iCAD (ICAD) Q1 2022 Earnings Call Transcript

iCAD (ICAD 2.03%)
Q1 2022 Earnings Call
May 11, 2022, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen, and welcome to the iCAD, Inc. first quarter 2022 earnings call. [Operator instructions] It is now my pleasure to turn the floor over to your host, Tony Takazawa, director, investor relations. Sir, the floor is yours.

Tony Takazawa -- Director, Investor Relations

Thank you, Matthew. Good afternoon, everyone. Thank you for joining us today for iCAD's first quarter 2022 earnings conference call. On the call today, we have Stacey Stevens, our president and chief executive officer; and Charlie Carter, our chief financial officer.

Before turning the call over to Stacey, I would like to remind everyone that we will be making forward-looking statements on the call today. These forward-looking statements are based on iCAD's, current expectations, and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations. For our list of factors that could cause actual results to differ.

Please see today's press release and our filings with the U.S. Securities and Exchange Commission. iCAD undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. I would also note that management may refer to certain non-GAAP financial measures.

Management believes that these measures provide meaningful information for investors and reflect the way they view the operating performance of the company. You can find a reconciliation of our GAAP to non-GAAP measures at the end of the earnings release. With that, I'll turn the call over to Stacey.

Stacey Stevens -- President and Chief Executive Officer

Thank you, Tony. And good afternoon, everyone. I will begin with some high-level comments on our first-quarter results and then provide additional granularity around the current business environment and key areas of focus for the company, for the rest of 2022. As we indicated in our pre-release on April 21st, Q1 has been a period of rapid change for our company.

As we announced the appointment of Timothy Norris Irish as chairman of the board of directors. He will succeed Michael Klein, who will remain as the director of the board. On behalf of the board of directors and our entire management team, I would like to thank Mike for his contributions as chairman of the board over the past three years. And we're excited to welcome Tim as he offers tremendous insight and decades of relevant experience in corporate leadership and health technologies, along with a proven track record of leading innovation and strategic change.

We also recently announced that our chief financial officer, Charles Carter, will be leaving the company for personal reasons. Charlie will continue to serve as CFO to assist with the transition of his responsibilities until his successor is in place. I would also like to thank Charlie on behalf of the board of directors and the entire iCAD team for his work as CFO over the past year. He has played an important role during a period of transition for the company.

And we appreciate the contributions that support our company's future success. We have previously shared that we believe we are currently at an important inflection point that offers significant potential across both sides of our business. With a robust portfolio of world-leading differentiated solutions in large under-penetrated markets in the detection segment, and the expansion of Xoft in promising applications such as the treatment of brain tumors in the cancer therapy segment, our team has been laying the foundation for a path to continued success this year. We plan to continue to leverage the strength of our robust portfolio of powerful solutions in 2022 and beyond by expanding access to the technologies in our existing portfolio, aggressively targeting broader market opportunities and offering more flexible ways for our technologies to meet customer needs.

Based on what the team accomplished in Q1, I believe that we have the right plans and the right team in place to successfully execute our strategic vision and elevate the company and our technologies to new heights. Although the global pandemic continued to present challenges in the earlier part of Q1, we are thankfully beginning to return to a more normal environment as COVID -related restrictions are beginning to loosen in many areas around the globe. This has, in many cases resulted in a more positive customer environment and better access to decision-makers. We saw particularly positive progress in the EU as COVID restrictions began to ease.

And traditional business activities such as cross-border travel, began to open up once again. From a supply side perspective, we proactively took a number of steps, starting last year and continuing into Q1, to reduce the potential for supply chain disruption. While this resulted in higher-than-anticipated cash burn, we believe it was prudent to establish an inventory cushion to protect against component shortages and inflationary price increases, and we believe we're now well-positioned to weather any potential short-term disruption that may come the rest of the year. Moving forward in 2022, we plan to burn substantially less cash in the subsequent quarters, and we have developed plans for a range of scenarios that should allow us to conserve and ultimately generate cash in 2023.

