AtriCure, Inc. Aktie

Well, good morning, everybody. Very pleased to welcome everyone to the last day here of the Goldman Sachs Healthcare Conference. Very pleased to have the management team here from AtriCure. Mike Carrel, Chief Executive Officer; and Angie Wirick, Chief Financial Officer.

I have obviously a series of questions, and I know it's the last day of the conference and it's been a long few days, but I will open it up if anyone does want to chime in and ask a question, we'll just get you a mic because this is being webcast.

So I'll just start maybe higher level on the strategy and then I want to jump into some of the products and then kind of the financials. But you've been CEO of AtriCure for a decade. I mean you took over the company, kind of sleepy cardiac surgery company. You brought it to a much higher growth place. Maybe just sort of talk to us about the broader evolution of the story and how you want to kind of frame the AtriCure message from here?

Sure. Yes, I've been with the company now almost 14 years. And we're now about -- this year, we'll do over $600 million in revenue. The position right now, though, is that we've got a Vision 2030 to do $1 billion in revenue by the end of this decade. That implies from here to the end of the decade. So it kind of the growth, the double-digit growth that we've always kind of achieved.

The way we do that is that we are #1 in the markets that we serve, in particular, around arrhythmia management for cardiac surgery. That is absolutely our core business. And we are not only winners in that space with over 90% market share in the areas that we're in. But on top of that, we are expanding that market. So we're not just treating preoperative Afib, but also postoperative Afib, and we've got a major trial that I know you're going to ask some questions about called BoxX-NoAF that triples the size of the overall market.

Our vision there is that there's 2 million patients that undergo cardiac surgery. And every one of those patients can benefit from an ablation in an AtriCure. And that market alone is almost a $10 billion market when you look at that on a global basis. You combine that with our pain management business, which was a business we got into about 6, 7 years ago, which is reducing pain after surgery for invasive surgeries, really ablating those nerves.

Our vision there is that any kind of complex surgery that interrogates or affects the nervous system in any way that we're going to be involved in that in a big way, right? We started with thoracotomies. We're now getting into amputations. We believe that is also a multibillion-dollar market as well, and we're playing on the fact that we have capital in place. So we look at it with like massive market opportunities, underpenetrated markets and a lot of growth over the next several years.

On top of that, we are profitable. And so we are making money, driving cash now. I couldn't have said that 3 years ago if we were sitting up here, Dave. But now we're profitable. And so you combine that. We don't have to go to the markets to raise money. We don't need -- we're not in that kind of position on that front. And what's exciting, I know you'll ask about competition, which is that now that we've done this, everybody is saying, "Oh, we want to get into that space."

To me, that is a reflection of that we found a space, we found a niche, we identified it, we built it and now people want to come and follow us. And fortunately for us, I think we've got the clinical evidence, the innovation in our products and the pipeline to really not only be ahead of that competition that's going to be coming in the space, for the next year, but really for the next decade or so.

And I do want to touch on competition just in the context of kind of the broader performance of the business. I think the past several years, it's sort of been like there's always like a thing, like a wall of worry that seems to like throw itself up.

I like that word. I don't really like it. It's a good way to describe it.

Best presentation I come up with because -- and then sort of -- you seem to just prove it because the business stands on its own merits. But it kind of -- so I think it was first was like, well, okay, now we have PFA and PFA is going to solve all the world's problems and we're not going to need CONVERGE. And then it was like, okay, now Edwards is coming with a competitive product on the left atrial appendage occlusion side. It's like, well, now this is going to hurt your business.

So maybe just help us think through your own strategic planning, how you think about getting ahead of seeing around corners and being ahead of some of these threats. And I know this is a very long question, but why do you think people get so wrapped around the axle on these things?

Well, first, maybe to look at us a little bit differently, we're not a single product company that comes to market. A lot of companies come to market, they're a single product. They have these massive incredible growth rates, and they're looking to be sold and they don't build up the infrastructure for scalability and diversification.

We actually have done that in the sense that we've been able to try things, put shots on goal and various different. Not ever all of it worked, but you can see how like whether it was pain management, and we're able to withstand some of that because of the way that we've kind of built that business and the diversification of that puts us in a much different spot than what an investor would normally look at.

Now what you haven't seen with us is we haven't had the 50% type of growth. We've had super solid, consistent double-digit revenue growth, hitting our numbers every quarter. That's what you get from AtriCure today, and we've got an opportunity sitting in front of us for some of those catalysts in a couple of different areas. The way that we view competition and we prepare for it is, number one is we've never stopped investing in things that we think are going to accelerate and grow the market overall.

For example, if you first look at our innovation pipeline, we didn't just come out with a clip. We're now on our seventh generation clip. So by the time competition is coming in, they're chasing our older technology, and we're already flipping people to the next technology. In this case, it was they chased the V clip, which was our second generation of the product, which is a great product.

And the products they've come out with aren't as good as that product, let alone the new products that we came out to market with our FLEX-Mini, which now represents over 40% of the revenue that we generate. And that number is continuing to grow because its profile of 60% smaller, which is what the customers have talked to us and wanted to see. You combine that with a really robust belief that clinical evidence makes a difference.

So if you have great technology and then you combine that with robust randomized controlled data, it's painful in the short term because it costs you money and it takes time. But in the long term, it creates an incredible moat because you're the only company in the world that's going to have that data. So how do we prepare for it is we're already preparing for it relative to that.

And then third is that we built a team that is more knowledgeable than anybody else in the space in the areas that we're in. So our team that's in the field is incredibly knowledgeable about atrial fibrillation, arrhythmias and pain management. That's what we do. That's what we do every single day. That's all we do, and we've got a very large team, and we invested in having that team for scalability. We also view competition as a recognition of the markets that we're developing.

So what I tell our team internally is I say, "Hey, this is good." If you've got Medtronic and Edwards saying, 2 of the largest, most well-respected great companies, they are fantastic companies coming into our space, that means they're recognizing it's a lot bigger than old little AtriCure and that this is a multi, multibillion dollar space that requires to have that. And we've got examples of when that's happened in other spaces.

You look at TAVR back 20 years ago, Edwards was first. Medtronic came in second. When Medtronic came in, it expanded the market. Same thing happened when Amulet came into the WATCHMAN space. WATCHMAN was there. Amulet came in. They both continue to grow really fast because there was a recognition and there were more companies that kind of validated that space. That's how we view competition is that it validates our space, and then we got to make sure that we've got the pieces in place to win in the market.

And maybe, you mentioned in your kind of intro, you're profitable, you've kind of crossed that chasm. But as you think about competition entering, the product is one piece of it. You talked about kind of the knowledge of your teams, but there's also other things you can do strategically and commercially to build a further moat around your products, whether that's investigator-initiated studies, whether that's additional clinical trials.

Like how do you think about balancing the profitability that you've achieved with spending off competition, but like why not plow even more into the business to -- because you're self-sustaining, right? You're not one of these early-stage companies that has a cash burn problem. So how do you think about just the trade-off between the profitability kind of tagline, but also things you can do to further strengthen your position ahead of new entrants?

Some of that -- the way you described it is -- and I don't mean to be offensive in anyway, is reactionary versus what do you do to build a great company that is ready for competition at any point in time. We're trying to build that we're ready for competition at any point in time. So when I describe that -- if you look at our P&L, we invested 18% to 20% in R&D for a reason.

Part of it is to expand and grow new markets. Part of it is to be ready for competition and build that moat in. R&D includes not only new products in the market, but the major investments in those trials. So LeAAPS had 138 centers in the United States involved in that trial.

Our BoxX-NoAF trial has already well over 20 is going to be up to 75 sites. These get people really involved in this area. They want to be involved in things that are practice building and game-changing for the overall market. You can just talk to surgeons that are a part of this. They get really excited about it. So -- but we're not doing it because competition is coming in. We're doing it because the right thing to establish this evidence to grow the market and to treat more patients.

And then, by the way, because we're the only ones that will have that evidence and it will only be on our product, it gives us a defensive measure. The ISRs or the independent -- sure everybody does those because you're trying to solve some scientific piece, but I wouldn't say that's how we're fending off the competition per se. On top of that, we're building out like we believe [Technical Difficulty] basis. They need to be [Technical Difficulty] and whether that's with competition or not.

We've been doing that for 10 years, which is why -- if I just did it now, and I all of a sudden hired a bunch of new people, it takes 2 to 3 years to really train them really well. Well, the people -- the tenure of our team is most of them have been with us for well over 5 years. So they've got established deep relationships and trusted relationships that are already there. That was before competition came there because the best thing to do to serve them is to do that. And I think that that's the way that you win against competition is that you invest early on even before you know the competition is entering into the space.

Maybe to put a finer point on it, I would say our philosophy is invest for growth. I think everything that Mike is describing, we're in a great position, as you've said, we are cash flow positive. We are ahead of our LRP relative to the bottom line expectations. And I think we feel comfortable that we can continue to improve profitability, improve margins continue to generate cash flow, but our investments are geared with an eye towards growth, where can we lean in and really drive top line. That's the philosophy that underlines all of our investment decisions.

That's a very helpful perspective. And I think hopefully frames for people, you described as proactive, but I think that's a great summary. And maybe we kind of have a case study, right, with Medtronic a few years ago, I think there was a tremendous amount of concern about your business, and you've continued to grow through it.

So maybe it was a -- I want to move on to the rest of the business. But just from an analog perspective, maybe just frame for us how that played out and how we should -- maybe is that a good...

Medtronic came out with a repeating clip in the space called Penditure. They came -- it was almost 3 years ago now that they came into the space. What I told people at the time was that -- and it wasn't a shock that they came to market, but the data that happened. They don't call me up and say, Mike, I'm coming in and put out a press release tomorrow.

So that obviously affected the stock really quickly there and people were concerned, as you mentioned. What played out there in that space? Medtronic is going to get some share. So they got some share out of the space. But I think what we demonstrated was that the innovation, our products were just innovation and [Technical Difficulty] bar none, it is superior. [Technical Difficulty] what our products kind of bring to the table on that. We've surrounded it by the evidence.

And then what you've seen out there is that they gained a little bit upfront and now their market share has actually declined. So I think they peaked about a year ago where they were in that kind of 8%, 9% market share. They're now down to about 5% market share in the U.S. And they'll have their fair share. They'll have a small share there from that standpoint. Why? Better products, better evidence, better team that understands the space. And I firmly believe that.

And so I think that's what we've seen played out with Medtronic. I don't know what the Edwards clip is going to look like, how we're going to compete against that yet, but our team is prepared, and I'm really confident that we will out-innovate them, out evidence them and outs support the team out in the field.

You made the reference to 18% to 20% of revenue being invested in R&D. You have a lot at play right now, both from a product and clinical development standpoint. You mentioned BoxX-NoAF, which is actually on a pretty long list of ongoing programs. Maybe just -- I know you have the LRP out there, but help us think about what are the next key clinical and regulatory milestones that you want investors to include into?

Yes. I think the exciting one we mentioned on our first quarter call was improving the BoxX-NoAF trial enrollment, pulling that in by over a year. When we launched the trial initially, we thought it was around a 2-year time line for enrollment. The pace of enrollment is exceptional, very similar to what we saw in our LeAAPS clinical trial. This is a trial that has 2 endpoints.

So you'll get a view of data, first and foremost, 30 days post enrollment. So we're looking at are you reducing postoperative Afib 30 days post procedure. So fairly quickly after we enroll the trial, there should be data out there. We'll follow the same patients for a 3-year time line. So there's another chunk of data that we'll look at further out.

Following somewhere in that time line, you'll also see LeAAPS data we expect in that time line as well. I think those are 2 of the major kind of data-driven areas that are coming from our R&D initiatives. Next year, we are also looking at launching another AtriCure device for open chest procedures. So I think that that's another data point to be on the watch out in terms of R&D activities and continue to look at each one of our franchises.

We're looking at product performance. We're looking at what we're hearing from customers, how we can optimize devices where there might be an unmet need. What you're seeing in our pain management business is optimizing the devices for thoracic sternotomy use, introducing the amputation-related device. But we're also looking at other procedures, surgical procedures and saying, where could there be a benefit to patients, and we've got something that we could offer -- so I think when you're talking about the next couple of years out, I would expect there to be more in that area as well.

And maybe just pull the thread for us a little bit further on LeAAPS and BoxX-NoAF. You see the data, you see the 30-day at BoxX-NoAF, you see the LeAAPS data and what's next?

What's next? I mean we're bullish that we'll have very positive trial data, which ultimately will expand our market. You're talking about multiplying the market activity for us in cardiac surgery. These are existing customers doing existing procedures with existing devices. I think this gives us an automatic start to go and attack these markets in full.

I think Mike said it really well at the beginning. When you think about a cardiac surgery patient, you're not asking a surgeon to just look at whether or not they have Afib, you're saying regardless of whether or not they have Afib, if you ablate them, if you manage their appendage, there is a benefit to this patient at some point in their lifetime.

Okay. Maybe just to take a step back for a second and just touch on the market for a second. LivaNova presented here on Monday, they talked about seeing very strong growth in overall cardiac surgery procedures. We continue to see growth in surgical valve procedures. I mean open heart procedures continue to grow at a pretty healthy rate. It seems despite sort of the continued growth in TAVR and other minimally invasive therapies. What are you seeing in just the broader market for cardiac surgery?

So the same thing that you mentioned LivaNova is saying. I think there's a very strong presence in cardiac surgery. Why? Because the demographics -- we've talked about this many years ago. I remember a report came out in 2015 when TAVR was coming, the next thing was going to be transcatheter mitral valve.

And by 2020, there was going to be no cardiac surgery. And we said that's just not going to happen. We believe that the -- just the way that -- I mean, yes, you're dealing with sicker and sicker patients. So there's no question about that. But at the same time, there's a ton of patients. People are getting older, they're living longer. And so we're definitely seeing a robust area in this the growth overall.

Now even if that didn't grow, if that was just flat and it was just 2 million patients annually every year for the next 10 years, and we only did 100,000 or 130,000 patients last year, our opportunity for growth is just within that market right there. So we've got a ton of room for growth just within that. That's what LeAAPS and BoxX enable us to do. That's why we think that once those read out, you will see an acceleration in the growth relative to our cardiac surgery franchise. for a decade or so.

And maybe it's a good segue to talk about the $600 million in revenue to the $1 billion. You talked about the kind of implied CAGR to get there. But maybe just operationally, unpack what are the drivers to achieve the next $400 million or so of sales to reach the $1 billion? How much of that should we think about as coming from underlying market growth, price penetration, new products? Like how do you kind of break that down for you?

I think this is a penetration game in each one of the markets that we're in. I think you're looking at continued strong growth in open heart procedures, both ablation and clip I think you're talking about continued very strong growth with our pain management devices.

If you look at the implied -- in the LRP that we gave, the implied CAGR between now and 2028, we gave kind of a $750 million number and then $1 billion by the end of the decade. It implied a very slight acceleration in growth in the back half, and we said that's really attributed to BoxX and LeAAPS. Expect both of those to be accretive to our growth rate. I think you're talking about existing markets being underpenetrated, continuing to penetrate with the best devices, continuing to innovate to make sure that we can drive penetration and then the upside of positive trial data that ultimately gives you access to an even broader group of patients.

And in terms of broader market trends, besides the impact of the BoxX-NoAF and LeAAPS, is there anything that could change in your business to get from the $600 million to $1 billion? Or is sort of a continuation of what you've been executing -- and then this is plus that.

Continuation of what we've been executing.

Okay. Very helpful. Maybe I'll see if there are any questions in the audience. Otherwise, happy to keep going. This is what always happens. And I'll come up to you and ask questions after. But well we can keep rolling here. Maybe we could touch on the ablation side. I mean this is another area where you've obviously seen this extraordinary adoption of PFA, but probably reaching peak-ish penetration in -- certainly in the U.S. How do we think about just your ablation business in kind of a PFA-dominated market?

Well, there's 2 parts of our business. So we touched upon earlier, the open chest or the concomitant treatment. PFA has 0 impact on that business today. And I don't -- and not for a long time, will PFA have that. We'll have our own device in that area, but that's not really growing the market. The things that are going to grow that market are BoxX and LeAAPS, that expands it, that gets us in every account.

I think what you're referring to is really our hybrid business, which is when you've got a patient that all they have is Afib, they walk in. And for that patient that's been in Afib for a long time, that patient should benefit or can benefit from our technology combined with PFA or RF or cryo. The way that we view that market is, yes, it's been under a tremendous amount of pressure. There's no question about it. And you can see in our business. I mean, last year, we shrunk almost 30% in that part of our business.

Despite that, we still grew the business in the double digits. So I mean, we were able to withstand that kind of pressure. We anticipate that pressure continuing this year. Eventually, though, what's going to happen with those patients is they're going to fail enough on the PFA side because there's no PFA catheter that's proven that they've got durability long term. And so for those early easy patients, PFA is fantastic. For the longer-standing persistent patients, they've been in Afib for a long time. It's worthwhile to try the PFA.

Like we're not trying to -- we're not -- we don't view ourselves as trying to take that away from the EP. But eventually, they're not going to be able to do anything to do everything they possibly can with it, and we're that next resort. Now that happens to be a lot of patients. When that funnel starts to build is the bigger question for us. Like how does that -- when do they start giving up on those patients?

Some sites you see it, like we have some light on certain centers like that, but we're just not at the bottom yet. So we view it as, hey, there's going to be pressure for a good period of time. But eventually, we know our technology works. We know we're helping patients out. and we think that it's going to come back eventually.

And maybe just run something by you to kind of get your perspective on this. If you think about the sort of the patient care continuum, like pre-PFA, you were drugged, drugs failed and maybe it's cryo or RF ablation, you tried that a couple of times, maybe 2 or 3 and maybe the long-standing persistent patients end up in the CONVERGE procedure. Then you have guidelines change, drugs go away, not really go away, but drugs may are in frontline therapy.

RF, you get rid of this like sort of long-ish procedure, enter PFA, super convenient procedure. I agree with you. We don't really know that it has long-term data. We'll see if -- how that plays out. I'm going to take the under on that, just kind of knowing the disease epidemiology and being in the space. But -- is there -- are we into sort of this like transition period where the EPs are figuring out in a PFA world, how to treat this patient population and kind of as that gets established, wouldn't your business return to a more normalized growth rate? I mean...

I absolutely believe that. And that's why we've continued to obviously be in that space because we do know that even if it's not -- even -- let's say, in the long term, long-standing persistent patients, let's go through that patient population. I mean the early-stage paroxysmal patient or even general persistent, let's say they're getting 80%, 90% success.

And you're probably not going to see that patient until they become long-standing persistent. In long-standing persistent, their success rates are still in that 50% range. And -- but let's say that number becomes 80%. That means 20% of those patients are -- that would -- if we could capture 10% of the 20%, that would be a growth for our business. And so yes, I do think eventually, those patients are going to come through.

They're going to be looking for a solution. And there are no other solutions that are on the market other than CONVERGE. It's approved. It works with PFA. So I do think that we're in that kind of interim period as they're trying to figure that out. Unfortunately, it's a painful interim period as they're trying to figure it out. But we're still here. We're persistent. We believe in it, and we believe those patients will eventually benefit from it. We're still treating patients. I mean like we still support a lot of surgeons and EPs that have that belief. We just don't know when that path is going to clear for us a little bit.

And what's reflected in your LRP on maybe this dynamic specifically?

Yes. I mean our belief was that hybrid would return to growth, but you would not continuously shrink through the kind of long-range plan period. I think what's great about our business, again, to wrap around to what Mike said earlier, is that you've got multiple drivers here, even though the expectation for hybrid may be changing, we've got other areas that are accelerating past kind of our expectations within the LRP. So I think you're really well insulated as we're in this kind of down trough period with our hybrid business.

And maybe we could just -- before we get to the financials, just talk about the pain management business. It's doing very well. It doesn't -- you seem to get -- you get categorized as a cardiovascular device company, but the business probably doesn't get the airtime that it merits.

So maybe talk to just a little bit about how that business is -- it strengthened quite a bit in terms of its performance and its contribution to your growth rate. Maybe just update us on just the progression there and how you're seeing it unfold.

Yes. So it started as a business that was focused on thoracotomies because we were cardiovasc in that space. That was the channel. We could leverage it. We could leverage systems that were already in the field, and that's where we saw the initial growth come off of it.

The reason that we're gaining traction is because unlike Afib where you treat it and you don't really know if you have success for a year or 2 years, in this one, you have success within 12 hours. Like you see the patient in the ICU with a step-down unit and you're like, holy cow, this person is able to get up, they're able to recover more quickly. And so you see it right away. That's why you see that benefit because a surgeon, a PA, an RN, anybody there.

So what we've seen is explosive growth where we're now in about 25% of all thoracic procedures on that front, which is typically, I'd say the largest portion of that is lung cancer patients. And we know the prevalence of lung cancer. There's about 150,000 or so thoracotomies every year in the United States. And we've made a great dent in that space, but we still have a long way to go.

We're still 75% to go in that area. What we've also found, though, is that, that's not the only invasive surgery that affects the nerves. And so what I love about this space is each one of the markets is not by itself a business that you'd be public on, call it. But the fact is, is that it works on almost every one of these, and it's easy to extend and the mechanism of action and how it works is actually very similar. So now we're getting into amputations. That's another 150,000 patients in the United States.

You can triple that when you look at it on a global basis, and we're now rolling that out. So we're looking at all those different areas like that. So we think that this has got a long runway for growth in each of those areas as we continue to expand the markets. But it's a great business. You've seen it grow at almost 30% consistently, and we will continue to expand it.

One of the areas we're really excited about is, obviously, the amputation is kind of exciting. because you get the micro effect of it. But in addition to them getting better recovery, we're now starting to see data that it actually might affect phantom limb pain. And that would be a really big market for us. We've got to study it. We're not there yet. But longer term, I think that could be also expand the market even more, kind of like what Box is doing to cardiac surgery. We think that could do that for amputations at some point.

That's good. Maybe we'll turn over to the financials for a second. I think in January, when you introduced the outlook for the year, you talked about it being kind of a back-end weighted year. You started the year at the high end of your guidance at 14% versus the 12% to 14%. Help us just think about how things are unfolding relative to those initial expectations. And and why you retained guidance despite the upside in the quarter?

Yes, I'll hit the last question first. I may think first quarter out of the gate. While we're pleased with the performance in Q1, you're early in the year. Our guidance philosophy, I think, is well known. We're putting out numbers that we want to make sure there's a pathway to beat. So feel really confident and felt like the first quarter trajectory, by and large, came in as we expected within the franchises.

Of course, some areas where there was increased strength in a couple of areas, a little bit more pressure, but overall, felt good about the performance of the business. Just early in the year, not ready to update the guidance there. I want to make sure we can continue to perform. The 12% to 14%, we did talk about it being more back half loaded. Some of that is maturation of our product launches.

When you think about the FLEX-Mini clip, yes, making good progress, but our expectation is that we exit the year in a very different place than where we started the year. CryoSPHERE MAX, we exited 2025 with a really high level of penetration, but our expectation is that, that will continue to grow. The amputation device, the cryoXT, that is a newer product launch that we expect as we operate throughout 2026 to continue to drive even more revenue there.

And then seeing some of our areas within Europe that we've had some weakness, the U.K. in particular, comps get easier, you start to think about kind of the back half being a better comparison for us. That was kind of what went into the guide relative to the expectations for back half of the year.

And maybe can you give us any sense as you kind of think about the back half of the year, some sort of explicit contribution from some of those new products, what portion of the growth they represent first half versus second half? And any framing would be helpful.

Yes. CryoXT, I'll start there, minimal contribution to revenue in the first quarter. I think you're going to see that the quarterly contribution, the numbers start to multiply. The longer that we're out there, the more accounts that we start to activate, you're going to see fulsome revenue contribution as we exit 2026. That's our expectation.

The FLEX-Mini device, I think this is an area where we've had really strong growth within our clip franchise. So appendage management has been a very strong double-digit grower for the company for a long time. FLEX-Mini is what helps us maintain. We have very good penetration within Afib patients, treatment of Afib patients, there appendage. We're starting to see much more prophylactic use even before LeAAPS data comes out. I think FLEX-Mini is a very compelling option where surgeons look at every patient and say, this device is incredible. It's tiny.

I think you're starting to see adoption continue even though the law of large numbers really should come into play for this franchise. CryoSPHERE MAX being 70-plus percent of the revenue, I think what you're finding is when you can reduce the freeze time in these procedures, that is incredibly compelling to a surgeon.

They want is they could see the immediate impact on the patient, but taking time out and making it better with the same kind of reliability on the freeze, I think we found that cryoSPHERE MAX is a complete home run. So that drives, I think, the conversion, you get a slight ASP uplift, but you're also seeing good volume growth fundamentally within those markets.

And maybe sort of at a high level, as you think about just the evolution of the business, exiting '26 and then through the rest of the LRP period, you'll be exiting the year with a higher -- with ramping new product contribution that should then presumably higher next year versus this year and higher in '28 versus '27. Hopefully, we'll be lapping some of the dynamics on the CONVERGE side. We'll see kind of how things play out there. Why couldn't you do better than 12% to 14% as you look forward?

We believe that we will. I mean I think that, that is -- the LRP guidance philosophy is no different from the annual guidance that we give. I think if you look at the performance in 2025, outperformed our initial year guidance, outperformed what the LRP implied relative to contribution of 2025.

Our goal is to put out financial numbers and expectations that investors can see, look, this is a company that can not just meet, but there's a pathway to beat. We feel really good that we've got the right kind of catalysts within the business to do that.

And when we looked at it, I think it's important when we rolled our LRP back in March of last year, one, we wanted to set something that we could kind of beat as Angie was referring to. But on top of that, was it by itself compelling? Like did that actually make sense?

And if you look at those numbers, if we can do that from now until the end of the decade plus improve the bottom line to that level, that's a compelling story that one can look to just on that independently, look at nothing else and say, okay, if you looked at that financial profile, our value should be much greater than what we're looking at today.

And just -- and we're saying -- and we know competition is coming in. So all that's built into those numbers relative to that. That will also part of it we said, okay, is that compelling story to tell us? It's one of the reasons we did the Investor Day, we said, hey, this is super compelling. Like to be able to drive this to get towards that $1 billion at that kind of growth rate and getting leverage every year to the bottom line, that's a compelling story.

And you can do your analysis on the 3 or 4 companies that have done that over the course of the last several years or last half a decade, and all of them have exponentially better multiples on both top and bottom line than what we've got today.

And maybe we'll just wrap with then a question kind of on capital allocation. I mean you talked about the -- one of the values of the business clearly is the diversified revenue stream that's able to sustain growth despite headwinds in one business, tailwinds in another. I mean a lot of companies face that end up at a much lower growth rate than 12% to 14%.

So as you think about your ramping cash generation and continued strengthening of the balance sheet, how are you thinking about internal versus external investments? And does M&A play a more important role as you go forward?

Internal is our focus at this point in time. We absolutely stay in tune with what's going on in the market, where there's new and emerging technology, things that might be interesting to us. And I'd say our main focus is we've got too many good catalysts and growth drivers within our organic R&D pipeline for us to focus on.

And what Angie always likes to remind us of is that when we're looking at M&A or things like that, is how is that going to drive revenue growth for us over what period of time. And so we're constantly thinking going back to the original conversation, it's about is it going to be driving meaningful revenue growth, both short, medium and long term for us.

Yes. Excellent. Well, I think with that, we are out of time. But Mike and Angie, thank you for making the trip.

Thank you.

Always appreciate having the opportunity to get the update, and we look forward to getting, I guess, the next update in August. Excellent. Well, thank you.

Excellent. Well, thank you. We appreciate it.

Thanks, David.

[indiscernible] CEO, Mike Carrel; and CFO, Angie Wirick. We're going to do a 30-minute fireside chat, but thanks, everyone, for joining us.

I guess, Mike, Angie, starting out at a high level on the '26 guide and some of the growth drivers in the business. You delivered 15% revenue growth in 2025. You're guiding 12% to 14% in '26. As a management team, you've consistently met or exceeded your guidance. So how should investors think about the setup for the year? What's giving you confidence in the range? And do you feel there's an appropriate level of conservatism baked in given kind of the macro environment?

I'm going to start with your last question first. Yes, I think there's appropriate conservatism. Our philosophy, and we've said this many times, is we want to put guidance out there that we feel really comfortable not just being able to meet, but that there's a pathway to beat.

And when I look at the setup for 2026, I'd say the big thing that we say is innovation is really driving revenue growth in 2026. Continuation of a lot of the product launches that we started in 2025. So in our pain management business, the cryoSPHERE MAX Probe. In our appendage management business, we have 2 product launches, the FLEX-Mini and the PRO-Mini. So those both give us a shot on goal.

I think in each one of these new product launches, you are talking about driving both growth in volume, but then also pricing uplift because there's new innovation built into the devices. And then even though it's not a new product launch, I don't think I can say EnCompass is a new product launch at this point in time, but we were also still very bullish on what we're seeing within the open ablation landscape and EnCompass continuing to drive growth.

Got it. And pain management has been one of the growth drivers for consecutive years now. MAX has been the core driver, but you recently launched XT for lower extremities. How should we think about the impact of XT on the franchise's growth profile going forward, whether that be in '27 or in the second half of '26?

Yes. I think with XT, so the device specific to the amputations market, we launched -- soft launch at the very end of 2025 and have kind of started full launch at this point in time. From a guidance perspective, we said expect it to contribute more fulsome in the back half of 2026 as we're exiting the year, just giving us time with the new therapy and market development that takes some time to get up and going.

I think the way that you think about XT in the context of our pain management franchise growth is while you start to hit kind of bigger numbers, law of large numbers start to apply in the base area of the business, thoracic and sternotomy, this is another driver for us. This is another way to augment and keep that pain management business at a very high growth rate.

In terms of the other franchises, open ablation and appendage management have been kind of the durable core of the business. EnCompass has been a big driver of that. But you said it's not a new product launch anymore, but it's still driving growth. How should investors think about how much runway is left in the adoption curve there?

I think there's an incredible runway. I think even within Afib patients, you're talking about the vast majority still don't get treated today. EnCompass Clamp us unlock [indiscernible] there's a reason for you to ablate the patient to manage their appendage and the pathway to being able to do that is the EnCompass device.

And if you think about just data numbers, there's 2 million patients that undergo cardiac surgery every year. And last year, just over 100,000 were treated with some sort of device from AtriCure. So you've got a long runway with the trials that we're running that are very differentiated on that standpoint. EnCompass is what enables that.

We took a procedure that was 40 minutes down to less than 10. So we operationalized it for those surgeons. We made it really an approachable area. So there's a ton of runway. So while it's not new, in many ways, it's new to the surgeons that we're introducing it to because they weren't doing any treatment before.

Got it. Kind of moving from top line drivers to profitability margins, which has been a really good story for AtriCure as of late. You doubled adjusted EBITDA nearly in '25. You're guiding $80 million to $82 million in '26. It seems like kind of ahead of the curve on the LRP you gave in March. So thinking about that, is it possible we could see that 20% plus EBITDA margin before the 2030 target?

Yes. I think it's very real given the trajectory that we're on. Again, no differently from our top line philosophy. When we guide on the bottom line, we want to make sure that we can deliver the number and a pathway to a beat. You've seen improvements to profitability, I think that have exceeded our own expectations. I think what's so compelling about our story is that we're doing that while still making pretty big investments in landmark clinical trials, things that we expect to be growth drivers for the business longer term.

Got it. And you had your first quarter of positive GAAP net income in the fourth quarter of '25. You're guiding to full year positive GAAP net income in '26. As AtriCure crosses into that profit -- crosses that profitability threshold, how should we think about the financial story of the company evolving? Is there any change in kind of your view of the company as a growth company? Or is it still kind of Steady Eddie that way?

Yes. I think we are investing for growth. Primary focus for us, the capital allocation, 1, 2 and 3, you're focused very much on organic development of activities that we think are going to be long-term growth drivers. I mean we want to continue our path on profitability to show that we're good stewards of the investments that we're making. I think it just tells you between the markets that we're in, very consistent double-digit revenue growth and high gross margins, given the investments that we've made in the company, we have the ability to be very, very profitable as a business long term, but still focused very much so on investing for growth.

And alongside that profitability, you're turning into cash flow positivity as well. So you talked about capital allocation, obviously being growth, growth, growth. But as you move into that positive free cash flow phase, is there any room for a formal return of capital program? Is that something you've considered?

In the near term, no.

You also got a new manufacturing facility coming online in the second half of the year. You called that out as a modest gross margin headwind. How long should we think about that absorption period lasting? And when does it move from maybe a structural headwind to a tailwind?

Yes. I think you're talking near term within the next year or so it's a bit of a headwind from a gross margin perspective. We will start manufacturing in that building much later this year. We'll open it up. You start to bear the burden of the facility. But once you get operational, I think that this is something that will ultimately turn.

The vision behind the expanded manufacturing capacity very much dovetails into what we presented at our Investor Day a year ago, which was we expect to be able to hit $1 billion in revenue as we exit this decade. We felt very good about line of sight and the drivers that we have within the business to be able to do that. We want to make sure that we were investing to support that growth. This manufacturing expansion helps us do just that.

Got it. Kind of moving to the competitive landscape, which has been a very hot topic for AtriCure over the recent years. Penditure was an overhang on the stock for about a year, but it seems like you've kind of weathered that storm and come on the other side, maybe stronger in some regards. What drove that outcome and your ability to weather that with a scaled player entering the market? And how do you think that displays the moat you've built around AtriClip and the clinical data you've made?

I think first is just our view on competition is that if a market has big competitors coming into your space, that means it's a really big space and probably a lot bigger than where you are. So I think it's a recognition of the investments that we've made over the last 10-plus years. People now see because of our success, they're looking to kind of follow us into that space, especially coming from those big players. I think that is a complement to us in terms of the work that we've done on that front.

