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Q1 2026 Earnings Call
2026-06-25Operator: Good day. Thank you for standing by. Welcome to the Nanox first quarter 2026 earnings call. I would now like to hand the conference over to Mike Cavanaugh, investor relations.
Mike Cavanaugh: Good morning. Welcome to the Nano-X Imaging first quarter 2026 investor call. Earlier today, Nano-X Imaging Ltd. released financial results for the quarter ending March 31, 2026. With me today is Erez Meltzer, Chief Executive Officer and Acting Chairman. Before we get started, I would like to remind everyone that management will be making forward-looking statements regarding the company's financial results, research and development, manufacturing, commercialization activities, regulatory process, and clinical activities, and other matters. These statements are subject to risks and uncertainties based on management's current expectations as of today and may not be updated in the future. We will also refer to certain non-GAAP financial measures. A reconciliation is provided with our press release. With that, I'd like to turn the call over to Erez Meltzer.
Erez Meltzer: Good morning. Thank you for joining us today for the Nano-X Imaging first quarter 2026 financial results conference call. I'm pleased to report that, as previously indicated, we are beginning to see early signs of revenue from Nanox.ARC. We are seeing momentum across multiple fronts, from record deployments to expanding partnerships supporting our technology and business model. We have worked diligently over the past two years to place a new technology in the medical imaging market. We have learned many lessons during this time and are using those lessons to help reshape our go-to-market strategy. Specifically, we have made various adaptations to our company strategy and operating model to better position us for long-term success. Changing behaviors is a long process. We need to educate customers not only on the medical utility of the Nanox systems, but also demonstrate why using them will benefit their practices financially. Here are the changes we have implemented based on lessons learned. First, we have restructured our U.S. commercial model to emphasize partnerships. This multi-channel approach supplements our direct sales efforts and provides broader market coverage more efficiently. In the first quarter alone, we secured multiple commercial agreements in the U.S. with established medical equipment distributors who have existing relationships and credibility in the market. Second, we are prioritizing deployments of Nanox.ARC systems at high-visibility reference sites like RadNet, the largest outpatient imaging center operator in the United States, where it is now in commercial use and integrated into routine clinical workflows. Third, we created the Nano-X Imaging Network to seek out business segments which offer potentially higher reimbursement rates, such as workers' compensation groups and concierge medical providers. Fourth, we initiated a restructuring process designed to optimize our cost structure, improve capital efficiency, reduce burn rates, and better align our operations with our long-term business objectives. We are seeing early signs that our multi-channel model is beginning to work — deployments are increasing, scan-based activities are starting to contribute to revenue, scan volume at active sites is increasing, and partners are beginning to generate pipeline and initial commercial activity. The Nano-X Imaging Network proof of concept is also beginning to contribute. As a reminder, this is a focused initiative targeting segments such as workers' compensation, concierge medicine, and outpatient specialty care, where positive reimbursement development may support higher per-scan pricing. We are exploring opportunities across three segments: a large integrated healthcare campus, an independent rehab and pain clinic, and an orthopedic physician's practice. I'm very excited to share a strategic deployment update. The Nanox.ARC System has been operational for several months at a RadNet site, where it is now in commercial use and integrated into routine clinical workflow. Based on this experience, we are exploring opportunities for expanded deployment across additional outpatient imaging centers and for clinical research, including early lung nodule detection. We believe this represents an important step in demonstrating the Nanox.ARC clinical value in a major outpatient imaging setting. In the first quarter, we secured multiple commercial agreements in the U.S. with established medical equipment distributors. Collectively, these agreements represent the potential for approximately 360 CapEx system sales over the next two to three years. During the second quarter, our primary focus was on onboarding these partners, training their teams, aligning go-to-market activities, and building the operational foundations required to support commercialization. We are now beginning to see the early results of these efforts, including initial leads for the Nanox.ARC and early commercial opportunities. That said, commercialization in medical imaging takes time — the transition from signed agreements to active sales, installation, and revenue recognition depends on factors such as site readiness and regulatory processes. We have also advanced partnerships in Latin America, signing a distribution agreement with