Virtual Radiologic Corp. Announces Third Quarter 2008 Financial Results

Reports Revenue of $29.0 Million; Volume Growth of 27 Percent


MINNEAPOLIS, Oct. 27, 2008 (GLOBE NEWSWIRE) -- Virtual Radiologic Corp. (Nasdaq:VRAD), a leading global provider of teleradiology services, today reported financial results for its third quarter ended September 30, 2008.

Third Quarter 2008 Highlights



 * Revenue of $29.0 million up 21%
 * Read volume of 600,386 up 27%
 * Adjusted EBITDA(1) of $6.5 million up 16% to 22.5% of revenue
 * Adjusted net income(2) of $3.6 million resulting in Adjusted
   diluted earnings per share(3) (EPS) of $0.21
 * GAAP net income of $3.6 million; GAAP EPS of $0.21
 * Cash and investments of $34.8 million; the Company has no debt
 * Shares repurchased totaled $1.9 million under the $8.0 million Share
   Repurchase Program

"We are pleased with our strong volume and revenue growth during the third quarter of 2008," said Sean Casey, Virtual Radiologic's Chairman and Chief Executive Officer. "High customer retention rates and new customer acquisitions at record levels, together with steps we have taken to strengthen our business and align our costs, give us the confidence that we are well positioned for future growth and profitability."

Third Quarter Results

Total revenues increased 21% to $29.0 million for the quarter ended September 30, 2008, compared to $24.0 million for the quarter ended September 30, 2007. The increase in revenue over the third quarter of 2007 resulted primarily from a 24% increase in the number of hospitals and medical facilities served to 978 as of September 30, 2008, which represents approximately 15% of all hospitals in the United States.

Adjusted EBITDA increased 16% to $6.5 million for the quarter ended September 30, 2008, compared to $5.6 million for the quarter ended September 30, 2007. This increase resulted primarily from the growth in total revenues and was offset by corresponding increases in professional services and sales, general and administrative expenses.

Adjusted net income was $3.6 million for the quarter ended September 30, 2008, compared to $3.3 million for the quarter ended September 30, 2007, resulting in Adjusted diluted earnings per share of $0.21 and $0.19, respectively.

GAAP net income (loss) available to common stockholders was $3.6 million for the quarter ended September 30, 2008, compared to $(18.0) million for the quarter ended September 30, 2007, resulting in diluted earnings (loss) per share of $0.21 and $(2.22), respectively.

Cash and Cash Equivalents and Short-term Investments totaled $34.8 million at September 30, 2008 from $32.4 million at June 30, 2008.

Share Repurchase Program

During the third quarter the Company completed share repurchases totaling $1.9 million under the $8.0 million share repurchase program announced on August 6, 2008. The program was subsequently completed on October 24, 2008, with a total of 944,760 shares repurchased at an average price of $8.44.

Conference Call Information

The Company will be hosting a conference call October 27, 2008 at 3:30 P.M. central DST to discuss these results and provide a general business update. Participants can access the call by dialing (877) 718-5098 (within the United States and Canada), or (719) 325-4807 (outside the United States and Canada). A live webcast of the conference call will be available on the Company's corporate web site at http://ir.virtualrad.com under "Events and Presentations." A replay of the call will be available approximately three hours after the call has ended and will be available until 11:59 P.M. eastern DST on Thursday, November 27, 2008. To access the replay, dial (719) 457-0820 and use passcode 4056318.

About Virtual Radiologic

Virtual Radiologic Corporation (http://www.virtualrad.com) provides teleradiology solutions to radiology practices and medical centers throughout the United States and internationally. Utilizing market-leading, proprietary workflow technology, Virtual Radiologic's predominantly U.S.-based physicians perform preliminary and final read interpretations for emergent and non-emergent needs -- day or night, 365 days a year. Virtual Radiologic's American Board of Radiology-certified radiologists are collectively licensed in all 50 states. Virtual Radiologic is Joint Commission-certified and serves over 600 clients supporting more than 975 medical facilities.

Safe Harbor for Forward-Looking and Cautionary Statements

Certain statements in this press release are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, in particular, statements about our plans, objectives, strategies and prospects regarding, among other things, our business and results of operations. These statements involve a number of risks, uncertainties and other factors that could cause actual results, performance or achievements of Virtual Radiologic Corporation to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Statements that are not historical facts in this press release are forward-looking statements that involve certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated. Except as required by applicable law, Virtual Radiologic Corporation undertakes no duty to update these forward-looking statements due to new information or as a result of future events.

