Lynn Lewis - IR Westwicke Partners Mike Carrel - President and CEO Andy Wade - VP & CFO.

Drew Ranieri - Stifel Nicolaus Danielle Antalffy - Leerink Partners John Gillings - JMP Securities Brooks West - Piper Jaffray Suraj Kalia - Northland Securities Matt Miksic - UBS.

Good afternoon and welcome to AtriCure's Third Quarter 2016 Conference Call. My name is Stephanie and I'll be your coordinator for the 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 cal 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.

Lynn Lewis?.

Thank you, Stephanie. By now, you should have received a copy of the earnings press release. If you have not received a copy, please call 513-755-4136 to have one emailed to you. Before we begin today, let me remind you that the company’s remarks include forward-looking statements.

Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond AtriCure's control, including risks and uncertainties described from time-to-time in AtriCure's SEC filings. AtriCure’s results may differ materially from those projected.

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

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

Mike?.

Thank you, Lynn. Good afternoon, everyone and thank you for joining us. We're pleased to report solid third quarter results and we're reiterating our revenue guidance of 20% to 22% growth for 2016. Third quarter revenues reached $38.3 million up 22% over the last year. Growth was led by sales in the U.S.

which were up 24% and driven by all areas of the business. International revenue was up 15% for the quarter with a key contribution from Japan and gross margins continued to be strong at 72%. Turning to the business trends, both our product and clinical pipeline remain healthy.

The AtriClip product line remains our fastest growing franchise and we continue to see strong and growing interest in managing the left atrial appendage. The recent released AtriClip PRO2 is gaining traction in broadening our opportunity in this underpenetrated market as well as contributing to incrementally higher ASP's.

Our recently launched CryoFORM Probe also continues to be well received as it helps us to access more cases and gain market share. We expect both products to continue to contribute more meaningfully as we move into 2017.

Sales of the EPi-Sense product line, the platform we acquired from nContact continued to grow sequentially despite the typically late summer slowdown. We remain confident that this strategic acquisition will further accelerate our MIS growth and will help drive increased collaboration between cardiac surgeons and DPs.

Throughout the third quarter we continued to be keenly focused on making sure that recently added accounts were fully trained and up to speed in order to drive consistent adoption. Additionally, we are steadily building a high-quality team of Minimally Invasive Managers or MIM's to complement our existing sales force.

As these individual ramp up, they can increasingly work in concert alongside our regional sales managers. In the third quarter we continued to do expansion on the West Coast and added MIMs in multiple areas. With MIM support, these accounts are starting to do cases and are gearing up for possible involvement in clinical trial next year.

We're just scratching the surface here and expect EPi-Sense to be more significantly contribute to revenue as we enter new sites build deeper relationship with EP and leverage our fully optimize sales force. On the sales and marketing front we've made significant progress on our commercial infrastructure as a whole.

We now have nine MIMs to focus on minimally invasive education and training of customers. Based on the accelerated momentum we are seeing, we're confident that we have made the right moves and added the right people and we expect to see continued benefit over the coming months.

With our commercial team intact and focused, the open portion of our business is prime for continued double-digit growth. We are the only company that is positioned to address the many patients who are still not treated at all or are undertreated in all categories MVRs, AVRs and CABG.

Increasing activity at the medical society level is driving the potential to upgrade guidelines and generate more clinical data, which ensures the clinician community is aware of the benefits of treatment and the downside of leaving AFIB alone concomitant, with these diseases.

On the clinical front, we're making steady progress with CONVERGE, which is the first head-to-head study to evaluate the conversion procedure versus catheter ablation in patients with persistent AFIB. We expect the trial result to support FDA approval of EPi-Sense devices, specifically for the treatment of persistent AFIB.

We have 51 patients enrolled to date, over the summer we've prepared several new sites, which will be coming online late in the fourth quarter and improve the pace of enrollment in 2017.

Moving to Deep AF, our trial for the staged dual epicardial endocardial procedure for the treatment of AFIB, we continue to work collaboratively with the FDA to incorporate risk mitigation protocols for the trial and still expect these to be largely complete by the end of the year.

