AtriCure Inc (ATRC) 2016 Q1 法說會逐字稿

Good afternoon and welcome to AtriCure's first-quarter 2016 earnings conference call.

My name is Jonathan and I will 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 the Gilmartin Group for a few introductory comments.

Thank you.

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

If you have not, 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.

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

Additionally, we refer to non-GAAP financial metrics.

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

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

Mike?

Thanks, Lynn.

Good afternoon, everyone, and thank you for joining us today.

We're off to a strong start in 2016.

During the first quarter, we reached several milestones, positioning us for accelerating growth throughout the year.

We are reiterating our revenue guidance of 25% growth for 2016.

In looking at 2016, we are particularly excited about initiatives that are driving our topline expectation.

We have two new products recently cleared and on the market in cryoFORM and AtriClip PRO2.

We also expect nContact to more meaningfully contribute as the year progresses as we enter new sites, expand to the West Coast, and leverage our full sales force.

Longer term, our end markets still remain underpenetrated.

We are ramping our clinical trials and expect our outcomes and differentiation to propel sustainable 18% topline growth.

Revenue in Q1 reached $35.9 million, up 20% year over year.

Growth was led by sales in the US, which were up 23%, and driven by all three areas of the business.

International revenue was up 10% for the quarter.

The AtriClip product line remains our fastest-growing franchise and we continue to see strong and growing interest in managing the left atrial appendage.

This market is still less than 20% penetrated, so we have a lot of opportunity for growth.

We are pleased to announce that we recently received FDA clearance for the AtriClip PRO2 Exclusion System.

This represents our most minimally invasive LAA management technology launched to date.

The AtriClip PRO2 uses a lower profile applier to enhance visibility within the surgical field and improves maneuverability through tight anatomic spaces.

We expect that this new offering will support continued strong growth in the AtriClip line of products.

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

Our new product releases, combined with the 2015 enhancements in our roadmap going forward, give us great confidence in our ability to achieve our objectives for the next several years.

Turning now to our cryo platform, we are pleased to have recently received FDA clearance for our new cryoFORM probe, which we announced earlier this month.

The cryoFORM probe offers increased probe flexibility to adapt to a variety of surgical ablation procedures.

The US clearance comes on the heels of our European launch of cryoFORM last fall, where we received positive feedback from our customers.

On the clinical front, we are making solid progress on DEEP AF and CONVERGE, our two IDE trials for sole therapy treatment of persistent and long-standing persistent Afib.

A brief update on each.

DEEP AF, our trial for staged dual epicardial endocardial procedures for the treatment of Afib, now has 13 sites enrolling -- 13 sites initiated and 40 patients enrolled to date.

We are seeing early traction with our online patient recruitment campaign and continue to target enrollment of 220 patients by the end of 2017.

The CONVERGE IDE 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.

We have made solid progress on enrollment, with 43 patients enrolled to date.

We expect to continue to make meaningful progress on both CONVERGE and DEEP AF this year by adding several new sites to each trial and accelerating enrollment.

The same can be said for our non-IDE trial in Europe, CEASE AF, which compares a DEEP-like procedure to standard catheter ablation.

We also started enrollment in the ATLAS trial in February, evaluating prophylactic treatment of the left atrial appendage for patients at risk of perioperative Afib, and we are on track to begin enrollment of the FROST trial to evaluate the effectiveness of cryoanalgesia for pain management in thoracotomy cardiac procedures.

We expect that sound clinical data to further differentiate us as a company and extend our leadership position in the treatment of Afib for many years to come.

Switching gears, we announced today that we have strengthened our balance sheet with the addition of a $25 million term loan with Silicon Valley Bank.

While our balance sheet was adequate before, we were able to secure this loan at favorable rates and terms and thus eliminate any doubts about the strength of our balance sheet.

Additionally, it is important to note our financial plans have not changed and we remain committed and confident in getting to EBITDA profitability in 2018.

Additionally, before turning the call over to Andy to provide more detail on terms of our updated credit facility and our financials, I want to reiterate our confidence in our 25% topline growth objective for 2016, which will be driven by an acceleration of growth in the second half of the year.

As we discussed in the last call, for the first half of the year there are some headwinds we face in what was otherwise and will otherwise be a very strong underlying performance that I want to walk you through.

First, our cryo business was slightly softer than expected in Q1 as we awaited US clearance of the cryoFORM probe.

We are pleased to now be in a position to launch the probe and expect ramping contribution throughout the year.

In the short time it has been on the market, we are already receiving excellent feedback.

