icad inc.

Good day and welcome to the ICAD Inc. Fourth Quarter and Full Year 2022 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.

Thank you, Operator. Good afternoon, everyone. Thank you for joining us today for ICAD's Fourth Quarter and Full Year 2022 Earnings Call. On the call today, we have Dana Brown, our President and Chief Executive 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. ICANN 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 the 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.

Thank you, Lenore, and good afternoon, everyone. For those of you I haven't had the opportunity to meet, I want to introduce myself. My name is Dana Brown, and per our March 13th leadership transition announcement, I'm the new president and CEO for ICAD. I've been a member of ICAD's board of directors for the past year and stepped into the chairman role in January. I want to take a few moments to tell you about my background and why I'm uniquely qualified to lead ICAD at this point in time. I spent the first 25 years of my career in the technology industry as a founding member of multiple successful ventures, including co-founder and chief marketing and business development officer for MetaSolve Software. MetaSolve was essentially ERP for telecom, media, and internet providers. During my tenure, we became a category killer, consistently winning deals against many of the larger players of the time, including Lucent and Telcordia. At the time, we had a unique business model choosing to focus our efforts on building disruptive, innovative technology while partnering with entities like EY for implementation services, who at one point in time had a $50 million backlog for our projects. I was responsible for our business development strategy with rigor. We continuously evaluated by builder partner options as ways to grow our footprint across technology markets and geographies. We implemented an aggressive acquisition strategy, enabling us to accelerate getting to market faster than our competition. We originally developed the platform for the mainframe environment. Now I'm really dating myself and subsequently ported it to client server and later redesigned it to be fast. My co-founder and I took the company public, and it was later acquired by Oracle, as it was and still is one of the largest enterprise systems ever built on the Oracle suite. After Metasolve, I became CEO of Ipsum Networks, which was a network performance management software company credited with pioneering route analytics technology, and it was acquired by Cisco in its early stages. I went on to be on the turnaround team of other tech ventures in the content delivery and mobile space. until 12 years ago when I made a shift from the tech sector to the nonprofit sector. I joined United Way Worldwide as its first chief digital officer and architected a co-development partnership between United Way, a 140-year-old, $5 billion global nonprofit, and Salesforce, a 24-year-old, eight-year-running, world's most innovative company, an unlikely partnership to build a new cloud called Philanthropy Cloud. It's a platform that empowers corporations to put their values into action. It extends each company's reach by engaging its customers and employees in philanthropic endeavors, enhancing brand reputation and awareness, attracting and retaining top talent, and delivering greater impact. Most recently, I served as a Senior Vice President, Chief Strategy and Operations Officer for Susan G. Komen, the world's leading breast cancer organization. Komen has invested more than $3.3 billion in groundbreaking breast cancer research, community health outreach, advocacy, and programs in more than 60 countries. At Komen, among leading other strategic initiatives in our turnaround and transformation, I led our efforts to create My Komen Health, the first patient care team and researcher engagement platform. designed to guide patients through the end-to-end breast cancer journey with access to experts, resources, and aid, as well as Share for Cures, the first ever patient-powered breast cancer research registry, storing information ranging from determinants of health, risk profiles, health status, including documentation of care delivery, such as diagnoses and interventions, all gathered from digital and non-digital EMR, EHR data, as well as genomic data. To summarize, and not to be trite, but I've been there and done that. I've built companies, teams, and products from the ground up. I've leveraged partners to create scale, become the category leader, and amassed an ecosystem that's thriving and sustainable. I've led product strategy through seismic shifts and underlying platforms and licensing models, and I've been responsible for changing business models, ways of doing business, through challenging turnarounds, implementing sizable cost reduction measures, while simultaneously diversifying revenue streams. And now I'm honored to be leading this incredible company. Working alongside our talented team, our board, our clients and partners, I'm committed to upholding our vision to be the world's most pervasive and personalized suite of AI cancer detection solutions, changing lives for patients around the world and creating value for our shareholders and stakeholders. I'm uniquely prepared to leverage my experience and expertise to position this company for future growth. So enough about my background. Let's dive into our business and financial update. 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. Therefore, we recently announced the company is exploring strategic options for the Zoft business. We remain confident that the ZOFT technology has the potential to positively impact the lives of cancer patients and the providers who care for them on a global scale. As we move through this time of transition, we want to explore strategic options that could accelerate the accessibility of this technology and provide more focus and synergies to its growth. We've hired two banks to help us explore these options. Retaining these two banks was driven by inbound relationship-based strategic inquiries. As we explore these opportunities, we've reduced operational costs and overhead for that line of business. We have streamlined operations to focus on what's essential to servicing and supporting new sales, as well as our existing installed base, resulting in an annualized decrease in expenses of $1.3 million. Moving to the detection side of our business, in the battle against cancer, We believe early detection and diagnosis is a key part in transforming the patient journey and quality of care. Breast cancer is the most common cancer in women worldwide and the second leading cause of cancer death among women in the US. With ICAD's early detection technology, we have the ability to detect cancers early, giving individuals the opportunity for more positive outcomes and more lives saved. As mentioned on previous calls, An important change for our company, driven by customers on the leading edge of the adoption curve, is a transition of our business from a perpetual license on-premise technology model to a more sustainable subscription-based license and SaaS or cloud-based technology platform. This business model and technology platform change is important as over time, it ensures a steady, reoccurring revenue stream that can grow more quickly and enable us to invest more in our products and services to meet our customers' needs now and in the future. Combining the subscription method of payment