares during an offering period.The ESPP was approved by stockholders at the Company’s 2018 Annual Meeting of Stockholders in May 2018, resulting in an increase of 500 shares available for sale under the ESPP which will be registered during the third quarter of 2018. As ofJune 30, 2018, there were 136 shares available for future issuance under the ESPP.

Expense Information Under FASB ASC 718

The following table summarizes the allocation of share-based compensation expense:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Cost of revenue	$	239	$	138	$	476	$	269
Research and development expenses		361		502		952		1,003
Selling, general and administrative expenses		2,934		3,057		5,996		6,053
Total	$	3,534	$	3,697	$	7,424	$	7,325

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Segment and Geographic Information

6 Months Ended

Jun. 30, 2018

Segment and Geographic Information [Abstract]

Segment and Geographic Information

11. SEGMENT AND GEOGRAPHIC INFORMATION

The Company develops, manufactures, and sells devices designed primarily for the surgical ablation of cardiac tissue and systems designed for the exclusion of the left atrial appendage. These devices are developed and marketed to a broad base of medical centers globally. Management considers all such sales to be part of a single operating segment. Revenue attributed to geographic areas, based on the location of customers, was as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
United States	$	40,834	$	35,534	$	79,270	$	68,802
Europe		6,694		5,688		12,565		10,877
Asia		4,049		3,785		6,488		6,436
Other international		225		224		473		389
Total international		10,968		9,697		19,526		17,702
Total revenue	$	51,802	$	45,231	$	98,796	$	86,504

United States revenue by product type was as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Open-heart ablation	$	18,073	$	16,790	$	35,652	$	32,495
Minimally invasive ablation		9,114		8,725		17,727		17,007
Appendage management		13,101		9,463		24,898		18,165
Total ablation and appendage management		40,288		34,978		78,277		67,667
Valve tools		546		556		993		1,135
Total United States	$	40,834	$	35,534	$	79,270	$	68,802

International revenue by product type was as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Open-heart ablation	$	5,836	$	5,674	$	10,745	$	10,264
Minimally invasive ablation		2,660		2,135		4,452		4,093
Appendage management		2,424		1,777		4,222		3,172
Total ablation and appendage management		10,920		9,586		19,419		17,529
Valve tools		48		111		107		173
Total international	$	10,968	$	9,697	$	19,526	$	17,702

The Company’s long-lived assets are located primarily in the United States, except for $1,006 as of June 30, 2018 and $957 as of December 31, 2017, which are located primarily in Europe.

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Description of Business and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2018

Description of Business and Summary of Significant Accounting Policies [Abstract]

Nature of the Business

Nature of the Business—The “Company” consists of AtriCure, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. 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

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 audited financial statements of the Company included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC.

Cash Equivalents

Cash Equivalents—The Company considers highly liquid investments with maturities of three months or less at the date of purchase as cash equivalents in the accompanying Condensed Consolidated Financial Statements.

Investments

Investments—The Company invests primarily in U.S. Government securities, corporate bonds, commercial paper and asset-backed securities and classifies all investments as available-for-sale. Investments with maturities of 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. Gains and losses are recognized using the specific identification method when securities are sold and are included in interest income or expense in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

Revenue Recognition

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

Sales Returns and Allowances—The Company maintains a provision for potential returns of defective or damaged products and products shipped in error and invoice adjustments. The Company adjusts the provision through consideration of a combination of specific identification and historical experience. Increases to the provision result in a reduction of revenue. The provision is included in accrued liabilities in the Condensed Consolidated Balance Sheets.

Allowance for Doubtful Accounts Receivable

Allowance for Doubtful Accounts Receivable—The Company evaluates the collectability of accounts receivable to determine the appropriate allowance for doubtful accounts considering the aging of accounts, historical credit losses, customer-specific information and other relevant factors. Increases to the allowance result in an increase in selling, general and administrative expenses. The Company adjusts the allowance based on current circumstances and charges off uncollectible receivables against the allowance when all attempts to collect the receivable have failed. The Company’s history of write-offs against the allowance has not been significant.

Inventories

Inventories—Inventories are stated at the lower of cost or net realizable value based on the first-in, first-out cost method (FIFO). The Company’s industry is characterized by rapid product development and frequent new product introductions. Uncertain timing of regulatory approval, variability in product launch strategies and variation in product use cause the Company to maintain reserves for excess, obsolete and expired products. Increases to inventory reserves result in an increase in cost of revenue. Inventories are written off against reserves when they are physically disposed.

