Market Overview

RadNet Reports Second Quarter Financial Results to Include Record Revenue and Reaffirms Guidance Ranges

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  • Total Net Revenue increased 6.3% to $244.4 million in the second quarter of 2018 from $230.0 million in the second quarter of 2017

  • Adjusted EBITDA(1) increased 3.0% to $38.2 million in the second quarter of 2018 from $37.0 million in the second quarter of 2017

  • Earnings Per Share was $0.11 in the second quarter of 2018, flat from the second quarter of 2017

  • Aggregate procedural volumes increased 3.7%  and same center volumes increased 1.0% as compared with the second quarter of 2017

  • RadNet enters into its first east coast capitation arrangement with EmblemHealth

  • RadNet reaffirms previously announced 2018 guidance levels

LOS ANGELES, Aug. 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 304 owned and/or operated outpatient imaging centers, today reported financial results for its second quarter of 2018.

Dr. Howard Berger, Chairman and Chief Executive Officer of RadNet, commented, "After being severely impacting by adverse weather conditions during the first quarter, I am pleased that our performance has recovered so effectively.  During the second quarter, we had strong revenue and EBITDA performance that is in line with our initial 2018 projections.  We again are demonstrating steady and consistent revenue growth, positive same store procedural gains and higher EBITDA as compared with prior year periods."

Dr. Berger continued, "We are excited about the remainder of 2018.  We expect to be very active during the second half of this year in some of our largest joint ventures.  We commenced operations with our partner MemorialCare in Southern California and will be looking to expand that joint venture beyond its current 34 centers.  We will also look to grow our New Jersey Imaging Networks JV with RWJ Barnabas during the second half of this year through expanding its access to capital and evaluating strategic acquisition opportunities.  For our consolidated operations, we will continue to focus on regional market business development, cost containment and evaluating strategic acquisitions."

Dr. Berger added, "On October 1st, we are scheduled to commence operations for our recently announced capitation partnership with EmblemHealth in the New York Metropolitan area in 26 new locations.  We will be investing into and expanding the size and capabilities of many of these locations to initially service about 200,000 patients who are part of Emblem's AdvantageCare medical group as well as position us to provide imaging services to other Emblem and non-Emblem patient populations.  This is an important strategic relationship for our company and we are excited to bring an alternative payment model to the east coast for diagnostic imaging.  We expect to enjoy the same success with capitation on the east coast as we've had for over two decades with similar partnerships in California.  We believe we are on the forefront of performance-based payment models and will look to grow these arrangements in the coming quarters."

Second Quarter Financial Results

For the second quarter of 2018, RadNet reported Revenue of $244.4 million and Adjusted EBITDA(1) of $38.2 million.  Revenue increased $14.4 million (or 6.3%) and Adjusted EBITDA(1) increased $1.1 million (or 3.0%) from the second quarter of last year.

For the second quarter, RadNet reported Net Income of $5.4 million, an increase of approximately $100,000 over the second quarter of 2017.  Per share diluted Net Income for the second quarter was $0.11, compared to the same amount in the second quarter of 2017 (based upon a weighted average number of diluted shares outstanding of 48.5 million and 47.2 million for these periods in 2018 and 2017, respectively).

Affecting Net Income in the second quarter of 2018 were certain non-cash expenses and non-recurring items including:  $1.1 million of non-cash employee stock compensation expense resulting from the vesting of certain options and restricted stock; $279,000 of severance paid in connection with headcount reductions related to cost savings initiatives; $105,000 loss on the sale of certain capital equipment; and $976,000 of non-cash amortization of deferred financing costs and loan discount on debt issuances.

For the second quarter of 2018, as compared with the prior year's second quarter, MRI volume increased 6.4%, CT volume increased 8.7% and PET/CT volume increased 13.3%.  Overall volume, taking into account routine imaging exams, inclusive of x-ray, ultrasound, mammography and other exams, increased 3.7% over the prior year's second quarter.  On a same-center basis, including only those centers which were part of RadNet for both the second quarters of 2018 and 2017, MRI volume increased 1.2%, CT volume increased 3.2% and PET/CT volume increased 0.1%.  Overall same-center volume, taking into account routine imaging exams, inclusive of x-ray, ultrasound, mammography and other exams, increased 1.0% over the prior year's same quarter.

