AtriCure Inc

Previous wording

We are a leading innovator in treatments for atrial fibrillation (Afib), left atrial appendage (LAA) management and post-operative pain management. Our ablation and left atrial appendage management (LAAM) products are used by physicians during both open-heart and minimally invasive procedures. In open-heart procedures, the physician is performing heart surgery for other conditions, and our products are used in conjunction with (or “concomitant” to) such a procedure. Minimally invasive procedures are performed on a standalone basis, and often include multi-disciplinary or “hybrid” approaches, combining surgical procedures using AtriCure ablation and LAAM products with catheter ablation procedures performed by electrophysiologists. Our pain management devices are used by physicians to freeze nerves during cardiothoracic or thoracic surgical procedures. We anticipate that substantially all of our revenue for the foreseeable future will relate to products we currently sell or are in the process of developing.

Current wording

We are a leading innovator in treatments for atrial fibrillation, left atrial appendage management and post-operative pain management. Our ablation and left atrial appendage management products are used by physicians during both open-heart and minimally invasive procedures. In open-heart procedures, the physician is performing heart surgery for other conditions, and our products are used in conjunction with (or “concomitant” to) such a procedure. Minimally invasive procedures are performed on a standalone basis, and often include multi-disciplinary or “hybrid” approaches, combining surgical procedures using AtriCure ablation and LAAM products with catheter ablation procedures performed by electrophysiologists. Our pain management devices are used by physicians to freeze nerves during cardiothoracic or thoracic surgical procedures. We anticipate that substantially all of our revenue for the foreseeable future will relate to products we currently sell or are in the process of developing.

Previous wording

In 2023, we realized significant global revenue growth and continued our strategic initiatives of product innovation, clinical science and expanding physician awareness and adoption through superior training and education. Our worldwide revenues for the year ended December 31, 2023 of $399,245 was an increase of 20.8% over the prior year driven by growing adoption across key product lines. Historically there have been limited competitors in our key markets, but we have begun to see more entrants that may cause variability in 2024 results. Highlights of the strategic and operational advancements in 2023 include:

Current wording

In 2024, we realized significant global revenue growth and continued our strategic initiatives of product innovation, clinical science and physician education and training to expand awareness and adoption. Our worldwide revenues for the year ended December 31, 2024 of $465,307 was an increase of 16.5% over the prior year driven by growing adoption across key product lines as well as new product launches. Historically there have been limited competitors in our key markets, but new entrants are marketing and developing competing products, procedures, and/or clinical solutions that may cause variability in our results.

Previous wording

CLINICAL SCIENCE. We continue to invest in studies to expand labeling claims, support various indications for our products and gather clinical data regarding our products.

Current wording

CLINICAL SCIENCE. We invest in studies to expand labeling claims, support various indications for our products and publish clinical data for therapies and procedures involving our products. During 2024, we supported the publication of 19 articles and 17 congress abstracts featuring clinical studies with our product.

Previous wording

LeAAPS. The Left Atrial Appendage Exclusion for Prophylactic Stroke Reduction (LeAAPS) IDE clinical trial is designed to evaluate the effectiveness of prophylactic LAA exclusion using the AtriClip LAA Exclusion System for the prevention of ischemic stroke or systemic arterial embolism in cardiac surgery patients without pre-operative AF diagnosis who are at risk for these events. This prospective, multicenter, randomized trial evaluates safety at 30 days post-procedure to demonstrate no increased risk with LAA exclusion during cardiac surgery, and efficacy over a minimum follow-up of five years post procedure. The trial provides for enrollment of up to 6,500 subjects at up to 250 sites worldwide. In January 2023, the first patient was enrolled in the trial, and we ended 2023 with nearly 1,400 patients enrolled. Site initiation and enrollment is ongoing.

Current wording

LeAAPS. The Left Atrial Appendage Exclusion for Prophylactic Stroke Reduction (LeAAPS) IDE clinical trial is designed to evaluate the effectiveness of prophylactic LAA exclusion using the AtriClip LAA Exclusion System for the prevention of ischemic stroke or systemic arterial embolism in cardiac surgery patients without pre-operative AF diagnosis who are at risk for these events. This prospective, multicenter, randomized trial evaluates safety at 30 days post-procedure to demonstrate no increased risk with LAA exclusion during cardiac surgery, and efficacy over a minimum follow-up of five years post procedure. The trial provides for enrollment of up to 6,500 subjects at up to 250 sites worldwide. In January 2023, the first patient was enrolled in the trial, and we ended 2024 with over 4,200 patients enrolled. Site initiation and enrollment is ongoing.

