Q2 2024 iCAD Inc Earnings Call
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Speaker Change: Eric Lonnqvist, Unknown Executive, Jessica Burns, Leonor Faber, Eric Lonnqvist, Eric Lonnqvist, Unknown Executive, Jessica Burns, Unknown Executive, Jessica Burns, Unknown Executive,
Operator: After management's prepared remarks, there will be a question and answer session. I would now like to turn the call over to Rosalind Christian of Investor Relations. The floor is yours.
Speaker Change: [inaudible]
Rosalind Christian: Good day and welcome to the ICAD Incorporated second quarter 2024 earnings call. At this time, all participants are on a listen-only mode. After management's prepared remarks, there will be a question and answer session. I would now like to turn the call over to Rosalind Christian of Investor Relations. The floor is yours.
Rosalind Christian: Thank you, operator. Good afternoon, everyone. Thank you for joining us today for ICAD's second quarter 2024 earnings call. On the call today, we have Dana Brown, our President and Chief Executive Officer, and Eric Lonnqvist, 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. These forward-looking statements are based on ICAB's current expectations and are subject to uncertainty and changes in circumstances. However, actual results may differ materially from these expectations.
Rosalind Christian: Thank you, operator. Good afternoon, everyone. Thank you for joining us today for ICAD's second quarter 2024 earnings call. On the call today, we have Dana Brown, our President and Chief Executive Officer, and Eric Lonnqvist, our Chief Financial Officer.
Rosalind Christian: 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. ICAD undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. Also, please 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. You can find a reconciliation of our gap to non-gap measures at the end of the earnings release. And with that, I'll turn the call over to Dana.
Speaker Change: 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 Change: These forward-looking statements are based on ICAB's current expectations and are subject to uncertainty and changes in circumstances.
Speaker Change: Actual results may differ 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.
Speaker Change: ICAD undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.
Speaker Change: Also, please 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 Change: You can find a reconciliation of our gap to non-gap measures at the end of the earnings release. And with that, I'll turn the call over to Dana.
Dana Brown: Thank you, Rosalyn, and good afternoon, everyone. I opened our last call recapping the progress we have made in executing a three-phase transformation plan. We completed phases one and two, in which we focused on stabilizing our cash burn, strengthening our leadership team, and divesting the ZOPT business. Phase three, Investing in Growth Initiatives, began in the first quarter of 2024, with a focus on expanding into key accounts and new markets with our existing solution. This phase is focused on maximizing revenue from our sizable installed base, upgrading customers to new versions, including the Transition to the Cloud, or SaaS, and Accelerating Deployment Across Large National Accounts.
Dana: Thank you, Rosalyn, and good afternoon, everyone.
Dana: I opened our last call recapping the progress we have made executing a three-phase transformation plan. We completed phases one and two, in which we focused on stabilizing our cash burn, strengthening our leadership team, and divesting the ZOCT business.
Speaker Change: Phase 3, Investing in Growth Initiatives, began in first quarter 2024 with a focus on expanding into key accounts and new markets with our existing solutions.
Speaker Change: This phase is focused on maximizing revenue from our sizable install base, upgrading customers to new versions, including the Transition to Cloud, or SAS, and accelerating deployment across large national accounts.
Dana Brown: This quarter continued the strategic momentum from Q1, during which we secured numerous new deals, announced the commercial availability of our profound cloud platform, and reported growth in our ARR metric. I'm pleased to announce that Q2 was another successful quarter for ICAD with revenue growth of 21% compared to the second quarter of 2023.
Speaker Change: This quarter continued the strategic momentum from Q1, during which we secured numerous new deals, announced the commercial availability of our profound cloud platform, and reported growth in our ARR metrics.
Speaker Change: I'm pleased to announce Q2 was another successful quarter for ICAD with revenue growth of 21% compared to the second quarter of 2023.
Dana Brown: Before we dive into the highlights of this quarter, let's take a moment to review the sizable market opportunity ahead of us and how ICAT is positioned for long-term growth. First, ICAT is the leading provider of AI-powered breast cancer detection solutions. Our technology is backed by over 50 clinical studies and has received global clearances, including FDA clearance, CE marking, and Health Canada licensing.
Speaker Change: Before we dive into the highlights of this quarter, let's take a moment to step back and review the sizable market opportunity ahead of us and how ICAT is positioned for long-term growth.
Dana Brown: With a 52% reduction in reading time and enhanced clinical performance, our solutions deliver superior accuracy and efficiency, which we believe significantly elevates us above our peers. Second, we all need to keep in mind the fact that the market for AI in mammography is vastly underpenetrated, with only 37% of US mammography sites currently using AI. This presents a substantial opportunity for ICAD to expand its market leadership globally. Third, while we're still a relatively small company, we have a global presence with more than 4,000 lifetime customers across 50 countries.
Speaker Change: First, ICAT is the leading provider of AI-powered breast cancer detection solutions.
Speaker Change: Our technology is backed by over 50 clinical studies and has received global clearances, including FDA clearance, CE marking, and Health Canada licensing.
Speaker Change: With a 52% reduction in reading time and enhanced clinical performance, our solutions deliver superior accuracy and efficiency, which we believe significantly elevates us above our peers.
Speaker Change: Second, we all need to keep sight of the fact that the market for AI in mammography is vastly underpenetrated, with only 37% of U.S. mammography sites currently using AI.
Speaker Change: This presents a substantial opportunity for ICAD to expand its market leadership globally.
Speaker Change: Third, while we're still a relatively small company, we have a global presence with more than 4,000 lifetime customers across 50 countries.
Dana Brown: Fourth, our strategic partnerships, including a 20-year collaboration with Google Health, enhance the strength and precision of our technology and expand access to millions of women and providers worldwide. These partnerships not only validate our technology but also provide a robust platform for future innovation and growth. And finally, with the release of our cloud platform, we're at the front end of evolving to a SaaS model. This shift is not only creating a more robust service offering for our customers, given its ease of integration and faster deployment, but will also create a more predictable, high-margin economic engine.
Speaker Change: Fourth, our strategic partnerships, including a 20-year collaboration with Google Health, enhance the strength and precision of our technology and expand access to millions of women and providers worldwide.
Speaker Change: These partnerships not only validate our technology, but also provide a robust platform for future innovation and growth.
Speaker Change: And finally, with the release of our cloud platform, we're at the front end of evolving to a SaaS model.
Speaker Change: This shift is not only creating a more robust service offering for our customers, given its ease of integration and faster deployment.
Dana Brown: It will take some time, but as SAS grows sequentially as a percentage of our revenue, this transformation should ultimately drive enhanced profitability and cash flow. While it's early days, the adoption of our SAS offering has gone better than planned. With our leading technology, significant market potential, global scale, strong partnerships, and exciting strategic shift to SaaS, ICAT is well positioned to capitalize on the vast opportunities ahead. Now, let's discuss the Q2 deal highlights.
Speaker Change: But we'll also create a more predictable, high-margin economic engine. It will take some time, but as SAS grows sequentially as a percentage of our revenue, this transformation should ultimately drive enhanced profitability and cash flow.
Speaker Change: While early days, the adoption of our SAS offering has been going better than planned.
Speaker Change: With our leading technology, significant market potential, global scale, strong partnerships, and exciting strategic shift to SaaS, ICAT is well positioned to capitalize on the vast opportunities ahead.
Dana Brown: In the second quarter, we closed 60 perpetual deals, 29 subscription deals, and 10 cloud deals. Some of these included Winsong Radiology, one of U.S. Radiology Specialists Incorporated's National Network of Premier Providers of Diagnostic Imaging Services. They signed a three-year deal for profound detection and profound density on profound cloud. Windsor provides over 100,000 exams a year. Steinberg Diagnostics, located in Nevada, reduced their hardware footprint and migrated to ICAD's cloud platform. In fact, their CIO noted it was the smoothest cloud conversion they had experienced.
Speaker Change: Now let's discuss the Q2 deal highlights.
Speaker Change: In the second quarter, we closed 60 perpetual deals, 29 subscription deals, and 10 cloud deals.
Speaker Change: Some of these included Winsong Radiology, one of U.S. Radiology Specialists, Inc., National Network of Premier Providers of Diagnostic Imaging Services.
