Sensus Healthcare - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 revenue was $8.34M, above Street consensus, but EPS missed due to deliberate spending on marketing and R&D; management expects profitability in each of the next three quarters and for FY25.
• Revenue beat versus consensus ($7.23M*) and unit shipments of 21 systems (15 to a large customer; 1 international) underpin top-line strength; EPS missed versus $0.02* on higher OpEx tied to derm conferences and TDI advancement.
• Sequential FDA activity accelerated: patient treatments up 65% q/q, installed base now >880 systems, and 11 Fair Deal Agreements initiated with 6 going live; management sees meaningful FDA revenue contribution in 2H25.
• Near-term catalysts: recurring FDA revenue ramp (45–60 day billing cycle), Q2 revenue expected above Q1, and potential TDI 510(k) clearance by year-end with no FDA questions to date.

What Went Well and What Went Wrong

What Went Well

• Revenue of $8.34M exceeded consensus and reflected 21 SRT shipments; management highlighted strong engagement at Winter Clinical, Maui Derm, and AAD, prompting orders for additional units to meet demand.
• FDA program traction: 65% sequential rise in treatments; management expects significant revenue contribution beginning in 2H25; “We expect to return to profitability in each of the next 3 quarters and to be profitable for the full year”.
• Strategic pipeline: TDI 510(k) resubmitted March 7; “we have not had any follow-up questions,” with determination expected by year-end; continued global expansion (ESTRO, Australia).

What Went Wrong

• Gross margin compressed to 53.0% vs 62.6% YoY on lower sales and higher service costs; net loss of $2.57M (−$0.16 per diluted share) vs $2.27M profit in Q1 2024.
• OpEx elevated: G&A $2.2M (professional fees/comp), S&M $2.2M (trade shows/studies/headcount), and R&D $2.6M (lobbying, development), driving negative adjusted EBITDA (−$2.48M).
• Concentration risk remains: 15 of 21 units shipped to a single large customer; management acknowledges pace and deliberateness of multisite FDA rollouts could slow near-term install cadence.

Transcript

Operator (participant)

Good day, and welcome to the Sensus Healthcare First Quarter 2025 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Tirth Patel with Alliance Advisors. Please go ahead.

Tirth Patel (Head of Investor Relations)

Good afternoon. This is Tirth Patel with Alliance Advisors IR. Thank you all for joining today's call to discuss Sensus Healthcare's First Quarter 2025 financial results. Joining me from Sensus are Joe Sardano, Chairman and Chief Executive Officer; Michael Sardano, President and General Counsel; and Javier Rampolla, Chief Financial Officer. As a reminder, some of the matters that will be discussed during today's call contain forward-looking statements within the meaning of federal securities laws. All statements other than historical facts that address activities Sensus Healthcare assumes, plans, expects, believes, intends, or anticipates, and other similar expressions that will, should, or may occur in the future are forward-looking statements. The forward-looking statements are management's beliefs based upon currently available information as of the date of this conference call, May 15th, 2025. Sensus Healthcare undertakes no obligation to revise or update any forward-looking statements except as required by law.

All forward-looking statements are subject to risks and uncertainties as described in the company's Forms 10-K, 10-Q, and other SEC filings. During today's call, references will be made to certain non-GAAP financial measures. Sensus Healthcare believes these measures provide useful information for investors, yet they should not be considered as a substitute for GAAP, nor should they be viewed as a substitute for operating results determined in accordance with GAAP. A reconciliation of non-GAAP to GAAP results is included in today's financial results news release. With that, I'd like to turn the call over to Joe Sardano. Joe?

Joe Sardano (Chairman and CEO)

Thank you, Tert. Good afternoon, everyone, and thank you for joining us today. During the first quarter, we invested in several important sales and marketing, research, and development initiatives that we expect will benefit our business for the remainder of the year and beyond. Of particular note, we significantly expanded awareness of our Fair Deal Agreement program and strengthened our brand visibility through a strong presence at several major industry events and through targeted marketing activities. Revenues for the first quarter came in at $8.3 million, and during the quarter, we shipped 21 SRT Systems, bringing our total installed base to over 880 systems. This does not include 11 Fair Deal Agreements initiated with six going live in Q1. We are on track to surpass 900 systems by the end of the second quarter and expect to reach the milestone of 1,000 units under direct sale within the next 12 months.

