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ICAD Reports Fourth Quarter And Full Year 2012 Financial Results

iCAD, Inc. (Nasdaq: ICAD), an industry-leading provider of advanced image analysis, workflow solutions and radiation therapy for the early identification and treatment of cancer, today reported financial results for the three and twelve months ended December 31, 2012.

“During the fourth quarter we posted strong revenue growth, maintained adjusted EBITDA profitability and generated positive cash flow,” said Ken Ferry, President and CEO of iCAD. “This considerable progress can be attributed to continued strong growth of our therapy solutions, a much stronger quarter in cancer detection coupled with on-going disciplined expense management. For the full year, therapy revenue was particularly strong as we more than doubled new systems and applicator sales compared with 2011.”

“We were pleased that the U.S. Centers for Medicare & Medicaid Services (CMS) issued an improved payment policy for the delivery of Intraoperative Radiation Therapy (IORT). The payment value assigned to IORT in the CMS Final Rule, announced in November 2012, was more than twice the value included in the Proposed Rule released by CMS in July 2012. We believe this favorable reimbursement policy, together with a growing body of clinical data, will accelerate the adoption of our technology by breast surgeons and radiation oncologists.”

“Over the course of 2012, we made good progress transforming our Cancer Detection business model to a mix of new and recurring revenue products. At the same time, we reduced operating expenses significantly year over year while continuing to invest in key product programs for mammography and MRI,” concluded Mr. Ferry.

Fourth Quarter Financial Results

Revenue: Total revenue for the fourth quarter of 2012 increased 18% to $7.8 million from $6.6 million for the fourth quarter of 2011, driven by a 94% increase in Therapy revenue offset by a 6% decrease in Cancer Detection product revenue.

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

  Three months ended December 31,
2012   2011   % Change
Products $ 4,728   $ 4,220   12 %
Service and supply   3,090     2,390   29 %
Total revenue

$

7,818   $ 6,610   18 %
 

 

Three months ended December 31,
2012   2011   % Change
Cancer Detection $ 4,710 $ 5,004 (6 )%
Therapy   3,108     1,606  

94

%
Total revenue $ 7,818   $ 6,610   18 %
 

Gross Margin: Gross profit for the fourth quarter of 2012 was $5.6 million, or 71.0% of revenue, compared with gross profit for the fourth quarter of 2011 of $4.5 million, or 68.1% of revenue.

Operating Expenses: Total operating expenses for the fourth quarter of 2012 declined to $6.3 million from $6.7 million for the fourth quarter of 2011, primarily the result of cost-control measures implemented in the fourth quarter of 2011.

Non-GAAP Adjusted EBITDA: Non-GAAP adjusted EBITDA, a non-GAAP financial measure as defined below, was income of $102,000 for the fourth quarter of 2012, compared with a loss of $1.2 million for the fourth quarter of 2011.

Net Loss: The net loss for the fourth quarter of 2012 was $2.7 million, or $0.25 per share, compared with a net loss for the fourth quarter of 2011 of $2.2 million, or $0.20 per share.

Non-GAAP Adjusted Net Loss: The Company posted a non-GAAP adjusted net loss, as defined below, for the fourth quarter of 2012 of $1.7 million, or $0.15 per share, compared with a non-GAAP adjusted net loss for the fourth quarter of 2011 of $2.3 million, or $0.21 per share.

Full Year Financial Results

Revenue: Total revenue for 2012 was $28.3 million, a decrease of 1%, compared with total revenue for 2011 of $28.7 million. The Xoft Axxent Electronic Brachytherapy system contributed approximately $11.0 million to 2012 revenue, an increase of $5.1 million or 87% compared with 2011. Therapy revenue consisted of approximately $8.1 million in product sales and $2.9 million in service and supply revenue.

