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Edited Transcript of SRTS earnings conference call or presentation 6-Nov-19 9:30pm GMT

Q3 2019 Sensus Healthcare Inc Earnings Call BOCA RATON Nov 28, 2019 (Thomson StreetEvents) -- Edited Transcript of Sensus Healthcare Inc earnings conference call or presentation Wednesday, November 6, 2019 at 9:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Arthur R. Levine Sensus Healthcare, Inc. - CFO * Joseph C. Sardano Sensus Healthcare, Inc. - Chairman, CEO & President ================================================================================ Conference Call Participants ================================================================================ * Andrew Jacob D'Silva B. Riley FBR, Inc., Research Division - Senior Analyst * Anthony V. Vendetti Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst * Faizzan Ahmad H.C. Wainwright & Co, LLC, Research Division - Research Analyst * William Patrick Fafinski Craig-Hallum Capital Group LLC, Research Division - Research Analyst * Kim Sutton Golodetz Lippert/Heilshorn & Associates, Inc. - SVP and Principal ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good day, ladies and gentlemen, and welcome to your Sensus Healthcare 3Q 2019 Financial Results Call. (Operator Instructions). At this time, it is my pleasure to turn the floor over to Kim Golodetz. Ma'am, the floor is yours. -------------------------------------------------------------------------------- Kim Sutton Golodetz, Lippert/Heilshorn & Associates, Inc. - SVP and Principal [2] -------------------------------------------------------------------------------- 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 Arthur Levine, Chief Financial Officer. As a reminder, some of the matters that will be discussed during today's call are forward-looking statements within the meaning of federal securities laws. 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. 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 those risk factors described in the company's Forms 10-K and 10-Q as filed with the SEC. During today's call, they will also be reference to certain non-GAAP financial measures. Sensus believes these measures provide useful information for investors yet should not be considered 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? -------------------------------------------------------------------------------- Joseph C. Sardano, Sensus Healthcare, Inc. - Chairman, CEO & President [3] -------------------------------------------------------------------------------- Thank you, Kim, and good afternoon, everyone. There were a number of very exciting positive events during the quarter and recent weeks that bode well for Sensus over the long term. That said, revenues for the quarter came in lighter than we had anticipated at $5.8 million on shipments of 16 of our systems. The longer sales cycle for our Sculptura systems in the oncology channel and geopolitical issues in China contributed to the shortfall. I note, however, that we have accumulated a strong pipeline of sales leads that should bear fruit for the upcoming year. In addition, we're exploring a new channel, which is in the veterinary market, which holds promise for future growth, and I'll tell you more about that initiative in a bit. I'll speak first about our oncology market, beginning with Sculptura, which has been generating a great deal of interest within the radiation oncology market. The third quarter and recent weeks were highlighted by our launch of Sculptura at a major medical conferences as we look important -- as we took important initial steps to build awareness for the capabilities of this important product. We had a large presence at this year's ASTRO trade show, the foremost meeting of radiation oncologists that took place in September, and we're delighted with the interest shown by potential customers, including an invitation-only gathering for the foremost luminary teaching hospitals co-hosted by UPenn and Sensus. Prior to that, our showcasing of Sculptura at the AAPM meeting, and at the 2019 American Brachytherapy Society's Annual Meeting, generated excitement among physicians and physicists for its new features and technology. Remember that Sculptura employs state-of-the-art Modulated Robotic Brachytherapy with Beam Sculpting capabilities and Robotic Respiratory Tracking. This Robotic Respiratory Tracking employs a robotic arm that considers the breathing of patients in order to deliver a precise beam of radiation. We are very pleased with the work of our oncology team and the interest being generated in this recently approved product. Our research agreement for Sculptura with the Perelman School of Medicine at the University of Pennsylvania is moving forward as planned, with patient treatment set to begin by early Q1. We continue to work with leading academic hospitals to place Sculptura, and are in the final stages of discussions with several important university medical centers to ship the system and engage in recent -- in research agreements with them. These agreements will help support our marketing and provide additional clinical evidence for new indications. We expect up to 3 more systems to be sold by the end of this year. Note that with a list price of $1.5 million and a recurring revenue stream generated by disposables, Sculptura is expected to play a significant role in the company's future. Our efforts to place SRT systems into the oncology marketplace are ongoing. But as I mentioned, the sales cycle is long. We received very positive news earlier this year when we were notified that SRT was added to Premier's group purchasing contracts, effective August 1 for the oncology market. Premier has 4,000 member hospitals and health systems throughout the U.S. and we've begun making inroads. Premier represents a fruitful avenue for growth. Note that we have worked to generate a robust list of leads as a result of the Premier contract. We are systematically targeting these institutions. It will take some time to convert these groups as hospitals tend to have a longer selling cycle as I just mentioned, but we believe we still start to see revenues for this channel next year. We shipped an SRT system to the Veterinary School of Colorado State University