AtriCure, Inc.

Good afternoon and welcome to AtriCure's first quarter 2019 earnings conference call. At this time, all participants are in listen-only mode. We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Lynn Lewis from the Gilmartin Group for a few introductory comments.

Thank you. By now you should have received a copy of the earnings press release. If you've not received a copy, please call 513-755-4136 to have an email to you. Before we begin today, let me remind you the company's remarks include forward-looking statements. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond Agercure's control, including risks and uncertainties described from time to time in Agercure's SEC filing. Agercure's results may differ materially from those projected. Adricure undertakes no obligation to publicly update any forward-looking statement. Additionally, we refer to non-GAAP financial measures, specifically revenue reported on a constant currency basis, adjusted EBITDA, and adjusted loss per share. A reconciliation of these non-GAAP financial measures with the most directly comparable GAAP measure is included in our press release, which is available on our website. With that, I'd like to turn the call over to Mike Carroll, President and Chief Executive Officer. Mike?

Thanks, Lynn. Good afternoon, and thank you for joining us. We have started 2019 with a solid first quarter of 15% revenue growth, our 26th straight double-digit growth quarter. We again had meaningful contribution from our appendage management products, launched a wide-street marketing campaign focused on concomitant ablation, and made excellent progress on multiple operational initiatives. Our team continues to deliver strong, consistent revenue growth driven by our patient-first culture, Technologically Advanced Products, and Investments in Innovation, Clinical Trials, and Education. Coupled with the diverse nature of our business and vast underpenetration of concomitant ablation in all types of major cardiac surgery, we are confident we are well positioned for continued growth. We are seeing in the field that evolving guidelines and emerging clinical data are driving behavior change, leading to steady demand for training and increasing adoption of our products. Demonstrating our confidence in our business, we are pulling up the bottom end of our 2019 guidance, which we now expect to be in the range of $222 million to $228 million, corresponding to growth of 10% to 13% for the year. Now turning to our first quarter performance. Revenue for the first quarter of 2019 was $54 million, reflecting 15% growth over the first quarter of 2018. This was highlighted by strong performance in the US led by our Appendage Management products and international growth of 28% compared to 2018 first quarter. Our Appendage Management franchise continues to outperform with first quarter growth of 32% year over year. We have now sold over 180,000 H-Equipped devices worldwide. We anticipate this business will be our fastest growing franchise for their foreseeable future. In the field, we receive steady, positive feedback on our innovative approach to advancing products in this franchise to meet clinical needs. Our approach, in conjunction with evolving market dynamics, is collectively driving our confidence in this platform and its long-term potential. On the minimally invasive side, we are seeing the attachment rate and convergent procedures increase steadily. On the open side, we are approaching the one-year mark of having the Atriclip Flex V device available in the U.S., and we are hitting our stride as it's being used in incrementally more open cases, especially CABG procedures. Turning more broadly to our open ablation platform, guidelines and emerging clinical data are driving changing behavior and increasing adoption. We continue to see a large opportunity in open procedures and are sustaining our investments in training and education to address this market. As one might expect, we have gotten several questions over the course of the last few months on low-risk TAVR and what it means for our business. So I'd like to take a minute to address this. As a starting point, this is something that we have factored into both our guidance and, more importantly, how we think about our business going forward. So from that standpoint, we don't foresee impact to our short or long-term expectations. At a higher level, though, we can also break down the market to what the potential impact could be. Based on market data, there are approximately 55,000 surgical aortic valve or AVR procedures annually in the United States. Roughly 16,000 of these patients have AFib. Of those, 25% are treated. This means the remaining 12,000 patients that are already on the table today are not getting treated, and the guidelines say that they should be. Taking this dynamic aside for a moment, if 100% of the surgical AVR market were to migrate to TAVR, we estimate that less than 7% of our business would be impact. This, of course, is not expected to happen. The overriding factor here is pushing trends in the upward direction is the dramatic underpenetration that I referenced earlier. So even if that 16,000 patient number sees downward pressure, It is more than offset by the large under-penetration prevalence that still exists. This penetration gap is even larger when we look at the cabbage market, where there are 160,000 to 180,000 procedures every year. Of those, about 40,000 have AFib, and only 10% are getting treated today. Our opportunity in open procedures is real and it's large. With a combination of updates to guidelines, our innovation, education, and training, we are just scratching the surface still. We just launched our Why Treat marketing campaign, which we believe