ICAD Inc (ICAD) 2012 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the iCAD, Inc., earnings conference call.

My name is Dominique and I will be your operator for today.

(Operator Instructions).

As a reminder, this call is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Ms. Anne Marie Fields.

Please proceed, ma'am.

Thank you.

Good morning.

This is Anne Marie Fields with LHA.

Thank you all for participating in today's call.

Joining me from iCAD are Ken Ferry, Chief Executive Officer, and Kevin Burns, Executive Vice President of Finance and Chief Financial Officer.

Following the market close yesterday, iCAD announced financial results for the 2012 second quarter.

If you've not received this news release or if you would like to be added to the Company's distribution list, please call LHA in New York at 212-838-3777 and speak with Carolyn Curran.

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

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

Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, August 2, 2012.

ICAD undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

So with that said, I'd now like to turn the call over to Ken Ferry.

Ken?

Thanks, Anne Marie.

Good morning, everyone, and thank you for joining us.

As I commented in the press release, our second-quarter results were mixed as revenue was weaker than anticipated while we continued to make solid progress managing expenses and reducing cash burn.

We are extremely encouraged by the growing momentum in the Xoft brachytherapy business, as our investments in the business over the last 18 months are generating real progress.

We've achieved strong revenue growth from new system placements, significantly increased procedure-based consumables sales from the growing installed base, and established broader international presence.

While our primary emphasis has been on breast IORT in the United States, we have been pleased with the growing interest in the skin and veterinary markets.

Lastly, we are seeing good progress on reimbursement in the United States, which should help to accelerate the adoption of our technology for breast IORT that much more quickly.

The CAD software business, however, is in a transitional stage as we target the installed base for upgrades and service where the recurring revenue becomes a more significant contributor to topline growth.

With the launch of our next-generation mammography CAD platform in July, we've made our first major step to generate significant new business from our considerable installed base.

We also continue to believe that CAD software for MRI and CT applications will provide additional growth opportunities over time as market adoption, reimbursement, and further progress with OEM partners continues to develop.

The CAD business is one of high gross margin and significant OEM commercial collaboration.

When the topline begins to grow again, significant positive cash flow can be generated, as it has in the past.

With that said, I'm going to turn the call over to Kevin who will give you a review of the second-quarter and six-month financials in greater detail.

Following Kevin's financial update, I'll provide you with a more detailed business update.

Kevin?

Thank you, Ken, and good morning, everyone.

As Ken mentioned, while topline results for the second quarter of 2012 were mixed, we are very pleased with the growth and momentum in the breast IORT segment and are optimistic about its prospects moving forward.

In addition, during the quarter we began to make progress on our transition of the CAD business to a recurring revenue model, and our CAD installed base represents a sizable market opportunity.

Ken will discuss this in more detail in a few minutes, but first let me provide some financial highlights.

As discussed on our last call, we enhanced our revenue reporting to reflect the two main oncology businesses we operate in, specifically cancer detection and therapy.

Our cancer detection revenue includes all of our image analysis and workflow products including mammography, MRI, and CT CAD platforms, as well as service revenue from these product lines, while our cancer therapy revenue encompasses electronic brachytherapy-related accessories and service and source agreements.

Now let's move on to a review of our revenues for the second quarter.

Overall, total revenues for the second quarter of 2012 was $5.9 million, down 11% from $6.6 million in the prior-year quarter.

This decrease was largely due to the continued weakness in cancer detection products, offset by solid growth in our therapy business.

Total cancer detection revenue for the quarter was $4.4 million, down 19% from $5.5 million a year ago.

Cancer detection product revenue for the quarter was $2.7 million, a decrease of 28% from $3.7 million a year ago.

This decrease is primarily due to the ongoing reduction in the number of FFDM installations, combined with a loss of market share by our OEM partners in digital mammography.

Cancer detection service revenue was $1.7 million, which is flat as compared to the second quarter of 2011.

Although we are seeing growth in the number of digital mammography products under service and subscription agreements, this growth is offset by a reduction in the revenue generated from our analog service agreements as the renewal rates on these products continue to decline.

Looking forward, we do expect growth in our recurring service revenue with the launch of PowerLook AMP, combined with the availability of our CAD products under a subscription model.

Year to date, total CAD revenue was $8.8 million, a 24% decrease from $11.5 million for the first half of 2011.

Again, this decrease reflects the slowing and the transition of mammography from film to digital as we near the completion of this cycle.