As a reminder we're targeting to enroll 220 patients in Deep AF and when we suspended the trial we had 41 patients enrolled. We're making steady progress on our non-IDE trial in Europe CEASE AF which compares deep light procedure to standard catheter ablation. CEASE AF currently has 34 patients enrolled.

We also 100 patients currently enrolled in our ATLAS trial, which evaluates the prophylactic treatment of the left atrial appendage for patients at risk of perioperative AFIB and as noted on the last call, we began enrollment during Q2 in the Frost trial to evaluate the effectiveness of cryoanalgesia for pain management in cardiac procedures involving thoracotomy.

All three sites are enrolling and we now had 13 patients enrolled. We continue to expect our investment in obtaining sound clinical data to further differentiate us as a company and extend our leadership position in the treatment of AFIB. I'll now turn the call over to Andy Wade our Chief Financial Officer.

Thank Mike. For the third quarter of 2016 revenue increased 22% on a GAAP basis to $38.3 million. Revenue from product sales in the U.S. was $30.6 million, an increase of 24% from the third quarter of 2015. Revenue from open chest ablation related product sales in the U.S.

increased by approximately $1.7 million to $14.8 million representing growth of 13%. U.S. sales of products used in minimally invasive procedures increased approximately $2,5 million to $7.5 million up 50% and influenced significantly by the nContact acquisition.

We continue to be pleased with the solid impact of the nContact acquisition through the first three quarters.

As Mike mentioned earlier and on previous calls, development of our clinical data in support of MIS ablation for treatment of AFIB through trials such as CONVERGE and Deep AF is critical to growing this market and business over the longer term.

Efforts to move EPi-Sense and related products into our existing customers has continued to ramp through the year as the training of our team and interested physicians takes hold. US sales of the AtriClip system during the third quarter of 2016 were $7.7 million as compared to $5.9 million for the third quarter of 2015, an increase of 30%.

International revenue grew 15% on both a GAAP and constant currency basis, as compared to the third quarter of 2015 to $7.8 million. Performance was solid across Asia with some slower growth in select EU markets. Gross margin for the third quarter of 2016 was 71.7% as compared with 71.5% for the third quarter of 2015.

Positive impacts on gross margin included the suspended medical device tax and the impact of EPi-Sense products. Pressure on gross margin included moving into a larger and more modern facility to support our growth along with an uptick in depreciation related to continued generate replacement across our customer base.

Operating expenses increased 18% or approximately $5.2 million from $28.6 million for the third quarter of 2015 to $33.8 million for the third quarter of 2016.

Research and development expenses, which include clinical and regulatory activities were $8.3 million for the third quarter of 2016 or 22% of sales, an increase of $1.8 million over the third quarter of 2015.

The increase was driven primarily by product development efforts and spending for our CONVERGE trial which was absorbed as part of the nContact acquisition. SG&A increased approximately $3.4 million from the third quarter of 2015 to a total of $25.5 million or 67% of sales.

The increase was primarily due to the changes in our sales, marketing and training organizations, to both bolster the nContact acquisition and our continued level of growth and procedures. Our adjusted EBITDA loss was approximately $1 million this quarter compared to a $2.2 million adjusted EBITDA loss for the third quarter of 2015.

Our net loss per share was $0.21 for the third quarter of 2016 compared to $0.22 for the third quarter of 2015. We ended the quarter with approximately $47.4 million in cash equivalents and investments. We continue to believe that our balance sheet is strong and that we have more than enough cash to reach cash flow generation.

Lastly, we are updating our guidance for 2016, we continue to anticipate current topline growth of approximately 20% to 22%. This represents approximately $156 million to $158 million in annual worldwide revenue.

We continue to anticipate gross margin to be 71% to 72% for the year based on current trends and investments to support our progress and expansion.

We expect R&D to be 23% to 24% of sales with the largest driver of the increase over prior year due to the absorption of the CONVERGE trial from the nContact acquisition along with continued R&D pipeline development. We expect SG&A to be roughly 69% to 70% of sales in 2016 which is less than the 2015 rate.

The overall increase in SG&A expense is driven by continued investment in our worldwide sales team as well as training and education expenses. We now expect adjusted EBITDA for 2016 to be a loss of approximately $12 million $14 million and a slight improvement from previous expectations.

