Q1 2024 ICAD Inc Earnings Call

Participants

Jeremy Bennett; Vice President of Marketing; ICAD Inc

Dana Brown; Executive Chairman of the Board, President, Chief Executive Officer; ICAD Inc

Eric Lonnqvist; Chief Financial Officer; ICAD Inc

Per Ostlund; Analyst; Craig-Hallum Capital Group LLC

Yale Jen; Analyst; Laidlaw & Company (UK) Ltd

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the ICAD Inc first quarter 2024 earnings call. ( Operator Instructions) Please note this call is being recorded.
It is now my pleasure to turn the floor over to your host, Mr. Jeremy Bennett. Sir, the floor is yours.

Jeremy Bennett

Thank you, operator. Good morning, everyone, and thank you for joining us for today for ICAD's first quarter fiscal year 2024 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 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. ICAD 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.
And with that, I'll turn the call over to Dana.

Dana Brown

Thank you, Jeremy, and good morning, everyone. Let's begin with our business update on our last call. I recap the progress we've made executing a phase transformation. We've completed Phases one and two, which were realigning our base and strengthening our foundation in these two phases, we were focused on stabilizing our cash burn, strengthening our leadership team and divesting the ZAP business Phase three, investing in growth initiatives began in first quarter 2024, with the focus on expanding into key accounts and new markets with our existing solution.
This phase is focused on maximizing revenue from our sizable installed base, including reengaging customers who've lapsed on annual maintenance service agreements, upgrading customers to new versions, including the transition to cloud and accelerating deployments across large national accounts to set us up for success.
We have developed and launched targeted lead gen programs previously a reliable and consistent inflow of new leads and a documented and measured pipeline management process did not exist. We've revamped our commercial models. We've reorganized our team structure how we target and segment our market, revised messaging, pricing and account management strategies.
And as noted on a prior call, we believe US sales had declined in part due 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 2022. After a thorough analysis of rep performance over the past three years and our large addressable market opportunity, we believe adding additional sales reps focused on new business and a more orchestrated effort on account retention and expansion would result in increased revenues in December 2023, we announced adding Peter Graham as head of North American sales in first quarter, key added four new reps to the sales team.
Let's turn now to a few brief Q1 deal highlights. Dignity Health, a part of Common Spirit signed a four year subscription deal. They're using our technology on their Hologic gantries. The initial deal was for a portion of their gantries. There will be room to expand as we go forward.
Riley radiology, a perpetual license deal was a competitive head-to-head win against Hologic. Raleigh radiology serves over 80,000 patients in the Raleigh market nor the Navajo while a smaller deal. It's important to our strategy to serve the First Nation. We will be working together to rollout continued education and support to expand the reach to Native American women. This was also a perpetual deal. University of Chicago Medical Center is an expansion for us with upgraded software and added exam volumes in 2024.
This is a subscription deal with room to continue to expand their use over the coming years. Avaira McKinnon hospital chose ICAD because of our ability to move them closer to a total virtual platform. We're supporting their 2D mammography today via a new VM platform with future plans to expand support to 3D and cloud Hancock Regional Hospital, a perpetual deal purchased for 2D and 3D profound detection solutions for use with their Hologic systems, Indiana University Health, our net perpetual deal also purchased both 2D and 3D profound detection solutions.
We are the largest health system in Indiana and are continuing to expand use of ICAD's AI in a mixed gantry environment. That's predominantly Hologic. There's additional room for expansion within this account as well University of Texas, Tyler, and upgrade of an existing perpetual deal. The value add for this upgrade was to improve detection accuracy and overall improved outcomes for their patients by adding 3D detection defined cancers earlier, reducing false positives and improving workflow efficiency.
And lastly, we expanded into five additional solar sites standardization with ICAD's ProFound AI Suite across all existing and new Solus sites enable Solus to remain the industry leader that provides both state-of-the-art technology with a best-in-class patient experience in Q1 we also achieved several milestones with our OUS sales channel, further expanding ICAD's global reach in Turkey. Profound detection has recently been implemented in one of the largest and most important hospitals in Istanbul, Andalou Medical Center.
