RadNet Reports First Quarter Financial Results and Reaffirms 2017 Guidance Ranges

• Total Net Revenue (“Revenue”) increased 5.8% to $229.0 million in the first quarter of 2017 from $216.4 million in the first quarter of 2016
  
  
• Adjusted EBITDA⁽¹⁾ increased 5.8% to $28.7 in the first quarter of 2017 from $27.1 million in the first quarter of 2016 
  
  
• Diluted loss per share was $(0.03) per share in the first quarter of 2017, flat from the prior year’s first quarter
  
  
• Aggregate procedural volumes increased 2.5% and same center volumes increased 2.1% as compared with the first quarter of 2016
  
  
• Established two joint ventures with Cedars-Sinai in the greater Los Angeles area
  
  
• Exited the Rhode Island marketplace through the sale of its five imaging centers
  
  

LOS ANGELES, May 10, 2017 (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 303 owned and/or operated outpatient imaging centers, today reported financial results for its first quarter of 2017.

Dr. Howard Berger, President and Chief Executive Officer of RadNet, commented, “I’m very pleased with the improvement of our base imaging center business in this first quarter as compared with last year’s first quarter, particularly when adjusting for year-over-year changes in two items that more favorably benefited last year’s first quarter.  In the first quarter of last year, we recognized $2.8 million of Other Income from Meaningful Use incentives as a result of our adoption of eRAD software and $825,000 of Revenue from our management contract in the sovereign nation of Qatar.  In this year’s first quarter, we recognized only $600,000, combined, for these two sources.  Adjusting both quarters by removing contributions from Meaningful Use and Qatar activities, Revenue from core operations increased 6.1% in this year’s first quarter and EBITDA increased 19.5%.”

“The performance of our imaging business is benefiting from a number of factors.  First, our investment in new technologies is beginning to pay dividends, especially 3D digital mammography – which is now being reimbursed by many of the large national payors in addition to Medicare.  Second, our performance benefited from successful pricing negotiations with private payors in several of our regions and with a number of our capitated medical groups.  Third, we continue to effectively control and reduce expenses.  Lastly, we are experiencing continuing improvement in our New York City marketplace from the integration of our acquisitions of New York Radiology Partners and Diagnostic Imaging Group,” added Dr. Berger. 

Financial Results

For the first quarter of 2017, RadNet reported Revenue of $229.0 million, Adjusted EBITDA⁽¹⁾ of $28.7 million and Net Loss  of $1.2 million.  Revenue increased $12.6 million (or 5.8%), Adjusted EBITDA⁽¹⁾ increased $1.6 million (or 5.8%) and Net Loss decreased $187,000, over the first quarter of 2016.  Per share Net Loss for the first quarter was $(0.03), compared to the same in the first quarter of 2016, based upon a weighted average number of basic and diluted shares outstanding of 46.6 million for both periods in 2017 and 2016.

Affecting Net Loss in the first quarter of 2017 were certain non-cash expenses and non-recurring items including:  $3.3 million of non-cash employee stock compensation expense resulting from the vesting of certain options and restricted stock; $203,000 of severance paid in connection with headcount reductions related to cost savings initiatives; and $814,000 of combined non-cash amortization of deferred financing costs and loan discounts related to financing fees paid as part of our existing credit facilities.

For the first quarter of 2017, as compared to the prior year’s first quarter, MRI volume increased 5.1%, CT volume increased 6.0% and PET/CT volume increased 5.7%.  Overall volume, taking into account routine imaging exams, inclusive of x-ray, ultrasound, mammography and other exams, increased 2.5% over the prior year’s first quarter.  On a same-center basis, including only those centers which were part of RadNet for both the first quarters of 2017 and 2016, MRI volume increased 3.3%, CT volume increased 4.4% and PET/CT volume increased 5.7%.  Overall same-center volume, taking into account routine imaging exams, inclusive of x-ray, ultrasound, mammography and other exams, increased 2.1% over the prior year’s same quarter.

