- Total Net Revenue (“Revenue”) increased 20.9% to $292.7 million in the third quarter of 2019 from $242.1 million in the third quarter of 2018
- Adjusted EBITDA(1) increased 7.7% to $41.0 million in the third quarter of 2019 from $38.1 million in the third quarter of 2018
- Earnings Per Share was $0.06 per share in the third quarter of 2019 as compared with $0.10 from the third quarter of 2018; Adjusting for legal settlements in this year’s third quarter, Adjusted Earnings Per Share was $0.08 per share
- Aggregate procedural volumes increased 13.0% and same center procedural volumes increased 4.7% from last year’s third quarter
- RadNet reaffirms previously announced 2019 guidance levels for Revenue, Adjusted EBITDA(1), Free Cash Flow and Cash Interest Expense
LOS ANGELES, Nov. 12, 2019 (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 340 owned and/or operated outpatient imaging centers, today reported financial results for its third quarter of 2019.
Dr. Howard Berger, President and Chief Executive Officer of RadNet, commented, “I am pleased with the continuing strength of our results relative to those of last year. Our metrics were favorable as compared with last year’s third quarter. We demonstrated strong Revenue and Adjusted EBITDA(1) growth, as well as aggregate and same center revenue and procedural increases.”
Dr. Berger continued, “We continue to make progress furthering the initiatives and integrating the transactions that we completed at the end of last year and earlier this year. During the fourth quarter of last year we commenced operations to provide imaging to approximately 175,000 members of EmblemHealth’s AdvantageCare Physicians (“ACP”) medical group in Long Island and the boroughs of New York City and assumed operations in 26 ACP offices. Concurrent with this, we acquired Medical Arts Imaging, expanding our New York metropolitan reach into Nassau and Suffolk counties of Long Island. We are making steady headway with improved metrics under the ACP contract, capturing more imaging into RadNet owned centers at the expense of local hospitals. We are also nearing completion of the full integration of the Medical Arts centers into the RadNet network. In California, we are also making measured progress in integrating the operations of Kern Radiology, which we acquired earlier this year.”
Dr. Berger added, “Last week, we announced a multifaceted strategic partnership with Whiterabbit.ai to address mammography compliance and improved diagnostics for breast cancer. The partnership will initially focus on processes and technology, including the use of machine learning and artificial intelligence, to drive women into RadNet facilities for their annual or bi-annual mammogram exams. We completed a pilot program which we began in July, and we are deploying the first phase of the program to all RadNet operations across our core markets. The relationship with Whiterabbit.ai emphasizes our interest in identifying leading-edge technologies that we believe will transform how diagnostic imaging services will be delivered in the future, particularly ones that could lower our operating costs and provide improvements to patient experience. As part of the partnership, RadNet has become a shareholder in Whiterabbit.ai, and we will be co-developing further technologies including those focused on image interpretation and consumer-facing applications.”
Third Quarter Financial Results
For the third quarter of 2019, RadNet reported Revenue of $292.7 million, Adjusted EBITDA(1) of $41.0 million and Net Income of $3.2 million. Revenue increased $50.5 million (or 20.9%) and Adjusted EBITDA(1) increased $2.9 million (or 7.7%) from last year’s same quarter.
Net Income decreased $1.8 million over the third quarter of 2018. Per share Net Income for the third quarter of 2019 was $0.06, compared to per share Net Income in the third quarter of 2018 of $0.10 (based upon a weighted average number of diluted shares outstanding of 50.4 million in 2019 and 48.6 million in 2018). Adjusting for $920,000 (the tax-effected impact of $1.2 million) of legal settlements in this year’s third quarter, Adjusted Net Income was $0.08 per share in the third quarter of 2019.
Affecting Net Income in the third quarter of 2019 were certain non-cash expenses or non-recurring items including: $1.4 million of non-cash employee stock compensation expense resulting from the vesting of certain options and restricted stock; $52,000 of severance paid in connection with headcount reductions related to cost savings initiatives; $917,000 loss on the sale or disposal of certain capital equipment; $1.2 million in legal settlements; and $1.1 million of amortization of deferred financing costs, other non-cash interest and loan discounts related to our credit facilities.
