Good day, ladies and gentlemen, and welcome to your Sensus Healthcare Conference Call [Operator Instructions]. At this time, it is my pleasure to turn the floor over to your host, Ms. Kim Golodetz. Ma'am, the floor is yours.

Thank you. This is Kim Golodetz with LHA. Thank you all for participating in today's call. Joining me from Sensus Healthcare are Joe Sardano, Chief Executive Officer; and Javier Rampolla, Chief Financial Officer. As a reminder, some of the matters that will be discussed during today's call contain forward-looking statements within the meaning of federal securities laws. All statements other than historical facts that address activity Sensus Healthcare assumes, plans, expects, believes, intends or anticipates or 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. Sensus Healthcare undertakes no obligation to update or revise any forward-looking statements, except as required by law. All forward-looking statements are subject to risks and uncertainties, including the continuation and severity of the COVID-19 pandemic and its impact on sales and marketing, as described in the company's Form 10-K and 10-Q. During today's call, there will also be references to certain non-GAAP financial measures. Sensus believes these measures provide useful information for investors yet should not be considered as a substitute for GAAP nor should they be viewed as a substitute for operating results determined 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 Sardano. Joe?

Thank you, Kim, and good afternoon, everyone. I hope everyone has remained healthy and is keeping safe as the country continues to battle the COVID-19 pandemic. As we expected and stated during our last earnings call, our quarterly revenues continue to be negatively impacted by COVID-19. Yet, we did see improvement as third quarter revenues of $1.6 million were up sequentially from second quarter revenues of $1.2 million. We continue to take all the steps necessary to keep Sensus on firm footing and prepare our company for rapid growth when the pandemic subsides. While our physician customers are focused on rebuilding patient traffic, we have used the past months wisely to lay the foundation for what we believe will be a profitable 2021. And as I described last quarter, during Q3, we continued to maintain strong customer ties via consistent outreach and sponsorship of helpful Zoom meetings with topics of interest to our customers. We continue to affirm SRT as an attractive alternative to most surgery as physicians are reluctant to incur the risk of infection and adverse events during this time. Our communications also included the recent American Society of Radiation Oncology's recommendation of SRT as the first-line alternative to surgery when treating patients with non-melanoma skin cancer. I'll remind you that ASTRO has more than 10,000 members and is the world's premier radiation oncology society and the authority on radiation therapy. Recall that approximately 15% of our installed base are in hospitals under the direct supervision and management of the radiation oncology departments. Those professionals recognize that SRT is the best radiation for this indication. Just last week, we participated in this year's virtual ASTRO meeting that was virtually well attended. In case for SRT was further reinforced by a retrospective study published in October in the Journal…

Thanks, Joe. It's a pleasure to be speaking with all of you this afternoon. Revenues for the third quarter of 2020 were $1.6 million compared with $5.8 million for the third quarter of 2019. As you are all aware, revenues were adversely impacted by lower unit sales through the quarter due to the COVID-19 pandemic. Revenues were derived from service contracts, our new mobile laser business and the sale of 2 SRT-100 system to customers in China. Gross profit for the third quarter of 2020 was $0.7 million or 41.5% of revenues compared with $3.8 million or 65.8% of revenues for the third quarter of 2019. Gross profit for the third quarter of 2020 was $0.7 million or 41.5% of revenue compared with $3.8 million or 65.8% of revenues for the third quarter of 2019. The overall decrease in gross profit was mostly due to the decrease in units sold as a result of the COVID-19 outbreak while still incurring fixed cost, depreciation and amortization expenses. Selling and marketing expense for Q3 of 2020 was $1 million compared to $2.1 million for the third quarter of 2019. The decrease was primarily attributable to cancellations of in-person trade shows due to COVID-19, a decrease in commission expense due to lower sales and reduced spending on marketing activities. General and administrative expense for the third quarter of 2020 was $1 million, relatively unchanged from the third quarter of 2019. Research and development expense for the third quarter of 2020 was $0.9 million compared with $1.6 million for the third quarter of 2019. The decrease was primarily due to a reduction in expense related to the development of the Sculptura system. We had other income of $0.6 million in the third quarter of 2020 compared with $0.1 million for the third quarter of…

