AtriCure Inc (ATRC) 2016 Q4 法說會逐字稿

Good afternoon, and welcome to AtriCure's Fourth Quarter 2016 Earnings Conference Call.

My name is [Vicky], 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 Lewis 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've 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, specifically adjusted EBITDA.

A reconciliation of any 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'd 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.

As we reflect on 2016, while we were a little short on our revenue expectations, we grew the top line 20%, exceeded our bottom-line expectations, and made significant progress in beginning our transformation into the minimally-invasive afib market, a large underpenetrated, underserved market, all while helping over 58,000 patients worldwide.

Throughout the year, we hit several key strategic milestones.

We completed the integration of nContact while enhancing our sales structure with the addition of a dedicated team focused on MIS.

Additionally, we have incorporated CONVERGE into our clinical trial program, and with the addition of six new sites enrolling and several more coming onboard by early April, we will have 20 sites and expect a meaningful acceleration in enrollment in Q2 and beyond.

We also expanded our portfolio onto the Japanese market, and released two new minimally-invasive products to the US market - the AtriClip PRO2 and the CryoFORM cryoablation probe, both of which address the opportunity in the minimally-invasive market and have started to contribute meaningfully.

So, we begin 2017 with a platform in place to continue our transformation to expand our minimally-invasive presence through our CONVERGE trial enrollment efforts and growth in the AtriClip franchise.

We are simultaneously solidifying our base open market, where we are the only PMA-approved product, and there's still significant under-penetration.

Thus, our revenue guidance for 2017 is 13% to 15% growth, taking into consideration our strength in the US MIS and AtriClip franchises, US open growth in the mid-single digits, and steady international growth.

We continue to have a clear line of sight to significant bottom-line improvement this year and EBITDA profitability in 2018.

Looking to the fourth quarter, revenues were $41.2 million, up 15% over last year, reflecting strength and momentum in US clip, MIS, and international sales results, and softer performance in our US open business.

Andy will go into more detail on the product revenue growth rates in his section, while I'll talk about business trends and key drivers.

Let's start with our Open business.

US Open revenue was up 1% in the quarter, with results characterized by some inconsistencies both internally and externally.

We are confident that the commercial team today is focused and now in a solid place.

Additionally, our market opportunity remains vast and under-penetrated, and we have many activities centered on improving consistent adoption of surgical ablation in the concomitant setting.

We remain the only company that is positioned to address the many afib patients who are not treated at all, or are under-treated all categories of cardiac surgery.

Increasing activity at the medical society level is driving upgraded guidelines and potential to generate more clinical data, which ensures the clinical community is aware of the benefits of treatment and the downside of leaving afib alone.

We are well-positioned to take advantage of these market tailwinds.

On that note, many of you likely saw that the Society of Thoracic Surgeons recently updated its guidelines for the surgical treatment of afib.

Most notably is the elevation of surgical ablation afib to a class I recommendation at the time of mitral valve surgery, aortic valve surgery, and coronary artery bypass grafting.

Previously, surgical ablation of afib at the time of heart surgery for structural and ischemic disease was a class II recommendation.

The updated guidelines reflect several years of work on the part of the authors, the STS as a society, and surgeons globally who have increasingly adopted concomitant afib ablation as the standard of care for structural heart surgery patients who also have afib.

We would like to take a moment to thank the STS and the cardiac surgeons who contributed to the updated guidelines.

The multi-year effort reflects increasing adoption of surgical ablation techniques for the treatment of afib and the result of a large body of scientific evidence showing that concomitant surgical ablation is safe and effective.

In addition to the new class I recommendation, there were other changes in the guidelines, including a class III recommendation for the excision or exclusion of the left atrial appendage in conjunction with surgical ablation of afib.

This is the first time that left atrial appendage management has been addressed in the STS guidelines.

We believe these guideline updates represent a significant advancement for the treatment of afib and will support long-term adoption of surgical ablation for afib worldwide.

Specifically, elevation to a level 1 indication from a level 2 is a tailwind which should have a positive long-term effect on the treatment of afib in the concomitant procedure.

We have recently partnered with AATS and several other societies on several expanded training programs, including significant time at the Mitral Valve Conclave in May and a new AATS [lead] afib course in November.

