Q2 2022 Sensus Healthcare Inc Earnings Call
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Good day, ladies and gentlemen, and welcome to the Census Health Care second quarter 2022 earnings conference call. All lines have been placed on a listen-only mode, and the floor will be open for questions and comments following the presentation. If you should require assistance throughout the conference, please press star 0 to reach a live operator. At this time, it is my pleasure to turn the floor over to your host, Kim Gallaudet. Ma'am, the floor is yours.
Thank you. This is Kim Galadot with LHA. Thank you all for participating in today's call. Joining me from Census Healthcare, or Joe Sardano, Chairman and Chief Executive Officer, Michael Sardano, President and General Counsel, and Javier Rampola, Chief Financial Officer. Thank you all for participating in Javier Rampola, and for participating in Javier Rampola.
As a reminder, some of the matters that we'll 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 census healthcare assumes, plans expects, believes, intends, or anticipates, and other similar expressions will, should, or may occur in the future, are forward-looking statements. The forward-looking statements or management beliefs based on currently available information as of the day of this conference call.
to certain non-GAAP financial measures. Census believes these measures provide useful information for investors, yet 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. A reconciliation of non-GAAP to GAAP results is included in today's financial results press release. YOU island individuals with grants to the United States of America and
With that said, I'd like to turn the call over to Joe Sardano. Joe?
Thank you, Kim, and good afternoon, everyone. I'm delighted to be reporting on another quarter of strong financial performance with significant year-over-year revenue growth and continued profitability. Our revenue of $12.1 million was more than double last year's Q2 revenue. In addition, we earned 21 cents a share compared with 20 cents from continuing operations in the first quarter of this year and the loss of 2 cents last year.
We've maintained our momentum since the close of the quarter and we're optimistic the second half of the year will be terrific.
If you recall, in January 2021, our SRT therapy received improved reimbursement when the Centers for Medicare and Medicaid Services, or CMS, revalued our main code upwards by 66% for a course of SRT in non-melanoma skin cancer.
In addition, ancillary codes received a double digit boost. Of note, Mohs surgery reimbursement went down.
Last quarter, we reported continued growth in patient volumes at customer sites, in part because SRT became so much more prominent during the pandemic, while surgeries were kept to a minimum.
This has continued in a best practice migration towards SRT that will not only be a permanent gain for Census, but will continue to generate demand for a non-invasive treatment approach.
We continue to leverage the improved reimbursement for SRT via a number of activities.
First.
We embarked on a rigorous education program to ensure our physician customers were educated on the improved ROI.
This work is ongoing and is especially significant at dermatology conferences and trade shows.
More recently, early this year, we established our Fair Market Value Lease Program with our banking partners and that has driven increased sales of our premium SRT100 vision with more than half of vision sales now occurring under lease.
Importantly, the leasing program brought vision into a more affordable price point while providing census with the premium economics the features deserve. Performance
We expect that vision sales growth in the US will continue to exceed basic systems.
We believe that through features such as image guidance and ultrasound, plus the software to track disease progression, guide therapy and plan treatments, vision systems provide better patient care, and we are delighted that physicians increasingly recognize this.
As you know, we spend a great deal of time with our physicians, including key opinion leaders at important medical conferences.
In addition, we engaged a new advertising firm for a digital marketing program directed at patients to make them aware of SRT.
We also began television advertising in select markets, specifically Florida, Texas, and Arizona.
Although there is particular focus on these regions of the country, you may have caught some of our ad's nationwide on HDTV, the cooking channel, PGA golf tournaments, Valley sports, baseball and Wimbledon.
We're running 10, 15, and 30 second clips.
The ads have been posted on our website, so feel free to view them.
The 2022 mid-term election may influence the frequency of ads over the near term as we expect greater exposure as more ad times free up post election.
We are also recognizing increased recurring revenues as the business grows in the form of service agreements.
At this point, approximately 80% of the systems that come off their one year warranty are covered by service agreements.
Note that our ability to diagnose any issues, including before they happen, has been made easier with our Sentinel technology, and that has greatly enhanced our customer service.
As a reminder, Sentinel is our proprietary HIPAA compliance software and is available on all our new products.
It allows physicians to easily and accurately document patient data for clinical billing and asset management purposes.
This technology has been a game changer for R SRT customers and for census.
as it clearly demonstrates the attractive ROI for the SRT100 vision and the SRT100 Plus systems.
We've also included Sentinel and all five of our Census branded aesthetic smart lasers.
While treating skin cancer is of great importance to the company, dermatologists also are mindful of the economics in the aesthetic space.
With this in mind, we remain focused on leveraging our sales organization to provide products that our customers demand.
