Stereotaxis(US:STXS)2022-11-10 21:12Financial Data and Key Metrics Changes - Revenue for Q3 2022 totaled $7.7 million, with recurring revenue consistent at $5.3 million compared to the prior year, while system revenue decreased to $2.4 million from $3.5 million due to hospital construction delays [26][27] - Gross margin for the quarter was 60%, with system gross margin at 16% and recurring revenue gross margin at 80, impacted by low production volume and significant fixed overhead expenses [27] - Operating loss and net loss for Q3 2022 were $5.1 million and $4.9 million, respectively, compared to $4.6 million for both in the previous year [29] - Negative free cash flow for the quarter was $2.7 million, significantly impacted by one-time expenses for a new headquarters and manufacturing facility, as well as an investment in inventory [30] Business Line Data and Key Metrics Changes - The company received 2 system orders during Q3, including a Genesis system in the U.S. and a Niobe system in China, with a strong start to Q4 with 2 signed purchase contracts [4][5] - The capital backlog expanded to over $13 million, or over $16 million including recent signed contracts, indicating a healthy pipeline of prospects across focused geographies [6][34] Market Data and Key Metrics Changes - Hospital construction timelines remain slow, impacting revenue recognition, but orders in the backlog are guaranteed with significant nonrefundable down payments [7][60] - The company noted that approximately half of its procedure volume comes from Europe and Asia, with a 15% year-over-year foreign exchange impact on revenue due to a strengthening U.S. dollar [66] Company Strategy and Development Direction - The company is focused on generating growth in orders and ensuring successful experiences with existing robotic practices, which is expected to positively reflect in financial statements [8][9] - The strategic innovation plan includes the development of the MAGiC catheter, mobile robot, and collaborations with MicroPort, aiming to transform endovascular surgery with robotics [13][20] - The company plans to offer multiple financial access options for the mobile robot, including purchase, lease, or disposable purchase commitments, to facilitate adoption [72] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in predicting system revenue and decided to avoid specific revenue guidance until forecasting abilities improve [32] - The existing system backlog and capital pipeline are expected to support year-over-year revenue growth in the coming quarters, with new technology launches anticipated to drive substantial growth [33][34] - The macro environment remains challenging, with hospitals facing financial and staffing pressures, but the company is pleased with order activity and pipeline shaping up positively [81][82] Other Important Information - The MAGiC Ablation catheter's CE Mark submission was made in July, and the technical review is currently underway, with expectations for U.S. FDA approval approximately two years after submission [14][16] - The collaboration with MicroPort in China is progressing well, with regulatory submissions and commercial preparations advancing in tandem [18][21] Q&A Session All Questions and Answers Question: Can you provide color around backlog and revenue recognition? - The backlog was over $13 million at the end of the quarter, and it is expected to convert to revenue within a year, although some orders may take longer [39][40] Question: What is the status of the MAGiC RF catheter CE Mark approval? - The completeness check was successful, and the technical review is ongoing, with confidence in the quality of the submission [44][45] Question: How is the sales funnel shaping up? - There are over a dozen opportunities in the U.S. and Europe, with a growing number in China, as the company tracks the sales funnel more systematically [52][53] Question: What is happening with construction timeline variability? - The delays are primarily due to staffing issues and engagement with external contractors, rather than budget approval [60][61] Question: What is the status of the mobile robot system? - The initial launch is still on track for next summer, with submissions expected in the first half of next year [67][68] Question: How is the company preparing the commercial organization for the mobile robot? - The focus is on building a robust capital sales capability in Europe, with plans to offer multiple financial access options for customers [78][72] Question: What is the current state of the market in China? - The company is seeing positive developments with MicroPort, and while the sales funnel has been driven by Stereotaxis, MicroPort is beginning to build its sales capability [89][95]