SRTS - NASDAQ

Good day, and welcome to the Sensus Healthcare Third 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 Tirth Patel with Alliance Advisors IR. Thank you all for joining today's call to discuss Sensus Healthcare's third 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, November 6, 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, and good afternoon, everyone. Thank you for joining us today. Supporting our expectations for future demand, earlier this week, CMS published first-ever dedicated CPT codes for superficial radiotherapy in nonmelanoma, skin cancer and keloids. Not only do these codes validate SRT for this indication while providing reimbursement certainty, but they also represent an increase in SRT delivery codes reimbursement per fraction of more than 300% compared with the current codes being used. We have already begun to communicate this message to our customer and prospect base. It is being very well received as we provide performance to those many who are awaiting the news. While we inform and educate our market over the next few weeks, we expect strong interest with demand on the rise. We are excited to having our own SRT coding at long last for our physicians and their patients. It really bodes well for SRT having a long and prosperous future in the dermatology space. Michael will discuss in further detail during his segment of the presentation. Now during the quarter, we continued to execute on our strategic priorities and made progress in several areas across the business. We shipped 16 SRT systems in the quarter, including 3 systems to China, reflecting ongoing interest in our technology, both domestically and internationally. With these shipments, we have now sold more than 900 systems globally since the launch of the SRT platform. We expect to reach 1,000 systems in 2026. Within our Fair Deal Agreement program, we continue to see encouraging utilization trends. FDA treatment volumes increased 20% from the second quarter. This was the third consecutive quarter of double-digit growth, and we expect this level of growth to continue through the end of the year. When compared to the first quarter, treatments increased 52%. And since launching the program late last year, quarterly treatment volumes have increased 157%. These trends underscore the ongoing adoption among installed sites and the growing awareness of SRT among patients and providers. We continue to focus resources on locations that are demonstrating strong physician engagement and the prospect for sustainable long-term utilization. And we believe this will support healthier, more efficient growth of the program going forward. We also maintained a strong balance sheet while taking steps to support future demand. We ended the quarter with $24.5 million in cash, up from approximately $22 million at the end of 2024. These gains were driven by improved working capital management, including ongoing collections. In addition, we have close to 100 SRT systems in inventory, which positions us well to respond to anticipated demand as the market environment becomes known. Let me turn the call over to Michael to expand upon our business and our recent progress. Michael?

Thanks, Joe. As Joe stated, we are elated about the finalization of the long sought-after and fought for SRT codes that CMS granted our technology this past week. This has been a decades-long process of lobbying and clinical validation complemented by significant patient demand in recent years as their awareness of the alternative to surgery has hit an inflection point. The goal of our lobbying efforts and the outcome of these new CPT codes is that the gap will now narrow between the office-based reimbursement and hospital outpatient rates. Leveling the playing field with hospital systems significantly strengthens the ROI for using SRT in dermatology offices and could expand adoption. Over the past few years, patients have been overwhelmingly demanding the nonsurgical option for their skin cancer treatment, and CMS is seeing that data. To remind everybody, skin cancer is the most prevalent cancer in the United States, with the American Academy of Dermatology stating that more than 9,500 people are diagnosed each day, equating to over 3.5 million people per year. That is nearly double all other cancers combined. With the new coding certainty, outstanding clinical results, and high patient demand, SRT is here to stay. During the third quarter, we made good progress in advancing our business priorities, in particular, with our Fair Deal Agreement program and reimbursement engagement as well as with software platform development and international expansion. Beginning with our FDA program. We remain encouraged by the continued momentum and utilization trends. Treatment volumes due to patient awareness and demand increased at a healthy pace for the third consecutive quarter. And as this program expands, it is becoming increasingly clear that the combination of education, patient awareness, and clinical experience is driving consistent uptake in supporting sustainable demand for SRT and IG-SRT within practices. The consistent growth in treatments across sites reinforces the effectiveness of our focused approach and this turnkey model. Now that we have complete clarity with SRT codes, we feel more confident than ever to maximize the adoption of our SRT technology like never before. Turning to our product pipeline. We continue to await feedback and next steps from the Food and Drug Administration with respect to our Transdermal Infusion, or TDI system, and I do not have any new updates to share. Yet we are taking this time to validate training pathways, refine support models, and assess market feedback to ensure we are well positioned for a strong commercial rollout. I also want to comment on the ongoing development of our Sentinel software platform, which is central to our long-term revenue model. Sentinel today enables secure data storage, remote diagnostics, and real-time service support, allowing our engineering team to monitor and address system issues without interrupting patient care. For physicians, this translates into essential reliability, enhanced treatment confidence, and a more efficient workflow. Sentinel is also integral to any turnkey model, such as Sensus' FDA program as it allows the monitoring of treatment volumes. As dermatology continues to consolidate and as more patient care shifts into scaled group structures, the value of enterprise-grade analytics has become more important, particularly for large dermatology networks and private equity-backed platforms. These organizations are highly focused on standardizing care, benchmarking performance across sites, and improving practice economics. Sentinel is well positioned to support those needs. Sensus is always enhancing the Sentinel platform to provide deeper utilization insights, treatment analytics, and practice-level visibility to help groups measure patient flows, patient engagement, and care efficiency across locations. Over time, we believe this will increase the retention rate of our platform, support recurring revenue models, and elevate our competitive advantage. Looking ahead, we have initiated an expanded R&D program to build the next generation of our Sentinel platform, with a road map designed to introduce additional analytics, reporting capabilities, and customer-facing tools. This multiphase initiative, which we call Sentinel 2.0, is already underway, and we expect to begin seeing initial results in 2026. On the international front, we are building a strong foundation for global expansion. As Joe noted, we shipped 3 systems to China during the quarter, and we are seeing encouraging interest across select international markets. Our MDSAP certification provides us with an expanded pathway to key geographies, including Canada, Brazil, Japan, and Australia. While we expect international sales to ramp gradually and recognize that the process may take up to 12 months in certain regions, we believe this expansion will provide meaningful contributions over time. Initial discussions with prospective partners in multiple markets are progressing well, and we expect initial sales under this certification in the near future. Additionally, Sensus will be exhibiting at its first trade show in Japan, JASTRO, the largest radiation oncology conference in the country, in 2 weeks, and we are very excited to be meeting face-to-face with potential Japanese customers for the first time in our 15 years in business. With that, I will turn the call over to Javier for a review of our financial performance. Javi?

