Q2 2020 AtriCure Inc Earnings Call
[music] good afternoon, and welcome to the H. Richard.
Second quarter.
Earnings Conference call at this time, all participants are in a listen only mode.
A question answer session towards the end of today's call.
This call is being recorded for replay purposes.
Let's turn the call over to Lynn Lewis from the Gilmartin group for few introductory comment.
Thank you Bye now you should have received a copy of the earnings press release have you have not received a copy. Please call 5137554 went three six to have one email to you before we begin today, let me remind you. The company's remarks include forward looking statement.
Forward looking statements are subject to numerous risks and uncertainties. Many what's your beyond atricures control, including risks and uncertainties described from time to time secures FTC filings educators results may differ materially from those projected interest or 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 reconciling. These non-GAAP financial 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 Carroll, President and Chief Executive Officer.
Mike.
Thank you Lynn good afternoon, and thanks for joining us hope youre, saying safe and healthy as we continue to face unprecedented challenges with the spend that much.
Before we get our quarterly review our results, we want to express our gratitude to shell plus workers.
Wanted to continue to rise to the occasion to keep our community safe and functioning.
Thank you for taking care of US you are the true hear us.
We are encouraged for second quarter results, despite the impact and challenges of Cobot 19, which we felt especially early in the quarter.
Total revenue was just under $41 billion down 31% from the same period last year.
We experienced the trough in April with monthly revenue down 54%, that's compared to April 2019, due to the significant slowdown of non emerging procedures in response to cobot 19 pandemic in the U.S. and Europe.
Began to see return a rapid return in May fall by steady volume stretching the procedures coming back on line and easy enough shelter in place restrictions.
Specifically in May we saw revenue improved by nearly 50% over April and in June we saw a similar improvement overnight.
Well, we're pleased about encouraging a rebound of our business in the U.S. and parts of Europe through the second half of the quarter. The situation does remain fluid, especially with the recent trends, indicating growing case volumes some reasons United States.
The last few weeks, we began to see more volatility in case volumes and now expect July revenue to be down somewhat compared to <unk>.
As we looked at a second after 2020, we remain cautiously optimistic about our outlook, while continuing to make sure we stay flexible and ready to mitigate any interruptions and we remain on track with all of our strategic initiatives.
To that end, we continue to prioritize the health and safety of our employees and promote remote working wherever possible.
At the same time, we are easing spending restrictions in several areas.
Specifically, we lifted the hiring freeze actively adding to our commercial team and other critical roles.
We are focused on her future on innovation clinical science education, strengthening our commercial infrastructure to ensure that we are well positioned on all our future catalyst such as the converge approval.
And amazed progress as we enter 2021 and 2022.
The strong performance in the second quarter is a testament to the resiliency of our team in nature.
Our amazing group has risen to face these challenging times within on wavering commitment to support our healthcare partners and to put patients first.
I'd like to highlight or clinical education team is one example of this dedication.
Over the past year, a clinical education team has developed a peer to peer education platform that is second to none.
In response to covert 19 pandemic, our team quickly developed and validated a process to adopt this platform to support our customers virtual.
As institutions across the country changed their policies and protocols physicians also had to adjusted these changes are candidate your care was helpful and prepared with this virtual platform and we stopped proactively.
Customers could not stopped thanking us for stepping up and showing that we care. This virtual platform for education became our outlet to continue to partner with clinicians as we could no longer corner customers and purse.
We've been able to work the medical community seamlessly literally transitioning from in person to promote engaging with our customers and building even stronger relationships as our team has been rising to the occasion.
Well managing through the pandemic, we were successful in achieving several milestones during the quarter and made significant progress on our strategic initiatives.
Starting with convert.
As many even though we are well aware the data read out from the converged trial was presented during the virtual HRS conference in early May.
Response on medical meeting has been tremendous.
As an example, Radcliffe group recently held a virtual symposium on our conversion procedure, which was endorsed by the British Heart Rhythm Society and accredited by the European bore accreditation in cardiology.
We were excited to seminar drew over 900 physicians the largest group of attendees, we have ever witnessed for a seminar of any ultrapure procedure.
Further with respect to converge a number of clinical papers were published in the arrhythmia Electrophysiology review and manuscript was submitted to the Journal American College of Cardiology and a second analysis is converge with submitted to the American Heart Association.
