Edited Transcript of ICAD earnings conference call or presentation 11-May-20 8:30pm GMT

Nonetheless, with strong revenues from the first 2 months of Q1, building off of our very robust prior quarter momentum, we were able to achieve 97% of our prior year’s Q1 revenues in spite of headwinds, which impacted the final 2 to 3 weeks of our quarter, typically the most prolifically in terms of revenue generation.

Turning now more specifically to our first theme, which involves expense management and balance sheet optimization. We proactively — we have reprioritized, redeployed and initiated appropriate cost mitigation efforts in early to mid-March to align with what we saw as a temporary and still see as a temporary disruption of ordering patterns. To this end, we have been exceedingly focused on making sure our balance sheet is appropriately positioned. We started this in February with the conversion to equity of our outstanding convertible debentures. Subsequently, in March, we entered into a new credit facility. And finally, in April, we completed an equity financing with gross proceeds of $12.5 million. The bolstering of our balance sheet, combined with cost efficiencies, that optimally prepared us to drive into what we see as a very receptive landscape of opportunities as we move towards the second half of 2020. To this end, we envision being able to not simply maintain our competitive position but to actually enhance our unique and sustainable competitive advantages.

This segues to our second theme. The current environment allows us to highlight and even amplify important and fundamental value propositions that are embedded within both our detection business and our therapy business. As patient care workflow escalates, iCAD’s AI trifecta toolkit will be even more clearly illuminated. As patient backlog builds, our 53% faster reading time for 3D mammography may become a virtual necessity. Our 57% reduction in reading time for complex cases, typically dense breast cases, may be even more essential. Additionally, our 7% reduction in false positive and unwarranted patient callback will ease the burden that will increase, and that’s the burden placed on our health care and screening facilities. And as importantly, our well-publicized and acclaimed 8% increase in detection sensitivity compared to detection levels of physicians reading 3D mammography images unaided by ProFound, will focus patient care on those with highest risk profiles and most likely in need of immediate care.

In sum, we anticipate that ProFound’s trifecta benefits will sign with increasing priority and amplitude than before COVID-19 entered our own lexicon.

Continuing the theme number two. Our detection and therapy business has unique value propositions that are added to the ones I just mentioned. These value propositions are now more fully revealed due to the impact of COVID-19 and the value illumination referenced above. In the area of detection, one of the hidden consequences of COVID-19 is women who are due, or even overdue, for screening mammography are either stuck at home and/or unable to readily access screening care. Now envision, a radiologist having mammographic images and AI data on their patients derived from the examination of the patient’s prior year examination using ProFound AI embedded capabilities and what we refer to as certainty of finding scores, which is essentially an algorithmic measurement of disease probability, physicians are now able to evaluate patients’ personalized risk profiles and determine individual patient risk and their appropriate scheduling requirements, all from data derived from a review of prior breast imaging. And all this can occur without the need for an office visit. Updated screening will obviously occur, if scheduled to come in, but this may now more likely occur for patients characterized as having higher risk profiles, along with the determination of a radiologist. Imagine the comfort and peace and the peace of mind for both patients, families and clinicians who are now able to determine whether a patient is of low risk, moderate risk or potentially high risk, all from an analysis of existing information already embedded within a patient’s prior year images. This all aligns with the basic premise of AI, that there is more information available when ProFound AI is used in conjunction with 3D mammography, whether it’s based on today’s images or even based on the prior year’s images as well. This is more than just an improvement in performance or a quicker reading time. ProFound AI therefore is now positioned as a risk assessment and scheduling tool when placed in the hands of radiologists who will consider all related patient factors.

Now recently, screening guidelines were issued by the American and European Colleges of Radiology, and they indicated that women of average risk should defer or delay screening. Now the obvious challenge here is that unless a woman actually has a known family history or a personal history of intervention, the overwhelming majority of women simply do not know their risk. Without a clear knowledge of who is at risk and who isn’t, we will see increasing exacerbation of patient apprehension. Our initial testing and evaluation in multiple sites has allowed us to conclude that we are now more broadly launching our ProFound Priors Program. We are also expediently working with the FDA on appropriate indication for used language. However, this capability is available on currently ProFound AI offerings and is in the market today. Based on early results and testimonials, we anticipate that this will be an increasingly well-received program in both U.S. and OUS operations. We envision this program being a solution to perhaps an even larger problem that is looming, and that is the ability of health care systems to handle what may be a doubling of patient volume as active screening resumes and all try to catch up. The ability to properly schedule patients will become increasingly more problematic when 40 million U.S. women, or 100 million worldwide, but 40 million U.S. women, which is the amount that are screened annually, begin to flow back to screening centers. Our U.S. health care system that is typically screening at a pace of 3.3 million per month may indeed be overwhelmed with significant backlog of patients significantly overdue for screening as per current mammography guidelines. Estimates range on prior year’s average, which was 3.3 million per month to 4.6 million per month needing to be required or perhaps as much as a doubling of 6.6 million patients per month as all try to catch up. Screening sites are simply not constructed to absorb this volume as testing the safety measures in place and properly stated procedure time interval. The alternative is an unacceptably delayed patient screening process and the prospect of more advanced cancers upon the eventual return of patients. A solution is needed. And it is increasingly clear to us that this recent confluence of events and circumstances has ushered in the era of what we call risk-adapted screening versus the current model of age-based screening. We believe that this will occur at a rate that we previously believed would take several years of gradual evolution and acceptance. Now borne out of necessity, we believe we are entering an era where patients will receive screening based on personalized individual risk factors rather than a reliance on primarily age-based criteria. It has been the company’s position for several years now that iCAD and its AI capability can lead the way towards what we see as a more and likely screening model where risk is the primary determinant of screening frequency. In my view, 3 to 5 years from now, we will all wonder what took us so long to get here.

For those of you who may be interested in hearing and actually seeing the views and opinions of key opinion leaders who are physicians, and how society is talking about the future of breast care screening and treatment, I invite all of you to view the iCAD website where we now have many recorded webinars, some of which involve hundreds of physicians speaking with each other directly and asking questions and co-developing solutions to real-time breast cancer screening and treatment challenges. You will observe a clear validation of the risk-adapted screening dynamic mentioned above.

Simultaneously, theme number two, which, again, focus on fundamentally enhancements to our value proposition due to current [atmosphere] is now yielding significant opportunities for our therapy business as well. Let me be specific. Xoft is now positioned to benefit from recent industry and clinical guidelines such as those issued by the American Society of Therapeutic Radiation Oncology, also known as ASTRO; and the American Brachytherapy Society, known as ABS. These societies have issued guidance that specifically includes moving towards hypofractionated care. What does that mean? Essentially, this translates into applying the appropriate and optimal amount of radiation dose in the shortest amount of time possible. This is the guideline. Typically, external beam radiation therapies can take up to 6 to 7 weeks. At this time, this rigorous daily treatment regimen and requirement, in many cases, may just not be feasible. The majority of cancer patients are typically older and often immune compromised. The current mounting backlog of patients may take many months to resolve and, in the view of many who we’ve spoken to, may become our new normal, particularly as COVID flares up again in the near future or in the fall. Xoft IORT treatment involves a simple 10-minute treatment of action and can be used for a full range of cancers. It is exceedingly well positioned as we move towards hypofractionation. We’ve had multiple conversations with key opinion leaders in radiation therapy in which we’ve often heard the comments: Xoft may indeed be the emerging poster child for hypofractionated care, single-dose treatment.

