STXS

Good afternoon. Thank you for joining us to Stereotaxis' First Quarter 2026 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. At this time, all participants have been placed on a listen-only mode.

The floor will be open for questions and comments following the presentation. As a reminder, today's call is being recorded. It is now my pleasure to turn the floor over to your host, David Fischel, Chairman and CEO of Stereotaxis.

Thank you, operator. Good afternoon, everyone. Stereotaxis has had an amazing start to this year. While our reported quarterly numbers don't yet reflect it, we're 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'll touch upon the key areas of progress, the commercial green shoots, and the opportunities ahead of us. Kim 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 20 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 we structurally change our opportunity. We essentially developed a fresh new startup 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. 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 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, failed multiple attempts to be treated with manual catheters, and was now successfully treated using MAGiC.

The most beautiful example for 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've 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're seeing meaningful progress, and our contract manufacturer still expects production to top 500 catheters a 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, and we are 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 above $8,000 per procedure and always above $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 worth of procedures.

These amounts are in line with the EP 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 J&J 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 GenesisX, the new robotic system that we received FDA clearance for at the end of last year, and which doesn't require construction to be installed in existing cath labs.

We have a healthy pipeline of physicians and hospitals that are working towards orders for GenesisX and who are prepared to be the first to demonstrate it installed rapidly in existing labs while working compatible with non-modified 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 GenesisX 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 solutions 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're 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. Everything is moving in the right direction, and we are efficiently driving broad-based progress on many fronts in parallel. We're doing this while weaning ourselves away from the dependencies and challenges of our legacy business. It's a tough transition. We are building a very attractive business on solid foundations. What is particularly exciting for me is that we aren't 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, EP, neuro, cardiac, and peripheral, with a matching portfolio of advanced interventional devices.

It means embedding these robots with the digital innovation, such that they not only mechanically manipulate devices, but add intelligence, connectivity, and automation to make procedures smarter, better, and quicker. This isn't an idle vision. We established a solid foundation for it with our initial portfolio of products. We've 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 GenesisX robot that is fully wireless, battery-operated, and mobile. We've 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. The second, a rehaul of our automated navigation software, so a physician simply designs a procedure and the robot executes it. A specific project here is with a larger industry partner who sees the opportunity for automation to offer the most efficient and yet personalized patient-specific therapy. 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're 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 paths, and stepping stones of progress along the path have become increasingly clear to us. We are energetically and enthusiastically advancing forward. Kim will now provide commentary on our financial results, and then 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 first quarter of 2026 totaled $6.3 million, compared to $7.5 million in the prior year first quarter. System revenue of $1.3 million and recurring revenue of $5 million, compared to $2 million and $5.5 million 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 first quarter of 2026 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 non-cash charges for stock compensation expense, mark-to-market adjustment for acquisition-related contingent earn-out consideration, and amortization of acquired intangibles. Excluding these non-cash 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 in the first quarter of 2026 were $6 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 non-cash 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 31st, Stereotaxis had cash and cash equivalents of $14.6 million and no debt. I will now hand the call back to David.

Thank you, Kim. 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 of above $10 million a quarter. From a financial perspective, we're 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 time needed to build momentum with recurring revenue. We have invested significantly in inventory that supports meaningful GenesisX and Synchrony revenue and maintain a clean balance sheet. We continue to pursue strategic opportunities for non-dilutive, non-debt 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 a commercial ramp, and achieve profitability. We'll now take your questions. Operator, can you please open the line to Q&A?

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

Yeah, great. Thanks for taking the questions. Just for my first one on catheters. You mentioned some initial green shoots, and I know it's still early days, but for your customers that have started to use the MAGiC portfolio, I know you commented you're seeing revenue per procedure above $5,000, sometimes around $8,000, which is great to hear. 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.

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 J&J catheters and are kind of, you know, for a period would like to use both and gradually transition. We have sites that have stayed only with J&J at this point, but know that they have to transition over the coming months. Really kind of, all of our sites fall into one of those three buckets. Right now we're still capacity constrained, that is the main barrier. There will be sites where as manufacturing continues to ramp, and it is getting better as the weeks go on.

