AtriCure (ATRC) Q4 2025 Earnings Call Transcript

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DATE

Tuesday, Feb. 17, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• President & Chief Executive Officer — Michael H. Carrel
• Chief Financial Officer — Angela L. Wirick

TAKEAWAYS

• Total Revenue -- $534.5 million for the year, up 14.9% on a reported basis and 14.4% on a constant currency basis.
• Adjusted EBITDA -- $61.8 million for the year, a $30.6 million increase over 2024.
• Cash Generation -- $45 million in full-year cash generated, ending the year at $167.4 million in cash and investments.
• Gross Margin -- 75% for both the fourth quarter and full year, representing a 45-basis-point and 29-basis-point increase compared to 2024, respectively.
• Fourth Quarter Revenue -- $140.5 million, growing 13.1% on a reported basis and 12.1% constant currency over 2024.
• U.S. Revenue -- $435.4 million for the year, up 13.7%, with U.S. open ablation contributing $143.8 million, up 16.3%.
• International Revenue -- $99.2 million for the year, a 20.2% reported and 17.5% constant currency increase.
• Profitability Metrics -- Fourth quarter adjusted EBITDA was $19.9 million (up from $12.7 million); net income $1.8 million versus a $15.6 million net loss in 2024.
• Earnings Per Share -- $0.04 for the quarter and $(0.24) for the year; adjusted EPS $0.06 for the quarter and $(0.11) for the year, both improved over 2024.
• Franchise Performance -- Pain management revenue grew 24% in 2025 and 33% worldwide; left atrial appendage franchise grew 19% with open devices accelerating; open ablation revenue increased over 17%.
• Minimally Invasive (MIS) Segment -- MIS revenue declined by 24%-26% worldwide in 2025 and U.S. MIS revenue fell by 31.2%, attributed to pressure from PFA catheters.
• Product Launches -- Two new products launched in 2025: AtriClip Pro Mini and Cryo XT probe, with Cryo XT expected to "contribute more meaningfully to revenue in 2026."
• Strategic Clinical Trials -- LEAPS clinical trial completed enrollment of more than 6,500 patients, exceeding expectations, and the BOX X NOAF trial initiated with 960 patients randomized for postoperative AFib management.
• Guidance for 2026 -- Revenue expected between $600 million and $610 million, representing 12%-14% growth, with adjusted EBITDA guidance of $80 million-$82 million and anticipated net income for the year.
• Market Positioning -- Company highlighted product differentiation and recurring innovation, noting that AtriClip implants exceed 750,000 globally with a reported safety rate of 0.007%.

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RISKS

• The MIS franchise experienced a "decline in revenue in 2026, although at a moderated rate," as management stated ongoing pressure from PFA catheters continues to affect minimally invasive and hybrid ablation business.
• International revenue suffered from "a decline in sales in the U.K. due to ongoing funding and reimbursement uncertainty with the National Health Service," materially impacting Q4 results.
• Hybrid AFib therapy revenues dropped 24%-26% worldwide in 2025, and management "remain prudent in our outlook and are assuming continued pressure in our U.S. hybrid business in 2026."
• Management cited expected "net cash burn in the first quarter of 2026, followed by positive cash generation for the remainder of the year" due to seasonal outflows for compensation and investments.

SUMMARY

AtriCure (NASDAQ:ATRC) noted double-digit revenue and margin expansion, with 2025 revenue surpassing initial guidance and multiple growth franchises compensating for declines in MIS and hybrid ablation. New product introductions in both pain management and appendage management aided adoption rates and gross margin improvements, while strategic trials, including LEAPS and BOX X NOAF, advanced as planned and reinforced the company’s focus on long-term preventative treatment markets. Market entry from competitors was addressed as validation of the company’s opportunity and product leadership, with new quality metrics in cardiac surgery expected to drive further adoption of AtriCure’s solutions. 2026 guidance was reaffirmed with projected revenue acceleration, margin expansion, and prioritized investments tempered by acknowledged macro and segment-specific headwinds.