Plus every other time a second and third competitor come into the space, the overall market has grown because you've now got more people talking about it and generating data and generating conversations with surgeons in our case. You saw that in TAVR. You saw that in the left atrial appendage space, in particular, both of those accelerated when they saw competition coming in. So we view competition in a very positive way, even though, obviously, you've got to detail it out and you want to win in the field. We do view it overall as positive.

Now getting to the specifics of why do we think that we win and why have we won in that space is because we've never stopped investing in the core principles of our company. And those are really 3 core principles. Number one is innovation. If you look at what we've done on the AtriClip side of things, we went from the original product to a V clip product, which is what everybody is trying to copy now to a mini product, which is 60% smaller than any product on the market today, even our own, and we're now coming out with a new one coming next year.

What customers recognize from us is the quality of that product, the innovation that comes into it is that we're meeting their needs and that we're listening to them. And so we've got great products. They're smaller, they're safer. All you have to do is go out there and you can look, we actually have no events with this product. I mean it's like 0.001% event rate with it. It's an incredibly safe product.

So you combine the innovation with the safety and quality you have, then you add to that the fact that we make investments in clinical evidence. We believe that innovation is great, but without clinical evidence, you can't really create that full moat that you're talking about. All the clinical evidence that has generated over the last 10 years is with our product.

So we have over 21,000 patients that have been studied, over 100 peer-reviewed papers, many randomized controlled trials, and we've got LeAAPS coming down the pathway, which is the largest cardiac surgery trial ever done. You invest in innovation, put clinical evidence behind that, that's very specific to your product and the performance of your product versus anybody else, people recognize this is what we do and what we know, which leads you to the third thing and the third pillar of what we build, which is education and training and awareness.

And so our teams understand this space better than anybody else. They've got great relationships. They're in the cases, and this is what we do every day. We're super focused on atrial fibrillation and the left atrial appendage. That's what we do incredibly well. We've got a whole team of people that talk about it, think about it, study it every single day. And we're recognized as a result by the physicians as being that way, not just by physicians, but by hospitals as well.

We've helped them get reimbursement. We've helped them get the guidelines to change. You combine all those things, that's why we win. It's not like any one thing that allows us to win. But at the end of the day, the best product wins. And so we've got the best product on the market, and we believe that with the new competition, we'll have the best -- we'll sell the best product.

And you said that competitors are trying to copy the V clip, but you're already one generation working on 2 generations ahead of that. So in a way that kind of emboldens your moat even more.

Yes.

Obviously, kind of the 100 million pound elephant in the room, Edwards announced that they're going to be entering the appendage management market. When you think about kind of the markets Edwards addresses, does that threaten a meaningful portion of your revenue? How should you think about the impact of Edwards entering the market? And how do you think your experience with Penditure influences your ability to kind of continue to maintain that moat that you talked about?

Again, let's start first. The fact that Edwards is interested in our market or the market that we're in that we've been focused on for the last 10-plus years, we take it as a complement, they think this market is that big. So to us, we think it's going to elevate everybody in the space that they're actually getting into the space. We welcome them with open arms, and then we'll compete with them on a day-to-day basis.

How do we think we can compete with them is that, that focus I talked about before, the continued innovation, we know we're going to have better products. We believe that our products are incredibly differentiated and that they're chasing old products when they're coming out with their new product when they come to market. They're not going to have the level of data or evidence in that area.

For Edwards, in particular, great company. I mean, obviously, they've done wonderful things to build markets over many years, and we've got a ton of respect for what they do on that front. They just don't know this space nearly as well as we do. And so as they enter into it, most of the procedures they are going to be involved with, they are a valve company that they're adding this to the valvular procedures. And they've been very open about that.

2/3 of all patients that go into cardiac surgery are coronary bypass patients. And we are in there for the ablation and the AtriClip, not just the AtriClip. And so we're in the CABG procedures. So there's not as much of an exposure on that front. And then when you add in the valve side, they're going to do an ablation on those patients as well.

And we're in there with them, and we have a huge sales force that's well trained on that front. So I think we're well positioned on that front. We're not taking it lightly. We know they're going to be coming into the market. I think we're all waiting for what does that product look like and how are they going to compete with us on that front, but we're going to be ready. And again, we welcome them.

And you talked about the limited exposure on the CABG side. What can you do to accelerate and kind of deepen your position in that portion of the business?

I think you're seeing it. I talked about, number one is the LeAAPS trial, which is a trial we started well before we knew this competition was coming into the space is that upon like we invested in it, we're fully enrolled in it, we will be the only company with a stroke label that is very specific to our product. That is a global positioning that we've basically done. It was a global trial that we did for that.

Number two is we invested in BoxX-NoAF, which is the prophylactic treatment of that patient so that you're basically reducing anybody's chance of getting Afib both postoperatively and in their lifetime. V clip is in every one of those as well. So you're adding an ablation tool plus the AtriClip. I think that puts us in a great position overall from creating that moat that you talked about.

Got it. And we've touched on this a lot so far. Your clinical trials, is something AtriCure has been heavily investing in and kind of a leader in the space. I think you talked about roughly 2/3 of cardiac surgery patients don't present with Afib, but a significant portion will develop it postoperatively. So when you think about the BoxX-NoAF trials and LeAAPS, like you said, you touched on this, but like at a high level, what do these trials mean for AtriCure as a whole?

They're game changing to think about it. Our vision is that every patient that enters the operating room for cardiac surgery has an ablation plus an AtriClip on them and maybe they also get a sternotomy nerve block on it if they're going in for a sternotomy. So we think that we're there. We understand ablation and the Afib incredibly well. We -- our products are the only ones used in these trials. So they're very specific in terms of what will actually work on that patient population. They're very large randomized controlled trials. We think it changes the game. It takes it from 100,000 patients getting treated every year to hopefully 2 million at some point in time, not obviously overnight, but I mean, obviously, that's the big patient population.

What you do know in cardiac surgery is there are 2 million patients that undergo cardiac surgery every year. If we can prove that almost every one of them will benefit from an ablation with our technology, our EnCompass Clamp and the AtriClip, that is a huge benefit for AtriCure overall and quite frankly, at the end of the day, for the patients.

So if we fast forward and both trials read out positively, obviously, there's kind of a lag for guidelines to update. You kind of touched on this a second ago, but how should we think about the impact on your addressable market and the kind of commercial investments and infrastructure upgrades that might be necessary to kind of facilitate ramping that growth?

Yes. I think when you get positive data, there should be a bit of a bump in terms of the revenue boost here. I think definitively, once you have the label, you've gone through the full PMA process and you've got an approval, that gives our team the license to -- they're able to go out and really market to this.

I think the good news is this is an existing customer, with an existing sales force. We will, of course, look to see where we need to augment in territory sizes that maybe make sense upon the launch to split here. But this isn't training a new surgeon. This isn't a new call point for us. This is an existing market. They're using the devices. They're just saying, look, rather than looking only for patients with Afib to treat, I'm going to treat every patient effectively that's on my operating table.

LeAAPS also recently hit the 50% event rate. What does that mean for the trial exactly? And how should we think about the path to a readout from here?

What it does -- I mean, the events are accumulating at a reasonably fast pace. We -- you've got a 5-year follow-up from the end of enrollment, which takes you into 2030. Since we've already hit 50%, that likely tells you we're probably going to be earlier than 2030. It's tough to predict exactly because you get waves of the events that come in, but we have to hit 469 events in total. Again, like you said, we're over 50%. We'll just keep marching towards that full piece. It's kind of a wait-and-see game at this point in time. It will be before 2030. I just don't know how much earlier.

Got it. And then on BoxX-NoAF, almost a year ahead of schedule, I believe. Can you walk us through the time line from enrollment completion, data adjudication, presentation and then eventual PMA submission? And then any conference you're targeting for presenting that data?

Yes. So we will expect to complete enrollment around the end of 2026. The first follow-up, so the first primary endpoint was 30 days post procedure. So relatively short time frame after you've completed enrollment, we'll go through the data adjudication process. We are targeting a surgical conference early in 2027. I think logically, AATS is probably the right one to think about just -- but depends on pace of enrollment and when we finalize.

And then typically, working through FDA process is around a 12-month time frame. So you're talking about positive data, we believe, early in 2027 and then approval in early '28. The nice thing about this trial is it doesn't just end there. I mean that gives us a chance to win in a very short time frame. We will follow these same patients for a 3-year time line to see what happens to their clinical AF burden and then go back to the FDA upon, again, positive results. So later at the end of this decade, have another chance of enhancing the label further.

And I want to touch something you said earlier about the label being exclusive for AtriCure. So if these trials are successful and you do have the label expansion, that would be exclusively for your products. That would not be something that would be rising tides raise all boats.

Correct. I mean somebody might try to -- they have a 510(k) that can sell their products, but they can't make the claims that we're making relative to this -- relative to stroke, reduction in postop Afib and reduction in clinical Afib.

Got it. You have a good slide in your investor deck where you show the progression of guidelines for your treatments over time. Guidance have been a tailwind for the business. They've been consistently been upgraded. And most recently, you had some STS postoperative Afib quality metric updates come out. That goes into effect in 2027, I believe.

Today, only 35% of cardiac surgery Afib patients end up getting treated. How should we think about that number increasing over the next couple of years? And how should we think about the commercial tailwind to AtriCure from that?

I think that combined with BoxX-NoAF is going to improve adoption quite dramatically. What that means is that the surgeon is going to be effectively required to do an ablation on the patients that have atrial fibrillation. And as you said, it's only 35% today. This is the society's way of saying, okay, we gave you guidelines that said you should treat. Now we're going to put some teeth behind that. And we're going to tell you that not only are there guidelines, we're going to actually make it part of your metrics that your hospital will be dinged if you don't ablate or treat enough patients.

The reason they're doing that is because they know that if you treat that patient, that patient does better. And that's why they're doing it. And so I think that, that's going to have a big boon to our business. Likely, obviously, sometime at the end of next year, you might see some kind of effect of that. Around the same time that BoxX is going to basically hopefully have some data out as well. So I think that that's a big positive. As Angie said, we think the combination of that probably helps the growth rate in that part of the business.

Got it. And you mentioned the star ratings. Is there a commercial playbook you're thinking of for how you can take most advantage of this? Any incremental investment? And then was -- these guideline changes probably not incorporated in the LRP, so that's probably a positive, right?

Yes, definitely a positive, I'd say, relative to the LRP. So I think we're -- our team is always looking about the best way to have the -- to drive some of these initiatives beyond just the commercial team, start to think about your reimbursement team, your marketing folks, how can you help further that message?

You've got kind of feet on the street, but then how do you -- how does the company overall provide air coverage and thinking through what that looks like once the quality metrics are out there and helping our accounts further understand how they can really take advantage of this and not be behind when this comes into play.

Got it. Kind of switching gears to the franchises, pain management, which we talked about has kind of been a nice growth driver for you. It's growing quickly, but without the benefit of reimbursement. How do you see the path to coverage? Is there a credible path to coverage? And what would unlocking reimbursement, if that did happen, mean for the TAM and adoption curve?

Yes. Unlock reimbursement, we need data. So we're investing in a lot of individual site data getting it published. The more and more of that data gets published, that's what happened in cardiac surgery. So you have something to compare to. In cardiac surgery, we saw the guidelines came out first. That was all from data we basically put together and we invested in that those guideline changes then led to 4 years later reimbursement changes, which has obviously continued on and now leading to star ratings.

I think the same playbook is going to happen within cryo, which is that we're investing in the data. Hopefully, that leads to guideline changes, which then lead to reimbursement. That would be a game changer in this space because that is one of the big pushbacks is they're not getting paid for it and the margins aren't nearly as good in thoracic surgery as they are in cardiac surgery.

And kind of building on that, XT is now launched and you've had a kind of deliberate ramp. In terms of your accounts, like how many accounts are active? What is the current physician feedback you're hearing? And then does the amputation market have a meaningfully different adoption profile than thoracic?

Yes. So at this point, we're in about 2 dozen accounts. So every cryo rep that we have in the field was told focused on one account, one account only, go really deep with your initial procedure, make sure that it's well understood. So about 2 dozen or so accounts, which we think is good progress to start the year at this point in time. This is in the amputation space. This is the procedure itself, the primary procedure of doing an amputation hasn't changed in a very long time. So this is new technology into procedures that hasn't seen a lot of innovation. I think beyond the excitement of, hey, there's something to be excited about. The feedback that the physicians can see and the nice thing about our pain management business, as you know, is you can see that immediately post procedure.

You're not waiting for a year to see, okay, is the patient Afib still a problem or not. You can see this immediately post procedure. And the feedback that we get from surgeons who have used the device along with the care teams who are caring for the patients post procedure is exceptional. They can see the benefit it has for the patients. I think longer term, no different from our other markets within Cryo Nerve Block looking to surround this therapy with additional data, being able to market to not just postoperative pain, but the potential for could it help with phantom limb pain. So thinking really big on this opportunity here.

I think given it's a new therapy and a new call point for us in a new area that hasn't seen a lot of innovation, the ramp may be a little bit slower than we saw in our thoracic business, but it still keeps us very bullish that this is long term, a great growth opportunity for the company.

In terms of growth opportunities, MAX has been a nice growth driver, but now it's in roughly about 75% of your accounts. When we think about pain management growth, is there an aspect where we start to get law of large numbers and we start to see growth slow a little bit? Or do you think there's a way to kind of offset that with the XT launch and a possible sternotomy expansion to extend the runway for that growth acceleration?

Yes, yes and yes. I think that's what's happening today in the field. I think we're starting to see with sternotomy, the feedback that we got from surgeons was we can see that it works, but to add the time that the legacy device took to do the ablation, they said it's too long.

I think cryoSPHERE MAX gives us a chance our team to go back to those surgeons say, you believed in it, you thought it had an impact, but we're talking about a significant reduction in time. And those have been sticky procedures, not the volume of growth, the volume of activity we do still is within the thoracic space. But I think in this particular area, continuing to find ways where cryoablation, managing a patient's pain for nerves that are exposed to surgical procedures, I think we're going to find multiple ways to continue to develop and cultivate new markets that help keep this as a high-growth driver.

And kind of turning to your leading franchise appendage management. You talked about this earlier, the next-generation AtriClip that's coming in 2027. Can you talk about what that product is, how it fits in the portfolio? And if it's addressing a different segment of the market that the current lineup doesn't?

[ Go for it. ]

Currently, we've got the FLEX-Mini product in the market. That market -- that has taken over the market by storm. It is much smaller than anything else that's out there, super easy to deploy, allows for great visualization, knowing that you're getting down to the base of the appendage. The new product that's coming out is going to be a V version of that. So an open-ended version, so you can kind of place that. Some people like that approach. And so that's the whole purpose behind it.

One is to give that to surgeons who like the open end versus the closed. And you've got a mix of surgeons on that front. Number two is it also allows us on the minimally invasive side to get it down to smaller trocar, which is really important towards any type of procedure, whether it's a hybrid procedure, but also towards minimally invasive cardiac surgery, mitral valve surgery, et cetera, getting that visualization is really important. And that V clip, I think, is going to make a big difference on that.

And you just talked about hybrid. Obviously, another point of discussion over the company has been PFA and its impact on the ablation franchises. And obviously, PFA has been a kind of hot topic in med tech as a whole. You recently committed or completed first-in-human treatments with your combo RF, PFA EnCompass Clamp in December. What does combining those modalities offer surgeons? And how should we think about the clinical trial path from here?

Sure. So we believe it's incredibly differentiated technology that we have combining PFA plus RF because it actually hits a different mechanisms of action on the heart. So you're going to have a much more complete, much more durable procedure when you do that. And you're going to -- it's going to be on our EnCompass Clamp first, and that's going to enable for that really fast and efficient procedure. I told you before that to do the same level of ablations before, you had to do 30-plus minutes.

Most of that is not the ablation time. It's the access time. That's why you were able to get down to less than 10 minutes. This will actually reduce the ablation times that were in there quite dramatically from 3 minutes or so of total ablation times down to well less than 1 minute. It just makes it easier for that surgeon to do it and to make it more approachable from that standpoint.

As PFA came out of the market, there was kind of a distraction from the MIS business. As PFA has gotten more penetrated into the market, we're kind of hitting significantly higher levels of penetration than we saw maybe a year ago. Does that change your view? Is it a structural headwind? Or is this something you still think is an opportunity to -- as the market matures for you to gain clarity and start to see a rebound in that business?

Yes. I think the where we sit today with our hybrid business, we have incredibly compelling clinical data and outcomes when used on patients, we know are unrivaled. This is in long-standing persistent Afib patients, the CONVERGE procedure, a dual approach, combining the best of surgery as well as what an EP is doing, we know is unrivaled for that patient set.

I think our belief that this could be a first-line therapy at this point in time, given the shift in this landscape to PFA, this is probably not a first-line therapy. But that being said, this is a good option for patients who have failed catheter ablation, something else has been tried or there's a belief that they're just ready for the Convergent procedure out of the gate.

I just think this is a place where clinically, we're still very relevant. There isn't another device that's been proven to help these patients in this way. So we look at this and say there's still an opportunity here. What we're looking for very frankly, is within kind of the account landscape to see a little bit more consistency in that referral.

PFA has been a great technology for EPs and for that space. But coming to the realization of this may not be the best thing for every patient and repeatedly doing a catheter ablation and moving on to a therapy that will help the patient. I think we look at that and say, we're here to catch when that happens and believe that this is a very compelling clinical advantage that the company has.

And you talk about CONVERGE. It takes multiple PFA catheter failures before EP can refer for it. What does it take to shorten that referral pathway? Is there anything you can do on the data or commercial side to accelerate that?

I think the biggest thing from that is once you get somebody who starts to do patients with Convergent and they realize that I'm only going to do one PFA and then refer them. I don't think you're going to get it where it's going to be first-line therapy. I think what you're going to see is maybe after that one or that second one, then sites that are starting to see success with Convergent will then start to obviously do a little bit earlier after the first one. That's -- it's going to have to be time on that front.

Got it. I think we're at time. Mike, Angie, thank you for joining us. Thank everyone in the audience.

Thank you. Appreciate it.

Thanks.

Good afternoon, and welcome to AtriCure's First Quarter 2026 Earnings Conference Call. This call is being recorded for replay purposes. [Operator Instructions]

I would now like to turn the call over to Marissa Bych from the Gilmartin Group for a few introductory comments.

Great. Thank you. By now, you should have received a copy of the earnings press release. If you have not received a copy, please call (513) 644-4484 to have one e-mailed to you.

Before we begin today, let me remind you that the company's remarks include forward-looking statements. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond AtriCure's control, including risks and uncertainties described from time to time in AtriCure's SEC filings. These statements include, but are not limited to, financial expectations and guidance, expectations regarding the potential market opportunity for AtriCure's franchises and growth initiatives, future product approvals and clearances, competition, reimbursement and clinical trial enrollment and outcomes. AtriCure's results may differ materially from those projected. AtriCure undertakes no obligation to publicly update any forward-looking statements.

Additionally, we refer to non-GAAP financial measures, specifically constant currency revenue, adjusted EBITDA and adjusted loss per share. A reconciliation of these non-GAAP financial measures with the most directly comparable GAAP measures is included in our press release, which is available on our website.

And with that, I would like to turn the call over to Mike Carrel, President and Chief Executive Officer.

Great. Good afternoon, everyone, and welcome to our call. AtriCure is off to a strong start in 2026 with worldwide revenue of $140 million in the first quarter, reflecting 14% growth year-over-year. We are building on the momentum we established in 2025 from new product launches with this quarter marking an acceleration in our worldwide growth rate from the preceding quarter and comparable quarter last year.

Fueling this acceleration is our U.S. business, which drove approximately 15% in the quarter from expanding adoption of AtriClip FLEX-Mini and PRO-Mini devices, cryoSPHERE MAX probe and continued strength from our EnCompass clamp. In addition, we generated $17 million in adjusted EBITDA, nearly double the first quarter of last year. Our results this quarter once again demonstrate our ability to deliver durable, double-digit revenue growth and expand profitability.

Beyond our financial results, we have made exceptional progress in our BoxX-NoAF clinical trial. Since initiating trial enrollment in the fourth quarter of last year, we have enrolled approximately 300 total patients. To date in this 960-patient randomized controlled trial, we are tracking well ahead of our original time line and now expect to complete enrollment around the end of this year, nearly 1 year ahead of plan. The pace of enrollment in this trial reflects an extremely high level of engagement from surgeons who experienced firsthand the impact postoperative Afib has on their patients.

As a reminder, up to half of cardiac surgery patients without pre-existing Afib will develop postoperative Afib, which is the most common complication of cardiac surgery. Because there is no established treatment today, postoperative Afib is a substantial burden on the health care spending, with estimates exceeding $2 billion annually in the U.S. alone. We are confident that our BoxX-NoAF clinical trial utilizing our EnCompass clamp and AtriClip device has the potential to meaningfully change treatment outcomes for this patient population and address the significant unmet clinical need.

BoxX-NoAF is also highly complementary to our LeAAPS clinical trial, studying stroke reduction benefit of left atrial appendage management in cardiac surgery patients without atrial fibrillation. We expect both of our landmark clinical trials to generate robust clinical evidence in support of preventative treatment for cardiac surgery patients, unlocking a massive global market opportunity for AtriCure while establishing new standards of care in cardiac surgery. We at AtriCure are well positioned to realize these significant catalysts for our business in the coming years.

Now on to updates covering franchise performance in the first quarter. Pain management once again led our portfolio growth, increasing 28% year-over-year. The cryoSPHERE MAX probe continues to be the primary driver of growth, contributing roughly 70% of our pain management sales this quarter. Surgeons across both new and existing accounts recognize the significant time savings and clinical effectiveness it provides, leading to more patients having their postoperative pain managed effectively.

Building on our legacy of innovation, we are also pleased that our cryoXT probe for amputation procedures is beginning to gain traction. We continue to receive outstanding feedback from each new surgeon that uses this device and through our registries are capturing clinical outcomes for this therapy. We are still in the early innings for cryoXT for the cryoXT therapy development and adoption. However, we remain confident in cryoXT contributing more meaningfully as we move to the back half of 2026.

Within our cardiac ablation franchises, worldwide open ablation revenue grew 15% in the first quarter, led by steady adoption of EnCompass clamp in the United States and Europe. EnCompass is delivering growth from both new and existing accounts even as we approach the 4-year anniversary of our U.S. full market launch.

As mentioned in our fourth quarter earnings call, our efforts to drive treatment of Afib in cardiac surgery patients was validated with a recent announcement from the Society of Thoracic Surgeons' Annual Meeting, including concomitant Afib treatment as a quality metric. There is strong precedent for the impact of quality metrics in cardiac surgery, and we believe this change will support increased adoption for surgical Afib ablation and appendage management, serving as a durable tailwind for growth for years ahead.

Our minimally invasive ablation franchise continued to face headwinds in the first quarter. We believe there is a role for hybrid therapy in the current and future treatment landscape and remain committed to providing a solution for the unmet need for patients with long-standing persistent Afib.

Finally, turning to our appendage management franchise, which saw 16% growth worldwide, driven by both our open and minimally invasive appendage management products. Our open left atrial appendage management business benefited from strong adoption of AtriClip FLEX-Mini in the United States, where we exited the quarter with FLEX-Mini contributing approximately 40% of our open appendage management revenue. More importantly, we believe our FLEX-Mini device has been impactful in driving share gains in this market.

Surgeons using our trialing competitive devices are impressed by the small form factor of AtriClip FLEX-Mini, along with robust clinical evidence and superior product performance of our AtriClip devices. In minimally invasive procedures, AtriClip PRO-Mini is building upon that adoption in the U.S., providing a pricing uplift that offsets pressure of our hybrid AF therapy procedure volumes. It remains clear that differentiated innovation plays an important role in maintaining our position as the leader in appendage management in cardiac surgery, and we continue to prioritize investments in this platform.

In our international markets, we are growing adoption across our legacy left atrial appendage management devices. Following the first quarter, we received CE Mark under EU MDR in Europe for both AtriClip FLEX-Mini and PRO-Mini devices and expect to launch both products in Europe later this year. New product launches in Europe, the United States, China and Japan, coupled with the future of LeAAPS clinical trial outcomes, provide a long runway for growth in our appendage management franchise.

In closing, the performance we delivered this quarter underscores the power of our innovation and focus on execution. While the rapid progress in our BoxX-NoAF clinical trial reinforces the significant opportunity ahead at AtriCure. We remain committed to advancing standards of care, scaling responsibly and delivering durable growth with improving profitability for our shareholders.

And with that, I'll turn the call over to Angie Wirick, our Chief Financial Officer. Angie?

Thanks, Mike. Worldwide revenue for the first quarter of 2026 was $141.2 million, up 14.3% on a reported basis and 12.8% on a constant currency basis versus the first quarter of 2025. Our performance reflects substantial growth driven by the continued adoption of key new products in the United States and many regions throughout the world. On a sequential basis, worldwide revenue increased approximately 1% compared to the fourth quarter 2025.

First quarter 2026 U.S. revenue was $116.2 million, a 14.9% increase from the first quarter of 2025. Open ablation product sales grew 17.3% to $39.1 million, fueled by the strong and sustained adoption of our EnCompass clamp across new and existing accounts. U.S. sales of appendage management products were $48.4 million, up 14.9% over the first quarter of 2025, driven primarily by increasing adoption of our AtriClip FLEX-Mini and PRO-Mini devices.

U.S. MIS ablation sales were $6.4 million, a decline of approximately 25% over the first quarter of 2025. And finally, U.S. pain management sales were $22.4 million, up 29.5% over the first quarter of 2025, led by the cryoSPHERE MAX probe, which contributed approximately 70% of pain Management sales in the quarter, driving increased adoption in both thoracic and sternotomy procedures.

International revenue totaled $25 million for the first quarter of 2026, up 11.5% on a reported basis and up 3.3% on a constant currency basis as compared to the first quarter of 2025. European sales were $16.1 million, up 13.2% and Asia Pacific and other international market sales were $8.9 million, up 8.4%. International growth was tempered by continued uncertainty in the U.K. as well as lower distributor sales in Asia. Offsetting these headwinds, we saw significant growth across franchises in other major geographies, largely driven by our direct markets.

Gross margin for the first quarter of 2026 was 77.4%, up 246 basis points from the first quarter of 2025. The increase was driven primarily by favorable product and geographic mix with strong U.S. performance propelled by our new product launches and adoption.

Transitioning to operating expenses for the quarter, total operating expenses increased $10.2 million or 10.3% from $98.6 million in the first quarter of 2025 to $108.8 million in the first quarter of 2026. Rapid enrollment in our BoxX-NoAF clinical trial, which offsets a decrease in LeAAPS clinical trial costs, along with increased headcount focused on product development initiatives, resulted in a 7.6% increase in research and development expense from the first quarter of 2025.

SG&A expense increased 11.2% from the first quarter of 2025 as we continue to support growth while driving leverage across the organization.

Completing the P&L, first quarter 2026 adjusted EBITDA was $17.1 million compared to $8.8 million for the first quarter of 2025, representing a 95% increase. We recorded net income of approximately $100,000 compared to a net loss of $6.7 million in the first quarter of 2025.

Earnings per share and adjusted earnings per share were both breakeven at $0.00 compared to a loss per share and adjusted loss per share of $0.14 in the first quarter of 2025. Our results reflect a balanced approach to allocating capital towards area we believe will sustain and accelerate growth, all while continuing to improve profitability.

Now turning to our balance sheet. We ended the first quarter with approximately $146 million in cash and investments. Cash burn for the quarter was slightly improved from the first quarter of 2025 and reflects our normal pattern of cash usage, driven by share vesting, variable compensation and operational needs.

As we move through the remainder of the year, we expect positive cash flow, resulting in full year cash generation that is moderately higher than 2025. Our balance sheet remains healthy and supports both current operations and our investment in strategic initiatives that we believe will drive long-term value creation.

And now on to our outlook for 2026. We are reiterating our expectations for full year revenue of $600 million to $610 million, reflecting growth of approximately 12% to 14% over full year 2025 results. Consistent with our first quarter results, we expect performance over the remainder of the year to be driven by our pain management, appendage management and open ablation franchises and partially offset by continuation of headwinds from our MIS ablation franchise, along with certain international markets. For the second quarter, we anticipate typical seasonality translating to mid-single-digit sequential growth.

On gross margin, while our first quarter 2026 results were exceptional as a result of extremely favorable mix. We continue to expect modest improvement in full year 2026 gross margin over full year 2025. Product and geographic mix are expected to be favorable in the near term. However, we will bring our expanded manufacturing facilities online in the second half of 2026, which will increase manufacturing cost burden, moderating the full year gross margin outlook.

Turning to operating expenses. As Mike mentioned, the accelerated timing for full enrollment in our BoxX-NoAF clinical trial has placed us significantly ahead of schedule, and we now expect full enrollment of the trial around the end of this year. As a result, over the next 3 quarters, we expect additional R&D investment. While the cost of BoxX-NoAF acceleration is incremental to our plan, we continue to drive strong gross margins and operating leverage, reflecting discipline across our business.

With that in mind, we are reiterating our expectations for full year 2026 adjusted EBITDA of $80 million to $82 million and full year net income, translating to earnings per share of approximately $0.00 to $0.04 and adjusted earnings per share of approximately $0.09 to $0.15.

Consistent with our 2025 performance, our quarterly outlook for adjusted EBITDA is largely informed by normal top line cadence and the timing of R&D spend. As a reminder, 2025 R&D spending included LeAAPS enrollment costs for the first half of 2025 only. Therefore, we expect a slightly higher increase in R&D spending in the second half of 2026.

In conclusion, our first quarter results highlight the durability of AtriCure innovation and continued improvement in our financial profile while funding investments in growth catalysts for the future. We remain energized by the opportunities in front of us and the exceptional AtriCure team who will make 2026 a success.

With that, I will turn the call back to Mike.

Thanks, Angie. 2026 is off to a good start, and our team is fully committed to our patients, our partners and our shareholders. As we look ahead, we are confident in our ability to execute with discipline, sustain operational excellence and build on the momentum that we've created, delivering meaningful progress throughout 2026 and well beyond.

And with that, I'll turn it over to the operator for any questions. Operator?

[Operator Instructions] And our first question comes from Bill Plovanic with Canaccord Genuity.

This is Zachary. Can you talk about the progress you're making on PFA integration? Any milestones that we should be on the lookout for this year? And then can you talk quickly about the RF enhancements you're making to come with the next-generation catheter?

Sure. I'll take that on. I appreciate the question. On the PFA, we're making great progress on that. We've done our first in-human over in Australia so far. We're now starting first in human in Europe as well. It's not really first in-human anymore, but we're going to be doing an additional 30 to 40 patients in Europe. And so that will obviously lead for our submission for the trial that we expect to start running sometime next year. And so we're on pace, doing great. No additional commentary at this point in time, but we're really pleased with the results that we've seen so far and feel like there aren't any specific milestones other than really submission to the FDA later on this year, acceptance of the IDE and then beginning to enroll as we kind of look into 2027 at some point in time.

So we'll give more details as we kind of get forward on that. We really want to focus today's effort on, obviously, the great progress we've made on the BoxX-NoAF clinical trial because we're so far ahead of plan that we wanted to make sure that we got that out there. 300 patients in a very short period of time put us well over a year ahead of plan, and we thought that was just a big, big milestone for us as we kind of close out this year being able to finish up enrollment around the end of the year. That's something we're super excited about.

As for the RF advancements, they are embedded in there. We've got both the RF and also the dual energy combined in some of those first-in-human playbooks, and that will all be indicated and looking forward to kind of seeing that in trials sometime next year.

Our next question comes from Matthew O'Brien with Piper Sandler.

The first one, Mike, I know you can't grow this pain management business 30% every quarter but just talk about what you saw in the quarter from a growth perspective in terms of new accounts, existing accounts with cryoSPHERE MAX? And then also on the ortho side of things, just maybe the contributions that you got from those different buckets and how do we think about the growth trajectory for that business? And then I do have a follow-up.

Yes. I'll start and just say that the cryo business, the pain business, is as we talked about our Analyst Day about a year ago, this is something that's got -- it's multiple billions of dollars of opportunity. Obviously, thoracic is an area that we've been established in for a long period of time. We're now starting to see some traction on the sternotomy side, and we're just starting on this, obviously, below-the-knee amputation area.

We're just scratching the surface in my mind in all the areas that people undergo surgery and have a lot of pain afterwards, both from other parts of the body and other types of surgeries to looking into and researching the impact that you can have on actually phantom limb pain, which affects over 3 million people. I mean these are big, big numbers when you look at it.

So we've got decades worth of growth in my mind here. Whether or not we can grow 30% for decades, obviously, the numbers get bigger and that becomes more difficult. But the good news is we've got multiple places to actually grow this market for many, many years to come.

And with that, I'll turn it over to Angie to give you some of the specifics on the numbers.

Yes. Matt, from an account perspective, we are about 70% of our pain management accounts have adopted cryoSPHERE MAX, and we continue to see every quarter since we've launched, we continue to see nice uptake. It was about 10% growth in the cryoSPHERE MAX accounts within the quarter. So this is clearly becoming the dominant device that's being used. I think surgeons are very compelled by the quick freeze times that they're seeing and just exceptional outcomes for their patients.

Got it. That's great to hear. On BoxX-NoAF, in my experience, Mike or Angie, when these things enroll faster, it's because doctors are seeing good outcomes. That's why they're doing more of these cases. Can you just talk about any kind of anecdotal feedback you're getting from the clinicians as far as outcomes here? And then kind of what's expected from these outcomes? And then given the time line for finishing enrollment, could we see -- because I think the follow-up is pretty short. Could we see data at ACC or HRS next year?

Yes. Great question. I think you're right that, that is kind of what you said. We don't have any specific information because it's obviously a blinded trial. I don't know exactly what's happening within the trial relative to the individual patients or the randomization on that front. That being said, we do know sites that have utilized this technology for their postoperative pain. We've seen it in all the preliminary work that went into going into the trial. And what we saw was significant reductions as a result of that.

