Q2 2022 Stereotaxis Inc Earnings Call

[music].

Good morning, Thank you for joining us for staying with us.

The second quarter 2022 our next conference call.

Some statements during the conference call a question and that is superior to follow may relate to future events expectations.

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 much usually just since some of the statements that the companys 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 a listen only mode disorder will be opened for questions.

Following the presentation.

And so remind us today's call is being recorded.

Now my pleasure to turn the floor over to host David Fisher, Chairman and CEO of Stereotaxis.

Thank you operator, and good morning, everyone.

I'm joined today by comparing our Chief Financial Officer.

We are operating in an environment that remains very similar to what I described on our last call in May It is both a challenging and exciting period for stereo taxes.

The macro business environment remained littered with a post pandemic related supply chain regulatory personnel and economic disruptions we.

We signed nearly 70% reduction in China procedure volumes during the second quarter.

You can see delays to hospital purchasing decision the construction projects.

Not yet observed an improvement in supply chain reliability and see inflationary pressures on various expenses.

The optics of our financial results in the quarter reflect these challenges, particularly the delays in hospital construction with negligible system revenue recognized in the quarter contributing to reduced revenue compared to last year's second quarter.

Despite these pressures and the optics of our financial results stereo taxes is making significant progress commercially technologically.

I am pleased with our progress and confident in where we stand in the path ahead of us we.

We have continued demand for our technology, we are advancing a transformative innovation pipeline. We are assembling an all star commercial team who we are.

Doing all this while maintaining financial stability and strength.

Let me first touch upon our recent commercial performance.

During the second quarter, we received three orders for Genesis systems, two of which were received since our last call.

All three of the orders came from the United States too.

Two orders or replacement cycle systems, where genesis will replace aged ne obese at existing hospitals.

Third order is unique and exciting and.

An existing hospital customer who already operate a successful robotic EP program. Besides establish a second robotic lab at the same hospital.

This is a prestigious hospital led by a key opinion leader in the field and will be the first E. P program in the U S with two of our robotic systems.

Our continued pace of Genesis orders bodes well for future financial results, because we now have over $12 million in backlog of system orders waiting to be shipped and installed and converted into revenue.

While timing of revenue recognition is often outside of our control and dependent on hospital construction.

Orders in our backlog are essentially guaranteed we can over 99% conversion rate and significant nonrefundable downpayments, providing confidence in their realization.

Our efforts to grow capital sales are performed alongside our continued commitment to the success of existing robotic practices and the development of the holistic commercial infrastructure that drives such success.

Two highlights from the second quarter include graduation of an additional cohort to fellows.

E P Fellows program and the publication of the robotic special issue in the journal of Basin.

11, Electrophysiology Fellows graduated from our Fellows program in the past quarter, we expect to graduate 19. This year and in total 65 Fellows have graduated from our program globally since it was launched.

These fellows represent the future of the field and enter it with appreciation in confidence, our technology, which bodes well for us going forward.

The body of clinical literature, supporting the clinical value of robotics any P. Also substantially increased with 16 peer reviewed publications included in a special issue of the journal.

Jim.

The publications covered at the broad range of topics, including the use of our technology across the spectrum of arrhythmias.

Several more novel ways, alongside various preoperative imaging and intraoperative mapping technology without the use of X ray and remotely over long distances.

We continue to view the quantity and quality of clinical data and our technology has a strong foundation for future adoption.

Most impactful to our mid and long term commercial performance remains the realization stereotactic strategic innovation play.

As a reminder, our innovation strategy consists of five key pillars.

Mobile system that enables broad accessibility of robotics, our own independent ablation catheter portfolio.

Does that expand our technology to new Endovascular indications shine.

China specific product ecosystem and digital platform for broad operating room connectivity.

Each of these will individually served substantial growth drivers that dwarf our existing business, but the five efforts are also synergistic and collectively serve as a foundational product ecosystem in our mission to transform endovascular surgery with robotics.

We were very pleased a month ago to announce the marks the mission of our proprietary Robotically navigated ablation catheter magic.

Submission of magic reflect the culmination of an extensive design development manufacturing and testing effort and I want to congratulate the many individuals who were instrumental in that effort.

The submission was made on schedule with the timeline, we provided at the start of this year and complies with the recent more stringent MTR regulations in Europe .

While the timeline for approval of the catheter is not knowable at this stage, we're preparing for commercialization upon receipt of CE Mark as early as year end.

