iCAD, Inc. (NASDAQ:ICAD)
Q3 2012 Earnings Call
October 31, 2012 10:00 AM ET
Anne Marie Fields - Investor Relations, LHA
Kenneth Ferry - President and Chief Executive Officer
Kevin Burns - Executive Vice President, Finance and Chief Financial Officer
Jeb Terry - Aberdeen Investment
Brian Marckx - Zacks Investment
Good day, ladies and gentlemen, and welcome to the Q3 2012 iCAD, Inc. earnings conference call. (Operator Instructions) And I would now like to turn the call over to Anne Marie Fields.
Anne Marie Fields
Thank you. Good morning. This is Anne Marie Fields with LHA. Thank you all for participating in today's call. Joining me from iCAD are Ken Ferry, Chief Executive Officer; and Kevin Burns, Executive Vice President, Finance and Chief Financial Officer.
Following the market closed yesterday, iCAD announced financial results for the 2012 third quarter. If you have not received this news release or if you would like to be added to the company's distribution list, please call LHA in New York at 212-838-3777 and speak with Carolyn Curran.
Before we begin, I would like to caution that comments made during this conference call by management will contain forward-looking statements that involve risks and uncertainties regarding the operations and future results of iCAD. I encourage you to review the company's past and future filings with the Securities and Exchange Commission, including, without limitation, the company's forms 10-K and 10-Q, which identify specific factors that may cause actual results of events to differ materially from those described in the forward-looking statements.
Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, October 31, 2012. iCAD undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.
So with that said, I'll now turn the call over to Ken.
Thanks, Anne Marie. And good morning, everyone, and thanks for joining us. During the third quarter, we demonstrated solid progress on our strategic plan as evidenced by the strong revenue growth with our cancer therapy products and continued financial discipline, including adjusted EBITDA profitability and an ongoing reduction in cash uses.
In fact, cancer therapy revenues were nearly 2.5 times what we were in Q3 of last year, and almost 3 times what we achieved in Q2 of this year. This is very encouraging related to hard work and ongoing investments that we've made in executing our oncology strategy since early 2011.
Conversely, we had a softer quarter than originally anticipated in cancer detection software, as we continue to shift this business to a more balanced mix of new business in recurring revenue. Overall, however, we're quite pleased to achieve over $8 million in total revenue for the quarter with solid progress with other important financial metrics on our income statement and balance sheet.
I'll now turn the call over to Kevin Burns, our CFO, who will provide you with more financial detail on the third quarter and nine months performance year-to-date. Kevin?
Thank you, Ken, and good morning, everyone. As Ken mentioned, we saw significant improvement in many financial metrics, including significant revenue growth in our cancer therapy products and positive adjusted EBITDA. We are pleased with these results, as they confirm that our strategy is working, and it gives us even greater confidence in the future potential of our platform.
As previously discussed, we enhanced our revenue reporting to reflect the two main oncology businesses we operate in, specifically cancer detection and therapy. Our cancer detection revenue includes all of our image analysis and workflow products, including mammography, MRI and CT CAD, as well as service revenue from these product lines, while our cancer therapy revenue encompasses electronic brachytherapy-related accessories and service and source agreement. Please note that all comparisons are made with the comparable 2011 period, unless otherwise, noted.
Now, let's move on to a review of our revenues for the third quarter. Overall, total revenue for the third quarter was $8.2 million, an increase of 2% from the third quarter of 2011. This increase was largely due to the significant growth in our therapy products, which was offset by weakness in cancer detection.
For the third quarter, cancer detection revenue was $3.8 million, down 40% from a year ago. The decrease was primarily due to lower sales of our digital mammography products as a result of the loss of market shares by our OEM partners in digital mammography, the near completion of the conversion of this market from film to digital, as well as product mix as we transition our business model to focus on new product upgrades and annual service contracts.
From a recurring revenue standpoint, we are seeing growth in a number of digital mammography products under service and subscription agreement. Although, this growth is partially offset by a reduction in the revenue generated from our analog service agreements as the renewal rates on the analog products continue to decline.