Thanks, Michael, and good afternoon, everyone. I'll start with a review of our financial results for the third quarter of 2025, and then I'll cover our year-to-date results. Revenues for the third quarter of 2025 were $6.9 million, compared with $8.8 million for the third quarter of 2024. As Joe mentioned, the number of units sold in the third quarter of 2025 was 16 compared to 27 in the third quarter of 2024. The decrease in revenue was primarily driven by a lower number of units sold to a larger customer, slightly offset by revenue recognized from the new placement program under the Fair Deal Agreement in 2025. Gross profit was $2.7 million for the quarter compared with $5.2 million a year ago. Gross margin was 39.1% versus 59.1% in the third quarter of 2024. The change in both metrics reflects lower sales, higher costs of servicing system, and the costs associated with the Fair Deal Agreement program. Total operating expenses for the third quarter of 2025 were $5.3 million compared with $3.7 million for the third quarter of 2024. Breaking that down, general and administrative expense was $1.9 million versus $1.6 million in the prior year period, with the increase reflecting higher IT and professional service fees and compensation. Selling and marketing expense was $1.5 million compared with $1.3 million last year, with the increase reflecting higher headcount and payroll costs due to commissions related to the Fair Deal Agreement program. And research and development expense was $1.8 million for the third quarter of 2025 compared with $0.9 million in the prior year quarter, with the increase reflecting significant lobbying costs related to the billing code reimbursement, higher headcount, and an increase in product development costs related to the next-generation systems. We're reporting a net loss for the third quarter of 2025 of $0.9 million, or $0.06 per share, compared with net income of $1.2 million, or $0.07, per diluted share for the third quarter of 2024. Adjusted EBITDA for the third quarter of 2025 was negative $2.4 million compared with $1.6 million in the year ago period. Please see the tables in today's news release for a reconciliation of GAAP to non-GAAP financial measures. Turning now to our year-to-date results. Revenues for the first 9 months of 2025 were $22.5 million compared with $28.7 million for the first 9 months of 2024. The number of units sold in the first 9 months of 2025 was 56, compared to 76 in the prior year period. The decrease in revenue was primarily driven by a lower number of units sold to a large customer, slightly offset by revenue recognized from the new placement program under the Fair Deal Agreement in 2025. Cost of sales for the first 9 months of 2025 was $12.6 million, compared with $11.4 million for the same period last year. Year-to-date 2025 gross profit was $10 million, or 44.4% of revenues, compared with $17.3 million, or 60.3% of revenue for the first 9 months of 2024. These declines are largely due to a lower number of SRT systems sold in 2025 period and higher cost of servicing system and the costs associated with the Fair Deal Agreement program. General and administrative expense for the first 9 months of 2025 was $6.1 million compared with $4.7 million for the first 9 months of 2024, with the increase primarily due to higher professional fees and insurance costs. Selling and marketing expense for the first 9 months of 2025 was $5.1 million compared with $3.6 million for the prior year period. The increase was primarily driven by an increase in trade show costs, payroll costs due to commissions related to the new placement program, and an increase in headcount. Research and development expense for the first 9 months of 2025 was $5.9 million compared with $2.7 million for the same period in 2024. The increase was primarily due to significant lobbying costs related to the billing code reimbursement, higher headcount, and an increase in product development costs related to the next-generation system. Other income for the 9 months ended September 30, 2025, was $0.5 million compared to $0.7 million for the same period in 2024 and relates to primarily interest income. For the first 9 months of 2025, our net loss was $4.6 million, or $0.28 per share, and adjusted EBITDA was negative $6.7 million for the comparable prior year period. The prior year period net income was $5.1 million, or $0.31 per diluted share, and adjusted EBITDA was $6.7 million. Regarding our balance sheet, we ended the third quarter with $24.5 million in cash and no debt. We continue to maintain a strong inventory with approximately $13 million in finished goods. We believe this provides sufficient capacity to support anticipated demand. We remain focused on disciplined expense management and working capital efficiency, and we believe these efforts contributed to the strength of our cash position exiting the quarter. I will now turn the call back to Joe for closing remarks. Joe?

