Good day everyone and thank you for joining us for Stereotaxis' Third Quarter 2020 Earnings Conference. 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 and 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 in a listen-only mode. The floor will be open for questions and comments following the presentation. Also 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. Please go ahead.

Thank you, operator and good morning everyone. I'm joined today by Kim Peery, our Chief Financial Officer. The highlight of the third quarter was a successful installation of the first Genesis robotic systems at Helsinki University in Finland, and Banner University in Arizona. There's always increased uncertainty and challenge with the deployment of new technology in the real world for daily clinical use. This challenge is particularly true for complex robotic technologies being deployed and used actively at the most demanding medical institutions. We are excited that both installations were completed successfully, and that our Genesis system has performed the highest expectations of our customers. Approximately 100 patients have been treated with the systems to-date for a broad array of arrhythmias. In additional several dozen patients have had other non-robotic procedures performed in the Genesis labs leveraging our Model S Imaging System. The systems have proven to be highly reliable, with no downtime or procedures mix due to technical issues. While I recognize that solid execution is expected by the investment community, there are two practical implications I believe are worth noting. First, this accomplishment is a testament to the Stereotaxis team. Large medical device companies that have teams and budgets orders of magnitude larger than ours have often struggled to develop robotic surgery systems that can withstand the requirements of robust real world use. Their significant value to the fact that Stereotaxis can design, build, and deploy cutting edge robotic technology. We stand as one of the few companies globally with this capability across surgical robotics and the pioneer and clear leader in endovascular surgery. Our success with Genesis gives me great confidence in our other ongoing R&D efforts. Second, having the Genesis and Model S system actively used without issue at respected medical centers provides our commercial efforts…

Thanks David and good morning everyone. Revenue for the third quarter of 2020 totaled $8.7 million, a 6% increase from the $8.2 million reported in the prior year third quarter. This increase was primarily due to the delivery and installation of our first Genesis system and was partially offset by lower recurring revenue driven by pandemic related reductions in procedure volumes. The system revenue reported in the quarter does not reflect full pricing of the Genesis system and some additional portions will be recognized in the coming months during the warranty period. Gross margin in the quarter was 54% of revenue. Gross margin on recurring revenue was 86% consistent with prior quarters. GAAP gross margin on system revenue was approximately breakeven and reflects that significant allocation of overhead expenses and initial installation costs that were not reflective of cash margins or expected future GAAP margins from system sales. Operating expenses in the third quarter of $6.2 million, decreased from $6.4 million in the prior year quarter. The decrease in operating expenses reflects increased investment in R&D projects, offset by pandemic related reduction to sales and marketing activity. Operating loss and net loss during the quarter were $1.6 million with adjusted negative free cash flow of $0.2 million. The cash flow for the quarter is an improvement from our previously provided guidance for cash utilization in the year. At quarter-end, Stereotaxis had cash and cash equivalents of $43.8 million, and we now expect to end this year with over $43 million. I will now hand the call back to David.

Thank you, Kim. As previously mentioned, we are providing preliminary guidance of robust double-digit revenue growth in 2021 with Genesis system revenue of between $10 million to $20 million. Gross margin for system revenue is expected to be more normalized and approximately 40% with room for future improvement with increased volume. We continue to invest in the team infrastructure and projects that are critical for success. We're proud that we are able to advance a robust innovation and commercial strategy while maintaining financial discipline. We look forward to now taking your questions. Operator, can you please open the lines to Q&A?

[Operator Instructions] And we'll first hear from Frank Takkinen of Lake Street Capital Markets.

Hi, thanks for taking my questions and congrats on all progress in the quarter. Just a couple from you today. So first I want to talk about the 2021 installs. Some backing into a number between about 7 to 13 systems next year, I've heard your comments about 50% replacement, 50% Greenfield give or take. So my question is one could you kind of talk to the different levels of guidance between the $10 million and the $20 million, and what's driving the - maybe a little bit larger range then I would expect this given between $10 million and $20 million? And then two, could you talk to the replacement cycle longer-term getting back to that 10 system per year replacement cycle level?

