Q4 2022 American Shared Hospital Services Earnings Call
Hello, and welcome to the American shared hospital services fourth quarter 2022 earnings Conference call.
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After todays presentation, there will be an opportunity to ask questions.
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And now I'll turn the conference over to Stephanie Prince of PSEG Advisory. There's press. Please go ahead.
Thank you Keith and thank you to everyone joining us today a M S as fourth 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 website at H S. 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 of 1995.
Actual results may vary materially from those indicated by these forward looking statements as a result of various important factors, including those discussed in the company's filings with the FCC.
This includes the company's quarterly report on Form 10-Q for the three month period ended March 31, 2020 to June 32022, and September 32020 to the annual report on Form 10-K for the year ended December 31, 2021 and the <unk>.
<unk> 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 Exec.
Executive Chairman of Ams Gray.
Thank you Stephanie and good day everyone.
Thank you for joining us today for our fourth quarter 2022 earnings Conference call.
I'll begin with some opening remarks, and then turn the call over to Craig to Gala, our president and CFO .
Peter got Giovanni American Church, newly appointed Chief Executive Officer will then spend a few minutes talking about his priorities and his plans for American shared.
Following their prepared remarks, we'll open the call up for your questions.
Our most exciting news recently is that on March 10th.
The board of directors appointed Peter Gotcher, you only as our Chief Executive Officer.
As you May remember Peter joined American shared six months ago.
Our C O O. After 40 years in the medical oncology business.
He's very well known and respected.
Many of US here at American shared have known him for many years.
He comes to us with strong market knowledge.
And professional contacts from across the entire radiation oncology spectrum.
I am now executive chairman of the board.
And I remain the largest shareholder of the company approximately 20% of the outstanding stock.
I plan to continue to be actively involved in the operations of the company.
As we work together to solidify the growth and profitability trends that we have firmly established in the year just ended.
As we also announced we've begun a search for a new public company CFO .
Seed Craig to gala.
Who has held that position for many years and will remain our CFO until a successor is in place.
Craig will continue to serve as president of our company.
And also as Chief Executive Officer, a J.
VK financing.
Our subsidiary, 81% owned by the parent company.
American shared ended a strong year with another solid fourth quarter.
Fourth quarter revenue.
Increased approximately 7%.
Period over period.
And reached over $5 million in quarterly revenue for the second time in 2022.
Our net income increase.
Increased 12% to.
246000, or four cents per share.
And capped a year of sustainable quarterly profit trend.
In fact.
This is now the eighth consecutive quarter.
Our earnings per share have been higher than the comparable quarter in the prior year.
I expect our profitability to continue.
For the full year.
Revenue increased 12% to nearly $20 million.
And our net income increased six times.
The $1 3 million or 21 cents per share.
Craig will go through the details in a few minutes.
Our cash balances grew 51% from last year to.
And at $12 5 million on December 31st.
And our $7 million line of credit.
It remains unused as well.
We believe these funds can be leveraged.
To invest in over $100 million of advanced radiation equipment.
Just recently.
We announced our first new order of the year.
A 1.3 million dollar agreement with a new customer.
Our increased investment.
In sales and marketing is beginning to pay off.
And our pipeline is filled.
With solid opportunities.
We believe that American shared is poised for growth.
I'll now turn the call over to Craig for a financial overview.
Greg.
Thank you Ray and good morning, everyone.
Fourth quarter revenue increased seven 4% to just over $5 million compared to $4 7 billion.
The fourth quarter last year.
As Ray mentioned this is the second time this year that we reported over 5 million in quarterly revenue.
For the 12 months of the year revenue increased 12% to $19 7 million.
Fourth quarter revenue for the proton therapy system in Florida increased 33, 4% to $2 2 million, primarily due to higher average reimbursement period over period for the current quarter.
Total proton therapy fractions in the fourth quarter were 981, a decline of 11, 9% compared to 1113 in the fourth quarter last year, which we consider within the typical quarterly fluctuation range.
Total gamma knife revenue decreased seven 1% to $2 8 million compared to the fourth quarter last year.
Domestic gamma knife revenue declined five 4%.
$2 million and international revenue decreased 11, 5% to 8 million period over period.
The decline in overall gamma knife revenue was a decrease in procedures.
Set by an increase in average reimbursement, which in turn was driven by an increase in the average rate at the company's retail sites.
Five favorable shift in payer mix to more commercial payers.
Revenue for same centers in operation, which excludes two gamma knife contracts that expired one each in the first and fourth quarters of 2021.
