Q4 2021 Stereotaxis Inc Earnings Call

Ladies and gentlemen, thank you for standing by at this time, we are assembling audience members and plan to be underway. Shortly we'd like to thank you for your patience and ask that you. Please continue to standby.

[music].

Please standby we're about to begin.

Good morning, Thank you for joining us for stereo taxes fourth quarter and full year 2021 earnings conference call.

Certain statements during the conference call and question and answer session 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 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 on listen only mode.

The floor will be opened for questions 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 Fisher, Chairman and CEO of stereo taxes.

Thank you operator, good morning, everyone I'm joined today by <unk> <unk>, our Chief Financial Officer.

Our prepared remarks today will be a bit longer than normal as I use the occasion of our annual call to provide a broader overview of stereotactic and our vision I will then review our progress in 2021 of our key goals and expectations for the year.

Texas is a pioneer and leader of robotics for Endovascular surgery.

<unk> developed a highly innovative suite of technologies that address the inherent limitations risks and challenges posed by manual handheld catheters.

Our mission is to make minimally invasive endovascular surgery.

<unk> available to improve its safety and outcome and to modernize it with the benefits of Digitization robotics.

Endovascular surgery, as a broad and growing field of medicine, where small intervention devices are navigated through a patient's vascular system.

Endovascular procedures positively impact millions of patients annually, but the mechanism of action.

And hope catheters as fundamental flaws.

The procedure therapy takes place at the catheter tip.

Emmanuel catheter has held and manipulated several feet away up to him.

Holding a pencil permits or rates or not.

Not precise not stable and there's limited manual catheters need to be Richard to allow for any control of <unk>, increasing the risk of patient injury.

<unk> are complex and operator dependent and visualization of the catheter exposes patients amputations tax rate radiation.

Stereotactic is robotics technology addresses the inherent limitations risks and challenges of traditional endovascular surgery by allowing for direct control of the catheter tip using precise computer controlled magnetic fields.

It allows from trusted precision stability.

Reaching areas previously unreachable and enhances patient and physician safety.

Physicians upgrade our robot from a computer cockpit seeded and protected from radiation with full control over the procedure, it's an ability to focus on the cognitive aspects of their profession.

These benefits are not theoretical hundreds of physicians at over 100, leading hospitals have treated over 100000 patients with our technology and there are over 400 scientific publications documenting our critical value.

A highly differentiated platform technology to confirm meaningful clinical value and a large field of medicine.

The perfect Foundation on which to build the preeminent medical Robotics company.

To realize our great potential to positively transform into vascular surgery. We spent the last years, putting in place the necessary foundations financial commercial and technological for healthy company with substantial long term growth.

But first necessary foundation with financial stability and strength we.

We start 2022 with $40 million in cash no debt and it was a business that can make significant investments in key value drivers, while still maintaining financial discipline and operating near breakeven.

In 2021, we invested 30% of our revenue in R&D.

That works that would be typical medical device company and allows for a robust innovation pipeline.

We built and moved into our new headquarters and manufacturing facility that will serve as the foundation for many years of growth.

We invested in improved IP infrastructure, and we are methodically growing and enhancing our team with key hiring across the organization.

With all of those investments, we maintained cash utilization of approximately <unk> million dollars per quarter, a level that we are very comfortable with given our balance sheet and that importantly, convinced long term stability and reliability to our customers and partners.

The second necessary foundation was implementing the right commercial infrastructure and processes that support adoption of our technology and allow existing customers to showcase their leadership.

While we still have substantial work to do here key corner stones of those foundations have been established.

Our robotic EP Fellows program graduated 23 positions globally last year.

Fellows represent the future of EEP and enter the community confident in our technology and its value.

We recently extended the robotic <unk> Fellowship program with a light version designed for existing EPS, the quantum introduction to robotics.

Much of this training has been possible through realistic training simulators, we just launched our latest generation stimulator, which has enhanced realism gamification features and is available online.

We continue to support a community of engaged D piece.

That are advancing clinical knowledge in the field the society for cardiac robotic navigation has grown as an independent society with an engaging conference in November .

<unk> is using our technology published 22 peer reviewed publications last year, including highly positive one showing superior clinical outcomes for the treatment of pediatric patients and an 82% reduction in the rate of silence strokes during April ablation.

Clinical support of procedures remains highly important and Pete and we pride ourselves on building skilled impactful commercial team.

His team worked in an integrated fashion leveraging proprietary connectivity technology to provide a network of in person and tell everybody technical and clinical support model for the future of procedural support across health care.

We look forward to building this team substantially in tandem with the introduction of new disposable products that drive higher utilization and revenue per procedure.

