Vaxcyte Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 8, 2024

There are 9 speakers on the call.

Operator

Good day,

Speaker 1

And welcome to the Sensus Healthcare 4th Quarter and Full Year 2023 Financial Results Conference Call. All participants will be in a listen only mode. Please also note that this event is being recorded today. I would now like to turn the conference over to Kim Golodetz. Please go ahead.

Speaker 2

Thank you, operator. This is Kim Golodetz with LHA. Thank you all for participating in today's call. Joining me from Sensus Healthcare are Joe Sardano, Chairman and Chief Executive Officer Michael Sardano, President and General Counsel and Javier Rampola, Chief Financial Officer. As a reminder, some of the matters that will be discussed today's call contain forward looking statements within the meaning of federal securities laws.

Speaker 2

All statements other than historical facts That address activities Sensus Healthcare assumes, plans, expects, believes, intends or anticipates and other similar expressions will, should or may occur in the future are forward looking statements. The forward looking statements are management's beliefs based on currently available information as of the date of this conference call, February 8, 2024. Sensus Healthcare undertakes no obligation to revise or update any forward statements except as required by law. All forward looking statements are subject to risks and uncertainties as described in the company's Forms 10 ks and 10 Q. During today's call, references will be made to certain non GAAP financial measures.

Speaker 2

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 in accordance with GAAP. A reconciliation of non GAAP to GAAP results is included in today's financial results press release. With that said, I'd like to turn the call over to Joe Sivano. Joe?

Speaker 3

Thank you, Kim, and good afternoon, everyone. Our 4th quarter financial results reflects our customers' acclimation to an inflationary environment as well as their understanding of the compelling financial proposition and better patient outcomes of SRT to treat non melanoma skin cancer and keloids. Sales improved substantially as we shipped 33 systems during the quarter, including 3 SRT systems outside the United States. This brings the total number of units shipped in 2023 to 66 units. We are fast approaching a total unit installation of 800 systems.

Speaker 3

For Q4, revenues were $12,600,000 versus 13 $1,000,000 a year ago, up more than threefold sequentially. We expect an uptick in the 4th quarter, are seasonally strongest as utilization of SRT to treat non melanoma skin cancer continues to increase. This increased utilization is being driven by favorable reimbursement and aging population and clinical results that are at least as good if not better than Mohs surgery. For quite some time customers and prospects alike have been for new ways to add SRT to their practices. As always, we listen closely to our market and we're delighted to meet their needs with highly competitive offering.

Speaker 3

This new recurring revenue model complements our capital equipment sales model, which you'll recall was enhanced with our fair market value lease, which we introduced in 2021. This new model provides recurring revenue to Sensus and expands our market by providing another viable option to bring SRT to dermatology practices. During the Q4, we made our first placement under this model. We've been carefully preparing this recurring revenue model over the past year, making sure that the economics work for both our customers and for Census and ensuring we were abiding by all applicable laws and regulations. Note also that the capabilities of SRT-one hundred Vision with image guided ultrasound and SENTINEL technology make the recurring revenue model possible.

Speaker 3

I've mentioned on previous quarterly calls that this advanced technology is expected to play a key role in our growth and now you may understand why we've been so excited with SENTINEL. This is our HIPAA compliance software with clinical, billing and asset management utility that also allows us to track utilization in real time. This technology is ideal for better managing dermatology clinics for all of our customers and is a Sensus Healthcare exclusive. During 2023, we also introduced an important new and improved high resolution ultrasound technology to provide see and treat capability. This leads to great clinical outcomes because the physician can actually see the impact of each treatment on the lesion and lesion resolution after treatment.

Speaker 3

We're looking forward to more directly benefiting from the SRT treatment growth rates we've seen. Recall that earlier in 2023, we found in our surveys of Medicare that SRT experienced a 27% year over year treatment growth rate for the 6 years we reviewed. Should this growth rate continue, SRT will soon become the treatment of choice for non melanoma skin cancer. We're very excited to be interacting with customers and prospects during the coming weeks. This weekend, we'll be showcasing our SRT products, in particular, the SRT-one hundred Vision IG SRT system and the SENTINEL technology and Sensus cloud capabilities at the South Beach Symposium, which begins today in Miami.

