What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-07-30 compared with 2025-04-30 · 88 added, 40 removed, 125 unchanged (51% of the section changed)

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(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, 2024 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.

This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions.

The actual results may differ from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those set forth under Item 1A “Risk Factors,” the cautionary statement regarding forward-looking statements below and elsewhere in this Form 10-Q.

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 consolidated financial statements and notes thereto as well as the information under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as of and for the year ended December 31, 2024 included in our Form 10-K filed with the Securities and Exchange Commission (SEC).

This discussion and analysis is intended to provide an understanding of our results of operations, financial condition and cash flows and contains forward-looking statements reflecting current expectations that involve risks, uncertainties and assumptions.

The actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those set forth under Item 1A “Risk Factors,” the cautionary statement regarding forward-looking statements below and elsewhere in this Form 10-Q.

Forward-Looking Statements

This Form 10-Q, including the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, "Quantitative and Qualitative Disclosures about Market Risk" 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, 2024.

This Form 10-Q contains forward-looking statements.

We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21F of the Securities Exchange Act of 1934.

There may be additional risks of which we are not presently aware or that we currently believe are immaterial which could have an adverse impact on our business.

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Forward-looking statements are based on AtriCure’s expectations, 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.

In light of these risks, uncertainties and other factors, the forward-looking events and circumstances described may not occur and our financial condition and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

In other words, these statements are not guarantees of future performance and inherently involve a wide range of risks and uncertainties that are difficult to predict.

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.

Some of the factors that could cause actual results to differ from our expectations include regional, national, or global political, economic, business, competitive, market and regulatory conditions and the other factors included in our Form 10-K for the fiscal year ended December 31, 2024 in “Item 1A Risk Factors,” “Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Item 7A Quantitative and Qualitative Disclosures About Market Risk.” 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.

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Minimally invasive procedures are performed on a standalone basis, and often include multi-disciplinary or “hybrid” approaches, combining surgical procedures using AtriCure ablation and LAAM products with catheter ablation procedures performed by electrophysiologists.

Our pain management devices are used by physicians to freeze nerves during cardiothoracic or thoracic surgical procedures.

Our pain management devices are used by physicians to freeze nerves during cardiothoracic or thoracic

surgical procedures.

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.

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Recent Developments

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.

In 2025, we continued to realize strong growth across most 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 six months ended June 30, 2025 was $259,759, representing an increase of $34,639, or 15.4% (15.3% on a constant currency basis), over the first six months of 2024, highlighted by accelerated adoption in our 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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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.

We expect to launch the AtriClip PRO-Mini device in the second half of 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.

We expect to launch the cryoXT probe in the second half of 2025.

CLINICAL SCIENCE .

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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 first quarter of 2025 with over 5,100 patients enrolled.

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

The first patient was enrolled in the trial in January 2023, and in July 2025, we completed trial enrollment of 6,500 patients across 137 centers globally.

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.

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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.

FDA approved the trial protocol during the fourth quarter of 2024, and we expect site initiation and enrollment 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.

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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.

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.

Results of Operations

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

Three months ended June 30, 2025 compared to three months ended June 30, 2024

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

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Loss from operations (6,192) (4.5) (7,168) (6.2)

Other expense, net:

Other income (expense), net

263 0.2 (587) (0.5)

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Three Months Ended

March 31, Change

June 30, Change

2025 2024 Amount %

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Worldwide revenue increased 17.1% (16.5% on a constant currency basis).

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.

In the United States, sales grew in most product lines with significant contribution from our AtriClip ® FLEX-Mini™ for appendage management and our cryoSPHERE MAX ™ probe for post-operative pain management, both launched in the second half of 2024, and our EnCompass ® clamp for open ablation.

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

International sales increased 23.3% (19.9% on a constant currency basis), with broad growth across our franchises and geographic regions.

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 $5,232 primarily reflecting higher sales volumes.

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

Gross margin decreased 15 basis points, driven by less favorable geographic and product mix.

Research and development expenses.

Research and development expenses increased $8,868 or 43.4%.

During the second quarter of 2025, the Company paid the first milestone of the Cooperation Agreement (see Note 8 – Commitments and Contingencies for related discussion) and recorded acquired in-process research and development (IPR&D) expense of $5,000.

Clinical trial expenses increased $2,185 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.

Expansion of product development, clinical and regulatory teams resulted in $1,925 higher personnel costs including share-based compensation.

Selling, general and administrative expenses.

