Q3 2024 Sensus Healthcare Inc Earnings Call
Good afternoon, and welcome to the Sensus healthcare third quarter 2024 financial results Conference call. All participants will begin listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad. After today's presentation, there will be an opportunity to teach west questions.
Ask your question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Kim called debts with Alliance Advisors IR. Please go ahead.
Kim Gala: Thank you. This is Kim gala, that's with a lot of alliance advisors I R. Thank you all for participating in today's call. Joining me from Sensus healthcare are Joseph Giordano, Chairman and Chief Executive Officer, Michael <unk>, President and General Counsel and hobby, Ron Paul Our Chief Financial Officer.
Kim Gala: I remind you of 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 anticipate and other similar expressions well should.
Kim Gala: It may occur in the future are forward looking statements and.
Kim Gala: The forward looking statements are management's beliefs based on currently available information as of the date of this conference call November 14th 2024.
Kim Gala: As health care undertakes no obligation to revise or update any forward looking statements, except as required by law. All forward looking statements are subject to risks and uncertainties as described in the company's one 10-K and 10-Q.
Kim Gala: During today's call references will be made to certain non-GAAP financial measures Sensus believes these measures provide useful information for investors yet.
Kim Gala: Should not be considered as a substitute for GAAP, nor should they be viewed as a substitute for operating results determined in accordance with GAAP.
A reconciliation of non-GAAP to GAAP results is included in today's financial results press release with that said I'd like to turn the call over to Joe Giordano Joe.
Joe Giordano: Thank you Kim and good afternoon, everyone.
Joe Giordano: Four we jump into the meat of todays call. Let me address the distribution of our earnings news release earlier today as you know, we typically issue our financial announcements after the market close today, we had an accidental disclosure situation with the vendor that handles the distribution of our news releases so out of.
Joe Giordano: Narbada of caution we issued our third quarter news release and filed our 8-K and 10-Q during live trading hours, we expect to return to our normal timing cadence next quarter and with that being said I'm delighted to be reporting another quarter of continued growth in revenues and.
Joe Giordano: Earnings this reflects our success in engaging customers with both existing and new sales the options for our SRT products revenues more than doubled year over year for the second consecutive quarter and we maintained profitability. Despite the summer seasonality of our business.
Joe Giordano: We shipped 27 SRT systems during the quarter, including one to Israel as we continue to build a global presence. This compares with 11 systems shipped in the year ago quarter. Once again many of the shipments were for our SRT 100 vision systems with.
Joe Giordano: Guided SRT, including a higher number of such systems sold to a large longtime customer.
Joe Giordano: The value of the business this customer provides and applaud their dedication to choosing a far more patient friendly alternative to most surgery with efficacy that's every bit as good.
Our fair deal agreement, which we referred to as F. D. A is proving to be as well received as we had envisioned perhaps even more so the F. D. A is our new shared revenue I G. S. R. T placement model, which we launched in March at the American Academy of Dermatology annual meeting it.
Joe Giordano: Complements our leasing programs as well as the outright sales of systems.
During the third quarter, we signed a seven F D. A contracts for a total of 22 as of September 30th and just this week, we entered into an exclusive agreement with platinum Dermatology partners, which will cover all of their 130 clinical sites in the U S. This is the largest sales to date under <unk>.
Joe Giordano: D E or otherwise and it holds potential to be a meaningful contributor to our top line.
Joe Giordano: Platinum is a group dermatology practice with headquarters in Dallas, They have more than 400, clinicians staffing clinics in Arizona, California, Florida, Nevada, and Texas, we exploit we expect to place several systems during the fourth quarter of 'twenty 'twenty four and we'll continue to provide.
Joe Giordano: Since of the platinum network over time.
Speaker Change: Platinum has been a census customer for several years and has an unwavering commitment to patient care. We are delighted to enter into this collaboration to extend the benefits of superficial radiotherapy to even more patients with non melanoma skin cancer and keloid scars non melanoma skin cancer.
Speaker Change: <unk> people nationwide platinum dermatology as current geographic footprint makes for a particularly promising partnership as they aggressively pursue strategic expansion nationally.
