Good day, and welcome to the Sensus Healthcare Second Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Tirth Patel with Alliance Advisors IR. Please go ahead.

Good afternoon. This is Turf Patel with Alliance Advisors IR. I'd like to start by apologizing for the press release being issued later than usual as there was a system-wide glitch with our wire service. But thank you all for joining today's call to discuss Sensus Healthcare's second quarter 2025 financial results. Joining me from Sensus are Joe Sardano, Chairman and Chief Executive Officer; Michael Sardano, President and General Counsel; and Javier Rampolla, Chief Financial Officer. As a reminder, some of the matters that will be discussed during today's call contain forward-looking statements within the meaning of federal securities laws. All statements other than historical facts that address activities Sensus Healthcare assumes, plans, expects, believes, intends or anticipates and other similar expressions that will, should or may occur in the future are forward-looking statements. The forward-looking statements are management's beliefs based upon currently available information as of the date of this conference call, August 7, 2025. Sensus Healthcare undertakes no obligation to revise or update any forward-looking statements, except as required by law. All forward-looking statements are subject to risks and uncertainties as described in the company's Forms 10-K, 10-Q and other SEC filings. During today's call, references will be made to certain non-GAAP financial measures. Sensus believes these measures provide useful information for investors, yet they should not be considered as a substitute for GAAP nor should they be viewed as a substitute for operating results determined in accordance with GAAP. A reconciliation of non-GAAP to GAAP results is included in today's financial results news release. With that, I'd like to turn the call over to Joe Sardano. Joe?

Thank you, Tirth. Good afternoon, everyone, and thank you for joining us. As you can see from the financial results we're reporting today, after a very dynamic start to Q2, our second quarter domestic sales momentum was temporarily stalled by a proposed local coverage determination or LCD that would limit the reimbursement of ultrasound when used with our SRT-100 Vision systems. Also, just a few weeks ago, Medicare stepped in with a proposed physician fee schedule that we believe may fundamentally alter demand for our products. Let me explain starting with the LCD. Our SRT-100 Vision combines the treatment power of superficial radiotherapy with image- guided ultrasound to ensure the best possible clinical outcome for patients. When treating non-melanoma skin cancer, it's the only way for a physician and patient to establish a treatment plan to visualize the eradication of the lesion from beginning to end. LCDs are reimbursement decisions made by a Medicare Administrative Contractor, or MAC, regarding whether a particular medical service is considered reasonable and necessary as such, whether it's covered under Medicare within the contractor's geographic jurisdiction. The question arose as to the frequency for which the ultrasound feature should be used. In mid-May, a proposed LCD to limit reimbursement for the use of ultrasound imaging prior to treating skin cancer was made public. It's important to note that in treating other forms of cancer, imaging modalities such as MRI, CT, PET, mass spectrometry or nuclear, they use ultrasound or other imaging devices for every fraction of treatment. With the SRT-100 Vision, Sensus innovated and introduced the same approach for treating non-melanoma skin cancer. This proposed LCD came out of nowhere. Up to that point in Q2, we were on track to surpass expectations, yet we found our market at a pause until there's clarification, which…

Thanks, Joe. During the second quarter, we continued to execute well on our 3-pronged strategy: increase patient awareness for SRT, grow internationally and advance our pipeline. The FDA program has proven to be a key strategic asset, aligning our growth [Audio Gap] boarding, analytics and customer marketing support. We are working with practices to help them increase awareness in their local markets, streamline patient pathways and maximize throughput. On that note, I want to point out that the reason we are able to offer this program is because of our internally developed HIPAA- compliant software platform that we call Sentinel. Sentinel enables our physician customers to store data via the cloud and also allow Sensus engineers to remotely diagnose and fix almost any problem that happens with the device. On the international front, momentum is building and our future is now greatly supported, thanks to the recent MDSAP certification. MDSAP stands for Medical Device Single Audit Program, and this regulatory certification marks a key milestone for Sensus. MDSAP validates the strength of our quality systems and provides us with immediate access to the markets of Brazil, Canada, Japan and Australia. It also enhances our credibility with partners in regions where regulatory rigor is a prerequisite. We are actively working with potential commercial partners that serve those countries and laying the foundation for additional revenue contributions potentially as early as later this year. The 4 systems shipped to China in Q2 represent significant sales growth and is a potential sign of economic strengthening in the territory. Shifting to the domestic market, the proposed Medicare physician fee schedule and the new potential delivery code that Joe mentioned could have a transformative effect on our U.S. commercial strategy. Historically, dermatologists billing for superficial radiotherapy have operated under a separate and lower reimbursement structure compared with the hospital, even when delivering superior therapeutic outcomes. We believe the new outpatient CPT delivery code, if issued, will improve SRT's positioning and allow physicians who have been on the fence to finally commit to offering their patients the nonsurgical choice. With that, I'll turn the call over to Javier for a review of our financial performance. Javier?