The catheter design builds upon nearly 20 years of experience and learning some existing biosensors magnetic catheter was developed and we are very excited for the clinical commercial and strategic benefits magic will provide.

Beyond the significant milestone with magic, we are methodically advancing the other technological pillars to our innovation strategy.

These are advancing against the headwinds of supply chain challenges of Covid quarantine in China personnel disruption and the regulatory distractions caused by M. D are in Europe .

Fight those we still view an initial launch of the mobile robot around this time next year as realistic and the hardware electronics and software aspect of the system are advancing nicely.

And Mike report and Stereotactic collaboration continues to progress well and we view a comprehensive product ecosystem in China coming together during the second half of 2023.

Ramping up production of guide wires for the required regulatory testing has gone slower than projected at our contract manufacturer and we now expect regulatory approvals and an initial launch in the first half of 2023, rather than at the start of the year.

Finally submission of an application to the FDA to initiate a prospective I E trial for the Magic catheter is currently waiting on certain animal trials that we expect to complete by year end.

Development progress is inherently non linear, particularly in this environment, but we are pleased by the breadth and quality impactful developments being advanced.

The methodical progress across multiple fronts on our innovation strategy brings us closer to a commercial break out and consistent long term revenue growth.

As our technology pipeline becomes de risked and approaches the market. We are placing increased focus on ensuring the right commercial team infrastructure and processes are in place to drive substantial revenue growth.

I was very excited to be able to announce last week. The two highly experienced and successful commercial leaders are joining stereotactic.

Franklin Heft, and Tim Glenn bring to stereotactic decades of significant and highly relevant experience if scaled businesses like ours in order of magnitude larger and lived through the complexity and rapid pace of pioneering new markets.

Their skill sets and geographical focuses are complementary to each other they are complementary and additive to our commercial leaders mitral pair and Katie Payne.

And we were able to find leadership of this caliber to enthusiastically join US is a testament to the opportunity in front of us and the company we are building.

Personally feel grateful to have these commercial leaders as partners in our journey and encouraged by the fact that their leadership will got our commercial activities.

Puzzled pieces are starting to come together and both the technological ecosystem and commercial organization our progress on both these fronts to support substantial long term growth in electrophysiology and more broadly in Endovascular interventions Kim.

Jim will now provide some commentary on our financial results and then I'll make a few financial comments as well before opening the call to Q&A.

Thank you David and good morning, everyone.

Revenue for the second quarter at 2022 totaled $6 2 million.

This is down from 9.1 night in the prior year second quarter, primarily due to recognizing revenue on just a partial robotics system this quarter compared to two systems last year.

Recurring revenue for the quarter was $5 6 million compared to $6 1 million in the prior years second quarter, reflecting headwinds in procedure volumes and some reduction in service revenue.

But also approach replacement cycles.

Gross margin for the second quarter of 2022 with 76% of revenue.

Gross margin of 61% and recurring revenue gross margin of 83%.

Operating expenses in the quarter at nine 8 million.

$2 7 million of noncash stock compensation expense, excluding stock compensation expense adjusted operating expenses were $7 2 million consistent with the prior year second quarter.

Operating loss and net loss for the second quarter of 2022.

With $5 2 million compared to $3 4 million and $1 2 million in the previous year.

Adjusted operating loss and adjusted net loss.

Noncash stock compensation expense were $2 5 million in the current year quarter compared to negative $6 million and positive one 6 million in the prior year quarter.

Negative free cash flow for the second quarter with 1.8 million compared to quite one night.

Prior year second quarter, and $1 2 million in the second quarter of 2020.

At June 30, we had cash and cash equivalents of $35 1 million and no debt.

I will now hand, the call back to David.

Thank you Kim.

Wanted to add a few additional comments on two key topics revenue expectations for the remainder of this year and our balance sheet and financial stability.

On the first topic, we view the revenue reported this quarter is a navy or in our performance our pace of system orders and current system backlog of over $12 million supports our prior guidance of system revenue and overall revenue growth for the year.

If we were able to install all the systems in our backlog, we would expect approximately $15 million in system sales for this year.

Typically we have discussed an approximate three to 12 months timeline between when a robot is ordered to when it is shipped are installed for revenue recognition.

We have seen significant variability in these timelines with various hospital projects delayed long beyond what our customers originally expected.

Those hospital construction delays introduced risks that a sufficient portion of backlog may not be recognized this year and instead next year, introducing caution to that guidance.

As all of the orders in our backlog will be delivered eventually any such delays would generate revenue growth in the coming year.

