Good afternoon, and welcome to the AtriCure’s First Quarter 2012 Earnings Conference Call. My name is, Karen, and I’ll be your coordinator for the call today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of today’s call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Mr. David Drachman, President and Chief Executive Officer of AtriCure. Mr. Drachman, please proceed.

Thank you, Karen. Good morning, and welcome to our first quarter earnings conference call. At this time, I would like to turn the call over to Sarah Luken our Investor Relations Associate and Executive Assistant, for a few introductory comments.

Thank you, Dave, and good afternoon, everyone. By now, you should have received a copy of the earnings press release. If you have not received a copy, please call me at 513-304-8931, and I will fax or e-mail you a copy. Before we begin today, let me remind you that the company’s remarks may include forward-looking statements. These statements include, but are not limited to, those that address activities, events or developments that AtriCure expects, believes or anticipates, will or may occur in the future, such as revenue and earnings estimates, other predictions of financial performance, launches of new products and market acceptance of new products. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond AtriCure’s control, including, but not limited to, the rate and degree of market acceptance of AtriCure’s products, governmental approvals, and other risks and uncertainties, described from time-to-time in AtriCure’s SEC filings. AtriCure’s results may differ materially from those projected on today’s call, and AtriCure undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additionally, we may refer to non-GAAP financial metrics. A reconciliation of these non-GAAP measures is included in our press release, which is available on our website. I would like to remind everyone on the call today, that the Food and Drug Administration, or FDA, has not approved certain AtriCure products for the treatment of atrial fibrillation or AF, or for stroke reduction. The company and others acting on its behalf may not promote these non-approved products to train doctors for the surgical treatment of AF, or stroke reduction unless the product is so indicated. These restrictions do not prevent doctors from choosing to use the products for the treatment of AF or stroke reduction, or prevent AtriCure from engaging in sales and marketing efforts, that focus only on the general attributes of the products for the current cleared uses. AtriCure educates and trains doctors in the proper use of its products and related technologies, including for the treatment of AF in accordance with the product specific indications. With that, I would like to turn the call back to Dave.

Alright. Thank you. Good morning and welcome to AtriCure’s First Quarter 2012 Conference Call. On today’s call, we will provide a review of business trends, the strategy for capitalizing on our AF approval, first quarter financial results and our clinical trial progress. We will conclude our prepared remarks with our outlook for near term, and long term growth prospects, then we will open the call for your questions. Before we begin, I would like to address the announcement yesterday, that Julie Piton has resigned as the company’s Chief Financial Officer, to pursue other opportunities. During Julie’s tenure, AtriCure has developed a strong accounting and financing with broad capabilities, including an Executive Director of Finance who has assumed responsibility for financial reporting and controls, as well as a corporate controller. Based on our internal assessment, and input from the diligence conducted by external consultants, we are confident, that the company is well positioned as we search for a successor. Board of Directors and I would like to thank Julie for her contributions, and wish her well. Turning to business trends, we believe that our first quarter results are a strong indicator that our strategic priorities are resulting, in new growth opportunities. We are experiencing a resurgence in U.S. revenue growth, when combined with continued strength, from our international market. We believe the result is accelerating growth during the second half of 2012. Our research indicates a stabilization of procedure volumes in the U.S. which together, with our premium product’s recent AF approval, strong international sales performance, and clinical leadership provides our best in class, sales marketing and professional education organization, with a powerful growth platform. Turning to review of our strategic plan, we capitalized on our AF approval. We believe that our recent AF approval is a large growth opportunity, and…

(Operator Instructions) The first question will come from the line of Rick Wise of Leerink Swann. Your line is open, please go ahead.

Alright. Good morning Dave. Can you just expand on your comments on physician training? You trained 210 docs to date at 120 sites? Can you talk about the kind of numbers we might expect that you proceed through the year? What maybe your hopes and dreams are?

