AtriCure Inc (ATRC) 2013 Q4 法說會逐字稿

Good afternoon and welcome to AtriCure's fourth-quarter 2013 earnings conference call.

My name is Brianna and I will be your coordinator for the call today.

At this time, all participants are in a listen-only mode.

We will be facilitating a question-and-answer session towards the end of today's call.

As a reminder this call is being recorded for replay purposes.

I would now like to turn the call over to Lynn Pieper, AtriCure's Investor Relations Consultant from Westwicke Partners, for a few introductory statements.

Please proceed.

Thank you.

By now you should have received a copy of the earnings press release.

If you have not received a copy please call 513-755-4136 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.

AtriCure's results may differ materially from those projected on today's call.

AtriCure undertakes no obligation to publicly update any forward-looking statements.

Additionally, we may refer to non-GAAP financial metrics.

A reconciliation of these non-GAAP measures is included in our press release which is available on our website.

I would like to remind everyone on the call today that the Food and Drug Administration or FDA does not approve certain AtriCure products for the treatment of atrial fibrillation or afib or for stroke reduction.

The Company and others acting on its behalf may not promote these nonapproved products to train doctors for the surgical treatment of afib or stroke reduction unless the product is so indicated.

These restrictions do not prevent doctors from choosing to use the products for the treatment of afib or stroke reduction or prevent AtriCure from engaging in sales and marketing efforts to focus only on the general attributes of the products for the current cleared uses.

AtriCure educates and trains doctors in the proper uses of its products and related technologies including for the treatment of afib in accordance with the product's specified indication.

With that I would like to turn the call over to Mike Carrel, President and Chief Executive Officer of AtriCure.

Mike?

Thank you, Lynn.

Good afternoon and thank you for joining us on our fourth-quarter call.

2013 was a strong year for AtriCure, a period of remarkable growth and accomplishments across the entire organization.

We started the year by raising the necessary capital to fund our growth, innovation and education agenda and our team executed to deliver on our strategy.

In the fourth quarter we announced and closed the acquisition of Estech which broadens and strengthens our minimally invasive platform meaningfully.

In sum we finished 2013 strong and exceeded our financial and business goals for the year.

This solid execution allows us to set the stage for a follow-on offering completed earlier this month bringing $66 million in net proceeds to the Company.

I am proud of what we have accomplished and confident in our 2014 outlook and long-term growth prospects.

Consistent with our preannouncement, we expect topline growth for 2014 of approximately 22% to 26% year-over-year on a GAAP basis which includes the contribution from products acquired in the recent Estech acquisition.

I will start today's call with a quick overview of our results for the quarter followed by an update on the business, new product developments and our clinical trial progress.

Then I will turn the call over to our CFO, Andy Wade, who will provide an overview of our financial results.

After that I will come back to make concluding remarks and we will open it up for questions.

Looking at the quarter, fourth-quarter revenue reached $22 million or an increase of 19% compared to last year.

Growth in the quarter was driven by strong US sales which were up 20% versus 2012.

We experienced a good balance across our various product and solution areas.

Our momentum continues and we are now solidly seeing the results of our commercial and training focus over the past year.

Key strengths were US open-heart sales which were up 19% and US clip sales which were up 55% in the quarter.

We also achieved solid international sales with key contributions from Germany, Japan and China.

Moving on to the Estech acquisition, we completed this transaction in early January.

As a reminder, Estech's portfolio encompasses innovative surgical ablation devices that allow physicians to perform a variety of traditional and minimally invasive procedures using temperature controlled RF energy.

A key reason behind the acquisition is the ease of use of Estech's technology which we believe will allow us to grow procedure volume and successfully train clinicians who may have previously been hesitant to conduct these procedures.

Since the acquisition, feedback from customers and physicians has been overwhelming, has been overwhelmingly excitement about the combination and our continued commitment to afib.

We believe the addition of Estech's products, pipeline and people combined with the complementary education and commercial strength of AtriCure further entrenches us in this space and will translate into convergence of additional accounts and future growth across the board.

