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Operator
Ladies and gentlemen, thank you for your patience. Please remain on the line. Your conference call will begin momentarily. Again, we do appreciate your patience. Please remain on the line. Your conference call will begin momentarily. Thank you. Thank you. Good day, ladies and gentlemen, and welcome to the Census Healthcare 1Q22 Financial Results Conference Call. All lines have been placed on a listen-only mode, and the floor will be open for questions and comments following the presentation. If you should require assistance throughout the conference, please press star zero on your telephone keypad to reach a live operator. At this time, it is my pleasure to turn the floor over to your host, Kim Gallaudet. Ma'am, the floor is yours.
Kim Gallaudet
Thank you. This is Kim Golodets with LHA. Thank you all for participating in today's call. Joining me from Census Healthcare are Joe Sardano, Chairman and Chief Executive Officer, Michael Sardano, President and General Counsel, 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. or statements other than historical facts that address activities Census Healthcare assumes, plans, expects, believes, intends, or anticipates, and other similar expressions, will, should, or may occur in the future, or forward-looking statements. The forward-looking statements are management's beliefs based on currently available information. Census 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 Forms 10-K and 10-Q. During today's call, there will also be reference to certain non-GAAP financial measures. Census 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 GAP. A reconciliation of non-GAP to GAP results is included in today's financial results press release. With that said, I'd like to turn the call over to Joe Sardana. Joe?
Kim Golodets
Thank you, Kim. Happy Cinco de Mayo, everyone, and happy Skin Cancer Awareness Month. I'd like to take this opportunity to urge all of you to take the proper precautions from the sun and to see your dermatologist for skin cancer screening. I'm delighted once again to be reporting excellent quarterly financial results with revenues of $10.3 million, which is more than three times last year's Q1 revenues. In addition, we earned $0.20 a share from continuing operations compared with a loss of $0.07 last year. Indeed, the year is off to a terrific start, and we are optimistic this momentum will continue. As you all know, during the worst of the COVID-19 outbreak, we did everything we could to support our customers, providing PPE, leads on scarce medicines, and continued educational programs via Zoom regarding the use of SRT in treating non-melanoma skin cancer and keloids during the pandemic. In short, we spent that time preparing for sustained growth. We later focused on educating our physician customers on the improved return on investment for the SRT. Recall that CMS reimbursement code for delivery of superficial radiation therapy, along with other codes associated with SRT, were revalued upward effective January of 2021, while codes for Mohs surgery were revalued downwards, These changes have had a direct and positive impact on patient access to care. During Q1, we shipped 33 total units, 26 SRTs, including one to China, and seven transdermal infusion systems, which I'll talk about in more detail shortly. The bulk of those units were the SRT100 Vision, our premium system with image-guided ultrasound. Additionally, the physicians are seeing the value in purchasing Sentinel, our proprietary HIPAA-compliant software. Sentinel is available on all of our new products, and it allows the physician to easily and accurately document patient data for both clinical and billing purposes. In addition, Sentinel allows the streamlining of service with remote diagnosis and asset management capabilities. This technology has been a game-changer for our SRT customers and for Census, as it clearly demonstrates the attractive ROI for the SRT100 Vision and SRT100 Plus systems. Sentinel is also included now in all five of our census-branded aesthetic smart lasers. We have continued to see growing patient volumes at customer sites, in part because SRT became so much more prominent during the pandemic while surgeries were kept to a minimum. We believe this positive shift resulted in best practice migration towards SRT that will not only be a permanent gain for Census, but will continue to generate demand for non-invasive treatment approach. In conjunction with the improved CMS reimbursement, we have firmly established our fair market value leasing program. The program has been well received both in Q1 of 2022 and in subsequent weeks and is supporting sales of our products across the board. We are also benefiting from the recurring revenue associated with service agreements. Approximately 50% of our customers have purchased extended warranty service agreements compared with just 25% a few years ago. Note that