Q1 2022 American Shared Hospital Services Earnings Call
Good day and welcome to the American shared hospital services first quarter 2022 earnings Conference call.
Participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero. After today's presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone.
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Please note this event is being recorded.
I would now like to turn the conference over to Stephanie Prince of P. C. G Advisory. Please go ahead.
Thank you, Matt 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.
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, 2021, and then.
And it is a proxy statement for the annual meeting of shareholders that will be held on June 21st 2022. The company assumes no obligation to update the information contained in this conference call I would now like to turn the call over to raise to close the ex CEO and Ray.
Thank you Stephanie good afternoon, everyone.
Thank you for joining us today for our first quarter 2022 earnings conference call.
I'll begin with some opening remarks, and then turn the call over to Alexis Wallace, Our Chief Accounting Officer for a financial review.
Craig the gala, our price not C O O N C F all well.
I'll then provide an operational review of the results.
Following their prepared remarks, we'll open the call for your questions.
<unk> started the new year on a strong note.
Total revenue increased 11% period over period.
$4 $8 million.
This is approximately 3% higher than the $4.7 million, we reported in the fourth quarter just past.
Which was the highest revenue quarter of 2021.
In this first quarter volumes bounce back for both proton beam therapy, and gamma knife procedures.
Margins benefited from decreased operating costs offset by an increase in selling and administrative costs from the pursuit of new business opportunities.
Net income in first quarter, 2022 was 269000 or four cents per diluted share.
Which builds on that that income will be reported in the fourth quarter 2021 of 219000 or also for <unk>.
For diluted share.
We believe that this is a great base for future growth and sustained profitability.
Subsequent to quarter end, we announced our third international locations.
That will be based in Puebla, Mexico.
This is the region of 6 million people located 80 miles from Mexico City.
We're excited to begin work on this radiation therapy center joint venture that will house the state of the art linear accelerator with multiple treatment techniques, including <unk>.
Hey, Matt.
B R T and radio surgery.
Operations are expected to start up in early 2023 pending.
Pending licensing and regulatory approvals.
Most recently.
We announced that we had expanded the company's sales team by hiring Tim keel as our vice president of sales and marketing.
Jim will be responsible for sales and marketing company wide.
Ernie Bates will be our vice president of international sales and marketing.
Jim has over 30 years of experience in the health care finance sector.
And Craig and I have known him for at least 25 years.
Over the years, Tim has held.
Several senior sales roles at leading financial firms like Bank of America, Citibank and Keybanc.
With a focus in project finance.
Collagen <unk>.
Outpatient surgery and diagnostic imaging.
With the pandemic waning now is a great time to leverage terms relationships with hospitals medical development entrepreneurs and medical equipment then.
And bring attention to Ams has expanded resources and our capabilities.
We're excited that Jim has joined US and we look forward to his contributions.
I'll now turn the call over to Alexis for the first quarter financial review.
Access.
Thank you Ray and good afternoon, everyone.
Before I begin my prepared remarks, I'd like to call your attention to our first quarter 2022 earnings press release that was issued earlier this morning.
You need a copy it can be accessed on our website at a S. H S dot com at press releases under the investors tab.
Now I'm turning to the first quarter results.
For the three months ended March 31st 2022 revenue increased 11, 1% to 4.847 million compared to revenue of 4.364 million for the first quarter F. 2021.
First quarter revenue for the company's proton therapy system installed in Orlando Health in Florida increased 33, 2% to 2.039 million.
Compared to revenue for the first quarter as 'twenty, 'twenty, one and 1.531 million.
Total proton therapy fractions in the first quarter were 1628, an increase of 32 point, 30% compared to 1231 proton therapy fractions in the first quarter F. 2021.
Revenue for the company's gamma knife operations decreased two 9% to 2.808 million for the first quarter of 2022.
Compared to 2.892 million for the first quarter of 2021.
Gamma knife procedures decreased by seven 3% to 300 and twenty-nine for the first quarter F. 2022 and 355 in the same period of the prior year.
Gross margin for the first quarter F. 2021 increased 41, 44.1% to 2.067 million or 42, 6% of revenue.
Turning to gross margin of 1.434 million or 32, 9% of revenue for the first quarter of 2021.
Selling and administrative costs increased by 21, 7% to 1.319 million. So that three month period compared to 1.084 million for the same period in the prior year.
Interest expense decreased 43.1% to 148000 compared to 260000 for the same period in the prior year.
Operating income for the first quarter was 600000 compared to operating income of 90000 in the first quarter of 2021.
An increase of 566.7%.
The increase reflects higher revenue and lower total direct operating costs and the and depreciation expense.
Income tax expense increased to 206000 for the first quarter compared to 6000 for the first quarter last year.
This increase was due to increased earnings during the current period.
