AtriCure Inc.

05/02/2024 | Press release | Distributed by Public on 05/02/2024 09:16

Quarterly Report for Quarter Ending March 31, 2024 (Form 10-Q)

atrc-20240331
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_____________________________________________
FORM 10-Q
___________________________________________________________________________________________
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
or
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____________to_____________
Commission File Number 000-51470
_____________________________________________
AtriCure, Inc.
(Exact name of Registrant as specified in its charter)
_____________________________________________
Delaware 34-1940305
(State or other jurisdiction of
incorporation)
(IRS Employer
Identification No.)
7555 Innovation Way
Mason, OH45040
(Address of principal executive offices)
(513) 755-4100
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
_____________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $.001 par value ATRC NASDAQ Global Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes☒No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ☒ Accelerated Filer ☐ Emerging growth company ☐
Non-Accelerated Filer ☐ Smaller reporting company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act: ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): YES ☐NO ☒
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class
Outstanding at April 29, 2024
Common Stock, $.001 par value
48,382,325

Table of Contents
Table of Contents
Page
PART I. FINANCIAL INFORMATION
Item 1.
Condensed Consolidated Financial Statements (Unaudited)
3
Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023
3
Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2024 and 2023
4
Condensed Consolidated Statements of Stockholders' Equity for the Three Months Ended March 31, 2024 and 2023
5
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023
6
Notes to Condensed Consolidated Financial Statements
7
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
17
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
21
Item 4.
Controls and Procedures
21
PART II. OTHER INFORMATION
22
Item 1.
Legal Proceedings
22
Item 1A.
Risk Factors
22
Item 5.
Other Information
22
Item 6.
Exhibits
22
Signatures
23

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ATRICURE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Per Share Amounts)
(Unaudited)
March 31,
2024 		December 31,
2023
Assets
Current assets:
Cash and cash equivalents $ 64,967 $ 84,310
Short-term investments 40,990 52,975
Accounts receivable, less allowance for credit losses of $350 and $500
55,319 52,501
Inventories 71,945 67,897
Prepaid and other current assets 12,004 8,563
Total current assets 245,225 266,246
Property and equipment, net 42,035 42,435
Operating lease right-of-use assets 4,199 4,324
Intangible assets, net 62,123 63,986
Goodwill 234,781 234,781
Other noncurrent assets 3,265 2,160
Total Assets $ 591,628 $ 613,932
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 28,991 $ 27,354
Accrued liabilities 29,719 44,682
Current maturities of lease liabilities 2,542 2,533
Total current liabilities 61,252 74,569
Long-term debt 61,865 60,593
Finance and operating lease liabilities
10,956 11,368
Other noncurrent liabilities 1,242 1,234
Total Liabilities 135,315 147,764
Commitments and contingencies (Note 9)
Stockholders' Equity:
Common stock, $0.001 par value, 90,000 shares authorized and 48,381 and 47,526 issued and outstanding
48 48
Additional paid-in capital 827,288 824,170
Accumulated other comprehensive loss (697) (993)
Accumulated deficit (370,326) (357,057)
Total Stockholders' Equity 456,313 466,168
Total Liabilities and Stockholders' Equity $ 591,628 $ 613,932
See accompanying notes to condensed consolidated financial statements.
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ATRICURE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended
March 31,
2024 2023
Revenue $ 108,851 $ 93,494
Cost of revenue 27,583 23,885
Gross profit 81,268 69,609
Operating expenses:
Research and development expenses 19,845 15,327
Selling, general and administrative expenses 72,340 60,064
Total operating expenses 92,185 75,391
Loss from operations (10,917) (5,782)
Other income (expense):
Interest expense (1,677) (1,636)
Interest income 952 875
Loss on debt extinguishment
(1,362) -
Other income (expense)
(82) 145
Loss before income tax expense (13,086) (6,398)
Income tax expense 183 78
Net loss $ (13,269) $ (6,476)
Basic and diluted net loss per share $ (0.28) $ (0.14)
Weighted average shares outstanding-basic and diluted 46,719 46,107
Comprehensive income (loss):
Unrealized gain on investments $ 539 $ 1,041
Foreign currency translation adjustment (243) (17)
Other comprehensive income 296 1,024
Net loss (13,269) (6,476)
Comprehensive loss, net of tax $ (12,973) $ (5,452)
See accompanying notes to condensed consolidated financial statements.
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ATRICURE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In Thousands)
(Unaudited)
Three Months Ended March 31, 2023
Common Stock
Additional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
Equity
Shares
Amount
Balance-December 31, 2022
46,563 $ 47 $ 787,422 $ (326,619) $ (4,096) $ 456,754
Impact of equity compensation plans 681 - 3,543 - - 3,543
Other comprehensive income - - - - 1,024 1,024
Net loss - - - (6,476) - (6,476)
Balance-March 31, 2023
47,244 $ 47 $ 790,965 $ (333,095) $ (3,072) $ 454,845
Three Months Ended March 31, 2024
Common Stock
Additional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
Equity
Shares
Amount
Balance-December 31, 2023
47,526 $ 48 $ 824,170 $ (357,057) $ (993) $ 466,168
Impact of equity compensation plans 855 - 3,118 - - 3,118
Other comprehensive income - - - - 296 296
Net loss - - - (13,269) - (13,269)
Balance-March 31, 2024
48,381 $ 48 $ 827,288 $ (370,326) $ (697) $ 456,313
See accompanying notes to condensed consolidated financial statements.
