iCAD (ICAD) 8-K Results of Operations and Financial Condition

Exhibit 99.1

    

iCAD REPORTS SECOND QUARTER 2019 FINANCIAL RESULTS

Conference call today at 8:30 a.m. ET

NASHUA, N.H. – August 1, 2019 –iCAD, Inc. (NASDAQ: ICAD), a global medical technology leader providing innovative cancer detection and therapy solutions, today reported financial results for the three and six months ended June 30, 2019.

Second Quarter 2019 Highlights:

• Total revenue of approximately $7.3 million, an increase of 19% over second quarter of 2018.

• Gross profit of $5.7 million, or 78%, in the second quarter of 2019 as compared to $4.8 million, or 78%, in the second quarter of 2018.

• GAAP Net Loss of $3.5 million, or ($0.20) per diluted share, which includes a $1.9 millionnon-cash charge associated with the fair value accounting treatment of the Q4 2018 convertible debentures.

• Non-GAAP Adjusted EBITDA loss of ($1.0) million compared tonon-GAAP Adjusted EBITDA loss of ($0.3) million in the second quarter of 2018.

• Non-GAAP Adjusted Net loss of $1.6 million or ($0.09) per diluted share compared tonon-GAAP adjusted Net loss of $1.0 million or ($0.06) per share.

First Half 2019 Highlights:

• Total revenue of approximately $14.1 million, an increase of 13% over the first half of 2018.

• Detection product revenue of approximately $6.6 million, an increase of 33% over the first six months of 2018.

• Gross profit of $11.0 million, or 78%, in the first half of 2019 as compared to $9.3 million, or 74%, in the first half of 2018.

“We have built significant momentum throughout our business in the first half of 2019,” said Michael Klein, Chairman and Chief Executive Officer of iCAD, Inc. “In Detection, our commercial launch of ProFound AI^™, our latest, deep-learning, cancer detection software solution for digital breast tomosynthesis, continues to see increased market adoption, and our product mix is increasingly shifting to ProFound AI with each passing quarter. Moreover, we are positioned to gain meaningful traction with this product in the second half of 2019. Our recent announcement that SimonMed Imaging, the largest physician owned imaging provider with 150 locations across the U.S., will be implementing ProFound AI in its centers, will have a positive impact on the second half of the year.”

“Detection revenue was up 31% year-over-year in the second quarter of 2019, and 17% for the first half of the year, as compared to the same period in 2018,” continued Mr. Klein. “We are very pleased with this performance and are especially excited about the growing contributions from ProFound AI. In Therapy, CMS’ proposed Radiation Oncology Bundled Payment Model explicitly incentivizes providers to choose high quality, cost-effective care, which could strongly favor Xoft^® IORT. We look forward to the potential implementation of this model in January or April 2020.”

“Our balance sheet is strong, bolstered by the recent $9.4 million financing. We ended the second quarter with $19.6 million in cash and cash equivalents, as compared to $12.2 million at the end of 2018. We are in an excellent financial position to continue executing on our growth strategy,” concluded Mr. Klein.

Second Quarter 2019 Financial Results

Revenue: Total revenue for the second quarter of 2019 was $7.3 million, an increase of $1.2 million, or 19%, compared to second quarter of 2018, reflecting a 37% increase in product revenue and flat service and supplies revenue.

In $000’s

	Three months ended June 30,
	2019		2018		$ Change		% Change
Product revenue	$	4,353	$	3,194	$	1,159		36	%
Service and supplies revenue		2,976		2,968		8		0	%
Total Revenue	$	7,329	$	6,162	$	1,167		19	%

Cancer Detection revenue for the second quarter, which includes revenue from our mammography, breast density, and CT Colon platforms, as well as the associated service and supplies revenue, increased by approximately $1.2 million as compared to the second quarter of 2018, driven by growth in the Company’s 3D imaging and Density products with corresponding increases in both Direct and OEM revenues. Therapy revenue, which includes Xoft^® Axxent^® eBx^® System^® sales, as well as the associated service and supplies revenue, for the second quarter of 2019, was flat as compared to the second quarter of 2018.

