What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-04-30 compared with 2024-10-30 · 52 added, 108 removed, 113 unchanged (59% of the section changed)

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Recent Developments

In 2024, we realized strong global revenue growth resulting from our continued strategic initiatives of product innovation, clinical science and physician education and training to expand awareness and adoption.

Our worldwide revenue for the nine months ended September 30, 2024 was $341,030, representing an increase of $48,328, or 16.5%, over the first nine months of 2023, driven by growing adoption across key product lines as well as new product launches.

During the first quarter of 2025, we realized strong growth across many of our key franchises and geographies, resulting from our continued strategic initiatives of product innovation, clinical science and physician education and training to expand awareness and adoption.

Our worldwide revenue for the three months ended March 31, 2025 was $123,620, representing an increase of $14,769, or 13.6% (14.1% on a constant currency basis), over the first three months of 2024, highlighted by accelerated adoption in our open-chest appendage management and pain management product lines, where recent product launches contributed to growth.

Historically there have been limited competitors in our key markets.

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We continue to invest in research and development of new products and pursue regulatory approvals to market and sell globally across all franchises.

Throughout 2024, we received several additional CE Mark certifications under the European Medical Device Regulation (EU MDR).

During the third quarter 2024, we received regulatory approval to sell the ENCOMPASS ® clamp in CE-marked countries in the European Union, representing a significant expansion of our open ablation franchise products in Europe.

• Minimally invasive .

In the first half of 2024, FDA granted 510(k) clearance for EPi-Ease™, our Hybrid access device to facilitate guide-wire delivery, vacuum application and endoscope insertion.

During the third quarter, FDA granted 510(k) clearance for our EnCapture clamp, the newest in our line of Isolator ® Synergy™ Ablation System clamps, with enhanced geometry and features to facilitate engagement with intended cardiac tissue.

• Pain management .

During the second quarter of 2024, we launched the cryoSPHERE ® + cryoablation probe for pain management in the US.

The cryoSPHERE ® + device leverages new technology that minimizes thermal loss by focusing energy at the ball tip, allowing for a reduction in freeze time by 25%.

Further, the cryoSPHERE MAX™ probe, recently launched in October 2024, features a larger ball tip designed to optimize Cryo Nerve Block therapy.

This new probe reduces freeze times by 50% when compared to the first generation cryoSPHERE ® cryoablation probe, and over 30% when compared to the cryoSPHERE ® + probe.

• Appendage management .

The first patient was treated and we launched the AtriClip ® FLEX-Mini™ device in the US during the third quarter of 2024.

The AtriClip FLEX-Mini sets a new standard as the smallest profile for surgical LAA device on the market and builds upon the proven technology of our AtriClip platform, with ease of use and design simplicity that offers enhanced access and increased visibility for physicians.

We also obtained additional international regulatory approvals for our AtriClip platform during the third quarter.

In China, we received approval to market and sell several models of our AtriClip ® Left Atrial Appendage Exclusion System from the National Medical Products Administration (NMPA) of China.

In CE-marked countries in Europe, we received expanded indication for the AtriClip for use in patients at high risk of thromboembolism for whom left atrial appendage exclusion is warranted.

• During the first quarter of 2025, FDA granted 510(k) clearance for the AtriClip ® PRO-Mini ™ LAA Exclusion System.

The device is built on the existing AtriClip platform, preloaded with the smallest surgical LAA management implant available in the market.

The size reduction provides surgeons with enhanced visualization for precise, secure exclusion of the LAA during minimally invasive procedures.

We expect to launch the AtriClip PRO-Mini device later in 2025.

• In April 2025, FDA granted 510(k) clearance for the cryoICE ® cryoXT™ probe, a cryoablation device designed specifically for Cryo Nerve Block therapy to alleviate pain in amputation patients.

This device temporarily blocks pain by freezing target peripheral nerves, blocking the conduction pathway at the site of amputation.

We expect to launch the cryoXT probe later in 2025.

CLINICAL SCIENCE .

We invest in studies to expand labeling claims, support various indications for our products and gather and publish clinical data for therapies and procedures involving our products.