Secondly, we have made substantial progress integrating nContact, further expanding and strengthening our presence in the minimally invasive ablation market.

While our training of the combined commercial team is off to a strong start, our national sales meeting was delayed from its originally scheduled date in early Q1 to early April.

As a result, we have not seen all the benefits of our training programs and expect to see these in the back half of the year and into 2017.

That said, in the short time we have combined the teams, we have already added over 20 new accounts and done over 40 new account trainings on the product.

These activities will drive significant growth in the remainder of 2016.

We also want to provide some commentary on the recent data coming out of the American College of Cardiology meeting in Chicago.

As you may be aware, the PARTNER II trial results surpassed many of the expectations out there, paving the way for TAVR penetration into the intermediate-risk patients.

We have always anticipated adoption of TAVR for intermediate-risk patients and have factored this in to our business planning and expectations.

While we do expect TAVR adoption to increase, many centers were already starting to treat intermediate-risk patients with TAVR.

Market commentary and analysis has indicated that hospitals with TAVR programs have also seen a halo effect from their TAVR programs, with dramatic increases in all heart-related surgical procedures.

This halo effect should not change moving forward and is beneficial to our business.

Additionally, to the extent that we do see or would see declining SABR procedure volumes, there still remain a substantial opportunity for AtriCure in the SABR space.

We estimate that only 25% of the patients presenting for SABR who have documented Afib actually receive a concomitant ablation today.

A large percentage of patients will still require SABR for reasons such as poor femoral access, [arch repair], and other factors.

Our opportunity in the SABR space is only somewhat driven by the overall SABR volumes, and rather, it is driven in large part by the undertreatment paradigm that exists today.

Moreover, in the concomitant space we estimate that the CABG plus concomitant Afib treatment opportunity is roughly 4 to 5 times as large as the SABR plus concomitant Afib opportunity.

While mitral valve plus concomitant Afib is the highest penetrated today, at roughly 60%, there remains significant opportunity in this space as well to balance off any effect if there were to be any declining SABR volumes that would have on our business.

Thus, we expect that our concomitant Afib ablation business will continue to grow in the midteens for the foreseeable future, while our clinical trials, DEEP AF and CONVERGE, lead to new approvals for standalone Afib treatment closer to the end of the decade.

We believe this multipronged growth strategy, combined with our clip and cryo efforts, support our long-term growth plans.

In summary, we are off to a solid start in 2016.

Our foundation is strong and the excitement in our business is palpable.

We remain well positioned to continue to execute on expanding and delivering our portfolio of innovative solutions for atrial fibrillation.

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

Thank you, Mike.

For the first quarter of 2016, revenue increased 20.3% on a GAAP basis to $35.9 million.

On a constant-currency basis, worldwide revenue increased 20.4%.

Revenue from product sales in the US was $28.3 million, an increase of 23.3% from the first quarter of 2015.

Revenue from open chest ablation related product sales in the US increased by approximately $1.6 million to $14 million, representing growth of 13.1%, driven by our education and training efforts.

The open growth was slower than in prior quarters, with a steady open clamp growth and a slightly lower rate for cryoprobes.

We expect the cryo growth rate to ramp up with more meaningful contribution in the second half of this year, based on our recently announced 510(k) clearance for our cryoFORM probe.

US sales of products used in minimally invasive procedures increased approximately $2.4 million to $6.7 million, up 54.7% and influenced significantly by the nContact acquisition.

While we are pleased with the solid impact of the nContact acquisition in Q1, we continue to believe that this business will only see modest organic growth during 2016.

Development of clinical data in support of MIS ablation for treatment of Afib, through trials such as our DEEP AF and CONVERGE IDE studies, is critical to growing this market and business over the longer term.

As Mike mentioned, efforts to move the nContact product set into our existing customers will ramp through the year as the training of our combined commercial team takes hold.

Conversations with physicians in both the EP and surgical communities continues to be extremely positive.

US sales of the AtriClip system during the first quarter of 2016 were $6.8 million, as compared to $5.5 million for the first quarter of 2015, an increase of 24.4%.

We remain encouraged by the strong and sustained growth rates for this part of our business.

International revenue grew 10.1% on a GAAP basis and 10.9% on a constant-currency basis, as compared to the first quarter of 2015, to just under $7.7 million.

Strengths included Japan, China, and France, with softness in a few of our core EU markets.

Valve tool sales were roughly $900,000 worldwide, including approximately $700,000 in the US and $200,000 in international markets.

