Acutus Medical, Inc. (AFIB) on Q2 2021 Results - Earnings Call Transcript
Operator: Good day, and thank you for standing by. Welcome to the Acutus Medical Incorporated Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. I would now like to hand the conference over to your speaker today, Caroline Corner, Investor Relations. Please go ahead.
Caroline Corner: Thank you, operator. Welcome to Acutus' second quarter 2021 earnings call. Joining me on today's call are Vince Burgess, President and Chief Executive Officer; and David Roman, Chief Financial Officer. This call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements. Factors that may cause results to differ from these forward-looking statements are discussed under the forward-looking statements section in the press release attached as an exhibit to Acutus' Form 8-K filed with the SEC today, and are also discussed in more detail under the Risk Factors section in Acutus' most recent filings with the SEC, including the risk factors described in Acutus' Form 10-K. Any forward-looking statements provided during this call, including projections for future performance are based on management's expectations as of today. Acutus undertakes no obligation to update these statements except as required by applicable law. Acutus' press release with second quarter 2021 results is also available on Acutus' website www.acutusmedical.com under the Investors section and includes additional details about Acutus' financial results. The Acutus website also has Acutus' SEC filings, which you are encouraged to review. A recording of today's call will be available on the Acutus website by 5:00 P.M. Pacific Time. Now, I'd like to turn the call over to Vince, for his comments and second quarter 2021 business highlights.
Vince Burgess: Thank you, Caroline and good afternoon to everyone joining us today. During today's call, I will provide an update on our key strategic priorities as well as some recent clinical, commercial and market developments. I will also comment on our second quarter results and provide some thoughts on external market dynamics. David will follow up with details on our financial and operational results as well as our outlook for the rest of the year. Our team remains steadfast in its commitment to reshape the field of electrophysiology. There is nothing more important to us than improving clinical outcomes and changing the treatment paradigm for the patients and healthcare professionals we serve. We recently completed an $83 million capital raise net of fees and expenses and with improved momentum in our business, we are charging forward on all fronts and realizing our strategy to become the partner of choice to electrophysiologists through our broad and differentiated portfolio of access, diagnostic imaging and therapy products. We are executing on our commitments and we are building this company for long-term success. As we look further -- as we look to further bolster our commercial strategy, we are pleased to welcome Niamh Pellegrini to our Board of Directors. Niamh currently serves as Chief Commercial Officer at Nevro and has over 20 years of experience in the medical device industry. Niamh has held commercial leadership roles at several companies where she has a track record of driving strong growth and consistent performance. We are very excited to benefit from Niamh's guidance as she joins the company's Board this month. I also want to thank Shahzad Malik for his extended service as we announced today that he will step down from our Board of Directors. Shahzad and his team at Advent Life Sciences were among the first to invest in Acutus during our Series A round in 2011. Shahzad has been a trusted adviser and friend over the past decade and we greatly appreciate his contributions and support. Over the past several months, we have seen ongoing improvements across our three strategic pillars; technology and innovation leadership, commercial execution and operational excellence. These improvements are reflected in our second quarter financial results as well as in recent product approvals and clearances, R&D program development and physician engagement. All of these initiatives were clearly on display at the 2021 Heart Rhythm Society meeting that was just wrapped up in Boston in late July. As a reminder, this was the first in-person HRS since 2019, and our first opportunity to be in front of a large group of physicians since our full-market launch in February of 2020. In our booth, we showcased our complete and highly differentiated product portfolio, as well as unveiled details of major development programs. We featured our broad offering from Access with our AcQCross Transseptal line of products to diagnostics and mapping with our AcQMap system to therapy with our AcQBlate Force-Sensing Ablation Catheter and System, as well as our Pulsed Field Ablation Program. We were thrilled and humbled by the strong attendance at our booth, and our relevant scientific sessions, and a large number of walk in customers eager to learn more about, who we are, and what we offer. Many of our conversations during the meeting carried a common theme of acknowledgment from the clinical community that Acutus is positioned not only as a participant in EP, but poised to be a leader in the field. Our sales team left the meeting with over 150 high potential leads and we are already capitalizing on these incremental commercial opportunities. Our rhythm theater session at HRS included nine of the industry's most well-known and accomplished EPs. Here we highlighted the core-to-boundary individual ablation strategy that is uniquely enabled by our AcQMap system. In addition, we introduced our development plans for our Pulsed Field Ablation or PFA program, which we believe provides a differentiated paradigm in ablation therapy. We had not previously discussed our PFA program in detail with the broader clinical community, and we were very encouraged by the response from HRS and attendees. A full replay of this session is available on our website and YouTube channel. Just to drill a bit deeper here unlike the vast majority of PFA programs under development we are using our AcQBlate Force-Sensing Ablation Catheter as the therapeutic workhorse delivery device for our PFA program. Physicians will have the opportunity to adopt PFA, with a familiar platform as well as have the option to use our catheter for either RF or PFA procedures. In addition, our catheter will enable focal point ablation with PFA, facilitating more targeted delivery of therapy and flexibility to reach any anatomy during treatment. Having a point ablation system will allow us to treat patients suffering from all cardiac