We believe this level of interest clearly demonstrates that the data is driving deeper discussions around the best treatment options for patients suffering from persistent and longstanding persistent they said, which is central to our patient first mission.
There are still work ahead and our team is diligently working with the FDA to complete the regulatory process to make this therapy available to patients suffering from a dance forms are they said.
We've had very productive and collaborative discussions with the FDA.
Following the debt relief at HRS and May we've engaged in deeper dialogue with the agency asking additional questions and for some additional analytics.
We are encouraged by these discussions and I reminded of the strength and durability of our data both in terms of safety and efficacy.
That said there are a lot of moving parts before the regulatory process is complete we're still working under the assumption that the FDA will convene a panel meeting, but we do not have insight has the potential timing it isn't it.
At this point, our expectation is it'll be a little bit further out than we had originally anticipated.
We made significant progress in our other markets changing clinical studies as well the amazed trial passing on major milestone I preparing and submitting our first module of the pmeight to the FDA.
As a reminder of the amazed trial is a 600 patient randomized control trial designed to show superiority.
Superiority for this trial is catheter ablation, plus atricures, Larry Ellie exclusion system.
Versus catheter ablation, along we completed enrollment in the trial in December 2019, and expect to have follow up on these patients early to mid 2021.
Followed by data analysis, and our full pmeight submission.
In addition to progress with the converge and amazed trials both of which we believe will be transformative for the company, we're making steady progress pushing forward important initiatives that augment our core ablation business.
In the second quarter, our innovative class fear fro Coke continued its positive upward trend in revenues. The Cryothree probe is intended for managing post operative pain in cardio thoracic patients.
This unique probe demonstrates our investment innovation and its resulting impacts to our business.
To support the increasing case volume, we continue to steadily AD sales and clinical resources to our throughout 16.
We believe that are Crowner block therapy is rapidly gaining momentum in drastic pain management market and expect meaningful contribution in the long term.
As part of the open ablation platform, we're continuing to work towards the five 10-K clearance of our new encompass plant and our team is preparing for subsequent market launch.
The encompass class provides a simpler and faster approach to blame me heart and open procedures. We expect this crap to appeal to high volume cabbage surgeons and to contribute to our open ablation revenue in the coming years.
What does this all meaning in the current environment.
We're continuing to strengthen our clinical evidence educating education and training and product innovation.
And as I mentioned earlier to further support the expansive growth of our initiatives. We continue to actively build our team hiring strategically throughout the second half of this year.
However, our optimism for the future is balanced by the uncertainty at the present environment.
We saw possible plateau and procedure volumes as we entered in July with increased volatility in mixed results through key markets. As a result, we remain measured in or out Lucky for Q3, and the remainder of the year and we're not providing financial guidance for 2020 at this time.
We are actively monitoring any evolving environment and trends remain flexible.
And we remain flexible compare to effectively respond to a pandemic.
Well, we cannot predict why do we will return to normalcy.
We are confident that our future is extremely bright our team remains focused in our business continues to be poised for long term growth and success I'll now turn the call over to Andy weight or Chief Financial Officer.
Thanks, Mike second quarter 2020 worldwide revenue was $40.8 million a decline of 30.7% on a GAAP basis, and 30.6% on a constant currency basis compared to the second quarter of 2019 you.
Revenue was $33.7 million, a decrease of 28.6% from the second quarter of 2019.
You ESS sales the open ablation and appendage management products experienced a slightly lower decline in sales than minimally invasive ablation due to the inherent ability to defer am I asked procedures.
Appendage management sales declined 21.1% to $13 million, an open ablation sales decreased 24.4% to $15.6 million, while minimally invasive sales decreased 47.7% to $4.8 million.
International revenue decreased to $7.1 million down, 39% on a GAAP basis, and 38.5% on a constant currency basis as compared to the second quarter of 2019.
We experienced significant variability in our international markets, resulting in a steep decline in volume across all product types.
Gross margin for the second quarter of 2020 was 67.7% as compared with 74.5% for the second quarter of 2090.
During the second quarter, we temporarily reduced our production capacity and modified our manufacturing operations in order to adhere to social distancing recommendations.
We have not furloughed or decreased pave our production employees and remain committed to their safety.
However, the fixed costs and reduction of production volumes to below our normal operating levels burden cost of revenue decreasing our gross margin by 6.8%.
Despite the temporary reduction in production, we ended the quarter with a strong inventory position.
