By M. Marin
NYSE:AMS
READ THE FULL AMS RESEARCH REPORT
Momentum accelerating, with Rhode Island cancer centers, plus new Linear Accelerator in Mexico representing new revenue sources…
Founded in 1983, American Shared Hospital Services (NYSE:AMS), which provides stereotactic radiosurgery equipment and advanced radiation therapy treatment systems to treat cancer patients, reported 2023 results last week and provided a business update. AMS has embarked on an ambitious expansion and revenue diversification strategy. AMS recently launched a business model to own and operate equipment itself at select locations, an initiative that is expected to boost revenue growth. The agreement to acquire controlling 60% interest in three radiation therapy cancer centers in Rhode Island is expected to expand the direct footprint (AMS also currently owns cancer care treatment centers in Peru, Ecuador and Mexico) and 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.
With revenue growth accelerating in 4Q23, the pending acquisition of three Rhode Island cancer centers expected to close this month and non-recurring costs expected to fall in 2024, we are optimistic about the company’s outlook. In addition to the pending Rhode Island transaction, the company also has a new site in Puebla, Mexico with a Versa HD Linear Accelerator that is slated to begin treating patients in 2Q24 and expected to produce a new revenue stream once patient treatments begin.
AMS targets driving sales volume and revenue growth through both geographic expansion and by developing or expanding existing and new business lines to support medical center customers that want to offer advanced radiation therapy technologies involving costly equipment. For example, the company’s Proton Beam Radiation Therapy (PBRT) business line, is a relatively new business for AMS. Revenue for the PBRT system at Orlando Health increased 13.2% y/y in 2023 to $10.1 million. Reflecting the apparent benefits of PBRT therapy and economics of owning the equipment, AMS has indicated that it would consider a direct retail network of PBRT footprint when/where it can, although the company will also continue to engage in discussions with medical centers for partnership agreement via the traditional business model.
Gamma Knife upgrades and de novo installations are also expected. AMS recently extended four Gamma Knife contracts that were set to expire. The company has indicated that it is engaged in multiple discussions for additional new business opportunities.
Strong balance sheet to support growth, plus solid cash flow generation and access to capital
The company has a management team with extensive industry related experience to support its growth strategy and a strong balance sheet. AMS ended December with $13.8 million in cash and equivalents and amended its credit facility in 1Q24 to attain increased financial flexibility. The facility includes a $7 million revolving line of credit. The company also consistently generates positive cash flow, which has averaged about $8 million per annum since 2013.
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