Additionally, we have expanded our advanced courses and in-person training sessions, and they are already at full capacity for the year.

Finally, we'll be launching a new cardiology marketing campaign targeted at the referring physician, ensuring the benefits of treatment.

These activities, plus a more seasoned team in the field after a year of integrating nContact, help solidify our confidence in our open business for 2017 and beyond.

Moving to our US clip and MIS businesses, we are excited about the accelerating momentum underway in the rest of our business as we leverage the stability in our Open business to deepen our focus on minimally-invasive solutions.

Both our product and clinical pipeline remain very healthy.

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

The PRO2 is gaining traction and broadening our opportunity in this under-penetrated market, contributing to strong volumes and incrementally higher ASPs.

Our CryoFORM probe continues to be well-received, and it helps us to access more cases and gain market share.

We expect both products to contribute more meaningfully throughout 2017.

Later in the year, we plan to roll out PRO-V, an even more versatile clip for minimally-invasive approaches, which should help support our trends in the clip franchise into 2018 and 2019.

We have further pipeline developments slated for 2018 and look forward to providing updates as these progress.

Internationally, sales remain strong, and the market is vastly underpenetrated.

During the fourth quarter, we received approval from the Japanese Ministry of Health, Labor, and Welfare for our CryoICE platform and Cryo2 cryoablation probe, launching both products into the Japanese market.

We are pleased to expand our offerings in Japan and anticipate continued growth in the Japanese market in the coming years.

The EPi-Sense product line, the cornerstone of our MIS platform, continues to grow both sequentially each quarter and year-over-year.

While it took a few more months than expected in 2016 to fully integrate our sales forces and get the CONVERGE trial on the right track, the feedback we received from clinicians about the potential for EPi-Sense has surpassed our expectations.

We are increasingly confident that our MIS strategy will help drive increased collaboration between cardiac surgeons and EPs.

Throughout 2016, we were acutely focused on adding new accounts and broadening our footprint.

We have added 50 new accounts since acquiring nContact.

Importantly, we also revitalized the majority of existing accounts by focusing on training and education to ensure consistent adoption.

As we enter 2017, while we have a robust pipeline of potential new accounts, we are focusing on deeper penetration into our existing base to increase utilization.

We are just scratching the surface here, and expect EPi-Sense to more significantly contribute to revenue as we enter new sites, build deeper relationships to EPs, and leverage our fully-optimized sales force.

Broadly, on our sales and marketing front, we have made significant progress on our commercial infrastructure as we stabilized our base open business and strengthened our commitment to minimally-invasive opportunity.

In 2016, we improved our sales force structure to include a high-quality team of minimally-invasive managers, or MIMs, to complement our existing sales force.

As these individuals ramp up, they can increasingly work in concert alongside our regional sales managers.

We are steadily building out this team to focus on minimally-invasive education and training of customers.

We have open positions in several territories, which we plan to fill throughout 2017.

Based on accelerating momentum we are seeing, we are highly confident that we have made the right moves and have the right people, and we expect to see continued benefits over the coming months.

On the clinical front, CONVERGE is our top priority.

We are making steady progress with CONVERGE, which is the first head-to-head study to evaluate the Convergent procedure versus catheter ablation in patients with persistent afib.

We expect the trial results to support FDA approval of EPi-Sense devices specifically for the treatment of persistent afib.

While we did not enroll many patients in the back half of last year, the combination of recently added sites and many new sites in our pipeline will help accelerate growth in 2017.

Several sites came online in Q4 and early Q1, including OhioHealth and St.

Vincent's Jacksonville, and as of today, we have 17 sites enrolling and 54 patients enrolled.

We are working diligently to continue to expand the number of sites and investing significant resources in patient recruitment activities around the trial.

As a result, we expect enrollment to accelerate throughout 2017.

As I've said before, our stretch goal is to be close to full enrollment by the end of the year, but it may take six or so months longer to get full enrollment of 153 patients.

All in, we accomplished much in 2016, and we are encouraged by our momentum as we enter 2017.

I will now turn the call over to Andy Wade, our Chief Financial Officer, and then we'll wrap up with some closing comments.

Thanks, Mike.

For the fourth quarter of 2016, revenue increased 15% on a GAAP basis to $41.2 million.