TopMed SAC in Peru in late May, with additional agreements in advanced stages of negotiation. We expect to announce more partnerships soon, further extending our commercial reach. We are now leading a shift toward a more CapEx-driven commercial model supported by our partner network. We believe this evolution can contribute to revenue growth while helping reduce future cash needs and enhance our path to breakeven. Regarding our South Korean operations — we have commenced implementation of our previously announced restructuring plan. We are also evaluating additional alternatives to further optimize the economics of our South Korea operation, including a broader restructuring that originally contemplated a potential sale of South Korean operations and related assets, or an orderly wind-down of all or parts of those operations. No decision has been made at this stage, and our evaluation remains ongoing. We are taking a disciplined approach to capital allocation and operational efficiency, evaluating all available options through the lens of long-term shareholder value. Looking ahead, we remain focused on three key priorities: continuing to scale deployment numbers, converting our pipeline of direct sales and partnership discussions into purchase orders and signed agreements, and supporting our partners to drive system sales and utilization. Turning to our AI business — I'd like to update you on our clinical trial partnership with Cedars-Sinai in Los Angeles. Based on the retrospective pilot at Cedars-Sinai, we created a return on investment calculator for the downstream economy of follow-ups for patients flagged by the AI cardio solution. Analyzing a random group of 5,000 cases, we can expect almost 1,800 patients with aortic calcification, of which 49 will be categorized as severe cases. This is expected to generate $3.8 million in the first year from downstream follow-ups to the medical center. More importantly, identifying severe cases early supports earlier clinical intervention, which may help improve patient outcomes. For another AI customer update — following a highly successful prospective pilot and supported by a paper presented at the World Congress on Osteoporosis last month, the 251st Hellenic Air Force General Hospital in Greece has transitioned to a revenue-generating commercial deployment. Highlights from the paper demonstrate that the AI bone solution was significantly better at correctly flagging vertebral fractures, showing a 14-fold increase in identified fractures compared to radiologists with no solution, and a nearly five-fold improvement compared to endocrinologists who utilized the solution to evaluate images. Beyond expanding our AI capabilities, we have begun to realize some anticipated synergies between Health IT, Nanox.AI, Nanox.ARC, and USARAD. We recently completed integration and performed a customer demo utilizing Nanox.AI algorithms with a Health IT partner PACS system. We have presented the Nanox.ARC to multiple Health IT customers, and we have gained new business for USARAD from Health IT through partnerships. The pipeline of cross-division lead generation is growing by the week. Regarding our new Health IT business — year to date, we've executed contracts with several new clients and received additional service add-on orders from existing clients. We have had customers' solutions go live this year, including some sales made pre-acquisition that have since been implemented, and we have begun to receive monthly recurring revenues from those accounts. Next month, Nanox.AI will be featured at the SCCT Annual Scientific Meeting in San Diego, where Dr. Blankstein, a member of our advisory board, will present early results from our multi-site AI-informed clinical trial. The data highlights that AI-enabled opportunistic coronary calcium detection can help drive earlier preventive care, and that our cardiac solution HealthCCSng performs reliably across multiple U.S. clinical sites and real-world workflows. A few additional updates on our OEM relationships — Varex tubes are undergoing the final integration process to become our main X-ray tube source for the Nanox.ARC systems. Regarding the Oak Ridge National Laboratory prototypes, tube assembly has begun and we anticipate testing completion and delivery in early Q3. We have initiated Nanox technology assessments with multiple global industry leaders in the security and inspection fields and will update as soon as appropriate. Before I hand the call over to our financial review, I would like to address our previously issued 2026 revenue target. Since providing this target earlier this year, we have made meaningful progress across commercial, operational, and strategic initiatives. At the same time, we have experienced longer than anticipated timelines between the execution of commercial agreements, system deployment, activations, commencement of services, and the related recognition of revenue. We have seen that the timing of revenue generation and revenue recognition can vary significantly based on factors often outside our control — site readiness, infrastructure completion, customer implementation schedules, activation timing, utilization ramp-up, and third-party execution. As a result, we no longer expect to achieve the revenue target previously announced for 2026. Importantly, what we are seeing is not a reduction in our confidence in the market opportunity, customer demand, or