Stereotaxis Inc (STXS) 2009 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Stereotaxis Third Quarter 2009 Financial Results Conference Call on today the 5th of November, 2009. Throughout today's recorded presentation all participants will be in a listen-only mode. After the presentation there will be an opportunity to ask questions. (Operator Instructions).

I will now hand the conference over to our host, Mr. Doug Sherk. Please go ahead, sir.

Thank you, operator, and good morning, everyone. Thank you for joining us for the Stereotaxis conference call and webcast to review financial results for the third quarter and first nine months of 2009, which ended on September 30th, 2009.

Before we get started we'd like to remind you that during the course of this conference call the Company may make projections and other forward-looking statements regarding future events or the future financial performance of the Company, including without limitation statements regarding future operation results, growth opportunities and other statements that reflect Stereotaxis plans, prospects, expectations, strategies, intentions and beliefs.

These statements are subject to many risks and uncertainties that could cause actual results to differ materially from expectations. For a detailed discussion of the risks and uncertainties that affect the Company's business and qualify the forward-looking statements made in this call we refer you the Company's recent public filings filed with the SEC, specifically the Form 10-K for the fiscal year ended December 31, 2008. The Company's projections and forward-looking statements are based on factors that are subject to change and therefore these statements speak only as of the date they are given.

The Company assumes no obligation to update any projections or forward-looking statements. In addition, regarding orders and backlogs there could be no assurance that the Company will recognize revenue related to its purchase orders and other commitments in any particular period, or at all, because some of these purchase orders and other commitments are subject to contingences that are outside of our control. In addition, these orders and commitments may be revised, modified or cancelled, either by their express terms as a result of negotiations, or by projects changes or delays.

Now, I'd like to turn the call over to Mike Kaminski, President and Chief Executive Officer of Stereotaxis.

Thank you, Doug. Good morning, everybody. On the call with me this morning is Jim Stolze, our CFO, and Dan Johnston, who has been on board since September and will become our CFO on November 15th. This will be Jim's last conference call.

Now he is retiring, as you know, at the end of the year and all of us here want to thank him for his many years of service to the Company. He's played a major role in our success and has been a valued business partner to me since he joined the Company. We're sorry to see him go but after spending the last two months working alongside Dan, I'm very confident that we'll have a smooth transition of responsibilities as well as an excellent new CFO.

Stereotaxis generated a strong third quarter financial performance, despite the weakness in the economy. We had strong revenue growth, increased gross margins, continued to drive down our operating expenses and had a sequential increase in new orders from the second quarter.

Revenue for the quarter grew 26% from the prior year. Recurring revenue, including disposable services and accessories, was a record $4.6 million compared to just $3.2 million last year, or 45% growth, reflecting the adoption of the magnetic irrigated catheter. We were especially happy with our record recurring revenue, given the impact of the slow summer seasonality, especially in Europe.

The increase in disposable product sales resulted in a very strong gross margin of 68% for the quarter. Third quarter operating expenses declined 18% from prior year demonstrating our continued focus on controlling expenses.

The extent of the progress we have made is also evident in our nine-month results. Our revenue for the nine-month period grew 31% from 2008 to $37 million. Recurring revenue increased 56%. Gross margin dollars of $24.7 million represented an increase of 37% from the prior year.

We have made excellent progress in the reduction of our infrastructure costs. Operating expenses for the nine-month period declined 19% from 2008 resulting in a 48% improvement in our operating loss to $18 million compared with the operating loss of $34.6 million a year ago. These results demonstrate our progress towards achieving our break -- achieving breakeven, while growing the Company in this exciting market space.

We continue to focus on the roll out of the magnetic irrigated catheter. All sites in the European Union have received the catheter and continue to gain experience. We're now running approximately two cases per week per site throughout Europe. However, approximately one-third of our European sites are performing nearly four cases per week.