Although first quarter profitability was impacted by elevated marketing and one-time legal expenses, we felt that the timing of these investments was warranted as they are fundamental to accelerating our trajectory of profitable growth. We expect to return to profitability in each of the next three quarters and to be profitable for the full year. Our marketing activities were very robust last quarter, with a strong presence at key industry events, including the Winter Clinical, Maui Derm, and the American Academy of Dermatology annual meeting. Our dinner event at the AAD featured Olympic gold medalist Katie Ledecky, attracted hundreds of attendees, which exceeded our expectations and the maximum capacity of the room. Yet that response highlights a significant interest in IGSRT and enthusiasm from prospective customers in our various SRT product acquisition programs, which support our decision to order more units by year-end to satisfy anticipated demand.

In addition to the big three derm conferences, we participated in several smaller meetings nationwide. These conferences provide a more intimate opportunity to speak with prospective customers and expand our reach, and have yielded a strong pipeline of new FDA opportunities. Building on recent successes, we intend to continue with this grassroots sales channel throughout the year. Not only are we spreading the word about FDA, but we also secured multiple new Fair Deal Agreements at these conferences. As you know, the FDA provides substantial long-term financial and strategic advantages to Sensus Healthcare, notably enhancing the visibility and predictability of our revenue streams. We continue to expect these agreements will begin to contribute significantly to our revenue in the second half of the year.

Although this program is still relatively new, we're encouraged by a 65% increase in patient treatments from our Fair Deal Agreement installations when comparing first quarter volumes with the fourth quarter. This underscores our belief that patient utilization ultimately drives long-term profitability and recurring revenue, and that this program is a winner. With that overview, I'll turn the call over to Michael for additional strategic and operational insights. Michael.

Michael Sardano (President and Chief Commercial Officer)

Thanks, Joe. Our Fair Deal Agreement initiative continues to prove highly successful. It provides a compelling competitive differentiation and is gaining momentum. FDA arrangements deliver substantial value by aligning our financial interests directly with patient volume and practice utilization. This strengthens our customer relationships as well as our long-term financial outlook through predictable and recurring revenue streams. The rapid adoption of FDA and growing enthusiasm among large dermatology groups in particular highlight our unique value proposition, broad adoption potential, and unmatched clinical record. Each FDA installation typically requires four to five months from signing the agreement to initial revenue generation to Sensus Healthcare due to the nature of patient traffic and insurance payment cycles. As these contracts begin to mature, we anticipate significant revenue contributions starting in the second half of 2025. We also anticipate signing three to five additional multi-site FDA customers in 2025.

Beginning this quarter, we are providing specific marketing support and data insights to FDA customers to help them build this part of their practice. We're starting with members of large, multi-site, PE-backed organizations, which not only helps that individual practice, but it also shows the power and potential of the FDA program to the corporate parent and to other owned dermatology practices. In parallel, our international strategy is progressing. We recently attended the European Society for Radiotherapy and Oncology, or ESTRO, show in Vienna, which was attended by the most prominent doctors and largest radiation therapy companies in the world. We will also soon be exhibiting at the Australian Academy of Dermatology annual meeting, where they have the highest rate of skin cancer of any country in the world. Additionally, our product innovation pipeline continues to advance, particularly with enhancements to our TransDermal Infusion System, or TDI.

We resubmitted our 510(k) application in early March, and with a 6-9 month FDA review cycle, we are expecting a determination before the end of the year. We'll be fine-tuning our revenue model and go-to-market strategy for TDI as it gets closer to market launch. We are optimistic about the commercial prospects for TDI alongside other enhancements in our technology pipeline. In summary, we are strategically executing our plans, building sustainable long-term growth through FDA installations, expanding our international presence, and pursuing technological and product innovation. Now, Javier will provide additional detail on our Q1 financial performance. Javier?

