Good afternoon. And welcome to AtriCure’s Fourth Quarter and Year End 2017 Earnings Conference Call. At this time, all participants are in a 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 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 have not received the copy, please call 513-755-4136 to have one emailed to you. Before we begin today, let 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 statements. Additionally, we refer to non-GAAP financial measures. Specifically revenue reported on a constant currency basis and adjusted EBITDA. A reconciliation of these non-GAAP financial 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 2017, our team made significant progress toward the goals we set for the year. We grew the topline 13%, marking our fifth straight year of double-digit revenue growth, impacted over 60,000 patients worldwide, reached enrollment of over 100 patients in the converged trial, surpassed 125,000 AtriCure milestone with over 34,000 sold in 2017 alone and we launched the AtriClip PRO•V device as a platform for current and future growth. We also added significant leadership to our Board of Directors with the addition of Kris Johnson and Reggie Groves. And we strengthened our executive team with the addition of Sam Privitera as Chief Technology Officer; and Vini Doraiswamy as the Head of Clinical, Regulatory and Scientific Affairs. As a cornerstone to our success, we continue to focus on three critical pillars, which are education, clinical science and innovation. We have created a strong foundation and culture that fosters a patient first mindset and drives towards the success. We begin 2018 with a platform in place to continue expanding our minimally invasive presence through our enrollment efforts in CONVERGE and DEEP clinical trials, and growth in the AtriClip franchise. We are simultaneously solidifying our base in the open market, which remains largely underpenetrated. Thus, our revenue guidance for 2018 is 9% to 12% growth. We also expect to realize adjusted EBITDA profitability for full year 2018. Now turning to the specifics of the quarterly performance, during the fourth quarter 2017, we posted revenues totaling $46.1 million, representing year-over-year growth of approximately 12%. We continue to work to drive broad consistent growth by improving adoption of surgical ablation in a concomitant setting through our company-sponsored education programs, as well as partnerships with key societies, which we believe contributed…

Thanks, Mike. For the fourth quarter of 2017, worldwide revenue increased 12% to $46.1 million. On a constant currency basis, worldwide revenue increased 11%. Revenue from product sales in the U.S. was $36.2 million, an increase of 11% from the fourth quarter of 2016. Revenue from open-chest ablation related products in the U.S. increased to $16.7 million, representing growth of 14%. U.S. sales of ablation products used in minimally invasive procedures were down 6% to $8.4 billion, as a result of reduced volumes from several key legacy customers, which were primarily impacted by wildfires as discussed on our last call. In addition, sales of EPi-Sense were lighter than expected this quarter, following three strong quarters in 2017. U.S. sales of the AtriClip system during the fourth quarter of 2017 were $10.6 million, as compared to $8.4 million for the fourth quarter of 2016, an increase of 27%. Growth was strong for both MIS and open AtriClip product. Early results were good for our PRO•V device launched late in the third quarter. International revenue of $9.9 million was up 16% or 10% on a constant currency basis, as compared to the fourth quarter of 2016. Growth was particularly strong in European distributor markets, China, Australia, and Canada. Gross margin for the fourth quarter of 2017 was 71%, as compared with 70.2% for the fourth quarter of 2016. The primary driver of the improvement was lower obsolescence charges, offset partially by changes in geographic mix. Pricing continues to remain relatively steady across both our product lines and geographies. Our adjusted EBITDA loss was approximately $300,000, compared to a $1.4 million adjusted EBITDA loss for the fourth quarter of 2016. Our operating loss for the quarter was $2.1 million, compared to the operating loss for the fourth quarter of 2016 of $7.7 million.…

Thank you, Andy. Throughout 2017, we made substantial advancements in our business, with considerable progress on CONVERGE, robust growth in EPi-Sense and exciting new AtriClip MIS platform with our PRO•V launch. As we enter 2018, we expect continued traction and rising momentum as the year progresses, with several milestones in our sights. Specifically, we are endeavoring to serve over 65,000 patients and train over 300 physicians worldwide. We also endeavor to complete the enrollment of CONVERGE and advance FROST and DEEP, launch three new products throughout the year, develop the open MIS markets and solidify our business, and in the process reach adjusted EBITDA profitability for the year. We are successfully building a portfolio of products, with excellent clinical data that expands our reach and benefits patients worldwide, and creates significant shareholder value. These accomplishments position AtriCure for long-term success With that, we will now open it up to questions.

