Q2 2021 Stereotaxis Inc Earnings Call
[music].
Good morning, Thank you for joining us for Stereotactic second quarter 2021 earnings conference call certain statements. During the conference call a question and answer period to follow may relate to future events expectations and as such constitute forward looking statements within the meaning of the private Securities Litigation Reform Act.
And at a 1995, such statements involve known and unknown risks and certainties and other factors, which may cause the actual results performance or achievements of the company in the future to be materially different from the statements that accompanies X you could east Med Tech today. These risks are described in detail in our public filings within the security.
And exchange Commission, including our latest periodic report on form 10-K, or 10-Q, which you know Judy to update these statements.
At this time, all participants have been placed on a listen only mode. The floor will be opened for questions and comments. Following the presentation. As a reminder, todays call is being recorded it is now my pleasure to turn the floor over to your host David Fisher, Chairman and CEO.
Axes.
Thank you operator, and good morning, everyone I'm joined today by comparing our Chief Financial Officer.
And the second quarter, we delivered robust growth and our strongest absolute revenue since 2015, as we continued to benefit from a return of robotic system sales.
And your comparison weighted by a particularly depressed second quarter of 2020.
Current quarter revenue was up approximately 70% year over year.
5% sequentially and up 33% from the second quarter of 2019.
Renewed adoption of robotic systems.
First significant wave of revenue growth and our strategic innovation plan.
I need to read the initial fruits of that strategy and are confident this strategy will lead to a multiyear period of sustained robust growth.
System revenue reported in the quarter reflects shipments of Genesis and model S system to a hospital and establishing a new robotic electrophysiology program and the United States as well as it and that Youll be system to a hospital, establishing a new rail robotic electrophysiology program and China.
As discussed on prior calls partial revenue recognition is often triggered from shipment of systems and the revenue reported reflects a portion of the overall contract value from these 2 deals.
During the second quarter, we received 2 orders for robotic systems, 1 as previously discussed to U S Hospital and other to 1 of the most prestigious medical centers in China from wide ranging from.
And why Beijing is a very large cardiovascular hospital with 17, Cath labs performing over 50000 interventional procedures a year.
Establishing a new robotic electrophysiology program after absorbing our success and other practices and conducting a head to head study that showed significantly lower rates of silent strokes and robotic versus manual patient procedures.
This was our second order from China, this year and needs to orders will be the first new robotic systems in China and nearly 10 years. This is a reflection of the renewed interest and acceptance that we are experiencing globally and a specific high level of customer and strategic interest, we're seeing and China.
Thus, China is emerging as a third geographic pillar for our business, we believe that emerging relationships with strong strategic partners and China may allow for broad adoption of our technology in that geography, we will enter into any relationship and a prudent fashion and enhances our long term opportunity and look forward to sharing additional details Juan.
Appropriate.
I recognize the uneven pace of orders announced on any individual quarterly call mixed projections difficult, but we continue to see significant interest and Genesis.
During the quarter, we hosted 35 separate <unk> visits 13 of which were to new potential customers.
Over the last 9 months, we received 7 orders from robotic systems, 5 of which were from greenfield customers, establishing new robotic programs.
We are now seeing increased activity from multiple hospitals that delayed lab replacement projects during the depths of the pandemic we.
We expect 2022 to reflect a near normalized level of replacement cycle projects.
Orders received and the remainder of 2021 and early 2022 are expected to result in approximately a doubling of system revenue next year and contribute to robust double digit revenue growth in 2022.
As we grow our business, we are investing and establishing the commercial operational and technological foundation and will allow for long term growth commercially.
Commercially and operationally, we continue to expand our fellows program are pleased to welcome several experienced new leaders across various roles and our organization and are on track to move into and expanded new headquarters at year end.
2 weeks ago, we were particularly excited to announce the addition of Dr. Miriam create as an independent board member.
And our long term experience and executive leadership and intuitive surgical is highly beneficial as we look to positively transform intervention medicine with robotics as intuitive has done across laparoscopic surgeries.
Technologically we are aggressively advancing the second and third waves and our strategic innovation plan.
Stereo taxes advanced Robotically navigated and magnetic ablation catheter represents the second wave and our strategic innovation plan and.
And the catheter has been progressing through the manufacturing and testing processes necessary for submissions for European approval and a U S. IDE study.
Fly chain challenges, however have caused some manufacturing delays at our partners Cisco and most recently in July of <unk> received a force majeure letter from a supplier of a specific epoxy glue delaying previously confirmed shipments.
It seems to be a global phenomenon and we have been addressing disruptions like this with grit and creativity, but they have a disruptive impact.
We now expect to complete manufacturing and testing of the hundreds of catheter is needed for our regulatory submissions and complete those submissions for European approval and a U S. Pivotal trial early next year.
We believe that will allow from revenue contribution from the catheter in Europe, and 2022, and a potential U S regulatory approval in 2023.
We continue to work energetically on a third wave of innovations both independently and with new partners that will accelerate our adoption and electrophysiology and expand our robotic technology into new adjacent markets.
We believe we will be in a position to present several of these in more detail at the end of this year and given our progress this should lead to several regulatory filings and product launches in 2022.
We are confident and the positive impact. These innovations will have on patients physicians providers, and and stereotactic financial and strategic Foundation.
Kim will now provide some commentary on our financial results and then ill make a few financial comments as well before opening the call to Q&A.
Thank you David and good morning, everyone.
Revenue for the second quarter of 2021 totaled $9.1 million and approximately 70% increase from the prior year second quarter, a 5% increase sequentially and a 33% increase from the second quarter of 2019.
