Stereotaxis Inc (STXS) 2018 Q1 法說會逐字稿

Ladies and gentlemen, please stand by. Good morning. Thank you for joining us for the Stereotaxis' First Quarter 2018 Earnings Conference Call.

Certain statements during this conference call and question-and-answer period following may relate to future events, expectations and, as such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performances or achievements of the company's future to be materially different from the statements that the company's executives may make today. These risks are described in detail in our public filings with the Securities and Exchange Commission, including our latest periodic report on Form 10-K or 10-Q. We assume no duty to update these statements. (Operator Instructions) As a reminder, today's call is being recorded.

It is now my pleasure to turn the floor over to your host, David Fischel, Chairman and CEO of Stereotaxis. Please go ahead.

Thank you, operator. Good morning, everyone. I'm joined today by Marty Stammer, our Chief Financial Officer.

Our last call in March was an annual earnings call, and so I used that occasion to provide a broader overview on Stereotaxis, our technology, clinical value, vision and goals. We'll make this quarterly call more brief. I'll discuss our commercial, innovation and clinical efforts. Marty will then review our financial results. Following our prepared remarks, we look forward to fielding your questions.

After a period of discovery and delineation of strategic paths forward, we are deep in execution loaded Stereotaxis and I'm pleased with our progress. Our overarching commercial goal is to ensure that our physician customers have successful growing robotic ablation practices. Successful robotic practices that attract patients, capture market share in their region and showcase the clinical and commercial benefits of adopting robotics creates an environment for significant adoption of our technology. We have a well-defined, multi-pronged strategy here categorized into 6 fields: effective physician training, good procedure support, tools to drive physician practice growth, tools to generate patient demand, building physician relationships and supporting impactful clinical literature. We have many individual initiatives within each of these categories, and I described several of them on our last call.

A few recent highlights include: expanding our CE Mark label to include navigation in the pericardial space. This milestone represents our first approval outside of the vascular system. Advancing the reality of remote medicine by facilitating a procedure performed from a conference in Dubai on a patient over 6,000 kilometers away in Helsinki, Finland. We're exploring how remote peer-to-peer support and remote procedures can become available for physicians in a more standard way.

Launching in the coming week a more patient-friendly web page as our first step in building a more informative and impactful web presence. This builds upon and follows the resurrection of our social media accounts last year. Organizing a VT training seminar for over a dozen physicians. Continuing robust growth of enrollment in our VT superiority trial, with 25 patients enrolled this year through April and 111 patients enrolled in total. Organizing highly successful booths and presentations at the recent EHRA conference in Barcelona and HRS conference in Boston, along with various other smaller conferences. We're adjusting the first innings of these commercial efforts and have an extensive list of projects being advanced.

These commercial efforts led to another quarter of recurring revenue growth. While modest, the recent pattern of consistent growth contrasts with our previous history and inflects entirely what in retail will be described as same-store sales growth.

We are confident that our recurring revenue should continue to grow on a year-over-year basis in the coming quarters, and currently estimate approximately $28 million in recurring revenue this year. This level would be the highest Stereotaxis has ever recorded in its history.

When the timing is right, I expect the environment will be conducive to [an effort] to reinvigorate system sales. The market opportunity remains very significant for new robotic ablation practices as the cardiac ablation market is among the largest and most rapidly growing medical device markets, with significant long-term tailwinds.

Shifting to our innovation goals. I have in previous calls described why innovation and collaboration is crucial for a company like Stereotaxis that is at the cutting edge of technology, advancing the exciting medical field of electrophysiology. I believe we're doing well in reinvigorating Stereotaxis' commitment to innovation and collaboration. We have an innovation plan being advanced that is elegant, realistic and medically and commercially sound. Our innovation plan addresses each of the 5 core technologies utilized in a robotic cardiac ablation procedure and has the guiding goals of improving patient care, physician choice and technology availability. The right innovation plan can provide these benefit to patients, physicians and hospitals while also improving Stereotaxis' opportunity.

