Semler Scientific(SMLR) - 2021 Q1 - Quarterly Report

Part I. Financial Information This section presents the company's financial statements, management's analysis, market risk disclosures, and internal controls Financial Statements The company reported strong Q1 2021 financial performance with significant revenue and net income growth, driven by rebounding variable-fee licenses and strategic investments Condensed Statements of Income (Q1 2021 vs Q1 2020) | Metric | For the three months ended March 31, 2021 (in thousands of dollars) | For the three months ended March 31, 2020 (in thousands of dollars) | | :--- | :--- | :--- | | Revenues | $13,183 | $9,430 | | Income from operations | $6,019 | $3,452 | | Net income | $4,877 | $2,673 | | Net income per share, basic | $0.73 | $0.41 | | Net income per share, diluted | $0.60 | $0.33 | Condensed Balance Sheet Highlights | Metric | March 31, 2021 (in thousands of dollars) | December 31, 2020 (in thousands of dollars) | | :--- | :--- | :--- | | Cash | $26,478 | $22,079 | | Total current assets | $33,285 | $26,603 | | Total assets | $40,646 | $34,639 | | Total current liabilities | $5,073 | $4,514 | | Total stockholders' equity | $35,268 | $29,793 | Condensed Statements of Cash Flows (Q1 2021 vs Q1 2020) | Metric | For the three months ended March 31, 2021 (in thousands of dollars) | For the three months ended March 31, 2020 (in thousands of dollars) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $4,606 | $3,703 | | Net Cash Used in Investing Activities | ($216) | ($233) | | Net Cash Provided by Financing Activities | $9 | $3 | | Increase in Cash | $4,399 | $3,473 | - The company's revenues, particularly from variable-fee licenses, were negatively impacted by the COVID-19 pandemic in the first half of 2020 but rebounded to exceed pre-pandemic levels in the second half of 2020 and the first quarter of 2021[25] - The company has significant customer concentration, with two customers accounting for 38.3% and 30.4% of total revenues for the three months ended March 31, 2021[61] - Subsequent to the quarter end, in April 2021, the company entered into an exclusive distribution agreement with a private company, committing to purchase $2.0 million of product inventory[87] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2021 revenue growth driven by QuantaFlo® adoption, strategic product expansion, and strong liquidity Overview and Recent Developments The company focuses on providing technology solutions like QuantaFlo® and is expanding offerings through strategic partnerships - The company's mission is to provide technology solutions, like its FDA-cleared QuantaFlo® product for diagnosing peripheral arterial disease (PAD), to improve clinical effectiveness for healthcare providers[89] - Business activity, which had decreased due to COVID-19 restrictions in early 2020, has since returned to and exceeded pre-pandemic levels as customers address a backlog of untested patients[90] - The company is expanding its product offerings beyond QuantaFlo® through strategic investments and exclusive distribution agreements with three private companies focused on chronic disease management[91][94][95] Results of Operations Q1 2021 saw significant revenue growth and improved operating leverage, despite increased cost of revenues Q1 2021 vs Q1 2020 Performance | Metric | Q1 2021 (in millions of dollars) | Q1 2020 (in millions of dollars) | Change (in millions of dollars) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $13.2M | $9.4M | +$3.8M | +40% | | Operating Expenses | $7.2M | $6.0M | +$1.2M | +20% | | Pre-tax Net Income | $6.0M | $3.5M | +$2.5M | +74% | | Net Income | $4.9M | $2.7M | +$2.2M | +82% | - Revenue growth was driven by an increase in fees from vascular testing products, which rose to $12.9 million in Q1 2021 from $9.2 million in Q1 2020, due to growth in both fixed-fee and variable-fee licenses from new and existing customers[96][97] - Operating expenses as a percentage of revenues decreased to 54% in Q1 2021 from 63% in Q1 2020, demonstrating improved operating leverage despite a 20% absolute increase in expenses[98] - Cost of revenues increased 86% to $1.6 million, primarily due to a non-recurring inventory adjustment and increased headcount[99] Liquidity and Capital Resources The company's cash position significantly improved in Q1 2021, driven by strong operating cash flow - The company's cash position improved, with cash increasing to $26.5 million at March 31, 2021, from $22.1 million at December 31, 2020, and working capital stood at approximately $28.2 million[108] - For Q1 2021, net cash provided by operating activities was $4.6 million, primarily driven by net income of $4.9 million, offset by an increase in trade accounts receivable[111] - Investing activities used $0.2 million for purchases of assets for lease and fixed assets to support business growth[112] Quantitative and Qualitative Disclosures about Market Risk The company reports that there are no applicable quantitative or qualitative disclosures regarding market risk - Not applicable[116] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2021, with no material changes in internal controls - Management, including the CEO and senior finance officers, concluded that the company's disclosure controls and procedures were effective as of March 31, 2021[120] - There were no changes in internal control over financial reporting during the first fiscal quarter that materially affected, or are reasonably likely to materially affect, these controls[121] Part II. Other Information This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, and exhibits Legal Proceedings The company reports no material legal proceedings - None[123] Risk Factors The company reports that there are no applicable risk factors to disclose - Not applicable[124] Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities or use of proceeds - None[125] Defaults upon Senior Securities The company reports no defaults upon senior securities - None[126] Mine Safety Disclosures The company reports that this item is not applicable - Not applicable[127] Other Information The company reports that this item is not applicable - Not applicable[128] Exhibits This section lists the exhibits filed with the Form 10-Q, including required certifications and Inline XBRL documents - The exhibits filed with the report include Rule 13a-14(a) certifications for the Principal Executive Officer and Principal Financial Officer, a Section 1350 certification, and Inline XBRL data files[129]