Well, our aim is Rick, so the question is what do we anticipate going forward in terms of the numbers of training events and training positions. Our aim is in the first 18 months post approval and the approval as you know was December 15, 2011. This had trained 1000 surgeons with our current users and to target approximately a 100 sites that are highly competitive sites for expansion of market share. So, we had very clear plan in terms of training, what we are doing to basically maximize the effectiveness of our training program is we are trying to focus on small numbers of position going to one site at a time, training one group of surgeons at a time and having intimate dialogue of about the curriculum, but also about the process going forward which is what patient does that group think should be treated would present with pre-operative atrial fibrillation so that we can develop a standardization of which patient should be treated. Second thing is very important is that help physicians follow their patients. One limitation in cardiac surgery whether it is CABG or valve or atrial fibrillation treatment is general speaking cardiac surgeons do not follow their patients. So, we’ve developed a registry as well as our post approval study and we want to help the cardiac surgeons standardize their procedures through advanced training as well as to the ability to track their patient’s long term and then they can begin to understand the favorable impact they are making on patients as well as published data as well as modified techniques if necessary. I hope that addressed your question?

Yes. I’ll follow up later. I guess my follow up question now would be on AtriClip up I think it is at 24% sequentially, again can you talk about the uptick there? To what extent is this being driven by the procedure (inaudible) or is the training driving this and remind us where we are with the next gen version. Thanks Dave.

Thank you Rick. So, all the above certainly I would like to comment on is that our AF approval created a buzz at STS and it is still a buzz in the cardiac surgery community about the AF approval. There are very few products that actually go to panels you know that our cardiac surgical products that go through panel and get certain approval to treat to these date. So, that is definitely a buzz about AF and about AtriCure within the cardiac surgical community. So, the procedure volume increase we think, has impacted our clip sales, we also think that training education has impacted it, but overall we think that there’s buzz around treating atrial fibrillation, and it has also been a positive momentum gain in specific, for the AtriCure system, and we would expect, that that would continue through the remainder of the year

Thanks very much.

Thank you.

Thanks for your question, next question comes from the line of Matt Dolan of Roth Capital, please go ahead. Matt Dolan – Roth Capital: Hi, good morning Dave.

Hey Matt Matt Dolan – Roth Capital: The first question is just on that buzz, you just mentioned. And we’re trying to dissect out how much of the nice performance, you had in Q1, do you think I came from the label and the announcement and I think you did say, that you expect your growth rate to accelerate through the year, so what kind of growth rate could we see upon exit of 2012?

Well, accelerate we said during the second half of the year. Our most difficult comp is in the second quarter, so and we’re really working on the process of implementing training, and we believe that the benefits of the training and education process will be stronger in the second half of the year. In terms of growth rates, you know exiting the year, I’ll reserve comment on that, I think the concept of the 12% to 15% guidance, on a full year basis is our current thought process. Matt Dolan – Roth Capital: Okay, great. And then on the clip, how much, it sounds like your getting halo effect there. Are you seeing new accounts adopt the product, or is it a utilization dynamic that’s helping you?

It’s more utilization, if you look at our top 250, if you remember we talked about the top 250 accounts being in target, you know this past quarter is 67% of the top 250 accounts, actually purchased the clip, and more than 50% of the clip sales came from our top 250 accounts, which are also (inaudible) accounts that were aiming for in terms of training, early on the process. Matt Dolan – Roth Capital: Thank you.

Thanks Matt

Thank you for your question. The next question comes from the line of Tom Gunderson of Piper Jaffray. Line is open, please go ahead.

Hi, thanks. Good morning Dave. So again, a little bit on the growth. I think you answered it a little bit on the last questioner, it seems like you’ve got the label and had a successful STS, you had training is going well, and you had a good first quarter and we’re suppose to wait till second half for acceleration. It feels like we’re there and the reason you’re holding back a little bit is because of tough comps on Q2, but is it from an internal, from a 20:12 standpoint, you feel like you’ve got the wind behind you and a little bit of momentum as you head into Q2 or is it something about Q2 that slows you down relative to Q1?

No, I think the Q1 result had a lot to do with the activity in the buzz around the AF approval and the implementation of training. I think as we get into Q2, we’re actually in the very next stage in terms of implementing trend. So, we find our training programs and we have this phase 3 process that we’re also adding, which I think is important. So again, phase 1, we get this certification process, phase 2, as we look for ways to increase utilization, increase penetration. And then in phase 3, we bring in our market development mangers, to help with these educational campaigns in the patients who are referring physician. All that we think, is under way and more refine going into Q2. And we would anticipate that we would see more of the impact of that, in the second half of the year.