Year-to-date, cancer detection revenue was down 29% to $12.6 million from the same period of 2011. Again, this decrease reflects the slowing in the transition of mammography from film to digital as we near the completion of this cycle. Therapy revenue continued to post strong growth, increasing 146% to $4.4 million from the third quarter of 2011. Product sales, which include controllers, applicators and other accessories, increased 179% to $3.8 million.
In the third quarter, we sold a record 12 controllers and a record 190 balloon applicators, up from 5 controllers and 41 balloon applicators in the third quarter of 2011. Our therapy service and source revenue continued to increase and grew 47% year-over-year to approximately $650,000 in the third quarter of 2012.
This growth reflects the increase in the size of our customer base as well as the up tick in the number of minutes customers are purchasing under source usage agreements. Year-to-date, total therapy revenue increase 85% to $7.9 million with product sales increased by approximately 100% to $6.1 million, and service and source revenue growing by 45% to $1.8 million.
Year-to-date, we have sold 22 controllers versus 10 controllers in the first nine month of 2011, and we have sold 472 billion applicators compared with 109 billion applicators in the same period last year. In addition to the growth in balloon sales, we are also seeing growing traction instant procedures.
Now, turning to the record P&L. Gross profit for the third quarter of 2012 was $5.9 million or 72% of revenue, which compares with a gross profit of $5.9 million or 73% of revenue for the third quarter of 2011. The declined of 1 point in gross margin percentage is due to the mix shift between cancer detection therapy revenues.
Our gross margin percentage will continue to fluctuate based on mix and volume on a quarter-to-quarter basis, and we continue to expect margins in the low-to-mid 70% range. For the first nine months of 2012, gross margin was $14.5 million or 71% of revenue compared with $15.5 million or 70% of revenue for the first nine months of 2011.
As we've discussed, operating expenses continue to benefit from initiatives implemented, primarily in the second quarter of 2011. On a year-over-year basis, we reduced operating expense in this quarter to $6.5 million from an adjusted $7.9 million for the third quarter of 2011. This is a decrease of 17%. Compared to the second quarter of 2012, operating expenses grew by $443,000, primarily due to increase in variable compensation expenses in the third quarter.
While expenses have been reducing significantly compared to 2011, we continue to invest in our growth strategy, including the launch of new clinical trials, investment in new therapy applicators, and the development of next generation CAD products and enhancements. Looking forward, we expect our fourth quarter spent to be up slightly from the third quarter due to a few key trade shows that Ken will discuss shortly.
Moving on to our profit metrics. Our loss from operations decreased to $640,000 from an adjusted loss of $2 million in the same quarter last year. Adjusted EBITDA, as defined in our press release, was a gain of $303,000 for the third quarter of 2012 compared with a loss of $868,000 in the prior year's third quarter, and a loss of $931,000 in the second quarter of 2012. As we have stated in the past, we believe a quarterly revenue level in the $8 million range will result in an adjusted EBITDA of breakeven or slightly positive, and that's just where we came in and we are very pleased to reach this milestone.
Turning now to other income and expense, during the third quarter, we reported $126,000 gain due to the change in the fair value of warrants that we issued earlier in the year as a part of our financing arrangement. In addition, net interest expense in the quarter was $883,000, of which $574,000 was cash payable related to the financing arrangements. The balance of $309,000 represents non-cash amortization of financing cost concealment obligation.
Adjusted EBITDA for the first nine months of 2012 was a loss of $1.6 million compared with a loss of $6.8 million for the first nine months of 2011, an improvement of $5.2 million. On a per share basis, our non-GAAP adjusted net loss for the third quarter was $0.15 per share compared with an adjusted net loss of $0.17 per share for the third quarter of 2011.
Moving on to the balance sheet. We ended the quarter with $13.8 million in cash and cash equivalents, up from $4.6 million at the end of 2011. As reported, we strengthened our balance sheet in early January with the issuance of a $13 million senior security note to Deerfield Management.
