SRTS - NASDAQ

Good afternoon and welcome to the Sensus Healthcare First Quarter 2023 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Kim Golodetz. Please go ahead.

Thank you. This is Kim Golodetz with LHA. Thank you all for participating in today's call. Joining me from Sensus Healthcare are Joseph 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 will, should, or may occur in the future are forward-looking statements. The forward-looking statements are management's beliefs based on currently available information as of the date of this conference call, May 3rd, 2023. 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 and 10-Q. During today's conference 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 press release. With that said, I'd like to turn the call over to Joseph Sardano. Joe?

Thank you, Kim and good afternoon everyone. Our first quarter financial results are disappointing as potential new customers delayed making SRT purchase decisions as inflation has impacted their business in two ways. First, many dermatologists depend on elective aesthetic procedures as a meaningful source of practice revenue and profit. And inflation has caused consumers to pull back on these expenditures, either having these procedures done less frequently or foregoing them altogether. Second, inflation is also impacting operating expenses at dermatology offices as overall cost including salaries continue to rise. This all has an adverse effect on cash flow for all dermatology practices. In addition, many of the larger practices have been impacted as their cash was being deployed for acquisitions. These activities have also been impacted. While interest in our SRT system is as high as it ever has been, we have run into hesitancy towards making these decisions. We view this as a temporary operating environment as markets adjust. But importantly, we also are taking matters into our own hands and working on programs that will address these hesitancies and put us back on a growth trajectory. In fact, we have sufficient confidence we will be able to address customer concerns that we've been building inventory and prepaying for components. We expect to ship more than 60 systems during the 2023 year as we have already ordered and paid for all of them. Excellent clinical results in treating non-melanoma skin cancer non-invasively with published studies showing that SRT is as good or better than Mohs should be reason enough to choose SRT. Add to that fact that most procedures can leave scars and raise the risk of infection and even death. The fact that our reimbursement is so much higher than it was years ago, while Mohs surgery reimbursement has come down, SRT becomes a clearer choice. We are very excited to be working on making this choice even easier. A recent survey of Medicare reimbursement for skin cancer shows SRT has a compounded annual growth of 27% year over year for the past six years. During that same time period, Mohs has grown at a 5% growth. Our fair market value leasing program which results and a return on investment with only two to two and a half patients treated per month has been successful and still generates a great deal of interest, especially in this inflationary environment. This interest is evidenced by our booth traffic encountered at the conferences and trade shows we've been attending in the past quarter. Our customers are also inquiring about other types of sales programs and we are actively discussing these potential options. Please don't assume all dermatologists know about the attractiveness of SRT as many still need to be educated. So, given the higher reimbursement and favorable comparison to Mohs, we've stepped up our marketing and education programs. While we have always had a presence at key conferences, including South Beach Symposium, fall, winter and spring clinicals, and the big one, the American Academy of Dermatology Annual Meeting, we're increasing our presence at smaller regional conferences as well. These smaller events allow us to get closer to our customers without so many other companies competing for attention. We've also increased our social media and search engine optimization activities. You can follow us on Facebook or Instagram to get a sense of how active we are. We are seeing reimbursement cuts in the treatments of mainstream cancers. Interest from the radiation oncology segment is treating skin cancers to make up for lost revenue due to these cuts for an opportunity. Thus we will be attending the American Society of Therapeutic Radiation Oncology or ASTRO later this year in San Diego. We are excited to recently launch important upgrades to the Vision system, including new state-of-the-art, solid state, high frequency ultrasound. This upgrade provides the industry's best view of the epidermis and utilizes a new ergonomically designed probe with single-use disposable. This new and improved high resolution ultrasound technology provides a see and treat capability, which leads to great outcomes in patient reassurances because the physician can actually see the lesion has resolved after treatment with SRT. While we're maintaining focus on our core dermatology business and providing products our customers need and want, we are broadening senses reach into the radiation oncology as I mentioned. Here, SRT systems provide a compelling economic option for treating skin cancer and in many cases, represent a new source of revenue for hospitals. Interest from this channel is high and we are optimistic it will become meaningful component of revenue. We certainly sold an installed SRT system -- we recently sold and installed an SRT 100 system to Beth Israel Deaconess Hospital in Plymouth, Massachusetts. With over 50 hospitals currently using SRT technology in the US, we are very excited about the potential to provide the most patient-friendly and robust alternative to treating non-melanoma skin cancer to hospitals as they increasingly recognize this underserved opportunity. And with that overview, I'd like to turn the call over to Michael Sardano. Michael?