Decreased six 7% when compared to those same centers during the same period the prior year.
Total gamma knife procedures decreased by 10, 8%.
329 for the fourth quarter of 2022 from 369 in the fourth quarter of 2021, primarily due to normal cyclical fluctuations and the expiration of one contract in the fourth quarter of 2021.
Gamma knife domestic procedures declined 10% to 243.
In international procedures decreased 13, 1% to 80.
<unk> 86 for the fourth quarter of 2022 compared to 2021.
M&A volumes for same centers in operation decreased eight 4% when compared to gamma knife volumes for those same centers during the same period the prior year.
We're looking forward to receiving the permits for the protection to icon upgrade.
Again, they've center in Ecuador.
We are expecting this soon so we can begin treating patients in the third quarter.
Remember that this will be one of the few gamma knife icon units in all of South America.
The permit from the new leaner linear accelerator or linac for niche cancer Center joint venture in Puebla, Mexico is expected soon as well.
Gross margin for the fourth quarter decreased two 3% to $2 3 million or 45.1% of revenue.
<unk> to gross margin of $2 2 million or 47, 3% of revenue for the fourth quarter of 2021.
Selling and administrative costs increased by 14, 7% to $1 4 million compared to $1 2 million last year, primarily due to higher sales and related.
These associated with new business opportunities.
Operating income was <unk> 6 million compared to <unk> 7 billion in the fourth quarter of 2021.
Decrease of 18, 4%, reflecting higher operating costs selling and administrative expenses.
Income tax expense increased 23, 3% to 333000 for the fourth quarter of 2022 compared to 270000 for the fourth quarter last year.
The increase in income tax expense for the current period was primarily due to higher earnings.
The current period return to provision adjustments arising from foreign income taxes filed during the current period as.
As well as permanent domestic tax differences to continue through the end of this year.
Net income attributable to American shared hospital services in the fourth quarter 2022 was 246000 or four cents per diluted share an increase of 12, 3% compared to net income.
219000, or four cents per diluted share for the fourth quarter of 2021.
The increase in net income dollars was due to increased revenues and higher average reimbursement rates on both gamma knife and P. B R T procedures.
Fully diluted weighted average common shares outstanding were $6 3 million.
And $6 1 million for the fourth quarter of 2022 and 'twenty.
<unk> 2021 respectively.
Adjusted EBITDA, a non-GAAP financial measure was $202 million 161000 for the fourth quarter of 2022, essentially even with the EBITDA in the fourth quarter of 2021.
For the 12 months of 2022 net income attributable to American shared hospital services was $1 3 million or 21 cents per diluted share compared to non-GAAP net income after a net effect of the extinguishing the debt not a controlling interest in <unk>.
Interest and income taxes was <unk> 4 million or seven cents per diluted share.
Adjusted EBITDA, a non-GAAP financial measure was $8 2 million for the year compared to the.
$7 2 million for all of 2021.
At December 31st 2022, cash cash equivalents and restricted cash was $12 5 million, an increase of $4 2 million or five 7% since year end 2021.
Shareholders equity.
Equity, excluding non controlling interest in subsidiaries was $21 6 million or $3.50 per outstanding share at December 31st 2022, compared to $19 9 million or $3 28.
Our outstanding share at December 31st 2021.
To close my remarks, MFS had a good year in 2022 and supported by our deep resources and solid Foundation, we believe that we are positioned for future growth.
I'll now turn the call over to Peter to discuss these priorities and plans C E O.
Thank you Craig and good morning, everyone.
I want to first thank ray and the board for their confidence in me.
As C E O Ray did a fantastic job in streamlining the company and positioning it for growth and I now look forward to leading American shared intuit's next stages.
As I said on the last quarterly call. When I was first introduced to you American shared uniquely provides clinical cancer treatment centers the opportunity to partner with all the major original equipment manufacturers through one turnkey vendor in one creator.
Relationship.
This is uncommon in our industry and was one of the major factors in my decision to join the management team here at American Chair.
Yeah.
Since I was appointed.
C L O in September I've been focusing on three key target areas.
These include aggressively working with major Oems to strengthen our business relationships and develop.
Sales and marketing strategies.
Also working with our current installed base of <unk> gamma knife sites and treatment centers to strengthen and enhance these relationships.
And I've been developing and implementing new sales and marketing strategies and programs to assist our sales teams and lead generation prospecting and managing the sales funnel and pipeline.
