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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported) August
7, 2024
RadNet,
Inc.
(Exact
name of registrant as specified in its charter)
Delaware |
|
001-33307 |
|
13-3326724 |
(State or other jurisdiction
of incorporation) |
|
(Commission File Number) |
|
(IRS Employer Identification No.) |
1510 Cotner Avenue |
|
|
Los
Angeles, California |
|
90025 |
(Address of Principal Executive Offices) |
|
(Zip Code) |
(310) 478-7808
Registrant’s
Telephone Number, Including Area Code
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under
any of the following provisions:
| ☐ | Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class |
Trading
Symbol(s) |
Name
of each exchange on which registered |
Common
Stock, $0.0001 par value |
RDNT |
NASDAQ |
Indicate
by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405
of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging
growth company ☐
If an emerging
growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | RESULTS OF OPERATIONS AND FINANCIAL CONDITION |
On August 7, 2024 RadNet,
Inc. (“RadNet”) issued a press release and, on August 8, 2024, held a conference call regarding its 2024 financial results
for the second quarter ended June 30, 2024. A copy of the press release is furnished as Exhibit 99.1 and a copy of the transcript of the
conference call is furnished as Exhibit 99.2 to this Current Report.
The information in this Current
Report, including Exhibit 99.1 and Exhibit 99.2 is being furnished and shall not be deemed “filed” for purposes of Section
18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section. The information in this Current Report,
including Exhibit 99.1 and Exhibit 99.2 shall not be incorporated by reference into any registration statement or other document filed
with the Commission.
| Item 9.01 | FINANCIAL STATEMENTS AND EXHIBITS |
(d) Exhibits
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: August 9, 2024 |
RADNET, INC. |
|
|
|
|
|
|
|
|
|
By: |
/s/ Mark D.
Stolper |
|
|
Name: | Mark D. Stolper |
|
|
Title: |
Chief Financial Officer |
|
EXHIBIT INDEX
Exhibit 99.1
FOR IMMEDIATE RELEASE
RadNet Reports Second Quarter Financial
Results with Record Quarterly Revenue and Adjusted EBITDA(1) and Revises Upwards 2024 Financial Guidance Ranges
| · | Total Company Revenue increased 13.9% to $459.7 million in the second
quarter of 2024 from $403.7 million in the second quarter of 2023; Revenue from the Digital Health reportable segment (inclusive of intersegment
revenue) increased 36.4% to $15.8 million in the second quarter of 2024 from $11.6 million in the second quarter of 2023 |
| · | Digital Health Revenue growth resulted in part from a $3.2 million (or
136.6%) increase in AI Revenue, which climbed to $5.6 million during the second quarter of 2024 from $2.4 million in the second quarter
of 2023 |
| · | Total Company Adjusted EBITDA(1) was $72.3
million in the second quarter of 2024 as compared
with $60.4 million in the second quarter of 2023, an increase of 19.7%; Digital
Health reportable segment Adjusted EBITDA(1) increased 135.2% to $3.3 million in the second quarter of 2024 from $1.4 million
in the second quarter of 2023 |
| · | Total Company Adjusted EBITDA(1) margins increased by 76 bps
to 15.7% in the second quarter of 2024 as compared with 15.0% in the second quarter of 2023 |
| · | Adjusting for unusual or one-time items in the quarter,
Adjusted Diluted Earnings Per Share(3) was $0.16 for the second quarter of 2024; This compares with Adjusted Earnings Per Share(3)
of $0.10 for the second quarter of 2023 |
| · | Aggregate procedural volumes increased 9.2% and same-center procedural
volumes increased 6.1% compared with the second quarter of 2023 |
| · | Completed a successful refinancing of our senior secured Term Loan and
Revolver, reducing borrowing costs, extending maturities and funding approximately $168 million of additional cash to the balance sheet |
| · | As of June 30, 2024, we had a cash balance of $741.7 million and Net Debt
to Adjusted EBITDA(1) ratio of 1.1 |
| · | Previously announced acquisition of six American Health Imaging centers
in Houston was completed on June 1, 2024; RadNet has begun the integration of these centers into the previously purchased Houston Medical
Imaging operations |
| · | RadNet revises full-year 2024 guidance levels to increase Revenue, Adjusted
EBITDA(1) and Free Cash Flow(2) ranges |
LOS ANGELES, California, August 7, 2024 –
RadNet, Inc. (NASDAQ: RDNT), a national leader in providing high-quality, cost-effective, fixed-site outpatient
diagnostic imaging services through a network of 398 owned and operated outpatient imaging centers, today reported financial results
for its second quarter of 2024.
Dr. Howard Berger, President and Chief Executive
Officer of RadNet, commented, “Both the Imaging Center and Digital Health reportable operating segments demonstrated strong growth
and achieved record quarterly results. Total Company Revenue grew 13.9% as compared with last year’s second quarter to a record
$459.7 million. The Digital Health segment Revenue of $15.8 million increased 36.4% from last year’s same quarter. The strong growth
in Digital Health was, in part, driven by the AI businesses, whose Revenue increased 136.6% as compared with last year’s second
quarter, mainly from the continuing success of the rollout of the Enhanced Breast Cancer Detection (EBCD) DeepHealth AI-powered screening
mammography program.”
“Improved reimbursement from commercial
and capitated payors, continued strong demand for advanced imaging modalities, the growth of the Digital Health businesses and effective
cost controls resulted in an increase to Adjusted EBITDA(1) margins. Total Company EBITDA(1) margin of 15.7% during
this second quarter increased by 76 basis points over last year’s second quarter.” added Dr. Berger.
Dr. Berger continued, “Including the recently
announced joint venture with Providence Health System, a recent expansion of the Ventura County, California partnership with Dignity Health
and certain new de novo centers we have opened within existing joint ventures, as of the end of this second quarter, we had 149 of our
398 centers (or 37.4%) held in partnership with leading health systems. These partnerships allow us to play a more integral role within
the local healthcare communities we serve by increasing access, disseminating new technologies and improving the quality of patient care.”
“Given the positive trends we continue to
experience in virtually all aspects of our business and the strong financial performance of the second quarter, we are revising upwards
certain guidance levels in anticipation of financial results that we believe will exceed both our original expectations and the amendments
we made to the guidance ranges upon releasing our first quarter 2024 results in May. We have increased 2024 guidance ranges for Revenue,
Adjusted EBITDA(1) and Free Cash Flow(2),” added Dr. Berger.
Dr. Berger continued, “In response to high
demand and patient backlogs in many of RadNet’s local markets, we continue to pursue expanding capacity through the development
and construction of new imaging centers. We anticipate opening approximately six new centers by year end 2024 and an additional 15 centers
in 2025. Approximately half of these new centers will be within existing health system partnerships. Within Digital Health, but for Houston,
we are substantially complete with implementing the EBCD program. Continued development of the DeepHealth OS technology platform places
us on-track towards beginning implementation within RadNet in the coming months and within external customers as early as the first quarter
of 2025. The DeepHealth OS integrates generative AI capabilities to help us and external customers automate and drive efficiencies for
many of the back-office and support functions involved with running imaging centers.”
“RadNet’s balance sheet continues
to strengthen. In April, we completed a successful refinancing of our term loan and revolving line of credit, resulting in a reduction
of interest rates, an extension of maturities and the funding of additional cash to the balance sheet of approximately $168 million. At
quarter end, we had a cash balance of $741.7 million, and our leverage ratio of Net Debt to Adjusted EBITDA(1) was at a record
low, slightly above 1.0,” concluded Dr. Berger.
Second Quarter Financial Results
For the second quarter of 2024, RadNet reported
Total Company Revenue of $459.7 million and Adjusted EBITDA(1) of $72.3 million. Revenue increased $56.0 million (or 13.9%)
and Adjusted EBITDA(1) increased $11.9 million (or 19.7%) as compared with the second quarter of 2023.
For the second quarter of 2024, RadNet reported
Digital Health Revenue (inclusive of intersegment revenue) of $15.8 million and Adjusted EBITDA(1) of $3.3 million. Revenue
increased $4.2 million (or 36.4%) and Adjusted EBITDA(1) increased $1.9 million (or 135.2%) as compared with the second quarter
of 2023. Digital Health Revenue and Adjusted EBITDA(1) growth was due in part from a $3.2 million (or 136.6%) increase in AI
Revenue, which climbed to $5.6 million during the second quarter of 2024.
Unadjusted for unusual or one-time items impacting
the second quarter, Total Company Net Loss for the second quarter of 2024 was $3.0 million as compared with a Total Company Net Income
of $8.4 million for the second quarter of 2023. Net Loss Per Share for the second quarter of 2024 was $(0.04),
compared with a Net Income per share of $0.12 in the second quarter of 2023, based upon a weighted average number of diluted shares outstanding
of 73.4 million shares in 2024 and 60.9 million shares in 2023.
There were a number
of unusual or one-time items impacting the second quarter including: $1.9 million of non-cash loss from interest rate swaps; $5.6
million of non-cash interest expense related to extraordinary interest rate swap Other Comprehensive Income amortization, $0.8 million
expense related to leases for de novo facilities under construction that have yet to open their operations; $8.8 million of debt restructuring
and extinguishment expenses related to the April 2024 successful debt refinancing transaction; and $3.3 million of non-capitalized research
and development expenses related to the DeepHealth Cloud OS and generative AI. Adjusting for the above items, Total Company Adjusted Earnings(3)
was $12.0 million and diluted Adjusted Earnings Per Share(3) was $0.16 during the second quarter of 2024. This compares with
Total Company Adjusted Earnings(3) of $5.9 million and diluted Adjusted Earnings Per Share(3) of $0.10 during the
second quarter of 2023.
For the second quarter of 2024, as compared with
the prior year’s second quarter, MRI volume increased 16.0%, CT volume increased 14.8% and PET/CT volume increased 20.4%. Overall
volume, taking into account routine imaging exams, inclusive of x-ray, ultrasound, mammography and other exams, increased 9.2% over the
prior year’s second quarter. On a same-center basis, including only those centers which were part of RadNet for both the second
quarters of 2024 and 2023, MRI volume increased 11.7%, CT volume increased 9.9% and PET/CT volume increased 13.7%. Overall same-center
volume, taking into account routine imaging exams, inclusive of x-ray, ultrasound, mammography and other exams, increased 6.1% over the
prior year’s same quarter
Six Month Financial Results
For the first six months of 2024, RadNet reported
Total Company Revenue of $891.4 million and Adjusted EBITDA(1) of $130.8 million. Revenue increased $97.1 million (or 12.2%)
and Adjusted EBITDA(1) increased $22.2 million (or 20.4%) as compared with the first six months of 2023.
For the first six months of 2024, RadNet reported
Digital Health Revenue (inclusive of intersegment revenue) of $30.5 million and Adjusted EBITDA(1) of $6.8 million. Revenue
increased $7.8 million (or 34.4%) and Adjusted EBITDA(1) increased $5.4 million (or 381.5%) as compared with the first six
months of 2023. Digital Health Revenue and Adjusted EBITDA(1) growth was due in part to a $5.8 million (or 128.2%) increase
in AI Revenue, which climbed to $10.3 million during the six month period of 2024.
Unadjusted for one-time or unusual items, Total
Company Net Loss for the first six months of 2024 was $5.8 million as compared with a Total Company Net Loss of $12.6 million for the
first six months of 2023. Net Loss Per Share for the six month period of 2024 was $(0.08), compared with a
Net Loss per share of $(0.21) in the six month period of 2023, based upon a weighted average number of diluted shares outstanding of 71.8
million shares in 2024 and 59.2 million shares in 2023.