Speaker 3

We'll also be at the Winter Clinical also in Miami beginning February 16. We'll follow those conferences up the American Academy of Dermatology's Annual Meeting being held March 8 through 12 in San Diego, where we will have a very strong presence. While dermatology is our primary market, we continue to engage with the radiation oncology market, is mainly a hospital based channel. As mentioned last quarter, we've had good success in this area, having recently placed an SRT system at Cape Cod Hospital. As a reminder, this market has a longer sales cycle as we continue to see increased interest.

Speaker 3

With respect to the transdermal infusion product, we filed our 510 application with the U. S. FDA in October of 2023 and are hopeful that we'll be hearing from the agency in the coming weeks. This system will, for example, allow platelet rich plasma or PRP to be applied to the scalp in a pain free hair restoration experience. In addition, posters have already been presented on the application of hyperhidrosis or overactive sweat glands.

Speaker 3

Our transdermal system includes SENTINEL IT solution capabilities as do all 6 of our Sensus branded aesthetic smart lasers. We will be exhibiting our TDI product at the upcoming dermatology trade shows as a works in progress. With those remarks, I'll turn the call over to Michael Sardano, who in addition to his duties as President and General Counsel, joined our Board of Directors last week. He'll give you a brief update on our international business and talk about our new collaboration with Qurais. Michael?

Speaker 3

Thanks,

Speaker 4

Joe. We spent the last year working to open up new international territories, which requires both regulatory approvals and strategic engagement of distributors. We continue to support our international distributors across Asia, Europe and the Middle East, and we are developing a number of promising opportunities to supplement our strong demand in China. We sold a total of 13 systems internationally in 2023, which includes sales to 3 new territories for Sensus during the year, namely Ireland, Guatemala and Turkey. As I stated in our last earnings call in November, our plan is to our Latin American, European and Asian footprint as quickly as possible with Brazil and Japan being longer term prospects as they are highly regulated.

Speaker 4

Our goal is to open 2 to 3 new territories per year, which we achieved in 2023. Turning back to the U. S. Market. Earlier this week, we announced a collaboration with Cureraise.

Speaker 4

Cureraise is led by 2 radiation oncologists, Doctor. Mohammad Khan, who is on the Census Medical Advisory Board and is Vice Chair for Radiation Oncology Education at Emory University in Atlanta and Doctor. Clayton Hess, who is the Director of Dignity Health at Sierra Nevada Memorial Hospital in California. Curease has purchased an SRT-one hundred Vision and will be treating patients out of their California headquarters. Pureraise is focused on 3 main endeavors, the treatment of patients for non melanoma skin cancer and keloids, treatment oversight for Sensus' dermatology customers and conducting clinical trials with the use of Sensus' SRT technology.

Speaker 4

Qurease will be instrumental to our reoccurring revenue model, and we are very excited to be partnering with them. With that, I'll turn the call over to Javier for a discussion of our financial results.

Speaker 5

Thanks, Michael, and good afternoon, everyone. As Joe mentioned, Our revenues for the Q4 of 2023 were $12,600,000 and this compares with revenues of $13,100,000 year ago and revenues of $3,900,000 in the Q3 of 2023. The decrease versus the prior year reflects a lower number of SRT units sold. Gross profit for the Q4 of 2023 was 7,800,000 or 62.3 percent of revenues compared with gross profit of $8,400,000 or 63.7 percent of revenues for the Q4 of 2022. The decrease was primarily due to the lower number of units sold in the 2023 quarter.

Speaker 5

Telina marketing expense for the Q4 of 2023 was $600,000 compared with $1,600,000 for the 4th of 2022. The decrease was primarily attributable to lower compensation expense, partially offset by higher trade show costs. General and administrative expense for the Q4 of 2023 was $1,000,000 compared with $1,400,000 the Q4 of 2022. The decrease was due to lower compensation expense in the 2023 quarter and higher bad debt expense in the prior year quarter. Research and development expense for the Q4 of 2023 was $7,000,000 compared with $1,200,000 in the same quarter last year.

