Good afternoon, and welcome to AtriCure's Fourth Quarter 2021 Earnings Conference Call. This call is being recorded for replay purposes. I would now like to hand the call over to Marissa Bych from the Gilmartin Group for a few introductory comments.

Thank you. By now, you should have received a copy of the earnings press release. If you have not received 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. These statements include, but are not limited to financial expectations and guidance, expectations regarding the potential market opportunity for AtriCure's franchises and growth initiatives, including the adoption of the Hybrid AF procedure and future product approvals, clearances and reimbursement. AtriCure's results may differ materially from those projected. AtriCure undertakes no obligation to publicly update any forward-looking statements. Additionally, we refer to non-GAAP financial measures, specifically revenue reported on a constant currency basis, adjusted EBITDA and adjusted loss per share. 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 would like to turn the call over to Mike Carrel, President and Chief Executive Officer. Mike?

Thanks, Marissa. Good afternoon, everyone, and thank you for joining us. We hope that you're all well. The fourth quarter of 2021 concluded an extraordinary year for AtriCure. As described in our preliminary announcement in this afternoon's release, we delivered $73.2 million in revenue in the quarter, reflecting growth of approximately 27% over the fourth quarter of 2020 and 4% sequentially. Growth was primarily driven by pain management and Hybrid AF therapy franchise expansion in both existing and new accounts, while underlying strength in our appendage management franchise continued to reflect the broad appeal of our AtriClip product line. Before providing a more detailed review of the business, I want to recognize the ongoing challenges related to the continued impact of the COVID-19 pandemic. At the beginning of the fourth quarter, many of our customers experienced staffing shortages and capacity constraints, suppressing cardiac procedure volumes. The quarter ended much like 2020 with the spike in cases that brought difficult operating conditions across our customer base. These constraints have carried over and continued to impact 2022. Like many other companies, we are still experiencing pressure from the pandemic this quarter. Although we are pleased to have seen an uptick in volumes in recent weeks as conditions slowly begin to improve, we continue to believe our business is positioned for strong growth over the year ahead, and we are reaffirming our annual guidance of $315 million to $330 million in 2022. I would like to highlight the initiatives facilitating our growth, starting with our Hybrid AF therapy for long-standing persistent Afib patients. We are pleased with our progress since receiving PMA approval from our pivotal CONVERGE clinical trial in April 2021. As a reminder, this achievement marks the only FDA approval for the stand-alone treatment of patients with long-standing persistent Afib. We estimate that approximately 45% of the millions of diagnosed Afib patients are long-standing persistent, presenting AtriCure with a unique opportunity to establish the Hybrid AF procedure as the standard of care in this vastly underpenetrated market. As last year unfolded, we saw procedure volumes rebound to near pre-COVID levels and then begin to accelerate in the second half of the year. We ended the year with record EPi-Sense system sales in the fourth quarter, with many potential new accounts and growing our physician base within existing accounts within this multibillion-dollar market opportunity. We are increasing training efforts to meet the demand from the physician community and recently added a third mobile lab. We also continue to expand our commercial team through the addition of sales representatives and clinical support as well as therapy awareness representatives to build relationships and develop programs focused on the needs of the cardiology community at large as we look further upstream within patient referral channels. Turning now to our open ablation franchise, where we marked the 10th anniversary of our PMA approval for the Isolator Synergy ablation system. This foundational technology of AtriCure was the first medical device approved for the treatment of persistent and long-standing persistent Afib during open heart procedures. We have spent the past decade driving physician awareness, education, and adoption, resulting in consistent growth and expansion of the therapy since 2011. More recently, we received FDA 510(k) clearance for our EnCompass device, which provides a simpler and faster approach to ablating open heart procedures. Through the limited launch, we have now completed over 150 procedures in the United States. The success to date of our limited launch gives us conviction in the EnCompass clamp's broad appeal to high-volume cardiac surgeons. We