ST. LOUIS, Nov. 7, 2011 /PRNewswire/ -- Stereotaxis, Inc. (NASDAQ: STXS) today reported financial results for the third quarter ended September 30, 2011.
Third Quarter 2011 Financial Results
Revenue for the third quarter was $8.5 million, down 38% from the year ago period. The decrease was primarily due to softness in Niobe® robotic system sales, resulting from market demand for a more efficient solution for complex ablation procedures and the ongoing platform transition from Niobe II to the Company’s new Epoch platform. The Company recognized revenue on one Niobe system and $1.0 million in Odyssey systems in the third quarter. Recurring revenue in the quarter was $6.5 million, a 14% increase from the year-ago quarter. This growth was attributable to the larger installed base of Niobe systems and increased utilization leading to greater disposable sales and service contracts over last year, as well as favorable pricing.
The Company generated global new capital orders of $2.2 million in the third quarter, which were comprised of four upgrades to the Epoch platform from Niobe II, two Vdrive robotic navigation systems, and $1.6 million in orders related to Odyssey.
“Our top-line performance and system orders in the quarter, as we expected, were impacted by market demand for a more efficient solution for complex ablation procedures and the ongoing platform transition from Niobe II to Epoch,” said Michael P. Kaminski, President and Chief Executive Officer of Stereotaxis. “These factors contributed to softness in Niobe II revenue and the related impact on Odyssey installations in Niobe labs. Meanwhile, we continue to build market momentum and interest in the Epoch platform ahead of its planned launch in December. We remain encouraged by the early, positive market feedback, which indicates that Epoch’s much improved efficiency and technological enhancements could regenerate market demand for magnetic robotics in electrophysiology procedures. We are focused on driving rapid market adoption of the Epoch platform, and reaffirm our plan for initial shipments to customers before the end of this year.”
Kaminski continued, “We are taking actions that we believe will provide us with the necessary financial resources to capitalize on our growth opportunities. Our operating expense reduction continues, and we expect to see the initial impact beginning in the fourth quarter 2011, with full realization of a 15% to 20% reduction in annualized year-to-date September 30, 2011 operating expenses by the beginning of 2012. In addition, we anticipate completing a non-equity capital raise by November 30, 2011, which would satisfy our obligation under the Fourth Loan Modification Agreement with Silicon Valley Bank.”
Gross margin was $5.9 million, or 68.9% of net revenue, including a $0.5 million charge related to the absorption of overhead costs based on normal production levels. Before the charge, gross margin in the quarter was 74.3% compared to $10.0 million, or 72.2% of net revenue in the year ago quarter. The improvement in gross margin as a percent of net revenue prior to this charge was due to a higher mix of recurring revenue in the 2011 third quarter.
Operating expenses were $14.9 million in the third quarter, an increase of 10% compared to the $13.6 million in the year ago period. The increase was primarily due to higher research and development expenditures related to the Niobe Epoch and Odyssey upgrades, increased spending on registrations in Japan and foreign currency exchange losses as the U.S. dollar strengthened against the Euro.
The net loss for the third quarter was $(7.3) million, or $(0.13) per share, compared to a net loss of $(5.1) million, or $(0.10) per share, reported for the third quarter 2010. The weighted average shares outstanding for the third quarter of 2011 totaled 54.9 million, compared with 50.1 million in the third quarter of 2010. The increase in shares outstanding was due in large part to the issuance of 4.6 million shares as part of the stock offering completed in November 2010.
At September 30, 2011, Stereotaxis had cash and cash equivalents of $17.0 million, compared to $23.3 million on June 30, 2011. Total debt was $29.0 million, including $16.9 million drawn against the Company’s $20 million line of credit. Cash burn for the third quarter 2011 was $6.4 million.