Turning to operating expenses, excluding the effect of noncash adjustments to the contingent consideration liability our operating costs decreased $7.5 million from $49.9 million for the second quarter of 2000 $19 million to $42.4 million.
For the second quarter of 2020.
This decrease was primarily driven by lower variable compensation costs as well as a decrease in travel training and marketing costs due to travel restrictions imposed by Kogan 19, and in person group training events and trade shows that were cancelled delayed or transition to virtual platforms.
The decrease was probably offset partially by the addition of approximately $3.1 million I'm central hard costs, which were not present in the second quarter of 2019.
As a reminder, central hurt operating costs consist primarily of the amaze clinical trial and supporting field team as well as Pmeight readiness efforts.
Our operating loss for the quarter was $7.3 million compared to the operating loss of $3.8 million for the second quarter of 2019.
In addition to the decreased operating expenses Justin did we recorded a seven and a half million dollar reduction in the contingent consideration liability this quarter, which has a reduction to our SGN a expenses.
In the second quarter of 2020, we had an adjusted EBITDA loss of $6.1 million compared to positive adjusted EBITDA of $1.4 million for the second quarter of 2019.
Our loss per share was 20 cents for the second quarter of 2020 compared to an 11 cents loss per share for the second quarter of 2019.
While the adjusted loss per share each period was 38 cents and 17 cents respectively.
During the first and second quarters, we did adjust our operating plan and expect to continuously evaluate and adapt as we navigate the kobin 19 pandemic in the second half of 2020.
First and foremost we're committed to our people and our plan or felt reflects this commitment.
In addition to the met measures we discussed on the last call. We've implemented a program to supplement the variable compensation of our very talented field sales team.
We also remain committed to our strategic research and product development activities and our hiring in certain key roles to position ourselves for the long term.
Despite limitations on travel our team has been adaptive and finding resourceful ways to support our patients first initiatives.
Through implementing remote clinical trial support and launching a virtual training platform. We continue to gather clinical evidence and partner with our physicians to bring awareness to the vastly under treated population are they said patients.
We've also taken measures to bolster our capital structure and liquidity on May 13, 2020, we completed a stock offering issuing 4.6 million shares of common stock and receiving net proceeds of $189 million.
We believe this raise will allow us to navigate the inherent uncertainty and unprecedented impact on our results of operations during the near term and be in a position of strength as we execute on our strategic initiatives in the next decade.
We ended the quarter with approximately $248 million in cash cash equivalents and investments.
Finally, as Mike noted earlier, we started to see steady increase in activity during may and June as hospitals started to do more emergent and elective procedures, where our products are used.
However, the situation across our markets remains unpredictable and early results from July activity or mixed.
The rising number of Coven 19 cases in some of our largest domestic sales territories and delays in international markets rebounding in the past few weeks are causing us to tread cautiously into the third quarter.
As we do not want to get ahead of ourselves and cannot predict procedural trends at this time, we are continuing to hold on providing 2020 financial guidance.
We continue to believe our current cash and investments are sufficient to fund our operations and allow us to focus our efforts on strategic initiatives to fuel a promising future free atricure.
At this point I would like to turn the call back to Mike.
Mike Your your muted.
Sorry. Thank you thank Andy I would like to thank the entire H. your team for their passion and commitment to working as one to help patients.
Our communities and our partners through these challenging times.
I'm proud to say that once again, we've been recognized as one of the top workplaces in Cincinnati inquire interment Atomic office was recognized as a national standard top workplace.
Thank you to everyone at age of here for creating a world class culture, I'm humbled to be part of this team and work a lot work alongside of you each and every day, please stay safe and healthy everyone with that I'll turn it over to questions.
Thank you.
[noise] question [noise].
And your telephone.
From the Q.
[noise] limit yourself to one.
A follow up once again.
Good question.
Question comes from Robbie Marcus JP Morgan.
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Hi, This is actually Lilly on for Robbie Thanks for taking the question.
You guys had previously mentioned fourth quarter assembling something close to normal butlin.
A line now potentially below June does this outlets so hold true and how is your view on the recovery in the back half the air change given the spike in cases, we've seen across the country.
[noise] I'm actually I think he looked at the numbers. Obviously, we did we did very well better than expected in the may in the genotype much better than expected them to bounce back was very strong.