So first, I would say that your SP that you're using to estimate 7 to 13 systems is probably conservative. And so those numbers of systems you'll probably have higher revenues than what you're estimating, just as kind of one comment. At second, at the large range is really driven by the fact that we're rebuilding a capital sales capability at Stereotaxis. And so when you're doing so, you want to be conservative in terms of your ranges, you don't want to assume just because you're having advanced discussions or things are in late stages of negotiations, you don't want to assume necessarily that all of those are going to come through. And then - and so there is uncertainty with every individual process, there is uncertainty. Unfortunately there is sufficient number of activities taking place at multiple hospitals. And that is then - and that kind of gives us that confidence with that range. But again, it's hard to give pinpoint answers. We're not yet a company that has a history of selling dozens of systems a quarter where you can do find statistical analysis of where exactly every order is and how exactly it's likely to play out. And so that's kind of the justification for the range. If you think about kind of replacement cycle. It's actually interesting that if we look at kind of some of those advanced discussions that are taking place, it runs a spectrum from pure replacement cycles and to second labs and existing customers to complete new Greenfield customer's and then - and so there is that mix, I still think that a 10 per year back of the envelope and replacement cycle opportunity is completely valid. One thing that has been interesting watching hospitals re-enter a period where they can start to think about budgets, they can start to kind of consider again, capital spending, and kind of play games for their labs. Is that - I think that the pandemic - obviously it froze everyone earlier this year. But as some of the hospitals start to get back to normal planning, they prioritize building new labs more than they prioritize replacing older equipment. And so I wouldn't be surprised if - obviously, we saw today's news on Pfizer vaccine and let's see how kind of things evolved from a macro perspective. But I wouldn't be surprised if there is a return to new lab build outs which provide a real economic boon for the hospital. Since electrophysiology departments are a large revenue driver for hospitals, I wouldn't be surprised if those return a little bit more quickly than pure replacement plans were when you have an existing lab, and you're planning to replace the x-ray and to replace the lab equipment. And again, less things are breaking down, those are things that might be pushed out further by hospital administrators.

Just two more from me. And then on the Model S Imaging offering with the system, I was hoping you could just give us some feedback, you've heard from the first two installs on that. And then just kind of frame the importance of the Model S Imaging add-on for the installs in 2021?

Sure, so as a reminder the Model S Imaging system is a single plane fluoroscopy system. And that was developed by omega medical imaging in conjunction with Stereotaxis. And what allows us to do is, it allows us to provide a hospital's with a complete lab solution, a complete robotic lab solution and we're able to bundle it together and offer hospitals a significant cost savings over what previously establishing a robotic lab would cost them. And provide also a better experience by having one architectural planning team, one installation team, one service team, and one service contract, one purchase contract, and so that has really been kind of one of the core parts of our strategy of our innovation strategy and commercial strategy is taking on that type of responsibility and control. And I think that there is obviously when you start to deploy fluoroscopy systems that don't carry the name of a large, large and global company with it, there is more questioning and concern. And I think that kind of we're glad that we can have existing potential customers look at labs like [Banner and Helsinki] and see that x-ray is able to work well across a range of procedures. And there has been - we're continuing to also refine products and to improve the product offering based on feedback and overall we're thrilled with how things are going.

And then just last one for me on the utilization of the system. Sounds like over 90 procedures out of the first two installed systems is tracking fantastically from a utilization perspective. Just curious if you could share with us your learnings about how some of these - how you believe utilization could trend following install versus the utilization of your currently installed base of Niobe Systems?

I think it's still a little bit premature to write both the procedure volumes that's Helsinki and Banner are above our average. I don't know whether to allocate that though to the customers involved and the physicians involved or whether it's driven by Genesis versus Niobe. And so I think it's a little bit too premature to come up with kind of models for that at this point. I apologize.

