AtriCure, Inc. 10-Q

Item 1. Financial Statements ATRICURE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands, Except Per Share Amounts) (Unaudited) June 30, 2025 December 31, 2024 Assets Current assets: Cash and cash equivalents $ 117,796 $ 122,721 Accounts receivable, less allowance for credit losses of $ 650 and $ 550 66,004 60,339 Inventories 76,344 75,335 Prepaid and other current assets 11,113 9,431 Total current assets 271,257 267,826 Property and equipment, net 40,681 41,659 Operating lease right-of-use assets 7,086 5,727 Intangible assets, net 52,246 56,467 Goodwill 234,781 234,781 Other noncurrent assets 2,798 2,868 Total Assets $ 608,849 $ 609,328 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 25,678 $ 25,032 Accrued liabilities 40,257 45,587 Current lease liabilities 2,908 2,805 Total current liabilities 68,843 73,424 Long-term debt 61,865 61,865 Finance and operating lease liabilities 12,478 11,860 Other noncurrent liabilities 1,172 1,210 Total Liabilities 144,358 148,359 Commitments and contingencies (Note 8) Stockholders’ Equity: Common stock, $ 0.001 par value, 90,000 shares authorized and 49,691 and 48,869 issued and outstanding 50 49 Additional paid-in capital 878,384 863,710 Accumulated other comprehensive income (loss) 749 ( 1,035 ) Accumulated deficit ( 414,692 ) ( 401,755 ) Total Stockholders’ Equity 464,491 460,969 Total Liabilities and Stockholders’ Equity $ 608,849 $ 609,328 See accompanying notes to condensed consolidated financial statements. 3 Table of Contents ATRICURE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In Thousands, Except Per Share Amounts) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Revenue $ 136,139 $ 116,269 $ 259,759 $ 225,120 Cost of revenue 34,657 29,425 65,649 57,008 Gross profit 101,482 86,844 194,110 168,112 Operating expenses: Research and development expenses 29,284 20,416 51,812 40,261 Selling, general and administrative expenses 78,390 73,596 154,444 145,936 Total operating expenses 107,674 94,012 206,256 186,197 Loss from operations ( 6,192 ) ( 7,168 ) ( 12,146 ) ( 18,085 ) Other income (expense): Interest expense ( 1,490 ) ( 1,612 ) ( 2,906 ) ( 3,289 ) Interest income 941 997 1,983 1,949 Loss on debt extinguishment — — — ( 1,362 ) Other income (expense) 812 28 632 ( 54 ) Loss before income tax expense ( 5,929 ) ( 7,755 ) ( 12,437 ) ( 20,841 ) Income tax expense 261 253 500 436 Net loss $ ( 6,190 ) $ ( 8,008 ) $ ( 12,937 ) $ ( 21,277 ) Basic and diluted net loss per share $ ( 0.13 ) $ ( 0.17 ) $ ( 0.27 ) $ ( 0.45 ) Weighted average shares outstanding—basic and diluted 47,721 46,909 47,557 46,814 Comprehensive income (loss): Unrealized gain on investments $ — $ 246 $ — $ 785 Foreign currency translation adjustment 979 ( 118 ) 1,784 ( 361 ) Other comprehensive income 979 128 1,784 424 Net loss ( 6,190 ) ( 8,008 ) ( 12,937 ) ( 21,277 ) Comprehensive loss, net of tax $ ( 5,211 ) $ ( 7,880 ) $ ( 11,153 ) $ ( 20,853 ) See accompanying notes to condensed consolidated financial statements. 4 Table of Contents ATRICURE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In Thousands) (Unaudited) Three-Month Period Ended June 30, 2024 Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Shares Amount Balance—March 31, 2024 48,381 $ 48 $ 827,288 $ ( 370,326 ) $ ( 697 ) $ 456,313 Impact of equity compensation plans 305 1 13,651 — — 13,652 Other comprehensive income — — — — 128 128 Net loss — — — ( 8,008 ) — ( 8,008 ) Balance—June 30, 2024 48,686 $ 49 $ 840,939 $ ( 378,334 ) $ ( 569 ) $ 462,085 Three-Month Period Ended June 30, 2025 Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Shares Amount Balance—March 31, 2025 49,493 $ 49 $ 863,302 $ ( 408,502 ) $ ( 230 ) $ 454,619 Impact of equity compensation plans 198 1 15,082 — — 15,083 Other comprehensive income — — — — 979 979 Net loss — — — ( 6,190 ) — ( 6,190 ) Balance—June 30, 2025 49,691 $ 50 $ 878,384 $ ( 414,692 ) $ 749 $ 464,491 Six-Month Period Ended June 30, 2024 Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Shares Amount Balance—December 31, 2023 47,526 $ 48 $ 824,170 $ ( 357,057 ) $ ( 993 ) $ 466,168 Impact of equity compensation plans 1,160 1 16,769 — — 16,770 Other comprehensive income — — — — 424 424 Net loss — — — ( 21,277 ) — ( 21,277 ) Balance—June 30, 2024 48,686 $ 49 $ 840,939 $ ( 378,334 ) $ ( 569 ) $ 462,085 Six-Month Period Ended June 30, 2025 Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Shares Amount Balance—December 31, 2024 48,869 $ 49 $ 863,710 $ ( 401,755 ) $ ( 1,035 ) $ 460,969 Impact of equity compensation plans 822 1 14,674 — — 14,675 Other comprehensive income — — — — 1,784 1,784 Net loss — — — ( 12,937 ) — ( 12,937 ) Balance—June 30, 2025 49,691 $ 50 $ 878,384 $ ( 414,692 ) $ 749 $ 464,491 See accompanying notes to condensed consolidated financial statements. 