Q3 2021 Stereotaxis Inc Earnings Call
Good morning, Thank you for joining us for stereotactic third quarter 2021 earnings conference call.
Certain statements during the conference call and question and answer period to follow may relate to future events expectations and fetched constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 such.
Such statements involve known and unknown risks uncertainties 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 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.
At this time, all participants have been placed in a listen only mode.
The floor will be open for question and comments following the presentation. As a reminder, today's call is being recorded it is now my pleasure to turn the floor over to your host David official chairman and CEO of stereo taxes.
Thank you operator, and good morning, everyone I'm joined today by comparing our Chief Financial Officer.
We are proud of the progress made on multiple fronts in the third quarter.
We continued to demonstrate both year over year and sequential revenue growth driven by increased adoption of our robotic systems, we initiated a strategic collaboration with Michael <unk> Pete that serves as the foundation for a new geographic pillar for our business in China we.
We made meaningful progress on a wave of upcoming innovation and we did this while establishing new headquarters is expanding our team and maintaining financial discipline I will discuss each of these in a bit more detail.
System revenue in the third quarter reflects the successful installation and launch of the Genesis and model S system Princess Grace Hospital in Monaco as well as the shipment of agenda system model S system to Missouri Baptist and St. Louis.
Oh hospitals have begun performing procedures and we are pleased with the launches.
Since our last call we received orders for two additional Genesis system, one from a hospital, establishing a new robotic electrophysiology program in Europe, and the second from a U S hospital that is upgrading its existing robotic lab.
We made progress on multiple other capital processes during the quarter and expect additional near term orders.
Activity supports our confidence in our previously provided guidance of approximately a doubling of robotic system revenue next year.
Strength of our system revenue more than counteracted the impact a resurgence of Covid in hospital staffing shortages had on recurring revenue by depressing procedure volumes.
We felt the brunt of this impact in August across several geographies with a return towards more normal activity through September and October.
We continue to view renewed adoption of robotic system is the first significant wave of revenue growth in our strategic innovation plan to be followed in relatively rapid succession by additional ways.
We are aggressively advancing the subsequent waves of innovation and revenue growth.
Our proprietary Robotically navigated ablation catheter represents the second wave and our strategic innovation plan.
Supply chain challenges that had delayed production. We're successfully address late in the summer and Cisco has been ramping up manufacturing of the hundreds of catheter is needed for submissions for European approval in the U S. IDE study.
We remain on track with the timeline provided on the last call and expect to complete the manufacturing and testing early next year and believe that will allow for initial revenue contribution from the catheter in Europe in 2022, and a potential U S regulatory approval in 2023.
We continue to work energetically on a third wave of innovation that we are looking forward to showcase at innovation day next month tentatively planned for Monday December 13th.
As mentioned on previous calls these innovations not only expand our robotic technology to new clinical applications, but also enhance our opportunity in E&P and across interventional medicine.
View. These innovations is transformative for stereotactic strategic and financial future and are very excited to share them with you.
Geographically our strategy has been to deliver this revenue growth with a focus on the United States and Europe.
As a small company pioneering transformative technology with very long growth runway geographic focus is prudent.
On our last call I mentioned that we were seeing particularly high customer and strategic interest in China, and the China with us emerging as a potential third geographic pillar for our business.
We were very pleased to enter into a strategic collaboration with micro for E. P. As a realization of that promise.
Mike report is one of the largest and most successful medical device companies in China, specifically in the cardiovascular field.
<unk> E P. I spoke of particularly broad platform of EP products and our commercial team that is serving hundreds of customers across China.
Our collaboration calls for the development of a robust ecosystem of products in China surrounding our robotic technology, including integration of micro ports mapping system with our robots and the development of a robotically navigable catheters and regulatory approvals for Genesis and future innovations.
Since entering into the collaboration both teams have begun working together on development regulatory and commercial activity with an aim towards substantial long term revenue growth and value creation.
China is a unique region, where many of the benefits of our robotic technology, a pronounced and with the right ecosystem of products I believe we could see a very significant business there with the potential to sell tens of systems a year.
We expect this ecosystem of technologies catheters integrated mapping and robotics to come into focus in 2023 and to support a substantial commercial effort them.
In a similar way to how we're building the foundations for long term growth in China. We are investing in the foundation for substantial growth here the.
The most tangible activities include the Buildout of our new headquarters and growth of our team.
<unk> new headquarters in downtown St. Louis is in the final stages of being built out and we plan to move our office there in the middle of December a.
Our new space will support improved collaboration and extended team and several times greater manufacturing capacity.
Modern office and was a financially thoughtful move.
Already this year our team has expanded by 14 additional net hires this growth and enhancement of our team is across all parts of the business with a particular focus on R&D manufacturing and service operations and clinical regulatory and quality.
These are the right areas to invest at this point in our growth cycle and we have a strategy for how to build a substantially larger commercial sales team as our new catheter and future innovations come to market.
We are glad that we have been able to make these investments in a financially prudent fashion. We have maintained a relatively low cash utilization of about $22 million through the first nine months of this year and even with substantial cost to build out the new headquarters and advanced several innovations, we expect to end the year with greater than $40 million in cash.
Tim will now provide some commentary on our financial results and then I will make a few financial comments as well before opening the call to Q&A.
Thank you David and good morning, everyone.
Revenue for the third quarter of 2021 totaled $9 1 million.
5% increase from the prior year third quarter.
System revenue of $3 5 million increase to the delivery of Genesis Ahriman system in both the U S and Europe.
Recurring revenue for the quarter was $5 3 million consistent with the prior year third quarter and pressured by a resurgence of Covid Becky <unk> procedure volumes across various geographies.
Gross margin for the third quarter at 2021 was 52% of revenue with system gross margin of 5% and recurring revenue gross margin of 86%.
System gross margins reflect an allocation of overhead and other expenses and do not reflect a normalized expected margin from system revenue, which we expect to be north of 30% for the full year.
Operating expenses in the quarter at $9 4 million included $2 6 million in noncash stock compensation expense.
Excluding stock compensation expense adjusted operating expenses were $6 8 million compared to $5 5 million in the prior year third quarter.
Increased adjusted operating expenses continued to reflect R&D project spending and measured investment in key business functions.
Operating loss and net loss for the third quarter at 2021 were $4 6 million compared to $1 6 million in the previous year.
Adjusted operating loss and adjusted net loss, excluding noncash stock compensation expense for 2 million for the quarter, both compared to the prior year quarter, adjusted operating and net loss of <unk> 8 million.