And further building upon theme number two for our radiation therapy business, it is well known that a single-fraction boost of radiation applied directly to a lesion or tumor bed can reduce the course of its sterile beam radiation therapy back up to 50%. This can take a 6- to 7-week regimen down to as little as 3 weeks. In sum, the drive towards hypofractionation, combined with the impending CMS reimbursement that benefits Xoft IORT and focuses on, in sum, the value of care over its volume. iCAD therapy’s business plan indeed be in a uniquely beneficial position to significantly increase and broaden its adoption.

This now brings me to our third — our third theme. iCAD has an extremely exciting and emerging breakout opportunity in our Xoft offering in the area of brain cancer treatment. For over 4 years, the committed group of leading-edge physicians has been using Xoft IORT for the treatment of the most confounding and intractable form of brain cancer, glioblastoma, also known as GBM. After the excision of the GBM, Xoft IORT is delivered real-time in a standard operating room. The procedure involves 10 to 12 minutes of extremely precise, kilovoltage radiation therapy that’s not megavoltage as in external beam, and it’s delivered directly to the excised tumor cavity. There is no need for a shielded room and no radioactivity.

The primary endpoint is to determine patient improvement in overall survival and as significantly the period of progression-free survival, which is also a key quality of life measurement. Future efforts will likely involve the use of Xoft IORT as an adjunctive tool to improve the results of other [care modalities], be they follow-up external beam radiation therapy, other treatment modalities and devices for GBM or trimethylated patients with the use of temozolomide. After 4 years, the result of this initial cohort of 30 patients is drawing attention from an increasingly larger group of neurosurgeons and neuro-oncologists. In September of 2019, overall survival and progression-free survival results were presented at the European Neurosurgery Conference and subsequently were published in World Neurosurgery, a peer-reviewed journal. As of September 30, 2019, results from all 30 mass sets of patients, both the control arm and [results] arm were analyzed and presented at the aforementioned conference. As of September 30, all 15 patients in the study control arm, all who had received state-of-the-art care had died. The overall average survival time was 21 months at that time. The results arm of the trial involved a mass set of 15 patients as well. This arm received only surgical excision and then 10 to 12 minutes of Xoft IORT. These also had an overall survival time of 24 months as of that time, September 30. And after 3 years, actually nearly 4 years today, correct me, 9 of the 15 treated patients were still alive as of September 30, 2019.

With data now gathered through December 31, a full 90 days later than the results reported, results were submitted to the American Society of Clinical Oncology, also known as ASCO, and the results were accepted. The ASCO data will highlight patient overall survival through December 31 and will improve the life index scores as well as the progression-free survival scores and accompanying p values. As this season’s conference is now virtual, the study abstract will be released from its current embargo and will be available online this coming Wednesday this week at 5:00 p.m. Eastern Standard Time. And we have a scheduled webinar with the lead investigator of this study, Dr. Krivoshapkin, that is scheduled for this Thursday at 8:00 a.m. Eastern Time. The iCAD website has information on how to register for this important webinar.

As this study continues to enroll, we are expanding our efforts aided by our recent financing. An Advisory Board is in the forming stage, and over 10 targeted sites have been identified for further study evaluation and will examine the use of Xoft in both de novo or new GBMs as well as recurrent GBMs, or ones with glioblastoma, along with other high-grade gliomas. As an FDA-cleared product, I want to reinforce this isn’t a (inaudible) product. These efforts represent a closed-market study and will further accelerate and inform our commercialization strategy.

To see how big an opportunity this may be worldwide, almost 297,000 cases of brain and nervous system cancers are diagnosed each year. Glioblastoma are the most common and aggressive type of malignant primary brain tumor, with a medium survival of 10 to 12 months. While our data is still early and more sites are needed to fully validate these initial results, we believe we can make a very meaningful contribution in the treatment of this deadly disease. Xoft IORT for the treatment of brain cancers is a source of obvious excitement. It has clarified the reality that the unique properties in Xoft electronic brachytherapy technology is fundamentally beyond just a product; beyond just a pure or, you might say, platform technology. It is an exceedingly scalable core technology, in some ways similar to radio frequency ablation, atrial ablation or laser frequency ablation, all of which responds to dozens of companies, multiples or dozens of applications and countless levels and layers of shareholder value. It bears repeating that Xoft’s offering is already FDA-cleared for all cancers in the body and has a range of reimbursement values for each. Our strong balance sheet allowed us to continue proliferating Xoft for technology capabilities with our partners, on our own or in many different forms.

So to summarize all that has been discussed. Theme one involves bolstering our balance sheet. Theme two was the emergence of new and then amplify iCAD value drivers that are embedded within both our detection and our therapy offering and our great benefit to patients, clinicians and health care facilities. And theme number three is a very exciting, breakthrough opportunity playing out real-time with Xoft IORT treatment for brain cancer. Now I’m sure all on this call can detect a high level of enthusiasm and excitement within iCAD today even during these unique times. Although no one can precisely predict the pace of subsiding COVID dynamics, we are exceedingly well positioned for new realities that lay ahead in our current, emerging and possibly now breakout areas of opportunity. This new reality is combined with our strengthened balance sheet, plus the kind of position where we could be where we are — where we couldn’t be more excited about our prospects for both significant and sustainable growth.

I will now turn the call over to Scott Areglado, who will review our Q1 financials.

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Richard Scott Areglado, iCAD, Inc. – CFO [4]

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Good afternoon, everyone, and thank you, Mike. I’ll now summarize our financial results for the first quarter ended March 31, 2020.

As Mike mentioned, despite the headwinds presented by COVID-19 during the last few weeks of March, our first quarter results declined $0.2 million or 3% with total revenue of $6.6 million as compared to the first quarter of 2019.

In the detection business, revenue grew $0.3 million or 7% due primarily to an increase in AI product sales. Historically, our quarterly revenues tended to be back-loaded into the last few weeks of each quarter. So the timing of stay-at-home workers and a general shutdown throughout the country had a disproportionate impact on the shape of our core. However, we continue to be pleased with the commercial adoption of ProFound AI in the marketplace, and as Mike said, we have reason to be optimistic about our fundamental value proposition embedded in both sides of our business.

