iCAD - Q1 2023

Transcript

Speaker 0

Good day, everyone, and welcome to the Icad Inc. First Quarter 2023 Earnings Call. 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. It is now my pleasure to turn the floor over to your host, Leonor Faber. Ma'am, the floor is yours.

Speaker 1

Thank you, operator. Good afternoon, everyone. Thank you for joining us today for iCAD's Q1 2023 Earnings Call. On the call today, we have Dana Brown, our President and Chief Executive Officer 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 call today.

These forward looking statements are based on iCAD's current expectations and are subject to uncertainty and changes in circumstances. 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.

ICANN undertakes no Obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. 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. 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 2

Thank you, Leonor, and good afternoon, everyone. Let's begin with our business update. As mentioned on our previous call, we are exploring strategic options for the Xopt business that could accelerate the accessibility of this technology and provide more focus and synergies to its growth. While we explore these options, we continue to operate the business and customers worldwide continue to treat patients with this targeted therapy. And while we retain staff to support sales and services, revenue for Q1 was 18% lower than our budget, Coming in at $1,430,000 versus $1,700,000 Sales have slowed as customers and distributors are cautious about the business' future.

To address these concerns, we've redeployed some internal resources to better support Xoft sales. I am pleased to report that the body of evidence supporting Xoft continues to grow. Compelling new research was published last quarter in the peer reviewed Journal of Contemporary Brachytherapy. In the longest term study of Xoft, Skin, EBX to date, researchers confirmed Xoft is a safe and effective treatment for non melanoma skin cancer with 98.9 percent of patients remaining recurrence free at a medium follow-up of 7.6 years. This study adds to the body of clinical evidence that puts Zoft Skin EBX on par with Mohs surgery In terms of safety, efficacy and reoccurrence rates, but with fewer side effects and more comfort and convenience for patients.

We remain confident that the Xoft technology has the potential to positively impact the lives of cancer patients and the providers who care for them on a global scale. We'll provide further updates on its strategic options at the appropriate point in time. Turning to the Detection side of our business. As mentioned on our prior earnings call, while both the therapy and Detection lines of business Have great market opportunity and potential, we believe our core competencies and focus need to be solely on detection and our strategy around AI. But before we go into Q1 results, I want to take just a moment to speak to this week's news.

I'm sure many of you saw the U. S. Preventive Services Task announcement from earlier this week. They published new draft mammography guidelines, which recommend women of average risk Begin screening mammography at age 40. With 20,000,000 women in the U.

S. Between the ages of 40 to 49, These recommendations offer the potential for our technology to benefit more women and improve providers' ability to meet the increased demand for these services. However, although mammography is the gold standard for breast cancer screening, It can still miss about 20% of breast cancers present at the time of screening. Mammography also cannot determine a woman's risk As cancer developing in the short or the long term and the new guidelines do not specify how a woman would know if she's of average risk. Our Breast AI suite comprised of detection, density and risk maximizes the effectiveness of mammography.

Our detection solution delivers up to 2 times the clinical performance compared to leading competitors and is clinically proven to improve accuracy And efficiency for radiologists. In a recent study, our detection solution was shown to catch up to 23% more cancers that might have otherwise gone undetected. Our density solution not only meets the needs recently outlined by the FDA, but it has long been used worldwide to enhance patient care and personalized results. And our risk solution As up to 2.4 times more accurate than traditional risk models. Our leading edge AI portfolio Is the only commercially available 360 degree solution clinically proven to assist clinicians in daily practice to detect more cancers, evaluate breast density and identify women at high risk of developing breast cancer.

And with the recent U. S. Preventative Services Task Force guidelines, it's clear that our technology is more relevant than ever. So back to our Q1 updates. First of note, we strengthened our leadership team with seasoned leaders poised to execute In Q1 of this year, we brought on Bill Keyes as Senior Vice President, U.

S. Commercial Sales. As a seasoned leader with more than 35 years of healthcare technology experience, Bill brings to the team a consistent track record In building and leading sales teams, driving growth via enterprise sales and expertise in software as a service. We also recently welcomed to the team Vasu Avodhanala as our new Chief Product Officer. I've worked with Vasu over the past several years and can attest that he is an outstanding leader with 25 years of product development, business analytics and technology innovation experience.

