AtriCure, Inc. (ATRC) Q3 2025 Earnings Call Transcript

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Overview

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.

Key Financial Performance

Total Revenue $134 million, reflecting a 16% increase year-over-year. Growth was driven across key franchises globally, demonstrating the expanding adoption of therapies and breadth of market opportunities.

Adjusted EBITDA Nearly $18 million, showing substantial improvement in profitability and cash generation. This was approximately $10 million above the third quarter of 2024, driven by strong revenue growth and disciplined investment.

Cash Generation Over $30 million in the third quarter, including a one-time cash inflow of approximately $6 million from a sale-leaseback transaction. This reflects strong operational performance and capital management.

U.S. Revenue $109.3 million, a 14.5% increase from the third quarter of 2024. Growth was driven by robust adoption of innovative technologies across franchises, despite a decline in minimally invasive ablation sales.

Open Ablation Product Sales (U.S.) $35.6 million, up 16.3% over 2024, driven by expanding use of the EnCompass Clamp.

Appendage Management Product Sales (U.S.) $45.4 million, up 21.5% over the third quarter of 2024, led by ramping adoption of the AtriClip FLEX-Mini device. Growth in open LAA devices was over 26% for the quarter.

Pain Management Product Sales (U.S.) $20.8 million, up 27.7% over the third quarter of 2024, reflecting increasing application of cryoSPHERE MAX and cryoSPHERE+ probes, primarily in thoracic procedures.

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

Gross Margin 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 $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%, reflecting a slower pace of spending as projects transitioned. SG&A expenses increased 6.8%, demonstrating leverage as operations scaled.

Adjusted Loss Per Share $0.01 in the third quarter of 2025 compared to $0.17 in the third quarter of 2024, reflecting improved profitability.

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Operating Highlights

AtriClip FLEX-Mini and cryoSPHERE MAX devices: Propelling growth in appendage and pain management in the U.S.

EnCompass Clamp: Driving growth in Europe and steady growth in the U.S.

cryoXT device: Setting a new standard for managing pain in lower limb amputation procedures.

Appendage management: Worldwide revenue grew over 20%, driven by AtriClip FLEX-Mini and PRO-Mini devices.

Pain management: Grew 28% in the quarter, driven by cryoSPHERE MAX and cryoSPHERE+ probes.

International revenue: Increased by 22%, with European sales up 24.2% and Asia Pacific sales up 18.8%.

Revenue growth: Achieved $134 million in total revenue, a 16% year-over-year increase.

Profitability: Generated $18 million in adjusted EBITDA and $30 million in cash in Q3.

Gross margin: Improved to 75.5%, driven by favorable product mix.

LeAAPS clinical trial: Completed enrollment of over 6,500 patients to evaluate AtriClip for stroke prevention.

BoxX-NoAF clinical trial: Initiated to reduce postoperative Afib in cardiac surgery patients.

Vanish registry: Launched to track outcomes of cryoXT in extremity amputation patients.

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Risk or Challenges

Minimally Invasive Hybrid Therapy: Market dynamics in the U.S. remain challenging due to increased adoption of PFA catheter technology, which could impact the growth and adoption of AtriCure's hybrid AF therapy.

CryoXT Device Adoption: While the cryoXT device shows promise in improving recovery and quality of life for patients, its adoption is expected to take time, potentially delaying revenue growth in this segment.

Geographic and Product Mix Variability: Potential impacts on gross margin due to varying geographic and product mix, which could affect profitability.

Regulatory and Clinical Trial Risks: Dependence on successful outcomes from clinical trials like LeAAPS and BoxX-NoAF, as well as regulatory approvals, poses risks to future product adoption and market expansion.

Supply Chain and Operational Costs: Expansion of the Ohio campus and other operational investments could lead to increased costs, impacting short-term financial performance.

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Guidance & Outlook

Revenue Guidance: The company expects to achieve approximately $532 million to $534 million in full year 2025 revenue, reflecting approximately 14% to 15% growth compared to 2024.

Gross Margin Outlook: Full year 2025 gross margin is expected to be slightly higher than 2024, with potential impacts from geographic and product mix.

Adjusted EBITDA Guidance: The company is raising its positive adjusted EBITDA outlook to approximately $55 million to $57 million for the full year 2025.

Adjusted Loss Per Share: Expected adjusted loss per share is approximately $0.23 to $0.26 for the full year 2025.

Capital Allocation Priorities: Focus on investments in clinical science, product development, and therapy awareness while driving expanded profitability.