Rebalancing Operating Expenses Around the Epoch and Odyssey Platforms
In order to ensure the successful commercialization of the Epoch and Odyssey platforms, as well as conserve resources, Stereotaxis began implementing a wide ranging plan in the 2011 third quarter that includes rebalancing and reducing operating expenses to minimize the Company’s cash burn, while continuing to fund R&D investment in key growth areas. As of September 30, 2011, the Company has completed the majority of the operating expense reductions through headcount and discretionary spending cuts and continues to implement processes and changes to further reduce operating costs. The Company anticipates that this will result in an operating expense reduction of 15% to 20% on a year-to-date September 30th annual run rate basis.
Non-Equity Capital Raise
On October 11, 2011, Company entered into a non-binding term sheet with an institutional investor to raise non-equity capital. The Company expects the capital raise to be completed by November 30, 2011, satisfying the Company’s obligation under the Fourth Loan Modification Agreement with Silicon Valley Bank. The Company and the institutional investor are working diligently and in good faith to close the transaction, subject to customary closing conditions including the negotiation and execution of mutually acceptable, definitive transaction documentation.
Year-to-Date Financial Performance
Revenue for the first nine months of 2011 was $30.4 million, compared to $39.5 million in the first nine months of 2010. Gross margin was $21.2 million, or 69.8% of revenue, compared with $27.8 million, or 70.4% of revenue in the first nine months of the prior year. Operating expenses were $48.6 million for the first nine months of 2011 compared with $43.3 million in the same period of 2010. The net loss was $(26.5) million for the first nine months of 2011 compared with $(17.4) million for the comparable period of 2010. Cash burn for the first nine months of 2011, including payments against the Biosense Webster advance, was $23.4 million compared with $16.0 million in the first nine months of 2010. Stereotaxis has historically included the repayment of the Biosense advance as part of cash burn as operationally the advance is reduced by the earning of royalties. Of the $23.4 million in year-to-date cash burn, $4.8 million is repayment of Biosense debt.
Conference Call and Webcast
Stereotaxis will host a conference call and webcast today, November 7, 2011 at 4:30 p.m. Eastern Time, to discuss third quarter results and operational progress. The dial-in number for the conference call is 1-800-762-8779 for domestic participants and 1-480-629-9771 for international participants. Participants are asked to call the above numbers 5-10 minutes prior to the starting time. A real-time listen-only webcast of the conference call will be accessible at www.stereotaxis.com, in the “Investor Relations” section under “Event Calendar.” Listeners should go to the website at least 15 minutes prior to the live conference call to install any necessary audio software.
An audio replay of the call will be available for seven days following the call, and can be accessed by dialing 1-800-406-7325 for domestic callers and 303-590-3030 for international callers, both using passcode 4484029#. The call will also be available on the Internet live and for 90 days thereafter at www.stereotaxis.com.
About Stereotaxis www.stereotaxis.com www.odysseyexperience.com
Stereotaxis designs, manufactures and markets an advanced cardiology instrument control system for use in a hospital’s interventional surgical suite to enhance the treatment of coronary artery disease and arrhythmias. The Niobe® Remote Magnetic Navigation System is designed to enable physicians to complete more complex interventional procedures by providing image guided delivery of catheters and guidewires through the blood vessels and chambers of the heart to treatment sites. This is achieved using computer-controlled, externally applied magnetic fields that govern the motion of the working tip of the catheter or guidewire, resulting in improved navigation and reduced x-ray exposure.
Stereotaxis’ Odyssey portfolio of products provides an innovative enterprise solution for integrating, recording and networking interventional lab information within hospitals and around the world. Odyssey Vision integrates data for magnetic and standard interventional labs, enhancing the physician workflow through a consolidated display of multiple systems and eliminating the challenge of interacting simultaneously with many separate diagnostic systems. The Odyssey Cinema Studio then captures a complete record of synchronized procedure data that can be viewed live or from a comprehensive archive of cases performed. Odyssey solution then enables hospitals to efficiently share live and recorded clinical data anywhere around the world to maximize referrals and promote collaboration.
The core components of the Stereotaxis systems have received regulatory clearance in the U.S., Europe, Canada and elsewhere. For more information, please visit www.stereotaxis.com and www.odysseyexperience.com.
