icad inc.

Thank you for joining us today for ICATS first quarter 2023 earnings call. On the call today, we have Dana Brown, our President and Chief Executive Officer, and Eric Longquist, our Chief Financial 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 ICATS' current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations or 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 a 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. Let's begin with our business update. As mentioned on our previous call, we are exploring strategic options for the ZOPS business that could accelerate the accessibility of this technology and provide more focus and synergies to its growth. While we explore these options, we continue to operate the business, and customers worldwide continue to treat patients with this targeted therapy. And while we retain staff to support sales and services, revenue for Q1 was 18% lower than our budget, coming in at 1.43 million versus 1.7 million. Sales have slowed as customers and distributors are cautious about the business's future. To address these concerns, we've redeployed some internal resources to better support ZOFT sales. I am pleased to report that the body of evidence supporting ZOFT continues to grow. Compelling new research was published last quarter in the peer-reviewed Journal of Contemporary Brachytherapy. In the longest-term study of ZOFT skin EBX to date, Researchers confirmed ZOFT is a safe and effective treatment for non-melanoma skin cancer, with 98.9% of patients remaining recurrence-free at a medium follow-up of 7.6 years. This study adds to the body of clinical evidence that puts ZOFT skin EBX on par with Mohs surgery in terms of safety, efficacy, and recurrence rates, but with fewer side effects, and more comfort and convenience for patients. We remain confident that the Zoth technology has the potential to positively impact the lives of cancer patients and the providers who care for them on a global scale. We'll provide further updates on its strategic options at the appropriate point in time. Turning to the detection side of our business, as mentioned on our prior earnings call, 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. But before we go into Q1 results, I want to take just a moment to speak to this week's news. I'm sure many of you saw the U.S. Preventive Services Task Force announcement from earlier this week. They've published new draft mammography guidelines, which recommend women of average risk begin screening mammography at age 40. With 20 million women in the U.S. between the ages of 40 to 49, these recommendations offer the potential for our technology to benefit more women and improve providers' ability to meet the increased demand for these services. However, although mammography is the gold standard for breast cancer screening, it can still miss about 20% of breast cancers present at the time of screening. Mammography also cannot determine a woman's risk of cancer developing in the short or the long term, and the new guidelines do not specify how a woman would know if she's of average risk. Our Breast AI Suite, comprised of detection, density, and risk, maximizes the effectiveness of mammography. Our detection solution delivers up to two times the clinical performance compared to leading competitors. and is clinically proven to improve accuracy and efficiency for radiologists. In a recent study, our detection solution was shown to catch up to 23% more cancers that might have otherwise gone undetected. Our density solution not only meets the needs recently outlined by the FDA, but it has long been used worldwide to enhance patient care and personalized results. And our risk solution is up to 2.4 times more accurate than traditional risk models. Our leading edge AI portfolio is the only commercially available 360-degree solution clinically proven to assist clinicians in daily practice to detect more cancers, evaluate breast density, and identify women at high risk of developing breast cancer. And with the recent U.S. Preventative Services Task Force guidelines, it's clear that our technology is more relevant than ever. So back to our Q1 updates. First of note, we strengthen our leadership team with seasoned leaders poised to execute our strategic vision and grow our business. In Q1 of this year, we brought on Bill Keyes as Senior Vice President, U.S. Commercial Sales. As a seasoned leader with more than 35 years of healthcare technology experience, Bill brings to the team a consistent track record in building and leading sales teams, driving growth via enterprise sales, and expertise in software as a service. We also recently welcomed to the team Vasu Avudanila as our new Chief Product Officer. I've worked with Vasu over the past several years and can attest that he's an outstanding leader with 25 years of product development, business analytics, and technology innovation experience. Vasu most recently served as Vice President Health Technology and Digital Transformation at Susan G. Komen. Vasu has a track record of turning new ideas into successful products that disrupt the status quo and enhance the customer experience. In his last role at Susan G. Komen, Faisal was instrumental in the success of Komen's direct-to-patient programs and services, including the development and launch of Komen Health Cloud, a software-as-a-service patient engagement platform, as well as Share for Cures, the first patient-powered breast cancer research registry. I'm pleased to welcome him to our team and look forward to incorporating his unique perspective into our future roadmap. Continuing to strengthen our