iCAD, Inc. (ICAD) Q2 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals several concerns: the transition to a recurring revenue model is expected to negatively impact short-term GAAP revenue and cash flow, and there are risks related to market penetration, regulatory challenges, and competitive pressures. Although there is a 21% revenue increase, the absence of a share repurchase program and unclear management responses in the Q&A section add to the negative sentiment. Despite some positive financial metrics, the overall outlook suggests a negative stock price movement.
Key Financial Performance
Revenue $5 million, an increase of $0.9 million or 21% over Q2 2023. The increase is attributable to key deals and the momentum from the expanded sales team.
Product Revenue $3.3 million, up 41% over the prior year. This growth is driven by successful sales initiatives.
Service Revenue $1.8 million, down 5% over the prior year. The decline is largely due to service customers migrating to subscription or cloud products.
Gross Profit $4.2 million, with a gross profit margin of 84%, up from 81% in Q2 2023. The increase in gross profit is attributed to higher revenue.
Operating Expenses $6.2 million, a $0.3 million or 4% increase year-over-year. The increase is primarily due to investments in R&D and regulatory support for product and regional expansion.
GAAP Net Loss $1.7 million or $0.07 per diluted share, compared to a net loss of $2.3 million or $0.09 per diluted share in Q2 2023. The improvement is due to increased revenue.
Non-GAAP Adjusted EBITDA Loss Decreased by $0.9 million to $1.2 million in Q2 2024 from the same period in 2023.
Cash and Cash Equivalents $20.4 million as of June 30, 2024, down from $21.7 million as of December 31, 2023.
Net Cash Used from Operating Activities $1.1 million for the first six months of 2024, compared to $1.9 million for the same period in 2023, an improvement of 43% year-over-year due to stronger sales performance.
Total Annual Recurring Revenue (T-ARR) $9.2 million as of June 30, 2024, up from $8.5 million in Q2 2023.
Maintenance Services ARR (M-ARR) $6.9 million, down from $7.3 million at the end of Q2 2023, due to service customers migrating to subscription or cloud products.
Subscription ARR (S-ARR) $2 million, up from $1.3 million at the end of Q2 2023.
Cloud ARR (C-ARR) $0.2 million, representing the first recurring revenue from the Cloud product.
Total Orders Closed 60 perpetual, 29 subscription, and 10 cloud orders in Q2 2024.
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Operating Highlights
ProFound Cloud Platform: Commercial availability announced, providing a cost-effective, secure, and scalable means to access and deploy the latest ProFound Breast Health Suite of AI solutions.
AI-powered Breast Health Suite: Integration with Densitas' intelliMammo and intelliMaven for enhanced operational efficiency and compliance.
Market Expansion: Secured a deal for eight detection and density licenses to a health group in Dusseldorf, Germany, and expanding in Chile, Argentina, Mexico, and Japan.
Partnerships: 20-year collaboration with Google Health enhances technology and access.
Revenue Growth: Q2 revenue increased by 21% year-over-year to $5 million.
SaaS Transition: Shift to SaaS model expected to drive enhanced profitability and cash flow.
Three Phase Transformation Plan: Phase 3 focuses on investing in growth initiatives, expanding into key accounts and new markets.
Cloud Strategy: Adoption of SaaS offering has exceeded expectations, with 10 cloud deals adding over $1.2 million to backlog.
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Risk or Challenges
Market Penetration Risk: The market for AI in mammography is underpenetrated, with only 37% of US mammography sites currently using AI, indicating a risk of slow adoption and competition in expanding market share.
Regulatory Challenges: The company is subject to regulatory scrutiny and compliance requirements, which could impact the speed of product development and market entry.
Supply Chain Challenges: Transitioning to a SaaS model may involve complexities in supply chain management, particularly in ensuring the availability of necessary technology and infrastructure.
Economic Factors: The shift to a recurring revenue model may lead to lower GAAP revenue and negative cash flow in the short term, impacting financial stability.