Thank you. [Operator Instructions] And our first question for today comes from the line of Danielle Antalffy with Leerink Partners.

Hi. Good afternoon, guys. Thank you so much for taking the question. Just a question on the 2018 outlook and guidance, Mike, could you talk a little bit about the puts and takes to the 9% to 12%. I mean, obviously, you had a stronger quarter in Q4 than that, what’s going to -- what’s driving the deceleration versus Q4? And maybe talk about some of the tailwind. How you’re thinking about the impact of guideline to the open business? Is that something that can accelerate growth in the open business? Or is it really just more incremental than a true growth accelerator? Thanks so much.

Sure. As we mentioned, Danielle, we feel really good about the number will be in the range of our sixth straight year in a row of double-digit revenue growth in 2018 and also going after that achieving a bottomline profitability. Obviously, there’s always upside in numbers. But we are not going to bank on it per se, but there’s a lot of great things happening in our business. We have got the guidelines behind us, lots of great conversations and you’re seeing the impact of that in the numbers and we anticipate that to play true into the year, into 2018 and for many more years to go. On top of that, obviously, coming out with the new products that we have got, both PRO•V coming out at the end of last year, FLEX•V coming out here and actually and start selling it in the month of March. So we do anticipate some upside when it comes to all of those as well. But, quite frankly, we feel really comfortable with the number that we have got on a global overall basis and that’s kind of where we are for the year at this point.

Thank you. And our next question comes from the line of Jason Mills with Canaccord Genuity.

Great. Can you guys hear me, okay, Mike?

Yeah. I hear you great.

Okay. Congratulations again on a good quarter. I know I told you that earlier last month. But the good end of the year. So, I guess, I’d like to start and following up on Danielle’s question. Mike, international, while it’s a fraction of your U.S. business there are pockets of real upside opportunities it seems to me, Japan being one of them. Also, so could you talk about that? In addition to that, what’s implicit in your guidance for U.S. MIS growth? Obviously, as you predicted was somewhat volatile through 2017. You’ve said that it will remain volatile to some extent until you get a labeling indication, but can you put a finer point to that specific to the year 2018. I have one more follow-up if possible.

Sure. I’ll start on the international side. So, on the international side, Japan is a great market for us. We had very strong growth this past year, with Clip and Cryo beginning to become standard of care over in Japan. We do anticipate to have another a good solid year out of that market. In addition to that, we had a really strong year in Australia and South Korea, where we almost doubled our business. It was on small numbers. But we saw some very good progress in those markets and we anticipate to see some significant progress there as well. As we look into Europe, in particular EPi-Sense is really beginning to take hold in Italy and the U.K. We have not really had that product. We had it approved over there, but we actually weren’t -- didn’t have a lot of traction until just recently. So I anticipate there’s definitely some good growth that could come in those two markets relative to that. We have also got and our management team has really been in place now for about a year and a half in Europe and have got the utmost in confidence for the team we put together, they now understand our products, understand our process and understand how to serve the physicians well. And so, I think, we are in a really good spot to expand in the Nordic countries and also in Germany as well. As it relates to kind of our overall guidance and kind of MIS, without giving any kind of specific granularity to different components, we are really focused on kind of the overall revenue number for the year, and obviously, there’s going to be puts and takes as the year goes on. There is obviously upside to some degree relative to some of the MIS, as we are up to 173 sites that are now actually using the product or did use the product in 2017, that’s up from when we bought them at about 38 or so sites, so we have made progress now. We have got to kind of make sure that we are within those sites, but actually continuing to adopt and use that technology. And then, as we talked about earlier some of the legacy, as DEEP kind of gets up and running the excitement builds around that. We do think that there is going to be some momentum, but on a quarterly basis, it’s kind of tough to predict that per se, that’s why we have kind of given you that overall number.