Subsequent to the end of the quarter, on April 1^st, RadNet established two imaging joint ventures with Cedars-Sinai, one of the premier academic medical centers in the country. The joint venture agreement in Santa Monica consists initially of one multi-modality imaging center (Resolution Imaging), which was contributed to the joint venture by RadNet.  Under the terms of the joint venture in the San Fernando Valley, Cedars-Sinai has purchased an interest in four imaging centers previously owned by RadNet.  RadNet will continue to manage the operations of the imaging centers of both joint ventures on a day-to-day basis.

Additionally, subsequent to quarter end, on April 1^st, RadNet sold the assets of its five locations in Rhode Island comprising The Imaging Institute to a strategic buyer for $5.0 million.  The five centers were originally part of RadNet’s acquisition completed in November 2011 of the United States operations of CML Healthcare. The divestiture is consistent with RadNet’s core operating strategy of being the leading outpatient imaging provider in all the geographies in which it operates.  It was concluded that these Rhode Island assets were better suited under the ownership of another local operator who seeks to aggressively expand its presence in that marketplace.

2017 Guidance Update

RadNet reaffirms its previously announced 2017 guidance ranges as follows:

Total Net Revenue					$895 million - $925 million
Adjusted EBITDA(1)					$135 million - $145 million
Capital Expenditures (a)					$55 million - $60 million
Cash Interest Expense					$35 million - $40 million
Free Cash Flow Generation (b)					$40 million - $50 million

(a) Net of proceeds from the sale of equipment, imaging centers and joint venture interests.
(b) Defined by the Company as Adjusted EBITDA⁽¹⁾ less total capital expenditures and cash paid for interest.

Dr. Berger highlighted, “We remain confident about our previously announced guidance levels.  When we set our guidance levels upon the release of our fourth quarter 2016 earnings, we incorporated normal seasonality that we experience in our business.  This seasonality considers the typical front-loading of our capital spending in the first half of the year and lower first quarter Revenue and profitability from weaker utilization of services as a result of winter weather on the east coast and from patients in high deductible programs seeking to avoid or delay services.  Comparing the first quarter results with our internal projections, we are on track to meet our objectives for the year.” 

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 first quarter 2017 results on Wednesday, May 10th, 2017 at 7:30 a.m. Pacific Time (10:30 a.m. Eastern Time).

Conference Call Details:

Date:  Wednesday, May 10, 2017
Time:  10:30 a.m. Eastern Time
Dial In-Number:  888-596-2573
International Dial-In Number:  913-312-0379

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=124224 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 3102466.

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 303 owned and/or operated outpatient imaging centers. 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 2017 financial guidance, 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.

 

RADNET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
								March 31,				December 31,
								2017				2016
								(unaudited)
ASSETS
CURRENT ASSETS
	Cash and cash equivalents							$	8,294			$	20,638
	Accounts receivable, net								169,538				164,210
	Due from affiliates								2,122				2,428
	Prepaid expenses and other current assets								23,635				28,435
	Assets held for sale								4,851				2,203
		Total current assets							208,440				217,914
PROPERTY AND EQUIPMENT, NET									257,458				247,725
OTHER ASSETS
	Goodwill								239,954				239,553
	Other intangible assets								42,132				42,682
	Deferred financing costs								1,919				2,004
	Investment in joint ventures								46,114				43,509
	Deferred tax assets, net of current portion								51,446				50,356
	Deposits and other								6,519				5,733
		Total assets						$	853,982			$	849,476
LIABILITIES AND EQUITY
CURRENT LIABILITIES
	Accounts payable, accrued expenses and other							$	113,729			$	111,166
	Due to affiliates								12,786				13,141
	Deferred revenue								1,574				1,516
	Current portion of deferred rent								2,997				2,961
	Current portion of notes payable								22,016				22,031
	Current portion of obligations under capital leases								5,826				4,526
		Total current liabilities							158,928				155,341
LONG-TERM LIABILITIES
	Deferred rent, net of current portion								26,739				24,799
	Notes payable, net of current portion								603,404				609,445
	Obligations under capital lease, net of current portion								4,606				2,730
	Other non-current liabilities								7,197				5,108
		Total liabilities							800,874				797,423
EQUITY
	RadNet, Inc. stockholders' equity:
	Common stock - $.0001 par value, 200,000,000 shares authorized;
		47,216,929, and 46,574,904 shares issued and outstanding at
		March 31, 2017 and December 31, 2016, respectively							4				4
	Additional paid-in-capital								201,563				198,387
	Accumulated other comprehensive (loss) gain								(470	)			306
	Accumulated deficit								(151,421	)			(150,211	)
		Total RadNet, Inc.'s stockholders' equity							49,676				48,486
	Noncontrolling interests								3,432				3,567
		Total equity							53,108				52,053
		Total liabilities and equity						$	853,982			$	849,476

