Stereotaxis Inc (STXS) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth quarter 2011 Stereotaxis Inc earnings conference call. My name is Keith, and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later on we will conduct a question-and-answer session. (Operator Instructions) As a reminder, today's conference is being recorded for replay purposes. And, I would now like to turn the conference over to your host for today, Mr. Greg Gin of EVC Group. Please go ahead, sir.

Thank you, Keith. And, good afternoon, everyone. Thank you for joining us for the Stereotaxis conference call and webcast to review the financial resorts for the fourth quarter and full year 2011 which ended on December 31, 2011.

Before we get started, we would 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 for the future financial performance of the Company, including without limitation, statements regarding future operating results, growth opportunities, and other statements that reflects 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 that qualify as forward-looking statements made on this call we refer you to the Company's periodic and other public filings with the SEC including the form 10-K for the fiscal year ended December 31, 2010 and the quarterly filings for 2011. 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 backlog, there can 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 contingencies that are outside of our control. In addition, these orders and commitments may be revised, modified, or cancelled either by their expressed terms as a result of negotiations or by project changes or delays.

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

Thank you, Greg. Good afternoon, everyone, and thank you for joining us for the review of our fourth quarter and full year 2011 performance. With me today is our Chief Financial Officer, Sam Duggan. Following our prepared remarks we'll open up the call for your questions. Before we begin a more detailed discussion of our 2011 performance and strategic priorities for 2012, I'd like to address some broader topics.

Clearly, 2011 was a challenging year for us, in which we experienced both successes and setbacks. During 2011, as we recognized the impact of our robotic platform transition on our financial results, we took immediate actions, including significantly reducing operating expenses, raising capital, and executing on the Epoch platform commercial launch. While we're confident these actions will lead to improved operating performance beginning in 2012, we know we have much work to do. We're determined to lead this company to profitability and will continue to take the necessary steps to improve on our financial position as we execute on our current business plan and growth strategies. To that end, our immediate priority is to address the capital needs of the company.

Specifically, we're working to first extend our debt facility with Silicon Valley Bank which we expect in the upcoming weeks. And, second, to secure additional capital through one of several options we're considering. As Sam will discuss later, these steps are fundamental to our continuing to be able to drive our business model forward. We're optimistic that we'll be able to complete both of these in the relative near term. However, we are limited in what we can disclose at this time as to both the nature of these transactions or the specific timetable. We'll keep everyone informed when we're able to report more.

Now, let me discuss our performance in 2011. Among our successes was the introduction of the fourth generation magnetic robotic system, the Niobe ES, or Epoch System, in mid-December. Niobe ES provides exceptional advancements in operational response time and a shorter learning curve, along with expanded capabilities that position the product to address the needs of the large community hospital market, which often has a single physician operator performing complex ablations. We're encouraged by the early, very favorable response which we believe indicates that our new robotic platform meets the needs and provides a strong, competitive advantage in terms of safety and now efficiency.

Secondly, utilization continues to increase as evidenced by 15% growth in recurring revenue in 2011 over 2010, and we achieved a record high, $7.4 million in the fourth quarter. This performance reflects a strong growth we continue to see in clinical procedures on the magnetic platform, which drives disposal sales and service contracts. Company-wide, nearly 10,000 procedures were performed in 2011, an increase of 11% over the prior year. Complex procedures for atrial fib and VT were up 23%, evidence of the fundamental value for complex ablations.

Last year we began reporting how those -- on those sites installed after 2011 -- 2007, are performing at a much different rate of adoption than those sites installed prior to that time. The primary reason is that our early installations did not meet the needs of physicians for complex ablations and we therefore lost their interest and commitment. At sites installed after 2007, our utilization in complex procedures grew 48% last year. This level of growth demonstrates the value we're bringing to address the needs of these patients. Additionally, we're making progress in the entire installed base as evidenced by the fact that our top 90 sites are now averaging two procedures per week.

Third, we reduced our operating expenses, the run rate by 20% by the end of 2011 to align costs to the revenue growth. Operating expenses are at our lowest level since 2005. Offsetting these successes we experienced some setbacks. While we are excited about the potential of the Epoch platform, the platform transition had a negative impact on 2011 financial results. Following the introduction of the Epoch product at the HRS meeting in May, Niobe system orders and revenue stalled as customers waited to see the upgraded technology. The Odyssey business was also negatively impacted as Odyssey orders and installations -- at installations in Niobe lab slowed. At the same time, while we had significant interest in Odyssey from standard labs, the anticipated larger deals did not materialize.

