Q2 2020 Sensus Healthcare Inc Earnings Call
[music].
Thank you for holding ladies and gentleman your line for the census, healthcare financial results Conference call. At this time, we are still gathering additional participants and we'll get started momentarily. We thank you for your patience and I see you. Please continue to halt.
[music].
Good day, ladies and gentlemen, and welcome to the census Health care financial results Conference call. All lines have been placed in listen only mode and the floor will be opened for your questions and comments following the presentation.
At this time it it's my pleasure to turn the floor, but your house limits <unk> Kim Golodetz ma'am. The floor is yours dainty sank years. This Kim Golodetz with L.A.J.. Thank you all participating in today's call joining me from sensors health care, our Joe Sardano, Chief Executive Officer, and Javier run Paula.
Chief Financial Officer.
As a reminder, some of the matters that will be discussed during today's call contain forward looking statements within the meaning of federal securities laws. All statements other than historical facts that address activity senses health care assumes plans expects believes intends anticipates and other similar expressions well should or may occur in the.
<unk> are forward looking statements.
The forward looking statements or management's beliefs based on currently available information since its health care undertakes no obligation to update or revise any forward looking statements except as required by law. All forward looking statements are subject to risks and uncertainties, including the continuation in severity of the covered 19 pandemic and its impact.
Sales and marketing as described in the company's forms 10-K in 10-Q.
During today's call. They will also be referenced just certain non-GAAP financial measures census believes these measures provide useful information for investors should not be considered a substitute for gap nor should they be viewed as a substitute for operating results determined in accordance with GAAP. A reconciliation of non-GAAP to GAAP results is included in.
In today's financial results press release with that said I'd like to turn the call over to Joe Sardano Joe.
Thank you Kim and good afternoon, everyone I hope all is well as the Golden pandemic continues to impact our health and our economy as we expected in stated that our last earnings call. Our quarterly revenues continued to be negatively impacted by code was 19 with Q2 revenues down sharply to one.
Point 2 million from 7.5 billion a year ago well. These are disappointing numbers. We're doing all we can position senses for significant future growth as evidenced by the announcements we've made over the past few weeks I continue to be pleased with our ability to maintain strong customer ties during depend.
Nick through various virtual offerings and with our judicious conservation of cash and their relentless focus on expense reduction. So we've had some exciting recent news that bodes well for the future of census earlier. This week, we announced the acquisition of to mobile laser companies that serves as they have.
Florida, a static Momo laser services serves southeast and southwest, Florida, and aesthetic laser partners or central and Northern Florida. Each of these companies it's been in business for more than two decades, and both have a high level of customer trust and satisfaction together they have approximately 30 lasers and.
Van and service more than 150, dermatology practices in Florida, including more than 500, dermatologist or not current census customers. Their lasers facilitate a wide range of in office is static dermatology procedures, including facial rejuvenation wrinkles.
Movil body sculpting and fat removal among others customers can rent the lasers for choice of time frames ranging for as little as one day to several days weeks and even month.
He's lasers roll off the van instead, the dermatology office and then back into the man onto the next customer both of these acquired companies are profitable businesses and will immediately accredited to EBITDA and earnings assuming dermatology clinics will be at 80% of their pre Cobas 19 lot.
Oh, we expect these companies will add approximately 1 billion in revenues over the next 12 months.
Both were all cash transactions and neither has any associated earn outs or contingency payments. These acquisitions form the basis of the new division named census, laser aesthetic solutions or slab.
I would point to the talented executives who built these businesses do executive positions. Paul Me out all who founded aesthetic mobile laser services will be vice president of Slas, and Matthew Hoffert, who founded a static laser partners will be the regional manager for central and Northern Florida.
Known Paul Matt and their companies for over eight years and impressed by their ability to grow their businesses through trust and reliable service. We're extremely excited to embark on this phase of growth supported by these two exceptional individuals slas will be an important step in and you and significant gross spread.
The g. for senses that complements our own laser products that we've had under development. We expect these lasers will be on the market by the ended the year following U.S. food and drug administration five 10-K clearance. These new lasers will be equipped with our proprietary and exclusive Sentinel I T solution Soc.
Where which provides asset management and HIPPA compliant patient data and storage capability.
Satellite T. solutions package also contains the software necessary to support shared service models, including the rest direct patient building.
This will further transform census into a technology solutions company with our customers experiencing the benefits of Smart technology Importantly, Sentinel will provide an avenue for recurring revenues.
Looking forward to integrating our new lasers into slash to reach and impressive number of dermatologists also it should be noted that these acquisitions bring us potential new customers for our SRT. So systems over the near term. We believe we will benefit from the gradual reopening of the U.S. economy.