Thanks, Michael. Good afternoon, everyone. I will first review our recent financial results, and then I will turn to year-to-date results. Revenues for the second quarter of 2025 were $7.3 million compared with $9.2 million for the second quarter of 2024. The year-over- year decline was primarily due to fewer capital system sales to a large customer, partially offset by growth in the recurring revenue from Fair Deal Agreements. Gross profit was $2.9 million for the second quarter of 2025 compared with $5.4 million for the prior year quarter. Gross margin was 39.7% versus 58.7% a year ago, primarily driven by lower sales and higher cost of service. General and administrative expense was $2 million for the second quarter of 2025 compared with $1.6 million in the second quarter of 2024, reflecting higher professional fees and compensation. Selling and marketing expense was $1.4 million for the second quarter of 2025 compared with $1 million in the second quarter of 2024. The increase was due to higher trade show expenses, higher costs related to clinical studies and higher payroll costs due to an increase in headcount. Research and development expense was $1.5 million for the second quarter of 2025 compared with $0.9 million for the year -- prior year quarter, primarily due to costs associated with ongoing product development and readiness for the anticipated TDI commercialization. Net loss for the second quarter of 2025 was $1 million or $0.06 per share compared with net income of $1.6 million or $0.10 per diluted share for the second quarter of 2024. Adjusted EBITDA for the second quarter of 2025 was negative $1.8 million versus a positive $2.1 million in the year ago quarter, reflecting higher operating expenses and lower revenue. Please see the table in the news release we issued earlier today for…

Thank you, Javier. Thank you, Michael. Sensus is well positioned, and we have a capable staff ready to capitalize on these opportunities. I extend thanks to our team for their continued dedication to our customers for their partnership. Operator, we're now ready to open the line for questions.

[Operator Instructions] Our first question will come from Benjamin Haynor with Lake Street Capital.

On the proposed CMS reimbursement under the physician fee schedule for next year, it does look like the radiation delivery code tripled and the imaging code associated with the image guidance for SRT came down a bit. Is that -- is there any kind of connection there with the LCD and how CMS sees the utilization under the new codes versus how they're currently billed under the -- with the G code for the image guidance?

Yes. Let me let Michael answer that since we're heavily involved with a lot of the lobbying at CMS and so on. So keep in mind that their original letter that came out under the LCD was strictly for the utilization of ultrasound or limiting the utilization of ultrasound because they felt utilizing it for every fraction was too much. They felt that it needed to be used more sparingly. Quite frankly, in the protocols that we use, they are used more sparingly. So Michael, if you want to take that one?

Yes, sure. So the LCD and the proposed physician fee schedule are actually 2 separate items. So the LCD came out first and was a little more bleak than the proposed physician fee schedule. So the LCD, we don't believe will actually take place. We don't believe that it's going to come through due to our lobbying efforts and a few other entities out there lobbying. And it was going after only the ultrasound portion, like Joe just said, it was flagged for overutilization. On the proposed physician fee schedule, however, the proposal is actually -- and I've been with Sensus for close to 15 years since the beginning, and we've been lobbying in general for SRT because we're the company that brought SRT back. And so this is something that on the delivery code side of things that we've been asking for, for literally the entire time, which is when we started the company, it was about 5x more to have a hospital bill SRT than it was an outpatient facility, whether that's derm or radiation oncologists, any outpatient facility got 1/5 of what a hospital got based on just built-in fixed costs essentially, technical components is what they call it in CMS. So what they're doing now is they're actually evening it out. They're bundling a lot of different technical components into SRT in general. And they're going to -- no matter what, if you're in a hospital or in an outpatient facility because they realize now that the vast majority of the close to 1,000 units that we've sold now for the last 15 years are in outpatient facilities, not in hospitals. So with that being said, they realized that they needed to even it out. So we're very, very thrilled to see that the proposal would actually make it like you just said, about a 300-plus percent increase in the delivery code for SRT, which would be pretty amazing.