Therapy revenue continued to post solid year-over-year growth this past quarter, increasing 28% to $1.5 million from $1.2 million in the second quarter of 2011.

We were disappointed in the lack of sequential growth in the business, but feel very comfortable that this will rebound in the third quarter.

Product sales, which includes controllers, applicators, and other accessories, increased 17% from $760,000 in the second quarter of 2011 to approximately $900,000 in the second quarter of 2012.

In the second quarter, we sold four controllers and a record 161 balloon applicators, up from three controllers and 26 balloon applicators in the second quarter of 2011.

Our therapy service and source revenue continues to increase, and grew 50% year over year to over $600,000 in the second quarter of 2012.

This growth reflects the increase in the size of our customer base, as well as the uptick in the number of minutes customers are purchasing under source agreements.

Year to date, therapy revenue showed a very healthy increase of 41% to $3.5 million from $2.5 million in the first half of 2011.

Turning to the rest of the P&L, gross profit for the second quarter of 2012 was $4.2 million, or 70% of revenue, which compares with a gross profit of $4.5 million, or 68% of revenue, for the second quarter of 2011.

Although revenue decreased by approximately $700,000 versus second quarter of 2011 and the revenue mix changed from cancer detection to therapy, we were able to achieve a gross margin of approximately 70% from manufacturing and service expense controls.

Our gross margin percentage will continue to fluctuate based on mix and volume on a quarter-to-quarter basis, although we expect to maintain margins in the low to mid 70% range.

For the first six months of 2012, gross margin was $8.6 million, or 70% of revenue, compared to $9.6 million, or 69% of revenue, for the first six months of 2011.

As Ken mentioned, operating expenses continue to benefit from cost-savings programs initiated in 2011, and that will continue to positively impact our P&L throughout 2012.

We reduced operating expenses to $6.1 million this quarter from an adjusted $10.7 million in the second quarter of 2011, a decrease of 43%.

While expenses will reduce significantly, we continue to invest in our growth strategy, including the launch of new clinical trials, investments in new therapy applicators, and the development of next-generation CAD products and enhancements.

Looking forward, we expect quarterly expense to be in the $6.5 million range.

Moving on to our profit metrics, our loss from operations decreased to $1.9 million from a loss of $5.3 million in the same quarter last year, an improvement of 64%.

For the first half of 2012, the loss from operations was reduced to $4 million from a loss of $9.5 million in the first half of 2011.

Adjusted EBITDA, as defined in our press release, was a loss of $931,000 for the second quarter of 2012, compared to a loss of $3.6 million in the prior-year quarter and a loss of $990,000 in the first quarter of 2012.

Given my prior comments related to our expected gross margin and operating expenses, we believe a quarterly revenue level of between $7.5 million to $8 million will result in adjusted EBITDA of breakeven or slightly positive.

Moving onto other income and expense, during the second quarter we reported a $213,000 loss due to the change in the fair value of warrants that we issued earlier in the year as part of our financing arrangement.

In addition, net interest in the quarter was slightly over $800,000, of which $457,000 is cash payables related to the financing, and the balance represents non-cash amortization of financing costs and settlement obligations.

On a per-share basis, our non-GAAP adjusted net loss for the quarter was $0.05 per share, compared to an adjusted net loss of $0.09 per share for the second quarter of 2011, a $0.04 per share improvement.

Year to date, our non-GAAP adjusted net loss per share was $0.10, compared to a non-GAAP adjusted net loss per share of $0.15 for the same period in 2011.

Turning now to the balance sheet, we ended the quarter with $14.3 million in cash and cash equivalents, up from $4.6 million at the close of 2011.

As reported, we strengthened our balance sheet in early January with the issuance of a $15 million senior secured note to Deerfield Management.

For the first six months of 2012, we used approximately $4.3 million of cash to fund operations.

Much of this was weighted to the first quarter when we used approximately $3.9 million to fund operations.

As we reported at the time, there were several factors that contributed to that unusually high cash usage, including growth in DSOs, annual incentive payments, settlement obligations of $500,000, and a payroll that fell on the last day of the quarter.

As projected at the time, our cash used by operations in the second quarter was substantially lower at approximately $400,000.

With that financial overview, let me now turn the call back over to Ken.

Ken?

Thank you, Kevin.

I'll start with an update on cancer detection products, specifically mammography CAD.