As a reminder, our fair deal agreement provides flexibility for the customers to deploy capital to other areas of their business, which is especially valuable under challenging macroeconomic conditions given.
Speaker Change: Given the growing utilization of best <unk> T to treat non melanoma skin cancer and key Lloyds and the interest we have generated to date. We believe this option will contribute to our growth for years to come.
Speaker Change: As our activities continue to grow we fully expect our objectives for these agreements to be achieved by year end. All of these agreements will begin to provide recurring revenue to census, beginning in 2025 with significant volumes projected for the second half of the year and with that I will ask Michael to discuss SRT.
Expansion into the strategic other strategic markets Michael.
Michael: Thanks, Joe We also continued to focus on bringing our SRT technology to the radiation oncology market.
During the third quarter, we shipped an SRT system to Swedish hospital in Seattle, which is owned by Providence Health and services.
Michael: This sale is such a large and prestigious institution represents our latest success in generating interest and SRT from hospital oncology Department.
Michael: Although the hospital market tends to have a longer sales cycle, we expect to generate continued demand from this channel.
Michael: Tober, we attended the American Society for therapeutic radiation oncology or Astro annual conference and we were delighted with the traffic at our booth.
Michael: Hospitals are looking for additional sources of revenue and the radiation departments are excellent targets, because we offer a cost effective and clinically proven alternative to the very expensive linear accelerators and other electron beam radiation systems to treat non melanoma skin cancers.
Michael: Switching gears for a moment I'll now turn to a brief update on our transdermal infusion product or TDI as we relayed to you last quarter. We continued to develop this product with feedback from our Kols and the many pharma companies interested in this technology as a result, our engineers have added <unk>.
Any new features which we had plans for a phase two development, we expect to submit our five 10-K application to the U S food and drug administration before the end of the year.
I would also like to update you on the international and veterinary market potential we have been making good progress in bringing our SRT systems to global markets in particular in Asia and the Middle East. Our goal continues to be to open up two to three new territories, each year, which we achieved over the last.
Michael: Three years.
Michael: During the third quarter, we shipped our system to a hospital in Israel.
Michael: This follows a previous sale two highlights that the veterinary specialists referral center knowledge farm at Bayberry College in Tel Aviv to treat tumors in cats and dogs.
Michael: The veterinary market is an interesting incremental growth opportunity for us and recall that Colorado State University.
Michael: College of Veterinary Medicine has two of our SRT systems and are treating household pets as well as horses, they're preserving all of this data to eventually publish their research on treating animals with SRT.
Michael: We are also speaking with potential veterinary customers for our SRT systems for their individual practices and we will update you should we signed any agreements in this channel.
Speaker Change: With that I'll turn the call over to Javier for a review of our recent financial results.
Javier: Thanks, Michael Thanks, Michael and good.
Javier: Afternoon, everyone.
Speaker Change: Revenues for the third quarter of 2024 more than doubled to $8 8 million up 127% from $3 9 million in the third quarter of 2023.
Speaker Change: She wants to have an SRT unit versus 11, a year ago. The increase was primarily driven by a higher number of SRT systems sold to a large customer.
Gross profit for the third quarter of 2024 was $5 2 million or 59, 3% of revenues compared with 2 million or 51% of revenue for the board water after 2023.
Speaker Change: The increase was primarily due to the higher number of units sold in the 2024th quarter.
Selling and marketing expenses for the third quarter of 2024 was $1 3 million, which is unchanged from the prior year.
Note that marketing expenses tend to be lowest during the summer months.
Speaker Change: Our pure trade shows and conferences.
Speaker Change: General all nominees told me of expense for the third quarter of 2024 was $1 6 million compared with $1 5 million a year ago.
Speaker Change: Slight increase was primarily due to higher compensation and bad debt expenses, which were offset by a reduction in bank fees.
Speaker Change: The reasons on development expense for the third quarter of 2024 was <unk> 9 million compared with $1 1 million in the same quarter last year.
Speaker Change: The decrease was primarily due to expenses related to a project to develop a drug delivery system for aesthetic yields as a majority of the development expense procure it last year.
