Earnings Call Transcript - STXS Q1 2026

Operator, Operator

Good afternoon. Thank you for joining us for Stereotaxis' First Quarter 2026 Earnings Conference Call. Certain statements during the conference call and the question-and-answer period to follow may relate to future events and expectations and, as such, are 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 most recent periodic reports on Form 10-K and 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.

David Leo Fischel, Chairman and CEO

It is now my pleasure to turn the floor over to your host, David Leo Fischel, chairman and CEO of Stereotaxis. Thank you, operator, and good afternoon, everyone. Stereotaxis has had an amazing start to this year. While our reported quarterly numbers do not yet reflect it, we are going through one of the most exciting periods in Stereotaxis' history, given the amount of progress, the initial commercial green shoots of success, and the clarity on the opportunity ahead of us. These give us confidence in our overall vision reaching a new level of maturity in our near-term and long-term growth. In my prepared remarks, I will touch upon the key areas of progress, the commercial green shoots, and the opportunities ahead of us. Kimberly will then review our first-quarter results, and we will open the line to questions. The most notable achievement of the past year has been a string of regulatory approvals in the U.S. and Europe for an entirely new foundational ecosystem of products. While Stereotaxis has a long history, our clinical and commercial experience is nearly all with first-generation technology from twenty years ago. After spending the past eight years and over $75 million rebuilding an R&D pipeline, we brought to market an entirely new foundation of products. In just the past few months, we received four U.S. FDA regulatory approvals: for a complex surgical robot, robotically steered therapeutic and diagnostic catheters, and a digital surgery cockpit. Outside of the U.S., we received multiple approvals in Europe and China. These product approvals are not just incremental innovations, but rather they structurally change our opportunity. We essentially developed a fresh new start-up company on the shoulders of our legacy technology and funded by our legacy business. The streak of regulatory success that began last year continued in the first part of this year, with two essential FDA approvals. First, in January, we received PMA approval for the MAGIC cardiac ablation catheter. Then just last month, we received FDA clearance for Synchrony, our digital surgery cockpit that introduces connectivity and intelligence to the operating room. MAGIC is Stereotaxis' first proprietary therapeutic catheter and is the first ablation catheter ever to be approved by the FDA specifically for arrhythmia patients with complex congenital heart disease. The catheter strategically allows us to overcome our historical dependency on Johnson & Johnson, and to participate robustly in the recurring revenue of each procedure. Following regulatory approval, we recently announced that we began first MAGIC procedures at multiple U.S. hospitals. Those procedures have gone well. The first patient treated with the catheter had complex congenital heart disease, was being cardioverted weekly, had failed multiple attempts to be treated with manual catheters, and was now successfully treated using MAGIC. The most beautiful example of why our innovations are critical and improve lives. The physician who did that procedure later commented, and I quote, "that was the most gratifying case I have ever done. I could have never done this without robotics." Demand for MAGIC is much higher than supply, and we are rolling out the catheter in both Europe and the U.S. in line with the manufacturing ramp. While the ramp is gradual, we are seeing meaningful progress in our contract manufacturers and still expect production to top 500 catheters per month by the end of this year. In addition, to mitigate catheter shortages, we began selling an additional catheter in Europe that we have exclusive rights to through our collaboration with MicroPort. We are also making meaningful progress on other efforts that expand production capacity and redundancy. For now, the still-small contribution from our new catheters is being countered by the headwind of winding down our relationship with Johnson & Johnson. This transition is messy and makes it difficult in reported quarterly financials to observe the underlying ramp of our new disposable business. The green shoots of this new business model are very evident to us, though, and are very attractive. In our initial U.S. MAGIC procedures, we are seeing disposable revenue often greater than $8,000 per procedure, and always greater than $5,000. This robust razor-blade business model benefits from our strategy to build a synergistic portfolio of catheters, including MAGIC, MAGIC Sweep, and Map It. In Europe, just this month, we received an order for $100,000 in disposables from a single hospital for what it expects to be a month's worth of procedures. These amounts are in line with the electrophysiology market but are unprecedented for us. They demonstrate the transformation that is just starting to take shape in our business model. Still at low numbers but increasingly very material, as we advance through this year and transition our installed base of robotic accounts over to this new ecosystem. By the end of this year, we expect to have substantially transitioned customers as they use up remaining inventory of Johnson & Johnson catheters, work through hospital approvals and