arrhythmias, including atrial fibrillation and disease in the ventricles and right atrium. Combined with our AcQMap mapping system, our PFA program will have the potential to enable patient-specific ablation therapy, especially among more complex patients. This is a deliberate choice to enable a fast therapy platform on a fast imaging platform to guide therapy in line with our mission to treat AF with a personalized approach to improved outcomes. In recent months, animal studies have shown increasingly promising results and we continue to expect first-in-human for our PFA program later this year, and will provide updates accordingly. In addition to PFA, we continue to make progress in our efforts to bring a therapeutic catheter to the US, Enrollment in our US IDE trial for right atrial flutter is progressing well and we continue to expect to complete enrollment toward the end of this year, with approval for the catheter and system in late 2022, or early 2023. In May the FDA-approved our IDE application to evaluate the AcQBlate Force-Sensing Ablation Catheter and System in both paroxysmal and persistent atrial fibrillation patients. We are in the process of recruiting sites and expect to treat the first patient in this trial during the third quarter. As we continue to advance our clinical development pipeline, we have achieved several important regulatory clearances and approvals that are critical elements of our product portfolio. These include our AcQBlate Force-Sensing Ablation Catheter and System in Europe, our complete line of AcQCross Transseptal devices and our next-generation delivery sheets and Access devices. Our Transseptal and Access product lines are allowing us to increase our revenue for the procedure into accounts where we do not currently have an AcQMap system and generate revenue in both EP and structural heart procedures. Earlier this week, we announced the receipt of CE Mark approval and 510(k) clearance for our AcQMap 8 software package. AcQMap 8 is a significant update to our mapping software that will continue to set the standard on fast mapping and diagnose of complex arrhythmias. AcQMap 8 will greatly improve physicians' ability to visualize and identify regions of interest for the treatment of complex rhythms, helping our customers further improve patient outcomes through an even more streamlined procedure. We expect this software upgrade to be a key factor supporting increased mapping procedural utilization here in the second half of the year. Over the past year and a half, we have significantly expanded our product portfolio from about 15 SKUs in January of 2020 to just over 100 SKUs as of the end of July. This equips our commercial teams with the critical foundation of Acutus products needed to build scale in EP. We will continue to expand our product offering in the coming months and years with both incremental launches as well as new platforms. Now turning to our results during the second quarter. We generated revenue of $4.7 million compared to $1.1 million in Q2 of 2020 and compared to $3.6 million in Q1 of 2021. Year-over-year growth was driven by higher procedure volumes globally and increased capital equipment revenue while procedure volumes and disposable revenues accounted for sequential growth in the quarter. We increased the worldwide installed base of second-generation AcQMap consoles to 68 at the end of Q2, up from 57 at the end of Q1 bringing the total installed base of AcQMap eight consoles to 70 as of June 30, 2021 versus 62 at the end of last quarter. We exited the quarter with a strong funnel and expect to see continued growth in our installed base through the rest of the year. As discussed previously, we continue to focus not only on growing our installed base, but also targeting the right accounts for sustainable utilization. During the second quarter, we saw these efforts take hold with several new customers now performing procedure volumes within the top quartile of utilization. At these same accounts, we saw active reorder rates during both exiting Q2 as well as here early in Q3. Moving to procedures. We registered volume growth on both a year-over-year and sequential basis in our Europe and US direct business. This growth came from both new account openings and associated uptake as well as underlying growth in existing centers. In addition, our expanded product line is driving disposable revenues outside of AcQMap cases and we expect this to be a key driver on a go-forward basis. In the US, we saw general stability in market dynamics during the second quarter with limited restrictions on elective procedure volumes. As you are all aware, however, COVID infection rates have been rising across the US. This is an extremely fluid situation and we are actively monitoring hospital and government actions in response to higher COVID cases, COVID related hospital admissions and staffing shortages. As any regional coded restrictions in the US emerge, we are prepared to actively reallocate our field team's resources elsewhere. In the U.K. and Europe, COVID continued to affect our business throughout the second quarter. One of our largest centers in Europe for example was shut for nearly two weeks due to a shortage of anesthesiologists and nurses. We continue to see some intermittent COVID related headwinds in Europe and the UK, but not materially different from what we have seen in the last few months. Through these challenges, our team continued to execute extremely well and drove increased procedural volumes, new account openings, and overall revenue growth. Lastly, our partnership with Biotronik continues to deliver strong results. During the quarter, we were able to fill almost all the back orders for our ablation catheter to support a full launch in Biotronik territories and we expect to see broader adoption of our products through Biotronik in the coming quarters. Procedure volumes were negatively impacted by hospital closures in Germany and our ramp in new markets like Malaysia has been delayed both due to COVID. In the face of these external factors, the Biotronik commercial team remains heavily engaged on training and implementation and we expect this collaboration to be a critical driver over the short, medium, and long-term. Overall, I am extremely proud of the progress our teams are making to execute our strategy and bring innovative solutions to this large and growing market. Through the rest of 2021, we expect to have several clinical data, regulatory, and product milestones that will further illustrate our long-term value proposition. We look forward to providing those updates throughout the year. With that, I'll now turn it over to David for our financial results. David?