In the U.S. adoption has been slower, reflecting the challenge of more users per site to train and a larger number of sites in the installed base. The top one-third sites in the U.S. are performing two cases per week. We now expect to complete the introduction of all 70 U.S. sites in early 2010.

Due to the intense support needed to work through the learning curve we have increased our clinical support staff and training organizations as we intensify our focus on driving adoption. In addition, we have some very important new product introductions that will help us drive adoption.

We recently announced the approval of our partnered non-localized magnetic irrigated catheter in Europe. This new product is designed for simpler cardiac procedures not required in 3D electro anatomical mapping and expands the market potential uses of the NIOBE platform. The catheter is pending approval in the FDA.

Also released this past quarter in Europe is the 0.1 Tesla high field strength NIOBE system feature. This allows physicians to modify the strength of the magnetic force for certain applications. Both the non-localized magnetic catheter and the 0.1 Tesla features are expected to be released in the U.S. in late 2009 or early 2010.

In addition, we have several other new products in the pipeline for launch in 2010, all focused on improving our value propositions and driving adoption. We expect these new products to enhance our market position and drive incremental revenue in the next year. We continue to make good progress on scientific development and proof of our value proposition.

Since we last spoke there have been several significant updates, including a strong showing at the recent symposium in Venice, Italy in early October. During this conference [Professor Audrogal's] group from Lisbon presented their early experience with the magnetic irrigated catheter for AF. Since moving to the magnetic irrigated catheter from a solid tip eight millimeter catheter, they have documented an improvement in acute outcomes as well as a nearly 30% reduction in procedure time. Their overall X-ray time for these cases has also dropped from 34 minutes to 24 minutes when the irrigating catheter was used.

Also, during the meeting, [Dr. Bianke] from Turin, Italy presented what we believe to be the most detailed description to date of the learning curve for the magnetic navigation and the positive effects of our new NAVIGANT 3.0 software. During the first month of work with the system, this group performed a wide variety of both atrial and ventrical procedures and by the end of the month they were already documenting times that were comparable to their manual times. They concluded that the learning curve is very short and that routine use is possible even within the first month of activity.

The European Society Cardiology in Barcelona in September also featured multiple abstracts on the use of the technology for a variety of EP applications.

[Dr. Pessoloze] from the Medical University of Vienna presented a series comparing 40 AF patients treated with magnetic navigation to 40 patients treated with conventional methods. The acute outcome of the two groups were similar, but the patients treated with magnetic navigation had X-ray times that were 50% less than the conventional patients. He followed the magnetic group carefully with daily halter monitoring and reported 73% were free from AF at nine months, which is an excellent product result. We believe these studies are a factor, along with longer experience with the magnetic irrigated catheter behind our strong utilization growth in Europe.

Turning now to the current market environment and our outlook for capital expenditures, new orders for the third quarter totaled $6.3 million, up sequentially from the $5 million in the second quarter. Included in the $6.3 million were orders for four NIOBE systems and seven ODYSSEY systems.

We were happy to announce our first multiple order of ODDYSEY systems outside of a NIOBE lab. In September, St. David's Medical Center in Austin ordered four ODYSSEY systems with the Cinema feature. One of these systems will be placed in a NIOBE lab. The other three will be used to manage standard non-NIOBE labs. This is a testament to the value of the ODYSSEY system to simplify complex information, improve efficiency, enhance record management and provide an effective training tool. We expect the ODDYSEY to become the third leg of our revenue model as we move into 2010.

We're encouraged by the improvement of new orders and are optimistic that this represents the beginning of a trend. Based on our conversations with customers at hospitals and EP labs, we do believe that the outlook for spending is becoming more positive. This observation has been confirmed by several recent industry and investment bank surveys. For example, recent reports from [Lyric Swann] and Oppenheimer cite and stabilization of the hospital budgets, a less than anticipated decline in expenditures in 2009, an indication by some hospitals that they anticipate increased spending in 2010.