for evaluation and studies. CSU is recognized as a premier Equine Center of Excellence. Our agreement with the school calls for the development of protocols and published clinical data. The veterinary market represents a growth area for Sensus, and these studies will prove that point. I'll turn now to the dermatology market. We shipped 14 Visions and 2 SRT-100s during the quarter into this market. We also shipped the first 3 of 5 SRT-100+ systems to a large dermatology practice in a shared revenue program. These units are being installed under a shared services model and represents another opportunity to address solutions the market is looking for. Our flexibility to address market needs is made possible by our Sentinel IT product. Sentinel is a powerful platform that provides large multisite customers and asset management program. This is an exclusive Sensus product that is not available from anyone else in this market. It also provides users the opportunity to store HIPAA-compliant patient data on the cloud. The system has been working in the SRT-100 Vision for a few years, and we have now expanded these capabilities to the SRT-100+. As mentioned, this technology is unique to Sensus and will be part of our platform for all future products. Sentinel IT provides our customers with powerful tools that will store important patient data by greater practice efficiency. We will provide you with updates as we progress with this initiative. Note that over the near term, revenues for this initiative will be modest, but we do expect to derive some revenue from this initial agreement during the fourth quarter. Of the 14 Vision systems we shipped during Q3, 13 were to SkinCure, a key customer that provides turnkey solutions to the practices they sell to. SkinCure provides the units, addresses state regulatory requirements, facilitates access to radiation oncologists for consultation and full-time board-certified radiation therapists to deliver treatments and provides billing and collection services within an exclusive and proprietary model. After a funding issue that delayed our shipments to them in the second quarter, we're comfortable this customer is firmly back on track following 2 consecutive quarters of robust sales. Note that third quarter sales on a sequential basis tend to be impacted by summer vacations and that fourth quarter tends to be the strongest of the year. We continue our efforts to increase CMS reimbursement for SRT and have been actively engaged to push for a revaluation of our main code 77401. While CMS has made public that this code is due for revaluation, based on current criteria. The agency is sticking to the timing of revaluation of 2021, as they've previously declared. Our expectation is that a new rate will be set for 2021, and we will know that new rate this time next year. The expected higher rate should accelerate future SRT-100+ and Vision sales in the U.S. as it will provide much-needed clarity and direction. We continue to invest in sales and marketing and exhibited our SRT systems for the treatment of keloids and non-melanoma skin cancer at several regional dermatology trade shows. During the quarter, our SRT-100+ was also featured on a popular dermatology cable TV program, where a young woman's keloids were treated successfully on air. We expected -- we expect the SRT-100+ to continue to be featured on the show, which is hosted by Dr. Sandra League, otherwise known as Dr. Pimple Popper TLC Network, one of the highest-rated cable TV shows, with original programming every Thursday at 9:00 p.m. with consistent rebroadcast. Our international efforts posted mixed results for the quarter. On the regulatory front, we received clearance from Korea and regulatory approvals in new larger markets, including Brazil and India are in process. However, our sales efforts in China have not gone as planned and impacted Q3 revenues. The current geopolitical uncertainty with China has temporarily pooled our expectations for that market. We are optimistic that the U.S. and China will soon resolve their trade differences. In the meantime, with views constantly in flux regarding the trade agreements, we're seeing customers sitting on the sidelines until they are confident of confirmation of an agreement. I'll now turn the call over to Arthur Levine, our Chief Financial Officer, who'll go over our financial results in more detail. Arthur? -------------------------------------------------------------------------------- Arthur R. Levine, Sensus Healthcare, Inc. - CFO [4] -------------------------------------------------------------------------------- Thanks, Joe. It's a pleasure to be speaking with all of you today. Revenues for the third quarter of 2019 were $5.8 million, down 8% from $6.3 million in the third quarter of 2018. The decrease was attributable to fewer unit sales. There were no international sales in the quarter, and as Joe mentioned, the expected signing of certain Sculptura orders was delayed to Q4. Gross profit for the third quarter of 2019 was $3.8 million or 65.8% of revenues. This compares to $4.2 million, which also was 65.8% of revenues for the third quarter of 2018. The comparable gross margin percentage on lower revenues was due to a similar product mix in both periods favoring the high-margin SRT-100 Vision units. We continue to view the low- to mid-60s range as an appropriate way to model our gross margin going forward for the next few quarters. Selling and marketing expense for the third quarter of 2019 was $2.1 million, up slightly from $2 million in the third quarter of 2018. As indicated last quarter, we expected sales and marketing expenses to increase a bit in the third quarter, primarily due to costs associated with ASTRO and with the Sculptura launch as well as the hiring of sales reps. Overall, we continue to expect sales and marketing expenses to be somewhat higher for the full year 2019 compared to 2018. General and administrative expenses for the third quarter of 2019 were $0.96 million, about $50,000 more than the third quarter of 2018. We continue to expect G&A expenses to trend relatively flat compared to 2018 for the remainder of the year, given our attention to expense control. Research and development expense for the third quarter of 2019 was $1.6 million compared with $1.7 million for the third quarter of 2018. The slight decrease was mainly due to lower expenses related to Sculptura, as we move from R&D to production. We expect a decrease in R&D spending during the fourth quarter compared to Q3. We reported a net loss for the third quarter of 2019 of $0.7 million or $0.04 per diluted share, and this compares with a net loss of $0.5 million or a loss of $0.03 per share for the third quarter of 2018. Adjusted EBITDA for the third quarter of 2019 was negative $0.5 million compared with a negative $0.1 million for the third quarter of 2018. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization and stock compensation expense. As I mentioned last quarter, our main areas of discretionary spending are marketing, clinical studies and R&D. We have been managing these areas closely, but we will continue to spend, in particular, on marketing as we roll out the Sculptura, first to luminaries and then to other customers. We will be careful and focused going forward in our R&D and other spending. Cash and investments were $14.9 million as of September 30, 2019 compared with $15.4 million as of December 31, 2018. The company had no outstanding borrowings on the $5 million revolving line of credit as of quarter end and no long-term debt. Now turning briefly to our year-to-date financial results. Revenues for the 9 months ended September 30, 2019, were $18.8 million compared with $18.3 million for the 9 months ended September 30, 2018. Gross profit for the first 9 months of 2019 was $12.1 million or 64.5% of revenue compared with $12 million or 65.7% of revenue for the same period of 2018. Selling and marketing expense was $6.7 million for the 9 months ended September 30, 2019, compared with $6.1 million for the year-ago period. G&A expense was $2.9 million year-to-date compared with $3.2 million for the prior year period. R&D expense for the 9 months ended September 30, 2019, was $5.5 million compared with $4.8 million for the prior year period. The net loss for the 9 months ended September 30, 2019, was $2.7 million or $0.17 per share compared with net loss of $2.1 million or $0.16 per share for the 9 months ended September 30, 2018. Adjusted EBITDA for the first 9 months of 2019 was negative $2.1 million compared with negative $0.8 million for the first 9 months of 2018. With that, I will turn the call back over to Joe. -------------------------------------------------------------------------------- Joseph C. Sardano, Sensus Healthcare, Inc. - Chairman, CEO & President [5] -------------------------------------------------------------------------------- Thanks, Arthur. Our fourth quarter revenues are typically the highest of the year, and we expect this trend to continue in 2019. While our dermatology market is fairly consistent, we do expect the oncology market to pick up with a few shipments of Sculptura to key university research hospitals. While we have always been very diligent about our cost structure. We recently took a deep look at expenses and are taking advantage of opportunities to reduce spending where possible. That said, our cost reductions is will in no way jeopardize our future growth, and we believe that our products have enormous room to grow with an installed base of approximately 450 units. 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. I'll repeat what I've said in the past, we continue to work to ensure that physicians are aware of the recent positive data comparing SRT and non-melanoma skin cancer to most surgery. And note that physicians who are -- who exceed the most cure rate for non-melanoma skin cancer. The market for keloid treatment with SRT is growing and has the data to back it up, with a study showing only 3% recurrence rates treating keloids with SRT. We're very pleased with our position and our target markets, providing efficacious and price attractive solutions to physicians and patients. Furthermore, we expect that external factors such as reimbursement and tariffs will ultimately resolve in our favor. Thank you for your time and attention. And now operator, we're ready to take questions. Thank you. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question comes from Alex Nowak with Craig-Hallum Capital. -------------------------------------------------------------------------------- William Patrick Fafinski, Craig-Hallum Capital Group LLC, Research Division - Research Analyst [2] -------------------------------------------------------------------------------- This is actually Will on for Alex today. So just -- I'll start with China. Just to quantify how many placements went to China in Q2? Understand there weren't any OUS placements in Q3, but just want a better sense of how much of a headwind that was? Any way you can kind of parse that out or give additional color would be helpful. -------------------------------------------------------------------------------- Joseph C. Sardano, Sensus Healthcare, Inc. - Chairman, CEO & President [3] -------------------------------------------------------------------------------- Yes, I don't think we had anything in Q2. What we were comparing to was if we looked at the third quarter of last year, we had several units. And before the end of the year, we had several units going to China. And I think it was just towards the end of Q2 or the beginning of Q3 that we saw some additional tariffs knocked on us, which knocked us out of the park. They were 25% importation -- or exportation tariffs into the -- into China as a result of the trade wars that were going on. So that happened pretty drastically. And I think we're seeing changes in what transpires almost on a daily basis with that trade war. -------------------------------------------------------------------------------- William Patrick Fafinski, Craig-Hallum Capital Group LLC, Research Division - Research Analyst [4] -------------------------------------------------------------------------------- Got it. Okay. Yes, yes that makes sense. And then you mentioned last quarter, still needed to work out some of the terms of SkinCure. I appreciate your comments earlier, but could you just provide an update on the partner, more specifically on the credit situation. Where that sits today? And just if there's any updates from