Thanks Joe. In addition to the priorities Joe just discussed, we have stepped our efforts to open up new international territories, a demanding and analytical process requiring regulatory approvals and engaging the right distributors. Our recently appointed Vice President of Quality and Regulatory Affairs has been making terrific progress in initiating dialogues with regulatory authorities working hand in glove with our Vice President of International Sales and myself. In particular, we've had recent success in new Asian territories as we shipped our first system to Taiwan. We also shipped two SRT systems to China during the first quarter and we believe we are witnessing them finally coming out of the pandemic. We fully expect that China will take delivery of more than 10 SRT systems throughout 2023 and we are looking forward to expanding our Asian footprint even further with a specific target on Korea and Japan. South America is also a priority for us and we are actively engaging strategic territories such as Brazil. According to Brazil's National Cancer Institute, non-melanoma skin cancer is the most prevalent cancer in the country, accounting for about 30% of all cancers. So, clearly, Brazil represents an exciting market opportunity for our SRT products. With regard to the company's aesthetic products, we expect to submit an FDA 510(k) application to bring them up to the technological level of our SRT product line, which our customers have been embracing. With that, I'll turn the call over to Javier Rampolla for a discussion of our financial results.

Thanks Michael and good afternoon, everybody. As Joe mentioned, our revenues for the first quarter of 2023 were $3.4 million and this compares with $10.3 million for the first quarter of 2022. The decrease was primarily due to a lower number of SRT units sold due to the impact of inflation under medical practices and lower sales to a large customer. Gross profit for the first quarter of 2023 was $1.6 million or 47.1% of revenues compared with $7.1 million or 68.9% of revenues a year ago. The decrease were primarily due to the lower number of units sold and the higher cost charged by vendors in 2023 quarter, reflecting another impact of inflation. Going forward, we anticipate gross margins to return to the mid-60% range. Selling and marketing expense for the first quarter of 2023 was $2.1 million compared with $1.2 million for the first quarter of 2022. The increase was attributable to higher threshold and advertising expense. Note that we have increased our participation in real tradeshows that are attended by our target customers, these are considerably less expensive than large national shows and are an efficient way of using our cash. General and administrative expense for the first quarter of 2023 was $1.4 million compared with $1.3 million for the first quarter of 2022. The increase was primarily due to higher proportion of fee and travel expense offset by reduction in insurance expense. Research and development expense for the first quarter of 2023 was $1.1 million compared with $0.7 million for the same quarter last year. The increase was primarily due to expenses related to our ongoing aesthetic project during 2023 to develop a drug delivery system. We expect R&D expense to remain at the same general level for the remaining quarters of 2023. Other income of $0.2 million for the first quarter of 2023 was related to interest income. Other income of $12.8 million for the year ago quarter was related to the gain on the sale of a non-core asset. We recorded an income tax benefit in the first quarter of 2023 of $0.8 million. This compares with income tax expense of $0.6 million in the first quarter of 2022. Net loss for the first quarter of 2023 was $1.9 million or $0.12 per share and this compares with net income of $16.1 million or $0.97 per diluted share for the first quarter of 2022. Net income for the 2022 quarter included $12.8 million gain on the sale of a non-core asset or $0.77 per diluted share. Adjusted EBITDA, which we define as earnings report interest, taxes depreciation, amortization and stock compensation spent was negative $2.7 million for the 2023 first quarter compared with a positive $16.9 million a year ago. Turning now to our balance sheet. Cash and cash equivalents were $19.3 million as of March 31, 2023 compared with $25.5 million as of December 31, 2022. The company had no outstanding borrowings under its revolving line of credit of March 31, 2023 or December 31, 2022. Account receivables were $12.7 million at quarter end compared with $17.3 million on December 31, 2022, reflecting the decline in first quarter sales. Despite a tough quarter, we continue to prepare for the growth we envision. Specifically, we have continue to build finished goods inventory and to prepay for materials, in part, to get ahead of the expected inflationary price increases. Inventory stood at $6.3 million at the end of Q1, up considerably from $3.5 million as of December 31, 2022. Prepaid and other current assets increased to $10.7 million as of March 31, 2023 compared with $6.9 million as of December 31, 2022. I will underscore what we have been saying for some time. And that is our attention to expense management is front and center. Our cash spend is very focused and is intended to support our ability to achieve our long-term goals. Nevertheless, our balance sheet continues to position us well to take advantage of the company growth opportunities we might come across. As a final comment, please see the table in the news release we issued earlier today for a reconciliation of GAAP to non-GAAP financial measures. With that, I'll turn the call back over to Joe.

