Q4 2022 Sensus Healthcare Inc Earnings Call
Welcome to the Sensus healthcare fourth quarter 2022 earnings conference call.
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I would now like to turn the conference over to Kim Sutton <unk> with L. A J Investor Relations. Please go ahead.
Thank you. This is Kim Collins with L. A J. Thank you all for participating in today's call. Joining me from Sensus healthcare are Joe start Danner, Chairman and Chief Executive Officer, Michael Giordano, President and General Counsel and hobby Ara I'm Thaler 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.
All should or may occur in the future are forward looking statements. The forward looking statements of management's beliefs based on currently available information as of the date of this conference call February nine 2023.
That's just health care undertakes no obligation to revise or update any forward looking statements except as required by law also are looking statements are subject to risks and uncertainties as described in the company's forms 10-K, and 10 P. M.
During today's conference call references will be made to certain non-GAAP financial measures Sensus believes these measures provide useful information for investors yet they should not be considered as a substitute for GAAP, nor should they be geared 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 Santana jokes.
Thank you Kim and good afternoon, everyone I address you today with the highest of confidence that sensus healthcare is better positioned today than ever before in our history with all the pieces in place for even greater execution of our business plan, we believe our superficial radiation therapy technology.
Remaining the number one choice for noninvasive treatment of skin cancer by both physicians and patients are improved reimbursement combined with a fair market value lease program provides our customers with an excellent patient acquisition tool, making the acquisition of our lead technology and easy transfer.
Our new and improved high resolution ultrasound technology provides see and treat capability, which leads to great outcomes and patient reassurances during.
During the fourth quarter and throughout 2022, we strategically executed delivering strong revenue and profits importantly, we also took a number of steps to position sensors for future success. These included assembling the staff and strategies to drive exceptional growth building inventory develop.
<unk> new aesthetic products that are anticipated to receive FDA clearance in the latter half of 2023 further investing in our Sentinel it solutions capability, and increasing sales and marketing programs head count and capabilities.
As we've been saying for some time with better reimbursement of superficial radiation therapy for non melanoma skin cancer and lower reimbursement for most surgery, along with data, suggesting that one in five Americans will develop skin cancer, we have powerful tailwind to support our programs.
Recall that in January 21, our SRT therapy received improved reimbursement from the centers for Medicare and Medicaid services when they re valued our main code upwards by 66% for a course of SRT and non melanoma skin cancer. In addition, ancillary codes received the double digit boost.
We continue to capitalize on these reimbursement changes and more and more practitioners are recognizing SRT as a best practice for the noninvasive treatment of non melanoma skin cancer a.
A rigorous physician education program highlighting the improved return on investment for SRT is ongoing.
Especially a dermatology conferences and trade shows in fact this weekend at the important South Beach Symposium in Miami, a key opinion leader Dr. Michael Gold will be discussing SRT and its benefits. This will be followed up two weeks later at the winter clinical conference in Miami by another key opinion leader Dr. Mark Nestor.
We recently launched important upgrades to this system, including new state of the art solid state high frequency ultrasound, which provides the industry's best view of the epidermis and utilizes our new are gone up or gone up modestly designed probe with single use disposables this upgrades CIS.
Some is garnering interest among physicians and the SRT 100 vision has become our leading SRT products.
The fair market value lease program, we launched earlier last year continues to support purchases of our feature rich SRT 100 vision system and its percentage of system sales continues to increase.
While we are maintaining focus on our core dermatology business and providing products our customers need and want radiation oncology is another important avenue for growth, we're gaining awareness among radiation oncologists and recently sold an SRT 100, plus system to a large luminary hospital in the northeast.
And with that overview I'd like to turn the call over to Michael sorry, Dan Oh for a bit more color on the quarter.
Joe we've been executing extremely well as evidenced by our record high revenues for both the fourth quarter and the full year. We expect continued top line momentum in 2023 and beyond from our unique line of superficial radiation therapy devices, which will continue to lead our revenue growth throughout the coming years we.
Expect the recently acquired aesthetic devices to materially add to our revenue in the latter part of 2023 as we advance through the regulatory process.
Additionally, we now have a dedicated and experienced aesthetic sales professional to manage this part of our business.
During the fourth quarter, we shipped 36, SRT units of which 27 for the SRT 100 vision <unk>.
