Stereotaxis, Inc.

Second quarter 2023 earnings conference call. Certain statements during the conference call and question and answer period to follow may relate to future events, expectations, and as such constitute forward-looking statements within the meanings 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 in the 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 on a listen-only mode. The floor will be open 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.

Thank you, Operator, and good morning, everyone.

We are pleased to return to robust double-digit growth in the second quarter with a 28% year-over-year increase in revenues. System revenue for the quarter reflects partial revenue recognition on two Genesis systems, both of which are being installed this summer at hospitals in the U.S. and Europe. During the second quarter, we received orders for two Genesis systems, one from a new Greenfield Hospital in Europe and the second as an upgrade of an AOB system to Genesis in the U.S. The net effect of the orders we received and the revenue recognized led to a slight increase in system backlog, which as of quarter end stands at $16 million. We expect similar or increased levels of system revenue in the upcoming quarters as our backlog is converted into revenue. We also continue to see a healthy pipeline of replacement cycle and Greenfield Hospitals interested in our robotic technology, which is expected to continue to contribute to backlog and provide confidence in sustained year-over-year revenue growth. Genesis system sales remain the primary driver of our growth as we work towards advancing a robust innovation strategy towards commercialization. Our recurring revenue in the quarter was impacted by the loss of royalty payments that we no longer receive from Johnson & Johnson, as well as J&J catheter production shortages, which pressured procedure volumes. Each individually presented a high single-digit headwind to recurring revenue. The J&J catheter production shortages, which pressured procedure volumes throughout the first half of this year, seem to have been resolved in July, and we expect procedures to rebound to more normal levels in the third quarter. On our last call, we hinted at a special announcement we had planned for the Heart Rhythm Society Conference. A highlight of the last quarter, was the announcement at that conference of a global strategic collaboration with Abbott to integrate Abbott's latest InsightX mapping system with Stereotaxis' robots. The integration of our technologies makes the use of Abbott's leading mapping system an attractive option for the community of robotic electrophysiologists who have long desired increased choice in mapping. It enhances the overall physician experience, streamlines procedural workflow, and supports the improved treatment of patients who have complex arrhythmias. From a strategic perspective, this was a major leap forward in our effort to build an open ecosystem where the benefits of robotics can be paired with a broad range of diagnostic and therapeutic technologies. It will also significantly support the launch and more rapid adoption of our proprietary next generation ablation catheter, MAGIC. There was significant excitement at HRS around our integration announcement. We had an opportunity to educate the broader Abbott commercial leadership team on our technology, and Abbott dedicated a space in their booth to showcase our collaboration. Abbott software is currently released in Europe, and last month we celebrated the first integrated end-site robotic procedures at Erasmus Medical Center in the Netherlands and Marine Health St. Elizabeth Hospital in Germany. These sites continue to do integrated procedures, and other sites are moving through the adoption process. We expect integration to be available in the U.S. late this year, as Abbott software and connectivity cable are approved in the U.S. The main drive for significant joint adoption of our technologies will take place concurrent with the Magic launch, so we anticipate a continued shift and diversification towards Abbott's end-site system until then.