AtriCure, Inc. Q2 FY2024 Earnings Call

Good afternoon, and welcome to AtriCure's Second Quarter 2024 Earnings Conference Call. This call is being recorded for replay purposes. I would now like to turn the call over to Marissa Bych, from the Gilmartin Group for a few introductory comments.

Great. Thank you, operator. 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 franchises and growth initiatives, future product approvals, clearances, competition, reimbursement, and clinical trial outcomes. AtriCure's results may differ materially from those projected. AtriCure undertakes no obligation to publicly update any forward-looking statements. Additionally, we refer to non-GAAP financial measures, specifically revenue reported on a constant currency basis, 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. And with that, I would like to turn the call over to Mike Carrel, President and Chief Executive Officer of AtriCure.

Great. Good afternoon, everyone, and thank you for joining us. I am pleased to highlight another strong quarter at AtriCure driven by our unwavering commitment to the treatment of patients with atrial fibrillation and postoperative pain. We achieved total revenue of $116 million, reflecting over 15% growth, driven by increasing demand across our portfolio of technologies. Our results were underscored by accelerated growth in several areas of business, including US pain management, US open appendage management, and across our international franchises. We also continue our path towards sustained profitability, generating nearly $8 million in positive adjusted EBITDA for the quarter. Additionally, we reached an exciting milestone with positive cash flow generation of over $8 million this quarter, and we plan to generate positive cash flow for the remainder of the year. Now turning to updates on our business and highlights for the quarter. Starting with the pain management franchise, which grew 25% in the second quarter of 2024. We drove remarkable acceleration in CryoSPHERE sales, with strength in international markets bolstered by the US, where we successfully launched the CryoSPHERE probe. Physicians and patients are realizing the benefits of this enhanced technology with a 25% reduction in free time, which is generating more momentum in Cryo Nerve Block therapy. We're also excited about the CryoSPHERE Max probe launching later this year. The CryoSPHERE Max builds upon the features of the CryoSPHERE Star with a larger bolt-up bringing more efficiency to procedures through even greater reduction in ablation and procedure time. In parallel, we are exploring additional applications of Cryo Nerve Block therapy to expand our addressable markets and look forward to sharing those updates as we progress. Now on to our franchises centered on the treatment of atrial fibrillation. Our open ablation franchise grew 15% worldwide, reflecting strength in our Encompass clamp in the United States along with rising treatment rates in key international markets. Our EnCompass Clamp utilizes our synergy ablation system for a simpler and faster surgical treatment of atrial fibrillation, and we see steady interest in treatment with Encompass as we introduce this innovative technology across our customer base. While the Encompass clamp is currently only available in the United States, we anticipate EU MDR approval and European launch in the back half of 2024. Next, our appendage management franchise achieved worldwide revenue growth of 15%, with open chest devices outpacing our MIS devices. In the United States, our