iCAD (ICAD) Q1 2021 Earnings Call Transcript

iCAD (ICAD 2.63%)
Q1 2021 Earnings Call
Apr 28, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings and welcome to iCAD, Inc.'s first-quarter 2021 earnings call. [Operator instructions] Please note this conference is being recorded. I would now like to turn the conference over to your host, Jeremy Feffer, investor relations. Thank you.

You may begin.

Jeremy Feffer -- Investor Relations

Thank you, Devon, and good afternoon, everyone. Thank you for participating in today's call. Joining me from iCAD are Michael Klein, chairman and chief executive officer; Stacey Stevens, president; and Scott Areglado, chief financial officer. Earlier this afternoon, iCAD announced financial results for the three months ended March 31, 2021.

Before we begin, I would like to caution that comments made during this conference call by management contain forward-looking statements, involve risks and uncertainties regarding the operations and future results of iCAD. I would also note that management may refer to certain non-GAAP financial measures. Management believes that these measures provide meaningful information for investors and reflects the way that these -- that 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.

I encourage you to review the company's filings with the Securities and Exchange Commission, including, without limitation, Forms 10-Q and 10-K, which identify specific risk factors that may cause actual results or events to differ materially from those described in the forward-looking statements. Furthermore, the content of this conference call contains time sensitivity information that is accurate only as of the date of this live broadcast, April 28, 2021. iCAD undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. With that said, it's my pleasure to turn the call over to Michael Klein.

Mike?

Mike Klein -- Chairman and Chief Executive Officer

Thank you, Jeremy, and good afternoon, everyone. I'd like to begin today by highlighting a few key financial metrics with a particular focus on iCAD's top line revenue momentum. iCAD's first quarter total revenue of $8.6 million represented a 32% increase over our first quarter 2020. I'd like to highlight the balance in our strong Q1 performance.

We achieved year-over-year growth in both product and service revenue and in both segments of our business, detection and therapy. Our detection business was up 28% as compared to Q1 of last year. This includes 34% year-over-year growth in product sales and 13% year-over-year growth in service sales. Importantly, service revenue is becoming an increasingly important aspect of our overall business, especially in detection.

Prior generation AI systems that are being replaced by newly installed ProFound 3D technology and are coming off of initial warranty period associated with new installation, as these roll off of warranty, the result is growth and recognition of recurring revenue service contract sales on a go-forward basis. Diving a little deeper into our detection business in Q1. As we indicated in a prior call, our recently signed five-year exclusive agreement with Solis Mammography, a clear industry leader that operates in more than 80 branded centers in 11 states, has already begun stimulating the accelerating adoption of ProFound AI by other local screening centers in Solis' markets and catchment areas. Local awareness campaigns activate both patient screening as well as clinical adoption.

Importantly, Q1 was a quarter defined by continued and broader market penetration with a significant number of more moderately sized deals in geographically diverse areas. Achieving our Q1 sales goals was not dependent on longer-cycle multimillion-dollar deals. We view this as a positive indicator of the broad and fundamental continuing momentum in our detection business, momentum that is not overly reliant on large-scale deals nor specific sales regions to achieve revenue growth objectives. Having said this, we do have a healthy mix of large, as well as moderately sized deals in our sales pipeline.

iCAD's newest offering, ProFound AI for risk assessment, is a product that looks two years ahead and provides unique and personalized probability score for potential future breast cancers. And it's also played a key role in several of our Q1 deals. This product is a significant differentiator for us and is available on a licensed sales basis for a limited period. Mid- to later this year, we anticipate offering our risk product to our customers on a recurring revenue subscription model basis.

We continue to amass preliminary clinical experience with risk prior to transitioning to a subscription-only model. Our subscription-based risk offering provides us with the opportunity for meaningful recurring and predictable revenue, revenues that we anticipate will come with higher margins. With that said, as we move toward subscription, it is important to note that those revenue streams for our risk offering will be split between the current year and subsequent years. We closely map our go-to-market strategies to customer demands and procurement temperament .

We also have a relatively strong ability to modulate the pace with which we move toward subscription-based recurring sales. Understanding and governing this pace has high value, as I've continued to steadily increase pace and throughput per hour and per day as they increasingly catch up with the prior screening backlog caused by COVID-19. As a reminder, ProFound Risk Assessment can identify cancers that are not visible or discernible today, yet they may exist in a sub visual range. Our cutting-edge AI risk algorithm can predict those cancers two years before they enter a physician's visual field and in doing so, provides a unique risk score for each patient for the future.

Risk is currently available from large and still growing 2D market, particularly outside the U.S. Importantly, our commercial launch plans for our 3D risk offering has been carefully curated. Our targeted Xoft launch with preliminary sites, which I referenced a moment ago, is ongoing. We believe it will be critical to the commercial success of this product for us to leverage the early user experience from key opinion leaders at these luminary sites.

Our launch of ProFound AI for detection, which we started in Q1 of 2019, has taught us volumes about how to most potently and effectively pace and price and introduce new products into the market. We recently announced several important achievements related to our flagship ProFound AI Detection product. Again, this is AI's offering that improves cancer detection on today's mammogram. Let me distinguish this product from our risk offering that looks two years ahead.

In March, we received FDA clearance for version 3.0 of ProFound AI for 3D mammography detection, that's detections today. Compared to previous versions of the software, the Profound AI 3.0 algorithm offers up to a 10% improvement in performance and up to 40% faster processing. Version 3.0 of ProFound AI was built with millions of additional images and provides physicians with the ability to interpret an increasing amount of data in 3D digital breast tomosynthesis cases and analyze each image to detect malignant lesions more efficiently and with even greater precision. This FDA clearance and additional generations that are already well under way will keep iCAD at the forefront of cancer detection innovation.

We now have over 7,700 2D and 3D installations. We see this along with our unique ability to integrate with all mammography systems, imaging workstations and pack providers, these are providers that transfer data and images, we see this as a significant barrier to competitive entry. And as I've said in the past, there are over 1,800 combinations of technologies that we've had to settle for and unlock over many years. We also gather thousands of images each month to further refine the precision of our AI algorithm.

Additionally, in the area of risk assessment, we believe we are years ahead of any foreseeable competition. Moving in parallel with the growth of our AI offerings, we also experienced significant year-over-year growth in Q1 in our therapy business, in both product and service revenues. Total therapy revenues of $2.9 million represented a 41% increase over Q1 last year. Year-over-year product revenue doubled in Q1.

And service revenue increased 11% as compared to Q1 2020. The growth in our therapy business was driven by several factors, including the sale of 10 controllers in Q1. Approximately 45% of Xoft's product sales in Q1 were due to an initial surge in dermatology controller installation, which were heavily influenced by the emergence of shifts in reimbursement, payer coverage and a positive change in regulations. Stacey will provide additional detail on this in a few minutes.

With that, I'd like to move on to our development program in intraoperative radiation therapy, or IORT, specifically as it relates to the treatment of recurrent glioblastomas, or GBMs. As you know, the updated data on glioblastoma continues to indicate rather dramatic improvement compared to the control group in both the endpoint areas of overall cancer survival, as well as progression-free survival time. Our new study, led by Dr. Santosh Kesari, a nationally prominent neuro-oncologist at the John Wayne Cancer Institute, is now enrolling and is designed to further validate these dual endpoint outcomes at multiple procedure sites in both the U.S.

and Europe. We anticipate the first patient treatment will occur in the weeks ahead as multiple sites are now recruiting patients. As a reminder, the outcome for this 80 to 100-patient trial will be an assessment of overall patient survival. The secondary yet equally significant endpoint will be the assessment of the pattern of disease progression, potential adverse events and quality of life.

This is not an overly long or expensive trial since most sites already have access to Xoft's technology, a technology that has FDA clearance and that can be used across a wide range of cancers. We also anticipate that some preliminary data on the key endpoints of disease progression will be submitted for publication as well as presentation by the end of 2021. I'd like to take a moment now to discuss the current operating environment. In the U.S., while scattered regions may have experienced a moderate uptick in COVID-19 cases, the presence of multiple vaccines is beginning to lift the country out of the pandemic.

The recovery efforts in Europe appear to be lagging a few months behind. We are very pleased, however, with our overall business performance and our outlook in both the U.S. and in Europe. We see our AI offering assisting on multiple fronts, from scheduling, operational efficiency and detection performance.

