Q4 2019 Earnings Call
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Welcome to the fourth quarter and year end 2019 financial results Conference call. My name is narrowing out of your operator for today's call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session. During the question and answer session. If your question. Please press Star then one on your.
Touchtone phone. Please note that this conference is being recorded I don't know kind of call over to Stephanie Prince Stephanie you may begin.
Thank you Danielle and thank you to everyone joining us today before turning the call ever to manage Matt I'd like to make the following remarks concerning forward looking statements. Please note that various remarks that they may be made on this conference call about future expectations plans and prospects for the company constitute forward looking.
Instead, the purposes, the safe Harbor provisions under the private Securities Litigation Reform Act of 1995.
Actual results may vary materially from those indicated by these forward looking statement as a result of various important factors, including those discussed in the company's filings with the FCC.
These include the company's annual report on form 10-K, and the quarterly reports on form 10-Q for each of the three quarters of 2019 ended March June and September as well as the definitive proxy statement for the annual meeting of shareholders held on June 20, ferrous 2019, the company's Sam.
No obligation to update the information contained in this conference call.
I'd now like to turn the call over to Craig, our Chief operating and financial Officer Craig.
Thank you Stephanie and good afternoon to everyone joining us today.
Our fourth quarter and year end 2019 earnings conference call.
I will begin by walking through our business and operational results Alexis Wallace Our controller will then provide a financial review.
Well, we that Dr. Bates Alexis Wallace early Bates and myself well open the call for your questions.
In the fourth quarter or proton therapy business continued to post good growth.
Revenue for the Orlando Health proton therapy system, increasing 4.7% to 1.486 million driven by higher volumes.
Total proton therapy fracture.
[noise] [noise] in the quarter increased by 67 or 4.3%.
What are over quarter to 1600, and 11 compared to 1544 in the 2018 fourth quarter.
For the full year proton therapy revenue increased 23% infractions were up 17% growth.
Growing awareness of the clinical benefits and expanding uses a proton therapy treatment continues to increase which will support the continued growth of this important cancer therapy.
Yeah emanate revenues in the fourth quarter increased by 4.1% 3.230 million.
The number of gamma knife procedures increased by 60 in the fourth quarter, two 414 compared to 354 in last year's fourth quarter.
The increase in procedures was driven by the continued ramping up of our Standalone facility in Lima, Peru as well as the addition of our new site in Maryville, Indiana, which began treating patients January 2019.
Overall, the gamma knife business posted an increase in volume, but the decline in average reimbursement in the fourth quarter.
We completed two cobalt 60 related during the first quarter 2020, and contracted for an icon upgrade with existing customers.
We've also continued to hold discussion with interested parties for additional PRT MRF when that placements as we previously disclosed however, realistically we expect a slowdown in these conversations as the country and healthcare system continue to deal the Kobin 19 pin debit.
Oh.
We do expect an impact on our business from the code that co bid 19 virus, we don't expect significant impact on the proton therapy business, which is predominantly performed up to patients with cancerous tumors.
Assuming patients continue to be diagnosis timely basis, we expect near term volumes to remain steady.
However, approximately 40% of M&A procedures are considered non urgent and may be subject to delayed treatment due to posted 19.
We do see some softening in volumes at site in March.
Expect more of an impact during the second quarter, although it's hard to be more specific at this time.
As noted in our press release this morning, and as discussed on our third quarter Conference call in July 2019.
The centers for Medicare and Medicaid services announced the proposed new mandatory payment model for radiation oncology services that is intended to test and episodic payment structure or bundled payment across certain radiation therapy providers and suppliers.
CMS projects that approximately 40% duration oncology providers will be randomly selected and included in this model and approximately 60% we'll continue to receive reimbursement based on the current fee for service methodology.
The proposed payment model, which significantly altered dms is payment methodology for radiation oncology services.
For the 60% the centers not included in the proposed model Medicare reimbursement 2024, the most commonly used proton therapy delivery codes.
As proposed to approximately 15.5%.
3.6% for the gamma knife.
The timing details the proposed payment model continues to remain uncertain.
As a result, we cannot estimate the potential impact of adoptions of the proposed rule.
