Q2 2021 American Shared Hospital Services Earnings Call

Good afternoon, and welcome to the American shared hospital services second quarter 2021 earnings conference call.

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Please note. This event is being recorded I would now like to turn the conference over to Stephanie Prince. Please go ahead.

Thank you Andrea and thank you to everyone joining us today before turning the call over to 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 of 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 of various important factors, including those discussed in the company's filings with the SEC. This includes the company's annual report on Form 10-K for the year ended December 31, 'twenty 'twenty quarterly report on form <unk>.

10-Q for the quarter ended March 31, 2021 and the definitive proxy statement for the annual meeting of shareholders that was held on June 20, <unk> 2021 the company assumes no obligation to update the information contained in this conference call I would now like to turn the call over to race to Covid actually.

<unk> a M right.

Thank you Stephanie good afternoon, everyone.

Thanks for joining us today for our second quarter 2021 earnings Conference call.

I'll begin with some opening remarks, and then Craig to go over our president.

Oh, Oh, and CFO, who will go through the business and operational results.

Alexis Wallace, our Chief Accounting Officer will then provide a financial review.

Following that myself, Craig Alexis and Ernie Bates, our senior Vice President.

And business development and international operations.

We'll open the call for your questions.

A M S had a good second quarter.

Compared to the deepest endemic impacted quarter of last year.

Total revenue increased 12% year over year.

Net income increased to $157000 in the second quarter.

After the net effect of the extinguishment of debt.

From 29000.

In this year's first quarter.

This growth resulted from the revenue increase.

And decreases in depreciation expense.

Selling and administrative costs.

And interest expense.

Craig on Alexis will go into the details in a few moments.

Our operating results have improved.

From the actions we've taken over the last several quarters.

This includes the year end balance sheet restructuring.

And the debt refinancing that we completed in April 2021.

As a reminder.

On April 13.

We announced the establishment of a bank relationship with fifth third Bank N a.

Principal subsidiary of fifth third Bancorp.

Which is the diversified bank holding company.

Headquartered in Cincinnati, Ohio with over $200 billion.

In assets.

The $22 million credit agreement that we signed with them.

Is a milestone in our company's history.

It consists of three facilities, including two term loans that refinance the bulk of our equipment.

And added.

Two our working capital.

We also signed for 7 billion dollar revolving line of credit.

Which will be used to increase our flexibility in negotiating future projects.

Combined with our current cash balance of $8.4 million.

And the positive cash flow, we expect to generate in the second half of the year.

A M bass has a war chest for future projects of over $15 million.

The refinancing had several other benefits as well.

Including immediately lowering our cost of capital.

And swinging to a positive working capital position.

We significantly reduced our principal payments by an estimated $5.9 million over the next 12 months.

And we will realize savings on interest expense.

And free up approximately $300000 in previously restricted cash.

These actions have changed the financial profile of the company.

It's put a M S firmly on the path to reach sustained profitability.

We now have substantial financial resources for future business opportunities.

With our expanded radiation therapy equipment offerings.

I'll now turn the call over to Craig for.

For the second quarter operational review.

Greg.

Thank you Ray and good afternoon, everyone in the second quarter total revenue increased to $4 million 476000.

12% above last year, which was the most deeply pandemic impacted quarter of the year.

Second quarter revenue for the company's proton therapy system installed at Orlando Health increased 10, 6% compared to the second quarter of 2020.

Higher average reimbursement per fraction offset a lower number of fractions with continued to lag from the lingering impacts from the pandemic.

Total proton therapy fractions decreased 17, 9% to 1100 nine compared to 1300 <unk> 51.

Gamma knife revenue was strong increasing 13% to $2.9 million in keep the increase can be attributed to higher volumes and higher average reimbursement per treatment at the company's retail sites, our gamma knife centers in Peru, and Ecuador, both contributed to.

The quarter's results as well.

Gamma knife procedures increased by seven 4% to 376 for the second quarter.

Gamma knife volumes for centers in operation increased 18, 4% from gamma knife volumes for those same centers during the same period of the prior year.

With the increase in revenue the gross margin percent snapped back to 35, 9% of revenue in the second quarter compared to 22, 7% of revenue for the second quarter last year.