The heavier loss compared to 2015 is driven primarily by the acquisition of nContact in late 2015 including PMA clinical trial expenses and enhancements to the sales and education teams to support the MIS portion of our business. In terms of EPS, this adjusted EBITDA range translates into a loss of between $1.10 and $1.16.

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

Before closing I want to take a quick moment of acknowledge the many employees at AtriCure who have been personally affected by a AFIB we showcase some of the stories as part of our social media We showcase some of the stories as part of her social media campaign throughout September as part of AFIB Awareness Month.

We’ve historically used this month to help generate interest and awareness about the work that AtriCure and others did to educate physicians and improve patient lives.

Continue on the momentum that we built over the last few years, we utilized all sets of our social media profile to tell story about AFIB and AtriCure's role in furthering solutions to solve this global AFIB epidemic.

We're deeply committed to this endeavour and remain steadfast in our efforts with that and closing of our third quarter comments we remain confident of our fundamental in our business outlook remain strong.

With our commercial infrastructure gaining leverage new product starting to contribute and EPi-Sense product line building momentum we're well-positioned to execute on delivering and expanding our portfolio of innovative solutions for AFIB.

On top of our progress this quarter our world-class engineering and R&D teams are continuing to innovate and we have additional new product related for launch next year. I continue to be excited about our growth prospects and we remain confident in our path towards adjusted even profitability in 2018. With that we’ll now open up to questions..

Thank you. [Operator Instructions] Our first question comes from Rick Wise with Stifel. Your line is open. Rick your line is open..

Hi guys its Drew Ranieri for Rick. Can you guys hear me okay..

Yes..

Sorry about that.

Just wanted to touch on your international business first, it continues to be strong and you talked about Asia being a strong point in the quarter offset by some EU areas, but can you just spend a little bit more time on what you're seeing specifically on the weakness? Are these isolated events that are going to pass or is there anything structurally happening in Europe that you're seeing..

Nothing structurally happening in Europe. We had a very strong quarter in Japan as I mentioned in my comments Drew and as we look to Europe we just a slower summer month than normal and we think that we'll beginning to kind of pick that back up. We've got a good team in place. We’d really good Q1 and Q2 if your call.

We’re a little better than expected in Europe and we just think was slower summer overall but nothing structural change from that standpoint..

And then I know that you've working getting fellowships done with the societies and further, furthering surgeon education, but can you just talk about some of the progress you are making with the societies in getting AF treatment into guidelines as level I evidence.

What has to happen with the societies? What continues to need to be done may be just an update on timing of when you believe it could happen..

Yes, I don’t have any specific update on the timing. We’re working very closely with all the major societies HRS, AATS, STS, ACC. We provided grants for various different meta-analysis and others to look at the data and to show that actually people live longer if you treat AFIB at the time you're actually treating some of the other diseases.

And so we've been working very closely. The data is very promising on that front. We do anticipate that some data will come out over the next 12 to 18 months. Some changes might occur but it's really in societies hands and we don't have any specifics as to when that’s going to happen, but we’re confident that it will eventually happen..

Okay. And then just lastly on gross margins, they came in a bit better than we expected, is there any reason to think that GM shouldn't sequentially improve going into the fourth quarter..

No. We held guidance Drew, just knowing it was going to be somewhere in that same area. So, there's nothing -- I wouldn't anticipate big improvements or big detriments either. So, just steady as she goes..

Great. Thanks guys. I'll hop back in queue..

Our next question comes from Jason Mills with Canaccord Genuity. Your line is open. Jason your line is open. We’ll move on to our next question. Our next question comes from Danielle Antalffy with Leerink Partners. Your line is open..

Hey, good afternoon, guys. Can you hear me okay. .

We are, okay..

Okay. Great. Thanks so much for taking the question and congrats on the nice I'll call it maybe a turnaround quarter. I don’t know if it's too early to say that, but Mike I was hoping you could comment on Aortic valve portion of the business.

So we now, I know it's early, but six weeks of an intermediate risk TAVR launch and you did do one of the major surgical valve players earlier this week whether you did see some impact on the surgical valve side of things.