Negative free cash flow for the third quarter with $1 5 million compared to <unk> 2 million for the prior year third quarter negative free cash flow for the first nine months of 2021 totaled $1 9 million compared to $3 9 million during the same period the previous year.
At September 30th we had cash and cash equivalents of $42 8 million.
I will now hand, the call back to David.
Thank you Kim.
System with our previous guidance, we expect robotic system revenue for 2021, approximately $11 million given the orders we announced on today's call and several additional orders we expect in the near term. We continue to expect approximately a doubling of system revenue in 2022 compared to 2021 contributing to robust double digit overall.
<unk> growth in 2022.
We expect to start 2022 with $40 million in cash and we'll continue to balance increased investments in key value drivers with financial Prudence.
Robust balance sheet allows us to continue these investments and reach profitability without the need for additional financing.
We look forward to now taking your questions. Operator can you. Please open the lines for Q&A.
Thank you if you would like to ask a question. Please signal by pressing star one 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. Please press star one to ask a question, we'll pause for just a moment to allow everyone the opportunity to signal for questions.
Thank you our first question will come from Josh Jennings with Cowen.
Hi, good morning, Thanks for taking the questions.
Hi, Josh Good morning wanted to ask.
Good morning wanted to ask about the <unk>.
Third wave of innovation, but I know, we're going to get more details.
Couple of weeks, so well hold off.
Wanted to just check here David.
Sure.
Because you've had more orders you're expecting two more since the last call expecting for orders to come in in the in the relatively near term he hasn't makers port partnership.
I just wanted to see if you could provide an update on the sales funnel trends both replacement Greenfield channels.
So what is your level of confidence in that doubling.
System revenue next year has increased since the last earnings call.
I have one follow up.
Yeah.
Sure. So I it was difficult to hear you, but I think I understood that you wanted to get more color on the pipeline of orders.
And our confidence in a doubling of system revenue next year is that correct.
That's right. Thank you sorry for the.
Transmission.
So.
Kind of our guidance for next year on system revenue, Yes. We described on the last call is predicated.
Largely on a return to a more normalized level of replacement cycle system sales across our installed base and.
And then kind of similar or perhaps some growth in the number of Greenfield system sale.
Sales next year and when we look at our installed base, we see that many of the replacement cycle projects are and that seem to be advancing in a way where where that would support our thesis.
And similarly as you saw we do continue to engage with and received orders from Greenfield the hospitals, where we haven't had a system before and so given that level of activity.
I would expect obviously given the commentary today several new orders.
Before our next call and.
We are on track to meeting that expectation of approximately a doubling next year.
Great and then I just wanted to follow up on the China Micro Port partnership.
And.
I know, it's very early it's only been less than two months since you announced that.
That agreement.
But they have a large number of China hospital accounts already that south of electrophysiology business I was hoping you can just help us understand that.
Selling process the sales cycle, maybe the book to Bill time into that channel.
Anything else you can offer just in terms of whether or not their tender processes involved.
Some regions and just the book to Bill timing.
With us Michael My support distribution channel.
And then whether or not this partnership gives even more confidence in that two.
2022, near doubling of our system revenue.
We think that it will take time for this partnership to bear fruit in terms of generating new orders in China. Thanks, a lot David.
Sure. So so our China business has done beautifully over all that despite being on a relatively small part of our installed base and they use us very actively and then and we obviously have to add the two orders and system revenues this year from China and that team there.
<unk> has performed beautifully.
When we look at kind of a relationship with micro port I would divide the activities into three main categories and one is innovation related activities, how do we build out the right ecosystem of products in China as surrounding our robotic technology and the second is the regulatory activities, which is part of also building out that ecosystem, but how do we bring Jenny.
Just to China, how do we bring our new catheter to China, how do we bring other future innovations and then the third is the commercial activity together and there obviously, we benefit from that from them.
The footprint and the team that Michael Port has which is order of magnitude larger much larger than that and arps.
When I think about kind of what we should expect over the coming few years I'd say.
In 2022, he won't yet have the ecosystem of products that allow you to really accelerate and push hard from a commercial perspective.
I think that there are obviously leveraging the micro <unk> I expect 2022 to be better than 2021 in China. So that will contribute to our overall growth and but I really think that what were what were working hardest on is all of the innovation and regulatory activities.
That really create that nice.
Kind of a nice proprietary tightly connected ecosystem of products in China, and I think that that's what and when.
When when that comes together, which we think should be in 2023 that really allows you to now not just.
Increase your efforts, but really kind of make.
Exponential increase in the in the way Youre commercialized in the market to the right. There is a range of commercial activities. We can do now to prepare for that some of that will bear fruit in the nearer term, but in terms of really accelerating and reaching what we want to be the potential of this partnership I would look more towards the building of that product ecosystem.
And right now it seems like that's a 2023 event.
Great. Thanks, so much.
Thank you. Our next question comes from Adam later with Piper Sandler.
Hi, David Hi, Ken Thanks for taking the questions and congrats on the progress.
Wanted to start with.
A question just on head count and you talked about adding 14, new members to the team year to date with just curious if you could maybe elaborate on what those rules are the functions are at stereo taxis are they part of the commercial organization and then one question I get from investors is you know.
When will you look to kind of go a little bit more on the offense, we're aggressive in terms of adding headcount to the sales team. The company has obviously done a really nice job managing cash and operating with discipline, but when can we see spending.
Maybe accelerate some just to capitalize on the large opportunity in front of the company and then I had a follow up thanks.
Sure Hi, Adam Good morning, So so the 14 incremental new hires and it's obviously more than that but you also had turnover obviously in a normal business, but the 14 incremental new hires which is about probably 10 plus percent between 10 and 15% of our of our employee base.
That kind of was primarily focused on it's across all aspects of the business, including actually the sales team, but it's primarily was focused on R&D clinical regulatory quality and manufacturing slash field operations.
Do we think about kind of what we're doing right now in the normal lifecycle of a business. Those are the types of things that you due prior to.
To a significant commercial effort and so those are areas, where we've had a lot of activity, we could kind of see immediate near term use for incremental.
Energy and effort, there and and so kind of we've been we've been kind of investing accordingly in that.
On the R&D team, particularly.
I think that kind of some of the things we expect to show you next month.
Our transformative for our business and for our long term growth and so I think that kind of then it will be very clear why why we are increasing the R&D team given that activity and I think that that innovation. They might also help explain why we have not yet aggressively built up the commercial team.
Obviously, we've spoken in the past, having our own proprietary ablation catheter and the <unk>.