On a constant-currency basis, worldwide revenue also increased 15%.

Revenue from product sales in the US was $32.7 million, an increase of 13% from the fourth quarter of 2015.

Revenue from open-chest ablation-related products in the US increased to $14.6 million, representing growth of 1%.

US sales of products used in minimally-invasive procedures increased approximately $1.8 million to $8.9 million, up 25% and influenced heavily by the contribution from EPi-Sense products.

US sales of the AtriClip system during the fourth quarter of 2016 were $8.4 million as compared to $6.7 million for the fourth quarter of 2015, an increase of 26%.

Growth was again strong for the MIS clip products, driven by the launch of the AtriClip PRO2 late in the year.

Open clip performance was stronger than the open ablation growth.

International revenue of $8.5 million was up 22% on a GAAP basis and 23% on a constant-currency basis as compared to the fourth quarter of 2015.

European markets performed well, and sales in Asia were particular strong during the quarter.

Gross margin for the fourth quarter of 2016 was 70.2% as compared with 71.2% for the fourth quarter of 2015.

The primarily driver of the decrease were charges related to excess scrap and obsolete inventory.

We expect lower charges in future years, as you will note with our guidance that I will discuss shortly.

Positive trends on gross margin included pricing of the EPi-Sense product line, suspension of the medical device tax, and the new AtriClip PRO2 product.

Pricing continues to remain relatively steady on other product lines.

Operating expenses increased 1%, or approximately $400,000 from $36.2 million for the fourth quarter of 2015 to $36.6 million for the fourth quarter of 2016.

Research and development expenses, which include clinical and regulatory activities, were $9.9 million for the fourth quarter of 2016, or 24% of sales, an increase of $2.1 million over the fourth quarter of 2015.

The increase was driven primarily by product development efforts around a new RF generator, consulting related to the Company's compliance and quality systems performed in the second half of 2016, and headcount additions.

SG&A decreased approximately $1.7 million from the fourth quarter of 2015 to a total of $26.7 million, or 65% of sales.

$2.5 million of the decrease was related to transaction costs of the nContact acquisition recorded in the prior year.

In the current year, a $1 million charge was recorded related to the nContact contingent consideration liability primarily related to the time value of money.

Our operating loss for the quarter was $7.7 million, an improvement of $2.9 million over the operating loss for fourth quarter of 2015 of $10.9 million.

Our adjusted EBITDA loss was approximately $1.4 million compared to a $6.1 million adjusted EBITDA loss for the fourth quarter of 2015.

We did remove the effect of the $1 million noncash charge related to the change in the nContact consideration liability in the adjusted EBITDA loss calculation for 2016.

Our adjusted EBITDA loss in the fourth quarter of 2015 included approximately $2.5 million of costs related to the nContact acquisition.

Our reported net loss per share was $0.27 for the fourth quarter of 2016 compared to a $0.36 loss for the fourth quarter of 2015.

The fourth quarter 2016 net loss per share would have been $0.24 without the noncash charge related to the nContact contingent consideration liability.

The fourth quarter 2015 net loss per share would have been approximately $0.27 without the acquisition-related costs.

Turning to the full year, worldwide revenue was $155.1 million, a GAAP increase of 20%, or $25.4 million over 2015.

On a constant-currency basis, growth was also approximately 20%.

For the US, sales grew 20% to $122.4 million.

US Open revenue grew 8% to $58.1 million.

US sales of products used in minimally-invasive procedures increased 45% from 2015 to $31.2 million, which was influenced by EPi-Sense products acquired in the nContact transaction in late 2015.

US sales of AtriClip products grew 24% to $30.3 million, driven by strong performance in both the Open and MIS products.

International revenue grew 19% on both a GAAP basis and constant-currency basis to $32.7 million.

Performance was especially strong in Japan, China, and select EU markets during 2016.

Gross margin was 71.6% for both 2016 and 2015.

EPS was a loss of $1.05 for 2016 compared to $0.97 for 2015, and our adjusted EBITDA loss was $9.2 million for 2016 compared to $11.4 million for 2015.

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

Without this, the adjusted EBITDA loss was approximately $8.4 million, and the net loss per share was approximately $0.86.

for 2016, approximately $1 million was recorded in the P&L for the noncash charge related to the contingent consideration liability from the nContact acquisition.