For the third quarter of 2019, as compared with the prior year’s third quarter, MRI volume increased 11.8%, CT volume increased 14.9% and PET/CT volume increased 8.5%. Overall volume, taking into account routine imaging exams, inclusive of x-ray, ultrasound, mammography and other exams, increased 13.0% 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 2019 and 2018, MRI volume increased 5.3%, CT volume increased 6.5% and PET/CT volume decreased 0.1%. Overall same-center volume, taking into account routine imaging exams, inclusive of x-ray, ultrasound, mammography and other exams, increased 4.7% compared with the prior year’s same quarter.
Nine Month Financial Results
For the nine months ended September 30, 2019, RadNet reported Revenue of $853.3 million, Adjusted EBITDA(1) of $117.2 million and Net Income of $4.4 million. Revenue increased $135.4 million (or 18.9%), Adjusted EBITDA(1) increased $19.9 million (or 20.5%) and Net Income increased $1.3 million over the first nine months of 2018. Net Income Per Share for the nine month period ended September 30, 2019 was $0.09 per diluted share, compared to Net Income of $0.06 per diluted share in corresponding nine month period of 2018 (based upon a weighted average number of fully diluted shares outstanding of 50.1 million in 2019 and 48.5 million in 2018). Adjusting for $938,000 (the tax-effected impact of $1.2 million) of legal settlements in the third quarter, Adjusted Net Income was $0.11 per share nine months ended September 30, 2019.
Affecting operating results in the nine months ended September 30, 2019 were certain non-cash expenses or non-recurring items including: $7.0 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; $2.0 million loss on the sale of certain capital equipment; $1.2 million in legal settlements; and $3.1 million of amortization of deferred financing costs, other non-cash interest and loan discounts related to our credit facilities.
2019 Guidance Update
RadNet reaffirms its previously announced 2019 guidance ranges as follows:
Total Net Revenue$1,100 million – $1,150 millionAdjusted EBITDA(1)$158 million – $168 millionFree Cash Flow (a)$45 million – $55 million Cash Interest Expense$43 million – $48 million
RadNet is increasing its 2019 guidance range for Capital Expenditures as follows:
Guidance Range after 2nd QuarterRevised Guidance RangeCapital Expenditures (b)$63 million – $68 million$65 million – $70 million
(a) Defined by the Company as Adjusted EBITDA(1) less total capital expenditures and cash paid for interest.(b) Net of proceeds from the sale of equipment, imaging centers and joint venture interests.
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 2019 results on Tuesday, November 12th, 2019 at 7:30 a.m. Pacific Time (10:30 a.m. Eastern Time).
Conference Call Details:
Date: Tuesday, November 12, 2019
Time: 10:30 a.m. Eastern Time
International Dial-In Number:
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 or http://www.radnet 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 from the U.S., or for international callers, and using the passcode 5482581.
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 340 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 8,000 employees. For more information, visit .
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 2019 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.