open appendage management devices saw an acceleration in revenue growth to nearly 17% for the quarter despite competitive device activity. We continue to believe competition validates this tremendous market opportunity in front of us. More importantly, we are focused on leading the field with innovation and clinical evidence. To that end, I am excited to share that we have just received FDA clearance of our newest generation AtriClip device, the AtriClip FLEX Mini. Our AtriClip platform is widely recognized in the physician community for its ease of use, unparalleled safety, and outstanding closure results, and this latest innovation introduces a much smaller implant profile while maintaining the performance of our legacy platforms. Put simply, the AtriClip FLEX Mini is a great new and differentiated device which we expect to achieve rapid adoption once fully launched later this year. In addition, we are enrolling in our groundbreaking market-expanding LeAAPS stroke reduction trial at a robust pace with over 2,900 patients enrolled as of today. We expect to complete enrollment of the 6,500 patients in the middle of 2025. This landmark global clinical trial is expected to show a clear benefit to using atrial devices to manage the appendage in patients who undergo cardiac surgery without preoperative afib diagnosis, a market of well over 1 million patients annually. Finally, we are continuing to drive adoption of our hybrid AF therapy globally. In the second quarter, we saw growth in procedure volumes and new accounts, although in certain hospitals in the United States, case volumes were impacted as EP shifted their time to new PFA catheter devices. We understand and appreciate the benefits of these technologies. Our experience with the introduction of the PFA catheters in Europe several years ago tells us this diversion will eventually diminish. To that point, we have seen rapidly expanding interest and growth of our hybrid AF therapies in Europe over the last two years, leading to increasing treatment with our EPi-Sense technology. We expect this to hold true in the US for our US hybrid therapy franchise, particularly as physician experience shows the limitations of these devices in treating long-standing persistent Afib patients. In the meantime, we are bringing awareness to the differentiated benefits of hybrid AF. The wealth of data from our CONVERGE CCF and DEEP trials, as well as numerous other studies, repeatedly demonstrates better outcomes for advanced AF patients using a hybrid approach, and this has influenced guidelines positively worldwide. We believe that the focus on more efficient endocardial ablation can serve as a tailwind for everyone in the market. In the long run, AtriCure will benefit from the growing funnel of patients. Considering the ongoing robust growth in our portfolio, but offset by relative softness in our MIS ablation and MIS appendage management sales, we're revising our full-year guidance to $456 million to $461 million, reflecting growth of approximately 15% over full year 2023. We also continue to manage our spending with discretion and are reaffirming our guidance and our plans to deliver adjusted EBITDA of $26 million to $29 million. In closing, we are pleased with our first half performance, showing the breadth of our growth platforms. We also remain confident in our strategies to invest in growth and market expansion opportunities, leading to durable growth, expanding profitability, and cash flow generation. With that, I will turn it over to our CFO, Angie Wirick.

