Q4 2023 American Shared Hospital Services Earnings Call
Good day and welcome to the American shared hospital services fourth quarter 2023 earnings Conference call.
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Please note this event is being recorded.
I would now like to turn the conference over to Stephanie Prince of P. C. G Advisory. Please go ahead.
Thank you Becky and thank you to everyone joining us cobalt Oems.
Fourth quarter 2023 earnings press release was issued yesterday after the market close.
A copy can be accessed on the company's website at a S. H S dot com.
Food waste is under the investors tab.
Before turning the call over to management I'd 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.
The private Securities Litigation Reform Act.
Hi.
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 at the office.
Okay.
This includes the company's quarterly report on Form 10-Q for the three month periods ended March 31 June 30th September 30 of 2023, well annual report on Form 10-K for the year ended December 31 2022.
The proxy statement for the annual meeting of shareholders that was held on June 28 2023.
Company assumes no obligation to update the information.
None: That's cool.
None: Before I turn over turn the call over to Ray.
To remind participants that we're going to limit all questioners to one question and one time.
As always we'll be happy to take additional questions offline anytime.
I'd now like to turn the call over to raise to Kodiak executive Chairman right.
Thank you Stephanie and good day to everyone.
Thanks for joining us today for our fourth quarter 2023 earnings Conference calls.
I'll begin with some opening remarks, and then turn the call over to Bob Hyatt, Our Chief Financial Officer for a financial review of the fourth quarter.
Following their prepared remarks, we'll open the call for your questions.
Before I turn to our results.
I'd like to acknowledge the passing of our founder and long time chairman.
None: C E O and friend Dr.
None: Dr. Ernest Bates.
Dr. Bates was 87 when he died last week.
He was a highly respected board certified neurosurgeon.
Entrepreneur.
And philanthropists.
And what's known as a trailblazer on champion.
For portable medical care for those in underserved communities.
Personally I have known Doctor base for many years.
He invited me to join our board of American shared in 'twenty all nine.
And he was a good friend.
I know that we're all going to miss him.
His wise counsel.
And as incredible sense of humor.
Now I'd like to transition to our results.
By almost every measure MFS had a good year in 2023.
We made continual improvement as the year progressed.
And advanced in several important ways.
Notably the sales team, we put together last year has gelled and.
And we ended the year with the strongest sales pipeline in many years.
This is due not only to the team who are well known in our industry.
But also to our expanded financial solutions and closer integration with our strategic Oh, yeah.
Together. These factors have resulted in significantly increasing the breadth of opportunities for our consideration.
These include a range of advanced radiation equipment in various settings as.
As well as the expansion of our business model.
We will also consider the development of our own majority owned.
Proton beam.
And radiation oncology centers.
The United States.
We would all of them and operate these centers.
With this expansion of our business model.
The team was also responsible for strengthening our core business.
Working with customers to increase utilization of their equipment.
And assist in the signing of four lease extensions.
That is four of our 10 domestic gamma knife customers.
Signed extensions over the last 15 months.
And there are others in the pipeline.
We believe these extended agreements are a testament to our partnership business model.
And financial flexibility.
International results are also heating.
In the fourth quarter, we completed the equipment upgrade in Ecuador.
New state of the art Gamma knife iPhone.
This is the only gamma knife in Ecuador for Noninvasive radio surgery.
Already our volumes are up for the quarter. Despite the downtime we had for the installation.
Our third International Center in Puebla, Mexico is going to begin treating patients in the second quarter.
When it opens in a few weeks the linear accelerator or linac, yeah, we installed with the map I G. R T and radio surgery capabilities will offer the most advanced radiation therapy available in our catchment area.
We've also continued to invest in three unique business opportunities that I've mentioned before.
We announced the first of these deals during the fourth quarter.
It is an acquisition of a 60% majority interest in.
And three radiation therapy cancer centers.
In Rhode Island.
Importantly, these will be our first direct patient services, our retail centers in.
In the United States when the acquisition is completed.
We look forward to closing this deal soon and disclosing more details.
But until then.
