Q3 2021 Sensus Healthcare Inc Earnings Call
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Ladies and gentlemen, and welcome to the Sensus healthcare third quarter financial results Conference call.
Participants are currently in a listen only mode. We will conduct a Q&A session at the end of the conference.
Technical assistance at any time during the program you may do so by pressing star zero on your telephone keypad and I will now turn the program over to you can go with it.
Thank you. This is Kim gala, that's what L. A J. Thank you all for participating in today's call. Joining me from Sensus healthcare are Joseph Giordano, Chief Executive Officer, and Javier Ram Powell, our 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 activities Sensus healthcare assumes plans expects believes intends or anticipates and other similar expressions will should or may occur in the future.
Our forward looking statements.
Forward looking statements are management's beliefs based on currently available information Sensus healthcare undertakes no obligation to update or revise any forward looking statements, except as required by law.
Forward looking statements are subject to risks and uncertainties, including the continuation on severity of the COVID-19 pandemic and its impact on sales and marketing as described in the company's forms 10-K and 10-Q.
During today's call there will also be reference to certain non-GAAP financial measures.
Sensus believes these measures provide useful information for investors get should not be considered as a substitute for GAAP, nor should they be viewed as a substitute for operating results determined in accordance with GAAP.
Reconciliation of non-GAAP to GAAP results is included in today's financial results press release.
With that said I'd like to turn the call over to Joe Sardana Joe.
Thank you Kim and good afternoon, everybody. Thank you all for joining us today.
When I last spoke with you in August for our Q2 conference call. We believe that business was starting to get back to normal as we resumed in person sales calls and indeed, the third quarter and subsequent weeks featured several encouraging events that bode well for continued sales growth.
Not only in the fourth quarter, but through 2022, we believe we have turned the corner and the impact of the pandemic is now largely in the rearview mirror I am pleased to share with you what we're seeing that gives us such encouragement.
First our domestic business has significantly improved compared with the pandemic impacted third quarter of 2020 Q.
Q3 revenues of $5 5 million were up 244% and although modest we reported our first profitable third quarter in the company's history with net income of 200000 and diluted earnings per share of <unk>.
We shipped 14 systems during the third quarter, including eight Premier priced SRT 100 vision systems.
This growth reflects our ability to effectively described the attributes of our superficial radiation therapy systems for the treatment of non melanoma skin cancer in keloid scars as we continue to educate our market on the new cm, but CMS reimbursement schedules made available to <unk>.
T treatments effective January one 2021.
Our sales staff is at its best when we are able to discuss these attributes directly with prospective customers and in person demonstrations in physician visits we were able to conduct made a huge difference.
Our highly encouraged by the reception of our fair market value lease program that has been received to date. Our physician customers are beginning to take advantage of this offering and its ability to provide a positive ROI for the SRT 100 vision by treating just two patients per month.
Recall that the vision has many features that make premium attractive along with image guided ultrasound capabilities Division includes Sentinel a powerful platform that provides census, with the opportunity for remote diagnostics, while providing.
<unk> with asset management capabilities as well as HIPAA compliant patient data collection.
With respect to improved reimbursement our organization has done an excellent job in articulating the new CMS reimbursement rates that went into effect at the start of the year along with the benefits of SRT to a growing number of physicians.
This has led to improved patient volumes at customer sites as well recall that CMS issued new reimbursement amounts for CPT treatment codes ultrasound coding for the SRT 100 vision system and A&M codes. The combination of these higher values provide SRT users as much as a 50.
5% increase over the reimbursement amounts over the past several years.
Compounding this with significant reductions in most surgery and related biopsies are SRT technology provides a strong financial argument complementing any dermatology practice.
Note that we continue to see increasing volumes for SRT systems installed at customer sites, only not only to the higher reimbursement codes, but because srd became so much more prominent in the midst of the pandemic, while surgeries were held to a minimum.
We believe this positive shift resulted in a best practice towards Src Src and will be a permanent fixture in the dermatology process.
