Stereotaxis, Inc. Q4 FY2025 Earnings Call

Good afternoon. Thank you for joining us for Stereotaxis' Fourth Quarter and Full Year 2025 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 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'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. The operator provided instructions. 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.

Thank you, operator. Good afternoon, everyone. This has been a year of tremendous progress. I'm proud of the broad-based technological and commercial progress we've advanced despite operating as a small team in a complex environment with considerable challenges. During today's call, I'll discuss the key accomplishments of the past year, the primary challenges we're addressing and our main goals and expectations for this year. This being our annual call, I want to start, though, by stepping back and providing context for our journey. Stereotaxis' overarching mission is to pioneer robotics within minimally invasive endovascular surgery. We are the clear robotic leader in this huge field of medicine where tens of millions of procedures are performed annually with essentially no robotic adoption. Unlike robots in other fields, an endovascular robot must control highly flexible devices navigated through tortuous tiny delicate blood vessels. This is particularly challenging and has led to a graveyard of failed attempts to address the field with Stereotaxis standing as the battle-tested flag bearer for this mission. It's an important and attractive mission. There remains significant room to improve patient care with the precision, safety and unique mechanistic and digital benefits of robotics. Stereotaxis' approach to the technical challenge of navigating an endovascular anatomy was science-fiction when first proposed using precise computer-controlled magnetic fields to control the tip of flexible devices, deep within the body. Over the years, that concept was turned into reality. The technology was refined and it demonstrated its clinical relevance and value in robust real-world use at over 100 hospitals that treated over 150,000 patients. While our technology was advanced and differentiated, we suffered from key structural and strategic limitations. We didn't develop or sell the catheters used with our robot, creating unhealthy dependency, limiting innovation and a poor razor without the razor-blade business model. Our robot remained highly difficult for hospitals to adopt, requiring significant construction, planning, time and cost. We remain focused on only one specific clinical procedure, minimizing the platform potential for our technology to help patients with a variety of diseases. We spent the last several years advancing a comprehensive innovation strategy that address these structural issues. The strategy establishes a solid foundation for a healthy business with strategic independence and an attractive, scalable, profitable commercial model. Most importantly, for the patients and physicians that rely on us, the strategy provides significant innovations that improve and broaden our impact on medicine. The strategy rests on four primary pillars: first, making our robot widely available by innovating it such that it doesn't require construction and can be rapidly installed in the majority of labs. Second, building an ecosystem of catheters and integrations in our core EP ablation market, so physicians have greater choice and technologies while we reduce our dependencies and build attractive recurring revenue. Third, leveraging our core technology such that it becomes a platform for endovascular surgery more broadly, providing value in several new clinical indications. And fourth, establishing a digital backbone that introduces connectivity and intelligence to our robot and the broader operating room environment. This past year was a milestone year for Stereotaxis in bringing this technology to reality. The highlight was achieving regulatory approvals in the United States and Europe for the GenesisX robot, MAGiC Ablation Catheter and MAGiC Sweep high-density Mapping Catheter. These are highly complex technologies, that face the most demanding regulatory requirements. Achieving these regulatory milestones would be a coup for any company and it's particularly rewarding for us given how efficiently it was achieved. These three devices, GenesisX, MAGiC and MAGiC Sweep serve as a core foundation on which to pioneer robotics within the EP field. The EP market has become one of the most attractive medical device markets, treating approximately 2 million patients a year and generating over $13 billion in device revenue annually, expected to grow to $20 billion by 2030. Robotics has long demonstrated its clinical value in this market, particularly by enabling complex procedures to be done effectively and safely. Our first commercial focus is on these complex procedures with higher-risk patients and the most unmet medical need, congenital heart disease, pediatrics and ventricular tachycardia. We view this as a $2 billion market opportunity that can be expanded and serves as an attractive beachhead for robotics more broadly in electrophysiology. The combination of these three technologies allows for adoption of robotics in the EP field with much greater ease, less complexity and less cost for hospitals. For Stereotaxis, it allows for a dramatically different commercial model than what we have experienced in the past. Access to robotics is shifting from the outright sale of a couple of million dollar robot that must go through a construction process to a blend of sales, leases and placements funded by disposable commitments. Our per procedure disposable revenue is starting to benefit from a portfolio of catheters, taking us from an average revenue per procedure of $1,000 to over $5,000. This is a structural shift in our commercial model and provides for a much more attractive foundation upon which to build a growing profitable business. The commercial contribution from these new products was modest in 2025. We sold 1 GenesisX system and MAGiC and MAGiC Sweep each contributed hundreds of thousands of dollars in revenue for the full year. The opportunity for just the catheters in our existing robotic procedure volume is over $20 million annually. There are several factors for this gradual commercial start, including the timing of regulatory approvals in the second half of the year, the importance of these devices being commercialized together as a synergistic portfolio, the administrative efforts post-approval to get on hospital contracts and work through regional registrations and a challenge in ramping manufacturing. That last challenge, ramping high-quality manufacturing has been a primary focus over the last months, so let me provide some additional color on that. GenesisX is manufactured by us in St. Louis, where we have significant experience in manufacturing complex robotic systems. We completed the production of our first commercial GenesisX system in mid-2025 with many observations for how the assembly process could be improved. We've incorporated these observations into our instructions, refined processes and work with suppliers on modifications to components that support the effort. We