David Roman: Thank you, Vince and good afternoon everyone. During my remarks today, I will provide details on second quarter 2021 operating results as well as our outlook for the rest of the year. As Vince mentioned, our revenues for the second quarter of 2021 were $4.7 million, up from $1.1 million in Q2 of 2020. The Q2 year-over-year revenue increase was driven by procedural adoption for our broad range of EP products and Transseptal Access devices, direct capital sales of our AcQMap console, and our distribution agreement with Biotronik. Sales in our direct businesses of $3.5 million increased from $900,000 in the second quarter of 2020. On a sequential basis, sales in our direct business advanced 45%, led by higher procedure volumes and associated disposables as well as increased contribution from new product launches. Revenue through distribution agreements of approximately $1.2 million compared with $223,000 in the prior year second quarter, driven by both procedure volume growth, capital sales, and new market access through our partner Biotronik. Non-GAAP gross margin was negative 54% for the second quarter of 2021 compared with negative 130% in the second quarter of 2020 and negative 89% last quarter. The sequential and year-over-year improvement in our non-GAAP gross margin largely relates to higher production volumes and increased disposables mix. As we have discussed previously, we have made and continue to make significant investments in our manufacturing footprint to support long-term growth. With ongoing growth in our business, we expect to see our gross margin continue to improve as we scale revenue. Non-GAAP R&D expenses were approximately $8.5 million in the second quarter compared with $8.1 million for the same period of 2020. The increase in R&D expenses was primarily related to investments in the AcQBlate Force-Sensing Ablation Catheter our Pulsed Field Ablation program, software development, and upgrade to our AcQMap mapping catheter. Non-GAAP SG&A expenses were $12.5 million in the second quarter of 2021 compared with $8 million in the year ago quarter. The increase was primarily due to the expansion of our commercial team, in conjunction with our full global launch, and an increase in G&A for public company-related costs. Excluding specified items, our non-GAAP net loss for the second quarter of 2021 was $25 million or $0.89 per share compared to a non-GAAP net loss of $18.8 million for the second quarter of 2020 or $1.08 per share after giving effect to the pro forma conversion of our convertible preferred stock. Our total cash balance at the end of the second quarter of 2021 was $81.2 million. In early July, we completed a secondary equity offering including the greenshoe over allotment, which resulted in gross proceeds of $88.6 million and the issuance of 6.325 million shares of common stock. Net of fees and expenses the offering yielded proceeds of approximately $83 million which we'll utilize to fund commercial expansion, accelerate key R&D programs, and invest in infrastructure to support future growth. Looking to the remainder of 2021, I would like to provide some further detail regarding our outlook for the rest of the year. For the full-year, we are maintaining our guidance range and expect revenue to be in a range of $22 million to $30 million. We recognize the wide range in this outlook for the second half of the year. This largely relates to the variables in the external environment, as well as the extent to which our business is influenced by capital orders and conversions. The lower end of our guidance range, requires a similar improvement in the second half of the year as to, what we have seen on a year-to-date basis. The Q4 to Q1 and Q1 to Q2 improvements in our business primarily came from new account openings, increased same-store utilization, higher new product contributions and moderating but still present COVID headwinds. At the mid-to-high end of our guidance range, we would need to see an acceleration in these key drivers, normalization of end-market conditions related to COVID and higher capital equipment conversions. As it relates to the phasing of sales through the back half of the year, we would expect a disproportionate weighting to the fourth quarter. This is largely tied to the potential for short-term COVID disruptions, some enhanced seasonality due to extended vacations and time away from the hospital in several key centers and geographies and the resulting impact and timing of reorder rates and new system installations. Based on the electric procedure volume patterns observed in 2020, we think it is very reasonable to expect any procedure volume disruption to prove transient. We will provide further updates during investor conferences and our third quarter earnings call in November. I will now turn the call back to Vince, for closing remarks and to facilitate the Q&A.
