ATRC

Afternoon, and welcome to AtriCure's first quarter 2026 earnings conference call. This call is being recorded for replay purposes, and at this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session following prepared remarks from AtriCure's management. I would now like to turn the call over to Marissa Bych from the Gilmartin Group for a few introductory comments.

Great. Thank you. By now, you should have received a copy of the earnings press release. If you have not received a copy, please call 513-644-4484 to have one emailed to you. Before we begin today, let me remind you that the company's remarks include forward-looking statements. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond AtriCure's control, including risks and uncertainties described from time to time in AtriCure's SEC filings. These statements include, but are not limited to, financial expectations and guidance, expectations regarding the potential market opportunity for AtriCure's franchises and growth initiatives, future product approvals and clearances, competition, reimbursement, and clinical trial enrollment and outcomes. AtriCure's results may differ materially from those projected. AtriCure undertakes no obligation to publicly update any forward-looking statement.

Additionally, we refer to non-GAAP financial measures, specifically constant currency revenue, adjusted EBITDA, and adjusted loss per share. A reconciliation of these non-GAAP financial measures with the most directly comparable GAAP measures is included in our press release, which is available on our website. With that, I would like to turn the call over to Mike Carrel, President and Chief Executive Officer.

Great. Good afternoon, everyone, and welcome to our call. AtriCure is off to a strong start in 2026, with worldwide revenue of $140 million in the first quarter, reflecting 14% growth year-over-year. We are building on the momentum we established in 2025 from new product launches, with this quarter marking an acceleration in our worldwide growth rate from the preceding quarter and comparable quarter last year. Fueling this acceleration is our U.S. business, which drove approximately 15% in the quarter from expanding adoption of AtriClip FLEX-Mini and PRO-Mini devices, cryoSPHERE MAX Probe, and continued strength from our EnCompass Clamp. In addition, we generated $17 million in adjusted EBITDA, nearly double the first quarter of last year. Our results this quarter once again demonstrate our ability to deliver durable, double-digit revenue growth and expand profitability.

Beyond our financial results, we have made exceptional progress in our BoxX-NoAF clinical trial. Since initiating trial enrollment in the fourth quarter of last year, we have enrolled approximately 300 total patients to date in this 960 patient randomized controlled trial. We are tracking well ahead of our original timeline and now expect complete enrollment around the end of this year, nearly one year ahead of plan. The pace of enrollment in this trial reflects an extremely high level of engagement from surgeons who experience firsthand the impact postoperative Afib has on their patients. As a reminder, up to half of cardiac surgery patients without pre-existing Afib will develop postoperative Afib, which is the most common complication of cardiac surgery.

There is no established treatment today, postoperative Afib is a substantial burden on the healthcare spending, with estimates exceeding $2 billion annually in the U.S. alone. We are confident that our BoxX-NoAF clinical trial, utilizing our EnCompass Clamp and AtriClip device, has the potential to meaningfully change treatment outcomes for this patient population and address the significant unmet clinical need. BoxX-NoAF is also highly complementary to our LeAAPS clinical trial studying stroke reduction benefit of left atrial appendage management in cardiac surgery patients without atrial fibrillation. We expect both of our landmark clinical trials to generate robust clinical evidence in support of preventative treatments for cardiac surgery patients, unlocking a massive global market opportunity for AtriCure while establishing new standards of care in cardiac surgery. We at AtriCure are well-positioned to realize these significant catalysts for our business in the coming years.

Now on to updates covering franchise performance in the first quarter. Pain management once again led our portfolio growth, increasing 28% year-over-year. The cryoSPHERE MAX Probe continues to be the primary driver of growth, contributing roughly 70% of our pain management sales this quarter. Surgeons across both new and existing accounts recognize the significant time savings and clinical effectiveness it provides, leading to more patients having their postoperative pain managed effectively. Building on our legacy of innovation, we are also pleased that our cryoXT Probe for amputation procedures is beginning to gain traction. We continue to receive outstanding feedback from each new surgeon that uses this device and through our registries are capturing clinical outcomes for this therapy. We are still in the early innings for the cryoXT therapy development and adoption.