We were so excited to be live in Las Vegas last month at one of the most prestigious gatherings of dermatologist default clinical.
Our SRT systems were well received as our special group of Kols provided very positive presentations for src's impact on treating non melanoma skin cancer and key Lloyds during COVID-19, along with the new reimbursement values for our codes.
When you provided us with an excellent platform to demonstrate our product offerings to more than 200 practitioners in person and more than 500. Virtually this is always an important trade show for us, but because we had the opportunity to demonstrate our technology in person for the first time in almost two years the excitement.
It was powerful interest in our products and the number of new sales leads both were very robust with excellent foot traffic at our booth on the Tradeshow floor.
We have assembled an impressive roster of leads for follow up in the coming months and we were very excited about the potential conversion of these leads into customers. In addition, new and updated data on the safety and efficacy of superficial re radiation therapy as well as image guided SRT.
And discussions of improved reimbursement supported our presence in particular, a session titled New and future innovations and Dermatological care was led by a panel of key opinion leaders Dr. Brian Berman of the University of Miami Miller School of Medicine, Dr. Mark Nestor of the center.
For clinical and cosmetic research and the center for cosmetic enhancement in Aventura, Florida.
Dr. Michael Gold founder Gold skin care Center, and clinical assistant Professor at Vanderbilt University and Dr. David Goldberg founder of skin laser in surgery of New York, and New Jersey clinical director and Professor of Laser Research Department of Dermatology at New York's Icahn School of Medicine at Mount Sinai.
International sales continue to be promising in particular in China, where we engaged a new distributor partner late last year during the third quarter. We sold another SRT system in China are six months of the year, we expect to sell additional systems in China in the coming months.
Importantly, early in Q4, the Chinese health authority renewed our license to market. The SRT 100 system for an additional five years. This new license runs through December of 2026 and covers the sale of our superficial radiation therapy to treat non melanoma skin cancer.
Keloid.
Recall that China is an important market for our products accounting for 20% of the world's population the indication for the SRT 100 to treat key Lloyds, which we received in 2017 is of particular interest to women and their physicians to prevent and treat key Lloyd's following cesarean section. We currently have.
46 systems installed in hospitals throughout China.
We also are expanding our focus to India for further international growth and are hopeful to record our first sale of there in the near future. In addition, we're finalizing plans for a new distributor in Taiwan.
Research work with Sculpsure continues at Stanford, although delays in hospital market due to Covid have stalled development, we believe that research to support various oncological indications will resume by the end of the year and in.
And the resumption of sculpt tourist sales will begin towards the end of 2022 once clinical data becomes available we.
We are pursuing new indications for our SRT systems as well as you know during the first quarter, we shipped the system to wholly named Medical Center in Teaneck, New Jersey, as a pilot program and the use of SRT to treat the lungs of COVID-19 pneumonia patients. The hospital has used the <unk>.
System on several patients to date and plans to prepare a paper for publication.
While we are thrilled to help play a part in the treatment of recovery of COVID-19 patients note that this program is out of our hands and it's completely managed by Holy name. We will certainly report back to investors. When this papers published and we can't put a timeline on it is the availability to treat COVID-19 patients is at an all time low thank goodness.
<unk>.
We will continue to pursue collaboration with interested institutions, who believe in our low dose radiation solution for COVID-19 patients.
As a reminder, in evaluating this opportunity history showed a very successful approach to treating pneumonia with radiation going back nearly 75 years, our SRT systems are well suited for.
COVID-19, because they are portable and allow for bedside treatment in the ICU.
Another indication for SRT is in the veterinarian market earlier. This year, we shipped an SRT systems, Colorado State University Veterinary school and announced the first treatment on a canine.
CSU is continuing to treat cats and dogs and is now preparing to begin a treatment protocol for horses tumors.
Tumors are common in horses in the use of SRT, especially around the eyes is a promising therapy, we hope to report data from CSU at some point in the near future.
