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II

ICAD INC (ICAD)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue rose 14% year over year to $5.4 million, gross margin was 86%, and GAAP diluted EPS from continuing operations was ($0.03); product revenue grew 23.5% while services dipped 1.8% .
  • Annual Recurring Revenue (ARR) reached $9.8 million (+11% YoY), with continued mix shift toward subscription and cloud (S-ARR $2.6M; C-ARR $0.8M), reflecting SaaS transition momentum .
  • Management highlighted strong sales execution, deal timing pull-forward into Q4, and cautioned near‑term GAAP revenue “lumpiness” and potential flattening as more business moves to ratable cloud/subscription recognition; expects cloud momentum to continue in 2025 .
  • No formal quantitative guidance was issued; cash and equivalents were $17.2 million, and management stated resources are sufficient to fund planned operations for at least 12 months without needing additional financing .
  • Wall Street consensus (S&P Global) was unavailable for ICAD, so we cannot quantify beats/misses vs estimates; management said results “exceeded expectations,” but that is not a Street consensus metric .

What Went Well and What Went Wrong

What Went Well

  • Strong product revenue growth (+23.5% YoY) with total Q4 revenue +14% YoY; gross margin held at 86% demonstrating high revenue quality .
  • SaaS transition gained traction: ARR +11% YoY to $9.8M and closed 19 cloud deals in Q4 (up from 13 in Q3 and 10 in Q2), signaling increasing adoption of ProFound Cloud .
  • FDA clearance of ProFound Detection v4.0 (DBT) delivered improved clinical performance; CEO: “Version 4.0 delivers a smarter AI… 22% improvement… 50% increase in sensitivity for dense breast tissue… 60% improvement in identifying invasive lobular cancers” and “18% reduction in false positive” .

Quotes:

  • “Fourth quarter marked another strong quarter… revenue of $5.4 million… ARR of $9.8 million… accelerating adoption of ProFound Cloud” – Dana Brown .
  • “We do expect momentum to continue for cloud [in ‘25]” – Eric Lonnqvist .
  • “4.0… performing even better… in clinical practice than… regulatory data set” – Dana Brown .

What Went Wrong

  • GAAP net loss from continuing operations widened YoY to ($0.9) million in Q4 and non‑GAAP adjusted EBITDA loss was ($0.5) million, reflecting higher operating expenses (+10% YoY) and SaaS transition costs .
  • Services revenue declined slightly (-1.8% YoY in Q4; broader declines during 2024) due to customer migrations from perpetual maintenance to subscription/cloud, impacting near‑term service revenue .
  • Gross margin percentage fell vs prior year (Q4’23 was 91%), explained by a one-time benefit in Q4’23 and amortization for cloud product starting Q1’24 .

Financial Results

Summary Financials (USD; oldest → newest)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$5.029 $4.217 $5.408
GAAP Diluted EPS – Continuing Ops ($USD)($0.07) ($0.07) ($0.03)
Gross Margin (%)84% 86% 86%
Operating Expenses ($USD Millions)$6.165 $5.649 $5.534
Non-GAAP Adjusted EBITDA ($USD Millions)($1.179) ($1.463) ($0.525)

Segment Mix (USD; oldest → newest)

MetricQ2 2024Q3 2024Q4 2024
Product Revenue ($USD Millions)$3.254 $2.508 $3.668
Services Revenue ($USD Millions)$1.775 $1.709 $1.740

KPIs and Commercial Activity (oldest → newest)

KPIQ2 2024Q3 2024Q4 2024
Total ARR ($USD Millions)$9.159 $9.261 $9.778
M‑ARR ($USD Millions)$6.910 $6.750 $6.375
S‑ARR ($USD Millions)$2.030 $2.143 $2.616
C‑ARR ($USD Millions)$0.218 $0.369 $0.787
Deals Closed (Perpetual / Subscription / Cloud)60 / 29 / 10 52 / 20 / 13 54 / 33 / 19

Actuals vs Estimates (S&P Global)

MetricQ4 2024 ActualS&P Global ConsensusSurprise
Revenue ($USD Millions)$5.408 N/AN/A
GAAP Diluted EPS – Continuing Ops ($USD)($0.03) N/AN/A

Note: S&P Global consensus data was unavailable for ICAD this quarter, so beats/misses cannot be quantified.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue trajectoryNear term (2025)None providedExpect “lumpiness” and potential flattening of GAAP revenue during SaaS transition; cloud momentum to continue Qualitative caution
Cloud deals momentum2025None provided“We do expect… momentum to continue for cloud” Maintained growth view
ARR focusOngoingNone providedStrategic priority to grow ARR and recurring base Emphasis increased
OpEx2025None providedNo quantitative guidance; do not assume current run-rate persists Clarification
Backlog/visibility2025None providedConsidering reporting backlog metrics; ARR increases as cloud deals go live with ~one-quarter lag Transparency initiative

No formal quantitative ranges were issued for revenue, margins, OpEx, or tax rate.

