American Shared Hospital Services (NYSE:AMS) Q4 2022 Earnings Conference Call March 24, 2023 1:00 PM ET

Company Participants

Stephanie Prince - PCG Advisory

Raymond Stachowiak - Executive Chairman

Peter Gaccione - CEO

Craig Tagawa - CFO

Conference Call Participants

Tony Kamin - Eastwood Partners

Anthony Marquez - Private Investor

Tony Kamin - Eastwood Partners

Operator

Hello, and welcome to the American Shared Hospital Services Fourth Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note, today’s event is being recorded. I would now like to turn the conference over to Stephanie Prince of PCG Advisory. Ms. Prince, please go ahead.

Stephanie Prince

Thank you, Keith, and thank you to everyone joining us today. AMS' fourth quarter 2022 earnings press release was issued this morning before the market opened. If you need a copy, it can be accessed on the company's website at ashs.com at Press Releases under the Investors tab.

Before turning the call over to management, I would like to make the following remarks concerning forward-looking statements. Please note that various remarks that may be made on this conference call about future expectations, plans and prospects for the company constitute forward-looking statements for the purposes of Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.

Actual results may vary materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the company's filings with the SEC. This includes the company's quarterly reports on Form 10-Q for the 3-month periods ended March 31, 2022, June 30, 2022, and September 30, 2022, the annual report on Form 10-K for the year ended December 31, 2021, and the definitive proxy statement for the Annual Meeting of Shareholders that was held on June 21, 2022. The Company assumes no obligation to update the information contained in this conference call.

I would now like to turn the call over to Ray Stachowiak, Executive Chairman of AMS. Ray?

Raymond Stachowiak

Thank you, Stephanie, and good day, everyone. Thank you for joining us today for our fourth quarter 2022 earnings conference call. I'll begin with some opening remarks. And then turn the call over to Craig Tagawa, our President and CFO, for a financial review of our fourth quarter. Peter Gaccione, American Shared's newly appointed Chief Executive Officer will then spend a few minutes talking about his priorities and his plans for American Shared. Following the prepared remarks, we'll open the call up for your questions.

Our most exciting news recently is that on March 10, the Board of Directors appointed Peter Gaccione as our Chief Executive Officer. As you may remember, Peter joined American Shared 6 months ago as our COO after 40 years in the medical oncology business. He's very well known and respected. Many of us here at American Shared have known him for many years. He comes to us with strong market knowledge and professional contacts from across the entire radiation oncology spectrum.

I am now Executive Chairman of the Board, and I remain the largest shareholder of the company, approximately 20% of the outstanding stock. I plan to continue to be actively involved in the operations of the company as we work together to solidify the growth and profitability trends that we have firmly established in the year just ended.

As we also announced, we've begun a search for a new public company CFO to succeed Craig Tagawa, who has held the position for many years and will remain our CFO until a successor is in place. Craig will continue to serve as President of our company and also as Chief Executive Officer of GK Financing, our subsidiary, 81% owned by the parent company.

American Shared ended a strong year with another solid fourth quarter. Fourth quarter revenue increased approximately 7% period-over-period and reached over $5 million in quarterly revenue for the second time in 2022. Our net income increased 12% to $246,000 or $0.04 per share and capped a year of sustainable quarterly profit trend. In fact, this is now the eighth consecutive quarter where earnings per share have been higher than the comparable quarter in the prior year. I expect our profitability to continue.

For the full year, the revenue increased 12% to nearly $20 million, and our net income increased 6x to $1.3 million or $0.21 per share. Craig will go through the details in a few minutes. Our cash balances grew 51% from last year to end at $12.5 million on December 31, and our $7 million line of credit remains unused as well.

We believe these funds can be leveraged to invest in over $100 million of advanced radiation equipment. Just recently, we announced our first new order of the year, a $1.3 million agreement with a new customer. Our increased investment in sales and marketing is beginning to pay off, and our pipeline is filled with solid opportunities. We believe that American Shared is poised for growth.

I will now turn the call over to Craig for a financial overview. Craig?

Craig Tagawa

Thank you, Ray, and good morning, everyone. Fourth quarter revenue increased 7.4% to just over $5 million compared to $4.7 million in the fourth quarter last year. As Ray mentioned, this is the second time this year that we reported over $5 million in quarterly revenue.

For the 12 months of the year, revenue increased 12% to $19.7 million. Fourth quarter revenue for the proton therapy system in Florida increased 33.4% to $2.2 million, primarily due to higher average reimbursement period-over-period for the current quarter.