Thanks Javier. Thanks Michael. Listen, we believe that Sensus Healthcare is in a terrific position to distinguish ourselves from a technology perspective, much of which is based on our Sentinel IT solutions software. As a reminder, Sentinel is our proprietary HIPAA-compliant software solution and is available on all our new products. It allows physicians to easily and accurately document and store patient data for clinical billing and asset management purposes. This technology has been a game changer for our SRT customers and for Sensus as it clearly demonstrates and documents the attractive ROI for the SRT-100 Vision and the SRT-100+. In recent weeks, we launched expanded capabilities and indications of our Sentinel technology by showcasing Sensus Cloud at last month's AAD Annual Meeting, which was well-received. This new feature of Sentinel is a cloud-based asset management, remote monitoring and diagnostic platform that is now available on all our products. The platform boasts continuous remote monitoring to track the status of the system from any web browser or iOS device. Continuous backups ensure that valuable information is safely stored in the cloud and allows providers with multiple locations or group practices to monitor their equipment remotely at all times. The Sensus Cloud system has also provides monitor any service issues without having to send an engineer to the field such as calibration, monitoring voltage, and temperature. All our products have the Sentinel IT solution capabilities embedded in them, including all our future products being prepared for FDA submission in the coming months. We are still in the early stages of tapping the enormous market opportunity for SRT. Our systems are well positioned in a large and largely untapped market comprised of some 14,000 dermatologists, 1,000 most surgeons in the US, representing more than 8,500 offices, not to mention a further 6,500 plastic surgeons, 5,500 radiation oncologists. Our systems provide a compelling alternative to surgery for millions of patients and arguably the only solution to prevent the recurrence of keloids following surgical excision. As an overlay to all this, skin cancer is a large and growing condition with estimates that one in five Americans will develop skin cancer during their lifetime. This tells us that nearly 70 million will have non-melanoma skin cancer. So, clearly there's a need for our SRT systems both now and even more so in the future. We are confident that Sensus is positioned for success to despite the challenges of the first quarter. We have a great staff to drive growth and implement these strategies, which is why we have built inventory to meet expected demand. We will continue investing in our Sentinel IT capability and carefully increasing sales and marketing programs headcount and capabilities. With those comments, I thank you for your time and attention and now operator, we're ready to take questions.

We will now begin the question-and-answer session. [Operator Instructions] First question comes from Scott Henry of ROTH Capital. Please go ahead.

Thank you. Good afternoon. Certainly capital equipment has some volatility, I guess we're seeing the downside of that. But that happens, you've got a good product, so we'll figure it out. But I had some specific questions. I'll start on the big picture, then I'll go to the small picture. When you're citing inflation for the problems, I guess, I mean that's just raising prices and theory, your customer could raise price as well. Are you really talking about is a more challenging economic environment and perhaps a more challenging environment for financing the products? I'm just trying to connect the dots between inflation and business without economic challenges.

Yes. Scott, thanks for being on and I want to thank you again for hosting a marvelous meeting last quarter, it was as usual great. The inflation piece that we're seeing has nothing to do with the prices, has nothing to do with the challenges of the inflation overall as much as it has with each individual physician that we're talking to or the groups that are private equity backed that are being impacted. When you think of the people that are going to their offices that are looking for their quarterly Botox treatments or their quarterly laser treatments or their hair treatments, things like this, those are the folks that inflation is really impacting and those are the folks that have less money, less discretionary money to spend on these things because we know that the cost of food and everything else has gone up, gas and everything else. So, instead of going once a quarter to get their procedures, there may be going once every six months or twice a year or giving it up entirely. So, I've sat -- I've spent four to six weeks this past quarter alone sitting face-to-face with our doctors, both single operators as well as the multiple installation operators as well as the national operators. They're all seeing the same thing. And when I look at them and I say is your business down 25%, what is it down? They look at me and their head is even further down. They feel that it's more than that. So, with that part of the business impacting their cash flow because it's all cash business, they're thinking twice about what they're spending money on. Now, spending money on us is a good investment. It's a good deal. But you still have to pry it out of the hands of somebody that's not making the money that they were before. So, it's a grassroots inflationary thing that's impacting their cash, which is making them think a little differently on how they're using the money that they have and trying to preserve that money rather than reinvesting it. And we have a little more convincing to do that SRT is still a very, very good investment because there's money there that's coming from CMS, Medicare, Medicaid to reimburse for these patients. But I think you can pretty much pick up on the fact that it impacts us too. None of us are going out to buy a new house. None of us are refinancing our houses with the new financial rates the way they are. We are all seeing gas prices go up. We're all seeing our food prices going up. So, this is impacting the grassroots of the people that are servicing or getting these services from our customers who are causing them to think twice before spending a dollar. We don't think it's going to last forever. I don't think it's going to go into the second half of this year, but it's certainly impacting the first half. And I think everybody is being surprised by it because I don't think the media or the markets has addressed the inflation levels to the point that everybody is really experiencing it from a personal experience standpoint.