Moving on to gross profit. Gross profit for the first quarter of 2020 was $4.5 million as compared to $5.3 million in the first quarter of 2019. On a percentage basis, gross profit was 69% as compared to 78% for the first quarter of 2020 and 2019, respectively. As we have discussed in prior quarters, we have seen increased fixed costs in our margin. The shift in our mix of revenue from the high detection and therapy margin business to lower-margin business impacted our margin line disproportionately in the first quarter of 2020. In April, we took steps to realign our cost structure with a decreased revenue forecast. These cost adjustments begin to take effect during the second quarter, and we will only realize the full annualized benefit in Q3. However, with an evolving revenue picture, we may continue to see some margin pressure as we intend to maintain maximum flexibility to drive growth.

Operating expenses were $8.4 million for the first quarter ended March 31, 2020 with increases in both sales and marketing and G&A relative to the prior year quarter but overall down sequentially from 9.1% in Q4 2019. As Mike said, we undertook cost-mitigation efforts to align our cost structure in response to the expected impact of COVID-19 on the company’s activities going forward. The primary cost areas that were impacted include salaries, travel, marketing and sales and other targeted cost areas. While we expect Q2 costs to decrease in excess of 10%, the full annualized impact won’t appear until the third quarter as we executed this at the beginning of Q2 and we have some modest offsetting onetime expenses. However, as Mike mentioned, we intend to continue to invest in targeted growth initiatives such as brain cancer to drive the business over the long term.

Now summarizing our profit metrics. GAAP net loss for the first quarter of 2020 was a loss of $11.8 million or $0.59 per diluted share compared with a GAAP net loss of $3.7 million or $0.22 per diluted share for the first quarter of 2019. Non-GAAP adjusted net loss for the first quarter, which also excludes the impact of the fair value of the convertible debentures, was $3.9 million or $0.20 per diluted share compared with a non-GAAP adjusted net loss of $1.1 million or $0.07 per diluted share for the first quarter of 2019. Non-GAAP adjusted EBITDA for the first quarter of 2020 was a loss of $3.1 million to a $2.5 million increase compared to the first quarter 2019 non-GAAP adjusted EBITDA loss of $0.6 million.

Moving on to the balance sheet. As you would expect, we continue to optimize all elements of our balance sheet. In February, we completed the conversion of the outstanding debentures and issued to the investors approximately 1.8 million shares. In February, we closed our new credit facility with Bridge Bank. These 2 steps reduced our outstanding debt from approximately $20 million to a $7 million term loan with repayment beginning in 2021. This facility includes an additional $5 million revolver that we have yet to draw on. We ended the quarter with $14.3 million of cash and equivalents, and in April, we issued approximately 1.6 million shares of our common stock with gross proceeds of $12.5 million in an equity offering with a group of high-quality institutional investors. With both the cost-alignment and balance sheet actions we have taken, our company is well positioned to continue to advance the long-term strategy that Mike outlined and navigate through this period of economic uncertainty.

This concludes the financial highlights of our presentation, and I would like to turn the call over to Stacey. Stacey?

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Stacey M. Stevens, iCAD, Inc. – President [5]

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Thank you, Scott, and good afternoon, everyone. Despite the short-term challenges posed by COVID-19, we remain optimistic about a full bounce-back in both segments of our business with what we see as an enhanced competitive position.

Technologies in both segments offer unique value to assist health systems in recovering from the impact of the pandemic, and certain elements have been amplified as a result of COVID-19. I’m pleased to provide you with updates around our initiatives aimed at accelerating our growth and expanding our global footprint and the steps we’re taking to evolve our business model to reflect the reality of how our customers consume information during this time. For this quarter, I will focus many of my comments on our strategic marketing and education programs that, during this time, have become in some ways, our primary sales engine and method of obtaining qualified sales leads that build our pipeline.

We are pleased to see the continuing strong momentum on the detection side of our business, driven by demand for ProFound AI globally. As Mike noted, though, the closing of certain transactions has been deferred until the impact of COVID-19 on the health care system begins to subside. We continue to pursue numerous system-wide deals, and as noted on previous calls, our sales pipeline continues to grow, reflecting continued strong customer interest in our technology. With that said, the qualitative feedback we continue to receive from our customers about the clinical and workflow impact this solution is having on providers and their patients remains extremely encouraging. We have recently published on our website a number of testimonials and success stories from customers who have adopted ProFound AI with overwhelmingly positive recognition of the benefits this technology has offered to practice and especially patients. A growing number of customers emphatically agree that adopting this solution has provided a way for their practices to go from surviving to thriving by optimizing operational efficiencies, clinician confidence and patient outcomes while demonstrating clinically proven benefits such as improved cancer detection, fewer false positive and empowering radiologists to these cases in less time. As an example, according to a recent testimonial from the Wooster Community Hospital, ProFound AI streamlined their workflow and enabled them to increase the number of cases seen per day from 19 to 24, increasing revenue by $80,000 without increasing expenses. The power of this leading-edge solution is undisputed, and customers are increasingly recognizing that the cost of ProFound AI pays for itself based on enhanced productivity alone.

On the therapy side, despite the COVID-19-related challenges during the last 2 weeks of March, this business performed very well in the first quarter with new systems being placed in Bangladesh, Turkey, Taiwan and China, and we continue to see positive momentum on the clinical data front with new results expected in key IORT indications in the coming weeks. COVID-19 has also accelerated a changing health economic landscape and recalibrated patient treatment approaches in cancer therapy, as Mike outlined. We believe the combined impact will influence provider selection of IORT as both cost savings and reducing the frequency of patient exposure to health care workers will be important issues ongoing.

With that, I’d now like to provide you with a brief update on our specific activities in both our cancer detection and cancer therapy segment. While COVID-19 has introduced new challenges with a number of trade shows and other events being canceled this quarter and posing unprecedented limitations on our sales force, we have taken a proactive approach to combat these issues, which, in many ways, has proven to be even more successful than some of our traditional marketing approaches. Our marketing team has effectively stepped in as a strong sales engine, generating qualified leads through a blitz of virtual education and digital engagement, creating what we believe will prove over time to be a lower-cost, higher-yield approach to this effort. In early March, we intentionally began to pivot our efforts to focus more on virtual tactics, which thus far has proven to be a great success. These include a series of virtual programs, bringing the latest in our portfolio of leading-edge cancer detection and therapy solutions directly to our key audiences with a laser focus on carefully measuring return on investment, specifically on revenue impact, with key performance indicators being tracked through Salesforce.com and other critical platforms. These live programs have not only attracted large audience of attendees, they have produced an overwhelmingly positive response among participants.