Speaker 5

The decrease was primarily due to the completion of development of a delivery system for the aesthetic market. We have submitted a 510 application to the U. S. Food and Drug Administration I have completed most of the work on this project. Other income of $200,000 for the Q4 of 2023 was mostly related to interest income and was unchanged from the Q4 of 2022.

Speaker 5

Net income for the Q4 of 2023 was $7,000,000 or $0.17 per diluted share for the Q4 of 2022. Adjusted EBITDA, which we define as earnings before interest, taxes, depreciation, amortization and stock compensation expense was $5,700,000 for the Q4 of 2023, up from $4,300,000 for the Q4 of 2022. Let me touch on a few out of full year financial results highlights. Revenues for 2023 were $24,400,000 compared with $44,500,000 for 2022, reflecting a lower number of facility units sold as customers deferred purchases due to macroeconomics conditions and lower sales to a customer in 2023. Gross profit was $14,100,000 for 2023 or 57.6 percent of revenues compared with $29,600,000 or 66.5 percent of revenues for 2022, reflecting a lower number of unit sold and higher cost charge by vendors in 2023.

Speaker 5

Selling and marketing expense was $5,600,000 for 2023 compared with $6,300,000 for 20 due to lower compensation expense offset by higher trade show expenses. General and administrative expense was $5,200,000 for 2023 compared with $5,000,000 for 20.22 with the increase reflecting higher professional fees and compensation expense. R and D was 3,700,000 for 2023 compared with $3,500,000 for 20.22 with the increase largely due related to the development of a drug delivery system for aesthetic use. Other income net of $1,000,000 for 20.23 was mostly related to interest income. Other income net of $13,200,000 for 20.22 was related primarily to the gain of $12,800,000 on the sale of a non core asset.

Speaker 5

Net income for 2023 was $500,000 or $0.03 per diluted share, and this compares with net income for 2022 of $24,200,000 or $1.46 per diluted share. Net income for 2022 includes the $12,800,000 gain on the sale of a non core asset. Adjusted EBITDA for 2023 was $300,000 compared with 28.1 $1,000,000 for 20.22. Turning now to our balance sheet. Cash and cash equivalents of December 31, 2023, were $23,100,000 versus $25,500,000 as of December 31, 2022.

Speaker 5

The company had no outstanding borrowings under its revolving line of credit as of year end 2023 or 2022. We built finished goods and inventory and prepaid for materials earlier during 2023, in part to get ahead of any price increases and to prepare for the anticipated growth, especially from the recurring revenue model. At the end of 2023, Inventories were $11,900,000 well above $3,500,000 as of the end of 2022. Prepaid inventory was $3,000,000 at the end of 2,003 versus $6,600,000 at year end 2022. Us well to take advantage of the compelling growth opportunities we may come across or that we may create ourselves.

Speaker 5

As a final comment, please see the table in the news release we issued earlier today for a reconciliation of GAAP to non GAAP financial measures. With that, I'll turn the call back to Joe.

Speaker 3

Thanks, Javier and Michael. The ROI for our premium SRT system under our fair market value leasing program continues to be compelling and although it's early, our initial introductions of our recurring revenue model are being met with great deal of interest. With the many upcoming medical meetings, I'm sure we'll gain momentum for this program as the word spreads. Published studies have shown that SRT clinical results are as good or better than Mohs surgery and certainly it's non invasive leaving no scarring. There's no question that SRT and IG SRT have become the number one option to surgery.

Speaker 3

As I've said many times, we are still in the early stages of tapping the enormous market opportunity for SRT, just in non melanoma skin cancer and keloids. Our systems are well positioned in a large and largely untapped market. They provide a compelling alternative to surgery for millions of patients and arguably the only solution to prevent the recurrence of keloids following excision. As an overlay to all of this, An estimated 1 in 5 Americans will develop skin cancer during their lifetime. This tells us that nearly 70,000,000 people will have non melanoma skin cancer.