However, we remain confident in cryoXT contributing more meaningfully as we move to the back half of 2026. Within our cardiac ablation franchises, worldwide open ablation revenue grew 15% in the first quarter, led by steady adoption of EnCompass Clamp in the United States and Europe. EnCompass is delivering growth from both new and existing accounts, even as we approach the four-year anniversary of our U.S. full market launch. As mentioned in our fourth quarter earnings call, our efforts to drive treatment of Afib in cardiac surgery patients was validated with the recent announcement from the Society of Thoracic Surgeons annual meeting, including concomitant Afib treatment as a quality metric. There is strong precedent for the impact of quality metrics in cardiac surgery, and we believe this change will support increased adoption for surgical Afib ablation and appendage management, serving as a durable tailwind for growth for years ahead.

Our minimally invasive ablation franchise continued to face headwinds in the first quarter. We believe there's a role for hybrid therapy in the current and future treatment landscape, and remain committed to providing a solution for the unmet need for patients with long-standing persistent Afib. Finally, turning to our appendage management franchise, which saw 16% growth worldwide, driven by both our open and minimally invasive appendage management products. Our open left atrial appendage management business benefited from strong adoption of AtriClip FLEX-Mini in the United States, where we exited the quarter with FLEX-Mini contributing approximately 40% of our open appendage management revenue. More importantly, we believe our FLEX-Mini device has been impactful in driving share gains in this market.

Surgeons using our or are trialing competitive devices are impressed by the small form factor of AtriClip FLEX-Mini, along with robust clinical evidence and superior product performance of our AtriClip devices. In minimally invasive procedures, AtriClip PRO-Mini is building upon that adoption in the U.S., providing a pricing uplift that offsets pressure of our hybrid AF therapy procedure volumes. It remains clear that differentiated innovation plays an important role in maintaining our position as the leader in appendage management in cardiac surgery, and we continue to prioritize investments in this platform. In our international markets, we are growing adoption across our legacy left atrial appendage management devices. Following the first quarter, we received CE Mark under EU MDR in Europe for both AtriClip FLEX-Mini and PRO-Mini devices, and expect to launch both products in Europe later this year.

New product launches in Europe, the United States, China, and Japan, coupled with the future of LeAAPS clinical trial outcomes, provide a long runway for growth in our appendage management franchise. In closing, the performance we delivered this quarter underscores the power of our innovation and focus on execution. While the rapid progress in our BoxX-NoAF clinical trial reinforces the significant opportunity ahead at AtriCure. We remain committed to advancing standards of care, scaling responsibly, and delivering durable growth with improving profitability for our shareholders. With that, I'll turn the call over to Angie Wirick, our Chief Financial Officer. Angie?

Thanks, Mike. Worldwide revenue for the first quarter of 2026 was $141.2 million, up 14.3% on a reported basis, and 12.8% on a constant currency basis versus the first quarter of 2025. Our performance reflects substantial growth driven by the continued adoption of key new products in the United States and many regions throughout the world. On a sequential basis, worldwide revenue increased approximately 1% compared to the fourth quarter 2025. First quarter 2026 U.S. revenue was $116.2 million, a 14.9% increase from the first quarter of 2025. Open ablation product sales grew 17.3% to $39.1 million, fueled by the strong and sustained adoption of our EnCompass Clamp across new and existing accounts.

U.S. sales of appendage management products were $48.4 million, up 14.9% over the first quarter of 2025, driven primarily by increasing adoption of our AtriClip FLEX-Mini and PRO-Mini devices. U.S. MIS ablation sales were $6.4 million, a decline of approximately 25% over the first quarter of 2025. Finally, U.S. pain management sales were $22.4 million, up 29.5% over the first quarter of 2025, led by the cryoSPHERE MAX Probe, which contributed approximately 70% of pain management sales in the quarter, driving increased adoption in both thoracic and sternotomy procedures.