Our experience has been that the larger deals led to more decision makers and resulted in a more complex sales cycle. For example, several customers pulled us into broad discussions on how Odyssey could become the point of integration for procedure room data. Due to the growing interest in a handful of reference sites, we forecasted that we could close some of these deals in the second half of 2011. However, what we experienced was that the clinical champion at the institution had less influence when the CIO became more involved in the purchase decision. At that point, Odyssey became a lower priority among the other initiatives of the organization. As a result, we have adjusted our sales strategy to focus on smaller integration projects, where the institution's clinical champion can drive the value discussions.

Now, let me discuss how we view 2012. With the release of Niobe ES we expect renewed growth and system revenue and new capital orders during the year. Most likely, this growth will unfold as the year progresses with the upgrade of the install base first leading to the increased Epoch utilization and strengthening of reference sites, which will then translate to increased system orders. We gained momentum in the fourth quarter and to date have upgraded 21 sites to the Niobe ES with extremely positive clinical results. The first 386 Epoch procedures, 70% which were AF, demonstrated a 25% -- 25 minute improvement in average ablation time over Niobe II. In surveys of Niobe ES new software features, operators noted greater procedural efficiency in 92% of cases.

And, anecdotally, physicians have described the Niobe ES as one of the most important innovations for the EP practice to date. We expect the Niobe ES to significantly improve procedure volume during 2012. Average utilization in the initial sites is up 51% over prior year. And, in the nine sites with both Niobe ES and Vdrive, usage is up an additional 16% from those with just Niobe ES alone. Released in Europe early 2011, the Vdrive, which allows robotic manipulation of traditional manual catheters, recently surpassed 500 clinical procedures. Early feedback indicates that Vdrive can save up to 30 minutes in robotic procedure time and multiple physician users have confirmed its significant clinical value.

With regulatory clearance to market the Vdrive in Europe and Canada, and striving to obtain commercial release in the US by the end of the year, the device will be a significant part of our robotic offering. We expect the recovery of the robotic business to have a positive impact on Odyssey products given that approximately 75% of magnetic platforms include Odyssey product sales. In addition, we believe our strategy to pursue smaller standard lab deals will allow us to quickly penetrate the market and provide a longer term opportunity to become a preferred standard in these labs. Furthermore, Odyssey sales will benefit from our Biosense Webster distribution agreement.

We've invested significant time and effort to develop this collaboration and we're beginning to see the initial results. Thus far, in the first quarter of 2012, we've booked two orders from Biosense Webster and expect more in the upcoming months. We believe the anticipated rebound of capital sales in 2012, a stronger foundation of recurring revenue, and our lower operating costs, better position us to generate improved financial performance going forward. At this point, I'll turn the call over to Sam to provide further details on the quarterly and full financial year results. Sam?

Thanks, Mike, and good afternoon everyone. In the fourth quarter 2011, revenue was $11.6 million, compared to $14.5 million in the 2010 fourth quarter and $8.5 million in the third quarter 2011. We posted revenue of $2.3 million on two Niobe systems and Odyssey revenue was $1.8 million. With the release of Niobe ES we realized sequential improvement in system revenue and new capital orders in the quarter. System revenue grew to $4.2 million in Q4 compared to $2 million in Q3, and new capital orders increased to $3.6 million, versus $2.2 in the prior quarter. Recurring revenue reached a record high $7.4 million in the fourth quarter, an 18% improvement over the prior year quarter. The rise in recurring revenue was attributable to an increase utilization, which drove higher disposable revenue along with improved pricing and advanced purchases of disposables related to Niobe ES upgrades.

We valued our active backlog at approximately $20 million, which included 10 Niobe system orders. This is a decrease of $9 million from our active backlog at the beginning of the fourth quarter which we valued at approximately $29 million and which included 16 Niobe systems. During the quarter we added $3.6 million in new orders, converted $4.2 million in system revenues, reversed $0.9 million in deferral revenue and other adjustments and removed five projects from active backlog valued at $7.3 million. While it is possible one or more of these projects could convert to revenue in the next 18 months, we have not included them in our plans for 2012. Gross margin was $8.3 million, or 71.4%, in Q4, compared to a margin of 73.4% in the year ago quarter. This was the result of higher cost absorption with fewer Niobe sales as well as weaker Odyssey pricing. Excluding a $0.2 million charge related to the under-absorption of overhead based on normal production levels, gross margin was 73.2% in the fourth quarter.