that partnership? -------------------------------------------------------------------------------- Joseph C. Sardano, Sensus Healthcare, Inc. - Chairman, CEO & President [5] -------------------------------------------------------------------------------- Sure. So yes, first of all, it's a great partnership. We work very, very well together, and it's a great opportunity for both us and them to penetrate this market. Talks continue to keep ongoing, and we continue to answer needs that we have for each other. And I think that we'll be able to probably announce something before the end of the year with regard to finalizing and continuing our agreement, which we both have intentions to do. It's just a very good partnership. And like I've said before, I wish I had 2 or 3 more partners like these guys. But right now, things are going very, very well. -------------------------------------------------------------------------------- William Patrick Fafinski, Craig-Hallum Capital Group LLC, Research Division - Research Analyst [6] -------------------------------------------------------------------------------- Got it. Understood. And then if I could just sneak one more in here. You started this practice of leasing your own systems during Q2. Could you just comment on where this stands today? And if you could just provide a little bit more detail on this business model, such as how and when you're paid for the systems and ultimately, how the systems are capitalized on the balance sheet? -------------------------------------------------------------------------------- Joseph C. Sardano, Sensus Healthcare, Inc. - Chairman, CEO & President [7] -------------------------------------------------------------------------------- All right. Will, I appreciate that question. The model is very much like a model that exists out there now. It's a fee-for-service or a shared service program that we have with one of the biggest organizations in the country for dermatology and dermatology practices. So we install -- we've installed 3 systems so far. We have 2 more that are going to be going in for installation as we continue that process. And just to give you an idea, 5 systems -- had we sold 5 systems, you would be looking at about $1 million in revenue. Going with this model, you're looking at about $750,000 per unit going in over the course of the term. So you're looking at about $3.5 million to $4 million in revenue that can be realized from this model versus the actual sales model. So this is a good opportunity for us. It seems to be fitting a niche for a lot of these larger organizations that are supported by investment bankers. And so it's exciting. We expect this to grow as we continue. And we're excited for the opportunity, and it should spread to other major users as well. -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- And our next question comes from Andrew D'Silva with B. Riley FBR. -------------------------------------------------------------------------------- Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [9] -------------------------------------------------------------------------------- I guess, just from a high level, can you just let me know when you were looking at the business during the second quarter call, it seemed like the visibility was more clear at least from where you were standing? And it seems like 2019 would shape out more favorably and consistently on a quarterly basis? And then also, just from -- just a standard SRT-100 standpoint that seemed to underperform what we were expecting domestically. Could you just provide a little context around everything, please? -------------------------------------------------------------------------------- Joseph C. Sardano, Sensus Healthcare, Inc. - Chairman, CEO & President [10] -------------------------------------------------------------------------------- Sure. And thank you, Andy, for being on the line. Let me address the first one regarding -- I think it's pretty much towards the Sculptura. We've got a bunch of units that we manufactured initially for an initial group of luminary accounts. And those accounts continue to work on the paperwork internally. We don't expect to lose any of those accounts. They have timelines to execute those accounts. And the timelines are before the end of the year, they must provide those. So we thought we were going to get some in Q3, but we didn't, but we didn't lose the business, nobody said, no, they're still working on the paperwork. So we continue to be very positive about those accounts and they're big accounts. So we can understand why it might take them a little longer. Regarding any of the international business. I think that the -- as we mentioned to Will, prior, some of these things that are happening with the trade wars that happen on a daily basis, I think, catch a lot of people off guard. We just happen to be in that sweet spot of medical devices where 25% of the tariffs or increased tariffs are being targeted. So we're being used as a pawn in a lot of ways. But on the other hand, you have this technology that is very much needed in China. So hopefully, they can resolve these problems, and we can move on with our lives there. Regarding the SRT-100. What we're seeing all of a sudden, is that as we get closer, there's more information coming out of CMS on a daily basis. And I know that some of you have looked at what CMS has been talking about lately, they make it public. They've made it public over the last year that they were going to look at 2021 for the change in our 77401 code. We desperately worked with them to let them know that we would like to have it done sooner. But when you think of what the mandate is for CMS to reduce costs, which they are doing in almost every other area of medicine, I think it was announced by AuntMinnie many yesterday that radiology is going to lose $5 billion in revenues based on cuts that CMS is making. They're not going to move up the time line for us to increase our number a year ahead of time, because that's just not their mandate, okay? So they've made it very, very clear that 2021 is the date. Now as these things continue to become more and more noticeable. And our physicians are very, very much aware of it. All of these things are discussed at every one