Our success in these efforts is evidenced by the fact that in the last few months alone, we have generated more qualified leads by orders of magnitude than we did at our 2 largest trade shows combined in 2019. In April, this series of events primarily focused on the power of ProFound AI in both the U.S. and Europe, featuring key sites with positive experiences using the technology. For one of these events, we joined forces with the Targeted Medical Education, or TME, Breast Care Network, which is comprised of nationally recognized clinical thought leaders in the breast cancer risk, detection, genetics and precision treatment space. This strategic partnerships leveraged thought leaders using ProFound AI as well as a well-established network of experts, which provides physician education with the ultimate goal of improving the quality and access to advanced breast care. This event also provided a venue for KOLs to discuss the strong value proposition iCAD’s technology offers, particularly in light of the COVID-19 pandemic, as ProFound AI offers crucial information such as case scores, which can help radiologists assess which patients should not just delay screening and presents a viable solution to the growing mammography backlog that will need to be cleared once COVID-19 passes. The event was exceptionally well attended with overwhelmingly positive engagement among a number of key industry professionals in the days that followed. This month, we are shifting the focus of these events to shine a light on the Xoft system and the benefits it offers to patients. We will be hosting virtual events and webinars, focusing specifically on the impact of COVID on breast cancer surgery and targeted radiation therapy, featuring key thought leaders on intraoperative radiation therapies and actual Xoft customers who will share best practices and discuss how targeted radiation therapy is emerging as a way to optimize workflow and minimize COVID-19 exposure to patients and clinicians.

Aside from this robust program of virtual webinar events, we are transitioning to an increasingly digital marketing strategy such as placing impactful video testimonials, press releases, blog content and earned media. In Q1 alone, positive earned media coverage featuring our technology reached an audience of more than 20 million clinicians and patients. We have also increased our activity on key social media platforms such as LinkedIn, Twitter and Facebook with significant and measurable increases in engagement among a number of strategic key audiences.

Let’s turn to Europe. Our performance here was quite strong. Momentum in Q1 was driven by a comprehensive customer educational campaign started in 2019, including press conferences, physician events and symposiums at key radiologists conferences. Positive product experience shared by our early adopters and important key opinion leaders throughout Europe, accelerated ProFound AI adoption. This extensive communication campaign has helped all of our channels, direct distributor and OEM to build a sustainable pipeline and address the dynamic marketplace where iCAD is evolving as the leading expert in AI with both ProFound AI for 2D and 3D.

In France, our direct sales efforts with large private and public buying groups has started to show development, yielding sales in Q1. Additionally, expansion of the distribution network and extensive training, along with key market development efforts all throughout 2019, has resulted in increased sales in major European countries such as Austria, Belgium and Greece.

Now moving on to cancer therapy. Looking ahead, we remain very excited about the future of our IORT business and continue to work on completing research for new clinical application areas. As Mike mentioned, this week, the embargo will lift on new Xoft neuro data to be presented at the American Society of Clinical Oncology’s Virtual Scientific Program. This research will also be discussed in more detail by study investigators in a virtual satellite symposium to follow in partnership with the European Society for Radiotherapy. Our near-term focus will continue to be on the brain tumor application as we accelerate initiatives to what will support a full commercial launch. We are now turning our attention to the creation of a world-class medical advisory board and the recruitment of leading neurosurgery sites globally to begin a multi-site clinical study. We anticipate enrolling first patients in the second half of 2020.

We are applying lessons learned from our breast therapy business that will enable us to successfully and rapidly deploy this technology to patients suffering from this devastating cancer who currently have very limited treatment options and a very poor prognosis.

So in summary, in the face of a challenging operating marketplace, our business is well prepared for the inevitable global bounce back. We have multiple growth engines and several key catalysts expected over the coming quarters. We continue to achieve progress towards creating a sustainable leadership position for iCAD, driving long-term growth and generating significant shareholder value.

Now we will open the call for questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) And the first question will come from Dave Turkaly with JMP Securities.

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David Louis Turkaly, JMP Securities LLC, Research Division – MD and Senior Research Analyst [2]

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I think you made some comments from the strength in both your direct and your OEM side, and I was just curious. I mean I’m sure your direct guys have this new value proposition nailed. But the OEM, is that resonating the trifecta benefits and then some of the other things you mentioned with those accounts as well? Maybe any color you could give on the strength that you saw there.

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Stacey M. Stevens, iCAD, Inc. – President [3]

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Yes. Dave, Stacey. So in the comments, I was talking specific to our European business, but I think it applies for the U.S. business as well. And we have invested an enormous amount of time in training events for the OEM partners. In fact, this whole situation of COVID-19 will allow quarantine in our homes. There’s actually less people with a lot more time for training events, right? So we’ve actually retrained all of our OEM partners globally. So we actually feel that this has given us a unique opportunity for them to even be stronger at presenting the value proposition of the technology.

Now the OEM partners are particularly interested in this program that we’re calling our ProFound Priors Program where the technology, ProFound AI technology, is being used to look at prior mammograms and helps to really prioritize which women should come back for mammography screening earlier than others when the impact of this [is less]. So I think that the training has been more than ever. And I would say at any — more than any other point in time, our OEM partners are very confident at describing the value proposition of the technology.

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Michael S. Klein, iCAD, Inc. – Executive Chairman & CEO [4]

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Dave, if I could add a point to Stacey’s to build upon it. So it’s a good question. The — one of the things that’s interesting is that our OEM partners, who mostly, as you know, were selling the tomography equipment, capital equipment, particularly our 3D and some 2D, so this isn’t a great opportunity to be selling capital equipment in this marketplace, but it is a great time to be approaching your customers to help them out with the deluge of screening that they’ll be facing or how to keep the lights on so they can have enough capital to be able to buy their technology. So we have had some, I’d say, 3 of the 4 major players out there, major partnership initiatives that allow them to go into their customers and, in fact, all customers and be able to say, we can help out, we can help bring patients back. And I think what this has resulted in is an even higher-level appreciation. So really, what is the fourth value proposition? Beyond all the performance of the screening rapidity is this whole area of risk, and that’s really helping us a lot. And we believe that’s going to sustain. And as you know, we have a product, ProFound Panorama, coming out later this year, and we couldn’t have a better segue to that new product than the introduction of ProFound Priors with our OEMs.

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David Louis Turkaly, JMP Securities LLC, Research Division – MD and Senior Research Analyst [5]

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It’s good to hear. And that’s kind of what I was just thinking. Given the size of some of those capital guys and the market that they’re in, I would think they’re incented to have something a little different to help them sell.

When you talk about — obviously, we’ll be excited to join the webinars this week and hear the embargoed data, but I think you said the post-marketing study you’re working on was — I think you said 10 sites that you would enroll in the second half of ’20, maybe the first patient. So I’m just — we think you said de novo and then also recurrent. I’m curious as to the sort of size of that. And then, I guess, how long that you plan on — how long that trial will go. And what — I mean you’ve talked about using Xoft with a lot of different things, but I’m assuming this is just IORT in — primarily in the United States. Is that fair?

