AtriCure Inc (ATRC) 2015 Q4 法說會逐字稿

Good afternoon, and welcome to AtriCure's Fourth Quarter and Year-End 2015 Earnings Conference Call.

My name is Karen, and I'll be your coordinator for the call today.

(Operator instructions.) As a reminder, this call is being recorded for replay purposes.

I would now like to turn the call over to Lynn Pieper from Gilmartin Group for a few introductory comments.

Thanks, Karen.

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

If you have not received a copy, please call 513-755-4136 to have one e-mailed 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.

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

Additionally, we refer to non-GAAP financial metrics.

A reconciliation of these non-GAAP measures with the most directly comparable GAAP measures are 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 to everyone for joining us.

We are pleased to report another outstanding year for AtriCure.

2015 was marked by strong growth in operational execution across all areas of our business.

Our technologies and therapies continued to provide treatment to patients with the most serious forms of atrial fibrillation.

During 2015, over 25,000 patients were treated with ablations, and almost 23,000 atrial fib devices were implanted.

We completed the integration of Estech, acquired nContact, hit several key milestones in our clinical trials, incorporated a converged IDE into our clinical trial program, and significantly expanded our professional education programs.

We also released two new products to the market - a cryo-analgesic therapy for pain management, and the CryoFORM cryosurgery probe in the EU.

In October, we moved into our new facility in Mason, Ohio, which was designed to support long-term growth, and to enable more collaboration across the business and with our customers.

The new facility has exceeded our expectations across all fronts.

Our accomplishments throughout 2015 position us to accelerate sales in 2016, and we are reiterating our top line guidance of 25% growth for the year.

Our fourth quarter revenue reached $35.9 million, up 22% from Q4 2014, or 24% on a constant-currency basis.

Growth was predominantly powered by sales in the US, which were up 31% year-over-year.

Domestic growth was driven by ablation-related open heart products, ablation-related minimally invasive products, and the entire AtriClip portfolio of LAA management products.

International revenue was down 5% compared to the fourth quarter of 2014, but up 4% on a constant-currency basis.

This decline was driven primarily by exchange rates and weaknesses in select distributor markets, particularly China.

Moving on to our business trends, the AtriClip product line remains our fastest growing franchise, and we continue to see strong and growing interest in managing the left atrial appendage.

We have now sold more than 65,000 AtriClip LAA occlusion devices, including almost 23,000 AtriClip devices in 2015 alone.

We continue to be encouraged by increasing awareness of the importance of managing the left atrial appendage.

At major medical society meetings and congresses, such as the most recent afib symposium, which had over 500 EPs in attendance, and the Society of Thoracic Surgery STS annual meeting, with over 1,500 surgeons, there's been a lot of discussion about appendage management, and the AtriClip received many positive comments.

With more than 18,000 AtriClip devices sold in the US in 2015, we are less than 20% penetrated, and have a long way to go toward adoption.

As we mentioned in our last call, 2015 was the year of cryo for AtriCure, and in the fall we launched the CryoFORM cryoablation probe as an expansion to our leading cryo surgical platform in Europe.

The CryoFORM probe is even more flexible than Cryo3 probe that we launched in 2014.

The newest probe allows for easier manipulation and application of the device, and provides physicians the flexibility to adapt to a variety of surgical ablation procedures, particularly in a minimally invasive setting or approach.

We have submitted an application for 510-K clearance with the Food and Drug Administration, and anticipate clearance in 2016.

We are encouraged by the interest from accounts in the EU, and look forward to further expansion in the US market.

Staying on the cryo theme, we have seen strong interest in and adoption of cryo-analgesia in many accounts, and believe our growth in cryo will continue to outpace other ablation products.

Additionally, our product pipeline is ramping up in 2016 with two new AtriClip products expected to launch.

These new releases, combined with the 2015 enhancements and our roadmap, going forward, give us great confidence in our objectives for the next several years.

As part of our commitment to advancing technologies for the treatment of afib, we will continue to make substantial investments in R&D, and will keep innovating to provide physicians with new and better options for treating their patients.

In the fourth quarter, we completed the strategic acquisition of nContact, further expanding and strengthening our presence in the minimally invasive ablation market.

The response from both EP and surgical communities has been exceptionally positive.

