AtriCure, Inc. (ATRC) Q2 2025 Earnings Call Transcript

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Overview

The earnings call showed a mix of positive and negative elements. Strong product development and market expansion are counterbalanced by guidance indicating slowed growth and flat EBITDA. The Q&A reveals cautious optimism but acknowledges competitive pressures and uncertainties, especially in the MIS business. The market cap indicates potential for moderate stock movement, resulting in a neutral sentiment.

Key Financial Performance

Total Revenue $136 million, reflecting a 17% year-over-year increase. The growth was broad-based, driven by the strength and durability of the business and significant market opportunities across all franchises.

Adjusted EBITDA Over $15 million, a sizable increase compared to the previous year. This reflects improved profitability and cash generation.

Cash Generation Nearly $18 million in the second quarter, indicating strong financial performance.

Appendage Management Revenue Worldwide revenue grew over 20%, driven by open left atrial appendage management growth of 29%. In the U.S., the AtriClip FLEX Mini device contributed significantly, accounting for just over 20% of U.S. appendage management revenue.

Open Ablation Revenue Growth of 15% this quarter, led by the EnCompass Clamp, which has seen continued adoption.

Pain Management Revenue Grew nearly 43% in the quarter, driven by sales of cryoSPHERE MAX and cryoSPHERE+ probes. The cryoSPHERE MAX probe contributed over 50% of Pain Management sales.

U.S. Revenue $110.6 million, a 15.7% increase from the second quarter of 2024. Open ablation product sales were $36.5 million (up 18.6%), appendage management products were $45.1 million (up 18.9%), and Pain Management sales were $21.2 million (up 41.1%).

International Revenue $25.6 million, up 23.3% on a reported basis and 19.9% on a constant currency basis 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%).

Gross Margin 74.5% for the second quarter of 2025, a decrease of approximately 15 basis points compared to the second quarter of 2024. This was primarily due to less favorable geographic and product mix.

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. This included a $5 million milestone payment under the PFA co-development agreement. Excluding this, the increase was $8.7 million or 9.2%.

Adjusted Loss Per Share $0.02 in the second quarter of 2025 compared to $0.17 in the second quarter of 2024, showing improvement.

Cash and Investments $117.8 million at the end of the second quarter, with $17.9 million generated in cash during the quarter.

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Operating Highlights

AtriClip FLEX Mini and cryoSPHERE MAX: Drove accelerated growth in Pain Management and appendage management. First lower limb amputation procedures using cryoXT device for Pain Management were performed.

AtriClip PRO Mini: Announced first clinical use. Smallest surgical left atrial appendage implant available, enhancing visualization and precision during minimally invasive procedures.

EnCompass Clamp: Continued strong adoption, marking the third anniversary of its launch. Development of PFA-enabled EnCompass platform progressing with preclinical testing initiated.

cryoSPHERE MAX and cryoSPHERE+ probes: Significant expansion within existing accounts and new physician users. Launched cryoSPHERE MAX in Europe.

cryoXT probe: Completed initial procedures for Pain Management in lower limb amputations. Preparing for commercial launch later this year.

International expansion: Revenue grew 23.3% on a reported basis, driven by broad growth across franchises and major markets. Launched cryoSPHERE MAX in Europe.

U.S. market: Appendage management revenue grew 20%, driven by AtriClip FLEX Mini adoption. Pain Management sales grew 41.1%, with cryoSPHERE MAX contributing over 50% of sales.

Revenue growth: Total revenue of $136 million, a 17% year-over-year increase. Adjusted EBITDA of $15 million and $18 million in cash generation.

Clinical trials: Completed enrollment in LeAAPS trial with over 6,500 patients. Preparing for BoxX-NoAF trial to expand ablation technologies' addressable market.

Profitability: Improved adjusted EBITDA margins to 9%-11% for 2025. Loss per share reduced to $0.13 from $0.17 year-over-year.