Okay dermatology practices that have begun to reopen are focusing on self pay procedures in order to begin recovering the extensive income they lost due to the corona virus as such the timing to begin. This initiative is ideal. These two actors your acquisitions are just to start with a new strategic initiative.
In that overtime, we will consider acquiring additional mobile laser providers and certain other states.
These are ample opportunity to explore and time is right with an aging population increasingly focused on a static and practice valuations at attractive levels.
I want to underscore that the aesthetic laser business is an excellent one to be operating in has the demographics are extremely attractive a large portion of the population, namely the baby boomers and Gen. Xers are keenly focused on maintaining a useful appearing and they sell.
Hey nature of serving them provide excellent margins the ability to add Sentinel to our new lasers is expected to be very attractive business model for both rentals and the placement of lasers under shared revenue programs and even outright sale I'll turn now to superficial radiation therapy or SRT.
The bread and butter of our business during the pandemic. Our revenues were largely limited to service agreements as we were unable to get into derm practices. We view this as a temporary situation and have already been able to begin scheduling appointments as we all believe one day. This pandemic will be in the rearview mirror, thanks to the many people and.
Companies in various segments of health care striving towards a cure again, we want to express our appreciation to those on the front lines of this epidemic our real heroes.
Our preparations for the most pandemic environment, our ongoing we continue to expand awareness of SRT and its utility in treating nonmelanoma skin cancer, while supporting physician customers and protecting cash during the quarter. We began sponsoring a series of online programs for dermatologists, providing you form for sharing information.
Practice regimens with one another these programs are from SRT using alternative to most surgery as physicians are reluctant to incur the risks of infection and adverse events. During this time to that end, we were delighted that the American society of radiation oncology or Astro recommended SRT.
The first line alternative to surgery, when treating patients with Nonmelanoma skin cancer Astro has more than 10000 members the world's premier radiation oncology Society and the off authority on radiation therapy, we spend nearly seven years working alongside radiation oncologist to prove the epic.
Because the of SRT and we look forward to rather leveraging their view of SRT as a first line alternative to surgery with prospective customers and to encourage existing customers to increase utilization of our SRT systems. As a reminder, approximately 15% of our installed base are in hospitals under the direct superbly.
Isn't and management of the radiation oncology department. They do recognize that this is the best radiation to treat nonmelanoma skin cancer. We're also looking forward to this year's virtual Astro meeting scheduled for October 25th through 28, where we will be involved and participating with virtual media and advertising to those.
As attending online.
These guidelines from Astro follow the consensus reported by the American cutaneous oncology society, or eight coasts, which supports our technology as the leading noninvasive treatment option for non melanoma skin cancer patients, who are high risk surgical candidates because of preexisting conditions and for patients who simply want.
To avoid the pain risk anesthetic outcomes of surgery.
We were also delighted after several years of effort the American society of Radiological technologist or eight as our Ti has approved our training for our SRT systems for continuing education credits under the approval of our Estar T systems, all three of our systems will be eligible for.
Credits the S. R. T 100, the S. R. T 100, plus and training will provide 4.5, continuing education units. While the started T. 100 vision training will provide 6.5, continuing education units. This has been one more important piece of incentive for practices to use SRT.
He systems, we believe that these events, including the Astro consensus along with a SRT accreditations will generate many more inquiries from the radiation oncology segment as they continue to experience negative reimbursement trends in other cancer treatments skin cancer treatment provide them opportunities.
During the course with 19 outbreak surgeries for skin cancer has been postponed for weeks or even months. However, physicians continue to use that started teasers devices with protocols were being finalized SRT proved to be an excellent complement for most surgeons, allowing them to treat patients during uncertain times.
As I stated before our SRT units, where the last units turned off at the beginning of the closures and the first units turned on when the clinics reopened SRT has always been an efficacious treatment yet with no risk of infection and rapid treatment times and with the patient able to leave the office. After just a few minutes rather than having to wait.
For hours and <unk> in a waiting room or in a car in the parking lot well tissue as examined SRT is even more attractive in today's environment, turning the important topic of reimbursement in the U.S., we've been in constant contact with the centers for Medicare and Medicaid services. They have just come out yesterday with their statements for comp.
Since requesting additional information from the relative value scale update committee or Rob we will comply probably in supporting the rock with all request for additional data needed by CMS for clarification. We continue to expect the positive result in the revaluation of our main SRT building code post comment.
Sorry, we continue to be encouraged that this code will be revalued upward well most surgery reimbursement has been recommended downward by 8% along with Dermatopathology, which is directed relate directly related to most surgery also an 8% reduction after the new rates are announced.