Executive Vice President and Chief Financial Officer
RADNET, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA) September 30, 2019 December 31, 2018 (unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents$37,688 $10,389 Accounts receivable, net 150,748 148,919 Due from affiliates 1,385 595 Prepaid expenses and other current assets 47,857 46,288 Assets held for sale 2,041 2,499 Total current assets 239,719 208,690 PROPERTY, EQUIPMENT AND RIGHT-OF-USE ASSETS Property and equipment, net 352,310 345,729 Operating lease right-of-use assets 438,558 – Total property, equipment and right-of-use assets 790,868 345,729 OTHER ASSETS Goodwill 439,867 418,093 Other intangible assets 43,613 40,593 Deferred financing costs 1,670 1,354 Investment in joint ventures 36,868 37,973 Deferred tax assets, net of current portion 34,423 31,506 Deposits and other 30,872 25,392 Total assets$1,617,900 $1,109,330 LIABILITIES AND EQUITY CURRENT LIABILITIES Accounts payable, accrued expenses and other$175,894 $181,028 Due to affiliates 18,592 13,089 Deferred revenue 1,908 2,398 Current portion of deferred rent – 3,735 Current portion of finance lease 4,095 – Current portion of operating lease 69,308 – Current portion of notes payable and long term debt 39,719 33,653 Current portion of obligations under capital lease – 5,614 Total current liabilities 309,516 239,517 LONG-TERM LIABILITIES Deferred rent, net of current portion – 31,542 Finance lease, net of current portion 4,042 – Operating lease, net of current portion 410,958 – Notes payable, net of current portion 662,605 626,507 Obligations under capital lease, net of current portion – 6,505 Other non-current liabilities 15,707 5,006 Total liabilities 1,402,828 909,077 EQUITY RadNet, Inc. stockholders‘ equity: Common stock – $.0001 par value, 200,000,000 shares authorized; 50,254,136 and 48,977,485 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively 5 5 Additional paid-in-capital 260,463 242,835 Accumulated other comprehensive (loss) income (12,250) 2,259 Accumulated deficit (113,555) (117,915)Total RadNet, Inc.‘s stockholders‘ equity 134,663 127,184 Noncontrolling interests 80,409 73,069 Total equity 215,072 200,253 Total liabilities and equity$1,617,900 $1,109,330
RADNET, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)(unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2019
REVENUE Service fee revenue$261,908 $217,552 $762,751 $641,136 Revenue under capitation arrangements 30,784 24,596 90,587 76,799 Total revenue 292,692 242,148 853,338 717,935 OPERATING EXPENSES Cost of operations, excluding depreciation and amortization 254,383 208,511 743,997 634,200 Depreciation and amortization 20,490 17,480 60,193 53,422 Loss (gain) on sale and disposal of equipment 917 (373) 1,990 (2,204)Severance costs 52 82 1,054 1,087 Total operating expenses 275,842 225,700 807,234 686,505 INCOME FROM OPERATIONS 16,850 16,448 46,104 31,430 OTHER INCOME AND EXPENSES Interest expense 11,895 10,663 36,589 31,343 Equity in earnings of joint ventures (1,955) (2,822) (6,072) (9,547)Other expenses 2 7 1,271 13 Total other expenses 9,942 7,848 31,788 21,809 INCOME BEFORE INCOME TAXES 6,908 8,600 14,316 9,621 Provision for income taxes (1,816) (2,827) (3,556) (2,835)NET INCOME 5,092 5,773 10,760 6,786 Net income attributable to noncontrolling interests 1,897 734 6,400 3,679 NET INCOME ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS$3,195 $5,039 $4,360 $3,107 BASIC NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS$0.06 $0.10 $0.09 $0.06 DILUTED NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS$0.06 $0.10 $0.09 $0.06 WEIGHTED AVERAGE SHARES OUTSTANDING Basic 49,807,460 48,010,726 49,597,138 47,937,215 Diluted 50,360,360 48,615,392 50,113,306 48,481,305
RADNET, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS(IN THOUSANDS)(unaudited) Nine Months Ended September 30, 2019