So I was wondering if you could comment on what you guys have been seeing, but even more importantly how the market is segmented for you in Aortic valve surgery and why TAVR isn’t likely to be a major impact even despite the intermediary risk indication?.

Well the big thing is imminent and like you said there was obviously some announcements from some people out in the space of actually selling the valves where they saw flatness which is pretty much what we've been anticipating and we've been anticipating that for over a year now, where you would see flatness to down with pressure on the overall AVR market and so that's something that we've anticipated overall.

Our focus is really on the under-penetration less than 25% of the patients that actually have their open chest procedures today would be AVRs are still not getting treated, so a lot of the work that we're doing continues to be around education and training to help those physicians treat, treat better, treat more and get the complete Cox maze IV done so that these patients can do better.

And they do, do better and getting data along those lines and so we're really focused on that 75% of the patient population that isn’t getting treated right now and so we're not seeing a tremendous impact from what you're talking about yet again we anticipate that we're going to see some just that's kind of built into the numbers and open the thoughts that we've had for the last couple of years.

But that's kind of our focus right now is really under the under treatment paradigm that is out there right now..

Okay.

That makes sense and if I could follow-up there, I had conversation with one physician actually a surgeon who noticed when they get, where their heart team gets updation that needs -- that has aortic stenosis, if that patient does have they are send to surgery, it's not the way the dynamic works if the patients has that is not as per – is that an automatic okay you have to go and get surgery or could that patient still get it.

I guess that's what I'm trying to understand?.

Yes I think that but it's a great question because in the 25% that are getting treated today where you've got surgeons that are committed to AFIB and treating the AFIB or you've got heart teams that are committed to treating at that time, they are already doing it, you're absolutely correct.

I think that that's exactly what is happening and that they're basic because they know the benefits of treating the AFIB at that same time and they can't do it on the tablet side.

I think some of the underpenetration piece of it as we get more and more people comfortable getting better at treating it and seeing that the positive results of that then we will start to see that move from that stand point but I do think that in that core base that you've got – you're exactly right from the surgeon you talked.

Now if we talk to a surgeon that isn’t treating the AFIB today, then they're likely not quite there yet and I might prefer them on that side as an example..

Okay, okay understood. And then I was hoping just in the context of the open business, if you could talk a little bit about the dynamics you're seeing and how the cardiac bundle might not impact you guys and that is all I have, thanks so much..

Yes and we will continue to see progress this quarter, we did as you saw in the numbers better than we had done in the previous couple of quarters relative to kind of the open growth overall, we're seeing it across all the different categories in terms of the treatment paradigm there as it relates to the cardiac bundle relative to cabbage, it really is not the AFIB portion is not part of that, it's actually outside of the bundle, as a result of that if somebody and they want to treat the AFIB, they actually are outside the bundle and outside of that pathway from that standpoint.

So we should not be impacted in any meaningful way from that standpoint..

In some weird way if I could just follow-up I was hoping in some weird way could that actually motivate hospitals to look for and treat the AS in a cabbage patient more aggressively than they do today fall out of the bundle?.

There is a possibility that could happen..

Yes okay. Thank you so much..

Our next question comes from John Gillings with JMP Securities. Your line is open..

Hey guys. Can you hear me okay..

Yes..

Okay. Great.

I just want to hit on the sales force a little bit maybe you could give us some color on some of the people that you hired to backfill the promotions quarter or two ago, how long if you could provide us how long they have been in place and how long it typically takes for someone to get fully ramped up?.

So it typically takes about to get kind of comfortable six months to get to be fully ramped up about a year and to really be what I'll call superstar you're in, you’re out there to three years and kind of as you kind of grow your territories build the relationships and really kind of build penetration in that area.

So it take some time now they have got an advantage, they are going into areas that actually have good penetration and they had good reps to fall behind so it give or take good kindly go faster from some of those areas.

But we hired most of those early part of the year kind of then in the April to June timeframe for all getting up online and we feel like they're making great progress across the board. .

Okay, so we could still potentially see some tailwind from those guys developing for a while that's good to know and then in terms of the guys that got promoted to be sales managers that it sound like they had some real rock stars who are doing you know $3, $4 million in business in some cases may be you can help us understand what their role is like, today how much time they're able to spend out in the field with the new guys versus the some of the other tasks they have to perform..