Total proton therapy fractions in the fourth quarter were 981, a decline of 11.9% compared to 1,113 in the fourth quarter last year, which we consider within a typical quarterly fluctuation range. Total Gamma Knife revenue decreased 7.1% to $2.8 million compared to the fourth quarter last year.

Domestic Gamma Knife revenue declined 5.4% to $2 million, and international revenue decreased 11.5% to $0.8 million period-over-period. The decline in overall Gamma Knife revenue was a decrease in procedures, offset by an increase in average reimbursement, which, in turn, was driven by an increase in the average rate of the company's retail sites caused by a favorable shift in payer mix to more commercial payers.

Revenue for same centers in operation, which excludes two Gamma Knife contracts that expired, one each in the first and fourth quarters of 2021, decreased 6.7% when compared to those same centers during the same period of the prior year. Total Gamma Knife procedures decreased by 10.8% to 329 for the fourth quarter of 2022 from 369 in the fourth quarter of 2021, primarily due to normal cyclical fluctuations and the expiration of one contract in the fourth quarter of 2021.

Gamma Knife domestic procedures declined 10% to 243 and international procedures decreased 13.1% to 86 for the fourth quarter of 2022 compared to 2021. Gamma Knife volumes for same centers in operation decreased 8.4% when compared to Gamma Knife volumes for those same centers during the same period of the prior year.

We are looking forward to receiving the permits for the perfection to Icon upgrade for our Gamma Knife Center in Ecuador. We are expecting this soon so we can begin treating patients in the third quarter. Remember that this will be one of the few Gamma Knife Icon units in all of South America. The permit for the new linear accelerator, or LINAC, for our new cancer center joint venture in Puebla, Mexico, is expected soon as well.

Gross margin for the fourth quarter decreased 2.3% to $2.3 million or 45.1% of revenue compared to gross margin of $2.2 million or 47.3% of revenue for the fourth quarter of 2021. Selling and administrative costs increased by 14.7% to $1.4 million compared to $1.2 million last year, primarily due to higher sales and related fees associated with new business opportunities.

Operating income was $0.6 million compared to $0.7 million in the fourth quarter of 2021, a decrease of 18.4%, reflecting higher operating costs and selling and administrative expenses. Income tax expense increased 23.3% to $333,000 for the fourth quarter of 2022 compared to $270,000 for the fourth quarter last year. The increase in income tax expense for the current period was primarily due to higher earnings during the current period, return to provision adjustments arising from foreign income taxes filed during the current period, as well as permanent domestic tax differences that continued through the end of this year.

Net income attributable to American Shared Hospital Services in the fourth quarter 2022 was $246,000 or $0.04 per diluted share, an increase of 12.3% compared to net income of $219,000 or $0.04 per diluted share for the fourth quarter of 2021. The increase in net income dollars was due to increased revenues and higher average reimbursement rates on both Gamma Knife and PBRT procedures. Fully diluted weighted average common shares outstanding were 6.3 million and 6.1 million for the fourth quarter of 2022 and 2021, respectively.

Adjusted EBITDA, a non-GAAP financial measure, was $2,161,000 for the fourth quarter of 2022, essentially even with the EBITDA in the fourth quarter of 2021. For the 12 months of 2022, net income attributable to American Shared Hospital Services was $1.3 million or $0.21 per diluted share compared to non-GAAP net income after net effect of the extinguishment of the debt, non-controlling interest and income taxes was $0.4 million or $0.07 per diluted share. Adjusted EBITDA, a non-GAAP financial measure, was $8.2 million for the year compared to $7.2 million for all of 2021.

At December 31, 2022, cash, cash equivalents and restricted cash was $12.5 million, an increase of $4.2 million or 5.7% since year-end 2021. Shareholders' equity, excluding non-controlling interest in subsidiaries, was $21.6 million or $3.50 per outstanding share at December 31, 2022 compared to $19.9 million or $3.28 per outstanding share at December 31, 2021. To close my remarks, AMS had a good year in 2022, and supported by our deep resources and solid foundation, we believe that we are positioned for future growth.

I will now turn the call over to Peter to discuss his priorities and plans as CEO.

Peter Gaccione

Thank you, Craig, and good morning, everyone. I want to first thank Ray and the Board for their confidence in me. As CEO, Ray did a fantastic job in streamlining the company and positioning it for growth. and I now look forward to leading American Shared into its next stages.

As I said on the last quarterly call, when I was first introduced to you, American Shared uniquely provides clinical cancer treatment centers the opportunity to partner with all the major original equipment manufacturers through one turnkey vendor in one creative relationship. This is uncommon in our industry and was one of the major factors in my decision to join the management team here at American Shared.