our ability to diagnose any issues, including before they happen, has been made easier with the Sentinel technology, and it has greatly enhanced our customer service. During the first quarter, we continue to sharpen our focus on our core dermatology market, And in March, we sold a non-core asset for $15 million cash. We now have the strongest balance sheet in the history of the company with $32.8 million in cash and equivalents and no debt as of March 31, 2022. Our board of directors approved a $3 million share repurchase program that we intend to deploy thoughtfully and in the best interest of our stockholders. We will also utilize our cash to add to our product portfolio as we continue to search for unique technologies that will expand our footprint in the dermatology space, contributing to our profitability and bottom line. As we plan for future growth, we are mindful of ways to leverage one of our core competencies, namely our sales organization. With a view toward adding product to serve our customers, recall that in December we entered into an exclusive U.S. distribution agreement for a non-invasive drug delivery system. We have branded this product as transdermal infusion systems. This system is cleared by the U.S. FDA for local administration of ionic drug solutions into the body for medical purposes and can be used as an alternative to injections offering patient treatments with no pain, no needles, and no downtime. We were delighted to highlight this system for non-invasive drug delivery for skin rejuvenation treatments pre-laser treatments, pre- and post-plastic surgery at the Winter Clinical in Hawaii in January and at the American Academy of Dermatology Conference in Boston in March. We are excited about the potential for this system, in particular for the delivery of phenosteride. You probably know this drug as Propecia or PRP, and it is a leading product for hair growth. Dr. Glynis Ablon, a key opinion-leading dermatologist, with the Ablon Skin Institute and Research Center in Los Angeles, an associate clinical professor at UCLA, is studying the delivery of PRP with our transdermal system. We believe her work will validate the system's excellent utility for this hair restoration indication, and we are pleased to be working with a physician of her caliber and look forward to the results of her study. Additionally, Dr. Mark Nestor, Director of Cosmetic Enhancement, Center for Clinical and Cosmetic Research in Aventura, Florida, recently presented an abstract outlining the efficacy of utilizing transdermal infusion for subjects with axillary hyperhidrosis, which are for excessive sweat glands. We also featured our SRT systems at the AED conference, where we continued to highlight SRT's impact on treating non-melanoma skin cancer and keloids. as well as the Fair Market Value Leasing Program I just mentioned. In both Hawaii and AED in Boston, we were so very happy to return to in-person meetings. They are a very valuable avenue for solidifying our customer relationships and generating important sales leads. In addition, we have some marketing initiatives that will be active in May in conjunction with the Skin Cancer Awareness Month. Turning to international markets, we delivered one SRT unit to China, which is, as you know, a solid market for us, especially for the use of SRT in the prevention of keloids. We remain encouraged with this market in spite of the pandemic situation in parts of the country. On another note, we're very excited to announce that Census was given regulatory approval to treat non-melanoma skin cancer and keloids with SRT in Taiwan. We're seeing a lot of interest and are looking forward to announcing orders coming from this new territory. I also want to mention that during the first quarter, we hired nine sales representatives, returning our sales organization to pre-pandemic levels, plus two service engineers and a clinical application specialist. We will continue to hire throughout the remainder of the year to support sales and marketing and customer service as we continue to expand our footprint. We continue to be confident in our sales and earnings trajectory as supported by a robust organization, excellent products backed by rigorous research, and creative methods of financing and a committed management team. Before I turn the call over to Javier to review our financial results, I want to emphasize how pleased I am with our financial performance and just as important with the dedication of our staff. We are always cognizant of our surroundings. Notwithstanding the geopolitical and financial turmoil that abounds and noting our usual seasonality, we're very much aware of the threats of inflation, wars, pandemics. In spite of these factors, we expect continued profitability for the year. For the most part, the pandemic seems to be behind us. We have a robust backlog of orders, and we continue to keep a keen eye on expenses. With that, I'll turn the call over to Javier. Javier?
Kim
Thanks, Joe. It is a pleasure to be speaking with all of you this afternoon. As Joe mentioned, revenues for the first quarter of 2022 were $10.3 million, and this compares with revenues of $3.1 million for the first quarter of 2021, which was impacted by the COVID-19 pandemic. Revenues for the 2022 quarter reflect the sale of 33 units. 26 SRT systems, including one SRT100 system shipped to China, and seven transdermal infusion systems, as well as revenue from service contracts and our mobile laser business. Gross profit for Q1 of 2022 was $7.1 million, or 69.1% of revenues, and this compares with $1.6 million, or 51.6%, of revenues for the first quarter of 2021. The increases were primarily driven by the higher number of units sold in 2022, service revenue on installed units, and the impact of COVID-19 on the 2021 quarter. Gross margin was up more than 100 basis points over the fourth quarter of 2021, owing to product mix. Selling and marketing expense for the first quarter of 2022 was $1.2 million compared with $1.1 million for the first quarter of 2021. The increase was primarily attributable to higher ratio expenses and commissions. General administrative expense for Q1 of 2022 was $1.3 million compared with $1 million for the first quarter of 2021. The increase was primarily due to higher professional fees and compensation expense. Research and development expense for the first quarter of 2022 was $0.7 million unchanged from prior year quarter. Other income of $12.8 million is related to the gain resulted on the sale of a non-core asset. Net income for the first quarter of 2022 was $16.1 million or $0.97 per diluted share, and this compares with a net loss of $1.1 million or $0.07 per share for the first quarter of 2021. Note that the net income includes a gain on the sale of a non-core asset of $12.8 million which is recorded as other income on the P&L, and which translate to 77 cents. Adjusted EBITDA, which we define as earnings before interest, taxes, depreciation, amortization, and stock compensation expense, was a positive 16.9 million for the 2022 first quarter, compared with a negative 0.8 million for the first quarter of last year. Turning now to our balance sheet. Cash and investments were $32.8 million as of March 31, 2022, compared with $14.5 million as of December 31, 2021. The company had no outstanding borrowings under its revolving line of credit as of March 31, 2022, or December 31, 2021. As John mentioned, during the first quarter, our board of directors authorized a $3 million share repurchase program. The company has not yet repurchased shares under this program as we have been in a quiet period since the program was put in place. While we continue to place utmost attention on expense management, the recent cash infusion from the sale of the non-core asset, plus the ability to access our revolving line of credit, puts Census in the strongest financial position in the company's history. As a final comment, please see the table in the news release we issued earlier today for the reconciliation of GATT to non-GATT financial measures. With that, I'll turn the call back over to Joe.
Kim Golodets
Thanks, Javier. I can't say enough of how proud I am of our entire Census team and their continued dedication to our customers and patients during past challenging times. Our financial results speak to that dedication. Our SRT systems are well positioned in a large market consisting of some 14,000 dermatologists, 1,000 Mohs surgeons in the U.S. representing more than 7,500 offices, not to mention a further 6,500 plastic surgeons and 5,500 radiation oncologists. Our systems provide a compelling alternative to surgery for millions of patients and arguably the only solution to prevent the recurrence of keloids following surgical excisions. Before we open the call for questions, I want to mention that we'll be presenting at the HC Wainwright Global Investment Conference being held in Miami Beach, May 23rd to the 25th, and we'll be available for one-on-one meetings. I hope to see you all there. With those comments, I thank you for your time and attention, and now, operator, we're ready to take questions.
Operator
Thank you. The floor is now open for questions. If you do have a question, please press star 1 on your telephone keypad at this time. Questions will be taken in the order they were received. If at any time your question has been answered, you can remove yourself from the queue by pressing 1. Again, ladies and gentlemen, if you have a question, please press star 1 on your telephone keypad at this time. Our first question comes from Alex Nowak. Please state your question.
Alex Nowak
Good afternoon, everyone. This is Chase on for Alex. First of all, congrats on the great quarter. And first from me, the acceleration in demand for SRT, can you call out if it's all from the better reimbursement piece? Is it the best practice conversion or how much of it is from the FMV lease program? Thanks. Thanks, Jason.
Kim Golodets
First of all, I think that all of the above has contributed to the overall results that we've seen. So it's a combination of increased reimbursement, better fair market value lease, which lowers the monthly commitment that the doctors have to come up with, which provides them with a much better ROI on their investments. So I think it's a combination of everything. And then, of course, the best practices we think has one of the biggest factors in this because doctors got to learn more about SRT and how it kept their cash flow going as well as their productivity. So I think all of the above has contributed equally to the success that we're seeing.
Alex Nowak
Yeah, and along those lines, when your sales reps are entering dermatology practices, how many of them are aware of the reimbursement change now? Or I guess what I'm trying to eke out is how much more greenfield opportunity is there for you guys to spread the news?
Kim Golodets
Well, I think every one of our salespeople have been thoroughly trained on what this all means for them and their customers. And, of course, this is their livelihood. So I think we're getting better and better at educating the doctor's and teaching them about fair market value lease because that's very new to them. And I think we can see the light going on with everybody that we make a call on. So cold calling has become even more important, and identifying what these opportunities are for these doctors is becoming even more important. So as we get more people in the field and as we talk to more people and as we go to more trade shows, I think we're going to see more excitement and more – you know, more results.
Alex Nowak
Great. Yeah, that's helpful color. And then as you've expanded your reach here and continue to within the dermatology practices, any more additional color on what you could give for other products that you're looking to add, you know, maybe some verticals or, you know, what you think is a really nice tuck-in potentially?
Kim Golodets
Well, I think the targets that we're looking at are all going to be something that we can put in the briefcase of every one of our salespeople and still talk to the same decision maker. That's what our customers have been asking for from us for the last several years because of the fact that they enjoy to work with Census Healthcare. And so I think that we'll continue along those lines. This will allow us for opportunities to bundle sales with customers and provide them with opportunities to get into some unique devices and unique applications just like we did with transdermal infusion.
Alex Nowak
And just lastly for me, is there any way to quantify, you know, what portion of the growth that the transdermal system is driving? I know you don't want to get into specifics about ASPs, but any way you could help us kind of understand what portion of the growth that that system is driving?
Kim Golodets
Sure. Well, as we stated, seven of the units that were shipped in the first quarter were transdermal units. So you can see that it represents about 20%, 22% of our overall shipments as far as units goes. And then, of course, those units were placed pretty much with very key KOLs so that we can establish a good base for the product in the market space. So It's very, very strategic in how we're bringing it to the market. We're going with the doctors who can provide us with a lot of data, a lot of feedback, and a lot of information, and not just for us, but for the rest of the market regarding the indications and the use of the equipment. So as that continues to grow, I think that the product will continue to grow, and the fact that it's a very low-cost, effective type of product that can generate a lot of revenue for our doctors I think that it bodes well for volume sales in the future, but it's certainly at some point going to take off with a lot more units sold than we're seeing with SRT just because of the cost factors.
Alex Nowak
That's it for me. Thanks again, and congrats on the quarter. Thank you very much.
Operator
Again, ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad at this time. Our next question comes from Anthony Vendetti. Please state your question.
Anthony Vendetti
Thanks. Yes, congratulations. Obviously, it's another strong quarter. Joe, I guess just following up on the transdermal system and then add a question about the two conferences, AAD and ASLMS. So right now, the seven that you shipped to the KOLs, are those – placed for now, and then what's the business model, what will be the go-forward commercial price, list price or ASP, and just exactly how is that going to work?
Kim Golodets
The revenues came in on all seven units. We never give anything away. There's value there, and the doctors perceive it as value. And our selling price, we're looking at around $35,000, $32,000 to $35,000 for the product So it's a very affordable price for a lot of the dermatology and or plastic surgery offices. So we expect the device to, you know, fly off the shelves, if you will, once we get going and once some of these publications that our doctors are working on are going to get it out there.
Anthony Vendetti
And the consumable for that is how much?