Previous wording

TRAINING. Our professional education and marketing teams conduct virtual and in-person training programs for physicians and healthcare professionals. These training methods ensure invaluable access to continuing education and awareness of our products and related procedures. During 2023, we launched new training courses for Advanced Practice Providers, pain management in pectus procedures, as well as a best practice course for developing arrhythmia programs, with a primary focus on Hybrid therapies. These trainings allow for collaborative, hands-on engagement with our physician partners and other healthcare professionals. Additionally, our professional education courses continue to benefit from use of inanimate models or synthetic cadavers, known as CADets. These reusable CADets provide a sustainable alternative to the use of animals or cadavers, in addition to reducing spend on training programs.

Current wording

TRAINING. Our professional education and marketing teams conduct a variety of virtual and in-person training programs for physicians and other healthcare professionals. These training methods ensure access to continuing education and awareness of our products and related procedures. During 2023, we launched new training courses for Advanced Practice Providers, pain management in pectus procedures, as well as a best practice course for developing arrhythmia programs, with a primary focus on Hybrid therapies. These trainings allow for collaborative, hands-on engagement with our physician partners and other healthcare professionals. Additionally, our professional education courses continue to be enhanced by the use of simulation models or synthetic cadavers, known as CADets. These reusable CADets provide a sustainable alternative to the use of cadaver specimens, in addition to increasing the efficiencies of education and more cost effective training alternatives. In 2024, we continue to innovate physician training to improve accessibility and efficiency for our physician partners. We are currently piloting the use of live streaming to enable remote proctoring and case observation.

Previous wording

SOCIETY GUIDELINES. In 2023, the American College of Cardiology (ACC), American Heart Association (AHA), American College of Clinical Pharmacy (ACCP), and HRS released Guidelines for Diagnosis and Management of Atrial Fibrillation, and they upgraded Left Atrial Appendage Management to the highest recommendation of Class 1 and now include Hybrid AF™ Therapy as a Class 2 recommendation. These societal guidelines are reflective of the scientific evidence suggesting that surgical and hybrid ablation is safe and effective for patients who have Afib.

Current wording

SOCIETY GUIDELINES. In 2024, the European Society of Cardiology (ESC) released Guidelines for Management of Atrial Fibrillation developed in collaboration with European Association of Cardio-Thoracic Surgery (EACTS), in which they upgraded LAAM to the highest Class 1 recommendation. During 2023, the American College of Cardiology (ACC), American Heart Association (AHA), American College of Clinical Pharmacy (ACCP) and HRS released Guidelines for Diagnosis and Management of Atrial Fibrillation, and upgraded LAAM to the highest recommendation of Class 1 and included Hybrid AF Therapy as a Class 2 recommendation. All major cardiac societal guidelines now include a Class 1 recommendation for surgical management of the left atrial appendage. These societal guidelines are reflective of the scientific evidence suggesting that surgical and hybrid ablation is safe and effective for patients who have Afib.

Previous wording

Worldwide revenue increased 20.8% (20.6% on a constant currency basis). In the United States, we experienced growth in all key product lines as a result of deepening market penetration and expanding physician adoption. Key products contributing to the increase in revenue in the United States were:

Current wording

Worldwide revenue increased 16.5% as reported and on a constant currency basis. We experienced growth in all key product lines as a result of deepening market penetration, continuing physician adoption and new product launches. International revenue increased 25.6% as reported and on a constant currency basis, across all franchises and major geographic regions, while key products contributing to the increase in revenue in the United States were:

Previous wording

•the ENCOMPASS® clamp in open ablation,

Current wording

•EnCompass clamp in open ablation,

Previous wording

•the cryoSPHERE® probe for post-operative pain management and

Current wording

•cryoSPHERE probes for post-operative pain management and

Previous wording

•the AtriClip® Flex⋅V®for appendage management.

Current wording

•AtriClip® Flex⋅V®for appendage management.

