American Shared Hospital Services - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 revenue was $7.071M (+16% QoQ; +0.2% YoY), with diluted EPS of -$0.04; EPS beat S&P Global consensus (-$0.07*) while revenue was slightly below ($7.29M*), reflecting sequential treatment volume recovery but continued YoY pressure in PBRT and Gamma Knife.
• Direct Patient Services revenue rose to $3.500M, leasing revenue was $3.571M, PBRT revenue was $1.921M, and radiation therapy revenue reached $2.541M; management cited strong LINAC momentum and diversification benefits.
• Gross margin fell to $1.630M YoY given lower volumes, while adjusted EBITDA improved sequentially to $1.701M; the prior-year quarter included a $3.679M bargain purchase gain that elevated YoY comparables.
• Execution catalysts: Esprit installation in Guadalajara expected to start up in late 2025 and new CON approvals for a Bristol RT center and a Rhode Island proton center; management emphasized operational efficiency, cost controls, and tuck-in M&A pipeline as drivers for 2H and medium-term growth.

What Went Well and What Went Wrong

What Went Well

• Sequential patient volume recovery and improved momentum with an explicit focus on operational enhancements and efficiency; CFO: “increase in treatment volumes compared to last quarter… expect further recovery into the back half of this year”.
• Diversification: LINAC growth underscored the shift beyond leasing; CFO highlighted “linear accelerator business growth… 34% revenue growth quarter over quarter and 7% sequentially”.
• Direct patient services expansion: Rhode Island centers and Puebla drove radiation therapy revenue growth; CEO emphasized pipeline strength and balance sheet positioning for next phase of growth.

What Went Wrong

• Gross margin fell to $1.630M (vs. $2.468M YoY) due to lower treatment volumes, pressuring profitability.
• Leasing segment declined YoY to $3.571M (from $3.899M) on lower Gamma Knife volumes (contract expirations) and lower PBRT volumes; PBRT revenue decreased YoY to $1.921M (from $2.420M) due to cyclical fluctuations.
• Net loss of -$0.280M vs. prior-year net income of $3.602M, with the year-ago period benefitting from a $3.679M bargain purchase gain; adjusted EBITDA down YoY to $1.701M (from $2.010M).

Transcript

Speaker 3

Today, and welcome to the American Shared Hospital Services second quarter 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Kieran Smith with PCG Advisory. Please go ahead.

Speaker 1

Thank you, Megan, and thank you everyone for joining us today. American Shared Hospital Services' second quarter 2025 earnings press release was issued today before the market opened. 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 three-month period ended March 31, 2025, and an annual report on Form 10-K for the year ended December 31, 2024. 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 to remind everyone about our Q&A policy, where we provide each participant the time to ask one question and one follow-up. 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, please go ahead.

Speaker 0

Thank you, Kieran, and good afternoon, everyone. Thanks for joining us today for our second quarter 2025 earnings conference call. I'll begin with some opening remarks, then turn the call over to Gary Delanois, our CEO, for additional detail, followed by Scott Frech, our CFO, for a financial review of our second quarter and first half 2025 results. Following our prepared remarks, we'll open the call for questions. We are very pleased to see that volumes have continued to improve, and second quarter 2025 revenue increased 16% sequentially from last quarter, which is driven by the expansion of our direct patient services segment and additional international business development initiatives. We're continuing to see the benefits from our transition from a cancer treatment equipment leasing focus to a more patient-centric service model.

I'm also happy to see treatment volumes continuing to pick up, and we look forward to a stronger back half of 2025. I'd like to point out for our long-term-minded investor base that for the past four consecutive years, we've shown significant revenue growth, which has almost doubled since 2021, and for the past three years in a row, we've been profitable. It's important for investors to bear in mind that on a short-term basis, there will be normal fluctuations due to the specific nature of our business, but over the medium or longer term, we're in a very good position to continue our track record of strong profitable revenue growth. I urge investors to focus on the long-term overall growth opportunity as we execute on our strategic initiatives and upcoming milestones.

