American Shared Hospital Services Q1 2023 Earnings Call Transcript

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May 12, 2023

There are 5 speakers on the call.

Operator

Good morning, and welcome to the American Shared Hospital Services First Quarter 2023 Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I will now like to turn the conference over to Stephanie Prince from PCG Advisory.

Operator

Please go ahead.

Speaker 1

Thank you, Anthony, and thank you to everyone joining us today. AMS' Q1 2023 earnings press release Issued this morning before the market opened. If you need a copy, it can be accessed on the company's website at ashs.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 Private Securities Litigation Reform Act of 1995.

Speaker 1

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 SEC. This includes the company's annual report on Form 10 ks for the year ended December 31, 2022, and the definitive proxy statement for the Annual Meeting of Shareholders to be held on June 20, 2023. The company assumes no obligation to update the information contained in this conference call. I would now like to turn the call over to Ray Stachowiak, Executive Chairman of AMS. Ray?

Speaker 2

Thank you, Stephanie, and good morning, everyone. Thanks for joining us today for our 1st Quarter 2023 Earnings Conference Call. I will begin with some opening remarks And then turn the call over to Peter Gazzioni, American Share's recently appointed Chief Executive Officer. Bob Hyatt, our new Chief Financial Officer, will then give a financial review of our Q1 results. Following the prepared remarks, we'll open the call for your questions.

Speaker 2

Today, I'd like to start off by focusing on the expansion of our team over the last 12 months. In my mind, these are some of the final steps to be put in place And the turnaround that we've undertaken at AMS during the past couple of years. Most recently, Bob Hyatt joined our team as our Chief Financial Officer in April. Bob is a seasoned financial executive Who has served as CFO at both public and private companies. I believe he will make Significant contributions to our growth.

Speaker 2

In the past 12 months, we've also added our new CEO, Peter Gascioni, a very well respected executive in our industry. We also added Tim Kiel As our Vice President of Domestic Sales and Business Development and Ranjit Pradham as our new in house customer advocate. He is in charge of growing our current client relationships. Ernie Bates continues to flourish In developing our international opportunities, in his continuing role as Vice President of International Sales And business development. Craig Tagawa, our President, continues to provide very valuable contributions in the structuring and negotiation of our future orders.

Speaker 2

While these investments have currently added to our These investments have begun to pay off with our sales pipeline now full with numerous possibilities that are working their way through the complex sales cycle required for our product offerings. During the Q1, we received the approvals we are waiting for to place the upgraded Gamma Knife Icon in Ecuador As well as the approval for the new Linear Accelerator or LINAC for our new cancer center joint venture in Puebla, Mexico. The installation of this new Linac has already begun, and we're excited at the We continue to generate Strong positive cash flow during the Q1 despite its challenges. We ended the quarter with $13,200,000 in cash, Roughly equivalent to $2.03 per share. If we subtract that $2.03 From our recent stock price of $2.80 a share, it sure seems to me that it greatly undervalues All of our other tangible assets.

Speaker 2

Looking ahead, with stronger international growth on Horizon, The numerous new contract possibilities domestically and a strong financial position, We're confident that AMS is poised for new growth. I'll now turn the call over to Peter.

Speaker 3

Thank you, Ray, and good morning, everyone. Since our last conference call, our sales and customer support teams have been very active. Internationally, we've been working hard in both Peru and Ecuador to increase education and marketing to our referring physicians. We have a large network and as we've expanded our customer support teams, We've improved communications with them all. This includes informing all of our referring physicians Zumz will provide several additional treatment capabilities for patients, including faster treatment times, frameless treatments, Advanced onboard CT imaging with same day imaging and treatment and allow for remote treatment planning and approval.

Speaker 3

All of these changes will improve the patient's treatment experience, increase departmental workflow And also the important relationship that we have with our physician referral network. In Ecuador, As Ray said, we now have received the required permits to upgrade the current Gamma Knife 4C to the Gamma Knife Icon And we're scheduled for delivery and installation in July August 2023. We are also on track at Pueblo, Mexico, The new Linac with VMAT, image guided radiation and radio surgery was delivered to the site last week And the mechanical equipment installation has already begun as planned. We're excited about the Q3 start up of both advanced systems. In the U.

Speaker 3

S, our recently appointed customer advocate has been working diligently with many of our sites to see how to increase patient volumes. We believe that the solution is a combination of increased marketing As well as possible equipment upgrades to bring in new treatment capabilities at some sites, which also means that our agreements will be extended. This is what our 2nd order of the year is. As Ray mentioned, a 5 year agreement extension with an equipment upgrade to the newest Gamma Knife ESPRIT. The ESPRIT will provide additional treatment capabilities for patients to improve the patient treatment experience, including faster treatment times, and we expect that patient volume will increase as a result.

Speaker 3

It will be the first Esprits in the U. S. When it is installed in the Q4. In addition, our first order of the year is scheduled to begin installation in September 2023 as planned. Broadly, sales activity is very strong with a number of projects moving through our sales pipeline.

Speaker 3

This includes the 2 orders that we've already announced this year. This activity includes Gamma Knife projects worldwide, including the U. S. With MR Linacs and Proton Beam Radiation Therapy Centers as well. In addition, given U.

