Item 2. Management’s Discussion and Analysis
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 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 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. 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 as amended by our subsequent quarterly reports on Form 10-Q. 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. Forward-looking statements often 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,” “drives,” “seek,” “believes,” “see,” “focus,” “should,” “will,” “would,” “opportunity,” “outlook,” “could,” “can,” “may,” “future,” “predicts,” “target,” “potential,” "forecast," "trend," "might" and similar expressions and the negative versions of those words, and may be identified by the context in which they are used. However, the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements include, without limitation, statements that address activities, events, circumstances or developments that AtriCure expects, believes or anticipates will or may occur in the future, such as earnings estimates (including projections and guidance), other predictions of financial performance, launches by AtriCure of new products, developments with competitors and market acceptance of AtriCure's products. Such statements are based largely upon current expectations of AtriCure. 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 different materially from those expressed or implied. 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. 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” and subsequent Form 10-Q reports. 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), left atrial appendage (LAA) management and post-operative pain management. Our ablation and left atrial appendage management (LAAM) products are used by physicians during both open-heart and minimally invasive surgical procedures. In open-heart procedures, the physician is performing heart surgery for other conditions and our products are used in conjunction with (or “concomitant” to) such a procedure. 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 ablate peripheral nerves, providing pain relief in
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cardiac, thoracic and amputation 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.
We sell our products to medical centers through our direct sales force in the United States, Germany, France, the United Kingdom, the Benelux region, Australia and Canada. We also sell our products through distributors who in turn sell our products to medical centers in other markets. Our business is primarily transacted in U.S. Dollars; direct sales outside the United States are transacted in Euros, British Pounds, Australian Dollars or Canadian Dollars.
Recent Developments
In 2025, we continued to realize strong growth across most of our key franchises and geographies, resulting from our 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, 2025 was $394,028, representing an increase of $52,998, or 15.5% (15.3% on a constant currency basis), over the first nine months of 2024, highlighted by accelerated adoption in our appendage management and pain management product lines, where recent product launches contributed to growth. There are limited competitors in our key markets; however, new entrants are developing competing products, procedures, and/or clinical solutions that may cause variability in our results.
Highlights of the strategic and operational advancements include:
PRODUCT INNOVATION . We continue to invest in research and development of new products and pursue regulatory approvals to market and sell globally across all franchises.
Pain management. During the third quarter of 2025, we launched the cryoICE® cryoXT™ probe in the United States. The cryoXT probe is 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, preventing the conduction pathway at the site of amputation.
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.
LeAAPS. 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 period of five years post procedure. In July 2025, we completed trial enrollment of 6,500 patients across 137 centers globally. Patient follow-up for a minimum of five years post procedure is required by the study protocol and remains ongoing.
BoxX-NoAF. The 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 evaluates the impact of concomitant ablation using the EnCompass clamp and LAA exclusion with the AtriClip system 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 during October 2025, we completed the first patient enrollment. Site initiation and enrollment is ongoing.
TRAINING . 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 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.
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Results of Operations
Three months ended September 30, 2025 compared to three months ended September 30, 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,
2025 2024
Amount % of
Revenues Amount % of
Revenues
Revenue $ 134,269 100.0 % $ 115,910 100.0 %
Cost of revenue 32,937 24.5 29,117 25.1
Gross profit 101,332 75.5 86,793 74.9
Operating expenses:
Research and development expenses 22,892 17.0 20,960 18.1
Selling, general and administrative expenses 78,232 58.3 73,238 63.2
Total operating expenses 101,124 75.3 94,198 81.3
Income (loss) from operations 208 0.2 (7,405) (6.4)
Other expense, net (294) (0.2) (126) (0.1)
Loss before income tax expense (86) (0.1) (7,531) (6.5)
Income tax expense 181 0.1 322 0.3
Net loss $ (267) (0.2) % $ (7,853) (6.8) %
Revenue. 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:
Three Months Ended
September 30, Change
2025 2024 Amount %
Open ablation $ 35,592 $ 30,601 $ 4,991 16.3 %
Minimally invasive ablation 7,428 11,117 (3,689) (33.2)
Pain management 20,837 16,314 4,523 27.7
Appendage management 45,450 37,420 8,030 21.5
Total United States $ 109,307 $ 95,452 $ 13,855 14.5
Total International 24,962 20,458 4,504 22.0
Total revenue $ 134,269 $ 115,910 $ 18,359 15.8 %
Worldwide revenue increased 15.8% (15.1% on a constant currency basis). In the United States, sales grew in most product lines with significant contribution from our AtriClip ® FLEX-Mini™ device for appendage management, our EnCompass ® clamp for open ablation and our cryoSPHERE MAX ™ probe for post-operative pain management. Minimally invasive ablation sales declined during the quarter from continued reduction in Hybrid procedures as physicians adopt PFA catheters to treat patients. International sales increased 22.0% (17.9% on a constant currency basis), with broad growth across all of our franchises and most 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. 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 growth in revenue on a constant currency basis provides an additional and meaningful assessment of revenue to both management and investors.
Cost of revenue and gross margin. Cost of revenue increased $3,820 primarily reflecting higher sales volumes. Gross margin increased 59 basis points, driven by favorable product mix.
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Research and development expenses. Research and development expenses increased $1,932 or 9.2%, primarily from a $2,081 increase in personnel costs, including share-based compensation and travel expenses. Clinical expenses overall decreased $517 driven by the completion of the LeAAPS trial enrollment, partially offset by patient enrollments in registries and continued LeAAPS trial follow-up activities.
