Q1 2021 ICAD Inc Earnings Call

Greetings and welcome to the I Can't Inc. First quarter 2021 earnings call at the time all participants are in a listen only mode of question and that's the session will follow the phone the presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I would now like to turn the conference over to your home.

Jeremy Feffer Investor Relations. Thank you you may begin.

Thank you Devin and good afternoon, everyone. Thank you for participating on today's call. Joining me from iPad are Michael Klein, Chairman and Chief Executive Officer, Stacey Stevens, President and Scott Eric of Auto Chief Financial Officer earlier. This afternoon Ikat announced financial results for the three months ended March 30 <unk>.

<unk> 2021.

Before we begin I would like to caution the comments made during the conference call by management contain forward looking statements involve risks and uncertainties regarding the operations and future results of ICANN I.

I would also note that management may refer to certain non-GAAP financial measures management believes that these measures provide meaningful information for investors and reflects the wave of diesel that they view the operating performance of the company you can find the reconciliation of our GAAP to non-GAAP measures at the end of the earnings release I encourage you to review the company's filings with the Securities and Exchange Commission.

Including without limitation, the form 10-Q, and 10-K, which identifies specific risk factors that may cause actual results or events to differ materially from those described in the forward looking statements.

Furthermore of the content of this conference call contains time sensitive information that is accurate only as of the date of this live broadcast April 28, 2021, I cant undertakes no obligation to revise or update any statements to reflect the events or circumstances. After the date of this conference call.

With that said, it's my pleasure to turn the call over to Michael Klein Mike.

Thank you Jeremy and good afternoon, everyone.

I'd like to begin today by highlighting a few key financial metrics with the particular focus on I catch the top line revenue momentum.

<unk> first quarter total revenue of eight 6 million represented a 32% increase over our first quarter 'twenty 'twenty I'd like to highlight the balance in our strong Q1 performance, we achieved year over year growth in both product and service revenue and in both segments of our business detection.

And therapy on.

The detection business was up 28% as compared to Q1 of last year. This includes 34% year over year of growth in product sales and 13% year over year growth in service sales importantly.

Importantly service revenue is becoming an increasingly important aspect of the overall business, especially in detection.

The prior generation AI systems that are being replaced by newly installed profound three D technology and are coming off of the initial warranty period associated with new installations.

As these roll off of warranty. The result is growth and recognition of recurring revenue service contract sales on a go forward basis diving, a little deeper into our detection business in Q1, as we indicated in the prior call. Our recently signed five year exclusive agreement with Solas mammography are clear.

Street leader that operates in more than 80 branded centers in 11 States has already begun stimulating the accelerating the adoption of profound AI by other local screening center and so lets us markets and catchment areas local awareness campaigns activate both patient screening as well as Clint.

Adoption importantly, Q1 was the quarter defined by continued and broader market penetration with the significant number of more moderately sized deals and geographically diverse areas, achieving our Q1 sales growth was not dependent on longer cycle multimillion dollar deals.

View of this as a positive indicator of the broad and fundamental continuing momentum in our detection business momentum that is not overly reliant on large scale deal deals north specific sales regions to achieve revenue growth objectives, having said this we do of the healthy mix of large as well.

As moderately sized deals and our sales pipeline.

I cant newest offering profound AI for risk assessment is the product that looks two years ahead and provides a unique and personalized probability score for potential future breast cancers, and it's also played a key role in several of our Q1 deals. This product is of significant differentiate.

From us and is available on our license sales basis for a limited period.

Mid to later this year, we anticipate offering our risk product to our customers on a recurring revenue subscription model basis, we continue to amass luminary clinical experience with risk prior to transitioning to a subscription only model.

The subscription based risk offering provides us with the opportunity for meaningful recurring and predictable revenue revenue that we anticipate will come with higher margins with that said as we move towards subscription. It is important to note that those revenue streams for our risk offering will be split between the current year and subsequent years.

<unk>.

We closely map our go to market strategies to customer demands and procurement temperament. We also have a relatively strong ability to modulate the pace with which we move towards subscription based recurring sales understanding and governing this pace has high value and sites continue to steadily increase patient true.

Per hour and per day as they increasingly catch up with the prior screening backlog caused by COVID-19, as a reminder, profound risk assessing kind of identified cancers that are not visible or discernible today, yet they may exist in a sub visual range are cutting edge.

I risk algorithm can predict those cancers two years before the enter a physician's visual field and in doing so provides a unique risk score for each station for the future risk is currently available from large and still growing to the market, particularly outside the us.

Importantly, our commercial launch plan for US three day risk offering has been carefully curated our targeted soft launched the smoke with luminary sites, which I referenced a moment ago is ongoing we believe it will be critical to the commercial success of this product for us to leverage the early user experience from <unk>.

The opinion leaders at these luminary sites are the launch of profound AI for detection, which we started in Q1 of 2019 has taught us volumes about how to most potently and effectively pace and price and introduce new products into the market. We recently announced several important achievements.

Humans related to our flagship profound AI.

<unk> price again. This is AI is offering that improved cancer detection on todays mammogram, let me distinguish this product from a risk offering that looks two years ahead in March we received FDA clearance for version three point of profound AI for three D mammography deter.

That's detections today.

Parents of previous versions of the software the profound AI three point O algorithm offers up to a 10% improvement in import in performance and up to 40% faster processing of <unk>.

<unk> three point O of profound AI was dealt with millions of additional images and provides physicians with the ability to interpret an increasing amount of data in three D. Digital breast tomo synthesis of cases and analyze each of them it's to detect the legit malignant lesions more efficiently and with even.

Greater precision this FDA clearance and additional generations that are already well underway, we will keep on cat at the forefront of cancer detection innovations.

We now have over 70, 702 D and three the installations, we see this along with our unique ability to integrate with all of mammography systems imaging workstations and pack providers. These are providers that transfer data and the images. We see this is of significant barriers to competitive.

The entry and as I've said in the past the over 1800 combinations of technologies that we've had the solid floor and unlocked over many years. We also gathered thousands of the images each month to further refine the precision of our AI algorithm.

Additionally, in the area of risk assessment. We believe we are years ahead of any foreseeable competition moving in parallel with the growth of our AI offerings. We also experienced significant year over year of growth in Q1 in our therapy business is both product and service revenues total therapy revenues of two.

$9 million represented 41% increase over Q1 of last year year over year of product revenue doubled in Q1 and service revenue increased 11% as compared to Q1 2020 the growth in our therapy therapy business was driven by several factors.

Factors, including the sale of 10 controllers in Q1 of <unk>.

Actually 45% of soft product sales in Q1 were due to an initial surge in dermatology controller installations, which were heavily influenced by the emergence of shifts in reimbursement payer coverage and a positive change the regulations Stacey will provide additional detail on on this on a few minutes.

With that I'd like to move on to our development program and intraoperative radiation therapy or IOR T. Specifically as it relates to the treatment of recurrent glioblastoma or GBM as you know the updated data on Glioblastoma continues to indicate rather dramatic improvement compared to the control group.

In both the end point areas of overall cancer survival as well as progression free survival time.

Our new study led by Dr. Santana case of read on nationally prominent neuro oncologists that the John Wayne Cancer Institute is now enrolling and is designed to further validate these dual endpoint outcomes at multiple prestige of sites in both the us and Europe, we anticipate the first patient treatment.

[noise] occur in the weeks ahead as multiple sites are now recruiting patients as a reminder of the outcome for this 80 to 100 patient trial will be an assessment of overall patient survival.

The secondary yet equally significant endpoint will be the assessment of the pattern of disease progression potential adverse events and quality of life. This is not an overly long or expensive trial since most sites already of access disaster technology.

The technology that has FDA clearance and that can be used across a wide range of cancers.

We also anticipate that some preliminary data on the key endpoint of disease progression will be submitted for publication as well as presentation by the end of 2021 I'd.

