Good morning. . Thank you for joining us for Stereotaxis Third Quarter 2022 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, and good morning, everyone. I'm joined today by Kim Peery, our Chief Financial Officer. Against the backdrop of a challenging macro environment, I'm pleased with the commercial and technological progress we've made since our last call. From a commercial perspective, the overall dynamic remains similar to what we've described in the past. Continued and more consistent order activity, hospital construction delays, and positive engagement with customers. We received two system orders during the third quarter and have had a strong start to the fourth quarter with two signed purchase contracts already received, reflecting the continued global interest and demand for our robotic technology. The third quarter orders include a Genesis system in the United States and a Niobe system in China. The recent signed purchase orders are for replacement Genesis systems in Europe and the U.S.
Over the course of this year, we have seen more consistency and reliability in the pace of orders, which I believe demonstrates greater maturity in our capital sales pipeline and processes. We've now seen several quarters in a row with multiple system orders and have a healthy pipeline of greenfield and replacement cycle prospects across each of our three focus geographies. The recent improvements in our commercial leadership and capital sales infrastructure are expected to further improve our execution and growth. This order activity is encouraging. It has expanded our capital backlog to over $13 million, or over $16 million if we include the two signed purchase contracts worth of robotic systems that have been ordered but not yet recognized as revenue, pending shipment and installation. Hospital construction timelines continue to be slow, with hospital customers consistently struggling to meet their own internal expectations.
While this is outside of our control and impacts revenue recognition, orders in our backlog are essentially guaranteed with significant non-refundable down payments, providing confidence in their realization. On the commercial front, we will continue to focus on what we can control, generating growth in orders and ensuring that existing robotic practices have successful experiences with our technology. That fundamental progress will ultimately carry through and positively present itself in the optics of our financial statements. Last month, I had the opportunity to join many of the most prominent users of our technology at the Society for Cardiac Robotic Navigation's annual conference in Budapest. The conference was well-attended with over 100 participants. Several presentations highlighted our clinical value across the broad range of arrhythmias, including more recent data showing superior safety and efficacy for pediatric patients.
Other presentations demonstrated our ability to be used alongside a spectrum of mapping and imaging technologies, showcased our innovation pipeline, and detailed how robotics can enable ablation procedures to be performed through the arm access rather than the groin. Qualitatively, it was a very positive meeting. There is an increasingly positive vibe on the trajectory of robotics in the field, and we are fortunate to benefit from a strong vocal community of physicians that are passionate to advance robotics. Following the SCRN conference, I had the opportunity to visit The Cardinal Stefan Wyszyński National Institute of Cardiology in Warsaw to celebrate the recent launch of Genesis in Poland. The physicians at the institute are among the newest additions to this community of vocal advocates. It was encouraging to hear how pleased they have been with the clinical and commercial value of establishing a robotic electrophysiology program.
During my visit, I had the opportunity to watch them successfully treat a young woman with complex congenital heart disease, which reinforced the positive impact our robotic technology has on patients that otherwise would have no good alternative treatment options. Shifting now to the progress made on our Strategic Innovation Plan. As a reminder, Stereotaxis' innovation strategy includes multiple key efforts that individually serve as substantial growth drivers and collectively serve as a foundational product ecosystem for our mission to transform endovascular surgery with robotics. There's truly a broad range of progress here happening in parallel, and things are generally advancing in line with the previously shared timelines. I'll share some additional details and color specifically on the MAGiC catheter, the mobile robot, our collaboration with MicroPort, and recent testing of our guide wires and guide catheters with several neurosurgeons.
As announced last quarter, the MAGiC ablation catheter CE mark submission was made in July under the new, more stringent MDR regulations. Last month, the EU notified body performed its completeness check of the submission. The completeness checks concluded successfully, and subsequent to that, they began their technical review of all the data. MDR has created a significant backlog of work with the EU notified bodies, so it remains difficult to estimate how rapidly they will perform their technical review. We were overall pleased with the thoroughness and engagement they provided during the completeness check. In the U.S., our IDE submission remains dependent on successfully completing a few pre-clinical survival studies. Establishing an official institutional animal care and use program that is of GLP level quality was a major undertaking and necessary milestone to start those studies.
I'm pleased that the IACUC committee formally launched our program recently, enabling us to start pre-clinical studies shortly. We continue to see U.S. FDA approval of the MAGiC catheter approximately two years after CE mark as a reasonable timeline. The excitement with which physicians at the SCRN conference view the MAGiC catheter reinforces our own excitement for clinical, commercial, and strategic benefits MAGiC will provide. Development of the next generation mobile robot has advanced well with the hardware, electronics, and software aspects of the system coming together nicely. Supply chain challenges which had previously held up progress seem behind us and should no longer pose a risk to our timeline. We continue to envision an initial launch of the system next summer. The transition of our technology from a construction project to a broadly deployable technology is transformational for our opportunity and for the accessibility of robotics in the field.
