Lynn Pieper – Investor Relations Mike Carrel – President and Chief Executive Officer Andy Wade – Vice President and Chief Financial Officer.

Rick Wise – Stifel Tom Gunderson – Piper Jaffray Danielle Antalffy – Leerink Partners Jason Mills – Canaccord Genuity Jose Haresco – JMP Securities.

Ladies and gentlemen, good afternoon and welcome to AtriCure’s Third Quarter 2014 Earnings Conference Call. My name is Ryan, and I’ll be the coordinator for the call today. At this time, all participants are in listen-only mode. And 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’d now like to turn the call over to Lynn Pieper from Westwicke Partners for a few introductory comments..

Thanks Ryan. 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 on today’s call.

AtriCure undertakes no obligation to publicly update any forward-looking statements. Additionally, we may refer to non-GAAP financial metrics. A reconciliation of these non-GAAP measures with the most directly comparable GAAP measures is included in our press release, which is available on our website.

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

Mike?.

Thank you, Lynn. Good afternoon and thank you for joining us. We are pleased to report strong third quarter results and based on the strength of our year-to-date results. We are raising our guidance for 2014 to a revenue range of $105 million to $106 million reflecting approximately 28% to 29% year-over-year growth.

We continue to see a tremendous amount of untapped potential in our markets, and thus our plans remain focused on growth and successfully expanding the Afib market through improved patient outcomes, training and education. We also plan to continue to execute on our clinical trials.

We are pleased to have the completed enrollment in the ABLATE Post Approval Study or PAS in the third quarter, another milestone towards delivering data to prove the benefit of our innovative products to patients. And we are also excited to announce the way we received FDA approval for a deep protocol.

These developments along with an improved pipeline of products, give us great confidence that we have many years of growth ahead of us. Our future looks bright indeed. Before review our quarterly performance, I want to provide an update on our clinical programs.

Our ABLATE Post Approval Study is intended to build additional evidence of the safety efficacy and long-term durability of the Maze IV concomitant treatment for Afib using our proprietary surgical devices to treat non-paroxysmal forms of atrial fibrillation.

As of October 3, 2014 the ABLATE PAS enrolled 365 patients at 40 hospitals across the United States. AtriCure expects to release preliminary data from the study in about a year with a complete report expected to be published in three years. I cannot over emphasize.

This is a major milestone as we expect the post approval study will provide additional compelling evidence of the benefits of treating Afib at the time of cardiac surgery. Moving on to our stroke trial. We have enrolled five patients to-date, while the enrollment has been slower than expected.

We believe that remains excitement long-term for the study and we are in the process of working with each site on ways to improve this enrollment in the coming quarters. On the stage DEEP AF trial, we’re happy to let you know that our IDE has been approved and we continue to expect, we can continue to expect to begin that the pivotal trial in 2015.

This landmark trial provide electrophysiologist and the cardiac surgeons together as a team in an effort to help establish a new standard of care for patients presenting with persistent or long standing persistent Afib, a significant risk factor for stroke.

We expect to enroll 220 patients in 25 sites internationally during the process of finalizing our principle investigators and will announce them shortly. This is very exciting news for the company. Now turning to the quarter, once again it was all about execution.

Our third quarter revenue reached $26.7 million or an increase of 32% compared with the third quarter of last year. Growth was balanced across all of our product lines both in the U.S. and internationally. In the U.S, overall sales in the year were up 27% year-over-year and international sales were up 53%.

Our international sales were driven by key contributions from Europe with notable strength in Germany and the UK. We continue to see increasing clinician interest and managing the left atrial appendage and tremendous untapped potential in our markets.

As we look to the future, we have spent consider time evaluating our long-term markets and are confident we are just beginning to build momentum in treating Afib for all appropriate open heart patients. As such our commitment to our education strategy will only increase.

Additionally, we continue to make significant progress setting AtriCure up for continued long-term success with our investments in clinical trials and science in research and development, which will pay dividends for many years to come. As for our training and education this year in the U.S. we are continuing to gain traction.

We have conducted 11 advanced training courses in the U.S. this year and continue to expect to complete 15 by the end of the year. As we gain experience in interacted more physicians additional training opportunities are being presented than we would have originally expected.

Based on the success of our Maze IV training day almost every major society for surgeons and electrophysiologist in the respective congresses globally, are now asking us to ABLATE education and awareness efforts within their societies.

