Stereotaxis Inc (STXS)

Q2 2012 Earnings Call

August 06, 2012 05:00 pm ET


Greg Gin - IR, EVC

Mike Kaminski - Chief Executive Officer and President

Sam Duggan - Chief Financial Officer




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Good day, ladies and gentlemen. Welcome to the Q2 2012 Stereotaxis Incorporated Earnings Conference Call. My name is Reggie and I will be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions). As a reminder this call is being recorded for replay purposes.

I would now like to turn the call over to Mr. Greg Gin of EVC. Please proceed, sir.

Greg Gin

Thank you, Reggie. Good afternoon, everyone. Thank you for joining us for the Stereotaxis conference call and webcast to review the financial results for the second quarter, which ended on June 30, 2012.

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 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 the Form 10-K for the fiscal year ended December 31, 2011, and the quarterly filing for 2012.

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 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 canceled, either by their express terms as a result of negotiations or by project changes or delays.

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

Mike Kaminski

Thank you, Greg. Good afternoon, everyone. Thank you for joining us for the review of our second quarter 2012 performance. With me today is our Chief Financial Officer, Sam Duggan. Following our prepared remarks, we'll open up the call for your questions.

Let me briefly review the quarterly results then Sam will provide further details in his prepared remarks. As the year unfolds, we're seeing greater excitement around our Niobe Epic Systems, or Niobe ES, which is designed to significantly enhance complex electrophysiology procedures. In addition, we are continuing to build a strong referral base of Niobe ES users, which we believe will accelerate future capital sales.

In the second quarter, we generated two new Niobe ES orders and two went to revenue, both in North America. We also upgraded 22 sites in the installed base to Niobe ES bringing the total upgraded sites to 41 in the first half of the year and surpassing our milestone of 40 installations.

To-date, 47 sites or over 30% of our customer base in North America and EU have transitioned to the ES platform since its launch in December 2011. We are also seeing encouraging results from our focus on increasing clinical adoption. Among Niobe ES users, utilization grew 28% during the first half of 2012, while all sites grew 13% compared to a year ago period.

For the same period atrial fib procedures increased 31% in ES sites and by 23% for all sites. According to these trends there's an extremely positive feedback from physicians, some of which have told us that they no longer will perform complex procedures without the advanced capabilities of the Niobe ES system. It has changed the way they approach EP procedures.

At the same time, we continue to make substantial progress on reducing operating expenses, which were down 27% year-over-year. Our commitment to cost reduction has resulted in a 52% improvement in operating losses for the first half of 2012, compared to the same period last year.

As I outlined on the last quarterly call, our current cost reduction initiatives include leveraging our clinical sales force to help drive capital sales, focus spending on R&D project, aggressively reducing general expenses including G&A, support functions and discretionary spending that does not align with top line growth.

Today, we have completed a majority of the discretionary spending cuts and continued to realign other areas. We're on track for the 15% to 20% decrease in operating expenses by year end from the first quarter of 2012. We've also significantly improved our balance sheet and financial position in the quarter by securing approximately $18.5 million in gross proceeds from our successful financing.

Offsetting these successes, we faced challenges in the quarter that impacted top line growth. First was a sequential decline in recurring revenue. This decrease was largely a result of the stocking of disposables by customers in the first quarter in anticipation of an ES upgrade or Vdrive utilization, which resulted in lower purchases in the second quarter.

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