Q2 2023 iCAD Inc Earnings Call
Speaker 1: Thank you.
Speaker 2: Greetings. Welcome to the ICAD Inc. 2nd Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation.
Speaker 2: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.
Speaker 2: Please note this conference is being recorded. I will now turn the conference over to your host, Jessica Burns. You may begin.
Through our OEM sales channel, we joined forces with G E to secure a significant Italian tender for 26, new mammography units all to be equipped with power looked into the assessment. The installation of these units are scheduled for later this year and will further extend the accessibility of our cutting edge technology to <unk>.
Women in Italy on.
On the clinical side, Dr Dal from Paris, France, who's collaborating with ICANN on our breast arterial calcification or D. A C product recently presented or findings at bison at French breast imaging Congress in May.
And lastly, before we move to the financial update I just want to remind you that we're actively assessing and modeling revenue growth and footprint expansion scenarios as communicated on prior calls we plan to update you on our strategic plan and relevant metrics and milestones on our third quarter earnings call and.
In summary, we're taking decisive actions to drive rapid transformation within the company prioritizing stability cash preservation and the development of a strong competitive long term strategy. Our goal is to diversify our revenue stream and reduced customer concentration, ensuring a more sustainable and resilient future.
I'll now turn the call over to Eric for a detailed review of our Q2 2023 financials.
Good afternoon, everyone and thank you Dana.
I'll now summarize our financial results for the second quarter ended June 32023.
Total revenue for the quarter was $5 9 million a decline of $1 7 million or 23% from the second quarter of 2022.
Although this is down from last year. It is generally in line with our expectations.
Detection segment revenue was $4 2 million down 21% from last year.
Within detection second quarter 2023 product revenue was $2 3 million down 34% over the prior year.
This decline is attributed to a variety of factors, including our transition to subscription.
Longer purchasing cycles increased competition and budget constraints.
It's actually service revenue was $1 9 million up 3% over the prior year.
Okay.
The therapy segment revenue was $1 7 million down $6 million or 26% versus the second quarter of 2022.
Therapy product revenue was <unk> 3 million down 66% year over year.
Services revenue was $1 4 million up 6% year over year.
Moving on to gross profit.
On a percentage of revenue basis gross profit was 74% for the second quarter of 2023, which was up from 73% the second quarter of 2022.
On a pure dollar basis gross profit for the quarter was $4 3 million as.
Compared to $5 5 million last year, largely reflecting the reductions in revenues.
Total operating expenses for the second quarter of 2023 were $6 3 million or $2 3 million or 27% decrease year over year.
It's improved run rate reflects the implemented cost cutting measures previously announced.
Operating loss was $1 9 million in the quarter ended June 32023 versus $3 1 million in the quarter ended June 32022.
GAAP net loss for the second quarter of 2023 was 1.8 million or seven cents per diluted share compared with a GAAP net loss of $3 1 million or 12 cents per diluted share for the second quarter 2022.
non-GAAP adjusted EBITDA for the second quarter of 2023 was a loss of $1 5 million versus $2 7 million for Q2 2022.
non-GAAP adjusted net loss for the quarter was $1 6 million or seven cents per diluted share compared to $3 1 million or 12 cents per diluted share in Q2, 2022, reflecting a few adjustments to GAAP net loss in each period.
Moving on to the balance sheet as of June 32023, the company had cash and cash equivalents of $19 million compared to cash and cash equivalents of $21 3 million on December 31 2022.
This concludes the financial highlights of our presentation I would now like to turn the call back over to the operator to lead the Q&A.
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One moment, please while we poll for questions.
Your first question for today is coming from per Ostlund with Craig Hallum capital.
Thank you good afternoon, Dana and Eric.
Want to start with today's announcements might as well.
It's a nice headlines with Google health, great to see that relationship expanding.
I'm curious from the standpoint.
Ah, replacing one part of the double Reed paradigm.
Is that going to be a country by country effort across.
Across the globe and how much momentum really is there in that regard.
The reason I ask this because I feel like.
You'd efficiency that comes with the double read the radiology shortage.