The significant timelines associated with capital purchases and hospital construction reinforced the importance of our strategy to make robotics broadly accessible by bypassing logistics and construction complexities.

I mentioned earlier based on our current progress we expect commercial availability of our mobile robot by the middle of next year.

On the topic of financial stability, we are obviously cognizant of evolving macro concerns and the potential for extended periods of economic and capital market pressure.

Our commitment to managing stereo taxes in a financially prudent and disciplined fashion serves us well in that environment.

Recent inflationary pressures have started to impact various costs for supplies services and transportation. We are working to mitigate cost increases and overall remain confident in our financial position and ability to manage the business with a modest controlled burn as we invest for growth.

While we had higher than normal cash utilization in the first half of this year much of this was due to increased spending on inventory and one time costs to establish our new headquarter.

We expect continued investment in inventory in the back half of the year, but expect to end the year with approximately $32 million in cash and no debt.

Our normalized operating business as having approximately a $1 million cash burn rate per quarter.

Financial Prudence combined with our strong balance sheet leaves us in a comfortable position to continue advancing our strategy in a self sufficient fashion without the need for additional financings.

I recognize the poor optics of our financial results, but view this alongside our confidence that our fundamental progress is significant and position is strong with continued demand for our technology. We are advancing a transformative innovation pipeline with multiple impactful launches in 2023 and beyond we are.

Assembling an all star commercial team and we are able to do this while maintaining financial stability and strength.

14, now taking your questions. Operator can you. Please open the line for Q&A.

Yeah.

So suddenly.

Ladies and gentlemen, if you would like to ask a question. Please signal by pressing star one on your telephone keypad.

You find that your question husbands religion.

Religion lose yourself from the queue by pressing star two.

Once again, Chris thought I wanted to ask a question.

And Susan I'll take our first question.

Josh Jennings with Cowen. Please go ahead.

Hi, good morning.

Thanks for taking the questions David.

It was great to see some new system orders come in this quarter and our checks suggest that the demand for robotic may make navigation is building I was just wondering if you could just help us think about.

The sales funnel go through replacement channels Greenfield channel.

As we sit here today and Oh relative.

Relative to earlier in the year.

Hi, Josh good morning, and so we've continued to make progress on that.

The infrastructure for managing our sales pipeline I think on the last call, we talked a little bit more about that new infrastructure that was being built and that has been a.

Fairly kind of fully operationalize now in the United States and in the process of being operationalized outside the United States overall, the sales funnel looks relatively good.

Think there's dramatic differences from the type of commentary we gave at the beginning of the year, where we said we had a.

A few dozen a couple dozen.

More than a couple dozen systems in that pipeline, but we have more and better quality of information now that we have that improved capital sales pipeline infrastructure and then overall, we still see a good range of both replacement cycle in Greenfield systems.

In that pipeline globally, and and and we've been grinding away at them I think like you say the the.

Pace of orders that we've had Ah is consistent with our with overall our guidance that would drive growth this year and that would drive growth in future years, but.

Hopefully we can also increase that pace at some point.

Thank you and then just thinking about the.

The order Soc Tam.

<unk> two.

The build out of the second robotics lab at one of your.

Customers Center.

Our sense is that center is within a big Hospital network and I know, we've talked about this before a little bit on the last earnings call as well, but just remind.

Remind us of how you're positioned and you sell your commercial team is attacking ibms.

And any other details you can share about the decision by this.

This E T lab to build out a second robotics lab.

Sure. So so you are correct that it was a good guess, but it is.

Hospitals that has a good historical experience with our system is part of a large IDM across the U S and and decided based off of that experience to buy.

Second robot.

Overall, I'd say that.

Obviously, the reason why they adopted a second system is because they have experience with both the clinical value of our technology and with the economic value for the hospital of our technology and in allowing them to treat patients that otherwise they wouldn't be able to treat and in driving efficiencies.

Across the system.

It was a very nice earlier this year visiting the hospital and the head of the cardiovascular service line was talking so highly about how when they review all their data how our system is made.

Complex ablation is far more efficient and.

And reduce the variability and timelines for those procedures and so that kind of was really a for vote of confidence not just from the clinicians, but also from the administrators there and from an <unk> perspective, we do think that we have sufficient and XP.

Experience in the field again, both from a clinical data perspective, and from a and economic value from a hospital perspective.

Have meaningful conversations with larger IDM.

With the goal of having a relationship that spreads robotics more broadly across an idea and it proves that there is value and not just when the biases adopted from a bottom up perspective, but also from a top down perspective, and those discussions are obviously, a larger strategic to style discussion.