Operating expenses in the fourth quarter were $12.9 million, down $1.2 million from the year ago period. The decrease was principally related to reduced head count impacting sales and marketing and general and administrative. We have successfully managed operating expenses to their lowest run rate since 2005. The net loss for the fourth quarter was $5.5 million, or $0.10 per share, compared to a net loss of $2.5 million, or $0.05 per share, reported for the fourth quarter 2010, and $7.3 million, or $0.13 per share, in the third quarter of 2011. In the fourth quarter cash burn was $14.8 million, compared to $6.4 million in the third quarter. The increase was due to $3.1 million of remaining debt to Biosense Webster and working capital use of $7.5 million, $6.6 million of which related to growth in accounts receivable. This was to be expected, given the turnaround of the business that began in the fourth quarter.

In other words, as our business improved, our working capital increased, principally due to higher than normal shipments near the end of the quarter that drove accounts receivable. The third quarter also benefited from high collections near the end of the quarter. Revenue for the full year 2011 was $42 million, compared to $54.1 million reported in 2010. As Mike stated, the transition to the new Epoch platform resulted in lower system revenue for both the Niobe and Odyssey businesses. During the year, we recognized revenue of $7.8 million on Niobe, compared to $21.9 million in 2010. Odyssey system revenue was $7.4 million, down 20.3% from a year ago. Conversely, recurring revenue grew to $26.4 million in 2011, from $22.9 million in 2010.

For the full year 2011, gross margin was 70.2% of net revenue, positively impacted by a higher mix of recurring revenue. Excluding a $0.6 million charge related to the absorption of overhead based on normal production levels, gross margin was 71.7% for the full year 2011. Operating expenses were $61.4 million for the full year 2011, an increase of $4 million from the year ago period. The rise relates to the development of Niobe ES and Odyssey upgrades, head count to support higher utilization rates, and increased spending on registrations in Japan as Niobe ES approaches the end of clinical trials. The net loss for full year 2011was $32 million, or $0.58 per share, compared to a net loss of $19.9 million, or $0.39 per share, reported for 2010.

At December 31, 2011 we had cash and cash equivalence of $14 million, compared to $35.2 million at the prior year end. Outstanding debt was $38.5 million versus $28.9 million a year ago, and included $15.2 million from the Callan transaction completed in the fourth quarter. As a reminder of the terms of the deal, we received $15 million, or net $14.3 million, on December 5, with a potential additional availability of $5 million if we achieve the following milestones. We will receive $2.5 million beginning July 1, 2012, with the sale of six Niobe ES systems for the nine months ended June 30, 2012. We will receive an additional $2.5 million beginning December 31, 2012, with the sale of 10 Niobe ES systems for the 2012 fiscal year. If we do not complete the first milestone but achieve the second, we will still receive all $5 million. The financing carries a 16% interest rate and matures December 31, 2018. Under the terms of the facility, debt is paid down through royalty payments from Biosense Webster.

Looking to 2012, we expect system revenue to substantially improve and to grow at a faster pace than recurring revenue as we experience higher system sales through Niobe ES and Odyssey. While this will allow for improved cost absorption in system margins, total gross margin percentage in 2012 is expected to be slightly lower giving the smaller margin of systems revenue compared to recurring. In terms of recurring revenue, the fourth quarter record results benefited from a sharp increase in disposable revenue in December of high volume sites performing a large number of cases following their upgrade to Niobe ES. We do not anticipate seeing a repeat of the fourth quarter record high results in the first quarter of 2012, as disposable revenue was exceptionally high in December. We believe the fourth quarter cash burn represented a high point and expect a significant reduction beginning in 2012, as we continue to benefit from lower operating expenses and only a slight rise in working capital.

In the first quarter, which typically carries the highest cash burn, we expect to use approximately $5 million in cash resources. We believe our lower cost structure and expected rebound in revenue will improve cash flow and lower capital requirements in 2012. However, as Mike discussed at the top of the call, in addition to the expected lower capital burns in 2012 I just mentioned, we are also taking steps to address the ongoing capital needs of the company. Following the market close today, we issued an AK announcing receipt of a debt waiver from Silicon Valley Bank, related to the liquidity ratio financial covenant as of February 29, 2012. Silicon Valley Bank has been a great partner and has worked with us closely over the past several months.