Late last year, we entered into an exclusive US distribution agreement for a non-invasive drug delivery system called the TransDermal Infusion System or TDI.
This system is cleared by the US FDA for the local administration of the far far far purposes.
The TDI launch is going very well and is generating significant interest among potential customers who recognize its ability to eliminate injections.
The system permits many procedures to be less painful for patients and interest in particularly is particularly high for the aesthetic facial procedures, hair growth and hyphuridrosis or excessive sweating. The system permits many procedures to be less painful for patients and interest in and interest in the aesthetic facial procedures. sweating.
As validation, we were excited to take orders to deliver 10 systems to hair enhancement centers.
HEC will be delivering U.SK under skin hair growth serum called SkinSaver's Hair.
U.S.K. under skin is a subsidiary of EMS Pharma, the largest pharmaceutical company in Brazil, and it's the subsidiary of one of Brazil's largest englomance.
Two systems will be delivered in this year's third quarter, and the remainder will be delivered in the fourth quarter. And the remainder will be delivered in the fourth quarter.
HEC is rapidly growing and currently operates nine centers in Texas.
and we aim to support their expansion plans beyond this year.
In addition, work to study the delivery of finasteride for hair growth is underway by Dr. Glynis Ablon of the Ablon Skin Institute and Research Center and Associate Clinical Professor at UCLA.
FNASTERIDE is more commonly known as propitia. Work has also been done by Dr. Mark Nestor, the founder of the Center for Clinical and Cosmetic Research in Aventura, Florida, who presented an abstract at the Hawaii Winter Clinical, outlining the efficacy of utilizing TDI for subjects with agglory, hyperhydrosis, or excessive sweat lines. of sweat lines.
We were delighted to ship a second SRT-100 system to Colorado State University School of Veterinary Medicine during Q2.
CSU is a highly regarded equine program and this system will be used in their new dedicated facility.
We called that last year we shipped an SRT system that was being used to treat a variety of tumor types in companion and other smaller animals, including squamous cell carcinoma in a matamata turtle at the Denver Zoo. Research on horses is expected to be published next year, and if the research continues to show beneficial outcomes as it has so far in a small number, veterinary medicine could be an important new market.
for our SRT systems with approximately 30,000 veterinary practices in the US. materials is higher but not more than 70,000 to 22,000,? and number one is the cost area of mandatory you well.
I'll briefly mention our international business now, as I think the fact that we shipped five SRT systems to Asia, including to China, in spite of the never-ending pandemic in that country, reflects the importance of treating patients for skin cancer and kiloids, despite the geopolitical uncertainty.
That certainly holds true in the US as non-melanoma skin cancer needs to be treated regardless of the economy.
Before I turn the call over to Javier to review our financial results, I want to underscore how pleased I am with our financial performance and just as important with the dedication of our staff and our customers. And just as important with the dedication of our staff and our customers.
We believe we are providing important products to benefit the health of people around the world and our organization not only feels it, we live it. We believe we are providing important products to benefit the health of people around the world
As they said last quarter, we are always cognizant of our surroundings.
Notwithstanding the geopolitical and financial turmoil that abounds and noting our usual seasonality, we are very much aware of the threats of inflation, wars and pandemics.
Despite of these factors, we expect continued profitability for the year. We have a robust backlog of orders and we continue to keep a keen eye on expenses.
We also have the strongest balance sheet in the company's history, and we will deploy cash to benefit our shareholders, be it in the form of stock repurchases or accredited acquisitions of companies and products that complements our dermatology footprint.
With that, I'll turn the call over to Javier.
Thank you. It is a pleasure to be speaking with all of you this afternoon.
As Joe mentioned, revenues for the second quarter of 2022 were 12.1 million, and this compares with revenues of 5.4 million for the second quarter of 2021, which was impacted by the COVID-19 pandemic.
Revenue for the 2022 quarter reflects a higher number of units sold, including the cell of 5 SRT-100 systems that were shipped to Asia along with revenue from service contracts and a remodeled later business.
Gross profit for the second quarter of 2022 was 8.3 million or 68.6% of revenue. And is compares with 3.3 million or 61.1% of revenues for the second quarter of 2021.
The increases were primarily driven by the higher number of units sold in 2022, service revenue on installed units and the impact of COVID-19 on the 2021 quarter.
Cellular marketing expand for the second quarter of 2022 was 1.7 million compared with 1.3 million for the second quarter of 2021.
The increase was primarily attributable to higher trade-zo expand, advertising expand and commissions, upset by a decline in other marketer expenses.