Vasu most recently served as Vice President, Health Technology and Digital Transformation at Susan G. Komen. Faasoo has a track record of turning new ideas into successful products that disrupt the status quo and enhance the customer experience. In his last role as Susan G. Komen, Faixu was instrumental in the success of Komen's direct to patient programs and services, including the development and launch of Komen Health Cloud, a software as a service patient engagement platform, as well as Share for Cures, The first patient powered breast cancer research registry.

I'm pleased to welcome him to our team and look forward to incorporating his unique perspective into our future roadmap. Continuing to strengthen our leadership team, we also recently welcomed Michelle Strong as our new Chief Operations Officer. With more than 25 years of experience in marketing and healthcare technology, most recently serving as Vice President of Marketing Strategy at Susan G. Komen, Michelle is a seasoned leader who excels at strategically building and growing organizations, tackling challenging initiatives and developing strategic partnerships. She specializes in the implementation of new business strategies that broaden awareness, Bolster brand equity and drive revenue growth.

Under Michelle's leadership, Komen's brand health experienced significant improvements year over year, resulting in increased revenues and stakeholder engagement to advance its mission to save lives from breast cancer. I'm pleased to welcome her to the team and confident that her unique set of skills and expertise will be instrumental in our go to market success. Additionally, I'm pleased to report that we've completed our search for a full time CFO, as the Board of Directors appointed Eric Longfist As our new Chief Financial Officer, Eric has demonstrated strong financial acumen and a commitment to excellence in his most recent position as iCAD's Vice President of Financial Planning and Analysis. Eric has been with iCAD for over 3 years And during that time, been a strong and stable leader through leadership and market changes. Eric's leadership style, And you will hear more from Eric later on this call.

The addition of these seasoned executives will accelerate key initiatives in the company's strategic plans, such as new partnerships with patient advocacy groups, pharmaceutical companies and payer organizations. With these important changes to our leadership team, we're confident we have the right people in the right roles at the right time to help us achieve our vision of offering the most pervasive and personalized breast screening AI technology. And while we work on these exciting transformations as a company, compelling new research continues to validate the benefits Our BreastAI portfolio offers to clinicians and patients. In March, at the European Congress of Radiology meeting, Commonly referred to as ECR, we were pleased to again see physicians share their real world clinical experience and evidence that iCAD's Breast AI Suite has a positive impact on cancer detection in women's lives. In a research presentation session at the meeting, Doctor.

Kathy Schilling, the Medical Director of the Christine E. Lynn Women's Health and Wellness Institute at Boca Raton Regional Hospital presented findings from a study that found our ProFound AI detection solution increased the cancer detection rate among 9 dedicated breast imaging radiologists by 23% without increasing the rate of recalls. This improvement was so significant, the media took note. Both Fox and CBS Covered this study in nationally syndicated segments featuring iPad and Doctor. Schilling.

Doctor. Schilling will be sharing more about this research Along with our clinical experience, best practices and compelling case studies demonstrating the unique benefits our technology offers In our upcoming Profound Insights, Profound Impact webinar on May 24th, we invite all of you to join us for this webinar. New clinical evidence supporting ProFound AI risk was also published in the Journal of Clinical Oncology last quarter. According to the study findings, ProFound AI risk for 2 d mammography is more accurate than tire CUSIC version 8, A commonly used lifestyle risk model. And of note, our ProFound AI risk was found to be more accurate for both Short term and long term risk assessments.

Physicians have traditionally estimated breast cancer risk by examining the patient's known risk factors such as family 3, but about 85% of breast cancers occur in women who have no family history of breast cancer. Our risk solution accurately identified 20% of breast cancers as high risk compared to only 7.1% for tire CUSIC. With iCAD's risk solution, patient care has never been more personalized. By empowering radiologists with more information about a woman's specific risk, They can tailor breast cancer screening and maximize mammography's effectiveness, which ultimately leads to finding cancer sooner, Reducing costs to the overall healthcare system and most importantly, saving lives. Also in the Q1, The FDA announced the implementation of a national dense breast reporting standard, which is a significant advancement in healthcare for women, As nearly 50% of all women aged 40 and over have dense breasts, one of the strongest and most prevalent breast cancer risk factors.

