[October 28, 2014]

iCAD Reports Third Quarter Financial Results

iCAD, Inc. (Nasdaq:ICAD), an industry-leading provider of advanced image analysis, workflow solutions and radiation therapy for the early identification and treatment of cancer, today reported financial results for the three and nine months ended September 30, 2014.

"Our strong financial results in the third quarter underscore the considerable progress we have made in the radiation therapy and cancer detection areas. Also, the acquisitions of DermEbx and Radion in mid-July contributed significantly, resulting in recurring revenue more than doubling over the same period last year," stated Ken Ferry, President and Chief Executive Officer of iCAD. "Our results were highlighted by year-over-year total revenue growth of more than 50%. In addition, recurring service revenue increased by 110% for the quarter as compared to the comparable quarter last year and by 61% for the first nine months of 2014. Additionally, we achieved a non-GAAP Adjusted EBITDA margin of 20%, and generated more than $2.2 million in positive cash flow from operations. Finally, we returned to profitability with net income of $0.02 per diluted share and non GAAP Adjusted net income of $0.04 per share.

"We successfully integrated the DermEbx and Radion acquisitions in the quarter, which expand our Xoft^® Electronic Brachytherapy (eBx^®) offering to include the components that enable dermatologists and radiation oncologists to develop, launch and manage their eBx programs for the treatment of non-melanoma skin cancer. Growth in our Cancer Detection product sales was attributable to a strong mix of new business from our MRI products combined with upgrades and services to our mammography products customer base.

"We are at the early stages of market adoption in three very large markets including 3D mammography, non-melanoma skin cancer and breast IORT. We are executing well on our strategy and expect that continued top-line growth combined with expanding margins and operating leverage will result in growing profitability and, in turn, increased shareholder value," added Mr. Ferry.

Third Quarter Financial Results

Revenue: Total revenue for the third quarter of 2014 increased 51.7% to $12.6 million from $8.3 million for the third quarter of 2013, reflecting a 2.4% increase in Product revenue and a 109.9% increase in Service and supply revenue.

Therapy revenue increased 91.9% which includes Xoft^® Axxent^® Electronic Brachytherapy System^® product sales, as well as the associated service and supply revenue. Cancer Detection revenue increased 14.5% which includes film, digital mammography, MRI and CT CAD platforms, as well as service and supply revenue from these products.

Gross Profit: Gross profit for the third quarter of 2014 increased to $9.2 million, or 72.9% of revenue, from $5.9 million, or 71.5% of revenue, for the third quarter of 2013. The increase in gross margin was primarily due to higher Detection products revenue and Therapy service and supply revenue associated with the acquisition of DermEbx and Radion.

Operating Expenses: Total operating expenses for the third quarter of 2014 increased to $8.3 million from $6.3 million for the third quarter of 2013, and include DermEbx and Radion expenses for the period from July 15, 2014 through September 30, 2014.

Non-GAAP Adjusted EBITDA: Non-GAAP adjusted EBITDA, a non-GAAP financial measure as defined below, was $2.6 million, or 20.3% of revenue, for the third quarter of 2014, compared with non-GAAP adjusted EBITDA of $545,000, or 6.6% of revenue, for the same period in 2013.

Net Income/Loss: Net income for the third quarter of 2014 was $274,000, or $0.02 per diluted share, compared with a net loss for the third quarter of 2013 of $589,000, or $0.05 per share.

Non-GAAP Adjusted Net Income/Loss: Non-GAAP adjusted net income, as defined below, for the third quarter of 2014 was $590,000, or $0.04 per diluted share, compared with a non-GAAP adjusted net loss for the third quarter of 2013 of $1.2 million, or $0.11 per share.

Cash and Cash Equivalents: As of September 30, 2014, iCAD had cash and cash equivalents of $33.4 million, compared with $11.9 million as of December 31, 2013. The Company generated $2.2 million in cash flow from operations in the third quarter of 2014.

On July 15, 2014, iCAD acquired DermEbx™ and Radion, Inc. for a total consideration of $12.6 million, consisting of $3.8 million in cash and 1.2 million shares of iCAD common stock.

Nine Month Financial Results

Revenue: Total revenue for the first nine months of 2014 increased 28.5% to $30.8 million from $23.9 million for the same period in 2013, reflecting a 50.5% increase in Therapy revenue and a 9.3% increase in Cancer Detection revenue.

Gross Profit: Gross profit for the first nine months of 2014 was $21.9 million, or 71.3% of revenue, compared with gross profit for the first nine months of 2013 of $16.8 million, or 70.2% of revenue.

Operating Expenses: Total operating expenses for the nine months ended September 30, 2014 increased to $21.6 million from $18.0 million for the same period in 2013.