With this, we still remain operationally diligent and cognizant of evolving business conditions to what we clearly see as the waning phase of COVID-19. It is for this reason that we have been very mindful and careful in managing our operating expenses over the last several quarters. It is worth highlighting that while we achieved Q1 top line growth of 32%, which I referenced earlier, our operating expenses decreased approximately 7% versus Q1 2020. We continue to realize both leverage and a surge in productivity, while our development team has achieved product release goals at an accelerated pace.

Sales growth, combined with cost controls and the above productivity gains, allowed us to reduce iCAD's pre-tax loss to $1.6 million in Q1, which was 86% lower than Q1 of 2020 losses. We also ended Q1 with cash and cash equivalents of $46. 9 million, which includes the proceeds of our successfully closed $25 million public offering in March. Looking ahead, we intend to begin utilizing these proceeds in the second quarter to broaden our U.S.

commercial activities and expand our outside U.S. commercial footprint in both Europe, the Middle East and Asia Pacific regions. More specifically, as we move into the second half of the year, we intend to add to our commercial efforts, particularly in areas where we may have an above threshold reliance on OEM or distributor coverage or in areas where broader adoption patterns may be clearly emerging outside of core metro areas. The impact of some of these efforts may manifest and improve gross margins for iCAD products.

Additionally, as Scott will mention, we plan to use a portion of our near $47 million in cash to retire the modest amount of debt that remains on our balance sheet. Finally, during this discussion of expenses and cash, I would be remiss if I didn't mention the upcoming departure of our chief financial officer, Scott Areglado. Scott has been a valued member of the iCAD team for 10 years, having served as CFO for the last two years. He has been instrumental in helping to drive revenue growth, our disciplined approach to expense management and in significantly improving our balance sheet.

We wish Scott well in his future endeavors. I am pleased to announce today that we have retained Charles Carter. Charles is now on board and will assume the title of Interim CFO next week on May 4, until such time as a permanent successor is named. Charlie, as he goes by, is a highly seasoned executive with both public and private company CFO experience.

The iCAD executive team and Board are very confident in Charlie's financial leadership and comprehensive business acumen. Stacey and I look forward to working with Charlie, who will join us on our subsequent earnings call. In summary, we continue to operate with significant momentum in a vastly improved clinical and economic environment. We have achieved important progress throughout the business.

We look forward to continued growth and are highly confident in our long-term growth prospects. Both our detection and therapy segments remain at clear and comparable inflection points with significant growth rates anticipated. We have an increasingly strong balance sheet, and we'll continue our steady march toward both positive EBITDA and cash flow, along with continued top line growth. I'd like to now turn the call over to Scott for his review of the financials.

Scott?

Scott Areglado -- Chief Financial Officer

Good afternoon, everyone, and thank you, Mike, for those kind words. I am fortunate to have spent the last 10 years at iCAD and to work with so many talented people on the iCAD team. I'm particularly proud of our efforts over the past two years as iCAD has truly evolved into an industry-leading medical technology company. With that, I'll now summarize our financial results for the first quarter ended March 31, 2021.

First quarter 2021 total revenues were $8.6 million, representing a year-over-year increase of $2 million or 32% as compared to $6.6 million in the first quarter 2020. Detection revenues were $5.7 million in the first quarter of '21, an increase of 28% over the first quarter of 2020, driven by a 34% increase in detection product revenue and a 13% increase in service revenue. Moving on to gross profit. On a percentage basis, gross profit was 73% for the first quarter of 2021 compared to 69% for the first quarter of 2020.

On a pure dollar basis, gross profit for the first quarter of 2021 was $6.3 million as compared to $4.5 million in the first quarter of 2020. Gross margin improvements in the first quarter of 2021 were driven primarily by improved service margins in the detection business. Total operating expenses for the first quarter of 2021 were $7.8 million, a $0.6 million or 7% decrease from $8.4 million in the first quarter of 2020. As we noted on our prior call, expenses in Q4 2020 had some onetime items on a higher revenue number in Q4.

So Q1 is more representative of our 2021 expense run rate. As Mike mentioned earlier, we expect to invest during 2021 to continue to drive sustainable long-term growth. However, we remain committed to a disciplined approach in managing these investments, which is reflected in the first quarter net loss of $1.6 million or $0.07 per share as compared to Q1 '20 loss of $11.8 million or $0.59 per share. Non-GAAP adjusted EBITDA for the first quarter of 2021 was a loss of $0.4 million, which represented an improvement of $2.7 million compared to the first quarter 2020 non-GAAP adjusted EBITDA loss of $3.1 million.

Non-GAAP adjusted net loss for the first quarter of 2021 was $1.6 million or $0.07 per diluted share as compared to a non-GAAP adjusted net loss of $3.9 million or $0.20 per diluted share for the first quarter of 2020. This metric highlights our improvements in margin and operating expenses as it eliminates the onetime items in 2020 associated with retiring convertible debentures last year. Moving on to the balance sheet. As of March 31, 2021, the company had cash and cash equivalents of $46.9 million compared to cash and equivalents of $27.2 million at December 31, 2020.

As Mike mentioned, during March, the company received $25.1 million in gross proceeds from the sale of approximately 1.4 million shares of our common stock at a public offering price of $18 per share. We were pleased with the number of leading healthcare-focused institutional investors that participated in the offering. Finally, I would like to note that we retired our outstanding $7 million term loan with Western Alliance bank, which will eliminate interest costs going forward. This concludes the financial highlights of our presentation, and I would now like to turn the call over to Stacey.

Stacey?

Stace Stevens -- President

Thank you, Scott, and good afternoon, everyone. Following a strong 2020 despite unprecedented challenges brought on by the pandemic, we are very pleased with the balanced performance across both segments of our business in Q1. With new product introductions, momentum in clinical studies and new market opportunities emerging, we continue to be well positioned for success as we look ahead in 2021 and beyond. Let's begin by highlighting the progress of our company's latest advancement, ProFound AI Risk.

On the last earnings call, I reported that we were finalizing the data collection and validation of the risk algorithm for 3D breast tomosynthesis. We are pleased to announce that we are on track with bringing this product to market this summer. As I highlighted, this process requires a collection of 3D cases for both training and validation. We have made significant progress in collecting the cases needed for each of the DBT imaging systems to be supported and the preliminary performance results with the 3D images are very promising.

The performance of the ProFound AI Risk model with 3D images is showing even better results compared to the model when used with 2D images, which is already far superior to traditional risk models based predominantly on family history. We anticipate that ProFound AI Risk will be particularly well positioned for success in the years ahead as mammography begins to transition from what is primarily an age-based screening paradigm today to a more effective and efficient risk-adjusted screening paradigm. This technology offers a practical solution that empowers physicians to offer more personalized screening that is truly individualized for each woman. Expanding the body of clinical evidence supporting our technologies with high-impact clinical studies remains a priority focus area for us.

ProFound AI Risk is already supported by a study published in radiology in 2020. With the goal of conducting a global retrospective multi-ethnic and multi-geographic analysis of 2D risk, since January, we have completed a significant amount of work to finalize the agreements with the thought leader research groups in Italy, Spain and Germany. Despite the challenges of COVID travel restrictions, together with our EU team, we plan to finalize equipment installation and begin validation at these sites in the upcoming months. As we have previously stated, a U.S.

retrospective analysis study of ProFound AI Risk used with both 2D and 3D images will also be led by Dr. Emily Conant, Professor of Radiology at the Hospital of the University of Pennsylvania, whose data also reflects an ethnically diverse group of women with a special focus on genetically predisposed women at high risk, such as younger African-American women. In the last couple of months, we have finalized the UPenn research agreement and protocol design, and we have moved on to the early stages of data analysis for 2D risk. As we near the final stages of 3D risk development, we have identified additional U.S.

sites for inclusion of other ethnic groups, including Southeast Asian, American and women of Hispanic origin. This research will contribute to the growing body of evidence supporting our technology and potentially pave the way toward more personalized screening recommendations by professional organizations that establish clinical recommendations and guidelines for breast cancer screening such as the National Cancer Institute, the National Comprehensive Cancer Network, the American College of Radiology and others. So in summary, we continue to see strong interest for risk in the market and remain very positive about the impact our innovative risk solution will have on moving business forward. I look forward to providing further updates on ProFound Risk in the coming months.