Vince Burgess: Thank you, David. As I reflect on the cadence of our performance in the first half of the year, I'm pleased with the trajectory of our business. Our commercial execution globally is strengthening, and I am confident we have the right team in place. In addition, we continue to advance several key products through our pipeline and expect 2021 and 2022 to be very active years for product approvals, regulatory clearances and clinical milestones. We are rigorously focused on our own execution to maximize performance and drive our business forward. We appreciate your continued interest and support and we'll now open the call to your questions. Operator?
Operator: Your first question comes from the line of Robbie Marcus from JPMorgan. Your line is open.
Saran Baskar: Hey guys, this is Saran on from Robbie's team. Thanks for taking the question. The color on the guidance there, I just want to dig into that a little bit. So if I look at the midpoint $26 million in sales for the full-year versus about eight -- just over $8 million in the first half. What are you seeing right now in the quarter that gives you the confidence that either utilization or new placements can get you to the lower end or the midpoint of that guidance? I mean, what are you seeing so far that gives you that confidence?
David Roman: Sure. Let me just frame that a little bit. If I look at the year-to-date drivers -- and the way I think about that is the improvement in our revenue from the fourth quarter to the first quarter and the first quarter to the second quarter, -- what the drivers of that were as I said new account placements, new product adoption and increased utilization. As I look at each of those, -- let me start with new account openings. We opened a number of accounts very late in the second quarter, what I would describe as really the last week of the second quarter. And those accounts where we opened late, we are seeing very strong uptake in utilization. One of those accounts is already in our top quartile of utilization, as we referenced on the call, I would also say that a couple of the other accounts we opened in the second quarter earlier on also saw a significant ramp in utilization during the second quarter. On the new product front, most of the -- many of those new products were really launched during the second quarter. And that second quarter launch cadence, we saw a very strong uptake in products like our non stress -- our Transseptal crossing devices as well as our AcQBlate, Ablation Catheter. That trend on new products is continuing here into the third quarter and we would expect those products to contribute incrementally on a sequential basis. At the same token, those new accounts that we opened at the end of the second quarter, really had no contribution to second quarter revenue and we should see the contribution of those sequentially start to increase in Q3 versus Q2 as well. And then the last piece of the puzzle here and this is a very important variable both in Q2 and for the rest of the year is how we execute against capital conversions. And just to remind you and everybody on the call well the increase in our installed base is not necessarily reflective of a capital sale. Remember we place systems under evaluation and later aim to convert those to a capital sale. So we have a number of systems coming up for evaluation in -- where that evaluation has completed where we expect to convert those to capital. We already have converted -- we already have seen conversions here in the third quarter.
A – VinceBurgess: I mean I would also comment that our commercial team is in the US in particular and Europe is really coming together. We added a new Chief Commercial Officer, Wayne Wilder. And I think March 1st of this year. And the team is really gelling as we sit here today. And if you look at our direct revenues in Q4 of last year as set against our direct revenues in Q1 of this year and then Q1 as set against Q2 the team is figuring out the formula here for driving installs driving utilization driving engagement with our docs.
Saran Baskar: Got it. Thanks. And looking below that top line I think spend actually came in a little lighter than we were expecting in the quarter. As you have this revenue ramp and especially weighted to 4Q where should I think about operating expenses coming in at relative to what we saw in the quarter?
David Roman: Yes. So we have spent quite a lot of time in the past several months really trying to fine-tune our operating expenses and prioritize our investments in R&D. I know your team specifically has focused a lot on R&D. You'll probably notice that R&D was down sequentially from Q1 to Q2 on a non-GAAP basis not reflecting our lack of investment in R&D, but more reflecting our effort to very clearly prioritize our investments and to ensure that we are utilizing our precious resources in a way that is most productive. So if you look at our operating expense some flat-ish on a non-GAAP basis from Q4 through Q2, despite the revenue ramp. Our cash burn did moderate significantly from Q1 to Q2 as well. I would not expect a $7 million a quarter improvement in our cash burn going forward. But on the operating expense side I actually would not expect significant growth in OpEx in the back half of the year which -- contrasted against an improving gross margin which you saw here. We will grow operating expenses on a go-forward basis particularly to support the commercial expansion. But I would expect us to be in this $23 million to $25 million a quarter range on just pure operating expenses and then that being started -- that starts -- it should start to get funded a little bit by a turn in the gross profit line because as we said previously to be at a positive gross margin we need to be at about a $3 million monthly run rate to get to gross margin breakeven depending on some mix factors obviously. So we are very focused on managing our expenses in a disciplined way not foregoing opportunities to invest at this stage in our development, but ensuring that we're prioritizing those investments and effectively managing our cash.
Saran Baskar: Thanks for taking my question.
Operator: Next question comes from the line of Bob Hopkins from Bank of America.