Non-GAAP Adjusted EBITDA: Non-GAAP adjusted EBITDA for the first nine months of 2014 was $3.9 million, compared with $1.6 million for the first nine months of 2013.

Net Loss: The net loss for the first nine months of 2014 was $913,000, or $0.07 per share, compared with a net loss for the first nine months of 2013 of $3.2 million, or $0.30 per share.

Non-GAAP Adjusted Net Loss: The Company's non-GAAP adjusted net loss for the first nine months of 2014 was $1.3 million, or $0.10 per share, compared with a non-GAAP adjusted net loss for the first nine months of 2013 of $3.7 million, or $0.34 per share.

Financial Guidance

Based on the Company's strong financial performance in the third quarter, iCAD is increasing financial guidance for the second half of 2014 and now expects revenue in the second half of 2014 to be in the range of $25.5 million to $26 million and an adjusted EBITDA margin in the 18% to 22% range. This compares with previous guidance for revenue in the second half of 2014 between $23 million to $25 million and an adjusted EBITDA margin in the range of 10% to 15%.

Conference Call

iCAD management will host an investment community conference call today beginning at 5:00 p.m. Eastern time to discuss these results and answer questions. Shareholders and other interested parties may participate in the conference call by dialing 855-217-4501 (domestic) 716-220-9431 (international) and entering passcode 22623761. The call also will be broadcast live on the Internet at www.streetevents.com and www.icadmed.com.

A replay of the call will be accessible two hours after its completion through November 3, 2014 by dialing 855-859-2056 (domestic) or 404-537-3406 (international) and entering passcode 22623761. The call will also be archived for 90 days at www.streetevents.com and www.icadmed.com.

Use of Non-GAAP Financial Measures

In its quarterly news releases, conference calls, slide presentations or webcasts, the Company may use or discuss non-GAAP financial measures as defined by SEC Regulation G. The GAAP financial measures most directly comparable to each non-GAAP financial measure used or discussed, and a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure, are included in this press release after the condensed consolidated financial statements. When analyzing the Company's operating performance, investors should not consider these non-GAAP measures as a substitute for the comparable financial measures prepared in accordance with GAAP. The Company's quarterly news releases containing such non-GAAP reconciliations can be found on the Investors section of the Company's website at www.icadmed.com.

About iCAD, Inc.

iCAD delivers innovative cancer detection and radiation therapy solutions and services that enable clinicians to find and treat cancers earlier and faster while improving patient outcomes. iCAD offers a comprehensive range of upgradeable computer aided detection (CAD) and workflow solutions to support rapid and accurate detection of breast, prostate and colorectal cancers. iCAD's Xoft® Axxent® Electronic Brachytherapy (eBx®) System® is a painless, non-invasive technology that delivers high dose rate, low energy radiation, which targets cancer while minimizing exposure to surrounding healthy tissue. The Xoft System is FDA cleared and CE marked for use anywhere in the body, including treatment of non-melanoma skin cancer, early-stage breast cancer and gynecological cancers. The comprehensive iCAD technology platforms include advanced hardware and software as well as management services designed to support cancer detection and radiation therapy treatments. For more information, visit www.icadmed.com or www.xoftinc.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995

Certain statements contained in this News Release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve a number of known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to the Company's ability to defend itself in litigation matters, to achieve business and strategic objectives, the risks of uncertainty of patent protection, the impact of supply and manufacturing constraints or difficulties, uncertainty of future sales levels, protection of patents and other proprietary rights, the impact of supply and manufacturing constraints or difficulties, product market acceptance, possible technological obsolescence of products, increased competition, litigation and/or government regulation, changes in Medicare or other reimbursement policies, risks relating to our existing and future debt obligations, competitive factors, the effects of a decline in the economy or markets served by the Company; and other risks detailed in the Company's filings with the Securities and Exchange Commission. The words "believe", "demonstrate", "intend", "expect", "estimate", "will", "continue", "anticipate", "likely", "seek", and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on those forward-looking statements, which speak only as of the date the statement was made. The Company is under no obligation to provide any updates to any information contained in this release. For additional disclosure regarding these and other risks faced by iCAD, please see the disclosure contained in our public filings with the Securities and Exchange Commission, available on the Investors section of our website at http://www.icadmed.com and on the SEC's website at http://www.sec.gov.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO COMPARABLE GAAP MEASURES
(Unaudited, in thousands, except per share amounts)

The following is a reconciliation of the non-GAAP financial measures used by the Company to describe the Company's financial results determined in accordance with United States generally accepted accounting principles (GAAP). An explanation of these measures is also included below under the heading "Explanation of Non-GAAP Financial Measures."

While management believes that these non-GAAP financial measures provide useful supplemental information to investors regarding the underlying performance of the Company's business operations, investors are reminded to consider these non-GAAP financial measures in addition to, and not as a substitute for, financial performance measures prepared in accordance with GAAP. In addition, it should be noted that these non-GAAP financial measures may be different from non-GAAP financial measures used by other companies, and management may utilize other measures to illustrate performance in the future. Non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP.