International revenue totaled $25 million for the first quarter of 2026, up 11.5% on a reported basis and up 3.3% on a constant currency basis as compared to the first quarter of 2025. European sales were $16.1 million, up 13.2%, and Asia-Pacific and other international market sales were 8.9%-- $8.9 million, up 8.4%. International growth was tempered by continued uncertainty in the U.K. as well as lower distributor sales in Asia. Offsetting these headwinds, we saw significant growth across franchises in other major geographies, largely driven by our direct markets.

Gross margin for the first quarter of 2026 was 77.4%, up 246 basis points from the first quarter of 2025. The increase was driven primarily by favorable product and geographic mix, with strong U.S. performance propelled by our new product launches and adoption. Transitioning to operating expenses for the quarter, total operating expenses increased $10.2 million or 10.3% from $98.6 million in the first quarter of 2025 to $108.8 million in the first quarter of 2026. Rapid enrollment in our BoxX-NoAF clinical trial, which offsets a decrease in LeAAPS clinical trial costs, along with increased headcount focused on product development initiatives, resulted in a 7.6% increase in research and development expense from the first quarter of 2025.

SG&A expense increased 11.2% from the first quarter of 2025 as we continue to support growth while driving leverage across the organization. Completing the P&L first quarter 2026 adjusted EBITDA was $17.1 million compared to $8.8 million for the first quarter of 2025, representing a 95% increase. We recorded net income of approximately $100,000 compared to a net loss of $6.7 million in the first quarter of 2025. Earnings per share and adjusted earnings per share were both breakeven at $0.00 compared to a loss per share and adjusted loss per share of $0.14 in the first quarter of 2025. Our results reflect a balanced approach to allocating capital towards area we believe will sustain and accelerate growth all while continuing to improve profitability.

Now turning to our balance sheet. We ended the first quarter with approximately $146 million in cash and investments. Cash burn for the quarter was slightly improved from the first quarter of 2025 and reflects our normal pattern of cash usage driven by share vesting, variable compensation, and operational needs. As we move through the remainder of the year, we expect positive cash flow resulting in full year cash generation that is moderately higher than 2025. Our balance sheet remains healthy and supports both current operations and our investment in strategic initiatives that we believe will drive long-term value creation. Now on to our outlook for 2026. We are reiterating our expectations for full year revenue of $600 million-$610 million, reflecting growth of approximately 12%-14% over full year 2025 results.

Consistent with our first quarter results, we expect performance over the remainder of the year to be driven by our pain management, appendage management, and open ablation franchises, and partially offset by continuation of headwinds from our MIS ablation franchise along with certain international markets. For the second quarter, we anticipate typical seasonality translating to mid-single digit sequential growth. On gross margin, while our first quarter 2026 results were exceptional as a result of extremely favorable mix, we continue to expect modest improvement in full year 2026 gross margin over full year 2025. Product and geographic mix are expected to be favorable in the near term. We will bring our expanded manufacturing facilities online in the second half of 2026, which will increase manufacturing cost burden, moderating the full year gross margin outlook.

Turning to operating expenses, as Mike mentioned, the accelerated timing for full enrollment in our BoxX-NoAF clinical trial has placed us significantly ahead of schedule, and we now expect full enrollment of the trial around the end of this year. Over the next three quarters, we expect additional R&D investment. While the cost of BoxX-NoAF acceleration is incremental to our plan, we continue to drive strong gross margins and operating leverage reflecting discipline across our business. With that in mind, we are reiterating our expectations for full year 2026 adjusted EBITDA of $80 million-$82 million and full year net income, translating to earnings per share of approximately $0.00-$0.04 and adjusted earnings per share of approximately $0.09-$0.15.

Consistent with our 2025 performance, our quarterly outlook for adjusted EBITDA is largely informed by normal top-line cadence and the timing of R&D spend. As a reminder, 2025 R&D spending included LeAAPS enrollment costs for the first half of 2025 only. Therefore, we expect a slightly higher increase in R&D spending in the second half of 2026. In conclusion, our first quarter results highlight the durability of AtriCure innovation and continued improvement in our financial profile while funding investments in growth catalysts for the future. We remain energized by the opportunities in front of us and the exceptional AtriCure team who will make 2026 a success. With that, I will turn the call back to Mike.