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ATRICURE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended
March 31,
2024 2023
Cash flows from operating activities:
Net loss $ (13,269) $ (6,476)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Share-based compensation expense 9,265 8,760
Depreciation 2,589 2,205
Amortization of intangible assets 1,863 738
Amortization of deferred financing costs 176 121
Amortization of investments 107 169
Loss on debt extinguishment
1,362 -
Other non-cash adjustments 190 160
Changes in operating assets and liabilities:
Accounts receivable (2,789) (2,900)
Inventories (4,145) (2,847)
Other current assets (3,458) (2,472)
Accounts payable 2,093 3,066
Accrued liabilities (14,888) (4,819)
Other noncurrent assets and liabilities (112) 216
Net cash used in operating activities (21,016) (4,079)
Cash flows from investing activities:
Sales and maturities of available-for-sale securities 12,418 31,315
Purchases of property and equipment (2,774) (2,502)
Net cash provided by investing activities 9,644 28,813
Cash flows from financing activities:
Proceeds from revolving credit facility, net of financing costs
61,210 -
Payments on debt and leases (62,065) (240)
Payment of financing costs and bank fees
(860) (60)
Proceeds from stock option exercises 390 522
Shares repurchased for payment of taxes on stock awards (6,537) (5,739)
Net cash used in financing activities (7,862) (5,517)
Effect of exchange rate changes on cash and cash equivalents (109) 25
Net (decrease) increase in cash and cash equivalents
(19,343) 19,242
Cash and cash equivalents-beginning of period 84,310 58,099
Cash and cash equivalents-end of period $ 64,967 $ 77,341
Supplemental cash flow information:
Cash paid for interest $ 726 $ 1,487
Net cash paid (received) for income taxes 17 (12)
Non-cash investing and financing activities:
Accrued purchases of property and equipment 860 787
See accompanying notes to condensed consolidated financial statements.
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ATRICURE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except per share amounts)
(Unaudited)

1.DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of the Business-The "Company" or "AtriCure" consists of AtriCure, Inc. and its wholly-owned subsidiaries. The Company is a leading innovator in surgical treatments and therapies for atrial fibrillation (Afib), left atrial appendage (LAA) management and post-operative pain management, and sells its products to medical centers globally through its direct sales force and distributors.
Basis of Presentation-The accompanying interim financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (SEC). All intercompany accounts and transactions have been eliminated in consolidation. The accompanying interim financial statements are unaudited, but in the opinion of the Company's management, contain all normal, recurring adjustments considered necessary to present fairly the financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America (GAAP) applicable to interim periods. Certain information and footnote disclosures included in annual financial statements prepared in accordance with GAAP have been omitted or condensed. The Company believes the disclosures herein are adequate to make the information presented not misleading. Results of operations are not necessarily indicative of the results expected for the full year or for any future period.
The accompanying interim financial statements should be read in conjunction with the Company's audited financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC. There have been no changes in the Company's significant accounting policies for the three months ended March 31, 2024 as compared to the significant accounting policies described in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.
Use of Estimates-The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including inventories, intangible assets, valuation allowance for deferred income tax assets, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense, including share-based compensation expense. Estimates are based on historical experience, where applicable, and other reasonable assumptions. Actual results could differ from those estimates.
Segments-The Company's chief operating decision maker is its Chief Executive Officer, who reviews financial information presented on a consolidated basis, accompanied only by revenue information by product type and geographic area, for purposes of allocating resources and evaluating financial performance. Accordingly, the Company has determined that it has a single operating segment. The Company's long-lived assets are located in the United States, except for $3,625 as of March 31, 2024 and $3,432 as of December 31, 2023 located primarily in Europe.
Earnings Per Share-Basic and diluted net loss per share are computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Since the Company has experienced net losses for all periods presented, net loss per share excludes the effect of 2,615 and 1,882 shares as of March 31, 2024 and 2023 because they are anti-dilutive. Therefore, the number of shares used for basic and diluted net loss per share are the same.
2.FAIR VALUE
The Financial Accounting Standards Board's (FASB) Accounting Standards Codification (ASC) 820, "Fair Value Measurements and Disclosures" (ASC 820), defines fair value as the exchange price that would be received for an asset or paid to settle a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:
•Level 1-Quoted prices in active markets for identical assets or liabilities.
•Level 2-Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•Level 3-Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
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ATRICURE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except per share amounts)
(Unaudited)
The following table represents the Company's fair value hierarchy for its financial assets measured at fair value on a recurring basis as of March 31, 2024:
Quoted Prices in
Active Markets for
Identical Assets
(Level 1) 		Significant Other
Observable Inputs
(Level 2) 		Significant Other
Unobservable
Inputs (Level 3) 		Total
Assets:
Money market funds $ - $ 55,411 $ - $ 55,411
Government and agency obligations 12,852 - - 12,852
Corporate bonds - 25,891 - 25,891
Asset-backed securities - 2,247 - 2,247
Total assets $ 12,852 $ 83,549 $ - $ 96,401
There were no changes in the levels or methodology of measurement of financial assets and liabilities during the three months ended March 31, 2024.
