Q3 2022 American Shared Hospital Services Earnings Call

Good day and welcome to the American shared hospital services third quarter 2022 earnings Conference call.

All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero.

After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone.

To withdraw your question. Please press Star then two.

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.

<unk> third quarter 2022 earnings press release was issued this morning before the market opened if you need a copy it can be accessed on the company's web site at H H S. Dot com at press releases under the investors tab.

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 prior.

But Securities Litigation Reform Act 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 U S. We see.

This includes the company's quarterly reports on Form 10-Q for the three month periods ended March 31, and June 32020 to the annual report on Form 10-K for the year ended December 31, 2021 and then definitive proxy statement for the annual meeting of shareholders that was 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 race to Kodiak.

CEO of Ams right.

Thank you Stephanie and good afternoon, everyone.

Thank you for joining us today for our third quarter 2022 earnings Conference call.

I'll begin with some opening remarks, and then I'll turn the call over to Craig <unk>, our president and CFO .

For a financial review of the third quarter.

Craig will then turn the call over to Peter Gotcher, you only <unk> newly appointed Chief operating officer.

Peter is going to spend a few minutes talking about his first priorities and plans for operations and sales.

Following the prepared remarks, we'll open the call for your questions.

The third quarter was another good quarter for Ams.

Revenue increased 18% driven.

Driven by higher <unk> volume and higher average reimbursement for both proton beams and gamma knife procedures.

For the first nine months of the year.

Revenue increased 14%.

Net income for the third quarter was $316000 or five cents per diluted share.

The fifth consecutive quarter.

That we've reported positive Ernie.

On a trailing 12 month basis.

Our earnings per share now totaled 21 cents.

Yeah.

Our cash has grown over that time as well.

And now totals $11 7 million.

Which equates to $1 90 per outstanding share.

At quarter end.

Craig will go into more detail in a few minutes.

But I'm proud of our accomplishments and all that our team has achieved over the past couple of years.

As we've talked about this has included strengthened the balance sheet to take on new projects.

Expanding our product and service offerings.

And most recently, bringing in experienced sales and operations management.

<unk> new business.

We are excited to appoint Peter got Giovanni <unk>, Chief operating officer in September .

Peter is well known and respected in the health care industry.

And brings strong market knowledge across the entire radiation oncology spectrum.

The company has known him for many years.

Peter has the right experience and professional contacts.

And we believe he's the right person to lead the operating efforts of the company.

Peter will be working with Tim keel.

Our senior Health care Finance professional who joined US last may as.

As our vice president of sales and marketing.

And Ernie Bates, Vice President of international sales and marketing.

Then with the company for many years.

With this team in place, we look forward to leveraging our very strong financial resources, the $11 million in cash.

And the unused line of credit we have a $7 million.

As we aggressively pursue new business opportunities for our company.

Yeah.

I'll now turn the call over to Craig for his financial review of the third quarter.

Greg.

Thank you Ray and good afternoon, everyone.

Third quarter revenue increased 17, 6% to $4 8 million compared to $4 1 million in the third quarter last year.

We've been reporting stronger revenue from the pandemic lows for several quarters now.

For the first nine months of the year revenue increased 14%.

Third quarter revenue for the proton therapy system in Florida increased 82.4% to $2 4 million due to continuing growth in volumes and the higher average reimbursement for the current quarter.

Total proton therapy fractions in the third quarter increased 41% to 1363.

<unk> 973 in the third quarter last year.

Last year's quarter was impacted by the COVID-19, pandemic as well as downtime for some system repairs.

Gamma knife revenue decreased 12% to $2 5 million compared to Q3 last year.

The decrease was due to a decrease in procedures offset by an increase in average reimbursement.

Which in turn 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.

Revenue for same centers in operation, which excludes the two gamma knife contracts that expired one each in the first and fourth quarters of 2021 decreased 12, 5% when compared to those same centers during the same period of the prior year.

Gamma knife procedures decreased by 12, 8% to 293 for the third quarter, primarily due to the expiration of the two contracts I just mentioned.

Gamma knife volumes for same centers in operation for the three and nine month periods.

Decreased nine 3% and four 4%, respectively, when compared to gamma knife volumes for those same centers during the same period of the prior year and.

In the current period, there were temporary staffing shortages at several of our domestic customers. In addition to normal cyclical fluctuations.

We went back and compared our current gamma knife volumes to 200 to 2019.

Before the pandemic.

Same store volumes are up for both the third quarter and nine month periods from that time.

And our international locations volumes at our center in Ecuador has picked up.

Upgrade at the center is now scheduled for the spring 2023, with the delay being related to obtaining the necessary regulatory approvals.

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

The new linear accelerator for our joint venture in Puebla, Mexico is now scheduled for spring 2023 as well.

Again, pending the necessary licensing and regulatory approvals.

Gross margin dollars increased 33, 4% to $2 million.

Third quarter.

Gross margin percentage expanded 470 basis points to 45% of revenue.

The increase was achieved despite a higher operating costs at the company's international sites driven by increased volumes.

Selling and administrative costs increased by 12, 6% to $1 3 million for the third quarter due to higher sales and related fees associated with new business opportunities.

