Q3 2023 iCAD Inc Earnings Call
Good day, everyone and welcome to the ICANN, Inc. Third quarter 2023 earnings call.
Speaker 1: Good day, everyone, and welcome to the iCAD, Inc. 3rd Quarter 2023 Earnings Call.
Speaker 1: At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation.
At this time, all participants have been placed on a listen only mode and we will open the floor for your questions and comments after the presentation.
Speaker 1: It is now my pleasure to turn the floor over to your host, Lenore Faber. Ma'am, the floor is yours.
It is now my pleasure to turn the floor over to your host manure Faber ma'am the floor is yours.
Thank you operator, good afternoon, everyone. Thank you for joining us today for Ikat third quarter 2023 earnings call on the call today, we have Dana Brown, our president and Chief Executive Officer, and Eric Lundquist, Our Chief Financial Officer.
Speaker 2: Thank you, Operator. Good afternoon, everyone. Thank you for joining us today for ICAD's third quarter 2023 earnings call. On the call today, we have Dana Brown, our President and Chief Executive Officer, and Eric Lundquist, our Chief Financial Officer.
Before turning the call over to Dana I would like to remind everyone that we will be making forward looking statements on the call today.
Speaker 2: These forward-looking statements are based on ICAD's current expectations and are subject to uncertainty and changes in circumstances.
These forward looking statements are based on ikat current expectations and are subject to uncertainty and changes in circumstances.
Speaker 2: Actual results may offer materially from these expectations. For a list of factors that could cause actual results to differ, please see today's press release and our filings with the U.S. Securities and Exchange Commission.
Actual results may offer it materially from these expectations for a list of factors that could cause actual results to differ please see today's press release in our filings with the U S Securities and Exchange Commission.
Speaker 2: ICAT undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.
<unk> undertakes no obligation to revise or update any statements to reflect events or circumstances. After the date of this conference call.
Speaker 2: I would also note that management will refer to certain non-GAAP financial measures. Management believes that these measures provide meaningful information for investors and reflect the way they view the operating performance of the company.
I would also note that management will refer to certain non-GAAP financial measures management believes that these measures provide meaningful information for investors and reflect the way they view the operating performance of the company.
Speaker 2: You can find a reconciliation of our GAAP to non-GAAP measures at the end of the earnings release. With that, I'll turn the call over to Dana.
You can find a reconciliation of our GAAP to non-GAAP measures at the end of the earnings release with that I'll turn the call over to Dana.
Speaker 3: Thank you, Lenore, and good afternoon, everyone. Let's begin with our business update. On October 23rd, we announced that Electa, a world leader in brachytherapy solutions, acquired Zost, our therapy subsidiary, for approximately $5.5 million in assumed liability.
Thank you Lenoir and good afternoon, everyone.
Let's begin with our business update on October 23rd we announced that Elekta a world leader in Breaky therapy solutions acquired Jos our therapy subsidiary for approximately $5 5 million and assumed liabilities.
Speaker 3: As previously disclosed, we have been in the process of exploring strategic options for the ZOFT business that would accelerate the accessibility of this technology and provide more focus and synergies to its growth.
As previously disclosed we have been in the process of exploring strategic options for the <unk> business that would accelerate the accessibility of this technology and provide more focused and synergies to its growth.
Speaker 3: We're pleased that Electa has acquired the Zoff subsidiary, along with both the technology and the team.
We're pleased that Elekta has acquired the <unk> subsidiary, along with both the technology and the team we're confident that the Zap technology under the leadership of John look Gray will continue to positively impact the lives of cancer patients and the providers who care for them on a global scale.
Speaker 3: We're confident that the ZOP technology, under the leadership of John LePray, will continue to positively impact the lives of cancer patients and the providers who care for them on a global scale.
Speaker 3: Elected took over the business effective immediately upon signing and have completed their final payment
I liked it took over the business effective immediately upon signing and have completed their final payments later in this call Eric will provide further updates on the transaction and its impact on cash our balance sheet and operations.
Speaker 3: Later in this call, Eric will provide further updates on the transaction and its impact on cash, a balance sheet, and operations.
Speaker 3: Our thanks to the outstanding work of the Craig Hallam Capital Group, who served as advisors to us for this transaction. Let's now turn to the...
Our thanks to the outstanding work of the Craig Hallum Capital Group, who served as advisers to exit this transaction.
Let's now turn to the detection side of the business.
Speaker 3: As we close out six months since our leadership transition and finalize our growth plans for 2024 and beyond, it's important to recap the trajectory of changes we've made and how those changes are setting us up for future success.
As we close out six months since our leadership transition and finalize our growth plans for 'twenty 'twenty four and beyond it is important to recap the trajectory of changes we've made and how those changes are setting us up for future success.
Speaker 3: In just six months, we've made substantial progress executing a three-phase transformation.
In just six months, we've made substantial progress executing a three phased transformation.
Speaker 3: Phase one was realigning our base. Phase two, strengthening our foundation. And phase three, investing in growth initiatives. Let's start with phase one, realigning our base. In the past six months, we have stabilized the business through reducing our cash burn.
Phase one was realigning our base.
Two strengthening our foundation and phase III investing in growth initiatives, let's start with phase one realigning our base in the past six months, we have stabilized the business to reducing our cash burn.
Speaker 3: EBITDA, which we now view as a relevant metric to indicate operating cash flow, was a loss of $1.1 million in Q3'23 versus a loss of $3 million in Q1'23. This represents an improvement of nearly $2 million a quarter.
EBITDA, which we now view as relevant metrics indicate operating cash flow with a lots of $1 1 million in Q3 23.
First is the loss of $3 million in Q1 of 'twenty. Three this represents an improvement of nearly $2 million of border.
Speaker 3: We've reduced our cash burn. Year to date, FY23 total cash burn of $4.4 million, which excludes the one-time cash infusions like our projected soft proceeds, compared to full year FY22 cash burn of $13 million. We believe cash burn has stabilized.
We've reduced our cash burn.
Year to date FY 'twenty, three total cash burn of 4.4 million, which excludes the one time cash infusions like our projected soft proceeds compared to full year FY 'twenty two cash burn at 13 million, we believe cash burn has stabilized with.
