iCAD Reports Fourth Quarter and Full Year 2012 Financial Results

  iCAD Reports Fourth Quarter and Full Year 2012 Financial Results

Fourth Quarter Revenue Increases 18% Over Prior Year; Positive Cash Flow from
                                  Operations

 Conference Call Begins Wednesday, February 20^th at 10:00 a.m. Eastern Time

Business Wire

NASHUA, N.H. -- February 19, 2013

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

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

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

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

Fourth Quarter Financial Results

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

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

                    Three months ended December 31,
                     2012        2011     % Change
Products             $  4,728    $ 4,220  12   %
Service and supply     3,090     2,390  29   %
Total revenue        $  7,818    $ 6,610  18   %
                     
                    Three months ended December 31,
                     2012        2011     % Change
Cancer Detection     $  4,710     $ 5,004   (6   )%
Therapy                3,108     1,606  94   %
Total revenue        $  7,818    $ 6,610  18   %
                                            

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

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

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

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

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

Full Year Financial Results

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

                    12 months ended December 31,
                     2012      2011      % Change
Products             $ 17,976  $ 19,328  (7   )%
Service and supply    10,299   9,324   10   %
Total revenue        $ 28,275  $ 28,652  (1   )%
                     
                    12 months ended December 31,
                     2012      2011      % Change
Cancer Detection     $ 17,262   $ 22,765   (24  )%
Therapy               11,013   5,887   87   %
Total revenue        $ 28,275  $ 28,652  (1   )%
                                           

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

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

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

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

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

Use of Non-GAAP Financial Measures

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

Conference Call

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

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

About iCAD, Inc.

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

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

Certain statements contained in this News Release constitute “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve a number of known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, but are not limited to the
Company’s ability to defend itself in litigation matters, to achieve business
and strategic objectives, the risks of uncertainty of patent protection, the
impact of supply and manufacturing constraints or difficulties, uncertainty of
future sales levels, protection of patents and other proprietary rights, the
impact of supply and manufacturing constraints or difficulties, product market
acceptance, possible technological obsolescence of products, increased
competition, litigation and/or government regulation, changes in Medicare
reimbursement policies, risks relating to our existing and future debt
obligations, competitive factors, the effects of a decline in the economy or
markets served by the Company; and other risks detailed in the Company’s
filings with the Securities and Exchange Commission. The words “believe”,
“demonstrate”, “intend”, “expect”, “estimate”, “will”, “continue”,
“anticipate”, “likely”, “seek”, and similar expressions identify
forward-looking statements. Readers are cautioned not to place undue reliance
on those forward-looking statements, which speak only as of the date the
statement was made. The Company is under no obligation to provide any updates
to any information contained in this release. For additional disclosure
regarding these and other risks faced by iCAD, please see the disclosure
contained in our public filings with the Securities and Exchange Commission,
available on the Investors section of our website at http://www.icadmed.com
and on the SEC’s website at http://www.sec.gov.

iCAD, INC. AND SUBSIDIARY
                                                             
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands except for share data)
                                                                  
                                                 December 31,     December 31,
Assets                                           2012             2011
                                                                  
Current assets:
Cash and cash equivalents                      $ 13,948         $ 4,576
Trade accounts receivable, net of allowance
for doubtful accounts of $48 in 2012 and $54     4,980            4,003
in 2011
Inventory, net                                   2,119            2,040
Prepaid expenses and other current assets        486             490       
Total current assets                             21,533          11,109    
                                                                  
Property and equipment, net of accumulated
depreciation and amortization of $3,627 in       1,483            1,884
2012 and $3,184 in 2011
Other assets                                     638              595
Intangible assets, net of accumulated
amortization of $10,744 in 2012 and $8,840       15,230           17,064
in 2011
Goodwill                                         21,109          21,109    
Total assets                                   $ 59,993        $ 51,761    
                                                                  
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable                               $ 1,940          $ 1,198
Accrued and other expenses                       4,142            5,521
Interest payable                                 499              -
Warrant liability                                1,538            -
Deferred revenue                                 6,520           5,765     
Total current liabilities                        14,639          12,484    
                                                                  
Deferred revenue, long-term portion              1,502            1,446
Other long-term liabilities                      1,341            1,776
Notes payable                                    14,846          -         
Total liabilities                                32,328          15,706    
                                                                  