There will be public comment period. The final rates will be set in November and we'll go into effect on January 2nd 2021. In addition, last year's CMS granted utilization of E and M codes or evaluation and management codes in conjunction for billing with the SRT that code as a recommend.
Did an increased to $96 per patient treatment from $74 with an average protocol at 14 visits you can see an important component added to the treatment process. We believe SRT will make significant market inroads under the new rates today, we have penetrated only about 2% of the U.S. market so clear.
Early there's plenty of runway for growth. This expectation further supports the formation of Slas with an immediate entree to new customers looking overseas. During recent weeks, we've been able to renew or focus on international business and are thrilled that benson's. When recently joined census, as vice President of International sales.
Benson joined us from owner of our distribution partners in China, and the wasted no time and resuming shipments to China with the sale of in SRT 100. During the month of July we've known Benson for years and he is a terrific addition to our team. We expect he will be able to jumpstart our sales not only to China, but also across southeast Asia.
I work T., Lloyd scars, or a particular problem, especially in China, especially mode post the Syrian section. So we believe there's a very large market for SRT, there and Benson is the right person to lead the way we do expect additional modest sales in China in the second half of the year now I'd like to talk briefly about.
Golf tour, our Anissa Tropic radiation therapy system with beams sculpting capabilities and robotic respiratory tracking.
This system has utility in as many as 17 different oncology indications. However, coven 19 pandemic is impacting the timing of research work with sculptor at luminary hospitals, including the University of Pennsylvania, and Stanford. So the benefit of supported research has been delayed.
Given current treatment constraints at hospitals, our scope tourist sales force forecasts are guided this year. Although recent interest has been very high we believe sales of this system will largely be pushed into 2021.
I mentioned on our last conference call. The during the fourth quarter of 2019, we had begun reducing expenses, including Rightsizing, our team and planning for profitability in 2020.
Given these actions along with our cash position and the revolving line of credit I'm confident we're well prepared to resume sales as geography is continue to open up of particular importance. These actions have allowed us to.
The flexibility to pursue mobile laser acquisitions, so while sales and earnings will not be what we had hoped for this year looking beyond the pandemic. We believe we are well positioned to rebound in the months ahead now I'll turn the call over to hobby here to discuss our financial results Javier.
Thanks, Joe is our pressure to be speaking with all of you do something though.
Revenues for the second quarter 220, 20 were 1.2 million compared with 7.5 meet him for a second quarter. After the on 19.
You are aware revenues were a bit we impacted by working itself through <unk> water and get to the company my team and I mean [noise].
Revenues were allowed you to derive from service contracts.
Gross profit for the second quarter of 2000, 21.6 million or 54.1% of revenue compared with 4.9 million or 66.1% of revenue 42nd quarter of 2018.
The decrease in gross profit on broke marking our do it for lover revenue.
Selling and marketing expense for the second quarter opens up and 20 wasn't 1.2 million compared with 2 million for the second wore off the dots on 19 did decrease was primarily attributable to cancellation on trade shows due to company 19, I did weaken commission expense due to lower sales and reduce spending on marketing activity.
General and administrative expense for the second quarter, I'm 20 to 21.9 million compared with 1 million afford it second quarter of the Dot 19. The decrease was primarily due to a reduction in headcount or were getting expand going for is expected to be around 1.1 need on the water.
Research and development I spend for the second quarter was up 21.1 million compared with 1.9 million for the second quarter. After talking on 18 degrees west primarily due to a reduction in expenses related to develop mean I'll just go through it.
Net loss for the second quarter of the dots on 20 was 2.6 million or 16 cents centsper share compared with net income <unk> 0.1 man or one cents per diluted share for the second quarter of 2019.
Adjusted EBITDA, you find out earnings before interest taxes, depreciation amortization and stock compensation expense was negative 2.3 me and for the second water or was up about 20, <unk> or <unk> point 4 million for the second quarter of 2019.
I will briefly review our year to date by NASA results.
Revenue for the first half of the dominant 20 were 2.9 million confirmed with Google 12.9 leader when it first half offices on anything.
Gross profit for the first half a dozen 20 was 1.3 billion or 47.1% of revenue compared with 8.3, Neil young or 63.9% of Grammy first hot off the top 19.
Selling and marketing expense was 3 million put it first half with 2020 compared with 4.5 million for the first half what 2019.
<unk> I mean, they've expanded was 2.2 liter and your today compared with 2 million a year ago research and development expense for the first half what did happen on 20 was 2.4 million compared with 3.9, Nino Fred Fred I talked about 19.
Net loss for the first half was up about 20.