Speaker 3: We've continued to manage the shift to a subscription-based annual reoccurring revenue cycle. We'll talk more about ARR growth later in this call, but in summary, we had a 30% increase in ARR since the start of the subscription transition. We've achieved 16% compounded annual growth rate in total ARR over the two-year period or through the end of Q3 2020.
We've continued to manage the shift to a subscription base annual reoccurring revenue cycle will talk more about our growth later in this call but in summary, we had a 30% increase in the E. R. R. Since the start of the subscription transition we've achieved 16% compounded annual growth rate in total.
Our R over the two year period or through the end of Q3 23.
Speaker 3: And we've completed the realignment of our cost base for our core business and I'm pleased to affirm the company does not need to raise additional funding to pursue growth initiatives.
And we've completed the realignment of our cost base for our core business and I'm pleased to affirm the company does not need to raise additional funding to pursue growth initiatives.
And phase two strengthening the foundation in the past six months, we have expanded our leadership team with the appointment of our permanent CFO, Eric and the addition of the C O L Chief product Officer, Vice President of marketing and Vice President of customer success.
Speaker 3: In phase two, strengthening the foundation, in the past six months we have expanded our leadership team with the appointment of our permanent CFO , Eric, and the addition of a COO, Chief Product Officer, Vice President of Marketing, and Vice President of Customer Success. We're also making good progress in recruiting new board members.
Also making good progress in recruiting new board members.
Speaker 3: We've upgraded our brand by transitioning from a product focused to a patient centric value proposition, resulting in our new tagline of creating a world where cancer can't hide. You'll see more of the rebrand launch in Q4. And we've developed and launched targeted.
We've upgraded our brand by transitioning from a product focused to a patient centric value proposition, resulting in our new tagline of creating a world where cancer can tie.
You'll see more of that rebrand launch in Q4.
And we've developed and launched targeted lead Gen programs previously a reliable and consistent inflow of new leads and the documented and measured pipeline management process did not exist.
Speaker 3: Previously, a reliable and consistent inflow of new leads and a documented and measured pipeline management process did not exist.
Speaker 3: We've revamped our commercial model, reorganized our team structure, how we target and segment our markets, revised messaging pricing, and account management strategy.
We've revamped our commercial model reorganized our team structure, how we target and segment our markets revised messaging pricing and account management strategies.
Speaker 3: We've announced game-changing collaborations with esteemed partners, exemplifying our company's commitment to creating the world's most pervasive and personalized suite of AI cancer detection solutions for our shareholders and stakeholders.
We've announced game changing collaborations with the steamed partners exemplifying, our company's commitment to creating the world's most pervasive and personalized suite a.
Cancer detection solutions for our shareholders and stakeholders.
Speaker 3: To recap these partnerships, we signed a 20-year worldwide development and commercialization agreement with Google Health to integrate Google's AI technology with our profound detection for 2D mammography for use upon regulatory approval as an independent reader for breast cancer screening.
To recap these partnerships, we signed a 20 year worldwide development and commercialization agreement with Google Health.
To integrate Google's AI technology with our profound detection for two D. Mammography for use upon regulatory approval as an independent reader for breast cancer screening.
We signed a strategic multiyear commercial agreement with radiology partners, the nation's largest radiology practice, providing 15% of all U S. Mammography screening through its owned and affiliated practice, enabling ik to expand access to the company's breast AI suite to thousands of physicians of millions.
Speaker 3: We signed a strategic multi-year commercial agreement with radiology partners, the nation's largest radiology practice, providing 15% of all U.S. mammography screenings through its owned and affiliated practice, enabling ICAD to expand access to the company's breast AI suite to thousands of physicians and millions of patients in the U.S.
Patients in the U S. We've just wrapped up our testing phase and will begin the next phase of identifying and coordinating rollout with radiology partners across this network of facilities.
Speaker 3: We've just wrapped up our testing phase, and we'll begin the next phase of identifying and coordinating a rollout with radiology partners across this network of facilities.
And we've secured the largest subscription deal to date with the prestigious multi specialty academic medical center renowned for exceptional health care services and ranked as one of the top hospitals in the U S.
Speaker 3: And last but not least, the divestiture of Zoff, coupled with realigning our cost basis and strengthening key foundational building blocks, we've completed the necessary steps to streamline operation and put all our focus into scaling the profound AI breast health business, immediately prioritizing expanding our sales and partnership models to grow revenue, which leads us to phase three, investing in and launching growth initiatives.
And last but not least the divestiture of the off coupled with realigning our cost basis and strengthening key foundational building blocks, we have completed the necessary steps to streamline operations and put all our focus into scaling the profound AI breast health business immediately prioritizing expanding our sales and <unk>.
Partnership models to grow revenue.
Which leads us to phase III investing in and launching growth initiatives on.
Speaker 3: On the prior two earnings calls, I've noted we're actively assessing and modeling revenue growth and market expansion scenarios. We've aligned on a three-phase approach. Phase one, expanding our existing accounts. Phase two, growing our channels, both direct and indirect. And phase three, entering new markets.
On the prior two earnings calls I've noted, we're actively assessing and modeling revenue growth and market expansion scenarios. We've aligned on a three phased approach phase one expanding our existing accounts phase two growing our channels, both direct and indirect and phase III entering new markets.
Speaker 3: These phases will overlap. However, we've clearly defined dates and gates, which are measurable criteria that act as triggers within a phase to open the gate to enter the next phase. We've orchestrated these phases to maximize growing annual recurring revenue while keeping burn in check, which is why we believe we do not need to raise additional funding to pursue the growth initiatives in phase three. Let's take a few moments and break these phases down. Phase one is.
These phases will overlap. However, we've clearly defined dates engage which are measurable criteria to act as triggers within a phase to open the gate to enter the next phase we've orchestrated these phases to maximize growing annual recurring revenue, while keeping burn in check which is why we believe we do not need to raise.
Additional funding to pursue the growth initiatives in phase III was take a few moments and break these pages down.
Phase one is expand existing accounts.