  12 months ended December 31,
2012   2011   % Change
Products $ 17,976   $

19,328

  (7 )%
Service and supply   10,299     9,324   10 %
Total revenue $ 28,275   $ 28,652   (1 )%
 

 

12 months ended December 31,

2012   2011   % Change
Cancer Detection $ 17,262 $ 22,765 (24 )%
Therapy   11,013     5,887   87 %
Total revenue $ 28,275   $ 28,652   (1 )%
 

Gross Margin: Gross profit for 2012 was $20.0 million, or 70.8% of revenue, compared with gross profit for 2011 of $20.0 million, or 69.9% of revenue.

Net Loss: The Company posted a net loss for 2012 of $9.4 million, or $0.87 per share, compared with a net loss for 2011 of $37.6 million, or $3.45 per share.

Non-GAAP Adjusted EBITDA: Non-GAAP adjusted EBITDA for 2012 was a loss of $1.5 million, compared with a loss for 2011 of $7.9 million.

Non-GAAP Adjusted Net Loss: The Company posted a non-GAAP adjusted net loss for 2012 of $8.8 million, or $0.81 per share, compared with a non-GAAP adjusted net loss for 2011 of $12.4 million, or $1.14 per share.

Cash and Cash Flow: As of December 31, 2012, the Company had cash and cash equivalents of $13.9 million, compared with $13.8 million as of September 30, 2012 and $4.6 million as of December 31, 2011. Net cash used by operations during 2012 was $4.2 million. In January 2012 the Company entered into a five-year, $15 million debt facility agreement with Deerfield Management Company LP, a leading healthcare investment fund. Under the terms of the agreement, the Company issued a $15 million principal amount of senior secured notes, which included a revenue purchase agreement and warrants.

Use of Non-GAAP Financial Measures

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

Conference Call

iCAD management will host an investment community conference call on Wednesday, February 20, 2013 beginning at 10:00 a.m. Eastern time to discuss these results and answer questions. Shareholders and other interested parties may participate in the conference call by dialing 800-591-6930 (domestic) or 617-614-4908 (international) and entering passcode 60116734. The call also will be broadcast live on the Internet at www.streetevents.com, www.earnings.com and www.icadmed.com.

A replay of the conference call will be accessible two hours after its completion through February 27, 2013 by dialing 888-286-8010 (domestic) or 617-801-6888 (international) and entering passcode 71898017. The call will also be archived for 90 days at www.streetevents.com, www.earnings.com and www.icadmed.com.

About iCAD, Inc.

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

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

Certain statements contained in this News Release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve a number of known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to the Company’s ability to defend itself in litigation matters, to achieve business and strategic objectives, 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, litigation and/or government regulation, changes in Medicare 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 at http://www.sec.gov.

iCAD, INC. AND SUBSIDIARY
   
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands except for share data)
 
December 31, December 31,

Assets

2012

2011

 
Current assets:
Cash and cash equivalents $ 13,948 $ 4,576

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

4,980 4,003
Inventory, net 2,119 2,040
Prepaid expenses and other current assets 486   490  
Total current assets 21,533   11,109  
 

Property and equipment, net of accumulated depreciation and amortization of $3,627 in 2012 and $3,184 in 2011

1,483 1,884
Other assets 638 595

Intangible assets, net of accumulated amortization of $10,744 in 2012 and $8,840 in 2011

15,230 17,064
Goodwill 21,109   21,109  
Total assets $ 59,993   $ 51,761  
 

Liabilities and Stockholders' Equity

Current liabilities:
Accounts payable $ 1,940 $ 1,198
Accrued and other expenses 4,142 5,521
Interest payable 499 -
Warrant liability 1,538 -
Deferred revenue 6,520   5,765  
Total current liabilities 14,639   12,484  
 
Deferred revenue, long-term portion 1,502 1,446
Other long-term liabilities 1,341 1,776
Notes payable 14,846   -  
Total liabilities 32,328   15,706  
 
Commitments and Contingencies
 
Stockholders' equity:
Preferred stock, $ .01 par value: authorized 1,000,000 shares;
none issued. - -
Common stock, $ .01 par value: authorized 85,000,000
shares; issued 10,993,933 in 2012 and 10,950,902 in 2011;
outstanding 10,808,102 in 2012 and 10,765,071 in 2011 110 110
Additional paid-in capital 165,416 164,432
Accumulated deficit (136,446 ) (127,072 )
Treasury stock at cost 185,831 in 2012 and 2011 (1,415 ) (1,415 )
Total stockholders' equity 27,665   36,055  
 