However reductions in the reimbursement rates or changes in reimbursement methodology or administration for radio surgery and radiation therapy could adversely affect our revenues and financial results. We'll keep you informed of any new information that we receive although it's probably prudent to expect to delay in the current environment.
With that ill now turn the call over to Lexus for a detailed financial discussion Alexis.
Thank you Craig good afternoon, everyone before I begin my prepared remarks, I'd like to call your attention to our fourth quarter and year end 2019 earnings results issued this morning.
You can access a copy of the earnings release on our website Ashland Dotcom at press release, asking leases under the investors tab.
For the three months ended December 31st 2019 revenues of 4.786 million, that's consistent with revenue in the fourth quarter of 2018, a 4.770 million.
Fourth quarter revenue, if our proton therapy system installed Arlanda health, and Florida increased 4.7% to 194 hundred 86000 compared to revenue for the fourth quarter of 2018 of 1 million 419 Alan.
Revenue for the company's gamma knife operations increased 4.1% to 3.230 million at the fourth quarter 2019, compared to 391 hundred 2000 for the fourth quarter at 28.
The increase the increase is due to increased by in the existing sites offset by a decline in average reimbursement at the company's retail sites.
Gross margin for the fourth quarter at 2018 degrees decreased a 1.441 million, 30.1% of revenue compared to gross margin at 1.565 million, our 32.8% revenue for the fourth quarter at 20 team.
The decrease is due to higher depreciation on the M&A, Nigeria equipment at a customer location is contractors that to expire and then second quarter at 2020.
Net income for the fourth quarter at 2018, or the 193000 or three cents per share.
Compared to net income for the fourth quarter. After 18 at 170000, our three cents per share and 165003 cents per share in that third quarter at 2018.
Adjusted EBITDA, a non-GAAP financial measure was 2.056 million for the fourth quarter at 2019 compared to two main 346000 for the fourth quarter at 2018.
On the balance sheet at December 31st 2019, cash cash equivalents unrestricted cash was 1.779 million.
Pad to 1.792 million at December 31st 20 team.
Shareholders' equity at December 31st 2019 was 31 million $811005.47 per outstanding share.
As compared to shop to shareholders' equity at December 31st 2018 at 31 million $48005.43 per outstanding share.
And should outstanding shares total 598 hundred 70 17000 at December 31st 2019, compared to 5.714 million at December 31st 2018.
This concludes the pharma part of our presentation, Daryl we'd we'd like to now turn the call back over T for questions.
And if anyone has question you Press Star then one on your Touchtone phone. Once again, if you have any question Press Star then one on your Touchtone phone and I'm standing by for questions.
Like scan that scar than we got its a.
Okay rainy John go ahead.
Yes.
Certainly.
I understand that this very little guidance you could you give.
In the current environment.
Obviously, everyone fundamentals.
The country starts to open up some.
It may or early June but.
There's no guarantees for that and.
You know hospitals.
I can do active.
Work and intend to.
This is a better control so.
Yes.
I don't have my normal questions because I.
I understand that everything's on hold.
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Actually would be interested in.
Your medical opinion is too.
Yeah.
What's your thoughts era.
Getting this opened up and.
You will get ready for the second wave baby in the flow.
Anyhow, that's about the only question I would have.
I think at this point, obviously, it's it's unknown and people are working very diligently to come up with some.
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Jurors or.
Vaccines to combat this but I think.
It's too early to tell at this point and we're all hoping that.
Yes.
Over with the in a fairly short period of time, but there's obviously no guarantees as to the lift that this will last.
All right I understand that.
Personal viewpoint.
Category, where.
I have to recover but not even see my Greg.
In two years.
This gets under better control.
I mean I'm looking forward to.
And as everybody in this country currently.
Hi.
Okay.
We have anything to add.
Thank you lending.
Okay and if anyone else has a question you can press Star then one on your Touchtone phone.
Yes, good question from it sounds like Tim Green.
Born if you both cued up or question ask your question yes.
I have noticed your accounts receivable balances increasing its up by 170%.
But over the past four years material allowance for doubtful accounts has remained steady at 100000 could you speak to that please.
