Stereotaxis' CEO Discusses Q1 2011 Results - Earnings Call Transcript

Stereotaxis, Inc. ( STXS)

Q1 2011 Earnings Call

May 2, 2011 4:30 PM ET

Executives

Greg Gin – IR, EVC Group Inc.

Mike Kaminski – President and CEO

Dan Johnston – CFO

Analysts

Sameer Harish – ThinkEquity Partners

Tao Levy – Collins Stewart Investments

Spencer Nam – Madison Williams & Company

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to Stereotaxis to report First Quarter 2011 Financial Results and Conduct Conference Call. During today’s presentation, all participants will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions). Today’s conference is being recorded, May 2, 2011. I would now like to turn the conference over to our host, Greg Gin. Please go ahead.

Greg Gin

Thank you, Alisha [ph], and good afternoon everyone. Thank you for joining us for the Stereotaxis conference call and webcast to review the financial results for the first quarter of 2011, which ended on March 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 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 qualify forward-looking statements made in this call, we refer you to the company’s recent public filings filed with the SEC, specifically the Form 10-K for the fiscal year ended December 31, 2010.

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 would 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 today on our first quarter 2011 conference call. With me today is Dan Johnston, our Chief Financial Officer. I will start with our prepared remarks with a review of the first quarter and then preview our exciting key product introductions scheduled for the HRS meeting in San Francisco this week. Including in our new releases are the Epoch platform, that we announced in the press release a few days ago. Dan will then discuss the financials before we open it up to your questions .

So let me get started. In the first quarter, we generated $10.2 million in revenue including $4.3 million in capital and $5.9 million in recurring revenue. Gross margins remained strong at 71% and operating expenses were in line with our expectations reflecting an increased spending in the Odyssey infrastructure and the Asia-Pacific channel. New orders totaled $7.1 million, virtually identical to the $7.2 million reported in the prior year period, and reflecting first quarter seasonality.

Niobe orders at $4.6 million or less that our expectations due to delayed customer decisions. Conversely, our Niobe pipeline of late-stage customers continue to demonstrate a growing interest in our platform, driven by the rebounding of reference sites in North America, and the expansion into Eastern Europe and Asia. Modeling our sales process and the conversion of late-stage customers into order, supports our forecast for growth in new orders this year on the platform.

Odyssey incoming orders of $2.5 million including 45% of orders coming from standard labs, continue to demonstrate strong market interest for Odyssey, as the clinical networking platform for all interventional suits. Niobe utilization continued to grow in the fourth quarter – over the fourth quarter of 2010, although not reflected in the recurring revenue due to fluctuations and shipments of disposables.

As we indicated in our fourth quarter results call, we expected the first quarter would be challenging. I will now discuss the factors that impacted our first quarter and the actions we are taking that give us confidence that we will exceed our expectations for the year.

As we discussed in the fall, we did experience a delay in the imaging partners’ magnetic model being shipped for a six-month period. I am pleased to announce that this is on schedule to be resolved and shipments will resume this quarter. More importantly, I want to discuss the overall Niobe trends.

To start, let me provide some historical perspective on Niobe sales. Since 2003, we systematically grew new Niobe annual placements until the irrigated catheter delay and recall in 2007 and 2008. Since that period, Niobe orders that we converted to revenue in a given year have ranged from 20 to 30 per year, indicating an adoption rate that we believe does not reflect our system’s value in this high growth market. With approximately 400 newer renovated EP labs built per year globally, the market potential is much greater than the 20 or 30 Niobes we have historically sold. We firmly believe that we can accelerate the sales rate to 50 to 100 new platforms per year with the right system enhancements combined with Niobe’s proven safety and efficacy benefits.

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