iCAD - Q1 2023
May 15, 2023
Transcript
Operator (participant)
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, Lenore Faber. Ma'am, the floor is yours.
Lenore Faber (Company Representative)
Thank you, operator. Good afternoon, everyone. Thank you for joining us today for iCAD's first quarter 2023 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 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 in 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.
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.
Dana Brown (President and CEO)
Thank you, Lenore. Good afternoon, everyone. Let's begin with our business update. As mentioned on our previous call, we are exploring strategic options for the Xoft 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. While we retain staff to support sales and services, revenue for Q1 was 18% lower than our budget, coming in at $1.43 million versus $1.7 million. Sales have slowed as customers and distributors are cautious about the business's 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% of patients remaining recurrence-free at a median follow-up of 7.6 years. This study adds to the body of clinical evidence that puts Xoft 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. 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 Force announcement from earlier this week. They've published new draft mammography guidelines, which recommend women of average risk begin screening mammography at age 40. With 20 million 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.
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 of 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 two 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. Our risk solution is up to 2.4x 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. With the recent U.S. Preventive Services Task Force guidelines, it's clear that our technology is more relevant than ever. Back to our Q1 updates. First, of note, we strengthened our leadership team with seasoned leaders poised to execute our strategic vision and grow our business. 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 Avadhanula as our new Chief Product Officer. I've worked with Vasu over the past several years and can attest that he's 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. Vasu 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 at Susan G. Komen, Vasu 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 ShareForCures, 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. I'm pleased to report that we've completed our search for a full-time CFO as the board of directors appointed Eric Lonnqvist 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 three years, and during that time been a strong and stable leader through leadership and market changes.
Eric's leadership style, combined with his strong financial and business acumen, will be instrumental in leading the financial operations of the company. Eric has more than 15 years of finance and accounting experience in the medical device and technology industries, 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. While we work on these exciting transformations as a company, compelling new research continues to validate the benefits our breast AI 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 and women's lives. In a research presentation session at the meeting, Dr. Kathy Schilling, the Medical Director of the Christine E. Lynn Women's Health & 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 nine 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 the study in nationally syndicated segments featuring iCAD and Dr. Schilling.
Dr. Schilling will be sharing more about this research, along with her 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 2D mammography is more accurate than Tyrer-Cuzick version 8, a commonly used lifestyle risk model. 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 history.
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 Tyrer-Cuzick. 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 first quarter, 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.
Dense breast notifications are only as effective as the assessments 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 increase 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 distributors with potential customers from all over the world.
We also hosted a special evening event featuring talks from renowned leaders in breast imaging AI, including Dr. Kathy Schilling and Dr. Axel Gräwingholt, who shared compelling testimonies and clinical case studies demonstrating the power of our technology to an audience of more than 100 radiologists. 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 first 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 on 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.
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 $4.3 million to $4.6 million, and annualized cash burn by $4.9 million to $5.2 million, 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 SAR 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 nine 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 revenue spread across the contract term. I also mentioned on the last call and earlier today that 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 read 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 help all women get access to the breast health care they need. Expanding our cloud-based AI platform 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.
Eric Lonnqvist (CFO)
Good afternoon, everyone. Thank you, Dana. I'll now summarize our financial results for the first quarter ended March 31st, 2023. Total revenue for the quarter was $5.8 million, a decline of $1.7 million or 23% from the first quarter of 2022. The detection segment revenue was $4.3 million, down 21% from last year. Within detection, first quarter of 2023 product revenue was $2.5 million, 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 $1.9 million, up 13% over the prior year. From a regional standpoint, detection segment revenue for the US was $3.7 million, a decline of 19% from the first quarter of 2022.
Detection segment revenue for OUS was $0.6 million, a decline of 35% from the first quarter of 2022. The therapy segment revenue was $1.4 million, down $0.6 million or 28% versus the first quarter of 2022. Therapy product revenue was $0.3 million, down 59% year-over-year. Services revenue was $1.2 million, down 11% year-over-year. Moving on to gross profit. On a percentage of revenue basis, gross profit was 71% for the first quarter of 2023, which was in line with the first quarter of 2022. On a pure dollar basis, gross profit for the quarter was $4.1 million, as compared to $5.3 million last year. This is largely reflective of a reduction in revenues.
Total operating expenses for the first quarter ended March 31st, 2023, versus $3.5 million in the quarter ended March 31st, 2022. GAAP net loss for the first quarter of 2023 was $3.8 million, or $0.15 per diluted share, compared with a GAAP net loss of $3.5 million or $0.14 per diluted share for the first quarter of 2022. Non-GAAP adjusted EBITDA for the first quarter of 2023 was a loss of $3 million versus $2.7 million in Q1 2022. Non-GAAP adjusted net loss for the quarter was $3.6 million or $0.14 per diluted share, compared to $3.5 million 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 31st, 2023, the company had cash and cash equivalents of $19.6 million, compared to cash and cash equivalents of $29.8 million on March 31st, 2022. This concludes the financial highlights of our presentation. I'd like to now turn the call back over to the operator to lead the Q&A.