One of our critical initiatives is the Left Atrial Appendage Exclusion for Prophylactic Stroke Reduction (LeAAPS) IDE clinical trial.

LeAAPS is designed to evaluate the effectiveness of prophylactic LAA exclusion using the AtriClip LAA Exclusion System for the prevention of ischemic stroke or systemic arterial embolism in cardiac surgery patients without pre-operative AF diagnosis who are at risk for these events.

The Left Atrial Appendage Exclusion for Prophylactic Stroke Reduction (LeAAPS) IDE clinical trial is designed to evaluate the effectiveness of prophylactic LAA exclusion using the AtriClip LAA Exclusion System for the prevention of ischemic stroke or systemic arterial embolism in cardiac surgery patients without pre-operative AF diagnosis who are at risk for these events.

This prospective, multicenter, randomized trial evaluates safety at 30 days post-procedure to demonstrate no increased risk with LAA exclusion during cardiac surgery, and efficacy over a minimum follow-up of five years post procedure.

The trial provides for enrollment of up to 6,500 subjects at up to 250 sites worldwide.

The first patient was enrolled in the trial in January 2023, and we ended the third quarter of 2024 with over 3,400 patients enrolled.

Site initiation and enrollment is ongoing.

The first patient was enrolled in the trial in January 2023, and we ended the first quarter of 2025 with over 5,100 patients enrolled.

Trial enrollment is expected to be completed in the second half of 2025.

The EnCompass clamp and the AtriClip in Box Lesion and Left Atrial Appendage E X clusion Procedure for the Prevention of N ew O nset of A trial F ibrillation (BoxX-NoAF) IDE trial will evaluate the impact of concomitant ablation and LAA exclusion in non-AF patients for the reduction of post-operative AF (POAF) and Clinical AF.

This prospective, multi-center, multi-national randomized trial evaluates safety at 30 days post-procedure for POAF and secondary effectiveness for Clinical AF through three years.

The trial provides enrollment of up to 960 subjects.

FDA approved the trial protocol during the fourth quarter of 2024, and we expect site initiation to begin later this year.

Our professional education team conducts a variety of in-person and virtual training programs for physicians and other healthcare professionals.

These training methods ensure access to continuing education and awareness of our products and related procedures.

During 2023, we launched new training courses for Advanced Practice Providers, pain management in pectus procedures, as well as a best practice course for developing arrhythmia programs, with a primary focus on Hybrid therapies.

These training events allow for collaborative, hands-on engagement with our physician partners and other healthcare professionals.

During 2025, we launched new and innovative training methods for physicians that include virtual proctoring and observerships as well as the ability to review case-in-a-box on a peer-to-peer basis.

We have also extended our courses for Advanced Practice Providers, incorporating new content and workshops.

We also recently launched our first electronic manual created by physicians for physicians that provides an outline for best practices in developing and growing a Hybrid Ablation Program.

These new training events along with our traditional on-demand, local and national training courses allow for collaborative, hands-on engagement with our physician partners and other healthcare professionals.

Additionally, our professional education courses continue to be enhanced by the use of simulation models or synthetic cadavers, known as CADets.

These reusable CADets provide a sustainable alternative to the use of cadaver specimens, in addition to increasing the efficiencies of education and more cost effective training alternatives.

In 2024, we continue to innovate physician training to improve accessibility and efficiency for our physician partners.

We are currently piloting the use of live streaming to enable remote proctoring and case observation.

Results of Operations

Three months ended September 30, 2024 compared to three months ended September 30, 2023

Three months ended March 31, 2025 compared to three months ended March 31, 2024

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

September 30,

Revenues Amount % of

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Three Months Ended

September 30, Change

March 31, Change

2025 2024 Amount %

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Worldwide revenue increased 13.6% (14.1% on a constant currency basis).

In the United States, sales grew in key product lines, including our ENCOMPASS ® clamp in open ablation, AtriClip ® Flex⋅V ® for appendage management and our cryoSPHERE ® probes for post-operative pain management.

Growth in minimally invasive ablation was driven by our EPi-Sense ® System devices for Hybrid AF™ Therapy.

International sales increased 23.3% (22.4% on a constant currency basis), with strength across all franchises in Europe and most of our other major markets.

