Sensus Healthcare, Inc. — Q1 2021 Form 10-Q
Business context and reporting period: Unaudited results for the three months ended March 31, 2021, compared with Q1 2020. Sensus manufactures superficial radiation therapy devices and related services for healthcare providers; it reports one operating segment.
Financial performance
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Revenue | $3.070 million | $1.679 million; up 82.8% |
| Product revenue | $1.674 million | $1.076 million |
| Service revenue | $1.396 million | $0.603 million |
| Gross profit / margin | $1.586 million / 51.6% | $0.709 million / 42.2% |
| Operating expenses | $2.701 million | $4.346 million |
| Operating loss | $1.115 million | $3.637 million |
| Net loss / diluted loss per share | $1.115 million / $0.07 | $3.587 million / $0.22 |
| Operating cash flow | $(1.115) million | $0.434 million |
Revenue growth reflected more units sold, service revenue on installed units, and the COVID-19 impact on Q1 2020. Gross margin improved as gross profit grew faster than sales. Selling and marketing expense fell 40.4%, general and administrative expense fell 26.9%, and research and development expense fell 46.0%; the company attributed these reductions to, among other items, pandemic-related event cancellations and reduced headcount, and Sculptura entering production.
Financial position and liquidity
At March 31, 2021, cash and cash equivalents were $13.652 million, down from $14.907 million at year-end 2020. Current assets were $23.915 million and current liabilities $4.682 million. Total assets were $26.482 million, total liabilities $6.047 million, and stockholders’ equity $20.435 million.
There were no borrowings under the revolving credit facility; the company reported a $0.213 million loan payable related to its Paycheck Protection Program loan. It was in compliance with its financial covenants. Operating cash use was attributed primarily to the net loss and working-capital timing, including collections on units sold. Investing cash use was $0.080 million, primarily equipment purchases; financing cash use was $0.060 million, including loan repayments and stock-compensation withholding taxes.
Outlook, risks, contingencies, and unusual items
The filing gives no quantified revenue, earnings, or cash-flow guidance. Management said COVID-19 continued to affect sales and could disrupt the company, its customers, suppliers, and vendors; the future impact could not be reasonably estimated. Management identified revenue generation, gross margins, operating expenses, and working capital as factors affecting liquidity and said it may seek additional funds in the future.
The company disclosed a Department of Justice investigation concerning a physician’s Medicare billing involving the SRT-100. Sensus disputes wrongdoing, says it has cooperated, and could not estimate the cost of the matter. Sales are concentrated in the U.S. (about 95% of Q1 revenue); one U.S. customer represented about 7% of quarterly revenue and 57% of accounts receivable at March 31. Other stated risks include reimbursement levels, regulation, intellectual property, manufacturing, international operations, and information security. No off-balance-sheet arrangements or material subsequent events were reported.
Important facts for investors to verify
- Whether sales growth and the higher gross margin are sustainable as pandemic conditions and customer purchasing patterns change.
- Cash burn, receivable collections, and the company’s funding needs; cash declined by $1.255 million during the quarter.
- Customer concentration and collection risk, particularly the customer representing 57% of accounts receivable.
- Developments and potential financial exposure from the DOJ investigation; the filing provides no clear estimate of potential cost.
- The effects of reimbursement changes and COVID-19 on demand, operations, and future profitability.