ICAD Reports First Quarter 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 first quarter ended March 31, 2012.

“Our results were mixed for the first quarter of 2012. We achieved record sales in the therapy segment of the business and continued to make considerable progress on expense management. However, weak demand in the cancer detection segment negatively affected overall revenue performance,” commented Ken Ferry, President and CEO of iCAD.

“We were particularly pleased to see stronger demand for the Axxent Electronic Brachytherapy system driven by the continued growing interest in breast Intraoperative Radiation Therapy (IORT). As a result, we achieved a record volume of new system sales and procedure based consumables in the first quarter of 2012. This momentum underscores our confidence that IORT will continue to gain acceptance as a new standard of care particularly for certain early stage breast cancer patients.

“The cancer detection segment experienced softer demand in the quarter particularly for digital mammography CAD. We continue to focus on the transition to a recurring revenue business model as the installed base of over 4,000 systems represents the largest addressable market opportunity for increased revenues.

“Our strategic plan for 2012 is to drive the adoption of IORT in early breast cancer treatment and to increase recurring revenues in our mammography cancer detection business. We have made good progress on these initiatives in early 2012. In addition, we have made significant progress in lowering our operating costs and strengthened our balance sheet. Moving forward we expect that increasing revenues combined with our disciplined expense management will put us on the road to profitability,” concluded Mr. Ferry.

First Quarter Financial Results

Revenue: Total revenue for the first quarter of 2012 decreased 14% to $6.3 million from $7.3 million for the first quarter of 2011. The decrease resulted primarily from a decline in Cancer Detection product revenues due to ongoing challenging market conditions in digital mammography. These declines were offset by significant increases in sales of the Company’s Xoft system, which contributed approximately $2.0 million in revenue, representing a 51% increase compared with the first quarter 2011.

Cancer Detection revenue includes film, digital mammography, MRI and CT CAD platforms, as well as service and supply revenue from these products. Therapy revenue includes Xoft Axxent Electronic Brachytherapy product sales, as well as associated service and supply revenue.
  Three months ended March 31,
2012       2011     % Change  
Products $ 4,079     $ 5,215     (22 )%
Service and supply   2,264       2,129    

Total revenue $ 6,343     $ 7,344     (14 )%

Three months ended March 31,
  2012       2011     % Change  
Cancer Detection $ 4,339 $ 6,018 (28 )%
Therapy   2,004       1,326    

Total revenue $ 6,343     $ 7,344     (14 )%

Gross Margin: Gross profit for the first quarter of 2012 was $4.4 million, or 69.8% of revenue, compared with $5.1 million, or 69.9% of revenue, for the first quarter of 2011.

Operating Expenses: During the first quarter of 2012, the Company incurred total operating expenses of $6.5 million, a 31% decrease from total operating expenses of $9.4 million for the first quarter of 2011. This substantial decrease is due to ongoing cost saving measures implemented in the second half of 2011.

Net Loss: For the first quarter of 2012, the Company posted a net loss of $2.3 million, or $0.04 per share, compared with a net loss of $4.3 million, or $0.08 per share, for the first quarter of 2011.

Non-GAAP Adjusted Net Loss: For the first quarter of 2012, the Company posted a non-GAAP adjusted net loss of $2.8 million, or $0.05 per share, compared with a non-GAAP adjusted net loss of $3.5 million, or $0.06 per share, in the first quarter of 2011.

Non-GAAP Adjusted EBITDA: Non-GAAP Adjusted EBITDA was a loss of $990,000 in the first quarter of 2012, compared with a loss of $2.3 million in the first quarter of 2011.

Cash and Cash Flow: The Company ended the first quarter of 2012 with cash and cash equivalents of $15.0 million. During the quarter net cash used by operations was $3.9 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 senior secured 5.75% notes, which included a revenue purchase agreement and 2,250,000 warrants.

Use of Non-GAAP Financial Measures

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

Conference Call

iCAD management will host an investment community conference call on Tuesday, May 8, 2012 beginning at 10:00 a.m. Eastern time to discuss these results and answer questions. Shareholders and other interested parties may participate in the conference call by dialing 866-713-8567 (domestic) or 617-597-5326 (international) and entering passcode 98133292. The call also will be broadcast live on the Internet at www.streetevents.com, www.fulldisclosure.com and www.icadmed.com.

A replay of the conference call will be accessible two hours after its completion through May 15, 2012 by dialing 888-286-8010 (domestic) or 617-801-6888 (international) and entering passcode 76256849. The call will also be archived for 90 days at www.streetevents.com, www.fulldisclosure.com and www.icadmed.com.

About iCAD, Inc.

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

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

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

-Tables to Follow -
Consolidated Statements of Operations
(In thousands except for per share data)
Three Months Ended March 31,
  2012     2011  
Products $ 4,079 $ 5,215
Service and supplies 2,264   2,129  
Total revenue 6,343 7,344
Cost of revenue:
Products 1,107 1,207
Service and supplies 577 772
Amortization of acquired intangibles 232   233  
Total cost of revenue 1,916 2,212
Gross profit 4,427   5,132  
Operating expenses:
Engineering and product development 2,212 2,776
Marketing and sales 2,646 3,727
General and administrative 1,618 2,804
(Gain) loss on indemnification asset -   43  
Total operating expenses 6,476 9,350
Loss from operations (2,049 ) (4,218 )
Gain on warrant 599 -
Interest expense, net (814 ) (94 )
Net loss $ (2,264 ) $ (4,312 )
Net loss per share:
Basic and diluted $ (0.04 ) $ (0.08 )
Weighted average number of shares used in
computing loss per share:
Basic and diluted 53,880   54,366  
Consolidated Balance Sheets
(In thousands except for share data)
March 31, December 31,

2012 2011
Current assets:
Cash and cash equivalents $ 14,965 $ 4,576
Trade accounts receivable, net of allowance for doubtful

   accounts of $54 in 2012 and 2011
4,440 4,003
Inventory, net 1,787 2,040
Prepaid expenses and other current assets 964   490  
Total current assets 22,156   11,109  
Property and equipment, net of accumulated depreciation
and amortization of $3,383 in 2012 and $3,184 in 2011 1,621 1,884
Other assets 861 595
Intangible assets, net of accumulated amortization

   of $9,363 in 2012 and $8,840 in 2011
16,544 17,064
Goodwill 21,109   21,109  
Total assets $ 62,291   $ 51,761  

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,180 $ 1,125
Accrued and other expenses 3,497 5,594
Interest payable 496 -
Warrant payable 400 -
Deferred revenue 5,590   5,765  
Total current liabilities 11,163   12,484  
Deferred revenue, long-term portion 1,363 1,446
Other long-term liabilities 1,579 1,776
Notes payable 14,188   -  
Total liabilities 28,293   15,706  
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 54,873,186 in 2012 and 54,754,510 in 2011;
outstanding 53,944,031 in 2012 and 53,825,355 in 2011 549 547
Additional paid-in capital 164,200 163,995
Accumulated deficit (129,336 ) (127,072 )
Treasury stock at cost 929,155 in 2012 and 2011 (1,415 ) (1,415 )
Total stockholders' equity 33,998   36,055  
Total liabilities and stockholders' equity $ 62,291   $ 51,761  
See accompanying notes to consolidated financial statements.


(Unaudited, in thousands, except per share amounts)

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