Good day, and welcome to the RadNet Business Update conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Mark Stolper, Executive Vice President and Chief Financial Officer. Please go ahead.
Thank you. Good morning, everyone, and thank you for joining our team today. We are very excited to discuss the acquisition of iCAD, which we announced last evening in a press release after the market closed. Today, we have approximately a dozen slides to go through, which will give you more detail about why we are so excited about what iCAD will bring to the company. After our presentation, we will open up the call to your questions. I just want to remind everyone before we begin of the disclosures that we have here on pages numbers two and three regarding that this is not an offer or solicitation. This presentation contains forward-looking statements typical of what we release in our earnings reports each quarter, and we will use some non-GAAP items. I'd like to introduce the speakers today. On the call with me today, we have Dr.
Howard Berger, RadNet's Chief Executive Officer. We have Case Westorp, who's the President and Chief Executive Officer of RadNet's Digital Health Division. Part of his team is also joining today, Sham Soker, who's the Chief Operations and Technology Officer for RadNet Digital Health. We have Sanjay Mishra, who is the Chief Commercial Officer of RadNet Digital Health, and we have also Dr. Gregory Sorensen, who is the Chief Science Officer of RadNet. With that, I'd like to turn the call over to Dr. Berger, who's going to make some opening remarks.
Thank you, Mark, and good morning, everybody. About five years ago, RadNet made a bold move to enter the field of artificial intelligence with its purchase of DeepHealth. Hard to believe that five years seems to have elapsed so quickly, but the success that we've had, not only receiving FDA approval for our DeepHealth AI breast imaging tools, but implementing it in the RadNet centers. As of this quarter, we are seeing approximately 40% of our patients adopting to have artificial intelligence, which approximates approximately 600,000 mammograms annual. The results and benefits of this have become very obvious and very satisfying to us because we have, both through our efforts and other reported publications, seen the benefit of earlier detection, both in terms of better outcomes and reducing healthcare costs.
Given that success and with what we felt even five years ago that this would be the standard of care in the field of breast imaging and screening mammography, we have decided to make another bold move to merge with iCAD, another public company who has been doing development of artificial intelligence for close to 15 years. By combining these teams, we hope to accelerate the growth and utilization, and more importantly, the importance of this as a screening tool that can have substantial impact on both our U.S. as well as global opportunities that both iCAD and RadNet, through its DeepHealth Division, have been working on. I couldn't be more proud of my team, and I couldn't be more enthusiastic about how important this is to the healthcare community and obviously the radiology community.
I think, again, demonstrates that RadNet continues to earn the moniker we have attached to us of leading radiology forward. With that, I'd like to turn the call over to Dr. Gregory Sorensen. Not only is Dr. Sorensen the Chief Scientific Officer, but was the founder and developer of the DeepHealth breast AI product. Thank you.
Thanks, Dr. Berger. Hello, everyone. Thanks for spending some time with us today. I'd like to spend just a couple of slides giving you some background about why we're so excited about the iCAD acquisition and why we think this is going to be such a good thing for the health of the women around the world and a growth driver for RadNet. First, a little bit of background, as Dr. Berger has alluded to about RadNet, we're very interested and very focused on improving the lives of women through screening technologies and especially mammography. This may not be apparent, but actually close to a third of RadNet's overall revenue is focused on breast health. We have tremendous scale. As you can see in this slide, close to 2 million mammograms a year are done across the RadNet network.
Just for putting that in context, that's about as many mammograms as the entire country of England every year. This is already a big part of our business. That is, of course, why we've been investing so much, not only in AI, but in new ways of using AI. As Dr. Berger alluded to, our enhanced breast cancer detection program, we've now documented in hundreds of thousands of women that we can, with this novel workflow, leverage AI to boost the cancer detection rate substantially, more than 20% in women across many different age groups, different racial categories. We can also use it to lower recall rates. It's really quite compelling. Further background, RadNet is very interested in bringing this technology into novel settings, such as in grocery stores, doctor's offices, etc.
For all these reasons, mammography has been on our mind and AI and its ability to improve the lives of women for quite some time. Next slide, please, Mark. With that background, it's obvious we've been watching with delight the growth and the presence of iCAD, a 40-year-old company that has been, as Dr. Berger said, focused on artificial intelligence, especially in women's health, for quite some time. They have been able to build a substantial install base. They're in more than 50 countries, more than 1,500 healthcare providers are using their software, and they've got software to help detect cancer better and are working on other tools.
You think about that, 2 million mammograms inside RadNet now, by this acquisition, will be able to reach four times as many, so up to another 8 million mammograms that iCAD touches, and bring this novel technology and new technologies that we are building not just to the patients that RadNet sees, but to women around the world. It is a really compelling idea. We can take the innovations that we validate inside the RadNet portfolio and now, through the DeepHealth mechanism, spread them around the world. To help describe that in more detail, I would like to now turn the time over to our DeepHealth CEO, Case. Take it away, Kees, and on to the next slide, please, Mark.
