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.

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. 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?

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.

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…

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…

[Operator Instructions] The first question today comes from Tony Kamin with Eastwood Partners. Please go ahead.

Sure. Hello. I'd just I guess first, just like to echo the statements you made on Dr. Bates. He was really an exceptional person and a great loss. My first question is, Ray I noticed last year on the full year results, both the Proton Beam business was, I think, $10.1 million in revenue, the Gamma Knife, just a little bit higher. So on one proton beam, you're basically showing pretty equivalent revenues to the whole gamma knife operation. So I was glad to hear in your intro that the company is considering doing looking for potentially wholly owned proton beams to kind of get that side of the business going. Can you talk a little more about that and what you see as the potential opportunity? And anymore color on the proton beam side would be great.

Sure. That's a very good observation, Tony, and thanks for joining us again today. I appreciate it. But yes, we are very consciously pursuing proton beam opportunities, not necessarily on a leasing arrangement like the revenue sharing model we have currently with Orlando Health, but instead where we would own and operate our own proton beam centers, we would invite participation under that business model the local healthcare 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 just opens up a whole greater universe of opportunities for us to pursue and owning and operating and having majority control ownership of a proton beam radiation therapy center is in our business model. We're pursuing those opportunities Tony.

We have not pursued anything other than these opportunities in Rhode Island with GenesisCare. We've developed very good local management and knowledge of capabilities in Rhode Island. And we're kind of, I'll say, taking one step at a time for the moment.

Fair enough. Thanks very much.

[Operator Instructions] The next question comes from Michael Cooper a Private Investor. Please go ahead.

Good afternoon. And I echo the sentiments around Dr. Bates. It's unfortunate to see his passing. My question is with regard to Rhode Island. Could you clarify 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 equipment, which I'm assuming is $5 million per location in and around that type of quantum and they've got 70 customers a day coming in for procedures I believe. And if I read it correctly, a procedure is worth about $6,000. I could be off there. But I think that's the average procedure fee that you're getting right now. So am I working with the right type of numbers on the daily revenue, maybe $400,000 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?

Tony or Michael rather, thanks for your question. 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 an appropriate amount per patient and keep in mind, those patients might get anywhere from 10 to 30 treatments for their radiation treatment of cancer. So the 70 patients, 70 a day is more of a treatment number. Do you follow my train of thought there?

Yes, yes.

Okay. So I can't comment. I mean, I'm sure our investors, their appetite is whetted a bit. I can make some general comments that we do expect revenue from these three centers to be in the $9 million or $10 million 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 it for the 2024 because we're only going to have eight and a half months maybe of revenue in 2024 of that $9 million 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, but I can't go much further than that. I can say that two of the three centers have really good equipment, a 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 too much.

That's very helpful.

Okay.

And as a followup, could we get a little bit of color on the revenue potential of Pueblo, Mexico, as well as the increase in Ecuador from the equipment upgrade?

I can't talk too much about individual situations. I can tell you that in the case of Pueblo, I would expect at least $1 million of incremental revenue from this new revenue stream in the first twelve-month period. And once again, we will not have that full year effect in 2024. It will come on in 2025 for a full year. We're expected to treat our first patient in May of 2024. In Ecuador I think we'll see some increases from that account, but I can't comment too much individually. Is that 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 Stachowiak for any closing remarks.

Yes, I think one point I'd like to make is the Rhode Island acquisition is an increase in our future revenue almost immediately. When we close on the transaction, we'll start recognizing revenue on the first day thereafter the close and this is an important distinction. If you look at our situation in Pueblo, we're owning and operating 85% ownership, and we agreed to this arrangement in late 2022, and our revenue stream from that situation is not coming on until the second quarter of 2024. So 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 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 AMS is at an inflection point. We're excited about the future and I hope you all stay tuned. We'll speak with you next on our first quarter call in mid-May and please contact us directly if you have any questions before then. Be well and stay safe. Thanks for your time today. Goodbye.

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