Speaker Change: They signed a three-year deal for profound detection and profound density on profound cloud. Winsome provides over 100,000 exams a year.
Speaker Change: Steinberg Diagnostic, located in Nevada, reduced their hardware footprint and migrated to ICAD's cloud platform. In fact, their CIO noted it was the smoothest cloud conversion they had experienced.
Dana Brown: Steinberg provides over 75,000 annual exams and made a four-year commitment for profound detection and profound density. Baylor Scott & White Health System signed a three-year subscription agreement for eight of their sites, securing a long-term commitment for profound detection 2D and 3D. We closed our first opportunity with Change Healthcare, one of our PACS partners for Washington Hospital in California. This was also a subscription deal.
Speaker Change: Steinberg provides over 75,000 annual exams and made a four-year commitment for profound detection and profound density.
Speaker Change: Baylor Scott & White Health System signed a three-year subscription agreement for eight of their sites, securing a long-term commitment for profound detection 2D and 3D.
Speaker Change: We closed our first opportunity with Change Healthcare, one of our PACS partners for Washington Hospital in California. This was also a subscription deal.
Dana Brown: And through our FAIRRM partnership, we're expanding at Sutter Health in Northern California. We're expanding to four more locations for a total of eight locations out of 31 using ICAD. This is a cloud deal for us, and we're pleased to report that you're experiencing very fast turnaround times under four minutes round trip.
Speaker Change: And through our Fairarm partnership, we're expanding at Sutter Health in Northern California. We're expanding to four more locations for a total of eight locations out of 31 using iCAD.
Speaker Change: This is a cloud deal for us, and we're pleased to report they're experiencing very fast turnaround times under four minutes round trip. We've also improved their cancer detection rate from 4.8 to 6.3 per 1000, a 30% improvement.
Dana Brown: We've also improved their cancer detection rate from 4.8 to 6.3 per 1,000, a 30% improvement. Moving to partnership updates, In April, we announced our partnership with Densitize.
Dana Brown: Through this partnership, ITAD will be reselling Intelimamo and Intelimaven, products designed to offer a scalable, sustainable quality assurance system tailored for mammography facilities to maximize operational efficiency, optimize compliance with the FDA's Mammography Quality Standards Act, and equip and meet ACR accreditation standards. Densitalk's operational AI solutions, Intellimamo and Intellimavine, together with ICAD's AI-powered Breast Health Suite This synergy ensures that every woman receives the most precise and personalized care journey possible.
Speaker Change: Moving to partnership updates. In April, we announced our partnership with Densitas.
Speaker Change: Through this partnership, iCAD will be reselling Intellimamo and Intellimavine.
Speaker Change: Products designed to offer a scalable, sustainable, quality-assurance system tailored for mammography facilities to maximize operational efficiency, optimize compliance with the FDA's Mammography Quality Standards Act, EQIP, and meet ACR accreditation standards.
Speaker Change: Densitask's operational AI solutions, Intellimamo and Intellimaven, together with ICAD's AI-powered Breast Health Suite, elevate the standard for image quality, screening, and diagnostic accuracy in comprehensive care with state-of-the-art AI innovations.
Speaker Change: This synergy ensures that every woman receives the most precise and personalized care journey possible.
Dana Brown: In November, we announced our intent to partner with CancerIQ, and we formally executed this partnership agreement in April. Cancer IQ helps providers overcome the challenges of managing cancer risk assessments to offer more personalized, evidence-based care pathways that lead to early cancer detection and prevention. Integrated with leading EHR workflows, CancerIQ's Lifetime Risk Calculator offers tire-acusic scores 7 and 8, Gale, and NCCN Guidelines.
Speaker Change: In November, we announced our intent to partner with CancerIQ, and we formally executed this partnership agreement in April.
Speaker Change: Cancer IQ helps providers traverse the challenges of managing cancer risk assessments to offer more personalized, evidence-based care pathways that lead to early cancer detection and prevention.
Speaker Change: Integrated with leading EHR workflows, CancerIQ's Lifetime Risk Calculator offers Tyracusec scores 7 and 8, GAIL, and NCCN guidelines.
Dana Brown: Coupled with ICAD's density and short-term AI risks from the profound suite, clinicians will have a clear picture of a patient's future breast cancer risk and whether or not breast cancer is detected today. Through this partnership and the combination of our solutions, we will provide a seamless way to uniquely inform physicians and patients of cancer risk across a variety of assessment models ranging from one year to lifetime risk, leading to earlier detection of breast cancer when treatments work best, are less invasive and costly, and outcomes are improved.
Speaker Change: Coupled with ICAD's density and short-term AI risk from the profound suite, clinicians will have a clear picture of a patient's future breast cancer risk and if breast cancer is detected today.
Speaker Change: Through this partnership and the combination of our solutions, we will provide a seamless way to uniquely inform physicians and patients of cancer risk across a variety of assessment models spanning from one year to lifetime risk.
Speaker Change: Leading to earlier detection of breast cancer when treatments work best are less invasive and costly and outcomes are improved
Dana Brown: In the second quarter, we also expanded ICAD's global presence. We secured a deal for eight detection and density licenses to a prestigious health group in Dusseldorf, Germany. We have a growing pipeline for our cloud-delivered solutions in Europe, Israel, and the Arab Emirates, with several of the opportunities being quite large. The availability of ICAD's commercial cloud platform also enables us to target small practices that we were not able to reach with our previous on-prem deployment model. And lastly, expansion opportunities are well underway in Chile, Argentina, Mexico, and Japan. We expect to be active in these countries in the next 12 months.
Speaker Change: In second quarter, we also expanded ICAD's global reach. We secured a deal for eight detection and density licenses to a prestigious health group in Dusseldorf, Germany.
Speaker Change: We have a growing pipeline for our cloud-delivered solutions in Europe, Israel, and Arab Emirates, with several of the opportunities being quite large.
Speaker Change: Availability of ICAD's commercial cloud platform also enables us to target small practices that we were not able to reach with our previous on-prem deployment model.
Speaker Change: And lastly, expansion opportunities are well underway in Chile, Argentina, Mexico, and Japan. We expect to be active in these countries in the next 12 months.
Dana Brown: Turning now to marketing and a quick review of our second quarter conference and publication activity. In April, we participated in SBI, the Society of Breast Imaging Symposium held in Montreal, Canada. With over 1,600 attendees, nearly 90% of which are trained breast imagers, this is the largest dedicated meeting for key ICAD targets. This show delivers strong leads to our sales pipeline and advances the stages of deals in progress.
Speaker Change: Turning now to marketing and a quick review of our second quarter conference and publication activity.
Dana Brown: Over the course of the show, our team gave over 100 demos of the profound suite of solutions. Of note, Dr. Sherwin Chu, a breast imaging fellow at Washington University School of Medicine, received the Wendell Scott Research Award for his paper, The Impact of Clinical Implementation of an Artificial Intelligence Program on Screening Mammography Outcomes, which highlights the potential of AI-CAD to improve cancer detection rates and recall rates in clinical settings within the U.S. The award is presented for the Most Outstanding Abstract submitted by a Breast Imaging Fellow to the symposium.
Speaker Change: In April, we participated in SBI, the Society of Breast Imaging Symposium held in Montreal, Canada. With over 1,600 attendees, nearly 90% of which are trained breast imagers, this is the largest dedicated meeting for key ICAD targets.
Speaker Change: This show delivers strong leads to our sales pipeline and advances the stages of deals in progress. Over the course of the show, our team gave over 100 demos of the profound suite of solutions.
Speaker Change: Of note, Dr. Sherwin Chu, a Breast Imaging Fellow at Washington University School of Medicine, received the Wendell Scott Research Award for his paper, The Impact of Clinical Implementation of an Artificial Intelligence Program on Screening Mammography Outcomes.
Speaker Change: which highlights the potential of AI-CAD to improve cancer detection rates and recall rates in clinical settings within the U.S. The award is presented to the most outstanding abstract submitted by a breast imaging fellow to the symposium.
Dana Brown: In May, we participated in HCP, the HealthConnect Partners Radiology and Imaging Reverse Expo in Dallas. The audience focus is radiology and imaging directors, healthcare administrators, and executives. It's a more intimate and exclusive setting with only 90 attendees.