of the trade shows that we got in general sessions with all of these doctors, they're all being made aware of what CMS is going to do and when they're going to do it. And as we draw closer to that line, we're finding out that doctors are saying, you know what, we're close enough that we're willing to wait to see exactly what the direction is, what the number is. Now, again, being involved in health care for as many years as I have. Every time they put in flux the reimbursement for MRI or for PET CT. It kind of froze the market when people didn't know. And in all of those cases, those incurred major reductions in reimbursement, but utilization went up. Once the codes were made aware and everybody knew what it was, the volumes went up like crazy. Now we're being faced with an opportunity where they've made the statement that the reimbursement is going to go up. We don't know how much, but it's going to go up because it hasn't been revalued in 20 years. But the fact is that it's unknown yet. It hasn't been put into practice, it hasn't been put into law. And all of a sudden, we're seeing customers that are saying or prospects that are saying, we want to hold off, it's only going to be another 6 to 10 months and we'll know for sure, let's wait until it comes at that time. So that provides clarity and direction that they're looking for and that they're safer in making a decision. Now based on that, we think that it's a huge opportunity that we've got working with SkinCure because they're the ones that can come in and take over all of the financial risks for those doctors who want to move forward with the technology, who want to move forward with being able to treat their patients, but don't want to take the financial risk. So it's a great opportunity for SkinCure starting in 2020, I think, and maybe even in this quarter to impact their business even more. And as we continue to support them with the things that we need and as well as the things that they need. So I think that we put ourselves in a very, very good position to protect ourselves from this physician attitude that they have to wait now and we'll see exactly where it goes and how it gets there. But I think that we're positive on all fronts, and we're fortunate to have our bases covered. -------------------------------------------------------------------------------- Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [11] -------------------------------------------------------------------------------- Okay, great. That was a lot of color. And when we start thinking about your sales team, how have they been performing lately? Has there been any turnover? And then you did make a comment related to potentially having or would liking to have more than 1 partner similar to SkinCure. Is there any initiative in place to expand out to have new or additional turnkey partnerships? -------------------------------------------------------------------------------- Joseph C. Sardano, Sensus Healthcare, Inc. - Chairman, CEO & President [12] -------------------------------------------------------------------------------- Number one, there's always turnover in the organization. It's just the nature of sales. You're always trying to improve and get better in every territory that you possibly can. I would have to say that we've got a great bunch of people, probably the best that we've ever had in our history. So that is continuously is a positive thing for us. Regarding another group next to SkinCure. We've got a great partnership now. And quite frankly, I wish that I had that kind of partnership in other areas of our market, whether it be oncology space, veterinarian space or something else, but we're very, very satisfied with the relationship that we have with SkinCure. And I don't think that neither one of us are willing to walk away from a great opportunity that we are in. And I think that both sides are investing even more, and we're invested in each other even more in making things happen, and growing that business from there. We don't want to satisfy ourselves with the level of business that we have now. And when you consider the revenue that we reported for Q3, pretty much was all SkinCure. So that's a pretty darn good partnership, I think, to have around, while all these other things and parameters are going on around us. What our job to do is now get international going and get the domestic oncology business going. If we can get those going, I think that we'll be fine. And when you look at oncology, we're just starting to grow in that market. And again, I relay my experiences in the past that when we were at the ASTRO Show, we had developed well over 100 new leads, and there was a lot of action around the booth. We had to put a second Sculptura unit in just so that we could accommodate the demand that we had for the demonstrations. As we start building up the prospect base. And as customers start getting in line for buying these things, we'll have a better opportunity and predictability of the business that's going to be able to come in and we'll have a little more control over what's coming in with a larger prospect base. But we're developing that prospect base as we speak. And are we disappointed in our results? We're not disappointed with the relationships that we have because they continue to grow, and we're confident in those relationships. We're disappointed in the fact that they don't understand that we have orders every quarter. It's just not in their thinking. So we continue to push. They continue to work and strive and get everything done for us, and I expect that we'll be successful in the end, and then we start developing those forecast that we've got from the big base. Now you talked about sales, I would like to increase our sales organization in the oncology space. I think that we need more people to attack the market there. If we were able to generate with the people that we have 103 new accounts or prospects coming to ASTRO. If I double that sales force, maybe I'll have 200 or 300, and then get more in the pipe so that we're more predictable and we can be more secure in what we're saying we're going to do from quarter-to-quarter, which will get us to the point where we'll be able to provide guidance. I think that could be the answer that