2024 Guidance Update
RadNet amends its previously announced guidance
levels as follows:
Imaging Center Segment
|
Original Guidance Range |
Revised Guidance Range After Q1 Results |
Revised Guidance Range After Q2 Results |
Total Net Revenue |
$1,650 - $1,700 million |
$1,675 - $1,725 million |
$1,685 - $1,735 million |
Adjusted EBITDA(1) |
$250 - $260 million |
$255 - $265 million |
$257 - $267 million |
Capital Expenditures(a) |
$125 - $135 million |
$130 - $140 million |
$135 - $145 million |
Cash Interest Expense(b) |
$40 - $45 million |
$37 - $42 million |
$32 - $37 million |
Free Cash Flow (2) |
$65 - $75 million |
$68 - $78 million |
$72 - $80 million |
|
|
|
|
| (a) | Net of proceeds from the sale of equipment, imaging centers and joint venture interests and New Jersey
Imaging Network capital expenditures. |
| (b) | Includes payments to and from counterparties on interest rate swaps and nets interest income from our
cash balance recorded in Other Income. |
Digital Health Segment
|
Original
Guidance Range |
Revised
Guidance Range After
Q1 Results |
Revised
Guidance Range After
Q2 Results |
|
|
|
|
Total Net Revenue (inclusive of intersegment revenue) |
$60 - $70 million |
$60 - $70 million |
$60 - $70 million |
|
|
|
|
Adjusted EBITDA(1) Before Non-Capitalized R&D - DeepHealth Cloud OS & Generative AI |
$12 - $14 million |
$13 - $15 million |
$13 - $15 million |
|
|
|
|
Non-Capitalized R&D - DeepHealth Cloud OS & Generative AI |
$11 - $13 million |
$12 - $14 million |
$12 - $14 million |
|
|
|
|
Capital Expenditures |
$3 - $5 million |
$3 - $5 million |
$3 - $5 million |
|
|
|
|
Free Cash Flow(2) Before Non-Capitalized R&D - DeepHealth Cloud OS & Generative AI |
$8 - $10 million |
$8 - $10 million |
$8 - $10 million |
|
|
|
|
Free Cash Flow(2) After Non-Capitalized R&D - DeepHealth Cloud OS & Generative AI |
$(2) - $(5) million |
$(2) - $(5) million |
$(2) - $(5) million |
“We
have increased guidance ranges of our core Imaging Center reporting segment for Revenue and Adjusted EBITDA(1).
Furthermore, despite increasing the Capital Expenditures guidance range by $5 million, we are expecting Free Cash Flow(2)
to be higher for the year. This is the result of the projected increase in Adjusted EBITDA(1) and lower Cash
Interest Expense. With respect to the Digital Health reportable segment, we remain on track to meet our original guidance levels.”
Conference Call for Tomorrow
Dr. Howard Berger, President and Chief Executive
Officer, and Mark Stolper, Executive Vice President and Chief Financial Officer, will host a conference call to discuss its second quarter
2024 results on Thursday, August 8th, 2024 at 7:30 a.m. Pacific Time (10:30 a.m. Eastern Time).
Conference Call Details:
Date: Thursday, August 8, 2024
Time: 10:30 a.m. Eastern Time
Dial In-Number: 844-826-3035
International Dial-In Number: 412-317-5195
It is recommended
that participants dial in approximately 5 minutes prior to the start of the 10:30 a.m. call. There will also be simultaneous and archived
webcasts available at https://viavid.webcasts.com/starthere.jsp?ei=1680804&tp_key=197206db18 or
http://www.radnet.com under the “Investors” menu section and “News Releases” sub-menu of the website. An archived
replay of the call will also be available and can be accessed by dialing 844-512-2921 from the U.S., or 412-317-6671 for international
callers, and using the passcode 10191154.
About RadNet, Inc.
RadNet, Inc., is the leading national provider
of freestanding, fixed-site diagnostic imaging services and related information technology solutions (including artificial intelligence)
in the United States based on the number of locations and annual imaging revenue. RadNet has a network of 398 owned and/or operated outpatient
imaging centers. RadNet's markets include Arizona, California, Delaware, Florida, Maryland, New Jersey, New York and Texas. Together with
affiliated radiologists, inclusive of full-time and per diem employees and technologists, RadNet has a total of over 10,000 employees.
For more information, visit http://www.radnet.com.
Forward Looking Statements
This press release contains “forward-looking
statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking
statements are expressions of our current beliefs, expectations and assumptions regarding the future of our business, future plans and
strategies, projections, and anticipated future conditions, events and trends. Forward-looking statements can generally be identified
by words such as: “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,”
“project,” “estimate,” “expect,” “strategy,” “future,” “likely,”
“may,” “should,” “will” and similar references to future periods. Forward-looking statements in this
press release include, among others, statements about our anticipated business results, balance sheet and liquidity and our future liquidity,
burn rate and our continuing ability to service or refinance our current indebtedness.
Forward-looking statements are neither historical
facts nor assurances of future performance. Because forward-looking statements relate to the future, they are inherently subject to uncertainties,
risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and
financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not place undue
reliance on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to
differ materially from those indicated in the forward-looking statements include, among others, the following:
| · | the availability and terms of capital to fund
our business; |
| · | our ability to service our indebtedness, make
principal and interest payments as those payments become due and remain in compliance with applicable debt covenants, in addition to our
ability to refinance such indebtedness on acceptable terms; |
| · | changes in general economic conditions nationally
and regionally in the markets in which we operate; |
| · | the availability and terms of capital to fund
the expansion of our business and improvements to our existing facilities; |
| · | our ability to maintain our current credit rating
and the impact on our funding costs and competitive position if we do not do so; |
| · | our ability to acquire, develop, implement and monetize technology, digital
health initiatives, artificial intelligence algorithms and applications; |
| · | volatility in interest and exchange rates, or
credit markets; |
| · | the adequacy of our cash flow and earnings to
fund our current and future operations; |
| · | changes in service mix, revenue mix and procedure
volumes; |
| · | delays in receiving payments for services provided; |
| · | increased bankruptcies among our partner physicians
or joint venture partners; |
| · | the impact of the political environment and related
developments on the current healthcare marketplace and on our business, including with respect to the future of the Affordable Care Act;
|
| · | the extent to which the ongoing implementation
of healthcare reform, or changes in or new legislation, regulations or guidance, enforcement thereof by federal and state regulators or
related litigation result in a reduction in coverage or reimbursement rates for our services, or other material impacts to our business; |
| · | closures or slowdowns and changes in labor costs
and labor difficulties, including stoppages affecting either our operations or our suppliers' abilities to deliver supplies needed in
our facilities; |
| · | the occurrence of hostilities, political instability
or catastrophic events; |
| · | the emergence or reemergence of and effects related
to future pandemics, epidemics and infectious diseases; and |
| · | noncompliance by us with any privacy or security
laws or any cybersecurity incident or other security breach by us or a third party involving the misappropriation, loss or other unauthorized
use or disclosure of confidential information. |
Any forward-looking statement contained in this
current report is based on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation
to publicly update any forward-looking statement, whether written or oral, that we may make from time to time, whether as a result of
changed circumstances, new information, future developments or otherwise, except as required by applicable law.
Regulation G: GAAP and Non-GAAP Financial
Information
This release contains certain financial information
not reported in accordance with GAAP. The Company uses both GAAP and non-GAAP metrics to measure its financial results. The Company believes
that, in addition to GAAP metrics, these non-GAAP metrics assist the Company in measuring its cash-based performance. The Company believes
this information is useful to investors and other interested parties because it removes unusual and nonrecurring charges that occur in
the affected period and provides a basis for measuring the Company's financial condition against other quarters. Such information should
not be considered as a substitute for any measures calculated in accordance with GAAP, and may not be comparable to other similarly titled
measures of other companies. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial
information prepared in accordance with GAAP. Reconciliation of this information to the most comparable GAAP measures is included in this
release in the tables which follow.
CONTACTS:
RadNet, Inc.
Mark Stolper, 310-445-2800
Executive Vice President and Chief Financial
Officer
RADNET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
| |
June 30, 2024 | | |
December 31, 2023 | |
| |
(unaudited) | | |
| |
ASSETS | |
| | | |
| | |
CURRENT ASSETS | |
| | | |
| | |
Cash and Cash equivalents | |
$ | 741,679 | | |
$ | 342,570 | |
Accounts receivable | |
| 195,288 | | |
| 163,707 | |
Due from affiliates | |
| 29,221 | | |
| 25,342 | |
Prepaid expenses and other current assets | |
| 38,536 | | |
| 47,657 | |
Total current assets | |
| 1,004,724 | | |
| 579,276 | |
PROPERTY, EQUIPMENT AND RIGHT-OF-USE ASSETS | |
| | | |
| | |
Property and equipment, net | |
| 652,882 | | |
| 604,401 | |
Operating lease right-of-use assets | |
| 624,081 | | |
| 596,032 | |
Total property, equipment and right-of-use assets | |
| 1,276,963 | | |
| 1,200,433 | |
OTHER ASSETS | |
| | | |
| | |
Goodwill | |
| 708,980 | | |
| 679,463 | |
Other intangible assets | |
| 84,049 | | |
| 90,615 | |
Deferred financing costs | |
| 2,505 | | |
| 1,643 | |
Investment in joint ventures | |
| 100,844 | | |
| 92,710 | |
Deposits and other | |
| 51,358 | | |
| 46,333 | |
Total Assets | |
$ | 3,229,423 | | |
$ | 2,690,473 | |
| |
| | | |
| | |
LIABILITIES AND EQUITY | |
| | | |
| | |
CURRENT LIABILITIES | |
| | | |
| | |
Accounts payable, accrued expenses and other | |
$ | 353,898 | | |
$ | 342,940 | |
Due to affiliates | |
| 32,375 | | |
| 15,910 | |
Deferred revenue | |
| 4,462 | | |
| 4,647 | |
Current operating lease liability | |
| 59,251 | | |
| 55,981 | |
Current portion of notes payable | |
| 24,215 | | |
| 17,974 | |
Total current liabilities | |
| 474,201 | | |
| 437,452 | |
LONG-TERM LIABILITIES | |
| | | |
| | |
Long-term operating lease liability | |
| 632,385 | | |
| 605,097 | |
Notes payable, net of current portion | |
| 1,002,392 | | |
| 812,068 | |
Deferred tax liability, net | |
| 17,471 | | |
| 15,776 | |
Other non-current liabilities | |
| 10,134 | | |
| 6,721 | |
Total liabilities | |
| 2,136,583 | | |
| 1,877,114 | |
EQUITY | |
| | | |
| | |
RadNet, Inc. stockholders' equity: | |
| | | |
| | |
Common stock - $0.0001 par value, 200,000,000 shares authorized; 73,968,042 and 67,956,318 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively | |
| 7 | | |
| 7 | |
Additional paid-in-capital | |
| 974,355 | | |
| 722,750 | |
Accumulated other comprehensive loss | |
| (8,057 | ) | |
| (12,484 | ) |
Accumulated deficit | |
| (85,339 | ) | |
| (79,578 | ) |
Total RadNet, Inc.'s Stockholders' equity: | |
| 880,966 | | |
| 630,695 | |
Noncontrolling interests | |
| 211,874 | | |
| 182,664 | |
Total Equity | |
| 1,092,840 | | |
| 813,359 | |
Total liabilities and equity | |
$ | 3,229,423 | | |
$ | 2,690,473 | |
RADNET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT FOR SHARE AND PER SHARE DATA)
(unaudited)
| |
Three Months Ended June 30, | | |
Six Months Ended June 30, | |
| |
2024 | | |
2023 | | |
2024 | | |
2023 | |
| |
| | |
| | |
| | |
| |
REVENUE | |
| | | |
| | | |
| | | |
| | |
Service fee revenue | |
$ | 422,745 | | |
$ | 363,918 | | |
$ | 819,934 | | |