Speaker Change: In May, we participated in HCP, the HealthConnect Partners Radiology and Imaging Reverse Expo in Dallas.
Speaker Change: The audience focuses radiology and imaging directors, healthcare administrators, and executives. It's a more intimate and exclusive setting with only 90 attendees.
Dana Brown: We had over 50 meetings, which resulted in several new, larger opportunities that are underway in the sales process. In May, we also participated in our Gantry Partners Siemens Innovations for Healthcare 2024 event in Orlando, Florida. Over 900 Siemens customers were present.
Speaker Change: We had over 50 meetings, which resulted in several new, larger opportunities that are underway in the sales process.
Speaker Change: In May, we also participated in our Gantry Partners Siemens Innovations for Healthcare 2024 in Orlando, Florida. Over 900 of Siemens customers were present.
Dana Brown: And lastly, to round out the quarter, in June, we participated in another important and large show for us, CIMM, the Society for Imaging Informatics and Methods. With an audience of over 1,500 attendees, it's a very technically focused show with an audience of clinicians, imaging IT professionals, scientists, and developers. At the show, our team delivered numerous demos and met with multiple current and new partners, OEMs, PACs, and AI platforms. Also at this show, Dr. Mark Trail, a key KOL for ICAD, delivered his abstract titled, "Change in Image-Derived AI-Based Risk Scores to Identify Women at an Increased Likelihood of Breast Cancer." This retrospective study analyzed risk score changes between prior and current DBT mammograms in cohorts of 514 controls and 52 cancers.
Speaker Change: And lastly, to round out the quarter, in June, we participated in another important and large show for us, SIM, the Society for Imaging Informatics in Medicine.
Speaker Change: With an audience of over 1,500 attendees, it's a very technically focused show with an audience of clinicians, imaging IT professionals, scientists, and developers.
Speaker Change: At the show, our team delivered numerous demos and met with multiple current and new partners, OEMs, PACs, and AI Platform.
Speaker Change: Also at this show, Dr. Mark Trail, a key KOL for ICAD, delivered his abstract titled Change in Image-Derived AI-Based Risk Scores to Identify Women at an Increased Likelihood of Breast Cancer. https://www.cdc.gov.au
Speaker Change: This retrospective study analyzed risk score changes between prior and current DBT mammograms in cohorts of 514 controls and 52 cancers.
Dana Brown: Profound AI Risk predicts one-year breast cancer risk by analyzing mammographic features, density, and age. The results indicate that a change in an AI-derived risk score between a woman's prior and current mammograms is a strong predictor of breast cancer risk, with a twofold increase in risk for every 0.2 unit increase in score. Notably, a significant proportion of women initially classified as low risk showed a substantial increase in risk at their subsequent mammogram. Outside of the US, we participated in RoCo Germany, held in Weisbaden.
Speaker Change: Profound AI Risk predicts one-year breast cancer risk by analyzing mammographic features, density, and age.
Speaker Change: The results indicate that a change in an AI-derived risk score between a woman's prior and current mammograms is a strong predictor of breast cancer risk, with a two-fold increase in risk for every 0.2 unit increase in score.
Speaker Change: Notably, a significant proportion of women initially classified as low-risk showed a substantial increase in risk at their subsequent mammogram.
Speaker Change: Outside of the US, we participated in RoCo Germany, held in Weisbaden, SIRAM, the Spanish Radiology Society in Barcelona,
Dana Brown: SIRAM, the Spanish Radiology Society, in Barcelona. The SIPHM Congress in France and the SRC in Switzerland. We were featured in numerous publications in the second quarter, and I'll highlight just a few for you. First, a publication from the July issue of Radiology Imaging Cancer titled AI-Enhanced Mammography with Digital Breast Tomosynthesis for Breast Cancer Detection Clinical Value in Comparison with Human Performance. This paper reported on the results of a study designed to compare two deep learning-based commercially available artificial intelligence systems for mammography with digital breast tomosynthesis and benchmark them against the performance of radiologists. The two AI systems were ours in ScreenPoint. Of 419 female patients with a median age of 60 years, 58 had histologically proven breast cancer.
Speaker Change: The SIPHM Congress in France and SRC in Switzerland.
Speaker Change: We were featured in numerous publications in the second quarter, and I'll highlight just a few for you.
Dana Brown: The AUC was 0.86 for ScreenPoint's Transpara and 0.93 for ICAD's Profound AI. Radiology Today featured insights from Dr. Kathy Schilling of the Lynn Women's Health and Wellness Institute at Baptist Health Boca Raton Regional Hospital. Profound AI is featured, demonstrating how AI is revolutionizing breast cancer screening, helping their radiologists find 23% more cancers without increasing recall rates. In a webinar titled Revolutionizing Cancer Care: The Role of AI in Breast Imaging, Dr. Nikki Gidwani of Stony Brook Hospital highlights her personal experience with AI and the power of ICAD's newest algorithm. She discusses how comprehensive breast imaging centers are staying at the forefront with best-in-class AI cancer detection, risk evaluation, and breast arterial pacification assessment solutions.
Speaker Change: First, a publication from the July issue of Radiology Imaging Cancer titled, AI Enhanced Mammography with Digital Breast Tumor Synthesis for Breast Cancer Detection, Clinical Value in Comparison with Human Performance.
Dana Brown: This webinar is available for replay via our website. And lastly, an op-ed from myself, titled Uniting for Health Equity: Addressing Breast Cancer Disparities, was published on Juneteenth by Ant Mini, a leading radiology news publication. The purpose of the op-ed was to acknowledge the persistent disparities in the realm of breast health, where minority groups face disproportionately higher risks of certain aggressive breast cancers and poor outcomes compared to white women. The statistics are sobering.
Speaker Change: This paper reported on the results of a study designed to compare two deep learning based commercially available artificial intelligence systems for mammography with digital breast tomosynthesis and benchmark them against the performance of radiologists.
Speaker Change: The two AI systems were ours in ScreenPoint.
Speaker Change: Of 419 female patients with a median age of 60 years, 58 had histologically proven breast cancer. The AUC was 0.86 for ScreenPoint's Transpara and 0.93 for ICAD's Profound AI.
Speaker Change: Radiology Today featured insights from Dr. Kathy Schilling of Lynn Women's Health and Wellness Institute at Baptist Health Boca Raton Regional Hospital.
Speaker Change: Profound AI is featured, demonstrating how AI is revolutionizing breast cancer screening, helping their radiologists find 23% more cancers without increasing recall rates.
Speaker Change: In a webinar titled Revolutionizing Cancer Care, The Role of AI in Breast Imaging, Dr. Nikki Gidwani of Stony Brook Hospital highlights her personal experience with AI and the power of ICAD's newest algorithm.
Speaker Change: She discusses how comprehensive breast imaging centers are staying at the forefront with best-in-class AI cancer detection, risk evaluation, and breast arterial calcification assessment solutions. This webinar is available for replay via our website.
Speaker Change: And lastly, an op-ed from myself, titled Uniting for Health Equity, Addressing Breast Cancer Disparities, was published on Juneteenth by Ant Mini, a leading radiology news publication.
Speaker Change: The purpose of the op-ed was to acknowledge the persistent disparities in the realm of breast health, where minority groups face disproportionately higher risks of certain aggressive breast cancers and poor outcomes compared to white women.
Dana Brown: Black women are not only more likely to be diagnosed with breast cancer at younger ages and in later stages, but they also have a higher mortality rate. According to recent data from the American Cancer Society, black women are 40% more likely to die from breast cancer than white women, and this gap widens among younger age groups.
Speaker Change: The statistics are sobering.
Speaker Change: Black women are not only more likely to be diagnosed with breast cancer at younger ages and later stages, but they also have a higher mortality rate.
Speaker Change: According to recent data from the American Cancer Society, black women are 40% more likely to die from breast cancer than white women, and this gap widens among younger age groups.
Dana Brown: Moreover, the Centers for Disease Control and Prevention report that black women have an 81% higher rate of triple negative breast cancer, an aggressive subtype that can be more challenging to detect and treat through traditional screening methods. This incident rate of triple negative is particularly concerning in light of the fact that black women are also given fewer digital breast tomosynthesis, DBT, or 3D mammograms than other racial and ethnic groups. Even though DBT is better able to detect aggressive cancers, especially when complemented with mammographic artificial intelligence solutions, black women face barriers to receiving the care they need due to a lack of representation in the health care system, lack of provider cultural competence, and substandard care.
