Joanne Wuensch: Good morning, and another nice quarter. Question on operating margins. I think your LRP was 450 basis points over — was it over the two-year period, I would assume? But anyway, and as I was…
Dan Brennan: No, it was over — not to interrupt you, Joanne, it was over the three-year period, 2024 to 2026 was the 150 basis points.
Joanne Wuensch: Excellent. Thank you for that clarification. But as I’m looking at the quarter delivery, it looks like some of the leverage came from R&D, some of it came from SG&A. I’m just curious how you’re thinking about providing that leverage over the three-year period. Thank you.
Dan Brennan: Yeah, I think over the three-year period, all lines will contribute. And I think it’s really a great part of the history of the company and kind of the DNA of the margin expansion story is that at any given point in time, all lines can contribute. So, gross margin at that 69.8%, I didn’t love that this quarter, but I’m optimistic that that improves through the year. But we said at Investor Day, and we reiterated it on our January call, that gross margin probably is not going to contribute this year to the 30 basis points to 50 basis points. So, this year, it’s more of an OpEx leverage story. But absolutely, in ’25 and ’26, I think gross margin can contribute. Recall, we used to be at 72.4% gross margin back in 2019.
We’re maniacally focused on getting back and improving that from where it is today and have the plans to do that. So, I think the summary is, as we look to improve the 150 basis points over the three years, that puts us kind of at the doorstep of 28% at the end of ’26, which is a nice spot to be. It puts that 30% long-term goal that we have really in focus, and all lines of the P&L can contribute along that journey.
Operator: The next question…
Joanne Wuensch: Thank you.
Operator: Sure. The next question comes from Vijay Kumar with Evercore ISI. Please go ahead.
Vijay Kumar: Hey, guys. Thanks for taking my question, and congrats on a really solid print here. Mike, maybe one question on the EP portfolio. The 70% overall growth, 85% US, how — can you give us a little bit of color on, was there any stocking dynamic, how much of this was driven by the account of openings versus that procedure uptake? And sort of related to that, does new tech add-on payment, does it matter where we are on TPT? Thank you.
Mike Mahoney: Yeah. So, the results in the US, 85%, as you mentioned, it was really a mid-quarter launch. So, the teams moved pretty quickly to have some impact in the first quarter. And we look forward to good results, obviously, in the second quarter and the rest of the year based on the momentum. So, there’s not any big one-time stocking. So, this is driven by new account openings and, I would say, very rapid adoption of the technology and therefore continued utilization of the product once they have the platform. We’re also seeing multiple hospitals buying their second console, which also is a great sign, because it shows the adoption and using it routinely every day. So, it’s really new account openings and increased adoption once they start using the platform.
And that’s driving the US results. And as I mentioned in Europe, which I think is impressive, now that they have a bit more supply, they continue to open more accounts and increase the utilization of the existing accounts with the FARAPULSE platform. On the TPT, we think it’s a bit less significant for FARAPULSE, but something we’ll continue to evaluate and we’ll provide you updates as we see them.
Ken Stein: Just to clarify, that’s on NTAP.
Mike Mahoney: I’m sorry.
Ken Stein: Yeah. And Vijay, I think just important maybe to point out, first off, right, the NTAP applies to inpatient Medicare fee-for-service, which is really a small minority of AF ablations today. Having said that, we still do believe that FARAPULSE can use the proposed NTAP related to one of our customers. And actually, I think it’s important from a physician perspective and a hospital perspective that we’re not in a position of having to create unique ICD-10 codes that are product-specific. That’s really not helpful to either the physicians or to hospitals.
Vijay Kumar: That’s very helpful. Thanks, guys.
Operator: The next question comes from Travis Steed with Bank of America. Please go ahead.
Travis Steed: Hey, everybody. Congrats again on the good quarter. I wanted to ask about the new DRG for ablation and left atrial appendage closure and the overall LAAC market. Do you think that market can kind of sustain this 20%-plus growth through — before the indication extensions or do you kind of need to see those indication extensions at some point sooner rather than later?
Mike Mahoney: I’ll make comments, then Dr. Stein. We’re pleased with our WATCHMAN performance. We grew globally 19%, but keep in mind that’s coming off of a nearly a 30% comp from first quarter 2023. And we still maintain, if not enhance, our strong share position. And we’re excited not only with the share position, but with the growth of WATCHMAN, but also some upcoming trials that Ken can further highlight with OPTION and CHAMPION, which we believe if successful will significantly widen the market — TAM for WATCHMAN. So, Dr. Stein, if you want to comment on any of that and also the concomitant item?
Ken Stein: Yeah, thanks, Mike. Yeah, so Travis, first on the trials — I mean, first of all, this is still a healthy market. This is still a very under-penetrated therapy. When you look at patients who are at high risk for stroke and AF, we stand to benefit from the WATCHMAN procedure. The trials that Mike mentioned, right, the first one is the OPTION trial, that evaluates the use of WATCHMAN as an alternative to oral anticoagulants following ablation. And we hope to be able to present the results of that trial late this year or early next year. Then that’s followed by CHAMPION, which is the all-comers trial versus the novel oral anticoagulants. And again, we expect that to report out in 2026. So, these are now in the relatively near term that we’re going to see those data points.