As you know we've expanded our operations into aesthetic laser business the strategy behind the acquisition of mobile aesthetic laser companies last year and the formation of sensors laser aesthetic solutions or slash, where smart steps to increase our customer base provide a beachhead for further acquisitions.
And improve access to laser technology the.
The integration of our Sentinel It solutions software into our proprietary laser is complete and these lasers are now available through slabs.
We implemented creative rental and leasing options for our lasers and believe the combination of Sentinel technology, which provides asset management and HIPAA compliant patient data and storage capability and also contains a software to support shared service models, including direct patient billing is an important avenue.
For growth.
We also have been actively evaluating an expansion to our mobile aesthetic laser business beyond Florida by our strategic transactions in geographies, where we have an existing SRT customer base in particular, we see Texas, Georgia, and Arizona is top prospects to roll into the <unk> Division.
Over the long term, we expect <unk> to become a meaningful source of recurring revenue.
Before I turn the call over to Javier to review our financial results in more detail.
Want to impress upon you our optimism for the rest of the year.
The resumption of significant sales.
Following peak pandemic months, and a robust backlog of orders along with the keen focus on expenses positions census for a profitable fourth quarter and full year with that I turn the call over to Javier Javier Thanks, Joe.
<unk> will be speaking with all of you this afternoon.
Joe mentioned revenues for the third quarter of 2021 were $5 5 million and this compares with revenues of $1 6 million put it third quarter of development underway, which went up personally impacted by the start of the COVID-19 pandemic.
Revenues for the 2021 quarter reflect the sale of <unk> systems, Inc.
Clothing, eight premium SRT 100 vision systems.
And one SRT 100 system shipped to China as well as service contract.
Our new mobile laser business.
We're cautiously optimistic that the worst of this pandemic is behind us, although we're watching the payments and some of our targeted area for any impact.
Cost of sales for the third quarter of 2021 was $2 3 million compared with zero point $9 million for the prior year quarter. The increase reflects higher sales during the 2021 quarter.
Gross profit for the quarter of 2021 was $3 2 million or 57, 9% revenue and this compares with gross profit of <unk> 7 million or 41, 5% of revenue for the prior year quarter.
The increase in gross profit was primarily driven by the higher number of units sold in 2021 service revenue on a unit of the impact of COVID-19 on their development 20 quarter.
Selling and marketing expense for the third quarter of 2021 was $1 2 million up from $1 million project.
Third quarter of 2020.
Slight increase was primarily due to higher commission expense.
General and administrative expense for the third quarter of 2020 was $1 1 million compared with $1 million for the third quarter of 2020.
The increase was primarily due to higher stock compensation expense.
Research and development expense for the third quarter of 2020 110.7 million compare with $0 9 million for the prior year quarter.
Decrease was due to lower spending on physical sort of project and surge protection faced during 2020.
Our net income for the third quarter of 2021 zero point $2 million or one per diluted share compares favorably with a net loss in the prior year third quarter of $1 7 million or 10.
<unk> per share.
Adjusted EBITDA, which is defined as earnings before interest taxes, depreciation amortization and stock compensation expense.
Spain was positive <unk> 5 million compared with a negative $1 5 million in the third quarter last year.
I will briefly review our year to date financial results.
Revenues for the first nine months of 2021 were $14 million compared.
Compared with $4 5 million for the first nine months of 2020.
211% increase was primarily driven by higher number of units sold in 2021.
Service revenue on units and the impact of COVID-19 on their 2020 period.
A couple of sales of $5 9 million for the first nine months of the document 21, compared with $2 5 million a year ago.
<unk> was due to higher sales in the 2021 period.
Profit for the first nine months after talking about 'twenty one.
$8 1 million or 58% of revenue compared with 2 million or <unk> 45, 1% of revenue for the first nine months of 2020.
The increase in gross profit was primarily driven by the higher number of units sold in 2021 service revenue on a unit and the impact of COVID-19 on the first nine months of disaster about 'twenty.