We are in the process of finalizing an extension of our credit agreement with Silicon Valley Bank which we currently expect sometime in the next few weeks. In addition, we are working to secure additional financing and are actively looking at, and considering, a number of potential alternatives. Addressing those capital needs is our immediate priority and successfully completing these steps is fundamental for our ability to drive our business model forward as currently planned. While we are optimistic we will be able to complete both the Silicon Valley Bank extension and the additional capital transaction in the relative near term, we can't assure you that we will be able to do so on that timetable, or at all. Consistent with our policy with respect to any transaction that we might be contemplating or discussing, we do not comment publicly on those transactions. At the present time, I cannot give you any more details as to what we are discussing or the time frame on which it might be completed.

In summary, 2011 was certainly a challenging year for our Company but we are encouraged by the progress we made as the year progressed. We believe the actions we've taken to lower our cost structure and to increase sales positions has significantly improved financial results in 2012. With that, I'll turn the call back to Mike.

Thanks, Sam. We have several positive trends on which to build in 2012. We have outlined the following milestones to achieve for the year. First, extend our credit facility with Silicon Valley Bank as well as securing the necessary additional financing to ensure that we have adequate capital for our planned ongoing needs. Second, achieve at least 10 new Niobe ES system sales. Third, complete 40 Epoch ES upgrades during the first half of the year. The demonstrated value of our technology solutions is further enhanced with introduction of the Epoch platform.

We'll continue to innovate and advance our platform towards our vision that robotic interventional medicine becomes the standard of care by providing a consistent and superior approach to patient care, at the same time, taking the necessary steps to strengthen shareholder returns. Thank you for joining us on the call today and your continued support. With that, operator, let's open it up to any questions.

(Operator Instructions)

Jose Haresco, JMP Securities.

Hi guys, good afternoon.

Hi, Jose.

Hi, Jose.

Let's see here. Let's talk a little bit about the backlog. I think you mentioned a couple of moving parts, or a $7 million taken off of the backlog last quarter and you added $3 million. Has anything changed, while we're talking about numbers, has anything changed in terms of how you think about or qualify these large projects?

I'm just trying to figure out that $10 million that you have in the backlog. Has the criteria by which you were judging those and including them in the probability of them being completed in 18 months changed over the last six months or so? In other words, should we, perhaps, look to see that number to be above the core predictables as we had in the 2012?

Jose, let me -- Sam can address the puts and takes of the backlog. Let me address the overarching question you asked first. If you look at the backlog today, there is 10 systems in backlog. I think we believe 8 of the 10 should be in a position to go to revenue this year. Two are sitting right on the beginning of next year in the 18-month window.

We've taken everything outside of that, out of the backlog. And then, the 10 we're confident will go to be an Epoch system in that period of time, the next 18 months. All right? So, and we think that we're now in a position to make that a very predictable part of how we look at revenue roll forward in the Company's business model.

I would say, Jose, we are attempting to make the backlog more predictable as we move forward. And by that I mean we are trying to make sure that as new items come into backlog, that we have a very -- a high level of confidence that they will turn to revenue.

Some of which could turn to revenue relatively quickly depending upon whether it's something where there is the building of a new hospital which could take longer. But some of them we may wait until later in the process to actually allow them to go into backlog which will create more predictability for the investment community in terms of the ability of that backlog to turn to revenue, hopefully in a shorter period of time.

Relative to the items that were taken out of backlog, there were five Niobe systems that came out. With them, there was four Vision and three Cinema that came out along with them. Because usually when we make a sale they get bundled with part of our Odyssey products as well.

Okay. Was the removal of those items tied to hospital's pulling back on the project? And, conversely the 10 systems that you have now, how much -- how many of the systems coming, I guess, have at least qualitatively something to do with the availability now of the Niobe ES?

Well, the removal was generated because Sam and I were not confident that they would come to revenue in a predictable time frame, in that 18 months Sam mentioned. As far as systems coming in, as Sam mentioned, we're going to make sure that as we enter them in, there is a high level of confidence that they will translate to revenue in that window. Or else we won't enter them as a new capital order until they do have the ability to translate in that time frame.

And, to put it differently, Jose, as I indicated in some of my remarks, even though these items have been removed from backlog because we don't have confidence they are going to turn and they are going to convert to revenue in the near term, that doesn't mean that all of these items have been removed from our sales pipeline. These things may in fact come back into the backlog somewhere down the line where we're more comfortable that it's predictable that they will in fact convert to revenue.