Inventories consist of the following:

	June 30,		December 31,
	2018		2017
Raw materials	$	8,729	$	7,755
Work in process		1,549		1,299
Finished goods		11,404		13,397
Inventories	$	21,682	$	22,451

Property and Equipment

Property and Equipment—Property and equipment is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of assets. The estimated useful life by major asset category is the following:

	Estimated Useful Life
Generators and related equipment	1 - 3 years
Building under capital lease	15 years
Computers, software and office equipment	3 years
Machinery and equipment	3 - 7 years
Furniture and fixtures	3 - 7 years
Leasehold improvements	5 - 15 years
Equipment under capital leases	3 - 5 years

The Company reassesses the useful lives of property and equipment at least annually and retires assets if they are no longer in service. Maintenance and repair costs are expensed as incurred.

The Company’s radiofrequency (RF) and cryo generators are generally placed with customers that use the Company’s disposable products. The estimated useful lives of generators are based on anticipated usage by customers and may change in future periods with changes in usage or introduction of new technologies. Depreciation related to generators and related equipment, which is recorded in cost of revenue in the Condensed Consolidated Statements of Operations and Comprehensive Loss, was $814 and $909for the three months ended June 30, 2018 and 2017 and $1,641 and $1,825 for the six months ended June 30, 2018 and 2017. As of June 30, 2018 and December 31, 2017, the net carrying value of generators and related equipment included in net property and equipment in the Condensed Consolidated Balance Sheets was $4,717 and $4,656.

The Company reviews property and equipment for impairment at least annually using its best estimates based on reasonable and supportable assumptions and expected future cash flows. Property and equipment impairments recorded by the Company have not been significant.

Intangible Assets

Intangible Assets—Intangible assets with determinable useful lives are amortized on a straight-line basis over the estimated periods benefited.

Intangible assets include In-Process Research and Development (IPR&D), which represents the value of technology acquired in business combinations that has not yet reached technological feasibility. The primary basis for determining technological feasibility is obtaining specific regulatory approval. IPR&D is accounted for as an indefinite-lived intangible asset until completion or abandonment of the IPR&D project. Upon completion of the development project, IPR&D will be amortized over its estimated useful life. If the IPR&D project is abandoned, the IPR&D would be written off. IPR&D represents an estimate of the fair value of the pre-market approval (PMA) that may result from the CONVERGE IDE clinical trial.

The Company reviews intangible assets for impairment at least annually using its best estimates based on reasonable and supportable assumptions and projections. The Company has historically tested IPR&D for impairment annually on November 30.

Goodwill

Goodwill—Goodwill represents the excess of purchase price over the fair value of the net assets acquired in business combinations. The Company has historically tested goodwill for impairment annually on November 30, or more often if impairment indicators are present. The Company’s goodwill is accounted for in a single reporting unit representing the Company’s consolidated operations.

Other Noncurrent Liabilities

Other Noncurrent Liabilities—Other noncurrent liabilities consist of acquisition-related contingent consideration and other contractual obligations. Although the Company expects to settle a portion of the contingent consideration liability in 2018, the balance is included in noncurrent liabilities as such settlement is both required and expected to be made in shares of the Company’s common stock pursuant to the nContact Surgical, Inc. (nContact) merger agreement.

Other Income (Expense)

Other Income (Expense)—Other income (expense) consists primarily of foreign currency transaction gains and losses generated by settlements of intercompany balances denominated in Euros and customer invoicing in British Pounds.

Taxes

Taxes—Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities from a change in tax rates is recognized in the period that includes the enactment date.

The Company’s estimate of the valuation allowance for deferred income tax assets requires significant estimates and judgments about future operating results. Deferred income tax assets are reduced by valuation allowances if, based on the consideration of all available evidence, it is more-likely-than-not that the deferred income tax asset will not be realized. Significant weight is given to evidence that can be objectively verified. The Company evaluates deferred income tax assets on an annual basis to determine if valuation allowances are required. Deferred income tax assets are realized by having sufficient future taxable income to allow the related tax benefits to reduce taxes otherwise payable. The sources of taxable income that may be available to realize the benefit of deferred income tax assets are future reversals of existing taxable temporary differences, future taxable income, exclusive of reversing temporary differences and carryforwards, taxable income in carry-back years and tax planning strategies that are both prudent and feasible. In evaluating the need for a valuation allowance, the existence of cumulative losses in recent years is significant objectively verifiable negative evidence that must be overcome by objectively verifiable positive evidence to avoid the need to record a valuation allowance. The Company has recorded a full valuation allowance against substantially all net deferred income tax assets as it is more-likely-than-not that the benefit of the deferred income tax assets will not be recognized in future periods.