In the United States, sales grew in most product lines with strong contribution from our EnCompass ® clamp in open ablation, AtriClip ® FLEX-Mini™ for appendage management and our cryoSPHERE MAX ™ probe for post-operative pain management.

Minimally invasive ablation and minimally invasive appendage management sales declined during the quarter as customers referred fewer patients for Hybrid procedures.

International sales increased 20.8% (23.9% on a constant currency basis), with growth in major geographic markets driven by appendage management, open ablation and pain management franchises.

Revenue reported on a constant currency basis is a non-GAAP measure calculated by applying previous period foreign currency exchange rates, which are determined by the average daily exchange rate, to each of the comparable periods.

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Cost of revenue increased $3,409 primarily reflecting higher sales volumes.

Gross margin decreased 27 basis points, driven primarily by less favorable geographic and product mix.

Gross margin increased 27 basis points, driven by favorable product mix.

Research and development expenses.

Research and development expenses increased $2,683 or 13.5%.

Expansion of product development, clinical and regulatory teams resulted in $1,815 increase in personnel costs including travel and share-based compensation.

Clinical trial expenses increased $739 from increased clinical activity and consulting costs, driven by LeAAPS clinical trial patient enrollment and follow up activities.

These increases were partially offset by a $2,179 decrease in product development project spend and regulatory filings and submission costs incurred in 2023 related to several products brought to market in 2024, including cryoSPHERE+ and AtriClip FLEX-Mini.

Clinical trial expenses increased $2,025 driven by LeAAPS clinical trial patient enrollment and follow up activities.

Expansion of product development, clinical and regulatory teams resulted in $1,661 increase in personnel costs including share-based compensation.

These increases were partially offset by a $692 reduction in regulatory filing and submission costs as a result of the timing of product development initiatives.

Selling, general and administrative expenses.

Selling, general and administrative expenses increased $11,634, or 18.9%, driven by $9,337 increase in personnel costs including travel and share-based compensation, primarily reflecting headcount growth and variable compensation.

Consulting fees increased $1,274, while marketing and meeting costs increased $725.

Professional services, IT and other corporate costs grew $444, offset by a $401 decrease in training costs.

Selling, general and administrative expenses increased $3,714, or 5.1%, driven by a $4,238 increase in personnel costs, primarily reflecting headcount growth.

These increases were partially offset by a $542 decrease in travel costs.

Other income (expense).

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

Nine months ended September 30, 2024 compared to nine months ended September 30, 2023

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

Nine Months Ended

September 30,

Revenues Amount % of

Revenue $ 341,030 100.0 % $ 292,702 100.0 %

Cost of revenue 86,125 25.3 72,147 24.6

Gross profit 254,905 74.7 220,555 75.4

Operating expenses:

Research and development expenses 61,221 18.0 53,119 18.1

Selling, general and administrative expenses 219,174 64.3 185,451 63.4

Total operating expenses 280,395 82.2 238,570 81.5

Loss from operations (25,490) (7.5) (18,015) (6.2)

Other expense, net:

(2,882) (0.8) (2,416) (0.8)

Loss before income tax expense (28,372) (8.3) (20,431) (7.0)

Income tax expense 758 0.2 218 0.1

Net loss $ (29,130) (8.5) % $ (20,649) (7.1) %

The following table sets forth, for the periods indicated, our revenue by product type and geography expressed as dollar amounts and the corresponding change in such revenues between periods, in both dollars and percentages:

Nine Months Ended

September 30, Change

2024 2023 Amount %

Open ablation $ 90,661 $ 77,988 $ 12,673 16.2 %

Minimally invasive ablation 35,263 31,900 3,363 10.5

Pain management 44,059 36,249 7,810 21.5

Appendage management 111,257 98,647 12,610 12.8

Total United States $ 281,240 $ 244,784 $ 36,456 14.9

Total International 59,790 47,918 11,872 24.8

Total revenue $ 341,030 $ 292,702 $ 48,328 16.5 %

Worldwide revenue increased 16.5% (16.5% on a constant currency basis).

