American Shared Hospital Services (AMS) on Q1 2021 Results - Earnings Call Transcript
Operator: Good day, and welcome to the American Shared Hospital Services First Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. 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, Andrew and thank you to everyone joining us today. 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.
Ray Stachowiak: Thank you, Stephanie, and good afternoon, everyone. Thanks for joining us today for our first quarter 2021 earnings conference call. I'll begin with some opening remarks, and then Craig Tagawa, our President, COO and CFO will go through the business and operational results. Alexis Wallace, our Chief Accounting Officer, will then provide a financial review. Following that, myself, Craig, Alexis and Ernie Bates, our Senior VP, Sales and Business Development and International Operations, we'll open the call for your questions. Since our year-end conference call just five weeks ago, we announced an important action that's resulted in a stronger balance sheet and is expected to enhance long-term shareholder value. That action that we announced on April 13 was this establishment of a banking relationship with Fifth Third Bank, N.A., the principal subsidiary of Fifth Third Bancorp, a diversified bank holding company headquartered in Cincinnati, Ohio, with over $200 billion in assets. The $22 million credit agreement that we signed with Fifth Third is a milestone in our company's history. It consists of three facilities. A term loan of $9.5 million that refinanced $6.8 million of domestic Gamma Knife debt and additional $1.6 million was used for two Gamma Knife reloads with two customers that had recently extended their agreements. The remaining $1.1 million is available for future projects. The second facility is a $5.5 million term loan that refinance the company’s PBRT equipment debt and also provide additional working capital. This debt was due to mature in the fourth quarter of 2021. The third facility in the credit agreement is a $7 million revolving line of credit, which will be used to increase our flexibility in negotiating future projects and for general corporate purposes. The term loans will deliver significant principal payment reductions, which we estimate at $5.9 million over the next 12 months.
Craig Tagawa: Thank you, Ray, and good afternoon, everyone. In the first quarter, we reported breakeven results on total revenue of approximately $4.4 million, a 4.5% decline compared to first quarter revenue last year, which was the only mostly non-pandemic impacted quarter of the 2020 year. First quarter Gamma Knife revenue rebounded from the pandemic lows and was even with a strong quarter last year. Our Gamma Knife Centers in Peru and Ecuador both contributed a strong first quarter. However, COVID-19 is having a lingering impact on PBRT volumes, and combined with planned maintenance, fractions were down again in the first quarter. First quarter revenue for the company's proton therapy system installed at Orlando Health decreased 8.7%, when compared with the first quarter of 2020, period-over-period higher average reimbursement per fraction helped to partially offset the lower number of fractions. Gamma Knife revenue of $2.9 million was even with the first quarter of 2020, as a decrease in volume was offset by an increase in the average reimbursement rate. Total proton therapy fractions decreased 26.6%, primarily due to the continued impact from COVID-19, compounded by maintenance related downtime. Gamma Knife procedures decreased by 5.6% to 355 for the first quarter from 376 in the same period of last year, the decrease was primarily due to the expiration of a contract in the fourth quarter of 2020 and an additional contract in the first quarter of 2021, offset by the acquisition of GKCE in the second quarter of 2020. Gamma Knife volumes for centers in operation were even with Gamma Knife volumes for those same centers during the same period of the prior year. Gross margin for the current first quarter increased by – increased to 32.9% of revenue compared to gross margin of 30.5% of revenue for the first quarter last year.
Alexis Wallace: Thank you, Craig; and good afternoon, everyone. Before I begin my prepared remarks, I'd like to call your attention to our first quarter earnings press release that was issued early this morning. If you need a copy, it can be accessed on our website at ashs.com at press releases under the investors tab. Now turning to our first quarter results. For the three months ended March 31, 2021, total revenue was $4,364,000 a decrease of 4.5% when compared with $4,568,000 reported for the first quarter of 2020. First quarter revenue for the company's proton therapy system installed at Orlando Health in Florida was $1,531,000, a decrease of 8.7% when compared with the first quarter of 2020. Total proton therapy fractions decreased 26.6% to 1,231 for the three month period ended March 31, 2021 compared to 1,676 for the same period in the prior year. Revenue for the company's Gamma Knife operations was $2,892,000, even when compared with the first quarter of 2020. Gamma Knife procedures decreased by 5.6% to 355 for the first quarter of 2021 from 376 in the same period of the prior year. Gamma Knife volumes for centers in operation were even with Gamma Knife volumes for those same centers during the same period of the prior year. Gross margin for the first quarter of 2021 increased to $1,434,000, or 32.9% of revenue, compared to gross margin of $1,394,000, or 30.5% of revenue, for the first quarter of 2020.
Operator: At this time, we will begin the question-and-answer session. The first question comes from Jeffrey Cohen, a private investor. Please go ahead.
Unidentified Analyst: Hi, this is Jeffrey Cohen. Good morning. I was curious about your revolver and whether you've drawn down at all on it.
Ray Stachowiak: Jeff, thanks for your question. This is Ray Stachowiak. The answer is no, we've not drawn down on our revolver.
Unidentified Analyst: Thank you.
Ray Stachowiak: There is been no need too.
Operator: The next question comes from Lenny Dunn with Mutual Trust Company. Please go ahead.
Lenny Dunn: Good morning. Actually, I have two questions, because obviously growing the top line is preeminent. Other than the one Gamma Knife you discussed, are there others in the pipeline? And part of that question is, I know you wrote-off some, is there possible ability to play some of them, even though they're written-off, if the customer can arrange the right contract with you?
Ray Stachowiak: Lenny, hi, this is Ray. Thanks for your call and welcome back to our quarterly call. We continue to search for locations to place our Gamma Knife, whether there are used systems coming out of old accounts or new situations, new Gamma Knife. I don't have anything to announce today, and – but we continue to prospect and try to move situations along. As we've mentioned in the past, it's a very long sales cycle and these things do take time. But I probably can say that we've got more discussions going on than we have in the recent past.
Lenny Dunn: I would think so with the COVID thing. And also with the proton beam, Mevion has placed some and hospitals are buying outright. But I would think that, there is still a pay for use market out there, and that it's possible to get another one or two of these done. Do you have anything in the pipeline, I'm not asking for specifics?
Ray Stachowiak: We continue our search to find some nice homes for proton beam therapy, primarily in the U.S.
Lenny Dunn: Yes. And then the other question is on the other side of the balance sheet, you still have that expensive office rent, have you made an effort to maybe re-lease that and move to space that makes more sense?
Ray Stachowiak: I can assure you that, yes. We've taken a look at it and are making our best efforts to look at that opportunity. As you know, the office space market is pretty down as you know, under the present set of circumstances.
Lenny Dunn: And when does your lease run to?
Ray Stachowiak: I can't recall. Craig, do you have thoughts on that?
Craig Tagawa: I think there's another three years to go approximately.
Lenny Dunn: Hopefully one of these startups wants expensive space and you can re-lease. Okay, well, that's really – my questions have been answered and I'm hoping that our next conference call we have some results, but patient guy.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Ray Stachowiak for any closing remarks.
Ray Stachowiak: Thanks for joining us today. We're very excited about the future for American Shared. Please feel free to contact us directly if you have any questions, before our next second quarter conference call in mid-August. We all hope that you stay safe and have a great day. Goodbye.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