Speaker Change: Moreover, the Centers for Disease Control and Prevention report that black women have an 81% higher rate of triple negative breast cancer, an aggressive subtype that can be more challenging to detect and treat through traditional screening methods.
Speaker Change: This incident rate of triple negative is particularly concerning in light of the fact that black women are also given fewer digital breast tomosynthesis DBT or 3d mammograms than other racial and ethnic groups
Speaker Change: Even though DBT is better able to detect aggressive cancers, especially when complemented with mammographic artificial intelligence solutions.
Speaker Change: Black women face barriers to receiving the care they need due to a lack of representation in the healthcare system, lack of provider cultural competence and substandard care.
Dana Brown: The use of patient navigators who facilitate communication and help to navigate the complex healthcare system, along with enhanced physician education regarding health disparities, including the impact of systemic racism and implicit biases, could significantly improve breast cancer outcomes for black women, and advocating for the inclusion of mammographic AI assessments within breast cancer screenings adds an unbiased layer of informative data as the algorithm isn't biased by the color of the patient's skin or where she lives. This dual approach of patient navigation and physician education, including unbiased AI, addresses both the interpersonal and systemic levels of health care, fostering an environment where black women feel heard, respected, and adequately supported throughout their breast cancer journey. Globally, over 2.3 million women are diagnosed annually with breast cancer, and every 47 seconds, someone loses their life to this disease.
Speaker Change: The use of patient navigators who facilitate communication and help to navigate the complex healthcare system.
Speaker Change: along with enhanced physician education regarding health disparities, including the impact of systemic racism and implicit biases, could significantly improve breast cancer outcomes for Black women.
Speaker Change: And advocating for the inclusion of mammographic AI assessments within breast cancer screenings adds an unbiased layer of informative data, as the algorithm isn't biased by the color of the patient's skin or where she lives.
Speaker Change: This dual approach of patient navigation and physician education, including unbiased AI, addresses both the interpersonal and systemic levels of healthcare.
Speaker Change: Fostering an environment where Black women feel heard, respected, and adequately supported throughout their breast cancer journey.
Speaker Change: Globally, over 2.3 million women are diagnosed annually with breast cancer and every 47 seconds someone loses their life to this disease.
Dana Brown: Early detection is key in the fight against breast cancer, where the five-year survival rate increases to over 99% for stage one disease. Yet, over 20% of breast cancers are missed in traditional mammogram screening workflows, leading to advanced, late-stage diagnoses for many breast cancer patients. AI detection solutions, when added to a radiology workflow, are proven to improve cancer detection rates by typically greater than 23% when compared to traditional non-AI reader workflows.
Speaker Change: Early detection is key in the fight against breast cancer, where the five-year survival rate increases to over 99% for a stage one disease.
Speaker Change: Yet over 20% of breast cancers are missed in traditional mammogram screening workflows leading to advanced late-stage diagnoses for many breast cancer patients.
Speaker Change: AI detection solutions, when added into a radiology workflow, are proven to improve cancer detection rates typically greater than 23% when compared to traditional non-AI reader workflows.
Dana Brown: AI offers the potential to address disparities and improve outcomes by eliminating racial, geographic, and socioeconomic biases. ICAT is committed to this goal by ensuring diversity within its AI training data set. By using large, diverse data sets representing a wide range of backgrounds, our profound AI breast health solutions deliver accurate and equitable results for all women, regardless of race or ethnicity. Through data transparency and continuous improvement, we strive to create a world where cancer can't hide from any patient population or community. With the availability of cloud-based AI solutions, geographical barriers are minimized. For example, a mammogram can be uploaded, analyzed by AI, and reviewed by a specialized breast radiologist from anywhere in the world.
Speaker Change: AI offers the potential to address disparities and improve outcomes by eliminating racial, geographic, and socioeconomic biases.
ICAT: ICAT is committed to this goal by ensuring diversity within its AI training data set.
ICAT: By using large, diverse datasets, representing a wide range of backgrounds, our profound AI breast health solutions deliver accurate and equitable results for all women, regardless of race or ethnicity.
ICAT: Through data transparency and continuous improvement, we strive to create a world where cancer can't hide from any patient population or community.
ICAT: With the availability of cloud-based AI solutions, geographical barriers are minimized. A mammogram can be uploaded, analyzed by AI, and reviewed by a specialized breast radiologist from anywhere in the world.
Dana Brown: This ensures that high-quality breast cancer screening and expert interpretations are accessible to all women, regardless of their location, thereby promoting equitable health care access and out. Inclusivity in AI development and access is critical, ensuring that no community is left behind. Let's now turn to updates on their technology. Late last quarter, we announced commercial availability of Profound Cloud, built on the Google Cloud Platform. Our innovative Software as a Service, or SAS, platform provides medical providers with a cost-effective, secure, and scalable means to access and deploy the latest profound breast health suite of AI solutions. Powered by Google's cloud architecture and health AI innovations, Profound Cloud integrates a lightweight edge client and a cloud-based component. Together, they securely transport and process mammography screening data between imaging sources and the cloud-based AI.
ICAT: This ensures that high-quality breast cancer screening and expert interpretations are accessible to all women, regardless of their location, thereby promoting equitable health care access and outcomes.
ICAT: Inclusivity in AI development and access is critical, ensuring that no community is left behind.
Dana Brown: The process data is seamlessly delivered to systems that utilize AI outputs, including mammography review workstations, PACS, and image and data storage systems. As noted earlier, we've already secured multiple deals for our newly released cloud platform. Early performance results from the first 30,000 profound AI cloud cases delivered an impressive processing time that's over 50% faster compared to many traditional on-premise deployment solutions. The healthcare landscape is shifting towards technology as a service models, avoiding the pitfalls of investing in rapidly outdated hardware and software. As AI relies heavily on specialized hardware, like graphical processing units or GPUs, setting up and upgrading both software and hardware becomes increasingly complex.
Dana Brown: Cloud-based solutions, like Profound Cloud, address this challenge by providing software as a service to ensure that all customers access the latest technology without the initial hardware investment, support contracts, and constant updates. Moreover, Profound Cloud provides facility administrators the ability to update configurations and perform administrative tasks in multiple languages. ProfoundCloud is designed to support patients, providers, and partners while facilitating the management of diverse data types critical for comprehensive healthcare analysis. This includes 2D and 3D mammography images alongside all cancer images.
ICAT: Let's now turn to updates on our technology.
ICAT: Late last quarter, we announced commercial availability of Profound Cloud, built on the Google Cloud Platform.
Dana Brown: And in parallel, it stores limited images of benign, recall, and normal cases. ProfoundCloud also manages deep detection and density assessment results, radiology, and pathology reports, while ensuring seamless access to critical diagnostic information. Importantly, Profound Cloud securely handles de-identified patient information and provider data, adhering to strict privacy and compliance standards. The comprehensive approach enables robust analytics for informed decision making. We're seeing greater-than-planned interest in our cloud platform, surpassing our initial expectations. This is good news for ICAT on many fronts, including ease of deployment and upgrades, faster releases of new features and functions for our customers, and long-term enhanced economics that drive sustained stakeholder value.
ICAT: Our innovative Software-as-a-Service, or SAS platform, provides medical providers with a cost-effective, secure, and scalable means to access and deploy the latest profound breast health suite of AI solutions.
ICAT: Powered by Google's cloud architecture and health AI innovations, Profound Cloud integrates a lightweight edge client and cloud-based components.
ICAT: Together, they securely transport and process mammography screening data between imaging sources and the cloud-based AI.
ICAT: The process data is seamlessly delivered to systems that utilize AI outputs, including mammography review workstations, PACS, and image and data storage systems.
Dana Brown: Now we're at the front end of this business evolution, with significant transformation expected over the next three years. In the short term, as we promote and support more and more customers choosing our cloud platform, we will intentionally sacrifice immediate recognition of some gap revenue and cash flow, as we'll recognize revenue and receive cash on a monthly basis rather than up front. We will strategically deploy some capital from our strong cash position to support this strategy, and over time, this strategy should show strong economic returns as we become a more profitable company.