We expect contribution from Estech products to ramp through 2014 as we get our salesforce and distributors fully trained.

Andy will go into more detail about our expectations during his section.

Throughout 2013 and leading into 2014, we have strengthened our bench through several additions to be AtriCure team.

We have 61 net new additions growing from an employee base of 229 at the end of 2012 to 290 currently.

This includes the Estech team, several senior hires that we have mentioned on prior calls as well as great additions to our Board and Dr. Jim Cox who joined AtriCure in 2013.

Lastly, the recent offering which we completed earlier this month was comprised of primary and secondary shares and bolsters our balance sheet efficiently so we may have ample resources to fund both our clinical and strategic growth initiatives successfully.

In the US, we are gaining momentum around our training and education efforts as we continue to host individualized courses as well as training symposia.

For example, at the Society of Thoracic Surgeons conference last month, we hosted several education oriented events throughout the meeting.

Some of the key AtriCure sponsored events at STS included first, an all-day Fellows program with over 40 surgeons who learned from the Who's Who of arrhythmia surgery.

Second, a lunch meeting for our first cardiovascular physician assistant Maze training even with over 30 CVPAs in attendance.

We also sponsored a dinner with 45 prominent cardiovascular surgeons attending who are interested in learning more about our upcoming FDA clinical study of the atrial clip product for stroke reduction.

We had two booths.

One featured our new AtriCure branding and had consistent traffic and we also had a second booth featuring the complete Estech line of products with a fusion dual energy ablation device also generated a lot of interest.

Lastly, we hosted a series of surgeon one-on-one interviews just off the trade show floor in what is known as the tech suite.

The objective was to gather input on product features for projects in our development pipeline.

30 surgeons participated with results being funneled directly to our project teams.

These events are just some examples of our commitment and investments in training, education and incorporation of surgeon feedback on our development efforts.

We are confident that these efforts are beginning to pay off with greater awareness of afib and will ultimately increase adoption.

We continue to make strides in our international education and training initiatives as well.

We have partnered with leading afib centers and thought leaders across Europe to provide the best in class training on surgical ablation and formed a Maze IV European educational steering committee to include luminaries in the area of surgical afib ablation from five leading centers across Europe.

To provide an update, we have several training programs since our first international Maze program which took place last quarter in Germany at the Santa Stuttgart Cardiac Surgery Center.

For 2014 we plan to hold at least 10 training programs which are already scheduled to occur in the first three quarters of the year.

We have just recently initiated sales in France after receiving our registration to begin selling products at the end of Q4 with the first patient being treated in January.

We are on track with our launch and expect sales to more meaningfully contribute throughout 2014.

Looking at Japan, we are moving along and are in execution mode.

As previously mentioned we signed an extension to our multiyear agreement with Century Medical through 2019 which includes minimum revenue commitments through the next three years.

The new agreement provides CMI with the exclusive rights to market AtriCure product lines including future sales of the Clip and cryo.

While I am enthusiastic about the longer-term opportunity we continue to expect it to take 12 to 18 months for the Clip approval and up to three years for cryo approval.

Now turning to some of our business trends.

In the fourth quarter, the US open-heart revenue was up 19% compared to the same period last year.

We continue to build momentum on the early gains of our investments in education and training which result in sustainable growth opportunities.

AtriClip is gaining momentum and contributed meaningfully to our US growth rate with growth of 55% compared to last year.

We believe this is in part due to the growing belief in the management of the left atrial appendage as a viable treatment option.

We are successfully expanding our education and training programs which as anticipated resulted in increased utilization, competitive share gains and cross-selling opportunities.

Training levels and the conversion of competitive accounts continues to provide inroads into new hospitals.

In 2013, we sold to 122 new hospitals representing over $4 million in revenue.

We also lost some customers but on a net basis we are making significant strides in expanding our footprint and the accounts we lost were much smaller on a per account basis.

We are focusing our efforts on the right customers, those that are committed to afib and in performed greater procedure volumes.