expect this year to manufacture approximately 1 GenesisX robot every 2 months with the ability at our current facility to scale to several dozen robots a year. We have a similar experience with Genesis and so the grind of improving manufacturing and what we are experiencing with GenesisX is something we are familiar and comfortable with. The MAGiC catheter is manufactured by Osypka, a contract manufacturing partner in Germany. We initiated the development and regulatory process for MAGiC with Osypka long before our acquisition of APT, which brought us in-house catheter development and manufacturing expertise. Scaling manufacturing of MAGiC at Osypka has been challenged since receipt of CE Mark last year, and so we saw only modest revenue throughout 2025 of hundreds of thousands of dollars. Catheter production has been in the dozens of catheters a month range when we needed to scale to hundreds of catheters a month, just to meet interest from our current customers. The fourth quarter and early start of this year were particularly hit by catheter shortages as Osypka implemented a production change, improving a specific process to address the largest drag on production yield. This change was successfully implemented earlier this quarter. And this March, we expect to receive for the first time over 100 catheters. Osypka has a detailed production plan for this year that considers personnel, components, equipment and space and projects growing manufacturing to approximately 500 catheters a month. Alongside working with Osypka on this plan, we are investing in additional ways to expand manufacturing capacity and redundancy. We are clear-eyed about these challenges, confident they will be overcome and excited by the way things are coming together. As we look at this year, there are four key efforts we are focused on to create significant commercial and strategic value. The first is demonstrating the real-world value of GenesisX by establishing at least 5 active GenesisX programs. In this early phase of commercialization, we have focused our efforts on approaching some of the more influential and impactful physicians in the electrophysiology field, who have shown interest in our technology for years but have now reengaged with us more enthusiastically when seeing our new innovations. We have several term sheets negotiated for a mix of sales, leases and placements with significant disposable commitments. Our ambition for orders is greater than the number of GenesisX systems we expect to install and orders this year may very well outpace our production. As we establish these first GenesisX programs, we will also be demonstrating the ability for GenesisX to be installed rapidly in existing labs while working compatible with non-modified x-rays for major x-ray manufacturers. This demonstration will be very beneficial in expanding adoption beyond the early adopters. Our second key focus is MAGiC and MAGiC Sweep manufacturing and commercialization. As previously mentioned, we are investing significant effort in ramping MAGiC manufacturing and expect to scale from 100 MAGiC catheters this month, to 500 catheters a month by year-end. As manufacturing scales, we expect to transition our existing EP customers to our proprietary catheters. We're already advancing administrative efforts across our hospital customer base to ensure value assessment committee approvals and hospital contracts are in place in advance of manufacturing supply. In addition to these core efforts with our EP customers, we have made progress with the regulatory efforts to combine MAGiC with a Pulsed Field Ablation generator from CardioFocus and we'll submit a regulatory dossier to our EU-notified body shortly and expect to launch MAGiC with PFA in Europe by year-end. Our third key focus is tied to ensuring we become a platform robotic technology, not just in EP, but for a broad spectrum of endovascular procedures across interventional cardiology, interventional radiology and neuro interventions. While we are very focused and excited by our opportunity in EP, we believe we have a credible path to pioneering robotics broadly across endovascular surgery. Until now, we have presented our efforts to expand into these markets with a relatively modest approach. The development of Guide Catheter and Guidewire that would allow physicians using GenesisX to safely and efficiently navigate through tortuous anatomy. That effort remains impactful and relevant. We submitted EMAGIN 5F our 5-French guide catheter for regulatory approval in both the U.S. and Europe and are working through the regulatory process. We completed development of EMAGIN .014, our very small 0.014-inch diameter guidewire and expect to submit it for regulatory approvals this summer. These will address meaningful unmet medical needs, and we are excited for their impact. But we also have known that this was a modest approach to entering the neuro-interventional and interventional cardiology market. We are doing much more under the surface and have two significant strategic efforts well underway that would allow us to make a much bigger splash with robotics. Over the next few months, we expect these opportunities to reach the point where we can share openly, a comprehensive strategy for technological leadership in robotics across interventional cardiology and neuro interventions. Finally, our fourth key effort this year is demonstrating the initial value of our Digital Surgery suite technology. As a reminder, Synchrony and SynX are our digital solutions that modernize the interventional surgical suite with enhanced workflow, remote connectivity and smart AI capabilities. We received CE Mark for Synchrony in the fourth quarter and submitted the technology for U.S. FDA clearance. We received questions from FDA earlier this year and responded to those questions last month. We expect FDA clearance for Synchrony in the coming weeks and have already observed strong initial demand for the technology. We expect several U.S. hospitals to standardize their EP labs with Synchrony and are currently projecting over $3 million in revenue from initial demand this year. In tandem with this regulatory and commercial effort, we continue to advance the connectivity app SynX that enables real-time collaboration and communication with Synchrony systems and expect to complete the first AI features that will be incorporated into Synchrony and are related to the NVIDIA program we were accepted into last year. These will add additional layers of clinical value and a Software-as-a-Service revenue model to Synchrony. We are in a particularly exciting period for Stereotaxis. There is much work to be done, and we are grinding through many key efforts in parallel, but we are also starting to see very positive fruits of our strategy materialize. This will be an important year during which we establish manufacturing and commercial capabilities that support substantial revenue growth over a sustained multiyear period, while simultaneously advancing a robust pipeline of innovations to key development, regulatory and commercial milestones. Kim will now provide additional commentary on our financial results, and I'll make a few financial comments as well before opening the call to Q&A. Kim?