Came close to being back to normal mature in time for them and as you mentioned July was kind of has been basically kind of flat to down little bit in terms of overall case volume I think it's unpredictable as as cases kind of pop up in Big States, like Florida, and Texas and there's shutdowns in Lockdowns on some of the hospitals, it's a little bit uncertain, we're not going to go back to levels that we saw.
Earlier in the second quarter. So at this point, that's how we're not giving specific guidance I think that it's kind of stabilize to some degree, but it's not like it's gonna grow its not growing back necessarily as fast as it was in the second quarter.
Gotcha, and then just a quick follow up on converge what do you guys doing now to prepare ahead of the panel and eventually have trouble. Thanks.
Yeah. Thanks, a question and the we're obviously a again really excited most of you heard the data that came out at HRS. This year, where we want to across every metric that was out there both on safety and efficacy in terms of beating the numbers that were previously established and showed superiority. So we're excited about that working.
Collaboratively with the FDA.
What we're doing to prepare for that is that we've got a site set up all over the country. We dug deep dive analysis pretty much every site around the country for all the EPA is all of our marketing materials are ready to go.
And in addition to that we've kinda got a team of over 35 people on the P. side of our business that had been trained I understand that procedure very well we merged the team from the literally it seemed that we have with this with the DPP background, and that's where we're adding headcount as well. So we've got broad based coverage, we've got sites ready to do.
Training and education, once we're able to get up and running and be much more proactive on that front end and we're in a really good position. The good news that we've been training for this and preparing for since we bought the company to make sure. We were in this position and now we're just waiting for that label to come through so we can kind of really go after the market in a big way.
Thank you and our next question comes.
Yeah.
Your line is open.
Good afternoon, everyone Oh.
Thank you for taking my question.
Mike can you give me a right.
Yep.
Perfect hope, everyone, a safe and healthy so a lot of information provided Mike.
Can you stratify the backlog versus the new patient pulled through what are you seeing in the market what level of backlog.
Cannot be converted or you know is is being delayed just trying to stratify. The numbers, we are seeing <unk> versus those two buckets.
Yeah, I don't know that it's as much of a backlog issue to stratify, it's rather it's a very fair and good question to think through like whats backlog versus that mutations.
We're seeing is because some of the backlog was one of the as an example, one of the issues that you see or that patients who need to get treated are hesitant to go into hospitals. During this time and so there's a big push to try to get the to realize it. It's a safe place to go that would essentially be backlog, but they're not coming into the hospital. So a lot of what you're seeing is more net new patients versus.
Really all backlog kind of coming in.
Coming into the hospital quite frankly, and so as we look forward I mean, I think there's a little bit of backlog, but we're really got to get those patients to come back and realized incredibly safe place to get tree didn't they should get treated. It also can have up there got bigger issues out there.
Got it and Mike in terms of at least if we look at the numbers are in the U.S. am I ask got hit or impacted more than open.
Should we expect that moving forward and presumably the open cases are being influenced more so by the the immediacy of the procedure I guess and am I S is being delayed it's not the right way of thinking about it for the remainder of the year.
I don't know what do think works right. It's a good way to think about it because I think naturally that is what happens is that the open cases come back first primarily because two reasons one some of the open numbers small amount, but our cryo sphere, which which is basically the crime nerve block piece, which is actually a growing part of our business. The other part of it.
Open is that obviously, it's natural that the patients that are needed cabbage and need to be treated and our compromised they've got to get back earlier, it's really not elective procedure quite frankly, you can only push off cardiac surgery for valves or a bypass only so so long so you're correct in thinking that I was surprised interestingly enough.
If you looked at it by month April was almost no am I asked revenue in some of the come back that happened in the May June timeframe was actually am I ask coming back and there were sites that were beginning to kind of get up to speed, we actually saw steady increase as the quarter.
Came along and my outside of our business. So while you're right to think of it the way that you said I also caution because interestingly enough. The am I ask cases have started to see some strength overall as a quarter came together.
Our next question comes.
Hi.
Oh, absolutely. Thanks for taking my questions just a follow up a little bit on the converged and all you know.
Mike you need the I know you know with the data you didn't want to say a heck of a lot in front of you know the outcome. What can you help us think through as far as the panel goes in terms of what FDA, maybe really examining what investors she kind of cute themselves up for it'd really be looking for during that panel because those things are typically set up to really question.