In $000’s

	Three months ended June 30,
	2019		2018		$ Change			% Change
Detection revenue
Product revenue	$	3,808	$	2,486	$	1,322			53	%
Service and supplies revenue		1,401		1,504		(108	)		(7	)%
Detection Revenue	$	5,209	$	3,990	$	1,219			31	%
Therapy revenue
Product revenue	$	545	$	708	$	(163	)		(23	)%
Service and supplies revenue		1,575		1,464		111			8	%
Therapy Revenue	$	2,120	$	2,172	$	(52	)		(2	)%
Total Revenue	$	7,329	$	6,162	$	1,167			19	%

Gross Profit: Gross profit for the second quarter of 2019 was $5.7 million, or 78% of revenue, compared to $4.8 million, or 78% of revenue, for the second quarter of 2018. Gross profit percent changes are primarily due to changes in the mix of business, consulting costs related tonon-recurring engineering revenue, additional manufacturing investments and amortization of acquired intangibles.

Operating Expenses: Total operating expenses for the second quarter of 2019 were $7.2 million, a $1.5 million increase, or 26% increase, from the $5.7 million in the second quarter of 2018. The increase was driven by increased marketing and sales expenses in support of our commercialization efforts to drive adoption of Profound AI.

GAAP Net Loss: Net loss for the second quarter of 2019 was ($3.5) million, or ($0.20) per diluted share, compared with a net loss of ($1.0) million, or ($0.06) per diluted share, for the second quarter of 2018. GAAP Net Loss includes a $1.9 millionnon-cash charge associated with the fair value accounting treatment of our convertible debentures issued in December 2018.

Non-GAAP Adjusted EBITDA:Non-GAAP adjusted EBITDA, anon-GAAP financial measure as defined below, for the second quarter of 2019 was a loss of ($1.0) million, compared to a second quarter 2018non-GAAP adjusted EBITDA loss of ($0.3) million. Please refer to the section entitled “Reconciliation ofNon-GAAP Financial Measures to Comparable GAAP Measures” and the accompanying financial table included at the end of this release for a reconciliation of GAAP Net Loss toNon-GAAP Adjusted EBITDA results for the three-month periods ended June 30, 2019 and 2018, respectively.

Six Months Ended June 30, 2019 Financial Results

Revenue: Total revenue for the six months ended June 30, 2019, was $14.1 million, an increase of $1.6 million, or 13%, over the same period of 2018, reflecting a 32% increase in product revenue and a 5% decrease in service and supplies revenue.

In $000’s

	Six months ended June 30,
	2019		2018		$ Change			% Change
Product revenue	$	8,175	$	6,208	$	1,967			32	%
Service revenue		5,927		6,267		(340	)		(5	)%
Total Revenue	$	14,102	$	12,475	$	1,627			13	%

Cancer Detection revenue for the six months ended June 30, 2019, which includes revenue from our mammography, breast density, and CT Colon platforms, as well as the associated service and supplies revenue, increased by approximately $1.4 million, or 17%, as compared to the same six month period of 2018, driven by growth in the Company’s direct sales of 2D and 3D imaging products. Therapy revenue, which includes Xoft^® Axxent^® eBx^® System^® sales, as well as the associated service and supplies revenue, for the six months ended June 30, 2019, increased $0.3 million, or 6%, to $4.7 million as compared to the same six month period of 2018.

In $000’s

	Six months ended June 30,
	2019		2018		$ Change			% Change
Detection revenue
Product revenue	$	6,613	$	4,975	$	1,623			33	%
Service revenue		2,764		3,026		(247	)		(8	)%
Detection Revenue	$	9,377	$	8,001	$	1,376			17	%
Therapy revenue
Product revenue	$	1,577	$	1,233	$	344			28	%
Service revenue		3,148		3,241		(93	)		(3	)%
Therapy Revenue	$	4,725	$	4,474	$	251			6	%
Total Revenue	$	14,102	$	12,475	$	1,627			13	%

Gross Profit: Gross profit for the six months ended June 30, 2019, was $11.0 million, or 78% of revenue, compared with $9.3 million, or 74% of revenue, in the same six months of 2018. Gross profit percent changes are primarily due to changes in the mix of business, consulting costs related tonon-recurring engineering revenue, additional manufacturing investments and amortization of acquired intangibles.

Operating Expenses: Total operating expenses for the six months ended June 30, 2019, were $13.5 million, an increase of $0.1 million, or 1%, to $13.5 million from $13.4 million in the same six month period of 2018. The increase was due to increased marketing and sales expenses, partially offset by decreases in engineering and product development costs.

GAAP Net Loss: Net loss for the six months ended June 30, 2019, was ($7.2) million, or ($0.42) per diluted share, compared with a net loss of ($4.3) million, or ($0.26) per diluted share, for the same six month period of 2018. GAAP Net Loss includes a $4.4 millionnon-cash charge associated with the fair value accounting treatment of our convertible debentures issued in December 2018.