Gross margin for the first quarter of 2016 was 72.1%, as compared with 72.7% for the first quarter of 2015.

Pressure on gross margin included moving into a larger and more modern facility to support our growth, along with continued heavy capital placement, particularly as we penetrate worldwide minimally invasive markets, as well as placing our cryo generators.

Positive impact on gross margin included the increased mix of US sales, the suspended medical device tax, and the impact of nContact products.

Operating expenses increased 31.5% or approximately $8.5 million, from $26.9 million for the first quarter of 2015 to $35.3 million for the first quarter of 2016.

Research and development expenses, which include clinical and regulatory activities, were $8.6 million for the first quarter of 2016, or 23.8% of sales, an increase of $3 million over the first quarter of 2015.

The increase was driven primarily by both efforts in our product development team, as well as the ramp in spending for our MIS-related trials, including the CONVERGE trial absorbed as part of the nContact acquisition.

SG&A increased approximately $5.5 million for the first quarter of -- from the first quarter of 2015 to a total of $26.8 million or 74.5% of sales.

The increase was primarily due to the changes in our sales and training organizations to both support the nContact acquisition and our general level of growth in procedures.

In addition, we have made some investments in administrative areas to support our growth.

Our adjusted EBITDA loss was approximately $4.4 million this quarter, compared to a $2.1 million adjusted EBITDA loss for the first quarter of 2015.

Our net loss per share was $0.31 for the first quarter of 2016, compared to $0.19 for the first quarter of 2015.

We ended the quarter with approximately $29.5 million in cash, cash equivalents, and investments.

As Mike noted earlier, we closed on an updated credit facility with our longtime banking partner Silicon Valley Bank.

The facility provides for a $25 million term loan, as well as a revolving credit facility secured by receivables and inventory, both bearing interest at prime.

The term loan will be interest only for 12 months, with an option to extend an additional six months based on meeting growth targets.

After the interest-only period, the term loan will amortize monthly for the remainder of the five-year term in even increments.

The credit facility is subject to certain covenants around liquidity and sales growth, along with other customary terms and conditions.

Our intent in updating our credit facility was to take advantage of the availability of capital at a very reasonable cost and favorable terms to the Company, thus strengthening our balance sheet.

Lastly, we are reiterating our guidance for 2016.

We anticipate constant-currency topline growth of approximately 25%.

At current exchange rates, this represents approximately $162 million in worldwide revenue.

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 our 2015 reported gross margin.

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

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

We're 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 AF 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 enhancements to 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 a Q2 loss similar to that of Q1 and improving slightly through Q3 and Q4.

As Mike mentioned earlier, we expect some of the headwinds in Q1 to continue in Q2, with a more meaningful acceleration in revenue growth in the second half of the year.

With that in mind, we expect Q2 topline growth to be in the range of 23% to 24% versus the prior year.

Again, we are reiterating our 25% growth expectation for the full year.

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

Thank you, Andy.

We are pleased with our start to 2016.

We are ramping up our clinical trials with a focus on DEEP and CONVERGE, bringing new products to market for the AtriClip franchise, and optimizing our commercial footprint through sales training.

We expect cryo and nContact to be big contributors in the back half of the year and I am more excited about our growth prospects than ever.

We are confident in our 25% topline growth objective for the year, long-term growth objective of 18%, and a path to profitability in 2018.

With that, we will now open it up for questions.

(Operator Instructions).

Rick Wise, Stifel.

It is Drew Ranieri on for Rick.

Thanks for taking the question.

I guess just to start, and congratulations getting the AtriClip PRO2, but as we think about your product pipeline, should we be thinking more about the development as just broadening your portfolio or are these going to be just iterations to make the procedure easier for docs or a combination of the above?

It is going to be a combination of the above.

In the short term, both.

PRO2 in particular is an extension of an existing product.

It is basically getting -- it is making it a lot easier for them to use the product.

And then by the end of the year, we will be coming out with a [PRO V] and that product will likely be a little bit more of a platform change.

It is a great product that we are looking forward.

It will also be for more minimally invasive procedures, but then enable us to actually get in even smaller spaces longer term, so I think that's going to portend some things in the future from that standpoint.

On the cryo side of things, obviously we made some tremendous progress over the last couple years with two new product extensions that we have done, and we anticipate further ones on cryoanalgesia and other parts of our business as well.

Great, thanks.

And then, just maybe to touch on the clinical trials, so it looks like enrollment for DEEP increased nicely sequentially, but maybe not so much for CONVERGE.