Our collaboration with MicroPort in China has seen progress on the Genesis regulatory submission, mapping integration, catheter development, and commercial preparation all happening in tandem. During the third quarter, Genesis was installed at MicroPort's showroom in Shanghai, and all required local regulatory testing was completed successfully. We expect a Genesis regulatory submission to China and China's NMPA before the end of this year. Mapping integration with MicroPort's Columbus mapping system has also been largely completed. Development of a MicroPort ablation catheter has advanced well, as has progress in filing for the MAGiC catheter in China, which is expected to take place soon after the MAGiC's receipt of CE mark. All this sets us up nicely for having a complete, up-to-date, and integrated product ecosystem ready for commercialization in China by the latter part of next year.
In preparation for this launch, MicroPort has already started to invest in preparatory commercial activities. They recently hired six individuals as part of a dedicated robotic capital sales team. That team will work alongside the over 100 members of the core electrophysiology clinical sales team to drive adoption of robotics in Chinese EP markets. MicroPort's EP division is poised to play a very significant role in the Chinese EP market, having just completed its own IPO on the Shanghai Stock Exchange, raising $170 million and now valued at over $1.5 billion. We are pleased to be partnered with them and believe their strength and strategic alignment around robotics shines light on the commercial opportunity ahead of us as the product ecosystem becomes available.
Last on the innovation side, I wanted to provide a little color on our efforts to expand the benefits of robotic magnetic navigation beyond electrophysiology into multiple new clinical indications. Foremost on our mind, pun intended, is neurointervention. As previously shared, we have been working to develop the software user interface and interventional tools that could be valuable for neurosurgeons performing complex endovascular therapy for stroke. Three weeks ago, we hosted three neurosurgeons from three prestigious hospitals in the United States to evaluate our devices in neurovascular phantoms. They tested our magnetic guide catheters to overcome proximal challenges in gaining and establishing access to the brain, and then our magnetic guide wires to navigate smaller tortuous vessels deeper in the brain to deliver coils and reach clots. They tried the same activity with standard manual devices they've used in daily practice for many years.
Let me share a few quotes they made while using our technology. "I've done thousands of similar procedures, and what we were just able to do with your robot is unbelievable." "This provided an unprecedented ability to rapidly reach areas that are otherwise impossible to get to." "This would have real value right now in my daily practice." "In some of these procedures, I've been forced to spend an hour exchanging handfuls of devices to finally reach the target, and with this catheter, it was effortless. The clinical and financial benefit is huge." End quote. Experiences like this give us confidence that we are on the right path and that the work we are doing will play an important role in the improvement of medicine. We are still working to establish consistent, scalable manufacturing of the guide wires and guide catheters.
As that is accomplished and we make regulatory submissions and approach commercial launch, we will arrange an innovation day where those physicians and other neurosurgeons like them can share their experience with our technology and how they see it improving clinical outcomes, expanding access to patients, and reducing procedure time and cost. Kim will now provide some commentary on our financial results, and then I'll make a few financial comments as well before opening the call to Q&A.
Thank you, David, and good morning, everyone. Revenue for the third quarter of 2022 totaled $7.7 million. Recurring revenue for the quarter was $5.3 million, consistent with the $5.3 million reported in the prior year third quarter. System revenue for the quarter was $2.4 million, down from $3.5 million in the prior year third quarter due to hospital construction delays that continue to slow the conversion of our system backlog into revenue. Gross margin for the third quarter was 60% of revenue, with system gross margin of 16% and recurring revenue gross margin of 80%. System gross margin remains impacted by low production volume and the allocation of significant fixed overhead expense. Recurring gross margins were slightly impacted by a one-time write-off and the strengthened dollar.
Operating expenses in the quarter of $9.6 million included $2.7 million in non-cash stock compensation expense. Excluding stock compensation expense, adjusted operating expenses were $6.9 million, which is consistent with the $6.8 million in the prior year third quarter and $7.2 million in the second quarter of this year. Operating loss and net loss for the third quarter of 2022 were $5.1 million and $4.9 million, compared to $4.6 million for both in the previous year. Adjusted operating loss and adjusted net loss, excluding non-cash stock compensation expense, were $2.4 million and $2.2 million in the current year quarter, compared to $2 million for both in the prior year quarter.
Negative free cash flow for the third quarter was $2.7 million, compared to $1.5 million in the prior year third quarter. Negative cash flow this year has been significantly impacted by over $2 million on one-time expenses for our new headquarters and manufacturing facility, as well as an over $3 million investment in inventory. At September 30, we had cash and cash equivalents of $32.4 million and no debt. I will now hand the call back to David.