This center has a strategic relationship with Johns Hopkins Hospital, providing continuous access to the latest innovations and technology advancements. This relationship provides Icade's significant exposure within this Eastern European region. In Serbia, we secured our second sale at a large oncology site in volume readiness, expanding presence within this country.
In Poland, we celebrated our first installation of profound detection and one of the largest oncology sites just outside of Warsaw, radome ski Centrum oncologists in Israel to complement the 13 licenses of profound detection and risk already sold to the complete hospital network, one of Israel's leading medical groups. We sold the 14th license to the clear lead research center where they will be conducting a research study leading to future publication in France, our direct sales force signed an agreement with one of the largest multisite private clinics hub for Audinate to facilitate implementing profound detection across their 100 clinics in France.
Lastly, in the first quarter, I had received international television exposure featuring interviews of several radiologists using profound detection from different countries. This aired on French Belgium and Israeli television.
Turning now to marketing and clinical research, a quick review of our first quarter conference and publication activity in January, I had participated in Arab Health and Dubai, the largest health care exhibition in the Middle East, attracting over 52,000 professionals from 176 countries. During this event, we announced our new partnership with Evotec healthcare solutions.
Our distributor in the UAE with Emitec. We engaged in meetings with three prominent hospital groups, Prime Healthcare, EHS in Brazil and with the UAE Ministry of Health in late February, we attended the European Society, radiology or ECRVNLECR. are the largest and most important medical imaging conference in Europe this year. The conference Drew just under 19,000 attendees from 127 countries, including over 12,000 radiology professionals. We hosted an event with over 40 of our European distributors and their customers coming from 13 different countries.
ICAD was also prominently featured in four clinical presentations covering a variety of topics. A retrospective study at their radio Amelia breast screening program in Italy led by Andrea literacy, Ph. D aim to assess the efficacy of implementing ICAD's ProFound AI K. scoring strategy and a breast screening program to expedite the reading process.
This study concluded that adding artificial intelligence case scoring in a breast screening program can overcome delay and improved prioritization in most probably true positive cases, a second retrospective study by the same group, AIM to assess the integration of ICAD's case malignancy scoring into a breast screening program to alleviate workload without compromising accuracy. Analyzing data from over 31,000 screening exams, including 92 proven tumors.
The study stimulated to integration, AI and human reading protocols, results show that implementing ICAD's ProFound AI could substantially reduce the number of human readings and workload by up to 30% with a modest improvement in recall rate and no increase in false negatives observed Jonas Velac, a research associate and PhD candidate, along with others from the University of St. Gallen and credit risk get pushed with in Switzerland in radiology and theater in Germany presented a retrospective evaluation of interval breast cancer using cutting edge advances in AI for radiological imaging using AI to reduce the number of interval carcinomas by using a diagnostic software.
And Dr. Suraj Carnegie, Chief Medical Officer for solar tomography was awarded an ECR certificate of merit for his presentation on breast arterial calcification or BAC. as a proxy for broader vessel disease. In addition, we showcased at two GE. sponsored educational events.
One topic on the adoption of artificial intelligence in breast imaging by Dr. Karim Valley gear, head of medical imaging department Institute, BlueStar BLUE-C in France, and the second on the impact of AI in clinical routines for the detection of breast cancer on mammograms by Dr. Axel Bradley, both of Germany.
Lastly, in March, we showcased our solutions at the National consortium of breast centers, annual interdisciplinary Breast Center Conference in Las Vegas to over 900 attendees. This conference focus is to increase the quality of breast care provided to women across the globe through interdisciplinary education for breast health professionals.
Many breast health care practices are not standardized, and this conference provides a learning and networking environment, enabling breast professionals to learn about genetics risks. The latest treatment technologies, procedures as well as become certified and sharpen their skills in detecting and treating breast cancer.
It's a very engaged audience with strong interest in risk detection and quality programs and resulted in several strong leads for our sales pipeline. We hosted a breakfast symposium for nearly 200 of the attendees featuring a presentation by Dr. Nikki 1E, a breast radiologist with Stony Brook University Hospital calculated one you discussed how breast imaging centers are staying at the forefront with best-in-class AI solutions.