However, since breast notifications are only as effective as the assessment themselves, as studies show wide variation in visual Assessment agreement and radiologists may even disagree with their own assessment year to year. This can be confusing for patients, Lead to unnecessary additional imaging and increased patient and facility costs. ICAD's Breast AI suite Empowers clinicians to lead the way in breast care and our customers using our density assessment solutions are well equipped to provide accurate breast density assessments, and we expect more facilities to demand this technology as they work to bring care standards in line with new federal regulations. Turning now to our operations outside of the U. S.

As I just mentioned, Q1 was marked by a very well attended ECR meeting in Vienna. We connected many of our We also hosted a special evening event featuring talks from renowned leaders in breast imaging AI, including Doctor. Kathy Schilling and Doctor. Axel Grabbingholt, who shared compelling testimonies and clinical case studies Demonstrating the power of our technology to an audience of more than 100 radiologists. Also, our team was pleased to partner with GE In a workshop for radiologists.

On the sales side, iCAD will be expanding into one of the largest screening regions in German speaking Switzerland. This will be the 1st screening program that will use ProFound AI detection and ProFound AI risk in their review process. With the expansion of our distribution territories, iCAD's visibility continues to grow in a global scale. Our regional partners are bringing in larger and more Significant opportunities and we're seeing a significant uptake in demand for our subscription offering in Europe, where this is quickly becoming the preferred purchasing model. And lastly, before we move to the financial update, I also want to provide you a brief update on our business model transition.

As noted on our last call, We implemented several strategic changes, including continued cost reduction measures to align and streamline our cost base, Reducing annualized expenses by $4,300,000 to $4,600,000 and annualized cash burn by $4,900,000 to $5,200,000 putting us on track to achieve our goal of profitability exiting 2024. We also noted on our last earnings call, We will revisit our subscription annual recurring revenue or SAAR metric when subscription deals make up a more material and consistent portion of our revenue. Along these lines, we're pleased to report that we closed 9 subscription deals in Q1. While we believe the move To a subscription based license model is good for our long term future as it builds a more predictable and profitable revenue stream, it does create a short term impact on revenue because we're only able to recognize a small portion of total revenues spread across the contract term. I also mentioned on the last call and earlier today We're going through a rigorous and thoughtful process to evaluate a range of growth opportunities.

To recap, these include Going direct to patients with offerings like a new GPT powered digital care platform, access to elective risk assessments And other personalized predictive scoring solutions, pursuing payer and reimbursement strategies to get risk assessments And AI Red Screenings covered partnering with large employers with women's health initiatives to provide AI powered mobile screening services on campus Supporting patient advocacy organizations on the front lines of tackling health disparities and utilizing aid programs to address other cancers and modalities. In summary, we're making bold moves to rapidly transform this company with a focus on stability, preserving cash and building a defensible and competitive long term strategy that diversifies our revenue stream and smooths out our customer concentration. We look forward to continuing to update you on the metrics and milestones of this strategy later this year. I'll now turn the call over to Eric for a detailed review of our Q1 2023 Financials.

Speaker 3

Good afternoon, everyone, and thank you, Dana. I'll now summarize our financial results for the Q1 ended March 31, 2023. Total revenue for the quarter was $5,800,000 a decline of $1,700,000 or 23% from the Q1 of 2022. The Detection segment revenue was $4,300,000 down 21% from last year. Within Detection, Q1 2023 product revenue was $2,500,000 down 36% over the prior year.

A portion of the decline is attributable to a greater number of subscription deals for the quarter over the prior year. Detection service revenue was $1,900,000 up 13% over the prior year. From a regional standpoint, Detection segment revenue for the U. S. Was $3,700,000 a decline of 19% from the Q1 of 2022.

Detection segment revenue for OUS was $600,000 a decline of 35% from the Q1 of 2022. The therapy segment revenue was $1,400,000 down $600,000 or 28% versus the Q1 of 2022. Therapy product revenue was $300,000 down 59% year over year. Services revenue was $1,200,000 down 11% year over year. Moving on to gross profit.