As manufacturing continues to ramp, there will be sites that will just, you know, they've completely shifted over and every procedure they do will be with MAGiC, MAGiC Sweep and Map-iT kind of, our ecosystem of catheters. There are other sites that will likely run things side by side for a period of time. There's others, like I mentioned, that kind of will stay in the J&J ecosystem as long as they can. Essentially, they all know that over the coming months, probably over the next year, they essentially have to transition, given the availability of J&J catheters. That kind of will drive a transition point.

We're 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 kind of comfortable to start ordering MAGiC in a robust fashion as they've shifted over.

Okay, great. Just one follow-up from me on that. Just, you know, as we look at the quarter's results and your reiteration of guidance, I was hoping you'd 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 monthly catheter metric by year-end, but, you know, have you seen a meaningful shift in catheter production yield or any notable trends since the end of March? How should we be thinking about some of these 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.

Yeah, sure. If you think about the ASPs that our catheter portfolio provide, and you think that we're working towards 500 catheters a month by the end of this year, you can do kind of back-end envelope math, and you can see that the type of just 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. That's there is a lot of benefit to the shift in business model where you actually capture the revenue per procedure. And again, this is not with charging the hospital any more than what they're used to paying. This is really just participating in the revenue that previously we didn't participate in. That's the primary driver, obviously, to revenue.

You can start to model things where our recurring revenue by itself is reaching the near $10 million or so level as we ramp manufacturing of catheters to that level. On the systems 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 GenesisX. I think the majority of GenesisX accounts will be in the lease plus disposable commitment category, though there are some definite opportunities for sales there, but the Genesis system is still fully a sale, that would be kind of revenue recognition up front. That's kind of the way we're looking at the opportunity as we go through this year.

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

Great. Thanks. This is Kyle on for Adam. I guess first to dig in a little more there on the disposable business. I was wondering if you could just kind of quantify the impact in the quarter for us, just to kind of try to help us, you know, understand where these impacts are in the quarter.

Sure. MAGiC and MAGiC Sweep, the MAGiC portfolio was very small in the quarter overall. I think like we mentioned in our call in March, we had very little production in January, February because they were shifting over a process in the manufacturing line to a newer process which improved the yield significantly. Essentially in January and February, the entire all production was meant for validating that shift in the process. Then we did have decent production in March, but that was most of the revenue from that production comes into April by the time it gets produced and sterilized and shipped to us, and then we can actually ship to customers and recognize revenue.

There was very little revenue recognition in the first quarter from MAGiC and MAGiC Sweep. The primary headwind is that Johnson & Johnson has not been supplying catheters well to accounts, there's obviously a pressure there in our accounts from that. That's kind of where the pressure on procedures from the Johnson & Johnson catheter and behavior versus the step up in revenue from shifting procedures to the MAGiC environment. That's kind of the give and take that's happening in our disposable revenue right now. The step up from the MAGiC portfolio should overshadow as we start to get meaningful numbers in the second quarter, third quarter. Should overshadow by far any pressures that we're seeing from Johnson & Johnson.

Okay, great. That's helpful. For my follow-up, maybe on the systems side, you know, heard some of the discussion around, you know, the pipeline and where discussions are. I was just hoping you could maybe dig in a little more, if you could just give kind of more on the qualitative measures. Just what's the early feedback? What are those discussions like? Maybe that can kinda help us understand, you know, when you expect that first order to come in for GenesisX.

Yep, sure. Maybe I'll step back a little bit and provide, again, 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 have appreciated till now. Historically, in our entire history, we have only sold our robot with an integrated, magnetically modified, magnetically shielded X-ray, all of our systems to date. We have built GenesisX such that it can work compatible with non-integrated X-rays.

That is a structural change that, as you implement it, provides you a much, much bigger base of accounts and labs where you can place your robot, and it makes the process of installing your robot much, much easier because you're not having to always install it concurrent with a specific unique X-ray. Implementing that, we obviously did receive our first order for GenesisX last year. We shipped the system. The system is awaiting installation at an account. That was done according to the historical model, which we'll still continue to do, where we sell our robots concurrent with selling magnetically shielded and integrated X-rays. That's kind of how all Genesis sales are still being done.