we're looking for. And so Arthur and I look for areas that we can save money at so that we can increase areas where it will produce more revenues for us, and we're constantly doing that every day that we work. -------------------------------------------------------------------------------- Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [13] -------------------------------------------------------------------------------- Last couple of questions for me, I'll tie them into one. Just related to Sculptura, since we were just kind of referencing that. I was just curious on the CMS's alternative payment bottle. They had carve-outs related to the IoT platform. And I was wondering if that's been any sort of topic as you've discussed Sculptura through the sales and marketing process? And then just you referenced potentially placing some Sculptura units in the fourth quarter. Are those going to be normal ASPs? Or are they going to be discounted KOL ASPs? -------------------------------------------------------------------------------- Joseph C. Sardano, Sensus Healthcare, Inc. - Chairman, CEO & President [14] -------------------------------------------------------------------------------- We still have the discounted ASPs that are coming out. And those are the folks that are -- have the paperwork ready to sign. It's just a matter of them passing it back to us. Everything has been negotiated. The numbers are right. I mean, it's just a process that we go through and we push hard enough without ticking anybody off. And that's internal people telling us back off, but we're pushing hard as hell. So that's an opportunity, clearly, that we continue to push. And I think the other part of your question, Andy, forgive me, if you can repeat it? -------------------------------------------------------------------------------- Andrew Jacob D'Silva, B. Riley FBR, Inc., Research Division - Senior Analyst [15] -------------------------------------------------------------------------------- Yes, just the alternative payment model from CMS as it relates to Sculptura that had IORT coming down there. -------------------------------------------------------------------------------- Joseph C. Sardano, Sensus Healthcare, Inc. - Chairman, CEO & President [16] -------------------------------------------------------------------------------- Yes, that's a positive for us. And as we bring that up to the accounts. I mean, they know it. They have quality control people in that space, and they know that this is an opportunity for them as well. But keep in mind, we're still limited to the number of people that we presented to. And irregardless of how that model fits, and it's a positive model in favor of ours. They still have a long internal process to get us purchase orders. But they're aware of it, the ones that we talk to, they say that this is a perfect fit, this is exactly what we need. Every one of themselves says that, but now we still have to go through the purchase process and get into that cycle. -------------------------------------------------------------------------------- Operator [17] -------------------------------------------------------------------------------- And our next question comes from Anthony Vendetti with Maxim Group. -------------------------------------------------------------------------------- Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [18] -------------------------------------------------------------------------------- So Joe, you said that SkinCure accounted for 13 of the SRT sales -- division sales, right? -------------------------------------------------------------------------------- Joseph C. Sardano, Sensus Healthcare, Inc. - Chairman, CEO & President [19] -------------------------------------------------------------------------------- The 15 units that went out, yes. -------------------------------------------------------------------------------- Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [20] -------------------------------------------------------------------------------- Yes. And they were on -- are they on the Centennial (sic) [Sentinel] platform? Is that correct? -------------------------------------------------------------------------------- Joseph C. Sardano, Sensus Healthcare, Inc. - Chairman, CEO & President [21] -------------------------------------------------------------------------------- Yes, they're on the Sentinel platform. -------------------------------------------------------------------------------- Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [22] -------------------------------------------------------------------------------- Sentinel. So I got a chance to see that, it's an impressive platform. Can you talk a little bit about how the payment works on this platform, the service component just a little bit more about that. I know you addressed it a little bit, but I'm just trying to understand it a little bit better. -------------------------------------------------------------------------------- Joseph C. Sardano, Sensus Healthcare, Inc. - Chairman, CEO & President [23] -------------------------------------------------------------------------------- Yes. Well, we have a service component, which customers -- to -- are utilizing and getting extended service warranties. And then you have the Sentinel platform, which is -- we're monetizing and putting on top of that, it's for utilization. So the biggest area of opportunity is we've delivered that to the Vision product with the feedback and with the help from our customer at SkinCure. We've applied that to the SRT-100+. So every product that we have has that capability now, which is allowing us to deliver the SRT-100+ in other areas on a fee-shared service platform, which we're getting paid for upfront on. So those are things that are helping us. We think that in the future as we continue to grow that business amongst our customers, that it continues to be an opportunity for us in every way. So we're looking at a fee that will cover that. We look at a licensing fee, if you will. And so those are the opportunities that we have with the IT platform. We had something along those lines at General Electric, it was called Centricity. It was a very popular IT program. And within that, they were able to charge a