AtriCure Inc (ATRC) 2015 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the AtriCure, Inc.

2015 Third Quarter Earnings Call.

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

Later we will conduct a question and answer session and instructions will be given at that time.

(operator instructions).

As a reminder, today's program is being recorded.

I would now like to introduce your host for today's program, Lynn Pieper, Investor Relations.

Please go ahead.

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 including 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 publically update any forward-looking statements.

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

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

With that, I'd like to turn the call over to Mike Carrel, President and Chief Executive Officer.

Mike.

Thank you, Lynn.

Good afternoon and thank you for joining us.

We are pleased to report solid third-quarter results which, reflect continued execution on our commercial, clinical and education strategic initiatives.

We also recently closed the acquisition of nContact, further expanding and strengthening our presence in the Afib market.

As a communicator, a few weeks ago we raised our revenue guidance for 2015 to a range of $129.5 million to $130.5 million dollars.

We're very excited about the combination which we expect to drive organic growth at or above the 18% level, an increase from our previous growth objective in the mid-teens.

As a combined entity we have a stronger platform to advance our goal of being the leader in the treatment of cardiac arrhythmias.

I'm more confident than ever that our end markets are strong and growing and the acquisition of nContact will prove to be very beneficial to patients, physicians and all of our stakeholders.

We have many new products indications, a strong pipeline of additional products and clinical trials that will be a catalyst for driving continued growth for many years to come.

Looking at the third quarter our revenue was in line with our pre-announcement at $31.4 million, an increase of 18% as reported and 21% on a constant currency basis when compared to the third quarter of last year.

We demonstrated strong growth across all product lines in the US where sales grew 23% year-over-year.

US open heart sales were up 16%, MIS was up 27% and AtriClip system sales were up 38% in the quarter.

Open Clip was up 36% and AtriClip Pro grew 44%.

Internationally revenue increased 2% as reported and 13% constant currency, again negatively impacted by the weak euro.

We continue to see strong growth from our direct sales channels driven by key contributions from Germany and the UK.

Sales were softer in distributor channels, particularly in Eastern Europe.

Now moving on to our business trends, AtriClip remains our fastest growing franchise and strong interest in managing Left Atrial Appendage continues to grow.

Additionally, our commitment to physician training and education remains an important pillar of our strategy.

We continue to offer one event technical training course per month and recently conducted our first Master's course in Boston.

We've also have initiated an on-site, in-person concomitant training program in the US.

Additionally in Europe our sole therapy training program is underway.

These are just part of programs that we have in place to educate and properly train physicians in treating Afib and managing the Left Atrial Appendage.

Overall we continue to grow on the open side and still have a long way to go in penetrating con-commitment procedures.

The market remains large and under penetrated for multiple categories of structural heart surgery including CABG, aortic valve and mitral valve procedures.

2015 has really been the year of cryo for us.

Our more flexible cryo probe released at the end of 2014 and the new cryo-analgesic indication have both contributed nicely to our overall growth.

Additionally, we recently launched the CryoFORM Cryoablation Probe as an expansion to our cryo surgical platform in Europe.

CryoFORM is an even more flexible probe than the device launched last year.

The newest probe allows for easier manipulation and application of the device.

This provides physicians the flexibility to adapt to a variety of surgical ablation procedures, particularly in minimally invasive setting or approach.

CryoFORM was received incredibly well at the recent European Association for Cardiac Surgery annual meeting.

In fact, we're already starting to receive orders in the first month it has been available internationally.

Additionally, as part of our investments in R&D we are committed to coming out with at least two new products per year and for 2016 we expect to launch two AtriClip products.

These new releases combined with the 2015 enhancements mentioned above give us great confidence in our objectives for the next several years.

We will continue to make these investments and keep innovating to drive better patient care and adoption.

On the clinical front, while we have several clinical programs underway with meaningful progress expected over the next 12 to 14 months, the key areas for the rest of 2015 and 2016 are DEEP and CONVERGE which are FDA trials for sole therapy treatment of persistent and long-standing persistent Afib.

Driving strong enrollment and momentum is our top priority from a clinical perspective.

