Stereotaxis(STXS) - 2020 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q1 2020 totaled $5.8 million, with recurring revenue of $5.5 million, representing an 18% decline from $6.7 million in the same quarter last year due to lower procedure volumes and delayed service activities following the COVID-19 outbreak [32] - Gross margin for Q1 was approximately 83%, while operating expenses decreased by 11% to $6.9 million from $7.7 million in the prior year quarter, primarily due to timing of R&D projects and pandemic-related reductions in sales and marketing activities [33] - Operating loss and net loss for Q1 were $2.1 million and $2 million respectively, with negative free cash flow of $2.2 million compared to $1.8 million for Q1 2019 [34] Business Line Data and Key Metrics Changes - Approximately half of Stereotaxis' recurring revenue comes from disposables used in procedures, with a significant decline in recurring revenue observed in Q1 due to decreased procedure volumes across geographies [10][32] - Service revenue, which comprises just over half of recurring revenue, is primarily driven by multiyear non-cancelable contracts and is viewed as a source of stability for the company [13] Market Data and Key Metrics Changes - Procedure volumes in North America and Europe saw a sudden decline of approximately 70% below normal levels starting in the second week of March, with many hospitals halting procedures entirely [9] - In Asia, procedure volume was down over 50% compared to the prior year, but this decline was isolated to China, which had a modest impact on overall global business [8] Company Strategy and Development Direction - The company announced FDA clearance of its novel Genesis robotic system and projected significant revenue growth driven by its adoption, although the pandemic has disrupted progress on several expected purchase orders [14][16] - Stereotaxis is focusing on maintaining financial stability and supporting the patients and physicians that rely on its technology while continuing to advance strategic innovations [17][28] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the duration and slope of the recovery in procedure activity, indicating that reduced activity is expected to persist for several months [10] - The company has suspended its guidance for robust double-digit revenue growth for the year due to the uncertain duration and scope of the pandemic [36] Other Important Information - The company received a $2.2 million forgivable loan through the Paycheck Protection Program, which has helped avoid additional expense reductions [30] - Stereotaxis has adapted to the new environment by launching telerobotic test drives, allowing physicians to remotely experience the Genesis system [24] Q&A Session Summary Question: Details on Genesis purchase orders - Management indicated that no projects have been canceled, but hospital administrators have shifted focus to COVID-related activities, causing delays in contract negotiations [40][42] Question: Insights on ramping up cardiac ablation procedures - There is variability in responses from hospitals regarding the ramp-up of procedures, with some expressing a desire to return to normal operations while others remain cautious [44][46] Question: R&D efforts and pipeline projects - Management highlighted ongoing innovation efforts, including the next-generation magnetic ablation catheter and advancements in telemedicine capabilities [49][55] Question: Impact of disposables versus service activities on revenue - Approximately 70% of the revenue decline was attributed to reduced disposable sales, while 30% was due to delays in specific service projects [65] Question: Variable expenses that can be reduced - Management emphasized the importance of maintaining financial stability while exploring ways to reduce expenses without harming the company's capabilities [66][70] Question: Robotic EP fellows program and potential customers - The fellowship program has been successful, with over 40 fellows from more than 20 hospitals, and management views them as strategic investments for future growth [97][100]