Since I was appointed COO in September, I've been focusing on three key target areas. These include: aggressively working with major OEMs to strengthen our business relationships and develop sales and marketing strategies. Also working with our current installed base of Lexel Gamma Knife sites and treatment centers to strengthen and enhance these relationships.

And I've been developing and implementing new sales and marketing strategies and programs to assist our sales teams in lead generation, prospecting, and managing the sales funnel and pipeline. In this regard, we’ve seen a significant increase in our lead generation and opportunities within our sales funnel over the past few months.

I believe that we've made great progress in all three of these areas. And now as CEO, I plan to also focus on increasing the global branding and awareness of American Shared with cancer treatment C level officers and purchasing committees. We need to make them more aware of what we’ve to offer and how we and how we must at American Shared differ from traditional financing options by showing them how easy it is to obtain the latest treatment systems in their department, fast without heavy financial burden, and allowing them to allocate their financial resources elsewhere within their facility. Further, we will soon start to prospect and address new opportunities directly with larger national and strategic networks, in addition to continuing to work closely with our strategic OEM partners.

We have recently hired a customer advocate to help us better manage our installed base as well as support our company's marketing and branding initiatives, not only for American Shared, but for GK Financing as well. Going forward, you will see American Shared much more visible on major social media platforms, broadening the messaging and information on our websites, and increasing our visibility at major radiation oncology and radiosurgery trade shows, both domestically and internationally.

In addition, we also recently added services of another financial sales professional to pursue additional new business opportunities. We are in the process of developing and executing growth strategies to make advanced treatment technology more easily accessible to end users in areas where patients and communities are underserved, not only within the U.S., but in targeted international locations where patient treatment wait times are way too long.

Part of this strategy will include additional joint ventures such as in Puebla, Mexico, targeted acquisitions of well-established cancer centers and by expanding our creative financial and turnkey solutions to offer greater customer flexibility. We all believe that AMS has multiple opportunities for growth, and with our newly expanded team structure and deep financial resources, we look forward to updating you on our progress in the quarters ahead. Thank you for joining us today. This concludes the formal part of our presentation.

Question-and-Answer Session

Operator

[Operator Instructions] And the first question comes from Harry [indiscernible] with Ford Ashford [ph].

Unidentified Analyst

How are you? Hi, Ray, Peter and Craig. This is [indiscernible] hope you’re having a great day.

Peter Gaccione

Thank you, Harry.

Raymond Stachowiak

Thank you.

Unidentified Analyst

So we are great admirers of what you're doing, and I might take a little bit longer with this because, at Ford Ashford, we believe that people are more familiar with your business that this will bring about a lot more acceptance of your company. So just to go through some numbers here. I don't want you to be polite. I want to be really rude. If I say something wrong, I want you to stop me and correct me immediately. But the joke, which is not really a joke is that the market doesn't seem to understand about your company that depreciation is a noncash expense.

So when I'm just looking at the numbers, it looks like, annually, you're doing approximately $7 million in cash flow from operations and $8.2 million in EBITDA yearly, so approximately a little over $2 million per quarter in EBITDA. So $17 million market cap, $7 million in cash flow from operations. You're 2.42x cash earnings, which, I believe, makes you the cheapest public company in the United States on an enterprise value to cash flow basis, which is kind of fascinating given how stable your business is when you combine proton beam therapy with Gamma Knife procedures, it's fascinating.

Raymond Stachowiak

Well, Harry …

Craig Tagawa

If I’ve said anything in the numbers so far that's wrong?

Raymond Stachowiak

No, you have not. [Indiscernible] with your observations. I mentioned during our last quarterly conference call that I firmly believe that we're undervalued. If you look at any of those metrics, and compare it to the market as a whole, or with a company that may not have grown too much in the past, but you can outline the future of our company. So positively, we are really undervalued.

Unidentified Analyst

Yes. I mean certainly at 2.4x cash flow, I mean, I don't mean this in a facetious way, but even the local Laundromat doesn't sell at 2.4x cash flow from operations and certainly not a well-respected medical business. And so it's just fascinating that even in a steady state, where the market might value, let's say, an 8x multiple. If you net out the cash you have, which I understand your filings, my estimate at this moment, it's just an estimate or guesstimate is that you probably have $14 million to $15 million in unrestricted cash today. And looking at your balance sheet, it looks like you have $14 million in total debt, if you add long-term debt plus the current portion of long-term debt. So essentially, with just cash you have on the balance sheet, if you so chose, you could be almost completely debt free, I believe. Is that correct?

Raymond Stachowiak

I think you're fairly correct in those numbers. Yes.