Increase in disposable revenue that that provides that allows for a very natural way to build the sales team.
In a significant fashion, where you can kind of move more towards the model that most other companies have in this field with one sales rep per hospital.
Really dedicated to a specific hospital and that is that would be a sustainable model. When we have our own ablation catheter and so we have a plan in place for how to build the sales team as that comes to market and then I think some of the other innovations as well will probably provide some color as to when you when it makes sense.
To incrementally invest in the sales team.
And then switch to kind of a more.
Again kind of step wise or exponential growth in the sales team. So hopefully it will become clearer and we can also discuss this more in December.
Okay understood I appreciate the Fulsome response, David and then for the follow up.
S CRM in the medical meetings coming up this weekend tomorrow I believe so just wanted to take your pulse there how impactful could that meeting be is this a potential springboard for genesis are there.
Presentation of note or planned.
Stereo taxes commercial activities at that event that could maybe kind of help you.
Bill Beaumont build the momentum.
Heading into the latter part of this year in 2022. Thanks, so much guys for taking the questions.
Sure So I'm actually I'm actually doing today's call from the society for cardiac robotic navigation conference and it starts formerly tomorrow, but theres already some activities today in this evening and then and the SCO Ren.
Independent physician led society, but its obviously was started and he's run by physicians that are very passionate about what we're doing in our mission.
To improve cardiac disease and it is and it has lost summed into a beautiful organization over the last few years.
In the press release, we shared earlier this week.
We kind of listed many of the more interesting or unique topics that are being discussed.
So it's a powerhouse that group of physicians that are speaking at the conference and so overall, we're very excited by it.
It always allows us to engage with them with physicians that know us very well and there are some physicians also that arent long term users of <unk>.
Taxes that join and so I kind of I view it as one of the nicest the events of the year in terms of engaging with the community.
And so I Wouldnt I don't expect kind of bad.
Orders don't get signed at conferences like this if that was kind of what you were perhaps alluding to.
That's usually kind of won that administrative side when we talk about near term late.
Orders, but.
But I do think it's a very good opportunity to engage with them with the physician community and then reality also with the strategic community.
It was nice to see how many other companies CRM has that has recruited to support the conference and to join the conference and so there's a range of both both.
Both the physician community in general.
Electrophysiology industry community here.
Great. Thanks for the color David.
Thank you.
Thank you. Our next question comes from Frank to Kennon with Lake Street capital markets.
David Kim Congrats on the quarter. Thanks for taking my questions I wanted to start on the order side.
Can you just level set us on how many orders you have in hand, right now that will be recognized in 2022, and then as you start to get more greenfield orders into the.
Book. Please can you just talk a little bit about expected.
The time from order to install some of those might have in comparison to some of your greenfield sites.
Hi, Frank and Mike sure. So the two orders that we announced today those will.
Turning to revenue.
Installations in 2022, and <unk> and generally I would expect again that the timeline between an order and.
And kind of either a shipment or an installation is probably somewhere in the range of three to nine months in a typical it's typical situation.
Okay. That's helpful. And then I wanted to ask on the disposable side of the business, obviously, a lot of impacts in different headwinds in the quarter, maybe bring us a little bit deeper into what went on exactly in this quarter and then how youre kind of feeling about.
Sequential rebound into the last quarter of this year.
Sure. So as then as probably I kind of Ive heard on some of the other earnings calls of other medical device companies.
I think both both the resurgence of Covid in certain geographies relatively broadly actually both in the U S in Europe and and in some unique cases, we heard about.
Just personnel challenges and staffing challenges.
We did see a decline in procedures, particularly in August and then gradually kind of returning back to better and better activity in September and October and so overall, it's a it is still a pressured environment, we've not got us back to levels.
Pre COVID-19.
That being said, we're able to with the system.
Revenue counteract those forces, but that is still somewhat pressured external environment.
Okay, and then just last one for me maybe give us an update on utilization trends I know some of your.
Early as Genesis users were tracking above the average of the overall installed base, maybe talk to some of your mid year installed and how those are tracking from a utilization perspective.
I do not actually have the numbers closely available I know that when we do launch a new site and kind of anecdotally I'm thinking about it and one of the most recent ones we get.
Flurry of.
Near term activity.
One of those at launching just a few weeks ago, and then and so there is.
There is a general.
Increasing activity again I would.
I wouldn't kind of we're still in the early phases of these launches and so it's hard for me to say that it typically we would expect.
About 100 procedures per system per year, it's hard for me to.
Put kind of something down definitively that it should be much higher with genesis, but our activity both at.
At banner and Helsinki, where we've obviously been installed now for over a year and then that the initial activity, which is really kind of bad weeks or a few months.
It kind of toward the more recent sites.
Matches that.
Okay. That's helpful. I'll stop there thanks for taking my questions.
Okay. Thank you Frank.
Thank you again as a reminder, please press star one if you would like to enter the queue.
Our next question comes from Javier for circa with Spartan Spartan capital.
Yeah.
Hi, Thank you so much great being here congratulations on a solid quarter.
My question is regarding the progress with the rebar theme.
Terry magnetic ablation catheter.
And if management has any sort of expectation as far as when you expect market entry for us.
Right.
Sure.
So as we kind of discussed in the prepared remarks.
Our Sip is still ramping up the manufacturing of the hundreds of catheters needed for and for the testing necessary for regulatory submissions.
That is advancing relatively well and.
And we expect to finish all the manufacturing and the testing early in the year and that will support our CE Mark submission and all support an <unk> submission to FDA and so with that.
We would expect.
CE Mark approval at some point in 2022, and a commercial launch in Europe in 2022, and depending on how well we're able to enroll patients I mean I'd E trial, how quickly we're able to do it it could support also an approval in 2023 in the U S.
Excellent thank you and.
Another quick follow up question.
I think this was touched on before but as.
As far as the micro port strategic collaboration.
Could you provide any insight as far as any specific channels or infrastructure. That's currently in place to support them.
Double system revenue in 2022.
Sure we have a commercial team of about 40 people at globally.
That's kind of event they're focused from.
System sales to clinical adoption to training.
But that.
That direct global sales team along with distributors that we have in various geographies like eastern Europe.
Like the middle East like our relationship with micro Port.
<unk>.
That kind of that commercial effort is what we expect to drive the increase in revenue next year and and I think that's a reasonable again assumption given what that team has shown they are capable of doing this year.
<unk>.
The natural benefit you have with time and as you commercialize Genesis more and more there is there is increased comfort in the community about how it is performing that is able to work well and that gives you a natural tailwind.
And then you also have been.
