Greetings, and welcome to the AxoGen Inc. Second Quarter 2016 Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Patrick Till from Investor Relations. Thank you. You may begin.

Thank you, operator, and good afternoon, everyone. Thank you for joining us today for the AxoGen conference call to discuss the financial results for the second quarter ended June 30, 2016. Today’s call is being broadcast live via webcast, which is available on the AxoGen website. Within an hour following the end of the live call, a replay will be available on the company’s website at www.axogeninc.com, under Investors. Before we get started, I’d like to remind you that during the course of this conference call, the company will make projections and forward-looking statements regarding the future events. We encourage you to review the company’s past and future filings with the SEC, including without limitation, the company’s Forms 10-K and 10-Q which identify the specific factors that may cause actual results or events to differ materially from those described in these forward-looking statements. These factors may include, without limitation, statements regarding the product acquisition and or development, product potential, regulatory environment, sales and marketing strategies, capital resources or operating performance. And with that, I’d like to turn the call over to Karen Zaderej, President and Chief Executive Officer of AxoGen. Karen?

Thanks, Patrick, and good afternoon, everyone. Welcome to our second quarter 2016 conference call. Joining me on the call today is AxoGen’s Chief Financial Officer, Pete Mariani Additionally, our call today was opened by Patrick Till of the Trout Group, who are now serving as our new Investor Relations firm. I’m sure many of you know the Trout Group, and we’re pleased to have him join the AxoGen team. I would like to begin today’s call with a review of our second quarter highlights, followed by a brief company overview, and an update on our key strategic initiatives. Pete will then provide a review of our second quarter financial results and updated guidance. After which time, we’ll open it up to Q&A. Now, turning to the quarter, revenue was $10.4 million, and was up $4 million, or 62% over the prior year. We are specially excited as this marks our first ever quarter with revenue above $10 million, and marks our 22nd consecutive quarter of year-over-year double-digit revenue growth. The execution of our strategic initiative is continuing to deliver solid results. Our revenue growth reflects the expanding penetration and adoption of AxoGen’s portfolio of products and the repair of nerve injuries. The growing demand is a direct result of increased market awareness, surgeon education, and our solid sales execution. Our growth is driven by deeper penetration into our existing accounts, as well as the development of new accounts. This progress is reinforcing AxoGen’s position as a preeminent choice for surgeons when considering nerve repair. We generated $4 million of revenue growth over Q2 2015. The majority of this growth was generated from active accounts. We define active accounts as those that have developed a certain level of consistency in their utilization of the AxoGen portfolio of products. These accounts are…

Thanks, Karen. In the second quarter of 2016, revenue was $10.4 million, an increase of $4 million, or 62% over the prior year. The growth in revenue was primarily the result of increases in unit volume, as well as price. As in prior quarters, the majority of our revenue growth is driven by growth in active accounts. Additionally, we continue to see growth in our pipeline of new accounts, as surgeons become familiar with our products and begin to develop their treatment algorithms. Gross profit in the second quarter was $8.9 million, an increase of 65% compared to $5.4 million in the prior year second quarter. Gross margin was 85.2% compared to 83.8% in the prior year. The year-over-year increase was driven by growth in unit volume, operational efficiencies and price increases. We have now completed the transition of our processing facility to Dayton, Ohio and are running at expected levels. Total operating expenses in the second quarter were $10.5 million, up 39% over the prior year, as we continue to make important investments in pursuit of our strategic initiatives. These investments include expanding our sales footprint, increasing physician education, expanding market awareness, and developing future products. These investments are driving growth in the company’s operating expenses. But importantly, at a lower rate than sales growth demonstrating the operating leverage in our business model. Sales and marketing expenses in the second quarter were $6.8 million, up 41%, or $2 million over the prior year. As a percentage of revenue, sales and marketing expenses decreased to 65% compared to 75% in the prior year. As Karen mentioned, we ended the quarter with 44 direct sales reps, up from 32 in the second quarter of 2015. Year-to-date, we have now completed six national education courses compared to four in the prior year.…

Thanks, Pete. Before we close, I’d like to highlight a few additional items. First we were very pleased to have been included in the Russell 2000 Index in June. We believe that being a part of the Russell 2000 should continue to increase our exposure within the investment community and broaden our investor base. Additionally, we are pleased to announce three Investor Events in the coming months. August 17, we will be presenting at the Wet Bush conference in New York City. September 28, we will be hosting a small Investor Event at the American Society of Surgery for the Hand in Austin, Texas. And November 21, we will be hosting our first Investor and Analyst Day in New York City. The Investor Events in Austin and New York City will include a review of clinical data and best practices in the repair of peripheral nerve and key opinion leaders as well as an opportunity to interact with the AxoGen leadership team. More detailed information about these events will be available on our website and announced in upcoming releases. In closing, our efforts to expand market awareness, surgeon education and enhanced sales execution are allowing us to increase both the number and penetration of our accounts and deliver solid results. Along with our additional initiatives to help develop clinical evidence, new products and new markets, we are reinforcing our position as the preeminent nerve repair company and building a foundation for long-term sustainable growth. Before taking questions, I want to thank our investors for their continued support and all of the members of the AxoGen team for their commitment to helping patients with nerve injuries. At this point, I’d like to open up the line for questions, Jessy?