Taking a closer look at Q1, iCAD's total revenue was $7.52 million. This is on track with the expected trajectory we previously laid out, and is a particularly encouraging result given continued COVID headwinds early in the quarter, and the fact that we were simultaneously overhauling our commercial infrastructure to position the company for long-term success. Overall, our Q1 results provide a solid foundation to build on for 2022, and I would like to express my sincere gratitude to our hard working and dedicated teams for their laser-focus and execution in achieving these results. Looking at the detection business, the key aspects of our plan, are to increase our penetration of the broader available market and to better address the needs of the emerging enterprise-level customers.

However, both initiatives require different sales approaches and skills than what we have emphasized in the past. And it became clear that the skills enabling our early success, were not the same skills that we needed to be successful moving forward. As a result, we have worked diligently to adjust our sales motion and have made great progress in enhancing our commercial infrastructure with new and highly successful sales personnel in key territories across the U.S. Although these changes are recent, they are already having a positive impact on our business.

In Q1, we saw continued positive momentum in our goal to further penetrate the broader available market. And in parallel, we have implemented several initiatives to continually drive our growing pipeline. We recently announced particularly positive momentum for ProFound AI among customers equipped with a leading provider of 3D mammography systems. With customers continuing to report ongoing workflow advantages and clinical superiority with iCAD suite of AI powered Breast Health Solutions compared to other breast AI solutions.

Some of these customers have been and we'll share their experiences using ProFound AI, and our new ProFound insights, profound impact Webinar Series, which we recently launched and will run through the rest of the year. As expected, our sales force with skill sets and relationships are proving to be a key element that is enabling us to successfully reach new customers. For example, in Q1, our team solidified an enterprise deal with one of the largest world renowned academic research institutions with multiple locations throughout the U.S., as well as several other key contracts with high-profile facilities across the country and worldwide. We are pleased with the early success we're seeing, and excited by what we can accomplish moving forward.

Another key aspect of our plan is to better address the needs of enterprise level customers who are becoming a very important opportunity in the detection market. These customers are very attractive as they generally represent larger installations with longer-term strategic partnership opportunities. We're seeing increased traction with these customers and we have evolved our sales approach and leveraged the skill sets of our enhanced commercial team. Our strategic plan also includes providing customers more flexible ways to procure our technology.

These efforts include expanding our legacy partnership to now include various PACS vendors, and working with AI aggregators. We were pleased to see some of these partners contribute to our overall revenue in Q1. As mentioned on the last call, we began testing a subscription model in Q1 for some customers who prefer the operational expense approach due to budget constraints. Historically, the purchasing model in the detection business has been a capital investment decision and a perpetual software license purchase, but we have learned that some customers may prefer a more flexible payment plan.

The subscription model allows the segment of our customers the ability to acquire our technology when capital budget is not available, and also begins to build an install base that we believe will generate long-term recurring revenue for the company. While there is growing customer interest for this model, we still expect it to be a small percentage of our overall revenue in 2022, and we continue to lead with a capital model. We're also making great strides as we continue to collect additional clinical data to support our leading edge ProFound AI Risk product. We believe that this first-in-kind technology, not only has the potential to change the landscape of breast cancer screening, and also that short-term personalized risk assessment should become the standard of care for women.

The portfolio of evidence supporting this technology continues to grow with four studies currently underway. We look forward to seeing research presented from some of these studies at upcoming tradeshows in Q2, including the International Workshop on Breast Imaging, which will take place in Belgium later this month, and the European Congress of Radiology, which will take place in Vienna this July. While we are proud to report that we have a growing number of early adopters of this technology, we expect that the additional clinical data will make the use of ProFound AI Risk even more compelling for clinicians working to improve breast cancer screening outcomes. In addition, we are exploring various product and pricing combinations that could help drive adoption of this capability moving forward, including a bundled pricing model, where all of our breast AI technologies can be adopted together as a premium package.

Now, turning to our therapy business. Revenue in the therapy segment fell short of our expectations due primarily to a restructuring of one of our dermatology partners who is presently positioning itself to go after the derm opportunity in a more accelerated fashion, including adding additional sales resources on their end. We fully expect this segment to rebound considerably in Q2, and expect our U.S. dermatology business to continue to be the primary growth driver for Xoft in 2022.