Speaker 3: This phase is focused on maximizing revenue from our sizable install base, including reengaging customers who've lapsed on annual maintenance service agreements, are behind in upgrading to new versions, including the transition to cloud, winning back lost or deeply lost customers, and accelerating deployment across large national accounts.
This phase is focused on maximizing revenue from our sizeable installed base, including re engaging customers, who Blackstone annual maintenance service agreements are behind and upgrading to new versions, including the transition to cloud.
Winning back lost or deeply last customers and accelerating deployment across large national accounts for.
Speaker 3: For example, I just mentioned our strategic multi-year commercial agreement with radiology partners.
For example, I just mentioned our strategic multiyear commercial agreement with Radiology partners Radiology partners is a leading provider of mammography services the millions of women across more than 3200 facilities, including 17 of the 20 largest health systems in the country.
Speaker 3: Radiology Partners is a leading provider of mammography services to millions of women across more than 3,200 facilities, including 17 of the 20 largest health systems in the country.
Speaker 3: We're honored that Radiology Partners has selected ICAD as its provider of breast AI technologies, and we're working closely with Radiology Partners to actively deploy ICAD's advanced technology through their cloud to their network of facilities.
We're honored that radiology partners has selected <unk> as its provider abreast AI technologies, and we're working closely with radiology partners to actively deploy I catch advanced technology through their cloud to their network of facilities.
Speaker 3: The initial order from radiology partners, recognized in one first quarter of this year, represents less than 5% of the total potential from this partnership.
The initial order from radiology partners recognized in one first quarter of this year represents less than 5% of the total potential from this partnership. It's a long term relationship that will take time to adopt and rollout across their large enterprise.
Speaker 3: It's a long-term relationship and will take time to adopt and roll out across their large enterprise.
Speaker 3: And while you've heard us announce in past quarters winning deals with large enterprise customers like Solus, Radiology Partners, SimonMed, Ascension, and Cleveland Clinic, who collectively serve about 15% of the U.S. mammography screening market, great potential lies ahead for ICAD, as many of these customers are in the early stages of rolling out our technology and are continuing to expand it to more sites and markets each year.
And while you've heard us announce in past quarters, winning deals with large enterprise customers like Solus Radiology partners, Simon Med Ascension, and Cleveland clinic, who collectively serve about 15% of the U S. Mammography screening market great potential lies ahead for ICANN as many of these customers are in the early stages of rolling out our technology.
<unk> and are continuing to expand it to more sites and markets each month.
Speaker 3: The focus of this phase is to accelerate deployment of our technology across these national and regional accounts, as well as re-engage approximately 1,000 of our 4,000 customers who've lapsed on their maintenance agreements or who are operating on older software versions.
Focus of this phase is to accelerate deployment of our technology across these national and regional accounts as well as re engage approximately 1000 of our 4000 customers, who blackstone their maintenance agreements or who are operating on older software versions.
Speaker 3: Moving to phase two, which is growing channels, both direct and indirect. This phase is focused on accelerating winning new business in both the U.S. and O.U.S. through growing our direct sales force and establishing new distribution partnerships.
Moving to phase II, which is growing channels, both direct and indirect this phase is focused on accelerating winning new business in both the U S and O U S through growing our direct sales force and establishing new distribution partnerships back.
Speaker 3: Backed by science, clinical evidence, and proven patient outcomes, our profound breast health suite solutions of cancer detection, density assessment, and risk evaluation provide an unmatched approach to accurately detecting more cancers earlier, providing certainty and peace of mind to providers and patients.
Backed by science and clinical evidence and proven patient outcomes are profound breast health suite solutions, a cancer detection density assessment and risk evaluation provide an unmatched approach to accurately detecting more cancers earlier, providing certainty and peace of mind to providers and patients.
Speaker 3: Our mission is to see that these solutions are deployed universally as part of a standard of care for breast health in order to achieve our vision of a world where cancer can't hide.
Our mission is to see that these solutions are deployed universally as part of a standard of care for breast health in order to achieve our vision of a world where cancer can tide.
We're pursuing a large addressable market, where significant patient need exists globally more than 31000 mammography systems serve approximately 250 million women in the age range recommended for annual mammograms.
Speaker 3: We're pursuing a large addressable market where significant patient need exists. Globally, more than 31,000 mammography systems serve approximately 250 million women in the age range recommended for annual mammograms.
Speaker 3: Yet recent research indicates only 37% of mammography sites are currently using artificial intelligence.
Yet recent research indicates only 37% of mammography sites are currently using artificial intelligence in.
Speaker 3: In the United States, for example, there are 8,800 certified mammography sites.
In the United States. For example, there are 8800 certified mammography sites of the 37% of sites using AI, we have one third of that market.
Speaker 3: of the 37 percent of sites using AI, we have one-third of that mark.
Speaker 3: Expanding into the 63% of the market that is not using AI, plus additional wins in the segment using AI, but not profound, results in significant opportunity for new business.
Expanding into the 63% of the market that is not using AI plus additional wins in this segment using AI, but not profound results in significant opportunity for new business.
Speaker 3: We believe U.S. sales have declined due in part to a significant reduction in the sales force that occurred in FY22.
We believe U S sales have declined due in part to a significant reduction in the sales force that occurred in FY 'twenty two.
Speaker 3: In the U.S., we currently have six sales reps versus 12 in Q3 of FY22.
In the U S. We currently have six sales reps versus 12 in Q3 of FY 'twenty two.
Speaker 3: After a thorough analysis of rep performance over the past three years, we believe adding additional sales reps focused on new business, given our large addressable market opportunity I just discussed, and reps focused on large national accounts like radiology partners will lead to revenue growth. This leads us to phase two.
After a thorough analysis of rep performance over the past three years, we believe adding additional sales reps focused on new business, given our large addressable market opportunity I, just discussed and reps focused on large national accounts like radiology partners will lead to revenue growth.
So we just the phase III entering new markets.
Speaker 3: After measurable progress in phases 1 and 2, we'll begin phase 3, most likely in FY25.
After measurable progress in phases, one and two will begin phase III, most likely in FY 'twenty five.
Speaker 3: As mentioned on prior earnings calls, and as just one example of growth, is our work with Solace Mammography to commercialize our heart health solution, which was previously referred to as breast arterial calcification.