Thank you, David, and good afternoon, everyone. Revenue for the fourth quarter of 2025 totaled $8.6 million, a 36% increase compared to $6.3 million in the prior year fourth quarter. System revenue for the quarter of $3.3 million, compared to $1.4 million in the prior year quarter and reflected partial revenue recognition on 2 Genesis systems and ancillary devices. Recurring revenue for the quarter of $5.3 million compared to $9.4 million in the prior year quarter, benefiting from initial sales of Stereotaxis MAGiC Sweep catheter in the U.S. and MAGiC catheter in Europe. Revenue for the full year 2025 totaled $32.4 million compared to $26.9 million in the 2024. Full-year System revenue was $10.2 million compared to $8.6 million in the prior year. Full year recurring revenue of $22.2 million compared to $18.3 million in the prior year, with growth driven by increased catheter revenue. Gross margin for the fourth quarter and full year 2025 was approximately 50% and 53% of revenue. For the full year, recurring revenue gross margin was 67% and System gross margin was 21%. Full year recurring gross margins were impacted by acquisition-related accounting, that temporarily reduced disposable margin and by lower initial margins on newly launched devices. System gross margins remain impacted by fixed overhead allocated over low production levels. Anticipated increases in production volume of existing devices within the next 3 years are expected to support recurring revenue margins of over 75% and System margins of over 50%. Operating expenses in the fourth quarter of $10 million included $3 million in noncash charges for stock compensation expense, mark-to-market adjustment for acquisition-related contingent earn-out consideration and amortization of acquired intangible assets. Excluding these noncash charges, adjusted operating expenses in the quarter were $7 million. Adjusted operating expenses for the full year 2025 were $26.3 million compared with $27 million in the prior year, primarily driven by lower general and administrative expenses as well as the receipt of an employee retention tax credit, reducing current year operating expenses. Operating loss and net loss in the fourth quarter of 2025 were $5.6 million and $5.5 million compared with $7.6 million and $7.5 million in the previous year. Adjusted operating loss and adjusted net loss for the quarter, excluding noncash charges, were $2.6 million and $2.5 million, compared with $3.8 million and $3.6 million in the previous year. For the full year 2025, adjusted operating loss of $9.3 million and adjusted net loss of $8.8 million compared to an adjusted operating loss of $12.4 million and an adjusted net loss of $11.7 million in the prior year. Negative free cash flow for the full year was $13.8 million compared to $8.5 million for the full year 2024, with the increase driven by use of $5.6 million for working capital in 2025. In the fourth quarter, Stereotaxis generated $4 million from the second closing of the registered direct financing announced in July and $3.1 million through its at-the-market offering at an average stock price of $3.17. On December 31, Stereotaxis had cash and cash equivalents of $13.4 million and no debt. I will now hand the call back to David.