Brad Bowers: You have Brad Bowers on for Bob today. Thanks for taking the question. We understand the cardiac procedures this year have held on better than some of the others. But with COVID cases rising, I was just wondering if you're nervous or if you're seeing any signs that your access to the hospitals, might be going down again? Or if you've worked out some new arrangements and what your confidence is that you're going to be able to get your sales force into talk to EPs going forward.
Vincent Burgess: Yeah. I mean, I'll take that. I think the large majority of our hospital customers we've talked with have made -- invested a lot of time and energy, to figure out how to discharge patients following ablation on a same-day basis, so that they can get patients in at a hospital, not have to have spend an overnight, not have family away from the patient overnight all that sort of thing. Having said that, there's only so much you can do. And certainly, we are seeing regional hotspots, crop up and impact the hospital business, the EP business and our business. I pointed during the prepared comments to some hospitals in Central Europe. This last quarter where they didn't have enough anesthesiologists, or nurses to staff, because of some of the influx of patients they were seeing. And they shut down typically for two to four -- two, three weeks. And then, they'd gradually find a way to come back up. The U.S. right now, as I commented earlier is very fluid and very regional. And we're watching it like a hawk. Now if you remember, our U.S. installations are highly concentrated, very much so in the southwest and in the southeast. The southwest, we're not seeing much impact if any impact. As we sit here today -- I was on the phone with one of our top customers just before this call and he said that, they're their inpatient COVID population is something like, 1/10 that it was at the peak last whatever it was spring. And they are unaffected by COVID at this time. Talked to our Regional Business Director in the southwest, heard the same thing. Also spoke with one of our top salespeople in Florida today. And it's a different story over there. We've got some historically very productive installs, in Florida. And the majority of those as we sit here today, have curtailed or stopped elective procedures over the last 10 days to 14 days. We're hearing that they hope to -- a couple of them hope to come back online here within a week or so. But I'll tell you, it's a little bit of a white knuckle situation out there. And we don't have a crystal ball on this. We're moving resources around a hospital shutdown. And we repurposed our team. And they're off selling our septal crossing devices into other accounts that are still up and running or we have our mappers fly and cover cases elsewhere, where we can. But it's a very fluid situation in the United States right now to be perfectly candid with you.
Brad Bowers: Got it. Totally understand the fluidity and difficulties. So I appreciate the color that you are able to give us. So thank you for that. And then, if I can just on one follow-up here. I just wanted to understand the amount of runway that the recent capital raise gives you? And how much revenue growth versus cost-cutting would help out on the cash burn there going forward. So I appreciate you are taking all questions.
David Roman: Yeah. We think this would get us to mid-2023, assuming no drastic actions on expenses or abnormal cost management initiatives that we'd have to undertake. So that contemplates continued hiring within our sales force, continued investment in R&D programs, advancing our clinical programs et cetera. So we think this does provide us with a -- with good runway to that time point. So as we think about the cash management or the model here, I want to be really clear on the cost side, we're not necessarily looking to cut expenses. We're looking to put our resources in the most productive place as possible. And each dollar we have, we know is a dollar that could be spent elsewhere. So we're going to continue to invest very actively in our business to make sure we do that prudently. As you well know, revenue growth and gross profit pays a lot of bills. So as we look forward turning that gross margin positive should have a pretty pronounced impact on cash burn and we're not necessarily looking to increase expenses on the heels of a turn in our gross profit. That would simply improve our overall financial position.
Brad Bowers: Understood. Thank you.
Operator: Next question comes from the line of Margaret Kaczor from William Blair. Your line is open.
Margaret Kaczor: Hey good afternoon guys. Thanks for taking the questions. Maybe to start off with just wanted to follow-up on HRS. It sounds like you had some strong feedback there the 150 high potential leads, which seems like a pretty nice number versus the sum of the installed base we have now. So I was just curious, how do you qualify high potential lead? How have they historically trended in the past in terms of closure rates? And over what time period should we potentially look for something like that?