In dollars gross margin increased 77% to $1.6 million.

Contributing to the gross margin expansion was a decrease in depreciation and amortization by 393000 or 24% to $1.244000.

The decrease was primarily due to the exploration of one contract in the fourth quarter of 2020.

And another contract in the first quarter of 2021 as well as the absence of depreciation for the impaired equipment that was written off at year end.

In dollars the decrease in depreciation and amortization more than offset smaller increases in maintenance and supplies and other direct operating costs.

Selling and administrative costs also decreased declining by 10% period over period, primarily due to lower legal and other fees related to the GK CE acquisition that we closed last June.

The improved revenue and decrease costs flowed through the income statement.

Operating income reached 352000 compared to an operating loss of $570000 in the second quarter of 2020, a positive swing of 922000.

Net income was 157000 core <unk> per share excluding the extinguishment of debt related to the prepayment penalties charged by your former lenders as a result of refinancing that ray spoke about.

The changes that we've made added to our cash balances and we ended the second quarter with $8.4 million at June 30th.

During the first and second quarter of 2021, we completed two cobalt 60 reloads, we have several other projects pending in our pipeline.

Upgrade at Gamma Knife Center, Ecuador is expected to be completed in late 2021 or early 2022.

It will be one of the few gamma knife units in all of South America.

We are also planning a cobalt 60 reload in the fourth quarter based on the recently executed contract extension we.

We continue to have many discussions with potential clients, where our expanded product line with that I'll now turn the call over to Alexis for a detailed financial discussion Alexis.

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.

Need a copy it can be accessed on our website as a test dot com at press releases under the investors tab.

Now turning to our second quarter results.

For the three months ended June 30th 2021 revenue increased 12, 2% to $4 million 476000, compared to revenue of $3 million 991000 kind of second quarter of 2020.

Second quarter revenue for the company's proton therapy system installed at Orlando Health in Florida increased 10.6% to one 549000 compared to revenue for the second quarter of 2000.21.401 million.

Total proton therapy fractions in the second quarter were 1109, a decrease of 17, 9% compared to 1351 proton therapy fractions in the second quarter at 2020.

Revenue for the company's gamma knife operations increased 13% to 2.927 million for the second quarter of 2021 compared to 2.590 million for the second quarter of 2020.

Gamma knife procedures increased by seven 4% to 300 and some effects for the second quarter of 2021.

350 in the same period of the prior year.

Gross margin for the second quarter of 2020, one increased 77, 2% to 1.607 million or 35, 9% of revenue compared to gross margin of 907000 or 22, 7% of revenue for the second quarter of 2020.

Selling and administrative costs decreased by nine 9% to 1.090 million for the three months period compared to 1.210 million for the same period in the prior year.

Operating income for the second quarter of 2021.352000 compared to an operating loss of 570000 in the second quarter of 2020, a positive swing of 19 I'm trying 2000.

Net loss in the second quarter was 87000 or one cent per diluted share compared to a net loss of 483000 or eight cents per diluted share for the second quarter of 2020.

The net loss in the current period includes a pretax charge of 401000 on the extinguishment of debt.

Net income excluding the net charge of 244000 after minority interest and income taxes was 157000 or three cents per diluted share.

Fully diluted weighted average common shares outstanding were 5.802 million and 6.077 million for the second quarter I kind of 'twenty, one and 'twenty 'twenty respectively.

Adjusted EBITDA, a non-GAAP financial measure was 1.829 million for the second quarter of 2020 one.

Compared to compared to 1.437 million for the second quarter of 2020.

At June 30th turning 21 cash cash equivalents and restricted cash was 8 million and 437000 compared to 4.325 million at December 31.2020.

Shareholders' equity at June 30th 'twenty, 'twenty, one 'twenty 3.714 million or $4 four per outstanding share.

This compares to shareholders' equity at December 31st 2020, and 23.650 million or four about $4 eight per outstanding share.

This concludes the formal part of our presentation Andrea we'd now like to turn the call back over to you for questions.

We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

If you are using a speaker phone please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

Once again that is.

Star then one to ask a question.