tender processes, and gain experience with MAGIC. The structural transformation to our disposable business model is taking place as we simultaneously structurally transform our capital business. This is happening primarily through the launch of Genesis X, the new robotic system that we received FDA clearance for at the end of last year, and which does not require construction to be installed in existing cath labs. We have a healthy pipeline of physicians and hospitals that are working towards orders for Genesis X and who are prepared to be the first to demonstrate it installed rapidly in existing labs while being compatible with nonmodified X-rays from major X-ray manufacturers. Compatibility testing and commercial agreements are advancing in tandem. We continue to expect to establish at least five active Genesis programs over the course of this year. These initial adopters and their demonstrations of the technology's accessibility, interoperability, and performance will be very beneficial in expanding adoption. The second significant change to our capital business is the start of a synergistic but independent capital opportunity with Synchrony and SynX. As a reminder, Synchrony and SynX are our digital solution that modernize the interventional surgical suite with enhanced workflow, remote connectivity, and smart AI capabilities. Just last month, we received FDA clearance for Synchrony. We have already received orders for multiple systems and have shipped the first systems to customers. We are very confident in our guidance of $3 million in revenue from Synchrony this year. The initial commercial green shoots from our new product portfolio are exciting. The operational and commercial friction to ramp manufacturing and implement new products makes progress gradual, but everything is moving in the right direction and we are efficiently driving broad-based progress on many fronts in parallel. We are doing this while weaning ourselves away from the dependencies and challenges of our legacy business. It is a tough transition, but we are building a very attractive business on solid foundations. What is particularly exciting for me is that we are not resting on our laurels. While the benefits of this first wave of innovation start to become operational and commercial reality, we are energetically planting the seeds for significant opportunities that will blossom over the next few years. Our vision for what Stereotaxis can and will accomplish is becoming increasingly clear and tangible. That vision can be summarized as follows. Our core mission is to pioneer robotics across endovascular surgery. That means building fantastic robots that enable what is otherwise impossible — improving patient outcomes and physician experiences. It means these robots should be fully mobile, unobtrusive, interoperable, and accessible. It means robots that can do the full range of activity necessary across the breadth of endovascular procedures — electrophysiology (EP), neuro, cardiac, and peripheral — with a matching portfolio of advanced interventional devices. It means embedding these robots with digital innovation such that they not only mechanically manipulate devices, but add intelligence, connectivity, and automation to make procedures smarter, better, and quicker. This is not an idle vision. We established a solid foundation for it with our initial portfolio of products. We have also been advancing in the background multiple efforts to realize the full vision. A few examples. First, at the European Heart Rhythm Association conference last month, we showed off a future generation of the Genesis X robot that is fully wireless, battery-operated, and mobile. We have invested in this project for a few years, and it is moving along well. In the future, all our robotic platforms will be fully mobile and wireless. Second, we are busy at work with two significant AI efforts: one for decision-support AI features incorporated into Synchrony to help physicians intraoperatively benefit from the wisdom of thousands of procedures; and the second, a rehaul of our automated navigation software so physicians simply design a procedure and the robot executes it. A specific project here is with a larger industry partner that sees the opportunity for automation to offer the most efficient and yet personalized patient-specific therapy. And finally, and most significantly and transformationally, we announced the acquisition of Robocath last month, which, as mentioned at the time, gives Stereotaxis a fully complementary and separate robotic mechanism of action for endovascular device navigation. The combination of our technologies offers a clear vision for how our robotic solution, including the full ecosystem of digital innovations, will enable remote, automated, and fully robotic treatment of stroke and cardiovascular disease. The puzzle pieces have come together in a remarkable fashion. We are fully focused on executing the key operational and commercial activities to reap the rewards from our recent regulatory approvals, grow revenue, and reach breakeven. We are simultaneously busy at work through the acquisition of Robocath, other business development activities, and in-house R&D on a robust innovation effort across robotics, interventional devices, AI, and automation. The goals, direction of the path, and stepping stones of progress along the path have become increasingly clear to us. We are energetically and enthusiastically advancing forward. Kimberly will now review our first-quarter results, and then I will make a few financial comments as well before opening the call to questions. Kimberly?