I'd like to take a moment now to discuss the current operating environment in the us while scattered regions regions may have experienced a modest or moderate uptick in COVID-19 cases, the presence of multiple vaccines is beginning to lift the country out of the pandemic. The recovery efforts in Europe appeared to be lagging of.

Few months behind we are very pleased however, with the overall business performance and our outlook in both the us and in Europe, we see our AI offerings assisting on multiple fronts from scheduling operational efficiency and detection performance with this we still remain operationally diligent and cash.

Cognizant of evolving business conditions to what we clearly see as the waning phase of COVID-19. It is for this reason that we have been very mindful and careful in managing our operating expenses over the last several quarters. It is worth highlighting that while we achieved Q1 top line growth of 32.

Percent, which I referenced earlier, our operating expenses decreased approximately 7% versus Q1 2020, we continue to realize both leverage and of surgeon productivity, while our development team has achieved product with the schools at an accelerated pace channel.

Sales growth combined with cost controls and the above productivity gains allowed us to reduce I cats pretax loss to $1 6 million in Q1, which was 86% lower than Q1 of 2020 losses. We also ended Q1 with cash and cash equivalents of $46 9 million.

Which includes the proceeds of our successfully closed 25 million dollar of public offering in March looking ahead, we intend to begin utilizing these proceeds in the second quarter to broaden our U S commercial activities and expand our outside the U S commercial footprint in both Europe, the middle East and Asia.

Pacific regions more specifically as we move into the second half of the year, we intend to add to our commercial efforts, particularly in areas, where we may have an above threshold reliance on OEM or distributor coverage or in areas, where broader adoption patterns may be clearly emerging outside of core metro.

Ares the impact of some of these efforts may manifest and improved gross margins for ikat products. Additionally, as Scott will mention we plan to use of portion of our 47 of our near $47 million in cash to retire the modest amount of debt debt remains on our balance sheet. Finally during this discussion of expenses.

And cash I would be remiss, if I didnt mentioned on the upcoming departure of our Chief Financial Officer, Scott Arguido, Scott has been a valued member of the eye care team for 10 years, having served as the us see.

CFO for the last two years he has been instrumental in helping to drive revenue growth our disciplined approach to expense management, and then significantly improving our balance sheet, we wish Scott well in his future endeavors.

I am pleased to announce today that we have retained Charles Carter Charles is now on board and will assume the title of interim CFO next week on May force until such time as a permanent successor is named.

Charlie as you go as he goes by is a highly seasoned executive with both public and private company CFO experience. The ikat executive team and board of very confident Charlie's financial leadership and comprehensive business acumen.

The and I look forward to working with Charlie who will join US on our subsequent earnings call. In summary, we continue to operate with significant momentum and a vastly improves clinical and economic environment. We have achieved important progress throughout the business look forward to continued growth in our highly concentrated on our long term growth prospects both of our data.

Actions and therapy segments remain a clear and palpable inflection points with significant growth rates anticipated, we have an increasingly strong balance sheet and we will continue our steady march towards both positive EBITDA and cash flow along with continued top line growth I'd like to now turn the call over to Scott for his review of the finish.

Scott.

Good afternoon, everyone and thank you Mike some of those kind words I am fortunate to have spent the last 10 years that ICANN and to work with so many talented people on the ikat team I am, particularly proud of our efforts over the past two years as ICANN has truly evolved into an industry, leading medical technology company.

With that I'll now summarize our financial results for the first quarter ended March 31 2021.

First quarter 2021, total revenues were $8 6 million, representing a year over year increase of $2 million or 32% as compared to $6 $6 million on the first quarter 2020 deter.

The detection revenues were $5 7 million in the first quarter of 'twenty, one an increase of 28% over the first quarter of 2020, driven by a 34% increase from detection product revenue and a 13% increase in service revenue.

Moving on to gross profit on a percentage basis gross profit was <unk> 73 per cent for the first quarter of 2021 compared to 69% for the first quarter of 2020.

On a pure dollar basis gross profit for the first quarter of 2021 was $6 3 million as compared to $4 5 million in the first quarter of 2020.

Gross margin improvements in the first quarter of 2021 were driven primarily by improved service margins in the detection business.

Total operating expenses for the first quarter of 2021 were $7 8 million, a <unk> 6 million or 7% decrease from $8 4 million in the first quarter of 2020.

As we noted on our prior call expenses in Q4 2020 had some one time items on a higher revenue number in Q4. So Q1 is more representative of our 2021 expense run rate as.

As Mike mentioned earlier, we expect to invest during 2021 to continue to drive sustainable long term growth.

However, we remain committed to a disciplined approach in managing this these investments which is reflected in the first quarter net loss of $1 6 million or seven cents per share of.

As compared to Q1, 'twenty loss of $11 8 million or <unk> 59 per share.

Non-GAAP adjusted EBITDA for the first quarter of 2021 was a loss of <unk> 4 million, which represented an improvement of $2 7 million compared to the first quarter 2020, non-GAAP adjusted EBITDA loss of $3 1 million.

Non-GAAP adjusted net loss for the first quarter of 2021 was $1 6 million or seven cents per diluted share as compared to a non-GAAP adjusted net loss of $3 9 million or <unk> 20 per diluted share for the first quarter of 2020.

This metric highlights on improvements in margin and operating expenses as it eliminates the onetime items in 2020 associated with retiring the convertible debentures last year.

Moving on to the balance sheet as of March 31, 2021, the company had cash and cash equivalents of $46 9 million compared to cash and equivalents of $27 2 million at December 31, 2020.

As Mike mentioned during much of the company received $25 $1 million on gross proceeds from the sale of approximately one 4 million shares of our common stock at a public offering price of $18 per share. We were pleased with the number of leading health care focused institutional investors that participated in the offer.

Sure.

Finally, I would like to note that we retired our outstanding 7 million dollar term loans with Western Alliance Bank, which will eliminate interest costs going forward.

This concludes the financial highlights of our presentation and I would now like to turn the call over to Stacey Stacey.

Thank you Scott and good afternoon, everyone. Following a strong 2020, despite unprecedented challenges brought on by the pandemic. We are very pleased with the balance performance across both segments of our business in Q1 with new product introductions momentum in clinical studies and new market opportunities emerge.

We continue to be well positioned for success as we look ahead in 2021 and beyond.

Let's begin by highlighting the progress of our Companys latest advancement of profound AI risk on the last earnings call I reported that we were finalizing the data collection and validation of the risk algorithm for three D breast tomo synthesis.

We are pleased to announce that we are on track with bringing the product to market. This summer.

Highlighted this process requires the collection of three D cases for both the training and validation we have made significant progress on collecting the cases needed for each of the DBT imaging systems to be supported and the preliminary performance results with the three D. Images are very promising the performance of the profound AI risk model with three.

Images is selling even better results compared to the model. When you use with two of the images, which is already far superior to traditional rest of models based predominantly on family history.

We anticipate the profound AI rescue will be particularly well positioned for success in the years ahead as mammography begins to transition from what is primarily on age based screening paradigm today to a more effective and efficient risk adjusted screening paradigm. This technology offers the practical solution that empowers physicians too.

From more personalized screening that is truly individualized for each woman.

Expanding the body of clinical evidence supporting our technologies with high impact clinical studies remains the priority focus area for us.

On the high risk is already supported by a study published in the radiology in 2020 with.

With the goal of conducting of global retrospective multi ethnic and multi geographic analysis of two the risk since January we have completed a significant amount of work to finalize the agreements with the thought leader of research groups in Italy, Spain, and Germany. Despite the challenges of COVID-19 travel restrictions together with R E.

We plan to finalize the equipment installation and begin validation at the sites in the upcoming months.

As we have previously stated of U S. Retrospective analysis study of profound AI risk us with both the two D and three D. Images will also be led by Dr. Emily Conant Professor of radiology at the hospital of the University of Pennsylvania, whose day to also reflects the ethnically diverse group of women with a special focus on Jeanette.

Predispose women at high risk such as younger African American women.