She shared her personal journey with breast AI solutions and the power of ICAD's newest algorithm in helping imaging centers meet key clinical, operational quality and financial business objectives. We were proud to announce a philanthropic global health collaboration with RAG eight international red aid a non-profit charitable organization dedicated to improving radiology health care in medically underserved regions is collaborating with I had to introduce mammography AI based decision support, starting with an implementation in Guiana using ICAD's profound detection.
Partnerships' primary goal is to improve the speed efficiency and accuracy of breast imaging and breast cancer detection by providing low resource medical institutions with access to technology education, clinical support and hands-on training.
We've recently installed our solutions, Indiana, where implementation of our ProFound AI detection solution, coupled with RAD age, educational and capacity building initiatives aimed to increase and improve breast cancer detection for patients in need such collaboration endeavors to build a Ai supported models for globally, reducing health care disparities and increasing health equity by widening access to earlier cancer diagnostics breast cancer remains a significant global health challenge, particularly in regions where trained clinical personnel and technological resources are scarce and drive deep disparities in breast cancer outcomes, dedicated to our mission of creating a world where cancer can tide.
We're honored to partner with Red aid on this transformative program to ensure advances in early cancer detection are available globally our deployment of ProFound AI detection in Guiana represents a significant step forward in the fight against breast cancer in low resource settings. Together with Red aid, we can revolutionize breast cancer detection, accuracy and efficiency, ensuring medical professionals have the training and the tools they need to work smarter.
When it comes to cancer diagnosis, we believe where you live should not determine whether you live from a clinical data perspective, a paper published in The Lancet in February 2024 shows that the performance of ProFound Risk with 2D mammography holds up in five European screening populations that were not used for the development of ProFound Risk for D.
This paper is an external validation of ProFound Risk for two D that shows this performance generalizable across the five screening populations with ACV greater than 0.7. The results also show that ProFound Risk for two D can predict later stage breast cancers as high risk among women who are currently sent home with a negative mammogram when ProFound Risk for 2D is it used clinically, this means that ProFound Risk for two D could help with earlier identification of women that may carry elevated mortality and morbidity risks associated with late-stage breast cancer and thus could potentially save lives if additional personalized screening strategies are implemented for these women rather than if they just follow the typical average screening regimens.
Let's turn now to updates on our technology. In mid-March, we released new advanced workstation features for our flagship solution profound detection for both 2D and 3D mammography aimed at further improving and facilitating radiologists interpretation of mammograms within their workstation. The new features for the profound detection solution are designed to improve.
The readability of Vytek had results through a configuration option to limit to three lesion mark visible on a workstation view, display 3D images. This refinement ensures that radiologists can interpret the most critical information, thereby streamlining the diagnostic process for more efficient decision-making. The introduction of color coded lesion marks and Kate scores on the profound scorecard provides an intuitive visual aid allowing radiologists to discern the suspicion level of detected abnormalities quickly.
This color-coded system based on cancer occurrence per screening population offers a concise, comprehensive representation of the severity of detected lesions and the overall case, further aiding and accurate diagnoses and prioritization of cases.
And lastly, the support for fine tunings for ranges based on the facility's own real-world data enables users to customize the detection system according to their specific clinical needs, enhancing performance and adaptability to varying patient populations.
The progression of ICAD's leading breast health, a eye for over 20 years represents our continuous improvement in technology and functionality, demonstrating our unwavering commitment to advancing cancer detection capabilities and improving patient outcomes from the inception of ICAD's 2D detection in 2002, to the launch of 3D detection Version one in 2016, powered by three D version two detection in 2018 and Version three in 2021. Each version has pushed the boundaries of cancer detection solutions now in 2024 the release of Version three detection service pack marks another milestone representing a commitment to ongoing enhancement and ensuring that profound detection remains at the forefront of early cancer detection solution.
