SENSUS HEALTHCARE, INC. You should read the following discussion and analysis in conjunction with the information set forth within the financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and with our Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year endedDecember 31, 2021 (the "2021 Annual Report"). Overview
Sensus is a medical device company committed to providing highly effective, non-invasive, and cost-effective treatments for both oncological and non-oncological skin conditions.
OnFebruary 25, 2022 , the Company sold its Sculptura assets for$15 million in cash. Additional information regarding this transaction can be found in Note 2 and in the Company's Current Report on Form 8-K, filed with theSecurities and Exchange Commission onMarch 3, 2022 . Impact of COVID-19
The outbreak of COVID-19, which was declared a pandemic by theWorld Health Organization onMarch 11, 2020 , has materially and adversely impacted theU.S. and global economies, as well as the Company, and its employees and operations, as well as customer demand. Although we have been able to continue to operate and service customers throughout the pandemic, it significantly impacted the Company's sales throughout 2020, as social distancing forced physicians to temporarily close their practices. In 2021 and in the first two quarters of 2022, the Company was able to increase sales significantly. However, the ongoing COVID-19 pandemic, including the possible emergence of new variants, could further impact the Company's operations and the operations of the Company's customers, suppliers and vendors as a result of ongoing quarantines, facility closures, and travel and logistics restrictions. The extent to which the COVID-19 pandemic impacts the Company's business, results of operations and financial condition will depend on future developments. The Company cannot reasonably estimate the impact at this time. Segment Information
The Company manages its business globally within one reportable segment, which is consistent with how our management reviews the business, prioritizes investment and resource allocation decisions, and assesses operating performance.
Results of Operations
For the Three Months Ended For the Six Months Ended
June 30, June 30,
(in thousands, except shares and per
share data) 2022 2021 2022 2021
Revenues $ 12,080 $ 5,422 $ 22,417 $ 8,492
Cost of sales 3,824 2,077 7,013 3,561
Gross profit 8,256 3,345 15,404 4,931
Operating expenses
Selling and marketing 1,728 1,254 2,946 2,322
General and administrative 1,131 1,445 2,404 2,417
Research and development 827 925 1,556 1,586
Total operating expenses 3,686 3,624 6,906 6,325
Income (loss) from operations 4,570 (279 ) 8,498 (1,394 )
Other income (expense):
Gain on sale of assets - - 12,779 -
Interest income 25 - 28 1
Interest expense (1 ) - (1 ) (1 )
Other income, net 24 - 12,806 -
Net income (loss) before income tax 4,594 (279 ) 21,304 (1,394 )
Provision for income taxes 1,070 - 1,718 -
Net income (loss) $ 3,524 $ (279 ) $ 19,586 $ (1,394 )
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Three months ended
Revenues. Revenues were$12.1 million for the three months endedJune 30, 2022 compared to$5.4 million for the three months endedJune 30, 2021 , an increase of 124.1% or$6.7 million . The increase was primarily driven by the higher number of units sold in the 2022 quarter, service revenue on installed units and the impact of COVID-19 in the three months endedJune 30, 2021 . Cost of sales. Cost of sales was$3.8 million for the three months endedJune 30, 2022 compared to$2.1 million for the three months endedJune 30, 2021 , an increase of$1.7 million , or 81.0%. The increase in cost of sales was primarily related to the increase in sales in the three months endedJune 30, 2022 . Gross profit. Gross profit was$8.3 million for the three months endedJune 30, 2022 compared to$3.3 million for the three months endedJune 30, 2021 , an increase of$5.0 million , or 152%. Our overall gross profit percentage was 68.6% in the three months endedJune 30, 2022 compared to 61.1% in the corresponding period in 2021. The increase in gross profit was primarily driven by the higher number of units sold in 2022, service revenue on installed units, and the impact of COVID-19 in the three months endedJune 30, 2021 . Selling and marketing. Selling and marketing expense was$1.7 million for the three months endedJune 30, 2022 compared to$1.3 million for the three months endedJune 30, 2021 , an increase of$0.4 million , or 30.8%. The increase was primarily attributable to an increase in tradeshow expense, advertising expense and commissions offset by other marketing expenses. General and administrative. General and administrative expense was$1.1 million for the three months endedJune 30, 2022 compared to$1.4 million for the three months endedJune 30, 2021 , a decrease of$0.3 million , or 21.4%. The net decrease in general and administrative expense was primarily due to higher legal and professional fees in 2021.
Research and development. Research and development expense was
Six months ended
Revenues. Revenues were$22.4 million for the six months endedJune 30, 2022 compared to$8.5 million for the six months endedJune 30, 2021 , an increase of 163.5% or$13.9 million . The increase was primarily driven by the higher number of units sold in 2022, service revenue on installed units and the impact of COVID-19 in the first six months of 2021.