So it's always difficult to know when or how those will evolve, but we definitely have those discussions and that and think that at some point that makes a lot of sense for an IDM center into so hopefully at some point will be a tough you more.

Thanks, a lot Dave appreciate it.

Thank you Josh.

And the next question comes from the Marcellus with Piper Sandler. Please go ahead.

Hey, David Hi, Ken Good morning, and thanks for taking the questions.

Maybe just to start one clarification question on the mobile.

Our <unk> system.

I think I heard you expect launch by.

Both U S and O U S.

I wanted to clarify that and then maybe just talk about kind of.

Where are we from a design standpoint, we have design lock.

And just level of confidence in hitting these timelines and then I had a follow up thanks.

Sure Hi, Adam Good morning, and so so you came out a little bit during your question. So I think I understood it fully but but in case I'm wrong. Please correct me so.

We talked about and given where we are right now in the development process.

Feeling confident that we should be able to have a launch by this time next year.

Yeah, I'd say that that would be in one of those two major geography, either Europe or the U S at least and so I would assume that both geographies would be relatively soon after each other so in within a couple of months within a few months of each other but at least one of those we should have a launch.

By mid next year, and and overall from a development perspective again, there's the mechanical aspects of electrical aspects. The control software the user interface software. So theres various parts that have to come together. There has been all sorts of challenges a lot of the past, particularly on the supply chain side on the electric side and also on capital.

Hardware side.

But overall the parts are coming together, we have not yet started.

A V N V and testing of our system.

We've done.

The larger knowledge of the developer.

And overall feel very good where we stand and that will start to bnb testing prior to yearend and.

We'll have we'll be able to submit for regulatory approval and around that time, and and and that that will lead to the timeline. We suggested of of a launch by mid year.

That's very helpful color, David Thank you for that and then maybe.

For the next question just on the the Magic RF ablation catheter.

The message.

The expected timelines for Europe and launch there, but maybe wanted to ask a question on <unk>.

Path forward in the U S marketplace.

You know just when do you think the U S. IDE trial can can get go in.

Anything on trial design that you can share at this point in time and ultimately how do we think about potential.

Potential U S approval for that technology.

Sure so the European submission required.

Huge body of them.

Of testing that kind of bench testing lab related testing.

And required a whole range I mean dozens of animal studies and and did not require a human.

Study it will require a post approval study in the EU.

In the U S. We have all of those same requirements and the vast majority of the of the CE, Mark dossier and will be identical or nearly identical for <unk> for the U S. I E submission and so that's kind of all sat and already we do have though a few add about a dozen.

In additional animal studies that were requested by the F. D. A beyond a few dozen studies that we submitted for the European submission and those animal studies require.

Kind of a follow up period of relatively short, but still a follow up period and so we've been building out a more to run those studies, we've been developing our own animal study capability and and and and that has been really that's the one gating factor.

To being able to complete those studies and and submit the IDE to FDA and so we expect to complete those studies before year end and ER and to be able to submit died he kind.

Kind of immediately upon that we've had multiple discussions with FDA. So far so we have a fairly clear understanding of what the trial design should be and I would expect.

A round let's.

Let's say 150 or so patients study.

In one specific clinical indication one specific type of arrhythmia with a relatively short follow up.

Maximum three months follow up and and so given that it's a very common.

Arrhythmia and given that we have an installed base of users and the catheter would be able to be used either with the niobe orthogenesis system. So we can really benefit from our fully installed base there.

And I think that that's a trial that should enroll very quickly once we gain <unk> approval and we can actually start to study both enrollment and follow up should happen fairly quickly.

Okay, Great that's very helpful color.

If you don't mind, I'm going to try and sneak one more in and.

You know I noticed in the I think it was in the press release.

There was some commentary about it.

The commercial infrastructure and the progress being made there and kind of laying the foundation.

You know historically, you've been very judicious and conservative with spend.

And I also think in the past you've talked about the magic catheter launch kind of been.

An impetus for kind of going more on the offensive then.

I know, we're not quite there yet but.

Just wondering kind of.

What are the plans looking ahead for <unk>.

Commercial infrastructure and building out the team just any additional color you can provide would be.

Much appreciate it thanks again David.

Sure.

So so yeah, I think you're completely right that we are are we.

We take seriously our commitment to running the company in a financially judicious fashion and yeah, I think that kind of that debt.

That discipline does.