Commitments and Contingencies
                                                                  
Stockholders' equity:
Preferred stock, $ .01 par value: authorized
1,000,000 shares;
none issued.                                     -                -
Common stock, $ .01 par value: authorized
85,000,000
shares; issued 10,993,933 in 2012 and
10,950,902 in 2011;
outstanding 10,808,102 in 2012 and               110              110
10,765,071 in 2011
Additional paid-in capital                       165,416          164,432
Accumulated deficit                              (136,446  )      (127,072  )
Treasury stock at cost 185,831 in 2012 and       (1,415    )      (1,415    )
2011
Total stockholders' equity                       27,665          36,055    
                                                                  
Total liabilities and stockholders' equity     $ 59,993        $ 51,761    
                                                                  

iCAD, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands except for per share data)
                                                              
                      Three Months Ended December    Year Ended December 31,
                       31,
                       2012             2011           2012          2011
Revenue:
Products             $ 4,728         $  4,220        $ 17,976      $ 19,328
Service and            3,090           2,390         10,299       9,324   
supplies
Total revenue          7,818            6,610          28,275        28,652
                                                                     
Cost of revenue:
Products               1,231            1,161          4,834         4,788
Service and            801              715            2,479         2,906
supplies
Amortization of
acquired               233             232           931          931     
intangibles
Total cost of          2,265            2,108          8,244         8,625
revenue
                                                                  
Gross profit           5,553           4,502         20,031       20,027  
                                                                     
Operating
expenses:
Engineering and
product                1,611            2,081          7,769         10,791
development
Marketing and          2,732            2,904          10,708        13,684
sales
General and            1,995            1,750          6,966         9,999
administrative
Contingent             -                -              -             (4,900  )
Consideration
Goodwill               -                -              -             26,828
Impairment
Loss on
indemnification        -               (60     )      -            741     
asset
Total operating        6,338            6,675          25,443        57,143
expenses
                                                                  
Loss from              (785    )        (2,173  )      (5,412  )     (37,116 )
operations
                                                                     
Gain on sale of        -                -              -             -
patent
Loss from change
in fair value of       (1,051  )        -              (539    )     -
warrant
Interest expense       (866    )        (104    )      (3,415  )     (431    )
Other (expense)        8                12             35            36
income
Tax (expense)          (8      )        39            (43     )     (76     )
benefit
Net loss and         $ (2,702  )     $  (2,226  )    $ (9,374  )   $ (37,587 )
comprehensive loss
                                                                     
Net loss per
share:
Basic and diluted    $ (0.25   )     $  (0.20   )    $ (0.87   )   $ (3.45   )
                                                                     
Weighted average
number of shares
used in
computing loss per
share:
Basic and diluted      10,808          10,918        10,796       10,910  
                                                                     

iCAD, INC. AND SUBSIDIARY
                                                           
Condensed Consolidated Statements of Cash Flows
                                                                   
                                              For the year ended December 31,
                                               2012                2011
                                              (in thousands)
Cash flow from operating activities:
Net loss                                     $ (9,374   )       $  (37,587  )
Adjustments to reconcile net loss to net
cash used for
operating activities:
Depreciation                                   891                 1,077
Amortization                                   1,904               2,094
Gain from change in fair value of warrant      539                 -
Goodwill impairment                            -                   26,828
Loss on disposal of assets                     174                 21
Loss on indemnification asset                  -                   741
Stock-based compensation expense               996                 904
Amortization of debt discount and debt         1,012               -
costs
Interest on settlement obligations             388                 422
Fair value of contingent consideration         -                   (4,900   )
Changes in operating assets and
liabilities, net of acquisition:
Accounts receivable                            (976     )          (614     )
Inventory                                      (79      )          1,449
Prepaid and other current assets               469                 248
Accounts payable                               815                 (1,375   )
Accrued expenses                               (1,775   )          (713     )
Deferred revenue                               812                1,263    
Total adjustments                              5,170              27,445   
                                                                   
Net cash used for operating activities         (4,204   )          (10,142  )
                                                                   
Cash flow from investing activities:
Additions to patents, technology and other     (70      )          (13      )
Additions to property and equipment            (665     )          (263     )
Net cash used for investing activities         (735     )          (276     )
                                                                   
Cash flow from financing activities:
Issuance of common stock for cash              -                   60
Taxes paid related to restricted stock         (14      )          (67      )
issuance
Payment for Xoft                               -                   (1,268   )
Proceeds from debt financing, net              14,325             -        
Net cash (used for) provided by financing      14,311             (1,275   )
activities
                                                                   
Increase (decrease) in cash and                9,372               (11,693  )
equivalents
Cash and equivalents, beginning of period      4,576              16,269   
Cash and equivalents, end of period          $ 13,948          $  4,576    
                                                                            

  RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO COMPARABLE GAAP MEASURES

             (Unaudited, in thousands, except per share amounts)

The following is a reconciliation of the non-GAAP financial measures used by
the Company to describe the Company's financial results determined in
accordance with United States generally accepted accounting principles (GAAP).
An explanation of these measures is also included below under the heading
"Explanation of Non-GAAP Financial Measures".