So much in fact that we have several sites and even more. We've got 5-plus sites or so that have decided to adopt this and will not come into the trial because they're seeing such good results relative to using the EnCompass clamp plus the AtriClip to see significant reductions in that. If you look at the STS database, what you see is it's about 35% to 40% of all patients that undergo cardiac surgery go into postop Afib, sometimes you'll see up to 50% in some studies where you'll see it as high as that. And we're seeing in the trials in different areas that it's less than 10%. We don't need that to win the trial, though, and to have a meaningful clinical impact on it. So we feel really confident and really good about where this is going and the results that we'll wind up seeing.

In terms of timing of results, you're correct. We think it's going to be around the end of the year based on the pace of enrollment we're seeing right now. I said around because it could be sometime at the end of December or early January time frame that we might have full enrollment in place. Then you're right, we've got about 30 days of follow-up from that last patient. And then we'll have to obviously adjudicate all of that data.

So if you start to do the math, as you just described, probably not HRS, more likely a surgical congress that we would do some sort of late breaker. The surgical congress that is out that late is AATS next year. If we got the data earlier, STS is in the January, February time frame. Obviously, that is highly unlikely to make it that quickly, but we're hopeful that we can conclude the trial, get those initial results and get some data out there as a late breaker sometime at the AATS, which is around the same time as HRS next year.

Our next question comes from Marie Thibault with BTIG.

I wanted to spend a minute here on your international business. I think you called out some uncertainty on the U.K. side, which I know isn't brand new and also some lower distributor sales from APAC. So can you tell us a little bit more about what's going on behind the scenes there? And any visibility on when things might start to improve? And then it sounds like the direct markets, OUS have been healthy. So just any more color on those markets as well.

Yes. Marie, you called out the 2 kind of headwinds that we're facing within our international business. The U.K. within Europe, we had anticipated that being a drag and talked I think, at length within our guidance that we've baked in a run rate that looks very similar to how we exited 2025. That held true for the first quarter of 2026 as we started the year.

And then just with our larger distributors in Asia, inherently, distributor orders can be lumpy. We expect that pressure to be transient as we think about the rest of 2026. You mentioned it, but I'll remind everybody. I'd say outside the headwinds, we saw really good growth in our franchises in our direct markets in Europe, Australia and Canada. We continue to be excited about bringing new products into each of those markets and seeing the progress that the teams are making there and continue to focus on the NHS and making sure that our pain management device.

And then kind of any other budgetary pressures, what we can control that we are addressing quickly to get this market to a rebound. So guidance does not assume any kind of recovery in the U.K. and then strong business in other areas within Europe and the distributors in Asia that that's expected to be transient again.

Okay. Great detail. And then maybe my follow-up on the Convergent procedure side, just wanted to understand kind of how your view of that market has been evolving. Obviously, the PFA landscape has evolved quickly. So would just love an update on what you're seeing there on the ground.

Yes. On the ground, we kind of talked about it very briefly during my remarks. There's definitely a continued headwind in that area. What we're seeing is the data is still incredibly strong and these patients benefit from using the Convergent platform. That being said, they're getting multiple PFA catheters first. They're trying one than another. Some are going up to 3. That's obviously delaying that pipeline and those patients coming through. That's why it becomes tough to predict exact timing for us on that.

That being said, if you talk to most people that are actually using it, they actually do believe in it. They're just seeing fewer patients or they're trying to catheter out one more time before they actually send that patient on. So that's the reality that we're dealing with right now. That's why we've set the expectations as we have. But we really feel like those that are utilizing technology are getting incredible benefit, and we're having lots of -- we continue to have lots of good conversations with the EPs. And we do think that it's a solution that matters, and we have to continue to support.

Our next question comes from Lily Lozada with JPMorgan.

This is Henry on for Lily. I just wanted to pivot a little bit to talk about the guidance. You were able to beat on the top line but you reiterated the revenue guide. Can you talk a little bit more about why that's not flowing through into the full year guide? And are there any headwinds in particular you'd like to call out for the remainder of 2026?

Yes. I think on the top line guide, we came in ahead of our expectations, both top and bottom line, a positive start to the year, but it is still early in the year and want to see continued outperformance before we revisit the guidance. I think that's very much in line with our philosophy and track and impact years. We are guiding to numbers that we feel very confident that we can achieve and look to beat and raise throughout the year.

The headwinds we just touched on is primarily within our international business and then in our hybrid ablation business in the U.S. and in the areas of outperformance, very similar to what you saw in the first quarter results. Expecting continued really strong growth within our pain management franchise, our open ablation franchise and appendage management as well.

Our next question comes from Mike Matson with Needham.

This is Joseph on for Mike. Maybe just one on international first, China and Japan. I was wondering if you guys could just maybe give a broad overview on where you are now with the portfolio in terms of approvals or launches and maybe where that portfolio could sit in China and Japan by the end of this year?

Yes. Pretty comparable between both our China and Japan markets. You have the basic RF ablation devices. Neither market has EnCompass at this point in time. We just recently put China -- put our AtriClip in China. So that's a newer product launch in that market. And then within Japan, we've had different versions of our AtriClip on market and got expanded clearances for the mini devices more recently there and are working on other product launches. I think with any market that you enter into, you're looking at the product set and what the market can absorb given economic considerations, so on and so forth. But it is a subset of the overall products that we've got launched and are selling within the U.S. market.

Okay. Great. Makes sense. And then one on appendage management. So obviously, a very strong year in 2025 and with new products, it's looking good as well. But with the increased competition, it's just, I guess, trying to get a handle on basically where they are, where your competitors are with trialing and incentives. Has that kind of steadied off? Are you seeing increased incentives for them to trial the product from your customers? Just trying to understand how these new entrants are affecting your sales or not affecting.

Yes. And just right now, there's only one entrant in the market that's Medtronic. They do have a product that we compete with today. And as I mentioned in my comments, what we saw was they kind of peaked in market share back in the kind of summer time frame, late summer, early fall time frame. And we've seen with FLEX-Mini gaining more and more adoption at more and more sites that we're actually gaining some of that share back. We still have the predominant market share in the United States.

We feel like the innovation that we put out there with FLEX-Mini, with PRO-Mini with obviously clinical evidence that we'll generate that will be very specific to our product that we're going to be in a very good place both in terms of who we're competing with right now and also if Edwards does come into the market. Obviously, they've mentioned that they're going to be coming into the market later on this year, and we will be ready for that. Again, the way that we know how to compete is to build the best products that are what the market really wants to meet those needs. We continue to innovate.

On top of that, we've invested heavily in clinical evidence that's very specific to our product, both in the LeAAPS and in the BoxX trial, which both include the appendage, looking for the benefits that we can get for stroke reduction on that, that will be very specific to our product and our product only. And putting that level of evidence is something that none of the competition has actually started a trial down that pathway, and these are long trials. So it gives us a great deal of confidence in terms of the future for that. So.

Continue with the innovation, continue with the clinical evidence gives us confidence that when competition comes in, whether it's the ones that are out there, the ones that are talking about coming into the market and there may be more in the future that we are going to be incredibly well positioned.

We also believe, as I've mentioned on this call before, that competition coming into the market means it's a big market. It means that it is a multibillion-dollar market that can take on competition like this. All great markets in medical devices typically have several players in there, and we believe that, that's actually a really good sign that this is a big and robust market on the international scale.

Our next question comes from John McAulay with Stifel.

Just want to put a finer point on the 2026 guidance commentary you gave. So reiterating the top line range and adjusted EBITDA range. I just want to understand the intention there as you beat on both. Would you expect that we let numbers for the rest of the year sort of stay where they are to reflect the strength in the quarter or the hybrid and international headwinds you called out, you expect that those sort of offset the $2 million of upside as we look ahead to the rest of '26?

John, no different from our philosophy on guiding. We are putting out numbers that we believe we cannot only meet, but that we've got a pathway to beat. I think with one quarter in, you're still early in the year. And specific to the top line, felt like the right and prudent thing to do at this point in the year was just to hold the guide and expect that we've got the ability to outperform no different than when we started the first quarter.

On the bottom line, I'd say more of a shift in we are -- with the pace of enrollment on BoxX-NoAF, those costs are incremental, pulling enrollment in by a year into 2026, that is incremental to our plan in 2026 for the full year. We had a very strong margin -- gross margin in the first quarter, expect for there to be improvement over 2025.

But that being said, some of the favorability on the margin side is transient, again, with the mix of the international business primarily. You take that kind of whole calculus and the diligence that we're seeing across the business to see improvement in leverage that positioned us really well to be able to absorb the additional trial costs and hold the bottom line guide where it's at. And again, no different are putting numbers out there, we expect not only to meet but to be.

That's helpful. And just to make sure I'm understanding the dynamics OUS. So in the quarter, you highlighted 3.3% constant currency growth. Is that what we should be expecting for the year ahead? Or what are the drivers of acceleration or reacceleration we should be looking at in that business?

Yes. Good question. I'd say the -- we are expecting our international business to grow on a reported basis closer in line to the overall company guide. So that would be kind of double-digit growth for our international business. You saw more favorability from a currency in the first quarter, expect for that to lean a bit as we think about the rest of the year. Strength in our direct markets in Europe, we expect for that to be a continued driver there. You've got newer product launches in that market. EnCompass is a big driver in our European market and then a bit of a rebound in our Asia distributors. Again, I think ordering patterns can be kind of lumpy there. So expecting that to rebound as well. And that's the calculus to get to kind of that mid-double-digit growth expectation for the year.

Our next question comes from Danny Stauder with Citizens.

Just first one on pain management. Great to see the strong quarter. You noted improved market penetration in thoracic and sternotomy. But just on the latter of the 2, it's nice to hear you're starting to see traction. But I was just curious what was driving this of late. We've talked about sternotomy and that opportunity for a bit now. So I just wanted to see if there was any newer developments that's leading to this?

Yes. Great question. I think what you're seeing here, Danny, is that you're seeing it works in sternotomy. It just takes a little bit longer to get there. With the MAX product that has reduced the time in half that really has improved adoption and the willingness of somebody to even try it. And then once they try it, they see really good results pretty quickly, and then it becomes a lot more sticky at that point in time.

So I'd say that's really what you're seeing. It's not something that you'll ever get a hockey stick curve off of, I don't believe, but I think that you're going to continue to see nice robust growth within this area as we add more and more accounts. So we've got many accounts that are actually doing this now. It's no longer just a handful across the country. People are talking to each other. They're talking about the results, whether it's at trade shows or other places like that or peer-to-peer conversations, and that's really what's driving it.

Okay. Great. And then just one follow-up on the FTS quality metric update. Could you give us a little more color on this? First when will it start? And should we be thinking of this more as a longer tail growth over the next few years versus more near-term uptick? Just any more information on how we should think about this in terms of incremental adoption or just frame the potential revenue opportunity here would be really helpful.

Sure. I'll start by saying just a reminder to everybody that in the U.S., about 35% of all patients that have Afib that undergo cardiac surgery actually get an ablation. And so that is obviously a very low number. You still have 65% left to go. The quality metric is meant to address that. It's meant to say that -- and what they put out there was that there'd be 70% of the patients actually get treated. That number will likely grow. That was the commentary that was at STS back in January of this year. They anticipate that they'll put some teeth into it. They wanted to roll out that this is becoming a quality metric. And that quality metric will go into effect sometime in 2027, at which point in time there will be some teeth in it in terms of they'll be measured on it. It will be recorded in the STS database.

How that's all -- the specifics behind that are still not disclosed yet by STS, but that is coming out. To give you some perspective, I mentioned in the call that previously, the last time they did any kind of therapeutic view like this, it was the Lima to the LAD. And when they made it a quality metric, it went from about 10% adoption up to 99.8% adoption or so today. So quality metrics matter. They make a difference. People look at them, hospitals look at them, they affect their ratings. And so we do anticipate that on the Afib side of things, we should see some uplift relative to the Afib side in 2027 as they're kind of rolling this out. And obviously, that will continue into '28 and beyond.

So we think that's going to be a big boon and positive for us on the ablation side to improve that penetration from 35% in the U.S. to hopefully obviously getting it closer to 80%, 90% or so at some point over the next 3 to 5 years. So we've got a lot of room for growth. This is a little bit of -- I don't know, you can call it care or stick depending on how you want to look at it, but it's an incentive either way for people to do the treatment. On top of that, obviously, we're going to have data that comes out on the non-Afib patients. And we believe you combine that with the quality metrics and the fact that the EnCompass clamp is so easy to use that we will start to see some really nice adoption overall over the next 3 to 5 years in a big way.

Our next question comes from Keith Hinton with Freedom Capital Markets.

I just have a quick one on AtriClip. Can you just talk a little bit -- and I apologize if I missed this, I'm jumping around a little bit. But can you talk a little bit about the use of FLEX-Mini versus the prior generations in open appendage? And then more broadly, can you just talk about the current ASP for AtriClip in the U.S. and how we should think about those dynamics going forward as uptake continues for FLEX and PRO-Mini?

Yes, I'll take this one. The AtriClip FLEX-Mini, what we are seeing is a pretty steady conversion from our last-generation AtriClip device, the AtriClip FLEX fee, less so from the original AtriClip device, which is still on the market. But between the 3 products, you've got different price points, and you've also got the ability for a surgeon to choose depending on the approach that they want to take for managing the appendage.

Exiting the first quarter 2026, we were up to about 40% of the revenue in the U.S. in open appendage management in the FLEX-Mini clip. We exited last year a little over 35%. So we continue to see steady share gains by that new product launch. And from an ASP perspective, we're well positioned by offering a range here as low as $1,100 with the original AtriClip device for accounts where pricing is a sensitivity and the FLEX-Mini clip up to $2,250.

Our next question comes from Suraj Kalia with Oppenheimer & Co. Suraj your lines is open, please unmute your button.

I am showing no further questions at this time. I would now like to turn it back to Mike Carrel for closing remarks.

Great. Well, I just wanted to thank everybody for joining for the call today after an exciting Q1 and what's starting to be a great 2026 overall. So thank you for joining. We appreciate it. We look forward to talking to you again in July. Talk to you soon.

This concludes the question-and-answer session. This concludes today's conference call as well. Thank you for participating. You may now disconnect.

Good afternoon, and welcome to AtriCure's Fourth Quarter and Full Year 2025 Earnings Conference Call. This call is being recorded for replay purposes. [Operator Instructions]

I would now like to turn the call over to Marissa Bych from the Gilmartin Group for a few introductory comments.

Great. Thank you. By now, you should have received a copy of the earnings press release. If you have not received a copy, please call (513) 644-4484 to have one e-mail to you.

Before we begin today, let me remind you that the company's remarks include forward-looking statements. Forward-looking statements are subject to numerous risks and uncertainties many of which are beyond AtriCure's control, including risks and uncertainties described from time to time in AtriCure's SEC filings. These statements include, but are not limited to, financial expectations and guidance, expectations regarding the potential market opportunity for AtriCure's franchises and growth initiatives, future product approvals and clearances, competition, reimbursement and clinical trial outcomes. AtriCure's results may differ materially from those projected. AtriCure undertakes no obligation to publicly update any forward-looking statements.

Additionally, we refer to non-GAAP financial measures specifically constant currency revenue, adjusted EBITDA, adjusted EBITDA margin and adjusted loss per share. A reconciliation of these non-GAAP financial measures with the most directly comparable GAAP measures is included in our press release which is available on our website.

And with that, I would like to turn the call over to Mike Carrel, President and CEO.

Thank you, and good afternoon, everyone, and thank you for joining us. 2025 was an exceptional year at AtriCure with achievements across our business. We closed the year with total revenue of $534 million, reflecting 15% growth over 2024 and made substantial improvements to profitability and cash generation with nearly $62 million in adjusted EBITDA and $45 million in cash generated in 2025.

More importantly, 2025 demonstrated the power of our innovation engine. We accelerated worldwide revenue growth in 3 of our 4 franchises, driven by newer product launches such as our cryoSPHERE MAX PRO and AtriClip FLEX-Mini device, continued adoption of our therapies, notably with the EnCompass Clamp and launched two new products during the year, our AtriClip PRO Mini and cryoXT PRO, as a result of our strong operational execution and meaningful progress across these strategic priorities, we are well positioned for the year ahead and reaffirm our guidance for 2026 revenue growth of 12% to 14% growth.

It is now almost 1 year since we hosted our March 2025 Analyst and Investor Day, where we featured several catalysts for our business and established long-term financial targets. We committed to sustained double-digit revenue growth, expanding profitability and meaningful cash generation, and we have delivered on all three, simply put, we are outpacing the plan. We generated revenue growth of 15% for the year, and the operating leverage in our business is becoming increasingly visible. R&D spend is leveling off with the completion of the enrollment in LeAAPS. Our commercial team is driving efficiency gains in SG&A and our new product launches are contributing to gross margin improvement.

In addition to our financial progress, we have advanced key strategic initiatives outlined at our Investor Day. First, our groundbreaking LeAAPS clinical trial completed enrollment of more than 6,500 patients last July, well ahead of expectations. This trial is evaluating the benefit of our AtriClip devices on non-AF patients undergoing cardiac surgery representing a global opportunity of nearly 1.4 million patients each year. Interest and participation from our trial investigators was outstanding, with more than 500 surgeons across 137 different sites who enrolled in the LeAAPS trial.

During the years ahead, we will continue to follow LeAAPS patients as we await the results of the trial. Following LeAAPS enrollment, we initiated our BoxX-NoAF clinical trial, a 960 patient randomized controlled trial aimed at reducing the onset of postoperative Afib in cardiac surgery patients who do not have preexisting Afib. Up to 50% of cardiac surgery patients without Afib will develop postoperative Afib, making it the most common complication in cardiac surgery. The stark reality is that these patients tend to see worse acute and long-term clinical outcomes.

Postoperative Afib is also associated with higher health -- higher health care cost burden, with estimates exceeding $2 billion annually in the United States alone. Using our EnCompass Clamp and AtriClip devices, we believe this trial will demonstrate the benefits of ablation for non-AF patients during cardiac surgery.

We are pleased with our progress on the site initiation and enrollment today and look forward to updating you throughout the year. In addition to these landmark clinical trials, we are also advancing development efforts on our dual energy EnCompass Clamp. Our goal for this program is centered around shortening RF ablation times and introducing PFA as a complementary energy source. On its own, our innovative EnCompass Clamp technology was a significant step in streamlining cardiac surgery ablation procedures, leading to increasing adoption.

Now by pairing advanced RFA with PFA in our EnCompass device, we will deliver unprecedented speed and flexibility for surgeons. During 2025, we reached two milestones with our development partner and completed first-in-human treatments in December with excellent results. In the year ahead, we expect to finish device and generate development in preparation of the initiation of a clinical trial, marking another key milestone in our product development pipeline.

At our Investor Day, we shared our strategy for building upon the greenfield opportunity in surgical pain management, including expansion into amputation procedures. We launched our cryoXT device for pain management and amputation procedures in the third quarter of 2025 and continue to receive overwhelmingly positive surgeon feedback. Patients are recovering faster than ever, experiencing less acute postoperative pain and in many cases, with reduced phantom limb pain as well. We are being deliberate in our rollout with each Cryo Nerve Block at focusing on one account at a time to ensure adoption is sticky before expanding our user base. As we cultivate this opportunity, we expect cryoXT to contribute more meaningfully to revenue in the back half of 2026.

Taking a step back, each strategic initiative coupled with continuous product innovation that is the hallmark of AtriCure supports our vision to create standards of care across all of our markets. BoxX-NoAF and LeAAPS also share an objective that is truly transformational for our company, moving standards of care in cardiac surgery towards preventative treatment of Afib and related complications. Both trials enable AtriCure and AtriCure alone to unlock massive market expansion opportunities and future growth acceleration.

Now on operational highlights from each of our franchises from the fourth quarter and full year 2025. Starting with pain management. In the fourth quarter of 2025, we achieved 24% growth, driven by continued increasing adoption of our cryoSPHERE MAX device. The time savings offered by this device compared to our legacy probes have been compelling to surgeons, particularly there was in thoracic surgery.

For the year, worldwide revenue grew 33% in 2025 and marking an acceleration for 2024 growth. We ended the year with roughly 500 accounts in the U.S., choosing our cryoSPHERE MAX device and saw growth in accounts utilizing Cryo Nerve Block worldwide. In addition, during 2025, we reached over 100,000 patients treated with our cryoSPHERE probes, framing the tremendous growth and patient impact of this franchise since launching in 2019.

Turning now to appendage management. We delivered fourth quarter growth of 15% globally, with open left atrial appendage growth well outpacing our MIS left atrial appendage devices. We are pleased with the consistent momentum of our open appendage management business, which powered full year worldwide revenue growth for our left atrial appendage franchise of 19% and again, marking an acceleration over 2024. AtriClip FLEX-Mini and AtriClip PRO Mini largely drove this acceleration in growth with the surgeons drawn to the low profile of our mini AtriClip devices.

Much of our growth is volume driven, though we also benefit from a favorable price mix as surgeons convert from legacy devices. We exited 2025 with over 300 active accounts purchasing FLEX-Mini and saw FLEX-Mini contribute 18% of our worldwide left atrial appendage management revenue in 2025, leading to increased market share in the United States. We believe our innovation along with our robust clinical evidence and superior product performance has and will continue to differentiate our AtriClip devices from the competition.

Within our Afib ablation franchises, open ablation growth came in over 17% for both fourth quarter and full year 2025 with the EnCompass Clamp being the primary contributor. The durability of EnCompass growth since launch in 2022 exemplifies the staying power of AtriCure innovation. As I mentioned earlier, EnCompass dramatically reduced procedure times and simplified open-heart ablation enabling a deeper penetration in treating Afib concomitant to cardiac surgery. Our EnCompass Clamp is now present in over 830 accounts worldwide, reflecting a mid-teens increase over 2024. In the U.S., our EnCompass utilization is further along we are seeing adoption largely improve in penetration of CABG procedures.

That said, the treatment of pre-op Afib patients undergoing cardiac surgery remains vastly underpenetrated. At the most recent Society of Thoracic Surgeons, STS conference last month, we were excited to learn that concomitant Afib treatment is no longer optional. It will be a quality metric in which hospitals will be evaluated and graded by their adoption of this metric. By early next year, it will be included in star ratings, which patients and physicians use to determine who provides the best care.

This is only the second time in the past 25 years, where a therapeutic treatment has become a quality metric in cardiac surgery, and we want to recognize the contributions of our physician partners to this effort. They have put a stake in the ground related to the treatment of Afib, which will benefit tens of thousands of patients moving forward. This change builds upon existing societal guidelines that recommend treatment, and AtriCure's specific technology, which makes it feasible to treat, placing a spotlight on the opportunity for continued growth in open heart procedures.

And finally, in minimally invasive Afib treatment, our hybrid Afib therapy continued to feel the pressure of PFA adoption in the U.S. in 2025. This was a tough headwind for our business. With full year worldwide revenues declining 26% for 2024. We believe there's a compelling clinical value for Hybrid AF therapy in patients with long-standing persistent Afib. However, it is undeniable that PFA catheters are dominating the stand-alone Afib treatment right now.

As we exited the year, we saw an encouraging sign with sequential revenue improvement in the U.S. from the third quarter to the fourth quarter and added accounts performing the conversion procedure. While these signals are positive, we are looking for evidence for further stabilization of a Hybrid franchise, which reflects broad-based and repeatable trends across our customers. We remain prudent in our outlook and are assuming continued pressure in our U.S. Hybrid business in 2026, although we are anticipating a lower rate of decline than in 2025. We remain committed to this market in the millions of patients with advanced Afib who can benefit from our approach. And our team and infrastructure remain ready to scale as the market recognizes the value of Hybrid AF therapy.

In closing, 2025 was a year of substantial growth and remarkable execution for AtriCure. Our progress is a testament to the dedication of our talent of the extended team who remain committed to advancing our mission and our goals. We are delivering better than promised growth, financial and strategic initiatives and are excited for our momentum to continue in 2026. and we will work to transform standard of care in each one of our markets for many years to come.

And with that, I will turn the call over to Angie Wirick, our Chief Financial Officer. Angie?

Thanks, Mike. For the fourth quarter 2025, worldwide revenue reached $140.5 million, representing growth of 13.1% on a reported basis and 12.1% on a constant currency basis when compared to the fourth quarter of 2024. U.S. revenue grew 12.6% to $114.3 million from the fourth quarter of 2024, supported by robust contribution from newer product launches in pain management and open appendage management, specifically our cryoSPHERE MAX and AtriClip FLEX-Mini devices, along with continued adoption of our EnCompass Clamp in open ablation.

International revenue totaled $26.2 million, up 15.3% on a reported basis and 9.9% on a constant currency basis as compared to the fourth quarter of 2024. While our international markets delivered solid growth overall, our fourth quarter results were impacted by a decline in sales in the U.K. due to ongoing funding and reimbursement uncertainty with the National Health Service. The U.K. has been our fastest-growing European market in 2023 and 2024, so this created a meaningful impact in the fourth quarter. Sequentially, worldwide sales grew $6.2 million or 4.6% over the third quarter of 2025.

Gross margin for the fourth quarter of 2025 was 75%, an increase of 45 basis points from 2024, driven primarily by favorable product mix. Research and development expenses decreased $10.5 million on a reported basis, largely due to the upfront payment of $12 million for our exclusive licensing and co-development agreement for PSA Technology in the fourth quarter of 2024 and offset by a $1 million milestone payment in the fourth quarter of 2025. Excluding these charges, R&D was approximately 2% higher in the fourth quarter of 2025 compared to the prior period, with a decrease in LeAAPS clinical trial costs offset partially by enrollment activity in our BoxX-NoAF clinical trial. SG&A expenses increased $6.2 million or 8.5% over the fourth quarter of 2024, showing continued leverage when compared with 13% revenue growth.

In the fourth quarter, we also continued to build on our momentum on the bottom line, delivering both positive adjusted EBITDA and net income. We drove positive adjusted EBITDA of $19.9 million for the fourth quarter 2025 compared to $12.7 million in 2024. And net income of $1.8 million versus a $15.6 million net loss in 2024. Earnings per share in the fourth quarter of 2025 was $0.04 and adjusted earnings per share was $0.06, representing a significant improvement over fourth quarter of 2024, which reported a loss per share of $0.33 and an adjusted loss per share of $0.08.

Now to review full year 2025 results. Worldwide revenue was $534.5 million, an increase of 14.9% on a reported basis and 14.4% on a constant currency basis, well ahead of our initial 2025 guidance range of 11% to 13% growth. U.S. sales increased 13.7% to $435.4 million, international sales increased 20.2% on a reported basis and 17.5% on a constant currency basis to $99.2 million. U.S. open ablation sales increased to $143.8 million or 16.3% growth over 2024, driven by continued strength from EnCompass Clamp sales, which ended the year contributing over 60% of our U.S. open ablation revenue.

Our U.S. pain management franchise grew 32.5% to $81.9 million propelled by rapid adoption of the cryoSPHERE MAX probe in both new and existing centers. U.S. appendage management sales reached $178.1 million, a 17.5% increase over 2024, with approximately 24% growth in open appendage management devices offset by a 6% decline in MIS appendage management devices. The primary driver of open appendage management growth in 2025 was the adoption of our AtriClip FLEX-Mini device.

And finally, U.S. MIS revenue was $31.5 million, reflecting a 31.2% decline over 2024 as customers prioritize PFA catheters over our devices. Our Hybrid business was a strong headwind throughout 2025, with a $16 million total decline in our U.S. MIS ablation and MIS appendage management devices. However, taking a step back, the combined strength of our U.S. open ablation, open appendage management and pain management franchises grew U.S. revenue by nearly $69 million or 22% in 2025, more than offsetting the pressure from Hybrid.

International revenue saw robust growth across major geographic regions of franchises, except for pressures in the U.K., as mentioned previously. We were pleased to see continued strength in our appendage management devices across international markets in 2025, and the acceleration of our open ablation franchise growth, partially due to the launch of our EnCompass Clamp in Europe. Gross margin for the year ended at 75%, an increase of 29 basis points from 2024, driven primarily by more favorable product mix as well as the continued production efficiencies as we scale.

Turning to operating expenses. Full year 2025 operating expenses increased 5.9% to $410.2 million, up from $387.5 million in 2024. Research and development costs as reported expanded by $3 million or 3.2%. Research and development costs include the upfront payment associated with our PSA partnership agreement in '24 as well as the milestone payments in 2025. Excluding these charges, 2025 research and development expenses grew approximately 11%, driven by LeAAPS and BoxX-NoAF trial costs and a modest increase in head count and related spend. SG&A expenses increased $19.7 million or 6.7%, primarily on increased head count and demonstrating improving leverage. Going forward, we remain committed to funding key R&D initiatives that support innovation and growth while expanding our total operating leverage across the business.

Full year 2025 adjusted EBITDA was $61.8 million compared to $31.1 million in 2024, an improvement of $30.6 million. Our loss per share was $0.24 in 2025 compared to a loss per share of $0.95 in 2024, and adjusted loss per share was $0.11 and $0.67, respectively. We ended 2025 with $167.4 million in cash and investments, reflecting full year cash generation of approximately $45 million. With these results, we continue to bolster our balance sheet, showing efficient capital management and ensuring financial flexibility to support future growth.

And finally, turning to our outlook for 2026. Consistent with our guidance in early January, we expect to achieve between $600 million and $610 million in revenue for the year, translating to growth of 12% to 14% over the full year 2025 results. From a franchise standpoint, we anticipate pain management will lead growth again in 2026, followed by open appendage management and open ablation growth more closely aligned to the overall guidance range. As Mike mentioned in his remarks, while we remain cautiously optimistic about minimally invasive ablation and MIS appendage management, we do expect a decline in revenue in 2026, although at a moderated rate.

Geographically, we anticipate both the U.S. and international businesses to deliver growth at rates that are more closely aligned during the year, as our outlook contemplates ongoing uncertainty in the U.K. for the duration of 2026. Finally, in terms of quarterly cadence, we expect typical seasonality to broadly shape the year on a sequential basis, with first quarter revenue tracking roughly in line to down slightly with the fourth quarter of 2025.

From a margin perspective, we anticipate that we will see modest gross margin expansion in 2026 and from the benefit of product and geographic mix as well as cost savings initiatives. Additionally, as we've shown in 2025, we would anticipate some variability each quarter based on product and geographic mix. Looking at operating expenses, we will continue to exercise disciplined capital allocation, focusing our investments on the next generation of growth drivers for AtriCure. We project research and development expenses to moderate slightly, growing in low teens on an organic basis and mid-teens on factoring in PFA milestone payments in 2025 and 2026. Additionally, we expect SG&A spending to continue to grow below top line growth rates, supporting further improvements in overall profitability.

On the bottom line, we are excited to reaffirm our 2026 expectation for adjusted EBITDA range of $80 million to $82 million and full year net income. With the expected cadence on top line and normal first quarter activities, our adjusted EBITDA margin will step down from the fourth quarter 2025 exit rate and gradually build during the year. Our adjusted EBITDA guidance corresponds to full year earnings per share of approximately $0 to $0.04 and adjusted earnings per share of $0.09 to $0.15. We also anticipate another year of positive cash generation. As a reminder, we typically experience higher cash outflows within the first quarter of the year due to annual variable compensation payments, share vesting and operational investments. And with that, we anticipate a net cash burn in first quarter of 2026, followed by positive cash generation for the remainder of the year and full year 2026.

Overall, we delivered strong results in 2025 and the outlook for our business demonstrates our commitment to expanding profitability while also enabling key strategic growth initiatives. We will continue the trajectory from 2025 to exceed our long-range financial targets discussed at our Analyst and Investor Day last March, driving double-digit revenue growth towards our $1 billion revenue goal in 2030 and while improving profitability over 20% adjusted EBITDA margin and all with a focus on creating long-term value for our shareholders.

With that, I'll hand the call over to Mike.

Thanks, Angie. In closing, I want to recognize our team for an outstanding year. You remain focused on patients, executed with discipline and never lost sight of the standards of care we are trying to build. We are well positioned to raise the bar again in 2026, and I am confident in our ability to continue delivering operational excellence across the business.

And with that, we'll turn it over to questions. Thank you.

[Operator Instructions] Our first question comes from William Plovanic with Canaccord Genuity.

Great. Just first off, obviously, some news from a competitor a week or so ago had a pretty significant impact on your stock. I was just wondering if you would like to just comment on your thoughts on them entering the market and what that might do competitively to your position?

And then secondly, just on the LeAAPS trial, you continue to enroll. I mean -- I'm sorry, you continue to do follow-up. I know you've talked about we'll see data, I think, at 50% and 75% of the event rate. Just wondering if there's been any change in when we'd expect to see some of that data, if it might grow faster than expected or if it's on the time lines?

Thank you and I appreciate that. And obviously, we're very cognizant of the competitive entry into the market. From our perspective, as I've mentioned on this call before, we kind of take it in a really positive way that it validates our market. It tells you that you've got two major top 5 medical device companies that have decided that cardiac surgery is a market that matters. It's a market that is a growth market that people are coming after and coming into, and we've established a leadership position in this market, and we're pretty proud of that. And so we welcome that competition. Like we saw with the previous competitor that came into the space, it grew our revenue growth rate. If you just look at 2025, we grew 24% on the open left atrial appendage management business that is up from the growth from 2024 from 2024 to 2025.

So we're really seeing this impact on our business in a positive way. more people are in conversations. They're talking about managing the appendage, you now see it in the quality metrics, they're recognizing a trend we saw 10 years ago, if not more, that this is a very large underpenetrated big market opportunity.

And on top of that, I think we are well positioned for the competitive landscape when it comes in because we've made the investments over that 10- to 15-year period to make sure that we did not stop innovating. We're on the 10th generation of the product. We've got minimally invasive products. We've got open chest products, we are established globally as a leader in this space with over 750,000 implants with an incredible safety rate of 0.07 to demonstrate this product works safely every single time. It is an incredible product from that standpoint and the efficacy we know is excellent.