Thank you, Dr. Sorensen. Thank you all for tuning in so that we can share our great excitement for the acquisition that we announced yesterday. If there are three things that I want you to remember about why we're so excited about the acquisition, it's all about skill and capabilities, customer reach, and the most comprehensive portfolio of breast imaging AI solutions. This acquisition will strengthen RadNet's DeepHealth leadership in AI-driven breast cancer solutions by accelerating skill across commercial, product, and engineering functions to meet the growing market demands that we see in this space. It allows us to expand reach, and that's also what Dr. Sorensen already explained, to combined 10 million annual mammograms in terms of volume, or otherwise said, over 1,700 provider sites, and that over more than 50 countries. It also creates the industry's most comprehensive portfolio of breast imaging AI solutions.
We will spend some time shortly about that, where Sham Soker, our CTO, will go through what that really means. Now, last but not least, this transaction will allow enhancing iCAD's financial performance with a positive adjusted EBITDA run rate expected by 2026. We deliver that through attractive synergies. Next slide, please. To get us grounded on the financial baseline of the combination, first of all, I want to remind people of the guidance that we have given for DeepHealth in 2025, which is for revenue $80 million-$90 million and for adjusted EBITDA $15 million-$17 million. The acquisition will add to that, based on the 2024 reported actuals of iCAD, a sizable $20 million, close to $20 million of revenue.
Moreover, following the acquisition, we expect positive adjusted EBITDA run rate by the end of 2026, again, through the identification that we see on attractive synergies. Let me dig into that a little bit more on the next page. We see three types of synergies: cost synergies, commercial synergies, and product synergies. All three are equally important in the success of integrating iCAD with DeepHealth. On cost synergies, we see over $7 million run rate cost synergies. Approximately half of that in direct savings, think of duplicative costs on the board of directors or public company costs or audits, and these can all now be avoided. The other half, really by fulfilling pre-existing hiring plans of DeepHealth in the commercial and R&D and other domains.
On commercial synergies, we're super excited that we can expand into iCAD's install base in terms of DeepHealth differentiating offering, obviously in the domain of breast, but also beyond in terms of the informatics solutions that we provide or other population health AI solutions that we can deliver. It gives us access to over 50 plus countries. It accelerates our European growth plans. Obviously, the commercial funnels, when we combine those, that only strengthens our ability to grow further. In terms of product synergies, I want to mention again that from day one, we'll have a highly complementary offering. Sham shortly will talk through what that means and how we will capitalize on that. iCAD also brings in future products and propositions that will strengthen our suites, such as breast arterial calcification and image-based risk assessment.
Last but not least, this allows us to expand our product, R&D, and regulatory capacity to accelerate new solutions above the two examples that I just mentioned. I'm going to hand over to Sanjay, who is going to talk us through how the iCAD workforce and team is expected to accelerate our DeepHealth growth plans. Sanjog, over to you.
Thank you, Kees. Good morning, everyone. As Kees mentioned earlier, one of the key strategic reasons of this acquisition is really the addition of a team which is seasoned and experienced professionals. With the addition of the iCAD team, we will be able to accelerate our growth plans as well as expand our capabilities at DeepHealth, specifically in scaling our AI portfolio across the globe. If you look at one of the most compelling drivers of this acquisition, it's the strong people synergies between our two organizations. Both teams share a very complementary culture centered around innovation, agility, and a deep commitment to customer success.
We believe this alignment will enhance our talent pool by combining experienced leaders and high-performing teams, as well as helping accelerate integration through shared values and operational philosophies that we also believe, as well as foster cross-functional collaboration, enabling us to deliver enhanced value to our clients. This acquisition is bringing 66 employees of iCAD into the DeepHealth family, where 26 of their employees are in the commercial space that includes sales, service, and marketing. The sales and service teams will help us in expanding our reach, not only in the U.S. market, but globally as well. They do not only give us the reach to the existing install base of iCAD, but also help us to deploy a portfolio of AI solutions at scale. Now, the combined team can also cross-sell each other's customer bases as well as share client knowledge and support.
Another 26 employees will help us in strengthening our product and R&D teams. This is, again, extremely critical as we scale up our AI portfolio that definitely brings that capability. This includes employees from quality and regulatory as well as clinical affairs. Lastly, there is a 14-member team which includes all the support functions, including finance, HR, and other functions. The addition of the iCAD team fills up immediately some of the key positions that we had anticipated to hire at DeepHealth in 2025 in order to strengthen and expand our commercial, product, and R&D teams. This will help us in accelerating the external growth for DeepHealth. Hence, we are confident that these people synergies will be a critical factor in unlocking the full value of this transaction and driving sustainable long-term performance for the combined organization. With that, I'll turn over to Sham.
Thanks, Sanjog. Good morning, everyone. I want to walk a little bit through the offering portfolio and what we're really excited about. As Dr. Berger and Dr. Sorensen emphasized earlier, a key pillar of our mission is expanding the reach of high-quality mammography screening to serve more people. With this acquisition now, we have a complementary progressive set of offerings for customers early in their AI adoption journey, where people are just looking for AI, to customers that are using and that want to use AI in very advanced ways, as RadNet does, for example, with its EBCD program, Enhanced Breast Cancer Detection Program, where we have workflows where there are secondary reviews and so forth to drive really the highest level of cancer detection and reduced recalls.