2018CASH FLOWS FROM OPERATING ACTIVITIES Net income$10,760 $6,786 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 60,193 53,422 Amortization of operating lease assets 49,948 – Equity in earnings of joint ventures (6,072) (9,547)Distributions from joint ventures 3,924 21,783 Amortization deferred financing costs and loan discount 3,103 2,924 Loss (gain) on sale and disposal of equipment 1,990 (2,204)Stock-based compensation 6,963 6,557 Noncash item in other expenses (559) – Change in fair value of contingent consideration (1,749) – Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in purchase transactions: Accounts receivable (3,467) (9,641)Other current assets (1,569) (5,680)Other assets (5,770) (1,209)Deferred taxes (4,230) 1,531 Operating leases (49,721) – Deferred rent – 2,397 Deferred revenue (490) 353 Accounts payable, accrued expenses and other 19,349 20,386 Net cash provided by operating activities 82,603 87,858 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of imaging facilities (27,150) (17,393)Equity investments at fair value (143) (2,200)Purchase of property and equipment (68,269) (62,595)Proceeds from sale of equipment 760 2,587 Proceeds from sale of equity interests in a joint venture 132 – Nulogix return of capital 792 – Equity contributions in existing joint ventures (103) (2,000)Net cash used in investing activities (93,981) (81,601)CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on notes and leases payable (4,778) (4,374)Payments on Term Loan Debt (29,918) (24,810)Proceeds from issuance of new debt 97,144 – Distributions paid to noncontrolling interests (1,818) (913)Proceeds from sale of noncontrolling interest 5,275 – Contribution from a noncontrolling partners 750 – Purchase of noncontrolling interests – (200)Proceeds from revolving credit facility 251,200 44,000 Payments on revolving credit facility (279,200) (44,000)Proceeds from issuance of common stock upon exercise of options 50 10 Net cash provided by (used in) financing activities 38,705 (30,287)EFFECT OF EXCHANGE RATE CHANGES ON CASH (28) (65)NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 27,299 (24,095)CASH AND CASH EQUIVALENTS, beginning of period 10,389 51,322 CASH AND CASH EQUIVALENTS, end of period$37,688 $27,227 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period for interest$36,058 $27,136
RECONCILIATION OF GAAP NET INCOME (LOSS) ATTRIBUTABLE TO RADNET, INC. COMMON SHAREHOLDERS TO ADJUSTED EBITDA(1)
Three Months Ended September 30, 2019 2018 Net Income Attributable to RadNet, Inc. Common Shareholders$3,195 $5,039 Plus Interest Expense 11,895 10,663 Plus Provision for Income Taxes 1,816 2,827 Plus Depreciation and Amortization 20,490 17,480 Plus (Gain) Loss on Sale of Equipment 917 (373)Plus Severance Costs 52 82 Plus Other Expenses 2 7 Plus Non-Cash Employee Stock-Based Compensation 1,381 1,667 Plus Transaction Costs – EmblemHealth/ACP – 681 Plus Legal Settlements 1,248 – Adjusted EBITDA(1)
$ 40,996 $ 38,073 Nine Months Ended September 30, 2019 2018 Net Income Attributable to RadNet, Inc. Common Shareholders$4,360 $3,107 Plus Interest Expense 36,589 31,343 Plus Provision for Income Taxes 3,557 2,835 Plus Depreciation and Amortization 60,193 53,422 Plus (Gain) Loss on Sale of Equipment 1,990 (2,204)Plus Severance Costs 1,054 1,087 Plus Other Expenses 1,271 13 Plus Non-Cash Employee Stock-Based Compensation 6,964 6,557 Plus Transaction Costs – EmblemHealth/ACP – 681 Plus Gain on Sale of Equipment Attributable to Noncontrolling Interest – 440 Plus Legal Settlements 1,248 – Adjusted EBITDA(1)
$ 117,226 $ 97,281
PAYOR CLASS BREAKDOWN** Third Quarter 2019 Commercial Insurance57.8%Medicare21.0%Capitation10.5%Workers Compensation/Personal Injury3.7%Medicaid2.4%Other4.5%Total100.0% **Calculated as percentages of global payments received from that period‘s dates of services.
RADNET PAYMENTS BY MODALITY * Third Quarter Full Year Full Year Full Year 2019 2018 2017 2016 MRI36.0% 35.2% 34.9% 34.7%CT16.7% 16.5% 16.2% 15.8%PET/CT5.5% 5.7% 5.2% 5.0%X-ray8.1% 8.4% 8.9% 9.3%Ultrasound12.5% 12.2% 12.1% 12.3%Mammography15.0% 15.8% 16.3% 16.5%Nuclear Medicine1.0% 1.1% 1.1% 1.2%Other5.0% 5.1% 5.2% 5.2% 100.0% 100.0% 100.0% 100.0% Note * Based upon global payments received from that period‘s dates of service.
(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.