That's how we did the first GenesisX shipment as well. Making GenesisX such that it can work compatibly with the broad range of X-rays from the major X-ray manufacturers is a big effort. We've done a huge amount of that effort already. We're very confident in the assessments and testing that we've done to date. What we're really looking right now for the first few GenesisX systems, apart from that one that we've already sold, is proving the model that GenesisX can work compatible with any of the large X-ray manufacturers. That, to some extent, opens you up to a whole world of capital opportunity that previously was not available to us.

The first users who are going to work with us in that effort are obviously need to be physicians and hospitals who are comfortable in that type of pioneering work and in the kind of working through the uncertainty and the risk. We obviously, through all the kind of scientific testing, we can explain, and we can document why there isn't a real risk. There's always a somewhat of a risk when you're the first ones to demonstrate something. We're glad that we do have accounts that are kind of open and interested in working with us to demonstrate the robot working in this non-integrated fashion.

That's really what we're doing with these first kind of pioneering accounts that are gonna start using GenesisX and serving as some of the show places where GenesisX works in existing labs.

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

Hi. Thanks, David and Kim. Appreciate taking the question. Wanted to just ask about some of the Johnson & Johnson turbulence and just thinking about the MAGiC integration at these centers. You know, what mapping platform are electrophysiologists using today when they integrate MAGiC into ablation case. Could there be any turbulence going forward? I mean, should we be thinking that MAGiC will be used with CARTO as well as this catheter supply relationship ends with J&J?

Sure. Good afternoon, Josh. So we've been committed to the concept of open ecosystems around our robot, where you can pair the benefits of our robot with the broad range of diagnostic and therapeutic technologies out there. That has been kind of one of our commitments from the beginning to our physicians. It's the right thing for patients, for physicians, for hospitals, and overall for the progress of medicine. As part of that, we integrated with Abbott's EnSite X system, its latest mapping technology, and we're fully integrated with EnSite, and that has been the predominant mapping system that is being used with MAGiC. There are some ways to make MAGiC work also with CARTO, and we also obviously have a full integration with MicroPort's mapping system, Columbus.

That is not available in the U.S., that is available in Europe and in China obviously. There are kind of some others, in the majority of cases and definitely in the U.S. and mostly in Europe, you're seeing EnSite X being used with MAGiC, Abbott's EnSite X system.

Thanks for those details. Also at HRS, you know, in the robotics symposium, I think two topics we were impressed with. I mean, one, just some of the progress on the PFA development. If you could just share any incremental progress today. Then also, there seemed to be optimism from some electrophysiologists that are already involved in the cardiology ASCs or cardiology ambulatory procedure centers that robotics could be incorporated. Sorry for two questions in one, but maybe you could touch on both of those topics and how you see the PFA evolving with robotic, on the robotic platform and integrating in the MAGiC catheter and then also, just the opportunity in ASCs. Thanks for taking the questions.

Sure. Thanks a lot. Yeah, I'll definitely touch upon both PFA and the ASC setting. Maybe before that, just since you mentioned HRS and the Society for Cardiac Robotic Navigation symposium that happened at HRS, I mean, that was a beautiful demonstration of how the fact that we are innovating and bringing new solutions to the market does create a different level of excitement in the field. There With all of the challenges and all of the messiness to the transition, we had at HRS about, I don't know, it was a huge room and probably about 200 or so people who came. At the far end, you had to walk all the way at the end of the hallway in order to get to the room of SCRN.

Right, you had probably about 200 or so people who attended that session with fantastic talks from multiple physicians and KOL physicians. That was kind of a really nice event. I think it's reflective generally of the type of interest. We're still a small player in the EP field, but there is a renewed interest from many physicians who long had thought that robotics was an old technology and a stale technology, and are interested and kind of, starting to recognize that the technology that they remembered is not anymore how it is today, and the opportunity is there for them to actually engage with us in a much more meaningful way.

That was one of the highlights, obviously, of the last few weeks as the whole HRS conference, neuroconferences, and then specifically the SCRN session there. If we look at PFA specifically, I know I didn't include any discussions about that in the prepared remarks, not because there's anything negative, just because we're continuing as we've discussed in the March call, and we had enough other things to speak about on this call. We're still working, obviously with CardioFocus. We have the announced collaboration. We're working on the effort of getting compatibility between MAGiC and CardioFocus' generator, PFA generator approved in Europe. We've done kind of meaningful work and started actually the kind of regulatory engagement with a notified body. That's kind of clearly underway.