Thanks, Angie. 2026 is off to a good start, and our team is fully committed to our patients, our partners, and our shareholders. As we look ahead, we are confident in our ability to execute with discipline, sustain operational excellence, and build on the momentum that we've created, delivering meaningful progress throughout 2026 and well beyond. With that, I'll turn it over to the operator for any questions. Operator?

Our first question comes from Bill Plovanic with Canaccord Genuity. Your line is open.

Hey guys, it's Zachary. Thank you for taking the question. Can you talk about the progress you're making on PFA integration? Any milestones that we should be on the lookout for this year? Can you talk quickly about the RF enhancements you're making to come with the next generation catheter? Thank you.

Sure. I'll take that on and appreciate the question. On the PFA, we're making great progress on that. We've done our first in-human over in Australia so far. We're now starting first in-human in Europe as well. It's not really first in-human anymore, but we're gonna be doing an additional 30-40 patients in Europe. That will obviously lead for our submission for the trial that we expect to start running sometime next year. We're on pace, doing great.

No additional commentary at this point in time, but we're really pleased with the results that we've seen so far, and feel like there aren't any specific milestones other than really submission to the FDA later on this year, acceptance of the IDE, and then beginning to enroll, as we kind of look into 2027 at some point in time. We'll give more details as we kind of get forward on that. We really wanted to focus today's effort on obviously the great progress we've made on the BoxX-NoAF clinical trial because we're so far ahead of plan that we wanted to make sure that we got that out there.

300 patients in a very short period of time put us well over a year ahead of plan, and we thought that was just a big milestone for us as we kind of close out this year being able to finish up enrollment around the end of the year. That's something we're super excited about. As for the RF advancements, they are embedded in there. We've got both the RF and also the dual energy combined in some of those first in-human playbooks, and that'll all be indicated and looking forward to kind of seeing that in trials sometime next year.

Thank you. Our next question comes from Matthew O'Brien with Piper Sandler. Your line is open.

Afternoon, thanks so much for taking the questions. The first one, Mike, I know you can't grow this pain management business 30% every quarter, but just talk about what you saw in the quarter from a growth perspective in terms of new accounts, existing accounts, with cryoSPHERE MAX. Also on the ortho side of things, just maybe the contributions that you got from those different buckets and how we think about the growth trajectory for that business. I do have a follow-up.

Yeah. I'll start and just say that the cryo business, the pain business, as we talked about our Analyst Day about a year ago, this is something that's got its multiple billion dollars of opportunity. Obviously, thoracic is an area that we've been established in for a long period of time. We're now starting to see some traction on the sternotomy side, and we're just starting on this, obviously below the knee amputation area. We're just scratching the surface in my mind in all the areas that people undergo surgery and have a lot of pain afterwards, both from other parts of the body and other types of surgeries to looking into and researching the impact that you can have on actually phantom limb pain, which affects over 3 million people.

I mean, these are big, big numbers when you look at it. We've got decades worth of growth in my mind here. Whether or not we can grow 30% for decades, obviously, the numbers get bigger and that becomes more difficult. The good news is we've got multiple places to actually grow this market for many, many years to come. With that, I'll turn it over to Angie to give you some of the specifics on the numbers.

Matt, from an account perspective, we are about 70% of our pain management accounts have adopted cryoSPHERE MAX, we continue to see every quarter since we've launched, we continue to see nice uptake. It was about 10% growth in the cryoSPHERE MAX accounts within the quarter. This is clearly becoming the dominant device that's being used. I think surgeons are very compelled by the quick freeze times that they're seeing and just exceptional outcomes for their patients.