Speaker 3

So clearly, there's a need for our SRT systems both now and even more so in the future. We are confident that Sensus is positioned for success and we have a great team to drive growth and implement our strategies. With those comments, I thank you for your time and attention. And now operator, we're ready to take questions.

Speaker 1

And our first question will come from Alex Nowak with Craig Hallum Capital. Please go ahead.

Speaker 6

Okay, great. Good afternoon, everyone. Joe, I was hoping you could expand on the new recurring model that you placed here. Maybe kind of walk through how This came together all the work you've been doing in the background to make it possible. Maybe something touch on the economics, just Some more detail as you're venturing into the recurring model versus the CapEx model that we certainly know very well.

Speaker 3

Sure. First of all, we've been evaluating this model for quite some time and We wanted to make sure that we were timing it right for when we would bring it to market. And I would tell you that over the last year to 2 years, we've been engaged with our customer base, our prospect base who have continued to ask us to get involved in a recurring model, recurring revenue model such as this. And so in listening to them, we've decided to that this is the right time for us come into this market and it is a good opportunity to complement the existing offerings that we have in fair market value leases as well as the other SRT-one hundred products that we have as well. So with that being said, The model is a model where we can come in and provide a service using our technology along with HR or people that would assist.

Speaker 3

We've provided some support with Qurate's people being able to provide oversight for these customers, and we're working closely with independent dermatology based coding and billing experts that could help us and help our customers with that endeavor. So we think that we have all the tools necessary to provide a turnkey position with the SRT 100 Vision IG SRT program that gives them another choice in getting SRT into their practice.

Speaker 6

Makes total sense. You might not want to go into the economic piece

Speaker 7

On the

Speaker 6

call here, but I'll try for it anyway. If you place an SRT vision, is this something that will under normal utilization pay itself back over. Help us out around there.

Speaker 3

Yes. Of course, it has to work out for both sides. So for us, it will allow us to get involved with the recurring revenue model. And I would tell you this that I think that we will target A bunch of units that will be installed this year and it will probably be the Q1 and Q2 of next year before we start recognizing substantial or incremental revenues that we can claim for the following year. I don't see Significant revenues happening this year, but I think that it will be a start.

Speaker 3

And I think as we continue to play systems over the coming years, It will generate an awful lot of revenue for the company long term, along with selling the products as well.

Speaker 6

Yes, no doubt. Does the model change the SkinCure relationship at all?

Speaker 3

No, it shouldn't. I think it this complements The offering that we have, SkinCure is doing very, very well on their own. They have an excellent format and an excellent model that works very, very well for the customer base that they have. But it seemed like over the last year or so that there were customers or prospects were left out of that where they didn't want to go one way or the other and this provides them with an alternative. So for us, it's just an additional tool that allows A lot more prospects to come into play.

Speaker 3

If you look at what we did with the fair market value lease, that provided a lot customers the opportunity to move up from an SRT-one hundred to an SRT-one hundred Vision. So it made it more affordable. This is going to further enhance The more customers to want to get involved with SRT-one hundred, especially the 100 Vision IG SRT product. And what we're trying to do overall is make this more available to more patients who are looking to get this done. So this just adds to our vocabulary, if you will, or the armaments that we have, the tools in our toolbox.

Speaker 3

Then just

Speaker 6

maybe just a last set of questions. Big Q4 bounced back after what has been a difficult, let's call 18 months With the market environment that's out there in Aesthetics and Dermatology, just expand on what you're seeing out there. Q4, is this the turn back We're going to be 2024 is going to be back in a positive momentum from here. What is it how are Q1 places looking like? And then just lastly on the cost cuts, it looks like you implemented a number of cost cuts, maybe walk through a little bit more there.

Speaker 6

Let's get a stick.