Speaker Change: As noted earlier, we've already secured multiple deals for our newly released cloud platform.
Speaker Change: Early performance results from the first 30,000 Profound AI Cloud cases delivered an impressive processing time that's over 50% faster compared to many traditional on-premise deployment solutions.
Speaker Change: The healthcare landscape is shifting towards technology-as-a-service models, avoiding the pitfalls of investing in rapidly outdated hardware and software.
Speaker Change: As AI relies heavily on specialized hardware, like graphical processing units, or GPUs, setting up and upgrading both software and hardware becomes increasingly complex.
Speaker Change: Cloud-based solutions, like Profound Cloud, address this challenge by providing softwares of service to ensure that all customers access the latest technology without the initial hardware investment, support contracts, and constant updates.
Speaker Change: Moreover, Profound Cloud provides facility administrators the ability to update configurations and perform administrative tasks in multiple languages.
Speaker Change: Profound Cloud is designed to support patients, providers, and partners while facilitating the management of diverse data types critical for comprehensive health care analysis.
Speaker Change: This includes 2D and 3D mammography images alongside all cancer images, and in parallel, it stores limited images of benign, recall, and normal cases.
Speaker Change: Profound Cloud also manages profound detection and density assessment results, radiology and pathology reports, while ensuring seamless access to critical diagnostic information.
Speaker Change: Importantly, ProfoundCloud securely handles de-identified patient information and provider data, adhering to strict privacy and compliance standards. The comprehensive approach enables robust analytics for informed decision making.
Speaker Change: We're seeing greater than planned interest in our cloud platform.
Speaker Change: Surpassing our initial expectations. This is good news for ICAT on many fronts, including ease of deployment and upgrades, faster releases of new features and functions for our customers, and long-term enhanced economics that drive sustained stakeholder value.
Speaker Change: Now we're at the front end of this business evolution, with significant transformation expected over the next three years.
Speaker Change: In the short term, as we promote and support more and more customers choosing our cloud platform, we will intentionally sacrifice immediate recognition of some gap revenue and cash flow.
Speaker Change: as will recognize revenue and receive cash on a monthly basis rather than up front.
Speaker Change: We will strategically deploy some capital from our strong cash position to support this strategy. And over time, this strategy should show strong economic returns as we become a more profitable company.
Dana Brown: Furthermore, as the recurring revenue builds, we'll be entering each quarter with more and more visibility and predictability. As an example of the recurring build, the 10 cloud deals closed in Q2 add in excess of $1.2 million to our backlog for both billings and GAAP revenue. I'll now turn the call over to Eric for a detailed review of our Q2 2024 financials. Good afternoon, everyone, and thank you, Dana.
Speaker Change: Furthermore, as the reoccurring revenue builds, we'll be entering each quarter with more and more visibility and predictability.
Speaker Change: As an example of the reoccurring build, the 10 cloud deals closed in Q2 add in excess of $1.2 million to our backlog for both billings and gap revenue.
Speaker Change: I'll now turn the call over to Eric for a detailed review of our Q2 2024 financials.
Eric Lonnqvist: I'll now summarize our financial results for the second quarter ended June 30, 2024. Revenue for the quarter was $5 million, an increase of $0.9 million, or 21% over the first quarter of 2022. The increase is attributable to some of the key deals Dana noted earlier in the call, helping to continue the momentum of our recently expanded sales. Second quarter 2024 product revenue was $3.3 million, up 41% over the prior year.
Eric Lonnqvist: Good afternoon, everyone, and thank you, Dana. I'll now summarize our financial results for the 2nd quarter ended June 30th, 2024.
Eric Lonnqvist: Revenue for the quarter was $5 million, an increase of $0.9 million or 21% over the first quarter of 2023.
Eric Lonnqvist: The increase is attributable to some of the key deals Dana noted earlier in the call, helping to continue the momentum of our recently expanded sales team.
Eric Lonnqvist: Second quarter 2024 product revenue was $3.3 million, up 41% over the prior year.
Eric Lonnqvist: Service revenue was $1.8 million, down 5% over the prior year. The decline was largely driven by service customers migrating to our subscription or cloud products. Moving on to gross profit. On a percentage of revenue basis, gross profit was 84% for the second quarter of 2020, which was up from 81% in the first quarter of 2023. On a pure dollar basis, gross profit for the quarter was $4.2 million, as compared to $3.4 million last year.
Eric Lonnqvist: Service revenue was $1.8 million, down 5% over the prior year.
Eric Lonnqvist: This decline was largely driven by service customers migrating to our subscription or cloud products.
Eric Lonnqvist: Moving on to gross profit. On a percentage of revenue basis, gross profit was 84% for the second quarter of 2024.
Eric Lonnqvist: Which was up from 81% in the first quarter of 2023.
Eric Lonnqvist: On a pure dollar basis, gross profit for the quarter was $4.2 million, as compared to $3.4 million last year.
Eric Lonnqvist: Total operating expenses for the first quarter of 2024 were $6.2 million, a 0.3 million or 4% increase year over year. The largest driver of the increase was investments in R&D and regulatory affairs to support plans for both product and regional expansion. This increase was partially offset by additional streamlining of expenses in G&A. Gap net loss for the second quarter of 2024 was $1.7 million or $0.07 per diluted share compared with a gap net loss of $2.3 million or $0.09 per diluted share for the second quarter of 2023.
Eric Lonnqvist: Total operating expenses for the first quarter of 2024 were $6.2 million.
Eric Lonnqvist: A 0.3 million or 4% increase year over year.
Eric Lonnqvist: The largest driver of the increase was investments in R&D and regulatory to support plans for both product and regional expansion.
Eric Lonnqvist: This increase was partially offset by additional streamlining of expenses in G&A.
Speaker Change: Gap net loss for the second quarter of 2024 was $1.7 million, or $0.07 per diluted share, compared with a gap net loss of $2.3 million, or $0.09 per diluted share, in the second quarter of 2023.
Speaker Change: Non-GAAP-adjusted EBITDA loss decreased $0.9 million to $1.2 million in the quarter ended June 30, 2024 from the same period in 2023.
Eric Lonnqvist: Non-gap adjusted EBITDA losses decreased $0.9 million to $1.2 million in the quarter ended June 30, 2024 from the same period in 2022. Moving to the balance. As of June 30, 2024, the company had cash and cash equivalents of $20.4 million, compared to cash and cash equivalents of $21.7 million as of December 31, 2024. Net cash used from operating activities for the first six months and to June 30th 2024 was 1.1 million, compared to 1.9 million for the first six months of 2023. This improvement of 43% year over year is due primarily to stronger sales performance in 2020. We believe we have sufficient cash resources to fund our planned current operations with no need to raise additional funding.
Speaker Change: Moving to the balance sheet. As of June 30th, 2024, the company had cash and cash equivalents of $20.4 million, compared to cash and cash equivalents of $21.7 million as of December 31st, 2024.
Speaker Change: Net cash used from operating activities for the first six months ended June 30, 2024 was $1.1 million, compared to $1.9 million for the first six months of 2023.
Speaker Change: This improvement of 43% year over year is due primarily to stronger sales performance in 2024.
Speaker Change: We believe we have sufficient cash resources to fund our planned current operations with no need to raise additional funding.
Eric Lonnqvist: As noted in prior earnings calls, the steady shift to a recurring revenue model from a perpetual model has numerous benefits, including Better Business Visibility, More Efficient Expense Management, and an Improved Ability to Predict Future Cash Flow. That said, this shift will also create lower gap revenue and negative cash flow as our SAS revenues grow. To help illustrate our progress in this transition, we began recording the following Annual Recurring Revenue Metrics, or ARR, in Q3 2013.
Speaker Change: As noted in prior earnings calls, the steady shift to a recurring revenue model from a perpetual model has numerous benefits.
Speaker Change: Including better business visibility, more efficient expense management, and an improved ability to predict future cash flow.
Speaker Change: That said, this shift will also create lower gap revenue and negative cash flow as our SAS revenues grow.
Eric Lonnqvist: Total ARR or TARR represents the annualized value of subscription licenses, maintenance contracts, and active cloud services at the end of a reporting period. Maintenance Services ARR, or MARR, represents the annualized value of active perpetual license maintenance service contracts at the end of a reporting period. Subscription ARR, or FAR, represents the annualized value of active subscription or term licenses at the end of a reporting period. Cloud ARR or CARR represents the annualized value of active cloud services contracts at the end of a reporting period.
