STIFEL 2026 HEALTHCARE CONFERENCE - ATRICURE INC

Explicit Guidance:

• FY2026 Revenue: Updated guidance of $606–$610 million for Q4, implying 11–14% year-over-year growth for the full year.
• FY2027 Outlook: Management anticipates a "modest movement" in adoption due to new quality metrics, with specific expectations for higher growth in the ablation segment compared to the appendage segment (which is already highly penetrated).
• FY2028 Long-Range Plan: Maintains the target of $750 million in revenue and a 14% adjusted EBITDA margin. Management believes the company is "tracking ahead of schedule" and anticipates "continued outperformance" of the long-range plan (LRP) due to new catalysts.
• Gross Margins: Expects potential short-term margin compression in FY2027 due to the ramp-up of a new manufacturing facility (doubling capacity), which will not be fully utilized in the near term. Long-term margins remain "very positive" driven by high-margin new product launches (Pain Management, Encompass, AtriClip).

Business-Segment Outlook:

• Pain Management: Encompasses three sub-segments: Amputation (growing, currently $1.5M Q3 run rate, expected to reach $10M+), Thoracic (25% penetration, focusing on revitalization via CryoMax), and Sternotomy (<10% penetration, ~250k procedure market, viewed as the largest opportunity).
• Cardiac Surgery (LAA): Open-heart appendage management has the highest penetration rate in the portfolio; growth is expected to be constrained by market saturation rather than competition.
• Hybrid Business: Anticipates continued pressure in 2026 due to the shift toward Pulsed Field Ablation (PFA), which accounts for 85–90% of U.S. AFib ablations. No bottom is called yet; growth is expected only as more centers successfully integrate Converge with PFA.

Market and Competitive Outlook:

• Pricing & Adoption: The STS Quality Metric (initially 70% target, rising to 90%+) will drive adoption, particularly for ablation where penetration is currently low. Metrics will be reported at site and surgeon levels twice yearly.
• Competition: Acknowledges Edwards' Eclipsys device entering the LAA market; views competition as validating the space but maintains Atriclip has the "best product" (smallest profile) and superior evidence.
• Market Share: Consensus for LAA US growth in 2027 is ~12%; management sees no immediate need to adjust this downward due to competition, viewing market saturation as the primary headwind.

Macro / Industry Outlook:

• Regulatory & Quality Metrics: STS quality metrics are being phased in: 2027 is viewed as a year of awareness and implementation, with deeper impact expected in 2028–2029.
• Clinical Data Trends: Post-operative AFib rates in real-world settings are significantly higher (35–55%) than physicians perceive, driven by better monitoring (ILR), creating a large addressable opportunity for Box X if trial data is positive.

Strategic Initiatives:

• Box X Trial: Fully enrolled by end of current year. Primary endpoint data (30-day post-op AFib reduction) expected May 2027. Secondary endpoint (3-year burden reduction) requires 5 years but may conclude earlier than planned.
• LEAPS Trial: 6,500 patients enrolled (completed July 2025); 50% of events hit earlier this year. 75% event threshold anticipated in 2028, with final results ahead of the original 5-year timeline.
• New Product Launches:
  • Flex Mini 30mm: FDA clearance secured; launch expected late current year to address undersized appendages.
  • Flex Mini V: Combines FlexV approach with Mini profile; expects clearance and launch late 2027.
• Capacity Expansion: New manufacturing facility at corporate headquarters doubling production capacity; costs will impact 2027 gross margins.
• Commercial Expansion: No intent to double headcount; planning targeted territory splits and adding reps to the cardiac team to support Box X launch, optimizing for manageable territory sizes post-FDA label.
• M&A/Capital Allocation: No current plans for M&A or transformative external investments; capital will be reinvested in R&D and new product development.

Risks and Headwinds to Outlook:

• Gross Margin Compression: Facility expansion costs and near-term capacity utilization issues in 2027.
• Hybrid Segment Volatility: Continued pressure from PFA adoption delaying the turnaround in the hybrid business.
• Regulatory Uncertainty: STS quality metrics are phased; full impact on surgeon behavior is uncertain until 2028–2029.
• Trial Data Execution: Box X and LEAPS data readouts are critical inflection points; failure to meet endpoints could stall growth.
• Market Saturation: LAA open-heart business growth limited by high existing penetration rates.

Management Tone on the Future:

• Confidence Level: High confidence in continued double-digit revenue growth and outperformance of the 2028 LRP targets.
• Guidance Philosophy: Described as "prudent conservatism" to ensure a pathway to meeting numbers; management expresses enthusiasm for the "tailwinds" from quality metrics and Box X.
• Strategic Outlook: Optimistic about the "greenfields" in Box X and the long-term potential of the LAA market despite competition.

Miscellaneous:

• Timeline for Box X Impact: Management believes Box X will have a "much higher" impact on the business in 2027 compared to the STS Quality Metrics, despite the need to wait for the FDA label post-data readout.
• Sales Force Structure: Current U.S. headcount is 350 (200 cardiac, 40 hybrid, rest pain management); no significant net increase planned, only strategic re-allocation.