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Michael S. Klein, iCAD, Inc. – Executive Chairman & CEO [6]

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Well, let me characterize it. In GBM, a lot of the interest started in Europe. And we actually have the — roughly 10 sites, which we actually have 10 to 12 that are interested, very interested even all the way to the [top] accounts. About 4 of them are in Europe and 8 of them are in the U.S. And the interest has been since we want to be able to get critical mass, the (inaudible) considering like breast cancer, we have a couple of hundred thousand cases a year, is running studies that would involve both new and recurrent cases. And also, we’d be selecting cases that are above a certain point and below a certain point. Those results can vary. So we are interested. All parties which are coming together are going to help us define the study.

This will be a multi-arm study with a control. And Xoft will be the variable. But we also see it being a study that wouldn’t just be Xoft in comparison to everybody else. It’s going to be Xoft plus another modality, Xoft plus temozolomide compared to one that doesn’t use Xoft but uses TMZ. So there’s a couple of ways that our very intrigued neurosurgeons and neuro-oncologists want us to actually disrupt. Our goal is to design a uniform trial that may have some local variability so that we can create a registry of these patients. This is FDA approved, but these aren’t Phase III trials. So a registry of these patients to be able to pull from that a full range of data.

Now the amount, the [30] sites that you mentioned will vary according to each arm in the trial. And obviously, the goal is to hit that [level of] statistical significance. And most have said that for each arm in the trial, you’re going to need at least 40 to 50 patients for each arm in the trial.

So what’s most interesting here is that when you’re dealing with patients who specifically recur in less than 10 to 12 months and the longevity is not much beyond that, these are trials that will actually start producing results less quickly. And also, this is a product that is available for commercial sale, but we do want to get further downfield with some of these studies. We certainly can sell it, but we certainly believe that the ramp will come with more of these studies in place.

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Operator [7]

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And moving on, we have Frank Takkinen with LakeStreet Capital Markets.

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Frank James Takkinen, Lake Street Capital Markets, LLC, Research Division – Equity Research Analyst [8]

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I just wanted to go back to one of the comments you made, Stacey, about more leads in this period versus your 2 largest conferences last year combined. I was hoping you could, one, repeat that so that I’m on — basically I’m on the same page with you there. And then, two, can you help us quantify what that could mean as far as a building pipeline for the rest of the year?

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Stacey M. Stevens, iCAD, Inc. – President [9]

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Yes. It’s interesting. What we’re seeing is incredibly strong attendance at these virtual events, and in particular, the event that we hosted in conjunction with TME. We had about 400 registrants for that event. And we actually had so much demand for it that we actually rebroadcast this event last week, and we had another large group of customers on that.

So what we’re finding is that in some ways, it’s an easier way to reach a large group of highly targeted customers, right? This is really our sweet spot. These are our breast imaging folks and, in some cases, it’s administrators and executives in health systems and to be able to reach them with a very targeted message.

And these events largely have been lightly branded, right? So they haven’t been an iPad infomercial. They’ve truly been educational events, and I think it’s carried a lot of credibility with them because we’ve had some very high-profile radiologists and breast surgeons, right, really speaking sort of objectively about how our technology can help health systems recover from this challenging time, right? So we’re finding that after these virtual events, webinars, that we’re getting a lot of engagement with our customers, a lot of follow-up, a lot of retest for more information or virtual demos or further engagement with our sales team. So it’s turning out to be, obviously, a much lower-cost option since we pay a ton of money to go to these trade shows, but just a way to get a larger number of sell-side leads faster and more efficiently than we are able to get at some of these trade shows.

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Michael S. Klein, iCAD, Inc. – Executive Chairman & CEO [10]

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Yes. And just to add on that, Frank, I think we’re — this is an opportunity for us to start to measure the effectiveness of these different programs and to start thinking about how we optimize our costs — our selling costs and how we build our pipeline. So it’s a great opportunity for us. It really is. And again, the way — so…

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Stacey M. Stevens, iCAD, Inc. – President [11]

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;

And it’s a great way to…

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Michael S. Klein, iCAD, Inc. – Executive Chairman & CEO [12]

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I’m sorry. As I said, the way we’re doing that is that we have typically a 7-stage sales process, all the way from the initial prospecting, all the way to qualifying and then getting to the final economic decision-maker. And we’ve been able to believe through these cycles of the sales process because people are [gullible]. So we’re able to get to the administrators. We’re able to get to the department [chairmen] without disruption. We have conversations and show them data and putting them on the screen. It’s actually [confounded] us because we actually thought this would slow down the process. But if [something] actually slowed down the sales process, the real gating factor here is just the economic realities of the hospitals in terms of being — them trying to be capital efficient. So we’ve been able to advance these sale — throughout this process through the use of web-based tools and have this dialogue with many (inaudible) companies and are having a similar experience. We wonder, why are we so much busier now than we thought we’ll be? Because we’re carrying through these life cycles at the sales front at a rapid rate. We’re just looking for the ordering pattern through the sales door. And that’s the last piece to fall. So they are, in a sense, well…

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Frank James Takkinen, Lake Street Capital Markets, LLC, Research Division – Equity Research Analyst [13]

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That makes sense.

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Michael S. Klein, iCAD, Inc. – Executive Chairman & CEO [14]

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The finance (inaudible).

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Frank James Takkinen, Lake Street Capital Markets, LLC, Research Division – Equity Research Analyst [15]

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Got it. And then next, you’ve alluded to some big potential purchases of ProFound in previous conversations. One, has there been any significant progress with any of these? And then as a second part to the question, in the case of a bolus of orders to address the backlog, what bottlenecks are top of mind to address to have the capacity and resources to support a broad rollout?

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Michael S. Klein, iCAD, Inc. – Executive Chairman & CEO [16]

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Yes. I would — the best answer to that is that those same orders, those bolus of orders, those large orders that we get, they invariably happen towards the end of the quarter. And in fact, they almost — almost half of them were by design. I mean that — just like everybody else, you buy a car at the end of the year or at the end of the month. Our customer go to the same store as we go to except on the purchasing side. So one of the things that happens when we lost the last couple of weeks of the quarter is a lot of those sales have sort of stumbled into now this quarter. And so that is the dynamic we saw. But they haven’t gone away. In fact, we’ve been able to mature another 2 or 3 of those orders that we’re talking about, significant orders, through the process that I outlined earlier in terms of being able to move from prospecting to qualifying to both strategic, operational, financial and clinical decision-makers earlier than we might normally have done so.

I’m sorry, could you repeat the second part of the question?

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Frank James Takkinen, Lake Street Capital Markets, LLC, Research Division – Equity Research Analyst [17]

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Just talking about some bottlenecks you may experience if you did have a broad-based rollout that needed to take place.