Thank you, Javier. As Javier just discussed, we have judiciously controlled our expenses and this careful attention, along with non-dilutive capital resulted in an increase in cash and equivalents to $16.1 million as of September 30 from $15.5 million as of December 31, 2019. We believe our capital structure is healthy and will support the resumption of growth we expect in the fourth quarter and throughout the coming year. I must reiterate the congratulations I expressed last quarter to the Sensus’ team for their focus on our customers. We expect a better financial performance in the fourth quarter, and we look forward to an excellent 2021 with higher reimbursement amounts for SRT increased work with Sculptura and commercial sales as well as the contribution from our newly acquired companies Sensus Laser Aesthetic Solutions. I'll remind you that our products have enormous room to grow. Our SRT systems are well positioned in a large market consisting of some 14,000 dermatologists, 1,000 most surgeons in the U.S., representing more than 7,500 offices and growing. Not to mention a further 6,500 plastic surgeons and 5,500 radiation oncologists. We provide a compelling alternative to surgery for millions of patients and arguably the only solution for the treatment of keloids. With those comments, I'd like to thank you for your time and attention. And now operator, we're ready to take questions. Operator?

[Operator Instructions] And our first question comes from Ben Haynor with Alliance Global Partners. Please go ahead.

Good afternoon, gentlemen.

Good afternoon, Ben.

Excellent. So just on the new Board member, it looks like she's joining effective January 1, and you have used her as a consultant, it sounds like in the past. Is there anything that she can do on the CMS front with the kind of the data sharing and everything that's going on at the moment?

Yes. She is -- can provide us tremendous help in gaining support from a lot of the people that are in the legislature. I'll just give you an example. She most recently worked with the now Senator Hickenlooper out of Colorado when he was the Governor of the state of Colorado. And thanks to her, him and other people on our team, he was the guy who really signed into law the ability for our dermatology practices to be able to access SRT in the state of Colorado. So that was a real good help, and she's been close to him ever since. So we continue to look for opportunities to continue to support any and all of our efforts with CMS in supporting SRT. So we're excited for those opportunities as we continue to move ahead.

And you mentioned what she was able to do in Colorado. Are there a lot of other state regulators that there are opportunities that you see?

for the most part, we have pretty much 80% of the country locked in with regulatory permission to sell in those states. We're still working on a few others, and I'm sure that she's going to be able to help out in quite a few, along with our existing teams. So we're excited for that opportunity to make that happen and grow our market.

Excellent. And then lastly for me, just on the mobile laser opportunity. Are you seeing any other potential acquisitions there? Can you give any more color on how that's going thus far? And just anything on that front would be helpful.

Well, we're very excited for the opportunity that we have. We see a lot of opportunities in this market. We're looking for a lot of growth in our own market within the state of Florida. I think the combination of Sensus, along with the new team and the company, the companies that we've acquired are going to give us access to a much bigger market with a lot more flexibility and opportunity to provide services to a growing base of customers in the state of Florida. So I would say that at some point -- we're expecting at some point in the fourth quarter to perhaps announce some engagements with some large groups in the state of Florida and expanding our services there. So we're very, very excited for that opportunity. Now in other parts of the country. We think that if we can maintain and grow our business here and see how that works out over the next six months, I think we can get very aggressive with potential acquisitions in other key areas in the country, and we like our opportunities there. We think that they're huge.

So get the model right and then scale it basically?

Exactly.

Okay. Got it. Well, congrats on the progress, and thanks a lot, gentlemen.

Thank you.

[Operator Instructions] Next we go to the line of Scott Henry with ROTH Capital. Please go ahead.

Thank you, and good afternoon. Joe, with regards to SRT units, I think you said there were two in China. Were there any sales in the U.S.?

Yes, Scott. There was one sale in the U.S. in Q3. So a total of two units.

I'm sorry, I didn't hear it. Did you say there was one sale in the U.S. in Q3?

Correct.

Okay, and how should we think about the SRT market in the near term? When would you expect that to start normalizing again?

I think for the last two quarters, we've been saying that fourth quarter, we should start seeing signs of at least some light at the end of the tunnel. Although we're seeing the COVID pandemic starting to come back to us here in the fall as the colder weather comes in. We're still seeing some good signs of opportunity for the fourth quarter. We're still expecting the fourth quarter to be a decent quarter for us. It's not going to be anything compared to the quarters that we experienced last year. But I think that we're going to see a significant increase in revenues in the fourth quarter as our prospects are starting to loosen up and believing in their own practices. So we're excited for the fourth quarter and especially for the beginning of 2021. And a lot of that has to do with once we get CMS to announce what the new reimbursement is going to be. I think that, that's going to excite everybody and get things going as well.

Okay. And for Q3, can you give us any color around the mix of revenues? I guess I can factor in three SRT machines. And then, I guess, probably mostly service contracts. And I think you said a modest amount in the laser service business. Is that correct?

