Stereotaxis, Inc. — Form 10-Q Summary
Reporting period: Quarterly and six-month periods ended June 30, 2023; filed August 11, 2023. Stereotaxis develops and sells robotic magnetic navigation systems, interventional devices, imaging systems, software, and related services, primarily for electrophysiology and cardiac ablation procedures.
Financial Performance and Position
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Total revenue | $7.9 million | $6.2 million | $14.4 million | $13.2 million |
| Systems revenue | $3.3 million | $0.6 million | $5.1 million | $2.2 million |
| Disposables, service and accessories | $4.5 million | $5.6 million | $9.3 million | $11.0 million |
| Gross margin | 53% | 76% | 56% | 73% |
| Operating loss | $(5.3) million | $(5.2) million | $(10.9) million | $(9.3) million |
| Net loss | $(5.0) million | $(5.1) million | $(10.3) million | $(9.2) million |
| Net loss attributable to common stockholders | $(5.3) million | $(5.5) million | $(11.0) million | $(9.9) million |
| Basic and diluted loss per share | $(0.07) | $(0.07) | $(0.14) | $(0.13) |
- Operating expenses were $9.5 million in Q2 and $19.0 million for the six-month period. Six-month research and development expense was $5.4 million, sales and marketing expense was $6.5 million, and general and administrative expense was $7.1 million.
- Net interest income increased to $0.3 million in Q2 and $0.6 million for six months, primarily from higher interest rates and invested balances.
- Cash and cash equivalents were $22.9 million at June 30, 2023; total cash, cash equivalents, and restricted cash were $23.9 million. Working capital was $24.5 million versus $29.0 million at December 31, 2022.
- Operating cash use was $5.7 million for the first six months, compared with $3.3 million in the prior-year period. Investing cash flow was $19.8 million, primarily from maturity of short-term investments. Financing cash flow was $0.03 million.
- The Company reported no debt. Operating lease liabilities totaled approximately $5.7 million, with future minimum lease payments of $8.2 million before interest.
- Deferred revenue was $9.9 million, including $8.2 million current and $1.6 million long term. Remaining performance obligations under system contracts were approximately $15.8 million at June 30, 2023.
Material Changes Versus Prior Comparable Period
- Second-quarter revenue increased 28%, and six-month revenue increased approximately 9%, driven by higher system sales volumes.
- Disposables, service and accessories revenue declined approximately 18% in Q2 and 15% for six months. The decline reflected lower prior-period royalties from Biosense Webster and partner catheter supply shortages, as well as procedure-volume challenges.
- Gross margin declined substantially because of product mix, as systems carry lower margins than recurring disposables and services. Six-month systems gross margin was approximately $0.7 million versus $0.4 million in the prior year.
- Six-month operating loss increased by approximately $1.6 million, despite higher revenue, while net loss increased by approximately $1.1 million.
- All 5.6 million outstanding Series B preferred shares were converted into common stock in April 2023. Common shares issued increased to 80.7 million at June 30, 2023, from 74.9 million at December 31, 2022.
- The Company adopted the current expected credit loss standard in 2023; management reported no material impact.
Guidance, Outlook, Risks and Unusual Items
The filing does not provide formal revenue, earnings, or cash-flow guidance. Management continues to pursue expansion of robotic magnetic navigation into coronary, neurovascular, and peripheral interventions and is pursuing regulatory approvals for the MAGiC catheter. Approval timing and outcome remain uncertain.
- Supply-chain disruptions, component shortages, inflation, logistics delays, hospital staffing constraints, and customer construction delays could adversely affect manufacturing, system installations, procedure volumes, and recurring revenue.
- Hospital customers may delay or cancel capital purchases, lengthening already variable sales and installation cycles. Catheter shortages at customers and strategic partners may reduce disposable procedures and revenue.
- Existing strategic relationships are important to product compatibility and commercialization; the Company cannot assure their continuation or the availability of equivalent alternatives on acceptable terms.
- The Company maintains cash at financial institutions in excess of FDIC insurance limits. It reported that less than 6% of total cash, cash equivalents, and marketable securities was held at Silicon Valley Bank and that it does not believe the bank’s receivership created a loss exposure.
- Series A preferred stock remains outstanding in the mezzanine section, carries a 6% cumulative dividend, and is convertible into approximately 48.4 million common shares. The Series A shares may also create redemption obligations upon specified change-of-control or other events.
- Stock-based compensation was $5.3 million for the first six months, including $3.5 million related to the CEO performance award. No performance milestones had been achieved as of June 30, 2023.
- Management reported no material legal proceedings, no subsequent events, effective disclosure controls, and no material changes to internal control over financial reporting.
Investor Verification Items
- Verify the sustainability and profitability of increased system sales given the sharp decline in gross margin and continuing operating cash burn.
- Assess whether recurring disposable, service, accessory, and royalty revenue can recover from partner supply constraints and lower royalty contributions.
- Review cash runway using the $5.7 million six-month operating cash outflow and the Company’s continuing losses, despite $23.9 million of total cash and restricted cash.
- Evaluate potential dilution from approximately 48.4 million Series A conversion shares, 3.8 million options and stock appreciation rights, 1.4 million unvested restricted stock units, and the CEO performance award.
- Monitor regulatory milestones for the MAGiC catheter and international registrations for the Genesis RMN System.
- Review customer deposits, deferred revenue, the $15.8 million of remaining system-contract obligations, and the timing and conditions for recognizing that revenue.