Q2 2024 Summary
Published Jan 30, 2025, 7:25 PM UTC- iCAD's cloud platform is expected to grow faster than subscription, with positive early indicators suggesting future growth potential.
- Significant increase in deal volume, with nearly 100 deals closed in Q2, including 29 subscriptions, indicating strong sales execution and growth momentum for iCAD.
- Recurring revenue has increased from just over $6 million in Q1 2022 to over $9 million in Q2 2024, demonstrating a successful shift to a more stable and predictable revenue model.
- The company's shift to a cloud-based SaaS model may result in lower GAAP revenue and negative cash flow in the short term, as revenue and cash are recognized monthly rather than upfront, potentially impacting near-term financial performance.
- There is uncertainty about the timing of the cloud platform's adoption and its impact on revenue growth. The company acknowledges that they need a few more quarters to see how the adoption rate stabilizes and becomes predictable, which could lead to unpredictable revenue trends in the near future.
- The company's revenue growth may be dependent on a few large deals, leading to potential revenue volatility. Significant deals like the Baylor Scott & White subscription had a notable impact on revenue, and reliance on such deals may make future growth less predictable.
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Q2 Revenue Drivers
Q: What drove the strong $5M revenue in Q2?
A: The strong Q2 revenue of $5 million was driven by the expanded sales team hitting their stride, rebalanced territories, and an emphasis on renewals. While the Baylor Scott & White deal was impactful, contributing upfront revenue similar to Raleigh Radiology in Q1, overall increased volume and nearly 100 deals, including 29 subscriptions, significantly contributed to the top line. The sales team’s efforts, especially in expanded territories like the West Coast, led to this success. -
Cloud Adoption Impact
Q: Is cloud adoption accelerating revenue growth?
A: Yes, cloud adoption is accelerating growth. With 10 cloud deals in the quarter, despite cloud being commercially available for less than the full quarter, customers are embracing it due to ease of trials and faster closing cycles. The ability to test the product easily has led to closing more deals than planned, and we expect cloud adoption to grow faster than subscription going forward. Early indicators are positive, and cloud is seen as the future for iCAD and its customers. -
ARR Growth
Q: Why compare ARR since Q1 2022?
A: We started selling subscription deals in Q1 2022, when we had just over $6 million in recurring revenue from our perpetual maintenance business. As of the end of Q2 2024, recurring revenue has grown to over $9 million, showing cumulative progression towards a larger, more stable base of recurring revenue sources. This comparison highlights the significant growth in our recurring revenue since initiating the shift to a subscription model. -
Revenue Recognition Shift
Q: How will cloud shift affect revenue modeling?
A: The faster transition to cloud could have a counterintuitive effect on revenue recognition. Even though we're securing more cloud deals, recognized revenue in a given quarter could decrease because revenue is recognized ratably over the contract term (e.g., 36 months), potentially reducing quarterly recognized revenue despite increased deal volume. However, it builds a strong backlog of recurring revenue, making future quarters more predictable and stable. We'll need a few more quarters to see how cloud adoption stabilizes before we can model future revenue trends accurately. -
Sales Team Expansion
Q: Do you need to add more salespeople?
A: Currently, our sales team is the right size. While we're still adjusting roles and understanding who excels in securing new business versus maintaining existing accounts, we're set in terms of team size. Our focus is on optimizing the current team, and as we look at new territories, we'll figure out the right mix of direct support and potential partners or distributors. For the U.S., the team is set, and we feel good about where we're at.