are moving towards full commercial availability in 2022 and expect this device, along with our legacy technology and focused commercial and market development resources, to deepen our penetration of the cardiac surgery market over the next decade. Complementing our opportunities in both open and hybrid ablation is our appendage management franchise. In 2021, the AtriClip product line grew 39% with record sales of AtriClip Flex-V devices. We are working on continued innovations to enhance this business in the future. We expect to see steady expansion of the franchise as the mounting wave of clinical evidence grows for our appendage management and the surgical procedures and from the expansion of the Hybrid AF therapy. Finally, turning to our pain management franchise, Cryo Nerve Block. We entered the pain management market nearly six years ago with a goal of improving the recovery of patients undergoing cardiothoracic surgery. The early results were compelling, leading to the development and 2019 launch of our cryoSPHERE probe, a dedicated device for managing postoperative pain in thoracic surgery patients. Our unique technology uses a differentiated freezing method to block the nerve from transmitting pain signals after thoracic surgery, providing a long-lasting form of pain relief for patients. Cryo Nerve Block has become one of our fastest-growing therapies, providing an uplift in our open ablation results. In 2021, we nearly doubled our Cryo Nerve Block commercial team, doubled our U.S. market penetration and expanded to more than 400 accounts, and received CE Mark approval in Europe. We will continue to invest in our dedicated commercial and education teams to drive therapy adoption this year. Beyond our core drivers, a number of clinical innovations and regulatory developments position us for ongoing expansion. In appendage management, we expect submission of our LEAPS protocol to the FDA this year and subsequent initiation of the clinical trial to study the prophylactic use of the AtriClip device after promising results from the ATLAS trial. More than two-thirds of cardiac surgery patients do not have a preoperative Afib diagnosis, representing a significant expansion of the addressable market for appendage management globally. While the LEAPS trial will take a number of years to complete, we expect awareness for treating appendage to continue to increase. Next, we are looking to expand into markets that are highly complementary to our core competency of treating complex arrhythmias, leveraging the unique physician relationships we have developed and building upon AtriCure RF ablation technology. We expect to begin a new IDE trial for the treatment of patients with inappropriate sinus tachycardia or IST using hybrid ablation procedures. This disease results in an extremely elevated heart rate and distressing symptoms of heart palpitations, contributing to the inability to sleep or exercise. Like Afib, IST has a dramatic impact on a patient's quality of life. IST most often occurs in young women, and currently, there are no approved treatments. The trial, which we are calling Heal IST, along with the development of a dedicated device, focuses on the solution for the significant unmet need. We also continue to expand investigator-sponsored research programs with particular emphasis on real-world evidence for our therapies through registries. In addition to our clinical activities, we have ongoing reimbursement efforts for our Cryo Nerve Block and other therapies. Internationally, we received clearance of our first product in Europe under the new EU Medical Device Regulations or MDR. And we have a strong foundation of expertise to build on and expect to continue to pursue additional product clearances throughout our international markets. In summary, we remain excited about our potential in 2022 and over the next decade. Our growth opportunities are diverse, and our products offer differentiated and proven solutions in markets with substantial unmet needs. While new challenges arose over the past two years for companies across the industry, we remain very bullish on the future of AtriCure. Before I turn the call over to Angie, I want to highlight another important initiative, our inaugural ESG report, which we published last week. Our commitment to operating responsibly, sustainably, and improving the well-being of the communities around us has long been an important aspect of our culture and one that we take seriously. Our ESG strategy is tied directly to our core values: to heal the lives of patients, grow and empower our people, and collaborate with our partners. In this report, we address our ESG achievements so far and lay out additional initiatives we are undertaking. I encourage you to read the report to learn about our efforts, and we'll be happy to discuss our work in this area in more detail. I'll now turn the call over to Angie Wirick, our Chief Financial Officer, to discuss more detailed results for the quarter.