Start to replacement cycle that again, we got very little benefit of that during this past year, but a normalized level would incrementally add at least several more systems and I think that next year is going to look much more like normalized deal from a replacement cycle. So I think those are the those are the ways we think about.
The commercial effort and what's driving it.
Revenue growth next year, and I would also kind of.
Kind of just kind of add similar to what items that question was earlier is that we do have a plan for how to build the commercial team up in a much more robust way. So when we think about the commercial team that's needed to sustain a multiyear.
A significant double digit revenue growth there was a plan in place for that and I think youll see us.
As we launch the catheter and then also as you have better clarity on some of our future innovations.
Why why that staged approach to building the commercial team makes a lot of sense.
Okay.
Cost of pay for the insight.
Sure.
Thank you. Our next question comes from Guy Koski with Puffer fish capital.
Hey, David how are you.
Hi, guys good morning.
Good morning to you as well my question is regarding the magnetic DC randomized trial you guys. I know you talked about it like maybe over a year ago in the last I had heard that it was going to be result in early or at least in 2022 I guess, one do you have any update on that and also is it significant and you still feel that it has.
Significance once it's released.
Sure. So let me talk about clinical data overall.
And then touch upon the specifically the magnetic beauty trial. So the overall the continued build out of the clinical data for robotics and EP is kind of I think one of our strong points and I was particularly pleased with the publication in pediatric patients that came out.
Few weeks ago.
I think again kind of that tough consistently that type of data coming out.
A safety benefit an efficacy benefit.
<unk>.
Across all sorts of arrhythmias across all sorts of patients and then particularly in the most kind of a delicate sensitive patients like children.
Like those with severe disease, and that's and that's what drives our entire business and our reason for existence is how good that clinical data.
So that's kind of overall being a very strong suite and I think also on the last call I mentioned that there was a very interesting publication on silent cerebral events that should come out very soon so I hope that we will have an ability to share that also in the near term and then the magnetic B T trial was actually.
Prospective randomized.
The randomized trial initiated by stereo taxes.
Multiple centers looking.
To demonstrate superiority of robotics versus manual ablation in ischemic VT patients.
We ended up enrolling about 180 patients. The last patient was enrolled I believe in February or March of last year.
One year follow up period, and so we should have the last follow up in the first quarter of 2023 with probably kind of blind.
Blinding of the data.
A few months later and so I would expect by about mid 2023.
Test data announced from that trial, and and again I think that kind of.
It's unlikely that any one data point immediately switches the field, but I think the totality of the data is.
Is what really counts and the magnetic beauty trial is obviously.
In terms of the structure of the trial.
Good as it gets it's a prospective randomized.
Head to head trial.
It's kind of it's as good of a structure as one could ever ask for and again, we think that given given kind of everything that we know still be blinded and we expect that we're going to show, we're going to show off well and and so we're excited to have that as part of environment carrier.
One follow up question, David regarding the Fellowship program.
I think originally it sounded like from what I've been able to ascertain you're at about 18.
Graduate and it looked like the programme now has close to 50 and I'm just curious like once they graduate I guess, one is that accurate and then to once these doctors do graduate what what is it.
How many do you track what percentage of them are actually able to use robots in their day to day or just kind of curious what happens to them once they graduate from the program.
Sure. So I don't have the exact numbers in front of me right now, but there has been a gradual growth from I think we had about 10 graduate in the first year and now we have about 20 or so.
Yes fellows in any given year to have about 40 fellows active right now across the U S. In Europe, we actually just started in Asia Pacific version of the Fellowship program as well, so that's and that's kind of adding a little bit on top of that and then and I'd say that kind of theirs.
Theres kind of three ways things evolved after the fellow graduates from the social program and he goes on to practice either they.
They stay on at the site or we help in matchmaking them with sites that have a robot and they can continue their procedural activity there.
Often times again kind of their energy in Houston.
And kind of.
Engagement, they have with us in the Fellowship program.
It provides kind of a nice halo effect wherever they go.
<unk>.
Is they might go to affect it doesn't have a robot, but then they remain engaged with us and we try to advance the capital process at that site and then third setting. They go to a site that doesn't have the opportunity to do a capital.
Build out of our lab and adoption of a robot in the near term and then what we tried to do is to find ways to engage with them and to maintain a connection with the hope that when an opportunity presents itself in the future that we can kind of start a robotic program there and that they will be the clinical champion for that and so that's kind of the way I'd categorized.
The graduates and and.
And I don't have again I apologize it doesn't have to just the numbers in front of me, but I, probably guess that about.
Somewhere about a third of the graduate to probably end up that at sites that have a robotic program and so they just continue their procedural activity after the fellowship.
Eric.
The number that you guys target I mean could you add 150.
Those I'm just kind of.
Obviously that's.
Somewhat of a leading indicator on the more followership people you would have the greater opportunities are it sounds like.
But I'm curious like is your capacity for 100 students to 150 is now that you're accurate capacity is there any kind of plan there that you have.
Yes, so it's really driven by two things, it's driven by how many robotic programs. We have at University style hospitals, where they have fellowship programs and it's driven by how well we do in attracting fellows in those programs catchy joined our program and so what I'd say is that given our installed base we're doing.
Relatively well, maybe we could have 50% more fellows, if we really kind of we're successful across the entire installed base.
But relatively we've had.
I'd say the majority of fellows at hospitals that are active users of our robot.
And have fellowship programs are part of our program and so there is room for incremental improvement, but we can double or triple the fellowship program given our existing installed base as we sell new robots and have an expanding installed base that provides additional opportunities, but we're doing relatively well and are in our existing base.
Got it just last question no one asked it so I'll ask it did you do continue to do these virtual test drives this quarter and do you have any kind of numbers that you could share with us.
Yes, we've continued to do them and we've seen more and more though as then.
Things have opened up.
Our opened up closed down opened up again, we've seen more and more site visits to actual hospital accounts and so our hospitals like banner University, and and Helsinki University and Monaco.
All hosted physicians already and so we're continuing the <unk> visits.
But but but I would say that we're kind of seeing more and more of a shift towards.
In person visits.
Thanks, so much David.
Thank you guys.
Thank you and as a final reminder, we are now holding for questions. Please press star one now if you would like to ask a question.
I am showing no questions at this time I would now like to turn the call back over for closing remarks.
Okay. Thank you for all your questions and for your continued support we look forward to speaking with you in a few months at stereo Texas' innovation day. Thank you.
Thank you ladies and gentlemen. This concludes today's teleconference. You may now disconnect.
Okay.
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Yes.
