Good day, and welcome to the American Shared Hospital Services Second Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Kirin Smith, Investor Relations. Please go ahead.

Thank you, Dave, and thank you, everyone, for joining us today. AMS' second quarter 2024 earnings press release was issued today after the market closed. If you need a copy, it can be accessed on the company's website at www.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 3-month period ended March 31, 2024, the annual report on Form 10-K for the year ended December 31, 2023, and the definitive proxy statement for the Annual Meeting of Shareholders that was held on June 25, 2024. The company assumes no obligation to update the information contained in this conference call. Before I turn the call over to Ray, I would like to remind everyone about our Q&A Policy. That we provide each participant the time to ask one question and one follow-up. As always, we will 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 and CEO. Ray, please go ahead.

Thank you, Kirin. Good afternoon, everyone. Thank you for joining us today for our second quarter 2024 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 second quarter results. Following the prepared remarks, we'll open the call for your questions. Now on to the quarterly results. We're very pleased to report that AMS had a strong second quarter and we're extremely excited about the upcoming year. We continue to show market improvement and advancement in several important ways. The quarter showcased an extremely nice early benefit from the Rhode Island acquisition that we closed just this past May with an immediate gain of $4.9 million pretax. This gain reflects the value of the net assets we acquired in excess of the purchase price we paid. I've often discussed that we are fortunate to have a robust balance sheet with significant capital to deploy for strategic initiatives and business opportunities that we come across. The Rhode Island acquisition is a great example of how we deployed approximately $3 million and we're able to strategically acquire fair market value assets worth approximately $8 million. This was clearly an excellent allocation of our capital. The team continues to focus on strengthening our core business by working with customers to increase utilization of the equipment. This focused strategy led to the signing of 5 lease extensions in the last 15 months from our 10 domestic Gamma Knife customers with others still in the pipeline. We believe these extended agreements are a testament to our partnership business model and financial flexibility. Our international retail results are also showing continued momentum. In the second quarter, we saw volumes increase following our completed equipment upgrade in Ecuador to…

Thank you, Ray, and good afternoon, everyone. Second quarter revenue increased 27% to $7.1 million compared to $5.7 million in the year ago quarter. As previously discussed, we redefined our business segments to better reflect our revenue sources. Rental revenue from the company's medical equipment leasing segment, which we now refer to as leasing, was $3.9 million for the second quarter of 2024 compared to $4.81 million in the year ago quarter, a decrease of 19%. Revenue from the company's direct patient services or retail segment was $3.16 million for the second quarter ended June 30, 2024, compared to 756,000 for the year ago quarter, marking an increase of 318%. This increase was due to the acquisition in Rhode Island and increased volumes at our existing retail locations. Additionally, the upgrade of the equipment in Ecuador added capacity, improved patient experience and volume, and the Peru revenues increased due to promotion of the center throughout the country. Second quarter revenue for the company's proton therapy system in Florida was $2.42 million, a decrease of 5%, primarily due to continued cyclical volume changes. Total proton therapy fractions in the second quarter were 1236 compared to 1370 proton therapy fractions in the second quarter of 2023, a 10% decrease due to normal cyclical fluctuations. Total Gamma Knife procedures revenue decreased 9% to $2.74 million due to a decrease in revenues from two expired contracts but was nearly offset by high volume in our international locations. To put this in perspective, total Gamma Knife procedures were 340 for the second quarter compared to 309 in the second quarter a year ago. However, excluding the two customer contracts that expired, Gamma Knife procedures increased by 65 or 24% for the second quarter of 2024. Gross margin for the second quarter of 2024 decreased 2%…

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Marla Marin with Zacks. Please go ahead.

So one question. So I just wanted to confirm a couple of things. As you continue to explore opportunities to grow the direct business, you're also continuing to pursue additional opportunities on the leasing side of the business. And along with that, once you begin to upgrade the equipment at Sacred Heart, should we anticipate that there will be service interruptions there that will fall into 3Q and potentially 4Q as well? Thank you.

