Stereotaxis CEO Discusses Q2 2011 Results - Earnings Call Transcript

Stereotaxis, Inc. ( STXS)

Q2 2011 Earnings Conference Call

August 8, 2011 4:30 PM ET


Greg Gin – IR

Mike Kaminski – President and CEO

Dan Johnston – CFO


Tao Levy – Collins Stewart

Steven Lichtman – Oppenheimer

Spencer Nam – Madison Williams

Sameer Harish – ThinkEquity

Jose Haresco – JMP Securities



Ladies and gentlemen, thank you for standing by. Welcome to the Stereotaxis second quarter 2011 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, August 8, 2011. I would now like to turn the conference over to Greg Gin. Please go ahead.

Greg Gin

Thank you, operator. And good afternoon, everyone. Thank you for joining us for the Stereotaxis conference call and webcast to review the financial results for the second quarter of 2011, which ended on June 30, 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 the 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’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 today on our second quarter 2011 conference call. We have a lot of important information to review today. So I’d like to spend a few moments going over the agenda. I will start with prepared remarks with a review of the factors that impacted our second quarter performance.

Then I’ll discuss the company’s transition plan, as outlined in the afternoon’s press release that is designed to build rapid adoption of our new Epoch robotic platform, capitalize on the Odyssey opportunity, and substantially conserve financial resources. We will then review the financial results and provide details of the financial impact of the restructuring before open it up to calls.

Let me get started. Second quarter was a challenging quarter for Stereotaxis and reflects the beginning of a period of significant transition for the company. Revenue was down 22.7% from the second quarter of 2010. Gross margin in the second quarter was 69.7%, up 250 basis points from a year ago. Global new capital orders were $4.4 million and were comprised of two Niobe systems as well as $1.7 million in orders related to Odyssey.

Operating expenses increased due to the impact of marketing expenses for two major medical meetings associated with the release of our Epoch platform. The bright spot for the quarter were marked momentum and interest in Epoch, which is designed to significantly enhance the efficiency for all robotic EP procedures and whose market adoption will significantly contribute to the growth and profitability in the future. The second was the 17.9% growth in recurring revenue, which reflects the continued growth in the clinical procedures and the pipeline momentum for the Odyssey system in the standard EP lines.

While we are disappointed with our systems revenue and new capital order performance in the second quarter, we believe we clearly understand the drivers for our results and on a path to turn this around. Our financial performance in the quarter and year-to-date is mainly driven by soft Niobe revenue and the related impact on the Odyssey business and the emergence of the larger standard lab Odyssey deal, which take longer to closer but significantly increase our growth potential.

With our key focus on building top-line growth, we are mindful of conserving resources during the transition period. Therefore, we are embarking on an aggressive and immediate action plan to implement and rebalance and reduce the level of spending. This plan will focus on aligning our operating expenses with a revenue growth expectation, minimizing the cash burn while continuing to drive investments in R&D.

2011 has become a transition year for the company, one in which we need to regenerate robotic market demand in EP, continue to expand in the promise of the Odyssey product and rebalance our spending so we can invest in strengthening our value in the market but lower our burn rate. Accomplishing this will position us for a strong 2012 and beyond.

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