What I want to walk you through is this offering cascade that we now can bring to the market from left to right, right? First, let me talk a bit about iCAD's core offering, right? It's an AI detection software that improves cancer detection rates above conventional 3D mammography. They've proven, over the years, significant clinical benefit to the product. The other nice, really beautiful thing about that offering is that it has very broad compatibility: 2D mammography systems, 3D mammography systems, regulatory approvals in over 50 countries, expanding the broad reach, but more importantly, also regulatory approvals across multiple diverse set of systems: Hologic systems, GE systems, Siemens systems, Fuji systems. You have a strong base offering that we can bring to many customers that gets people going on their AI and improved cancer screening journey, right?
On top of that now, we can bring the next level of offering, which is, okay, you have AI, but to really get the maximum value of AI, that AI has to be integrated into the reading environment of the radiologist very, very tightly, right? You get the detection right overlaid on top of the images. You can go right to the point where the studies need to have the cancers identified, the data from the AI automatically populating into the reports, right? That idea that AI plus viewing plus reporting now creates a more efficient workflow, right? Rads can read faster, not just more accurately, right? All the way to the highest level of the cascade, which is what we do now in RadNet and what RadNet has implemented and some others are starting to implement, which is this enhanced breast cancer screening, right?
Where now we're generating revenue, as Dr. Berger mentioned earlier, about 40% of our customers adopting this, where they get not only the radiologists get AI at the point of detection, but we have an AI-assisted safeguard review process where if there's disagreement between the AI and the radiologist's primary read, a second reader is triggered to come for a safeguard review. When you put all that together, now you have improved cancer detection, you have workflow efficiency because you have now that integrated in that viewing and reporting environment. With the second reviewer, you have even more improved cancer detection as well as reduction in recalls. That's what we've published, and we've shown really strong clinical outcomes in 600,000 women in studies and that we've started to now release this smart mammogram with recalls, right?
The opportunity here is we can meet customers at the earliest level of the adoption all the way to this advanced opportunity where there's even now revenue generation opportunities, but also, really more importantly, the optimal screening and detection solution in the market, right? Now, the other aspect of this acquisition that we're excited about is also the future roadmap and future roadmap possibilities. iCAD brings also these advanced risk products, two specifically: image-based risk, which is to look at can we predict the future risk based on the current mammogram, and then what's called breast arterial calcification, essentially the ability to look at cardiac risk factors from a mammogram, right? Both of those products have approvals, some approvals outside of the U.S., but not yet approved in the U.S.
Taking those models, bringing them into the RadNet ecosystem where we can test and validate and use the RadNet data as well as the RadNet clinical environment to accelerate those risk products is another part of the synergies, the product synergies that we're looking to harness as well. With all those, as we put those pieces together from early adopters to advanced users to adding risk product, we believe it's the most comprehensive breast AI portfolio, and we can bring that to this large customer base now that we bring together as iCAD and DeepHealth. With that, I'm going to hand off to Mark, who will kind of go through the transaction summary.
Thank you, Sham. As many of you saw in the press release last night, we summarized some of the integral financial aspects of the transaction. This is a stock-for-stock acquisition where we will be having a fixed exchange rate of RadNet shares of 0.0677 shares of RadNet Common Stock for each share of iCAD Common Stock. As of the end of business yesterday, the closing price of RadNet Stock valued iCAD at the equity of iCAD at $103 million. You may have seen that iCAD closed last quarter, meaning December 31, 2024, with about $17 million of cash. The enterprise value as of the end of the cash at the end of the last quarter for the valuation of iCAD was approximately $85 million.
The price of iCAD that we're paying as of yesterday's close was about $3.61, representing about a 98% premium to the iCAD shareholders. The transaction is expected to close during the second or third quarter of this year. It is subject to approval by iCAD stockholders. There will be a proxy statement that is mailed and delivered to the iCAD shareholders, and the transaction is also subject to other customary closing conditions. It was unanimously approved by both companies' board of directors. With that, I'd like to have the operator open the call to questions from the investors and the analysts. Thank you.
Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. Our first question today will come from Brian Tanquilut with Jefferies. Please go ahead.
Hey, good morning, guys, and congrats on the deal. Maybe Howard or the team, just curious, as we think about the implementation and kind of integration plan for iCAD, in terms of the cross-sell, in terms of developing the AI that's in the pipeline right now with, I know you guys mentioned risk assessment and BAC. Just curious how you're thinking about that path, number one, and then second, the monetization goals for those IP assets as we think about maybe two to three years down the road.
Thank you, Brian.
Go ahead, Kees.
Yeah. Thank you, Dr. Berger. Let me start off with, so I sketched out the three different domains of synergies or value creation. The way to think about it on the cost synergies, that's really an 18-month timeline as we integrate the teams. I think you're referring obviously more to the commercial synergies and product synergies. Those are going to be on a longer time scale. Think of three years where over three years' time span, we are going to upsell into the installed base of iCAD with a degree of success that we've underwritten to ultimately get to, let's say, high single digit, at least for the breast AI domain of revenue upsell opportunities.
For the product roadmap, quite frankly, we see that really as an acceleration of the roadmap items, which is a bit hard to quantify how that ultimately will impact our bottom line, other than that it strengthens our conviction for accelerated growth.