While this evidence remains antidotal, we do believe the worst is behind us and that we're well positioned for continued revenue growth in 2010 for the following reasons; first, our strong 18-month backlog; secondly, is the very short order to revenue cycle for the ODYSSEY platform; third, we continue to take orders, which we will ship for NIOBE and deliver -- that we'll take and deliver in the same year; and finally, we expect continued growth of recurring revenue.

In addition, we've continued to manage our operating expenses with a watchful eye on achieving breakeven. These factors, along with the $28 million in additional capital raised through our recent stock offering in October, lead us to be very optimistic about achieving our goals of profitability and cash flow breakeven.

And with that, let me turn it over to Jim to discuss our third quarter financial results in more detail.

Thank you, Mike. Revenue for the third quarter totaled $13.3 million, an increase of 26% over the prior year. Systems revenue was $8.7 million of the total and included revenue recognized on six NIOBE systems and seven ODDSSEY systems. All the NIOBE systems and four of the ODDSSEY systems were sold outside the U.S.

As Mike mentioned, new orders in the third quarter for both NIOBE and ODDSSEY systems totaled $6.3 million and included approximately $1.8 million of orders for ODDYSSEY and Cinema. As Mike indicated on the last quarter conference call, we're beginning to focus our view of backlog on those systems we believe will be taken to revenue over the next 18 months on a rolling basis.

As of September 30 backlog we expect to recognize within this 18-month horizon amounted to approximately $38.4 million compared to $41.5 million at the end of the June quarter, principally driven by the book-to-bill for the current quarter. Within this $38 million backlog there has been some movement of the systems within the 18-month horizon, principally the shift of a few systems from early -- from 2009 rather to early 2010.

In addition, the Company has approximately $15 million of backlog it expects to be recognized to revenue beyond the 18 months, which reflects our removal of two systems during the quarter. Orders remaining in backlog beyond the 18-month horizon are much more susceptible to project delay, modification or deferral.

Gross margin for the third quarter was $9 million or 68% of revenue. This represented a 30% increase from $6.9 million or 65% of revenue in the 2008 third quarter. The increase reflects a moderate improvement in the average revenue recognized for our four NIOBE systems as well as the continuing increase in the higher-margin recurring revenue as a percentage of our total revenue.

Average selling prices recognized on the NIOBE systems were slightly above ASPs in the second quarter, which included several large revenue deferrals pending completion of installation. ODYSSEY pricing in the third quarter was slightly below the prior quarter.

Systems revenue margin was 60% for the third quarter, comparable to the 61% achieved in the second quarter, and a modest improvement from the 58% realized in the third quarter of 2008. The margin from disposable services and accessories was 82% for the third quarter, comparable to the 83% achieved in the third quarter of 2008.

Operating expenses continued their decline to $13.2 million in the recent third quarter compared with $14.6 million in the second quarter and represented approximate 18% reduction compared to the $16.1 million in the third quarter of 2008. This is our fourth quarter of sub $15 million operating expenses and we now anticipate our normal run rate to be less than $15 million a quarter. As we exit the year, we expect new investments in our clinical training and ODYSSEY field staff in order to drive adoption and enhance these revenues sources.

We reported a net loss of $5.8 million, or $0.14 per share, for the recent third quarter, much improved from the $10.1 net loss, or $0.28 per share, in the third quarter a year ago.

Average shares outstanding for the recent third quarter were 42 million compared with 36.6 million in the same quarter last year, reflecting the 4.4 million shares issued as a part of the two simultaneous offerings that we completed at the end of December, 2008.

We used $3.5 million in cash from operations during the quarter, improving approximately $2 million from the $5.6 million of cash used in the second quarter this year. We continue to make progress improving our working capital position, as demonstrated by a decrease in day sales outstanding to 78 from 84 in the second quarter and our continued decrease in our total inventory balances.

We will continue to focus on cost containment and additional improvements to working capital in order to minimize our cash used in our operating activities. Cash investments totaled $12 million at September 30, a decline of less than $1 million from the end of June.