Okay, great Joe. Thanks for the color. I'm going to hit you with just kind of speed round of a couple of questions, so I don't take too much time up. First, could you talk about what service revenues were in the quarter just approximately?

The service revenue was a little bit -- there was a 28% on total revenue in the quarter.

Okay, that's helpful. And then did you -- I didn't hear it, but did you mention how many transdermal units you sold in the quarter or you booked in the quarter as revenue?

Here's what we're doing on transdermal. Reengineering the transdermal device. It's going to be one of the new units that's going to go through the FDA process. It's going to include the sentinel package to it. So, rather than flood the market with the product that doesn't have that, I don't want to have to go back to those customers and explain we got a new one. So, we're that close to introducing that new product through the FDA process, I'd rather hold off and wait and make sure that they have the best product we have available.

Okay. So, I'm going to take that as zero in Q1 and we should kind of hold off on that product line in the near-term? Is that--

Yes, I think that it -- once it comes into the market, I think it will accelerate because just from an interest standpoint, we've received tremendous interest from the folks in the pharmaceutical area pertaining to dermatology. They're trying to find ways to implement the drugs that they have rather than through a needle, if they can do it through TDI or what we would call a drug device system that would implement it without the pain, without the injections, that's what they're looking for as well. So, there's a huge opportunity in working with the bigger organization to that end.

Okay. And then when I do the algebra to get to total revenues, it seemed like the revenue per SRT unit declined in Q1, is that correct? And should that rebound?

I think there -- obviously, the average selling price remains the same, Scott. It's just a mix of the products.

Okay. So the price is the same, but the mix went in a direction, I guess, that resulted in an effective price decline. So, as mix changes, it should rebound. Okay, that's helpful. Thank you, Javier. And then final question, you've given us some guidance for the year in terms of units. We know you did 10 in first quarter; how should we think about second quarter?

Like I said in the statements, we'll do more than 60 this year. So, whatever number above 60, whether it's 100, whether it's 70, whether it's 61, we'll do more than 60 in a very short period of time. So, we know that we'll be profitable with those numbers.

Okay. But I guess what I'm trying to understand is we should think about 2Q as another challenging quarter with more of a rebound in the second half? Is that --

Yes, I see Q2 is another challenge okay. Hopefully, it's not as bad as the first quarter, but it's going to be a challenge as well, but we're slowly getting out of it. I think we're finding that our customers -- our potential customers and prospects are learning to live with the inflation. We all have to live with the fact these are the circumstances and life goes on. And so they're reassessing what their annual business is going to be, but we'll all get to the point where life goes on and we have to continue doing business.

Okay, all right. Thank you for taking all the questions.

No, thanks, Scott. Appreciate it.

Next question comes from Chaitanya Gollakota of H.C. Wainwright. Please go ahead.

Hey. This is Chait on behalf of Yi Chen. So, the Fed just raised the interest rate again today, would that delay the company's ability to return to profitability?

No.

Okay. And also your guidance on the 60 SRT systems that you could potentially ship this year, 60 or more, is that domestic or international or both?

It's going to be both, but in the -- I think Michael clearly stated that we'll send 10 systems to China this year.

Okay. That excludes the two that have already been sent -- includes include the two that have already been sent.

Yes. And one to Taiwan.

Right, right. And any early trends that you've seen so far in Q2. I know you said that Q2 may be a little bit of a challenge, but any trends that you've seen so far would be helpful?

Yes, like I just told Scott, we're starting to see the realization that we have to get our plans together. And when I say our, I mean our dermatology space including the dermatologists as well as the larger groups. So, I think everybody's coming to -- with the grip that we still got to move on, we still got to do something, but everybody is very, very careful. So, I think that we'll see some improvement in Q2, but I think second half of the year is where I think the realization of getting on with life is going to hit.

Awesome. And lastly, any further dermatology conferences that you would be attending in future?

Well, I think that there's going to be smaller regional shows that we're going to attend. Michael, you might be able to talk to it. I'll say this in the third -- in the fourth quarter -- beginning in the fourth quarter because of the interest that we're seeing in the radiation oncology market, we're going to go to the ASTRO Show. The ASTRO Show is usually twice as big as the American Academy of Dermatology. It's where radiation oncology is prominent. So, we want to be there to help promote that interest in skin cancer. Michael, if you want to talk further to the smaller trade shows?