the value proposition of our solutions. We continue to expand our installed base, advance customer implementation, and execute against commercial agreements that contemplate the deployment of hundreds of systems over the coming years. Based on our experience to date, we have concluded that annual revenue guidance is not currently the most effective way to evaluate the progress of our business. Accordingly, we do not currently intend to provide annual revenue guidance going forward. Instead, we intend to focus investors on the operational, commercial, and strategic milestones that we believe are more meaningful indications of our progress — including deployments, activations, utilization growth, customer adoption, service expansion, and execution against our commercial agreements. We remain highly confident in the long-term opportunity across our imaging, AI, teleradiology, OEM, and Health IT businesses. Now for the financial review. As previously announced, our CFO Ran Daniel is in the process of transitioning out of his role. Guy Nathansohn will be joining the company and is working alongside the team to ensure a smooth handover. Today's financial review will be presented by me, and Guy is with me here today. Revenue for the quarter ended March 31st, 2026 was $4.3 million compared to $2.8 million in the comparable period. The increase largely stems from $0.9 million from the consolidation of VasoHealthcare IT, now Nanox Health IT Inc., and $0.5 million from our teleradiology services. Gross loss for the period was $2.6 million on a GAAP basis compared to $3 million. Non-GAAP gross loss was $2.2 million compared to $0.4 million. Revenue from teleradiology services was $3.1 million compared to $2.6 million. GAAP gross profit from teleradiology services was $0.7 million, a gross profit margin of approximately 24%, compared to $0.4 million and approximately 17%. Non-GAAP gross profit from teleradiology services was $1.1 million, a gross profit margin of approximately 36%, compared to $1 million and approximately 39%. The increase in revenue was mainly attributed to customer retention and increased volume of reading services. During the period, revenue from sales and deployment of imaging systems was $167,000 compared to $33,000, stemming from two Nanox.CONNECT unit sales of $118,000, imaging system deployment of $11,000, and OEM services of $38,000. Revenue from AI and software solutions for the period was $1 million compared to $0.2 million. Revenue of $0.9 million was generated by Nanox Health IT Inc. Gross loss from AI and software solutions was $1.7 million on a GAAP basis compared to $1.9 million. Non-GAAP gross profit from AI and software solutions was $0.3 million compared to $81,000. R&D expenses were $4.8 million compared to $5 million. Sales and marketing expenses were $2.2 million compared to $0.9 million, mainly due to increases of $0.8 million in salaries and wages and $0.3 million in sales and marketing activities. G&A expenses were $5.2 million compared to $5.1 million. GAAP net loss was $14.3 million compared to $13.2 million. Non-GAAP net loss attributable to ordinary shares was $11.1 million compared to $9.4 million. Turning to our balance sheet — as of March 31st, 2026, the company had total cash and cash equivalents, short-term deposits, and long-term restricted deposits of $44.2 million compared to $60 million as of December 31st, 2025. During the period, the company experienced negative cash flow from operations of $14 million and $1.8 million for purchasing property and equipment, mainly for ARC X construction. Management expects that the company's cash as of March 31st, 2026 is sufficient to support operations under its current operating plans for at least one year from the date of the press release. However, these factors raise substantial doubt as to the company's ability to continue as a going concern. On a preliminary unaudited basis, the company estimates its cash and cash equivalents net of short-term bank loan to be approximately $27 million as of the date of the press release. Management is continuing to seek to raise funds in the private equity and capital markets, as the company will need to finance its operations. There is no assurance that the company will be able to obtain such funding. To the extent additional funding is provided through the sale of securities or issuance of indebtedness, ordinary shareholder ownership interest may be diluted, and the terms of the financing may adversely affect the rights of ordinary shareholders. We ended the quarter with property and equipment net of $30.6 million compared to $29.7 million as of December 31st, 2025. We had approximately 69.6 million shares outstanding as of March 31st, 2026. During the first quarter of 2026, the company granted officers, employees, and consultants approximately 1 million RSUs. In closing — while commercialization has not gone as rapidly as planned two years ago, we remain confident in the ultimate success of the comprehensive suite of Nanox solutions. We remain focused on scaling deployment numbers, converting our pipeline into signed agreements, and supporting our partners to drive system sales and utilization. We believe we are at the beginning of expanding access to medical imaging, and the progress we have made this quarter reinforces our confidence in the path ahead. Thank you for joining our call today. Operator, please open the call to questions.