In 2021, stereotactic demonstrated it could meaningfully restart capital sales.

After many years of minimal activity, we sold seven systems during this year.

The restart of system sales played out globally with three of these in the U S. Two in Europe and two in China.

Five of these systems were to hospitals, establishing an entirely new robotic practices.

We've been pleased with how we're liable and while our latest robot Genesis is performing daily real world use with the utilization that Genesis accounts and with the positive feedback from users.

Since FDA approval of Genesis exactly two years ago, we've received orders for 13 robotic systems in total the majority from new Greenfield customers.

This rebuilding of our capital sales capability is taking place despite the backdrop of a challenging macro environment.

Four of these orders received in the later months of 2021 and start of 2022 will contribute to our capital revenue this year.

The makeup of these orders both geographic and customer mix, it's fairly similar to last year with two from the U S. One from Europe and one from China.

Half of our Greenfield and heifer replacement projects.

On our last call we expected several near term replacement system orders. There were four specifically that seems very close to completion and that should have been received by now.

Each of these cases clinical support remains high and the hospital will need to initiate a replacement project in the near term we.

We are still working towards the orders and believe they should be received soon.

The delays highlight the challenge of scaling a capital business dependent on construction project timelines, particularly with the disruption of Covid and construction hampered due to supply chain and labor issues.

We have a pipeline of over a couple of dozen high likelihood capital projects globally, reflecting a good mix of both greenfield and replacement projects.

We still expect a similar amount of capital revenue from Greenfield accounts. This year as received last year, which was five systems.

We had previously expected a normalized level of replacement cycle capital in 2022, which given our installed base should be in the high single digit number of systems a year.

While the replacement cycle opportunity is essentially a guaranteed revenue stream. It has remained muted as hospitals continue to extend the life of labs.

We expect 2020 to tap more replacement activity and the two systems recognized last year, but likely still below a normalized level.

Our launch of Genesis was an initial demonstration of how meaningful innovation can drive revenue growth.

We continue to expect Genesis to contribute to growth this year and in the future, but it was really the first stepping stone in our effort to build a product ecosystem that allows for widespread adoption of robotics is a platform technology across endovascular surgery.

At our recent innovation day, we outlined our pipeline of technologies that are in the later stages of development.

These are the technological foundations necessary to fulfill our potential and they serve as multiple independent drivers of growth in the coming years.

Specifically, we view our key growth drivers.

First our mobile robotic magnetic navigation system that enables broad accessibility of robotics.

Second our own independent ablation catheter portfolio through the EP market.

Third our family of guide wires, and catheters and expand the benefits of our robot into new Endovascular indications.

For a separate China specific EP product ecosystem, we are developing in collaboration with micro for EP.

And fifth a digital platform for broad operating room connectivity.

Each of these opportunities by themselves conserve as substantial growth drivers that dwarf our existing business.

Its value being advanced independently, but are also synergistic and complementary charter.

Collectively they serve as a foundational product ecosystem as we look to transform endovascular surgery with robotics.

The first technology, a smaller self shielding mobile robot frees us from extensive architectural planning and construction currently necessary to adopt our technology.

It makes our robot robotic technology more accessible to many physicians and customers that have wanted to adopt her try it but weren't able to navigate the logistic and economic hurdles.

We are aggressively advancing through mechanical electrical and software development and our R&D team benefits from its recent success with the Genesis system.

We have working prototypes and near final designs of most aspects of the robot and have made this progress despite myriad supply chain delays.

We expect to complete development in the second half of this year from testing and file for regulatory approvals in the U S and Europe at yearend and to start limited commercialization in both geographies next year.

While stereotactic can grow sales without the system. Our mobile system is designed for manufacturing and deployment at scale. So that we have line of sight to selling over 100 systems a year.

The second technology, a portfolio of ablation catheters for cardiac ablation market is important in that it significantly improves upon the agent catheter technology are current users are limited to and in that it provides for a stronger strategic and financial foundation for us in electrophysiology.

Magic Robotically navigated Oracle ablation catheter is a first catheter in this portfolio.

<unk> advanced magic towards CE, Mark in IV trial submissions.

Our partner Zika faced multiple labor and material delays and just completed the manufacturing of hundreds of catheters necessary for regulatory testing.

We are in the midst of formal testing and regulatory documentation of these catheters, but given the manufacturing delays and specific tests with longer lead times, we now estimate our CE Mark submission in summer and an IDE submission shortly thereafter.

We remain highly pleased with the feedback positions provide on magic and in its clinical commercial and strategic impact.

Our regulatory submission in Europe will benefit from the experience of SIFCO recently had bringing several of its own catheters through the new MDI regulations.

