Stereotaxis Inc (STXS) 2015 Q2 法說會逐字稿

Good day and welcome to the Stereotaxis second-quarter 2015 financial results conference call. Today's conference is being recorded.

At this time I would like to turn the call over to Jim Byers at MKR Group. Please go ahead, sir.

Thank you, operator, and good morning everyone. Thank you for joining us this morning for the Stereotaxis conference call and webcast to review financial results for its 2015 second quarter ended June 30, 2015.

Before we get started we'd like to remind you that during the course of this conference call the Company might make projections and other forward-looking statements regarding future events or the future financial performance of the Company. These include without limitation statements regarding future operating 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 that qualify the forward-looking statements made on this call, we refer you to the Company's periodic and other public filings filed with the SEC including its most recent Forms 10-Q and 10-K and the Form 8-K filed today. 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 the Company's control. In addition these orders and commitments may be revised, modified or canceled either by their express terms as a result of negotiations or by project changes or delays.

Now with that said I would like to turn the call over to Bill Mills, Chairman and CEO of Stereotaxis.

Thanks, Jim, and welcome everyone to our second-quarter 2015 earnings call. With me today is our CFO Marty Stammer. Following our prepared remarks we will open up the call to questions and answers.

Starting with our financial results for the quarter, we are pleased to report significant progress on several fronts. Total revenue for the second quarter was up 20% year over year and system revenue increased 168% over the prior year on sales of two Niobe ES systems, two Vdrive systems and $1 million in Odyssey Solution product sales during the quarter. This also was the third consecutive quarter in which we recognized revenue on two Niobe ES system sales.

At the same time we decreased our operating loss in the second quarter by 25% compared to last year. In fact, this is the third straight quarter in which we achieved a year-over-year reduction in operating loss.

For the first half of 2015, operating loss decreased by 31% from the same period a year ago. At the halfway point of the year our Niobe system sales have already surpassed all of last year's.

While the sales cycle for Niobe is by nature relatively long we have substantially shortened the clinical learning curve for new operators through our training programs which incorporate best practices developed in partnership with our existing user base. This approach was applied to the startup of the new Niobe lab at Floreasca Hospital in Bucharest, Romania which held its nationally televised grand opening ceremony in May. After the first week of use the physicians were scheduling their most difficult cases.

We continue to make steady progress in Japan and we're excited to announce during the quarter the first procedures performed there with our Niobe ES system. After installation of the Niobe lab at Takatsuki Hospital in June which was part of a complete hospital renovation Dr. Kohei Yamashiro conducted a magnetically navigated ventricular tachycardia or VT ablation in early July.

Coinciding with the first procedure the hospital held a grand opening lecture on July 3 that was attended by 300 guests and included presentations by Dr. Yamashiro and Dr. Hiroshi Nakagawa, an electrophysiologist and globally recognized expert on the Stereotaxis system. Since then the hospital's EP team has completed more than 15 ablation procedures with the Niobe system citing its ease-of-use, precise control and significantly increased safety and generating effective lesions.

In addition, Takatsuki Hospital has demonstrated Niobe procedures to visiting physicians and executives from multiple Japan hospitals interested in magnetic navigation.

As we begin to build a body of clinical evidence from a Japanese patient population we continue to expand discussions with the Japan EP community. This past week we engaged more than 80 participants at our featured symposium during the scientific sessions of Japan HRS which this year was consolidated with the Japanese Society of Electrocardiology Annual Meeting.

The many preeminent industry events taking place during the last three months provided large-scale opportunities to present to a global audience our innovative technology and the increasing clinical evidence on the benefits of a fully remote, computer assisted procedure environment. In Milan we made our first, I'm sorry, our fifth appearance at the European Heart Rhythm Association EUROPACE Congress, a biennial event that attracts approximately 5,000 EP professionals. During a live case transmission from Humanitas Research Hospital in Italy, Dr. Maurizio Gasparini addressed the audience, noting that he exclusively uses the Niobe system for performing ablations because he finds it has significant advantages over manual techniques.

At HRS in Boston the audience was impressed by the recent clinical data that underscores the Niobe systems' exceptionally strong performance in the treatment of VT, a serious arrhythmia which can lead to sudden cardiac death. Led by Dr. Lakkireddy, the Kansas University Medical Center EP team conducted a retrospective meta-analysis which revealed positive results in all clinical endpoints for VT ablation using the Niobe system including acute success, procedure time, fluoroscopy time, long-term outcomes and complication rates.