We have set the stage for long-term outperformance as we execute on our growth strategy and work towards building significant shareholder value. I'll now hand the call over to Gary and Scott, who will walk you through our overall business, robust business development pipeline, exciting strategic growth opportunities, and a focus on operational and cost efficiencies that drive our confidence in the long-term trajectory of our company. With that, I'll hand the call over to Gary Delanois for additional details.

Speaker 4

Thanks, Ray, and good afternoon, everyone. I echo Ray's enthusiasm for our near and longer-term growth opportunities. My confidence and enthusiasm for our business growth strategy continues to grow, and I am excited for our next phase of growth. For this past quarter, we saw double-digit sequential revenue growth, which increased 16% from last quarter. This growth was driven by the continued benefit from the Rhode Island acquisition that we closed last year, as well as from the opening of our new radiation therapy treatment center in Puebla, Mexico. As we focus on revenue growth, we also remain focused on profitability. Our Q2 2025 adjusted EBITDA came in at $1.7 million compared to $949,000 in Q1 2025. We continue to have strong cost controls in place and are reliant on treatment volumes to drive top-line growth.

We are happy to see treatment volume continuing to increase from the last quarter as we continue to optimize and grow the business. While we do expect to see quarterly fluctuations in treatment volumes, I'm energized by the growth we have seen in the overall business and with our business development initiatives we have in motion. We also continue to see benefits from our acquisition of the three Rhode Island cancer treatment centers and our newer one in Puebla, Mexico. At the Rhode Island centers, we have recruited and secured, through our professional services agreement with Brown University Health, three outstanding radiation oncologists, and as of today, I am pleased to announce they are seeing new patient consultations at our three centers. This significant accomplishment is a key element that sets the stage for increasing volumes and utilization to fuel future top and bottom line growth.

We are well on our way, and I remain confident that we will see steady growth in treatment volumes and increased referring physician engagement with the healthcare community and our health system partners, Care New England and Prospect CharterCare. We also remain focused on our radiation therapy equipment leasing segment and continue to work with our health system customers to create greater community awareness among referring physicians to drive increased utilizations of their Gamma Knife system, the gold standard for stereotactic radiosurgery. Our international business segment also represents a large growth opportunity where we are seeing continued momentum.

As you may recall, we have the only Gamma Knife centers in the countries of Peru and Ecuador, and along with our third international center in Puebla, Mexico, where we are treating cancer patients for a full range of cancer diagnoses with the most advanced radiation therapy treatment capabilities available in our catchment area. Last year, we established our fourth international center with our joint venture agreement for a Gamma Knife center in Guadalajara, Mexico, and we continue to expect to start treating patients and generating revenue towards the end of this year. As this will be the only S3 Gamma Knife in a country of 130 million people, it certainly will provide a major benefit to patients in Mexico and clearly represents an untapped growth engine for us.

Over the months and years ahead, we expect stronger international growth from additional treatment growth in Ecuador and strong volume from our newly upgraded center in Peru and our two new centers in Guadalajara and Puebla. As we've discussed in prior calls, we continue to expand our footprint in Rhode Island. The acquisition of a majority interest in the three radiation therapy treatment centers in Rhode Island were our first direct patient services cancer treatment centers in the U.S. This business segment highlights the power of our growth strategy while also demonstrating our ability to partner with health systems, Care New England, and Prospect CharterCare, the second and third largest health systems in Rhode Island.

The second is the Certificate of Need, or CON, that we have been granted to build and operate a fourth radiation therapy treatment center in Bristol, Rhode Island, and the third is a CON that we officially obtained this past December to build and operate the first proton beam radiation therapy center in the state of Rhode Island, which represents another major growth opportunity. We also continue to evaluate potential tuck-in acquisitions that can help expand our footprint and add to our growth. We look forward to announcing additional details on these opportunities as they progress. Before I hand the call over to Scott, I'd like to reiterate our strong confidence in the overall business. Bear in mind that as with most growth stage companies, there will be some fluctuations from time to time.