Selling, general and administrative expenses. Selling, general and administrative expenses increased $4,994, or 6.8%, driven by a $5,629 increase in personnel costs, including travel and share-based compensation, as a result of growth in headcount and variable compensation. These increases were partially offset by lower consulting costs of $1,071.
Other income (expense). Other expense consists primarily of net interest expense.
Nine months ended September 30, 2025 compared to nine months ended September 30, 2024
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,
2025 2024
Amount % of
Revenues Amount % of
Revenues
Revenue $ 394,028 100.0 % $ 341,030 100.0 %
Cost of revenue 98,586 25.0 86,125 25.3
Gross profit 295,442 75.0 254,905 74.7
Operating expenses:
Research and development expenses 74,704 19.0 61,221 18.0
Selling, general and administrative expenses 232,676 59.1 219,174 64.3
Total operating expenses 307,380 78.0 280,395 82.2
Loss from operations (11,938) (3.0) (25,490) (7.5)
Other expense, net
(585) (0.1) (2,882) (0.8)
Loss before income tax expense (12,523) (3.2) (28,372) (8.3)
Income tax expense 681 0.2 758 0.2
Net loss $ (13,204) (3.4) % $ (29,130) (8.5) %
Revenue. 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
2025 2024 Amount %
Open ablation $ 105,368 $ 90,661 $ 14,707 16.2 %
Minimally invasive ablation 23,747 35,263 (11,516) (32.7)
Pain management 59,275 44,059 15,216 34.5
Appendage management 132,649 111,257 21,392 19.2
Total United States $ 321,039 $ 281,240 $ 39,799 14.2
Total International 72,989 59,790 13,199 22.1
Total revenue $ 394,028 $ 341,030 $ 52,998 15.5 %
Worldwide revenue increased 15.5% (15.3% on a constant currency basis). In the United States, sales grew across most product lines with strong contribution from our AtriClip FLEX-Mini device for appendage management, EnCompass clamp in open ablation and cryoSPHERE MAX probe for post-operative pain management. Sales for minimally invasive ablation devices declined as physicians referred fewer patients for Hybrid procedures. International sales increased 22.1% (20.5% on a constant currency basis), with growth in major geographic markets across all product lines.
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Cost of revenue and gross margin. Cost of revenue increased $12,461 as a result of higher sales volumes. Gross margin increased 23 basis points, driven by favorable product mix.
Research and development expenses. Research and development expenses increased $13,483 or 22.0%, driven by a $5,486 increase in personnel costs, including share-based compensation and travel, as a result of headcount growth and higher variable and share-based compensation. Additional increases include the second quarter milestone payment of $5,000 for the acquired IPR&D and $3,693 of clinical trial expenses for LeAAPS clinical trial patient enrollment and follow up activities. These increases were partially offset by a $879 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 $13,502, or 6.2%, driven by a $14,862 increase in personnel costs, including travel and share-based compensation, primarily reflecting growth in headcount and variable and share-based compensation. This increase was partially offset by $1,102 decrease in marketing and training costs and $1,018 decrease in consulting costs.
Other income (expense). Other expense decreased $2,297, primarily due to the $1,362 loss on debt extinguishment during the first quarter of 2024. Net interest expense decreased $512 from lower borrowing costs, while net foreign currency transaction gain increased $402.
Liquidity and Capital Resources
As of September 30, 2025, we had cash and cash equivalents of $147,865 and outstanding debt of $61,865. We had unused borrowing capacity of $61,885 (see Note 6 – Borrowings and Financing Obligation for related discussion). 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 $223,270 and an accumulated deficit of $414,959 as of September 30, 2025.
Consolidated Cash Flows - For the nine months ended September 30, 2025 and 2024
Cash flows provided by operating activities. Net cash provided by operating activities increased $30,939 from 2024 to 2025, reflecting improved operating results of $15,926, driven by higher sales and moderating expansion of operating expenses. This improvement includes an adjustment of $5,000 related to the acquired IPR&D milestone payment in 2025. Cash used for working capital and other assets and liabilities decreased $6,559 primarily due to moderating investments in inventory.
Cash flows used in investing activities. Net cash used in investing activities increased by $56,875 from 2024 to 2025, due to a $53,668 decrease in sales and maturities of available-for-sale securities and the first acquired IPR&D milestone payment for $5,000 in 2025.
Cash flows used in financing activities. Net cash used in financing activities decreased by $4,419 in 2025. This decrease was a result of $6,250 in proceeds from the August 2025 sale-and-leaseback arrangement and a $1,679 reduction of payments
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for extinguishment of debt and financing fees from 2024. These improvements were offset by a $4,176 increase in shares repurchased for payment of taxes on stock awards.
Credit facility. 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 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. 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. The borrowings 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. As of September 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 September 30, 2025.
For additional information on the terms and conditions, as well as applicable interest and fee payments, see Note 6 – Borrowings and Financing Obligation.
Uses of liquidity and capital resources. 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: market acceptance of our current and future products; costs to develop and support our products, including professional training; costs to expand and support our sales and marketing efforts; operating and filing costs relating to changes in regulatory policies or laws; costs for clinical trials and to secure regulatory approval for new products; 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, tariffs, and fluctuations in currency exchange rates that may impact our liquidity and access to capital resources.
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, inventories, share-based compensation and income taxes. 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, 2024 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
Refer to Note 1, “Description of the Business and Summary of Significant Accounting Policies” to the condensed financial statements for a discussion of recently issued accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of September 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.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.