Stereotaxis, Inc.

Good afternoon. Thank you for joining us for Stereo Taxes Third Quarter 2024 Earnings Conference Call. Certain statements during the conference call and question and answer session period to follow may relate to future events, expectations, and as such constituent 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 in the future to be materially different from the statements that the company 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 Stereo Taxes. David?

Thank you, Operator, and good afternoon, everyone. I'm pleased with our performance this quarter. We demonstrated solid commercial execution, successfully closed and integrated the APT acquisition, and are advancing in parallel a broad range of innovation and regulatory efforts that are strategically transformational. On our last call, I provided significant commentary on our innovation strategy and APT. I'll keep today's remarks relatively brief with just a focus on the key updates. Kim will then share our financial results, and we'll open the call to Q&A. Our revenue growth in the third quarter was predominantly driven by partial revenue recognition of three Genesis systems that were delivered to customers late in the quarter. All three were delivered to European hospitals, two of which are upgrading their existing robotic labs to Genesis, and one of which is establishing an entirely new robotic program. As has been our custom, we'll announce Genesis launches in coordination with each hospital as they treat their first patients. Our pipeline of Genesis customers remains robust, and we received orders for two additional Genesis systems in the third quarter. The combination of these incremental orders and system revenue left us with a capital backlog of $15.5 million at the end of the third quarter. We continue to see an active pipeline of interested customers in Genesis, and expect to continue to receive orders in this and coming quarters. The recent CE mark for Genesis X has allowed us to start to build a pipeline of Genesis X customers that incrementally adds to our robotic opportunity. This Genesis X pipeline will ultimately dwarf our Genesis pipeline. While we have not yet received CE mark approval for the magic catheter, which is key to the launch of Genesis X, we expect it in the near term At around a similar time as that milestone, we expect to receive our first Genesis X system order. We are very excited to start to see the impact Genesis X will have on patients, physicians, hospitals, and on our overall growth trajectory. Our capital results have been predominantly driven by Europe, where we have the most advanced product ecosystem coming into fruition. With regulatory approvals in the United States and China, slightly behind Europe, we look forward to those geographies increasingly contributing to our capital orders and revenue. Our robotic system orders have also historically remained fully driven by the electrophysiology specialty. In the coming year, as we introduce the first vascular catheters and guide wires, we look forward to starting to receive orders driven by a broader array of specialties. Recurring revenue in the third quarter benefited from the partial quarter contribution of catheter revenue from the acquisition of APT. This contribution was approximately half a million dollars in the third quarter and will be larger in the fourth quarter. We are excited by the positive reception to APT's catheters from our customers in the community of robotic electrophysiologists. We expect meaningful sequential revenue growth from these catheters in the fourth and subsequent quarters. I described on our last call the clinical and commercial synergy, as well as the commercial strategy with these differentiated catheters. I'm pleased that the early months following the acquisition continue to validate the synergy and strategy. While the addition of APT is supporting a return to growth in recurring revenue, our largest recurring revenue opportunity remains ahead of us, with regulatory approvals and commercial launches of robotically-navigated ablation and mapping catheters and vascular guidance catheters and wires. That segues well into updates on our innovation strategy. We are aggressively driving broad-based progress across the late stages of a comprehensive innovation strategy. The MAGIC catheter, our proprietary, robotically-navigated cardiac ablation catheter, is close to receiving European CE mark approval. During the third quarter, following our earnings call, we received questions on the last outstanding area of review, microbiology. We responded to those questions, received a second round of brief clarification questions, and are awaiting final confirmation that our microbiology review has been completed. We should receive CE mark from ADVIC shortly afterwards. We are very much looking forward to approval and expect significant commercial adoption of MAGIC, given our clinical experience in the ongoing European study and the positive feedback we receive from our community of robotic customers. In the US, FDA is continuing its review of the MAGIC PMA submission, and we continue to have collaborative and thoughtful dialogue. We have aligned on an expected indication for MAGIC, and the data that support that indication. The ongoing dialogue supports our expectation of achieving an initial regulatory approval, leveraging the data being generated in the ongoing European MAGIC study with a clear plan for subsequent post-approval studies in the U.S. We appreciate the collaborative nature of these discussions and believe they are reflective of a shared appreciation for the importance of ensuring MAGIC becomes available for patients and physicians who depend on it. Beyond magic, we made significant progress with what will be the first ever robotic high-density mapping catheter and vascular guidance catheter. Both of these catheters were being advanced with APT over the last couple years and completed development around the time of acquisition. During the third quarter, we manufactured the hundreds of catheters needed for formal regulatory testing and expect to complete all testing within a couple months setting us up for regulatory submissions next quarter in early 2025. Both catheters provide significant value clinically, commercially, and strategically. Some very recent anecdotal color on the interest in these two catheters may be helpful. I had the opportunity to meet with dozens of our customers at the Society for Cardiac Robotic Navigations annual conference two weeks ago in Portugal. Immediately after that, I visited physicians at one of the most prestigious and globally well-respected EP centers in France. At both the conference and at this prestigious hospital, there was significant focus on the importance of mapping and how our robotic mapping catheter addresses a primary barrier to physician interest and use of robotics. The French hospital viewed our emerging comprehensive product ecosystem and the mapping catheter in particular as highlights warranting reassessing the impact robotics can have on the field. Following the meeting in France, I visited London, where I had the opportunity to meet, amongst other activities, with non-electrophysiologists to explore initial uses of our robotic guide catheter and guide wire. We identified several new indications with unmet medical need where our overall approach, and the guide catheter specifically, can improve care and add value. We are excited by how the mapping and guide catheter can boost adoption of robotics in EP and initiate adoption in the broader endovascular field. I want to highlight the contributions of our new teammates from APT who work diligently and efficiently on the development and manufacturing of these catheters. The unique expertise of APT is highly complementary and additive to Stereotext's strategy as we increasingly focus on a broad family of robotically-steered endovascular devices. Beyond catheters, we have several other significant regulatory and development efforts ongoing. The primary milestone in the last quarter was attaining CE mark for Genesis X in Europe and submitting Genesis X to the FDA for US 510 clearance. FDA reviewed our submission and sent us a first round of questions in October. We've begun preparing our answers and expect to respond in the coming weeks. In China, we have been working with our partner, Microport, to gain regulatory approval for the Genesis robot, mapping integration, and a novel ablation catheter. The Chinese NMPA regulatory body recently completed an onsite audit of our quality system and the Genesis system in St. Louis. The success of that audit, with very positive feedback shared by the reviewers, is a testament to our team and the high-quality operations they established. The successful audit portends well for near-term approvals in China. There's much more going on, but we're keeping today's call focused on the primary milestones and will provide a more comprehensive review on our next call. Our broad-based progress on a new foundational product ecosystem across three key geographies is transformational. We are in a particularly exciting period. I'll hand the call over to Kim to discuss our financial results, and then I'll make a few financial comments as well before we open the line to Q&A. Kim?

