AtriCure, Inc.ATRC
AtriCure, Inc. Stock Compensation Disclosure
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, performance share units 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 December 31, 2025, 5,787 shares of common stock had been reserved for issuance under the 2023 Plan and 3,157 shares were available for future grants. The Company issues registered shares of common stock for stock option exercises, restricted stock grants and performance award grants.
The following table summarizes total share-based compensation expense related to employees, directors and consultants for 2025, 2024 and 2023. The expense was allocated as follows:
| 2025 | 2024 | 2023 | |||||||||||||||
| Cost of revenue | $ | 2,699 | $ | 2,323 | $ | 1,817 | |||||||||||
| Research and development expenses | 7,976 | 6,951 | 5,802 | ||||||||||||||
| Selling, general and administrative expenses | 34,010 | 31,131 | 28,109 | ||||||||||||||
| Total | $ | 44,685 | $ | 40,405 | $ | 35,728 | |||||||||||
Performance Share Awards and Units. The award agreements for the performance share awards (PSAs) provide that each PSA that vests represents the right to receive one share of the Company’s common stock at the end of the performance period. The number of shares that vest and are issued to the recipient is based upon the Company’s performance with respect to specified targets at the end of the three-year performance period. Each target has a range of payouts that are used to determine the number of shares that will be issuable when the award vests. The performance and market condition payouts will be determined independently and accumulated to determine the total payout for the three-year performance period, subject to the maximum payout defined in the PSA agreements. All or a portion of the PSAs may vest following a change of control or a termination of service by reason of death or disability.
PSAs granted in 2025 have three weighted performance targets measured over a three-year performance period: (i) the Company’s compound annual revenue growth rate (CAGR) in constant currency, a performance condition, (ii) percentage increase in Adjusted EBITDA over base year, a performance condition, and (iii) relative total shareholder return (TSR), a market condition. Adjusted EBITDA is calculated as net income/loss before other income/expense (including interest), income tax expense, depreciation and amortization expense, share-based compensation expense and non-recurring charges that are not reflective of the operational results of the Company's core business and may affect comparability of results period-over-period. Adjusted EBITDA specifically excludes PFA co-development upfront and milestone payments. TSR is measured against the NASDAQ Health Care Index constituents and the 20-trading-day average stock price prior to the start and end of the performance period. The 2025 PSAs are weighted 50% on the CAGR performance target, 30% on the Adjusted EBITDA target, and 20% on the TSR performance target. PSAs granted in 2025 have payout opportunities ranging from 0% to 200% of the target amount. PSAs awarded prior to 2025 have two weighted performance targets measured over a three-year performance period: (i) the Company’s compound annual revenue growth rate (CAGR), a performance condition and (ii) relative total shareholder return (TSR), a market condition. PSAs granted in 2023 and 2024 are weighted 75% on the CAGR performance target and 25% on the TSR performance target and have payout opportunities ranging from 0% to 300% of the target amount.
During 2024, the Compensation Committee approved the grant of Performance Share Units (PSUs) to the Company's President and Chief Executive Officer. The award agreement for the PSUs provides that each PSU that vests represents the right to receive one share of the Company's common stock at the end of the measurement periods. The number of shares that vest and are issued are based on the attainment of specified stock prices over three measurement periods over a four year period. PSUs vest in defined tranches on the last day of the measurement period, subject to a market vesting condition upon the simple moving average of the closing share price during the 60 consecutive calendar days immediately prior to and including the measurement period date. PSUs that do not vest on the last day of the measurement period are forfeited. PSUs may vest following termination of service by reason of death or disability or change in control based on the performance criteria achieved as of the termination date or in connection with the change in control as specified in the award agreement.
Performance share activity at target attainment under the plans during 2025 was as follows:
Performance Share Awards and Units | Number of Shares Outstanding | Weighted Average Grant Date Fair Value | |||||||||
| Outstanding at January 1, 2025 | 688 | $ | 37.63 | ||||||||
| Awarded | 261 | 44.73 | |||||||||
| Vested | (211) | 46.60 | |||||||||
| Forfeited | (44) | 23.87 | |||||||||
| Outstanding at December 31, 2025 | 694 | $ | 37.21 | ||||||||
The total fair value of performance share awards vested during 2025, 2024 and 2023 was $8,335, $3,459 and $4,955.