Lexus I'll, let you.
Respond to that question.
Yes.
The bulk of why it's increasing is related to our proton therapy and because the accounts receivable and momentum basis are much larger for that site.
And then it can be impacted.
At year end based on how many months of that we had collected so we collected quite a bit in January related to that unit.
Couple of other sites that had some large outstanding balances and so you'll you'll see it should should see a job, but not in the first quarter.
And but generally it it's higher because of the designs that are coming out of our proton therapy site.
Thank you.
And we have another question, it's from Anthony Marchese go head Anthony.
Hey, guys.
I have a couple of questions how are you.
I think of all hey.
First of all I was.
I wasn't very clear when you're I guess I'm confused when you started talking about CMS changes on balance assuming.
Nothing changes other CMS changes beneficial.
True MMS.
The.
If you look at it from a standpoint of.
The gamma knife, we believe it's neutral.
Okay in relation to the proton system.
Under the new guidelines, which we don't know that these are final.
It could decrease the reimbursement for.
Cons in that currently protons as you know are reimbursed on a per fraction basis and this will be based on indications treated cancer cancers indications treated. So this could result from a Medicare standpoint, a lowering of.
Of the treatments.
Reimbursement for a course of treatment.
Okay.
With respect to proton beam anodes, you guys had been talking about potentially.
And to.
The.
Adding new proton beam therapy is that on ice. So that's on hole, but this has that opportunity gone away or is it on hold how would you characterize.
The conversations at this point.
I'll, let Ernie Bates answer that question for you Anthony.
Okay.
Hey, Tony This is there any bates or you can you. Please repeat the question again I'm sorry.
So as you guys you guys Thats OK Thats like approach you guys are talking.
The last conference call about effect that you had the potential to add.
You know several proton beams.
So given what happened with co bid.
All those conversations on hold at this point or are they going away on the continuing I'm just curious if the ways. We you guys are Lucy your opinion at this point share Tony you I'll, just say that for the most step to the most part discussion surrounding protons.
The development of new proton centers are currently suspended.
But third there continues to be interest among our potential clinical partners to adopt.
Proton therapy to their centers.
There is one site we can.
Continue to have ongoing discussions with.
And there is interest there to develop a radiation therapy center, which would ultimately include.
Single room proton therapy system and facility.
So we are continuing to have ongoing discussions with.
Potential hospital and clinical partner on that.
Right and you also at what point had discussed.
The potential for your Florida facility actually to have a second machine has that gone anywhere or is that still.
A potential.
It's still a potential and is being analyzed at this at this point, but like everything else.
It's slowed down with the what's happening within that.
The healthcare right.
Okay. Yeah. My concern is just from a stock standpoint, you've had a book value of tangible book value if I'm not mistaken.
Close to $5 a share from stops at about 45 so.
Actually my head trying to understand why the discount so I don't expect you to answer that but it's just it's just the.
So that's been anomaly perhaps.
But I had a final question relating to the.
The care Act and a number of the other executives at federal oven is now offering businesses you guys plan to do you qualify.
Turning to take advantage of that.
We'll have to look into that and see if we would qualify or not to.
To be honest with Daphne.
Okay.
Uh-huh shadow exceeded your shoes, but unless it seems to me that you would qualify in some of the.
The.
Things being offered I would think would be extremely beneficial for your guidance, obviously I don't need itself, but I think you I.
I think you do qualify and obviously as a shareholder would.
So would be interested in if you guys do qualify perhaps making some signs of public.
Statement about it because like I said the advantages are many.
Yes.
We would do that other questions I'm not a question. Thank you.
Thank you Tony Thanks, Tony.
And once again if anyone has questions. Please press star then one of your Touchtone phone.
And we Oh wait we got another from Lenny Dunn go ahead.
Yes.
So much bigger question, but.
It's my understanding that the SBK Sidoti Your bank will.
Read you interest free.
Six months worth of payroll.
As long as you agreed people your employees for six months.
At the end of the six months.
Forgive the low.
So I can't imagine.
Why you wouldn't want to take advantage of that.
Well certainly look into any thank you.
And we have another question from Robert BACE go head Robert.