Well the way that we’re structured we have 11 area directors; they were promoted to an area director position.

Our area directors are in the field all the time, they pretty much in the field 95% of the time they’re with their teams, they’re helping, train, educate work with their teams on the surgical place they just happened instead of being in one area that are actually managing the caseloads of the entire region and balancing those resources but they are typically in the field almost 100% of the time today and helping train bring along those of people kind of in our culture and are selling process.

We’re not doing a lot of spreadsheet work or lot of administrative work on the part its they’re pretty much in the field helping cover cases, helping manage that team and train them and get and get them up and ready for that not but be very little – what I would call spreadsheet management. .

Okay, great yes. That’s what I was hoping to here so appreciate that. And then with the MIM, Minimally Invasive Managers I think you said you had nine and previously I think you said you are shooting for 14 by the end of the year is that still kind of goal we’re looking at. .

Yes, we shooting for 14, we probably won’t get quite get the 14 by the end of the year but we are hiring in that area we’re trying to do now just make sure those we hire are really getting up to speed quickly learning the products that we have and helping kind of build and bridge those relationships in cardiology and surgical communities well so we’re very happy with the team we got on board that I'm really impressed of going around the country over the last three weeks meeting with all the different teams and have really quite frankly been blown away by the talent that we’ve been able to recruit into that position.

.

Okay fantastic and then just, just one last one. You’d previously mentioned that some of the EPi-Sense training had been part of the distraction that had previously been experienced by the sales force in the you’re in the process of kind of pushing the brunt of that onto your educational team.

Can you give us kind of an update on where things are in that process is that something it's still a distraction to the sales team or is that kind of ironed out and normalized now just, just where things are there?.

Yes, the on the EPi-Sense side what's happening is out team got really folks is the great product and people got really excited about that part of the market and so they started to take people to training and they were in a lot of ways kind of taken their eye off of the open side of our business little bit and they have got to do it a delicate balance of doing both.

And now we’ve got our team focused really well in the open staying focused their hiring these MIMs is absolutely critical and then also getting people to training and not turn to everybody wants that kind of win when want to accounted the time and actually the team is refocused doing a really, really nice job and really setting ourselves up for 2017 and 18 in a big way.

.

Our next question comes from Jason Mills with Canaccord Genuity. Your line is now open.

Hi, Mike, can you hear me okay. .

Yep. .

Sorry about before thanks for taking the question is that pop back in queue.

So I apologize if this is redundant but I wanted to follow on question I heard from the last question or with respect to sales force and specifically you have talked about with simply within contact, there are lack of representation on the road basis on the west coast and wanted to ask you about progress there has people continues to march forward.

And in contact with becomes down the line of the more important part of your portfolio and I guess more in general your progress with the, with respect to account expansion on the minimally invasive side as well as the left atrial appendage and again I apologize if you cover the little bit this. .

No, actually I haven’t covered letter on so I'll start with the, the West Coast expansion. We've got three MIMs that have actually been hired into the West Coast. They are doing very, very well. We're starting to actually get cases going in many different areas.

It takes anywhere from 6 to 12 months to get a site up and running and going and 12 months is really when you start to see some cases because they've got to try out the cases, make sure that they're working, make sure they're getting good ablation lines of the [tools] and tested by the EEP.

Building that relationship to the EP and the surgeon it just takes time for them to technically get their learn from how they're doing it and we're in the process that many different out West where they're actually making that type of progress right now. Many of them have been gone through that.

So the surgeon understand how to use the product and now it's about actually getting some patients and utilizing the technology and so we're definitely making some really good progress there and feel really good.

Again we've got three MIMs out on the West Coast now and they're just as I mentioned before, these people are incredibly talented and we're learning a lot from them. They've got deep EEP backgrounds and they're bringing a lot to the table for us.

On the Equip side we are starting to see in many of these cases more and more people wanting to manage the appendage at the same time and so we're starting to see some of those come down where people are actually managing at the same time they're doing the conversion procedure. So we feel good about that.

I think that that's going to continue to increase over time as we enter into next year beyond where you are going to do it concomitantly because we want to get it done at the same time and it's a really simple and easy thing to do..