• Angela L. Wirick disclosed that in the LEAPS clinical trial, "half the patients got an AtriClip, half the patients got nothing," and device sales in the trial provided "a minimal contribution in any one quarter that we were doing enrollment."
• Fourth quarter U.K. revenue declined more than $1 million due to funding and reimbursement issues, with the NHS pulling reimbursement for pain management products and elective procedures facing delays.
• Management stated, "expect typical seasonality" in 2026, with Q1 revenue "roughly in line to down slightly with 2025" and improved gross margins forecast based on mix and efficiencies.
• Adjusted EBITDA margin reached 14% in Q4, but management "expect there to be a step down." as quarterly margin normalizes in 2026.
• No new product iterations for Encompass are scheduled before the dual-energy clamp, with management indicating current penetration and product performance remain growth drivers.
• CryoSphere Max had approximately 500 U.S. accounts by year-end, while active Flex Mini accounts exceeded 300, with the device making up 18% of appendage management revenue in 2025.
• Operating leverage improved as SG&A growth (6.7%) remained below top-line growth, and R&D, excluding one-time charges, grew approximately 11%, highlighting efficient capital allocation.
• Management reinforced ongoing commitment to "invest in game-changing clinical trials," while cautioning that both U.S. and international revenue outlooks factor continued U.K. and segment headwinds.

INDUSTRY GLOSSARY

• PFA (Pulsed Field Ablation): An emerging energy modality for cardiac ablation that uses electrical pulses to ablate tissue with the goal of reducing collateral damage compared to traditional radiofrequency ablation.
• LEAPS Trial: A randomized clinical trial evaluating the AtriClip device for stroke reduction in non-AFib patients undergoing cardiac surgery.
• BOX X NOAF Trial: A 960-patient trial focused on reducing the onset of postoperative atrial fibrillation in patients without preexisting AFib during cardiac surgery.
• SG&A (Selling, General, and Administrative): Operating expenses not directly tied to production, such as sales force, marketing, and administrative costs.
• CONVERGE Procedure: The company’s proprietary minimally invasive, hybrid ablation procedure for treating persistent atrial fibrillation.

Full Conference Call Transcript

Michael H. Carrel: 2025 was an exceptional year at AtriCure, Inc. 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 three of our four franchises driven by newer product launches, such as our CryoSphere Max probe 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 Cryo XT probe.

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%. It is now almost one 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 LEAPS, 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 LEAPS 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-AFib patients undergoing cardiac surgery, representing a global opportunity of nearly 1,400,000 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 LEAPS trial.

During the years ahead, we will continue to follow LEAPS patients as we await the results of the trial. Following LEAPS enrollment, we initiated our BOX X 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 a higher healthcare 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-AFib patients during cardiac surgery. We are pleased with our progress on the site initiation and enrollment to date 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 goals for this program center 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 RF 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 generator development in preparation for 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 Cryo XT device for pain management and amputation procedures in 2025 and continue to receive overwhelmingly positive surgeon feedback.

Patients are recovering faster than ever, experiencing less acute postoperative pain and, in many cases, reduced phantom limb pain as well. We are being deliberate in our rollout with each Cryo Nerve Block rep focusing on one account at a time to ensure adoption is sticky before expanding our user base. As we cultivate this opportunity, we expect Cryo XT to contribute more meaningfully to revenue in 2026. Taking a step back, each strategic initiative, coupled with continuous product innovation that is the hallmark of AtriCure, Inc., supports our vision to create standards of care across all of our markets.

BOX X NOAF and LEAPS 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, Inc.—and AtriCure, Inc. 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 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 those in thoracic surgery.