Javier Rampolla (CFO)

Thanks, Michael. Good afternoon, everyone. Revenue for the first quarter of 2025 was $8.3 million, which was down from $10.7 million in Q1 of 2024, primarily due to lower unit sales to our largest customer. We shipped 21 SRT systems last quarter, including 15 to a large customer and one internationally. We expect Q2 revenue to be higher than Q1 revenue, and we also expect that revenue in the second half of the year will be higher than the first half of the year. Our gross profit for Q1 of 2025 was $4.4 million, resulting in a gross margin of 52%, reflecting the lower sales and higher costs associated with services provided. Operating expenses were significantly higher versus the prior year, reflecting our strategic growth initiative. General and administrative expenses rose to $2.2 million from $1.6 million a year ago due to professional fees and compensation.

Some expenses were unique to the first quarter, and we do not anticipate similar levels in subsequent quarters. We expect G&A expenses to be about $1.8 million per quarter for the rest of the year, again, largely in line with last year's levels. Selling and marketing expenses increased to $2.2 million from $1.3 million a year ago, driven by our participation in major industry events. We expect sales and marketing expenses to be about $1.3 million per quarter going forward, which is largely in line with our quarterly spend last year. Research and development expenses increased to $2.6 million from $0.9 million in the prior year period, reflecting our continued investment in production innovation, specifically our advanced TDI system, lobbying for favorable reimbursement policies, and ongoing work on product enhancements. Some of those expenses were one-time, while others reflect a heightened emphasis on R&D.

For the balance of the year, we expect R&D expenses to be about $1.5 million per quarter, which is up about $1 million per quarter during 2024. We reported a net loss for the first quarter of 2025 of $2.6 million, or a loss of $0.16 per share, compared to net income of $2.3 million, or $0.14 per share in the prior year quarter. Adjusted EBITDA was negative $2.5 million for Q1 of 2025, compared with a positive $3 million a year ago, reflecting higher operating expenses and lower revenue. Please see the table in the news release we issued earlier today for a reconciliation of GAAP to non-GAAP financial measures. Our balance sheet remains strong as we ended the quarter with $19.1 million in cash, no debt, and inventory maintained at $9.9 million.

This inventory level positions us to meet the anticipated demand in upcoming quarters for both direct and for placements under the Fair Deal Agreement. I will now turn it back to Joe for closing remarks.

Joe Sardano (Chairman and CEO)

Thank you, Javier and Michael, for those updates. To sum things up before we take your questions, the first quarter was strategically significant, marked by important investments that position us for profitable growth. Our underlying metrics, business metrics, and strategic momentum give us strong confidence for the remainder of 2025 and beyond. We anticipate revenue growth and profitability as the year progresses, with profitability for the full year. We appreciate your continued support and look forward to providing further updates throughout the year. Operator, we're ready to take questions.

Operator (participant)

We will now begin the question-and-answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you'd like to withdraw your question, please press star, then two. At this time, we'll pause momentarily to assemble our roster. Your first question comes from Yi Chen with HC Wainwright. Please go ahead.

Yi Chen (Analyst)

Thank you for taking my questions. My first question is, the first quarter of 2025 appears to be weaker compared to the first quarter of 2024. Do you think the rest of the quarters of 2025 could be stronger or weaker compared to the 2024 quarters?

Joe Sardano (Chairman and CEO)

Yeah, no, we're expecting each subsequent quarter to be profitable, Yi. We are excited about what the opportunity provides us. That's based on revenues that we're starting to see coming from the Fair Deal Agreement as well as the outright sale of products.

Yi Chen (Analyst)

Does any part of the first quarter revenue based on the Fair Deal Agreement?

Joe Sardano (Chairman and CEO)

Yes.

Yi Chen (Analyst)

Not large enough. Is that right? Because you made the comment that you expect a meaningful contribution to start in the second half.

Joe Sardano (Chairman and CEO)

That's correct. As we've been stating for the past 6-12 months, is that we're going to start seeing some significant revenues in the second half of 2025. We are on track for that.

Yi Chen (Analyst)

Got it. Got it. Has the existing U.S. tariff policy affected the company's business?

Joe Sardano (Chairman and CEO)

So far, we have not witnessed any tariff repercussions on any of our businesses.

Yi Chen (Analyst)

Okay, great. Thank you.

Joe Sardano (Chairman and CEO)

Thank you, Yi.

