RadNet Reports Second Quarter Financial Results and Reaffirms 2013 Full-Year Guidance

FOR IMMEDIATE RELEASE

• Service Fee Revenue, net of contractual allowances and discounts (“Revenue”) was $183.5 million, an increase of ­­­­6.8% from $171.7  million in the second quarter of 2012

• Adjusted EBITDA⁽¹⁾ was $30.0 million, a decrease of 4.2% from $31.4 million in the prior year’s second quarter

• On a sequential basis, comparing the second quarter’s performance in 2013 with the first quarter of 2013, Revenue increased $3.7 million (or 2.1%), Adjusted EBITDA⁽¹⁾ increased $4.5 million (or 17.5%) and Net Income increased $4.0 million

•  RadNet reports diluted per share Net Income of $0.07 compared to diluted per share Net Income $0.07 in the prior year’s second quarter; RadNet reports Income Before Income Taxes of $5.3 million compared to Income Before Income Taxes of $3.3 million in the prior year’s second quarter

•  Same Center procedural volumes decreased 0.3% as compared with the second quarter of 2012

• RadNet reaffirms 2013 guidance levels  

LOS ANGELES, California, August 9, 2013 – RadNet, Inc. (NASDAQ: RDNT), a national leader in providing high-quality, cost-effective, fixed-site outpatient diagnostic imaging services through a network of 248 owned and/or operated outpatient imaging centers, today reported financial results for its second quarter of 2013.

Second Quarter Financial Results

For the second quarter of 2013, RadNet reported Revenue, Adjusted EBITDA⁽¹⁾ and Net Income Attributable to RadNet, Inc. Common Stockholders (“Net Income”) of $183.5 million, $30.0 million and $2.7 million, respectively.  Revenueincreased $11.7 million (or 6.8%), Adjusted EBITDA⁽¹⁾ decreased $1.3 million (or 4.2%) and Net Income decreased $0.3 million, respectively, over the second quarter of 2012.  Net Income for the second quarter was $0.07 per diluted share, compared to a Net Income of $0.07 per diluted share in the second quarter of 2012 (based upon a weighted average number of diluted shares outstanding of 40.4 million and 39.4 million for these periods in 2013 and 2012, respectively).  Income Before Income Taxes in the second quarter of 2013 was $5.3 million as compared with Income Before Income Taxes of $3.3 million in the second quarter of 2012.

On a sequential basis, comparing the second quarter’s performance in 2013 with the first quarter of 2013, Revenue increased $3.7 million (or 2.1%), Adjusted EBITDA(1) increased $4.5 million (or 17.5%) and Net Income increased $4.0.

Affecting operating results in the second quarter of 2013 were certain non-cash expenses and non-recurring items including:  $630,000 of non-cash employee stock compensation expense resulting from the vesting of certain options and warrants; $117,000 of severance paid in connection with headcount reductions related to cost savings initiatives from previously announced acquisitions; $192,000 loss on the disposal of certain capital equipment; $1.2 million of non-cash amortization of deferred loan costs and discount on issuance of debt as part of our existing credit facilities; and $2.1 million gain on the sale of an imaging center.

For the second quarter of 2013, as compared to the prior year’s second quarter, MRI volume increased 10.7%, CT volume decreased 0.6% and PET/CT volume decreased 2.4%.  Overall volume, taking into account routine imaging exams, inclusive of x-ray, ultrasound, mammography and other exams, increased 7.8% 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 2013 and 2012, MRI volume increased 0.3%, CT volume decreased 6.3% and PET/CT volume decreased 5.9%.  Overall same-center volume, taking into account routine imaging exams, inclusive of x-ray, ultrasound, mammography and other exams, decreased 0.3% over the prior year’s same quarter.

Dr. Howard Berger, President and Chief Executive Officer of RadNet, commented “We are pleased with the improvement of our business relative to the first quarter of this year.  Procedural volumes, Revenue, EBITDA and Net Income increased on a sequential basis from this year’s first quarter performance.  Additionally, our same center procedural volumes showed some stabilization, as they were relatively consistent with the second quarter of 2012.  In aggregate terms, our Revenue and procedural volumes increased from last year’s second quarter principally resulting from the contribution of the Lenox Hill operations we acquired on December 31, 2012.  Lenox Hill is performing according to plan and we continue to see further opportunities to grow in the Manhattan marketplace.”

“The operating environment continues to be a difficult one.  Payors continue to manage utilization and to pressure all imaging providers with reduced pricing.  RadNet is responding with continuing efforts to reduce costs by capitalizing on our scale and engaging private payors in pricing discussions that reflect our importance to the healthcare delivery systems in the local markets in which we operate.  We will also continue to engage in discussions with community hospitals, health systems and medical groups about partnership opportunities that will bring efficiency and long-term strength to our imaging operations”, added Dr. Berger.