A brief update on each; first DEEP AF, our trial for stage dual [apocardial] endocardial procedure for the treatment now has 13 sites through the IRB process and 15 patients enrolled to date with zero complications.

The pipeline of patients is starting to develop and we have another six cases scheduled by the middle of November.

We expect by the end of the year to have 15 sites up and running and over 25 patients enrolled.

We continue to anticipate approximately two years to achieve full enrollment of the 220 patients.

As you know, this trial is very important as it is designed to prove the effectiveness of sole therapy to treat the sickest AF patients.

The CONVERGE IDE clinical trial is a multi-center open label randomized pivotal study evaluating the safety and efficacy of the [epocent] AF Guided Coagulation System for the treatment of persistent AF patients, refractory or intolerant to at least one class-one or class-two anti-arrhythmic drug.

This is the first head-to-head study to evaluate the convergent procedure versus catheter ablation in patients with persistent and long-standing persistent Afib.

We expect the trial results to support FDA approval of nContact devices specifically for the treatment of persistent atrial fibrillation.

The trial is in its early stages and we expect to complete enrollment in 2017.

We'll learn more and may make slight modifications as we start investing more heavily in managing the trial with our resources in the coming quarters.

The DEEP and CONVERGE trials are designed to achieve the same goal proving the safety and effectiveness of the sole Afib hybrid therapy but in different ways.

CONVERGE is similar to what we were doing with DEEP in terms of the partnership required with EPs.

However, it is really a different approach as surgical portion is performed through the abdomen by a trans-diaphragmatic approach.

The key advantages of the convergent procedure are that both the surgical procedures, EP procedures, are typically performed in a single setting and it is not necessary to single one ventilate patients with compromised lung function.

And while in current practice the LAA is not excluded, we believe it is an easier procedure for the surgeon, significantly better that catheter only ablations and can require shorter hospital stays and less pain for the patient.

This is a good point to turn to the nContact acquisition.

We're extremely pleased to bring these innovative procedures and products under the broader AtriCure umbrella.

As a reminder, nContact is a portfolio of differentiated devices that provide for less invasive ablation options.

Its technology is used in the convergent procedure mentioned above, a multi-disciplinary therapy in which the closed chest surgical epicardial ablation is performed and then completed by an endocardial catheter ablation, which is performed by the electrophysiologist.

A key factor driving this combination is in context similar focused on developing sole therapy for treating the patients suffering with persistent Afib which is a multi-billion dollar under penetrated opportunity.

This is why both clinical trials are critical and when combined are highly differentiated and expand our addressable market.

There is very little overlap between our centers and our customer account base is broaden meaningfully.

Since announcing the acquisition, feedback from physicians has been positive and they are intrigued by the possibility of learning different methods and techniques.

Our sales team is also energized and excited to have another approach as they speak with clinicians.

The potential of both DEEP and CONVERGE is already generating conversations of surgeons and EPs and producing a buzz in the field.

This early feedback is very encouraging.

We are committed to the completion of both trials and establishing sole therapy options to address persistent Afib.

Bottom line, nContact is a great strategic fit that offers synergy across many areas.

We believe the acquisition will significantly augment our growth, strengthen our clinical programs and leverage our operating structure.

Additionally, we are pleased with our Q3 results and have taken steps to further strengthen our position as a leader in the treatment of Afib.

With the acquisition of nContact combined with the success we have seen in our core business, we are confident we can sustain organic revenue growth of approximately 18% through the end of the decade.

This is up from 15% long-term growth expectations that we had previously communicated.

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

Thank you, Mike.

For the third quarter of 2015 revenue increased 18% on a GAAP basis to $32.4 million.

On a constant currency basis worldwide revenue increased 21%.

Revenue from product sales in the US was $24.7 million, increase of 23% from the third quarter of 2014.

Revenue from open chest ablation related product sales in the US increased by approximately $1.8 million to $13 million representing growth of 16% driven by our education and training efforts as we build the still under penetrated market for concomitant surgical ablation.

US sales of products used in minimally invasive procedures increased approximately $1.1 million to $5 million, up 27% and driven by all MIS products.

As with the earlier quarters, the fusion product line continue to grow faster than expected.