General and administrative expand for the second quarter of 2022 was 1.1 million compared with 1.4 million for the second quarter of 2021.
The decrease was primarily due to a higher legal and professional fee in 2021.
Research and development expand for the second quarter of 2022 was 0.8 million compared with 49 million in the pro-year quarter.
We recorded a provision for income tax in the second quarter of 2022 of $1.1 million and had no such provision in the second quarter of last year.
May income for the second quarter of 2022 was 3.5 million or 21 cents per diluted share and this compares with a net loss of 0.3 million or 2 cents per share for the second quarter of 2021.
Adjusted to give it up, which we define as earnings before interest taxes, depreciation, amoritesation and stock compensation expense, was 4.7 million for the 2022 second quarter, compared with a negative 0.1 million for the second quarter of last year.
Turning briefly toward your today financial results.
Reveal for the first half of 2022 were 22.4 million of 164% over the 8.5 million for the first half of 2021.
The increase was primarily driven by a higher number of units sold in 2022, service revenue on installed units and the impact of COVID-19 on the first half of 2021.
Gross profit for the first half of 2022 was $15.4 million or 68.8% of revenue compared with $4.9 million or 57.6% of revenue for the first half of 2021.
The increases work primarily driven by a high number of units sold in 2022. Service room on install units and the impact of COVID-19 on the first half of 2021.
For the first half of 2022, selling the market and expense was 2.9 million compared with 2.3 million for the first half of 2021. Compared with 2.3 million for the first half of 2021.
The increase was primarily attributable to higher threshold expense, and the increase was mainly proportional to higher threshold expense and commissions, offset by a decline in older market and expenses.
General and administrative expense was $2.4 million for the first half of 2022, unchanged from the prior year period, while research and development expense also was unchanged from the prior year at $1.6 million.
NETING come for the first half of 2022, what 19.6 or $1.17 for the LUTIT Chair, compared with a net loss of 1.4 million, or 8 cents per chair for the first half of 2021. NETING come for the first half of 2021.
May income for the first half of 2022 includes a 12.8-metre-long gain on the sale of a non-core asset in the first quarter of 2022.
Adjusted EBITDA for the first half of 2022 was 21.5 million compared with a negative 0.9 million for the first half of 2021.
Turning onto our balance sheet.
Cash and investments were $33.7 million as of June 30, 2022, compared with $14.5 million as of December 31, 2021.
The company had no outstanding borrowing under its revolving line of credit as of June 30, 2022 or December 31, 2021.
During the second quarter of 2022, the company repurchased 126 523 shares of company stock in the open market a price ranging from 746 to 856 for a total of $1 million.
Recall that during the first quarter, the Board of Directors approved a $3 million share repurchase program.
While we have always placed utmost attention on expense management, we continue to be in the strongest financial position in the company's history.
This adaptation toward balance sheet was well positioned to take advantage of failing growth opportunities. We may come across.
So final comment, please see the table in the newsreadies we issued earlier today for every consideration of GAP to the NONGAAP financial measures.
With that, I'll turn the call back over to Joe.
Thank you, Hoggier. Once again, I'd like to stress how proud I am of our entire Census team, including our customers, and their continued dedication to our patients during challenging times and their tenacious dedication to growing our business. Our financial results speak to that dedication. I'm also proud to share with you that our President and General Counsel Michael Sardano who was honored last week by the South Florida Business Journal.
as one of the region's top 40 executives under the age of 40. Congratulations on this achievement, Michael.
Our SRT systems are well positioned in a large market consisting of some 14,000 dermatologists and 1,000 Mohs surgeons in the U.S., representing more than 7,500 offices, not to mention a further 6,500 plastic surgeons and 5,500 radiation oncologists.
Our systems provide a compelling alternative to surgery for millions of patients and arguably the only solution to prevent the recurrence of kiloids following surgical excision.
Before we open the call for questions, I want to mention that we'll be presenting at the HC Wainwright Global Investment Conference, being held in New York City September 12th through the 14th, and we'll be available for one-on-one meetings. I hope to see some of you there. With those comments, I thank you for your time and attention, and now operator, we're ready to take questions.
Ladies and gentlemen, the floor is now open for questions. If you do have a question, please press star 1 on your telephone keypad at this time. If you're using a speakerphone, we ask that while posing your question, you pick up your handset to provide favorable sound quality. Once again, ladies and gentlemen, if you do have a question or comment, please press star 1 on your telephone keypad at this time. Please hold as we poll for questions.
And our first question comes from Alex Noah from Craig Hallam Capital. Please go ahead.
Hey guys, this is Jason from Alex. Congrats on the great quarter. Thank you for joining us. Thank you for joining us.