5 Table of Contents ATRICURE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited) Six Months Ended June 30, 2025 2024 Cash flows from operating activities: Net loss $ ( 12,937 ) $ ( 21,277 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Share-based compensation expense 21,001 19,656 Depreciation 6,034 5,231 Amortization of intangible assets 4,221 3,748 Amortization of deferred financing costs 239 239 Amortization of investments — 107 Loss on debt extinguishment — 1,362 Acquired in-process research and development expense 5,000 — Other non-cash adjustments 311 534 Changes in operating assets and liabilities: Accounts receivable ( 4,844 ) ( 3,131 ) Inventories ( 74 ) ( 5,887 ) Other current assets ( 1,482 ) ( 1,069 ) Accounts payable ( 45 ) ( 10 ) Accrued liabilities ( 5,832 ) ( 12,564 ) Other noncurrent assets and liabilities ( 1,001 ) ( 575 ) Net cash provided by (used in) operating activities 10,591 ( 13,636 ) Cash flows from investing activities: Sales and maturities of available-for-sale securities — 45,668 Purchases of property and equipment ( 4,843 ) ( 5,158 ) Proceeds from sale of property and equipment — 25 Acquisitions, including in-process research and development ( 5,000 ) — Proceeds from capital grant 500 — Net cash (used in) provided by investing activities ( 9,343 ) 40,535 Cash flows from financing activities: Proceeds from revolving credit facility, net of financing costs — 61,210 Payments on debt and leases ( 579 ) ( 62,329 ) Payment of financing costs and bank fees — ( 1,002 ) Proceeds from stock option exercises and employee stock purchase plan 4,251 3,809 Shares repurchased for payment of taxes on stock awards ( 10,578 ) ( 6,696 ) Net cash used in financing activities ( 6,906 ) ( 5,008 ) Effect of exchange rate changes on cash and cash equivalents 733 ( 166 ) Net (decrease) increase in cash and cash equivalents ( 4,925 ) 21,725 Cash and cash equivalents—beginning of period 122,721 84,310 Cash and cash equivalents—end of period $ 117,796 $ 106,035 Supplemental cash flow information: Cash paid for interest $ 2,574 $ 2,175 Cash paid for taxes, net of refunds 882 509 Non-cash investing and financing activities: Accrued purchases of property and equipment 895 845 See accompanying notes to condensed consolidated financial statements. 6 Table of Contents 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” or “AtriCure” consists of AtriCure, Inc. and its wholly-owned subsidiaries. The Company is a leading innovator in surgical treatments and therapies for atrial fibrillation (Afib), left atrial appendage (LAA) management and post-operative pain 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). All intercompany accounts and transactions have been eliminated in consolidation. 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 interim financial statements should be read in conjunction with the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC. There have been no changes in the Company's significant accounting policies for the six months ended June 30, 2025 as compared to the significant accounting policies described in the Company's Annual Report on Form 10-K for the year ended December 31, 2024. Use of Estimates —The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense. Actual results could differ from those estimates. Segments —The Company evaluates reporting segments in accordance with the Financial Accounting Standards Board's (FASB) Accounting Standards Codification (ASC) 280, "Segment Reporting". The chief operating decision maker is its Chief Executive Officer. The Company has one business activity and operates as one operating segment: the development, manufacture