• 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.