Selling and marketing expenses for what $3 5 million for the first nine months after 2021 compared with $4 million for the first nine months of 2020.
<unk> was primarily attributable to lower trade show expense due to cancellations related to COVID-19, reduced marketing activities, including travel and lower salary and benefit expenses due to reduced head count partially offset by an increase in commission expense.
General and administrative expense was $3 5 million for the first nine months of <unk> 21, compared with $3 2 million for the prior year period.
The increase was primarily due to higher legal and professional fees.
<unk> expenses and insurance premium costs.
Research and development expense for the first nine months of the document 'twenty, one was $2 3 million compared with $3 3 million for the first nine months up to document in 'twenty.
The decrease reflects the lower spending at physical projects enter production.
In 2020.
Net loss for the first nine months of 2021 was one two or a loss of <unk> seven per share compared with a net loss of $7 $90 million or a loss of 48 per share for the first nine months of the dominant in 'twenty.
Adjusted EBITDA for the first nine months of 2021 with a negative <unk> 4 million compared with a negative $7 1 million for the first nine months after document Duane.
Turning now to our balance sheet.
Cash and cash equivalents as of September 32021 were $16 4 million compared with 14 nanometer and as of December 31 2020.
Company has no long term debt and zero point $1 million in outstanding borrowings under COVID-19, Paycheck protection program as of September 32021.
We are confident that with our ongoing attention to expense management, along with our current cash access to all of our existing revolving credit agreement, we continue to be financially well positioned to support our expected growth for the remainder of 2021 and the John.
As a final comment please see the table in the news release, we issued earlier today when a reconciliation of GAAP to non-GAAP financial measures.
I'll turn the call back over to Joe.
Javier.
Our third quarter results reflect the dedication of the entire census team and I am so very proud of the way all pulled together during the pandemic to keep our company going knowing that our products are so important to the health of so many.
We kept the census name in front of our customers being helpful to them in whatever way, we could while the word world stood still during the pandemic we.
We've now hired back the vast majority of our pre pandemic sales team and it's a testament to the census that we have been able to backfill our sales team to pre COVID-19 numbers, we have plans to expand the sales organization to support the opportunity we face.
Each quarter I remind you that our products have enormous room to grow our SRT 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 the firm.
There are 6500 plastic surgeons and 5500 radiation oncologists, our SRT systems provide a competitive compelling alternative to surgery for millions of patients and arguably the only solution to prevent the recurrence of keloid following surgical excision.
Before we open up the call for questions I want to mention that we were delighted to be invited to participate in the <unk> annual Craig Hallum Alpha Select conference being held on November 16. This is a one on one and small group meeting virtual format.
Later to kick off the new year and as a sign of recovery, we expect to be participating in one on one meetings with our Investor Relations agency, La and San Francisco concurrent with the Jpmorgan Health Care Conference. The second week of January I hope to meet with many of you in person there with those comp.
I'd like to thank you for your time and attention and now operator, we're ready to take questions.
All right, ladies and gentlemen at this time, if you have any questions. You may join the question queue by pressing star one on your telephone keypad again Thats star one on your telephone keypad to join the question queue.
And it looks like our first question will come from Alex Nowak, Alex Your line is now open.
Hey, good afternoon, everyone. This is connor on for Alex Thanks for taking the questions.
My first question kind of revolves around reimbursement.
With the recent payment fee schedule published were there any changes that we should be aware of that would have.
I have an impact on the reimbursement for the SRT system.
None.
What they what they published on the first of January usually goes for the entire year, so until theres any indications to changes they usually.
Give for warning to the people about changes that you just don't do the marble truly overnight. So there has been no indications and we don't see any.
<unk> forthcoming.
Sure Okay.
And then on the mobile laser business.
Integrated into Florida, now can you share any progress that you have about kind of integrating that into new geographies and kind of what we should expect to hear in 2022.