Innovation focus: Continued investment in clinical and economic data for Cryo Nerve Block therapies. Advancing PFA-enabled EnCompass platform and preparing for first in-human use.

Non-opioid solutions: Expanding access to non-opioid Pain Management solutions globally, aligning with healthcare priorities.

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Risk or Challenges

Minimally Invasive Ablation Sales: Decline in sales due to increased adoption of PFA catheter technology in the U.S., creating competitive pressure.

Gross Margin: Slight decrease in gross margin (74.5%) compared to the previous year due to less favorable geographic and product mix, particularly in international markets.

Operating Expenses: Increase in operating expenses by 14.5%, driven by a $5 million milestone payment under the PFA co-development agreement and higher R&D expenses.

Hybrid Therapy Market Dynamics: Challenging market dynamics in the U.S. due to increased adoption of PFA catheter technology, impacting minimally invasive hybrid therapy.

Seasonality in Revenue: Expected low single-digit sequential decline in revenue from Q2 to Q3 due to typical summer seasonality.

Regulatory and Clinical Trial Risks: Dependence on successful outcomes of clinical trials like LeAAPS and BoxX-NoAF to expand market opportunities and gain regulatory approvals.

International Business Risks: Potential risks from geographic and product mix impacting margins and growth in international markets.

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Guidance & Outlook

Revenue Expectations: AtriCure expects to achieve $527 million to $533 million in revenue for the year 2025, reflecting growth of approximately 13% to 15% over 2024. International business growth is expected to outpace U.S. growth, driven broadly across franchises.

Product Launches and Market Expansion: The company plans to commercially launch the cryoXT probe for Pain Management in lower limb amputations later this year. Additionally, the cryoSPHERE MAX will expand access in Europe, and the AtriClip PRO Mini device will enhance minimally invasive procedures.

Clinical Trials and Innovations: Results from the LeAAPS clinical trial, which completed enrollment, are expected to support a stroke prevention indication exclusive to AtriClip surgical devices. The first patient enrollment in the BoxX-NoAF trial is expected later this year, aiming to expand the use of ablation technologies in cardiac surgery patients without preexisting Afib. The PFA-enabled EnCompass platform is progressing, with first in-human use anticipated later this year.

Profitability and Margins: The company raised its outlook for positive adjusted EBITDA to approximately $49 million to $52 million for the full year 2025, with adjusted EBITDA margins in the range of 9% to 11%. Gross margin for 2025 is expected to be comparable to 2024.

Quarterly Revenue Trends: A low single-digit sequential decline in revenue is expected from the second to third quarter due to typical summer seasonality, followed by a strong rebound in the fourth quarter.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:What impact has the completion of the LeAAPS trial had on physician utilization of AtriClip products?

A:The completion of the LeAAPS trial has had no significant impact on revenue or physician utilization of AtriClip products. The trial involved 6,500 patients, with half receiving a clip and half not, making it a small part of the overall business. Many physicians were already using AtriClips on all their patients before the trial. Overall, there has been an increase in adoption, with 30% growth in the U.S. and six successive quarters of sequential growth, partly due to competition raising awareness.

Q:How is the company managing discussions with EPs about PFA failures?

A:The company is managing discussions with EPs about PFA failures by being open and transparent, discussing clinical evidence and data, and emphasizing the additive benefits of epicardial solutions for nonresponders or failures. Conversations are collaborative and scientific, not argumentative. While some sites are returning and referring more patients, this has not yet impacted overall numbers. The company believes in the long-term market potential for epicardial ablation, supported by three major randomized controlled trials.

Q:Why does the guidance imply a deceleration in top-line growth and flat to slightly down adjusted EBITDA in the next two quarters?

A:The guidance reflects the company's philosophy of setting achievable targets with potential for outperformance. While the business has momentum from new product launches and international growth, there is expected pressure in the second half of 2025 from the hybrid business. There were no one-time expense drivers in the quarter, and the guidance strategy remains consistent with past practices.

Q:What trends are being observed in the MIS business, and when is it expected to bottom out?