On that point Mike are they doing the appendage through a different avenue? To my knowledge you've not introduced the diaphragmatic delivery system or the PRO2 as of yet. Maybe you could update us on that..

Yeah we have. We're obviously have working on that type of product longer-term that's not in anything in the next in the near term into next year by any means but we're definitely working on it. We've got projects internally.

Right now what they're doing is they're basically -- they've got to make a separate incision to do it during that time, but they -- a lot of surgeons it's a pretty simple and easy thing to add on concomitantly with the ablation. They do have to make a separate incision to it..

Yeah understood, understood. Lastly for me as I guess a more 20,000 question and we'll bring in some recent events.

So obviously I am sure you know there is a company that just went public in the state so effectively that has a perhaps the next generation technology for diagnosis of AFIB down the line we're going to be using patch product so I am guessing to diagnose the asymptomatic AFIB.

And obviously the investor reaction to that since you are an AFIB company was quite good.

I'm wondering what you think the disconnect here is because there seems to be as I hear a lot of discussion about when investors asked me about your market, there seems to be a negative conversation associated with them essentially the TAM declining yet for assigning fairly robust assertions to companies that are seeking to expand the AFIB market, which I think they could possibly do despite their diagnosis.

What is the disconnect in your mind just thinking about your market AFIB and where it's going ultimately and what that means for AtriCure in terms of procedure grow..

It's tough for me to understand or to really make a comment on what the disconnect is relative to that. We're obviously selling a product for treatment. They're selling a diagnostic product and maybe there is something along those lines. It's difficult for me to gauge that one way or the other. The ridden product is a great product.

We actually use it in our clinical trials and we think they've got a great product in the market and you're right, they're going to likely increase the number of diagnoses that are out there over time, which we think will benefit us as well long-term.

But I don't have a sound answer to the disconnect per se other than they're really in a diagnostic market and we're in the treatment arm of it and maybe what is a little bit more mature from that standpoint in terms of our size and scale today and people are excited about kind of what they're bringing into the future given their size.

That's the best -- you probably know their story better than I do….

I am not talking about separating the two company per se, but just what we're thinking about as that story was being told was a fairly strong excitement about AFIB in general and seems to be as everyone talks about including them and underpenetrated, underdiagnosed state.

It would seem to me that more diagnosis would ultimately benefit all those that are planning therapies and you’re moving obviously in the minimally invasive were even more opportunities so I guess you foresee the future and in terms of procedure volume whether be minimally invasive surgical or catheter ablation in which the market which you don't play all markets for the type that you both or that was sort of the just that the across to your question.

.

And I definitely to the tied listing although there is no question about when you look at our conversion or the procedures that were going after the labeling where the reason we’re excited about those markets is because two thirds of the patients that are diagnosed with AFIB persistent in our long-standing persistent in AFIB that are not treated effectively with the catheters.

And so as a result a hybrid approach that were, we’re talking about the combines the surgical procedures whether it’s a conversion approach or deep approach due do a very good job of treating that we’re going to proved out with our clinical trials and that market is usually 4000 or so of those types of cases that happen every year and there is 300,000 of ablation done every year in the country so there is massive rooms for a large market.

The key there though as I talked about my comments is we got to get the clinical data to be the differentiator and once that clinical data does get proven out obviously we think the market is a very large market for us. .

That's helpful. I’ll get back in queue. Thanks Mike. .

Our next question comes from Brooks West with Piper Jaffray. Your line is open. .

Hi, thanks guys and apologize I just jumped on the call.

Mike I want to circle back on the, on the deep trial your comments there is sounded like, your conversations with FDA might be wrapping up around year end just wondering when you might be back to enrolling the trial and also on the foot side given the momentum in the in the conversion trial I'm wondering if maybe there is also a thought process around, shelving deep or maybe deemphasizing that given some of the momentum you’ve got some of the other clinical programs.

.

Yes, I mean I’ll start with actually the latter question which there is definitely no intention to shelve deep it’s incredibly important trial, it’s a big portion of our revenue base today, overall we think that the treatment is excellent treatment with excellent results and so we believe that trial is a really important piece for us long term.