In this regard we have seen a significant increase in our lead generation and opportunities within our sales funnel over the past few months.
I believe that we've made great progress in all three of these areas and now as CEO I plan to also focus on.
Increasing the global branding and awareness of American shared with cancer treatment C level officers and purchasing committees we.
We need to make them more aware of what we have to offer and how we and how we must.
At American shared differ from traditional financing options by showing them how easy it is to obtain the latest treatment systems.
And their department fast without heavy financial burden.
And allowing them to allocate their financial resources elsewhere within their facility.
Further we will soon start to prospect and address new opportunities directly with larger national and strategic networks. In addition to continuing to work closely with our strategic OEM partners.
We have recently hired a customer advocate to help us better manage our install base as well as support our company's marketing and branding initiatives.
Only for American shared but for GK financing as well.
Going forward, you will see American shared much more visible a major social media platforms broadening the messaging and information on our websites.
And increasing our visibility at major radiation oncology and radio surgery, Tradeshows, both domestically and internationally.
In addition, we also recently added services of another financial sales professional to pursue additional new business opportunities.
We are in the process of developing and executing growth strategies.
Advanced treatment technology more easily accessible to end users in areas, where patients and communities are under served not only within the U S. But in targeted international locations, where patient treatment wait times are way too long.
Part of this strategy will include additional joint ventures, such as in Pueblo, Mexico.
Targeted acquisitions of well established cancer centers.
And by expert expanding our creative financial and turnkey solutions to offer greater customer flexibility.
We all believe that a M S has multiple opportunities for growth.
And with our newly expanded team structure and deep financial resources.
We look forward to updating you on our progress in the quarters ahead.
Thank you for joining US today. This concludes the formal part of our presentation.
Thank you at this time, we will 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 to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble the roster.
Yeah.
And the first question comes from Harry Long with Ford Ashford.
How are you Hi, Ray Peter and Craig This is Terry long hope, you're having a great day.
Thank you Harry Thank you.
So we're great admirers of what Youre doing and I might take a little bit longer with us because at four at Ashford. We believe that people are more familiar with your business that this will bring about a lot more acceptance of of your company. So just to go through some numbers here I don't want you to be polite I wanted to be really rude, if I say something wrong I want you to.
Stop me and correct me immediately but the joke, which is not really a joke is that the market doesn't seem to understand about your company that depreciation is a noncash expense.
When I'm just looking at the numbers it looks like annually youre doing approximately $7 million in cash flow from operations and $8 2 million in EBITDA yearly so approximately a little over 2 million per quarter, and EBITDA, so $17 million market cap $7 million in cash flow from operations you know your 2.42 times.
Cash earnings which are.
I believe makes you the cheapest public company in the United States on an enterprise value to cash flow basis, which is kind of fascinated given how stable your businesses. When you combine proton beam therapy with a with gamma knife procedures, it's fascinating.
Well, if I said anything in the numbers so far that's wrong.
No you'd have now.
I'll be in touch with your.
Your observations.
You know I mentioned.
I mentioned during our last quarterly conference call.
I firmly believe that we're undervalued.
If you look at any of those metrics and compare it to the market as a whole.
Or with a.
Company that.
It may not have grown too much in the past, but you can.
Outline the future of our company so positively.
Were really undervalued.
Yeah, I mean, certainly at 2.4 times cash flow I mean, I don't mean this in it.
Facetious way, but even the local laundromat doesn't sell at two four times cash flow from operations and certainly not a well respected medical business and so it's just fascinating that even in a steady state.
The market might value, let's say, an eight times multiple.
If you net out the cash you have which I understand your filings you know my estimate at this moment. It's just an estimate or guesstimate is that you probably have 14 million to 15 million in unrestricted cash today and looking at your balance sheet. It looks like you have $14 million in total debt. If you had long term debt plus the current portion of long term debt so essentially.
Cash you have on the balance sheet. If you. So chose you could be almost completely debt free I believe is that correct.
I think you're fairly correct in those numbers yes.
Right and so then just adding back in just you know go into the conclusion of those numbers is that actually the true cash flow generation of the business since youre doing approximately $1 million in interest expense each year. So the true cash flow generation of the business is actually almost exactly your EBITDA or about $8 million in cash flow from operations and I say that.
True cash flow from operations, if you add back in interest expense, which can immediately be netted out with cash on hand is because since depreciation is such a huge component of the.