Thank you. [Operator Instructions] Our first question is coming from the line of David Turkaly with JMP Securities. Please proceed with your question.

Thanks and congrats and keeping momentum going. I guess one quick one, the 5,100 accounts, I don’t think I’ve seen in the past. So I was just curious, as to where that number – where that came from, and I think it’s a larger number than I’ve ever considered. So any color on that would be great?

Sure. Hi, Dave. So it is a new number. We’ve not put it out there before, but we spent quite a bit of time looking at the targets and potential in the marketplace. So not only have we looked at 5,100 accounts, but we’ve also graded those accounts. So we’re not saying that we’re going after 5,100 as a high potential account. That’s just a universe ranging from Level 1, Level 2 trauma centers, children hospitals, military hospitals, all the way down to a surgery centers that would do surgery related to nerves. And so what we want to really showcase is that the universe is 5,100. Having said that, we’re in only 374 of those accounts is active account. And so we really just scratching the surface and even the 374 accounts that we’re in. We still are typically at one surgeon, in even apartment – apart of that surgeon’s treatment algorithm. So we’ve got a lot of growth opportunity.

Great, and on the 374, thanks for the detail. You mentioned that there is five times more revs that they use all three products. Just directionally, I mean how many accounts are doing this today? Is it 50 or is there any color around what the number of accounts that use all three is?

Yes, I don’t have that level of detail to provide today. But there is interesting that that five times revenue has been a very consistent number for us. As we look back over time, as we get accounts up to that level where they have three products. We’ve remained very consistent and demonstrating that that brings us up to – again five time increase in revenue. And I’ve always use that as a proxy for really adoption towards their treatment algorithm that is, it’s mathematically more than just that they use three products. It’s that they’re really starting to adopt the best practices when they do that.

And last, quick one maybe is to repeat your guidance were above 80% on the gross margin line. Could you just help us think about the 85% this quarter and what factors you consider that would kind of make that not be the norm as we’re looking at sort of sequential sales increases? Thanks a lot.

Yes, thanks Dave. We’re just – we’re happy with the gross margin that we were able to provide in the quarter. We’re comfortable that the business is operating well, and we just like that providing guidance on gross margins above 80% is the conservative place for us to be, and we’ll continue to be there. But we – the company is performing well here and we think we could continue to do above 80% margins.

Well, it’s an impressive number, thank you.

Yes.

Thanks Dave.

Thank you. [Operator Instructions] Our next question is coming from the line of Bruce Jackson with Lake Street Capital Markets. Please proceed with your question.

Hi, guys, nice quarter.

Hi.

Thanks, Bruce.

Okay, so first with the price increase. Can you give us a general sense of what percentage that was?

Well, so our price increase, we took on March first and as we have done in the past, and it varies by item code. So there is not one number across the Board. But we’ve netted out between price and mix still in sort of high single-digits, and about frankly where we’ve been in the last several years as well.

Okay, great. Second question, sometimes the demand can be used somewhat lumpy for lack of a better term because you’ve got seasonality and various other end-user patterns. How would you character as a sales coming out of the quarter and going into July, is it like – would you say that demand is steady up a little, down a little? How would you say we’re heading into the third quarter here?

What we’ve talked about that, especially the trauma market and the incidence of trauma follows activity, and so certainly locally there can be shifts where we see Mayo Clinic has a high seasonality and spring and fall because they tend to refer from an agricultural referral network or referral area, and – whereas Vail will be winter and summer, because they have the timber industry and they have the sporting events around the snow. And so there are certainly some differences locally, but we believe that the seasonality is higher in the summer months, and so that we see an impact, historically in second and third quarter. And we don’t give quarterly guidance. I don’t have anything, I can tell you forward looking into second and third quarter and fourth quarter of this year. But if I look back historically, you’ve seen that there’s been a higher growth in the second and third quarter.

Okay. That’s helpful. Then the last question, the sales force productivity looked really good. This quarter, you’ve got the reps are now annualized and they’re all up to full speed. And we’ve had some discussions in the past about the model where you don’t necessarily have to have the reps in the operating rooms to do all the procedures? I’m just curious to get your latest thinking on where the sales per rep could get you?

Well, as we’ve modeled this and we’ve modeled it not as much on our own history obviously as it is on other similar markets with a similar selling process. So again this is not a service model. It’s a model where the reps come in to help convert a surgeon and to get them comfortable with the change. So they’re going to be in the first, to say six to 10 cases with the surgeon. And then they’re going to come back as the surgeon is changing the treatment algorithm, but not for the same types of cases over-and-over again. If I look at other products that have had that similar selling process, they’ve been on average about $2 million per rep. That’s what we think will be a reasonable number for us to get to on average. Again as you can see from our numbers are our reps are not on average at $2 million yet, but that’s also because they’re in the learning stages. So that’s what we’re working towards.

Okay, great. Again nice quarter, thank you very much.

Thank you.

Thank you.

Thank you. It appears we have no additional questions at this time. So I’d like to pass the floor back over to management for any additional concluding comments.

Well, thank you, Jessy. And I want to thank everyone for joining us on today call. We look forward to speaking with you on the Q3 conference call in November.

Thank you. Ladies and gentlemen, this does conclude today teleconference. Again, we thank you for your participation and you may disconnect your lines at this time.