Total bank and other debt was $30.8 million at the end of September with $16.2 million drawn against the working capital line with Silicon Valley Bank. Included in this total debt is approximately $14 million owed to Biosense Webster related to the $18 million facility that was finalized in July of last year. Repayment of this liability, as you recall, will be from royalties otherwise payable from Biosense to Stereotaxis taxes with no minimum cash outlay requirements until May, 2010.

In early October, we completed a follow-on offering in the public market. We issued a total of 7.475 million shares, including the exercise of the underwriters over allotment. The transaction was priced at $4.00 a share, a 6% discount from the closing price the prior day. Gross proceeds were about $30 million. Net of transaction cost, we received approximately $28 million. This transaction will be reflected on our fourth quarter and year-end financials.

Also, in October we announced the extension and increase of our working capital line with Silicon Valley Bank. Under the new agreement Stereotaxis can borrow up to $30 million compared with the $25 million under the previous agreement. The expiration date was extended one year and will mature on March 2011.

We also announced the extension of the $10 million commitment from the two shareholders to March 31st, 2011. We believe that with an expected decrease in our quarterly cash burn, the new capital and our increased bank line, the Company is very well positioned to continue to execute on its plan for growth to achieve breakeven financial results.

Finally, I would like to reiterate the Company's outlook for 2009. Total revenue for 2009 is expected to exceed 2008 revenue, gross margins above 65%. Operating expenses are now expected to be below $60 million for the full 2009 year.

Now let me turn the call back to Mike.

Thank you, Jim. As we come to the end of 2009, I wanted to reemphasize that I am pleased with the progress we've made this year but more energized by the opportunity in front of us. We uniquely address the needs of patients and clinicians in a large double-digit growth market with an ever strengthening clinical value proposition. In addition, we've introduced a series of new products, which open up future revenue streams and expansion opportunities. Our short-term focus is on driving clinical adoption, especially in the U.S. and we're confident in our abilities to do just that, as 2010 unfolds.

With that, I'd like to open it up to any questions.

(Operator Instructions). The first question comes from Mimi Pham from [JMP Securities].

Regarding the just for the U.S., your reference site, are you aware that a -- did any prospective NIOBE purchasers make any site visits in the third quarter and are you aware of any that are scheduled or have already been done in the fourth quarter, if you can just maybe give us some rough estimates or talk about that?

Yes there were quite a few in the third quarter. They -- and there are several scheduled in the fourth quarter. In fact, some are in today, Mimi, in St. Louis. So we continue to see a lot of activity in the U.S. on prospective customers interested in buying the system.

And is it your sense, I mean, I guess if you want to help us over the next -- think about the next couple quarters, do you expect a ramp in your U.S. new orders as early as fourth quarter or is that something we should think about more for first half of next year?

If you listen to our sales force obviously they're very bullish. I think the activity would suggest there's going to be a ramp. The timing of which I believe Jim and I would look at and be probably more conservative in our estimate of the timing but, outside of the U.S. it remains strong, as you can see. And, inside the U.S., activity is picking up, so we -- sales thinks it will translate very quickly to orders but we're going to -- now, what's interesting, Mimi, is the ODYSSEY seem to broach both a therapeutic value proposition and an IT budget, which as you know has been less impacted by the U.S. economy. So the ODYSSEY seems to have a growth path that's different than most capital products.

Thanks and then I guess, related to that, for what is your strategy for the Boston AF meeting in terms of targeting U.S. doctors? You know, when we were at HRS it was still I guess too early for U.S. doctors to talk to other U.S. Are we going to see data or are you going to have a show, you know, specific meeting scheduled?

We will set up a series of conferences. What we found to be more cost effective is small user meetings that we host for physicians. We'll continue to do that. I'm not sure of the exact plans but I'll let you know when those are planned for okay?

Okay thank you.

Imran Zafar, Deutsche Bank.