with the SaaS method of deployment offers an accelerated way for customers to adopt, deploy, and scale our technologies with significantly lower upfront costs. SaaS implementations enable customers to leverage new functionality more easily and quickly without costly capital outlays associated with traditional model. While demand continues to be promising for this model, we're still in the early stages of the adoption curve, and the percentage of our overall revenue from subscription licenses remains small. You'll hear more from us on this metric as it becomes a more significant percentage of our overall revenue. As noted in our earnings call announcement, we have implemented further cost reduction measures to continue to align and streamline our cost base. We're focused on creating a broad and long runway needed to change the business while we run the business. It's a reset and recalibrate year for us, and we're already making important changes. We recently made several changes to the operations, which have reduced annualized expenses by 4.3 to $4.6 million. And annualized cash burn has been reduced 4.9 to 5.2 million. As a result, together with exploring strategic options for the therapy business, we're now projecting to be cash flow positive and return to profitability before the end of 2024. We believe these changes give us the runway needed to successfully navigate our business model transition without needing to raise additional capital. I also want to be clear that transitioning our business model isn't just about moving to a SaaS subscription platform. We're going through a rigorous and thoughtful process to evaluate a range of growth opportunities, such as going direct to patients, working with our industry clinical partners with offerings like a new GPT-powered digital care platform, access to elective risk assessments, and other personalized predictive scoring solutions. We're looking at pursuing payer and reimbursement strategies to get risk assessments and AI-RED screenings covered. particularly for women with dense breasts as early detection can save thousands of dollars in medical expenses incurred with late stage diagnoses in their courses of treatment. We're partnering with large employers with women's health initiatives to provide AI powered mobile screening services on campus. We're looking at 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. And we're looking at expanding our cloud-based AI platform to address other cancers and modalities. We have strong existing partnerships that can help us mitigate the risk of expanding into these new initiatives. Partnerships like our strategic development and commercialization agreement with Google Health to integrate its artificial intelligence technology into our breast AI suite. As previously discussed, this is the first commercial partnership Google Health has entered into to introduce its breast imaging AI into clinical practice. And it is positioned to improve our market-leading breast cancer AI solutions for mammography, as well as expand access to our technology to millions of women and providers worldwide. Like our partnership with Solis Mammography, the largest independent provider of breast screening and diagnostic services in the U.S., Solis is the first in the country to offer profound AI risk with a new direct-to-patient program called MAMO+. Additionally, last quarter, we announced a new development and commercial collaboration agreement with SOLUS focused on using mammography to define cardiovascular risk, a new application that could identify millions of women at risk for heart disease using data obtained from their mammogram. With heart disease being the number one killer among women in the U.S., This collaboration not only offers the potential to address a significant unmet need in patient care, but also to penetrate a sizable new market, given that approximately 40 million women are screened in the US annually. And lastly, I would be remiss if I didn't mention the ability to further leverage our existing partnerships with top medical technology companies like GE and Siemens, and of course, our developing relationship with RAD Partners. In summary, from a business standpoint, I'm focused on creating runway, preserving cash, and building a defensible and competitive long-term strategy that diversifies our revenue stream and smooths out our customer concentration. We expect to be able to share the metrics and milestones of our strategy in the third quarter of this year. I'll now summarize our financial results for the fourth quarter and the year ended December 31st, 2022. Revenues for the year ended December 31, 2022 were $27.9 million, a decrease of $5.7 million or 17% over $33.6 million in fiscal 2021. The detection segment revenue decreased $2.3 million to $19.7 million with a $3.2 million reduction in product revenue offset by a $0.8 million increase in service revenue. The therapy segment revenue decreased 3.5 million or 30% to 8.1 million for full year 2022. The decrease in therapy revenues was primarily due to a 2.8 million decrease in product revenue. Total revenue for fourth quarter of 2022 was 6.5 million, down 17% from 7.8 million in the fourth quarter of 2021. The detection segment revenue decreased 0.9 million to approximately 4.6 million with a 1.2 million reduction in product revenue offset by a 0.3 million increase in service revenue. The therapy segment revenue decreased 0.4 million or 17% to 1.9 million from the fourth quarter of 2021. The decrease in therapy revenues was primarily due to a 0.4 million decrease in product revenue. Moving on to gross profit, on a percentage basis, gross profit was 71% for the fourth quarter of 2022, compared to 73% for the fourth quarter of 2021. Gross profit for the fourth quarter of 2022 was 4.6 million, as compared to 5.7 million in the fourth quarter of 2021, reflective of the reduction in revenue. Total operating expenses for the fourth quarter of 2022 were 7.96 million, a $1.9 million decrease, or 19%, from $9.85 million in the fourth quarter of 2021. The decrease was related to cost-cutting measures implemented in 2022. The operating loss decreased $0.8 million to $3.3 million in the quarter ended December 31, 2022, from the same period in 2021. This decrease in operating loss was predominantly due to the $1.9 million decrease in operating expenses as offset by decline in gross margin from reduced revenue. Gap net loss for the fourth quarter of 2022 was 3.1 million or 0.12 per diluted share compared with a gap net loss of 4.1 million or 0.17 per diluted share for the fourth quarter of 2021. This year over year decrease in the gap loss per share is primarily due to the operating expense reductions. Looking ahead, following the 4.3 to 4.6 million of reduced annualized expenses, as I just mentioned, we are now projecting to return to profitability before the end of 2024. Non-GAAP adjusted EBITDA for the fourth quarter of 2022 was a loss of 2.8 million. Non-GAAP adjusted net loss for the fourth quarter of 2022 was 3 million, or 0.12 cents per share. Moving to the balance sheet, as of December 31st, 2022, the company had cash and cash equivalents of $21.3 million compared to cash and cash equivalents of $34.3 million at December 31st, 2021. Cash and cash equivalents from operating activities used during the fourth quarter of 2022 were $3.1 million. This concludes the financial highlights of our presentation. And I would now like to turn the call back over to the operator to lead us through the Q&A.

