Q2 2020 American Shared Hospital Services Earnings Call

Welcome to the second quarter 2020 earnings Conference call. My name is enough and I'll be operator for today's call at this time.

I never listen only mode.

Later, we'll conduct a question answer session. During the question answer session. If your question. Please press Star then one and you touched on phone. Please note that this conference is being recorded I'm not trying to call, but just help me think that's great you may begin.

Thank you Vanessa and thank you to everyone joining us today before turning the call over the management I would like to make the following remarks concerning forward looking statements.

Please note that various remarks that may be made on this conference call about future expectations plans and prospects for the company constitute forward looking statements for the purposes, a safe Harbor provisions under the private Securities Litigation Reform Act of 1995.

Actual results may vary materially from those indicated by these forward looking statements as a result, various important factors, including those discussed in the company's filings with the FCC. This includes the company's annual report on form 10-K for the year ended December 31 2019.

Form 10-Q for the period ended March 31, 2020, and the definitive proxy statement for the annual meeting of shareholders that was held on June 26, 2020, the company's assumes no obligation to update the information contained in this conference call.

I'd now like to turn the call over to raise statuette interim president and CEO Ray.

Thank you Stephanie good afternoon, everyone for joining us today to our second quarter 2020 earnings Conference call.

I'll begin with some opening remarks, and then Craig took our our COO and CFO will go through the business operational results.

Alexis Wallace our controller will then provide a financial review.

Following that Craig Elecsys or any Bates and I will open the call for your questions.

The second quarter was tough in many ways. So many companies and have a mass was no exception.

People delayed their treatments more than expected.

Although volumes have bounced back in July.

Craig is going to talk more about the details in a few Matt.

In mid June we were excited to announce that we completed the acquisition of approximately 98% of the total outstanding shares of Gamma Knife Center, Ecuador essay summits majority shareholders.

She Casey Ecuador is a well established gamma knife operation.

Founded and 20 online as a private clinic to introduce advanced stereotactic radio surgery into Ecuador.

It was the first health care institution to provide this technology in Ecuador and continues to operate the only gamma knife center in the country.

Gee Casey Ecuador.

Owns its facilities, which are adjacent to one of ecuador's, leading health care providers and is located and Ecuador's largest city Guayaquil, which has a population of approximately 2.5 million people.

The center is also not far from our Gamma knife center in Peru.

Although ecuador's been hard hit by the pandemic beyond that we think theres, a large opportunity to increase patient volumes by expanding referral sources, increasing the number of pay yours and public sector outreach.

We'll be upgrading their gamma knife model for C to a gamma knife perfexion in late 2020 or early 2021.

It will be one at a few in all of South America.

The gold standard Perfexion system can drive higher patient volumes by allowing for greater ease of use faster treatment times and treatment of wider range of anatomical structures.

This acquisition meshes, well with our strategy to diversify our business model and expand further into international markets.

We paid a good price of one times historical revenue of 2 million exclusive subsequent working capital payments, which will be a nice addition to our revenue base.

In sum this is an accretive acquisition and a great debt for HMS.

Thank you for your continued support of our company.

I've got great beliefs, any a mass and its opportunities for growth.

I'll now turn over to call to Craig sort of second quarter operational review.

Craig.

Thank you Ray and good afternoon, everyone.

Cobot, 19th impact was greater than we'd expected over the full three months for second quarter of both the gamma knife MPPR key sites of our business.

Jim Knight revenue declined 28.1% to 2.590 million compared to the second quarter of 2019 due to the impact of cope with 19 on volumes and lower average reimbursement at our retail retail sites compared to the rates. We received in the same period last.

Sure.

Gemini procedures declined by 3.1% to 350 from 361 in the second quarter of 2018.

Also as a result, as the cobot 19 pandemic.

M&A volumes for centers in operation decreased 8.9% Gamma knife volumes for those same centers during the same period as the prior year, primarily due to the impact of the cobot 19 pandemic.

Proton therapy revenue of 1.401 million was essentially even compare to the second quarter of last year.

Total proton therapy fractions, and the second quarter were 1351, a decrease of 4.1% compared to 1409 proton therapy fractions and the second quarter of 2019.

The decrease from the first quarter was 19.3% when we did 1676 fractions in the first quarter of this year.

The decrease for the second quarter also primarily resulted from the impact of the Cobot 19 pandemic gross margin for the second quarter of 2020 decreased to 22.7% revenue compared to 33.3% of revenue for the second quarter of 29.

Team.

The revenue decline and the high fixed cost nature of our business combined to result in a net loss in second quarter of 483000 compared to net income of 31000 for the second quarter of 29 team.

The decrease was due to the lower gamma knife revenue as well as higher expenses come to pandemic.

The switch to a virtual annual meeting and transaction costs from the June acquisition of the Gamma knife Center in Ecuador.

Looking ahead volumes in both the PBR tea.

And again, the nice facilities began to pick up in early July despite typical seasonal headwinds.

PBR, t. volume, which predominantly treats malignant tumors rebounded, especially well during the month.

With the Cobot 19 resurgence insert sure several areas of the country, we remain uncertain as to what volumes were turned to a sustained normalcy.

In the third quarter, we expect to expense the last of the transaction costs related to our acquisition in Ecuador.

Although volumes in Ecuador have also been impacted by the by the virus. We do expect post Kobin 19 volumes to be accretive to earnings.

We remain on track to upgrade the gamma knife perfexion to the icon platform at the lowest medical center in September.

We continue discuss other upgrade some reloads, although the timing remains complicated.

We've also continued to hold discussions with several interested parties for additional PBR T gamma knife and an MRI Linux placements as we've discussed.