In addition to our focus on ProFound AI Risk, we are continuing to advance our flagship ProFound AI breast cancer detection solutions for both 3D and 2D mammograms. As Mike mentioned, we received FDA clearance on the third-generation ProFound AI in March, which includes additional clinical performance enhancements. The new ProFound AI release is accompanied by a major platform release, which marks our ability now to track specific usage of the product, which will allow us to more widely offer an operational subscription license model. The new platform also significantly reduces the time it takes to process images as well as introduces the ProFound AI index card, which provides our customers with a simplified summary of all iCAD AI results in a single view.

Additionally, the release offers further enhancements to how our AI integrates with PACS and mammography reading stations to further improve reading workflow and efficiency for our customers. In the next few months, our near-term plans are to release the third-generation ProFound AI for 2D mammography in the European and other markets outside of the U.S. ProFound AI for 2D will significantly improve the algorithm performance for all supported vendors. In addition, we plan to couple this release with a new and improved deep learning breast density assessment product which will support synthesized 2D images from both GE and Hologic.

We are also pleased to announce that just last month at the European Congress of Radiology, Dr. Emily Conant from UPenn presented research on ProFound AI, indicating that our technology was able to triage one-thirds of 3D screening exams as normal mammograms with no missed cancers. When additional risk factors such as breast density and age were also considered, the study found that almost 60% of cases could be triaged as normal with no missed cancers. In the interview with [inaudible], Dr.

Conant indicated that this can have an impact on site's operational efficiencies and that these case scores could potentially further refine who should get supplemental screening. The results of the study are very exciting and encouraging relative to how our breast AI products may be used further to benefit breast cancer screening in the future. I'd now like to review our performance internationally, We continue to build our sales channels in Europe with the addition of a second sales representative in France, and we're actively looking to fill a direct headcount in Germany to drive sales. Both of these countries are among the largest mammography markets in Europe.

The first quarter of 2021 marked the first sale by our Swiss distributor, which also included ProFound AI Risk. We also won a public tender in Athens and executed a webinar at the Greek Breast Radiology Innovation Course with nearly 500 participants in attendance. In the Asia Pacific region, an area largely untapped by iCAD historically, expansion is under way with an investigation into the market landscape, regulatory time lines and channel building. Three distributors have already been vetted and interviewed from Australia, South Korea and Thailand, with the latter being a master distributor who has direct teams in more than six countries.

During Q1, we received regulatory approval in Taiwan. And as a result, our distributor was able to sell two units in the first quarter. Now moving on to our therapy business, which has demonstrated important progress in multiple areas in Q1. We continue to implement a two-tier strategy to drive revenue around the current applications while developing the new indications, neuro and rectal, through our clinical trials, KOL sites and pre-commercial efforts, which we will talk a lot more about at our upcoming Xoft webinar scheduled in May.

In Q1, there were 10 systems sold worldwide, including six shipments into the dermatology segment. As mentioned on the last earnings call, the skin business was restarted in Q4 of 2020 due to some favorable reimbursement changes. And now in Q1, we saw continued momentum with some favorable regulation revisions for Xoft derm in the states of Florida and South Carolina, and we shipped three systems to strategic KOL sites in South Carolina, Georgia and Southern California. In the OUS business, including China, we have seen consistency with controller placements and source usage.

We continue to grow the pipeline in China and in other OUS areas, and we are actively working on several opportunities for future commercial neuro sites. Moving on to the new clinical applications. In addition to the updates Mike discussed on neuro, we're also making progress on our rectal indication. We expect to submit for regulatory clearance in both the U.S.

and Europe in the upcoming months. Dr. Te Vuong, a world-renowned physician in the colorectal area, will begin treating patients shortly, and we expect to add additional KOLs in the second half of the year. So in summary, we are excited about the progress and accomplishments we have driven across both sides of our business, and we look forward to providing you with further updates as we continue to advance our business forward in 2021, drive sustained leadership and create additional shareholder value.

We will now open up the call for questions. Operator?

Questions & Answers:

Operator

[Operator instructions] Our first question comes from the line of Dave Turkaly with JMP Securities. Please give your question.

Dave Turkaly -- JMP Securities -- Analyst

Great. Congrats on the quarter coming in even above your preannouncement. Mike, maybe just to start, if I could, on the product side of your detection business, the 34% increase. And you called out in the press release that ProFound continued adoption of ProFound AI.

And then you also mentioned the risk, the 2D here in the U.S. and Europe. I was wondering, can you give us any color as to sort of what was the biggest driver geographically? And then also, anything you'd want to comment on maybe by risk versus kind of core ProFound AI 3D?

Mike Klein -- Chairman and Chief Executive Officer

Sure, David. Good to hear you. On a geographic basis, it really was a balanced effort. It was also balanced in terms of the contribution coming from multiple sized deals without the mega deal that we typically get that define certain quarters.

But with the geographic disparity, probably the single biggest indicator that you put your finger on is the risk offering. What the risk offering does is, to reiterate a point, is finding things that are sub visual. So it's allowing physicians to make informed choices about how to set up a screening regimen, a personalized regimen. Previously, they may not have had that information about things.

In fact, it wasn't a may, they definitely didn't have the sub visual capability to see things. We had to declare it, is either there or not. Even if it was sub visual, if they couldn't see it and verify it or biopsy it, we wouldn't show it. We couldn't show it.

It would be considered a false positive. But now with this risk assessment product, we could show them what the algorithm sees two years in advance. That allows them to more precisely develop a prescription for that individual patient to call that patient back at six months, nine months and some rare cases even beyond the normal regimen, maybe the longer interval. The other thing it does, David, is that for sites that are delayed and virtually everybody is backlogged in terms of patients treated, if you're trying to determine who to bring in first and you basically were only screening 30 million out of 40 million last year, which is what we did, basically, everybody is 25% behind, you want to know which patients might be the most problematic ones from a year ago that you missed.

So what a lot of sites are beginning to do is use the risk product and examine the prior year's images to determine who to bring back earliest as screening centers open up and get used more widely. They're spending as much as they were before. They're extending their days, but this tool gives them a rational basis for deciding who can go to the front of the line. That's the triaging element that's a bit of what Stacey was referring to.

Dave Turkaly -- JMP Securities -- Analyst

Got it. And then as a quick follow-up. You mentioned the subscription business and that you may begin rolling that out midyear. I hope Charlie is up for the task here.

That said, you mentioned maybe subscriptions only as you kind of evolve into this new risk 3D maybe here in the U.S. I guess any updated thoughts on that in terms of timing? I mean, as we move into next year, do we think that a majority of the contracts that the licenses that you've done in the past will be on that basis because you'll have that new product in hand as well as ProFound AI and other versions?

Mike Klein -- Chairman and Chief Executive Officer

The net effect for this year will be mid to low single-digit percentage of our total iCAD sales will have an impact of subscription. And this is largely because, one, it will happen later this year, but primarily because it will only be tied to our risk product. Our other product, that being detection, seeing what's there today will continue to be sold on a license basis where we get everything upfront. So it will just be the risk product.

And the risk product which is designed to be on a prescription is largely because the iterations in that product is such that every six or nine months, we expect to improve and enhance that offering. And rather than have sites be upset and disappointed that I just bought this new product like I just bought this iPhone and now six months later, I need to buy another one, this is a product that will continually improve as we introduce other risk factors. But we've modeled this up many, many ways. And we still are very comfortable that this number will be in the single digits, in the mid to low single digits.

And even next year, as we look at 2022, it will still be barely breaking into double digits. So it's nowhere near going to be a dominant part of our business. And you could be certain we will be signaling and providing information on the growth of the subscription business as we proceed. I think it also -- while this is a field that's catching up on screening, it's also a particularly good time to not be tied to screening volumes because we want to also wait till everybody's back in full capacity with full four patients an hour versus the current two to three.

So we do self-govern, to a large extent, these contracts. And there are a number of sites that when they continue having to pay versus paying once upfront, they still will tilt toward the onetime license fee even if we offered choice. So again, I've said a lot around the core theme of that low single digits, David very modest in terms of implications this year, as well as next.

Dave Turkaly -- JMP Securities -- Analyst

Thank you.

Operator

Our next question comes from the line of Chris Pasquale with Guggenheim. Please give a question.