Speaker Change: Other income of <unk> 3 million for the third quarter of 2024 was mostly related to interest income and was unchanged from the prior year's third quarter.
Speaker Change: Net income for the third quarter of 2024 was $1 2 million or seven cents per diluted share and this compares with a net loss of one 5 million or a loss of nine cents per share for the third quarter of 2023.
Speaker Change: Adjusted EBITDA, which we define as earnings before interest taxes, depreciation amortization and stock compensation expense was $1 6 million for the third quarter of 2024, compared with negative $1 7 million for the third quarter of 2023.
Speaker Change: This represents a tremendous year over year improvement of more than $3 3 million.
Speaker Change: Turning now to all of our financial results for the first nine months after talking about 'twenty four.
Speaker Change: Revenues for the nine months ended September 32024, we're at 28 7 million compared with $11 8 million for the same period. After about some on 23, an increase of $16 9 million or 143%.
Speaker Change: The increase was primarily driven by a higher number of units sold to a large customer.
Speaker Change: Cost of sale was 11 4 million for the first nine months up to 124, compared with $5 6 million for the same period of 2023.
Speaker Change: The increase was primarily related to high yourselves in the 2024 period.
Speaker Change: Profit was $17 3 million or 16, 3% of revenue and this compares with $6 2 million or 52, 6% of revenues for the first nine months of two thoughts around 23.
Speaker Change: The increase was primarily driven by a hard number of units sold in the 2020 for a period.
Speaker Change: We expect gross margin to continue to be in the 60% level for the fourth quarter of 2024.
Speaker Change: Selling and marketing expense was $3 6 million for the first nine months of 2024 down from 5 million a year ago. The difference was primarily attributable to a declining marketing agency expense from an expense and lower head count.
Speaker Change: General and administrative expense was $4 7 million for the nine months ended September 32024, compared with $4 2 million a year ago.
Speaker Change: The increase was primarily due to higher compensation and bad debt expenses, which were offset by a reduction in bank fees and insurance expenses.
Speaker Change: Where is your home development expense was $2 7 million for the nine months ended September 32024, compared with 3 million in the prior year period.
Speaker Change: The decrease was primarily due to expenses related to a project to develop a drug delivery system for aesthetics oops.
Speaker Change: Other income of <unk> 7 million and <unk> 8 million for the nine months ended September 32000, and play Board entered I can I'm twenty-three, respectively relates primarily to interest income.
Net income for the first nine months of 2024 was $5 1 million or 31 cents per diluted share compared with a net loss of $3 7 million or a loss of 23 per share for the year ago period.
Speaker Change: Adjusted EBITDA for the first nine months of 2024 was $6 7 million compared with negative $5 4 million for the first nine months after it oftentimes plenty for.
Speaker Change: As with Q3, the year to date improvement in adjusted EBITA was truly impressive with a swing of more than 12 million.
Speaker Change: Turning now to our balance sheet.
Speaker Change: Cash and cash equivalents were $22 6 million as of September 32024 versus $23 1 million at December 31, two vessel in 'twenty, three and we had no outstanding borrowings under our revolving credit line, we maintain a strong balance sheet to take advantage of the companion walkable communities.
Speaker Change: We may come across all create and our touch and continues to be very focused on highly disciplined.
Accounts receivables was 17 million as of September 32024, compared with $11 6 million as of December 31, 2923.
Speaker Change: As of today, approximately 8 million of those receivable have been collected.
Speaker Change: Total inventories worth 12 billion, which is consistent with $11 9 million as of December 31, 2023.
Speaker Change: We continue to maintain a healthy inventory level to meet the expected demand for the direct sales and four placements on the deferred deal agreement.
Speaker Change: A final comment please see the tables in our news release, we issued earlier. This afternoon for a reconciliation of GAAP to non-GAAP financial measures with that I'll turn the call back to Joe.
Joe Giordano: Thanks, Michael and Javier we continue to be very excited about the future of senses says we are transforming our company into an industry powerhouse our financial results certainly reflect our hard work to date to provide multiple options to our customers of course, we wouldn't be successful if our products.