Our focus in 2014 is shifting from adding new accounts to increasing penetration at the existing accounts including the newly acquired Estech customers and driving procedure volumes.

We will continue to invest in training and education to drive net additions to our customer base and building procedure volume overall.

MIS sales in the US were up 3% in the fourth quarter which is in line with our expectations of tempered performance in the short term.

We continue to anticipate stabilization and MIS as our efforts begin to take hold over the long term.

Internationally, revenues were up 17% for the quarter achieving sales of $5.5 million.

We saw strong growth from the Benelux and German regions.

Asia was also strong in the quarter specifically China.

We continue to see a rebound in our Russia business over the prior year and quarter over quarter.

On a separate note, we are optimistic that the Estech acquisition could add substantially to our international sales growth given its strong presence in Europe with over 40% of the sales that they had coming from this region.

Operationally our gross margin was 71.6% for the quarter and our net loss was $5 million or $0.24 per share.

Moving to an update on our clinical programs.

We have now enrolled 258 patients in our ABLATE post-approval study or PAS and have 48 sites enrolling with the remaining two sites in the final stages of approval.

This is up from 38 sites last quarter.

We are ahead of plan and we expect to complete enrollment this year.

On the staged DEEP AF feasibility trial, we completed enrollment in the fourth quarter with a total of 30 patients.

After submitting our 20-patient data to the FDA in late 2013, we have a meeting with the agency next month to review our protocol and lesion set.

We plan to submit pivotal trial protocol early in the second quarter.

Moving to our stroke trial, as previously discussed we receive approval from the FDA for a seven site, 30-patient feasibility trial this past October.

Primary safety evaluations will occur at 30 days and patients will be followed for six months.

Two of the seven sites are ready for enrollment and the other five are in process and obtaining IRB approval.

We expect to have results from the feasibility study by the end of 2014.

In parallel, we are currently in discussions with the FDA on our pivotal trial protocol.

As you might expect the interest in this potentially seminal study is very strong.

At this point it is too early to provide more detail than that and we look forward to updating you on the progress over the upcoming quarters.

In summary, we started 2014 with a sound business and a strong momentum.

We will build on our strengths by continuing our investments in education and innovation which we believe will fuel our long-term growth.

I will now turn the call over to Andy Wade, our Chief Financial Officer.

Thank you, Mike.

For the fourth quarter of 2013, revenue increased 19.2% to $21.9 million.

Revenue from product sales in the US was $16.4 million, an increase of 20% from the fourth quarter of 2012.

Revenue from open chest ablation related product sales in the US increased by approximately $1.6 million to $9.9 million and US sales of products used in minimally invasive procedures increased approximately $100,000 to $3.5 million.

US sales of the AtriClip system during the fourth quarter of 2013 were $2.9 million as compared to $1.9 million for the fourth quarter of 2012, an increase of 55.4%.

International revenue grew 16.6% on a GAAP basis and 13.7% on a constant currency basis as compared to the fourth quarter of 2012 to $5.5 million.

Gross margin for the fourth quarter of 2013 was 71.6% as compared with 70.8% for the fourth quarter of 2012.

Note that the medical device excise tax expense for the fourth quarter was $19,000.

The increase in gross margin was driven primarily through volume leverage partially offset by increased OUS capital sales.

Pricing remained relatively steady.

Operating expenses increased 38.1% or approximately $5.7 million from $14.9 million for the fourth quarter of 2012 to $20.5 million for the fourth quarter of 2013.

Research and development expenses, which include clinical activities, were $3.6 million for the fourth quarter of 2013 or 16.7% of sales, an increase of $681,000 over the fourth quarter of 2012.

SG&A increased approximately $5 million from the fourth quarter of 2012 to a total of $16.9 million or 77% of sales.

Note that approximately $1.2 million of this increase is driven by costs related to the recent Estech acquisition.

The remaining increase was due primarily to increases in selling, marketing and training costs.

Our operating loss for the quarter was $4.8 million as compared with approximately $1.9 million for the fourth quarter of 2012.