Despite higher interest rates, our fair market value lease program continues to draw interest as an efficient way to acquire our devices.
Our international business is also doing well as we shipped a record 16 units during the 2022 and six during the fourth quarter most of which went to Asia. We are concentrating on opening new markets in Latin America, Australia, and the EU. So we have enormous potential outside the United States with that I will.
Turn the call over to Javier and Poland for a discussion of our financial results.
Thanks, Michael It is a pleasure to be speaking with all of you. This afternoon.
Our revenues for the fourth quarter of 2022 were $13 1 million and this compares with revenues of $13 million for the fourth quarter of 2021.
Gross profit for the fourth quarter of development funding to what.
$8 4 million or 63, 7% of revenue.
Herb with $8 9 million or 68% of revenues for the fourth quarter after docs on 'twenty one.
<unk> was primarily driven by the higher manufacturing cost in 2022, all these cautionary pressures yet our gross margin remains in our target range of the mid <unk> percentage.
Selling and marketing expense for the fourth quarter of 2022 was $1 6 million compared with $1 3 million for the fourth quarter of 2021.
The increase was attributable to higher advertising expense and higher compensation expense due to increased head count.
General and administrative expenses for the fourth floor of the document 22 was $1 4 million compared with one 1 million for the fourth quarter of 2021. The increase was primarily due to higher professional fees, along with higher compensation and bad debt expense.
Wishes on development expense for the fourth quarter. After document 22 was $1 2 million unchanged from the prior year quarter, we expect R&D expense to remain at these general level each quarter of the Doctor May 23.
We recorded a provision for income tax in the fourth quarter of 2022 of $1 6 million.
Had no such provision in the fourth quarter of last year.
Net income for the fourth quarter of 2022 was $2 8 million or 17 cents per diluted share and this compares with net income of $5 3 million or 32 cents per diluted share for the fourth quarter of 2021, the decline was largely attributable.
Now to the income tax in 2022 and to a lesser extent increase in cost of goods.
Adjusted EBITDA, which we define our earnings before interest taxes, depreciation amortization and stock compensation expense was $4 3 million for the 2022 fourth quarter compared with $5 6 million a year ago.
Turning briefly to full year financial results.
Revenues for 2022 of them were $44 5 million compared with $27 million for 2021, the 65% increase was driven by a higher number of units sold in 2022 due to the increase in demand.
Cost of sales for 2022 were $14 9 million compared with $10 1 million for 2021 with the increase reflecting the higher number of units sold.
Gross profit for 2022 was $29 6 million or 66, 5% of revenue compared with $17 million or 62, 8% of revenue for 2021.
The increases were driven by a higher number of units sold in 2020, So on service revenue plus installed in doing it.
The labor market and expand four to document 'twenty, two what $6 3 million compared with $4 8 million for 2021.
The increase was primarily attributable to higher spending on marketing and activity and interest in head count.
General and administrative expense for 2022 was $5 million compared with $4 6 million for 2021, the increase was primarily due to higher compensation and bad debt expense.
Research and development expense for 2022 was $3 5 million compared with $3 4 million for 2021 as I just indicated we expect R&D expense in 2023, it will be generally consistent with 2022.
The company reported other income for 2022.
$13 2 million compared with points or a $1 million for 2021, the increase was mostly related to a gain on the sale of a noncore asset.
Net income for 2022 was $24 2 million or $1 46 per diluted share compared with $4 1 million or 25 cents per diluted share in 2021.
Net income for 2022, excluding a gain on the sale of our noncore assets was $11 5 million or <unk> 69 per diluted share.
Adjusted EBITDA before deducting in 'twenty, two it was $28 1 million compared with $5 1 million at Ford did happen in 'twenty one.
Turning now to our balance sheet.
Cash and cash equivalents were $25 5 million as of December 31, 2022, compared with $14 5 million as of December 31, 2021. The company had no outstanding borrowings under its revolving line of credit as of December 31, 2022 or 2021.
Yeah.
In preparation for the future growth, we ambition, we placed orders for inventory, which stood at $3 5 million in inventory and $6 3 million in prepaid as of December 31 to document 22 up from $1 8 million in inventory on a $1 9 million in prepay a year ago.
<unk> receivables were $17 3 million plus $12 1 million on December 31, 2021, reflecting the increase in sales.