Okay. And then as far as procedures stabilizing, Edwards has launched and did well with their Sapien, but we’re expecting a halo effect on surgical AVR’s, where we see an increase, simply because of patients coming in, and all of them being qualified for Percutaneous values. Are you doing anything to target or partner with new Sapien accounts and do you buy into the idea that, that valve procedures might go up and that might be beneficial to you guys?

We really are into anything to sort of partner with Sapien accounts, although these are all high-profile accounts by large. So, the customer, there is some overlap. I am not sure that the increased number of patients that we are talking about from a Sapien perspective and the crossover to some of those patients into a surgical, standard surgical AVR is going to make a significant difference in our business. I think our growth is generally going to come from a very well-designed sales organization in terms of the structure and implementing and executing an educational plan that strikes out with increasing core competencies of physicians which increases their competence in performing procedures with multiple comorbidities, followed by advanced training, followed by marketing campaigns aimed at physicians as well as patients. The one thing that I think people may underestimate is that cardiologists, the biggest nuisance for cardiologists, I would take a bet that if you were to take a survey and talk to clinical cardiologists toward referring physicians for these patients that we see, the biggest nuisance is taking care of atrial fibrillation. We get a lot of phone calls – had patients admitted to the emergency room. They typically don’t like to deal with atrial fibrillation and it tends to be the Number 1 nuisance when we survey them. So, we can have surgeons talk to their referring cardiologists and really educate them on what surgical ablation is because there really hasn’t been that form to do that, we think that that’s going to basically give the surgeons an advantage to gain more referrals and also give the referring physicians a reason to answer their atrial fibrillation to be corrected. So, those are the sorts of strategies that we think that really will benefit us going forward.

And then, just a quick one, I know I am going over my limit, but a quick question, quick answer, what kind of timeframe are you looking for, for a CFO? Would you expect to have one by the next call?

That’s a difficult question. I think we have a very strong internal team, to redevelop a very strong internal team and we are very confident in the internal team. We feel like our advisers are consultants are as well and we have all the dozen resumes from consultants and advisers that we are beginning to plan to introduce now and we want to make sure that we, in the highest quality professional on board. So, whether it takes a quarter or two quarters, the business is in very good hands and we want to make sure that we take our time. We also have retained the services of Lynn Pieper and Westwicke. So, we have IR services that can help us supplement the external activities of a CFO, while we make sure that we bring on the best possible candidate.

Thanks David.

Jason Mills – Canaccord Genuity: Thanks Dave, congrats on a good quarter. To say that your atrial fibrillation FDA approval is a competitive advantage, I think is an understatement, but I want to know how that’s in the early days being manifested in your business? I am wondering if you can give us some quantitative metrics in terms of how many centers ordered, your surgical ablation, especially on the open side, surgical ablation products during the quarter relative to say, either the third or fourth quarter of last year prior to the FDA approval?

We had about 350 accounts ordered product in the first quarter, which is approximately a 20% increase over the fourth quarter. Jason Mills – Canaccord Genuity: And how many of those were new accounts that have never ordered from you before, roughly?

Roughly, I would say that, of the 350, about 10% of new accounts, but we are also – that could be Clip technology, that could be – may not necessarily be directly associated to the approval, however, we are targeting our current users first thinking that the current users often have the product on the shelf and they are just even more training and education to facilitate sales and penetration. So, we are trying to screen, we actually have one of our top executives that takes every account that we are targeting for training and screens them in a value, so that we prioritize our educational resources in areas where we can, where we believe we can facilitate sales the quickest, and as you point out, sometimes it’s a competitive account, but very often that’s accounts where we already have one or two users, but there is an under penetration from the other surgeons in the group. Jason Mills – Canaccord Genuity: Got it. That’s very helpful. I don’t imagine that you care what they are ordering these new accounts, given that you have the only FDA approval for A-fib product and the only, at least the most widely sought after Clip, surgical Clip product, whichever one they start with is probably of no consequence to you initially, correct?