Competitive Pressures: iCAD faces competitive pressures from other AI-powered breast cancer detection solutions, necessitating continuous innovation and market differentiation.
Customer Migration Risk: As customers migrate from service to subscription or cloud products, there is a risk of revenue loss during the transition period.
Cash Flow Visibility: The transition to a recurring revenue model may create challenges in cash flow visibility and predictability in the short term.
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Guidance & Outlook
Transformation Plan: iCAD is executing a three-phase transformation plan, having completed Phases 1 and 2 focused on stabilizing cash burn and strengthening leadership. Phase 3, which began in Q1 2024, emphasizes investing in growth initiatives, expanding into key accounts and new markets.
Revenue Growth: Q2 2024 revenue grew by 21% compared to Q2 2023, reaching $5 million.
SaaS Transition: The company is transitioning to a SaaS model with the ProFound Cloud platform, which is expected to enhance profitability and cash flow over time.
Market Opportunity: The AI in mammography market is underpenetrated, with only 37% of US sites using AI, presenting a significant growth opportunity for iCAD.
Partnerships: Strategic partnerships, including a 20-year collaboration with Google Health, are expected to enhance technology and expand access.
International Expansion: iCAD is expanding its reach in Europe, Israel, Arab Emirates, and Latin America, with plans to be active in these regions within the next 12 months.
Annual Recurring Revenue (ARR): Total ARR was $9.2 million as of June 30, 2024, up from $8.5 million in Q2 2023.
Cloud ARR: Cloud ARR was $0.2 million, representing the first recurring revenue from the Cloud product.
Future Revenue Expectations: The shift to a recurring revenue model is expected to create lower GAAP revenue and negative cash flow in the short term, but will improve business visibility and predictability in the long term.
Backlog Growth: The 10 cloud deals closed in Q2 added over $1.2 million to the backlog for both billings and GAAP revenue.
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Shareholder Return Plan
Share Repurchase Program: None
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Key Q&A
Q:Did anything stick out in second quarter like Raleigh or like Solis that you feel needs to be called out?
A:No one deal stands out; the success was due to the addition of sales team members and rebalancing territories.
Q:Did you have the field pretty well ceded for when that was going to be available?
A:The deal cycle didn't complete in three months; some deals were closed quicker due to positive product performance.
Q:Is there anything left to do there in terms of team size?
A:The team size is currently appropriate, but there is still some load balancing happening.
Q:Why did you use Q1 2022 as a comp for ARR change?
A:Q1 2022 was when we started selling subscription deals.
Q:Do you anticipate cloud revenue to grow faster than subscription?
A:Yes, cloud is expected to grow faster than subscription, but the timing of overtaking is still uncertain.
Q:Will the faster transition to cloud affect revenue recognition?
A:Yes, recognized revenue could go down even with more cloud deals due to ratable recognition over the contract term.
Q:Review of Unclear Management Responses
A:Management did not provide a direct answer regarding the specific impact of individual deals on revenue, stating that no one deal stands out, which lacked clarity on the significance of those deals.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI risk
ARR value
Breast Imaging
Cancer
CancerIQ
Dr
PACS
Radiology
SaaS
Scott
Society
Windsong
access
age
assessment
attendee
audience
availability
cancer risk
cash flow
cloud deal
cloud subscription
count
day
deal subscription
deployment
end reporting
hardware
image
increase
migration
month
outcome
platform
publication
risk breast
score
server
shift
show
software
storage
subscription cloud
th
woman breast
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iCAD, Inc. (ICAD) Q2 2024 Earnings Call Transcript
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The earnings call reveals several concerns: the transition to a recurring revenue model is expected to negatively impact short-term GAAP revenue and cash flow, and there are risks related to market penetration, regulatory challenges, and competitive pressures. Although there is a 21% revenue increase, the absence of a share repurchase program and unclear management responses in the Q&A section add to the negative sentiment. Despite some positive financial metrics, the overall outlook suggests a negative stock price movement.
ICAD Report
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
