Sensus Healthcare, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Sensus manufactures radiation therapy devices and related services for healthcare providers. Results are unaudited and presented against Q1 2021 unless otherwise noted.
Financial performance
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $10.338 million | $3.070 million |
| Gross profit / margin | $7.149 million / 69.1% | $1.586 million / 51.6% |
| Operating expenses | $3.219 million | $2.701 million |
| Operating income (loss) | $3.930 million | $(1.115) million |
| Net income (loss) | $16.062 million | $(1.115) million |
| Operating cash flow | $3.082 million | $(1.115) million |
Revenue rose 236.7%, primarily reflecting more device units sold, service revenue on installed units, and the COVID-19-related weakness in Q1 2021. Product revenue was $9.228 million versus $1.674 million; service revenue was $1.110 million versus $1.396 million. Gross margin improved to 69.1% from 51.6%.
Net income includes a $12.779 million gain on the February 2022 sale of Sculptura assets; therefore, reported earnings substantially exceed operating income. Income tax expense was $648,000, with the filing attributing the effective tax rate partly to release of a valuation allowance. Selling and marketing expense was $1.218 million, general and administrative expense $1.273 million, and R&D expense $728,000.
Cash, liquidity, debt, and balance sheet
- Cash and cash equivalents were $32.830 million at March 31, 2022, up $18.311 million from year-end. The Sculptura sale generated $15 million of cash proceeds.
- Operating activities provided $3.082 million; investing activities provided $14.596 million, including sale proceeds and $44,000 of property and equipment purchases; financing activities provided $273,000.
- Current assets were $48.462 million and current liabilities $10.262 million. Total assets were $53.929 million; total liabilities were $11.471 million.
- No borrowings were outstanding under the revolving credit facility at quarter-end. The loan payable balance was zero, compared with $51,000 at December 31, 2021.
- In April 2022, the revolver was amended: its term was extended to April 1, 2024, and its commitment increased from $10 million to $15 million; borrowing limits also depend on the borrowing base and applicable sublimit.
Material changes, outlook, and risks
- Sculptura disposition: Assets were sold for $15 million cash on February 25, 2022, producing a $12.779 million gain.
- Customer and geographic concentration: The U.S. represented 98% of Q1 revenue. One U.S. customer represented approximately 81% of revenue and 93% of accounts receivable at March 31, 2022.
- Management outlook: No quantified revenue or earnings guidance is provided. Management said it expects available cash, borrowing capacity, and other factors to support cash requirements, while noting it may seek additional funds. Planned capital needs include sales and marketing and R&D expansion.
- Risks: The filing highlights continuing COVID-19 uncertainty, reimbursement levels and provider purchasing decisions, regulatory requirements, manufacturing costs, international operations, customer concentration, and information-security risks. Management said it did not then expect a significant business impact from Russia’s invasion of Ukraine but would continue monitoring developments.
- Contingency: The Department of Justice has investigated physician Medicare billing involving SRT-100 and sought information from the company. Sensus said it has cooperated, disputes wrongdoing, and cannot estimate any potential cost or outcome.
- Other subsequent event: The headquarters lease was renewed through September 2027 on April 7, 2022. Management reported disclosure controls were effective and no significant change in internal control during the quarter.
Important facts for investors to verify
- How much of revenue and future earnings is sustainable excluding the one-time Sculptura gain, and whether the improved gross margin persists.
- The timing and collection of receivables, given one customer’s 93% share of quarter-end receivables, and the effect of customer concentration on future sales.
- The status and potential financial exposure of the DOJ investigation; the filing provides no estimable amount.
- The amended revolver’s detailed borrowing-base availability, covenants, and terms; the filing reports no quarter-end borrowings and covenant compliance.
- The cash-flow table contains an inconsistency: the financial statements report Q1 2022 investing cash flow of $14.596 million, while MD&A’s summary table reports $14.956 million. Confirm the correct figure against the filed statements.