Continued development of clinical data and support of MIS ablation for the treatment of Afib through trials such as our DEEP and CONVERGE IDE studies, are critical to growing this market over the long-term.

US sales of the AtriClips, (inaudible) during the third quarter of 2015, were $5.9 million as compared to $4.3 million for the third quarter of 2014, an increase of 38%.

We continue to be encouraged by the strong performance of this part of our business with very strong growth in both the open and MIS AtriClip products.

International revenue grew to $6.7 million, 2% on a GAAP basis and 13% on a constant currency basis as compared to the third quarter of 2014.

Strengths included the direct markets in the EU and certain distributor markets.

Gross margin for the third quarter of 2015 was 71.5% as compared with 70.8% for the third quarter of 2014.

The primary drivers of improvement were the increased mix of US sales and the elimination of the Estech transition related expenses recorded in 2014.

Offsetting these improvements were heavier loaner depreciation.

Operating expenses increased 45% or approximately $8.9 million from $19.7 million for the third quarter of 2014 to $28.6 million for the third quarter of 2015.

Note that the prior year SG&A expense included a $5.4 million income item due to the adjustment of the Estech acquisition related earnout liability.

Without this operating expenses are up $3.5 million or 14%.

Research and development expenses, which include clinical and regulatory activities, were $6.5 million for the third quarter of 2015 or 21% of sales, an increase of $1.5 million over the third quarter of 2014.

The increase was driven by both clinical trial and product development efforts.

SG&A increased approximately $7.4 million from the third quarter of 2014 to a total of $22.1 million or 70% of sales.

Without the earnout adjustment in the prior year SG&A expenses are up $2.4 million or 14%.

The increase is driven primarily by filming expenses including heavier performance based compensation based on strong US performance, marketing expenses and training activities.

Our operating loss for the quarter was $6.1 million compared to $802,000 for the third quarter of 2014.

The prior year net loss included the $5.4 million income item due to the adjustment of the Estech acquisition related earnout liability.

Our adjusted EBITDA loss was approximately $2.2 million this quarter compared to a $3.2 million adjusted EBITDA loss for the third quarter of 2014.

Our net loss per share was $0.22 for the third quarter of 2015 compared to $0.02 for the third quarter of 2014.

We ended the quarter with approximately $59 million in cash, cash equivalents and investments.

Lastly, we adjusted our 2015 guidance in light of the recent nContact acquisition.

We anticipate constant currency worldwide growth of approximately 23% to 24%.

At current exchange rates this represents approximately 20% to 21% year-over-year worldwide growth on a GAAP basis or a range of $129.5 million to $130.5 million.

We continue to anticipate gross margin to be approximately 71% to 72% for the year based on current trends and investments to support growth.

The bottom end represents a slight increase from 2014 reported gross margin.

Items with a positive effect on gross margin include volume leverage, no additional non-recurring costs from the Estech acquisition and programs to increase efficiency.

Headwinds on gross margin include continued heavy loan or capital placement, placing a new building into service in the fourth quarter and other manufacturing costs.

We are still targeting long-term gross margins of 75% and believe this is achievable due to increased volumes and efficiency along with the nContact acquisition.

We were previously expecting adjusted EBITDA for 2015 to be a loss of approximately $7 million to $8 million.

With the nContact transaction we increased the loss for the year to $10 million to $12 million due to the transaction fees, integration costs and increased Q4 operating loss from the acquired company.

As we have noted in the past, outside of costs related to nContact we continue to feel that the investments and clinical science and product development are driving the bulk of the EBITDA loss and are warranted given the exciting long-term growth plan of the Company.

We expect R&D to be 20% to 21% of sales for the year driven by spending in clinical trials and product development.

We expect SG&A to be roughly 72% to 73% of sales in 2015 driven by continued increases on spending related to selling, training and education and international expansion.

Our operating expense assumptions now include the impact of the nContact transaction.

As a reminder, we recently provided high level guidance for 2016 and beyond.

For 2016 we expect our consolidated revenue growth, including nContact to be approximately 25% at current exchange rates.

With this acquisition and the success we've seen in other franchises we are confident in our long-term revenue outlook of approximately 18% growth.

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

Great.

Thank you, Andy.