Unidentified Analyst

Right. And so then just adding back in just to the conclusion of those numbers is that actually the true cash flow generation of the business, since you're doing approximately $1 million in interest expense each year, so the true cash flow generation of the business is actually almost exactly your EBITDA or about $8 million in cash flow from operations. And I say that your true cash flow from operations, if you add back an interest expense, which could immediately be netted out with cash on hand is because since depreciation is such a huge component of the cash earnings, that's why it seems like the actual cash flow from operations, if you net out interest expense, which you easily could do, you could pay down your debt right now is really $8 million.

So at $8 million a year, you're basically at 2x cash flow from operations, 2x8 $16 million versus $17 million in market cap. I mean this is fascinating. It's better than 2.4x cash flow from operations. And so essentially, if you even had an 8x multiple on that $8 million for a steady state company, the company should be at a $64 million market cap. And, according to your vision, if you grow, and the market loves medical companies at a 15x multiple, your market cap would be at $120 million, if you were growing at double digits.

So I just wanted to get conceptual agreement on what the stakes are here? And so it seems like this situation is ripe for M&A. You mentioned correctly so that the cash on the balance sheet gives you a lot of optionality, certainly gives you about $100 million in buying power for more advanced radiological equipment. So here's my 1 question. How do you view strategically as a company the psychology of making a sale, let's say, the long beach situation to a group of doctors in private practice, the associated risks with which you're very good at building out a proton therapy room, versus, let's say, some hospitals, which, as you know, all the time, they need to get cash.

And doing a sale and leaseback agreement where an existing hospital with existing cash flow from operations that could be easily quantified essentially buying a controlling or a minority stake in a sale and leaseback sort of situation or just taking an outright minority stake for the hospital to free up cash? How do you view those two different sales cycles strategically?

Raymond Stachowiak

Let's -- we are probably not inclined to approach health care systems and pursuing sale leaseback situations. When you do such, you're really talking money over money financing, and we believe that our company offers much more value added than that type of capability. So we are going to pursue that path to providing radiation oncology equipment, it's a very capital intensive proposition for health care systems. And they're trying -- inevitably, as an example, any health care -- major health care system, as an example, might have $100 million of requests for capital expenditure coming through the financial officer's desk each year, and they only have $25 million of capital to allocate. So where do they invest? And in partnership with American Shared, we can expand that capital budget so that they can enter the marketplace through this high tech technology much faster than the competition and remain competitive and a leader in cancer treatment within the respective service area. Does that make sense?

Unidentified Analyst

It makes total sense. And I apologize for asking a similar question in a slightly different way, but have you ever considered, rather than controlling the proton beam therapy center, taking minority stakes, 20% to 40% might be more geographically diversified and just diversified in terms of centers without having to have that huge outlay of, let's say, $100 million or $150 million, et cetera?

Raymond Stachowiak

If the situation calls for that, and that's what meets the customer's needs, I'd say, yes, we would be very open to those type of situations.

Unidentified Analyst

Because what's fascinating here mathematically is, let's say you're growing at 30% to 50%, either 47 point something depending on further data or closer to 30 something in proton beam therapy. Just mathematically, there's a point where essentially the growth of the proton beam therapy is so great that it overtakes the decrease in business domestically, the decrease in Gamma Knife. But of course, you are limited to the center in Orlando.

But it just seems like the optionality, the embedded optionality on your balance sheet, let's say, I estimate $14 million, $15 million in cash on unrestricted cash on the balance sheet, it's just amazing that optionality. So I'm going to let someone else ask a question. But before I go, could you give us a little bit of color on -- it seems like the mix of payers, or commercial payers has really improved the cash flow from proton beam therapy. Could you talk to us, give us an intuition about where that comes from? Or what drives the increase in commercial payers versus Medicare?

Raymond Stachowiak

Okay. And that's a very good question, Harry. And I will divert that question to our resonant [ph] expert, Craig Tagawa, who monitors that very closely. Craig, could you comment on that?

Craig Tagawa

Sure, Ray. There's a couple of factors in that. One, it's -- it has to do with, obviously, the types of pairs that are the type of patients that are coming in the indications that they have. If there are more indications that are at an older population, where Medicare is the primary insurer you're going to have, in general, a lower average reimbursement rate. Medicare pays primarily lower than our HMOs and PPOs. So it's really partly the indication and partly just the type of patient that comes through. And it goes in cycles. It's not predictable.

Unidentified Analyst

Understood. And I'm just guessing here again, total guess, but it seems like as they find more and more uses for proton beam therapy outside of oncology that almost, by definition, that, that's drawing in demographically a younger patient or, just a guess?

Raymond Stachowiak

Thank you. I’m going to get back [indiscernible].