On a percentage of revenue basis, gross profit was 71% for the Q1 of 2023, which was in line with the Q1 of 2022. On a pure dollar basis, gross profit for the quarter was $4,100,000 as compared to $5,300,000 last year. This is largely reflective of a reduction in revenues. Total operating expenses for the Q1 For the Q1 ended March 31, 2023 versus $3,500,000 in the quarter ended March 31, 2022. GAAP net loss for the Q1 of 2023 was $3,800,000 or $0.15 per diluted share compared with a GAAP net loss of $3,500,000 or $0.14 per diluted share for the Q1 of 2022.

Non GAAP adjusted EBITDA for the Q1 of 2023 was a loss of 3,000,000 versus $2,700,000 in Q1 2022. Non GAAP adjusted net loss for the quarter was 3,600,000 or $0.14 per diluted share compared to $3,500,000 or $0.14 per diluted share in Q1 of 2022, reflecting a few adjustments to GAAP net loss in each period. Moving on to the balance sheet. As of March 31, 2023, the company had cash and cash equivalents of $19,600,000 compared to cash and cash equivalents of 29,800,000 on March 31, 2022. This concludes the financial highlights of our presentation.

I'd like to now turn the call back over to the operator to leave the Q and A.

Speaker 0

Certainly. At this time, we'll be conducting a question and answer session. If you have any questions or comments, please press star 1 on your phone at this time. We do ask that while posing your question, please pick up your handset if you're listening on speakerphone to provide Your first question is coming from Per Ostlund from Craig Hallum. Your line is live.

Speaker 4

Thank you. Good afternoon, everybody, and Congratulations, Eric, on your elevation into the new role. Thank you. So we're only about 6 weeks removed from Your Q4 call and obviously a lot of sweeping change in the shadow of that. So I think maybe a little bit unfair For us to ask too many questions about change since, but I guess we kind of have to.

So I'm curious if we can start with the therapy side since you are evaluating strategic alternatives there. Is there anything you can do to characterize some of the early discussions that you had or the level of interest you think you've found? Has it been Kind of meeting expectations, exceeding expectations. If a sale is the ultimate endgame there, How are you kind of thinking about valuation?

Speaker 2

Hey, Per. So thanks for the question and no worries on if they're unfair when it comes with the territory. So maybe, like you said, some adjectives, right, to kind of describe the conversations. I will say they're plural, So that's good. We have multiple parties that we're in discussion with.

The downside is it does take time to respond to all their questions. The parties are in what we're characterizing as Phase 1 due diligence, which lets them firm up Their proposal to us, right, so their financial proposal, think about the timeframe that would Be required to actually put things in writing in terms of like a definitive agreement. So It's good. We got multiple parties. They're at the same phase.

Nothing is definitive yet. So it's a little bit Wait and see, but I think we feel good about it. I think understanding the business and the potential for it With the customer base, we get to be on the front lines of hearing testimonials for that every day. So naturally, we're probably going to think that it can always be valued for more, once somebody really understands the potential for it. But I think so far we're pretty pleased, and everybody's coming in around the same numbers, the same dots, Right.

If you were to plot them on a graph, so it's being consistent there.

Speaker 4

Okay. Maybe just a quick Follow on to that, is there if we're talking about Phase 1 diligence, is it still reasonable to think that a second quarter Outcome, maybe it's not a completion, but a second quarter outcome, where you know what the end of the process is going to look like and then you're in a position to Make a decision on the furlough and then those sorts of things. Is that still kind of the target?

Speaker 2

Yes. That's definitely still the target. We still feel good about that. One never knows if something may pop up, but there's no indicators, right, otherwise at this point. So it still feels good.

Like you said, I think it will take it always will take a little bit longer than expected to get through legal agreements and actual closing. But if we keep staying on track, then we feel good.

Speaker 4

Okay, very good. I want to ask you a question about therapy And I think that because you alluded to this last call, Dana, and I'm intrigued by it, when you're talking about evaluating programs with Patient advocacy groups and large employers and what have you. I think historically, I don't want to speak for everybody, I think, but I think historically in our community, we've kind of taken to thinking of the sale as a sale to a radiology practice, whether it's And Solis or whoever it is, Radiology Partners, how does it look when you're not selling it To somebody like that, because I think that it's a very creative way, potentially creative way to go about proliferating the technology, But how do you do that and how do you get paid for it?