$ | 716,338 | |
Revenue under capitation arrangements | |
| 36,969 | | |
| 39,797 | | |
| 71,487 | | |
| 77,941 | |
Total service revenue | |
| 459,714 | | |
| 403,715 | | |
| 891,421 | | |
| 794,279 | |
OPERATING EXPENSES | |
| | | |
| | | |
| | | |
| | |
Cost of operations, excluding depreciation and amortization | |
| 389,724 | | |
| 345,147 | | |
| 777,313 | | |
| 697,012 | |
Depreciation and amortization | |
| 34,475 | | |
| 32,180 | | |
| 66,843 | | |
| 63,495 | |
Loss (gain) on sale and disposal of equipment and other | |
| 401 | | |
| 77 | | |
| 587 | | |
| 656 | |
Severance costs | |
| 268 | | |
| 1,870 | | |
| 493 | | |
| 2,004 | |
Total operating expenses | |
| 424,868 | | |
| 379,274 | | |
| 845,236 | | |
| 763,167 | |
INCOME (LOSS) FROM OPERATIONS | |
| 34,846 | | |
| 24,441 | | |
| 46,185 | | |
| 31,112 | |
OTHER INCOME AND EXPENSES | |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| 26,082 | | |
| 16,039 | | |
| 42,349 | | |
| 31,761 | |
Equity in earnings of joint ventures | |
| (3,389 | ) | |
| (1,423 | ) | |
| (7,713 | ) | |
| (2,851 | ) |
Non-cash change in fair value of interest rate hedge | |
| 1,890 | | |
| (4,159 | ) | |
| 674 | | |
| (66 | ) |
Debt restructuring and extinguishment expenses | |
| 8,762 | | |
| – | | |
| 8,762 | | |
| – | |
Other expenses (income) | |
| (7,900 | ) | |
| 40 | | |
| (10,834 | ) | |
| 1,472 | |
Total other (income) expenses | |
| 25,445 | | |
| 10,497 | | |
| 33,238 | | |
| 30,316 | |
INCOME (LOSS) BEFORE INCOME TAXES | |
| 9,401 | | |
| 13,944 | | |
| 12,947 | | |
| 796 | |
Provision for income taxes | |
| (2,456 | ) | |
| 614 | | |
| (592 | ) | |
| (521 | ) |
NET INCOME (LOSS) | |
| 6,945 | | |
| 14,558 | | |
| 12,355 | | |
| 275 | |
Net income (loss) attributable to noncontrolling interests | |
| 9,927 | | |
| 6,189 | | |
| 18,116 | | |
| 12,911 | |
NET INCOME (LOSS) ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS | |
$ | (2,982 | ) | |
$ | 8,369 | | |
$ | (5,761 | ) | |
$ | (12,636 | ) |
| |
| | | |
| | | |
| | | |
| | |
BASIC NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS | |
$ | (0.04 | ) | |
$ | 0.14 | | |
$ | (0.08 | ) | |
$ | (0.21 | ) |
| |
| | | |
| | | |
| | | |
| | |
DILUTED NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS | |
$ | (0.04 | ) | |
$ | 0.12 | | |
$ | (0.08 | ) | |
$ | (0.21 | ) |
WEIGHTED AVERAGE SHARES OUTSTANDING | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 73,419,124 | | |
| 59,880,803 | | |
| 71,795,080 | | |
| 59,221,453 | |
Diluted | |
| 73,419,124 | | |
| 60,916,985 | | |
| 71,795,080 | | |
| 59,221,453 | |
RADNET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS
(IN THOUSANDS)
(unaudited)
| |
Six Months Ended June 30, | |
| |
2024 | | |
2023 | |
CASH FLOWS FROM OPERATING ACTIVITIES | |
| | | |
| | |
Net income (loss) | |
$ | 12,355 | | |
$ | 275 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 66,843 | | |
| 63,495 | |
Amortization of operating lease assets | |
| 30,006 | | |
| 31,601 | |
Equity in earnings of joint ventures | |
| (6,713 | ) | |
| 6,096 | |
Amortization deferred financing costs and loan discount | |
| 1,541 | | |
| 1,494 | |
Loss (Gain) on sale and disposal of equipment | |
| 587 | | |
| 656 | |
Loss on extinguishment of debt | |
| 2,080 | | |
| – | |
Amortization of cash flow hedge | |
| 7,256 | | |
| 1,844 | |
Non-cash change in fair value of interest rate hedge | |
| 674 | | |
| (66 | ) |
Stock-based compensation | |
| 16,645 | | |
| 17,055 | |
Change in fair value of contingent consideration | |
| 1,974 | | |
| 3,098 | |
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in purchase transactions: | |
| | | |
| | |
Accounts receivable | |
| (31,581 | ) | |
| (8,124 | ) |
Other current assets | |
| 5,242 | | |
| 4,703 | |
Other assets | |
| (5,553 | ) | |
| (6,590 | ) |
Deferred taxes | |
| 1,791 | | |
| (2,249 | ) |
Operating lease liability | |
| (27,707 | ) | |
| (28,582 | ) |
Deferred revenue | |
| (185 | ) | |
| 1,033 | |
Accounts payable, accrued expenses and other | |
| 57,835 | | |
| 14,952 | |
Net cash provided by operating activities | |
| 133,090 | | |
| 100,691 | |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES | |
| | | |
| | |
Purchase of imaging facilities and other acquisitions | |
| (32,771 | ) | |
| (10,315 | ) |
Purchase of property and equipment and other | |
| (104,095 | ) | |
| (95,380 | ) |
Proceeds from sale of equipment | |
| 9 | | |
| 73 | |
Equity contributions in existing and purchase of interest in joint ventures | |
| (1,421 | ) | |
| (288 | ) |
Net cash used in investing activities | |
| (138,278 | ) | |
| (105,910 | ) |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES | |
| | | |
| | |
Principal payments on notes and leases payable | |
| (2,624 | ) | |
| (1,052 | ) |
Payments on Term Loan Debt | |
| (682,438 | ) | |
| (7,376 | ) |
Proceeds from issuance of new debt, net of issuing costs | |
| 863,869 | | |
| – | |
Contribution from noncontrolling interests | |
| 4,169 | | |
| – | |
Payments on contingent consideration | |
| (3,614 | ) | |
| – | |
Distributions paid to noncontrolling interests | |
| (2,423 | ) | |
| (3,523 | ) |
Proceeds from sale of economic interests in majority owned subsidiary, net of taxes | |
| 8,713 | | |
| – | |
Proceeds from issuance of common stock | |
| 218,385 | | |
| 246,202 | |
Proceeds from issuance of common stock upon exercise of options | |
| 367 | | |
| 51 | |
Net cash provided by financing activities | |
| 404,404 | | |
| 234,302 | |
| |
| | | |
| | |
EFFECT OF EXCHANGE RATE CHANGES ON CASH | |
| (107 | ) | |
| (266 | ) |
NET DECREASE IN CASH AND CASH EQUIVALENTS | |
| 399,109 | | |
| 228,817 | |
CASH AND CASH EQUIVALENTS, beginning of period | |
| 342,570 | | |
| 127,834 | |
CASH AND CASH EQUIVALENTS, end of period | |
| 741,679 | | |
| 356,651 | |
| |
| | | |
| | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | |
| | | |
| | |
Cash paid during the period for interest | |
$ | 34,203 | | |
$ | 39,301 | |
Cash paid during the period for income taxes | |
$ | 705 | | |
$ | 201 | |
RADNET, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME ATTRIBUTABLE TO RADNET, INC. COMMON SHAREHOLDERS TO ADJUSTED EBITDA
(IN THOUSANDS)
| |
Three Months Ended June 30, | | |
Six Months Ended June 30, | |
| |
2024 | | |
2023 | | |
2024 | | |
2023 | |
| |
| | |
| | |
| | |
| |
Net income (loss) attributable to Radnet, Inc. common stockholders | |
$ | (2,982 | ) | |
$ | 8,369 | | |
$ | (5,761 | ) | |
$ | (12,636 | ) |
Income taxes | |
| 2,456 | | |
| (614 | ) | |
| 592 | | |
| 521 | |
Interest expense | |
| 26,082 | | |
| 16,039 | | |
| 42,349 | | |
| 31,761 | |
Severance costs | |
| 268 | | |
| 1,870 | | |
| 493 | | |
| 2,004 | |
Depreciation and amortization | |
| 34,475 | | |
| 32,180 | | |
| 66,843 | | |
| 63,495 | |
Non-cash employee stock-based compensation | |
| 4,749 | | |
| 4,871 | | |
| 16,646 | | |
| 17,056 | |
Loss (gain) on sale and disposal of equipment and other | |
| 401 | | |
| 77 | | |
| 587 | | |
| 656 | |
Non-cash change in fair value of interest rate hedge | |
| 1,890 | | |
| (4,159 | ) | |
| 674 | | |
| (66 | ) |
Other expenses (income) | |
| (7,900 | ) | |
| 40 | | |
| (10,834 | ) | |
| 1,472 | |
Non-Capitalized R&D - DeepHealth Cloud OS & Generative AI | |
| 3,317 | | |
| – | | |
| 6,632 | | |
| – | |
Loss (gain) on extinguishment of debt and related expenses | |
| 8,762 | | |
| – | | |
| 8,762 | | |
| – | |
Non-cash change to contingent consideration | |
| – | | |
| 1,014 | | |
| 1,974 | | |
| 2,630 | |
Non-operational rent expenses | |
| 809 | | |
| 759 | | |
| 1,832 | | |
| 1,718 | |
| |
| | | |
| | | |
| | | |
| | |
Adjusted EBITDA Including EBITDA from Digital Health | |
$ | 72,327 | | |
$ | 60,446 | | |
$ | 130,789 | | |
$ | 108,611 | |
| |
| | | |
| | | |
| | | |
| | |
EBITDA from Digital Health | |
| 3,269 | | |
| 1,390 | | |
| 6,789 | | |
| 1,410 | |
| |
| | | |
| | | |
| | | |
| | |
Adjusted EBITDA excluding EBITDA from Digital Health | |
$ | 69,058 | | |
$ | 59,056 | | |
$ | 124,000 | | |
$ | 107,201 | |
PAYMENTS BY PAYOR CLASS
| |
Second Quarter | |
| |
2024 | |
| |
| |
Commercial Insurance | |
| 58.5% | |
Medicare | |
| 22.1% | |
Capitation | |
| 8.0% | |
Medicaid | |
| 2.4% | |
Workers Compensation/Personal Injury | |
| 2.4% | |
Other* | |
| 6.5% | |
Total | |
| 100.0% | |
* Includes management fee, teleradiology and Digital Health financial reporting unit revenue.
PAYMENTS BY MODALITY
| |
Second Quarter | | |
Full Year | | |
Full Year | | |
Full Year | |
| |
2024 | | |
2023 | | |
2022 | | |
2021 | |
| |
| | |
| | |
| | |
| |
MRI | |
| 37.2% | | |
| 36.8% | | |
| 36.8% | | |
| 36.0% | |
CT | |
| 15.8% | | |
| 16.8% | | |
| 17.5% | | |
| 17.2% | |
PET/CT | |
| 7.1% | | |
| 6.4% | | |
| 5.8% | | |
| 5.5% | |
X-ray | |
| 6.2% | | |
| 6.5% | | |
| 6.7% | | |
| 3.9% | |
Ultrasound | |
| 13.9% | | |
| 12.9% | | |
| 12.6% | | |
| 12.7% | |
Mammography | |
| 16.1% | | |
| 16.0% | | |
| 15.3% | | |
| 16.1% | |
Nuclear Medicine | |
| 1.0% | | |
| 0.8% | | |
| 0.9% | | |
| 1.0% | |
Other | |
| 2.7% | | |
| 3.9% | | |
| 4.5% | | |
| 4.6% | |
| |
| 100.0% | | |
| 100.0% | | |
| 100.0% | | |
| 100.0% | |
PROCEDURES BY MODALITY*
| |
Second Quarter | | |
Second Quarter | |
| |
2024 | | |
2023 | |
| |
| | |
| |
MRI | |
| 449,781 | | |
| 387,619 | |
CT | |
| 269,939 | | |
| 235,138 | |
PET/CT | |
| 18,107 | | |
| 15,036 | |
Nuclear Medicine | |
| 9,610 | | |
| 9,463 | |
Ultrasound | |
| 664,043 | | |
| 620,660 | |
Mammography | |
| 483,510 | | |
| 450,747 | |
X-ray and Other | |
| 890,814 | | |
| 832,719 | |
Total | |
| 2,785,804 | | |
| 2,551,382 | |
* Volumes include wholy owned and joint venture centers.
RADNET, INC. AND SUBSIDIARIES
SCHEDULE OF ADJUSTED EARNINGS AND EARNINGS PER SHARE (3)
(IN THOUSANDS EXCEPT SHARE DATA)
(unaudited)
| |
Three Months Ended June 30, | |
| |
2024 | | |
2023(iv) | |
| |
| | |
| |
NET INCOME ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS | |
| (2,982 | ) | |
$ | 8,369 | |
| |
| | | |
| | |
Add/Subtract non-cash change in fair value of interest rate swaps (i) | |
| 1,890 | | |
| (4,159 | ) |
Non-cash interest expense from extraordinary interest rate swap OCI amortization | |
| 5,559 | | |
| – | |
Non-operational rent expenses (iii) | |
| 809 | | |
| 759 | |
Contingent consideration | |
| – | | |
| 1,014 | |
Non-Capitalized R&D - DeepHealth Cloud OS & Generative AI | |
| 3,317 | | |
| – | |
Debt restructing and extinguishment expenses (v) | |
| 8,762 | | |
| – | |
Total adjustments - loss (gain) | |
| 20,337 | | |
| (2,386 | ) |
Subtract tax impact of Adjustments (ii) | |
| (5,308 | ) | |
| (105 | ) |
Tax effected impact of adjustments | |
| 15,029 | | |
| (2,491 | ) |
| |
| | | |
| | |
TOTAL ADJUSTMENT TO NET INCOME ATTRIBUTABLE TO RADNET, INC. COMMON SHAREHOLDERS | |
| 15,029 | | |
| (2,491 | ) |
| |
| | | |
| | |
ADJUSTED NET INCOME ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS | |
| 12,047 | | |
| 5,878 | |
| |
| | | |
| | |
WEIGHTED AVERAGE SHARES OUTSTANDING | |
| | | |
| | |
Diluted | |
| 74,944,366 | | |
| 60,916,985 | |
| |
| | | |
| | |
ADJUSTED DILUTED NET INCOME PER SHARE | |
| | | |
| | |
ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS | |
| 0.16 | | |
$ | 0.10 | |
(i) |
Impact from the change in fair value of the swpas during the quarter. Excludes the recurring amortization of the accumulation
of the changes in fair value out of Other Comprehensive Income that existed prior to the hedges becoming ineffective. |
(ii) |
Tax effected using 26.1% and (4.40)% blended federal and state effective tax rate for the second quarter of 2024 and 2023, respectively. |
(iii) |
Represents rent expense associated with de novo sites under construction prior to them becoming operational. |
(iv) |
Restated from what was presented in 2023 to include the losses of the AI businesses (ie, not add the
losses back to earnings as was the case in 2023). The restated Adjusted Earnings for 2023 is due to the fact that AI is no longer its own reportable operating segment and
is now embedded in the Digital Health reportable operating segment. |
(v) |
Extraordinary expense related to the Company's successful April 2024 debt refinancing transaction. |
Footnotes
(1)
The Company defines Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, each from continuing operations
and adjusted for losses or gains on the sale of equipment, other income or loss, debt extinguishments and non-cash equity compensation.
