Sensus Healthcare, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Unaudited results; dollar amounts below are in millions unless stated otherwise. Sensus manufactures and sells radiation therapy devices and related services to healthcare providers.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $5.525 | $1.620 | $14.017 | $4.483 |
| Gross profit | $3.201 | $0.672 | $8.132 | $2.021 |
| Gross margin | 57.9% | 41.5% | 58.0% | 45.1% |
| Operating expenses | $3.006 | $2.951 | $9.331 | $10.512 |
| Operating income (loss) | $0.195 | $(2.279) | $(1.199) | $(8.491) |
| Net income (loss) | $0.195 | $(1.692) | $(1.199) | $(7.854) |
| Basic/diluted EPS | $0.01 | $(0.10) | $(0.07) | $(0.48) |
Q3 revenue rose 241% year over year, primarily from more device units sold, service revenue on installed units, and comparison with COVID-affected 2020 results. Nine-month revenue increased 213%. Product revenue was $4.392 million in Q3 and $10.316 million year to date; service revenue was $1.133 million and $3.701 million, respectively.
Q3 operating profitability improved to $0.195 million from a $2.279 million loss. The nine-month operating loss narrowed to $1.199 million. The prior-year periods included a $0.588 million bargain-purchase gain, reported in other income. Nine-month selling and marketing and R&D costs declined, while G&A increased.
Cash, liquidity, and debt
- Cash and cash equivalents were $16.391 million at September 30, 2021, up $1.484 million from December 31, 2020.
- Nine-month operating cash flow was positive $1.494 million, versus negative $0.074 million in 2020. Investing cash flow was positive $0.167 million; financing cash flow was negative $0.177 million.
- Current assets were $24.469 million and current liabilities $4.773 million. The company had no revolver borrowings; its facility permitted borrowings subject to a $10 million commitment and borrowing-base terms, and it was in compliance with covenants.
- Loan payable was $0.105 million current, down from $0.267 million noncurrent at year-end 2020. The company reported $0.162 million of principal repayments during the period.
- Total liabilities were $5.019 million and stockholders’ equity was $20.607 million at quarter end.
Material changes, outlook, and risks
- Higher unit sales and service revenue drove the revenue and gross-margin improvement. Management attributed the 2020 comparison partly to COVID-related practice closures and disruption.
- Management said it could not reasonably estimate COVID-19’s continuing impact. It anticipated being able to meet cash requirements using available resources, including the revolver, but may seek additional funding in the future. No specific revenue, earnings, or cash-flow guidance was provided.
- One U.S. customer represented approximately 43% of Q3 revenue and 35% of nine-month revenue; it accounted for about 58% of receivables at September 30. U.S. sales were 97% of Q3 revenue and 93% year to date.
- The company recorded $0.088 million of intangible-asset impairment and a $0.046 million loss on sale of equipment related to its aesthetic-laser acquisitions. It said it did not expect further acquisition-related impairment charges.
- The subsidiary’s manufacturing-facility lease was confirmed terminated effective October 31, 2021. Remaining reported operating lease liabilities at September 30 were $0.240 million.
- A Department of Justice investigation concerning a physician’s Medicare billing and possible company involvement remained unresolved. Sensus said it had cooperated, disputed wrongdoing, and could not estimate potential costs.
- Other disclosed risks include reimbursement levels, customer and geographic concentration, international activity, regulation, manufacturing costs, intellectual property, and IT/data security. Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting.
Key facts for investors to verify
- Whether the Q3 sales rebound and margin improvement persist, and how much reflects device sales versus recurring service revenue.
- The concentration and collection risk associated with the major U.S. customer and the company’s heavily U.S.-weighted revenue.
- Developments in COVID-related demand, reimbursement, and the DOJ investigation, including any potential financial exposure.
- Whether positive operating cash flow continues given the nine-month net loss, working-capital movements, and future operating and development needs.
- The status of lease termination and any subsequent effects on manufacturing capacity or costs.