Operator

Thank you. And the next question comes from Anthony Marquez, a Private Investor.

Anthony Marquez

Hey, first of all, those were excellent. I have to tell you, those were excellent questions by the prior. A lot of my questions were answered from the prior individual and they were outstanding questions. Have you guys ever considered us buying the stock back at these levels, it would just seem to make -- my first question is, yes, have you considered a share buyback at these levels? It just seems to me to be [indiscernible] cheap. And so what if you're taking stock out of the flow, why not accrue that to the benefit of current shareholders?

Raymond Stachowiak

Well, Tony, that's a very good question. And I have to dodge it a bit in the forward-looking criteria, but I can assure our shareholders and investors here on this call that over the last 3 years, and my duration of CEO with American Shared, I brought that level of experience as a CEO to the company.

I had 19 years prior experience as a CEO in the company I founded, and I can assure our shareholders and investors that many different strategic options for the future of our company have been debated and pursued. And we are where we are today, and we think we're best positioned truly to benefit our shareholders. And if they stick with us, I think they'll have a nice return on their investment. I've mentioned in prior calls and in Harry's questions, I think we are an undervalued stock from any kind of metric.

You look at our P/E ratio and it seems like every quarter that goes by, our P/E ratio gets smaller. If you look at the EBITDA numbers, the growth in EBITDA from $7.2 million in 2021 to $8.2 million in 2022, without any really new revenue streams coming on board. And then you look at the resources we are pouring into our sales and marketing efforts, those resources are going to pay off in obtaining new agreements and new revenue streams. As everyone knows if they're familiar with our company, we got long sales cycles in our company. It's a complex sale, but we got really, really good resort to take on that challenge.

Anthony Marquez

Right. And my second question is, I think part of the reason why the stock trades were traded, there's no analyst coverage at all. I don't know if -- and as we all know, you've got to pay something in this environment or in the micro cap sector you have to pay, in essence, you have to -- although everybody will deny it, you have to basically pay something for research coverage. Has there been any movement to try and get some research -- even some of the paid research services, which I believe are pretty good, would be better than nothing because at least you get your name out there. I'm just curious, has that been -- I'm not sure has there been any effort made to try and attract some type of analyst coverage.

Raymond Stachowiak

I think those efforts are starting to be made. And I will just comment that I'm kind of an old school investor in the sense that before I start promoting an investment, let's demonstrate a good solid foundation, sustained growth, sustained profitability, something to lean on, something to sell, something to go to pitch to the financial analysts community.

Anthony Marquez

I'm going to differ a little bit with you in that respect, and that is that you've just laid out in the prior call, you just laid out a good reason forgetting about any growth. Just the way we are today would be a great reason to buy the stock and people buy stocks for different reasons. Some stocks are growth stocks, some stocks are asset plays. And I think in this situation, you have an asset play right now, coupled with a potential growth -- with a potential growth play.

So I'm going to disagree a little bit by saying why try and get analyst research now because you haven't shown sustained growth. But what you have shown is the ability to continue to generate impressive EBITDA relative to your market cap. So I'll just leave it at that. I'm not trying to be argumentative, I'm just pointing out that I think it's a mistake not to try and get analyst coverage because I think you fall into many buckets and the bucket right now is clearly an asset play. Anyway, thank you very much I appreciate you taking the questions.

Raymond Stachowiak

Tony, let me digest all that and reflect on it. I think those are really -- it's really great feedback. And I'd like to think of myself as someone that listens well, okay, and always open to input. So let me take that under advice, [indiscernible], okay?

Anthony Marquez

All right. Thank you.

Raymond Stachowiak

All right.

Operator

Thank you. [Operator Instructions] And the next question comes from Tony Kamin with Eastwood Partners.

Tony Kamin

Hi, everyone. It was really nice to hear the sort of comprehensive plan you have now in terms of both working more closely with manufacturers and also the new efforts to reach out to end customers. So great to hear that. It just sounds very comprehensive. And I guess my first question is around the new customer that you announced with the $1.3 million sale. Can you kind of characterize that customer? Is it a hospital? Or is it some other kind of entity? Or -- and is it Gamma Knife equipment, or is it something other than that?

Raymond Stachowiak

Yes. I think I will divert that question to Peter. However, we probably cannot identify that customer by name because of our nondisclosure agreements that we have sometimes with our clients. But …

Tony Kamin

That's why I characterize rather than name.

Raymond Stachowiak

Yes, Peter, could you characterize that client?