Vince Burgess: Yeah, great question. And I'll tell you we spent a lot of time pre-gaming for HRS this year. We were on the phone with the organizers of HRS on almost a weekly basis trying to figure out who the heck was coming. Were people coming from overseas, were people coming at all were fellows coming and what not, and titrated our staffing up to the very last moment. So we felt like there was a pretty good group of folks that were going to go ahead and come to Boston and we staffed midrange and went pretty all out in terms of physician engagement and some after exhibit hour’s social events and that sort of thing. And I'll just tell you it really paid off. The attendance, I don't have the actual numbers but what was interesting was we were able to generate interest and booth traffic and true high-quality leads that -- I would have been happy with that lead number in a normal year. This year I only talked to two or three physicians from OUS, the whole show. It was -- virtually no one came from Europe and very few physicians from Asia. And I would also point out that the attendance from the west -- as we looked at our leads, the vast majority of our leads were from mid country to the east. And the leads from the west were actually down significantly and disproportionately lower, which I think reflected some of the hesitancy to travel either due to COVID or just fatigue and wanting to spend time with family. But in spite of all of that generated over 150 high quality leads. We did something I've never done before in my career. On the Monday following, we had 24 of our booth participants sit and go line by line look at lead by lead and connect the dots with each and every lead, assess the quality of each lead and assign those 24 after -- 24 hours after getting home assigned those to our account managers and mappers and VPs. And we had really, really good engagement not just with our mapping system leads but with our septal crossing leads and our left heart sheet that we just launched a couple of months ago, which by the way every single left heart procedure needs a left heart sheet is just a rock-star new product. I think we're going to really do some great things with. So great leads there and those are also kind of door openers for mapping systems as well. So super excited about how it went. As usual I think you might have been at our HRS in San Francisco a couple of years ago. We always come with a little bit of a different look, a little bit of a swagger. We don't wear suits and ties. And I think people appreciate the way we come at -- our rather unconventional approach and the way we passionately come at this business.
Margaret Kaczor: Okay. Just to follow-up the 150 could be physicians of all sorts that are going for various types of products. And ultimately they start as transseptal crossing capital ultimately hopefully can grow that high. So maybe correct me if I'm wrong on that. And then second of all, if you look at the procedure ASP or your revenue per account, I'm just trying to figure out a good way of trying to bring in some of those other products that you guys have. How is that trending? And is that a good number for us to take a look at as we go towards future quarters?
David Roman: Yes. So I think on the first part of that question Margaret, that's a fair assessment. Each physician coming to the booth may have had a different interest. Clearly, we're trying to steer people to the AcQMap system as kind of the anchor tenant of our portfolio. But certainly, as physicians look to get to know our company, some of the Access devices, which are universally available for their existing procedures is a good way to introduce us to the account and we have seen in one account in Arizona, for example, it was actually having the Transseptal product that got us the system into Banner Health in Scottsdale late in the second quarter. And the other -- on the second part of was how to model the impact on some of these new products. I think the ASP is probably the most efficient way to talk about it. We did see the ASPs in our direct businesses rise modestly Q1 to Q2. With that should rise probably more -- continue to rise on a sequential basis, because remember the timing of some of these product launches, was really within the second quarter. And more takes -- it takes some process to get through that committee and get on contracts and other things like that. But we would expect to see a progressive improvement in our revenue per procedure on a go-forward basis. And obviously in the US specifically, we would expect a step function of that once we have an ablation catheter available, because in that area, we're leaving to the tune of $2,000 of the total procedure opportunity on the table right now.
Margaret Kaczor: Got it. Thanks, guys.
Operator: Your next question comes from the line of Bill Plovanic from Canaccord. Your line is open.
Bill Plovanic: Great. Thanks. Good evening. Thanks for taking my questions. I'd like to focus on the system placement pipeline. First, just with the new COO coming on and kind of getting the CRM going and then, you've made some commentary regarding focusing on the right counts. I want to make sure that we don't get lost and concerned if maybe the installed base numbers are different in the next couple of quarters, because you're shifting systems around in the field, I wanted to ask that question. And how should we think about that? And then, from unproductive accounts to potentially productive accounts. And then secondly, as you talk about that new installed pipeline, you have a lot of systems out there that are getting ready or kind of hitting that a six to 12-month time frame where there's some decisions to be made. And how should we really think about the capital as we exit this year and into next year, especially when you think about the lease versus the sale programs? Thanks.