Speaker Change: To help illustrate our progress in this transition, we began reporting the following Annual Recurring Revenue Metrics, or ARR, in Q3-23.
Speaker Change: Total ARR, or TARR, represents the annualized value of subscription license, maintenance contracts, and active cloud services at the end of a reporting period.
Speaker Change: Maintenance Services ARR, or MARR, represents the annualized value of active perpetual license maintenance service contracts at the end of a reporting period.
Speaker Change: Subscription ARR, or FAR, represents the annualized value of active subscription or term licenses at the end of a reporting period.
Speaker Change: Cloud ARR or CARR represents the annualized value of active cloud services contracts at the end of a reporting period.
Eric Lonnqvist: Total ARR or TARR was $9.2 million as of June 30, 2024, up from $8.5 million in the second quarter of 2022. Maintenance Services ARR or MARR was $6.9 million, down from $7.3 million at the end of the second quarter of 2023.
Speaker Change: Total ARR, or TARR, was $9.2 million as of June 30, 2024, up from $8.5 million in the second quarter of 2023.
Speaker Change: Maintenance Services ARR or MARR was $6.9 million.
Speaker Change: Down from 7.3 million at the end of the second quarter of 2023.
Eric Lonnqvist: This decline relates in part to service customers migrating to our subscription or cloud product. Subscription ARR or SARR was 2 million, up from 1.3 million at the end of the second quarter of 2020. Cloud ARR, or CARR, was 0.2 million, representing the first recurring revenue from our cloud product. In addition to the recurring revenue metrics noted above, we also began disclosing the total number of orders relating to perpetual product, subscription, and cloud deals. The intent of this metric is to illustrate the pure volume of sales without the complexity of multiple gap revenue streams.
Speaker Change: This decline relates in part to service customers migrating to our subscription or cloud products.
Speaker Change: Subscription ARR or SARR was $2 million, up from $1.3 million at the end of the second quarter of 2023.
Speaker Change: Cloud ARR, or CARR, was 0.2 million, representing the first recurring revenue from our cloud product.
Speaker Change: In addition to the recurring revenue metrics noted above, we also began disclosing the total number of orders relating to perpetual product, subscription, and cloud deals.
Speaker Change: The intent of this metric is to illustrate the pure volume of sales without the complexity of multiple gap revenue streams.
Operator: We are pleased to report that in the second quarter of 2024, we closed 60 perpetual, 29 subscription, and 10 cloud orders. Year to date, we have secured 136 perpetual, 44 subscription, and 12 cloud orders. Please note that these counts include all new upsell and migration deals and exclude standard renewal. 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.
Speaker Change: We are pleased to report that in the second quarter of 2024, we closed 60 perpetual, 29 subscription, and 10 cloud orders.
Speaker Change: Year-to-date, we have secured 136 perpetual, 44 subscription, and 12 cloud orders.
Speaker Change: Please note that these counts include all new upsell and migration deals and exclude standard renewals.
Speaker Change: 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.
Operator: The floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while asking your question, you please pick up your handset if listening on a speaker, to provide optimum sound quality.
Speaker Change: Certainly.
Speaker Change: The floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please hold just a moment while we poll for questions.
Operator: Please hold just a moment while we pull for you. Your first question is coming from Per Ostlund with Craig Halloway. Please pose your question; you're live. Thank you. Good afternoon, Dana and Eric.
Speaker Change: Your first question is coming from Per Aslund with Craig Hallam Capital. Please pose your question. Your line is live.
Per Ostlund: Lots of good stuff to process here, so I guess. Naturally, let's start out with the top.
Per Aslund: Thank you. Good afternoon, Dana and Eric.
Unknown Speaker: The $5 million in the quarter was certainly more than we had. Unknown Speaker, last year, or last quarter, called out Raleigh and some of the Solis expansion in there. Ed Shebbing Ben, somewhat impactful to that quarter.
Speaker Change: We called out Raleigh and some of the SOLAS expansion in there.
Unknown Speaker: And so I..., a little bit. Did anything stick out in the second quarter like Raleigh or like Solis that, or maybe it needs to be called out? I know you. Hanford, Joe.
Per Aslund: as having been, you know, somewhat impactful to that quarter. And so I think, you know, we and probably everybody else tempered second quarter a little bit. Did anything stick out in second quarter like Raleigh or like Solis that
Speaker Change: that you feel needs to be called out. I know you mentioned a handful of deals data, but
Unknown Speaker: [inaudible] are we at the point where there's just so much in the pipeline that it's really not worth suggesting that one deal or another in a quarter is going to move. Needle, or is there just enough going on that maybe we're kind of seeing that we're at a So, first of all, thanks. Good to talk with you again.
Speaker Change: You know, are we at the point where there's just so much in the pipeline that it's really not worth Suggesting that one deal or another in a quarter is going to move that move the needle Or is there just enough going on that maybe we're kind of seeing that we're at a new base here
Dana Brown: I'm going to ask Eric to also kind of chime in, because he is looking at it from a different point of view than myself. So, speaking kind of from my point of view, I think, you know, one of the most important contributing factors to Q2 success was, as we mentioned, we added additional sales team members. One came on board in late December, and the rest came on board in January.
Speaker Change: So, first of all, thanks. Good to talk with you again. I'm going to ask Eric to also kind of chime in because he is looking at it right from a different point of view than myself. So speaking kind of from my point of view, I think, you know, one of the most important contributing factors to Q2 success was, as we mentioned, we added additional sales team members.
Dana Brown: So, in Q2, you're seeing them hit their stride, as well as some of the work that we did to, I'm going to call it, reload balance, right, the territories and also put an emphasis on renewal. So, I think it was just a lot of things kind of beginning to work together. From my point of view, no one deal stands out. Eric, I don't know if you have a different point of view or any additional color you want to add. Yeah, hi there.
Eric Lonnqvist: One came on board in late December and the rest came on board in January. So in Q2, you're seeing them hit their stride, as well as some of the work that we did to, I'm going to call it reload balance, right, the territories.
Eric Lonnqvist: Eric, I don't know if you have a different point of view or any additional like color you want to add.
Eric Lonnqvist: I think the Baylor, Scott, and White deal was really big because it was a subscription, and we took a car vote up front. So that was, it was impactful. Unusual type of hit, plus for revenue, Q1, similar to Raleigh Radiology and Q1. Some of the other bigger deals like cloud computing and the cloud deals for Windsong and Steinberg, those are ratable over 36 months. So those aren't really impacting the $5 million gap revenue number this quarter. So that's that's the one I'd call out.
Eric Lonnqvist: Yeah, hi there. I think the the Baylor, Scott and White deal was was really big because it that was a subscription and we took a car vote up front. So that was that was impactful and.
Speaker Change: Unusual type of hit, plus for revenue, Q1, similar to Raleigh Radiology.
Speaker Change: and Q1. Some of the other bigger deals like cloud and the cloud deals for Winsong and Steinberg those are those are ratable over 36 months so those aren't
Eric Lonnqvist: But the bigger the bigger impact, will tell you, really did a good job of just getting volume up across the board. It was more active. There were more feet, there were more people.
Speaker Change: Those aren't really impacting the $5 million gap revenue number this quarter, so that's that's the one I'd call out. But the bigger the bigger impact I think is.
Speaker Change: supports what Dan is saying to a degree. I think the sales team
Eric Lonnqvist: The territories we've expanded into have been successful, particularly on the West Coast. The other thing the team did, the migrations have been very successful. So we released the deal accounts. You'll see the volume is up.
Speaker Change: The other thing the team did, the migrations have been very successful. So we released the deal counts. So you'll see the volume is up. We had close to 100 deals this quarter, 29 subscriptions. So a number of those are migrations. So the team is
Eric Lonnqvist: We had close to 100 deals this quarter, 29 subscriptions. So a number of those are migrations. So the team is, as the service contracts come to an end, perpetual maintenance. They've been working to convert customers to cloud or subscription products, and that's been going very well. So that was a contributor to the deals and the revenue in Q2 as well. That makes sense. So I...
Speaker Change: As the service contracts come to an end.