Peter Gaccione

Sure, sure. Yes, thank you for the question. Yes, this I would characterize it as twofold. It is a joint venture cancer treatment center that does have a Gamma Knife, and it's a joint venture with a large neighboring hospital affiliate. And this was a situation where they needed to upgrade an older model system into a newer model system, and we were able to consult with them and creatively come up with a way to make it happen. Because they only had two alternatives, make it happen to grow their patients and continue a great and fantastic radiosurgery program, or look to close it down, which no one wanted to do. And with our support and creativity, it happened and things worked out extremely well.

Tony Kamin

Great. And …

Raymond Stachowiak

Before you go to your next question, let me just kind of add a little bit of color to that. That local hospital as a member of that joint venture is part of a larger health care system. And the folks in the C suite of that health care system have seen what American Shared is capable of doing to this local hospital they own. And thus, it's opened the doors to the C suite within that health care system, okay? That's some of the intangible benefits. Small order, but it's some of the intangible benefits we're accruing.

Tony Kamin

Well, I would think in this very difficult sort of credit and interest rate environment for it -- I'm sure it's got a lot of your ultimate end user prospective customers thinking about how they can access finance in pretty effective and rational way. So I guess, I'm curious in terms of your experience there. And on the other side, I would think it also holds true for Elekta and your other potential manufacturer partners that they realize they've got to help, that end user customer be more creative in ways to access the technology in a rational economic sense. Have you seen changes because of sort of what's been going on in the economy and interest rates that have been helpful that way? And is that awareness there on both the manufacturer and end user side?

Raymond Stachowiak

Yes. I will let Peter answer that. In general, I'll just say, yes, I think we have started seeing that. But Peter, do you want to take that question on a bit?

Peter Gaccione

Sure, sure. That's a very -- it's a good question, and there's actually a lot in that question. I can tell you, I've been in this business, as you know, for over 40 years. I have very good credibility and know so many of the key decision makers and opinion leaders, not only on the practice level of the doctors and the cancer institute's, but also in the senior management and sales levels of the many OEMs that we deal with.

And what I can say is that we are getting a lot of interest and a lot of calls from many people in the industry that just know that I'm now here at American Shared. And they're wanting to know more about, "Oh, okay, we know you're there. We know you've been in the industry," and that's when the conversations start about the financing and the differences that we offer for funding.

So just as in the case of this situation where we received our first order, they actually contacted us just because of that. And we're getting a lot of calls because of that. So a lot of it is due to people that know you. It's a very small community. Everyone knows everyone in this business, past reputations, credibility. And this is a different way, like I had mentioned, it's uncommon in this industry, and we're working on getting that awareness out to everyone. But it's an interesting dynamic. And I can tell you, I really see things happening just from, again, our pipeline and leads and activities that we are looking at.

Tony Kamin

Ray, I kind of wrote this down, hopefully, I copied what you said correctly, but I think you said that the pipeline is filled with solid opportunities. Can either of you sort of comment a little bit or give a little more color on the pipeline? Is it for -- is it across a range of products? Is it …

Peter Gaccione

Yes, I can outline that very easily for you. And we have been talking about the expansion of our product offerings and what's our strategy and a little bit more diversification than just the provision to Gamma Knife and proton beam. So let me comment in a couple of different ways about what is in our pipeline. It contains many different product offerings. It contains Gamma Knifes, linear accelerators, MR LINACs, and even the provision of proton beam systems. And that's consistent with the expansion of everything we've been talking about, let's expand our product offerings. We have opportunities domestically, and we have opportunities internationally as well.

We have opportunities with new business clients, new clients we've not had, and we got opportunities we are pursuing with our existing clients, expanding those relationships. We have business model structures that could vary. They could be, I will say, the traditional agreements that we've had in the past, where we provide Gamma Knife, let's say, for x dollars for every treatment. Or maybe we provide that Gamma Knife for some percentage of the revenue that the health care system collects off that Gamma Knife.

We also are pursuing joint ventures where we have ownership, sometimes majority, sometimes minority in a joint venture relationship. And one of the great features of that type of relationship is those relationships don't have contracts or agreements that expire that have a contract expiration date. So they're very long-term oriented. That and all those types of opportunities exist within our pipeline.

Tony Kamin

No, that sounds great. Two more quick questions. One, recently in the press, I've been reading an increasing number of articles talking about Gamma Knife. Gamma Knife is, in general, growing. And if I'm not sure quite what they're saying, whether it's procedures or capabilities or something growing in '23. It feels like for a few years, I didn't really see much about that. But again, there's been some press about growth. Is that something you're seeing? Or is that just -- is that correct?

Raymond Stachowiak

I'm going to direct that question to Peter. He's our resonant expert on the Gamma Knife market.