Our adjusted EBITDA loss was approximately $3.3 million compared to a $945,000 adjusted EBITDA loss for the fourth quarter of 2012.

Our net loss per share was $0.24 for the fourth quarter of 2013 compared to $0.12 for the fourth quarter of 2012.

Turning to the full year, worldwide revenue was $81.9 million, a GAAP increase of 16.6% or $11.6 million over 2012.

On a constant currency basis, growth was 16.1%.

For the US, sales grew 18.4% to $62.3 million.

US open revenue was strong growing at 15.1% to $37.8 million.

US sales of products used in minimally invasive procedures increased 7.2% from 2012 to $13.6 million which was stronger than expected.

US sales of AtriClip products grew 54.5% to $10.8 million driven by strong performance in both open and minimally invasive cases.

International revenue grew 11% on a GAAP basis and 9.1% on a constant currency basis to $19.6 million.

Gross margin was 72.7% for 2013 compared to 71.2% for 2012.

EPS was a loss of $0.56 for 2013 compared to $0.47 for 2012 and our adjusted EBITDA loss was $5.8 million for 2013 compared to $1.8 million for 2012.

As previously mentioned, 2013 included approximately $1.2 million of expense or $0.06 per share related to the transaction cost of the Estech merger closed on December 31.

We ended the year with $34 million in cash, cash equivalents and investments.

Additionally we had approximately $8 million of borrowing capacity under the revolving portion of our credit facility.

As Mike mentioned, we closed the follow-on offering on February 12, bringing $66 million in net proceeds to the Company.

As of today our pro forma cash position stands at $91 million.

Lastly, we are reiterating our guidance for 2014.

We anticipate topline growth of approximately 22% to 26% year-over-year or a range of $100 million to $103 million on a GAAP basis, including the contribution of the products acquired in the recent Estech acquisition.

Organic revenue growth is expected to be approximately 13% to 15% with the remaining portion expected from the Estech products.

We estimate Estech's valve products which are distinct from the core ablation franchise to generate revenue of approximately $3 million for the year.

For modeling purposes, we expect sales contribution from Estech products to be softer in the first half of the year and accelerating throughout 2014 as we fully trained our salesforce and distributors and complete the infrastructure integration.

As a result, we expect overall revenues to be lighter in the beginning of year versus the second half.

We anticipate gross margin to be approximately 70% to 72% for the year based on current trends.

This does represent a decrease from the 2013 reported gross margin due primarily to a slightly lower relative gross margin on acquired products along with Estech transaction related costs expected in the first half of 2014.

We are still targeting long-term gross margins of 75% and believe this is achievable.

We expect R&D to be approximately 19% to 20% of sales and we expect SG&A to be roughly 70% to 72% of sales in 2014.

These figures include approximately $3.5 million in transition costs related to the Estech acquisition.

Outside of the transaction related expenses we anticipate increased spending related to clinical science, R&D, selling, training and education along with international expansion.

We expect adjusted EBITDA for 2014 to be a loss in the range of $9 million to $10 million including transaction related costs which we estimate at $3.5 million.

As previously disclosed, we expect the Estech transaction to be dilutive to earnings in 2014 and accretive in 2015 and beyond.

Finally, we anticipate an increase in net cash burn for 2014 versus 2013 due to the expense items just described along with working capital and capital expenditures needed to support our growth strategy.

At this point I would like to turn the call back to Mike for closing comments.

Thank you, Andy.

In summary, our team made significant progress in 2013 in growing our business and we have begun 2014 with substantial momentum.

Our core growth strategy is to expand the market and capture share by increasing awareness through education and training and driving innovation through clinical and commercial support.

We look forward to updating you on our progress during future calls and we will now open the call for questions.

(Operator Instructions).

Danielle Antalffy, Leerink Partners.

Thanks so much.

Good afternoon, guys.

Thanks for taking the question.

First I wanted to touch on the AtriClip and what you are expecting or factoring in for guidance from a potential Watchman approval.

Obviously sales there have been strong, Watchmen is supposed to get approval at some point this year potentially midyear timeframe.