Thank you, Javier and Michael. Before we open the call to questions, I'd like to share a brief closing moment. We recently announced the passing of my dear friend and Sensus Board member, Mr. Bill McCall. Bill was an extraordinary leader and a wonderful person, and his insights were foundational to Sensus. I don't need to restate the sentiments conveyed in the news release we issued last Friday other than to say my wish for each of you is to have someone like Bill McCall in your life. Separately, as Sensus has navigated these final weeks of debate regarding coding and reimbursement for SRT, I want to recognize and thank our employees, our business partners, our KOLs, and customers, as we work together to expand access to safe, effective and noninvasive treatment options for patients. After years of hard work, we have cleared validation that SRT is a great technology with tremendous value to skin cancer patients and keloid patients. We remain focused on disciplined execution and on supporting our customers and their patients. We are confident in our strategy, balance sheet, and utilization momentum. We look forward to updating you on future developments. And operator, we're now ready to open the line for questions.

[Operator Instructions] Our first question comes from Anthony Vendetti of Maxim Group.

So just 2 questions. One is on the LCD reimbursement for ultrasound guided on your ultrasound-guided SRT system. What has been the impact on that, if any, this quarter? And what's your update on what you think will be the impact? Any change to that? And then just in terms of -- I know you gave the system sales, but any utilization trend metrics that you can provide for this quarter?

Thanks, Anthony. Appreciate the question. First and foremost, we know that the original letter came from ASTRO and it was their questioning of the utilization of ultrasound -- the frequency of the utilization of ultrasound. They didn't feel that it was something that was medically necessary to be used each and every time for the fractions. Now in our model for the FDA, we never used it every fraction. So quite frankly, it was less impactful to us because of that. And therefore, the reduction of the utilization of ultrasound by CMS, it does impact us, but it has been made up by the fact that the actual fractionation reimbursement code went up about 300%. So based on that, we don't lose very much in our FDA program. And in a lot of cases, it might be beneficial -- even more beneficial for a lot of our physicians directly. So we don't see the same impact with our FDA program as maybe somebody else might do. But that's very, very important for us. And if there's anything else, Michael -- I'll hand it over to Michael.

Yes. Just to add some color on that. Again, I differentiate between SRT and IG-SRT. One has the image guidance, one doesn't. What this has done, the 300% increase that Joe and I have talked about, is the new delivery code, which basically CMS allowed the hospital rate in for the first time. And this is something that we've been asking for since we started the company. Why was it for so long that if you were in a hospital setting and you billed an SRT code for the delivery code, you'd get $125 per fraction, whereas the dermatologists would only get $25 per fraction. Well, now that is completely aligned. The new coding going up about 340%. We just said over 300% to make it just sound easy in the script. So the base SRT-100 unit, which has been significantly less reimbursement overall than the as of late IG-SRT unit, Vision, is now getting a 300-plus-percent increase as well, and the Vision does as well. So both products from a delivery code standpoint get a massive, massive increase, one that we've never seen before in my days in health care of 15 years. Does that make sense?

And then just on the utilization trends, any metrics you can provide that would be great.

As Javi indicated, we've seen 20% increase on utilization from the third quarter over the second quarter. And year-to-date, it's 152% increase on the utilization. We expect those trends to continue. There's nothing that's stopping the patients from wanting to have SRT knowing that it's noninvasive. That's the choice that they prefer. And as they become more familiar with our technology, I think that that's going to continue on the rise.