Next, we'll hear from Josh Jennings of Cowen.

Thanks David, and congratulations on getting those initial Genesis systems up and running. We're looking - just to ask a question on the timing of your guidance issuance for 2021. I think it implies that the sales funnel is in a very good place, and these discussions you're having with potential hospital purchasers of Genesis are going extremely well. But I was wondering you give us any kind of color in terms of the timing decision to issue guidance today. And then any incremental details on the placement pipeline is it spread out between U.S. and international customer base evenly that will be great.

So, I think the rationale for providing that kind of a guidance on the system side today is really driven by the fact that I recognize that it is important for the investment community to have additional color on that. I think we feel that we're in a position where we can provide such color. And given that the next call is likely only to be in four months, that leaves a large gap where we would be - we would have a feeling for how things are going and you know wouldn't be able to communicate that until March when the next earnings call takes place. And so just felt like the right thing to provide kind of some directional color as people start to look towards next year. And we obviously didn't provide guidance on operating expenses or on kind of - on kind of other aspects of the business but I thought kind of, since again Genesis is our first wave of revenue growth and made sense to provide kind of a more clarity on how that is going. And in terms of kind of the split between Europe or the U.S. or between kind of replacement cycle and others. And I do very much see it kind of distributed fairly equally between the two regions the two broader global regions. And between this mix like prebuild new completely - new customers, like the order that we announced that we received already from the U.S. And there are kind of late, late, late stage tenders and which kind of also, this one is a Greenfield tender in Europe. And then also kind of replaced some project and so I think kind of obviously, with any individual deal can kind of - can push the numbers significantly in one bucket versus the other, given the number of deals that we're talking about. But I expect kind of a roughly equal mix between those two.

Excellent, no that’s great.

And something like a second robotic lab and an existing customer. I don't know where that exactly gets categorized that falls somewhere in between both, right.

Understood, understood and thanks for that. And understand that your timing, timing makes a lot of sense. But also just want to confirm as a follow-up that your ability to issue the 2021 guidance today is because you have through your discussions with these potential hospital customers, you feel like the sales funnel is in a very good place. And you had good discussions, and there haven't been any cancelled discussions over the past six months for potential customers?

Yes, there's several hospitals that are in later stages of negotiating with us. And one have confirmed with us inclusion of a robotic program in the 2021 budget. And so, those are the types of factors that guide our decision making.

Excellent - so it's great to hear. And then just on the terms of the sales funnel and the evolution over the last number of months, and as you see it going forward the telerobotic capabilities in the era of COVID is that driving some incremental demand or even moderate demand. Do you think or do you choose partnership in terms of AC mapping integrated into Genesis? How are those two buckets kind of helping build demand here?

I think those are all part of it, I don't think anyone is individually changing the dynamics in a dramatic fashion. But we are thrilled with our collaboration with Acute is and that's kind of a collaboration that is growing and becoming stronger. And there we're also going to be - releasing soon integration of contact mapping capabilities between our robotic system and their mapping system. And so I think kind of - there's a clear positive influence that I think both companies have on each other. And so that has obviously been kind of one helpful dynamic and the whole telerobotic capability I think there is a little bit of a positive halo effect. Where customers see that that is a positive way for the future to evolve and they like seeing that and they'd like to see that activity. I'd also say that that's probably not the main driver of their - not even a very significant driver of their purchasing decisions at this time. And what it has allowed us to do these telerobotic capabilities like I described a little bit in the prepared remarks, it has allowed us to really continue engaging with customers in a regular fashion. And despite the restrictions on travel, despite the lack of conferences, and we're able to have a very robust kind of dialogue with a broad range of customers. And have to say from a personal perspective, this has been kind of one of the most exciting periods of my time at Stereotaxis given how much interaction I'm able to have with customers, and yet how efficiently that's able to happen. And so really kind of my two biggest kind of a enjoyment and I’m working with R&D team and working with customers can both take place kind of simultaneously throughout the day and both kind of in a very robust fashion.

