Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis in conjunction with the information set forth within the condensed consolidated 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-100^TM, SRT-100+^TM and SRT-100 Vision^TM. 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

		For the Three Months Ended								For the Nine Months Ended
		September 30,								September 30,
(in thousands, except shares and per share data)		2025				2024				2025				2024
Revenues		$	6,884			$	8,839			$	22,543			$	28,741
Cost of sales			4,171				3,599				12,573				11,416
Gross profit			2,713				5,240				9,970				17,325
Operating expenses
General and administrative			1,917				1,573				6,111				4,731
Selling and marketing			1,546				1,309				5,122				3,575
Research and development			1,819				863				5,896				2,655
Total operating expenses			5,282				3,745				17,129				10,961
(Loss) income from operations			(2,569	)			1,495				(7,159	)			6,364
Other income:
Interest income, net			160				279				528				702
Other income, net			160				279				528				702
(Loss) income before income tax			(2,409	)			1,774				(6,631	)			7,066
(Benefit from) provision for income taxes			(1,466	)			559				(2,079	)			1,965
Net (loss) income		$	(943	)		$	1,215			$	(4,552	)		$	5,101

Three months ended September 30, 2025 compared to the three months ended September 30, 2024

Revenues. Revenues were $6.9 million for the three months ended September 30, 2025 compared to $8.8 million for the three months ended September 30, 2024, a decrease of $1.9 million, or 21.6%. The decrease in revenue was primarily driven by a lower number of units sold (16 in the three months ended September 30, 2025, compared to 27 in the three months ended September 30, 2024), reflecting reduced sales to a large customer, slightly offset by revenue recognized from the new placement program under the Fair Deal Agreement.

Cost of sales. Cost of sales was $4.2 million for the three months ended September 30, 2025 compared to $3.6 million for the three months ended September 30, 2024, an increase of $0.6 million, or 16.7%. The increase in cost of sales was primarily related to higher costs of servicing systems and the cost associated with the new placement program under the Fair Deal Agreement, which generates costs related to installation and training in advance of related revenues, in the three months ended September 30, 2025 compared to the three months ended September 30, 2024.

Gross profit. Gross profit was $2.7 million for the three months ended September 30, 2025 compared to $5.2 million for the three months ended September 30, 2024, a decrease of $2.5 million, or 48.1%. Our overall gross profit percentage was 39.1% in the three months ended September 30, 2025 compared to 59.1% in the corresponding period in 2024. The decrease in gross profit was primarily driven by lower sales, higher costs of servicing systems, and the cost associated with the new placement program in the three months ended September 30, 2025 compared to the three months ended September 30, 2024.

General and administrative. General and administrative expense was $1.9 million for the three months ended September 30, 2025 compared to $1.6 million for the three months ended September 30, 2024, an increase of $0.3 million, or 18.8%. The net increase in general and administrative expense was primarily due to higher professional fees (IT and consult) and compensation.

Selling and marketing. Selling and marketing expense was $1.5 million for the three months ended September 30, 2025 compared to $1.3 million for the three months ended September 30, 2024, an increase of $0.2 million, or 15.4%. The increase was primarily driven by an increase in payroll cost due to commissions related to the new placement program and an increase in headcount.

Research and development. Research and development expense was $1.8 million for the three months ended September 30, 2025 compared to $0.9 million for the three months ended September 30, 2024, an increase of $0.9 million, or 100.0%. The increase was primarily due to significant lobbying costs related to billing code reimbursement, increased headcount, and an increase in product development costs related to next generation systems.

Other income. Other income of $0.2 million for the three months ended September 30, 2025 and $0.3 million for the three months ended September 30, 2024 relates primarily to interest income.

Income taxes. The effective tax rates for the three months ended September 30, 2025 and 2024 were 60.9% and 31.5%, respectively. The increase in the effective tax rate for the three months ended September 30, 2025 compared to the prior period was primarily attributable to an increase in the estimated tax credits that are expected to be generated and utilized in proportion to the amount of pretax profit. 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 high effective tax rate benefit 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.

Nine months ended September 30, 2025 compared to the nine months ended September 30, 2024

Revenues. Revenues were $22.5 million for the nine months ended September 30, 2025 compared to $28.7 million for the nine months ended September 30, 2024, a decrease of $6.2 million, or 21.6%. The decrease in revenue was primarily driven by a lower number of units sold (56 in the nine months ended September 30, 2025, compared to 76 in the nine months ended September 30, 2024), reflecting reduced sales to a large customer, slightly offset by revenue recognized from the new placement program under the Fair Deal Agreement.

Cost of sales. Cost of sales was $12.6 million for the nine months ended September 30, 2025 compared to $11.4 million for the nine months ended September 30, 2024, an increase of $1.2 million, or 10.5%. The increase in cost of sales was primarily related to higher costs of servicing systems and the cost associated with the new placement program under the Fair Deal Agreement, which generates costs related to installation and training in advance of related revenues, in the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024.