Thank you, Kim. We are pleased that we were able to deliver double-digit revenue growth in 2025, while focusing attention on driving significant development and regulatory progress, working through challenging manufacturing ramps and starting to shift away from an older product ecosystem. We expect to again deliver double-digit revenue growth this year with both System and recurring revenue increasing over the course of the year, in line with manufacturing ramps for GenesisX and MAGiC. We expect quarterly revenue to be below $10 million per quarter in the first 2 quarters of the year and then to ramp above $10 million per quarter in the following 2 quarters with annual revenue surpassing $40 million. Accomplishing our four key milestones for this year will set us up for accelerated growth in future years. These development, regulatory, manufacturing and commercial efforts are being advanced while maintaining fairly stable operating expenses. We benefit from the reduction in certain expenses as programs reach key milestones and then reinvest those savings in the key programs important for the next drivers of growth. We continue to invest meaningfully in efforts critical for near-term results as well as in programs that provide long-term strategic value. We expect growing recurring revenue and stable operating expenses this year to support reduced cash use in 2026 compared to 2025. We also expect a working capital benefit to cash flow this year after a significant investment of near $6 million in working capital last year. We feel comfortable with our balance sheet, allowing us to advance our innovation strategy to market, fund the commercial ramp and achieve profitability. We'll now take your questions. Operator, can you please open the line to Q&A?

The operator provided instructions. And we will take our first question from the line of Danny Stauder from Citizens.

I guess my first question is about the goal of five GenesisX programs you mentioned. Is this in addition to that, and do you still expect to sell the previous Genesis system? I believe you had commented before that that would still be the expectation. Also, I'm trying to get a better understanding of what the segment mix could look like for the full year.

Hi Danny. Yes, as we discussed on the last call, we expect Genesis orders and sales to continue at a similar pace to the last several years. We've generally sold roughly mid-single-digit numbers of Genesis systems each year, which has added up to about $10 million in revenue annually. We expect Genesis commercial levels to remain relatively similar for the next couple of years while we ramp GenesisX. Right now, the GenesisX effort is focused on key opinion leader accounts in Europe and the U.S., demonstrating that with the new technology we can install it in existing cath labs without special construction, that it can work alongside existing X-rays, and that there are KOLs in the field who are respected by their peers, have watched us over time, recognize that our innovations change the trajectory of robotics in EP, and want to be part of that change.

Great. I appreciate it. And then just one follow-up on Synchrony. Great that you're expecting FDA approval in the coming weeks. But on that $3-plus million revenue goal in 2026, just curious what's assumed in that number? Is that a certain number of target accounts? Or does it assume a certain amount of time being able to be sold during the year? Just trying to understand what the room for upside is there? And any more color would be great.