Operator (participant)
Certainly. At this time, we'll be conducting a question and answer session. If you have any questions or comments, please press star one on your phone at this time. We do ask that while posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality. Once again, if you have any questions or comments, please press star one on your phone. Your first question is coming from Per Ostlund from Craig-Hallum. Your line is live.
Per Ostlund (Supervisory Analyst)
Thank you. Good afternoon everybody and congratulations, Eric, on your elevation into the new role.
Eric Lonnqvist (CFO)
Thank you.
Per Ostlund (Supervisory Analyst)
We're only about six weeks removed from your fourth quarter call and obviously a lot of sweeping change, you know, in the shadow of that. It's, I think maybe a little bit unfair for us to ask too many questions about, you know, change since, but I guess we kinda have to. 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've 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 end game there, you know, how are you kinda thinking about valuation?
Dana Brown (President and CEO)
Hey, Per. Thanks for the question and no worries on if they're unfair. It comes with the territory. Maybe, you know, like you said, some adjectives, right? To kinda 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 one due diligence, which lets them firm up, you know, their proposal to us, right? Their financial proposal, think about, you know, the timeframe that would be required, to actually, you know, put things in writing in terms of, like, a definitive agreement. You know, it's good. We got multiple parties. They're at the same phase.
Nothing is, you know, definitive yet, so it's a little bit wait and see. I think we feel good about it. I think, you know, understanding the business and the potential for it with the customer base, you know, we get to be on the front lines of hearing, you know, testimonials for that every day. Naturally, we're probably gonna think that it can always be valued for more, you know, once somebody really understands the potential for it. I think so far we're pretty pleased, and everybody's coming in around the same, you know, the same numbers, the same dots, right? If you were to plot them on a graph. It's being consistent there.
Per Ostlund (Supervisory Analyst)
Okay. maybe just a quick follow-on to that. Is there-
Dana Brown (President and CEO)
Sure.
Per Ostlund (Supervisory Analyst)
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, you know, where you know what the end of the process is gonna look like, and then you're in-
Dana Brown (President and CEO)
Yeah
Per Ostlund (Supervisory Analyst)
-a position to make a decision on the furlough and those sorts of things. Is that still kind of the target?
Dana Brown (President and CEO)
Yeah. Yeah.
Per Ostlund (Supervisory Analyst)
Okay.
Dana Brown (President and CEO)
That's definitely still the target. We still feel good about that. You know, 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, you know, it always will take a little bit longer than expected to get through, you know, legal agreements and actual closing. If we keep staying on track, then we feel good.
Per Ostlund (Supervisory Analyst)
Okay. Very good. I want to ask you a question about therapy and, and I think that, 'cause 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 a
Dana Brown (President and CEO)
Mm-hmm.
Per Ostlund (Supervisory Analyst)
You know, and, you know, Solis or whoever it is, Radiology Partners. How does it look when you're not selling it to somebody like that? I think that it's a very creative way to go about proliferating the technology. How do you do that, and how do you get paid for it?
Dana Brown (President and CEO)
Yeah.
Per Ostlund (Supervisory Analyst)
If that makes sense.
Dana Brown (President and CEO)
At the beginning of the question, I think you said therapy, but you're meaning detection.
Per Ostlund (Supervisory Analyst)
Yeah, I meant detection for sure. Yes.
Dana Brown (President and CEO)
Yeah. Okay.
Per Ostlund (Supervisory Analyst)
Sorry.
Dana Brown (President and CEO)
Great. No worries. Yeah, so we are aggressively exploring those options. I think, you know, 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, you know, health and wellness initiatives, especially for, you know, women who may be employed by them. You know, how we get paid for those two types of programs could span a variety of methods. You know, very simply, there's a lot of precedent already being set in the medical community, direct to patient, maybe home health test kits or, you know, assessments. We've seen a lot of that with genetic testing.
you know, the good news is our patients are able to get their mammography images today, and they can, you know, move them between provider to provider. Enabling 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. just, you know, web portals, web-based, you know, payment, you know, carts, that's kind of the approach that we would take there. For large employers, it's typically something that they, you know, provide as a program basis to their entire staff, so something that's out of, you know, a benefits type of budget, an HR type of budget. That's how we would be looking, right, to be compensated in that regard.
Per Ostlund (Supervisory Analyst)
Okay. Okay. One last one, if I can.
Dana Brown (President and CEO)
Yeah.
