• Total Net Revenue (“Revenue”) increased 6.4% to $242.1 million in the third quarter of 2018 from $227.6 million in the third quarter of 2017
  
• Adjusted EBITDA⁽¹⁾ increased 5.5% to $38.1 million in the third quarter of 2018 from $36.1 million in the third quarter of 2017
   
• Earnings Per Share is $0.10 per share in the third quarter of 2018 as compared with  $0.07 from the third quarter of 2017

• Aggregate procedural volumes increased 3.5%; same center procedural volumes increased 0.8%

• Subsequent to the end of the quarter, RadNet acquired Medical Arts Imaging in Long Island, NY and commenced operations of the EmblemHealth capitation contract

LOS ANGELES, Nov. 09, 2018 (GLOBE NEWSWIRE) —  RadNet, Inc. (NASDAQ: RDNT), a national leader in providing high-quality, cost-effective, fixed-site outpatient diagnostic imaging services through a network of 341 (adjusted for centers added on October 1, 2018 related to the previously announced Medical Arts Imaging and EmblemHealth transactions) owned and/or operated outpatient imaging centers, today reported financial results for its third quarter of 2018.

Dr. Howard Berger, President and Chief Executive Officer of RadNet, commented, “I am pleased with our results this quarter. We compared favorably in all metrics relative to last year’s third quarter.  We demonstrated Revenue, Adjusted EBITDA⁽¹⁾ and earnings growth as well as positive same center revenue and procedural increases.”  

Dr. Berger continued, “Immediately after quarter-end, we completed two important initiatives that further our strategy in New York and set the stage for growth in the coming quarters.  First, under a capitation arrangement we announced in August, we commenced operations on October 1st to provide imaging to approximately 200,000 members of EmblemHealth’s AdvantageCare Physicians medical group in Long Island and the boroughs of New York City.  The contract included RadNet assuming operations in 26 AdvantageCare offices.  During this third quarter, we hired and trained the employees needed to staff the new offices and procured the equipment necessary to support the anticipated patient volumes.  While capitation has been an important and successful aspect of our operating strategy in California, this is our first inroad into risk-based contracting on the east coast.  We are in discussions with other east coast medical groups and payors about network contracting and population health opportunities and are very interested in expanding through managing the imaging for larger patient populations.”

Dr. Berger added, “The second transaction in New York, the acquisition of Medical Arts Imaging, was completed on October 1st and expanded our New York metropolitan network into Nassau and Suffolk counties of Long Island.  The ten centers of Medical Arts are instrumental in providing the capacity and coverage necessary to effectively service the EmblemHealth capitated members.  Expanding our platform into Long Island with EmblemHeatlh and Medical Arts has already surfaced additional opportunities to grow our operations in New York.  Launching this capitation contract and integrating both the Medical Arts and AdvantageCare locations into the RadNet network will be our primary area of focus for the remainder of the year.” 

Third Quarter Financial Results

For the third quarter of 2018, RadNet reported Revenue of $242 million, Adjusted EBITDA⁽¹⁾ of $38.1 million and Net Income of $5.0 million.  Revenue increased $14.5 million (or 6.4%) and Adjusted EBITDA⁽¹⁾ increased $2.0 million (or 5.5%) from last year’s same quarter.

Net Income increased $1.8 million over the third quarter of 2017.  Per share Net Income for the third quarter was $0.10, compared to per share Net Income in the third quarter of 2017 of $0.07 (based upon a weighted average number of diluted shares outstanding of 48.6 million and 47.6 million for these periods in 2018 and 2017, respectively).

Affecting Net Income in the third quarter of 2018 were certain non-cash expenses or non-recurring items including:  $1.7 million of non-cash employee stock compensation expense resulting from the vesting of certain options and restricted stock; $82,000 of severance paid in connection with headcount reductions related to cost savings initiatives; $373,000 gain on the sale or disposal of certain capital equipment; and $977,000 of amortization of deferred financing costs, other non-cash interest and loan discounts related to our credit facilities.