Peter Gaccione

Yes, you're absolutely correct in what you've been seeing. For a while there in the early days for radiosurgery, the Gamma Knife was doing extremely well. And then as everyone knows, with linear accelerators radiosurgery started to catch up a little bit there. But not only do we, also other vendors, do see an uptick in the Gamma Knife modality and Gamma Knife treatment. And a lot of it has to do with the advantages that are offered in software, in treatment planning, in same day imaging and treatment. So there have been a lot of things done to that system, and it has really taken an upturn. So you're correct when you say you're hearing that that there's an increase in the Gamma Knife type treatments, not only in the U.S., but worldwide. And this, of course, filtrates to the installed base as well when it comes time to do upgrades as well.

Tony Kamin

No, that's exciting. And then last question, which I feel I have asked for many years, but it's so important in terms of size. Can you kind of characterize the appetite now for new proton systems? Obviously, it's been several years since you installed in Orlando and I know shareholders are really hoping for an encore somewhere else. Can you just kind of talk about proton in general?

Raymond Stachowiak

Well, I can tell you that we are still very much pursuing proton beam opportunities. Without commenting too much in terms of forward-looking, I can assure you that we probably have looked at more proton beam opportunities in the last 9 months than I recall as a shareholder going back to 20 -- or as a board member going back to 2009. And some of those, quite frankly, are not worth our investment because the partnership that we're asking to become with, be partners with, there's too much of a CapEx spend involved to support the revenue streams that would be coming in. So we're very intelligently analyzing these opportunities. And we believe there are a few out there that meet our criteria.

Tony Kamin

Great. Well, thank you guys, very much for all these questions. I appreciate it.

Operator

Thank you. And the next question is a follow-up from Harry [Indiscernible] with Fort Ashford.

Unidentified Analyst

Hi, Gentleman. I thought I would take more time, but if no one else is in the queue. So I like to estimate really general and then gets super specific. So, I mean, I think the elephant in the room is that not only as [indiscernible] gentlemen, I thought I'd take more time if no 1 else is in the queue. So I'd like to ask some really general and then get super specific. So I mean I think the elephant in the room is that not only is Ray is an amazing investor, but coming back to the cash on the balance sheet and that optionality. 12 to 15 months from now, our estimate is it's going to be at least $20 million to $23 million in cash, which will be greater than the market -- the current market cap of your company.

And so I guess our question is, using Ray's expertise and the expertise of Peter and Craig, and do you buy other cash flow businesses and sort of become a conglomerate like a mini Berkshire Hathaway and use those cash flows you have to diversify and that cash on the balance sheet opportunistically? Or do you stick with your knitting and proton beam therapy? And that's really our big question. Which of those two paths would you like to take?

Raymond Stachowiak

Yes. We're probably not going to become the Berkshire Hathaway of radiation oncology equipment.

Unidentified Analyst

But have a lot of other interests. I was following your career, you do many more things on that.

Raymond Stachowiak

And I'd like to semi correct you on your cash projections. And yes, maybe our free cash flow at $7 million, $8 million a year level as measured by, let's say, EBITDA. But it wouldn't be prudent use of the cash we have, if we -- we are going to have some CapEx spend in 2023 because we got upgrades occurring in Ecuador. We've got the new site going into Puebla. And we may not necessarily finance 100% of those purchases. We'll probably put in some level of equity. So there'll be some CapEx spend equity-wise in those investment opportunities.

So let's be prudent on how we use the resources we have. I will comment that I -- 1 of my greatest accomplishments at Shared Imaging was buying $20 million, $25 million, $30 million worth of equipment every year, and I was 100% owner at the time I bought the company, and I never needed to dilute my equity while financing that CapEx spend. I had developed it with banking relationships. And we feel that our banking relationship with feel [indiscernible] Third Bank is solid. We believe Fifth Third Bank is a solid bank, and we'll be prudent in financially engineering our growth.

Unidentified Analyst

This is perfect. This leads into my next question. So I was looking at your -- some of your debt covenants that you disclosed in your last annual report, and it looks like I could see a total debt to EBITDA covenant at 3x, but are there any current debt covenants which prevent the company now or in the future from paying a dividend to common shareholders?

Raymond Stachowiak

There is a restriction in our banking relationship that talks about how much dividends we can pay out to our shareholders. There is a provision to do so, but it's limited.

Unidentified Analyst

And to that point, I wonder if just because it's perfectly reasonable if you have unrestricted cash on hand, which could pay your entire debt, which I believe you do were quickly will, I wonder if they'd be open, or if the company would be open to negotiating an amendment to such confidence that state that if you do have unrestricted cash on the balance sheet, which could literally pay all of the debt, not that you would want to, but if you so chose, if they were loosened some of those restrictions on dividends, but moving on, this is a very specific question. And I only ask this question because it sounds like full speed ahead on proton beam therapy, if possible.