The following table represents the Company's fair value hierarchy for its financial assets measured at fair value on a recurring basis as of December 31, 2023:
Quoted Prices in
Active Markets for
Identical Assets
(Level 1) 		Significant Other
Observable Inputs
(Level 2) 		Significant Other
Unobservable
Inputs (Level 3) 		Total
Assets:
Money market funds $ - $ 77,864 $ - $ 77,864
Government and agency obligations 12,711 - - 12,711
Corporate bonds - 38,033 - 38,033
Asset-backed securities - 2,231 - 2,231
Total assets $ 12,711 $ 118,128 $ - $ 130,839
Contingent Consideration. The Company's contingent consideration arrangements arising from the SentreHEART acquisition obligate the Company to pay certain defined amounts to former shareholders of SentreHEART if specified milestones are met related to the aMAZE™ IDE clinical trial, including PMA approval and reimbursement for the therapy involving SentreHEART's devices. The PMA approval milestone expired December 31, 2023. The Company assessed the projected probability of payment during the contractual achievement periods to be remote, resulting in no reported fair value as of March 31, 2024 and December 31, 2023.
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ATRICURE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except per share amounts)
(Unaudited)
3.INVESTMENTS
Investments as of March 31, 2024 consisted of the following:
Cost Basis Unrealized
Losses 		Fair Value
Corporate bonds $ 26,000 $ (109) $ 25,891
Government and agency obligations 12,999 (147) 12,852
Asset-backed securities 2,252 (5) 2,247
Total $ 41,251 $ (261) $ 40,990
Investments as of December 31, 2023 consisted of the following:
Cost Basis Unrealized
Losses 		Fair Value
Corporate bonds $ 38,514 $ (481) $ 38,033
Government and agency obligations 12,998 (287) 12,711
Asset-backed securities 2,263 (32) 2,231
Total $ 53,775 $ (800) $ 52,975
The gross realized gains or losses from sales of available-for-sale investments were not significant in the three months ended March 31, 2024 and 2023.
The cost and fair value of investments in debt securities, by contractual maturity, as of March 31, 2024 were as follows:
Available-for-sale
Amortized Cost Fair Value
Due in 1 year or less
$ 38,999 $ 38,743
Instruments not due at a single maturity date 2,252 2,247
Total $ 41,251 $ 40,990
Instruments not due at a single maturity date consist of asset-backed securities. Actual maturities may differ from the contractual maturities due to call or prepayment rights.
4.INVENTORIES
Inventories consist of the following:
March 31,
2024 		December 31,
2023
Raw materials $ 35,862 $ 36,751
Work in process 5,789 3,582
Finished goods 30,294 27,564
Total $ 71,945 $ 67,897
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ATRICURE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except per share amounts)
(Unaudited)
5.INTANGIBLE ASSETS
The following table provides a summary of the Company's intangible assets:
March 31, 2024 December 31, 2023
Cost Accumulated
Amortization 		Cost Accumulated
Amortization
Technology $ 46,470 $ 10,822 $ 46,470 $ 10,084
Patents 30,000 3,525 30,000 2,400
Total $ 76,470 $ 14,347 $ 76,470 $ 12,484
The following table summarizes the allocation of amortization expense of intangible assets:
Three Months Ended
March 31,
2024 2023
Cost of revenues $ 1,125 $ -
Selling, general and administrative expenses 738 738
Total $ 1,863 $ 738
Future amortization expense is projected as follows:
2024 (excluding the three months ended March 31, 2024)
$ 5,590
2025 8,353
2026 9,553
2027 10,453
2028 6,553
2029 and thereafter
21,621
Total $ 62,123
6.ACCRUED LIABILITIES
Accrued liabilities consist of the following:
March 31,
2024 		December 31,
2023
Accrued compensation and employee-related expenses $ 24,271 $ 39,425
Sales returns and allowances 2,749 2,503
Other accrued liabilities 2,699 2,754
Total $ 29,719 $ 44,682
7.INDEBTEDNESS
On January 5, 2024, the Company entered into a credit agreement (Credit Agreement) with JPMorgan Chase Bank, N.A., as administrative agent, and JPMorgan Chase Bank, N.A., as bookrunner and lead arranger (JPMCB), and Silicon Valley Bank, a Division of First-Citizens Bank & Trust Company, as Joint Lead Arrangers and Joint Bookrunners, and the lenders party thereto (Lenders). The Credit Agreement provides for an asset based revolving credit facility (ABL Facility) in an amount of up to $125,000. Borrowing availability under the ABL Facility is based on the lesser of $125,000 or a borrowing base calculation as defined by the Credit Agreement. The Company may request an increase in the revolving commitment by up to $40,000 (not to exceed a total of $165,000). A portion of the ABL Facility, limited to $5,000, is available for the issuance of letters of credit by JPMCB or other financial institutions. JPMCB in its sole discretion, may create swingline loans by advancing floating rate revolving loans requested. Any such swingline loans will reduce availability under the ABL Facility on a dollar-for-dollar basis.
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ATRICURE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except per share amounts)
(Unaudited)
At closing, the Company borrowed $61,865. The proceeds of the ABL Facility were used to terminate the Company's outstanding indebtedness and final fee under the Loan and Security Agreement with Silicon Valley Bank (SVB Loan Agreement). Certain prepayment and early termination fees under the SVB Loan Agreement were waived at termination. The termination of the SVB Loan Agreement was treated as a debt extinguishment and the resulting loss on debt extinguishment is $1,362. As of March 31, 2024, the Company had borrowings of $61,865 and had borrowing capacity of $61,885 under the ABL facility.