System revenue of $2.7 million includes the delivery of a genesis system and the U S and the delivery of a niobe system to China.
Recurring revenue for the quarter was $6.1 million compared to $5.1 million and the prior year second quarter.
The increase and recurring revenue reflects a rebound in procedure volume from the depths of the pandemic and last year's second quarter.
Right.
Gross margin for the second quarter of 2021 was 72% of revenue with system gross margin of 48% and recurring revenue gross margin of 86%.
Operating expenses and the quarter at $9.9 million included $2.8 million and noncash stock compensation expense.
This increased noncash stock compensation does not reflect increasing numbers of securities granted but is driven by an increasing stock price and accounting for the previously announced CEO long term performance plan.
Excluding stock compensation expense adjusted operating expenses were $7.2 million. This compares to $5.3 million and the prior year second quarter and is up from $6.2 million sequentially.
The increase and adjusted operating expenses, primarily reflects measured hiring across key functions and the company and R&D project spending.
Operating loss and net loss for the second quarter of 2021 were $3.4 million and $1.2 million compared to 1 point.
$9 million and the prior year.
<unk> net loss and the current quarter reflects a favorable $2.2 million adjustment further forgiveness of the paycheck protection mode.
Adjusted operating loss and adjusted net income excluding noncash stock compensation expense were negative $6 million and positive $1.6 million for the quarter, both compared to the prior year adjusted operating and net loss of negative $1 million.
Negative free cash flow for the second quarter was <unk> 1 million compared to $1.2 million and the prior year second quarter.
At June 30, we had cash and cash equivalents of $44.2 million consistent with the beginning of the year.
I will now hand, the call back to David.
Thank you Kim as.
And as mentioned in today's press release, we now expect robotics system revenue of approximately $11 million for 2021 based on the orders. We have received to date. We expect orders received during the remainder of 2021 and in early 2022 to result in approximately a doubling of system revenue in 2022 compared to 2021.
<unk> and contribute to robust double digit overall revenue growth in 2022.
Stereo, Texas remains in the early phases of our multiyear turnaround as we establish the foundation for significant adoption of robotics, and electrophysiology and across interventional medicine, we are advancing our strategic our strategy and our methodical fashion and are pleased that we are able to advance multiple fronts in tandem while maintaining.
Financial discipline, we are and expect to continue increasing our investments and our team infrastructure and technology, but have been able to do so while continuing to run the company near breakeven. This is best reflected in the essentially identical cash position, we have maintained over the last 4 quarters.
<unk> balance sheet allow us to continue these investments and reach profitability without the need for additional financing.
Look forward to now take your questions. Operator can you. Please open the line for Q&A.
Thank you.
If you would like to ask a question. Please signal the question and 1 on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
And again, Chris I wanted to ask a question we take the first question from Adam <unk> at Piper Sandler.
Hi, David Hi, Kim Thanks for taking the questions here and congrats on the solid quarter.
First just wanted to start with the the system guidance and the commentary on 2022 is the first day.
David can you just bridge us to the $11 million and system sales for this year it sounds like those orders.
Have been executed and we affirm install dates and the back half of the year, but wanted to confirm that and then second as we think about 2022, you expect roughly a double.
And and system revenues, maybe just talk a little bit more about.
The visibility there and the capital funnel and what kind of gives you the confidence that.
Revenue should double next year, and then had a follow up.
Sure plant and good morning, so and so when we look at the revenue guidance for this year and the capital system revenue guidance for this year that is reflective of the orders that we've received to date and net we're confident we'll be at.
Recognize this revenue to date and the proportion of those systems that will be recognized as revenue per day. This year still and so that gives us the confidence and that number.
There is some potential for free.
For upside to that number but again given kind of that we're already in August.
And the likelihood of having significant upside to that number is low and the.
Confidence in the 2022 guidance from the preliminary guidance for 2022 is is that there is.
We do have significant activity with multiple sites and.
And we do have confidence from that activity that next year should be more or less normalized level of replacement cycle Rajiv and this.
We're having very little replacement cycle cycle revenue and and.
Just from the Delta between what we would have this year and what would be a more normalized level.
And what amount to several systems and high single digit low double digit.
System revenue just from the replacement cycle and so that along with the continued pace of discussions with new potential customers gives us confidence that we should be able to have quarters like like the once we announced last March and.
In the coming quarters and and.
And that shouldnt be a surprise to us and and and again that should lead to kind of.
Nice revenue trajectory as we go into next year.
Got it that's very helpful. Thanks, David and for the follow up maybe just wanted to ask a little bit about how you see the back half of the year playing out from a top line perspective, just any color around.
Quarterly cadence or progression of sales both on the system side in terms of revenue recognition and then on the disposable side where.
AF volumes have snapped back nicely here in Q2, but then we also have delta and potentially some seasonality in Q3, so just any broad strokes.
Around how youre thinking about the back half of the year and thanks, so much for taking my questions.
Sure.
If we look at the last 2 quarters of the year I would kind of think that system revenue should be and.
And should be relatively similar between the third quarter and fourth quarter, and and getting us to that 11 million guidance and and procedure disposable revenue. It is tough to estimate how that's going to go and overall, we see the rebound and the gradual rebound back towards normality.
And that you described and we have heard.
Mentally some pressure, particularly in a few southern states.
Last few weeks with the rebound and Delta generally it seems like hospitals are well prepared and and that that shouldnt happen.
Big disruptive impact, but there is definitely a little bit of disruption out there and in the world It probably shouldn't have.
Big impact on our overall recurring revenue but.
But but but it's very hard to estimate exactly what to what to see and so generally I would kind of think of numbers that are similar to what we've reported.
Just now.
And that's kind of a fair for the back half of the year.