We are currently installing our first Xoft System for skin in Florida in Q2 with our partner, Derma Therapies and expect to convert several more new customers in this key market in the months ahead. We also have successfully on-boarded our west coast partner, DermaCure RT, and expect to see several more key placements in Q2 as a result of this strategic relationship. With the COVID restrictions beginning to lift in many areas earlier this year, I'm happy to report that we were able to attend multiple in-person trade shows in Q1 that have stimulated are already growing pipeline of dermatology prospects. With more conferences and events planned in Q2 in various geographic locations, we look forward to continuing this momentum.

Additionally, we continue to advance the GLIOX trial, our multinational clinical study examining the use of intra -operative radiation therapy with the Xoft System for the treatment of recurrent glioblastoma. Researchers have now treated five patients under GLIOX protocol to date at Providence St. John's, and we expect to have at least ten patients treated with Xoft Brain IORT by the end of Q2, while concurrently adding multiple new sites in both the U.S.. and global markets.

For example, recently, doctors at Caceres University in Caceres, Spain have successfully treated multiple cases of recurrent glioblastoma with the Xoft system in preparation for beginning with GLIOX trial. This facility has also used Xoft eBx to treat patients with brain metastases, rectal cancer, and head and neck tumors. We're also encouraged to see more facilities, adding new indications for the Xoft system as it provides a practical solution that offers the potential to optimize treatment times and reduce side effects, which ultimately enhances patient care. For example, clinicians at the Miguel Servet University Hospital in Zaragoza, Spain have recently utilized Xoft IORT in their cancer treatment regimen for sarcomas and brain metastases.

Notably, this facility has been using the Xoft system for the treatment of breast and gynecological cancers for years, with now more than 700 breast cancers and 200 gynecological cancers treated today. We're also continuing to see interest in forward momentum in Xoft and other global markets with a significant sale in Taiwan in Q1. Now looking at our international AI business, as noted earlier, we continue to see improvement in the selling environment, especially in the EU. This can be attributed in part to a reduction in COVID restrictions and the introduction of a subscription pricing alternative.

We expect our European business to continue to contribute more revenue than has been the case in the past two years where this geography was hard hit by COVID constraints. We remain optimistic as we look ahead, as we believe we now have a stronger commercial infrastructure in place and a solid and growing pipeline to ensure the trajectory we are on will continue to position the organization for success and bring our world-leading portfolio of innovative solutions into the hands of more clinicians worldwide. We remain very confident in the unique value our portfolio of technologies offers. And I believe we are successfully navigating the changes necessary to capture more of that opportunity and drive growth through 2022 and beyond.

With that, I will now turn the call over to Charlie to walk you through the financial highlights from the quarter. Charlie?

Charlie Carter -- Chief Financial Officer

Good afternoon, everyone, and thank you, Stacey. I'll now summarize our financial results for the quarter ended March 31st, 2022. Total revenues for the quarter were $7.5 million, a decline of $1.1 million, or 13% from the first quarter of 2021. The detection segment revenue was $5.5 million, down 3.5% from last year.

Within detection, first quarter '22 product revenue was $3.9 million versus a strong comparable first quarter of 2021 that was up 34% over the prior year. Product revenue declined year over year, largely due to lingering COVID-19 impact in early Q1 '22, causing access to decision-makers to be challenging, especially for large deals, and the restructuring of our commercial team in the United States. Detection service revenue was $1.7 million up 6.4% over the prior year. The therapy segment revenue was $2 million down $923,000 or 32% versus the first quarter of 2021.

Therapy product revenue was $696,000 down 50% year over year against a very tough comp from last. Services revenue were $1.3 million down 15% year over year. As Stacey mentioned, the decrease is primarily due to a restructuring of one of our dermatology partners as they restructure and are focused on quickly growing their sales and support infrastructure. We expect therapy revenue to improve in Q2 in the remainder of '22.

Moving on to gross profit. On a percentage of revenue basis, gross profit was 71.5% for the first quarter of '22, compared to 72.8% for the first quarter of 2021 with the reduction related to temporary lower average selling prices for certain Xoft supplies. On a pure dollar basis, gross profit for the quarter was $5.4 million, as compared to $6.3 million last year, largely reflective of the reduction in revenues. Total operating expenses for the first quarter of 2022 were $8.9 million, a $1 million or 14% increase year over year.