Separately and importantly, we also are continuing to advance the pipeline of Robotically navigating EP catheters that follow magic, including a pulsed field ablation solution and single shot Cryoablation catheter.

The third technology, our family of Interventional guide wires and guide catheters will allow our robot to be leveraged into several additional clinical indications, where endovascular navigation can be challenging.

We mentioned five specific indications of focus nor interventions coronary angioplasty peripheral intervention tumor embolization and AAA grafts.

The first guide wires and his family have begun manufacturing to formal regulatory testing and we expect to file regular regulatory submissions in Europe , and the U S and summer line for approvals late in the year.

Family of similar guide wires, and then larger guidance catheters will follow next year.

We've started sharing this strategy with a select group of physicians that we believe will be early adopters of the technology across clinical specialties, both within existing hospitals that have a robot and a new potential hospitals and are very pleased with the many scenarios, where they view distal tip controllable wire is very helpful in reducing procedure time and challenge.

The launch of these devices will demonstrate the power of our robot as a full platform across Endovascular surgery.

Fourth in China, specifically, we have a collaboration with micro port EP to develop and commercialize product ecosystem for cardiac ablation that is independent of the ecosystem. We're building in the U S and Europe .

Microsoft has been advancing regulatory work for Genesis and subsequently the mobile robot is developing compatible ablation catheters and is integrating its mapping system with our robust development of this ecosystem will allow us to benefit from Mike reports substantial commercial team in China.

And fifth we.

We have always viewed connectivity is a core value proposition for our robotic technology and are leveraging our historical experiences to build a modern platform for collaboration and remote support of operating rooms. This enhances our robots and is independent value as a solution across operating groups.

Collectively these technologies circuit that foundational product ecosystem for our preeminent medical robotics company with the ability to transform endovascular interventions.

Allow for significant growth in electrophysiology and the broader field of Endovascular surgery in the coming years.

Tim 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 fourth quarter at 2021 totaled $8 2 million, a 21% increase from the prior year fourth quarter.

Recurring revenue for the quarter was $5 7 million in system revenue was $2 3 million revenue for the full year 2021 totaled 35 million growth of 32% from $26 6 million in 2020.

Recurring revenue of $22 9 million for the full year 2021 increased 4% from the prior year, reflecting a partial recovery in procedure volumes from the depth of the COVID-19 pandemic in 2020.

System revenue of $11 2 million for the full year 2021 increased from $3 6 million in the prior year, reflecting increasing adoption of our Genesis arguments system.

Gross margin for the fourth quarter and full year of 2021 were 72% and 66% of revenue.

For the full year 2021, we reported gross margins of 86% on recurring revenue and 33% for system revenue.

These margins are consistent with our previous commentary and expect it to remain stable with margin expansion in system revenue driven by scale.

Operating expenses in the fourth quarter with $9 3 million, including $2 6 million noncash stock compensation expense.

Excluding stock compensation expense adjusted operating expenses in the current quarter were $6 7 million compared to the prior year adjusted operating expenses of $5 7 million adjusted operating expenses for the full year 2021, or $26 9 million.

<unk>, 20% from $22 6 million in the prior year with the increase driven predominantly by R&D project spending and measured hiring across key areas of the company.

Operating loss and net loss for the fourth quarter of 2021 were both $3 4 million compared to $1 2 million for bulk from the previous year adjusted operating loss and adjusted net loss for the quarter, excluding noncash stock compensation expense were a point 8 million compared to <unk> 4 million for.

From the previous year for the full year 2021, adjusted operating loss of $3 6 million and adjusted net loss was $1 4 million compared to $3 6 million and $3 5 million in the prior year period.

Net loss in the current year includes a favorable $2 2 million dollar adjustment for the forgiveness of the paycheck protection loan.

Negative free cash flow for the full year 2021, with $4 3 million compared to $3 6 million for the full year 2020, excluding significant investments in our new headquarters and manufacturing facility negative free cash flow for the full year 2021 would have been one 8 million.

At December 31st we had cash and cash equivalents of $40 1 million and no debt.

I will now hand, the call back to David.

Thank you Kim.

As we look out on 2022, we anticipate revenue growth for the year driven by continued commercial adoption of the Genesis RMM system and stable recurring revenue.

Based on current customer schedules. The majority of system revenue for the year will be recognized in the second half of the year.

As mentioned previously in my prepared remarks, we anticipate a similar level of Greenfield capital sales as of last year and some growth in replacement capital, but still below our normalized level.

We continue to invest in the team infrastructure projects that are critical for success and expect modest growth in operating expenses.

Now that we can do this while maintaining financial discipline, our robust balance sheet allows us to reach profitability without the need for additional financings.