As a result, we will be expanding our pre-meeting training efforts in 2015 to include more than twice as many as this past year. Additionally, many leading institutions such as the Cleveland Clinic are asking us to help them organize in person advanced training sessions to promote the treatment of Afib and concomitant setting.

We have conducted over 10 of these events already in 2014 and expect this to grow significantly in 2015 and beyond. In fact on Monday of this week, we launched the series of physician education sessions to run for the next several weeks.

What is most striking is the range of courses, labs, proctoring and dinner events occurring almost every day of each week across all of our procedures and products, all around the world.

From a surgeon case observation of a concomitant transverse sinus clip placement in Fort Myers, to a Maze IV course co-led by the committee chairs of the AATS education committee at [indiscernible] campus.

This is just an example – a small example of the efforts underway and in process and is a testament to the field teams’ ability to engage physicians in their physician’s consultant’s interest in working with us. Turning to our business trends. In the third quarter U.S. open revenue was up 17% compared to the same period a year ago.

We continue to build momentum on the gains of our investments in education and training, which we are confident resulting in sustainable growth. As stated earlier, we’re continuing to see a large runway ahead of us; the market for surgical ablation can comment into open procedures is vastly underpenetrated.

AtriClip continued to be a strong contributor to our U.S. growth rate in the quarter with an increase of over 58% over last year. AtriClip Pro increased 74% while open clips were up 53%. We have sold over 38,000 clips to-date, which is more than any other available product on the market for LAA combined.

This level of discussion and activity around managing the left atrial appendage continues to increase and we expect to have sold over 50,000 by mid-2015.

The growth in our clip revenue isn’t just being driven by our marketing initiatives; it’s also being driven by the broader market realizing that managing the left atrial appendage is the right way to treat these patients.

With the MIS clip, what is starting to happen is that, when a physician performs at right lateral thoracotomy they realize it’s an opportunity to manage the appendage. The physicians can see the LAA using this approach and increasingly they are dealing with it.

Our clip is ineffective and is a more affordable option than anything else that can be used at this time. We are encouraged that the market is moving toward managing the left atrial appendage. At this time, I want to take a minute to address Watchman as it relates to this, because I know a lot of you might be curious as to our thoughts.

First, I would like to compliment Boston Scientific on being the trial ablators in running a stroke trial. As those of you, who have been following this space, no at a recent panel meeting they received a 6 to 5 majority recommendation from the panel for the all-important risk benefit of an approval.

There was a lot of discussion at the panel around treating patients who are counter indicated for oral anticoagulants. We believe the interest in decision generated by recent developments worldwide leads to the following implications for AtriCure. First it re-informs, reaffirms the importance of LAA management therapy.

Second, it confirms our stroke trial strategy regarding these target patients. We think that it’s very clear, what the FDA wants, a trial which, in which you are treating a patient population for oral contraindicated patients.

We are working with this exact trial design and our feasibility study and we’ll likely pursue it with our pivotal trial as well. Third, it creates interest and drives market growth for the AtriClip franchise and we are serving complimentary markets in patients. MIS sales in the U.S.

were up 13% for the third quarter, driven by the contribution from Estech products. The underlying U.S. MIS market after four years of declines in our business stabilized and grew at a modest pace in 2103.

We have seen the same year-to-date in 2014 and continue to expect modest to little organic growth through the rest of this year with reported improvements driven largely by the Estech fusion product line. Our future growth in this area will be driven primarily by the previously discussed clinical trials we are pursuing and we’re very excited about.

Internationally, revenues were $6.6 million for the quarter and increased a 53%. Sales were up across Europe, with Germany continuing to be a strong growth engine. We are pleased with our new agents in the UK and we’re gaining traction in France. Sales in Asia were also strong.

Operationally, our gross margin was 70.5% for the quarter and our net loss was approximately $500,000 or $0.02 per share both in line with our expectations. This included expenses related to transitioning Estech, the Estech business into AtriCure, which we expect to be in significant going forward.

The integration of Estech has gone according to plan and they substantially completed. The remaining increase in operating expenses was primarily driven – was driven primarily by an increase in selling marketing, product development and training expenses.

While overall, operating expenses were higher in the third quarter of 2014 compared to 2013, they are in line with our expectations and investments in our operating structure and future growth plans.