We are pleased with our sales performance and other accomplishments in the third quarter.

As the only company in the world with an FDA approval to treat the most serious forms of atrial fibrillation, we continue to be committed to advancing the field.

And we will now turn the call over to questions.

(Operator Instructions).

And we would like to ask that you please limit yourself to one question and one follow-up.

Our first question comes from the line of Danielle Antalffy from Leerink Partners.

Thanks so much for taking the questions.

Mike, I know you touched on this a few weeks ago when you announced the nContact acquisition but I think one of the initial concerns was potential cannibalization of the existing minimally invasive business.

I wonder if you could remind us and/or elaborate on comments you made on that call and on how it's actually complementary other than the obvious which is your removing a competitor from the market.

How are the addressable markets actually different here if at all?

Well, it's the same basic patient population, Danielle, so that part is actually the same.

The other thing that's the same is that you've got an EP and a surgeon working together on the heart team concept that you've seen in TAV or in other areas so those areas are actually very similar.

The part that's different and what differentiates this and why this is really important is that this allows us to go after that multi-billion dollar opportunity that's the minimally invasive space.

We're the sole therapy treatment for the persistent and long-standing persistent patients.

The reason for that is think about the two.

You've got on one end the DEEP procedure and on the other one you've got the converged procedure and they really have different EP preferences and different surgical skills to accomplish both of those and so we think with the combination of both approaches we'll be able to basically get the majority of EPs and surgeons to be comfortable with the overall procedure.

Just having the DEEP procedure by itself, that was really geared towards a surgeon who has skills on the video assisted side, is comfortable with the [VAS] procedure, has a commitment to basically making sure they get the appendage every single time they're doing the procedure and has a more robust ablation profile on that one.

The other one is for somebody who may not be as comfortable on the surgical side going after the VAS procedure or it might be an EP who wants a little bit less pain for their patient and so they get much better results than you would get with a catheter based procedure and that surgeon may not be able to do or want to go out and do the training necessary to do the full DEEP procedure.

And so we believe that this really kind of allows us to go after that huge surgeon population and EP population that are treating the Afib patients and many of the people that were not available to the DEEP procedure are going to be available to the converted procedure.

Okay that's really helpful.

Thanks for that and then just one quick follow-up; obviously a lot of the growth you're seeing today is being driven by your training programs and I understand you're in the latter of [seizes] for the most part of those training programs.

Wondering if you have centers today that are sort of fully operational from both a -- or I'm sorry, from the mitral CABG and/or aortic valve perspectives.

Can you give us a sense of what percentage of their patients they're doing open ablation of their aortic surgical and/or CABG patients, just trying to understand what the ultimate market opportunity could be here once all of your centers are doing all three procedures.

Well, I mean the best places, I'll give you two examples because those two are the ones that do a lot of our in person training, so we send people to Asheville, North Carolina with [Dr.

Grow] and then there's a group that goes to Cleveland Clinic or there's Saint Vincent's in Indianapolis.

Those are centers that basically are at I would say 95% of the patients that come in with Afib regardless of it's an AVR or CABG or mitral valve are actually getting treated.

Now, we don't believe that you're going to have every site in the country get to 95% penetration in their area so but you can see that the potential is obviously there when you've got less than 25% getting treated today across all those different platforms.

But if you look at the best places and when we send people for the training where they're actually watching these surgeons, they're watching a combination of cases.

What one point that you made where you said we're kind of at the end of the training, training never ends.

It's actually a continuous process.

We're continuing to learn new ways to train.

Like I mentioned earlier, we rolled out this Master's Level training in Boston.

We're going to be doing another Master's Level training in New York.

We've already got almost 40 people signed up for that so we might have to break it up into two different trainings that weekend.

So and these Master's Levels courses.

These are people that have already been to one or two other courses and they're kind of going to that next level of detail and depth during the training programs and so we're pretty excited about continuing down the progress that we're making on training.

I don't anticipate that we will slow down in that area because we think that it's an incredibly important piece of our business and people want more and more training.

The more training they get, the more they want.

All right, thanks so much, guys.

Michael Matson, Needham & Company.

Thanks for taking my questions.

I guess I just wanted to start with the MIS business.