Previous wording

Cost of revenue and gross margin. Cost of revenue increased $14,436 primarily reflecting higher sales volumes. The gross margin increase of 80 basis points was driven by favorable production efficiencies, partially offset by less favorable geographic and product mix.

Current wording

Cost of revenue and gross margin. Cost of revenue increased $18,908 primarily reflecting higher sales volumes. Gross margin decreased by 55 basis points driven by less favorable geographic and product mix, as well as an increase in product costs.

Previous wording

Other income and expense. Other income and expense consists primarily of net interest expense and net foreign currency transaction losses. Net interest expense was $3,133 for 2023 and $2,992 for 2022.

Current wording

Other income and expense. During 2024, the Company recognized a loss on debt extinguishment of $1,362. See Note 9 - Indebtedness for related discussion. The remaining activity consists primarily of net interest expense and net foreign currency transaction losses.

Previous wording

As of December 31, 2023, we had cash, cash equivalents and investments of $137,285 and borrowing capacity of approximately $28,750 under the SVB Credit Facility. As a result of the new asset-based credit agreement with JPMorgan Chase Bank, N.A. entered into on January 5, 2024, unused borrowing availability increased to approximately $61,885 (see Note 8 – Indebtedness for related discussion). All cash equivalents and investments and most of our operating cash are held in United States financial institutions. A minor portion of our cash is held in foreign banks to support our international operations. We had net working capital of $191,677 and an accumulated deficit of $357,057 as of December 31, 2023.

Current wording

As of December 31, 2024, we had cash and cash equivalents of $122,721 and unused borrowing capacity of approximately $61,885 under our existing credit agreement. All cash equivalents and most of our operating cash are held in United States financial institutions. A minor portion of our cash is held in foreign banks to support our international operations. We had net working capital of $194,402 and an accumulated deficit of $401,755 as of December 31, 2024.

Previous wording

Uses of liquidity and capital resources. Our executive officers and Board of Directors review our funding sources and future capital requirements in connection with our annual operating plan and periodic updates to the plan. Our principal cash requirements include costs of operations, capital expenditures, debt service costs and other contractual obligations. Our future capital requirements depend on a number of factors, including, without limitation: market acceptance of our current and future products; investments in working capital; costs to develop and support our products, including professional training; costs to expand and support our sales and marketing efforts; operating and filing costs relating to changes in regulatory policies or laws; costs for clinical trials and to secure regulatory approval for new products; costs to prosecute, defend and enforce our intellectual property rights; maintenance and enhancements to our information systems and security; and possible acquisitions and joint ventures, including potential business integration costs. We continue to evaluate additional measures to maintain financial flexibility, and we will continue to closely monitor macroeconomic conditions including, but not limited to, inflationary pressures, rising interest rates, and fluctuations in currency exchange rates that may impact our liquidity and access to capital resources.

Current wording

Uses of liquidity and capital resources. Our executive officers and Board of Directors review our funding sources and future capital requirements in connection with our annual operating plan and periodic updates to the plan. Our principal cash requirements include costs of operations, capital expenditures, debt service costs and other contractual obligations. Our future capital requirements depend on a number of factors, including, without limitation: market acceptance of our current and future products; investments in working capital; costs to develop and support our products, including professional training, clinical trials and contractual development costs; costs to expand and support our sales and marketing efforts; operating and filing costs required by regulatory policies or laws; costs for clinical trials and to secure regulatory approval for new products; costs to prosecute, defend and enforce our intellectual property rights; costs to defend against and/or resolve litigation or claims against us; maintenance and enhancements to our information systems and security; and possible acquisitions and joint ventures, including potential business integration costs. We continue to evaluate additional measures to maintain financial flexibility, and we will continue to closely monitor macroeconomic conditions including, but not limited to, inflationary pressures, changing interest rates, and fluctuations in currency exchange rates that may impact our liquidity and access to capital resources.