Now take your questions. Operator can you. Please open the lines for Q&A.

Certainly thank you to signal for a question. Please press star one on your telephone keypad also if you are using a speaker phone. Please make sure that your mute button is turned off to allow your signal to reach our equipment. Once again. It is star one at this time for questions and we will pause to give everyone the opportunity to signal.

Our first question will come from Alex Nowak with Craig Hallum Capital Group.

Great. Good morning, everyone sounds like Youre pretty confident Genesis here could have at least six installs in 2022, if I'm, adding this up correctly. So for orders that you talked about that at least.

Hi, Alex.

I think we lost you for a moment.

Okay.

Mr. Novak if you would please check your mute button, we're unable to hear you.

Maybe we'll move on and get back to Alex later.

Thank you and moving on we'll go to Adam meter with Piper Sandler.

Hi, David Hi, Kim Thanks for taking the questions and congrats on the progress last year wanted to start with system outlook for 2022, I think you had previously talked about the expectation of a doubling of system revenue in 'twenty two relative to 'twenty one it sounds like that's no longer the expectation given.

Well it sounds like there are some headwinds on the replacement front. So can you talk maybe a little bit about some of the developments in past months set of kind of colored that.

New viewpoints.

Are you getting any feedback from customers that they're interested but potentially waiting on the next gen mobile system in 'twenty three or is this really just kind of a function of COVID-19, omicron in kind of the ripple through effects just any more color. There would be helpful. And then I had a follow up thanks.

Sure Adam So I think we've managed the introduction of new technology in our pipeline, well and I don't see that as kind of thing.

Material impact as we described in the call. There are we have a relatively nice pipeline of customers that are interest generally I was out in the field visiting customers also this week generally when we're out we can send.

Positivity that is growing on our technology and on our innovation pipeline as a whole.

And so generally it feels good.

And what's challenging is that we have it's very difficult to time.

When exactly orders get received and when hospital construction advances and so we have had mentioned on the call that in November when we had our last earnings call.

Sure.

For a replacement cycle orders that were seemingly imminent.

And that should have been received.

Those four has still not been received.

Remain seemingly imminent and one of the primary drivers of the delays in each of those has been their own construction schedules and their own challenges with.

With labor shortages or material shortage is getting construction projects.

Moving.

And so is there are there are macro headwinds that that add to that I think et cetera.

Highlights.

The value of some of the innovations that we're doing particularly the increased accessibility of robotics in the future but.

But those are some of the challenges that we face.

Our guidance as we as we put it now I think it's prudent given given the fact that we at this point in the year hubs.

For system that will that are kind of set for revenue. This year I think it's prudent to give guidance like we did which is more or less.

Similar infield numbers and more replacement than last year, but not yet.

Standardized replacement cycle level.

And so that that felt like the prudent thing to do given that given where we stand today I can be surprised in a month from now and.

All four of those go through are there, there's obviously others in the pipeline, but those are the most.

Should be the most.

Easiest to bad.

And we'll have to see how those go.

Got it that's really helpful color I appreciate all that David and then maybe I'll ask about the.

The disposable side of the business.

I'm not sure it was addressed on the call, but I think I saw in the press release.

You're assuming.

More or less kind of.

Our stable business in 'twenty, two relative to 'twenty, one so did.

Did I interpret that correctly, we should kind of think of disposable revenue kind of being similar to 2021 levels or should we expect.

Essentially some increase over last year, and then maybe just talk about kind of.

Your expectations and what that implies from a system utilization standpoint.

Yes, so I think the way that you read the press release is correct.

I think we if you think about the primary drivers of that.

Of recurring revenue will be increases in procedure with right now, which right now are driven predominantly by macro factors and while there is some improvement in the COVID-19 situation in reality, we are it is still overall.

Kind of a fairly similar environment for the last year or so and so and we don't necessarily know when COVID-19 impacts will be completely gone at hospitals, and so I think that that kind of feels prudent and then obviously the second much more substantial impact will be the introduction of new disposable devices given the timing.

We're not guiding for any material revenue this year that we have.

Hope that we can start to weigh those can start to contribute to revenue later in the year.

When you think about kind of the other driver of utilization overall is the launch of <unk>.

New Greenfield robotic practices and overall, we've actually been very happy with the utilization and launch of Greenfield practices.

But.

Given that there is no service revenue for the first year, they are under warranty and given the natural ramp up in utilization that takes place as you train new physicians that you get a new completely new site up and running those are relatively more minor contributors to recurring revenue and you have the <unk>.

Interacting force that replacement cycle projects, you lose service revenue for that first year during the warranty period and so given all of those dynamics I think we're relatively stable recurring revenue seems like it seems like the reasonable.