 

RADNET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT SHARE DATA)
(unaudited)
										Three Months Ended
										March 31,
										2017					2016
NET REVENUE
		Service fee revenue, net of contractual allowances and discounts								$	212,750				$	200,842
		Provision for bad debts									(11,646	)				(10,304	)
		Net service fee revenue									201,104					190,538
		Revenue under capitation arrangements									27,909					25,850
			Total net revenue								229,013					216,388
OPERATING EXPENSES
		Cost of operations, excluding depreciation and amortization									205,454					196,826
		Depreciation and amortization									16,654					16,412
		Gain on sale and disposal of equipment									(45	)				-
		Severance costs									203					167
			Total operating expenses								222,266					213,405
INCOME FROM OPERATIONS											6,747					2,983
OTHER INCOME AND EXPENSES
		Interest expense									10,240					10,681
		Meaningful use incentive									(250	)				(2,808	)
		Equity in earnings of joint ventures									(1,928	)				(2,279	)
		Other expenses									3					2
			Total other expenses								8,065					5,596
LOSS BEFORE INCOME TAXES											(1,318	)				(2,613	)
		Benefit from income taxes									458					1,506
NET LOSS											(860	)				(1,107	)
		Net income attributable to noncontrolling interests									350					290
NET LOSS ATTRIBUTABLE TO RADNET, INC.
		COMMON STOCKHOLDERS								$	(1,210	)			$	(1,397	)
BASIC AND DILUTED LOSS PER SHARE
		ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS								$	(0.03	)			$	(0.03	)
DILUTED NET INCOME PER SHARE
		ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS								$	(0.03	)			$	(0.03	)
WEIGHTED AVERAGE SHARES OUTSTANDING
		Basic and Diluted									46,560,017					46,581,491
		Diluted									46,560,017					46,581,491

 