Per Ostlund (Supervisory Analyst)
There's been the substantial cut in expenses.
Dana Brown (President and CEO)
Yeah
Per Ostlund (Supervisory Analyst)
In the cash, 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. 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?
Dana Brown (President and CEO)
Yeah. It's a great question, one we think about every day. If we were to embark on one of these new strategic initiatives, you know, 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. You know, if we decide to go that route, then, you know, that's something that when I talked about analyzing the strategic alternatives, I mentioned we were gonna update metrics and milestones on the third quarter call, which would be, you know, happening in fourth quarter this calendar year. At that point in time, we might revise it, but we would be able to, you know, tell you the reason why.
You know, this is what we think opening up this part of the market would mean to our business and the type of growth that we would expect. If we just, you know, continue, as you said, we're selling to radiologists, to 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, you know, able to run the business and still achieve that target of exiting 2024, being break even, right, or cash flow positive.
Per Ostlund (Supervisory Analyst)
Okay. Sounds good. Thank you, Dana. I appreciate it.
Dana Brown (President and CEO)
Mm-hmm. Yeah.
Operator (participant)
Thank you. Your next question is coming from Marie Thibault from BTIG. Your line is live.
Marie Thibault (Managing Director and Medical Technology and Digital Health Analyst)
Hi, Dana and Eric. Thanks for taking the questions. Wanted to ask my first here about the Xoft 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?
Dana Brown (President and CEO)
I'm gonna let Eric chime in here as well, but I think, you know, At the high level, yeah, I would think of Xoft as being, you know, just stable and kind of flat. Not new growth in terms of either new product sales or new customers in that business in the short term. We definitely want to get Eric's point of view as well.
Eric Lonnqvist (CFO)
Yeah. 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 Xoft. 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. I think flattish in Q2 from Q1 is a good way to go.
Marie Thibault (Managing Director and Medical Technology and Digital Health Analyst)
Okay. That's helpful. Thank you. Then as sort of a follow-up to that, Eric, I know you're very new in the seat.
Eric Lonnqvist (CFO)
Yeah.
Marie Thibault (Managing Director and Medical Technology and Digital Health Analyst)
I'm curious if this, you know, understanding that obviously, you know, 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?
Eric Lonnqvist (CFO)
Yeah. 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. I think by then we'll have a clearer picture of 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. I think in the near term, I don't think we'll be providing revenue guidance for this quarter and probably next, 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.
Marie Thibault (Managing Director and Medical Technology and Digital Health Analyst)
Okay. Understood. Thank you.
Eric Lonnqvist (CFO)
Sure.
Operator (participant)
Thank you. Your next question's coming from Yale Jen from Laidlaw & Company. Your line is live.
Yale Jen (Managing Director and Biotechnology Analyst)
Good afternoon, and thanks for taking the questions. My first question, Dana, is that you mentioned about nine deals signed in the first quarter. Could you give us a little bit color in terms of whether that sort of meet your expectation, exceeds it, or something you want, you know, further work on? I know you don't give a 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? Then I have a follow-up.
Dana Brown (President and CEO)
Okay. Sure. Eric, I'm gonna ask you to chime in on this as well. From my point of view, the nine subscription deals in Q1, I think was fantastic. Definitely pleased with that. You know, our new sales leader, his name is Bill, I 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. You know, I think it was great success for Q1. I think we're doing well here in the middle of Q2. You know, can't, you know, make the call yet, but I think we're pleased with those results. Eric has a bit more, you know, of a historical perspective.
He's been with iCAD for three years. I just stepped into this role, I guess, just now, 60 days ago. Would love to hear his point of view on if the nine deals in the first quarter, you know, met expectations, exceeded, just how he's thinking about it.
Eric Lonnqvist (CFO)
The nine deals and the associated annual recurring revenue with them was above budget globally. It was good. It was a pleasing quarter. I think particularly on the OUS side, you kno`w, five of those nine deals were for OUS related. They had one of the deals was their largest deal they've had to date. We have seen a faster shift in to subscription in OUS, and that trend is continuing and starting to accelerate a little bit. Q2, at this point, like Dana said, we don't, we don't know yet, but as of right now, it looks like a stronger quarter than Q1 in US and OUS, as far as subscription deals. We have a couple of deals that would be among the biggest we've had to date.
Still a forecast, but the trend is encouraging as far as the shift to subscription.
Yale Jen (Managing Director and Biotechnology Analyst)
Okay, great. congrats on that. Maybe just one more question here, which is more 10,000 ft., which is that in term of transition is ongoing at this moment, and Eric, you sort of mentioned that maybe starting from third quarter, you might give some guidance. just curious whether do you feel that overall, is the transition getting to a more, quote-unquote, mature stage by third quarter or maybe in the fourth quarter that you will have more confidence or more visibility to talk about? Thanks.