Certainly. At this time, we'll be conducting a question-and-answer session. If you have any questions or comments, please press star 1 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 1 on your phone. Your first question is coming from Per Oslin from Craig Hallam Capital Group. Your line is live.

Thanks. Good afternoon, Dana. Hi, Lenore. I want to start out with the restructuring announced with the 8K last week. And I apologize in advance. This might be a little bit of a long-winded question. So I want to take it in a couple of pieces. Obviously, in the 8K and in your prepared remarks, Dana, it's very, very clear that the company is focusing its efforts around the cancer detection side of the business. But the reduction in force was also said to come predominantly from the detection side of the business. So I'm curious as to, I guess, the identification of where within detection you saw the most logical places to cut out of. Because it doesn't sound like you're pulling back on go-to-market. It doesn't sound like you're pulling back on

product development um so i guess i'm i'm curious where you saw the i don't know for lack of a better word bloat or or the opportunity to to take costs out of that side of the business since it is the focus going forward yeah so um first of all pair nice to hear from you um and thanks for the question so as we looked across the organization on the detection side and as you mentioned i mean it's already was already a fairly lean organization But we still had some silos. So one of the things that we've done is create more cross-functional teams, a little bit of some hybrid roles. So particularly when you think about the skill sets and expertise required, for example, pre-sales and post-sales, where you're working with customers to envision how to incorporate the technology in their environment, how to maximize it for best practice. Those were examples of where we could get some economies of scale, right, or synergies by combining teams. So that's an example of where, you know, we were able to take out, you know, do some of those reduction. Another area is just looking across the organization, you know, at skill sets and expertise that's best poised for where we want to go, particularly when we look at things that are cloud-based. So that also enabled us to get some efficiencies by combining some roles and kind of just really streamlining what folks are focused on.