In summary, the excitement in our business is at a high and with the success of our clinical, technical and commercial teams; we continue to see great growth prospects in both the short and long-term. I will now turn the call over to Andy Wade, our Chief Financial Officer..

Thank you, Mike. For the third quarter of 2014, revenue increased 32.4% to $26.7 million. Revenue from product sales in the U.S. was $20.1, an increase of 26.7% from the third quarter of 2013. Revenue from open chest ablation related product sales in the U.S. increased by approximately $1.6 million to $11.3 million and U.S.

sales of products used in minimally invasive procedures increased approximately $400,000 to $3.9 million. MIS growth was influenced heavily by the sales of products acquired in our December 2013 acquisition of Estech. U.S.

sales of the AtriClip system during the third quarter of 2014 were $4.3 million as compared to $2.7 million for the third quarter of 2013, an increase of 58.1%. International revenue grew 53.4% on a GAAP basis and 53.9% on a constant currency basis, as compared to the third quarter of 2013 to $6.6 million.

Valve sales totaled approximately $700,000 worldwide, $575,000 in the U.S. and $125,000 in the international markets. Gross margin for the third quarter of 2014 was 70.8% as compared with 72.9% for the third quarter of 2013.

As in previous quarters, the sales of the products acquired in the Estech transaction put some pressure on the overall gross margin. The international sales mix was higher in 2014, which also has a negative impact on gross margin.

Additionally, the placement in servicing of the capital needed to run our ablation disposables including the Estech equipment continues to be strong, but does put some pressure on gross margin as we build the business to support these placements.

Operating expenses increased 13.8% or approximately $2.4 million from $17.3 million for the third quarter of 2013 to $19.7 million for the third quarter of 2014.

Research and development expenses, which include clinical and regulatory activities, were $5 million for the third quarter of 2014 or 19% of sales, an increase of $1.8 million over the third quarter of 2013. The increase was driven by both clinical trial and product development efforts.

SG&A increased approximately $600,000 from the third quarter of 2013 to a total of $14.7 million or 55% of sales. The increase was due primarily to the increases in selling, marketing and training costs. Our operating loss for the quarter was $803,000 as compared with approximately $2.6 million for the third quarter of 2013.

This operating loss for the quarter, as well as our SG&A expense include a $5.4 million offset to expense due to an adjustment to the earn out liability recorded in conjunction with the Estech transaction.

As we stated on the last call, any payments that are made in association with the Estech earn out are not included in our operating expense guidance. However, from an accounting standpoint, we must periodically review the liability on our balance sheet and have thus made this adjustment. The earn out liability has been reduced to zero.

For modeling purposes, excluding the earn out, our SG&A expenses would have been approximately $20 million in the third quarter and reflect our continued investments to support our growth strategy.

Our adjusted EBITDA loss, which does not include the positive earn out liability adjustment was approximately $3.2 million compared to a $1.4 million adjusted EBITDA loss for the third quarter of 2013. Note that our EBITDA loss in Q3 includes approximately $300,000 of cost related to transitioning the Estech business into AtriCure.

Our net loss per share was $0.02 for the third quarter of 2014, compared to $0.13 for the third quarter of 2013. The EPS loss for the quarter would have been $0.22 without the benefit of the earn out adjustment. We ended the quarter with $71.2 million in cash, cash equivalents and investments. Lastly, we are positively adjusting our guidance for 2014.

We anticipate top-line growth of approximately 28% to 29% year-over-year or a range of $105 million to $106 million on a GAAP basis, including the contribution of the products acquired in the Estech acquisition. This is up from our previous guidance of 26% to 28% or $103 million to $105 million.

We anticipate gross margin to be approximately 70% for the year based on current trends and investments to support growth. This represents a decrease from the 2013 reported gross margin due primarily to a slightly lower relative gross margin on acquired products, strong international sales mix, along with Estech transaction related costs.

We are still targeting long-term gross margins of 75% and believe this is achievable within the next five years due to increased volumes and efficiency. We expect R&D to be 18% to 19% of sales and we expect SG&A to be roughly 66% to 68% of sales in 2014 including the previously described earn out adjustment.

These figures include approximately $4 million in transaction cost related to the Estech acquisition and the $8 million earn out adjustment recorded this year. For modeling purposes neither of these items should be considered going forward.

