Q4 2023 ICAD Inc Earnings Call
Participants
Jeremy Bennett; VP of Marketing; ICAD Inc
Dana Brown; President, CEO, and Chairman of the Board; ICAD Inc
Eric Lonnqvist; Chief Financial Officer; ICAD Inc
Per Ostlund; Analyst; Craig-Hallum Capital Group LLC
Marie Thibault; Analyst; BTIG LLC
I-Eh Jen; Analsyt; Laidlaw & Company (UK) Ltd
Presentation
Operator
Greetings and welcome to the ICON Inc. fourth quarter and full year 2023 earnings conference call. At this time, all participants are on a listen-only mode and a question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded and I will now turn the conference over to your host, Mr. Jeremy Bennett. Sir, the floor is yours.
Jeremy Bennett
Thank you, operator, and good afternoon, everyone. Thank you for joining us today for Eyetech's Fourth Quarter and Full Year 2023 earnings call. On the call today, we have Dana Brown, our President and Chief Executive Officer, and Eric Blomquist, our Chief Financial Officer. Before turning the call over to Dana, I would like to remind everyone that we'll be making forward-looking statements on the call today. These forward-looking statements are based on 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 US Securities and Exchange Commission. I can undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. Also, please 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.
Dana Brown
Thank you, Jeremy, and good afternoon, everyone. This week marks one year since I was named President and CEO of ICAG. I had my first earnings call on March 28, of last year. And during that call, I shared my background why the Board and I believe I was uniquely qualified to lead the Company and our confidence in the company's future.
As I stated then and reiterate now I'm honored to be leading this incredible company working alongside our talented team, our Board, our clients and partners and committed to uphold our vision to be the world's most pervasive and personalized suite of AI cancer detection solutions, changing lives for patients around the world and creating value for our shareholders and stakeholders.
The management team we've assembled is uniquely prepared to leverage their experience and expertise to position this Company for future growth. And I hope as you followed our progress over the course of the past year, you see we deliver on what we say we're going to do. Before we get into financials, I want to take a few minutes, particularly in light of 2024 being our 1st year as a company solely focused on AI. cancer detection and risk solutions.
To recap our solution set and market opportunities. I-cat is a global leader in AI powered cancer detection solutions. Our mission is to create a world where cancer can tie because cancer winds when it hides remaining undetected cancer poses one of the greatest threats to life with our industry leading profound Breast Health suite cancer has finally met its profound Breast Health suite, enables medical providers and professionals to accurately and reliably identify where cancer may be hiding and when it might make it smooth.
The profound suite offer solutions is comprised of four areas, number one, breast cancer detection, number two, density assessment, number three, one or two year breast cancer risk evaluation and number four, cardiovascular risk evaluation related to elevated levels of breast arterial calcification, powered by the latest innovations in artificial intelligence and built on one of the largest, most demographically and geographically diverse datasets. Profound suite offers unique 360 degree solutions for cancer detection, density assessment and personalized risk evaluation, all based on a 2D or 3D mammograms collection of images, the profound detection solutions scores cases and suspicious lesions, helping radiologists identify and focus on areas of most concern and highest suspicion of cancer, profound density assessment standardizes and simplifies breast density reporting algorithmically examining a women's breast anatomy from the mammogram image. The ProFound Risk Solution provides a near term probability for developing breast cancer in the next one or two years, making it more actionable and relevant than generalized lifetime risk scores.
Profound heart health solution identifies a presence and quantity of breast arterial calcification, which is proven to correlate with calcifications elsewhere in the body, raising concern for cardiovascular or heart health concerns used by thousands of providers serving millions of patients. Profound is available in over 50 countries we estimate that Profound has been used for more than 40 million mammograms wxorldwide in the last five years alone with over 25 years of experience in a cancer detection, I Cat has secured 45 patents completed over 50 clinical studies. And as I just described, we train our algorithms on one of the largest and most diverse data sets pulling data regularly from over 100 global locations. It had deep experience and unmatched set of capabilities differentiates i-CAT from its competition and positions it as the industry leader with an AI solution that continuously gets better as the Company continually refines its algorithm models using its extensive data set and Research Partners.
As outlined during our 2023 third quarter earnings call, I had is increasing its leading position as the premier breast AI solution by transitioning into a platform-based Software as a Service data as a service organization by implementing a three-phase transformation phase one, realigning our base Phase two, strengthening our foundation and Phase three investing in growth initiatives. In 2023, we made good progress executing Phases one and two, including stabilize the business through reducing our cash burn EBITDA, which we view as a relevant metric to indicate.
