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II

ICAD INC (ICAD)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 revenue was $4.217M (+3.5% YoY) with gross margin steady at 86%; GAAP net loss from continuing operations widened to $(1.801)M (EPS $(0.07)), driven by higher R&D/regulatory spend to support product and regional expansion .
  • Annual Recurring Revenue (ARR) rose to $9.3M (+10% YoY), with 85 deals closed (52 perpetual, 20 subscription, 13 cloud), underscoring ongoing SaaS transition momentum .
  • Management reiterated near-term top-line pressure as customers shift to ratable cloud subscriptions; Q3 cloud wins added >$0.85M to backlog for future billings/GAAP revenue, increasing revenue visibility despite short-term GAAP headwinds .
  • FDA cleared ProFound Detection v4.0 (DBT) with 22% improved detection of challenging/aggressive cancers and 18% fewer lesion markings; rollout expected to start mid-December, representing a near-term upgrade catalyst .
  • Cash and cash equivalents were $18.8M with management stating sufficient resources to fund planned operations without raising capital, reducing financing risk .

What Went Well and What Went Wrong

What Went Well

  • SaaS transition progressed: 13 cloud deals in Q3, including strategic 3-year cloud wins at UCSD (~90k exams/year) and Charlotte Radiology; ARR reached $9.3M (+10% YoY) .
  • Regulatory/product momentum: FDA clearance of ProFound Detection v4.0 (DBT) with 22% improved detection and 18% fewer markings; management expects new customers and upgrades to choose v4.0 .
  • Global expansion: New distribution alliances (Dominican Republic, France, Spain, Turkey, UAE), regulatory clearance in South Africa, first Blackford platform customer (SCP Radiology, 22k exams/year) .

What Went Wrong

  • Profitability: Non-GAAP adjusted EBITDA loss increased to $(1.463)M from $(0.838)M YoY; GAAP net loss from continuing operations widened to $(1.801)M (EPS $(0.07)) from $(1.037)M (EPS $(0.04)) YoY .
  • Services revenue declined: Q3 services revenue fell 8.9% YoY to $1.709M as customers migrated to subscription/cloud offerings, pressuring near-term GAAP .
  • Operating expenses rose 19% YoY to $5.649M on R&D/regulatory investments to support product/regional expansion, compressing operating results in the quarter .

Financial Results

Sequential performance (Q1→Q2→Q3 2024)

MetricQ1 2024Q2 2024Q3 2024
Total Revenue ($USD Millions)$4.954 $5.029 $4.217
Product Revenue ($USD Millions)$3.102 $3.254 $2.508
Services Revenue ($USD Millions)$1.852 $1.775 $1.709
Gross Profit ($USD Millions)$4.113 $4.217 $3.634
Gross Profit Margin %83% 84% 86%
Total Operating Expenses ($USD Millions)$5.554 $6.165 $5.649
GAAP Net Loss – Continuing Ops ($USD Millions)$(1.222) $(1.739) $(1.801)
Diluted EPS – Continuing Ops ($USD)$(0.05) $(0.07) $(0.07)
Non-GAAP Adjusted EBITDA ($USD Millions)$(1.073) $(1.179) $(1.463)
Cash and Cash Equivalents ($USD Millions)$20.284 $20.353 $18.793

YoY comparison (Q3 2023 vs Q3 2024)

MetricQ3 2023Q3 2024
Total Revenue ($USD Millions)$4.073 $4.217
Product Revenue ($USD Millions)$2.198 $2.508
Services Revenue ($USD Millions)$1.875 $1.709
Gross Profit ($USD Millions)$3.521 $3.634
Gross Profit Margin %86% 86%
Total Operating Expenses ($USD Millions)$4.740 $5.649
GAAP Net Loss – Continuing Ops ($USD Millions)$(1.037) $(1.801)
Diluted EPS – Continuing Ops ($USD)$(0.04) $(0.07)
Non-GAAP Adjusted EBITDA ($USD Millions)$(0.838) $(1.463)

Segment breakdown (Q1→Q2→Q3 2024)

SegmentQ1 2024 ($USD Millions)Q2 2024 ($USD Millions)Q3 2024 ($USD Millions)
Product$3.102 $3.254 $2.508
Services$1.852 $1.775 $1.709
Total$4.954 $5.029 $4.217

KPIs and Operating Metrics

KPIQ1 2024Q2 2024Q3 2024
Total ARR ($USD Millions)$9.0 $9.2 $9.3
M-ARR ($USD Millions)$7.0 $6.9 $6.7
S-ARR ($USD Millions)$1.9 $2.0 $2.2
C-ARR ($USD Millions)n/a (tracking begins later) $0.2 $0.4
Perpetual deals (count)76 60 52
Subscription deals (count)16 29 20
Cloud deals (count)n/a 10 13
Cloud backlog addition ($USD)—>$1.2M >$0.85M

Vs. Estimates

  • Wall Street consensus (S&P Global) for Q3 2024 revenue/EPS was unavailable at this time; no direct vs-estimates comparison can be provided.