I would say that that’s true. While we come in and we try to evasively show them the full system, so which includes the ORLab mapping system, all of our clamping technology, the Clip. I wouldn’t say that we have our preference of which part they buy first, but in general, I think if we can get them on the ablation product first, we are likely to get a higher revenue in gross profit dollar per procedure than getting the Clip in. Jason Mills – Canaccord Genuity: Got it. Just a few more, I will get back in queue. U.S., talk about direct markets where you can go in a relatively short period of time that you are not in right now and the sustainability of that international growth. I guess if I gave you two choices and one of them wasn’t to maintain your current growth, you are either going to get down 5% growth or up 5% growth, I am wondering if that is a good way to ask to give us a sense for what, where you see the opportunity. And then the last question I will sneak is just on the stroke trial, when you expect to begin in rolling patients? Thanks guys. Good quarter.

Thank you, Jason. Great questions. One of the things, actually very interesting to us is there is a 165,000 open hearts in Germany, which is one of our direct markets, where we have just added. If you look at the U.S., there is 300,000 open hearts. So, Germany is the size of Montana. It has 85 million people. If they do a 165,000 open heart procedures, the U.S. obviously with 300 million people and much larger geography does 300,000 open heart procedures. And Germany tends to be in elderly population overall. So, the percentage of AF is high. So, we think Germany is really a very crucial market and it’s very aligned with cryo technology. So, the new ice box, which we have had some ups and downs in terms of that platform, but we are getting that organized and together, but the ECN and the cryo technologies, and our other products in Germany, we think are great opportunity for us. And in the Benelux, we have some very high-profile minimally-invasive sites, and that continues to be a very target-rich as well. I think our strategy right now is also to take some of our FDA trials and go to Europe. So, for example, in the stage DEEP AF trial, there’s two very high volume, minimally-invasive/hybrid accounts in the Benelux that we are going to include in our stage DEEP AF feasibility trial to gain exposure in that region and gain exposure in Europe. In Germany, we will include probably six to eight post-approval study centers as well to gain more momentum because as you know, the European sites like to be involved in FDA regulated clinical trial. So, in terms of the markets and their potential, we think that Germany is a very strong target-rich environment, Benelux as well. Those probably are two most forward moving markets and then the UK, probably in Number 3. But we still have significant opportunity to expand. We are expanding into Poland, we are doing much better in Turkey. We are doing actually better in Italy even though the economics are not favorable. So, there is still a lot of growth in Europe and we have got a great team that’s very, very focused in just doing an outstanding job. So, thank you. Jason Mills – Canaccord Genuity: And the question on commencement of the stroke patients?

The stroke patients, we anticipate the – what we are waiting for is the next-generation platform, which is specifically designed for the thoracoscopic approach and we have a (inaudible) that’s compatible as well to make the procedure truly thoracoscopic. So, that device should be ready for human use around the end of July, which means that we would submit amendment to IVE around August 1st, and the only thing that’s changing is – so we would anticipate full approval in the August timeframe, and then once we get full approval, we will have an accelerated path for IRB approvals, because we are in the process now of submitting to the IRBs. To answer your question, I think if we should see enrollment begin in the fourth quarter or likely the early portion of the fourth quarter for the stroke. Jason Mills – Canaccord Genuity: Thank you.

Thank you.

Thank you. Your next question comes from Charley Jones of Barrington Research. Please proceed. Charley Jones – Barrington Research: Good morning. Thanks for taking my questions. Great quarter.

Hi Charley. Thank you. Charley Jones – Barrington Research: So, I guess my first question is around the number of devices that you are seeing being used in the procedure, and I am wondering if you are noticing that the less trend surgeons or maybe less education-based surgeons are using the fewer number of devices per procedure. And when you see them come out of your training program if we see that number increase fairly substantially, what kind of revenue per procedure do you think you can achieve over a longer period of time in the U.S. on the open side? Thanks.