EPs are excited about improving outcomes of their catheter ablations with convergent hybrid procedure, and are really driving the heart team concept that was so successful in the [tabber space].

We believe we can capitalize on this trend, and are already starting to see new customer wins.

Additionally, the commercial teams were integrated in early 2016, and our training of a much broader sales force continues.

As a result, we expect to see significant growth in the back half of the year and into 2017, giving us confidence in our long-term objective of 18% top line growth.

On the clinical front, we are continuing to invest heavily in a robust clinical program.

At the afib symposium mentioned earlier, AtriCure received several positive accolades from EPs for our commitment to strong clinical science, with two ongoing IDE trials of hybrid approaches to treating persistent and longstanding persistent afib.

It is clear that EPs are realizing that AtriCure is more than just a surgical device company.

It is an afib company.

We are continuing to progress on DEEP AF and CONVERGE, our two IDE trials for the sole therapy treatment of persistent and longstanding persistent afib.

Here's a brief update on each.

DEEP AF, our trial for stage dual epicardial-endocardial procedure for the treatment of afib now has 11 sites initiated, 29 patients enrolled to date.

We had a deep investigators' meeting at STS recently, and have rolled out an online patient recruitment campaign in conjunction with heartvalvesurgery.com.

The site and investigators are excited about the outreach campaign and that we are already seeing the early benefit.

We also made minor modifications to the exclusion criteria, and we are targeting enrollment of the 220 patients by the end of 2017.

The CONVERGE IDE clinical trial was initiated by nContact.

It is a multi-center, open-label, randomized pivotal study evaluating the safety and efficacy of the Epi-Sense AF guided Coagulation System for the treatment of persistent AF patients, refractory or intolerant, to at least one Class I and-or Class II anti-arrhythmic drug.

This is the first head-to-head study to evaluate the conversion procedure versus catheter ablation in patients with persistent and longstanding persistent afib.

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

To date, we have enrolled 39 patients, up from just 20, when we acquired nContact.

Looking forward to 2016, we are continuing to enhance our clinical science programs.

We expect to make meaningful progress on CONVERGE, DEEP, and CEASE-AF, and adding several new sites to each trial and accelerating enrollment.

In addition, we are starting two additional Company-sponsored trials in the first half of 2016.

First, per our recent press release, we started enrollment in the ATLAS trial last week, evaluating prophylactic treatment of the left atrial appendage.

Secondly, we plan to begin the [FROST] trial to evaluate the effectiveness of cryoanalgesia for pain management and thoracotomy procedures.

We believe in and are committed to the development of sound clinical data to further differentiate us as a Company and to extend our leadership position in the treatment of afib for many, many years to come.

Our commitment to physician training and education remains an important pillar of our strategy, and we continue to realize benefit from our efforts.

In 2015, we conducted 12 advanced ablation courses in the US, another 15 international Maze training courses.

The highlight from 2015 was the establishment of the James Cox Fellowship program in conjunction with AATS.

This program will have the benefit of driving better adoption by young surgeons from all over the globe.

In 2015 there were six fellows, and we expect a similar amount in 2016.

Looking forward to 2016, we are continuing to build on our educational efforts to grow awareness of afib and expand access to treatment.

Some of our plans include the following - one, 10 advanced ablation courses in the US, further expansion of the Maze IV Registry to over 15 centers and 500 patients by the end of 2016, and integrating nContact product training into our case observation and proctoring programs.

In summary, we finished 2015 with strong momentum across the board.

As we enter 2016, our foundation is strong, and the excitement in our business is palpable.

With our commercial integration of nContact complete, our strong product pipeline, and our ramping clinical programs, we are well-positioned to continue to execute on expanding and delivering our portfolio of innovative solutions for the atrial fibrillation market.

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

Thank you, Mike.

For the fourth quarter of 2015, revenue increased 21.9% on a GAAP basis to $35.9 million.

On a constant-currency basis, worldwide revenue increased 24%.

Revenue from product sales in the US was $28.9 million, an increase of 30.7% from the fourth quarter of 2014.

Revenue from open chest ablation-related products in the US increased by approximately $2.3 million to $14.5 million, representing growth of 19.2%, driven by our education and training efforts as we build the still-underpenetrated market for concomitant surgical ablation.

US sales of products used in minimally invasive procedures increased approximately $2.9 million to $7.1 million, up 67.2%, and influenced heavily by the contribution from nContact products, as expected.