That’s helpful color. Thanks for the update on the CONVERGE account status, Mike, that was another question I had. So as a follow-up, perhaps, you could just take it up to a $20,000 foot view and give us your latest assessment of the market. It just -- it seems as we do our research, I am sure, my colleagues on the phone see it similarly that when you look at surgical open for sure and even to some extent MIS ablation cap or Afib ablation. The competitive landscape doesn’t seem to be getting much more difficult. And so, I just would love your assessment with respect to the competitive landscape what you’re seeing and maybe level set as we enter a new year with respect to penetration rate projections that you see across the three aspects of your business. You’ve gone over that in various presentations in the past and I think it is important for investors to understand the level of penetration at which you currently stand sort of juxtaposed to the competitive landscape, which doesn’t seem like it’s getting tougher, which is a good place for you to be. So maybe you could just help us out there?

Yeah. And I think the biggest competitive components in most of our -- in particular, I’ll start with the open side of the business. The biggest competition there is really going after just treatment, making sure that physicians are treating the Afib at the same time. They are treating the rest of the surgical procedure. And there is so much data that’s out there right now, but those are the tailwinds. I mean it’s not just the guidelines, but as I mentioned during my remarks, I talked about the Chamberlain paper. You’re still talking about only 30% penetrated across the Board and less than 10% in CABG patients. And these are surgeons that now are getting the data. They can’t say, oh, there’s no data out there to show that there’s benefit. There’s data to show that these patients live longer and it is paper after paper that is coming out. They are now beginning to really kind of digest that. They want to get more training. They want to learn. They want to learn how to do it right. And so, I think, that that really portends to a long-term future, where we are going to be able to actually go after that space. As we look at the Clip market, you saw we had 34,000 Clips that were sold in 2017 that’s a 29% or so unit increase that we had, just a great growth rate across the Board. Again, I think, there’s just more and more papers coming out, as I mentioned, the JAMA paper and others that show the benefits of managing the appendage and you’ve got lots of endo kind of the watchman’s of the world that are out there that are being used or the amulets in these clinical trials are out there that…

Thank you. And our next question comes from the line of Rick Wise with Stifel.

Hi, Mike and Andy. It’s Drew Ranieri on for Rick. Just a two-part question on your clinical trial -- trials, Mike, to reach the mid-2018 full enrollment for CONVERGE. You mentioned that patient enrollment will need to accelerate. So is this the sub-xiphoid approach that’s going to be driving that or the additional sites that are coming on Board. Just what are the keys to kind of getting CONVERGE finished on time. And it sounds like you’re making great progress on FROST and DEEP getting back on track. But could you just also review where you stand with the ATLAS and CEASE trials?

Sure. As it relates to CONVERGE, it’s mostly the sites. We are now up to 25 sites enrolling and those sites, we anticipate two more to come on Board, they probably won’t contribute that much to it, but the sites we got now are really kind of getting into their clinical practice and so we anticipate that we’ll have strong enrollment here. We have had decent enrollment for beginning part of the year and now there’s a good rich pipeline of patients coming down right now. So it’s mostly the new sites and actually existing sites have been around for a while really getting excited to kind of see the end game here and trying to contribute towards it and so we are putting on a full court press on that and having lots of success we think in getting more patients into the pipeline and again feeling comfortable with the dates there. As it relates to ATLAS, we are at over 500 patients in the ATLAS trial at this point. We are actually now looking at, probably, wind up being at about 550 to 600 or so. We are beginning to look at the data relative to that and we’ll likely begin to pivot towards using that data to evaluate what a better long-term trial is going to look like. Because if you recall when we did the ATLAS trial, it was really done the kind of hypothesis -- generate some hypothesis around kind of where we could go with a full blown IV trial over the next several years. I think we have got enough data that we need to kind of look at it over the next three months to six months and then from there really put together a real long-term trial to make a difference on that front. So we feel good about the enrollment there. It’s been way ahead of plan relative to the numbers and we feel like we are going to have enough data from that. We really want to move towards a more pivotal trial at some point in time. As it relates to CEASE, we are up to about 89 patients and so we are close to the trial kind of getting in the mid-150s or so range, and we are still evaluating kind of where we go with that. We are making some good progress there.