Sure. So on Synchrony, Synchrony is sold as a capital equipment upfront. As described in the prepared remarks, we do have a recurring revenue stream through that predominantly service contracts and the premium software subscription to SynX, which would create a Software-as-a-Service business model. As we have more AI features implemented into Synchrony as well, we'll also create kind of a Software-as-a-Service model for those special features. But the guidance for this year is really just focused on the capital sales of Synchrony systems. We have several hospitals that we expect to standardize their EP labs on Synchrony. And so those are multisystem deals that we believe will materialize, with oftentimes a handful or even sometimes more numbers of systems in an individual hospital. And then there are other hospitals that would like kind of to try individual Synchrony systems. And so as we are kind of getting closer to regulatory approval, we've been having those discussions, and we feel fairly confident that we will have a decent number of systems sold in the current year. I think we've given rough, rough indications in the past that pricing of Synchrony would be in the $150,000 to $200,000 or so range from a capital equipment perspective. There are differences between the systems, depending on how many third-party equipments you want to kind of loop-into Synchrony. But so generally, looking at that type of a price range would get you to the number of systems that we're talking about.

The operator provided instructions. Our next question comes from the line of Josh Jennings from TD Cowen.

Thanks for the thorough download of the go-forward strategic plan. A couple of questions on MAGiC: it sounds like feedback from early users continues to be strong. I was hoping to get a better understanding of, with the manufacturing capacity constraints as you're ramping, how you are allocating catheters to existing versus new accounts. And I assume access to THERMOCOOL RMN is still in play; I'd love to get our arms around that dynamic a little better.

Josh, thanks for the question. MAGiC is a very strong medical device and catheter, and we're pleased with its performance and design. Ramping up manufacturing has been challenging, and that has been a major focus for us over the past several months. Launching the device requires not only administrative work but also managing users' expectations, and demand has exceeded the supply we've been able to provide. Our commercial team and physician partners understand the situation and have generally been patient and accommodating as we work through the ramp. Now that we're in the U.S., we're addressing hospital administrative items so that as catheter supply increases, those processes are already in place. We are working in parallel on these efforts so MAGiC can become the significant revenue contributor we expect, and over the course of this year you should see manufacturing ramp to meet the demand levels I mentioned in the prepared remarks.

And then with the path to launching MAGiC with Pulsed Field Ablation in collaboration with CardioFocus this year in Europe, can you help us understand what you need to show EU regulators regarding compatibility with the Centauri generator and any required in-human data? Will you run any first-in-human studies after approval? Please lay out the milestones and timing for EU approval.

Sure. So the general scope of the argument to the regulators is that CardioFocus' Centauri PFA generator has been approved in Europe for several years, is working compatible in a regulatory approved fashion with three point-by-point RF ablation catheters that are available in Europe and with three of the very large companies in our field. There's significant clinical experience there. And when you look at the compatibility testing that has been done between the MAGiC Catheter and the Centauri Generator, both bench testing, fairly robust high-quality animal testing, the catheter, the MAGiC Catheter is very similar in tip design and ablation characteristics to those three existing catheters. The compatibility testing results when you look at it across the range of tests, is also very similar results. The risk profile is no higher, perhaps probably less actually. And so there's a fairly strong argument for why adding compatibility, you have an approved device, an approved catheter in Europe and approved PFA generator in Europe. And so adding a fourth catheter to that compatibility matrix is not a significant risk given all the data that has been accumulated to support that. And so we've kind of compiled the dossier together in collaboration, as the two companies, and that is going to be going in for review by the EU notified body in the short term.

The operator provided instructions. Our next question comes from the line of Kyle Bauser from ROTH Capital.

Congrats on all the updates. So David, you talked a bit about the guidance for the full year and the quarterly revenue level to be kind of below the $10 million level in the first half and above in the second half. Can you talk a little bit more about product mix? I know across Systems and Disposables, you're expecting growth, but just kind of trying to understand kind of the mix in terms of percentage of that over $40 million coming from Systems versus disposables.

Sure. For System revenue, you have a baseline similar to last year with incremental growth from the GenesisX launches. The five GenesisX systems we are guiding for this year will be a mix of sales, leases, and disposable commitments, so the exact revenue and the timing of revenue recognition are difficult to estimate right now. Overall, however, those placements will generate some capital revenue, producing a step-up in capital revenue versus last year as GenesisX contributes above the baseline Genesis level. Most of the revenue growth will come from Disposables, and that will occur alongside the manufacturing ramp of MAGiC. We see both MAGiC and MAGiC Sweep as the primary drivers of revenue growth this year, primarily as manufacturing expands from about 100 catheters to 500 catheters. Historically, average selling prices for ablation catheters are roughly $3,000 to $4,000 in the U.S. and EUR 2,000 to EUR 3,000 in Europe, which should give a general sense of the monthly revenue we would expect from MAGiC as the year progresses. Finally, the $3 million of Synchrony revenue would be capital revenue.