Thanks, Mike. Our second quarter 2024 worldwide revenue of $116.3 million increased 15.2% on a reported basis and 15.4% on a constant currency basis when compared to the second quarter of 2023. On a sequential basis, worldwide revenue grew 6.8% from the first to the second quarter of 2024. Second quarter 2024 US revenue was $95.5 million, a 12.5% increase from the second quarter of 2023. Open ablation product sales were $30.8 million, up 13.9% compared to 2023, with the continued strength of the Encompass clamp adoption. US sales of appendage management products were $37.9 million, up 11.8% over the second quarter of 2023, and notably, despite competitive activity, our appendage management products used in open chest procedures accelerated to 17% growth in the second quarter, propelled by our AtriClip FLEX V device. These positive results were partially offset by a slight decline in our minimally invasive appendage management products, reflecting slower growth in minimally invasive ablation sales which ended the quarter at $11.8 million, up 4% over the second quarter of 2023. As Mike mentioned in his remarks, interest in PFA catheters within certain hospital systems led to pressure in our hybrid therapy results for the quarter. Finally, rounding out our US business is pain management, where sales reached $15 million in the second quarter of 2024, reflecting 19.2% growth over the second quarter of 2023. We delivered exceptional performance across our international franchises, driving total international revenue of $20.7 million, up 29.4% on a reported basis and 30.4% on a constant currency basis as compared to the second quarter of 2023. Our revenue in Europe was $6 million, up 33.6%, and Asia Pacific and other international markets accounted for $8.1 million, up 23.5%. Consistent with the first quarter, our international growth was seen across all franchises and in most major markets. We expect momentum throughout our international business to continue for the remainder of 2024. Turning to another key metric for the second quarter of 2024, gross margin was 74.7%, which represented an approximate 170 basis point decrease compared to the second quarter of 2023. This decrease was primarily driven by less favorable geographic and product mix. Now moving to details of our operating expenses for the quarter. Total operating expenses increased $12.8 million or 15.7% from $81.2 million in the second quarter of 2023 to $94 million in the second quarter of 2024. We continue to grow investments in research and development activities, which saw a 17% increase from the second quarter of 2023, driven by strong enrollment in our LeAAPS clinical trial and resources focused on both clinical trials and new product development initiatives. SG&A expenses increased 15%, primarily from the measured expansion of our team globally as well as from physician training programs. Adjusted EBITDA for the quarter was $7.8 million compared to $8 million for the second quarter of 2023. Our loss per share was $0.17 in the second quarter of 2024 compared to a loss per share of $0.11 in the second quarter of 2023, while the adjusted loss per share each period was $0.17 and $0.12, respectively. We ended the second quarter with $114 million in cash and investments, having generated $8.1 million in cash flow during the second quarter. We continue to expect positive cash generation for the remainder of the year and are on solid footing to fund current and future operating needs of the business with our strong balance sheet. Now turning to our outlook for 2024. We are determined to advance adoption of each of our therapies throughout our markets globally. We are experiencing healthy growth across most of our business with a lower contribution from our US minimally invasive ablation and MIS appendage management products. We believe the impact on our US hybrid therapy business will ultimately be temporary. With these dynamics in mind, we are refining our full-year 2024 revenue guidance to be between $456 million and $461 million, reflecting growth of approximately 15% at the midpoint over 2023. Consistent with our normal quarterly cadence, we anticipate summer seasonality to result in a low single-digit sequential decline in revenue from the second to the third quarter, followed by a rebound in the fourth quarter. From a margin perspective, we are carefully managing investments in our business, prioritizing opportunities for future growth and market expansion as we realize efficiency and leverage from our operations. We believe this approach solidifies the staying power of our business well into the future. We are maintaining our expectation that 2024 gross margin will be comparable to 2023 with potential for varying impacts from cost savings initiatives offset by product and geographic mix. On the bottom line, we remain committed to improving profitability and are maintaining our outlook of positive adjusted EBITDA of approximately $26 million to $29 million for the full year 2024, corresponding to adjusted loss per share of approximately $0.74 to $0.82. Based on revenue cadence and key areas of spending in the coming quarters, we expect a modest improvement in adjusted EBITDA in the third quarter of 2024 over the third quarter of 2023, and a more robust increase in adjusted EBITDA in the fourth quarter of 2024. In closing, our second quarter results demonstrate solid performance throughout our markets. I would like to thank our team for their commitment to our mission; what you do each day matters. Together, we remain confident we are well positioned to improve the lives of millions of patients worldwide with our therapies, driving growth well into the future. At this point, I'll turn the call back to Mike for closing comments.