Create a lot of value for stereotactic and ensures that we are that we don't waste our shareholder value and capital.

And so when but as now that that product ecosystem starts to come together.

And obviously the catheter, but also the mobile system in a range of technologies that are coming together. It does obviously a warrant focusing more on the commercial team and how to ensure that we have an excellent commercial organization and then and so with that kind of obviously Europe is going to be a particular area of focus.

Given the launch next year are putting in place the right leadership is and is the first step in that.

And and as we start to launch and go through the lunch I would expect a fairly substantial build out of our European commercial team again, I think that given the step up in revenue per procedure that the match catheter provides that will be a fairly and from a financial perspective for the company are fairly low risk.

The build out of the team and as you can do that very much hand in hand with adoption of the magic catheter specific accounts and so you can do a very kind of band.

Laser focused pinpointed hiring and whether theres a high ROI for each hire and then and so I think you'll see us kind of probably over the course of next year.

During a fairly substantial build out perhaps even the doubling of the European team.

Thanks for the color to that.

Thank you.

And our next question comes from Neil Chatterji from B Riley. Please go ahead.

Hi, Thanks for taking the questions.

Hum.

Maybe just circling back just on that does that.

Hospital construction environment, just curious you know where.

About a month over a month into the new quarter I'm, just kind of curious if you've seen any signs of improvement here in July and now August .

And then also if there's any way to potentially.

Characterize any barriers to conversion you would see for the systems that are in backlog.

For example, or some tied to the larger hospital construction projects.

Sure So hi, Neil.

And so overall obviously the commentary we gave today is as of as of today. It's Adam. So so we continue to see delays.

Delays in hospital construction, where even you know.

Couple of the orders that we received late last year.

They are where where we would've expected to be installing systems around now.

It's still unclear, whether we are going to deliver systems in a couple of months a few months or.

Or if it's going to take them longer and so there is kind of back quite a lot of.

Uncertainty and I'm, just kind of delays when it comes to our hospital customers and their own processes and building out labs and getting themselves organized to be ready for us to install and so I'd say kind of it's still is a fairly massive world out there and.

On the side. Your second question you kind of asked about.

Uncertainty with conversion and so I didn't know is that kind of in terms of the timeline of when an order or backlog would be converted into revenue or the end or risk in terms of the overall will convert into revenue.

Clarify that just.

Yeah, I mean, maybe just in relation to the the the.

Construction environment. So just in terms of you know.

Is it alright.

Some of these type of larger construction projects, where that's that's.

Because it's a larger project, that's the way and get even more so.

If it was just the EP lab conversion.

Yeah, it's a it's a mix as there are some where you have full build outs of wings are full field blowouts or a floor or a hospital. So those are kind of part of obviously a much larger projects and other ones might just be that lab, but then oftentimes what you see is that there might be.

Eight labs in a in a cardiovascular.

Kind of a wing of the hospital and the hospital will just go through loud bylaw by lap. So theyre doing lab, one one last one finishes theyre going to do that too went up two finishes, they're gonna do lap III and we might be lab lab or whatever in that in that line and then and so as you have any delays you have kind of been a.

Start to impact like a domino effect the lives after them and so that usually that is a that is a fairly common scenario.

Got it got it.

And then if I can ask another question here. So I'm just curious in terms of switching gears to the <unk>.

So the potential magic launch in Europe , just curious in terms of.

What your expectation is for how quickly states.

Could switch over to using magic.

Alright, including any I guess regional nuances you might see there.

Sure. So there's a there's a.

There's a range, obviously I'd say kind of there will be from a purely logistic and legal ability to launch funds to embark in certain countries will be able to launch that pretty much immediately with that we'll have to have a hospital contract for purchasing the product, but that should happen very very quickly and we can be prime.

To to enter into those agreements and almost immediately upon CE Mark and then so that's kind of very easy from a logistics perspective, while in some countries, particularly the Nordic countries and France lets say and there are tenders either country tenders or regional tenders that you have to enter into so you can usually sell some.

Amount even of a of an approved product outside of the tender at the new under a new technology clauses or other things, but you can't you can't pursue wholesale and adoption wholesales transition of of a site until you go through that tender so that logistic aspect will mean that in surgeon.

Countries that certain accounts.

There will be there will be only partial adoption for the first let's say until you get over those tenders, which can take let's say anywhere between six months to a year after CE mark process, and but again at other hospitals, let's say, particularly in our Netherlands, Belgium, Germany and.

