Executive Summary

Q2 revenue rose 21% year over year to $5.03M on stronger product sales; gross margin expanded to 84% (from 81%), and GAAP net loss from continuing ops improved to $(1.71)M; diluted EPS was $(0.06) per press release, though the 8‑K statement of operations shows $(0.07) (small classification/rounding differences noted) .
Annual Recurring Revenue (ARR) reached $9.2M (+7% YoY), with Subscription ARR at $2.0M (+54% YoY) and first Cloud ARR at $0.2M, reflecting momentum in the SaaS transition; Maintenance ARR declined to $6.9M as customers migrate to subscription/cloud .
Commercial traction: 99 orders closed (60 perpetual, 29 subscription, 10 cloud), with the 10 cloud deals adding >$1.2M to backlog for future billings and GAAP revenue recognition .
Management emphasized early but better‑than‑expected adoption of the new ProFound Cloud SaaS platform, a multi‑year transition expected to improve profitability and cash flow predictability, albeit with near‑term GAAP revenue deferral as ratable recognition grows .
Potential stock catalysts: accelerating cloud migrations and enterprise wins (e.g., Windsong Radiology/US Radiology, Change Healthcare, Ferrum/Sutter) and regulatory milestones (Detection v4.0, Heart Health, Risk de novo) over the next few quarters/quarters‑plus .

What Went Well and What Went Wrong

What Went Well
- Strong topline and mix: Q2 revenue +21% YoY to $5.03M, driven by product revenue +41% YoY; gross margin improved to 84% from 81% .
- SaaS traction and visibility: Total ARR $9.2M (+7% YoY); Subscription ARR $2.0M (+~54% YoY), first Cloud ARR $0.2M; 10 cloud deals added >$1.2M to backlog; management sees “more predictable and robust economic model” from SaaS .
- Execution momentum: 60 perpetual, 29 subscription, 10 cloud deals closed; management cited sales force expansion, territory balancing, and faster cloud trials driving velocity. Quote: “we closed 60 perpetual, 29 subscription, and 10 cloud deals… [cloud] has been received better than expected” .
What Went Wrong
- Services revenue down: Q2 services revenue fell 5% YoY to $1.78M as customers migrate to subscription/cloud, an intentional shift but a headwind to services line growth near‑term .
- Operating expenses ticked up: Q2 operating expenses rose 4% YoY to ~$6.15M, with investment in R&D and regulatory for product/region expansion partially offset by G&A streamlining .
- Near‑term GAAP revenue pressure from SaaS: Management reiterated that the shift to ratable SaaS recognition can lower near‑term GAAP revenue and cash flow even as recurring backlog builds .

Financial Results

Headline P&L (oldest → newest)

Metric	Q4 2023	Q1 2024	Q2 2024
Revenue ($M)	$4.74	$4.95	$5.03
Gross Profit ($M)	$4.32	$4.11	$4.23
Gross Margin %	91%	83%	84%
Operating Expenses ($M)	$5.04	$5.55	$6.15
GAAP Net Loss – Continuing Ops ($M)	$(0.54)	$(1.22)	$(1.71)
Diluted EPS – Continuing Ops ($)	$(0.02)	$(0.05)	$(0.06)

Note: The 8‑K attached statement of operations shows Q2 diluted loss per share from continuing ops of $(0.07), and slightly different line items (e.g., cost allocations); the press release condensed statements show $(0.06) and are used above for consistency .

Revenue Mix (oldest → newest)

Metric	Q4 2023	Q1 2024	Q2 2024
Product Revenue ($M)	$2.97	$3.10	$3.25
Services Revenue ($M)	$1.77	$1.85	$1.78
Total Revenue ($M)	$4.74	$4.95	$5.03

Q2 Year-over-Year (Q2’23 → Q2’24)

Metric	Q2 2023	Q2 2024
Total Revenue ($M)	$4.17	$5.03
Product Revenue ($M)	$2.30	$3.25
Services Revenue ($M)	$1.87	$1.78
Gross Margin %	81%	84%
GAAP Net Loss – Continuing Ops ($M)	$(2.34)	$(1.71)
Diluted EPS – Continuing Ops ($)	$(0.09)	$(0.06)

KPIs and Operating Metrics (oldest → newest)

KPI	Q4 2023	Q1 2024	Q2 2024
Total ARR ($M)	$8.7	$9.0	$9.2
Maintenance ARR ($M)	$7.0	$7.0	$6.9
Subscription ARR ($M)	$1.7	$1.9	$2.0
Cloud ARR ($M)	N/A (pre‑launch)	N/A (just launched)	$0.2
Orders – Perpetual (count)	80	76	60
Orders – Subscription (count)	9	16	29
Orders – Cloud (count)	0	0 (first cloud YTD)	10

Non‑GAAP (Q2 YoY)

Metric	Q2 2023	Q2 2024
Adjusted EBITDA ($M)	$(2.10)	$(1.18)
Adjusted Net Loss – Continuing Ops ($M)	$(2.24)	$(1.57)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Company guidance (revenue, margins, opex, etc.)	FY/Q3 outlook	None provided	None provided; management reiterated SaaS shift may reduce near‑term GAAP revenue while building recurring backlog and visibility	Maintained no formal guidance
Backlog indicator (Cloud deals YTD)	Multi‑year	N/A	10 cloud deals in Q2 added >$1.2M to backlog for billings/GAAP revenue	New disclosure (visibility proxy)