Six Month Financial Results

For the six months ended June 30, 2018, RadNet reported Revenue of $475.8 million and Adjusted EBITDA(1) of $59.2 million.  Revenue increased $16.8 million (or 3.7%) and Adjusted EBITDA(1) decreased $6.5 million (or -9.9%) from the same six month period last year.  The decline in Adjusted EBITDA(1) for the six month period was mainly due to a significant loss of Revenue during the first quarter as a result of adverse weather conditions in the northeast.

For the six month period in 2018, RadNet reported a Net Loss of $(1.9) million as compared with Net Income of $4.1 million for the six month period in 2017.  Per share Net Loss for the six month period in 2018 was $(0.04), compared to per share Net Income in the prior year's same period of $0.09 (based upon a weighted average number of basic shares outstanding of 47.9 million and fully diluted shares outstanding of 47.1 million for these periods in 2018 and 2017, respectively).

Affecting Net Loss for the six month period of 2018 were certain non-cash expenses and non-recurring items including:  $4.9 million of non-cash employee stock compensation expense resulting from the vesting of certain options and restricted stock; $1.0 million of severance paid in connection with headcount reductions related to cost savings initiatives; and $1.9 million of combined non-cash amortization of deferred financing costs and loan discounts related to financing fees paid as part of our existing credit facilities.

2018 Guidance Update

RadNet reaffirms its previously announced 2018 guidance ranges, as amended after its first quarter results, as follows:

Total Net Revenue   $945 million - $970 million
Adjusted EBITDA(1)   $140 million - $150 million
Cash Interest Expense   $33 million - $38 million
Free Cash Flow Generation (a)   $45 million - $55 million

 
     

   (a) Defined by the Company as Adjusted EBITDA(1) less total capital expenditures and cash paid for interest.

RadNet has revised its Capital Expenditure guidance level upwards by $10 million to reflect additional investment it will make in conjunction with the recently announced EmblemHealth partnership in New York:

  Original Guidance Range Revised Guidance Range
Capital Expenditures (b) $50 million - $55 million $60 million - $65 million
     

   (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 second quarter 2018 results on Thursday, August 9th, 2018 at 7:30 a.m. Pacific Time (10:30 a.m. Eastern Time).

Conference Call Details:

Date:  Thursday, August 9, 2018
Time:  10:30 a.m. Eastern Time
Dial In-Number:  866-575-6539
International Dial-In Number:  323-794-2575

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=130839 or http://www.radnet.com under the "About RadNet" menu section and "News and Press 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 3215507.

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 304 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 7,400 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)
                     
                June 30,   December 31,
                  2018       2017  
                (unaudited)    
ASSETS
CURRENT ASSETS              
  Cash and cash equivalents     $   16,252     $   51,322  
  Accounts receivable, net           152,174         155,518  
  Due from affiliates             516         2,343  
  Prepaid expenses and other current assets        34,690         26,168  
  Assets held for sale             2,499         -   
       Total current assets         206,131         235,351  
PROPERTY AND EQUIPMENT, NET         286,484         244,301  
OTHER ASSETS              
  Goodwill             275,272         256,776  
  Other intangible assets           39,795         40,422  
  Deferred financing costs           1,624         1,895  
  Investment in joint ventures         54,077         52,435  
  Deferred tax assets, net of current portion       30,930         30,852  
  Deposits and other             18,671         6,947  
       Total assets       $   912,984     $   868,979  
LIABILITIES AND EQUITY
CURRENT LIABILITIES              
  Accounts payable, accrued expenses and other $   144,467     $   135,809  
  Due to affiliates             10,450         16,387  
  Deferred revenue             2,759         2,606  
  Current portion of deferred rent         2,713         2,714  
  Current portion of notes payable       30,219         30,224  
  Current portion of obligations under capital leases     3,364         3,866  
       Total current liabilities         193,972         191,606  
LONG-TERM LIABILITIES            
  Deferred rent, net of current portion       28,040         26,251  
  Notes payable, net of current portion       557,257         572,365  
  Obligations under capital lease, net of current portion     4,053         2,672  
  Other non-current liabilities         4,728         6,160  
       Total liabilities           788,050         799,054  
EQUITY                
  RadNet, Inc. stockholders' equity:        
  Common stock - $.0001 par value, 200,000,000 shares authorized;      
    48,284,925, and 47,723,915 shares issued and outstanding at                
    June 30, 2018 and December 31, 2017, respectively     5         5  
  Additional paid-in-capital           235,713         212,261  
  Accumulated other comprehensive income (loss)     3,677         (548 )
  Accumulated deficit             (152,090 )       (150,158 )
    Total RadNet, Inc.'s stockholders' equity       87,305         61,560  
  Noncontrolling interests           37,629         8,365  
       Total equity           124,934         69,925  
        Total liabilities and equity   $   912,984     $   868,979  
                     