and sale of devices used by physicians in surgical procedures, designed primarily for the ablation of cardiac tissue, the exclusion of the left atrial appendage and the ablation of peripheral nerves. These devices are developed and marketed to a broad base of medical centers globally. Management considers all such sales to be part of the single operating segment. The Chief Executive Officer is regularly provided with consolidated expenses consistent with the presented consolidated statements of operations, accompanied by revenue information by product type and geographic area, for purposes of allocating resources and evaluating financial performance. Revenue by product type and geographic area is included at Note 9 – Revenue. The Company’s long-lived assets are located in the United States, except for $ 6,033 as of June 30, 2025 and $ 4,021 as of December 31, 2024 located primarily in Europe. Earnings Per Share —Basic and diluted net loss per share are 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 2,930 and 2,675 shares as of June 30, 2025 and 2024 because they are anti-dilutive. Therefore, the number of shares used for basic and diluted net loss per share are the same. 2. FAIR VALUE Fair value is defined as the exchange price that would be received for an asset or paid to settle a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. To measure fair value of assets and liabilities, the Company uses the following fair value hierarchy based on three levels of inputs: • Level 1—Observable inputs, such as 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. 7 Table of Contents ATRICURE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands, except per share amounts) (Unaudited) • 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 following table represents the Company’s fair value hierarchy for its financial assets measured at fair value on a recurring basis as of June 30, 2025: 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 $ 106,132 $ — $ — $ 106,132 Total assets $ 106,132 $ — $ — $ 106,132 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, 2025. The following table represents the Company’s fair value hierarchy for its financial assets measured at fair value on a recurring basis as of December 31, 2024: 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 $ 101,147 $ — $ — $ 101,147 Total assets $ 101,147 $ — $ — $ 101,147 Contingent Consideration. The Company’s contingent consideration arrangements arising from the SentreHEART acquisition obligate the Company to pay certain defined amounts to former shareholders of SentreHEART if specified milestones are met related to the aMAZE™ IDE clinical trial, including PMA approval and reimbursement for the therapy involving SentreHEART’s devices. The PMA approval milestone expired December 31, 2023, while the achievement period for the reimbursement milestone expires on December 31, 2026. The Company assessed the projected probability of payment during the contractual achievement periods to be remote, resulting in no reported fair value as of June 30, 2025 and December 31, 2024. 3. INVENTORIES Inventories consist of the following: June 30, 2025 December 31, 2024 Raw materials $ 38,630 $ 37,703 Work in process 7,346 3,604 Finished goods 30,368 34,028 Total $ 76,344 $ 75,335 8 Table of Contents 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, 2025 December 31, 2024 Cost Accumulated Amortization Cost Accumulated Amortization Technology $ 46,470 $ 14,624 $ 46,470 $ 13,103 Patents 30,000 9,600 30,000 6,900 Total $ 76,470 $ 24,224 $ 76,470 $ 20,003 The following table summarizes the allocation of amortization expense of intangible assets: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Cost of revenues $ 1,350 $ 1,125 $ 2,700 $ 2,250 Research and development expenses 761 760 1,521 1,498 Total $ 2,111 $ 1,885 $ 4,221 $ 3,748 Future amortization expense is projected as follows: 2025 (excluding the six months ended June 30, 2025) $ 4,220 2026 9,535 2027 10,435 2028 6,535 2029 2,935 2030 and thereafter 18,586 Total $ 52,246 5. ACCRUED LIABILITIES Accrued liabilities consist of the following: June 30, 2025 December 31, 2024 Accrued compensation and employee-related expenses $ 33,906 $ 39,505 Sales