Outside of the transaction related expenses, we anticipate continued increases in spending related to clinical science, R&D, selling, training and education and international expansion. We expect EBITDA for 2014 to be a loss of approximately $12 million including transaction related costs, which we estimated $4 million.

This is up from the previous guidance of $9 to $10 EBITDA loss driven by compensation on strong U.S. sales performance, some incremental Estech expenses to ensure a smooth integration and strong capital equipment, placement which impacts gross margin.

We continue to expect the Estech transaction to be dilutive to earnings in 2014 and accretive in 2015 and beyond. We planned to provide our full guidance for 2015 when we issue our fourth quarter and 2014 year end results early next year.

Directionally for 2015, we expect to drive roughly 15% sales growth over 2014 and expect to see an EBITDA loss in line with our current rate excluding Estech transition cost. At this point, I would like to turn the call back to Mike for closing comments..

Thank you, Andy. AtriCure is well positioned with the right products, pipeline and people to further cement us as the leader in the development of technologies to treat challenging Afib conditions. Our core growth strategy is unchanged and in fact accelerating.

We will work to expand the market and capture share by increasing awareness through education and training and driving innovation through clinical and commercial support. We look forward to updating you on our progress during future calls and we’ll now open it up to questions. Thank you..

[Operator Instructions] And our first question comes through from Rick Wise with Stifel..

Good afternoon and really another fantastic quarter here. Mike, maybe just to start off talk about a little more about the – the training and the courses, I mean clearly that you are on track for the 15 this year and sounds like I heard you correctly that could double next year.

It just makes me want to pay even more careful attention to think about the related impact on sales, maybe just talk a little bit if you could about once doctors are trained, our new centers are trained how long it takes to see an impact on sales and, what kind of rough correlation we should make between course and volume or growth or how to think about that?.

I would say, we’re kind of in the – in the second phase of the training. So, if you recall take you back just a moment, we trained over 1500 surgeons on a basic core Maze training course that we are running. And we transported that overseas and I have actually started to do that overseas, we are trained about 400 or so over in Europe as well.

And you are seeing some of those results, and we’ve done the analysis on those course which is typically a four hour, well three hour excuse me didactic course, where they are just learning the basics of Afib, if you recall Dr. Cox helped us revamp that entire course. So, that it actually was very, very practical.

When you look at revenue pre and post, we see about a 30% increase in our revenue after going through the training course. However, what you are seeing is obviously, we don’t, we wanted certainly population to train on that front.

And so in order to continue to grow to get more expansion off of that group, we’ve actually added on these advanced training courses and some of the items that I talked about. So, Phase II was and we’re still doing some of those other Maze course, we just don’t as many, we did about 50 or so this year, just those basic course.

The advanced courses typically have anywhere between we’ve had as low as 15 people and as high as 50 people at courses when we were in Las Vegas.

And those courses are about, they are actually a day and half, are not quite, but about a day long, but there on evening course where they go through this didactic, they go through a dinner discussion and then in the next morning on electrophysiologist talks and they go through practical application and dialogue and discussion.

So, much more advanced about the usage in various different surgeries. And those are ones where we’ve done 15 of those this year.

We’ve not been able to track what the revenue is coming in and out of that, we’ll have to wait to kind of see what the result is, but what we do know is that the excitement around it is actually driving more usage not just from the surgeons, but also when they go back and talk to their fellow surgeons, because they are bringing other back in for courses that may not have been doing it before.

The next phase that is, what you started to hear was that education is sprouting and getting deeper and we’re getting much more integrated into the societies and into the high end academic institutions and other places that are doing in person training courses like we’ve done at the Cleveland Clinic where they come in for dinner, they talk to the surgeons about the cases the next day and then they go and they watch the case for the next day and they talk about treatment options, what to do pre and post-surgery and so we’re getting a lot of feedback and certainly see momentum with that.

We’re beginning to look at fellowship courses, as well and so it’s becoming much more deep and rich in terms of the training program to put a pure metric to it, is difficult now because, we’re kind of through that phase of just trying to do the bullet training and we’re getting much more intimate and really starting to build dedicated surgeons.

The reason I brought Cleveland Clinic is because I look at them as the – they are the parameter kind of where you could be for sites, for the concomitant treatment of Afib.