Operator: Our first question comes from the line of Jeffrey Cohen with Ladenburg Thalmann and Company.
Jeffrey Cohen: Could you talk about the teleradiology business — rates, number of customers, volumes, and utilization?
Erez Meltzer: Since the acquisition of USARAD, we have managed to more than double the revenues from teleradiology. This is mainly due to an increase in the number of customers — right now, a few hundred customers, varying significantly in size. We are also trying to change the mix toward higher-priced readings such as MRI and CT. One key trend is a significant increase in MRI and CT scan volumes, which impacts the increase in revenues. We monitor scan volumes on a weekly basis, and they are higher than last year. An important dynamic is the cross-selling between Nanox units — USARAD is giving us opportunities to sell the ARC, sell AI, and sell Nanox Health IT to new customers. On the other side, every Nanox.ARC we deploy is a new system where the customer often asks us to provide teleradiology reading services in addition. We expect to see growth in that segment as well.
Jeffrey Cohen: Can you talk about the cadence of deployments for the balance of the year?
Erez Meltzer: We currently have signed agreements for approximately 360 units with business partners over the next two to three years, and our partner Howard estimates their portion at 60 this year. This is in addition to all direct sales efforts and additional business partners we are still working to add. Internationally, Greece, Romania, Peru, Argentina, and the Czech Republic are coming up, and we already have a system in France. More countries are in planning. The RadNet deployment is particularly important — as the largest medical imaging chain in the U.S., their system has been successfully tested commercially and clinically. The plan is to expand the collaboration to more systems across RadNet sites. Additionally, we are planning to install 21 sites of the Nano-X Imaging Network — one retail site is already scanning, and as of yesterday, two sites have received the systems and will begin scanning as soon as preparations are complete. Everything is subject to regulation, approvals, permits, and site preparation.
Operator: Our next question comes from the line of Scott Henry with A.G.P.
Scott Henry: Should we expect Q2 to be sequentially stronger than Q1?
Erez Meltzer: We'll probably be ready with those numbers shortly, and as soon as they're ready, we're going to share them.
Scott Henry: On spending levels — should we expect total operating expenses to start to decline sequentially?
Erez Meltzer: The answer is yes. The reduction in Korean operations and cost savings in other areas, including reducing headcount in Israel by 15 employees and cutting the scope of employment of others, should result in a reduction in the burn rate. Based on early indications for June, we can expect a decline.
Scott Henry: On the AI business — at what level would we expect that business to reach gross profit breakeven? Is that a 2027 event or late 2026?
Erez Meltzer: Since the gross profit margin of AI and IT is very high — I would say probably in the 80s — the answer is that breakeven would come earlier than you might think. We had previously indicated cash neutrality or breakeven by the tail end of 2026, which may now be pushed by a quarter. Early 2027 is probably a reasonable estimate based on current trends.
Operator: Our next question comes from the line of Sarah James with Cantor Fitzgerald.
Analyst: With the removal of the $35 million revenue guidance, can you help us frame how to think about the rest of 2026? Is Q1 a run rate, or do you expect revenue to ramp?
Erez Meltzer: The fact that we have removed guidance doesn't mean we're not going to work hard to be where we want to be. We are planning a ramp-up in Q3 and Q4. In Q1, following RSNA, we signed most of the agreements with business partners. Q2 has been mainly focused on onboarding, training sales people, and building a list of tens of customers that we've already engaged with through meetings with business partners. Our channel managers and partners are now going to those customers. Q3 will probably be the implementation phase. We also have additional business partners coming soon, as well as further expansion in Europe and Latin America.
Operator: There are no further questions at this time. Erez, would you like to provide any further remarks?
Erez Meltzer: We expect Q2 will be better than Q1 — whether much or a little, we will share that in the very near future. I'll end by saying we are really confident that we are taking the right steps. It's step-by-step, but the way we are putting a framework for success and for scale is something that will enable us to justify the confidence in our ability to transform and become what we want to be and what our mission is.