For the third quarter of 2018, as compared with the prior year’s third quarter, MRI volume increased 5.0%, CT volume increased 7.9% and PET/CT volume increased 14.0%.  Overall volume, taking into account routine imaging exams, inclusive of x-ray, ultrasound, mammography and other exams, increased 3.5% over the prior year’s third quarter.  On a same-center basis, including only those centers which were part of RadNet for both the third quarters of 2018 and 2017, MRI volume increased 0.1%, CT volume increased 1.5% and PET/CT volume decreased 2.7%.  Overall same-center volume, taking into account routine imaging exams, inclusive of x-ray, ultrasound, mammography and other exams, increased 0.8% compared with the prior year’s same quarter.

Nine Month Financial Results

For the nine months ended September 30, 2018, RadNet reported Revenue of $717.9 million, Adjusted EBITDA⁽¹⁾ of $97.3 million and Net Income of $3.1 million.  Revenue increased $31.3 million (or 4.6%), Adjusted EBITDA⁽¹⁾ decreased $4.5 million (or -4.0%) and Net Income decreased $4.2 million over the first nine months of 2017 primarily as a result of the severe weather conditions which materially impact the first quarter results.  Net Income Per Share for the nine month period ended September 30, 2018 was $0.06 per diluted share, compared to Net Income of $0.16 per diluted share in corresponding nine month period of 2017 (based upon a weighted average number of fully diluted shares outstanding of 48.5 million and 47.2 million for these periods in 2018 and 2017, respectively).

Affecting operating results in the nine months ended September 30, 2018 were certain non-cash expenses or non-recurring items including:  $6.6 million of non-cash employee stock compensation expense resulting from the vesting of certain options and restricted stock; $1.1 million of severance paid in connection with headcount reductions related to cost savings initiatives; $2.2 gain on the sale of certain capital equipment; and $2.9 million of amortization of deferred financing costs, other non-cash interest and loan discounts related to our credit facilities.

2018 Guidance Update

RadNet reaffirms its previously announced 2018 guidance ranges as follows:

Total Net Revenue		$945 million – $970 million
Adjusted EBITDA(1)		$140 million – $150 million
Capital Expenditures (a)		$60 million – $65 million
Cash Interest Expense		$33 million – $38 million
Free Cash Flow Generation (b)		$45 million – $55 million

1. Net of proceeds from the sale of equipment, imaging centers and joint venture interests.
2. Defined by the Company as Adjusted EBITDA⁽¹⁾ less total capital expenditures and cash paid for interest (as adjusted for any extraordinary dividends from subsidiaries or joint ventures not captured in Adjusted EBITDA⁽¹⁾).

Conference Call for Today

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 third quarter 2018 results on Friday, November 9th, 2018 at 7:30 a.m. Pacific Time (10:30 a.m. Eastern Time).

Conference Call Details:

Date:  Friday, November 9, 2018
Time:  10:30 a.m. Eastern Time
Dial In-Number:  888-224-1005
International Dial-In Number:  323-994-2093

It is recommended that participants dial in approximately 5 to 10 minutes prior to the start of the 10:30 a.m. call.  There will also be simultaneous and archived webcasts available at http://public.viavid.com/index.php?id=132050 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 5971938.

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.

About RadNet, Inc.

RadNet, Inc. is the leading national provider of freestanding, fixed-site diagnostic imaging services in the United States based on the number of locations and annual imaging revenue. RadNet has a network of 341 owned and/or operated outpatient imaging centers (adjusted for 36 centers acquired on October 1, 2018 related to the Medical Arts Imaging and EmblemHealth transactions). RadNet’s core markets include California, Maryland, Delaware, New Jersey and New York. In addition, RadNet provides radiology information technology solutions, teleradiology professional services and other related products and services to customers in the diagnostic imaging industry.  Together with affiliated radiologists, and inclusive of full-time and per diem employees and technicians, RadNet has a total of approximately 7,300 employees. For more information, visit http://www.radnet.com.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Specifically, statements concerning successfully integrating acquired operations, successfully achieving 2018 financial guidance, achieving cost savings, successfully developing and integrating new lines of business, continuing to grow its business by generating patient referrals and contracts with radiology practices, and receiving third-party reimbursement for diagnostic imaging services, 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 the Company’s actual results to differ materially from the statements contained herein. Further information on potential risk factors that could affect RadNet’s business and its financial results are detailed in its most recent Annual Report on Form 10-K, as filed with the Securities and Exchange Commission. Undue reliance should not be placed on forward-looking statements, especially guidance on future financial performance, which speaks only as of the date they are 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.