The Credit Agreement has a three-year term, and all outstanding borrowings are due upon maturity of the Credit Agreement on January 5, 2027. Through January 2025, the Company's required minimum utilization of the ABL facility is 40% of the aggregate revolving commitment or $50,000. Subject to customary exceptions and restrictions, the Company may voluntarily prepay outstanding amounts under the ABL Facility at any time thereafter without premium or penalty. Any voluntary prepayments made will not reduce commitments under the ABL Facility. The Credit Agreement contains mandatory prepayment provisions which require prepayment of amounts outstanding under the ABL Facility upon specified events or Availability shortfall.
Future maturities of long-term debt are projected as follows:
2024 (excluding the three months ended March 31, 2024) $ -
2025 -
2026 -
2027 61,865
2028 -
Total long-term debt, of which $61,865 is noncurrent
$ 61,865
The ABL Facility is subject to a facility fee of 0.37% per annum of the daily available revolving commitment and paid on a quarterly basis. Outstanding amounts under the Credit Agreement 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. All swingline loans bear interest at a rate per annum equal to the ABR plus the applicable margin under the Credit Agreement. Alternate base rate is equal to the greater of Prime, the NYFRB Rate plus 0.50% or Adjusted Term SOFR Rate plus 1.00%. The applicable margin on borrowings will adjust ranging 1.50% to 1.75% per annum for ABR borrowings and from 2.50% to 2.75% per annum for SOFR term borrowings determined by the average historical excess availability. Participation and fronting fees are accrued and paid on a quarterly basis.
The ABL Facility is secured by the assets of the Company, consisting of personal, tangible or intangible property, including certain outstanding equity interests of the Company's direct subsidiaries, subject to limitations specified in the Credit Agreement. The Credit Agreement contains customary representations and warranties, events of default and financial, affirmative and negative covenants for facilities of this type, including but not limited to financial covenants relating to a fixed charge coverage ratio, a minimum liquidity requirement and a minimum excess availability requirement, and restrictions on indebtedness, liens, investments and acquisitions, asset dispositions, specified agreements, restricted payments and prepayment of certain indebtedness.
8.LEASES
The Company has operating and finance leases for office, manufacturing and warehouse facilities and automobiles. The Company's leases have remaining lease terms of less than one year to nine years. Options to renew or extend leases beyond their initial term have been excluded from measurement of the right-of-use (ROU) assets and lease liabilities as exercise is not reasonably certain.
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ATRICURE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except per share amounts)
(Unaudited)
The weighted average remaining lease term and the discount rate for the reporting periods are as follows:
March 31, 2024 December 31, 2023
Operating Leases
Weighted average remaining lease term (years) 4.6 4.8
Weighted average discount rate 5.89 % 5.75 %
Finance Leases
Weighted average remaining lease term (years) 6.4 6.7
Weighted average discount rate 6.93 % 6.93 %
A letter of credit for $1,250 issued to the lessor of the Company's corporate headquarters building is renewed annually and remains outstanding as of March 31, 2024.
The components of lease expense are as follows:
Three Months Ended
March 31,
2024 2023
Operating lease cost $ 380 $ 310
Finance lease cost:
Amortization of right-of-use assets 255 255
Interest on lease liabilities 157 175
Total finance lease cost $ 412 $ 430
Short-term lease expense was not significant for the three months ended March 31, 2024 and 2023.
Supplemental cash flow information related to leases is as follows:
Three Months Ended
March 31, 2024 		Three Months Ended
March 31, 2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases $ 393 $ 317
Operating cash flows for finance leases 158 175
Financing cash flows for finance leases 264 240
Right-of-use assets obtained in exchange for lease obligations:
Operating leases 235 1,061
Finance leases - -
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ATRICURE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except per share amounts)
(Unaudited)
Supplemental balance sheet information related to leases is as follows:
March 31, 2024 December 31, 2023
Operating Leases
Operating lease right-of-use assets $ 4,199 $ 4,324
Current maturities of lease liabilities
1,451 1,447
Finance and operating lease liabilities
3,164 3,307
Total operating lease liabilities $ 4,615 $ 4,754
Finance Leases
Property and equipment, at cost $ 14,620 $ 14,620
Accumulated depreciation (8,360) (8,105)
Property and equipment, net $ 6,260 $ 6,515
Current maturities of lease liabilities
$ 1,091 $ 1,086
Finance and operating lease liabilities
7,792 8,061
Total finance lease liabilities $ 8,883 $ 9,147
Future maturities of lease liabilities as of March 31, 2024 are as follows:
Operating Leases Finance Leases
2024 (excluding the three months ended March 31, 2024)
$ 1,103 $ 1,267
2025 1,237 1,638
2026 903 1,671
2027 897 1,703
2028 489 1,725
2029 and thereafter
751 3,099
Total payments $ 5,380 $ 11,103
Less imputed interest (765) (2,220)
Total $ 4,615 $ 8,883
9.COMMITMENTS AND CONTINGENCIES
License Agreement. The Company had been a party to a license agreement that required royalty payments of 5% of specified product sales. In May 2023, the Company entered into an agreement that terminated the license agreement and the Company's obligations to make royalty payments under the license agreement. Royalty expense of $0 and $901 was recorded for the three months ended March 31, 2024 and 2023 as a component of Cost of Revenue in the accompanying Condensed Consolidated Statement of Operations.