Yes.
Oh.
Number of your group shareholder for years.
And now we saw very minor Ingeus birthday.
Well, hoping for you have any new.
Our next as you're working on it you haven't mentioned.
Sure Hi referrals.
Price a shares any new products that you're working on to increase.
Your volume.
Anyone of the series.
Insertions to half now.
I think.
If you look at it we've announced is we're looking to upgrade some of our.
Gamma knife sites with the.
With the icon upgrade which will allow us to do.
Some larger tumors.
Yes, I apologize CNS.
How is that going up.
Well, we just we completed one in September.
And Kevin Medical Center, and I think we also announce that.
We will be putting one day in and our Albuquerque site at Loveless.
Medical Center.
Those are the first two that we.
We will have done and I think we're looking to.
Partner with some of the hospitals to do the MRI linear tech.
So.
I think those are two of the things that we're looking at and I'll, let Ernie based comment if theres anything else it.
He sees.
Yes, Bob I would also mentioned that we are looking at.
Relatively new modalities that.
Received FDA approval in or in the marketplace. There I think we've talked about this modality in the past on previous calls.
But boat you left and a company called Viewray.
Have FDA approved linear accelerators that have an integrated MRI imaging device.
And so the referred to as Mrls or an MSR Linux and.
Prior to this this pandemic hitting we were starting to see quite a bit of interest from a number of different.
Potential clinical partners, both domestically and internationally to adopt this this modality.
So we're definitely continuing to watch that space very close Ingram, we're in close discussions with.
Both senders about potential revenue sharing opportunities.
Clinical partners.
Yeah Theres.
Each of her.
Those items.
Hi, Andrew effect.
Yes.
Honored by these companies.
Hi, good job running upgrades eggs I, just hope if you pick up.
Yes, Bob in fact in the United States There are approximately 4000.
Linear accelerators various institutions across to us and up those 4000, roughly thousand or so of those units.
Our replaced every year.
And so we've seen hospitals that are looking to replace.
Older linear accelerators with this new modality.
The issue that they have is that the cost of that if that equipment is significantly higher than just swapping out to a new linak and that's one of the reasons, where we're seeing quite a bit of interest from hospital partners to.
Mitigate that capital risk by partnering with American shared so.
We see we see tremendous opportunity in that space.
Just as we did with the gamma knife 30 odd years when.
I've really great trading for yes.
And well right.
I think my ears are limited so I'd like to see so.
Bill I.
About 35000 shares.
She is well up before I CRO.
Keep growing and doing a good job you're honest fruitful.
And your good people and I know to hire some rough rough competition from all over the world.
Including over here.
This country.
And.
Just keep going on.
And I still have facing you show. Thank you very guy for answers my question, Okay, well. Thank you and continued best health to you.
Thank you for your support Bob.
And if anyone asked a question you can press Star then one on your Tesco.
We have a question from Tim Tim grades bar.
Yes. Thank you for taking the questions I notice the interest expense has gone down significantly can you reflect on is that is the reduction in the interest rates as you are trying to.
Refinance long term debt or is that a reduction in the overall balance combination of both.
And we like you come to market.
I'll let alone.
Answer that question for you.
Yes, it at primarily it has to do at Thats paying down our balances. So as lead we pay down those balances. The interest expense is going down the Prince last question on the payment going on on we have done some refinancing in last couple of years down a lot of hands on and you.
Reloader and there is an existing balance on the data, we assemble refinance that amount at a little bit lower rate.
The combination.
And if anyone else has question restart and one on your Touchtone phone.
And we have no more questions at this time.
Okay, Daryl thank you and no.
Let dr. Bates make his closing comments if you'd like.
I just like to say I wanted to thank you all for joining us this afternoon.
The fights to overcome the cold feet.
And David continuous American shared hospital services locations current remain open to continue to meet the needs cancer patients, which represent a greater part of our business.
Looking beyond that and maybe we believe that we remain well positioned for growth.
We look forward to speaking with you would be in first quarter of fully 20 conference call.
Early base until will stay strong and healthy.
Goodbye.
And thank you again, ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.
Okay.
Okay.
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