David Roman: Sure. So, I'll take the second part of the question, and Vince maybe you can expand on the strategy with respect to our account placements. The capital contribution to our business Bill will become more significant here in the second half of the year and on a go-forward basis. And that is true both in -- across all three of our operating segments Europe, US and our distribution partners. And the reason for that is exactly what you pointed out which is, we have a number of evaluations that are coming to expiration. And we will be in a position to convert those to capital commitment deals or cash sales. The benefit of the capital commitment deals for us is it gives us a nice stream of long term predictable revenue. It does result in slightly lower upfront revenue that we're able to recognize. But as we've started to come to completion on evaluations, we are having pretty good success actually on the capital conversion side and would expect that percentage of revenue to rise here. I think we referenced in the script that capital sales were roughly flat-ish Q1 to Q2. As we also have systems out there for greater than a year on permanent commitments or capital purchases, we will start to recognize services associated with that, which is about $25,000 a year of service and $5,000 in software that as a standard is included in the first year of the installation. On your first question about the pace of installs and the strategy around identifying productive accounts and moving systems around, we are actively doing that. There is very little value to us and actually anyone in the ecosys the patient or us having a system in a site that doesn't make sense. And that can be the result of the physician champion has left. It can be the result of the fact that we quite frankly in our early commercial launch did not tick the right accounts into which to install these systems, or there can be a variety of other factors at play. So we will look to move systems around bring them back here, upgrade them and redeploy them into the field. In the second quarter, as I said, we added eight net installations to the installed base. We will probably have some removals here in the back half of the year. So that could impact the pace of the increase in the installed base. I would certainly expect to see the installed base higher on December 31 and where it was on June 30. But our focus is really on finding the absolute right accounts. And without -- I don't want to go into the revenue numbers that one account in particular is ordered here in July, but it is really a reflection of getting accounts to the point where they're doing multiple procedures a week and that driving consistent utilization and reorder rates. We opened a center in April in the Czech Republic that was doing five procedures a week some months, and to the tune of 10 to 15 a month very consistently. That was not a multi-month ramp up. That was almost immediately subsequent to installation. And we have a couple -- we probably now have three or four of those accounts as an example that we've been able to open here recently in the US. So the installed base will continue to grow. I think there has -- I know there's a tremendous set of focus on the growth in the installed base. Our focus is on trying to both grow the installed base, but at a pace that allows us to meaningfully ramp utilization and disposable revenue and reorder rates.
Vince Burgess: Yes. The other thing I'd add is, we're not resting in terms of refinements that we can and need to make to our console and software to increase and improve the hit rate and uptake rate at every install we do. I can't even fathom, the thousands the number -- the thousands of man hours our software algorithm and marketing team spent figuring out the workflow, figuring out the additional tools that we needed to add to that console to address situations where we didn't have that snap uptake. And that resulted -- that effort and that focus resulted in the launch of AcQMap 8, which we just -- we got approval on and announced whatever it was yesterday. This is a major release for us. This software -- suite of software products not only integrates ablation now fully into our system in Europe and CE Mark countries, fully integrates with our RF generator our pump, our cubic force unit, our mapping system in a way that puts us absolutely in a position where we're going toe-to-toe with the competition with a complete mapping and ablation system. But I think even more importantly, we have now added and we have CE and FDA clearance on a whole suite of algorithms, which automatically interpret our maps for our mapper and for the physician. And to zero their eyes in on a whole chamber view of the or the left to right atrium and we automatically highlight and show regions of interest that those mappers and physicians to focus their eyes in on. And I will tell you that was probably the biggest single impediment to rapid uptake for our physicians really around the world that -- for the folks that got the system it was -- the maps A-fib and other complex arrhythmias are just that. They're complex. They're somewhat chaotic. And to the human eye to look at a whole chamber to try and visualize and do your therapy planning around a fairly chaotic rhythm, We now have algorithms that will actually crank through and churn through all that data and call people's attention to specific areas. And I think that's going to – that has the potential to dramatically increase our uptake rates and our utilization rates as we go forward. And that's launching – we're launching that across our entire fleet over the next couple of weeks. We don't hold up the process by trying to sell software upgrades and monetize those software upgrades for any significant revenue because we want the best possible product in front of every single customer every day.
Bill Plovanic: Great. And if I could follow-up with the question Vince, we've talked about this. When you're launching a new product it's getting that reproducibility repeatability of the process. You've talked in the past about onboarding an account and the things you've learned over time. I'm curious, how much has that changed over the past 90 to 100 days since you last revisited that at least with the investment community? And how should we think about that in terms of repeat –
Vince Burgess: I think over the last three, three and half, four months we've gotten a lot better at onboarding accounts. And not to get too into the weeds here, but I think one of the things that we've learned is that when you have a brand-new physician user looking at these – the mapping system and the results the images that come out of the mapping system there's a temptation to go right into the most complex nastiest multiple redo case possible so that we can show the clinical utility of our product out of the gates. That kind of makes sense, but it's also pretty risky, because if the doctor doesn't – as a doctor interpreting what he's looking at and planning his therapy strategy, and maybe even believing what he's looking at that can be an uphill battle. What we do now typically is we actually as close as we can to mandate our physicians, use our mapping system in simple cases in the first couple of cases, where we know what that rhythm is going to look like science rhythm or typical flooders something like that. And the doctor has it in his or her mind what that map should show. If it has the fidelity and the reproducibility you want, and the visceral effect that we have when we actually go in there with our catheter and show the physician exactly what he expected to see or she, that builds credibility and confidence much more quickly. And it sounds like kind of a nuance, but that approach has had a very significant effect on the uptake on a physician-by-physician basis.
Bill Plovanic: Excellent. Thanks for taking my questions.
Vince Burgess: Thanks for coming to our Rhythm Theater as well, Bill. We hope you enjoyed that session.
Bill Plovanic: I did. Thank you.
Operator: Next question comes from the line of Marie Thibault from BTIG. Your line is open.