Thank you, Angie. And everyone, we are excited about the first half of 2024, with continued strong double-digit growth across our platforms, advancing key clinical and innovation initiatives geared towards market penetration and expansion while improving our cash flow generation. Our team is dedicated to delivering the best-in-class results for patients affected by Afib and pain after surgery, and I remain confident in our products, the abilities of our team, and the strength of our R&D initiatives. I look forward to an exceptional back half of 2024 and all that it has in store for AtriCure and all of us. With that, I'll turn it over to the operator for questions.

Our first question comes from Robbie Marcus with JPMorgan. Your line is open.

Hi, this is actually Lilly on for Robbie. Thanks so much for taking the question. Can you just give us your refreshed thoughts on sort of the long-term impact of PFA on the business? Clearly, the launch is having at least a near-term impact. So is your thinking still that PFA can be complementary to your technologies? And what gives you the confidence in those case volumes coming back on the MIS side eventually when PFA is having such great traction?

Yes. It's a great and fair question. As we look at PFA, we do still think that it has a really positive impact. As more and more patients enter into the funnel, there are going to be more failures. If you think about the areas that PFA is incredibly successful, it's made it a lot faster for people to do this procedure. I think there's still a lot of questions about whether it is going to be more effective and safer on that front. But we are definitely seeing it being faster. So they're filling that funnel and you're seeing a lot of growth in the catheter-based companies, in particular, for treating many of the patients. What that means is that if you're failing at the same rate, you're going to have more patients that need to be treated once they fail. We believe the hybrid therapy is a great complement that – once you've failed that, you pretty much have tried that last kind of shot to go after that patient and help them out with the catheter. Hybrid really helps out quite dramatically there. We started to see it in Europe, so we think this is going to happen. Looking at the data that's come out of Europe from various registries and also with our own experience at sites, we are starting to see that the sites that got a little distracted by PFA, they got excited about it, are still using PFA quite a bit. But they are actually seeing some failures come 6 to 12 months later and then they’re saying, we've really got to get back on track on our hybrid therapy and start to use that. We think we're starting to see that in Europe. We're starting to see robust growth in this area in Europe, and we see that continuing right now. We anticipate the same happening in the US. I can't give a definitive date when that's all going to turn because right now, a lot of the sites are distracted by making that changeover from whatever device they were using to PFA, but they're still doing procedures. Once they have the failures, they will still come back to hybrid. We think that long-term, the funnel is going to be so large that it's actually going to increase the overall number of patients quite a bit. On top of that, I would add one more thing, which is that we're also still seeing new sites come on board. We’re seeing a lot of sites that are implementing PFA, but are also saying wait. We also want to implement hybrid that comes into our courses. In June, we had a record number of people come to our hybrid course; we had almost 100 people from across the country coming to the course, and these were a mix of 50% surgeons, 50% EPs coming as teams to discuss the future of hybrid therapy and what was happening on that front.

Got it. Okay. And then just as a follow-up on the open side of the appendage management business. It's been a few quarters now with competition on the market. So can you talk a bit about how those dynamics have evolved this quarter? How sticky has that trialing that you called out been? And how should we be thinking about that business growing for the rest of the year?

Yes, I think you saw in the numbers that the market is growing. We talked about the fact that when competition enters a market, it's great flattery to us that we've actually got a really big and robust market in front of us and that over time, we thought that the market would overall grow. This quarter, we saw growth accelerate to 17% on the open side of our business. Medtronic is obviously getting some business themselves as well, but by having two of us in the market, you’re creating more demand, more interest, and really sound pricing out there on that front. So from our standpoint, having that entrant is already starting to have a positive impact on the overall market dynamics. That being said, we also just came out with and literally just got the FDA clearance right before this call for our new Flex Mini device that is the smallest profile best product in the market. It is an exceptional product. I can't be more excited about a product we’ve had in a long time. When we rolled out Encompass, we changed the way people thought about the market on that front. I think the same thing is going to happen with the Flex Mini device due to its smaller size and profile. It’s really a great platform for us to build on, and we're excited to launch that in the back half of this year.

Our next question comes from Bill Plovanic with Canaccord. Your line is now open.

Hi, Mike and Angie, it's John on for Bill tonight and congrats on the quarter. Maybe just circle back here to AtriClip 2. On Flex Mini, can you describe maybe the pricing strategy that you guys will take upon launch here? Do you think you'll raise the price reflecting the benefits of the device?

Yes, John. With each new innovation we bring to market, one of our goals is to improve overall ASP. And I'd say that's still our strategy with the Flex Mini.

Okay. Great. I don't know if you talked about it on the call; I didn't hear it, but you recently did a press release about clearance in China too for AtriClip. So how are you thinking about that market in terms of opportunity size? What commercial approach will you take there?

Appreciate that. Yes, we did get clearance for the AtriClip device in China. We've been working on that for quite some time and feel really good about the fact that we're going to be able to access an enormous market that has over 200,000 cardiac surgeries a year. So we already have great market share on the ablation side of our business there today. This AtriClip obviously adds significantly to our product offering in that market. We don't anticipate much impact on revenue this year, but expect that as we look at '25, '26, and going forward, having that product on the market is something they have been asking for and want in the market. This is a great product, and we anticipate that it will impact revenue in the years to come.

And our next question comes from Rick Stifel.

Angie, this is John on for Rick today. I just wanted to go back to guidance. You brought it down by a few million, talking about pressures on the converted side of the business and on the AtriClip side. I just wanted to better understand what you're seeing today in both those businesses. Have these pressures bottomed out in your view or are they still getting worse? Where do we stand now?