Thanks, Mike. Our fourth quarter 2021 worldwide revenue of $73.2 million increased 26.8% on a reported basis and 27.4% on a constant currency basis when compared to the fourth quarter of 2020. U.S. revenue was $61.2 million, a 29.1% increase from the fourth quarter of 2020, reflecting healthy activity across product lines, enhanced by record sales of cryoSPHERE, the EPi-Sense system, and AtriClip Flex-V devices. International revenue totaled $12 million, up 16.3% on a reported basis and up 19.3% on a constant currency basis as compared to the fourth quarter of 2020. Activity across Europe, the Middle East, and Africa accounted for $7.4 million of our international revenue, while Asia and other international markets accounted for $4.6 million of our international revenue. On a sequential basis, we experienced growth of approximately 3.9% in our worldwide revenue from the third to the fourth quarter. While the fourth quarter saw growth in key product lines, we typically see a higher sequential increase, reflecting the impact on procedure volumes from both hospital staffing constraints and Omicron, and to a lesser extent, pressure from declining FX rates and distributor transitions in the quarter. Now touching on a few key metrics for the fourth quarter. Gross margin was 75.1%, up 160 basis points from the fourth quarter of 2020, largely driven by favorable geographic and product mix and continued leverage from scaling our operations. We had an adjusted EBITDA loss of $2.1 million compared to positive adjusted EBITDA of $1.7 million for the fourth quarter of 2020. This change to our bottom line reflects incremental headcount, variable compensation, and training costs in 2021 along with the return of most operating costs to pre-pandemic norms. Our loss per share was $0.30 for the fourth quarter of 2021 compared to a loss per share of $0.42 for the fourth quarter of 2020. The adjusted loss per share for each period was $0.30 and $0.18, respectively. Now to recap our 2021 fiscal year. Worldwide revenue was $274.3 million, an increase of 32.8% on a reported basis and 32.4% on a constant currency basis. U.S. sales increased to 35.4% to $229.1 million, while international sales increased 21.2% to $45.2 million, a 19.1% increase on a constant currency basis. The recovery of cardiac surgery procedure volume during 2021 due to reductions in COVID-19 restrictions is the primary driver of the increase, along with strong adoption of key products in each franchise. Two notable growth drivers in 2021 were our cryoSPHERE probe and the EPi-Sense system. U.S. product sales of cryoSPHERE totaled $22.7 million in 2021 while U.S. product sales of EPi-Sense reached $26.3 million, each reflected within open ablation and MIS ablation revenue, respectively. Gross margin for the full year was 75.0% compared to 72.3% in 2020. The gross margin improvement of 270 basis points was driven by our return to normal production activity in 2021 and favorable geographic and product mix, offset partially by inventory management charges in 2021 associated with product. Now turning to full-year operating expenses. For comparability, I will exclude changes in the fair value of the contingent consideration recorded in both years as well as an impairment charge from the IPR&D asset associated with the aMAZE PMA, which was recorded in the third quarter of 2021. Total operating expenses increased $59.3 million or 30.6% from $193.9 million in 2020 to $253.2 million in 2021. The increase results mainly from our investments in 2021 to expand the business as personnel costs, variable compensation and share-based compensation expenses saw the largest increases over suppressed levels in 2020. Additionally, with the expansion of training programs following the CONVERGE PMA approval in April 2021 and easing travel and meeting restrictions, we experienced an increase in associated costs. Full year 2021 adjusted EBITDA loss was $8.8 million compared to $6.3 million in 2020. Our earnings per share was $1.11 in 2021, reflecting the significant adjustment to the contingent consideration liability compared to a loss per share of $1.14 in 2020. Adjusted loss per share was $1.16 and $1.01, respectively. We ended 2021 with $223.4 million of cash and investments. Other highlights for the year include refinancing our credit facility, which significantly reduced our borrowing costs while expanding capacity. Additionally, with support throughout our supply chain, we were able to bolster our inventory position in anticipation of future growth. Finally, turning to our outlook for 2022. Consistent with our announcement in early January, we expect to achieve between $315 million and $330 million in revenue for the year. While confident in our position to drive accelerated growth from our historical results, we recognize several macro trends that could meaningfully drive our revenue upward or downward for the year. We remain cautiously optimistic that procedure volumes will continue to normalize and will be boosted by our many growth catalysts. In the first quarter of the year, we have historically seen a sequentially flat progression from our fourth quarter. However, we are not immune to the ongoing effect of Omicron or staffing challenges, which are currently impacting procedure volumes. Therefore, we expect first quarter 2022 revenue to be down slightly from fourth quarter 2021 revenue of $73.2 million. We expect 2022 gross margin to be comparable to 2021 with the potential for varying impacts from increasing costs and mix. We are also maintaining our level of investment in research and development activities, several of which Mike highlighted earlier in the call, and will gain leverage from SG&A expenses. Therefore, full year 2022 adjusted EBITDA is expected to be a loss of approximately $2 million to $4 million, corresponding with a full year 2022 adjusted loss per share of $1.07 to $1.12, with the slight decline in quarterly revenues on a sequential basis and discretionary spending in the first quarter. Our first quarter 2022 adjusted EBITDA is expected to be a loss that slightly exceeds the upper end of our full year guidance range. As quarterly revenues increase during the year, we expect improvement to quarterly adjusted EBITDA. Finally, as a reminder, we typically experience a heavier cash burn in the first quarter due to variable compensation payments, share vesting and other operating needs. We are thoughtfully managing our business for long-term success, balancing investments to drive growth and progressing towards profitability. In 2022, we continue to prioritize investments in numerous strategic initiatives in support of our catalyst-rich future. At this point, I will turn the call back to Mike for closing comments.