For the year, worldwide revenue grew 33% in 2025, marking an acceleration from 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 cryoablation 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%, again marking an acceleration over 2024. AtriClip Flex Mini and AtriClip Pro Mini largely drove this acceleration in growth, with 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 the 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, Inc. 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 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, Inc.’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 24% to 26% over 2024. We believe there is compelling clinical value for hybrid AF therapy in patients with longstanding persistent AFib. However, it is undeniable that PFA catheters are dominating 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 CONVERGE procedure. While these signals are positive, we are looking for evidence for further stabilization of our 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 and 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, Inc. Our progress is a testament to the dedication of our 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 standards of care in each one of our markets for many years to come. I will now turn the call over to Angela L. Wirick, our Chief Financial Officer. Angie?

Angela L. Wirick: 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 2024. U.S. revenue grew 12.6% to $114.3 million from 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 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. had 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 2025. Gross margin for the fourth quarter 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 co-development agreement for PFA technology in 2024 and offset by a $1 million milestone payment in 2025. Excluding these charges, R&D was approximately 2% higher in 2025 compared to the prior period, with a decrease in LEAPS clinical trial costs offset partially by enrollment activity in our BOX X NOAF clinical trial. SG&A expenses increased $6.2 million, or 8.5%, over 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 2025 was $0.04, and adjusted earnings per share was $0.06, representing a significant improvement over 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 and 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, which represented approximately 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 prioritized 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 drove U.S. revenue by nearly $69 million, or 22%, in 2025, more than offsetting the pressure from hybrid.

International revenues saw robust growth across major geographic regions and 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 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 the PFA partnership agreement in 2024 as well as the milestone payments in 2025. Excluding these charges, 2025 research and development expenses grew approximately 11%, driven by LEAPS and BOX X NOAF trial costs and a modest increase in headcount and related spend. SG&A expenses increased $19.7 million, or 6.7%, primarily on increased headcount 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 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 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 2025. From a margin perspective, we anticipate that we will see modest gross margin expansion in 2026 from the benefit of product and geographic mix as well as cost savings initiatives.

Angela L. Wirick: Additionally, as we have 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, Inc. We project research and development expenses to moderate slightly, growing in low teens on an organic basis and mid-teens factoring in PFA milestone payments in 2025 and 2026. Additionally, we expect SG&A spending to continue to grow below the top-line growth rate, supporting further improvements in overall profitability. On the bottom line, we are excited to reaffirm our 2026 expectation for adjusted EBITDA 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 $0.00 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.

With that, we anticipate a net cash burn in the 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 while improving profitability to over 20% adjusted EBITDA margin, and all with a focus on creating long-term value for our shareholders. With that, I will hand the call over to Mike.

Michael H. Carrel: Angie, thank you. In closing, I want to recognize our team for an outstanding year. You remained 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. We will now open for questions. Please press the appropriate key on your telephone and wait for your name to be announced. In the interest of time, we ask that you please limit yourself to one question and one follow-up. Our first question comes from William Plovanic with Canaccord Genuity. Your line is open. Great.

Thanks for taking my questions. Just first off, obviously, some news from a competitor a week or so ago had some 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 LEAPS trial, you continue to enroll—yeah. I mean, I am sorry. You continue to do follow-up. I know you have talked about, you know, we will see data, I think, at 50% to 75% to the event rate.

Just wondering if there has been any change in when we would expect to see some of that data, if it might accrue faster than expected or if it is on the timeline. Thanks for taking my questions.

Michael H. Carrel: Thank you, and appreciate that. And obviously, we are very cognizant of the competitive entry into the market. From our perspective, as I have mentioned on this call before, we take it in a really positive way that it validates our market. It tells you that you have two major top five medical device companies that have decided that cardiac surgery is a market that matters. It is a market that is a growth market that people are coming after and coming into. And we have established a leadership position in this market, and we are 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 to 2025. So we are seeing this impact on our business in a positive way. More people are in conversations. They are talking about managing the appendage. You now see it in the quality metrics. They are recognizing a trend we saw ten 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 have made the investments over that ten- to fifteen-year period to make sure that we did not stop innovating. We are on the tenth generation of a product. We have got minimally invasive products. We have 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 0.007% 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 have continued to innovate, as you have seen with our Flex Mini product that has established and accelerated growth as well. The Pro Mini product we rolled out last year. As we have mentioned, we have got another new product coming out in 2026. So we are not going to stop innovating or investing in clinical evidence. And you are seeing that clinical evidence as, Bill, you talked about the LEAPS trial. Six thousand five hundred and seventy-three 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 have already studied over 21,000 patients in over 100 peer-reviewed and published articles over the last ten years. So we feel like we are in a great position on that front. To your question, Bill, specifically around when LEAPS data will come out, we are not going to release data at 50%. What we get is a thumbs-up to continue. And so we have already passed by the 50% in terms of the number of events—thumbs-up, continue.