returns and allowances 3,278 3,123 Other accrued liabilities 3,073 2,959 Total $ 40,257 $ 45,587 6. INDEBTEDNESS The Company has a credit agreement (Credit Agreement) with JPMorgan Chase Bank, N.A., as administrative agent, and JPMorgan Chase Bank, N.A., as bookrunner and lead arranger (JPMCB), and Silicon Valley Bank, a Division of First-Citizens Bank & Trust Company, as Joint Lead Arrangers and Joint Bookrunners, and the lenders party thereto (Lenders) effective January 5, 2024. The Credit Agreement provides for an asset based revolving credit facility (ABL Facility) in an amount of up to $ 125,000 . Borrowing availability under the ABL Facility is based on the lesser of $ 125,000 or a borrowing base calculation as defined by the Credit Agreement. The Company may request an increase in the revolving commitment by up to $ 40,000 (not to exceed a total of $ 165,000 ). A portion of the ABL Facility, limited to $ 5,000 , is available for the issuance of letters of credit by JPMCB or other financial institutions. JPMCB in its sole discretion, may create swingline loans by advancing floating rate revolving loans requested. Any such swingline loans will reduce availability under the ABL Facility on a dollar-for-dollar basis. 9 Table of Contents ATRICURE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands, except per share amounts) (Unaudited) The Credit Agreement has a three-year term, and all outstanding borrowings are due upon maturity of the Credit Agreement on January 5, 2027. Subject to customary exceptions and restrictions, the Company may voluntarily prepay outstanding amounts under the ABL Facility at any time thereafter without premium or penalty. Any voluntary prepayments made will not reduce commitments under the ABL Facility. The Credit Agreement contains mandatory prepayment provisions which require prepayment of amounts outstanding under the ABL Facility upon specified events or Availability shortfall. As of June 30, 2025, the Company had borrowings of $ 61,865 and had borrowing capacity of $ 61,885 under the ABL facility. Future maturities of long-term debt are projected as follows: 2025 (excluding the six months ended June 30, 2025) $ — 2026 — 2027 61,865 2028 — 2029 — Total long-term debt, of which $ 61,865 is noncurrent $ 61,865 The ABL Facility is subject to a facility fee of 0.37 % per annum of the daily available revolving commitment and paid on a quarterly basis. Outstanding amounts under the Credit Agreement bear interest at a rate per annum equal to, at the Company's election: (i) an alternate base rate (ABR) plus an applicable margin or (ii) an adjusted term secured overnight financing rate (SOFR) plus an applicable margin. All swingline loans bear interest at a rate per annum equal to the ABR plus the applicable margin under the Credit Agreement. Alternate base rate is equal to the greater of Prime, the NYFRB Rate plus 0.50 % or Adjusted Term SOFR Rate plus 1.00 %. The applicable margin on borrowings will adjust ranging 1.50 % to 1.75 % per annum for ABR borrowings and from 2.50 % to 2.75 % per annum for SOFR term borrowings determined by the average historical excess availability. Participation and fronting fees are accrued and paid on a quarterly basis. As of June 30, 2025, the effective interest rate on the ABL Facility was 7.16 %. The ABL Facility is secured by the assets of the Company, consisting of personal, tangible or intangible property, including certain outstanding equity interests of the Company’s direct subsidiaries, subject to limitations specified in the Credit Agreement. The Credit Agreement contains customary representations and warranties, events of default and financial, affirmative and negative covenants for facilities of this type, including but not limited to financial covenants relating to a fixed charge coverage ratio and minimum excess availability, and restrictions on indebtedness, liens, investments and acquisitions, asset dispositions, specified agreements, restricted payments and prepayment of certain indebtedness. 