Recently, we announced the collaboration with Acutus Medical, a private company that has developed and commercialized a highly innovative cardiac mapping system. Acutus' mapping system uses a proprietary diagnostic basket catheter with several dozen ultrasound transducers and electrodes to rapidly acquire high resolution anatomical and electrical maps of the heart chamber. The additional data provided by these maps is particularly useful in complex atrial fibrillation procedures. And Acutus shares a similar vision as Stereotaxis of addressing significant unmet clinical needs and enabling the treatment of arrhythmias that are often difficult to treat well with other technologies.

Successful initial clinical cases with our technologies were performed by Dr. Toyi (sic) [Tamas Szili-Torok] Torok of Erasmus University in Rotterdam, who demonstrated the value of using both technologies together. Both companies plan to further integrate our technologies to improve physician workflow and enhance the ability for our robotic technology to provide automated navigation to areas of interest identified by Acutus' mapping system. We are excited to be working with Acutus team, and this collaboration advances our innovation goals of improving patient care and physician choice.

While various other aspects of our innovation plan have not been discussed, we are confident in our broader innovation strategy and additional details will be provided as appropriate. I am proud of the progress our team is making along multiple projects and believe this progress can meaningfully contribute to our commercial performance in 2019 and beyond.

Lastly, before Marty reviews our financial performance, I want to touch upon the growing body of clinical literature that supports our technology. The benefits of robotic cardiac ablation are not theoretical. They're demonstrated on a regular basis at over 100 leading hospitals globally that actively use our technology. They've also been demonstrated with scientific rigor in over 340 peer-reviewed publications. 18 publications have showcased our clinical value year-to-date, a significant increase in run rate from the 37 publications in 2017, which itself was a significant increase from 22 in 2016.

The independent physician Society for Cardiac Robotic Navigation just released a special supplement in the Medical Journal, Europace, which included 8 publications on our technology. One publication that recently came to my attention and I want to share came from Dr. Holm and the electrophysiology team at Lund University in Sweden. The study compared 112 patients with paroxysmal and persistent atrial fibrillation, treated utilizing robotic magnetic navigation to 102 similar patients treated with manual ablation catheters. Stereotaxis' safety benefits has been consistently documented, and this study has similarly found that patients treated robotically had a 70% lower rate of major adverse events and were exposed to 38% less radiation. More interestingly, the authors also found clinically meaningful and statistically significant increases in efficacy for patients treated with robotics. At every time point, from 0.5 year post procedure until the final follow-up 3.5 years post procedure, freedom from atrial fibrillation and clinically effective survival were significantly higher in the robotic magnetic navigation arm. At 3.5 years post ablation, those treated with robotics had a statistically significant 38% increase in freedom from atrial fibrillation versus their counterparts treated with conventional manual technology. Procedure times were equivalent between both arms. We're working on ways to ensure the dramatic data in this and similar clinical publications is more readily available to patients, physicians and the broader community.

I'll now pass the call over to Marty, who will discuss the first quarter financial results in more detail.

Thanks, David, and good morning, everyone. Revenue for the first quarter of 2018 was $7 million, consistent with the prior year first quarter. Recurring revenue was $7 million in the first quarter, up 3% from $6.8 million in the prior year quarter. System revenue in the first quarter was $20,000, down from $200,000 in the prior year quarter.

Gross margin in the quarter was $5.7 million or 82% of revenue, consistent with the first quarter of 2017.

Operating expenses in the first quarter were $6.8 million, down 10% from $7.6 million in the prior year quarter. The reduction in operating expenses reflects a significant decrease in general and administrative expense, increased investment in research and development and stable sales and marketing expense.

Operating loss in the first quarter was $1.1 million compared to $1.9 million in the prior year first quarter. Net income in the first quarter was $1.4 million compared to $1.2 million in the first quarter of 2017. Excluding mark-to-market warrant revaluation, the company would have reported a net loss of $1.2 million for the 2018 first quarter compared to a net loss of $2 million for the 2017 first quarter.

Cash burn for the first quarter was $2 million compared to $2.7 million in the year-ago first quarter and $800,000 in the preceding fourth quarter. Cash burn in the first quarter was impacted by the timing of cash collections as demonstrated by the significant increase in accounts receivable, which is expected to reverse in the second quarter.