We also have kind of another collaboration, one of those that we've kind of not mentioned the name, but discussed over the last couple of years. That is also overall a clear opportunity for leveraging a variant of MAGiC with their generator. We continue to view that kind of as an exciting space. I think during the talks, the physician talks at the SCRN symposium, there was a few kind of where the speakers were noting how despite all of the enthusiasm for PFA, there is still various safety signals that things like stability of the catheter with the tissue are particularly important for PFA, both efficacy and safety. Our stability of the catheter is one of our hallmarks of our catheter and a great benefit there.

As you start to think about PFA in the ventricle, we have an ability to obviously get anywhere in the ventricle to stay steady on that tissue. We're probably in a very, very good position. Some of the speakers there weren't part of our animal studies, and so they, I believe, shared data from those animal studies in their presentations. On the ASC side, the ASC side is fascinating. It's obviously still a minority, right? The vast majority of cardiac ablation procedures are still done in the hospital setting. You've seen in several states that ASC starting to get set up to do cardiac ablation procedures.

There's obviously the precedent in many other areas of medical devices where ASCs have kind of become a dominant setting for procedures. We think and believe that the robot, the Stereotaxis' robot should be very well suited for the ASC, particularly because of our safety profile. That's obviously one of the biggest risks from moving from the hospital setting to the ASC setting, is that you don't have the same safety net in terms of all of the hospital resources around you. We think that our robot can provide a big benefit there. The vast majority of procedures currently being done in the ASC setting are paroxysmal AF. That's not where our robot shine.

Our robot can shine in, things like PVCs and in various other areas where stability and safety and navigation is more challenging. I very much hope, believe that one of those GenesisX installations this year will be in the ASC setting, and that will start to demonstrate also the financial and clinical merit of having a robot in the ASC setting. Again, this is small. This is something that will be a long-term, will have a long-term tailwind to it in the U.S. definitely think there's merit to us being there early on and starting to demonstrate the value there.

Hopefully that will give us another opportunity over the next few years to grow kind of and to help the ASC setting grow as a field for cardiac ablation.

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

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

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

Good afternoon. Thank you for joining us for Stereotaxis's 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. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions and comments following the presentation. As a reminder, today's call is being recorded.

It is now my pleasure to turn the floor over to your host, David Fischel, Chairman and CEO of 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 in the 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 remained 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 addressed 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 in 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. 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 is 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 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 one 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. Let me provide some additional color on that.

GenesisX is manufactured by us in St. Louis, where we have significant experience 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 worked with suppliers on modifications to components that support the effort. We expect this year to manufacture approximately one GenesisX robot every two months, with the ability at our current facility to scale to several dozen robots a year. We had a similar experience with Genesis, 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. 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. 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 five 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 re-engaged 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 from 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 the pulsed field ablation generator of CardioFocus. We'll submit a regulatory dossier to our new 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 neurointerventions. 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've presented our efforts to expand into these markets with a relatively modest approach, the development of a guide catheter and guide wire 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 five 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 guide wire, and expect to submit it for regulatory approvals this summer. These will address meaningful unmet medical needs, and we are excited for their impact. We also have known that this was a modest approach to entering the neurointerventional 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 neurointerventions.

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's 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 multi-year 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. 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 two 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's 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 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 three 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 non-cash charges for stock compensation expense, mark-to-market adjustment for acquisition-related contingent earn-out consideration, and amortization of acquired intangible assets. Excluding these non-cash 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 non-cash 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 31st, 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're 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 two quarters of the year and then to ramp above $10 million in the following two 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 into 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 a commercial ramp, and achieve profitability.

We'll now take your questions. Operator, can you please open the line to Q&A?

Thank you. Quick reminder before we start the Q&A. If you'd like to ask a question, please press star and the number one on your telephone keypad to raise your hand and enter the queue. If you'd like to withdraw your question or your question has been answered, please press star one again. Thank you. We will take our first question from the line of Daniel Stauder from Citizens. Please go ahead.

Yeah, great. Thanks for the questions. I guess just my first one would be on the goal of five GenesisX programs that you talked about. Is this in addition to that, do you still expect to sell the previous Genesis system? Cause I believe you had commented before that would still be the expectation, and I'm just trying to get a better understanding of what the mix between segments could look like for the full year. Thanks.