First, on the disposable revenue line, that was a tad below what we were looking for. Can you just -- obviously Q3 seasonally procedure wise is slower quarter but can you just talk about the revenue capture per procedure, whether that's tracking in line with your expectations?

Yes revenue per procedure is tracking very well. We're about 1,000 per case. The number of cases and I think we're most impacted by the seasonality of Europe if you look at, kind of break it up by market, which we see every year, kind of the disappearance of some European sites for holiday but even the U.S. had some seasonality that normally we were affected by in the third quarter as well.

Okay and then, as you look at the ODYSSEY placements in the quarter and as well the ODYSSEY systems in your backlog, can you just give us a sense of the breakdown between magnetic labs versus non-magnetic labs?

In the backlog there's very few non-magnetic labs yet. We just introduced that in late summer and that's why we're pretty excited about some [statements]. Now there's since introduction I can tell you the pipeline for ODYSSEY non-magnetic labs has grown considerably, even in a two or three-month period, so we're seeing a pretty high market interest in that product line thus far. Now, we don't have enough experience to look at the translation of interest to orders but I can tell you that the nice addition of this platform is the order to revenue cycle is very short and we would anticipate the same, David's orders, which were entered in September to go to revenue very quickly.

And then, Mike, can you just take, spend a minute, talking about the competitive landscape for ODYSSEY? I think Philips has a somewhat similar system.

They -- well, there's Philips and the imaging companies will come out with large screen systems. Where ODYSSEY really for non-magnetic labs is getting a lot of visibility is its ability to connect lab information together so that you can integrate, store and send network lab data among all the labs, as well as to the office and outside of the facility and that is very unique to our platform and that seems to be the area that really has differentiated our product line from others and, in fact, we think there's space for Stereotaxis to work with the imaging companies in partnerships that allow us to sell this ODYSSEY backbone, as well as connect to their labs and our labs, so there's an opportunity in there to integrate the platform together.

Okay and then, Jim, just a parting gift for you, one last quick question, the two systems that were removed from the backlog, just talk about why those were removed.

Yes, as we look at each of these, Imran, as Mike had said, we continue to look for activity that would tell us that they are doing drawings or they've got the architects in or the building is actually under construction and these two sites we just weren't satisfied that they were moving down the path to give us confidence that they would really be coming to revenue, certainly not in the 18-month horizon, and we just decided to move them out entirely.

Those two, Imran, were outside of the 18 months. They were in the other traunch, that $15 million.

$15 million, okay great. Okay thank you so much.

Sameer Harish, Needham & Company.

Maybe could you guys highlight what you're seeing in the atrial fibrillation market today, just give us an update on what the growth profile of that market looks like?

Obviously we triangulate with some of the suppliers in the market and we still hear strong left sided growth. I know that there's a lot of different earnings coming out right now that are reporting different things but I believe if you really just boil down to left sided ablation growth, it's growing pretty strong. And double-digits, certainly I've heard it's still close to 20 if not above 20 in AF growth.

Well, as far as penetration of that market, is -- how would you say that's growing relative to the number of EP labs out there? Are there more physicians getting involved? Is it growth coming mostly from existing physician base? Kind of what's the dynamic going on there?

I believe it's growing, as you would expect most markets to grow outside of just the normal tertiary care teaching centers, so there's growth into community base centers. That's what we see that there's only so much capacity in a big hospital and the demand is in the community so we're seeing more and more community hospitals look at developing AF programs and we've sold -- all right.

No sorry, I was just going to say when you look relative to those comments to the backlog, that you have going forward, what's the contribution you see there from the more community based hospitals relative to sort of the larger academic centers?

Yes it has -- now, it's historically, and I think it's tracking pretty true now, is we've run late -- we've historically ran about 60% of NIOBE sales outside of teaching facility, so we continue to see that. We've followed that growth out and I think that's true, both in the U.S. as well in Europe.