Operator (participant)

Your next question comes from Jason Wittes with Roth Capital. Please go ahead.

Jason Wittes (Analyst)

Hi, thank you. Thanks for taking the questions. Just a couple on the Fair Deal Agreement. You mentioned four to five—I think you're saying four to five months to get fully up to speed on these installs. And do you have a sense of what kind of volumes you may anticipate once they reach full capacity?

Michael Sardano (President and Chief Commercial Officer)

Hey, Jason, it's Michael. The four to five month comment wasn't in regards to installs. It was in regards to once an install—excuse me, I should rephrase that. Once an agreement is signed, any agreement, by the time it gets installed and we actually receive money from any patients, it's four to five months from that signing of the agreement.

Jason Wittes (Analyst)

Oh, because of that, right? I apologize. Right. Okay.

Michael Sardano (President and Chief Commercial Officer)

Yeah, exactly.

Jason Wittes (Analyst)

Do you have a sense of—do you anticipate these things hit the ground running, or do you—I mean, is there a build-up over a year in terms of volumes? Do you have a general sense of how that might go?

Michael Sardano (President and Chief Commercial Officer)

Yeah, everything is key to the patient volume once it's installed. The cool thing is here, when we're doing the capital equipment over the last 15 years, nothing changes prior to installation on the Fair Deal Agreement. It's something that we've been doing for 15 years straight, and we have an expertise at. Once it's implemented, the only difference is that from the billing standpoint, we get a piece of the pie from every patient that comes through. As each of these sites start ramping up the marketing—I think you heard that I mentioned that we're also helping with that marketing as well from a general standpoint—once that patient volume gears up, that's when you're going to see tremendous revenue coming through. We've stated that in the second half, we believe that it's going to be much more significant.

Jason Wittes (Analyst)

Got it. Also, I think you mentioned that you're getting some traction with smaller players. I think initially, I think you've given us something like a 350 potential unit opportunity, which I think was based primarily on larger PE-backed centers. Does this increase the pie, in your opinion, based on what you've been seeing in this last quarter in terms of who you've been talking to and who's interested in FDA agreements?

Michael Sardano (President and Chief Commercial Officer)

Yeah, absolutely. The PE-backed groups, the larger ones, the roll-ups, are the ones that we're really—those are the big fish. We're obviously targeting those. It's a slower process as far as getting those groups to sign on, much like a hospital sale. Once they sign on, it's like a huge hockey stick, of course, to your point. Like I said in our comments here, we believe we can sign three to five more of those type of groups by the end of the year because those negotiations are ongoing. I can't comment on who.

Jason Wittes (Analyst)

That's fair. Can you comment on roughly kind of the range of sizes in terms of how many machines they may be interested in sending out FDAs with?

Michael Sardano (President and Chief Commercial Officer)

Each of these sites have 150-plus offices nationwide, each of them, or some more, of course. From there, it's really unlimited as far as how many they want to start with. I think that sky's the limit.

Joe Sardano (Chairman and CEO)

Jason, let me pipe in here. I think one of the key things that we mentioned is a 65% increase in the number of treatments from Q4 to Q1. That's the focus that we're on. We need to drive those treatments because that's what drives the revenue. The installations are great. I think that as we work with these larger groups, we're naturally going to be putting the products into their biggest areas first. It's not going to be the weakest areas because they're interested in making the money as well. Since we're splitting that revenue 50/50, we're both targeting the same and targeting and having the same objective.

When you look at the first quarter, which is the fourth quarter where we had minimal installations, to the second quarter where we're starting to install more, to have a 65% increase, you can imagine where this could possibly go once we start accelerating the installations, the patient volumes at each place. I think it only starts multiplying, and it allows us to possibly hit a hockey stick much sooner than not.

Jason Wittes (Analyst)

Got it. I appreciate the comments. I'll jump back to Q.

Joe Sardano (Chairman and CEO)

Thank you.

Operator (participant)

Your next question comes from Jeremy Pearlman with Maxim Group. Please go ahead.

Jeremy Pearlman (Equity Analyst)

Thank you for taking the question. Good evening. Just a couple more questions on the FDA units. Do you have a current number for the current install base, and is there a target goal by the end of 2025? Or that's not something you shared?