Kimberly R. Peery, CFO

Thank you, David, and good afternoon, everyone. Revenue for the 2026 first quarter totaled $6.3 million, compared to $7.5 million in the prior year first quarter. System revenue was $1.3 million and recurring revenue was $5.0 million, compared to $2.0 million and $5.5 million, respectively, in the prior year first quarter. System revenue in the current quarter reflects revenue recognition on the installation of one Genesis system and partial revenue recognition of other ancillary systems. Recurring revenue in the quarter was pressured by the transition from the Johnson & Johnson ecosystem. Gross margin for the 2026 first quarter was 60% of revenue. Recurring revenue gross margin was 66%, and system gross margin was 39%. Operating expenses in the quarter of $9.8 million included $3.1 million in noncash charges for stock compensation expense, a mark-to-market adjustment for acquisition-related contingent earnout, and amortization of acquired intangibles. Excluding these noncash charges, adjusted operating expenses were $6.7 million, similar to the prior year adjusted operating expenses of $6.8 million. Operating loss and net loss for the 2026 first quarter were $6.0 million and $5.9 million, compared with $5.9 million and $5.8 million in the previous year. Adjusted operating loss and adjusted net loss for the quarter, excluding noncash charges, were $2.9 million and $2.8 million, compared with $2.7 million and $2.6 million in the previous year. Negative free cash flow for the first quarter was $3.5 million compared to $1.8 million in the previous year. At March 31, Stereotaxis had cash and cash equivalents of $14.6 million and no debt. I will now hand the call back to David.

David Leo Fischel, Chairman and CEO

Thank you, Kimberly. I want to conclude by emphasizing that while not yet reflected in our quarterly financial results, the commercial green shoots I mentioned previously have begun. Over the coming months, the positive impact will grow in momentum, and overshadow the pressures on our legacy business. We are reiterating our revenue guidance for the year of double-digit revenue growth, with annual revenue expected to surpass $40 million. Revenue will ramp up sequentially each quarter, and we expect both the third and fourth quarters of this year to have revenue above $10 million per quarter. From a financial perspective, we are confident that we can advance our strategy, integrate Robocath, and grow significantly without subjecting investors to substantial dilution. Operating losses will be reduced as we grow recurring revenue, with the majority of recurring revenue dropping to the bottom line. We have opportunistically taken advantage of the ATM at prices significantly higher than our current valuation, with overall minimal dilution, strengthening our balance sheet and bridging us through the acquisition of Robocath and the time needed to build momentum with recurring revenue. We have invested significantly in inventory that supports meaningful Genesis X and Synchrony revenue, and maintain a clean balance sheet. We continue to pursue strategic opportunities for nondilutive, nondebt financing. It is a delicate balancing act and there is much being done in parallel, but we feel comfortable with our balance sheet allowing us to advance our innovation strategy to market, fund the commercial ramp, and achieve profitability. We will now take your questions. Operator, can you please open the line to Q&A?

Operator, Operator

Thank you. We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your question is from the line of Danny Stauder with Citizens. Your line is now open. Please go ahead.

Danny Stauder, Analyst

Yes. Great. Thanks for taking the questions. So just for my first one, on catheters, you mentioned some initial green shoots, and I know it is still early days. But for your comparable customers that have started to use the MAGIC portfolio, I know you commented you are seeing revenue per procedure above $5,000 and sometimes around $8,000, which is great to hear. But I was just curious if you could give us more color here specifically in terms of how sticky utilization has been for new users of MAGIC. Are you seeing a pretty immediate uptick following adoption? Does it take time to ramp? Any more commentary would be great. Thank you. Okay. Great. And just one follow-up for me on that. As we look at the quarter's results and your reiteration of guidance, I was hoping you could give us a little bit more on what is assumed in reaching that $40 million-plus number in terms of the timing of manufacturing improvement. I know you still called out the 500-per-month catheter metric by year-end, but have you seen a meaningful shift in catheter production yield or any notable trends since March? How should we be thinking about some of the headwinds in the second quarter? Really here just trying to get a sense of how confident you are in the continued improvement throughout the year on this front. Thank you.