Cost of sales. Cost of sales was
Gross profit. Gross profit was$15.4 million for the six months endedJune 30, 2022 compared to$4.9 million for the six months endedJune 30, 2021 , an increase of$10.5 million , or 214.3%. Our overall gross profit percentage was 68.8% in the six months endedJune 30, 2022 compared to 57.6% in the corresponding period in 2021. The increase in gross profit was primarily driven by the higher number of units sold in 2022, service revenue on installed units, and the impact of COVID-19 in the six months endedJune 30, 2021 . Selling and marketing. Selling and marketing expense was$2.9 million for the six months endedJune 30, 2022 compared to$2.3 million for the six months endedJune 30, 2021 , an increase of$0.6 million , or 26.1%. The increase was primarily attributable to an increase in tradeshow expense, advertising expense and commissions offset by other marketing expenses.
General and administrative. General and administrative expense remained
unchanged at
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Research and development. Research and development expense remained unchanged at
Other income. Other income of
Financial Condition
The following discussion summarizes significant changes in assets and
liabilities. Please see the condensed consolidated balance sheets as of
Assets
Cash and cash equivalents at
Accounts receivable atJune 30, 2022 decreased$1.8 million fromDecember 31, 2021 , primarily due to collection of receivables offset by an increase in sales of units in the six months endedJune 30, 2022 .
Inventories at
Liabilities
There were no borrowings under our revolving line of credit at
Liquidity and Capital Resources
The Company's liquidity position and capital requirements may be impacted by a number of factors, including the following:
? ability to generate and increase revenue; ? fluctuations in gross margins, operating expenses and net results; and ? fluctuations in working capital.
The Company's primary short-term capital needs, which are subject to change, include expenditures related to:
? expansion of sales and marketing activities; and
? expansion of research and development activities.
Sensus management regularly evaluates cash requirements for current operations,
commitments, capital requirements and business development transactions. Given
our ability to borrow under our revolving credit facility and other factors,
management anticipates that the Company will be able to satisfy its cash
requirements for these purposes; however, it may seek to raise additional funds
for these or other purposes in the future.
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Cash flows
The following table provides a summary of cash flows for the periods indicated:
For the Six Months Ended
June 30,
(in thousands) 2022 2021
Net cash provided by (used in):
Operating activities $ 4,978 $ 241
Investing activities 14,911 170
Financing activities (705 ) (114 )
Total $ 19,184 $ 297
Net cash provided by operating activities was approximately $5.0 million for the
six months ended June 30, 2022 , consisting of net income of approximately $19.6
million and an increase in net operating assets of approximately $2.9 million ,
offset by non-cash charges of approximately $11.7 million . Cash flows provided
by operating activities primarily include the receipt of revenues offset by the
payment of operating expenses incurred in the normal course of business.
Non-cash charges consisted of a gain on asset sale (see Note 2, Dispositions,
for more information), stock compensation expense, depreciation and
amortization, a warranty provision, and impairment of intangible assets. Net
cash provided in operating activities was $0.2 million for the six months ended
June 30, 2021 , consisting of a net loss of $1.4 million and an increase in net
operating assets of $0.9 million and non-cash charges of $0.7 million . Cash
flows used in operating activities consist primarily of revenues, offset by the
payment of operating expenses incurred in the normal course of business,
including year-end incentive compensation accrued for in the prior year.
Net cash provided by investing activities for the six months ended June 30, 2022
reflected $15 million of proceeds from the sale of assets, partially offset by
purchases of property and equipment. Net cash provided by investing activities
for the six months ended June 30, 2021 reflected approximately $0.2 million of
proceeds from the sale of assets, partially offset by purchases of propertyand equipment. Net cash used in financing activities for the six months endedJune 30, 2022 primarily reflected$1.1 million to repurchase common stock, withholding taxes on stock-based compensation, and loan payable, offset by approximately$0.4 million of exercised stock options. Net cash used in financing activities for the six months endedJune 30, 2021 primarily reflected$0.1 million of loan repayments and withholding taxes on stock compensation. Indebtedness
Please see Note 5, Debt, to the financial statements.
Contractual Obligations and Commitments
Please see Note 9, Commitments and Contingencies, to the financial statements.
Critical Accounting Policies and Estimates
The preparation of condensed consolidated financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the condensed consolidated financial statements
and the reported amounts of revenue and expense during the reporting periods.
Actual results could differ significantly from those estimates. For a summary of
these and additional accounting policies see Note 1, Organization and Summary of
Significant Accounting Policies, to the financial statements. In addition,
see Critical Accounting Policies in Management's Discussion and Analysis of
Financial Condition and Results of Operations and Note 1, Organization and
Summary of Significant Accounting Policies, in the 2021 Annual Report for
further information.
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