Net Loss Per Share

Net Loss Per Share—Basic and diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Since the Company has experienced net losses for all periods presented, net loss per share excludes the effect of 4,063 and 4,349 stock options, restricted stock shares, restricted stock units and performance award shares as of June 30, 2018 and 2017 because they are anti-dilutive. Therefore, the number of shares calculated for basic net loss per share is also used for the diluted net loss per share calculation.

Comprehensive Loss and Accumulated Other Comprehensive Income

Comprehensive Loss and Accumulated Other Comprehensive Income—In addition to net losses, the comprehensive loss includes foreign currency translation adjustments and unrealized losses on investments.

Accumulated other comprehensive income (loss) consisted of the following (net of tax):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Total accumulated other comprehensive income (loss) at beginning of period	$	112	$	(393)	$	34	$	(468)
Unrealized Losses on Investments
Balance at beginning of period	$	(14)	$	(19)	$	(6)	$	(21)
Other comprehensive income (loss) before reclassifications		1		4		(7)		6
Balance at end of period	$	(13)	$	(15)	$	(13)	$	(15)
Foreign Currency Translation Adjustment
Balance at beginning of period	$	126	$	(374)	$	40	$	(447)
Other comprehensive (loss) income before reclassifications		(349)		373		(181)		425
Amounts reclassified from accumulated other comprehensive income (loss) to other income (loss)		138		(31)		56		(10)
Balance at end of period	$	(85)	$	(32)	$	(85)	$	(32)
Total accumulated other comprehensive loss at end of period	$	(98)	$	(47)	$	(98)	$	(47)

Research and Development Costs

Research and Development Costs—Research and development costs are expensed as incurred. These costs include compensation and other costs associated with the development of and research related to new and existing products or concepts, preclinical studies, clinical trials and regulatory affairs.

Advertising Costs

Advertising Costs—The Company expenses advertising costs as incurred. Advertising costs were not significant during the three and six months ended June 30, 2018 and 2017.

Share-Based Compensation

Share-Based Compensation—The Company records share-based compensation for all employee share-based payment awards, including stock options, restricted stock, restricted stock units, performance shares and stock purchases related to an employee stock purchase plan, based on estimated fair values. The value of the portion of an award that is ultimately expected to vest, net of estimated forfeitures, is recognized as expense over the service period in the Company’s Condensed Consolidated Statements of Operations and Comprehensive Loss. The Company estimates forfeitures at the time of grant and adjusts them in subsequent periods if actual forfeitures differ from those estimates. The Company recognized share-based compensation expense of $3,534 and $3,697 for the three months ended June 30, 2018 and 2017 and $7,424 and $7,325 for the six months ended June 30, 2018 and 2017.

The Company estimates the fair value of time-based options on the date of grant using the Black-Scholes option-pricing model (Black-Scholes model). The Company’s determination of fair value is affected by the Company’s stock price, as well as subjective variables including, but not limited to, the Company’s expected stock price volatility over the term of the awards and actual and projected employee stock option exercise behaviors. The Company estimates the fair value of restricted stock, restricted stock units and performance shares based upon the grant date closing market price of the Company’s common stock.

The Company also has an employee stock purchase plan (ESPP) which is available to all eligible employees as defined by the plan document. Under the ESPP, shares of the Company’s common stock may be purchased at a discount. At the beginning of each purchase period, the Company estimates the number of shares to be purchased in the period and the fair value of the shares based upon the Company’s stock price on the first day of the purchase period using the Black-Scholes model. Estimated compensation expense is recorded during the purchase period and is trued up to actual at the time of stock purchase.

Use of Estimates

Use of Estimates—The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingencies in the financial statements. Actual results could differ from those estimates.