Without this charge, the 2016 adjusted EBITDA loss was approximately $8.2 million, and the net loss per share was approximately $1.02.

Note that 2016 included a full year of nContact operating costs and integration costs, which we will leverage, going forward.

We ended the year with approximately $47 million in cash, cash equivalents, and investments.

Lastly, we are reiterating our guidance for 2017.

We anticipate top-line growth of approximately 13% to 15% year-over-year at current exchange rates, or approximately $175 million to $178 million on a GAAP basis.

Implied in this guidance is mid-single digit growth in US Open, and over 20% growth in both US minimally-invasive ablation and AtriClip product sales.

International revenue is expected to grow in the mid-teens.

While we are not providing quarterly guidance, for modeling purposes, we anticipate revenue growth for Q1 and Q2 to be toward the low end of our anticipated growth rate range, and for Q3 and Q4 to be toward the higher end of that range.

We anticipate gross margins to be approximately 72% to 73% for the year based on current trends and investments to support growth.

The bottom end represents a slight increase from the 2016 reported gross margin.

Items with a positive effect on gross margin include volume leverage, positive pricing impacts of PRO2 and EPi-Sense, and programs to increase efficiency.

Headwinds on gross margin include additional investment in resources dedicated to our operations and quality systems to support our growth and patient safety, along with continued heavy capital placement, particularly 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 in efficiency, along with higher pricing on new products.

We expect R&D to be 22% to 23% of sales, a slight improvement compared to 2016.

Continued investment in this area includes the CONVERGE trial, other clinical science activity, along with progressive R&D pipeline development.

We expect SG&A to be roughly 65% to 66% of sales in 2017, which is an improvement compared to the 2016 rate.

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

We expect adjusted EBITDA for 2017 to be a loss of approximately $4 million to $6 million, a significant improvement from the adjusted EBITDA loss reported for 2016.

In terms of EPS, this adjusted EBITDA range translates into a loss of between $0.94 and $1.04 per share.

We anticipate the adjusted EBITDA loss to be heaviest in the beginning of the year, with an expected loss of approximately $5 million in Q1, which translates to an EPS loss in the range of $0.36 to $0.39.

We expect steady improvement throughout the year.

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

Thank you, Andy.

In closing, we are confident that our fundamentals and business outlook remain strong.

2016 was a year of transition and transformation as we worked towards greater predictability, embarked on building an EP sales force, and enhanced our focus on minimally-invasive approaches.

We are confident that these efforts, along with the product releases of PRO2 and CryoFORM, have set the Company up for strong growth not only in 2017 but for the long-term, and with some exciting clinical data and expanding indications coming near the end of the decade.

Specifically in 2017, we anticipate incremental volume growth for PRO2 and CryoFORM as these new products settle into the market.

Additionally, we expect EPi-Sense to be an increasing contributor in 2017 as we take advantage of our new sales structure, and we are extremely focused on enrolling in the CONVERGE trial.

As Andy mentioned, we are confident in our guidance in 2017 of 13% to 15% top-line growth through the year, and a path to adjusted EBITDA profitability in 2018.

With that, we'll open up to questions.

Operator?

(Operator instructions.) Brooks West, Piper Jaffray.

Just let me start with a quick clinical trial update, and then I want to ask a question on Q4.

Did you mention, Mike, where you are with the ATLAS and DEEP trial?

And then, specifically, I'm wondering when the DEEP trial's going to start enrolling again.

Yes.

We didn't answer that specifically, but I'm happy to.

So, our focus really is -- and our top priority, as I mentioned, is on CONVERGE and really getting these sites up and running.

But, we are making progress on DEEP.

We've had great conversations with the FDA, and we anticipate to begin enrollment some time in 2017.

But, our focus is really getting ourselves moving on CONVERGE right now with a fast follow-on to DEEP after that.

In terms of ATLAS, we've made great progress.

We've enrolled over 150 patients so far.

We're up to over 10 sites, and we've got 10 more sites in the pipeline ready to begin to enroll in that, as well.

So, we're making good progress on that, but I wanted to make the focus today on CONVERGE.

And then, the main question, just looking back at Q4, you said a little bit internal, a little bit external.