And we've continued to innovate, as you've seen with our FLEX-Mini product that has established and accelerated growth as well, the PRO Mini product we rolled out last year. And as we've mentioned, we've got another new product coming out in 2027. So we're not going to stop innovating or investing in clinical evidence. And you're seeing that clinical evidence, as Bill, you talked about the LeAAPS trial, 6,573 patients were enrolled in that trial. That trial includes the AtriClip only in the trial. So half the patients got an AtriClip, half the patients got nothing. The idea there is to demonstrate stroke reduction in patients that are undergoing cardiac surgery who do not have pre-op Afib, we believe that will create even more differentiation on top of the fact that we've already studied over 21,000 patients in over 100 peer-reviewed and published articles over the last 10 years. So we feel like we are in a great position on that front.

To your question, Bill, specifically around when LeAAPS data will come out? We're not going to release data on when we hit the 50%. What we get is a thumbs-up continue. And so we've already passed 5% to 50% in terms of the number of events thumbs up, continue the trial is ongoing and in a good place. We actually don't see the data. We just get a positive thumbs up from the committee from the DSMB at that point in time. That will happen again at 75%. And then obviously, results will be finalized at 100% of all the events.

So if there was any kind of confusion on that front, what we get is a positive thumbs-up and not specific data that we're going to be able to release necessarily early on that front. But it is a really positive sign that the DSMB basically came back with a big thumbs up and gave us all the encouragement to continue to go forward.

Our next question comes from Matthew O'Brien with Piper Sandler.

Anna this is on for Matt. So maybe to start for the guide for the year, I appreciate you reiterated the metrics you provided earlier this year, which is really good to see. I guess just with this new competitive entry in the Clip business, any color you can provide on how that might be contemplated into the guidance that you've set out today?

Anna, it's Angie. I think as we started to form our guidance range for 2026, we were expecting this kind of news to come out. I think it was discussed pretty widely with the investment community last year. So not a big surprise here as we look through the year, have factored in with any of our franchises kind of a range of outcomes there that goes into the overall guide and feel very confident we're reaffirming the guide today, the 12% to 14%. And we have factored in some very, very mild competitive pressures as we think about the back half of the year.

I think we're focused on within our business controlling what we can, which is continuing to spread the adoption of the FLEX-Mini Clip. It is an excellent product and want to make sure that as many customers as possible, have their hands on this prior to the competitive entry. And ultimately, we think by doing that and continuing to focus on our markets, both Afib and non-Afib patients that will ultimately square up for a really good year from a growth perspective.

Got it. Super helpful. And then, I guess, a little bit more on the Clip business. It came in a little bit softer than we were modeling this quarter, particularly in the U.S. So just any more color you can provide on the dynamics there and how you're thinking about that business going forward?

Yes. The softness that we saw, particularly in the U.S. came in are minimally invasive Clip, we were down about 6%. We had a nice quarter in the third quarter, I think, with a lot of accounts choosing to adopt the PRO Mini product, the new product that we launched in 2025 kind of middle of the year and saw a bit of softness there. I think until our Hybrid ablation business sees kind of growth in procedures year-over-year. And on a repeat basis would expect some variability on that end. I think, if you take a step back and open appendage management, we were high teens growth in that area of the business for the fourth quarter. Mike talked about in his prepared remarks, open appendage management growth for the year. And I think that's showing the testament of the innovation with our FLEX-Mini Clip and growing awareness and interest in treating appendages during cardiac surgery.

Our next question comes from Mike Matson with Needham & Company.

So I have one, just on LeAAPS. Since the enrollment stopped, I was wondering if that had any impact on your AtriClip business. I guess, can you remind me, were you getting paid for the clips that were used in that? Or were you guys covering the cost of those?

Mike, we were -- we do get paid for the devices that were used in the trial. As Mike mentioned, the LeAAPS clinical trial was randomized 1:1. So half of those devices ultimately would have been revenue generating for us as a business. I think when you take a step back and look at the volume of open appendage management devices that we do, it's a minimal contribution in any 1 quarter that we were doing enrollment.

Would also say, and I think we've talked about this quite a bit with investors, there were a number of surgeons who were enrolling in the trial who believe in prophylactic treatment. So by them enrolling in the trial, they were forced to randomize their patients 1:1. So I think there are probably some areas where we were losing revenue, so to speak, offset by other surgeons who were enrolled in the trial and weren't necessarily prophylactically treating. The overall message here is, yes, revenue contributing, but I'd say on the volume that we were doing, not significant to any 1 quarter.

Okay. That's helpful. Just trying to figure out what it means. I know it was kind of last summer, but -- okay. And then just on EnCompass, I mean, obviously, this has been a home run product for AtriCure and you're working on the dual energy version, but that's going to require some trials and probably take a couple of years. So do you have any kind of new versions or enhancements planned kind of in the interim to maybe continue to drive the price mix and just increased penetration into CABG.

Yes. We don't necessarily have a new product iteration coming out. If you recall, we first released something the long version of it. And then last year, we released the short version, which obviously was a needed acceleration into the market from that standpoint. The penetration is low in CABG, and we're going to continue to kind of market talk to those customers, get them trained up and do the work associated with that.

In addition to that, we're obviously running the BoxX-NoAF trial, which is exclusively using the EnCompass Clamp with the AtriClip. So there is -- that gives us an opportunity to talk to more and more sites that are becoming involved in that trial. Some of them were not EnCompass users before. And so that's obviously an area of getting kind of exposure to some surgeons that want to be a part of that trial at major academic institutions, et cetera. It's really important to kind of get them to be part of it.

So we will definitely get traction from a variety of different angles with the EnCompass Clamp, but no net new innovation at this point in time, nor do we think that it's necessary. Right now, that product is actually showing that we can get the times down to less than 10 minutes of total procedure time. So it's quite remarkable how we're able to get an incredible ablation in that really short period of time. We're getting more and more articles published. We recently actually had one that was a peer-reviewed article published, it was almost 90% success at 1 year coming from that in over 150 patients. So this is something that we're seeing really, really good results with, and we just need to kind of continue to be out there talking about it and talking about the benefits of getting a full ablation in.

Our next question comes from Marie Thibault with BTIG.

I wanted to see, maybe it's a little too in the weeds, but I wanted to see if you could help us size the part of your U.S. appendage management business that might be directly in competition with the new entrants. One way I was thinking about it as maybe thinking about those open clips that are used in concomitant valve surgeries. And I wondered if you were able to size that for us against sort of the 2025 U.S. revenue you did in appendage management.

We haven't given really specific guidance on those particular areas. As we know that the overall market in this space is there's about 300,000-or-so patients that undergo cardiac surgery. With the combination of the LeAAPS trial and the Afib patients overall, we believe that, that's obviously a very large market opportunity. About 170,000 to 180,000 of those patients are coronary bypass patients. So you've got the breakdown that, that is obviously a market that we will be in and is not obviously connected to the valvular space. I think you guys can see the numbers that it's what, 35,000 to 40,000 or so mitral valves and something similar along those lines, maybe a little bit higher on the aortic valve side, depending on which reports that you look at overall. And then there's obviously other surgeries that kind of happen to kind of make up the total number overall.

When you break down that particular market, when you look at it that way, we're obviously very strong in the valvular market. today. That is where a great deal of penetration is, but we also have great advantages in that market, in the sense that usually when people are treating in the mitral valve space, they're also doing in ablation at the same time. that ablation is critical to the success of that surgery to the recovery of those patients. Penetration is much higher in the mitral valve space in that area, something around 60% to 70% of patients with Afib are actually getting treated, with something whether it's an EnCompass Clamp or our PRO devices or other RF devices combined with AtriClip at the same time. It's part of the Cox-Maze procedure that is there.

And so we feel like we've got a built-in advantage in the sense that we've got over 300 people out in the field that understand how Afib is treated, how you need to treat it properly in the combination of the AtriClip with the ablation devices is a critical understanding that we have that others don't necessarily have from that standpoint. As we look at the CABG market, obviously, that is a greenfield approach, and we're the only ones really in that space exclusively from that standpoint.

Yes. That's great detail, Mike. A quick follow-up for Angie. I heard your discussion of modest gross margin expansion, which we're excited to see. On the OpEx leverage, we're seeing SG&A leverage. Could we get a little bit of R&D leverage as well this year as you kind of switch out the trial cost that you're going on?

I think you nailed it, Marie, I'd say on all angles expect modest gross margin improvement. We are seeing the newer product launches, particularly with the strength and uptake in the U.S. markets. contributing to an improvement in our gross margin. Our operations team has also been very focused on some of our highest selling products like the EnCompass Clamp. I can't necessarily call it a new product launch because it's been in the market for a couple of years now in the U.S., but streamlining those costs there. So you're seeing the benefit of that. You saw that more in earnest as we exited 2025 and expect for that to continue into 2026. Expect SG&A growth to be below top line growth. That was an area of leverage for our business significantly in 2025 should be an area of leverage in 2026.

And the last point on the R&D costs with the conclusion of enrollment in LeAAPS, we are seeing a step down in those clinical trial costs. We still follow patients, so there is still spend in the P&L. We are expecting a pretty strong year from BoxX-NoAF enrollment perspective. but the mix, the different trial design and size of both of those trials says you're going to start to see some pretty natural leverage coming through within R&D. What we said in our prepared remarks is expect on an organic basis kind of low teens growth in that area.

Our next question comes from Lilly Lozada with JPMorgan.

Great. Maybe I'll start with one, on profitability. You already hit the 14% adjusted EBITDA guidance that you pointed to at your Investor Day this current quarter. And you still have a few years to go before getting to the end of the LRP. So is the 14% just conservatism? And if not, what other dynamics will we be keeping in mind as it relates to the progression of adjusted EBITDA moving forward?

Good question, Lilly, the 14%, super happy with the performance, obviously, in the fourth quarter on the bottom line, a big milestone for our company, not only the 14% adjusted EBITDA, but pulling in positive net income for the quarter. As we think about going forward, I would expect there to be a step down. So 2026, the full year shouldn't look like full 14% but we are significantly ahead of our LRP estimates when it comes to the bottom line movement there as well as our top line growth rate.

So I think the dynamics to focus on when we say we're kind of ahead on the bottom line, we've been talking about driving efficiency within the P&L and in our business for a very long time. I think you're seeing the benefit of size and scale and previous investments ultimately driving us to this point here. As we look forward, our main priorities are continuing to invest in kind of game-changing clinical trials, LeAAPS and BoxX-NoAF are both those and also making sure that our product portfolio and platforms continue to meet market needs. Each one of our markets is significantly underpenetrated even still today. So we see a lot of opportunity and internal development efforts are a clear priority for us.

So we're pleased with the progress on the bottom line would expect to well exceed kind of the '28 goal here in the near term from an adjusted EBITDA perspective and look forward to continuing to charge towards the 20% EBITDA margin towards the end of the decade.

Great. That's helpful. And then just as a follow-up, open with EnCompass has continued to be really strong. Can you talk through how many patients you've treated with EnCompass in 2025 and where penetration for the product stands relative to the total opportunity? And can you help quantify how meaningful of an opportunity you think the inclusion in the star rating is.

Yes, maybe I'll hit on it. If you look at globally, there's 2 million patients that undergo cardiac surgery. And in 2025, we treated about 50,000. So we're still obviously very underpenetrated in that market. both the LeAAPS and the BoxX-NoAF trial are international trials. So the idea is not just to get a label in the U.S., but to also get additional reimbursement and market expansion opportunities in countries throughout the world. By including them in the trial, I think that makes it a lot easier and smoother to kind of get that for a trial of that size and scale to go after those markets.

So on a global basis, we are very under-penetrated overall in the market, not just on EnCompass, but on cryoRF, et cetera, because there some there are obviously a lot of surgeons that continue to use some of the original technology that we have that work incredibly well and treat patients today. EnCompass obviously is a big growth driver. You can see there's just lots of opportunity for us.

Our next question comes from Danny Stauder with Citizens JMP.

Yes. Great. So just first one for me. On international sales, you called out the U.K. budget issues. Did that have a more notable impact to any specific segment it looked like international pain management was down slightly. So maybe it's there. And then how much was that in terms of headwind to total sales as well as maybe on a segment basis during the quarter? And how should we think about this going forward in 2026?

Yes. Danny, when you break down the different franchises in the U.K., the two areas where we saw the most impact was our pain management device for which the NHS pulled reimbursement and said they felt like it was should be covered under different codes. So we saw a significant reduction in the procedures there. The other area that we saw was in stand-alone treatment of AFib. So our minimally invasive ablation business. That's an elective procedure. So saw a bit of weakness there as they're prioritizing the more emergent procedures.

A little bit less of an impact when you think about our open cardiac procedures. Those tend to be emergent need to be done. But those are the areas that were impacted broadly across the U.K. We talked about this as one of our fastest-growing markets in Europe over the past couple of years. We were on about a $4 million run rate per quarter. and saw that drop down a little over $1 million in the fourth quarter, which is really when we saw the big impact for 2025.

Got it. No, that's helpful. And just one follow-up for me on cryoXT. You mentioned you were being more deliberate with your rollout. This might be because it's a little bit different of a sales point. So I was curious if there are any more substantial training with surgeons compared to your prior launches? Or any more nuance on this cryoXT launch as we think about our model and as it ramps up?

Yes. I think it's a great question, and it's kind of the way that we approach new product areas that we're getting into with cryoXT, in particular, very similar to when we went with EnCompass and felt like we had a really big CABG opportunity there, and we wanted to make sure we took our time. If you recall, this is exactly how we did the rollout with EnCompass. The first 6 to 12 months, we really were holding back a little bit as we made sure that we learned about the procedure, understood kind of how it worked in this particular surgeons or physicians' hands. Got feedback on that enabled our training, educated us as we kind of went forward to better train surgeons as we got forward.

And -- that's once we did that, we opened up the box really kind of go after everybody. Same thing with XT. This is a very new area. We're talking to vascular surgeons though, orthopedic surgeons. These are not surgeons that we had -- typically have relationships with, we want to make sure that we get it right, that we get feedback from them that we learn from them as we kind of roll it out to additional sites and go forward. We're in that learning phase right now. But by the end of this year, we do anticipate or middle of this year, we do anticipate that we're going to open that up quite a bit. But we're getting great feedback. All of the XT has been positive, but you do learn as you roll that out, especially as you're going into a new therapeutic area like this with new surgeons that you've not worked before.

Our next question comes from John McAulay with Stifel.

First one on the PFA program. I was hoping for an update there. A couple of dynamics. I noticed one versus our model, and we might have been mismodeling it, but costs that you paid in the quarter was lower than we were expecting to your PSA partner. And could you just clarify if that was, again, mismodeling our part or the charge was pushed out? And then just any potential impact on timing there and when we can expect our next update and for a trial to get going?

Yes, John, I don't think it's mismodeling. We had said kind of a range of potential milestones that we would thought could be met within 2025, the third milestone roughly, call it, $4 million pushing into 2026. Everything is on progress. I think the big news coming out of this particular work is that we had first-in-human use to really good results as we thought -- work through the back end of 2025.

And it doesn't change the time line to add to that. I think the second part of your question was as we look forward and get ourselves ready for a clinical trial design on that front, we will be ready in the same kind of time frame we talked about at the Analyst Day.

That's helpful. And I think it was last month, you made some comments about CONVERGE and some improvements in a few accounts, so I understand the dynamics are still fluid. You're still expecting declines this year, albeit at a lower rate. Just wanted to get an update about 1 month on just the state of the field for CONVERGE, what you're seeing on the ground and particularly post the Afib symposium, just any meetings of customers there. And how the dynamics are looking now versus either a month ago or a year ago, however, do you think you'd optimally frame it?

I think that we continue to feel like there is optimism and light. We're seeing many sites that had previously done, CONVERGE went away from it as they got in the PFA are now starting to do -- but it's just not enough cases to feel confident to come out with a number that says, okay, I've got confidence that consistently every single quarter, we're going to be at a point that we can grow that. But you are seeing those sites come back. They want to get retrained or they want to kind of look at their workflow again. And so the good news is that we've got a lot of new sites kind of coming on board from that standpoint, just not enough to move the number at this point in time.

So it's a positive outlook, but not ready to kind of commit to anything relative to numbers as we look out throughout this year. But it is moving in the right direction as we saw in Q4, and we do feel like we're in a good place, and we're having a lot of good conversations with customers right now.

Our next question comes from Danielle Antalffy with UBS.

It's Jayna on for Danielle. I know we're in the early innings of pain management expansion. And I know that you said reps are staying in one account until it's sticky. But I was just wondering, those reps that have successfully been executing. How long are they in the accounts before they're pivoting to the next account?

It's not about time that's about getting the number of cases down with them and making sure that they've got -- they're doing it properly. They've got a protocol right, not just with the surgeon, but also with the kind of after intensive care unit once they kind of have a step-down units in those areas and how they care of these patients. We do believe that, that -- takes, let's say, it's a 3-month or so process, but it really means they've got to get 10 to 15 cases underneath their belt to really feel really comfortable before we're ready to move on and get that consistency going that we can learn from them on that front.

But we're seeing good progress in a lot of different accounts. And almost every 1 of our reps has an account that is actually using the product today. So they're already down that pathway, and we've got a pretty good size field team out there.

That's great to hear. And then on open ablation, specifically, how much runway is left from a CABG perspective? And then also, I know you're talking about getting more implanting physicians from the new trials like BoxX-NoAF. I was just curious if you could comment on the percent penetration on that perspective as well.

Specifically to CABG, if you look at Afib patients alone, it's around 20% of the patients that undergo carditis have Afib and they're undergoing it for coronary bypass, about 20% of those patients get it. But if you look at it in totality, when you start to think about BoxX-NoAF and the expansion opportunity that exists there, that number is obviously much less than 10%, and when you add in the non-Afib patients. So big market opportunities still sitting in front of us.

And our final question comes from Suraj Kalia with Oppenheimer.

Mike, Andy, can you hear me all right?

Yes.

We can.

Perfect. So Angie, one question, and forgive me if it's a little long. Just wanted to follow up on an earlier question. So Angie, if you look at the U.S. AtriClip, right, for the last 3 quarters of 2025 being roughly flattish. Is -- can you help us reconcile some of the dynamics here -- so your comment about MIS drop-off picked up by open, fair enough. Can you give us some idea about how much was LeAAPS contribution? And at the same time, obviously, there is new product introduction. So what was the ASP lift. Just too many moving parts here and trying to get our bearings right.

And Mike, quickly for you, if I could, what is preventing let's say, [indiscernible] is launched next year, right, Q1, Q2 of '27. What is preventing [indiscernible] to be used prophylactically post any cardiac surgery because there is a time gap to LeAAPS data comes online.

All right. I'll start, Suraj with your questions. I'd say the dynamic when you're seeing some of the variability on our appendage management line item franchise, it is primarily within our MIS clipping. So we talked about in the third quarter, we had a stronger quarter with adoption of the PRO V or PRO Mini product, I should say. If we've seen MIS appendage management devices throughout the year, see quite a bit of variability for that to grow in earnest, we need to see growth within our hybrid ablation franchise, which obviously was on a downward trajectory throughout 2025.

When I take a step back, we've seen strong growth within our open appendage management devices throughout 2025. When I take a step back in any 1 quarter, it is a couple of points for our open appendage management products as AtriClip FLEX-Mini takes hold. That is the difference between volume and overall reported revenue growth. It's a couple of points that is pricing related. We are seeing a lot of customers switch over to our FLEX-Mini device. They like the lower profile that, that device provides, and it comes with the track record and strength of our previous AtriClip platform.

Sure. And to answer your question about whether or not -- or what is the preventative measure that is out there kind of upon a launch? I mean as I described earlier, and you look at the advantages that we have in the market today, both with exceptional products on the safety and the efficacy side of things, we feel like we've got incredible products and new product launches coming out. We've got our own next-generation product coming out the middle of next year. We believe our products are going to be superior to all products that are on the market. We've got over 21,000 patients that have been studied using our product today showing exceptional closure.

Again, I'm rementioning the 100 peer-reviewed articles that have been out there on top of the fact that we've got an implementation of safety rates that is quite exceptional on that front. So I think our products alone demonstrate that, and our customers understand that. They also understand that we're the ones investing in the data that is coming out. Every cardiac surgery program, both in the U.S. and around the globe understand there's only one company that is making the investments that we're making in clinical evidence. That's [indiscernible]. We're doing big randomized controlled data trials underneath this.

And you've seen this in other areas, those that invest in the data, those that invest in proving it out that way wind up winning in the long run. The combination of having the best products with the best clinical evidence today and coming usually wins in the market long term. You can look at -- you've seen it in the left atrial appendage market already and when you look at the occlusion market. And I would say that you're going to probably see it in this market as well. That doesn't mean that we're not getting ourselves ready for competitive competitors coming in, trying to ride our totals on the things that we put out there and the trials that we've run and helping out with guidelines and those types of things, we understand that, and we're very well aware that they're very good competitors. And that the -- and we respect them from that. We will never do that. We've got to earn the business of our customers every single day, and we're going to do that through 1 innovation, to clinical evidence.

And the third piece is our team that is in the field is second to none in the world. That is across both our field team, our clinicals and our education team that are out there and understanding how does that appendage work? How does the Afib work and how do you manage that every single day. So I've got a great deal of confidence in our team. Again, that doesn't mean that they're not going to come in and make some noise. This is also why markets grow. I mean I think that when you look at in big markets, when WATCHMAN came to market, then you have [indiscernible] to market. The market actually grew when big competitors come into their space. And so we believe that the market overall is going to grow, and we are going to get our fair share given all the positives that I just talked about relative to our products and our team.

This concludes the question-and-answer session. I would now like to turn it back to Mike Carrel for closing remarks.

Great. Everyone, thank you for joining us on the call today. We look forward to a great Q1 and talking to you again in the April, May time frame. Have a great night. Bye now.

This concludes today's conference call. Thanks for participating. You may now disconnect.

Hi, everyone. Thanks for joining. I'm Lily Lozada. I'm on the medtech team here at JPMorgan. Very happy to have the AtriCure with us here today. CEO, Michael Carrel is going to do a presentation for us, and then we'll jump into some Q&A.

Great. Thank you, everyone. I'm Michael Carrel, President and CEO of AtriCure. And thank you to JPMorgan once again, and as always for inviting us and having us as a part of this day, the event of JPMorgan in San Francisco. So I'm going to talk about AtriCure. This is -- it's not going forward. I was just -- there we go. All right. Got to workout with my thumb a little bit more, I think, and the -- my goal today is to hopefully give you a really good overview of the opportunity that we have at AtriCure.

Our dedication and focus is to patients at the end of the day, and it's dedicated to reducing the burden of Afib globally and pain after surgery. And hopefully, at the end of today, what you're going to feel is that this is a really large market opportunity. So we're talking about $10 billion worth of possible annual opportunity that sits within the portfolio that we have today, and you'll see how large that is, but in addition to that, how strong our portfolio of products are to deliver towards that with a combination of technology and the products that we have in the pipeline and also the clinical evidence that we've already generated, but also that we're leading to generate over the course of the next 2, 3, 4, 5 years.

Another thing to note about AtriCure is that we are already a global company, serving in 58 countries around the world. And -- but by being global, we're also manufacturing 100% of our product right here in the United States, right just outside of Cincinnati, Ohio. And we're proud to be manufacturing that at a very low cost price, and it's very efficient. It's not because of all the tariffs and everything that have gone on that we manufacture and do that, we do that because our quality system is incredibly strong, having a combination of R&D working very closely with the manufacturing floor on a regular basis. But obviously, it does give you a benefit when it comes to tariffs when that kind of happened earlier on this year.

And one of the areas that you'll hear me talk about, you will hear me use the word standard of care. How are we changing and creating and bringing evidence with our products to truly create new standards that help these patients out? And I'm going to focus on that in the core areas that we have as a business. So I'll start with -- as I've learned, I've got to go a little bit -- clearly, I'm not working out enough with my thumb. There we go. All right. I think it's like sensitive in certain areas there. All right. So the first part of the conversation is around atrial fibrillation. There are almost 60 million patients around the globe that have Afib. When I started with the company 13 years ago, and we were looking at that number, that number was 30 million. That number is growing fast for all the dynamics that you might imagine in our society around the number of people, but it's also because people are living longer, and Afib effectively is a disease of the aged. And as you get older, you're eventually going to get it. One of the physicians once told me, it's kind of like gray hair. Eventually, if you live long enough, you're either going to lose your hair or have gray hair. If you live long enough, you're probably going to get Afib at some point in time in your lifetime.

And it -- what we're focused on is the most complicated portion of that disease, which are the patients that have been in Afib for more than 1 year. Why that's important is because Afib is a lot like cancer. It's a progressive disease. The longer you have it, the more difficult it is to treat like in cancer. When you have a cancer patient, if you're in Stage 1, you think one way. If you're in Stage 3, you have to throw more at that patient. Same thing is happening with Afib, and we are the kind of end of that part of that disease state. We're the more -- we deal with those more complicated to treat patients. Because you'll hear from a lot of the big companies that are here presenting in various different platforms they have, they're typically dealing with the earlier-stage atrial fibrillation patient, and we're dealing again with the sickest of sick patients out there. And you think there aren't that many patients in that.

In fact, that represents 45% of all Afib patients that are out there. So it is a very large market opportunity that exists. And Afib is bad. If you haven't heard it, you haven't seen all the commercials that you see on the TV, but Afib is a bad disease. You've got a 5 to 6 more chance -- more likely chance of having strokes. You've got a 5x more likely chance of leading to heart failure. And it also, in more recent studies, has shown that those that get Afib at an earlier age have a more likely chance of having dementia. Afib is bad. You want to get rid of it. You want to get yourself back into sinus rhythm.

In fact, some recent reports that we saw, it's actually when you look at it relative to cancer, when you diagnose Afib, it is actually -- your chances of survival at 5 years in that diagnosis is worse than about 2/3 of the cancers that you have out there. Think about that. You hear cancer and you're thinking that's a death sentence. You have -- 2/3 of those cancers are not as bad as getting Afib and the diagnosis that you're going to have with Afib because of the items that you see on this page. So that's our first business, and I'm going to walk you through that in a moment.

The second part, my thumb worked at that time, that's awesome, is another persistent problem is pain after surgery. So there is -- obviously, everybody in all the medtech companies are trying to figure out how do you make things less invasive, make it easier on the patient, get them home and out of the hospital more quickly with less invasive technologies to treat whatever element they have. However, there are some elements you have to do invasive surgery, and it's a lot. There are millions and millions of patients that undergo various surgeries, thoracotomies, sternotomies, amputations. And when you have pain after that surgery, your recovery is much slower. Just imagine, you've got lung cancer, and they're taking out one of your lung nodules, and they've got to go through your ribcage. Your ribcage is there to protect your lungs. You've got nerves there. When they go and they extract that out of your body, it's incredibly painful after surgery. What do you have to do? You want to breathe and recover. Your body wants to naturally have that breathing mechanism to it. If it hurts to breathe, you're not going to recover as quickly as an example. That's like one case study that you can look at.

When you use cryoanalgesia, you can reduce that pain, and you can reduce the amount of opioids one takes. Because how do they deal with that today? If any of you have had a parent or a loved one who's gone to the hospital and had surgery, they send you home with opioids. That's how they get you out of the hospital. Well, with cryo nerve block, it will last for anywhere as short as 6 weeks up to 3 months where you will be pain-free, which allows your body the time to recover, reduce the amount of opioids, recover more quickly. And what does that do not only for the patient, but there are more and more studies now that we've demonstrated that you can reduce the health care cost overall. In fact, a recent study we did on thoracotomy showed that you can save between $8,000 and $15,000 in the after recovery, where those patients aren't going back into urgent care, going back and calling in and taking additional drugs they've got to take as a result of that, or they just can't recover quickly enough. That doesn't include lost time at work and all those other items to the economy and things like that.

So our 2 main businesses are reducing the epidemic of Afib; and two, reducing pain after surgery. Well, okay, yes, it's a problem, but is it a big market? I started with the company back in 2012. This is 2010 (sic) [ 2026 ] here. The market opportunity at the time we were thinking about was about $1 billion, and we were excited. We were a $50 million, $100 million company, and we were thinking, okay, that is a really big market opportunity. As we've gotten deeper and focused like a lot of companies, the more focused that you get, you find additional opportunities. And today, we can go after about $10 billion. It's about $5 billion today. And with the trials that I'm going to talk about here in a moment, it expands to well over $10 billion worth of real revenue, patients being treated market opportunity on an annual basis. And you do that with additional innovation and new products, evidence that shows that this works in a broad base of patients, and then establishing awareness and clinical education so that they can actually implement it.

So I'm going to walk you through those markets here in a moment. So the first one is cardiac surgery. Cardiac surgery is our largest market. I'll give you just a -- our goal here is that every patient that undergoes cardiac surgery has an ablation and a clip, our AtriClip. Today, we are less than 10% penetrated in that overall global market opportunity. What do I mean by cardiac surgery? It's very simple. Think of you're having valvular disease and you need your valve replaced, or you've got to get your coronaries replaced or repaired. Pretty simple. That makes up 95% of all cardiac surgery that is out there today, all fits within that category.

We historically have talked about this that 1/3 of those patients had Afib. And if you had Afib, that was going -- we want to treat those patients with Afib. What we've learned recently over the last 5 years is that actually when you undergo cardiac surgery, you've got about a 35% to 40% chance of going into something called postoperative Afib. That expands the market opportunity so that we want to have every patient that hits that operating table get out of AFib, whether it's postoperatively in that first 30 days or for their long-term care to get out of Afib. And you saw the reasons why, reduce your stroke rates, get them out of the hospital and faster recovery. This market opportunity alone, if you take that 2 million patients, you do some discounting on it and you get to -- on our prices and everything else, you get to an over $7 billion annual opportunity. And I'm going to walk you through the trials that are going to get there.

What's great about AtriCure is, we've already got the products. We've got a simple, easy-to-use innovation that we've done over the last 15 years. Our new EnCompass Clamp made it really easy to go after that. In addition to that, guidelines have changed in the market, and we've got clinical evidence coming down the pipeline over the next kind of back half of this decade that is going to make this a true standard of care where every patient is getting treated.

The second area is our pain management franchise that I just talked about the why, but our goal here is to make it a standard of care so that if you're undergoing any kind of invasive surgery in which your nerves, large nerves are getting stretched or cut that we can significantly reduce that pain and the amount of opioids that you need to take. This market opportunity alone, just in the areas that we're in today, which is a thoracotomy, a sternotomy or amputations, is an over $2 billion market opportunity just in that area. And it's the fastest-growing part of our business. Again, the good news here, we have product. We have a platform in place. We're in almost every hospital in the United States, in many hospitals throughout Europe and Asia. And the economics show this works, and they see an immediate benefit of pain reduction. Big opportunities to go after, and I'm going to go into a little bit more detail. And then our hybrid therapy area is when all you have is Afib. It's for the really complex Afib when the catheters don't work.

We all hear about the world out there of PFA, which is exceptional technology, and it works really, really well. However, many of those patients, even after multiple catheter ablations still do fail and don't respond. We're not trying to compete in that early-stage portion of it. It's when you've had 2 or 3 catheter ablations, and now that long-standing persistent patient is in need of some help because the catheters just don't work. That's when we come in. And we are the only one in the world in that area. In every one of these categories, we are #1 in the world. We are the leading edge area in terms of pushing the innovation and pushing the clinical evidence with it.

Specifically on cardiac surgery and making it standard of care, I talked about the technology, and I just wanted to kind of show a picture here because I thought it was important. These 2 innovations are new innovations that we've brought out over the last 3 or 4 years. The EnCompass Clamp is on top. Why that's important is that we were trying to get adoption over the last 1.5 decades, and people asked, why isn't it getting adopted? And so you have to look at, is it easy to use, can every cardiac surgeon do this procedure on every one of their patients? And the answer to that 6 or 7 years ago was no. We did not -- we had technology, we had technology that would enable you to get a really good result, but it was technically challenging to do.

So we invented the EnCompass Clamp to make it super simple so that we could address the full 2 million patient population. What have you seen and what have we seen during that period of time, an acceleration in our growth rate in our open ablation business. We used to be a mid-single-digit grower in that area. That has typically been in the high teens, if not more, over the last 5 years since this has come on to the market. And I believe that, that's going to continue to expand. So we've made it really easy to use.

In addition to that, we've continued to innovate on our AtriClip platform, which is to manage the left atrial appendage. That's what you see down below. It's called the FLEX-Mini. That FLEX-Mini device is the smallest profile and best device on the market by far. It's our best product. It's our most recent innovation. Why is it so good? Very simply by being smaller, you get much better visualization. You can get down to the base of the appendage, and you can manage it more acutely and easily. Once people use this technology, they don't want to ever go back. So we continue to innovate in this area, and this is how we can do it.

Now the other way that you get adoption is you get clinical guidelines and evidence. And what you're seeing here is that by investing in clinical evidence, in science, you hear us talk about the trials that we're doing and the ongoing trials that we do. With our technology, we've been able to see a shift in guidelines, where today, it is a Level 1 guideline for a majority of the items that we do in open cardiac surgery. And when I talk about our next trial to go after the postop Afib trial, that's why we're doing a trial of that size is to then go change guidelines. So guidelines have changed adoption. But guidelines alone with easy technology don't do it, you need a third portion of it, which is to have reimbursement. But that clinical evidence I talked about is what drives a lot of that.

So when you look at the clinical evidence here, the clinical evidence we generated in the 2000s generated significant increases. Let me just repeat that, significant increases that CMS gave because they believe it's better for the patient and better for the economics of CMS to pay upfront to treat that patient at the time of cardiac surgery so much so that they're willing to pay over $10,000 when you're on a CABG, when you have a double valve procedure, almost $24,000 additional, and they're willing to give the physician an additional payment. This is all what leads to faster adoption and faster growth rates on that.