Previous wording

As of January 5, 2024, we entered into an asset-based credit agreement with JPMorgan Chase Bank, N.A. as Administrative Agent, JPMorgan Chase Bank, N.A. and Silicon Valley Bank, a division of First-Citizen Bank and Trust Company, as Joint Lead Arrangers and Joint Bookrunners (Credit Agreement) that provides for a $125,000 asset-based revolving credit facility (ABL Facility), with an option to increase the revolving commitment by an additional $40,000. A portion of the ABL facility, limited to $5,000, is available for the issuance of letters of credit. The Credit Agreement has a three-year term and expires January 5, 2027. Amounts available to be drawn from time to time under the ABL Facility are determined by calculating the applicable borrowing base, which is based upon applicable percentages of the values of eligible accounts receivable, eligible inventory, eligible liquid assets, less reserves as determined by the Administrative Agent, all as specified in the Credit Agreement. The borrowings bear interest at a rate per annum equal to, at the Company's election: (i) an alternate base rate (ABR) plus an applicable margin or (ii) an adjusted term secured overnight financing rate (SOFR) plus an applicable margin. At the time of closing, the Company borrowed $61,865 and had unused borrowing availability of approximately $61,885. The proceeds of the ABL Facility were used to terminate the Company’s indebtedness under the SVB Loan Agreement. As a result of the new Credit Agreement, the $60,000 borrowings outstanding under the SVB Loan Agreement as of December 31, 2023 are classified as noncurrent in the Consolidated Balance Sheet.

Current wording

Credit facility. On January 5, 2024, we entered into an asset-based credit agreement with JPMorgan Chase Bank, N.A. as Administrative Agent, JPMorgan Chase Bank, N.A. and Silicon Valley Bank, a division of First-Citizen Bank and Trust Company, as Joint Lead Arrangers and Joint Bookrunners (Credit Agreement) that provides for a $125,000 asset-based revolving credit facility (ABL Facility), with an option to increase the revolving commitment by an additional $40,000. A portion of the ABL facility, limited to $5,000, is available for the issuance of letters of credit. The Credit Agreement has a three-year term and expires January 5, 2027. Amounts available to be drawn from time to time under the ABL Facility are determined by calculating the applicable borrowing base, which is based upon applicable percentages of the values of eligible accounts receivable, eligible inventory, eligible liquid assets, less reserves as determined by the Administrative Agent, all as specified in the Credit Agreement. The borrowings bear interest at a rate per annum equal to, at the Company's election: (i) an alternate base rate (ABR) plus an applicable margin or (ii) an adjusted term secured overnight financing rate (SOFR) plus an applicable margin. The proceeds of the ABL Facility were used to terminate the Company’s indebtedness under the prior loan agreement with Silicon Valley Bank. As of December 31, 2024, our outstanding debt was $61,865 and we had unused borrowing availability of approximately $61,885.

Previous wording

Our corporate headquarters lease agreement requires a $1,250 letter of credit which renews annually and remains outstanding as of December 31, 2023.

Current wording

Our corporate headquarters lease requires a $1,250 letter of credit which renews annually and remains outstanding as of December 31, 2024.

Previous wording

Capital Expenditures. We incur capital expenditures on an ongoing basis to continue investment in our growth and our ability to better serve our customers. Throughout 2021 through 2023, we continued expansion and renovation of our manufacturing and engineering facilities in our Mason, Ohio campus.

Current wording

Capital Expenditures. We incur capital expenditures on an ongoing basis to continue investment in our growth and our ability to better serve our customers. In recent years, we have expanded the manufacturing and engineering facilities in our Mason, Ohio campus and expect to continue to invest in facilities to support our growth.

Previous wording

Other Contractual Obligations. Our future obligations include both current and long-term obligations. In 2022, the Company entered into a clinical trial management agreement for the LeAAPS clinical trial. The terms of the agreement require we make milestone payments upon achievement of various enrollment and project milestones over the estimated ten-year term, yet the agreement may be terminated early for any reason. Furthermore, we incur additional variable costs, including pass through costs from clinical trial sites. We expect to disburse between $14,000 and $17,000 of fixed and variable costs based on estimated achievement of milestone payments, site initiation and trial enrollment within the next twelve months.

Current wording

Other Contractual Obligations. Our future obligations include both current and long-term obligations. In 2022, the Company entered into a clinical trial management agreement for the LeAAPS clinical trial. The terms of the agreement require payments upon achievement of various enrollment and project milestones over the estimated ten-year term, yet the agreement may be terminated early for any reason. Furthermore, we incur additional variable costs, including pass through costs from clinical trial sites. We expect to disburse between $14,000 and $17,000 of fixed and variable costs based on estimated achievement of milestone payments, site initiation and trial enrollment within the next twelve months.