Adjusted EBITDA includes equity earnings in unconsolidated operations and subtracts allocations of earnings to non-controlling
interests in subsidiaries, and is adjusted for non-cash or extraordinary and one-time events taken place
during the period.
Adjusted EBITDA is reconciled to its nearest comparable
GAAP financial measure. Adjusted EBITDA is a non-GAAP financial measure used as analytical indicator by RadNet management and the healthcare
industry to assess business performance, and is a measure of leverage capacity and ability to service debt. Adjusted EBITDA should not
be considered a measure of financial performance under GAAP, and the items excluded from Adjusted EBITDA should not be considered in isolation
or as alternatives to net income, cash flows generated by operating, investing or financing activities or other financial statement data
presented in the consolidated financial statements as an indicator of financial performance or liquidity. As Adjusted EBITDA is not a
measurement determined in accordance with GAAP and is therefore susceptible to varying methods of calculation, this metric, as presented,
may not be comparable to other similarly titled measures of other companies.
(2)
As noted above, the Company defines Free Cash Flow as Adjusted EBITDA less total Capital Expenditures (whether completed with cash
or financed) and Cash Interest Expense. Free Cash Flow is a non-GAAP financial measure. The Company
uses Free Cash Flow because the Company believes it provides useful information for investors and management because it measures our capacity
to generate cash from our operating activities. Free Cash Flow does not represent total cash flow since it does not include the cash flows
generated by or used in financing activities. In addition, our definition of Free Cash Flow may differ from definitions used by other
companies.
Free Cash Flow should not be considered a measure
of financial performance under GAAP, and the items excluded from Adjusted EBITDA should not be considered in isolation or as alternatives
to net income, cash flows generated by operating, investing or financing activities or other financial statement data presented in the
consolidated financial statements as an indicator of financial performance or liquidity. As Adjusted EBITDA is not a measurement determined
in accordance with GAAP and is therefore susceptible to varying methods of calculation, this metric, as presented, may not be comparable
to other similarly titled measures of other companies.
(3) The Company defines Adjusted Earnings
(Loss) Per Share as net income or loss attributable to RadNet, Inc. common stockholders and excludes losses or gains on the disposal of
equipment, loss on debt extinguishments, bargain purchase gains, severance costs, loss on impairment, loss or gain on swap valuation,
gain on extinguishment of debt, unusual or non-recurring entries that impact the Company’s tax provision and any other non-recurring
or unusual transactions recorded during the period.
Adjusted Earnings (Loss) Per Share is reconciled
to its nearest comparable GAAP financial measure. Adjusted Earnings (Loss) Per Share is a non-GAAP financial measure used as analytical
indicator by RadNet management and the healthcare industry to assess business performance. Adjusted Earnings Per Share should not be considered
a measure of financial performance under GAAP, and the items excluded from Adjusted Earnings Per Share should not be considered in isolation
or as alternatives to net income, cash flows generated by operating, investing or financing activities or other financial statement data
presented in the consolidated financial statements as an indicator of financial performance or liquidity. As Adjusted Earnings Per Share
is not a measurement determined in accordance with GAAP and is therefore susceptible to varying methods of calculation, this metric, as
presented, may not be comparable to other similarly titled measures of other companies.
Exhibit 99.2
C O R P O R A T E P A R T I
C I P A N T S
Dr. Howard Berger, President, Chief
Executive Officer
Mark Stolper, Chief Financial Officer
C O N F E R E N C E C A L L
P A R T I C I P A N T S
Brian Tanquilut, Jefferies
David MacDonald, Truist Securities
John Ransom, Raymond James
Andrew Mok, Barclays Bank
Larry Solow, CJS Securities
Brandon Carney for Yuan Zhi, B. Riley
Securities
P R E S E N T A T I O N
Operator
Good morning, everyone, and welcome to the RadNet
Inc. Second Quarter 2024 Financial Results Conference Call.
All participants will be in a 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 your telephone keypad. 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.
Mark Stolper
Thank you. Good morning, ladies and gentlemen,
and thank you for joining Dr. Howard Berger and me today to discuss RadNet’s second quarter 2024 financial results.
Before we begin today, we’d like to remind
everyone of the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. This presentation contains forward-looking
statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Specifically, statements concerning anticipated
future financial and operating performance, RadNet’s ability to continue to grow the business by generating patient referrals and
contracts with radiology practices, recruiting and retaining technologists, receiving third party reimbursement for diagnostic imaging
services, successfully integrating acquired operations, generating revenue and Adjusted EBITDA for the acquired operations as estimated,
among others, are forward-looking statements within the meaning of the Safe Harbor.
Forward-looking statements are based on Management’s
current preliminary expectations and are subject to risks and uncertainties which may cause RadNet’s actual results to materially
differ from the statements contained herein. These risks and uncertainties include those risks set forth in RadNet’s reports filed
with the SEC from time to time, including RadNet’s annual report on Form 10-K for the year ended December 31, 2023. Undue reliance
should not be placed on forward-looking statements, especially guidance on future financial performance which speaks only as of the date
it is made. RadNet undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances
after the date they were made, or to reflect the occurrence of unanticipated events.
With that, I’d like to turn the call over
to Dr. Berger.
Dr. Howard Berger
Thank you, Mark. Good morning, everyone, and thank
you for joining us today. On today’s call, Mark and I plan to provide you with highlights from our second quarter 2024 results,
give you more insight into factors which affected the performance, and discuss our future strategy. After our prepared remarks, we will
open the call to your questions.
I’d like to thank all of you for your interest
in our Company and for dedicating a portion of your day to participate in our conference call this morning.
Let’s begin. Our performance in the second
quarter was highlighted by the strongest quarter in our Company’s history with record revenue and Adjusted EBITDA. Relative to last
year's second quarter, total Company revenue increased 13.9%, imaging center revenue increased 13.2% digital health revenue increased
36.4%. Imaging center revenue growth was driven by heavy demand in virtually all of our markets benefiting from the increasing utilization
of diagnostic imaging within healthcare as well as the shift to procedural volumes away from the more expensive hospital alternatives
to ambulatory freestanding imaging centers like the ones RadNet operates.
Also contributing to the strong revenue performance
was the positive impact of improved reimbursement from commercial and capitated payors who recognize the important role we play as a lower
priced alternative to hospital-based imaging.
Lastly, our top line is benefiting from a continuing
shift in modality mix towards advanced imaging, particularly MR, CT and PET/CT, where our revenue per scan is substantially higher than
with routine imaging. Relative to last year's second quarter, our advanced imaging increased by 149 basis points as a percentage of our
procedural volume mix. This is both a function of an overall industry trend as well as the significant capital investment we have made
in the last few years in advanced imaging equipment for growth and replacement.
Driving the revenue growth within the digital
health was the artificial intelligence, AI business, including our EBCD - breast cancer screening AI-powered initiative, which grew 136.6%
quarter over last year’s same quarter. Adjusted EBITDA was also a quarterly record. In conjunction with the strong revenue results
which I just discussed, our focus on operational efficiency, improved management and utilization of labor, investments in information
technology and effective cost control contributed to a total Company Adjusted EBITDA which increased 19.7% from last year’s second
quarter .
Another contributing factor to Adjusted EBITDA
growth was the disproportionate growth in the higher profit margin digital health businesses. Cumulatively, these factors drove a 76 basis
point increase in our Adjusted EBITDA margin as compared with last year’s second quarter. While we are pleased with this margin
expansion, I remain convinced we have further opportunity to improve the margins in the future.
The strong operating results in the second quarter
relative to our internal budget resulted in our decision to increase 2024 full year guidance ranges for revenue, Adjusted EBITDA, and
free cash flow, which we also increased after reporting our first quarter financial results. Mark will discuss this in more detail in
his prepared remarks.
We continue a multi-faceted approach to accelerate
growth. With respect to acquisitions, we completed the two previously announced Houston, Texas center acquisitions of 13 centers from
Houston Medical Imaging and American Health Imaging. We are now in the beginning process of integrating these acquisitions with each other
and onto the RadNet operating clinical and IT systems. We are confident there are further opportunities in Houston for acquisitions, de
novo build-outs health system partnerships and other means of expansion, which include bringing our artificial intelligence and leading
edge clinical and operating digital health solutions to the Houston patient and referring physician communities.
We also completed an expansion of our Ventura
County joint venture with Dignity Health System through the recent acquisition of four imaging centers and the addition of Community Memorial
Health System in Ventura as a second partner to our RadNet in that JV.
Twenty-twenty-four continues to be a year of reinvestment
in our business. Year-to-date, we have opened five de novo facilities and we have six additional scheduled openings for the remainder
of this year, which are in substantial construction as we speak. Moreover, we have 15 additional projects in development which we intend
to open during 2025. These de novo facilities are almost equally split between wholly-owned and joint ventured centers and are located
in markets where we have patient backlogs, require additional capacity, or where we currently lack access points to serve identified patient
populations. While these projects are requiring us to make capital investments above our normal spending, we are confident that these
centers will be material contributors as of the others that we've already opened through our long-term performance and growth.
We continue to grow our hospital and health system
joint venture businesses. Currently, 149 of our 398 centers, or 37.4% are held within health system partnerships. Our partners are some
of the largest and most successful health systems in our geographies. Partners include RWJBarnabas, Memorial Healthcare, Dignity Health,
Cedars Sinai Health System, University of Maryland Medical System, Advantis, and others. These and other health systems are seeking long-term
strategies around outpatient imaging and have recognized that cost effective and efficient freestanding centers will continue to capture
market share from hospitals as payors and patients migrate their site of care towards lower cost, high quality solutions.
Our hospital and health system partners have been
instrumental in increasing our procedural volumes with their physician relationships. And as I have indicated in the past, the anticipation
and hope is that close to 50% of our centers will be in joint centers within the next two to three years.
We continue to make progress in digital health.
As some of you remember, we announced earlier this year the formation of the RadNet digital health financial reporting segment, that was
effective January 1, 2024, which combines the eRAD and DeepHealth OS software businesses into what was our clinical AI reporting segment
during 2023. The financial impact of these digital health businesses has great potential for RadNet and the healthcare space in general,
both as a customer of the DeepHealth OS and AI solutions, and of course as the owner of these businesses which sell their solutions to
customers outside of RadNet. Software businesses, and in particular SaaS-based models, can operate at significantly higher margins than
RadNet’s core imaging center segment and require less capital investment.
Within digital health, we continue to sell service
and support eRAD solutions to new and existing customers while we focus on the ongoing development of the next generation DeepHealth OS
cloud-based operating system and generative AI modules. We continue to believe that DeepHealth OS could have a major impact in lowering
cost and increasing efficiency in the areas of patient scheduling, preauthorization, insurance verification, revenue cycle management,
and reporting. We will begin testing some of these AI-powered automation tools of DeepHealth OS in the third and fourth quarters of this
year and aim to have commercially available solutions as early as the first half of 2025.
Our enhanced breast cancer diagnostic mammography,
EBCD, offering is virtually complete with the exception of the newly entered Houston marketplace. Adoption rates continue to rise and
now its seen over 40% on the East Coast and are averaging close to 30% on the West Coast where we have more recently implemented the program.
Our lung AI and prostate AI tools, as well as Neural AI Solutions are also expanding their customer base, predominantly in Europe. This
has been highlighted in the U.K., where our lung AI solution is the partner of choice for a four country rollout of the National Healthcare
Systems targeted lung health check lung cancer screening program.