Operating expenses in '22 included a $300,000 increase in the reserve for doubtful accounts, reflecting the general global economic concerns and potential elevated risk to trade receivables. This is mostly a general reserve increase and is not related to any material known defaults. The operating costs increased also reflects lower expenses in 2021 due to lingering COVID-19 reductions in employee levels as compared to full staffing and additional costs related to building the U.S. sales team capabilities this year.

The company remains committed to managing operating expenses with a selective focus on spending to support current revenue target achievement and future revenue growth, while maintaining the clinical superiority of our technology. Operating loss was $3.5 million in the quarter ended March 31, 2022, versus $1.5 million in the quarter ended March 31, 2021. This increase in operating loss was due to lower revenues and higher operating costs in Q1 '22 versus Q1 '21 as already discussed. GAAP net loss for the first quarter of '22 was $3.5 million or $0.14 per diluted share, compared with a GAAP net loss of $1.6 million or $0.07 per diluted share for the first quarter of 2021.

This year-over-year increase represents the change in operating loss offset by a $100,000 of interest expense in Q1 2021. Non-GAAP adjusted EBITDA for the first quarter of 2022 was a loss of $2.7 million versus $0.4 million in Q1 2021. Non-GAAP adjusted net loss for the quarter was $3.5 million or $0.14 per diluted share, compared to $1.6 million or $0.07 per diluted share in Q1 2021, reflecting few adjustments to GAAP net loss in each period. Moving onto the balance sheet.

As of March 31, 2022, the company had cash and cash equivalents at $29.8 million, compared to cash and cash equivalents of $34.3 million at March 31, 2021. Cash and cash equivalents used during the first quarter were $4.5 million. As Stacey mentioned, iCAD is derisking supply chain elongation by adding inventory. The increase in inventory levels and the timing of the payments add a large impact on cash use in the quarter.

While we do not expect to see a similar uptick in inventory levels moving forward, we do believe maintaining this increased inventory level, will de -risk the supply chain for the remainder of '22. There were also some non-cash impacts to our working capital in the quarter due to changes in our accounts receivable. Roughly half of the change was due to unbilled contract assets moving to accounts receivable upon invoicing. The remainder was primarily due to the difference in the strength of business at the end of Q1 versus Q4.

The COVID-19 related decrease in December 2021 sales, resulted in the lower accounts receivable balance, while Q1 2022 reflected iCAD's traditional money -- monthly pattern, with the majority of sales occurring in the third month, resulting in higher relative accounts receivable balance at the end of the quarter. This concludes the financial highlights of our presentation. I would now like to turn the call back over to Tony to lead the Q&A.

Tony Takazawa -- Director, Investor Relations

Thanks, Charlie. Matthew, can we open up the lines for questions, please?

Questions & Answers:

Operator

Certainly. [Operator instructions] Please hold while we pool for questions. Your first question is coming from Per Ostlund from Craig-Hallum. Your line is live.

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

Thank you. Good afternoon, everybody. Let's start with the efforts to reconstruct the commercial efforts, the commercial team. I think Stacey, if I recall correctly, you had about a dozen salespeople on the detection side and I think there we're going to be about half kind of turning over there.

Either within or outside of the company. Just curious as to where that stands if all the territories have been filled, if there's anything that you're still kind of in need of resource-wise on that front and bigger picture. What kind of maturation process or time frame do you typically think about as you add new people to the organization?

Stacey Stevens -- President and Chief Executive Officer

Yes. Sure. Thanks for that, Per. So I'm really pleased with the progress that we made in overhauling the commercial infrastructure during the quarter, we moved very fast.

We worked with a top tier sales recruiter. We were able to attract great talent. As you mentioned, we turned over about 40% of our U.S. sales team, and I would characterize it as we're about one hire away from having the full team in place that we would like to ideally have.

And we're expecting to fill that last territory by the end of this month. So we're really pleased with the progress. The new reps have all except for that one that we haven't filled yet, they have all been fully trained and they are already contributing revenue to our pipeline of opportunity. So we're really pleased that we were able to accomplish this so fast in the quarter.