Yeah, Kees, maybe if I can add a little bit, right? If you look at the three pillar products that we kind of talked about, the early product, which is AI only, and then going all the way to kind of a full review product, the first pillar is kind of a sub-$5 product, the AI only per study. If you then bring the viewer and the reporting, we're talking about between $5-$15, and then as you get into the advanced one, you're now talking $15-plus in terms of price per study kind of thing, right? There's a value cascade there as we now bring these more advanced AI solutions. On top of that, you have the risk products, which would be complementary to that as well as we start to bring them to the market.
The first three products, and that's the reason why we put it on the slide, those will be available immediately, right? Day one, we bring that offering into the market. The risk products will come in over time and now provide even additional opportunities over the midterm horizon.
Got it. That makes sense.
Sorensen, if I could just add.
Go ahead.
One last comment to that. We're starting to have good conversations with employers and payers around the benefits that they would see if they were to cover the Enhanced Breast Cancer Detection Program. It really is, strictly from an employer's point of view, it's actually a cost savings to their employees as well as to their own bottom line. That is based on, as I said earlier, hundreds of thousands of women, the data from RadNet. Now with the iCAD sockets, with the installed base they have, as payers say, "Oh, well, we'd like to have that ability," in geographies that there are not RadNet providers, now that we've got iCAD, we've got providers basically in every state who could then tap into that employer eagerness to pay. The women benefit, the payer benefits, and then we have this full suite of solutions.
No matter kind of where on the product horizon that Sham laid out, a particular provider might want to dial into, we can meet all of those opportunities. With the promise of added reimbursement, I think we're going to see more eagerness for that. Hard to predict how quickly, which I know was the core of your question, but kind of over the timeframe you proposed, a couple of years, we have a lot of confidence that's going to happen.
Awesome. Maybe for Howard and Mark, obviously, you're doing the deal here on the digital health side of the business. I think a lot of investors are wanting or looking for you to do deals on the other side on the core business. Just curious how we should be thinking about capital deployment of that $750 million of cash still in your balance sheet and what the pipeline looks like, and should we expect deal announcements sometime this year? Thanks.
Thanks, Brian. I'll take this initially, Mark, and then you can chime in. As you've seen from the announcement here, this particular acquisition was done as a stock-for-stock transaction. In fact, we actually will add to our cash reserves once the transaction is closed. We did not use any of our balance sheet, if you will, for this acquisition. I think the importance of that is that the shareholders, stockholders of iCAD, saw the benefit in this combination, this merger, and being a part of the growth story in artificial intelligence, particularly for breast imaging, and therefore were confident about the long-term benefit and opportunity by having RadNet stock. That being said, we are, as we always have been, looking at expanding the services side of our business. There are several that are in conversation and others that are in the beginning process of further investigation.
This will not at all hamper the growth of the services side of the division. In fact, in some ways, may help it because as people begin to understand our roadmap for the digital health division, the relationship, whether it's acquisitions of imaging centers and the ability for them to transform their IT platform and begin using AI, or if it's hospital systems and joint venture partners, both current and future, RadNet becomes an even more formidable partner in terms of the skills and deployment of what the future of radiology is going to look like. In a way, we are looking at this as an opportunity to further solidify our position as the leader in the outpatient imaging space. We're getting more and more inbound calls, unsolicited, I might say, from hospital systems that are looking for an outpatient imaging strategy.
This is an integral part of that strategy, which ultimately dovetails into their inpatient strategy too. I think this sends the message that we wanted into the community and the marketplace about our commitment to digital health, not only for RadNet, but as a transformative part of what radiology will clearly be adopting over the next several years to transform radiology into truly a tech services and tech-enabled business. Mark, go ahead if you want to add to some of that.
Sure. I'll just emphasize that, Brian, that we do have an active pipeline of imaging center acquisition opportunities. I'm highly confident that we will put some capital to work this year. With some of the dislocation in the capital markets, both on the equity side as well as the debt side, I think it's putting more and more pressure on some of the smaller operators, some of the private equity-owned operators. I think that that bodes well for more and more opportunities on the core imaging center side going forward. We have been extremely disciplined with regards to price and valuation. We'll continue to be that way. We feel we have a very good sense of what businesses are worth in our industry, but I'm also highly confident that we'll get some transactions done this year.
Awesome. Thank you.
Our next question will come from David MacDonald of Truist. Please go ahead.
Hey, good morning, guys, and congratulations. Just a couple of quick ones. One, just on the commercial employees that you're adding, the 26 that you mentioned in the slides. Can you guys remind us right now in the digital health area, roughly how many sales folks you have? Secondly, just on the 1,500 providers that iCAD gives you access to, I assume the bulk of those are kind of traditional radiology sites. Are there any non-traditional channels where they're seeing some success in terms of their product offering?
Thank you. Sanjog, do you want to take both questions?
Sure. The first one in terms of the sales. Today we have roughly 11 people between the US and Europe in a sales organization who are basically customer-facing at this point of time. With the iCAD acquisition, we will add another roughly 12-13 people who will join the sales team, predominantly in the US to a large extent. Of course, we will also continue to expand the European footprint when it comes to the commercial teams. That is number one. On the 1,500 iCAD customer base, at this point of time, this is a combination of not only outpatient radiology imaging centers, but it also has a lot of hospitals to whom iCAD is currently selling their AI solutions. This gives us a good footprint in terms of us selling both our enterprise imaging solution as well as our AI portfolio.