Operator: Thank you. This does conclude today's conference. Thank you for participating. You may now disconnect.
Mike Cavanaugh: Good morning. Welcome to the Nano-X Imaging first quarter 2026 investor call. Earlier today, Nano-X Imaging Ltd. released financial results for the quarter ending March 31, 2026. With me today is Erez Meltzer, Chief Executive Officer and Acting Chairman. Before we get started, I would like to remind everyone that management will be making forward-looking statements regarding the company's financial results, research and development, manufacturing, commercialization activities, regulatory process, and clinical activities, and other matters. These statements are subject to risks and uncertainties based on management's current expectations as of today and may not be updated in the future. We will also refer to certain non-GAAP financial measures. A reconciliation is provided with our press release. With that, I'd like to turn the call over to Erez Meltzer.
Erez Meltzer: Good morning. Thank you for joining us today for the Nano-X Imaging first quarter 2026 financial results conference call. I'm pleased to report that, as previously indicated, we are beginning to see early signs of revenue from Nanox.ARC. We are seeing momentum across multiple fronts, from record deployments to expanding partnerships supporting our technology and business model. We have worked diligently over the past two years to place a new technology in the medical imaging market. We have learned many lessons during this time and are using those lessons to help reshape our go-to-market strategy. Specifically, we have made various adaptations to our company strategy and operating model to better position us for long-term success. Changing behaviors is a long process. We need to educate customers not only on the medical utility of the Nanox systems, but also demonstrate why using them will benefit their practices financially. Here are the changes we have implemented based on lessons learned. First, we have restructured our U.S. commercial model to emphasize partnerships. This multi-channel approach supplements our direct sales efforts and provides broader market coverage more efficiently. In the first quarter alone, we secured multiple commercial agreements in the U.S. with established medical equipment distributors who have existing relationships and credibility in the market. Second, we are prioritizing deployments of Nanox.ARC systems at high-visibility reference sites like RadNet, the largest outpatient imaging center operator in the United States, where it is now in commercial use and integrated into routine clinical workflows. Third, we created the Nano-X Imaging Network to seek out business segments which offer potentially higher reimbursement rates, such as workers' compensation groups and concierge medical providers. Fourth, we initiated a restructuring process designed to optimize our cost structure, improve capital efficiency, reduce burn rates, and better align our operations with our long-term business objectives. We are seeing early signs that our multi-channel model is beginning to work — deployments are increasing, scan-based activities are starting to contribute to revenue, scan volume at active sites is increasing, and partners are beginning to generate pipeline and initial commercial activity. The Nano-X Imaging Network proof of concept is also beginning to contribute. As a reminder, this is a focused initiative targeting segments such as workers' compensation, concierge medicine, and outpatient specialty care, where positive reimbursement development may support higher per-scan pricing. We are exploring opportunities across three segments: a large integrated healthcare campus, an independent rehab and pain clinic, and an orthopedic physician's practice. I'm very excited to share a strategic deployment update. The Nanox.ARC System has been operational for several months at a RadNet site, where it is now in commercial use and integrated into routine clinical workflow. Based on this experience, we are exploring opportunities for expanded deployment across additional outpatient imaging centers and for clinical research, including early lung nodule detection. We believe this represents an important step in demonstrating the Nanox.ARC clinical value in a major outpatient imaging setting. In the first quarter, we secured multiple commercial agreements in the U.S. with established medical equipment distributors. Collectively, these agreements represent the potential for approximately 360 CapEx system sales over the next two to three years. During the second quarter, our primary focus was on onboarding these partners, training their teams, aligning go-to-market activities, and building the operational foundations required to support commercialization. We are now beginning to see the early results of these efforts, including initial leads for the Nanox.ARC and early commercial opportunities. That said, commercialization in medical imaging takes time — the transition from signed agreements to active sales, installation, and revenue recognition depends on factors such as site readiness and regulatory processes. We have also advanced partnerships in Latin America, signing a distribution agreement with TopMed SAC in Peru in late May, with additional agreements in advanced stages of negotiation. We expect to