So let's talk about that's what's happened in the AFib side, the original Afib, you come into the operating room with Afib. But we've got 2 definitive standard of care changing trials. The first one is called LeAAPS. It is the largest trial ever done in cardiac surgery. It is a randomized controlled trial. Half the patients in the trial get a AtriClip, half of them don't. These patients that come in do not have Afib. So it's the other 2/3 of the patient population. We believe we are going to see a significant reduction in their stroke rates when we look at them over a 5-year period. We enrolled this trial 2 years ahead of plan. We are now waiting for the events to accrue. Once those events accrue, we look at the data, and then we'll go for approval with the FDA. We've got a 5-year look that we think. We are seeing the events come in faster. So it's probably going to be faster than the 5 years. I can't give specific times on that, but I can tell you it's going to be probably earlier than that 5 years that we're going to be able to see that data.

Once that gets approved, you just saw on the slides, standards of care will change. It will become quality metrics. Every patient in the globe will be getting an AtriClip at the time of cardiac surgery. And I think everybody can start to do the math on what that looks like in a P&L as you go forward. The other really exciting part about this trial and the next one is that we don't have to go invest in a new sales force. We have the call points. We're in all these sites today. We're already in all these procedures, and we have all these relationships. So this is just an absolute market expansion that allows us to not only get top line to grow faster, but also will drive down to the bottom line as well. And you've seen that we've had some great progress there recently.

The next trial is another standards-changing trial for that same patient that goes in without Afib. It's already guidelines Level 1 to treat the Afib. Now it's going after that next patient population because we can reduce, and we've seen in studies that you can take that 35%, 40% postop Afib and you can bring that down to less than 10%. Many studies have demonstrated that over the course of the last 5 years, which is why we kicked off this trial in the fourth quarter of this year. We're already well ahead of plan in terms of enrollment. We're allowed to enroll at 75 sites. It's 960 patients randomized. Half the patients get an EnCompass Clamp and the clip that I showed you, and the other half of the patients get nothing, which is the standard of care today.

When we combine these 2 trials, LeAAPS to show stroke reduction, this one to show a reduction in AFib both short term and long term, we think that every patient, again, is going to -- undergoing cardiac surgery is going to have an ablation plus a clip placed on the them. Massive market opportunity.

On the cryo nerve block side, I just thought it was important to kind of show you what those products look like and what innovation looks like. We continue to innovate in this market. And that innovation drives growth and drives adoption. The top one there is that when you were doing some of the ablations to freeze the nerves, it took 2 minutes per nerve that you would freeze. You would think, "Oh, that doesn't sound like a lot of time." That's a lot of time for someone to be holding on and to stay there. To reduce that in half to 60 seconds, you saw our growth rate accelerate by bringing out our cryoSPHERE MAX last year. Innovation is driving adoption, making it easier for them to do that procedure. And then below that, you're going to -- you look at and you're seeing our new device that we just rolled out called our cryoXT for extremities. This is for amputation. So I'm going to go through some more details on the next slide.

So for amputations, there are about 180,000 amputations in the United States. Of those, our first initial target is 100,000 of those patients that have below-the-knee amputation. So these are primarily diabetic patients. You need to get rid of that limb in order to survive. However, as you can imagine, when you take that limb off, you've got several nerves there that are incredibly sensitive that you're cutting. When you freeze that nerve using our unique technology, it's very simple to do, these patients go home postop day 1 instead of having to stay in the hospital for 4 or 5 days, allows them to recover, get their prosthetic faster, walk more quickly and have no pain. Significantly reduces the amount of opioids they take, and in addition to that, there are indications that you might actually reduce something called phantom limb pain, which is an excruciating pain that many of these patients have and live with for the rest of their lives.

Because when they cut the nerve initially, their body trick themselves and still think you've got that leg. And so it's still trying to connect to something. But when you freeze it, you're tricking the brain back, and therefore, you're reducing that phantom limb pain that anybody is actually feeling, which is phenomenal because a lot of these patients, interestingly enough, you can imagine that pain is so great. They commit suicide. They don't want to go on with their lives. They can't get themselves back to work because they're constantly in pain. Reducing both the acute pain and the longer term pain is critical.

So what does that lead to? What do like all these markets -- at our Analyst Day in March of this past year, we put out guidance. It was our first time putting out long-term guidance. And we are already well ahead of the plan that we put out just last March. If you look at the performance in 2025 and the guidance that we're giving for this year, you can see that we're already ahead of plan in this area. We said we -- by the end of the decade, we would be a $1 billion company, generating 20% operating margin on an EBITDA basis and converting that to cash. So already ahead of our plan.

And if you look at comparable companies that are kind of doing this, you would look at our multiple and you would realize, AtriCure is undervalued today. And I'm just stating fact. Just go look at those. I know that people get up and say, their company is undervalued, go look at the relative multiples on it. And how are we going to do that? I mentioned some of it, but just to summarize, in 2024, you can see the innovation engine that we have. New products like PRO-Mini Our cryoXT probe that just came out, our LeAAPS got fully enrolled ahead of plan, we initiated our BoxX-NoAF trial, which is the trial that I was referring to on reducing postoperative Afib. As we look at this year, launching cryoXT, we should see some increase in the revenue growth by the end of the year in that area.

We will not get through complete enrollment in BoxX-NoAF. We said it was going to be about a 2-year enrollment period, but again, we are already ahead of plan on that. We've got new platforms on our cryo business, and we're going to initiate an EnCompass PFA IDE trial, either by the end of this year or the early part of sometime probably in mid-2027. And we're not going to stop innovating on our AtriClip platform where everybody asks us questions about competitive threats coming into the market, which we've always viewed as a positive. But in addition to that, we don't rest on our laurels, we continue to out-innovate so that they're going to be chasing something of our old technology versus what we're coming out with next, and we'll come out with a new clip in mid next year. And then we're going to continue to look at that LeAAPS follow-up.

And then as you look at the back half of the decade, all that data is going to come through, and you're going to see an acceleration in that growth rate. And you can see it just this year. We had a great year this year. Just in summary, 15% overall growth. 86% increase in the positive EBITDA. You saw the guidance that we gave. We're going to -- we started the year at $40 million to $42 million of adjusted EBITDA guidance, we ended the year saying in our most recent press release earlier this week, $57 million to $59 million of adjusted EBITDA, generating $44 million worth of cash this year. So the business is incredibly healthy and in a really good place. In addition to many of the milestones I talked about earlier, you can see the growth rates. I want to highlight our guidance for a moment.

For this year, we're guiding to 12% to 14%. Just as a reminder, last year, when we guided, we guided to 11% to 13% and finished at 15%. So you can kind of understand the philosophy of the company relative to that. We also raised our guidance well above consensus to $80 million to $82 million, which is very close to that 14% target that we talked about getting to in 2028, we'll be almost there in 2026. And we will generate cash for the full year, and we also put there that we are going to generate net income for the first time in 2026.

So in summary, AtriCure is the leader in every one of our markets. These are large markets that we're going after. We're investing heavily in research and development that will enable us to not only grow our bottom line, but our top line and accelerate through the end of the decade. With that, I'll bring Lily back up to ask me some more questions. Thank you.

Maybe we can start with the preannouncement. You announced fourth quarter revenue as a step ahead of the Street. So can you talk through what your takeaways were from the quarter? What surprised you? And any commentary on how things performed by segment?

Yes. We felt really good about the quarter overall. I mean, as you mentioned, we beat on both top and bottom line against consensus and against all the analysts that were out there. Our top line was driven by the things that have been driving our growth for the last -- pretty much throughout the year. Our cryo nerve block had exceptional, exceptional growth for the quarter. Not much contribution from XT yet, but we did see really good growth overall in that area. Our open ablation and our open clip also saw excellent growth.

I'd say, our open ablation was exceptional growth for the quarter, continue to see adoption of the EnCompass Clamp and the growth in that area. Our open AtriClip had really solid growth for the quarter as well. The only pressure point we saw in the quarter was really -- because we've had some analysts say, well, we wanted to be a little bit more. And I think you might even have noted that in your's, Lily. So when we looked at that, we understand that. We understand everybody kind of probably had an expectation of $1 million beat, maybe a $2 million or $3 million beat. Really, that was mostly the pressure that we saw from the international side very specific to the U.K.

The U.K. is under a lot of budget crisis right now. And kind of in the -- I'll call it, the back 4 months of the year, we saw a lot of pressure from the U.K. basically canceling procedures or pushing procedures off as they kind of get their budget in check and very acutely to cryo nerve block because it had grown so fast in the U.K. over 2 years that they basically said, "Hey, we need to go evaluate the benefit of that." So we definitely saw a really big drop in the fourth quarter relative to specifically the U.K. on that. But in our guidance, we've anticipated that and looked at that for this coming year, assuming that doesn't come back in the U.K. So our 12% to 14% for 2026 already includes that pressure point that we saw in the fourth quarter.

But overall, top line feel really solid with that one kind of soft spot, I would say. In addition to that, on our bottom line, as you saw, we actually raised our guidance, and we'll hopefully obviously update more specific later on, but we feel really good about the overall number on that front.

You talked about pain, open ablation, open clip all being really good. You didn't mention MIS. So how should we think about what that look like in fourth quarter? I think in the U.S., it was around 30% declines each quarter year-to-date. And so what did fourth quarter look like relative to that?

Relatively similar. So I -- and I didn't mean to avoid it. Yes, we saw the same kind of pressure that we've been seeing throughout the year within our hybrid business. The one thing that I hate to -- you can't declare victory, but it is the first quarter that we've seen in a really long time where from Q3 to Q4, we actually saw a sequential uptick in both revenue and we had a couple -- 3 more accounts ordered from us in Q4 than we had in Q3. That's the first time we've seen that in the last couple of years. And so hopefully, that doesn't say that we're at the bottom. We don't want to declare victory, but we're definitely seeing -- there was still pressure in the quarter. We anticipate pressure in this year. It will just be less than what the pressure was from last year. And we did see some kind of highlights from that standpoint.

Yes. That's definitely encouraging. You talked about guiding to 12% to 14% for this year. We can dive into all the different products and segments deeper in a few minutes. But at a high level, anything you'd call out in terms of cadence that we should be thinking about for the year? I know you have a lot of new products rolling out that will probably pick up steam as we progress through 2026. And so how should we be thinking about the progression and growth by segment this year?

I'd say that -- I'll start with the progression. We anticipate probably, obviously, with the XT launch and with FLEX-Mini and other, accounts going to continue to kind of build up steam as the year kind of goes on, you anticipate the back half of the year might be a little bit stronger relative to that, especially on the XT side with the cryo nerve block and as we get into more accounts on the FLEX-Mini many side of things. So I'd say kind of that natural a little bit of a progression towards the end of the year and an acceleration in that area. By segment, on the open ablation side and the AtriClip side, pretty more normal. It's really more of the cryo that will kind of have more of the ramp as you kind of go through the year. So I'd say lower end of the guide in the early part of the year and higher end of the guide in the back half.

You just -- following up on that, let's dig into pain a little bit. Growth in this segment has been accelerating pretty consistently year-over-year throughout 2025. You have XT still in the really early stages. So is there any reason we can't continue to see that in 2026?

See what?

See an acceleration in growth in cryo?

I think that overall -- I don't know that I'll see an -- you just see an acceleration. I just think you're going to see really -- that will be our highest growth rate products in 2026. There's no question about that. To say it's going to be an acceleration per se, I don't know that I would jump quite that far yet. The MAX has been a great product. It's taken off a lot faster than we ever expected. It's now enabling us to get in sternotomy. So we're definitely seeing people get -- do repeat sternotomy and expand into that market opportunity for us. The back half of the year, you'll see maybe some acceleration as XT gains hold because at the beginning part of the year, we don't expect much coming from XT, but the back half of the year, you might get some acceleration relative to that.

Let's dig a little bit deeper into XT. What has early feedback and utilization been like? I mean, where do you think you stand in the rollout moving into '26?

It's a great question. So the way that we do our rollouts, in particular this one, it's a brand new market opportunity for us. It's a new surgeon base. So we are only giving our -- we only gave our reps 1 site they can go after. So we purposely kind of put a limiter on it to make sure that they get it right and see what feedback we might get. So far the -- and to get through VAC committees and those things. But the feedback we've gotten so far is that it absolutely works. Almost every one of those sites are now repeating and using it on their cases. So that's a really good sign that those sites -- now we're starting to open it up, and we just have to get through the VAC committee and that piece of it. But the feedback from the sites that've been utilizing it has been excellent. I haven't heard one negative piece coming out of it. It's very fast to use. It's easy to use. And so -- and they're getting great results. Patients are going home faster. I mean I love the stories that you hear about patients getting home in a day afterwards without any opioids. I mean, those are great stories to hear.

Shifting gears to open. I think it's been several years now that we've been all pleasantly surprised with how well you've been able to sustain this level of growth since launching EnCompass. I assume a lot of the mix tailwinds are behind us at this point. So what do you think it is that's allowed you to sustain this level of elevated growth for so long? And is this just the go-forward growth rate we should be using for open for the foreseeable future?

Open is, I mean, the growth -- it's not going to necessarily accelerate right now. It will accelerate after BoxX-NoAF. I just want to be really clear. As you look out in the back half of the decade, once that data is positive, you will see an acceleration because it's the same product, as I was mentioning earlier. In the near term, the reason we can continue to grow is because it's a super easy product to use. We're still underpenetrated in Afib patients. So there's still a large pool of patients that we can kind of grow into. It's an easy-to-use product. The guidelines have changed. And so the guidelines are there and reimbursement is now in place. So yes, I do think we're going to continue to kind of go after and get after that space. Market, in particular, the growth that we're seeing there is in coronary bypass or CABG patients because that's really where we see the least penetration overall in the market. And we feel like there's a huge opportunity there because there's so many patients.

Yes. Where do you stand in terms of penetration across both CABG and valve procedures?

Valve procedures were -- if you mix the 2 together, we're over 50% and CABG is around 20%, give or take, I mean, but -- so there's -- and CABG has got a huge -- a larger opportunity because there's just more patients overall.

Yes. Shifting gears to appendage management, and this has seen a nice acceleration in growth recently with the rollout of FLEX-Mini. Should we think about the uptick that we've seen in growth as more of a onetime increase from price? Or do you think this can continue as we lap the initial launch?

Yes, most of that is not going to be price, it's going to be volume. We're seeing really good volume growth relative to the AtriClip device, and we anticipate we'll see really good volume growth this year. We're still in only 1/3 of the accounts. We have a lot of accounts to kind of get into. So there is some shifting of that, but it's also getting net new users to be using the product. So we do anticipate a little bit of a mix of both, but we still have a lot of sites to open up. Interesting enough, when we look back at the data when we rolled out FLEX-V, which before we had FLEX-Mini and is the product that the competition tried to copy, that represented about 80 -- we went from 0% to 80% over about a 7-year period. We have made a lot faster progress in terms of number of sites and percent what FLEX-Mini is representing right now in just 1 year. We're probably about 1.5 years ahead of what we did with the V product, which obviously was a huge home run product for us.

It's been some time that you've had competition on the market, but it doesn't seem like they've made a meaningful dent in your momentum at all. So any change in what you've seen on the competitive landscape in recent months? And what do you think it is that's allowed you to maintain your share presence despite having a large competitor on the market?

A couple of things. And interestingly enough, I think people forget that we've actually been competing against Medtronic, I mean just like for -- since I started 13 years ago and well before that. I mean they have ablation products. They have tools that have been in the space for a very long period of time. And we took the share of the market over the last decade from basically, we're at about 50-50, and now we're at about 95% market share on the ablation side before the AtriClip came out. So why? And I think we repeated that even when they came in with a product to compete with us with their device. The reason for that is that we make exceptional products. Our products, I believe, are superior to anything else that's on the market today. We're constantly innovating and challenging ourselves even without that competition to come out with the next generation of that product to push that product line. You see it with the FLEX-Mini. We'll have another net new generation product coming out in 2027. We're also investing heavily in clinical evidence that changes the game relative to that. And we know our product works every single time.

On top of that, we've got a field team that understands atrial fibrillation, understands the market well. So we've -- we're covered pretty much every single hospital in the United States. If you look at the size of our cardiac surgery sales force, we're in 1,000 of the hospitals that are out there performing this. So we've got really good relationships, really good coverage, and our team knows their stuff. And so if they're looking for someone to add value to them in the operating room around AFib or managing the appendage, they're looking to us because this is all we do. And this is all they're trained on. And so they know it better than anybody else in the world. And many times, they know better than the surgeon themselves. So I think all those kind of components together make it easy -- not easy, but it is -- it allows us to be able to defend ourselves against competition.

In addition to that, competition is good. I mean when you're the only one in the market, that tells you the market is not that big. When you have big players coming into your market who're saying, "I want to get into that market," that means that market opportunity is a multibillion-dollar market opportunity. And we're not a multibillion-dollar company yet. And so what that tells you is that they see the value of the underpenetration that's still there, and by creating more awareness, that's going to raise the bar for everybody. And we've got lots of examples of this happening, whether it was in the TAVR world at the beginning. I know it's slower market now, but 15 years ago, when you had 2 big players going after it, it raised the bar for everybody. Same thing happened in the left atrial appendage market. You see that competition happening in PFA right now. So when competition comes in, guess what, it raises the bar, more patients get treated.

Is there anything you'd highlight from an IP perspective that you think protects your moat?

We do have IP. I'm very confident in the IP that we have. However, my philosophy is a little bit different, like I'm going to win by having the best products in the market, the best clinical evidence and making sure I've got a field force that can support those. And IP we will have, we will generate and we'll make sure that we can win on that front if we need to utilize it. But we want to be thinking ahead and not fighting behind. And that's really kind of how we view IP. But we've got the IP if we need to utilize it.

Maybe shifting gears a little bit in the few minutes we have left. I think the big positive surprise from the preannouncement was the profitability that you guided to for next year. EBITDA came in pretty well ahead. You have your first year of net income profitability. And so what's driving that incremental leverage that people didn't have in their models?

I think slightly on the gross margin line, I mean, I'd say that's very slow, but you're just getting leverage across the P&L. So in particular, on the R&D side, what you're seeing a little bit of leverage is we don't have LeAAPS involved in there anymore. So LeAAPS was a really massive trial that was obviously enrolling incredibly fast. BoxX-NoAF is a large trial, but not quite as large. So you're not going to have that same kind of math. So you have a little bit of leverage kind of coming out from that standpoint. And then just purely around really good financial management on the SG&A side of the business, getting leverage off of the team that we've trained out in the field has been really important to us. And we anticipate that, that's going to continue to expand. As you saw in our long-term numbers, we'll continue to expand that bottom line.

And you're starting to generate cash. How should we be thinking about where those dollars are going as you begin to be cash flow positive in a more meaningful way?

I mean right now, what I would think about is we're going to just shore up -- not shore up, but really continue to strengthen our balance sheet. We've got -- we're in a super solid position. We don't need to go out and raise any kind of money, but we do think we need to kind of shore up and have an even stronger balance sheet, and we think that generating cash will put that for now. We're a growth company, and we're investing in all the right things, and so we're going to keep putting it on the balance sheet for right now.

With that, I think we're almost out of time, so maybe we can wrap it up there. Thanks so much, Mike, for presenting, and thanks everyone for joining.

Thanks for having us. Awesome. Thanks.

Well, good afternoon, everyone. Thanks for joining us. I'm Danielle Antalffy, the U.S. med tech analyst here at UBS. Very lucky to have with us the AtriCure team. We have CEO, Mike Carrel, CFO; Angie Wirick. Thank you, guys, both, for joining us.

Thank you.

Thanks for having us.

And I guess, maybe, let's start, obviously, Q3 just ended. You guys had another strong quarter. Sales upside raised guidance. Maybe just talk about what's happening out there and remind us where we're falling out for 2025, and then we can start the Q&A.

Yes. Great third quarter, I'd say, the full year and especially pronounced in the third quarter, showed the strength of our new product launches. Within each franchise, we can look at something very specific within innovation that's driven really nice results. When you think about our appendage management franchise, the introduction of FLEX-Mini in the second half of 2024, more pronounced driver of growth in 2025, and we continue to see strong uptake of that device within our open appendage management market.

Within our pain management franchise, the cryoSPHERE MAX, big exclamation point on an already really fast-growing franchise, seeing wonderful execution from the team in terms of driving really robust adoption of that device. Obviously, taking time out of our procedure helps. The innovation is really pronounced there.

And we also have the continued tailwind of EnCompass within our open ablation franchise. I mean launched in the U.S. a couple of years ago. What we saw in the third quarter was continued really steady growth in the U.S., but then also a really nice uplift in our European markets as that device launches and starting to take hold.

So the framework, I think you've got multiple different business drivers throughout our franchises. I mean, it sets up for a really nice construct for kind of mid- to upper digit growth in 2025 and then a continuation into 2026.

Yes. And so I want to see what you guys will give me on 2026. But before we go there, let's touch on each of the business units, if we could. So open ablation. I mean that's the workhorse piece of your business and it's been growing mid- to high teens-ish?

Yes.

Yes.

And I guess, so number one, you did launch EnCompass a few years ago. So what's the runway left for EnCompass contributing to that? And what has been the driver, I think. And maybe, Mike, you could talk about the 3 different areas and where we are from a penetration perspective.

The driver for EnCompass is that it's so easy to use, and you can do the procedure in less than 10 minutes. And so what you've seen is, and I hate to use this word, but it's the best way to describe it, we've democratized the procedure. Everybody thinks of cardiac surgeons as being incredibly technical and they can pretty much do anything, but not all of them truly get behind the heart when they're doing a procedure.

So what this has done is made it easy for a surgeon to actually approach the technology and utilize it on every single patient that hits their operating room table today that has Afib in long term for pretty much everybody that hits the operating room table. And so what EnCompass has done is, and why it's got such a long runway, is that we're still in less than 10% of all CABG patients that have Afib today. And so that's the market, and those are the people that are now starting to adopt it.

We used to be pretty much almost all in valvular technologies, in mitral valve and aortic valve. The larger portion of the patients, almost 75% that undergo cardiac surgery, are CABG patients. And those patients that have Afib, they weren't getting treated.

And that number has come up dramatically because of the EnCompass clamp and has enabled it from that standpoint. So just the ease of use, the simplicity of it and being able to approach it is really what's kind of enabled that to grow. And then long term, not only are we going to be able to go after CABG, but you may have read or heard our BoxX-NoAF trial, which is for postoperative Afib and long-term clinical Afib patients that go into the operating room today and they do not have Afib, which is about 70% of all those patients.

And our belief is that if you prophylactically ablate them, and put the AtriClip on, that you can significantly reduce their post-op Afib, which is a very big deal, and then you can also long-term effect their Afib. That's all being done with an EnCompass and an AtriClip. So long term, the market is severely under-penetrated, if you start to think about 2 million patients around the globe that could benefit from that.

Yes, yes. Just on the surgeon side of things, I mean, you mentioned democratizing and I like how you use that. So are you in all the -- are all surgeons, like where are we from a penetrating the surgeon perspective?

We are in -- from -- before surgeons, if you just look at the number of sites that are using the EnCompass clamp today, it's about 75% of all sites. In the United States that do cardiac surgery utilize the EnCompass cloud. Now to give you some feeling on that, about 100% use the AtriClip. So we're not quite -- we're still room to grow from 75% to 100%. So there's still room there. But more importantly, I think the next part of your question is from the depth of getting within the number of physicians. We can't get an exact number of physicians, but I would suggest that we're at a fairly lower -- much lower percentage, less than 50% of surgeons are utilizing the technology.

Okay. So there is still runway to go even from a surgeon perspective.

Absolutely. But I think the -- what we look at is a procedure standpoint, what's -- what number of procedures are we involved in because that's actually also incredibly important. Are they -- let's say you've got a surgeon that might use it once or twice and they use it on just their complicated patients or someone has been in a super advanced Afib, but they're not using it on their earlier stage. How do you get them to use it on every patient that has Afib and then eventually use all of their patients that hit the operating room table. That's kind of -- it's not just getting to the surgeon, but also getting them to utilize it in all their cases.

Yes. Okay. All right. And let's talk about the appendage management business. And what the growth drivers are there. Obviously, a very under-penetrated market. I think there is some misperceptions out there as to is it competing with WATCHMAN and some of these left atrial appendage closure devices. So maybe talk a little bit about the competitive landscape as well.

Yes. They can comment you just doesn't compete at all with WATCHMAN or Amulet because they're -- someone that's getting that is somebody that has Afib, they've got no other issues and they're...

Just getting that procedure.

Just getting that procedure. And depending on all the -- there's like 55 new trials going on within that space around anticoagulants versus non. And so there's a lot of change that's happening there. But for ours, it's a captive audience. People are hit in the operating room table. And the question is, do you put an AtriClip on those patients? First, do they have Afib? The data, the guidelines, everything says absolutely.

Obviously, we're running a trial for the non -- the patients don't have Afib right away, but we can reduce that Afib. That's the LeAAPS trial. That opens up to the full 2 million patients. So there's a ton of room for penetration within that market. We, again, don't compete against those kind of plugs for lack of a better word, in that space at all. I mean every once in a while, you'll see -- like really once in a while, you'll see a WATCHMAN that is on a patient that undergoes cardiac surgery, but it's fairly rare.

Yes. Okay. But you are competing with Medtronic's Penditure. There might be another device coming to market at some point in time.

That's why we're here.

So maybe talk about the competitive moat that you've built around the AtriClip.

Sure. I mean, first, Medtronic has been in the market for almost 2 years now. And I think we've shown and demonstrated that when you've got superior technology. And when I say superior technologies, the way the technology works, combined with the quality of that product, the safety profile of that product, combined with the clinical evidence that we have supporting it and behind it. We've got over 16,000 patients that have been studied. We've got -- that demonstrate pretty much 100% closure with no flow whatsoever and an incredible safety record.

We look at this data every single week. I think our record is like 0.0004% complication rate with it. So pretty much 0 on a number that's 750,000 or so atrial fibs that have been implanted over the lifetime of the device. So I think safety, efficacy. We've also got a clinical team that knows these relationships is in every one of these cases, it's typically combined with an ablation. So now you start to think about, okay, I've got an EnCompass clamp, and I have an AtriClip. Why am I going to use somebody else's clip on that front. That being said, Medtronic's come into the market. And as we talked about probably when they first came in. I said, this is validation for the overall space that you've got a big player that thinks the market big enough to make an investment in this particular area.

And I think we've got a lot of leverage and better technology that we can basically win with. And whether a competitor comes in, I think there's several competitors that have thought about coming in over the years. There's all these rumors about one of the big competitors that is in the cardiac surgery space coming into the space. We welcome that opportunity to compete against them.

Yes. What have you seen with Medtronic? I mean did you lose any accounts with the Penditure launch?

We didn't necessarily lose accounts, but you definitely have accounts that will utilize both of us. So Medtronic selling their product. But you'll tend to see probably like what they do with the valves. They keep both valves on there, so they're going to use TAVR, like they're going to use a SAPIEN value. They are going to use the CoreValve today and they may segment that and different surgeons may have different relationships for why they might utilize 1 technology. But obviously, we've maintained fairly robust market share in this space, and we feel really comfortable with our ability to defend going forward.

So I was going to ask you if you have a sense of what your market share is?

In the U.S., our market share -- I mean, globally, it's outside the U.S., it's almost 100%. But in the U.S., our market share is kind of in that -- kind of 95 to -- 92 to 95.

So I was going to say 90, but okay, okay. That's better than I thought. All right. So what about the pain management business. So that's been a business that has been also delivering very robust growth. So how sustainable is that? Maybe talk about the phantom limb pain and potential TAM expansion in pain.

I'll let Angie talk about the overall market and cryo MAX and what's happening there, and then I'll talk about XT.

Yes. What's been exciting in the pain management. We launched this area of the business in 2019 with our original cryoSPHERE device. We saw kind of a steady and nice acceleration in growth as we were penetrating thoracic procedures. The market size overall in the U.S. around 150,000 or so thoracic procedures, that market in and of itself is a growing market. And we saw a nice uptick in that market. We developed the cryoSPHERE+, which launched in the middle of 2024. You saw an immediate acceleration of growth.

Same ASP is the original device. It was just driving volume growth, came with a slight reduction in the procedure time, more pronounced acceleration when we launched the cryoSPHERE MAX, which took the freeze time, the procedure time and basically cut it in half.

So I think adding time into a procedure to do a pain management, we knew was something where we get an area where we got pushed back and very clearly doing that, delivering that within the cryoSPHERE MAX device made a difference, and you saw an acceleration in growth.

Still under-penetrated in this market, we also -- I talked about the sternotomy market around 250,000 or so patients a year in the U.S. Time is a big deal in those procedures. So the MAX is giving us a place to go back to customers who had interest, but said the time that it's taking for us to do the pain management is too long. So we feel optimistic about that on a long-term basis, which says, when you're working in big markets, you're the really only player you've got differentiated technology. We think the runway for growth is very long.

And the XT is for the amputations and that we're just starting to get in that market. The data so far and the feedback has been exceptional. So there's two reasons that you're doing it. Number one is for the acute pain right after surgery, so they can recover more quickly. They get to the hospital faster. They feel almost zero pain, they can put the prosthetic on, begin to walk and recover. I mean, these are big, big deals for patients that are undergoing amputations.

On top of that, we're also starting to see people that are actually having a reduction in long-term phantom limb pain. So a lot of people that undergo amputations, you hear 70% of them wind up having like they feel like their leg is still there and it hurts. And a lot of that's because they develop, what they call, the neuroma like a pain points at the end of it because the signals don't know where to go. And so this kind of blocks that signal for a long enough period of time that they're not actually having some of that phantom limb pain.

So this is a really big market, and we're just starting 185,000 or so in the United States alone. We'll obviously grow globally after that. And so far, the rollout has been great. Not big revenue yet, but it will be longer term.

Right. Okay. And then we do have to talk about MIS, minimally invasive. That has been...

We don't have to shy away from that. She says in a quiet voice.

That's been the one area where you have not been growing. And maybe talk about, first of all, what are the growth drivers in that business? I think international has actually done fairly well. But can international ultimately serve as a proxy for what to expect in the U.S? Is U.S. -- are we ever turning around? What's going to help it turn around?

A couple of parts to that question. Let's start with our international experience. PFA was on the market in Europe well before the United States. And I think initially the feedback we got from EPs where we felt like PFA would solve AFib for all of our patients. And so it was very difficult for our teams to start any type of convergent program. I think with the experience in Europe told EPs where there are failures. It doesn't work universally for every single patient.

It's great technology. But when you think about where CONVERGE is really differentiated in long-standing persistent Afib patients, EPs are having the experience that those patients were coming back. The catheter ablation alone wasn't enough. And we saw kind of once they went through that experience that they moved into, I need to do something more and that's something more was with CONVERGE. We're going through a similar experience in the United States at this point in time.

Maybe a differentiator is that the willingness to do multiple repeat catheter ablations in the U.S. is a bit higher. So we are going through that plenty of account proof points that say, look, they're understanding EPs are seeing that maybe this doesn't work universally the same way for every single patient, and there might be a need for more. Our accounts are -- across the board aren't in the same place. So I think until we kind of get through that experience broadly across the customer base, where they're seeing more and more repeat redo patients where they need to go back and do something I think eventually, they move on to CONVERGE.

So the biggest growth driver, I think that was the first part of your question, is we need time, I think here for the experience to be there. And I think EPs have to be willing to move to refer a patient on to something more -- realize, look, that doesn't matter the PFA catheter, the specifics around which device they're using, that it doesn't universally work for every single long-standing persistent Afib patient, I think, is where we need to go in advance. Mike, go ahead.

Yes. I mean what I'd add to that is if you think about PFA, it's a great technology. It makes that procedure a lot faster. Yes. I mean it's easier, it's faster, and you talk to EPs, absolutely. It presumably makes it safer -- especially it does make it safer for fistulas and other items like that. So it solves both of those things. But what the data is showing you is that the failure rate is pretty much the exact same as it was before. Even though they're doing a lot more ablation now than they were before, but the failure rate is almost the exact same in almost every segment of categorization of that Afib patient. So what's happening? They're going to do one procedure, then they're going to follow up and try to do it again, and say maybe I missed it.

But after that, we do think that they're going to wind up going into a convergent or hybrid because they've just done everything they can possibly do. And we feel like that's obviously an advantage relative to us. And if you look at the rates of failure, the rates of failure in a long-standing persistent patient are still greater than 50%. So -- and even to the tune of like 20%, 25% in some of these studies for these patients.

Well, that's a lot of patients. And if you actually do the math on how much of the market we're getting today, it's like 0.25% of ablation market. So there is going to be a day when all those patients, you're going to realize I've ablated them 2 or 3 times, and then we're the solution after that. And we still feel that, like I feel really good about the data, the efficacy, the work we do with it. We've worked on how do you get this down to like a 24- or 36-hour procedure, meaning you can get home within like 1 or 2 days, so that it's not nearly as adverse to sending somebody into surgery.

We've worked on all those things, and we're ready for those patients to come through, but we have to have patients. I mean, as Angie said, I think that's what the -- the growth will come. I just can't tell you what quarter it's going to come. So we will guide conservatively and continue to do so. Set expectations really low on this part of our business. But I do think those shareholders that are in this for the long term, they're going to win and benefit from the fact that it's going to come back.

Okay. Do you think that just with the advent of PFA, the mix of patients being treated it has changed, so fewer long-standing persistent patients or even being treated almost like push to the side because you've got so many paroxysmal patients getting treated with PFA or is that not?

The data wouldn't suggest that. I'd say that the data would suggest that you're still sticking at around 10%. I mean everything that -- it's around -- even though 45% of patients are long-standing persistent, 10% of those that get treated are long-standing persistent.

Are long-standing, yes. Okay.

And more of the repeat catheters are in the long-standing persistent because they're the ones that are failing more often, so they're having to come back.