Okay. So you guys are pleased with the proposed rates. I mean, obviously, you'd be more pleased if they're higher as would anyone. And then just on the LCD, kind of the -- I know you think it probably doesn't end up going through, but did that impact kind of interest on the FDA side? Did it impact treatment volumes, anything of that nature when that did come out, everyone kind of puckers, I imagine.

Yes, everyone kind of just -- what happened is it just a pause because there was no clear path right there as far as whether it was going to happen or not. And the thing is when -- what we've learned over the last 2, 3 months since it's come out because of our lobbying and efforts there is that the ultrasound -- the people that were attacking the ultrasound are not people that actually use SRT, correct? It's just a turf. And what's happening is we have studies out there that show that ultrasound, IGSRT does improve, right, statistically, the cure rate for non-onymous skin cancer. And so we fully believe that IGSRT and SRT are here to stay, and ultrasound will continue to be part of the SRT portfolio of products.

Okay. Got it. And then just looking for an update. I think you're getting close to 1,000 capital sales out there. Is that still kind of on track for about a year from now, up from the 900-ish that you're at now?

I think the way we're going right now and the way Michael described what possibly could happen, which is 1 of 2 things. I think it will accelerate the installation of our units over the next several months once everything is cleared. It's very, very clear that there's 1 of 2 things that will happen. One is that everything will remain the same or status quo, which is what we would like to see. It is what our biggest partner would like to see. But if the second thing happens based on the recommendations of CMS and the reimbursement schedule, which you've adequately described at a 300% increase, it also bodes well for the technology moving ahead as well and for the doctors that are going to get the reimbursement. So we don't see any downside, but we would prefer that we move along the same lines with the status quo, which we think based on our lobbying efforts and the information that we've had over the last 2 to 3 weeks, that we're getting closer to that kind of a decision, although it might be another sometime in the fourth quarter before we understand what that decision is. CMS will take their time on this.

Our next question will come from Anthony Vendetti with Maxim Group.

So I think the -- obviously, hopefully, the -- like you said, the local coverage determination won't go into effect. But in the meantime, I think you mentioned that a large customer has paused purchases. Is that your largest customer? And once this reimbursement issue is clarified, have they indicated, hey, we just need clarification and we're going to move forward? Where does that stand as we speak right now?

Yes. The answer to that, Anthony, is absolutely yes. Customers -- anytime something goes up in the air that causes a question mark, there's always a pause, okay? We've had pause through COVID. We've had pause through other reimbursement issues. We've had pauses through a bunch of other things. And anytime anything in health care is unclear, everybody waits to wait until they have the final verdict as to what's going on. Our customer is committed to IGSRT from Sensus Healthcare. I don't think that there's any other way about it. And I think that if and when this becomes clear that the status quo remains, I think our customers, their customers are going to rapidly want to revamp everything. I don't think anybody is losing interest in IGSRT. I think it continues to remain a hot priority for all of these customers, all the doctors that want to put it in their practice. And I think that we're not going to be losing any customers, but we're going to be scrambling like hell to get deliveries out before the end of the year. And this is all going to be resolved before the end of the year.

Okay. But yes, and obviously, we all know the fourth quarter is always a large quarter in the aesthetic industry and December, particularly try to get -- like you said, try to get those purchases in before the year-end for tax reasons and everything else. But we're in almost the middle of the third quarter. So it seems like this could have a pretty outsized or significant impact in sales for the quarter ending September 30, correct?

It could happen. Yes, it could happen unless, of course, the CMS lets us know early. I mean there's no time line as to when they're going to tell us, but hopefully, earlier, the better, but I can't predict when they're going to say something, but they have to say something soon.

Okay. Okay. And can some of that be offset by -- through China? I know you delivered 4 to China this -- in the second quarter. Those purchases are typically variable. If you delivered 4 in the second quarter, is there a possibility you could deliver more to China this quarter? Or is that unlikely in this quarter?