Non-GAAP Adjusted EBITDA:Non-GAAP adjusted EBITDA, anon-GAAP financial measure as defined below, for the six month period ended June 30, 2019, was a loss of ($1.5) million, compared tonon-GAAP adjusted EBITDA loss of ($2.7) million in the same six month period of 2018. Please refer to the section entitled “Reconciliation ofNon-GAAP Financial Measures to Comparable GAAP Measures” and the accompanying financial table included at the end of this release for a reconciliation of GAAP Net Loss toNon-GAAP Adjusted EBITDA results for thesix-month periods ended June 30, 2019 and 2018, respectively.

Cash and Cash Equivalents: As of June 30, 2019, the Company had cash and cash equivalents of $19.6 million, compared with cash and cash equivalents of $12.2 million at December 31, 2018.

Conference Call

Thursday, August 1st @ 8:30am Eastern Time

Domestic:	877-407-0784
International:	201-689-8560
Conference ID:	13692827
Webcast:	http://public.viavid.com/index.php?id=135488

Use ofNon-GAAP Financial Measures

In its quarterly news releases, conference calls, slide presentations or webcasts, the Company may use or discussnon-GAAP financial measures as defined by SEC Regulation G. The GAAP financial measures most directly comparable to eachnon-GAAP financial measure used or discussed, and a reconciliation of the differences between eachnon-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 thesenon-GAAP measures as a substitute for the comparable financial measures prepared in accordance with GAAP. The Company’s quarterly news releases containing suchnon-GAAP reconciliations can be found on the Investors section of the Company’s website atwww.icadmed.com.

About iCAD, Inc.

Headquartered in Nashua, NH, iCAD is a global medical technology leader providing innovative cancer detection and therapy solutions. For more information, visitwww.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 achieve business and strategic objectives, increase sales and acceptance of products, implement expansion plans, the risks of uncertainty of patent protection, the impact of supply and manufacturing constraints or difficulties, uncertainty of future sales levels, protection of patents and other proprietary rights, the impact of supply and manufacturing constraints or difficulties, product market acceptance, possible technological obsolescence of products, increased competition, to successfully defend itself in litigation matters, government regulation, changes in Medicare or other reimbursement policies, risks relating to our existing and future debt obligations, competitive factors, the effects of a decline in the economy or markets served by the Company; 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,” “seek,” 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 athttp://www.sec.gov.

Contacts:

Media Inquiries:

Jessica Burns, iCAD

+1-201-423-4492

jburns@icadmed.com

Investor Relations:

Jeremy Feffer, LifeSci Advisors

+1-212-915-2568

jeremy@lifesciadvisors.com

iCAD, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands except for per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Revenue:
Products	$	4,353		$	3,194		$	8,175		$	6,208
Service and supplies		2,976			2,968			5,927			6,267
Total revenue		7,329			6,162			14,102			12,475
Cost of revenue:
Products		645			537			1,325			995
Service and supplies		858			739			1,575			1,991
Amortization and depreciation		100			102			194			207
Total cost of revenue		1,603			1,378			3,094			3,193
Gross profit		5,726			4,784			11,008			9,282
Operating expenses:
Engineering and product development		2,139			2,057			4,266			5,396
Marketing and sales		3,120			2,006			5,693			4,172
General and administrative		1,858			1,583			3,404			3,641
Amortization and depreciation		67			77			137			160
Total operating expenses		7,184			5,723			13,500			13,369
Loss from operations		(1,458	)		(939	)		(2,492	)		(4,087	)
Interest expense		(202	)		(113	)		(411	)		(255	)
Loss on fair value of convertible debentures		(1,915	)		—			(4,440	)		—
Other income		64			29			123			51
Other expense, net		(2,053	)		(84	)		(4,728	)		(204	)
Loss before income tax expense		(3,511	)		(1,023	)		(7,220	)		(4,291	)
Tax expense		(19	)		(4	)		(27	)		(17	)
Net loss and comprehensive loss	$	(3,530	)	$	(1,027	)	$	(7,247	)	$	(4,308	)
Net loss per share:
Basic	$	(0.20	)	$	(0.06	)	$	(0.42	)	$	(0.26	)
Diluted	$	(0.20	)	$	(0.06	)	$	(0.42	)	$	(0.26	)
Weighted average number of shares used in computing loss per share:
Basic		17,640			16,664			17,422			16,624
Diluted		17,640			16,664			17,422			16,624