Right. Okay. All right. So taking everything that you just talking about the different businesses, different growth drivers as we look ahead to 2026, and we have had this debate a number of times, and I look at your core open ablation business, and I'm like, I don't see why that wouldn't be able to grow sustainably mid-teens. Tell me why I'm wrong?

I don't have a good reason to tell you why you're wrong. I mean we feel really good about the business overall. It's a strong business that we've committed to. I think you've got both short and long term. And when you look long term, and you start to see the data that will come out with LeAAPS and our BoxX study. This is a very big market opportunity. I think by the end of the decade, that actually could be expanding. I mean if those trials are positive, that part of our business is going to grow even faster at some point.

Yes. And then if we look at appendage management, I'm curious -- let's say, this other big competitor does launch in 2026. Should we think of -- like what would be your approach, if you're me, and you're like, "oh, I have to model this." Do I look at when Medtronic launch and how you guys grew through Penditure, like how would you ...

Yes. I think the Medtronic Penditure launch is certainly a relevant example. I would think more about the specific competitor and where their strength is in cardiac surgery.

I mean if you compare and contrast different reasons why companies are in different procedures and where they might have more of a foothold versus less. I think that's a good way to start kind of parsing out the market and saying, where could they be highly relevant and most likely to be successful. If they are successful, that's probably a good starting point from this. I think our expectation would be a competitor comes in, yes, they likely are successful in selling devices. I think it's a question of are they taking from you or in a market that in and of itself is completely underpenetrated.

So we aren't talking about a market where every patient has their appendage managed today, right? There's still room within the market to grow. I think the idea that you have more awareness, you have another very loud voice and important voice talking about managing appendage. Our view of competition has been this is going to help market growth overall.

And I would have -- look, when you think about the segmentation she talked about, when you think about the competitors. What advantages do we have? We sell ablation tools that go along with the clip. So that's -- you're doing both at the same time in a vast majority of the cases. I mean, most of them have an EnCompass clamp plus something else.

When you say vast majority, were you talking 75%, 50%, 90%.

Closer to 75%. I mean at least a minute, probably around that number. I don't know what would you -- for the total kind of combination of those, plus on top of that, though, if you think about the focus on where we're going and you think about EnCompass and what we're going to be doing in that space around CABGs, if there's no valve in that procedure. And so why would you be in that procedure for a device that is 1/3 of the price of what you're selling a valve for in another.

So there's -- like you have to look at incentives. When you have to segment it and say, "And oh, by the way, 70% of all cardiac surgery is in the coronary bypass area." And so there's a huge opportunity there for not only the clip, but also the EnCompass, that's the segmentation you look at like what part of the market are they going to win it? That's a little different than the previous competitor. Medtronic does have an ablation tool that we compete with every day in the market as well. So that was a different kind of competition. So they've got a little bit of a broader -- or maybe another reason, maybe there because they want to get an ablation tool along with their clip or something along those lines.

Right. Okay. And then looking at -- so again, if we're talking about high-level 2026, MIS. I mean you're going to have such easy comps. Can MIS grow in 2026? Or is this still going to be defining.

I -- of course, there's the potential to grow, I would say, until we see growth, we're not likely going to guide that it will be. I mean I think this is the point in time in this particular franchise, we need to see it to have the confidence to be able to guide there.

Okay. Understood. All right. And international. If we didn't really touch on international, but you have been seeing great growth internationally as well. What are the drivers there? And sort of what's the runway for your different markets internationally or different businesses?

Yes. I mean, internationally, grossly, I'd say across the board, you have a very, very long runway. Any penetration rate we talk about in the U.S. significantly less than that anywhere else in the world we're at. Within our different markets, if you were to break down our international business, probably the highest potential in Europe. Majority of our products are already on market there. They're already being sold there, some of them earlier innings than other, and we're seeing kind of a cross franchise really broad-based and good growth within our European markets. Beyond Europe, you start to get into different levels of products being on market today.

Again, very low penetration rates, which they look very long runway in terms of continuing to penetrate existing markets, and we're looking to continue to get devices approved in different markets where it makes sense, where we think we can be successful, which would extend the runway there. So we feel really good that the international part of our business has a very long runway for growth.

Okay. And I guess, I'm not sure if you'll answer this, but I'm going to try. So why would growth decelerate in 2026 versus 2025?

I mean I wouldn't be doing my job if I didn't point out law of large numbers. So if we're talking about growth rates and percentages, I think that's something just to keep in mind. We feel confident in the trajectory of the business and that you're going to see continued really strong contribution, particularly when you think about the new product launches in the U.S. and how some of them are starting to create tailwinds in our international business, we feel like those are good things and drivers that will continue on.

And so you brought up new product launches. And that is something AtriCure. You guys have done a very good job of continuing to innovate. You have had EnCompass for a few years now, what's next in the open ablation business? Where are you investing your organic R&D dollars right now?

On the open side of the business, what you'll see on the EnCompass clamp is kind of a 2 step of, first, we'll have some advanced RF, which is a faster ablation and even more robust than we've already got in the market, which is the market leader in that particular space. And we've got a PFA platform that will come down the EnCompass clamp. So those are two things that we'll have first in human on that by the end of this year and will be in the clinical trial either late next year or early 2027. That will be kind of the next innovation relative to kind of open ablation in EnCompass. The biggest deal in that area is the clinical evidence.

I was going to say BoxX-NoAF.

Yes. BoxX-NoAF is going to -- that will change the game for basically everybody on the operating room table getting the EnCompass clamp with the existing technology that we know is going to work incredibly well because it works great.

Yes. Remind us when that is?

We just started, just launched it. We've had our first patient enrolled, and we anticipate I think it will take about 2 years to enroll. And then there's 2 endpoints in that trial, which is -- and the good news about that is that the first endpoint is a pretty quick endpoint, which is have -- in the first 30 days after surgery, do you reduce that postoperative Afib. Today, 35% of all patients that undergo cardiac surgery going to postop Afib, we think we can reduce that significantly. So we can win the trial first with that. And then we're also putting loop recorders in every one of those patients. So we can look it out over 3 years and say, did you reduce Afib clinically over that 3-year period.

But to win, we're going to have an answer to that probably sometime in 2028 from a data standpoint. So it's not as long as like a LeAAPS where you have to wait for strokes and events to happen on that front.

Right. And I want to touch on LeAAPS. But before that, when you talk about the appendage management business and innovation there and where the focus is? Is it just getting smaller? Is it...

Yes. I think about the FLEX-Mini device, we took the original AtriClip and shrunk it down tremendously that went back to kind of closed-loop design and made other improvements. I'm short selling our engineers that put a lot of work into building an incredibly good device, but we also have been highly successful with our open-ended FLEX-V device. So thinking about how do you make that product even smaller. I'd say those are the type of innovations that we're looking for.

This is coming from customer feedback. I mean this is what we hear consistently from surgeons. Smaller is better. They know the technology works incredibly well, but smaller is better, so likely continue to try and shrink the size of the device.

Okay. Got you. And I do want to talk about LeAAPS because I think that's really important. So remind us where we are with that. And if it does work, like what's a realistic way to think about the adoption ramp here?

Well, high-level trials, just over 6,500 patients randomized 1:1. These were patients that preoperatively did not have any diagnosis of Afib. The concept behind it is that those patients have a very good chance of going into heart failure and also Afib over the next 5-year period of time. And so the idea here is to significantly reduce the stroke rates in that particular patient population, but prophylactically managing the appendage and getting rid of it. We are fully enrolled, enrolled through July. We're accumulating events rights now. It's event-driven trial. We have to get to 469 events. And at that point, we can unlock it, look at it and did we have fewer strokes in one arm versus the other arm, which we believe will be the case. We anticipate that's probably sometime in 2028 and without giving an exact obviously, I can't -- the events happen -- when the events happened. originally we thought it was going to be in 5 years.

They're accumulating at a little bit faster pace than we had predicted from that standpoint, which we think is actually a good thing for us overall. I do think that if the data is positive, like we think it's going to be that this changes the game. It takes us from doing -- there's 2 million patients. And it's a global trial. We are in 15 different countries. So we have a very good recognition to be able to kind of get it. So it's not just something that -- even though it's an IDE trial in the U.S., we will get benefit from this trial overseas for reimbursement for, obviously, adoption at that point. I think adoption could be fairly quick after the data comes out.

Okay. Got you. All right. Let's talk about financials now, Angie. Margin expansion. What are the drivers going forward? You guys are adjusted EBITDA positive at this point. So how do we think about, I guess, just the drivers, but also if you want to tell us where we're going.

I'd be happy to tell you where we're going. Drivers on margin expansion. I think strong top line growth is, one, continued, I'd say, steady expansion of gross margin New products are going a long way to help us kind of expand gross margin. Our goal with the new product launches is to improve both the cost profile, but then also the pricing on a device. We're building in new technology innovation, so I think that's another component. I'd say that's a little bit more steady of a contribution. But then you're also continuing to see leverage within SG&A in the near term.

Longer term, we will start to see natural leverage within R&D. That's LeAAPS concluding. That's the BoxX-NoAF trial concluding. Even while continuing to fund a really robust pipeline, I think you start to -- back half of the decade, you're going to start to see leverage out of R&D, SG&A more in the near term. So earlier this year, we put out a couple of stakes in the ground when you think about our LRP. We're performing ahead of plan at this point in time. So I think it says, look, we'll be well ahead of the 20% adjusted EBITDA margin in 2030, which was our target.

Yes. How expensive are these clinical trials?

They're pretty expensive. A good way to calibrate on LeAAPS when you look at the increase in R&D over the past couple of years, I think that will tell you how much because that was fully incremental trial spend. We weren't really replacing something else at the time because I think we had a year or 2 of a lapse between the CONVERGE trial and the LeAAPS trial. So I think you've got -- that's -- and we ramped R&D pretty quickly as a result of that trial.

Okay. That's good to know. All right. And then capital allocation. And you guys are starting to generate free cash flow. And so how do we think about how your capital allocation strategy will evolve over the next few years.

I mean I think it's going to look a lot like it has over the past couple of years, which is a very big focus on internal organic R&D efforts. That's -- I said earlier, 1 through 5, it could be 1 through 10. Those are the main priorities here. I mean finding ways to win, finding ways whether that's short term when you think about, okay, cryoXT in a new market launch. The work has been done on the device. We're opening up that market. There might be more of an investment within the field team. I think time will tell us whether or not we need to put down the pedal there.

We've got a really good, robust pipeline in terms of product development as well as clinical activities, so very much focused on the markets that we've got, the expansion efforts that we've got and bringing those to completion.

Okay. So less about -- because you guys have been acquisitive in the past to smaller type deals, but it seems like that is just very much not the focus.

Yes. Definitely not the focus. I mean we have people who are trying to understand what's out there, trying to understand different technology. I think a big difference as we've moved into profitability, the willingness to take on kind of losses, particularly when you think about the profile of companies we've acquired in the past. Very early stage, not driving a lot of top line, but there's an investment to get it to kind of the end state, less of a willingness there. We do not want to take a step backwards on profitability.

So could you do a deal, yes, you might have to sacrifice some of the organic activities that we're doing today. I think ultimately it says when that screen is applied, you're looking for unicorn and not likely to find something.

Yes. All right. And maybe in the last few minutes here, Mike, as you look -- you guys did host a very helpful, thorough Analyst Day back in, was that March?

Yes.

Yes. March. And you outlined a bunch of innovation, the clinical trials, what do you think is, in your mind, most important for AtriCure, if you had to pick one, Who's your favorite child?

Good luck there.

Gosh, I don't know that I think the holistic nature of our business is my favorite child overall. I just think that we kind of bring a lot to the table. That being said...

That's not an answer.

But I mean, if you look at the ability to have an impact on the broadest number of patients. It's going to be what you're going to see LeAAPS and BoxX-NoAF. The combination of those two -- the combination of those two really unlocks 2 million patients every year that we're going to be able to go after globally. I'd say that's probably kind of the lead-in on that. but it's tough to not be excited about some -- about our cryo business and what's happening there and helping patients that.

I mean when you see these patients recover more quickly, the videos that the docs send us about those recoveries, and you just feel awesome about yourself, you're contributing in a way, and that's going to be a big market for us as well. There aren't as many of them. So your impact on your top line isn't going to be as great but the impact on people's lives is pretty dramatic and awesome.

Yes. Do you have a favorite?

No, I would agree with his answer. There's too much to like. There's too many things to pick from to have a favorite here.

What do you -- I mean I acknowledge there's a, I think, based on what I believe, top line growth can be and profitability profile can be. There is a disconnect from a valuation perspective. What do you think people are missing?

I think that people get very nervous about competition.

I was going to say, I think your ability to compete.

Yes. And I think we're exceptionally well positioned to compete. I think we've made the investments and thank you to investors for allowing us to because like we've had a lot of investment over a period of time that is now coming to fruition over the next 2 to 3 years, whether it's in these big trials or these product launches that we're doing right now, and I think people don't recognize kind of how strong we are from a competitive standpoint to be able to weather that storm and they're probably not appreciating the fact that also that, that leverage is also coming in a really big way right now, too. I don't know what you would add, but.

I would agree with that. I think there's so many different drivers within the business that you can have the fear of competition, but the reality, the execution, the performance of this business over a very long period of time says AtriCure will win.

And some of it's just a different perspective. I view competition and say, let's look at several -- just look at the left atrial appendage market on the occluder side. What happened when Amulet came in to compete against WATCHMAN. The market grew faster and so when a big company...

And it usually does.

Usually, markets that have just one player in it, like they don't grow as fast. And so having big players believe that market and validating that, we view this as -- I know at a micro scale on each individual like Clip that we lose, yes, that's frustrating and more competitive. But we also think that it also makes us all better and more patients are going to get treated and that's going to help us out.

Yes. All right. Well, with that, we're out of time. So thank you, Mike and Angie.

Thank you, Danielle, thanks.

Good afternoon, and welcome to AtriCure's Third Quarter 2025 Earnings Conference Call. This call is being recorded for replay purposes.

[Operator Instructions] I would now like to turn the call over to Marissa Bych from the Gilmartin Group, for a few introductory comments.

Thank you. By now, you should have received a copy of the earnings press release. If you have not received a copy, please call (513) 644-4484 to have one e-mailed to you.

Before we begin today, let me remind you that the company's remarks include forward-looking statements. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond AtriCure's control, including risks and uncertainties described from time to time in AtriCure's SEC filings. These statements include, but are not limited to, financial expectations and guidance, expectations regarding the potential market opportunity for AtriCure's franchises and growth initiatives, future product approvals and clearances, competition, reimbursement, and clinical trial outcomes. AtriCure's results may differ materially from those projected. AtriCure undertakes no obligation to publicly update any forward-looking statements. Additionally, we refer to non-GAAP financial measures, specifically constant currency revenue, adjusted EBITDA and adjusted loss per share. A reconciliation of these non-GAAP financial measures with the most directly comparable GAAP measures is included in our press release, which is available on our website.

With that, I would like to turn the call over to Mike Carrel, President and Chief Executive Officer.

Great, and good afternoon, everyone. Thank you for joining us today. We had a very strong third quarter with total revenue of $134 million, reflecting a 16% increase year-over-year. Our growth was driven across key franchises globally, demonstrating the expanding adoption of our therapies and breadth of market opportunities.

We also substantially improved profitability and cash generation with nearly $18 million of adjusted EBITDA and over $30 million in cash generated in the third quarter. Overall, our revenue growth and profitability exceeded expectations for the quarter, and we will once again raise guidance for the year.

Product innovation and clinical science initiatives continue to flourish at AtriCure, and that is evident in the success of our recent product launches. The AtriClip FLEX-Mini and cryoSPHERE MAX devices are propelling outstanding growth in appendage and pain management in the United States. The launch of our EnCompass Clamp is driving accelerated growth in Europe while continuing to fuel steady growth in the United States many years after launch. And we are building on surgeon interest in this product with our PFA platform development program and further expanding our market opportunity with the initiation of our BoxX-NoAF clinical trial. Additionally, our cryoXT device, launched this quarter, will set a new standard for managing pain in lower limb amputation procedures. Each initiative reflects our commitment to delivering innovative therapies to address unmet clinical needs for patients around the world.

Now on to updates from each of our franchises. Starting with appendage management, where worldwide revenue grew over 20%, continuing the acceleration realized in the first half of 2025. This is a direct result of increasing adoption of our AtriClip FLEX-Mini and PRO-Mini devices. Both devices leveraged our third-generation AtriClip platform technology, featuring a smaller profile clip, which improves visibility in procedures. These devices are the smallest surgical LAA implants available, and build on more than a decade of outstanding results for the over 700,000 patients treated on our AtriClip platform.

Related to the AtriClip, early in the third quarter, we completed enrollment of over 6,500 patients across 137 sites globally in our landmark clinical trial, LeAAPS. The success of enrollment is a reflection of the strong interest from trial investigators, of which over 500 surgeons participated and are now focused on patient follow-up.

As most of you know, the LeAAPS trial is designed to evaluate the use of AtriClip devices for stroke prevention in cardiac surgery patients who do not have prior Afib diagnosis. This is a significant underserved patient population with more than 70% of the nearly 2 million patients who undergo cardiac surgery annually not having a prior Afib diagnosis, and we are very excited about the potential ahead. While we await the results of the trial, we are driving physician awareness and expanding access to AtriClip devices globally. To that end, we are pleased to announce the recent approvals of our AtriClip Flex-V, PRO-V and FLEX-Mini devices in Japan.

In addition to the groundbreaking clinical evidence from LeAAPS, we intend to stay leaders in this market with continuous innovation and have turned our research and development efforts towards delivering the next generation of AtriClip devices, and we look forward to sharing our progress over the coming year.

Within our ablation franchises, open ablation growth accelerated to over 18% for the quarter. Sales of our EnCompass Clamp continue to drive growth in the United States, and the launch in Europe boosted our international results. As I commented last quarter, the durability of the EnCompass Clamp's growth is a clear testament to our ability to deliver meaningful and consistent innovation, providing clinicians with effective and time-saving solutions. We expect to further advance concomitant ablation procedures with our platform development of an EnCompass Clamp enabled with PFA. We are making progress with robust preclinical testing and expect first-in-human use over the coming months.

Beyond technical innovation, we are also moving forward with our BoxX-NoAF clinical trial and are excited to share that the first patient was treated. BoxX-NoAF trial is another foundational study at AtriCure, aimed at reducing the onset of postoperative Afib in cardiac surgery patients who do not have a pre-existing Afib condition. This trial will significantly expand the opportunity to use our ablation technologies in this broader patient population, multiplying our cardiac surgery market opportunity overall. Adding to the momentum from our LeAAPS trial, we believe BoxX-NoAF will transform the standard of care in cardiac surgery towards preventative approaches.

In our minimally invasive hybrid therapy, market dynamics remained challenging in the U.S. due to increased adoption of PFA catheter technology. Nonetheless, we continue to see substantial unmet need for patients with long-standing persistent Afib and believe that our hybrid AF therapy is uniquely positioned to address this need.

Finally, turning to our pain management franchise, which grew 28% in the quarter and was driven by sales of our latest product innovations, the cryoSPHERE MAX and cryoSPHERE+ probes. These product launches have shown the value of reducing procedure times, allowing us to increase market penetration in thoracic surgery and gain traction in the sternotomy market. Another reason for optimism in our pain management business is the launch of cryoXT, which improves recovery and quality of life in patients following extremity amputation.

Feedback already from surgeons using the cryoXT device has been encouraging. And we are even more excited by the reports of rapid patient recovery in the days following the procedure. As is the case with new therapy development, it will take time to ramp the cryoXT use. But we are confident that the benefit for patients, physicians and hospital economics are significant.

We recently launched the vanish registry to track patient outcomes with cryoXT, and expect this data to demonstrate acute and phantom limb pain reduction with our Cryo Nerve Block therapy in patients undergoing extremity amputation. CryoXT unlocks a meaningful expansion opportunity in pain management and is another example of our ongoing commitment to innovation across all of our franchises.

Going forward, we will also continue to invest in comprehensive clinical and economic data to support the value of Cryo Nerve Block therapies. A non-opioid pain management -- but as non-opioid pain management becomes an increasing priority across health care, these efforts are helping drive broader awareness and adoption.

In closing, I want to express my gratitude to our entire AtriCure team for another successful quarter. Your work demonstrates an unrelenting focus on patients. We are executing well on our growth and profitability objectives, including record cash generation this quarter, providing a strong foundation as we end the year and go into 2026. I am confident that our shared determination to deliver exceptional patient outcomes and executing on our strategic priorities will transform standards of care in each of our markets.

With that, I'll turn the call over to Angie Wirick, our Chief Financial Officer. Angie?

Thank you, Mike. Our third quarter 2025 worldwide revenue of $134.3 million increased 15.8% on a reported basis and 15.1% on a constant currency basis when compared to the third quarter of 2024, reflecting healthy adoption across key product lines and markets. On a sequential basis, we experienced normal procedure seasonality with a 1.4% decline from the second quarter to the third quarter of 2025.

Third quarter 2025 U.S. revenue was $109.3 million, a 14.5% increase from the third quarter of 2024. While we experienced a decline in our minimally invasive ablation sales to $7.4 million for the quarter, all other U.S. franchises drove robust growth from the continued adoption of our innovative technologies.

Open ablation product sales in the U.S. were $35.6 million, up 16.3% over 2024, driven by expanding use of our EnCompass Clamp. Through the third quarter, total accounts purchasing Encompass reached 740 this year, surpassing the 700 accounts purchasing during the entire fiscal year 2024. U.S. sales of appendage management products were $45.4 million, up 21.5% over the third quarter of 2024, led by ramping adoption of our recently launched AtriClip FLEX-Mini device. Growth in open LAA devices was over 26% for the quarter, while our minimally invasive LAA devices were up slightly on conversions to AtriClip PRO-Mini, which launched earlier this year. Finally, pain management product sales were $20.8 million, up 27.7% over the third quarter of 2024, reflecting increasing application of our cryoSPHERE MAX and cryoSPHERE+ probes, primarily in thoracic procedures.

International revenue totaled $25 million, up 22% on a reported basis and 17.9% on a constant currency basis as compared to the third quarter of 2024. European sales contributed $15.2 million in the quarter, representing 24.2% growth. Sales in Asia Pacific and other international markets grew 18.8% to $9.8 million from the third quarter of 2024.

Our gross margin was 75.5%, an increase of 59 basis points from the third quarter of 2024, driven primarily by more favorable product mix globally, stemming in part from new product launches in the United States.

Operating expenses for the quarter totaled $101.1 million, an increase of $6.9 million or 7.4% from the third quarter of 2024. Research and development expenses rose 9.2% from the third quarter of 2024, reflecting a slower pace of spending in the quarter as we transition between projects after completing enrollment in LeAAPS and multiple new product launches over the last 12 months. SG&A expenses increased 6.8%, well below revenue growth for the quarter, demonstrating continued leverage as we further scale our operations.

As a result of our strong revenue growth and disciplined approach to investing, we recognized $17.8 million in adjusted EBITDA, roughly $10 million above the third quarter of 2024. We expanded our adjusted EBITDA margin to 13.3% for the quarter, showing continued progress throughout 2025 and achieving profitable growth. Our basic and diluted net loss per share as well as the adjusted loss per share was $0.01 in the third quarter of 2025 as compared to $0.17 in the third quarter of 2024.

Our balance sheet continues to strengthen as we ended the third quarter with $147.9 million in cash and investments, representing positive cash generation of $30.1 million for the quarter. This quarter, we had a onetime cash inflow of approximately $6 million from a sale-leaseback transaction as we began the expansion of our Ohio campus. We continue to expect positive cash generation in the first quarter, further elevating an already sound capital position.

Now turning to our outlook for the remainder of the year. We now expect to achieve approximately $532 million to $534 million in full year 2025 revenue, reflecting approximately 14% to 15% growth compared to 2024. We are confident in the long-term growth trajectory for the large underpenetrated markets we serve globally.

Year-to-date, gross margin is pacing 20 basis points above 2024 due to shifting product mix. We now expect our full year 2025 gross margin to be slightly higher than 2024 with the potential for varying impacts from geographic and product mix.

Next, our priorities for capital allocation continue to focus on cultivating future catalysts for our business through meaningful investments in clinical science, product development, and therapy awareness. While we make these investments, we are also committed to driving expanded profitability.

With that in mind, we are raising our positive adjusted EBITDA outlook to approximately $55 million to $57 million for the full year 2025, corresponding to an adjusted loss per share of approximately $0.23 to $0.26.

I would also like to thank our extended AtriCure team for driving exceptional overall financial performance this quarter. As we make great strides in our mission to reduce the burden of Afib and postoperative pain, we are meaningfully improving the sustainability of our business through continued revenue and margin expansion.

At this point, I will turn the call back to Mike.

Thank you, Angie. Our third quarter performance underpinned by strong revenue growth and increasing profitability highlights our team's persistence and commitment to our patients, partners, and our shareholders. I'm especially proud as we celebrate AtriCure's 25th anniversary this week. These same values of patients, people and partners have guided our company over the past 2.5 decades, building to the incredible opportunity that sits in front of us today. Our trajectory is truly exciting. And I look forward to sharing further progress as we end the year and begin 2026.

With that, we will turn it over to questions.

[Operator Instructions] Our first question comes from John Young with Canaccord.

Mike and Angie, congrats on a great quarter. First, I just wanted to ask on the CMS proposal for ablations to possibly move into the ASC setting. Do you believe that the decrease in strain on hospital cath labs can actually lead to a rebound in the EPi-Sense business?

I mean it's a good question, John. I don't know that that's going to have a material effect on the overall EPi-Sense business because we're not -- that's not really our business per se. I think it will just lead to more efficiency in the cath labs for sure. I think what's going to drive the EPi-Sense business is going to be as they have non-responders to PFA and they go through 1 or 2 nonresponding PFA techniques with the different catheters are out there. Then, they're going to look for, well, how am I going to treat this patient when I've done everything possible with the catheters at that point in time.

So what we're seeing now is we're starting to see some breakthroughs at a couple of sites. It's more than a couple, but several sites where they're starting to refer some patients, not enough to drive that revenue growth yet. But we are definitely starting to see that where they are seeing non-responders. And they've typically gone through 2 different catheter ablations at that point in time. So that that's going to be really kind of a leading indicator for us more so than the change in the ASC.

Is there any way to quantify the opportunity in Japan given those approvals that you got there?

Yes. Right now, I mean, there's about 40,000 or so cardiac surgeries in Japan in totality. So obviously, with the LeAAPS trial and others, you've got the possibility of getting that entire area to cover that. Today, we don't sell that many clips. We do have our AtriClip on the market today. We're the leading player in the market relative to that. And obviously, now bringing in our newer technology, hopefully, will help accelerate that overall. We don't anticipate getting any revenue in the near term from it as we kind of prep the market over the course of the next 6 months. But we did just get the approval. We actually got it earlier than we expected and we'll be rolling it out sometime next year.

Our next question comes from Lilly Lozada with JPMorgan.

Maybe I'll start with one on open and then I have a follow-up on guidance. In the open business, 19% growth is really impressive and well ahead of what the segment had done historically. Obviously, EnCompass has done really well, but what do you think is driving the acceleration at this point? I know you said you've already basically seen full conversion from the legacy product over to EnCompass and that it's really adoption in new accounts and CABG doctors who historically hadn't been customers that have been driving growth. So where do you think you stand in penetrating that population? And how long do you think we can see this level of growth in the open business?

I think you hit it. You could have answered the question right there, Lilly. It is primarily CABG patients because those surgeons have typically not done a good job of actually doing any kind of ablation on these patient population. They don't get behind the heart as we've talked about before. And so that's really what you're seeing. More and more surgeons are actually doing ablations that weren't doing it before. And we believe, obviously, EnCompass has really helped them get there, both from ease of use of the technology and the speed at which -- because it cut out about 30 minutes out of the procedure time. So it really dramatically improved it from both ease of use and speed to actually get a really good ablation done during that.

So yes, that's what's driving it right now. We're still severely underpenetrated in the CABG market. And we're maybe at approaching 10% of the CABG patients that have -- Afib are getting treated. And then when you look at all CABG patients -- and CABG patients tend to be the ones that go into most post-op Afib. And with BoxX-NoAF, we also see that as another really big opportunity. And we feel good about obviously enrolling our first patient in that, that we're going to enroll in that pretty quickly.

You saw what we did on the LeAAPS side. We'll enroll in this very quickly and then hopefully get those results in the coming years.

Yes. Maybe one thing to add, Lilly, on the growth. It was a little over 16% in the U.S. in our open ablation franchise and 26% in our international business. A big part of that was the uptick that we're seeing on adoption in Europe for our EnCompass Clamp, where our European open growth was over 30% for the quarter. So I think we're excited, obviously, for the long-term prospects here, as Mike said, seeing additional adoption and treatment within CABG patients in particular.

Just a clarification on guidance, on profitability specifically. You put up really nice results on adjusted EBITDA. So first, can you talk a bit about the strength that you're seeing from a margin perspective? And second, guidance, I think, implies a sequential step down on adjusted EBITDA. So what's driving that? Is that just conservatism? Or is there something else at play in the fourth quarter that we should be thinking about?

Sure. Touching on margins first, I'd say, starting with gross margin, we obviously saw some strength in the quarter with the shifting mix here. A portion of that is our international business with distributors, a more favorable mix. New product launches, which we've talked about contributing to margin accretion over the year as those continue to build as a percentage of the overall revenue. And then the third thing I would point out is we are starting to realize some efficiency from our manufacturing, specifically with the EnCompass Clamp. This is a project we had talked about a couple of quarters ago. We're starting to see that show up in the numbers as well. So expansion on the gross margin side.

Within operating expenses, a lighter quarter in R&D spend. This is transitioning from -- within clinical trials from our LeAAPS clinical trial, which enrolled early in the first quarter to now starting to ramp up with our BoxX-NoAF trial. That will start to contribute to spend as you think about the fourth quarter, which is part of what went into the fourth quarter guide and then continued leverage within SG&A.

So to the guide side on the bottom line, really pleased with the progress that we've made so far this year and the progress that we'll continue to make each quarter going forward. A bit of conservatism on the bottom line, but then also starting to ramp up some of the R&D initiatives in the fourth quarter.

Our next question comes from Marie Thibault with BTIG.

I wanted to talk a little bit about the appendage management business. Noticed that this is another quarter of high 20s growth in the Open Clip segment of that business. I wanted to understand, I think the majority of this is driven by a volume uptick. Just how sustainable is some of this high 20s growth? FLEX-Mini, how far along would you say we are in that rollout? Just some understanding of what that segment can do going forward.

We think there's a tremendous opportunity. I'm not going to commit to any specific numbers. But from an overall market dynamic standpoint, we're still in less than 30% of all sites in the United States with that product today. So we feel like there's a lot of upside just getting in sites, let alone getting to all the physicians that could use them at each one of those sites in addition to being used on a lot of patients.

So we feel like there's a lot of upside in that opportunity, not to mention the longer term with the LeAAPS trial and hopefully expanding the market opportunity in general. So we think that there's a great deal of opportunity without giving specifics on like what each quarter revenue growth is going to look like, but the opportunity is very large there.

I was just going to add, Marie, from a revenue contribution, FLEX-Mini was around 30% of our U.S. Open Clip growth or Open Clip revenue for the quarter. Obviously, continue to see really nice uplift each quarter following launch and a long runway, as Mike said.

Yes. Okay. Another sequential uptick. Great to hear. And then I guess a follow-up on the adjusted EBITDA metric. And my question is more kind of focused on the long-range plan that you set out earlier on that metric. Clearly ahead of schedule on those goals. So how would you think about the cadence now, the trajectory, where this metric can go very long term?

Thanks, Marie. At this point, we're not ready to guide for 2026 yet. We are extremely pleased with the progress that we're making on the bottom line and the trajectory that we're on. I would expect continued improvement as we operate into 2026. I think relative to our LRP metrics that we put out at our Analyst and Investor Day earlier in the year, we are ahead of schedule. And our goal all along, both top and bottom line is to continue to outperform.

Our next question comes from John McAulay with Stifel.

First one for me, I just want to sort of follow up on Lilly's question about the fourth quarter. In terms of EBITDA, I understand the reasoning typical sort of conservatism for the step down. I just wanted to get a better sense of revenue. It seems like sort of 12% implied in the fourth quarter. We've been doing to mid-teens all year. Just any dynamics in the fourth quarter we should be thinking about puts and takes for performance there?

John, I'd say we're really confident in the guide for the fourth quarter and for the full year. It's worth repeating our philosophy around guidance, which is to put numbers out there that we feel really confident in achieving with a pathway to beating. So the totality of our business, you can see almost every area is firing on good cylinders here.

Hybrid, we will expect continued softness, but that's a very small portion of our business overall. So just pleased with the trajectory there, really along the philosophy of our guide for the year.

In terms of comps, fourth quarter last year, you did have a couple of the new product launches hitting there, saw nice results overall, but that's really the only thing to take into consideration when you think about the comps for 2024.

One follow-up. Just curious, I may missed it. I didn't see anything specifically calling out in the press release. But any update on the PFA program, time lines there, progress there? Just be curious to know next steps and what we should be looking ahead for.

Yes. On the PFA, we've done all the preclinical testing on our products at this point. And we are going into first in human by the end of this year, early part of next year. And then the next step after that, as we talked about the Analyst Day, is to go into clinical trials likely in the early part of 2027. And so no change on that. And we've made great progress on that front and are getting really, really good results in all the work that we're doing.

Our next question comes from Mike Matson with Needham.

Mike, Angie, it's Joseph on for Mike. Maybe just a couple around pain management. I'm trying and just all ask them together. I guess with cryoXT, is that in a limited launch right now? I don't necessarily know if you said that in the prepared remarks? Or is that more pedal down launch just given the success with + and MAX? Is there going to be any contribution to pain management growth of that project -- product in 2025? And then, I guess, just the pain management portfolio, how much of that is available in Europe?