Correct. Correct. I mean the product -- the mix is products about 30% of the revenue and service is about 70%. And in the service, that's what the laser business is within the service number.

Okay. Great. The higher cash, what drove the cash higher given -- well, I guess, you're comparing it. Is that mostly working capital? Is that the accounts receivable that's driving that cash positive over the nine months?

Correct. In Q2, we collect receivables that we have been keeping for operations. We haven't borrow any amount.

Okay. And then Joe, you mentioned profitability in 2021. How do you define profitability? I mean are we talking basically cash flow positive? That would be my assumption. Cash flow positive, not EPS positive. Is that where we should kind of think about the bar?

Yes. If we recall, we finished Q4 2019 with positive cash flow. And we were expecting to continue that throughout 2020. That was the whole basis for our moving ahead in 2020. We were excited for that opportunity until COVID hit towards the middle of February when I think everybody really became aware of it, and then all the shutdowns followed. So we clearly are feeling that we are ahead of the game as we go into 2021 because, I think, everybody in the company has done such a great job in cutting down on expenses, cutting a lot of the fat out of our business, which we had before. And I think it's making us much more diligent with Javier's help and the whole team from Finance as well as the management team, which has recognized how we're able to become more efficient and spend less money and still drive revenues. Now again, driving revenues is going to be key, but we think that we can have significant revenues in 2021 and become profitable with a positive cash flow. No question about it.

Okay. And Joe, it seems an observation that COVID-19 has obviously made it very hard to sell equipment. And it appears like you're making a conscious effort to generate more recurring revenue streams to perhaps stabilize the income statement in good times and bad. Is that a fair assessment? Or is that just by chance? That's where you see the opportunities?

No, no. You're absolutely right. As a matter of fact, we had planned this coming into this year by making our service revenues more significant. The Sentinel IT Solutions software revenue is more significant. Those were all major components and initiatives that we had to start the year. We had a lot of conversations over the past several years with a lot of you guys that talk to us about recurring revenues. And I think that we're in a position now, especially with laser technology that we're bringing to the market, especially with our mobile laser and Sensus Laser Aesthetic Services. This gives us a great opportunity to start developing those recurring revenues, which we didn't think was appropriate at the time for SRT in the past as we were developing a solid base of customers. So I think that going into 2021, we're seeing signs of developing that recurring revenue. And quite frankly, some of that recurring revenue can seep over to SRT distribution and installations. So we're pursuing a lot of those things and a lot of those initiatives. And along with outright sales, I think that the revenue and the positive cash flow is going to be significant.

Okay. Great, and Sentinel IT solutions, I'm still trying to kind of figure out what that is. Is that basically a service contract that only pertains to your own machines, whether they be SRT or lasers? Or is that software you would use even with other people's products?

Right now, it's exclusive to us. And I think as we gain more access into the market and it becomes more well-known, I think that we're going to find other companies that might come to us and might want to license the Sentinel Solutions opportunity because we're the only ones that have brought it into dermatology. Now in my years' experience working at General Electric or Siemens, it exists in all those other environments. In radiology, radiation oncology, you have all those IT solution programs that exist. So one of the examples was at General Electric, if we own the IT portion of the hospital. At General Electric, we felt that we owned all of the equipment as well that went into that hospital because it became plug and play. And so we feel that we want to aggressively pursue Sentinel. We want to be able to provide that opportunity when physicians and physician groups get used to working with it and finding out how easy it makes their business run, how much more capable they are of increasing their productivity, increasing their revenues, lowering their downtime, all of these things, it provides them with a tremendous asset management tool as well as a patient data accumulation tool for storing patient data on the cloud, using it for billing and reimbursements and things like that. I think that it really is a productive tool for our customers that has not been seen in the dermatology space. So we think that there's a huge opportunity for us in this market.

Okay, great. Thank you for taking the question.

Thanks, Scott. Appreciate it.

Next, we go to the line of James Terwilliger with Northland Capital. Please go ahead.

Hey, Joe. Can you hear me?

Yes, sir, James. How are you?

I’m doing okay. Two quick questions, and I'll jump back in queue. My first question because I'm very excited about what you have in this press release is concerning the Sculptura. I think you said it clear before that with COVID and kind of the lockdown of the hospital environment that you didn't expect any Sculptura for this year, but we are starting to look to 2021. And it seems like you're talking to 10 hospitals here. Were you talking to all 10 of these prior to COVID and they started to talk again? Or were you talking to 5 prior to COVID and 5 new ones. Can you expand at all on Sculptura? I know you don't want to get into guidance, but can you tell me more than what you have in this one paragraph? And has pricing changed at all for Sculptura? Plus you had the Astro there. So anyway, a lot of questions there, but just tell me a little bit more about Sculptura because I think that's a great piece of equipment.

