iCAD Reports Third Quarter Financial Results

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iCAD Reports Third Quarter Financial Results

Therapy Revenue Up 146% Over Prior Year, Up 194% Sequentially

Conference Call Begins Wednesday, October 31stat 10:00 a.m. Eastern Time


NASHUA, N.H.--(BUSINESS WIRE)-- iCAD, Inc.(Nasdaq: ICAD), an industry-leading provider of advanced image analysis, workflow solutions and radiation therapy for the early identification and treatment of cancer, today reported financial results for the three and nine months ended September 30, 2012.

"During the third quarter we demonstrated solid progress on our strategic plan as evidenced by significant growth in Therapy revenue and strong financial discipline including adjusted EBITDA profitability and an ongoing reduction in cash use," said Ken Ferry, President and CEO of iCAD.

"The Therapy business achieved record growth in Axxent® Electronic Brachytherapy® system sales which was complemented by strong demand for balloon and surface applicators. The overall positive momentum underscores the continued growing market adoption of electronic brachytherapy and resulting increase in procedure volume. In particular, we were pleased with the substantial procedure growth in the treatment of skin cancer, which in the third quarter equaled the total skin cancer procedure volume for all of 2011. We also sold 12 Axxent systems in the third quarter and now have sold 22 year to date compared to 10 systems for the same period last year.

"During the quarter, the U.S. Centers for Medicare and Medicaid Services assigned a separate payment value for breast IORT delivery treatment codes in their 2013 proposed rule. We believe this will only further accelerate adoption of breast IORT in the future.

"We remain very enthusiastic about the growth potential for our Therapy products. We are in the early adoption phase of electronic brachytherapy and believe that there is significant room for growth in breast IORT and skin cancer treatment in addition to new areas in the future.

"Cancer Detection revenues during the third quarter were weaker than expected as we continue to shift this business model to a mix of new and recurring revenue by offering new products along with upgrades and annual service contracts. During the quarter we launched PowerLook AMP, our next-generation mammography computer-aided detection (CAD) system, and began marketing this upgrade to our U.S. installed base of more than 3,500 systems. We believe this new business model will provide a sizeable and steady revenue opportunity over time," concluded Mr. Ferry.

Third Quarter Financial Results

Revenue: Total revenue for the third quarter of 2012 increased 2% to $8.2 million from $8.1 million for the third quarter of 2011. The increase resulted primarily from a substantial increase in Therapy revenue, which increased by 146% to $4.4 million, offset by a decline in Cancer Detection product revenue.

Cancer Detection revenue includes film, digital mammography, MRI and CT CAD platforms, as well as service and supply revenue from these products. Therapy revenue includes Xoft Axxent Electronic Brachytherapy product sales, as well as the associated service and supply revenue.

   
Three months ended September 30,
 2012  2011 % Change 
Products$5,779 $5,754 0%
Service and supply 2,404  2,298 5%
Total revenue 8,183$8,0522%
 

 

Three months ended September 30,
 2012  2011 % Change 
Cancer Detection$3,780$6,264(40)%
Therapy 4,403  1,788 2146%
Total revenue$8,183 $8,052 2%
 

Gross Margin: Third quarter 2012 gross profit of $5.9 million, or 71.9% of revenue, compared with gross profit of $5.9 million, or 73.1% of revenue, for the third quarter of 2011.

Operating Expenses: Total operating expenses for the third quarter of 2012 declined to $6.5 million from $31.4 million for the third quarter of 2011, which included a non-cash charge of $26.8 million related to the impairment of goodwill offset by a non-cash gain of $3.8 million on contingent consideration. This gain represented a fair value adjustment to the contingent consideration liability related to the Company's acquisition of Xoft, Inc. in December 2010.

The goodwill impairment and gain on contingent consideration are non-cash items and are excluded from non-GAAP financial results. A further discussion of non-GAAP results for the third quarter and first nine months of fiscal 2012 is included elsewhere in this press release.

Net Loss: The net loss for the third quarter of 2012 was $1.5 million, or $0.14 per share, compared with a net loss of $25.6 million, or $2.34 per share, for the third quarter of 2011.

