ICAD Inc (ICAD) 2023 Q1 法說會逐字稿

Good day, everyone, and welcome to the iCAD, Inc. First Quarter 2023 Earnings Call. (Operator Instructions).

It is now my pleasure to turn the floor over to your host, Leonor Faber. Ma'am, the floor is yours.

Thank you, operator. Good afternoon, everyone. Thank you for joining us today for iCAD's First Quarter 2023 Earnings Call. On the call today, we have Dana Brown, our President and Chief Executive Officer; and Eric Lonnqvist, our Chief Financial Officer.

Before turning the call over to Dana, I would like to remind everyone that we will be making forward-looking statements on the call today. These forward-looking statements are based on iCAD's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations. For a list of factors that could cause actual results to differ, please see today's press release and our filings with the U.S. Securities and Exchange Commission. iCAD undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

I would also note that management will refer to certain non-GAAP financial measures. Management believes that these measures provide meaningful information for investors and reflect the way they view the operating performance of the company. You can find a reconciliation of our GAAP to non-GAAP measures at the end of the earnings release.

With that, I'll turn the call over to Dana.

Thank you, Leonor, and good afternoon, everyone. Let's begin with our business update. As mentioned on our previous call, we are exploring strategic options for the Xoft business that could accelerate the accessibility of this technology and provide more focus and synergies to its growth. While we explore these options, we continue to operate the business and customers worldwide continue to treat patients with this targeted therapy. And while we retain staff to support sales and services, revenue for Q1 was 18% lower than our budget coming in at $1.43 million versus $1.7 million. Sales have slowed as customers and distributors are cautious about the business' future.

To address these concerns, we've redeployed some internal resources to better support Xoft sales. I am pleased to report that the body of evidence supporting Xoft continues to grow. Compelling new research was published last quarter in the peer-reviewed Journal of Contemporary Brachytherapy. In the longest-term study of Xoft skin eBx to date, researchers confirmed Xoft is a safe and effective treatment for non-melanoma skin cancer with 98.9% of patients remaining recurrence-free at a median follow-up of 7.6 years. This study adds to the body of clinical evidence that puts Xoft Skin eBx on par with mode surgery in terms of safety, efficacy and reoccurrence rates, but with fewer side effects and more comfort and convenience for patients. We remain confident that the Xoft technology has the potential to positively impact the lives of cancer patients and the providers who care for them on a global scale. We'll provide further updates on its strategic options at the appropriate point in time.

Turning to the detection side of our business. As mentioned on our prior earnings call, while both the therapy and detection lines of business have great market opportunity and potential, we believe our core competencies and focus need to be solely on detection and our strategy around AI. But before we go into Q1 results, I want to take just a moment to speak to this week's news. I'm sure many of you saw the U.S. Preventive Services Task Force announcement from earlier this week.

They published new draft mammography guidelines, which recommend women of average risk begin screening mammography at age 40. With 20 million women in the U.S. between the ages of 40 to 49, these recommendations offer the potential for our technology to benefit more women and improve providers' ability to meet the increased demand for these services. However, although mammography is the gold standard for breast cancer screening, it can still miss about 20% of breast cancers present at the time of screening. Mammography also cannot determine a women's risk of cancer developing in the short or the long term, and the new guidelines do not specify how a woman would know if she's of average risk.

Our breast AI suite comprised of detection, density and risk, maximizes the effectiveness of mammography. Our detection solution delivers up to 2x the clinical performance compared to leading competitors and is clinically proven to improve accuracy and efficiency for radiologists. In a recent study, our detection solution was shown to catch up to 23% more cancers that might have otherwise gone undetected. Our density solution not only meets the needs recently outlined by the FDA, but it has long been used worldwide to enhance patient care and personalized results. And our risk solution is up to 2.4x more accurate than traditional risk models. Our leading-edge AI portfolio is the only commercially available 360-degree solution clinically proven to assist clinicians in daily practice to detect more cancers, evaluate breast density and identify women at high risk of developing breast cancer. And with the recent U.S. Preventative Services Task Force guidelines, it's clear that our technology is more relevant than ever.

So back to our Q1 updates. First of note, we strengthened our leadership team with seasoned leaders poised to execute our strategic vision and grow our business. In Q1 of this year, we brought on Bill Keyes as Senior Vice President, U.S. Commercial Sales. As a seasoned leader with more than 35 years of health care technology experience, Bill brings to the team a consistent track record in building and leading sales teams, driving growth via enterprise sales and expertise in software as a service. We also recently welcomed to the team Vasu Avadhanula as our new Chief Product Officer. I've worked with Vasu over the past several years and can attest that he's an outstanding leader with 25 years of product development, business analytics and technology innovation experience.

Vasu most recently served as Vice President, Health Technology and Digital Transformation at Susan G. Komen. Vasu has a track record of turning new ideas into successful products that disrupt the status quo and enhance the customer experience. In his last role at Susan G. Komen, Vasu was instrumental in the success of Komen's direct-to-patient programs and services, including the development and launch of Komen Health Cloud, a software-as-a-service patient engagement platform as well as share procurers, the first patient-powered breast cancer research registry. I'm pleased to welcome him to our team and look forward to incorporating his unique perspective into our future road map.

Continuing to strengthen our leadership team, we also recently welcomed Michelle Strong as our new Chief Operations Officer. With more than 25 years of experience in marketing and health care technology, most recently serving as Vice President of Marketing Strategy at Susan G. Komen. Michelle is a seasoned leader who excels as strategically building and growing organizations, tackling challenging initiatives and developing strategic partnerships. She specializes in the implementation of new business strategies that broaden awareness, bolster brand equity and drive revenue growth. Under Michelle's leadership, Komen's Brand Health experienced significant improvements year-over-year, resulting in increased revenues and stakeholder engagement to advance its mission to save lives from breast cancer. I'm pleased to welcome her to the team and confident that her unique set of skills and expertise will be instrumental in our go-to-market success.

Additionally, I'm pleased to report that we've completed our search for a full-time CFO as the Board of Directors appointed Eric Lonnqvist as our new Chief Financial Officer. Eric has demonstrated strong financial acumen and a commitment to excellence in his most recent position as iCAD's Vice President of Financial Planning and Analysis. Eric has been with iCAD for over 3 years, and during that time, been a strong and stable leader through leadership and market changes. Eric's leadership style, combined with a strong financial and business acumen will be instrumental in leading the financial operations of the company. Eric has more than 15 years of finance and accounting experience in the medical device and technology industries, and you will hear more through Eric later on this call.

The addition of these seasoned executives will accelerate key initiatives in the company's strategic plans, such as new partnerships with patient advocacy groups, pharmaceutical companies and payer organizations. With these important changes to our leadership team, we're confident we have the right people in the right roles at the right time to help us achieve our vision of offering the most pervasive and personalized breast screening AI technology. And while we work on these exciting transformations as a company, compelling new research continues to validate the benefits our Breast AI portfolio offers to clinicians and patients.

In March, at the European Congress of Radiology meeting, commonly referred to as ECR, we were pleased to again see physicians share their real-world clinical experience and evidence that iCAD's breast AI suite has a positive impact on cancer detection and women's lives. In the research presentation session at the meeting, Dr. Kathy Schilling, the Medical Director of the Christine E. Lynn Women's Health and Wellness Institute at Boca Raton Regional Hospital presented findings from a study that found our ProFound AI detection solution increased the cancer detection rate among 9 dedicated breast imaging radiologists by 23% without increasing the rate of recalls. This improvement was so significant the media took note. Both Fox and CBS covered the study in nationally syndicated segments featuring iCAD and Dr. Schilling. Dr. Schilling will be sharing more about this research along with our clinical experience, best practices and compelling case studies demonstrating the unique benefits our technology offers and our upcoming profound insights, profound impact webinar on May 24. We invite all of you to join us for this webinar.