Suffice to say that we believe and that's new business. The first from our expanded team and our new pipeline.
As an indicator of our ambitions for our company.
I'd like to repeat we will own and operate 60% ownership.
Our own radiation therapy centers in the United States when we close on this acquisition.
This is a very natural progression of.
Our business model.
We ended the year with the strongest quarters ripped.
Reporting total revenue in the fourth quarter of $5 $7 million.
Our year over year increase of 13%.
Gross margin was $2.8 million or 24% increase.
Reflecting continued tight control over direct costs.
And positive operating leverage.
The gross margin percentage was a 49% of revenue.
None: A level that hasnt been reached since 2019.
We earned six cents per share in the fourth quarter, despite the headwinds of $350000 in Rhode Island costs.
None: And 362000 of additional reserves on impaired assets.
For the full 12 months of 2023.
Revenue grew 8% to 21 3 million.
Gross margin was $9 $3 million and 11, 5% increase.
The gross margin percentage was 44%.
We earned 10 cents per share.
None: Despite Rhode Island expenses of $919000 for the whole year.
And additional reserves for impaired assets and removal costs of 940030 year.
We expect these headwinds to significantly decrease in 2024.
Our balance sheet remains strong.
We ended the year with $13 $8 million in cash and equivalents.
Roughly equal to $2.19 per share.
At year end, we also had $4 $5 million available on our $7 million line of credit.
All of which was repaid in the first quarter.
We're working hard to leverage these resources into additional long term revenue streams.
For our company.
Looking ahead, we expect stronger international growth.
From additional treatment capabilities in Ecuador.
And the opening of our new center in Puebla.
The projected closing of the Rhode Island acquisition will add three additional new revenue streams to our business.
We have additional new business opportunities advancing through our complex and long sales cycle as well.
We look forward to announcing more details out their appropriate time.
With that I'll turn the call over to Bob for a financial overview.
Thank you Ray and Hello, everyone.
First quarter revenue increased 13, 1% to $5.7 million compared to $5 million in the year ago quarter.
We've redefined our business segments to better reflect our revenue sources.
Rental revenue from the company's medical equipment leasing segment, which will referred to as leasing going forward was $4 $8 million for the fourth quarter of 2023 compared to $4 3 million in the year ago fourth quarter, an increase of 12%.
Revenue from the company are direct patient services or retail segment was $913000 for the fourth quarter ended December 31, 2023 compared to $764000 for the same period in.
The year ago quarter, an increase of 19, 5%.
Fourth quarter revenue for the company's proton therapy system in Florida was $3 $1 million, an increase of 39, 9% primarily due to continued increases in average reimbursement as well as an increase in traction.
Total proton therapy fractions in the fourth quarter were 475 compared to 981 proton therapy fractions in the fourth quarter of 2022 an.
An increase of 30%.
294 fractions.
None: Within the typical quarterly fluctuation range.
Total gamma knife revenue decreased eight 4% to $2 6 million.
The decrease in overall gaming.
Due to a decrease in procedures.
Contract well it sounds.
Sounds good at two sites for installation of upgrades.
Gamma knife procedures were 277 for the fourth quarter compared to 329 in the fourth quarter, a year ago, a decrease of 15, 8% or 52 procedures, reflecting the two expiring contracts and downtime for upgrades that were mentioned earlier.
Gross margin for the fourth quarter of 2023 increased 24, 1% to $2 $8 million compared to gross margin of $2 3 million for the fourth quarter too.
The gross margin reached a record high of 49, 4% compared to 45, 1% in the comparable quarter the highest it's been since 2019.
Selling and administrative costs increased by three 9% to $1 8 million in the fourth quarter of 2023 compared to $1 4 million didn't a year ago quarter.
This includes approximately $350000 that we've been pursuing new business opportunities as ray talked about as well as higher sales and marketing expenses.
Net interest expense was $175000 in the 2023 periods compared to $192000 in the comparable period of last year the.
The decrease was due to an increase in the interest rate on the company's variable rate debt offset by increases in interest income on the company's growing cash balance.