In determining compensation expense, the fair value of performance share awards with a performance condition is based on the market value of the Company’s stock on the grant date of the awards. The fair value of performance share awards and performance share units with a market condition is estimated on the grant date using a Monte Carlo simulation and includes the following assumptions:
| 2025 | 2024 | 2023 | |||||||||||||||
| Stock price | $ | 38.74 | $ | 36.28 | $38.81 | ||||||||||||
| Expected term (years) | 2.8 | 2.8 to 4.0 | 2.8 | ||||||||||||||
| Company volatility | 48.0% | 45.0% | 44.8% | ||||||||||||||
Market index average volatility † | 99.3% | 92.7% | 91.0% | ||||||||||||||
Market index average correlation † | 25.8% | 30.1% | 32.2% | ||||||||||||||
| Risk-free interest rate | 4.0% | 4.2 to 4.3% | 4.6% | ||||||||||||||
| Dividend yield | 0.0% | 0.0% | 0.0% | ||||||||||||||
† | Not applicable to valuation of performance share units. | |||||||
The expected term is estimated as the remaining performance period at the grant date. Expected volatility is estimated based on the Company and daily trading prices of the market index, adjusted for dividends and stock splits over the remaining performance period. The risk-free interest rate is based upon the United States Constant Maturity yield curve at the time of grant for the expected term of the performance share awards. Based on the assumptions above, the weighted average estimated grant date fair value per share and expense was as follows:
| 2025 | 2024 | 2023 | |||||||||||||||
| Weighted average estimated grant date fair value | $ | 44.73 | $ | 33.19 | $ | 46.16 | |||||||||||
| Expense | 12,246 | 11,356 | 11,417 | ||||||||||||||
As of December 31, 2025, $15,414 of unrecognized compensation costs related to non-vested performance share awards and performance share units are expected to be recognized over a weighted-average period of 1.7 years.
Restricted Stock Awards and Units. Restricted stock awards and restricted stock units granted generally vest at a rate of 33.3% on the first, second and third anniversaries of the grant date. Activity under the plans during 2025 was as follows:
| Restricted Stock Awards | RSA Shares Outstanding | Weighted Average Grant Date Fair Value | |||||||||
| Outstanding at January 1, 2025 | 1,633 | $ | 36.69 | ||||||||
| Awarded | 958 | 37.49 | |||||||||
| Released | (710) | 38.47 | |||||||||
| Forfeited | (143) | 36.06 | |||||||||
| Outstanding at December 31, 2025 | 1,738 | $ | 36.45 | ||||||||
The total fair value of restricted stock vested during 2025, 2024 and 2023 was $26,270, $14,732 and $13,824.
In determining compensation expense, the fair value of restricted stock awards and restricted stock units is based on the market value of the Company’s stock on the grant date of the awards. The weighted average estimated grant date fair value per share and expense was as follows:
| 2025 | 2024 | 2023 | |||||||||||||||
| Weighted average estimated grant date fair value | $ | 37.49 | $ | 33.47 | $ | 39.21 | |||||||||||
| Expense | 30,396 | 26,975 | 21,797 | ||||||||||||||
As of December 31, 2025, $37,652 of unrecognized compensation costs related to non-vested restricted stock awards and restricted stock units are expected to be recognized over a weighted-average period of 1.8 years.
Stock Options. Stock options granted generally vest at a rate of 33.3% on the first, second and third anniversaries of the grant date and expire ten years from the date of grant. Activity under the plans during 2025 was as follows:
| Time-Based Stock Options | Number of Shares Outstanding | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||||||||||
| Outstanding at January 1, 2025 | 262 | $ | 35.71 | ||||||||||||||||||||
| Granted | — | — | |||||||||||||||||||||
| Exercised | (64) | 21.21 | |||||||||||||||||||||
| Forfeited | (8) | (68.65) | |||||||||||||||||||||
| Outstanding at December 31, 2025 | 190 | $ | 39.23 | 3.0 | $ | 2,044 | |||||||||||||||||
| Vested and expected to vest | 190 | $ | 39.23 | 2.9 | $ | 2,044 | |||||||||||||||||
| Exercisable at December 31, 2025 | 190 | $ | 39.23 | 3.0 | $ | 2,044 | |||||||||||||||||
The total intrinsic value of options exercised during the years ended December 31, 2025, 2024 and 2023 was $895, $711 and $2,982. As a result of the Company’s full valuation allowance on its net deferred tax assets, no tax benefit was recognized related to the stock option exercises. The exercise price per share of each option is equal to the fair market value of the underlying share on the date of grant. For 2025, 2024 and 2023, $1,367, $1,022 and $2,316 in cash proceeds from the exercise of stock options were included in the Consolidated Statements of Cash Flows.
No options were granted in 2025, 2024, or 2023. Option expense was $0, $328, and $765 for the years ended December 31, 2025, 2024 and 2023. As of December 31, 2025 there is no unrecognized compensation cost related to stock options.
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 and may not purchase a value of more than 3 shares during an offering period. As of December 31, 2025, 295 shares are available for future issuance under the ESPP. ESPP expense was $2,043, $1,746 and $1,749 for the years ended December 31, 2025, 2024 and 2023.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2021 | Feb 17, 2022 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.