Sure, James. I appreciate it. And I think you're latching on to something here. First of all, we have many more than 10 prospects that are interested in Sculptura. And the -- I would say that their interest has been peaking over this time because although a lot of these community hospitals and research teaching hospitals are more focused on the COVID environment. You still have a lot of people that are looking at this opportunity with technology and how it relates to Sculptura. So we definitely have more than 10. But I would tell you that the volume has increased quite a bit with these 10 who've seemed to be talking more to us as well as our installed base, and they're anxious to gain more information and data on it. And so although Sculptura has been delayed because of COVID, it doesn't mean that it's stopped. The dialogue continues. And keeping in mind that our team that relates to this part of the business and the oncology business has been able to increase and open up their path of communication. And so I think that we're seeing a whole lot more interest in it. And so eventually, this is going to open up, and I think that we're going to see potential sales in 2021 for Sculptura. It hurt us this year. We were expecting a few orders this year, but I think that we have an opportunity for Sculptura in 2021. We're excited about it.

Are you having -- on Sculptura, are you having any pushback on price yet? Or is it just more -- we just want more data, we just want more visibility?

We haven't had any pushback on price. And I think there's some reasons there. Number one, it seems like the reimbursement for Sculptura and Sculptura-type products like brachytherapy or intraoperative radiation therapy have been -- remained inconsistent. It's one of the components that we have not found CMS cutting back on reimbursements as they have been across the board with linear accelerators and so on. And so as you cut back in some of the other modalities, even in breast cancer, for instance, the American -- the Astro people came out about now a year ago that talked about anywhere between 1 and 5 treatments for breast cancer was appropriate. Prior to that, it was believed that you had to go through those 6 to 10 weeks, whatever those protocols were, but they have relegated now back down to the one to five treatments as being very viable. And a lot of it has to do with the cutbacks in reimbursement from using a linear accelerator on breast cancer, where maybe it is not as productive to utilize it on a linear accelerator, and it provides more productivity to be open for other types of cancers, which have a much better reimbursement. So our system at the $1.5 million MSRP, average selling price around $1.20 to 1.25 makes it very viable to do breast cancer patients based on the reimbursements that they're getting today. And so I think that they're looking at that. But more importantly, I think it's the outcomes, the potential solutions that you have. A linear accelerator has to go right through a person's chest wall in order to treat the breast. And that impacts cardiac function with arteries, your heart and things like that. We don't impact that. We bypass that. There's not as much collateral damage if any collateral damage at all using Sculptura versus anything else that exists for breast cancer. So I think that those outcomes, those solutions, along with the very amenable selling point, which, quite frankly, is the same as a brachytherapy product or IORT product. I think that it bodes well for Sculptura. I think we're in the right place at the right time.

Okay. Fantastic. And thanks for the update on Sculptura. It's a very nice piece of equipment. My second question is really on maybe some consolidation at 30,000 feet. You guys are making some small acquisitions. We've seen some small acquisitions in the marketplace. I believe someone has approached you in the past, and you said the terms were not the valuation that you had wanted. As COVID continues to put pressure on certain entities, do you see -- are you hearing thoughts from where you are on maybe some consolidation within the radiation oncology space to get some scale to get some mass, also considering that Varian's going through their own process, as we speak, in terms of being consolidated. Do you have any comment that you're comfortable sharing with us at this time?

Well, I think that's a good question, James. And I think that there's a lot of speculation in the market today with what's going on. And I think that there's no question that we're going to see a lot more M&A activity over the next 12 to 36 months, especially in health care. And I think that we're seeing signs where a lot of the bigger companies, whether it be Siemens, Varian, Elekta, GE, all of these companies, Philips, they seem to be looking to maybe smaller cap companies or maybe earlier stage companies versus what they did before because there's that appetite to acquire technology and to get that advancement, especially technology that is very cost effective that provide the same solutions, if not better. Now we definitely touch a market that none of the big boys do. And one of the biggest opportunities that we have and the biggest advantage that we have is we have a channel. We have a channel into the dermatology space with a radiation device that we brought back from the graves of the early 1900s and in the middle of the 1970s, modernizing that technology. And quite frankly, COVID has brought a larger attention to SRT being able to treat patients with skin cancer because of the age of the patients, the patient profiles, I mean they're the same profiles as the skin cancer patient, COVID patient is. So this awareness is becoming stronger and better as we speak. And I think that it bodes well for the future. If we have opportunities, we're definitely going to listen. If we have opportunities, to acquire, we're definitely going to listen. Have we've been talking? The discussions never stopped, but we have a focus. We have a target. We want to move forward and gain a certain point in our lives, if you will, and a certain valuation with the company before we consider anything. We don't want to go out too soon. We don't want to do anything too soon. We still have a lot of things to accomplish, and I think that we're going to get recognized for it.