The cash earnings that's why it seems like the actual cash flow from operations. If you net out interest expense, which you easily could do you could pay down your debt right. Now is really 8 million here, so with $8 million a year, you're basically at two times cash flow from operations, you know two times at $16 million versus $17 million in market cap. I mean, this is fascinating it's better than two four.
<unk> cash flow from operations and so.
Essentially if you even had an eight time multi eight times multiple on about $8 billion for a steady state company you know the company should be at a $64 million market cap and according your vision or if you grow and you know the the market loves medical companies out of 15 times multiple you know your market cap would be at $120 million. If you were growing a double.
So I just wanted to get conceptual agreement on what the stakes are here and so it seems like this situation is ripe for M&A.
You you've mentioned correctly, so that the cash on the balance sheet gives you a lot of optionality.
Certainly gives you about $100 million in buying power for more advanced radiological equipment. So here's my my number one question, how do you view strategically as a company.
The psychology of making a sale, let's see the long beach situation to a group of doctors in private practice the associated risks with.
Which are very good at building out.
A proton beam therapy room.
Versus let's say, some hospitals, which as you know all the time that they need to get cash and doing a sale and leaseback agreement, where an existing hospital with existing cash flow from operations that could be easily.
Usually quantified essentially a buying a controlling or a minority stake in a sale and leaseback sort of situation or just taking an outright minority stake for the hospital to free up cash how do you view those two different sales cycles strategically.
Okay.
Uh huh.
You know, we're probably not inclined to approach health care systems and pursuing sale leaseback situations. When you do such you're really talking money over money financing.
And we believe that our company offers much more value added.
And that type of capability.
So we're not pursue that path of providing radiation oncology equipment.
A very capital intensive proposition for health care systems.
And they're trying you know inevitably as an example, any health care major health care system. As an example might have a $100 million of request for capital expenditure coming through the financial officers deaths each year.
And they only have $25 million of capital to allocate.
So where do they where do they invest.
And in partnership with American shared we can expand that capital budget.
But they can enter the marketplace for this high tech technology, much faster than the competition and remain competitive and a leader in.
In cancer treatment within their respective service area.
That makes sense.
It makes total sense and I apologize for asking a similar question in a slightly different way, but have you ever considered rather than controlling the proton beam therapy Center.
Taking minority.
Minority Stakes, 20% to 40% you might be more geographically diversified and it's diversified in terms of centers without having to have that huge outlay of let's say $100 million.
But you know if the situation calls for that and that's what meets the customers' needs. So I'd say, yes, we'd be very open to those type of situations.
Because what's fascinating here mathematically is let's see you're growing it.
30% to 50% either 47 point something depending on the further data or closer to 30, something in proton beam therapy, just mathematically there is a point where <unk>.
Essentially the growth of the proton beam therapy is so great that it overtakes the decrease in business domestically the decrease in AR.
Yeah.
Of course, you're limited to the center in Orlando, but it just seems like the optionality embedded optionality on your balance sheet.
But let's say I asked doing a fortune $50 million in cash on unrestricted cash on the balance sheet, just amazing that optionality.
So I'm going to let someone else ask a question, but before I go could you give us a little bit of color on it.
It seems like the mix of payers the commercial payers, it's really improved the cash flow from proton beam therapy.
You talk to us Gibson intuition about where that comes from or what drives the increase in commercial payers versus Medicare.
Okay. That's a very good question Terry.
And I'll divert that question to our resident expert Greg to gala, who monitors that are very closely.
Greg could you comment on that.
Sure Alright.
The there's a couple of factors in that one.
It has to do with the obviously the types of payers or the type of patients that are coming in the indications that they have.
If there are more indications that are.
And older population, where Medicare is the primary insurer.
We're going to have in general are lower our average reimbursement rate Medicare pays.
Primarily lower than our hmos and ppos so.
It's really partly the indication and partly just the.
The type of patients that comes through and it's it's it goes in cycles, it's not predictable.
Understood I'm, just guessing here again total guests, but it seems like as they find more and more uses for proton beam therapy outside of oncology that almost by definition that that's dragging demographically a younger patient.
Just to get.
Thank you I'm going to get back into queue Joe.
Yeah.
Thank you and the next question comes from Anthony Marchese private Investor.
Hey, first of all that those were excellent I have to tell you those are excellent questions by the prior lot of my questions were answered from the prior individuals and their outstanding question have you guys ever considered.
Buying the stock back at these levels it would just seem to make.
My first question is have you considered a share buyback at these levels. It just seems to me to be.