Some of the other countries that you have kind of are you really have no logistics hurdles. Once you have CE, mark and the other kind of real effort.

The effort that will have to overcome it's not like you've got some physicians will be motivated and excited to be the first ones in the world to use it and and we'll be very kind of very much pioneering in that effort and while other hospitals I am sure. Other physicians will will want to see that one of their peers has first done.

10 cases of that originally I E are originally a b.

And kind of been has had good outcomes and we want to be able to speak with a physician and then based off of that we'll be comfortable trying it themselves. So that's just kind of a normal variability physician dynamics I think kind of where we're working hard on our side and as an organization to ensure that there is.

A thoughtful business plan for every one of our 30000 hospital accounts in Europe , what we're thinking about what are the drivers are for adoption.

How do we kind of approach that the individual physicians, how do we approach the hospital at an account and if there are any logistic things how do we know exactly what that application forms and logistic.

Logistic efforts, we have to go through to get into the account and so I think we're going to kind of be ready that that's our role is to be ready. So that as we gain approval, we can move as efficiently as possible and as thoughtfully as possible throughout that process.

Great Thanks for that and I'll jump back in queue.

Thank you.

Okay.

And we will now take the next question from Alex Nowak with Craig Hallum Capital. Please go ahead.

Great. Good morning, everyone. I was hoping that you cited on the construction question around hospitals, but maybe speak to the capex environment at the hospitals what is their willingness to go out there and place orders right now, particularly if they're seeing these delayed construction projects I know some of the peers are seeing a recovery others are not so much. So just to kind of stayed on the capex for the Cath lab.

Yes.

Sure Hi, Alex so.

So overall, obviously, we have been receiving as still orders and at a relatively regular pace and we still see a pipeline of their hospital customers that are interested and so I'd say that you are right that when there are construction delays that does oftentimes lead to.

And delays in us receiving an order, but yeah, but at some point they need to order and then there might be delays even after that beyond what they thought were the delays that they were expecting and so I I mean definitely there have been delays of orders because of the construction.

Construction dynamics at hospitals, but but but in the end of the day and as the world is still running our hospitals are still operating they still need to upgrade labs, they still need to build new labs, and so those delays do impact the order schedules.

But but orders do get done and then and then unfortunately, sometimes they get done and then you still have delays after that and then you're waiting kind of on the sideline to be able to deliver and install but but again, that's really a kind of a matter of timeline not a matter of that of.

And so and so we kind of back we sit here and do our best given that environment.

Yes, understood and then maybe expand on the real World study of Magic in Europe , what is that going to look like how many patients follow up time and is there a specific number of selected or is this just going to be basically.

Yeah.

And so the post market study in Europe will be that will be defined more clearly with in our discussions with the notified body in Europe .

Over the next few months I assume as we get questions and so we proposed kind of a study designed to them overall again I would not view that will that will and that will be kind of across a broader range of arrhythmias.

Probably kind of in the low hundreds of the of that patient's overall, we'll be able to do that across a broad range of our sites in Europe , and so overall kind of we think that will be a good trial for just building in a relatively broad kind of a dot on the on the catheter in Europe .

That is kind of post approval.

There is kind of obviously, a somewhat less pressure on that.

But ah, but obviously it would be important for us to be able to run that trial and to be able to kind of to show that there is a value across a broad range of appropriate to me is that through that trial.

Okay got it and then just lastly, just a clarification what is this system backlog right now I think it was $12 million 1.5, Viper system, roughly I guess its base right.

So it's it's a it's over $12 million of system backlog, it's a little bit and it's a little bit complicated to define it as exactly one system because as you saw let's say in the second quarter, we reported revenue on kind of half of our system. We have both the X ray component the robot component.

There is also sometimes a large screen display component and so we have some hospitals, where there is a mix of those and are kind of in play, but but in total a yeah. It's kind of let's say to me mid high single digit number of systems.

Come up to that as well if that's all dependent.

Some have systems out there, where we have shipped one of the parts, but not the other part and and so it's kind of it's a partial partial shipment.

I see I understand alright, thank you.

We will now take our next question from Frank <unk> with Lake Street Capital markets. Please go ahead.

Hey, David Thanks for taking my questions wanted to ask a little bit more on the mix of replacement versus Greenfield you provided some color around.

The funnel and I think what I heard was dozens maybe just talk to what the mix of that looks like from a replacement versus Greenfield perspective, and then how you expect that to trend.

Trend on a go forward basis.

Sure Hi, Frank So and so overall, it's a good mix between the two and I'd say, a relatively even mix and when we look at the late stage pipeline I think there is more and more.

