Q4 2023 Earnings Summary
- Strong Utilization Growth of SRT Systems: The company is observing a 27% year-over-year increase in utilization of SRT systems for treating non-melanoma skin cancer, indicating growing adoption and preference for non-invasive treatments.
- Expanding Installed Base: With over 750 installations of SRT products worldwide and expectations to reach 800 installations within the fiscal year, the company's market penetration is increasing, enhancing recurring revenue opportunities and market leadership.
- High Interest in Recurring Revenue Model: There is very high interest in the company's new recurring revenue model, especially among larger private equity-backed groups, which could lead to significant long-term revenue growth as more customers adopt this model.
- The company expressed uncertainty about future revenues from their new recurring revenue model, noting that they do not expect significant revenues from it this year and are cautious about predicting future sales due to economic factors like inflation and potential election year uncertainties.
- There is dependency on FDA approval for the transdermal infusion product, with expected approval timelines unclear, which may impact the company's ability to generate new revenue streams in the near term.
- The decrease in sales and marketing expenses in Q4 2023 was primarily due to a one-time reduction in compensation expense of approximately $800,000, which may not be sustainable in future quarters, potentially impacting future profitability.
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New Recurring Revenue Model
Q: What's the plan for the new recurring revenue model?
A: The company is introducing a recurring revenue model to complement its existing offerings, responding to customer demand over the past one to two years. This model provides a turnkey solution with their technology and personnel support, offering customers another choice to acquire SRT into their practices. -
Impact on 2024 Revenue
Q: How will the new model affect 2024 revenues?
A: They expect to install several units this year under the recurring revenue model but don't anticipate significant revenues until the first and second quarters of next year. As they continue to place systems, it will generate substantial revenue long term, alongside selling products. -
TDI Product FDA Approval
Q: When is FDA approval expected for the TDI product?
A: The company submitted the TDI product to the FDA in October 2023 and hopes to receive clearance by the second week of March, coinciding with the AAD conference. If approved, they plan to start shipping units in April and expect to generate $1 million to $2 million in revenue for the entire year. -
Utilization Trends
Q: What are the current utilization trends for SRT systems?
A: Utilization continues to grow with a 27% increase year over year in patient volumes. More patients are choosing non-invasive treatments, benefiting physicians with good cash flow and supporting the company's growth. They anticipate SRT will soon become the treatment of choice for non-melanoma skin cancer. -
Sales Outlook and Guidance
Q: Can you provide guidance on system shipments for 2024?
A: The company declined to provide specific shipment guidance but emphasized their commitment to achieve better results than the previous year, focusing on overachieving and under-committing. -
Gross Margin Expectations
Q: Will gross margins improve in 2024 with the new model?
A: At this early stage of the recurring revenue program, they expect margins to remain as they are now and anticipate improvement as the program develops. -
Cost Reductions Impact
Q: How have recent cost cuts affected expenses?
A: In Q4, they experienced a one-time reduction in compensation expense of about $800,000, contributing to decreased sales and marketing expenses. The company remains disciplined in managing expenses while executing their plans. -
Demand from Large Groups
Q: What's the demand for the recurring model among large practices?
A: Interest is very high, especially among larger, private equity–backed groups that prefer to use their capital to acquire more clinics. This model offers them flexibility without tying up capital. -
Relationship with SkinCure
Q: Does the new model affect the SkinCure partnership?
A: The new model complements existing offerings and doesn't change the relationship with SkinCure. It provides an alternative for customers who didn't fit previous models, expanding the tools available to reach more patients. -
Total Installed Base
Q: What's the current total installed base of SRT systems?
A: The company has over 750 installations of SRT products worldwide and expects to reach 800 installations within this fiscal year.
Research analysts covering Sensus Healthcare.