So just wondering how you are thinking about the Halo effect?

Will it actually I assume expand the market, how much?

Does it actually help your MIS Clip business more so than your open business?

How do we take about that?

Thank you, Danielle.

Nice to hear from you.

In terms of our best estimates for the AtriClip, it really assumes that this point since we don't know what is going to happen and when the timing is going to be for the FDA approval for the Watchmen, our goal is really just to focus on our business and what we are seeing in the market based on the procedure volumes and the momentum that we already kind of have.

So we really haven't factored that into our numbers per se.

Now we do believe that if the Watchman does get approved that there will be a long-term affect, a positive effect of the buzz around that to managing the appendage.

I don't know if it will have much impact on 2014, likely what you will start to see is in 2015 and 2016 that should help the market overall and should help us continue our growth long-term.

So that is kind of how we think about it, not much for 2014 but if it does get approved, I think it will have a positive impact on us long-term.

I think it will actually affect both MIS and the open side of our business because if people begin to believe as they are starting to right now, that managing appendage matters, people will begin to use the Clip on a more regular basis.

It's an easy product to use and we know that it safe and effective.

We know that it's a great product and so as a result of that we think that we are going to benefit from any kind of discussion around the management of the left atrial appendage.

Okay, that makes sense.

Great.

And then one follow-up question on Medtronic and the impact to the open surgical ablation business.

Just wondering, you guys have talked in the past about benefiting from a sort of defocus from Medtronic gaining market share clearly.

Has that trend persisted now in Q4 and into Q1?

Do you factor continued market share gains from a Medtronic defocus there in your 2014 guidance?

Interesting.

The Medtronic thing is an interesting kind of plus and minus and what I mean by that is I think that you have articulated what one of the pluses that are out there in terms of them kind of defocusing on it.

We clearly believe that we are gaining market share.

We don't know their exact numbers obviously but we know that we're turning accounts that were previously using or solely focused on the Medtronic devices and actually have moving over.

We anticipate that we will continue to see growth and penetration into those markets and to those customers.

We are seeing a lot of wins and we see expansion within the account that we won last year.

I talked on the call about 122 net wins, many of those were accounts that came from Medtronic.

We also had 17 customers that opened up accounts with us but didn't purchase from us last year.

We anticipate that will also generate some of the growth and a lot of those again are coming from Medtronic.

The one thing about Medtronic not being in the field that I would say hurts us a little bit is we are the ones out there putting the stake in the ground and as a result we're the missionaries and we are the ones that are pushing and pushing the industry.

If they were in there much like you'd asked about Boston and the Watchman, I think that there would be even more awareness if two of us were out there really pushing it hard.

So yes, we benefit by taking share.

I do believe that is occurring but I think the market would grow even faster if both of us were out there marketing and had labels from that standpoint.

Okay, perfect.

Thanks so much.

Tom Gunderson, Piper Jaffray.

Could you talk a little bit more, you had some in the script but talk a little bit more maybe even just on a percentage basis of what you think the role that international revenue growth will play in 2014 and beyond?

We anticipate that international will be a big part of a revenue growth, in line with the numbers that we have got on the top line in that 22% to 26%.

It might outsize that a little bit overall because Estech does bring in a larger portion of the revenue relative to what we had in revenue comes from the international side of the business.

So we anticipate a couple of points up maybe from what we were this year on the international side.

But pretty close to the same number.

Got it.

Thanks.

And then speaking of Estech, could you give us a sense, you gave us an overall employee growth in 2013, what was the starting salesforce and the ending salesforce and where do you think it goes in 2014 and in that, include the Estech side of it.

We started the year at around 35 in direct selling people and I think we had 11 or 12 ablation specialists or clinical specialists out in the field at the beginning of 2013.

We ended the year with about 39 US -- and this is the US I'm focusing on now -- and about 21 or 22 ablation specialists.

With the Estech team and everybody else we anticipate that we are at about 43 moving into that 44 or so range as the year goes on on the direct, 25 or so clinical specialists and we're evaluating now how do we actually either increase that or not.