Joe Giordano: Didn't work with reliable precision or meet important needs in the marketplace.
Joe Giordano: Our fair deal agreement would not be possible without our powerful Sentinel software. This is our HIPAA compliant software with clinical billing and asset management utility that also allows us to track utilization in real time. This technology is ideal for better managing dermatology clinics for all of our customers.
Joe Giordano: <unk> and its proprietary to sensus, we believe the software is an extremely valuable asset and is well protected by a host of patents in the meantime, I'll remind you that our products offer excellent solutions for treating non melanoma skin cancer in keloid scars and I'm deeply grateful to the talented team we have here at <unk>.
Joe Giordano: As for their dedication to making sure the benefits of our products are available to as many people as possible.
Joe Giordano: And indeed, many people will need our products and estimated one in five Americans will develop skin cancer during their lifetime, representing some 17 million people, so whether Medicare or private insurance. We are in early stages of tapping the enormous opportunity for SRT, just the non melanoma skin cancer and <unk>.
Eloise and with those comments I. Thank you for your time and attention and now operator, we're ready to take questions.
Speaker Change: We will now begin the question and answer session 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.
Speaker Change: Any time your question has been addressed and you would like to withdraw your question. Please press Star then two once again. It is star then one to ask a question.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from Jason <unk> with Roth. Please go ahead.
Speaker Change: Hi, Thanks for taking the questions first off with the per deal agreement with platinum Dermatology partners.
You mentioned there would be a few this year.
Speaker Change: The remaining I don't know if there is a remaining 130, but does that also imply that you're levered.
Speaker Change: Youll be signing contracts for the.
Speaker Change: Remaining 30 clinics or and how might that cascade.
Speaker Change: Into 2025.
Thanks, Jason for the question.
Speaker Change: First of all the contract that we have with them covers their 130 sites. So we don't have to sign any more contracts. It's one blanket contract for the 130 sites.
Speaker Change: We naturally have to do surveys at various sites.
Speaker Change: Immediately to install.
Speaker Change: Physicians and clinics that want this unit as quickly as they possibly can get their hands on so we're going to work as hard as we can to fulfill as many requests says they have that will probably take us into well into next year with consistent.
Speaker Change: Requests for adding additional additional products. So I think it's going to be an ongoing process as we continue to add resources to expand.
Speaker Change: A lot of the facilities that they have and to meet the requirements that they had at each one of their sites.
Speaker Change: Okay. So that means that probably went into the year. All 130 sites should basically be on the fair deal arrangement.
Speaker Change: It's all under the fair deal arrangement now and the potential is 130 sites.
Speaker Change: But you know we have to install them one at a time or in groups at one at a time and there's training that goes on there is construction that goes on so it has to be very well planned out and systematic.
Speaker Change: Okay. Thanks, Thanks for the color on that and then you mentioned your largest customer contributed this quarter what percentage of placements are related to your largest customer.
Speaker Change: They represent about 50%.
Speaker Change: Great I'll jump back in queue. Thank you very much.
Speaker Change: Jason.
Speaker Change: The next question comes from Anthony Vendetti with Maxim. Please go ahead.
Anthony Vendetti: Thank you good afternoon.
Speaker Change: Just on the obviously platinum dermatology has been been a longtime customer.
Speaker Change: And it's a great relationship that you have there 130 clinics as you pointed out.
Speaker Change: On the fair deal agreement, which covers all 130 clinics have they indicated and I know you said more of it will be.
Speaker Change: In the second half of 'twenty, five but have they indicated.
Speaker Change: How many systems, they're intending to buy or not buy but intending to.
Speaker Change: Procure under the fair deal agreement in 'twenty five.
Speaker Change: And any color you can add on that would be helpful. Thanks.
Sure Anthony Thanks again.
Speaker Change: It was funny. It was you were going through the process in developing this agreement as conversations continued we were targeting a certain number of units to be part of the agreement and they requested and quite frankly demanded that they didn't want to be limited to that number that they wanted it open for all 103.
Speaker Change: 30 sites that they currently have so it gave them the option to put a unit in quite frankly to all of these units. So we were very happy to hear that that they are aggressively pursuing this is that practical to happen right away, it's going to take time, but we will get there.