And the last couple of months, we have finalized the U Penn Research agreement and protocol design and we have moved on to the early stages of data analysis for two D of us as we near the final stages of three the rest development. We have identified additional U S site for inclusion of other ethnic groups, including Southeast Asian American and.

Women of Hispanic origin.

This research will contribute to the growing body of evidence supporting our technology and potentially pave the way towards more personalized.

Recommendations by professional organization that established clinical recommendations on guidelines for breast cancer screening such as the National Cancer Institute, the National comprehensive cancer network, The American College of radiology and others. So in summary, we continue to see strong interest for risk in the market and remain.

Very positive about the impact of our innovative rest of the leasing will have on moving business forward I look forward to providing further updates on profound rescue in the coming months.

In addition to our focus on profound AI risk, we are continuing to advance our flagship profound AI breast cancer detection solutions for both <unk> and two the mammogram as Mike mentioned, we received FDA clearance on the third generation profound AI in March which includes additional clinical performance enhancements.

The new profound AI released is accompanied by a major platform release with tomorrow or the ability now to track specific usage of the product, which will allow us to more widely offer an operational subscription license model.

The new platform also significantly reduces the time it takes the process images as well as introduces the profound AI index card, which provides our customers with a simplified summary of all ikat AI results and a single view. Additionally, the release offers further enhancements to how our AI integrates with tax.

And mammography reading stations to further improve reading workflow and efficiency for our customers.

In the next few months, our near term plans are to release, the third generation profound AI for acuity mammography and the European and other markets outside of the U S. Profound AI for two D will significantly improve the algorithm performance for all supported vendors. In addition, we plan a couple of this really with the new.

An improved deep learning breast density assessment product.

Which will support synthesize T. The images from both the <unk> and Hologic.

We were also pleased to announce that just last month at the European Congress of radiology, Dr. Emily Conant from New Penn presented research on profound AI, indicating that our technology was able to triage one third of three D screening on fans as normal mamograms with no net cancers when additional risk.

Factors, such as breast density and age or also considered the study found that almost 60% of cases could be triaged as normal with no net cancers in the interview with US many Dr. Cohn and indicated that this can have an impact on site the operational efficiencies and that these case scores could potentially further.

Refine who should get supplemental screening.

Results of the study are very exciting and encouraging relative to how our breath day AI products may be used further to benefit breast cancer screening in the future.

I'd now like to review our performance internationally, we continue to build our sales channels in Europe with the addition of a second sales representative in France, and we're actively looking to fill of direct head count in Germany to drive sales. Both of these countries are among the largest mammography markets in Europe.

The first quarter of 2021 mark the first sales by our Swiss distributor, which also included a profound AI risks. We also want of public tender in Athens, and executed a webinar at the Greek breast radiology innovation course, with nearly 500 participants and attendance.

In the Asia Pacific region, an area of largely untapped by Ikat historically expansion is underway with an investigation into the market landscape regulatory timelines and channel building.

Three distributors have already been embedded and interviewed from Australia, South Korea, and Thailand, with the latter being of Master distributor, who has direct teams and more than six countries during.

In Q1, we received regulatory approval in Taiwan, and as a result, our distributor was able to sell two units in the first quarter.

Now moving on to our therapy business, which has demonstrated important progress in multiple areas. In Q1, we continued to implement a two tier strategy to drive revenue around the current applications, while developing the new indications narrow and rectal through our clinical trials kols sites on pre commercial efforts, which we will.

Talk a lot more about at our upcoming soft webinar scheduled in May.

In Q1, there were 10 net system sold worldwide, including six shipments into the dermatology segment.

As mentioned on the last earnings call. The skin business was restarted in Q4 of 2020 due to some favorable reimbursement changes and now in Q1, we saw continued momentum with some favorable regulation revisions for the doctor them in the states of Florida, and South Carolina, and we shipped three systems to strategic Kols.

Sites in South Carolina, Georgia, and Southern California.

And the O us business, including China, we have seen consistency with controller placements from source usage, we continue to grow the pipeline in China and in other O U S areas and we are actively working on several opportunities for future commercial narrow sites move.

Moving on to the new clinical applications. In addition to the updates Mike discussed on Neuro. We're also making progress on our rectal indication, we expect to submit for regulatory clearance in both the us and Europe in the upcoming months Dr. Pave on a world renowned physician in the colorectal area will begin treating patients shortly and we.

To add additional kols in the second half of the year so on.

In summary, we are excited about the progress and accomplishments, we have driven across the both sides of our business and we look forward to providing you with further updates as we continue to advance our business forward in 2021 drive sustained leadership and create additional shareholder value.

We will now open up the call for questions operator.

At the sound will be conducting a question and answer session. If you would like to ask the question. Please press star one on your telephone keypad. The confirmation until the indicate your line is on the question queue. You May Press Star two of you would like to remove your question from the queue for participants using speaker equipment to make the necessary to pick up your handset before pressing the sarkies one moment, please as we pull.

For questions.

Our first question comes from the line of Dave <unk> with JMP Securities. Please proceed with your question.

Great Congrats on the.

The quarter coming in even above your pre announcement.

Maybe just to start.

If I could on.

On the product side of your detection business.

The 34% increase in you called out in the the press release debt.

<unk>.

Profound continued adoption of profound AI and then you also mentioned.

The risks the TD here in the U S from Europe I was wondering can.

Can you give us any color as to sort of.

What.

Was the biggest driver geographically and then also anything you'd want to comment on maybe by.

The risk versus.

Kind of core.

Profound AI 30 day.

Sure Dan could you hear us.

On a geographic basis, it really was a balanced effort.

There were but it was also a balance in terms of the.

Of contribution coming from multiple size deals without the mega deals that we typically get.

That's defined certain quarters the.

Yeah.

But what's the geographic disparity of probably the single biggest.

The indicators do you put your finger on is the risk offering but the risk offering does is.

To reiterate a point is finding things that are sub visuals.

Allowing physicians to make informed choices about how to set up a.

Screening regimen of personalized regimen previously they may not have had debt information about things, but in fact it wasn't of may they definitely didn't have the sub visual capability to see things, we had to declare it as either there or not.

If we didn't even if it was sub dismal if they couldn't see it and verify it or biopsy. It we wouldn't show it we couldn't ship it would be considered of false pause, but now with this risk assessment product, we can share them with the algorithm sees two years in advance that allows them to more precisely develop the prescription for <unk>.

That individual patient to call that patient back at six months nine months in some rare cases even.

Beyond the normal regimen, maybe the longer into the other thing. It does David is that for people that are coming for sites that are.

On that are delayed and virtually everybody is backlog in terms of patients treated if you're trying to determine who to bring in first and you basically were only screen $30 million on a $40 million last year, which is what we did basically everybody's <unk> 25 per cent behind you wanted to know which patients.

Might be the most problematic ones from a year ago that you Miss of what a lot of sides of the beginning to do is use the risk product and examine the prior year's images to determine who the bring back earliest.

The screening centers open up and get us more widely they're spending as much as they were before they are extending their day, but this tool gives them a rational basis sort of deciding who can go to the front of the line that's the triaging element that the.

A bit of what Stacy was referring to.

Got it and then as a quick follow up you mentioned the subscription business.

You may begin rolling it out mid year I hope all of Charlie's up for the task here.

That said.

You mentioned, maybe subscription only as you kind of evolve into this new risk three D. Maybe here in the U S.

I guess any thoughts you have updated thoughts on that in terms of timing I mean, as we move into next year.

Do we think that are the majority.

Of the contracts that you are moving the licenses that you've done in the past we will be on on that basis, because you'll have that new product in hand.

Well as you know.

The profound AI and other versions.

The net effect for this year.

We'll be a.

Low mid to low single digit percentage of our total sales will have an impact of subscription.

And this is largely because one it'll happen later this year.

But primarily because it'll only be tied to our rich product.

Our other product that being detect and seeing what's there today will continue to be sold on a license basis, where we get everything upfront. So it'll just be the risk from.