The growth there has been pretty strong.

I know that you've kind of tried to set the expectations a little lower but I was just wondering if you could comment on why you think the growth has been so strong there even in the US despite the lack of an approval on the DEEP data yet.

I think what you've seen is that there's a huge patient population.

We've talked about it.

It's millions of patients that are not getting treated appropriately in [theory] and looking for a different solutions and EPs are beginning to want to treat those patients and looking for ways to treat them.

So I think that's really what's driving it more than anything else.

It's really kind of organically being driven out in the field by the EPs and surgeons wanting to partner up and wanting to create better patient care.

And we've always been a little bit soft in terms of saying hey we don't want to set the wrong expectation because if one surgeon leaves one site or another it has that we've got bigger revenue concentration in that area.

That's why we get a little bit concerned on that but we do feel like we've got a great base of business there with people there that are doing a really nice job and obviously that's driving a good portion of our growth right now.

Okay thanks and then just on the cryoFORM Cryoablation Probe, you know, it's launched outside the US.

I guess it's not launched in the US yet but how big of a -- can you give us some more detail on this and how big of an impact do you think this could have on your sales.

Is it something that could be material?

And then I guess just same question on the new AtriClip products that you're planning to launch next year?

All that goes into when we talk about being really comfortable and confident in the long-term growth rate of 18% organically, that's what gets us comfortable, that I believe great companies continue to come out and innovate, had extensions of existing products to expand the market to grow the number of surgeons that can use the products and get them more comfortable with it and cryoFORM and both the clip products coming out next year and then we'll have products coming out in 2017 are really what enable us to feel that confident in those types of growth rates.

We feel like it enables us to get more surgeons comfortably using our products.

Specifically on the cryoFORM it's to go after more of the minimally invasive side on that front to a lot of right lateral thoracotomies where they're doing a minimally invasive surgical procedure and they just wanted a more flexible probe so we get a lot of feedback that they would like to have something more flexible to utilize it.

I think that that should have some reasonably meaningful impact on our sales in 2016 for sure and then on the Clip products we anticipate rolling out both of those next year and they'll have modest impact on next year but they'll have significant impact at the end of the year and into 2017 for sure so what you can see is these, a cadence of coming out with new products, training our team on it, making it simpler and easier for surgeons and making things less and less invasive.

Okay thanks and then just a quick housekeeping question for Andy, the -- what share count roughly should we be using for the fourth quarter after the deal closed?

Sure, the total was about 28.5 million before the deal and we issued approximately 3.7 million shares for the nContact transaction.

Jason Mills, Canaccord Genuity.

Thanks for taking the questions.

I want to go back to your previous question, Mike, and you were talking about the advantages of having both the CONVERGE and the DEEP clinical trials.

If you could and I know you don't have a crystal ball to see how these data play out but what we do know from single center studies in Europe is that the DEEP methodology or algorithm has delivered fantastic clinical outcomes.

CONVERGE has delivered much better clinical outcomes in catheter ablation but that's not really saying that much and on a relative basis DEEP has been better.

To your point, there aren't as many doing -- surgeons that are comfortable doing DEEP than CONVERGE and you've elucidated the advantages of having both but if we fast forward and then these trials we see a clear demarcation of clinical outcomes, how will you position these products sort of down the line relative to each other if DEEP is delivering say 10 percentage points better freedom from Afib rates than CONVERGE?

We're really going to let the market--

I'm just trying to think forward on this.

Yes.

No I think your question is very valid and to put some specific numbers to it, the CONVERGE trial single center data there's been a lot of data that's actually been accumulated and many manuscripts and abstracts that have been written on it.

They're getting about 85% success on antiarrhythmics or previously used antiarrhythmics that had failed and they're getting about a 65% success rate or so off the antiarrhythmics and so it's in about that range and that's for -- primarily for persistent patients, persistent long-standing persistent patients.

And then the DEEP is, like you said, about 10 or 15 points higher and then also you're getting the advantage of managing the appendage.

That being said, I think that you're going to wind up seeing where the sites are going to make the decision.

You're going to have different EPs that are going to prefer the simplicity of coming in through the abdomen, the less pain, the doing it at one setting and so I've been visiting with many of those people and a lot of EPs have a lot of comfort with that.