Yes, sure. Actually this week, I'll be going to Seattle for the ACMS which is the American College Mohs Surgery. There's the CRCPD Show next week in Houston. And then there's another few shows that all of our sales reps geographically will be attending their own geography and territories. So, we're really excited about attending these smaller shows. Just for frame of reference these shows cost a fraction of the cost of the major shows. Major shows obviously you're going to get a lot of derms, you're talking about almost 75% of the entire dermatology footprint in the United States come to that, plus additionally international people come to those. But these state shows, a lot of times you'll get a mom-and-pop type doctor and I know a few of them that have four or five of our machines they won't come to AAD, they won't come to the big shows just because they're just too busy. They can't leave their patients. A lot of them earn small rural areas like Ocala, Florida, for instance, that they have 60 patients a day. They can't take off a Friday to go to the AAD. So, they will come to these Florida-based little tiny shows. So, that's what we're talking about and we've been seeing a lot of traction with them.

Great. Thank you so much.

The next question comes from Anthony Vendetti of Maxim Group. Please go ahead.

Thanks. Good afternoon. So, just following on the question, about the ramp here in the second quarter. I know Joey said 60 -- at least 60 units for the year. What gives you confidence in the 60 number? Is that from an interest from the clients? We got to meet some of your clients which are our big proponents of SRT at AAD, have they indicated that they're going to place an order? It's just they're not sure of the timing, but definitely this year? Are these are these either some of them signed contracts for some time this year or you just feel very confident in the pipeline based on your customer conversations?

Thanks Anthony. I appreciate you being at our meeting at AAD and I think that we got a lot out of that. But to this point and to this question, we're very, very confident in the 60 plus number. Coming into the year, we had to fork over a lot of the money to order units for the entire year based on the feedback that we getting from our customers based on the needs that they had. So, we put those orders in place. It was done twofold, not only to meet the needs of what customers were expecting to deliver for us, but also to stave off any of the supply chain problems as well as any of the increased cost that we're going to be caused by any of the inflationary situations that exist. So, with all that being said, we had the confidence in providing our manufacturer with a big number of purchases of which we feel 60-plus is going to be some that we'll be able to do with confidence. So, it's not that we have orders, but we have indications and we feel that we're going to meet all of those expectations as we move along here.

Okay, that's helpful. And I believe Javier, you said that the gross margin should return to the mid-60%s, is that something that should happen by the third quarter, fourth quarter, how should we look at that?

So, as revenue start increasing, I'm going above the $5 million a quarter, that’s when we're going to start seeing the mid-60% gross margin percentage.

Okay. So, anything above $5 million should be over 60%. Okay.

We have some fixed cost in the margin that is actually driving their percentage.

Sure. Sure. No. Understood. Understood. Just on the costs in general though, are there any costs that are being trimmed or any potential hires that are being held back until the pickup in sales happens or is a business as usual at this point?

All of the above, Anthony, we're going every -- over everything with every fine to comb to save every penny that we can, but that's a norm. We've done that from day one. We haven't had any kind of reckless spending in the past just because we made money. I think the more money we make, the more we want to save and put in the bank, if you will. But all of those things are being considered whether we're going to expand immediately or a little farther into the future, but we're looking at every expense possible.

And then just two more questions on products. So, the transdermal infusion system that you're looking for FDA approval, have has that been submitted to the FDA? Is that under 510(k) process? And if so when was it submitted?

It's close to submitted., not submitted yet.

Yes, it hasn't been submitted yet. It's being processed, the paperwork is being put together, so we'll be submitted. So, I suspect it will be submitted probably this quarter. And it's a 510(k).

510(k), great. And then just lastly on the radiation oncology, it looks like you're ramping up an effort there. How would you -- just from a big picture, how would you categorize that opportunity and -- versus what you've been focusing on here before? So, maybe just talk about that and how you would look at that -- the initial ramp there and the total opportunity there?