Got a thing fits into the day they tend to be favorable. So how do we think about that the key things to really monitor with respect to the panel.
[noise] really fair question, I think that I mean, as you've seen the data looks great. I mean, so we get superiority across the board on efficacy.
Though at the panel I think the look at really the three main components efficacy safety and then the net benefit of that actually see over the safety in the trial on the efficacy side of things. So probably just want to look at the cut to the data.
As I mentioned in my comments, the more that we peel back the onion on it the more we looked at the data from all different angles, but durability of the data and the efficacy look even better like the more questions about so we feel really good about the efficacy side of things on the safety side, I think they'll probably want to talking about.
Really just I mean, it's only a small number of cases, but they'll just want to make sure that these are items that.
The good news there were no deaths all the patients actually one of doing well and had no long term effects across any of the issues that were out there and then they'll want to get into maybe possibly some details hub, okay, well as pericardial fusion what does that mean, what did that look like and how did the patient recovery et cetera, and just get some more specifics on it so I think those the kinds of things.
Dive into probably.
The good news is the safety rates were within what we had prescribed they would be with the FDA. When we started the trial on feel really good about it overall.
Got it that's helpful. And then just following up a little but you know again. The data was was excellent in my view you know what was the the commentary coming out of HRS from clinicians what kind of feedback that you get I think it at 900 Doc seminar.
That you can you can talk to I know you guys really want us to to be reasonable with our expectations for what kind of contribution we get.
On the M. outside from converged next year, but you know what kind of momentum or feedback or excitement enthusiasm are you hearing from clinicians coming out of the data.
I'm, mostly cautious just because I don't know when you're when we'll get when the exact eight you'll get the actual approval and me and when what's happening with cold and just kind of the ramp backup of hospitals. So what is the kind of get down that path, but I'm really excited about the day. That's it I think the data is incredibly compelling and you're seeing that on Twitter feeds and others from really top notch.
He is in a world they're talking about this procedure and talking about back wall ablation being something that is really positive and I just almost every day, there's a new tweet going out from one of the leading ease in the world whether its dr. natale or the Cleveland clinic, Dr was talking about convert.
People that were not doing the conversion procedure I've seen the data I'm not talking about the fact that it's really the only randomized controlled data that is out there and they're having debates on line about it under the really pushing it forward in a lot of ways I think that's really fast holding kinda watch that happened I'd say that the typical response and the conversations we've had and so I'm not it's.
Been really positive to see that got people.
Got it very helpful. Thank you.
Thank you and our next question comes from.
<unk>.
Yes, Hi, good afternoon. This is David on for Mike. Thanks for taking my question I, just a couple more on converge.
I mean, it's I understand you're running on the assumption that you'll you'll probably see a panel, but it sounds like that might be delayed from what you were pretty believe previously thinking. So he is a mid 2021 approval a fair assumption and then also just on the data and then to the hiring freeze.
Has there any been any change in pacing hiring for that sales force.
Yeah, well I'll start the last one which is that we feel we felt really good about kind of where we were looking into the back half the year not only on May and June but also even even the July wasn't as good as June it was so strong month relative to what you saw beginning a pandemic and we feel we need to invest in our long term and so we've lifted that and we're actually.
We are aggressively hiring all those rules right now and we feel good what can be able to find really talented and great people on board in terms of timing on the I, just I can't and I'm, not really going give specifics on timing, we're having great.
Dialogue with the FDA, it's back and forth good questions or both over the phone and on email et cetera, and really working collaboratively with them on it and so I just I'm hesitant to say, there's going to be an exact there I know the data you guys have seen the data and so from my standpoint, I'm, just trying to work through that process and.
Once we get that process, we get through it obviously, we believe wash get and eventually getting approval to predict exact dates you really tough reason I said that just given the fact that we're going back and lots of them in a really good positive collaborative late and knowing that we're sitting here at the beginning of August the likelihood of us actually getting a panel done probably in the in the fall timeframe.
It's just not that likely I don't have any specific feedback that says. This is why this is just me, giving you my insights given the back end points and fast, which again is that really positives and and we feel good about the process that we're going through the FDA.
Okay. That's helpful. And then maybe for Andy Opex was down year on year. So just wondering how durable. These cost savings initiatives are and then relative to the second quarter, how we should be thinking about margins in the third and fourth quarter.
Yeah sure David So on the on the spend you're right. Some of it is a mix it is a mix of.
