RadNet Reports Record Fourth Quarter and Full Year 2017 Results and Releases 2018 Financial Guidance

• For the fourth quarter of 2017, RadNet reports record Total Net Revenue (“Revenue”) of $235.6 million and record Adjusted EBITDA⁽¹⁾ of $40.7 million; Revenue increased 4.7% and Adjusted EBITDA⁽¹⁾ increased 16.6% as compared with the same quarter in 2016

• For full year 2017, RadNet reports record Revenue of $922.2 million and record Adjusted EBITDA⁽²⁾ of $142.5 million; Revenue increased 4.3% and Adjusted EBITDA⁽¹⁾ increased 7.1% as compared with full year 2016

• Net Income Attributable to RadNet, Inc. Common Stockholders for the fourth quarter was $6.3 million (or $0.13 per diluted share), compared to Net Income of $3.7 (or $0.08 per diluted share) in the fourth quarter of 2016; this is adjusted for a one-time $13.5 million non-cash increase to income tax expense in the 2017 quarter as a result of the Tax Cut and Jobs Act of 2017 and the revaluation of RadNet’s deferred tax asset. (“Adjusted Net Income”)

• For full year 2017, Adjusted Net Income was $13.6 million (or $0.29 per diluted share), compared with Net Income of $7.2 million (or $0.15 per diluted share) in 2016

• Financial leverage was reduced from 4.8x Net Debt to Adjusted EBITDA⁽¹⁾ at year end 2016 to 4.0x at the end of 2017

• In the fourth quarter, same center volumes increased 2.5% compared with last year’s fourth quarter

• RadNet announces 2018 guidance ranges, anticipating increases in Revenue, Adjusted EBITDA⁽¹⁾ and Free Cash Flow and a decrease in capital expenditures

LOS ANGELES, California, March 8, 2018 – RadNet, Inc. (NASDAQ: RDNT), a national leader in providing high-quality, cost-effective, fixed-site outpatient diagnostic imaging services through a network of 297 owned and/or operated outpatient imaging centers, today reported financial results for its fourth quarter and full year ended December 31, 2017.

Financial Results

Fourth Quarter Report:

For the fourth quarter of 2017, RadNet reported Revenue of $235.6 million, Adjusted EBITDA⁽¹⁾ of $40.7 million and Adjusted Net Income of $6.3 million.  Revenue increased $10.6 million (or 4.7%), Adjusted EBITDA⁽¹⁾ increased $5.8 million (or 16.6%) and Net Income increased $2.6 million over the fourth quarter of 2016. 

Adjusted Net Income (adjusted for a one-time $13.5 million non-cash increase to our income tax expense in the quarter as a result of the Tax Cut and Jobs Act of 2017 and the revaluation of our deferred tax asset) for the fourth quarter was $0.13 per diluted share, compared to a Net Income of $0.08 per diluted share in the fourth quarter of 2016.  These per share values are based upon a weighted average number of diluted shares outstanding of 47.9 million in the fourth quarter of 2017 and 46.4 million of diluted shares outstanding in the fourth quarter of 2016.

Affecting Adjusted Net Income in the fourth quarter of 2017 were certain non-cash expenses and non-recurring items including:  $944,000 of non-cash employee stock compensation expense resulting from the vesting of certain options and restricted stock; $255,000 of severance paid in connection with headcount reductions related to cost savings initiatives; $314,000 loss on the disposal of certain capital equipment; and $974,000 of amortization and write off of deferred financing costs and loan discount related to our existing credit facilities.

For the fourth quarter of 2017, as compared with the prior year’s fourth quarter (and adjusting for the sale of our Rhode Island subsidiary in the second quarter of 2017), MRI volume increased 4.7%, CT volume increased 8.1% and PET/CT volume increased 11.6%.  Overall volume, taking into account routine imaging exams, inclusive of x-ray, ultrasound, mammography and other exams, increased 3.4% over the prior year’s fourth quarter.  On a same-center basis, including only those centers which were part of RadNet for both the fourth quarters of 2017 and 2016, MRI volume increased 3.1%, CT volume increased 7.2% and PET/CT volume increased 9.9%.  Overall same-center volume, taking into account routine imaging exams, inclusive of x-ray, ultrasound, mammography and other exams, increased 2.5% from the prior year’s same quarter.

Dr. Howard Berger, President and Chief Executive Officer of RadNet, commented “I am very pleased with our fourth quarter results.  It was the best financial quarter in our Company’s history, and included record Revenue and Adjusted EBITDA.  During 2017, we furthered our strategic plan in all aspects of our business:  drove same center growth; established new joint ventures; expanded existing joint ventures; completed strategic acquisitions in our core markets; and grew our capitation business.  Further, we completed the divestitures of some non-core assets and made important investments in our infrastructure to position ourselves to be an effective and scalable platform from which to grow.  Healthcare is focused on migrating services towards ambulatory and lower cost settings.  Not only do I believe RadNet is well-positioned to capitalize on this trend, but I believe that we can continue to play a pivotal role with health plans, insurance companies, large medical groups and progressive health systems to accelerate and improve the changing landscape of the healthcare delivery system.”