Okay. Got it. I appreciate that. And then maybe just a follow-up to that around MAGiC ablation catheter, realizing it's early, you just got approval in the U.S. and you're working through building up supply and streamlining manufacturing. But any sort of initial feedback on how the transition has been going related to kind of switching out the third-party catheter for MAGiC or kind of any early provider feedback around that?

Sure. We obviously have strong procedures with MAGiC across multiple hospitals. The transition from the old ecosystem has not been an easy one; our previous partner did not make that transition easy. That's a challenge we knew we would have to grind through. From the customer perspective, many customers have a very positive view of robotics in this field. We've had long-term relationships with these customers, and they've been waiting for an improved catheter for many years. They have seen MAGiC do things that were previously not possible in terms of navigation capability, more stable forces regardless of how you approach the tissue, reduced irrigation, and improved tip lesion characteristics. Overall, we have a very good customer base that is excited to use MAGiC. As we work through this transition and ramp manufacturing, we're excited by what MAGiC will bring to these customers and how it will ultimately transform us. Working through this transition has been one of our biggest efforts and challenges, but we're delighted to have received FDA approval at the beginning of this year. We're glad the effort with Osypka is moving in the right direction, and we expect to see a significant ramp in manufacturing this year, which should set us up very well. As we exit this year, we should have a strong foundation for many years going forward, with continued innovation and an attractive revenue model.

The operator provided instructions. Our next question comes from the line of Frank Takkinen from Lake Street Capital Markets.

I was hoping to ask a little bit more about Q4, David. Obviously, I heard the questions about the manufacturing challenges. But maybe just parse-out what the reason is for that being a little bit lower? I think there was a guide out there for $6 million versus the $5.3 million reported. Was that all manufacturing and you would have been at kind of that $6 million mark, if it wasn't for that? Or was there maybe some procedural softness or anything else going on with the Q4 numbers?

So I think the two primary factors in the fourth quarter was MAGiC manufacturing was actually lower than in some previous quarters. I think I mentioned in the prepared remarks that there during the process of ramping manufacturing, we and the Osypka team identified one specific process, which was leading to the biggest cause of scrap at the end kind of during the final testing before you can kind of confirm that catheter is ready to ship-out to customers. There was one process that was leading to a very high scrap rate of the catheters. During the fourth quarter and then earlier into the first quarter, that process was being adjusted. Catheters were being manufactured with that new process, but those catheters were going into testing, which was kind of necessary to confirm the process and to make it something official within the Osypka system. And so that kind of was a drag on catheters in the fourth quarter. We're also working through the transition of J&J's catheter. And so there was some kind of a slowdown in volume in the fourth quarter from that transition, but MAGiC catheter manufacturing was the primary driver of that.

Okay. That's helpful. And then maybe just for my second one, can you just talk a little bit more about the different economic models for GenesisX? I heard your comments in the previous question related to the assumption that maybe a few of the 5 GenesisX placements this year might be an alternative placement model. What might that look like? And then if you were to take a longer-term view at it, how do you think that mix of kind of upfront sale versus alternative model might look for GenesisX over the next few years?

Sure. So there's really three core models that can be utilized, and it can be a mix of these three models in any specific deal. The three models are an outright capital sale, monthly, quarterly, annual lease and then a placement of a system with significant commitments to purchase disposable kits. So let's say, if they're buying MAGiC and MAGiC Sweep and a QuikCAS and some of the Map-iT catheters and you put that together in a kit and they commit to buy x numbers of those kits each quarter. And so those are kind of the three basic models. None of those are highly innovative. There's obviously other companies that have built very significant businesses off of a similar range of models. And so those are the three models that we're kind of working with. And there can be kind of individual situations where it's a mix of those three being used in the same exact deal. Historically, we didn't have the Disposable revenue, and we didn't have a system that could be installed and de-installed easily. And so really, we're limited to exclusively the capital sales model. It's the innovation in both our disposable devices and having a whole portfolio of Disposables now available that provides significant revenue per procedure that allow you to fund the capital. And it is the innovation in GenesisX and its ease of accessibility that makes those alternative models available. I overall am agnostic to the three models, and we are pricing things in a fashion where we are agnostic to the three models. From a working capital perspective, it's obviously nice to get cash upfront in a capital sale. But from an overall economic value, we're pricing things such that we're agnostic to the three models. And even from a working capital perspective, the amount of recurring revenue that can be driven by a placement model is very significant. And this is high-margin revenue. And so essentially, within less than a year, the variable cost invested in a capital system can be paid off and kind of we see that as an attractive way, if that ultimately accelerates adoption, that's a great model to use. I believe Intuitive Surgical, over 50% of their systems are either placed or on a leasing basis or on a disposable commitment basis. And so I assume that as we grow, that will become the majority of our capital will be done through that as well.