Speaker 3

Sure. Well, if you recall, we announced after the Q1 that we had been speaking to a lot of our customers, thanks to the early meetings and conferences that we had in February March as we are coming upon those same types of meetings again this year. And in listening to those customers, we started to understand Where they were hurting and how they were getting impacted by the economy and inflation with less people coming through their doors getting the aesthetics work that they required which was cash business for them. And based on that and then following up at the AAD, I mean, it was pretty much clear where the market was going. And after the Q1, we pretty much announced that to a lot of people.

Speaker 3

Not a lot of people believe this at that time, but I think that it proved out over the course of the year. And quite frankly everything that we said would happen as we forecasted the order and provided what we thought was guidance for where the year was going. I think it proved out exactly where we were. And I think we did a little better than where the market actually was leading us from the first, second and third quarter then when we got into the Q4. So how does this look for the Q1 and beyond for 2024?

Speaker 3

Well, of course, we have excitement as we're moving into the new year because we ended the year with Some great momentum. We're introducing a new model, which we think is going to take up a lot of space as far as taking on a lot of products that we're going to install. But I think it's also going to lead to more sales because I think People are going to continue to buy the product versus having to share revenues with anybody. I think it's going to bring some customers to base and give them Give us a whole lot more flexibility on what we're offering. And then we're pushing really, really hard with the FDA for the TDI product And we're gaining a lot of interest in that.

Speaker 3

We can't really push it or sell it. We can show it as a works in progress. But there's once we get FDA clearance For that, I think it's going to generate some good revenue and you're looking at $1,000,000 to $2,000,000 is what we're predicting or identifying as that potential revenue for the entire year. So with all that being said, yes, we hope that there's no more world strife. We hope that there's no more inflation.

Speaker 3

These are all things that we can't control. We're in the middle of an election year. Take all that away and we're enthusiastic about what we're doing because more and more patients are going to have access to SRT, which means that they're going to have More treatments being done on SRT and we want to participate in that and that in the short and long term is going to generate more revenue for I think we're establishing ourselves with a total solutions turnkey type of operation to address Almost every instance that our customers looking for to acquire SRT because they recognize the fact too that they need SRT to treat skin cancer because there's just not enough doctors to go around for the amount of skin cancer that exists. So we're excited it's going to hit on all the revenue points that we possibly can get including recurring revenues now that we're looking at on top of service revenues that continue to increase. And so I have to say that we're very enthusiastic and we're just going to drive and execute as we have.

Speaker 3

And again, I'm going to thank the entire team headed by Javier that's kept us Extremely disciplined on our expenses and we've always been extremely mature about those and disciplined about it. And I think that we continue to be even more disciplined as the years go on and as the months and days go So again, we're overall overexcited in every way.

Speaker 6

It's great to hear. Appreciate the update. Thank you.

Speaker 3

No. Thank you, Alex.

Speaker 4

Thanks, Alex.

Speaker 1

And our next question will come from Yi Chen with H. C. Wainwright. Please go ahead.

Operator

Thank you for taking my questions. My first question is, the number of systems shipped in the quarter, that includes the assistant under the recurring revenue model, correct?

Speaker 5

No, it doesn't.

Operator

No, it doesn't? Okay.

Speaker 1

No, it doesn't. Okay.

Operator

So The 66 units

Speaker 3

that we talked about were ones that recognize revenue.

Operator

Okay. So for 2024, do you expect the models under the recurring revenue I mean systems shift under the recurring revenue model could increase significantly and maybe potentially overtake the number of systems shipped under the capital purchase?

Speaker 3

We don't feel that way, Yi. We think that it's going to complement our selling. But again, it's not going to I don't think it's going to overtake selling the equipment outright, but it's just another way for our customers to acquire The system now I don't know what it's going to be like in a year or 2 years from now, but I would tell you that In this 1st year of initiating recurring revenue model, we still expect to sell more units than provide in the recurring revenue model platform.

Operator

Do you have to share any part of the recurring revenue with QRe's?

Speaker 7

No.

Operator

At this point, how many systems you expect to ship to be shipped in 2024?