The trial is ongoing and in a good place. We actually do not see the data. We just get a positive thumbs-up from the committee, from the DSMB, at that point in time. It 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 are going to be able to release necessarily early on that. 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.

William Plovanic: Great. Thank you.

Michael H. Carrel: Thank you. Our next question comes from Matthew O’Brien with Piper Sandler. Your line is open.

Angela L. Wirick: Hi, Mike. Hi, Angie. This is Anna on for Matt. Thank you for taking our questions. 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 have set out today? Hi. Hi, Anna. It is 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. We have factored in, with any of our franchises, kind of a range that goes into the overall guide and feel very confident we are reaffirming the guide today of 12% to 14%, and have factored in some very, very mild competitive pressures as we think about the back half of the year. I think we are focused within our business on controlling what we can, which is continuing to spread the adoption of the Flex Mini clip. It is an excellent product. I 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 are thinking about that business going forward? Yeah. The softness that we saw, particularly in the U.S., came in our 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 growth in procedures year over year and on a repeat basis, we would expect some variability on that end. I think if you take a step back, in 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 24% open appendage management growth for the year, and I think that is showing the testament of the innovation with our Flex Mini clip and growing awareness and interest in treating appendages during cardiac surgery. Great. Thanks so much.

Michael H. Carrel: Thank you. Our next question comes from Mike Matson with Needham & Company. Your line is open. Yes, thanks for taking my question. So I have one just on LEAPS. So 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?

Angela L. Wirick: Mike, we do get paid for the devices that were used in the trial. As Mike mentioned, the LEAPS clinical trial was randomized one-to-one, so half of those devices ultimately would have been revenue-generating for us as a business. When you take a step back and look at the volume of open appendage management devices that we do, it is a minimal contribution in any one quarter that we were doing enrollment. I would also say, and I think we have 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 one-to-one. So I think there were probably some areas where we were losing revenue, so to speak, offset by other surgeons who were enrolled in the trial and were not necessarily prophylactically treating. The overall message here is yes, revenue-contributing, but on the volume that we were doing, not significant to any one quarter.

Michael H. Carrel: Okay. That is helpful. Just trying to figure out what it means. I know it was last summer, but okay.

Mike Matson: And then just on Encompass, I mean, obviously, this has been a home run product for AtriCure, Inc., and you are working on the dual-energy version, but that is going to require some trials and probably take a couple of years. So do you have any kind of new versions or enhancements planned in the interim to continue to drive the price mix and just increase penetration into CABG? Yeah. We do not necessarily have a new product iteration coming out. If you recall, we first released 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 are going to continue to market, talk to those customers, get them trained up, and do the work associated with that. In addition to that, we are running the BOX X NOAF trial, which is exclusively using the Encompass clamp with the AtriClip. So 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 is an area of getting exposure to some surgeons that want to be a part of that trial at major academic institutions, etc. It is really important to get them to be part of it.

So we will definitely get traction from a variety of different angles on the Encompass clamp, but no net new innovation at this point in time, nor do we think that it is necessary. Right now, that product is actually showing that we can get the times down to less than ten minutes total procedure time. So it is quite remarkable how we are able to get an incredible ablation in that really short period of time. We are getting more and more articles published. We recently had one that was a peer-reviewed article published. It was almost 90% success at one year in over 150 patients.

So this is something that we are seeing really, really good results with, and we just need to continue to be out there talking about it and talking about the benefits of getting a full ablation in. Okay. Great. Thank you.