Okay, that makes sense. Maybe a follow-up to that point. You, in the press release, talked about the notion of a partner-led model, and this has been something that has come up in recent quarters. How does that affect your go-to-market? How much of your sales and marketing effort becomes geared toward securing partners more so than actually, you know, infield type sales.

Right. So we have introduced a new leader, right? We call it the new senior vice president for commercial. He joined the organization just in early January. And as a part of that move, right, we've also created some new roles focused exclusively on partnerships. So kind of creating an overlay for the whole sales organization with individuals whose primary focus responsibility each and every day is working with the partners, motivating them, making sure that our direct sales force is appropriately leveraging the partner resources that we have in the field. So we're feeling good about that because now we've been able to create some focus and some dedicated roles on partnership. I mean, when we look at the ideas that I kind of enumerated as areas that we're exploring to diversify revenue, each and every one of them will have a strong partnership component. So, you know, I think that you're going to be hearing more and more from us as we go forward.

Okay, good. That makes, that makes sense. Look forward to that. Um, maybe the other side of the restructuring, um, and again, it's not the focus of the company, but, um, or going forward, it's not the focus of the company, but bears, um, a little bit of discussion. I think on the, on the Zoff side, I think that that is more straightforward. With that restructuring there, as it pertains to the strategic alternatives, I don't know how much you necessarily can say, but can you characterize any of your early discussions there? Do you have a desired timeline to sort of come to a conclusion on that? Does the furlough actually help a potential sale by streamlining the organization? And last but not least on that, apologies for the four-part question, how do you think about valuation or how should we think about valuation of that business and potentially look to sell it?

Okay, so I think I missed one of the four. I got, you know, how the furlough impacts potential timeline, valuation. I think I may have missed the very first one.

Just the thought around, you know, characterizing early discussions, I guess.

Okay, okay, great. Um, so I'll answer timeline and furlough and kind of characterize the discussion. And then Dan Shay, our interim CFO is on the line, so I'm going to pass the ball to him. So you'll get to hear a different voice for a little bit, and he can talk about what we're thinking about valuation. But, um, so the furlough staff, you know, we focused on ensuring that we could, you know, service and support existing customers and any new customers. So, you know, anything we can do to continue to help the business actually be accretive, right, and a strategic option is what we were focused on. You know, the discussions are interesting because I would say it's a full spectrum from, you know, potential options that are really strategic, global in scale, to those that want to really just almost kind of restart a business around the technology and its IP. So it's a broad spectrum, which is very interesting. I think it also speaks to just, you know, the breadth, right, of the solutions that were created in the Zoff business. As far as timeline, you know, as soon as possible, you know, we're targeting a quarter to, get far enough along through these conversations that one, you know, we know the right next steps with the staff who were furloughed, as well as, you know, we're able to ensure that services and support for customers continue to not miss a beat. So, and then I'll pass it over to Dan, if you want to talk about the evaluation process and just our models for it.

Yeah, thank you. I think the evaluation is going to depend, of course, on who we're talking to, who's the buyer. Are they a strategic buyer? Are they more of a financial buyer? I think the feeling is that what we have with Zoft is a pretty strong brand that is worth something different to some buyers than others. It's a strong product, and it's got – a great name within the Durham circles and other modalities. So I think the valuation is just going to depend on who the buyer is and how they're going to use it. And as Dana said, it's sort of something that we're looking at pretty actively. The timeline is the furlough could be 90 days. 90 days is sort of the feeling that it's sort of to pump the brakes a little bit, save some money. and run a process that's efficient and commands a value that's commensurate with the brand.

Okay. That all sounds good. All sounds logical. I will turn over the floor. Thanks.

Thanks. Thank you. I'd like to let our audience know that we also have Dan Shea, Interim CFO, on the line for questions. Your next question is coming from Marie Tybalt from BTIG. Your line is live.