Thank you, Kim. We recognize that system revenue in any given quarter has been difficult to predict and that we have not done a good job in guiding the financial community over the last several quarters. Given that experience, we've determined that it's more prudent to avoid providing specific revenue guidance until we have better faith in our forecasting ability. Fundamentally, we are pleased with the order activity we've seen and the opportunities to grow that activity going forward. We believe that our existing system backlog of over $13 million, along with our capital pipeline, supports year-over-year revenue growth over the coming quarters. New technology launches and an enhanced commercial organization will support more substantial revenue growth over the coming years. As Kim mentioned, our cash use this year has been significantly impacted by our investment in our new facility and in robot inventory.
Those are both conscious, and we believe prudent investments, the former to support many years of growth and the latter, given the challenging supply chain environment. Our core operating burn rate, excluding those items and smoothed for quarterly variability, remains approximately $1 million a quarter. We are cognizant of the macro environment and the importance of being financially prudent and disciplined. We remain confident in the ability to advance our strategy, drive organic growth, and reach profitability with our current financial resources. We look forward to now taking your questions. Operator, can you please open the line to Q&A?
At this time, if you'd like to ask a question, simply press Star, then the number 1 on your telephone keypad. To withdraw your question, press Star 1 again. Our first question will come from the line of Adam Maeder with Piper Sandler. Please go ahead.
Hi, good morning, and thank you for taking the questions. Congrats on the progress. Maybe to start.
Good morning.
Hey, good morning. Wanted to start on just the backlog, which is starting to build here. You know, just trying to think about our models and, you know, how to kind of ascribe revenue. You know, any color around drawdown of the backlog, revenue recognition over the next couple of quarters, and just how you think about kind of visibility there. Then I had a follow-up or two. Thanks.
Sure. As described in the call, we have a backlog of, as of the end of the quarter, it was over $13 million. If you include the two recent purchase contracts that were signed, it's over $16 million. We have obviously done a poor job in guiding you and the rest of the financial community in really knowing how those orders that were received end up turning into revenue. There's nothing that has changed in that kind of. I think after a few quarters of us not being able to guide successfully, you know, kind of at some point, we realized that we need to improve our own forecasting ability on these installs and shipments.
Overall, I think that while we have case examples where orders are received and shipped very quickly, and we recognize revenue very quickly, and we have some that have taken over a year before a hospital is ready, I think that the general thought that backlog should turn into revenue within a year time makes sense in the vast majority of cases. I would generally think that the backlog that we show should convert to revenue over the next year. There might be a few examples where that doesn't take place, and it takes a little bit over a year, but there will also definitely be examples where things are received and convert much more quickly, even within the same quarter.
I think that's a general statement on how to think about order backlog and its conversion into revenue. Obviously, in any given quarter, a shipment of one system or installation of one system, and being in that quarter or not can make the difference between almost $2 million. There's a lot of volatility there. But that's, I think, a general statement that will hold true.
Okay, that's perfect. Really, really helpful color. Thank you for that. And then for the next question, wanted to ask about the MAGiC RF catheter, and just level of visibility into CE mark approval. You know, certainly recognize the MDR process has been challenging for, you know, all med tech participants, but it seems like things are going well for you guys. Just wanted to see if there's any additional color you can share at this time in terms of, you know, those discussions or timelines.
Yeah. Obviously, when you put in a regulatory submission, a lot of it is outside of your control. You're in the dark until you get asked questions. You really don't get great color into how things are going. What was nice was that last month when they did their completeness check, it was a very thorough completeness check. Based on some of the smaller observations they made and some of the questions they asked, it was clear that they did a very detailed review.
Overall, we were able to answer all the questions and to make certain small adjustments to the submission based on their observations very rapidly, and we were able to kind of then have a finalized completeness check, and they moved on to do the technical review. Overall, we were pleased with that engagement, both in terms of clearly the effort that they made and the ability for our application to live up to kind of the rigorous standards. We are back in the midst of the technical review. I generally feel good with what we submitted and with the quality of the submission and with obviously the quality of the device.
I think that also Osypka had some experience with MDR submissions just prior to the MAGiC submission, so we benefited from that experience. Overall, I feel good with things, but obviously it's in the hands of the notified body and we are primed to respond if we get any questions, and otherwise, we are crossing our fingers for an approval as soon as possible.
Okay, perfect. Thank you for that color. I'm gonna sneak in one more, if that's okay. Just a quick clarification question. The mobile robotic system, you know, it sounds like things are tracking more or less to kinda, you know, the summer timeframe for approval and launch. Hopefully, I heard that correctly. Have you made those submissions to FDA or the European notified body? Just wanted to clarify that. Thanks again, and congrats on the progress.
