Sensus Healthcare, Inc.: Form 10-Q for the period ended Mar 31, 2025

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 the 2024 Annual Report.

Overview

Sensus Healthcare, Inc. (together, with its subsidiaries, Sensus Medical Devices Ltd. and Sensus Healthcare Services, LLC, unless the context otherwise indicates, “Sensus,” “we,” “us,” “our,” or the “Company”) is a medical device company committed to providing highly effective, non-invasive and cost-effective treatments for both oncological and non-oncological skin conditions. The Company uses a proprietary low-energy X-ray technology known as superficial radiation therapy (“SRT”), which is based on over a decade of dedicated research and development, and has successfully incorporated SRT into a portfolio of treatment devices: the SRT-100TM, SRT-100+TM and SRT-100 VisionTM. To date, SRT technology has been used to effectively and safely treat oncological and non-oncological skin conditions in hundreds of thousands of patients around the world.

Segment Information

The Company manages its business globally within one reportable segment, which is consistent with how our management views the business, prioritizes investment and resource allocation decisions, and assesses operating performance.

Results of Operations

(in thousands, except shares and per share data)

18

Three months ended March 31, 2025 compared to the three months ended March 31, 2024

Revenues. Revenues were $8.3 million for the three months ended March 31, 2025 compared to $10.7 million for the three months ended March 31, 2024, a decrease of $2.4 million, or 22.4%. The decrease was primarily driven by a lower number of units sold to a large customer in the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Cost of sales. Cost of sales was $4.0 million for the three months ended March 31, 2025 and 2024.

Gross profit. Gross profit was $4.4 million for the three months ended March 31, 2025 compared to $6.7 million for the three months ended March 31, 2024, a decrease of $2.3 million, or 34.3%. Our overall gross profit percentage was 53.0% in the three months ended March 31, 2025 compared to 62.6% in the corresponding period in 2024. The decrease in gross profit was primarily driven by lower sales and higher costs of service in the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Selling and marketing. Selling and marketing expense was $2.2 million for the three months ended March 31, 2025 compared to $1.3 million for the three months ended March 31, 2024, an increase of $0.9 million, or 69.2%. The increase was primarily driven by an increase in tradeshow costs, costs related to clinical studies, and payroll cost due to increase in headcount.

General and administrative. General and administrative expense was $2.2 million for the three months ended March 31, 2025 compared to $1.6 million for the three months ended March 31, 2024, an increase of $0.6 million, or 37.5%. The net increase in general and administrative expense was primarily due to higher professional fees and compensation.

Research and development. Research and development expense was $2.6 million for the three months ended March 31, 2025 compared to $0.9 million for the three months ended March 31, 2024, an increase of $1.7 million, or 188.9%. The increase was primarily due to significant lobbying costs related to billing code reimbursement, increased headcount and existing product development cost.

Other income. Other income of $0.2 million for the three months ended March 31, 2025 and 2024 relates primarily to interest income.

Income taxes. The effective tax rates for the three months ended March 31, 2025 and 2024 were (4.5%) and 26.7%, respectively. The significant decrease in the effective tax rate in the current period primarily reflects an increase in estimated tax credits expected to be generated and utilized during the year. These credits, which include federal incentives for research and development and other qualifying activities, are large in proportion to our income before taxes, resulting in a negative effective tax rate for the quarter. Looking ahead, we anticipate that our effective tax rate for the full year 2025 will continue to differ materially from the U.S. federal statutory rate of 21.0%, driven largely by the favorable impact of these tax credits relative to our pre-tax income.

Financial Condition

The following discussion summarizes significant changes in assets and liabilities. Please see the condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024 contained in Part I, Item 1 of this filing.

Assets

Cash and cash equivalents were $19.1 million at March 31, 2025 compared to $22.1 million at December 31, 2024, a decrease of $3.0 million. See Cash Flows for details on the change in cash and cash equivalents during the three months ended March 31, 2025.

Accounts receivable was $18.0 million at March 31, 2025 compared to $19.7 million at December 31, 2024, a decrease of $1.7 million. The decrease was primarily due to the decrease in sales and concentration of sales to the Company’s primary customer that is subject to extended payment terms.