Thank you, Angie. While this year brought renewed challenges to the health care community, we remain committed to the fundamental value we provide to patients. To that end, we are fueling investments for the future and are focused on executing on the many catalysts for growth that we discussed today. Thank you for joining us, and we'll now open it up to questions.

Our first question comes from the line of David Saxon from Needham.

Mike and Angie, maybe first one on the cryoSPHERE probe. If I heard you correctly, I think you did $22.7 million for the year. And if that's correct, by my math, you're kind of mid-single-digit penetration in that $350 million market. So just wondering where that goes from here? Can you reach low-teens penetration in '22 just given the sales force expansion and potential procedure volume recovery?

Yes. I mean your numbers are about right. And so on all ends in terms of market penetration at this point, we did about 9,000 to 10,000 or so total cases at the 400 sites that we talked about throughout the year. And we anticipate that we're going to get deeper and deeper into those accounts. I do anticipate that we'll be able to get into the double digits as the year progresses. But I'd say that we'll be in that range. And we feel really good about the growth prospects for that business. We added people because there's demand. We've more than doubled the size of our team. We continue to add resources, check out our website. You can see that we're looking for people all over the country to cover cases, which is a big deal, but also just to add resources to get into even more new accounts.

Got it. And then maybe one for Angie. I mean you said gross margin should be somewhat similar to '21. But if I recall correctly, your long-term target is 75%. So seeing that you've achieved that here in a tough environment, I guess, where does that go going forward as revenue continues to grow and you get more leverage? And if memory serves, cryoSPHERE and EPi-Sense are both pretty accretive to margin. So yes, I guess where does that go? Why not continued improvement from '21?

Sure, David, that's a great question. Historically, we've observed modest annual improvements in our gross margin. In 2021, we experienced a significant boost due to our geographic mix; at the start of the year, U.S. product revenue accounted for 84% of our total, compared to the historical range of 80% to 82%. The positive impact on product mix also came from the EPi-Sense revenue and the V Clip product. Looking ahead to 2022, we're facing some headwinds, including investments in expanding our production capacity and our team, while also being cautious of inflation and supply chain pressures that others are mentioning. On the upside, we have the advantage of higher U.S. revenues and positive product mix trends.

Our next question comes from the line of Robbie Marcus from JPMorgan.

Great. To start, how should we approach minimally invasive growth this year? There’s a significant opportunity. You’ve had nearly a full year to educate and engage with centers. Could this potentially be your fastest-growing business line in 2022?

