Semler Scientific(SMLR) - 2021 Q3 - Quarterly Report

Part I. Financial Information Financial Statements The unaudited condensed financial statements for Q3 and YTD September 2021 highlight strong revenue and net income growth, alongside increased assets and cash Condensed Statements of Income The condensed statements of income show strong nine-month revenue and net income growth, but Q3 net income declined despite revenue gains due to higher operating expenses Condensed Statements of Income (Unaudited, in thousands) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $13,991 | $10,727 | $41,485 | $26,530 | | Income from operations | $5,253 | $5,555 | $17,735 | $9,966 | | Net income | $4,150 | $4,866 | $15,715 | $8,614 | | Diluted EPS | $0.51 | $0.61 | $1.93 | $1.07 | Condensed Balance Sheets As of September 30, 2021, the company's balance sheet strengthened, with cash and cash equivalents rising to $35.9 million and total assets growing to $51.0 million Condensed Balance Sheet Highlights (in thousands) | Metric | September 30, 2021 (Unaudited) | December 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $35,930 | $22,079 | | Total current assets | $46,095 | $26,603 | | Total assets | $50,973 | $34,639 | | Total current liabilities | $6,693 | $4,514 | | Total stockholders' equity | $44,014 | $29,793 | Condensed Statements of Cash Flows For the nine months ended September 30, 2021, the company generated $14.4 million in cash from operating activities, resulting in a total cash increase of $13.9 million Condensed Statements of Cash Flows (Unaudited, in thousands) | Metric | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $14,399 | $9,568 | | Net Cash Used in Investing Activities | ($602) | ($690) | | Net Cash Provided by Financing Activities | $54 | $174 | | Increase in Cash | $13,851 | $9,052 | | Cash and cash equivalents, end of period | $35,930 | $16,793 | Notes to Condensed Financial Statements Key notes to the financial statements detail COVID-19 impacts, revenue composition, inventory commitments, strategic investments, and significant customer concentration - The company's revenues rebounded after the initial COVID-19 impact in 2020, but management believes the Delta variant may have negatively impacted sequential revenue growth in Q3 2021, particularly for variable-fee licenses[24] - For the nine months ended September 30, 2021, revenue was composed of approximately $22.7 million from fixed-fee leases and $18.0 million from variable-fee licenses[42][49] - The company has a significant concentration of credit risk, with two customers accounting for 39.7% and 27.9% of total revenues for the three months ended September 30, 2021[66] - The company has entered into distribution agreements and made investments in private companies to expand its product lines, including a commitment to purchase $1.2 million in inventory from one partner[43][44][59] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strong revenue growth driven by QuantaFlo® adoption, noting a Q3 2021 sequential growth slowdown, increased operating expenses, and a strong liquidity position Results of Operations: Three Months Ended September 30, 2021 vs 2020 In Q3 2021, revenues increased 30% to $14.0 million, but a 69% rise in operating expenses to $8.7 million led to a 15% decrease in net income to $4.2 million Q3 2021 vs Q3 2020 Performance (in millions) | Metric | Q3 2021 | Q3 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $14.0 | $10.7 | +30% | | Fixed-fee licenses | $7.8 | $6.3 | +24% | | Variable-fee licenses | $5.9 | $4.1 | +44% | | Total Operating Expenses | $8.7 | $5.2 | +69% | | Net Income | $4.2 | $4.9 | -15% | Results of Operations: Nine Months Ended September 30, 2021 vs 2020 For the first nine months of 2021, revenues grew 56% to $41.5 million, outpacing a 43% increase in operating expenses to $23.8 million, resulting in an 82% increase in net income to $15.7 million Nine Months 2021 vs 2020 Performance (in millions) | Metric | Nine Months 2021 | Nine Months 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $41.5 | $26.5 | +56% | | Fixed-fee licenses | $22.7 | $18.7 | +21% | | Variable-fee licenses | $18.0 | $7.1 | +154% | | Total Operating Expenses | $23.8 | $16.6 | +43% | | Net Income | $15.7 | $8.6 | +82% | Liquidity and Capital Resources The company maintains a strong liquidity position, with cash and cash equivalents increasing by $13.8 million to $35.9 million as of September 30, 2021, primarily driven by $14.4 million in operating cash flow - Cash and cash equivalents increased to $35.9 million at September 30, 2021, from $22.1 million at December 31, 2020[127] Cash Flow Summary - Nine Months Ended Sep 30, 2021 (in millions) | Cash Flow Source | Amount | | :--- | :--- | | Net Cash from Operating Activities | $14.4 | | Net Cash Used in Investing Activities | ($0.6) | | Net Cash Provided by Financing Activities | $0.054 | - As of September 30, 2021, the company had working capital of approximately $39.4 million[127] Quantitative and Qualitative Disclosures about Market Risk This section is not applicable for the reporting period - The company states that this item is not applicable[135] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2021, with no material changes in internal control over financial reporting during the third quarter - Based on an evaluation as of September 30, 2021, the Chief Executive Officer and senior finance executives concluded that the company's disclosure controls and procedures were effective[138] - There were no changes in internal control over financial reporting during the third fiscal quarter that materially affected, or are reasonably likely to materially affect, these controls[139] Part II. Other Information Legal Proceedings The company reported no legal proceedings during the period - None[141] Risk Factors This section is not applicable, indicating no material changes from the risk factors previously disclosed in the company's Annual Report on Form 10-K - Not applicable[142] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[143] Defaults upon Senior Securities The company reported no defaults upon senior securities - None[144] Mine Safety Disclosures This section is not applicable to the company - Not applicable[145] Other Information The company reported no other information required to be disclosed under this item - Not applicable[146] Exhibits This section lists the exhibits filed with the Form 10-Q, including officer certifications and XBRL data files - The report lists exhibits including Rule 13a-14(a) certifications for the Principal Executive Officer and Principal Financial Officer, a Section 1350 Certification, and Inline XBRL documents[148]