Got it. Thanks. That's great to hear. you know, on BoxX-NoAF, you know, in my experience, Mike or Angie, when these things enroll faster, it's because doctors are seeing good outcomes. That's why they're doing more of these cases. Can you just talk about any kind of anecdotal feedback you're getting from the clinicians as far as outcomes here? Or kinda what's expected from these outcomes? You know, given the timeline for finishing enrollment, could we see-? 'Cause I think the follow-up's pretty short. Could we see data at ACC or HRS next year? Thanks so much.

Great question. I think you're right that that is kind of what you said, that we don't have any specific information because it's obviously a blinded trial. I don't know exactly what's happening within the trial relative to the individual patients, or the randomization on that front. That being said, we do know sites that have utilized this technology for their postoperative pain. We've seen it in all the preliminary work that went into going into the trial, and what we saw was significant reductions as a result of that. Much in fact that we have several sites, and it's even more. We've got 5+ sites or so that have decided to adopt this and will not come into the trial because they're seeing such good results relative to using the EnCompass Clamp plus the AtriClip to see significant reductions in that.

If you look at the STS database, what you see is it's about 35%-40% of all patients that undergo cardiac surgery, go into post-op Afib. Sometimes you'll see up to 50% in some studies where you'll see it as high as that. We're seeing in the trials in different areas that it's less than 10%. We don't need that to win the trial, though, and to have a meaningful clinical impact on it. We feel really confident and really good about where this is going, and the result that we'll wind up seeing. In terms of timing of results, you're correct. We think it's gonna be around the end of the year based on the pace of enrollment we're seeing right now.

I said around because it could be sometime at the end of December or early January timeframe that we might have full enrollment in place. You're right. We've got about 30 days of follow-up from that last patient. We'll have to obviously adjudicate all of that data. If you start to do the math as you just described, probably not HRS, more likely a surgical congress that we would do some sort of late breaker. The surgical congress that is out that late is AATS next year. If we got the data earlier, STS is in the January, February time frame. Obviously, that is highly unlikely to make it back quickly, but we're hopeful that we can conclude the trial, get those initial results, and get some data out there as a late breaker sometime at the AATS, which is around the same time as HRS next year.

Thank you. Our next question comes from Marie Thibault with BTIG. Your line is open.

Hi, good evening. Thanks for taking the questions. Wanted to spend a minute here on your international business. I think you called out, you know, some uncertainty on the U.K. side, which I know isn't brand new, and also some lower distributor sales from APAC. Can you tell us a little bit more about what's going on behind the scenes there, and any visibility on when things might start to improve? Then it sounds like, you know, the direct markets, OUS have been healthy, just any more color on those markets as well.

Yeah, Marie, you called out the two kind of headwinds that we're facing within our international business. You know, the U.K. within Europe, we had anticipated that being a drag and talked, you know, I think at length within our guidance that we baked in a run rate that looks very similar to how we exited 2025. You know, that held true for the first quarter of 2026 as we started the year. Just with our larger distributors in Asia, inherently distributor orders can be lumpy. You know, we expect that pressure to be transient as we think about the rest of 2026. You know, you mentioned it, but I'll remind everybody, I'd say outside the headwinds, we saw really good growth in our franchises in our direct markets in Europe, Australia, and Canada.

We continue to be excited about bringing new products into each of those markets and seeing the progress that the teams are making there, and continue to focus on the NHS and making sure that our pain management device and then, kind of any other budgetary pressures, what we can control that we are addressing, you know, quickly to get this market to a rebound. Guidance does not assume any kind of recovery in the U.K., and then strong business, you know, other areas within Europe and, you know, the distributors in Asia that that's expected to be transient again.

Okay, great detail. Thank you for that, Angie. Then maybe my follow-up on the Convergent procedure side, just wanted to understand kind of how your view of that market has been evolving. Obviously, the PFA landscape has evolved quickly, would just love an update on what you're seeing there on the ground. Thanks for taking the questions.