Okay. Can you shed some color on the strength of the disposables in the fourth quarter? You mentioned that they were tied to a couple of upgrades into the Niobe ES. You said that Q1 was going to be -- wasn't going to reflect that again. Is that type of dynamic reflective of what might happen when you see other upgrades, perhaps in Q2, Q3, Q4?

As we look to our disposable revenue, we actually -- we had a record quarter obviously for all recurring revenue. And we had a large increase in disposable sales. We believe a lot of that was a pull-forward for some of the initial high-volume sites that use disposables in anticipation of the ES upgrade.

Even if we had used a more normalized level of what disposable revenue had looked like, it still would have been a record quarter and a record year for recurring revenue. S, we do not believe that we would see the same level of recurring revenue. And we didn't want the investment community to use $7.4 million as the starting off point from which to look at Q1 2012.

We think that disposable revenue could be lower, a few $100,000 or so, from where it was at this level. And that's why we were just pointing it out, that we saw that spike. If we receive another spike from some of the other upgrades, that would be great but we're not anticipating that at this time.

Jose, let me add a little bit to that, what Sam mentioned is there is a normal increase which would have made it a record quarter. There is a little bit of lumpiness due to the Epoch coming in to the system, and that will even out as the year progresses.

Okay. Remind us of how many sales people you have at this point. I know there is a lot of changes in the organization. And number two, with Niobe ES and Vdrive coming on later in the year, can you just give us a sense of what clinical activities you will be working on throughout the next 12 months to restart or rekindle that interest in the combined product?

So to your first question, as you know, we break our sales group into account management, which is the sales force who drives clinical adoption into the install base. So after a site is installed they take over and drive it through an adoption process. And then, capital sales, which is obviously a different process. There is, roughly, worldwide 30 account management and 15 capital that are in the sales force in the field. Now, obviously, in capital we use distributors as well. So, if you start looking outside of Western Europe and the US, we have a large number of distributors that work with us, as well.

The second question on there was how the plan is for the year. So the Epoch rollout, the strategy around the Epoch rollout, was around upgrading the sites that we could leverage early in the year. So you'll see the first six, where the sites -- we had three in the Europe and three in the US, which allowed us to get it up and running in some of the early real innovative sites. And then, the next wave of sites were the ones we think we can build the reference bases from. After that, we start getting into -- later in the year we'll get into sites that we traditionally have called not all the way through the adoption process or stalled accounts, if you listen to the common language we use. And those will take us a longer period of time to get transformed into an adopted customer.

So we'll begin to work on those as we get to mid-year with the resources we have. So what we're doing now is prioritizing, obviously, the first sites so that we can create the most positive wave of excitement that -- prior to HRS, which comes up in May.

Okay. Great, thank you very much.

Thank you, Jose.

Steven Lichtman, Oppenheimer.

Hi, guys.

High, Steve.

How you doing, Steve?

Mike, I apologize if I missed this, but update on the US timing for Vdrive, is that still back half of this year?

We're -- Steve, we're going right now in the process with the FDA, we're still optimistic we can get it by the end of this year. And we'll just have to update everybody as the quarters unfold. Because it is a 510-K process which will require some clinicals.

And then, as that emerges we'll keep everybody well informed of that. But we're optimistic and working hard to get it released in the US this year. Obviously, it is in Canada and Europe and we're getting very positive Vdrive feedback so far.

Got it. In terms of the total install base out there today, the potential for upgrade, can you remind us what that is? I guess you're talking by mid-year, hopefully, 61 upgrades, what is the denominator again?

There is roughly 162 in the installed base as of year-end. And of that number, roughly, 152 of them are Niobe IIs that could be upgraded to Niobe ES.

Okay. And your hit rate so far in terms of who you guys have approached from an upgrade has been very high, obviously. Is that right? Has there been any -- anybody who says no? And if so, what kind of feedback do you get on that front?

It's been very positive. Obviously, the -- what's even better than our salesmen showing up is the word they're hearing from other accounts that have been upgraded. So, the references they're getting from their peers is making it easier for us to sell. But, obviously as a capital sale, it takes some time to go through it. So, we're -- as you noted, the mid- year goal is to upgrade 40 accounts by the end of the second quarter. We think we're well on pace to get that done. Think that will create the real trajectory we need to drive both utilization and the reference sites.

Okay, got it. I guess we may have the first quarter call before HRS, but I'm not sure, but just early look at HRS, will there be any larger type of datasets that we can expect from you guys there?