John, at this point, we think that the pressure kind of started, I'll say, late in the first quarter. We just didn't exit the second quarter in a way that we would have expected. I think we were hearing an increasingly low drumbeat from our field team that PSA, the number of accounts that we're getting access to the FA technology, and the distraction that they were seeing relative to their programs were something that escalated pretty pronounced in the second quarter and would persist through the rest of this year at a minimum. That's the driver in our view. I think our philosophy regarding guidance has always been to be very prudent when we think about our guidance; we want to put numbers out there we feel very comfortable that we can meet as well as the pathway to see upside for investors. As we're looking at this, we anticipate it beyond 2024 when this recovers, so to speak.

That's clear. And then also sort of sticking to guidance in the prior guidance, I'm just curious how much of an impact from the Flex Mini positive launch impact was incorporated and how much, if any, Flex Mini or price increases were incorporated now?

Going into 2024, we felt pretty confident that we would have clearance from the FDA for this product in the middle of the year, and I’d say the timing looks no different from how it's evolved and ultimately our clearance. We still expect for this product to be launched in the second half of the year, which was baked into our guidance going into the year.

If you look at the overall guidance, our open appendage management has robust growth built within. It's the MIS part that you're not seeing, and obviously, Flex Mini is a part of that.

Our next question comes from Marie Thibault with BTIG.

This is Sam on for Marie tonight. Maybe I can shift over to the open ablation side of things. I guess I'm just wondering how you’re thinking about the mid- to long-term outlook on the business. Can this still be, call it, a mid-double-digit grower? And then on the quarter, how much more room is there to run in terms of penetration for the Encompass clamp?

Good question, Sam. I’d say we felt good. It was a solid quarter for our open ablation franchise, and we continue to be bullish and believe that the Encompass clamp will help sustain growth in this area of our business. We're seeing really good activity across accounts that are using Encompass and our team is focused right now on deeper penetration with accounts who have adopted the technology, ensuring it's not just one surgeon using the clamp but broadening adoption to a broader set of accounts. We estimate that the US market is only about 30% to 40% penetrated at this time. So we're focused on the fact that this market is vastly underpenetrated. We've got superior technology that makes this procedure incredibly easy for surgeons to perform, and the focus will be to continue to grow adoption.

Really helpful, Angie. And then maybe if I can come back to CONVERGE for just a second. I guess the accounts that are still using it are maybe not as distracted from some of the PFA launches. Are they using PFA in the endovascular side of the procedure? Just wondering if the complementary nature, even at some accounts, is starting to work its way through.

Yes, we are definitely starting to see some accounts. We see that over in Europe where you see it already. That's kind of where our experience has been. In the US, you're not seeing a ton of it, but we've got several sites that are beginning to use both PFA and CONVERGE in their procedures. We expect, and anticipate, if they do PFA and when that PFA fails, we'll come back in and do kind of the second stage as the CONVERGE procedure at that point in time. That is what we anticipate leading us into 2025 and beyond relative to that complementary aspect because if you look at the data coming out, you're seeing failure rates are basically the same as they were with RF and Cryo, and you still have those patients. What do you do after that? And that's where you're going to start to see more patients in need for something beyond just a catheter, regardless of what that energy source might look like. We're starting to see this already in Europe; those values are going to turn into hybrid cases.

Our next question comes from Daniel Antalffy with UBS. Your line is open.

Hey, good afternoon, guys. Thanks so much for taking the question. Mike, just a follow-up on AtriClip and what you're seeing from a competitive perspective there. Can you talk a bit about what you're seeing from a site perspective? Have you seen sites drop competitive products to trial? Are we through the trialing period? Are you still seeing trialing? And then just one quick follow-up after that.