We also recently announced commercial availability of ProFound cloud built on the Google Cloud Platform. Our innovative software-as-a-service or SaaS platform provides medical providers with a cost effective, secure and scalable means to access and deploy the latest profound Breast Health suite of AI solutions. With the commercial launch of ProFound cloud, i-CAT is enabling interoperability and access to breast AI solutions at enterprise scale, revolutionizing global access to cutting edge AI solutions in Breast Health, powered by Google Cloud architecture and Google's health AI innovations ProFound cloud integrates a lightweight edge client and cloud-based components.
Together, they securely transport and process mammography screening data between imaging sources such as imaging modalities and picture archiving, communication systems or packs and the cloud-based AI process data is seamlessly delivered to systems that utilize AI output, including mammography review, workstations, packs and image and data storage systems.
The healthcare landscape is shifting towards technology as a service models, avoiding the pitfalls of investing in rapidly outdated hardware and software. As a I relies heavily on specialized hardware like graphical processing units or GPUs setting up and upgrading the software and hardware becomes increasingly complex. Cloud-based solutions like ProFound cloud address this challenge by providing software as a service to ensure that all customers access the latest technology without the initial hardware investments, support contracts and constant updates.
Moreover, ProFound cloud provides facility administrators, the ability to access the administration site, enabling them to update configurations and perform administrative tasks in multiple languages. Profound cloud is designed to support patients, providers and partners while facilitating the management of diverse data types critical for a comprehensive health care analysis.
This includes 2D and 3D mammography images alongside all cancer images and parallel stores, limited images of benign recall and normal cases, ProFound cloud also manages ProFound Risk and density assessment results, radiology and pathology reports and detection results while ensuring seamless access to critical diagnostic information. Importantly, ProFound cloud securely handles de-identified patient information and provider data, adhering to strict privacy and compliance standards. Comprehensive approach enables robust analytics for informed decision-making.
Before turning the call over to Eric, in case you missed the announcements earlier in the first quarter, I also want to note the addition of two new Board members. We are pleased to welcome Dr. Henrik recheck to our Board of Directors. Dr. resect is a renowned radiologist and researcher with over 40 years of experience in the field for more than 20 years. She was Chair of the Department of Radiology at Memorial Sloan Kettering Cancer Center in New York City, a position from which she stepped down in January 2023.
In addition to her many prestigious roles, she is actively engaged in global health initiatives, promoting international education and collaboration to improve access to oncological imaging and cancer care. Thus, the reset has published over 380 peer-reviewed original research articles more than 300 review articles editorials book chapters in 18, but she served as President of multiple prominent medical societies, a member of multiple Board of Directors and advisory boards and Board of Trustees.
In recognition of our scientific accomplishments and tireless global outreach. She has received numerous awards, including honorary doctorates from the Ludwig Maximilian University, Munich, Germany and the University of Toulouse, the third, Paul EBITDA in Toulouse, France, Dr. Reese extensive experience and clinical expertise in radiology research and the development of novel imaging applications will be invaluable as we continue to develop and deploy innovative AI powered solutions that improve patient outcomes around the world.
We also announced the appointment of Mike Doyle to our Board of Directors. Mr. Doyle is a seasoned technology and healthcare executive with over 35 years of experience. He is currently the CEO of Spire Health, a leading health care technology company focused on improving health outcomes for cardio respiratory patients through continuous virtual patient monitoring Baer, along with Mr. Doyle recent companies, all achieved measurable patient and health outcomes improvement by harnessing the power of AI and machine learning.
He has been the CEO and Director of seven health care companies. Mr. Doyle has also been appointed to numerous private not-for-profit and public company boards and brings a wealth of experience in health care technology and business strategy to the Eyetech Board of Directors.
I'll now turn the call over to Eric for a detailed review of our Q1 2024 financials.