Things that we've talked about it several hours and he is now so I'm just curious.
We are really nearing that sort of a tipping point now you know where where maybe you'll these things have conspired together and all of that.
Deliberation in your relationship.
Might really be reading.
Leading to the point, where that don't reach Georgia to start to go away worldwide.
Hey per thanks for the question.
So.
There's a I would say a little bit of layering right in terms of the speed with which countries and then individually imaging centers will adopt it. So first I would say we're definitely seeing momentum in fact, you may have seen news in the recent press and if not we can be.
Sure to provide you with some links to it about this work happening in Scandinavia, So they've kind of been on the leading edge. If you will of kind of Trialing. This there are already clinical studies underway in the U K that will begin kind of stepping into them participating with Google.
But in terms of the regulatory approval you're right. It is gonna be well first of all if you are talking or European Union. You do you have a block of countries right. They go together to define regulatory requirements. So you know once for example, we receive EU and that's gonna make it easier in the countries that accept that regular.
Tori I'll say designation versus other countries around the world may have their own regulatory requirements that they need us to go through.
Occasionally countries will also want some proof I'll say that their population who can benefit from this specific type of work, but I also think as time goes on we're going to see a little bit more acceptance of research work, that's done and another related perhaps even neighboring country also.
You know satisfying if you will the information needs for a particular country before they approve the technology.
Because you're right you know the efficiencies that are gained.
Our emits, especially in today's not only radiologists shortage, but also in terms of you know price points and the ability to retain those radiologists. So I think it's going to pick up speed.
I think when you if you're thinking about the U S. I do think we're going to continue to lag for a lot of different reasons. So I think you're going to see outside of the U S, particularly in Europe and Ah in Asia Pacific, you're actually going to see them pull ahead in terms of deploying the technology.
In this manner.
Okay, Okay that makes sense.
Let me turn to the other.
Come on.
Is it news items on Friday afternoon.
Now it's moving up.
At the market facility, the $20 million to $25 million.
Given that you ended the second quarter was about $19 million in cash it looks like you only use about $700000 during the quarter, you've been putting efforts in place to cut costs further.
And.
From a potential divestiture absorbed so I'm just I guess I'm curious if you had a big pitch.
Sure level.
What was the thinking in terms of putting the clue Rubin.
And are there areas of investment opportunistic investment that you see right now that you might want to be.
So yes some of these clinical investments yeah, yeah. So great question. So at a high level. We you know put the ATM in place because my understanding again, there reminding everybody kind of five months five and a half months [laughter], if you will into the role.
The company has had an ATM in place a couple of different points in time in the past and I think just to be honest in terms of various management and leadership transitions. It had lapsed. So just to be prudent even if we wanted to get one filed an active to your point it might be opportunistic.
There may be an opportunistic need for it there may be also a very strategic need for it you know right now you know today, we're still working through our analysis as I mentioned on the strategic options that we're evaluating ways to expand the business. Yeah. We've mentioned this on.
[noise] calls going direct to patient are working with large employers, particularly that are self insured or that have a large employee employee wellness programs that they find them going deeper into breast health. So beyond just mammography, perhaps you know ultrasound.
M R I S.
Either five months ago I wouldn't have dreamed that this Google 20 year, Google relationship, what's going to happen. This fast so and you're right to make sure. We have I'll say first mover advantage and really leverage the strength of this partnership we need to be prepared to support the regulatory.
The approval process in parallel in many countries or regions at the same time. So we have some analysis going on to make sure we understand the resource needs for that even read partners right, which we announced them I think now probably we can have maybe two weeks ago securing that deal that's a long.
Term relationship and you know well will take US you know honestly a few years to roll out across their network because it's so fast as well as you know the new technology and new solutions that together with Red partners, we think of an innovate and develop so so to use a phrase from my.
Texas background, it's a little bit fiction to get ready, so making sure that we just have a mechanism in place if and when we have you know support from our board and we have the I'll call. It the supporting our ROI models to substantiate using any additional funds.
Sure that makes perfect sense, Okay, one more quick one for me.
Speaking of big deals congratulations on the Cleveland clinic subscription sale that you referenced.