Hi, Danny. Good afternoon. Sure. Yes, as we discussed on the last call, we expect Genesis sales orders and sales to continue at kind of a similar pace that they've been in for the last several years. We've generally been selling approximately mid-single digit numbers of Genesis systems each year. That has kind of added up to near $10 million or so in revenue from those systems each year. We expect kind of the Genesis commercial kind of levels to stay relatively similar for at least the next couple years or so while we're still ramping GenesisX.

The effort right now with GenesisX is predominantly going to some of these KOL accounts both in Europe and the U.S., demonstrating that with new technology, we can install it in existing cath labs that don't require special construction, that we can work alongside existing X-rays, and that there are KOLs in this field who are respected by their peers, who have watched us for long periods of time, and that they recognize that our innovations do make a change to kind of the trajectory of robotics in EP, and they wanna be a part of that change.

Great. I appreciate it. Just one follow-up on Synchrony. Great that you're expecting FDA approval in the coming weeks. On that $3 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? Thanks.

Sure. On Synchrony is sold as a capital equipment upfront, as described in the prepared remarks. We do have recurring revenue stream through that, predominantly service contracts and a premium software-as-a-service subscription to things 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. 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 multi-system deals that we believe will materialize with oftentimes, you know, in a handful or even sometimes more numbers of systems in an individual hospital. Then there are other hospitals that would like kind of to try individual Synchrony systems. 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 indications in the past that pricing of Synchrony would be in the, you know, in the $150,000-$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. Generally looking at that type of a price range would get you to the number of systems that we're talking about.

Perfect. Thanks so much for the questions.

Thank you. Our next question comes from the line of Josh Jennings from TD Cowen. Please go ahead.

Hi. Good afternoon. Thanks for the thorough download of the go-forward strategic plan. A couple questions on MAGiC. Sounds like feedback from early users continues to be strong. I was just hoping to get a better understanding of with the capacity, manufacturing capacity constraints as they're ramping, how are you allocating catheters to specific accounts and new accounts? I'm assuming that the access to THERMOCOOL, RMN is still in play. Love to just get our arms around that dynamic a little bit better.

Josh, good afternoon. Thanks for the question. That is obviously a challenge, where MAGiC is a great medical device. It's a great catheter. We've had kind of its performance as a catheter is overall great. We're very pleased with the way we designed it. The process of ramping manufacturing has obviously been a challenge. That has been a big part of our focus over the last several months. It is challenging as you try to launch a device. You have to work through all the administrative efforts. You also have to manage the psychology of all of your users. We have many more users that would want MAGiC catheter supply than what we've been able to manage.

It's a process with the commercial team, with the physicians. They understand the process that we're going through, and they're, and, you know, generally, they've been very patient with us and accommodating of the ramp that we're working through. We'll kind of continue doing that, and obviously now that we're in the U.S., we're working through all the administrative items at hospitals so that as catheter supply does ramp, we are already addressing all of the administrative efforts. We're just kind of working in parallel on these multiple items so that ultimately MAGiC can ramp to the significant revenue contributor that is expected.

I think kind of over the course of this year, you'll see that, as the manufacturing ramps, there essentially will be demand already in place for the types of volumes that I commented on in the prepared remarks.

Well, thanks for that. Just with the path to launching MAGiC with pulsed field ablation, with that collaboration with CardioFocus, this year in Europe, maybe just help us understand the what you need to show E.U. regulators, just from a compatibility with the Centauri generator and any in-human data that is required, or will you run some first in-human data after approval? Maybe just lay out the milestones and the timing you expect for E.U. approval. Thanks a lot for taking the questions.

Sure. The general scope of the argument to the regulators is that CardioFocus' Centauri PFA generator has been approved in Europe for several years, has is working compatible in a regulatory approved fashion with three point by point RF ablation catheters that kind of are available in Europe and with three of the very large companies in our field. There's significant clinical experience there. 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 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, you know, across the range of tests is also very similar results. The risk profile is no higher, perhaps probably less actually. There's a fairly strong argument for why adding compatibility. You have an approved device, approved catheter in Europe, an approved PFA generator in Europe, adding a fourth catheter to that compatibility matrix is not a significant risk given all the data that has been accumulated to support that. We've kind of compiled a dossier together in collaboration, the two companies, and that is going to be going in for review by the E.U. notified body in the short term.