Year-to-date, we've used approximately $4.6 million of cash to fund operations, as previously discussed our use of cash have significantly declined over the last six months. In the second quarter we used approximately $455,000 to fund operations and in the third quarter of 2012, our cash use decreased to approximately $282,000.
In the third quarter, we also grew our accounts receivable balance by $2.4 million to $5.7 million, and also saw a sizeable increase in deferred revenues, reflecting a number of customers under the annual agreement. Looking forward, we expect to have positive cash flow from operations in the fourth quarter of this year, based on our strong AR condition and attraction we are seeing in the business.
With that financial overview, let me now turn the call back to Ken.
Thanks, Kevin. Let me begin with some comments on our cancer detection products, and then we'll move on for an update on the cancer therapy products.
Historically, we've generate the majority of our software revenues from digital mammography CAD as installed base of screening systems, transitioned from film-based technology to digital technology. As this transition to digital technology is approaching 90% today in United States, demand for digital CAD systems associated with the new digital mammography systems has declined over time.
While we're aggressively pursuing remaining business opportunities, we are transitioning to a business model that focuses on our large installed base, we are offering new functionality through upgrades and annual licenses and service agreements. To this end, we launched PowerLook AMP, our next generation mammo CAD platform in the quarter. This new platform is very scalable to enable new functionality to be added, either through our internal R&D efforts or from third parties.
PowerLook offers an enhanced feature set as well as an option to add Matakina's Volpara breast density assessment software. This new offering should represent a considerable additional business opportunity over time to our installed base of over 3,500 first generation systems.
We will be showcasing this new platform along with our entire CAD's suite for mammography, MRI and CT at the upcoming Radiological Society of North America Annual Meeting in Chicago at the end of November. As many of you know, this annual medical meeting is the largest radiology meeting worldwide. And it offers us a great opportunity to introduce new products and highlight works in progress of products to come in the future.
And speaking of the future, mammography CAD, we are making good progress with our OEM partners on a development of CAD for tomosynthesis or 3D mammography. This new technology has the potential to replace the majority of the 2D systems over the next five to seven years, and also represents a considerable CAD opportunity for iCAD over this timeframe as well. Also, we continue to be strongly committed to MRI and CT CAD products. Prostate MRI with CAD should represent a considerable opportunity as adoption and resulting procedure volumes increase over time.
Now, shifting to the therapy business. We saw a significant increase in demand for new systems as well as procedure based applicators in the quarter. The rapidly growing installed based combined with increasing procedure volume is generating a nice mix of new and recurring revenue as we further the adoption of electronic brachytherapy.
We are particularly pleased to see the growth from skin cancer applicator sales. We believe that the number of skin procedures performed in the third quarter nearly equaled all of 2011 volume. The growth is coming from the treatment of non-melanoma skin cancers. According to the National Cancer Institute it is estimated that there are more than 2 million new cases per year in the U.S.
The Xoft System is being used as an alternative to most surgery and alternative radiation therapy systems. In many cases the cosmetic outcomes are outstanding, particularly when treating lesions on the face. Breast IORT is also experiencing considerable traction as balloon applicator sales are on a pace to increase five-fold over 2011.
This is particularly significant as over 100,000 women in the United States each year are eligible for IORT as an alternative to five and six weeks of whole breast radiation therapy. And even the with five-fold procedure growth over 2011, we are still in early stage of market adoption. And what we believe could even further accelerate adoption of IORT, the Center for Medicare or Medicaid, or CMS in July, probably it proposed 2013 rule and a separate CPT1 reimbursement code, and payment value was assigned for treatment delivery.
In addition to the treatment planning code, which was established and put in place in January 1, 2012, for treatment planning, shows considerable progress on reimbursement for IORT. This is very, very encouraging, particularly in light of already a very, very strong year in 2012.
Also as reported last quarter, we launched our IORT study to further assess to the safety and efficacy of IORT in early stage breast cancer patients. The study will grow up to a thousand patients to as many as 50 sites in United States and Europe, and the study subjects will be followed for 10 years after treatment with follow-up data collected on an annual basis. The interest in participation and the study has been very strong, and hopefully this additional long-term data should really help the further adoption of IORT for breast cancer treatment.