They are cheap and so what if you're taking stock out of the float why not accrue that to the benefit of current shareholders.
Well.
Tony that that's a very good question and.
I have to Dodge it a bit.
And forward looking criteria, but I can assure our shareholders and investors here on this call.
That.
You know over the last three years and my duration of CEO .
With American shared.
I brought that level of experience as a CEO to the company.
I had 19 years prior experience as a CEO .
And the company I founded.
And I can assure our shareholders and investors that.
Many different strategic options for the future of our company.
Had been debated in pursuit.
And we.
We are where we are today and we think we're best positioned.
Truly to benefit our shareholders.
And if they stick with us I think that'll have a nice return on their investment.
As mentioned in prior calls and in Harry's questions I think were undervalued stock.
You know from any kind of metrics.
If you look at our P/e ratio and you know it seems like every quarter that goes by our P/e ratio gets smaller.
If you look at the EBITDA numbers the growth in EBITDA from $7 2 million in 2021 to $8 2 million in 2022.
Without any really new revenue streams coming on board.
And then you look at the resources were pouring into our sales and marketing efforts.
<unk> resources are going to pay off.
In obtaining new agreements and new revenue streams.
As everyone knows that they're familiar with our company, we got long sales cycles in our company.
It's a complex sale.
But we got really really good resource.
The take on that challenge.
Alright and my.
My second question is I think part of the reason why you know that.
The stock trades were crazy, there's no analyst coverage at all.
Don't know if you know and as we all know you know you've got to pay something and in this environment and Microcap sector. You have to pay in essence, you have to although everybody well then I will have to basically pay something.
Research coverage.
Has there been any movement to try and.
Get some even some of the paid research services, which I believe are pretty good.
It would be better than nothing because at least you get your name out there.
Mhm.
I'm just curious about then I'm not sure has there been any effort made to try and attract some type of.
The analyst coverage.
I think those efforts are starting to be made.
And I'll just comment.
That.
I'm kind of old school investor in the sense that before I start promoting.
And investment.
Let's demonstrate a good solid foundation.
Sustained growth sustained profitability.
The lean on something to sell something to.
Go to pitch to the financial analysts.
Yeah.
I'm going to defer a little bit with you in that respect and that is that you've just laid out in the prior caller just laid out a good reason.
Forgetting about any growth just the way we are today it would be a great reason to buy the stock and people buy stocks for different reasons, some stocks a growth stock some stocks are.
Asset plays and I think in this situation, we will have an asset play right now coupled with a potential growth.
With a potential growth quite fond of disagree a little bit by saying.
Uh-huh why why try and get analyst research now because you haven't shown sustained growth, but where you have shown us.
The ability to continue to generate impressive EBITA relative to your market cap. So I'll just leave it at that I'm not trying to be argumentative I'm, just pointing out that I think it's a mistake not to try and get analyst coverage, because I think you fall into many buckets in the bucket right now is clearly.
You know an asset play anyway. Thank you very much.
Appreciate you taking the questions.
Tony I I.
Let me Digest, all that and reflect on it I think those are really that's really great feedback.
And.
Like to think of myself as someone that listens lessons well okay.
Always open to.
Input so.
Let me take that under advisement.
Right.
Thank you once again please press Star then one if you would like to ask a question.
And the next question comes from Tony Kamin with Eastwood partners.
Hi, everyone.
It was really nice to hear the sort of comprehensive plan you have now in terms of both working more closely with manufacturers and also the new efforts to reach out to end customers. So.
You know great to hear that it just sounds very comprehensive and I guess my first question is around the new customer that you announced.
With the 1.3 million sale can you kind of characterize that customer is at a hospital or is it some other kind of entity or.
And isn't gamma knife equipment or is it something other than that.
Yeah, I think I'll divert that question that Peter However, we probably cannot identify that customer by name because of our non disclosure agreements that we have sometimes with our clients.
But we got twice I'd characterize where they're sitting today.
Yeah Yeah.
Peter could you characterize that client and.
Sure sure sure.
Sure Ken.
Yeah, and thank you for the question, Yes, I would characterize it as a two fold it is a joint.
Joint venture.
A cancer treatment center of that.
It does have a a gamma knife and that's a joint venture with a large neighboring our hospital affiliate.
And this was a situation where they needed to upgrade a older model system into a newer model system, and we were able to consult with them and creatively come up with a way to make it happen.
Because they only had two alternatives make it make it happen to grow their patients and continue a great and fantastic Radiosurgery program.