Hi, Dana. Hi, Dan. Thank you for taking the questions this afternoon. I wanted to pick up on where Per left off on the Zoft business and just see if I can drill a little bit more in on your outlook near term for that business. I certainly understand that the service revenue ought to hold up given installed base and that being a recurring business. revenue model, but I'm curious if we should expect product revenue to just sort of be flat from where it was in 2022. How to think about that? I'm certainly a little bit concerned that with some of the furloughs and certainly the announced possibility of a sale that, you know, the workforce may not be quite as motivated. So, how would you have us thinking about that near-term therapy revenue from the product side?

So, hi, Marie. This is Dana. answer a few comments and I'm going to turn it over to Dan. The first thing I want to say, and I've only been on board a short while, but that Zoff team is amazingly committed. Extremely passionate about the product, the research work that they're doing. We just got some additional data studies that again prove just the distinctiveness and competitiveness of it. I wouldn't underestimate the power of a small but mighty team that's continuing to manage that business. As you mentioned, that business has a high percentage of reoccurring revenue, somewhere 60%, 65%. So we were able to take that into account with our reductions to make sure they were able to service and support the customers that we have. Dan, I'm going to turn it over to you if there's some additional comments you want to make for Marie's question.

Yeah, I think you're right to point out the persistency of the service revenue. That's a known, and I think that when we thought of the furlough decisions, I think that was a big factor in determining who would get furloughed and who wouldn't get furloughed. I think right now there's a There's a workforce that's there that's covering manufacturing, field service, sort of assembling source X-rays and filling orders for all kinds of disposables. And on the product side, I think back to the discussion just earlier, I think the go-to-market approach with ZOFT is at least partially done through our partners. And so, you know, there is, you know, like we said, there is a bit of a, you know, sort of a lull now because of the furlough. But I think the controllers, we're still getting controllers in. We have an order, a supply chain that's delivering, you know, enough to have them available to be purchased. And, you know, in particular, you know, outside the U.S. market, there's some strong partners who are in a position to make orders. I think it's a good question on the product side. I think you're also right to highlight the persistency of the service revenue.

Sure. Okay, that's helpful. Thank you for that. I guess to sort of highlight one other thing that you mentioned today that's new to us is the profitability timelines. Very encouraging to hear that. What are you assuming in that? Are you assuming that, you know, there is a strategic option found for Zoft? You know, are you assuming some sort of growth on the top line? And as part of that question, I guess if you could refresh us on what margins look like for the detection business, that would help us as we plot out, you know, getting to profitability in late 24. Thank you for the questions.

So, hey, Dan, I'll flip it on you. If you want to go first and maybe tackle some of the metrics oriented, and then I can talk to some of the underlying just assumptions on the business model side.

Okay. Yeah, I mean, I think you're right to highlight, you know, the sale and what that might mean to, you know, if a sale, if it's a sale and it generates cash in a sale, it's going to obviously help our process for determining how much runway we have to you know, get the detection business up and running or keep running and sort of, you know, follow through on everything that Dana started with. So, you know, I think from a margin standpoint, I think, you know, the detection margins are, I guess, you know, off the top of my head, it's like around 80%. And, you know, I think the ZOF margins are more, you know, 30 or 40%. you know, for, you know, obviously for, you know, it's probably more like 85 and 40 would be the way to think of it. And, yeah, so I think we're, I think the hard products, if you will, that are at ZOFT, you know, are lower margin than the, you know, the software we're selling at the detection side.

Okay. And then just in the assumptions.

Yeah, I was just gonna say, so the model we have right now is, is very conservative. So it is actually not dependent on, um, you know, receiving an influx of cash, for example, from the soft sale, that would be good news, right. And we would actually treat it a bit as, you know, an investment reserve and assuming we create some really compelling ROI models from some of these areas that I mentioned that we could diversify into from a revenue standpoint. then we'd want to be able to deploy, right, that cash to bring those additional revenue streams online. So this is, you know, right now, like I said, we've made the cuts, the cost reductions deep enough that we could be, you know, self-sustaining, right, to get to this point, right, of being cash flow positive and being profitable as we exit next year in the most, like, conservative scenarios. And then we've got work ahead of us over the course of the next few months to build out these business case options, alternatives, and see which ones we want to dive into, right, and take on. And then we would be in a position at that point in time to get in talking about market opportunity, what it could mean to actually grow the business, hopefully even faster.