Well, we have a very nice model of providing services to a huge customer base of over 400 physicians that are renting these lasers on various levels being daily weekly monthly and annually and so those customers had to recover during the call.
Pandemic, just like everybody else and we're starting to see that business rise.
So how we want to integrate we want to approach operators in these other cities that we mentioned.
And surround our existing customer base with with.
And operator that is servicing a larger customer base on a rental basis. So again like I've mentioned before we're not looking for the biggest but we're looking for the best operators along with their customers that have the longest tenure is the longest relationship. So we feel that the integrating them into our program in those areas can.
Presentation live talking about what the new reimbursement codes, we're all about and how it is significantly impacted.
Skin cancer patients. So we had that were regular panels that we're headed up by the doctors that we mentioned and then there was a full panel in an evening session, where we had.
The original session that was about I would say seven to 800 people in the room and then specifically for a dessert session that lasted about 10 15 minutes as a follow up we had a panel of all of those doctors talking to about 80% to 100 docs that were keenly interested in the products. So we're excited most of those customer.
If not all of them came by the Booth, we have several prospects that could close before the end of the year based on what we have from that meeting and we have our salespeople working on them now and I think the combination of <unk>.
<unk> about the reimbursement codes, along with the new coating that is being used and the fair market value lease really really helped us distinguish ourselves from previous years in talking directly to the doctors.
As we've been doing one on one with our salespeople going around so having that many people in one room listening to the same thing all at once was a real help for us.
Okay, Great. That's good color and then.
Can you talk a little bit more about the.
The static laser business Youre your expansion there.
Obviously, we know about the two mobile units that you purchased last year.
Can you tell us that business has picked back up and what your plans on that.
Well that business, we're seeing organic growth with that business coming back because the practices are coming back in.
The doctors and their clinics are seeing a lot more patients than before so.
It's difficult to bring these new products when you're breaking in so.
This meeting will be helpful. We have the south should be South Beach symposium, which will be more of a local Florida show. If you will in February and then we had the AAD.
In March so we've got.
Some soft introductions of these products directly to the consumer who wants to buy and we still have an opportunity to provide these products to about 400 customers in Florida, who are looking to rent. So we're exposing the products a little by little and I think that will grow from there.
Alright, it looks like our next question will come from Ben Hayner, Ben Your line is now open.
Good afternoon, gentlemen, can you hear me all right.
Are you allowed and clear Ben Thank you.
Got it thank you guys.
So you mentioned earlier the backlog log of orders are you on.
On anything.
Apply chain related or is that just quanta.
Quantity of orders type of things and then if you could kind of characterize it in terms of how quickly you might worked through that backlog.
Any visibility that you can provide there would be helpful. Sure sure I think that the the end of Q2 and the start of Q3 and all during Q3, we received excellent feedback from the prospects that we were talking to and from.
Our main customer and so on so with putting all of those things together.
We started picking up backlog of orders and we had to provide additional.
Reemergence of Covid varian for whatever than you've had in the past.
Let's put it let's put it this way the market is reacting post COVID-19.
And in order to stay ahead of the supply chain problems that exist not that we're experiencing any but in order to stay ahead of it I think it's even more important for us and our customers to realize that there could start seeing leeway or some some time in between the time, we manufacture a get the order.
To manufacture and deliver so that's all a good problem to have and we're putting pressure on the system to deliver what we've what we're getting.
Okay, Great. That's very helpful. And then lastly for me you mentioned the distribution partner in China, and it sounds like things are going pretty well there, but you'd also could you also.
Give us more color and then im curious about the new distributor in Taiwan, what do you see that market looking like.
They're kind of reimbursement already in place or any characteristics that you could share.
Would be helpful.
Well.
We're very very happy with with the way we're handling China as you know our new VP of international sales as a Chinese national who is <unk>.
American citizen, who works very very hard and is very knowledgeable with 16% to 20 years' experience in the international market and very well connected particularly in China. So our distribution partner there is an excellent one we see them with progressing with.