7. LEASES The Company has operating and finance leases for office, manufacturing and warehouse facilities and automobiles. The Company’s leases have remaining lease terms of less than one year to eleven years . Options to renew or extend leases beyond their initial term have been excluded from measurement of the right-of-use (ROU) assets and lease liabilities as exercise is not reasonably certain. The weighted average remaining lease term and the discount rate for the reporting periods are as follows: June 30, 2025 December 31, 2024 Operating Leases Weighted average remaining lease term (years) 5.6 4.4 Weighted average discount rate 6.9 % 6.9 % Finance Leases Weighted average remaining lease term (years) 5.2 5.7 Weighted average discount rate 7.0 % 7.0 % A letter of credit for $ 1,250 issued to the lessor of the Company's corporate headquarters building is renewed annually and remains outstanding as of June 30, 2025. 10 Table of Contents ATRICURE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands, except per share amounts) (Unaudited) The components of lease expense are as follows: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Operating lease cost $ 491 $ 384 $ 957 $ 764 Finance lease cost: Amortization of right-of-use assets 262 268 524 523 Interest on lease liabilities 142 160 289 317 Total finance lease cost $ 404 $ 428 $ 813 $ 840 Short-term lease expense was not significant for the three and six months ended June 30, 2025 and 2024. Supplemental cash flow information related to leases is as follows: Six Months Ended June 30, 2025 Six Months Ended June 30, 2024 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases $ 1,021 $ 453 Operating cash flows for finance leases 289 317 Financing cash flows for finance leases 579 505 Right-of-use assets and corresponding lease obligations related to new and modified lease agreements: Operating leases $ 1,891 $ 322 Finance leases — 421 Supplemental balance sheet information related to leases is as follows: June 30, 2025 December 31, 2024 Operating Leases Operating lease right-of-use assets $ 7,086 $ 5,727 Current lease liabilities $ 1,663 $ 1,619 Finance and operating lease liabilities 5,835 4,579 Total operating lease liabilities $ 7,498 $ 6,198 Finance Leases Property and equipment, at cost $ 14,765 $ 14,765 Accumulated depreciation ( 9,399 ) ( 8,875 ) Property and equipment, net $ 5,366 $ 5,890 Current lease liabilities $ 1,245 $ 1,186 Finance and operating lease liabilities 6,643 7,281 Total finance lease liabilities $ 7,888 $ 8,467 11 Table of Contents ATRICURE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands, except per share amounts) (Unaudited) Future maturities of lease liabilities as of June 30, 2025 are as follows: Operating Leases Finance Leases 2025 (excluding the six months ended June 30, 2025) $ 1,004 $ 875 2026 1,803 1,775 2027 1,751 1,808 2028 1,332 1,842 2029 948 1,818 2030 and thereafter 2,378 1,339 Total payments $ 9,216 $ 9,457 Less imputed interest ( 1,718 ) ( 1,569 ) Total $ 7,498 $ 7,888 8. COMMITMENTS AND CONTINGENCIES Cooperation Agreement. The Company holds an exclusive licensing agreement (Cooperation Agreement) to co-develop and commercialize equipment incorporating pulsed field ablation (PFA) technology. The Cooperation Agreement requires the Company to pay contingent consideration, settled in cash, with a maximum payout of $ 28,000 if all milestones are achieved successfully through the agreement term ending in 2034. The contingent consideration will be expensed when each milestone is paid or becomes payable as a result of achievement. Payments made under this agreement were $ 5,000 for the three and six months ended June 30, 2025 and included as a component of research and development expense. The agreement also contains provisions requiring future royalty payments on devices incorporating co-developed technology upon commercialization. Purchase Agreements. The Company enters into standard purchase agreements with suppliers in the ordinary course of business, generally with terms that allow cancellation. In 2022, the Company entered into a clinical trial management agreement for the LeAAPS clinical trial. The terms of the agreement require payments upon achievement of various enrollment and project milestones over the estimated ten-year term, yet the agreement may be terminated early for any reason. Furthermore, we incur additional variable costs, including pass through