On the risk product.

Which is.

Designed to be on a prescription is largely because the.

The iterations on that product is such that every six or nine months, we expect to improve and enhance that offering and rather than have sites. The upset and disappointed that I. Just bought this new product like I just bought this iPhone and now six months later I need to buy another one this is the product it will continually improve it.

The improved as we introduce other risk factors, but we've modeled this out many many ways and we still are very comfortable that this number will be in the single digits in the midst of low single digits and even next year as we look at 2022, it will still be barely breaking into the double digits. So it's nowhere.

We're going to be a dominant part of our business and you can be certain we will be signaling in providing information on the growth of the subscription business as we proceed.

It also while this while this is the field that's catching up on screening. It's also a particularly good time to not be tied to screening volumes because we want to also wait until every us back at full capacity with full for patients on our versus the current two to three so we do self govern.

To a large extent these.

These contracts and.

There are a number of sites that when they look at the continuum of having to pay versus paying once upfront that's still till towards the.

That still will tilt towards the one time license fee, even if we offered.

To us.

So again.

Got a lot around the core theme of that low single digits. The modest in terms of very modest in terms of implications of this year as well as next.

Thank you.

Our next question comes from the line of Christopher squad with Guggenheim. Please see what's the question.

Thanks, and congrats on a nice quarter and a couple of questions about the therapy business first I was hoping going on with just a little bit more detail about the changes taking place in the derm segment, where you see that going in and given the the history there.

How do you make sure you're building something sustainable.

And then on the new indications.

Getting to see the the continued progress.

With the neuro I'm curious what plans you have in the rectal indication around.

The data generation and the clinical program to support adoption there.

Great well I'll, let Stacy feel that one from she addressed the made those comments in our opening dialog sales.

Sure Let me, Chris Let me take the questions about the dermatology market first then.

No there have been two very important changes that have taken place in the market that give us a lot of confidence that we can be very successful of sort of going back into the dermatology segment, where we did have a successful business. Several years ago. The first of a change is that reimbursement coverage has been greatly.

And it back.

Back up until now up until the only really a few months ago that was the only positive reimbursement coverage in about 20 states in the country. I mean, if you look at where that is today and there are a lot of negatives policies to at the time and in a bunch of states now basically we have a coverage either positive policies are silent.

On policies and we have very good luck getting payment on in areas, where there are silent policies. The basically cover the entire country. So for example, the northeast with the place where they were very negative policies for years and years on and now that market has been the opened up Florida has been opened up as well.

It has always been considered sort of the the Holy Grail market given the incidence of non melanoma skin cancer. So that's the first thing a broader reimbursement coverage. The second really important element that allows us to be more competitive in that market is that during the time of COVID-19 as a lot of health care of appointments.

Moved into a telemedicine type format.

There the regulations that required a radiation oncologists the physically be present in the dermatology office.

Personally in person overseeing each treatment of which there are typically eight for each patient.

That requirement got relaxed and now it's gone away right. So what we have us radiation oncologists being able to remotely oversee the patient treatments and that has important economic you.

You know benefits for the dermatologists because up until now the dermatologists had to pay a radiation oncologists between $500 to $2000 of day to come in and personally oversee these treatment. So if you look at the combination of broader reimbursement and now stronger economics for the derm. It it's the recipe for.

Being able to go out and go back into that market very successfully we're not doing it all on our own and we're doing it with partners. So we have one primary partner, who has a radiation oncology services provider, who purchases of equipment from US and then and then execute a business arrangement with the dermatology practices right. So.

There's a lot of different ways of going after this but we're very confident on that the derm market can be a growth driver for the business in 2021 and beyond.

Let me see what was your other question about the rest of it.

Yep.

Yep.

Yeah. So as I mentioned with me you got some really good progress on in the next couple of months, we'll be looking to submit to the FDA and CE Mark for that product are our primary researcher in this area as a woman by the name of Doctor Cave on Who's out of Canada, and she is a world renowned.

Specialists in the colorectal area and that she will be heading up our clinical study for that indication and overtime, we will be bringing on other sites on both in Canada, the us and the rest of the world, but she'll be our primary investigator and sort of be beginning to generate data that will use as part of our.

Go to market strategy.

And then Mike do you want to take the narrow piece of the.

Yes, neuro, obviously, where we're deeply.

Entrenched in the trial, which I indicated will begin enrolling at multiple sites over eight sites. There actually are more than a dozen sites now that are interested in the technology, but we don't want to get too broad in the clinical study. So what we have done has begun to powerful.

Kate those that are interested in the study and those that want to participate in the registry those people who are in the registry, which will use to us.

Accumulate additional data will be sites that we would expect to commercially procure the technology again. This is a FDA cleared offering.

The study is largely for validation purposes, obviously to us.

Great further verification of the great results, we saw on out.

Out of the or eastern European study.

And.

As we move forward we are the.

The answer some question about sort of the go to market strategy that may have been embedded in your question. We are exploring the idea of.

A one time sales model for the controllers similar to our other areas of <unk>.

Versus a potential technology as the service model, which would basically mean instead of buying the control of the people would say I want to do five or eight treatments per month that would allow us to move controllers from maybe one two as many as three to four different locations. This is an ideal.

Some of this given the more episodic nature of the neuro surgical treatment and also the ability to optimize the return on this technology of if he can use it on multiple sites, but it's also on win for each site. Because you don't have to have a major capital procurement.

We would get paid sort of on a procedure basis quite similar to the recurring revenue model. We're talking about on the software side. So instead of a SaaS model more of a past sort of technology is the service model, we're still playing with that.

There are some obvious benefits to that there are some obvious logistical challenges of the other model, but it looks very beneficial in the last thing I'll say about us it wasn't like we invented the model. We learned this from our time on these partners, where we ship now 12 controllers and they were actually trading 40 to 50 at 40 to 50 hospital located.

And the.

The value creation being generated is quite significant for them and we in some ways and watch what they've done.

And that's allowed us the kind of go to school, a little bit on the spread of business model.

The good good question Fred on packed.

With three parts hopefully we've answered the employer.

Our next question comes from the line of more reasonable with BTG. Please see what the question.

Hi, Thank you for taking the questions on and Scott I just wanted to say good luck with Euro on next steps on your future plans that was the on working with you.

Thank you Marie.

Yeah I wanted to ask my first year of a two parter on the flagship profound AI product.

Maybe if it's possible to get an update on the number of licenses sold for that product at this point because that's the metric I know from investors are interested in and as far as the Gen. Three version of the product what have you heard early feedback from the field at all I know what type of launch, but would love to also hear sort of your.

Launch plan for that product what are you going to us.

Existing customers of our look further afield.

Yes, the marine out I'll take that one so as you know we announced our 1000th install of.

Profound both two D and three D.

In the fourth quart of sort of midway through so we obviously had the benefit of the last month of Q.

The last year as well as the first quarter.

I don't have a precise number for you on this because I think we are.

Okay.

I guess, what we were focused on in the thousands of this and just you know.

Focusing on the market, but I mean, I've got to say that we're probably between 11 or 1200 installations systems at this point.

Just as the back of the envelope calculation.

And in total that's the sort of a subset of the 7700 cases or rather.

The installations that I mentioned earlier.

As far as the second part of your question three point out we've just begin to begun to introduce that into the market having gotten the approval from the latter part of the Q1, but we already known of the feedback because we did.

We did run side by side this before before of regulatory approval, we ran side by side.

This three point overs into both of our current version as well as our competitive offering out there and I would say that three point O is what made the the.

So the steel sort of a no brainer.

Significantly better results on the specificity, which means the ability to have on them.

Debt on the sensitivity, which is again, it's hard to do both but specificity, which is the ability to rule out those things that arent cancer, you heard Stacy mentioned that Emily kind of its data at 21 front.

The up to 60% of the cases that of screen show.

From our norms and those the Champ and no box.

So had no cancers, so what we're seeing and being able to move that up by as much as 10% because that data was based on the prior at the.