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Michael S. Klein, iCAD, Inc. – Executive Chairman & CEO [18]

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Yes. I think that on the kind of the AI — I’m sorry, on the sales side, the biggest challenge even in March we started seeing was somebody wants to take an order, but we’ve got to get in those care days. We had to have the people in our site, which we’ve sort of reopened as a [sort of] medical facility, on rotating shifts. So we had someone workings, practicing safety. And then you had to get people show up, shippers to show up. Then we had to deliver to a hospital weekly, the parking lot that may have had a testing going on or, in some cases, even a (inaudible) set up, what we’ve said. Then deliver, then train and then properly serviced, and that was very difficult to do. It wasn’t a supply issue nor was it even a demand issue. It was a logistical issue.

And on the AI side, it’s certainly not a supply issue because software is pretty much downloaded or you just ship server and download it. And it’s also not as much a demand issue in terms of what we call fundamental demand, it’s really been the distraction of hospitals, particularly in the early phases of this, as everybody was on the front line in the whole hospital. And all the administration, if you weren’t doing something related to first-line, first-responder activities, that would be unusual.

Now of course, it took the form of most of the large areas that you saw climbing up the curve, but now we may have sort of flattened the curve in most places. We’re seeing light. And those blocks and that availability for decision-makers to come together, those logistical complications are significantly less. But again, we don’t know the — We’re over this hurdle, but we’re not yet to, let’s say, full engagement, sustainable engagement, but we are moving out of shelves, moving in place.

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Frank James Takkinen, Lake Street Capital Markets, LLC, Research Division – Equity Research Analyst [19]

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Got it. And then just one — if I could sneak one last one that coattails right into that. You — obviously, we’ve seen mammograms sharply reduced in light of COVID-19 through the end of March and April and into, I’m assuming, the beginning of May. I was hoping you could talk to any trends you’re seeing based on maybe a rebound in scanning as we got to the back half of April and the early days of May.

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Michael S. Klein, iCAD, Inc. – Executive Chairman & CEO [20]

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Yes. We work very closely with many sites. And it depends on the contract on a — well, in some cases, depends on the person. But in the U.S., we are seeing the lights on, you might say, in numerous areas [of] manufacturing with some to say — you can almost map them to what the state regulations are in terms of them opening up. But what we’ve seen in all cases who decided they’d open up, they had opened up first with short hours, at times with hours that maybe come before or after. In other words, they’re trying to space out their treatment time. There’s a pattern of 4 screens an hour, which, in a lot cases, led to 8 hours or 9 hours, 32 patients a day. It’s going to be a while before we are back to that. People are — they may extend their hours. That will help. But they’re trying to scrub and rub and clean in between those treatments that I think patients coming in to screen were not going to be happy being right after another patient was there. So we’re going to see sort of a spreading out. We may see over time a longer day, giving time to rub and scrub down the equipment. But you’ll see a steady flow of patients returning for probably over a longer day and longer spatial relationship between the — for both patients and [spatial] relationship between the treatment times. But I do believe that what we’re doing in terms of risk is going to be the approach. People want to use our risk tools or their own assessment of risk just on what they may have written down from their notes. We’re just happy to give them a very useful tool that they could use and go back with last year’s images and literally the applications based on certainty of findings or risk. We make it easier for them to prioritize. So stretching those (inaudible). So I think what you’ll see is that instead of every woman coming back based on the 12 months, you’re going to see those of greatest need, as indicated by the radiologist, looking at scores and their own notes. That’s going to be the change. And that’s where we see this movement to risk-adapted screening be tremendously catalyzed and becoming, more so than ever before, closer to the new normal or the way things will be.

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Operator [21]

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Now we have Per Ostlund from Craig-Hallum Capital.

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Per Erik Ostlund, Craig-Hallum Capital Group LLC, Research Division – Senior Research Analyst [22]

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So I don’t want to dwell on the current environment. But for posterity’s sake, I guess we’ll start there.

So if we stipulate that January and February sounds like were very strong months and into March was strong and it kind of tailed at the end of March just like it did for pretty much everybody else, is your internal assumption at this point — in the absence of financial guidance, would you suggest that maybe April and May might look a little like the tail end of March and that you expect to start to kind of steer out of that in June or July? Or how should we think about that?

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Michael S. Klein, iCAD, Inc. – Executive Chairman & CEO [23]

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Well, if…

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Per Erik Ostlund, Craig-Hallum Capital Group LLC, Research Division – Senior Research Analyst [24]

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(inaudible)

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Michael S. Klein, iCAD, Inc. – Executive Chairman & CEO [25]

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Well, you — you’ve tracked us long enough, Per, to know our catalyst,, which is in each quarter, about 30% of the quarter comes in, in the first month, 30% in the second month and 40% in the third month. And when you lose half of your first month — of your third month, you can lose 20%, which has pretty much messed your own projections, sorry, right? It is almost like that. But what’s interesting is that we always have lower projections in the first and second months of the quarter. So the third month of the quarter, June, is where most of the sales occur. And in fact, if you went back to even a — to some of the quarters last year, in fact after the summer, sometimes you get 50% of your sales after the summer months. So a lot of this quarter is going to come down to June. And it’s not like we get it in 1/3, 1/3, 1/3. So a lot of it is being deferred. A lot of what we hear is we are keeping — we’re being very mindful of things; we are not going to break to our full capacity to make decisions that are going to help productivity; in fact, we have to be ahead of the curve and stay close to us in May and in early June. So we’re going to have a better read on this in the next 2 weeks. But I think it’s — I don’t know if I would necessarily say that, let’s say, the half a month relates to — of March relates to, let’s say, half a month of April and May. I think what we’re seeing is just a generalized almost rolling 30- to 40-day let’s connect, let’s stay in touch. That’s not to say that orders are not coming yet. In fact, in the areas that are over the curve, we see that. But we — what we basically have is almost like a sort of rolling deferrals, almost — you can almost map it to the flattening of the curve.

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Per Erik Ostlund, Craig-Hallum Capital Group LLC, Research Division – Senior Research Analyst [26]

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Okay. Okay, that makes sense.

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Michael S. Klein, iCAD, Inc. – Executive Chairman & CEO [27]

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It’s a dynamic — I call it dynamically modulating demand, okay? A made-up word, but it just, to me, best describes it.

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Per Erik Ostlund, Craig-Hallum Capital Group LLC, Research Division – Senior Research Analyst [28]

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Sure. Okay. So let’s turn to the opportunity. I think we’ve talked for close to a year now since the radiation oncology payment model was proposed. Is that being a fairly seminal event for the Xoft business? Fast forward to today, I guess first and foremost, you have an update on where that payment model resides because, obviously, CMS is probably busy with some other things right now. But perhaps secondarily, and maybe — or actually more importantly, has the RO payment model, given the environment today, become less accelerant and more luxury given that the lead and the sensitivity around hospital burden and ASTRO actually coming in behind you in support of hypofractionation? Is the RO model almost, in a way, purple wisdom in the sense that we’re going to see this bolus of demand coming fast and furious at some point just because of where we are today with building?