will bolster adoption even further. As mentioned on our last call, we began enrollment in our iSAFEB clinical trial in the first quarter of this year. We have three sites activated and are on track to add several more throughout this year with additional enrollment following. The ICE AFib trial is a unique opportunity to generate systematic clinical evidence on the safety and effectiveness of concomitant cryosurgery for the treatment of AFib patients undergoing structural heart surgery. We are confident our continued commitment to developing clinical evidence will support growth in the concomitant treatment and allow us to educate and train at a much deeper level for better treatment and better patient care. Within our MIS business, we experienced some softness in the first quarter. Our MIS results continue to fluctuate quarterly due to a small number of sites comprising a relatively large portion of the MIS volume. We expect this trend of quarterly volatility to remain until we receive the FDA approval for the Epicense system using convergent approach, and we have factored this into our guidance for the year. As a reminder, our last patient and converged trial was treated in August of last year. All converged patients are followed for one year post-treatment. We will then work with our principal investigators and be in a position to submit the data to the FDA as part of an application for premarket approval of the AtriCure Epicent system for the treatment of persistent and long-standing persistent AFib using the conversion approach. As we've disclosed previously, for planning purposes, we are anticipating an FDA panel and would expect to disclose the data around the time of that meeting. Until then, we continue to make investments in our training programs. We currently have a team of clinical experts well-versed in the Epicent system and who understand EP well. That team will be prepared to ramp up our outreach and education programs quickly upon receipt of the PMA for treatment of persistent and long-standing persistent AFib patient population. We are also pleased with the progress in our DEEP-AF-IDE clinical trial, which as previously mentioned, received FDA approval to include an additional 40 patients. As a reminder, Deep AF provides another alternative for minimally invasive approaches, and we look forward to providing updates as the trial continues to advance throughout 2019. Our investments in these prospective clinical trials continue to bolster our position as a leading innovator in the market. We expect that upon the successful conclusion of these trials, we will be able to market our technologies and therapies as a comprehensive platform for a dramatically expanded group of physicians and patients. Now, switching gears to pain management. We launched the Cryo-ICE Cryosphere Probe in the United States in mid-February, and we are already seeing good activity from this product. As a reminder, the Cryosphere Probe is the first device in the Cryo platform designed specifically for cryonerve block. In cryonerve block therapy, the Cryosphere Probe is used to block pain by ablating peripheral nerves. This prevents peripheral nerves from transmitting pain signals for several months during which time the nerve regenerates. Physicians are adopting cryonerve block therapy as a key part of their pain management strategies, offering a unique solution for patients undergoing cardiothoracic surgery. Last year, we established a small, dedicated thoracic team to support cryonerve block therapy in select markets. The team is currently up to seven people, a manager and six therapy awareness reps, and we expect this number to expand as the year progresses. We are receiving positive feedback from our customers, and we expect the Cryosphere probe to offer significant opportunity as we look to 2020 and 21 and beyond. Turning to our investment in training and education. This quarter, We have continued to drive adoption of surgical ablation in a concomitant setting through our HR-Cure-sponsored educational programs, as well as collaborations with professional societies. We talked earlier about the STS guidelines and the impact of our ability to speak with surgeons about that requirement to treat. Also, though, the guidelines are enabling us to further accelerate our training programs. We have expanded our list of KOL trainers around the country, and our courses are almost completely full. As we announced earlier this year, STS has endorsed our training program, which is a strong statement on the quality of such program. We're also having an incrementally larger presence at scientific meetings. Just last month, we were at the International Symposium of Left Atrial Appendage, ISLA, 2019 meeting. In past years, atrial clip devices were part of the clinical discussion, but this year, the atrial clip line was featured prominently in discussions, symposia, live cases, and presentations, and was an important part of the overall conversation. Turning now to our international performance, we had strong results with revenue growth of 28% in the first quarter. In Europe, we saw particular strength from the UK, France, and Germany, with Atriflip and Epicense devices driving the momentum. In Asia, we are now seeing consistent order patterns and expect strength in those markets throughout the year. Well, international business represents roughly 20% of our overall revenue. With investments in the past years, we expect it to be consistently steady and strong grower for the business. Overall, we are pleased with the maturation of our team and our business, and we're off to a strong start to the year. With that, I want to turn the call over to Andy Wade, our Chief Financial Officer, and I'll turn at the end for closing comments.