The 43 point out well.

What that would mean potentially is that up to as much as 70% of cases, if they have no marks they potentially have no cats now that's significant because we always talk about the fact that we sell US 53% of reading time, when you use our.

In combination with <unk> tomo.

If you actually don't need to read or certainly the up to the physician and if you have data that suggests that up to 70% of the cases, where there are no marks.

Kansas, well that means that more than two thirds of the cases.

It may not need to be right now that's the claim that we cannot make.

And no we ever likely be able to make that claim.

In the us with the FDA, but it is what the data suggests but its clearly something that sites would need to make their own decisions on it is probably most likely that that kind of high specificity.

And perhaps not reading of cases would be used in certain developing countries, where there's a shortage of radios.

But we are seeing a dramatic impact on.

On three point O, particularly in this area of specificity.

Alright, Thank you for that the clear explanation of Mike maybe I'll ask my follow up here.

On a therapy like Chris asked him on the derm. It certainly seemed like it contributed to the strength of therapy this quarter and it sounds like it could be of sustainable trend I guess I wanted to get a sense of whether we should expect kind of lumpiness since you're working with the partner and possibly there is orders ahead of us or how should we envision.

Kind of the derm business Rolling out was this the one time event and we shouldn't expect the similar strength going forward. Thank you.

I'll make a comment then I'll I'll ask dates of the colored in I think Q1 was a little bit of the of.

A little bit of a day.

I'd say surged in the sense that a lot of this data was new.

On coverage, there's no negative coverage policies anymore, they're all positive coverage of silent on.

As Stacy indicated and I think this came as.

Good news the many folks and then.

Of course, the the removal of the impediment to using the proud of particularly in Florida.

It is an enormous boom to the dirt so.

So I do think that this business is on an upward trajectory. However, I would be remiss in saying that any kind of capital equipment. In this market Wouldnt have some degree I hate the word lumpiness. Some degree of let's say time pressure elements associated with of course.

Capital equipment cycles are just longer than our software cycles. So I think the trajectory over time, it's clearly northward, but it would be hard to game of precisely from quarter to quarter, given the inherent longer cycle the capital equipment can take I.

Don't know if you want to answer that Stacy.

No I think that's right Mike I think generally the trajectory is upward and we may see some variation quarter to quarter on but I don't think it's going to be sort of steep ups and downs I think we have restarted. This business. We've got you know we started the investment in the business.

You know where the.

Doing a lot of promotional work marketing work to us back at the terms and I think we have a lot of confidence of that you know maybe it won't be exactly the same performance we sustained in Q1, but it's not going to be big up and that ups and downs either right I think it's going to be a steady trajectory in and we're going to see very strong performance from that particular segue.

Throughout 2021.

I think I would just add.

It just stay on to stay at the comments that the one thing that can be lost on folks is that the businesses 60 per cent of recurring revenue business. When you add service and you read the source contracts and then you add balloon us balloons are not going to be used in the case of skin, but people would renew them of course.

The contracts and at different volumes that may require a new contract one of the things we like about having 10, new controllers installed and having a 100% increase in price is the private placements are always a lead indicator for the recurring service.

And the source contract revenue and also the lubes, where their us so where the margin instead of placed.

On the more it can help the recurring revenue element.

All of the service lines and in doing so on a relative basis kind of ease back on some of the overall lumpiness of numbers.

Our next question comes from the line of per Ostlund with Craig Hallum. Please suit the question.

Thanks, Good afternoon everybody.

Ill start by adding my best wishes to us Scott as well good luck in your future endeavors, we will Miss you.

Thank you Pierre.

So I guess my first question that you've talked about the profound AI road map and I Didnt hear it not that it wasn't maybe said, but I didn't hear anything about.

On the priors product I know there was theres been a fair amount of talk about risk and clearly that is helping drive adoption of the flagship.

Just curious where prior sort of stands in the roadmap as you're viewing it today and when you think about prior specifically I know we've talked about this a little bit in the past, Mike, but I think it could be helpful.

<unk>.

To kind of hear it again, how priors is is truly value add to radiologists in patients.

Beyond simply applying the flagship profound AI product two of prior year mammogram.

That's a great question.

I'm glad I have the opportunity to clarify that.

What we've done with prior is is that we took it off of the detection platform and put it onto the risk platform because it was providing more important information on the ability to predict than it was on the ability to detect it's very useful to us.

Compare the algorithm.

The results last year this year's algorithm, but it's even more compelling.

For prediction for the prediction algorithm to be able to go back multiple years and then also look at the risk factors and tie it all together and that makes for what you've previously heard US say is panorama the ability to look forward and backwards so by putting it on the risk platform, what we effectively.

Did was we accelerated on a risk product and we put the panorama, where the prior platform tied to our yearend anticipated release, which will be the next version of risk I mentioned earlier that the risk product is kind of go into subscription and one of the reasons for that as debt we expect continual.

Innovation. So what we've done is we've put the price program on the risk brought to them and where we get an even better yield and.

On a bigger wild factor for customers than we do on the detection side.

Okay that makes us that makes a lot of sense.

Pivoting to the operating expense side of things. So I think your comment about the revenue growth of 32% on the operating expense reduction of 7% in the quarters pretty stark.

As we are hopefully coming out the other side of the pandemic I know a question that I get fairly regularly is how much expense actually needs to come back and how much might structurally stay out and based on your commentary.

It sounds like actually quite of lot of it'll probably stay out of.

With <unk>, representing more of a normal run rate, maybe with a little bit of investment layered on us that the right way to think about it or is there is there some expense that will ultimately come back in future periods.

Let me make a comment and Scott can color in.

What's really been interesting and I don't think we're alone in this is that the expense mix is is going to change all of these literally hundreds of thousands of your spending on trade shows and travel and endless French meals, whatever I mean, we've obviously you know I haven't had those expenses and I think we've actually learned the level of.

The prudency debt and maybe.

These things that I don't think the shows will be quite the same.

The the approach of doing web web based the presentation demos is just so productive and even the way we call on customers now so productive I don't think we'll ever fully go back to the way we used to work in there for some of those expenses will just not come back, but having said that we actually are finding that there are ways of.

Now, reaching customers that are really cost effective, but theyre out of it so our search engine Nokia as the optimization tools the ability to.

Auto reach people that hit our website hits.

Hits them back with customized information the ability to do customized presentation, that's where we're going to be putting our dollars.

And also I mentioned, we're going to be adding some some cost with direct sales people that will replace distributors that'll that'll be a bit of of hit.

But when I say it here there will be an expense, but it'll be offset by us clawing back 20% to 30% of what we would have to give to a distributor.

In terms of a transfer price so any of our investments will be designed to help the top line grow faster.

I would just say that.

Think we're going to have a steady state lower expense rate than before but for sales acceleration purposes, we will invest where we believe we can create almost an unfair advantage in terms of disproportion gain on the sales revenue side to offset the <unk>.

But all of these free floating expense or is that no one ever thought about getting rid of them.

The you know it's time for us to I think of.

We've all become a lot smarter about both expense and how we spend our time, so hopefully that sort of answered your question the two different ways.

Good question.

Yep.

Say that answered it quite well last question probably of a very easy one, but realizing that the timelines and structure of the the.

The model have been.

Fairly fluid.

Has there been anything new on the Ro APM side or is it or are we kind of just in a holding pattern until things get finalized more around the middle of the year.

Yes, that's a good question per se to monitor this very carefully states.

Sure. So as you know as per the December 2020, COVID-19 relief relief legislation was what delayed the radiation oncology.

Model until no sooner than January of 2022.

So you know since that time, we have been very actively engaged with CMS I personally had a meeting with him along with one of our kols and to really make the pitch to get IOR T. Back of included in the model for next year, we don't know what the outcome of that will be.

But CMS was very open to hearing our perspective on that day, we had a meeting with on a 567 people. They encouraged us to continue to submit updated data we're going to have new data on our own expert clinical study are ready to go the same in may of <unk>.