And just one last question from me. I understand in terms of how your team is decided on disclosing some pipeline indication developments. But maybe, if I could ask, just from a high level, how would you have the investment community think about the evolution of the pipeline? Is the development team working on multiple indications at once or is the focus on a single indication at a time and just building on new indication say - so just as an example neurovascular? And then moving on to the next indication I guess from a high level, just how would you have the investment community think about next indications, and then how the development team is pursuing those? Thanks a lot.

Sure, and so the comment on the third wave was really to - I recognize that obviously, revenue models are being built upon the first wave of innovation, which is Genesis, the second wave of innovation, which is the proprietary ablation catheter. And I just kind of - wanted to make clear that there has been a significant derisking of some of the activity in that third wave over the last few months, which makes me much more excited about that actually having a positive impact on revenue growth, kind of in the coming quarters. And so we hope to be able to share more with you next year at the end of next year. And then, and that has implications both in electrophysiology and outside of electrophysiology. When we think about indications outside of electrophysiology, I would think more along the lines of you won’t have tools that can be used across several indications. And so, if you can - imagine interventional devices that are not necessarily one indication specific. But that allow a range of physicians to experiment with the benefits of improved navigation, improved stability, improved precision, ability to navigate complex, kind of torturous anatomy, that kind of, you want tools that allow that. And then you provide physicians the ability to experiment where necessarily, where the clinical value is best. And obviously, we do that with certain indications in mind where we expect the clinical value to be best. But you want kind of to provide the tools that allow physicians to also - and experiment for themselves and develop clinical indications where - we might not have necessarily thought about it.

Next question, Jason Wittes of Northland Capital Markets.

Kim follow-up on Genesis sales for next year especially, you've gone from selling one or two systems a year actually maybe one in 2018, one in 2019 for my estimates to now you’re going to do, it sounds like seven to 15 perhaps more. Is there a change, first of all, two questions related to that one, how long is the sales cycle on these? And secondly, in terms of your sales force, has it been reorganized or what is the sales support behind the Genesis sales effort at this point?

Sure, and so the sales cycle can be very variable, and it depends really on kind of the hospital and their - how the parallel tracks of preparing a room for installation or for replacement verses and contractual negotiations take place. And in certain hospitals, one leads the other and in other times the other will lead. And I would kind of expect generally a timeline of about, let's say three to nine months from order till kind of installation, revenue recognition. And then if you see kind of both orders in Helsinki and Banner, and you wrap right around the middle of that. And we have kind of - there are all kind of cases in mind right now, where I can imagine that being much shorter, and others where it could be longer, but I would kind of use that three to nine months is probably a good metric. And I would also just remind again, that when we announced orders, those are firm, firm orders. So unlike sometimes other capital equipment, companies will report backlogs and order books, and kind of those orders could be cancelled. In our cases, cancellation would be a - have financial consequences for the customer and so, kind of orders are expected to be very, very firm orders. And on the sales force yes.

Sorry. Go ahead.

So we still have a relatively modest sales force. And with the vast majority of the sales team focused on clinical adoption supporting existing customers, ensuring that they can do procedures, that they can get trained, as the nursing and support staff at the hospital is kind of running efficiently. And so, that is still the vast majority of our sales team. We have several individuals who are predominantly focused on capital sales, including sales management. And we have experimented with some additional kind of marketing relationships or co-marketing relationships to try to improve kind of top of funnel activity. And we are cognizant that - at some point, as you want to - you want to become a company that doesn't sell individual systems every quarter or few systems a quarter, you want to become a company that can sell 100 or 100s of systems a year. And that requires both improvements to and obviously augmentation of the commercial capabilities, and improvements from an innovation perspective to the product offering. And then - and so we're very much working towards that type of future where we can do that. I don't think that you're going to see us grow the sales force in perhaps the more traditional way of just hiring, and many capital reps and sending them to fly out constantly to knock on doors. We're trying somewhat more creative things right now. And we're also constantly assessing the external, macro-environment. So if we assess the - so as we assess both the external environment and we work internally on certain commercial capabilities or tools, and innovation efforts that we can get us to that kind of point of being able to sell kind of order magnitude more systems.