They're more comfortable referring for that particular patient population and they get results that are significantly better than what you're seeing with the catheter based results and that's why there's going to be a huge, in our mind, market for that procedure and we'll let the sites decide what's most important.

I mean EPs are making that decision everyday today.

They're going to have to make the decision when am I going to send somebody over for the converged procedure versus just the catheter procedure and so I'd say that we'll let the market decide.

We think both are excellent procedures.

They both get very good results and we stand behind the results of both of them so we're not going to make a preference to it.

We're just going to basically show them the different technologies that we have and allow the surgeons and EPs to make that decision on their own.

Thank you.

That's helpful.

My follow-up question is on concomitant.

In our research what came up though has been somewhat surprising over the last year or so is that on the cryo side notwithstanding that even though you have the only label, you're losing what seems to be a fair amount of business to Medtronic when it comes to those concomitant procedures in which cryo is used whereas surgeons prefer it or like to use it concomitant to RF.

It's hard for us to tell just doing sort of random primary research just how much in revenue you may be losing but it seems to be meaningful.

So now that you have cryoFORM could you quantify for us at all what sort of incremental revenue opportunity is now at your behest given a better technology in cryoFORM?

Yes I don't know that I would say we're losing.

I mean Medtronic's got a -- they've had a very strong business for many years.

It is difficult to get exactly -- they're a large company and this is a product line within their surgical division and so it's tough to know exactly what their sales are per se and so from our standpoint I don't know that we're "losing business" but it's more difficult to kind of take over some of those sites that were comfortable with using their technology from before.

We do think the cryoFORM does open up the market, does allow us to continue to gain share.

We've gained share we believe over the course of the last three years on the concomitant side of our business overall and that we do think cryoFORM enables us to kind of gain some additional share for those surgeons that are looking for a more flexible product on the minimally invasive side.

But to give quantification of that, I mean it's basically baked into our number where that's one of the reasons we feel comfortable and confident with the overall 18% growth number for next year.

I'd say that's the best way to kind of think about it is that it just allows us to have the level of confidence to be able to bring up our growth rate for next year and then also for subsequent years after that.

Rick Wise, Stifel.

Let me just go back to your goal of the two new products per year.

2016 you talked about the two new AtriClips.

Can you just dive a little deeper?

Are you willing to do that a little bit, Mike?

You know, do they facilitate all procedures?

Do they expand the patient population?

Is this something that might have a better margin or a better ASP?

Just again, a little more color on what these might do in first half, second half, just any color?

Yes sure.

The products will come out.

We'll probably have one that comes out kind of the end of the first half and one that comes out at the end of the second half of next year and when we think about the two kind of Clip related products, it -- in a lot of ways it's similar to the nContact acquisition which is that you just got some surgeons that maybe aren't comfortable using the Pro today because of the design of it, because of the hoop that's on it and that maybe they're just not comfortable with it given how they've been trained or where they've come from etcetera so these are to make it much easier to open up that population, to have more and more surgeons be able to use the product in a more minimally invasive environment.

And so the idea here is to make things that are more minimally invasive and easier for surgeons to use in just about any setting and so from our standpoint that's really been the focus of it.

We do anticipate these are much more highly technical products.

There will be some increase in the price because of that.

What we haven't determined yet but we're obviously scanning the market to kind of get a good feel for that but we do anticipate that it should open up more doors and more surgeons to use our product.

Got you and just a second question from me, I mean obviously you had an excellent quarter in the US, that 23%, I mean outstanding by any measure but it was a tad slower than the many quarters that preceded it.

The question I'm often asked is what shall we read into that slightly slower growth?

I mean it's the seasonally slow quarter I know.

Any additional perspective and here's an opportunity for you to answer the questions I've been getting and maybe a little more color.

I know that there are quarterly ebbs and flows.

Is that the right way to view it or anything else to reflect on?

No I don't -- in fact, I actually think it's a little bit different.

I think that we had a fantastic quarter in the US.

We're up 23% and which is obviously in my mind off of an incredibly difficult comp over the last couple of years.

If you look back to 2013 we grew 25%.