And our first question comes from Lenny Dunn of Mutual Trust Company. Please go ahead.

Yes, good afternoon and.

The company.

It is now turned around.

But.

You still have that high overhead office space, which was I was hoping you'd be able to release by now.

Has any progress been made on that.

Lenny This is ray.

Hmm.

We continue to pursue those efforts, but you.

You know we've not been successful thus far.

As you probably are aware the demand for office space has declined and we just not had any.

Good fortune shiny on us.

In our attempts to.

Reduce our cost on that line item.

When does the lease run too.

I think it runs a couple more years, Craig do you have that information handy.

Yes, I believe it's a couple more years and.

We do have it listed but as Ray mentioned, we haven't.

First of all in Subletting.

Okay.

Have you had any.

<unk>.

No.

Michigan machinery that youre trying to re lease.

I should say.

Because you've been attempting.

Six months.

We'd have a deal.

Well I think I think I can confidently say that have we gotten any more leads in the answer to that question as definitively yes.

But I would probably be remiss, if I expand it on that much further.

We are having traction.

On these leads.

And.

We're making our best efforts to pursue our strategic direction and along those lines.

Okay.

With the proton beams.

No.

Two contracts that you had.

But you still have.

Ability to.

To use them.

No.

Are you still pursuing.

Possibilities of getting placement.

We definitely have that in our product bag and it would be pursuing any opportunities along those lines.

Those opportunities have been few and far between especially these last 15.16 months with the coronavirus going on there.

The number of hospital systems looking at that levels of technology.

I can pretty confidently say has been significantly reduced because of that.

But youre right, we do have that right too.

You know.

To those deposits with levy on them.

You know we're looking to.

To do so.

Okay.

Sure.

That's clearly there was a little more high end.

Installation is clearly the necessary for the patients that are available.

Thanks.

The altruistic.

Josh.

Surgeons would get them to prevail in hospitals, making installation.

Okay.

I agree with you Lenny.

And your book value is now conservatively a hair over $4.

When we trade normally which is most days.

The stack is substantially below.

All of that level.

No.

The exposure here.

It is not existent.

Investors.

How are you doing anything to that.

That does it for potential for in person Roadshows.

Trying to get involved in that.

Yeah, I think there is that potential we now have a much.

More positive outlook at least in my view.

The company's fortunes.

And you know if you look at our average daily trading volume. It has significantly picked up we've gotten interest from some retail investors along the way.

And.

You know if I had to summarize our second quarter results I'd, probably summarize it in a couple of simple concepts.

First concept would be that.

If you take out the.

Loss from the extinguishment of debt.

We had net income of 157000 in the second quarter compared to 29000 in the first quarter.

It might not be too many dollars all at all but it's a trend in the right direction.

And the second concept that summarize our performance and our second quarter and where we're at as a company.

Is $15 million.

We ended our second quarter was $8.4 million in cash we got a $7 million line of credit available for our use there is no money outstanding on that $7 million line of credit.

We've got over $15 million to invest.

And that's what we're looking to do.

Okay.

You think that you would add anything to the portfolio.

Harris.

So.

I think we've extended our product offering is pretty extensively but still continue to look at it as radiation therapy equipment equipment deck emits radiation for treatment of cancer I think that's a pretty good niche we're in.

I think so too.

We more units standing to cover the overhead because it offline.

Xtra.

Revenue related to the Bottomline.

Yes.

Absolutely.

Yes.

Okay.

My questions.

We're patient investors.

If you can tell.

To keep improving the quarters I guess the share price eventually will take care of itself.

A little more exposure.

Mhm.

Thank you Larry for.

For those comments.

Again, if you would like to ask a question. Please press Star then one.

This concludes our question and answer session.

I would like to turn the conference back over to Ray stock the Kodiak for any closing remarks.

Thank you Andrea.

Thanks, everyone for joining us today.

We remain very confident about the future of American shared hospital services.

If you have any questions feel free to contact us directly.

Our third quarter conference call will be held in mid November.

Enjoy the rest of your summer and please stay safe.

Have a good rest of the evening.

Goodbye.

Sure.

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.

Okay.

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