Finally, we continue to improve liquidity and
financial leverage. We ended the second quarter with a cash balance of $741.7 million and a net debt to Adjusted EBITDA ratio of just
slightly more than one. On April 18, we opportunistically refinanced our debt facilities. With this financing, we are able to reduce our
cost of capital, extend maturities, and add an additional approximately $168 million to RadNet’s cash balance. With all of this,
RadNet is in the best financial condition in its history and is poised for accelerated growth.
At this time, I’d like to turn the call
back over to Mark to discuss some of the highlights of our second quarter 2024 performance. When he is finished, I will make some closing
remarks.
Mark Stolper
Thank you, Howard. I’m now going to briefly
review our second quarter 2024 performance and attempt to highlight what I believe to be some material items. I will also give some further
explanation of certain items in our financial statements as well as provide some insights into some of the metrics that drove our second
quarter performance. I will also provide an update to the 2024 financial guidance levels which were released in conjunction with our 2023
year-end results in March of this year and revised in May in conjunction with our first quarter 2024 results.
In my discussion, I will use the term Adjusted
EBITDA, which is a non-GAAP financial measure. The Company defines Adjusted EBITDA as earnings before interest, taxes, depreciation and
amortization, and excludes losses or gains on the disposal of equipment, other income or loss, loss on debt extinguishments, and non-cash
equity compensation. Adjusted EBITDA includes equity earnings of unconsolidated operations and subtracts allocations of earnings to non-controlling
interests and subsidiaries, and is adjusted for non-cash or extraordinary and one-time events taking place during the period. A full quantitative
reconciliation of Adjusted EBITDA to net income or loss attributable to RadNet, Inc. common shareholders is included in our earnings release.
With that said, I’d now like to review our
second quarter 2024 results.
For the second quarter of 2024, we reported total
Company revenue of $459.7 million and Adjusted EBITDA of $72.3 million. Revenue increased $56 million or 13.9% and Adjusted EBITDA increased
$11.9 million or 19.7% as compared with the second quarter of 2023.
Breaking this performance down to the individual
operating segments, our imaging center segment reported revenue of $443.9 million and Adjusted EBITDA of $69.1 million. This was an increase
of $53.8 million or 13.2% in revenue and an increase of $10 million or 16.9% in Adjusted EBITDA as compared with the second quarter of
2023. Driving this performance were strong aggregate and same center procedural volumes, the impact of higher reimbursement we are receiving
from commercial and capitated payors, the gradual movement towards advanced imaging, and tight expense control.
The digital health segment reported revenue of
$15.8 million and Adjusted EBITDA of $3.3 million.. Revenue increased $4.2 million or 36.4% and Adjusted EBITDA increased $1.9 million
or 135.2% as compared with the second quarter of 2023. Digital health’s significant growth was due in part from a $3.2 million increase
in AI revenue, which climbed to $5.6 million during the second quarter of 2023.
Total Company net loss for the second quarter
of 2024 was $3 million as compared with a total Company net income of $8.4 million for the second quarter of 2023. Net loss per share
for the second quarter of 2024 was negative $0.04 compared with a net income per share of $0.12 in the second quarter of '23, based upon
a weighted average number of diluted shares outstanding of 73.4 million shares in 2024 and 60.9 million shares in 2023.
There were a number of unusual or one-time items
impacting the second quarter, including the following: $1.9 million of non-cash loss from interest rate swaps, $5.6 million of non-cash
interest expense related to extraordinary interest rate swaps, other comprehensive income amortization, $809,000 expense related to leases
for de novo facilities under construction that have yet to open their operations, $8.8 million of debt restructuring and extinguishment
expenses related to the April 2024 successful debt refinancing transaction, and $3.3 million of non-capitalized R&D expenses related
to the DeepHealth cloud OS and generative AI development.
Adjusting for the above items, total Company adjusted
earnings was $12 million and diluted adjusted earnings per share was $0.16 per share during the second quarter of 2024. This compares
favorably with total Company adjusted earnings of 2023 of $5.9 million and diluted adjusted earnings per share of $0.10 during last year's
second quarter.
For the second quarter of 2024 as compared with
the prior year’s second quarter, MRI volume increased 16%, CT volume increased 14.8%, and PET/CT volume increased 20.4%. Overall
volume, taking into account all routine imaging exams inclusive of X-ray, ultrasound, mammography, and all other exams, increased 9.2%
over the prior year’s second quarter. On a same center basis including only those centers which were part of RadNet for both the
second quarters of 2024 and 2023, MRI volume increased 11.7%, CT volume increased 9.9%, and PET/CT volume increased 13.7%. Overall same
center volume, taking into account all routine imaging exams, increased 6.1% over the prior year's same quarter.
In the second quarter of 2024, we performed 2,785,804
total procedures. The procedures were consistent with our multi-modality approach whereby 73.5% of all the work we did by volume was from
routine imaging. Since we now have a table of our aggregate procedure volumes broken down by modality in our earnings release, I won’t
go through the numbers, but want to make the following point. In his remarks, Dr. Berger mentioned that we are experiencing a slow shift
to higher acuity procedures, or what we call advanced imaging. In the second quarter, 26.5% of our procedures were from MRI, CT and PET/CT.
In last year’s second quarter, this metric was 25%, which represents a shift of 1.5% of all of our procedure volumes this year towards
advanced imaging. The higher pricing and better margins that the more advanced imaging procedures have improves our financial results,
including our operating margins.
Overall, GAAP interest expense for the second
quarter of 2024 was $26.1 million as compared with $16 million during last year’s second quarter. In the second quarter of 2024,
cash interest expense, which includes payments to and from counterparties on interest rate swaps and net interest income from our cash
balance, was $3.8 million. This compares with $12.4 million in the second quarter of 2023. The lower cash interest this quarter is primarily
the result of significantly more interest income on the larger cash balances, as well as the timing of cash interest paid on our term
loan.
With regards to the balance sheet, as of June
30, 2024 unadjusted for bond to term loan discounts, we had $301.6 million of net debt, which is our total debt at par value less our
cash balance. Note that this debt balance includes New Jersey Imaging Network's debt of $140.6 million, for which RadNet is neither a
borrower nor a guarantor, and it includes NJIN's cash balance of $86.5 million. This company-wide net debt compares with $518.9 million
of net debt as of June 30 of 2023.
As at June 30, 2024, we were undrawn on our $282
million of revolving credit line and we had a cash balance of $741.7 million At June 30, 2024, our accounts receivable balance was $195.3
million, an increase of $31.6 million from year end 2023. The increase in accounts receivable is primarily the result of increased business,
some collection delays resulting from the cyber attack on Change Healthcare and the normal effect of cash collections from the resetting
of patient deductibles each year in January. Our DSOs, or days sales outstanding, was 34.9 days at June 30, near a historic low and flat
from the end of the first quarter of 2024.
Through June 30, 2024, we had total capital expenditures
net of proceeds from the sale of imaging equipment of $98.6 million. This total includes $6.9 million spent under equipment notes and
the remainder spent in cash and excludes $12.4 million in New Jersey Imaging Network's capital expenditures. Note that each year, we front-load
the majority of our capital decisions into the first part of the year and have been spending extraordinarily on growth CapEx to fund the
de novo facilities in construction.
At this time, I’d like to update and revise
our 2024 fiscal year guidance levels, which we released in conjunction with our fourth quarter and year-end 2023 results, and which we
amended after reporting our first quarter 2024 financial results in May.
Given the positive trends we are experiencing
in virtually all aspects of our business and the strong financial performance of the first and second quarters, we are revising upwards
certain guidance levels in anticipation of financial results that we believe will exceed our original and revised expectations. We amended
our previously announced guidance levels as follows.
For revenue, we increased our guidance ranges
by $10 million at the low and high end. For EBITDA, we increased—and that range is now $1.685,000,000 to $1,735,000,000. We increased
our EBITDA guidance range by $2 million at the low and the high ends to $257 million to $260 million in the imaging center segment. We
also increased our capital expenditures in the imaging center segment by $5 million to $135 million to $145 million. We lowered our cash
interest expense as a result of the refinancing transaction and the higher cash balance to $32 million to $37 million, which is a lowering
of $5 million of cash interest expense. We increased our free cash flow guidance range by $4 million to $72 million to $80 million in
the imaging center segment.
For the digital health segment, our guidance ranges
all remain the same and we are on track to meet the originally anticipated projections.
I’ll now take a few minutes to give you
an update on 2025 Medicare reimbursement. As a reminder, Medicare reimbursement represents about 22% of our business mix.
With respect to Medicare reimbursement, several
weeks ago, we received a matrix for proposed rates by CPT code, which is typically part of the physician fee schedule proposal that is
released about this time every year. We have completed an initial analysis and compared those rates to 2024 rates. We volume weighted
our analysis using expected 2025 procedural volumes. As you may recall, four years ago, CMS moved forward with increased reimbursement
for evaluation and management CPT codes, which favors certain physician specialties that regulate bills for these services, particularly
primary care doctors. CMS proposed doing so with budget neutrality, meaning that it proposed to reallocate reimbursement from physicians
who rarely bill for E&M codes to physicians who regularly bill for these codes.
As a result, radiology and most other specialties
experienced cuts in reimbursement from 2021 through 2024, which was an intentional phase-in of the reimbursement cuts to pay for the reimbursement
benefit being provided to primary care physicians. The cuts we are currently facing in 2024 were substantially mitigated by congressional
legislation that was passed in March of this year as part of the Consolidated Appropriations Act.
In the proposed rule, we received several weeks
ago governing 2025 reimbursement. Medicare appears to effectively be phasing in the remainder of the E&M code related cut avoided
last year and this year. The cut proposed for 2025 results from a decrease in the conversion factor in the Medicare fee schedule by about
2.8% from $33.29 down to $32.36, along with certain minor changes to the RVUs of certain radiology CPT codes. Our initial analysis of
the proposal for next year implies that RadNet on roughly $1.8 billion in revenue would face an approximate $6 million to $8 million revenue
hit in 2025 from its Medicare business.
Because of proposed decrease in the conversion
factor affects all physicians, not just radiologists, there are many lobbying groups from the various medical specialties aggressively
opposing the cut, including radiology's two main lobbying forces, the Association for Quality Imaging, or AQI, and the American College
of Radiology, the ACR. At this time, our experts believe there’s a high probability that the final rule governing next year's Medicare
payments will be less severe than the current proposal as a result of congressional action that could take place later this year.
In November of this year, during our third quarter
financial results call, we hope to have a more fulsome update on this matter. While the $6 million to $8 million cut to RadNet's revenue
next year is not insignificant, we have reimbursement increases scheduled from capitated and commercial payers that will fully mitigate
this Medicare reduction should it go into effect as currently promised.
I’d like now to turn the call back over
to Dr. Berger, who will make some closing remarks.
Dr. Howard Berger
Thank you, Mark.
As we progress in the second half of the year,
we continue to be excited about future opportunities in RadNet. Our core imaging business, which we are experiencing continuing trends
that we believe are sustainable for the foreseeable future. The shift from more expensive hospital imaging to more cost effective outpatient
imaging, should continue. We also expect the growing demand for advanced imaging to continue well into the future. This is being driven
by technology advances in equipment, contrast materials, radioactive pharmaceuticals, post processing software, and artificial intelligence;
all of which drive new applications for utilizing diagnostic imaging, particularly in the population health and screening tools. Prostate,
Alzheimer's, coronary cardiac angiography, lung cancer screening, just to name a few, will be opportunities for more advanced imaging
utilization.
Furthermore, our health system partnership model
continues to gain traction as we are engaged in discussions with several new health systems to establish partnerships and work with existing
partners to expand joint ventures which we are already in operation.
Within digital health, we are making significant
progress with initiatives that are poised to help us drive more revenue, reduce cost and increase margins. We continue to work towards
the commercial launch of our new DeepHealth operating system technology platform in the fourth quarter of 2024. DeepHealth OS will be
the delivery platform for solutions that automate business processes and more effectively manage patient and clinical data, including
automating patient scheduling, clinical reporting, medical coding, sales and marketing, and clinical workflow. The end result will be
improved patient experience.
In parallel to the DeepHealth operating system
development, we are continuing to grow revenue from clinical AI solutions for breast, lung, and prostate cancer screening. Our breast
AI is improving the productivity and accuracy of our radiologists, while improving the valuable benefit—while providing the valuable
benefit to our patients from which they are willing to self-pay. We are formulating similar screening programs for prostate, lung and
other chronic diseases for both domestic and international markets as we firmly believe that healthcare needs to shift towards prevention
and early detection and not just focused on treating patients who are already presenting with serious symptomatology. We are also working
with imaging equipment manufactures in efforts to make their technology smarter and more capable.
Operator, we are now ready for the question-and-answer
portion of the call.
Operator
We will now begin the question-and-answer session.
To ask a question, you may press star, and then one on your telephone keypad. If you are using a speakerphone, please pick up your handset
before pressing the keys. To withdraw your question, please press star, then two. At this time, we’ll pause momentarily to assemble
our roster.
Our first question will come from Brian Tanquilut
with Jefferies. You may now go ahead.
Brian Tanquilut
Hey, good morning guys. Congrats on a solid quarter.
Maybe, Howard, as I think about AI maybe to start, I know there’s a lot of moving pieces there. You guys are working on a lot of
things. For investors on the call and for us, what are the catalysts or the developments that we need to watch out for? What are you working
on that we need to keep an eye out for for the next six to 12 months on the AI front? Thanks.
Dr. Howard Berger
Good morning, Brian. Hope you’re well. I think the main focus which, hopefully, will be reflected in our results, is the deployment
of the DeepHealth operating system internally to the RadNet owned centers. That’s probably the place where we’re going to
get the first indications of how these new tools will better improve the patient experience as well as the clinical adoption. And that,
I think, will drive improved margins in our business. But the importance of this is that we can implement these tools, make them ready
for prime time, if you will, and improve the likelihood of success in the external implementation and commercialization of these, which
we expect to begin in 2025.
What is unique about RadNet and maybe as much
as any other single facet is the enormous amount of data that we own that is helping drive the development of these new tools and which
others outside are recognizing the value of and are tapping into RadNet, through their collaboration on development of products, both
for RadNet and the commercial market.
So, I think, in the early stage of this, which
are already beginning and which I hope to be able to report on in a more substantive way, certainly at the end of the third quarter but
more particularly with the end of the year's results, we see great opportunity. Which was the primary reason why we developed this interest
in not only the clinical side of artificial intelligence but the generative side which will address not only improving our margins but
addresses the continuing issue we have with challenges in hiring and recruiting, and therefore leading to automation that will make all
of our current employees that much more efficient and comfortable.
So, perhaps, a little longer answer, Brian, that
you wanted, but I think looking at, continuing to look at expanding our margins and deployment internally of RadNet, which is I want to
emphasize, has already begun, will be where I think we’ll see the early results of the investment and expertise that we have.
Brian Tanquilut
That is awesome. And then maybe, Mark, as I look
at the balance sheet, obviously, you’re sitting on a good chunk of cash. I’m guessing you’re looking to deploy that
at some point. So I’m just curious how you’re thinking about capital deployment and what you are seeing in the market for
acquisitions today?
Dr. Howard Berger
Yes. Maybe that is something better than I can
answer (multiple speakers)…
Mark Stolper
Go ahead, Howard.
Dr. Howard Berger
… at this point. But we are very carefully
assessing deploying that capital in both segments of the Company, the Digital Health division as well as the Imaging Center segment. We
have, as we have always had in the past, a number of acquisitions constantly that we are looking at, most of those in the past have, as
you well know, Brian, been more of our tuck-in acquisitions, which we tend to try to accomplish in the three to five times EBITDA range.
But there may be other larger acquisitions that
could stretch that multiple for what we would call very strategic investments that we would be looking at that would expand our geographic
presence in the Imaging Center division.
But we need to also be mindful of the opportunities
that we have in the Digital Health division to improve the tools that we’re working on and add other tools that I believe will complement
the opportunity to roll out a broader artificial intelligence platform.
At the end of the day, I think artificial intelligence
on both the clinical and the generative side will be transformative for radiology, perhaps more than any other specialty. And I think
people will be looking for two important tools in making their decisions as to who they want to be their provider.
The first one will be cloud adoption. I think
there is no way to avoid having the kind of functionality that health systems and large-scale operators like RadNet will require in order
to create the efficiencies that only cloud technology will provide along with what we believe will be improved cyber security to protect
this data from cyber terrorists, if you will, or hackers.
The other part of this, though, is that there
is going to be hundreds; I probably would be comfortable saying of artificial intelligence clinical tools that will be useful in various
parts of the health care industry.
A lot of them, as I mentioned before, could be
related to population health and screening tools, which we are already experiencing a huge growth in, not just in cancer screening, but
also cardiac screening, which I believe will be a big part of AI and screening in the future.
But other specific targeted AI tools that will
help improve the accuracy of diagnosis, both on the hospital side as well as the outpatient side, that will need to be incorporated. And
the breadth of all of these AI tools will benefit from or, let’s say, the people that offer this, will benefit if they can consolidate
this onto a single platform rather than putting the burden on either the hospital or the imaging centers to try to integrate from multiple
different sources.
So you have probably already seen in the marketplace
where there are companies that talk about doing that kind of integration or platform for AI. And I assure you, RadNet will be in the pick
of that, whether we own those AI tools or whether we simply provide them on some sort of license basis for our customers.
Brian Tanquilut
Awesome. Thank you, Howard.
Howard Berger
Thanks, Brian.
Operator
Our next question will come from David MacDonald
with Truist. You may now go ahead.
David MacDonald
Good morning guys. A couple of quick questions.
I wanted to just briefly come back to the volume strength in the quarter. You guys talked a little bit about the de novo development activity.
I’m wondering if you could also just touch on your remote capabilities, equipment efficiency and what you’re seeing on throughputs,
access to labor to meet the demand that you guys are seeing? Just any additional detail there would be helpful.
Dr. Howard Berger
I will be happy to take that. Thanks, Dave. Well,
you brought up a point which I have failed to mention earlier, but we have talked about it in the past. And that is smart technology,
if you will, to help address both the efficiency and labor shortages that we have.
We currently use a product called the remote center
operations to manage a lot of the MRs that we do daily that are overseen by technologists who are not necessarily on site. That technology,
which we have in the past been purchasing, we are now developing and beginning to implement ourselves a product and an implementation
that we call tech live.
And that, as I mentioned, has just begun implementation
here in this second quarter and which we will accelerate towards the end of the year. But the importance of this is that we believe that
the same kind of tools are capable of being designed and implemented for basically all of the imaging modalities that we operate.
So not just MR, but CT, PET/CT, x-ray, ultrasound,
nuclear medicine, and that is the future, if you will, not only because of the efficiencies that it creates and improved quality, but
also, as I have stressed over and over again, the limitations that are the bane of the existence for everybody in health care, but particularly
in imaging of available staffing.
If I were able to flip a switch and open all of
our rooms for all the demand that we are currently getting, you would see a large increase in our revenues and subsequently in our profitability.
But this is not an overnight process. It is one that we are working both internally and externally with other partners, both on the technology
side and on the recruiting and staffing and educational side of this, if you will.
But that is the future, smart technology. I want
to introduce that term because you will be hearing more of it in the very near future from us about how we’re working with the OEMs
in trying to enhance the productivity of their equipment by putting these kind of tools, which we uniquely have onto their equipment or
integrating with their equipment.
So all of that will fall into a broadened effort
in our Digital Health division, which we’re all extremely excited here, again, not only because of what it represents in terms of
the future for health care, but a new avenue for continued growth of RadNet in a different area other than just the Imaging Center segment
by itself. So I think these future tools will take up more and more of our close call conferences as well as announcements that we will
be making.
But we intend to be very aggressive in investing
in both sides of our business because they’re really synergistic. And the more centers they have, the better that we can develop
the new tools, and the more tools we create, the bigger market opportunity that there is for us.
David MacDonald
Okay. And then, guys, just two others. Just on
the de novos, given that these are being added in markets where you have demand backlogs, can you just talk about the profitability ramp
and the return on invested capital of these relative to where it was maybe a couple of years ago? And then the other question I had was
just any early learnings or feedback from the Houston market, whether that is incoming calls from other practices, potentially hospital
JV partners or just any high-level observations from Houston?
Mark Stolper
Yes, sure. So I will take the de novo portion
of the question first, Dave. Because the de novo centers have been focused in areas where we have heavy patient demand, including significant
backlogs or in the case of about half of the de novo centers that we have in development today, which are in hospital joint ventures,
these are situations where we believe we can fill the new centers' patient volume very quickly, faster than historically we have been
able to do.
Although de novos have always been part of our
business, historically, the pace at which we’re opening them today exceeds that pace that we have ever done in the past. And that’s
because of these patient volumes.
So typically, historically, we have seen that
it could take several quarters to a year for a de novo center to ramp up and start contributing positively to our EBITDA. What we’re
seeing with the recent de novos and what we expect with the de novos that we have under construction currently is that they’re ramping
up much more quickly. And within a quarter or two, they’re already starting to have a positive EBITDA contribution.
So if you go back 20, 30-years in this industry,
Dave, there was a point where there existed overcapacity in the industry as a whole on the outpatient side with 6,000 to 7,000 imaging
centers that has existed for now a couple of decades. And what happened is that as the industry has steadily grown each year, the industry
itself has grown into that overcapacity, where today, that overcapacity doesn’t exist.
And so in order for us to create the capacity
that we need to service the patient volumes, we either have to buy somebody that has capacity that we could then fill which is less available
today than in the past or we have to build it ourselves. And so that is what we have been doing. And the ramp-up that we are seeing in
these de novo centers is happening much more quickly.
With respect to the second part of your question,
with Houston, I will let Dr. Berger comment.
Dr. Howard Berger
Okay. Yes, I think the fact that we entered the
Houston market has already presented itself with other opportunities. One of which the second acquisition that we did, we closed this
quarter and then there’s other operators that are talking to us. So we expect to make announcements about continued expansion in
the Houston market and potentially look at de novos that might be appropriate there.
In that regard, I just want to amplify one thing
that Mark mentioned. And with the validation, I think, of doing de novos is really looking at that, even though about 3/8th of our centers
are in joint ventures with hospital systems, 50% of the de novos are in those joint ventures.
And I think the significance of that is that all
of the systems that we’re dealing with are experiencing the same issues that RadNet’s wholly-owned centers are, and that is
capacity either to take on the shift away from the hospital’s outpatient work as well as the increasing demand for outpatient imaging.
As Mark highlighted, I think what was, Mark, our year-over-year same-store growth? Sixteen and a half percent?
Mark Stolper
Six point one percent.
Dr. Howard Berger
Six point one percent, which I believe was about
what it was last quarter or somewhere in there, maybe even in that ballpark. But the fact of the matter is these are the benchmarks by
which we’re using the decision-making as to where we’re deploying capital.
And in a way, the market should almost look at
our de novo centers as really in lieu of acquisitions. And so rather than paying higher multiples, what we’re doing is building
out these in areas where we know we have that capacity and demand.
And again, I will point out that half of those
are coming from our hospital joint venture partners who would not be giving their approval for this expansion. If they did not have the
same sense of need to add this capacity in a market, meaning the imaging market, which is growing at 2x to 3x the rate that it has in
the past.
David MacDonald
Okay. Thanks very much.
Operator
Our next question will come from John Ransom with
Raymond James. You may now go ahead.
John Ransom
Hey, good morning. So a question I am getting
is just on margin flow-through. So on our model, I mean, you guys were well ahead on revenue, about $20 million, but the EBITDA flow-through
was a bit less. So the margin was maybe 50 bps less than we would have guessed even—and we were at lower revenues. So is there anything
with the margin flow-through in the quarter? Is it the de novos? Or is there something else going on?
Mark Stolper
Yes, John, let me take that. First of all, we
were happy and proud to show margin expansion in this quarter relative to last year. Our total Company EBITDA margin was up about 76 basis
points, which is a function of a number of things.
On the Imaging Center side, it is a function of
the focus and the growth in the higher acuity exams or what we call advanced imaging, and there was about 150 basis point shift towards
advanced imaging and away from routine imaging relative to last year’s second quarter.
It is also a function of the fact that we have
been successful in getting price increases, both from capitated as well as commercial payors. And it has been a focus of tight cost control
as well as the growth in our Digital Health businesses because our Digital Health businesses have the promise and the capability of driving
much higher margins, particularly the SaaS-based software businesses. So we are showing margin expansion.
What I will tell you on the Imaging Center segment
side is that our continued point of pain is on the labor front. Although we have been much more successful in the last year and a half
in terms of recruiting and retaining talent, it has become simply more expensive to hire and retain talent.
And so some of the excellent growth that you’re
seeing on the top line is going towards higher salary benefits and wages in order to appropriately staff our centers and meet the heavy
demand that we have. So that is what you are seeing on the flow-through is that a bigger portion of that flow-through is being allocated
towards salary, benefits and wages.