Can you maybe just talk about what is -- why was there a slowdown for CONVERGE enrollment and was there something specifically that caused it, then maybe what you expect to do by year-end in terms of enrollment for DEEP and CONVERGE?

Yes, and we're not giving specific numbers for the year, but we are going to continue to see increases in both of those trials as the year progresses.

And specifically relating to the CONVERGE in terms of what you proposed as a slowdown, it is pretty much on track to what we thought we would actually get.

One of the items when we bought nContact is there are several sites that were so happy with the success they were actually having with the procedure that they are having trouble randomizing to the other arm in the trial.

So I actually went out in the quarter, visited almost every one of those sites that was having a difficult time randomizing and getting patients convinced because they were just so happy with what they're getting at their institution with the results of CONVERGE.

So, one of the items that we are doing is we're actually going back to the FDA over the course of the next three or so months, talking about expanding the number of sites because we are not getting the amount of volume that we might otherwise like to get from some of the sites that are great customers, do great work for patients, but may not have -- may not be able to enroll as briskly as we would like in the trial.

But, basically, they're getting good results.

Great, thanks, Mike.

I will hop back in the queue.

Danielle Antalffy, Leerink Partners.

Good afternoon, guys, and congrats on a great quarter.

Mike, you did give color in the prepared remarks on the impact of TAVR in intermediate-risk patients, but I was wondering if you could give color -- a little bit more color on the long-term growth trajectory there because we will have an intermediate-risk approval in TAVR potentially by the end of this year.

They are studying low risk.

What happens to the end-user market here if TAVR is eventually approved in low risk?

If you maybe could give us some sense of the pathway to growth that still exists, even in that scenario, that would be helpful.

As I mentioned, I will start with the other parts and then I will get to the TAVR in a second.

But if you think about both on the mitral side, we continue to be underpenetrated there.

We are doing a lot of training and we have helped that penetration get up to 60% and that number can get even higher.

You would be surprised at how many sites are still not treating it fully and using the complete set of products to actually finish off and do the Cox-Maze IV through the training.

So we are making a lot of progress and continue to do that on the mitral side of the business.

On the CABG side, there is even more upside, and we're really starting to see many of our sites begin to adopt it and treat these patients.

There is more and more data coming out from STS and other societies about the treatment for CABGs and on the AVRs as well, that you must treat and you should treat these patients.

And so I think the societies are behind it, our training is behind it, we have got the fellowships going, and we are creating that kind of awareness for it.

So, both of those areas still have a tremendous amount of growth from the underpenetration area, and on the mitral side, that number is growing every year in terms of the number of patients, the number of procedures being done, and on the CABG side, that continues to grow at a slower pace, at a 1% to 2% pace on the number of procedures, but we are growing because we are getting increased penetration in there because that's even less penetrated than the AVR side of it.

On the CABG side, we are closer to about a 10% penetration at this point and we think that we can make some significant progress on that side.

On the AVR side, we did look at it and say, what is going to happen?

We played out all the different scenarios.

I don't think anybody completely knows what is going to happen in it.

What you have seen over in Germany and some other areas, you have seen a decline of about 5% or so on the overall AVR standalone volume, but what you are also seeing is when you combine AVR with CABG in a lot of procedures, you are actually seeing an increase in the overall combination of those two.

And so, I was at a site recently where, while they have seen a decrease on their AVR volumes, they have actually seen an overall increase in their heart volume as a result of AVR plus CABG coming together in some of those, where obviously you're not going to be able to do TAVR in those particular procedures.

And so, from that standpoint when you play out the worst-case scenario and you look at maybe some softness on the overall topline procedure growth, we really believe it is still underpenetrated.

At 25% penetration, even if you had a significant shrinkage on that, as I mentioned in my comments we still see a tremendous amount of upside in growth coming off of the AVR.

And then combine that with the other pieces on CABG and mitrals, I think we have got, as I mentioned, midteen type growth from now through the end of the decade.

To think beyond that is, I think, a little bit too long term from where we sit today, but hopefully that gives you some context and perspective to it.

That's very helpful, and I will follow up with the question I tend to always ask and that's, any sense of where you guys are from a training perspective?

How much of the growth here was driven by, quote, same-store sales, given your deeper training efforts, I guess you would say?

Yes, we trained or we had about 250 physicians and nurses and other professionals actually go through our courses this year in total in 2015.

We do track very closely the procedure volume that goes on within there -- within those sites that come to the training.

We continue to be that those that come typically get about a 40% increase over the previous, maybe 38% to 40% or so, and some of those sites are actually sites that had previously been to training, too.