I'll underscore what we have been saying for some time our attention to expense management is front and center and we continue to be in a stronger financial position in the company's history, our balance sheet position us well to take advantage of the compelling growth opportunity, we may come across as a final comment.
Please see the table in the news release, we issued earlier today for a reconciliation of GAAP to non-GAAP financial measures.
I'll turn the call back over to Joe.
Thanks, Javier and Michael as Javier just said Sensus healthcare has never been in a better position to meet the challenges of the future. We are well capitalized and have business momentum. In addition, we're very excited about the portfolio lineup. We have planned for later this year and especially in 2024, along with future enhancements to our SRT one <unk>.
<unk> vision and Sentinel It solutions software Sentinel is a proprietary HIPAA compliant software solution and is available on all our new products. It allows physicians to easily and accurately document in store patient data for clinical billing and asset management first purposes. This technology.
It's been a game changer for our SRT customers and for Sensus as it clearly demonstrates the attractive ROI for the SRT 100 vision and the SRT 100, plus systems, a priority focus for sensus is expanding the capabilities and indications of our Sentinel technology under the leadership of her.
<unk> promoted chief Technical Officer, we have already doubled the number of engineers that census to six as we work to include artificial intelligence and diagnostic capabilities and Sentinel I want to add that our new lasers, including all six of our sensus branded aesthetic smart lasers will have the Sentinel salute.
<unk> capability embedded in that in recent months. This portfolio was expanded to include silk diode laser a true true truly portable laser with a lightweight handpiece supercold cooling tip and the highly repetition rates the ability to blend wavelengths, while emitting light vertically toward the skin.
Increases efficiency by maintaining the density of the laser and the selected area, resulting in deeper and better penetration and more homogeneous energy distribution.
Importantly, the laser is sensitive to all skin types, making this laser removal available to everyone. We have showcased silk at the fall clinical and will also showcase the laser this weekend in our booths at the annual South Beach Symposium.
While we're very excited about the potential of silk. We're also excited about the new lasers, we plan to introduce later this year and early next year once cleared by the FDA.
We have stepped up our marketing as well we're pleased with the early success of our new digital advertising initiatives to increase patient awareness of SRT. Our Facebook page remains very active as we work to engage the public we will continue to increase our C O activity, which is resulting in many more patients visiting our website to learn.
[noise] about SRT treatment, our SRT systems are well positioned in a large and largely untapped market consisting of some 14000 dermatologists and 1000, most surgeons in the U S representing more than 8500 offices not to mention a further 6500 plastic surgeons and 5500 radiation on.
Colleges are systems provide a compelling alternative to surgery for millions of patients and arguably the only solution to prevent the recurrence of keloid following surgical excision.
In addition, skin cancer is a large and growing condition with estimates that one in five Americans will develop skin cancer. During their lifetime. This tells us that nearly 70 million people will contract non melanoma skin cancer in this country. So clearly this is a need for our SRT systems, both now and even more so.
In the future in summary, we have our strongest team ever in place to support our growth with thoughtful programs efficiency and leadership, we are deploying capital to invest in sensus, deploying and bringing in new technologies and adding to our sales force as evidenced of our enthusiasm for our future, we repurchased 3 million.
Of our common stock through a share buyback program with those comments I. Thank you for your time and attention and now operator, we're ready to take questions.
We will now begin the question and answer session.
The ASIC to ask a question you May Press Star then one on your telephone keypad.
If you're using a speaker phone please pick up your handset before pressing the keys and to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Okay.
And our first question here will come from and Haydon with Alliance Global Partners. Please go ahead.
Good afternoon, gentlemen, thanks for taking the questions.
First off for me on the case.
K submissions that are going in this year.
For aesthetic products should we think about those all as as lasers are there.
Other cases, it'll be going in and any color on it conditions, but those might treat outside of the laser submissions.
Ben Thanks for being on good hearing your voice and I appreciate the question.
It's going to be a variety of aesthetic products that are going to be submitted to the FDA products that we've been able to acquire this technology and we're excited for that offering but I would tell you that it's going to be a variety of various aesthetic products that are going to be unique to the market that is going to have a.
Very very nice niche into the marketplace.
Okay and do you plan.
Let investors know about those upon submission or do you wait until approval or launch I think kind of a thing.