Non-GAAP Adjusted Net Loss: For the third quarter of 2012 the Company posted a non-GAAP adjusted net loss of $1.6 million, or $0.15 per share, compared with a non-GAAP adjusted net loss of $1.8 million, or $0.17 per share, for the third quarter of 2011.

Non-GAAP Adjusted EBITDA: Non-GAAP adjusted EBITDA, a non-GAAP financial measure as defined below, was a gain of $303,000 in the third quarter of 2012, compared with a loss of $868,000 in the third quarter of 2011.

Nine Month Financial Results

Revenue: Total revenue for the nine months ended September 30, 2012 was $20.5 million, a decrease of 7%, compared with total revenue of $22.0 million for the nine months ended September 30, 2011. Therapy revenues contributed approximately $7.9 million to revenue year-to-date in 2012, an increase of $3.6 million or 85% compared to the same period in 2011. Therapy revenue consisted of approximately $6.1 million in product sales and $1.8 million in service and supply revenue.

   
Nine months ended September 30,
 2012  2011 % Change 
Products$13,433 $15,463 (13)%
Service and supply 7,024  6,579 7%
Total revenue$20,457 $22,042 (7)%
 

 

Nine months ended September 30,

 2012  2011 % Change 
Cancer Detection$12,551$17,761(29)%
Therapy 7,906  4,281 85%
Total revenue$20,457 $22,042 (7)%
 

Gross Margin: For the first nine months of 2012, gross profit was $14.5 million, or 70.8% of revenue, compared with $15.5 million, or 70.4% of revenue, for the first nine months of 2011.

Net Loss: For the nine months ended September 30, 2012 the Company posted a net loss of $6.7 million, or $0.62 per share, compared with a net loss of $35.4 million, or $3.24 per share, for the same nine-month period in 2011.

Non-GAAP Adjusted Net Loss: For the first nine months of 2012 the Company posted a non-GAAP adjusted net loss of $7.1 million, or $0.66 per share, compared with a non-GAAP adjusted net loss of $10.1 million, or $0.93 per share, for the first nine months of 2011.

Non-GAAP Adjusted EBITDA: Non-GAAP adjusted EBITDA was a loss of $1.6 million for the first nine months of 2012, compared with a loss of $6.8 million for the first nine months of 2011.

Cash and Cash Flow: As of September 30, 2012, the Company had cash and cash equivalents of $13.8 million, compared with $4.6 million as of December 31, 2011. Net cash used by operations during the first nine months of 2012 was $4.6 million. In January 2012 the Company entered into a five-year, $15 million debt facility agreement with Deerfield Management Company LP, a leading healthcare investment fund. Under the terms of the agreement, the Company issued a $15 million principal amount of senior secured notes, which included a revenue purchase agreement and warrants.

Use of Non-GAAP Financial Measures

In its quarterly news releases, conference calls, slide presentations or webcasts, the Company may use or discuss non-GAAP financial measures as defined by SEC Regulation G. The GAAP financial measures most directly comparable to each non-GAAP financial measure used or discussed, and a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure, are included in this press release after the condensed consolidated financial statements. When analyzing the Company's operating performance, investors should not consider these non-GAAP measures as a substitute for the comparable financial measures prepared in accordance with GAAP. The Company's quarterly news releases containing such non-GAAP reconciliations can be found on the Investors section of the Company's web site at www.icadmed.com.

Conference Call

iCAD management will host an investment community conference call on Wednesday, October 31, 2012 beginning at 10:00 a.m. Eastern Time to discuss these results and answer questions. Shareholders and other interested parties may participate in the conference call by dialing 800-591-6923 (domestic) or 617- 614-4907 (international) and entering passcode 90641442. The call also will be broadcast live on the Internet at www.streetevents.com, www.fulldisclosure.com and www.icadmed.com.

A replay of the conference call will be accessible two hours after its completion through November 7, 2012 by dialing 888-286-8010 (domestic) or 617-801-6888 (international) and entering passcode 50982309. The call will also be archived for 90 days at www.streetevents.com,www.fulldisclosure.com and www.icadmed.com.