Speaker 2

Yes.

Speaker 4

If that makes sense.

Speaker 2

So at the beginning of the question, I think you said therapy, but you're meaning detection.

Speaker 4

Yes.

Speaker 2

Okay. Great. No worries. Yes. So we are aggressively exploring those options.

I think From our experience at Susan G. Komen, we know what it takes to provide technology And I'll say cancer related support programs and services directly in the hands of patients, and directly in the hands of Employers that want to put in place health and wellness initiatives, especially for women who may be Employed by them. So, how we get paid for those two types of programs could span a variety of methods. Very simply, there's a lot of precedent already being set, in the medical community, direct to patient, maybe home Health test kits or assessments. We've seen a lot of that with genetic testing.

The good news is our patients are able to get their Mammography images today and they can move them between provider to provider. So Billing us to have access to their images isn't a lot different than an already existing process that the patient has to get access to their images. And then just web portals, web based payment That's kind of the approach that we would take there. For large employers, it's typically something that they provide as a program basis To their entire staff, so something that's out of a benefits type of budget and HR type of budget. So that's how we would be looking, right, to be compensated in that regard.

Speaker 5

Okay.

Speaker 4

One last one, if I can. So there's been the substantial cut in expenses and then in The cash burn and the target there is to have that get you to profitability. Again, this is another one of those that's very, very early, but Do you feel like the cut that you've made is sufficient to get you to that target without, I guess, let's say, under investing in the business.

Speaker 2

Yes, it's a great question, When we think about every day. So if we were to embark on one of these new strategic Initiatives like a bold diversification of the revenue stream, then there may be a corresponding investment, right, some Cash we need to burn in order to build right the necessary programs or technologies to do that. If we decide to go that route, then that's something that when I talked about analyzing the strategic Alternatives, I mentioned we were going to update metrics and milestones on the Q3 call, which would be happening in Q4 this calendar year. So at that point in time, we might revise it, but we would be able to tell you the reason why. This is what we think Opening up this part of the market was mean to our business and the type of growth that we would expect.

But if we just continue, as you said, we're selling to radiologists, The large imaging centers to health networks with the set of solutions that we have today, then we do think those cuts are what was needed and we're Able to run the business and still achieve that target of exiting 2024, being breakeven, right, or Cash flow positive.

Speaker 4

Okay. Sounds good. Thank you, Dana. I appreciate it. Yes.

Speaker 0

Your next question is coming from Marie Thibault from BTIG. Your line is live.

Speaker 6

Hi, Dana and Eric. Thanks for taking the questions. I wanted to ask my first here about the Zoft business. You mentioned at the start of the call that it came in about 18 below your internal plan. How should we think about the very near term for Xoft?

Should we continue to think about sort of minimal to no new product Sales in that business while you work through the strategic alternatives and the furlough plans.

Speaker 2

I'm going to let Eric chime in here as well. But I think just at the high level, yes, I would think of Xoft Just being just stable and kind of flat. So not new growth in terms of either new product sales or new In that business in the short term, but we definitely want to get Eric's point of view as well.

Speaker 3

Yes. Hi, Marie. I think that I would echo what Dana said, largely remaining having revenue remain flat in Q2. We did pull a little bit of more help to work on the source and service revenue in Q2. I think we had a bit of a dip in Q1 As some of the furloughed resources were pulled off of Zaf.

So we're trying to remedy that this quarter with a little more proactive Calling and working with customers for balloon and source orders and so forth. But I think flattish in Q2 from Q1 is a good way to go. Okay.

Speaker 6

That's helpful. Thank you. And then As sort of a follow-up to that, Eric, I know you're very new in the seat. But I'm curious if this Understanding that obviously, the subscription model, you won't be able to give us more detail on, but do you think iCAD will be able to return to offering revenue guidance at some point as you Get settled in the seat.

Speaker 3

Yes. I think Dana, if you want me to answer that one. We've had conversations about that and we continue to. I think A lot of the target as far as timing for how things will be going forward with the new management team is Q3. So I think by then we'll have a clearer picture What we can give for guidance going forward and we'll have some more stability as far as the plan going forward at that point.