With some of the trade shows and some of the Internet exposure that they are providing to our product and our technology and we're seeing some additional.
Some additional signs that we'll be able to deliver some more products there in the fourth quarter.
They suffer the same things that we see here in the U S. In that the government owned hospitals of which those are the majority are under a lot of pressure because of COVID-19 problems that are happening there their numbers are not as low as us okay. They continue to experience problems, but the private health care market is very very.
I'm just wondering if you could talk a little bit about China I know you have a new distributor there how that how that's been going any color there and then a little bit on your expansion into India and it comments there yep sure. The <unk> like I. Just previously mentioned I think that we're going to sell some more units into China.
So we're excited about that.
No exactly how many but I think that will have a few queue for sales that will go into China.
The Indian market, we have been opened by the Indian government to be able to sell their we've identified one or two distribution opportunities, which we will pursue and probably sign up in the fourth quarter, which will give us an opportunity to start selling there in the first part of next year, but that is.
At the very very big market, there's a huge private healthcare segment and their and their healthcare business overall and that's the that's the side that will probably be able to penetrate the most.
Okay. Just lastly, any any update on sculpture Hunter jumped the pipeline there and shut off that can heal sure.
Things are going very well with with our friends at Stanford They are taking the lead.
They are working on their protocols with their institute in based Investigational review Board. They will establish those protocols hopefully they will be made very apparent very very soon to us and I think that at some point in the first quarter, they're going to start treating patients and which means that we should start.
Being results or information regarding the results in treating those patients around mid year next year and I'm anticipating maybe a sale or two by the end of next year.
Okay, great. Thank you so much.
Thank you.
Alright, it looks like our next question is from the chains.
<unk> Your line is now open.
Oh, Thank you for taking my questions do you expect to experience any supply itching issues related to manufacturing the components or logistics.
Can hear you loud and clear James how are you I'm doing well uhm congratulations on what I think is a great quarter and some extremely positive tone, it's nice to see things get back to normal and and open up most of my questions have been answered but.
The the one we just had on the supply chain, so, but here's another way to look at that with the reimbursement that you've had out there and kind of the success that you're having how are your I know a lot of companies are trying to slowly increased pricing has there been any change in in pricing as you look at this S. R T technology.
And the model in any change of that going forward.
In terms of them know and we we haven't made any major announcements or anything like that but our our pricing is slowly creeped up over the last year year and a half.
So you're starting to see our average selling prices for the various products increasing significantly I would tell you that three years ago in 2019 average selling price for the S. R. T 100, <unk> 100, plus which was just being announced with somewhere between 195 to 200.
Quarter, not just a good quarter, but a good quarter during very very difficult and challenging times, Oh I've got one more one more I'm, sorry, I I like.
Did you see much of a slowdown with the Delta Covid variant in terms of your operations in Florida, and Texas, where I'm trying to go is these are good numbers I guess my question is could they have been better did you see anything with with Delta impacting your operations it didn't really impact us that.
Much.
Partly because as of this moment.
My understanding is that Florida has one of the lowest numbers of COVID-19 patients out there so.
Whatever that Spike was we recovered very very quickly those patients that were numerous numbers from 19% to 35 years old that weren't vaccinated for whatever reason got healthy very very quickly and are out of the hospital in the numbers and the hospitals are very low these days.
Alright Fantastic now that is my last question, but again congratulations on a good quarter keep up the good work and I'll talk to you soon thanks for take thank you James I appreciate it. Thank you.
Yeah.
All right it looks like that concludes our Q&A session. So go ahead for closing remarks.
Okay. So in closing I want to thank you once again for your time this afternoon and for your continued interest in Sensus healthcare, we look forward to our next financial results Conference call. When we report our full year in late February and to seeing some of you in San Francisco in January in.
In the meantime be well everyone and thank you. So much for your continued interest and support of Sensus healthcare. Thank you.
Ladies and gentlemen, this does conclude your call you may now disconnect your lines and thank you again.