6.2 million or 38 cents per share compared with a net loss of 2 million or 12 cents per share put it first half what 2019.
'cause equivalent as an investment were 18.9 million I said June 30000, Twain compared with 51, finding out that December 31 2018.
Water and we had no long term debt I know what anymore. We went over 10 million a revolving line of credit with Silicon Valley Bank. In addition answers receive alone on that it's movies is administration basic protection program and everybody occurs I bumped it up and I'm going to be used for employee compensation facilities costs.
We're confident that with their cost cutting we have effect that along with a current cash access to the revolving credit agreement on that need to be long, we're financing it will position the company like around a virus and then intact I'm ready to go visit with that I will turn to go back over to Joe.
Thank you Javier we share the disappointment in frustration of many other companies that were suddenly impacted by covert 19, but I believe we're navigating the pandemic to the best of our abilities and I congratulate the census team for their focus on our customers. We expect the better financial performance in the second half of 2020 and look forward to.
An excellent 2021 with higher reimbursement amounts for SRT increased worked with sculptor and commercial sales and the contribution from our newly acquired companies Slas. As a reminder, our products have enormous room to grow our MSR T systems are well positioned in a large market consisting of some 14000.
Dermatologists and 1000, most surgeons in the U.S., representing more than 7500 offices and growing not to mention to further 6500 plastic surgeons and 5500 radiation oncologists, we provide a compelling and alternative to surgery for millions of patients and arguably the only solution.
For the treatment of keywords. In addition, five year retrospective study with that started T. showed a cure rate of 98.9%, which exceeds the most cure rate for nonmelanoma skin cancer. The market for key Lloyd treatment with SRT is growing and has the data to back it up with the studies showing only a 3% recur.
This rate after treating keyboards with SRT within installed base of 473 units, we've barely scratched the surface and with more most surgeons turning to SRT to treat their patients during the time of cobot 19, and most likely afterwards, we believe many of them will even more will be more convinced.
Of the benefits with those comments I'd like to thank you for your time and attention and now operator, we're ready to take questions.
Thank you, ladies and gentlemen, it a star one on your telephone if you have a question or comment at this time again star one for any question.
Maybe I'll go first to Alex now at Craig Hallum capital Great.
Great. Good afternoon, everyone. This is Wilson scan for Alex I Hope you were all well and thanks for taking my questions.
Joe just to start you appreciate the reimbursement comments can you just walk us through what happened with physician fee schedule. You know what does the protocol with a rock committee, how far apart or you when CMS and just what can be done from now until November to have that final decision be in your favor.
Thanks for the question well if I appreciate it.
First of all let me say that we're not far apart with CMS at all I think there were working very very closely with CMS and I think that they're being very cooperative than I think they understand exactly where we need to be so they asked for some questions based on the submission by the rock to the am may and why.
For the questions I mean, the questions are very simple we want to provide the support to the rough committee. So that they have all the answers and so I think that they're just looking at clarification on some things is that as delay, yes, but again with the government anything can happen and we'll get those questions answered.
Promptly and I think that we'll continue to move towards an upward trend in the in our reimbursement I think they're only asking those questions because they want to help us get to where we need to be.
Got it understood appreciate the color there and then could you just speak to what your customers capital budgets look like right now as we as we sit in early August and just what their appetite is for adopting new technology I'm. Just generally thanks, well I think as a dermatology space. We're looking at doctors, we still have Uh huh.
At the prospect list and I think that we'll see some results sometime in the fourth quarter. There was a survey that was conducted by a very reliable and reputable group on dermatology practices. It can was conducted over a thousand dermatology practices, which identified a the times that they were close the amount of money that they log.
And when they also they should be back to about 90% of their workload and they predicted that sometime in October that's when it was going to take place now our own surveys with our own customers indicated pretty much. The exact same thing. So we're expecting the fourth quarter to rebound, perhaps not in the same fashion that we're expecting let's say.
Certainly we're going to see some some rebounds and I'm I'm going to reflect upon the first the ended the fourth quarter. When we were looking at targeting the year as a profits and starting the company off with a with some some great program as we mentioned that that time that you know, we're just waiting to get 2020 out of the way.
Because we felt that 2021 was going to you'd be a year with increased reimbursements and and and such for our customers and so we didn't expect at that time that a that a pandemic was gonna come around like it has but those words seem to be more compelling at this time than they ever did I think everybody.
He wants and wishes for 2020 to get over with we whereas as anxious to get 2020 started but we felt the 2021 was our year and we were looking at being profitable in 2020 and a unfortunately this is come around but based on the processes that Javier and his financial team as well as all of the departure.