Yes. Evaluating the business, it's a valid question, Robbie. If we break it down into several components, specifically regarding our growth guidance of 15% to 20%, which exceeds our historical averages, there are certain challenges we face. While the open business remains crucial to us, it is likely to grow at rates below those figures. Historically, we've seen open ablation growth in the mid to high single digits, and we are comfortable maintaining this, even with new product launches and reimbursements in 2022. On the positive side, the Clip franchise is expected to outperform those numbers, along with the Cryo Nerve Block, which is projected to be one of the fastest-growing segments, and Hybrid as well. I won't specify which will grow more quickly, but all three are anticipated to exceed the overall business growth rates of 15% to 20%. Regarding minimally invasive offerings, this category is divided into two segments: CONVERGE and the EPi-Sense product, which are both expected to grow significantly. However, the part of our business formerly known as deep or TT is experiencing flat to slight decline. Overall, while minimally invasive growth may not be as rapid, we expect CONVERGE to expand similarly to the Cryo Nerve Block and Clip. All these areas show strong growth potential with minimal competition.

Great. And then it's interesting to hear about some of these new trials you're running, IST. How do we think about the addressable market size for that? And how do you think about just whether it's organic new products or inorganic products to add to your rep's bag? How are you thinking about expansion of different products and procedures over the future?

It's a great question. When we evaluate our business, it's exciting because we don't need acquisitions to accelerate our growth. Looking at our franchises, particularly CONVERGE, we're in the early stages. I’ve compared it before to when TAVR was just starting about 10 to 12 years ago. At that time, it was a small market that eventually set new care standards. We believe CONVERGE will follow a similar path. While we may not make as much per procedure and it might not grow as large as the aortic stenosis market, there’s still a substantial opportunity because more individuals have long-standing persistent Afib than aortic stenosis. We're at the beginning of establishing this market and its care standards. The Cryo Nerve Block opportunity is also significant; the U.S. market is over $350 million, with Europe now gaining clearance and approval. We are just beginning to penetrate that market, and the product is effective, which provides us with a lot of organic growth opportunities as we continue to invest in clinical data to validate its benefits. IST is different; it represents an entirely new market using our existing product. We anticipate launching a new product late next year or early the following year, and we're refining it now. The data suggests that nearly 4 million people in the U.S. have IST, which presents a massive opportunity. However, even starting from zero cases, it's a large and challenging market. Electrophysiologists consider these patients some of the most difficult to treat since solutions are limited. There’s a substantial market opportunity that could reach into the hundreds of millions of dollars, with a significant number of patients we can support. I haven't even touched on our LEAPS trials or opportunities linked to left atrial appendage management. Many patients undergoing cardiac surgery eventually experience atrial fibrillation, and if we can show that putting a clip on during cardiac surgery is beneficial, it could prevent additional procedures down the line, improving patient outcomes and providing societal benefits. Thus, we view it as a major market opportunity. Our focus will be on expanding our existing platforms developed in recent years by leveraging new technologies and clinical data. We believe there are decades of growth ahead of us.

Our next question comes from the line of Matthew O'Brien from Piper Sandler.

Great. Mike, just to follow up a little bit on Robbie's question on MIS. I mean the U.S. MIS number did bump up nicely in Q4. And I know you're going to say both to this question, but where did some of that bump rating growth come from? Was it on the new center side and folks that are starting to really adopt Convergent? Or was it some centers, maybe you added a year or two ago looking at the data, really refining the protocols and knowing how to attract those patients? What should the two of those really drive most of that growth that we saw in Q4?

I would say it’s primarily from existing sites. Currently, we’re not seeing significant revenue from new sites since they are just getting started. We don't offer bulk packages upfront to drive revenue in the first six months for new sites; instead, we focus on ensuring that they are well-trained and that their case lines are established. So most of our growth is actually coming from existing centers, where they are improving their programs, establishing better referral patterns, and encouraging more of their EPs to refer patients. We've also added a number of new sites, which we expect will contribute to our growth in 2022, as well as in 2023 and 2024. However, there is a lag between opening a new site and seeing a substantial revenue contribution. Hopefully, a year from now, I'll be able to share that a significant portion of revenue is coming from the new sites we added in the last 12 to 18 months.