Speaker 3

I don't want to go there. We're always going to try to push for more. But again, it all depends on how the year works out. I mean, when we started when we were at this Last year at this time, we were expecting some big things happening in 2023 after such a great Q4 as well. But didn't turn out that way.

Speaker 3

Inflation hit really hard. So it makes you worry about predicting things and saying things. We would rather Overachieve and under commit versus going the other way, we don't want to disappoint anybody, but I can assure you that Everybody in the team is going to work very, very hard to make sure that we achieve better than what we did the year before.

Operator

Okay, got it. And shall we expect the gross margin to improve in 2024 as you place more units under the recurring revenue model?

Speaker 5

So I will give the margins, Yi, the way they are right Now we're basically at the early stage of this program. So I will just keep them the way it is and that will continue to improve as we continue developing this program.

Operator

Okay, got it. Thank you.

Speaker 7

Thank you, Yi. Thanks.

Speaker 1

And our next question will come from Anthony Vendetti with Maxim Group.

Speaker 8

So if we could just dig in a little more into The utilization trends that you're seeing for the systems that you have out there. And do you have a total installed base at this point number that you can share? And then just an update, I know you're awaiting FDA approval for your transdermal infusion system, but where is that exactly and I guess, obviously, up to the FDA, but what's your expectation for final approval?

Speaker 3

Number 1, we have over 7.50 installations of SRT products around the world. So we're closing in hopefully sometime in this fiscal year we'll hit 800 and go beyond. The we submitted the TDI product in October of 2023. And I couldn't predict when the FDA will finally approve it, but we sure would like to get FDA clearance by the time We get to the AAD in March, the 2nd week in March. If we had that approved, I think that we could start Shipping units in April, we've begun the process of working with manufacturing and getting things lined up for that process.

Speaker 3

So I think that we'll be ready to ship in the Q2 of this year as long as we get FDA clearance in the Q1.

Speaker 8

Okay. No, that's great. And just any type of utilization trends that you're able to glean from your sentinel system or just from what you're hearing from the physicians?

Speaker 3

Yes, I think that we're seeing the same as we've seen in the past with the 27% increase year over year. Clearly, the volumes continue to go up. And so there's more and more people that are getting their bodies scanned or whatever for skin cancer and they seem to be choosing the non invasive way of being treated. So It's a fast way. It's a more productive way.

Speaker 3

It's a good cash flow for the doctors. There's a lot of good points for all of this to happen. And I think that that trend is going to continue to grow and there's no question in my mind as I've stated before that this will sooner or later become the number one choice for treatment of non melanoma skin cancer. I think it will be the treatment of choice very, very shortly.

Speaker 8

Okay, great. And then just lastly, in terms of the recurring model, Is there a minimum number of treatments? I know in the fair market lease, it's relatively It's 2%, 2.5%, depending on the interest rate, I guess, treatments per month or whatever to just breakeven, which is obviously Not a large number, but in terms of how many treatments do they have to perform in order to get the placement or is it a placement and it's just a revenue sharing program?

Speaker 3

Yes. First of all, the although 2 patients is the approximate breakeven to own a system or to buy a system, There's not a minimum number of units or patients that must be delivered with a recurring revenue. But I would tell you that we don't have any of our customers currently with SRT that do less than 10 patients a month for the most part. And we have some customers that are doing 50 60 patients a month. So we're seeing some very high volumes at those sites.

Speaker 3

And so clearly we're going to approach The customers and the customers who are interested in this model are the ones that know that they have some decent volumes. They're going to come to us and we're going to come to whatever agreement we're going to establish. But clearly, I think The model that we're going to have is that if the doctors do a lot of patients, they're going to have the ability to keep most of their money. And I think that's going to be a fair valuation for us and I think that it's going to be profitable for us and profitable for them. So We're looking forward to introducing this model to them.

Speaker 3

I think that they'll agree that this is something that is going to be worthwhile for them to review. But I would also tell you this, if we made 10 presentations to 10 different customers on the recurring revenue model, I'll bet you 5 end up buying it anyway.