Understand you had a lot of moving pieces looking in the nContact integration and the rebuilding of the EP sales force.

Was there anything in the market that changed that you'd want us to understand?

Can you just go a little bit deeper on maybe what some of the external factors were?

And the second part of that is remind us where you are with the field force.

Do you have now a dedicated MIS and dedicated Open?

Is everybody doing everything?

And just kind of help us understand the strategy with the sales force as it stands.

Thanks.

Sure.

So, I'll start with the strategy, and then I'll go into some of the impacts.

But basically, the overall structure of the team is we've got regional sales managers that sell the breadth of our product line.

The surgeons are the ones that use it.

They've got a lot of knowledge around the afib market in general.

And then, we've got a dedicated EP, or minimally-invasive sales team.

That team is the one that we've built out over the last 15 or so months.

We're now up to 10 people today.

We've got 53 or so on the regional sales manager ranks.

We'll grow that 53 to around 55 or so this year, and on the minimally-invasive or EP space, you've got 10 growing to 14-plus.

Could be more depending upon demand and as we find the talent that is out there, but we'll be adding to that throughout the year, and so we're making good progress on that.

Those teams actually work in concert with one another on accounts.

As you can imagine, when you're building out heart teams, you've got EPs and surgeons that are involved in the minimally-invasive approaches.

It's really important to kind of have a collaboration from that standpoint.

So, they both work very closely from that standpoint.

In terms of your question about the impact of the changes, some of the external-internal factors.

There's a lot of different items, as I mentioned.

Some of the external factors were we had a lot of surgeons move this year, more surgeons than they had previously.

That was some of the external factor.

We're not seeing a decrease in terms of the market, per se.

I mean, the number of cardiac procedures actually have not gone down.

You've seen pressure on the AVRs, but on the overall cardiac procedures, on mitrals, CABGs, and the combination of all that, they've not gone down.

In fact, they've gone up over the last several years.

And so, that is really not having the impact.

It's really getting surgeons kind of back on track and working it.

And this external-internal component is actually interfaced, because our regional sales managers, as they were spending more time without having the dedicated MIS team really in place yet, it was pulling them off of being in the OR on a regular basis.

We believe that we've kind of corrected on that front, but again, we're being cautious about our growth rate as we look at the year.

We're looking at kind of the mid-single digit range of growth on the Open side.

Jason Mills, Canaccord Genuity.

Hi, this is actually Cecilia on for Jason.

And I just wanted to ask briefly on EBITDA loss and what's implied in your guidance for this year, and the potential to possibly hit EBITDA-positive in the back half of the year, just any commentary from you that might cause this to happen.

Thank you.

I mean, just given what we said about Q1, it is definitely implied that, as you get towards the back half of the year, you're going to have to see some positivity specifically as you get out to Q4.

I mean, we'll provide some color as we go through the year, but just given the expectation of approximately $5 million of a loss in the first quarter and still trying to hit the range, then you're making a reasonable assumption.

And then, if I could just ask really quickly on the clip business, this recent trend in PRO2, are you at all supply-constrained at this point?

And then, just impact from the new clip coming on later in 2017, just timing, impact, and relative ASPs?

Right now, we don't have any impact, no concerns about the inventory from a PRO2 standpoint.

We're locked and loaded.

I know that was some things we were work through as we were rolling out, and the demand was faster than we thought in the back half of fourth quarter, but we're all set from an inventory standpoint.

As it relates to PRO-V, it won't have much impact on the revenue in 2017, but it will be rolled out at the end this year, early part of next year.

And as we roll that out, we anticipate that should help us sustain the strong growth that we anticipate, going forward, on the clip franchise overall.

Rick Wise, Stifel.

Let me start with, again, the outlook for 2017, Mike.

I hear your confidence, and I think you're laying out very clearly.

Maybe talk about a couple of factors supporting that confidence.

I mean, one, obviously the STS guidelines should support, I would think, extended, expanded conversations with surgeons.

But, help us understand how that conversation's evolving, both in general and maybe as it relates to your training courses.

You mentioned the AATS events, but talk about your training events.

My impression is you have significantly more people signed up for this year than last.

If you could just talk us through all those things?

Sure.

I mean, the overall guidance for the year is 13% to 15%, and we're obviously confident overall in that number.