Chris Pasquale -- Guggenheim Securities -- Analyst

Thanks. Congrats on a nice quarter. I had a couple of questions about the therapy business. First, I was hoping you can go into a little bit more detail about the changes taking place in the derm segment, where you see that going.

And given the history there, how do you make sure you're building something sustainable? And then on the new indications, exciting to see the continued progress with neuro. Curious what plans you have in the rectal indication around data generation and a clinical program to support adoption there.

Mike Klein -- Chairman and Chief Executive Officer

Great. I'll let Stacey fill that one since she made those comments in our opening dialogue. Stace?

Stace Stevens -- President

Sure. Chris, let me take the questions about the dermatology market first. And there have been two very important changes that have taken place in the market that give us a lot of confidence that we can be very successful sort of going back into this dermatology segment, where we did have a successful business several years ago. The first change is that reimbursement coverage has been greatly expanded.

Back up until now, up until only really a few months ago, there was only positive reimbursement coverage in about 20 states in the country. If you look at where that is today, and there are a lot of negative policies too at the time in a bunch of states, now basically, we have coverage either positive policies or silent policies, and we have very good luck getting payment in areas where there are silent policies that basically cover the entire country. So for example, the Northeast was a place where there were very negative policies for years and years. And now that market has been opened up.

Florida has been opened up as well. which has always been considered sort of the Holy Grail market given the incidence of non-melanoma skin cancer. So that's the first thing, broader reimbursement coverage. The second really important element that allows us to be more competitive in that market is that during the time of COVID, as a lot of healthcare appointments moved into a telemedicine type format, the regulations that required a radiation oncologist to physically be present in the dermatology office, personally, in person, overseeing each treatment of which there are typically eight for each patient, that requirement got relaxed and now it's gone away, right? So what we have is radiation oncologists being able to remotely oversee the patient treatment.

And that has important economic benefits for the dermatologist because up until now, the dermatologist had to pay a radiation oncologist between $1,500 to $2,000 a day to come in and personally oversee these treatments. So if you look at the combination with broader reimbursement and now stronger economics for the derm, it's a recipe for being able to go back into that market very successfully. We're not doing it all on our own. We're doing it with partners.

We have one primary partner who is a radiation oncology services provider who purchases equipment from us and then executes a business arrangement with the dermatology practices, right? So there's a lot of different ways we're going after this, but we're very confident that the derm market can be a growth driver for the business in 2021 and beyond. Let me see. What was your other question about the rectal indication? Yes. So as I mentioned, we've made some really good progress.

In the next couple of months, we'll be looking to submit to the FDA and to CE Mark for that product. Our primary researcher in this area is a woman by the name of Dr. Te Vuong, who's out of Canada, and she is a world-renowned specialist in the colorectal area, and she will be heading up our clinical study for that indication. And over time, we'll be bringing on other sites, both in Canada, the U.S.

and the rest of the world, but she'll be our primary investigator and she'll be beginning to generate data that we'll use as part of our go-to-market strategy. And then, Mike, do you want the neuro piece of this?

Mike Klein -- Chairman and Chief Executive Officer

Yes. Neuro, obviously, we're deeply entrenched in the trial, which I indicated will begin enrolling at multiple sites, over eight sites. There actually are more than a dozen sites now that are interested in this technology, but we don't want to get too broad in the clinical study. So what we have done is begun to bifurcate those that are interested in the study and those that want to participate in what we call a registry.

Those people who are in the registry which we'll use to accumulate additional data will be sites that we would expect to commercially procure the technology. Again, this is a FDA-cleared offering. This study is largely for validation purposes and, obviously, to create further verification of the great results we sought out, out of our Eastern European study. And as we move forward, we need to answer some questions about sort of the go-to-market strategy that may have been embedded in your question.

We are exploring the idea of a onetime sales model for the controllers, similar to our other areas, versus a potential technology as a service model, which would basically mean instead of buying the controller, Pete would say, "I want to do five or eight treatments per month." That would allow us to move controllers from maybe one to as many as three to four different locations. This is an ideal indication -- this given the more episodic nature of neurosurgical treatment and also the ability to optimize the return on this technology, if we can use it in multiple sites. But it's also a win for each site because you don't have to have a major capital procurement. We would get paid sort of on a procedure basis, quite similar to the recurring revenue model we're talking about on the software side.

So instead of a SaaS model, more of a TaaS or technology as a service model. We're still playing with that. There are some obvious benefits to that. There are some obvious logistical challenges with the other model, but it looks very beneficial.

And the last thing I'll say about it is, it wasn't like we invented that model. We learned this from our Taiwanese partners where we ship now 12 controllers, and they're actually treating at 40 to 50 hospital locations and the value creation being generated is quite significant for them. And we, in some ways, have watched what they've done and that's allowed us to kind of go to school a little bit on this type of business model. So it's a good question, Chris, to unpack with three parts.

Hopefully, we've answered them for you.

Operator

Our next question comes from the line of Marie Thibault with BTIG. Please state your question.

Marie Thibault -- BTIG -- Analyst

Hi. Thank you for taking the questions and Scott, I just wanted to say good luck with your next steps and your future plans. It was fun working with you.

Scott Areglado -- Chief Financial Officer

Thank you, Marie.

Marie Thibault -- BTIG -- Analyst

Yes. I wanted to ask my first here, a two-parter on the flagship ProFound AI product. Maybe if it's possible to get an update on the number of licenses sold for that product at this point because that's the metric I know some investors are interested in. And as far as the Gen 3 version of the product, what have you heard early feedback from the field at all? I know it's not launched, but would love to also hear sort of your launch plans for that product, whether you go to existing customers or look for other fields.

Mike Klein -- Chairman and Chief Executive Officer

Yes, Marie. I'll take that one. So as you know, we announced our 1,000th install of ProFound, both 2D and 3D, in the fourth quarter, sort of the midway through. So we obviously have the benefit of the last month of last year as well as the first quarter.

I don't have a precise number for you on this because I guess we're more focused on hitting 1,000 of this and just focusing on the market. But I mean, I've got to say that we're probably between 1,100 and 1,200 installations systems at this point, just the back-of-the-envelope calculation. And in total, that's sort of a subset of the 7,700 cases or rather installations that I mentioned earlier. As far as the second part of your question, 3.0.

We've just begun to introduce that into the market, having gotten the approval in the latter part of Q1. But we already know the feedback because we did run side by side before regulatory approval, we ran side by side this 3.0 version to both our current version as well as a competitive offering out there. And I would say that 3.0 is what made the Solis deal sort of a no-brainer. Significantly better results on the specificity, which means the ability to have and a little bit on the sensitivity, which is, again, it's hard to do both.

But specificity, which is the ability to rule out those things that aren't cancer, you heard Stacey mention that Emily Conant's data at 21 sites showed that up to 60% of the cases that are screened are norms and those that show up in no marks also had no cancers. So what we're seeing in being able to move that up by as much as 10%, because that data was based on the prior algorithm before 3.0, what that would mean potentially is that up to as much as 70% of cases, if they have no marks, they potentially have no cancers. Now that's significant because we always talk about the fact that we sell you 53% of reading time when you use our product in combination with 3D tomo. If you actually don't need to read or certainly would be up to the physician, if you have data that suggest that up to 70% of the cases where there are no marks, there are no cancers, well, that means that more than two-thirds of the cases may not need to be read.

Now that's a claim that we cannot make and nor we ever likely be able to make that claim in the U.S. with the FDA, but it is what the data suggests. But it's clearly something that sites would need to make their own decisions on and it's probably most likely that, that kind of high specificity and perhaps not reading of cases would be used in certain developing countries where there's a shortage of radiologists. But we are seeing a dramatic impact on 3.0, particularly in this area of specificity.

Marie Thibault -- BTIG -- Analyst

All right. Thank you for the explanation Mike. Maybe I'll ask my follow-up here on therapy, like Chris asked. On Xoft derm, it certainly seemed like it contributed to the strength of therapy this quarter.

And it sounds like it could be a sustainable trend. I guess I want to get a sense of whether we should expect kind of lumpiness since you're working with a partner and possibly there's orders ahead. Or how should we envision kind of the derm business rolling out? Was this a onetime event and we shouldn't expect a similar strength going forward? Thank you.