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)
								September 30,				December 31,
									2018				2017
								(unaudited)
ASSETS
CURRENT ASSETS
	Cash and cash equivalents							$	27,227			$	51,322
	Accounts receivable, net								156,401				155,518
	Due from affiliates								754				2,343
	Prepaid expenses and other current assets								40,135				26,168
	Assets held for sale								2,499				–
		Total current assets							227,016				235,351
PROPERTY AND EQUIPMENT, NET									285,787				244,301
OTHER ASSETS
	Goodwill								274,361				256,776
	Other intangible assets								39,010				40,422
	Deferred financing costs								1,489				1,895
	Investment in joint ventures								42,199				52,435
	Deferred tax assets, net of current portion								23,040				30,852
	Deposits and other								17,740				6,947
		Total assets						$	910,642			$	868,979
LIABILITIES AND EQUITY
CURRENT LIABILITIES
	Accounts payable, accrued expenses and other							$	150,146			$	135,809
	Due to affiliates								14,192				16,387
	Deferred revenue								2,959				2,606
	Current portion of deferred rent								2,720				2,714
	Current portion of notes payable								30,118				30,224
	Current portion of obligations under capital leases								3,258				3,866
		Total current liabilities							203,393				191,606
LONG-TERM LIABILITIES
	Deferred rent, net of current portion								28,642				26,251
	Notes payable, net of current portion								549,802				572,365
	Obligations under capital lease, net of current portion								3,162				2,672
	Other non-current liabilities								4,356				6,160
		Total liabilities							789,355				799,054
EQUITY
	RadNet, Inc. stockholders’ equity:
	Common stock – $.0001 par value, 200,000,000 shares authorized;
		48,334,925, and 47,723,915 shares issued and outstanding at
		September 30, 2018 and December 31, 2017, respectively							5				5
	Additional paid-in-capital								237,072				212,261
	Accumulated other comprehensive income (loss)								4,276				(548	)
	Accumulated deficit								(147,051	)			(150,158	)
		Total RadNet, Inc.’s stockholders’ equity							94,302				61,560
	Noncontrolling interests								26,985				8,365
		Total equity							121,287				69,925
		Total liabilities and equity						$	910,642			$	868,979

 

