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9 August, 2016

RadNet Reports Second Quarter Financial Results and Reaffirms Previously Announced 2016 Guidance Levels

FOR IMMEDIATE RELEASE

  • Total Net Revenue, modified for working capital adjustments related to New York acquisitions, (“Adjusted Revenue”),  increased 10.0% to $224.6 million in the second quarter of 2016 from $204.3 million in the second quarter of 2015
  • Adjusted EBITDA(1) increased 4.7% to $35.1 million in the second quarter of 2016 from $33.5 million in the second quarter of 2015 
  • Sequentially, as compared to the first quarter of 2016, Adjusted Revenue increased 3.8%, and Adjusted EBITDA(1) increased 29.6%
  • Earnings Per Share was $0.09 per share, also modified for New York acquisition-related tax-effective adjustments  (“Adjusted Earnings Per Share”), in the second quarter of 2016, an increase from $0.08 from the second quarter of 2015
  • Aggregate procedural volumes increased 9.6% and same center volumes increased 0.4% as compared with the second quarter of 2015
  • Completed successful refinancing of the majority of our debt facilities on July 1st, effectively extending maturities and providing additional operating flexibility
  • Commenced operations of our first health system joint venture in California with Dignity Health 

LOS ANGELES, California, August 9, 2016 – RadNet, Inc. (NASDAQ: RDNT), a national leader in providing high-quality, cost-effective, fixed-site outpatient diagnostic imaging services through a network of 310 owned and/or operated outpatient imaging centers, today reported financial results for its second quarter of 2016.

Dr. Howard Berger, President and Chief Executive Officer of RadNet, commented, “I am very pleased with our operational results this quarter and the improvements we are making to our business.  Normalizing our results for the one-time non-cash gains and losses in the quarter related to our New York acquisitions, our business produced double digit revenue growth, positive same store procedural growth for the ninth quarter in a row and higher EBITDA and Earnings as compared with last year’s second quarter.  Additionally, sequentially from our first quarter of this year, our EBITDA increased almost 30%, raising EBITDA margins from 12.5% in the first quarter to 15.6% in the second quarter of 2016.”  

Dr. Berger continued, “I’m excited about the opportunities we have in front of us to continue to expand and improve our business organically, particularly our ability to leverage best practices of the most successful aspects of our business on the east and west coasts.  For example, we are pursuing several new health system partnerships on the west coast, a business model that has traditionally been a strength of our east coast operations, and we are looking to expand existing joint ventures on the east coast.  During the quarter, we announced and commenced operations with our first California health system partnership with Dignity Health in the city of Glendale.  This announcement and other initiatives we are working on in California with our Breastlink and oncology capabilities have created keen interest from other prominent health systems.  We are more encouraged than ever that the joint venture partnership model that we’ve successfully demonstrated in the mid-Atlantic and New Jersey marketplaces will become more prominent for our west coast operations in the coming quarters.”

Dr. Berger added, “Another example of the sharing of best practices between our east and west coast operations is the opportunity to bring capitation and risk-based contracting outside of our California marketplace, where it has been such an integral aspect of how we’ve successfully grown our business.  Diagnostic Imaging Group, which we acquired last year, had a small risk-based component of its business.  With the combination of DIG’s assets with our other significant New York metropolitan operations which include Lenox Hill Radiology, New York Radiology Partners and our Mid-Rockland Imaging centers, we have begun to initiate meaningful conversations with medical groups on the east coast interested in our risk-based exclusive network contracting capabilities.  I’m more confident than ever that this will be the successful model of the post-Affordable Care Act era, and that RadNet will be the first imaging center company to meaningfully align with major capitated medical groups, health systems and Accountable Care Organizations across all of our target markets.  We expect to be in a position to discuss these opportunities more meaningfully before year end.”

“From a financial perspective, we’ve never been in a stronger position to grow our business.  We completed the refinancing of our senior debt facilities on July 1st, where we lengthened the maturities on our debt to 2023 (in the case of our first lien term loan) and 2021 in the case of our senior revolving credit facility.  At the same time, we availed ourselves of additional operating flexibility to continue to grow our business and pursue the types of opportunities for expansion that we envision will be available to us over the next several years.  We believe that securing our capital structure in a low interest rate environment was prudent and allows us to focus on operations without having concern about risks associated with the capital markets in years to come,” finished Dr. Berger.

Second Quarter Financial Results

For the second quarter of 2016, RadNet reported Adjusted Revenue of $224.6 million, after adding back $6.1 million of one-time non-cash working capital adjustments related to New York acquisitions which served to lower GAAP Revenue by such an amount during the quarter.  Adjusted EBITDA(1) for the second quarter was $35.1 million.  Adjusted Revenue increased $20.3 million (or 10.0%) and Adjusted EBITDA(1) increased $1.6 million (or 4.7%) from the second quarter of last year.

For the second quarter, RadNet reported Adjusted Net Income of $4.4 million, which is modified by removing certain tax effected non-cash items including (i) the $6.1 million of working capital adjustments mentioned above; (ii) a $5.0 million settlement gain on the return of common stock relating to the acquisition of Diagnostic Imaging Group; and (iii) a $221,000 one-time adjustment to depreciation in conjunction with the finalization of the purchase price allocation related to the Diagnostic Imaging Group acquisition.  Adjusted Net Income increased $987,000 over the second quarter of 2015.