And adds within the company I think everybody has done a very very good job to preserve our cash I mean, it's hard to fathom that after the ended the second quarter, we have more cash in the bank than we did after the end of 2019, especially with this pandemic. So I think it's all due to the cost cutting efforts by every manager in the company and.
I think that we recognize that we have an opportunity beyond this period, and that's where we want to bid.
<unk>.
Right no. That's that's good to hear one more for me and then I'll hop back in queue, but several weeks back there was an unsolicited offer to purchase the company.
Understand you're probably limited in what you can say here, but is there any update or any new details that you can share.
Nothing nothing to report.
Understood. Thanks for taking the questions.
Thank you.
Well go next to Scott Henry at Roth Capital.
Thank you and good afternoon, I've got a couple of questions.
First did you give.
Unit numbers for the quarter I I recognize that they're going to be small but.
I didn't hear if you gave them.
Or if yeah. So we're quite frankly, Scott thanks for being on the line and they weren't given because there weren't any new numbers. The goes the entire revenue base for the for this quarter was based on service.
Okay.
Oh, Okay and then.
Could you talk about and and I don't know she can we get I mean, obviously, if you didn't have any volume into Q. What are you seeing any month to month trends.
Yeah, Hi, how to July look relative to June early August any any trends that would maybe signal where the bottom is.
Yes, I mean, the trends are pretty evident we're seeing a lot more interest and as a matter of fact in July we started seeing the a practice is opening up for our salespeople to actually visits the centers. So that we can make presentations and so on so I think that the doors are opening a grad.
Really but theyre opening and I think it trends to a good second half when I say, good second half comparable to the first half.
They do expect I mean, obviously not get worse than the zero, but you do expect perhaps Q3 in Q4 times to look better than Q1 like <unk>.
<unk>.
Yeah Q3 in Q4 should look better than than a Q1 in Q2 and I remember after Q1.
People last there was a question that came up that said you know trying to get me on guidance and things like that what is Q2 look like and I said you know I don't think anybody can predict what Q2 or Q3 is going to bring but I said why do we started zero on every penny above that well, we'll be very very happy for it. So oh, we happy with 1.2 million.
No, but that's where we've got and you know we're facing something that weve never faced before and we're going to work our way through that and I only thing our team and everybody within the organization that has stepped up in finding ways to cut costs and quite frankly, we started that from day, one we just accelerated once the.
Pandemic started.
Okay.
And then kind of follow up on that reimbursement question I could you talk about where the reimbursement level. It is today and where it could go so he get a sense of how important any of these change made changes may be and driving the business.
Sure I.
I mean, we didnt get some very very positive news in indications from a from CMS in that it. They did announce in M-codes last year, we were allowed to use E and M codes for each and every time a patient walked into the office support treatment. So we know that on average there to receiving about 14 treatments. So the E and M codes when.
From $74 to $96 for reimbursement for each one of those visits which is an approximate 30% increase so that's something that the doctors will relish when they start using those codes for reimbursement beginning in.
The first of January 2021, with that we fully expect a an uptick on the reimbursement for our main code, which is seven seven for one and we don't know where that's going to be we have no indications, where that's going to be but the indication is that CMS has asked the questions.
Maybe there was some blank sort of maybe there was some you know a misunderstanding or whatever but they're asking for information related to that and we're going to provide them with the with the information it's not that it's difficult information that just asking for the information with that we expect that a they'll continue to move forward and continue to.
To provide an increase in the reimbursement and I have to go back to the fact that this code has not been re values since 2002 and by statute. They have to revalue with every five years and three years ago. The CMS folks ask the rough to react to revalue it well.
It wasn't revalued in January it was submitted to the A.M.A., who submitted to the CMS folks and so now we're getting a question or two that says can you verify or can you quantify this and will provide them with that information, they're not hard questions, there very easy and they're simply for clarification.
[music].
Okay, and and the final question.
No that the mobile laser acquisition.
Yeah, I guess I guess two things one did you disclose how much you paid for that anywhere in second.
You don't want to what's the driver I mean, why do you want to getting that business is easy to leverage it into your current business. It just seems so kind of different.
Different skill set than what you typically do so I'm just trying to understand I mean, one millionaire in revenues.
You know for the amount of time, you may spend on it.
<unk>, maybe a tough trade off but there might be some some other reasons, but I just wanted to get your sense behind that decision.
You know first of all the this is a cut a these are companies that we've known of for quite a long time and they have an excellent reputation with some of our customers, but they bring to the table a whole slew of customers that were not serving currently so to make to add 150, plus new custom.