We're going to do some evaluation in the long-term for our business on that front.

Probably won't have as much impact on 2014 but will have impact on 2015 and 2016 as we look at what the sales force makeup needs to look at for the long term.

Right now the goal is to get all 45 of the people we have got or approximately 44, 45 people to get them understanding and selling the products.

We just had a global training meeting last week where we spent two full days getting everybody up to speed, understanding the procedures and they are off and running this week on that right now and talking to their customers and feel really good about the team that we've got in place.

Internationally we have about 10 or so people; at the beginning of the year we had about six.

With the Estech team, we have got about another three to four and in terms of on a direct and managing the distributor basis as well.

Our presence is Germany, and in -- our direct presence is Germany, Benelux region and now France and we have agency or kind of a mix of agency and distributor in UK and the rest of the world is a distributor business for us.

Good color.

Thanks, Mike.

Jason Mills, Canaccord Genuity.

Thanks for taking the question, Mike.

Hi, Andy.

I have been bouncing between a few calls so my apologies if you have covered this, Mike, but first question is just US ablation -- open ablation, procedural trends as you work through 2013, clearly you had your hands full in converting accounts and I'm sure you had your minds on growing the overall procedural volume as well.

But given you are gaining so much there perhaps didn't focus as much attention on that.

As you move forward, what sort of market are you encountering in terms of procedural growth on the open side, potential for procedural growth expansion from sole-therapy with the trials coming up?

And just thinking about that both in 2014 and as you move forward and account wins or you know, important or perhaps less important than they were in 2013?

I actually completely agree with you.

In terms of procedural volume for the treatment of afib during the cardiac surgeries, we anticipate that our team will continue to expand on a per doctor basis or per physician basis and within the accounts they are going to continue to grow the number of procedures that they are doing.

The number of cardiovascular procedures aren't growing necessarily but the number of afib procedures being performed we believe we did see that trend increase at the back half of the year as the education and training came to fruition and we anticipate that will continue and it is a big focus area.

As I mentioned in my comments a little bit, Jason, we had 122 accounts that were added this year that were not in the previous year.

We can't add that many new accounts every year like you said we had a lot of net new adds.

Now it is a matter of growing those accounts and the size of those accounts and getting them to do Maze procedure on every single one and our team is spending a lot of time in the field making sure that is the case and spending time with that.

So you are correct in your assumption on that front.

On the MIS side, we continue with our tempered expectations relative to that.

I do that, obviously we can't go proactively market or push that particular piece of our business.

I think we are getting a little bit of Halo relative to the EPs not getting good results so they are kind of pushing it our way and beginning to get more surgical interest on that front.

As the trial picks up, I would say that you might get some uptick on it, I wouldn't say 2014 will hit too much because the trial probably won't be up and running until late 2014 or early 2015 depending on feedback back and forth with the FDA.

When we get that up and running maybe I will have a better feel for exactly what volume increases could occur but it probably won't be meaningful to the overall number for a couple of years.

That makes sense.

On the open side just from the market standpoint based on your market research, can you put quantitative numbers to what the growth looked like in the second half of the year, what environment you are looking at in terms of market growth in 2014?

I did have one follow-up on the [LAA] side if you don't mind.

It's tough for me to put an exact number because I don't know what Medtronic sales were.

So what I do know is I believe we have taken some share but I also believe that a huge portion of our business is with basically a growth in the market not just taking share.

I think on the last call I talked about a 50-50 kind of split between taking share and growing the market.

I would say I feel it's probably about the same this quarter but again I just don't know what their numbers are relative to that.

So I'm doing it based on okay I took this account from them therefore and I extrapolating out as opposed to knowing they just don't break that out for me unfortunately.

So I don't have a good feel for it on the open side.

The one other thing that is probably important for everybody to know when you asked about the question about MIS.

It's important to understand that Estech obviously most of their products are MIS platform products.

So we will likely see some growth on the MIS side just for the fact that we're selling the Estech products, when you look at kind of just the gross year-over-year growth because of that.

