AtriCure Inc

Previous wording

In 2024, we realized strong global revenue growth and continued our 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, 2024 was $225,120, representing an increase of $30,708, or 15.8%, over the first six months of 2023, driven by growing adoption across key product lines. Historically there have been limited competitors in our key markets. We are seeing new entrants developing competing products, procedures, and/or clinical solutions that may cause variability in our results.

Current wording

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. Historically there have been 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.

Previous wording

PRODUCT INNOVATION. We continue to invest in research and development of new products across our business and pursue approvals to market and sell our products globally. Activities for the first half of 2024 include:

Current wording

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

Previous wording

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

Current wording

•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.

Previous wording

•Launch of the cryoSPHERE®+ cryoablation probe for pain management in the US in the second quarter of 2024. 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%, which reduces operative time.

Current wording

•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.

Previous wording

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

Current wording

•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.

Previous wording

CLINICAL SCIENCE. We invest in studies to expand labeling claims, support various indications for our products and gather and publish clinical data regarding 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. 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 second quarter of 2024 with over 2,700 patients enrolled. Site initiation and enrollment is ongoing.

Current wording

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. 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.

Previous wording

TRAINING. Our professional education and marketing teams conduct a variety of in-person and virtual training programs for physicians and other healthcare professionals. These training methods ensure invaluable 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. 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.

Current wording

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 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. 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.

Previous wording

Worldwide revenue increased 15.2% (15.4% on a constant currency basis). In the United States, we experienced growth in several key product lines, including our ENCOMPASS® clamp in open ablation and the AtriClip® Flex⋅V®for appendage management in open-chest procedures. In addition, the full launch of the cryoSPHERE®+ probe in the second quarter augmented strong growth in post-operative pain management sales. Growth in minimally invasive ablation was driven by our Epi-Sense® System devices for Hybrid AF™ Therapy. International sales increased 29.4% (30.4% on a constant currency basis), with strength across all franchises and most of our major markets.

Current wording

Worldwide revenue increased 17.9% (17.8% 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.

Previous wording

Cost of revenue and gross margin. Cost of revenue increased $5,584 primarily reflecting higher sales volumes. Gross margin decreased 168 basis points, driven primarily by unfavorable geographic and product mix, as well as increased product costs.

Current wording

Cost of revenue and gross margin. Cost of revenue increased $4,696 primarily reflecting higher sales volumes. Gross margin decreased 27 basis points, driven primarily by less favorable geographic and product mix.

Previous wording

Research and development expenses. Research and development expenses increased $2,978 or 17.1%. Expansion of product development, clinical and regulatory teams resulted in $1,525 increase in personnel costs including travel and share-based compensation. Clinical trial expenses increased $1,331 primarily from higher patient enrollment and follow-up activity in the LeAAPS clinical trial throughout the quarter.

Current wording

Research and development expenses. Research and development expenses increased $606 or 3.0%. 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.

Previous wording

Selling, general and administrative expenses. Selling, general and administrative expenses increased $9,813, or 15.4%, driven by a $6,997 increase in personnel costs including travel and share-based compensation, primarily reflecting headcount growth. Marketing, training, and meeting costs increased $725 and legal and professional services, IT and other corporate costs grew $848. Fluctuation was also driven by legal settlements in the prior year, resulting in a $412 non-recurring net gain recorded in 2023.

Current wording

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.

Previous wording

Other income (expense). Other income and expense consists primarily of net interest expense and net foreign currency transaction losses.

Current wording

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

Previous wording

Worldwide revenue increased 15.8% (15.8% on a constant currency basis). In the United States, growth in 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® probe for post-operative pain management and AtriClip® Flex⋅V®for appendage management in open-chest procedures. International sales increased 25.6% (25.8% on a constant currency basis), across all franchises and most major geographic regions.

Current wording

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.

Previous wording

Cost of revenue and gross margin. Cost of revenue increased $9,282, reflecting higher sales volumes, while gross margin decreased 77 basis points, primarily driven by unfavorable geographic and product mix, as well as an increase in product costs.

Current wording

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.

Previous wording

Research and development expenses. Research and development expenses increased $7,496 or 22.9%, primarily from a $3,489 increase in personnel costs as a result of additional headcount in our product development, regulatory, and clinical teams. Clinical trial expenses increased $2,786 due to increased clinical activity primarily driven by the LeAAPS trial. Product development project spend and consulting costs also contributed incremental expense of $1,141, reflecting continued investment in our product pipeline.

Current wording

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.

Previous wording

Selling, general and administrative expenses. Selling, general and administrative expenses increased $22,089, or 17.8%, due to a $13,426 increase in personnel costs, including travel and share-based compensation, as a result of growth in headcount. Selling, general and administrative expenses were also increased by $1,569 in marketing, training and meeting activities, and $1,433 in legal and professional services, IT and corporate costs reflecting operational growth. The increase was further driven by a $4,466 non-recurring net gain during 2023 related to legal settlements.

Current wording

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.

Previous wording

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 losses.

Current wording

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.

Previous wording

As of June 30, 2024, the Company had cash, cash equivalents and investments of $114,020 and outstanding debt of $61,865. We had unused borrowing capacity of $61,885 (see Note 7 - Indebtedness for related discussion). All cash equivalents and investments and most of our operating cash are 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 $191,627 and an accumulated deficit of $378,334 as of June 30, 2024.

Current wording

As of September 30, 2024, we had cash, cash equivalents and investments of $130,335 and outstanding debt of $61,865. We had unused borrowing capacity of $61,885 (see Note 7 - Indebtedness for related discussion). All cash equivalents and investments and most of our operating cash are 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.

Previous wording

Cash flows used in operating activities. Net cash used in operating activities increased $12,568 from 2023 to 2024, driven by a decrease in operating results of $9,683, primarily due to a prior year $4,466 nonrecurring net gain for legal settlements, partially offset by a current period increase in non-cash charges of $5,575. Cash used for working capital and other assets and liabilities increased $8,460 on higher annual variable compensation payments due to improved operating performance, partially offset by increased collections of receivables and fewer purchases of inventory.

Current wording

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.

Previous wording

Cash flows provided by investing activities. Net cash provided by investing activities increased by $27,802 in 2024 compared to 2023, due to the $30,000 in cash paid for acquisition of intellectual property in the prior year, offset by a $2,647 decrease in sales and maturities of available-for-sale securities and $424 decrease in purchases of property and equipment.

Current wording

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.

Previous wording

Cash flows used in financing activities. Net cash used in financing activities increased by $2,485 in 2024. This increase was a result of a $1,556 payment for extinguishment of debt and financing fees, net of borrowings, and a $658 increase in shares repurchased for payment of taxes on stock awards.

Current wording

Cash flows used in financing activities. Net cash used in financing activities increased by $2,950 in 2024. 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.