They treat every patient that comes in there, and as a result when you see them as one of our top customers, just driven by the concomitant treatment of that and we see that, if we can get everybody up to that, we’ve got tremendous growth long-term as we begin to train people, one of the reasons we bring people to Cleveland Clinic.

I know that was a long answer, but hopefully contextualize it a little bit..

No it’s very helpful. Turning to gross margin, Andy your comments are very clear and I think there very similar to what you’ve said in the past and Mike, I think recently said publicly something the pathway to 75% is clear.

And I’m sort of thinking about whatever 50 to 100 basis points an improvement a year, but when we look ahead again looking for a specific 2015 guidance, but so what happens in the next 12 months that gets you something like, clearly is that sort is it, are you going to be closing the facility is that what’s going to get, make the Estech margin is less of a drag is it just further volume.

Just help us understand what the head, so we can have confidence in that improvement?.

Sure, couple of things Rick, one you mentioned is Estech. So there were certainly people within the organization that we’re here to help us transition the business that fall out over the period.

So that clearly was a drag for this year, other things would include, we’ve done a lot of capital work this year on upgrading things with our icebox product that will slow down through next year.

So, those are a couple of examples of things that I see in the next 12 months to help this thing, start to get on the rise to the 75% that we’ve talked about. Over that, beyond that period the new facility will help with many things that we start to look at bringing Estech products in-house..

Just one last quick one for you Mike, I’m always asking about it, when I talk to you about M&A or the possibility of you thinking about bringing in other technology in your product line, is that still a priority of, is that a priority and or you just got so much clear run rate here, you probably distracted that way? Thanks..

I mean right now we’re very focused on executing what we’ve got at hand, we’ve got a lot of clear run rate as you mentioned Rick. And so, the team is laser focused on making sure we execute with big markets that we’ve got in front of us.

That doesn’t mean that we’re not going to be opportunistic, if we see something that make sense and can be additive to is and so we’re also always considering it in attending shows and doing our competitive diligence on that front.

So, we’re not, but we’re really focused mostly on executing this business, because there is so much in front of us just with what we’ve got in the product line we have in front of us today..

Our next question comes to you from Tom Gunderson, with Piper Jaffray..

Hi, good afternoon. So, maybe to take on to Rick’s first question on your last acquisition Estech, we’re going to anniversary that in another couple of months. And I’m wondering Mike, separate from the contract and the earn outs and what two sides negotiated at the time.

How you view, how it’s going from a revenue contribution standpoint is that meeting your expectations little higher, little lower and based on the tentative sort of soft guidance for next year of 15% growth, should I assume that the Estech’s products would be part of that 15% growth?.

There is a first piece in terms of what it’s meeting is, it’s right on our expectations. We’re very happy with the way that it’s come together. We feel really good about it on several fronts, the fusion technologies beginning to really gain some traction in the hands of our team. We’ll start to see some growth coming off of that in the coming year.

In terms of the open side of the business their clamp business, we have basically moved that share into our business there is very little clamp business that we sell any more from that. And so for us overall it’s actually gone very well and pretty much as expected.

I’m not sure, I completely understand the question about the softness relative to the guidance I mean, – we feel pretty good that our organic rate coming into next year will be 15% including whatever we had from this year. So it will be – there is their number, our number and that’s what there will be one number coming into next year.

And we feel good that that’s a good solid number coming into next year..

Got it. No, I didn’t mean soft as far as negative and then soft as far as it’s not your definitive guidance yet..

Okay. That’s fair, that’s fair..

And then on international, 52%, 53% is pretty growth rate and I’m assuming that you’re harvesting a lot of the investment that you did in training and expansion of education last year on the U.S.

side in the past you’ve given us kind of, here is what they did before training, here is when they got trained and here’s what they did three, six and nine months after the training in the U.S. Do you have that in whole U.S.

or at least some color on that?.

We have not been able to track that data yet whole U.S. partly, because we go through distributors in a lot of the different countries. And so it’s more difficult to track it on a facility-by-facility basis like if that doctor actually holds it.

We are beginning to start to look at it on a micro basis in Germany and the Benelux region, because those are really our biggest direct market. I don’t have the data right now, just because we’re starting to analyze it.

We’re just starting to get enough information, so on the next call we could give it little bit, but it will be really only focused on those direct countries. With that being said, the European growth is really simple, I mean it’s coming off of years training and education is we believe it’s driving an aspect of that growth for sure.