Sure. Thanks, Adam. Yes, that is tracking well. We still feel confident in an initial launch next summer. We have not made any submissions to date. We don't expect to make any submissions for at least another few months, but we have fairly good clarity given our engagement with both the regulatory bodies in Europe and the U.S. We have a fairly clear view of what our regulatory strategy would be and feel very confident on that given also our recent experience with Genesis. We're good where we stand. We feel very good about that.
Great. Thank you.
Thank you.
Next question will come from the line of Neil Chatterji with B. Riley. Please go ahead.
Yeah, thanks for taking the questions. Yeah, if you could just maybe characterize how the sales funnel is shaping up. I think you've talked about kind of, you know, having a couple dozen, you know, in the past. Just kinda curious, you know, if there's any update on that.
Yeah. We had kind of... sure, Neil. Let me try to kind of give a little bit of color there. We described, I think it was, probably in the springtime that we were starting to work on a more organized and disciplined way to track the sales funnel and to... and really this is kind of less for reporting out purposes, more for making sure that we as a team are advancing the pipeline and are responsive to any potential risks or red flags or opportunities in the pipeline, as quickly and as good as possible. That kind of process has been a nice process in that it does create a lot of visibility on the pipeline and helps us better understand it.
Now, there are certain types of insights on that pipeline that will really only come over the period of time. Because what we're trying to do, what we would like to do is that now as we are tracking these projects in an organized way, over time, you start to be able to do statistical analyses. I hope that at some point in the future, I can give guidance on orders that we expect. That is something that we can feel confident about based off of data, based off of knowing how our pipeline looks at any given point, how many specific customers are there, where they are in terms of progress along a range of activities, clinical activities, administrative activities, construction or project-related activities.
Hopefully also in the future, that last part doesn't have to be as relevant. As we go over time, we'll be able to do more statistical analysis, and I think be able to get greater clarity on how we can ascribe a pipeline at any given time. Right now, what we include in the pipeline, there are a range of things from things that are very, very early with very little tangible activity having been completed, to things that are very, very late with you know. It's very green across the board. You have a lot of green checkmarks and really we are even sometimes in the transactional phase of negotiating contracts and working on that.
I would say that when you look at kind of the more realistic near-term opportunity or things that we have higher confidence in understanding those projects, understanding the potential of them to move forward, I'd say you still remain in kind of about over a dozen each in the geographies of the U.S. and Europe. Then a little bit less than that, but a nice growing amount also in China as China is starting to build its commercial capability. That's kind of how I describe things right now.
I hope in the future that we'll be able to kind of to provide things like a quantitative measurement of what's early versus mid versus late, how generally we think about when a late stage thing, you know, the probability and timelines of that converting into orders as well as for mid or early stage projects. We're kind of just building though that kind of the database now, and it'll take obviously a few quarters until you have enough of a timeline on that data to make sense of it.
Got it. Thanks for that color there. Maybe just kind of in relating to that, you know, you had a nice order for, you know, second system into Overland Park with HCA. I was just curious to hear any color around your, you know, any further progress, you know, kind of around the health system or IDN strategy.
Sure. Yeah, Dr. DeLurgio is a prominent physician in the field, and he's been a great proponent of robotics for many years now. He was actually the primary author on the publication a few years ago, which demonstrated a statistically significant improvements in efficacy, safety, and efficiency for robotics versus manual catheters in AF. He has both experienced himself the benefits of robotics at Overland Park and prior to that at Kansas University. He has seen kind of, and he's obviously been a part of a broader community of users and the publication of data and involvement in SCRN.
We've really benefited at Overland Park due to the local experience that he had and the local experience that the administrators had seeing the value of robotics at the hospital. He is still prominent also within that IDN, within HCA. We have a few other hospitals at HCA that use our robot, some of them very well. We continue to think that over time, it is, it would make sense and it is reasonable that there can be a broader IDN type strategy that evolves, either with that IDN or with, there's a couple other larger IDNs that we have multiple installations with. We continue to try to advance that. We have, oftentimes nice engagement with, individuals, higher up in the system.
Again, I think that both as there's increased clinical acceptance and use in the field and as the product ecosystem becomes one in which we can offer an IDN a range of different ways to adopt our technology, both of those help significantly in getting to the point where you have kind of a top-down approach from an IDN driving things from the top down. I think there's already some benefits from the bottom up given the relationships that we've built.
Great. Thanks for that. I'll hop back in the queue.
Okay. Thank you.
Our next question will come from the line of Frank Takkinen with Lake Street Capital Markets. Please go ahead.
Great. Thanks for taking my questions. Maybe just to start with, construction timeline variability. Can you call out, what is happening with a little bit greater detail? Is it more of a staffing issue or is it the hospital is reluctant to fork over the CapEx required for the construction project? Just maybe a little bit more clarity into what is occurring with the construction timeline variability.