At March 31, 2018, Stereotaxis had cash and cash equivalents of $11.6 million, no debt and $4.5 million in unused borrowing capacity on its revolving credit facility for a total liquidity of $16.1 million.

I will now hand the call back to David.

Thank you, Marty. As detailed in our press release, we expect to show continued year-over-year growth in recurring revenue in the coming quarters. For the full year 2018, expected recurring revenue of approximately $28 million represent the highest annual level of recurring revenue the company has achieved in its history. The increase in accounts receivable, which negatively impacted cash flow in the first quarter, is expected to reverse this quarter, and we expect to end the quarter with an increased level of cash than we started the quarter.

Overall, operating expenses are expected to moderately increase in 2018 when compared to 2017, primarily driven by R&D spending and strategic innovation initiative. Stereotaxis' balance sheet will allow the company to deliver on its commercial and innovation initiatives over the coming years and reach profitability without the need for additional financing.

That concludes our prepared remarks. Operator, can you please open the line to questions?

(Operator Instructions) And we will hear first from [John Morganelli], who's a private investor.

I think that the company is doing -- going in the right direction. I just had a question about, is there any effort to get this news about the company out to attract potential investors? Obviously, we would like to see more people invest in the company and the stock price is always a concern. But the news seems to be moving in the right direction since David took over. And I was just wondering if there's any strategies about that at all?

Thanks for the question. I also share perhaps the frustration in your voice that while there's good news that often comes out, that doesn't necessarily reflect itself in the stock price.

Usually when the good news is up, stock goes down for some reason, I don't know why, but it does.

All I know is that fundamentally, we have to focus on improving the company. And as we do more and more things that make it obvious to the outside world that we will have a growing and flourishing company, I expect that at some point the markets will appreciate that. In the interim, we have tried to have obvious open Q&A on our calls. We're trying to be more responsive to the investment community. I will be speaking at the LD Micro Conference in about a month from now. And so we are -- we're trying to engage with the community. Obviously given our status not on NASDAQ and being kind of a low stock priced and generally low liquidity, it doesn't lend itself to kind of robust investor participation. But again, I think, kind of, our primary focus has to be on doing the right things fundamentally for the business. Markets can remain irrational for a period of time, but over time, fundamentals and valuations do come together. And in the interim, obviously, we're open to engaging more with investors, and so we'll try to do that as available.

(Operator Instructions) We will now hear from Joe Hurley with Chi-Rho Financial.

A question, since you mentioned NASDAQ, is there a game plan? Or what are the requirements to get relisted on NASDAQ at some point?

So the requirements for NASDAQ, the primary hurdle right now would be our stock price. And so in order to have a stock price that will allow listing on NASDAQ, we would either have to have a stock that appreciates meaningfully or, as described on the last call, would have to do a reverse stock split. We -- the last call, if you were on it and remember the comments made by several individuals during the Q&A, it was pretty clear aversion towards a reverse stock split. And I understand that aversion and share it, we've no plans or expectations to do a reverse split at this time. And so while I think that relisting on NASDAQ will be fundamentally beneficial for shareholders and for the company, we preferred out -- and we preferred out the flexibility to do a reverse split if needed. I share that aversion to the reverse split and there is no plan or expectations to do one at this time. And if we ultimately do decide to pull the trigger, I expect it will be done from a position of strength and concurrent with very positive news. So for now, we are going to wait for the stock to appreciate naturally or we're going to wait for one of those opportunities to uplift at the same time as very positive news.

Got it. Got it. And I was on the call. I just didn't recall that. And I guess if you are coming from strength, it really shouldn't make any difference to shareholders, especially if you could get relisted on the NASDAQ, right? So I think that's all...

And that's why we don't want to just do it as kind of -- as just kind of random steps along the process. We want it to be done kind of in the right setting, if needed.

(Operator Instructions) And at this time, we have no additional questions in the queue. I will turn the call back over to your host for any additional or closing remarks.

Okay. Thank you very much for joining the call and for your continued support and interest in Stereotaxis. We look forward to working hard on your behalf over the coming months and speaking again on our next quarterly call. Take care.

With that, ladies and gentlemen, this will conclude your call for today. We do thank you for your participation, and you may now disconnect.