Total liabilities and stockholders' equity $ 59,993   $ 51,761  
 
iCAD, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands except for per share data)
       

 

Three Months Ended December 31,

 

Year Ended December 31,

2012 2011 2012 2011
Revenue:
Products $ 4,728 $ 4,220 $ 17,976 $ 19,328
Service and supplies 3,090   2,390   10,299   9,324  
Total revenue 7,818 6,610 28,275 28,652
 
Cost of revenue:
Products 1,231 1,161 4,834 4,788
Service and supplies 801 715 2,479 2,906
Amortization of acquired intangibles 233   232   931   931  
Total cost of revenue 2,265 2,108 8,244 8,625
       
Gross profit 5,553   4,502   20,031   20,027  
 
Operating expenses:
Engineering and product development 1,611 2,081 7,769 10,791
Marketing and sales 2,732 2,904 10,708 13,684
General and administrative 1,995 1,750 6,966 9,999
Contingent Consideration - - - (4,900 )
Goodwill Impairment - - - 26,828
Loss on indemnification asset -   (60 ) -   741  
Total operating expenses 6,338 6,675 25,443 57,143
       
Loss from operations (785 ) (2,173 ) (5,412 ) (37,116 )
 
Gain on sale of patent - - - -
Loss from change in fair value of warrant (1,051 ) - (539 ) -
Interest expense (866 ) (104 ) (3,415 ) (431 )
Other (expense) income 8 12 35 36
Tax (expense) benefit (8 ) 39   (43 ) (76 )
Net loss and comprehensive loss $ (2,702 ) $ (2,226 ) $ (9,374 ) $ (37,587 )
 
Net loss per share:
Basic and diluted $ (0.25 ) $ (0.20 ) $ (0.87 ) $ (3.45 )
 
Weighted average number of shares used in
computing loss per share:
Basic and diluted 10,808   10,918   10,796   10,910  
 
iCAD, INC. AND SUBSIDIARY
   
Condensed Consolidated Statements of Cash Flows
 

 

For the year ended December 31,

2012 2011

 

(in thousands)

Cash flow from operating activities:
Net loss $ (9,374 ) $ (37,587 )
Adjustments to reconcile net loss to net cash used for
operating activities:
Depreciation 891 1,077
Amortization 1,904 2,094
Gain from change in fair value of warrant 539 -
Goodwill impairment - 26,828
Loss on disposal of assets 174 21
Loss on indemnification asset - 741
Stock-based compensation expense 996 904
Amortization of debt discount and debt costs 1,012 -
Interest on settlement obligations 388 422
Fair value of contingent consideration - (4,900 )
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable (976 ) (614 )
Inventory (79 ) 1,449
Prepaid and other current assets 469 248
Accounts payable 815 (1,375 )
Accrued expenses (1,775 ) (713 )
Deferred revenue 812   1,263  
Total adjustments 5,170   27,445  
 
Net cash used for operating activities (4,204 ) (10,142 )
 
Cash flow from investing activities:
Additions to patents, technology and other (70 ) (13 )
Additions to property and equipment (665 ) (263 )
Net cash used for investing activities (735 ) (276 )
 
Cash flow from financing activities:
Issuance of common stock for cash - 60
Taxes paid related to restricted stock issuance (14 ) (67 )
Payment for Xoft - (1,268 )
Proceeds from debt financing, net 14,325   -  
Net cash (used for) provided by financing activities 14,311   (1,275 )
 
Increase (decrease) in cash and equivalents 9,372 (11,693 )
Cash and equivalents, beginning of period 4,576   16,269  
Cash and equivalents, end of period $ 13,948   $ 4,576  
 

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO COMPARABLE GAAP MEASURES

(Unaudited, in thousands, except per share amounts)

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