Dana Brown (President and CEO)
Yeah. Eric, if you wanna go ahead and address that one.
Eric Lonnqvist (CFO)
Sure. I think that timeline, there's a lot of talks with the 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 kinda where I'm going as far as clarity. Of course, there will be two more quarters out in terms of what's going to happen with Xoft. I would expect we'll have a very clear picture by then. We'll have two 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 more executive management and I think.
I just think we should be on the same page by Q3 with all these, kind of impactful decisions to make about firming up directions to go in a lot of these areas.
Yale Jen (Managing Director and Biotechnology Analyst)
Okay, great. Again, congrats on Eric and, for your new position, and, thanks for the guidance.
Eric Lonnqvist (CFO)
Thank you.
Operator (participant)
Thank you. Your next question is coming from Frank Takkinen from Lake Street Capital Markets. Your line is live.
Frank Takkinen (Senior Research Analyst)
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 kinda what should we be looking for over the next 12 months within those?
Dana Brown (President and CEO)
Yeah. The Google Health partnership is primarily a technology partnership, right? It's a development agreement, so the technology's on track. We're, we're pleased with that. There's, you know, no major shifts. I would say it's just engineers, you know, kinda heads down and building a lot of technology in the algorithm. That's great. On the Radiology Partners, we have not signed the contract with them yet, but I would say it's for, 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. That was fabulous. 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?
With our cloud, our commercial cloud platform. 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 actually provide it as a piece of standalone technology within the Radiology Partners cloud, what they call their RPX. That was a bit of slowdown that we put on our side 'cause we didn't wanna be rushed thinking about how we wanted to license and price that for it, make sure that we were really kind of future-proofing the agreement. You know, as far as any other terms in the agreement that are outstanding, it's just down to, you know, small i's and crossing small p's. That looks well.
They are continuing to bring us into deals, so, you know, we are actively partnering with them in the field. It's just the actual paperwork is lagging a bit behind.
Frank Takkinen (Senior Research Analyst)
Okay. That's helpful. Just for my second one.
Dana Brown (President and CEO)
Mm-hmm.
Frank Takkinen (Senior Research Analyst)
Maybe any update you can provide around the initiatives to go 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 out in the field. 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-
Dana Brown (President and CEO)
Mm-hmm.
Frank Takkinen (Senior Research Analyst)
With their scanners.
Dana Brown (President and CEO)
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. You know, I would say from a competitive standpoint, you know, we don't see them any more than we would have in the past, you know. I would say the common set of folks that we hear about here in the U.S. are primarily ScreenPoint, right? We'll hear about ScreenPoint in deals against us. From a European standpoint, we do see Lunit a little bit more, Therapixel. It's kind of the same set. The competition is happening more so from the independent AI software companies than, you know, Hologic and their embedded technology.
Frank Takkinen (Senior Research Analyst)
Okay. That's good color. I'll stop there. Thanks.
Dana Brown (President and CEO)
Mm-hmm. Okay.
Operator (participant)
Thank you. Your next question is coming from François Brisebois from Oppenheimer & Co. Inc.. Your line is live.
François Brisebois (Managing Director and Senior Analyst)
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 licenses?
Dana Brown (President and CEO)
Mm-hmm.
François Brisebois (Managing Director and Senior Analyst)
Understood in the new comp program from the sales force? Thank you.
Dana Brown (President and CEO)
Yeah. Yeah. Yeah. I'll chime in, and then Eric, if there's anything additional you wanna add, please do. But Frank, you're right. You know, I think for the foreseeable future, you know, we're always gonna live in a both world, right? We're gonna 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. Then we have accounts that want, you know, cloud-based. We're not planning on, I'll say, end-of-lifing 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. You'll see both.
What we do think is that over time, this mix, right, if you could envision a pie chart, you know, 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, you know, we're motivating and compensating the sales force to drive that shift or that mix between those two pie slices at the right rate. You know, close watch on cash and what it does to revenue.
François Brisebois (Managing Director and Senior Analyst)
Thank you.
Eric Lonnqvist (CFO)
Yeah, I can add a little bit if it'll help too. I think you'll see this kind of a slow and steady move to subscription over the 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. The comp plan is doing sent perpetual and subscription somewhat separately, but it's all geared towards an ACV metric for the reps. They are getting in kind of that annual occurring revenue kind of mindset. But we do anticipate a strong mix. It's not gonna shift overnight.
Operator (participant)
Thank you. That concludes our Q&A session. I'll now hand the conference back to Dana Brown for closing remarks. Please go ahead.
Lenore Faber (Company Representative)
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.
Operator (participant)
Thank you, everyone. This concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.