Got it thanks, so much.
Thank you.
If you find that your question has been answered you may remove yourself from the cube, Chris and Scott too.
And we would take the next question from Josh Jennings and Colin.
Hi, Good morning, David and thanks for taking my questions.
And to start Hi, Josh good morning.
Good morning, and let's start off with the third wave of innovation and the updated comments you provided or outlook on new indications.
Billings and then even product launches in 2020 too low.
And that could have to disclose exactly what these these new indications will be but.
Can you help us just bridge.
But it seems like an accelerated timeline, but with.
And what type of clinical data.
<unk>.
For these filings and for these approvals.
But also to drive commercial traction and should we be expecting data for these new indications and the coming months or before these filings.
Sure Great question, and so I guess, maybe 1.1 preliminary comment is that and.
And the discussion of.
The next wave of innovations will not be exclusively and discussion of new indications and so there are and there will be and aspect of that about how we're expanding into adjacencies to the electrophysiology space and.
And starting to address new clinical applications, but there will also be and.
And multiple updates related to electrophysiology or more general technology updates and so I think kind of do you have to think about it broader than just <unk>.
<unk> expanded indications.
And the specific questions with clinical data for most of the technologies that we're talking about there is not.
Our requirement for preclinical data and the way that you would typically think about it and.
A larger study in humans and.
And in order to pursue regulatory approval and so you should not expect that we're going to have a press release announcing some clinical data and the next few months and it related to those and.
And I think youre right that particularly as you think about new indications building up clinical literature is important as you go through the adoption phase and so that will be something that we do focus on with the initial adopters who are really.
The kind of leaders in that adoption and the field and but that will be something that will happen and kind of during the course of day initial launch.
Understood. Thanks for that help there and but.
Thinking about the high level commentary on system revenues doubling in 2022.
Does that assumption baked in.
Central demand from these new indications are this low.
Third wave of innovation.
And other tackle and next year.
No that does not so the revenue guidance and commentary is based on our existing business and electric physiology business.
And we expect that's kind of mentioned and the call we expect.
Regulatory submissions and.
And and initial revenue from this third wave of innovation, but that would not be and that would not be something that we would kind of included in guidance at this point.
Understood and then lastly, just <unk>.
You commented about this Beijing Center.
And the order for Niobe after they performed.
Study.
And believe you stated.
And that demonstrated a reduction and asymptomatic cerebral embolic events.
And with robotic magnetic navigation of inflation versus versus manual population.
Is that so data that has been published and chemistry taxes build on that it seems like if that can be proven and.
It could be a big deal in terms of sparkling and even further demand and electrophysiology community. Thanks for taking the questions.
Sure I agree that is dramatic data and and pairs nicely with all the other safety benefits that we've shown over time and the study has not yet been published and I have to be somewhat careful and not sharing too much details, but we've seen all the data and the abstract of it and it's been submitted for publication.
And by the authors and and.
But it showed a very dramatic difference between and the rates of silent strokes and Emmanuel ablation vs and robotic ablation and it wasn't nicely designed study every patient and HUD.
Preop MRI Postop MRI and <unk>.
Looked for the differences between those 2 images to kind of discern and the rate and severity of the silent strokes and <unk>.
And again, it was kind of very very dramatic differences and.
Between the 2 arms and a relatively large number of patients. So I hope that it gets published and the near term and we can and we can point to the investment community too.
And obviously more importantly, our customers and physician community and to that data, but we have to wait until it gets published.
And maybe just 1 quick follow up here, sorry, but just mechanistically and I think it makes sense why you could see that reduction and silent stroke.
Strokes are asymptomatic cerebral and blood, but could you just.
Give us a refresher on why parabolic magnetic navigation catheters.
And may be continuous contact with the myocardium could could deliver a lower rate of overhead line.
Thanks, a lot.
So the authors and we'll discuss that better than I can.
And their publication, but but I think kind of a couple of things that you can think about and.
And 1 is kind of the stability of the ablation against the wall and.
And and kind of the reduced risk of that.
And of knocking off Ambalaj and Youll navigating those seem to be kind of 2 of the 2 of the drivers and again, that's kind of driven by the mechanistic design of a magnetically driven ablation catheter and it gives it that stability against the beating heart and gives us kind of a softer shopped, which makes it less likely to add.
And to cause harm.
Great. Thanks, a lot.
Thank you.
The next question comes from Frank <unk> at Lake Street capital markets.
Hey, Thanks for taking my questions just wanted to start with fiscal year 'twenty 2 system guidance I wanted to ask a little bit more specifically, how many orders do you have in hand, right now to be recognized in 2022, and then if you could just bridge us to that double of how many more additional orders you need between now.
And call it mid 2022 to get to the double and system sales.
And fiscal year 'twenty 2.
Sure Hi, Frank.
So we've announced to date this year 7 orders for robotic systems, all of which will have at least their initial revenue recognition in 2021. So there will be a portion of that revenue that gets recognized in 2022.
Predominant and.
And for each of those 700 systems will be in 2021, and so its orders that we expect to come in the coming months and.
And from let's say now through the middle of next year.
Will that will generate the 2022 guidance.
And we don't obviously have any of those orders yet those are those are the ones that will take place now through the middle of 2022 and.
And so that is and that's the way we're looking at things and if you look at kind of roughly than the math you are looking at and.
Low to mid double digit systems in order to get to that type of revenue.
Got it okay that makes sense and then I just wanted to ask a little bit more on the mix of Greenfield versus new systems expected in fiscal year 'twenty 2 I hear your comments about.
Getting back to a more normalized replacement cycle in 2022 to me that sounds like.