Purchase Agreements.The Company enters into standard purchase agreements with suppliers in the ordinary course of business, generally with terms that allow cancellation.
Legal. The Company may, from time to time, become a party to legal proceedings. Such matters are subject to many uncertainties and to outcomes of which the financial impacts are not predictable with assurance and that may not be known for extended periods of time. A liability is established once management determines a loss is probable and an amount can be reasonably estimated. The Company recognizes income from a favorable resolution of legal proceedings when the associated cash or assets are received.
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ATRICURE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except per share amounts)
(Unaudited)
The Company received a Civil Investigative Demand (CID) from the U.S. Department of Justice (USDOJ) in December 2017 stating that it is investigating the Company to determine whether the Company has violated the False Claims Act, relating to the promotion of certain medical devices related to the treatment of atrial fibrillation for off-label use and submitted or caused to be submitted false claims to certain federal and state health care programs for medically unnecessary healthcare services related to the treatment of atrial fibrillation. The CID covers the period from January 2010 to December 2017 and required the production of documents and answers to written interrogatories. The Company had no knowledge of the investigation prior to receipt of the CID. The Company maintains rigorous policies and procedures to promote compliance with the False Claims Act and other applicable regulatory requirements. The Company provided the USDOJ with documents and answers to the written interrogatories. In March 2021, USDOJ informed the Company that its investigation was based on a lawsuit brought on behalf of the United States and various state and local governments under the qui tamprovisions of federal and certain state and local False Claims Acts. Although the USDOJ and all of the state and local governments declined to intervene, the relator continues to pursue the case. During the third quarter of 2022, the relator filed a Fourth Amended Complaint, which dropped allegations of off-label promotion and alleges that the Company paid illegal kickbacks to healthcare providers in exchange for using or referring the Company's products, in violation of the federal Anti-Kickback Statute and various comparable state and local laws. While the Company is contesting the case, it is not possible to predict when this matter may be resolved or what impact, if any, the outcome of this matter might have on our consolidated financial position, results of operations or cash flows.
During the first quarter of 2023, the Company entered into a legal settlement for $7,500 in connection with the settlement of claims filed against a competitor. The Company recorded a $4,000 gain for the three months ended March 31, 2023 for the proceeds received as a reduction to selling, general and administrative expenses.
10.REVENUE
The Company develops, manufactures and sells devices designed primarily for surgical ablation of cardiac tissue, exclusion of the left atrial appendage, and temporarily blocking pain by ablating peripheral nerves. These devices are marketed to a broad base of medical centers globally. The Company recognizes revenue when control of promised goods is transferred to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods.
United States revenue by product type is as follows:
Three Months Ended
March 31,
2024 2023
Open ablation $ 29,300 $ 25,142
Minimally invasive ablation 12,318 9,637
Pain management 12,739 11,068
Total ablation $ 54,357 $ 45,847
Appendage management 35,892 32,342
Total United States $ 90,249 $ 78,189
International revenue by product type is as follows:
Three Months Ended
March 31,
2024 2023
Open ablation $ 7,902 $ 7,286
Minimally invasive ablation 2,114 1,867
Pain management 937 228
Total ablation $ 10,953 $ 9,381
Appendage management 7,649 5,924
Total International $ 18,602 $ 15,305
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ATRICURE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except per share amounts)
(Unaudited)
Revenue attributed to customer geographic locations is as follows:
Three Months Ended
March 31,
2024 2023
United States $ 90,249 $ 78,189
Europe 11,348 9,401
Asia Pacific 6,281 5,402
Other International 973 502
Total International 18,602 15,305
Total Revenue $ 108,851 $ 93,494
11.INCOME TAX PROVISION
The Company files federal, state and foreign income tax returns in jurisdictions with varying statutes of limitations. The Company uses the asset and liability method to determine its provision for income taxes. The Company's provision for income taxes in interim periods is computed by applying the discrete method and is based on financial results through the end of the interim period. The Company determined that using the discrete method is more appropriate than using the annual effective tax rate method. The Company is unable to estimate the annual effective tax rate with sufficient precision to use the effective tax rate method, which requires a full-year projection of income. The effective tax rate for the three months ended March 31, 2024 and 2023 was (1.4%) and (1.2%). The Company's worldwide effective tax rate differs from the US statutory rate of 21% primarily due to valuation allowances.
The Company's federal, state, local and foreign tax returns are routinely subject to review by various taxing authorities. The Company has not accrued any interest and penalties related to unrecognized income tax benefits as a result of offsetting net operating losses. However, if required, the Company will recognize interest and penalties within income tax expense and within the related tax liability.
12.EQUITY COMPENSATION PLANS
The Company has two share-based incentive plans: the 2023 Stock Incentive Plan (2023 Plan) and the 2018 Employee Stock Purchase Plan (ESPP).
Stock Incentive Plan
Under the 2023 Plan, the Board of Directors may grant restricted stock awards or restricted stock units (collectively RSAs), nonstatutory stock options, performance share awards (PSAs) or stock appreciation rights to Company employees, directors and consultants, and may grant incentive stock options to Company employees. The Compensation Committee of the Board of Directors, as the administrator of the 2023 Plan, has the authority to determine the terms of any awards, including the number of shares subject to each award, the exercisability of the awards and the form of consideration. As of March 31, 2024, 2,287 shares of common stock have been reserved for issuance under the 2023 Plan, and 869 shares were available for future grants. The Company issues registered shares of common stock for stock option exercises, restricted stock grants and performance share award payments.