New clinical evidence supporting ProFound AI risk was also published in the Journal of Clinical Oncology last quarter. According to the study findings, ProFound AI risk for 2D mammography is more accurate than Tyrer-Cuzick v8, a commonly used lifestyle risk model. And of note, our ProFound AI risk was found to be more accurate for both short-term and long-term risk assessments. Physicians have traditionally estimated breast cancer risk by examining the patient's known risk factors such as family history. But about 85% of breast cancers are current women who have no family history of breast cancer. Our risk solution accurately identified 20% of breast cancers as high risk compared to only 7.1% for Tyrer-Cuzick. With iCAD's risk solution, patient care has never been more personalized. By empowering radiologists with more information about a woman's specific risk, vacant tailor breast cancer screening and maximize mammography's effectiveness, which ultimately leads to finding cancer sooner, reducing cost to the overall health care system and most importantly, saving lives.

Also in the first quarter, the FDA announced the implementation of a national dense breast reporting standard, which is a significant advancement in health care for women as nearly 50% of all women aged 40 and over have dense breasts, one of the strongest and most prevalent breast cancer risk factors. However, dense breast notifications are only as effective as the assessment themselves as studies show wide variation in visual assessment agreement, and radiologists may even disagree with their own assessment year-to-year. This can be confusing for patients, lead to unnecessary additional imaging and increase patient and facility costs. iCAD's Breast II suite empowers clinicians to lead the way in breast care. And our customers using our density assessment solutions are well equipped to provide accurate breast density assessments, and we expect more facilities to demand this technology as they work to bring care standards in line with new federal regulations.

Turning now to our operations outside of the U.S. As I just mentioned, Q1 was marked by a very well-attended ECR meeting in Vienna. We connected many of our distributors with potential customers from all over the world. We also hosted a special evening event featuring talks from renowned leaders in breast imaging AI, including Dr. Kathy Schilling and Dr. Axel Grawingholt, who shared compelling testimonies and clinical case studies demonstrating the power of our technology to an audience of more than 100 radiologists. Also, our team was pleased to partner with GE in a workshop for radiologists.

On the sales side, iCAD will be expanding into one of the largest screening regions in German-speaking Switzerland. This will be the first screening program that will use ProFound AI detection and ProFound AI risk in their review process. With the expansion of our distribution territories, iCAD's visibility continues to grow on a global scale. Our regional partners are bringing in larger and more significant opportunities, and we're seeing a significant uptake in demand for our subscription offering in Europe, where this is quickly becoming the preferred purchasing model. And lastly, before we move to the financial update, I also want to provide you a brief update on our business model transition.

As noted on our last call, we implemented several strategic changes, including continued cost reduction measures to align and streamline our cost base, reducing annualized expenses by $4.3 million to $4.6 million and annualized cash burn by $4.9 million to $5.2 million, putting us on track to achieve our goal of profitability exiting 2024. We also noted on our last earnings call, we will revisit our subscription annual recurring revenue, or SARR metric when subscription deals make up a more material and consistent portion of our revenue. Along these lines, we're pleased to report that we closed 9 subscription deals in Q1. While we believe the move to a subscription-based license model is good for our long-term future as it builds a more predictable and profitable revenue stream, it does create a short-term impact on revenue because we're only able to recognize a small portion of total revenue spread across the contract term.

I also mentioned on the last call and earlier today that we're going through a rigorous and thoughtful process to evaluate a range of growth opportunities. To recap, these include going direct to patients with offerings like a new GPT powered digital care platform, access to elective risk assessments and other personalized predictive scoring solutions, pursuing payer and reimbursement strategies to get risk assessments and AI red screenings covered, partnering with large employers with women's health initiatives to provide AI-powered mobile screening services on campus. -- supporting patient advocacy organizations on the front lines of tackling health disparities and utilizing AI programs to help all women get access to the breast health care they need and expanding our cloud-based AI platform to address other cancers and modalities.

In summary, we're making bold moves to rapidly transform this company with a focus on stability, preserving cash and building a defensible and competitive long-term strategy that diversifies our revenue stream and smooth out our customer concentration. We look forward to continuing to update you on the metrics and milestones of the strategy later this year. I'll now turn the call over to Eric for a detailed review of our Q1 2023 financials.

Good afternoon, everyone, and thank you, Dana. I'll now summarize our financial results for the first quarter ended March 31, 2023. The total revenue for the quarter was $5.8 million, a decline of $1.7 million or 23% from the first quarter of 2022. The Detection segment revenue was $4.3 million, down 21% from last year. Within detection, first quarter 2023 product revenue was $2.5 million, down 36% over the prior year. A portion of the decline is attributable to a greater number of subscription deals for the quarter over the prior year. Detection service revenue was $1.9 million, up to 13% over the prior year.

From a regional standpoint, Detection segment revenue for the U.S. was $3.7 million, a decline of 19% from the first quarter of 2022. The Detection segment revenue for OUS was $0.6 million, a decline of 35% from the first quarter of 2022. The therapy segment revenue was $1.4 million, down $0.6 million or 28% versus the first quarter of 2022. Therapy product revenue was $0.3 million, down 59% year-over-year. Services revenue was $1.2 million, down 11% year-over-year.

Moving on to gross profit. On a percentage of revenue basis, gross profit was 71% for the first quarter of 2023, which was in line with the first quarter of 2022. On a pure dollar basis, gross profit for the quarter was $4.1 million as compared to $5.3 million last year. This is largely reflective of a reduction in revenues. Total operating expenses for the first quarter -- for the first quarter ended March 31, 2023, versus $3.5 million in the quarter ended March 31, 2022. GAAP net loss for the first quarter of 2023 was $3.8 million or $0.15 per diluted share compared with a GAAP net loss of $3.5 million or $0.14 per diluted share for the first quarter of 2022.

Non-GAAP adjusted EBITDA for the first quarter of 2023 was a loss of $3 million versus $2.7 million in Q1 2022. Non-GAAP adjusted net loss for the quarter was $3.6 million or $0.14 per diluted share compared to $3.5 million or $0.14 per diluted share in Q1 of 2022, reflecting a few adjustments to GAAP net loss in each period. Moving on to the balance sheet. As of March 31, 2023, the company had cash and cash equivalents of $19.6 million compared to cash and cash equivalents of $29.8 million on March 31, 2022.

This concludes the financial highlights of our presentation. I'd like to now turn the call back over to the operator to lead the Q&A.

Certainly. At this time, we'll be conducting a question-and-answer session. (Operator Instructions) Your first question is coming from Per Ostlund from Craig-Hallum.

Thank you. Congratulations, Eric, on your elevation into the new role. So, we're only about 6 weeks removed from your fourth quarter call and obviously, a lot of sweeping change in the shadow of that. So, I think maybe a little bit unfair for us to ask too many questions about change since, but I guess we kind of have to. So, I'm curious if we can start with the therapy side since you are evaluating strategic alternatives there, is there anything you can do to characterize some of the early discussions that you had or the level of interest you think you've found -- has it been kind of meeting expectations, exceeding expectations? If a sale is the ultimate end game there? How are you kind of thinking about valuation?

Per. So thanks for the question and no worries on if they're unfair in terms of the territory. So maybe like you said, some adjectives right, to kind of describe the conversations. I will say they're plural. So that's good. We have multiple parties that we're in discussion with. The downside is it does take time to respond to all their questions. The parties are in what we're characterizing as Phase I due diligence, which lets them firm up their proposal to us, right? So, their financial proposal. I think about the time frame that would be required to actually put things in writing in terms of like a definitive agreement. So, it's good.

We've got multiple parties. They're at the same phase. Nothing is definitive yet. So, it's a little bit late and see. But I think we feel good about it. I think understanding the business and the potential for it with the customer base, we get to be on the front lines of hearing testimonials for that every day. So naturally, we're probably going to think that it can always be valued for more once somebody really understands the potential for it. But I think so far, we're pretty pleased. And everybody is coming in around the same numbers, the same dots, right, if you were to plot them on a graph. So, it's been consistent there.

Okay. Maybe just a quick follow-on to that. Is there -- if we're talking about Phase 1 diligence -- is it still reasonable to think that a second quarter outcome, maybe it's not a completion, but a second quarter outcome where you know what the end of the process is going to look like and then you're in a position to make a decision on the furlough and then those sorts of things. Is that still kind of the target?

Yes. Yes, that's definitely still the target. We still feel good about that. One never knows if something may pop up, but there's no indicators, right, otherwise at this point. So, it still feels good. Like you said, I think it will take -- they always will take a little bit longer than expected to get through legal agreements and actual closing. But if we keep staying on track, then we feel good.

Okay. Very good. I want to ask you a question about therapy. And I think that -- because you alluded to this last call, Dana, and I'm intrigued by it when you're talking about evaluating programs with patient advocacy groups and large employers and what have you. I think historically, I don't want to speak for everybody, I think, but I think historically, in our community, we've kind of taken to thinking of the sale as a sale to a radiology practice, whether it's and sole or whoever it is, radiology partners. How does it look when you're not selling it to somebody like that? Because I think that it's a very creative way, potentially creative way to go about proliferating the technology. But how do you do that and how do you get paid for it?

Yes. At the beginning of the question, I think you said therapy that you're meaning detection.

That's the action for sure. Yes.

Great. No worries. Yes. So, we are aggressively exploring those options. I think from our experience at Susan G. Komen, we know what it takes to provide technology and, I'll say, cancer-related support programs and services directly in the hands of patients and directly in the hands of employers that want to put in place health and wellness initiatives, especially for women who may be employed by them. So how we get paid for those 2 types of programs could span a variety of methods. -- very simply, there's a lot of precedent already being set in the medical community, direct-to-patient, maybe home health test kits or assessment. We've seen a lot of that with genetic testing.

The good news is our patients are able to get their mammography images today and they can move them between provider to provider, so enabling us to have access to their images isn't a lot different than an already existing process that the patient has to get access to their images. And then just web portals, web-based payment cards, that's kind of the approach that we would take there. For large employers, it's typically something that they provide as a program basis to their entire staff. So, something that's out of a benefit type of budget and HR type of budget. So that's how we'll be looking, right, to be compensated in that regard.

Okay. Okay. One last one, if I can. So, there's been a substantial cut in expenses and then in the cash burn and the target there is to have that get you to profitability. Again, this is another one of those that's very, very early, but do you feel like the cuts that you've made is sufficient to get you to that target without, I guess, let's say, underinvesting in the business.

Yes, it's a great question. When we think about every day. So if we were to embark on one of these new strategic initiatives, like a bold diversification of the revenue stream, then there may be a corresponding investment rate, some cash we need to burn in order to build, right, the necessary programs or technologies to do that. So, if we decide to go that route, then that's something that when I talked about analyzing the strategic alternatives, I mentioned we were going to update metrics and milestones on the third quarter call, which would be happening in fourth quarter this calendar year.

So, at that point in time, we might revise it, but we would be able to tell you the reason why. This is what we think opening up this part of the market would mean to our business and the type of growth that we would expect. But if we just continue, as you said, we're selling to radiologists, to large imaging centers, to health networks with the set of solutions that we have today, then we do think those cuts are what was needed, and we're able to run the business and still achieve that target of exiting 2024 being breakeven, right, or cash flow positive.

Okay. Sounds good. Thank you, Dana. I appreciate it.

Yes.

Your next question is coming from Marie Thibault from BTIG.

And Eric I wanted to ask my first hear about the Xoft business. You mentioned at the start of the call that it came in about 18% below your internal plan. How should we think about the very near term for Xoft we continue to think about sort of minimal to no new product sales in that business while you work through the strategic alternatives and the furlough plans?

I'm going to let Eric chime in here as well. But I think just at the high level, yes, I would think of Xoft as being just stable and kind of flat, so not new growth in terms of either new product sales or new customers in that business in the short term. But we definitely want to get Eric's point of view as well.

Marie, I think that I would echo what Dana said, largely remaining having revenue remained flat in Q2. We did pull a little bit of more help to work on the source and service revenue in Q2. I think we had a bit of a dip in Q1 as some of the furloughed resources were pulled off of that. So, we're trying to remedy that this quarter with a little more proactive calling and working with customers for balloon and source orders and so forth. But I think flattish in Q2 from Q1 is a good way to go.

Okay. That's helpful. And then as sort of a follow-up to that, Eric, I know you're very new in the seat. But I'm curious if this understanding that, obviously, the subscription model, you won't be able to give us more detail on. But do you think iCAD will be able to return to offering revenue guidance at some point as you get settled in the seat?

Yes. I think, Dana, if you want me to answer that one, we've had conversations about that, and we continue to -- I think a lot of the target as far as timing for how things will be going forward with the new management team is Q3. So, I think by then, we'll have a clearer picture of what we can give for guidance going forward and we'll have some more stability as far as the plan going forward at that point. So, I think in the near term, I don't think we'll be providing revenue guidance for this quarter and probably next. But I do foresee in the future where we'll be stable enough with the new team that we may be able to have that discussion and determine if we can give more guidance going forward.

Your next question is coming from Yale Jen from Laidlaw & Company.

And my first question, Dana, is that you mentioned about night deal signed in the first quarter. Could you give us a little bit color in terms of whether that sort of meet your expectations exceed it or something you want to further work on? And I know you don't give guidance, but -- how would you see that -- whether that could be something you can think about for remaining of the year? Or will we have more rapid growth going to the rest of the year? And then I have a follow-up.

Okay. Sure. And Eric, I'm going to ask you to chime in on this as well. But from my point of view, the 9 subscription deals in Q1, I think, was fantastic. So definitely pleased with that. Our new sales leader, his name is Bill talked about it in my comments. He's putting a lot of discipline in place with the sales team. He has revamped the comp plan to, I think, give us the right incentives to achieve a healthy mix between perpetual licenses and subscription licenses. So, I think it was a great success for Q1. I think we're doing well here in the middle of Q2. I can't make the call yet, but I think we're pleased with those results. Eric has a bit more of a historical perspective. He's been with iCAD for 3 years. So, I just stepped into this role, I guess, just now 60 days ago. So, I would love to hear his point of view on if the 9 deals in the first quarter met expectations exceeded, just how he's thinking about it.

Yes. The 9 deals in the associated annual recurring revenue with them was above budget globally. So, it was good. It was a pleasing quarter. I think particularly on the OUS side, 5 of those 9 deals were OUS related. And they had -- one of the deals was their largest deal they've had to date. So, we have seen a faster shift to subscription in OUS, and that trend is continuing and starting to accelerate a little bit. Q2, at this point, like Dana said, we don't know yet. But as of right now, it looks like a stronger quarter than Q1 in U.S. and OUS as far as subscription deals. We have a couple of deals that would be among the biggest we've had to date. So still forecast, but the trend is encouraging as far as the shift to subscription.

Okay. Great. Congress on that. And maybe just one more question here, which is more 10,000 feet, which is that in terms of transition is ongoing at the moment. And Eric, you sort of mentioned that maybe starting from the third quarter, you might give some guidance. Just curious whether do you feel that -- so overall, is the transition getting to a more mature stage by third quarter or maybe in the fourth quarter that you will have more confidence or more visibility to talk about...

Yes, Eric, if you want to go ahead and address that one.

Sure. I think that time line, there's a lot of talks with the new management team about potential diversification of revenue streams and projects that we need to discuss internally and with our Board. And I just think a lot of that will become clearer by the time we get to Q3 is kind of where I'm going as far as clarity. Of course, there will be 2 more quarters out in terms of what's going to happen with Xoft. I would expect we'll have a very clear picture by then. We'll have 2 more quarters behind us in terms of our transition to subscription. There's a lot of discussion there. We have a new sales leader. We have some more executive management. And I think -- I just think we'll be -- we should be on the same page by Q3 with all these kind of impactful decisions to make about firming up or actions to go in a lot of these areas.

Okay. Great. And again, congrats Eric and for your new position and thanks for the guidance.

Your next question is coming from Frank Takkinen from Lake Street Capital Markets.

Maybe just to start, could you provide us an update on the Google Health partnership as well as the radiology partners partnership? Just what's the latest there? Any change in strategy specifically behind those partnerships? And kind of what should we be looking for over the next 12 months within those?