Estimates for this year.

Okay. That's that's helpful and have more questions, but I'll, let some others jump in thanks again for taking my question.

Thank you.

We will return to Alex Nowak with Craig Hallum Capital Group.

Alright excellent thanks, not sure what happened there, but thanks for bringing me back on it.

Sounds like the question I have was asked I'm going to move over to kind of the prospective centers here. When you are speaking to them and sharing some of the interventional tools that you share during the innovation day and the pipeline what kind of has been their feedback I guess, how critical is it knowing that stair taxes is going to have additional capabilities beyond RF.

For those centers be willing to go ahead and bias there taxes robot.

Okay.

It's hard to it's hard to answer that too clearly now and we have talked with several of our electrophysiology customers and at first about tools like the guide wires and guide catheters and there are actually some.

Some procedures and electrophysiology, where there seems to be value and and through them. We have also been introduced or have had some discussions with interventional cardiologists.

And with other physicians kind of at their hospitals.

And then obviously independent of that there were some physicians that have been helping us in neurosurgery and in other fields.

<unk>.

I can't say that for the specific Greenfield accounts that we have that have been on our kind of on our pipeline.

Our pipeline list that.

Suddenly the demonstration of these has changed the dynamic and they're suddenly accelerating versus what they were doing before.

What I'd say is that it adds to the positivity and of those discussions, particularly with administrators, who who kind of can start to see potential for broader use of the robot.

And I.

And I think that as we as we also launched the devices and there starts to be real real clinical use and demonstration of utility in other clinical indications I think that that will be even a much stronger and.

But much stronger kind of.

The weight on the positive side of those discussions.

Okay, No that makes sense and then in the interventional tools beyond EP or I guess beyond your own magic catheter and some of the additional pipeline items here you mentioned the regulatory submission timelines. There are there any other milestones that we should be tracking around manufacturing technical feasibility that we should be watching for throughout this year just to confirm that.

We've got a working product here and these new categories.

Yes, it really will be the submissions because.

I mean, we have we have a.

A product that has gone through many animal studies.

A lot of testing.

Demos with many physicians and so I think I'm fairly fairly very confident that we have a working product.

There is an extensive amount of documentation that is required for the submission.

And formalized testing for that documentation.

There was obviously the ramp up in manufacturing, which for disposable devices is much more and much more stringent in its quality controls and the requirement that from day one for those for those manufactured units you have no flaws whatsoever.

Manufacturing and so those those things obviously.

Kind of all all necessary for prior to submission I think kind of the main the main milestone that will be visible externally is when we actually submit.

For CE, Mark and night eased or for the guide wires for CE Mark in fact 10-K.

Okay that makes sense I appreciate the update thank you.

Thank you.

And next we'll go to Jason <unk> with loop capital.

Hi, Thanks for taking my questions, maybe just some follow ups here.

You mentioned four systems were imminent and it looks as if.

There just to be determined at this point so.

I suppose some of that might have been built into your expectations for 'twenty two for 2022.

And then the second question related to that is when.

You get that type of order, which I assume is a replacement.

How quickly does it normally get into the ground is there still sort of a six to nine month delay or those going relatively quickly.

Sure. So yes, those when we think about.

The guidance of the doubling of system revenue.

It was predicated on more or less.

Similar levels.

Of Greenfield and a return of replacement cycle to the high single digit number of system that would lead to a doubling of system revenue. If we would have come out today with that.

Entering the year with two Greenfield orders and.

Replacement cycle orders I think it would have been obvious one that.

That doubling of revenue was very very much.

Likely in the cards and and so we'll have to see how those play out like mentioned in the prepared remarks. These are the replacement cycle projects are.

Essentially.

<unk>.

Almost can be considered needed in terms of their ultimate contribution to revenue.

But they are dependent on when the hospital actually decides that its changing in tax rate and the construction time line of the hospital for for those types of Refurbishments of labs and that is something that is kind of really outside of our control.

Most parts and.

And so thats kind of the dynamic there in terms of when that order. It goes into revenue it really depends on the site itself and then and how they advanced the construction and when they want to accept delivery of the robot.

And so.

I would say that at the lowest end youre talking about three months, usually two to three months and at the highest end for the replacement cycles, probably nine months.

Is would be a relatively longer time, and so probably probably six months is a good reasonable estimate for most of those.

Okay, that's very helpful and I agree that.

Those I think you're roughly 100 systems out there that are likely to be replaced.

But I would in terms of what's holding them up I think you alluded to some of it.

I, suppose, it's COVID-19 and staffing or kind of the main themes.

Is that your take in terms of.