Hi, Frank. Good morning. Sure. I think it's really more of the former, and sometimes it isn't just staffing in the way that we normally talk about staffing, nurse staffing or tech staffing. Oftentimes it's also engagement with external contractors and architects. The reason I don't think it's really the latter is that before they get the internal approval and budget to pay for the down payment on our system and to order the system, they're usually at the same time getting approval for the entire budget also for construction. It usually isn't really a budget approval question anymore. They gain budget approval. They put in an order for our system. They pay the down payment, which is a real cash outlay.
You would think that once you make a $multi-hundred thousand cash outlay, that you are motivated to try to now get a realization of that investment by following through and actually having a lab constructed and prepared. We have seen in the most egregious of cases construction timelines that have taken over a year longer than what they were expected. We have one order that we did ship and recognize a partial revenue on, but that has still not been installed almost two years after they made the initial order and paid the initial down payment. We have seen, depending, obviously, some hospitals are more organized and some regions seem to have less of a chaotic construction environment.
We have seen some hospitals very, very much struggle in advancing construction project, and it seems to be either turnover of their internal staff and/or issues dealing with architects and contractors.
Got it. That's helpful. Maybe on the DSA side, and saw that number was down a little bit more than expected quarter-over-quarter. Anything specific to call out in that line item?
Sorry, can you repeat the question on the DSA side?
The Disposable Services and Accessories line.
Oh, disposables. There, I'd say that generally, procedures remain roughly kind of in line. They did drop after COVID started about two years ago. We've had some volatility there, but generally not significantly, and it's more or less remained kind of in a stable level since then. We continue to have on the service side some pressure as hospitals are doing replacement project and give us replacement orders. You usually lose your service revenue kind of because that's waiting until they install the Genesis system, and then they have a one-year warranty also. That would be kind of my general take.
I don't see anything substantial taking place there. There's also a little bit of an impact of FX. We're obviously about a little bit more than half of our procedure volume. Let's say, you know, almost half of our business comes from Europe and Asia. With the strengthening of the U.S. dollar, you have about, probably year-over-year, probably about a 15% or so FX hit to any of that revenue.
Okay, that's helpful. Maybe one quick last one to follow up on Adam Maeder's last question related to the submission of, approval documentation or clearance documentation for the mobile robot. I think you said another few months till we submit. Do you think that could occur by year-end, or is that more likely a Q1 2023 event when you submit for mobile clearances?
We talked about an initial launch in the summer of next year. Based off of our strategy, that's something that would take place in the first half of next year for submission, and that would allow us to have in the third quarter an initial launch. We feel we have a lot of clarity, both given discussions we have had and given recent experience on what is needed for a regulatory submission. We feel good about that. I think kind of, again, I don't wanna go into too much color. There are reasons why not to give too much color there, from both kind of competitive points of view and just keeping some of our trade secrets to ourselves.
We're comfortable in our regulatory path, given some of our discussions, and that sets us up nicely that even with a submission in the first half of next year, we'll have an ability to do an initial launch in summer.
Okay, great. Thanks for taking my questions, and congrats on all the progress.
Thanks, Frank.
Your next question will come from the line of Alex Nowak with Craig-Hallum. Please go ahead.
Hey, great. Good morning, everyone. I was just hoping to discuss a little bit on the mobile robot system, just how you're preparing the commercial organization to sell that system once it's launched. I would imagine it's a little bit of a different sale than Genesis or Niobe. Just anything that can be done from a, whether it be disposable financing agreements, fair value lease agreements to help just make that purchase easier for some centers.
Sure. Thanks for the question, Alex. You're right. I'll kind of talk on the second part first. You're right that one of the big benefits. There's kind of a couple big commercial benefits from that technology and from the ability to evolve our technology in that kind of way. One of them is obviously reducing the construction burden and everything associated with that. The site being able to accelerate timelines for gaining a robot in the site. The other one is the ability to start to offer customers different ways to access the technology financially. Kind of, I think that the technology gives you both a reduction in the construction burden and a reduction in the financial burden kind of at the same time.
From a financial perspective, I would think that we will start to offer kind of three ways to access the technology, which will be all, to some extent, we will be as a company agnostic to the choice that a customer chooses. We will obviously continue to offer them the ability to purchase a system. We would offer the ability to lease or rent a system, and we would offer the ability to place a system with substantial disposable purchase commitments. The way that we would structure those three is such that to some extent, Stereotaxis is agnostic financially to which one the customer chooses. Because at the end of the day, you can retain the same value for a robot, approximately, let's say $1.5 million value of a robot excluding an X-ray.