RADNET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT SHARE DATA)
(unaudited)
								Three Months Ended								Nine Months Ended
								September 30,								September 30,
									2018				2017				2018				2017
NET REVENUE
		Service fee revenue, net of contractual allowances and discounts										$	211,313							$	638,119
		Provision for bad debts											(11,687	)							(35,187	)
		Net service fee revenue						$	217,552				199,626			$	641,136				602,932
		Revenue under capitation arrangements							24,596				27,981				76,799				83,702
			Total net revenue						242,148				227,607				717,935				686,634
OPERATING EXPENSES
		Cost of operations, excluding depreciation and amortization							208,511				198,109				634,200				602,174
		Depreciation and amortization							17,480				17,053				53,422				50,319
		(Gain) loss on sale and disposal of equipment							(373	)			420				(2,204	)			828
		Severance costs							82				1,186				1,087				1,566
			Total operating expenses						225,700				216,768				686,505				654,887
INCOME FROM OPERATIONS									16,448				10,839				31,430				31,747
OTHER INCOME AND EXPENSES
		Interest expense							10,663				10,169				31,343				30,712
		Equity in earnings of joint ventures							(2,822	)			(3,450	)			(9,547	)			(8,372	)
		Gain on sale of imaging centers							–				(845	)			–				(3,146	)
		Other expenses (income)							7				4				13				(236	)
			Total other expenses						7,848				5,878				21,809				18,958
INCOME BEFORE INCOME TAXES									8,600				4,961				9,621				12,789
		Provision for income taxes							(2,827	)			(1,112	)			(2,835	)			(4,177	)
NET INCOME									5,773				3,849				6,786				8,612
		Net income attributable to noncontrolling interests							734				623				3,679				1,286
NET INCOME ATTRIBUTABLE TO RADNET, INC.
		COMMON STOCKHOLDERS						$	5,039			$	3,226			$	3,107			$	7,326
BASIC  NET INCOME PER SHARE
		ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS						$	0.10			$	0.07			$	0.06			$	0.16
DILUTED NET INCOME PER SHARE
		ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS						$	0.10			$	0.07			$	0.06			$	0.16
WEIGHTED AVERAGE SHARES OUTSTANDING
		Basic							48,010,726				46,953,705				47,937,215				46,760,583
		Diluted							48,615,392				47,577,750				48,481,305				47,239,360

 

RADNET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(unaudited)
								Nine Months Ended September 30,
									2018				2017
CASH FLOWS FROM OPERATING ACTIVITIES
	Net income							$	6,786			$	8,612
	Adjustments to reconcile net income
	to net cash provided by operating activities:
	Depreciation and amortization								53,422				50,319
	Provision for bad debts								–				35,187
	Equity in earnings of joint ventures								(9,547	)			(8,372	)
	Distributions from joint ventures								21,783				6,785
	Amortization deferred financing costs and loan discount								2,924				2,509
	(Gain) loss on sale and disposal of equipment								(2,204	)			828
	Gain on sale of imaging centers								–				(3,146	)
	Stock-based compensation								6,557				5,842
	Non cash severance								–				1,047
	Changes in operating assets and liabilities, net of assets
	acquired and liabilities assumed in purchase transactions:
	Accounts receivable								(9,641	)			(38,770	)
	Other current assets								(5,680	)			2,981
	Other assets								(1,209	)			309
	Deferred taxes								1,531				2,031
	Deferred rent								2,397				2,137
	Deferred revenue								353				428
	Accounts payable, accrued expenses and other								20,386				6,857
	Net cash provided by operating activities								87,858				75,584
CASH FLOWS FROM INVESTING ACTIVITIES
	Purchase of imaging facilities								(17,393	)			(22,904	)
	Investment at cost								(2,200	)			(500	)
	Purchase of property and equipment								(62,595	)			(52,807	)
	Proceeds from sale of equipment								2,587				571
	Proceeds from sale of imaging and medical practice assets								–				8,429
	Cash distribution from new JV partner								–				1,473
	Equity contributions in existing and purchase of interest in joint ventures								(2,000	)			(80	)
	Net cash used in investing activities								(81,601	)			(65,818	)
CASH FLOWS FROM FINANCING ACTIVITIES
	Principal payments on notes and leases payable								(4,374	)			(5,297	)
	Proceeds from borrowings								–				170,000
	Payments on Term Loan Debt								(24,810	)			(188,396	)
	Distributions paid to noncontrolling interests								(913	)			(1,065	)
	Deferred financing costs and debt discount								–				(5,067	)
	Proceeds from sale of noncontrolling interest, net of taxes								–				7,726
	Contributions from noncontrolling partners								–				125
	Purchase of non-controlling interests								(200	)			–
	Proceeds from revolving credit facility								44,000				139,400
	Payments on revolving credit facility								(44,000	)			(139,400	)
	Proceeds from issuance of common stock upon exercise of options								10				–
	Net cash used in financing activities								(30,287	)			(21,974	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH									(65	)			38
NET DECREASE IN CASH AND CASH EQUIVALENTS									(24,095	)			(12,170	)
CASH AND CASH EQUIVALENTS, beginning of period									51,322				20,638
CASH AND CASH EQUIVALENTS, end of period								$	27,227			$	8,468
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
	Cash paid during the period for interest							$	27,136			$	29,134