Got it. And then on the clip side of things, again, a very good performance here in '21. It actually looks like it accelerated '21 versus '19 versus what you had seen before that. Just talk a little bit about what you're seeing as far as the growth in the clip business, if it's the sales reps you’re adding? And then I guess, woven within there on the last date, has that started to influence utilization of the clip or attracted new doctors at this point?

I'd say that the last date provides confirmatory information that supports the management of the appendage. Over time, this has significantly impacted our growth rates. Additionally, we have continued to innovate, and within the current quarter, there is substantial potential for growth in the clip franchise, as there are many patients available. Increasing data, whether from us or others, continues to show the benefits, and we are beginning to see those advantages in the field. Furthermore, we have strong attachment rates with CONVERGE, consistently around the 60% to 70% range. Currently, we are at the higher end of that spectrum, possibly reaching the low 70s in the fourth quarter regarding the combination of the clip with the CONVERGE procedure. Thus, we are increasingly seeing these procedures integrated.

Our next question comes from the line of Bill Plovanic from Canaccord.

Great. So we can see the numbers and there were really strong results across the board in the new product categories. Mike, you mentioned that you're seeing benefits in your existing accounts with CONVERGE. How can we measure when those new accounts will become productive? What metrics are you monitoring so we can keep track of this as it develops?

It's a really fair question. And we know everybody wants to have us kind of just roll out every single net new center and everybody trained, etc. We don't want to do that right up front because we don't want to have swings quarter-to-quarter that may not be indicative of where we're going, because a particular area in the country might be very deep, and maybe it's really more important for them to go deeper in existing accounts than adding an account. And so when you do that and you macro bring it up, it may not be the right metric to look at. That being said, we will likely give kind of an annual number. Every year, we'll update you on the number of sites that we basically get. We'll probably do that sometime later this year to give you kind of, hey, here's the first year, here's what we basically came to. You can see the number of sites that are buying from us. We're looking at internally, in addition to that, things like repeat buyers, how much they are getting per site. We're looking at softer things like at sites, like what's actually happening? Are they establishing days where they're actually talking about these patients? Or do they have monthly meetings to discuss the patients they're going to treat in the next month going forward? Have they established those types of programs or EPs and surgeons are collaborating in that way? Those are really good telltale signs of a really good, sticky program that's going to be around for a long time if they're establishing those types of protocols and benefits to it. And so we're really looking at those to kind of get a sense of what does our future kind of look like on that front.

Okay. And then on the guidance for the first quarter, basically you have this down sequentially. Is that more of a U.S. phenomenon, OUS, global? And are there any specific product categories that are more impacted than others that we should think about?

I'll let Angie answer that one.

Sure. Bill, so I think the sequential decline, I would say, think about it globally. While we're seeing some improvement in Europe and in the U.S., I think the same impact is being felt kind of around the world from the staffing challenges that we're seeing impacting our customers. It's interesting, I'd say, a little bit more resistance in the Cryo Nerve Block franchise in terms of being able to manage through. I think some of that's the immediate results that physicians can see when they treat a patient. And we're also pleased with the progress that we've seen on the MIS side is slightly lower patients staying in our open cardiac surgery business.

Okay. And then if I could, just a clarification on the EBIT guidance, the adjusted EBITDA guidance for Q1. Are you saying that it would be like $1 million or it's closer to like a $4 million loss in Q1?

What we indicated was that we anticipate the Q1 EBITDA loss could be greater than the total guidance range, possibly surpassing the $4 million overall loss for the year. This is primarily due to Q1 typically being our lowest revenue quarter, along with discretionary spending and other factors in that period leading to a higher burn relative to revenue.

Our next question comes from the line of Danielle Antalffy from SVB Leerink.

