ICAD

icad inc. (ICAD)

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iCAD, Inc. (ICAD)

Q1 2013 Results Earnings Call

April 30, 2013 10:00 AM ET

Executives

Anne Marie Fields - Vice President, LHA, IR

Ken Ferry - Chief Executive Officer

Kevin Burns - Executive Vice President, Finance and CFO

Analysts

Brian Marckx - Zacks Investment Research

Jeb Terry - Aberdeen

Shawn Boyd - Next Mark Capital

Presentation

Operator

Good day, ladies and gentlemen. And welcome to the Q1 2013 iCAD Incorporated Earnings Conference Call. My name is Debra, and I will be your operator for today. At this time, all participants are in listen-only mode. We’ll conduct a question-and-answer session towards the end of the conference. (Operator Instructions)

As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Anne Marie Fields, Vice President of LHA. Please proceed, ma'am.

Anne Marie Fields

Thank you, Debra. Good morning. This is Anne Marie Fields with LHA. Thank you all for participating in today's call. Joining me from iCAD are Ken Ferry, Chief Executive Officer; and Kevin Burns, Executive Vice President, Finance and Chief Financial Officer.

Following the market close yesterday, iCAD announced financial results for the first quarter ended March 31, 2013. If you have not received this news release or if you would like to be added to the company's distribution list, please call LHA in New York at 212-838-3777 and speak with Carolyn Curran.

Before we begin, I would like to caution that comments made during this conference call by management will contain forward-looking statements that involve risks and uncertainties regarding the operations and future results of iCAD.

I encourage you to review the company's past and future filings with the Securities and Exchange Commission, including, without limitation, the company's Forms 10-K and 10-Q, which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements.

Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, April 30, 2013. iCAD undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

With that said, I would like to turn the call over to Ken Ferry. Ken?

Ken Ferry

Thanks, Anne Marie. Good morning, everyone, and thank you for joining us. Our financial results for the first quarter of 2013 were particularly strong when compared to the same period of 2012. Further, we have now achieved three consecutive strong quarters indicating that our strategy and execution in the oncology market is continuing to make considerable progress.

In the first quarter, we delivered 25% revenue growth, while reducing operating expenses by 7%. When compared to the first quarter of 2012 this combination contributed significantly to the achievement of over $0.5 million of adjusted EBITDA profitability.

Growth was extremely strong for therapy products in the first quarter as interest continue to grow for the use of the Axxent Brachytherapy System in the treatment of certain breast and skin cancers.

We also had a relatively strong quarter with software products. This is encouraging as we are beginning to see a favorable market response to our new mammography CAD platform, PowerLook AMP and we are also making good progress in MRI software sales due in part to the launch of next-generation breast and prostate inhibitor products through our global partner InVivo.

With that, I’ll turn the call over to Kevin Burns our CFO who will provide you with more financial detail on the first quarter. After Kevin's remarks, I will come back and provide a brief business update before taking your questions. Kevin?

Kevin Burns

Thank you, Ken, and good morning, everyone. As Ken mentioned, we are pleased with our first quarter financial performance. It was another quarter of solid financial results including strong revenue growth from our cancer therapy products, continued expense management and a third consecutive quarter of adjusted EBITDA profitability.

We are pleased with our ongoing performance as these results confirm that our investments are producing topline results and our expense management programs continue to provide significant benefit.

We report revenues by the two main oncology areas in which we operate, specifically cancer detection and therapy. Our cancer detection revenue includes all of our image analysis and workflow products, including mammography, MRI and CT CAD platforms, as well as service revenue from these product lines. Our cancer therapy revenue encompasses electronic brachytherapy, related accessories and service and source agreements.

Now let's move on to review of our revenue for the quarter. Total revenue for the first quarter was $7.9 million, an increase of 25% from the first quarter of 2012, driven by 64% increase in our therapy revenue, and a 7% increase in cancer detection revenue. We are pleased to note that both our product revenue, and our service and supply revenue increased by 25%, which demonstrates progress we’ve made in both categories.

Cancer detection revenue for the quarter was $4.6 million, up 7% from $4.3 million a year ago, showing progress with our strategy to transition this business. In the first quarter, we announced our collaboration with Invivo, a Philips Healthcare Business and a worldwide leader in MRI.

In March, we released a next-generation platform for prostate and breast imaging solution that integrates our advanced MRI image analysis software with Invivo’s suite of MRI products. In the first quarter, we recognized approximately $50,000 of service revenue related to customization work for Invivo.

In addition from the recurring services revenue standpoint, we continue to see growth in the number of digital mammography products under service and subscription agreement, although this growth is partially offset by a reduction and the revenue generated from our analog service agreements as a renewal rate on the analog products continued to decline.

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