Per share Adjusted Net Income for the second quarter was $0.09, compared to per share Adjusted Net Income in the second quarter of 2015 of $0.08 (based upon a weighted average number of diluted shares outstanding of 46.9 million and 44.7 million for these periods in 2016 and 2015, respectively).

Affecting Net Income in the second quarter of 2016 were certain non-cash expenses and non-recurring items including:  $5.0 million settlement gain related to the return of common stock in connection with our acquisition of Diagnostic Imaging Group; $6.1 million charge to Revenue related to working capital adjustments also pertaining to acquisitions we completed in New York; $221,000 of one-time depreciation expense related to the finalization of the purchase price allocation related to the Diagnostic Imaging Group acquisition; $1.0 million of non-cash employee stock compensation expense resulting from the vesting of certain options and restricted stock; $173,000 of severance paid in connection with headcount reductions related to cost savings initiatives; $441,000 loss on the sale of certain capital equipment; and $1.4 million of non-cash amortization of deferred financing costs and discount on debt issuances.

For the second quarter of 2016, as compared with the prior year’s second quarter, MRI volume increased 7.5%, CT volume increased 8.9% and PET/CT volume increased 4.8%.  Overall volume, taking into account routine imaging exams, inclusive of x-ray, ultrasound, mammography and other exams, increased 9.6% 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 2016 and 2015, MRI volume increased 3.0%, CT volume increased 4.4% and PET/CT volume increased 1.3%.  Overall same-center volume, taking into account routine imaging exams, inclusive of x-ray, ultrasound, mammography and other exams, increased 0.4% over the prior year’s same quarter.

Six Month Financial Results

For the six months ended June 30, 2016, RadNet reported Adjusted Revenue of $441.0 million, after adding back $6.1 million of one-time non-cash working capital adjustments related to NY acquisitions which served to lower GAAP Revenue by such an amount during the six month period.  Adjusted EBITDA(1) for the six month period in 2016 was $62.2 million. Adjusted Revenue increased $55.4 million (or 14.4%) and Adjusted EBITDA(1) increased $8.5 million (or 15.8%) from the same six month period last year.

For the six month period in 2016, RadNet reported Adjusted Net Income of $2.6 million, which is modified by removing certain tax effected non-cash items including (i) the $6.1 million of working capital adjustments mentioned above; (ii) a $5.0 million settlement gain on the return of common stock relating to the acquisition of Diagnostic Imaging Group; and (iii) a $110,000 one-time adjustment to depreciation in conjunction with the finalization of the purchase price allocation related to the Diagnostic Imaging Group acquisition.

Adjusted Net Income increased $3.8 million over the six month period of 2015. Per share Adjusted Net Income for the six month period in 2016 was $0.06, compared to per share Adjusted Net Loss in the prior year’s same period of $(0.03) (based upon a weighted average number of diluted shares outstanding of 47.0 million and 43.1 million for these periods in 2016 and 2015, respectively).

Affecting operating results in the six months ended June 30, 2016 were certain non-cash expenses and non-recurring items including:  $5.0 million settlement gain related to the return of common stock in connection with the acquisition of Diagnostic Imaging Group; $6.1 million charge to Revenue related to a working capital adjustment also pertaining to acquisitions we completed in New York; $110,000 of one-time depreciation expense related to the finalization of the purchase price allocation related to the Diagnostic Imaging Group acquisition;  $3.8 million of non-cash employee stock compensation expense resulting from the vesting of certain options and restricted stock; $340,000 of severance paid in connection with headcount reductions related to cost savings initiatives; $441,000 loss on the sale of certain capital equipment; and $2.7 million of non-cash amortization of deferred financing costs and discount on debt issuances.

2016 Guidance Update

RadNet reaffirms its previously announced 2016 guidance ranges as follows:

Total Net Revenue (a)$870 million - $910 million
Adjusted EBITDA(1)$130 million - $140 million
Capital Expenditures (b)$50 million - $55 million
Cash Interest Expense$37 million - $40 million
Free Cash Flow Generation (c)$40 million - $50 million

(a)   Note the change from prior years.  This metric is now presented after the subtraction of bad debt.
(b)   Net of proceeds from the sale of equipment, imaging centers and joint venture interests.  Represents an increase of $5 million from originally announced guidance range.
(c)   Defined by the Company as Adjusted EBITDA(1) less total capital expenditures and cash paid for interest. 

Dr. Berger added, “We are on track to meet our guidance ranges for the year.  All ranges remain unchanged from what we announced earlier in the year with the exception of increasing our targeted capital expenditure range by $5 million.  This increase is to fund a replacement program of our computed radiography (CR x-ray) scanners to provide them with digital wireless transmitting capabilities.  This will improve quality, lower labor costs and comply with a new CMS ruling which would otherwise lower our x-ray reimbursement from traditional CR systems beginning in 2018.”

 

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 310 owned and/or operated outpatient imaging centers. RadNet's core markets include California, Maryland, Delaware, New Jersey, New York and Rhode Island. 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 7,300 employees. For more information, visit http://www.radnet.com.

9 August, 2016 | Financial News, Earnings Report