And it may not be our natural growth rate in terms of on an organic basis but because we're selling procedurally together what you might see is an increase in the overall MIS revenue for us as a business because of that.

So as you are thinking about your modeling (multiple speakers).

That is very helpful.

That was my expectation that Estech was doing a bit more on the MIS side so thanks for the confirmation.

On the LAA side quickly, I think in the past you talked about -- and perhaps you've given is already and I missed it, sorry.

You have talked about customer penetration both from the open and the minimally invasive side with the Clip.

If you haven't provided those numbers or even if you have could you give us those again in terms of your accounts that are doing ablation that are now buying the clips both from the open and the minimally invasive side?

Thanks, Mike.

The penetration is consistent.

I think some of the investors have called in our batting average, I think it is a great term when they use that.

And we have been pretty consistent in the 65% to 70% range on the open side and close to 90% on the MIS side in terms of the accounts buying from us and we held that trend in the fourth quarter like the third quarter.

They were pretty consistent so we will continue to focus on obviously growing that.

We anticipate long-term we can grow it but we have made great progress over the last 18 months going from a much lower number up to that 70% and 90% number, respectively.

Perfect.

Thank you.

I will get back in queue.

Jose Haresco, JMP Securities.

Good afternoon.

Thanks for taking the question.

Could you give us a bit of a sense of the overlap in the commercial footprint of the folks at Estech and your organizations?

What we did when we put the two companies together and we have made all the decisions relative to the sales force at this time, in the US what we did is we mapped out that 44 or so 45 territories and they took over some of the roles.

There were several that were kind of overlapping but many of them, a couple of them were net new territories I would say maybe three net new to territories that we added.

We did not keep the entire salesforce for Estech when there was overlap.

There was quite a bit of overlap in about eight or so territories that did not come over when we put the two together.

Different story over in Europe, over in Europe there was less overlap and much more complementary where we actually -- they had a German team, we had a German team.

We actually split it up and split up Germany in North and South and they had a gentleman who was running all their distributor relationships in France and he actually just added and complemented us on the distribution side.

So we pretty much brought that entire team over from Estech.

As you think about -- you guys have always done a huge and great amount of work in changing how you train your surgeons.

Is that protocol locked in at this point in terms of how you get your surgeons to be trained or are there still changes to be made over the next year?

It is different.

We are definitely moving from what I would call didactic 101 training and awareness about here is what the Maze is, here is why it's important, here is how to treat afib on the open and concomitant basis.

That was really the basis of it and Dr. Cox did a wonderful job of really redoing that course.

We will continue to do that for sure because people continue to need to be reminded especially those that took the course early on and weren't a part of the great teachings that Dr. Cox put into the plan, really kind of the latter half of year or second to third quarter of last year.

However, we have trained a lot of sites and so there's two things that really are a focus of ours.

Number one is on international basis taking that same training protocol and bringing it to Europe and then bringing it over to Asia.

We feel that that is going to be a big growth opportunity for us.

I talked a little bit about that.

The second piece is what we call advanced training courses and the advanced training courses will include the 101 as a beginning portion of it.

People will likely stay overnight and then they will have an opportunity to actually get advanced training about why that lesion set was in place and have good debate and discussion amongst surgeons that are doing the procedures.

We believe this is critical to the question that was asked earlier around penetration in the accounts because we are getting them to be really excited about afib, to talk about when they have seen success etc.

and to showcase studies like that and to possibly even have case, show them a live case also.

So there is a lot more that is going on in the advanced course.

It will likely be about a day and a half course that we send people to as opposed to just a two-hour didactic.

Great, thank you very much.

There are no further questions in the queue.

I will now turn the call back over to Mr. Mike Carrel.

Good.

Thank you again everyone for participating in the call tonight.

We realize it is a very busy night with everybody out there on different earnings calls.

So have a wonderful evening.

Ladies and gentlemen, that concludes today's conference.

Thank you for your participation.

You may now disconnect.

Have a great day.