Employee Stock Purchase Plan
Under the ESPP, shares of the Company's common stock may be purchased at a discount (15%) to the lesser of the closing price of the Company's common stock on the first or last trading day of the offering period. The offering period (currently six months) and the offering price are subject to change. Participants may not purchase more than $25 of the Company's common stock in a calendar year or more than 3 shares during an offering period. As of March 31, 2024, there were 782 shares available for future issuance under the ESPP.
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ATRICURE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except per share amounts)
(Unaudited)
Share-Based Compensation Expense Information
The following table summarizes the allocation of share-based compensation expense:
Three Months Ended
March 31,
2024 2023
Cost of revenue $ 530 $ 443
Research and development expenses 1,619 1,304
Selling, general and administrative expenses 7,116 7,013
Total $ 9,265 $ 8,760
13.COMPREHENSIVE LOSS AND ACCUMULATED OTHER COMPREHENSIVE LOSS
In addition to net losses, comprehensive loss includes foreign currency translation adjustments and unrealized gains (losses) on investments.
Accumulated other comprehensive loss consisted of the following, net of tax:
Three Months Ended
March 31,
2024 2023
Total accumulated other comprehensive loss at beginning of period $ (993) $ (4,096)
Unrealized Gains (Losses) on Investments
Balance at beginning of period $ (800) $ (3,698)
Other comprehensive income before reclassifications 539 1,041
Balance at end of period $ (261) $ (2,657)
Foreign Currency Translation Adjustment
Balance at beginning of period $ (193) $ (398)
Other comprehensive (loss) income before reclassifications (262) 125
Amounts reclassified to other income (expense) 19 (142)
Balance at end of period $ (436) $ (415)
Total accumulated other comprehensive loss at end of period $ (697) $ (3,072)
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
(Dollar amounts referenced in this Item 2 are in thousands, except per share amounts.)
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and notes thereto contained in Item 1 of Part I of this Form 10-Q and our audited financial statements and notes thereto as of and for the year ended December 31, 2023 included in our Form 10-K filed with the Securities and Exchange Commission (SEC) to provide an understanding of our results of operations, financial condition and cash flows. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. The actual results may differ from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those set forth under Item 1A "Risk Factors," the cautionary statement regarding forward-looking statements below and elsewhere in this Form 10-Q.
Forward-Looking Statements
This Form 10-Q, including the sections titled "Management's Discussion and Analysis of Financial Condition and Results of Operations", "Quantitative and Qualitative Disclosures about Market Risk" and "Risk Factors," contains forward-looking statements regarding our future performance. All forward-looking information is inherently uncertain and actual results may differ materially from assumptions, estimates or expectations reflected or contained in the forward-looking statements as a result of various factors, including those set forth under "Risk Factors" and elsewhere in this quarterly report on Form 10-Q, and in our annual report on Form 10-K for the year ended December 31, 2023. There may be additional risks of which we are not presently aware or that we currently believe are immaterial which could have an adverse impact on our business. Forward-looking statements often address our expected future business, financial performance, financial condition and results of operations, and often contain words such as "intends," "estimates," "anticipates," "hopes," "projects," "plans," "expects," "drives," "seek," "believes," "see," "focus," "should," "will," "would," "opportunity," "outlook," "could," "can," "may," "future," "predicts," "target," "potential," "forecast," "trend," "might" and similar expressions and the negative versions of those words, and may be identified by the context in which they are used. Such statements are based only upon current expectations of AtriCure. However, the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements include, without limitation, statements that address activities, events, circumstances or developments that AtriCure expects, believes or anticipates will or may occur in the future, such as earnings estimates (including projections and guidance), other predictions of financial performance, launches by AtriCure of new products, developments with competitors and market acceptance of AtriCure's products. Such statements are based largely upon current expectations of AtriCure. Any forward-looking statement speaks only as of the date made. Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to different materially from those expressed or implied. Forward-looking statements are based on AtriCure's experience and perception of current conditions, trends, expected future developments and other factors it believes are appropriate under the circumstances and are subject to numerous risks and uncertainties, many of which are beyond AtriCure's control. In other words, these statements are not guarantees of future performance and inherently involve a wide range of risks and uncertainties that are difficult to predict. With respect to the forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. These forward-looking statements speak only as of the date of this Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statements to reflect new information or future events or otherwise unless required by law.
Overview
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.
We sell our products to medical centers through our direct sales force in the United States, Germany, France, the United Kingdom, the Benelux region, Australia and Canada. We also sell our products through distributors who in turn sell our products to medical centers in other markets. Our business is primarily transacted in U.S. Dollars; direct sales transactions outside the United States are transacted in Euros, British Pounds, Australian Dollars or Canadian Dollars.
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Recent Developments
During the first quarter of 2024, we realized strong 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 revenue for the three months ended March 31, 2024 was $108,851, representing an increase of $15,357, or 16.4%, over the first three months of 2023, 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 include:
PRODUCT INNOVATION. In October 2023, FDA granted 510(k) clearance for our next generation cryoSPHERE®+ cryoablation probe for pain management. During the first quarter of 2024, we completed the initial procedures with the cryoSPHERE+, realizing a 25% reduction in ablation time. The product is currently in an extended limited launch period in the United States with full launch expected by the end of the second quarter. In addition, we received several CE mark certifications under the European Medical Device Regulation (EU MDR).