In the United States, growth in all key product lines reflected continuing adoption of our products, including the ENCOMPASS clamp in open ablation, Hybrid AF Therapy procedures using the EPi-Sense System in minimally invasive ablation, cryoSPHERE probes for post-operative pain

management and AtriClip Flex⋅V for appendage management in open-chest procedures.

International sales increased 24.8% (24.6% on a constant currency basis), across all franchises and major geographic regions.

Cost of revenue and gross margin.

Cost of revenue increased $13,978, reflecting higher sales volumes, while gross margin decreased 61 basis points, primarily driven by less favorable geographic and product mix, as well as an increase in product costs.

Research and development expenses.

Research and development expenses increased $8,102 or 15.3%, primarily from a $5,305 increase in personnel costs as a result of additional headcount in our product development, regulatory, and clinical teams.

Clinical trial expenses increased $3,448 due to increased clinical activity primarily driven by the LeAAPS trial.

These were partially offset by a $574 decrease due to higher regulatory approval costs in 2023.

Selling, general and administrative expenses.

Selling, general and administrative expenses increased $33,723, or 18.2%, due to a $22,763 increase in personnel costs, including travel and share-based compensation, as a result of growth in headcount and variable compensation.

Selling, general and administrative expenses also increased $1,877 for professional services, IT and corporate costs reflecting operational growth, a $1,892 increase in marketing, training and meeting activities and an increase of $901 in consulting fees.

The increase was further driven by a $4,412 non-recurring net gain during 2023 related to legal settlements;

see Note 9 - Commitments and Contingencies for related discussion.

Other income (expense).

During the first quarter of 2024, the Company recognized a loss on debt extinguishment of $1,362;

see Note 7 - Indebtedness for related discussion.

The remaining activity consists primarily of net interest expense and net foreign currency transaction gains or losses.

Liquidity and Capital Resources

As of September 30, 2024, we had cash, cash equivalents and investments of $130,335 and outstanding debt of $61,865.

As of March 31, 2025, we had cash and cash equivalents of $99,885 and outstanding debt of $61,865.

We had unused borrowing capacity of $61,885 (see Note 6 – Indebtedness for related discussion).

All cash equivalents and investments and most of our operating cash are held in United States financial institutions.

All cash equivalents and most of our operating cash is held in United States financial institutions.

A small portion of our cash is held in foreign banks to support our international operations.

We had net working capital of $194,855 and an accumulated deficit of $386,187 as of September 30, 2024.

Consolidated Cash Flows - For the nine months ended September 30, 2024 and 2023

Cash flows provided by operating activities.

Net cash provided by operating activities increased $5,914 from 2023 to 2024.

Operating results declined $8,481, primarily due to a $4,412 nonrecurring net gain for legal settlements recorded in 2023.

In addition, non-cash charges increased $7,633 in 2024.

Cash used for working capital and other assets and liabilities decreased $6,762 due to collection of accounts receivable and moderating investments in inventory in 2024, partially offset by higher annual variable compensation payments due to improved operating performance.

Cash flows provided by investing activities.

Net cash provided by investing activities increased by $20,324 in 2024 compared to 2023, due to the cash paid for acquisition of intellectual property in the prior year of $30,000, offset by a $10,147 decrease in sales and maturities of available-for-sale securities.

We had net working capital of $190,263 and an accumulated deficit of $408,502 as of March 31, 2025.

Consolidated Cash Flows - For the three months ended March 31, 2025 and 2024

Cash flows used in operating activities.

Net cash used in operating activities decreased $9,990 from 2024 to 2025, reflecting the improvement in operating results of $6,522, driven by higher sales and improvements to operating margin.

In addition, cash used for working capital and other assets and liabilities decreased $3,691 primarily due to moderating investments in inventory.

Cash flows used in investing activities.

Net cash used in investing activities increased by $11,325 in 2025 compared to 2024, due a $12,418 decrease in sales and maturities of available-for-sale securities offset by a $500 increase in capital grant proceeds and $593 decrease of purchases of property and equipment.

Cash flows used in financing activities.

Net cash used in financing activities increased by $2,463 in 2025.

This increase was a result of a $1,623 payment for extinguishment of debt and financing fees, net of borrowings, and a $998 decrease in proceeds from stock option exercises and the employee stock purchase plan.