You can retain that same value and just kind of capture that value through different mechanisms of payment. I think that by offering customers that, we've seen that with other robots in other clinical fields that has then become very valuable and helpful in driving adoption, in accelerating timelines for moving deals forward. I think by offering those three options for a customer, you really allow yourself to kind of to give them the best way to move forward and to let them choose depending on whatever the dynamics, the politics internal to the hospital are, the bureaucracy internally, they can choose whatever is best for them to advance a deal.
That's great, and that's very helpful.
Sorry.
Sorry, go ahead, Dave.
No, continue, Alex. Sorry.
No, I was just gonna say maybe on that commercial organization, just around the sales structure there, if any changes need to be made.
Yeah, exactly. That was the first part of your question. I wasn't trying to avoid that. On that side, I'd say that, the primary focus right now is on building a substantial and improved capital sales capability in Europe. We're having the mobile robot available with the MAGiC catheter will obviously provide a lot of benefits and a lot of flexibility and a lot of opportunity in how we approach customers. That's where the primary focus thinking about the mobile robot launch will be. In the US, we also think about it in terms of how it can drive vascular adoption in the new clinical applications.
In Europe, really, as Frank has joined to lead that team, we've had kind of many discussions on how you build a robust capital sales capability, how you expand your team, and how does something like the mobile robot obviously impact the way you think about that. We're overall in that kind of planning and learning stages. We have, over the years, accumulated a whole host of customers and physicians who have been interested in our technology but have not been able to move forward due to administrative construction challenges at their hospital.
We have already a list of many physicians who have a fundamental interest and desire in our technology, have not had access with it before, and who would obviously be the first ones that are being approached, and some have already been in some ways kind of made knowledgeable about our innovation pipeline so that when the technology becomes available, we can move forward.
Yeah. Very helpful. I know we were talking about the orders and the pipeline, what it looks like there, but just maybe comment on the general CapEx environment out there for hospitals. A lot of mixed signals this earnings season about what hospitals are seeing. Just curious what you're hearing. Are things getting better?
It's hard. We're a very small fish in a very big ocean, and it's very hard for me to give great color on the overall macro environment when it comes to CapEx. Definitely, we still live in a world where there's headwinds, right? We see hospitals all the time have pressures, whether they're financial pressures or staffing pressures. It's not an easy environment. It's not a tailwind type environment where you have just people running to you to try to buy things and to try to spend money easily because they have overflows of budgets. With that said, I read the same probably reports and same kind of commentary that some of the larger capital equipment players in the medical device space have made over this quarter.
I hear you that there is a differences of opinion, though I think generally they also say that there's a general macro pressure, and so it's really just a question of, is it becoming slightly easier or slightly worse? I think from our perspective, like, I think was hopefully conveyed in the press release and in the prepared remarks, overall, we're pleased with the order activity we've seen both in the third quarter. Obviously in the start of fourth quarter, we had kind of a nice bolus of activity and overall in our pipeline. So overall, we're very pleased with how our pipeline seems to be shaping up.
Again, we're a small fish in a large ocean, so I'm not sure that our activity necessarily should kind of be representative of the broader world.
Yep. Understood. That makes sense. Then maybe some of the goalposts to watch here for validation and then around the commercial launch, eventually in the neurointervention side.
I think we're a little bit still early there. We'll obviously, like kind of I mentioned before, as we are nearing a regulatory approval for guide wires and guide catheters that would allow us to start to launch, we're gonna want to do an innovation day where, you know, I promise you, I have written approval that the quotes that I quoted in my prepared remarks were approved by the physicians. Those were quotes they made while they were here. Obviously it'll be nice for the financial community and also the neurosurgical community to hear some of their experience and to see some of that kind of firsthand.
We'll try to arrange an innovation day next year prior to the launch, where you can get much more feedback on what we've actually accomplished there and why it's beneficial for patients and practices. Overall, kind of again, I'd say that we are now kind of in that. I think Elon Musk once said it well, manufacturing hell, as you try to scale manufacturing and build things in a consistent fashion. We know that we have devices that have been designed and developed that work very well, that can provide clinical value, and now we have to get to the point where we can manufacture them consistently and scalably prior to doing a regulatory submission. That's our effort right now in front of us.
Again, hopefully, within a couple of quarters, within a few quarters, we'll be able to provide a much more meaningful update, so that you have color on that launch.
All right. That sounds good. Thanks for the update. Appreciate it.
Okay. Thank you very much.
Your next question will come from the line of Josh Jennings with Cowen. Please go ahead.
Hi. Good morning. Thanks, David. Wanted to just ask about China. It's great to see another Niobe order come in. Want to just help on how to think about the thrust into China in front of Genesis approval. Is MicroPort capital team starting to market Niobe in front of Genesis approval? Do you still have your own Stereotaxis team out in the field? Just wanted to better understand, I guess, the next 12 months before we see a China FDA approval for Genesis.