So you're getting it off of those sites because what they're doing is they are either sending different physicians to get trained or somebody to continues to have an interest to grow their capabilities beyond mitrals and into the AVRs and into the CABGs.

And so, that's a lot of what the training continues to be.

We will continue that training this year.

I think many of the other efforts that we are seeing are the in-person training, as I mentioned before on this call.

The Cox Fellowship had eight participants this year.

We anticipate another eight.

We re-upped it with AATS and we will be -- we are recruiting for another eight for this coming year, and we anticipate that that is going to build a bench of people that are actually able to do this and do the full Cox-Maze IV in 95% or so of the patients when they come in with Afib.

That's great.

Thank you so much.

Jason Mills, Canaccord Genuity.

This is actually Cecilia Furlong on for Jason, and we just wanted to ask about US open ablation and US clip sales growth on a year-over-year basis slowed modestly from the timelines in 2015 and continue to slightly lower growth trends seen in the second half of 2015.

Could you just give us a bit more color on the dynamics of these two end markets and what your expectations are for these franchises through the balance of 2016?

Yes, Cecilia, as I mentioned in the previous question with Danielle, I think I covered most of the rationale and reasons, so I won't go back and repeat myself on the open side of the business by CABG, AVR, and why we see the growth rates continuing to increase there in those underpenetrated markets.

On the clip side of the business, we had -- obviously, we have always talked about having incredibly frothy growth in 2015.

We never anticipated to be in that 40%-plus for the long term, and so we feel like the growth rate that we are sitting in right now is actually -- we are continuing to go against -- they're bigger numbers, higher comps.

We have always talked about that being north of 20%.

We've been consistent on that call, and we were north of 20% this quarter and we anticipate that going forward as well.

Great, thank you.

And then, just turning quickly to gross margins, and I appreciate you commented a bit about this, but you again showed meaningful progress on the DM line in Q1.

Are you seeing more expeditious returns from your COGS efficiency programs and can you just give us a little more color on your thoughts for [GM] expansion over the next few years?

Thank you.

Sure.

Cecilia, I wouldn't say that we have seen anything ahead of our expectations there, so I talked through some of the headwinds and tailwinds, so to speak.

I think that covers what we have been up to and what we are seeing.

Over the next few years, it really is going to be leveraging the facility that I spoke of that we have recently moved into, those kinds of things, as well as just normal efficiency programs, looking for material cost and other things to drive down really the cost side and push up the margins.

So, just the steady march to the 75%.

Great, thank you.

Suraj Kalia, Northland Securities.

Congratulations on a nice quarter.

So, Mike, let me just ask -- I know it has been asked a couple of times, but let me ask the same question a little differently.

The thing about TAVR keeps coming up regularly in client discussions, so, Mike, our understanding right now it is roughly 400 or so centers around the country are doing these procedures.

I guess the first part of my question is based on [this] internal developments, what is the volume of SAVR that overlaps at least 400 or so centers?

And the other part of my question is about one-third of these patients, at least that's the (inaudible), will have concomitant AF.

It is not like TAVR is going to get rid of the AF, so how are they being treated currently, I guess, would be my question?

I am going to address your second question because it's actually a really, really insightful question because the data actually that is coming out, if I actually look at it, those patients that actually have AF that were being treated in the TAVR programs had much worse outcomes than those patients that did not have AF, and there is more and more data that is going to be coming out and getting published over the next 6 to 12 months on that.

But I do -- you are absolutely correct and I should have made that comment in my prepared remarks that -- but just since many of those papers have not come out yet, it was maybe a little bit premature, but you are right.

I do think that that is going to be one of the precursors to looking at it because I think they're going to have to look at those patients so they don't have to go in and do a secondary procedure on that front.

That's going to be something that I think many of these sites are going to have to look at.

In terms of the overlap at the specific 400 centers, I'd only be guessing if I told you a specific number relative to the overlap on that side.

I do believe there were about 55,000 AVRs done last year.

We anticipate the number will be reasonably consistent in the US this year and our conservative estimates have -- we actually bring that number down in terms of how we give our guidance, so we don't assume that will be flat.

We assume a worst-case kind of scenario when we actually look at those over the next couple of years, because obviously we can't predict everything associated with it.

It was interesting to listen to some of the conference calls of some of the players in this space that are selling valves in those areas where they actually continue to see growth and some of their AVR products, and I was fascinated to see that, whereas we are not saying that we're going to see growth per se in the number of procedures.

We're going to continue to see an increase in penetration from that 25% up.