Operating income increased 141% to approximately <unk> five.

5 million, reflecting higher revenue and cost.

Good cost containment.

Income tax expense increased to 176000.

The three month period compared to 17000 for the same period in the prior year.

The increase in income tax expense for the current period was due to higher earnings during the current period return to provision adjustments arising from foreign income tax returns filed during the current period as well as permanent domestic tax differences.

Just to continue through the end of this year.

Net income attributable to American shared hospital services in the third quarter 2022 was 315000 or five cents per diluted share compared to net income of 33000 or one cents per diluted share for the third quarter of 2021.

Fully diluted weighted average common shares outstanding increased modestly from last year to $6 million 273000.

Adjusted EBITDA, a non-GAAP financial measure increased 28% year over year to 1.999 million for the third quarter of 2022.

At September 30th 2022, cash cash equivalents and restricted cash was one it was $11 million 664000 compared to $8 million 263000 at December 31 2021.

Shareholders' equity excluding Noncontrolling interest in subsidiaries was $21 million 215000, or $3 and 45% 45 cents per outstanding share at September 30th two.

<unk> 22, compared to 19.893 million or three.

$3 28 per outstanding share at December 31, 2021 in closing, we believe that Ams to strengthen on every level and is poised for renewed growth in the years ahead I'll now turn the call over to Peter for some comments about his mandate and initial folk.

Peter.

Thank you, Greg and good afternoon, everyone.

I'm happy to be here and I'm excited about the prospects in Africa on opportunities here at MFS.

MFS and uniquely in the radiation oncology business clinical cancer treatment centers have the opportunity to partner with all the major our original equipment manufacturers through one turnkey vendor in one create a relationship.

This is uncommon in our industry and one of the major factors in my decision to join the management team here at a M S.

Since I joined the company a few weeks ago I've focused on three key targeted areas.

Firstly I'd been aggressively working with major Oems to strengthen our business relations and on developing joint sales and marketing strategies.

These strategies are focused on obtaining new sockets with advanced treatment systems and solutions using linear accelerators.

Harlan acts proton beam therapy, as well as total turnkey services, such as new Gold's room renovations and even modular buildings.

Next I had been working with our clients and our current install base on lifestyle gamma knife sites treatment centers to strengthen and enhance these business relationships.

Our installed base sites are at a stage, where many needs and start planning for either upgrades.

New systems to replace current systems or even exploring the expansion of their current centers treatment capabilities.

Adding new products to help treat cancer patients.

These relationships are extremely important and ensuring their slow as part of managing and expanding the lifecycle of our installed base.

Another area I have been focusing on is developing and implementing new sales and marketing strategies and programs to assist our sales teams and lead generation prospecting managing the funnel sales funnel and the pipeline.

Some of these strategies include working more in concert with major OEM sales and marketing teams.

As well as on their senior leadership level, bringing together senior management with the Oems.

In addition, we plan to use more targeted sales and marketing based data that show, where the highest cancer treatment incidences are seen and then discussing this aspect with prospects in more of a consultative sales approach.

Further and as part of this we'll be working closer with an expert marketing firm to help customers mark with their abilities to cancer patients within their own community.

Local physicians and hospitals.

And two cancer survivor as well.

So when they need to recommend the treatment facility to a family member or friend.

We'll know who has the latest treatments.

These are just a few of the key areas that ive been addressing since coming on board in September .

And of course, there are many other areas that will be addressed over time.

I very much look forward to updating you on our progress in the quarters ahead.

Thank you for listening today. This concludes the formal part of our presentation.

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 any time your question that's been addressed it and you would like to withdraw your question. Please press Star then two.

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

Our first question will come from Tony Kamin with Eastwood partners. Please go ahead.

Hi, everyone.

It it on the surface a I know.

That's been a shareholder on and off I won't say much for for I think about 20 years. So I think that was one of the best quarters, if not the best quarter of overseeing so congratulations on that.

I'm curious, though with gamma knife volumes as you indicated being down do.

Due to things like temporary staffing issues have so far in.

This quarter have you started to see any normalization of of that kind of activity.

Tony how are you.

Good to hear from you.

Right.

Thank you for your question.

As you know, we can't really comment on fourth quarter activity in this call, but we are very closely monitoring the causes of the decreases in our gamma knife volumes.

We have had some staffing shortages.

And we'd be happy to share maybe a couple of examples with you.

That Craig can get into.

And I assure you that we're well aware of it.

And that corrective action by management is being taken.

Greg would you like to give Tony a couple of examples in the rest of our investors on this call.

Sure I think Tony as you know one of the.

Key aspects of our contracts.

Is that we don't have any minimum <unk>.

Volume guarantees so.

As there are fluctuations within some of the centers regarding staffing.

Which we did have in the third quarter as we mentioned in our press release and we could have temporary downturn, you'll say in one case, a physician had left one of the sites one of the treating physicians and but he has since come back so.

So that led to one of the decrease is a significant decrease to one of the centers that we have.

And there was another one where there was a staffing shortage as you know there are many staffing shortages throughout the health care industry currently and we did experience that and it's been spent corrected.