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Description of Business and Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2018

Description of Business and Summary of Significant Accounting Policies [Abstract]

Summary Of Inventories

Inventories consist of the following:

	June 30,		December 31,
	2018		2017
Raw materials	$	8,729	$	7,755
Work in process		1,549		1,299
Finished goods		11,404		13,397
Inventories	$	21,682	$	22,451

Summary of Property and Equipment

	Estimated Useful Life
Generators and related equipment	1 - 3 years
Building under capital lease	15 years
Computers, software and office equipment	3 years
Machinery and equipment	3 - 7 years
Furniture and fixtures	3 - 7 years
Leasehold improvements	5 - 15 years
Equipment under capital leases	3 - 5 years

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) consisted of the following (net of tax):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Total accumulated other comprehensive income (loss) at beginning of period	$	112	$	(393)	$	34	$	(468)
Unrealized Losses on Investments
Balance at beginning of period	$	(14)	$	(19)	$	(6)	$	(21)
Other comprehensive income (loss) before reclassifications		1		4		(7)		6
Balance at end of period	$	(13)	$	(15)	$	(13)	$	(15)
Foreign Currency Translation Adjustment
Balance at beginning of period	$	126	$	(374)	$	40	$	(447)
Other comprehensive (loss) income before reclassifications		(349)		373		(181)		425
Amounts reclassified from accumulated other comprehensive income (loss) to other income (loss)		138		(31)		56		(10)
Balance at end of period	$	(85)	$	(32)	$	(85)	$	(32)
Total accumulated other comprehensive loss at end of period	$	(98)	$	(47)	$	(98)	$	(47)

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Fair Value (Tables)

6 Months Ended

Jun. 30, 2018

Fair Value [Abstract]

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table represents the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2018:  

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Total
Assets:
Money market funds	$	—	$	2,603	$	—	$	2,603
Commercial paper		—		8,541		—		8,541
U.S. government securities		2,584		—		—		2,584
Corporate bonds		—		8,099		—		8,099
Asset-backed securities		—		3,978		—		3,978
Total assets	$	2,584	$	23,221	$	—	$	25,805
Liabilities:
Acquisition-related contingent consideration		—		—		31,182		31,182
Total liabilities	$	—	$	—	$	31,182	$	31,182

There were no changes in the levels or methodology of measurement of financial assets and liabilities during the three and six months ended June 30, 2018.

The following table represents the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2017:  

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Total
Assets:
Money market funds	$	—	$	12,774	$	—	$	12,774
Commercial paper		—		7,472		—		7,472
U.S. government agencies and securities		2,999		—		—		2,999
Corporate bonds		—		2,920		—		2,920
Total assets	$	2,999	$	23,166	$	—	$	26,165
Liabilities:
Acquisition-related contingent consideration		—		—		37,098		37,098
Total liabilities	$	—	$	—	$	37,098	$	37,098

Level 3 Fair Value Measurements Using Significant Other Unobservable Inputs for Acquisition-Related Contingent Consideration

The following table represents the Company’s Level 3 fair value measurements using significant other unobservable inputs for acquisition-related contingent consideration:

	Six Months Ended		Twelve Months Ended
	June 30,		December 31, 2017
Beginning Balance	$	37,098	$	41,176
Amounts acquired		—		—
Changes in fair value included in earnings		(5,916)		(4,078)
Ending Balance	$	31,182	$	37,098

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Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2018

Intangible Assets [Abstract]

Company's Intangible Assets

The following table provides a summary of the Company’s intangible assets:

		June 30, 2018				December 31, 2017
	Estimated Useful Life	Cost		Accumulated Amortization		Cost		Accumulated Amortization
Fusion technology	10 years	$	9,242	$	4,159	$	9,242	$	3,697
SUBTLE access technology	5 years		2,179		1,203		2,179		981
IPR&D			44,021		—		44,021		—
Total		$	55,442	$	5,362	$	55,442	$	4,678

Future Amortization Expense Related to Intangible Assets with Definite Lives

Amortization expense of intangible assets with definite lives is projected as follows:

2018	$	683	July 1, 2018 through December 31, 2018
2019		1,367
2020		1,235
2021		924
2022		925
2023 and thereafter		925
Total	$	6,059

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Accrued Liabilities (Tables)

6 Months Ended

Jun. 30, 2018

Accrued Liabilities [Abstract]

Accrued Liabilities

Accrued liabilities consisted of the following:

	June 30,		December 31,
	2018		2017
Accrued commissions	$	5,416	$	6,964
Accrued payroll and employee-related expenses		4,370		4,097
Accrued bonus		4,163		4,726
Sales returns and allowances		1,319		1,169
Other accrued liabilities		701		695
Accrued royalties		669		626
Accrued taxes		523		634
Total	$	17,161	$	18,911

