Stereotaxis, Inc. — Q2 2022 Form 10-Q Summary
Business context and reporting period
Stereotaxis develops and markets robotic magnetic navigation systems, instruments, disposables, and information systems for minimally invasive endovascular procedures, primarily cardiac electrophysiology. The filing covers the unaudited three and six months ended June 30, 2022, filed August 11, 2022.
Key financial metrics
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $6.2 million | $9.1 million | $13.2 million | $17.7 million |
| Gross profit | $4.7 million | $6.5 million | $9.6 million | $12.5 million |
| Gross margin | 76% | 72% | 73% | 71% |
| Operating loss | $5.2 million | $3.4 million | $9.3 million | $4.9 million |
| Net loss | $5.1 million | $1.2 million | $9.2 million | $2.7 million |
| Net loss attributable to common stockholders | $5.5 million | $1.5 million | $9.9 million | $3.4 million |
| Loss per share | $0.07 | $0.02 | $0.13 | $0.05 |
| Cash used in operating activities | Not separately provided | Not separately provided | $3.3 million | $0.3 million |
Revenue consisted of $0.6 million from systems and $5.6 million from disposables, service, and accessories in Q2. For the six-month period, systems revenue was $2.2 million and disposables, service, and accessories revenue was $11.0 million. No sublease revenue was recorded in 2022.
At June 30, 2022, cash and cash equivalents were $33.5 million and total cash, cash equivalents, and restricted cash were $35.1 million. Working capital was $33.0 million, compared with $38.1 million at December 31, 2021. The Company reported no debt. Operating lease liabilities totaled $6.0 million, with future minimum operating lease payments of $9.0 million.
Total assets were $56.7 million and total liabilities were $21.2 million at June 30, 2022. Inventories increased to $7.8 million from $4.4 million at year-end 2021, reflecting actions to increase inventory amid supply-chain constraints.
Material changes versus the prior comparable period
- Q2 revenue declined 32%, primarily because system revenue fell from $2.7 million to $0.6 million; disposables, service, and accessories revenue declined approximately 9%.
- Six-month revenue declined approximately 25%, with systems revenue down approximately 58% and recurring/disposable-related revenue down approximately 8%.
- Gross margin improved to 76% in Q2 and 73% for the six months, primarily because of product mix, despite lower gross profit dollars.
- Operating expenses were $9.8 million in Q2, broadly comparable with $9.9 million in the prior year. For the six months, operating expenses increased 8% to $18.9 million.
- The six-month operating loss nearly doubled, driven by lower revenue and higher research and development, sales and marketing, and general and administrative costs.
- Share-based compensation increased to $5.2 million for the six months from $4.2 million, including $3.5 million related to the CEO Performance Award.
- Cash used in operating activities increased to $3.3 million from $0.3 million, while investing cash use increased to $1.8 million because of equipment and construction costs for the new facility.
- Prior-year results included a $2.2 million gain from forgiveness of the Paycheck Protection Program loan; no comparable gain was recorded in 2022.
Guidance, outlook, commentary, risks, and unusual items
The filing does not provide specific quantitative revenue, earnings, or cash-flow guidance. Management expects procedure volumes, service activity, and system placements to experience continuing periodic disruption during 2022 and expects capital system orders to remain subject to delays.
Management reported that first-half 2022 procedure volumes declined approximately 13% from the prior-year period, with notable declines in Asia Pacific and North America. COVID-19 resurgences, hospital staffing shortages, supply-chain disruptions, logistics delays, inflation, and delayed hospital construction projects continued to affect demand and installations.
The Company stated that manufacturing and supply-chain impacts were manageable as of the filing date, but warned that further interruptions could limit its ability to manufacture or ship products and could materially affect results and liquidity. Hospital financing constraints may lengthen sales cycles, delay capital projects, reduce procedures, and increase customer payment risk.
Strategic relationships supporting compatibility with imaging, catheter-location, and disposable-device technologies are important to commercialization. The Company cannot assure that these relationships will continue or that equivalent alternatives will be available on competitive terms.
The Company entered a ten-year lease for approximately 43,100 square feet of office and manufacturing space. As of June 30, 2022, none of the CEO Performance Award’s market-capitalization milestones had been achieved, although related non-cash compensation expense continued to be recognized. Management stated that pending legal matters were not expected to have a material effect, and disclosed no subsequent events.
Important facts for investors to verify
- Whether system placements and system revenue recover after the substantial first-half decline.
- Whether procedure volumes improve from the reported 13% year-over-year decline.
- The pace of cash consumption and the adequacy of the $35.1 million cash and restricted-cash balance relative to continuing operating losses.
- Inventory utilization, supply-chain availability, inflationary cost pressure, and potential obsolescence reserves.
- The effect of the new facility lease and related capital expenditures on future liquidity.
- The ongoing dilution and expense implications of Series A and Series B convertible preferred stock, options, restricted stock units, and the CEO Performance Award.
- Whether recurring revenue, deferred revenue, and the approximately $14.2 million of remaining system-contract performance obligations convert into recognized revenue as expected.