Great and just wanted to if you could follow up on your comments that you expect to release the new products in 2010, would you care to highlight any of those products for us?

I'm going to wait until the February call because we'll be releasing some of them at HRS and then highlight the ones we expect, okay?

Okay and then lastly, the training in the U.S. on the magnetic irrigated, can you give us an update on have any of the centers completed the proctoring and where do you stand on that?

In the U.S. it has taken a little longer, as I mentioned the number of physicians and the number of sites. I think we're looking at about 15% that we think have been through the training and have got to the adoption. We're still concentrated on the next traunch, which is about another 25%. We're adding some resources, both in training and the field, in order to really focus and accelerate the learning curve.

And that takes a little longer but we're pretty optimistic as they move through the results should mirror Europe and the ability to move the customers up the adoption curve.

Great and one last question, again, Jim, I'll give you one as well. Can you just comment a little bit on the decrease in the sales and marketing? It was a little bit stronger than we'd expected.

Yes sales and marketing, there's each quarter there are some unique things. HRS occurs in the second quarter and that's our biggest show, so that's the principal driver behind the change in sales and marketing.

Spencer Nam, Summer Street Research.

Just a couple of questions about the adoption and the new orders that you guys booked, clearly a nice lift from last quarter, but also you mentioned that the new booked orders include ODYSSEY systems as well and from that perspective I mean how should we think about the previous orders were NIOBE exclusive. Now you've got ODYSSEYs. How should we think about that going forward? Obviously we're going to see increase but the ODYSSEY is -- may likely to sort of dominate the -- potentially dominate the backlog, new order backlog, so you guys bring in. I was wondering what you -- you know, how you would explain the NIOBE adoption versus ODYSSEY adoption going forward?

Spencer, we think the ODYSSEY has some real upside. Obviously it's pretty early in that. If you look at what's happened in the last quarter is we've disconnected it from the magnetic lab, which gave us an -- you know, this began the ability to sell this in non-magnetic labs. And the needs and the value is seen outside of the work station for just a magnetic lab.

So we're seeing a lot of activity. Obviously it's part and parcel to both strong IT budgets and the ability to, as I mentioned, bring some clinical value and quality metrics to care given across labs. I think you'll see that become the third leg, as I mentioned, of our revenue model. We will -- we should continue to see a more robust order pattern on that, as we progress through 2010, but we also expect NIOBE interest and activity in the U.S. we think is turning the corner as well. So both, ODYSSEY as a percent maybe growth faster versus old historic ODYSSEY orders but I think both have growth potential.

Great I appreciate that. That's helpful. So, in terms of NIOBE adoption and NIOBE interest, how would you characterize the say what is from the moment that you identify a potential interest, what kind of batting average are you guys seeing with NIOBE conversion from a lead generation to booking a new order here?

It's -- now you're talking about what percent of the x-ray replacement market? Is that the question?

More specifically kind of how would you characterize it? You know, you don't have to be specific I guess if you do not share this with the Street but how would you characterize your batting average in terms of all those who show interest in NIOBE system, what kind of conversion are you seeing at the end of the day measured by the number of systems that are ordered over a quarter or something like that? How should I think about the funnel?

Yes let me see if this answers. It will be a more of a macro answer but let's see if this gets to your question. We believe there's 300 to 350 x-ray systems replaced in EP every year and it has been growing for a couple of years for some time now and should continue because of the growth of the EP space, right. Of those, we look at the percent of that replacement market because this is a natural churn of that market where they're going in and the customers are going to replace or add a new x-ray system and redo their room.

If you look at our percent penetration in that churn, we run a higher percent penetration in Europe than the U.S. because we believe we've established and had irrigated out ahead of time. In fact, the penetration in Europe is over 20% and the penetration in the U.S. is slightly more than half of that and we think Europe continues to move up and there's an opportunity for the U.S. to come up to that rate as reference sites continue to strengthen in the U.S. So we track penetration of the x-ray replacement market and we're seeing nice movement once we have established reference sites and we think the leader of that obviously, and the proof of that, is in Europe.