Most of the entire fiscal year 'twenty 2 guidance. So I just wanted to understand kind of how youre thinking about new.
Versus greenfield more specifically and fiscal year 'twenty 2.
Sure. So if you look at let's say, a low to mid teens and system number.
Next year.
And you look at let's say this year, we've had and then.
5 out of the 700 systems have been Greenfield systems, if you'd look at AR and.
Roughly looking at it if you look at let's say similar numbers of Greenfield systems, and then a replacement cycle of Edison.
Mid to high single digits number of systems replacement cycle that would get you to a low teens number of systems for next year and that feels overall like a reasonable assumption again, we're going to work hard on trying to increase the number of Greenfield systems, we recognize the long term value from that.
And but kind of when we when we look through both from the bottom up and from the top down what feels reasonable that debt.
And that feels like a reasonable way to to project.
Perfect Crystal clear and last 1 from me just wanted to ask on the margin profile of the third or the second and third innovations.
Looking at your current recurring revenue margin and 80% plus consistently do you feel the both the catheter as well as the broader innovation strategy are going to provide products with similar gross margins. If they are and the disposable side of the business.
The disposables.
The new disposables that we developed will be top tier medical device gross margin products and.
And I'm not sure if they will always be 85% are they might be a tiny bit south of that at least at lower volumes at initial volumes.
But there will be a top tier gross margin and.
Medical device products, and so I wouldn't expect and significant moves.
And gross margin.
Perfect. That's all from me and thanks for taking my questions.
Thank you.
Once again, if you would like to ask a question. Please press star 1.
The next question from Jason we did at Northland.
Hi, Thanks for taking the questions first off just a clarification I think you mentioned 2023 was that for U S approval or was that for U S. <unk>. If you could just clarify.
That was for a potential U S approval.
So what does that can you walk us through kind of the timing and terms of IDE submission and review et cetera, that's assumed in that 22 and 3 number.
Sure. So if we submit.
U S IDE application in the beginning of 2022 and and start a trial start enrolling patients, let's say in the middle of the year and.
And it should be a relatively rapid enrollment relatively.
Rapid follow up and you can have data, let's say.
6 to 9 months later with then.
Our submission for PMA approval kind of immediately on the heels of that the last follow up and that would be kind of the timeline that gets you into a 2023 submission to the FDA and and potential approval.
Okay very helpful.
Also it sounds like you've made some.
Recent hires.
Beefing up the organization is this.
To support the current business or is this anticipation of sort of the.
The expansion that you've mentioned in terms of for 2022.
Yeah.
And really kind of <unk>.
Looking out as we as we think about our business and wanting to build a business that can do.
Do much more and they can grow too much more sizable.
Scale, you want to have the infrastructure and.
To do that growth and part of infrastructure is having the team and the and.
And that is kind of capable and confident and works well together and so obviously on the commercial side. We're looking at how can we build a commercial team that can really scale.
And both whereas new innovations come out and as we have increased our system sales and to help drive new system sales and.
On the R&D side, we have a team that has been able to do amazing amounts with relatively.
Relatively lean fashion, and so any ways to accelerate the various innovations that are taking place as is.
I think a good use of shareholder capital and then and then operationally we want to modernize and really set the foundation for a company that can be and.
Magnitude larger and so that day that explains things like our move to the new office and and.
And across operations.
And the desire to modernize and improve things and then and we've been fortunate to find some individuals who have joined us recently and.
And that we think will play a good role and in that.
Okay.
And what a lot of helpful color there.
Does that.
Does that imply that you're willing to sort of increase the burn somewhat or is it still going to or you've kind of had a philosophy to kind of.
Keep it relatively breakeven kind of fall revenues and terms youre spending it sounds like you're getting a bit more aggressive.
And next year and my my and my summarizing that correctly youre thinking or how would you think about your spending profile higher.
I would think that generally we are.
We feel comfortable investing and drivers of growth and kind of drivers of share.
And improved business and so we're really looking at it over a longer term period, what's the right thing for the overall business and we're in.
Not going to be the type of company that burn significant amounts of money in any way, where there is concern over our financing.
<unk> and.
But as you see over the last year, we've been flat we've had no burn right now.
Essentially for 4 quarters in a row.
And that's while we think both growing the business and and increasing our investments and operations and so I think kind of we'll try to do something similar I don't want anyone to hold us to any specific quarter that we're always going to maintain exact breakeven because we're not managing the business and that way, if we find opportunities to invest more.
And something that's a positive.
<unk> for the business, we will do that.
And and if that leads to a quarter, where we have.
<unk> burn.
Be it and we will.
Keep managing things from a macro perspective, we're stereotaxis student and very stable financial position and and where all of these investments are prudent investments that actually have a meaningful impact on long term growth.
Okay. That's very helpful. And then maybe just a quick follow up I know you mentioned you are going to look for it to have some launches into some adjacencies outside of V. P.
It's probably hard to project since but is there a possibility that we'll see some contribution or meaningful contribution even in 2022.
Or how should we be thinking about these launches and how they.
Play apart and.
Cerro Texas performance next year.
Okay.
And we don't want to guide for meaningful revenue and so that's why I think and the guidance and the revenue guidance, we had kind of anticipated meaningful revenue from these launches in 2022, but and.
We should expect some.
Some initial revenue some initial and and real world experience.
Okay, great. Thank you I'll jump back in queue.
Thank you.
Once again, if you would like to ask a question. Please press star 1.
It appears there are no further questions at this time, Mr Fisher and I'd like to turn the call back to you.
Okay. Thank you very much for your questions and your continued support we look forward to working hard on your behalf and the coming months and speaking again next quarter. Thank you very much.