This past weekend, we attended the American Society of Radiation Oncology or ASTRO in Boston, where we showcased our brachytherapy products. We are extremely pleased with the group traffic as a momentum behind electronic brachytherapy and breast IORT in particular was very evident among the participants.
So in closing, our strategic plan is gaining traction with tangible results. We've been successful in every area of our cancer therapy business, and we are very encouraged by its ongoing potential to drive continued higher revenue growth. We are in the early adoption cycles, so there is considerable room for growth in our current indications and in future applications as well.
We're transitioning our cancer detection software business to one of new capability and recurring revenues, and expect us to provide ongoing growth in the coming quarters. In parallel, we've had really strong results managing our cost and our cash, while investing in our future. We're now beginning to see the benefits of this strategy and look forward to its continued success.
With that said, operator, we're ready to open up the line for questions.
(Operator Instructions) Your first question comes from the line of Jeb Terry, Aberdeen Investment.
Jeb Terry - Aberdeen Investment
Ken, at the end of Q2, you mention that there were some orders for lost, as it slipped into July, and now obviously you had a terrific Q3. Can you comment as to how the volumes are persisting in the current quarter?
Well, the way I would describe it, Jeb, is you're correct. We had a softer Q2 with a number of orders just missing, the cut off, and we were the beneficiaries of that in July, and it helped us to get off to a strong quarter. But I would say that if you were to smooth that out if you will, we still would have seen probably eight or nine new systems at a minimum in the quarter without that additional business.
So it was a very strong quarter, regardless of where we ended in Q2. And that was extremely encouraging. I think we see comparable momentum in the fourth quarter. A little bit early to try to predict where we'll end up. But I think if you go back to Kevin's comments that we are encouraged that we have a good shot at being cash flow positive in the fourth quarter, obviously one of those components would be a strong revenue picture.
So I'm not really prepared to give any guidance, forward-looking comments. But what I would say is we see the momentum continuing. Obviously, the recurring revenue piece is extremely encouraging, because in the therapy business, not only are we adding new customer, but we're adding volume with our existing customers. So that piece of it should continue to grow nicely in the fourth quarter.
What I would say is we have strong and robust funnel in the fourth quarter, and just as an example with the ASTRO meeting in Boston, I haven't seen the final tally on lead generation. But on Sunday, in the 10 to 5 window that the booth was open, we literally generated 80 leads. And that's a record for the first day at ASTRO. And that will help us to start the funnel building process probably for 2013.
So we see the momentum continuing, but it's a little early to try to predict Q4 in a comparative sense with Q3. And one thing I will say about Q4, as we are hopeful that the software business will be stronger than Q3, number of different dynamics occurred in Q3, where that business was weaker than we expected. And at least out of the box in Q4, we're more encouraged that that should be a stronger quarter for software.
Jeb Terry - Aberdeen Investment
I noted that the deferred revenue went up very nicely, and clearly that'd be related through some success saw in your upgrade package. Can you refresh my memory on, what the economics are of an upgrade package, and then comment on how you see that progressing?
Before I do that, maybe Kevin can make a comment on the growth in deferred revenue in the components.
Quarter-over-quarter our deferred revenue grew by $1 million. And that consisted of growth, not only in the CAD subscription business, where we're seeing a lot more pickup in terms of the number of annual agreements that we're selling, but also new customers on the Xoft side of the business, who are purchasing service agreement and purchasing annual source agreement. So the combination of those two increased our deferred revenue quite dramatically on a quarterly basis.
So maybe to address the question a little bit more, I think you meant toward the CAD business, Jeb. What we're basically seeing is two things. One is we have customers that are on annual agreements from a service standpoint with us as well as the OEMs, and those are coming to conclusion. And what we're now offering is agreements that could potentially add new functionality beyond just break fix, and the average selling price for those agreements is higher. Obviously, because it will be more value over time associated with them. So that's one component of it.
