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Stereotaxis Inc. Reports Operating Results (10-Q)

August 09, 2011 | About:
10qk

10qk

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Stereotaxis Inc. (STXS) filed Quarterly Report for the period ended 2011-06-30.

Stereotaxis Inc. has a market cap of $157.1 million; its shares were traded at around $2.85 with and P/S ratio of 2.9.

Highlight of Business Operations:

Revenue. Revenue decreased from $15.0 million for the three months ended June 30, 2010 to $11.6 million for the three months ended June 30, 2011, a decrease of approximately 23%. Revenue from the sale of systems decreased from $9.4 million to $5.0 million, a decrease of approximately 47%, primarily due to a decrease in the number of NIOBE systems sold. We recognized revenue on three NIOBE systems and a total of $1.6 million for ODYSSEY and CINEMA systems during the 2011 period, versus seven NIOBE systems and a total of $2.5 million for ODYSSEY and CINEMA systems during the 2010 period. Revenue from sales of disposable interventional devices, service and accessories increased to $6.6 million for the three months ended June 30, 2011 from $5.6 million for the three months ended June 30, 2010, an increase of approximately 18%. The increase was attributable to the increased base of installed systems, the resulting disposable sales and service contracts, as well as favorable pricing.

Cost of Revenue. Cost of revenue decreased from $4.9 million for the three months ended June 30, 2010 to $3.5 million for the three months ended June 30, 2011, a decrease of approximately 29%. Cost of revenue for systems sold decreased from $4.3 million for the three months ended June 30, 2010 to $2.5 million for the three months ended June 30, 2011, a decrease of approximately 42%. This decrease was primarily due to a decrease in the number of NIOBE and ODYSSEY systems sold. Cost of revenue for disposables, service and accessories increased from $0.6 million for the three months ended June 30, 2010 to $1.0 million for the three months ended June 30, 2011, an increase of approximately 63%. As a percentage of our total revenue, overall gross margin increased to 70% for the three months ended June 30, 2011 from 67% for the three months ended June 30, 2010 due to a shift from systems revenue to recurring revenue. Gross margin for systems was 50% for the three months ended June 30, 2011 compared to 54% for the three months ended June 30, 2010. The decrease was primarily due to a change in product mix from NIOBE to ODYSSEY systems. Gross margin for disposables, service and accessories was 85% for the current quarter compared to 89% for the three months ended June 30, 2010 due to higher costs associated with software upgrades in 2011 compared to 2010.

Revenue. Revenue decreased from $25.6 million for the six months ended June 30, 2010 to $21.8 million for the six months ended June 30, 2011, a decrease of approximately 15%. Revenue from the sale of systems decreased from $14.7 million to $9.3 million, a decrease of approximately 37%, primarily due to a decrease in the number of NIOBE systems sold. We recognized revenue on four NIOBE systems and a total of $4.3 million for ODYSSEY systems during the 2011 period, versus eleven NIOBE systems and a total of $3.3 million for ODYSSEY systems during the 2010 period. Revenue from sales of disposable interventional devices, service and accessories increased to $12.5 million for the six months ended June 30, 2011 from $11.0 million for the six months ended June 30, 2010, an increase of approximately 14%. The increase was attributable to the increased base of installed systems, the resulting disposable sales and service contracts, as well as favorable pricing.

Cost of Revenue. Cost of revenue decreased from $7.8 million for the six months ended June 30, 2010 to $6.5 million for the six months ended June 30, 2011, a decrease of approximately 17%. As a percentage of our total revenue, overall gross margin improved to 70% for the six months ended June 30, 2011 compared to 69% during the same six month period of the prior year, due to a shift from system revenue to recurring revenue. Cost of revenue for systems sold decreased from $6.4 million for the six months ended June 30, 2010 to $4.7 million for the six months ended June 30, 2011, a decrease of approximately 26%, primarily due to the decrease in the number of NIOBE systems sold. Gross margin for systems was 49% for the six months ended June 30, 2011 compared to 56% for the six months ended June 30, 2010. Cost of revenue for disposables, service and accessories increased to $1.8 million during the 2011 period from $1.5 million during the 2010 period, resulting in a decrease in gross margin to 85% from 87% between these periods. This decrease in cost of revenue was primarily due to higher costs associated with software upgrades in 2011 compared to 2010.

Under the 2010 amendment to the loan agreement, the Company entered into a $10 million term loan maturing on December 31, 2013 with $2 million of principal due in 2011 and $4 million of principal due in each of 2012 and 2013. Interest on the term loan accrues at the rate of prime plus 3.5%. Under this agreement, the Company provided its primary lender with warrants to purchase 111,111 shares of common stock. The warrants are exercisable at $3.60 per share, beginning on December 17, 2010 and expiring on December 17, 2015. The fair value of these warrants of $228,332, calculated using the Black Scholes method, will be deferred and amortized to interest expense ratably over the life of the term loan.

In July 2008, the Company and Biosense Webster entered into an amendment to their existing agreements relating to the development and sale of catheters. Pursuant to the amendment, Biosense Webster agreed to pay to the Company $10.0 million as an advance on royalty amounts that were owed at the time the amendment was executed or would be owed in the future by Biosense Webster to the Company pursuant to the royalty provisions of one of the existing agreements. The Company and Biosense Webster also agreed that an aggregate of up to $8.0 million of certain agreed upon research and development expenses that were owed at the time the amendment was executed or may be owed in the future by the Company to Biosense Webster pursuant to the existing agreement would be deferred and will be due, together with any unrecouped portion of the $10.0 million royalty advance, on the Final Payment Date (as defined below). Interest on the outstanding and unrecouped amounts of the royalty advance and deferred research and development expenses will accrue at an interest rate of the prime rate plus 0.75%. Outstanding royalty advances and deferred research and development expenses and accrued interest thereon will be recouped by Biosense Webster by deductions from royalty amounts otherwise owed to the Company from Biosense Webster pursuant to the existing agreement. The Company has the right to prepay any amounts due pursuant to the Amendment at any time without penalty. Approximately $18.0 million had been advanced by Biosense Webster to the Company pursuant to the amendment. As of June 30, 2011, $11.6 million of royalty payments owed by Biosense and $3.6 million in supplemental payments had been used to reduce the advances together with the accrued interest thereon and the remaining approximately $4.7 million of amounts owed to Biosense Webster has been classified as short-term debt in the accompanying balance sheet. The Company recorded interest expense of $0.1 million and $0.2 million and disposables, service and accessories revenue of $0.9 million and $1.8 million for the three and six months ended June 30, 2011, related to this agreement.

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