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Good morning, Thank you for joining us for stereotactic third quarter 2021 earnings conference call.
Certain statements during the conference call and question and answer period to follow may relate to future events expectations and searched 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 performance or achievements of the company in the 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.
At this time, all participants have been placed in a listen only mode.
The floor will be open for question and comments following the presentation. As a reminder, today's call is being recorded it is now my pleasure to turn the floor over to your host David official chairman and CEO of stereotactic.
Thank you operator, and good morning, everyone I'm joined today by comparing our Chief Financial Officer.
We are proud of the progress made on multiple fronts in the third quarter. We continued to demonstrate both year over year and sequential revenue growth driven by increased adoption of our robotic systems we own.
Mitigated a strategic collaboration with Mike report you Pete that serves as the foundation for a new geographic pillar for our business in China.
We made meaningful progress on a wave of upcoming innovations and we did this while establishing new headquarters is expanding our team and maintaining financial discipline I will discuss each of these in a bit more detail.
System revenue in the third quarter reflects the successful installation and launch of the Genesis and model S system Princess Grace Hospital in Monaco as well as the shipment of the Genesis of the model S system to Missouri Baptist and St. Louis.
Oh hospitals have begun performing procedures and we are pleased with the launches.
Last call we received orders for two additional Genesis system, one from a hospital, establishing a new robotic electrophysiology program in Europe, and the second from a U S hospital that is upgrading its existing robotic lab.
We made progress on multiple other capital processes during the quarter and expect additional near term orders. This activity supports our confidence in our previously provided guidance of approximately a doubling of robotic system revenue next year.
Strength of our system revenue more than counteracted the impact a resurgence of Covid in hospital staffing shortages had on recurring revenue by depressing procedure volumes.
We felt the brunt of this impact in August across several geographies with a return towards more normal activity through September and October.
We continue to view renewed adoption of robotic system as the first significant wave of revenue growth in our strategic innovation plan to be followed in relatively rapid succession by additional waves.
We are aggressively advancing the subsequent waves of innovation and revenue growth our.
Our proprietary Robotically navigated ablation catheter represents the second wave and our strategic innovation plan.
My chain challenges that had delayed production were successfully addressed late in the summer and is typically has been ramping up manufacturing of the hundreds of catheter is needed for submissions for European approval and a U S. IDE study.
We remain on track with the timeline provided on the last call and expect to complete the manufacturing and testing early next year and believe that will allow for initial revenue contribution from the catheter in Europe in 2022, and a potential U S regulatory approval in 2023.
We continue to work energetically on a third wave of innovation that we are looking forward to showcase at innovation day next month tentatively planned for Monday December 13th.
As mentioned on previous calls these innovations not only expand our robotic technology to new clinical applications, but also enhance our opportunity in E&P and across interventional medicine.
We view these innovations as transformative for stereotactic strategic and financial future and are very excited to share them with you.
Geographically our strategy has been to deliver this revenue growth with a focus on the United States and Europe.
As a small company pioneering transformative technology with very long growth runway geographic focuses prudent.
On our last call I mentioned that we were seeing particularly high customer and strategic interest in China, and the China with us emerging as a potential third geographic pillar for our business.
We were very pleased to enter into a strategic collaboration with micro part EEP as a realization of that promise.
Mike report is one of the largest and most successful medical device companies in China, specifically in the cardiovascular field.
Report EP I spoke of particularly broad platform of EP products and our commercial team that is serving hundreds of customers across China.
Collaboration cost for the development of a robust ecosystem of products in China surrounding our robotic technology, including integration of micro towards mapping system with our robots and the development of Robotically navigable catheters and regulatory approvals for Genesis and future innovations.
Since entering into the collaboration both teams have begun working together on development regulatory and commercial activity with an aim towards substantial long term revenue growth and value creation.
It's a unique region, where many of the benefits of robotic technology are pronounced and with the right ecosystem of products I believe we could see a very significant business there with the potential to sell tens of systems a year.
We expect this ecosystem of technologies catheters integrated mapping and robotics to come into focus in 2023 and to support a substantial commercial effort.
In a similar way to how we are building the foundations for long term growth in China. We are investing in the foundation for substantial growth here the.
The most tangible activities include the Buildout of our new headquarters and growth of our team.
So Texas is new headquarters in downtown St. Louis is in the final stages of being built out and we plan to move our office there in the middle of December a.
Our new space will support improved collaboration and extended team and several times greater manufacturing capacity.
Modern office and was a financially thoughtful moves.
Already this year our team has expanded by 14 additional net hires this growth and enhancement of our team is across all parts of the business with a particular focus on R&D manufacturing and service operations and clinical regulatory and quality.
The right areas to invest are disappointed in our growth cycle and we have a strategy for how to build a substantially larger commercial sales team as our new catheter and future innovations come to market.
We are glad that we have been able to make these investments in a financially prudent fashion. We have maintained a relatively low cash utilization of about $22 million through the first nine months of this year and even with substantial cost to build out the new headquarters and advanced several innovations, we expect to end the year with greater than $40 million in cash.
Jim will now provide some commentary on our financial results and then I will make a few financial comments as well before opening the call to Q&A.
Okay.
Thank you David and good morning, everyone.
Revenue for the third quarter of 2021 totaled $9 1 million.
5% increase from the prior year third quarter.
System revenue of $3 5 million includes the delivery of Genesis arguments systems in both the U S and Europe.
Recurring revenue for the quarter was $5 3 million consistent with the prior year third quarter and pressured by a resurgence of COVID-19 that depressed procedure volumes across various geographies.
Gross margin for the third quarter at 2021 with 52% of revenue with system gross margin of 5% and recurring revenue gross margin of 86%.
System gross margins reflect an allocation of overhead and other expenses and do not reflect a normalized expected margin from system revenue, which we expect to be north of 30% for the full year.
Operating expenses in the quarter of $9 4 million included $2 6 million in noncash stock compensation expense.
Excluding stock compensation expense adjusted operating expenses were $6 8 million compared to $5 5 million in the prior year third quarter.
Increased adjusted operating expenses continued to reflect R&D project spending and measured investment in key business functions.
Operating loss and net loss for the third quarter of 2021 were $4 6 million compared to $1 6 million in the previous year.
Adjusted operating loss and adjusted net loss, excluding noncash stock compensation expense for $2 million for the quarter, both compared to the prior year quarter, adjusted operating and net loss of <unk> 8 million.
Negative free cash flow for the third quarter with $1 5 million compared to <unk> 2 million for the prior year third quarter negative free cash flow for the first nine months of 2021 totaled $1 9 million compared to $3 9 million during the same period the previous year.