Yes, we’re seeing great strength in the AtriClip product, and it works all the time. We haven't lost any accounts as a result of competitors. We're not seeing anybody flip over and not continue to use the AtriClip for a majority of their cases. Overall, we feel like we're having great success. We do have some sites that may have trialed other products and have returned to AtriClip full time for lack of a better word. We've definitely seen some of that for sure. As you can see with our overall growth rate, we’re still seeing robust growth with a very large number; it's one of our biggest franchises. So we feel like we're in a really good spot from that standpoint.

Okay, got it. And then just to clarify one point on CONVERGE and what you think you're seeing there with the PFA. Is it more PFA distractions from the EP side of things or do you think it’s more PFA that impacts the end patient market here?

Yes. So there are two different dynamics, and you're right. The first thing is the distraction. That's really what we're seeing mostly today, which is that you've got sites that are now having to go purchase the equipment, install it, train their teams, and get their whole workflow along with the PFA system in-house. They're making that switch quickly. As a result of making that switch, they become incredibly distracted with which patients they're treating. They tend to treat the earlier patients and focus on the efficiency of their sites, how many cases they can do in a day, etc. You see that at many sites throughout the country. I'd say that's the primary thing we see. What we also anticipate is that you’re going to see people who will try and say, 'You know what, I’m going to go try this PFA just one last time.' But we also see a lot of catheters being sold today. Most people on this call know it's about 400,000 or so catheters ablated in the US just for Afib last year. This year, we anticipate that growth is about 15%, around 480,000 or so this year. That's an additional 80,000 patients that are going to be treated, and the failure rates are equivalent. So you're going to have many more patients who will need treatment, regardless of what that energy source might be. That’s why we’re excited about ‘25 and ‘26 because we’re starting to see it in Europe; those values will turn into hybrid cases.

Our next question comes from Mike Matson with Needham & Company.

Andrew, this is Joseph on for Mike. Maybe the first question, I'm just kind of wondering about the sustainability of the international sales. Obviously, that's been a strong growth driver for you guys. I think you said you expect continued momentum throughout the year. So maybe a little additional color there would be helpful. But a little bit more specifically, like China, I guess, if you could comment on maybe the environment there, how is China revenue going? Obviously, you'll be launching the AtriClip. But we’ve heard some companies see some weakness in China. So if you could comment on that, that would be helpful.

Yes. To start with the international business very broadly, I think that there are many reasons to be optimistic about sustained accelerated growth levels. First off, in each market that we operate, we are significantly underpenetrated. So there is a big opportunity in front of us. We're seeing particular successes in each of our franchises in Europe as that team focuses on driving good accelerated adoption across each of our therapies. Mike mentioned in his comments, the Encompass clamp, which we expect to be on the market in Europe later this year. We're continuing to invest to bring technology to our European markets along with the technology that’s there; that is one area of focus. Beyond just Europe, we are looking at each market and saying where does new and innovative technology belong. In China, one example of that is the AtriClip; the business is very solid, we work with a group of distributors in China, and we’re not seeing the same level of disruption. The AtriClip will be a nice complement to our ablation technology in that market.

Okay, yes, great. That's very helpful. And then maybe just a quick one. We're curious about how sternotomy is going in the pain management franchise.

Yes, for sternotomy, the feedback we've given on this call before is really that the biggest pushback we got was time; I talked about Crossfire plus reducing time by 25%, and then CryoSPHERE Max reducing time by 50%. You're basically taking freeze time from two minutes down to one minute for one of those freezes. That’s a big yield for that. I do anticipate that once we do a full launch on CryoSPHERE Max, that it might have some impact on sternotomy. We're not baking it into our numbers, though. We’re assuming there won’t be much of an uptake on that as we look kind of to the guidance in the back half of this year. As we look at next year and we get the max rolled out, we might incorporate it in our guidance if we start to see some upside relative to that. I see sternotomy as a huge upside for us, and we’ve built really two different devices that we think will make a difference in that market.

And our next question comes from Daniel Stauder with Citizens JMP.