As mentioned on prior earnings calls and as just one example of growth is our work with bolus mammography to commercialize our heart health solution, which was previously referred to as breast arterial calcification.
Speaker 3: In fourth quarter 2022, we announced the development and commercial collaboration agreement with Solace.
In fourth quarter, 2022, we announced the development and commercial collaboration agreement with Solas.
Speaker 3: This collaboration is focused on using mammography to define cardiovascular risk, a new application that could identify millions of women at risk for heart disease using data obtained from their mammogram.
This collaboration is focused on using mammography to define cardiovascular risk and new application that could identify millions of women at risk for heart disease using data obtained from their mammogram.
Speaker 3: With heart disease being the number one killer among women in the US, this collaboration not only offers the potential to address a significant unmet need in patient care, but also to penetrate a sizable new market.
Heart disease being the number one killer among women in the U S. This collaboration not only offers the potential to address a significant unmet need and patient care, but also to penetrate a sizable new market. This.
Speaker 3: This product is currently available for investigational use only as we go through the FDA approval process, so more to come.
This product is currently available for investigational use only as we go through the FDA approval process, so more to come.
Speaker 3: Just to reiterate, once we've reached critical mass in phases one and two that warrant and enable us to expand our focus, we'll update you on our growth initiative.
Just to reiterate once we've reached critical mass in phases, one and two that warrant and enable us to expand our focus we'll update you on our growth initiatives.
Speaker 3: Let's now turn to a few brief 2-3 highlights.
Let's now turn to a few brief Q3 highlights.
Speaker 3: Our sales force continues to secure opportunities with some of the most esteemed and prestigious healthcare facilities worldwide.
Our sales force continues to secure opportunities with some of the most distinct and prestigious healthcare facilities worldwide.
Speaker 3: Among the new licenses sold last quarter, we also secured our first two customers through our AI platform partners, Ferrum Health, Sutter Health, and Radiology Associates of Albuquerque.
On the new licenses sold last quarter. We also secured our first two customers through our AI platform partner bear in Perl, Sutter health and radiology associates of Albuquerque.
Speaker 3: Ferrum Health is a leading AI platform provider, delivering access to the most innovative and impactful clinical AI technologies on a single platform. We expect additional expansion with Ferrum in Q4 and beyond, with significant near-term expansion opportunities within the Sutter Health System, which encompasses more than 20 sites.
Firm health is a leading AI platform provider delivering access to the most innovative and impactful clinical AI technologies on a single platform.
We expect additional expansion with bare them in Q4 and beyond with significant near term expansion opportunities within the Sutter health system, which encompasses more than 20 sites.
Speaker 3: We also expanded deployment with our key partner, Solus Mammography, adding two new Solus sites in Texas.
We also expanded deployment with our key partner Solus mammography, adding two new solar sites in Texas. We expect continued expansion with solas across new U S markets in Q4 and beyond as the Solas model of personalized care continues to expand nationally.
Speaker 3: We expect continued expansion with SOLAS across new U.S. markets in Q4 and beyond, as the SOLAS model of personalized care continues to expand nationally.
Speaker 3: Solus Mammography has approximately 115 sites nationwide, and to date, we've implemented our solution at 85% of those sites.
So lets mammography has approximately 115 sites nationwide and to date, we've implemented our solution at 85% of those sites.
Speaker 3: We also continued expansion within the government sector, adding the prestigious Walter Reed National Naval Medical Center and the VA Medical Center in Birmingham, Alabama.
We also continued expansion within the government sector, adding the prestigious Walter Reed National Naval Medical Center, and the VA Medical Center in Birmingham, Alabama.
Speaker 3: Reinforcing the strategy in near-term revenue opportunities in phase one, expanding into existing accounts, you've heard us announce in past quarters winning deals with large enterprise customers like Solis, Radiology Partners, Simon Med, Extension, and Cleveland Clinic, who collectively serve about 15% of the U.S. mammography screening market.
Reinforcing this strategy in near term revenue opportunities in phase one expanding into existing accounts, you've heard us announce in past quarters, winning deals with large enterprise customers like solus radiology partner, Simon Med extension, and Cleveland clinic, who collectively serve about 15% of the U S mammography screening market.
Speaker 3: Great potential lies ahead for iCAD as many of these customers are in the early stages of rolling out their technology and are continuing to expand into more sites and markets.
Great potential lies ahead for ICANN as many of these customers are in the early stages of rolling out the technology and are continuing to expand it to more sites and markets each month.
Speaker 3: During the past quarter, we also achieved several key milestones with our OUS sales channel, further expanding the growing global reach of ICATS technology.
During the past quarter. We also achieved several key milestones with our O U S sales channel further expanding the growing global reach of <unk> technology.
Speaker 3: Our direct sales force in France achieved a groundbreaking milestone by finalizing its most significant deal to date. Thirteen profound AI licenses were sold to a leading radiology group in Dijon, France.
Our direct sales force in France achieved a groundbreaking milestones by finalizing its most significant deal to date 13 profound AI licenses were sold to a leading radiology group in Dijon, France.
Speaker 3: Our OUS team also signed and onboarded two new distributors to oversee operations in the United Arab Emirates and Slovenia, Croatia. Our Benelux distributors not only secured a pivotal deal with Brussels University in Belgium, but also expanded their support to the Luxembourg screening program by adding eight density assessment licenses alongside the existing detection licenses sold in Q2.
Our O U S team also signed an onboarding two new distributors to oversee operations in the United Arab Emirates, and Slovenia Croatia.
Our Benelux distributors not only secured a pivotal deal with Brussels University in Belgium, but also expanded their support to the Luxembourg screening program by adding eight density assessment licenses alongside the existing detection licenses sold in Q2.
Speaker 3: and several firsts marked Q3 with the Saudi Arabian distributors completing their first customer sale for Profound AI 2D, 3D, and the first customer site installs occurring in Turkey.
And several first Mark Q3, with the Saudi Arabian distributors completing their first customer sale for profound AI two D. Three D and the first customer site installs occurring in Turkey.