Okay, when you talk about collaborations at the top of the funnel, you're talking about things such as your relationship with Acutus. Is that the way we should be thinking about it?

That would be a reasonable guess.

Okay. And then I don't know if I can push you on. So 2021, you will have the ablation catheter that we see [e-marks]. And then you'll also it looks like you'll have the FDA submission, or IND. Is this, in terms of Europe at least is this more of a second half eventually or how can we pinpoint it more in terms of when it might hit the numbers?

Yes, we still obviously there is a lot of moving parts in getting a catheter regulatory approved. I would assume from a revenue perspective, I would not put anything in the first half.

Okay, and related to the earlier question, I know you've talked about when the disposables or the recurring revenue stream gets - I guess large enough per procedure, you would think about adding sales people? Does this ablation catheter gets you there, obviously not in the U.S., but in Europe. So is there - I suppose you'll see how it goes, but assuming it goes well, does that support additional salespeople?

Yes as I mentioned before, one of the challenges of Stereotaxis is that from a commercial team perspective, and larger companies in this field, as well as many other medical device fields, do hire sales people, almost dedicated per hospital. And they're able to justify that given the revenue per procedure. That would be something that we could do now it would boost our procedure volumes now. But it would be a highly under accretive strategy with a new catheter volumes below our average volume per account, having a salesperson per account would be very much and financially feasible. That doesn't mean that you necessarily want to do that in every account, but it means that you have the flexibility now to be much more aggressive on the commercial team.

And then on capital budgets, it sounds, like that's not been an issue and your discussions with hospitals? It sounds like other than the comment, that there more particular?

It has been an issue, there are still many hospitals out there that are suffering and having difficulty and planning for things that they previously weren't planning for, and/or that have pushed out replacements for their labs for a few years. So, there is definitely still stress in the market. I think kind of what I tried to convey in the prepared remarks is that there is a return to more normal capital planning.

Okay.

At that - a range of hospitals, but there are definitely others that are still suffering.

So thanks for clarifying that. And also, I guess, last question, you mentioned, you've got these sites up and running congratulations. And it sounds like they're running quite smoothly, which is also impressive, given some of the other capital equipment companies out there and the complexity of this system? Do we take it that - a lot of - your customers are on the sidelines. And actually, I don't know if they can actually bid at this point, but are clear looking for - sounds like they're going to clearly look for that stability or that or couple test subjects before they want to pull the trigger on any system. Is that kind of been - how some of your discussions have went and I'm characterizing this correctly?

Yes, I think that there is a level of confidence that comes from seeing not just from hearing that we have installed the systems at Stereotaxis headquarter, and we have tested them. And we've done and more studies on them, but seeing that the peers who aren't compensated by Stereotaxis who are kind of independent, that they're using it in day-to-day fashion with similar patients to what you as a potential physician customer would be looking to use it with. And then and that it's been working smoothly, I think that is kind of that does provide a lot of confidence to physicians and those at the hospital. And then - and so that's - that kind of while they can’t, while travelling is largely restricted. And using our telerobotic capabilities, we can allow a visiting, kind of physician so to speak to virtually visit and view a procedure at Banner or Helsinki. And obviously with Banner or Helsinki’s permission and then obviously just by phone discussions - and between the physicians also helps.

Okay, and then last quarter, you did mention I think you did something like over 200. But you marked something like over 200 demos. I don't know if you care to update that number, how it progressed this quarter?