It definitely helps in growing. The third piece is, of course, iCAD also goes around distributing not only through their direct sales team, but there are also indirect channels, including distributors and aggregators with whom they currently partner up. That also opens up a door for us to use those distribution channels in selling our portfolio.
Okay. Just a couple of other quick ones. One, can you just provide a little bit more detail on the image-based risk evaluation product? Right now, when these guys are using this, I assume that this is kind of looking at the patient, etc. Can you talk about the potential benefits over time in terms of how you guys think about this relative to potentially your payer partners? Just any additional detail on that product and what you would expect the steps to be to kind of get that ramped up and going domestically.
Yeah. Maybe let me take that one. Today, risk is based on a questionnaire. Tyrer-Cuzick is kind of the standard. What you do is you have your screening mammogram, and then when we have these women, we also do the screening. We also do the risk questionnaire. Based on that risk, some of the women will be eligible for kind of more rapid screening protocols or MR-based screening based on the risk levels and so forth, right? The image-based risk is sort of, let's say, complementary to that, right? Because not all women fill those questionnaires. It's kind of laborious to administer, etc. The idea behind the image-based risk is, okay, now when you get your screening mammogram, you get, hey, a clear sign. But maybe that there is a 12-24 month risk that something may develop.
The clinical protocol then can be accelerated, very similar to the Tyrer-Cuzick risk score. We can now monitor women more closely if they're at a higher risk, right? That's the promise of the technology, right? As you can imagine, we're looking at forward risk. The regulators, especially FDA, see that as a de novo product, right? They see that really as a higher risk product. Therefore, iCAD so far has built that product, has some data in markets outside of the US where they've commercialized it. The idea is to now bring that into the US under investigation. Hopefully, it gives you a bit of background.
Okay. And then, guys, just last question. I think it's 14% of their revenue is OUS. Looking at the breakdown from some of their filings, it looks like a good chunk of that is in France. I'm just curious, is there any specific countries or anything outside the US that you would flag in terms of a disproportionate opportunity, or should we just think about this as you integrate the products outside the US also has some nice running room here?
Yeah. I can take that. Yes, France is definitely one of the biggest markets outside of Europe for them. At this point of time, it's whatever we understand. They are also expanding their reach beyond the existing countries, and specifically some of the European countries where they see a potential, let's say, like Germany is one market. The Nordics is one market, but Australia per se, which is also kind of an evolving market specifically with adoption of AI. These are some of those key markets that we are looking at expanding, or they are looking at expanding, including, of course, Brazil is, again, another market where we're seeing a lot of adoption of AI. These will be some of those other important markets from a future standpoint.
Okay. Thanks very much. I think the distinction maybe here is a little bit revenue so far by geography versus boots-on-the-ground investments that have been done recently and going forward. That is what Sonja is trying to emphasize, which shows a broader coverage across those 50-plus countries as we go forward.
Okay. Just one additional element, right, as Dr. Berger talked about tech-enabled services. As many of you know, we have a radiology reading service in the U.K. Like we've now done in the lung cancer screening space in the U.K., we see there's a nice opportunity also for combined reading and mammography opportunity also in the U.K., right, just to sort of highlight that as well.
Thank you.
Our next question today will come from Andrew Mok of Barclays. Please go ahead.
Hi, good morning. Just wanted to follow up on the 26 FTEs in each of the commercial and R&D segment. I think the release mentions that you anticipate these employees to join DeepHealth. First, what actions do you take on your side to ensure that they join? You previously earmarked $20 million in guidance for digital health reinvestment, which includes sales. How much of the hiring needs does this fill for the year? Does that alleviate some of the $20 million of reinvestment for this year? Thanks.
Yeah. Thank you for that question. Let me start with the last question first. The way we look at it right now, the earlier communicated $20 million was across commercial and product and R&D efforts. We see that roughly $3 million-$4 million out of that, so let's say 15%-20%, will be fulfilled by the iCAD acquisition. That's what we were also referring to as we stated, fulfilling earlier hiring needs. [Audio Distortion] That's maybe the answer. Shem, Sonja, do you want to talk a little bit about—let me also say we're obviously very, very focused to retain people. Partially, that is to make sure that we emphasize that iCAD strategy and core proposition, as Shem laid it out, is something that we will roll forward and will be part of our suite of offering going forward.
Secondly, there will be the traditional retention vehicles in place, obviously, to make sure that employees are satisfied and excited about our journey ahead. Sanjog and Sham, do you want to talk about specifically your two domains on that? Any additional color?
Yeah. Specifically on the commercial part, like I mentioned, with the addition of 13-14 FTEs, that definitely kind of takes care of all the AI portion of the commercial expansion that we were wanting to do specifically in the US. Of course, we will still have a little bit of additional commercial teams on the enterprise imaging because the existing teams from iCAD bring in more of the AI experience as compared to enterprise imaging. We will at least, let's call it this way, that at least 70% of our commercial requirement from an employee standpoint is taken care of. Of course, as I mentioned, that does not take into account the Europe expansion because iCAD does not have a commercial team in Europe, which is predominantly or outside of the US is predominantly done through distributors and aggregators.