Continued development of clinical data in support of MIS ablation for the treatment of afib through trials, such as our DEEP and CONVERGE PMA studies, are critical to growing this market.

US sales of the AtriClip system during the fourth quarter of 2015 were $6.7 million as compared to $4.8 million for the fourth quarter of 2014, an increase of 38.2%.

Growth was again strong for both the open and MIS clips.

International revenue of $7 million was down 4.6% on a GAAP basis and up 3.8% on a constant-currency basis as compared to the fourth quarter of 2014.

In addition to the currency pressure in our European markets, we experienced some weakness and sweetness in certain markets, primarily China.

Valve tool sales totaled $700,000 worldwide, with approximately $600,000 in the US and $100,000 in international markets.

This was down $300,000 from last year.

Gross margin for the fourth quarter of 2015 was 71.2% as compared with 69.4% for the fourth quarter of 2014.

The primary driver of improvement was the higher concentration of sales in the US, along with a positive impact of the nContact product line.

Pricing continues to remain steady.

Operating expenses increased 43.6%, or approximately $11 million, from $25.2 million for the fourth quarter of 2014 to $36.2 million for the fourth quarter of 2015.

Research and development expenses, which include clinical and regulatory activities, were $7.8 million for the fourth quarter of 2015, or 21.7% of sales, an increase of $2.8 million over the fourth quarter of 2014.

The increase was driven by clinical trial costs, product development efforts, and headcount additions.

SG&A increased approximately $8.2 million from the fourth quarter of 2014 to a total of $28.4 million, or 79.2% of sales.

Approximately $2.5 million of the increase was related to transaction costs of the nContact acquisition.

The remaining increase was due primarily to headcount and variable compensation, as well as increases in marketing and training efforts.

Our operating loss for the quarter was $10.6 million, an increase of $5.8 million over the operating loss for the fourth quarter of 2014 of $4.8 million.

Our adjusted EBITDA loss was approximately $6.1 million compared to a $1.6 million adjusted EBITDA loss for the fourth quarter of 2014.

Note that our EBITDA loss in the fourth quarter includes approximately $2.5 million of costs related to the nContact acquisition.

Our reported net loss per share was $0.36 for the fourth quarter 2015, but would have been approximately $0.27 without the acquisition-related costs.

Net loss per share for the fourth quarter 2014 was $0.20.

Turning to the full year, worldwide revenue was $129.8 million, a GAAP increase of 20.8%, or $22.3 million over 2014.

On a constant-currency basis, growth was 23.8%.

For the US, sales grew 27.4% to $102.2 million.

US open revenue was strong, growing at 19.9% to $53.5 million.

US sales of products used in minimally invasive procedures increased 34.4% from 2014 to $21.6 million, which was influenced by the sales of products acquired in the nContact transaction.

US sales of AtriClip products grew 46.2% to $24.4 million, driven by strong performance in both the open and MIS products.

International revenue grew 1.1% on a GAAP basis and 12.9% on a constant-currency basis to $27.5 million.

Outside of the volatile euro to US dollar exchange rate in 2015, we saw softness in China and Russia.

Gross margin was 71.6% for 2015 compared to 70.5% for 2014.

EPS was a loss of $0.97 for 2015 compared to $0.61 for 2014, and our adjusted EBITDA loss was $11.4 million for 2015 compared to $12 million for 2014.

Our SG&A expense for 2014, and therefore operating income, net loss, and EPS, included an $8 million offset to expense due to an adjustment to the earn-out liability recorded in conjunction with the Estech transaction that closed late in 2013.

The $12 million EBITDA loss for 2014 already removed the impact of this earn-out adjustment.

As a reminder, the final estimated impact of Estech-related nonrecurring expenses for 2014 was approximately $4 million, most of which was contained within SG&A expenses.

Without these expenses, the adjusted EBITDA loss would have been $7.9 million for 2014.

For 2015, approximately $3 million in transaction and integration costs related to the nContact acquisition were included in the P&L.

Without this, the adjusted EBITDA loss would have been approximately $8.4 million.

We ended the year with $42.3 million in cash, cash equivalents, and investments.

Lastly, we are reiterating our guidance for 2016.

We anticipate top-line growth of approximately 25% year-over-year at current exchange rates, or approximately $162 million on a GAAP basis.