Speaker 3

S. Market trends that point to more consolidation of cancer centers, American Share is becoming more involved in discussions for U. S. Cancer center acquisitions, Joint ventures and other creative turnkey financial models, similar to some of our past successes. Although we cannot disclose any further information due to confidentiality agreements, but the point is that these are new and additional projects that have been recently added to our already increasing sales funnel.

Speaker 3

We've also greatly increased our social media presence on our 4 major platforms. And I believe that this increased marketing and the expanded visibility of American Share's Unique value proposition is driving a large part of this interest. As a reminder, American Share's unique position provides clinical cancer treatment centers the opportunity to partner with all the major Original equipment manufacturers through one turnkey vendor in one creative relationship. American Share now has multiple opportunities for growth and with our newly expanded team and deep financial resources, We intend to become actively involved in many of them. I'll now turn the call over to Bob for a financial overview.

Speaker 4

Thank you, Peter, and good morning, everyone. 1st quarter revenue increased 1.6% to $4,900,000 compared to $4,800,000 in the year ago period. 1st quarter revenue for the Proton Therapy System in Florida increased 13.5 percent to $2,300,000 compared to $2,000,000 primarily due to higher average reimbursement period over period for the current quarter. Total proton therapy fractions in the Q1 were 1536, a decline of 5.7 percent or 92 fractions compared to 1628 in the Q1 last year. Total Gamma Knife revenue decreased 7% to $2,600,000 compared to $2,800,000 in last year's Domestic Gamma Knife revenue declined 8.9 percent to $1,900,000 and international revenue decreased 1.4 percent to 0 point $7,000,000 period over period.

Speaker 4

The decline in overall Gamma Knife revenue was due to a decrease in procedures, partially offset by an increase in average reimbursement. The increase in average reimbursement continues to be driven by a favorable shift in payer mix to more commercial payers. Total Gamma Knife procedures decreased by 10.9 percent to 293 for the Q1 of 2023 from 329 in the first quarter of 2022, also within the range of normal cyclical fluctuations. Gamma Knife domestic procedures declined 15% 216 and international procedures increased 2.7 percent to 77% for the Q1 of 2023 compared to 2022. As Peter mentioned, our new customer advocate has been working to increase customer utilization, and we expect additional international growth with the Approval is now in place for the ICON upgrade with advanced treatment capabilities at our Gamma Knife Cancer Center in Ecuador And for the new linear accelerator or LINAC for our new cancer center joint venture in Puebla, Mexico.

Speaker 4

Both are expected to be in place in treating patients in the Q3 of this year. Gross margin for the Q1 decreased 7.7 percent to $1,900,000 or 38.7 percent of revenue compared to gross margin of $2,100,000 or 42.6 percent of revenue for the Q1 of 2022. Selling and administrative Costs increased by 16.7 percent to $1,500,000 for the Q1 compared to $1,300,000 as we continue to invest in sales and marketing initiatives associated with new business opportunities. Net interest expense increased 184,000 in the 2023 period compared to 148,000 last year, an increase of 24.3% as a result of increases in the interest rate on the company's variable rate debt. Operating income was 98,000 Compared to operating income of $600,000 in the Q1 of 2022, a decrease of 83.7%.

Speaker 4

This reflects higher operating costs and selling and administrative expenses. Income tax expense decreased 67% to $68,000 for the Q1 of 2023 compared to $206,000 for the Q1 last year. The period over period decrease was primarily due to lower earnings in the current period and return to provision adjustments arising from foreign tax returns as well as permanent domestic tax differences in the prior year. Net income attributable to American Shared Hospital Services in the Q1 of 2023 was $188,000 or $0.03 per diluted share compared to net income of 269,000 or $0.04 per diluted share for the Q1 of 2022. The decrease was primarily due to higher interest expense And higher selling and administrative expenses I discussed.

Speaker 4

Fully diluted weighted average Common shares outstanding were $6,472,000 $6,299,000 for the Q1 of 2023 in 2022, respectively. Adjusted EBITDA, a non GAAP financial measure, was approximately $1,900,000 in both periods. At March 31, 2023, cash, cash flow equivalents and restricted cash was $13,200,000 an increase of 748,000 since December 31, 2022. Shareholders' equity, Excluding non controlling interest and subsidiaries was $21,900,000 or $3.54 per outstanding share at quarter end compared to $21,600,000 or $3.50 per outstanding share at March 31, 2022. This concludes the formal part of our presentation.

Speaker 4

Thank you for joining us today. We look forward to updating you on our progress in the quarters ahead.

Operator

We will now begin the question and answer It appears there are no questions. This concludes our question and answer session. I would like to turn the conference back over to Ray Stachowiak for any closing remarks.

Speaker 2

Thank you, Anthony, and thank you to everyone who joined us today. I'd like to just make a couple of observations. 1, If you analyze our balance sheet, we got more cash on our balance sheet today than we do interest bearing debt, a bit of a milestone. And most of all, we've assembled a great team. Our management team is well poised, is very experienced to grow our company and reach our goals of same growth and profitability.

Speaker 2

AMS is in the best position it has been for several years. All the pieces it seems like are now in place We're very excited about our future. We look forward to speaking with you again on our Q2 call in mid August.

Operator

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

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Earnings Conference Call
American Shared Hospital Services Q1 2023
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