We think that in concert with the CONVERGE it actually provide options for surgeons to give their patients so, they can actually choose various different options and this pros and cons, each individual approach and we really want to be a have a breath of offering for people and are out there for that huge patient population I talked about before.

In terms of the timeline around deep will being very patient, we’re just working with the FDA.

I don’t want to give an exact timeline of exactly one will begin to enroll from that standpoint and right now we’re really just focused on working through them on kind of how to educate the both the surgeon and the patient just to make sure that there are well educated to us and can make sure that they can address them and they get back to the hospitals quickly as possible to talk about in the last call.

So it's right now we’re just working for with them their pace we’re not rushing it by any means because like you said we CONVERGE going on but were definitely not shelving deep at the super important long-term trial for us. .

Okay.

Thanks for that and then I guess two more for me on the appendage side, on the clip side I’m wondering if you are seeing a halo effect from watchmen obviously different procedure but that product is doing really well for BSC I’m wondering if that’s, if you’re seeing any Halo effect from that on your business and then just the financial questions for Andy.

There is a question I get a lot just if you could bridge us from, current income statement to EBIT profitable in 2018 given just high level I think that would be helpful for investors. Thanks. .

Yes, I’ll start on the appendage side we talk about on this call before that, the watchmen and discussion on left atrial appendage definitely as an impact because people believe that managing the appendage is the right thing to do and we do get benefit from that as more and more people talk about managing it and the benefits of managing it and so I don't know if you want to call that a pure Halo effect but to some degree you basically get that, you get from that standpoint.

I know what Andy can address the bridging point. .

Sure, so brooks I mean the bridge to get there is really kind of twofold one is we do continue to expect margins, gross margins to improve over the next couple of years with slight pickups as we leverage that operations organization and then really it's just leveraging the OpEx structure over the next couple years is our sales force continues to be more, more productive and the investments we've made over the last couple years start to pay off.

So it's really no more complicated than that to get us to EBITDA positive..

And that Andy thanks for that, is that exiting the year at EBITDA positive or is it a full year thought..

2018 is a full year..

Full year. Okay guys thanks so much..

Our next question comes from Suraj Kalia with Northland Securities. Your line is open..

Good afternoon everyone. Congrats on the quarter. Mike lot of questions have been asked I guess one of the things that he committed little differently, can you give us some color on what percent if your open cases are less than 65 years of age versus greater than 65 years of age. .

I don't have that data at my fingertips. A vast majority of the patients that are getting treated are over 65 years of age, but a specific percentage would be we don't have that data and unfortunately it’s difficult to actually collect it.

I’m just trying to get data from SDS and other places to find out are those patients actually getting treated and how are you getting treated let alone getting some of the ages on that.

Now that being said, if you actually look at our trial and you look at the post approval study trial you can look at the average age is in the upper 60s so, we know the data on the clinical trial that we did specifically. .

Mike in terms of the mitigating factor or DEEP AF, little leveraging to talk about it helpful what risk factors are you looking at mitigating in discussions with the FDA or is it too early to talk about it. .

In terms of the, for the DEEP trial that?.

Correct..

It’s simply most of its around patient education relative to making sure that patients are aware that if they feel certain symptoms that they get themselves the hospital relatively quickly and it's also making sure that the surgeons who have typically not had any kind of issues with officials like EP's are just quite frankly aware that fact I think happened because it's so rare, they hadn’t been thinking about it and just making sure that we've educated on every all the PIs on the clinical trial to ensure that they understand that this could happen and if they're not very careful and they're not thinking about it..

Great..

How you language that, how you work that is really what we're looking back and forth with the FDA on..

Fair enough.

So Mike let's say tomorrow you guys reach some level of conclusion with the FDA in terms of EAF, 41 patients enrolled so far or at least when you will put a pause on it, 220 needed, how does that with the new protocol, would you all need to reach out to hospitals advice them or what are the time delays and how was the enrollment schedule looks like, any color there you can share? Thank you for taking my questions..

Yes, no color at this time because I think it depends and now we've got all the sites. We are having regular conversations with the PIs and the study coordinators at the different sites to make sure that once we get that final go ahead to go back to the IRB process.