With the team getting up to speed on nContact in the first quarter, we expect Q1 2016 revenue to be sequentially flat from Q4 2015, and then improve from there to achieve the 25% growth for the year.

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

The top end represents a slight increase from the 2015 reported gross margin.

Items with a positive effect on gross margin include volume leverage, the positive impact of the nContact products, the suspended medical device tax, and programs to increase efficiency.

Headwinds on gross margin include moving into a larger and more modern facility to support our growth, along with continued heavy capital placement primarily as we penetrate worldwide minimally invasive markets.

We are still targeting long-term gross margins of 75% and believe this is achievable within the next few years due to increased volumes and efficiency.

We expect R&D to be 23% to 24% of sales, with the largest driver of the increase due to the absorption of the CONVERGE trial from the nContact acquisition, along with the expansion and enrollment of our DEEP trial and continued R&D pipeline development.

We expect SG&A to be roughly 70% to 71% of sales in 2016, which is slightly under the 2015 rate.

The overall increase in SG&A expense is driven by continued investment in our worldwide sales team, as well as training and education expenses.

We expect adjusted EBITDA for 2016 to be a loss of approximately $14 million to $15 million.

The heavier loss compared to 2015 is driven primarily by the acquisition of nContact in late 2015, including PMA clinical trial expenses and changes around the sales and education teams to support the MIS portion of our business.

In terms of EPS, this EBITDA range translates into a loss of between $1.12 and $1.22, with the heaviest loss coming in Q1.

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

Thank you, Andy.

To wrap up, I'm excited about 2016 and beyond.

In the current year, we are working hard to ramp up our clinical trials, starting with DEEP and CONVERGE, and bringing new products to market for the AtriClip franchise.

Additionally, we expect cryo and nContact be big contributors in the back half of the year.

As Andy mentioned, we remain confident in our guidance for 2016.

We will start the year sequentially flat from Q4 and end the year strong after nContact is fully integrated, with expected 25% top-line growth for the year and a path to EBITDA profitability in 2018.

We are also maintaining our long-term objective of 18% revenue growth.

By the end of the decade, our goal is to be the recognized leader in afib and appendage management, and to have improved the lives of more than 500,000 patients.

As we look forward, I am more excited about our business than ever before.

We have a terrific team assembled here at AtriCure, and we will continue to advance the treatment of atrial fibrillation.

We will now turn the call over to questions.

Thank you.

(Operator instructions.) Matt Miksic, UBS.

Hey, good evening.

Thanks for taking the question.

I want to just follow up, Mike, if I could on -- you mentioned training, and you've talked about it before as an important driver.

If you could talk a little bit about -- just walk us through maybe what you're expecting this year in terms of contribution, just if it's from training from last year, or how we should think about the investments you make in this year, just any kind of light you can shed on that that as an important growth driver.

And then, I have one follow-up.

Well, we don't really talk about the specific revenue that's tied to the training education programs.

It's really about getting more and more patients treated.

Historically, we have seen procedure volumes go up between about 40% and 45% overall in the areas that have actually come to our advanced training courses.

This year we'll do another 10 or so of those advanced courses, about one per month or so.

In those courses we get about 15 to 25, and actually recently we've had as high as 35 or 40, which is higher than we normally like to have at those programs.

But, the training programs have been excellent.

They continue to get better.

We actually have people coming back for repeat trainings at this point because they're starting to build a network on their own of working together, talking about the different cases that they're approaching, whether it be an MVR, an AVR, or CABG case, and they're really kind of beginning to kind of build a whole network of how do we treat these, how do we work together to get that number up, and we're seeing a lot of increase in the procedures from that standpoint.

So, we believe that the training is obviously absolutely critical.

Now, that's one angle to the training.

In addition to that, we've also got the James Cox Fellowship program, which is getting at a much earlier stage to send people over for three months to sites that are doing a very high percentage of their cases.

Everybody that's really included by AATS in that is over 75% of the patients that walk in the door that have afib are getting treated.

So, it's really kind of setting the stage for a future of surgeons that are going to be treating everybody that walks into the OR that has afib that should be treated, getting treated.

So, we're constantly looking at different ways to train on that front, and we're also seeing many more case observations.

We have to open up more and more sites around the country.