As expected, the US market demand for digital mammography systems continues to decline, comparatively, as approximately 85% of the installed base has converted from film to digital technology.

In an effort to capture as much business as possible with the 1,600 to 1,700 systems that are still using film, we've begun to offer an annual subscription product to complement the perpetual licensing product that we have offered to her OEM partners for some time.

In addition, we're planning FDA submissions soon for CAD approval for Philips and Fuji, as both companies have commented that they have pent-up demand for CAD on their recently approved FFDM systems.

As I mentioned in my opening comments, we are shifting our focus in the CAD business to the considerable recurring revenue opportunity in the installed base.

Today, we have just over 3,500 systems installed with our OEM partners in the United States.

Of the 3,500 systems, only approximately 20% buy ongoing service from us.

With the July introduction of PowerLook advanced mammography platform, we now have a meaningful upgrade to offer to our existing customers, as well as the 80% of the installed base that we have done little to no business with since their original purchase.

We believe that this 80%, or 2,800 systems installed base, represents an incremental addressable market opportunity of $80 million to $100 million over time.

PowerLook AMP is iCAD's next-generation mammography CAD product, which will be sold not only to new customers, but as an upgrade to our installed base and on an annual subscription basis.

This scalable platform features new Windows 7-based hardware and a modular design that allows radiologists unprecedented flexibility in choosing products and functionality that enhance their clinical workflow today and in the future.

In addition to industry-leading tissue and lesion measurement tools, PowerLook AMP is enhanced by the seamless integration of Matakina's Volpara breast density solution.

Breast density is one of the hottest topics in mammography currently.

We know that dense breast tissue is known to be one of the leading risk factors for breast cancer in women, and mammograms can sometimes fail to detect tumors present in dense breasts as the tissue can obscure the tumors.

Legislation has been passed in four states -- Connecticut, Texas, Virginia, and New York, to date -- requiring mammography facilities to inform patients of dense breast tissue when found during an exam.

There are 16 other states with legislation in various stages.

These laws will give women who may be at higher risk of breast cancer additional information to discuss with their physicians regarding the need for further screening.

We expect that this momentum relative to legislation will increase demand for tools to better assess breast density in a more reliable way.

The previous methods of assessing breast density are area-based methods, quite subjective and prone to inconsistent interpretation.

ICAD is partnering with Matakina to offer Volpara breast density as an integrated solution on the PowerLook platform.

The Volpara product utilizes volumetric parameters that are more quantitative than traditional methods and help to standardize the assessment of breast density.

In conjunction with the late July release of PowerLook AMP, we have recently kicked off a comprehensive direct marketing and sales campaign to the installed base.

We believe that the revenue opportunity with this exciting new product to be considerable in the coming years.

In addition, we continue to have confidence of our growth potential with MRI CAD for prostate cancer detection and CT CAD for colon cancer detection as well.

Now for a further update on our brachytherapy product line.

As I commented earlier, we are quite pleased with the traction in the business on a year-to-date basis.

Controller sales in the first half of 2012 were double the number that we sold in the first half of 2011.

Also as previously mentioned, balloon applicator sales grew almost fivefold in the first half of 2012 versus the same period in 2011.

What is also very encouraging is that we are in the early stages of market adoption.

Today, over 100,000 women each year in the United States are diagnosed with certain early-stage breast cancers and are eligible for breast IORT as an alternative to traditional whole-breast radiation therapy.

Today, in spite of our nearly fivefold growth in balloon applicator sales versus last year, we are only approaching 1% market adoption of the eligible patients, leaving considerable room for growth in the coming years.

In addition, the Center for Medicare and Medicaid Services in their 2013 proposed rule assigned a separate payment value for IORT delivery treatment codes.

We believe this progress will further accelerate adoption of breast IORT.

Also as I mentioned earlier, we're seeing strong interest in the use of this platform technology for the use in skin cancer and veterinary care.

On the international front, first-patient treatments occurred in late April in Germany and Portugal.

We also successfully exhibited the Axxent electronic brachytherapy system at ESTRO in Spain in May and at the Milan breast meeting and international society for IORT in June.

We will continue our focused efforts to further global adoption of our technology.

These efforts include the launch of an IORT study where we have a goal of enrolling up to 1,000 patients across 50 centers, continued presence at key medical opinion leader meetings on a global basis, a hub-and-spoke approach in major US markets to accelerate adoption, and the use of social media to increase patient awareness.