So it's going to take some time to get back their IRB process, which will likely happen next year some time and which one to get online first because it's going to depend on how quickly they can get through it and get it through their IRB..

Fair enough. Thanks for taking the question and congrats on the quarter..

Thanks..

[Operator Instructions] Our next question comes from Matt Miksic with UBS. Your line is open..

Hi thanks for taking the questions. We covered a lot of ground here, but I just wanted to follow up on couple things.

One is around the EPi-Sense and CONVERGE, could you talk about I guess the types of patients that you're enrolling there and whether I guess when I look at the folks who could be referred to that study, they may already be in a situation where they've got Persistent AF.

And I'm just wondering in the centers there you're hearing anything about folks who want procedure which is good thing and I referred which is also a good thing but not well about being randomized because they're already on their second or third catheter and not wanting to go down that road again.

I'm wondering if you're seeing anything like that and one follow-up..

That's a great question, little bit about the trial Matt to give you some context to it, the way the trial is randomized, these are de novo patients.

They can't have a catheter ablation before hand, but your question is actually very valid which is a lot of one of the issues that we had when we purchased nContact and we're kind of getting into the trial, which is why we need new sites is that many of the sites that were slated to enroll we're having strong success in the CONVERGE arm and so they were having difficulty randomizing as you described.

And that's why we've been -- the sites that really are doing most of the enrollment are new sites that we've actually gotten on board over the last year, which is why we're excited to get these next three or four online over the course of the next three months or so, so that we can accelerate enrollment into next year.

So it's an excellent question, but to note right now the de novo patients, they've not had a catheter ablation beforehand.

So you actually hit on two of the open items that caused enrollment to not be incredibly brisk as you got to have a novo patient because like you said a lot of these patients have had an ablation before and two, you're then going to have somebody you got to make sure that site is ready and willing to randomize.

And most of the older sites that were part of trial, they're not doing a lot of enrollment at this time and it's really the new sites that are doing it..

Got it, that's helpful color. And kudos to you on what looked like it's clearly a platform that folks are interested in and you're getting decent results, so year into the deal it looks like it was a good deal.

On the AtriClip side and just general surgery or it looks like open heart surgery and contaminant use of AtriClip, can you talk a little bit about, I know you had some folks we get them on phone and they're bumped up about AtriClip and using it lot, can you talk a little bit about how you're doing in terms of expanding -- expanding adoption across the wider group of folks and what kind of strategies you're using to do that?.

Yes we're continuing to make progress on the adoption across multiple fronts. There's the regular treatment of it and we're also doing this ATLAS trial for the prophylactic treatment of patients that don't currently have AFIB but are at risk of getting AFIB post-operatively. And as I mentioned on the call, we've got a 100 patients already enrolled.

We've got sites lining up and wanting to be a part of that trial, top sites from throughout the country. So we're really excited to get that up. We can get up to 20 sites to enroll.

Right now we've got six of those sites that have gone through the IRB and we were looking for 2,000 patients to actually enroll into that trial over the course of the next 18 or so months.

So we're super excited as we get more and more people online to really look at that data and then figure out from that data on really influence what our next trials going to be and what kind of labeling change we might be able to go back to the FDA with at some point in time.

In terms of just a general concomitant treatment, it's every day our team is treat, treat, treat, make sure you're taking care of the appendage.

it's part of the maze procedure to take care of the appendage when you're doing it and so we're just in there making sure they are taking care of the appendage whether they're using the clip or they're doing something else. Right now it's first and foremost treat the patient appropriately.

Get the Cox maze work done, when you've got a concomitant treatment, how do we grow that and then over time as they begin to use or try out the clip, more and more people are getting comfortable with it.

And then I think that one of the questions that Brooks asked earlier which is a halo effect, I think that just by the sheer nature of having somebody else out there talking about managing the appendage, people are getting more comfortable putting our device on from that standpoint as well..

Great, well thanks to the color. A - Mike Carrel Okay..

And that concludes the Q&A session. I would now turn the call back over to Mike Carrel for closing remarks..

Great, well again thank you everyone for joining us today and we look forward to talking to you further on the conference call at the end of the fourth quarter. Have a great day. Operator Ladies and gentlemen, that does conclude today's conference. You may all disconnect and everyone have a great day..