Okay, understood. Thank you for taking the question. You're welcome.

Thank you. Once again, everyone, if you have any questions or comments, please press star, then one on your phone. Your next question is coming from Yale Jin from Laidlaw and Company. Your line is live.

Good afternoon, and thanks for taking the questions and the congrats, Dana, to become the leader of the company right now. My first question is that just based on a rough estimate of this year, The therapy business take about 30% of the total revenue, and I understand this year is in transition for the detection, so the revenue is a little bit lower. But nevertheless, this seems to be a reasonably large hole eventually need to be filled and add more. from the detection to presumably to reach the profitability goal by the end of 2024. So was there any specific or potential aspect or particular areas you feel that could sort of grow the revenue much quicker and or that you can maybe comment on?

So I'll chime in with one area in particular that I think we're just beginning to I'll say maximize right or explore and then Dan I can pass it over to you. I think the greatest near-term opportunity we have and it's based upon the great work that got accomplished in 2022 is really leveraging some of our new channel partnerships. So I believe on the last earnings call right the partnership that's in development was introduced with RAD Partners. So that's an exciting partnership. It's beginning to pick up speed. In fact, I personally probably spend an hour or so each day with the team working through details in terms of the architecture, the scaling, helping RAD Partners think through how they're going to ramp up their business around it. So that's an exciting area of growth that we'll see come online here in 2023 and then really begin to take hold in 2024. Dan, I'm going to pass it over to you if there's any other comments you want to add.

No, not a ton. I think you're right, Eyal, that the therapy business is about 29% of our 2022 revenue. And I guess the thinking, at least on the path that is to explore strategic options, is the feeling that the two businesses aren't as integrated as we might have originally envisioned in the past. You're not going to lose a lot of synergies by separating the two. And then, candidly, it's just what Dana said. It's giving us more runway to sort of grow into this SAS subscription model by, A, hopefully generating you know, a big check or a check for the Zop business. And then B, really, it's like we're very focused on, you know, preserving cash and minimizing our losses and cash burn.

Okay, great. That's very, very helpful. And maybe just one more question here. Which is the Google Health that the partnership you have just recently built? Would that be more of the increased awareness to a much greater general public or there's other sort of other aspects that could also involve in the revenue generating generation?

Yeah, so I think, you know, just to also just to make sure we're all clear, right? So this is a technology partnership, right? So we're leveraging And co-developing technology with Google. Google would not be like a channel partner from a sales perspective for us. But to your point, obviously, Google has great brand awareness, great processing power. You know, we're actually seeing already the ways in which knowing the processing power, the lift it's going to give. Two operations, a turnaround time, right, for reading these images is just fantastic. So as part of the work we're doing in exploring the best way to deploy the technology with RAD Partners, for example. So I do think that the Google Health relationship will be seen as, you know, risk mitigation for companies that are moving to cloud for the first time for this kind of technology and services. I do think because of their brand awareness, because of the work they already have in place around data security and privacy, that's going to help, again, hopefully shorten, right, the sales cycle. So I think, like, indirectly, you're going to see that it's going to accelerate and help revenue, even though they're not per se a sales channel for us.

Okay, great. That's very helpful as well. And thanks for taking the question and congrats.

Yeah, thank you.

Thank you. Your next question is coming from Dave Turkley from JMP Securities. Your line is live.

Good evening. I was wondering if you might be able to offer us some color potentially on, specifically on detection, maybe trends that you've seen. Obviously, we're pretty close to the end of the first quarter. I know you don't want to probably give any guidance, but... Is there any color or any thoughts you could offer us in terms of, you know, what that trajectory would look like either in the first quarter or for the rest of the year?

Yeah. So, Dan, I'm going to let you go first on this one as well.