A return to provision adjustments arising from foreign income tax returns filed during the current period.
Permanent domestic tax differences.
The tax rate is expected to remain at an elevated level through the end of this year.
Net income in the first quarter of 2022 with 269000 or four cents per diluted share.
Compared to net income of 29000 or zero cents per diluted share for the first quarter of 2021.
Fully weighted fully diluted weighted average common shares outstanding were 6.299 million.
And 6.322 million for the first quarter of 2022 2021 respectively.
Adjusted EBITDA, a non-GAAP financial measure was 1.922 million for the first quarter of 2020 two.
Compared to 1.600 million for the first quarter of 2021.
An increase of 21%.
At March 31st 2022, cash cash equivalents and restricted cash.
One 8 million and 401000 compared to 8.263 million at December 31st 2021.
Shareholders' equity at March 31st 2022, with $24 million 720000 or $4.07 per outstanding share.
This compares to shareholders' equity at December 31st 2021 of.
24.239 million or $4.01 per outstanding share.
I'll now turn the call over to Craig for the first quarter operational review.
Craig.
Thank you Alexis and good afternoon, everyone.
As the Lexus mentioned total revenue in the first quarter was $4 8 million and 11, 1% increase over the first quarter of last year.
Was a strong start to the year. It continues the emerging trend.
Again in the fourth quarter, when we reported $4 7 billion in revenue, which was the highest revenue quarter of 2021.
First quarter 2022 revenues to the proton therapy system in Florida.
Kris 33, 2% to $2 million due to increased volumes total proton therapy fractions increased 32, 3% to 1628.
This snapback was primarily due to weak results in last year's first quarter from the impact of the pandemic as well as a full quarter with no significant maintenance downtime after two consecutive quarters of sporadic downtime.
Gamma knife revenue decreased two 9% to $2 8 billion. The decrease was due to a decrease in procedures offset by an increase in average reimbursement.
The increase in the average reimbursement was driven by an increase in the average rate at the company's retail sites caused by a favorable shift in payer mix to more commercial payers.
However, using a new metric revenue for same centers in operation increased 7.2% when compared to those same centers during the same period of the prior year.
Gamma knife procedures decreased by seven 3% to three three.
329 for the first quarter.
This was primarily due to the expiration of two contracts one each in the first and fourth quarters of 2021.
Excluding the two expired contracts gamma knife volumes for same centers in operation increased 1.9% when compared to gamma knife volumes for those same centers during the same period of the prior year.
Gross margin increased 44, 1% in dollars to $2 $1 million.
The gross margin percentage expanded 970 basis points.
42, 6% of revenue compared to 32, 9% for the first quarter of 2021.
The increase was primarily due to a 16.6% decrease in other direct operating costs, resulting from the exploration of the.
Two contracts that Ive mentioned, a moment ago.
Selling and administrative costs increased by 21, 7% to $1 3 billion compared to last years first quarter due to higher legal and related fees associated with new business opportunities like the Puebla, Mexico project that we recently announced.
Interest expense decreased 43, 1% to 148000 compared to 260000 for the same period last year. A result of the debt refinancing that we completed in April 2021, which significantly lowered the interest rate on the portfolio.
Just as importantly, the refinancing increased our liquidity by reducing our debt service payments and making available a $7 million line of credit.
In addition to our current Rachel ratio, which is defined as current assets over current liabilities has increased to 3.2 times compared to one six times at March 31 21.
At our international locations the icon upgrade of Gamma Knife Center, Ecuador is now scheduled to be installed late this year as we continue to wait for the necessary regulatory approvals. It will be one of the few gamma knife icon units in all of South America.
We will also be placing that do linear accelerated at the joint venture in Puebla, Mexico that we recently announced when it opens in early 2023 pending licensing and regulatory approvals.
We're excited about the expansion of our sales team, which when combined with our expanded radiation therapy product offerings offerings.
As expected to increase our new business pipeline and the discussions we have with both existing and potential clients for advanced product placements. This concludes the formal part of our presentation, Matt we'd now like to turn the call back to you and open to questions.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys. If at anytime you question has been addressed and you would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to.
[noise] assemble our roster.
Yeah.
And our first question will come from Tony Kamin with Eastwood Partners. Please go ahead.
Hi, I actually missed the first few minutes of the call. So if I, if I ask anything Terry you've already answered I apologize.
Mike It was a good quarter and my question is really I think an obvious one the the proton beam.
Had great results it smell a in that quarter. It was over 40% of your revenue with one machine versus I'm not sure. How many total total gamma knives. So my question is you've added a new salesman, you've got presumably a very happy and referenced the bolt quiet and years of experience.
Here for the last few years it seem like the notion was well these things are too expensive. The interest rates are so low they'll finance them themselves that it was COVID-19.