Those are two of the instances, where we were hurt during the nine month period and more particularly in the.

Third quarter this year.

Okay in the sort of the description of all the.

New ore or further efforts that you're making in terms of things like I'm getting.

Getting closer relationships with what's your manufacturers and the sales teams for the manufacturers that all sounds really promising when you look at the just knock out performance of your current proton beam.

You know and I know I've asked this in the past, but it would seem like that would be an incredible kind of reference client to hospitals to really demonstrate the reality of of kind of the positive economics. They could achieve I I know that's balanced against you know the.

The economy lately with much higher interest rates, which isn't a positive but can you can you talk about proton beam in particular and.

You know what it might take to to see.

You know just to see sort of a breakthrough there where you could start to actually place some of these.

Yeah.

Yeah, Tony that that's a great question.

Yeah, we have one.

Proton beam center in Orlando, as you're well aware of its performing well.

We've been trying to pursue.

You know for three years now additional proton beam centers.

And.

We continue to do so in our efforts to do so are probably stronger today than they ever have been primarily because we got more human resources to go after that business.

We've got Peter we've got Tim Kelly added myself, a couple of years ago. In addition to Craig and Ernie Bates Junior.

So we got more resources at that but we're not going to wait around to get our second third proton beam deal.

Hmm.

We think that will eventually come.

But in the meantime, let's expand our product offerings.

There's a huge demand and need.

For radiation oncology equipment.

And it doesn't necessarily have to be just protons it doesn't necessarily have to be gamma knives.

So we've kind of expanded our product offerings so that.

We can grow our business and not be dependent upon any one.

Product or manufacturer.

Those opportunities for proton beams I feel confident.

They'll come along in due time and.

We're not going to be reluctant to pursue that whatsoever, we're going to pursue it.

Aggressively.

And you know I think our day will come when that second and third systems will be will be placed.

Right.

And you know what I certainly.

Got it.

Appreciate and are extremely supportive of your going in you know.

Placing other new equipment and kind of broadening a M S. As line in and maybe getting some things in there or a little less expensive and easier to.

To get approval to put it into hospitals I guess as a final comment.

Ray in particular are even though the declines in the markets have brought a lot of stocks should being really cheap when I look at am as on any sort of quantitative basis. It just seems like.

You know the company company's valuation remains Ah just.

Remarkably cheap and I just wonder if if you have any.

Our thoughts on what what might be done to to address that.

Well Tony.

Tony I couldn't agree with you more.

Yeah.

I totally agree and well make these comments to our investors on this call.

That we believe our stock is undervalued.

I made that comment I spoke at the LD Micro conference couple of weeks ago L. A.

And that made that same comment.

I'm proud to say that.

Yeah.

You know if you take our last 12 months of earnings or EPS over those last 12 months was 21 a share.

Our price.

At closing yesterday was $2.73.

That's a p/e ratio 13th.

That's a pretty low p/e ratio in my opinion.

It's almost every quarter goes by that P/e ratio starts getting lower and lower.

I think.

We're undervalued.

You know it is part of my job to be bullish on our company and our stock.

One of the reasons.

That I have become our largest shareholder.

Close to 18 19, 20% ownership now.

I remain very bullish.

Were not widely followed.

I was reluctant a I'll say a year or two ago to go on the road and promote our stock I think we need to take care of some of internal issues that we had and solidify.

The foundation of our company.

That's been done.

So now, let's expand our sales management and marketing efforts.

Operations management.

And.

Let's see how we can grow our company.

I'd like to point out in.

In addition that if you annualize our first nine months of this year.

We're close to about 19, and a half $20 million on an annualized rate for 2022.

You know we closed last year at about $17 6 million of revenue.

So.

Even without.

Expanding incremental new revenue streams, we've grown our business double digits.

That's not a bad accomplishment and it's a reflection of trying to increase their volumes from our own existing sites.

Which.

Because of our high fixed cost structure really adds to the bottom line when we increase their treatment volumes.

Well and I think if you look at the company on an EBITDA basis. If his idea it's it's the valuation.

It is even more stark, but anyway. Thank you very much for all the questions and good luck going forward really appreciate it. Thank you.

Thank you Tony.

Again, if you have a question. Please press Star then one.

Again, that's star then one if he would like to join the question queue.

Okay.

This concludes our question and answer session I would like to turn the conference back over to Ray the Kodiak for any closing remarks.

Okay.

Well, Thank you, Matt and thank you for everyone, who has joined us today.

Yeah, I just gave.

In my closing comments I wanted to make the point I just made.

But our earnings per share 21 cents or closing price.

At yesterday's close at 273, a p/e ratio of 13.

You know it seems like a low valuation.

We've got a strong foundation, we've got significant resources available to invest readily available to invest.

We've expanded our sales management and marketing team.

And I really believe we're positioned well for what I have always said our goal is sustained growth and profitability.

So with that being said thank you again, we look forward to speaking with you again on our fourth quarter and year end call in early March.

If you have any questions.

Feel free to contact us directly.

And we appreciate your time.

Be well stay safe and goodbye.

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