leadership team, we also recently welcomed Michelle Strong as our new Chief Operations Officer. With more than 25 years of experience in marketing and healthcare technology, most recently serving as Vice President of Marketing Strategy at Susan G. Komen, Michelle is a seasoned leader who excels at strategically building and growing organizations, tackling challenging initiatives, and developing strategic partnerships. She specializes in the implementation of new business strategies that broaden awareness, bolster brand equity, and drive revenue growth. Under Michelle's leadership, Komen's Brand Health experienced significant improvements year over year, resulting in increased revenues and stakeholder engagement to advance its mission to save lives from breast cancer. I'm pleased to welcome her to the team and confident that her unique set of skills and expertise will be instrumental in our go-to-market success. Additionally, I'm pleased to report that we've completed our search for a full-time CFO, as the Board of Directors appointed Eric Longfus as our new Chief Financial Officer. Eric has demonstrated strong financial acumen and a commitment to excellence in his most recent position as ICAD's Vice President of Financial Planning and Analysis. Eric has been with ICAD for over three years, and during that time, been a strong and stable leader through leadership and market changes. Eric's leadership style, combined with his strong financial and business acumen, will be instrumental in leading the financial operations of the company. Eric has more than 15 years of finance and accounting experience in the medical device and technology industries, and you will hear more from Eric later on this call. The addition of these seasoned executives will accelerate key initiatives in the company's strategic plans, such as new partnerships with patient advocacy groups, pharmaceutical companies, and payer organizations. With these important changes to our leadership team, we're confident we have the right people in the right roles at the right time to help us achieve our vision of offering the most pervasive and personalized breast screening AI technology. And while we work on these exciting transformations as a company, compelling new research continues to validate the benefits our breast AI portfolio offers to clinicians and patients. In March, at the European Congress of Radiology meeting, commonly referred to as ECR, we were pleased to again see physicians share their real-world clinical experience and evidence that ICAD's Breast AI Suite has a positive impact on cancer detection and women's lives. In a research presentation session at the meeting, Dr. Cathy Schilling, the Medical Director of the Christine E. Lin Women's Health and Wellness Institute at Boca Raton Regional Hospital presented findings from a study that found our profound AI detection solution increased the cancer detection rate among nine dedicated breast imaging radiologists by 23% without increasing the rate of recalls. This improvement was so significant, the media took note. Both Fox and CBS covered this study in nationally syndicated segments featuring ICAD and Dr. Schilling. Dr. Schilling will be sharing more about this research along with her clinical experience, best practices, and compelling case studies demonstrating the unique benefits our technology offers in our upcoming Profound Insights, Profound Impact webinar on May 24th. We invite all of you to join us for this webinar. New clinical evidence supporting profound AI risk was also published in the Journal of Clinical Oncology last quarter. According to the study findings, profound AI risk for 2D mammography is more accurate than Tire Cusick version 8, a commonly used lifestyle risk model. And of note, our profound AI risk was found to be more accurate for both short-term and long-term risk assessments. Physicians have traditionally estimated breast cancer risk by examining the patient's known risk factors, such as family history. But about 85% of breast cancers occur in women who have no family history of breast cancer. Our risk solution accurately identified 20% of breast cancers as high risk, compared to only 7.1% for Tyrecusic. With ICAD's risk solution, patient care has never been more personalized. By empowering radiologists with more information about a woman's specific risk, they can tailor breast cancer screening and maximize mammography's effectiveness, which ultimately leads to finding cancer sooner, reducing costs to the overall healthcare system, and most importantly, saving lives. Also in the first quarter, the FDA announced the implementation of a national dense breast reporting standard. which is a significant advancement in healthcare for women, as nearly 50% of all women aged 40 and over have dense breasts, one of the strongest and most prevalent breast cancer risk factors. However, dense breast notifications are only as effective as the assessment themselves, as studies show wide variation in visual assessment agreement, and radiologists may even disagree with their own assessment year to year. This can be confusing for patients, lead to unnecessary additional imaging, and increase patient and facility costs. ICAD's Breast AI Suite empowers clinicians to lead the way in breast care, and our customers using our density assessment solutions are well-equipped to provide accurate breast density assessments. And we expect more facilities to demand this technology as they work to bring care standards in line with new federal regulations. Turning now to our operations outside of the US. As I just mentioned, Q1 was marked by a very