Or or look to close it down which no one wanted to do and with our support and our creativity.
It happened and things worked out extremely well.
Great and <unk>.
Before you go to your next question, let me just kind of add a little bit of color to that that local hospital. That's a member of that joint venture.
As part of a larger health care system.
And the folks in the C suite of that health care systems have seen what American shared is capable of doing COVID-19.
This local hospital day one.
Thus, it's opened the doors to the C suite within that health care system.
Okay.
That's some of the intangible benefits to.
The small order, but it's some of the intangible benefits we're accruing.
Well I would think in this very difficult sort of credit and interest rate environment.
For it I'm sure it's got a lot of your ultimate.
And user perspective customers thinking about how they can access finance.
In a in a pretty effective and rational way. So I guess I'm you know I'm curious in terms of your your experience there.
And.
The other side I would think it also holds true for.
[noise] Elekta in your other potential manufacturer partners that.
They realize they've got to help the end user customer be more creative.
Ways to two axis.
The technology, you don't want a rational economic sense is have you seen changes because of sort of what's been going on in the economy and interest rates would've been helpful that way and and as that awareness there on both the manufacturer and the end user side.
Yeah, I'll, let Peter answer that in general I'll, just say, yes, I think we have start seeing that but Peter you want.
I'll take that question on Tibet.
Sure sure that that's that's a very.
Good question and there's actually a lot in that question I can tell you I've been in this.
Business is as you know for <unk>.
For 40 years I have very good credibility and know so many of the key decision makers.
In our opinion leaders not only on the practice level of the doctors in the cancer institutes, but also in the senior management and sales levels up the Betty OEM.
Oems that we deal with.
And what I can say is that.
We're getting a lot of interest and a lot of calls from many people in the industry that just know that I am now here.
At American share.
And they're wanting to know more about Oh, Okay. We know you are there we know you've been in the industry.
And that's when the conversation start about the financing and the differences that we offer for funding.
So just isn't the case of this situation, where we received our first order or are they actually contacted us just just because of that and we're getting a lot of calls because of that so a lot of it is due to.
People that know you what's in every small community.
Everyone in this business past reputation credibility.
And this is a different way like I had mentioned that it's uncommon in this industry and we're working on getting that awareness out to everyone, but it's it's.
It's an interesting dynamic and I can tell you I really see things happening just from again our our.
Pipeline and at Leeds and the activities that we're looking at.
Ras I kind of wrote this down hopefully I copied what you said correctly, but I think he said that pipeline is filled with solid opportunities.
Kim can either of you sort of comment a little bit or give a little more color on the pipeline is it four is it across a range of products is it is it yeah.
I can outline that very easily for ya.
Yeah.
And you know we have been talking about.
The expansion of our product offerings, and what's our strategy in a little bit more diversification than just the provision of gamma knives and proton beam. So.
Let me comment in a couple of different ways about what is in our pipeline.
It contains many different product offerings.
<unk> gamma knives.
Linear accelerators M, our Linux and even the provision of proton beam systems.
And that's consistent with the expansion of everything we've been talking about it let's.
Let's expand our product offerings.
We have opportunities domestically.
And we have opportunities internationally as well.
We have opportunities.
With new business clients, new clients, we've not had.
And we got opportunities, we're pursuing with our existing clients expanding those relationships.
We have.
Business models structures that.
Could vary.
Could be I'll say, the traditional agreements that we've had in the past where we provide a gamma knife, let's say for X dollars for every treatment.
Or maybe are we provided at gamma knife for some percentage of the revenue.
That the health care system collects off that gamma knife.
We also are pursuing joint ventures, where we have ownership sometime.
Sometimes majority sometimes minority.
And a joint venture relationship and one of the great features of that type of relationship is.
Those relationships don't have.
Contracts or agreements that expire that have a contract expiration date.
They're very long term oriented.
Is that in all of those types of opportunities exist.
Within our pipeline.
That sounds great two more two more quick questions one.
Recently in the press Ive been reading.
An increasing number of articles talking about gamma knife gamma knives in general growing.
I'm not sure quite what they are seeing whether its procedures or capabilities or something growing in 'twenty three it feels like I'm for a few years.
I didn't really see much about that but it but.
Again, there's been some press about growth is that something you're seeing or.
Is that just is that correct.
I'm going to direct that question to up here you see our resident expert on the gamma knife market.
Yes.
You're absolutely correct in what you've been seeing you know for a while they're in the early days for Radiosurgery. The gamma knife was.