On the ground, we kind of talked about it very briefly during my remarks. There's definitely a continued headwind in that area. What we're seeing is the data is still incredibly strong, and these patients benefit from using the Convergent platform. That being said, they're getting multiple PFA catheters first. They're trying one, then another. You know, some are going up to three. That's obviously delaying that pipeline and those patients coming through. That's why it becomes tough to predict exact timing for us on that. That being said, if you talk to most people that are actually using it, they actually do believe in it. They're just seeing fewer patients, or they're trying the catheter out 1 more time before they actually send that patient on. That's the reality that we're dealing with right now.

It's why we've set the expectations as we have. We really feel like those that are utilizing technology are getting incredible benefit, and we're having lots of good conversations with the EPs, and we do think that it's a solution that matters, and we have to continue to support.

Thank you. Our next question comes from Lily Lozada with JPMorgan. Your line is open.

Hi, this is Henry on for Lily. Thank you for taking the question. I just wanted to pivot a little bit to talk about the guidance. You were able to beat on the top line, you reiterated the revenue guide. Can you talk a little bit more about why that's not flowing through into the full year guide? Are there any headwinds in particular you'd like to call out for the remainder of 2026?

I think that on the top line guide, we came in ahead of our expectations, both top and bottom line. You know, a positive start to the year, it is still early in the year and want to see continued outperformance before we revisit the guidance. I think that's very much in line with our philosophy in track and impact years. We are guiding to numbers that we feel very confident that we can achieve and look to beat and raise throughout the year. The headwinds we just touched on is primarily within our international business and then in our hybrid ablation business in the U.S. The areas of outperformance, very similar to what you saw in the first quarter results, expecting continued really strong growth within our pain management franchise, our open ablation franchise, and appendage management as well.

Thank you. Our next question comes from Mike Matson with Needham. Your line is open.

Hi, Mike, Angie. Hope you two are doing well. This is Joseph on for Mike. Maybe just one on international first, China and Japan. I was wondering if you guys could just maybe give a broad overview on where you are now with the portfolio in terms of approvals or launches and, you know, maybe where that portfolio could sit in China and Japan by the end of this year?

Yeah, pretty comparable between both our China and Japan markets. You have the basic RF ablation devices. Neither market has EnCompass at this point in time. We just recently put our AtriClip in China, that's a newer product launch in that market. Then within Japan, we've had different versions of our AtriClip on market and got expanded clearances for the Mini devices more recently there and are working on other product launches. I think, you know, with any market that you enter into, you're looking at, you know, the product set and what the market can absorb given economic considerations, so on and so forth. It is a subset of the overall products that we've got launched and are selling within the U.S. market.

Okay, great. Makes sense. One on appendage management. Obviously a very strong year in 2025 and, you know, with new products, it's looking good as well. With the increased competition, it's just, I guess, you know, trying to get a handle on basically where they are, where your competitors are with trialing and incentives. Has that kind of steadied off? Are you seeing increased incentives for them to trial the product from your customers? Just trying to understand how these new entrants are affecting your sales or not affecting.

Yeah. Just right now there's only one entrant in the market, that's Medtronic. They do have a product that we compete with today. As I mentioned in my comments, what we saw was they kind of peaked in market share back in the kind of summer timeframe, late summer, early fall timeframe. We've seen with FLEX-Mini gaining more and more adoption at more and more sites that we're actually gaining some of that share back. We still have the predominant market share in the United States.

We feel like the innovations that we put out there with FLEX-Mini, with PRO-Mini, with obviously clinical evidence that we'll generate that will be very specific to our product, that we're gonna be in a very good place, both in terms of who we're competing with right now and also, if Edwards does come into the market. Obviously they've mentioned that they're gonna be coming into the market later on this year, and we will be ready for that. Again, the way that we know how to compete is to build the best products that are, what the market really wants, to meet those needs. We continue to innovate.

On top of that, we've invested heavily in clinical evidence that's very specific to our product, both in the LeAAPS and in the BoxX trial, which both include the appendage, looking for the benefits that we can get for stroke reduction on that that will be very specific to our product and our product only. Putting that level of evidence is something that none of the competition has actually started a trial down that pathway, and these are long trials, so it gives us a great deal of confidence in terms of the future for that.