Sure. On the -- related to the XT launch, I don't know that I'd call it a limited launch, but definitely a very focused launch at this point in time. And so we won't see a lot of contribution. Typically with our launches, you don't start to see a lot of contribution until about 3 to 6 months after the launch after we've kind of worked it out, gone to the site, seen a lot of success and kind of built upon that. So I guess you could call it limited. We just don't call it that internally. But -- so we don't anticipate much revenue coming this quarter, but we do anticipate in obviously, next year that it will be a meaningful contributor to our overall business in 2026.

As it relates to Europe, we do have our cryoSPHERE over there. And so it's being used and there's a lot of -- it's throughout Europe and then also in Australia.

I'll just ask another one on pain management. I did see a video on AtriCure's website. I guess this was on XT just interviewing a surgeon. And he said this quote that just caught me. I'm just kind of curious you guys' opinion. He said, utilizing Cryo Nerve Block for 10 to 15 minutes can add a lifetime of benefit to the patient and the absence or need for secondary procedures.

So obviously, it seems like a very positive comment. I'm just kind of curious what kind of discussions are you having physicians or maybe physicians having with each other or their own colleagues to looking for alternatives to opioids or reduce opioid use. What are you hearing from them?

Well, I mean, what we're seeing from the market in general, I mean, I think what the physician on our website was talking about is that you can see the dramatic benefit is unlike our Afib franchise, where when they -- when you don't necessarily solve the Afib per se right then and there. It's got a long-term effect of it. You really want to affect that long-term aspect of it.

With the pain management, you literally see it they recover that much more quickly. They don't have pain when you're in the step-down units and they're going through recovery. So it's quite remarkable to see that. And that's why you're hearing that kind of benefit because they can -- like, for example, on an amputation case, they can begin to walk faster. They can get the prosthetics fit more quickly. They can begin to get out of the hospital a lot faster. And they don't feel that general pain right away after the surgery. So that's an example of where the cryo nerve block can help.

Then obviously, long term, what he's referring to is that in his practice because he was one of the early adopters in this area. He was practicing and seeing actually that there's not just the original post-op pain that he's saving, but also longer term phantom limb pain that he's seeing. And those are studies that we have ongoing and that we're looking at to see how we can get those published, et cetera.

Our next question comes from Danielle Antalffy with UBS.

So just two questions for me. One, Mike and Angie, this is now, gosh, I mean, I don't know, like the -- it's multiple years in a row now of mid to high teens open ablation growth. And I'm just curious if you can talk about the sustainability of that growth. I know you guys talked about it at your Analyst Day. But -- maybe remind us what's most important in driving sustainability of growth there? Is it new modalities like PFA? Is it training more surgeons? Is it same-store utilization growth? Is it just iterating on the products like EnCompass, et cetera? Because it's been a few years now, and it just does not seem to be losing steam.

Yes. I mean the biggest thing right there, quite frankly, is awareness for the product because EnCompass right now, we have the products today. That's what's going to drive the overall growth, both in Afib patients. And then as you look out longer term, like we talked about at our Analyst Day in the non-Afib patients as well. We think that prophylactic treatment to reduce post-op Afib as with this clinical trial we just kicked off is going to have meaningful benefit and helpful with the existing technology we have today.

So the technology works incredibly well. It's very fast to utilize it and get a robust box lesion and then you add the AtriClip to it, and it's incredibly robust from that standpoint. We're already seeing papers get published that show incredible results with that BoxX and the box lesion. The BoxX being the box, and then the X being the exclusion of the appendage, which is exactly what we're seeing in there.

So the two big things right now are awareness within the community that this works and is incredibly robust and more papers out. And two is expanding that opportunity for post-op Afib patients because that obviously more than doubles, if not triples, the overall patient population. So that's really where you're going to see the growth, but no new technology per se.

I'm curious about -- so my second question is on the appendage management business. And I'm actually curious, we have a pretty major clinical trial coming for the minimally invasive approach -- or I should say, for WATCHMAN, the stand-alone approach. And I'm curious as to whether you think that is going to be a boon for the entire market and help actually your appendage management business? Because if I recall back in the days of -- early days of WATCHMAN data, what we actually saw was a class increase across the board for appendage management. So I'd love to hear your views on how that could impact your appendage management business.

Yes. I'd love to say that the data coming out of WATCHMAN, at this point, I think the awareness is out there on appendage management and the importance of managing it, both from what WATCHMAN did. And if you recall, the LAAOS III trial for Afib patients was incredibly positive to reducing stroke and the AtriClip was used in that trial as well. So I'd say that -- and the guidelines have now changed.

So there's been a lot of that already in existence in the open kind of, call it, concomitant use of the AtriClip during open heart surgery. I think the bigger move is going to be with LeAAPS because LeAAPS is really going to open up that market, much like I just mentioned with BoxX-NoAF. This is the prophylactic treatment of that appendage, I think, is going to be once we get that data out, which is obviously going to take a little while. And so we're all going to be patient on it. That's going to really move the market and quite frankly, move our volumes quite dramatically at that point in time.

Our next question comes from Matthew O'Brien with Piper Sandler.

Mike and Angie, this is Anna on for Matt. Just if I could ask a question on competition, specifically for AtriClip. There's been some concern around future entrants disrupting your position in the space. So if you could speak maybe to the moat around AtriClip and the differentiation of the device based on the competition you've seen in the past, that would be super helpful.

Sure. I mean competition is inevitable in medical devices. As I've mentioned on this call before, we believe competition is good because it means. And it validates the space that we're in as being a very large market, especially when very large strategics decide that they're going to make some level of investment even if it's small and with inferior products. We do believe that they're going to come into the market and compete against us and create validation that managing the appendage is the right thing to do and create that kind of awareness.

We feel like we've got the best products in the market. We continue to innovate. The FLEX-Mini device and our FLEX-V device are the best products in the market. We just had clinical data that was published on the V that showed 100% closure using the V clip in 150 patients that was just peer-reviewed and published just recently. That's on top of over 95 peer-reviewed papers and 16,000 patients that have been studied to date in peer-reviewed articles showing exceptional closure of that product, which obviously is incredibly important.

The level of evidence that is already out there on top of that and on top of the innovation like the FLEX-Mini, which is the smallest product on the market, creating better visibility, easier to use for physicians when they're using the product. You've also got the LeAAPS trial that is expanding the market and will be the only product in the -- or the only trial in the market that is going to demonstrate stroke reduction prophylactically and it will be only using the AtriClip.

So I think that there's a lot of things over the coming years that are going to be out there to help us benefit and show the AtriClip is obviously the best product in the market. But in addition to that, I do welcome competition. I think it's good. It's validated. It shows this is a big market that matters and one that others are very interested in.

Then I guess just on the hybrid business, there's obviously been some softness in that segment for a while now. When do you think you'll reach a bottom there and sort of see that growth inflect a bit?

Yes. I mean as I mentioned in my comments, I mean, obviously, there's been a lot of pressure on that with the PFA technologies out there specifically. We're not hiding from that in any way. We know that, that's the case. As I mentioned earlier, kind of what -- when John asked the question about progression, we do see people doing multiple ablations before they move on to hybrid.

I do think you're going to start to see some breakthroughs on that. I'm not ready to give a here's the bottom and -- but you're starting to see definitely more cases coming through from sites that used to do a lot, then went to almost 0 and are now starting to do some cases again, not back to their old numbers. But they're definitely starting to see patients that have failed 1 or usually 2 catheters with the PFA and the different technologies that are out there.

So we do anticipate that we will eventually see growth coming back to this market because there are just so many patients in this market. And just sheer math on it, if there are 600,000 catheter ablations, about 10% of those that are being ablated every year our long-standing persistent patients, which is like 60,000 patients. And those are the patients where the catheters don't work very well and have the highest rate of reds or having to go back in. And so we anticipate that, that fall-through is going to eventually happen for us. And that they're going to have no other choice but to look for another technology that can help them out epicardial like ours.

Our next question comes from Suraj Kalia with Oppenheimer.

[Operator Instructions] I'm showing no further questions at this time. I would now like to turn it back to Mike Carrel for closing remarks.

Sure. Again, everyone, thank you for joining us today on the call. We really do appreciate all of the support and are looking forward to closing the year incredibly strong and having an incredible 2026. Have a wonderful evening. Bye now.

This concludes today's conference call. Thanks for participating. You may now disconnect.

Good afternoon, and welcome to AtriCure's Second Quarter 2025 Earnings Conference Call. This call is being recorded for replay purposes [Operator Instructions]

I would now like to turn the call over to Marissa Bych from Gilmartin Group for a few introductory comments.

Thank you. By now, you should have received a copy of the earnings press release. If you have not received a copy, please call (513) 644-4484 to have one e-mail to you.

Before we begin today, let me remind you that the company's remarks include forward-looking statements. Forward-looking statements are subject to numerous risks and uncertainties many of which are beyond AtriCure's control, including risks and uncertainties described from time to time in AtriCure's SEC filings. These statements include, but are not limited to, financial expectations and guidance, expectations regarding the potential market opportunity for AtriCure franchises and growth initiatives, future product approvals and clearances, competition, reimbursement and clinical trial outcomes. AtriCure's results may differ materially from those projected. AtriCure undertakes no obligation to publicly update any forward-looking statements.

Additionally, we refer to non-GAAP financial measures, specifically constant currency revenue, adjusted EBITDA and adjusted loss per share. A reconciliation of these non-GAAP financial measures with the most directly comparable GAAP measures is included in our press release which is available on our website.

With that, I would like to turn the call over to Mike Carrel, President and Chief Executive Officer.

Good afternoon, and thank you for joining us. We are pleased to report an outstanding second quarter with total revenue of $136 million, reflecting a 17% year-over-year increase. Our growth was broad-based, reinforcing the strength and durability of our business and AtriCure's significant market opportunity across all of our franchises. We also delivered a sizable increase in profitability and cash generation with over $15 million in adjusted EBITDA and nearly $18 million in cash generation in the second quarter.

Our pipeline of innovation and clinical science initiatives continues to thrive and generate results as well. More specifically, new product launches such as AtriClip FLEX-Mini and cryoSPHERE MAX drove accelerated growth in pain management and appendage management and the first lower limb amputation procedures using our cryoXT device for pain management or performed in this quarter. Additionally, we began testing our PFA device for cardiac surgery. However, most notable is the completion of enrollment and our groundbreaking LEAP clinical trial. I will touch upon these milestones in greater detail later in my remarks, but each reflects our resolve to deliver innovative therapies to address unmet clinical needs for patients around the world as we sustained strong growth and improved shareholder returns.

Now on to updates from each of our franchises. Starting with appendage management, worldwide revenue grew over 20%, driven by open left atrial appendage management growth of 29%. In the United States, we saw an acceleration in revenue from increasing adoption of our AtriClip FLEX-Mini device. This quarter, FLEX-Mini reached just over 20% of our U.S. appendage management revenue, showing the demand from physicians for this lower-profile solution. Internationally, we are expanding access to AtriClip devices and continuing to invest in physician awareness to support long-term growth.

We also are excited to announce the first clinical use of our latest innovation in the AtriClip platform, the AtriClip PRO Mini device. Building on the success of the FLEX-Mini and open chest procedures, the PRO Mini leverages our third-generation AtriClip platform, which is the smallest surgical left atrial appendage implant available, enhancing visualization of precision during minimally invasive procedures. The PRO Mini is another example of our ongoing commitment to innovation across our franchises.

Turning to LeAAPS trial. We are thrilled to announce we completed enrollment earlier this month. This is a major milestone, not only for AtriCure but for all cardiac surgery and patients treated as it marks the largest global medical device clinical trial ever conducted in this space with total enrollment exceeding 6,500 patients. LeAAPS is designed to evaluate the use of AtriClip devices for stroke prevention in cardiac surgery for patients who do not have a prior Afib diagnosis. This is a large and underserved patient population with more than 70% of the nearly 2 million patients who undergo cardiac surgery annually not having a prior Afib diagnosis. We believe the rapid pace of enrollment reflects the strong momentum behind our clinical evidence strategy and interest from surgeons and the broader clinical community in expanding the standard of care for these patients.

I would like to pause and recognize the team at AtriCure for truly outstanding trial execution and our position in hospital partners who are instrumental in this landmark study. Your collective efforts achieved full enrollment well ahead of our initial projections and place us closer to definitive clinical evidence supporting left atrial appendage management in cardiac surgery.

Now we shift our focus to a robust patient follow-up as we await the study outcomes. We expect results from our LeAAPS clinical trial to support a stroke prevention indication that is exclusive to AtriClip surgical devices and help shape future treatment guidelines.

Within our ablation franchises, open ablation posted a healthy growth of 15% this quarter. Performance was once again led by our EnCompass Clamp, reflecting deep continued adoption across a broad customer base. This quarter also marked the third anniversary of the EnCompass Clamp launch. The durability of EnCompass growth is a clear testament to our ability to deliver meaningful and consistent innovation, providing clinicians with effective and time-saving solutions.

On the topic of innovation, we are also progressing development of our PFA-enabled EnCompass platform. During the quarter, we achieved the first milestone in our PFA partnership with the delivery of generators to begin robust preclinical testing, putting us one step closer to first in human use, which we expect to happen later this year. We look forward to providing more updates on our development milestones as they occur.

Turning to clinical initiatives. We are preparing sites for activation in our BoxX-NoAF trial. As discussed at our Investor Day earlier this year, BoxX-NoAF is aimed at reducing postoperative Afib in cardiac surgery patients who do not have preexisting Afib, increasing our addressable market by over threefold by significantly expanding the opportunity to use our ablation technologies in this broader patient population. Building on momentum from our LeAAPS trial, we believe BoxX-NoAF will transform the standard of care in cardiac surgery toward preventative approaches for patients without Afib. BoxX-NoAF is a foundational study for AtriCure, and we expect the first patient to be enrolled in the trial later this year.

In our minimally invasive hybrid therapy, market dynamics remain challenging in the U.S. due to increased adoption of the PFA catheter technology. We continue to see durable interest in our MIS offerings in Europe, where PFA has been on the market longer and clinical understanding and patient segmentation are more advanced. We believe patients with long-standing persistent Afib remain undertreated and our hybrid therapy is uniquely positioned to address this need.

Now turning to our pain management franchise, which grew nearly 43% in the quarter. The acceleration in growth continues to be driven by sales of our latest innovations, the cryoSPHERE MAX and cryoSPHERE+ probes. We are realizing significant expansion within existing accounts along with new physician users, and we are also encouraged by feedback from surgeons using cryoSPHERE MAX and [ stenotic ] procedures where reduced procedure time is particularly impactful. Additionally, we are expanding access to our next-generation prior ablation technology outside the U.S. with the launch of cryoSPHERE MAX in Europe. This launch represents another step in bringing superior pain management solutions to patients and providers globally.

In addition to growth in thoracic and cardiac procedures, we're encouraged by the opportunity for Cryo Nerve Block therapy in extremity amputations. Following 510(k) clearance early in the second quarter, we completed initial procedures with our cryoXT probe for pain management and lower limb amputations. While feedback from surgeons using this device has been excellent, we are even more excited by the reports of rapid patient recovery in the days following the procedure. We believe cryoXT unlocks a meaningful expansion opportunity for AtriCure, and we're focused on preparing for commercial launch later this year.

Parallel to our innovation and market expansion efforts, we continue to invest in clinical and economic data to support the value of Cryo Nerve Block therapies. As non-opioid pain management becomes an increasing priority across health care, these efforts are helping drive broader awareness and adoption. We remain committed to expanding access innovative non-opioid solutions that improve patient outcomes and align with the goals of hospitals, surgeons and payers.

In closing, I want to thank our entire team for an outstanding quarter. Our financial results were stellar, with accelerating growth and meaningful improvement to profitability, providing a strong foundation for the second half of 2025 and beyond. I am confident that our focus on delivering exceptional patient outcomes, building our clinical and commercial momentum and executing on our strategic priorities will transform standard of care in each of our markets.

And with that, I will turn it over to Angie Wirick, our Chief Financial Officer. Angie?

Thanks, Mike. Our second quarter 2025 worldwide revenue of $136.1 million increased 17.1% on a reported basis and 16.5% on a constant currency basis when compared to the second quarter of 2024. On a sequential basis, worldwide revenue grew 10.1% from the first quarter to the second quarter of 2025. Second quarter 2025 U.S. revenue was $110.6 million, a 15.7% increase from the second quarter of 2024 and an acceleration over our first quarter results.

Open ablation product sales were $36.5 million, up 18.6% over 2024 with continued strong adoption of our EnCompass Clamp in both new and existing accounts. U.S. sales of appendage management products were $45.1 million, up 18.9% over the second quarter of 2024 on an increasing adoption of our recently launched AtriClip FLEX-Mini device, driving open appendage management growth to 30% for the quarter. U.S. pain management sales were $21.2 million in the second quarter 2025, reflecting 41.1% growth over the second quarter of 2024. The CryoSPHERE MAX probe contributed just over 50% of our pain management sales in the quarter emphasizing the benefit of reduced procedure times direction. Finally, with continued pressure on hybrid therapy procedures because of PFA catheter adoption, we saw a decline in our minimally invasive ablation sales, which ended the quarter at $7.8 million.

International revenue was $25.6 million, up 23.3% on a reported basis and 19.9% on a constant currency basis as compared to the second quarter of 2024. European sales accounted for $16.1 million, up 27.7% and Asia Pacific and other international markets accounted for $9.4 million, up 16.3%. International growth was driven broadly across franchises in most major markets and we expect good momentum in our international business to continue for the remainder of 2025.

Gross margin was 74.5% for the second quarter of 2025 which represents an approximately 15 basis point decrease in comparison to the second quarter 2024. This decrease was primarily driven by less favorable geographic and product mix largely within our international business.

Now moving on to details of our operating expenses for the quarter. Total operating expenses increased $13.7 million or 14.5% from $94 million in the second quarter of 2024 to $107.7 million in the second quarter of 2025. Our total reported operating expenses included a $5 million milestone payment under the PFA co-development agreement. Excluding this milestone payment, total operating expenses increased $8.7 million or 9.2%. Growth in research and development expenses was approximately 19%, excluding the PFA milestone payment, driven by an acceleration in LeAAPS enrollment during the quarter and continued progress on our R&D pipeline. SG&A expenses increased 6.5%, primarily from thoughtful expansion of our team globally to support our growth.

With strong top line growth and modest expansion of our operating expenses in the quarter, we saw outstanding results on the bottom line with adjusted EBITDA of $15.4 million this quarter compared to $7.8 million for the second quarter of 2024. Our loss per share was $0.13 in the second quarter of 2025 compared to a loss per share of $0.17 in the second quarter of 2024, while the adjusted loss per share each period was $0.02 and $0.17, respectively.

We ended the second quarter with $117.8 million in cash and investments, generating $17.9 million in cash during the second quarter, including the PFA milestone payment. We continue to expect positive cash generation for the full year, further strengthening our already robust capital position.

And finally, turning to our outlook for 2025. Given ongoing strength from our many growth catalysts and our second quarter results, we now expect to achieve $527 million to $533 million in revenue for the year, reflecting growth of approximately 13% to 15% over 2024. Like our results to date, our international business will outpace growth in the U.S., driven broadly across franchises. On a U.S. franchise level, we expect strength from new product launches in our pain management and appendage management franchises along with continuing adoption of our EnCompass Clamp and open ablation to drive growth for the remainder of the year and now anticipate continued modest sequential declines in our U.S. hybrid franchise for the remainder of 2025.

In terms of quarterly cadence, we expect our third quarter will experience typical summer seasonality, resulting in a low single-digit sequential decline in revenue from the second to third quarter followed by a strong rebound in the fourth quarter.

From a margin perspective, we are maintaining our expectation that 2025 gross margin will be comparable to 2024 with potential for varying impacts from cost savings initiatives and product mix offset by geographic mix. On the bottom line, we continue to advance our efforts to expand profitability and are therefore raising our outlook of positive adjusted EBITDA to approximately $49 million to $52 million for the full year 2025. This places our adjusted EBITDA margins in the range of 9% to 11% for the remainder of 2025 with expectations that third quarter is at the lower end of this range, while fourth quarter is at the higher end of this range. And finally, the corresponding adjusted loss per share is approximately $0.34 to $0.39.

In closing, we are truly pleased with our results and the unwavering effort from our team around the world. This quarter highlights the breadth of our business and many growth catalysts with continued improvement in profitability. We are extremely confident in the outlook for the remainder of 2025 and beyond.

At this point, I'll turn the call back to Mike for closing comments.

Thank you, Angie. The completion of another well-executed quarter of strong revenue growth and profitability reflects our team's persistence and devotion to our patients partners and shareholders. We have a best-in-class product and clinical pipeline that coupled with our existing platforms will increase our ability to impact patients around the world and propel our business to continued growth. The future at AtriCure is bright, and I look forward to providing updates as the year progresses.

With that, I'll turn it over to the operator for questions.

[Operator Instructions] Our first question comes from Bill Plovanic with Canaccord Genuity.

It's Zachary on for Bill. My first question is for appendage management. So you completed LeAAPS enrollment a few weeks ago. What are you seeing in terms of how the completion of that trial has impacted physician utilization of the products post enrollment? Because you were getting paid for the implants. So what are you seeing, like have docs been using the places at the same rate as utilization decreased? Can you provide any color on that?

Sure. From a LeAAPS standpoint, it's such a de minimis and small part of our overall kind of AtriClip -- if you think about the total trial size, I mean it is only 6,500 patients, half of those patients get a clip, half the patients do not get a clip. So it really has no impact on our revenue. And actually, many of those people were clipping or putting AtriClips on every one of their patients before. So it kind of all washes out the revenue impact of kind of not having LeAAPS is pretty much a complete wash from that standpoint.

Now as you saw, we're seeing an overall increase in adoption. People are just managing the appendage a lot more. You saw that in the growth rate in the U.S. with almost 30% growth overall, you're seeing it on the global number on the open side of our business. It's just been really interesting to kind of see, as I talked about on the call, many, many months ago or quarters ago, when competition came in, we thought that would actually help the overall market and create more awareness and what we're seeing is that's actually happened. We've had 6 successive quarters of sequential growth and increasing growth on that platform. Some of that's due to innovation, but some of it's also doing to just having competition in the space, raises awareness, more people want to treat, they know they must treat when they've got the patient's chest open like that. So it's really -- the LeAAPS ending has zero impact on the overall revenue base.

Got it. And then my follow-up question is, what is the interaction like with your discussion with EPs about PFA failures? Like how are you managing those discussions because, on one hand, it's they are your customer base, so you don't want to totally alienate them. But how are you managing explaining that as the funnel grows, there's going to be PFA failures, but also balancing their adoption of PFA.

Yes. I think every EP is on a different journey with their interaction and working with PFA. We do have some sites, so they're -- while, obviously, we're under a lot of pressure in that part of the business and many sites have not come back per se. There are many sites, though that have -- we are starting to see that funnel come up. We haven't -- we're not seeing it in the numbers yet, but we definitely see that.

How is the conversation go? We're just very open and transparent. We have the obvious conversation about the clinical evidence and data that is out there. We don't try to push them by any means that they must go down this pathway. We talk to them very specifically about what are the benefits of PFA or the benefits of doing a follow-up with an epicardial solution at some point in time when they do see nonresponders or failures from that standpoint. And so they're, I would say, very collaborative type of conversations that are not ones in which we're having a discussion where it's this or that, it's more this is additive when you have a difficult patient population. And as I -- and the funnel is beginning to build, and again, we're seeing some customers begin to come back and actually start to refer many more patients. Unfortunately, it's not having an overall impact on the numbers yet.

Long term, I think that we still believe that there's a huge market for the long-standing persistent patients in which we have three major randomized controlled trials done around the globe that have demonstrated adding epicardial ablation is beneficial and additive to anything that you use, whether it's cryo, PFA or RF. Obviously, more and more people have gone to the PFA route, and we think that we are additive and will continue to be so. And it's just a lot of good -- it's dialogue and not an argument between the two, it's more of a scientific discussion.

Our next question comes from Lily Lozada with JPMorgan.

Congrats on the nice quarter. Maybe just starting with guidance. I think the guide implies a deceleration on the top line relative to the 17% growth you put up this quarter. So is there anything to read into there other than just conservatism? And then similarly on EBITDA, that came in a good amount above, but I think the guide implies adjusted EBITDA flat to slightly down in the next two quarters. So any reason that, that can't be higher? And was there anything onetime that drove the strength in the quarter?

Thanks, Lily. I'll take that. I'd say on both top and bottom line, our philosophy relative to guidance is really unchanged from what you've seen for AtriCure over a very long period of time, which is we want to put out numbers guide to numbers that we feel like we can execute against. And you can see the ability to do better. So a [ beaten race ] kind of strategy as we're looking at the rest of the year. Obviously, the momentum throughout the business with our new product launches in the U.S. as well as our international business, which continues to fire on every cylinder, we feel really good about the outlook for the year. I'd say maybe a change from kind of where we started the year would be our expectations for a bit more pressure in the second half of 2025 with our hybrid business. All that together, though, you saw in the second quarter, 17% growth, but our guide range gives us great opportunity to outperform that number. Relative to the question of anything onetime in the quarter on an expense side, there wasn't anything same philosophy on the bottom line as we're taking on the top line.

Great. That's helpful. And then just a follow-up on the MIS point. It sounds like those pressures might be more significant than you had expected last quarter. So can you talk a little bit about the trends that you're seeing there? And at what point do you think this business can see a bottom?

Yes. As I'd say that, yes, we're feeling a lot of pressure with PFA in those accounts. As I mentioned, we do see some bright spots with some accounts coming back and beginning to use it. But if you look at the overall number that we saw for the quarter with the 17% overall growth, we feel really good about the overall platform we're delivering. We understand that there's a lot of pressure. And we just don't want to get ahead of ourselves. We want to be very clear with investors that look at this as upside at this point in time. Like this is something that it's going to be under pressure. There is clear clinical value. No doubt about it. All the data suggests that. But the timing for when it's going to kind of bounce back. I think it's just too difficult for us to give any true indication on that particular front.

That being said, you can see the power of the rest of our business is able to get us to a 17% number on the top line far ahead of any expectations that were out there in the market. You can see it's across every one of the other new product launches. We've had a series of new product launches that came out last year. We're still getting benefit from EnCompass. On top of that, we've had the PRO Mini just come out, and we've got XT that will kick in at the end of this year. So we feel like the cadence of new products, new markets that we're going after, far obviously overcomes obviously, the pressure that we're feeling there. But we do recognize it, and we're going to continue to focus on it. And hopefully, we'll get some upside with it. Maybe not this year, but it could happen, but for sure, obviously, in the future. But we just want to set the expectation really low on that for all investors at this point in time. And we can do that because of the strength of the rest of our business as you're seeing.

Our next question comes from Marie Thibault with BTIG.

Congrats on a really nice quarter. I wanted to ask a little about pain management certainly looks like cryoSPHERE MAX is doing extremely well and I wanted to understand where you are in terms of conversion of accounts to cryoSPHERE MAX as we -- in the U.S. and as we head into Europe if we should expect a similarly strong uptick. And I have a quick follow up on pain management as well.

Thanks, Marie. In terms of the progress with our cryoSPHERE MAX device, as we exited the second quarter, it was a little over half of our U.S. accounts, pretty similar parity to it representing a little over half of the revenue in the quarter in the U.S. pain management franchise relative to expectations in Europe, I think with the kind of the premium ASP. I'd say we are cautiously optimistic. Clearly, the time savings has a benefit -- a clinical benefit to the users, and we can see that with the pace of adoption in the U.S. but economics matter a bit more in those markets, as you know. So I think we're cautiously optimistic that long term, this is a big driver of growth. I think in the near term, with the uplift in pricing, probably a little bit slower kind of ramp than what we've seen in the U.S.

Okay. That makes a lot of sense, Angie. And then my follow-up is on cryoSPHERE XT. I heard you say that you're preparing for a launch later this year. My understanding was that this is not being included in the outlook. I think it wasn't being included as of last quarter. So I want to confirm that, that's still true that anything that we see from that launch could be upside? And anything you're telling us about what you need to do to prepare for that launch.

Yes. On the guidance side, you are correct. This is an upside to the guide that we gave for the year. We expect pretty minimal revenue contribution in 2025 and have said this is a more meaningful contribution when we think about 2026 and go forward from there relative to what we need to do to prepare. I think our teams in a great spot. There was training earlier this year when we got the 510(k) clearance I know the team is going to have another run at that training again in a little bit more detail. They've also been intimately involved in some of the first use cases and have seen from a physician experience from a patient experience impact that that's having. So they're well prepared relative to kind of what we need to do on the launch.

The only thing I'd add relative to that is I think if you look at how we typically launch a new therapy. So when we launched cryoSPHERE, the first time back in 2019 in a big way. We definitely take our time because we want to learn from the first customers to begin to use it, kind of adjust and kind of iterate our approach to the market relative to that. That's kind of how we see the rest of this year going. There's a lot of learning, which is why we're not baking any kind of revenue into the numbers this year as we begin to learn. Angie described it really well but our team is prepared, They'll be trained very well, but there's nothing like getting real-world experience that we anticipate getting kind of in the latter part of this year as we're kind of getting ready for a bigger launch in 2026, where it will be in our revenue at that time.

Our next question comes from John McAulay with Stifel.

I wanted to focus on some clinical initiatives that you mentioned on the call, BoxX-NoAF, LeAAPS and also your PFA program. Just want to sort of clarify and level set again just the next key milestones for those programs and what we can expect next for these sorts of trials and initiatives?

Sure. So I'll start with LeAAPS because that's the one that we just kind of closed out. Obviously, we enrolled a lot faster than we expected, which means we'll hopefully see data faster. But right now, we're in a follow-up mode. We have up to 5 years for follow-up. We obviously anticipate that the events that will take place in that trial will come sooner than that. We anticipate that we're going to have to get to the full number of events within that trial, which is about 469 or so overall events that have to occur. We're tracking those. We will get an interim look at 50% of the events then 75%. I don't anticipate that we'll necessarily win at that particular point because obviously, the trial is powered for the full piece of it, but we will get some looks at it. So with LeAAPS, you're not going to get any near-term pieces to that relative to that or don't expect anything kind of in the near term relative to anything.

In the BoxX-NoAF, we are up and running, and we are getting sites through the IRB process right now. We anticipate that we'll have our first enrollment this year, and we'll have many sites up and running. So I think the next big thing to see is first enrollment which then will lead towards obviously, robust enrollment that we anticipate in 2026, and we do anticipate that we'll be able to enroll fairly quickly there. It's 75 sites that we're allowed to use and get up and running. And we have a list of sites that is far in excess of that. So now it's really just kind of getting through the IRB process with all these sites.

And as you saw with LeAAPS, it's the same great clinical team we have there executing this trial. So we -- and many of the same sites because it's a very similar if not the same patient population. And so we feel like we're going to be able to execute that really well as we kind of roll that out. But the next big milestone for you to look for is first patient treated, which we do anticipate happening this year.

And the PFA front, it's first in human. You'll anticipate seeing a first-in-human by the end of this year with our Encompass clamp. So I'd say that's kind of the next big milestone relative to that.

Great. That's helpful. And just switching gears to the SG&A spend. I think it's three quarters in a row now of mid-single-digit growth there as opposed to strong double digits mid-teens in the top line. I just want to sort of level set clarify exactly how we should be thinking about that growth rate going forward just in the context of, again, sort of strong double-digit top line? And how much leverage should we be expecting there?

John, I think our performance thus far, the past couple of quarters is what you should continue to expect. I think we've -- our longer-term outlook is that we are operating in kind of a single-digit growth rate, so well below top line growth while still investing in commercial resources while still attacking our underpenetrated market opportunities in each area, where we see momentum starting to see the benefit of operating in size and scale, particularly in back office functions. So I'd say, I think, single-digit kind of mid- to upper single-digit growth on that particular line item going forward.

Our next question comes from Dan Stauder with Citizens JMP.

Yes. Great. Congrats on the really strong quarter. So just first question on appendage management. Another really great quarter. It's nice to see growth accelerating even with the quarter year-over-year comp. But I just wanted to ask, are there any more puts and takes on what drove growth here? Is this really just FLEX-Mini or are you seeing any indication of a halo effect from FLEX-Mini for your other offerings?

Yes. FLEX-Mini was definitely the growth driver in the quarter in the U.S. Outside the U.S., where FLEX-Mini isn't available, we're seeing growth across our AtriClip platform. We do still see some growth in the FLEX-V, which, if you recall, was kind of the dominant clip that had been sold in the U.S. markets. Most of the growth that we would have seen normally has been given over to FLEX-Mini but are still seeing a bit of a halo effect on our FLEX-V product at this point, Danny.

Great. And then just one follow-up on pain management. Really impressive as well given the performance of the first two quarters, how should we be thinking about the back half year. Adoption is clearly very healthy, but just with the more difficult comps, how should we be thinking about our models?

Yes. Great question. I would say this is an area of the business that we expect to well outperform the overall company guidance range. I think to say that we can continue at 40%. I think that's possible, but with set expectations a bit lower than that. As you said, the comps from last year with the new product introductions more healthily contributing to the back half of 2024 are a consideration here, but feel good about the momentum of this business. So think of this as something where you're talking about well higher than the overall company growth rate probably a bit less on a percentage basis than where we've been performing so far this year.

Our next question comes from Mike Matson with Needham & Company.

Angie and Mike, this is Joseph on for Mike. Would like to just maybe asking another question or two on pain management. Really appreciate all the color you guys have given just some of the drivers there. But if it would be possible just to get kind of like a summary of all the levers in there. I know price is one aspect of it. But I guess I'm curious how much of the conference engagement is driving this? To which position awareness just around Cryo Nerve Block in general or the clinical benefits and procedure time with MAX? Is this a lot of the previous investments in the sales team kind of reaching full potential as well? Just would really like to hear all of those levers there.