Notes Regarding the Use of Non-GAAP Financial Measures

The Company records its results of operations in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In addition, the Company is providing certain supplemental non-GAAP information which the Company believes to be an important indicator of its financial performance. These financial measures are not financial measures under GAAP and the Company's calculation of these non-GAAP financial measures may not be comparable to the calculation of similarly titled measures reported by other companies. The Company uses the following non-GAAP financial measures:



 *  Adjusted EBITDA -- operating income excluding the effects of
    depreciation and amortization and non-cash stock-based compensation
    expense;

 *  Adjusted net income -- net income available to common stockholders
    excluding the effects of non-controlling interest, non-cash
    stock-based compensation, net of tax, non-recurring financing charges,
    preferred cash dividends paid and Series A Cumulative Redeemable
    Convertible Preferred Stock accretion;

 *  Adjusted diluted earnings per share -- Adjusted net income divided by
    Pro-forma diluted shares outstanding; and

 *  Pro-forma diluted shares outstanding -- weighted average diluted
    shares outstanding plus weighted average Series A Preferred Stock
    outstanding, common share equivalents and the additional weighted
    average common shares that would have been outstanding had the
    Company's initial public offering been completed as of the beginning
    of the applicable reporting period.

The Company presents these non-GAAP financial measures because it believes that they are a useful indicator of its performance and on going operations. The Company's management also uses these non-GAAP financial measures in order to review and assess its operating performance and its management team in connection with certain incentive programs and the preparation of its financial projections. In addition, the Company believes that these non-GAAP financial measures are useful to investors because such measures are frequently used by securities analysts to measure a company's operating performance without regard to certain items, such as income tax expense, interest expense and depreciation and amortization, which can vary substantially from company to company.

Adjusted EBITDA, Adjusted net income, Adjusted diluted earnings per share and Pro-forma diluted shares outstanding are not measurements of the Company's financial performance under GAAP and should not be considered as an alternative to operating income, net income, earnings per share or any other performance measures derived in accordance with GAAP.



 (1) Adjusted EBITDA consists of operating income excluding the
     effects of depreciation and amortization and non-cash stock-based
     compensation expense. See "Notes Regarding the Use of Non-GAAP
     Financial Measures" and "Supplemental Information and Non-GAAP
     Reconciliations" for more information related to Adjusted EBITDA.

 (2) Adjusted net income consists of net income available to common
     stockholders excluding the effects of non-controlling interest,
     non-cash stock-based compensation, net of tax, non-recurring
     financing charges, preferred cash dividends paid and Series A
     Cumulative Redeemable Convertible Preferred Stock accretion.
     See "Notes Regarding the Use of Non-GAAP Financial Measures"
     and "Supplemental Information and Non-GAAP Reconciliations"
     for more information related to Adjusted net income.

 (3) Adjusted diluted earnings per share consists of Adjusted
     net income divided by Pro-forma diluted shares outstanding. See
     "Notes Regarding the Use of Non-GAAP Financial Measures" and
     "Supplemental Information and Non-GAAP Reconciliations" for more
     information related to Adjusted diluted earnings per share.


                   VIRTUAL RADIOLOGIC CORPORATION

                 CONSOLIDATED STATEMENTS OF OPERATIONS
                              (Unaudited)
                 (in thousands, except per share data)

                             Three Months Ended     Nine Months Ended  
                                September 30,         September 30,
                            -------------------    -------------------
                              2008       2007        2008       2007
                            --------   --------    --------   --------

 Revenue                    $ 29,025   $ 24,033    $ 78,266   $ 63,298
                            --------   --------    --------   --------
 
 Operating costs and
  expenses
  Professional services       12,899     11,748      35,176     32,434
  Sales, general and
   administrative              9,600      7,842      27,667     22,137
  Depreciation and
   amortization                1,286        654       3,357      1,701  
                            --------   --------    --------   --------  
                                                                        
    Total operating
     costs and expenses       23,785     20,244      66,200     56,272
                            --------   --------    --------   --------  
                                                                        