Thank you, Marla, for your question. I appreciate it. We have been focusing on both of our segments, the leasing segment, where we lease our equipment and the retail segment where we own and operate substantially majority control of our own centers that provide the services to the patients directly and our centers that bill the patients or the patients' insurance company. We are pursuing both segments, but I think you can tell from the Rhode Island acquisition and the opening of our operation in Puebla, Mexico and the signing of a new center in Guadalajara, Mexico that our focus and the business opportunities we're signing up are more in the retail segment. So we're looking very favorably towards that retail segment in our business model.

Thank you. And in terms of any downtime at the Sacred Heart venue?

I'm not at liberty to discuss any individual site.

Our next question comes from Tony Kamin with Eastwood Partners. Please go ahead.

Hi, Ray. Question just for clarification, the acquisition of Rhode Island, I think, concluded in the first or second week of May. So this quarter that you just reported didn't include a full 3 months. Is that correct?

That is correct.

Okay. So that's great. And then, in terms of maybe your early learning, if any yet, I know it's very early but having this direct relationship, are you guys learning something from it? And I'm asking that also specifically in relation to the projected proton beam in Rhode Island. You applied for the certificate. Has the timeline of that changed any from the last call?

The timeline for the CON application, we continue to have delays in scheduling the hearing for the CON, but it is looking like it's getting closer to have a hearing on the CON. And we really don't expect any negative feedback from that process. What we have been learning, we're always learning but we do have a very experienced team, myself, Craig, and Greg Mercurio, who is our Senior Vice President of Radiation Oncology, he's not on the call here today but we probably each have three decades or more of experience owning and operating such centers in one such form or another, each situation is unique, and you're going to learn from it. So we are experiencing a learning curve. But we've got great team of individuals that I'd say are very confident in owning and operating these centers and making them successful. And here we are, we made this acquisition, and it was from a bankruptcy process, and we benefited from that process. And when you make acquisitions, a lot of times you value the assets. And the value of the assets is less than your purchase price and you wind up recording some goodwill on your books. Here, it's just the opposite. We paid about $3 million approximately. And we acquired assets with a fair market value of about $8 million, 4.9 million, whatever the number is here approximately, gain on that acquisition and it's just remarkable, and not only have we been able to process that gain, 3.7 million after tax. But now we have three really good radiation therapy cancer centers in the state of Rhode Island that I think you'll see the benefits of owning and operating those in the coming quarters.

It's really exciting as a long-time shareholder to see so much sort of momentum and different projects going on. I can't quite recall a time when that was the case. So in that light, sort of my final question and although don't want to slip one comment in there. Are you doing more marketing or changing the marketing for the Rhode Island centers? And then my last question is, there's a quote from Craig in the news release saying we have continued to see a significant increase and the breadth of opportunities for consideration. Our sales pipeline remains extremely strong with additional projects. Is there any sort of further color you can give on that? Thank you.

Well, we're keeping our eyes and ears, I'll say close to the marketplace. The result of it was Rhode Island. I mean we came across this opportunity by keeping our eyes and ears close to the market on the ground, what's going on and what opportunities exist out there. And we took a little bit of a step back when Peter Gaccione, our CEO, passed away earlier this year, but we've regained. We've kind of strengthened our management team and some of the duties and responsibilities, and we've got a good team of people pursuing these opportunities. And it's probably a bigger, better pipeline than we've ever had.

This concludes our question-and-answer session. I would like to turn the conference back over to Ray Stachowiak for any closing remarks.

Okay. Thank you, Dave, and thank you for everyone who joined us today. We're really excited about our future. We believe that AMS is at a critical inflection point, especially following the recent Rhode Island acquisition. We look forward to updating you on our continued progress. And as always, if you have any questions in the meantime, please do not hesitate to contact us directly. Thank you for your continued interest in American Shared Hospital Services.

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