We will be, of course, adding maybe another few people for the outside of US expansion. Sham, do you want to comment on the R&D and product?
Maybe just very briefly, I think the kind of the really interesting opportunities in our colleagues' quick areas. One is ML, machine learning, and AI expertise, which iCAD brings, which we're quite excited about. I think they're quite excited about the RadNet data estate and the ability to maybe accelerate some of the models. There is a really nice win-win and excitement around that from the team. The other area is quality and regulatory. They've had this demonstrated experience of being in multiple markets and really putting a very thoughtful and accelerated strategy to enter new markets. We are very excited to combine that capability to the rest of the product portfolio so we can bring that into more markets.
There's really, really nice complementary synergy to really accelerate both businesses going forward.
Maybe just a follow-up. Mark, you did not explicitly reiterate guidance with the release and deck, but there are obviously references to it. Can we take that to understand that guidance is reiterated today?
Yeah. We didn't change guidance, or we've never historically changed guidance in the middle of a quarter. What this transaction would do for us, obviously, if you look at iCAD's filings for 2024, they did about $19.6 million of revenue. They lost about $4 million of EBITDA. We don't know exactly when this transaction will close because it is subject to iCAD shareholder vote. Assuming it closes, let's say, close to the beginning of the third quarter, we'd have one quarter's worth of their revenue. You can assume that's $4 million-$5 million of revenue within our 2025 guidance.
We expect it to be fairly neutral with respect to EBITDA this year because of the synergies that we talked about today in terms of the alleviation of costs on the digital health side in terms of hiring, as well as some of the synergies that we would expect to get fairly immediately in regards to some of the direct costs that Case went over in terms of the elimination of board of directors costs, certain public company costs, auditor costs, and the like. I think it is going to be a positive on the revenue side for 2025, clearly likely in the $4 million-$5 million range and fairly neutral on the EBITDA side.
Great. Thank you.
Our next question today will come from Larry Solow of CJS Securities. Please go ahead.
Hi, good morning. It's Pete Lucas for Larry. Mark, you touched on it in your remarks in some of the Q&A, but can you just kind of expand on your decision to use stock versus cash given your current one-time leverage position? Was it mostly just to give iCAD employees a sense of the upside or keeping powder dry for more? How did you guys think about that?
Yeah, I think it was both of those things. As Dr. Berger mentioned, the iCAD shareholders, board of directors, I should say, really like the business combination, see the value here, see the value creation for iCAD shareholders, that possibility. Therefore, we're excited about taking RadNet stock. From our perspective, we're keeping powder dry for other transactions that we could contemplate here in the near future, particularly on the imaging center side. I would say lastly is that we're very cognizant of keeping our leverage low. We think having leverage very low, having a lot of dry powder, having a lot of liquidity, especially in these uncertain financial times and uncertain financial markets, is extremely valuable to the company. By making this transaction all stock, we preserve all of that optionality.
Great. Thanks. Last one for me. You touched on it, and I think you went through it. I apologize if I missed some of it here. In terms of how do we think about the synergies and the timing of them in terms of the contracts that iCAD has when they get a chance to be renewed? I know some of the cost synergies will be immediate. If you could kind of just maybe touch again on the immediate cost for us.
Yeah. This is Kees.
Mark, you want to take it over?
Go ahead, Case. Go ahead, Kees.
Yeah. Specifically for the cost synergies, look, we've identified this for the presentation, $7 million-plus cost synergies. We have a plan to execute those in an 18-month time frame. If it's a summer close, then we hit that run rate by end of year 2026. That sort of gives you that timeline. You've got the other data points in terms of where we think we end the year depending on closing time in terms of EBITDA impact. Yes, it will be slightly negative, but we'll manage it. In terms of commercial synergies, if that's also the question, that's going to take longer. We definitely have a clear line of sight of all the upsell opportunities into the installed base, but we also recognize that there are renewal periods for imaging centers and hospital systems.
The way we have looked at it, also based on past experience in terms of contracting, but also working through these types of deals, we see that really as a three-year period to meaningfully have a positive impact on the installed base of the iCAD perimeter.
Very helpful. Thanks.
Our next question will come from Jim Sidoti of Sidoti & Company. Please go ahead.
Hi, good morning. Thanks again for taking questions. Two questions for me. First, can you just briefly describe what you gain with the Profound software as opposed to what DeepHealth is offering currently? What is the main difference between what you're acquiring to what you currently offer? How does iCAD plan to grow basically four times in 2026, up to $80 million-$90 million from $20 million in 2025? I'm sorry, in 2024.
Let me take the last question first. Shem, if you can sort of talk about Profound AI versus our Smart Memo AI and within that Smart Memo solution and our AI within that. There might be a confusion, but let me make sure I understand the question correct on that. Mark, if you just go to the page where it shows the DeepHealth financials of $80 million-$90 million and separately for iCAD, the 2024 actuals. The $80 million-$90 million is really our current guidance for DeepHealth standalone without iCAD for full year 2025. Separately, you have iCAD $20 million. Yeah.
Yeah, that makes sense. Sorry.
No problem. Thank you for asking. Sham, do you want to talk about Profound AI versus the broader Smart Mammogram solution?