Doing extremely well and then as everyone knows with linear accelerators are radio surgery started to catch up a little bit there, but but.
Not only do we also other vendors.
Do see an uptick and gamma knife.
Modality in gamma knife treatment.
And a lot of it has to do with the advantages that are offered in our software and treatment planning and same day imaging and treatment.
While there have been a lot of things done to that system and it has really.
Taken an upturn so you're correct when you say youre hearing that that.
There was an increase in the AR and the gamma knife type treatments not only in the U S but worldwide.
And this of course still trades for the installed base as well and when it comes time to do.
Upgrades.
As well so that's it.
And then last question, which I feel I've I've asked us for many years, but it's so important in terms of size.
Can you can you kind of characterize the the appetite now for for for New Proton systems. I mean, obviously, it's a it's been several years since since you installed in Orlando and I know shareholders are really hoping for a flooring and encore somewhere else.
Can you just kind of talk about proton in general.
Yeah.
Well I can tell you that.
We are still very much pursuing proton being opportunities.
Without commenting too much in terms of forward looking.
I can assure you that we probably looked at more proton beam opportunities in the last nine months than I recall as a shareholder going back to the 20th her as a board member going back to 21 nine.
And are some of those quite frankly.
Not worth our investment because the.
Partnerships that we're asking them to be calm with be partners with us.
There's too much of a capex spend involved to support the revenue streams that would be coming out.
So we're very intelligent.
They are analyzing these opportunities.
And we believe we believe there are a few out there that meet our criteria.
Great well. Thank you guys very much for for all those questions I appreciate it.
Sure.
Yeah.
Thank you and then ask questions I'll find out from Harry along with Florida Ashford.
Hi, gentlemen, I thought I'd take more time, but if no one else is in the queue. So definitely really general and then get Super specific so I mean, I think the elephant in the room is that you know.
Not only is right you know what I'm.
Amazing Investor but.
Going back to the cash on the balance sheet and that Optionality 12 to 15 months from now our estimate is it's going to be at least $20 million to $23 million in cash, which will be greater than the market. The current market cap of your company.
So I guess my question is.
Using <unk> expertise and the expertise of Peter and Craig do you buy other cash flow businesses and sort of become a conglomerate like many Berkshire Hathaway.
And use those cash flows you have to diversify in that cash on the balance sheet opportunistically or do you stick with your knitting and proton beam therapy. That's really are a big question, which of those two paths would you like to take.
Yeah.
Really not going to become the Berkshire Hathaway of radiation oncology equipment.
Yeah, it's kind of a lot of other interests. Following your career you do many more things on that.
I'd like to.
Semi correct you on your cash projections and yeah, AVR free cash flow is that that dominate.
Our year levels as measured by let's say EBITDA.
But if.
It wouldn't be prudent use of the cash we have if we are we are going to have some capex spend in 'twenty two 'twenty three because we got upgrades occurring in Ecuador, where we got the new site going into quite well.
We may not necessarily finance are hungry for 100%.
Those purchases.
We will probably put in some level of equity so there'll be some capex spend equity wise and those investment opportunities.
So let's be prudent on how we use the resources we have.
I'll comment that I, one of my greatest accomplishments at shared imaging.
Was buying 2025 $30 million worth of equipment every year.
And I was 100% owner at the time I bought the company.
And I never needed to dilute my equity.
While financing that Capex spend.
I had developed it with banking relationships and we feel that our bank relationship with fifth third bank.
Is solid we believe fifth third bank, there's a solid bank.
And.
We'll be prudent and financially engineering our growth.
This is perfect. This leads into my next question.
So I was looking at your some of your debt covenants that you disclosed in your from your last annual report.
And it looks like.
I could see a total debt to EBITDA covenant of three times, but are there any current debt covenants, which prevent the company now or in the future from paying a dividend to common shareholders.
There is a restriction in our banking relationship.
About how much dividends we.
We can pay out to our shareholders. There is a provision to do so.
But it's limited.
And to that point I Wonder if just you know.
Because it's perfectly reasonable up your unrestricted cash on hand, which could pick your entire that Richard I believe you deal. We're quickly will I wonder if they'd be open or if the company would be open to negotiating an amendment to such covenants that state that if you do have unrestricted cash on the balance sheet, which could literally pay all of the debt not that.
You would want to but if you so chose.
If they would lose some of those restrictions on dividends.
Moving on this is a very specific question and I only ask this question because it sounds like you know full speed ahead on proton beam therapy, if possible I noticed.