Speaker 3: And lastly, a preview of our showcase at RSNA 2023, occurring November 25th to 30th.
And lastly, a preview of our showcase at our SNA 2023 occurring November 25th 230th.
Speaker 3: At RS&A, ICAD will be demonstrating new AI-powered innovations in mammography, highlighting new product enhancements, partnerships, and workflow solutions featuring our profound breast health suite.
At our SG&A I CAD will be demonstrating new AI powered innovations in mammography, highlighting new product enhancements partnerships and workflow solutions featuring our profound breast health suite were featured in four clinical abstracts, including presentations from both doctor axle grabbing hold of radiology.
Speaker 3: were featured in four clinical abstracts, including presentations from both Dr. Axel Gravingholt of Radiology AM Theater, Paderborn, Germany, and Dr. Michael Erickson of the Karolinska Institute on new data highlighting profound risks, short-term risk assessment capabilities for evaluating development of breast cancer in the next one to two years.
M Theater powder, born Germany, and Dr. Michael Ericsson of the Karolinska Institute on new data highlighting profound risks short term risk assessment capabilities for evaluating development of breast cancer in the next one to two years, including a multinational validation of our clinical image.
Speaker 3: including a multinational validation of a clinical image-based AI risk model for individualizing breast cancer screening.
<unk> AI risk model for individualized <unk> breast cancer screening.
Presentations from both doctors Shiraz Patel of Solas, mammography and Doctor too Hot DAU of Hindery Mondor Hospital on the novel application of deep learning AI to detect and quantify breath arterial calcification on digital mammography as I mentioned earlier this solution is not yet.
Speaker 3: presentations from both Dr. Chirag Patel of Solis Mammography and Dr. Thu Ha Dao of Henry Mondor Hospital on the novel application of deep learning AI to detect and quantify breast arterial calcifications on digital mammography.
Speaker 3: As I mentioned earlier, this solution has not yet been cleared by the FDA for commercial use. It's being used in investigational mode only at this time and expect clearance in late 2024.
Being cleared by the FDA for commercial use it's being used and investigational mode. Only at this time and expect clearance in late 2024.
Speaker 3: And Emily Conant, Professor of Radiology and the Vice Chair of Faculty Development in the Department of Radiology at the University of Pennsylvania, Perlman School of Medicine, and past president of SBI, will be highlighting new data from ICAD's fourth generation enhancements during the AI Showcase Theater presentation titled, From Pixels to Practice, Harnessing Innovations in Breast AI to Improve Patient Outcomes.
And Emily Conant Professor of Radiology, and the Vice chair of Faculty development and the department of Radiology at the University of Pennsylvania, Perelman School of Medicine, and past President of SDI will be highlighting new data from ipads fourth generation enhancements during the AI showcase theater presentation.
Titled from pixels to practice harnessing innovations in breast AI to improve patient outcomes.
Speaker 3: We will also be demonstrating new product enhancements, including our new profound detection version 4.0 and density version 4.1 solution that streamline workflows, provide support for analysis of prior mammograms, identify cancers even earlier with more accuracy, and lead to improved patient outcomes.
We will also be demonstrating new product enhancements, including our new profound detection version 4.0 and density version 4.1 solutions that streamline workflows provide support for analysis of prior mammogram identify cancers, even earlier with more accuracy and lead to improved patient outcomes.
I continue to be optimistic about the company and its prospects with a portfolio of market, leading bursting tying technologies, we are addressing significant unmet needs in global health.
Speaker 3: I continue to be optimistic about the company and its prospects. With a portfolio of market-leading, first-in-kind technologies, we are addressing significant unmet needs in global health. And I'm confident that we are taking the right steps and that we're building the right team to ensure continued growth for the company and create additional shareholder value.
And I'm confident that we are taking the right steps and that we're building the right team to ensure continued growth for the company and create additional shareholder value.
Speaker 3: In summary, we're taking decisive actions to drive rapid transformation within the company.
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.
Speaker 3: prioritizing stability, cash preservation, and the development of a strong competitive long-term strategy.
Speaker 3: Our goal is to diversify our revenue stream and reduce customer concentration, ensuring a more sustainable and resilient future. I'll now turn the call over to Eric for a detailed review of our Q3 2023 financials.
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 Q3 2023 financials.
Good afternoon, everyone and thank you Dana.
Speaker 4: Good afternoon, everyone, and thank you, Dana. I'll now summarize our financial results for the third quarter and did September 30th, 2023.
I'll now summarize our financial results for the third quarter ended September 32023.
Speaker 4: Please note that these results exclude the divested ZOP segment. Results relating to the ZOP segment are presented in Note 2 of our 10Q.
Please note that these results exclude the divested <unk> segment.
Relating to those off segment are presented in note two of our 10-Q.
Revenue for the quarter was $4 1 million a decline of one 3 million or 7% from third quarter of 2022.
Speaker 4: Revenue for the quarter was $4.1 million, a decline of $0.3 million, or 7% in the third quarter of 2022.
Speaker 4: Third quarter 2023 product revenue was 2.2 million, down 15% over the prior year.
Third quarter 2023 product revenue was $2 2 million down 15% over the prior year.
Speaker 4: The decline is attributable to a variety of factors, including our transition to subscription, longer purchasing cycles, increased competition, and budget constraints.
The decline is attributable to a variety of factors, including our transition to subscription.
Longer purchasing cycles increased competition and budget constraints.
Speaker 4: protection service revenue was 1.9 million, up 3% over the prior year.
<unk> service revenue was $1 9 million up 3% over the prior year.
Moving onto gross profit.
Speaker 4: On a percentage of revenue basis, gross profit was 86% for the third quarter of 2023, which was up from 85% the third quarter of 2022.
On a percentage of revenue basis gross profit was 86% for the third quarter of 2023, which was up from 85% the third quarter of 2022.
Speaker 4: On a pure dollar basis, gross profit for the quarter was $3.5 million as compared to $3.7 million last year, largely reflective of the reduction in revenue.
On a pure dollar basis gross profit for the quarter was $3 5 million as compared to $3 7 million last year, largely reflective of the reduction in revenues.