Cards further communication and really had oh openness and willingness to discuss this topic right. So we don't know what will happen, but we're continuing to work in the background of the with a D. C. Based health policy attorney working directly with CMS. We are now engaging from a patient advocacy organization.

On to stand behind the cause here.

And the early organizations that support women, who tend to have a more challenging access to traditional forms of of.

Radiation. So we don't know where this will all end you know right now we think that it's going to go into place in January of next year.

If we don't end up back in the model, it's still going to be favorable for us at the company because now in 30 per cent of the geographies that are mandated to be in the program right that delta as you and I have discussed between.

The six week treatment and IOR T that delta is a much more narrow than it's been in the past so that alone will help us be more.

Additive to where we're staying the course, we're doing everything we can along with our kols to pitch. The reasons why I O. R. T is a primary example of high quality cost effective care and it should be in the model and it's going to take some time to know.

The outcome of that will be.

Excellent. Thanks Stacy.

Sure.

Yes.

Our next question comes the line of Paul Mitchell with cancer poster of Pizza with your question.

Great Hi, guys. Thanks for taking the questions congrats on the nice quarter and Scott It's been great working with you. Good luck on your next venture. So I wanted to thank art on the protection side of the business sure.

So, let's continue to expand pretty meaningfully during the quarter into multiple states.

Was wondering of profound AI was installed in any of those new sites during the first quarter or maybe it was could occur.

This quarter next quarter I was wondering your visibility of your confidence level on that and then also recently Simon but it was taken out by a private equity firm. So that happens often follow on common but would something like that generally be a headwind or tailwind to Simon the expansion plans.

Yeah, let.

Let me take that in reverse order.

Obviously, the first thing.

We did I did when I heard the news was called up John Simon and I was glad to hear that he will still be with the program.

And he's still very interested in growth and in fact.

Growing and new and unique ways in new markets and potentially in other even other indications. So that's.

Of that go on into too much detail that was very good to say and it could develop and he's got a mandate and dollars behind them to grow they want to be the number one radiology chain in the country.

Which is interesting because that's exactly what it told us we'd like to be and the Solus agreement.

It's worked quite well for us I would say, it's worked quite well for them in the sense that they already added in Q1.

Over a dozen locations, which then become part of the deal as you know, it's the five year deal.

The deal so as they grow we grow.

It has already kind of had the intended effect the even in the end of Q4 after the announcement of us deal.

You may recall that the wake Radiologists was 22 sites in North Carolina.

Heavily influenced or impacted by so since the <unk>.

So it was the agreement which was.

Quite a quite loudly and the south east.

Which led to yet another large whole logic accounts to a doctor of technology and that is happening.

And that has happened in multiple sites throughout the Q1, and we expect us to continue as they continue to grow and it's really interesting that we of the two.

To us is solus and Simon med, both private equity backed with a lot of capital that have significant growth mandates and we do a true we do expect we're already seeing it and we will expect.

Their awareness campaigns and in particular, you'll see awareness campaigns that happened around mother's day, and mostly happened in breast cancer awareness month.

It really get quite loud.

Some of the campaigns that people want to do.

Our direct to consumer of direct to patient campaign, which.

Which we'd prefer to do with them.

But it won't have that effect.

The effect in Q4. It has had the effect in Q1 I expect it will continue to have an effect now with both companies Simon net inflows.

That was great. Thanks, a lot Mike for that.

And then I.

Appreciate the color on the operating expenses in the quarter and it gets going forward, but.

In the past, we've talked about of us off and I guess, you're on both sides of the business should be profitable by maybe the second half of 'twenty one.

Or are we kind of getting.

We kind of pushing that time line up a little bit like maybe in the second quarter itself will be profitable even sooner than you previously expected.

I think we're in the position where we're.

We're hovering around the.

Yes.

The EBITDA positive cash flow and we have to make some strategic decisions, which is do we want to press our advantage and continue to build the top line.

Or turn on turn profitable will drive close to the profitability.

I think that having the $47 million of capital.

This enabled us to make decisions that.

In the spirit of Hey, we've got a lot of momentum coming out of COVID-19, We've got a.

They got us a significantly less press our advantage forward.

If it.

If it moves that timelines from being profitable.

By a quarter or two that's a pretty good but yet it moves the top line.

On that that's that's that's been sort of the two.

The thing we've been aiming for is the continued growth.

But we always want to stay close enough that in any one quarter.

If there is any impact like COVID-19, we can always kind of pull back on some of our what I call surge capacity or gig economy workers to turn profitable.

As need be the one thing I'd also want to say is that.

The further we pursue the and again Ive indicated that the subscription model will have low single digits of cohort five.

5% impact on the year those that is always a challenge also in terms of being profitable because we'll put in all of the costs upfront.

Most of the returns will happen in subsequent year. So our goal has been to stay hovering around the hoop. If you will with the ability to turn profitable if we need to but let's make no mistake about as the business continues to grow no matter. How much we may think of investing and inevitably has to turn profitable with positive EBITDA and cash.

Hello.

They're generating we're generating a lot of levers in the business now has the margins of picking up as the top line grows and as we prudently manage expenses.

Inevitable that we're going to turn.

Going to turn that in the positive direction on basically just saying, we're basically just saying that we.

That that if it means having to sacrifice of quarter or two of profitability to get inordinately greater growth, we just might do that because it makes sense.

Makes sense makes sense to me Mike. Thanks, a lot. The we're taking the time I'll leave it there.

Congrats again.

Okay.

Our next question comes from the line of Francois for Us well with Oppenheimer. Please share with your question.

Hey, Thanks for taking the question just a quick one here I'm sorry, if you mentioned this before but.

Is there you know having numbers the top line came in higher than the preliminary numbers is there something specific there from a certain section that debt was better than expected.

I think in Q1.

The the vast number of $2 9 million, which again was related to this.

You know aforementioned surged in dermatology.

The 100% over the <unk>.

The first quarter of last year.

So doubled so I think that was there was clearly a breakout performance on the <unk> side.

Where we're.

We're seeing the continued growth on the AI side, as well, but I would say debt.

If you were the charted out you'd probably see a noticeable uptick in soft in the first quarter.

And as indicated through some of the other questions, we can't predict that that spike will happen.

In any one particular quarter given the inherent.

Spiking us to use that word of capital equipment sales, but the trajectory of certainly northward.

An example of the fixes it.

Great and then just as we think down the road here with risk becoming more of a thing you mentioned, maybe 5% this year than a little more next year is this something in the income statement that you guys are thinking about breaking out just profound risk to separate it from profound AI, especially if it might have more of the subscription.

Model.

And the other parts of the business.

Yeah, we have we have been talking awhile.

And this is something that Charlie will be doing.

We've been talking while not creating a sort of a third line. So we of product services and what we would call subscription. We're just we've been waiting for it to be a more meaningful part of the business the break it out.

Certainly as we had the 2022.

That'll be the case, but it's not we said that we won't be providing that.

Debt break out this year.

I think we're waiting we don't want to force it to happen if it if it's not been significant enough at that point, just not the measurable enough to really warranted, but I suspect that could change as you move forward and certainly when we moved two of subscription only model to risk, which we said will be in the mid to latter part of the year, we will do that and we will do that with.

Simple notification.

The they even have a special investor meeting, which we know we typically have in the fall to do it it would probably be in the fall.

To the earlier, but we would want to give ample.

You'll notice the cases that I know people want to build the months.

Okay, Great and is the subscription if I'm understanding this right is the profound AI detection would that also maybe be on subscription or are we just focusing on subscription for risk.

The bottom of we're going with is the five profound.

Let's say you pay a 30 to $40000 per license.

And on top of that you can buy a subscription for let's say you know 15 on demand for risk.

It may be the.

The people and will only be offering risk at a certain point in that format.

We're not intending right of way to drive the detection business too.

Two of subscription only model, but that will be of choice that sites can make.