We've predominately been on the East Coast on that, and we're starting to open up West Coast sites as well.

And that's actually been increasing quite substantially over the last couple of months.

Understood.

That's very helpful.

Thanks for that.

And just one, if I could, on the cryo probe.

And with the introduction coming some time during the year, if you could talk about maybe what the mix of that product could be, what your experience with it has been so far, and what we should expect over the long-term in terms of mix of your business?

Well, what we've seen on the cryo probe, if you just -- and this is more of a reminder -- today on the market in the US, we've got a cryo2 and a cryo3 probe.

The cryo2 probe is really the Cadillac probe.

It's the stiffest probe that we have, creates incredible great transmitter lines, very stiff, not as bendable as the cryo3.

We introduced a cryo3 probe in late 2014, and that really helped power a lot of the growth in 2015 around the cryo platform, because you could use it in more minimally invasive settings.

People could use it, more easily bend it, and it was a great probe that was used from that.

So, we actually saw an increase, and it grew at a faster pace than our clients did, north of 30% on the growth rate for the cryo side of things.

So, we saw nice growth that came off of that overall.

Now, what we're doing is the CryoFORM in Europe.

We just rolled it out in the fourth quarter after getting the approval over there.

Again, we anticipate here in the US.

That's an even more flexible probe.

And then, with that probe we anticipate that we'll be able to continue to grow the market even more.

So, (inaudible) probe, all used for different reasons in the market.

So, more competitive with the new probe I guess is what you're seeing in Europe and what you'd expect in the US?

Yes.

Great, thanks so much.

Danielle Antalffy, Leerink Partners.

Yes, hi, good afternoon, guys.

Thanks so much for taking the question, and congrats on another great year.

Mike, I was wondering if you could comment on some of the momentum we saw in Q4.

It looks like US open ablations, (inaudible) all accelerated actually in the quarter.

This is before new product [flow].

Can you talk about what drove that?

I assume some of it's training, or maybe I'm missing something here.

So, what drove it?

How sustainable is it, going forward?

Yes, I mean, on both the open and the -- I'll start with the open side of the business.

The open side of business, we continued to see a long runway for that product.

We've talked about it here, where we anticipate that portion of the business growing at 15% to 20% on an organic basis from now through the end of the decade.

We continue to feel that, as we kind of march down that pathway of getting more and more patients treated, that that's the right growth rate for that particular part of our business.

Training and education awareness play a critical portion of that, which is why we keep doing it.

Some of the items I talked about it in Matt's question relative to putting in the sponsorship that we're working with AATS on training people at very young age, starting to work with academic institutions at residency programs.

Those are some of the things that we're looking at.

And so, yes, that definitely helps drive some of that open side of things, for sure.

Number two, I think in terms of the clip side of things, is there's just more awareness out there for managing the appendage being a positive thing, and people know that the product works.

So, the product works incredibly well.

We've got great feedback on that.

We've got over 65,000 implants to date.

And with that breeds a lot of confidence.

And as people use it more and more, they realize how simple and easy it is to use.

They test it when they're actually in the OR.

They're getting imaging afterwards, and they're seeing good closure with it.

So, they're feeling really comfortable and confident with it, and that's actually helping drive adoption, as well.

And just to follow up on that, how much of the growth in both of those areas is new folks at existing centers using it in their procedures versus existing users just using it more frequently, I guess, if you have that level of visibility?

Yes.

I wish I could tell you that I've got that exact level of visibility.

What I've got is kind of conversations and the feedback we've gotten from the field, but we don't actually track it by user.

We track it by site.

We have continued to see the number of sites growth substantially over the past.

Every quarter we're seeing the number of sites that are ordering clip grow.

So, it's definitely new sites.

It's surgeons within a site that are building it and working with their teams, and then also people that started out by doing it for on-pump and then decide, wait, I can do this instead of cutting and sewing, and save myself 10 minutes.

It's across the board mix between those, and to give a specific percentage would be much more of a guess than anything else.

Okay, that's fair.

And then, last question for me.

Internationally, you mentioned some weakness specifically in China, obviously lots of volatility in some of these international markets.

Just wondering if you could comment on what's reflected in your guidance from a macro perspective.

Is your guidance assuming some continued weakness there, or is there potential downside, further downside from that?

On the international front, we've got a bunch of tailwinds, quite frankly, on a positive side coming into 2016.