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. One of our critical initiatives is the Left Atrial Appendage Exclusion for Prophylactic Stroke Reduction (LeAAPS) IDE clinical trial. LeAAPS 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. The first patient was enrolled in the trial in January 2023, and we ended the first quarter of 2024 with over 2,000 patients enrolled. Site initiation and enrollment is ongoing.
TRAINING.Our professional education and marketing teams conduct a variety of in-person and virtual training programs for physicians and other 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 training events 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.

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Results of Operations
Three months ended March 31, 2024 compared to three months ended March 31, 2023
The following table sets forth, for the periods indicated, our results of operations expressed as dollar amounts and as percentages of revenue:
Three Months Ended
March 31,
2024 2023
Amount % of
Revenues 		Amount % of
Revenues
Revenue $ 108,851 100.0 % $ 93,494 100.0 %
Cost of revenue 27,583 25.3 23,885 25.5
Gross profit 81,268 74.7 69,609 74.5
Operating expenses:
Research and development expenses 19,845 18.2 15,327 16.4
Selling, general and administrative expenses 72,340 66.5 60,064 64.2
Total operating expenses 92,185 84.7 75,391 80.6
Loss from operations (10,917) (10.0) (5,782) (6.2)
Other expense, net: (2,169) (2.0) (616) (0.7)
Loss before income tax expense (13,086) (12.0) (6,398) (6.8)
Income tax expense 183 0.2 78 0.1
Net loss $ (13,269) (12.2) % $ (6,476) (7.0) %
Revenue. The following table sets forth, for the periods indicated, our revenue by product type and geography expressed as dollar amounts and the corresponding change in such revenues between periods, in both dollars and percentages:
Three Months Ended
March 31, 		Change
2024 2023 Amount %
Open ablation $ 29,300 $ 25,142 $ 4,158 16.5 %
Minimally invasive ablation 12,318 9,637 2,681 27.8
Pain management 12,739 11,068 1,671 15.1
Appendage management 35,892 32,342 3,550 11.0
Total United States $ 90,249 $ 78,189 $ 12,060 15.4
Total International 18,602 15,305 3,297 21.5
Total revenue $ 108,851 $ 93,494 $ 15,357 16.4 %
Worldwide revenue increased 16.4% (16.3% on a constant currency basis). In the United States, we experienced growth in key product lines, including the ENCOMPASS®clamp in open ablation, Hybrid AF™ Therapy procedures using the EPi-Sense System in minimally invasive ablation, cryoSPHERE®probe for post-operative pain management and AtriClip®Flex⋅V® for appendage management. International sales increased 21.5% (21.1% on a constant currency basis), across franchises and major geographic regions, bolstered by strong sales of appendage management and post-operative pain management products.
Revenue reported on a constant currency basis is a non-GAAP measure calculated by applying previous period foreign currency exchange rates, which are determined by the average daily exchange rate, to each of the comparable periods. Revenue is analyzed on a constant currency basis to better measure the comparability of results between periods. Because changes in foreign currency exchange rates have a non-operating impact on revenue, we believe that evaluating growth in revenue on a constant currency basis provides an additional and meaningful assessment of revenue to both management and investors.
Cost of revenue and gross margin. Cost of revenue increased $3,698 primarily reflecting higher sales volumes. Gross margin increased 21 basis points, driven by product and geographic mix.
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Research and development expenses. Research and development expenses increased $4,518 or 29.5%. Expansion of product development, clinical and regulatory teams resulted in $1,964 of increased personnel costs, including travel and share-based compensation. Clinical trial expenses increased $1,455 from increased enrollment activity in the LeAAPS clinical trial throughout the quarter. Product development project spend increased $1,001 reflecting continued investment in our product pipeline.
Selling, general and administrative expenses.Selling, general and administrative expenses increased $12,276, or 20.4%, driven by a $6,429 increase in personnel costs as a result of growth in headcount and travel expenses. The increase was further driven by the $4,000 gain on proceeds from a legal settlement during the first quarter of 2023. During the first quarter of 2024, fees for professional services, legal and IT increased $930 and marketing activities also increased $654.
Other income (expense).During the first quarter of 2024, the Company recognized a loss on debt extinguishment of $1,362; see Note 7 - Indebtedness for related discussion. The remaining activity consists primarily of net interest expense and net foreign currency transaction losses.
Liquidity and Capital Resources
As of March 31, 2024, the Company had cash, cash equivalents and investments of $105,957 and outstanding debt of $61,865. We had unused borrowing capacity of $61,885 (see Note 7 - Indebtedness for related discussion). All cash equivalents and investments and most of our operating cash are held in United States financial institutions. A small portion of our cash is held in foreign banks to support our international operations. We had net working capital of $183,973 and an accumulated deficit of $370,326 as of March 31, 2024.
Three Months Ended March 31,
2024 2023 Change
(dollars in thousands)
Net cash used in operating activities $ (21,016) $ (4,079) $ 16,937
Net cash provided by investing activities 9,644 28,813 (19,169)
Net cash used in financing activities (7,862) (5,517) 2,345
Cash flows used in operating activities.Net cash used in operating activities increased $16,937 from 2023 to 2024. Cash used for working capital and other assets and liabilities increased $13,543 on higher annual variable compensation payments due to improved operating performance, as well as continued investment in inventory to support future growth. The remaining change is largely attributable to decrease in operating margin due to a one-time gain on legal settlement recorded in 2023 of $4,000.
