AtriCure, Inc. (ATRC) Earnings

Management highlights

### Strategic Clinical Trials - The Box NOAAF trial, investigating ablation and LAA management for cardiac surgery patients without a history of atrial fibrillation, has surpassed 50% enrollment with over 500 patients enrolled, and is on track to complete full enrollment of 960 patients by the end of 2026, well ahead of the original schedule. Data readouts are expected in H1 2027. - The LEAPS trial, investigating stroke reduction benefits of left atrial appendage management for cardiac surgery patients without AFib, continues to follow over 6,500 enrolled patients as it approaches outcome readouts. - Both trials support planned label expansion for AtriCure devices, creating new long-term growth catalysts in the cardiac surgery market. ### Product Innovation and Commercial Progress - CryoSphere Max for pain management has completed positive evaluations at multiple top U.S. cancer centers, with robust account growth and still low market penetration (less than 25% in thoracotomy), leaving significant long-term growth headroom. Sternotomy procedures are already beginning to drive incremental growth, with almost 100 accounts conducting testing. - The Cryo XT probe for amputation procedures received positive feedback at the Society for Vascular Surgery annual meeting, with early adoption showing improved patient recovery. Revenue contribution is expected to accelerate in the back half of 2026. - Atriclip Flex Mini and Pro Mini have received very positive surgeon feedback due to their reduced size and proven clinical performance, with upcoming launches in Europe and continued portfolio expansion across Asia. ### Competitive Positioning - Management views new entrants to the appendage management market as validation of the large, robust market opportunity. - AtriCure's competitive moat is built on three core pillars: continuous product innovation that delivers superior device performance, a unique 10-year compendium of unmatched clinical data from over 20,000 patients across multiple landmark trials, and a large global field and education team with deep specialized expertise in AFib and surgical appendage management. ### Financial Performance - Gross margin reached 77.2% in Q2 2026, up 270 basis points YoY, driven by favorable product/geographic mix and manufacturing efficiencies. - Total operating expenses increased 1.2% YoY (6.1% excluding a prior-year $5 million milestone payment), with R&D rising 9% to support clinical trials and pipeline development, and SG&A rising 5.3% as the company invests in growth while delivering operating leverage. - Adjusted EBITDA hit $27.3 million, up 78% YoY, with net income of $9 million compared to a $6.2 million net loss in Q2 2025. The company generated $22 million in operating cash flow during the quarter, ending with $167.8 million in cash and investments.

Guidance

- Full year 2026 revenue guidance is updated to $602 million to $610 million, representing 12.5% to 14% YoY growth. Growth is expected to be led by the pain management, appendage management, and open ablation franchises, with ongoing pressure in MIS ablation and select international markets. - Adjusted EBITDA guidance is raised to $85 million to $89 million for full year 2026, representing an approximate 14% adjusted EBITDA margin at the guidance midpoint, driven by strong first half performance and expanding operating leverage. - Full year 2026 guidance expects net income between $0.05 and $0.13 earnings per share, and adjusted earnings per share between $0.24 and $0.32. The company reiterates expectations for IPR&D charges in the back half of 2026 tied to PFA platform development milestones. - The company expects normal seasonal revenue trends in the back half of 2026, with Q3 revenue down 1% to 2% sequentially from Q2, followed by a revenue rebound in Q4. - The company reiterates expectations to maintain positive cash generation through the remainder of 2026, strengthening its balance sheet and financial flexibility.

Segment performance

AtriCure reported total worldwide Q2 2026 revenue of $153.6 million, an increase of 12.8% year-over-year (12.4% constant currency). U.S. revenue totaled $125.6 million, up 13.6% YoY, while international revenue reached $28 million, up 9.6% YoY (7.1% constant currency). 1. Pain Management: Worldwide revenue grew 27% YoY; U.S. revenue hit $27.1 million, up 27.8% YoY, accounting for 17.6% of total worldwide revenue. 75% of U.S. pain management revenue comes from CryoSphere Max, with early but growing contribution from the newly launched Cryo XT probe. 2. Open Ablation: Worldwide revenue grew 11% YoY; U.S. revenue was $40.9 million, up 12.1% YoY, accounting for 26.6% of total worldwide revenue. Growth is driven by adoption of the Encompass clamp, with expanding momentum in international markets. 3. Minimally Invasive (MIS) Ablation: U.S. revenue totaled $6 million, remaining under continued pressure and declining YoY due to market focus on PFA catheters. This segment accounts for 3.9% of total worldwide revenue. 4. Appendage Management: Worldwide revenue grew 14% YoY; U.S. revenue was $51.6 million, up 14.4% YoY, accounting for 33.6% of total worldwide revenue. The newly launched Atriclip Flex Mini and Pro Mini devices now represent 45% of total appendage management revenue, with strong surgeon adoption.

Risks & headwinds

- Minimally invasive ablation segment performance remains under continued pressure due to market focus on competing PFA catheters, with stabilization of referral patterns for hybrid procedures only seen in a small subset of accounts, and no expectation of a return to growth until stabilization occurs across a broader customer base. - Select international markets, specifically the UK and Germany, have seen softness in revenue, with reimbursement headwinds in the UK partially offset by recent positive reimbursement news for the Encompass clamp. This pressure has already been incorporated into full year 2026 guidance. - New competitive entry into the core appendage management market creates potential risk of share degradation and pricing pressure, despite management's confidence in AtriCure's competitive positioning. - A small near-term gross margin headwind is expected in the back half of 2026 as the company brings a new expanded manufacturing facility online.

Analyst Q&A

• Q: How have you incorporated new competitive appendage management product launches into guidance, and what factors will protect your market share from meaningful loss? /

  A: Competitive product trials in the back half of 2026 are already incorporated into current guidance. Management notes that new large-company entry validates the large market opportunity, and AtriCure holds key advantages: superior product design with a continuous innovation pipeline, over a decade of unmatched clinical evidence including two large landmark trials and 100+ peer-reviewed papers covering 20,000+ patients, and a 500-person global field and education team with deep specialized expertise in combined ablation and appendage management.

• Q: What is driving the accelerating growth in pain management, and can it become AtriCure's second largest franchise? /

  A: Growth is driven by three factors: ongoing low penetration in thoracotomy, where even top cancer centers are just starting to adopt CryoSphere Max; early adoption in sternotomy, which has already expanded to almost 100 testing accounts; and early revenue growth from the new Cryo XT probe for amputations. All three segments have significant long-term growth headroom, supporting continued expansion of the franchise.

• Q: Is the strong Q2 2026 profitability sustainable, and what is your updated long-term margin outlook? /

  A: Most of the 270 basis point gross margin improvement comes from sustainable shifts to higher-margin new products (CryoSphere Max, Atriclip Mini devices) and manufacturing cost improvements for mature products like Encompass, not one-time geographic mix shifts. The company is ahead of its original long-range profitability plan by almost two years, and remains on track to deliver top-tier medtech margins by 2030, with SG&A growing at mid-to-upper single digits, below top-line growth.

• Q: What is the timeline for the Box NOAAF trial after data readout, and what pathway will you use for FDA approval? /

  A: After enrollment completion, the 30-day post-op AFib endpoint will be available shortly, with data expected to be presented as a late breaker at the May 2027 AATS meeting. The company will submit to FDA around the same time for approval. This will be a PMA submission, supported by unique randomized controlled trial data that will provide a strong competitive differentiator for labeling. FDA approval is expected approximately 12 months after submission.