2015 was a little bit of a disappointing year overall, growing on a constant currency of 12.5%.

We were definitely hoping for than that.

With the exchange rates remaining relatively constant for this year, we anticipate to see a greater growth rate than that 12.5% to get closer to the organic numbers that we had talked about before, kind of the long-term organic numbers.

We do see a little bit of an uptick on that.

What's driving that is a couple of different things.

Number one is in Japan, as you saw earlier in the year -- and I did not mention it in my comments and probably should have, but we got clip approved to sell in Japan, and we are looking forward to getting reimbursement in that market as well here fairly soon.

Likely by the third quarter, early part of the third quarter is the target for that.

That should help drive the Japanese market quite substantially, because we don't sell the clip there today.

On top of that, we're looking to get some cryo into the Japanese market by the end of the year, as well.

So, we've got a couple of really good pieces that we've been working on for three years or so to kind of get into the Japanese market, which is our second largest market in the world.

As I mentioned, China was little bit soft in the fourth quarter.

The first three quarters were actually fairly good, and we're rebuilding the relationship and things we've got with our China distributor there.

So, we anticipate that actually it will kick off the year very strong, and that we should see some stronger growth in China than we saw in last year, as well.

So, I don't see a lot of down side, per se, from that number from this year, and I see that we actually have some upside into the guidance that we've got there.

Okay.

So, it sounds like the international business is not contingent upon any sort of macro conditions.

It's very new product-driven.

No, not at all.

Great.

Okay, thank you.

And we discounted many of the areas that we saw pressure through much of the year, which were a lot of these Eastern Bloc countries, I would say, in some of the distributor markets that were a little bit tighter just with the economy and what happened there.

We kind of -- we hit some lows there that we pretty much have to come up, because there's not much to go down from in those markets today.

Okay, that's helpful.

Thanks so much.

Jason Mills, Canaccord Genuity.

Hi, this is actually Jeff filling in for Jason.

Two quick questions from me.

First, wondering if you could provide any -- or if there are any unique quarterly trends in the business in this year that you would -- investors should be keen to.

I appreciate the commentary that Q1 will be flat, but is there anything else that we should be aware of in terms of gross margin or on OpEx?

No, I think that you'll see a lot of the heaviest loss in the first quarter.

Like we said, it'll be flat sequentially from Q4 to Q1, and then ramping as the year goes on.

As people on our team -- we just rolled out commission plans.

The teams just got everything in terms of their quotas for the year in the January timeframe that included all the products.

We did not have that in at the end of last year after we bought nContact.

So, as they get used to selling, positioning, and working with that product and better understanding it, we anticipate the back half of the year to see some substantial growth in that part of the business.

Great, thanks.

And for my second question, I was just wondering, your open business blew away expectations, and appreciate the importance of training and awareness here.

Looking ahead, wondering if you could give us an update on the procedure side on the open market and the opportunities there, going forward?

Yes, we continue to see the open market, as I mentioned, as a really strong grower, in that 15% to 20% organic growth from now through the end of the decade.

That helps us get comfortable with the 18% overall long-term growth that we've talked about, with clip being above that 20% number.

We've kind of talked about on that call before, as well.

So, what's driving that is just more and more people are now realizing the benefit of treating, and the more that they get trained on it, the more they come to the training, the more they're seeing their colleagues do it and get better results with these patients, the more you're starting to see people say, wait, I've got to treat on every single patient that comes in the door.

So, they're kind of moving down that pathway that we've talked about.

It doesn't happen overnight.

Some products you can overnight just flip a switch and all of a sudden start putting something in.

With this it takes time for someone to develop full comfort with doing the complete Maze, doing it on all their cases, whether it's an AVR, a CABG, or a mitral valve.

And we're starting to see growth in all of those different areas of our business across the board.

And so, I'd say that probably the biggest issue is that we're still less than 25% penetrated around the globe, and we see growth in all three of those different areas.

Great, thanks for the color.

I'll get back in queue.

Rick Wise, Stifel.

Hi, guys, it's Drew Ranieri in for Rick.

Just a couple questions.

So, the first, I just wanted to start on your ATLAS trial.

So, I think there's -- it's set to enroll up to 2,000 patients, (inaudible) follow-up through 365 days.