We'll -- I think our first call is right -- we'll try to do it right around the HRS, that week of. And then, we'll update everybody on the latest data from all of the sites.

Okay. But will there be any presentation at HRS that we should be looking forward to?

We have several podiums and posters. I think the latest count was north of 20. So I know some of those will come from these sites. So yes, and we'll point those out as we get closer.

Got it. And then, just lastly, I apologize, I just want to make sure I'm clear on the backlog. So in terms of how many system sales, or systems are in the backlog, or Epochs are in the backlog, is it one at this point? Or how many are Epoch?

10.

All of them will be Epoch. So, there is 10 of them.

10, okay.

The backlog is all Epoch now. 10 is -- there is 10 systems of which we believe 8 will go to revenue this year.

Okay. Got it. Perfect. Thanks, guys.

Sure.

Al Boris, Deutsche Bank.

Hey, Mike.

Hi, Al.

Couple questions. Back to the Epoch upgrade. Can you give us an idea of what kind of time is involved to just update a Niobe II versus put a whole system in there? And back a little bit to the idea that further up the chain of command you go the more time it takes. How does that differ from -- that time differ from a whole system sale versus an upgrade? And, secondly, can you talk a little bit more about the shorter learning curve with the Epoch?

Sure. Al, the time for an upgrade, now this is from a Niobe II to an Epoch, I think it takes two to three days. We're trying to do it -- we're trying to accommodate it, obviously, some of the challenge here is you're juggling lab time. So, in many cases they want us to do it on weekends.

You're effectively upgrading software, putting some new motors in and putting some new covers over the magnet. So, it is not a very difficult process.

But it does take the lab down and obviously that is a conflict of them trying to do more procedures. So we're juggling schedules. And that is some of the pace of what we can get done. As far as a full new Epoch system, the time is the same as the Niobe II. So it traditionally has taken us about a week.

So what we did is we installed for a week, then the X-ray partner would come in, install their system, and then we would come back together and calibrate. So it was largely a little over two weeks to get all the room up and running. And that is the same with Epoch as it was with Niobe II.

Oh, the capital sales cycle for the upgrade, now, the upgrade itself there's a couple of different forms out that we're out right now. There is obviously a capital upgrade that we're marketing, just to go from a Niobe II to an ES. That, to go through the normal capital budgets can take -- it usually doesn't go through a whole budgeting process, obviously, because we've just released it and there's many sites doing it.

But it can take months to quarters to get that done. We're also looking at some flexibility in financing that we're doing. Just recognizing that there's an advantage of usage and utilization in reference sites if we can get them up and running faster. So we get some flexibility on how we put those packages together.

We've clearly gone down several different models. One is a pure capital sale, if that sale to be done. If not, we're looking for other forms offer commitment for utilization and financial commitments either through the number of cases, and/or through service contracts, and things of that nature.

It's obviously more important for us to get the ES upgraded to develop the reference sites to drive utilization, drive recurring revenue, in terms of what that can bring. The capital, while it is nice to have, it is not a huge amount of money we're talking about, so.

And, what about the learning curve?

Thank you. The learning curve I don't believe we have pure data on this because most of the people we're upgrading are users, right? So, they're not going back through a learning curve from the start. But, thus far, we've got very, very positive feedback on a couple features. One of them that I hear about continually is a feature called click and go, in which you no longer have to learn how to move magnetic vectors. You just basically click on the screen and then we take care of all that behind the scenes and take the catheter right to that spot. It is very simple to navigate and it is much more intuitive to how they want to move a catheter in a heart. We anticipate it will be a shortened learning curve. We haven't measured that out of the chute yet. And we'll do that as the quarters unfold.

Overall, the feedback has been very positive. User interface is much easier to use and the response time is what -- the biggest feature that we're hearing from. It use to take 6 seconds for the catheter to move and now it moves in about 125 milliseconds. So, the feedback we're getting is very good in terms of how quickly it is able to move and how much easier it is for the initial users to be able to learn from.

Great. Okay. That's it for me. Thank you.

Thanks, Al.

Thank you.

Ladies and gentlemen, that's all the time we have today for the question and answer portion. I'd like to turn the call back over to Management.

Well thank you, everybody, for participating in the call. And we look forward to talking again in early May and showing you the results and talking about the results of the Epoch rollout. So, thank you very much.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. A replay of this conference will be available one hour after this. The replay dial in number is 1-888-286-8010 with access code 14422617. And with that, you may all disconnect the lines. And have a great rest of your day.