Yeah. Yeah, absolutely. The main advantage of Profound AI that we gain, right, is the multi-system compatibility and the multi-modality compatibility. Meaning, for example, our AI today, the DeepHealth AI today, is only compatible on 3D in the US market. The Profound works both on 2D and 3D, so you can get into more systems. They also have compatibility to more OEM providers, right? Today, DeepHealth is only compatible on GE and Hologic. They have Siemens as well as Fujifilm. The idea that together, the AI-only product can now address a larger installed base and a larger segment of the market is a significant product gain now that we have in our portfolio, right? We've already now also talked about, besides the Profound products, the risk products they have now work in and in other markets as well, right?
That's the other element as well that we gain.
Okay. Great. Thank you for clearing that up for me.
Yeah.
Our next question will come from John Ransom of Raymond James. Please go ahead.
Hey, good afternoon. Good morning. Just looking at your digital health division, how do we think about the growth now, the 80-90? Let's think 85. Where's the growth coming from just in terms of converting customers to eRAD, converting yourself to eRAD, more penetration with breast and lung, DeepHealth OS? Could you just kind of think about how you're thinking about that growth and how we would allocate that?
Can you hear me?
Just to clarify the question.
Did I stop stopping?
Did I stop stopping? I'm proud of myself for stopping, Mark. This is good.
Oh, I figured I'd let the DeepHealth guys answer.
Yeah, no problem.
Just to clarify the question from my side, the question here is how much will be RadNet-related growth versus external growth as we move forward? Is that the question?
That and just you've got the old AI product, which we were modeling at kind of 20-30. You've got the old eRAD that you're converting yourself to DeepHealth. Yeah, and yeah, the internal versus external. Just trying to think about how we think about the revenue growth among all those little buckets.
Good. Sanjog?
Yeah. There are a couple of areas where we are basically expecting our growth in 2025 as compared to 2024. First, talking about AI. If we look at our breast AI with the adoption, with the deployment of EBCD at RadNet, that is expected to grow anywhere in the 15%-17% this year as compared to last year. That's one, the breast AI. We have the lung AI, which we today sell in Europe and specifically at the U.K. with the NHS. That's expected to grow anywhere between 32%-35%, which is what we see with the lung screening program adoption in the U.K. market specifically. Of course, there are other countries within Europe which are also seeing adoption of the lung AI solution.
The last but not the least is our prostate AI is also seeing adoption across Europe and US. That's also expected to drive anywhere between 20-22%. That's on the AI side where we expect this kind of growth to come in. Now, specifically moving on the non-AI to our enterprise imaging, we see existing customer base with our eRAD solutions of RIS and PACS. Okay? That's expected to grow anywhere around 15-17%. With the launch of our DeepHealth OS, which is our cloud-native PACS plus TechLive plus the other solutions that we are launching, that's where we are also expecting a substantial growth because it's the first year that we are launching our OS products in the market. That's expected to also drive a substantial portion of our enterprise imaging.
We have our existing installed base driving 15-17%, plus we have the new products in the EI space that's also driving incremental revenue for us in 2025.
Yeah. One thing if I can—
Internal versus external mix. I know your plan is to convert all the RadNet centers to DeepHealth by the end of the year. On a pro forma basis, what does the internal versus external revenue look like for digital health by the end of the year?
Yeah. Today, within RadNet, roughly 40-41% of our revenue comes from RadNet adoption, whether it's our RIS, PACS kind of solutions, as well as other solutions like TechLive, which is our remote scanning. The rest, 58-59% is coming from external customers.
That won't change much even with the adoption?
That will change significantly with iCAD, right? Because now we add $20 million all external, right? So that number now becomes much more of an external revenue piece, right, with the acquisition. Maybe one comment on the midterm, right? Sanjay nicely outlined the short term. The midterm now is these worlds come together, right? Both the core imaging enterprise imaging solution, which is our DeepHealth OS product, and then the individual AI point solution. Now we come to the market as a portfolio company, right? You have a base radiology platform, and now we have a scaled memo product, a scaled lung product, a scaled prostate product, a scaled neuro product. Now you have the midterm as health systems and also internationally, people are looking for fewer partners to really drive the AI-based radiology revolution. We are there.
We are kind of in the lead to be that in the midterm, right? We can't underestimate the midterm strategy as we bring all these portfolio elements together.
Okay. Thank you very much.
I would just echo that. This is Greg. I would just echo Sham's point. This is Greg by pointing out that kind of in parallel with this eagerness to bring in AI is the shift to cloud-based solutions. The fact that iCAD already has an installed base with a customer that's already connected to either their box or the cloud or both means that it's a really easy thing for the customer to add on these additional features that now they can see bring them so much value. It really makes it a much more straightforward adoption motion on their part. As you know, that kind of friction is such a big challenge in all healthcare environments.
A big part of our enthusiasm about the combination is that reduction in friction that as people see the benefits to patients, they can quickly adopt them without a lot of hassle, without a lot of IT kind of infrastructure blockade, rather just the opposite. It's a really facilitated, easy-to-do thing.
Great. Thank you so much.
Again, it is star and then one to ask a question. Our next question will come from Yuan Zhi of B. Riley. Please go ahead.