This increase was a result a $3,635 increase in shares repurchased for payment of taxes on stock awards, offset by a $1,428 reduction of payments for extinguishment of debt and financing fees from 2024.

Credit facility.

As of January 5, 2024, we entered into a credit agreement (Credit Agreement) with JPMorgan Chase Bank, N.A.

The Company has a credit agreement (Credit Agreement) with JPMorgan Chase Bank, N.A.

as Administrative Agent, JPMorgan Chase Bank, N.A.

and Silicon Valley Bank, a division of First-Citizens Bank and Trust Company, as Joint Lead Arrangers and Joint Bookrunners that provides for a $125,000 asset-based revolving credit facility (ABL Facility), with an option to increase the revolving commitment by an additional $40,000.

and Silicon Valley Bank, a division of First-Citizens Bank and Trust Company, as Joint Lead Arrangers and Joint Bookrunners effective January 5, 2024.

The Credit Agreement provides for a $125,000 asset-based revolving credit facility (ABL Facility), with an option to increase the revolving commitment by an additional $40,000.

A portion of the ABL Facility, limited to $5,000, is available for the issuance of letters of credit.

The Credit Agreement has a three-year term and expires January 5, 2027.

Agreement has a three-year term and expires January 5, 2027.

Amounts available to be drawn from time to time under the ABL Facility are determined by calculating the applicable borrowing base, which is based upon applicable percentages of the values of eligible accounts receivable, eligible inventory, eligible liquid assets, less reserves as determined by the Administrative Agent, all as specified in the Credit Agreement.

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(i) an alternate base rate (ABR) plus an applicable margin or (ii) an adjusted term secured overnight financing rate (SOFR) plus an applicable margin.

As of September 30, 2024, the Company has borrowed $61,865, classified as noncurrent and had unused borrowing availability of $61,885.

Our corporate headquarters lease agreement requires a $1,250 letter of credit which we renew annually and remains outstanding as of September 30, 2024.

As of March 31, 2025, the Company has borrowed $61,865, classified as noncurrent and had unused borrowing availability of $61,885.

Our corporate headquarters lease agreement requires a $1,250 letter of credit which we renew annually and remains outstanding as of March 31, 2025.

For additional information on the terms and conditions, as well as applicable interest and fee payments, see Note 6 – Indebtedness.

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Our executive officers and Board of Directors review our funding sources and future capital requirements in connection with our annual operating plan and periodic updates to the plan.

Our principal cash requirements include costs of operations, capital expenditures, debt service costs and other contractual obligations.

Our future capital requirements depend on a number of factors, including, without limitation:

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costs to prosecute, defend and enforce our intellectual property rights;

costs to defend against and/or resolve litigation or claims against us;

maintenance and enhancements to our information systems and security;

and possible acquisitions and joint ventures, including potential business integration costs.

We continue to evaluate additional measures to maintain financial flexibility, and we will continue to closely monitor macroeconomic conditions including, but not limited to, inflationary pressures, rising interest rates, and fluctuations in currency exchange rates that may impact our liquidity and access to capital resources.

Our principal cash requirements include costs of operations, capital expenditures, debt service costs and other contractual obligations.

We continue to evaluate additional measures to maintain financial flexibility, and we will continue to closely monitor macroeconomic conditions including, but not limited to, inflationary pressures, rising interest rates, tariffs, and fluctuations in currency exchange rates that may impact our liquidity and access to capital resources.

Critical Accounting Policies and Estimates

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Recent Accounting Pronouncements

As of September 30, 2024, there were no material changes to the information provided regarding recent accounting pronouncements in Note 1, “Description of the Business and Summary of Significant Accounting Policies” in the Company’s Form 10-K for the fiscal year ended December 31, 2023.

As of March 31, 2025, there were no material changes to the information provided regarding recent accounting pronouncements in Note 1, “Description of the Business and Summary of Significant Accounting Policies” in the Company’s Form 10-K for the fiscal year ended December 31, 2024.

Quantitative and Qualitative Disclosures About Market Risk

As of September 30, 2024, 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, 2023.

As of March 31, 2025, 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, 2024.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis