This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk09: 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. All 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 are forward-looking statements. The forward-looking statements are management's beliefs based on currently available information as of the date of this conference call, November 3rd, 2022. Census Healthcare undertakes no application to revise or update any forward-looking statements except as required by law. while 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 conference call, references will be made to certain non-GAAP financial measures. Census believes these measures provide useful information for investors, yet they should not be considered as a substitute for GAAP. nor should they be reviewed 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?
spk08: Thank you, Kim, and good afternoon, everyone. I'm delighted to be reporting continued excellent execution of our growth strategy, strong financial performance evidenced by our very good year-over-year revenue growth, and continued profitability. Our revenue of $9 million was up 64% over last year. In addition, we posted diluted earnings per share of 11 cents compared with 1 cent a year ago. Despite some economic uncertainty and the impact of Hurricane Ian on many of our customers, we're optimistic the fourth quarter will be profitable as well. As you know, last January, our SRT therapy received improved reimbursement from the Centers for Medicare and Medicaid Services, or CMS, when they revalued our main code upwards by 66% for a course of SRT in non-melanoma skin cancer. In addition, ancillary codes received a double-digit boost. Of note, Mohs surgery reimbursement went down. These actions have been game changers for SRT. We have capitalized on these reimbursement changes throughout the pandemic and beyond as patient volumes at customer sites remain robust and more and more practitioners recognized SRT as a best practice for the non-invasive treatment of non-melanoma skin cancer. Our rigorous physician education program highlighting the improved return on investment for SRT is ongoing. especially at dermatology conferences and trade shows. The fair market value lease program we launched earlier this year has supported the purchase of our premium featured and premium priced SRT 100 vision systems. More than half of SRT system sales are now for the vision system, and we expect this percentage to increase with the introduction of significant technology upgrade this past quarter. Note that the interest rates have not yet dampened demand for the vision systems, as return on investment is still robust for physicians, but of course a bit lower than it was before the Fed began raising interest rates. In August, we introduced new state-of-the-art solid-state high-frequency ultrasound, which provides the best view of the epidermis in the market and utilizes a new ergonomically designed probe employing single-use disposables. The upgrade operates in the ideal megahertz range for visualization of all layers of the skin, which is essential for treating skin cancer lesions. In addition, it has built-in electronic medical record capability that allows the operator to easily and accurately record and capture the ultrasound images. This ability improves patient treatments. The new ergonomic probe features single-use disposable standoffs on the tip to create the best skin-to-probe distance. Setup time is also fast, which both our customers and their patients appreciate. All SRT vision units sold from now on will include the new ultrasound technology. Last quarter, I mentioned that we engaged a new advertising firm for a digital marketing program to increase patient awareness of SRT. You may have noticed that our Facebook page has been very active as we work to engage the public. We are also running television advertising in markets where we have the largest presence, for example, Florida, Texas, and Arizona, along with some select national spots. Owing to the upcoming midterm elections, ad space is very expensive, so we've pulled back on purchases. We'll resume more television advertising after the elections and holidays. We still have clips on our website, so if you haven't yet had the opportunity to view them, you can do so. We are also recognizing increased recurring revenues as the business grows in the form of service agreements. At this point, approximately 80% of the systems that come off of their own one-year warranty are covered by service agreements, and 40% of our customers who are eligible for service agreements have opted for them. Note that our ability to diagnose any issues, including before they happen, have been made easier with our Sentinel technology, and that has greatly enhanced our customer service. As a reminder, Sentinel is our proprietary HIPAA-compliant software and is available on all our new products. It allows physicians to easily and accurately document patient data for clinical billing and asset management purposes. 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 the SRT100 Plus systems. We've also included Sentinel in all six of our Sensus branded aesthetic smart lasers, including the new hair removal system Silk by Sensus that we're very proud of. We launched the system at the Fall Clinical Dermatology Conference last month, generating initial interest. Silk is a diode laser that's truly portable. with a lightweight handpiece, super cold cooling tip, and high repetition rates. The ability to blend wavelengths while emitting light vertically toward the skin increases efficiency by maintaining the density of the laser in the selected area, resulting in deeper and better penetration and more homogeneous energy distributions. Importantly, the laser is sensitive to all skin types, making laser hair removal available to everyone. We're very excited about Silk's potential, and its development is in direct response to our customers' needs. We will continue to showcase the product at conferences and trade shows as we work to build awareness for this new aesthetic laser. We also continue to build awareness for our transdermal infusion system, or TDI. Recall that late last year, we entered into an exclusive U.S. distribution agreement with this noninvasive drug delivery system, which is cleared by the U.S. FDA for the local administration of iconic ionic drug solutions in the body for medical purposes. The TDI launch continues to go very well and is generating significant interest among potential customers who recognize its ability to eliminate injections. The system permits many procedures to be less painful for patients, and interest is particularly high for aesthetic facial procedures, hair growth, and hyperhidrosis or excessive sweating. We took orders during the quarter for 10 systems from hair enhancement centers. Hair enhancement centers will be using our TDI systems to deliver their U.SK Underskins Hair Growth Serum called Skin Savers Hair, U.S.SK Underskins. is a subsidiary of EMS Pharma, the largest pharmaceutical company in Brazil, and in itself, a subsidiary of one of Brazil's largest conglomerates. We delivered one TDI system during the third quarter, and the remainder will be delivered in the fourth quarter. HEC is rapidly growing and currently operates 10 centers in Texas, and we intend to and support their expansion plans beyond this year. In addition, work by Dr. Glynis Ablon of the Ablon Skin Institute and Research Center at Associate Clinical Professor of UCLA to study the delivery of finasteride for hair growth is ongoing. Finasteride is more commonly known as Propecia. Dr. Ablon presented her positive study data at the fall clinical. In addition, Dr. Mark Nestor, the founder of Center for Clinical and Cosmetic Research in Aventura, Florida, continues to present data on the efficacy of utilizing TDI for subjects with axillary hyperhidrosis or excessive sweat glands. He highlighted his work at the fall clinical, which followed his abstract at the winter clinical earlier this year in Hawaii. Turning briefly to our international business, during Q3, we shipped four SRT100 systems to China. while the pandemic rages on and China takes zero tolerance stance on COVID. There has been some discussion about China relaxing that policy, which I would expect to be a positive development for us. That said, no matter where in the world you are, and regardless of economic headwinds or geopolitical uncertainty, skin cancer needs to be treated. Before I turn the call over to Javier to review our financial results, I want to praise our dedicated staff. In particular, as Hurricane Ian bore down on us here in Florida, our staff never stopped thinking about our customers, their patients, and how we could help. Many of our customers and prospective customers in Southwest Florida suffered severe damage and have not yet reopened their clinics. This has impacted our near-term expectations for sales. While we're still looking to post a profit in Q4, at this point, we can't say how the quarter will turn out. We have a robust backlog of orders and we continue to keep a keen eye on expenses. We also have the strongest balance sheet in the company's history and will deploy cash to benefit our shareholders, be it in the form of stock repurchases or acquisitions. With that, I'll turn the call over to Javier.
spk01: Thanks, Joe. It's a pleasure to be speaking with all of you this afternoon. As Joe mentioned, our revenues for the third quarter of 2022 were $9 million, and this compares with revenues of 5.5 million for the third quarter of 2021, which was still impacted by the COVID-19 pandemic. Revenues for the 2022 quarter reflect a higher number of units sold, including four SRT100 systems that were shipped to Asia, along with service contract revenue and sales of our transdermal infusion system. Gross profit for the third quarter of 2022 was 5.9 million or 65.6% of revenues. And this compares federally with 3.2 million or 57.9% of revenues for the third quarter of 2021. The increases were mostly driven by a higher number of units sold in 2022, service revenue on installed units and the impact of COVID-19 on the 2021 quarter. Selling and marketing expense for the third quarter of 2022 was 1.8 million, up from 1.2 million for the third quarter of 2021. The increase was mostly attributable to higher trade show and advertising expenses. General and administrative expense for the third quarter of 2022 was 1.2 million, compared with $1.1 million for the third quarter of 2021. The slight increase was mostly due to higher professional fees. Research and development expense for the second quarter of 2022 was $0.7 million unchanged from the prior year quarter. We recorded a provision for income tax in the third quarter of 2022 of 0.5 million and we had no such provision in the third quarter of last year. Net income for the third quarter of 2022 was 1.8 million or 11 cents per diluted share and this compares with net income of 0.2 million. or one cent per share for the third quarter of 2021. Adjusted EBITDA, which we define as earnings before interest, taxes, depreciation, amortization, and stock compensation expense, was 2.3 million for the 2022 third quarter, up from 0.5 million a year ago. Turning briefly to year-to-date financial results, Revenues for the first nine months of 2022 were $31.4 million, up 124% over $14 million for the first nine months of 2021. The increase was mostly driven by a higher number of units sold, service revenue on installed units, and the impact of COVID-19 on the 2021 results. Gross profit for the first nine months of 2022 was $21.3 million or 67.8% of revenue, compared with $8.1 million or 58% of revenue for the first nine months of 2021. As with the revenues, the increases were mostly driven by higher number of units sold in 2022. service revenue on installed units, and the impact of COVID-19 on comparable 2021 period results. For the first nine months of 2022, selling and marketing expense was $4.8 million, compared with $3.5 million for the same period of 2021. The increase was mostly attributable to higher threshold expense, advertising, and commission expenses. General and administrative expense was $3.6 million through September 30, 2022, compared with $3.5 million in the same period a year ago, while research and development expense was unchanged from the prior year at $2.3 million. Net income for the first nine months of 2022 was $21.4 million or $1.28 per diluted share. compared with a net loss of $1.2 million, or $0.07 per share, for the first nine months of 2021. Net income for the first nine months of 2022 includes a $12.8 million gain on the sale of a non-core asset within the first quarter. Net income for the ninth month and the September 30, 2022, excluding this gain, was $8.6 million, or $0.52 per diluted share. Adjusted EBITDA for the first nine months of 2022 was $23.8 million, compared with a negative $0.4 million for the same period of 2021. Turning now to our balance sheet. Cash and investments were $37.6 million as of September 30, 2022, up from $14.5 million as of September 31, 2021. The company had no outstanding borrowings under its revolving line of credit. I want to score what we have been saying for some time. Our attention to expense management is front and center, and we continue to be in the strongest financial position in the company's history. Our balance sheet positions us well to take advantage of the compelling growth opportunities we may come across. As a final comment, please see the table in the news release we issued earlier today for the reconciliation of GAAP to non-GAAP financial measures. With that, I'll turn the call back over to Joe.
spk08: Thank you, Javier. I'd like to stress once again how proud I am of our entire Census team and their dedication to our patients. Our financial results continue to reflect that dedication. Our SRT systems are well positioned in a large and largely untapped market consisting of 14,000 dermatologists and 1,000 Mohs surgeons in the U.S., representing more than 8,500 offices, not to mention a further 6,500 plastic surgeons and 5,500 radiation oncologists. Our system provides a compelling alternative to surgery for millions of patients and arguably the only solution to prevent the recurrence of keloids following surgical excision. Before we open the call for questions, I want to mention that we'll be available for in-person meetings in New York City at the Greg Hallam Alpha Select Conference on November 17th. Please contact Greg Hallam if you would like a meeting. We also will be available in-person meetings during the J.P. Morgan Health Conference in San Francisco, which is taking place January 9th through the 12th. Our IR firm, LHA, will be scheduling the meetings, so please contact them if you'd like to meet. With those comments, I thank you for your time and attention. And now, operator, we're ready to take questions.
spk04: Yes, thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble the roster. And the first question comes from Alex Nowak with Craig Hallam Capital Group.
spk07: Hey, Joe and team. So this is Chase on for Alex. Just starting off from us. You know, we were all pretty excited around Q2. And I think we were thinking about potential for sequential growth into Q3. You know, macro has certainly changed. But can you speak a little bit more specifically on, you know, the dynamics that changed in the quarter? You know, was it predominantly the macro environment causing some pause from clinicians? And then going into Q4, you know, I know you're not giving guidance, but where do you think SRT placements can go And, you know, is there still a chance that year-over-year growth can continue into Q4 as well?
spk08: Thanks. Thanks for being on and thanks for the question. As far as Q3, I don't think we ever represented that Q3 was going to be bigger or better than any of the other quarters. As a matter of fact, there is seasonality in Q3, and I think we made that clear after the Q2 call based on the fact that after two years of COVID, our doctors, for many of them, took extended vacations with their families and went on some extravagant vacations, which I think they deserved after having two years of not being able to go anywhere with their families. So we fully expected Q3 to be seasonal as we had projected. And to that point, I think one of the reasons why Q2 was so good in recognition of having that kind of vision was We really worked extra hard in Q2 to try to bring a lot of orders into Q2 versus waiting for Q3 because we thought of that. So I think it was one of the reasons why we had the exceptional Q2 of 12 plus million dollars in revenue. And we made that statement during our calls with our analysts at that time. So the other thing that may have impacted some of our revenues, we know for a fact that it impacted some of our revenues, is during the week of Hurricane Ian, coming closer and closer to Florida and not knowing exactly where it was going to hit, but understanding exactly where it ended up hitting. We closed our offices for three days because we were suffering quite a bit of storm damage with a lot of rain and a lot of wind in our area. So we sent our employees home to make sure that their homes were secure and that they were able to get home rather than waiting for the last minute, not being able to get home with floods. So I can I can assure you that our employees' safety is of utmost interest to us, and we wanted to make sure that we kept with that theme. And so, therefore, a lot of things that could have been shipped and maybe one or two to some of the areas that ended up getting hit ended up were impacted in not shipping some things. So all of those things combined, I think, resulted in a phenomenal quarter for us with great results, in spite of the fact that we had major storms and we were facing seasonality and we had a successful Q2 as well. Regarding Q4, there's no question in our mind that we're going to remain profitable for the balance of the year and that we have a sufficient backlog to have a successful Q4. So we're excited for the future and for every quarter here on in.
spk07: Yeah, no, certainly. And you definitely message that and hope the team is all safe down there. And good thing you took those measures. I thank you for doing that.
spk08: And you're right. Everybody was safe. Everybody was able to secure their places. Some damage was incurred by some households. But other than that, everybody remained safe and we're fine.
spk07: Thank you. Good. Good. Concerning the backlog, you know, any more color you can give us there. you know, did it grow from Q2 or are we starting to fill a little bit of that backlog potentially? You know, any more color you can give us there would be helpful.
spk08: Yeah, I think that we had some backlog coming into Q4 caused by some of the things that happened in Q3. So, we do have some backlog and I think that the backlog from Q4 will probably grow greater into the backlog for Q1 of next year. So, you know, all of that still continues. We also have The IRS code 179, which is going to impact their Q4 with a lot of doctors wanting to take advantage of that tax relief, if you will, based on what I would consider exceptional revenues that they're experiencing right now. But you have to remember that in the world of dermatology and aesthetics, the economy has a huge impact on dermatology who rely heavily on aesthetic practices. the cash business. So we'll see where the economy goes. The inflation rate is impacting it. We know that already in speaking to some of our doctors. But we're hopeful that everything will continue, because one thing for sure, inflation doesn't stop skin cancer. And so it's something that needs to be continued to be treated, and patients continue to need to be treated. So we'll keep pushing forward. We expect a good Q4.
spk07: Yeah, absolutely. Thanks for the color. And then last from us, you're generating a fair amount of profit now. Balance sheet is looking like you can go on offense a bit here. You know, what are capital allocation priorities, you know, between buybacks, you know, further Salesforce investments and M&A, maybe on the M&A front, you know, how are you thinking about potential additions there? Is it more capital products? You know, is it procedural volume link products? I mean, any sort of, you know, strategic thoughts you can give us there would be helpful.
spk08: Yeah. You know, we're being very aggressive in our pursuit of technology. We want to have very unique, opportunistic technology that we can add to our portfolio, and we want to give our salespeople as much technology as possible so that our doctors, who are single decision makers in a lot of their practices with several influencers throughout, can have the opportunity to decide on a a bundle of products that we might be able to offer them. So, for instance, the TDI product is very unique in that it offers patients a pain-free experience without having to experience needles. And needles, we know, is very excessive for hyperhidrosis for the sweat glands.
spk00: Those needles are injected into the armpits. This now deletes the need for having to do that.
spk08: Dr. Nestor's paper that was presented the last two shows that we were present at Highly indicated that in generating a lot of interest. I can tell you that we don't have the supply to meet the demand at this point, and we're pushing like crazy to increase our resources for manufacturing. So that's a big opportunity for us. The new product that we just added, which is for hair removal, the fact that it has multiple laser capabilities in one unique form, and it's able to treat
spk00: multiple skin of color is a huge opportunity for us.
spk08: The fact that it's mobile and compact, those are features that are exclusive to the product. So, again, providing unique features to products that nobody else has. We continue to look for those products, and we have to be very careful because we found ourselves probably window shopping, if you will, looking at opportunities, and we made ourselves avoid the fact that we're going to potentially bite off more than we can chew. One of the things that we cherish is the fact that we do not have any debt. And going into this period of, I would say, questionable finances with inflation rates and things like that, I don't think it would be very wise for us to incur any major kind of debt to make an acquisition, regardless of how good that acquisition may be.
spk00: I think that we have to
spk08: make sure that we live within our means and that we continue to work with technologies that we can afford and that we know we can provide a good ROI to our customers as well as to our investors because I don't think our investors would be too happy if we had a high debt going into this inflation period.
spk07: Yep, noted there. Thanks again, Joe. I appreciate the question. No, thank you. Appreciate it.
spk04: Thank you. And the next question comes from Scott Henry with Roth Capital.
spk06: Thank you, and good afternoon. Joe, you certainly picked a good time to put cash on the balance sheet when you can make a return on it, at least.
spk00: Thank you.
spk06: A couple questions. First, did you mention how many SRT units were sold in the quarter? I didn't seem to catch that.
spk01: Yeah, we actually thought we chipped 27 systems. Out of them, 17 were visions and 10 SRT 100s.
spk06: Okay. When you say you shipped that, you booked revenues on 27?
spk00: Correct.
spk06: Okay. And, you know, as we start to get more sources of revenue, are you going to disclose the revenue for different products? And I guess maybe another way to ask it is, You know, what percent of the revenues in the quarter were from SRT, Vision, or 100s?
spk08: You know, you have to remember, Scott, that the TDI product is a very low-cost product. The average selling price is somewhere around $28,000. So, you know, we didn't ship 10 systems and to, you know, identify that as, you know, that kind of revenue. it's pretty small. So, you know, the vision overall was the biggest number at 5.5 million revenue, and then you're looking at approximately $1.6 million in service revenue. So that generates pretty much the majority of the revenue that we have, totaling the 9 million. So I think that it's going to be appropriate someday when we have significant numbers to reflect what each one of those units have. If we're going to be over a half a million or over a million dollars on a quarterly basis with TDI or with the aesthetic product or the laser product. I think that that will be appropriate. Right now, just launching the new laser product, the mobile laser product, and TDI is pretty early, and I don't see the numbers as being that significant. But we'll get there. We'll make it significant.
spk06: Okay, great. And then I know there was some discussion on the fourth quarter outlook, I guess a little – less clear given the hurricane. Is it fair to say that you would expect sequential growth from Q3 to Q4?
spk08: You know, that's what we're driving for. I mean, there's no question that that's our objective, but fourth quarter has always proved to be the best quarter of the year, so we're continuing to anticipate that. We see activities towards that for sure.
spk06: Okay. All right. That's great. That is perfect. Now, gross margins, I think, you know, according to my first-pass numbers, were 68%, 69% in the last two quarters, or in the first and second quarter, about 65% in the third quarter. Would you expect them to bounce back a little, or I guess is it just a volume thing?
spk01: Scott, it's all about the mix. It's all about the mix of the visions and the SRT 100s and the deals and things like that. We have always experienced margins in the mid-60s, and I expect that to maintain. When we have higher than the mid-60s, it's because, I mean, we were able to make close deals with significant higher margins than normally. But I think the mid-60s is the number that we should be looking into.
spk06: Okay, great. And, you know, final question. You've mentioned a little bit about the backlog. Could you talk about how we should think about the backlog at the current time versus a couple quarters ago? Just trying to get a sense of the magnitude of the backlog and how to think about that relative to quarterly revenues.
spk08: Again, because Q4 has always been the best quarter for us, it seems like our prospect base as well as backlog grows pretty good during the course of the quarter. And as I had mentioned to everybody after the last quarter, when they asked me what are my observations, what am I thinking, I think we identified the fact that doctors were going to take extensive vacations in Q3, which could cause us to see the seasonality about it. And then I also mentioned the fact that because we were going into an election year, and again, irregardless of whether it's midterms or for presidential elections, there always seems to be holding pattern with all decision-making is people keep their hands in their pocket until after a decision is made or and after the results are made final so we have another week to go and so we've seen decision-making being held true to that where people are waiting for for those types of things to happen but then again after that I see the floodgates opening up and everybody's going to be very very busy I can see the activity already starting to grow and I know that a lot of us are going to be on the road between now and the end of the year, and I'm hoping that everybody makes it home by Christmas Eve.
spk06: Okay. All right. Great. Thank you for taking the questions.
spk08: No, thanks, Scott. Appreciate it.
spk04: Thank you. And the next question comes from Yi Chen with HC Rainwright.
spk02: Thank you for taking my questions. Just to clarify that you would expect the fourth quarter to be the best quarter of 2022, given the negative impact from the hurricane and the general economy, correct? Yes. Okay. And regarding the SRT vision systems being shipped, are they all equipped with the new ultrasound probe?
spk08: Everything that's being shipped now is with the new ultrasound.
spk02: Does the price increase?
spk08: The price has increased, yes. Okay. Thank you.
spk02: So... If the general economy's recession persists throughout 2023, would it be reasonable to say that it could have a pretty significant impact on the number of new orders for the transdermal infusion systems, but not necessarily impact the number of SRT systems? Is that correct?
spk08: Say that again. I'm not sure I understood what you said.
spk02: If the recession persists throughout 2023, would it be reasonable to say it could have a significant negative impact on the number of orders for TDI systems, but not necessarily the SRT systems?
spk08: I think that it might be a little bit the other way around because you have to remember that as we introduced the new fair market value lease, since it's based on what the interest rates are and the government has decided to have its third raise of interest this year, those interest rates continue to go up. So although there is still an excellent ROI, it's still going to be a little less than it was before each time that there's a raise. So we're hoping that it's not going to impact it that much, but I think that we have to expect that it will.
spk02: So you're saying because people purchased SRT systems was a loan that could have a negative impact on the order number?
spk08: I'm just saying that it could. I don't think that it's going to have a negative impact on the products that they purchased. So if you look at the mix, for instance, that Scott had asked before, where we had 17 visions and 10 SRT-100s that were shipped, if you look at the quarter before, we had many more visions being shipped versus SRT-100s. So we're still going to sell the SRT technology, but now we're going to still push towards the vision and we'll still have many more orders for vision, but I think that we're going to sell more SRTs because it's going to have a better ROI because of the lower cost. And so when you look at what our numbers were from Q2 to Q3, we had 27 units totally sold. I think if you go back to Q2, it was about 36 units that were sold. You know, there's not that many units in difference. And compared to what the headwinds were with the hurricane as well as the vacation time for the doctors, eight units was not a big number. It was very, very small. And I think that there's two or three numbers in there that were delayed because of Hurricane Ian that are going to be shipped in the next quarter. So it gives us a head start on a few things.
spk02: Okay. I mean, the press release mentioned that a recession could affect aesthetic procedures. So, I mean, if the recession persists, then that means there may not be that many patients who would like to pay for aesthetic procedure and that could negatively impact the order for TDI systems as well, right?
spk08: Yeah, I don't think it's going to impact TDI systems only because it's such a small amount of money that the doctor has to pay for this. And it makes sense for them to purchase a TDI system because it provides their patients who are going to go through the procedures no matter what a much better experience because there's no pain involved, no needles involved. So it's an enhancement that will help the doctors in a lot of cases that doesn't cost a whole lot of money. So although there might be fewer aesthetic procedures, I don't see it happening in the area that it's going to impact TDI. So I think where it's going to impact on the aesthetics is people that are going to have microneedling for facial rejuvenation or some of those other things. But we're going to be impacting hyperhidrosis. It's almost a medical condition that people have to have needles stuck into their armpits, which is extremely painful for excessive sweating and things. Then you have hair restoration. Somebody wants their hair restored This helps the doctor cut the pain, cut the cost, and cuts the time. So I think it's going to attract more patients to their table. Everything that we're doing, again, is to enhance the patient experience in the treatment. And I think this allows the physicians to see that they can draw more patients into their practice. I think all these doctors are going to be looking for that kind of a solution during this kind of a period. So we're not in the same vein as the other aesthetics, as I mentioned. with facial restoration. Instead of a patient going every four months, now they'll go maybe over every six months. So that's two times a year versus three times a year. That's a big cut. That's a 33% cut in their expenditure and in a doctor's revenue. But I don't think the TDI is going to have that kind of an impact.
spk02: Got it.
spk08: Thank you. Just also to answer that, to your point, I think that we'll sell more as time goes on of TDI. I just need more manufacturing.
spk02: Got it. Thank you.
spk04: Thank you. And the next question comes from Benjamin Hainer with Alliance Global Partners.
spk03: Gentlemen, thanks for taking the questions. Just wanted to kind of hit on the product updates and the launch of the SILK. You mentioned that the SILK lasers, you mentioned that there's an updated disposable with the vision. Is that something that could be a meaningful revenue opportunity, or is it still mostly the revenue that you see from these units mostly going to be due to the capital purchase?
spk08: Well, on the vision, there's a recurring revenue piece because there's a cap that goes with the transducer that they use for ultrasound.
spk00: So that cap is something that's needed. It's a very low-cost item.
spk08: It's a plastic piece that goes over the transducer, and it keeps the actual transducer from touching the patient's skin, so it's something that's required for sanitation and things like that. But that is something that we've got, and I think that that'll be sold on a regular basis. I don't think that it's going to impact into the hundreds of thousands or millions of dollars for us, but it's definitely a revenue source for us. As far as the new silk product, what our doctors have been asking us for is they don't like to have consumables sold with those products. They want low-cost lasers with no consumables. And so that's exactly what this does. It has literally no consumables. We will have a service component, which will create a revenue source for us. But what we try to bring to market is something that's extremely reliable, something that's productive, and something that's cost-effective for our customers as well as providing the best outcomes for patients with the best experience. So that's a theme that we're going to keep moving along because that seems what the doctors want.
spk03: Okay, that makes sense. And you kind of anticipated my question there in that, you know, does a tougher aesthetic market benefit you guys in that, in the sense that, you know, the docs want to get away from consumables? And, you know, I know some of the vendors out there in this market have gotten, you know, maybe a little bit aggressive in shoehorning unneeded consumables into the laser products that they offer. So, I mean, I guess, do you think you get more consideration with a low cost, you know, and kind of no disposable type laser as the market, you know, maybe gets a little bit tougher and it's, in a way, almost a more ideal market to introduce it into?
spk08: Yeah, I think you hit it right on the head. That's our goal with our products is to bring something that, first of all, a physician can say this is a unique technology. Number two, it's easy to acquire and I don't have to worry about you know, keeping my shelves full with all of these consumable products. And, you know, without those consumables, they don't have to charge the patient as much. Or if they want to charge the patient as much, they make more money themselves. So there's a larger margin for it. So I would think that there would be a favorable decision for our products over somebody else's. And that's what we want to do is we want to have an advantage over selling our products versus somebody else.
spk03: Excellent. And then just back to the vision improvements and the workflow or set up a time improvement that you have. I know it's definitely a shorter procedure than most surgery, but how much of a needle mover is or are these kind of improved workflow elements that you have with the update to the vision?
spk08: Well, again, a good point. First of all, there's less prep for the patient because the patient usually has to get prepped to have an ultrasound. I mean, if any of us have any experience with our wives or significant others going for birth and things like that, we know what the ultrasound process is and how the patient preps for that ultrasound. Well, now we eliminate that prep and all that goo and stuff that's added to the patient's body in order to apply the transducer isn't necessary for these patients. And so on top of that, the resolution that we have for the physician and for the imaging piece, it's much more productive for the treater or the physician who's going to treat the patient because they don't have to apply all that stuff. They don't have the same time to apply for the patient prep. The other thing is the importance of the transducer itself and the image quality that it gives you because Now they can see very clearly the dermis part of the skin, which is very evident, so that when we're identifying skin cancer to put together treatment planning, this makes it very, very beneficial to the doc. And we have to keep in mind that SRT is recession-proof in any way because, again, skin cancer patients want their skin cancer treated. Doctors want to treat them.
spk03: Yeah, yeah. Makes sense. And lastly for me, just on the digital advertising, television advertising front, you know, I think you mentioned the returns, the level of interest that you had gotten on the Q2 call from these efforts. Any updates there in terms of, you know, like calls per day or inquiries per day or however you kind of measure it internally?
spk08: Yeah, no, thanks for bringing that up because the fact of the matter is that we see our patient inquiries continue to grow. I would say that we're in excess of 30 a day in answering those questions and providing feedback to the physicians and setting up times with physicians so that their practices are getting these patients and they're very appreciative of it. It's funny, I just got one today from one of the plastic surgeons in Orlando who's very adept at doing keloids, and we've had a bunch of people from the islands, for instance, who have keloids, and he referred our system to one of the doctors in Jamaica, who I'm in contact now, who wants to buy a system because we've got five or six patients on a regular basis from the islands looking for treatment of keloids. You know, it's funny how this thing transitions, but I think it bodes pretty well for what we're doing and how the patients are responding. The interesting point about it is, you know, like you and I or anybody else, how we get on the Internet in the evenings or on weekends when we have less to do away from our work We're getting a ton load of patients. We come into the morning, Monday morning, and we've got, you know, 20 or 30 that are just waiting for us from the weekend, from patients inquiring on the weekend.
spk00: And then every night, we've got a backlog.
spk08: And when we start first thing in the morning of 5 to 10, and that continues to grow. So we're excited for it. And now we're going to grow our SEO compatibility and working on Google and everything else to even draw it even higher.
spk03: Okay, great. Well, thanks for all the colored gentlemen and taking the questions, and that's it for me. Thank you.
spk04: Thanks, Ben. Thank you. And we have time for one more question, and it comes from Anthony Vendetti with Maximum Group.
spk05: Thanks. Thanks. Hi, Joe. Hey, Anthony.
spk04: How are you?
spk05: Good, good, good. How are you? Good. Good, good. And, Javier, just a quick follow-up to the TDI. So the 10 systems sold this quarter – You said the ASP is around 28,000. We're for the inherent enhancement centers. I know it could be used for other transdermal techniques. You mentioned people with, I guess, hyperhidrosis is one area. Is it being sold in the U.S. by Census for ASPs? Anything else at this point, or is that what's out there in the pipeline? And do you expect sales outside of Heron Hansen Centers in the fourth quarter or early next year?
spk08: Yeah. Good question. I will tell you that we've sold several systems just for the facial rejuvenation portion. So we're seeing a lot of activity there, but it seems like there's a significant activity because of the need for hyperhidrosis because that's a real problem for those patients that are going through that. And then hair restoration, if you understand that market, and we're learning from our doctors as we go, tremendous pain and blood involved with using needles through the scalp, thousands of needles. to rejuvenate hair follicles and things like that to get that growing. Not having to go through that pain with the multiple needles and the blood involved is making physicians drool over the opportunity to have more patients go through the procedures because it's usually the patients that stop the procedure after two or three times. They say, I can't stand it anymore. I don't want to go any further. So to enhance that experience for that patient, is great. I think that we had one of our personnel who came back from witnessing the hyperhidrosis one, and the patient literally said, man, bring it on. This is exactly what we need, because they couldn't stand having the needles injected into their armpits. I mean, just thinking about it is beyond acceptable to me, but I'd rather sweat. That would make me sweat, just to think about it. But I think that we're seeing a whole lot of more applications coming about, and the doctors are using it wherever patients have a problem with needles. One thing I want to bring up is an experience that I had in the past, is when I first introduced MRIs to the market back in 1980, it was assumed that the U.S. market, that there was about 3% of the market of the people that were definitely afraid of very closed spaces, and they couldn't take it. Since MRIs come in, it's grown to over 20% of people that are afraid of those closed-in spaces. And that's the reason why you're seeing open MRIs today that expand more to the patient's needs and to provide a better experience. I think we're seeing that experience going to renew with TDI, where there's more patients that are going to be more afraid of needles. And the fact that they've got a choice now, those doctors are going to reap the rewards of having more patients walk through their doors. just like SRT versus most.
spk05: Right, right. Okay, no, that's helpful. Lastly, on the new SRT vision system, you know, solid-state high-frequency ultrasound, and a better view of the epidermis, are the older systems eligible for an upgrade, or is this just incrementally better, and therefore... not worth doing upgrades for, and this is more for the newer SALs, or do you have an upgrade program in place?
spk08: You know, this is, it's not something that we're going to be able to do by retrofitting existing units in the field. So it's, Like any other evolution of technology, there's going to be advancements. This is something that our customers were asking for. So they have to buy the new equipment at the higher cost due to the capabilities of the ultrasound. But it's just that's the way it is. But I think it's a huge advantage for them and their patients.
spk05: Okay. So there isn't really an upgrade program. If they want the new vision system, they'd have to purchase it, like, like anyone else, as a new purchase. Yeah, correct. That's what I thought. Okay, good. I was just checking. All right. I think that's all I have for now. I appreciate it. Thank you, Anthony.
spk04: Thank you. And this concludes our question and answer session. I would like to return the conference back to management for any closing comments.
spk08: Okay, thank you once again for your time this afternoon and for your interest in Census Healthcare. We look forward to our next financial results and conference call when we report our fourth quarter results in late February or early March. So thank you, everyone, for your interest, and be well. We'll talk to you soon. Thanks.
spk04: Thank you. The conference is now concluded. Thank you for attending today's presentation.
Disclaimer