 

RADNET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT SHARE DATA)
(unaudited)
                Three Months Ended   Six Months Ended
                June 30,   June 30,
                  2018       2017       2018       2017  
NET REVENUE                        
    Service fee revenue, net of contractual allowances and discounts     $   214,056         $   426,806  
    Provision for bad debts                 (11,854 )           (23,500 )
    Net service fee revenue         $   219,416         202,202     $   423,584         403,306  
    Revenue under capitation arrangements         24,979         27,812         52,203         55,721  
              Total net revenue           244,395         230,014         475,787         459,027  
OPERATING EXPENSES                      
    Cost of operations, excluding depreciation and amortization       210,055         198,611         425,689         404,065  
    Depreciation and amortization           18,086         16,612         35,942         33,266  
    Loss (gain) on sale and disposal of equipment         105         453         (1,831 )       408  
    Severance costs             279         177         1,005         380  
              Total operating expenses         228,525         215,853         460,805         438,119  
INCOME FROM OPERATIONS           15,870         14,161         14,982         20,908  
                             
OTHER INCOME AND EXPENSES                    
    Interest expense             10,641         10,303         20,680         20,543  
    Equity in earnings of joint ventures           (3,748 )       (2,994 )       (6,725 )       (4,922 )
    Gain on sale of imaging centers           -          (2,301 )       -          (2,301 )
    Other expenses (income)             5         7         6         (240 )
              Total other expenses           6,898         5,015         13,961         13,080  
INCOME BEFORE INCOME TAXES           8,972         9,146         1,021         7,828  
    Provision for income taxes           (2,505 )       (3,523 )       (8 )       (3,065 )
NET INCOME               6,467         5,623         1,013         4,763  
    Net income attributable to noncontrolling interests       1,061         313         2,945         663  
NET INCOME (LOSS) ATTRIBUTABLE TO RADNET, INC.                 
    COMMON STOCKHOLDERS       $   5,406     $   5,310     $   (1,932 )   $   4,100  
                             
BASIC  NET INCOME (LOSS) PER SHARE                   
    ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS $   0.11     $   0.11     $   (0.04 )   $   0.09  
DILUTED NET INCOME (LOSS) PER SHARE                   
    ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS $   0.11     $   0.11     $   (0.04 )   $   0.09  
WEIGHTED AVERAGE SHARES OUTSTANDING                  
    Basic               47,969,003         46,756,276         47,896,216         46,662,420  
    Diluted               48,526,033         47,195,898         47,896,216         47,068,563  
                             

 

RADNET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(unaudited)
                Six Months Ended June 30,
                  2018       2017    
CASH FLOWS FROM OPERATING ACTIVITIES           
                       
   Net income        $   1,013     $   4,763    
   Adjustments to reconcile net income           
     to net cash provided by operating activities:           
   Depreciation and amortization        35,942         33,266    
   Provision for bad debts        -          23,500    
   Equity in earnings of joint ventures        (6,725 )       (4,922 )  
   Distributions from joint ventures        7,083         3,993    
   Amortization deferred financing costs and loan discount        1,949         1,636    
   (Gain) loss on sale and disposal of equipment        (1,831 )       408    
   Gain on sale of imaging centers        -          (2,301 )  
   Stock-based compensation        4,890         4,314    
   Changes in operating assets and liabilities, net of assets           
      acquired and liabilities assumed in purchase transactions:           
        Accounts receivable        3,344         (29,445 )  
        Other current assets        (4,228 )       4,553    
        Other assets        (7,697 )       (835 )  
        Deferred taxes        (78 )       1,940    
        Deferred rent        1,788         1,830    
        Deferred revenue        153         445    
        Accounts payable, accrued expenses and other        11,345         7,014    
           Net cash provided by operating activities        46,948         50,159    
 CASH FLOWS FROM INVESTING ACTIVITIES           
   Purchase of imaging facilities        (14,094 )       (9,904 )  
   Investment at cost        (2,200 )       (500 )  
   Purchase of property and equipment        (45,133 )       (42,647 )  
   Proceeds from sale of equipment        2,324         63    
   Proceeds from sale of imaging facilities        -          5,627    
   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        (61,103 )       (45,968 )  
 CASH FLOWS FROM FINANCING ACTIVITIES           
   Principal payments on notes and leases payable        (3,393 )       (3,769 )  
   Payments on Term Loan Debt                  (16,540 )       (12,125 )  
   Distributions paid to noncontrolling interests        (913 )       (655 )  
   Deferred financing costs and debt discount        -          (570 )  
   Proceeds from sale of noncontrolling interest, net of taxes        -          4,850    
   Contributions from noncontrolling partners        -          125    
   Proceeds from revolving credit facility        19,800         139,400    
   Payments on revolving credit facility        (19,800 )       (139,400 )  
         Net cash used in financing activities        (20,846 )       (12,144 )  
 EFFECT OF EXCHANGE RATE CHANGES ON CASH        (69 )       22    
 NET DECREASE IN CASH AND CASH EQUIVALENTS        (35,070 )       (7,931 )  
 CASH AND CASH EQUIVALENTS, beginning of period        51,322         20,638    
 CASH AND CASH EQUIVALENTS, end of period    $   16,252     $   12,707    
                       
 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION           
   Cash paid during the period for interest    $   17,509     $   19,023    
                       

 

 

 

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

(IN THOUSANDS)

               
              Three Months Ended
              June 30,
                2018       2017  
                   
                   
Net Income Attributable to RadNet, Inc. Common Shareholders   $   5,406     $   5,310  
Plus Interest Expense               10,641         10,303  
Plus Provision for Income Taxes             2,505         3,523  
Plus Depreciation and Amortization             18,086         16,612  
Plus Other Expenses               5         7  
Plus Severance Costs               279         177  
Less Gain on Sale of Imaging Centers           -          (2,301 )
Plus Loss on Sale of Equipment             105         453  
Plus Expenses of Divested/Closed Operations           -          1,200  
Plus Reimbursable Legal Expenses             -          723  
Plus Non Cash Employee Stock Compensation           1,146         1,038  
  Adjusted EBITDA(1)       $    38,173     $    37,045  
                   
                   
              Six Months Ended
              June 30,
                2018       2017  
                   
                   
Net (Loss) Income Attributable to RadNet, Inc. Common Shareholders   $   (1,932 )   $   4,100  
Plus Interest Expense               20,680         20,543  
Plus Provision for Income Taxes             8         3,065  
Plus Depreciation and Amortization             35,942         33,266  
Plus Other Expenses               6         10  
Plus Severance Costs               1,005         380  
Less Gain on Sale of Imaging Centers           -          (2,301 )
Plus Gain on Sale of Equipment Attributable to Noncontrolling Interest       440         -   
Plus (Gain) Loss on Sale of Equipment           (1,831 )       408  
Plus Expenses of Divested/Closed Operations           -          1,200  
Plus Reimbursable Legal Expenses             -          723  
Plus Non Cash Employee Stock Compensation           4,890         4,314  
  Adjusted EBITDA(1)       $    59,208     $    65,708  
                   


                 
PAYOR CLASS BREAKDOWN**
                 
                 
    Second Quarter            
    2018              
                 
Commercial Insurance   59.3 %            
Medicare   20.1 %            
Capitation   11.0 %            
Workers Compensation/Personal Injury   3.7 %            
Medicaid   2.8 %            
Other   3.2 %            
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 *
                 
                 
    Second Quarter   Full Year   Full Year   Full Year
    2018   2017   2016   2015
                 
MRI         35.3 %        34.9 %         34.7 %        35.3 %
CT   16.7 %   16.2 %   15.8 %   15.7 %
PET/CT   5.7 %   5.2 %   5.0 %   5.1 %
X-ray   8.5 %   8.9 %   9.3 %   9.6 %
Ultrasound   12.0 %   12.1 %   12.3 %   11.5 %
Mammography   15.6 %   16.3 %   16.5 %   16.4 %
Nuclear Medicine   1.1 %   1.1 %   1.2 %   1.3 %
Other   5.1 %   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, 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.

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