At September 30, we had cash and cash equivalents of $42 8 million.
I will now hand, the call back to David.
Thank you Kim consistent with our previous guidance, we expect robotics system revenue for 2021 of approximately $11 million.
Given the orders, we announced on today's call and several additional orders we expect in the near term. We continue to expect approximately a doubling of system revenue in 2022 compared to 2021 contributing to robust double digit overall revenue growth in 2022.
We expect to start 2022 with $40 million in cash and we'll continue to balance increased investments in key value drivers with financial Prudence.
<unk> balance sheet allows us to continue these investments and reach profitability without the need for additional financing.
We look forward to now taking your questions. Operator can you. Please open the lines for Q&A.
Thank you if you would like to ask a question. Please signal by pressing star one 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. Please press star one to ask a question, we'll pause for just a moment to allow everyone the opportunity to signal for questions.
Thank you our first question will come from Josh Jennings with Cowen.
Hi, good morning, Thanks for taking the questions.
Hi, Jeff Good morning wanted to ask.
Good morning wanted to ask about the.
This third wave of innovation, but I know, we're going to get more details on that in a couple of weeks, so well hold off.
Wanted to just check your David.
<unk> had more orders you're expecting two more since the last call expecting more orders.
To come in in the in the relatively near term you have the mic port partnerships.
I just wanted to see if you could provide an update on the sales funnel trends in both replacement Greenfield channels.
So what is your level of confidence in that doubling.
System revenue next year has increased since the last earnings call.
Just have one follow up.
Sure. So it was difficult to hear you, but I think I understood that you wanted to get more color on the pipeline of orders.
And our confidence in the doubling of system revenue next year is that correct.
That's great. Thank you sorry for the.
Transmissions.
So.
Kind of our guidance for next year on system revenue as we described on the last call is predicated.
Largely on a return to a more normalized level of replacement cycle system sales across our installed base and.
And then kind of similar or perhaps some growth in the number of Greenfield system sale.
Sales next year and when we look at our installed base, we see that many of the replacement cycle projects that.
Seem to be advancing in a way, where where that would support our thesis.
And similarly as you saw we do continue to engage with and received orders from Greenfield hospitals, where we haven't had a system before and so given that level of activity.
I would expect obviously given the commentary today several new orders.
Before our next call and I think we're on track to meeting that expectation of that.
Approximately a doubling next year.
Great and then I just wanted to follow up on the China Micro Port partnership.
And.
I know, it's very early it's only been I think less than two months since you announced that.
That agreement.
But they have a large number of China hospital accounts already.
The electrophysiology business I was hoping you can just help us understand that.
Selling process the sales cycle, maybe the book to bill timing through that channel.
Anything else you can offer us in terms of whether or not their tender processes involved in <unk>.
Some regions and just the book to Bill timing.
With us Michael support distribution channels, and then whether or not this partnership gives even more confidence in that two.
2022, near doubling of our system revenue.
We think that it will take time for this partnership to bear fruit in terms of generating new orders in China. Thanks, a lot David.
Sure. So so our China business has done beautifully overall, despite being on a relatively small part of our installed base and they use us very actively in and we obviously had the two were the two orders and system revenues this year and from China and that team there has.
<unk> has performed beautifully.
When we look at kind of a relationship with micro port I would divide activities into three main categories and one is innovation related activities, how do we build out the right ecosystem of products in China as surrounding our robotic technology and the second is the regulatory activities, which is part of also building out that ecosystem, but how do we bring Jenny.
As to China, how do we bring our new catheter to China, how do we bring other future innovations and then the third is the commercial activity together and there obviously, we benefit from the from them.
The footprint and the team that Michael Port has which is order of magnitude larger much larger than than ours.
When I think about kind of what we should expect over the coming few years I'd say then in 2022, you won't yet have the ecosystem of products that allow you to really accelerate and push hard from a commercial perspective.
I think that there are obviously leveraging the micro <unk> I expect 2022 to be better than 2021 in China, and so that will contribute to our overall growth and but I really think that what were what were working hardest on is all of the innovation and regulatory activities that really create that nice.
Kind of a.
Nice proprietary tightly connected ecosystem of products in China, and I think that that's what.
When that comes together, which we think should be in 2023 that really allows you to now not just increase your efforts, but really kind of make.
An exponential increase in the in the way Youre commercializing the market. So the rate there is a range of commercial activities. We can do now to prepare for that some of that will bear fruit Justin in the nearer term, but in terms of really accelerating and reaching what we want to be the potential of this partnership I would look more towards the building of that product ecosystem.
And right now it seems like Thats, a 2023 event.
Great. Thanks, so much.
Thank you. Our next question comes from Adam <unk> with Piper Sandler.
Hi, David Hi, Ken Thanks for taking the questions and congrats on the progress wanted to start with.
A question just on head count and you talked about adding 14, new members to the team year to date with just curious if you could maybe elaborate on what those roles are the functions are at stereotactic are they part of the commercial organization.
And then one question I get from investors as well.
When will you look to kind of go a little bit more on the offense, we're aggressive in terms of adding headcount to the sales team. The company has obviously done a really nice job managing cash and operating with discipline, but when can we see spending.
Maybe accelerate some just to capitalize on the large opportunity in front of the company and then I had a follow up thanks.
Sure Hi, Adam Good morning, So so the 14 incremental new hires and it's obviously more than that but you also have turnover, obviously in a normal business, but in 14 incremental new hires which is about probably 10 plus percent between 10 and 15% of our of our employee base.
That kind of was primarily focused on it's across all aspects of the business, including actually the sales team, but it's primarily was focused on R&D clinical regulatory quality and manufacturing slash field operations. When we think about kind of what we're doing right now in the normal lifecycle of a bid.
Those are the types of things that you do prior to.
To a significant commercial efforts and so those are areas, where we've had a lot of activity, we could kind of see immediate near term use for incremental.
The energy and effort there and.
And so kind of we've been we've been kind of investing accordingly in that.
On the R&D team, particularly.
I think that kind of some of the things we expect to show you next month.
I think our transformative for our business and for our long term growth and so I think that kind of then it will be very clear why why we are increasing the R&D team given that activity and I think that that innovation. They might also help explain why we have not yet aggressively built up the commercial team.
Obviously, we've spoken in the past, having our own proprietary ablation catheter and the increase in disposable revenue that that provides that allows for a very natural way to build the sales team.
In a significant fashion, where you can kind of move more towards the model that most other companies have in this field with one sales rep per hospital.