Speaker Change: for Perpetual Maintenance. They've been working to convert customers to cloud or subscription products, and that's been going very well. So that was a contributor to the deals and the revenue in Q2 as well.
Speaker Change: Okay, that makes sense. And I noticed the shift to subscription, so that makes a lot of sense.
Per Ostlund: When you talk about the cloud count, because the cloud count was 10 and a quarter, available for something less than the whole quarter, did you do you have the feeling pretty well seated for when that was going to be available? Was there a bolus, kind of, to kind of be that first, you know, eight or 10, you know, deals that we're going to sign on the dotted line? And is there a lot waiting behind that since there wasn't the full commercial available? Yeah, Dana, I don't know if you want to take it.
Speaker Change: When you talk about the cloud count, because if the cloud count was 10 in the quarter, and it was commercially available for something less than the whole quarter, did you did you have the
Speaker Change: The field pretty well seeded for when that was going to be available. Was there a bowl? It's kind of waiting
Speaker Change: to kind of be that first eight or 10 deals that we're gonna sign on the dotted line.
Speaker Change: And is there a lot waiting behind that since there wasn't the full commercial availability for the total quarter?
Speaker Change: Unknown Executive, Jessica Burns, Leonor Faber, Eric Lonnqvist
Eric Lonnqvist: I have some thoughts on it. Yeah, you go first this time, and then I'll time in if I need to add anything. Yeah, yeah. Well, I think, you know, the whole deal cycle didn't complete in three months for most of these. There were conversations in Q1 even before the cloud was readily available. But that being said, I do think the deals close quicker, and the performance that Dana mentioned of the product has helped.
Speaker Change: Yeah, Dana, I don't know if you want to take that. I have some thoughts on it.
Dana: Yeah, you go first this time and then I'll chime in if I need to add anything. Yeah, yeah.
Dana: Well, I think you know the whole deal cycle didn't complete in three months for most of these there was conversations in q1 even before
Speaker Change: Cloud is readily available But that being said I do think the deal is closed quicker and the performance that Dana mentioned of the product
Eric Lonnqvist: You know, some of the customers wanted to test the product and the environment, and they did, and the results were positive. So some of the bigger deals were sped up and closed quicker. Other deals can't be counted on that.
Speaker Change: has helped. Some of the customers wanted to test the product and the environment and they did and the results were positive. So some of the bigger deals were sped up and closed quicker. And then
Eric Lonnqvist: Those were some migrations that we went to customers that weren't even thinking about the cloud, and their subscription or their service contract ended, and they said, well, this sounds interesting. And it moved kind of quickly some customers that wanted to get rid of the hardware that they retire to buy in these boxes every three years or so, and they're ready to move their technology forward, and it just just kind of kind of clicked, but some of the bigger ones had been there were talks in q1 also before these came together, but going forward, I think that Just because of all the positives Dana mentioned and Opening Remark, there's going to be Compared to the perpetual model, we're feeling a lot of pressure that it's moving quicker in this direction. Excellent Dana, did you have anything to add to that?
Speaker Change: Other deals in that can count.
Speaker Change: Those were some migrations that we went to customers that weren't even thinking about cloud and their subscription or their service contract ended and they go, well, this sounds interesting. And it, it moved kind of quickly some customers that wanted to get rid of, rid of hardware that they
Speaker Change: Tommy.
Speaker Change: Retire to buy in these boxes every three years or you know, and They're ready to move their technology forward and it just just kind of kind of clicked But some of the bigger ones had been there been talks In q1 also before these came together But going forward I think that
Speaker Change: Just because of all the positives Dana mentioned and.
Speaker Change: The opening remarks.
Speaker Change: There's going to be a natural push and it's
Speaker Change: with how the product's performing and the excitement in customers when you talk to it and just the ease.
Speaker Change: Use it Compared to the perpetual model it we're feeling a lot of pressure that it's moving quicker this in this direction
Speaker Change: Unknown Executive, Jessica Burns, Leonor Faber, Eric Lonnqvist
Dana Brown: No, yeah, I think, you know, my net was that we did close more than we had planned. So that was great, as Eric mentioned, their ability even to just do a trial, right? Kind of test it out; it's so much easier with it being in the cloud that it just enabled the whole process to go faster, so, since you mentioned the sales. Transcription by Transcriptional October 2014, New folks, fourth quarter, first quarter, yeah. Peter Graham coming in as, Is there anything left to do there? Is there momentum in the field that you feel you need to lean in on to add more people? Or anywhere else?
Speaker Change: Okay, excellent. Dana, did you have anything to add to that or?
Dana: So that was great. As Eric mentioned, it just their ability even to just do a trial, right, kind of test it out is so much easier with it being cloud that it just enabled the whole process to go faster. So.
Dana: Sure, that makes sense. Since you mentioned the sales.
Dana: Reconfiguration, the new folks, fourth quarter, first quarter, you have the
Peter Graham: There's Peter Graham coming in as SVP. Is there anything left to do there? Are you is there momentum in the field that you feel you need to lean lean in on to add more people? Anywhere do you feel pretty good about where you're at?
Dana Brown: Do you feel pretty good about where you're at? Yeah, right now. I think the team is the right size. So we've still done a little bit of, I'll call it, you know, juggling a bit, right, as people are settling into roles, and we're understanding kind of who's performing well, say, you know, securing new business versus maintaining existing accounts and helping them through upgrades and upsells. So still just a little bit of load balancing happening.
Peter Graham: Yeah, right now I think the team is the right size.
Peter Graham: So we've still done a little bit of, I'll call it just, you know, juggling a bit, right, as people are settling into roles and we're understanding.
Peter Graham: kind of who's performing well, say, you know, securing new business versus maintaining existing accounts and helping them through upgrades and upsells. So still just a little bit of load balancing happening, but in terms of like a quantity, a team size.
Peter Graham: we're set for now. Our focus will really be as we begin to look at new territories, figuring out like the right mix there, right, of perhaps, you know, some direct support, and then any additional partners or distributors we may need.
Dana Brown: But in terms of like quantity, a team size, we're set for now. Our focus will really be, as we begin to look at new territories, figuring out the right mix there, right, of perhaps, you know, some direct support, and then any additional partners or distributors we may need. But here in the US, I think we're set.
Per Ostlund: Perfect. Thanks for the answer. Yeah. Thanks. Your next question is coming from Yale Gen with Laidlaw. Please pose your question. Your line is open.
Peter Graham: But here for, you know, the U.S., I think we're set.
Speaker Change: Perfect. Thanks for the answers. Appreciate it. Yeah. Thanks.
Speaker Change: Your next question is coming from Yale Gen with Laidlaw and Company. Please pose your question. Your line is live.
Yale Gen: Thanks for taking the questions and congrats on the good quarters that you've had. The first question is that, in your personal life, you have an ARR change since the start of the subscription, and you are comparing to the first quarter of 22, with the current court. Curious why you use that particular quarter as a compass. Yeah, I can I can jump on that. Hi, Yale.
Yale Gen: Thanks for taking the questions and congrats on the good quarters that you here. The first question is that in your first release
Speaker Change: You have an ARR change since the start of the subscription, and you are comparing to the first quarter of 2022 with the current quarters. I'm just curious why you use that particular quarter as a comp.
Eric Lonnqvist: Hi. Thanks. So we started selling subscription deals in Q1 22. So that's why we picked that quarter to do it.
Speaker Change: Yeah, I can I can jump on that. Hi, Yale. Hi, good. Thanks. So we started selling subscription deals in Q1 22.
Eric Lonnqvist: So that's really the start of this company. We just released cloud last quarter. So that's gonna accelerate the shift, but we truly started this shift to a recurring model in Q1 22. So back then we had just a little, you'll see in the press release, but just over $6 million of recurring revenue. And that was from our perpetual maintenance business.
Speaker Change: So that's why we picked that quarter to do it. So that's really the start of this company. We just released cloud last quarter. So that's going to
Speaker Change: Accelerate the shift, but we truly started this shift to a recurring model in Q1-22. So back then we had just a little, you'll see in the press release, but just over $6 million of recurring revenue, and that was from our perpetual maintenance business.