Mike Klein -- Chairman and Chief Executive Officer

I'll make a comment, and I'll ask Stacey to color it in. I think Q1 was a little bit of a, I'd say, surge in the sense that a lot of this data was new. Coverage, there's no negative coverage policies anymore. They're all positive coverage.

They're silent, as Stacey indicated. And I think this came as good news to many folks. And then of course, the removal of this impediment to using the product, particularly in Florida, is an enormous boom to derm. So I do think that this business is on an upward trajectory.

However, I would be remiss in saying that any kind of capital equipment in this market wouldn't have some degree, I hate the word lumpiness, some degree of, let's say, time pressure elements associated with it because capital equipment cycles are just longer than our software cycles. So I think the trajectory over time is clearly northward, but it would be hard to game it precisely from quarter-to-quarter given the inherent longer cycle that capital equipment can take. I don't know if you want to add to that, Stacey.

Stace Stevens -- President

No, I think that's right, Mike. I think generally, the trajectory is upward. We may see some variation quarter-to-quarter, but I don't think it's going to be sort of steep ups and downs. I think we have restarted this business.

We've started investment in the business. We're doing a lot of promotional work, marketing work back at the derms. And I think we have a lot of confidence so that maybe it won't be exactly the same performance we've sustained in Q1, but it's not going to be big ups and downs either, right? I think it's going to be a steady trajectory and we're going to see very strong performance from that particular segment throughout 2021.

Mike Klein -- Chairman and Chief Executive Officer

I would just add to Stacey's comments that the one thing that can be lost on folks is that Xoft business is 60% a recurring revenue business when you add service and you add source contracts and you add balloon use. Balloons are not going to be used in the case of skin, but people would renew source contracts. And at different volumes, that may require a new contract. One of the things we like about having 10 new controllers installed and having a 100% increase in products is the product placements are always a lead indicator for the recurring service and source contract revenues and also balloons where they're used.

So the more units that are placed, the more it can help the recurring revenue element of the service lines. And in doing so, may, on a relative basis, kind of ease back on some of the overall lumpiness in numbers.

Operator

Our next question comes from the line of Per Ostlund with Craig-Hallum. Please state your question.

Per Ostlund -- Craig-Hallum Capital Group LLC -- Analyst

Thanks. Good afternoon everybody. I will start by adding my best wishes to you, Scott, as well. Good luck in your future endeavors.

We will miss you.

Scott Areglado -- Chief Financial Officer

Thank you, Per.

Per Ostlund -- Craig-Hallum Capital Group LLC -- Analyst

So I guess my first question. You've talked about the ProFound AI road map. And I didn't hear, not that it wasn't maybe said, but I didn't hear anything about the Priors product. I know there's been a fair amount of talk about Risk, and clearly, that's helping drive adoption of the flagship.

Just curious where Priors sort of stands in the road map as you're viewing it today. And when you think about Priors specifically, I know we've talked about this a little bit in the past, Mike, but I think it could be helpful to kind of hear it again how Priors is truly value-add to radiologists and patients beyond simply applying the flagship ProFound AI product to a prior year mammogram.

Mike Klein -- Chairman and Chief Executive Officer

That's a great question. And actually, I'm glad I have the opportunity to clarify that. What we've done with Priors is that we took it off of the detection platform and put it on to the risk platform because it was providing more important information on the ability to predict than it was on the ability to detect. It's very useful to compare the results last year to this year's algorithm.

But it's even more compelling for the prediction algorithm to be able to go back multiple years and then also look at the risk factors and tie it all together. And that makes for what you previously heard us say is panorama, the ability to look forward and backwards. So by putting it on the risk platform, what we effectively did was we accelerated our risk product, and we put the panorama or the Prior platform tied to our year-end anticipated release, which will be the next version of risk. I mentioned earlier that the risk product is going to go to subscription.

And one of the reasons for that is that we expect continual innovation. So what we've done is we've put the Priors program on the risk platform, where we get an even better yield and a bigger wow factor for customers than we do on the detection side.

Per Ostlund -- Craig-Hallum Capital Group LLC -- Analyst

OK. That makes a lot of sense. Pivoting to the operating expense side of things. So I think your comment about the revenue growth of 32% and the operating expense reduction of 7% in the quarter is pretty stark.

As we are hopefully coming out of the other side of the pandemic, I know a question that I get fairly regularly is how much expense actually needs to come back and how much might structurally stay out. And based on your commentary, it sounds like actually quite a lot of it will probably stay out with 1Q representing more of a normal run rate, maybe with a little bit of investment layered on. Is that the right way to think about it? Or is there some expense that will ultimately come back in future periods?

Mike Klein -- Chairman and Chief Executive Officer

Let me make a comment, then Scott can color in. What's really been interesting, and I don't think we're alone in this, is that the expense mix is going to change. All of these literally hundreds of thousands we were spending on trade shows and travel and endless French meals, whatever, we've obviously haven't had those expenses. And I think we've actually learned a level of prudency and maybe look at these things that I don't think these shows will be quite the same.

The approach of doing web-based presentation demos is just so productive And even the way we call on customers now is so productive. I don't think we'll ever fully go back to the way we used to work. And therefore, some of those expenses will just not come back. But having said that, we actually are finding that there are ways of now reaching customers that are really cost effective, but they're additive.

So our search engine optimization tool, the ability to auto reach people that hit our website and hit them back with customized information, the ability to do customized presentations, that's where we're going to be putting our dollars. And also, I mentioned we're going to be adding some cost with direct salespeople that will replace distributors. That will be a bit of a hit. But when I say a hit, it'll be an expense but will be offset by us clawing back 20% to 30% of what we would have to give to a distributor in terms of a transfer price.

So any of our investments will be designed to help the top line grow faster. So I would just say that I think we're going to have a steady state, lower expense rate than before. But for sales acceleration purposes, we will invest where we believe we could create almost an unfair advantage in terms of disproportionate gain on the sales revenue side to offset the expense. But all these free-floating expenses that no one ever thought about getting rid of, it's time for us to -- I think we've all become a lot smarter about both expenses and how we spend our time.

So hopefully, that sort of answers your question in two different ways, Per. It's a good question.

Per Ostlund -- Craig-Hallum Capital Group LLC -- Analyst

Yes, I would say that answered it quite well. Last question, probably a very easy one. But realizing that the time lines and structure of the model have been fairly fluid. Has there been anything new on the RO-APM side? Or are we kind of just in a holding pattern until things get finalized more around the middle of the year?

Mike Klein -- Chairman and Chief Executive Officer

Yes, that's a good question for Stacey, who monitors this very carefully. Stace?

Stace Stevens -- President

Sure. So as you know, Per, the December 2020 COVID relief legislation was what delayed the radiation oncology model until no sooner than January of 2022. So since that time, we have been very actively engaged with CMS. I personally had a meeting with them, along with one of our KOLs, to really make the pitch to get IORT back included in the model for next year.

We don't know what the outcome of that will be. But CMS was very open to hearing our perspective on that. We had a meeting with five, six, seven people. They encouraged us to continue to submit updated data, and we're going to have new data on our own expert clinical study ready to go soon.

And they encouraged further communication and really had an openness and willingness to discuss this topic, right? So we don't know what will happen, but we're continuing to work in the background with a DC-based health policy attorney working directly with CMS. We are now engaging from patient advocacy organizations to stand behind the cause here, particularly organizations that support women who tend to have more challenging access to traditional forms of radiation. So we don't know where this will all end. Right now, we think that it's going to go into place in January of next year.

Even if we don't end up back in the model, it's still going to be favorable for us as a company because now in 30% of the geographies that are mandated to be in the program, right, that delta as you and I have discussed, between the six-week treatment in IORT, that delta is much more narrow than it's been in the past. So that alone will help us be more competitive. So we're staying the course. We're doing everything we can along with our KOLs to pitch the reasons why IORT is a primary example of high-quality, cost-effective care and should be in the model.

And it's going to take some time to know what the outcome of that will be.

Per Ostlund -- Craig-Hallum Capital Group LLC -- Analyst

Excellent. Thanks Stacey.

Operator

Our next question comes from the line of Kyle Mikson with Cantor Fitzgerald. Please state your question.

Kyle Mikson -- Cantor Fitzgerald -- Analyst

Hi guys. Thanks for taking the questions. Congrats on the nice quarter. And Scott, it's been great working with you.

