Semler Scientific(SMLR) - 2022 Q1 - Quarterly Report

Part I. Financial Information Financial Statements For Q1 2022, Semler Scientific reported a 6% revenue increase to $14.0 million, but net income decreased 31% to $3.4 million due to a 41% rise in operating expenses, with cash flow from operations declining significantly Condensed Statements of Income (Q1 2022 vs Q1 2021) | Financial Metric | Q1 2022 (in thousands) | Q1 2021 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Revenues | $14,016 | $13,183 | +6.3% | | Income from operations | $3,942 | $6,019 | -34.5% | | Net income | $3,360 | $4,877 | -31.1% | | Diluted EPS | $0.41 | $0.60 | -31.7% | Condensed Balance Sheet Highlights | Account | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $38,426 | $37,323 | | Total current assets | $50,470 | $45,536 | | Total assets | $55,435 | $50,672 | | Total current liabilities | $5,819 | $4,880 | | Total stockholders' equity | $49,392 | $45,547 | Condensed Statements of Cash Flows (Q1 2022 vs Q1 2021) | Cash Flow Activity | Q1 2022 (in thousands) | Q1 2021 (in thousands) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $1,502 | $4,606 | | Net Cash Used in Investing Activities | ($256) | ($216) | | Net Cash (Used in) Provided by Financing Activities | ($143) | $9 | | Increase in Cash | $1,103 | $4,399 | Notes to Condensed Financial Statements The notes detail financial preparation, revenue recognition, COVID-19 impact, customer concentration, strategic investments, and a new share repurchase program - The company attributes a new pattern in the home-testing market, with higher volumes earlier in the year, to a COVID-19 related timing change in customer ordering behavior, resulting in 67% sequential revenue growth from the home-testing market compared to Q4 2021[27][28] Revenue Breakdown (Three months ended March 31) | Revenue Source | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Variable-fee licenses | $5,842 | $5,658 | | Hardware and accessories | $285 | $331 | | Fixed-fee leases (calculated) | $7,889 | $7,194 | | Total Revenue | $14,016 | $13,183 | Customer Concentration | Metric | Period | Concentration Details | | :--- | :--- | :--- | | Revenues | Q1 2022 | Two customers accounted for 35.4% and 31.7% | | | Q1 2021 | Two customers accounted for 38.3% and 30.4% | | Accounts Receivable | Mar 31, 2022 | Three customers accounted for 30.2%, 26.8%, and 22.5% | | | Dec 31, 2021 | Three customers accounted for 21.9%, 20.1%, and 16.6% | - On March 14, 2022, the Board authorized a share repurchase program of up to $20.0 million, with the company purchasing 2,030 shares for approximately $99 thousand during the quarter[80] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes 6% revenue growth to increased installed units, but a 41% surge in operating expenses, driven by higher headcount and salary increases, led to a 31% net income decrease, while the company maintains strong liquidity Overview Semler Scientific provides technology solutions for chronic disease evaluation and treatment, with its primary product QuantaFlo for PAD diagnosis, and is expanding into diabetes and early Alzheimer's disease diagnostics - The company's mission is to develop, manufacture, and market innovative products for chronic disease evaluation and treatment[96] - Strategic expansion includes an exclusive marketing and distribution agreement for 'Insulin Insights' and investments in a company developing 'Discern,' a test for early Alzheimer's disease[97] Results of Operations In Q1 2022, revenues increased 6% to $14.0 million, driven by growth in both fixed-fee and variable-fee licenses, but total operating expenses rose 41% to $10.0 million, leading to a 31% net income decline to $3.4 million Revenue by Type (Q1 2022 vs Q1 2021) | Revenue Type | Q1 2022 (in millions) | Q1 2021 (in millions) | | :--- | :--- | :--- | | Fixed-fee licenses | $7.9 | $7.2 | | Variable-fee licenses | $5.8 | $5.7 | | Total Vascular Testing Fees | $13.7 | $12.9 | - Total operating expenses increased by 41% YoY, from $7.1 million to $10.0 million, primarily due to increased personnel expenses associated with business expansion[108] - Key drivers for increased operating expenses across Engineering, Sales & Marketing, and G&A were increased headcount, annual pay raises, and the expiry of COVID-19 related payroll tax credits[110][111][113] Liquidity and Capital Resources As of March 31, 2022, the company held $38.4 million in cash and cash equivalents and $44.7 million in working capital, despite a decrease in net cash from operating activities to $1.5 million - The company had cash and cash equivalents of $38.4 million and working capital of approximately $44.7 million as of March 31, 2022[116] - Net cash provided by operating activities decreased from $4.6 million in Q1 2021 to $1.5 million in Q1 2022, primarily due to lower net income and increased working capital requirements[118] - Financing activities used $0.1 million, which included $0.1 million for treasury stock acquisition under the new share purchase program[122] Quantitative and Qualitative Disclosures About Market Risk This section is not applicable for the reporting period - Not applicable[125] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2022, the Chief Executive Officer and senior finance officers concluded that the company's disclosure controls and procedures were effective[127] - There were no material changes in internal control over financial reporting during the first quarter ended March 31, 2022[128][129] Part II. Other Information Legal Proceedings The company reported no legal proceedings during the period - None[132] Risk Factors This section is not applicable, indicating no material changes to previously disclosed risk factors - Not applicable[133] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities, but purchased 2,030 shares under its new $20 million share repurchase program, leaving approximately $19.9 million available Issuer Purchases of Equity Securities (March 15-31, 2022) | Total Shares Purchased | Average Price Paid Per Share | Maximum Dollar Value Remaining for Purchase | | :--- | :--- | :--- | | 2,030 | $48.45 | $19,901,359 | - On March 14, 2022, the Board of Directors authorized a share repurchase program for up to $20.0 million of its outstanding common stock with no expiration date[137] Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate documents, officer certifications, and XBRL data files - Exhibits filed include certifications by the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act[141]