Michael H. Carrel: Thank you. Our next question comes from Marie Yoko Thibault with BTIG. Your line is open.

Angela L. Wirick: Hi, good evening. Thanks for taking the questions. Wanted to see—maybe it is 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. One way I was thinking about it is 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 the 2025 U.S. revenue you did in appendage management.

Michael H. Carrel: We have not given really specific guidance on those particular areas. As we know, the overall market in this space is there are about 100,000 or so patients that undergo cardiac surgery. With the combination of the LEAPS trial and the AFib patients overall, we believe that is a very large market opportunity. About 70,000 to 100,000 of those patients are coronary bypass patients. So you have the breakdown that is a market that we will be in and is not connected to the valvular space.

I think you can see the numbers—that is, 35,000 to 40,000 or so mitral valves, and similar along those lines, maybe a little bit higher on the aortic valve side, depending on which reports you look at overall. And then there are other surgeries that happen to make up the total number overall. When you break down that particular market, when you look at it that way, we are 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 the mitral valve space, they are also doing an 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 is an Encompass clamp or our prior devices or other RF devices, combined with AtriClip at the same time. It is part of the Cox-Maze procedure that is there.

And so we feel like we have a built-in advantage in the sense that we have over 300 people out in the field that understand how AFib is treated, how you need to treat it properly, and the combination of the AtriClip with the ablation devices is a critical understanding that we have that others do not necessarily have. As we look at the CABG market, that is a greenfield approach, and we are the only ones really in that space exclusively.

Angela L. Wirick: Yeah. That is great detail, Mike. Thank you for that. A quick follow-up for Angie. I heard your discussion of modest gross margin expansion, which we are excited to see. On the OpEx leverage, we are used to 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 have going on? Thanks for taking the question.

Angela L. Wirick: I think you nailed it, Marie. I would 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 cannot necessarily call it a new product launch because it has been in the market for a couple of years now in the U.S., but we have been streamlining those costs. So you are 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 and should be an area of leverage in 2026. And the last point on the R&D costs, with the conclusion of enrollment in LEAPS, we are seeing a step down in those clinical trial costs. We still follow up patients, so there is still spend in the P&L. We are expecting a pretty strong year from a BOX X NOAF enrollment perspective. But the mix, the different trial design and size of both of those trials, says you are 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, low-teens growth in that area. Very good. Thank you.

Michael H. Carrel: Thank you. Our next question comes from Lilia-Celine Lozada with J.P. Morgan. Your line is open.

Angela L. Wirick: Great. Thanks so much for taking the question. I will 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 should we be keeping in mind as it relates to the progression of adjusted EBITDA moving forward?

Angela L. Wirick: Good question, Lily. The 14%—we are 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, expect there to be a step down. So 2026, the full year, should not look like a 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 are ahead on the bottom line—we have been talking about driving efficiency within the P&L and in our business for a very long time. I think you are seeing the benefit of size and scale in previous investments ultimately driving us to this point here. As we look forward, our main priorities are continuing to invest in game-changing clinical trials—LEAPS and BOX X 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 are super pleased with the progress on the bottom line. We would expect to well exceed the 2028 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 is 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 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 ratings is? Thanks so much.

Michael H. Carrel: Yeah. Maybe I will hit on a couple of things. If you look at globally, there are 2 million patients that undergo cardiac surgery, and in 2025, we treated about 50,000. So we are still very underpenetrated in that market. Both the LEAPS and the BOX X 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 get that for a trial of that size and scale to go after those markets.

So on a global basis, we are very underpenetrated overall in the market, not just on Encompass but on cryo, RF, etc., because there are a lot of surgeons that continue to use some of the original technology we have that works incredibly well and treats patients today. Encompass, obviously, is a big growth driver. You can see there is lots of opportunity for us.

Michael H. Carrel: Thank you. Our next question comes from Daniel Walker Stauder with Citizens JMP. Your line is open. Yeah. Great. Thanks. 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 was down slightly, so maybe it is 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?