Good luck on your next venture.

Scott Areglado -- Chief Financial Officer

Thanks, Kyle.

Kyle Mikson -- Cantor Fitzgerald -- Analyst

So I wanted to start on the [inaudible] side of the business, sure. Solis continued to expand pretty meaningfully during the quarter into multiple states. Was wondering if ProFound AI was installed in any of those new sites during the first quarter or maybe this would occur this quarter, next quarter. Was wondering your visibility, your confidence level on that.

And then also recently, SimonMed was taken out by a private equity firm. So that happens often, it's not uncommon. But would something like that generally be a headwind or a tailwind to SimonMed's expansion plans?

Mike Klein -- Chairman and Chief Executive Officer

Yes, let me take that in reverse order. Obviously, the first thing I did when I heard the news was called up John Simon, and I was glad to hear that he will still be with the program. And he's still very interested in growth. And in fact, growing in new and unique ways in new markets and potentially even other indications.

So without going into too much detail, that was very good to see, and it could develop. And he's got a mandate and dollars behind him to grow. They want to be the number one radiology chain in the country, which is interesting because that's exactly what Solis would like to be. And the Solis agreement has worked quite well for us.

I would say it's worked quite well for them in the sense that they already added in Q1 over a dozen locations, which then become part of the deal. As you know, it's a five-year deal, exclusive deal. So as they grow, we grow. It has already, Kyle, had the intended effect that even in the end of Q4, after the announcement of this deal, you may recall that Wake Radiology, whose 22 sites in North Carolina was heavily influenced or impacted by the Solis' agreement, which was made quite loudly in the Southeast, which led to yet another large Hologic account to adopt our technology.

And that has happened in multiple sites throughout Q1. And we expect it to continue as they continue to grow. And it's really interesting that we have the two Ss, Solis and SimonMed, both private equity backed with a lot of capital that have significant growth mandates. And we do expect we're already seeing it, and we will expect their awareness campaign.

And in particular, you'll see awareness campaigns that happen around Mother's Day, and mostly happen in Breast Cancer Awareness month that really get quite loud. Some of the campaigns that people want to do are direct-to-consumer or direct-to-patient campaigns, which we prefer to do with them. But it won't have that effect. It's had the effect in Q4.

It's had the effect in Q1. I expect it will continue to have an effect now with both companies, SimonMed and Solis.

Kyle Mikson -- Cantor Fitzgerald -- Analyst

That was great. Thanks Mike for that. And I appreciate the color around the operating expenses in the quarter, and I guess, going forward. But in the past, we talked about Xoft.

And I guess both sides of the business should be profitable by the second half of '21. Are we kind of pushing that time line up a little bit? Like maybe in the second quarter, Xoft to be profitable even sooner than you previously expected?

Mike Klein -- Chairman and Chief Executive Officer

I think we're in the position where we're hovering around this positive EBITDA, positive cash flow, and we have to make some strategic decisions, which is do we want to press our advantage and continue to build the top line or turn profitable or drive close to profitability. I think that having the $47 million of capital has enabled us to make decisions and we've got a lot of momentum coming out of COVID. We've got a significant lead, let's press our advantage forward. And if it moves that time line to being profitable by a quarter or two, that's a pretty good but yet, it moves the top line, that's been sort of the thing we've been aiming for is to have continued growth.

But we always want to stay close enough that in any one quarter, that if there's any impact like COVID, we can always kind of pull back on some of our, what I call, surge capacity or gig economy workers to turn profitable as need be. The one thing I'd also want to say is that the further we pursue and again, I've indicated that the subscription model will have low single digits, let's call it 5% impact on the year. That is always a challenge also in terms of being profitable because we'll put in all the costs upfront but most of the returns will happen in subsequent year. So our goal has been to stay hovering around the hoop, if you will, with the ability to turn profitable if we need to.

But let's make no mistake about it. As the business continues to grow, no matter how much we may think of investment, it inevitably has to turn profitable with positive EBITDA and cash flow because we're generating a lot of leverage in the business now. As the margins are picking up, as the top line grows and as we prudently manage expenses, it's inevitable that we're going to turn in that positive direction. I'm basically just saying that we, that if it means having to sacrifice a quarter or two of profitability to get inordinately greater growth, we just might do that if it makes sense.

Kyle Mikson -- Cantor Fitzgerald -- Analyst

Thanks for taking the time. I'll leave it there.

Operator

Our next question comes from the line of Francois Brisebois with Oppenheimer. Please ask your question.

Francois Brisebois -- Oppenheimer & Co. Inc. -- Analyst

Just a quick one here. I'm sorry if you mentioned this before, but having numbers, the top line come in higher than the preliminary numbers, is there something specific there from a certain section that was better than expected?

Mike Klein -- Chairman and Chief Executive Officer

I think in Q1, the Xoft number of $2.9 million, which, again, was related to this aforementioned surge in dermatology and Xoft product to 100% over first quarter of last year, so doubled. So I think that was clearly a breakout performance on the Xoft side. We're seeing the continued growth on the AI side as well. But I would say that if you were to chart it out, you would probably see a noticeable uptick in Xoft in the first quarter.

And as indicated through some of the other questions, we can't predict that, that spike will happen in any one particular quarter given the inherent spikiness, to use that word, of capital equipment sales, but the trajectory is certainly northward and exist on both ends of it .

Francois Brisebois -- Oppenheimer & Co. Inc. -- Analyst

Great. And then just as we think down the road here with risk becoming more of a thing, you mentioned maybe 5% this year, then a little more next year. Is this something in the income statement that you guys are thinking about breaking out just ProFound Risk to separate it, ProFound AI, especially if it might have more of the subscription model in the other parts of the business?

Mike Klein -- Chairman and Chief Executive Officer

Yes. We have been talking a while and this is something that Charlie will be doing. We've been talking a while about creating a sort of a third line. So we have product, services and what we would call subscription.

We've been waiting for it to be a more meaningful part of the business to break it out. Certainly, as we head to 2022, that will be the case. But we said that we will keep providing that breakout this year. I think we don't want to force it to happen if it's not been significant enough.

At that point, it's not been measurable enough to really warrant it, but I suspect that could change as we move forward. And certainly, when we move to a subscription-only model for risk, which we said will be in the mid- to latter part of the year, we will do that, and we will do that with ample notification. We may even have a special investor meeting, which we know we typically have in the fall, to do it. It would probably be in the fall, could be earlier.

But we would want to give ample notification of that. I know people want to build their models.

Francois Brisebois -- Oppenheimer & Co. Inc. -- Analyst

OK. Great. If I'm understanding this right, is the ProFound AI detection -- will that also maybe be on subscription? Or are we just focusing on subscription for risk?

Mike Klein -- Chairman and Chief Executive Officer

The model we're going with is by ProFound. Let's say you pay $30,000 to $40,000 for a license and on top of that, you can buy a subscription for, let's say, $1,500 a month for risk and we'll only be offering risk at a certain point in that format. We're not intending right away to drive the detection business to a subscription-only model. But that will be a choice that sites can make.

We think we have a better argument. When we say argument, we think the presentation of the two products lends itself the risk. But as previously mentioned, products, such as the introduction of Priors being into the risk product, makes it very compelling to want to have a product that you don't have to keep replacing. So it really lends itself to that.

If it drags detection along, we've kind of modeled that to a degree as well. We don't think it's going to happen at a pace faster than what we've indicated. But if that is the case, we'll certainly have ample notice of that. Keep in mind, we don't want to be overly wedded to a volume-based market right now given the current straining volumes.

That would be something to think further about later this year.

Francois Brisebois -- Oppenheimer & Co. Inc. -- Analyst

OK. Great. And if I can sneak in a quick last one. I guess, what's the reason that the EU has been so slow or is just not necessarily going to 3D from 2D? Can you just remind us what the reason is there?

Mike Klein -- Chairman and Chief Executive Officer

Yes. Stacey, you want to handle that?

Stace Stevens -- President

Yes, absolutely. So you find with Europe, in most med tech devices, that Europe typically lags by about three or four years the United States in terms of technology adoption. So that's one impact. The other thing is that in Europe, there are a couple of different things going on there.