Speaker Change: And keep in mind that they are progressing as well, they're continuing to buy clinics all over the country and in particular in the zones and the and the areas of the country that they're in right now so they're only going to add to that but that's pretty much what the agreement calls for.
Speaker Change: It's up to their prerogative to put in as many as they as they want as many as they can and we're ready to do it and they wanted an open for all 130 sites. They didnt want it limited.
Speaker Change: Okay, Great no that's helpful and it most likely though.
Speaker Change: Most likely wouldnt be more than one per site is that true and then in terms of other large dermatology practices.
Speaker Change: Are you in in any negotiations with other groups similar in size to platinum dermatology.
Speaker Change: There is about 12 to 15 of these companies that are private equity sponsored been back and I will tell you that we have several that are reviewing the contracts.
Speaker Change: Okay great.
Speaker Change: And then and then maybe this is for Michael but on the international front.
Speaker Change: How are you going how are you pursuing.
Speaker Change: Demand in.
Speaker Change: In the international market. How are you is it is it.
Speaker Change: Hi.
Speaker Change: It's mostly through distributors, but.
Speaker Change: You're making the fair deal agreement available there at all or is that always on a transfer price basis, Hey, how are you. Thanks for the question no. So the fair deal agreement will not be offered internationally at least for the time being I'm not going to say that will never offer. It you never know, but for right now it's mainly through distributors in fact, we just.
Speaker Change: Had a major conference in Vietnam.
Speaker Change: A week ago actually and.
Speaker Change: Great Great interest there again more distributors, it's expanding into the larger you know southeast Asia territory. As you May remember in Q2, we shipped our first ever vision I G SRT system to Taiwan, and that's creating a lot of buyers and a lot of interest in other major hospitals in areas like Vietnam Laos.
Speaker Change: Cambodia, So we're really really excited for all of that buzz and muscle.
Speaker Change: Well see where it goes.
Speaker Change: Okay, Great and then maybe Joe just a quick comment on.
Joe Giordano: It's traditionally the summer quarter, which just concluded September 30th is the quietest quarter.
Joe Giordano: For the industry in general what would you attribute it to.
Joe Giordano: To the you know the outperformance from Sensus.
Joe Giordano: Is it mostly related to <unk>.
Joe Giordano: The platinum dermatology.
Joe Giordano: The deal or or.
Speaker Change: What else would you contribute to attribute to the to the better quarter than expected.
Speaker Change: Well you know, it's a better quarter than we've had another third quarters, but keep in mind its still wasn't as good as our second quarter. So we did see seasonality into it but quite frankly, the third quarter didn't recognize any contribution from the platinum deal. So that's yet to come but.
Speaker Change: The SBA agreements, we're going to see as we get into as we install more and more of these units were starting to see revenues from the installations that we have that are related to F. D. A we're starting to see increases of volumes patient volumes from month to month and as I stated before I think that we'll see.
Speaker Change: See more significant revenues being accounted for in the second half of 2025, as we continue to install more and more machines volumes continue to increase in revenues begin to increase so I think that that will continue to grow and I think were really trending well as far as the existing installations and as.
Speaker Change: We keep adding more and more installations as the as we come close to the end of the year and then we're going to have a very heavy schedule of installations in the first half of next year as well.
Speaker Change: Okay, great. Thanks for all that color I'll hop back in the queue I appreciate it. Thank you. Thank you.
Speaker Change: The next question comes from Iliad, Zubkov with Freedom broker. Please go ahead.
Speaker Change: Hi, good afternoon, and thank you for taking my question. So my first question is on the fair deal agreement with platinum.
Speaker Change: I'm curious.
Speaker Change: So 130 clinics is quite a lot and that's great.
If you have a few more or just like D. A.
Speaker Change: Section capacity would be enough to.
Speaker Change: Serve it.
Speaker Change: That's a good question and yes, we do have the capacity to be able to install units and keeping in mind that.
Speaker Change: Like I said before there's about 12 to 15 of these companies that have anywhere between 104 hundred centers. So we're capable of handling the volume that they're going to give us.