During our rhythm theater program, Dr. David Burkhardt from the Texas Cardiac Arrhythmia Institute discussed his thoughts on magnetic navigation as the standard of care for VT ablation. Through multiple studies Dr. Burkhardt and his colleagues who maintain a rigorous definition of success have concluded that safer, higher-quality ablations can be achieved with the Niobe system compared to other approaches. Our clinical strength in VT is becoming increasingly well-established and provides significant opportunity for Stereotaxis to lead the VT market.

Finally, at both HRS and EUROPACE we were pleased to showcase and discuss the development of the new V motion feature of our Vdrive system which provides automatic orientation of an ICE catheter to track a localized ablation catheter. Additionally, we highlighted the latest enhancements to ablation history which are designed to compensate for movement of the heart during the respiratory cycle.

Physicians at one of our highest volume sites in North America, Robert Wood Johnson Hospital, have said that ablation history has elevated their clinical practice to the next level by providing a context in which wattage and contact duration of the catheter can be visualized and thus display greater evidence of lesion gaps. These lesion gaps are one of the common failure points reported by physicians in achieving favorable AF outcomes. Our global sales and marketing teams are very focused on follow-up of the many quality leads generated by recent industry events as well as building increased visibility and appreciation for the accumulating data supporting the clinical benefits and efficiencies of our technology.

Now I would like to turn the call over to Marty to provide details of our second-quarter and six-month financial results.

Thanks, Bill, and good morning everyone. Revenue in the second quarter was $9.7 million, up 20% from $8 million in the year-ago quarter and up 1% on a sequential basis. System revenue of $3.1 million was an increase of 168% year over year and a 9% increase on a sequential basis.

In the second quarter we recognized revenue of $1.9 million on two Niobe systems, $1 million in Odyssey Solution products and $200,000 on two Vdrive systems. During the quarter we generated new capital orders of $1.6 million. At quarter-end our backlog was $3.1 million.

Recurring revenue in the quarter was $6.6 million compared to $6.9 million in the prior-year quarter and $6.7 million in the first quarter. The decrease in recurring revenue compared to the prior-year quarter was primarily driven by the stronger US dollar in 2015.

Procedures declined 3% year over year and 5% sequentially. Gross margin in the second quarter of 2015 was $6.7 million, or 70% of revenue on a higher mix of system revenue compared to $6.1 million, or 75% of revenue in the year-ago second quarter and $6.9 million, or 72% of revenue in the first quarter.

Operating expenses remained unchanged year over year at $8.4 million and compared to $8.3 million in the first quarter. Operating loss was $1.7 million in the 2015 second quarter compared to a loss of $2.3 million in the 2014 second quarter, a 25% reduction and a loss of $1.4 million in the first quarter.

Interest expense was $800,000 in all three quarters related to HealthCare Royalty Partners' debt. Net loss for the second quarter of 2015 was $1.5 million, or $0.07 per share compared to a net loss of $1.9 million, or $0.10 per share reported for the second quarter of 2014.

The weighted average diluted shares outstanding for the second quarters of 2015 and 2014 totaled $21 million and $19.6 million respectively. Excluding mark-to-market warrant revaluation, our net loss would have been $2.5 million, or $0.12 per share in the second quarter of 2015 and $3.1 million, or $0.16 per share in the 2014 second quarter.

Cash burn from operations was $900,000 compared to $3.1 million in the year-ago quarter and $3.3 million in the first quarter. For the first six months of 2015 total revenue was $19.2 million, up 17% compared to $16.4 million in the first six months of 2014. System revenue improved 138% to $5.9 million from $2.5 million in the first half of last year.

Recurring revenue was $13.3 million compared to $13.9 million in the prior-year period with the decrease primarily attributable to the stronger US dollar in 2015. Procedures were down 1% compared to the first six months of 2014. Gross margin for the first half of 2015 was $13.6 million, or 71% of revenue compared to $12.8 million or 78% of revenue in the first half of 2014.

Operating expenses improved 3% year over year totaling $16.8 million for the first six months of 2015 compared to $17.3 million for the same period in 2014. Operating loss was $3.1 million versus $4.5 million in the first half of 2014, a 31% improvement.

Net loss improved 23% to $4.7 million or $0.22 per share in the first six months of 2015 from $6.1 million or $0.31 per share in the first six months of 2014. Excluding mark-to-market warrant revaluation, the first half of 2015 net loss would have been $4.8 million, or $0.23 per share and the first-half 2014 net loss would have been $6.2 million or $0.32 per share.

Cash burn was $4.3 million compared to $5.5 million in the first six months of 2014. At June 30, we had cash and cash equivalents of $3.6 million compared to $4.4 million on March 31 with no borrowings against our SBB revolver at either date.

During the quarter we raised $100,000 through our controlled equity offering. Total debt was $18.3 million all related to HealthCare Realty Partners' long-term debt.