There's two are based in the state of Florida up 90 customers already you know makes it quite compelling so now they're all in the same space, where all the same segment and it just gives us a whole lot more opportunities to service the whole lot more accounts on the other had were fully expecting to introduce a new line of lasers, which we've.
Been talking about for the last couple of years in the fourth quarter first quarter of 2021 and so.
We're excited to bring those lasers and part of the reason goes back to the fact that over the last several years a lot of our customers have said you know we really like working with census, we wish that you could sell us other products because we want to work with you for other products and we said so what other products would you like us to serve.
And they said well number one we would like for you to sell us laser products. Okay. Why laser products. They said you haven't heard and we said now what's the story. They said how do you get rid of a laser sales.
That's the big joke in the laser land and they said by one.
And then you never see the sales person again, and the and the fact of the matter is we consistently stay with our customers we hold their hands, we help them build their businesses. We're very interested in their success and we worked very hard to ensure that our customers are successful and so we want to bring that same philosophy to the lasers now here we have to come.
Studies that have done exactly that with their customers. They have provided their customers the opportunity to have success without the benefit of ownership as a matter of fact, you know I remember my son coming to coming home. After his first your college, saying that the car you bought me last year I want to sell.
I said you just got the car why do you want to sell he says it's a depreciating asset. He just came back from business school. After one year and you learn that pretty quickly. So I'm excited that these doctors are enjoying the benefits of having these lasers come in and out now with the advent and the introduction of our products, which will.
We'll have the Sentinel.
He solutions as part of it we will interface those products and integrate those products into those customers spaces and I go back to my days that general electric and Siemens, where we used to develop companies for brand new technologies like M.R.I. or pet C.T., we used to put them in mobile vans, who provide.
Got it shared services to hospitals hospitals use the you know engage with either one day a week per month, you know four times, a month or three times a week, depending on their volume, but they can increase their their usage over time until it got to the point, where they wanted to buy their own product because they can justify so.
Where do they go in by the product well of GE within that band GE was the one we ended up buying selling the machine and putting in the hospital. So if we're addressing more customers with the solutions in a in mobile vans and mobile services and then we can integrate our products, we're gonna be able to provide.
Our customers the laser customers not only with daily weekly monthly and yearly service contracts, but if they ever get to the point they can even by the product and so we go from soup to nuts, and providing the service to the customer and who knows we might even think of doing in asset management program, where we say to that.
Customer just sign with census for five years and will guarantee you upgrade the number of units. The you want in and out all of these things you'll never you will always remain state of the art. So we think it's a big opportunity provide something different in the laser business rather than just selling and quite frankly, all you guys had been hounding us for years, saying how about a recurring revenue.
This is a prime beautiful recurring revenues a process that supported by Sentinel can predict give us eyes on every one of the installations in everything that they're doing at all times. So we're excited for this opportunity now go one step further.
There are companies like this.
Almost in every state in the country.
And if we wanted to do a roll up of these practices of these businesses that are so well run for such a long period of time.
Just like private equity is doing with oncology practices. Yeah. We had 10 of these practices in 24 months, we might be doing two and a half you know two and a half million to $3 million year with these things you're looking at 10 practices is doing $30 million to $40 million year in growing.
So that's big business and that's what we see in this project and we've seen it working with these guys for the last seven eight years, knowing them, but it was only during this time that we had a chance to sit down talk and discover what we're looking for and it became very evident that this was a marriage made and having a few well.
Okay. Thanks for that color Joe on in thanks for taking the multiple questions appreciate it.
No. Thank you Scott.
[noise] and I find a reminder, that it is star one if you had a question or comment.
Our next to James Terwilliger Northland capital markets.
Hey, Joe can you hear me.
I certainly can James how are you.
I'm doing okay. How are you.
Good.
I've got a couple quick questions.
First of all [laughter] I'm going to build on what the previous Taylor said and this acquisition and maybe I'm misinterpreting. The press release. It says over 150, plus dermatology practices in Florida alone.
Are there other states as well or.
Hi. This is just that were there just they just service, Florida, Okay, just Florida Okay.
And then secondly, accessing and a 500 dermatologist who are not current census customers.
But they're doing 100, and 150 dermatology practices, what's the total dr.. Thanks, Hey can you share that with me because I'm, sorry, if I'm wrong.
Go ahead, when you're well you've got you've got 150 practices. There's lot of those practices that have more than one dermatologist. So totals about 500 dermatologists in their hundred 50 practices and so in the state of Florida. There's a few thousand dermatologists, it's a big market with a lot of dermatologists it within the state.
Right. So we go from our 90 practices that represent.
About 300, 400 physicians that use our equipment in the state to now about 150, you know the exact number in the state of Florida is 1500 68 dermatologists.