Previous wording

We have operating and finance leases primarily for our corporate offices, manufacturing and warehouse facilities and automobiles. Our finance leases consist primarily of principal and interest payments related to our Mason, Ohio headquarters building. As of December 31, 2023, we have current finance lease obligations of $1,086 and long-term obligations of $8,061. Our operating leases for office and warehouse space includes current obligations of $1,447 and long-term obligations of $3,307. For additional information, see Note 9 – Leases.

Current wording

We have operating and finance leases primarily for our offices, manufacturing and warehouse facilities and automobiles. Our finance leases consist primarily of principal and interest payments related to our Mason, Ohio headquarters building. As of December 31, 2024, current finance lease obligations are $1,186 and long-term obligations are $7,281. Our operating leases for office and warehouse space includes current obligations of $1,619 and long-term obligations of $4,579 as of December 31, 2024. For additional information, see Note 10 – Leases.

Previous wording

We have contractual obligations for contingent consideration payments related to the SentreHEART acquisition. Subject to the terms and conditions of the SentreHEART merger agreement, such contingent consideration would be paid in AtriCure common stock and cash, up to a specified maximum number of shares. As of December 31, 2023, we believe the likelihood of payment is remote, and the estimated fair value of the contingent consideration is $0. See Note 2 – Fair Value.

Current wording

We have a contractual obligation for a contingent consideration payment under the SentreHEART merger agreement that would be paid in AtriCure common stock and cash, up to a specified maximum number of shares. As of December 31, 2024, we believe the likelihood of payment is remote, and the estimated fair value of the contingent consideration is $0. See Note 2 – Fair Value.

Previous wording

Sources of liquidity. We believe that our current cash, cash equivalents and investments, along with the cash we expect to generate or use for operations or access via our Credit Agreement, will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next twelve months. However, we have on file with the SEC a shelf registration statement which allows us to sell any combination of debt securities, common stock, preferred stock, warrants, depository shares and units in one or more offerings should we choose to do so in the future. We expect to maintain the effectiveness of the shelf registration statement for the foreseeable future.

Current wording

Sources of liquidity. We believe that our current cash and cash equivalents, along with the cash we expect to generate or use for operations or access via our Credit Agreement, will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next twelve months. However, we have a shelf registration statement on file with the SEC which allows us to sell any combination of debt securities, common stock, preferred stock, warrants, depository shares and units in one or more offerings should we choose to do so in the future. We expect to maintain the effectiveness of the shelf registration statement for the foreseeable future.

Previous wording

Cash flows used in financing activities. Net cash from financing activities increased by $7,027 in 2023 compared to 2022, reflecting savings of $5,644 due to fewer shares repurchased at a lower value for payment of taxes on stock awards and an increase of $1,536 of proceeds from the employee stock purchase plan and stock option exercise activity.

Current wording

Cash flows used in financing activities. Net cash used in financing activities increased by $3,571 in 2024 compared to 2023, driven by $1,686 payment for extinguishment of debt and financing fees, net of borrowings, and a $1,491 decrease in proceeds from stock option exercises and the employee stock purchase plan.

Previous wording

Inflationary pressures may have an adverse impact on our results of operations or financial condition in the foreseeable future. Inflation has impacted our operating costs throughout 2023 and 2022. Continued increases in our cost of revenue may affect our ability to maintain our gross margin if the selling prices of our products do not increase commensurately, while continued increases in our operating expenses may adversely affect our operating results and the ability to make discretionary investments. We will continue to monitor the impact of inflation on our cost of revenue and operating expenses.

Current wording

Inflationary pressures may have an adverse impact on our results of operations or financial condition in the foreseeable future. Inflation has impacted our operating costs throughout 2024 and 2023. Continued increases in our cost of revenue may affect our ability to maintain our gross margin if selling prices of our products do not increase commensurately, while continued increases in our operating expenses may adversely affect our operating results and the ability to make discretionary investments. We will continue to monitor the impact of inflation on our cost of revenue and operating expenses.

Previous wording

Income Taxes—Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities from changes in tax rates is recognized in the period that includes the enactment date.

Current wording

Income Taxes—Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases along with operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities from changes in tax rates is recognized in the period that includes the enactment date.