announce more partnerships soon, further extending our commercial reach. We are now leading a shift toward a more CapEx-driven commercial model supported by our partner network. We believe this evolution can contribute to revenue growth while helping reduce future cash needs and enhance our path to breakeven. Regarding our South Korean operations — we have commenced implementation of our previously announced restructuring plan. We are also evaluating additional alternatives to further optimize the economics of our South Korea operation, including a broader restructuring that originally contemplated a potential sale of South Korean operations and related assets, or an orderly wind-down of all or parts of those operations. No decision has been made at this stage, and our evaluation remains ongoing. We are taking a disciplined approach to capital allocation and operational efficiency, evaluating all available options through the lens of long-term shareholder value. Looking ahead, we remain focused on three key priorities: continuing to scale deployment numbers, converting our pipeline of direct sales and partnership discussions into purchase orders and signed agreements, and supporting our partners to drive system sales and utilization. Turning to our AI business — I'd like to update you on our clinical trial partnership with Cedars-Sinai in Los Angeles. Based on the retrospective pilot at Cedars-Sinai, we created a return on investment calculator for the downstream economy of follow-ups for patients flagged by the AI cardio solution. Analyzing a random group of 5,000 cases, we can expect almost 1,800 patients with aortic calcification, of which 49 will be categorized as severe cases. This is expected to generate $3.8 million in the first year from downstream follow-ups to the medical center. More importantly, identifying severe cases early supports earlier clinical intervention, which may help improve patient outcomes. For another AI customer update — following a highly successful prospective pilot and supported by a paper presented at the World Congress on Osteoporosis last month, the 251st Hellenic Air Force General Hospital in Greece has transitioned to a revenue-generating commercial deployment. Highlights from the paper demonstrate that the AI bone solution was significantly better at correctly flagging vertebral fractures, showing a 14-fold increase in identified fractures compared to radiologists with no solution, and a nearly five-fold improvement compared to endocrinologists who utilized the solution to evaluate images. Beyond expanding our AI capabilities, we have begun to realize some anticipated synergies between Health IT, Nanox.AI, Nanox.ARC, and USARAD. We recently completed integration and performed a customer demo utilizing Nanox.AI algorithms with a Health IT partner PACS system. We have presented the Nanox.ARC to multiple Health IT customers, and we have gained new business for USARAD from Health IT through partnerships. The pipeline of cross-division lead generation is growing by the week. Regarding our new Health IT business — year to date, we've executed contracts with several new clients and received additional service add-on orders from existing clients. We have had customers' solutions go live this year, including some sales made pre-acquisition that have since been implemented, and we have begun to receive monthly recurring revenues from those accounts. Next month, Nanox.AI will be featured at the SCCT Annual Scientific Meeting in San Diego, where Dr. Blankstein, a member of our advisory board, will present early results from our multi-site AI-informed clinical trial. The data highlights that AI-enabled opportunistic coronary calcium detection can help drive earlier preventive care, and that our cardiac solution HealthCCSng performs reliably across multiple U.S. clinical sites and real-world workflows. A few additional updates on our OEM relationships — Varex tubes are undergoing the final integration process to become our main X-ray tube source for the Nanox.ARC systems. Regarding the Oak Ridge National Laboratory prototypes, tube assembly has begun and we anticipate testing completion and delivery in early Q3. We have initiated Nanox technology assessments with multiple global industry leaders in the security and inspection fields and will update as soon as appropriate. Before I hand the call over to our financial review, I would like to address our previously issued 2026 revenue target. Since providing this target earlier this year, we have made meaningful progress across commercial, operational, and strategic initiatives. At the same time, we have experienced longer than anticipated timelines between the execution of commercial agreements, system deployment, activations, commencement of services, and the related recognition of revenue. We have seen that the timing of revenue generation and revenue recognition can vary significantly based on factors often outside our control — site readiness, infrastructure completion, customer implementation schedules, activation timing, utilization ramp-up, and third-party execution. As a result, we no longer expect to achieve the revenue target previously announced for 2026. Importantly, what we are seeing is not a reduction in our confidence in the market opportunity, customer demand, or the value proposition of our solutions. We continue to