By M. Marin

NYSE:AMS

READ THE FULL AMS RESEARCH REPORT

1Q24 revenue up, Rhode Island centers come on stream in 2Q

American Shared Hospital Services (NYSE:AMS) reported 1Q24 results yesterday and provided a business update. The company provides stereotactic radiosurgery equipment and advanced radiation therapy treatment systems to treat cancer patients and has embarked on an ambitious growth strategy aimed at expanding by geographic market and by business line and boosting and diversifying revenue.

AMS recently launched a business model to own and operate (O&O) equipment itself at select locations, an initiative that is expected to boost revenue growth. To further this initiative, the company recently acquired controlling 60% interest in three radiation therapy cancer centers in Rhode Island, which is expected to expand the company’s direct footprint. AMS also currently owns cancer care treatment centers in Peru, Ecuador and Mexico. Rhode Island is expected to contribute annual revenue of roughly $9 million to $10 million. As the company continues to expand the direct retail footprint, we expect strong segment growth to continue.

Rhode Island represents AMS’ first domestic retail locations. The company will consolidate revenue from the new Rhode Island operations beginning this month following the deal close on May 9, 2024, and the operations are therefore expected to contribute to 2Q24 results for a portion of the period. In addition, the site in Puebla, Mexico that has a Versa HD Linear Accelerator is slated to begin treating patients in the next month or so and also represents a new revenue stream once patient treatments begin.

Revenue backlog up, with additional traditional, O&O projects expected over time

The company noted that its sales pipeline is robust and management anticipates announcing additional projects over time. Moreover, with Rhode Island, AMS’ projected revenue backlog – measuring projected revenues for the next 10 years from retail centers and lease agreements through their respective expiration dates – has reached more than $210 million which is more than double the level at year-end 2023. In addition, over the past 12 months AMS has signed four lease extensions from its base of ten Gamma Knife sites, including an upgrade to a Leksell Gamma Knife Esprit (Elekta’s latest model) for an existing customer, further augmenting backlog. Management indicated that it is engaged in discussions with several other medical centers for potential upgrades and lease extensions. Thus, Gamma Knife upgrades and de novo installations are also expected.

Other potential new business opportunities

In addition, the company is pursuing other opportunities in Rhode Island and has filed CONs (Certificate of Need) with the Rhode Island Department of Health. One CON is to open a cancer treatment center in Bristol, Rhode Island, which AMS believes is an underserved market. The other is to install a PBRT device in the state. We are optimistic about the prospect of installing a new PBRT device, but note that the design, facility construction and installation process is lengthy.

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