Operating income for the fourth quarter of 2023 was 407000 compared to operating income of 590000 in the fourth quarter of 2022, which reflects the higher selling and administrative expenses.
Kris and reserves for impaired assets and removal costs.
62000 in the correct period.
Income tax expense was 338000 for the fourth quarter of 2023 modestly higher compared to income tax expense of 333000 for the same period last year. This was primarily due to the higher taxable income offset by permanent tax differences recorded last year.
None: Net income attributable to American shared hospital services in the fourth quarter of 2023 was $415000 or six cents per diluted share.
Compared to net income of 246004 cents per diluted share for the fourth quarter of 22.
Fully diluted weighted average common shares outstanding was $6 million.
6.284 million for the fourth quarter of 2023, and 2022 respectively.
Adjusted EBITDA, a non-GAAP financial measure was $2 7 million for the fourth quarter of 2023 compared to $2 2 million for the fourth quarter of 2022.
At December 31, 2020 free cash equivalents restricted cash was $15.
Compared to $12 5 million at December 31, 2022.
Shareholders' equity excluding non controlling interests to subsidiaries was $22 6 billion or $3 59 per outstanding share of your ads compared to $21 6 billion or $3 57 per outstanding share at December 31st Drivetrain too.
This concludes the formal part of our presentation.
You for joining us today, and we look forward to updating you on our progress in the quarters ahead.
That said, we'd like to turn the call back to you and open it up for questions.
We will now begin the question and answer session.
To ask a question you May press Star then one on you touched on time.
If you are using a speakerphone please pick up your handset before pressing the keys.
In the interest of time, please limit yourself to one question and one follow up.
If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
At this time, well pause momentarily to assemble our roster.
Yeah.
The first question today comes from Tony Kamin with Eastwood partners.
Go ahead sure Hello, I, just I guess first just like to Echo the statement. She made on Dr. Bates He was truly an exceptional.
Person and and a great course, Oh My my first question is.
Right on.
This last year on a full year results.
The proton beam business was I think $10 1 million in revenue.
The gamma knife, just a little bit higher so so on one proton beam.
Showing no pretty equivalent revenues to the whole home.
I'm a knife operations. So I was glad to hear in your intro that the company's considering doing.
You know looking for potentially wholly owned.
One being just to kind of get that side of the business growing can you talk a little more about that and what you see as the potential opportunity in and you know.
Any anything any more color on the proton beam side would be great.
Sure.
But yes, we are very <unk>.
Consciously.
Pursuing proton beam opportunities.
None: Not necessarily on a leasing arrangement like the revenue sharing model, we have currently with Orlando health.
But instead, we're we would own and operate our own proton beam centers.
We would.
Invite participation under that business model, but local health care systems. So that we have a good partnership with all parties in that region wherever we decide to go.
But we would like to have majority ownership.
Of that owned and operated business model.
We've diversified in a lot of ways this past year or two.
And this is another way of diversification.
And in the case of the acquisition of Rhode Island.
We're owning and operating our own radiation therapy centers.
And we have been doing that at our international locations, but not domestically.
And it's just a lot of different opportunities by how we've pivoted our business model.
None: This opens up a whole.
Greater universe of opportunities for us to pursue.
And owning and operating and haven't been majority control ownership of them.
Proton beam radiation therapy center.
Is an hour.
Is in her.
Business model.
We are pursuing those opportunities Tommy.
I think that would be great and as a follow up just hum and Rhode Island with with Genesis care is there I know their portfolio is pretty large and expensive or are there more opportunities like the one youre pursuing in Rhode Island potentially.
Potentially arising out of that situation with Genesis care.
Yeah.
We have not pursued anything other than these opportunities in Rhode Island with Genesis care we've.
We've developed a very good local management and knowledge of capabilities in Rhode Island.
And.
You know, we're kind of I'll say, taking one step at a time for the moment.
Fair enough thanks very much.
Hmm.
Yeah.
As a reminder, if you would like to ask a question. Please press Star then one could be joined into the question queue.