The other thing we're looking at is, besides the part of this final 10% to 15% of the film-based community out there that are lower volume mammography screening sites. And so buying an annual license for our CAD versus buying the entire system upfront is more attractive. And again, that is also something where you would recognize that revenue ratably over the course of the year.
So there is an up tick in both service agreements transitioning to a richer feature set agreement, which has a higher selling price combined with the annual agreements that are being sold in lieu of an outright purchase. So in some cases, probably hurt us a little bit on revenue, because we're not selling a system out right, but that annuity that we think over the next three, four, five years coming in, will bode well for us in the longer term.
Jeb Terry - Aberdeen Investment
And just an easy question, Kevin, can you comment on headcount and then CapEx?
Our headcount for the quarter was approximately 140, relatively flat over last quarter or two. And our CapEx in the quarter was about $190,000.
One other comment I would make on that is that, we did an awful lot in the middle of 2011 to reduce our expenses. And we literally took the headcount of the company down over 30%. And I can't be more pleased with the progress with now our third quarter is the highest revenue quarter we've had since prior to 2011, and we did that with 30% to 35% less people.
So kudos to our employees, who worked very hard and accomplished a lot. We achieved a very, very strong revenue number with a lot less resources. And I think it bodes well for the future that we've been able to position our expenses. And at the same time, with that reduction increase our performance …
Jeb Terry - Aberdeen Investment
Back to your headcount notion, can you comment on the sales and market function and as we look forward into kind of growing the upgrade business as well as the Xoft business.
On the Xoft Brachytherapy business, we've got a strong sales team in place in the United States and we will continue to invest in that team as we see, what's called the reimbursement environment continue to improve. And so today, I think we have a strong team in place. We're not looking immediately at any increases, but we certainly will assess that over the fourth quarter.
We are looking at adding service personnel because there is growing installed base and opportunity is something we're now addressing relative to supporting our bigger customer base, so that's probably front and center.
We are investing in different areas with the Brachytherapy business. One of which is really to increase our study activity because the more studies we can do with the technology, and more of that can further adoption as well as reimbursement, that's certainly in an important component. And while we're very, very pleased with the CMS ruling relative to a CPT1 code for planning and treatment delivery of IRT, a multi-fraction code particular for skin is extremely important. So we're investing in that area.
And the last part, I would say on the Brachytherapy side, is we're investing internationally. We are getting some solid traction in Europe. We have treatments going on in Germany and Portugal. We will very shortly have treatments of patients in the U.K. And so we're looking to strengthen our investments internationally. So number of different areas, but pretty much within the framework of our cost structure, so we'll maybe shifting some priority.
But I'm not implying that our operating expenses are going to go up significantly. We would like to continue to manage the momentum that says, when you're a little north of $8 million in revenue, you should be adjusted EBITDA breakeven to positive.
On the CAD side of the business, really what we've done is we've invested in telesales combined with using our direct sales team to go out and sell the upgrades and the annual licenses to our customer base as well as continuing to work closely with our OEM partners.
And so again, it's been more of a shift of priorities, where our sales team is spending a little bit more time in the mammo world versus say MRI or CT. And then we're backing it up with a strong third-party telesales effort. So that as we get to this 3,000 plus customer installed base, we really understand what the dynamics are.
And when we send a direct sales person and it's usually to have a very productive meeting, because it's been a well qualified opportunity. So we're trying to do targeted investments in sales and marketing. With that said, we're trying to not appreciably increase our operating expenses, look at other places we can cut back. So we can use those investments to grow the topline and not change our financial structure as we've communicated.
Your next question comes from the line of Brian Marckx, Zacks Investment.
Brian Marckx - Zacks Investment
From your perspective, can you talk about what's driving the growth in IORT therapy and specifically how much is at the new structure of the CMS reimbursement, and how much is it data coming out of target? And is it more than just those two things?