 

RADNET, INC.
RECONCILIATION OF GAAP NET INCOME (LOSS) ATTRIBUTABLE TO RADNET, INC.
COMMON SHAREHOLDERS TO ADJUSTED EBITDA⁽¹⁾
(IN THOUSANDS)

							Three Months Ended
							September 30,
								2018				2017
Net Income Attributable to RadNet, Inc. Common Shareholders							$	5,039			$	3,226
Plus Interest Expense								10,663				10,169
Plus Provision for Income Taxes								2,827				1,112
Plus Depreciation and Amortization								17,480				17,053
Plus (Gain) Loss on Sale of Equipment								(373	)			420
Plus Severance Costs								82				1,186
Plus Other Expenses								7				4
Plus Non-Cash Employee Stock-Based Compensation								1,667				1,528
Plus Transaction Costs – EmblemHealth/ACP								681				–
Plus Fees Related to Term Loan Refinancing								–				235
Plus Expenses of Divested/Closed Operations								–				1,986
Less Gain on Sale of Imaging Centers								–				(845	)
	Adjusted EBITDA(1)						$	38,073			$	36,074
							Nine Months Ended
							September 30,
								2018				2017
Net Income Attributable to RadNet, Inc. Common Shareholders							$	3,107			$	7,326
Plus Interest Expense								31,343				30,712
Plus Provision for Income Taxes								2,835				4,177
Plus Depreciation and Amortization								53,422				50,319
Plus (Gain) Loss on Sale of Equipment								(2,204	)			828
Plus Severance Costs								1,087				1,566
Plus Other Expenses								13				14
Plus Non-Cash Employee Stock-Based Compensation								6,557				5,842
Plus Transaction Costs – EmblemHealth/ACP								681
Plus Fees Related to Term Loan Refinancing								–				235
Plus Expenses of Divested/Closed Operations								–				3,186
Plus Reimbursable Legal Expenses								–				723
Plus Gain on Sale of Equipment Attributable to Noncontrolling Interest								440				–
Less Gain on Sale of Imaging Centers								–				(3,146	)
	Adjusted EBITDA(1)						$	97,281			$	101,782

 

PAYOR CLASS BREAKDOWN**
		Third Quarter
		2018
Commercial Insurance		59.8	%
Medicare		20.4	%
Capitation		10.2	%
Workers Compensation/Personal Injury		2.7	%
Medicaid		3.7	%
Other		3.3	%
Total		100.0	%
**Calculated as percentages of global payments received from consolidated imaging centers from that periods dates of services and excludes payments from hospital contracts, Breastlink operations, imaging center management fees, eRAD, Imaging on Call and other miscellaneous revenue.

RADNET PAYMENTS BY MODALITY *
		Third Quarter			Full Year			Full Year			Full Year
		2018			2017			2016			2015
MRI		35.0	%		34.9	%		34.7	%		35.3	%
CT		16.7	%		16.2	%		15.8	%		15.7	%
PET/CT		5.8	%		5.2	%		5.0	%		5.1	%
X-ray		9.1	%		8.9	%		9.3	%		9.6	%
Ultrasound		12.1	%		12.1	%		12.3	%		11.5	%
Mammography		15.3	%		16.3	%		16.5	%		16.4	%
Nuclear Medicine		1.2	%		1.1	%		1.2	%		1.3	%
Other		4.9	%		5.2	%		5.2	%		5.1	%
		100.0	%		100.0	%		100.0	%		100.0	%
Note
* Based upon global payments received from consolidated Imaging Centers from that period’s dates of service.
Excludes payments from hospital contracts, Breastlink, Imaging on Call, eRAD, Center Management Fees and other miscellaneous operating activities.

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, transaction expenses, 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 paid.  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.