So okay were approximately now in in over one third of the dermatology practices in the state of Florida.
That's right I was trying to get to was was looking at not just the installed base, but the potential installed base.
So I'm going to pivot here, a little bit didn't go down.
The international markets I thought it was very encouraging data to to get a better business development, especially now with what's happened here in the United States to maybe pivot a little focus towards the international markets.
Already so what a machine into China, how much just remind me. Please what is your current.
Normalized market not under cover but what's your.
Current a percentage of revenue that is international and in the press release, you do talk about additional orders coming from China and 2020 2021 can you expand on that at all.
Yes, the our existing population in outside of the United States is about 10% of our overall installation base and I would tell you that about 75% of that installation base outside the U.S. is in China. We have approximately 30 units in China itself and now we're expanding.
Into Vietnam, Taiwan, Korea, and a few other places and over the last six months during the Cold did you know pandemic, China seem to be coming out of it very very soon based on the feedback that we were getting and so we felt that there was an opportunity to start so.
Selling in China based on on that opportunity and it came up to us that we were able to higher this individual away from he worked with FFO soon which is a almost a 200 billion dollar public company on the Hong Kong exchange and for their distribution partner Chindex, which they wholly owned.
And so he was working with them for the last 16 years, and Oh, just and talking to him after working with them for the last eight years throughout the you know being on the other side of the fence found out that he was he was vulnerable and we felt that he was a very unique skilled individuals are we wanted to bring onboard and.
We started talking in the and he accepted so.
His communication in China, because he's a perfectly a you know bilingual and speaks a Chinese has allowed us to have better communications and we were able to take advantage of the early out. If you will are there early recovery of coated in China, and it's still doesn't take away the fact that piece.
People need to be treated for their key lloyds as well as their they're scarring and the other scarring as well as the skin cancer. So this unit went to a scarring Institute, which is a beautiful facility right in the town. Unfortunately, it'd be said where are we closed down.
Our our embassy so it's in a very visible place very highlight visibly and so we're excited and we think based on the feedback and the prospects that we have that we could see additional business in China before the end of the year and well into next year.
Okay. Thank you for additional information and then my last question and I know you don't want to give guidance and clearly I don't want to push you, but you're going to be much better job in what I would've thought with my model in terms of managing expenses and it's extremely impressive that you actually increased or cash balance. During this time in your press release, you say DNA can kind of.
Run at this level.
I would think Irene deal could quantify the at this level now that sculptor is gone, but I'm sure you've got other things there like a laser business.
[laughter] sales and marketing so how should we think of sales and marketing because that number came much lower than what I was looking for and I wouldn't think that's going to take off until you.
Restrictions are taken off as well so I don't want you to give any guidance, but should R&D be at this level in should sales and marketing stay here, but I know sales and marketing should gradually be trending up is things open up any color you could provide would be fantastic for me.
Hey, Jim he's not here so basically on a DNA. We had we had a very very very good decrease of the DNA I think it's gonna be mundane I'm sorry, it's how it goes on marketing sales and marketing is gonna be on reduced drastically changed your Joe because of the sell these directors ready to sell so the less.
I felt that we happened to less participation on that trade show, it's going to redo of this over and marketing and I'm R&D are we still have some progress that we're working on especially also with the laser so it will maintain probably the same level through the over here.
Okay Fantastic, that's kind of what I thought budget, they really nice job on expense control. There's nothing you can do about it covidien did a very nice job with.
With what's conserving cash and generating cash I jump back I was wondering whether that's a James James to you because it was a very very good question hobby or answered the expense side of it I think that we have that under control pretty much between now and the ended the year and it's not going to be reflective on sales and marketing button sales and marketing listen we wish that we had 10 times.
<unk> expenses on sales be on the sales and marketing piece, because we'd have to sales to go with it. Therefore, the revenue to go with it but a lot of our business and presentations had to be conducted via zone.
But now we're starting to see action, where the doors are opening up and the doctors are asking us to come in for those presentations. So I would just I would suspect that these sales and marketing expense will go up slightly in Q3 and might get to normal numbers in Q4.
And so that part of the business I think we'll we'll benefit and won't and we'll see an increase there, but I think we'll see an increase in revenues as well.
Okay fantastic. Thank you very much for taking my questions and I think it's a good quarter in a difficult conditions take care Joe ticketing. Thank you appreciate it.
And just a final reminder, that at a star one if you had a question or comment what kind of lastly to Yi Chen at H.C. Wainwright.
Hi, This is provided in dining in around teach and thanks for taking my question I wanted to start off by hearing your views on the current stages of dermatology practice reopening across the country.