We installed as I indicated in the base of our presentation. We delivered -- installed -- sold, delivered, and installed a unit to Deaconess Hospital in Plymouth, Massachusetts. Deaconess Hospital is part of the Mass General health system and it's a big place. And there was a lot of questions asked when they inquired about having the technology. First of all, they're getting cuts. All these hospitals are receiving major cuts in their regular line of radiation oncology. All the other cancers are looking at major cuts. I remember being back at General Electric when it was thought that 51% reduction in reimbursement was going to happen in all of these other cancers. We know for a fact that breast cancer has been reduced tremendously, probably cut in half. We'll see the same things with lung cancer and everything in the very near future if it hasn't happened already. So, these administrators that are running these hospitals along with the radiation oncology departments are looking over the fence. What else can we do to bring in some revenue here? And the obvious one is going to be skin cancer. It's one of the major cancers, that they do not treat that they're capable of treating, that they have to know how to treat, they just don't have access to the patients because they haven't made themselves available to capture those patients. Well, we also know that these hospitals in all of these communities do have the ability and the wherewithal to advertise to market for non-invasive skin cancer treatments available in their outpatient centers. And I think that we're going to start seeing those hospitals aggressively pursue that because we all know that the numbers of skin cancer patients outnumber the number of regular cancer patients four to one. And so that's a huge volume that they can go and attract and bring to them and they've got to find a way to increase their revenues because of the losses in these other areas. And most of these hospitals that we know of, I mean, they don't work on big margins. Those hospitals, they could have as much as $8 billion to $10 billion in operating budgets, 1% could be a margin. They can't afford to lose anything one way or the other. So they're going to be going after everything that they possibly can to increase those revenues. And this is one way of doing it. And we've been seeing it for approximately 6 months to 12 months now, and I've been talking about the interest that we're seeing in radiation oncology in skin cancer. Now, the problem that we have with those guys is the fact that it takes so long for them to drive a purchase order. All right? They can say yes to us today, and all of a sudden, it takes 6 months to 12 months, 18 months before you get a purchase order. With Deaconess Hospital, it didn't take that long, okay? They asked us for a quote, they must have gotten the approvals right away because they said we can't afford to take these reductions because they knew the reductions were immediate. And the next thing we sent them the quote and we got the proposal signed with the PO. So, I'm not saying everyone's going to be like that, but I'm just going to tell you I'm expecting a couple more within the next short period of time. I just can't tell you when, but I know the quotes are out there and hopefully the POs will come pretty quick.

Okay, great. All right, thanks so much. Appreciate it, everyone. I'll hop back into the queue.

There's time for one more question. Benjamin Haynor of Alliance Global Partners. Please go ahead.

Good afternoon, gentlemen. Thanks for taking the questions. First off for me, you mentioned programs that you're working on to kind of move some of these practices out of their shell shock of the present economic environment. Can you expand upon that? I mean, I know you mentioned going to smaller shows and your social media activities, but what else is there that you're planning on doing or doing that can help move people out of this funk?

Yes, Ben, thanks for being on. And that was a good catch. As we're sitting with our doctors who are making these decisions, you want to find out what worries them, what makes them hesitate, things like that. And so we're asking the questions as to what can we do to alleviate that hesitancy. That SRT is good for your patients, that you have good revenue, but I know that you're worried about this, that, or that. So there are going to be situations where we're going to be able to help them understand how we can take away those hesitancies and those worries. And, now is not the time for us to be running and looking for a rock to climb under. Now is the time to be front and center with our customers to help them with their business needs. They've got some problems. They've got some revenue deficiencies. So we are going to come up not with a specific program, but we want to talk to every individual physician who knows that this is something that can help them. And let's figure out something that makes sense for them that we can get our product in there to help them get that revenue that they're looking for because they're losing it on another end. So it's not necessarily a program that we have to establish for everybody because I think it could be different for different people, especially in different parts of the country and depending on how big or small these groups are. They could have one center, they could have five centers, they could have 20 centers. So I think that we're open to all of that. We're talking to them about that. And I think they're thinking, wow, I've got a real partner here to work with, and I think that we're going to get a lot of things done. It's going to impact different things, but we'll see what that does. But as long as we're able to help our customers get some revenue out of it and help them get the revenue that they've got, I don't think these doctors will ever forget that we were there for them.

Okay. That makes sense. And then on the drug delivery system, it kind of sounds like the updates are mostly more on the software side. Is that the right characterization? I mean, are there any, more hardware-ish developments that maybe expand the sort of procedures that it can be used in? I'll start with that and then I've got a follow-up on the drug delivery.

Okay. It's a little bit of both, Ben. I mean, what we've done over the last month and a half is we went to doctors, our KOLs, and asked them for input. They've actually seen the hardware. They've been able to evaluate it and how they would use it in their practice. And has it put a few delays into it? Yes, because we've changed some engineering things, just the hand piece itself has changed a little because of their input. But we're listening to our doctor's, we're making the adjustments that we need. And is it costing us a little time? Yes, but it's getting us a more closer product to perfection that they're looking for. So it's a little bit of both, both of the software as well as the hardware.

Okay. Got it. And then you mentioned Pharma, I think alongside the drug delivery system. Do you get a sense that maybe some of these Pharma reps could kind of help push the system out there, just saying, hey, this is a better solution to deliver the drug this way for patients, and you wind up getting sales that way, or is it mostly going to be the germs kind of discovering it on their own?