Yes. Great. Just for my first question, pain management, a strong quarter, and it sounds like CryoSPHERE Plus had some really good, strong early feedback. But can you give us any color on this dynamic in terms of growth? Is this new physician usage with the new features, or is it higher utilization with the time benefits? Just any more commentary would be great.

Danny, it's a combination of both. We’ve seen a really strong account growth in the quarter; we've seen that the past two quarters to start the year. But we’re also seeing that within existing accounts that they continue to expand their adoption across the broader set of patients. It's a combination of both. I think the introduction of the CryoSPHERE Plus probe, new technology, has reinvigorated this market and certainly for our field team as they go back to customers who may have had hesitation with time. We’ve got a significant reduction in time with the CryoSPHERE Plus, and we’re also excited later this year with the CryoSPHERE Max.

Great. And then just one follow-up on appendage management. You've been asked about it a bit, but US sales tempered down by the MIS piece. Is any of that from LARIAT like we had seen in the prior quarter, or is it just the impact you mentioned in AtriClip MIS with the EPs time being taken up by the PFA?

It's the latter. This is not a dynamic that we saw in the first quarter with the drop-off in Lariat; it's really the softness in the MIS AtriClip side given the slower MIS ablation quarter.

And our next question comes from Suraj Kalia with Oppenheimer & Co.

So Mike, many questions have been asked. Let me ask the first one on PFA and the next one on AtriClip, and I’ll throw both of them your way together. So PFA, Mike, it's not new; it’s been around. We've been talking about it for years now. What is different from your expectations in terms of managing the PFA onslaught? What are you seeing differently right now that you're like, 'You know what, we didn’t factor this into our calculation?'

Yes. On the PFA front, it’s a great question, Suraj. It’s really the distraction of the sites happening. What’s different is we expected, like you said, and we were aware of it. We saw what we saw in Europe; we anticipated the impact of going toward that second ablation. That was all kind of built into our numbers and thought process relative to it. I'd say the actual workflow at the site was a little bit more pronounced in terms of how fast they moved into the sites and then took that time away from them to be able to focus on hybrid. They are so focused on getting their systems up and running, getting through their VAPs committees, how their contracting was going to look, and how they were going to go with their patient flow with RF versus Cryo versus PFA. That thought process may have taken over more mindshare. That’s why we say that it’s temporary; it just took over a little more mindshare as they were getting those programs up and running. Not as much affecting the actual patient treatment per se for the long-standing persistent patients. We think the data is still out there, and they feel good. The data from Europe is not compelling to treat those patients. So for now, it’s mostly that distraction, a little bit more than we expected for this quarter.

Maybe I’m paraphrasing here one of the comments you made in your prepared remarks or in your comments to one of the questions, something to that effect that over time, the long-term growth increases because the PFA failures will lead to more patients being funneled through. Again, I think some tariff pricing. Just to remind us, and maybe I’m mistaken here, is CONVERGE only energy modality specific or is it RF? Or is it irrespective of energy modality?

I’m not sure that I completely understand the question around the modalities. The EPi-Sense device is an RF device. So that is today utilizing RF technology on that front. In terms of what can be used on the other side, the EPi-Sense can be used with anything. They can be used with Cryo or whatever they decide to use on the catheter-based side of the technology; that doesn't have any impact on whether or not you can or cannot use the EPi-Sense device. I'm not sure if that's exactly what you're asking.

Yes. As we try to get Suraj back, I'll answer the second question; our strategy in AtriClip has been around entering the year, and for many years now, we've been pretty much 100% penetrated in kind of the number of cardiac surgery centers in the US with our open AtriClip devices. So the growth you’re seeing is really within existing accounts.

This concludes the question-and-answer session.

I would now like to turn it back to Mike Carrel, President and CEO, for closing remarks.

Again, everyone, thank you for joining and your interest in AtriCure. As I said, we had a great first half of the year and are looking forward to the second half of the year, and we’re really excited about the Flex Mini device that we just announced today. You will see more on that in the near future. Talk to you soon.

This concludes today's conference call. Thank you for participating. You may now disconnect.