So in closing our opening comments, we're making good progress on our strategic plan and are beginning to see results.

Our IORT business is up more than 40% for the first half of the year, and we expect to have an even stronger second half.

The plan for our cancer detection business is to increase focus on upgrades and service to our considerable installed base.

We will do this in conjunction with the recent release of PowerLook AMP, our next-generation digital mammography platform.

As a result, we are confident it will be a catalyst for growth in the coming quarters.

At the same time, we continue to employ the operational discipline that allows us to sustain and execute our growth strategy, while containing costs and reducing cash burn.

We enter the back half of 2012 confident that the foundation we've built in the first half of the year will result in growing revenues.

Our strategy is sound, our commitment to achieving our goals is steadfast, and we appreciate your support and encouragement as we build upon this momentum.

With that overview, Operator, we're ready to take questions.

(Operator Instructions).

[Donald Frank], [Frank Associates].

Mr. Ferry, on the positive side, you have a good patent portfolio, IORT is improving, a good staff, improved reimbursements from the government, good cost controls, and new products under way.

On the negative side, you have little or no analyst coverage, the reverse split which is impending, the stock share price is below interest by many buyers, very thin trading volume, and of course continue to use cash for operations.

Many of us have been shareholders for a lot of years, and of course we're looking forward to getting some improvement in the share price.

Have you considered selling the Company with the potential future benefits that you may have?

I think our whole focus is on executing our strategy, Don, and we feel very confident with the strategy.

We think that the Xoft business has tremendous potential to create value over time.

The traction we're getting on a comparative basis is considerable.

We're very bullish with that business in the second half.

I think we're realistic in that it's still a developing high-growth business, and its predictability is not as ideal as we would like.

But we clearly see tremendous momentum there.

A simple example is, well, we had a few major orders that did not fall in Q2 as we had expected, which would've allowed us to have sequential growth over Q1 and have a growth well north of 50% versus last year.

We did receive in the first few weeks of July several orders worth almost $600,000 that we shipped.

We also ended up receiving two additional orders which we shipped in July, so we've essentially in July shipped as many as we did the entire second quarter of the year.

And I am pleased to say that seven months year to date, we've now shipped more systems than we did all of last year in Xoft.

So if you combine that with this applicator momentum, which, as I mentioned, we could easily see a 3X to 4X or 5X increase over last year, this is a jewel of a business, quite frankly, that we think as we continue to work it over the next, say, two to three years has the ability to create tremendous value and shareholder value, of course, as well.

So it's at a challenging stage to demonstrate that today, but I think as you look at small-growth businesses and you look at the trajectory this one is on with a lot of the dynamics around it, we are very, very confident that it will create shareholder value over time, so now would not be an ideal time to consider putting it in play.

The software business is going through a transition.

This is not unusual for a lot of businesses.

We all would've liked the timing to be more seamless relative to the near-saturation of the digital mammography.

However, with the introduction of PowerLook AMP we now have our first major product that we can target at this large installed base, of which, I mentioned earlier, about 80% does not buy things from us on a regular basis.

So I think the product portfolio, the different segments we play in, the markets are considerable in terms of opportunity.

With that said, it's maybe a personal opinion, but I think the Company is woefully undervalued, and that that is not, obviously, a time as well that you would consider putting a Company in play.

So we're going to execute on our plan.

We think in the next 12 to 24 months the results of that execution should substantially increase shareholder value, and that's really where our focus will be over the next several years.

Jeb Terry, Aberdeen Investment Management.

Good morning, Ken.

I'm encouraged by the news on your expendable revenues, and Xoft in particular.

Can you clarify or add color to how the procedures are occurring, how they're progressing?

And then, also, go through the -- just what are the decision process or who decides when IORT is used in light of what's now happened with some of the reimbursement decisions?

Sure.

You know, what has encouraged us quite a bit, Jeb, is that the volume of applicators growing at a fairly dramatic rate.

And what that says is two important things.

One is that we obviously are getting a larger installed base and more sites doing IORT, but it also says that the sites are doing higher volumes.

So rather than buying a novel technology, per se, and doing a procedure a week or one here or there, based on particular patient and surgeon and so forth, we're seeing our sites really ramp up and they're doing these almost on a daily basis.

So I think the progress is fairly dramatic.

When we look at the procedure volume growth, you go back to the first couple of quarters of last year, it was 35 balloons in the first quarter.