Inventories was $9.9 million at March 31, 2025 compared to $10.1 million at December 31, 2024, a decrease of $0.2 million. The decrease was primarily due to reclassification of inventory to property and equipment to lease the equipment to dermatology clinics in the quarter ended March 31, 2025.

Liabilities

There were no borrowings outstanding under our revolving line of credit with Comerica Bank at March 31, 2025 or December 31, 2024.

Liquidity and Capital Resources

In general terms, liquidity is a measurement of the Company’s ability to meet its cash needs. For the three months ended March 31, 2025, funding was derived primarily from cash generated by the sale of equipment to our customers in the ordinary course of business. The Company believes that proceeds from maturing cash equivalents, as well as the Company’s borrowing capacity under its existing line of credit and access to capital resources are sufficient to meet operating capital and funding requirements for the next 12 months from the date of this quarterly report. Please see Note 3, Debt, to the condensed consolidated financial statements for a discussion regarding the Company’s revolving credit facility with Comerica Bank. 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
• financial market instability or disruptions to the banking system due to bank failures

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’s management regularly evaluates cash requirements for current operations, commitments, capital requirements and business development transactions, and may seek to raise additional funds for these purposes in the future. However, there can be no assurance that it will be able to raise such funds or the terms on which such funds may be raised, if at all.

Cash flows

The following table provides a summary of cash flows for the periods indicated:

(in thousands)

Cash flows from operating activities

Net cash used in operating activities was $2.7 million for the three months ended March 31, 2025, consisting of net loss of $2.6 million and an increase in net operating assets of $0.5 million, offset by non-cash charges of $0.4 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 items consisted of stock-based compensation expense, provision for product warranties, amortization of right-of-use asset and depreciation and amortization of property and equipment. Net cash used in operating activities was approximately $8.2 million for the three months ended March 31, 2024, consisting of net income of approximately $2.3 million and non-cash charges of approximately $1.1 million, offset by an increase in net operating assets of $11.6 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 items consisted of deferred income taxes, stock-based compensation expense, provision for product warranties, amortization of right-of-use asset and depreciation and amortization of property and equipment.

Cash flows from investing activities

Net cash used in investing activities for the three months ended March 31, 2025 reflected $7 thousand of purchases of property and equipment. Net cash used in investing activities for the three months ended March 31, 2024 reflected $0.2 million of purchases of property and equipment.

Cash flows from financing activities

Net cash used in financing activities for the three months ended March 31, 2025 reflected $0.3 million of repurchases of common stock. No cash was provided by or used in financing activities for the three months ended March 31, 2024.

Inflation

During the first quarter of 2025, we continued to experience some increase in commodity and shipping prices and energy and labor costs which resulted in inflationary pressures across various parts of our business and operations, including on our customers, partners, and suppliers. We continue to monitor the impact of inflation and we are taking actions, such as ordering inventory in advance, to minimize its effects on our product cost and sales.

Indebtedness

Please see Note 3, Debt, to the condensed consolidated financial statements.

Contractual Obligations and Commitments

Please see Note 6, Commitments and Contingencies, to the condensed consolidated financial statements.

Critical Accounting Policies and Estimates

The preparation of the 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. Management has not applied any critical accounting estimates but has identified certain accounting policies as critical to understanding the financial condition and results of operations. For a detailed discussion on the application of these and other accounting policies, see the Note 1*, Organization and Summary of Significant Accounting Policies* to the consolidated financial statements included in the 2024 Annual Report for further information.

Evaluation of Disclosure Control and Procedures

As of March 31, 2025, the end of the period covered by this Form 10-Q, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer each concluded that, as of March 31, 2025, the end of the period covered by this Form 10-Q, we maintained effective disclosure controls and procedures.

Changes in Internal Control Over Financial Reporting

There have been no significant changes in our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our 2024 Annual Report, as updated in our subsequent quarterly reports. The risks described in our 2024 Annual Report and our subsequent quarterly reports are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results.