You mean the telerobotic visits to St. Louis.

Yes.

We're hosting physicians - so yes we've had by now over 250 individuals, physicians, hospital administrators and - who visited us over the last I guess by now it's about nine months or so since we started that.

[indiscernible] Waterloo Partners.

My question is this, I'm just curious when you're - and we talked about this earlier once before, you're talking to the hospitals about enhancing the ROI on the machines. To what extent are you able to convince or is it such that there are procedures that currently cannot be ablated? And as you go from Niobe to Genesis and perhaps from the Johnson & Johnson catheter to your own proprietary? Does that pool of you know conditions where you cannot do manual ablation, does the robot then allow you to perform a robotic procedure so it can be done?

Yes, so actually, we did implement on our website on the hospital page of our website. We did implement kind of a short form of an ROI calculator that's actually open access for anyone. And we have a more sophisticated model behind that that we do share with hospital customers. And that was just implemented and kind of completed over late summertime. And the core aspect of an ROI calculation is being able to do more procedures, and doing more procedures can either take place, because we're able to help physicians treat patients that otherwise wouldn't be good candidates for cardiac ablation with manual catheters, or by attracting patients. And what's nice at least, and obviously, internationally, every country is different, and reimbursements are different in every country but in the U.S., the average - Medicare reimbursement and private payment reimbursement is overall very attractive for hospitals. And you need very few, very few incremental procedures a year, definitely less than one a week to have IRS in the 10s of percentages, in the 50% range. And then - so that is a core part of our ROI discussion with hospital administrators. And then I don't think Genesis necessarily changes that, I think the catheter does allow us to change some of the dynamics there. But I'm not sure Genesis versus Niobe, change that ROI calculation. But we have been, as I've mentioned something before, we're building out a whole range of tools and capabilities and infrastructure that allows us to become a company that can sell dozens, hundreds of systems a year. And that's obviously one small part of that infrastructure, which we've now implemented.

I see one other question. It seems like you are - you like you enjoy marketing and sales, which is great. I'm curious - is there a head of sales at the company? And also, what is your - how many people do you have in sales - and how many are in Europe versus the U.S.?

Sure. So we have a head of a North American commercialization, EMEA commercialization, and Asia Pacific commercialization. And then we have about depending on how you count sales team, we have about 40 individuals globally, that includes things like training, a kind of, obviously, a lot of that is clinical support for procedures, and sales management. And about, about a dozen of those are in Europe, and less than a handful in Asia, and the rest in North America.

[Operator Instructions] We'll now hear from Christopher Hillary of Roubaix.

I just wanted to ask you, it seems like your outlook and your visibility has improved? Do you feel like something has changed over this most recent period of time? Or is it simply the passage of time and the cumulative efforts that you've been doing on research and sales?

So I think kind of if you remember in the beginning of March, when we had our annual call this year, we were fairly bullish about the level of activity across multiple hospitals, and that were kind of seriously planning for installation of Genesis, and then obviously, kind of pandemic heroes from left field and that throws a lot of those discussions kind of through April, May, June, July. We've been able to restart many or several of those conversations, and we've had other conversations that have emerged. And that gives us the confidence now that the environment is still pressured but there is sufficient activity that allows us to feel kind of that type of confidence.

Great. Real tribute to your product that you can see that despite the challenging backdrop for your customers.

Thank you.

It's a big world, we're still a very small fish in a very, very big ocean. So again, at some point, and, you know, kind of very intuitive is still selling 100 plus systems a quarter. That's really kind of the goal we have to go to, but it's a step-by-step process. And so kind of we’ll continue.

[Operator Instructions] And it appears there are no further questions at this time.

Okay, thank you for all your questions and for your continued support and interest. We wish you a healthy and successful end of the year and look forward to speaking with you in 2021. Thank you.

That does conclude today's conference. Thank you all for your participation. You may now disconnect.