Yes. So, the Google Health partnership is primarily a technology partnership right, is a development agreement. So, the technology is on track. So, we're pleased with that. There's no major shifts. I would say it's just engineers kind of heads down and building a lot of technology and the algorithms. So that's great. On the Rad Partners, we have not signed the contract with them yet. But it's -- I would say, it's for a good reason because we've discovered in our testing that we actually had some technology that enabled I'll say, their cloud, their performance processing time to be greatly increased, speeded up. So that was fabulous. And because of that, they actually went to license some additional technology from us. It's actually a part of the technology that we're building in concert with Google, right?

So, with our cloud, our commercial cloud platform. So, we had to press pause a bit because we needed to do some more homework and kind of accelerate some of that development so that we could actually provide it as a piece of stand-alone technology within the Rad Partners cloud, so what they call their RPX. So that was a bit of a slowdown that we put on our side because we didn't want to be rushed thinking about how we wanted to license and price that for it, make sure that we were really kind of future-proofing the agreement. But as far as any other terms in the agreement that are outstanding, it's just down to small eyes and crossing small Ps. So that looks well. They are continuing to bring us into deals. So, we are actively partnering with them in the field. It's just the actual paperwork is lagging a bit behind.

Okay. That's helpful. And then just for my second one. Maybe any update you can provide around the around the initiatives to go after Hologic. I know predates your position, but I know there was previously a lot of focus to go after some of the Hologic accounts just given the big bolus of systems that they own on the field. So maybe just any update on going after those and whether you see if Hologic is taking share on the AI front with their system that they include in their scanners.

We don't have a, I'll call it, a specific campaign, right, or approach around Hologic at least not at this point in time. Like you said, there may have been some that predate my involvement with the company. But I would say from a competitive standpoint, we don't see them any more than we would have in the past. I would say the common set of folks that we hear about here in the U.S. are primarily screen point, right? So, we'll hear about screen point of deals against us. From a European standpoint, we do see Lunit a little bit more Therapixel. So, it's kind of the same set, so the competition is happening more so from the independent AI software companies than Hologic in their embedded technology.

Your next question is coming from Frank Brisebois from Oppenheimer.

Just a quick one here. In terms of the SaaS transition model, is this something that we want to completely transition to set? Or how do we deal with accounts that may be like the perpetual license? Is that understood in the new comp program from the sales force?

Yes. Yes. So, I'll chime in and then Eric, if there's anything additional you want to add, please do. But Frank, you're right. I think for the foreseeable future, we're always going to live in a both world, right? So, we're going to have accounts. We still see them today that want perpetual. They want it on-premise, it meets their operational as well as their security requirements. And then we have accounts that want cloud-based. So, we're not planning on, I'll say, end-of-life-ing or discontinuing the perpetual on-prem model. We need to have that available. We've obviously got a large installed base. So, in terms of software upgrades, maintenance and support. So, you'll see both. But what we do think is that over time, this mix, right? If you could envision a pie chart, how much of the pie is perpetual versus how much is subscription. That's what we're closely watching and leveraging the way in which we're motivating and compensating the sales force to drive that shift or that mix between those 2 pie slices at the right rate. So close watch on cash and what it does to revenue.

Yes, I can add a little bit if it will help, too. I think you'll see this kind of a slow and steady move to subscription over the course of the year. we're trying to strike that right balance between not going too fast or too slow to the transition because of the cash and revenue implications that Dana touched on. So, the comp plan do incent perpetual and subscription somewhat separately, but it's all geared towards an ACV metric for the reps. So, they are getting in kind of that annual recurring revenue kind of mindset, but we do anticipate a strong mix. It's not going to shift overnight.

That concludes our Q&A session. I will now hand the conference back to Dana Brown for closing remarks. Please go ahead.

Thank you, operator. In conclusion, we're making bold moves to rapidly transform this company with a focus on stability, preserving cash and building a defensible and competitive long-term strategy that diversifies our revenue stream and smooth out our customer concentration. Demand for our technology continues to be strong. The evidence supporting it continues to grow, and we're continuing to strengthen our team. I remain optimistic about the company and its future, and I'm confident we're taking the right steps to ensure continued growth and create additional shareholder value. I look forward to updating you next quarter as we continue to get clarity on our strategy, expand our partnerships and drive towards increased shareholder value. Thank you, and have a great evening.

Thank you, everyone. This concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.