RadNet Reports Record Second Quarter Financial Results and Adjusts Upwards 2014 Guidance Ranges for Revenue and Adjusted EBITDA(1)

FOR IMMEDIATE RELEASE

• Adjusted EBITDA(1), Income Before Income Taxes and Net Income Per Share are the highest quarterly results in the Company’s history

• Adjusted EBITDA(1) increased 11.3%, from $30.0 million in the second quarter of 2013 to $33.4 in the second quarter of 2014 

• Sequentially, as compared to the first quarter of 2014, Total Net Revenue (“Revenue”) increased 6.0%, and Adjusted EBITDA(1) increased 20.9%

• Earnings Per Share increased from $0.07 per share in the second quarter of 2013 to $0.12 per share in the second quarter of 2014;  Income Before Income Taxes increased $3.8 million (excluding non-recurring gains and losses from the sale of imaging centers and Loss on Early Extinguishment of Debt) over last year’s second quarter

• Implementation from the previously announced $30 million cost savings initiatives is substantially complete and continues to enhance operating margins; additional cost savings measures are being instituted

• Aggregate and same-center procedural volumes appear to by aided by the reported over 8 million enrollees in state and privately managed health insurance exchanges, including over 1.4 million enrollees in California

• 2014 guidance levels for Revenue and Adjusted EBITDA(1) are increased  

LOS ANGELES, California, August 8, 2014 – RadNet, Inc. (NASDAQ: RDNT), a national leader in providing high-quality, cost-effective, fixed-site outpatient diagnostic imaging services through a network of 251 owned and/or operated outpatient imaging centers, today reported financial results for its second quarter of 2014.

Dr. Howard Berger, President and Chief Executive Officer of RadNet, commented, “We are very pleased with our performance in the second quarter.  We reported record Adjusted EBITDA⁽¹⁾ and pre-tax earnings and increased aggregate and same store volume from last year’s second quarter.  Our sequential growth in Revenue, Adjusted EBITDA⁽¹⁾ and Net Income was even more pronounced when compared with the first quarter of 2014.  Helping us mitigate the $22 million full-year 2014 Medicare negative impact has been our execution of a $30 million cost savings plan we began implementing in the fourth quarter of last year.  Although this cost savings plan is substantially complete, we continue to execute on an additional $10 million of annualized cost savings we identified and announced several months ago.  We expect to begin benefitting from these additional cost savings in the third and fourth quarters of 2014.”

Dr. Berger continued, “Consistent with our goal to reduce debt, we repaid $12.9 million of net debt during the second quarter, which included retiring the remaining approximately $6.5 million of our 10 3/8% senior notes during the quarter, the most expensive part of our capital structure.  As a result of our refinancing transaction, we face no near term maturities.  Our first lien term loan matures in 2018 and our second lien term loan matures in 2021.  We believe the current capital structure, which has an average debt cost of about 5.5%, provides us the financial flexibility to comfortably manage and grow our business.  Our refinancing transaction completed in March 2014 saves us approximately $5 million of annual interest expense.  This, combined with our projection of reducing capital expenditures to approximately $10 million for the next two quarters, are the reasons why we believe RadNet can generate $30 million or more of free cash flow over the remainder of the year.”

Dr. Berger added, “We continue to experience strong volumes, which has been partially driven by participation of previously uninsured or underinsured individuals who are now enrollees of state run or privately managed healthcare exchanges, particularly those in California.  We expect the current level of utilization of imaging services will continue for the remainder of 2014.”

Second Quarter Financial Results

For the second quarter of 2014, RadNet reported Revenue of $179.1 million, Adjusted EBITDA⁽¹⁾ of $33.4 million and Net Income of $5.1 million, respectively.  Revenueincreased $2.6 million (or 1.5%), Adjusted EBITDA⁽¹⁾ increased $3.4 million (or 11.3%) and Net Income increased $2.5 million, respectively, over the second quarter of 2013.  Per share Net Income for the second quarter was $0.12, compared to per share Net Income in the second quarter of 2013 of $0.07 (based upon a weighted average number of diluted shares outstanding of 43.3 million and 39.8 million for these periods in 2014 and 2013, respectively).

Affecting Net Income in the second quarter of 2014 were certain non-cash expenses and non-recurring items including:  $611,000 of non-cash employee stock compensation expense resulting from the vesting of certain options and restricted stock; $383,000 of severance paid in connection with headcount reductions related to cost savings initiatives; $46,000 loss on the sale of certain capital equipment; $1.4 million of combined non-cash amortization and write-off of Deferred Financing Expense and discount on issuance and refinance of debt related to financing fees paid as part of our existing credit facilities; and $471,000 loss on the extinguishment of debt related to redeeming in April 2014 the remaining portion of senior unsecured notes.