So I think in the near term, I don't think we'll be providing revenue guidance for this quarter and probably next. But I do foresee in the future where we'll be Stable enough with the new team that we may be able to have that discussion, determine if we can give more guidance going forward.

Speaker 6

Okay, understood. Thank you.

Speaker 4

Thank

Speaker 0

you. Your next question is coming from Yale Jen

Speaker 5

And my first question is, Dana, is that you mentioned about nice deals signed in the Q1. Could you give us A little bit color in terms of whether that sort of major expectation exceeded or something you want to further And I know you don't give guidance, but how would you see that, Whether that could be something you can think about for remaining of the year or will we have more rapid growth Going to the rest of the years, and then I have a follow-up.

Speaker 2

Okay, sure. And Eric, I'm going to ask you to chime in on this as well. But from my point of view, the 9 subscription deals in Q1, I think it was fantastic. So definitely pleased with that. Our new sales leader, his name is Bill, we Talked about him right in my comments.

He's putting a lot of discipline in place with the sales team. He has revamped The comp plan to I think give us the right incentives to achieve a healthy mix between perpetual licenses and subscription licenses. So, I think it was great success for Q1. I think we're doing well here in the middle of Q2. Can't make the call yet, but I think we're pleased with those results.

Eric has a bit more of a historical perspective. He's been with iCAD for 3 years. So I just stepped into this role, I guess, just now 60 days ago. So, would love to hear his point of view on if the Nine deals in the Q1 met expectations, exceeded, just how he's thinking about it?

Speaker 3

Yes. The 9 deals and the associated annual recurring revenue with them was above budget globally. So It was good. It was a pleasing quarter. I think particularly on the OUS side, 5 of those 9 deals were OUS related.

And they had one of the deals was their largest deal they've had to date. So we have seen a faster shift to subscription in OUS and that trend is continuing and starting to accelerate a little bit. Q2, at this point, like Dan has said, we don't know yet. But as of right now, It looks like a stronger quarter than Q1 in U. S.

And OUS. As far as subscription deals, we have a couple of deals that would be Among the biggest we've had to date. So still a forecast, but the trend is encouraging as far as

Speaker 5

Okay, great. Congrats on that. And then maybe just one more question here, which is more 10,000 feet, which is that in terms of transition is ongoing at this moment. And Eric, you sort of mentioned that maybe starting from Q3, you might give some guidance. Just curious whether do you feel that So overall, is the transition getting to a more mature stage by Q3 or maybe even Q4 that you will

Speaker 2

Yes. Eric, if you want to go ahead and address that one.

Speaker 3

Sure. I think that timeline, there's a lot of talks with new management team about potential diversification of revenue streams and projects that we need to discuss internally and with our board. I just think A lot of that will become clearer by the time we get to Q3 is kind of where I'm going as far as clarity. Of course, there will be 2 more quarters out in terms of what's going to happen with Zoft. I would We'll have a very clear picture by then.

We'll have 2 more quarters behind us in terms of our transition to subscription. There's a lot of discussion there. We have a new sales leader. We have some new some more executive management. And I think I just think we'll be We should be on the same page by Q3 with all these, kind of impactful decisions to make about firming out directions to go In a lot of these areas.

Speaker 5

Okay, great. And again, congrats on Eric and for your new position and thanks for the guidance.

Speaker 3

Thank you.

Speaker 0

Thank you. Your next question is coming from Frank Taconan from Lake Street Capital Markets. Your line is live.

Speaker 7

Hey, thanks for taking my questions. Maybe just to start, could you provide us an update on The Google Health Partnership as well as the Radiology Partners partnership, just what's the latest there? Any change in Strategy specifically behind those partnerships and kind of what you would be looking for over the next 12 months within those?

Speaker 2

Yes. So the Google Health Partnership is primarily a technology partnership, right? It's a development agreement. So The technology is on track. So we're pleased with that.