Realizing widespread partners.
Not be as large.
<unk> network, but realizing that it is a.
The more complex organization, how do you think about it.
Many locations are we talking about when did they take on the whole product suite and.
When do we start thinking about a P&L impact.
Mhm phases in over a number of quarters.
Yeah.
So so crazy Cleveland clinic is getting started with our core product, which is detection so using it in screening mammography today.
As with most of those large customers like that or I'll say, particularly innovative and kind of leading edge, they're taking a look at the density and the risk solutions as well I would honestly you need to check with our sales team to understand the full rollout timeline for Cleveland clinic across all of their <unk>.
Right I mean, that's something that we can definitely follow up with you on but I think it's similar to I you know I mentioned in the update I just wanted to make sure because they think you know.
There's a bit of a tendency once we announce a new customer to kind of like okay. Now now move on to the next new customer rate instead of like to your point thinking about okay. This is a customer with a couple of hundred locations and they're not all going to be up and running not all of the radiologists right. It will be up to speed. It takes you know time to.
Roll that out and so there's additional revenue opportunity within these accounts because they may have gotten started with a pilot site or a proof of concept site and then over time as they deploy it to more of their locations or more of their markets theres more upside potential for us and so Eric and I are working on a way.
To model that right. So because it helps us think about it internally, it's a little bit of a matrix to model, where we have different I'll say kind of product packages do they buy the whole bundle are they buying just a single product today and then over time you know they may opt into deploying others and then you know mapping.
According to the number of sites, they have and how theyre going to roll. It out. So we've actually we've actually started I'll say kind of that spreadsheet or that model and that's one of the pieces of information that we hope to be able to turn this still and share more clearly when we get to the next quarter earnings call and we're hoping that there'll be some good metrics in there to edge.
Kate everyone on them to help you with your models as well.
Excellent. Okay. Thank you for all the answers and I appreciate Oh, yeah, Yeah no problem.
Your next question is coming from Murray side bolt at B T I T.
Hey, Dan O'hare, Eric This is Sam on for Maria Thanks for taking the questions. This afternoon.
Couple of questions on the Google Health partnership and maybe I'll just take them one at a time here, but have you guys submitted to that integrated algo for CE, Mark yet and if not do you have any visibility about one you might submit it.
Yeah, we we have not submitted it yet.
Let me maybe I'll take your other question I'm going to pull up the timeline, while we're chatting. So if im sure you know there's still a few months away right from being finished from the developers point of view right and then kind of going through our own testing and test databases. So so still development work in <unk>.
Regressed.
Okay. Okay understood and then you know have you guys disclosed I guess the financial arrangements, how they're structured if it's a revenue share licensing fee or anything you've got to share publically about the deal.
Looking to Eric here, if we've shared anything historically so it is a revenue share. So we are committed to say we will be the device manufacturer of record right. So that's why we have characterized it as a commercialization agreements will be the ones taking the technology.
Holiday to market and then selling it and then we'll pay a royalty back to Google for you know you said there I P.
In the effort.
So Google is not is not actively like selling AI technology to imaging centers and hospitals, they really would it be the are in R&D.
Okay.
Okay that makes sense and maybe more of a higher level, one button and its kind of following up on <unk> question here, but how incremental of an opportunity could this be right because from our understanding and all the data you know the detection now goes already quite good. So you know is there a certain point, where you might get an inflection I guess I'm just trying to understand.
The opera Yeah here from the agree yeah, yeah, yeah. So the second agreement mm.
I will say is the.
Okay upside I guess opportunity right like what makes this better you know then the first agreement that we had it's really twofold.
The first is the length of time. The first agreement was a five year just takes us out to 20 years.
It's huge right it was like caffeine.
Those are nice totally taken here, it's like it's still a little like Wow I'm, especially in the world of technology right to think 20 years ahead. So like it's a long term committed relationship as you can probably imagine like we're envisioning lots of innovation right to happen along the way. So that's number one is just the Linkedin.
Time that we're gonna be partnering and then number two is the approved use of our combined efforts as a second reader or even an independent reader. So just the first agreement I'll describe it as was really the purpose right or.