While management believes that these non-GAAP financial measures provide
useful supplemental information to investors regarding the underlying
performance of the Company's business operations, investors are reminded to
consider these non-GAAP measures in addition to, and not as a substitute for,
financial performance measures prepared in accordance with GAAP. In addition,
it should be noted that these non-GAAP financial measures may be different
from non-GAAP measures used by other companies, and management may utilize
other measures to illustrate performance in the future. Non-GAAP measures have
limitations in that they do not reflect all of the amounts associated with the
Company's results of operations as determined in accordance with GAAP.

Non-GAAP Adjusted EBITDA

Set forth below is a reconciliation of the Company's "Non-GAAP Adjusted
EBITDA"

(Unaudited, in thousands)
                                                  
                      Three Months Ended December    Year Ended December 31,
                       31,
                       2012            2011           2012         2011
GAAP Net Loss        $ (2,702  )     $  (2,226  )    $ (9,374  )   $ (37,587 )
                                                                     
Interest Expense       866              104            3,415         431
Other (expense)        (8      )        (12     )      (35     )     (36     )
income
Stock Compensation     265              220            996           904
Depreciation           190              264            891           1,077
Amortization           432              524            1,904         2,094
Tax expense            8                (39     )      43            76
(benefit)
Severance              -                5              80            542
Loss (Gain) on         1,051            -              539           -
warrant
Recall and patent      -                10             -             1,578
lawsuits
Acquisition            -                -              -             374
related
Contingent             -                -              -             (4,900  )
consideration
Goodwill               -                -              -             26,828
Impairment
Loss on
indemnification        -               (60     )      -            741     
asset
Non GAAP Adjusted    $ 102          $  (1,210  )    $ (1,541  )   $ (7,878  )
EBITDA
                                                                             

Non-GAAP Adjusted Net Loss

Set forth below is a reconciliation of the Company's "Non-GAAP Adjusted Net
Loss"

(Unaudited, in thousands, except loss per share)
                                                  
                      Three Months Ended December    Year Ended December 31,
                       31,
                       2012            2011           2012         2011
GAAP Net Loss        $ (2,702  )     $  (2,226  )    $ (9,374  )   $ (37,587 )
Adjustments to net
loss:
Severance              -                5              80            542
Gain on warrant        1,051            -              539           -
Recall and patent      -                10             -             1,578
lawsuits
Acquisition            -                -              -             374
related
Contingent             -                -              -             (4,900  )
consideration
Goodwill               -                -              -             26,828
Impairment
Loss on
indemnification        -               (60     )      -            741     
asset
Non GAAP Adjusted    $ (1,651  )     $  (2,271  )    $ (8,755  )   $ (12,424 )
Net Loss
                                                                     
                                                                     
Net loss per share
GAAP Net loss per    $ (0.25   )     $  (0.20   )    $ (0.87   )   $ (3.45   )
share
Adjustments to net
loss (as detailed      0.10            (0.01   )      0.06         2.31    
above)
Non GAAP Adjusted    $ (0.15   )     $  (0.21   )    $ (0.81   )   $ (1.14   )
Net Loss per share
                                                                             

Explanation of Non-GAAP Financial Measures

The Company reports its financial results in accordance with United States
generally accepted accounting principles, or U.S. GAAP (“GAAP”). However,
management believes that in order to properly understand the Company's
short-term and long-term financial and operational trends, investors may wish
to consider the impact of certain non-cash or non-recurring items, when used
as a supplement to financial performance measures in accordance with GAAP.
These items result from facts and circumstances that vary in frequency and/or
impact on continuing operations. Management also uses results of operations
before such items to evaluate the operating performance of the Company and
compare it against past periods, make operating decisions, and serve as a
basis for strategic planning. These non-GAAP financial measures provide
management with additional means to understand and evaluate the operating
results and trends in the Company's ongoing business by eliminating certain
non-cash expenses and other items that management believes might otherwise
make comparisons of the Company's ongoing business with prior periods more
difficult, obscure trends in ongoing operations, or reduce management's
ability to make useful forecasts. Management believes that these non-GAAP
financial measures provide additional means of evaluating period-over-period
operating performance. In addition, management understands that some investors
and financial analysts find this information helpful in analyzing the
Company's financial and operational performance and comparing this performance
to its peers and competitors.