But two is that, if you recall when I first started the infrastructure and it really wasn’t in play and we didn’t have much there. And so under our leadership of Pat Kennedy, who is running it for us today. We’ve really expanded the team and added some great, great talent.

And so from that standpoint, we’ve now got a good infrastructure in place there and that’s helping drive some of the commercial gains that we’re seeing there.

And then third, is that Estech was strong over in Europe and so they gave us some gains in countries like Italy and Russia where they really complemented us quite a bit and we’re selling in the different parts of the countries. And so that’s really helped us out quite a bit as well.

So, it’s a combination of all three of those that have driven that, it’s not just the education I don’t think we’re seeing the fruits of all that labor quite yet in Europe yet. So, I think we’ll start to see some of that in 2015 and 2016..

Got it. Thanks. That’s it from me..

Next question is from Danielle Antalffy with Leerink Partners..

Hi, good afternoon guys. Thanks so much for taking the question and congrats on another fabulous quarter. I just wonder you have another strong quarter as US ablation growth.

And Mike, I was hoping you could just walk us through the different sort of sub segments within that, where you’re seeing the most growth today number one and where you see the most run rate. And so by that I mean, obviously mitral is a big piece of your business, aortic and CABG are two other opportunities.

And just trying to get a sense of sort of how penetrated we are within that to better frame the runway ahead?.

It’s an excellent question. We’ve actually spent a lot of time over the course of the last three months actually looking at the market opportunity through 2020 to see. And we get, we’re fully penetrated in each one of those areas, how far we penetrated, how many procedures are being done today.

If you look at the FTS database and you guys can all get it online, what you’ll see first and foremost is that overall the growth in procedures has gone from in 2011 at the end it was about – just over 17,000 procedures being done, combination of concomitant and MIS procedures.

Since we have done our training in the labeling that number in the US, in 2013 just two years later was over 24,000 procedures that’s after many years of basic stagnant growth sitting in the 16,000, 17,000 procedure range. And so you can see the impact of that training and education is having on that.

And if you just look at the first quarter of this year, it’s actually on our page to do close to 27,000 this year. And so we feel like the fly wheel starting to spin on all different fronts of that, then we would dug down deep into what on the mitrals, the aortics and the CABGs like you had described.

We have made great progress on the mitrals, but we are not merely penetrated to the degree that some people would expect, some people have quoted out numbers of 60 plus percent penetration in the mitral space. We think it’s significantly below that and there is still a lot of opportunity there.

For example, we were recently invited to be a part of mitral valve conclave and actually participate in some of the education sessions there, because they know that they’re under treating just in the mitral space. So, there’s lots of opportunity just within that particular category.

On the aortic and the CABG side, we have revamped and done additional training on that where surgeons are asking us for training, so they can treat during that procedure and we’re starting to see actually some nice segment growth off of those areas as well.

But quite frankly there is going to be even bigger opportunity, because people are asking now that I’m comfortable on the mitral side, I want to begin to expand my capabilities to go after the aortic and the CABG cases.

And that’s one of the reasons we’re going to Cleveland Clinic and some of the other areas as they want to see these types of cases and they want to take it on and are getting much, much more comfortable treating this disease.

So, we see advancements in all those areas and we think the market opportunity continues to be right both in the US and internationally. Hopefully that helps a little bit Danielle..

Feels like the leverage side of things Mike, if you could talk about sort of how you think about the business longer term when you can start. At what sort of level of revenue can you start to generate some more meaningful positive operating leverage and sort of this half way to profitability? Thanks so much..

I think – well I hear a little bit of noise there. I’ll turn to speak over there – the noise there. The question I know was about the pathway to profitability and we get that question a lot. And our focus is to remain very close to profitability.

We kind of gave, kind of high level guidance that we talked about kind of keeping on the EBITDA run rate stands the Estech numbers coming into next year as that soft guidance as Tom had mentioned.

And we think that that’s really a prudent way to continue the investments to be very close that we could turn the corner very quickly to be profitable several years out.

So, without giving specific dates or quarters, we’re close enough to profitability to be able to turn it with the kind of growth rate that we’ve got, well also evaluating every year whether or not we’ve got the right level of investments to continue to grow the path that we’re on..

Our next question comes to you from Jason Mills with Canaccord Genuity..