For the second quarter of 2014, as compared to the prior year’s second quarter, MRI volume increased 2.6%, CT volume increased 5.7% and PET/CT volume decreased 0.3%.  Overall volume, taking into account routine imaging exams, inclusive of x-ray, ultrasound, mammography and other exams, increased 6.2% 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 2014 and 2013, MRI volume increased 0.5%, CT volume increased 3.5% and PET/CT volume decreased 7.6%.  Overall same-center volume, taking into account routine imaging exams, inclusive of x-ray, ultrasound, mammography and other exams, increased 4.0% over the prior year’s same quarter.

Six Month Financial Results 

For the six months ended June 30, 2014, RadNet reported Revenue, Adjusted EBITDA⁽¹⁾ and Net Income of $348.0 million, $61.1 million and $3.7 million (excluding the tax adjusted loss on extinguishment of debt), respectively.  Revenuedecreased $1.5 million (or negative 0.4%), Adjusted EBITDA⁽¹⁾ increased $5.5 million (or 9.8%) and Net Income increased $3.4 million (also excluding the tax adjusted loss on extinguishment of debt and gain on sale of imaging centers), respectively, over the first six months of 2013.  Net Income for the six month period ended June 30, 2014 was $0.09 per diluted share (excluding the tax adjusted loss on extinguishment of debt), compared to Net Income of $0.03 per diluted share in corresponding six month period of 2013 (based upon a weighted average number of fully diluted shares outstanding of 42.2 million and 40.0 million for these periods in 2014 and 2013, respectively).

Affecting operating results in the six months ended June 30, 2014 were certain non-cash expenses and non-recurring items including:  $1.6 million of non-cash employee stock compensation expense resulting from the vesting of certain options and  restricted stock; $864,000 of severance paid in connection with headcount reductions related to cost savings initiatives; $292,000 loss on the sale of certain capital equipment; $3.2 million of combined non-cash amortization and write-off of Deferred Financing Expense and discount on issuance and refinance of debt related to financing fees paid as part of our existing credit facilities; and $15.9 million loss on the extinguishment of debt related to the Company’s March 25, 2014 refinancing of its senior unsecured notes with a new second lien term loan.

2014 Guidance Update

RadNet updates the previously announced 2014 fiscal year guidance ranges as follows:

(a) Service Fee Revenue, net of contractual allowances plus Revenue under capitation arrangements.
(b) Net of proceeds from the sale of equipment, imaging centers and joint venture interests.
(c) Defined by the Company as Adjusted EBITDA⁽¹⁾ less total capital expenditures and cash paid for interest. 

Dr. Berger highlighted, “Based upon the strong second quarter results along with increasing confidence we have about the remaining two quarters of 2014, we have increased our Revenue and Adjusted EBITDA⁽¹⁾ guidance levels for 2014.  We continue to experience strong volumes, particularly on the West Coast where there has been a disproportionately high participation in the state run and privately managed healthcare exchanges.  Additionally, subsequent to the end of the second quarter in early July, we completed four small tuck-in acquisitions which should contribute $10-$12 million of annualized revenue.  These acquisitions, which include the transaction we previously announced with Healthcare Partners, required us to deploy only approximately $7 million of capital.  Although our focus remains on repaying our debt, these small tuck-in acquisitions will remain a part of our disciplined and measured growth plan.  We also slightly raised our capital expenditure projection for the year to reflect some additional investment we will be making in California to build capacity necessary to service the expanded demand we have been experiencing for our services.”

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 2014 results on Friday, August 8th, 2013 at 7:30 a.m. Pacific Daylight Time (10:30 a.m. Eastern Daylight Time).

Conference Call Details:

Date:  Friday, August 8, 2014
Time:  10:30 a.m. EDT
Dial In-Number:  800-946-0712
International Dial-In Number:  719-325-4764

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=110348 or http://www.radnet.com under the “About RadNet” menu section and “News & Press Releases” sub-menu of the website.  An archived replay of the call will also be available and can be accessed by dialing 877-870-5176 from the U.S., or 858-384-5517 for international callers, and using the passcode 9939359.

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 a national market leader providing high-quality, cost-effective diagnostic imaging services through a network of 251 fully-owned and operated outpatient imaging centers.  RadNet’s core markets include California, Maryland, Delaware, Rhode Island, New Jersey and New York.  Together with affiliated radiologists, and inclusive of full-time and per diem employees and technicians, RadNet has a total of approximately 6,000 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 2014 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.

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

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.

RadNet, Inc.
Mark Stolper
310-445-2800
Executive Vice President and Chief Financial Officer