A lot of these folks come from a background that makes this on boarding process a little bit easier and faster. There's not as much of a ramp-up time. Some of them came from within the same industry. So there's always a little bit of up time to get fully productive.

But I'm very confident that as we move through Q2, that we'll have our entire team fully productive and firing on all cylinders.

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

OK. Great. That makes sense. Maybe dovetailing off of that, and you alluded to it without mentioning names, but as I understand, I think there was at least maybe one or two people that joined your organization from the leading 3D mammography OEM out there.

Stacey Stevens -- President and Chief Executive Officer

Correct.

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

When you bring somebody like that in, and I admit iCAD is hardly the first company to make a competitive hire like that. But you have embarked, I think, more aggressively in the last few months on going after that OEM customer base, in terms of putting ProFound AI in over what type of competitive offering they might have. In terms of that kind of timing where you're going on more aggressively at that end-user base, how important and how helpful is it to have somebody or somebodies, plural, coming over from that other organization in terms of going out and targeting those people. And then maybe related to that, how much sharing of best practices is there? So if somebody comes over from Hologic and it is only one territory.

Is there any kind of passive effort to sort of share some knowledge across other territories given those people's knowledge of where they came from.

Stacey Stevens -- President and Chief Executive Officer

Yes. Sure. Great question. And it certainly has been very helpful to have some reps who sort of came from selling to the same customers in the same territory, right? Who have been selling mammography with the leading provider of Tomo, right? So they have had a particularly fast ramp up.

And in fact, even during Q1, we even had an order that was going to that vendor kind of changed over to iCAD. So I think it's really great when you have people that understand that it's important to separate the decision from the imaging hardware. Separate it from the choice of the AI software and that there are big differences and clinical performance. And we've been very successful and being able to add an increasing rate, convince our customers to separate those two decisions and our pipeline of opportunity in that category has increased substantially.

Not only with some of the new reps it that came on, but also with the reps that have been in place for a while, right? And we've had particular programs in place, right? That measure every individuals reps pipeline and what percentage of each deal is represented by the different mammography vendors. So I would say we've made progress across the board that are certainly has been sharing of information between our reps and that's always been the case, right? We have a small enough team where there's always even a weekly opportunity to share best practices among the team and competitive strategy. So we've had a lot of that going on. But I'm really pleased with the momentum and progress in terms of how our pipeline looks not only in terms of its overall growth, but the profile of it and the mix of mammography gantries that are represented within.

And we expect that to continue to accelerate going forward.

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

Great. I will ask one more, promise only one more bigger-picture question on Risk. Now that it's been out there are a few quarters. Do you see Risk as almost like ProFound AI playing out in just another venue and what I mean by that is I think when ProFound AI came -- came out and then you may still run into this today where you are almost selling against yourself because a lot of clinicians probably had grown to be a little bit nonplussed by original CAD software and you had to educate them as to why ProFound was better.

Is Risk the same playbook in the sense that older Risk assessment models we're not that great, and maybe now you've got to reeducate or educate a new, that user base as to why exactly ProFound Risk is so much better. And in that vein, how critical are these studies that are going on right now going to drive that point home for your target market?

Stacey Stevens -- President and Chief Executive Officer

Yes. Of course. And I think when it comes to ProFound AI Risk, as we've said before, we're really leading a major paradigm shift from what historically has been an age-based screening paradigm in mammography to what we believe will become a risk-adjusted screening paradigm, precision screening, unique and individualized for each woman's unique risk profile. And we're certainly the only company that now is able to offer a short-term risk solution that can assess, with around 80% accuracy, which women are likely to develop breast cancer in the next year.

There is nothing like this on the market. The existing models, like you mention, are lifetime risk models that have a lot of challenges. They, number one, are not very accurate, they're about 50% or 60% accurate, and they're also not very actionable. What do I do if I'm told they have a 50% chance of developing breast cancer in my lifetime.

So we really believe that ProFound AI Risk is going to make a major impact on breast cancer screening. And like we have said of all of our other products, we think the key to changing this paradigm is developing a very compelling body of clinical data. And so a lot of our effort in the first half of 2022 has been on collecting more data on larger, more diverse patient population to prove out the clinical performance. And we've made tremendous progress since the beginning of the year in that regard.