Our focus and track record of long-term revenue growth and profitability on top of our strong balance sheet gives me great confidence in the strategies we have in place for long-term growth. With that, I'll turn the call over to Scott Frech, our CFO, for a financial overview.

Speaker 1

Thank you, Gary, and good afternoon, everyone. For the second quarter ended June 30, 2025, total revenue increased 16% to $7.1 million compared to $6.1 million for Q1 2025 and was up slightly compared to Q2 2024. Revenue from our direct patient services segment was $3.5 million for Q2 2025 compared to $3.1 million in Q2 2024, marking an increase of 12%. This growth was primarily driven by the acquisition of a majority interest in the Rhode Island radiation therapy operations in Q2 2024 and the launch of operations in Puebla, Mexico, in the second half of 2024. Revenue from the equipment leasing segment decreased to $3.6 million from $3.9 million in Q2 2024. Gamma Knife revenue increased 25% from Q1 2025 to $2.6 million for Q2 2025 and was down about 5% compared to Q2 2024.

The number of Gamma Knife procedures in Q2 2025 was 264, a 27% increase from Q1 2025, but down 22% compared to Q2 2024. This decline was primarily due to the expiration of two contracts in December 2024 and April 2025. Revenue from proton beam radiation therapy, or PBRT, increased 17% from Q1 2025 to $1.9 million for Q2 2025, but decreased 20% compared to Q2 2024. Total proton therapy fractions for Q2 2025 were 1,114, a 34% increase from Q1 2025 and down about 10% from Q2 2024. This decline was primarily due to normal cyclical fluctuations. Revenue from linear accelerator, or LINAC, systems was up 7% from Q1 2025 to $2.5 million for Q2 2025 and up 34% compared to Q2 2024 due to the acquisition of the Rhode Island radiation therapy operations and the launch of operations in Puebla, Mexico.

Our gross margin for Q2 2025 increased 73% from Q1 2025 to $1.6 million and decreased 34% compared to $2.5 million in Q2 2024. The year-over-year decline in gross margin in percentage reflects increased operational expenses, higher staffing costs, and investments in technology infrastructure to support growth initiatives, as well as lower Gamma Knife treatment volumes and the strong growth margin from our direct patient services segment, which has a lower gross margin percentage. Q2 2025 operating income was a loss of $544,000 compared to a loss of $1.3 million in Q1 2025 and a loss of $1,000 in Q2 2024. Net loss attributable to American Shared Hospital Services for Q2 2025 was $280,000 or $0.04 per diluted share compared to a net loss of $625,000 in Q1 2025 or $0.10 per share. Q2 2024 yielded a net income of $3.6 million or $0.55 per diluted share.

Adjusted EBITDA, our non-GAAP financial measure, was $1.7 million for Q2 2025 compared to $949,000 in Q1 2025 and $2 million in Q2 2024. I will now review our six-month results. For the first half of 2025, total revenue increased 7% to $13.2 million compared to $12.3 million in the first half of 2024. Revenue from our direct patient services segment was $6.6 million for the first half of 2025 compared to $4.1 million in the first half of 2024, marking an increase of 61%. This significant growth was primarily driven by the acquisition of the Rhode Island radiation therapy operations in Q2 2024 and the launch of operations in Puebla, Mexico, in the second half of 2024. Revenue from the equipment leasing segment decreased to $6.6 million from $8.2 million in the first half of 2024.

Gamma Knife revenue declined 11.4% to $4.7 million for the first half of 2025 compared to $5.3 million in the first half of 2024. The number of Gamma Knife procedures in the first half of 2025 was 472, a 23% decrease from 613 procedures in the first half of 2024. This decline was primarily due to the expiration of two contracts in December 2024 and April 2025 and downtimes to upgrade a third customer to newer technology. Revenue from proton beam radiation therapy, or PBRT, decreased 30% to $3.6 million in the first half of 2025 compared to $5.1 million in the first half of 2024. Total proton therapy fractions for the first half of 2025 were 1,945, a 23% decrease from the 2,512 fractions in the first half of 2024. This decline was primarily due to normal cyclical fluctuations.