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Indebtedness (Tables)

6 Months Ended

Jun. 30, 2018

Indebtedness [Abstract]

Future Maturities On Debt And Capital Lease Obligations

2018	$	736	July 1, 2018 through December 31, 2018
2019		5,303
2020		12,943
2021		12,947
2022		12,968
2023 and thereafter		16,260
Total payments	$	61,157
Imputed interest		(6,676)
Net long-term debt and capital lease obligations, of which $589 is current and $53,892 is noncurrent	$	54,481

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Equity Compensation Plans (Tables)

6 Months Ended

Jun. 30, 2018

Equity Compensation Plans [Abstract]

Share-Based Compensation Expense Related to Employee Share-Based Compensation

The following table summarizes the allocation of share-based compensation expense:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Cost of revenue	$	239	$	138	$	476	$	269
Research and development expenses		361		502		952		1,003
Selling, general and administrative expenses		2,934		3,057		5,996		6,053
Total	$	3,534	$	3,697	$	7,424	$	7,325

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Segment and Geographic Information (Tables)

6 Months Ended

Jun. 30, 2018

Segment and Geographic Information [Abstract]

Revenue by Geographic Area

Revenue attributed to geographic areas, based on the location of customers, was as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
United States	$	40,834	$	35,534	$	79,270	$	68,802
Europe		6,694		5,688		12,565		10,877
Asia		4,049		3,785		6,488		6,436
Other international		225		224		473		389
Total international		10,968		9,697		19,526		17,702
Total revenue	$	51,802	$	45,231	$	98,796	$	86,504

Revenue by Product Type

United States revenue by product type was as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Open-heart ablation	$	18,073	$	16,790	$	35,652	$	32,495
Minimally invasive ablation		9,114		8,725		17,727		17,007
Appendage management		13,101		9,463		24,898		18,165
Total ablation and appendage management		40,288		34,978		78,277		67,667
Valve tools		546		556		993		1,135
Total United States	$	40,834	$	35,534	$	79,270	$	68,802

International revenue by product type was as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Open-heart ablation	$	5,836	$	5,674	$	10,745	$	10,264
Minimally invasive ablation		2,660		2,135		4,452		4,093
Appendage management		2,424		1,777		4,222		3,172
Total ablation and appendage management		10,920		9,586		19,419		17,529
Valve tools		48		111		107		173
Total international	$	10,968	$	9,697	$	19,526	$	17,702

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Description of Business and Summary of Significant Accounting Policies (Narrative) (Details) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Description Of Business And Significant Accounting Policies [Line Items]
Depreciation			$ 3,719	$ 3,906
Net carrying amount of loaned equipment	$ 28,126		$ 28,126		$ 28,749
Options, restricted stock and performance based shares excluded from calculation of net loss per share			4,063	4,349
Share-based compensation expense recognized	3,534	$ 3,697	$ 7,424	$ 7,325
Generators And Related Equipment [Member]
Description Of Business And Significant Accounting Policies [Line Items]
Depreciation	814	$ 909	1,641	$ 1,825
Carrying Amount of Loaned Equipment [Member]
Description Of Business And Significant Accounting Policies [Line Items]
Net carrying amount of loaned equipment	$ 4,717		$ 4,717		$ 4,656
Short-term Debt [Member]
Description Of Business And Significant Accounting Policies [Line Items]
Maturity period of short term investment			1 year

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Description of Business and Summary of Significant Accounting Policies (Summary Of Inventories) (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Description of Business and Summary of Significant Accounting Policies [Abstract]
Raw materials	$ 8,729	$ 7,755
Work in process	1,549	1,299
Finished goods	11,404	13,397
Inventories	$ 21,682	$ 22,451

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Description of Business and Summary of Significant Accounting Policies (Summary Of Property And Equipment) (Details)	6 Months Ended
	Jun. 30, 2018
Building under Capital Lease [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	15 years
Computers, Software and Office Equipment [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	3 years
Minimum [Member] | Generator and Related Equipment [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	1 year
Minimum [Member] | Machinery And Equipment [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	3 years
Minimum [Member] | Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	3 years
Minimum [Member] | Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	5 years
Minimum [Member] | Equipment under Capital Leases [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	3 years
Maximum [Member] | Generator and Related Equipment [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	3 years
Maximum [Member] | Machinery And Equipment [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	7 years
Maximum [Member] | Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	7 years
Maximum [Member] | Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	15 years
Maximum [Member] | Equipment under Capital Leases [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	5 years