We have four clinical studies that are underway. One of them is already having presentation coming up later this month, and then again at the European Congress of Radiology in July. We have another one that we are in the final stages of collecting the data, and about six months from now, we expect peer review publication on that one. And then we also have three cost-effectiveness studies around risk as well.

So we've made a significant investment in these clinical studies, but we believe that they serve as a foundation and are really the necessary factor to get widespread adoption. And we're pleased with the progress that we've made, the results that we're seeing so far. And even our attachment rate of risk is continuing to grow. As I mentioned in the script, we're now sort of packaging.

We're the only company that can uniquely pull together ProFound AI, ProFound Density and ProFound AI Risk into what really is a premium AI offering. So we're doing that now and trying to position our technology as more of a premium bundle that really cannot be matched by any other company out there. And we're enthusiastic about the impact that that can have on the risk attachment rate as well.

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

As well, you should be. Thanks, Stacey. I appreciate that.

Stacey Stevens -- President and Chief Executive Officer

Yeah. Sure, Per. Thanks.

Operator

Thank you. Your next question is coming from Marie Thibault from BTIG. Your line is live.

Marie Thibault -- BTIG -- Analyst

Hi. Thanks for taking the questions this evening. Stacey and Charlie, good luck to you on your next enterprise here.

Charlie Carter -- Chief Financial Officer

Thank you, Marie.

Marie Thibault -- BTIG -- Analyst

I wanted to start with the -- I think Stacey, you mentioned a deal that was solidified in Q1. Wanted to see if we could learn some more details about that. Some of the things that led to the success, whether that revenue is going to be recognized here in Q2 or has already been recognized. And then just generally, any comments on the capital purchasing environment certainly sounded like it was looking at bit rosier, but would love to hear some more details there.

Stacey Stevens -- President and Chief Executive Officer

Sure. Sure. Yeah. With regard to the environment, what I would say is that it's getting better with every month.

Certainly our access to decision-makers is getting a lot better as we go forward every month. It's still not like pre-pandemic levels. Because we still find that our customers still have a lot of distractions, a lot of issues that they're dealing with in particular staffing shortages across the board. So it makes it still a little bit sometimes hard to predict the timing on some deals, but it's significantly better than it was.

We are able to travel to meet in person again, which has been very challenging, right? For two years. So we're optimistic and we're really glad to see our reps out and in their accounts again, both in the U.S. and in Europe. With respect to the large enterprise deal, so my first point that I will make about that is that, that is the imaging vendor who is in that account is predominantly made up of the vendor that is the leading Tomo provider.

It's a little bit of a mixed labs, and the keys to closing that really where the clinical superiority that the customer found relative to ProFound AI. And the deployment of the technology across the enterprise was really to be able to provide all patients access to that same high-quality level of care that same cancer detection accuracy, reduction in false positives and reduced reading time. So we're pleased with that. A good chunk of the revenue from that was in Q1.

However, we do have a lot of service contract revenue and things that gets recognized ratably over time and technology protection-type programs. So there is more revenue to come on that, but a good chunk of it did get recognized in Q1.

Marie Thibault -- BTIG -- Analyst

OK. Very good. So that sounds like it was a competitive as well. Very good to hear.

And maybe I could get a little more detail on what you're seeing so far with the subscription model. Any details you can offer in terms of the range of pricing you're thinking about or the length of some of those agreements? Would just love to hear more. Thank you.

Stacey Stevens -- President and Chief Executive Officer

Sure. So this is subscription played out exactly as we anticipated in Q1, right? We did see growing demand for that model, right? And there were some customers who -- we did take some orders under that model. It was a very small percentage of our business really sort of immaterial, not enough to even reported out. And we expect that to grow over time, but still overall, the -- a small percentage of our overall revenue and in 2022, and once we decide that it is meaningful enough, in terms of our overall revenue, we certainly will be transparent about it and report a metric that will be easier to track, the timing of that is still unknown.