I think that we want to try to wait until we get to the launch period is going to make sense because as we go through this process of getting the equipment ready as it's going through all of its testing with the various regulatory people and assembling all of that data we have to get that to the FDA, which could take a little bit of time, but we're expecting to.
To submit either by the end of the first quarter or the middle of the second quarter and since there are 500 10-K. They usually result in 90 day approval process, but you know as.
As we get closer to that I would say that we would be able to announce it to the world as it works in progress sometime around the American Academy of Dermatology meeting.
Okay.
Thank you.
Got it and then on the <unk>.
That's the.
The luminary accounts in the northeast in the radiation oncology.
What are your thoughts on the kind of the sales cycle that is radiation radiation.
College apartments will require and you know kind.
Kind of initial level of interest any color you can provide there yep.
You know the hospital market is a very difficult market and I describe it as you know when they when everybody at the hospital says, yes, we want to buy it it could take up to 12 to 14 to 16 months 18 months before you get a purchase order. So it's a very long selling cycle.
But we're starting to see some hospitals that are requesting.
Some quotes if you will for our system because there's a lot more interest in that hospital market or in the radiation oncology market to get involved with skin cancer and I think one of the reasons that we're seeing that is that centers for Medicare Medicaid services are working hard to reduce reimbursement in other areas.
As of cancer for instance, breast cancer lung cancer all of these cancers because of their high volume types of cancers with very high expense, we're starting to see reduction in those reimbursements across the line and as those reductions happened. Your hospitals are starting to look at additional sources of revenue and if theyre looking over.
The fence, if you will and looking at greener pastures, one of the things that they don't have access to or have not accessed whether it's on purpose or not is the skin cancer market and when you look at skin cancers, It's four times greater than all the other cancers combined so.
The acquisition of a technology like SRT is very minimal compared to the millions of dollars. They spend on the radiation oncology products in those other areas yet the return on investment for them is very very good and very strong. So I think that they see an additional cash positive opportunity in cancer in an area that there.
Not addressing and I think that the bigger hospitals, the smart hospitals that look at the future of looking at this and are asking us about SRT.
Okay. So does that mean.
That makes us.
And then lastly for me on the share repurchases you got into a little bit more aggressive there.
Maybe my recollection is right, but I think you have 3 million authorizes their plants or get a re upped the authorization there and continue with the share repurchase activities.
Yeah.
We went to the board and the board there was more than happy to provide us with $3 million to repurchase our shares we did that to the fullest extent. We spent the 3 million shares. We think that we were as good as an investors as anybody else and getting those shares at a very decent price and we think the best investment is in our own company and.
So is the opportunity out there in the future I think the board is always open to making things like that happen and we will definitely look at it if that opportunity should come across again.
Got it.
Great. Thanks for taking the questions gentlemen, I'll jump back in queue.
Yeah.
Thanks Ben.
Our next question will come from Alex Nowak with Craig Hallum. Please go ahead.
Alright, great. Good afternoon, everyone you know the reimbursement increase.
A big piece of the business over the last couple of years.
We all get it but I'm curious about physicians when you go out there in the field and speak with them do that.
The physicians do they all get the reimbursement change at this point or is it still call. It a minority.
As soon as we get the reimbursement or really what that would do for their practice just curious where are we regarding that.
Process conditions.
Alex again, thanks for being on I appreciate the question.
It's an ongoing process you have to remember that these individuals business owners are very very business are very very busy and doing a lot of things to keep their practices open they're faced with a lot of challenges every time, we touch base with them every time were face to face every time. We go to these meetings. It has they have to be reminded of what the reimbursement is.
And so it's ongoing we continue to push it now the ones that have it already are recognizing the reimbursement increases because they are the ones that are reaping the benefits because they already have the product as these references go buy or continue to move I think that's where we gain additional sales and additional references because it is good for them.
And now keep in mind that last year was the first year since Covid two years that we've been able to go to meetings and talk to these doctors face to face that's where we have the biggest impact when we're in the field, we're knocking on doors, they're busy they're listening sometimes do they comprehend, but it always takes additional conversation to for them to understand but.
I would tell you that we're getting there and but it's never easy to make these sales and when you look at our technology you could say well we are the only technology in the market. We have no competition I would tell you that the competition is everybody who is knocking on the doors of dermatologists because they have a dollar everybody is trying to get a percentage of that dollar and we have to.