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Description of Business and Summary of Significant Accounting Policies (Accumulated Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Accumulated Other Comprehensive Income (Loss) [Line Items]
Total accumulated other comprehensive income (loss) at beginning of period	$ 112	$ (393)	$ 34	$ (468)
Total accumulated other comprehensive income (loss) at end of period	(98)	(47)	(98)	(47)
Unrealized Losses On Investments [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Total accumulated other comprehensive income (loss) at beginning of period	(14)	(19)	(6)	(21)
Other comprehensive income (loss) before reclassifications	1	4	(7)	6
Total accumulated other comprehensive income (loss) at end of period	(13)	(15)	(13)	(15)
Foreign Currency Translation Adjustment [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Total accumulated other comprehensive income (loss) at beginning of period	126	(374)	40	(447)
Other comprehensive income (loss) before reclassifications	(349)	373	(181)	425
Amounts reclassified from accumulated other comprehensive income (loss) to other income (loss)	138	(31)	56	(10)
Total accumulated other comprehensive income (loss) at end of period	$ (85)	$ (32)	$ (85)	$ (32)

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Fair Value (Narrative) (Details) - USD ($) $ in Thousands	6 Months Ended		12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Fair Value [Abstract]
Change in value of contingent consideration	$ (5,916)
Changes in fair value included in earnings	$ (5,916)		$ (4,078)

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Fair Value (Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis) (Details) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Assets:
Total assets	$ 25,805	$ 26,165
Liabilities:
Acquisition-related contingent consideration	31,182	37,098
Total liabilities	31,182	37,098
Money Market Funds [Member]
Assets:
Total assets	2,603	12,774
Commercial Paper [Member]
Assets:
Total assets	8,541	7,472
U.S. Government Securities [Member]
Assets:
Total assets	2,584	2,999
Corporate Bonds [Member]
Assets:
Total assets	8,099	2,920
Asset-backed Securities [Member]
Assets:
Total assets	3,978
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets:
Total assets	2,584	2,999
Liabilities:
Acquisition-related contingent consideration
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U.S. Government Securities [Member]
Assets:
Total assets	2,584	2,999
Significant Other Observable Inputs (Level 2) [Member]
Assets:
Total assets	23,221	23,166
Liabilities:
Acquisition-related contingent consideration
Significant Other Observable Inputs (Level 2) [Member] | Money Market Funds [Member]
Assets:
Total assets	2,603	12,774
Significant Other Observable Inputs (Level 2) [Member] | Commercial Paper [Member]
Assets:
Total assets	8,541	7,472
Significant Other Observable Inputs (Level 2) [Member] | Corporate Bonds [Member]
Assets:
Total assets	8,099	2,920
Significant Other Observable Inputs (Level 2) [Member] | Asset-backed Securities [Member]
Assets:
Total assets	3,978
Significant Other Unobservable Inputs (Level 3) [Member]
Liabilities:
Acquisition-related contingent consideration	31,182	37,098
Total liabilities	$ 31,182	$ 37,098

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Fair Value (Level 3 Fair Value Measurements Using Significant Other Unobservable Inputs for Acquisition-Related Contingent Consideration) (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Fair Value [Abstract]
Beginning Balance	$ 37,098	$ 41,176
Amounts acquired
Changes in fair value included in earnings	(5,916)	(4,078)
Ending Balance	$ 31,182	$ 37,098

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Intangible Assets (Narative) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Intangible Assets [Abstract]
Amortization of intangible assets	$ 342	$ 342	$ 684	$ 684

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Intangible Assets (Company's Intangible Assets) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Finite-Lived Intangible Assets [Line Items]
Cost	$ 55,442	$ 55,442
Accumulated Amortization	$ 5,362	4,678
Fusion Technology [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life	10 years
Cost	$ 9,242	9,242
Accumulated Amortization	$ 4,159	3,697
SUBTLE Access Technology [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life	5 years
Cost	$ 2,179	2,179
Accumulated Amortization	1,203	981
IPR&D [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	$ 44,021	$ 44,021

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Intangible Assets (Future Amortization Expense Related to Intangible Assets with Definite Lives) (Details) $ in Thousands	Jun. 30, 2018 USD ($)
Intangible Assets [Abstract]
2018	$ 683
2019	1,367
2020	1,235
2021	924
2022	925
2023 and thereafter	925
Total	$ 6,059