What's going on especially in the replacement market.

I'd say, it's actually less COVID-19 and staffing of labs.

And more.

The.

Challenges that some hospitals are housing when working with contractors and architects.

Finalized production plans.

That there is a general general challenge in the construction world and that leads to projects oftentimes being delayed and oftentimes.

When hospitals are doing.

Construction, and let's say, we our lab.

<unk> in the interventional suite.

And they usually have kind of a relative.

Relatively continuous planned work they're doing.

Last two and then we're supposed to be slotted after that and so as flat to construction.

It's delayed than lab for us is delayed and they just kind of effect does that trickle effect, which I think is generally there is delays in construction that does impact the timing of.

With hospitals.

That's very helpful. As well one one related follow up then is just the mobile system I assume.

Does it really have that bottleneck to deal with the way. It's designed is that correct assumption.

For the most part that will make it a much simpler process there yes.

Great I'll jump back in queue. Thank you very much.

Thank you.

And next we'll go to Josh Jennings with Cowen.

Hi, good morning, Thanks for taking the questions.

David was hoping to just understand better the four orders that are in backlog currently and just the expectation for for those placements in beginning of revenue recognition.

I think you talked about majority of system revenue come in the back half does that include a couple of these four orders that are in our current backlog or could they be.

Stalled in the first half of the year.

Yes, so of those four orders I guess that the majority will.

At least half of them will turn into revenue in the second half of the year just based on when.

Specifically the hospitals want those delivered.

And so.

So that's the dynamic of the four that we are kind of assurant.

Great great. Thanks, sorry, just.

You laid that out I just didn't digest it appropriately.

And then I also wanted to just ask about China.

Have one China order and backlog.

That would bring you to eight systems in China was that order generated through the collaboration.

With Mike report.

And maybe just give us a status of.

Mike reports selling efforts between our understanding is that as you build out this ecosystem.

Expecting.

Collection and 23 in 2024 with that collaboration we just wanted to get an update on what Mike reports doing this year in terms of marketing.

And then also when Genesis could get approved in China. Thanks for taking the questions.

Sure. Thanks, Ross so yes.

All commercialization now does happen in collaboration with our direct.

<unk> in China.

And that has existed from before and the micro <unk> commercial team.

<unk>.

What kind of is important in terms of building of the product ecosystem is most of the collaboration with my 40 P is still on the development of the ecosystem to both the technical and the regulatory work for that.

We have some commercial engagement, particularly from our leadership to leadership.

Perspective, but in order for Michael Port to be able to go out to its entire commercial team and to start putting in putting in place the.

The types of.

<unk> expectations on each commercial individual on their team at for adoption of robotics in their territories, you really need to have the product ecosystem and so there is there is commercial engagement that can take place obviously prior to that at primarily between kind of the leadership of both teams and there is collaboration across.

The board, but.

But really that ecosystem with not being integration with catheters and with regulatory approval of Genesis is then is the foundation that we are working towards so that we can really take advantage of the broad.

Commercial organization.

Great and maybe just throw one last one im sorry.

Just thinking about collaborations and strategic partnerships.

<unk> announced one last year with Mike report and could there be other strategic distribution.

Ships in.

Future or strategic development collaborations with other companies.

That's my last one so sorry, thanks, Dave.

Sure. Thanks, Josh.

So.

I would say geographically.

We are focused on the core markets of the U S in Europe , and and we viewed the collaboration with micro Port is a very opportunistic way to take advantage of the significant interest we were seeing from clinicians in China and from the strategic interest we were seeing in China and obviously there is.

There is an opportunity there that is substantial very substantial and so that made a lot of times, we are not going out of our way to to to try to broadly geographically diversified because I think it's far more valuable and impactful to to demonstrate that we.

Can become a significant market share player in EP in new clinical applications in Europe , and the U S.

And so that's really our primary drive and I think that's where most of the value creation will be made.

Apart from obviously this independent effort in China.

If we think about collaborations generally in that both in electrophysiology and new clinical applications I would say that there is continuous dialogue with various.

Companies in the field.

We have plotted.

Path towards multiple significant revenue drivers.

That is independent of any collaboration and I think that that is a healthy way to advance the business and I think that it is a very viable path and a very attractive cost.

But obviously you want to build robust ecosystems around robotics I think there is significant value to robotics and many of these clinical applications and so if the right types of collaborations emerge that is there's some things that sometimes is discussed.

And so.

That type of natural dialogue that takes place over the course of business.

Great. Thanks for those answers Dave.

Thanks, Josh.

And next we'll go to Frank kicking in with Lake Street capital markets.