Have a good story in doing it and so far.
I would say that a 65% increase in our business over last year I think that we're making headway I think that we're doing well there. So we are getting across to them and as we go to the meetings and more presentations are made I think that will continue to to achieve the goals that we're looking at.
That's very helpful. I mean, and it still sounds like it's still building. So I mean that kind of leads into my second question here you've committed to growth. This year on the top line and also the bottom line, but on the top line. How do we think about that growth you've got ramping on the dermatology side. You've got this radiation oncology piece is starting to flow through of new products coming in.
The second half just how do we start to think about growth for this year.
Well again, we havent provided any kind of guidance and I don't know, if we're going to get to the guidance piece.
I think sometimes.
There's a there's levels of expectation that I don't know, how they're derived but there's levels of expectation for us that might not be as accurate as they should be but.
I can assure you this and I think that you've been around for a long time, Alex and you know what what kind of a company, we are where ultra conservative, but we worked very very hard and we tried to make the right decisions all the time to grow our business and we're always thinking of the future. So how do I think that future business I have to look at it and I have to look at my team.
We have to challenge ourselves to how do we do better from the previous year and I.
I think that will do better than the previous year, we keep adding products that will add revenue, we know that that revenue based on the rfps. The FDA submissions are going to are going to probably happen around the fourth quarter of this year, where we're going to have any kind of impact whatsoever.
So I would say that our SRT business will continue to grow organically and we will continue to grow our topline as well as our bottom line as we continue to pursue these technologies that will add to our portfolio and again, we want to add technologies that are different that are better than what anybody else has and that provide what we.
We think as the same theme and that is a noninvasive way of a treatment that provides the patient with no pain in their treatment a much better experience.
And with better results. So that's what we're looking for that's our goal.
That's helpful and then priorities for capital allocation, obviously, you did the share buyback here, but do you worry about the cashback.
Do you guys more towards M&A on the go forward.
Yes.
The you know the end of M&A is always something that's on our minds and we've had the opportunity to evaluate a lot of companies. This year, we've talked to a lot of principles and those companies and you still have a lot of people that believe their company is worth probably a little more than what we're willing to pay and one of the things that.
You know we're committed to is we do not want to go into that we do not want to dilute our existing shareholders. So with that in mind. We are looking for an opportunity that's going to add to our portfolio. While at the same time, adding revenue to what we're trying to accomplish with exceptional products and so rather than fighting.
Off more than we can chew, we're looking at technologies that could add to our portfolio that we can get fairly reasonably that we can find a payback or ROI in a very rapid succession and so what we look for is something that we can pay back within six to 12 months and that's being very very aggressive for what we're trying to do.
And then just real quick can you maybe comment on the accounts receivable balance it did spike up here in Q4.
Standing did increase so I'm just curious if there was any onetime items in that number there.
No I mean, what we had was we had some exceptional growth with some some great revenues for over the course of various months and customers.
Questor, some some terms so we provided them with the terms, but we know that.
Everybody has a good forward. So when you look at where our cash position. It was something that we were able to afford while at the same time, encouraging and helping our customers accomplish their goals and objectives as well. So we worked very very closely with our customers. There. Their success is very important to us because as they as they proven over.
Time customers end up buying more than one system. I mean, we have single Doc for instance that has 10 of our systems in 2014 of his offices.
That hasn't been done without any kind of sensitivity with helping him with his business and with its patients and it's the same thing with all of our customers. So extending a term here or there doesn't doesn't hurt us.
And so we will continue to do that when it helps us drive the business and helps our customers as well.
Okay understood I appreciate the update thank you.
Thank you Alex.
And our next question will come from <unk> Chen with H C. Wainwright. Please go ahead.
Okay.
Hey, congratulations on all the success. This is shaped on behalf of your churn.
I guess.
I think it's fair to understand that.
The increase in SRT systems sold and.
It is primarily related to the increase in ACO or digital marketing efforts that you guys have put in place the exceptionally well.
So related to that what are your expectations for this year in terms of advertising digital marketing and our kols engagement as it relates to the SRT systems.
You are refraining from providing any sort of guidance, but any expectations on the kind of marketing activity.
And also the kind of theme so do you expect.