Sure. Hi, Josh. Good morning, and thanks for the question. It's actually I mean, it has been really exciting working with the MicroPort team, so I view that as the increasingly positive leg to the business that is starting to be built. Overall, if we talk just about the Niobe orders that we've received over the last year and a half, I'd say that those have been primarily driven by the Stereotaxis team based in China. Part of the reason why we were able to enter into a collaboration with MicroPort, part of the reason why kind of we've seen a lot of positivity in China is because we had three dedicated salespeople there.
They're a great small team, and they've been able to support a handful of customers or sites there that have been using our robot for several years, that they really do great work with our robot. Great work clinically, great work from an academic perspective, publishing, they're very vocal proponents of our technology, and that has really had a halo effect on our entire kind of relationship with strategics there, with everything. I'd say that kind of the Niobe orders that are taking place, that's not really part of a concentrated commercial effort. That is more word of mouth and some activity from our Stereotaxis team there.
Oftentimes you do have hospitals in China where they do have a budget that they receive, that if they don't use it to some extent, they would lose it. If they're interested, they will move forward, even though they're getting a technology that is still the Niobe system, not the Genesis system. Again, the Niobe system works well. It has worked well in the field there. They see their peers that are using it well on a daily basis, so they're comfortable moving forward given that they have the budget available.
When I look kind of forward in terms of what we're doing with MicroPort on multiple fronts, there's, as described in the prepared remarks, several things that have to come together from a technology perspective to have this kind of complete ecosystem that works together well in China. That is, the Genesis regulatory approval. And then we will also advance the mobile system in China, but that doesn't seem to be as critical or as necessary for widespread adoption. There's the mapping integration, and there's the bringing into the country of both the MAGiC catheter and the development of the MicroPort specific catheter. All of those are advancing fairly nicely despite the lockdowns and some of the kind of complexities with working in China over the last year.
The R&D team there has been, and regulatory teams there have been very engaged and very kind of capable. What is even more impressive is seeing how they're starting to plan, even though we're probably still, you know, about a year out, hopefully a little bit less than that, but about a year out of having that complete ecosystem available in China. They're already starting to invest fairly substantially in building a dedicated robotic sales capability. The collaboration between our team and their team has been very nice also on the commercial front.
I'd say that their team, again, they're more in the training phase and learning phase, so their team has not really driven, I think, robotic sales in a meaningful way yet. They're starting to now make that effort. Earlier this week, last weekend, there was a large conference in China that MicroPort attended. They were showcasing the robotic technology as the primary technology being showcased at their booth. I think there's a lot of aligned interest and aligned strategy in driving robotics in China and making MicroPort a much more substantial player in the Chinese EP market.
I think the market there, at least the financial community in China, is also recognizing that opportunity given their successful IPO and their valuation on the Chinese stock exchange as well. Overall, things have been advancing very nicely with MicroPort.
That's great to hear. I just wanted to make sure I fully understood your comments just around the sales funnel in China. You talked about the U.S., about a dozen, Europe, about a dozen, and then something lower than that in China, but that sales funnel has all been driven by your Stereotaxis team. MicroPort really hasn't contributed to that yet.
Yeah. I'd say that MicroPort from a, you know, from just the higher level executives, they're definitely been engaged over the last several months in the capital pipeline and how do we build it and how do we engage with physicians. They have made efforts there. I'd say that when I talk about them hiring six people who are a dedicated capital sales team just focused on robotics and the 100-plus people on their EP sales team, those individuals have not really played a role yet at all in the building of a robotic pipeline. The benefits from that team will play out more substantially as we approach full ecosystem in China.
Excellent. Thanks for that. Just wanted to ask about where you stand with the development of a PFA catheter. I think there's been a debate on whether tissue contact is essential. Second part of the question is really just how RMN or robotic magnetic navigation could be important tool for PFA procedures in the future.
Yep. Good question. There was actually a presentation on some of the animal work that was done with PFA and our catheter at the SCRN conference. Overall, the thought there is, the thesis there is that catheter stability and contact with tissue is particularly important in PFA, where you're having microsecond pulses of therapy delivery. If you do not have stability during that microsecond, you don't actually have efficacy, you don't have kind of a good therapy delivery. I think there's a lot of reasons why the core mechanism of action of Stereotaxis will have particular value in the PFA environment.
We have been working, as described before, and there's at least two companies with PFA generators that are working to integrate that type of therapy from that generator with our catheters. We have been continuing to engage with those parties. Before we can move into human use, we need to do some additional preclinical work. Having our IACUC, the Institutional Animal Care and Use Committee, set up and the ability to do animal trials again at our new facility was an important milestone, not just in the MAGiC IDE process, but also in that effort.