The good news is, I think you hit on all the levers, but I'll try to kind of maybe extrapolate or kind of talk a little bit more detail about it. I'd say the #1 piece is that when you come out with great innovation and you listen to what is kind of holding you up, in this case, it was time in the procedure. And going from a 2-minute freeze down to a 1-minute freeze really made the procedure much more approachable for surgeons, both in terms of surgeons that were not using it and surgeons that were using it now want to use it on more of their cases. That is the #1 driver there.

We happen to get a little bit of a price benefit because they're moving to MAX, but they're not moving but we're getting more of the benefit because the volume is seriously increasing because of the speed at which they're able to do that in the thoracic cases. We've had a really small amount that's happening in sternotomy because of that. So we're definitely seeing some activity there that we hadn't seen I wouldn't say that's been a meaningful number or meaningfully contributing to it at this point in time. And as I mentioned in my comments, we're encouraged, but we're not putting that really into our numbers in any way, shape or form. But it's obviously an encouraging piece, and we're hearing positive pieces from that standpoint. So I'd say that, #1 is just great innovation leads to listening to the customers, cutting down that time and cryoSPHERE MAX is really going to hit the mark on that front.

And maybe one thing to add. You asked the question about kind of price versus volume. I think it's important in this particular franchise. In the U.S., our growth is 41%. When we look at volume growth, we're a little over 30% volume growth. I think when you look at that in the span of kind of what this franchise has done, that's an exceptional quarter for us. Both new and existing accounts are seeing growth, and we had a really strong second quarter of kind of new account adoption as well.

Okay. Great. Yes, that's very helpful. And then maybe just a quick one, R&D spend. Looking at the second half of 2025. LeAAPS enrollment is complete. Obviously, still expenses associated with that. But then you have these other trials starting up. And just kind of curious, I know there's acceleration in this quarter, but how you view that trending maybe just on a year-over-year basis?

Yes. R&D percentage growth every year, I think we would expect to be in line, maybe slightly higher than kind of top line growth just given momentum behind clinical trial enrollment and product development efforts. So you'll see less of a ramp than we've seen over kind of the course of the LeAAPS trial but with the new BoxX-NoAF, the new clinical trial starting as well as us really advancing our PFA development efforts, still expect pretty robust growth in R&D year-over-year.

Our next question comes from Danielle Antalffy with UBS.

Congrats on another strong quarter. Just a question on the open ablation business. I mean, that's been your guys -- that plus appendage management has been your bread and butter for forever now. And this is now the second consecutive year you're tracking. I know this isn't -- you don't give guidance by business, but so far year-to-date, about 15% growth last year, you grew open by 15%.

Mike, can you talk about the runway there? Because I know you guys sort of framed this as more high single, low double-digit grower longer term. I mean, you haven't seen momentum flow there at all over the last few years. And so I appreciate we're now two years into EnCompass, but it just feels like maybe we're missing something and there's more momentum there and longer runway than maybe we had thought previously. I would love to hear your thoughts on that.

So Danielle, I appreciate the question. And you're right, we've seen some great momentum in this area. As you know, we're three years into the EnCompass launch. And what you've seen is, if you look back three years ago, the penetration rate was probably closer to 25%. We're now probably closer to 35%, 40% in Afib-only patients. But all the guidelines and reimbursement suggest every one of those patients, meaning close to 100% should be treated. A vast majority of those are in coronary bypass patients and some in [ AVR ] patients. And that is the market where they just weren't treating at all. So we have a big market opportunity still in front of us EnCompass makes it very approachable for those surgeons to do something where they don't have to get behind the heart, but they can get a really robust lesion, they can do it very quickly in under 10 minutes. And when they do that and they add the AtriClip with it, they actually get a great result with this and there are more and more studies that we anticipate coming out here in the next 6 to 12 months to show the efficacy benefits of that as well. And so the opportunity, I'll call it, in the next 3-year venture is mostly around that CABG patient we're going from 35%, 40% to 80%, 90% of Afib-only patients in the U.S. And those numbers are significantly lower even to this date in the OUS market. They've gone from about 10% to 20%. So massive market opportunity just in Afib patients.

Obviously, BoxX-NoAF is designed to triple the size of that overall market. So we anticipate that there is growth for -- I've talked about it before. It's more than a decade worth of really strong growth sitting in front of us. With BoxX-NoAF, we anticipate being able to demonstrate that there is real clinical benefit to using an EnCompass Clamp to do a box lesion [ adding an ] AtriClip, you're going to benefit both short term with post-op Afib and longer term clinical benefit that, that patient is not going to develop Afib, which most patients do develop. So we look at the runway, and it's not short term. We have great short-term runway just in Afib, and we've got a longer-term runway that's going to kick in with BoxX-NoAF.

And we try to talk a little bit about that at the Analyst Day, but hopefully, that gives you context to why we're so excited about the overall market here and why we've got a long-term growth prospect here.

Yes. Totally. I guess one of my other -- is just a follow-up question on that in the open ablation business. And one of the gating factors for technologies has always been capacity. And I guess I'm just curious about where you guys think you are from a treating surgeon perspective. Like do you think -- I know a few years ago and really still education, physician awareness, education, your training days, things like that are a big driver. Are you still adding new surgeons? Or do you feel like you're sort of at where you're going to be with from a treating surgeon perspective? I'm thinking specifically, again, your open ablation business?

No, we're adding surgeons every day. I mean it's -- that CABG surgeon that wasn't doing any treatment before are net new customers for us. They may be in a site that was doing mitral valve and treating in a different surgeon with maybe doing some of the mitral valves but we are absolutely adding a lot of new surgeons that we're just not treating before. And that's the market opportunity that sits in front of us, there's adding those surgeons who were afraid to treat before and now feel like it's an approachable procedure for them to take care of and they're getting both -- we've reduced the time with a great procedure and CMS has decided to reimburse for it. So they don't have to worry about the hospital cost relative to that as well because it's a profitable procedure for them to add this. And why did CMS add that because they know these patients live longer and have better lives if they're ablated at the time of cardiac surgery. So again, we're going to add more surgeons. There's still a long runway here to go.

Our next question comes from Suraj Kalia with Oppenheimer & Co.

Mike, Angie, can you hear me all right?

We can hear you.

Perfect. Congrats on a nice quarter. So Mike, two questions from my side. First on PFA. For your PFA clamp, Mike, how should we think about the core focus of your clamp device? Are you all focusing on some differentiated waveform? Is it going to be dual energy? Is that going to be product stratification? How should we think about when you'll -- or at least the road map for your PFA surgical clamp?

Yes. I think we talked about this a little bit at the Analyst Day, but to kind of reiterate or kind of emphasize it. So it's a really good question to kind of emphasize this. Number one is, if you think about the improvements that have been made with the EnCompass Clamp, I think you have to start there. There is a procedure that used to take 30 to 40 minutes that now a surgeon can do in much less time and they can get really robust lesions today. And by cutting down that procedural time, that's been kind of the really big benefit relative to the EnCompass Clamp. One of our differentiators is to add PFA into the EnCompass clamp first. We do believe that, that is a big deal relative to being able to do that because that's what most surgeons are now beginning to use and really like that clamp and the procedure.

The second differentiator is that we're going to have a combination of both PFA and RFA in one clamp, they build -- to deliver it at different times in the same generator to make it very simple and easy for them to do. And we think that's going to be a differentiator as well in terms of being able to kind of combine the two energy sources relative to that. So you've got both the ergonomic of the EnCompass Clamp that already exists, but now you're adding PFA to that and you're adding PFA plus RF into the same plant, we think that, that's a differentiator from that standpoint.

Got it. Angie, one question for you. Appreciate you giving us volume price split for the pain management component of the business. Maybe if I could on the appendage management. I mean, we know many price is significantly higher than the base model, [ FLEX-V ] is also significantly higher. I think I heard Mike say 20% contribution of many in the quarter. Forgive me if I heard that wrong. But just if you could split out the different buckets so that we can strip out price uplift versus unit uplift.

All right. So Suraj, you're correct. The AtriClip FLEX-Mini was about 20%, a little over 20% contribution of our U.S. appendage management revenue in the quarter. I think we also talked about open appended management. This is an open product grew about 30% in the second quarter. That 30%, if you look at a unit-based growth is up about 20%. So clearly, some uplift on pricing, but 20% volume growth in that franchise is excellent at this point in time given where we're at in terms of penetration of that particular market. We did see a little bit of growth in FLEX-V as well, but we're seeing more shifting over to a more robust adoption in the FLEX-Mini clip.

Thank you. I'm showing no further questions at this time. I would now like to turn it back to Mike Carrel for closing remarks.

Great. Everyone, thanks again. Hopefully, you got a sense -- that we've got in front of us, and we look forward to talking to you on the...

This concludes today's conference call. Thank you for participating. You may now disconnect.

We'll go ahead and get started here. I think it is one of the final presentations today. It's nice to be in a room with a window. So, I think that is a bonus. So, I want to welcome Angie Wirick, Chief Financial Officer of AtriCure. As has been the case in all these meetings, we welcome everyone's participation here. From the audience, just wave at me, and we'll get you a mic so those on the webcast participating can make sure to hear any questions. So, I thought it would be a good opportunity. We've had a little bit of time since your analyst meeting in late March, and then you've had 1 quarter of results since then. Maybe just kind of talk to us about some of the reflections you have on the analyst meeting, how some of your investor conversations have gone since then? And what are the topics that you think people kind of digested as you expected? And what are some of the things that you think may have gone underappreciated?

Okay. Well, I'll just start by saying thanks for having us at the conference. The goal of our Analyst and Investor Day, which we held at the end of March really was to drive home the point about the breadth of opportunity at AtriCure. So, the existing portfolio of products, the large markets in which we serve in, but then also to illuminate the pipeline of R&D activities that we've got between product development and clinical science, which I think then gets to one of your questions, which is what really resonated with investors and those that were there with our covering analysts as well. And I would say any time you hear from a customer, so we had 2 cardiac surgeons who really brought to life the LeAAPS clinical trial and our BoxX-NoAF trial and talking about what this means to be focused not just on disease state of Afib, but getting into preventative care and cardiac surgery, I think really brought to life the reason why we're doing these trials and what they see firsthand. Equally so, hearing from 2 EPs who are at the forefront of using PFA catheters. I think it's illuminating. Investors have heard from Mike and I both that we believe CONVERGE over a long-term basis will be successful amidst a significant amount of pressure today, but hearing from EPs their firsthand experience. And I think Dr. Su did a nice job also of actually showing here's what a map look like for a patient that I tried PFA on. I look like I had great results, but then fast forward 6 months later, this is what I'm seeing in my practice. So, I think the firsthand from any time you have customers who speak, I think that, that really resonates. All of that was wrapped up with this bolder kind of longer-term financial trajectory. And I would say we're proud to be along with the steps of improving profitability along with double-digit revenue growth. It's mixed feedback from the investor community on what we could do from a top-line perspective and making sure that, that's our focus, which it is.

And one of the areas where I get questions as I get the story, you have the 2 businesses that sort of compete with other things out there that look less invasive, whether that's CONVERGE and PFA or other endovascular ablation or appendage management and WATCHMAN type procedures. When I look on the PFA side, I think 3 years ago, the sort of continuum for patients with Afib was drugs, drugs, drugs, ablation, ablation, then maybe surgery. And now drugs is off the table basically [Technical Difficulty] line therapy, but it also seems like now it's going to be PFA, PFA, RF, RF, where does like CONVERGE or surgery fit in this new treatment paradigm?

It's such a great question. I think you're exactly right today with PFA being so fast, so much faster than existing catheters, comparable safety. It EP looks at a patient and says, why wouldn't I try this? And I would likely try it multiple times. I think what we're seeing in accounts that had early experience with PFA was, it worked or it appeared to work. And if you think about where we really are focused with CONVERGE, long-standing persistent Afib patients, their hearts have been remodeled to such an extent that catheters may have some effect, but over time, it's not a durable option. That's exactly what the CONVERGE clinical trial proved. And this is the experience that we're seeing from EPs in the field. Look, the longer I follow this patient who I tried and looked like I had a great block from the PFA, now it's coming back, and I've got to do something else. What we think CONVERGE ultimately will be is you've tried a couple of times with catheters, try to do what you can, least invasive, and then move on to CONVERGE, which is such a good durable option for those long-standing persistent Afib patients.

And CONVERGE had a really good start. We were talking about this earlier. If you go back subsequent to the PMA and then the initial launch, I think you were generally significantly outperforming expectations and had a really good start, and that has sort of leveled off or not sustained. How do you think, I mean sometimes these product launches do go through rapid adoption, flattening, reacceleration. And as you kind of think about where we are in that, what; talk us through that evolution, like what gets to that reacceleration point?

Yes. I think we faced 2 main challenges following the PMA approval and initial launch of CONVERGE. The first being the excitement coming out of COVID for this label, a lot of accounts wanted to start programs, and we saw a nice uptake in new account openings. I think what we found from that was the logistics of the procedure involving a surgeon and an EP, making sure that the patient has a good experience through that full paradigm, the full treatment that we needed to do some work there, and that's what we were focused on in 2023 and 2024. Then you were hit with the hurdle of PFA comes to the United States, catheters, and every EP wants to try this. They're getting that into their accounts. And we see quite a bit of distraction to the earlier comment; every EP wants to try it, quicker, same safety. So, it's kind of like why not, why wouldn't I try this? So, we believe longer term, the logistics part, I think we made great progress on, and feel like we've got a good algorithm going forward, and have done a lot of nice work within existing Converge accounts. And that's not work that we have to repeat kind of when the PFA pressure is up. I think when PFA, you have EPs who have the experience of seeing the impact on patients over a longer-term basis, our belief is CONVERGE will see growth again.

Okay. And does that mean you've throttled back market development efforts with CONVERGE or sales force investment as these dynamics unfold, so you're keeping it warm, but not necessarily prioritizing investments?

Yes. I would say, aren't prioritizing, but I say that knowing that going into this time frame, we, the company had made a significant amount of investments in this area, in the sales team in particular. So commercial resources at this point in time are not a priority, making sure that we're being very diligent when we see rep turnover, where are the places where we've got momentum, and makes sense. In other places, could you wait a while before that is kind of reinvested? From a market development standpoint, we still start new accounts. We're still supporting education programs, and we've got new customers. So, I think through all of this PFA pressure, we are still seeing an uptake in new accounts, which I think is another bright spot for us.

Okay. Maybe toggling some other parts of the business, talk a little bit about appendage management, also an area where there are diversity of solutions. Maybe just how that business is going and what you're seeing as we see more concomitant procedures get performed on the ablation side. And I know in general, we're talking different patient populations, but there is a distraction and workflow dynamic to navigate here, as well.

We don't, I would say when you think about where our AtriClip is used, it's in a cardiac surgery patient. So, you've got to have the procedure for some other reason. You aren't opening someone's chest just to manage their appendage. So, and the cardiac surgery market is not dying. The number of procedures is very steady, if not growing. So, this is a patient population that AtriCure, with the original founding of the company, said we believe that there will be cardiac surgery for a very long time, and those patients need options. So, the concomitant ablation with WATCHMAN, we don't see that as much pressure today. We've also, in the same time, have continued to innovate. So, our appendage management franchise, we're super excited to have yet another generation of AtriClip that launched at the end of last year. It drove some nice upside in the first quarter results. I'm talking about the FLEX-Mini. We'll also have a minimally invasive version of that clip, the PRO-Mini that's launched here in the second quarter, and that will start to contribute as well. I think the benefit of low visibility, so super low profile, significantly smaller than the existing devices on the market, gives a surgeon kind of the best world from being able to see on the patient and not having any kind of adjacent structures impacted. So, the other part I would just call out in our appendage management franchise, it's beyond just technology. We're also studying in cardiac surgery through our LeAAPS clinical trial, the benefit of, if your patients in cardiac surgery, whether or not they have Afib, you should manage the appendage. It's a no-brainer. It takes a couple of minutes to do. And we believe LeAAPS will ultimately say, look, there's a stroke reduction benefit for those patients who don't have Afib.

And right now, what percentage of cardiac surgery cases use AtriClip ?

If you're an Afib patient, we believe somewhere between 50% to 60% today have their appendage managed with our AtriClip device. If you don't have Afib, there are still surgeons who believe today, even without LeAAPS, they're kind of on the forefront of this idea of prophylactic clipping. It's somewhere less than 10%. Those are kind of best guesses in terms of the estimates of where it's being used or not.

Okay. And is this one of the areas seeing increased resource allocation in lieu of CONVERGE?

Yes. But our cardiac surgery team, I think the nice thing is when we talk about increased resource allocation, it's based on case coverage. So, you're not starting a brand-new team. This is the same team that's selling the ablation component of it, talking to surgeons about treating Afib. So, they'll cover both.

Okay. Maybe going to pain management. I mean this is a business that's done well. So maybe help us think through like sustainability of this and where this fits in that same resource prioritization scale?

Yes. So, our pain management business, one of the key things that we did when we launched the dedicated probe in 2019 was to start a completely new team. Cardiac surgery reps have some crossover. So, there are some thoracic procedures that our reps were in. What we found was there was a bigger interest in thoracic, pure thoracic procedures, think lung resection and said we need a dedicated team, pain specialists who know this device, who know the pain paradigm incredibly well and ramped up the team pretty quickly in that particular area. That team has been working with the same product up until last year. So, Gen 2 and Gen 3 with our cryoSPHERE+ and cryoSPHERE MAX probes, which launched in the middle of last year. I think what you saw with both of them bringing time reduction to a procedure was a ramp in revenue growth. So, what we've heard consistently is time and money in these procedures matters. So being able to reduce kind of time and procedure clearly reignited this thoracic market. It was already one of our top leading growth markets, but this is an area where I think you saw new and continued expanding usage within our existing customers. So, what we're seeing though in pain management is we had great success in the thoracic cavity. So thoracic procedures, also looking at sternotomy, reducing time really impacts the ability for a surgeon to say, I want to keep a chest open for another 10 minutes as opposed to 30 minutes impacts that market. It also led us to think about other markets such as amputations. So below-the-knee amputations, we've developed a purpose-driven device for those procedures, the cryoXT, which we just got 510(k) clearance and we will launch later this year. So, kind of talked about what we've done. I would say at each point, the commercial team building, the new product innovation and expanded markets tells us that this is a market, an area of our business that we will continue to see really strong growth for a long period of time. And we're not stopping there. We're looking at procedures where we think our pain management devices could have a difference. So, if you think of a surgical procedure, exposed nerve, bigger nerve size, that's where AtriCure really differentiates from other solutions on the market.

And what would be an example of that?

Amputation is one. So, but thinking beyond that and other procedures where there might be some benefit. So, stay tuned.

Do you want to share any other?

I don't know. There's no late breaking news at this point. So...

No news or no news that you want to share?

No news at this point.

Okay. Maybe just wrapping up by segment on the open ablation business. I mean I think last year, there was a flurry of various concerns about clamps and market share and Medtronic's potential impact here. Maybe how has this kind of trended and you've done well in the open ablation business and EnCompass has done really well. So...

Yes. The concerns, let me start with the concerns, I think, for Medtronic are more on the AtriClip side and thinking does that potentially impact your broader market, both AtriClip as well as your open ablation. Medtronic is a competitor in that space, but not making big investments there. The revolution in cardiac surgery, Afib treatment was the EnCompass Clamp. That took a very difficult procedure. So, treating Afib and the legacy Cox-Maze procedure, 45 minutes incredibly difficult to do. Very skilled surgeons had no problem with it, but it was a barrier that we found from time to time of different surgeons didn't like to have to get the access to the heart to be able to do the fulsome procedure. EnCompass democratized treatment. EnCompass made it really easy to slide the clamp in place to be able to do a nice lesion set and do something for those patients. So, we continue to invest and innovate. You don't see that from anybody else out there. This is an area of the field that we're completely dedicated to. We're also excited, very similar to our appendage management business to be studying preventative treatments for cardiac surgery patients. So, this is evolving the market to go beyond if you have Afib in cardiac surgery, saying there's a benefit to patients who don't have Afib, either on an acute basis. So post-op Afib, there's a significant percentage of cardiac surgery patients who will develop postoperative Afib. So doing something to reduce your chances, effectively treating you as if you had Afib going into the procedure as well as development of Afib over a long-term basis. EnCompass makes that possible. You can do the clinical trial, but if in the end, you have a procedure that's incredibly difficult to do, adoption is probably not going to be there. EnCompass helps us get there.

Okay. Maybe just kind of wrapping this together. I think for this year, you've guided to 11% to 13% top line growth, you obviously started the year above that at 14%, recognizing there's still uncertainty probably where the minimally invasive business bottoms. We're still hard to know exactly what part of the PFA curve we're in, but still in the ramping phase. But what are some of the puts and takes for the balance of the year that contribute to the implied deceleration in performance from Q1 to the rest of the year?

Yes. I think early in the year, not as likely to want to raise. I'd say probably the biggest headwind would have been our minimally invasive business and it was a bit, the pressure that we experienced was a bit more than we had anticipated in the first quarter. That being said, there were a couple of areas of the business that ultimately outperformed our expectation, two product launches, our AtriClip FLEX-Mini as well as our cryoSPHERE MAX, both led to overall results, the 14% overall growth. And those are things that we expect as the year continues to be areas where there's upside to the overall guide.

And when you say that the minimally invasive dynamic came in below expectations, is that, where was that primarily just the rate of PFA adoption that surprised you?

Yes. Because it was hard for us to judge. It's not been a linear trajectory here. We find accounts are incredibly distracted as they're trying to get PFA into their hospitals, trying to figure out the workflow, how exactly that will be applied. And then once they have PFA technology, it's using them on patients. So, they tend to say, okay, I'm going to hold on doing the CONVERGE procedure. My workflow now will ask to do another one or two PFA catheter ablations before I move on to CONVERGE. So, part of this is…

And workflow being kind of the patient treatment continuum?

Correct.

Okay.

So and what you heard at our Analyst and Investor Day from two EPs, they basically said, look, about a year ago, I stopped referring everybody for CONVERGE. I wanted to try PFA on those patients. What I ultimately saw was effective in the near-term. So looked as if I had a great block on that patient six to nine months later, sometimes a year later, that patient has recurred with their Afib, and I've got to do something more fulsome for them.

And have you thought about doing, I know this is a push and pull between your customers all want to use PFA. So, you don't want to necessarily deflate what your customers are doing, what they're interested in. But at the same time, for these patients, PFA, it doesn't really have anything to do with efficacy. It has to do with speed and efficiency and maybe safety. So, you doing any more aggressive marketing or clinical research to demonstrate this segment of the population and why PFA is not the right tool for them?

Yes, it's such an astute question. I think that's the balance our sales team has to strike with the customer. Even with the best clinical data, more aggressive marketing, will it change somebody's appetite for wanting to try? And I think we're of the mind likely an EP is going to continue to try. We find that they'll say, well, but in my hands, I see that study, but in my hands, I think I could potentially have better outcomes. So, we're focused much more on, okay, so you try PFA. It's super exciting. This has brought great speed to your program. Your patient funnel is expanding. You're reaching many more patients. What happens when you have failures? What are you going to do next? That's where our team is really focused with customers. So, what comes next after that point?

Okay. Maybe we turn to margins. Your gross margin guidance for the year contemplates modest improvement year-over-year. I mean, probably some puts and takes in there. I know it's early in the year. That's a hard-line item to move. But help us think about the trajectory of gross margins through the balance of 2025.

Yes. The stiffest headwind that we face is an international business that's outpacing U.S. growth, and it is exceptional growth. Would take the top line benefit over kind of the impact to margin, but that's the biggest headwind that we face.

How big a difference is there roughly?

Depending on the country, whether or not we're working with distributors, you could be talking about 10 to 40 points on margin. So, it is meaningful for the overall company, even though international is around 20% of our business, it does have an impact there. Nice tailwinds that are helping margins, are some of the new product launches where part of our objective in R&D is improved pricing. You're building new differentiated technology and also improve kind of the manufacturing aspect of it. The pricing and typically the focus on the manufacturing cost generally means it's an improved margin.

Okay. And where can this go? I mean the gross margin, the CONVERGE is probably declining so gross margin headwind.

Yes.

International becoming bigger is gross margin headwind. Tariffs, I don't think you have much of an impact that's maybe negligible. And then you have on one side, then you have maybe scale, efficiency, are there other product mix opportunities? Like what are the positives and negatives?

I think you just outlined all incredibly well. It's like you were an operator at one point in time.

Failed the try.

So, you hit it. I'd say to the balance, mix will have an impact, I'd say, but there used to be a point in time in AtriCure's kind of life where CONVERGE was significantly disconnected from a lot of our other products. When you think about the newer product launches that we've had, we're driving margins that are getting closer to a CONVERGE margin. So even with the pressure there, I'd say U.S. margins are improving. The international side, we're improving. I'd say that, that one is again, I would take top line growth over kind of the impact to margin any day. We continue to be really focused and intentional when we bring products to market on the pricing in those countries.

And how do you think about that top line versus margin dynamics? You crossed the chasm, right? You are profitable. I know you have objectives to be meaningfully more profitable than you set out at the LRP. But you're at a point you're 9% adjusted EBITDA margin in your guidance. So small moves in that can really have a significant impact. So how do you think about those trade-offs? Because it doesn't sound like growing double digits on the top line automatically gives you operating leverage.

Yes, I would agree with that. I think the expansion of the top line is just one component. What you're seeing though is leverage in SG&A, leading up to this time frame. This is an area where AtriCure had invested significantly. We touched on kind of building out a fully new sales team for Cryo Nerve Block in advance of the PMA for CONVERGE. We rapidly expanded that team and made sure that we were prepared to launch in the right way. This is also a period of time where cardiac surgery we were focused on training doctors and building out that team as well. As I think forward and think about some of the big catalysts and initiatives, we're in a great place, which is you've got established teams where you can hand over the clinical data, you can hand over the new products and you've got a team that's ready to go. You're not building something out, you're augmenting based on pace of growth. So top line expansion is part of it. You're going to see leverage through SG&A. That's a big area. Modest improvements to gross margin. That's kind of what we contemplated as we thought through kind of the next 5 years. And then R&D very naturally, we'll start to see leverage. Over the past several years, R&D has escalated pretty significantly. The LeAAPS clinical trial is one of the big drivers there. Even with some of the newer trials like BoxX-NoAF, they don't rival the spend that we've got on LeAAPS. So, you'll see some natural leverage but our focus as a company is grow, grow, grow, make sure that we've got ways to continue to hold a really steady and good growth rate.

And on the SG&A point, can you give us a little bit more flavor on the leverage in S&M versus G&A? Some companies at your scale have lots of inefficiencies in G&A and big opportunities there. Where are the biggest potential sources of leverage?

I think it's probably between the 2. There is within G&A, and we're starting to see that very practically, I'd say, day-to-day here over time. I'd say that represents itself in the numbers maybe in a bigger way. Within our SMT, I think we found more leverage within training. I think COVID made us think about training our customers in a different way. There was a period of time where you couldn't be with customers. And so, you found any way that you possibly could. We talked about mobile labs on many earnings calls, bringing training to customers. Then we took a couple of steps back and said, what's the most impactful? What was great about was being able to bring the training but a one-on-one has a very different flavor than you're in a room pack full of surgeons or EPs or health care practitioners who are around these patients and you're hearing firsthand, all these are the challenges that I faced when I started a CONVERGE program or when I was a cardiac surgery surgeon learning how to do a Cox-Maze procedure. These are kind of the things. I think we found just more efficient ways that were driven less about cost savings and more about how it can be most impactful from an education standpoint. And we've long said education is an area where we think we differentiate in market.

Okay. And maybe just I want to come back to the LRP in a second. But as you think about 2025, like you had a good first quarter above the full year guidance. As you kind of thought about the puts and takes in the 11% to 13% and 9% operating margin, if you ended up at like 12% and 9%, would you guys be happy with that? Or did you as you set forth this guidance, is it kind of like let's keep this in check but we're trying to be conservative.

Yes. Our philosophy on guidance is not to be happy with achieving the range that we gave out. Our philosophy on guidance is to guide to numbers that investors feel really good about our ability to achieve while there's still being upside, so reason to beat. And I think if you looked out at the company over a very long period of time, that has manifested itself in the performance of the company.

Okay. And on the LRP, I mean, 2030 is a long way away. And I know there was sort of a revenue number that tells the story. But like as you thought about, we want to get out and do this LRP, we want to give a multiyear, give investors a window into what we see as a multiyear outlook. What were you trying to achieve with that? Because like on the one hand, I say, okay, stock is under pressure, people are questioning the growth rate. This is a way to kind of manage perspective on what long-term growth could be, but you still embedded an acceleration in the outer years to get there. So how did you think about laying that out?

Yes. Part of 2030 being the target is internally many years ago, Mike Carrel, our CEO, set out a Vision 2030 for the company. And it was a rallying cry to say we can and will accelerate growth. We're coming out of COVID. We've invested in a lot of different areas. AtriCure can and will accelerate growth and be prepared. Think further out to the future than you ever have. You think about it, pre-COVID, we were $200 million or so in revenue, and it was we have everything it will take to get to $1 billion by the end of this decade. So, prepare yourself. And that meant different things across every single function within the company. So, part of this was linking to and we brought people to Cincinnati, Ohio, I wanted them to feel kind of what we feel and see every day as a company and the excitement that we have so part of that was bringing the investment community in on, look, this is what we're driving towards as a company. So, part of the acceleration that you see in the LRP between now and 2030 is things like the clinical trials, BoxX-NoAF, where prophylactic ablation, not likely to have a big uptick before you see data. But the nice thing about that particular trial is you get data in 2 different forms. It's following postoperative Afib. So, 30 days post every patient, we're going to know did it have a benefit to those patients. So that likely says you're going to see data within a short period of time once you finished enrollment, which we hope is pretty rapid. You'll also follow those same patients for 3 years and see what the benefit is. Part of that is, I think when we get data, that will push more of the surgeon community to do this to consider preventative treatment.

Okay. And maybe just on adjusted EBITDA and free cash flow, both of which inflect significantly over the LRP from where you are today, more than doubling your adjusted EBITDA margin. Maybe we could start with that. Talk us through, if I kind of put together what we talked about previously, was R&D kind of starting to see natural leverage, modest gross margin expansion. It seems to put a lot of onus on SG&A leverage to get there. Is that a fair way to look at it?

I think it depends on when your calc between R&D and SG&A. What is true modest leverage. I mean, I think naturally, R&D, we're not cutting programs. We're investing pretty heavily here. But LeAAPS is such a unique clinical trial and the spend associated with that is very unique.

How much is that again?

We haven't quantified, but think tens of millions of dollars over a number of years. So, and if you look at the ramp in R&D over the past 2 or 3 years, you can definitively see the impact from LeAAPS. So, we started enrollment just 2 years ago. And from that point on, you saw a pretty big drive increase in R&D. So definitely pressure on SG&A. But I think when you think of the life cycle of where we had invested within, particularly in SMT, heavy investments kind of leading up to this time frame. And each one of the opportunities that we've talked about, whether it's amputations, it's prophylactic ablation or clipping, you have a ready-made sales team where you can hand over kind of these new products or clinical data.

And the other opportunities that you don't want to tell us about?

There's just always something more. I think that's one of the greatest things about AtriCure, things that you didn't think would be possible. I joined the company in 2014. We were not talking about pain management at that time. This was an Afib company. that was cardiac surgery focused, wanted to get into minimally invasive treatments in a more fulsome way. And someone has an idea somewhere and says, I think we could do this and be incredibly successful. Our pain management franchise was born in 2019 and when I look at it today, it's incredible what we've done.

And then on cash flow, I mean, also a very big target for free cash flow conversion moving from about cash flow breakeven to slightly positive this year. Doubling sales would seem like you will need incremental CapEx over the LRP period. So how do you, what's the bridge to that level of free cash flow conversion?

Yes. The improvement on profitability gets you most of the way there. And there aren't big structural things, investments that we need to make within CapEx. So, the target that we put out there says, look, you can make those types of investments, but there isn't you don't need to create a completely new facility that AtriCure is financing, like we've got everything kind of we need to on that trajectory to make it there.

Okay. I'll close on capital allocation. The categories you serve are, I would say, provide good opportunity because they're sort of niche in nature, you can own them and have a strong competitive position, but at the same time, don't offer obvious adjacencies from an M&A standpoint. So how do you think about acquisitions? And to what extent is that a significant part of your and Mike's time thinking about other things to bring into the portfolio?

Yes. We, I think we spend and we've got business development within the company. I think they spend a significant amount of time trying to understand the landscape who's out there either developing new products that may have play somewhere in our markets or if there's some adjacency. I think we try and understand kind of the landscape in a very deep and detailed way. That being said, while M&A played a bigger role historically for the company, there are so many great organic opportunities internally. It's just not our focus at this point in time. I'd also say, historically, when the company did M&A, more of an appetite to take on companies that were losing money. We feel very strongly today that if that were the case, that there would be something else within the P&L that we need to give. We do not want to take steps backwards on our bottom-line trajectory.

Excellent. Okay. Well, in a couple of time we have left, maybe I'll turn it back to you. Any closing remarks or key takeaways that you want to make sure people digest from the presentation.

Yes. I would just, I would say the same goal that we had at the Analyst and Investor Day, the breadth of opportunity at the company, kind of being the leader in each of the markets that we serve. You've also seen a company that has grown its addressable market opportunity significantly over the last 10 years, and we're not satisfied with stopping there. So, continue to drive incredible market expansion, continue to drive double-digit revenue growth and all of that wrapped up down a new area where we are profitable.

Excellent. Well, we very much appreciate you making the trip and for those sticking around this evening, we have a 4:45 panel with Goldman Sachs Capital Markets on the state of dynamics there with respect to health care. So, it should be an interesting panel to invite everyone to join that. Angie, thank you for making the trip.

Thank you, David.