That would be very helpful and the second quick question I have is on the sink laser hair removal systems any update on the commercialization process so far.
How's it going and any feedback, especially on the international markets as I understand that our global hubs, where people visit for hair removal treatment. So.
Any color on that would be very helpful. Thank you.
Thanks for that question regarding SCO.
Let me tell you where we're at as what we've accomplished in just the last six to eight months of aggressively pursuing a digital strategy.
We weren't originally from about two patient inquiries per week to now we're getting about 30 to 35 per day.
With that SCO, we moved up on Google from approximately page nine to page four we feel that within the next three months with continued efforts here and continued emphasis will be on page. One. So we're excited as we progress and invest in that part of our business now we also expect the number.
<unk> of patient inquiries to increase and so what we have done is we have our own personnel involved with speaking to every one of those patients as they call in for the inquiry and we are able to set up those patients with meetings with their doctors with consults with doctors that have our equipment in their physical <unk>.
Area, and sometimes we give them a choice, but we always follow up and we find out that they've reached out to one particular doctor or another because of their approximately to where they're living and those doctors are gaining a whole lot more patients and patient flow for the treatment of skin cancer with SRT because these patients are specifically demand.
Ending a non invasive approach once they learn about it so we educate them we answer their questions and then we set them up with the appointments now on the other hand. These physicians are extremely thrilled that we're providing them additional revenue opportunities by directing those patients to them on the other hand, there are many dermatologists in that specific area.
<unk> that are not getting to those patients they're not getting those so our sales force obviously gets that information as well and says you know we've directed I don't know how many patients in your area over the course of the last month two months three months that youre not seeing and so that becomes a good selling tool for a lot of.
For a lot of our salespeople and that's going to continue to grow as we talk through this and as we've continued to add to our CRM CRM program.
Looking with our sales and marketing force. So we're going to continue to emphasize that we're going to continue to put more dollars into it in more time into it we see where our patient advocacy group is going to grow from the existing person that we have now to several over the next year or so and so we're excited about that and I think more patients will.
We continue to learn about SRT than ever before regarding hair removal.
This is a very unique product because it offers a multi multitude of wavelengths, which we think is going is very unique and because it applies to various skin colors.
And so this is going to be exciting now the real introduction of this is going to be at the AAD, where more people will be exposed to it and we'll have several of the units on display and for demonstration during that period.
So we're excited for that we have a certain number of units that we expect to sell during the course of 2023 that will add to our bottom line as well as our topline so.
We'll gain a lot of market in that area and then also keep in mind that just a few weeks ago, we announced that we did hire a pro.
<unk> in the aesthetic world to help us take this market to another level and so all of those things are heading in the right direction and of course, we feel that it is going to add more revenue to the company.
Thank you and congratulations once again.
Thank you.
Our next question will come from Scott Henry with Roth Capital. Please go ahead.
Thank you and good afternoon, congratulations Joe.
A tremendous 2022.
Hi.
Yes.
Some specific questions I recognize that you're seeing growth on the top line in 2023.
And growth on the bottom line and I know expectations Theres been some disconnect. So I wanted to flush something a little a couple specific.
My questions with regards to the bottom line when you say growth in 2023 and the bottom line are you pulling out one time events from 'twenty to 'twenty, two just trying to get a sense of what base you're using for 2022.
Scott first of all thanks for being on and we're very much looking forward to attending the Roth Capital Conference in March in Southern California, It's always a great event and we're excited to be there.
The.
We're definitely taking out that one event, okay. So when we look at increase in the bottom line.
Every product that we're bringing on board is going to add to that bottom line hopefully it adds to our margin.
As well because we model everything along those margins. So yes, you're absolutely right. We're looking at taking that one event out of that and still growing our bottom line.
Okay, Great and now they are saying and this might be for Javier.
And I look forward to seeing you as well Joe.
Throw that in.
The accounting rules when you make money consistently.
At some point you have to take.
You have to book a tax gain for your deferred tax assets.
And you start to calculate earnings on a fully tax basis going forward.
Youre starting to stack a lot of positive quarters together would you expect to report 2023 on a fully tax basis.
Yes, we have two of them.
We have two of them.
Okay, and what rate would you add.
Advice for that time period.
I will say that I believe we should forecast maybe like a 20%.