This concludes today's call. Thank you for your participation you may now disconnect.
[music].
[music].
[music].
Good morning, Thank you for joining us for Stereotactic second quarter 2021 earnings conference call certain statements. During the conference call a question and answer period to follow may relate to future events expectations and as such constitute forward looking statements within the meaning of the private Securities litigation.
From a 1995 such statements involve known and unknown risks and certainties and other factors, which may cause the actual results performance or achievements of the company in the future to be materially different from the statements that the company's executives from it take today. These risks are described in detail in our public filings with them.
Securities and Exchange Commission, including our latest periodic report on form 10-K, or 10-Q, which and no duty to update these statements and.
This time, all participants have been placed and at least and only mode. The floor will be opened for questions and I'll come and following the presentation. As a reminder, todays call is being recorded.
And he is now my pleasure to turn the floor over to your host David Fisher, Chairman and CEO of fuel taxes.
Thank you operator, and good morning, everyone I'm joined today by comparing our Chief Financial Officer and.
Second quarter, we delivered robust growth and our strongest absolute revenue since 2015, as we continued to benefit from a return of robotic systems.
And your comparisons are inflated by a particularly depressed second quarter of 2020. The current quarter revenue was up approximately 70% year over year up 5% sequentially and up 33% from the second quarter of 2019.
Renewed adoption of robotic system is the first significant wave of revenue growth and our strategic innovation plan.
And I'm pleased to reap the initial fruits of that strategy and are confident this strategy will lead to a multiyear period of sustained robust growth.
System revenue reported in the quarter reflects shipments up and Genesis and model X system to a hospital and establishing a new robotic electrophysiology program and the United States as well as it and that Youll be system to a hospital, establishing a new rail robotic electrophysiology program and China.
As discussed on prior calls partial revenue recognition is often triggered from shipment of systems and the revenue reported reflects a portion of the overall contract value from these 2 deals.
During the second quarter, we received 2 orders for robotic systems.
As previously discussed to U S Hospital and other to 1 of the most prestigious medical centers in China from why Beijing.
And why Beijing is a very large cardiovascular hospital with 17, Cath labs performing over 50000 interventional procedures a year.
And we're establishing a new robotic electrophysiology program after observing our success and other practices and conducting a head to head study that showed significantly lower rate of silent strokes and robotic versus manual patient procedures.
This was our second order from China. This year and leads to orders will be the first new robotic systems in China and nearly 10 years. This is a reflection of the renewed interest and acceptance that we are experiencing globally and a specific high level of customer and strategic interest we are seeing in China and thus.
China is emerging as a third geographic pillar for our business, we believe that emerging relationships with strong strategic partners in China.
Now for broad adoption of our technology in that geography, we will enter into any relationship and a prudent fashion and enhances our long term opportunity and look forward to sharing additional details when appropriate.
I recognize the uneven pace of orders announced on any individual quarterly call makes projections difficult, but we continue to see significant interest and Genesis during.
During the quarter, we hosted 35 separate <unk> visits 13 of which were to new potential customers.
Over the last 9 months, we received 7 orders from robotic systems, 5 of which were from greenfield customers, establishing new robotic programs.
We are now seeing increased activity from multiple hospitals that delayed lab replacement projects during the depths of the pandemic.
We expect 2022 to reflect a near normalized level of replacement cycle projects.
Orders received and the remainder of 2021 and early 2022 are expected to result in approximately a doubling of system revenue next year and contribute to robust double digit revenue growth in 2022.
As we grow our business, we are investing and establishing the commercial operational and technological foundation and will allow for long term growth.
<unk> and operationally, we continued to expand our fellows program are pleased to welcome several experienced new leaders across various roles and our organization and are on track to move into and expanded new headquarters at year end.
2 weeks ago, we were particularly excited to announce the addition, Dr. Miriam create as an independent board member from.
Long term experience and executive leadership and intuitive surgical is highly beneficial as we look to positively transform intervention low medicine with robotics and intuitive has done across laparoscopic surgeries.
Technologically we are aggressively advancing the second and third waves and our strategic innovation plan.
Sir your taxes advanced Robotically, and navigated and magnetic ablation catheter represents the second wave and our strategic innovation plan.
The catheter has been progressing through the manufacturing and testing processes necessary for submissions for European approval and a U S. IDE study.
Supply chain challenges, however have caused some manufacturing delays at our partner our Sitka.
Most recently in July a simple received a force majeure letter from a supplier of a specific and proxy glu delaying previously confirmed shipments.
It seems to be a global phenomenon and we have been addressing disruptions like this with grit and creativity, but they had a disruptive impact.
We now expect to complete manufacturing and testing of the hundreds of catheter is needed for our regulatory submissions and complete those submissions for European approval and a U S. Pivotal trial early next year.
We believe that will allow us and revenue contribution from the catheter in Europe, and 2022, and a potential U S regulatory approval in 2023.
We continue to work energetically on the third wave of innovations, both independently and with new partners that will accelerate our adoption and electrophysiology and expand our robotic technology into new adjacent markets.
We believe we will be in a position to present several of these and more detail at the end of this year and given our progress this should lead to several regulatory filings and product launches in 2022.
We are confident and the positive impact. These innovations will have on patients physicians providers, and and stereotactic financial and strategic Foundation.
Kim will now provide some commentary on our financial results and then ill make a few financial comments as well before opening the call for Q&A.
Thank you David and good morning, everyone.
Revenue for the second quarter of 2021 totaled $9.1 million and approximately 70% interest from the prior year second quarter, a 5% increase sequentially and a 33% increase from the second quarter of 2019.