iCAD, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

	March 31,			December 31,
	2019			2018
Assets
Current assets:
Cash and cash equivalents	$	19,567		$	12,185
Trade accounts receivable, net of allowance for doubtful accounts of $177 in 2019 and $177 in 2018		6,771			6,403
Inventory, net		2,258			1,587
Prepaid expenses and other current assets		1,172			1,045
Total current assets		29,768			21,220
Property and equipment, net of accumulated depreciation of $6,283 in 2019 and $6,214 in 2018		546			552
Operating lease assets		552			—
Other assets		53			53
Intangible assets, net of accumulated amortization of $7,903 in 2019 and $7,809 in 2018		1,367			1,550
Goodwill		8,362			8,362
Total Assets	$	40,648		$	31,737
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,727		$	1,154
Accrued and other expenses		5,018			5,060
Notes payable - current portion		2,250			1,851
Lease payable - current portion		618			15
Deferred revenue		5,242			5,165
Total current liabilities		14,855			13,245
Notes payable, long-term portion		3,133			4,254
Convertible debentures payable		11,410			6,970
Deferred revenue, long-term portion		330			331
Lease payable - long-term portion		18			38
Deferred tax		3			3
Total Liabilities		29,749			24,841
Stockholders’ Equity:
Common stock, $ .01 par value: authorized 30,000,000 shares; issued 17,500,265 in 2019 and 17,066,510 in 2018; outstanding 17,314,434 in 2019 and 16,880,679 in 2018		194			171
Additionalpaid-in capital		230,141			218,914
Accumulated deficit		(218,021	)		(210,774	)
Treasury stock at cost, 185,831 shares in 2019 and 2018		(1,415	)		(1,415	)
Total Stockholders’ Equity		10,899			6,896
Total Liabilities and Stockholders’ Equity	$	40,648		$	31,737

iCAD, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	For the six months ended June 30,
	2019			2018
Cash flow from operating activities:
Net loss	$	(7,247	)	$	(4,308	)
Adjustments to reconcile net loss to net cash used for operating activities:
Amortization		189			189
Depreciation		142			178
Bad debt provision		31			101
Inventory obsolesence reserve		—			(7	)
Stock-based compensation expense		516			773
Amortization of debt discount and debt costs		79			102
Change in fair value of convertible debentures		4,440			—
Deferred tax		—			(13	)
Loss on disposal of assets		—			12
Changes in operating assets and liabilities
Accounts receivable		(399	)		2,198
Inventory		(671	)		30
Prepaid and other current assets		51			91
Accounts payable		573			(490	)
Accrued expenses		(184	)		(1,209	)
Deferred revenue		76			890
Total adjustments		4,843			2,845
Net cash used for operating activities		(2,404	)		(1,463	)
Cash flow from investing activities:
Additions to patents, technology and other		(7	)		(4	)
Additions to property and equipment		(136	)		(60	)
Net cash (used for) provided by investing activities		(143	)		(64	)
Cash flow from financing activities:
Stock option exercises		1,395			—
Proceeds from issuance of common stock		10,350			—
Common stock Issuance costs		(998	)		—
Taxes paid related to restricted stock issuance		(12	)		(63	)
Principal payments of capital lease obligations		(6	)		(6	)
Principal repayment of debt financing, net		(800	)		—
Net cash provided by (used for) financing activities		9,929			(69	)
Increase in cash and equivalents		7,382			(1,596	)
Cash and equivalents, beginning of period		12,185			9,387
Cash and equivalents, end of period	$	19,567		$	7,791

Reconciliation ofNon-GAAP Financial Measures to Comparable GAAP Measures

The Company reports its financial results in accordance with United States generally accepted accounting principles, or GAAP. However, management believes that in order to understand the Company’s short-term and long-term financial and operational trends, investors may wish to consider the impact of certainnon-cash ornon-recurring items, when used as a supplement to financial performance measures in accordance with GAAP. These items result from facts and circumstances that vary in frequency and/or impact on continuing operations. Management also uses results of operations before such items to evaluate the operating performance of the Company and compare it against past periods, make operating decisions, and serve as a basis for strategic planning. Thesenon-GAAP financial measures provide management with additional means to understand and evaluate the operating results and trends in the Company’s ongoing business by eliminating certainnon-cash expenses and other items that management believes might otherwise make comparisons of the Company’s ongoing business with prior periods more difficult, obscure trends in ongoing operations or reduce management’s ability to make useful forecasts. Management believes that thesenon-GAAP financial measures provide additional means of evaluating period-over-period operating performance. In addition, management understands that some investors and financial analysts find this information helpful in analyzing the Company’s financial and operational performance and comparing this performance to its peers and competitors.