Operating cash flow was a loss of [$0.4 million] in Q4 '23 versus a loss of $3.6 million in Q1 of '23. This represents an improvement of nearly $3.2 million per quarter, reduced cash burn 2023 cash burn from operating activities of $5 million compared to 2022 cash burn from operating activities of $12.8 million. We believe cash burn has stabilized and I'm pleased to affirm the company does not need to raise additional funding to pursue current growth initiatives, continued to manage the shift to a subscription-based annual reoccurring revenue cycle. We'll talk more about ARR growth later in this call. But in summary, we had a 36% increase in ARR since the start of the subscription transition. We've achieved 16% compounded annual growth rate in total ARR over the two year period. Through the end of Q4 '23, we expanded our leadership team with the appointment of our permanent CFO, Eric and the addition of ICO. Chief Product Officer, Vice President of Marketing and Vice President of Customer Success.
In December, we announced expanding our sales leadership team to accommodate growth. Phil Cai's shifted and expanded his role to Senior Vice President Global Sales Operations, and Peter Graham joined us as Senior Vice President North American sales. We also made good progress in recruiting new Board members, and you may have seen the recent announcements on those additions. We upgraded our brand by transitioning from a product-focused to patient centric value proposition, resulting in our new tag line of creating a world where cancer can tide. You can see more of this brand upgrade in our new investor deck available for download via the Investors section of our website, ICAD., mid.com, and it's game changing collaborations with the steam to partners exemplifying our company's commitment to creating the world's most pervasive and personalized suite of AI cancer detection solutions. And last but not least, the divestiture of Zoloft also resulted in a reduction to cash burn and an influx of cash completing this divestiture has enabled us to put our focus into scaling the profound suite business immediately prioritizing expanding our sales and partnership models to grow revenue.
The company's next phase of transformation Phase three has begun in 2024 and includes launching initiatives that strengthen and deepen business with existing accounts and growing through expanding our direct and indirect sales channels, including expanding iCAD's geographic footprint. We believe US sales had declined due in part to significant reduction in the sales force in fiscal year 2022 as of Q3 2023. In the US, we had six sales reps versus 12 in Q3 of 2022. After a thorough analysis of rep performance over the past three years, we believe adding additional sales reps focused on new business given our large addressable market opportunity, which I'm going to discuss NetIQ's and reps focused on large national accounts, will lead to revenue growth. Since our Q3 call, we added four new team members to the sales organization. I'll take a few minutes now to outline our large addressable market opportunity. When diagnosing breast cancer early detection matters identified as Stage one cancer is more likely to respond to treatment and can result in greater survival rates. In fact, according to the American Cancer Society, the relative 5-year survival rate from breast cancer is 99% when detected early. However, the incidence of breast cancer is growing according to the World Health Organization. Breast cancer is the most common cancer worldwide recently surpassing lung cancer with 2.26 million new cases diagnosed worldwide in 2021 and eight women will get breast cancer in their lifetime. And every fourteen seconds of women is diagnosed with breast cancer worldwide. Compounding the situation, 59% of women in the U.S. missed their recommended screening mammograms. And for those who regularly screened for breast cancer, 20% to 40% of cancers are missed in mammogram screening with up to 50% miss in women with dense breast tissue. Traditional risk assessment models have relied on family history of the disease as a leading risk factor when in fact hit most surprising, 89% of women diagnosed with breast cancer have no direct family history of the disease and 90% to 95% are not related to inherited gene mutation as breast cancer detection is becoming increasingly complex. Ai can help radiologists fight cancer faster with greater accuracy and save more lives with the continuing migration from 2D reading systems to 3D known as DBT. or tomo systems. Radiologists are spending two times the amount of time reading hundreds, more images per 3D case compared to the four images captured with two D. 50 geometric increase in the number of images to read. Leads to stress 50% of radiologists are overworked and burnout is reported to be 49% for Medscape radiologist, lifestyle, happiness and burnout report 2022, simultaneously false positives and unnecessary recalls for suspected cancers have continued at similar rates while hard to detect interval cancers are being missed or diagnoses are delayed. The rise in workload for radiologists is felt by patients too. Interestingly, waiting weeks for results are receiving unnecessary recalls and biopsies lead to undue stress and anxiety, not to mention distrust of the health care system. On average, only 10% of women recalled back from a routine screening mammogram for a diagnostic workup are ultimately found to have cancer resulting in the patient being confused and frustrated with the process. Additionally, a significant economic burden is placed upon patients and payers that extend throughout multiple years when a breast cancer diagnosis is missed in its early stages and instead diagnosed at a later more advanced stage beyond associated clinical benefits finding and treating breast cancer earlier may limit the need for more intensive and expensive treatments. Increased patients' health related quality of life have a significant impact in managing health care costs among cancer patients and reduce caregiver and societal burden. I can calculate if diagnoses were shifted one stage earlier for just 20% of the 280,000 women in the U.S. diagnosed with breast cancer each year would result in a savings of approximately $3.7 billion across two years of patient treatment and health care costs. Our AI-powered mammograms are setting a new standard of care in cancer detection density assessment, a short term risk evaluation with iCAD's profound Breast Health suite, radiologist reading ties, maybe cotton with improved accuracy and specificity in finding suspicious cancerous lesions radiologist benefit from standard objective, inclusive results measured by an algorithm built upon many millions of images and patients benefit from receiving timely personalized results. Fact-based assessment of the breast density and short term risk assessments that inform their screening plans.
