American Shared Hospital Services — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; comparative figures are for fiscal 2022. This is an annual filing, not a standalone fourth-quarter report. The company provides Gamma Knife radiosurgery and proton beam radiation therapy (PBRT), through equipment leasing and direct-patient facilities.
Financial performance
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Revenue | $21.325 million | $19.746 million | +8.0% |
| Gross margin | $9.344 million (43.8%) | $8.382 million (42.4%) | +11.5% |
| Operating income | $0.270 million | $2.431 million | Down $2.161 million |
| Net income | $0.265 million | $1.555 million | Down $1.290 million |
| Net income attributable to ASHS | $0.610 million; $0.10 diluted EPS | $1.328 million; $0.21 diluted EPS | Down 54.1% |
| Cash from operating activities | $5.718 million | $7.235 million | Down $1.517 million |
- Revenue growth reflected higher PBRT revenue and equipment-sale revenue. Leasing revenue was $17.772 million; direct-patient revenue is reported as $3.353 million in the financial statements. Net equipment-sale revenue was $0.200 million.
- Gamma Knife revenue rose 1.8% to $10.992 million, although procedures fell 7.1% to 1,195, largely following the expiration of two U.S. contracts. PBRT revenue increased 13.2% to $10.133 million, on 1.4% more treatment fractions and higher average revenue per fraction.
- Costs of revenue rose 5.4% to $11.981 million. Selling and administrative expense increased 36.5% to $7.022 million, including about $0.919 million of fees associated with business opportunities, including the proposed Rhode Island acquisition. Interest expense rose 38.0% to $1.112 million.
- The company recorded $0.940 million of impairment and equipment-removal costs. Depreciation estimates for a retail Gamma Knife unit reduced 2023 net income by approximately $0.207 million, or $0.03 per diluted share.
Liquidity, cash flow and debt
- Cash, cash equivalents and restricted cash totaled $13.808 million at year-end, versus $12.453 million a year earlier. Working capital was $9.677 million, down from $13.548 million.
- Investing activities used $6.273 million, mainly for equipment purchases and the Puebla, Mexico LINAC project. Financing activities provided $1.910 million. Accounts receivable increased to $4.343 million, and year-end days sales outstanding increased to 74 from 70.
- Long-term debt, net, was $13.125 million at year-end, in addition to a $2.500 million revolving-line balance; the company repaid the revolver balance in January 2024. The Fifth Third credit agreement includes a $7 million revolving line and matures in April 2026. In January 2024, a further $2.7 million term loan was added to finance Puebla-related capital expenditures; the agreement’s floating rate was changed from LIBOR-based to SOFR plus 3.00%.
- The company reported $15.925 million of equipment-purchase and installation commitments and $14.805 million of service commitments at year-end. It stated there were no significant cash requirements for the purchase commitments in the next 12 months, pending financing.
Material changes, outlook and risks
- Medical-equipment leasing sites declined from 13 to 11 during 2023, including two Gamma Knife contracts that expired. One remaining customer contract was due to expire in November 2024.
- Management expected the Puebla facility to begin treating patients in June 2024. The company also planned to replace the Peru Gamma Knife with an Esprit unit in late 2024.
- The proposed Rhode Island acquisition would purchase 60% interests in two companies operating three cancer centers for $2.85 million. Closing remained subject to approvals and other conditions; the termination deadline was extended to April 30, 2024, and management anticipated conditions would be met in April. Closing was not assured.
- HoldCo was not in compliance with certain DFC loan covenants at December 31, 2023. DFC granted a waiver and amendment on March 28, 2024; management expected compliance under the amended and waived terms by March 31, 2024. The company said it was in compliance with its Fifth Third covenants at year-end.
- Management said available cash, borrowing capacity and capital resources were sufficient for current operations, debt commitments and funding needs for the 12 months following the report. This outlook depends on operating cash flow, financing availability and covenant compliance.
- Key risks include customer concentration—one customer generated approximately 48% of 2023 revenue—government reimbursement and payor-mix changes, capital-intensive projects, equipment obsolescence, debt and covenant constraints, and execution and integration risks if the Rhode Island acquisition closes. Medicare Gamma Knife reimbursement declined to approximately $7,420 per delivery in 2024 from $7,691 in 2023.
- Revenue-sharing arrangements represented approximately 70% of total revenue and depend on estimated reimbursement and payor mix. The auditor identified those revenue estimates as a critical audit matter. The company reported effective disclosure controls and management-assessed internal control over financial reporting as effective; the auditor did not express an opinion on internal controls.
Important facts for investors to verify
- Reconcile direct-patient revenue: the statement of operations reports $3.353 million for 2023, while the MD&A and segment note report $3.553 million. The filing text does not provide a clear explanation for this difference.
- Confirm the status and final terms of the Rhode Island acquisition, including required regulatory and stakeholder approvals, and assess the target companies’ liabilities and integration costs.
- Review the DFC covenant waiver and amended terms, subsequent compliance, and the company’s debt-service capacity and available borrowing headroom.
- Assess whether customer concentration, receivable collection trends, reimbursement rates and revenue-sharing estimates support reported revenue and cash generation.
- Evaluate the funding, timing and expected returns for Puebla and other equipment commitments, including the substantial related-party purchases and commitments involving Elekta.