Hey, David and Kim Thanks for taking my questions I wanted to stop start with procedural volumes. If you have any data around that can you share anything related to what procedures looked like in December January and February and if you don't have hard data maybe talk directionally.

That trend has been looking.

Yeah, so generally the <unk>.

Covid impact started in la.

Let's say late summer fall of last year got.

<unk> got a little bit better, but then got a little bit worse at the very end of the year and generally January was tough like December .

And then we see some improvements.

Since then.

And it seems like we're obviously just at the very beginning of March but it seems like March should be the best months of the first quarter.

That's what when we look at schedules that we get from physicians in and generally that type of activity. It seems like there is some.

Some more returning to normal it's obviously very spotty, where you have some hospitals that have had no impacts in other words, where those have been marked impact.

December January period.

But so generally it seems like it is.

Getting better I would say that most of again these motions if we look at a return to pre COVID-19 .

Utilization that is where.

We don't know how to guide towards that and so we are we are assuming.

<unk>.

Relatively relatively stable levels.

Probably some variation, giving the given the macro environment, but relatively stable as it has been over the last year year and a house.

Okay got it and then thinking about.

The supply chain given the extensive sourcing process.

The components needed to manufacture the Genesis system any any disturbances in the supply chain that youre seeing it.

Constant disturbances in supply chain overall, we've been able to manage them in a way where we haven't had.

Any material impact to two production for revenue and though so it's always a challenge and we are kind of there is a constant grind to ensure that that doesn't have a negative impact on.

On the development side, there is constantly been delays when youre waiting for components to come in and you're sourcing new components that you want to test out for development projects.

Both on the disposables and on the on the mobile system. So there is that general macro challenge out there.

We do spend more money and sometimes take more risks.

Sometimes spend more money just to reduce those types of risks of supply chain.

But that's a constant grind in and overall I think that we manage that side well.

We haven't seen kind of material impacts there other than generally development go slower because of it but.

But that's kind of been the dynamic there.

Okay, and then last one for me I wanted to specifically ask about the leasing model if I remember correctly, the mobile system will be able to leverage the leasing system, but I don't think that the Genesis right. Now is doing that one is there any chance or opportunity to start offering a leasing model with the Genesis and is this something you are.

Hearing requests from your customers.

Yes, I think that alter.

Alternative financial models for adopting large capital equipment is something that would be attractive to customers and we do hear it does seems to be something that has become very common with other robotic systems out there whether it's leasing type models for disposable commitment tight then.

Models until I think there is a lot of value to that there is a challenge in offering that type of model with a system that is.

Suddenly the permanent installation that cannot be removed easily.

And because you have limited recourse if things don't advance as.

That's kind of is predicated.

It's much easier with the mobile system, because if it's the Oscars and size it doesn't want to continue to believe or.

It can kind of be reversed the capital that's placed there can be reversed very quickly without an impact to the hospital and so and so.

So it really is not a very relevant model.

Sure.

For capital system that is a permanent installation in terms of financing of system that that can be done obviously also with the permanent.

System, but that doesn't seem to be really something that hospitals need from us because hospitals, usually have access to their own capital.

And to their own kind of financial aid.

Kind of lines and usually they have it at better better rates than we could ever offer and so that's not that's not kind of.

The option I think it's really the question of having the flexibility to say that we don't want to make a 10 year commitment we wanted to try something for a couple of years.

And then decide and Thats something thats very difficult to do with the Permian install.

Okay. That's helpful. I'll stop there thanks for taking my questions.

Thank you Frank.

As a final reminder, star one at this time for questions next we will move on to Javier Francecca with Spartan capital.

Hi, David and Kim Thanks for taking my question.

In regards to R&D can management provide any additional guidance on the key pipeline products showcased during investor day in late 2021 and specifically the impact on R&D going forward for 2022.

What should investors expect in R&D relative to revenue <unk>.

Andrew just operating costs in general.

Sure Javier So as mentioned in the prepared remarks, we do expect a continuous gradual increase in R&D expenses.

As we advance these innovations.

<unk> multiple projects that are each substantial projects in terms of both their investment and their impact.

Hi view those gradual increase in operating expenses is something that is still very much.

Sustainable which with maintaining.

Prudent financial profile as a company and so.

So we do it within our within our means that in a nice fashion in terms of the commercial impact.

I laid out and also in our Investor presentation, we've laid out and how we viewed these innovations and their impact on overall growth and the view that there are really five independent draw.

Drivers of growth through these innovations.

Obviously, you discussed it much more during this call, but I think that if you look at our future which is in the not so distant future over the course of this year and kind of whats with initial commercialization of all these technologies either this year or.

Next year.