Clinical Trials and Product Development: Progress in the BoxX-NoAF clinical trial and the LeAAPS trial, with expectations to transform standards of care in cardiac surgery. First-in-human use of the EnCompass Clamp enabled with PFA is expected in the coming months.

Market Expansion: Recent approvals of AtriClip devices in Japan and the launch of cryoXT for pain management are expected to drive market penetration and growth.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:Do you believe that the decrease in strain on hospital cath labs can actually lead to a rebound in the EPi-Sense business?

A:Michael H. Carrel stated that the decrease in strain on hospital cath labs is unlikely to have a material effect on the EPi-Sense business. Instead, the growth will be driven by non-responders to PFA techniques who have undergone multiple catheter ablations. He noted that some sites are starting to refer such patients, but not enough to drive significant revenue growth yet.

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

A:Michael H. Carrel mentioned that there are about 40,000 cardiac surgeries in Japan annually. While AtriClip is already on the market and is a leading player, the new technology approval will help accelerate growth. However, no immediate revenue is expected as the market is being prepped over the next six months, with rollout planned for next year.

Q:What is driving the acceleration in the open business, particularly with 19% growth?

A:Michael H. Carrel attributed the growth to increased adoption by CABG surgeons who historically did not perform ablations. The EnCompass technology has improved ease of use and reduced procedure time by 30 minutes. The CABG market remains underpenetrated, with only about 10% of CABG patients with Afib being treated. Angela Wirick added that U.S. open ablation grew over 16%, and international growth was 26%, driven by European adoption of EnCompass.

Q:Can you clarify the guidance on profitability and the sequential step down in adjusted EBITDA?

A:Angela Wirick explained that gross margin strength was due to favorable international mix, new product launches, and manufacturing efficiencies with EnCompass Clamp. Operating expenses were lighter due to transitioning clinical trials. The fourth-quarter guidance reflects conservatism and increased R&D spending for new trials.

Q:How sustainable is the high 20s growth in the Open Clip segment of the appendage management business?

A:Michael H. Carrel stated that the market is still underpenetrated, with less than 30% of U.S. sites using the product. There is significant upside potential as more sites and physicians adopt the technology. Angela Wirick added that FLEX-Mini contributed 30% of U.S. Open Clip revenue for the quarter.

Q:What is the long-term trajectory for the adjusted EBITDA metric?

A:Angela Wirick noted that while they are ahead of schedule on long-range plan metrics, they are not ready to guide for 2026. The goal is continued improvement and outperforming both top and bottom-line metrics.

Q:What are the next steps and timelines for the PFA program?

A:Michael H. Carrel stated that preclinical testing is complete, and first-in-human trials are expected by the end of this year or early next year. Clinical trials are likely to begin in early 2027.

Q:What is the status of the cryoXT launch and its contribution to pain management growth?

A:Michael H. Carrel described the launch as focused, with significant revenue contribution expected in 2026. The cryoSPHERE product is available in Europe and Australia.

Q:What discussions are happening among physicians regarding alternatives to opioids for pain management?

A:Michael H. Carrel highlighted the immediate and long-term benefits of cryo nerve block, such as faster recovery, reduced post-op pain, and potential reduction in phantom limb pain. Studies are ongoing to validate these benefits.

Q:How sustainable is the mid to high teens growth in the open ablation business?

A:Michael H. Carrel emphasized that awareness and existing technology like EnCompass are key drivers. The focus is on expanding treatment to post-op Afib patients, which could significantly increase the patient population.

Q:How could the WATCHMAN trial impact the appendage management business?

A:Michael H. Carrel believes the trial will not significantly impact awareness, as it is already high. The LeAAPS trial is expected to have a more substantial effect by expanding the market for prophylactic treatment of the appendage.

Q:What is the competitive position of AtriClip in the appendage management market?

A:Michael H. Carrel stated that AtriClip has the best products in the market, supported by extensive clinical data and innovation like FLEX-Mini. Competition is welcomed as it validates the market's importance.

Q:When will the hybrid business see growth again?

A:Michael H. Carrel noted that while the hybrid business has been impacted by PFA technologies, some sites are starting to perform cases again. Growth is expected as patients fail multiple catheter ablations and seek alternative technologies.

Q:Review of Unclear Management Responses

A:Management avoided providing specific numbers or timelines for certain questions, such as the long-term trajectory of adjusted EBITDA and the exact bottom for the hybrid business. Responses to questions about the sustainability of growth in certain segments and the impact of competition were also somewhat vague, relying on general statements rather than detailed data.

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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 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.

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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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