Marie Thibault: Hi. Good evening. Thank you for taking the questions. I want to start here with maybe a two-part question on utilization. You referred to some users in the top quartile and a new user, who's really kind of hit the ground running and is already in that top quartile for utilization. So I wonder, if you'd be able to give us any metrics on what top quartile means. Is that one or two procedures per week? What's a metric we could use to think about that? And then also in utilization curious to hear how AcQBlate users over in Europe and perhaps the AcQBlate trial participants in the US, how their utilization differs if at all? And any trends you've seen along those lines the impact of having that force sensing catheter?
David Roman: Sure. So, I'll – thanks, Maria. I'll start with the first question around the top quartile of utilization. That is between one and a half and two a week in that top quartile of utilization, it's still a pretty wide range. As I said, we still have some that are in the two to four to five a week range, but that's a rough average for you to use. On the second question, I don't have that breakout in front of me, but we do have – our utilization rates in Europe are not fully correlated with AcQBlate. And remember, we really just launched AcQBlate exiting the first quarter. Our revenue for AcQBlate in the first quarter for example is like $3,500. So basically one catheter or cut above probably three catheters in Europe. And then we've got that number at $94,000 in the second quarter but it's still in a concentrated number of accounts. And the example I gave you on the account in Europe doing 10 a week that we opened in April, they were doing that level without AcQBlate. They have added AcQBlate to that account. And actually they will – that will happen here in the third quarter. So it is definitely helpful and it does speed workflow a little bit. We're not yet at a point right now where the AcQBlate to AcQMap ratio is 1:1 in Europe though.
Marie Thibault: Okay. Thank you very much.
Vince Burgess: And I don't think there's a single account over there yet that has AcQMap 8, which integrates the catheter – the ablation catheter or the mapping system on the screen in a seamless way that is every bit as if not sort of more seamless than our competitors at J&J and HAVIT. We will start installing those software modules in those accounts in Europe, over the next couple of weeks. And I think the experience that the physicians are going to have is just going to be absolutely next level, when you have that mapping system tied to that ablation catheter seamlessly with that software integration.
Marie Thibault: Okay. That makes sense. All very helpful. And certainly the AcQMap 8 did look very usable, very user-friendly and helpful in finding those flow conduction zones and regions of interest. I guess a follow-up here on PFA, certainly a hot topic at HRS in Boston last month. Spoke with a number of companies there. Everyone seems to have something they're working on. Maybe you could go in a little more detail about why you think focal point catheter, the ability to have PFA and RF on the same catheter, why these things matter. And if anything, why you think your technology could have an advantage over the rest of the field. Thanks.
Vince Burgess: Yes. So if you think about the total number of ablations done in any chamber of the heart globally, it's about one million procedures a year today. 75-ish percent of those are done with a focal point ablation catheter not with a cryoballoon, not with a LASSO catheter that's enabled with PFA that's purpose-built to ablate a circle around the pulmonary vein. Virtually everybody else in PFA right now is focused on that circular lesion to quickly take out the pulmonary vein. Big market, attractive. It's – I get it. But in – as we really went deep with Dr. Mickelsen, who's driving our program here and understood how large a lesion we could make with a focal point ablation catheter. As we understood the pulmonary vein stenosis does not appear to be an issue with PFA, we came to the conclusion that yes, those 75% of ablation cases, where you pretty much have to have a focal point of ablation catheter, that's where we should go. But we can also – we think we can also go after those circular pulmonary vein isolation cases with a point ablation catheter and drop those lesion sets very fast. And as Doug Gibson said, in our Rhythm Theater, he's really – he's been our number one collaborator and contributor over the last year position from Scripps here in La Jolla has been with us shoulder to shoulder the whole year. As we've evolved our waveforms and our energy delivery, he said at the Rhythm Theater – he's like “I'm not sure how I see a circular PFA catheter. Is it going to be any faster in even doing the pulmonary vein isolation than a point ablation catheter if tuned properly”. So if we can go after the 75% of ablation cases that aren't going to be dealt with a – by a circular catheter or circular lesion plus be competitive in the pulmonary veins alone, I like our chances. And I think we've got a absolutely fantastic point of ablation catheter with force sensing on it, which by the way people are increasingly think – thinking force sensing is going to matter with PFA versus the out-of-the-gates view was that maybe it wouldn't. But when you tie that together with the mapping system, which again, we think you're going to want to have, if you're doing anything outside of the pulmonary veins, particularly a mapping system that maps the whole chamber in one minute or two and finds you – helps you find targets to ablate. I think we've got a vividly competitive program here.
Marie Thibault: Well, understood. Thank you, Vince.
Operator: This concludes all of the questions in the queue. Thank you all for participating in today's call. And have a great day, everyone.