Management defines "Non-GAAP “Adjusted EBITDA" as the sum of GAAP net loss
before provision for income taxes, acquisition-related expenses, total other
(income) expense, stock-based compensation expense, depreciation and
amortization, severance, gain on sale, loss on warrant, amortization of
acquired intangibles, acquisition related, patent litigation and recall costs,
contingent consideration, indemnification asset and goodwill impairment
charges. Management considers this non-GAAP financial measure to be an
important indicator of the Company's operational strength and performance of
its business and a good measure of its historical operating trends, in
particular the extent to which ongoing operations impact the Company's overall
financial performance.

Management defines "Non-GAAP Adjusted Net Loss" as the sum of GAAP net loss
before provision for the gain on sale of asset, severance, transaction, patent
litigation and recall costs, contingent consideration, indemnification asset
and goodwill impairment charges. Management considers this non-GAAP financial
measure to be an important indicator of the Company's operational strength and
performance of its business and a good measure of its historical operating
trends, in particular the extent to which ongoing operations impact the
Company's overall financial performance.

Management excludes each of the items identified below from the applicable
non-GAAP financial measure referenced above for the reasons set forth with
respect to that excluded item:

  *Stock-based compensation expense: excluded as these are non-cash expenses
    that management does not consider part of ongoing operating results when
    assessing the performance of the Company's business, and also because the
    total amount of expense is partially outside of the Company's control as
    it is based on factors such as stock price volatility and interest rates,
    which may be unrelated to our performance during the period in which the
    expense is incurred.
  *Amortization of acquired intangibles: acquisition-related expenses are
    reported at the time acquisition costs are incurred, and purchased
    intangibles are amortized over a period of several years after the
    acquisition and generally cannot be changed or influenced by management
    after the acquisition. Accordingly, these items are not considered by
    management in making operating decisions, and management believes that
    such expenses do not have a direct correlation to future business
    operations. Thus, including such charges does not accurately reflect the
    performance of the Company's ongoing operations for the period in which
    such charges are incurred.
  *Interest expense: In January 2012, the Company entered into a five-year,
    $15 million debt facility agreement. The Company excludes interest expense
    from its non GAAP Adjusted EBITDA calculation.
  *Severance: relates to costs incurred due to the termination of certain
    employees. The Company provides compensation to certain employees as an
    accommodation upon termination of employment without cause. Management
    believes that excluding severance costs from operating results provides
    investors with a better means for measuring current Company performance.
  *Recall and patent lawsuits: These expenses consist primarily of
    investigation, audit, legal and other professional fees related to the
    recall and patent litigation, as well as recoveries received from third
    parties. The Company excludes these costs and recoveries from its non-GAAP
    measures primarily because the Company believes that these costs and
    recoveries have no direct correlation to the core operation of the
    Company's.
  *Indemnification asset gain (loss): The Company recorded an indemnification
    asset representing Xoft, Inc.’s obligation to indemnify iCAD for the
    outcome of potential liabilities as a result of iCAD’s acquisition of
    Xoft, Inc. The Company does not consider the indemnification asset
    gain(loss) to be directly related to the continuing operations of the
    business
  *Gain (loss) on Warrant: The Company issued warrants in connection with the
    financing and the value changes according to fair value. It is excluded as
    these are non-cash expenses that management does not consider part of
    ongoing operating results when assessing the performance of the Company's
    business, also because the total amount of gain or loss is partially
    outside of the Company's control as it is based on factors such as stock
    price volatility and interest rates, which may be unrelated to our
    performance during the period in which the gain or loss is incurred.

On occasion in the future, there may be other items, such as significant asset
impairments, restructuring charges or significant gains or losses from
contingencies that the Company may exclude if it believes that doing so is
consistent with the goal of providing useful information to investors and
management.

Contact:

For iCAD
Kevin Burns, 937-431-7967
kburns@icadmed.com
or
For iCAD investor relations
LHA
Anne Marie Fields, 212-838-3777 x6604
afields@lhai.com
or
For iCAD media inquiries
Schwartz MSL
Helen Shik, 781-684-0770
iCAD@schwartzmsl.com
 
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