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4’23, Q1’24)	Current Period (Q2’24)	Trend
Cloud/SaaS transition	Announced ProFound Cloud; planned tracking of Cloud ARR; highlighted ratable recognition and near‑term revenue/cash headwinds	First full quarter of ProFound Cloud; 10 cloud deals; Cloud ARR $0.2M; >$1.2M backlog from Q2 cloud; faster deployments/performance	Accelerating adoption; building recurring base
Sales force & pipeline	Added SVP N. America, +4 reps; revamp commercial model and lead gen	Volume up across the board; migrations successful; 99 total orders; territory balancing drove momentum	Improved execution and deal velocity
Partnerships (GE, Google, platform)	GE MyBreastAI Suite integration; long‑term Google Health R&D collaboration; marketplace integrations	Expanding with Change Healthcare; Ferrum at Sutter; Windsong/US Radiology strategic agreement; Densitas & CancerIQ partnerships	Strengthening access and distribution
Regulatory pipeline (Detection v4.0, Heart Health, Risk)	v4.0 and Heart Health under FDA review; Risk treated as de novo (US); near‑term EU focus for combined algorithm	Continued; management still expects longer timelines; near‑term business not modeled on these	Steady progress; timelines cautious
International expansion	EMEA installs, distributors, shows (ECR)	New accounts in Germany; pipelines in Europe, Israel, UAE; LatAm and Japan expansion planned in 12 months	Broadening global reach
Services to subscription/cloud migration	Noted lapsed maintenance renewal effort; push to recurring	Services down 5% YoY as customers migrate; Maintenance ARR down; subs/cloud up	Mix shift continuing
Seasonality/budget cycles	Seasonal patterns; Q4 strength; lumpiness from perpetual	Reiterated; perpetual still causes variability	Unchanged

Management Commentary

“This was our first full quarter offering our ProFound Cloud SaaS platform… [it] should also create a more predictable and robust economic model for the business over time as it grows as a percentage of revenue.” – Dana Brown, CEO .
“In the second quarter, we closed 60 perpetual, 29 subscription and 10 cloud orders… migrations have been very successful… converting customers to cloud or subscription products.” – Eric Lonnqvist, CFO .
“The 10 cloud deals closed in Q2, add in excess of $1.2 million to our backlog for both billings and GAAP revenue.” – Eric Lonnqvist .
“We’re seeing greater than planned interest in our cloud platform, surpassing our initial expectations… with significant transformation expected over the next 3 years.” – Dana Brown .
On services softness: “Service revenue was… down 5%… largely driven by service customers migrating to our subscription [or] cloud products.” – Eric Lonnqvist .

Q&A Highlights

Topline surprise relative to models: One analyst noted $5M “was certainly more than we had and I think more than anybody had,” with sales force expansion and volume/migrations cited as drivers; Baylor Scott & White had an unusual upfront carve‑out in Q1, but Q2 cloud deals are largely ratable .
Cloud funnel/velocity: Early conversations pre‑launch helped seed Q2; cloud trials speed conversions; migrations accelerated as customers avoid on‑prem hardware refreshes .
Sales capacity: Team size viewed as appropriate for now; focus on role specialization (new business vs. account management) and territory balancing .
Modeling implications: Faster SaaS adoption can reduce quarterly GAAP revenue despite stronger bookings/visibility; ARR seen as a “soft guidance” proxy entering each quarter .
Regulatory timing: Detection v4.0 and Heart Health subject to evolving cybersecurity/data requirements; Risk treated as de novo; near‑term commercialization in U.S. uncertain (longer timelines) .

Estimates Context

S&P Global consensus estimates were unavailable via our tool for ICAD this quarter due to a mapping issue; as a result, we cannot present definitive consensus comparisons from S&P Global. Values retrieved from S&P Global were unavailable.
Qualitatively, an analyst on the call indicated Q2 revenue of ~$5M was above expectations (“more than anybody had”), but without S&P Global consensus, we cannot characterize an official beat/miss versus Street consensus .

Key Takeaways for Investors

Mix shift is working: Product strength and margin expansion alongside rising subscription/cloud ARR indicate the SaaS transition is gaining traction, with >$1.2M in cloud‑driven backlog added in Q2 .
Expect near‑term GAAP volatility as ratable SaaS ramps; use ARR and order metrics (perpetual/subscription/cloud counts) as visibility proxies during the model transition .
Sales execution improving: Expanded team, targeted lead gen, and role specialization are lifting deal volume and migration success; watch for sustained subscription/cloud order growth and M‑ARR declines as a healthy mix shift .
Pipeline and partnerships broaden reach: Platform/channel partners (GE, Change Healthcare, Ferrum), enterprise agreements (US Radiology/Windsong), and EU/ROW interest should support medium‑term growth .
Regulatory optionality: Detection v4.0, Heart Health, and Risk (de novo) represent future product catalysts; timelines remain cautious, with limited near‑term U.S. revenue assumed by management .
Cash runway intact: $20.4M cash at quarter end and improved operating cash burn YTD; management reiterated no need to raise capital for planned operations .
Watch services line: Continued services revenue pressure is expected as maintenance converts to subscription/cloud; the key is total ARR growth and deal momentum, not services stability .

Appendix: Other Q2‑Relevant Press Releases

Strategic agreement with Windsong Radiology/US Radiology Specialists to implement ProFound AI Breast Health across locations, underscoring enterprise adoption in U.S. networks .
SIIM 2024: Research highlighting AI‑derived risk score changes; ProFound Cloud performance and provider testimonials (e.g., SDMI) reinforce SaaS value proposition .

ICAD INC (ICAD)·Q2 2024 Earnings Summary