What was great about it for us is that we were really trying to sort of achieve revenue targets and have the subscription revenue be incremental to that, right? And truly be for deals for that there's no way we would have one otherwise, right? That customer has no capital budget and does not anticipate having capital budget certainly anytime in 2022. So that's exactly how it played out in Q1, right? We got some customers that we would not have seen otherwise in 2022. But by offering them that flexible payment model, where they can pay over the course of a couple of years, a little bit more than a couple of years. We were able to get them into the products and using ProFound AI and recognizing the clinical benefit.

So that's really going to be our strategy with every quarter, is to really try to make that subscription customer group be sort of incremental to our plan. We do expect it to grow over time and toward the end of the year, we may find ourselves in a situation where we have a higher percentage of that are subscription. But right now, it's small percentage of our business and that's how we see it for at least the next couple of quarters.

Marie Thibault -- BTIG -- Analyst

OK. Very good. We'll stay tuned. Thanks so much.

I'll hop back in the queue.

Stacey Stevens -- President and Chief Executive Officer

OK. Thanks, Marie

Operator

Thank you. Your next question is coming from Yale Jen from Laidlaw & Company. Your line is live.

Yale Jen -- Laidlaw and Company -- Analyst

Good afternoon and thanks for taking the questions. Just two questions here. The first one is about that academic institution you mentioned on the opening remarks. Could you elaborate a little more? And was that one mentioned a little bit earlier that you have recognized most of the revenue already or that's a separate one.

And then I have a follow-up.

Stacey Stevens -- President and Chief Executive Officer

Yes. That is the one that I was talking about that was a world-renowned academic research institution, a household name that everyone on this call would recognize. And we did -- it was deploying ProFound AI at a number of sites throughout the country, and we did recognize a sizable percentage of the revenue in Q1. But as I mentioned, there's some ongoing service revenue and technology protection-type revenue that we'll recognize in future quarters.

Yale Jen -- Laidlaw and Company -- Analyst

And if so, is that academic institution becoming one of the, quote, unquote, new or expanded focus for you guys or you already have that beforehand, but probably a little bit more effort going forward to pursue those opportunities.

Stacey Stevens -- President and Chief Executive Officer

It's becoming a greater percentage of our overall opportunities, Yale. We are seeing larger either health systems or multi-site academic research institutions, larger customers who are recognizing that if you don't have the technology and all of the hospitals are affiliated centers, that there is an inequity in care for patients. We hear that over and over again where we might have started off a deal in one or two of the hospitals that are affiliated with the system, and the customer comes back to us and says, "We don't want to offer women different access to care, " and there is a clear clinical value in this product that's proven in clinical study. So these types of larger opportunities are becoming more and more a part of our pipeline.

And again, they can take some more time to close, but I feel like we're getting our arms around some of the ways that we can manage that elongated sales cycle, whether it's better understanding our IT stakeholders, like the Chief Information Officer, better understanding the time-frame to get through the legal requirements. So we're learning as we go, and I think over the last six months, we have learned a lot about how to approach these enterprise deals in a way that we can plan for this elongated sales cycle and try to take some steps to proactively tighten it up. But this is great for us. It allows us to get faster market penetration, get larger average selling prices on every deal, and we're really pleased with that.

A lot of customers are recognizing the clinical value that the product has in this way.

Yale Jen -- Laidlaw and Company -- Analyst

And then maybe the follow-up question here really is that you mentioned earlier about bundling could be an approach that you help to increase the sales. Could you elaborate a little more, I understand maybe there's more things that you don't want to talk about. But overall, what -- how should we think about this particular approach which has been practiced by many people in many sectors, and thanks.

Stacey Stevens -- President and Chief Executive Officer

Right. Yes. Sure. So what we're finding is a lot of times our customers might get capital budget once a year or maybe once every couple of years.

And when they do, they want to make sure that they acquire the latest and greatest and sort of cool -- full portfolio of innovation that's available from us. So in the past we've more sold things a la carte. And we're finding that if we position and message this differently, especially now that we're starting to get some results from the -- the risk clinical studies that was really an important pieces this, that we were able to go in with really powerful messaging that again, no other company can match. There is no other company that can offer the level of clinical performance and ProFound AI plus our breast density and certainly no other company that has a short-term risk assessment solution, like we do.