That’s a great question. We have our Vice President of U.S. Sales. He is an absolute expert educating surgeons on how to basically maximize our product portfolio and given open heart procedure, and selling the benefits of plan, cryo, pen [ph], ORLab, Clip, and we have centers that use all of those products in an open heart procedure. Now, in terms of the average blended ASP, we said $3,000. For the educational programs, I do think that there is an opportunity to increase that. It should also be noted that our disposable products have, generally speaking, the exception of the Clip, have about an 80% gross margin. And the Clip is not far from that. So, we have this campaign going on right now when we do the education, we show and demonstrate all of our products and we have our U.S. sales organization, it’s led by one of the best technicians in terms of teaching people how to do a Maze and how to take advantage of a total technology platform. And I think that sort of leadership is gaining momentum within the sales organization and it’s clearly a momentum towards physicians using more products for procedure to optimize the technology to make the procedure simpler and faster. So, I would rather not answer the blended ASP question, because I think it’s a little early. I would rather stick with the $3,000, but I can tell you that we are making progress and there are more products being used for procedure based on the training and the demonstration of all of our products as well as based on the sales leadership and their understanding of how to make use of all the technology. Charley Jones – Barrington Research: I guess I had few questions around the Clip, curious how your ASPs are trending. And just in general, few questions around the Clip. How are some of your more experienced for maybe guys that maybe we see more eye-to-eye with using? Are they not using that in all of the patients, or are there a lot of guys who are using that in pretty much all of the patients? And finally on the Clip, can you talk a little bit about what percentage of docs are using the Clip coming into your training and whether or not there is any experience of what percentage of them are using that’s coming out?

Charley, could you repeat the first portion of the question? I am sorry. Charley Jones – Barrington Research: Well, I guess, curious on some of the guys, that you know that do really believe in stroke reduction and lucky draw appendage exclusion, and I am just wondering, within this group of thought leaders, are they still not using the Clip in certain cases, other than some huge (inaudible) LAA, and that was the first portion of it?

We still have a tremendous amount of opportunity with the Clip. There is -- I was in Barcelona, and it was a world leading group of experts, the faculties for the meeting, which was sponsored by AtriCure. Michelle Hunziker, Jim Cox and Walt Costella, was just a world leading group of faculty there. And there was a general consensus amongst the group, that every patient undergoing cardiac surgery should have the appendage taken. And I know Jim Cox was very very hopeful about this and I think, other people in the room as well that are keeping your leaders. When the chest is open, not to taking appendage, knowing that whether patients have a history of atrial fibrillation or not, it’s just not a thoughtful approach, especially knowing that the most common diagnosis for atrial fibrillation is an accidental finding. So many of these patients may have AF, it’s just hasn’t been diagnosed yet, and there’s certainly predisposed developing atrial fibrillation. And this data that suggested the only time surgeons actually see clots in the atrium, is during in-patients that have a history of atrial fibrillation, so.. Charley Jones – Barrington Research: (inaudible) looking. So, I guess a couple of questions. You know, on the referring cardiologist, I guess if I am a referring cardiologist, I don’t want to be referring people to a procedure that’s not approved, but now that its approved, it would seem like this group of people’s aptitude to refer increases significantly?

Well, I think the cardiologist, we have to get the message more widely spread to the cardiologist, that there is an approved technique, and also what the surgical ablation really is, and what the results are. So, we have to do with that work, and that’s part of this market development work that we talked about with the cardiac surgeons, communicating to the referring doctors. But I think your right, once the referring physicians understand, what surgical ablation is, because many of them think about the classic cut and sew maze, and don’t realize with these new ablation technologies we can get comparable results, with a 15 to 20 minute add on procedure, with very little risk to the patient. I think the referring physician community is going to take a little bit longer to get to them, because there are many more referring physicians, than cardiologists. We think the best way to basically invest our dollars, is surgeon training, and then having surgeons communicate the procedure and the outcomes to the patients. In terms of labeling, the interesting question about the labeling, if you have a patient that presents with atrial fibrillation, and requires corrective surgical procedures, and now you have a label product, are you responsible to basically talk to that patient about the alternative of treating the AF. Before there was a labeled product, a lot of physicians didn’t feel a responsibility, and didn’t actually inform their patients that there is a treatment for atrial fibrillation as well as a mitral valve, we think now, there is some responsibility that the cardiac surgeon has, if there is a history of AF to offer that patient a treatment solution. Charley Jones – Barrington Research: Finally, and this is it. Could you discuss with us, what you’re hearing from neurologists, and from the physician community, what level of stroke reduction would likely be necessary, for a successful minimally invasive clip? Thanks.