Okay.
Carry forwards, but yeah, we're working on it.
And then again for clarity it sounds like when we look for growth in 2023 over 2022 on the bottom line should we be thinking on a fully tax basis to a fully tax basis. So you know otherwise he started.
At a disadvantage.
Correct.
Okay great.
And then final question just with regards I was just hoping to understand kind of the process a little bit.
Because the lease programs important to your revenue model, we get higher interest rates, obviously someone has to pick up the cost of those higher interest rates not that it's a huge amount.
But does that come from the customer or do you kind of shrink margins a little to accommodate that I'm. Just curious are the nuts and bolts of what you do with the lease program win when the rates increase yes.
It's coming directly from the customer okay. So just to give you some.
Dia behind that the rates have gone up this year and we've always tried to tell the customer that youre breakeven with the SRT 100 vision based under those fair market value leases is approximately two patients a month, while the realization of it at the beginning before all these rate hikes, there was probably somewhere around one in a court one in <unk>.
Order patients, but you can't break up a patient into a quarter. So we just said two patients a month as the rates have gone up.
You can say now that it's really two patients a month. So it's not over two patients a month, it's really two patients a month and we're still fairly safe and having it just under the two patients a month, but you have to keep in mind that what the real opportunity is for our physicians is that we're offering a non recourse.
<unk> balance sheet program that doesn't take away from the customer or the doctors regular credit line. Okay. So that in itself is worth a whole lot of money to these doctors, where they don't have to hurt their credit in any other way. So this is a great program for them and it gives them all of the things that.
They need to be able to afford the vision product, which is what they want because it has all the tools and benefits. Let me go also to the previous question that you posed to Javier this quarter alone for the fourth quarter, we paid $1 $6 million in to the IRS.
Our goal is to continue to pay to the IRS, alright, and it's probably going to be more than $1 6 million, probably closer to one $8 million to $2 million, but it's going to be a lot of money and we want to continue to pay to the IRS. So.
That's an objective that we had that we have because we're making money, but it wasn't accounted for by whoever derived whatever our earnings per share were but I think that.
I think there we're happy to pay that and we look forward to paying even more for for 2023.
Well at least your base down in low tax states, but.
Thank you for taking the questions I appreciate it thanks, Scott Thanks, Scott.
Again, if you have a question. Please press star then one to join the queue.
Our next question will come from Anthony Vendetti with Maxim Group. Please go ahead.
Thanks.
So should.
You talked about the fair Mark Joe you talked about the fair market value lease program.
As being up.
A program that that's helped with the 22.
Sales of <unk>.
22 sales.
Interest rates went up.
But.
Maybe it's had some impact but you said obviously.
On the fair market value lease they may have may have to see.
Only about another one one and a half patients.
I think it's a month.
To still.
Be able to meet that the program itself.
Profitable in other words.
I think it was like one a month and then if you see now two and a half a month.
It still comes after two and a half it's still profitable could you just I might not be getting those numbers exactly right. So if you just go through that with me sure and then as best you can as best you can say.
Yeah.
Say, how much of an impact as rising interest rates you think had on the.
On your sales or the.
Fair market value lease program.
And just what's your outlook.
For that program I think it was 80% of sales last quarter, what was it approximately this quarter and do you expect that trend to be the same in 'twenty three okay. Thanks Anthony.
The again I'll go back to the analogy that in the early times, when we reintroduce fair market value lease the interest rate was low, but we still told the customer that they required two patients a month to breakeven it was actually about one and a quarter, one and a half patients, but you can't break up a patient into a quarter or a half it's either full.
Patient or whatnot. So we consistently told the customer being as conservative as we work requires two patients a month now with the increase over the last year.
As the fed increase that it really is about two patients a month, it's still slightly under but maybe 1% and seven eighths of a patient, but we still we still show pro.
Pro forma based on two patients a month and the physicians are okay with that but it does require an additional conversation because of the increase so.
It's not like we say okay. Your interest rate is 4% and you know we have to go through and say Okay. Now your interest rate is 9%. So there is a difference and it requires an additional.
Conversation or two to go through that but the breakeven is still two two patients a month now.
<unk>.
The ROI is still very very good as we were saying it still provides them the opportunity to get into that technology, and we still don't see any of our customers doing less than 10 patients a month. So they don't have a shortage of patients and then the big point of the fair market value lease is the fact.