Temporary things like travel.
Some of the reduction has been in pushing out head count as Mike mentioned, you know some of that will work well look to reinvest as we get into the latter part of the years, we talked about.
But it's it's this is where we're trying to watch things closely in terms of what's going on with the business and making sure that.
You know, we're keeping on the areas, where we've got some flexibility on the on the margin.
A lot of that really was due to just being less productive in the second quarter in terms of you know the inventory that we were producing so we still.
Like our longer term <unk> gross margin profile, but again, we've got to flex our our production capability a with demand. So I think the team's doing a very very good job of managing that and we'll look to you know we'll look to grow from here.
Thank you next question comes from.
Yeah.
Hi, Mike and Andy Thanks for taking the questions and I guess to start off I wanted to continue with converged, but just ask how you're viewing the adoption potential longer term persistent versus longstanding persistent patients and just any nuances around really reaching those longstanding.
Persistent peaks patients, specifically and creating new standard of care for that patient population.
Yeah, I mean, it's it's a really good questions to piece that kind of what's happening in a persistent market. We believe that we're going to be applicable to both the persistent and the longstanding persistent markets.
For sure the benefits are even greater in the long standing persist market there more durable.
And that's a great patient population to start with its 45% of patients that are out there. They're the ones that EPA is already raised their hands up immediately and say I can't duties on lot of waste will probably start with some of those more difficult to treat patients. She's a great success, and then move moved away into the persistent overtime, depending on how well they are treating the persistence.
Today, what you see I mean, so I think that's kind of how it's going to progress I think we'll probably do their longstanding persistence first primarily just because those are the sickest patients into the once they have no option for today.
And on the persistent side they have some people feel comfortable doing some aspects of persistent upfront maybe as a first line therapy with a catheter only and then moving to converge and after that I think we'll probably see some of that but that will be over time. So the good news that them, there's a there's millions and millions of patients here.
Both buckets and the results were strong across the board.
Great. Thank you and then I guess, if I could follow up and just ask about your credit nerves lots franchise and just as a market drivers and dynamics you saw during the quarter that shows the ramping adoption and then this is just thinking longer term.
The role of data and really opening up this opportunity further thank you.
Yeah.
What's amazing about it is that I mean, if you think about kroner block a lot of the what we saw was in a drastic patients really it falls into three major buckets that you have crown or bucking use for today. The first bucket is for lung cancer patients and cancer patients really don't get differ.
If they've got cancer and they've got to take out a lung nodule that's space, there's still going to continue down that path. They don't want us metastasized encounter block is used quite a bit within that area. So I'd say, that's kind of one is that that's continuing to grow and people are seeing the benefits of it too is in trauma cases, where you're coming into your and those cases can.
Can you do use now there were fewer common cases in general across the United States because people are driving less at the beginning the pandemic.
You saw that come back near the end and then finally, there being used in other types of procedures and what kind of see like the nuts procedure is one that is being used and that's one that there's lots of data that's getting published its out there and we're actually seeking an adolescent label and battery as well.
Thank you next question.
Yes.
Hi, Mike and Andy It's drew on for Rep Tonight.
Year to touch on search it Hey, Hey, Mike just a touch on surgeon training for a moment, it's always been a critical growth driver for structure, you mentioned on the call that you've shifted more towards interactive virtual training and case coverage.
You talked about any notable trends that you're seeing moving forward I mean could these drive or it could these initiatives drive either even better procedure recovery when cobot or ask her but dies down or should we be thinking that today is education initiatives virtual or in person should just drive even better cardiac surgery penetration.
Overtime.
I think a little bit of bulk I'm in the great thing about there and it's a really good question you could teach back into a variety of areas. I mean, one is if you look at our core basic mace training courses.
We've been able to touch more cardiac surgeons. During this period of time that really we've ever been able to because it's been virtual people are willing to get on the phone for a couple of hours go through.
That training and have a really good interactive dialogue they loved the journal clubs that we put together whether in smaller group settings at intimate conversations with it appears that we've been able to kind of run that you can't really yet if youre doing it in another environments. In addition to that what we're seeing as we've got these mobile cadaver labs that are going around and there's lot of training that's occurred.
There were getting a lot of demand that people want us to kind of hands on technical training with the product and that's gone really well because it bring it to the hospital in the hospital. They just kind of go outside they go into cadaver lab, and we're getting comments like Thats the best.