And as Andy mentioned, it's really broken down into kind of mid-single digits on the open side of the business, which is consistent with around where we were this year, and then on the other side, on the clip and the MIS side, we anticipate that being north of 20% on both of those.

So, I'll kind of break down each one.

So, on the Open side of the business, you mentioned it.

I think the number one piece is that the STS guideline changes really provide -- it's a landmark, and that's why we spent so much time on the call on it, is that we really believe this is a great conversation piece.

It's really a conversation we can have with the surgeons about why they should treat.

There's lots of data that's out there, and it's their society that's really kind of talking about it.

So, it's really enabled that.

And you mentioned it.

It's actually driven on the education front.

We are already sold out on the eight courses that we had for the year that we hadn't anticipated, which is how many we did last year.

We will likely add anywhere from two to four more courses this year, and if the demand continues to be high, that's great.

It's not just the surgeons that are interested in the course now.

We have the PAs and the RNs that are very interested because they've got a holistic approach in the OR with it.

So, it's really across that business.

And a lot of that I do equate to, since the STS guidelines came out, that level of demand has gone up.

We've also seen demand for our in-person courses and our non-atriotomy courses that we're doing.

And so, that's actually improved quite significantly, both at the Cleveland Clinic down in Asheville, North Carolina, where we're packed through the year, as well.

And so, we're looking for more places for that.

So, we're starting to see definitely an increase in activity.

Now, the impact on revenue this year is probably lighter in 2017, but it definitely gives us confidence that the Open business has stabilized, and we'll continue to kind of have that nice or reasonable growth rate that's there, as opposed to a shrinking growth rate, per se.

In addition to that, when you look at the other parts of our business, obviously we feel -- you talked about the mitral valve conclave and the AATS programs.

Those are new.

Those are areas where we're getting into and we're supporting those societies as best we can.

But, what that's showing is that not only are the guidelines changing, but the other societies are also recognizing it and wanting to make sure they've got additional trending programs because there's demand from the people within the societies.

On the MIS and the other pieces of our business, we feel very good about the growth that's coming off of that, coming off of CONVERGE in the fourth quarter, which was very strong.

We anticipate that that will continue to grow as the year goes on this year.

We saw great sequential growth every single quarter last year.

And so, we're really on a really good pace as we kind of move into this year.

And then, the same thing on the clip.

The PRO2 has really gotten people to both increase volume and ASP, and so we've kind of gotten a boost on both those fronts from both of those.

We anticipate that coming through this year, as well.

And maybe one last one, sort of a two-part one from me.

Back to gross margins, Andy, you said, and if I think I caught your words, you expect 75% gross margin in the next few years.

I think previously you've said more concretely perhaps by 2019.

Am I getting caught up in language, or is there any change in your thinking?

But, maybe tie that into the pipeline.

And Mike, you were talking about further products to be launched as the year unfolds.

Just, again, if you can break it down just in the simplest kind of way, how big a role do the new products play in getting you to the 75% goal, or is it volume, or is it mixed?

How do we think about just sort of prioritizing those drivers?

Thanks.

Honestly, Rick, it's all of the above.

So, the new product launches that'll happen will help from pricing perspective and a margin perspective, but a lot of it will be volume-driven as we continue to grow and leverage the new facility that we've moved into, all those kind of things.

So, as far as the 75%, we haven't given specifics, but we have sort of talked about this end of the decade-type timeframe, and that's still where we are.

So, thinking about it, stepwise-up from here is the right way to do it.

Danielle Antalffy, Leerink Partners.

Just a follow-up question on Rick's question regarding the guidelines.

It seems like very positive trends there when it comes to the physician training sessions and the number of folks that have signed up so far this year.

Mike, just wondering if you could comment on how quickly you start to see volumes ramp, how quickly you reap the benefits from a top-line perspective in the Open business post-physicians training in these advanced courses.

Historically we've seen it within a six- to 12-month period after that where we would track and measure that.

A lot of these people are repeat people because it's going into more advanced courses now, so I think it'll be to-be-told in terms of what kind of impact that's going to have from that standpoint.

Right now, we're just comfortable with kind of stating and that we're really consistent, that we're going to be in that kind of mid-single digit for the year and seeing how the year comes off.