Great helpful, and then in terms of ODYSSEY and the buzz around the ODYSSEY, I mean, are we -- what is the order of magnitude here? Is it -- I mean, are we talking about dozens of potential customers? Are we talking about -- how should we think about that?

You know, we think the market opportunity to bring data is in a lot of the EP labs and, as you look at the advanced labs obviously, there's thousands of advanced labs. The percent penetration in the model of how that will penetrate I think it's pretty early in the adoption curve to call that right now but we're -- we've seen a, I'd say exciting interest grow since August. We really pulled it away from the NIOBE this summer and said we have a product. We had to engineer it so it could be a standalone system. We began to show that.

We're investing; just now we're beginning to invest part of our sales force in just selling ODYSSEY and non-NIOBE rooms and magnetic rooms in hospitals potentially that have not bought a NIOBE. So with that effort of the last two or three months, we've seen a fairly sizable increase in the sales interest and funnel. So we're pretty bullish on the size this can be. It's early in the year. I'd like to let it mature, at least a quarter or two more, before we start putting some numbers around it but it can be pretty big.

And then there's two quick questions to finish up. What's your current burn rate?

$3.5 million.

A quarter?

Yes.

And then you just completed your $28 million financing. What are you planning? Are you -- would that be -- you guys feel like that's sort of the magic number if you want to call it that, to--?

Looking at our burn rate, Spencer, and projecting I mean if you look at probably $14 million available on the bank line remaining, $28 million added to the $12 million is $40 million. I mean you're looking at $50 million plus of availability, which we feel very comfortable with in terms of getting us down the path toward breakeven.

Great. Thanks very much.

Charley Jones, Barrington Research.

Jim, thank you for all your hard work and transparency. I wish you the best.

You bet, thanks, Charley.

A couple of my questions, I want to go a little bit deeper on a couple of Spencer's questions. I was hoping, Mike, you'd tell us whether or not you anticipate order growth in both the U.S. and E.U. next year and if you could go a little bit further and break down specifically to NIOBE order growth. Do you expect growth for NIOBE in both the U.S. and E.U. next year?

Charley, we're right now looking at activity that would suggest both markets would grow next year.

Okay and the chronic results you referred to today, Mike, do you know if they were using an endocardial or an epicardial approach and do you know what the follow-up criteria was? Was it seven day continuous monitoring or--?

It was an endocardial and they I believe it stated it was a halter monitor. I am not that -- I'm not exactly sure how often the halter monitor was on and if -- but the nine-month was I think it was a halter monitor at least the last 14 days of the nine months.

Great and then, Jim, can you give us the breakdown of system sales and orders in the U.S. and O.U.S.?

Yes all the system sales were O.U.S. and the orders, so the orders for the current quarter in the NIOBE were three E.U. and one in the U.S.

And then, Mike, is there any update for any of your exclusive agreements with Biosense?

No update yet.

And then my final question is around the magnetic catheter. Do you think that the hospitals that have -- you know, your larger users, will be using it more than two times a week? I know that a lot of these doctors, the EPs, the top EPs, have -- still have waiting lists nine months, 12 months out. Do you see this number increasing much or on what level do you think you can get to in some of these better hospitals?

The top group in Europe is running -- it's approaching four times a week. The top sites are above that obviously, as the top one-third in Europe is four times a week. And the top sites in Europe are well above that. If you look at the U.S. there's no reason to believe that they can't follow that same path. There are sites with the volumes that can all obviously adopt at that same, that rate.

That's helpful and then I guess, you know, these bottom two-thirds in the U.S., do you think that they can get up to a level of a couple per week eventually or do you think that that's too lofty of a goal for them?

Well, I think that our focus is going to be to make sure that the top third first go and maximize that opportunity, get up to European rates, right? And then the next third, to get them moving through the adoption curve further up; I think the bottom third will take us a little longer, Charley, just based on the resources we have but everybody will be in the curve but it will just take us longer to move them through it.