I noticed a note in your annual report that you had a $2.25 million in deposits for two Mevion S250 proton beam therapy systems, which were written down to zero. But my question is, even though for accounting purposes, those deposits were written down to 0. If you so chose to purchase one, Mevion still honor those deposits is going towards the purchase price. So if we separate the discussion of having it written down on your balance sheet for accounting purposes versus the commercial relationship?

Peter Gaccione

The answer to that question is yes. Mevion still has those deposits on our account. So if we purchase proton beam system from Mevion, we get credited for that deposit. I would like to point out that the amounts that we written -- that we wrote off in December -- in the fourth quarter rather of 2020, did include some capitalized interest on those deposits. So that capitalized interest component would not be on our account with Mevion. Does that make sense?

Unidentified Analyst

Total sense. And then follow-up one -- of those $2.25 million in deposits, does Mevion force you to apply half and half to two erent systems? Or if you so chose, could you combine those two different deposits into one deposit on a Mevion 250i system?

Raymond Stachowiak

I think it'd be reasonable that Mevion would assume that each deposit is on each respective order.

Unidentified Analyst

Okay. That's I also noticed Mevion has been talking about a 250 fit proton system and some other things. But is the S250i still state of the art, or could this deposit be applied until they make some improvement on the S250. I only ask this because if we are full speed ahead on proton beam therapy, rather than dividends or acquisitions outside of regological oncology or to focus on this like a [indiscernible].

Peter Gaccione

Yes, I think it's a fair assumption that if we acquire a proton system from Mevion, we've got good relationships with Mevion. And I think each party would be flexible how those deposits would be applied and how the exact configuration of purchase of the proton beam system, how that configuration would be. There's lots of different bells and whistle, like they do a Mevion proton beam system. And we're bound to, if and when we take delivery of such a system, we're bound to modify the equipment we currently have on order with them to get the latest technology. And Mevion would be in support of that flexibility. We've got a good relationship with [indiscernible].

Unidentified Analyst

That's wonderful to hear. It's a wonderful year. And also, is there any update, if any, on the Long Beach Equipment LLC, which I understand is not expected to do anything. But I was just curious if there was any further movement in that area.

Raymond Stachowiak

Yes, I will just comment. It's been a very challenging marketplace in that region. One that's challenged by the different health care systems in that region. And quite frankly, a search for an appropriate facility to locate the operation in the center.

Unidentified Analyst

Right, right. That's very interesting. The only other thing I was going to mention is just -- and this is just a request. I mean you get all these ridiculous requests all the time, so I apologize for saying this next thing. But I think because most people don't live in this proton beam therapy area the way that you do that even though I think it's an amazing discussion of the different manufacturers that you have like maybe Mevion, IBA in Hitachi, Pronova, Sumimoto Proton, Mitsubishi, et cetera, of the many manufacturers. I was just hoping maybe in the future, if there could be some discussion in the annual report of some of the different nonhospital players. Just when I was doing some research just here in Texas, it was very interesting to see some of what happened with Concord Medical, for instance, taking a 20% stake in the MD Anderson proton beam therapy center and then divesting of that stake later and things like U.S. Oncology, as you know, a subsidiary of McKesson, which it looks like -- I've no idea what the exact relationship is the Texas Center for Proton therapy in North Texas. But just some of these -- it seems like there are less than 40 proton beam therapy machines and maybe that's going to be 42 or 45 with some construction. But in the whole United States and just if there was some discussion of what's happening now with the industry either on this call or in an annual report of the super helpful. But we're just huge fans of you guys. We're great admirers of the cash flow generation, and we are looking forward to seeing your progress. Thanks so much.

Raymond Stachowiak

Thank you, Harry. Appreciate your comments and questions and your feedback. Appreciate it.

Operator

Thank you. And this concludes our question-and-answer session. I would like to return the call to Ray Stachowiak for any closing comments.

Raymond Stachowiak

Thank you, operator, and thank you to everyone who joined us here today. We have a good question-and-answer session. We appreciate your feedback and your questions, and hopefully, we've been helpful. We are very proud of the sustainable growth that we've experienced and the profitability trends we've established and as mentioned, as you can probably hear in our voices, we are very excited for the future of American Shared.

We really believe our newly aligned management team, the deep financial resources that we have, and our investment in our sales and marketing positions us very well for sustained growth and profitability. We look forward to speaking with you again in our first quarter results are announced in mid-May. Please contact us directly if you have any questions before them. Be well and stay safe. Goodbye.

Operator

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