Management defines“Non-GAAP Adjusted EBITDA” as the sum of GAAP Net Loss before provisions for interest expense, other income, stock-based compensation expense, depreciation and amortization, tax expense, severance, gain on sale of assets, loss on disposal of assets, acquisition and litigation related expenses. Management considers thisnon-GAAP financial measure to be an indicator of the Company’s operational strength and performance of its business and a good measure of its historical operating trends, in particular the extent to which ongoing operations impact the Company’s overall financial performance.

Thenon-GAAP financial measures do not replace the presentation of the Company’s GAAP financial results and should only be used as a supplement to, not as a substitute for, the Company’s financial results presented in accordance with GAAP. The Company has provided a reconciliation of eachnon-GAAP financial measure used in its financial reporting and investor presentations to the most directly comparable GAAP financial measure.

Management excludes each of the items identified below from the applicablenon-GAAP financial measure referenced above for the reasons set forth with respect to that excluded item:

• Interest expense: The Company excludes interest expense which includes interest from the facility agreement, interest on capital leases and interest on the convertible debentures from itsnon-GAAP Adjusted EBITDA calculation.

• Stock-based compensation expense: excluded as these arenon-cash expenses that management does not consider part of ongoing operating results when assessing the performance of the Company’s business, and also because the total amount of expense is partially outside of the Company’s control as it is based on factors such as stock price volatility and interest rates, which may be unrelated to our performance during the period in which the expense is incurred.

• Amortization and Depreciation: Purchased assets and intangibles are amortized over a period of several years and generally cannot be changed or influenced by management after they are acquired. Accordingly, thesenon-cash items are not considered by management in making operating decisions, and management believes that such expenses do not have a direct correlation to future business operations. Thus, including such charges does not accurately reflect the performance of the Company’s ongoing operations for the period in which such charges are incurred.

• Severance relates to costs incurred due to the termination of certain employees. The Company provides compensation to certain employees as an accommodation upon termination of employment without cause. Management believes that excluding severance costs from operating results provides investors with a better means for measuring current Company performance.

• Loss on fair value of convertible debentures. The Company excludes thisnon-cash item as it is not considered by management in making operating decisions, and management believes that such item does not have a direct correlation to future business operations.

• Acquisition related: relates to professional service fees associated with acquisitions. The Company does not consider these acquisition-related costs to be related to the organic continuing operations of the acquired businesses and are generally not relevant to assessing or estimating the long-term performance of the acquired assets.

• Litigation related: These expenses consist primarily of settlement, legal and other professional fees related to litigation. The Company excludes these costs from itsnon-GAAP measures primarily because the Company believes that these costs have no direct correlation to the core operations of the Company.

On occasion in the future, there may be other items, such as significant asset impairments, restructuring charges or significant gains or losses from contingencies that the Company may exclude if it believes that doing so is consistent with the goal of providing useful information to investors and management.

Non-GAAP Adjusted EBITDA

Set forth below is a reconciliation of the Company’s“Non-GAAP Adjusted EBITDA”

(Unaudited)

(In thousands except for per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
GAAP Net Loss	$	(3,530	)	$	(1,027	)	$	(7,247	)	$	(4,308	)
Interest Expense		202			113			411			255
Other income		(64	)		(29	)		(123	)		(51	)
Stock Compensation		304			382			516			773
Depreciation		73			82			142			178
Amortization		94			97			189			189
Tax (benefit) expense		19			4			27			17
Severance		32			17			32			161
Loss of fair value of convertble debentures		1,915			—			4,440			—
Loss on sale of Asset		—			—			—			12
Litigation related		5			24			77			66
Non-GAAP Adjusted EBITDA	$	(950	)	$	(337	)	$	(1,536	)	$	(2,708	)

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
GAAP Net Loss	$	(3,530	)	$	(1,027	)	$	(7,247	)	$	(4,308	)
Adjustments to Net Loss:
Severance		32			17			32			161
Loss of fair value of convertble debentures		1,915			—			4,440			—
Loss on sale of Asset		—			—			—			12
Litigation related		5			24			77			66
Non-GAAP Adjusted Net Loss	$	(1,578	)	$	(986	)	$	(2,698	)	$	(4,069	)
Net Loss per share
GAAP Net Loss per share	$	(0.20	)	$	(0.06	)	$	(0.42	)	$	(0.26	)
Adjustments to Net Loss (as detailed above)		0.11			0.00			0.26			0.01
Non-GAAP Adjusted Net Loss per share	$	(0.09	)	$	(0.06	)	$	(0.16	)	$	(0.24	)