John Ransom
Okay. And then likewise for the year, I mean,
you bumped the revenue by 10% and the EBITDA by 2%. So it is just building in more for labor absorption of that incremental revenue.
Mark Stolper
That’s right. And just so you know, our
philosophy on guidance and revising guidance is that we look at the actual quarters, meaning the quarters that have already been reported
and compare that relative to our initial budget.
And then what we do is we add the remaining quarters
just at budget. So to the extent that we have overachieved the existing—the already reported quarters and then we add the new budget,
if that now takes us into a new guidance range, that is when we will revise guidance ranges.
We don’t generally reforecast the future
quarters. So to the extent that we significantly beat the third and the fourth—see that we beat in the third quarter, we could potentially
adjust guidance thereafter. So we try to take a fairly conservative approach.
Dr. Howard Berger
John, let me just amplify one thing. I believe
some of the slowing, if you will, of margin expansion may be partially attributed to the slower-than-anticipated implementation of our
de novo centers. Here, we are in the midpoint of the year, where we’re looking at, initially, I think, 12 imaging centers to be
added.
We still have six or seven more to go. These are
large centers. Many of the regions that we are building these out in have been compromised in terms of the people who approve construction
plans, the regulatory issues that we have, getting radioactive material licenses, etc.
So I think it really kind of underscores the importance
of the de novo center growth because with the return that Mark described, those will significantly contribute to better margins than what
we might otherwise have achieved if we had just stretched to buy a bunch of centers that may not have had the same kind of margins that
we know we can build ourselves with the new centers.
John Ransom
So Howard, that was a perfect segue. So Mark,
one more numbers question. If we think about kind of jumping off point in fourth quarter, and I know we already have to think about 2025.
I mean you have highlighted the Medicare cuts potentially. I would imagine there is a good guy in terms of de novos running at fuller
margins next year than this year as you’re wrapping it up. But what are the puts and takes we should think of next year versus this
year as we start refining our models? Thanks.
Mark Stolper
Yes, sure. And we’ll talk much more about
this as we get into the third and fourth quarters and produce those quarterly results. But yes, so we will have a $6 million to $8 million
Medicare headwind. That will be fully mitigated and then some based upon pricing increases that we’re getting from commercial insurance
companies and capitated payors.
There obviously will be the additional contribution
of the six de novo centers that we intend to open by year-end. We have opened three de novo centers already in the first two quarters
of this year. Those will be fully operational for the entire year of 2025. Additionally, we have 15 de novo centers that are currently
slated for opening in 2025. So if we’re successful in opening all 15 or some portion thereof, those will already be additional contributing
factors.
Additionally, the Houston acquisitions, which
we did this year on April 1 and June 1, those 13 centers will now be contributing for the entire year of 2025. And we also expect improvement
in their financial results from integrating those operations onto the RadNet clinical and operating and IT systems.
We are in the midst or really the beginnings of
integrating those into the RadNet systems right now. There will be further tuck-in acquisitions that we’ll be announcing and completing
between now and year-end.
And there will be additional health system joint
ventures with both for new partnerships as well as expansions of existing joint ventures that we’re working on currently that hopefully
will announce by year-end and will be major contributors next year.
And then in addition to that, obviously, the further
growth and maturity and progress in the Digital Health side, both on the AI front in terms of getting greater penetration of the EBCD
program, both on the East Coast and the West Coast, bringing that EBCD program to the Houston marketplace, which we haven’t started
implementing, further growth with Aidence and Quantib on lung and prostate licensing, particularly with the NHS in the U.K. as that targeted
lung health check program rolls out, we expect to see significant growth there on the lung side.
We are also intending to launch a self-pay prostate
screening program here in America, which we have started selling the seeds for along the lines of what we’re doing with breast cancer
on the EBCD program. And then as Howard mentioned, launching the DeepHealth OS and doing a full commercial scale launch to external customers
in 2025.
So that is a big laundry list of things that we
have on our plate, but they are all very exciting, and I think they are all potential for having significant growth in the coming years.
John Ransom
And just lastly for me. I mean, you talked about
the 150 basis point mix shift to higher revenue scans. In your opinion, is that a kind of permanent structural feature that you will continue
to see that? And I have asked you this before, but we should think about like maybe 70% of that dropping to the margin line. So if it
is up 150, then maybe that is 100 points of margin, all else being equal?
Dr. Howard Berger
I think that is something that is going to continue
fairly substantially. I think at the end of the day, it is a demand—it’s a combination of current demand as well as new applications.
I would point very proudly to the growth that we have seen in MR and CT, which is dwarfed by the growth that we are seeing in PET/CT finally
coming into its own, if you will.
And the use of PET/CT, which I believe is just
going to continue to grow, maybe a function not so much of the demand that we have, but our ability to put more PET/CT scanners and replace
older ones, which are now really capable of improved scanning time and throughput as well as quality. It’s a remarkable shift.
And I believe over the last two quarters, I’m
doing this from memory, our PET/CT volume is quarter-over-quarter and almost all of it is organic growth, is about 20%, if I combine those
two quarters or somewhere in that area. That is coming from adoption of prostate and now a much more rapid adoption of PET/CT for Alzheimer’s
disease.
I should also note that by the end of this year,
we will have in place for the first time three PET MR systems, which I believe will make us the largest provider of that service and which
I think will be transformative in the future for adding additional capabilities, not only in diseases that we are looking at today, but
in new applications for this.
So the notion of technology driving imaging cannot
be underestimated. I think it is something which is now accelerating both because of improved equipment that all the OEMs are producing
as well as artificial intelligence and developing new tools to be able to accomplish these, particularly in the PET area.
So I think you can build those. Those all should
come in with higher margins for a number of reasons, not just because they are more expensive test, but because with the equipment that
we have put in that now can do these exams more efficiently, we are able to drive more revenue per unit time.
John Ransom
So lastly for me, I keep saying lastly, and I
keep lying. The two things I think people are looking for: one, being large-scale M&A; and secondly, being a major payer stepping
up and paying for the AI. So if you were a betting person, would either of those—is there a greater than a 50/50 chance that either
one of those or both might occur by the end of the year?
Dr. Howard Berger
Well, fortunately for you, John, I am a betting
person. So I think it is a very good—I've been doing this for 40 years, John. So I have been betting a long time on imaging, as
you well know. But I would say that there is a very good chance that both of those will occur within the next six to 12 months. At one
time, I believe it would take longer for the AI to get reimbursed.
At this point, our focus is not necessarily CMS,
but perhaps one or two or maybe even three of the major payors who are talking to us because the results that we are showing them for
artificial intelligence, right now, primarily in breast as you are well aware of, but the value proposition for it is overwhelmingly positive
and obvious right now. So those discussions are taking place. I think we have a great team that is able to both scientifically as well
as from a business standpoint make compelling arguments.
I think as Mark pointed out, we are going to see
MR become the bellwether for early prostate cancer detection, which will also have to be incorporated with prostate AI, which we own that
tool ourselves.
We are working on pilot projects to further demonstrate
that, although even as early as today, there was an article in radiology with a pilot study done by the Mayo Clinic that showed the efficacy
of prostate MR as a far better screening tool than anything else. So all of these things seem to be accelerating. And I’m a betting
man, and I think RadNet is a good bet.
John Ransom
All right. Thank you sir.
Howard Berger
Thank you John. Take care.
Operator
Our next question will come from Andrew Mok with
Barclays. You may now go ahead.
Andrew Mok
Hi, good morning. Wanted to better understand
the composition of the Digital Health segment EBITDA expectations for the year. I think the non-AI revenue within Digital Health makes
up about two-thirds of the revenue today. So is that have a similar EBITDA contribution?
And then relatedly, how should we think through
the net impact of the EBCD program so far in the runway from here? What is the latest adoption rate for the program? And what does that
actually translate into from a procedure standpoint?
So for instance, if you have done 956,000 mammograms
in the first half of this year, how many are actually Saige-Dx procedures within that, that you are able to collect an incremental $40
out of pocket on? Thanks.
Mark Stolper
Sure. Andrew, it's Mark. I will answer the first
question regarding the composition of the EBITDA of the Digital Health business. So there’s two businesses in the Digital Health
segment, one of which, as you correctly pointed out, is the AI business. The other is the software business.
The software business has historically been a
very profitable business. And last year, that eRAD business, which is now being morphed into what we call, DeepHealth OS. That eRAD business
last year did about $37 million of revenue and $20 million of EBITDA.
So when we move that very profitable business
into the Digital Health business or Digital Health segment that certainly is driving more of the revenue and the profitability in the
Digital Health operating segment.
We are expecting this year the Digital Health
operating segment to do about $60 million to $70 million of revenue. I would say, close to $40 million of which, again, will be software
licensing sales of eRAD. And then the remainder will be, let’s call it, $25 million-ish, give or take, will be AI revenue.
Right now our cost structure at AI, given the
teams at Aidence, Quanta, DeepHealth, all the developers, the machine learning folks, the AI scientists, the FDA people, marketing, sales,
you name it, is running close to about $25 million, if not a little bit more than that.
We are expecting our quarterly revenue of the
DeepHealth business to be somewhere north of $6 million as we are exiting this year. And so our AI business by itself will turn profitable
sometime in the fourth quarter of this year. So that when we look forward to 2025, we are going to have two profitable businesses as part
of Digital Health, both being the software business and then the AI business. And of course, we are expecting to have growth in the AI
business, which leads into your second question about adoption rates for EBCD.
What we’re currently seeing, and I’m
going to bifurcate it between East Coast rates and West Coast rates because we started the implementation of EBCD on the East Coast going
back to the fourth quarter of 2022. We are seeing about a 42% adoption rate on the East Coast for women electing to be part of the EBCD
program, which means that they are desiring to have their scan read by—the initial scan read by AI.
And on the West Coast, which we have much more
recently adopted, we are close to a 30% rate in terms of adoption. And the last report, we all received was about 28%. So what we are
really encouraged about that on the West Coast is that it took many months on the East Coast to get anywhere near a 30% adoption rate.
And what we have done is we've taken a lot of
the learnings from the East Coast, such as the marketing collateral, pricing, how we train our schedulers and front office people to communicate
the benefits of the services. All of that benefit and pain that we had to go through on the East Coast adoption, we have been able to
adopt as best practices on the West Coast to be able to drive a much higher adoption rate.
I don’t see any reason why the adoption
rates on the West Coast should be any different, ultimately, than the East Coast adoption rates, and we are still seeing growing adoption
rates on the East Coast. So we think that there is more to come in terms of the success of this program as we move later on into this
year and into 2025. I don’t know, Howard, do you have anything more to add?
Dr. Howard Berger
Yes. I would just want to point out that one of
the reasons—and we anticipated this that the adoption rate would be slower on the West Coast is that a substantial portion of our
volumes on the West Coast and therefore, revenue come from our capitated contracts.
And generally speaking, we cannot and do not do
artificial intelligence for the EBCD on the patients who are capitated without our discussing this with the medical groups that essentially
we subcapitate with.
We are beginning to have those conversations already
with them and that there is a high degree of interest that they may want to change their plan design to include in the program, the artificial
intelligence or breast because they even more readily see the long-term benefit of reducing some of their costs and improving outcomes,
for which they become the responsible payor, if you will. We haven’t done this yet because we have not had the East Coast implemented.
But if we take out the capitated lives, which
we don’t have that discretion right now of offering that on a pay-for-service basis to those capitated lives, if we rule those out
and reassessed, I would imagine that we would be in the mid- to high 30s for our fee-for-service patients on the West Coast. And in fact,
I will instruct our teams to do that because I think it is an interesting exercise.
But I think I just want to underscore one thing
is that this will be the standard of care for doing mammography. And whether it happens tomorrow or next year or the year after, in our
opinion here and that of most people who have seen these results and understand the science behind artificial intelligence, particularly
for breast imaging and breast cancer, it is the way to significantly improve the outcome and reduce cost.
So we are just in the early stages of this ball
game, but I’m happy to say we are the ones leading the way into this becoming adopted on a much larger scale. And I think with our
initiative, this is something that could have taken five to 10 years. I’m very proud of our teams and the decisions that we have
made over the years here to commit to the future of health care in radiology and imaging being driven by these kind of sophisticated tools.
Andrew Mok
Got it. Okay. And just to clarify, when you say
adoption rate, is that within the facilities that are offering the program? And if so, do you have kind of an offer rate then or what
the coverage rate is?
Mark Stolper
Yes. So the adoption rate is based upon—the
denominator of that is the number of mammography screening exams that we do. So we do about a little over two million mammography exams
per year. That is our current kind of run rate, of which about 1.6 million are screening mammography exams. And so those are the exams
that we offer this service on.