Eric Lonnqvist

Good morning, everyone, and thank you, Dana. I'll now summarize our financial results for the first quarter ended March 31, 2024. Revenue for the quarter was $5 million, an increase of $0.6 million or 14% over the first quarter of 2023.
The increase is attributable to some of the key deals Dana noted earlier in the call as well as some early traction from our expanded sales force First Quarter 2024. Product revenue was $3.1 million, up 26% over the prior year. Service revenue was $1.9 million, in line with the prior year.
Moving on to gross profit on a percentage of revenue basis, gross profit was 83% for the first quarter of 2024, which was up from 82% in the first quarter of 2023. On a pure dollar basis, gross profit for the quarter was $4.1 million as compared to $3.5 million last year.
Total operating expenses for the first quarter of 2024 were $5.6 million, a $1.2 million or 18% decrease year over year. This improved run rate reflects the implemented cost cutting measures. Previously announced GAAP net loss for the first quarter of 2024 was $1.2 million, or $0.05 per diluted share compared with a GAAP net loss of $3.1 million, or $0.12 per diluted share for the first quarter of 2023.
This year-over-year decrease in GAAP loss per share is primarily due to a combination of operating expense reductions and sales growth, driven by some of the deals noted earlier in the call, non-GAAP adjusted EBITDA loss decreased $1.3 million to $1.1 million in the quarter ended March 31, 2024 from the same period in 2023.
Moving on to the balance sheet. As of March 31, 2024, the Company had cash and cash equivalents of $20.3 million compared to cash equivalents of $21.7 million as of December 31, 2023. Net cash used for operating activities for the quarter ended March 31, 2024 was $1.2 million compared to $1.5 million in the first quarter of 2023.
This improvement of 23% year over year is due primarily to cost savings initiatives implemented during the first quarter of 2023. We believe we have sufficient cash resources to fund our planned current operations with no need to raise additional funding. As noted in prior earnings calls, 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 adds risks, including short term, lower GAAP revenue and negative cash flow impact, but for the next three years to help illustrate our progress in this transition we began reporting the following annual recurring revenue or ARR metrics in Q3 '23. Total ARR or TMAR represents the annualized value of subscription license maintenance contracts in active cloud services at the end of our reporting period.
Maintenance Services ARR, or MARR. represents the annualized value of active perpetual license maintenance service contracts at the end of the reporting period subscription ARR that SARR. represents the annualized value of active subscription or term licenses at the end of a reporting period, cloud ARR or CARR. represents the annualized value of active cloud services contracts at the end of a reporting period.
Total ARR or TDR was $9 million as of March 31, 2024 up from $8.7 million as of December 31, 2023. Maintenance Services ARR, or MAR, was $7 million in line with $7 million at the end of the prior fiscal quarter. Subscription ARR as ARR was $1.9 million, up from $1.7 million at the end of the prior fiscal quarter. With our commercial cloud platform now released, we will begin tracking cloud ARR in upcoming quarters. In addition to the recurring revenue metrics noted above, we also began disclosing the total 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 multiple GAAP revenue streams. We are pleased to report that in the first quarter of 2024, we closed 76 perpetual and 16 subscription orders.
This concludes the financial highlights of our presentation. I would now like to turn the call back over to the operator and we have the Q&A.

Question and Answer Session

Operator

Thank you. Ladies and gentlemen, the floor is now open for questions. (Operator Instructions)
Per Ostlund, Craig-Hallum.

Per Ostlund

Thank you and good morning, Dan and Eric. Congratulations on the quarter. I have to say I was pleasantly surprised by the result. I want to start with revisiting the key growth initiatives because obviously the US, the growth in the quarter was, I think, stellar and a little bit, certainly a little bit ahead of modeled on. So you cited Dana in your prepared remarks, but a handful of things.
And I was fairly quick in writing some of the development in the supplement as well. I'll start with the sales team. I know you talked about it being having gone from 12 down to 6 in the US as of 3Q last year. Tom, you bring in Peter Graham at the end of the year and then for additions here in the first quarter, are there are there more to come there? Or do you think that some kind of kind of refilling the team to the extent you have is sufficient for where you want to be at this point.

Dana Brown

First. Good morning and thanks for the thanks on the quarter, I think from this sales team perspective, we're stable and we might switch some players around as we begin to see who's you're gaining better traction in winning new business versus what we call kind of expanding land rate and in terms of existing accounts.
So there may be some shifting roles going forward. But I think from a quantity perspective, we're good for the rest of this calendar year.

Eric Lonnqvist

Okay. Very good. So then the other couple of things that you cited in the release in your remarks about the growth initiatives. So you noted that the lead generation targeted lead generation effort. You kind of felt like there wasn't really one in place there before. Where is that at kind of an implementation? Is there any color around what that entails? And then when you talked about a revamped commercial model and I think you alluded to a couple of things there in the press releases or in your comments as well. But just wondering if you could circle back to that a little bit and to discuss what you're doing there.