Joe Sardano (Chairman and CEO)

Yeah, we're not providing that kind of guidance. I think at this meeting or at this call right now, we've probably provided the most guidance based on the facts and the projections that we can see from the existing installations. I think that we're moving along fairly aggressively here, and I think it's going to be looking good for us.

Jeremy Pearlman (Equity Analyst)

Okay. Understood. You did mention that to reach mature utilization within the clinics, you're going to help those clinics get there. You mentioned some marketing. Maybe just could you talk a little bit of what else you plan on doing to help those clinics reach that mature utilization rate?

Joe Sardano (Chairman and CEO)

We have a database of analytics that we're able to provide and work with these accounts to identify those key places and then to identify the number of patients in each one of those regions. We can access those patients through aggressive marketing, digital marketing, and social media. That's the tact that we're taking. That's what's been working for us up until now, and I think it's going to accelerate even more.

Jeremy Pearlman (Equity Analyst)

Okay. Understood. And then just the sales and marketing expense that you expected through the rest of the quarter, that includes the marketing for these targeted patients for these FDA units?

Joe Sardano (Chairman and CEO)

Correct. Yes. Correct.

Jeremy Pearlman (Equity Analyst)

Okay. And then just one last question, switching over to you said you resubmitted the 510(k) application for the TDI at the end of March and expect hopefully a positive outcome by the end of 2025. Just playing devil's advocate, is there anything the FDA might come back with some feedback questions, anything you could think of, and how you expect to handle that?

Joe Sardano (Chairman and CEO)

I can tell you that right now, we've been very pleased with the fact that as a follow-up since our submission to the FDA, we have not had any follow-up questions from the FDA. We are very, very comfortable. I think so are they with the submission that we have. Things are moving along slowly. I think if they were going to have any questions, they would have gotten to us by now. So far, there are none. I think things are on track.

Michael Sardano (President and Chief Commercial Officer)

Yeah. We submitted March 7th, to be accurate, and then nothing has come back, like Joe said, so far. They usually get back to you quicker than two and a half months, so.

Joe Sardano (Chairman and CEO)

Usually, it's a few weeks.

Michael Sardano (President and Chief Commercial Officer)

Yeah.

Jeremy Pearlman (Equity Analyst)

Okay. Great to hear. Thank you so much for taking the questions, and I'll rejoin the queue. Have a good night.

Joe Sardano (Chairman and CEO)

Thank you, Jeremy.

Operator (participant)

Again, if you have a question, please press star, then one. Your next question comes from Ben Haynor with Lake Street Capital Markets. Please go ahead.

Ben Haynor (Analyst)

Good afternoon, gentlemen. Thanks for taking the questions and congrats on the 65% growth in treatments for the FDA accounts.

Joe Sardano (Chairman and CEO)

Thank you, Ben.

Ben Haynor (Analyst)

Was wondering on that 65% growth figure, if you could share maybe, I guess, how much of that growth sequentially was sort of same-store sales growth, or is there any sort of cohort analysis you could share that kind of helps us understand better how these things sort of ramp up?

Javier Rampolla (CFO)

Yeah, Ben, this is Javier. So basically, like 60% of the 65 is basically organic, right? Installations that we're producing in Q4 compared to what the production in Q1 is, and about 5% is the new go-live that we had within the quarter.

Ben Haynor (Analyst)

Okay. Got it. And then once they go live, kind of refresh my memory, how long after the treatments happen, do you guys receive the money? My recollection is like 45 days or two months or something like that.

Michael Sardano (President and Chief Commercial Officer)

Yeah. It's between 45 and 60 days. It really depends.

Ben Haynor (Analyst)

Okay. Got it. And then just thinking about these smaller conferences, maybe more intimate, what's the sort of profile of folks that are attending these? I mean, it sounds like maybe you can get closer to some of these potential multi-site agreement folks, the larger PE folks. But is there also a fairly large opportunity from maybe the smaller practices, the mom-and-pops at these sorts of conferences, or what's the right way to think about it?