Last year we grew 31% and this year we grew 23%.

I mean it's -- those are some significant numbers and when we were giving long-term guidance of 15%.

So from my standpoint I think that we're doing incredibly well.

The market has been able to sustain some very, very strong growth from that standpoint.

If you look at it relative to the first and the second quarter I think we kind of built into our guidance as we kind of looked out to the back half to the year that while we had great growth in those quarters we didn't anticipate to be at those kinds of levels in the 28% to 30% on an ongoing basis and we don't want to have that level of commitment out there.

I think 23% is outstanding and we feel very, very comfortable with that.

Our comfort level is really 25% growth combined for next year and then an 18% organic growth overall and those are numbers that I think are very strong and people should feel really good about because they're consistent numbers.

We've been consistent every single quarter and so we feel great about what happened in the US and this quarter.

I mean the international one was a little bit slower than we'd like.

We did -- and so from that standpoint we did get hit on Eastern Europe and some of the economic turmoil that's going on over there so I'd say that the opposite is happening there where we think that that can grow faster and we do anticipate that that will be the case as we kind of look forward into 2016 but there's definitely been some turmoil from a lot of things going on obviously over in Russia and some of the other countries over there that were a decent portion size of our business.

But in the US we feel great about the numbers, feel good about kind of where we stand and we think they reflect kind of what we've been hopefully setting as expectations for the Street and we never want to over set those expectations.

Tom Gunderson, Piper Jaffray.

Mike, per the last comment on East Europe and the distributor market growth that you showed in Q3, are you finding that you have to -- I'm assuming those are sold to them in dollars.

Are you finding that you have to offer them any special deals?

Is there any increasing pressure from your distributors to share the pain a little bit?

Not necessarily.

I mean there's -- and we're not comfortable with that from a margin standpoint so that's just not something that we're real comfortable doing.

We don't feel like -- we're not getting too much pressure on that now.

We did in the Latin America but it was a very, very small dollar number.

Got it, thanks.

And then is it -- maybe some preliminary thoughts from you on marketing to the consumer.

Several times you said large under penetrated market and that's part of the mantra of Afib here.

What do you -- what kinds of programs might you consider and when as far as I don't want to say they're all direct to consumer but to maybe funnel more patients into some of these centers that are doing 95% of their patients with your products?

Well I mean when it comes to treating the concomitant piece of the business we're obviously we've got the FDA label to do that, we partner with the centers to talk about what Afib programs might look like.

I mean it's a very local based type of program that they're doing.

We don't have a specific programs in place right now.

I think it's a valid question that I don't know that we've got a specific plan in place today for.

When it comes to sole therapy we -- until we get a label we can't even have conversations relative to that or discussions, so we're not really involved in any way, shape or form on the minimally invasive side or the sole therapy treatment in the US for sure.

But on the concomitant side we've talked about it but I'd say that it's a good question and one maybe that we need to ask ourselves a little more deeply and do some planning on but we don't have anything right now in place.

Got it, thanks.

That's it for me.

Thank you.

Matt Miksic, UBS.

Thanks for taking our questions.

So one if you could clarify I think I heard you say something about that it's a high utilization centers where you're doing some training is where you're seeing 95% penetration of these CABG and aortic and mitral concomitant procedures.

If I heard that correctly, could you elaborate on that a little bit?

And then I had one follow-up.

Sure and I'm giving estimates.

I don't have each one of the specific information there but there are definitely some (inaudible) but if you talk to the physicians and surgeons there, you talk to [Dr.

Gillenoff], [Dr.

Grow] or Dr. Gerdisch, these guys are treating every patient that they can that has Afib that comes into their OR.

They believe that they recover more quickly and they're basically taking all comers on and they do the full Cox-Maze procedure when they're doing it as well so these are -- and that's obviously one of the reasons that we send people.

They get excellent results.

They track their patients long-term and they care deeply about treating these patients and having partnerships with their EPs over time as well so I'd say that they're some of the best centers that are out there in the world for doing this and obviously the goal is to have every center around the country to be at that level but those are pretty lofty numbers to be at but that's why we do the training.

That's why we do the Master's courses.