So to the extent that someone schedules a screening
mammography exam, now she’s eligible for us to upsell the EBCD program. And so we are seeing 40% of all women on the East Coast
who are scheduling their mammography screening exam to elect into this program in 28 to 30 on the West Coast. Is that clear?
Andrew Mok
Got it. Okay. Yes, that makes sense. And if I
could just follow up with one more. I think the same center advanced imaging volumes were very strong in the quarter, up double digits,
leading to the continued procedural mix shift that you talked about.
But the revenue mix between routine advanced actually
looks relatively flat sequentially. So just curious what is going on underneath the volume mix with respect to pricing or anything else
that is keeping the revenue mix flat sequentially. Thanks.
Mark Stolper
Yes. The revenue mix that you are seeing in the
report, it’s based upon payments received, not accrued net revenue. So what we do is we apply the differential in those payments
to the current accrued revenue and say, hey, 25% or 30% of our revenue is MRI and so on and so forth.
So you will see a lag. So I would expect in the
coming quarters as we continue to see the increase towards higher acute exams, I would expect to see that those percentages will actually
shift in terms of the revenue as well.
Andrew Mok
Got it. And why is that, because bad debt assumptions
are different? What is the driver of that?
Mark Stolper
Just the lag in terms of the DSO of the difference
between payments received versus accrued net revenue. Accrued net revenue is an estimate based upon how many exams you do in the quarter.
Payments are based upon payments that you’re collecting from prior quarters.
Dr. Howard Berger
It might also be worth putting out, Mark, that
in the case of advanced imaging, all of those procedures require an authorization from the payor. And therefore, it is a slower process
of getting those patients done, submitting the bills with the authorization and ultimately getting paid, whereas on the routine imaging
mammography, x-ray and ultrasound, those do not require authorization and those get paid as quickly as we can present the bills.
Andrew Mok
Got it. Okay, thank you.
Operator
Our next question will come from Larry Solow with
CJS Securities. You may now go ahead.
Larry Solow
Great. Good morning. A couple of follow-ups. I
guess most of my questions have been answered. I guess, Mark, on the DeepHealth operating system sounds really exciting. I’m just
curious, as you roll this out, would you expect to start even getting some benefit on margins, maybe just next year or in the first year
or do you feel like it takes a little while? Is there some kind of learning curve you think to incorporate systems across internally?
And then the second question is, do you—eventually,
when you go external, do you think the external opportunity is actually bigger, greater than the internal opportunity? And then have you
also—third question there is, have there been thoughts to externalize or have you been approached on the EBCD AI test as well from
external parties? Thanks.
Mark Stolper
Sure. Okay. Let me take the first part of the
question first, which is, do we expect to see any benefits with respect to—in 2025 with the rollout...
Larry Solow
Rollout, right.
Mark Stolper
Yes, of DeepHealth OS. And the answer to that
question is yes, absolutely. The unique aspect of the DeepHealth OS relative to what we are currently using, which is our own eRAD kind
of risk packs technology platform is that the DeepHealth OS has a number of generative AI-powered modules as part of it that is focused
on automating business functions that we perform on behalf of our centers in order to automate aspects of the business that today we rely
heavily on labor and human capital for.
And these are in the areas around automating patient
scheduling, preauthorization, insurance verification, customer call centers or patient call centers as well as certain revenue cycle functions.
So we are already testing a couple of these modules internally.
But when they have a full-scale rollout here,
we expect that these automation tools will make our business much more efficient, which will have two benefits. One will be, I think,
from a patient-facing standpoint, it’s going to be better and more efficient to patients. They’re going to be able to schedule
their exams more efficiently and more expeditiously.
We will be able to take payments on a more automated
basis from an AR and collections standpoint. We are going to be able to get authorizations faster and more efficient from the insurance
company. So all of these things should have the intended effect of reducing our reliance on expensive human capital.
So we do expect to see benefits just from RadNet
adopting it internally. And then, of course, as we launch the fully commercialized product and start selling and licensing that product
to both our 200-plus existing eRAD customers as well as the rest of the industry, we expect and intend that this product is going to be
very successful. I mean it is a cloud-based product. It’s got all of the new and advanced bells and whistles, including these generative
AI modules.
We are already talking to our existing customer
base. We previewed a number of its capabilities in a demo last year at the big radiology show in November of last year called the RSNA,
the Radiological Society of North America Show in Chicago. We are going to be doing that same kind of customer outreach this November
in the show this year.
So we are very excited and think that this product
is as good or better than anything else that is on the marketplace, particularly for outpatient freestanding imaging centers, where this
workflow that we have built into it and the scalability of the product because we have had to make it scalable and work for RadNet internally,
we think is going to be the best in the industry.
There was a third part of your question that I
can’t remember.
Larry Solow
Just on the thoughts about, are you have been
approached at all about externalizing the Enhanced Breast Cancer Detection tool?
Mark Stolper
So yes, we are going to continue to drive adoption
rates internally, and we are having discussions with third parties about providing this technology and potentially even creating kind
of an EBCD like program for other customers.
We haven’t yet found any customer, that
hasn’t been our focus. But that is certainly where we are headed. And I think as Dr. Berger mentioned, reimbursement is a big part
of that because one of the—or probably the main reason why AI solutions have not been adopted on a widespread basis in the industry
is the lack of the ability for radiologists to bill and collect for the use of these AI tools.
We believe that once radiologists can actually
bill and collect for the use of these tools, then the whole industry is going to want to adopt these tools. Very similar to what happened
many years ago when mammography equipment was shifting from 2D technology to 3D technology with tomosynthesis.
There was a period of several years where Hologic
had introduced the technology to the world, but it wasn’t being adopted on a widespread basis because radiologists couldn’t
charge anything more for doing a 3D exam and therefore, they didn’t want to make the capital investment to provide a service that
they couldn’t bill and collect for.
And that is the problem with AI right now. We
do believe that that is just a matter of time. And once there is more widespread adoption for AI reimbursement, then that is the time
that we are going to be able to have a successful AI licensing business.
Larry Solow
Got it. I appreciate that color. I guess just
one last question. Just, Mark, with the increase in minimum wage in California and salaries, did that impact you guys at all?
Mark Stolper
It does. The minimum wage is being increased from
$17.50 to, I think, it is $20 or $21. I can’t remember. And that is built into our budget this year. The implementation of that
was delayed. It was supposed to go into effect, I think it was either June 1 or July 1. Do you remember, Howard?
Dr. Howard Berger
Yes, June 1st.
Mark Stolper
Yes. And because of budgetary reasons and the
impact on Newsom's budget, particularly from the county facilities and the hospitals, all the health care workers that they employ, they’ve
delayed that implementation to later this year. I think it did go into effect August 1st. Is that right, Howard?
Dr. Howard Berger
No, currently, it is scheduled to go in place,
I believe, October 1, but there is still some doubt as to whether or not they are going to do it this year or kick that can down the road
to January 1 of next year.
Mark Stolper
Yes. So there is a little bit of a good guy or
a cushion built into our guidance because we had anticipated that going into effect earlier on in the year.
Larry Solow
Got it. Okay, great. Thank you. Appreciate it.
Operator
Our next question will come from Yuan Zhi with
B. Riley. You may now go ahead.
Brandon Carney
Hi, this is Brandon Carney on for Yuan. Congrats
on another strong quarter. Thanks for taking our questions. First, we’re curious about the recent CMS update on the diagnostic radiopharmaceuticals
and how that would affect your PET scan volume. The proposed reimbursement change was for outpatient setting in the hospital and the update
was for a more favorable reimbursement. Does that mean that the hospital has more incentive to keep those PET scans within the outpatient
department rather than sending those patients to freestanding centers like yours?
Mark Stolper
Yes, sure. So that impacts, as you rightfully
said, the hospitals and not us. Look, the hospitals are a big player in PET/CT business today and they are going to continue to try to
keep as much of that business in-house.
I think like all the other modalities, it is an
inevitability that more and more of this business is going to move into the outpatient centers. And we are already demonstrating that
with the growth of the prostate imaging and Alzheimer’s imaging on the PET/CT side, where I think we have done more PSMA tests than
anyone else. Whether on the hospital side or the outpatient side, we have done about 13,900 PSMA test since the beginning of time.
We have done—this quarter alone, we've done
over 2,100 PSMA tests. And the same thing that you are seeing in Alzheimer’s, which is the other big growth area of PET/CT is that
we are kind of leading the way of these amyloid tests. We have done over 1,500 of these tests in the last several quarters. In July, we
did over 360 of these tests alone.
So I think that regardless of what the hospitals
are doing and regardless of how they are paying for these radioactive tracers, the fact of the matter is they are charging significantly
more for the technical component of the PET/CT than we are.
Generally, we are seeing that in the range of
2x to 4x what we are charging. So I think that although the hospitals will always be in the imaging business that more and more of this
business is going to be captured in the outpatient landscape.
Brandon Carney
Great. Thanks for that, especially the numbers
you have given, very helpful. It is great to see the 14% same-center growth on the PET scan volume. And just to follow up on what you
were seeing on the Alzheimer’s. Can you give some context about like how that increase is going right now? We saw the approval of
another amyloid agent. I think you mentioned that they saw a tripling of their sales for their amyloid imaging agent. What are you guys
seeing on Alzheimer’s specifically as it relates to the growth quarter-to-quarter?
Mark Stolper
Yes. So I'll start. So as I mentioned, we have
done over 1,400 of these studies thus far. It is growing fast. And if I look at the last two months, in July, we did a little over 360
of these studies. In June, so the month prior to that, we did only 208 of these studies. So we are talking about over a 60% increase on
a month-to-month basis.
These are still relatively small numbers, given
the fact that we do north of 75,000 PET/CTs or at least that is our current run rate in a year. But we are seeing a lot of growth. We
are seeing that the regional MAX that we call them, these are the Medicare administrators, are starting to more freely authorize these
initial studies.
We have seen others, as you mentioned, come in
on the radioactive contrast side to make that more competitive, which will ultimately drive down the cost of the radioactive tracer. We
think that that is going to continue.
And as the cost goes down, that is going to drive
more and more of these initial studies. I would also mention that as exciting as an opportunity as the Alzheimer’s is on the PET/CT
side, it is perhaps a more exciting opportunity on the MRI side.
Most all of these patients need an initial MRI
to establish a baseline and then every four to five months through the therapies once these patients go on these initial therapies, whether
it is the Biogen therapy or the Eli Lilly or others in terms of these treatments, they’re going to need additional MRIs every four
to five months to monitor potential adverse side effects of these therapies. So the Alzheimer’s opportunity, we remain excited about
because it is going to be just another driver of advanced imaging, both on the PET/CT and the MRI side.
Brandon Carney
Great. Very helpful. And then one last one. Just
wondering if you can clarify what you mean by the patient backlog? Are these patients that have appointments on the calendar? Or is it
some other kind of measurement of incoming volume? And then how does that backlog really help to inform plans on expanding capacity?
Dr. Howard Berger
Yes. The backlogs that we have are defined by,
if somebody calls in for an exam today, what is the earliest time that we can fit them into our schedule. And we monitor those by the
number of days that it takes to easily schedule a patient.
That being said, if there is a more urgent need,
we do keep a certain number of slots available for what we call add-ons. But the current circumstances we find ourselves in is that we
probably have the capacity to do a lot more of the demand that we are currently being asked to provide.
But our limitation is not so much the equipment
as it is the technologists that we need in order to staff the facilities to do that. So we find ourselves having closed rooms, which just
pushes the backlogs even higher.
These are things that we are trying to really
address by not only hiring or more aggressive recruiting and hiring, but really with technologies to upgrade equipment that gives us better
capacity and throughput and which then fundamentally would lower our backlog.
So it is a nice problem to have, but not one that
is optimally in the best interest of providing the level of care that we would otherwise like to. But this is the challenge that we are
faced with, and it is better than sitting around and waiting for the phone to ring. But every aspect of what we can do to potentially
accommodate the requests that we are getting are being pursued.
Brandon Carney
Great. Thanks again for taking our questions.
Operator
This concludes our question-and-answer session.
I would like to turn the conference back over to Dr. Berger for any closing remarks.
Dr. Howard Berger
All right. Thank you. I would like to take the
opportunity to thank all of our shareholders for their continued support and the employees of RadNet for their dedication and hard work.
Management will continue its endeavor to be a market leader that provides great services with an appropriate return on investment for
all stakeholders. Thank you for your time today, and I look forward to our next call. Good day.
Operator
The conference has now concluded. Thank you for
attending today’s presentation. You may now disconnect.
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RadNet (NASDAQ:RDNT)
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RadNet (NASDAQ:RDNT)
過去 株価チャート
から 10 2023 まで 10 2024