Thanks again.

Thanks, Josh.

Thank you. Our next question comes from the line of Kyle Bauser from ROTH Capital. Please go ahead.

Great. Thanks for taking my questions. Congrats on all the updates. 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 kinda trying to understand kind of the mix in terms of percentage of that over $40 million, you know, coming from system services disposables.

Sure. I would look at system revenue. You essentially have a baseline level similar to last year with a growth on top of that in terms of the GenesisX launches. The five GenesisX systems that we are guiding for this year, those will be a mix of sales and leases and disposable commitments. The actual revenue number from that is a little bit hard to estimate right now. At least how the revenue recognition, the accounting for that is a little bit hard to estimate as it will be a mix of those.

Overall, that will provide-- There will be some capital revenue from that, there will be kind of a step up in terms of capital revenue versus last year, with the contribution of GenesisX kind of going above the baseline Genesis level. Most of the revenue growth will come from the disposable side, and that will really happen in tandem with the manufacturing ramp of MAGiC. We see both MAGiC and MAGiC Sweep as being the primary drivers of revenue growth in this coming year. With, you know, kind of, mainly that playing out as the manufacturing ramps from 100 catheters to 500 catheters. We've talked in the past somewhat about average selling prices for ablation catheters.

Generally, in the U.S., you see ablation catheters in the $3,000-$4,000 range, and in Europe it's in the EUR 2,000-EUR 3,000 range. kind of that should give you a general feeling for the types of monthly revenue we would expect from MAGEC as we progress through the year. Sorry, I forgot one comment on the capital side is obviously the Synchrony revenue, the $3 million of Synchrony revenue, that would be capital revenue.

Okay. Got it. I appreciate that. Then maybe just as a follow-up to that, around MAGiC ablation catheter, realizing it's, you know, 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 kinda any early provider feedback around that? Thank you.

Sure. I mean, we have obviously had great procedures with MAGiC across multiple hospitals. We are the transition from the old ecosystem has not been an easy one. Our previous partner has not made that an easy transition. That's one of those challenges that we've always known we would have to grind through. From the customer perspective, we have many, many customers who have a lot of positive view of robotics in this field. We've had long-term relationships with these customers. They've been waiting for an improved catheter for many, many years.

They've seen the ability of MAGiC to do things that previously were not possible in terms of the navigation capability, the more stable forces, irrespective of how you approach the tissue, the reduced irrigation, kind of some of the tip lesion characteristics. Overall, we have very kind of a very good customer base that is excited to use MAGiC. As we work through this transition and as we ramp manufacturing, we're excited by what MAGiC will bring to these customers and how it will ultimately transform us. This is really, this working through this transition is one of the biggest efforts and challenges that we've been working through, but we're delighted that we got the regulatory approval by FDA at the beginning of this year.

We're glad that kind of the effort with those Osypka's overall moving in the right direction. We should be able to see kind of a significant ramp in manufacturing this year. That should set us up in a very, very good place. As we exit this year, we should have a very strong foundation then for kind of many years going forward, both of continued innovation and obviously a very attractive revenue model.

Okay. sounds great. That makes sense. thanks for taking my questions.

Thank you.

Thank you. Our next question comes from the line of Frank Takkinen from Lake Street Capital Markets. Please go ahead.

Great. Great. Thank you for taking the questions. I was hoping to ask a little bit more about Q4. David, obviously, you 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 guy out there for $6 million versus the $5.3 million reported. Was that all manufacturing and you would have been at kinda that $6 million mark if it, if it wasn't for that? Or was there maybe some procedural softness or anything else going on with the Q4 numbers?

I'd say 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 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, during the final testing before you can confirm that catheter is ready to ship out to customers. There was one process that was leading to 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. 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. 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 fourth quarter from that transition. MAGiC catheter manufacturing was the primary driver of that.

Okay. That's helpful. 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 five GenesisX placements this year might be an alternative placement model. What might that look like? 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. 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 or quarterly annual lease, and then a placement of a system with significant commitments to purchase disposable kits. Let's say if they're buying MAGiC and MAGiC Sweep and a Cook Cat 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. 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.