In your annual report that you had a $2 $2 5 million in deposits for two maybe on S. $2 50, I proton beam therapy systems, which were written down to zero.
But my question is even though for accounting purposes. Those deposits were written down to zero. If you. So chose to purchase one or two systems with <unk> still honor those deposits is going towards the purchase price. So if we separate the discussion of <unk>.
Having it written down on your balance sheet for accounting purposes versus the commercial relationship.
The answer that question is yes, maybe on still has those deposits on our account so if we purchase.
Net proton beam system from maybe on would get credited for that deposits I would like to point out.
The amounts that we written that we wrote off in December in the fourth quarter rather of 2020.
Did include some capitalized interest.
On those deposits so that capitalized interest component would not be on.
Our account with Navient.
That makes sense.
Total sense, and then follow up of those $2 million to $5 million in deposits.
Does maybe I'm forced you to apply half and half to two different systems, where if you. So chose could you combine those two different deposits into one deposit on a <unk> $2 50.
I think it would be reasonable that Matt beyond would assume that each deposit is on each respective order.
I'm just curious.
I also noticed maybe Ana has been talking about a $2 50 fit proton system and some other things, but as the S. $2 50 is the state of the art or or could this deposit would be applied to it. So they make some improvement on the $2 50, I only ask this because if we are full speed ahead on proton beam therapy, rather than you know dividends or acquisitions.
<unk> outside of bring logical oncology I just wanted to focus on this like a laser.
Yeah, I think it's a fair assumption yes.
We acquire a proton beam system, maybe on we've got big relationship.
And I think each party would be flexible.
All of those deposits would be slide and how old the exact configuration purchase of the proton system all that configuration would would be there's lots of different bells and whistles.
Hey.
Well, maybe on proton beam system, and we're bound to.
If and when we take delivery of such a system, we're bound to modify.
The equipment, we currently have on order with them to get the latest technology.
And maybe on would be in support of that flexibility, we got a good relationship with them.
That's that's wonderful to hear that's wonderful year and also is there any update if any on the long beach equipment L. L. C O, which I understand is not expected to do anything but I was just curious if there was any further movement in that area.
Yeah, I'll just comment it's been a very challenging marketplace in that region.
One that's challenged by.
The different health care systems in that region.
And quite frankly, our search for an appropriate facility.
Locate the operation and Masada.
Right right right no that's fair.
Very interesting.
Thing I was going to mention is just and this is just a request you get all these you know.
Particular request all the time, so I apologize for saying this next thing but I.
I think because most people don't live in this proton beam therapy.
The way that you do that even though I think it's an amazing discussion of the different manufacturers that you have what kind of maybe an IPA varian attaching pro Nova assuming boto proton Mitsubishi et cetera, the manufacturers.
Maybe in the future if there could be some discussion in the annual report from some of the different non hospital players.
And just when I was doing some research just here in Texas. It was very interesting to see.
Some of what happened with Concord Medical for instance, taking a 20% stake in the MD Anderson proton beam therapy Center, and then divesting of that stake later.
You know things like U S oncology as you know a subsidiary of Mckesson.
Which it looks like I have no idea what their exact relationship as the Texas Center for proton therapy in North, Texas, but just some of these.
Because it seems like there are less than 40 proton beam therapy machines, and maybe that's going to be a 42 or 45 with some construction, but in the whole United States and just if there was some discussion of what's happening now with the industry either on this call or in an annual report.
Super.
But.
We're just huge fans of you guys. We're great admirers of the cash flow generation and we're looking forward to seeing your progress. Thanks, so much.
Thank you Harry I appreciate your comments and questions in and.
Your feedback I appreciate it.
Thank you.
A question and answer session I would like to hand, the car race to Kodiak for any closing comments.
Thank you operator.
And thank you to everyone, who joined US here today, we have a good question and answer session.
We appreciate your feedback and your questions and hopefully we've been helpful.
We're very proud.
Of the sustainable growth.
We've experienced in the profitability trends we've established.
And as mentioned as you can probably hear in our voices, we're very excited for the future of American shares.
We really believe our newly aligned management team.
The deep financial resources that we have.
And our investment in our sales and marketing.
Positions us very well.
For sustained growth and profitability.
We look forward to speaking with you again in our first quarter results are announced in mid May.
Please contact us directly if you have any questions before then.
Be well and stay safe.
Goodbye.
Thank you. The conference has now concluded thank you for attending today's presentation.
Your lines.