So we're finding -- we're in the early stages of this. We're just getting going with it, but we're finding already a lot of interest from our customers and we're finding that our sales team is very interested in leading with the sort of premium bundle as a way of maximizing our differentiation versus all of our competitors.

Yale Jen -- Laidlaw and Company -- Analyst

OK. Great. That's very helpful and congrats on the other progress.

Stacey Stevens -- President and Chief Executive Officer

Thank you, Yale. Thank you so much.

Operator

Thank you. Your next question is coming from Frank Takkinen from Lake Street Capital Markets. Your line is live.

Frank Takkinen -- Lake Street Capital Markets -- Analyst

Great. Thanks for taking my questions and congrats all the progress.

Stacey Stevens -- President and Chief Executive Officer

Yeah. Sure. Hi, Frank. Thank you.

Frank Takkinen -- Lake Street Capital Markets -- Analyst

So let's start with the funnel. If we can funnel such pipeline, if we can talk about that a little bit more. It sounded pretty optimistic, like things are looking up. So maybe just bring us a little bit deeper into pipeline prospects right now.

Anything you can share with us versus how it feels right now, versus maybe last quarter and versus last year, and then how that plays into the expectation of a second half inflection in the detection business?

Stacey Stevens -- President and Chief Executive Officer

Sure. Yes. So we're very pleased with the progress in our pipeline. As I have said on the call last quarter, we really weren't addressing the full market opportunity.

Previously, we were a little bit more reliant on some of our legacy partnerships and we didn't have full compatibility with our product lines to ProFound AI to all of the latest generations of the mammography systems in the market. Now we do, and so we're able to access the entirety of the market, and that has really made an impact on our pipeline and how it's building. So if you said a layer on the changes that we made in the commercial infrastructure with now having access to the full availability of the market. We most certainly see that reflected in our pipeline quarter to quarter, even from a quarter ago to where we stand now and we're very optimistic that were on the trajectory that we had laid out last quarter in terms of seeing increasing growth and revenue each quarter.

And we're very pleased with how the pipeline looks right now and the results of our efforts are definitely being successful.

Frank Takkinen -- Lake Street Capital Markets -- Analyst

Perfect. That's very helpful. And then maybe just to follow up on Marie's line of questioning on the subscription model. What, if you were to speculate, what portion of the call it 10,000 plus 3D systems.

Do you feel are most interested in that flexible payment model or what portion do you feel are more interested in the capital? Just kind of trying to get a feel for how you're viewing the market and what different models they may elect to pursue in future periods?

Stacey Stevens -- President and Chief Executive Officer

Yeah. That's a really interesting question, and it might not be the answer that you would expect, right? So we initially expected that maybe low volume centers or smaller entities with lower budget might prefer that type of a model. What we have found so far and again, this is a very small number of deals. They've been all over the map so far, right? They could be a hospital.

They could be an imaging center chain. We don't really have enough data points yet to really say that there is one single profile that will fit this particular model. I think we'll get more color on that and clarity as we go forward. But right now, it's too small to really classify it as any one particular type of customer.

Frank Takkinen -- Lake Street Capital Markets -- Analyst

OK. Fair enough. We'll stop there. Congrats in your progress.

Stacey Stevens -- President and Chief Executive Officer

All right. Thanks, Frank.

Operator

That concludes our Q&A session, I will now hand the conference back to Stacey Stevens, president and CEO for closing remarks. Please go ahead.

Stacey Stevens -- President and Chief Executive Officer

OK. Thank you so much. And I want to thank everybody for joining the call tonight. We're very pleased with the progress that we've made in the past quarter, and we look forward to providing you with additional updates throughout the rest of this year, as we continue to advance our business and leading innovations really continue to drive sustained market leadership.

And of course, work to create significant additional long-term shareholder value. So with that, I wish everyone a great night and we'll talk to you next quarter.

Operator

[Operator signoff]

Duration: 46 minutes

Call participants:

Tony Takazawa -- Director, Investor Relations

Stacey Stevens -- President and Chief Executive Officer

Charlie Carter -- Chief Financial Officer

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

Marie Thibault -- BTIG -- Analyst

Yale Jen -- Laidlaw and Company -- Analyst

Frank Takkinen -- Lake Street Capital Markets -- Analyst

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