Speaker 8

Right, right. Okay. Especially if you're say as you're saying that on average, The physicians that purchased the product see 10 patients a month and some see many more than that. They may decide the fair market lease Is it better way of going it than sharing revenue? So but you've given them the option, which theoretically for some that are reticent necessarily to either go the lease route or lay out the cash could increase the adoption rate in 2024.

Speaker 4

Yes. Additionally, this is Michael. Hey, Anthony. How are you? Good.

Speaker 4

Part of this model also is that we're going to be taking away some of the work from an operation standpoint that go into the practices. So certain practices are actually willing to pay us on the outside to supply some personnel that would take away some of the operational work from the practice itself so that they could concentrate on other areas of the business. So we would be supplying those personnel to then take away that work. Okay, interesting. Okay, great.

Speaker 4

That's helpful color. I appreciate it. I'll hop back in the queue. Thanks. Thanks, Anthony.

Speaker 4

Thanks, Anthony.

Speaker 1

Our next question will come from Haynor with Alliance Global Partners. Please go ahead.

Speaker 7

Good afternoon, gentlemen. Thanks for taking the questions. Can you hear me okay?

Speaker 8

Yes, sir. Hey, Ben.

Speaker 7

So just to maybe clarify, how many different components will go into the recurring revenue model? I mean, it sounds like there's potential for rental, there's potential for a click fee, there's potential for some of the folks that are the personnel that you're putting on the ground. What could that fee encompass or how does that fee ultimately get put together On the mobile or quarterly or whatever it is?

Speaker 4

Yes. Thanks, Ben. Hey, Michael. Thanks for the question. So there's really 2 components to it.

Speaker 4

There's the device component and then there's the personnel component. So on the device side, it's simple The SRT-one hundred Vision, they utilize it the same way that they would if they purchased it or leased it. And on the personnel side, as I just said to Anthony, We would supply these personnel, mainly a radiation oncologist, an RTT and a physicist to do the work that these practices are usually on their own for. So for instance, if you bought a car, I always just use cars as an example, You'd have to take the car in to Toyota or what have you and have that fixed. Well, now we're going to do that for you.

Speaker 4

In addition, we can drive the car for you and we can do all the things that you'd normally have to do from a responsibility standpoint and an operations aspect. So some practices are very interested in that just because they're busy with other things.

Speaker 7

Okay. That makes sense. That's helpful. And then, I mean, do you have a sense on how much Demand there was out there for the recurring revenue model and providing the personnel that you haven't been able to fulfill just because you haven't had it in the past?

Speaker 3

Well, I can tell you that based on the meetings that we've had with people and people asking us about the model and interested in getting into this, I think the interest is very, very high. So I think the opportunity to make these presentations is extremely important. And I think the biggest impact that we're going to have is going to be with the bigger models, the bigger private equity backed Groups that are looking at this model and being very, very serious about it because they would like to use their capital to buy more clinics. And so we free up a lot of their capital to be able to do this. So I think that's where our biggest opportunity is going to be with this model.

Speaker 7

Okay. That's definitely helpful. And then on the expense side of the equation, obviously, great job controlling expenses. In particular, on sales and marketing, is that decline partially a function of moving to the recurring revenue model as well or is that just Straight up costs at all.

Speaker 5

So in Q4, we experienced a one time reduction in compensation expense that we recorded. So that is basically what is driving the decrease in selling marketing in Q4, Ben.

Speaker 7

Okay. And Keith, can I quantify that for me? I mean, is it $500,000

Speaker 5

It was about 800,000.

Speaker 7

Okay, great. I guess that's all I had, gentlemen. I'll take the rest offline. Thanks, Ben. Thanks, Ben.

Speaker 1

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

Speaker 3

Thank you. Thank you once again for your time this afternoon and for your interest in Sensus Healthcare. I'd like to mention that we'll in the 36th Annual ROTH Conference being held at Dana Point, California from March 17 through 19, and I hope to see some of you there. We'll speak with you again when we report Q1 financial results in May. In the meantime, thanks again for joining us today.

Speaker 1

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

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