Speaker 4: Total operating expenses for the second quarter of 2023 were $4.7 million, $2 million, or a 29% decrease year-over-year.
Total operating expenses for the second quarter of 2023 or $4.7 million 2 million or 29% decrease year over year.
This improved run rate reflects the implemented cost cutting measures previously announced.
Speaker 4: This improved run rate reflects the implemented cost-cutting measures previously announced.
Speaker 4: Operating loss was $1.2 million in the second quarter of September 30, 2023 versus $3 million in the quarter ended September 30, 2022.
Operating loss was $1 2 million in the second quarter of September 32023 versus $3 million in the quarter ended September 30 of 2022.
GAAP net loss for the third quarter of 2023 was $1 4 million or five cents per diluted share.
Speaker 4: Gap net loss for the third quarter of 2023 was $1.4 million, or $0.05 per diluted share.
Speaker 4: compared with a gap net loss of 3.9 million or 15 cents per diluted share for the third quarter of 2022.
Compared with a GAAP net loss of $3 9 million or 15 cents per diluted share for the third quarter of 2022.
Speaker 4: Non-GAAP-adjusted EBITDA for the third quarter of 2023 was a loss of $1.1 million versus $3.4 million in Q3 2022.
non-GAAP adjusted EBITDA for the third quarter of 2023 was a loss of $1 1 million versus $3 4 million in Q3 2022.
non-GAAP adjusted net loss for the quarter was $1 4 million or five cents per diluted share.
Speaker 4: non-GAAP adjusted net loss for the quarter was $1.4 million, or $0.05 per diluted share.
Compared to $3 9 million or 15 cents per diluted share in Q3 2022.
Speaker 4: compared to 3.9 million or 15 cents per diluted share in Q3 2022. Reflecting a few adjustments to gap, net loss in each period.
One thing a few adjustments to GAAP net loss in each period.
Speaker 4: Moving on to the balance sheet, as of September 30th, 2023, the company had cash and cash equivalents of 19 million compared to cash and cash equivalents of 21.3 million on December 31st, 2022.
Moving on to the balance sheet as of September 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.
Speaker 4: During the third quarter, the company generated net proceeds of approximately $1.8 million from the issuance of 958,248 shares of common stock in the at-the-market ATM offerings at a weighted average price of $2.26 per share.
During the third quarter the company generated net proceeds of approximately $1 8 million from the issuance of.
958248 shares of common stock in the at the market ATM offerings at a weighted average price of $2.26 per share.
Okay.
Speaker 4: In addition, the Zoff sale in October 2023 resulted in net cash proceeds of $4.8 million.
In addition, this off sale in October 2023 resulted in net cash proceeds of $4 8 million.
Speaker 4: Had the sales off occurred on September 30th, 2023, our cash balance would have been $23.8 million.
The sale of the off occurred on September 30 of 2023, our cash balance would have been $23 8 million.
Speaker 4: Accordingly, we believe we have sufficient cash resources to fund our planned operations with no need to raise additional.
Accordingly, we believe we have sufficient cash resources to fund our planned operations with no need to raise additional funding.
Speaker 4: The steady shift to a recurring revenue model from the perpetual model has numerous benefits, including better visibility, more efficient expense management, and an improved ability to predict future cash flows.
The steady shift to a recurring revenue model from a perpetual model has numerous benefits, including better visibility more efficient expense management, and an improved ability to predict future cash flow.
Speaker 4: It also has risks, including short-term lower gap revenue and negative cash flow impact for the next three years.
It also has risks, including short term lower GAAP revenue.
And negative cash flow impact for the next three years.
Speaker 4: As noted in the previous earnings announcement, our plan was to bring back the annual recurring revenue ARR metric once it had become a reliable and growing portion of our revenue.
As noted in previous earnings announcement, our plan was to bring back the annual recurring revenue or our metric once it had become a reliable and growing portion of our revenue mix.
Speaker 4: In addition to the previously disclosed subscription ARR metric, we are introducing three new ARR.
In addition to the previously disclosed subscription here our metric bearings.
We are introducing three new air our metrics.
Speaker 4: Total ARR or TARR represents the annualized value of subscription license, maintenance contracts, and active cloud services at the end of a reported.
Total Air R. T. A R. R represents the annualized value of subscription license maintenance contracts enacted cloud services at the end of a reporting period.
Maintenance services <unk> <unk> represents the annualized value of active perpetual license maintenance and service contracts at the end of the reporting period.
Speaker 4: Maintenance services ARR or MARR represents the annualized value of active perpetual license maintenance service contracts at the end of the reporting.
Speaker 4: Subscription ARR, or SAR, represents the annualized value of active subscription or term licenses at the end of a reporting period.
Subscription here are four <unk> represents the annualized value of active subscription or term licenses at the end of a reporting period.
Speaker 4: Cloud ARR or CARR represents the annualized value of active cloud services contracts at the end of the reporting.
Cloud <unk> or C. A R represents.
<unk> represents the annualized value of active cloud services contracts at the end of the reporting period.
Speaker 4: As of the end of Q3'23, total ARR, the TAR, was $8.3 million.
As of the end of Q3 23 total air R. A T. A R was $8 3 million.
Speaker 4: Maintenance services ARR or MARR was 6.9.
Maintenance services a R. R M. A R R.
$6 9 million.
Speaker 4: Description ARR or SAR was 1.4.
Subscription E. R. R. R. Pasadena was $1 4 million.
Speaker 4: Once we have released our commercial cloud platform, we'll begin tracking cloud AR.
Once we have released our commercial cloud platform will begin tracking cloud era.
Yeah.
Speaker 4: In addition to the recurring revenue metrics noted above, we will begin to disclose the total number of orders relating to perpetual product, subscription, and cloud deals.
In addition to the recurring revenue metrics noted above we will begin to disclose the total number of orders relating to your perpetual product subscription and cloud deals.
Speaker 4: The intent of this metric is to illustrate the pure volume of sales without the complexity of multiple gap revenue.
The intent of this metric is to illustrate the pure volume of sales without the complexity of multiple GAAP revenue streams.
Speaker 4: We are pleased to report that in Q3 23, we closed 60 perpetual and 7 subscriptions.