System revenue of $2.7 million includes the delivery of a genesis system and the U S and the delivery of a niobe system to China.
Recurring revenue for the quarter was $6.1 million compared to $5.1 million and the prior year second quarter.
The increase and recurring revenue reflects a rebound in procedure volume from the depths of the pandemic and last year's second quarter.
Okay.
Gross margin for the second quarter of 2021 was 72% of revenue with system gross margin of 48% and recurring revenue gross margin of 86%.
Operating expenses and the quarter at $9.9 million included $2.8 million and noncash stock compensation expense.
This increased noncash stock compensation does not reflect increasing numbers of securities granted but it's driven by an increasing stock price and accounting for the previously announced CEO long term performance plan.
Excluding stock compensation expense adjusted operating expenses were $7.2 million. This compares to $5.3 million and the prior year second quarter and is up from $6.2 million sequentially.
The increase and adjusted operating expenses, primarily reflects measured hiring across key functions and the company and R&D project spending.
Operating loss and net loss for the second quarter of 2021 were $3.4 million and $1.2 million compared to 1 point.
$9 million and the prior year.
<unk> net loss and the current quarter reflects a favorable $2.2 million adjustment further forgiveness of the paycheck protection loans.
Adjusted operating loss and adjusted net income excluding noncash stock compensation expense were negative $6 million and positive $1.6 million for the quarter, both compared to the prior year adjusted operating and net loss of negative $1 million.
Negative free cash flow for the second quarter was <unk> 1 million compared to $1.2 million and the prior year second quarter.
At June 30, we had cash and cash equivalents of $44.2 million consistent with the beginning of the year.
I will now hand, the call back to David.
Thank you Kevin as mentioned in today's press release, we now expect robotics system revenue of approximately $11 million for 2021 based on the orders. We have received to date. We expect orders received during the remainder of 2021 and in early 2022 to result in approximately a doubling of system.
And 2022 compared to 2021 and contribute to robust double digit overall revenue growth in 2022.
Stereo, Texas remain in the early phases of our multiyear turnaround as we establish the foundation for significant adoption of robotics, and electrophysiology and across interventional medicine, we are advancing our strategic our strategy and our methodical fashion and are pleased that we are able to advance multiple fronts in tandem while maintain.
And financial discipline.
And expect to continue increasing our investment and our team infrastructure and technology, but have been able to do so while continuing to run the company near breakeven. This is best reflected in the essentially identical cash position, we have maintained over the last 4 quarters.
But balance sheet, plus configured needs and investments and reach profitability without the need for additional financing.
And we look forward to taking your questions. Operator can you. Please open the line for Q&A.
Thank you if.
If you would like to ask a question. Please take note the question and 1 on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
Again, Chris I wanted to ask a question we take the first question from Adam <unk> at Piper Sandler.
Hi, David Hi, Kim Thanks for taking the questions here and congrats on the solid quarter.
First just wanted to start with the the system guidance and the commentary around 2022 is the first day.
David can you just bridge us to the $11 million and system sales for this year it sounds like those orders.
And have been executed and we affirm install dates and the back half of the year, but wanted to confirm that and then second as we think about 2022, you expect roughly a double and.
And the system revenue, maybe just talk a little bit more about.
The visibility there and the capital funnel and what kind of gives you the confidence that.
Revenue should double next year, and then I had a follow up.
Sure Planet and good morning, so and.
And so when we look at the revenue guidance for this year and the capital system revenue guidance for this year that is reflective of the orders that we've received to date and net we're confident we'll be.
And recognized as revenue to date and the proportion of those systems that will be recognized as revenue per day this year still and.
And so that gives us the confidence and that number and there is.
And some potential for.
And for upside to that number but again given kind of that we're already in August.
And the likelihood of having significant upside to that number is low and.
And the confidence in the 2022 guidance the preliminary guidance for 2022 is there is that there is.
We do have significant activity with multiple sites and and.
We do have confidence from that activity that next year should be more or less normalized level of replacement cycle Rajiv and.
This year, we're having very little replacement cycle cycle revenue and and.
Just from the Delta between what we have this year and what would be a more normalized level.
And what amount to several systems and high single digit low double digit.
And system revenue just from the replacement cycle and so that along with the continued pace of discussions with new potential customers gives us confidence that we should be able to have quarters like like the once we announced last March and.
In the coming quarters and.
And that shouldnt be a surprise to us and and and again that should lead to kind of.
Nice revenue trajectory as we go into next year.
Got it that's very helpful. Thanks, David and for the follow up maybe just wanted to ask a little bit about how you see the back half of the year playing out from a top line perspective, just any color around quarterly.
Quarterly cadence or progression of sales both on the system side in terms of revenue recognition and then on the disposable side where.
AF volumes have snapped back nicely here in Q2, but then we also have delta and potentially some seasonality in Q3, so just any broad strokes.
And how youre thinking about the back half of the year and thanks, so much for taking the questions.
Sure. So if we look at the last 2 quarters of the year I would kind of think that system revenue should be and.
And it should be relatively similar between the third quarter and fourth quarter and getting us to that even though your guidance and and procedure disposable revenue.
And is tough to estimate how that's going to go and overall, we see the rebound the gradual rebound back towards normality and that you described and we have heard.
From mentally some pressure, particularly in a few southern states there over the last few weeks with the rebound and Delta <unk>.
Generally it seems like hospitals are well prepared and and that that shouldnt happen.
Big disruptive impact, but there is definitely a little bit of disruption out there and in the world It probably shouldn't have.
Big impact on our overall recurring revenue, but but.
But it's very hard to estimate exactly what to what to see and so generally I would kind of think of numbers and are similar to what we've reported.