He's really dedicated to a specific hospital and that is that will be a sustainable model. When we have our own ablation catheter and so we have a plan in place for how to build the sales team as that comes to market and I think some of the other innovations as well will probably provide some color as to when.
When it makes sense to incrementally invest in the <unk>.
<unk> team.
And then switch to kind of a more.
Again kind of step wise or exponential growth in the sales team. So hopefully it will become clearer and we can also discuss this more in December.
Okay understood I appreciate the Fulsome response, David and then for the follow up.
S CRM medical meetings coming up this weekend tomorrow I believe so just wanted to take your pulse there how impactful could that meeting be is this a potential springboard for genesis are there.
Presentations of note or planned.
Stereo taxes commercial activities at that event that could maybe kind of help you.
Bill Beaumont build the momentum.
Heading into the latter part of this year in 2022. Thanks, so much guys for taking the questions.
Sure So I'm actually I'm actually doing today's call from the society for cardiac Robotics Navigation conference.
It starts formerly tomorrow, but there is already some activities today in this evening and then and the SCRA is independent.
Independent physician led society, but its obviously was started and he's run by physicians that are very passionate about what we're doing in our mission.
To improve cardiac disease and it is and it has lost summed into a beautiful organization over the last few years.
In the press release, we shared earlier this week.
Kind of listed many of the more interesting or unique topics that are being discussed.
So it's a powerhouse that group of physicians that are speaking at the conference and so overall, we're very excited by it.
It always allows us to engage with them with physicians that know us very well and there are some physicians also that arent long term users of certain.
Taxes that join and so I kind of I view it as one of the nicest events of the year in terms of engaging with the community and and so I Wouldnt I don't expect kind of that.
Orders don't get signed at conferences like this if that was kind of what you were perhaps alluding to.
It's usually kind of won that administrative side when we talk about near term late.
The orders but.
But I do think it's a very good opportunity to engage with them with the physician community and then reality also with the strategic community.
It was nice to see how many other companies CRM has that has recruited to support the conference into joined the conference and so there's a range of both both.
Both the physician community in general.
Electrophysiology industry community here.
Great. Thanks for the color David.
Thank you.
Thank you. Our next question comes from Frank to Kennon with Lake Street capital markets.
David Kim Congrats on the quarter. Thanks for taking my questions I wanted to start on the order side.
Can you just level set us on how many orders you have in hand, right now that will be recognized in 2022, and then as you start to get more greenfield orders into the <unk>.
Book. Please can you just talk a little bit about expected.
Time from order to install some of those might have in comparison to some of your greenfield sites.
Hi, Frank and Mike sure. So the two orders that we announced today as those will.
Turning to revenue installations in 2022 and then.
And generally I would expect again that the timeline between an order and.
And kind of either a shipment or an installation is probably somewhere in the range of three to nine months and a typical lag.
Typical situation.
Okay. That's helpful. And then I wanted to ask on the disposable side of the business, obviously, a lot of impacts different headwinds in the quarter, maybe bring us a little bit deeper into what went on exactly in this quarter and then how youre feeling about.
Sequential rebound into the last quarter of this year.
Sure. So as then as probably as kind of I've heard on some of the other earnings calls of other medical device companies.
Both both the resurgence of Covid in certain geographies relatively broadly actually both in the U S in Europe and and in some unique cases, we heard about.
Just personnel challenges and staffing challenges.
We did see.
A decline in procedures, particularly in August and then gradually kind of returning back to better and better activity in in September and October and so overall, it's a.
It is still a pressured environment, we've not got us back to levels.
Pre COVID-19.
That being said, we're able to with the system.
Revenue counteract those forces, but that is still somewhat pressured external environment.
Okay, and then just last one for me maybe give us an update on on utilization trends I know some of your <unk>.
Early as Genesis users were tracking above the average of the overall installed base, maybe talk to some of your mid year installs and how those are tracking from a utilization perspective.
I do not actually have the numbers closely available I know that when we do launch a new site and kind of anecdotally I'm thinking about and one of the most recent ones we get.
Flurry of.
Near term activity.
One of those at launching just a few weeks ago, and then and so there is.
There is a general.
Increasing activity again I would.
I wouldn't kind of we're still in the early phases of these launches and so it's hard for me to say that it typically we would expect.
About 100 procedures per system per year, it's hard for me to.
Put kind of something down definitively that it should be much higher with genesis, but our activity both at.
At banner and Helsinki, where we've obviously been installed now for over a year and then the initial activity, which is really kind of bad weeks or a few months.
Kind of towards more recent sites.
Matches that.
Okay. That's helpful. I'll stop there thanks for taking my questions.
Okay. Thank you Frank.
Thank you again as a reminder, please press star one if you would like to enter the queue.
Our next question comes from Javier for circa with Sparta, Ken Our Spartan capital.
Yes.
Hi, Thank you so much great being here congratulations on a solid quarter.
My question is regarding the progress with the robot.
Proprietary magnetic ablation catheter.
And if management has any sort of expectation as far as when you expect market entry for us.
Thanks.
Hi, Hi, there sure.
So as we kind of discussed in the prepared remarks.
<unk> is still ramping up the manufacturing of the hundreds of catheters needed for for the testing necessary for regulatory submissions.
That is advancing relatively well and we expect to finish all the manufacturing and the testing early in the year and that will support our CE Mark submission and all support an <unk> submission to FDA.
So with that we.
We would expect.
CE Mark approval at some point in 2022, and a commercial launch in Europe in 2022.
Depending on how well, we're able to enroll patients in the IV trial, how quickly we're able to do it it could support also an approval in 2023 in the U S.
Excellent thank you and another.
Another quick follow up question.
I think this was touched on before but.
As far as the micro port strategic collaboration.
Could you provide any insight as far as any specific channels or infrastructure. That's currently in place to support them.
Double system revenue in 2022.
Sure we have a commercial team of about 40 people at globally.
That's kind of as they are focused.
System sales to clinical adoption to training.
<unk>.
That direct.
Global sales team along with distributors that we have in <unk>.
Various geographies like eastern Europe.
Like the middle East like our relationship with micro Port.
Is that kind of commercial effort is what we expect to drive the increase in revenue next year, and and I think thats a reasonable again assumption given what that team has shown they are capable of doing this year.
<unk>.
The natural benefit you have with time and as you commercialize Genesis more and more there is there is increased comfort in the community about how it is performing that is able to work well and that gives you a natural tailwind.
And then you also have been.
The start to replacement cycle that again, we got very little benefit of that during this past year.