Okay. And then just lastly, just in terms of placements in the U.S. outside of that large customer, as we move into the fourth quarter here, which typically is the strongest quarter. But is there anything that you think will accelerate those placements in the fourth quarter as we speak today in terms of what you could see in terms of your pipeline or business activity?

We all know, and we announced the last quarter, that when the LCD came out that there was a complete stop to the order taking. And that was a result of us going to our customers saying, hang on, there's something that's going on here. And before we start installing more units, let's hold off to make sure that we understand what it is and so on. And then, of course, CMS came up with their actions in late July, which didn't further complicate anything, but still provided that halt on things. So what we see or what we have seen is a pent-up demand. We had a bunch of units that was going into the FDA program. We feel now that we have clarity that we'll be able to deliver those units so that we can start production with those customers. And I think that the knowledge of having these units with guaranteed reimbursement codes that begin January 1, I think we're going to have customers that get in line to purchase and/or to implement the program this year so that we start tracking down on the inventory that we have. And, of course, it's going to be first come, first serve. I think with the pent-up demand, there's going to be some aggressive marketing demand for our products. And we don't know where that could be yet, but we think that we're pretty good to be online to either hit breakeven or [ preprofitable ] for the fourth quarter. We're excited for what that prospect is.

And with that pent-up demand, if I may add, we bought a lot of credibility. I'm really proud of our sales team -- sales force nationally for going to these doctors and actually, from a short-term perspective, holding off on receiving some money in Q2, Q3. We could have easily gone out and just not told everyone and sold them all these IG-SRT units. But we bought credibility with the practices, with the large roll-up groups and told them, you know what, let's figure out exactly what's going to come down. And now I think you're going to see that, that's going to work out for us.

The next question comes from Ben Haynor of Lake Street Capital Markets.

Just on the reimbursement codes. It sounds to me based upon your commentary that there may be some shift between the SRT-100 -- [ based on SRT-100 ] Visions in terms of what goes out there with these shared services agreements with the FDA and it changes the calculus on that. Is that a fair assessment there?

I think that's a good observation, Ben. And I think rather than having our -- the Vision product decrease, I think we're going to see an uptick in the SRT-100. So I think that either way, it's going to help us because the important part of the Vision product is that it has an operating system known as Sentinel. You can't operate on a larger scale unless you have that Sentinel product so that you can manage your products out there in the field. So I think that's going to continue to be important for all of the accounts. Now the question is, well, what do we do with the Vision product? Well, the Vision product -- Javier mentioned the R&D program that we have for Sentinel 2.0. We're developing a program, a 2.0 Sentinel version that can be utilized with the SRT-100, which will literally give the SRT-100 same capabilities as the Vision product. So I think that we're meeting the demand of the market. We were anticipating what the market was going to do based on what CMS was going to provide. And I think that we're going to be meeting all of those perspectives. But to your point, it could impact the Vision, but I think the operating program with the 2.0 is going to maintain the Vision and its sustainability in the market.

Additionally, I want to point out, Ben, that the LCD when it first came out and then following that, the CMS proposed physician fee schedule [ is now final ], they kind of contradicted each other. And now CMS has put that issue to bed. So they actually did give the ultrasound for the first time its own code. There is an ultrasound code for SRT in association with SRT, which means they believe it is clinically viable and important. The value right now is a little lower than we want it to be, of course. But I think that over time, as people still utilize the ultrasound, because I'll tell you, the patients absolutely love seeing the lesion shrinking over time. From fraction 1 when they see how deep and what it looks like under the water, kind of like the iceberg effect with the Titanic, right? Well, you can only see the tip. Well, now you can see the whole thing and visualize it. They love seeing that shrink. And by the time the last fraction comes in and a couple of weeks after, they can see that it's gone. There is very big value in that clinically.

We're going to continue to work on that valuation working with CMS, helping them understand why that's very, very important. You really can't take away the vision that the doctors need to have in evaluating any kind of a tumor. Imagine a Mohs surgeon who does this -- who performs the Mohs surgery on somebody, and the patient at the end of the study says, "Okay, did you get it all?" The doc is going to say, "Yes, I got it all." "Well, show me, how did you get it all?" I mean, you have to take the guy's word for it. So now with imaging, you're always going to be able to show that the lesion was gone when you've got that ultrasound image. So we'll be able to continue to pursue a better reimbursement for that as we continue to utilize it.

And then just for clarity's sake, the LCD is basically completely nonoperative at this point.