Congrats on all the success with the new product launches. Mike, thanks so much for the color on EPi-Sense, that $26.3 million number. That's a great number. And I guess I'm just curious what that number was prior to this year. I don't know if you guys can give us that or sort of some sense of what kind of growth that was off of prior years, acknowledging CONVERGE had been done before you got the PMA approval?

Angie, do you want to take that one?

Sure. Danielle, we haven't provided the previous year's number. When comparing 2020 and 2021, much of that reflects a rebound in the MIS business. It’s more beneficial to look back at the levels from 2018 and 2019. During that period, we were averaging close to $9 million per quarter in U.S. MIS ablation, which was divided approximately 60-40 between CONVERGE and our legacy TT business. This context indicates healthy growth numbers, though not quite 100%, but still robust growth considering that in 2020, we experienced a significant decline due to COVID's impact on the MIS ablation line.

Got it. Yes, that's a great point. Okay. And then on CONVERGE, Mike, just curious how you're seeing this adopted? I appreciate the existing centers, but how readily are you seeing EPs embrace CONVERGE? I mean I sort of think of CONVERGE as a little bit misunderstood because EPs should be very excited about this because it brings more volume to their practice. I mean is that sort of what you're seeing out there and practice in the real world? Where are the friction points still? Does it just come down to logistics? Just curious about how you're seeing it embraced by EPs and then also where there are friction points, what those are?

Yes, you articulated that very well, Danielle. It has indeed been well received by electrophysiologists. We have gained numerous new centers, and the primary question pertains to the revenue generated from them. However, we have many new centers operational that we expect to contribute significantly in 2022 based on their current performance and the progress we’re observing with them. The EP community is quite enthusiastic. We've seen extensive engagement at both community hospitals and major academic institutions, which handle a high volume of cases. They are focused on the benefits this approach brings to their overall patient volumes, particularly in treating a patient population that has traditionally been underserved. While there are a few skeptics, they are quite rare. The major challenge involves logistics—specifically, figuring out how to effectively manage them. This includes ensuring the right handoffs and determining the structure of the program, as well as how patients will be cared for. Coordinating these elements is crucial to implementing their protocols at each site and facilitating collaboration. Once these logistics are established and operational, we begin to see a significant increase in case volumes.

Our next question comes from the line of Marie Thibault from BTIG.

I wanted to circle back to the Heal IST study and hear a little bit more about the timeline size of that. I see that there's a registry under clinical trials. But I don't know if that's the same trial and what we can expect here for timelines going forward on that product.

Yes, we are currently collaborating with the FDA and expect to initiate a full IDE trial later this year. While we don't have finalized numbers yet, we're estimating it will involve several hundred patients overall. We're still discussing the exact figures with the FDA. The trial is likely to be conducted at approximately 25 to 40 sites, and it will have an international focus. The procedure was developed by a group of physicians in Brussels, including Dr. Asmundis and Dr. La Meir, who have collaborated with us over the past four years. They played a key role in establishing the procedure, and we will rely heavily on their expertise to help organize the trial. We expect to receive FDA approval to proceed with the trial this year and will begin patient enrollment shortly after.

Okay, very helpful, another catalyst to look forward to. I want to ask my follow-up here, kind of a two-part, very quick parts. On the new products, like Cryo, you've just received CE Mark on Cryo. You're also planning a full launch of EnCompass Clamp. How meaningful is the CE mark for you in the cryo division? And then when it comes to EnCompass Clamp and some of these newer products, what is margin contribution like on those products? Are we seeing a pricing premium for some of these new products?

I'll answer the first question and then turn it over to Angie for the margin question. Cryo-free Europe is very promising for long-term impact, but in 2022, we won't see much effect. It will take time as we implement it. We actually received approval faster than anticipated, and we're excited about moving forward. We're currently expanding our team and applying the insights we've gained in the U.S. There are various reimbursement aspects to consider in Europe, but there's a strong eagerness to introduce it. I've been in Europe speaking with the team, and they are enthusiastic about the market launch. However, we need to assess each market individually due to differing reimbursement situations, which may slow down the process of establishing it as a standard of care there. In the U.S., we can make progress more quickly, which is why I don't expect much impact this year. I anticipate some influence starting in 2023, and by 2024, I believe it will be well-established in Europe.