And on the call you've talked about a quick enrollment and possibly have a data sometime in 2017.

But, just wondering, with ATLAS, could we possibly see initial data or presentations before 2016, and (inaudible) maybe on a 30- or 60- or a 90-day basis for the patients?

We don't anticipate putting much out from a data standpoint before 2017 some time.

So, I'd say that -- well, I know everybody would love that data in advance of that.

Really, the focus is going to be on getting all the data right, reconciling it.

My experience with clinical trials is you've really just got to make sure that you've got this data right, that you understand [closure], that you've got double reads on them, et cetera.

So, it'll likely be 2017 before we get data out.

Okay, got you.

And then, I know AtriCure has been supportive of Watchman approval and reimbursement.

And in the MCD, one thing that we found interesting was adding cardiovascular surgeons as potential operators to the guys that are doing mitral, aortic, and CABG cases.

So, just in your surgeon conversation, and I know the MCD is only a few weeks old, but have you seen kind of a light bulb go off over their heads with them thinking, hey, I can manage non-valvular AF patients now, why am I not managing the valvular AF patients with AtriClip?

I don't think that we've seen the light bulb or any of that kind of go off at this point.

What we have seen over the last two years is that, as there's been more and more talk about Watchman and all the different trials, and the data that's come out from them in terms of managing the appendage, they begin to draw to the conclusion that they need to manage the appendage in every one of these patients, and so we are seeing that more and more.

I mean, one of the reasons we were supportive of it is because we think managing the appendage is the right thing to do, and we are starting to see more and more surgeons get there.

But, they're kind of getting there by attending different conferences, talking to their colleagues in cardiology and on the EP side, interventional side now, and so there's more talk at the hospitals.

That's been going on.

There wasn't one light bulb that happened with the new approval from CMS.

Okay.

And if I could just make one last, and I'm sorry if I missed this, but did you guys give the individual growth rates for AtriClip and for Pro?

Did you give those, Andy?

No, we didn't give them, but they were -- for the quarter, Drew, open was north of 30%, and MIS was around 59%.

Great, thanks, guys.

(Inaudible) 38, yes.

Tom Gunderson, Piper Jaffray.

Hi, good afternoon, everybody.

So, Mike, I was going to ask about Japan and AtriClip.

You touched on that a little bit in a previous answer, but maybe we can dig in a little bit, A, for your guidance for 2016, was there any assumption on a Q3 or Q4 reimbursement approval for that?

And second, maybe just a little color on how the Japanese are treating or managing the left atrial appendage right now.

Yes, a little bit -- so I'll start with the color.

Right now, many of them are doing cut and sew, or they're not treating it at all.

I'd say that would be the predominant, I mean, so you're kind of getting mix of that.

Not much different than what you see in the US.

The markets are actually reasonably similar from that standpoint.

In terms of in -- kind of as we looked at the year, we do anticipate, and we've got a modest amount in our numbers in the back half of the year relative to getting the approvals on that.

So, we definitely have that as part of the international growth, and some of the growth we've got, a combination of the clip and the cryo, that give us confidence in the overall 25% number.

And then, as I read the ATLAS press release, I was -- maybe I was just viewing it through my own distorted lens, but it seemed to lend itself well to hospital issues, costs, expenses, et cetera.

Are you going to be capturing that, as well as the events, as you gather the data on this randomized trial?

Yes, that's one of the biggest reasons that we're doing the trial, is to actually figure out what does it do for hospital resource consumption.

The idea behind this trial is, with these 2,000 patients, it will lead to other trials.

We're going to learn a lot from the prophylactic treatment here of the appendage, and so we're going to kind see what the results come back, both on a symptom basis, as you kind of talked about, but also on what resource consumption [is].

So, we'll tracking all that at 30 days, at one year, are they going to be coming back for re-hospitalization, et cetera.

And so, that's a big part of the trial, and then that'll help us design the next trial that may lead to something much bigger.

Got it.

That's it from me.

Thanks.

Thank you.

And that concludes our question-and-answer session for today.

I would like to turn the conference back over to management for any additional comments.

Great.

As always, thank you for the great questions.

Thank you for participating on the call and your interest in AtriCure.

Have a wonderful evening.

Thank you.

Ladies and gentlemen, thank you for your participation in today's conference.

This does conclude the program, and you may now disconnect.

Everyone have a good day.