My question really I guess is do you think are you going to be able at some point here to place more proton beams and and in answering that question and I'm also curious is there anything that's changed from the clinical.
Study perspective that is just making these things just not interesting anymore to hospitals.
Tony Thank you for your questions.
Yeah.
As far as the technology goes the technology is still very relevant and desirous.
Of health care systems that want to be a leader in cancer treatment utilizing radiation.
Hum.
We are.
Very active and continue to be active.
We ramped up our activity I'll say in the pursuit of a.
More proton beam business.
There's nothing more than we would like is to be able to announce something along those lines.
Time in the future.
I think with our expanded sales team, we got the capabilities of going after that business.
And we certainly have the financial and economic resources to pursue it.
That's not stopping us as it may have in the past.
And our offering is still compelling to health care systems.
Our argument.
Is along the lines as an example.
You know many health care systems may have a $100 million of capital expenditure requests or capital wants or needs or desires, but only $25 million in their capital budgets.
And we can help stretched out capital budget.
You can get that technology.
That the clinicians.
And the strategic thinker, so that health care system desire, if they want to be a leading.
Health care provider.
Treating cancer with radiation.
So I think we still got a very compelling argument.
We've got the economic and financial resources.
And we're adding to our human resource capabilities.
Pursuit that business.
And was I correct in that you believe that your current your current.
Client is happy with with how things are going with the current proton beam.
Yeah, I think they're very happy he would have no.
You know, we would love to use them as a reference in the pursuit of new proton beam business I think there'll be very happy and.
<unk> provide a very good reference for us, okay, and because sort of last question on this topic from the manufacturer standpoint, they must understand how all kind of.
Slowly this had been moving.
Are you getting any sense that manufacturers are more open to working with you too.
Create a package that kind of works for everyone to move more machines.
Absolutely.
And yeah, I'd, just like to point out where.
We're a little bit more open to any manufacturer a proton beam systems, we've had a strong.
Historical relationship with Marianne and we still got a good relationship with them that beyond in my opinion.
But if we come across a customer that desires to have a proton beam system from another manufacturer.
Our hands are not tied to only one manufacturer of proton beam systems.
So we're pursuing that market with kind of you know on open ears open I type of concept.
You know listening to what the market the client desires.
But yet we will network with the Oems as well.
That's good to hear and then obviously just the leverage of a couple more proton beams on the value of American shared would be so.
Outside so that.
And I wish you luck in that again I might have missed this in the in the.
Opening, but can you talk a little bit about the expanded offerings of product line that Craig mentioned.
You mentioned and particularly with with some notion as to where you see.
Or or what you see in that expanded line that could be most of them potentially most impactful.
Mhm.
Sure. Thanks, Toni again for your question.
If you look at our AR portfolio.
The equipment holdings.
We have.
2014, gamma knives manufactured by Elekta.
And we have one proton beam system manufactured by <unk>.
There's lots of makes and models of what I'm going to call radiation therapy equipment that treats cancer with radiation in the marketplace.
Linear accelerator does it.
And those linear accelerators, those Linux com and many makes and models ranging from.
I'm going to say 3 million to maybe $7 million.
And we've expanded our product offerings to include your linear accelerators.
We've expanded our offerings to include M. Arlen acts.
Another.
Piece of equipment that treats.
Treats cancer with radiation that utilizes an M R system for treatment planning purposes.
So any kind of equipment that treats.
Cancer with radiation therapy equipment with radiation therapy is in our product bag.
And our recent joint venture that we announced in Puebla, Mexico is probably our best example.
Of how our expanded product offering created that opportunity, we're not putting in elekta gamma knife for proton beam system and quite well, we're putting in a linear accelerator.
Manufactured by Elekta.
That's a very high end linear accelerator now.
Now I'll treat have a wide variety of treatment options available for that population of $6 million.
I'm sorry.
Is that helpful. Tony Yeah, that's it that's extremely helpful.
I am very excited about.
About all that and and your hiring of a new salesman to two to expand that and I wish you all the luck with it. Thank you.
Okay. Thank you Tony.
Again, if you have a question. Please press Star then one.
Yeah.
Again it is star then one if he would like to join the question kit.
Yeah.
This concludes our question and answer session I would like to turn the conference back over to Ray stucco react for any closing remarks.
Thank you, Matt and thank you everyone for joining us today.
In summary, I'd like to mention that we.
We reported earnings per share of <unk> in the first quarter 2022.
We also reported earnings of four cents a share in the fourth quarter 2021.
With this base of business, we believe that <unk> is on a path to sustained profitability.
We look forward to speaking with you again on our second quarter call in mid August .
Please contact us directly if you have any questions before that.
Be well and stay safe.
Goodbye.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.