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American Shared Hospital Services (AMEX:AMS) Q4 2023 Earnings Call Transcript

American Shared Hospital Services (AMEX:AMS) Q4 2023 Earnings Call Transcript March 28, 2024

American Shared Hospital Services isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day and welcome to the American Shared Hospital Services Fourth Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Stephanie Prince of PCG Advisory. Please go ahead.

Stephanie Prince: Thank you Betsy, and thank you to everyone joining us today. AMS' fourth quarter 2023 earnings press release was issued yesterday after the market closed. 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. 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.

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This includes the company's quarterly report on Form 10-Q for the three-month period ended March 31, June 30, and September 30, 2023, the annual report on Form 10-K for the year ended December 31, 2022, and the definitive proxy statement for the Annual Meeting of Shareholders that was held on June 20, 2023. The company assumes no obligation to update the information contained in this conference call. Before I turn the call over to Ray, I'd like remind participants that we're going to limit all questioners to one question and one followup. As always, we'll be happy to take additional questions offline at any time. With that, I'd now like to turn the call over to Ray Stachowiak, Executive Chairman. Ray?

Raymond Stachowiak: Thank you, Stephanie, and good day to everyone. Thanks for joining us today for our fourth quarter 2023 earnings conference call. I'll begin with some opening remarks and then turn the call over to Bob Hiatt, our Chief Financial Officer for a financial review of the fourth quarter. Following the prepared remarks, we'll open the call for your questions.

Ernest: Personally, I've known Dr. Bates for many years. He invited me to join our Board of American Shared in 2009, and he was a good friend. I know that we're all going to miss him, his wise counsel and his incredible sense of humor. Now I'd like to transition to our results. By almost every measure, AMS 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 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 through our expanded financial solutions and closer integration with our strategic OEMs. 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 well as the expansion of our business model to also consider the development of our own majority owned Proton Beam and radiation oncology centers in the United States. We would own and operate these centers with this expansion of our business model. The team was also responsible for strengthening our core business by 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 up. In the fourth quarter, we completed the equipment upgrade in Ecuador to a new state-of-the-art Gamma Knife ICON. This is the only Gamma Knife in Ecuador for noninvasive radiosurgery. 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 Accelerators, or Linacs, that we installed with VMAT, IGRT and radiosurgery 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 three radiation therapy cancer centers in Rhode Island. Importantly, these will be our first direct patient services or retail centers 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 in this 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 quarter, reporting total revenue in the fourth quarter of $5.7 million a year-over-year increase of 13%.

A radiation oncologist supervising the use of radiation therapy equipment to treat a patient.
A radiation oncologist supervising the use of radiation therapy equipment to treat a patient.

Gross margin was $2.8 million, a 24% increase reflecting continued tight control over direct costs and positive operating leverage. The gross margin percentage was a 49% of revenue, a level that hasn't been reached since 2019. We earned $0.06 per share in the fourth quarter despite the headwinds of $350,000 in Rhode Island costs and $362,000 of additional reserves on impaired assets. For the full twelve months of 2023, revenue grew 8% to $21.3 million. Gross margin was $9.3 million, an 11.5% increase. The gross margin percentage was 44%. We earned $0.10 per share despite Rhode Island expenses of $919,000 for the whole year and additional reserves for impaired assets and removal costs of $940,000 for the 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 at the appropriate time.

With that, I'll turn the call over to Bob for a financial overview.

Robert Hiatt: Thank you, Ray and hello everyone. Fourth 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 we'll refer to as leasing going forward, was $4.8 million for the fourth quarter 2023, compared to $4.3 million in the year ago fourth quarter, an increase of 12%. Revenue from the company's direct patient services or retail segment was $913,000 for the fourth quarter ended December 31, 2023, compared to $764,000 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 fractions.

Total proton therapy fractions in the fourth quarter were 1275 compared to 981 proton therapy fractions in the fourth quarter of 2022, an increase of 30% or 294 fractions, which is within the typical quarterly fluctuation range. Total Gamma Knife revenue decreased 8.4% to $2.6 million The decrease in overall Gamma Knife revenue was primarily due to a decrease in procedures from two expired contracts as well as downtime at two sites for the installation of upgraded equipment. Total 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 expired 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 of 2022.

The gross margin percentage 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 23.9% to $1.8 million in the fourth quarter of 2023, compared to $1.4 million in the year ago quarter. This includes approximately $350,000 that we've invested in pursuing new business opportunities, as Ray talked about, as well as higher sales and marketing expenses. Net interest expense was $175,000 in the 2023 period, compared to $192,000 in the comparable period of last year. The decrease is 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 $407,000 compared to operating income of $590,000 in the fourth quarter of 2022, which reflects the higher selling and administrative expenses plus an increase in reserves for impaired assets and removal costs of 362,000 in the current period.

Income tax expense was $338,000 for the fourth quarter of 2023, modestly higher compared to income tax expense of $333,000 for the same period last year. This was primarily due to the higher taxable income offset by permanent tax differences recorded last year. Net income attributable to American Shared Hospital Services in the fourth quarter of 2023 was $415,000, or $0.06 per diluted share, compared to net income of $246,000, or $0.04 per diluted share for the fourth quarter of 2022. Fully diluted weighted average common shares outstanding were 6,552,000 and 6,284,000 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, 2023 cash equivalents and restricted cash was $13.8 million compared to $12.5 million at December 31, 2022. Shareholders equity excluding non-controlling interests in subsidiaries was $22.6 million or $3.59 per outstanding share at year end compared to $21.6 million or $3.50 per outstanding share at December 31, 2022. This concludes the formal part of our presentation. Thank you for joining us today and we look forward to updating you on our progress in the quarters ahead. Betsy, we'd like to turn the call back to you and open it up for questions.

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