There will be a relatively near term future of highly accessible robots that can navigate both the family of EP interventional devices that are proprietary to us as well as new interventional devices that impact new indications in the Endovascular surgery.

We have geographic expansion beyond the U S and Europe also into China with a very capable partner and we have this kind.

Kind of completely side effort that is both synergistic with our robot offerings, but it is a real independent.

Growth driver.

Operating room connectivity solution, which I think those are the five things that are on our mind as the substantial revenue drivers for the next few years.

Okay, and a quick follow up as far as more in the near term for again.

On R&D is there any sort of quantifiable guidance, you can provide or.

Is there still a lot of factors to consider before before throwing that out to investors.

In terms of operating expenses.

Yeah, but especially R&D or maybe like the actual amount or a percent relative to revenue.

Yes.

Think that the 30% of revenue that we have spent the last year is relatively a good number we expect to grow revenue. This year I expect R&D expense to grow as well it might fluctuate to 35% or so of revenue, it's not going to go to 50% of revenue.

Excellent thanks for taking my questions.

Okay. Thank you.

And next we'll go to Chris Basta Investor.

Hi, David.

Congrats on the results and the progress I just had a question around some of the publications in the fourth quarter, you had strong clinical data around reducing silent cerebral embolisms and also another publication around superior outcomes with pediatrics arrhythmias.

Are those.

Prior to that you also have a publication on the on the pulmonary hypertension and the positive benefits of the system are these translating can you can you discuss whether these are translating into higher procedure numbers in these respective areas and if not.

The company.

Looks to increase physician awareness around the system benefits in these in these newer.

Areas with the clinical results.

Thank you sure Chris so.

So we are particularly proud of the clinical data on our technology and specifically the publications that you mentioned and many others that have come before at that kind of corroborate that type of that positive impact in electrophysiology.

With our robot.

I've said before I think there has been kind of similar questions to this then on some prior calls we have said before that in procedural Madison and electrophysiology, specifically, most physicians seem to be driven not necessarily by clinical data, but by their own personal experience using a technology in pacing.

Their own patients and kind of the feel of how that went.

And so these types of publications do allow us to to open the conversation with the physician again to try to.

Have kind of a foot in the door to change behavior or experiment with something that they haven't done previously and it doesn't lead to.

Switch, where a physician read the publication and says Oh Wow now Im convinced now I'm going to do.

Ex procedures Robotically previously how thats doing it by hand, it really is kind of a.

Gradual process.

Trying to change ingrained behaviors at physician accounts and so we do use these publications, we view them as kind of this.

Foundation, which is a very attractive and beneficial foundation for our engagement with the community, but it is aimed at all a light switch in terms of how it impacts actual behavior in the field.

Got it understood and one follow up with respect to the upcoming catheter portfolio I'll call. It.

What are you what are you most excited about and that we've read about some doctors talking about the robotics advantages in the areas of pulse field ablation are you.

Can you share with me what do you think that is the cryo and the PFA and obviously the upcoming magic RF, what excites you most.

So on the EP specific portfolio.

Yes.

So I would say that.

The magic catheter, there is very very clear and knowledge of the broad range of electrophysiology procedures, where that is going to be.

Given all we know.

A significant advantage in step forward versus historical technology and available offering in the space and so that is and I think.

Great Workhorse foundation for the thousands of procedures that are currently being done on a robot and I sense that that will also allow for an expansion of utilization with many physicians really looking at us for procedures that maybe they haven't been thinking about I think their ability to navigate that catheter.

At pulse.

Pulsed field is big.

A trend an area of interest in this field and so I wouldn't view that as the second most important effort that we're making.

I'd say that right.

Right now the.

All of the clinical literature, and thinking about pulse field, it's fairly limited to paroxysmal atrial fibrillation and so is.

And there are still.

Question on exactly how pulse field will will.

Part of the ablation ecosystem, where we'll add benefits versus RF, where it will not not be worthwhile to be advanced versus RF and so I'd say that that is clearly the second second most interesting and attractive.

<unk> product of ours in EP.

And I think there is a lot of value of that stability and precision can provide in that.

But I think that that is less clearly defined.

Role for it given that still at pulse field as an entire field.

<unk> is still it's still kind of an earlier earlier innings of being explored and being understood.

And can you just confirm what you will you be in human testing this year on Psa.

We look to be in first in man testing by the end of the year.

Okay. Thanks.

Thank you.

And that concludes our question and answer session I would like to turn it back to Mr. Fischer for any additional or closing comments.

Yeah. So thank you very much for your question.

We'll continue to work hard on your behalf and look forward to speaking again in a couple of months.

Thank you again.

And that does conclude today's call we'd like to thank everyone for their participation you may now disconnect.