AMERICAN SHARED HOSPITAL SERVICES (AMS) Q3 2024 Earnings Summary

Executive Summary

Q3 revenue increased 36.3% year over year to $6.999M, driven by the first full-quarter contribution from Rhode Island direct patient services and the new Puebla, Mexico LINAC center; diluted EPS was ($0.03) as gross margin compressed to 19.6% on mix, lower Gamma Knife volumes, and integration costs .
Leasing (Gamma Knife/proton) softness and integration-related operating costs produced an operating loss of $0.89M; management expects integration/incremental Rhode Island costs to decrease by more than $300K in Q4, a potential near-term margin tailwind .
Segment mix shifted further to retail: retail revenue rose to $3.687M (+273% YoY) while leasing declined to $3.312M (-16% YoY); proton revenue grew 4.4% YoY on higher volumes, but Gamma Knife revenue fell 32.9% on contract expirations, scheduled upgrades, and staffing shortages .
Key catalysts going forward: integration efficiencies in RI, Puebla ramp, progress on Bristol RT center (CON granted) and a CON application for a RI proton center (would be sole system between NYC and Boston), plus an uptick in Gamma Knife volumes observed in October .

What Went Well and What Went Wrong

What Went Well
- Retail expansion delivered record quarterly retail revenue ($3.687M) on full-quarter RI and Puebla contributions; “The third quarter marks another quarter of strong revenue growth of 36.3% to $6.99 million” .
- Proton therapy revenue increased 4.4% YoY with fractions up 5.4%, reflecting stable demand and cyclical recovery .
- Management highlighted pipeline momentum and operational upgrades (new CT simulators, service/maintenance contracts) to support volume growth and reliability in RI; “we are well positioned for future growth” .
What Went Wrong
- Gross margin percentage fell to 19.6% (from 40.9% YoY) as mix shifted to lower-margin retail, Gamma Knife volumes fell, and integration costs weighed; operating loss was $0.89M .
- Gamma Knife revenue declined 32.9% and procedures fell 31.0% YoY, reflecting a contract expiration, ~2 months of scheduled upgrade downtime at a site, and physician staffing shortages at two sites .
- Integration and professional fees tied to RI acquisition and other initiatives added $300–$400K of quarterly costs; interest expense increased on higher rates and borrowings .

Financial Results

Consolidated P&L (USD, $ Millions unless noted)

Metric	Q3 2023	Q1 2024	Q2 2024	Q3 2024
Revenue	$5.13	$5.22	$7.06	$7.00
Gross Margin ($)	$2.10	$2.14	$2.47	$1.37
Gross Margin (%)	40.9%	41.1%	35.0%	19.6%
Operating Income (Loss)	$0.09	($0.09)	($0.00) (breakeven)	($0.89)
Net Income Attrib. to AMS	$0.12	$0.12	$3.60	($0.21)
Diluted EPS ($)	$0.02	$0.02	$0.55	($0.03)
Adjusted EBITDA	$1.67	$1.74	$2.01	$1.37

Segment Revenue (USD, $ Millions)

Segment	Q1 2024	Q2 2024	Q3 2024
Retail (Direct Patient Services)	$0.96	$3.16	$3.69
Leasing (Medical Equipment Leasing)	$4.25	$3.90	$3.31

Operating KPIs

KPI	Q1 2024	Q2 2024	Q3 2024
Proton Therapy Revenue ($)	$2.65M	$2.42M	$2.32M
Proton Therapy Fractions	1,276	1,236	1,252
Gamma Knife Revenue ($)	$2.57M	$2.74M	$1.82M
Gamma Knife Procedures	273	340	218

Balance Sheet Highlights (select)

Cash, cash equivalents, and restricted cash: $13.04M (Q1), $14.49M (Q2), $14.08M (Q3) .
Shareholders’ equity (ex-NCI): $22.84M (Q1), $26.54M (Q2), $26.42M (Q3) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Quantitative guidance (Revenue, EPS, margins, OpEx, tax)	FY/Q4 2024	None	None provided	Maintained (no guidance)
RI integration/incremental costs	Q4 2024	N/A	“We expect to see a decrease in excess of $300,000 in our fourth quarter”	Qualitative improvement
Strategic pipeline/volumes	Multi-quarter	N/A	Puebla ramping; RI efficiencies; October Gamma Knife volume uptick observed	Positive qualitative trajectory