We are pleased to report that in Q3 'twenty three we closed 60 perpetual and subscription orders. This brings our year to date total to 193 perpetual and 62 subscription orders.
Speaker 4: This brings our year-to-date total to 193 perpetual and 62 subscriptions.
Speaker 4: 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.
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.
Certainly.
Speaker 1: Certainly. Everyone at this time will be conducting a question and answer session. If you have any questions or comments, please press star one on your phone at this time.
At this time, we'll be conducting a question and answer session. If you have any questions or comments. Please press star one on your phone at this time we.
Speaker 1: We do ask that while posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality.
We do have some are posing your question. Please pickup your handset if you're listening on speaker phone to provide optimum sound quality.
Once again, if you have any questions or comments. Please press star one on your phone.
Speaker 1: Again, if you have any questions or comments, please press star 1 on.
Right.
Your first question is coming from per Ostlund from Craig Hallum Capital. Your line is live.
Speaker 1: Your first question is coming from Per Ausland from Craig Hallam Capital. Your line is live.
Thanks, Good afternoon, David and Eric.
Speaker 5: Thanks. Good afternoon, Dana and Eric. Congratulations, first and foremost, on the ZOPTA vestiture. It's nice to see the resolution there after the process. It really didn't start that long ago, so congrats on that.
Congratulations first and foremost on the unresolved divestiture, it's nice to see the resolution thereafter.
So really didn't start that long ago. So.
Congrats on that.
Sure.
A lot of places we could go here I think.
Obviously looking at the release and seeing that the <unk> business is now in the discontinued operations I think it does really highlight the margin profile of the Standalone detection business.
Speaker 5: Obviously, looking at the release and seeing that the Zopf business is now in the discontinued operations, I think it does really highlight
Speaker 5: margin profile of the standalone detection business. So maybe just a couple of questions around that to start out with if I could.
So maybe just a couple of questions around that to start out with if I could.
<unk>.
The.
Speaker 5: Expense structure looks like it came down by about a third year over year, the operating expense structure. You've done an admirable job there and spoken at some length about that over the last couple of quarters. Is there more to go there on that front and sort of part and parcel with that, do you have a break-even revenue level in mind for the standalone AI business, whether it's on an EBITDA basis or a cash flow?
Expense structure looks like it came down by about a third year over year, the operating expense structure.
You've done an admirable job there and then spoken at some length about that over the last couple of quarters is there more to go there.
On that front.
And sort of part and parcel with that do you have.
A breakeven revenue level in mind for the Standalone AI business, whether it's on an EBITDA basis or a cash flow basis.
Thanks pair so I'm going to turn the questions over to Eric but just wanted to say thanks and thanks for the comments on soft you know just maybe one data point there yeah. We were thrilled that our elected took both the technology and the.
Speaker 3: Thanks pair, so I'm going to turn the questions over to Eric, but just wanted to say thanks and thanks for the comments on soft, you know, just maybe 1 data point there. You know, we were thrilled that.
Speaker 3: elected took both the technology and the team. You know, there was
Team.
You know there was great market potential I think for the soft technology is just really difficult to do with two very different lines of business kind of under the same umbrella. So.
Speaker 3: Great market potential, I think, for this off technology is just really difficult to do with two very different lines of business kind of under the same umbrella. So so pleased that you're already kind of zeroing in on what the detection business looks like standalone. So, because that's what we've been focused on and and trying to get to on these calls. So with that, I'm going to turn it over to Eric. So we can talk about.
I'm, so pleased that you're already kind of zeroing in on what the detection business looks like Standalone. So because that's you know what we've been focused on in and trying to get to on these calls so with that I'm going to turn it over to Eric. So he can talk about kind of expense structures and you know where our thoughts are.
Speaker 6: kind of expense structures and where our thoughts are.
Yes.
Thanks Dana.
Yes, I think on the Saar.
Where the furloughs and all the other things we did in the last three quarters I don't think theres going to be as much savings next quarter.
Speaker 4: With the furloughs and all the other things we did in the last three quarters, I don't think there's going to be as much savings next quarter as you might expect if you're just looking at what we lost in the past historically for Zoft and thinking it's going to come down significantly. We had pulled back on clinical spend and employee spend significantly. So there could be some, and we did release.
Might expect if youre just looking at what we lost in the past historically resolved.
He is going to come down significantly we had we had pulled back on clinical spend and an employee spend significantly so there could be some and we did release.
Speaker 4: In a 10k the direct soft impact so there was about
In our 10-K to direct <unk> impact.
There was about.
<unk>.
Speaker 4: $377,000 loss in Q3. So that's called out. So that's what we lost from direct ZOP business. So in theory, we might pick some of that up going forward.
The $377000 loss in Q3, so thats called out so.
That's when we lost from direct off business. So.
So in theory, we might pick some of that up going forward.
Well I think it'll be.
I don't think it'll be.
Much much more than that.
Okay.
Speaker 5: Okay, so I guess I guess maybe maybe on that that that point since.
So I guess, maybe maybe beyond that.
That point since.
Speaker 5: since one of the discussion points in the prepared remarks.
Since one of the one of the discussion points in the prepared remarks.
Speaker 5: is growth initiatives. So, if we look at the third quarter expense structure for, again, for detection standalone, how much might actually need to come back now that you've got the ZAF proceeds and that transaction's completed and you've raised the funds through the out-the-market facility and you feel good about your cash position?
Is <unk>.
Growth initiatives. So if we look at the third quarter expense structure for again for detection stand alone.
How much might actually need to come back now that you've got dissolved proceeds and that transaction is completed and you've raised the funds from the aftermarket facility you feel good about your cash position.
Speaker 5: Is there spend that might need to come back now that you have that singular focus on AI, whether it is sort of redeveloping the sales force, you commented Dana, how the direct force is maybe down 50% year over year in terms of people. Is that something that gets bolstered? What else might get bolstered now that you feel like you're level set around one initiative?
Is there a spend that might need to come back now that you have that singular focus on AI, whether it is sort of redeveloped. The Salesforce you commented Dana I'll yeah.
Direct forces member, maybe down 50% year over year yeah.