On a hands on training that I've ever had and I didn't have to travel and trains a three day. So those the kinds of transformational things that are going on but I think we'll be sticky for the long term that will enable us to get in front of more people that I do think will eventually to your point have stickiness to kind of long term adoption.
Got it. Thank you and then just on encompass.
You mentioned that you're still on track for a five 10-K submission just want to make sure that.
I had that that timeline correct.
And when that timeline would be and then just touching on commercialization of the device I mean, what would you expect a full commercial launch or something or is there something about this particular clamp that might require a little bit more training for a surgeon.
I won't want to set a full commercial launch sometime next year.
We're in conversations with the FDA feedback on our submission and it's been a great submission. So far so from I don't know the exact timing is going to need to sometime early part of next year will likely begin to roll out of that.
Thanks for taking a cautious Mike.
Yes.
Thanks.
Question comes from.
Hey, good afternoon, I think so much for taking the question congrats on putting up a solid quarter. Despite all that.
Oh, that's happening I was curious.
Mike If you could give two questions first on the back half a year in and where we're seeing some other regional variation I mean can you give any color on sort of how.
Your regional revenue breaks down a little bit to give a sense of sort of south versus west versus northeast I mean, it sounds like maybe you have a lot of exposure in Texas for example, but just any sort of.
Color to give comfort on on how to think about the back half of the year as we do see covitz were spread seemingly and weve.
The country.
Yeah, Matt It's a very really fair question, Daniel I'll start with the kind of the northeast It was hit the hardest in the early part of the year. The northeast is a solid region for us its been a solid performer for us, but it basically went down to pretty much zero in the beginning part of April than it was it almost no cases were actually happening up there that's maybe.
A nice recovery in the last couple of months, but it's going to slow recovery and it's not back to full normal but the good news is that it's actually you know cases are happening every day now and people are busy which is really gets but you kind of alluded to it. If you look at Florida, Texas on Southern California. Those are three of our biggest most penetrated regions in the country in the world.
They are big aspects I want to hospital shutdown of pushes off two weeks you lose a couple of weeks here and then they're going to come back and that's why it's so really fluid moment they were tracking.
Every single day from that standpoint, that's why we're uncertain do is exactly what the numbers are going to look like in the back half the year, we do think that especially for right now you're getting you were getting impacted a little bit and southern Florida in particular kind of enough kind of Miami area.
And then Youre, a little bit obviously in Texas in certain areas like Houston in places like that we're seeing an impact so it's in pockets and what we're hopeful for is that those begin to recover and then if others get hit there a little slow down in some other as right now attending in some of the heavier areas, where we've got the heavier volume.
For sure and that's kind of I think a more short term phenomenon hopefully everything is going to recover here and there was hospital will come back on line I'm over the coming months got it. Okay. That's actually very helpful. Color. Thank you for that and then my second question is on converge and how to think about the go to market strategy here since you are.
Targeting not just the cardiac surgeon here, but really the E P.
Okay, and just curious about how to think you know I think you had what 27 U.S. trial centers do you go there first is there room to grow the number of procedures done in those existing trial centers and then you go to your currently and planning cardiac surgeon centers and try to get the p. by in there or how do we think about that.
A little bit of all the above I mean, we've got over 100, we had about 100 sites are so that continuously had been using our product not only to 27 trial sites, but really there's about 100 sites that were ordering every quarter or solid sites. They've got good case finds <unk> co which is them. So things have been kind of shifted a little bit but those are the obvious ones. We've got a plan for each.
One of those once we get the approval for how to expand within those sites get more ERP referrals and more easy piece to understand it. Besides just maybe the one or two each piece that were part of the trial that were part of initially we've also got a list of those that we think our sites that would be good partners for us based on who the p. might be.
What hospital covers they've gotten if they've got a good surgeon that's going to be very interested so we're hitting on all those and then we prioritize that on the timeframe and so once you get the approval will be ready to kind of hit the ground running within all of those hospitals. We're also taking inbound calls from people that are very interested as well. So they've been people that have obviously seen the data and they've theyre interested once you get the approval the.
Kind of muscle.
Thank you so much.
Thank you and I'm not showing any further questions at this time.
[noise] without any further questions again, I hope everybody stays a safe and healthy appreciate your interest in nature and look forward to talking to many of you over the coming months everybody rest this summer.
Ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a good.
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