Dana Brown

Yes. So you've heard correctly there was not. And what I call like a structured and repeatable and even trackable lead-generation process before I mean, middle part of a big sales team, especially when you're thinking about those winning new business is they need to be great at cold-calling at working their Rolodex, right or their network and that's a big part of the equation. But you always want to supplement on the sales team with qualified leads.
So at either in the business we're in, that's a B2B strategy lead gen strategy. So we've been leveraging platforms like unit-linked and making a more concerted effort around the trade shows conference seminars that we attend at really working that audience. I think this sales team, in particular, when you think about attending a tradeshow business has been knocking it out of the park with regard to and scheduled and organize meetings like with agendas with desired outcomes when they attend those trade shows.
And so walking away with either very qualified leads are actually making progress right on a deal. So and we're just beginning to move into the phase of more truly, I call it even hovering above the funnel type of lead gen activities. So part of the leadership additions we brought in last year was a new VP of Marketing and Michelle strong, who's our COO, has a really strong lead gen digital marketing type background in B2B, actually both B to B and B to C. So the combination of those, you know, areas of expertise as well as just more organization, right, is helping there.
So it is exciting to see when we kick off the Legion campaigns and then tracking right the results in terms of winning new leads and then having a follow-up conversations in terms of like overall like the restructure for the commercial model what we did to. First of all, I would say this is all pretty much focused on the U.S. and then a little bit of upgrading and expanding of OUS distributors. But most of these changes have come in the U.S. market.
So we have first was building these lead generation programs because we wanted to see what type of pipeline we could develop and then use that to model how many sales reps would be optimal to add when we added the sales reps, we also structured their focus. So instead of having everyone do everything and then consequently, maybe not doing things well and people gravitating towards areas, they're naturally most comfortable.
We did structure them into more segmented roll. So there's more focused on new business, there is more focused on retention and expansion of existing business. We did revamp our pricing models on one year. Cloud introduced a whole new cost structure for us and a way to deliver this solution. So and so that then kind of drove changes across the board all the way back into perpetual. You've seen us reporting our ARR now.
So that's based upon a subscription pricing model. So getting those pricing models it tighter and obviously, well documented and communicated right among ourselves team. So they know the price book and how to use it. And then last but not least, is just even with in our existing accounts, doing a better job of internally marketing the solution. I can't is fortunate in that we have some really large customers.
We talked about that today, trying to give some more color just because we win a deal, doesn't mean we're done with that deal, right? There's room to expand. So oftentimes, we need to be more involved in even the internal marketing within that account to enable radiologists and others to understand the solution. And why is it? It's going to make a difference right in their practice.

Per Ostlund

That's great color, Dana. Thank you need as far as it looks for the numbers specifically for a second? Because I think normally, the first quarter is a step back sequentially from the fourth quarter and then the fourth quarter, I think ran a little bit a little high with a couple of deals sliding out of Q. three. So we already had a pretty good our foundation from Q4.
I would have thought we would see a step back and we clearly didn't we saw a step forward in, I think the deal count and first quarter in aggregate was a little over 90 and it was right around 90 in Q4. So did anything pull forward here in the first quarter? Or was this really just is some of those initial efforts from the new sales folks from the Gen from the commercial? It a model shift that you're talking?

Dana Brown

Eric, do you want to dive in on this one more in there?

Eric Lonnqvist

Well, yes, I can answer that. So we had a couple of big drivers this quarter so there was one deal in particular, Dana mentioned rally radiology that team team's been working on for probably a year that came in that was up to over $300,000 revenue it in itself. And then Dan also mentioned the souls expansion. So there's another four or five sites that came in there that we expanded. So between those two kind of drivers that was close to $500,000 of revenue this quarter.
So and that caused the bond rally. So at Q4, you're right, tourism sliding from Q3 into Q4 are causing that $4.9 million last quarter. So this quarter, I think it's part of our model is a little bit lumpy because of the perpetual nature of it. So yes, I'm not sure it's a structural change that would come on. You had Is there still could be lumpiness going forward?

Per Ostlund

Not, but that's entirely fair. I don't think anybody expects differently. I was just curious to know a couple of those pieces, so I appreciate that a bit.
Last question for me. I promise this will be it for now. We didn't really talk about things that are from the FDA a whole line. It's only been a couple of months since you last updated us on this, Dana, but some do you look at, you know, 4.0 and you look at heart health is still tracking toward late 24 type opportunities for you where they kick in or where they get their approvals?

