Stereotaxis, Inc.
Q1 2018 Earnings Call Transcript

Published: 14 May 2018

[Operator:]

Good morning. Thank you for joining us for the Stereotaxis’ First Quarter 2018 Earnings Conference Call. Certain statements during this conference call and question-and-answer period following 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's future to be materially different from the statements that the company’s executives may make today. These risks are described in detail in our public filings with the Securities and Exchange Commission, including our latest periodic report on Form 10-K or 10-Q. We assume no duty to update these statements. At this time, all participants have been placed in a listen-only mode. The floor will be 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 Fischel, Chairman and CEO of Stereotaxis. Please go ahead.

[David Fischel:]

Thank you, operator. Good morning, everyone. I’m joined today by Marty Stammer, our Chief Financial Officer. Our last call in March was an annual earnings call and so I used the occasion to provide a broader overview on Stereotaxis, our technology clinical value, vision and goals. We will make this quarterly call more brief. I'll discuss our commercial innovation and clinical efforts. Marty will then review our financial results. Following our prepared remarks, we look forward to fielding your questions. After a period of discovery and delineation of strategic paths forward, we are deep in execution mode at Stereotaxis, and I'm pleased with our progress. Our overarching commercial goal is to ensure that our physician customers have successful growing robotic ablation practices. Successful robotic practices that attract patients capture market share in their region and showcase the clinical and commercial benefits of adopting robotics, creates an environment for significant adoption of our technology. We have a well-defined multipronged strategy here categorized into six fields

[Martin Stammer:]

Thanks, David, and good morning, everyone. Revenue for the first quarter of 2018 was $7 million consistent with the prior year first quarter. Recurring revenue was $7 million in the first quarter, up 3% from $6.8 million in the prior year quarter. System revenue in the first quarter was $20,000, down from $200,000 in the prior year quarter. Gross margin in the quarter was $5.7 million or 82% of revenue consistent with the first quarter of 2017. Operating expenses in the first quarter were $6.8 million, down 10% from $7.6 million in the prior year quarter. The reduction in operating expenses reflects a significant decrease in general and administrative expense, increased investment in research and development, and stable sales and marketing expense. Operating loss in the first quarter was $1.1 million compared to $1.9 million in the prior year first quarter. Net income in the first quarter was $1.4 million compared to $1.2 million in the first quarter of 2017. Excluding mark-to-market warrant revaluation, the company would have reported a net loss of $1.2 million for the 2018 first quarter compared to a net loss of $2 million for the 2017 first quarter. Cash burn for the first quarter was $2 million compared to $2.7 million in the year-ago first quarter and $800,000 in the preceding fourth quarter. Cash burn in the first quarter was impacted by the timing of cash collections as demonstrated by the significant increase in accounts receivable, which is expected to reverse in the second quarter. At March 31, 2018, Stereotaxis had cash and cash equivalents of $11.6 million. No debt and $4.5 million in unused borrowing capacity on its revolving credit facility for total liquidity of $16.1 million. I will now hand the call back to David.

[David Fischel:]

Thank you, Marty. As detailed in our press release, we expect to show continued year-over-year growth in recurring revenue in the coming quarters. For the full-year 2018, expect a recurring revenue of approximately $28 million, represent the highest annual level of recurring revenue the company has achieved in its history. The increase in accounts receivable which negatively impacted cash flow in the first quarter is expected to reverse this quarter, and we expect to end the quarter with an increased level of cash when we started the quarter. Overall, operating expenses are expected to moderately increase in 2018 compared to 2017, primarily driven by R&D spending and strategic innovation initiative. Stereotaxis's balance sheet will allow the company to deliver on its commercial and innovation initiatives over the coming years and reach profitability without the need for additional financing. That concludes our prepared remarks. Operator, can you please open the line to questions.

[Operator:]

[Operator Instructions] And we will hear first from John Morganelli, with -- who is a Private Investor.

[John Morganelli:]

Good morning. I just want to first of all thank you for the report. And I think that the company is doing -- is going in the right direction. I just had a question about, is there any effort to get this news about the company out to attract potential investors. Obviously, we would like to see more people invest in the company and the stock price is always a concern, but the news seems to be moving in the right direction since David took over and I was just wondering if there's any strategies about that at all?

[David Fischel:]

Hi, John. Good morning. Thanks for the question. I also share perhaps the frustration in your voice that while there's good news that often comes out that doesn’t necessarily reflect itself in the stock price.

[John Morganelli:]

Using when the good news [indiscernible] stock goes down for some reason, I don’t know why but it does.

[David Fischel:]

I -- all I know is that fundamentally we’ve to focus on improving the company and as we do more and more things that make it obvious to the outside world that we will have a growing and flourishing company, I expect that at some point the markets will appreciate that. In interim, we've tried to have obviously open Q&A on our calls, and we’re trying to be more responsive to the investment community. I will be speaking at the LD Micro Conference in about a month from now. And so we are trying to engage with the community, obviously giving our status not on NASDAQ and being kind of a low stock price and generally low liquidity, it doesn't lend itself to kind of robust investor participation. But, again, I think kind of our primary focus has to be on doing the right things fundamentally for the business. Markets can remain irrational for a period of time, but over time fundamentals and valuation do come together. And in the interim obviously we're open to engaging more with investors, and so we will try -- we will try to do that as available.

[John Morganelli:]

Thank you.

[David Fischel:]

Thanks, John.

[Operator:]

[Operator Instructions] We will now hear from Joe Hurley with Chi Rho Financial.

[Joe Hurley:]

Good morning, David.

[David Fischel:]

Hi. Good morning, Joe.

[Joe Hurley:]

I hope everything is well with you. A question since you’ve mentioned NASDAQ, is there a game plan or what are the requirements to get relisted on NASDAQ at some point?

[David Fischel:]

So the requirements for NASDAQ, the primary hurdle right now would be our stock price. And so in order to have a stock price that will allow listing on NASDAQ, we would either have to have a stock that appreciate meaningfully or as described on the last call, would have to do a reverse stock split. We -- the last call, if you were on it and remember the comments made by several individuals during the Q&A, it was pretty clear the aversion towards a reverse stock split. And I understand that aversion and share it, we’ve no plans or expectations to do a reverse split at this time. And so while I think that relisting on NASDAQ will be fundamentally beneficial for shareholders and for the company, we prefer to have -- and we prefer to have the flexibility to do a reverse split if needed. I share that aversion to the reverse split and there's no plan or expectations to do one at this time. And if we ultimately do decide to pull the trigger, I expect it will be done from a position of strength and concurrent with very positive news. So for now, we are going to wait for the stock to appreciate naturally or we’re going to wait for one of those opportunities to uplift at the same time as very positive news.

[Joe Hurley:]

Got it. Got it. And I was on the call, I just didn’t recall that. And I guess if you’re coming from strength, it really shouldn’t make any difference to shareholders, especially, if you could get you listed on the NASDAQ, right? So I think it's all may …

[David Fischel:]

And that’s why we don’t want to just do it as kind of -- as just kind of random steps along the process. We want it be done kind of in the right setting, if needed.

[Joe Hurley:]

Good. Thank you.

[David Fischel:]

Thank you, Joe.

[Operator:]

[Operator Instructions] And at this time, we have no additional questions in the queue. I will turn the call back to your host for any additional or closing remarks.

[David Fischel:]

Okay. Thank you very much for joining the call and for your continued support and interest in Stereotaxis. We look forward to working hard on your behalf over the coming months and speaking again at our next quarterly call. Take care.

[Operator:]

With that, ladies and gentleman, this will conclude your call for today. We do thank you for your participation, and you may now disconnect.