Speaker Change: Not something where youre going to install 20 of these systems in one month, because it has to be systematic.
Speaker Change: Medically installed with training construction.
And all of these things that have to go on so it takes a lot more planning in order to get a lot of these machines in there, but we'll get into a solid rhythm once all of these potential orders start coming in we will be able to adapt we're not worried about that we can manufacture whatever we need we currently have enough.
Speaker Change: Enough inventory to cover us for all of 2025, and we're preparing orders for for more orders in 2025, which will be delivered in the second half of this year and again going into 2026, so I'm very very comfortable with our capability of manufacturing that's number one.
Speaker Change: I think that the the second question that you had was.
Speaker Change: Regarding pretty much the same.
Speaker Change: <unk>.
Speaker Change: So we want to get more of these companies signed up to US I think that they recognize that we're a very good partner to be working with they recognize that our agreements are very compatible with their philosophy of doing business and so I think the reason why we branded it as the fair deal agreement.
Speaker Change: Is that it is it's a fair deal agreement, that's fair for us as well as fair to them.
Speaker Change: Greg you've already answered my second question. So thank you very much. Thank you.
Speaker Change: A fever.
Speaker Change: The next question comes from Jade Montgomery with H C. Wainwright. Please go ahead.
E Chen: Hi, Thanks for taking my question I'm, I'm, sorry E Chen from H C Wainwright.
E Chen: So with moving into 2020 five could you provide any comment of the target number of system shipped to the target number of fairy tale agreements you expected late next year.
Speaker Change: As many as we possibly can.
Speaker Change: [laughter] I mean, we really don't provide guidance, but.
We always attempt to get as much as we possibly can I think that.
Speaker Change: The interest is going to continue to increase as we continue to work with companies.
Speaker Change: And groups like a platinum.
Speaker Change: I think that we have a very very good contract I think we have an excellent technology.
We provide the software to that technology that allows them to be able to manage the assets themselves are as well as to be able to control the patient data the building and so on so we give them all the tools that they need to have a very successful installation and practice surrounding SRT and and skin cancer and keywords.
Speaker Change: It's a I think it will catch on and.
Speaker Change: Hopefully, we can turn it into an epidemic pardon me for using that word.
Speaker Change: [laughter], well hopefully better epidemic than last time.
Speaker Change: We hope so yes.
Speaker Change: [laughter] and also I may have missed this but given the deal with platinum dermatology, obviously that doesn't affect the third quarter of adults.
Speaker Change: But will that affect sales for this quarter and also just in general do you expect the sales of this fourth quarter to again exceed what you had last year.
Speaker Change: Well keep in mind that the FDA agreement doesn't impact sales numbers, because it's not a sale. It's a recurring revenue and we can only count on the revenue that we receive from treating each one of the patients. So it's not going to be a big bulk.
Speaker Change: Payment or revenue that we can count like a $500000 sale, but over time it will compound itself into very significant numbers for us and we see those significant numbers being very very apparent to us when we get into the second half of 2025.
Speaker Change: In the meantime, we will continue to sell product, we still have customers out there that want to buy the product. They don't want to share revenue with anybody because they feel that they want to keep all the revenue to themselves, which is fine we have.
Speaker Change: Uh huh.
Speaker Change: Leasing products that they can enter into which they are so we're excited to be able to provide our customers with every opportunity to acquire any of the products that we sell.
Speaker Change: Any way that they want to achieve it.
Speaker Change: Alright. Thank you so much for answering my questions. Thank you Jay.
Speaker Change: And that's it for all the questions. We have for today I would like to turn the conference back over to Joe Sardana for any closing remarks.
Joe Sardana: Thank you. Thank you everyone for being on the call today and thanks once again for your time this afternoon and for your interest in Sensus healthcare, we plan to conduct virtual one on one meetings with the investment community in the coming days and weeks. Please contact Alliance advisors IR, formerly <unk>, our investor relations firm to request the meeting.
Joe Sardana: And in particular Kim goal of this we will speak with you again, when we report fourth quarter financial results in February in the meantime, thanks again for joining us today.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].