Selling, general and administrative expenses increased $4,794, or 6.5%, driven by a $6,081 increase in personnel costs, primarily reflecting headcount growth.

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

These increases were partially offset by lower marketing and training costs of $803 and travel costs of $537.

Other income (expense).

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

Other income increased $851 due to $751 of net foreign currency transaction gains and net interest expense decreased $76 from lower borrowing costs.

Six months ended June 30, 2025 compared to six months ended June 30, 2024

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

Revenues Amount % of

Revenue $ 259,759 100.0 % $ 225,120 100.0 %

Cost of revenue 65,649 25.3 57,008 25.3

Gross profit 194,110 74.7 168,112 74.7

Operating expenses:

Research and development expenses 51,812 19.9 40,261 17.9

Selling, general and administrative expenses 154,444 59.5 145,936 64.8

Total operating expenses 206,256 79.4 186,197 82.7

Loss from operations (12,146) (4.7) (18,085) (8.0)

Other expense, net

(291) (0.1) (2,756) (1.2)

Loss before income tax expense (12,437) (4.8) (20,841) (9.3)

Income tax expense 500 0.2 436 0.2

Net loss $ (12,937) (5.0) % $ (21,277) (9.5) %

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:

Six Months Ended

June 30, Change

2025 2024 Amount %

Open ablation $ 69,776 $ 60,060 $ 9,716 16.2 %

Minimally invasive ablation 16,319 24,146 (7,827) (32.4)

Pain management 38,438 27,745 10,693 38.5

Appendage management 87,199 73,837 13,362 18.1

Total United States $ 211,732 $ 185,788 $ 25,944 14.0

Total International 48,027 39,332 8,695 22.1

Total revenue $ 259,759 $ 225,120 $ 34,639 15.4 %

Worldwide revenue increased 15.4% (15.3% on a constant currency basis).

In the United States, sales grew in most

product lines with strong contribution from our cryoSPHERE MAX probe for post-operative pain management, AtriClip ® FLEX-Mini for appendage management and our EnCompass clamp in open ablation.

Minimally invasive ablation and minimally invasive appendage management sales declined in the first half of the year as physicians referred fewer patients for Hybrid procedures.

International sales increased 22.1% (21.8% on a constant currency basis), with growth in major geographic markets across all product lines.

Cost of revenue and gross margin.

Cost of revenue increased $8,641 as a result of higher sales volumes with flat gross margin year over year.

Research and development expenses.

Research and development expenses increased $11,551 or 28.7%, driven by the first milestone payment of $5,000 for acquired IPR&D.

Clinical trial expenses increased $4,210 driven by LeAAPS clinical trial patient enrollment and follow up activities.

Personnel costs, including share-based compensation, increased $3,641 as a result of headcount growth.

These increases were partially offset by a $912 reduction in regulatory filing costs as a result of the timing of product development initiatives.

Selling, general and administrative expenses.

Selling, general and administrative expenses increased $8,508, or 5.8%, driven by a $10,312 increase in personnel costs, primarily reflecting headcount growth.

These increases were partially offset by $1,086 decrease in marketing and training costs and $1,079 decrease in travel costs.

Other income (expense).

Other expense decreased $2,465, primarily due to the $1,362 loss on debt extinguishment during the first quarter of 2024.

Net foreign currency transaction gain increased $653 and net interest expense decreased $437 from lower borrowing costs.

Liquidity and Capital Resources

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

As of June 30, 2025, we had cash and cash equivalents of $117,796 and outstanding debt of $61,865.

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

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

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.

We had net working capital of $202,414 and an accumulated deficit of $414,692 as of June 30, 2025.

Consolidated Cash Flows - For the six months ended June 30, 2025 and 2024

Cash flows provided by operating activities.

Net cash provided by operating activities increased $24,227 from 2024 to 2025, reflecting improved operating results of $8,340, driven by higher sales and moderating growth in operating expenses.

This improvement includes an adjustment of $5,000 related to the acquired IPR&D milestone payment.

Cash used for working capital and other assets and liabilities decreased $9,958 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.

Net cash used in investing activities increased by $49,878 from 2024 to 2025 2024, due to a $45,668 decrease in sales and maturities of available-for-sale securities and the first acquired IPR&D milestone payment for $5,000.

Cash flows used in financing activities.

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

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

The Credit 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 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.

As of June 30, 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 June 30, 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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Recent Accounting Pronouncements

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.

As of June 30, 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 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.

As of June 30, 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