Eric Lonnqvist: But once we started subscriptions, and now that we have cloud, you can now see that as of the end of Q2-24. And we're up over 9 million in recurring revenue. So much more stable base and kind of want to show that cumulative progression of getting to a bigger chunk of our revenue being from recurring sources. Okay, great. That's very helpful.
Speaker Change: But once we started subscription and now that we have cloud you can now see that as of the end of q2 24
Speaker Change: We're up over 9 million of recurring revenue, so much more stable base, and it's kind of wanted to show that cumulative progression of getting to a bigger chunk of our revenue being from recurring sources.
Yale Gen: And my next question is that, in terms of crowd versus subscription, Ah, the custom getting a relatively similar thing, except the manner of the data being delivered or being..., in storage? And if so, do you anticipate the cloud revenue to include people, the cost will be increased much more than subscriptions going forward. Yeah, I could take that one.
Speaker Change: Okay, great. That's very helpful. And my next question is that, in terms of crowd versus subscription,
Speaker Change: Uh.
Speaker Change: The custom getting a relatively similar thing, except that the manner of the data being delivered or being
Speaker Change: in storage and if so do you anticipate the crowd revenue to people a customer will be increased much more than subscribed going forward?
Speaker Change: Yeah, I could take that one. So, so.
Dana Brown: So, the physical method that the software is made available in a subscription is still on premises. So think of the software being, you know, loaded onto a server, either one we provide to the customer or the customer procures the server themselves. It's just the matter of how they're paying for the usage of it is a subscription, right?
Speaker Change: The physical method that the software is made available in subscription is still on premise. So think of the software being, you know, loaded onto a server, either one we provide to the customer or the customer procures the server themselves.
Speaker Change: It's just a matter of which they're paying for the usage of it is a subscription, right? So it's on a monthly basis.
Dana Brown: So on a monthly basis, versus the cloud, there is no server on site, right? So it's all hosted in the cloud. ICAD's native cloud environment is through Google, through that partnership that we announced a little bit over a year ago. So the data storage and the way in which we're able, you know, to manage the data are very different.
Speaker Change: versus the cloud, there is no server on site, right? So it's all hosted in the cloud. ICAD's native cloud environment is through Google, through that partnership that we announced a little bit over a year ago.
Dana Brown: You know, on-premise, it's housed there in the server, as well as other on-site storage facilities they may have, versus with the cloud, then we can store data, right, about the exam, as well as other data that we can use over time to help analyze it and do trend analysis for customers in the cloud. So let me know if that didn't answer the question. I think you had a second part too, which was whether or not we think we're going to see cloud computing being adopted more quickly.
Speaker Change: So, the data storage and the way in which we're able, you know, to manage the data is very different, you know, on-prem, it's housed there in the server, as well as other on-site storage facilities they may have.
Speaker Change: versus with the cloud, then we can store data right about the exam, as well as other data that we can use over time to help analyze it and do trend analysis for customers in the cloud.
Dana Brown: Was that right? Was that the second part of your question? Yes. Okay. And if the overall picture looks similar, would the cloud ultimately have a leg up in terms of convenience and other aspects, so it is more likely to be the one growing faster than the subscription?
Speaker Change: So let me know if that didn't didn't answer the question I think you had a second part too, which was if we if we think we're going to see Cloud being adopted more quickly. Was that right? Was that the second part of your question? Okay
Speaker Change: will have a leg up in terms of convenience and other aspects, so more likely to be the one grow faster than the subscription.
Dana Brown: Yeah, I do believe that cloud is going to grow faster than subscription. At what point in time its growth rate overtakes subscription is still a little bit TBD since we've only had it commercially available for one quarter. But the early indicators are positive. So yeah, we do see that as where the future is right for ICANN and for our customers. And maybe the last question here is that, given those kind of dynamics, If you're looking at your crystal ball for the end of the year, would you stop using this faster versus slower?
Speaker Change: Yeah.
Speaker Change: I do believe that cloud is going to grow faster than subscription.
Speaker Change: at what point in time its growth rate overtake subscription is still a little bit TBD since we've only had it commercially available for one quarter.
Speaker Change: But the early indicators are positive. So yeah, we do see that as where the future is, right, for ICANN and for our customers.
Speaker Change: If you're looking to your crystal ball end of the year.
Speaker Change: Would you stop using this
Dana Brown: potentially slower growth, you know, trajectory, the trend will become more clear, and then we'll be able to even look further at modeling for our years. Yeah, I mean, the faster transition, as we talked about, kind of in the remarks, has maybe a, you know, it's a little bit of a counterintuitive effect on revenue, right? Because even though we may be securing and winning more cloud deals, recognized revenue in that particular quarter could actually go down, right?
Speaker Change: faster versus potentially slightly slower growth, you know, trajectory being the trend become more clear, and then we'll be able to even look further at modeling for our years. And thanks.
Speaker Change: Yeah, I mean the the faster transition as we talked about kind of in the remarks has maybe a You know, it's a little bit of it could be a counterintuitive effect
Speaker Change: on revenue, right? Because even though we may be securing and winning more cloud deals.
Dana Brown: Because, as Eric mentioned, we can recognize it rutably over the term of the contract, you know, so if it's 36 months, we get one month at a time. But it also builds a really nice backlog of recurring revenue.
Speaker Change: recognized revenue in that particular quarter could actually go down, right? Because as Eric mentioned, we can recognize it.
Eric Lonnqvist: routably over, you know, the term of the contract.
Eric Lonnqvist: You know, so if it's 36 months, we get one month at a time, but it also builds a really nice backlog of reoccurring revenues. So that, you know, makes our entering each new quarter.
Dana Brown: So that, you know, makes entering each new quarter more predictable and more stable. So to your point, I think, you know, we need a few more quarters since the cloud is so new, and see how the adoption rate is beginning to, like, stabilize and become predictable on what its trend is going to be. But having that ARR should almost, you know, and I'm using air quotes here, form a soft guidance in terms of what revenue is already can be, you know, relied upon as we enter each quarter and then as we enter each new year. So. Okay, great. That's very helpful. And congrats on the progress because I, Louis-Wall-Looks, Yeah, thank you. And that would be, getting all the pieces in.
Speaker Change: more predictable and more stable. So to your point, I think, you know, we need a few more more quarters since cloud is so new and see how the adoption rate is beginning to like stabilize and get predictable.
Speaker Change: on what its trend is going to be, but having that ARR should almost, you know, and I'm using air quotes here, you know, form a soft guidance in terms of what revenue is already can be, you know, relied upon as we enter each quarter and then as we enter each new year.
Speaker Change: Okay, great. That's very helpful and congrats on the progress because I think people are looking forward to it.
Speaker Change: Yeah, thank you. And that would be, get all the pieces in place.
Yale Gen: Yeah, yeah. Thanks. Thank you. There appear to be no additional questions in queue at this time.
Speaker Change: Yeah, yeah. Thanks. Thank you.
Operator: I would now like to turn the floor back over to Dana Brown for any closing remarks. Thank you, operator. So, in conclusion, I just want to reiterate the same comments I've made in previous quarters. Hopefully, you know, with the news that we've reported in the last three quarters, you're beginning to see the results of our efforts. So, our demand for our technology continues to be strong, and we do believe with the cloud it's going to increase.
Speaker Change: There appear to be no additional questions in queue at this time. I would now like to turn the floor back over to Dana Brown for any closing remarks.
Dana Brown: Thank you, operator.
Dana Brown: So in conclusion, I just want to reiterate the same comments I've made in past quarters. Hopefully, you know, with the news that we've reported in the last three quarters, you're beginning to see the results of our efforts.
Operator: The evidence, right, the clinical evidence and the validation continues to grow. And our team continues to secure opportunities with some of the most prestigious and esteemed healthcare providers around the world. I remain optimistic about the company's future, and I firmly believe in our ability to generate significant shareholder value. Thank you so much, and have a great rest of your day. Thank you, everyone. This does conclude today's conference call.
Dana Brown: So our demand for our technology continues to be strong. We do believe with cloud it's going to increase.
Dana Brown: The evidence, right, the clinical evidence and the validation continues to grow. And our team continues to secure opportunities with some of the most prestigious and esteemed health care providers around the world.
Dana Brown: I remain optimistic about the company in its future and I firmly believe in our ability to generate significant shareholder value. Thank you so much and have a great rest of your day.
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