Yes. Marie, your question on margins, EnCompass is a great new device, but I'd say what you've seen in the past applies here, which is new product coming out of development, it takes a while to lean out the manufacturing, and you really get to scale. So it is a headwind to our margin. And then any product that we've got in Europe, unfortunately, at this point in time, it just is the lower margin that we see in the U.S. So that's the impact from those two.

Our next question comes from the line of Suraj Kalia from Oppenheimer.

Can you hear me all right, Mike?

Yes.

I have two questions. I know CONVERGE has been analyzed in various ways. If I remember correctly, Hybrid was involving around 1,500 cases across 200 centers before the data was released. I hope I'm accurate. So as we consider the 15% to 20% growth in CONVERGE, should we view that as a baseline? Additionally, from real-world experience, are these cases similar, and how are they developing?

Your numbers are quite accurate. Before COVID, which obviously affected volumes due to the elective nature of the procedure, we typically had around 80 to 90 sites purchasing from us each quarter, with perhaps as many as 100 conducting procedures. Over the year, that number rose to about 200 sites, as you mentioned. For the CONVERGE side, we are in the 1,500 to 1,800 range, which is consistent with what we've discussed in previous years. However, COVID certainly had some unusual effects on this. Could you remind me what your second question was, Suraj?

Angie's response addressed the question regarding the growth components. If I understood correctly, CONVERGE is expected to grow by over 15% or 20%. I was just trying to confirm whether that is the baseline and if we should anticipate an additional 15% to 20% growth on top of that baseline.

Yes. When considering the overall growth rate, I indicated that I wouldn't specify a number by category. The areas expected to grow at the high end include CONVERGE, Clip, and Cryo Nerve Block. On the other hand, our open ablation business, while performing well, is projected to grow below those ranges. Additionally, the minimally invasive business not including CONVERGE is essentially flat or slightly decreasing. Therefore, when combining those slightly declining areas with CONVERGE, the overall growth rate appears mixed. Does that clarify things?

Yes, thank you.

Fair enough. Mike, one last question. Regarding IST, it's quite interesting, and we can discuss it further later. As I understand it, the cause is not very clear. You can experience tachycardia from various sinus nodal sites. The current evidence for RF ablation shows inconsistent effectiveness and potential late adverse events. It seems you've identified a gap in the existing treatment that your new device could address. Could you provide some additional insights into your thoughts? The registry trial, regardless of the number of patients involved, would be intriguing to compare with what is currently known in the market. Any insights would be appreciated.

Yes. And Suraj, you're absolutely correct. This is a therapy that unfortunately has not worked primarily because of the way you have to enter into that area, and the inability of the endocardial catheter to access it properly. It's actually the perfect Hybrid solution because the endocardial catheter does play a role as they're doing it. And we can go off-line and get into more details on the specific lesion set and what they're doing. But the Brussels group really came up with a novel way to leverage and use our clamp to get around the crystal terminals and basically around the SBC and IBC and to make some of those connecting lesions. And they've been doing it for a while now, and they've seen dramatically good results without any long-term negative effects, as you described. And so we've tested that. They've actually written a paper that's been published. Again, we can get you the details on that. And that's the basis for a lot of the work that we've been doing and studying it and getting ready for the clinical trial in the U.S. But again, we'll be happy to talk in more detail on it. It's an exciting area, and there is still a lot to learn, as you mentioned.

And this does conclude the question-and-answer session of today's program. I'd like to hand the program back to Mike Carrel for any further remarks.

Great. Well, everyone, thank you so much for joining tonight. Hopefully, it was informative, and you're as excited about the future as we are here at AtriCure. Please be healthy, and have a wonderful evening. Bye now.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.