Hey, this is Brandon Carney for Yuan. Congratulations on the acquisition. Thanks for taking our question. Just one from us. Just was wondering if you could comment on the strategy here comparing EBCD with iCAD. The strategy for EBCD has been to offer it as an optional add-on directly to patients. We were just wondering how iCAD's customers generally incorporated the additional cost of AI. Have they implemented it as a sort of optional add-on like EBCD, or have they translated it directly into a general service fee for all patients? Thanks.
That's a great question.
Yeah, I can take that question, Greg.
Here you go, Greg. Yeah. Go for it.
Would that be all right, Kees?
Yeah.
Yeah, for sure.
Sure. I think the enhanced breast cancer detection that RadNet rolls out is really a service that's enabled by AI. What iCAD provides today is that point AI solution that gives an interpretation boost for the interpreting physician. When patients enrolled at the $40 EBCD program, they're getting a lot more than a point solution. In fact, they're getting extra services. As Sham explained earlier, they're getting not only the initial interpreting physician to get some AI, but then they're getting a separate step by the AI that iCAD doesn't have an offering for. We have DeepHealth as a separate FDA-registered product that dichotomizes the AI output and says, "Is this positive or is this negative?" Importantly, it compares it to the report that the physician generates. It triggers another step, which is, "Let's look and see if there is discrepancy.
If there is discrepancy, let's put a hold on the report so it doesn't go out and confuse the patient while an adjudication process happens. It arranges, the software arranges for an expert to be brought in to help look and see what's really going on between the first physician, the AI, old films, kind of the entire portfolio of information. All of that happens with that second interpreting physician services. Importantly, the DeepHealth software stack enables all of that work. That's software that iCAD doesn't have today and that now we can bring to all those iCAD customers. Now they'll get the opportunity to have whatever point solution they want, whether it's iCAD or DeepHealth, or it could even be somebody else's in theory.
Then this workflow that makes all of that happen efficiently, makes sure that there's no confusing paperwork going out to the patients, makes sure it's compliant with all the MQSA standards, all of those steps, that's all enabled by the DeepHealth stack that's now cloud-based and super efficient. That's what the $40 enables. As other providers see that now patients want that and are willing to pay, or an employer says, "I want that." We now have a couple of employers in different parts of the country who've said, "I want that for my covered employees." The employers are basically saying to the provider, "Please, we'll pay you for that." They need the IT stack to enable that. DeepHealth can now deploy that.
There are some other people who have looked at the point solution and asked patients to pay for a convenience read or something like that. This second safeguard review where another physician comes in, really that typically only happens in Europe at much greater expense. The win to the safeguard review is because of the clever AI and the workflow solution, it only has to happen in the most dangerous cases, the most important cases where a second physician can come in. That's what's helped all these RadNet patients so much and why 40% of the women opt in and why employers want it. Now we can bring that on top of what iCAD's already offering to essentially five times as many people as we can prior to the acquisition.
To the question also, have we seen signals from that installed base of iCAD that there's interest? The answer is yes. The full stack as we have it couldn't be offered because we have that and iCAD doesn't.
Great. Thanks for the color. Thanks for taking our question.
This will conclude our question and answer session. I would like to turn the conference back over to Dr. Berger for any closing remarks.
Thank you, Alison. I'd like to conclude with three themes that this call and the acquisition indicate. Number one, this is the beginning of what we believe will be further consolidation in the AI industry within radiology and healthcare for that matter. The importance of that can't be overstated. Many of these companies have been struggling for quite some period of time to establish themselves as viable companies that will be able to continue to invest and improve their artificial intelligence offerings. Clearly, most of them have been unable to do that or may fail. In a very real sense, this will help preserve the long-term stability in the AI space for breast imaging, which perhaps at this juncture may be one of the most important tools that AI has evolved for earlier detection and better outcomes.
In a way, I think many of the people who are using iCAD products as well as others should be relieved that a company such as RadNet now is a long-term provider of these services and committed to the industry. Secondly, we can't again overstate the importance and the transformation that is occurring in radiology and imaging that will improve workflow, earlier detection, and greater accuracy. This is the future of radiology, and it should be embraced and encouraged, and that's in fact what we're doing. I think that there's no company out there that can better take the responsibility for leading the way in this in the industry other than RadNet, given that we have both the clinical skills, the operational skills, and now the IT skills to be truly transformative.
Lastly, I want to go back to the last earnings call where I mentioned that it was RadNet's intent to be the leader in artificial intelligence for mammography, ultrasound, and X-ray. This clearly puts our stamp on the mammography portion of that initiative and that intention. I believe that we will be talking about further developments in the ultrasound and X-ray space in the near future. These are all the tools that have been somewhat overlooked and underutilized in terms of the potential impact on population health, again, for early detection and more accuracy. RadNet is fulfilling its mission by making this acquisition.
I want to compliment the digital health team, our merger and acquisition team, and our legal team for helping make this a reality, and the benefits of which I think will become more obvious as we further merge and evolve this into the scale and importance that I think lies ahead. I want to thank all of you for taking your time here. Clearly, the management team will be available if there's individual questions that you'd like to ask of us. We look forward to our next earnings call, which will be in approximately three weeks. Thank you all.
The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.