Is that something that gets bolstered what else might get bolstered now that you feel like youre levels.
Round, one initiatives mhm, so so you're you're tracking right along with that so we are going through an exercise right now to refine actually our budget for FY 'twenty four.
Speaker 6: So you're, you're tracking right along with us. So we are going through an exercise right now to refine actually our budget for 24 so that we can get that approved by our board at the upcoming December meeting. But there are really 2 areas that we're looking at for investment. So we've got, you know, I'll say spent the money right or have any commitments out there, but it is what we're looking at. So that we can determine what the ROI would be.
So that we can get that approved by our board at the upcoming December meeting, but there are really two areas that we're looking at for investments. So we've got you know I'll say spent the money right or have any commitments out there, but it is what we're looking at so that we can determine what the ROI would be the first one is on this.
Speaker 3: The 1st, 1 is on the sales team side. So how can we do some restructuring of the current sales team to get them better focused on new business versus ongoing account management? So, I talked a little bit about that. We believe that we have a significant amount of kind of lapsed revenue just have had team members.
Sales team side, so how can we do some restructuring of the current sales team to get them better focused on new business versus ongoing account management. So I talked a little bit about that we believe that we have a significant amount of kind of lapsed revenue.
How 'bout had team members on top of ensuring that accounts stayed current on their maintenance support agreements. If they had purchased a perpetual license so kind of getting more of an account management focus to some members of the team and then bringing on some additional team members focused on new business and then the second area.
Speaker 6: on top of ensuring that accounts stayed current on their maintenance support agreements if they had purchased a perpetual license. So kind of getting more of an account management focus to some members of the team and then bringing on some additional team members focused on new business.
Speaker 3: And then the second area that we're looking at is regulatory. So we're in a fortunate position now of having, you know, multiple products that have been developed over the last two years.
Yeah that we're looking at is regulatory so we're in a fortunate position now of having you know multiple products that have been developed over the last two years kind of multiple versions of those products and then the work with Google as well so we need to figure out how we can enable our regulatory team.
Speaker 3: kind of multiple versions of those products and then the work with Google as well. So we need to figure out how we can enable our regulatory team.
Speaker 3: to work in parallel through multiple approval processes instead of being very sequential. So that way we can begin to commercialize solutions in markets faster. So those are the two areas that we're looking at.
To work in parallel through multiple approval processes instead of being very sequential so that way. We can begin to commercialize solutions in markets faster. So those are the two areas that we're looking at them. So I think to your point, you probably will see a bit of an uptick in spend but.
Speaker 3: So, I think to your point, you probably will see a bit of an uptake and spend, but.
Speaker 3: We're going to continue to be really conservative and cautious, you know, to use the phrase not get out in front of our skis in that regard, but there will be a little bit there.
We're going to continue to be really conservative and cautious I'm. You know do you use the phrase not get out in front of our skis in that regard, but there will be a little bit there.
Okay, that's more than reasonable.
Speaker 5: Okay, that's more than reasonable. Um, actually, I'm going to come back to my 1st question just because I question was the length.
Actually I'm going to come back to my first question just because.
Question was lengthy.
Speaker 5: Now that you have the detection business, you know, as really it's the singular focus and the cost structures, most.
Now that you have the detection business is really it's the singular focus.
And the cost structures.
Mostly I think.
Set at this point.
Speaker 5: Is there a breakeven revenue level in mind, whether it's on an EBITDA basis or a cash flow basis?
Is there is there a breakeven revenue level in mind.
It's on an EBITDA basis, or a cash flow basis.
Or is it too early to say.
Speaker 4: I think it's too early to say. Yeah, that's what I was going to say. All the initiatives and inspections. I mean, you could look at the EBITDA that we released for this quarter and just...
I think I failed to say yeah.
Yeah.
[laughter].
And I just mentioned I mean, you can look at that.
EBITDA then we released for this quarter and just.
Minus one one and.
Speaker 4: if we had that much more in sales, did we break even? But I don't know that the cost structure is completely solidified yet, since there's a lot we're looking at.
Say, if we had that much more sales that would be breakeven, but I don't I don't know that the cost structure is completely solidified yet there's a lot we're looking at.
Okay, that's fair.
Speaker 5: Okay, that's fair. All right. I'll let I'll let some other people ask some questions. Thanks.
I'll, let I'll, let some other people ask some questions. Thanks.
Yep. Thanks.
Thank you once again, everyone. If you have any questions or comments. Please press star then one on your phone.
Speaker 1: Thank you. Once again, everyone, if you have any questions or comments, please press star then one on your phone. Please hold.
Please hold while we poll for questions.
Thank you that concludes our Q&A session I will now hand, the conference back to Dana Brown, President and Chief Executive Officer for closing remarks. Please go ahead.
Speaker 1: Thank you. That concludes our Q&A session. I'll now hand the conference back to Dana Brown, President and Chief Executive Officer, for closing remarks. Please go ahead.
Speaker 3: Thank you, operator. In conclusion, we're making bold moves to rapidly transform this company with the focus on maintaining stability, preserving cash and building a defensible and competitive long term strategy that diversifies our revenue stream and smooths out that customer concentration.
Thank you operator in conclusion, we're making bold moves to rapidly transform this company with a focus on maintaining stability preserving cash and building a defensible and competitive long term strategy that diversifies, our revenue stream and smooth out that customer concentration demand for our technology continues to be strong and the.
Speaker 3: Demand for technology continues to be strong and the evidence supporting it continues to grow and our team continues to secure opportunities with some of the most prestigious and esteemed healthcare facilities worldwide.
Evidence supporting it continues to grow and our team continues to secure opportunities with some of the most prestigious and esteemed health care facilities worldwide.
Speaker 3: I remain optimistic about the company and its future, and I firmly believe in the bright future of the company and our ability to generate significant shareholder value. Thank you and have a great evening.
Main optimistic about the company and its future and I firmly believe in the bright future of the company and our ability to generate significant shareholder value. Thank you and have a great evening.
Speaker 1: Thank you everyone, this concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.
Thank you everyone. This concludes today's event you may disconnect at this time and have a wonderful day. Thank you for your participation.