Permissible use within a more traditional mammography reading setting like Blake honestly like we have here in the U S. I don't know, which is B go in for your mammogram. The AI algorithm as is running it's helping the radiologist, but the AI algorithm can't run on its own.
It's not independent right. The radiologist has to use it they have to agree with it they can use it to support their.
Their findings or recommendations, but the a I cannot be independent. This is huge because this is now permitting the ability for this algorithm that we're jointly developing for us to apply right for a regulatory approval for it to be used independently right without you know that human <unk>.
Baldness. So so that really speaks to I think Google has confidence in the algorithm in and I CAD as you can probably imagine from a regulatory approval you know you're asking a piece of technology to tell someone whether or not they have cancer with.
Involving a human in that process, it's a little scary, even if they say you know out loud just kind of like thinking through this but you know as the algorithm is getting more and more and more accurate, which is what we're seeing and you know in our testing and such I think that there is huge upside potential because again you are changing and in.
Tire you know say countrywide standard for the way in which mammography is delivered to their whole population. So yeah. It's it's big.
Okay, well understood I appreciate the color there I'll jump back in queue here. Thanks Mhm.
Uh-huh.
Your next question for today is coming from Yale Jen at Laidlaw and company.
Good afternoon, and thanks for taking the questions and I'm going to also stock was at Google deals.
First of all.
I believe that the press release indicated.
<unk>.
What changed.
<unk> got is for the United States versus Europe .
Peak Wikia.
I'll comment on the U T D.
Well, it's so the first degree made which is still in place is two D and three D. So this agreement builds on top of that the reason the second press releases just talking about two D is that is because the use of.
Second reader is really outside of the U S. You, we do not have F D. A.
Approval.
No organization that is right too.
Not have a human radiologist in the in the standard of care right in the clinical pathways for mammography. So it you know.
Day, it really doesn't apply to the U S. And then outside of the U S than the most common type of mammography is still two D. But the agreement will enable us over time again back to that length of time, yeah. We can use the core algorithm, which is both to the.
And three D.
At some point in time in the future when the U S. Does you know hopefully begin to embrace the second reader workflow.
Okay great.
Very very helpful and then okay.
My more clarity.
That's on that which is you mentioned about the rack.
Ross.
Besides the.
Uh huh.
So what should we anticipate any thoughts about that.
And knowledge or database.
Well I'd say in general.
Who will understand as a country to country. All we can see which is different but overall should we see that.
You mean from.
So help me understand a little bit more so you mean from a timing standpoint.
In terms of the process all of the.
Okay.
The study.
Oh, okay.
Yeah.
The European country, Yeah, Yeah.
So it's a little bit you know remains to be seen them. The first studies that we're doing are actually in the U K our with the NIH.
It's very they're actually two studies underway at third steady kicking off here in the next few weeks that will be very very large scale.
So you know my my gut says no.
Other countries are doing a bit of a let's let's watch and see them as we begin to publish the results of these studies would they accept them you know as clinical evidence or their own populations or for whatever reason right, where they want you know their own their own country.
By country study I think you know from an EU standpoint.
Our hope is that the study that we're doing in the U K is the one that we see.
So I had mentioned there are three studies right. So the priority studies are the ones that we're leveraging for the EU submission, which should help with several countries right that are part of that you know that body and then we'll hop that you know just kind of learn as we go and as we watch the rate of adoption happened there other.
Trees that do not accept the EU regulatory mark or the CE Mark what they may require.
Okay great.
Well, maybe I can sneak in.
One more question sure.
In your press release.
Hey, Dave.
Oh gosh.
Paresh.
Mark you don't love them one 5%.
How should we read this data.
Dream.
The second lead a versus b.
Hi reader.
And what does that sort of.
That readout.
Provide.
Hopefully people can think how to use it.
Yeah. So.
I would say kind of at its at its simplest right way to kind of think about that percentage that 11, 5% is that.
The algorithm is exceeding the average radiologist I'll say AUC score.
By that percentage, so 11, and a half percentage better in terms of the accuracy.