    Operating income           5,240      3,789      12,066      7,026

 Other income (expense)
  Interest expense                --       (435)         --       (442)
  Interest income                185        138         450        252
                            --------   --------    --------   --------
    Total other income
     (expense)                   185       (297)        450       (190)
                            --------   --------    --------   --------
    Income before non-
     controlling
     interest and
     income tax                5,425      3,492      12,516      6,836

 Non-controlling
  interest expense                 2      1,752          10      2,091
                            --------   --------    --------   --------
    Income before
     income tax
     expense                   5,423      1,740      12,506      4,745

 Income tax expense            1,859      1,192       4,942      2,579
                            --------   --------    --------   --------
    Net income                 3,564        548       7,564      2,166

 Cash dividends paid
    Preferred                     --    (13,596)         --    (13,596)
 Series A Cumulative
  Redeemable
  Convertible
  Preferred Stock
   accretion                      --     (4,950)         --    (25,068)
                            --------   --------    --------   --------
    Net income (loss)
     available to
     common
     stockholders           $  3,564   $(17,998)   $  7,564   $(36,498)
                            ========   ========    ========   ========
                                                                        

 Earnings (loss) per
  common share
  Basic                     $   0.21   $  (2.22)   $   0.45   $  (4.91)
  Diluted                   $   0.21   $  (2.22)   $   0.44   $  (4.91)
 Weighted average
  common shares
  outstanding
  Basic                       16,733      8,122      16,689      7,436
  Diluted                     17,186      8,122      17,218      7,436



 ---------------------------------------------------------------------
               SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
                              (Unaudited)
                 (in thousands, except per share data)
 ---------------------------------------------------------------------

                            Three Months Ended     Nine Months Ended
                              September 30,          September 30,
 ---------------------------------------------------------------------
                              2008       2007        2008        2007
                            --------   --------    --------   --------
 Adjusted EBITDA(1)         $  6,524   $  5,610    $ 15,566   $ 12,063
 Adjusted net income(1)     $  3,565   $  3,279    $  7,661   $  6,260
 Adjusted diluted
  earnings per share(1)     $   0.21   $   0.19    $   0.44   $   0.37
 Pro-forma diluted
  shares outstanding(1)       17,186     17,390      17,218     17,116


 (1) See "Notes Regarding the Use of Non-GAAP Financial Measures" and
     "Supplemental Information and Non-GAAP Reconciliations" for more
     information related to the non-GAAP financial measures presented
     in this table

                    VIRTUAL RADIOLOGIC CORPORATION

         SUPPLEMENTAL INFORMATION AND NON-GAAP RECONCILIATIONS
                              (Unaudited)
                 (in thousands, except per share data)

 ---------------------------------------------------------------------
 The following table reconciles the GAAP financial measure of
 Operating income to the non-GAAP supplemental financial measure of
 Adjusted EBITDA which excludes the effects of depreciation and
 amortization and non-cash stock-based compensation expense.
 ---------------------------------------------------------------------


                            Three Months Ended      Nine Months Ended
                               September 30,           September 30,
                            -------------------    -------------------
                              2008        2007       2008       2007
                            --------   --------    --------   --------

 Reconciliation of
  Operating income to
  Adjusted EBITDA:

 Operating income              5,240      3,789      12,066      7,026
                            --------   --------    --------   --------
  Depreciation and
   amortization                1,286        654       3,357      1,701
  Physician non-cash
   stock-based
   compensation                 (419)       875        (978)     2,928
  Employee non-cash
   stock-based
   compensation                  417        292       1,121        408   
                            --------   --------    --------   --------   
                                                                         
 Adjusted EBITDA            $  6,524   $  5,610    $ 15,566   $ 12,063
                            ========   ========    ========   ========   
                                                                         
 ---------------------------------------------------------------------


 ---------------------------------------------------------------------
 The following table reconciles the GAAP financial measure of Net
 income (loss) available to common stockholders to the non-GAAP
 supplemental financial measure of Adjusted net income which excludes
 the effects of non-controlling interest, non-cash stock-based
 compensation expense, net of tax, non-recurring financing charges,
 preferred cash dividends paid, and Series A Cumulative Redeemable
 Convertible Preferred Stock accretion, and presents the related
 Adjusted diluted earnings per share.
 ---------------------------------------------------------------------