I will now hand the call back to Bill.

Thanks, Marty. Before we take questions I would like to acknowledge the important milestone of our 25th anniversary in June.

From our origins exploring technology that would provide navigation for devices guided directly through human brain tissue we conceived and in turn developed a distinct vision of a magnetic navigation system that would revolutionize the treatment of cardiac arrhythmias. Today our platform has been utilized in more than 80,000 EP procedures and established by hundreds of peer-reviewed publications as a differentiated cardiac ablation solution with significant clinical benefits.

We also maintain a strong IP portfolio with over 100 patents covering our core technology for many years into the future. We are focused every day on improving patient outcomes, building on our leadership position in magnetic navigation and expanding adoption in leading EP markets.

Now we'll open up the call to your questions.

(Operator Instructions) Chris Nix, UBS.

Yes, good morning. I'm very happy to see the technology progressing. I'm a little concerned, more than a little concerned that there's no Wall Street coverage of your Company any longer and I'm wondering what's being done to foster a relationship with any kind of analyst coverage?

Well it's a good question, Chris, and I think that certainly the more conduits that we have for information and importantly, too, not just for information but for an analysis and an understanding as to how to best interpret the information in our marketplace which is a complex one the better off I think we'll I'll be. And we would very much like to have additional people focused on helping the market understand our story and the opportunity that we represent.

As you know, analyst coverage is not something that one can command. It's not something that one can mandate. It's something that is offered at the choice of the analysts involved.

We all know that there is, there has been never a number of years a mandatory bifurcation between investment banking activity and analyst coverage. Certainly we have investment banking relationships but we do not as you pointed out have active analyst coverage at this point. That's something that we can encourage, it's something that we would like to have, it's something that I think we would all benefit from but it's not something that we can make happen in the sense that we can command it to come into being.

It has to be a choice that's made by those analysts. I think one of the challenges, candidly, that we face is that without extraordinary banking business being spread around for purposes of transactions that will generate banking fees, it can be challenging to interest analysts that might be associated with those sorts of activities to engage.

At the same time our market cap is small enough now that we are not in the mainstream for many of these analysts to engage. And I suspect if one were to consult the research group at UBS, a company I'm quite familiar with, I think you'd find that although the story would sound intriguing to them the market cap would place us outside of their universe of activity.

So we share your frustration in that regard. We are working in the ways that that can be worked to improve that situation but unfortunately it's not something that we can control or command in that sense. So I appreciate the question, though, Chris.

Yes, I'm just -- I love the technology and the medical community seems to regard it very highly. But I'm not sure what's going to get the stock up off the mat.

Well it's a great question. My sense is that we do require our story to be interpreted for purposes of the broader market understanding. And that can be accomplished in I think in a number of ways.

Certainly the most direct way is to have an authority figure who is knowledgeable like an analyst opine on the promise that they see if in fact that's what they see in our franchise. And that would be very helpful and the more authoritative and the more well-regarded that person is of course the more impactful that opinion will be.

But failing analyst coverage, another proxy for promise I think is any evidence that may be presented by business development-related activities. If we were to engage with another entity in our industry that is widely regarded as a knowledgeable player, current participant or prospective participant in our industry category and those folks were to engage with us in some ongoing business activity I think that that type of endorsement that would be implicit in that business arrangement would also perhaps catalyze the kind of thing that you're looking for.

Because there's no question that some sort of a catalyst is required to I think you said pick us up off the mat or jumpstart the engagement of the story. Because now it's being -- I don't think that adequate analytical coverage is being applied to the circumstance.

For better or for worse, it's better for us I think because we're excited about what we're doing and it's a fascinating theater in which we're working. But for better or for worse it's a complex one and a true understanding, an in-depth, informed, forward-looking and strategic understanding is in our business it requires quite an investment in time and energy and requires a certain level of expertise.

So we are in a business where ironically an authority figure, an analyst or other would be even more valuable than it might be and other industry settings where it's a little easier to get your arms around what is going on. So we share your frustration.

In fact, I would hazard a guess that we may be even more frustrated than you that it's as challenging as it is to get the message out there. But we're working on it.

Okay, thanks for taking my question.

(Operator Instructions) We have no additional questions at this time. I'd like to turn the call back to Jim Byers at the MKR Group for any additional or closing comments.

Thank you, operator and thanks to everyone for your participation on today's call and for your continued interest in Stereotaxis. We look forward to speaking with you again in the next quarter and sharing news of our further progress.

This will conclude today's call. Have a good afternoon. Thank you.

Thank you, sir. Again, that concludes today's call. Thank you for participating.