I think it's what you just mentioned. I think the bigger companies are looking for advantages to ensure that the customers that they have are utilizing their system, their drugs. And if they have a drug delivery system that is combined with that, combined with the sale of their drugs, especially a drug delivery system that they're able to monitor the amount of the dose, the amount of syringes that are being used or the amount of product that is being used in each and every patient because of the Sentinel or the Census Cloud, those are things that are enormously important to those folks and they want to be able to incorporate it as part of their system and selling it to those doctors. So we see it as a much bigger win for us working with the pharmaceutical companies versus our reps going to the individual dermatologists, which we'll do anyway, and making the individual presentation saying, here, buy one of these because you can use it for this. I think the drug companies are going to come in and sweep in and deliver to those customers because of the high volumes that are being used.

So, in other words, you could see potentially Pharma buying them from you and giving them to the doc?

Correct.

Okay. Just wanted to make sure I had that right. And then lastly, on the international plans, Europe obviously is a big international area for skin cancer and everything else. What are the plans there? I know the MDR situation is kind of difficult. I mean, do you kind of wait that out and then start to get over to Europe? Or what's kind of the thinking on some of the other geographies beyond Asia and South America?

I'll let Michael answer that since he so well introduced the things that we're doing, not only in Asia but also in Latin America.

Yes, sure. You mentioned Europe. We do have a few devices over in Europe. The thing with Europe is they want it for such a low price that it hasn't been that lucrative in general over the last few years. Asia and South America have a dual need for it in the fact that they have keloids as well. And so a lot of the reimbursements over there are through the actual governments. The governments have a little more power than even in Europe, and especially the United States, when it comes to South America and Asia. And so the governments are actively wanting keloids along with the skin cancer. So we're seeing that very strategic hospitals that are government hospitals in Asia, like in Taiwan, for instance, it was the largest hospital in Taiwan and Taipei that purchased the device, and they're starting, and that's how we started in China. And China now, we have well over 40 systems, and although China's the largest in Asia, we believe that Taiwan, Korea, Japan, Philippines, other places over there could represent per ratio with that many machines as well. And then South America's completely untouched. Brazil is the fifth largest country in the entire world. So I think that that's something that we definitely need to get on.

Okay. Got it. That makes sense. That's it for me. Thanks for taking the questions, guys.

Thanks, Ben.

The next question comes from Alex Nowak of Craig-Hallam Capital Group. Please go ahead.

Hi, this is Chase on for Alex. Thanks for taking the questions, guys. So help me understand the quarter a little bit better, Joe. I mean, walk me through kind of what changed. I get all the commentary of what your customers are going through. I mean, maybe just walk me through what changed from February kind of to the end of March, and then so far in April, through April there. What took expectations from year-over-year growth in those, two, three-month time periods to what looks like a, 50% decline in system placements at that minimum you guys gave?

Well, nothing changed from February to March. It was the same from January to March. As a matter of fact, it was the same from December to the end of March. The inflation has taken over and it's caused a worry coming into the New Year. If it hasn't caused a worry for you and your own personal life, then you're making more money and need make. I'm happy for you. But it's impacting every one of the individuals and the doctors that are out there, their staffs and everything else. So everybody's hanging on it. They're belts wondering where is it going and they're just waiting to see what might shake out. So there's two things that are going to happen. Something is going to shake out. I haven't seen our government step up to doing anything regarding inflation as a matter fact they're probably promoting more of it than we're seeing necessary. I mean, we're also seeing banks that are going out of business and there's not a whole lot of questions out of the banking industry or from anybody else as to what's going on with the banks and how is it impacting business. But it is, regardless, I mean, if it's not impacting us, then it's impacting our doctors because they're the ones dealing with those banks. And if one bank is a problem, then all the banks have a problem, because they start tightening up their belts. So this is very common. It's very obvious. It's very clear as to what's impacting individuals and making decisions. It's the same thing that's impacting you and me in making decisions in our own personal life. When you take it into a business, now it becomes even more serious because they're expecting certain revenues that have to pay the bills. And I want you to think of this, I mean how many of us are going to our bosses asking for less money these days. Everybody wants more. Everybody needs more money. because gas prices are up, groceries are up, all of this stuff. So again, these business orders are faced of keeping their best employees happy by giving them more money, by seeing their cost of operation going up, their toothpaste is going up, their band-aids are going up, all of their stock is going up and now we compound that with their business down by 25% at least. All right. Nothing has changed. Nothing that we see from the economic markets are going to change unless you guys tell us. You guys are the financial experts. Tell us what's changing in the financial world that's going to change or adjust our inflation rates. We should be asking you the questions. So tell us, give us some answers as to what these guys should be doing to overcome inflation and to keep producing the business because they need to hear those answers.

Yep. I hear you there, Joe. Maybe to kind a talk about mix, less sessions in the quarter, more SRT-100, is that something you think continues to be or is that a first half thing? I mean, I'm sure with all the upgrades you guys have made for the Vision that demand there remains strong kind of maybe chat to that?