The operator provided instructions. Our last question comes from the line of Adam Maeder from Piper Sandler.

This is Kyle Winborne on for Adam. I have one question on OpEx plans for 2026. I think I heard you say you expect it to be stable. Am I understanding that correctly — stable year-over-year, about the same level as 2025? And any qualitative color you can give on that. You discussed some investments you're looking at related to manufacturing issues. And as you think about scaling the commercial team for the U.S. launch, any color you can give on OpEx spend this year?

So sure. Our expectation is that operating expenses will overall be flat. As a reminder, our operating expenses include significant accounting items, not actual cash outlays, such as amortization of intangibles and noncash compensation related to stock plans that have not created any dilution for shareholders. If you exclude those items and look at our adjusted operating expenses, we have been running under $30 million a year for several years, in the high $20 millions, and we expect that level to continue this year. We have benefited from significant projects we advanced over the last several years including PMA work, the ablation catheter, a completely new robotic system, the Synchrony system, and other catheter projects. While we still have a full pipeline of internal innovation efforts, those were large projects that demanded substantial investment. As those programs reach regulatory approval, operating expenses naturally decline, which frees us up to make investments in other areas like the manufacturing ramp and commercial activities. We have a direct sales team in the U.S., Europe, and a smaller one in Asia; they are experienced with our space, our products, and our customers, and they have the capacity to handle the administrative efforts for MAGiC and MAGiC Sweep across our hospitals and to perform initial technology launches. As we ramp catheter revenue in specific accounts, we can hire individual reps to focus on those accounts, but that hiring is small relative to our installed base and the projected MAGiC ramp this year and would not result in major incremental spend, only low millions of dollars overall. In that context, we believe we can hold operating expenses more or less flat while making these targeted investments. With the manufacturing ramp behind us this year and GenesisX demonstrated across multiple hospitals, 2027 looks to be the year for more significant commercial investments on both the capital and disposable sides.

Super helpful. And then maybe just for my second question, I was curious maybe on the opportunity in China for this year. So could you kind of just remind us what you expect the portfolio there to look like for this year? And kind of how you're thinking about the macro outlook?

Sure. So we did receive with our partner, MicroPort EverPace, approval for the Genesis system, the system prior to GenesisX in China a year ago. They also received approval for a robotic ablation and high-density mapping catheter, which works only with their mapping system. And so that ecosystem became available around a year ago. They've been also working over the past year on refining the manufacturing and ramping the manufacturing of their own catheters in China and placing their mapping system with the robotic accounts in China to kind of demonstrate the value of that technology. We receive economics on that. And so while it isn't our own catheter, we receive economics on the adoption of that catheter and the shift from the old ecosystem to this new ecosystem. This year, we do expect the first Genesis systems to be sold in China. It has been a difficult environment from a macro perspective for capital. And so it has been slow advancing those deals, but there are a few in the pipeline that seem to be more promising. MicroPort expects to have several, roughly a handful of systems sold in China this year. Obviously, nothing is guaranteed until we get the purchase order, but that's overall their projections. And we do see them continue to invest in activity for capital sales. And so really kind of the story this year will be getting the first Genesis systems there, going through the GenesisX regulatory submission, going through the MAGiC regulatory submission and then also having kind of the shift from the older Johnson & Johnson catheter in China to MicroPort's existing catheter and the royalties that we'll receive with that shift.

There are no further questions on the queue. That concludes our question-and-answer session, that also concludes our call for today. Thank you all for joining, and you may now disconnect.

Thank you very much.