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6 November, 2014

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

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FOR IMMEDIATE RELEASE

  • Total Net Revenue (“Revenue”), Adjusted EBITDA(1) and Net Income (adjusted for extraordinary losses or gains) are the highest quarterly results in the Company’s history

  • Revenue increased 5.1%, from $175.2 million in the third quarter of 2013 to $184.1 in the third quarter of 2014

  • Adjusted EBITDA(1) increased 31.7%, from $25.4 million in the third quarter of 2013 to $33.4 in the third quarter of 2014

  • Earnings Per Share increased from a net loss of $(0.01) per share in the third quarter of 2013 to net income of $0.10 per share in the third quarter of 2014; Income Before Income Taxes increased $9.0 million (excluding non-recurring gains and losses on the sale and disposal of equipment) over last year’s third quarter

  • Aggregate and same-center procedural volumes increased 9.2% and 6.3%, respectively, from the third quarter of 2013; volumes continue to be enhanced by services provided to enrollees in state and privately managed health insurance exchanges

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

LOS ANGELES, California, November 6, 2014  – RadNet, Inc. (NASDAQ: RDNT), a national leader in providing high-quality, cost-effective, fixed-site outpatient diagnostic imaging services through a network of 263 owned and/or operated outpatient imaging centers, today reported financial results for its third quarter of 2014.

Dr. Howard Berger, President and Chief Executive Officer of RadNet, commented, “We are very pleased with our performance in the third quarter. We reported record quarterly Revenue, Adjusted EBITDA(1) and Net Income, all of which were substantial increases from last year’s third quarter. Benefits from our $30 million annualized cost savings program along with meaningful improvements in aggregate and same center procedural volumes drove this financial performance.”

Dr. Berger continued, “We continue to experience strong volumes from new patients enrolled in state and privately managed healthcare exchanges as part of the Affordable Care Act. Additionally, contribution from the small tuck-in acquisitions we recently completed and new capitation contracts we have begun servicing are also partially driving our improving top line performance. On the expense side, we incurred some additional costs during the quarter from the ramp-up of several newly acquired facilities, increased staffing and training of call center and front office personnel at certain California locations addressing greater patient volumes and from the continued implementation of our eRAD information technology solutions to several of RadNet’s regional operations. These additional costs were partially mitigated by our continued execution on $10 million of annualized additional cost savings we identified and announced several months ago.”

“In addition to the growth we are driving in our core imaging center business, we are continuing to pursue other avenues of expansion in newer initiatives such as the sale and licensing of our eRAD suite of information technology solutions, the provision of inpatient and outsourced professional radiology and management services and the establishment of joint ventures with hospitals and health systems. The traction we are experiencing with these newer lines of business gives me confidence that these initiatives will become more significant drivers of growth and future business opportunities,” added Dr. Berger.

Third Quarter Financial Results

For the third quarter of 2014, RadNet reported Revenue of $184.1 million, Adjusted EBITDA(1) of $33.4 million and Net Income of $4.5 million, respectively. Revenue increased $8.9 million (or 5.1%), Adjusted EBITDA(1) increased $8.0 million (or 31.7%) and Net Income increased $4.9 million, respectively, over the third quarter of 2013. Per share Net Income for the third quarter was $0.10, compared to per share Net Loss in the third quarter of 2013 of $(0.01) (based upon a weighted average number of diluted shares outstanding of 44.0 million and 39.2 million for these periods in 2014 and 2013, respectively).

Affecting Net Income in the third quarter of 2014 were certain non-cash expenses and non-recurring items including: $433,000 of non-cash employee stock compensation expense resulting from the vesting of certain options and restricted stock; $112,000 of severance paid in connection with headcount reductions related to cost savings initiatives; $1.3 million loss on the sale and disposal of equipment and tenant improvements; and $1.3 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.

For the third quarter of 2014, as compared to the prior year’s third quarter, MRI volume increased 8.0%, CT volume increased 11.9% and PET/CT volume increased 0.8%. Overall volume, taking into account routine imaging exams, inclusive of x-ray, ultrasound, mammography and other exams, increased 9.2% 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 2014 and 2013, MRI volume increased 5.6%, CT volume increased 10.3% and PET/CT volume decreased 1.6%. Overall same-center volume, taking into account routine imaging exams, inclusive of x-ray, ultrasound, mammography and other exams, increased 6.3% over the prior year’s same quarter.

Nine Month Financial Results 

For the nine months ended September 30, 2014, RadNet reported Revenue, Adjusted EBITDA(1) and Net Income of $532.0 million, $94.5 million and $8.6 million (excluding the tax adjusted losses on extinguishment of debt and sale and disposal of equipment), respectively. Revenue increased $7.4 million (or 1.4%), Adjusted EBITDA(1) increased $13.5 million (or 16.7%) and Net Income increased $6.9 million (also excluding the tax adjusted losses on extinguishment of debt and sale and disposal of equipment), respectively, over the first nine months of 2013. Net Income for the nine month period ended September 30, 2014 was $0.20 per diluted share (excluding the tax adjusted losses on extinguishment of debt and sale and disposal of equipment), compared to Net Income of $0.04 per diluted share in corresponding nine month period of 2013 (based upon a weighted average number of fully diluted shares outstanding of 40.7 million and 39.9 million for these periods in 2014 and 2013, respectively).

Affecting Net Income in the nine months ended September 30, 2014 were certain non-cash expenses and non-recurring items including: $2.1 million of non-cash employee stock compensation expense resulting from the vesting of certain options and restricted stock; $976,000 of severance paid in connection with headcount reductions related to cost savings initiatives; $1.6 million loss on the sale of certain capital equipment; $4.4 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 $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:

 Original 2014 GuidanceRevised Guidance After 3rd Quarter 2014
Revenue (a)$700 - $730mm$730-$745mm
Adjusted EBITDA(1)$110 - $120mm$123-$128mm
Capital Expenditures (b)$40 - $45mm$50 - $52mm
Cash Interest Expense$38 - $42mm$40 – 42mm
Free Cash Flow Generation (c)(2)$30 - $40mm$30 - $36mm

(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 third quarter results along with continuing confidence we have about the remainder of 2014, we have increased our Revenue and Adjusted EBITDA(1) guidance levels for 2014 from the original guidance levels set at the beginning of the year as well as from the increased levels we set after each of the first and second quarters. 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. In response to this, we increased our capital spending to provide additional capacity and access, and to accommodate further expected patients from the Affordable Care Act open enrollment, which begins on November 15th. It was recently estimated by the Los Angeles Times that in California, within its Covered California insurance exchange, participation is expected to increase from the current 1.2 million enrollees to 1.7 million enrollees after open enrollment.”

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 2014 results on Thursday, November 6th, 2014 at 7:30 a.m. Pacific Time (10:30 a.m. Eastern Time).

Conference Call Details:

Date: Thursday, November 6, 2014
Time: 10:30 a.m. Eastern Time
Dial In-Number: 800-306-6784
International Dial-In Number: 913-312-1378

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=111721 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 8962332.

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 263 fully-owned and operated outpatient imaging centers. RadNet’s core markets include California, Maryland, Delaware, Rhode Island, New Jersey and New York. In addition, RadNet provides radiology information technology solutions, teleradiology professional services and other 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 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.

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

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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

6 November, 2014