Yeah, starting out from us, business needs to be hitting on all cylinders. Your comments concerning the pipeline seem promising. Any reason we shouldn't be thinking about sequential revenue growth for the remaining two quarters of the year here, Joe.
I think all of that is very much possible. I think that we are on a good string here of business. And I think that that will continue between now and the end of the year. And I think that we will have a very strong second half of the year.
Got it. And it was nice to hear your comments on capital allocation. Any additional thoughts you can give us on what you're seeing, what the market looks like for small M&A or other commercial partnerships and dermatology?
There's a few companies out there that we think could be a good fit with us. You know, we're...
We're trying to talk to these companies. It's a very difficult time for a lot of these companies to gain any kind of consensus on what their future is. I think we're all hoping for a great economy, but it also provides us with an opportunity and for them to join with a company that's on the right track. So hopefully we're going to be able to accomplish something and hopefully we'll be able to do something soon.
Got it. And then we've heard kind of some inclinings around the market that in some areas, health care staff and shortages are getting marginally better. What have you heard recently from the field about the dynamic and dermatology offices? What have you heard about the dynamic and dermatology offices?
You know, from the standpoint of bringing on people or hiring people, things like that, it's very, very difficult. It's not easy. So you have to be extremely particular. We're not going to settle for second best when we've always worked towards getting the best people we possibly can get. So we want to continue on that track and hopefully we keep hiring people like we're hiring right now. So I would say that the hiring is slow only because the process that we've employed is
is very, very precise and very in depth. So we want to make sure that we get the best people up front.
Are you seeing any impact from your customers, maybe having a difficulty hiring or keeping fully staffed on your business at all? Should we expect any improvement there as the general ecosystem process? Yes.
First of all, I'll say this about the dermatology.
you know footprint that we have in the industry that we're in dermatologist have unbelievable loyalty with their employees
So they all are very very...
strong with the employee base that they have and how they're administering to their patient base. I think that a lot of them are also expanding and it's that expansion that they're probably seeing some difficulty. But because of the reputations that they have with their patients and in their communities, they're attracting a lot of good talent and because they have the background and the and the experience within their practices, they're able to bring
good people on board who are willing to work and train them to the benefit of the practice. So I don't see them hurting as much as a lot of people might think in other industries, because this is a very vibrant industry.
Got it. No, that's helpful to color. Yeah, I might have missed down the press release, but can you share the number of SRT systems that you guys shipped in the quarter? I know that's something to usually give.
I'll leave that up to audio here you go, Kelly. Which is 35 SRT systems in the quarter.
Got it. Thanks for that. And just last for me, if I can sneak one more in. Can you talk a little bit about your relationship with Skincare? Wondering if it ever would make sense to form a closer partnership there?
I think we got a great relationship with skin care. Like I said in the past, I wish I had 10 more customers like these guys. They're wonderful. They know what they're doing. They're professional in every way. They know how to treat patients. And they're working very well with their dermatology partners. So we're excited for them. And you know.
We're always talking together, so if an opportunity comes to work closer together, we'll see and we'll pursue and we'll discuss.
Got it. Yeah. Congrats again on the great quarter guys. Thank you very much.
Thank you, and our next question comes from Scott Henry from Roth Capital. Please go ahead.
Thank you and good afternoon Joe, Michael and Javier.
Wow, what another strong quarter. I mean, third one in a row. Really fantastic.
Uh.
I guess the natural question.
when you're selling a capital equipment type of object is, you know, do you have this abolus of orders and maybe it slows down from here? Or do you think this kind of pace or cadence can be maintained at these higher levels? I mean, you've got quarters that look like...
the year looked like in 2020. So we're just trying to get a sense of how sustainable it is.
Well, you know, Scott, it's a very, very good question. As we're looking at the market and you look at what market penetration that we had so far, we're probably somewhere around 3.5 to 4% of the market penetration. So we still have the best ahead of us, and I made a statement maybe 2 quarters ago when we announced 500 units stalled. I said that it took us 10 years to install 500 units and we would probably be able to install 500 units half that time for the next 500. So, I still believe that and I think that the market will be able to capture that and I think
So we provide them with the care flow that they need, with the return on investment that they need, and we give them more time to work those extra patients into their practice. So I think we provide them with them and all the tools for them to grow as well as our business to grow.