Earnings Call Themes & Trends (Q2 → Q3 → Q4; oldest → newest)

TopicQ2 2024 (Prior-2)Q3 2024 (Prior-1)Q4 2024 (Current)Trend
SaaS/Cloud transitionLaunched ProFound Cloud; 10 cloud deals; >50% faster processing; strategy to build recurring base 13 cloud deals; education on ratable revenue and backlog; seasonality and OUS summer softness 19 cloud deals; expect continued momentum; pulled-forward timing into Q4; one-quarter lag until ARR inclusion Accelerating adoption; improving visibility
ARR focusARR $9.2M; mix shift from maintenance to subscription/cloud ARR $9.3M; maintenance down; subscription/cloud up ARR $9.8M; subscription/cloud continued growth Up and mix improving
Regulatory/Tech (v4.0)Cloud commercial launch; clinical evidence highlights FDA clearance of Detection v4.0 announced with specific performance gains v4.0 outperforming regulatory dataset in practice; integration of priors, fewer false marks Strengthening clinical edge
Partnerships/ChannelsDeals with Windsong/Steinberg; partners incl. Densitas, CancerIQ; expanding in EU/ME OUS distribution alliances; Blackford (Bayer) AI platform; large health systems added New partnerships (Olea, Koios); RamSoft noted; sector platform (Sectra) first NHS deal Broadening ecosystem
Market/Regulatory densityDiscussion of breast density mandate; bundle demand for detection+density Density regulation impact; suite adoption Continues; v4.0 improves dense tissue sensitivity Supportive backdrop
Seasonality/mixQ2 strong on sales expansion; migrations Q3 seasonal softness esp. Europe; cloud deals ratable Q4 strong execution; timing pull-ins; caution on near-term lumpiness Normalizing through SaaS

Management Commentary

  • “Our fourth-quarter results reflect strong momentum in our transition to a SaaS-based model… receiving FDA clearance of ProFound Detection® Version 4.0, our most advanced AI solution to date” – Dana Brown .
  • “We expect 2025 to be a pivotal year for our SaaS transition… will significantly enhance our business model over time” – Dana Brown .
  • “We do expect this momentum to continue for cloud [in ‘25]… timing variances as we go through this transition” – Eric Lonnqvist .
  • “Gross profit was 86%… decline largely driven by a one-time benefit in Q4 ’23, along with amortization of our cloud product completed in Q1 ’24” – Eric Lonnqvist .
  • “4.0… performing even better… in clinical practice than… regulatory dataset” – Dana Brown .

Q&A Highlights

  • Deal timing and near-term revenue cadence: Q4 benefited from deals pulled forward; expect “lumpiness” and potential flattening during SaaS transition; cloud momentum to continue in 2025 .
  • ARR/backlog mechanics: Cloud implementations often have ~one-quarter lag before ARR inclusion; considering reporting backlog metrics to improve visibility .
  • v4.0 reception: Early clinical practice accuracy better than submitted dataset; expected to catalyze upgrades; maintenance status governs upgrade fees .
  • Mix shift and services: Maintenance ARR decline is driven by migration to subscription/cloud; no unusual churn in Q4 .
  • OpEx trajectory: No guidance; do not assume current run-rate; investments in R&D/regulatory for expansion .
  • GE channel: New GE deals remain 100% perpetual, sustaining perpetual revenue mix .

Estimates Context

  • S&P Global Wall Street consensus for ICAD was unavailable this quarter, so we cannot quantify beats/misses versus estimates. Management stated results “exceeded expectations,” but that is not a proxy for Street consensus .

Key Takeaways for Investors

  • Revenue quality remains high with 86% gross margin; expect near-term GAAP revenue “lumpiness” and potential flattening as SaaS mix rises and revenue recognition becomes more ratable .
  • ARR growth and mix shift are the core KPIs: total ARR rose to $9.8M, with subscription and cloud components expanding; monitor deal counts and ARR additions as cloud implementations go live with a typical one-quarter lag .
  • v4.0 FDA clearance and strong early clinical performance strengthen product differentiation, particularly in dense breast tissue and aggressive cancer subtypes—an upgrade catalyst across the installed base .
  • Partnerships expanding distribution and modality coverage (e.g., Koios ultrasound, Olea MRI, Sectra Amplifier, RamSoft) broaden the commercial funnel and could accelerate SaaS adoption .
  • Services revenue pressure is a known effect of migrations; over time this should be offset by growing recurring subscription/cloud revenue and improved visibility .
  • Operating expenses increased to support R&D and regulatory expansion; no formal OpEx guidance was given—model with prudence and watch updates for backlog/ARR disclosures .
  • Cash of $17.2M and no need for near-term financing provide runway to execute the SaaS transition—focus on ARR scaling and backlog conversion into billings and GAAP revenue during 2025 .