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Stacey M. Stevens, iCAD, Inc. – President [29]

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Yes. It’s a great question, Per. And in a lot of ways, sort of outside of the RO-APM, all of the stars are aligning for IORT, right? We’ve come to a period where we’ve gotten over the data hurdle, right, and there’ll be even more breast priority data coming in the coming months. And what this COVID-19 era has forced is for ASTRO to acknowledge it has been there for a very long time, that there’s is a lot of data proving that patients who receive hypofractionated treatments, have shortened retreatment regimes actually have the same outcomes and the same recurrence rates as patients who would receive the longer treatment plus the 6 to 7 weeks of external beam radiation. But we know that the financial and economic incentives have been aligned in such a way that patients were getting a lot of treatments, right, because that’s how people got paid.

And now I think given that we have the situation where, for example, you cannot bring an elderly woman into the hospital 30 times during the age of the coronavirus to receive external beam radiation, right, that’s just not going to happen anymore, right? So I think what we’re seeing now is an acknowledgment of the hypofractionated treatment being just as good and having such good outcomes. And I like to say that genie has come out of the bottle, okay? It’s now been revealed that, that data is there and that genie is not going back in the bottle, right?

So I think that to your point, I think that we’re benefiting and we’re starting to see an increased impact in IORT sort of based on the founding situation that we’re working through regardless of the RO-APM. Now having said that, I still think that we have every reason to believe that we’ll see publication of the RO-APM in 2020, right? We know that the final language was done by CMS in February. We know that final language had moved to the OMB website on March 11, right? And that’s usually the next step before it goes to the Federal Register. Now typically, it would only sit in OMB for about a week, but nothing is typical right now, right? And we know that things are further complicated by COVID-19. But the interesting thing that happened is that ASTRO has gone to CMS and asked them to delay the implementation of the RO-APM to January of 2021 and in the same letter actually asked the ASTRO to please publish the final language now as soon as possible, right, so that health systems can get prepared for that impact during 2020, right? So there’s definitely an acknowledgment by most parties here that this is coming, and there was actually an encouragement to CMS by parties who might not necessarily expect to accelerate the final publication of it. So I think we’re going to probably win in both regards, but your point is a great one that we’re getting momentum even outside of this that I think is going to — we’re going to see some benefits from perhaps later this year and certainly into next year.

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Per Erik Ostlund, Craig-Hallum Capital Group LLC, Research Division – Senior Research Analyst [30]

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Okay. That makes perfect sense. And then maybe following up on that point, and this question is going to apply beyond breast cancer. There’s — all the other cancers that you’re pursuing indication for, this will be relevant as well. But just as, for instance, breast cancer, you’ve historically talked about there being, call it, 100,000 relevant cases out of 300,000, again give or take, diagnoses just in the U.S. and Europe as IORT relevant. With the ongoing pandemic and the notion of IORT as a boost, how much of a bias upward do you think that 100,000 figure could potentially have here in terms of, again, hypofractionation taking it down from 6 weeks even if it’s doing Xoft up front and cutting it down to 2 or 3 weeks of the external beam mapping effect? And is there any clinical effort that you need to put behind that to validate? I know you’ve done some studies with IORT as a boost before. Is there more that needs to be done? Or will (inaudible) kind of stand on its own?

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Michael S. Klein, iCAD, Inc. – Executive Chairman & CEO [31]

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We’ll make an initial comment. Stacey, you can jump on. The — having run (inaudible) area as well as the external beam and the brachytherapy business is important to make. I know that when it comes to brachytherapy, let’s say in the case of breast cancer, as long as the case — in cases that don’t have node involvement or may not have multifocal reasons which can benefit by a singular dose that could then be amplified by external beam radiation therapy are very conducive to Xoft now as a boost to what may need to be a slightly expanded field. There is somewhere — it depends on the staging and grading the type of cancer, but somewhere between 50,000 and 100,000 additional cancers can be brought or can be brought into play in terms of IORT as a result of considering and as a boost to external beam radiation therapy. Beyond about 200,000, you’re in a zone where you’re later stage or into the nodes. Here, it’s multifocal. It’s just not going to be effective. But I do think it’s a really interesting question, Per, because we’ve said we’ve got about 1/3 of the 300,000. This would actually move us from, let’s say, 100,000 or 110,000 to somewhere between 150,000 and 200,000. And that we see as that’s the way. And I think we do need to tighten up between that 150,000 and 200,000. And what would be a variance there will be technologies we can control, that may directly source in such a way that we could hit a second lesion. So I think we can improve it to expand the market.

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Operator [32]

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(inaudible) of (inaudible).

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Unidentified Analyst, [33]

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I just wanted to start with the thoughts you have in terms to rolling out the Panorama — full Panorama program scheduled in second half of this year. At this moment, how are you thinking about that in terms of the time line and maybe even the scope of that? I know in certain products that the Panorama is already in place, but what’s the thoughts you have at this moment?

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Michael S. Klein, iCAD, Inc. – Executive Chairman & CEO [34]

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Well, one of the things that’s interesting is that our AI and software people, and some are resources and software development people, they haven’t missed a beat. In fact, I think a lot of them are almost thriving in this environment. So from a product development perspective, we are right on track. And what does on track mean? On track means we are prepared to launch in Europe in the third quarter, and then we’re prepared to launch in the U.S. in the fourth quarter. And that is because we’ve taken a couple of months to make sure we clear any FDA requirement that may pertain to the indication for use because the FDA gets particularly concerned when you start doing anything that comes close to that — something that could be labeled as prediction, that’s not a general use. But they — that’s when they start — when you move from detection to prediction, they start getting a little bit involved, more involved. And I know this from the early days of AI.

From a demand perspective, I have to — we have to believe — based on what we’ve seen with the Priors program, what we are effectively doing is feeding the market for ProFound. ProFound — I’m sorry, for Panorama. What Panorama is fundamentally about was linking today’s image to last year’s image. What we’re doing today with ProFound Prior is taking last year’s image and we’re then bringing them in as needed and comparing it to today’s image based on risk. So in some ways, we’re inverting the process. Once fulfilled, then Panorama comes out. We will take today’s image, let’s say August 1. We’ll take August 1 image, and we’ll look at the image from a year ago at that time. So we will real-time compare and look at the measurements of change and the trajectory of change and compare the woman to women that are similar to that unique woman profile. So in some ways, we are feeding the market because a big portion of Panorama is the value opposition of knowing the prior year’s information.

So I think it’s going to help us. But again, I do have to say we’re going to be tied to the possible order impact. But it makes complete sense that if you are trying to solve 6 million or even 5 million a month coming back, you would launch and start prioritizing those cases based on risk. And we believe that our risk-adaptive prior tools that you could look at to help determine which patients should come in first are going to become very significant parts of the value equation, and it is getting us down the path of many account in it.