Yeah. Well, I think, yeah, I guess the elephant in the room is the subscription model. And, you know, I think when we first sort of rolled out this project, this path you know i think we had sort of described it as sort of uh somewhat it could be bumpy a bumpy ride it could it could be you know it could come in you know big big um waves over the over the rocks or it could just be little dribbles and so far it's proven to be that way and so i think that's probably the way to think of the rest of the year is that you know we have a big we have a really big push to um to sell subscription. Our new head of sales has been pressing a new incentive program with our sales force that encourages the sale of subscriptions. He's exploring certain term contracts with guaranteed contracts for longer term periods that would That would really provide a sort of a more protected revenue stream, together with the subscription model which we are very excited about. So I think so, you know, look, looking into the future. I think we were definitely going to be pushing up against the, you know, the revenue, the accounting revenue point because it'll take time to build the base of the subscription base before we can start to really see, you know, a really, you know, again, persistent cash generating, you know, element of the business that will, you know, stand ready for the next wave of ventures.

Got it. And since you mentioned it, I wonder if you could give us any comment on specifically, again, just the detection side, because that's what's remaining, but any comment on Salesforce size, turnover, anything that's happened since you announced that restructuring would be helpful. Thank you.

So, I can jump in here. So, we did not do reductions on the Salesforce side, so we still have, you know, same team. As we mentioned, we just brought in a new leader for commercial, also same team from an OUS perspective. So, That team has remained stable. You know, the one change I think we made that's actually going to help them is creating this end-to-end customer success function for both pre- and post-sales so that, again, they're actually getting access to a bigger talent pool that can be available to help them, you know, either putting together proposals for customers or being at the ready to offer the post-sales services and support and training. So...

Thanks.

Thank you. Your next question is coming from Frank Brisbane from Oppenheimer. Your line is live.

Hi, thanks for taking the questions. I guess my first one is a big access on this profitability goal here. I'm just wondering if obviously transitioning to a subscription model is going to take a hit. in terms of the on the short term for influx, just based on how software models work or SAS models work. But so I was just wondering, you know, why such a focus on profitability in the short term through this transition of business here?

So I'll chime in and then I'm going to pass it to Dan. I was actually smiling, right, because, you know, I think the board would like to see it happen even faster. So I love that comment and that question. You know, I think so with the changes we've made so far, right, so with the cost restructuring, with really looking at, you know, a revenue stream from, I'll say, selling what we have, right, including the move to cloud by the end of the year, that is the – the fastest, if you will, that were able, right, to reach profitability. And we felt like actually that was being pretty prudent. So we didn't cut so far that we couldn't continue to maintain investment key initiatives. However, as we're exploring these new revenue opportunities, right, the way in which we could diversify, we may very well come back and we would, you know, go to our board first and say, here's a business plan proposal, right? If we can invest X we think that this could be the return on that investment, it might push out, right, the path to profitability. But we don't know that yet till we complete that diligence. And that's the work that we want to complete between now and third quarter. So again, you know, we took a really conservative approach, just building our base case model on our current set of detection solutions, taking into consideration moving to the cloud, taking into consideration how to leverage some of these key partnerships like with solace mammography with red partners um and we felt like we could get there you know next year so which is you know part of what i think as well so you know from your perspectives and having confidence in the business and our ability to execute um we felt like that was you know i say a responsible right and a sustainable approach to looking at our business plan going forward um dan is there anything that you want to chime in on the profitability side?

Yeah, you said a lot of what I would say. You know, I think the, I guess the thing that comes to mind is just sort of this notion of business planning is what we're talking about, and that's the core of what this is all about. And so, you know, when you're planning for a business, there's always the treasury person in the room who is probably a bit of the skunk of the lawn party because, you know, There's a motivation on one side to, you know, run to SAS as fast as possible. But of course, if you're not bringing in some of the revenues that were, you know, that were, you know, were pretty persistent before, you know, and we were getting upfront revenue on perpetual sales. We have certain customers that probably are never going to go to SAS. Maybe they will, you know, the OEMs overseas. You know, I think there just needs to be a balance between the pace to subscription and, you know, keeping some of the perpetual for a while. And then, you know, as long as you have the right runway to, that is cash, as long as you have enough cash to kind of hold yourself out there and just take your time and, you know, we'll get the cloud completed at some point here in the near term and it'll start to change the whole dynamic of how the business planning evolves. But in the near term, there needs to be a balance between, I guess, the person wearing the treasury hat and the people who want to go to a subscription as fast as possible. Hope that makes sense.

Yep, that's it for me. Thank you. Thanks.

Thank you. Your next question is coming from Frank Takanan from Lake Street Capital Market. Your line is live.

