By M. Marin
NYSE:AMS
READ THE FULL AMS RESEARCH REPORT
Full quarter consolidation Rhode Island, some contribution from Puebla, anticipate 6.7% Q/Q 3Q24 revenue increase
American Shared Hospital Services’ (NYSE:AMS) will report 3Q24 results on November 13, 2024, and hold a conference call that day at 1:00 pm ET. The company provides stereotactic radiosurgery equipment and advanced radiation therapy treatment systems to treat cancer patients.
We believe the underlying momentum in AMS’s operations continue, driven by the company’s ambitious growth strategy aimed at expanding by geographic market and by business line, boosting and diversifying revenue. For example, in 2Q24 revenue increased 27% year-over-year to $7.1 million. Revenue from the company’s newly acquired three Rhode Island radiation therapy facilities were only consolidated in mid-2Q24 and so did not include a full quarter. Moreover, AMS’s Versa HD Linear Accelerator at its 85%-owned Radiation Therapy Facility in Puebla, Mexico, a new revenue stream for AMS, began patient treatments in 3Q24. With Rhode Island and a partial contribution from Puebla in 3Q24, we anticipate a 6.7% quarter-over-quarter revenue increase.
Strengthening management team to support growth measures…
AMS purchased the Rhode Island facilities under a recently launched business model to own and operate (O&O) equipment itself at select locations is driving revenue growth. At the same time, the company continues to engage with existing customers to renew and extend lease agreements. To support the new growth measures, AMS has restructured and expanded its management team in recent quarters, including recently naming a new COO who has 28 years of healthcare management experience and also promoting someone from within the organization to SVP of Sales and Marketing to support outreach to new and existing customers as the company continues discussions to renew existing agreements and sign new ones.
As sales pipeline expands and new O&O projects are evaluated
Over the last 15 months, the AMS leasing segment has signed five lease extensions from its base of ten domestic Gamma Knife sites. For example, earlier this year the company extended its existing 10-year agreement with PeaceHealth Sacred Heart Medical Center at RiverBend in Springfield, Oregon and plans to upgrade the existing Gamma Knife ® Perfexion™ system there with an Esprit, which is Elekta’s newest Gamma Knife ® radiosurgery system. The Gamma Knife Esprit was introduced in 2022. Esprit offers enhanced CT imaging, frame or frameless patient treatments and a more flexible and faster treatment planning system with remote access that simplifies and shortens the treatment process. AMS is installing several of the first Esprits in the U.S. With the Esprit Gamma Knife treatment, patients can return home the same day as treatment.
AMS has indicated that it is in in discussion for upgrades and extensions at several other locations. The company believes its enhanced focus on sales, marketing, and customer service under a newly strengthened management team has led to improved customer relations and greater success at achieving contract extensions, as well as growing its pipeline for future new business. Management has indicated that it is engaged in discussions with several other medical centers for additional potential upgrades and lease extensions.
Leveraging ‘asset-light’ approach to reduce upfront capital commitment
At the same time, the company continues to evaluate new O&O opportunities. For instance, if AMS moves forward on an O&O PBRT center in Rhode Island that the company is evaluating, it likely would be launched under a relatively asset-light model. The company would not plan to own the actual facility, but would seek to partner with a REIT or another investor. This would reduce the company’s upfront capital investment significantly. In addition, AMS also would likely seek to enter into a JV, if applicable, with a medical center, while retaining a majority interest in the PBRT center, further reducing the upfront capital commitment and also likely broadening the medical services that the overall center could offer.
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