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Accrued Liabilities (Accrued Liabilities) (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Accrued Liabilities [Abstract]
Accrued commissions	$ 5,416	$ 6,964
Accrued payroll and employee-related expenses	4,370	4,097
Accrued bonus	4,163	4,726
Sales returns and allowances	1,319	1,169
Other accrued liabilities	701	695
Accrued royalties	669	626
Accrued taxes	523	634
Total	$ 17,161	$ 18,911

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Indebtedness (Narrative) (Details) - USD ($)			6 Months Ended
	Feb. 23, 2018	Apr. 25, 2016	Jun. 30, 2018	Oct. 31, 2015
Line of Credit Facility [Line Items]
Accumulated amortization on the capital leases			$ 2,699,000
Maximum [Member]
Line of Credit Facility [Line Items]
Letter of credit required to landlord			1,250,000
Silicon Valley Bank Agreement [Member] | Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Line of credit			0
Line of credit, availability			$ 18,750,000
Silicon Valley Bank, Second Amended And Restated Loan Agreement [Member]
Line of Credit Facility [Line Items]
Principal payment starting period after inception of loan to maturity	18 months
Silicon Valley Bank, Amended And Restated Loan Agreement Effective 2/23/18 [Member]
Line of Credit Facility [Line Items]
Upon certain conditions met, deferred loan payment period			6 months
Silicon Valley Bank, Amended And Restated Loan Agreement Effective 2/23/18 [Member] | Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Line of credit, maximum borrowing capacity	$ 20,000,000
Maturity date			Feb. 28, 2023
Optional increase in line of credit	$ 20,000,000
Additional fee on total term loan			0.33%
Silicon Valley Bank, Amended And Restated Loan Agreement Effective 2/23/18 [Member] | Revolving Credit Facility [Member] | Prime Rate [Member]
Line of Credit Facility [Line Items]
Basis rate			4.50%
Building And Equipment [Member]
Line of Credit Facility [Line Items]
Capital lease expiration period			Dec. 31, 2030
Cost of assets under lease			$ 14,462,000
Term Loan [Member] | Silicon Valley Bank, Second Amended And Restated Loan Agreement [Member]
Line of Credit Facility [Line Items]
Loan term	5 years
Term Loan [Member] | Silicon Valley Bank, Amended And Restated Loan Agreement Effective 2/23/18 [Member]
Line of Credit Facility [Line Items]
Loan amount	$ 40,000,000
Additional fee on total term loan		3.50%
Accrued fee amount			93,000
Financing costs			$ 744,000
Term Loan [Member] | Silicon Valley Bank, Amended And Restated Loan Agreement Effective 2/23/18 [Member] | Prime Rate [Member]
Line of Credit Facility [Line Items]
Basis rate			3.75%
Interest rate			8.25%
Mason Lease [Member] | Letter of Credit [Member]
Line of Credit Facility [Line Items]
Letter of credit outstanding				$ 1,250,000

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Indebtedness (Future Maturities On Debt And Capital Lease Obligations) (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Indebtedness [Abstract]
2018	$ 736
2019	5,303
2020	12,943
2021	12,947
2022	12,968
2023 and thereafter	16,260
Total payments	61,157
Imputed interest	(6,676)
Net long-term debt and capital lease obligations, of which $589 is current and $53,892 is noncurrent	54,481
Net capital lease obligations, current	589	$ 561
Net capital lease obligations, noncurrent	$ 53,892

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Commitments and Contingencies (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Commitments and Contingencies [Line Items]
Royalty expense	$ 695	$ 602	$ 1,367	$ 1,136
Minimum [Member]
Commitments and Contingencies [Line Items]
Royalty rates			3.00%
Royalty agreement term			18 years
Maximum [Member]
Commitments and Contingencies [Line Items]
Royalty rates			5.00%
Royalty agreement term			20 years
Office, Manufacturing, Warehouse Facilities, And Equipment [Member]
Commitments and Contingencies [Line Items]
Operating leases expire at various terms			Dec. 31, 2022

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Income Tax Provision (Narrative) (Details)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Income Tax Provision [Abstract]
Effective tax rate	(16.64%)	(0.25%)	(0.92%)	(0.23%)
Federal tax at statutory rate			21.00%		35.00%