Michael Sardano (President and Chief Commercial Officer)

Yeah. Yeah. I'll give you an example. I love analogies. When you go to these large—and you were at the AAD, so we saw you over there—and when you go to these large conferences, you see all the bigwigs, right? The AAD elite, if you will. When you go to a smaller state show, for instance, Oklahoma State Dermatology Show, you meet people that don't necessarily want to have the limelight, right? They don't come to the AAD.

What I can tell you is that we have a practice there, for instance, that does 60 patients a month on their SRT, and they've been doing it for four years because they're one of the only dermatologists in the area, and they have a bunch of farmers in that area, rural, that can't access—they don't have as much access to care that someone is in Miami or New York or LA. That is literally a perfect place to put an FDA agreement. You're talking about 60 patients in one spot. Like Joe has said and I've said in the past, I'd much rather have 10 agreements out there with 100 patients in each agreement than 100 agreements out there with 10 patients in each. It's far more profitable and lucrative. Does that make sense?

Ben Haynor (Analyst)

Yeah. That does make sense. I don't know, kind of following up on that, it kind of flows into the how multi-site are the multi-site agreements? I mean, if every one of these larger practice groups that you're talking to has 150 sites or more, what do you see in terms of do you deploy 30 units? Do you deploy 50 units? Is it 10 units? And everyone just tries to or kind of refers into the practices where the units exist, or how might that work? What's the right way to think about that?

Joe Sardano (Chairman and CEO)

I think that the strategy that we're seeing develop so far with each one of the larger groups is they've already identified anywhere between 10 and 20 practices that they want to have delivery and installation. They're usually the biggest practices that are going to have or generate the highest volumes. Then they'll start filling in the blanks from there. They are very slow on that process, but they're very calculated, okay? They are very determined to get these units installed, but it's a process that we have to go through. We're very comfortable with the process of delivery and installation and training and startup, but they have to be a whole lot more calculated and a lot more deliberate on a lot of those things. We work with the process.

They're a little different at each one, but once they get going, I think—and I think you could imagine this—if we have 5 or 10 in these practices installed and they're pumping out 10, 15, 20, 30 patients a month, they start seeing the revenue coming in. That's when they'll start accelerating the installations even more.

Ben Haynor (Analyst)

Okay. That makes sense. Lastly, for me, on those 10, 15, 20, whatever installations that each of them might have, do those tend to match up with the sort of patient database or the data that you have in terms of where the treatment volumes might be, or do they choose different ones than you guys might have chosen and how do you?

Joe Sardano (Chairman and CEO)

They match up very, very well. Even their own thoughts of what they think is a high-volume area, we could show them the analytics that proves them right. The confidence level in the data that we're able to provide them is really, really good for them as well as it is for us. That is the best of all worlds, and those are the units that usually get installed first. I think that is going to bode well for future credibility as we start directing them to some other areas where we can attract even more patients because in those areas where maybe they are not as busy, if we show them that there are as many patients as in very busy areas, they are just not attracting those patients. We think that SRT is going to be able to bring those patients into those practices.

They're going to be more than willing to put those units in there to attract more business, for sure.

Ben Haynor (Analyst)

Okay. That makes a lot of sense. Excellent. Thanks for taking the questions, guys, and I'll leave it there.

Joe Sardano (Chairman and CEO)

Thanks, Ben.

Ben Haynor (Analyst)

Thank you.

Operator (participant)

This concludes our question-and-answer session. I would like to turn the conference back over to Joe Sardano for any closing remarks.

Joe Sardano (Chairman and CEO)

Okay. Thanks for all the questions. As we wrap up today's call, I want to thank all of you for your continued interest in Sensus Healthcare. While the first quarter reflected various seasonal, event-driven, and opportunistic headwinds, we are optimistic about the trajectory for the remainder of the year, particularly as our FDA agreements begin to contribute to revenue and we return to profitability in the quarters ahead. I'd also like to recognize that May is Skin Cancer Awareness Month, an important reminder of why we do what we do. Every year, more people are diagnosed with skin cancer than all other cancers combined. At Sensus, we remain committed to delivering safe, effective, and patient-friendly solutions that help dermatologists treat skin cancer non-invasively and with confidence. Thank you again, and we look forward to updating you on our progress in about three months. Operator.

Operator (participant)

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.