Those guys are three of the trainers that do some of the Master's Level courses for us as well and so we kind of leverage them from that standpoint.

Is that the detail you were looking for?

I'm not sure if that helped.

Yes.

No and maybe just I'm trying to characterize those centers.

Do you feel like those are, as you said, they're sort of high water mark and are they sort of referral centers and are folks getting cared for there actually going there because of the expertise these guys have and Maze and so on?

Is that a fair way to characterize those centers?

No it's actually different so obviously Cleveland Clinic is a world class center that does more hearts than pretty much anybody else in the United States and people are getting referred there for a variety of different reasons, in a lot of ways because they've got a great name and they've got great surgeons and great training programs that are there and they're really at the cutting edge on the -- on doing the Maze procedures and there may be some referrals that go there for that but a lot of times we're getting referred there because they've got the best mitral surgery and/or by the way they also treat their Afib at the same time.

The other two quite frankly are, that I mentioned, are not academically focused in that way.

They're really great community areas though.

The Asheville, North Carolina has a [catchment] area of a million plus people and they're getting people within there and yes they are getting a lot of patients because they are great surgeons that are not only great at treating the mitral valve or the aortic.

They are also doing the concomitant procedures and the Maze procedure at the same time.

I couldn't tell you what percentage are getting referred because of the Maze to those different places but they're very different types of centers, which is why we offer that to surgeons because we want to be able to show them some people well, yes it's a Cleveland Clinic so you say well, you know, there's actually other sites in other areas that are also doing this as well and we'll send them to places like I just mentioned, Asheville or we'll send them to [Centerra] and some of the other great heart centers around the country that are more community based and kind of getting the catchment area from there and not necessarily getting people from around the country.

That's helpful.

That's helpful color.

The other question I had was on the sort of roll out and continuing enrollment of the clinical trials that you're pursuing for MIS and both procedure types now and the training that you're doing for open.

I guess you could talk a little bit about how you're sort of segmenting those resources or how you're going to avoid any kind of distraction, if you will, or dilution of resources as you sort of bring on this new technology/start up this put some effort behind enrollment and yet also as you talk about continue to sort of push forward with training for open ablation?

Yes.

I mean there are really two -- they're two separate groups for the reasons you just -- or partially for the reasons you just described.

The first group that's open is the concomitant training.

It's led by Dr. Cox.

We've also got a Vice President in the business whose sole focus it is is to build out these training programs for the concomitant treatment and the on label products and so we've got a whole team that basically is dedicated and focused to bringing on surgeons that do that.

We have a whole group, a network of surgeons, that are very DEEP in the concomitant treatment.

I mentioned several of them but we we've got about 10 plus surgeons around the country that actually do these programs and we continue to learn from those and that's really -- so it's a dedicated group that's focused on that.

It's really a different group that is part of the clinical trial group that is dedicated and focused to the clinical trial.

And so they really don't get in the way of one another.

They're obviously part of the same matric of their team obviously but they're not part of the same groups.

They report differently in the organization.

The team that focuses on the clinical trials reports into our VP of Clinical Trials and she really works very closely with them to make sure that we've got the right sites, that they're setting expectations for the sites that are going to come on and come into the trials.

We've got a Medical Affairs Director that reviews them, one in the US, one OUS and then we also leverage quite extensively the principal investigators involved in the trial to do some of the training and education as well so VCU has done several of the trainings for people that are interested in being a part of the DEEP trial and so we really leverage the infrastructure from that standpoint and we separate them and hopefully that gives you some context to kind of how they're very different and they're to getting in the way of one another.

For the new companies we're in contact obviously we're bringing on a team.

They had a team that was doing some similar items relative to the trials that they've got up and running but they didn't have as big an organization and so that's actually one of the things that we're putting in place is to make sure that we can actually focus efforts on that.

That's helpful color, Mike.

Thank you.

Thank you.

This does conclude the question and answer session of today's program.

I'd like to hand the program back to Mike Carrel for any further remarks.

Great.

Thank you for all the great questions today and thank you for participating in the call and your interest in AtriCure.

Have a wonderful evening.

Thank you, ladies and gentlemen, for your participation in today's conference.

This does conclude the program.

You may now disconnect.