I think you hit a real good point. I think that that's something that the doctors are going to look at as a secondary opportunity. They don't want to lose out on the revenue or the opportunity to treat skin cancer patients, because that brings them revenue. But maybe going with the first step with an SRT-100+ versus the Vision and then upgrading to the Vision later on, it's what we've seen from the initial time we've install the SRT-100 to now where we're upgrading a lot of those SRT-100s to the Vision. So I think that it's a very, very good step something that we can do that we are seeing a lot more of and we're providing our customers with those opportunities. So I think that that's a good path. It's one of the paths that we're looking at and it's one of the questions that we're discussing seriously with our docs. So I think that's a very, very good point, but it gives us enough opportunity to do something there.

And just trying to maybe start out a little bit, I know these kind of headwinds are just kind of starting to hit your understanding with your customers. But if we look at kind of the volumes that we're talking about for system placements now in 2023, I mean, when could we see kind of those levels that we exited 2022 with kind of return to the model? Is that something we're multiple years away? Or maybe just give a little bit of better guidance a little bit.

Yes, I think that we're going to -- here's what I would say, COVID really taught us a lot, okay, when we were forcefully shutdown. This is not a forceful shutdown. This is a conscientious slowdown in a lot of business, but they can't stay that way forever. When they were shutdown with COVID, it was something that they had no choice on. But we also saw the business come back drastically when they came back. Business was up 25% to 30%. They made more money than they ever did. So I don't think that we're going to allow ourselves to be hand tied by this inflation thing. That's why I see a much stronger second half, because whether there's inflation or not, people are saying we've got to move on. Life goes on. We got to continue. And like we've learned from the COVID years and even back in 2008 when the markets -- when the financial markets were shut down and even prior to that, that I've been in business in 2000, all of these areas we've come through and the companies that knew how to maneuver their way through that all came out it stronger. I think we're going to come out of it stronger. It's going to be good for our business. It's going to be good for our docs. And I think the relevancy of SRT and treating skin cancer patients of which we have plenty of skin cancer patients to treat and not enough doctors, I think is going to be relevant. I'll give you an example and I think a couple of the people were there for the meeting. When we had the AAD and I had Jeff and Mel, my former boss at General Electric, on a private situation, he was talking about access to dermatologists. Now he lives in South Carolina. And he said, he's called a dermatologist where he needs some help and he's on a six-month waiting list. Well, we called up the person that we knew that could help and he was there within the week. But the ordinary person is waiting three to six months to get into a dermatologist. That's backlog. That's money that's sitting on the table that the doctors aren't accessing. We've got to help them with their productivity. SRT helps them with those -- with that productivity and helps them grow that cash flow, which is exactly what these doctors learned during COVID. That when they were turned off from doing surgery, the SRT machine was the last machine they turned off. It continued with cash flow, continued with the productivity, and overall that was the best way to work it. And so when we look at the number of patients that we have and the recent information that we've gotten through our surveys with Medicare and Medicaid showing over the last six years that the growth in SRT has gone 27% year-over-year. We're getting there to the point where we will be the majority -- the SRT will treat the majority of skin cancer patients. And that's within a very short period of time. And in spite of this slowdown, I was maybe when we had a press release was probably about 18 to 20 months ago. We had a press release identifying the fact that we had our 500 system installed. I said that would probably take us, and it took us 10 years to get there. And I said at that time that, we'll probably do the next 500 and half the time. You're going to see that within the next short period of time, we're going to announce our 700 installation, which means we're more than halfway there only two years into the program. So we're on track. In spite of COVID, in spite of recession or inflation, in spite of all those things, we're gaining ground. We're installing more just a matter of time we're going to continue there.

Yes, got it. And then the last one to Joe. Just kind of along those lines. Certainly, can help your customers access a new full cash. Any other way that you guys can come up with a creative financing solution to get -- create the system in your customers' hand a little bit easier. I know fair market value leasing is probably a lower uptick now that interest rates have increased. And anything else you guys from a creative perspective?

Yes. Good point and one of the opportunities and one of the features that we have in our fair market value leases, we have the ability to offer our customers anywhere between 90 to 180 days before first payment is due. So they can actually build up a revenue base and a cash amount of money from Medicare, Medicaid treating these patients before having to pay $0.01 on the fair market value lease. And that can go as high as six months.

Got it. Thanks guys.

Thanks, Chase.

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

Thanks, Danielle. Thanks once again for your time this afternoon and for your interest in Sensus Healthcare. In the coming weeks, we plan to hold a series of one-on-one virtual meetings. Please contact our Investor Relations people from LHA, if you'd like to be on that schedule. We also look forward to our next financial results conference call, when we report our second quarter results in early August. And with that, thank you for joining us and we look forward to a good year. Thank you.