I guess the way I would describe it is that the studies of which target is a major component, but not the only one for sure, has been very positive. There has also been some informal presentations on the target study that have been given. I believe at international conferences although, it's not been formally published in the States that have shown that the follow-up data at five years, and a subset of patience in the 500 or 600 patient range at seven years, also continues to show comparable recurrence rates with whole-breast radiation therapy. So I think that that component of it is very, very favorable.
What we're also seeing, just really out all of the clinical meetings, particular in the breast surgeon side, in number of oncology meetings that it's just a real strong growing interest in IORT. And breast is the most obvious component, but the interest is across a number of different areas and organs in the body.
The view is that IORT could be used in the number of mammary invasive to invasive application. So I think in a general sense, there is a strong interest clinically. We are still seeing a lot of institutions that want to be the first on the block or they want to really differentiate from their competitors on a regional basis by offering IORT, and particularly breast, so that they could be seen as a women's health or breast health leader in their community. So that is still a very strong component.
We're also seeing a number of sites in the community that were not offering radiation therapy services on a full scale. And they see this is the actual way to not have to refer patients out or lose the revenue. So we're seeing our customers adding our technology, because the investment is not nearly a significant as the iridium-based technologies and all that bunkering, and so forth, it has to be put in place.
So there is a number of benefits. The other thing that's helping us as we think our product is so differentiated from sites in the market. We have superior capability around treatment delivery times which in the operating number is critical. We can typically deliver IORT in less than probably 50% of the time it takes to do with our competitor. We have a platform product that is being used and increasing numbers on skin in addition to IORT. So we're not a one trick pony, sort to speak in the market.
So I think our share has been very, very strong in United States. So that's helping us to grow the business. And to your point, Brian on reimbursement, sure, it does help. There's no question. A year ago this July when CMS made the mistake of bundling the treatment delivery with the lobectomy, that confused our customers. It really caused a number of customers to pause, because obviously when they see a CPT code put in place, when they see associated payment value, a number of customers start to invest in the technology knowing that it still may take some time to get the breakeven with this offering within your health system, but they really want to be prepared and be an early.
So we certainly saw a lot of confusion in the second half of last year, when CMS decided to do what they did. The fact that, we had a strong year without the obvious growing reimbursement was extremely encouraging. And now in July, to essentially have a payment value with an unbundled treatment delivery code, in any day we should see the final rule by November 1. We typically do.
This will only add, I think, to the confidence of our customers relative to making the purchase, knowing if the economics overtime will work just fine versus being in somewhat of an uncertain stage.
So a lot of different factors are driving the business. We're very excited about, it's just based on the momentum we've seen in 2012 year-to-date, particularly compared to our first year in the business in 2011.
Brian Marckx - Zacks Investment
What are you kind of modeled expectations relative to procedural volumes per installed unit kind of on a weekly or monthly basis over the longer term?
It's really hard for us at this point to model that with breast IORT it's really all over the map. Whereas some sites are doing a procedure to a week, some are doing five or six or seven a week. It really varies pretty significantly. But in the context of that market, you probably in 2012 as an estimate are going to see about a thousand U.S. procedures, plus or minus in breast IORT as defined by the balloon applicator sales. We think we should get hopefully a good 60%, 65% of those sales versus our competition.
And that's really 1% market penetration. So when you're only at 1% market penetration, since there is 100,000 women that are clinically eligible for the procedure, it's really hard to profile how the sites will grow, but our feeling is that with five or six increase in procedure volume over 2011, we are poised to have a very, very strong year. And then, we may, as that year goes on have a better handle on how many procedures these various sites will be doing on average.
On skin, it's a different bargain, since obviously in skin it's a multi treatment protocol where patients are getting a number of treatments versus just one. And we have seen enormous growth in skin volume. With that said, it's been pocketed in regions of the country where the reimbursement has been established and is strong. And so in that case, you may see a practice doing tenfold more skin procedures on a weekly basis, than another site could be doing breast procedures. And the treatment times are much shorter as well for skin.
So I guess I'd have to say that we haven't reached a point where we have enough data to kind of tell you what the average is, and it is a bit difficult to project future. But I would hope by the middle of 2012 or 2013, I should say, we would have had a good six quarters of steady progress and we could probably give you more accurate answer on that.