We think we have a better argument when we say argument, we think the presentation of the two products lends itself to risk costs as previously mentioned.

<unk> such as the introduction of priors being into the risk product makes it very compelling to one of the product. So you don't have to keep replacing so it really lends itself to that if it drags detection, along we've kind of modeled that to a degree as well we don't think it's going to happen at the pace faster than what we've indicated.

But if that is the case well, we'll certainly have ample notice of that keep in mind, we don't want to be overly wedded to a volume based market right now given the current screening volume that would be something to think further about later this year.

Okay, great and if I sneak in a quick last one is there a reason I guess, what's the reason that the EU has been so slow or is just not necessarily going to three D. From two day can you just remind us what the reason is the.

Yeah, Stacy you on a whole lot.

Yeah, absolutely. So you find with Europe of in most of it.

<unk> Tec.

Yeah devices, the that Europe, typically lags by about three or four years, the United States in terms of the technology adoption and yeah. So.

So that's one impact the other thing is that in Europe. There are a couple of different things going on there. One you know the screening population is done the only on two D. Right. So three D. Tomo was only used for of diagnostic mammography or you know of women who are symptomatic.

So there's still and the other thing is that there is a double Reed protocol in Europe as well so unlike in the us where a single radiologists leads every mammogram and the in Europe at two radiologists read every mammogram and.

The clinical studies going on right now that are looking to prove that one radiologist plus AI is better than two radiologists and they're already of some data that shows that but at the end of the day. There are still 6002 D mammography systems in Europe.

That are actively in use and so that gives us a great opportunity to go back in and sell the TD AI product there.

Big difference is that in the U S and the TD World. There was about a 90% of attachment rate of computer aided detection you know the.

From that we called the two D product back on the day.

It was only about 15% attachment rate in Europe. So a lot of those to the system never had any type of AI type of solution right. So there's a big opportunity with profound AI, where the sensitivity of so high and the specificity of it so good and that was the big reason why they weren't adopting earlier versions.

Of computer aided detection that go back in and sell product. There. So we're seeing growth in tomo definitely the market is growing over there, but it's still predominantly a to the market and it's going to be a little bit of a slower adoption cycle than what from the U S.

Thank you.

Yes.

Our next question comes from the line of Andrew just so with B Riley Securities. Please proceed with your question.

Hey, good afternoon, congrats on the strong quarter in Us Scott I'll Echo everybody else's comes it's really been of pleasure working with you.

And the Youtube.

Awesome. So just sort of a few quick questions here, we'll start on the risk side was there actually any.

Any of any material top line benefit during the first quarter from risk since it's still on a license for us related to state sales model.

And does the acquisition of change healthcare by United or or nuanced by Microsoft to have any impact on us.

How we should think about the subscription business.

Yeah.

On the cable the second part of that and.

Scott you may want to talk a little bit about the impact of the risk on the terms of specifics.

In Q1, we talked about the number of deals kind of being aided by our rest of us having risk bundled in but on the last point there I've said before about United I don't know if it was on the call or on a one on one.

That hit us.

It's a really positive thing that the.

The have the ultimate carriers, that's looking at the health care economics on.

Also of access to the change healthcare data because it makes it very easy for us to be able to prove the base case that finding things earlier and if.

If we could totally share, which we can debt you should find things one or two years earlier certainly the risk model proves that to be able to have the economics, which we could site from the public data or from Medicare data puts us.

Specifically be able to do that where the where the private payer. The that she has her own calculations that they could look at it makes us that much more compelling and that's exactly what we intend to do it is kind of little tough to kind of sort through all of the changes to get to the right parties. There so far but that's definitely on our future now on the the.

Microsoft Nuance piece I think that debt is very intriguing.

Basically you know a lot of people like to say that.

This is the Microsoft getting into sort of dragging speak voice of patients, but now we see this as basically Microsoft one of the big software companies basically, making a concerted decision to focus on the.

Medical imaging.

And their mission is empowering businesses Microsoft.

So this is a really I think really in the acquisition on their part if connects them to epic and Cerner and enables them to sort of have the back part of that phone upon which the patch business will is day it could lead to some consolidation into what is the very.

Very much for actualized business as I said, there's like 20 of these pacs companies, they're all running different railroad gauge tracks.

We'd have to work hard to harmonize. These railroad day track. So we could run on all of them, but if some big players are going to come in and they're going to basically enable the little more standardization in the space, that's going to be very positive and allow us to eliminate a lot of the work we have to do to make it work on all of these <unk>.

The same thing is going to do for us because it's going to put us in direct communication with companies like Microsoft I think if you use your own judgment in terms of what it might mean in terms of the others entering the space, but I think that it's a very intriguing development.

And.

I think that it will add to some standardization it'll put a spotlight on things and I think that we intend to the very front and center in terms of working with them closely and expanding the relationship we already use Microsoft cloud based services. So.

This is an opportunity for us to stand on a relationship.

Do you want it.

Yeah, Yeah, yeah. So the.

The risk is probably less than 15% to 20% of our revenue in Q1, and I would say of the answer to that is is that we're still trying to get this launched out of luminary sites Kols things like that we're bundling it with our three D, but putting it in on whatever I would say is the lower ASP right now to try.

And get adoption, so it's helping drive <unk> sales from.

But I expect it to grow over time here as people start to realize that we can continue to position the value of risk in the offering.

Okay. Thanks.

<unk>.

Yeah, I'll, let all of that debt and to Scott's last point there the.

Is the concerted effort on our side too on our part to get this product in the hands of the luminaries get the papers written.

Get the studies.

When we launched three D detection, we had the we launched it and then we had to wait six to nine months of the validation studies to come out. This this is part of an effort to get the validation studies done in advance of our hard lunch in advance of the subscription and also do it with a.

Significant amount of direct to consumer awareness building of.

Of this product, which we hope to do with some of the sites that we mentioned earlier.

Particularly in local markets. So there's a lot of forces that we're trying to pull together and also well aligned with when screening us back to full throttle, which we expect will happen towards the end of the summer.

Very good very good and then can you just help me reconcile the change.

From one detection.

Two detection plus risk and then two from having a perpetual license model to having a perpetual license model and the subscription model.

And reconciling that with your OEM partners like GE does that is.

Is that something that they are going to manage that process or does that transfer over to a direct sales.

And any color there I guess it'd be useful as we think about how those operations build out.

Yeah, we've been weaker we could probably on a one on one breakout some of the some of the sort of unpack that a bit more.

I would say debt.

Similar to other things we've done in terms of let's say of our technology innovation program, which gives you the ability to pay in advance for the next algorithm, but you have to pay a certain dollar amount it's almost like.

The picture of the technology innovation, we've always felt that directly ourselves.

We don't really offer that to our OEM partners because of the stuff we need to manage closely. This is gonna be the case right now for risk as well, particularly on the subscription side, it's too complicated right now to run it through the Oems until we have all of the pieces of the model in place.

Fact, the same thing applies to our Pacs partners, which would be nuanced and the change healthcare, even those parties, where we those inherently hard contracts that'll be cloud day more SaaS subscription contracts. Those are signed to say stay for a while in the realm of.

Our profound AI detection product only.

We want to just another way of saying, we want to sort of Coke closely guard.

And curate and keep an eye on precisely how the recurring revenue product line risk will be introduced it's more complex. If we actually start thinking about or other channels. So first do you want to get it right ourselves and then we will start moving into other channels over time.

That makes sense and the last last question from me as it was.

The soft obviously you touched on the reimbursement shift for the the dermatology side of the business.

If my memory serves me correct My day.

Mixing some of the names of about I think of as Palmetto and Nordic really open the reimbursement dynamic that benefited us.

The zap seven or so years ago.

Net debt is that dynamic at play with the current benefits now.

Or is this more of like a traditional or more of a durable benefit.

Within the radiation side of the business.

The good question of good memory, Andrew It was Palmetto and Meridian those of the two big ones and what we had is those sites and Florida as well all of these policies.