Thanks. Hi, Mike, hi Andy, congrats on another great quarter in the race.

Can you hear me okay?.

Hearing good..

Great. Mike, I want to go back to Danielle’s first question, very good elaboration on some of your opportunities with them in the concomitant space. I wonder if you could take us a little bit deeper into the training specifically for CABG and aortic.

We were told by some people that ablation methodology is a little bit more difficult, but once trained perhaps not as difficult as some may say.

Just maybe give us an overall assessment of where you are with respect to the training programs for CABG and aortic specifically and giving that the penetration level there are lower than mitral be it, sounds like mitral is little lower than what of us may have expected.

It still seems to be even under more under penetrated in those latter two areas and talk about sort of what the growth opportunities are there sort of concomitant, intended to your training initiative?.

Sure.

What really just the beginning phase, beginning to expand out the aortic and the CABG training, so but you’re correct that what happens is people graduate, think about it like going to graduate school where you’re in high school and you learn some skills that even the basics and you begin to do pulmonary vein isolation and then you kind of go to a college and you begin to do a full Maze procedure on the mitral, because you’ve already you’re on pump and you begin to do it, and then you begin to go to graduate school and you begin to look at the aortic and the CABG and you begin to kind of grow from that.

And that’s a good way to kind of progressively go there, you can’t go to graduate school without going through those steps to get there.

And we do see that, and that’s why I was saying people get comfortable doing the mitrals, if not a mitral surgeon obviously, they take a little bit of a different path and so we try to individualize it from that standpoint.

The case observations are big move towards that, two is that we’re actually working very closely with many of our clinical advisors to put together very simple step-by-step approaches for those surgeons that we can expand that training and go deeper.

So that some of those advanced trainings will become very focused on just the aortic and the CABG procedures. I anticipate we’ll rollout some of those more detailed ones mid to late next year and so that we can begin to go after and penetrate that market in the – in many years to come.

Hopefully we are going to get some context, so we’re kind of in the early stages of developing it, talking about it and showing cases and see more advanced training kind of coming out on that specific area in the later part of next year..

That helps. If you look at, if I’m looking at the growth rates and some of the things you’re saying about 2015 as well, and sort of just to post, what you put up this quarter, open ablation in MIS and in clip looking at those growth rates.

Is it fair to say that sort of the growth rates organically 15% is sort of where the concomitant, where you’re expecting the concomitant part of your business in the U.S.

to grow on a go forward basis, when you have perhaps AtriClip all in growing faster and MIS presume to grow a little bit slower?.

That’s a reasonable assumption, yes..

Okay that’s helpful.

And then lastly from me on operating expenses, Andy just from a housekeeping perspective, this level – this quarter’s level excluding the offset should we, grow that in the fourth quarter and then sort of as a run rate in 2015?.

I think Jason, we just kind of given you the broad guidance that, we’ll continue to make investments in the sales and marketing and training organization. So, given the teaser we gave you on EBITDA, I mean, I think, hopefully that sort of directionally helps you think about SG&A..

Okay, thanks guys..

Our next question is from Jose Haresco with JMP Securities..

Hey guys good afternoon, congratulations on the quarter..

Thanks Jose..

I guess, there’s been a lot of focus obviously on the training sessions, but could you give us a little more color on what you’re seeing and the surgeons and physicians who have gone through training, call at the beginning of this year or in the first half.

What are their behavior patterns look like, have you achieved greater penetration in their procedure base and where are they using the device and where would you like them to go in terms of different types of surgeries?.

What we’re seeing is that, they are increasing, we see – we continue to see, we just did the new analysis that basically showed, it continues to be about 30% increase from when they went into the training to, where do we look at six months, nine months or 12 months before and you look at the same distance afterwards.

It’s about a 30% growth rate overall from a revenue standpoint. So that’s the kind of, that’s the pattern that we continue to see as we analyze that from the U.S. standpoint.

What we see when they go back into practices they begin to just get more and more comfortable, they at first begin to start to use more products and particularly doing procedures, and then they use more products, because they start to bring cyro into it and they are using the clip.

And so, you combine that in the procedure, we’re starting to get more per procedure and we’re actually getting them to grow in all the procedures that we are doing..

Are you seeing any sort of halo effect when those folks come back to their practice, I think you might have touched on this earlier.