lot of different aspects of the business opportunity as far as the asset management or the patient protocols, based on HIPAA compliance and things like that. So there's many, many things that go into it, and we'll continue to discover each and every one of those opportunities as we continue to grow IT and continue to improve the IT or the Sentinel program. -------------------------------------------------------------------------------- Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [24] -------------------------------------------------------------------------------- Okay. And then just in terms of the ASP, division ASP was around $380,000, $380,000-or-so. Is that still holding? Is that about right? Or has that changed at all? -------------------------------------------------------------------------------- Joseph C. Sardano, Sensus Healthcare, Inc. - Chairman, CEO & President [25] -------------------------------------------------------------------------------- It was a little lower than that because there was one sale is Vision other than SkinCure. So our ASPs are slightly more than [$350,000]. Let's face it, SkinCure gets the best deal of anybody because of the volume that they have. Other customers that are buying Vision, it's higher. -------------------------------------------------------------------------------- Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [26] -------------------------------------------------------------------------------- Got it. And then in the commentary, you said that you expect up to 3 more Sculptura sales by the end of the year. Do you think it could be 3 or when you say up to 3, it might only be one, where are you in the rollout of those 3 potential systems? -------------------------------------------------------------------------------- Joseph C. Sardano, Sensus Healthcare, Inc. - Chairman, CEO & President [27] -------------------------------------------------------------------------------- All 3 are accounted for as far as the customers that we're looking at. They have the paperwork. It's just a matter of executing the paperwork. We want the paperwork executed yesterday, not tomorrow. We were hoping that we were going to be able to get some in Q3, but they've fallen into Q4. So we continue to pursue, and they have deadlines within that contract to execute before the end of the year or they lose the opportunity of getting into it at that price level, and then they'll have to go to the higher ASP. So we are already talking to almost everybody else that are interested at the higher ASP. So everything that we're talking to, those 100-plus customers that -- prospects that came to us at ASTRO. None of those are in the area of the luminary accounts section with these special prices. And my opinion is if those 3 don't come forward as per the contract, which they're all trying to do, they'll get moved into the higher level as well in 2020. So I think that they're incentivized to make something happen. And they know it. They're working hard internally to try to get those things done. -------------------------------------------------------------------------------- Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [28] -------------------------------------------------------------------------------- Okay. And then it sounds like you have a good pipeline, if you have 100-plus from the ASTRO meeting. But this is a larger sale. This is an ASP of $1 million, $1.1 million or so, right? And I know some of the earlier ones, they're going to get it at a discount if they close by the end of the year. But if you look at your pipeline for 2020, realistically, since it takes longer to close a Sculptura sale. What is a reasonable expectation? What's the expectation you're putting out there for your sales force? Should you be able to sell [20] of that [100] in the pipeline and have that in 2020? Or is it too difficult to measure at this point? -------------------------------------------------------------------------------- Joseph C. Sardano, Sensus Healthcare, Inc. - Chairman, CEO & President [29] -------------------------------------------------------------------------------- I'd love to be able to tell you that we're going to do [20], but I don't think that, that's going to meet expectation based on getting involved with the cycles and the budgeting cycles that those hospitals are in. It's not to say that some won't jump and be able to find the money by canceling another project, that can always happen. But when you're looking at selling these units and you're dropping the $1 million to our bottom line. If we sold 5 or 6 next year, that's big money for us. That's 20% added revenue for us, and that's big dollars for us. So I think that what I would predict is that I have expectations to make those things happen. Would I like a backlog going into '21? I would certainly do that because most of these customers when they order something, they know the delivery is going to be 90 to 120 days. We don't have these things sitting on the shelf. It's just too expensive for them to be completed and waiting to be shipped like we have with the SRT products. But certainly, more the better, we're trying very, very hard, and you never know, we might hit it sooner rather than later, but we're going to push for a number. And if we can exceed it, we're always pushing to exceed it, fine. But if we did 5 or 6, I would tell you that, that's a big year for us. That will be good. -------------------------------------------------------------------------------- Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [30] -------------------------------------------------------------------------------- Okay. Yes, that's very helpful. And then just lastly on China, is that -- dealing with all the geopolitical risk that you're dealing with and headwinds there. Is that something you'd think by the end of the year can come back online? Or is it better to be more conservative and say, look, this may push into 2020, and we shouldn't really expect any sales in China in the fourth quarter? -------------------------------------------------------------------------------- Joseph C. Sardano, Sensus Healthcare, Inc. - Chairman, CEO & President [31] -------------------------------------------------------------------------------- Yes. I'm