expand our installed base, advance customer implementation, and execute against commercial agreements that contemplate the deployment of hundreds of systems over the coming years. Based on our experience to date, we have concluded that annual revenue guidance is not currently the most effective way to evaluate the progress of our business. Accordingly, we do not currently intend to provide annual revenue guidance going forward. Instead, we intend to focus investors on the operational, commercial, and strategic milestones that we believe are more meaningful indications of our progress — including deployments, activations, utilization growth, customer adoption, service expansion, and execution against our commercial agreements. We remain highly confident in the long-term opportunity across our imaging, AI, teleradiology, OEM, and Health IT businesses. Now for the financial review. As previously announced, our CFO Ran Daniel is in the process of transitioning out of his role. Guy Nathansohn will be joining the company and is working alongside the team to ensure a smooth handover. Today's financial review will be presented by me, and Guy is with me here today. Revenue for the quarter ended March 31st, 2026 was $4.3 million compared to $2.8 million in the comparable period. The increase largely stems from $0.9 million from the consolidation of VasoHealthcare IT, now Nanox Health IT Inc., and $0.5 million from our teleradiology services. Gross loss for the period was $2.6 million on a GAAP basis compared to $3 million. Non-GAAP gross loss was $2.2 million compared to $0.4 million. Revenue from teleradiology services was $3.1 million compared to $2.6 million. GAAP gross profit from teleradiology services was $0.7 million, a gross profit margin of approximately 24%, compared to $0.4 million and approximately 17%. Non-GAAP gross profit from teleradiology services was $1.1 million, a gross profit margin of approximately 36%, compared to $1 million and approximately 39%. The increase in revenue was mainly attributed to customer retention and increased volume of reading services. During the period, revenue from sales and deployment of imaging systems was $167,000 compared to $33,000, stemming from two Nanox.CONNECT unit sales of $118,000, imaging system deployment of $11,000, and OEM services of $38,000. Revenue from AI and software solutions for the period was $1 million compared to $0.2 million. Revenue of $0.9 million was generated by Nanox Health IT Inc. Gross loss from AI and software solutions was $1.7 million on a GAAP basis compared to $1.9 million. Non-GAAP gross profit from AI and software solutions was $0.3 million compared to $81,000. R&D expenses were $4.8 million compared to $5 million. Sales and marketing expenses were $2.2 million compared to $0.9 million, mainly due to increases of $0.8 million in salaries and wages and $0.3 million in sales and marketing activities. G&A expenses were $5.2 million compared to $5.1 million. GAAP net loss was $14.3 million compared to $13.2 million. Non-GAAP net loss attributable to ordinary shares was $11.1 million compared to $9.4 million. Turning to our balance sheet — as of March 31st, 2026, the company had total cash and cash equivalents, short-term deposits, and long-term restricted deposits of $44.2 million compared to $60 million as of December 31st, 2025. During the period, the company experienced negative cash flow from operations of $14 million and $1.8 million for purchasing property and equipment, mainly for ARC X construction. Management expects that the company's cash as of March 31st, 2026 is sufficient to support operations under its current operating plans for at least one year from the date of the press release. However, these factors raise substantial doubt as to the company's ability to continue as a going concern. On a preliminary unaudited basis, the company estimates its cash and cash equivalents net of short-term bank loan to be approximately $27 million as of the date of the press release. Management is continuing to seek to raise funds in the private equity and capital markets, as the company will need to finance its operations. There is no assurance that the company will be able to obtain such funding. To the extent additional funding is provided through the sale of securities or issuance of indebtedness, ordinary shareholder ownership interest may be diluted, and the terms of the financing may adversely affect the rights of ordinary shareholders. We ended the quarter with property and equipment net of $30.6 million compared to $29.7 million as of December 31st, 2025. We had approximately 69.6 million shares outstanding as of March 31st, 2026. During the first quarter of 2026, the company granted officers, employees, and consultants approximately 1 million RSUs. In closing — while commercialization has not gone as rapidly as planned two years ago, we remain confident in the ultimate success of the comprehensive suite of Nanox solutions. We remain focused on scaling deployment numbers, converting our pipeline into signed agreements, and supporting our partners to drive system sales and utilization. We believe we are at the beginning of expanding access to medical imaging, and the progress we have made this quarter reinforces our confidence in the path ahead. Thank you for joining our call today. Operator, please open the call to questions.