Coming off of a slower Q4, we want to make sure that we're cautious as we enter this year, and we're going to continue to be at that pace right now.

Okay, so really it's a more 2018 and beyond tailwind?

Yes, and I think it also gives us -- I mean, I think one of the big things is that there was always these questions of was it going to keep shrinking, what's happening with it, and this really gives us the tailwind to be able to maintain that we're going to be in that mid-single digit area without having a shrinkage like many questions have come up in the past.

And then, Andy, just following up on the profitability question, can you give a little bit more color on the levers that you guys can pull there that are incremental in 2018 that gives you the confidence that you'll get to that EBIT profitability in 2018?

Thanks so much.

Sure.

It's generally leverage across the entirety of the business, to be honest.

Margin improvement is obviously part of it, but even just leveraging clinical trial and R&D spend, along with everything in SG&A.

So, it's not necessarily a particular thing, just that we're able to leverage a cost structure that is somewhat fixed in nature that you grow beyond.

So, honestly, it's really across the whole of the business.

Matt Miksic, UBS.

Hey, guys, this is Vic in for Matt.

Sorry, I'm just jumping on a couple of calls, so apologies if this has already been asked.

But, can you give us some sort of idea as to if you've seen any change in the competitive landscape in your Open business, given the launch of the new probe?

And then, can you also update us on how nContact grew in the fourth quarter?

Was it up or down sequentially?

Thank you.

Sure.

The competitive landscape, we continue to compete aggressively, but there's been no significant change on the Open side of our business, so there's really been no significant change on that front.

In terms of the nContact, it was sequentially up quite a bit.

We had a great fourth quarter overall in the MIS part of our business.

Pretty much all of that or most of that was driven by the nContact EPi-Sense products.

Suraj Kalia, Northland.

Ethan Potasnick, Needham & Company.

Hi, guys, this is Ethan Potasnick filling in for Mike Matson.

Just one more on the STS guidelines.

Could you maybe talk about what sort of customer feedback have you guys gotten on the changes at the STS annual meeting?

Feedback's been positive.

I mean, everybody that we spoke to, I think that it was kind of a good reminder for many people that they really do need to be treating these patients when they're on the table.

They're going to do better, and the data's out there now.

So, I think it's kind of a good shot in the arm for many of them, and it's a reminder, and so it's been very positive feedback that we've received so far.

And just to reiterate, have you guys done any surveys to attempt to quantify the impact of the STS guideline changes?

I'm not sure what you mean by survey to quantify the impact of it.

Well, I guess the overall quantifiable impact of the guideline changes.

In terms of what it's going to do to revenue for us?

Yes, revenue and overall impact.

Yes.

There's no specifics on that.

I mean, right now it's a general sense that you've got.

It's an under-penetrated market where you're still at 20% to 25% of patients are getting treated, so 75% of the patients that are on the operating room table that have afib are not getting treated.

And so, what this does is it obviously puts a spotlight on it, creates awareness for us to be able to talk to the fact that, hey, your own society is basically encouraging you to treat these patients because they do better, they live longer.

And so, those are the things that we're really focused on.

It's tough to quantify exactly what that impact is going to be.

You've really got to go -- it's a penetration game at this point in time in really kind of moving that market, so to quantify it.

We're saying this year we're going to be cautious about saying we're in the mid-single digits in the growth on the Open side of our business.

And again, we're going to be 13% to 15% total, and 20% on the minimally-invasive and clip business.

And how many salespeople do you guys plan to add during 2017?

Well, we've got three major components to our sales team.

We've got regional sales managers that are geographically focused, and we anticipate adding just a couple on that front.

On the minimally-invasive managers are the ones that are EP focused, we anticipate adding at least four this year, possibly more, which is going from 10 to probably around 14-plus.

And we'll add more as we see kind of demand and shifting.

We won't be shy about that.

And then, on the clinical specialists we've got, we've currently got about 45, and we'll likely add between five and 10 this year.

And I'm showing no further questions at this time.

I would now like to turn the call back over to Mr. Mike Carrel for closing remarks.

Great.

Well, thank you, everyone, for joining us today.

We appreciate your interest in AtriCure, and look forward to seeing you in the coming months.

Have a great day.

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

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

Everyone have a great day.