I would say this, that because of MDSAP, which is the license to sell all of the SRT technologies, not just the SRT-100, which is what we had before with the EU and with China. But with MDSAP, it allows us to sell all of our products, including the Vision product to a whole lot more countries than we had before, including Japan, India, Brazil. Those things would have cost an awful lot of money for us and probably would have happened in another 2 years. And again, Michael was the one who instigated that along with our quality and regulatory people. And so we've been working on something -- we've been working on MDSAP for the last 24 months, and it came to fruition where we met all of the requirements and went through all of the audits very quickly and got the approval. So I would tell you that I think that China will continue to order, but we're looking forward to other orders from other parts of the world.

Okay. Great. And then I guess, lastly, just back to the reimbursement issue. You have the LCD and then you have the proposed physician fee schedule. Let's say -- I know you've been doing some lobby and Michael has been involved in the lobbying for the LCD. But let's say that comes back and it is significantly reduced reimbursement there. What is your -- what's your path forward? Can you appeal it? Or is this like the time period where you -- or once it's made, it's tough to reverse?

Yes. Anthony, let me let Michael answer it, but let me just reiterate. This is strictly focused on ultrasound, focused on one code, not all the codes. It's strictly focused on the ultrasound code. And they just felt they're trying to say that it was used too much. You don't need to use it every fraction, and they're trying to say that, okay? We're trying to go the other way by saying you use MRI, you use CT scanners, you use all this other stuff for every other -- every fraction that you use to treat lung cancer, breast cancer, prostate cancer, all of those things are used on every fraction. Why do you think it needs to be less useful for skin cancer. It's the only device that's able to start and show a treatment plan at the beginning, which is extremely important. And even when you do surgery, if the patient says, show me that you got everything that you got the entire lesion, the doctor says, "Yes, I got it. I tell you I got it all. There's nothing that's visible that shows the patient, except if you use an ultrasound that's on the Vision product. That's the only product that's able to show the patient, look, it's gone. Here it was at the beginning. Here's your treatment, it's gone now. Nothing else exists. Go ahead, Michael.

I hear you...

Yes. To reiterate what Joe was saying, on the LCD side of things, it was really only about parameters of the usage of ultrasound, like Joe said. And the thing is for them, and it was a single organization, I'm not going to name names, that decided to try to fight against it. And they have absolutely no evidence to support their claim that it doesn't help, where, in fact, we, the SRT stakeholders amongst 2 other -- 2 or 3 other entities, have tremendous evidence showing that image guidance on SRT is actually tremendously helpful, both from a clinical study standpoint, including a clinical study that was done at NIH that they published it. So you can see it at NIH, which I don't -- there's no real entity that's better than NIH for showing clinical studies. So we have overwhelming evidence that's going to push that back on the LCD side of things. And then flipping it over to the Medicare side of things, the proposed physician fee schedule, what they're issuing here is a proposal to increase the delivery code of SRT. Now when I say that is, it is for the Vision, for the Plus and for the SRT. So the delivery code has nothing to do with which device we're talking about, the SRT-100 Vision, the SRT+ or the base SRT-100. So it would help both the Vision, which has ultrasound and the SRT-100 that does not have ultrasound. So that's what's being proposed here. And I think that it's something that we've been asking for since before we even invented IGSRT, which is pretty cool. Does that make sense?

Yes. No, it makes a lot of sense. I mean, as we all know, skin cancer is the #1 cancer. And we all know whether you surgically try to remove it or whether you use SRT, you have to make sure you get the entire parameter, whether that's vertically deep or horizontal out to make sure you clear those margins. And you would think imaging that to ensure that is something that should be standard practice. So it is a little bit shocking, but hopefully, the proper...

One more thing, Anthony. To that point, Anthony, we've got a new administration, and they're looking at everything. So we know that our health and human services is looking at everything that they possibly can to try to reduce costs, make sure that there's no fraud and abuse in anything. And so they're very, very particular. So it's our job now, unfortunately or fortunately, to have to go through the lobbying efforts to help them better understand this new administration, what's going on. Think of it, there was no letter, there was nothing for the last 5 years. And all of a sudden, an entity comes up with a letter, and they are not even a stakeholder in this. They have no say in any of this, but they came up with a letter because they're thinking that this is being used too much or whatever. Well, we're going to prove that it's not being used too much, that it's a help to the patient and it's a help to the outcomes for the patient. So as we educate them, this new administration, I think that they're gaining understanding. It seems that they recognize that when we talk to them each and every time, and they're open to the discussions. It's not like they're closed. They're almost like this letter came in and now they got to address it. They want to do the right thing. So we're presenting the other side of the story, but there was really nothing as far as evidence from the other side that decided to make a beef about it. They don't have any proof that it doesn't work. It works, and we're showing them that it does.