It was 26 in the second.

All of a sudden, we got to the fourth quarter, we did 109.

Then we did 125 in Q1 and 161 in the most recent quarter.

When you look at the sequential growth, it is pretty dramatic relative to adoption and sites, some fairly recent, in the last quarter or so, having purchased, really ramping these programs up quickly.

So that, to me, is extremely encouraging to see that not only are our sites deciding to offer this leading-edge technology, but they have put a comprehensive program around it with their surgeons, radiation oncologists, and their patients to make sure the right patients that fit the criteria are offered this as an alternative to whole-breast radiation.

We've felt all along that procedure volumes, along with new system placements, in tandem, are both equally important in this business.

And essentially, what we're saying is that seven months year to date, we've now placed 14 new systems, where all of last year we placed 13.

We're also saying that on a year-to-date basis, our applicator sales are almost 5X or five times what it was at this point last year.

So we think those are all extremely encouraging.

And what we're seeing is a mix of sites that have been doing IORT for a longer period of time, as well as sites that have come online in the last three to four months, all ramping with considerable volumes.

So that has been very, very encouraging.

And it'd be ideal to be able to have more linear sales, but in a business that's in this kind of an early-growth stage, it can be a little bit choppy.

So we end up in July having what has probably been our strongest month in that business, and given that it's the first month of a quarter, not ideal timing, but it does, I think, reinforce the momentum we have in the business.

In terms of your second question on the IORT criteria, there's probably two angles to that.

One is that the American Brachytherapy Society and the American Society of Breast Surgeons have very stringent criteria for which patients qualify for breast IORT.

There's an age factor, has to be a single lesion of no greater than a certain size, lymph nodes have to be clean.

There needs to be able to get a pathology, post-lumpectomy, that the tumor bed is free of cancer, and so forth.

So there's some pretty strict criteria.

Having met that criteria, somewhere between 100,000 to 110,000 of the 270,000 new breast cancer cases in the United States alone fit this criteria.

So it's a pretty significant number, and we're only approaching somewhere in the range of 1% adoption.

So I think there's this clinical criteria, but then there's also considerations of age of the patients; their proximity to getting whole-breast radiation, which we know can be up to six or seven weeks, five days a week, and how practical it is for people to be able to do that and travel long distances or keep a full-time job and so forth.

So there's lots of different factors relative to the criteria that do get considered, both clinical as well as practical.

What I would say, though, is that clearly in the context of the emphasis on women's health, a lot of major centers are trying to become or have become breast centers of excellence.

And what they're essentially doing is they're bringing in fellowship-trained specialized breast surgeons, and along with radiation oncology, they're offering more comprehensive breast care, particularly around breast cancer.

And what I believe we're seeing is that the interest in offering breast IORT as an alternative to whole-breast radiation has become one of the leading-edge technology offerings in these centers of excellence.

There's also growing evidence clinically of the effectiveness, as well.

There's going to be a major meeting on the West Coast in the month of September, and we do believe that the target study, which is the largest, most comprehensive study that's been published to date, will be updated.

And what we heard at a meeting in Europe, kind of in a preliminary fashion, was that while there were approximately 1,100 patients with a little over four years, to mean follow-up, published several years ago, they will now have possibly as many as 2,000 patients published at this next meeting with over four years of follow-up.

We're also hearing that of that entire population in the target study, they may have close to 600 patients that have seven years of follow-up.

And the whispers we're hearing are very encouraging in terms of the results still being very consistent with what was initially published in June of 2010.

So, lots of different factors certainly go into the criteria, clinical and otherwise.

We're extremely pleased to see the progress, and we're very hopeful that with our early Q3 momentum, that it will carry through to the rest of the quarter.

I think part of my second question was also had to do with just [trying] to -- let's just say economics of the decision process.

So if there's concern that reimbursement is not where it would hopefully wind up, is reimbursement holistically for the people in that decision chain adequate to drive continued growth in procedures?

I guess the way I would describe it is that the reimbursement is strong.

If you take a look at the 2013 proposed rule, which includes the additional IORT delivery reimbursement that we have learned about in early July of just under $500, the actual reimbursement to the hospital is now going to be just over $7,000 per procedure, and that's about a 12% increase over what they're actually getting paid in 2011.

In conjunction with that, and this is strictly for IORT -- it does not include the lumpectomy reimbursement, it does not include what the surgeon does, the radiation oncologist is receiving about $1,000 through a sum of about nine different codes for the work that they do in the OR.