Brian Marckx - Zacks Investment
What is the current volume coming from skin?
In procedures, third quarter about 175 procedures, if I recall 176 procedures. And if you'd go to Q2 it was around 60. Q1 was a little stronger, about 90. So if you're looking at a trend, it's a pretty significant number. We think based on the growing installed base of sites that are using it for a skin as a primary use, even though they will expand to other applications overtime, that should increase that number to maybe 200 or greater in the fourth quarter, somewhere in that range.
So we're clearly seeing a very big ramp with skin and what we have is some fairly large practices that are really doing significant volumes at this point in time. So that's a really big number when you're in the 200 range. But with that said, the balloon volumes as I think Kevin pointed out, we're about a 190 in Q3. So that's pretty significant as well. We would like to think that one should hit well over 200-ish in procedure volume in the quarter coming up at year end.
So you're looking now at a business that's in that 400 to 500 total procedure ranges when you add GYN in, and that's very, very different number on a quarterly basis from where the company was a year ago. And again, if you add that all up, it's probably again four or five full growth over 2011.
Brian Marckx - Zacks Investment
And just one last one, on the international side, maybe you just kind of talk a little bit about what you're seeing there, and is there any reimbursement uniqueness, I guess where you are in Europe right now?
In Europe, IORT is actually didn't more establish for a longer period of time then the United States, and obviously there is lot more emphasis in Europe of the most cost affective procedure where governments primarily are the payers. And you don't have all the politics that you have in United States around the private payers versus the government payers. So I think you see increasing demand and part of it is you don't have this dilemma where you run the risk of hospitals or providers themselves getting paid less for using this procedure versus the traditional whole-breast procedures. So that I think is a real plus.
We obviously have a formidable competitor there in size and it's based in Europe and has put a big emphasis on the European markets. So the competitive dynamics are different. But what we're doing essentially is we are trying to build centers of reference, centers of excellence. So as an example, we have a site in Italy, we have a site in Portugal. We will soon be treating patients in the U.K. and so we're trying to build up this reference centers of excellence in different regions which we think will help to drive the business versus just trying to put business in.
If we have any luck with the regulatory authorities in Taiwan, we should have a system installed there this quarter, and we would hope to have the opportunity to be treating patients before year end as well. So we're trying to get into the Asian market.
So I think the dynamics based on historical interest, the lack of our reimbursement hurdle typical to the United States, it's a strong market, a strong opportunity. The challenge, of course, as a small company is getting enough feet on the street, so to speak to be successful.
We have a very good distributor that we we're working closely within the U.K. that is doing a nice job for us. With that said, we would like to broaden that reach further. And we are evaluating opportunities to add direct resources or a direct resource to help to support and drive the business in Europe with Asia as a possibility, overtime as well.
But if really given our challenges with resources try to put the majority into United States, and we're seeing the results of that. And we are tying to be very targeted with the international market, but we definitely think there is significant opportunity. The emerging markets, as an example, we really believe we'll find this lower cost technology which is very mobile, very attractive versus the significant investments which we have to make in a bunkered environment for the iridium-based products.
So the entry point in cost, the lack of infrastructure requirements really could make this an attractive product in places like China, in India and the other parts potentially at the Middle East and Latin and South America. So it will take us sometime based on the size of our business, but we're confident that those markets are an excellent fit for the type of technology that we're bringing. We can essentially bring the technology to the patient versus have them in some cases travel long distances for therapy.
Thank you. I would now like to turn the call over to Mr. Ken Ferry for closing remark.
Thanks operator. Thank you for your questions and for your continued interest in iCAD. We are encouraged by our strong third quarter results and look forward to building on this momentum in the coming quarters. We look forward to delivering on our strategic plan and trust you will continue to follow our progress. We look forward to speaking with you again, when we report our fourth quarter results. Thanks for calling in and your interest. And have a great day.
Thank you for your participation in today's conference. This concludes the presentation. And you may now disconnect. Good day.
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