The replacement cycle that we've talked about in the past.

Is becoming more and more real and you'll see that obviously in the results of the last quarter and I expect it also probably in the results.

And kind of the upcoming quarters, and there's definitely kind of some of those replacement projects are now taking place and and and and so kind of we are seeing some of those now come through with.

I'd say that obviously from a from a fundamental perspective for us as a company.

Driving Greenfield adoption is a is a is as valuable and so we're putting kind of more and more focus there and we still have a range of greenfield hospitals in the pipeline and so on so I think youll kind of youll see a mix, but but but I'd say that at least in the in the very late stage pipeline, it's probably skewed more toward.

The replacement side.

Okay. That's helpful. And then maybe just an update on utilization I know some of the newer sites have been trending above some of the legacy side. So maybe just any color you can provide about utilization in the quarter and how that's been trying to.

Yeah. So if you exclude any dynamic of kind of Asia last quarter overall, the utilization has been I don't have the exact numbers again for the Genesis.

Installs or the new the new Greenfield installs that we just had from the beginning of this year, but overall the utilization has remained a very nice and that kind of above average levels in the second quarter and then so kind of where we're very happy with the way the Greenfield sites and Genesis system are being used and I don't know if fan.

If anyone on the call had an opportunity.

The new launch that we had in Warsaw in the first quarter late in the second quarter they had.

Conference hosted.

Hosted at their hospital at two of the like to I think of four live cases from the Haas from that conference, we're using our technology.

They had a lot of commentary at that conference.

Were they commented how impressed they were with the system, how they were using it across the broad range of arrhythmia, and so overall kind of I'd say that the experience at our existing sites at the new launches at the Genesee site has been overall very nice and and and.

So that's kind of in and outside of that I'd say overall utilization remains kind of relatively stable.

Kind of sometimes pressures like the second quarter in Asia Pacific.

But but overall have a relatively sticky.

Recurring revenue base, and so and so that kind of has been that's been obviously a bright spot in a in a lot of us have kind of an overall stable foundation to the business upon which to build upon.

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

Thanks, Mike.

Okay.

And then I will take the next question from Nathan Weinstein with Aegis capital. Please go ahead.

Hi, David Good morning, and thanks for taking my questions. These questions are about the innovation pillar is basically can.

Can you remind us from your perspective, what you see as the top endovascular adjacencies that could be most attractive for stereo taxes, and then secondly, any update on the China specific product ecosystem and does that remain an attractive opportunity as you see it.

Hi, Nathan Good morning, sure and so let me touch upon both of those so from a endovascular intervention and kind of then.

And adjacency to what we're doing in electrophysiology, that's kind of obviously one of the big pillars of our of our growth and I think our technology. The robotic magnetic navigation the concept of moving endovascular devices from their distal tip and by doing so allowing for precision safety and reach.

Stability that otherwise, it's not possible with Emmanuel catheter I think that's kind of has inherently a lot of advantages across a range of endovascular surgery at our at our kind of bad R&D innovation day that we hosted a lot late last year, we talked about five specific clinical applications.

And where there is kind of challenge and unmet medical need.

We think can be addressed very nicely with robotics, which our technology and so we are kind of building the ecosystem interventional devices guide wires guide catheters that can be used across those clinical applications I think places like neuro intervention.

Where you have particularly complex anatomy, particularly delicate anatomy and there's significant unmet medical need with many patients not getting therapy at all or not getting the therapy that that that would be beneficial to them.

Those that are particularly kind of attractive areas that I think we can we can provide a lot of value in them, but again.

Kind of all five of our clinical areas, where we're trying to have our sights on.

The others outside of neuro intervention being intervention cardiology peripheral.

Arterial disease.

AAA graft and embolization for cancer, and so I think kind of those five are where we currently have our sights on and as we bring out the right tool set to address them I think youll kind of hopefully see a in the first day, a year or so a range of clinical literature addressing a draw.

And kind of multiple different clinical specialties.

And on the China side, obviously, the disruptions and the quarantine to tighten in the second quarter were not that it's very beneficial to our overall progress, but it was very impressive but continue to work with micro 14, even while many of them were Acorn T and advancing the range of of this.

Product ecosystem that we're developing together in China and again the product ecosystem includes obviously, our regulatory approvals for our robots.

E X Ray system.

And not being integration with that with Michael <unk> mapping system, and then a range of ablation.

Potentially diagnostic catheters also in China, and bringing the magic catheter there a development of.