Continue with the innovation, continue with the clinical evidence, gives us confidence that when competition comes in, whether it's the ones that are out there, the ones that are talking about coming into the market, and there may be more in the future, that we are gonna be incredibly well-positioned. We also believe, as I've mentioned on this call before, that competition coming into the market means it's a big market. It means that it is a multi-billion dollar market that can take on competition like this. All great markets in medical devices typically have several players in there, and we believe that that's actually a really good sign that this is a big and robust market on the international scale.

Okay, great. Thanks so much and congrats on the quarter.

Thank you.

Thank you. Our next question comes from John McAulay with Stifel. Your line is open.

Hi, Mike and Angie. Thanks for taking the question. Just want to put a finer point on the 2026 guidance commentary you gave. Reiterating the top top line range and adjusted EBITDA range. Just wanna understand the intention there as you beat on both. Would you expect that we let numbers for the rest of the year sort of stay where they are to reflect the strength in the quarter or the hybrid and international headwinds you called out? Will you expect that those sort of offset the $2 million of upside as we look ahead to the rest of 2026?

Yeah, John, no different from our philosophy on guiding. We are putting out numbers that we believe we can not only meet, but that we've got a pathway to beat. I think with one quarter in, you're still early in the year. You know, the right and prudent thing to do at this point in the year was just to hold the guide and expect that we've got the ability to outperform, no different than when we started the first quarter. On the bottom line, I'd say more of a shift in we are with the pace of enrollment on BoxX-NoAF, those costs are incremental. You know, pulling enrollment in by a year into 2026, that is incremental to our plan in 2026 for the full year.

We had a very strong margin, gross margin in the first quarter. Expect for there to be improvement over 2025. That being said, some of the favorability on the margin side is transient, again, with the mix of the international business primarily. You know, you take that kind of whole calculus, and the diligence that we're seeing across the business to see improvement in leverage, that positioned us really well to be able to absorb the additional trial costs and hold the bottom line guide where it's at. Again, no different are putting numbers out there we expect not only to meet, but to beat.

Thanks. That's helpful. Just make sure I'm understanding the dynamics of OUS. In the quarter you highlighted 3.3% constant currency growth. Is that what we should be expecting for the year ahead, or what are the drivers of acceleration or re-acceleration we should be looking at in that business? Thanks.

Yeah. Good question. I'd say, you know, we are expecting our international business to grow on a reported basis closer in line to the overall company guide, so that'd be kind of double-digit growth for our international business. You saw more favorability from a currency in the first quarter. Expect for that to wane a bit as we think about the rest of the year. You know, strength in our direct markets in Europe, we expect for that to be a continued driver there. You've got newer product launches in that market, EnCompass is a big driver in our European market, and then a bit of a rebound in our Asia distributors. Again, I think ordering patterns can be kind of lumpy there, so expecting that to rebound as well. That's the calculus to get to kind of that mid double-digit growth expectation for the year.

Thanks, Angie. Appreciate it.

Thank you. Our next question comes from Danny Stauder with Citizens. Your line is open.

Yeah. Great. Thanks for the questions. This first one on pain management. Great to see the strong quarter. You noted improved market penetration in thoracic and sternotomy. Just on the latter of the two, it's nice to hear you're starting to see traction, but was just curious what was driving this of late. You know, we've talked about sternotomy and that opportunity for a bit now, so I just wanted to see if there was any newer developments that's leading to this. Thank you.

Yeah. Great question. I think what you're seeing here, Danny, is that you're seeing it works in sternotomy. It just takes a little bit longer to get there. With the MAX product that has reduced the time in half, that really has improved adoption and the willingness of somebody to even try it. Once they try it, they see really good results pretty quickly, it becomes a lot more sticky at that point in time. I'd say that's really what you're seeing. It's not something that you'll ever get a hockey stick curve off of, I don't believe, but I think that you're gonna continue to see nice, robust growth within this area as we add more and more accounts. We've got many accounts that are actually doing this now.

It's no longer just a handful across the country. People are talking to each other. They're talking about the results, whether it's at trade shows or other places like that, or peer-to-peer conversations. That's really what's driving it.