As noted above, iCAD's mission is to create a world where cancer can Tide because when cancer wins, we all lose for the health of women everywhere and the benefit of their communities. I catch a high-powered image-based solutions help detect cancer faster earlier and with greater accuracy as well as evaluate breast cancer and cardiovascular risk from a single mammogram profound Breast Health suite is cleared by the FDA and has received European CE mark and Health Canada licensing. As I noted earlier, profound is used by thousands of providers serving millions of patients. Profound is available in over 50 countries. According to a December 2023 report, approximately 40.5 million annual mammograms are conducted in the EU across 8,834 certified facilities as measured by the FDA mammography quality standards. Yet only 37% of facilities are using an AI. mammography solution. According to research end markets, United States, mammography and breast imaging market outlook report 2022 to 2025, leaving room for growth of the 3,268 facilities using a high, I can hedge an active customer base of 1,488 or 46% of the A. market and 17% of the total US market in the last five years alone, I can estimate reading more than 40 million mammograms worldwide based on the number of DBT. units relative to the total units left to be converted to DBT. and the associated large number of installation opportunities we believe are profound solutions for 3D may represent a significant growth opportunity in the United States. We also believe that there is a growth opportunity for 2D mammography and DBTAI. solutions in international markets, both from the analog to digital conversion as well as more countries adopt the practice of each exam being read by a single radiologist using AI rather than the current practice of having two radiologists read each exam. Furthermore, additional Western European countries have already implemented or are planning to implement mammography screening programs, which may increase the number of screening mammograms performed in those countries. Since having released our first FDA-cleared product in 2002, again, has remained committed to innovation in artificial intelligence by continuously improving and releasing the highest performing and most widely available solutions in breast care with FDA clearances, CE Marks & Health Canada licenses. The latest versions of ICAD. profound Breast Health suite solutions are currently under review with the FDA, including version 4.0 of our profound detection solution built on the newest deep learning neural network, AI per regulatory test data, i-CAT has observed detection version 4.0 will deliver significant improvements in specificity sensitivity and the highest AUC for area under the curve for specificity and sensitivity for breast cancer detection at 92.5% along with the new heart health solution measuring the level of calcification in breast arteries, identifying cardiovascular concerns a new cloud deployment options, iCAD's overall value and ease of implementation continued to improve in 2023, we strengthened our market leading partnership recognized as the leader in breast, a high-powered solutions, eyecare partners with industry leaders across technology, academic research, integration and advocacy organizations. To iterate and improve upon iCAD's software and make solutions more accessible to customers. Our solutions are interoperable with more than 50 packs vendors worldwide with 22 global distributors and growing iCAD's market share is on the rise in 2023. I can continue to work with Duke University, Indiana University of Pennsylvania and Karolinska Institute on artificial intelligence advancements in clinical testing. Additionally had expanded this partnership with Google Health to enhance the Company's technology and expand access to millions of women and providers worldwide. Icad's new 20-year research and development agreement includes co-development testing and integration of Google's AI technology with the profound Breast Health suite for 2D mammography for worldwide commercialization to potentially ease radiologist workload and reduce health care disparities for women. The conventional double read workflow used by most countries where mammograms are assessed by two separate radiologists has become increasingly challenging as there's a global radiologist workforce shortage, leveraging AI as a viable alternative to current double reading by introducing i-CAT as secondary independent reader can help radiology departments run more efficiently to make iCAD's solutions more available to customers. We expanded into new platform and channel partners, technology partners and health system partners.
In November of 2023, we announced ICAD. is the only breast cancer AI. detection solution integrated into GE.'s new my breast AI Suite and all in one platform made up of three workflow algorithms from iCAD's profound Breast Health suite. GE. has released my breast AI Suite first in the U.S. and plans to release globally in 2024 simplifying the sales and implementation process for GE. and enabling a I used by customers across the globe.
Additionally, I can develop several new partnerships and integrations with several AI. distributors and marketplace aggregators to implement ProFound AI via cloud options such as Feraheme change, healthcare, Blackford and have several others currently under negotiation to further expand Icade's footprint.
Looking forward, I cat is dedicated to serving those in need by establishing free equitable access to a I read mammograms to start, I can will bring profound detection to the countries of Ghana and Guiana in partnership with Red aid, a nonprofit entity that works in over 30 countries to improve and optimize access to medical imaging and radiology in low resource regions of the world. Together, iCAD and red aid plan to improve diagnosis of breast cancer or breast cancer mortality rates are the highest.
I'll now turn the call over to Eric for a detailed review of our Q4 and year end 2023 financials.
Eric Lonnqvist
Good afternoon, everyone, and thank you, Dana. I'll now summarize our financial results for the fourth quarter and year ended December 31, 2023. Please note that these results exclude the divested Xora business unless otherwise noted results relating to the soft business line are presented in Note two of our annual report on Form 10-K. Revenue for the year ended December 31, 2023, was $17.3 million, a decrease of $2.5 million or 13% from $19.8 million in fiscal 2022. Product revenue declined $2.7 million, offset by a $0.2 million increase in service revenue. The revenue decline was driven primarily by a reduction in sales force, along with our continued shift from a perpetual to a subscription based revenue model. Revenue for Q4 2023 was $4.7 million, an increase of $0.1 million or 2% from the fourth quarter of 2022 fourth quarter 2023, product revenue was $3 million, up 8% from the prior year. Service revenue was $1.8 million, down 6% over the prior year.
Moving on to gross profit on a percentage of revenue basis, gross profit was 91% for the fourth quarter of 2023, which was up from 84% in the fourth quarter of 2022. On a pure dollar basis, gross profit for the quarter was $4.3 million as compared to $3.9 million last year. Total operating expenses for the fourth quarter of 2023 were $5 million, a $1.4 million or 22% decrease year over year. This improved run rate reflects the implemented cost cutting measures. Previously announced GAAP net loss for the fourth quarter of 2023 was $0.5 million or $0.02 per diluted share, compared with GAAP net loss of $2.2 million, or $0.09 per diluted share for the fourth quarter of 2022. This year-over-year decrease in the GAAP loss per share is primarily due to the operating expense reductions. Non-gaap adjusted EBITDA loss decreased $1.7 million, $2.4 million in the quarter ended December 31, 2023, from the same period in 2022. Note that the non-GAAP adjusted EBITDA loss for quarter ended December 31, 2022, was $3.1 million with the Zoro business unit included.
Moving to the balance sheet. As of December 31, 2023, the company had cash and cash equivalents of $21.7 million compared to cash and cash equivalents of $21.3 million as of December 31, 2022. Net cash used for operating activities for the year ended December 31, 2023, was $5 million compared to $12.8 million for 2022. This improvement of approximately 61% year over year is due primarily to cost savings initiatives implemented during the first quarter of 2023. Please note that the cash balance in net cash used in operating activities, both reflect total ag had full absorbed in Detection data noted earlier, we believe we have sufficient cash resources to fund our planned current operations. No need to raise additional funding. The cash balance as of December 31, 2023, includes net proceeds of $4.5 million from the Xora sale in October 2023, as well as net proceeds of approximately $2 million from the issuance of shares of common stock in at-the-market or ATM offerings. The ATM proceeds were generated primarily in Q3 2023 as noted in our prior earnings call, the steady shift to a recurring revenue model from a perpetual model has numerous benefits, including better business visibility, more efficient expense management and an improved ability to predict future cash flow. It also has risks, including short term, lower GAAP revenue and negative cash flow impact for the next three years.
To help illustrate our progress in this transition, we began reporting the following annual recurring or ARR metrics in Q3 23, total ARR. Our key ARR represents the annualized value of subscription license maintenance contracts in active cloud services at the end of a reporting period. Maintenance Services, MARR., or MARR. represents the annualized value of active perpetual license maintenance service contracts at the end of the reporting period. Subscription ARR, or SARR. represents the annualized value of active subscription or term licenses at the end of day reporting period cloud ARR or CARR. represents the annualized value of active cloud service contracts at the end of our reporting period. Total ARR for TAR was $8.7 million as of December 31, 2023, up from $8.3 million at the end of the prior fiscal quarter. Maintenance Services ARR, or MARR. was $7 million, up from $6.9 million at the end of the prior fiscal quarter. Subscription ARR, or S. ARR was $1.7 million, up from $1.4 million at the end of the prior fiscal quarter. Once we have released our commercial cloud platform, we'll begin tracking cloud ARR. In addition to the recurring revenue metrics noted above. We also began disclosing the number of orders relating to perpetual product subscription and cloud deals. The intent of this metric is to illustrate the pure volume of sales without the complexity of the multiple GAAP revenue streams. We are pleased to report that in the fourth quarter of 2023, we closed 80 perpetual and nine subscription orders. This brought our 2023 year to date total to 273 perpetual and 31 subscription orders.
This concludes the financial highlights of our presentation. I would now like to turn the call back over to the operator to lead the Q&A.
Question and Answer Session
Operator
Thank you. At this time, we will be conducting our question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue and you may press star two, if you would like to remove your question from the queue For participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys for a moment, please.
While we poll for questions, banQi?
Our first question is coming from Per Ostlund with Craig-Hallum Capital Group. Your line is life.
Per Ostlund
Thanks and good afternoon, Eric. Now that we've gotten through the divestiture, obviously it seems like the margin profile of the detection business is very much shining through. And I think the growth profile ultimately will as well now that you really have the singular focus on the detection side, I wanted to I want to start out with some of the new product activity that you alluded to in your remarks, Dana. So you mentioned profile 4.0 under review at FDA, and we've talked about the Google Health combined algorithm. We've talked about breast artillery classifications. Kind of curious as to how the timing of those three things might start to phase in, I assume 4.0 is probably the nearest in and might have some impact here in 2024. But you tell me and then with respect to Google Health, is there a reader study there? What kind of the timing there and then saying gross progressed or Taylor all classifications.
Dana Brown
Sure. And so I think your sequences is correct.
So maybe just to reiterate and first of all, big caveat, right. It's all dependent upon regulatory approval on. And if I've learned anything in the last year and that can be unpredictable, I suspect so. So all of it, you know, comes with like best laid plans, right? So but AM 4.0 is a new version of the algorithm that is under review with the FDA because it's an update to an existing product, and that's already received the device classification. And I'm using air quotes here allegedly, it should move to fastest. So yes, we hope from it. The FDA can do their review and give us clearance to take that algorithm to market here within this calendar year, and we'll keep everyone updated as we move along through that process.
On price. Bacterial calcification, which is a new standalone solution that works with the entire suite is also in the FDA process, and it's a new product and not just for us, but for the market in general. So let's have Q&A going back and forth with the FDA. And but it's moving forward. So likewise, and we hope to receive clearance this year, but you just don't know what, it's a brand new product. And we have our partner, Solus monitor fee helping us with answering the questions from the FDA based on Geno real world experience on. And in fact, they'll be kicking off a tripping exercise to help prepare some of the additional data needed to answer some of the FDA's questions. The third one is the combined can Google algorithm in particular, use of the algorithm for independent and second leader on that is a European Union focused effort on not something that has widespread applicability in the United States as of today.
I mean, that's going to be a very long-term effort.
So that's probably going to take a few years to get through regulatory approvals. There are studies already underway, but we're expecting you to have to do multiple studies across different countries to get that algorithm through clearance. So it's not anything that we've built into our commercial model from a revenue standpoint and in this calendar year.
Per Ostlund
Okay, excellent. Um, you have one more product to license ProFound Risk yet, as I understand it, when we spoke at RSNA, FDA has had some new guidance related to those that that product and those type of tools credit for does, where does that stand today? Is there are you still in the data-gathering mode there? Is that also now back at FDA, kind of where --
Dana Brown
(multiple speakers) there yeah, there be a facility that has every single day and so on. Risk is already cleared in the European Union.
So it hasn't CE. mark. It also has its Health Canada licensing.
So we are actively selling it in those regions here in the US, we did hear back so that the first step with the FDA once the FDA had released its final guidance was to resubmit the risk product and ask the FDA to classify it. And they did come back in which we have a firm answer from them that it is classified as a de novo or brand-new device.
There is no predicate device in the market today.
And so we're definitely breaking ground with something brand-new. So we are going through the process right now of preparing have all of the data and the documentation information needed for a denovo device submission to the FDA. So that will be a longer process. So I think our estimates are it's probably going to be sometime early 2025. We hope if everything goes well, when you know, we received any form of clearance back from the FDA AdCom. But again, you never know kind of what questions they come back with, but it is moving forward and it seems to be better.
Understood now that we've submitted some of the answers to prior questions that we received. And so it's just a matter of, you know, going through the FDA process.
Per Ostlund
Sure. That makes sense. This may be a leading question, but indulge me another of the fact that it's being treated as a de novo it that obviously adds a little bit of time to the equation. But yes, it does it also at the same time actually strengthen your hand in the sense that there are other decision support tools out there that are kind of calling flips where you come out with a de novo clearance from FDA on your risk product? And should that kind of move to everybody sort of held the line for what they would want to use in that sort of scenario.
Dana Brown
And it has been in part to be to have saved a bit of the benefit. And being denovo is we can kind of set the bar right for what additional products you know, we need to provide in terms of functionality and their accuracy in order to claim.
We're a predicate device for that.
So on and it is also still available today for investigational use. So we still have customers using the product and deriving some benefit for their customers. They're just not able to commercialize it, but that strengthens that analysis and the data that we can provide to the FDA do their use of it in an investigation mode.
Per Ostlund
Okay, very good. I would ask two more if I can.
Yes, the on the revenue performance in Q4 was nicely ahead of my forecast and consensus and I would hazard a guess that we all probably trying to be a little bit conservative because of the moving parts in the transition and what have you did the quarter surprise you at all from versus your and Eric and the team's internal expectations because of an 80 immovable sale and nine subscription seems like a pretty good number come over, probably all implicitly had in our models.
Dana Brown
And I'm trying to think like the music so that the part that didn't did not raise surprises is we have a pretty rigorous forecasting and pipeline review process that happens every single week up very consistently. So we begin to see, you know, deals moving through stages of the pipeline, obviously much earlier than it's at a point where it's something you could announce, right? So I would say we began seeing that movement happen. The flipside is, you know, it was first time through that pipeline for kind of all of us as a team.
Great. And so while you might have a sales rep, you know, and forecasting you deal it at stage three, right? And have Stage four is kind of getting to the final stages here.
We ask as many questions as we can to try to validate that.
But you still got a little bit of, you know, fingers crossed that Ralf speaking apples to apples in terms of expectation that things are moving to this stage and so on. So you know, I would say like a round of financing back on the one hand, you know, we start building and beginning to have some of that predictability. On the other hand, it was first time through the process. And so we hope, you know, everybody was qualifying deals and categorizing them as stages that we're all on the same wavelength. I think Q4 in general, just having spent literally decades in software, it isn't always the best quarter, right? It's always very seasonal. So there was some expectation there in terms of just like the quantity of freight and deals that might come through, everybody like to take advantage of any discounts or just kind of end-of-year budget money that's available. So that part, I would say, kind of played through in terms of like a traditional software business, especially Software as a Service business back on, I'll ask Eric, if he wants to chime in, he can feel free to let you know, have the exact opposite point of view.
It sets up a bit.
Eric Lonnqvist
And I agree that I wasn't really that surprised by the results. Honestly, we had a few deals that slipped out of Q3. I think maybe my take would be that Q3 was a little lower than we expected in Q2, Q4 might have a slight benefit from that. But by now, I think it was in line with what we expected going into Q4 internally. And I don't think it's an anomaly for the business at all. I think it's up. I think it's a good quarter. We're happy with it, but it's not it's not a ridiculously high that we're surprised by it. I think it's I think we executed expectations in Q4.
Per Ostlund
That's great. One last one. I apologize. I feel like I'm hogging the queue, but thank you. But maybe just a super big picture question. Rsna, I think was it was your first time at RSNA, I believe, Dana, just curious if you had sort of a high-level takeaway of what you felt like on iCAD's overall presence and messaging and what the interest was in the JV other really interesting things out there that that gave you pause as far as your competitive standing or any kind of just any and you have viewed you kind of thought coming away from that show.
Dana Brown
So overall, I think our show presence and level of activity exceeded my expectations. It does. So we had a bit of an internal competition and kind of a high bar in terms of what would count as a meeting right, that was booked during RSNA meeting with a prospect our customer and had to meet certain criteria, as you heard on the call.
Right, Mike prepared remarks.
Yes, we were at a sales force, 50% signs of the year before.
And we had far more meetings and qualified meetings at RS&A generated by that small and mighty team. So in in both the US basis was international based meeting. So I think our share presence was great and we had people expressing genuine interest. And I would say the flip side is because I was a bit the notice meeting. They probably didn't get to walk the show floor and checkout other things that were going on as much as I thought that I might add, but I did get to spend time at some of our competitors boost CNO. Everybody's kind of a bit more friendly to us in the trade show environment. They knew of some walking around and open to talk. So that was great. And obviously seeing the presence of companies like GEM., which is fabulous and getting to get a peek at some of their innovations, things that were important to them in terms of articulating their innovation and the way that they want to see their products positioned.
As I mentioned, right, it was very timely because we were able to announce this full-blown integration into their my breast AI Suite at the show. So that was quite I think if I flip it around and I'm the radiologist walking the show floor. I think it can still be a bit overwhelming figuring out how all of these technology components fit together and kind of how how I make my decisions Ray, on what to use and in what order. So that gave us more insights when we when we came back home after the show on ways of which to really improve our messaging, our product demos, even our initial kind of introductory eyecare pitches.
So we've been spending a lot of time on that.
We are developing a new kind of adoption campaign and some training materials trying to make sure that we don't underestimate the amount of change management and cultural adoption that needs to happen with AI. rating you heard me put the stat and we actually talked about this even with Hologic team members at the show of only 37%, Ray, as you know, screening, right, mammography screening centers are using AI, and there's still a long ways to go to really, you know, saturate that market. And so what are barriers to adoption?
And a lot of it's just cultural and change.
And so we've been focusing a lot more on that and to complement maybe the technical aptitude and knowledge that we tried to share in our presentations in the past.
Per Ostlund
That's great. That's very thorough.
Thank you.
I my only answer.
Dana Brown
Yes.
Operator
Thank you. Our next question is coming from Marie Thibault with BTIG. Your line is live.
Marie Thibault
Hi, good evening. Thanks for taking the questions. Dan and Erik, I wanted to ask you about your new head of sales and the new folks that you welcomed onto your sales team tell me a little bit about when they came on when you expect them to ramp. What they're focused on. Is this perpetual versus subscription a bit of both and how we can expect to see OpEx maybe step up a little bit. I know that's been very nicely controlled, but I guess you have to spend a bit on some of these nacelles?
Dana Brown
Yes. So I'll talk a bit about the second, like the new structure for the sales team and then hand it over to Eric to talk about the OpEx side.
So maybe just to step back, when we had the six sales reps and we had a head of sales, I'll say everybody is kind of doing everything. And B, do we really get to know a salesperson, I would say most often their DNA skews to either really being excited about cold calls in new business, right, or they may like more of the ongoing relationship management account management. I'm just kind of care and feeding right of existing accounts. And given our large installed base, we were skewing much more right to that side of the equation, much more to an account management versus a new business type of DNA and the sales team. So when we thought about the way in which we wanted to restructure the team going forward. We wanted to do a better division of roles and responsibilities. So I'm the new Head of Sales. We brought on board and he's the new SVP for commercial for North America at both the US and Canada. And he definitely wired as a new business guy. So he likes getting the net new logos and breaking ground right in new and new accounts. So and to complement that, I would say, of the six that we had, we had one other individual who's really clearly kind of a new business person and we had one with a strong hybrid and the rest were really great at account management. So two of the four that we've added one was the new leader that I just mentioned, we added two more on account reps that are focused on new business and we have three people and kind of double-clicking on new business. We added a new strategic national accounts executive and she's on board. So that makes up the four new people that we have and then move that existing shelf payment to more of that account management role. And as account managers, they are really focused on and expanding within an existing account on making sure accounts are staying current on upgrades and updates, maintenance and support agreements whereas the new business team is really kind of net new logos. So everyone, the head, the new SVP, started very late December and the other three new individuals started in mid-January. So their pipelines are beginning to build on. A couple of them have some very small deals on the board as our SVP likes to describe it, and we're expecting right that that they've got a couple of quarters here of ramping up. So farther, they're on track with what our expectations are and hopefully begin to contribute in the second half of the year?
Yes, you were talking about, I would say maybe a couple of other ITO. I would say kind of hold and her team that we sell, we did add a couple of other regulatory resource and a couple of engineering resources as well.
Right. So to your point, when you think about OpEx, in addition to some of the sales hires we had a couple of others, and those are the departments as well.
Marie Thibault
Anything from Eric Clara?
Eric Lonnqvist
Yes, I can add in a little bit of color to add. So in Q4, our OpEx was right around $5 million, I think. And as you're thinking about what that means is kind of the first clean quarter without Zoloft, we did have some benefit in the quarter, I think one-time kind of a favorable P&L impact. So I'd say in the two to $300,000 range. So I think about Q4 is kind of where we're at in OpEx posted soft, but going forward is going to change quite a bit.
So Dan has mentioned and you've talked about we released publicly. He sees increases in the sales team for new heads and they're pretty are they pretty senior level people, some of them. So it will be a there will be an expense. It is largely isn't in our run rate for Q4. And there is also some of the things Dana mentioned in terms of investments in regulatory is part of the plan as we enter this kind of third investment phase after we've stabilized the cash burn. So you will see a bump for these initiatives in OpEx.
Marie Thibault
Okay. That's helpful detail from both of you thank you for that. And wanted a quick update on Q3. You mentioned that about a quarter of the customer base had lapsed. There are maintenance agreements and there is an effort there to tried to renew some of that, any early progress updates on that effort?
Dana Brown
We mean it because it's happened here like just the recent first quarter on that, we're still in the midst of we don't have anything that we are able to disclose yet. But I can tell you anecdotally it's going well and we actually have it a service pack which is an update quite a bit of functionality that will be released next week. And so that's also spurring customers to get current on the version of the software because they went take advantage of those new features and functions, but it is and to your point, we didn't make that information known in Q3. So it's something that we are tracking and those are metrics that we plan on being able to talk about on next quarter's call.
Marie Thibault
Okay.
We look forward to it. And one last question on. I'm just as I look ahead on your pipeline. You've got some nice new products like breast arterial calcification, potentially risk being added to kind of the suite of products that you offer. How should we think about how that impacts pricing or ASPM. as you kind of go out and offer these opportunities, would that increase the subscription ASP.s or is it all going to be part of one package. How to think about that?
