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

  • 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 RangeRevised 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.

Thursday, August 9, 2018 - 06:00