But a normalized level would incrementally add at least several more systems and I think that next year is going to look much more like normalized deal from a replacement cycle. So I think those are the those are the ways we think about.
The commercial effort and what's driving it.
Revenue growth next year, and then I'd also kind of.
Just kind of add similar to what items that question was earlier is that we do have a plan for how to build the commercial team up in a much more robust way. So when we think about the commercial team that's needed to sustain a multiyear.
A significant double digit revenue growth that there is a plan in place for that and I think youll see as we have.
As we launched the catheter and then also I've said as you have better clarity on some of our future innovations why why that staged approach to building the commercial team makes a lot of sense.
Okay.
Cost of pay for the insight.
Sure.
Thank you. Our next question comes from Guy just koski with Puffer fish capital.
Hey, David how are you.
Hi, guys good morning.
Good morning to you as well my question is regarding the magnetic DC randomized trial you guys. I know you talked about it like maybe over a year ago in the last I had heard that it was going to be resulted in early or at least in 2022 I guess, one do you have any update on that and also is it significant and.
Do you still feel that it has significant once it's released.
Sure. So let me talk about clinical data overall.
And then I'll then touch upon the specifically the magnetic BT trial. So the overall the continued build out of the clinical data for robotics and EP is kind of I think one of our strong points.
I was particularly pleased with the publication in pediatric patients that came out.
A few weeks ago.
I think again kind of that tough consistently that type of data coming out.
A safety benefit an efficacy benefit.
<unk>.
Across all sorts of arrhythmias across all sorts of patients and then particularly in the most kind of a delicate sensitive patients like children.
Like those with severe disease and that's.
That's what drives our entire business and our reason for existence is is how good that clinical data and so that's kind of overall been a very strong suite.
Think also on the last call I mentioned that there was a very interesting publication on silent cerebral events.
That should come out very soon so I hope that we'll have an ability to share that also in the near term and then the magnetic B T trial was actually a prospective.
Randomized trial initiated by stereo taxes.
Multiple centers looking to demonstrate superiority of robotics versus manual ablation in ischemic 50 patients and we ended up enrolling about 180 patients. The last patient was enrolled I believe in February or March of last year. There was a one year follow up.
And so we should have the last follow up in the first quarter of 2023 with probably kind of blind.
Blinding of the data.
A few months later and so I would expect by about mid <unk>.
2023 to have them.
Got to announce from that trial.
And again, I think that kind of.
It's unlikely that any one data point.
The lease which is the field, but I think the totality of the data is.
What really counts and the magnetic BT trial is obviously.
In terms of the structure of the trial.
Good as it gets it's a prospective randomized.
Trial.
It's kind of a it does good up a structure as one could ever ask for and again, we think that given given kind of everything that we know still be blinded.
We expect that we're going to show, we're going to show off well and and so we're excited to have that as part of environment carrier.
One follow up question, David regarding the Fellowship program I.
I think originally it sounded like from what I've been able to ascertain you're at about 18.
Graduate and it looked like the programme now has close to 50 and I'm just curious like once they graduate I guess, one is that accurate and then to once these doctors do graduate what what is it.
How many do you track what percentage of them are actually able to use robots in their day to day or just kind of curious what happens to them once they graduate from the program.
Sure. So I don't have the exact numbers in front of me right now, but but there hasnt been that gradual growth from I think we had about 10 graduates in the first year and now we have about 20 or so.
Fellows in any given year to have about 40, cellos active right now across the U S. In Europe, we actually just started in Asia Pacific version of the Fellowship program as well. So that said, that's kind of adding a little bit on top of that and then I would say that kind of theirs.
Theres kind of three ways things evolved after the fellow graduates from the social program and it goes on into practice either.
<unk>.
They stay on at the site or we help in matchmaking them with sites that have a robot and they can continue their procedural activity there.
Often times again kind of their energy in Houston.
Any kind of dengue.
The engagement they have with US the fellowship program.
Provides kind of a nice halo effect wherever they go.
Second is they might go to a site that doesn't have a robot, but then they remain engaged with us and we try to advance the capital process at that site and then in the third setting. They go to a site that doesn't have the opportunity to do a capital.
Build out of our lab and adoption of a robot in the near term and then what we tried to do is to find ways to engage with them and to maintain a connection with the hope that when an opportunity presents itself in the future that we can kind of start with robotic program, there and that they will be the clinical champion for that and so that's kind of the way I'd categorized.
Graduates and and.
And I don't have again I apologize it doesn't have to just the numbers in front of me but.
Probably guess that about.
Somewhere about a third of the graduates probably ended up there at sites that have a robotic program and so they just continue their procedural activity after the fellowship.
Is there a.
The number that you guys target I mean could you have a 150.
Fellows I'm, just kind of I'm trying to.
Do you see that.
Somewhat of a leading indicator on the more followership people you would have the greater opportunities that would sound like.
But I'm curious like is your capacity for 100 students to 150 is now that youre at your capacity is there any kind of plan there that you have.
Yes, so it's really driven by two things, it's driven by how many robotic programs. We have at universities style hospitals, where they have fellowship programs and it's driven by how well we do in attracting fellows in those programs catchy joined our program and so what I'd say is that given our installed base we're doing.
Relatively well, maybe we could have 50% more fellows, if we really kind of we're successful across the entire installed base.
But but relatively weak.
I'd say the majority of fellows at hospitals that are active users of our robot.
And have fellowship programs are part of our program and so.
There is room for incremental improvement, but we can double or triple the fellowship program, given our existing installed base as we sell new robots and have an expanding installed base that provides additional opportunities, but we're doing relatively well and are in our existing base.
Just last question no one asked it so I'll ask you did you do continue to do these virtual test drives this quarter and do you have any kind of numbers that you could share with us.
Yes, we've continued to do them and we've seen more and more though as then.
Things have opened up.
Our opened up close down opened up again, we've seen more and more site visits to actual hospital accounts, and so hospitals like banner University and and Helsinki.
The University.
Monaco have all hosted physicians already and so we're continuing the tolerability visits.
But but but I would say that we're kind of seeing more and more of a shift towards.
In person visits.
Thanks, so much David.
Thank you guys.
Thank you and as a final reminder, we are now holding for questions. Please press star one now if you would like to ask a question.
I am showing no questions at this time I would now like to turn the call back over for closing remarks.
Okay. Thank you for all your questions and for your continued support we look forward to speaking with you in a few in Amman Secretary of Texas' innovation day. Thank you.
Thank you ladies and gentlemen. This concludes today's teleconference. You may now disconnect.