One, the screening population is done only on 2D, right? So 3D tomo is only used for diagnostic mammography or women who are symptomatic. And the other thing is that there is a double read protocol in Europe as well. So unlike in the U.S., where a single radiologist reads every mammogram, in Europe, two radiologists read every mammogram. And there are clinical studies going on right now that are looking to prove that one radiologist plus AI is better than two radiologists, and there already is some data that shows that.

But at the end of the day, there are still 6,000 2D mammography systems in Europe that are actively in use. And so that gives us a great opportunity to go back and sell the 2D AI product there. Another big difference is that in the U.S. in the 2D world, there was about a 90% attachment rate of computer-aided detection, the name that we called the 2D product back in the day, where it was only about 16% attachment rate in Europe.

So a lot of those 2D systems never had any type of AI-type solution, right? So there's a big opportunity with ProFound AI where the sensitivity is so high and the specificity is so good, that was a big reason why they weren't adopting earlier versions of computer-aided detection to go back and sell product there. So we're seeing growth in tomo definitely. The market is growing over there. But it's still predominantly a 2D market, and it's going to be a little bit of a slower adoption cycle than what's in the U.S.

Operator

Our next question comes from the line of Andrew D'Silva with B. Riley Securities. Please ask your question.

Andrew D'Silva -- B. Riley Securities -- Analyst

Hey good afternoon. Congrats on a strong quarter. And Scott, like everybody else's comments, it's really been a pleasure working with you.

Scott Areglado -- Chief Financial Officer

Thanks, and you too.

Andrew D'Silva -- B. Riley Securities -- Analyst

Awesome. So I just have a few quick questions here. We'll start on the risk side. Was there actually, I guess, any material top line benefit during the first quarter from risk since it's still another license related sales model? And does the acquisition of Change Healthcare by United or Nuance by Microsoft have any impact on how we should think about the subscription business?

Mike Klein -- Chairman and Chief Executive Officer

Yes. I'll handle the second part of that. And Scott, you may want to talk a bit about the impact of risk in terms of specifics. And in Q1, we talked about the number of deals kind of being aided by risk or having risk bundled in.

But on the last point there, I said before that United, I don't know if it's on the call or on a one-on-one, that it's a really positive thing to have the ultimate carrier that's looking at the healthcare economics also have access to the Change Healthcare data. But it makes it very easy for us to be able to prove the base case that finding things earlier and if we could clearly show, which we can, that you could find things one or two years earlier, certainly, the risk model proves that. To be able to have the economics, if we could cite from public data or from Medicare data, but to specifically be able to do that with a private payer that actually has their own calculations that they could look at, makes it that much more compelling. And that's exactly what we intend to do.

It's been a little tough to kind of sort through all the changes and to get to the right parties there so far, but that's definitely in our future. Now on the Microsoft, Nuance piece, I think that, that is very intriguing. Basically, a lot of people like to say that this is Microsoft getting into sort of Dragon speech, voice dictation. But no, we see this as basically Microsoft, one of the big software companies, basically making a concerted decision to focus on medical imaging.

And their mission is empowering businesses, Microsoft, so this is a really, I think, brilliant acquisition on their part. It connects them to [inaudible] and enables them to sort of have the backbone upon which the PACS business is based. It could lead to some consolidation into what is a very, very much fractionalized business. As I said, there's like 20 of these PACS companies, they're all running different railroad gauge tracks.

We have to work hard to harmonize these railroad gauge tracks, so we could run on all of them. But if some big players are going to come in and they're going to basically enable a little more standardization in the space, that's going to be very positive and allow us to eliminate a lot of the work we have to do to make it work on all these systems. The same thing it's going to do for us is it's going to put us in direct communication with companies like Microsoft. I think if you use your own judgment in terms of what it might mean in terms of others entering the space, but I think that it's a very intriguing development.

And I think that it will add to some standardization. It will put a spotlight on things. And I think that we intend to be very front and center in terms of working with them closely and expanding the relationship. We already use Microsoft cloud-based services.

So this is an opportunity for us to expand our relationship. Scott, do you want to do risk?

Scott Areglado -- Chief Financial Officer

Yes. So the risk is probably less than 15% to 20% of our revenue in Q1. And I would say the answer to that is, is that we're still trying to get this launched out to luminary sites, KOLs, things like that. We're bundling it with our 3D but putting it in at what I would say is a lower ASP right now to try and get adoption.

So it's helping drive 3D sales. But I expect it to grow over time here as people start to realize we can continue to position the value of risk in the offering.

Andrew D'Silva -- B. Riley Securities -- Analyst

That's interesting and good context.

Mike Klein -- Chairman and Chief Executive Officer

Yes. I'll let add to Scott's last point there. This is a concerted effort on our part, too. Get this product in the hands of the luminary, get the papers written, get the studies out.

Because when we launched 3D detection, we launched it and then we had to wait six, nine months for the validation studies to come out. This is part of an effort to get these validation studies done in advance of our hard launch, in advance of subscription and also do it with a significant amount of direct-to-consumer awareness building of this product, which we hope to do with some of the sites that we mentioned earlier, particularly in local markets. So there's a lot of forces that we're trying to pull together and also will align with when screening is back to full throttle, which we expect will happen toward the end of the summer.

Andrew D'Silva -- B. Riley Securities -- Analyst

Very good. And then can you just help me reconcile the change from, one, detection to detection plus risk? And then two, from having a perpetual license model to having a perpetual license model and a subscription model and reconciling that with your OEM partners like GE? Is that something that they are going to manage that process? Or does that transfer over to direct sales? Just any color there, I guess, would be useful as we think about how those operations build out.

Mike Klein -- Chairman and Chief Executive Officer

Yes. We could probably, in a one-on-one, break out some of the -- unpack that a bit more. But I would say that similar to other things we've done in terms of, let's say, our technology innovation program, which gives you the ability to pay in advance for the next algorithm, but you have to pay a certain dollar amount, we call it a tip for the technology innovation, we've always sold that directly ourselves. We don't really offer that to our OEM partners because that's stuff we need to manage closely.

This isn't going to be the case right now for risk as well, particularly on the subscription side. It's too complicated right now to run it through the OEMs until we have all the pieces of the model in place. In fact, the same thing applies to our PACS partners, which would be Nuance and Change Healthcare. Even those parties where those inherently are contracts that will be cloud-based, more SaaS-like subscription contracts, those are starting to stay for a while in the realm of our ProFound AI detection product only.

So that's another way of saying we want to sort of closely guard and curate and keep an eye on precisely how the recurring revenue product line risk will be introduced. It's more complex if we actually start thinking about our other channels. So first, we want to get it right ourselves, and then we'll start moving into other channels over time.

Andrew D'Silva -- B. Riley Securities -- Analyst

That makes sense. And last question for me as it relates to Xoft. Obviously, you were touched on the reimbursement shift for the dermatology side of the business. If my memory serves me correct, might be mixing some names about it, I think it's Palmetto and Meridian really opened the reimbursement dynamic that benefited Xoft 7 or so years ago.

Is that dynamic at play with the current benefits now? Or is this more of like a traditional or more of a durable benefit within the radiation side business?

Mike Klein -- Chairman and Chief Executive Officer

A good question and good memory, Andrew. It was Palmetto and Meridian. Those are the two big ones. And what we had is those sites and Florida as well.

All these policies almost in one fell swoop turned into negative coverage policies. They said technology was experimental. And what started happening toward the end of last year was that all of those local, you may call them Medicare fiscal intermediaries, all of those turned either positive or silent. There were no remaining negative coverage policies.

So all those that were, let's say, we call them red territories, they all flipped to yellow or green, which is great. At the same time that, that happened, the overall global reimbursement on a national average basis that was being secured from Paul, like 12 or 13 of these regions, was averaging about 4,900. That was up from about 2,000 two years ago. And in the areas you mentioned, Palmetto and Meridian, that was cut to zero years ago.

So those have been steadily coming back to the point that we now have this national average of 4,900. And what Stacey mentioned, one of the big things on top of this issue of, let's say, coverage as well as payment, the two elements I really just went through, was regulation. And by not having the doctor have to sit by the controller, that eliminates an enormous cost and a cost that was really not necessary, at least in our view, from a safety perspective and efficacy, that it's a really wonderful impediment there out of the way.

Andrew D'Silva -- B. Riley Securities -- Analyst

OK. That was very useful. Thank you very much for the color. Best of luck going forward.