Angela L. Wirick: Yeah, Danny, when you break down the different franchises in the U.K., the two areas where we saw the most impact were our pain management device, for which the NHS pulled reimbursement and said they felt like it 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 is an elective procedure, so we saw a bit of weakness there as they are prioritizing the more emergent procedures. A little bit less of an impact when we 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.

Michael H. Carrel: Got it. That is helpful. And just one follow-up for me on Cryo XT. You mentioned you were being more deliberate with your rollout. This might be because it is a little bit different of a sales point. So was curious if there is any more substantial training needed with surgeons compared to your prior launches, or any more nuance on this cryo launch as we think about our model and as it ramps up? Thanks.

Michael H. Carrel: Yeah. I think it is a great question, and it is the way that we approach new product areas that we are getting into with Cryo XT in particular. Very similar to when we went with Encompass—we 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 six to twelve months.

We were holding back a little bit as we made sure that we learned about the procedure, understood how it worked in a particular surgeon’s hands, got feedback on that, enabled our training, and educated us as we went forward to better train surgeons as we moved forward. And once we did that, we opened up to go after everybody. Same thing with XT. This is a very new area. We are talking to vascular surgeons now, orthopedic surgeons. These are not surgeons that we had typically had 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 roll it out to additional sites and go forward. We are in that learning phase right now. But by the middle of this year, we anticipate that we are going to open that up quite a bit. We are getting great feedback. All feedback so far has been positive. But you do learn as you roll that out, especially as you are going into a new therapeutic area like this with new surgeons that you have not worked with before. Great. Thanks for the questions.

Michael H. Carrel: Thank you. Our next question comes from John Glenn McAulay with Stifel. Your line is open. I am okay, Angie. First one on the PFA program. Just was hoping for an update there. A couple dynamics I noticed: one versus our model—and we might have been mismodeling it—but cost that you paid in the quarter was lower than we were expecting to your PFA partner. And could you just clarify if that was, again, mismodeling on our part or the charge was pushed out? And then just any potential impact on timing there and when we can expect the next update and for a trial to get going.

Angela L. Wirick: Yeah, John. I do not think it is mismodeling. We had said kind of a range of potential milestones that we thought could be met within 2025. The third milestone—roughly, call it $4 million—pushed 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 with really good results as we worked through the back end of 2025.

Michael H. Carrel: And it does not change the timeline. 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 timeframe we talked about at the Analyst Day. That is helpful. And I think it was last month you made some comments about CONVERGE and some improvements in a few accounts. I understand the dynamics are still fluid. You are still expecting declines this year, albeit at a lower rate.

Just wanted to get an update about one month on—just the state of the field for CONVERGE, what you are seeing on the ground, and particularly post the AFib symposium, any meetings with customers there and how the dynamics are looking now versus either a month ago or a year ago, however you think is optimal to frame it.

Michael H. Carrel: Yeah. I think that we continue to feel like there is optimism and lights. We are seeing many sites that had previously done CONVERGE, went away from it as they got into PFA, are now starting to do it again. But it is just not enough cases to feel confident to come up with a number that says, okay, I have got confidence that consistently every single quarter we are 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 look at their workflow again. So the good news is that we have a lot of new sites coming on board.

Just not enough to move the number at this point in time. So it is a positive outlook, but not ready to 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 feel like we are in a good place, and we are having a lot of good conversations with customers right now. Great. Thanks for taking my questions.

Michael H. Carrel: Thank you. Our next question comes from Danielle Joy Antalffy with UBS. Your line is open.

Danielle Joy Antalffy: Hi, thanks for taking my questions. It is Jaina on for Danielle. I know we are in the early innings of pain management expansion, and I know that you said reps are staying in one account until it is sticky. But I was just wondering, those reps that have successfully been executing, how long are they in the account before they are pivoting to the next account?