RADNET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(unaudited)
							Three Months Ended March 31,
							2017				2016
CASH FLOWS FROM OPERATING ACTIVITIES
	Net loss						$	(860	)		$	(1,107	)
	Adjustments to reconcile net loss
	to net cash provided by operating activities:
	Depreciation and amortization							16,654				16,412
	Provision for bad debts							11,646				10,304
	Equity in earnings of joint ventures							(1,928	)			(2,279	)
	Distributions from joint ventures							2,323				2,038
	Amortization of deferred financing costs and loan discount							814				1,368
	Gain on sale and disposal of equipment							(45	)			-
	Stock-based compensation							3,276				2,733
	Changes in operating assets and liabilities, net of assets
	acquired and liabilities assumed in purchase transactions:
		Accounts receivable						(16,974	)			(25,291	)
		Other current assets						4,043				5,288
		Other assets						8				856
		Deferred taxes						(1,090	)			(1,612	)
		Deferred rent						1,976				443
		Deferred revenue						58				(70	)
		Accounts payable, accrued expenses and other						10,995				11,880
			Net cash provided by operating activities					30,896				20,963
CASH FLOWS FROM INVESTING ACTIVITIES
	Purchase of imaging facilities							(3,154	)			(5,007	)
	Investments at cost							(500	)			-
	Purchase of property and equipment							(30,371	)			(22,500	)
	Proceeds from sale of equipment							59				-
	Equity contributions in existing joint ventures							-				(294	)
			Net cash used in investing activities					(33,966	)			(27,801	)
CASH FLOWS FROM FINANCING ACTIVITIES
	Principal payments on notes and leases payable							(2,158	)			(3,166	)
	Payments on Term Loan Debt/Senior Notes							(6,063	)			(6,178	)
	Deferred financing costs and debt discount							(570	)			-
	Proceeds on revolving credit facility							105,100				126,200
	Payments on revolving credit facility							(105,100	)			(109,900	)
	Dividends paid to noncontrolling interests							(485	)			(158	)
			Net cash (used in) provided by financing activities					(9,276	)			6,798
EFFECT OF EXCHANGE RATE CHANGES ON CASH								2				4
NET DECREASE IN CASH AND CASH EQUIVALENTS								(12,344	)			(36	)
CASH AND CASH EQUIVALENTS, beginning of period								20,638				446
CASH AND CASH EQUIVALENTS, end of period							$	8,294			$	410
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
	Cash paid during the period for interest						$	11,035			$	9,085

RADNET, INC. RECONCILIATION OF GAAP NET INCOME (LOSS) ATTRIBUTABLE TO RADNET, INC. COMMON SHAREHOLDERS TO ADJUSTED EBITDA(1) (IN THOUSANDS)
							Three Months Ended
							March 31,
							2017				2016
Net Loss Attributable to RadNet, Inc. Common Shareholders							$	(1,210	)		$	(1,397	)
Less Benefit From Income Taxes								(458	)			(1,506	)
Plus Other Expenses (Income)								3				2
Plus Interest Expense								10,240				10,681
Plus Severance Costs								203				167
Less Gain on Sale of Equipment								(45	)			-
Plus Depreciation and Amortization								16,654				16,412
Plus Non Cash Employee Stock Compensation								3,276				2,733
	Adjusted EBITDA(1)						$	28,663			$	27,092

PAYOR CLASS BREAKDOWN**
	First Quarter
	2017
Commercial Insurance	58.6	%
Medicare	19.8	%
Capitation	11.6	%
Workers Compensation/Personal Injury	2.8	%
Medicaid	3.8	%
Other	3.4	%
Total	100.0	%
**Capitation percentage has been calculated based upon its proportion of Revenue Under Capitation Arrangements in the period  to
Service Fee Revenue, Net of Contractual Allowances and Discounts plus Revenue Under Capitation Arrangements.
After deducting the capitation percentage from 100%, all other payor class percentages are based upon a proportion to global payments
received from consolidated imaging centers from that periods dates of services and excludes payments
from hospital contracts, Breastlink, imaging center management fees, eRAD, Imaging on Call and other miscellaneous revenue.

 

RADNET PAYMENTS BY MODALITY *
		First Quarter			Full Year			Full Year			Full Year
		2017			2016			2015			2014
MRI		35.0	%		34.7	%		35.3	%		36.1	%
CT		16.3	%		15.8	%		15.7	%		15.3	%
PET/CT		5.1	%		5.0	%		5.1	%		5.7	%
X-ray		9.3	%		9.3	%		9.6	%		10.2	%
Ultrasound		12.2	%		12.3	%		11.5	%		11.1	%
Mammography		15.8	%		16.5	%		16.4	%		16.5	%
Nuclear Medicine		1.2	%		1.2	%		1.3	%		1.4	%
Other		5.1	%		5.2	%		5.1	%		3.7	%
		100.0	%		100.0	%		100.0	%		100.0	%
Note
* Based upon global payments received from consolidated Imaging Centers from that year'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, 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.

            CONTACTS:

RadNet, Inc.
Mark Stolper, 310-445-2800
Executive Vice President and Chief Financial Officer