Okay, great. Just one follow-up on the STS quality metric update. Could you give us a little more color on this? You know, first one, we'll start, should we be thinking of this more as a longer tail of growth over the next few years versus a more near-term uptick? Just any more information on how we should think about this in terms of incremental adoption or just frame the potential revenue opportunity here would be really helpful. Thank you.

Sure. I'll start by saying, just a reminder to everybody that in the U.S., about 35% of all patients that have Afib that undergo cardiac surgery actually get an ablation. That is obviously a very low number. You still have 65% left to go. The quality metric is meant to address that. It's meant to say that what they put out there was that there'd be 70% of the patients actually get treated. That number will likely grow. That was the commentary that was at STS back in January of this year. They anticipate that they'll put some teeth into it. They wanted to roll out that this is becoming a quality metric, and that quality metric will go into effect sometime in 2027.

At which point in time there'll be some teeth in it in terms of they'll be measured on it. It will be recorded in the STS database. The specifics behind that are still not disclosed yet by STS, but that is coming out. To give you some perspective, I mentioned in the call that previously, the last time they did any kind of therapeutic view like this, it was the LIMA to the LAD, and that when they made it a quality metric, it went from about 10% adoption up to 99.8% adoption or so today. Quality metrics matter. They make a difference. People look at them. Hospitals look at them. They affect their ratings.

We do anticipate that on the Afib side of things, we should see some uplift relative to the Afib side in 2027 as they're kind of rolling this out. Obviously, that will continue into 2028 and beyond. We think that's gonna be a big boon and positive force on the ablation side to improve that penetration from 35% in the U.S. to hopefully, obviously, getting it closer to 80%, 90% or so at some point over the next three or five years. We've got a lot of room for growth. This is a little bit of, I don't know, you can call it a carrot or a stick, depending on how you wanna look at it, but it's an incentive either way for people to do the treatment.

On top of that, obviously, we're gonna have data that comes out on the non-Afib patients, and we believe you combine that with the quality metrics and the fact that the EnCompass Clamp is so easy to use, that we will start to see some really nice adoption overall over the next three to five years in a big way.

Well, great color. Appreciate the questions.

Thank you. Our next question comes from Keith Hinton with Freedom Capital Markets. Your line is open.

Great. Thanks for taking the question. Just have a quick one on AtriClip. Can you just talk a little bit, I apologize if I missed this, I'm jumping around a little bit. Can you talk a little bit about the use of FLEX-Mini versus the prior generations in open appendage? More broadly, can you just talk about the current ASP for AtriClip in the U.S. and how we should think about those dynamics going forward as uptake continues for FLEX and PRO-Mini?

Yeah, I'll take this one. The AtriClip FLEX-Mini, what we are seeing is pretty steady conversion from our last generation AtriClip device, the AtriClip FLEX•V. Less so from the original AtriClip device, which is still on the market. Between the three products, you've got different price points, and you've also got the ability for a surgeon to choose depending on the approach that they wanna take for managing the appendage. Exiting the first quarter 2026, we were up to about 40% of the revenue in the U.S. in open appendage management in the FLEX-Mini clip. We exited last year a little over 35%, we continue to see steady share gains by that new product launch.

From an ASP perspective, you know, we're well-positioned by offering a range here as low as $1,100 with the original AtriClip device for accounts where pricing is a sensitivity, and the FLEX-Mini clip up to $2,250.

Thank you. Our next question comes from Suraj Kalia with Oppenheimer & Co. Your line is open. Suraj, your line is open. Please check your mute button. I am showing no further questions at this time. I would now like to turn it back to Mike Carrel for closing remarks.

Great. Well, just wanted to thank everybody for joining for the call today after an exciting Q1, and what's starting to be a great 2026 overall. Thank you for joining. We appreciate it, and we look forward to talking to you again in July. Talk to you soon.

This concludes the question-and-answer session. This concludes today's conference call as well. Thank you for participating. You may now disconnect.