Note: AMS does not issue formal financial guidance; management provided qualitative direction on integration costs and volume trends .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
Retail expansion (RI, Puebla)	Q1: RI acquisition closed; projected revenue backlog >$210M; Puebla nearing start . Q2: Full acquisition impact recorded via $3.7M after-tax bargain purchase gain; Puebla began treating .	Full-quarter RI/Puebla contribution drove 36% YoY revenue growth; integration costs and lower Gamma Knife volumes pressured profitability .	Revenue mix shifting to retail; near-term margin headwind from integration; improving as efficiencies realized .
Gamma Knife volumes	Q1: Slight revenue decline on expired contracts; int’l sites offset some impact . Q2: Procedures +10% but revenue -9% on mix/reimbursement .	Revenue -32.9% and procedures -31% YoY on contract loss, scheduled upgrade downtime, staffing shortages; October volume uptick noted .	Volatile; early signs of rebound post-upgrades/staffing .
Proton therapy	Q1: Revenue +14.5% YoY despite lower fractions . Q2: Revenue -5% on cyclical volumes .	Revenue +4.4% YoY; fractions +5.4% YoY .	Cyclical but stable-to-improving into 2H .
International buildout	Q1: Puebla near launch; Ecuador ICON upgrade; Peru strong . Q2: Puebla launched; JV signed for Guadalajara Gamma Knife .	Puebla ramping monthly; Guadalajara JV progressing .	Expanding capacity/footprint .
Regulatory/CON (Rhode Island)	Q2: CON granted for Bristol RT center; proton CON applied, hearing pending .	Bristol CON reaffirmed; proton CON application reiterated; proton would be only system between NYC and Boston if approved .	Advancing approvals; timing remains pending .
Capital allocation	—	Investor asked about buybacks; management noted the point without commitment, prioritizing growth investments .	Monitoring; growth remains focus .

Management Commentary

“The third quarter marks another quarter of strong revenue growth of 36.3% to $6.99 million… The quarter’s margins and profitability were affected by lower Gamma Knife treatment volumes, additional equipment service and preventative maintenance costs and other operating efficiencies we are implementing in Rhode Island. We anticipate seeing the benefits in future quarters.” – CEO Ray Stachowiak .
“We have been incurring incremental costs related to our Rhode Island acquisition in excess of $300,000 or $400,000 a quarter… We expect to see a decrease in excess of $300,000 in our fourth quarter.” – CEO Ray Stachowiak .
“We have already noticed an uptick in our Gamma Knife treatment volumes in the month of October.” – CEO Ray Stachowiak .
“Gross margin… was affected by lower Gamma Knife treatment volumes and the strong growth from our patient services segment, which has a lower gross margin.” – CFO Robert Hiatt .
“It is extremely gratifying to join the team at this clear inflection point… implementing strategic growth initiatives to drive growth in patient volumes which will improve our margins and overall profitability.” – COO Gary Delanois (appointment PR) .

Q&A Highlights

Integration and start-up costs: Management detailed RI integration costs (legal, accounting, valuations, service contracts) and conversion of high-cost temp staff to employees; Puebla start-up ramping after delayed launch, with monthly revenue increasing .
Volume drivers and marketing: Upgrades (CT simulators) in RI are restoring referrals; active outreach via JV health system partners to grow volumes .
Gamma Knife volatility: Q3 volumes impacted by vacations/maternity leave, scheduled upgrade downtime; management views factors as temporary with October uptick .
Capital returns: Investor pressed for buybacks given valuation; management “duly noted” but emphasized long-term growth and diversification into retail and a potential owned proton center .

Estimates Context

We attempted to retrieve S&P Global consensus for Q3 2024 revenue and EPS and adjacent quarters but could not due to a rate limit error on the S&P Global API at query time (Daily Request Limit Exceeded). As a result, we cannot present a vs-consensus comparison in this report and will update when accessible. Consensus coverage may also be limited for AMS given its size.
Without Street estimates available, we anchor evaluation vs prior year and sequential trends (see tables above) .

Key Takeaways for Investors

Mix shift to retail is accelerating top-line growth, but carries lower gross margins—expect near-term margin pressure to moderate as RI integration costs (> $300K/qtr) normalize and operational upgrades take effect; management expects a >$300K cost decrease in Q4 .
Gamma Knife headwinds (contract loss, downtime, staffing) weighed on leasing; near-term rebound is plausible given October volume uptick and completed upgrades, but variability remains a watch item .
Proton therapy appears stable with improving YoY comps in Q3; cyclical fluctuations persist, but the modality remains a steady contributor .
Strategic optionality: CON granted for a fourth RT center (Bristol) and a proton center CON application (would be sole system between NYC and Boston) could materially expand owned-operator economics over time; timelines extend beyond 2025 and carry execution/regulatory risk .
Balance sheet supports growth (Q3 cash ~$14.1M; equity ~$26.4M); management continues to prioritize expansion over buybacks, though shareholder feedback on capital returns is on the radar .
Near-term trading setup: narrative likely hinges on evidence of integration cost relief in Q4, confirmation of Gamma Knife volume recovery, and continued Puebla/retail ramp; lack of formal guidance may keep volatility elevated until datapoints confirm trajectory .

Appendix: Additional Relevant Press Releases in Q3 2024

AMS appointed Gary Delanois as EVP & COO and promoted Ranjit Pradhan to SVP Sales & Marketing, signaling focus on scaling operations and commercial momentum .
July JV signing for Guadalajara, Mexico Gamma Knife upgrade to Esprit expands international footprint and capacity .