costs from clinical trial sites. Payments made under this agreement were $ 3,375 and $ 3,362 for the three months ended June 30, 2025 and 2024 and $ 7,487 and $ 6,149 for the six months ended June 30, 2025 and 2024. Legal. The Company may, from time to time, become a party to legal proceedings which are subject to many uncertainties. Litigation and administrative proceedings over patent and other intellectual property rights are common in our industry, as are requests for information related to interactions with medical professionals. Accordingly, the financial impact of ultimate resolutions from legal proceedings may not be known for extended periods of time and are not predictable with assurance. A liability is established once management determines a loss is probable and an amount can be reasonably estimated. The Company recognizes income from a favorable resolution of legal proceedings when the associated cash or assets are received. On February 7, 2025, the representative for former securityholders of SentreHEART, Inc. filed a complaint in the Delaware Court of Chancery naming the Company as a defendant, and on May 23, 2025 filed a first amended complaint. The Company acquired SentreHEART, Inc. pursuant to a merger agreement dated August 11, 2019. The merger agreement provides for contingent consideration to be paid upon achievement of specified PMA and CPT reimbursement milestones by specified dates. The amended complaint alleges breach of contract and a related claim for breach of the implied covenant of good faith and fair dealing resulting from the Company's alleged failure to use commercially reasonable efforts to obtain premarket approval from FDA for the LARIAT System. The amended complaint seeks damages in the amount of the original PMA and CPT reimbursement milestones of up to $ 260,000 plus interest. The Company intends to vigorously defend this claim. A liability has not been recognized related to this matter because any potential loss is not currently probable or reasonably estimable. 12 Table of Contents ATRICURE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands, except per share amounts) (Unaudited) 9. REVENUE The Company develops, manufactures and sells devices designed for surgical ablation of cardiac tissue, exclusion of the left atrial appendage, and temporarily blocking pain by ablating peripheral nerves. These devices are marketed to a broad base of medical centers globally. 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. United States revenue by product type is as follows: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Open ablation $ 36,468 $ 30,760 $ 69,776 $ 60,060 Minimally invasive ablation 7,839 11,828 16,319 24,146 Pain management 21,168 15,006 38,438 27,745 Appendage management 45,108 37,945 87,199 73,837 Total United States $ 110,583 $ 95,539 $ 211,732 $ 185,788 International revenue by product type is as follows: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Open ablation $ 10,349 $ 9,170 $ 19,344 $ 17,072 Minimally invasive ablation 2,372 1,764 4,385 3,878 Pain management 2,033 1,241 3,822 2,178 Appendage management 10,802 8,555 20,476 16,204 Total International $ 25,556 $ 20,730 $ 48,027 $ 39,332 Revenue attributed to customer geographic locations is as follows: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 United States $ 110,583 $ 95,539 $ 211,732 $ 185,788 Europe 16,133 12,630 30,331 23,978 Asia Pacific 7,484 6,721 14,268 13,002 Other International 1,939 1,379 3,428 2,352 Total International 25,556 20,730 48,027 39,332 Total Revenue $ 136,139 $ 116,269 $ 259,759 $ 225,120 10. 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 the discrete method and is based on financial results through the end of the interim period. The Company determined that using the discrete method is more appropriate than using the annual effective tax rate method. The Company is unable to estimate the annual effective tax rate with sufficient precision to use the effective tax rate method, which requires a full-year projection of income. The effective tax rate for the three months ended June 30, 2025 and 2024 was ( 4.4 %) and ( 3.3 %). The effective tax rate for the six months ended June 30, 2025 and 2024 was ( 4.0 %) and ( 2.1 %). The Company’s worldwide effective tax rate differs from the US statutory rate of 21% primarily due to valuation allowances. 