Operator: Our first question comes from the line of Jeffrey Cohen with Ladenburg Thalmann and Company.
Jeffrey Cohen: Could you talk about the teleradiology business — rates, number of customers, volumes, and utilization?
Erez Meltzer: Since the acquisition of USARAD, we have managed to more than double the revenues from teleradiology. This is mainly due to an increase in the number of customers — right now, a few hundred customers, varying significantly in size. We are also trying to change the mix toward higher-priced readings such as MRI and CT. One key trend is a significant increase in MRI and CT scan volumes, which impacts the increase in revenues. We monitor scan volumes on a weekly basis, and they are higher than last year. An important dynamic is the cross-selling between Nanox units — USARAD is giving us opportunities to sell the ARC, sell AI, and sell Nanox Health IT to new customers. On the other side, every Nanox.ARC we deploy is a new system where the customer often asks us to provide teleradiology reading services in addition. We expect to see growth in that segment as well.
Jeffrey Cohen: Can you talk about the cadence of deployments for the balance of the year?
Erez Meltzer: We currently have signed agreements for approximately 360 units with business partners over the next two to three years, and our partner Howard estimates their portion at 60 this year. This is in addition to all direct sales efforts and additional business partners we are still working to add. Internationally, Greece, Romania, Peru, Argentina, and the Czech Republic are coming up, and we already have a system in France. More countries are in planning. The RadNet deployment is particularly important — as the largest medical imaging chain in the U.S., their system has been successfully tested commercially and clinically. The plan is to expand the collaboration to more systems across RadNet sites. Additionally, we are planning to install 21 sites of the Nano-X Imaging Network — one retail site is already scanning, and as of yesterday, two sites have received the systems and will begin scanning as soon as preparations are complete. Everything is subject to regulation, approvals, permits, and site preparation.
Operator: Our next question comes from the line of Scott Henry with A.G.P.
Scott Henry: Should we expect Q2 to be sequentially stronger than Q1?
Erez Meltzer: We'll probably be ready with those numbers shortly, and as soon as they're ready, we're going to share them.
Scott Henry: On spending levels — should we expect total operating expenses to start to decline sequentially?
Erez Meltzer: The answer is yes. The reduction in Korean operations and cost savings in other areas, including reducing headcount in Israel by 15 employees and cutting the scope of employment of others, should result in a reduction in the burn rate. Based on early indications for June, we can expect a decline.
Scott Henry: On the AI business — at what level would we expect that business to reach gross profit breakeven? Is that a 2027 event or late 2026?
Erez Meltzer: Since the gross profit margin of AI and IT is very high — I would say probably in the 80s — the answer is that breakeven would come earlier than you might think. We had previously indicated cash neutrality or breakeven by the tail end of 2026, which may now be pushed by a quarter. Early 2027 is probably a reasonable estimate based on current trends.
Operator: Our next question comes from the line of Sarah James with Cantor Fitzgerald.
Analyst: With the removal of the $35 million revenue guidance, can you help us frame how to think about the rest of 2026? Is Q1 a run rate, or do you expect revenue to ramp?
Erez Meltzer: The fact that we have removed guidance doesn't mean we're not going to work hard to be where we want to be. We are planning a ramp-up in Q3 and Q4. In Q1, following RSNA, we signed most of the agreements with business partners. Q2 has been mainly focused on onboarding, training sales people, and building a list of tens of customers that we've already engaged with through meetings with business partners. Our channel managers and partners are now going to those customers. Q3 will probably be the implementation phase. We also have additional business partners coming soon, as well as further expansion in Europe and Latin America.
Operator: There are no further questions at this time. Erez, would you like to provide any further remarks?
Erez Meltzer: We expect Q2 will be better than Q1 — whether much or a little, we will share that in the very near future. I'll end by saying we are really confident that we are taking the right steps. It's step-by-step, but the way we are putting a framework for success and for scale is something that will enable us to justify the confidence in our ability to transform and become what we want to be and what our mission is.
Operator: Thank you. This does conclude today's conference. Thank you for participating. You may now disconnect.