ultraconservative on all of the numbers that we try to work on. I would say, expect 0 and if anything comes through, it's a plus. We definitely -- there's a need -- there's a big need there, there's a big want, okay? Our distribution partners there want the systems. They have sales that they can conclude and deliver. So they're not making money by us not delivering to them. The option is that we can reduce our price by 25%, which is what the cost of the tariff is. But then, if you did that once, then that all of a sudden becomes your average selling price over there. And it's low enough as it is. It continues to meet the 65% target that we try to do with everything, considering that it's not a cost of sales over there, but just a transfer. So we don't want to impact that, so we're remaining solid on the pricing rather than conform like I know some other companies have done in order to declare sales. We cherish our average selling price and we want to keep it there, and we'll wait for the tariffs to be over and hopefully, unlock the floodgates. -------------------------------------------------------------------------------- Operator [32] -------------------------------------------------------------------------------- (Operator Instructions) And our next question comes from Yi Chen with H.C. Wainwright. -------------------------------------------------------------------------------- Faizzan Ahmad, H.C. Wainwright & Co, LLC, Research Division - Research Analyst [33] -------------------------------------------------------------------------------- This is Faizzan on for Yi Chen. I think a lot of it has been addressed mainly. But how many SRT systems are expected to be shipped in the full year 2019? -------------------------------------------------------------------------------- Joseph C. Sardano, Sensus Healthcare, Inc. - Chairman, CEO & President [34] -------------------------------------------------------------------------------- Well, we have 450 delivered now. And I think that's about 50 units year-to-date, somewhere along those lines. So we want to beat what we did in Q4 last year. So hopefully, that we'll be able to manage that, and we're fully expecting to do so. -------------------------------------------------------------------------------- Faizzan Ahmad, H.C. Wainwright & Co, LLC, Research Division - Research Analyst [35] -------------------------------------------------------------------------------- Great. There weren't any Sculptura? Are there -- how many Sculptura IORT systems were shipped in Q3 '19? -------------------------------------------------------------------------------- Joseph C. Sardano, Sensus Healthcare, Inc. - Chairman, CEO & President [36] -------------------------------------------------------------------------------- None. -------------------------------------------------------------------------------- Faizzan Ahmad, H.C. Wainwright & Co, LLC, Research Division - Research Analyst [37] -------------------------------------------------------------------------------- None, right. Okay. And do you know if you could shed some light on if there are any concerns or main concerns that are preventing more customers from adopting Sculptura now? And are the customers waiting for more clinical data for validation? -------------------------------------------------------------------------------- Joseph C. Sardano, Sensus Healthcare, Inc. - Chairman, CEO & President [38] -------------------------------------------------------------------------------- No as we -- the 3 customers that we have that we're waiting for POs on have all the paperwork that they need. It's just a matter of signing the paperwork and sending it back to us. So we don't have any concerns with those three, but we do have the concerns of the timing, okay, because they have a difficult time predicting it, and we do as well. But we don't see anything holding us back from a clinical aspect or anything else. These are luminary facilities that want to be involved in that clinical development with us. Their R&D -- their own R&D helps with patient data and so on. And it's just one of the DNAs that they have in trying to be the first into the marketplace with their programs. So we're excited for them. They're excited for us. They keep telling us this is exactly what we want. Stay patient. We're working on the paperwork and we'll get it to you. And so we push and push to the point where we don't want to tick them off, but we are ticking them off, but they don't understand your demand for having orders in on a quarterly basis. -------------------------------------------------------------------------------- Faizzan Ahmad, H.C. Wainwright & Co, LLC, Research Division - Research Analyst [39] -------------------------------------------------------------------------------- Sounds good. And then I just wanted to confirm the expected sales in China, they're mainly -- I mean the main reason they're deterred were by tariff, right? -------------------------------------------------------------------------------- Joseph C. Sardano, Sensus Healthcare, Inc. - Chairman, CEO & President [40] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Operator [41] -------------------------------------------------------------------------------- And it appears we have no further questions at this time. I'll turn it back over to management for any closing remarks. -------------------------------------------------------------------------------- Joseph C. Sardano, Sensus Healthcare, Inc. - Chairman, CEO & President [42] -------------------------------------------------------------------------------- Thank you. So in closing, I want to thank you all for your time this afternoon and for your interest in Sensus. I want to mention that we'll be participating in the Craig-Hallum Alpha Select Conference in New York on Tuesday of next week. Please contact Craig Hallum, if you'd like to meet with us there. We're sure as heck would like to meet with you. And thanks again, and have a great day. -------------------------------------------------------------------------------- Operator [43] -------------------------------------------------------------------------------- And this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time, and have a great day.