well-attended ECR meeting in Vienna. We connected many of our distributors with potential customers from all over the world. We also hosted a special evening event featuring talks from renowned leaders in breast imaging AI. including Dr. Kathy Schilling and Dr. Axel Gravingholt, who shared compelling testimonies and clinical case studies demonstrating the power of our technology to an audience of more than 100 radiologists. Also, our team was pleased to partner with GE in a workshop for radiologists. On the sales side, ICAD will be expanding into one of the largest screening regions in German-speaking Switzerland. This will be the first screening program that will use profound AI detection, and profound AI risk in their review process. With the expansion of our distribution territories, ICAD's visibility continues to grow in a global scale. Our regional partners are bringing in larger and more significant opportunities, and we're seeing a significant uptake in demand for our subscription offering in Europe, where this is quickly becoming the preferred purchasing model. And lastly, before we move to the financial update, I also want to provide you a brief update on our business model transition. As noted on our last call, we implemented several strategic changes, including continued cost reduction measures to align and streamline our cost base, reducing annualized expenses by 4.3 to 4.6 million and annualized cash burn by 4.9 to 5.2 million. putting us on track to achieve our goal of profitability exiting 2024. We also noted on our last earnings call, we will revisit our subscription annual recurring revenue, or SAR metric, when subscription deals make up a more material and consistent portion of our revenue. Along these lines, we're pleased to report that we closed nine subscription deals in Q1. While we believe the move to a subscription-based license model is good for our long-term future as it builds a more predictable and profitable revenue stream, it does create a short-term impact on revenue because we're only able to recognize a small portion of total revenue spread across the contract term. I also mentioned on the last call and earlier today that we're going through a rigorous and thoughtful process to evaluate a range of growth opportunities. To recap, these include going direct to patients with offerings like a new GPT-powered digital care platform, access to elective risk assessments, and other personalized predictive scoring solutions. Pursuing payer and reimbursement strategies to get risk assessments and AI-read screenings covered. Partnering with large employers with women's health initiatives to provide AI-powered mobile screening services on campus. 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 expanding our cloud-based AI platform to address other cancers and modalities. In summary, we're making bold moves to rapidly transform this company with a focus on stability, preserving cash, and building a defensible and competitive long-term strategy. that diversifies our revenue stream and smooths out our customer concentration. We look forward to continuing to update you on the metrics and milestones of this strategy later this year. I'll now turn the call over to Eric for a detailed review of our Q1 2023 financials.

Good afternoon, everyone, and thank you, Dana. I'll now summarize our financial results for the first quarter ended March 31st, 2023. Total revenue for the quarter was 5.8 million, a decline of 1.7 million, or 23% from the first quarter of 2022. The detection segment revenue was 4.3 million, down 21% from last year. Within detection, first quarter 2023 product revenue was 2.5 million, down 36% over the prior year. A portion of the decline is attributable to a greater number of subscription deals for the quarter over the prior year. Detection service revenue was 1.9 million, up 13% over the prior year. From a regional standpoint, detection segment revenue for the U.S. was 3.7 million, a decline of 19% from the first quarter of 2022. Detection segment revenue for OUS was 0.6 million, a decline of 35%, from the first quarter of 2022. The therapy segment revenue was 1.4 million, down 0.6 million, or 28%, versus the first quarter of 2022. Therapy product revenue was 0.3 million, down 59% year-over-year. Services revenue was 1.2 million, down 11% year-over-year. Moving on to gross profit, on a percentage of revenue basis, Gross profit was 71% for the first quarter of 2023, which was in line with the first quarter of 2022. On a pure dollar basis, gross profit for the quarter was $4.1 million, as compared to $5.3 million last year. This is largely reflective of a reduction in revenues. Total operating expenses for the first quarter ended March 31, 2023, versus 3.5 million in the quarter ended March 31st, 2022. GAAP net loss for the first quarter of 2023 was 3.8 million, or 15 cents per diluted share, compared with a GAAP net loss of 3.5 million, or 14 cents per diluted share, for the first quarter of 2022. Non-GAAP adjusted EBITDA for the first quarter of 2023 was a loss of 3 million, versus 2.7 million in Q1 2022. Non-GAAP adjusted net loss for the quarter was 3.6 million or 14 cents per diluted share compared to 3.5 million or 14 cents per diluted share in Q1 of 2022, reflecting a few adjustments to GAAP net loss in each period. Moving on to the balance sheet, as of March 31st, 2023, the company had cash and cash equivalents of 19.6 million compared to cash and cash equivalents of $29.8 million on March 31, 2022. This concludes the financial highlights of our presentation. I'd like to now turn the call back over to the operator to lead the Q&A.