Okay. Great. And sorry, if I missed this, but just to go to the STS guidelines, so it’s been about a year since they have come out. Can you just talk a bit more about how surgeon perspectives have evolved over the past year for treating AF? And how those conversations relate to just training course demand?

Yeah. I mean, this year’s STS, I mean, I think, it’s indicative. The number one paper -- the Chamberlain paper was about surgical ablation, and it was about the treatment and the fact that it actually improves these people’s lives and they live longer, if you do the surgical ablation at the time of other cardiac surgeries. And so, I think that right there kind of tells you and sets the tone for what STS was all about. There were lots of conversations there, and we have got demand and we are sold out in our courses right now. We are adding new sites to do kind of on-site looks, so people can fly in and actually watch several cases in a rows, they could see a CABG case, a mitral valve case and an aortic case, and we are adding new sites to be able to do that as well. But the demand is there right now and it’s pretty much sold out for the foreseeable future.

Thank you. And our next question comes from the line of Matt O’Brien with Piper Jaffray.

Hi, guys. This is Kevin on for Matt today. I wanted to start with the PRO•V product. I know it’s pretty early and we heard that the feedback was overwhelmingly positive. Can you just point us specifically to what you’ve been hearing from clinicians thus far? And then secondly, we heard the number of 250 that you’ve already placed. How many would you expect that to run this year and then given the higher price point, how the company just overall used the contribution of that product to the Clip business and that growth profile this year?

Yeah. So, I’ll start with the first. I mean, the reason the clinicians love this product is, it allows them to get into much tighter spaces, the maneuverability of it, the way that it articulates, it’s a third of the size of the other Clip device that we had. So in terms of actually getting access, it’s just that much easier to get in those tight spaces and so they are able to do procedures, they otherwise were not comfortable with doing. So, for example, if they had to go over the appendage and it was too difficult to go over the appendage with the hoop. Now they can kind of go right at the base and not have to kind of attack it that way. That is a big advantage when you’re in those tight spaces like that. It also allows them to feel much more comfortable getting to the base of the appendage. And so that kind of small nature of it and maneuverability, the open-ended nature of it, so they can kind of go at it at the base similar to the way that they have used other products that way, makes it just something they are very comfortable with and they are very comfortable using it in places they weren’t using it before. In terms of the numbers, we are not going to give out projections for our numbers for the year. We looked at this, the PRO•V is one where it is a much higher price point. We are not going after massive volumes relative to it at this point in time. We are really kind of going after it for kind of those unique cases and then over time it might migrate into some of those other cases. But we are taking it at a higher price point, because we think there’s a lot of value there. And if people want to kind of take the PRO2 and wind up using it instead of the PRO2, they can, but it’s obviously at higher cost.

Okay. Thanks. That’s very helpful. And then, lastly, with SG&A kind of expected to go up some, can you just provide us with an update on the size of the sales force. Do you have plans to continue expanding whether direct and clinical reps, how does that kind of shake out for the year and think about that number?

Yeah. Sure. So we are sitting today, when you break down kind of our sales force today, we have got 11 areas throughout the country. Within those 11 areas, we have about 55 or so direct RSMs, actually, I think, it’s 53, but we’ll grow it to kind of 55 to 57 or so this year. So adding a few more on that kind of regional kind of managing the geographies, we are then at about 15 or so in the minimally invasive. That number will grow to 17 to 20 or so as the year progresses and as they get better, and we are able to split up the territories there. And on the clinicals, we are sitting setting it at about 15 and we’ll grow that to the upper 50s by the end of the year as well. The clinicals are really focused on our case coverage and the clinical support of the cases.