I think kind of over the coming few months there will be some additional preclinical work that is completed on that, and that will allow us to kind of to hopefully move forward, assuming that those studies go successfully, kind of to the next step.
Great. Just one last one. Just follow up on the neuro, guidewire/guide catheter, projects. Just wanna confirm this. Those are 510(k) pathway, submissions, and they're gonna be compatible with both Genesis and the mobile system. Just is the mobile system that should we think about the penetration into the neuro indication or neuro opportunity, primarily driven by the mobile system combined with these guide wires and guide catheters? Thanks a lot.
Yep. Thanks for the question, Josh. Yeah, you're 100% correct. One of the beauties of guidewires and guide catheters is that and the way that we've designed them is that they're relatively interoperable with a broad range of traditional manual therapeutic devices. You know, various coiling kind of systems and aspiration catheters and thrombectomy catheters and the range of things that a physician would normally be using anyways. They're also backwards compatible. While they were designed to work particularly with the mobile system, they will be backwards compatible with Genesis and Niobe. That's the right way to look at it. It will kind of work across that spectrum.
I would expect when you want to enter into a new clinical field, whether it is neuro intervention or coronary intervention or peripheral or triple A grafts, you want to have accessibility of a robot. Right, again, when you're paving a completely new path, you can't assume that physicians will be 100% confident and certain that in the clinical value that our technology provides. So you want to give them a path also to be able to test our system, use our system, maybe, you know, commit to adopt it for a year or so, and then based off of the value that they generate, to be able to make the decision to purchase the system.
I think that having the mobile system will make it a much easier adoption in new clinical specialties. I would expect that to be the primary system being used by these new clinical specialties.
Great. Thank you.
Your next question will come from the line of Xavier Fonseca with Spartan Capital. Please go ahead.
Hi. Good morning. Thanks for taking my question. So obviously with the system installations, it has been very difficult. But my question is more along the lines of the recurring revenue and, you know, going forward and what we've seen so far in this environment. Can you go over some of the puts and takes for recurring revenue going into, you know, finishing the year and going to Q1 2023? And if you have maybe better visibility than compared to system installations and recognizing that revenue. And just as a quick follow-up, you know, where do you see along the lines of recurring revenue and procedure volume, where do you see console utilization going into 2023?
I would think generally there we've had a relatively stable recurring revenue. Q3 relatively is relatively always seasonally a little bit weaker quarter, given kind of procedural volumes outside the U.S. and summer vacations. Generally, we've had a relatively consistent recurring revenue. I think that would stay probably overall right until we start launching the MAGiC catheter in Europe and until we start kind of obviously commercializing more robustly in China or launching the new endovascular products outside of electrophysiology. We do get some benefit from new launches of new sites. Again, we had three of them earlier this year, complete greenfield sites that launched.
We have another one that should happen soon if their construction plays out, but should happen hopefully very soon. Overall, that tailwind, right, if you think about installed base of around 100 active systems, the benefit from any individual greenfield launch is around 1%. Even if the utilization has generally been higher at new installs than the traditional accounts, it's still kind of a relatively smaller impact on the overall numbers. What you also have is as hospitals are doing their replacement projects, you oftentimes have a six-month period or so when they are down, when the lab is down, and they're not doing any procedures, and they don't have service revenue, and then they have the one-year warranty period.
I'd say you have kind of that general messiness. I think that overall that leads to a relatively stable recurring revenue within the growth drivers being the MAGiC catheter, the launch of the MAGiC catheter and the MicroPort catheter in China and the new clinical indications.
Excellent. Just a quick question on China. I do remember in the last earnings call, it was noted that procedures were down 70%. Do you have an update on that number or, like, any sort of color for, you know, for China in Q3? Because I know it's been, you know, kind of a crazy year on that end.
Yeah. China was still down year-over-year in the third quarter. It rebounded very nicely versus the second quarter. I don't have the numbers right in front of me, but it was still down, definitely down double digits versus kind of last year, you know. My hope is that the fourth quarter has overall gone better. Though there are still lockdowns, and there still is some difficulty traveling for our sales team. I know that kind of they've experienced all sorts of challenges still even in October traveling to support cases in some of the cities. I think that kind of overall it's not as bad as the second quarter at all, but we're still not back to kind of an open environment there.
I've heard some of the recent general news reports that might open up fully. You know, I guess we'll see in the next few months how things play out there.
Okay. Thank you for taking my questions.
At this time, there are no further questions. I'll turn the conference back over for any closing remarks.
Okay. Thank you very much for all your good questions and for your continued support. We look forward to working hard on your behalf as we close out the year and speaking again in 2023. Thank you very much.
Ladies and gentlemen, that will conclude today's meeting. Thank you all for joining. You may now disconnect.