Dana Brown
Well, both products are under review, but from the with the FDA right now. So and we can we think about 2024, you're not going to see a big, a big impact, right, which could take time to get through the FDA and they're available for investigational use right now but under that categorization, we actually can't, you know, generate revenues from them from customers. (multiple speakers)
Marie Thibault
(multiple speakers) I'm looking into the future yet. But the CPR should think?
Dana Brown
Yes.
So the solutions are priced both, I would say individually, right? So if you're an existing customer and you want to add it on UK and the products are available in the cloud. So they can be an incremental unit price, right, a revenue to an existing subscription. And then we also offer, you know, the whole bundle. So And Eric, if you have any more like color, you want to add to how we think about the pricing.
Eric Lonnqvist
Side, the sales team is super excited to, again came in the door with our core suite of detection products. And they're chomping at the bit to have these add-ons to go to customers was kind of up our land-and-expand type strategy. So they can't get approved fast enough. I think for our new sales team.
Marie Thibault
Okay.
Good to hear. Thanks so much for taking the questions from here.
Operator
Yes, banQi final question today. Will be coming from Yale Jen with Laidlaw & Company. Your line is nice.
I-Eh Jen
Good afternoon and thanks for squeezing me in. Just two quick ones. The first one is I appreciate that you provide the detail of number of deals done in the fourth quarter. My question to that is that does the perpetual order of fourth quarter generally. So the four numbers a referable number for, let's say, 2024 or that also it's very fluctuating quarter over quarter.
Eric Lonnqvist
Again, I don't know if I take that one.
Dana Brown
Yeah, please.
Eric Lonnqvist
Yeah, I think you're asking you're asking if the perpetual deals fluctuate a lot between quarters?
I-Eh Jen
I mean, I didn't know what does that protect you rate a lot.
I mean, between quarters I'm just having we have the 81 up and the number ideas to one for the fourth quarter. So I wonder whether going forward, would that be a sort of read of the consistent number then roughly quarter-over-quarter?
Oh, that's actually also could be fluctuate quite a bit over time.
Eric Lonnqvist
Yes, they do have and they do fluctuate a little bit and order of magnitude of magnitude, not a time instead of looking forward?
I'm kind of looking back at the last few quarters. I mean, we were up a bit from Q3. I think I think if you're trying to think about how to model it going forward?
I probably look at what we did release the number in Q3. I think it was closer to 60 deals for perpetual, and we're up to 80-ish in Q4. So that's the movement right there. So it can move around quite bit. I'm not like to extra spend expense. It's been fairly consistent the last few quarters. I think more what can change the perpetual deals of the size of the deals still they can get one or two real big ones it can swing the revenue if you're if you're trying to model yourself?
I-Eh Jen
Yes.
Okay. Great.
Eric Lonnqvist
That's very helpful.
Our stable. But yes.
I-Eh Jen
Okay.
That's out of that's very helpful. And maybe just one more add to here, which is now you are a pure play in the detection side. So I do noticed that the margins, the gross margin has been sort of more stable from the last quarter. So should we consider this quarter's number?
Our reference point for 2024 may be yes.
Eric Lonnqvist
Yes, I can’t speak to the future. But for this quarter, it is the first quarter without often a clean view. We had the 91% margin. I think there's a few pieces in this quarter. That did drive it. It affected the mix shift of what we sold. We sold more licenses and less hardware this quarter. So our margins are higher on the licenses. So that that drove it up a bit. So going forward, if that mix shift changes more towards licenses, our margins will be better more towards hardware sales and the margins will come down a little bit. So this quarter we did benefit a bit from that. And I think last year we reported also in our continuing business would be, which would be detection alone our margin was f in 2022. So I think somewhere in that range is where we're kind of looking for detection. The 85 to 91, what we've seen to date, but it could be it could change due to a number of factors, the mix shift in sales and the mix shift more from perpetual to cloud. There's a number of factors that that could move that number going forward.
I-Eh Jen
Okay.
Great.
That's very helpful and help us during the modeling. So again, congrats on the progress look forward to talking neutralize the threat.
Dana Brown
Thanks.
Operator
Yes, thank you. As we have no further questions in queue, I shall hand it back to management for any closing remarks.
Dana Brown
Thank you, operator. In conclusion, we're making bold moves to rapidly transform this company with a focus on maintaining stability, preserving our cash and building a defensible and competitive long-term strategy. Demand for our technology continues to be strong. The evidence supporting it continues to grow, and our team continues to secure opportunities with some of the most prestigious and esteemed health care facilities worldwide. I remain optimistic about the Company and its future. And I firmly believe in the bright future of the Company and our ability to generate significant shareholder value.
Thank you and have a great evening.
Operator
Thank you. This concludes today's conference and you may disconnect your lines at this time, and we thank you for your participation.