Michael H. Carrel: It is not about time. It is about getting the number of cases done with them and making sure that they are doing it properly. They have the protocol right, not just with the surgeon but also with the intensive care unit once they have the step-down units and how they take care of these patients. We do believe that usually takes, let us say, a three-month or so process, but it really means they have got to get 10 to 15 cases underneath their belt to feel really comfortable before we are ready to move on and get that consistency going that we can learn from them on that front.

But we are seeing good progress in a lot of different accounts, and almost every one of our reps has an account that is actually using the product today. So they are already down that pathway, and we have a pretty good-sized field team out there. That is great to hear. And then on open ablation specifically, how much runway is left from a CABG perspective? And then also, I know you are talking about getting more implanting physicians from the new trials like BOX X NOAF. I was just curious if you could comment on the percent penetration on that perspective as well.

Michael H. Carrel: Specifically to CABG, if you look at AFib patients alone, it is around 20% of the patients that undergo cardiac surgery that have AFib, and they are undergoing it for a coronary bypass. About 20% of those patients get it. But if you look at it in totality, when you think about BOX X NOAF and the expansion opportunity that exists there, that number is much less than 10% when you add in the non-AFib patients. So big market opportunity still sitting in front of us. Got it. Thank you so much.

Michael H. Carrel: Thank you. And our final question comes from Suraj Kalia with Oppenheimer. Your line is open.

Suraj Kalia: Hey, Mike, Angie, can you hear me all right?

Angela L. Wirick: Yeah. We can. Perfect.

Michael H. Carrel: So, Angie, one question, and forgive me if it is a little long. Just wanted to follow up on an earlier question. So, Angie, if you look at U.S. AtriClip, right, for the last—March 2025 being roughly flattish—is 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 LEAPS 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 does preventing—let us say, eCLIPSE is launched next year, 2027—what is preventing eCLIPSE to be used prophylactically post any cardiac surgery? Because there is a time gap till LEAPS data comes online. Thank you for taking my questions.

Angela L. Wirick: Alright. I will start, Suraj, with your questions. I would say the dynamic when you are 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 Mini product. We have 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 have seen strong growth within our open appendage management devices throughout 2025.

If I take a step back, in any one 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—a couple of points that are pricing-related. We are seeing a lot of customers switch over to our Flex Mini device. They like the lower profile that device provides, and it comes with the track record and strength of our previous AtriClip platform.

Michael H. Carrel: Sure. And to answer your question about what is the preventative measure that is out there kind of at launch, as I described earlier, when 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 have incredible products and new product launches coming out. We have got our own next-generation product coming out. The 21,000 patients that have been studied using our product today show exceptional closure. Again, I am re-mentioning the 100 peer-reviewed articles that have been out there, on top of the fact that we have an implant safety rate that is quite exceptional.

So I think our products alone demonstrate that, and our customers understand that. They also understand that we are the ones investing in the data that is coming out. Every cardiac surgery program, both in the U.S. and around the globe, understands there is only one company that is making the investments that we are making in clinical evidence. That is AtriCure, Inc. We are doing big randomized controlled trials underneath this. And you have 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 and see it in the left atrial appendage market already when you look at the occlusion market. And I would say that you are going to probably see it in this market as well. That does not mean that we are not getting ourselves ready for competitors coming in, trying to ride our coattails on the things that we have put out there and the trials that we have run and helping out with guidelines and those types of things.

We understand that, and we are very well aware that there are very good competitors, and we respect them. We will never take that for granted. We have got to earn the business of our customers every single day, and we are going to do that through innovation, clinical evidence, and 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 the appendage works, how AFib works, and how you manage that every single day. So I have a great deal of confidence in our team.

Again, that does not mean that they are not going to come in and make some noise. This is also why markets grow. I think that when you look at big markets—when Watchman came to market, then you had Amulet come to market—the market actually grew when big competitors came into the 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 I just talked about relative to our products and our team. Thank you. Thank you.

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

Michael H. Carrel: 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 timeframe. Have a great night. Bye now.

Operator: This concludes today’s conference call. Thanks for participating. You may now disconnect.

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