Those are the three models that we're kind of working with. 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 deinstalled easily. Really, you were limited to exclusively the capital sales model. It's the innovation in both our disposable devices and having the whole portfolio of disposables now available that provides significant revenue per procedure that allow you to fund a capital. It is the innovation in GenesisX, and it's 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 up front in a capital sale, but from an overall economic value, we're pricing things such that we're agnostic to the three models. Even from a working capital perspective, the amount of recurring revenue that can be driven by a placement model is very significant. These are high margin revenue. Essentially, within less than a year, the variable cost invested in a capital system can be paid off. Kind of we see that as an attractive way. If that ultimately accelerates adoption, you know, that's a great model to use. I believe Intuitive Surgical, over 50% of their systems are either placed or, you know, on a leasing basis or on a disposable commitment basis.

I assume that as we grow, that will become the majority of our of our capital will be done through that as well.

Got it. That's helpful. Thank you.

Thank you.

Thank you. Our last question comes from the line of Adam Maeder from Piper Sandler. Please go ahead.

Hi, this is Kyle Winborn on for Adam. Thanks for taking our questions. I guess first one for me, just on OpEx plans for 2026. I think I heard you say you expect it to kind of be stable. Am I understanding that correctly, as stable year-over-year, so it's kind of the same level as 2025? Just kinda hoping for any qualitative color you can give on that. You know, you discussed some investments that you're looking at with some of the manufacturing issues and then, you know, also as you're thinking about kind of scaling the commercial team here for the U.S. launch, just any kind of color you can give there for OpEx spend this year.

Sure. Our expectation is that operating expenses will overall be flat. As a reminder, our operating expenses include significant, kind of what I call accounting expenses, not kind of actual cash outlays, but things related to amortization of intangibles and kind of non-cash compensation related to stock plans that still haven't created any dilution at all for shareholders. There's some of those accounting things. If you kind of take those out and look at our adjusted operating expenses, we've been running that at under $30 million a year now for several years, kind of in the high $20 million a year, and we expect it to stay kind of at that level also this year. We benefit from. There have been significant projects obviously that we've been advancing over the last several years in terms of PMA ablation catheter, a complete new robotic system, the Synchrony system, other catheter projects. While we still have a fairly full pipeline of innovation efforts going on internally, those were big projects that demanded huge amounts overall of investment. As that kind of reaches regulatory approvals, you have natural reductions in OpEx accordingly. That kind of frees us up to make certain investments in other areas like manufacturing ramp, where we're putting more effort, like the commercial activities. We have a direct sales team in U.S., Europe, and even a smaller one in Asia. That team is very good.

They know our space, they know our products, they know all of our existing customers. Overall, they have the capacity to go through all of the administrative efforts with the MAGiC and MAGiC Sweep across all our hospitals. They have the capacity to do the initial launches of the technology at all our customers. We've described, and we've kind of started the model of as we ramp catheter revenue in any specific account. We're excited about the ability to hire individual reps who can become focused on that account. That's not in the scale of our existing installed base, and as we ramp MAGiC this year, that isn't to the level where it would make major differences. That'd be in the low millions of dollars of investment overall.

In the scheme of kind of the overall operating expenses, we believe we can hold operating expenses more or less flat, kind of while doing so. As we get over the manufacturing ramp this year, we have kind of already demonstrated GenesisX working across multiple hospitals. I think 2027 shapes up to be the year where you make more significant investments in the commercial team, both on the capital side and the disposable side.

Super helpful. Thank you for all that color. Maybe just for my second question, I was curious maybe on the opportunity in China for this year. Could you kind of just remind us, you know, what you expect the portfolio there to look like for this year and kind of, you know, how you're thinking about the macro outlook? Thank you.

Sure. We did receive with our partner, MicroPort EP. We received approval for the Genesis system, the system prior to GenesisX in China a year ago. We also, they received approval for a robotic ablation and high-density mapping catheter, which works only with their mapping system. That kind of ecosystem became available around a year ago, and 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.

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. 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, you know, 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. We do see them continue to invest in activity for capital sales.

Really kind of the story this year will be getting the first Genesis systems there, going through the GenesisX regulatory submission and going through the MAGiC regulatory submission, and 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.

Super helpful. Thanks, David.

Thank you.

Thank you. 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.