Yes, as I stated earlier the the study that was done by an independent group a very reputable group of 1000 dermatology practices.
Showed that during the closures of the practices. The accounts on a on average lost about $350000 per per practice, which represented about $3.2 billion in revenue loss by dermatologists during the year. There closure. So you know in the second half.
Most of these doctors if not all of dermatologists are very very good business people as well because they run a practice.
And they know how to make money they don't like losing money. So what we're seeing is an acceleration in a lot of the it's a statics business you have a lot of people out there that were used to going to the doctors for their botox for their fillers. They want to get rid of their wrinkles. They want to do something different and so that is a very quick way.
Fast way of earning cash in those practices on the other side. We also saw with most surgery surgery practices SRT is an excellent complement because it didn't the MSR T was something that was used during the pandemic and still is being used during the pandemic because the profile of patient.
Oh for coal that is exactly the same patient profile that we have for skin cancer patients. There are over 65, a there they have hypertension there on beta blockers their diabetics. They have all the same pre existing conditions. So based on that dirt prior to the closure doctors most surgeons were saying look were.
We're not gonna do most surgery or we have to hold off on two or three months, but the people that had the SRT. The most surgeons that had the S.R.T. continued to treat those patients until their protocols were complete so it proved to them as well as others that SRT is something that can go through any pandemic or any type.
The situation. So I think that as we're looking in the future when a patient is a it has a skin cancer, you're not going to see a room filled with 10 patients waiting for their surgical procedure because the process as they go in and out of the rooms on a regular basis I think because of social distancing, we're going to see.
The fewer patients being treated with most and the potential of more patients being treated with SRT and this revelation to a lot of the practice is out there are going to say look we want SRT and we feel that with the combination of an increase in reimbursement for us SRT and a decrease.
Yes in moes.
That that combination will will bring more attention to SRT and help us with ourselves.
Thank you all my kind of color and I'm beginning to ask for recommendations are likely drive the market adoption of their soppy systems in the near come there is a pocket moved to quantify a little bit I know, it's a difficult but.
No I mean here, here's what I would say <unk> because that's a very very good question as well we know that Astro was one of the biggest than most powerful societies and all of health care.
They're very much at the forefront of technologies, they're very much at the forefront of the the political system as well. The first you know 30 to 50 systems that we have installed within the company. When we first started our all in hospital settings.
And so they're all under the supervision of radiation oncologists, so they recognize SRT as being the best way and the best radiation to treat skin cancer. I think was asked rose revelation and comments regarding this type of radiation being the best way to treat skin cancer is identifying that skin cancer is an opportunity.
For them and I think the follow up.
With the A.R.S.T. people regarding the the credits they see you credits for people who are getting trained by our system is a reflection on the good training that we provide but also that its worthy of receiving see you credits for the operators of the equipment. So I would tend to think that.
With the decline there's as they also announced that there was a 6% cut in all of their reimbursement across the board on all the other cancers, so with an advance or an uptick in our reimbursement I think there we're going to start to see a the radiation oncologists and looking more deeply into the opportunity of treating skin.
In cancer, because it is a big market. It is much bigger than the markets. They serve currently might not be the same money, but return on investment percentage wise, it's a much better return on their investment. So I think we're gonna start seeing some activity in that area.
Alright.
I mean, how are you, making up a bit salaried out well by its got to Canadian company.
These companies currently open for business, it's Mike Hogan 19.
And do you plan to acquire I, just had demagoguery practices in other states. Thank you.
Thank you again for the question. They are open and they are currently doing business and I think that they're extremely busy with their units in scheduling that business because like I said before doctors are looking for ways to recuperate the losses that they had when they were closed so I think we're going to see a much better <unk> Street.
If you will in the second half of the year with this with these services. So so that is great as far as acquiring other businesses like that were not acquiring dermatology practices were acquiring services to dermatology practices, we see that trend that in other parts of the country as well and so if like the.
Private equity firms are rolling up derm practices, we think that rolling up the services with laser a services is also an opportunity for us because their local operators that are doing very very good business with very high margins. So we think that that's an opportunity for census, as well and it provides us an opportunity to.
Integrate our own lasers, when they become available within a year.
Thank you and with no other questions holding I will turn the conference back to management for any additional or closing comments.
Thank you Jess appreciated so in closing I want to thank you once again for your time this afternoon and for your interest in sensors. We continue to move forward on multiple fronts. In spite of the pandemic and are optimistic about our prospects when we return to more typical business pattern.
Thanks, again have a good day and be safe. Thank you.
Ladies and gentlemen that well conclude today's call. We thank you for your participation you may disconnect at this time and have a great day.
Oh.
Oh.
[noise].