Okay, and I mean the natural question is, I've heard the presentation for years, and I mean you'll get the pictures and the non-advacant of SRT versus most surgery with some more results.
you know it did seem kind of like a noir that this shift would have been but it didn't happen for for a while you know do you think it was the reimbursement or do you think it was just the inflection of enough people seeing it uh... just reaching critical mass and one hour
Well, I think we've got a couple of things going for us right now. I think number one, the doctors are seeing more and more each and every year, each and every month, the benefits that patients are getting from SRT. And we're seeing that more and more patients are hearing about SRT and are starting to demand surgical choice. With the influx of cash and how we've been able to preserve our cash over the last two, three years in spite of COVID, we're now reinvesting that cash, as I mentioned during the dialogue that...
We're working with an outside agency at PR and advertising firm to create more patient awareness. And prior to that, based off of our website, and if anybody wants to go to our website, you'll see it's a new, advanced website that's a big user friendly for both there's and the patients. But we've gone from literally two patients a week inquiring by reaching us either off of our website or phone calls. And now we're seeing.
We're approaching 30 calls a day, 30 inquiries from patients. We're not even starting the PR program throughout the entire country, we're just starting to touch it. So I think that this is gonna continue to both, and as those patients keep inquiring, we set them up with doctors in the areas that these patients are living, whether it be for key lois or skin cancer, but wearing all the war stories, the horror stories that the patients are going through, the stories that they're getting from their communities, regarding the treatment of skin cancer and or key lois. We're just starting to touch it.
numbers in the first half of 22 and even sales at the end of 2021. Should we still expect season out in kind of a stronger 4Q? That's been a strong quarter or maybe we should think that that's more smoothed out given the big numbers we're seeing.
I would, you know, I, until we have go through it, I would have to say that we are looking at some.
some degree of seasonality. As we're going into the third quarter, you know, we're going to be pushing for our growth and continue to grow quarter over quarter. But the main thing is profitability. We want to be profitability in every quarter, which is what I said from day one of when we started this year. So as we're going into the third quarter, there's a lot of things that are going on that could impact what happens in the third quarter. I don't know if they will, but these are the things that we think about. We have a midterm election. A lot of people just keep their hands in their pockets.
until they know exactly what the result is. They just don't like to move. They might anticipate those results, but they still don't like to make decisions until after the results are confirmed. On top of that, I look at these doctors that we work with. They've really busted their butt over the last two, three years during COVID. And they had to recover a lot from their practice, from their families, all of those things. They made them better business, made them better doctors. And when I look at what they've had to go through, they haven't had vacations in two years with COVID. Where did you go with your family?
Couldn't go anywhere. And a lot of times their clinics were closed. So if I were the new money that they're making, or the renewed opportunities they've had within their practice, I'd be looking at taking some extended vacations with the wife and kids somewhere, whether it's the cottage, whether it's overseas, or wherever they want to go, for two years of being closed, I think they're going to take advantage of that. And that might extend into the November timeframe. Now, I don't know how it's going to impact ourselves. I will tell you that we have a good background going to this group, third quarter.
a little more of a long term as it's kind of noticed.
you seem to be building a little more of a recurring revenue stream into the business in addition to kind of a capital sale you know when you think out five years from now you know what percent of revenues would you like to be recurring revenue in the business model if we were to stick with the current uh... product line we have with with going to assume that we're not going to get into our expand our print into other uh... product lines for the same industry
You know, look at anywhere between 10 and 14% of recurring revenue based on the service agreements that we have. I think the service agreements are very important, not just for us, but also the doctors and starting to recognize the events of the service contract. Because with the Sentinel, we provide them with a tremendous impact in making sure that the machine do not go down. And that's what they have the reliability and they can expect this product to be working every time they book a patient, a federal patient for treating that's important to them.
Great. Thank you for taking the questions and congratulations again on the strong results. Thank you, Roomscot. Appreciate it very much. Thank you.
Thank you. And next question comes from Annie Vendetti from Maxim Group. Please go ahead.
Thank you. Hey Joe, hey Michael, how are you doing Javier?
How are you? How are you? How's it going? Good, good, thanks. So on the the trans vermal infusion systems, so you sold hand or you you have orders for 10, which is great to the to this hair enhancement, these hair enhancement centers. Two are going to delivered in the third order. One, you know, have any of them delivered yet since we're in the third quarter, eight are scheduled in the fourth quarter. And then on a red recognition side, had any of those.
System get recognized or did a percent of those get recognized here in the second quarter, or are all the revenues going to be recognized and delivered in the third and fourth?
Anthony, yes, so the order of 10, we expect at least 2 to be delivered in 3, the remaining of the year in Q4 now. So that's basically how we plan to recognize the revenue as well.
So none of these orders, no part of the revenues from these 10 orders were recognized in the second quarter that ended in Virginia, correct? …
Okay, great. And then switching gears to the SRT systems 35 with the bird, any of this to China or...