There's No major shifts. I would say it's just engineers kind of heads down and building a lot of technology in the algorithm. So that's great. On the Rad Partners, we have not signed the Contract with them yet, but it's I would say it's for good reason because We've discovered in our testing that we actually had some technology that enabled, I'll say their cloud, Their performance processing time to be greatly increased, speeded up. So that was fabulous.

And because of that, they actually want to license some additional technology from us. It's actually a part of the technology that we're building in concert with Google, right? So with our cloud, our commercial cloud platform. So we had to press pause a bit because we needed to do some more homework and kind of accelerate some of that development so that we could We provide it as a piece of standalone technology within the Rad Partners cloud. So what they call their RPX.

So that was a bit of slowdown that we put on our side because we didn't want to be rushed thinking about how we wanted to license and price Make sure that we were really kind of future proofing the agreement. But as far as any other terms in the agreement that are outstanding, It's just down to small i's and crossing small p's. So that looks well. They are continuing to bring us into deals. We are actively partnering with them in the field.

It's just the actual paperwork is lagging a bit behind.

Speaker 7

Okay. That's helpful. And then just my second one, maybe any update you can provide around The initiatives go to after Hologic, I know it predates your position, but I know there was previously a lot of focus to go after some of the Hologic accounts just given the big bolus of Systems that they own on the field. So maybe just any update on going after those and whether you see if Hologic is taking share on the AI front with their system that they include with their scanners.

Speaker 2

We don't have a, I'll call it a specific campaign, right, or approach Around Hologic, at least not at this point in time. Like you said, there may have been some that predate my involvement with the company. But I would say from a competitive standpoint, we don't see them any more than we would have in the past. I would say the common set of folks that we hear about here in the U. S.

Are primarily ScreenPoint, Right. So we'll hear about screen pointing deals against us. From a European standpoint, we do see Lunet a little bit more, Therapexel. So it's kind of the same set. So the competition is happening more so from the independent AI, software companies than Hologic and their embedded technology.

Speaker 0

Frank Brisby from Oppenheimer. Your line is live.

Speaker 3

Hi, thanks for taking the question. Just a quick one here. In terms of the SaaS transition model, Is this something that we want to completely transition to SaaS? Or how do we deal with accounts that may be, like the perpetual license? Is that Understood in the new comp program from the sales force.

Thank you.

Speaker 2

Yes. So, I'll chime in and then Eric, if there's Anything additional you want to add, please do. But, but Frank, you're right. I think for The foreseeable future, we're always going to live in a both world, right? So we're going to have accounts.

We still see them today That want perpetual. They want it on premise. It meets, their operational as well as their security requirements. And then we have accounts that want cloud based. So we're not planning on, I'll say end of life being or discontinuing the perpetual on prem model.

We need to have that available. We've obviously got a large installed base. So in terms of software upgrades, maintenance and support, so You'll see both. But what we do think is that over time, this mix, right, if you could envision a pie chart, how much of the pie Is perpetual versus how much is subscription? That's what we're closely watching and leveraging the way in which We're motivating and compensating the sales force to drive that shift for that mix between those 2 pie slices at the right rate.

Close watch on cash and what it does to revenue.

Speaker 3

Thank you. Yes. I can add a little bit, if it will help too. I think you'll see this kind of a slow and steady move to subscription over the Of course of the year, we're trying to strike that right balance between not going too fast or too slow To the transition because of the cash and revenue implications that Dana touched on. So the comp plan is doing sent perpetual and subscription Somewhat separately, but it's all geared towards an ACV metric for the reps.

So they are getting in kind of that annual recurring revenue Kind of mindset, but we do anticipate a strong mix. It's not going to shift overnight.

Speaker 0

Please go ahead.

Speaker 2

Thank you, operator. In conclusion, we're making bold moves to rapidly transform this company with a focus on stability, preserving cash and building a defensible and competitive long term strategy that diversifies our revenue stream and smooths out our customer concentration. Demand for our technology continues to be strong. The evidence supporting it continues to grow and we're continuing to strengthen our team. I remain optimistic about the company and its future, and I'm confident we're taking the right steps to ensure continued growth and create additional shareholder value.

I look forward to updating you next quarter as we continue to get clarity on our strategy, expand our partnerships and drive towards increased shareholder value. Thank you and have a great evening.

Speaker 0

Thank you, everyone. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.