So when you think about the cost of the system, use a number of $250,000 to $350,000, and you look at the cost of the sources and the applicators in addition, you would think that if a site were doing three or four or five procedures a week, this would be very financially viable for them.

Now the challenge, of course, is to compare it to whole-breast radiation where patients are going in for up to six or seven weeks at a time, five treatments per week.

There's no question that the total amount of reimbursement for that many trips and treatments does exceed the single treatment they get in IORT.

So you're still fighting, I would believe in certain centers that, quite frankly, have excess capacity, with the idea that if patients were to go through traditional treatments, the aggregate that they would have generated in reimbursement over a six- or seven-week basis will be greater than what you would get with IORT.

I would say that the sites, though, that are quite engaged in terms of capacity and quite busy would find this as a great supplement, not to mention the very obvious patient benefit.

So it's very good reimbursement on a standalone basis; probably in aggregate not as much as you would get in the traditional whole-breast radiation therapies, but to be fair, we're talking six to seven weeks, five days a week, versus a single episode in the operating room.

The other thing I would say is as we get more scrutiny and focus on cost reduction in health care, which is critically important, but obviously very, very challenging in today's environment, this is a much more cost-effective way to treat those percent of women that qualify for this procedure, much lower cost to the health care system.

What we're really hopeful of is that the payers, which really care about that much more so, quite frankly, than the caregivers, will really resonate with how much as a payer those that have got the coverage responsibility financially will benefit from this treatment.

And I think in those particular circumstances, the CPT-1 code around treatment planning and now treatment delivery helps significantly in that realm.

The growing clinical evidence is extremely important to the medical directors on the payer side to ensure that they're doing the right treatment for their patient and that cancer recurrence, which is obviously very serious for the patient, but also very costly for the payer, is at no greater risk than alternatives therapies that they might be using today.

So we think, I guess in summary, Jeb, the financial equation is still attractive, but we've got to get beyond this paradigm, if you will, of six to seven weeks comparison because it's really not fair.

Am I correct in assuming that most of these procedures that are being done today are private payer, and hence, therefore, what the hospital could be making could be -- and the radiation oncologists could be more than what you just described?

In other words, is the $7,000 and the $1,000 relative to a CMS Medicare patient or is that what the private pay payers pay?

That's what Medicare for actual 2012 versus proposed 2013 would pay, and the private payers could vary up or down from that number.

But typically, as you know, when CMS sets the numbers, most of the private payers ski off of those numbers to set their own rates relative to reimbursement.

But at the end of the day, reimbursement's improving.

When you think about the enormous pressure on reduction of cost in healthcare, we all know from being on the imaging side of the business there's been tremendous pressure to reduce reimbursement.

So to look at the Medicare proposed 2013 reimbursement and see a number of about $7,100 compared to $6,300 last year, not too many major procedures could claim they're seeing a 12% increase in reimbursement.

Now, that is also, again, due to this new payment that has been assigned to treatment delivery, combined with some of the other ancillary codes going up in value as well.

So we look at that very positively, given how much pressure there is on all of reimbursement, including radiation therapy in general, for reduction.

This is one of the few categories that's going up in reimbursement.

I see.

Thanks very much.

I'll let someone else ask a question.

(Operator Instructions).

[Scott Christie], [Christie Capital Management].

Good morning.

Gentlemen, do you have any idea what your low point in cash will be, and any idea when you might achieve a breakeven EBITDA or cash flow quarter?

As you know, we are -- at this point, we're not providing guidance, but what we have communicated is with a revenue range between $7.5 million to $8 million, our adjusted EBITDA will be breakeven.

And then, in order to cover the cash interest component, our revenue would probably need to be in the range of $8 million to $8.5 million.

So around a revenue range of $8.5 million is when we would be cash neutral from operations.

We have no further questions.

I would now like to turn the conference back over to Mr. Ferry for closing remarks.

I'd like to thank everyone for your questions and your continued interest in iCAD.

2012 continues to be an important year of execution for the Company.

We look forward to delivering on our strategic plan and trust you will continue to follow our progress.

We look forward to speaking with you again when we report our third-quarter results.

Thanks for calling in and have a great day.

Ladies and gentlemen, we thank you for your participation in today's conference.

This concludes the presentation.

You may now disconnect and have a great day.