Then the average radiologist and this is this was this study involving six radiologist, where the AI outperformed.
The six human radiologist.
Okay, great. Thanks, a lot.
Russell the province.
Thanks.
Your next question is coming from Frank checking at Lake Street capital.
Great. Thanks for taking my questions was hoping to ask for a little more color on the radiology partners agreement.
Can you share any of the financial specifics, whether that's on a per use basis or maybe quantify what the reality is for the the entirety of the contract understanding it's a multiyear effort, but just trying to frame up how large of a partner that can be.
Yeah. So.
I'm trying to think of like the simplest way to start the answer so.
Radiology partners is I call them a bit of a hybrid. So we may have discussed this on past calls this maybe a bit repetitive, but so radiology partners hi.
Has their own owned facilities, right, where I'll say they they own the facility. They provide you know the technology infrastructure kind of in a managed services environment as well as manage you know the radiologists that are actually performing the readings right doing the services.
They have other centers for which they may just do a portion of those services. They're more you know subcontracted and then they have some centers that they're really just providing the radiologist you know kind of staffing services. So so there's a variety.
Of types of you know I'll call it like ownership right or leasing arrangements that they have across those those facilities. So the way we established the partnership with them is essentially like a reseller so they're acting as a reseller within their own territory right, which is defined as.
The 3200 centers that Theres, a combination right of of that ownership model right on leasing model that I, just mentioned and so today Theyre planning on offering the technology to all of those centers through their cloud. So I just mentioned if you sit and go right.
They have their own managed services they have their own technology infrastructure. They had developed their own cloud environment and so our technology is is docked right are inserted into their cloud and so the licensing mechanism and then therefore the revenue mechanism is out of what we what we termed a per exam basis.
So as their volume can increase them as they can bring on different types of arrangements with different imaging centers were really just tracking it based on number of exams them. So the more they grow then we can grow with them. We haven't finalized the rollout plan yet that's work in progress.
Literally right now so again I think by the time, we get hopefully to the third quarter earnings call, we would be able to come back and Mike talk about them with their blessing as well on what it looks like over the course of the next few years. So.
I'll just kind of pause there see if I could raise more questions and answer [laughter]. That's good color I appreciate that.
For Oh for just one more question for me on the P&L operating expenses down to $6 3 million can you just level set us all on where we stand as it relates to the cost cuts that have been implemented.
And maybe said more directly is the $6 3 million total opex on a quarterly basis, a fair run rate to model off on a go forward basis.
Yeah, I'm going to let Eric chime in and take this question.
Sure Yeah, I think the short answer is a fair estimate of the run rate.
Going forward, though.
Q1, we were at an 8 million dollar opex.
For Q1, and then we we announced a $4 three to $4 $6 million of projected Opex cuts.
Oh that was annualized so.
That being down about one 5 million from that $8 million in Q1. This is pretty much where we expected.
We are seeing a little bit a little bit of savings from the furloughs on those outside as well.
So I think I think all of that should continue so I think it's a there are some some kind of anomalies going both ways in this quarter, but I think they kind of offset each other and.
It feels like a good spot and I think you're really seeing that impact that we see.
What we said was coming up with the Q1 cuts.
Okay got it thanks for taking the questions.
We have reached the end of the question and answer session and I will now turn the call over to Dana for closing remarks.
Thank you operator.
In conclusion, we're making bold moves to rapidly transformed this company with a focus on maintaining stability preserving cash and building a defensible and competitive long term strategy.
That we believe will diversify our revenue stream and smooth out some of our customer concentration.
The future is bright in fact, three of our independent directors have elected to take their compensation in equity.
Demand for our technology continues to be strong and the evidence supporting it continues to grow.
And as we discussed on today's call. Our team continues to secure opportunities with some of the most prestigious and esteemed health care facilities worldwide I remain optimistic about the company and its future and firmly believe in the bright future of the company and our ability to generate significant shareholder value.
I look forward to updating you next quarter as we continued to gain clarity on our strategy develop our long range execution plan and drive towards this increase shareholder value. Thank you and have a great evening.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.