About iCAD, Inc.

iCAD is an industry-leading provider of advanced image analysis, workflow solutions and radiation therapies for the early identification and treatment of common cancers. iCAD offers a comprehensive range of high-performance, upgradeable CAD solutions for mammography and advanced image analysis and workflow solutions for Magnetic Resonance Imaging, for breast and prostate cancers and Computed Tomography for colorectal cancer. iCAD's Xoft System, offers radiation treatment for early-stage breast cancer that can be administered in the form of intraoperative radiation therapy or accelerated partial breast irradiation. The Xoft System is also cleared for the treatment of non-melanoma skin cancer and endometrial cancer. For more information, call 877-iCADnow, or visit www.icadmed.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995

Certain statements contained in this News Release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve a number of known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to, the Company's ability to defend itself in litigation matters, the risks relating to the Company's acquisition of Xoft including, the expected benefits of the acquisition may not be achieved in a timely manner, or at all; the Xoft business operations may not be successfully integrated with iCAD's and iCAD may be unable to achieve the expected synergies, business and strategic objectives following the transaction, the risks of uncertainty of patent protection; the impact of supply and manufacturing constraints or difficulties; product market acceptance; possible technological obsolescence; increased competition; customer concentration; and other risks detailed in the Company's filings with the Securities and Exchange Commission. The words "believe", "demonstrate", "intend", "expect", "estimate", "will", "continue", "anticipate", "likely", and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on those forward-looking statements, which speak only as of the date the statement was made. The Company is under no obligation to provide any updates to any information contained in this release. For additional disclosure regarding these and other risks faced by iCAD, please see the disclosure contained in our public filings with the Securities and Exchange Commission, available on the Investors section of our website at http://www.icadmed.com and on the SEC's website at http://www.sec.gov.

 
 
iCAD, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands except for per share data)
     
Three Months Ended September 30,Nine Months Ended September 30,
 2012  2011  2012  2011 
Revenue:
Products$5,779$5,754$13,433$15,463
Service and supplies2,404 2,298 7,024 6,579 
Total revenue8,1838,05220,45722,042
 
Cost of revenue:
Products1,5271,2803,6033,627
Service and supplies5416501,6782,191
Amortization of acquired intangibles233 233 698 699 
Total cost of revenue2,3012,1635,9796,517
    
Gross profit5,882 5,889 14,478 15,525 
 
Operating expenses:
Engineering and product development1,9712,6306,1588,710
Marketing and sales2,8423,1087,97610,780
General and administrative1,7102,1474,9468,364
Contingent Consideration-(3,800)-(4,900)
Goodwill Impairment-26,828-26,828
Loss on indemnification asset- 508 - 801 
Total operating expenses6,52331,42119,08050,582
    
Loss from operations(641)(25,532)(4,602)(35,057)
 
Gain from change in fair value of warrant126-512-
Interest expense(883)(111)(2,549)(327)
Other (expense) income(67)6 (33)24 
Net loss and comprehensive loss$(1,465)$(25,637)$(6,672)$(35,360)
 
Net loss per share:
Basic and diluted$(0.14)$(2.34)$(0.62)$(3.24)
 
Weighted average number of shares used in
computing loss per share:
Basic and diluted10,805 10,936 10,792 10,907 
 
 
iCAD, INC. AND SUBSIDIARY
   
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands except for share data)
 
September 30,December 31,

Assets

20122011
 
Current assets:
Cash and cash equivalents$13,790$4,576

Trade accounts receivable, net of allowance for doubtful accounts of $48 in 2012 and $54 in 2011

5,7154,003
Inventory, net1,8632,040
Prepaid expenses and other current assets511490
Total current assets21,87911,109

 

Property and equipment, net of accumulated depreciation and amortization of $3,479 in 2012 and $3,184 in 2011

1,5051,884
Other assets868595

Intangible assets, net of accumulated amortization of $10,312 in 2012 and $8,840 in 2011

15,59517,064
Goodwill21,10921,109
Total assets$60,956$51,761
 

Liabilities and Stockholders' Equity

Current liabilities:
Accounts payable
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