Several micro port catheters, and so theres kind of quite a lot going on in that are in the collaboration and overall kind of we're very very happy and very pleased to see the the way that that collaboration is working well together the way we are developing a range of that.

Advancing arrange the technologies together, there and so I think kind of that is that the right ecosystem coming together.

I said in the prepared remarks should be available in the second half of next year, and probably kind of different different aspects of that ecosystem will come in and be available at different times, but that kind of coming altogether I think kind of as we start to get towards the back half of next year, you'll start to see kind of that coming into play and that's really when you can start to benefit from.

The from the substantial commercial organization.

Michael Port in and really driving driving kind of broader adoption across again.

Fairly large sales team.

Great. Thank you David.

Okay.

Our next question comes from Javier Suarez with Boston Capital. Please go ahead.

Hello.

Thanks for taking my question a quick question on all the fun for capital social with the underlying macro challenges that we've seen so far in 2022 how.

Overall commercial strategy for the four new system installs has changed.

I know the science is still there you know it's still a good system. There is still demand, but you know in the face of all these challenges how is there any has there been any any tweaks or changes to overall strategy.

Yeah.

Hi, Javier.

So no I don't think there is any real change to the overarching strategy at the overarching strategy is then is obviously, we are a technology, which which provides a lot of value and we have a we are still very small market share of less than 1% market share of just the electrophysiology market and I think the clinical value and and Uh huh.

<unk> care system value that we provide.

Is that being a substantially higher market share in electrophysiology and so we're doing the right things on the commercial side.

To gain our fair share of that market and then and then in tandem obviously doing the strategic innovations that allow us to.

Two two to kind of gain adoption much more easily and the current product set up which requires construction as it provides us with our own proprietary disposable, giving us the ability to build sales teams in a different fashion in a much more substantial.

Substantial fashion, and and and building out the technology ecosystem. So that we can be used across multiple clinical applications and not just electrophysiology. So I think that strategy is very sound and we're continuing to advance that.

Okay. Thank you very much no follow up question.

Thank you okay.

And it could have a follow up question from Josh Jennings with Cowen. Please go ahead.

David Thanks for taking the follow up David and Kim sorry.

Wanted to just follow up.

Ask about the cardiovascular indication.

I mean since the.

Innovation day in December .

A number of months I'm sure you've interacted with some neurovascular eventually some neurosurgeons and wanted to just hear from you what type of feedback you've gotten.

Is there any any specifics on a commission.

Commission's views on the clinical value proposition and then your team's internal 'cause optimism level sure. It's increased over the last seven months, but if you could share that that would be great and I think he keeps summer provided part of the answer already in one of the previous question.

Paul.

Sure. So so actually in the second quarter, we hosted our two neurosurgeons from two different hospitals, and who came to St. Louis and were working with us and with our with the devices. We've developed a with a with Phantoms.

We'll have that probably a few more visiting us in the late in the third or fourth quarter early fourth quarter and then so we've kind of had a we've been fortunate to benefit from from kind of.

A fairly passionate group of.

Prestigious neurosurgeons.

Who have been helping us in that development and overall I think that the.

That's the kind of the clinical value of N of being able to navigate tortuous vasculature is a is significant in neuro intervention, whether you look at it.

Uh huh.

Thrombectomy cases kind of aspiration cases risk ischemic stroke or you look at coiling cases for hemorrhagic stroke and there are a large range of patients who do not get therapy at all or who and when the physician is trying to reach at the site that needs therapy.

Could struggle for 2040 60.

<unk> hundred minutes trying to just get through the torturous vasculature, and obviously I'm stroke at time is brain and and and so there's a lot of clinical value to be had if you can if you can improve the efficiency of reaching the target site and you can do so in a safe fashion and so I think that's really what what motivates host physicians is that they see that.

With our tools they can.

Get places that otherwise they wouldn't be able to get what they can get to places much more efficiently much more quickly and without using a whole range of tools and and and so that is then that is kind of really where the value proposition is and and I think kind of as we as we get those tools to market that will allow us to start to obviously prove it in the clinical <unk>.

Sure.

I appreciate it.

Thank you.

And we have no final questions for today's call. So I would like to turn the call back to David Fisher for any additional or closing remarks.

Okay. Thank you very much everyone for your questions and for your continued support we look forward to working hard on your behalf in the coming months and speaking again next quarter. Thank you very much.

This concludes today's call. Thank you for your participation you may now disconnect.

Yes.

[music].