And again, Scott, best of luck going forward on your new endeavors.

Scott Areglado -- Chief Financial Officer

Thanks, Andy.

Operator

Our next question comes from the line of Brooks O'Neil from Lake Street Capital Markets. Please ask your question.

Brooks O'Neil -- Lake Street Capital Markets -- Analyst

Thank you. I have two quick ones. I hope one, I wonder if you could give us your estimate of your penetration in the breast diagnostic market. And two, I wonder if you have any comments about the application of ProFound beyond the breast diagnostic market.

Are there other opportunities for you going around the body? And congratulations on a great quarter.

Mike Klein -- Chairman and Chief Executive Officer

Yes, Brooks, two questions. The first one, penetration. We track ourselves, when we look at the 40 million images or women that get mammograms per year, we've been tracking ourselves for a while now and having over 50%, about 56%, 57%, of all U.S. screens that we're now talking like in the low 20 millions that are screened with our technology.

The balance would either not be using any AI or maybe using a early generation competitive technology. No one else is out there with 3D that we've seen installed or at least paid for and installed. You may see a trial unit out there. So our goal, obviously, is with 3D, to get to not only the penetration we had with 2D, where we're treating 22 million, 23 million patients and more than half of the 18,000 sites or cameras that are out there, but to go well above that.

So our strategy is to replace 2D and then go beyond that 56%, 57% and just keep going. And we believe we have this tremendous opportunity and advantage as a first mover and still pretty much the sole mover at this point because we just haven't seen any sold units into the market. So that's back to my point earlier about moving quicker and wanting to drive the top line. Now when we think of other areas, there are a number of areas that we are actually already in.

We already have an FDA-cleared product in colorectal AI, CT scanning of the colon. It's just that reimbursement is not there to support it. So that's an area we continue to examine. But the other areas that we look at are new.

One category is extensions of breast, which is obviously breast MRI, breast ultrasound. And then the third area is the ability to detect coronary vascular disease in breast images with the very same image. Breast material calcifications can be seen over time. And as we look at the priors, we begin to see changes in the arteries that feed the cardiac tree.

And in doing so, instead of focusing, let's say, on the cancer, it's a matter of doing the pattern recognition on these vessels. And the biggest part, which is the collection of data, is information we already have. So with millions of images that could be mined for this. So we're looking to make strategic decisions to prioritize.

The other area that we used to be in that we still have capabilities in that we will examine is the area of prostate. These are areas that where you might say we're a little bit of disciplined dilettantes at the moment in that we're looking at these. And we're applying some very careful metrics about the competitive landscape, reimbursement, how big is the market. So when we make the foray into an area, it's going to be a meaningful use of our dollars.

But I want to say this, Brooks. We're nowhere near done in breast. There is so much more to do with this risk product, with products that enable us to, as I said earlier, control patterns of care, giving women the information perhaps needed to even change their risk factors and change their scores. It's a long, long way to go.

And imagine if we had 22 million patients today giving us a pay-per-click. Just that alone makes us wish that we had a pay-per-click revenue model years ago. Of course, we didn't have the software tools, the industry wasn't ready for it. But just getting our current market share to go to pay-per-click over time, enormous implications for the business, just in breast.

Brooks O'Neil -- Lake Street Capital Markets -- Analyst

Yes, that's huge. That's great. I'm sure you know this but coronary artery disease is the number killer of women in the world today. So that's a huge and important market as well.

So I'm glad you're at least thinking about it.

Mike Klein -- Chairman and Chief Executive Officer

Well, the ability to turn every breast cancer imaging center into a women's holistic imaging center, where you can detect two diseases at once potentially, is enormous. And it's literally coming from the same set of images. So we're not ready to announce anything formal in this area, but we are actively looking at it.

Brooks O'Neil -- Lake Street Capital Markets -- Analyst

All right. Thank you.

Operator

Our next question comes from the line of Gene Mannheimer with Colliers Securities. Please ask your question.

Gene Mannheimer -- Colliers Securitites -- Analyst

Thanks. Good afternoon. Most of the question has been answered here, but appreciate the color around the revenue over attainment in the quarter. And I just wanted to ask if you feel there was to what extent was there any COVID catch-up relative to maybe some of the delays you saw last year? Did any of that come in Q1? Essentially, I'm trying to get a feel for your comfort level with consensus numbers because it looks like you're off to a great start out of the gate here.

Mike Klein -- Chairman and Chief Executive Officer

Thank you. I would say that there's certainly a little bit of catch up and that there were deals done in Q1 that would have or were hoped to have been done in the latter part of 2020. But we had very significant Q4. And that was, in large part, a significant amount of catch-up in that quarter because people were already starting to visualize.

Even though we haven't hit some of the peaks in January or early February, people were already back to screening. I think that what we're still going to see, and I think we're going to see it perhaps in the second half of the year, is that a lot of hospital budgets, as much as 40%, are on a July 1 to July 1 cycle. So for the ones that were kicking off on an annual year in January, we may be seeing a little bit of that in the early part of the year because they've got, let's say, renewed budgets. But a lot of folks are going to be hitting their budget cycle in July.

So that's just an interesting point of note in terms of the cycle of sales. I would say that sites are back to screening. We are catching up the 40 million women, of which 10 million were missed last year, working very, very hard. Sites starting to catch up by running extra hours, longer days on weekends.

I think we're kind of running at a point of stability, but I don't think we're quite caught up. And I think we're going to be catching up in terms of the actual screening. For most of this year, we'll be playing catch up. It's hard to get that much more patients' throughput through the system.

Now I believe we benefit from this because our risk tool, particularly as we start launching it in the back half of the year or midyear, you might say for 3D, and we launch it more on subscription later, is a very useful tool to help prioritizing those patients, which ones you can see first. Because it's very scary to not know which ones, should you do it on a LIFO, FIFO or whoever yells the most. It's very helpful, I should say, to have a rational basis for calling someone and saying, head of the line, your risk profile is higher than someone else's. So I think we will benefit from that dynamic as we move forward.

Gene Mannheimer -- Colliers Securitites -- Analyst

Thank you Mike.

Operator

And with that, this concludes our question-and-answer session. Now I would like to turn the floor back over to Mr. Klein for any closing remarks.

Mike Klein -- Chairman and Chief Executive Officer

I want to thank everybody for hanging in with us. A lot of questions, a lot of great questions. Let me close by extending my thanks for all of you joining us again so we could summarize the highlights of our business. And I'll just wrap up by saying that the takeaways that we want to bring forth to the quarter is that we have continuing sales momentum, driven by Profound AI, which is being aided significantly by Risk.

We have a significant near-term commercial opportunity with ProFound Risk, which we see as a giant leap forward toward risk adaptive screening and will play an increasingly larger role as we introduce 3D and also as we start broadening our footprint with additional sales resources and the application, where appropriate, of the subscription model. We see increased penetration not only with large deals but also with moderate sized deals outside of metro areas as we're getting that reach now. We see an emerging positive trend in dermatology and therapy, which we think will have an upward trajectory, but there could be some capital equipment undulations along the way. And finally, we see a dramatically significant opportunity in glioblastoma with real-time Xoft IOR treatment and the ensuing validation that will come with the clinical trial that is now starting to enroll.

So with that, we look forward to providing further updates on our progress. And I want to thank everybody for your continued interest in iCAD, and please enjoy the rest of your day and evening.

Operator

[Operator signoff]

Duration: 96 minutes

Call participants:

Jeremy Feffer -- Investor Relations

Mike Klein -- Chairman and Chief Executive Officer

Scott Areglado -- Chief Financial Officer

Stace Stevens -- President

Dave Turkaly -- JMP Securities -- Analyst

Chris Pasquale -- Guggenheim Securities -- Analyst

Marie Thibault -- BTIG -- Analyst

Per Ostlund -- Craig-Hallum Capital Group LLC -- Analyst

Kyle Mikson -- Cantor Fitzgerald -- Analyst

Francois Brisebois -- Oppenheimer & Co. Inc. -- Analyst

Andrew D'Silva -- B. Riley Securities -- Analyst

Brooks O'Neil -- Lake Street Capital Markets -- Analyst

Brooks ONeil -- Lake Street Capital Markets -- Analyst

Gene Mannheimer -- Colliers Securitites -- Analyst

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