Dana Brown

Yes. I guess I mean, you never know with the FDA, but I would say it's always going to skew longer than faster setup. But so yes, I think best case scenario would be end of this calendar year.
You know, for example, with for our detection algorithm, you heard me mention, I mean many, many prior versions and they usually have went very smoothly. The review of the algorithm itself is going very smoothly, but there's a whole host of new cyber security requirements. And this is first time, right of days rolling those out, we're going through those. So that's taking a little bit longer, right as they structure their questions back to us. And then we think we understand what they're asking rate and respond.
And so that's just taking a few more iterations and then same thing for E2 heart health, right? So working on firming up like the data that they need to see. And luckily, we have as a predicate device rate, there has come onto the market. So that's helping to clear some of their questions because they have something that they can refer to and help understand that. Yes, the messages that you heard about best case scenario being end of the year is still below plan.

Per Ostlund

Okay, excellent. Thanks for all the answers, and I appreciate it, Neil.

Operator

Yale Jen, Laidlaw & Company.

Yale Jen

Good morning and my congrats to the good quarters. I have maybe two or three questions here. The first one is for the first quarter, the perpetual versus the subscription yields you have, particularly in the conceptual question deal you have increased quarter over quarter compared to the last two quarters. Do you anticipate this trend to continue on for where and how would you see that? It's dynamic.

Dana Brown

Eric, you want to take that?

Eric Lonnqvist

Sure. I good morning now. Yes, we were we were up was 16 subscription deals was a good quarter for subscription. It still will have some ebbs and flows. There's customers that prefer perpetual com for one reason or another for security or so forth. But we are we are trying to get more and more to a recurring revenue model organizationally. So not only will the We the team is pushing on the subscription side a bit, and they're comped at way to maximize our annual recurring revenue.
So the team is incented to push on subscription as well as with our new cloud release in Q1, there will be another opportunity for recurring revenue through the cloud model, so that will be both subscription and cloud pushed by the by the team hub. It's hard to say exactly what the split would be going forward. But the team is incented to push on these recurring revenue deals.

Yale Jen

Okay, great. And the next question is in terms of per bulk, the two-part question at first of all first, is that is this the is that ready to go and you can actually sign deals based on what you have right now. Are you still improving? And second on off on that positive, is that the what might be the hurdles that you guys see it to have anything to get that first deal, steel units makes close.

Dana Brown

So and yet that are ProFound cloud is commercially available. So the sales team is actively selling it, and we already have our first deal on the cloud, and that actually occurred in second quarter here shows why widen chat about it, but you'll hear a lot more right on our next earnings call.

Yale Jen

Okay, great. That's very helpful. And congrats on that one, which is the last question here. Is that or I remember it the other day and you guys are talking about seasonality in terms of the revenue quarter in the fourth quarter you for different quarters, some are higher. Some may be lower for that process. Does that apply to now day's call? That's totally irrelevant now and thanks for taking the question.

Dana Brown

So maybe I'll give my point of view and a Eric would love for you to chime in, especially if you have a different point of view, I think Adam seasonality still applies and the primary driver of that is just the budget cycle. So many of our customers are on a calendar year budget. So they tend to wait a bit till towards the end of the year, see budget remaining.
I think there's also a bit of and training, if you will, that's happened, especially in the software industry where customers know the later they wait in the year, the better the deal they're going to get right because everybody is trying to capture as much business as possible so you can get into in a maybe better discount land hitter, but the longer kind of weight. So on so I think those two factors together just kind of drive you this mindset. So it's a little bit less about if I don't have it now, right, it is directly impacting my business and they can afford to wait a bit and in your decision-making process.

Yale Jen

Okay, great. That's very helpful. And again, congrats on the good performance for the quarter.

Operator

Thank you.

Dana Brown

Thanks.

Operator

This concludes our question and answer session. So I'd now like to turn the call back over to Dana Brown for any closing comments.

Dana Brown

Thank you, operator. In conclusion, I would just like to reiterate, 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 hope each of you have a great day.

Operator

Thank you. This does conclude today's event. You may disconnect your lines at this time and have a wonderful day and we thank you for your participation.