Just now and.
That's kind of a fair for the back half of the year.
Got it thanks, so much.
Thank you.
If you find that your question has been answered you may remove yourself from the queue by pressing star 2.
We'll take the next question from Josh Jennings of Cowen.
Hi, Good morning, David and thanks for taking my questions.
Hoping to start hi, Josh good morning.
Good morning.
With the third wave of innovation and the updated comments you provided or outlook on new indications.
Filings and then even product launches in 2022.
And that could add to this.
Exactly what these these new indications will be but.
Can you help us just bridge.
But it seems like an accelerated timeline, but what what type of clinical data.
Need if any for these filings and for these approvals.
But also to drive commercial traction and should we be expecting data for these new indications and the coming months or before these filings.
Sure Great question, and so I guess, maybe 1.1 preliminary comment is that and.
The discussion of the next wave of innovations will not be exclusively and discussion of new indications and so.
There are and there will be and aspect of that about how we're expanding into adjacencies to the electrophysiology space and.
And and starting to address new clinical applications, but there will also be.
And multiple updates related to electrophysiology or more general technology updates and then so I think kind of you have to think about it broader than just <unk>.
Just expanded indications and.
And on the specific question of clinical data for most of the technology that we're talking about there is not.
Squire meant for preclinical data and the way that you would typically think about it and.
A larger study in humans and.
And in order to pursue regulatory approval and so you should not expect that we're going to have a press release announcing some clinical data and the next few months and it related to those and.
I think youre right that particularly as you think about new indications building up clinical literature is important as you go through the adoption phase and so that will be something that we do focus on with our initial adopters who are really the.
Leaders in that adoption in the field and.
And but that will be something that will happen and kind of day. During the course of day initial launch.
Understood. Thanks for that help there and.
But thinking about the high level commentary on system revenues doubling in 2022 does that assumption baked in potential.
Potential demand from these new indications are this.
Third wave of innovation thats going to tackle and next year.
No that does not so the revenue guidance and commentary is based on our existing business and electric physiology business.
And we expect that's kind of mentioned in the call and we expect.
Regulatory submissions and.
And and initial revenue from this third wave of innovation, but that would not be and that would not be something that we would kind of included in guidance at this point.
Understood and then lastly, just you.
You commented about this Beijing Center.
And the order for niobium.
After they performed.
Study.
And believe you stated.
And that demonstrated a reduction in asymptomatic cerebral embolic events.
And with robotic magnetic navigation of inflation versus versus manual population.
Is that.
Data that has been published and chemistry taxes build on that it seems like if that.
Can be proven and.
And <unk>.
It could be a big deal in terms of sparkling and even further demand and electrophysiology and thanks for taking the questions.
Sure I agree that is dramatic data and and <unk>.
Pairs nicely with all the other safety benefits that we've shown over time and the study has not yet been published and I have to be somewhat careful and not sharing too much details, but we've seen all the data and the abstract of it and it's been submitted for publication by the authors and but it showed a very dramatic difference between.
And the rates of silent strokes.
Emmanuel ablation vs and robotic ablation and it wasn't nicely designed study every patient and hugged Preop MRI Postop MRI and <unk>.
I looked for the differences between those 2 images to kind of discern and the rate and severity of the silent strokes and and and.
And it was kind of very very dramatic differences and.
And between the 2 arms and a relatively large number of patients. So I hope that it gets published and the near term and we can and.
And we can point to the investment community too.
And obviously more importantly, our customers and physician community and to that data, but we have to wait until it gets published.
And maybe just 1 quick focus sorry, but just mechanistically and I think it makes sense why you could see that reduction and silent stroke.
Strokes are asymptomatic cerebral and blood, but could you just.
Give us a refresher on why robotic magnetic navigation catheters.
And may be continuous contact with the myocardium could could deliver a lower rate of black thanks a lot.
So the authors who will discuss that better than I can and their publication, but but I think kind of a couple of things that you can think about and.
1 is kind of the stability of the ablation against the wall and and and kind of the reduced risk of.
Knocking off and the lie as Youll navigating those seem to be kind of 2 of the 2 of the drivers and again, that's kind of driven by the mechanistic design of a magnetically drove an ablation catheter.
That stability against the beating heart and gives it kind of the softer shopped, which makes it less likely to cause harm.
Great. Thanks, a lot.
Thank you.
The next question comes from Frank <unk>, and Lake Street capital markets.
Hey, Thanks for taking my questions just wanted to start with fiscal year 'twenty 2 system guidance I wanted to ask a little bit more specifically, how many orders do you have in hand, right now to be recognized in 2022, and then if you could just bridge us to that double of how many more additional orders you need between.
Now and call it mid 2022 to get to the double and system sales.
And fiscal year 'twenty 2.
Sure Hi, Frank.
So we've announced to date this year 7 orders for robotic systems, all of which will have at least their initial revenue recognition in 2021. So there will be a portion of that revenue that gets recognized in 2022.
And <unk> dominant and.
And for each of those 700 systems will be in 2021, and so its orders that we expect to come in the coming months and.
And from let's say now through the middle of next year.
Well that will generate the 2022 guidance.
And we don't obviously have any of those orders yet those are those are ones that will take place now towards the middle of 2022 and.
And so that is and that's the way we're looking at things and if you look at kind of roughly than the math you are looking at and.
Low to mid double digit systems in order to get to that type of revenue.
Got it okay that makes sense and then I just wanted to ask a little bit more on the mix of Greenfield versus new systems expected in fiscal year 'twenty 2 I hear your comments about.
Getting back to a more normalized replacement cycle in 2022 to me that sounds like.