13 Table of Contents ATRICURE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands, except per share amounts) (Unaudited) The Company's federal, state, local and foreign tax returns 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 net operating losses. However, if required, the Company will recognize interest and penalties within income tax expense and within the related tax liability. On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act ("OBBBA"). Key elements of the Tax Cuts and Jobs Act are made permanent under the OBBBA, including 100% bonus depreciation, domestic research cost expensing and the business interest expense limitation. FASB ASC 740, "Income Taxes", requires the effects of changes in tax rates and laws on tax balances to be recognized in the period in which the legislation is enacted. As the date of enactment is after June 30, 2025, there is no financial impact as of and for the six-month period ended June 30, 2025. The Company is currently evaluating the impact of the OBBBA on its consolidated financial statements. 11. EQUITY COMPENSATION PLANS The Company has two share-based incentive plans: the 2023 Stock Incentive Plan (2023 Plan) and the 2018 Employee Stock Purchase Plan (ESPP). Stock Incentive Plan Under the 2023 Plan, the Board of Directors may grant restricted stock awards or restricted stock units (collectively RSAs), nonstatutory stock options, performance share awards, performance share units or stock appreciation rights to Company employees, directors and consultants, and may grant incentive stock options to Company employees. The Compensation Committee of the Board of Directors, as the administrator of the 2023 Plan, 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, 2025, 5,787 shares of common stock have been reserved for issuance under the 2023 Plan, and 3,141 shares were available for future grants. The Company issues registered shares of common stock for stock option exercises, restricted stock grants and performance share award payments. Employee Stock Purchase Plan Under the ESPP, shares of the Company’s common stock may be purchased at a discount ( 15 %) to the lesser of the closing price of the Company’s common stock on the first or 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 more than $ 25 of the Company’s common stock in a calendar year or more than 3 shares during an offering period. As of June 30, 2025, there were 381 shares available for future issuance under the ESPP. Share-Based Compensation Expense Information The following table summarizes the allocation of share-based compensation expense: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Cost of revenue $ 741 $ 628 $ 1,410 $ 1,158 Research and development expenses 1,982 1,733 3,834 3,352 Selling, general and administrative expenses 8,648 8,030 15,757 15,146 Total $ 11,371 $ 10,391 $ 21,001 $ 19,656 14 Table of Contents ATRICURE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands, except per share amounts) (Unaudited) 12. COMPREHENSIVE LOSS AND ACCUMULATED OTHER COMPREHENSIVE LOSS In addition to net losses, comprehensive loss includes foreign currency translation adjustments and unrealized gains (losses) on investments. Accumulated other comprehensive income (loss) consisted of the following, net of tax: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Total accumulated other comprehensive loss at beginning of period $ ( 230 ) $ ( 697 ) $ ( 1,035 ) $ ( 993 ) Unrealized Gains (Losses) on Investments Balance at beginning of period $ — $ ( 261 ) $ — $ ( 800 ) Other comprehensive income before reclassifications — 246 — 785 Balance at end of period $ — $ ( 15 ) $ — $ ( 15 ) Foreign Currency Translation Adjustment Balance at beginning of period $ ( 230 ) $ ( 436 ) $ ( 1,035 ) $ ( 193 ) Other comprehensive income (loss) before reclassifications 1,640 ( 125 ) 2,357 ( 388 ) Amounts reclassified to other income ( 661 ) 7 ( 573 ) 27 Balance at end of period $ 749 $ ( 554 ) $ 749 $ ( 554 ) Total accumulated other comprehensive income (loss) at end of period $ 749 $ ( 569 ) $ 749 $ ( 569 ) 15 Table of Contents