Well, thank you. You've got to have technology that's worthwhile to be acquired and you have to execute to prove in the marketplace that the technology deserved to be acquired at the price you want. So thanks for taking my questions. I'll jump back in queue. Thank you, Joe.

Thanks, James.

Next we go to the line of Anthony Vendetti with Maxim Group. Please go ahead.

Thanks. Joe, I don't know if you touched on this, but I wanted to talk a little bit about the strategy for the company's aesthetic laser products. I know you've made a couple of acquisitions in the space, they're mostly third-party sellers. And you had discussed possibly by the end of this year, launching a few or a couple of your own aesthetic devices, pending FDA clearance, 510(k) FDA clearance. I was wondering if you could just give a little bit more of an update on that time line, and if that's still relevant or has that been impacted by COVID-19 as well.

Thank you, Anthony. Great to hear your voice. Number one, we're still on track to bring our own laser products to the market. So that is on track, and we expect to introduce a family of lasers before the end of the year. We want to get them out in the open, so that we can hit the road running starting January 1 with those products. There's some early in the year trade shows that we want to be present at. Hopefully, we'll be able to be real-time versus virtual, first one in April -- in February, sorry, the next one in March. So we definitely want these products before the end of the year, and we're working on them, and we feel that we're on track for that. Of course, the biggest component, the biggest opportunity and the biggest differentiator that we're going to bring is the fact that Sentinel will be part of these lasers, and that's huge. And as we look at our existing Mobile Laser Aesthetics company that we have, we have a lot of lasers that belong to other companies. We own them, of course. But as we try to upgrade those products, we want to upgrade those products with our own rather than having to have other products. So we want to change those out eventually over a period of time where those upgrades will be available through a Sensus-branded product. And then, of course, we'll -- our people in that area will have the opportunity to not just rent by the day, by the week, by the month or by the year, but they can also sell our products to those customers once they've reached the point where they feel they need to buy versus just renting because they have the volume of…

Okay. Great. Just one quick follow-up on that, Joe. So the two companies you acquired, what's their combined -- I'm going to say customer -- I'm not going to say base, but what's your combined customer contactless?

Combined, they have over 250 dermatology offices that they work with in the state within their territories. I would tell you that it was less than 5% overflow, if you will, from our customers to theirs. So with our customers in the state of Florida, we've got about 350 customers that we now work with in the state of Florida, which is more than triple our previous number before the acquisition. And we expect to expand on that pretty much over the next 12 to 18 months, we think that we're going to be able to get more customers within the base. Let me go one step further, Anthony, if you don't mind, some of the surprising things that came to us when we were doing the due diligence, were the hospital customers that we have. We have the University of Miami, the hospital, the health care system that we service. We have Joe DiMaggio Hospital that we service. We have a couple of hospitals in Orlando that we service. These have been regular customers of theirs for the last 15 to 20 years, very, very good customers.

Interesting. Okay, great. Thank you.

Yeah, thank you.

Ladies and gentlemen, that was our final question. We now go back to Joe Sardano for closing remarks.

Well, thank you very much, Melinda. I want to thank all the people who ask those questions and those who are listening. In closing, I want to thank you once again for your time this afternoon and for your interest in Sensus Healthcare. We continue to move forward on multiple fronts and are optimistic about our prospects when we return to a more typical business pattern. I want to mention that we plan to participate in AGP's Virtual Investment Conference on November 19. We look for our press release in the coming days and how you might listen in, and we also will be available for virtual meetings via our IR firm, LHA. Please let me know if you'd like to speak with us at any time. You know that we're always open. And I want to thank everybody. I want to say please stay safe. And if we don't speak before Thanksgiving, happy Thanksgiving. I think we have a lot to be thankful for, regardless of the pandemic and everything else that might be going on around us, but I think it's time to look up to the stars and start reaching. So look forward to everybody, and talk to you soon. Thank you.

Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time. Have a great day.