The next question comes from Michael Cooper, a private investor.
Please go ahead.
Good afternoon and.
I Echo the sentiments around talk debate, it's unfortunate to see his passing.
Michael Cooper: My question is with regard to Rhode Island.
Could you.
Claire apply what I see as the business model there from what I picked up from your news release and reading some other.
Items.
So I see that you've got three existing clinics with state of the art.
Michael Cooper: Equipment, which I'm assuming is fine.
Michael Cooper: Yeah.
For.
Our location in in and around that type of quantum.
And they've got 70 customers a day coming in port procedures I believe.
And yes.
If I read it correctly, a procedure is worth about $6000.
Could be off there.
But I think that's the average procedure.
But youre getting right now.
Am I working with the right type of numbers on the daily revenue, maybe $400000 daily revenue.
On these three operations and did you pick up something to the order of $15 million worth of equipment.
For 2.8.
Million dollars.
Tony.
Michael rather.
Thanks for your question.
None: I'm not.
Really ready to share too much information about this opportunity.
We're still in this process of closing the transaction, which we do expect to occur I'll say in the next 30 days.
I can I'll say correct some of your assumptions.
We expect.
The 6000 per procedure might be inappropriate.
Mount per patient and keep in mind those patients might get anywhere from 10 to 30 treatments for their radiation treatment of cancer.
So the.
The 70 patients 70, a day its more of a treatment number.
Do you follow my train of thought yes, yes, okay. Okay.
So I can't comment I mean, I'm sure our investors or appetite is whetted a bit.
None: I can make some general comments.
You know, we do expect revenue.
None: From these three centers to be in the nine or 10 million dollar annual range.
That is a significant increase from the $21 million a year we have currently.
And keep in mind, that's we won't see the full effect of that for the 2024, because you know we're only going to have eight eight and a half months maybe of revenue in 2024 of that nine to 10 million.
I can also add that we expect our net income to be positive I can expect a contribution to EBITDA from this acquisition.
It can't go much further than that.
I can say that.
Two of the three centers have really good equipment.
Third less desirable.
So the 5 million might not be a correct assumption on your part either Michael.
Okay.
And that's probably as far as I can go without.
Crossing right too.
Very helpful.
Okay, and as a follow up could we get a little bit of color on the revenue potential who had low Mexico.
As well as the increase in Ecuador from the equipment upgrades.
None: Uh huh.
Oh I can't you know talk too much about individual situations I can tell you that.
None: In the case of Playboy.
I would expect at least a million dollars of incremental revenue from this new revenue stream in the first 12 month period.
And once again, we will not have that full year effect in 2024, it will come on in 2025 for full year.
We're expected treat our first patient in may of 2024.
In Ecuador, you know I think we'll see some increases from that account, but I can't.
Comment too much individually.
That's helpful.
That's very helpful. Thank you very much and look forward to the next year.
This concludes our question and answer session I would like to turn the conference back over to Ray to Kodiak for any closing remark.
Yeah, I think one point I'd like to make.
Is.
The Rhode Island acquisition.
Ray: Is is an increase in our future revenue almost.
Immediately.
You know when we close on that transaction, we'll start recognizing revenue on the first day thereafter to close.
And this is an important distinction.
If you look at our situation playbook.
We own we're owning and operating a 85% ownership.
And we agreed to this arrangement in late 2022.
And our revenue stream from that situations not coming on until the second quarter of 2024.
So there is that's a really good example of how long of a sales cycle and implementation cycle, we sometimes have.
And by growing by acquisition.
It gives us immediate jump in our revenue and profitability from day one.
So that's one of the reasons I'm very very bullish.
Ray: On this opportunity and anxious to proceed along those lines.
So with that I'd like to thank everyone, who joined us today.
I really believe impasse is that inflection point.
We're excited about the future.
And I hope you all stay tuned well.
We'll speak with you next on our first quarter call in mid May.
And please contact director contact us directly if you have any questions before then.
Well and stay safe thanks.
For your time today.
Goodbye.
Sure.
None: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
[music].