                             Three Months Ended     Nine Months Ended
                               September 30,          September 30,
                            -------------------    -------------------
                              2008       2007        2008       2007
                            --------   --------    --------   --------

 Reconciliation of Net income (loss) available to common stockholders
 to Adjusted net income:

 Net income (loss)
  available to common
  stockholders              $  3,564   $(17,998)   $  7,564   $(36,498)
                            --------   --------    --------   --------   
                                                                         
  Non-controlling
   interest expense                2      1,752          10      2,091
  Physician non-cash
   stock-based
   compensation, net
   of tax(1)                    (275)       412        (591)     1,382
  Employee non-cash
   stock-based
   compensation, net
   of tax(1)                     274        137         678        192
  Non-recurring
   financing charges              --        430          --        429
  Preferred cash
   dividends paid                 --     13,596          --     13,596
  Series A Cumulative
   Redeemable
   Convertible Preferred
   Stock accretion                --      4,950          --     25,068
                            --------   --------    --------   --------     
                                                                           
 Adjusted net income        $  3,565   $  3,279    $  7,661   $  6,260
                            ========   ========    ========   ========     
                                                                           

 Adjusted diluted
  earnings per share        $   0.21   $   0.19    $   0.44   $   0.37

 Reconciliation of
  Weighted average
  common shares
  outstanding to
 Pro-forma diluted
  shares outstanding:
 Weighted average
  diluted shares
  outstanding                 16,733      8,122      16,689      7,436
 Weighted average
  Series A Preferred
  Stock outstanding               --      3,627          --      3,627
 Common share
  equivalents                    453      1,641         529      2,053
 Assumed issuance of
  weighted average
  common shares from
  initial public
  offering(2)                     --      4,000          --      4,000
 Pro-forma diluted
  shares outstanding          17,186     17,390      17,218     17,116 
                            ========   ========    ========   ========

 (1) Assumes that the effective tax rate for the three and nine months
     ended September 30, 2007 was equal to the effective tax rate for
     the year ended December 31, 2007.

 (2) Assumes that the issuance of 4.0 million shares of common stock,
     which occurred in conjunction with the completion of the
     Company's initial public offering on November 14, 2007, occurred
     on January 1, 2007.
 ---------------------------------------------------------------------

                    VIRTUAL RADIOLOGIC CORPORATION

   CONDENSED CONSOLIDATED BALANCE SHEETS AND SELECTED OPERATING DATA
                              (Unaudited)





                                                     As of     As of
                                                   Sept. 30,   Dec. 31,
                                                     2008       2007
                                                   --------   --------
                                                      (in thousands)

 Cash and cash equivalents                         $ 27,755   $ 33,487
 Short-term investment                                7,000         --
 Accounts receivable, net                            16,659     12,486
 Other current assets                                 3,154      5,104
 Non-current assets                                  17,394      8,359
                                                   --------   --------
   Total assets                                    $ 71,962   $ 59,436
                                                   ========   ========

 Current liabilities                               $ 10,163   $  8,870
 Non-current liabilities                              1,692        228
                                                   --------   --------
   Total liabilities                                 11,855      9,098
 Non-controlling interest                                18          8
 Total stockholders' equity                          60,089     50,330
                                                   --------   --------

   Total liabilities and stockholders' equity      $ 71,962   $ 59,436
                                                   ========   ========

                                                    As of September 30,
                                                   -------------------
                                                     2008       2007
                                                   --------   --------
 Affiliated radiologists providing services             134        106
 Affiliated radiologists under contract                 147        121
 Customers                                              601        457
 Hospitals and other medical facilities served          978        787


                             Three Months Ended     Nine Months Ended
                                September 30,          September 30,
                            -------------------    -------------------
                              2008       2007        2008       2007
                            --------   --------    --------   --------

 Total reads                 600,386    473,263   1,609,274  1,238,579
 Percentage growth over
   prior year period             27%        56%         30%        71%
 Same site volume
  growth(1)                       1%        22%          7%        17%
 Percentage of revenue
  from final reads               24%        25%         23%        25%

 (1) Same-site volume growth is calculated as the percentage increase
     in the number of reads over the comparable prior year period
     generated by a facility that has been under contract for at least
     three months at the beginning of the measurement period and
     remains a customer throughout that period.

            

Contact Data