Thank you, David, and good afternoon, everyone. Revenue for the third quarter of 2024 totaled $9.2 million, an 18% year-over-year increase compared to $7.8 million in the prior year third quarter. System revenue for the third quarter was $4.4 million, driven by partial revenue recognition on delivery of three Genesis systems. This compares to system revenue of $3.5 million in the prior year third quarter. Recurring revenue of $4.8 million compares to $4.3 million in the prior year third quarter and reflects the two-month contribution of our previously announced acquisition of APT. We received two orders in the quarter and we maintained system backlog of 15.5 million as of the end of the third quarter. Gross margin for the third quarter of 2024 was 45% of revenue. Recurring revenue gross margin was 70% and system gross margin was 16%. Recurring revenue gross margin was impacted by accounting related to the acquisition of APT. As part of GAAP acquisition accounting, we are required to value finished goods inventory at market, giving us minimal accounting gross margin on the subsequent sales of that inventory. This is a temporary margin reduction with no economic impact. Once this inventory is sold in the next few months, we expect recurring revenue gross margin, including the APP products, to return to historical levels. System gross margin continues to reflect the allocation of significant overhead expenses on low production volume. Operating expenses in the quarter of $10.4 million included $2.5 million in non-cash stock compensation expense and a $0.7 million non-cash mark-to-market adjustment for acquisition-related contingent earn-out consideration. Excluding these non-cash charges, adjusted operating expenses were $7.2 million comparable to prior year adjusted operating expenses of $7.1 million. Operating expenses in the current year third quarter include two months of APT operating expenses following closing of the acquisition. Operating loss and net loss in the third quarter were $6.3 million and $6.2 million compared with $5.6 million and $5.4 million in the prior year third quarter Adjusted operating loss and adjusted net loss for the quarter, excluding non-cash stock compensation expense and the mark-to-market adjustment, were $3.1 million and $3 million, compared with $3 million and $2.8 million in the previous year. Negative free cash flow for the third quarter was $4.2 million. At September 30th, stereo taxes had cash and cash equivalents, including restricted cash of $11 million and no debt. Significant cash receipts in October increased stereo taxes' balance of cash and cash equivalents, including restricted cash, to $13.3 million at the end of October. I will now hand the call back to David.