Perfect. Thanks so much.

And then in addition to that we -- I should mention that, we are in the process of adding several, what I call, kind of clinical specialists that are focused on the cryoanalgesia space and we’ll add four of them throughout 2018.

Thank you. And our next question comes from the line of Suraj Kalia with Northland Securities.

Good afternoon, everyone. Thank you for taking my questions. So, Mike, couple of questions from my side, EPi-Sense, can you walk us through the sequential step down and if any impact on gross margins, the reimbursement for EPi-Sense is pretty good. So I am trying to get some color, how was this a blip or should we have any read-throughs for FY18?

Yeah. We just had a really strong Q3. I mean Q3 was -- on the EPi-Sense side of our business we were much better than expected in the third quarter and maybe we were too good. We had a lot of new sites kind of get up and running and so that kind of had an impact to some degree on kind of what we saw in the fourth quarter relative to that. But nothing -- no read through per se, no impact on gross margins as you mentioned, and we still feel very good about the EPi-Sense product line for the full year of 2018.

Got it. And finally, Mike, in terms of ATLAS and forgive me if I misheard this. I say -- in my -- as I was writing my notes you said 500 patients enrolled and maybe at 550 or so patients there is an interim analysis and then look at how the trial design should be? Maybe I misheard it. But Mike, in case I heard it right, help me understand ATLAS, it’s a 2:1 randomized AtriClip, no drug therapy. The primary endpoint is, if I remember correctly, just complication rates. Why would a trail redesign even from a patient perspective any additional color there that would be greatly appreciated? Thank you for taking my questions.

Yes. So maybe I misspoke, it’s not a trial redesign. So right now that is a -- it’s a company-sponsored trial that was done for generating data so that we could get a feel for what was the impact of putting a Clip on prophylactically on patients that did not have Afib. And you’re right it is randomized 2:1. And so what we are doing is, we are looking at that data and then we are looking at the spend relative to what -- where can we get the most out of our the dollar spent towards a long-term trial and what does that trial look like? And we are going to use the information we gathered from this to really think about how do we look at an IDE trial in the coming years. So this is more of a, I mean, it’s a trial that’s being done in these non-Afib patients and we are really looking at what’s the right Clip trial for the long-term.

Thank you.

Thank you. And our next question comes from the line of Mike Matson with Needham & Company.

Hi. This is David Saxon on for Mike. Can you guys hear me all right?

Yes.

Great. So my first question, can you comment on the pricing of the AtriClip FLEX•V and kind of what you’re expecting if you might see some sort of price premium versus prior open AtriClip devices?

Yeah. We do expect a price premium. We are not giving a specific number out. But we are -- we do expect a significant reasonable price premium over the existing Clip that’s out there today, just because of the engineering here it is a lot of value added that V Clip is -- it’s taken us almost four years to develop and test and put out there plus the new handle and the way that deployment works just some exceptional engineering by our team and so we will be getting or charging more for that.

Okay. Great. And then, just to follow-up on the training comments you made. I guess, how quickly do you think you can kind of ramp up your capacity. Is that a 2018 event or more into 2019?

Yeah. It’s not as much about ramping up capacity per se. But it’s about providing different options for different people for training. So it’s getting more intimate with them at various different levels, supporting societies and the various different training courses that they are running in conjunction with what we are doing. We do about one per month, which is about the cadence we can do with the faculty that we have got. We are trying to get new faculty on Board that might be able to increase that specifically focused on the CABG area. But I anticipate really -- we are really trying to leverage the societies and the academic centers as well to do kind of short courses and things like that also that can add value and can be additive to the approach that we have done ourselves.

Great. Well, thank you very much.

Thank you. And that concludes our question-and-answer session for today. I’d like to turn the call back over to Mike Carrel for any closing comments.

Great. Thank you everybody for joining today and we look forward to a very strong 2018. Have a great evening.