Gross profit. Gross profit was $10.0 million for the nine months ended September 30, 2025 compared to $17.3 million for the nine months ended September 30, 2024, a decrease of $7.3 million, or 42.2%. Our overall gross profit percentage was 44.4% in the nine months ended September 30, 2025 compared to 60.3% in the corresponding period in 2024. The decrease in gross profit was primarily driven by lower sales, higher costs of servicing systems, and the cost associated with the new placement program in the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024.

General and administrative. General and administrative expense was $6.1 million for the nine months ended September 30, 2025 compared to $4.7 million for the nine months ended September 30, 2024, an increase of $1.4 million, or 29.8%. The net increase in general and administrative expense was primarily due to higher professional fees and insurance costs.

Selling and marketing. Selling and marketing expense was $5.1 million for the nine months ended September 30, 2025 compared to $3.6 million for the nine months ended September 30, 2024, an increase of $1.5 million, or 41.7%. The increase was primarily driven by an increase in tradeshow costs, payroll cost due to commissions related to the new placement program, and an increase in headcount.

Research and development. Research and development expense was $5.9 million for the nine months ended September 30, 2025 compared to $2.7 million for the nine months ended September 30, 2024, an increase of $3.2 million, or 118.5%. The increase was primarily due to significant lobbying costs related to billing code reimbursement, increased headcount, and an increase in product development costs related to next generation systems.

Other income. Other income of $0.5 million for the nine months ended September 30, 2025 and $0.7 million for the nine months ended September 30, 2024 relates primarily to interest income.

Income taxes. The effective tax rates for the nine months ended September 30, 2025 and 2024 were 31.4% and 27.8%, respectively. The increase in the effective tax rate benefit for the nine months ended September 30, 2025 compared to the prior year period was primarily due to an increase in the estimated tax credits that are expected to be generated and utilized.

Financial Condition

The following discussion summarizes significant changes in assets and liabilities. Please see the condensed consolidated balance sheets as of September 30, 2025 and December 31, 2024 contained in Part I, Item 1 of this filing.

Assets

Cash and cash equivalents were $24.5 million at September 30, 2025 compared to $22.1 million at December 31, 2024, an increase of $2.4 million. See Cash Flows for details on the change in cash and cash equivalents during the nine months ended September 30, 2025.

Accounts receivable was $9.3 million at September 30, 2025 compared to $19.7 million at December 31, 2024, a decrease of $10.4 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 $13.0 million at September 30, 2025 compared to $10.1 million at December 31, 2024, an increase of $2.9 million. The increase was primarily due to the anticipation of increasing future sales.

Liabilities

There were no borrowings outstanding under our revolving line of credit with Comerica Bank at September 30, 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 nine months ended September 30, 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 this quarterly report was issued. 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.

The Company claimed Employee Retention Credits ("ERC") as provided in the Coronavirus Aid, Relief, and Economic Security Act of 2020 and subsequent amendments. The ERC is a fully refundable payroll tax credit to provide financial incentives to eligible businesses to retain their workforce through the period of financial hardship resulting from the COVID-19 pandemic. The Company received $0.3 million in the second quarter of 2025 and $0.2 million in the fourth quarter of 2024. These amounts were recorded against the payroll expenses in the condensed consolidated statements of income (loss). Further claims outstanding will be recorded in the period in which payment is received.

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:

		For the Nine Months Ended
		September 30,
(in thousands)		2025				2024
Net cash provided by (used in):
Operating activities		$	2,735			$	(4	)
Investing activities			(38	)			(573	)
Financing activities			(300	)			(13	)
Total		$	2,397			$	(590	)

Cash flows from operating activities

Net cash provided by operating activities was $2.7 million for the nine months ended September 30, 2025, consisting of net loss of $4.6 million and non-cash activity of $0.9 million, offset by a decrease in net operating assets of $8.2 million, primarily driven by a $10.4 million decrease in accounts receivable, a $2.0 million decrease in prepaid inventory, and a $3.7 million increase in inventories. 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, deferred income taxes, provision for product warranties, amortization of right-of-use asset, credit loss expense, and depreciation of property and equipment. Net cash used in operating activities was $4 thousand for the nine months ended September 30, 2024, consisting of net income of $5.1 million and noncash charges of $0.6 million, offset by an increase in net operating assets of $5.8 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 credit loss expense, 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 nine months ended September 30, 2025 reflected $38 thousand of purchases of property and equipment. Net cash used in investing activities for the nine months ended September 30, 2024 reflected $0.6 million of purchases of property and equipment.

Cash flows from financing activities

Net cash used in financing activities for the nine months ended September 30, 2025 reflected $0.3 million of repurchases of common stock. Net cash used in financing activities for the nine months ended September 30, 2024 reflected $34 thousand of exercised stock options, offset by $47 thousand of withholding taxes on stock-based compensation.

Inflation

During the first three quarters 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 revenue recognition 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.