Almost in one fell swoop turned into negative coverage policies.

They said technology was the experiment though.

What started happening towards the end of last year was that.

All of those local you Mike on the medical Medicare fiscal intermediaries.

All of the has turned either positive or neutral.

There were no there were no remaining negative coverage policies. So all of those that were let's say we call. It the red territories, there I'll flip to yellow or green, which was great at the same time that that happened the overall global reimbursement on a national average basis.

That was being secured from Paul like 12, or 13 of these regions.

Averaging about 4900 and that was up from about 2002 years ago and in the areas you mentioned Palmetto and meridian that was cut to zero yeah.

Years ago, so it hasn't been steadily coming back to the point that we know the national average of 4900 on what states you mentioned one of the big things on top of this issue of let's say coverage.

As well as payment the two elements that I really just went through was regulation and by not having the doctor has to sit by the controller.

That eliminated the enormous cost and of course, it was really not necessary released on our view from a safety perspective, and the efficacy that is a really wonderful impediment to the out of the way.

Okay got you.

Thank you very much for the color and best of luck on Board and again, that's got best of luck on towards on you in the new endeavors.

Thanks Sandy.

Our next question comes from the line of Brooks O'neil with Lake Street Capital markets. Please share with your question.

Hey, Thank you I have two quick ones I hope.

One I wonder if you could give us your estimate of your penetration of the breast diagnostic market and two I Wonder if you of any comments about the application of profound the.

On the breadth of diagnostic market are there other opportunities for you going around the body. Thanks, a lot and congratulations on a great quarter.

Yeah. Good question the first one penetration.

We track ourselves when we look at the 40 million.

Images or women, they're getting out of grams per year, we've been tracking yourselves for awhile now.

Having over 50% of about 50, 657% of all us screens. So that we're now talking like in the low 20 millions that are screened with the art technology the balance would either not be using any AI, where may be using a early generation competitive tech.

<unk> no one else is out there with three D that we've seen in stock or where at least paid for an installed we may see a trial units out there.

Our goal obviously is to with three day to get to not only the penetration we had with two day, where we're treating 'twenty two 'twenty 3 million patients.

And more than half of the 18000 sites or or cameras that are out there but to go well above that so our strategy is to replace two day.

And then go beyond that 50, 657% and just keep going and we believe we have this tremendous opportunity and advantage the first mover and so pretty much the sole mover at this point because we just haven't seen any sold units into the market. So that's back to my point earlier about moving quicker.

And wanted to drive the top line.

Now when we think of other areas. There are a number of areas that we actually are already is we already have an FDA cleared product.

In colorectal AI C T scanning of the coal its just that reimbursement is not there to support so that's an area. We continue to examine but the other areas that we look at where the one category of extensions of breast, which would obviously breath of MRI <unk>.

Breast ultrasound and then the third area of the ability to detect coronary vascular disease in breast images.

With the very same of its restaurant Euro calcifications can be seen over time and as we look at the priors, we begin to see changes in the arteries the feed the.

The cardiac tree.

And in doing so instead of focusing let's say on the cancer. It's a matter of doing the pattern recognition on these vessels.

And the biggest part which is the collection of data is information we already have with millions of images that could be mined for this so we're looking to make strategic decisions to prioritize the other area that we used to be and that we still have capabilities in.

Our debt that we will examine us the area of prostate.

These are areas that where you might say, we're a little bit of the.

Disciplined dilletantes at the moment and that we're looking at these and we're applying so I'm very careful metrics about the competitive landscape reimbursement how big of the market. So when we make before we get to an area, it's going to be of meaningful use of our jobs, but I want to say this brooks, we're nowhere near done in breath, there of so much more to do with us.

Net product with products that enable us to US said earlier control of patterns of care, giving women the information perhaps needed even changed the risk factors and change their scores theres a long long way to go and I imagine if we had 22 million patients today, giving us the pay per click.

That alone.

Makes us wish that we had a pay per click revenue model years ago of course, we didn't have the software tools of the interest he wasn't ready for it but just getting our current market share did go to pay per click over time.

Enormous implications from the business just the breast.

The children.

That's great I'm sure you know this but Gordon area of artillery diseases. The number one killer of women in the world today, So that's a huge and important market as well. So I'm glad you are at least thinking about it.

Well the ability to turn every breast cancer imaging center into a womens holistic imaging center week to detect two diseases as once potentially is enormous and it's literally coming from the same set of images. So we're not ready to announce anything formal in this area, but we are actively looking at.

Great. Thank you.

Okay.

Our next question comes from the line of Jean Manhattan with call of your Securities to suit the question.

Thanks. Good afternoon, most of most of the question has been answered here, but.

I appreciate the color around the the.

The revenue over attainment in the quarter and I just wanted to ask if you feel there was any.

To what extent was there any COVID-19 catch up well relative to maybe some of the delays you saw last year did that any of that come in Q1.

Sensually I'm trying to get a feel for your comfort level.

With consensus numbers, because it looks like you're off to a great start out of the gate here. Thank you.

I would say that yeah, there's certainly a little bit of catch up on that there were deals done in Q1 debt.

What we're hoping to have been done.

And the skin in the latter part of the 'twenty 'twenty, but we had very significant Q4.

And that was in large part.

A significant amount of catch up in the corner because people were already starting to visualize even though we hadn't hit some of the peaks in January early February people were already back the screening.

I think that what we're still going to say and I think we're going to see it perhaps on the second half of the year is that a lot of hospital budgets as much as 40% or on a July one to July one cycle.

So for the ones that we're kicking off on on an annual here on January we may be seeing a little bit of that in the early part of the year, because they've got let's say renewed budgets, but a lot of folks are going to be hitting their budget cycle in July.

So that's just an interesting point of note in terms of the cycle of the.

Of sales so I would say that sites are back the screening we are catching up the 40 million women of which $10 million, where miss last year, working very very hard side sort of catch up by running extra hours longer days on weekends, I think we're kind of running at a point of stability.

But I don't think we're quite caught up.

And I think we're going to be catching up in terms of the actual screening.

For most of this year, we will be playing catch up.

It's hard to get that much more patient throughput through the system now I believe we benefit from this the cros are risks tool.

Particularly as we start launching it in the back half of the year or mid year, you might say to three day and we launch it more on the subscription later is a very useful tool to help prioritizing those stations, which ones you can see first question.

It's very scary do not know, which ones should you do it on a LIFO FIFO or whoever yells. The most it's very helpful. I should say to have a rational basis for currently some on and saying head of the line your risk profile of chartered in someone else's. So I think that we will benefit.

From that dynamic as we move forward.

Great. Thank you Mike.

Yeah.

And with US. This concludes our question and answer session now I would like to turn the floor back over to Mr. Clemmer for any closing remarks.

Well I want to thank everybody for hanging in with US a lot of questions a lot of great questions.

Let me close by extending my thanks for all of you joining us.

Again, so we can summarize the highlights of our business and I'll, just wrap up by saying that the takeaways that we want to bring for us through the quarters that we of continuing sales momentum driven by profound AI, which is being aided significantly by risk we have the significant near term commercial opportunity with the profound.

The risk.

Which we see us a child the forward towards risk adaptive screening and will play an increasingly larger role as we introduced three D. And also as we start broadening our footprint with additional sales resources and the application where appropriate of the subscription model.

We see increased penetration not only with large deals, but also with moderate sized deals moderate sized deals outside of Mitchell errors, because we're getting that reached now.

We see an emerging positive trend in dermatology and therapy, which we think will have an upward trajectory.

But there could be some capital equipment undulations, along the way and finally, we see a dramatically significant opportunity in glioblastoma with real times after hour treatment and the on sealing foundation that will come with the critical clinical trial that is now starting to enroll so with that we look forward of providing further.

The updates on our progress and I want to thank everybody for your continued interest in our cabin. Please join the rest of your day in the evening.

This concludes today's teleconference. You may now disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.

[music].

Yeah.

[music].