And that's where we are going to get our growth.

Fair enough.

And I'm not asking for guidance per se, but where are your revenues per procedure currently?

And let's say exiting fiscal 2016, now that you have the platform also cleared, how do you all see your revenues per procedure, if I can use that metric, in the US for open heart or for minimally invasive, however you want to define it?

How should we think about that?

Thank you for taking my questions.

It is an estimate that is out there in terms of the total amount.

I think that the numbers we've previously given have been around -- we estimate it's about $3,500 or so per procedure.

It is a mix of products, though, because it depends on what they're doing -- that's on the open side of our business.

It depends on what they're doing.

If they are doing all cryo, it would be possibly less than that.

If they are using clamp plus cryo plus clip, it is going to be obviously more than that, so it really depends on which products they are using to complete the maze, but we estimate it is about $3,500 or so per procedure.

Matt Miksic, UBS.

Thanks for taking our questions.

Just a couple of quick follow-ups, one on -- a question was asked around training and I just wanted to get a sense, Mike, year over year as you think about your training activities, is this quarter -- are you on a regular run rate now and this quarter is about the same level of activity as last year?

Or are you expanding that by some amount that you can talk about?

And then, I have one follow-up.

Sure, on the advanced courses that we do, where we typically have that day and a half type training program to dive deep on that, we typically have 10 to 12 of those per year.

We're on the same kind of ramp as we had last year, although we've had more people attend them than we have last year, so we likely will have probably several more.

It is not a big jump on the number because we like to keep the number pretty tight from that standpoint.

So I would say we're -- it is relatively similar on that front in terms of the training.

Where we are seeing increases is in the number of people that are actually visiting sites, so going to Cleveland Clinic or going to some of the other community hospitals that do treat all of the Afibbers who are going in for concomitant surgery.

So we do see increases in those numbers.

The Cox Fellowship obviously has impact, and so we are looking at many different ways to do some of the training.

We did add -- for example, last year, one of the big items that we did that we did not have in previous years was we are now adding nurse and PA training as well so that we can train people in the hospital to be aware of it, to understand Afib.

And so, we are expanding it beyond just the surgeons so that we can have influence throughout the whole hospital to make sure everybody is aligned with how to treat this, when to treat it, which products to use, et cetera.

Okay, so if I understand your description, it is the same -- roughly the same (technical difficulty)

I think I heard you (multiple speakers) roughly the same.

The answer is it is roughly the same on that front, yes.

Okay.

And then on penetration, just to make -- I know this is something we have talked about before.

It is a 60% in (technical difficulty).

I thought it was 60% maybe a couple of quarters ago and I'm wondering whether it was sneaking up on 60% and now we are over, or is that actually still at about 60%?

And just as we look at these procedures and the way you've described them as a percentage of folks getting these procedures that also have Afib as being your target, just to clarify.

Is that persistent Afib or is that just -- is that the total Afib number?

Thanks.

I think -- so the 60% number is an estimate at the -- and we look at the data from SDS.

That SDS data is, quite frankly, 18 months behind relative to what the full penetration rates are, et cetera.

So from that standpoint, we are doing our best estimates based on looking at some of that old historical data, some of the trends that were there.

What we are seeing in the product we have got with the feedback we get from our sales force, et cetera, knowing sites that are not doing it today that we know we could move towards that and getting a general feel on the overall volumes in the US.

So, it really is our best estimate on those numbers.

I think when you try to get precision between 60%, 62%, or maybe it was 58% and now it is 62%, I don't have that level of precision in it and, quite frankly, it is next to impossible to actually get it when you look at it.

Secondly, and it's really important to understand this, when people talk about 60% and we've talked about this before, that is just the number of people that are doing some sort of ablation.

It does not mean that they're doing the full Cox-Maze IV.

So not only do we have growth to go from the 60% to, let's just call it, 90%, which it should be in the mitrals because you are already opening up the atrium, but in addition to that, within the 60%, they may only be doing a pulmonary vein isolation and using whether it is our clamps or a competitor clamps to basically do that procedure.

That is not a full Cox-Maze.

So there is growth within that procedure as well, and so we do have several layers of growth that we can achieve both better training to get them to do the procedure right and use the full set of products to treat that patient the best that they can and actually growing the number of patients that can get treated.

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I would like to hand the program back to Mike Carrel for any closing comments.

Thank you, everyone, for joining and participating in the call this evening.

Have a great evening and the rest of 2016.

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

This does conclude the program; you may now disconnect.

Good day.