AtriCure (ATRC) FY 2025 Conference September 03, 2025 03:45 PM ET Speaker0Okay. Well, good afternoon, everyone. I'm Nathan Traybeck, one of the Medical Device Analysts at Wells Fargo. I'm happy to have management from AtriCure with us for our first day of the Healthcare Conference. With us we have Mike Carroll, President and CEO and Angie Wyrig, CFO.Thank you for joining us.Speaker1Thanks for having us.Speaker0Great. So let's kick things off with your recent performance and what it means for the rest of the ...

Financial Data and Key Metrics Changes - Total revenue for Q2 2025 was $136 million, reflecting a 17% year-over-year increase and a 10.1% sequential growth from Q1 2025 [4][18] - Adjusted EBITDA was $15.4 million, compared to $7.8 million in Q2 2024, indicating significant profitability improvement [23] - Cash generation for the quarter was nearly $18 million, with cash and investments totaling $117.8 million at the end of Q2 2025 [4][23] Business Line Data and Key Metrics Changes - Appendage management revenue grew over 20%, with U.S. sales of appendage management products reaching $45.1 million, up 18.9% year-over-year [6][19] - Pain management franchise grew nearly 43%, driven by the CryoSphere Max and CryoSphere Plus probes, with U.S. sales at $21.2 million, reflecting a 41.1% increase [14][20] - Open ablation product sales were $36.5 million, up 18.6% year-over-year, led by the Encompass clamp [19][11] Market Data and Key Metrics Changes - U.S. revenue was $110.6 million, a 15.7% increase from Q2 2024, with international sales showing strong growth across all franchises [18][21] - European sales accounted for $16.1 million, up 27.7%, while Asia Pacific and other international markets contributed $9.4 million, up 16.3% [21] Company Strategy and Development Direction - The company is focused on innovation, with new product launches such as the AtriClip Flex Mini and CryoStere Max driving growth [5][14] - The completion of the LEAPS clinical trial enrollment is expected to enhance the standard of care for stroke prevention in cardiac surgery [9][10] - The company anticipates continued growth in international markets, outpacing U.S. growth, driven by new product launches and increased adoption of existing products [24][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving revenue guidance of $527 million to $533 million for 2025, reflecting growth of approximately 13% to 15% [24][27] - The company expects to maintain gross margins comparable to 2024, with adjusted EBITDA projected to be between $49 million and $52 million for the full year [27][24] - Management acknowledged challenges in the minimally invasive hybrid therapy market due to increased adoption of PFA catheter technology but remains optimistic about long-term growth opportunities [13][48] Other Important Information - The company is preparing for the launch of the Cryo XD probe for pain management in lower limb amputations, with initial procedures completed [15][16] - The company is also focused on expanding clinical and economic data to support the value of non-opioid pain management solutions [16] Q&A Session Summary Question: Impact of LEAPS trial completion on physician utilization - Management indicated that the completion of the LEAPS trial has had minimal impact on overall revenue, with continued growth in appendage management adoption [32][34] Question: Managing discussions with electrophysiologists regarding PFA failures - Management emphasized open and transparent discussions with electrophysiologists, focusing on the clinical benefits of PFA and the importance of follow-up solutions [37][39] Question: Guidance implications for top-line growth - Management clarified that guidance reflects a conservative approach, with expectations for continued strong performance driven by new product launches and international growth [43][45] Question: Trends in minimally invasive hybrid therapy - Management acknowledged significant pressure in the hybrid therapy segment but highlighted the overall strength of the business in achieving 17% growth [48][50] Question: Progress on Cryosphere MAX adoption - Management reported that Cryosphere MAX is in over half of U.S. accounts, with cautious optimism for similar uptake in Europe [55][57] Question: Key milestones for clinical initiatives - Management outlined upcoming milestones for LEAPS, BOX No AF, and PFA programs, with expectations for first patient enrollment in BOX No AF this year [66][70]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $124 million, reflecting a 14% growth compared to Q1 2024, with adjusted EBITDA of $9 million, representing over 200% improvement from the previous year [5][26] - U.S. revenue was $101.1 million, a 12.1% increase from Q1 2024, while international revenue totaled $22.5 million, up 20.8% [20][24] - Gross margin for Q1 2025 was 74.9%, an increase of 27 basis points from the previous year [24] Business Line Data and Key Metrics Changes - Appendage management revenue grew 19%, driven by 23% growth in open AtriClip devices and 7% in minimally invasive (MIS) devices [8][9] - Open ablation franchise sales increased by 14%, with a notable 47% growth in Encompass clamp sales [12][13] - Pain management franchise saw a 39% growth, largely due to the adoption of CryoStur Max and CryoStur Plus probes [17][18] Market Data and Key Metrics Changes - International sales in Europe accounted for $14.2 million, up 25.1%, while Asia Pacific and other markets contributed $8.3 million, up 14% [24] - The U.S. experienced a decline in MIS ablation sales by approximately 31% due to increased use of PFA catheters [22][23] Company Strategy and Development Direction - The company aims to maintain leadership in multibillion-dollar markets through investments in product development and clinical research [6][7] - AtriCure is focused on expanding the utilization of the AtriClip Flex Mini and Pro Mini devices, which are expected to drive future growth [10][11] - The company is also