Kim Golodets
There's a consumable that's going to be made available with various tips that come with the handheld pieces. So it's going to be used on a patient-by-patient basis and an area-by-area basis on the body for whatever it's used. They're very inexpensive tips, but they have to be used. So we expect to have a consumable component to that system as well.
Anthony Vendetti
Okay, great. And then... AAD in Boston and then the American Society for Laser Medicine and Surgery in San Diego. Can you talk about, obviously those were in person, can you talk about the traffic at your booths and just talk about customer interest and then whether or not you actually took any orders at either one of those conferences?
Kim Golodets
Well, first of all, for us, it was a thrill to get back to meetings, to be in person after two years of absence and doing everything on Zoom. And, you know, the dermatology community is a very welcoming community.
Kim
It's a very small community in spite of the 14,000, 15,000 dermatologists that are involved.
Kim Golodets
But, you know, everybody knows each other and there's references all over the place. And we had some outside third parties that were assisting us. They're looking at potential future marketing and PR work for us. They were amazed to see how many customers came to our booth and how good the meetings were. Again, when I worked at some of the big companies and went to some of these major meetings, There were a lot of complaints that came to the meetings. You had physicians and accounts that would come to those meetings, and they were complaining about something. Something wasn't working with the equipment. I can tell you that 100% of the customers that came to visit us weren't coming to us to complain about anything. They were happy to see us. They were looking at buying second and third units. and they were genuinely interested in the well-being of the company, and we were happy to see them as well. So we were very excited for the meetings, and we just can't wait to do more, and we're following up on all of the prospects and all the opportunities that we've had since. And to get to your point also, Anthony, on the transdermal piece, I think everybody was interested in the transdermal piece. Everybody wanted to know what the applications were and One of the big applications that we're seeing is with PRP, with hair restoration. As we know, the current process for hair restoration requires a lot of needles going into the scalp, which causes an awful lot of pain for patients that are looking to restore their hair. This eliminates that pain. You know, right across the board with this product, you're eliminating the use of needles and therefore eliminating the pain part of it. So I think that it's going to be an enhancement for those people that are looking to restore to restore their hairline and I think the doctors to be able to offer this is they're gonna be ahead of the game. The ones that get in there sooner are gonna expand their business very, very well.
Anthony Vendetti
And then just lastly on the new hires, the seven sales reps, the two service engineers, the clinical specialists, did that all happen in the first quarter or did some of that hiring happen after the first quarter?
Kim Golodets
Most of it happened after the first quarter. There was nine sales reps that we brought in. I could tell you there was probably seven of the nine that happened in the first quarter. Two extra service engineers and another applications person for clinical training and things like that all happened in the first quarter. And we're going to continue to expand the market throughout the year. I'd love to have our sales force doubled by the end of the year, but as everybody can probably figure out, the The market is very, very tough. There's a lot of competition out there for hiring the right people, and we don't want to make a mistake. We want to hire the right people, and I think that we did that in the first quarter.
Anthony Vendetti
Excellent. I'll hop back in the queue. Thanks. Appreciate it.
Kim Golodets
Thank you. Appreciate it, Anthony.
Operator
Ladies and gentlemen, if you would like to ask a question, please hit star 1 on your telephone keypad at this time. Again, if you would like to ask a question... please press star 1 on your telephone keypad at this time. Please hold while we poll for questions. At star 1, if you would like to ask a question. OK, we have a call. Again, that's star one. If you would like to ask a question. OK, so it doesn't look like we have any questions coming in. I'd like to turn it back over to Joe for closing remarks.
Kim Golodets
Thank you very much, and I appreciate everybody's questions and assistance today. So in closing, I want to thank you once again for your time this afternoon and for your interest in Census Healthcare. We look forward to our next Financial Results Conference call when we report our second quarter results in early August. Be well, everyone. Thank you.
Operator
Thank you. This concludes today's conference call. We thank you for your participation. You may disconnect your lines at this time, and have a great day.
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