Revenue from linear accelerator, or LINAC, systems was $4.9 million for the first half of 2025 compared to $1.9 million in the first half of 2024 due to the acquisition of the Rhode Island radiation therapy operations and the launch of operations in Puebla, Mexico. Our gross margin for the first half of 2025 was $2.6 million compared to $4.6 million in the first half of 2024. This decline in gross margin in percentage reflects increased operational expenses, higher staffing costs, as well as lower Gamma Knife treatment volumes and the strong growth from our direct patient services segment, which has a lower gross operating margin. For the first half of 2025, there was an operating loss of $1.8 million compared to a loss of $86,000 in the first half of 2024.

Net loss attributable to American Shared Hospital Services for the first half of 2025 was $905,000 or $0.14 per diluted share compared to the net income of $3.7 million or $0.57 per diluted share for the first half of 2024. Adjusted EBITDA, our non-GAAP financial measure, is $2.7 million for the first half of 2025 compared to $3.8 million for the first half of 2024. I will now go on to our balance sheet. We ended Q2 2025 with a strong financial position supported by our solid balance sheet. As of June 30, 2025, cash and cash equivalents, including restricted cash, sat at $11.3 million, consistent with the $11.3 million at December 31, 2024. Shareholders' equity, excluding non-controlling interest, was $24.5 million or $3.78 per outstanding share compared to $25.2 million or $3.92 per outstanding share on December 31, 2024.

Fully diluted weighted average common shares outstanding were 6,582,000 for Q2 2025 and 6,583,000 for Q2 2024. This concludes the formal part of our presentation. Thank you again for joining us today. We look forward to updating you on our progress in the quarters ahead. I'd now like to turn the call back to the operator and open it up for questions.

Speaker 3

We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Marla Marin with Zacks. Please go ahead.

Speaker 2

Thank you. As you move more and more towards the direct patient segment, you were seeing strong growth, and you're also leveraging some of the relationships that you have. You specifically cited relationships in Rhode Island with Brown University Health and I think some other organizations. As you move forward with the two new locations in Rhode Island, are there any pre-opening activities that you can engage in to try to make sure that you hit the ground running in those locations once they open?

Speaker 4

Yes, I am. Thank you very much for your call. One of the key items that we were able to accomplish, as I disclosed in my presentation, was the addition of three full-time radiation oncologists. That's the first time we have been fully staffed since we took over about a year ago. They will obviously also be covering the new centers. Obviously, the more imminent center is the Bristol location, which is a radiation therapy center. The longer-term project would be the proton center. In addition, as you point out, we are engaged with our health system partners, Care New England and Prospect CharterCare, as well as Brown University Health, as far as providing services, additional services at those locations as well.

Speaker 2

That will benefit the two new centers, presumably.

Speaker 4

Could you repeat that again? You broke up a little bit.

Speaker 2

I was just closing the loop there. That will benefit the two new centers, presumably, once they open.

Speaker 4

Yes. There's definitely economies of scale with us expanding within the greater Rhode Island marketplace.

Speaker 2

Okay, thank you.

Speaker 4

Thank you.

Speaker 3

Again, if you have a question, please press star, then one. This concludes our question and answer session. I would like to turn the conference back over to Gary Delanois for any closing remarks.

Speaker 4

Thank you, Megan, and thank you all for joining us today. I'll just wrap up quickly here and reiterate that we are at a key point in time as we execute on our growth strategy. We have put the building blocks in place and are focused on building strong momentum as our growth strategy takes hold. We are confident in our strategy and our team's ability to execute, and we look forward to updating you on our progress as we drive top-line growth, profitability, and long-term success. If you have any questions, please don't hesitate to reach out. Thank you again for your interest in American Shared Hospital Services. Thank you. That concludes the conference.

Speaker 3

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