Non-GAAP Adjusted EBITDA
Set forth below is a reconciliation of the Company's "Non-GAAP Adjusted EBITDA"
(Unaudited, in thousands)

Non-GAAP Adjusted Net Loss
Set forth below is a reconciliation of the Company's "Non-GAAP Adjusted Net Income (Loss)"
(Unaudited, in thousands, except loss per share)

Explanation of Non-GAAP Financial Measures

The Company reports its financial results in accordance with United States generally accepted accounting principles, or GAAP. However, management believes that in order to properly understand the Company's short-term and long-term financial and operational trends, investors may wish to consider the impact of certain non-cash or non-recurring items, when used as a supplement to financial performance measures in accordance with GAAP. These items result from facts and circumstances that vary in frequency and/or impact on continuing operations. Management also uses results of operations before such items to evaluate the operating performance of the Company and compare it against past periods, make operating decisions, and serve as a basis for strategic planning. These non-GAAP financial measures provide management with additional means to understand and evaluate the operating results and trends in the Company's ongoing business by eliminating certain non-cash expenses and other items that management believes might otherwise make comparisons of the Company's ongoing business with prior periods more difficult, obscure trends in ongoing operations or reduce management's ability to make useful forecasts. Management believes that these non-GAAP financial measures provide additional means of evaluating period-over-period operating performance. In addition, management understands that some investors and financial analysts find this information helpful in analyzing the Company's financial and operational performance and comparing this performance to its peers and competitors.

Management defines "Non-GAAP Adjusted EBITDA" as the sum of GAAP net income (loss) before provision for taxes, acquisition-related expenses, total other (income) expense, stock-based compensation expense, depreciation and amortization, severance, gain on sale, loss on warrant, amortization of acquired intangibles, acquisition related, patent litigation and recall costs, contingent consideration, indemnification asset and goodwill impairment charges. Management considers this non-GAAP financial measure to be an important indicator of the Company's operational strength and performance of its business and a good measure of its historical operating trends, in particular the extent to which ongoing operations impact the Company's overall financial performance.

Management defines "Non-GAAP Adjusted Net Income(loss)" as the sum of GAAP net income (loss) before provision for the gain on sale of asset, severance, transaction, patent litigation and recall costs, contingent consideration, indemnification asset and goodwill impairment charges. Management considers this non-GAAP financial measure to be an important indicator of the Company's operational strength and performance of its business and a good measure of its historical operating trends, in particular the extent to which ongoing operations impact the Company's overall financial performance.

Management excludes each of the items identified below from the applicable non-GAAP financial measure referenced above for the reasons set forth with respect to that excluded item:

• Stock-based compensation expense: excluded as these are non-cash expenses that management does not consider part of ongoing operating results when assessing the performance of the Company's business, and also because the total amount of expense is partially outside of the Company's control as it is based on factors such as stock price volatility and interest rates, which may be unrelated to our performance during the period in which the expense is incurred.
• Amortization of acquired intangibles: acquisition-related expenses are reported at the time acquisition costs are incurred, and purchased intangibles are amortized over a period of several years after the acquisition and generally cannot be changed or influenced by management after the acquisition. Accordingly, these items are not considered by management in making operating decisions, and management believes that such expenses do not have a direct correlation to future business operations. Thus, including such charges does not accurately reflect the performance of the Company's ongoing operations for the period in which such charges are incurred.
• Interest expense: In January 2012, the Company entered into a five-year, $15 million debt facility agreement. The Company excludes interest expense from its non GAAP Adjusted EBITDA calculation.
• Loss on extinguishment of debt: relates to the extinguishment of a portion of the $15 million debt facility agreement. It is excluded as this is an expense that management does not consider part of ongoing operating results when assessing the performance of the Company's business.
• Acquisition related: relates to transition and integration cost as well as professional service fees due to the acquisition of DermEbx and Radion. The Company does not consider these acquisition-related costs to be related to the organic continuing operations of the acquired businesses and are generally not relevant to assessing or estimating the long-term performance of the acquired assets.
• Gain (loss) on Warrant: The Company issued warrants in connection with the financing and the value changes according to fair value. It is excluded as these are non-cash expenses that management does not consider part of ongoing operating results when assessing the performance of the Company's business, also because the total amount of gain or loss is partially outside of the Company's control as it is based on factors such as stock price volatility and interest rates, which may be unrelated to our performance during the period in which the gain or loss is incurred.

On occasion in the future, there may be other items, such as significant asset impairments, restructuring charges or significant gains or losses from contingencies that the Company may exclude if it believes that doing so is consistent with the goal of providing useful information to investors and management.

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