When it come back to the practice start using it, how should we think about the time between, the time that they go back to their practice are using device and timing you might get a second call from someone else they work with [indiscernible] is being doing this for last few months and you kind of – and you get going on some of these procedures?.

I would say we’d see a small halo effect on that, I wouldn’t say that’s a huge broad halo effect. I think what, instead of seeing the practice what you want to seeing is people just in general around their communities and as they go to trade shows and other areas when they start to talk to people.

They realize that more and more is getting down and our team quite frankly as continued to grow or in their cases. Our team does a great job of following up with them to make sure that they are trying to pull their partners and others into it. I don’t know that it’s just them talking to them, I think it’s kind of a combination..

Okay.

And I guess lastly on the competitive front, we know the competitor has been very – kind of resources there any particular changes and how you think about competition for the next 12 to 24 months?.

No, I mean we – I think you hit it right, and we continue to see the competition we’ve always see out there. Medtronic on the open concomitants base and then contact in the – on the MIS side..

Okay, thank you very much..

Now looks that we have a follow up from Jason Mills, Canaccord Genuity..

Thanks guys, you didn’t expect to get on this quickly, Mike just a question about what’s going on in general and afibrillation specifically from a reimbursement standpoint, and it seems like CMS is getting a little bit more strict with the respect, how many catheter ablations can be done if you’re continuing to see failures.

And I’m wondering in light of the fact that year from now will have hopefully some really strong data out of the PAS study, showing the efficacy of surgical ablation and we know that surgical ablation is done on a lot of these failed catheter ablation patients.

I’m wondering what if anything that means to your business from a medium to long-term perspective?.

Well there is a lot in that question, so I’ll try to answer it in several different segments. As for reimbursement on the catheter side, I’m not aware of any major changes that are going on, but I think long-term when you look at trends, I think CMS is going to continue to look and they are going to pay for our works.

We know that our products work, we know we get good efficacy off of it, and so we think that will long-term benefit us. But I’m not aware of anything in the short term in terms of any kind of major shift in that.

But I think as they continue to look at it, we will long-term benefit from that both in terms of the PAS study that you mentioned, which I do think is going to be a very big study when we get the results coming out and hopefully announce them in the early 2016 timeframe.

Because, when we do that, we believe that that hopefully will have a positive impact on some of items.

But in addition to that, that’s one of the reasons we are doing the hybrid procedure, we know that you get very, very good results with that, and so we’re looking forward to getting going on that trial getting these sites up in running, because we believe the efficacy will be very strong and it’s a very good procedure and hopefully that will, again it will be a long-term influence that’s not one of the short term items.

But, again the team I think is going to pay for our works..

Got you, just two follow ups, it’s my understanding could be wrong, correct me if I’m wrong on that, no longer CMS is going to pay for more than two catheter ablations.

And we know that that some patients go for more than that, and so that’s really the thrust to my question? And secondly on the Deep trial, what are your expectations for enrollment, IRB approvals enrollment and sort of the timeline for that trial over the next 18, 24 months?.

Sure, I’m not aware of what you’re saying in terms of the two ablations, I know there is always talk about them doing that, I’ve heard that in the UK, I’ve heard that in the U.S. before, but I’ve actually not seen anything concrete to prove that point or heard it.

And so, I haven’t heard a credible source quite terrifically come out and actually make that kind of statement. So, from my standpoint, we’re focused without assuming that that doesn’t change.

With that being said, when you talk about Deep in terms of the timeline, what we’re looking at is, we’ve got 25 sites that we are approved to go up to, we’ve got many sites identified already, we’ve got about 10 sites that we feel very comfortable that can drive the right kind of volume and the right kind of safety and efficacy with the procedure.

These are people that are doing 20 plus procedures a year now. So, they’ve got very, very good experience with it. They understand it and we are just starting to go through the IRB process.

Now that process can take anywhere from three to nine months depending on the institution, the nine months are just when they depends on their institutional review board how long it takes to get through that.

So, our anticipation is we’ll begin to enroll patients sometime in the early part of 2015 and then it will take us about 2 years to enroll if we assume starting enrollment sometime in the second quarter of next year..

Helpful, thanks Mike..

Okay. And we have no other questions. So, Mike, I’ll turn it back to you for any closing comments..

Great. Thank you everyone for participating in the call and the great questions and your interest in AtriCure. Have a wonderful evening..