I am going to squeeze one more in here. Do you anticipate one-quarter next year of being GAAP profitable or at least non-GAAP profitable, Mike?

We're looking at that right now. We're laying out our plans for 2010 so we -- we're feeling pretty good but we want to make sure we're buttoned up all the numbers first.

Sure thanks again.

Todd Robbins, T. Robbins Capital Management.

Jim, since you're not going to be around to see the consequence of this question, I'll throw the first one at you. We used to do a calculation about breakeven taking your OpEx an dividing that by your gross margin and getting a number that would be around $21 million, $22 million, $23 million for revenues.

Right.

Should that OpEx number now be $14 million?

It's headed in that direction. What we're -- $14 million would average 56. That's probably a pretty aggressive goal, so I would still say that a breakeven GAAP quarter looks something like a $20 million or a $21 million quarter.

Todd, the other thing to keep in mind, there's obviously is the non-cash component of that 14.

Right. Yes so there's still some non-cash compensation, depreciation, amortization in those numbers so then EBITDA breakeven can be -- could be achieved prior to a GAAP breakeven for sure.

The difference between the two is what would you guess? About $1 million or so a quarter?

Pretty close yes.

That's helpful. The other question gets at the catheter that was introduced last week in Europe, CELSIUS. How should we think about this? Is this just another tool or is this something that opens up a different selling point or user profile?

It -- there's quite a few customers who want to use irrigated for non-3D mapping or even potentially with a different 3D system. The CELSIUS is needed to do that, right, so the classic application would be flutter or right sided, a difficult right sided ablation, where you may not need 3D anatomical mapping to do it but you want an irrigated catheter but you don't want to pay for the 3D mapping component, so it does offer -- open up a growth potential and it's just it's going to start rolling out in Europe I believe pretty quickly, so this month it should roll out.

So, when you say another 3D system, that would open up people such as St. Jude?

Potentially yes.

There's been a lot of questions about ODYSSEY. Should we think about the addressable market going beyond just the EP lab? Is this something that could be used in interventional cardiology or radiology or how should we think about the size of this market?

It -- we have had discussions; obviously with our channel we're currently just focused on EP but we've -- what's nice about it, Todd, is we've been pulled into discussion, which is nice to have a product that gets pulled into opportunities, and interventional cardiology we've even had inquiries outside of that and some other applications, IR. So the applications pretty broad. We think the market opportunity in EP alone can be significant, let alone when we begin to connect outside of that, so it's a pretty massive opportunity. We're pretty bullish on what it can do for the Company.

This may be a stretch but we used to think about the NIOBE being a lead for potential placements of ODYSSEY. Does it possibly turn around, such that ODYSSEY could be something that pulls through NIOBEs?

Potentially. You know, the interesting part of ODYSSEY obviously is connecting environments and beginning to create a user group that's broader than just within the hospital and we're beginning to see interest that's certainly built with that, so I think that bodes well for the NIOBE as well as just the connectivity of those really experienced clinicians with those that are potentially less experienced.

And, Jim, how does the ODYSSEY compare with the profitability of the NIOBE?

Both the hardware systems are yielding margins comparable, so our 60, 61, 62 points of margin on hardware is pretty steady across the line.

Same component of service tail on it as well after the warranty period.

Right.

Well, that's great. Thank you both, nice quarter. And, Jim, congratulations.

Thanks, Todd.

(Operator Instructions). There do not appear to be any further questions. Please continue with any points you wish to raise.

Thank you, everybody, for joining us today. Just to let you know, we will be at the Canaccord Adams Cardiovascular Conference next week. We'll be out on the East Coast later this year if you'd like to see us or have a meeting. Please give it to Doug Sherk and we'd be happy to do so and we look forward to talking to you all with our year-end results in February. Thank you.

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