Guidance Changes

MetricPeriodPrevious Guidance/CommentaryCurrent Guidance/CommentaryChange
Revenue trajectory (SaaS transition impact)Near-term (quarterly)Shift to SaaS to create more predictable, high-margin model over time; short-term lower GAAP revenue and cash flow as cloud ratably recognized Management reiterates top line may flatten or even drop short term as mix shifts to cloud; 13 cloud deals add >$0.85M backlog (billings and GAAP revenue) improving visibility Maintained cautionary outlook
Cash runwayFY2024Sufficient cash resources; no need to raise capital Sufficient cash resources; no need to raise capital Maintained
Product roadmapLate 2024ProFound Cloud launched; v4.0 and heart health in FDA process FDA cleared ProFound Detection v4.0; rollout start mid-December; new features reduce false positives and improve detection Raised product visibility

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2024)Previous Mentions (Q2 2024)Current Period (Q3 2024)Trend
SaaS/cloud transitionCommercial launch of ProFound Cloud; early interest; recurring model to improve predictability; caution of near-term GAAP impact Cloud processing >50% faster; stronger-than-expected demand; >$1.2M added to backlog from 10 cloud deals 13 cloud deals; >$0.85M backlog added; revenue may flatten/drop in short term as mix shifts Accelerating adoption, increasing backlog/visibility
ARR and deal countsBegan reporting ARR; Q1 deals: 76 perpetual, 16 subscription ARR $9.2M; Q2 deals: 60 perpetual, 29 subscription, 10 cloud ARR $9.3M; Q3 deals: 52 perpetual, 20 subscription, 13 cloud Steady ARR growth, rising cloud mix
Regulatory/productV3 service pack; cloud platform launched Cloud expansion; quality initiatives and partnerships FDA cleared v4.0 DBT; 22% improved detection; 18% fewer marks; rollout mid-Dec Strong product catalyst
Macro/seasonalityBudget-cycle seasonality commentary —Q3 seasonality (OUS vacations); deal counts up YoY; cloud exceeding plan Seasonal lull acknowledged; execution offset
Partnerships/platformRAD-AID, Densitas, CancerIQ, Siemens, GE Densitas/CancerIQ integration; Change Healthcare; Ferrum; Sutter expansion Blackford (Bayer) platform; SCP Radiology; regional distributors (Tamer, Ozel, deepc); global availability of ProFound Cloud Broadening ecosystem reach
Regulatory density rules——New FDA density reporting requirement in effect; reinforces detection+density bundle adoption Regulatory tailwind

Management Commentary

  • “We made continued progress… our ProFound Cloud SaaS platform… is achieving adoption rates ahead of our expectations… annual recurring revenue increased by 10% in the third quarter.” — Dana Brown, President & CEO .
  • “Total ARR… was $9.3M… Subscription ARR was $2.2M… Cloud ARR was $0.4M… we closed 52 perpetual, 20 subscription and 13 cloud orders.” — Eric Lonnqvist, CFO .
  • “Top line revenue may flatten or even drop in the short term as… more deals choose cloud versus perpetual… the long-term benefit is building backlog and predictable revenue.” — Dana Brown .
  • “ProFound Detection v4.0… offers a 22% improvement in detecting challenging and aggressive cancer subtypes… and an 18% reduction in lesion markings.” — Dana Brown .

Q&A Highlights

  • Seasonality and deal counts: Q3 is seasonally softer (OUS vacations), yet deal counts grew vs. Q3’23; cloud exceeded internal plans (13 deals) .
  • Competitive/access dynamics: Subscription/cloud models improve affordability/access and open doors across equipment ecosystems (e.g., Hologic sites), enabling side-by-side usage and easier trials .
  • v4.0 rollout: New customers expected to start on v4.0; first shipments expected mid-December; upgrades follow across deployment models .
  • Revenue classification: Product line includes perpetual, subscription, cloud; services decline tied to migration to subscription/cloud; GE new deals remain 100% perpetual .

Estimates Context

  • S&P Global consensus estimates for Q3 2024 (EPS, revenue) were unavailable; no versus-consensus assessment can be provided at this time.
  • Implication: Given the mix shift to cloud, we expect Street models to lean toward higher ARR/backlog visibility and lower near-term GAAP revenue/EBITDA, consistent with management’s commentary .

Key Takeaways for Investors

  • Cloud/SaaS mix shift is intentional; expect near-term GAAP revenue/EBITDA headwinds but rising ARR/backlog/visibility. Trading setups should account for ratable revenue recognition effects on quarterly optics .
  • FDA-cleared ProFound Detection v4.0 is a tangible upgrade catalyst; expect mid-December initial shipments and broader rollout across customer bases, potentially supporting product revenue and ARR in 2025 .
  • Deal momentum is broad-based (85 total in Q3), with strategic marquee wins (UCSD, Charlotte Radiology) and global expansion via Blackford/partners, underpinning pipeline depth .
  • Gross margin remains elite (86%), but Opex increased for R&D/regulatory to enable product/region expansion; monitor operating leverage as SaaS scales .
  • Services revenue decline reflects migration to ratable subscription/cloud; watch product line composition and renewal/migration cadence as indicators of transition progress .
  • Cash of $18.8M and reiterated “no capital raise needed” reduces financing risk during the transition, providing runway to execute .
  • GE channel remains perpetual-heavy; expect continued perpetual contribution near term while direct/channel cloud/subscription grows, affecting revenue mix .

Additional Relevant Press Releases (Q3 context)

  • iCAD to participate in iAccess Alpha Buyside Best Ideas (Sep 11, 2024) .
  • Global availability of ProFound Cloud highlighted at JFR (Oct 3, 2024) .
  • Strategic agreement with Windsong Radiology (Jul 29, 2024) .

Non-GAAP Adjustments (Q3)

  • Adjusted EBITDA excludes stock comp, depreciation/amortization, severance/furlough ($169k), and other items; Adjusted EBITDA loss $(1.463)M in Q3 .