Sure, well first of all I think the whole issue would be clipped if we’re going after patients that are contraindicated for anti-coagulation treatment. So, unlike in the endovascular devices, which traditionally for example, the watchman as you know is a non-inferiority concept, versus anti-coagulation treatment. (inaudible) concept is to take patients who’ve already had either a bleed, or had a previous TIA or stroke and those would be the patients that we would include in our trial. So, patients that are contraindicated to anticoagulation treatment are the target population. And so, what we would expect is that we would hopefully get results that are comparable to anticoagulation treatment, which tends to be less than 1% stroke risk. Charley Jones – Barrington Research: So, you are talking like an 80% stroke reduction?

We are talking about putting a clip on patients that contraindicate the anticoagulation treatment with the understanding that it’s been demonstrated at closing the appendage to the protect AF trial is comparable to too many treatments. Charley Jones – Barrington Research: But I mean, we have seen stroke rates in the mid-single digits, right? So, and if you are talking about less than 1%, wouldn’t that be just a massive difference?

We would hope to see a large improvement, but it also obviously could depend upon the presentation of the patient. You could have basically healthy 60-year-old that has a contraindication to anticoagulation treatment or you can have a 85-year-old with several co-morbidities that is contraindicated and their stroke risk at 85 years old with multiple co-morbidities might be higher than the younger healthier patients. So, I think less about the reduction of stroke and more about the indication and the inclusion criteria in terms of age and demographics that are in the trial in terms of how we would, how are the trials and what types of reductions that we would be looking for. Charley Jones – Barrington Research: Thanks for all the answers. Appreciate it.

Thank you.

Thank you for your question. Next question comes from Larry Haimovitch of HMTC. Please proceed. Larry Haimovitch – HMTC: Hi Dave. Congratulations on a really terrific quarter.

Thank you, Larry. Larry Haimovitch – HMTC: Dave, a lot of questions have been sort of around on this particular issue. When you got the AF approval, of course, we were all very, very excited –

Hello?

Larry’s line is still open. Let me see if I can find him. Larry Haimovitch – HMTC: Success in the quarter, or have you yet to see any real benefit from the fact that –

Operator?

Larry, your line keeps muted. Could you repeat your question for us? Larry Haimovitch – HMTC: I am sorry. Can you hear me now?

We can hear you now. Larry Haimovitch – HMTC: I am sorry, Dave. My question was regarding the label. You had a very, very good first quarter. I have been trying to understand just how significant the label has been or will be to your ability to grow the business faster than competition. So, the question is can you give us your own valuation at this point, now that you have had a label for several months, three, four, or five months, whatever it is, can’t remember exactly, but how important has that been so far in winning new business, taking market share and growing the business faster than competition?

It’s been, as Jason Mills said, absolutely critical. We are not seeing any accuracy of current users. We are seeing new users that want to work with AtriCure. We have had competitive convergence, significant competitive convergence from basically all our major competitors. People would prefer to use an on-label product and once they get familiar with AtriCure, I think they are also impressed by the fact that we have the widest range of technologies and also the quality of our products. So, the approval is really a very, very powerful selling tool, and I think it’s not only going to allow us to take share, I think that’s the smaller piece of the pie. The bigger piece of the pie is the fact that 65,000 patients did undergo corrective (inaudible) procedures with AF and not getting any replacement treatment. Larry Haimovitch – HMTC: Okay. Great, thanks Dave.

Thank you Larry.

Thank you for your question. We have no further questions. That does conclude your Q&A session. Now, I would like to turn the call back to David.

Thank you very much for your support and interest in AtriCure, and we look forward to our second quarter earnings call. Thank you.

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a good day.