[Operator Instructions] Our next question will come from Yi Chen with H.C. Wainwright & Co.

This is Eduardo on for Yi. Kind of an interesting roll wind with this LCD and the schedule change. Maybe have some details on the ROS distribution efforts and when you expect that to mature and impact sales? And yes, just get some details there. And then I have a follow-up on the smaller conferences you guys are planning on attending and any success with that.

I'll give you an opening statement on this. And again, I'll pass it on to Michael. But we've had a relationship with ROS and the leadership there for, I would say, 10, 15 years. Very, very highly respected organization within the radiation oncology world. They have strategic relationships throughout oncology, and they've been able to provide equipment and services to radiation oncology, I would say, for the last 20, 25 years. So we've been kind of friends and wanting to work together for the last several years. COVID probably got in the middle of a lot of things, and you had to do a lot of resets, both them as well as us post COVID. But that relationship is very, very strong, and we finally got together, put together an agreement and we're anxious for the results. From my standpoint, I think that we're going to see results before the end of the year, and I'll pass it on to Michael since he's had the last conversation with the whole organization. But their leadership is phenomenal and their infrastructure is great.

Yes. We continue to have meetings with them. They're getting ramped up very quickly. They've been around for about 20 years. They have excellent relationships with hospitals. So we're very excited to partner with them, their whole organization. They even have an international front as well, which we may expand into. They have some expertise. I told them about our MDSAP and they were extremely excited. So I think that they can put us in touch with really, really high-end distributors that do the same thing that they do here domestically, internationally in certain territories.

That's really helpful. And on that note of the MDSAP certification and expanding into international markets, do you have a time line? Obviously, the connection through ROS is going to be hopefully will be beneficial. Do you have a time line for when do you expect those relationships or kind of agreements to materialize and formalize?

Yes, absolutely. So some of them are going to be immediate. For instance, I'm actually traveling to Japan and Taiwan at the end of this month. So there's a Japanese, Taiwanese co-radiation meeting that's happening at the end of August. And I'll be going with our VP of International Affairs and meeting with the Japanese Radiation Regulatory Committee as well as the Taiwanese. And we already have an SRT-100 Vision that was sold last year, if you remember, to Taiwan. So the ribbon cutting will be -- the official ribbon cutting will be sometime soon. We're very excited about that, although they've been treating patients for over a year now. So I think that this is going to roll pretty quickly, especially in Asia because of the China presence that we've had for the last 10 years, and it just boils over to that. And then South America, I think, will be shortly after. And as Joe mentioned, this greatly helps us in India as well and just gives us a backbone that we never had before international. So we're pretty excited.

Yes, really exciting, especially the current uncertainty with domestic. I guess the final one. Do you see -- I know, obviously, maybe it might be hard to tell with kind of the general pause given the LCD and that uncertainty there. But do you feel there's any macro level softness in capital equipment spending in dermatology or oncology? Or do you think this pause is just kind of specific to some of the immediate uncertainties?

No, I don't think so. I think it's just immediate for SRT. And if you remember that the new administration just increased the Section 179 spending limit for $1 million from $500,000. So that's going to be helpful. And Joe, I think you were trying to say something as well.

Yes. I think that either way, I think that our FDA agreement is still going to be continuing to grow. As Javier announced, we had a 27% increase in utilization of patients being processed with our FDA program over Q1. We feel that Q3 is going to show the same results, if not greater. So it continues to evolve. And whether it's one program or the other, and again, our preference is to remain status quo, we think that this is going to grow in leaps and bounds. And I think that once the government makes the decision as to which way they're going to go, preferably again, the status quo, I think that gives clear sight for everybody in the marketplace that this is the way to go and the FDA, I think, is going to prosper and I think it's going to accelerate.

With no further questions, this will conclude our question-and-answer session. I would like to turn the conference back over to Joe Sardano for any closing remarks.

Okay. Well, as we wrap up today's call, I want to thank you all for your continued interest in Sensus Healthcare. We look forward to speaking to you again in about 3 months. Have a good one, everybody. Thank you. Operator?

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