Lastly, as noted in our press release this morning, and as discussed in our past three quarterly conference calls.

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 an episodic payment structure or bundled payment across certain radiation therapy providers that suppliers.

CMS projects that approximately 40% of radiation 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 significantly alter CMS is payment methodology for radiation oncology services for the 60% of the centers not included in the proposed model Medicare reimbursement in 2021 for the most commonly used proton therapy delivery codes.

Propose to increase pending final determination by approximately 4.9% and to create decrease 0.1% to the gamma knife.

However, and as expected in the current environment, we have not yet received any additional information from CMS on the timing and selection details of the proposed payment model.

As a result, we cannot estimate the potential impact of adoption of the proposed rule.

However reductions the reimbursement rates or changes in reimbursement methodology administration for radio surgery radiation therapy could adversely affect our revenues and financial results.

We'll keep you informed of any new information that we received with that I'll now turn the call overdue elecsys for the detailed financial discussion Elecsys.

Thank you Craig and good afternoon, everyone before I begin my prepared remarks, I'd like to call your attention to our second quarter earnings press release that was issued earlier this morning.

If you need a copy it can be accessed on our website ashes dotcom at press releases under the investors tab.

Now turning to our second quarter results.

For the three months ended June Thirtyth 2020.

Other revenue decreased 23.2% to streamline 991000 compared to revenues of 5 million 197002nd quarter 2019.

We had net revenue from the IP equipment this quarter compared to 188000, and the second quarter at 29 team and the credit now fully depreciated and sold after expiration of the company's contract on December 31st 29 team.

Second quarter revenue for the company's proton therapy system installed and Orlando House, and Florida decreased 0.6% to 194 hundred 1000 compared to revenue.

Second quarter at 29 team of 1.409 million.

Revenue for the company's gamma knife operation decreased 28.1% to Jim Lain 590000 for the second quarter. After 2020 compared to 3 million 603.600 million for the second quarter after 2018.

The decline was due to lower volumes as well as lower average reimbursement at the company's retail sites due to a higher mix of Medicare patients.

Gross margin for the second quarter at 2020 decreased to 907000 R. 22.7% of revenue compared to gross margin of 1.729 million, 33.8% of revenue for the second quarter at 2019.

Net loss for the second quarter at 2020, 483000 or eight cents per share. This compares to net income for the second quarter at 29 team as 31000 are one cent per share.

Fully diluted weighted average common shares outstanding were 6 million 77005, nine 906000 for the second quarter at 2020, and 29 team respectively.

Adjusted EBITDA and non-GAAP financial measure it wasn't 1.437 million for the second quarter 2020, compared to two main 465000 at the second quarter of 2019.

The decline was primarily due to the net income loss as long as lower depreciation and amortization is that companies IDR Keith.

Hi, GRP equipment.

Became fully depreciated and fourth quarter at 2019.

At June Thirtyth cash cash equivalents ash restricted cash was 4.409 million compared to 1.779 million at December 31st 2019.

Shareholders' equity at June Thirtyth, 2020 was 39 973000, our $5.44 per outstanding share.

This compares to shareholders' equity at December 31st 29 team at 31 million $811005.47 per outstanding share.

This includes the final part of our presentation, then I said, we'd like to turn now turn the call back over to you for questions.

Thank you well now begin the question answer session.

You have a question. Please press Star then one on your Touchtone phone.

If you're using the speaker phone you may need to pick up your headset first before passing the numbers.

During the question answer what have you know from the Q. Please press the pound other cash.

There will be delayed because for the first question was announced.

The first question.

Anthony.

Hi, Keith Your line is open.

Hi, congratulations on taking over the helma.

I've a question for you you've been a longtime shareholder.

Believe your cost bases in the stock is probably a dollar higher than where it is you've been on the board.

Stock currently trades at 40% of.

Book value, perhaps tangible book is it a little bit less let's call a $5 I guess I'm curious from your standpoint.

As a shareholder as a board member now as acting CEO what is it that you think.

But the market is.

Hi, there, saying or missing it's hard to find the stock.

Isn't going out a business, including Youre not.

That would be trading at.

Level of book value or this percentage of book value. So I'm just curious as now that you've been there a little bit your perception as to what's going to take to get the to at least trading which would be a bubble at least.

Tangible book.

Okay.

Hello.

Anthony Sorry, I was on mute for our second Okay. That's okay. No I thought it was my thoughts.

No [laughter] sorry about that at the thanks for your question I'm glad you brought that up.

As you mentioned and I've been a long time holder of stock in American shared hospital services and.

One thing Thats attracted my investment quite frankly is this issue of tangible book value being far in excess of our market value.

And.

It's not often that there's companies with 25 to 30 30 million plus the tangible equity.

[music].

That doesn't have a market value in excess of its book value I normally used to seeing that ratio market value over book value greater than one.

And it's certainly not in our case.

That's why the reasons I've invested.

Why is that then that way.

I can only speculate for some of the reasons.

We've not had a sustained period of earnings.

And our.

Performance I'll say has been choppy.

Over the last several years.

And.

I think there's opportunity.

Correct.

I think it will take some time.

But I am trying to bullish on this.

That we can do that.

You know most.

Company.

That are publicly traded.

Have a priced earnings ratio, that's gets monitor and is that out of whack.

How different it is a is that T ratio from the rest of the marketplace.

Well, it's hard to have a PE ratio when the denominator is zero.

So I think why the first things we gotta be focused on is how we can begin to turning some profits.

That's my answer.

Yes.

There are no further questions at this time.

Okay I'd like to thank everyone for joining us today.

Let us know if you have any questions before our third quarter conference call and mid November.

States say stay well.

Have a great weekend.

Good bye.

Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.