Annual Report:

For full year 2017, the Company reported Revenue of $922.2 million, Adjusted EBITDA⁽¹⁾ of $142.5 million and Adjusted Net Income of $13.6 million.  Revenue increased $37.7 million (or 4.3%) and Adjusted EBITDA⁽¹⁾ increased $9.5 million (or 7.1%).  Adjusted Net Income for 2017 was $0.29 per diluted share, compared to Net Income of $0.15 per diluted share in 2016 (based upon a weighted average number of diluted shares outstanding of 47.4 million and 46.7 million in 2017 and 2016, respectively).

Affecting Adjusted Net Income in 2017 were certain non-cash expenses and non-recurring items including:  $6.8 million of non-cash employee stock compensation expense resulting from the vesting of certain options and restricted stock; $1.8 million of severance paid in connection with headcount reductions related to cost savings initiatives; $1.1 million loss on the disposal of certain capital equipment; $3.1 million gain on the sale of imaging centers; $3.2 million of expenses related to divested and closed operations; and $3.5 million of amortization and write off of deferred financing fees and discount on issuance of debt related to our existing credit facilities and refinancing transaction.

For the year ended December 31, 2017, as compared to 2016 (and adjusting for the sale of our Rhode Island centers from both periods), MRI volume increased 4.8%, CT volume increased 6.7% and PET/CT volume increased 7.4%.  Overall volume, taking into account routine imaging exams, inclusive of x-ray, ultrasound, mammography and other exams, increased 3.1% for the twelve months of 2017 over 2016.

Dr. Berger remarked, “In 2017, we demonstrated many of the aspects of our business that make RadNet unique within healthcare.  We announced the establishment of significant joint ventures in Southern California with two large and well-respected health systems, Cedars Sinai and MemorialCare and expanded our existing joint venture with the RWJBarnabas health system in New Jersey as well as two of our venture partners in Maryland.  We divested non-core assets, which included our facilities in Rhode Island and our Breastlink and oncological operations in California and redeployed the proceeds of the divestitures into highly strategic acquisitions in California, Maryland and Delaware.  Our most significant acquisition was the purchase of Diagnostic Imaging Associates, the other significant outpatient operator in Delaware, which made us the largest outpatient provider of imaging services in that state.  We also made strategic enhancements to the capabilities of our eRAD information technology platform, which is now fully deployed across the RadNet facilities.  In 2017, we also made important investments in our infrastructure, particularly to our revenue cycle department by recruiting additional senior management talent, expanding customer service and patient collection teams and investing in tools and technology to increase productivity.”      

Dr. Berger added, “2017 was also notable for improving our balance sheet by lowering our financial leverage from 4.8x Net Debt to Adjusted EBITDA at year end 2016 to 4.0x at the end of 2017.  We generated over $50 million of Free Cash Flow during 2017, ended the year undrawn on our $117 million revolving credit facility and had a cash balance of over $50 million.  In August of 2017, we completed an amendment to our Senior Credit Facility which enabled us to retire the then existing Second Lien Term Loan, extend debt maturities and materially lower our cost of capital.”

Actual Results vs. 2017 Guidance:

The following compares the Company’s actual 2017 performance with previously announced revised guidance levels.

(a)  Note the change from prior years. This metric is now after the subtraction of bad debt.
(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 commented, “We met or exceeded our 2017 guidance levels in all categories.  Our Revenue and Adjusted EBITDA were at the high end of the guidance ranges.  Our strong Adjusted EBITDA performance, controlled capital spending and lower interest expense than projected contributed to our exceeding Free Cash Flow guidance.”

2018 Fiscal Year Guidance

For its 2018 fiscal year, RadNet announces its guidance ranges as follows:

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

Dr. Berger noted, “We are optimistic about 2018.  First, Medicare rates for 2018 are commensurate with 2017 reimbursement.  Second, we expect to benefit from some of the capital expenditures, infrastructure investments and acquisitions we made during 2017.  Third, in 2018, we have launched the MemorialCare joint venture and expect to expand other joint ventures we currently operate on both costs.  Fourth, we expect additional Revenue in 2018 from our continued adoption of 3D breast imaging.  Fifth, we expect to continue to benefit from the migration of services from hospital settings to the outpatient marketplace.  Lastly, we anticipate an ongoing earnings benefit from a significant reduction in our overall effective tax rate from the Tax Cut and Jobs Act of 2017.  It should also be noted that we are anticipating spending less on capital expenditures in 2018 than we did during the last two fiscal years as a result of having substantially completed the upgrade of our x-ray systems and the transition to 3D mammography.”

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 today, at 10:30 a.m. Eastern Time.  During the call, management will discuss the Company's 2017 fourth quarter and year-end results.

Conference Call Details:

Date:  Thursday, March 8, 2018
Time:  10:30 a.m. ET
Dial In-Number:  800-239-9838
International Dial-In Number:  323-794-2551

There will also be simultaneous and archived webcasts available at http://public.viavid.com/index.php?id=128646

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 844-512-2921 from the U.S., or 412-317-6671 for international callers, and using the passcode 2086619.

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 297 owned and/or operated outpatient imaging centers. RadNet’s core markets include California, Maryland, Delaware, 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 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 the Company’s acquired operations, successfully achieving 2018 financial guidance, achieving cost savings, successfully developing and integrating its information technology operations as well as 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 speak 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.

Contact: 

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