Hey, thanks for taking my questions. Wanted to start with one for you, Dana, on some of your past experiences. Just curious if you could elaborate on how you may elect to leverage some of that experience and some of those previous relationships into patient advocacy programs or anything of that nature that could help in better promoting profound care.

Yeah, so I'll speak about Komen in particular. So I know a lot of the work we did at Komen was focused on ensuring people were aware of their risk, right? In fact, we ran campaigns that were know your history, know your risk. A lot of the ways in which we were able to help people determine their risk were very traditional models, right? Family health history, looking at other key indicators or markers, I would say it was felt a little bit more like a survey, right, or kind of a Q&A kind of approach. And then looking at just kind of correlating common factors. So the other important thing about Coleman is, you know, you're looking at an organization that's mobilizing, you know, two and a half million women on an annual basis. And so they're also working with large corporate partners with women's health initiatives. So companies like Salesforce or Disney, you know, kind of that whole spectrum. So I think from ICAD's perspective, you know, we would be best served by leveraging and going direct to patient through organizations like a Komen, like a BCRF, which is Breast Cancer Research Foundation, like a Health and Her Hue, like American Cancer Society, because those organizations are looking for additional programs and tools, right, that they can create, you know, make sure that their patient base is aware of, and then provide ways for them to access it. You know, most of the, I'll call it cancer advocacy organizations, also have a lot of financial aid programs. So they help women get access to the care they need, right, to screenings, especially if, for example, they may not have the right health benefits, right? So they may be the underinsured or the non-insured. So there are ways in which we could work with them to ensure they get access, right, to readings the kind that, you know, our products, right, the Profound Suite can offer. So I'm excited about it because I think that there's – maybe there's just kind of a bit of a gap in knowledge about each other and how we could help each other. And I, you know, put those kinds of programs together in place at Komen. So I think, you know, it's going to be a natural opportunity for ICAT to leverage.

Okay. That's good color. And then just for my second one, I'm just curious if you could give an update on the competitive landscape, anything out there that's new or different. I mean, previous assumption was, ICAD had a pretty good lead on everybody, and with it continuously ingesting more data, it should continue to protect that lead. But as growth has flown a little bit, I was curious if that dynamic has changed and some other players have had the opportunity to improve their positioning.

Yeah, so I think it is a very competitive landscape. Some of the competition is, I would say, not necessarily... better in terms of, you know, efficiency and accuracy, but maybe better at, you know, pointing out some of the other benefits of the product, right? So we've got to make sure we're doing a good job of continuing to socialize and evangelize about the reasons why, why this is important and why you need, you know, why you should be focusing on it, why it should be a top component of your evaluation criteria. We haven't, you know, and again, you know, keeping in mind, you know, on board here for a few weeks, more active when I stepped into the executive chair role in January, but there aren't necessarily new competitors on a radar screen. It's just everybody's learning about each other's, you know, approach to selling, you know, competitive strengths and weaknesses, areas to spread, you know, FUD, fear, uncertainty, and doubt. So, you know, people get better competitors, right, as well as ourselves get better and better at that. I will say our new commercial sales lead has a really great approach to keeping tabs on the competition and equipping the team to effectively sell against them. So he also is just kind of within his first 90 days, but in just the short period of time, he and I have overlapped, you know, I've been a part of multiple conversations with the sales team, equipping them out in the field, right. To address, you know, concerns or point counterpoint. So, I think we're going to get better and better at being competitive in the sales process and really helping to bring what we know is the technology superiority of our product to light and making it easy to understand.

Okay. That's good, Colleen. Thanks for taking the questions.

Thank you. That concludes our Q&A session. I will now hand the conference back to Dana Brown, President and CEO of ICAD, for closing remarks. Please go ahead.

Thank you, operator. In conclusion, we made significant strides in 2022 with our transition to a cloud-based SaaS platform, and we plan to complete that technology upgrade late this year. Demand for our technology continues to be strong. The evidence supporting it is continuing to grow, and we are solidifying new and strategic partnerships that will ensure our continued success. I'm 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. And just to reiterate, I'm focused on creating runway, preserving cash, and building a defensible and competitive long-term strategy that diversifies our revenue stream and smooths out our customer concentration. I am looking forward to updating you next quarter as we continue to get clarity on our strategy, enhance our team, and drive towards increased shareholder value. Thank you and have a great evening.

Thank you, everyone. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.