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Equity Compensation Plans (Narrative) (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2018 USD ($) item shares	May 31, 2018 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of share-based incentive plans | item	2
Participants purchase limit shares	3,000
Offering period	6 months
Minimum [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	1 year
Maximum [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	4 years
2014 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiry of options from the date of grant	10 years
Common stock reserved for issuance	10,249,000
Shares available for future grants	513,000
Shares approved		850,000
2014 Plan [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercisable period beginning	3 years
2008 Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock reserved for issuance	136,000
Company's common stock may be purchased at a discount	15.00%
Participants purchase limit value | $	$ 25
2018 PSAs [Member] | Performance Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting right of shares of common stock	1
Vesting period	3 years
2018 PSAs [Member] | Minimum [Member] | Performance Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance stock award threshold, target and maximum payout opportunity percentage	0.00%
2018 PSAs [Member] | Maximum [Member] | Performance Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance stock award threshold, target and maximum payout opportunity percentage	200.00%
2018 Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock reserved for issuance	500,000
First Anniversary Date Of Grant [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Annual vesting percentage	0.33%
First Anniversary Date Of Grant [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Annual vesting percentage	0.33%
First Anniversary Date Of Grant [Member] | 2014 Plan [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Annual vesting percentage	25.00%
Second Anniversary Date Of Grant [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Annual vesting percentage	0.33%
Second Anniversary Date Of Grant [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Annual vesting percentage	0.33%
Second Anniversary Date Of Grant [Member] | 2014 Plan [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Annual vesting percentage	25.00%
Third Anniversary Date Of Grant [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Annual vesting percentage	0.33%
Third Anniversary Date Of Grant [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Annual vesting percentage	0.33%
Third Anniversary Date Of Grant [Member] | 2014 Plan [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Annual vesting percentage	25.00%

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Equity Compensation Plans (Share-Based Compensation Expense Related to Employee Share-Based Compensation) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total	$ 3,534	$ 3,697	$ 7,424	$ 7,325
Cost of Revenue [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total	239	138	476	269
Research and Development Expenses [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total	361	502	952	1,003
Selling, General and Administrative Expenses [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total	$ 2,934	$ 3,057	$ 5,996	$ 6,053

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Segment and Geographic Information (Narrative)(Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Europe [Member]
Long-lived assets	$ 1,006	$ 957

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Segment and Geographic Information (Revenue by Geographic Area) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	$ 51,802	$ 45,231	$ 98,796	$ 86,504
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	40,834	35,534	79,270	68,802
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	6,694	5,688	12,565	10,877
Asia [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	4,049	3,785	6,488	6,436
Other International [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	225	224	473	389
International [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	$ 10,968	$ 9,697	$ 19,526	$ 17,702

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Segment and Geographic Information (Revenue by Product Type) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Revenue from External Customer [Line Items]
Revenue	$ 51,802	$ 45,231	$ 98,796	$ 86,504
United States [Member]
Revenue from External Customer [Line Items]
Revenue	40,834	35,534	79,270	68,802
United States [Member] | Open-heart Ablation [Member]
Revenue from External Customer [Line Items]
Revenue	18,073	16,790	35,652	32,495
United States [Member] | Minimally Invasive Ablation [Member]
Revenue from External Customer [Line Items]
Revenue	9,114	8,725	17,727	17,007
United States [Member] | Appendage Management [Member]
Revenue from External Customer [Line Items]
Revenue	13,101	9,463	24,898	18,165
United States [Member] | Ablation And Appendage Management [Member]
Revenue from External Customer [Line Items]
Revenue	40,288	34,978	78,277	67,667
United States [Member] | Valve Tools [Member]
Revenue from External Customer [Line Items]
Revenue	546	556	993	1,135
International [Member]
Revenue from External Customer [Line Items]
Revenue	10,968	9,697	19,526	17,702
International [Member] | Open-heart Ablation [Member]
Revenue from External Customer [Line Items]
Revenue	5,836	5,674	10,745	10,264
International [Member] | Minimally Invasive Ablation [Member]
Revenue from External Customer [Line Items]
Revenue	2,660	2,135	4,452	4,093
International [Member] | Appendage Management [Member]
Revenue from External Customer [Line Items]
Revenue	2,424	1,777	4,222	3,172
International [Member] | Ablation And Appendage Management [Member]
Revenue from External Customer [Line Items]
Revenue	10,920	9,586	19,419	17,529
International [Member] | Valve Tools [Member]
Revenue from External Customer [Line Items]
Revenue	$ 48	$ 111	$ 107	$ 173