That its characteristics is that it's a.
Non recourse.
Off balance sheet lease, which means the doctor if he's in business for three years and we deal with all doctors that are in business for more than three years. They don't have to come up with any personal guarantees not signing personal guarantees and having off balance sheet financing is tremendously important, especially when they bring in their CPA.
Their CPA as they're telling them. This is.
It's a no brainer you need to you need to go into this now with all that being said.
We're still seeing the majority of the physicians buying cash.
Okay. They have the cash because they have the volume and they have the confidence with the cash to buy the products. So the majority of our sales are still.
With cash purchases and these fair market value lease is a great adjunct to get into the conversation, but when push comes to shove and it comes to the end and they are starting to talk to their CPA their CPA as youre, saying buy it outright you've got the cash do it.
I think I.
And it's a lot of it has to do with section 179 of the IRS code and I remember when I say the story often we were sitting at dinner in.
In a month of December with a physician talking about buying a system and at the time that we were having dinner before we took our first bite his CPA called him and he was telling them about its financial situation and is there something that he can buy and he says well I'm just sitting with the census, guys now talking about buying a machine and you can hear the CPA at the end of the book.
At the end of the Brown say by two.
We only sold one but the C pace it by two and that's because there was so much money being made that the guy needs a day.
A tax deduction.
That's where it is with the fair market value lease it's been a tremendous tool for us its tremendous topic of conversation, but again when push comes to shove. The majority of these doctors are buying cash.
Okay.
Yes, I know of section 179 always always helps out with fourth quarter sales.
In terms of China, because I know that that's been.
Sort of volatile.
On a quarterly basis were there any sales to China at all this quarter or no. Yes, we announced that we had six systems shipped to China and overall for the year, we had our best year of all selling sending 16 units to Asia altogether now.
Was one in Korea and <unk>.
Taiwan, we opened up yet Scott Taiwan was another place where we sold the units. So you had 14 units to China 16 units overall to Asia.
That's a that's a very good year and keep in mind that for the entire year, especially in China, you had the COVID-19 problem that really locked everything up there.
That's starting to open up as we understand China opened up.
From Covid, just prior to their new year, which allowed a lot of their citizens to be traveling overseas of which many came to the United States. So.
If China remains open, which we think it will.
We are hoping to do even better in Asia for 2023, but that's a good business for us.
Okay, Great and then last question on the silk.
Laser hair removal system I know you just you just introduced that.
Do you have any.
Any feedback.
And in terms of.
Orders can you talk about that a little bit yes, I mean, the feedback has been very very positive from the initial.
Introduction at the fall clinical in Las Vegas in October So we're seeing some good.
Some good volume that's being generated with our prospect base and now that we've hired.
What we consider a real specialty guy who's going to driver of aesthetics business.
I think that we're going to be successful with the product because it is unique.
It does have.
Multiple energies that can be used simultaneously. It is portable it is very cost effective at a low range as far as the cost and without consumables, which is exactly what the physicians are requesting so I think that as we become more known as we start to show up more I think that we're going to be more.
Prone to be selling more systems, we will have several units available at the American Academy of dermatology the upcoming meeting this weekend, it's going to be displayed following two weeks later at the fall or the winter clinical and it will also be displayed and so as we gain exposure I think that we're going to see some sales coming about so we're excited about it okay.
Excellent I'll jump back in the queue. Thanks Chip alright. Thank you.
That's all the time, we have for questions today and this concludes our question and answer session I'd like to turn the conference back over to Joseph Dan Oh for closing remarks.
Okay, well listen thank you everybody for the questions. Thank you for being on and once again. Thank you for your time this afternoon and for your interest in Sensus healthcare again, I want to wish to repeat that sensus healthcare is in the best position that we've ever been based on our technology, our people are ever demanding patient.
Population seeking a noninvasive solution to their skin cancer needs. We're looking forward to another great year I also want to mention that we'll be presenting at the 30 <unk> annual Roth conference being held in March 12 through the 14th in Laguna Niguel, California, and we hope to see as many of you there as possible in the meantime.
Thank you very much we look forward to talking to you again at our next results conference in early May Thank you.
The conference has now concluded. Thank you very much for attending today's presentation. You may now disconnect your lines.