Dr. Berger continued, “Furthermore we will continue to address our capital structure and look for ways we can reduce our cost of capital.  In April, during the early part of our second quarter, we completed a re-pricing of our Senior Secured Term Loan, which should save us approximately $5 million of cash interest payments annually.”

Acquisition of Manhattan Diagnostic Radiology

On August 1, 2013, subsequent to the end of the second quarter, we completed the acquisition of Manhattan Diagnostic Radiology (MDR), a multi-modality operation with four imaging centers located in Manhattan, New York, for cash consideration of $2.3 million.  The facilities will be operated in conjunction with the Lenox Hill Radiology group of centers.  As part of this transaction, we expect to close one of MDR’s facilities.  Over time, aspects of our respective Lenox Hill and MDR businesses, such as patient traffic, certain equipment and operating personnel, may be consolidated with each other in ways that better serve our patient and referring physician communities and which drive cost efficiencies.

“This transaction will increase our breadth of services, patient capacity and efficiency in Manhattan.  We continue to be excited about opportunities within Manhattan and other boroughs of New York City.  Manhattan, in particular, represents a new core market for us, and we believe there are further opportunities there for expansion, growth and consolidation.  Manhattan has patient density unlike any other market we have seen, and we believe we can operate there with great efficiency and strong margins,” added Dr. Berger.

Six Month Financial Results

For the six months ended June 30, 2013, RadNet reported Revenue, Adjusted EBITDA⁽¹⁾ and Net Income of $363.2 million, $55.6 million and $1.3 million, respectively.  Revenueincreased $23.0 million (or 6.8%), Adjusted EBITDA⁽¹⁾ decreased $4.9 million (or 8.0%) and Net Income decreased $1.5 million, respectively, over the first six months of 2012.  Net Income for the six month period ended June 30, 2013 was $0.03 per diluted share, compared to Net Income of $0.07 per diluted share in corresponding six month period of 2012 (based upon a weighted average number of fully diluted shares outstanding of 40.4 million and 39.2 million for these periods in 2013 and 2012, respectively).

Affecting operating results in the six months ended June 30, 2013 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 warrants; $240,000 of severance paid in connection with headcount reductions related to cost savings initiatives from previously announced acquisitions; $362,000 loss on the disposal of certain capital equipment; $2.1 million of non-cash amortization of deferred loan costs and discount on issuance of debt as part of our existing credit facilities; and $2.1 million gain on the sale of an imaging center.

2013 Guidance

RadNet reaffirms the following previously announced 2013 fiscal year guidance ranges:

(a)      Net of proceeds from the sale of equipment.
(b)     Defined by the Company as Adjusted EBITDA(1) less total capital expenditures and cash paid for interest.

Dr. Berger added, “Confirming our guidance implies that as we experienced in the second quarter of 2013 relative to the first quarter, we are expecting continued improvement in our business during the second half of 2013.  We remain optimistic this is achievable, due in part, to the contribution of cost savings initiatives from our information technology implementation of our eRAD subsidiary’s Radiology Information System (RIS) and Picture Archiving Communication System (PACS) and voice recognition transcription solutions and expected operational improvement in some of our east coast regions which experienced softness in the first half of 2013.”

Dr. Berger continued, “It is also important to note that we front-loaded much of our 2013 capital expenditures into the first half of 2013.  As a result, we are only budgeting to spend an additional between $12 million and $15 million for the remainder of the year.  Combined with projected cash interest expense in the second half of 2013 of between $20 million and $22 million as a result of our Senior Term Loan re-pricing transaction in April, we expect significantly more free cash flow generation over the next two quarters.  We anticipate utilizing accumulated cash for debt repayment or in conjunction with exploring opportunities that may arise to refinance our Senior Unsecured Notes, the most expensive part of our debt capital structure, when they become callable in 2014.”

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 RadNet’s second quarter 2013 results on Friday, August 9th, 2013 at 7:30 a.m. Pacific Time (10:30 a.m. Eastern Daylight Time).

Conference Call Details:

Date:  Friday, August 9, 2013
Time:  10:30 a.m. Eastern Time
Dial In-Number:  888-395-3227
International Dial-In Number:  719-325-2472

It is recommended that participants dial in approximately 5 to 10 minutes prior to the start of the 10:30 a.m. call. 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 9517719.

There will also be a simultaneous live webcast of the conference call which can be accessed under "News" in the RadNet Investor Relations section of the company website at http://www.radnet.com/ or you may use the link audio feed and archived recording of the conference call available at http://public.viavid.com/index.php?id=105643.

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 248 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 6,300 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 2013 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. 

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 that have 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 an 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.

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