Almost the entire fiscal year 'twenty 2 guidance. So I just wanted to understand kind of how youre thinking about new.
Versus greenfield more specifically and fiscal year 'twenty 2.
Sure. So if you look at let's say, a low to mid teens and system number.
Next year.
And you look at let's say this year, we've had and then.
And 5 out of the 700 systems have been Greenfield systems, if you'd look at AR and.
Roughly looking at it if you look at let's say similar numbers of Greenfield systems, and then a replacement cycle that it and.
And mid to high single digit number of systems replacement cycle that would get you to a low teens number of systems for next year and Thats feels overall like a reasonable assumption again, we're going to work hard on trying to increase the number of Greenfield systems, we recognized the long term value from.
That and but kind of when we when we look through both from the bottom up and from the top down what feels reasonable that debt.
And that feels like a reasonable way to project.
Perfect Crystal clear and last 1 from me just wanted to ask on and the margin profile of the third or the second and third innovations.
Looking at your current recurring revenue margin and 80% plus consistently do you feel the both the catheter as well as the broader innovation strategy are going to provide products with similar gross margins. If they are and the disposable side of the business.
The disposable.
The new disposables that we developed will be top tier medical device gross margin products and.
And I'm not sure if they will always be 85%.
And they might be a tiny bit south of that at least at lower volumes at initial volumes.
But they will be top tier gross margin and.
And medical device products, and so I wouldn't expect and significant moves.
And gross margin.
Perfect. That's all from me thanks for taking my questions.
Thank you.
Once again, if you would like to ask a question. Please press star 1.
The next question from Jason <unk> at Northland.
Hi, Thanks for taking the questions first off just a clarification I think you mentioned 2023 was that for U S approval or was that for U S. <unk>. If you could just clarify.
That was for a potential U S approval.
So what does that can you walk us through kind of the timing and terms of IDE submission and review et cetera, Thats assumed in that 22 and 3 number.
Sure. So if we submit.
U S IDE application in the beginning of 2022 and and startup trials start enrolling patients, let's say in the middle of the year and.
And it should be a relatively rapid enrollment relatively and.
Rapid follow up and you can have data, let's say.
6 to 9 months later with then.
Our submission for PMA approval kind of immediately on the heels of that the last follow up and that would be kind of the timeline that gets you into 2023 submission to the FDA and and potential approval.
Okay very helpful.
Also it sounds like you've made some.
Recent hires.
Beefing up the organization is this.
To support the current business or is this anticipation of sort of the.
The expansion that you've mentioned in terms of for 2022.
Yeah.
And really kind of <unk>.
Looking out as we as we think about our business and wanting to build a business that can do.
Do much more and they can grow too much more sizable.
Scale, you want to have the infrastructure.
To do that growth and part of infrastructure is having the team and the and.
And that is kind of capable and competent and works well together and so obviously on the commercial side. We're looking at how can we build a commercial team that can really scale.
And both as new innovations come out and as we have increased system sales and to help drive new system sales.
On the R&D side, we have a team that has been able to do amazing amounts with relatively.
Relatively lean and fashion and so any ways to accelerate the various innovations that are taking place as is.
I think a good use of shareholder capital and then and then operationally we want to modernize and really set the foundation for a company that can be and.
Magnitude larger and so that that explains things like our move to the new office and and.
And across operations.
And the desire to modernize and improve things and.
And we've been fortunate to find some individuals who have joined us recently and.
And that we think will play a good role and in that.
Okay.
A lot of helpful color there.
Does that.
Does that imply that you are willing to sort of increase the burn somewhat or is it still going to you've kind of had a philosophy to kind of keep it relatively breakeven kind of fall revenues and terms youre spending it sounds like youre getting a bit more aggressive.
And next year and my my and my summarizing that correctly youre thinking or how would you think about your spending profile higher.
I would think that generally we are.
We feel comfortable investing and drivers of growth and kind of drivers of share of and.
Improved business and so we're really looking at it over a longer term period, what's the right thing from the overall business and.
We're not going to be the type of company that burn significant amounts of money in any way, where there is concern over our financing position.
But as you see over the last year, we've been flat we've had no burn rate now at essentially for 4 quarters in a row.
While we've been both growing the business and and increasing our investments and operations and so I think kind of we'll try to do something similar I don't want kind of anyone to hold us to any specific quarter that we're always going to maintain exact breakeven because we're not managing the business and that way, if we find opportunities to invest more.
And something Thats, a positive ROI for the business, we will do that.
And and if that leads to a quarter, where we have a small burn.
So be it and we'll keep managing things from a macro perspective, and where stereotaxis isn't very stable financial position and and where all of these investments are prudent investments that actually have a meaningful impact on long term growth.
Okay. That's very helpful. And then maybe just a quick follow up I know you mentioned you are going to look for it to have some launches into some adjacencies outside of EEP.
It's probably hard to project since but is there a possibility that we'll see some contribution or meaningful contribution even in 2022.
Or how should we be thinking about these launches and how they.
Play a part and.
Zero taxes performance next year.
I wouldn't want to guide for meaningful revenue and so that's why I think and the guidance and the revenue guidance, we haven't kind of anticipated meaningful revenue from these launches in 2022, but and.
Yes.
You should expect day.
And some initial revenue from initial and and real world experience.
Okay, great. Thank you I'll jump back in queue.
Thank you.
Once again, if you would like to ask a question. Please press star 1.
<unk> and no further questions at this time, Mr Fisher and I would like to turn the call back to you.
Okay. Thank you very much for your questions and your continued support we look forward to working hard on your behalf and the coming months and speaking again next quarter. Thank you very much.
This concludes today's call. Thank you for your participation you may now disconnect.