David Leo Fischel, Chairman and CEO

Sure. Hi, Danny. Good afternoon. So MAGIC adoption is right now still limited by production capacity. We have sites that would like to transition 100% over. We have sites that have tried it and still have Johnson & Johnson catheters and are, for a period, choosing to use both and then gradually transition. And we have sites that have stayed only with Johnson & Johnson at this point but know that they have to transition over the coming months. Essentially, all of our sites fall into one of those three buckets. Right now, we are capacity-constrained, and so that is the main barrier. There will be sites that, as manufacturing continues to ramp — and it is getting better as the weeks go on — will completely shift over, and every procedure they do will be with MAGIC Sweep and the mapping kind of our ecosystem of catheters. There are other sites that will likely run things side by side for a period of time. And then there are others, like I mentioned, that will stay in the Johnson & Johnson ecosystem as long as they can. But essentially, they all know that over the coming months, probably over the next year, they essentially have to transition, given the available Johnson & Johnson catheters, and so that will drive a transition point. We are working really to ground-game account by account to get them over that transition, to get them comfortable and working well with MAGIC and the whole new ecosystem, and then comfortable to start ordering MAGIC in a robust fashion as they have shifted over. If you think about the ASPs that our catheter portfolio provides and you think that we are working towards 500 catheters per month by the end of this year, you can do kind of back-of-envelope math and you can see that the type of disposable revenue that we would have in a quarter around the end of this year is higher than all of our recurring revenue right now. There is a lot of benefit to the shift in business model, where you actually capture the revenue per procedure. Again, this is not charging the hospital any more than what they are used to paying; this is really just participating in the revenue that previously we did not participate in. That is the primary driver, obviously, to revenue until you can start to model things where our recurring revenue by itself is approaching the near-$10 million level. As we ramp manufacturing of catheters to that level, you will see the disposable revenue scale. On the system side, this was a particularly weak quarter from a system perspective. We still have a pipeline. We still have a backlog. We still engage with accounts both on Genesis and Genesis X. I think the majority of Genesis X accounts will be in the lease-plus-disposable-commitment category, though there are definite opportunities for outright sales as well. The Genesis system is still fully a sales model, and so that would be kind of revenue recognition upfront. That is how we are looking at the opportunity as we go through this year.

Operator, Operator

Your next question comes from Adam Maeder with Piper Sandler. Your line is now open. Please go ahead.

Nelson Cox, Analyst

Great. Thanks. This is Nelson Cox on for Adam. I guess, first, to dig in a little more on the disposable business, I was wondering if you could just kind of quantify the impact in the quarter for us, just to try to help us understand where these impacts are in the quarter? Okay, great, that is helpful. And then for my follow-up, maybe on the system side — I heard some of the discussion around the pipeline and where discussions are. I was just hoping you could dig in a little more on qualitative measures: what is the early feedback? What are the discussions like? That can kind of help us understand when you expect that first order to come in for Genesis X.

David Leo Fischel, Chairman and CEO

Sure. So MAGIC and MAGIC Sweep, the MAGIC portfolio, was very small in the quarter overall. We mentioned in our call in March that we had very little production in January and February because we were shifting over a process in the manufacturing line to a newer process which improved the yield significantly. Essentially, in January and February, the production was meant for validating that shift in the process. We did decent production in March, but most of that revenue from that production comes into April by the time it gets produced, sterilized, shipped to us, and then we can actually ship to customers and recognize revenue. So there was very little revenue in the first quarter from MAGIC and MAGIC Sweep. The primary headwind is that Johnson & Johnson has not been supplying catheters well to accounts, and so there is obviously pressure in our accounts from that. That is where the pressure on procedures from the Johnson & Johnson catheter availability versus the step-up in revenue from shifting procedures to the MAGIC environment occurs. Again, the step-up from the MAGIC portfolio should overshadow, as we start to get meaningful numbers in the second and third quarters, any pressures that we are seeing from Johnson & Johnson. Maybe I will step back a little bit and provide context for why this is a structural change that we are working through that is very beneficial as you come out on the other side of it, but is more complicated than perhaps many people appreciate. Historically, in our entire history, we have only sold our robot with an integrated magnetically modified, magnetically shielded X-ray. For all of our systems to date. We have built Genesis X such that it can be compatible with nonintegrated X-rays. That is a structural change that, as you implement it, provides you a much larger base of accounts and labs where you can place your robot. It makes the process of installing your robot much easier because you are not always installing it concurrently with a specific unique X-ray. We have done a huge amount of the work already to implement that compatibility and we are very confident in the assessments and testing to date. What we are really looking for with the first few Genesis X systems — apart from the one that we have already sold — is proving the model that Genesis X can work compatible with any of the large X-ray manufacturers. That opens you up to a whole world of capital opportunity that previously was not available to us. The first users who will work with us in that effort need to be physicians and hospitals comfortable with pioneering work and working through uncertainty and risk. We do the scientific testing and can document why there's not a material risk, but there is always some perceived risk when you are the first to demonstrate something. We are glad that we have accounts open and interested in working with us to demonstrate the robot working in this nonintegrated fashion, and that is really what we are doing with the first pioneering accounts that will serve as showplaces where Genesis X works in existing labs.