So I would say that when those floodgates open up and ordering patterns restore, if we were 2, 3 or 4 online for (inaudible) for care at the hospital, we have moved up the food chain in terms of clarity because we are solving a critical challenge, and that’s to tell you the patients coming back. So I think it’s helping our — you might say we’re almost relaunching Panorama to currently available ProFound AI Priors program.

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Unidentified Analyst, [35]

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Okay. That’s very helpful. Actually, that leads me to another question, which is very related, of the version of that could be using the previous year’s image to assess the future. So the propensity to conduct another trial or conduct another screen. And so I — my understanding is that capacity is available in some [constant] currently, and correct me if I’m wrong. And if so, do you have any either testimony or assessment in terms of how many of these cases or — roughly speaking, have been done? And has that been — generate any kind of positive feedback both from the radiologists as well as from publications and stuff?

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Michael S. Klein, iCAD, Inc. – Executive Chairman & CEO [36]

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Yes. So we actually have several sites that have adopted this and an extremely large site that is going through a full-fledged evaluation for what could be a significantly large number of sites. And we’ve also done a significant amount of work in Europe as well, and that work started even in Q1 when they went back and looked at prior year’s images. This is [Dr. Graven Holst]. And actually, you can find his experience with our technology by his examination of prior year’s images on one of our web — on our website as a webinar and basically talk about what he found when he went back 1 year early. And I think you’ll find this was rather stunning, and it’s probably — it’s best heard in his own words, but essentially he was able to find a significant amount of cancers in the prior year that were double read and were not seen because they were extraordinarily low with size and were found with ProFound. So we’ll be able to give you and others access to some of this testimonials.

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Unidentified Analyst, [37]

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Okay. Great. And maybe last question here is a housekeeping one, which you mentioned earlier that the second quarter might have a onetime expenditure. So the operating expense might — roughly 10% higher than the first quarter. Would you be able to help us in modeling purpose to allocate those expenses to — whether that be percentage to the engineering as well as the SG&A effect?

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Michael S. Klein, iCAD, Inc. – Executive Chairman & CEO [38]

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I certainly want to, but somebody is going to talk in our breakout about that. And we recognize everyone wants to build models. I don’t know if you want to add anything to that.

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Richard Scott Areglado, iCAD, Inc. – CFO [39]

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No. So it’s probably more centered around some of the sales and marketing and the G&A side. I’d say R&D to a lesser extent and begin to think about sort of a — I would take it mostly in the shape of how the expenses are in the quarter relative to each other if we’re to kind of take 10% across the board. But I would probably apply a little bit less to R&D and a little bit more to sales and marketing.

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Operator [40]

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Next question will come from Gene Mannheimer with Dougherty & Company.

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Eugene Mark Mannheimer, Dougherty & Company LLC, Research Division – Senior Research Analyst of Healthcare [41]

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I joined the call a little late, but did you quantify for us the COVID impact, so to speak, on the detection side in the quarter either in terms of revenue or maybe the number of installs that pushed out?

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Michael S. Klein, iCAD, Inc. – Executive Chairman & CEO [42]

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We didn’t.

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Stacey M. Stevens, iCAD, Inc. – President [43]

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You mean…

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Michael S. Klein, iCAD, Inc. – Executive Chairman & CEO [44]

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Yes. We didn’t. And in our opening kind of statement, we certainly didn’t, didn’t I, team?

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Richard Scott Areglado, iCAD, Inc. – CFO [45]

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Yes.

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Michael S. Klein, iCAD, Inc. – Executive Chairman & CEO [46]

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We can say that sales of ProFound were 11% above Q1 last year and AI overall was 7%. So we can go into the specifics of that. And you may have heard my comments earlier about we had — we were building on the momentum of Q1 and Q2 in — I’m sorry. I’m sorry, Q4 in first month, second month, January, February, and that’s when we typically get 30%, 30%, then 40%. So we can — I know you’re trying to adjust your models, and we’ll be happy to talk specifically about just more granularity.

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Eugene Mark Mannheimer, Dougherty & Company LLC, Research Division – Senior Research Analyst of Healthcare [47]

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Right. Right. Okay. Well, that’s helpful. I understand that. And guys, how do you look at your customers’ credit risk? In other words, in this pandemic, I mean, do you have a large concentration of clients that are ASCs? And have you seen any indication that they’re not paying? Or has anyone yet asked you for breaks in maintenance? Just indications along those lines would be helpful.

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Richard Scott Areglado, iCAD, Inc. – CFO [48]

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So Gene, it’s something we’ve carefully considered in the quarter, and I will tell you I got on my team right away about making calls and sort of getting themselves in the queue for following up on receivables and really pressing just because I was concerned that as these people shut down, we’d see some slowdown. So I think we did a pretty good job in the quarter.

I haven’t seen any real pushback on receivables. We have often spoken about OEMS, which are obviously going to continue to pay. So we don’t have a high — our concentrations of credits are typically in the OEM business and not as much on kind of the provider and the freestanding clinic radiologists or that type of thing, right? So — and they need our system. So generally, we’re going to pay. I think our credit risk is reasonably low given the current environment, right? I mean certainly, someone could turn south on us. So I think — does that answer your question?

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Eugene Mark Mannheimer, Dougherty & Company LLC, Research Division – Senior Research Analyst of Healthcare [49]

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It does. It does. Thank you, Scott. Appreciate it. Congrats on all the progress.

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Richard Scott Areglado, iCAD, Inc. – CFO [50]

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Thank you.

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Michael S. Klein, iCAD, Inc. – Executive Chairman & CEO [51]

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Thanks, Scott.

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Stacey M. Stevens, iCAD, Inc. – President [52]

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Thank you, Scott.

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Operator [53]

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And at this time, it does appear that we have no further questions in the queue.

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Michael S. Klein, iCAD, Inc. – Executive Chairman & CEO [54]

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Okay. All right. So let me summarize. And I will summarize essentially by repeating my earlier themes, which are, one, we continue and will continue to manage costs to accommodate currently disrupted customer ordering patterns. We have adequate capital and cost controls in place to fully weather the impact of COVID-19 throughout its duration.

But theme number two, the current environment highlights the fundamental value proposition embedded within our detection and therapy businesses. And our value proposition is, in fact, enhanced and amplified in this current environment. And again, that’s the case with our Priors program. And with Xoft, in some cases, being the main event in terms of radiation therapy, that could practically be delivered in an; environment where 6 to 8 weeks will be a challenge.

And then finally in the last area, which we called our — the third theme, now we are taking initial steps to commercialization strategy and evaluating current target size (inaudible) in what we see as a highly significant breakout opportunity in the area of plain cancer treatment. And that’s within Xoft and using IORT.

So with that, we’d like to thank all of you for joining us today. Please stay safe and healthy. And we look forward to providing information as we move forward into quarters ahead. And we will try to providing specific updates on our 3 core themes as we progress as well.

With that, thank you all and have a great day.

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Operator [55]

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Again, ladies and gentlemen, that does concludes the call for today. (inaudible). You may now disconnect.