A:The MIS business is under significant pressure from PFA competition, though some accounts are returning and showing bright spots. The company is cautious and does not expect a near-term recovery, emphasizing the strength of other business areas driving 17% overall growth. The timing for a rebound in the MIS business is uncertain, but the company remains optimistic about its long-term potential.

Q:What is the status of the cryoSPHERE MAX adoption in the U.S. and Europe?

A:As of the second quarter, cryoSPHERE MAX is in over half of U.S. accounts and represents a little over half of U.S. Pain Management revenue. In Europe, adoption is expected to be slower due to economic considerations, but the company is cautiously optimistic about long-term growth.

Q:Is the cryoSPHERE XT launch included in the current guidance, and what preparations are being made for its launch?

A:The cryoSPHERE XT launch is not included in the current guidance, and any revenue from it would be upside. Preparations include training and learning from initial use cases, with a focus on a larger launch in 2026.

Q:What are the next key milestones for the BoxX-NoAF, LeAAPS, and PFA programs?

A:For LeAAPS, follow-up is ongoing with up to 5 years for events to occur, and interim looks will happen at 50% and 75% of events. For BoxX-NoAF, first enrollment is expected this year, with robust enrollment anticipated in 2026. For the PFA program, the first in-human use of the EnCompass Clamp is expected by the end of this year.

Q:What is the expected growth rate for SG&A spend going forward?

A:SG&A spend is expected to grow in the mid- to upper single digits, below top-line growth, as the company benefits from scale while continuing to invest in commercial resources and market opportunities.

Q:What drove the growth in the appendage management business, and is there a halo effect from FLEX Mini?

A:The growth in the appendage management business was primarily driven by FLEX Mini in the U.S., which contributed over 20% of U.S. appendage management revenue. Outside the U.S., growth was seen across the AtriClip platform. There is some halo effect on FLEX-V, but most growth has shifted to FLEX Mini.

Q:What is driving the strong performance in the Pain Management business, and how should the back half of the year be modeled?

A:The strong performance in Pain Management is driven by the cryoSPHERE MAX, which reduces procedure time and increases adoption. Volume growth was over 30%, with additional benefit from pricing. The back half of the year is expected to outperform company guidance but may not sustain the 40% growth seen earlier due to tougher comps.

Q:What is the focus of the PFA clamp development, and what differentiates it?

A:The PFA clamp development focuses on integrating PFA into the EnCompass Clamp, which is already popular for its ergonomic design and efficiency. The clamp will combine PFA and RFA in one device, offering flexibility and simplicity for surgeons.

Q:What is the long-term growth potential for the open ablation business?

A:The open ablation business has significant long-term growth potential, driven by increasing penetration in CABG patients and the upcoming BoxX-NoAF trial, which could triple the market size. Current penetration is around 35-40% in Afib-only patients, with a goal of reaching 80-90%. International markets have even lower penetration, offering additional opportunities.

Q:Review of Unclear Management Responses

A:Management avoided giving a direct answer regarding the timing for a rebound in the MIS business, stating it is too difficult to provide a clear indication. They also set low expectations for near-term contributions from the cryoSPHERE XT launch and the LeAAPS trial, emphasizing long-term potential instead.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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The earnings call reflects strong product development, market expansion, and optimistic guidance, with new launches and international growth. Adjusted EBITDA guidance was raised, indicating financial health. The Q&A highlighted sustained growth in key segments and strategic focus on underpenetrated markets. While some uncertainties remain, the overall sentiment is positive, with a market cap indicating potential for significant stock movement.

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The earnings call shows mixed signals: strong revenue growth and product launches are positive, but uncertainties in market adoption and a lack of shareholder return plans are concerning. The Q&A reveals optimism in product adoption and financial metrics but also highlights pressure in certain business areas. The reaffirmed guidance and improved EBITDA are positive, but the lack of a buyback or dividend plan and some management evasiveness temper enthusiasm. Given the company's small market cap, the stock price is likely to remain stable in the short term.

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