Operator, Operator

Your next question comes from Joshua Jennings with TD Cowen. Your line is now open. Please go ahead.

Josh Jennings, Analyst

Hi. Thanks, David and Kimberly. Appreciate taking the questions. I wanted to just ask about some of the Johnson & Johnson turbulence. Thinking about the MAGIC integration at these centers, what mapping platform are electrophysiologists using today when they integrate MAGIC into an ablation case? Could there be any turbulence going forward? Should we be thinking that MAGIC will be used with CARTO as well as this catheter supply relationship ends with Johnson & Johnson? Also, at HRS in the robotics symposium, I think two topics stood out. One, some of the progress on pulsed-field ablation (PFA) development. Can you share any incremental progress today? And then also some electrophysiologists were optimistic that robotics could be incorporated into cardiology ambulatory surgical centers (ASCs). Can you touch on both topics — PFA evolving with the robotic platform integrating with MAGIC, and the opportunity in ASCs for robotics? Sorry for two questions in one, but appreciate any color.

David Leo Fischel, Chairman and CEO

Sure. Good afternoon, Joshua. We have been committed to the concept of open ecosystems around our robot where you can pair the benefits of our robot with a broad range of diagnostic and therapeutic technologies, and that has been one of our commitments from the beginning to our physicians. It is the right thing for patients, physicians, and hospitals. As part of that, we integrated with Abbott's ENSIGHT system, its latest mapping technology, and we are fully integrated with ENSIGHT. That has been the predominant mapping system being used with MAGIC. There are ways to make MAGIC work with CARTO as well. We also have an integration with CARTO. MicroPort's mapping system, Columbus, is not available in the U.S. but is available in Europe and China. In the majority of cases, and definitely in the U.S. and mostly in Europe, you are seeing Abbott's ENSIGHT being used with MAGIC. Since you mentioned HRS and the Society for Cardiac Robotic Navigation symposium, that was a beautiful demonstration of how bringing new solutions to the market creates a different level of excitement in the field. Despite all of the challenges and the messiness of transition, we had about 200 people attend that session, with fantastic talks from multiple physicians and key opinion leaders. That was one of the highlights over the last few weeks and is reflective of the interest: many physicians who long thought robotics was an old and stale technology are recognizing that the technology today is different and are interested in engaging with us. On PFA specifically, we are continuing the work we outlined on our March call and remain engaged with our announced collaboration with CardioFocus. We are working on getting compatibility between MAGIC and CardioFocus' PFA generator approved in Europe. We have started regulatory engagement with a notified body and have meaningful work underway. We also have another collaboration — one we have discussed in prior calls — that is a clear opportunity for leveraging a variant of MAGIC with another generator platform. We continue to view PFA as an exciting space. During the talks at the symposium, some speakers noted that despite enthusiasm for PFA, there are various safety signals; stability of the catheter on the tissue is particularly important for PFA efficacy and safety. Our catheter stability is one of the hallmarks and a significant benefit. As you start to think about PFA in the ventricle, our ability to reach anywhere in the ventricle and stay stable on that tissue is a real advantage. On ASCs, the setting is fascinating. While the vast majority of cardiac ablation procedures are still done in hospitals, several states are seeing ASCs set up to do ablation procedures. In many other areas of medicine, ASCs have become a dominant setting for procedures. We believe the Stereotaxis robot is well suited for the ASC because of our safety profile. One of the biggest risks in moving procedures to ASCs is the lack of the same hospital safety net, and our robot provides a significant safety advantage. Currently, most ASC procedures are for paroxysmal atrial fibrillation, which is not where our robot shines. Our robot excels in procedures like PVCs and other areas where stability, safety, and navigation are more challenging. I very much hope and believe that one of the Genesis X installations this year will be in an ASC setting, which would start to demonstrate the financial and clinical merit of having a robot there. This is a long-term opportunity in the U.S., but we think there is merit to being there early and starting to demonstrate value, which could grow as ASCs adopt more complex electrophysiology procedures over time.

Operator, Operator

There are no further questions at this time. I will now turn the call back to David Leo Fischel for closing remarks.

David Leo Fischel, Chairman and CEO

Okay. Thank you very much for your questions and for your continued support. We look forward to hosting any investors visiting our facility on Thursday for our annual shareholder meeting. We will continue working hard for your benefit and look forward to speaking again soon. Thank you very much.

Operator, Operator

This concludes today's call. Thank you for attending. You may now disconnect.