We believe so. I mean, I can't definitively say that. But what it was, was kind of rubbish if you want to use that word, because there was no evidence backing up anything that they said about the ultrasound capability in the LCD. There is no paper or a clinical reference saying that imaging hurts clinical outcomes. In fact, ASTRO, the radiation oncology lobby, supports imaging -- and so does all of radiation oncology support imaging -- before every fraction of every other cancer on earth, before breast cancer, before colorectal cancer, they always do imaging before therapeutic radiation. So why do they say that you don't need it for skin? They have absolutely no idea what they're talking about. And it was baseless. And CMS agrees that it was baseless by the sheer fact they just gave us a code for ultrasound showing us in the world that it's not baseless.

So it's a platform for us to continue to pursue it.

So it just depends on the adjective you want to choose rubbish or maybe something else. Got it.

I went English on that one, I know.

And then just the commentary on the pent-up demand and the pending sites that you have, I think you said 11, I guess what's the right way to think about how long those are typically pending? I know there's unique circumstances here recently, but do those 11 get -- go live during Q4? Or what's the right way to think about that?

We believe that they will. We believe that they will, and we believe that we're going to add to that.

[Operator Instructions] Our next question comes from Yi Chen of H.C. Wainwright.

This is Eduardo on for Yi. Just on the topic of CPT code, the reimbursement, I'm curious are you anticipating how that might impact deal flow and utilization, specifically whether you're going to see increased utilization in existing sites or increased accounts. You mentioned those 11 pending sites. I imagine there are going to be new customers. And also how you anticipate changes in maybe purchasing behavior? Do you think the FDA will continue to be the main vehicle for purchasing? Or do you think this will justify more outright systems purchases?

They're good questions. I don't think -- like I said in my monologue before, I don't think that our FDA is as impacted by the new coding as much as people think. And the makeup for whatever impact the ultrasound may have had is going to be taken up by the increase in the actual fractionation code of 340%, as Michael said. So it almost offsets any of the decreases. So I don't think that it's going to impact our FDA program that much, and I think that we'll be able to continue with that FDA program. So I think that, that's very viable. I think the impact that it will have is that it will increase sales on the SRT-100 side because that's the lower cost unit. But either way, you're going to see our margins now starting to take shape, and I see the longevity of the product and utilization of it. As reimbursement stabilizes and it becomes fact, imagine this, in the past, doctors used coding and they asked for reimbursement. Sometimes they would get it, sometimes they wouldn't. Now there's no way that anybody can refuse these codes, these reimbursements because it's what CMS says. They said this exists for SRT technology for the dermatology space to treat skin cancer and keloids. So they're undeniable. And so if you look at the amount of money that they're going to be getting on a patient-by-patient basis, it is a very, very strong reimbursement for them that bodes well for the ROI on the equipment, whether it's taken in the FDA form or whether they purchase it through a lease or direct purchase either way. So it's beneficial for the company, and we see a lot of good things happening because of it.

And a question on the international sales. What you anticipate the ramp to be there? And how should we model margins for those sales?

Yes, great question. This is Michael. So with the MDSAP certification we announced earlier this year, that gets us automatically into 5 of the toughest territories globally to get in from a regulatory standpoint. I'm really excited to say that we're going to Japan, like I said, in 2 weeks. That is the absolute most difficult country to receive regulatory clearance in, especially for radiation technology. So we'll see where that goes. But I think that we're ever-expanding on the international side. We've been -- obviously, our largest market outside the U.S. has clearly been China, which continues to adopt and especially as their economy gets better with time passing from COVID, they'll continue to go-go-go. But with the new -- with everything with MDSAP, this is going to -- from a distributor standpoint, once we get those locked in, I think that, that was the 6-to 12-month tie-up that I was talking about before, and we'll continue to go from there.

I think what will end up happening is we're going to start seeing a ramp outside the United States. And I think that we'll get to consistently about a 20% revenue base international, which will be 20% of our total revenue. Right now, we're somewhere between 5% and 10%. I think we can grow that over the next 12 to 24 months to about 20%.

And if I may add, the Vision, don't forget, is actually taking off internationally as well. Taiwan has 2 Visions now, and there is some demand in Asia for the SRT-100 Vision, and we plan to submit for regulatory clearance to China for the Vision as well, which we had not had in the past. So the Vision might start becoming a very big international unit for us, much like the base SRT-100 was for the last 6, 7 years.

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

Thank you. As we wrap up today's call, I again want to thank everyone for joining us and your continued interest in Sensus Healthcare. We appreciate your support, and we look forward to speaking with you again in a little more than 3 months when we report our Q4 financial results. Have a nice evening. Thank you.