Cash flows provided by investing activities.Net cash provided by investing activities decreased by $19,169 in 2024 compared to 2023, driven by a $18,897 decrease in sales and maturities of available-for-sale securities.
Cash flows used in financing activities.Net cash used in financing activities increased by $2,345 in 2024. This increase was a result of $1,451 payment for extinguishment of debt and financing fees, net of borrowings, and a $798 increase in shares repurchased for payment of taxes on stock awards.
Credit facility.As of January 5, 2024, we entered into a credit agreement (Credit Agreement) with JPMorgan Chase Bank, N.A. as Administrative Agent, JPMorgan Chase Bank, N.A. and Silicon Valley Bank, a division of First-Citizens Bank and Trust Company, as Joint Lead Arrangers and Joint Bookrunners 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. As of March 31, 2024, the Company has borrowed $61,865, classified as noncurrent and had unused borrowing availability of $61,885.
Our corporate headquarters lease agreement requires a $1,250 letter of credit which we renew annually and remains outstanding as of March 31, 2024.
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For additional information on the terms and conditions, as well as applicable interest and fee payments, see Note 7 - Indebtedness.
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 future capital requirements depend on a number of factors, including, without limitation: market acceptance of our current and future products; 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. Our principal cash requirements include costs of operations, capital expenditures, debt service costs and other contractual obligations.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenue and expenses and disclosures of contingent assets and liabilities at the date of the financial statements. On a periodic basis, we evaluate our estimates, including those related to sales returns and allowances, inventories, share-based compensation and income taxes. We use authoritative pronouncements, historical experience and other assumptions as the basis for making estimates. Actual results could differ from those estimates under different assumptions or conditions. Our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 includes additional information about the Company, our operations, our financial position and our critical accounting policies and estimates and should be read in conjunction with this Quarterly Report on Form 10-Q.
Recent Accounting Pronouncements
As of March 31, 2024, there were no material changes to the information provided regarding recent accounting pronouncements in Note 1, "Description of the Business and Summary of Significant Accounting Policies" in the Company's Form 10-K for the fiscal year ended December 31, 2023.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of March 31, 2024, there were no material changes to the information provided under Item 7A, "Quantitative and Qualitative Disclosures About Market Risk" in the Company's Form 10-K for the year ended December 31, 2023.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company's management, with the participation of the President and Chief Executive Officer (the Principal Executive Officer) and Chief Financial Officer (the Principal Accounting and Financial Officer), has evaluated the effectiveness of the Company's disclosure controls and procedures, as defined in Rules 13(a) -15(e) and 15(d) -15(e) of the Securities Exchange Act of 1934 as amended (Exchange Act), as of the end of the period covered by this report. Based on this evaluation, we concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in providing reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's forms and rules, and the material information relating to the Company is accumulated and communicated to management, including the President and Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
Control systems, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that control objectives are met. Because of inherent limitations in all control systems, no evaluation of controls can provide assurance that all control issues and instances of fraud, if any, within a company will be detected. Additionally, controls can be circumvented by individuals, by collusion of two or more people or by management override. Over time, controls can become inadequate because of changes in conditions or the degree of compliance may deteriorate. Further, the design of any system of controls is based in part upon assumptions about the likelihood of future events. There can be no assurance that any design will
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succeed in achieving its stated goals under all future conditions. Because of the inherent limitations in any cost-effective control system, misstatements due to errors or fraud may occur and not be detected.
Changes in Internal Control Over Financial Reporting
In the ordinary course of business, we routinely enhance our information systems by either upgrading current systems or implementing new ones. There were no changes in our internal control over financial reporting that occurred during the three months ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information with respect to legal proceedings can be found under the heading "Legal" in Note 9 - Commitments and Contingencies to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, and is incorporated herein by reference.
Item 1A. Risk Factors
In addition to the other information set forth in this report, careful consideration should be given to the factors discussed in Item 1A, "Risk Factors" in our Form 10-K for the year ended December 31, 2023, which could materially affect our business, financial condition or future results. The risks described therein are not the only risks facing us. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, also may adversely affect our business, financial condition and/or operating results. There have been no material changes with respect to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, which are incorporated herein by reference.
Item 5. Other Information
During the three months ended March 31, 2024, none of our executive officers or directors adopted,terminated or modified a "Rule 10b5-1(c) trading arrangement" or a "non-Rule 10b5-1 trading arrangement" (as each term is defined in Item 408 of Regulation S-K).
Item 6. Exhibits
Exhibit No. Description
10.1#
Form of Performance Share Award Agreement for Awards Granted in 2024.
10.2#
Form of Performance Stock Unit Award Agreement for Employees.
31.1
Rule 13a-14(a) Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Rule 13a-14(a) Certification of Principal Accounting and Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification pursuant to 18 U.S.C. Section 1350 by the Principal Executive Officer, as adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification pursuant to 18 U.S.C. Section 1350 by the Principal Accounting and Financial Officer, as adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
_________________________
# Compensatory plan or arrangement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
AtriCure,Inc.
(REGISTRANT)
Date: May 2, 2024
/s/ Michael H. Carrel
Michael H. Carrel
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 2, 2024
/s/ Angela L. Wirick
Angela L. Wirick
Chief Financial Officer
(Principal Accounting and Financial Officer)
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