developing a PFA-enabled version of the Encompass clamp, with expectations for clinical trials later this year [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving double-digit revenue growth and expanding profitability through the rest of the decade [6][7] - The company anticipates continued pressure in the U.S. MIS market but expects long-term adoption of hybrid AF therapy as physicians identify suitable patient segments [16][19] - AtriCure expects to generate positive cash flow for the remainder of 2025, with a modest gain for the year overall [27][28] Other Important Information - The company is reiterating its full-year revenue guidance of $517 million to $527 million, reflecting an 11% to 13% growth over 2024 [28][29] - AtriCure's LEAPS trial is expected to provide significant differentiation in the market by demonstrating the benefits of managing the appendage with AtriClip devices [12][100] Q&A Session Summary Question: Impact of tariffs on gross margin - Management expects a modest impact on gross margin due to the majority of suppliers being based in the U.S., with potential effects in the tens of basis points [36][38] Question: Acceleration in appendage management - The acceleration is attributed to the launch of the Flex Mini device, which has received positive feedback and increased adoption among physicians [39] Question: Guidance for revenue growth - Management is cautious about adjusting guidance upward at this early stage of the year, despite strong performance in key areas [42][43] Question: Pain management growth sources - Growth is driven by increased adoption of CryoStur Max, with significant improvements in existing accounts [45][47] Question: Confidence in MIS business recovery - Management believes there are signs of recovery, with many accounts starting to refer more patients as they experience failures with PFA [50][52] Question: Future contributions from new products - Management anticipates multiple years of growth from new product launches, including the Flex Mini and Encompass clamp [62][63] Question: Launch strategy for Cryo XT - The launch will be methodical, similar to previous product introductions, with expectations for gradual adoption [75][76] Question: Competitive landscape for AtriClip - Competition is seen as beneficial for market awareness, and AtriCure is focused on innovation and clinical evidence to maintain its competitive edge [88][90] Question: Longevity of Encompass clamp growth - There is significant room for growth in the U.S. market, with ongoing expansion into non-AFib patients expected to drive future sales [92][93] Question: Timeline for MIS market recovery - Management anticipates continued pressure this year but expects to see positive trends next year [96][98] Question: Differentiation from LEAPS trial - The LEAPS trial is expected to provide a unique stroke label for AtriCure, setting it apart from competitors [100]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $124 million, representing a 14% growth compared to the same period in 2024 [6][21] - Adjusted EBITDA for Q1 2025 was $9 million, an improvement of over 200% from Q1 2024 [6][26] - Gross margin for Q1 2025 was 74.9%, up 27 basis points from Q1 2024 [25] Business Line Data and Key Metrics Changes - Appendage management revenue grew 19%, with open AtriClip devices growing 23% and minimally invasive (MIS) devices growing 7% [10] - Open ablation franchise saw a 14% growth, with Encompass clamp sales increasing by over 47% [14] - Pain management franchise experienced a 39% growth, driven by the adoption of CryoStur Max and CryoStur Plus probes [18] Market Data and Key Metrics Changes - U.S. revenue was $101.1 million, a 12.1% increase from Q1 2024 [21] - International revenue totaled $22.5 million, up 20.8% on a reported basis [25] - European sales accounted for $14.2 million, reflecting a 25.1% increase [25] Company Strategy and Development Direction - The company aims to remain a leader in multibillion-dollar markets through investments in product development and clinical research [7][8] - A focus on double-digit revenue growth and expanding profitability through the rest of the decade is emphasized [7] - The company is expanding its Cryo nerve block therapy to address postoperative pain and reduce opioid dependency [19][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving positive cash flow for the remainder of 2025, with a modest gain expected for the year [27][28] - The company anticipates continued pressure in the U.S. MIS ablation and appendage management revenue in the near term [29] - Management highlighted the importance of maintaining relationships with electrophysiologists (EPs) to navigate competitive pressures from PFA technologies [81] Other Important Information - The company received FDA clearance for the AtriClip Pro Mini device, which is expected to enhance minimally invasive procedures [12] - The LEAPS trial is progressing rapidly, with total enrollment reaching 5,500 patients, aiming for 6,500 by Q3 2025 [13] Q&A Session Summary Question: Impact of tariffs on gross margin - Management expects a modest impact on gross margin due to tariffs, primarily because most suppliers are based in the U.S. [36] Question: Acceleration in appendage management - The acceleration is attributed to the launch of the Flex Mini device, which has received positive feedback from physicians [39] Question: Guidance for revenue growth - Management refrained from raising the low end of the revenue guidance range, citing it is early in the year [43] Question: Pain management growth sources - Growth is driven by increased adoption of CryoStur Max and improved procedure efficiency [47] Question: Confidence in MIS business recovery - Management believes there are signs of recovery, but anticipates continued pressure in the near term [100] Question: Future of Encompass clamp - The Encompass clamp is expected to continue driving growth, with significant market penetration still available [93]