RadNet(US:RDNT)2024-05-10 20:06PART I – FINANCIAL INFORMATION Financial Statements This section presents RadNet, Inc.'s unaudited condensed consolidated financial statements for Q1 2024 and 2023, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, along with explanatory notes Condensed Consolidated Financial Highlights (Q1 2024 vs Q1 2023) | Financial Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | | :--- | :--- | :--- | | Total Revenue | $431,707 | $390,564 | | Income from Operations | $11,339 | $6,671 | | Net Income (Loss) | $5,410 | $(14,283) | | Net Loss Attributable to Common Stockholders | $(2,779) | $(21,005) | | Diluted EPS | $(0.04) | $(0.36) | | Total Assets | $2,969,555 | $2,690,473 (as of Dec 31, 2023) | | Total Liabilities | $1,892,230 | $1,877,114 (as of Dec 31, 2023) | | Total Equity | $1,077,325 | $813,359 (as of Dec 31, 2023) | | Net Cash from Operating Activities | $17,085 | $32,616 | Notes to Condensed Consolidated Financial Statements These notes detail RadNet's business, accounting policies, segment changes, business combinations, debt structure, and subsequent events, including a March 2024 stock offering, Digital Health segment formation, California acquisitions, and April 2024 debt refinancing - The company operates 375 outpatient diagnostic imaging centers as of March 31, 202427 - In March 2024, RadNet completed a public offering of 5,232,500 common stock shares, raising $230.2 million in gross proceeds27 - In Q1 2024, RadNet revised its reportable segments, combining the eRad business with the AI segment to form a new Digital Health segment, with prior periods retrospectively adjusted87 Acquisitions in Q1 2024 (Imaging Center Segment) | Entity Acquired | Date Acquired | Total Consideration (in thousands) | Goodwill (in thousands) | | :--- | :--- | :--- | :--- | | Grossman Imaging Center of CMH, LLC | 3/31/2024 | $10,500 | $9,016 | | Providence Health System - Southern California | 3/31/2024 | $7,096 | $6,453 | | Antelope Valley Outpatient Imaging | 2/1/2024 | $3,530 | $687 | | Total | | $21,126 | $16,156 | - Subsequent to quarter-end, on April 18, 2024, RadNet refinanced its debt, securing an $875.0 million term loan and a $282.0 million revolving credit facility, extending maturities and reducing interest rates121 - RadNet has agreements to acquire Houston Medical Imaging, LLC (7 centers) and U.S. Imaging, Inc. (8 centers) in Texas, with closures anticipated in Q2 2024119120 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 financial results, noting a 10.5% increase in total revenue to $431.7 million driven by same-center growth and acquisitions, with improved Imaging Center profitability and Digital Health segment revenue growth, alongside enhanced liquidity from a stock offering and debt refinancing Results of Operations Q1 2024 total revenue increased 10.5% to $431.7 million, with Imaging Center segment revenue up 9.9% to $417.0 million driven by volume and advanced imaging, Digital Health segment revenue up 32.3% to $14.7 million, and consolidated net income improving to $5.4 million with Adjusted EBITDA reaching $58.5 million Imaging Center Segment Revenue (Q1 2024 vs Q1 2023) | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $417,046 | $379,487 | 9.9% | | Same Center Revenue | $376,655 | $348,240 | 8.2% | - Same-center revenue growth was driven by a 1.6% increase in procedure volume, with advanced modality imaging procedures growing by 5.1%152 Digital Health Segment Performance (Q1 2024 vs Q1 2023) | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Revenue | $14,661 | $11,078 | 32.3% | | Loss from Operations | $(3,015) | $(2,518) | 19.7% | Reconciliation of Net Income to Adjusted EBITDA | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | | :--- | :--- | :--- | | Net income attributable to RadNet, Inc. common stockholders | $(2,779) | $(21,005) | | Adjustments (Taxes, Interest, D&A, etc.) | $61,241 | $69,170 | | Adjusted EBITDA - Total Company | $58,462 | $48,165 | Liquidity and Capital Resources RadNet's liquidity significantly strengthened in Q1 2024, with cash increasing to $527.0 million due to $218.3 million net proceeds from a March stock offering and an additional $167.9 million from an April debt refinancing, ensuring sufficient capital for the next twelve months Cash Flow Summary (Q1 2024 vs Q1 2023) | Cash Flow Activity (in thousands) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Cash from Operating Activities | $17,085 | $32,616 | | Cash used in Investing Activities | $(60,937) | $(65,556) | | Cash from (used in) Financing Activities | $228,298 | $(3,821) | - Cash from financing activities in Q1 2024 was primarily driven by $218.3 million in net proceeds from a public common stock offering184 - As of March 31, 2024, RadNet had $821.2 million in total term loan debt and $187.4 million available under its Barclays revolving credit facility, plus $50.0 million under its Truist facility185 - In April 2024, RadNet refinanced its Barclays credit facility, securing an $875.0 million term loan and a $282.0 million revolver, extending maturities, reducing interest rates, and adding approximately $167.9 million in cash186 Quantitative and Qualitative Disclosures About Market Risk RadNet faces market risks primarily from foreign currency fluctuations in the UK, Netherlands, Canada, and Hungary, and interest rate changes on variable-rate debt, partially mitigated by interest rate swaps, where a 1% SOFR increase would raise annual interest expense by $2.6 million - RadNet is exposed to foreign exchange risk from operations in Pound Sterling, Euro, Canadian Dollar, and Hungarian Forint, where a hypothetical 1% decline would increase annual operating expenses by approximately $0.3 million187 - RadNet uses interest rate swaps on a notional amount of $400 million to mitigate interest rate risk on its variable-rate term loans188189 - A hypothetical 1% increase in SOFR rates would increase annual interest expense by $1.2 million on the unhedged Barclays term loan and $1.4 million on the Truist term loan189190 Controls and Procedures Management, including the CEO and CFO, concluded that RadNet's disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during Q1 2024 - The Principal Executive Officer and Principal Financial Officer concluded that disclosure controls and procedures were effective as of March 31, 2024191 - No material changes in internal control over financial reporting occurred during the quarter192 PART II – OTHER INFORMATION Legal Proceedings RadNet is involved in various ordinary course legal proceedings, but does not anticipate their outcomes will materially adversely impact its financial condition or results of operations - RadNet does not expect current legal proceedings to have a material adverse impact on its business, financial condition, or operations195 Risk Factors This section refers to the risk factors detailed in RadNet's Annual Report on Form 10-K for December 31, 2023, noting that those and other unknown or immaterial risks could adversely affect the business - For information on business risks and uncertainties, the report directs readers to the risk factors section of the Annual Report on Form 10-K for the year ended December 31, 2023196 Unregistered Sales of Equity Securities and Use of Proceeds On March 27, 2024, RadNet issued 95,019 common stock shares, valued at $4.6 million, in a private placement to settle a contingent liability from the Heart & Lung Imaging Limited acquisition, exempt from Securities Act registration - On March 27, 2024, RadNet issued 95,019 common stock shares valued at $4.6 million to settle a contingent liability from the Heart & Lung Imaging Limited acquisition197 - The issuance was conducted as a private placement, exempt from registration under Section 4(a)(2) of the Securities Act197 Exhibits This section lists exhibits filed with the 10-Q report, including amendments to executive employment agreements, the Third Amended and Restated First Lien Credit and Guaranty Agreement, and CEO and CFO certifications required by the Sarbanes-Oxley Act - Key exhibits filed include the new Third Amended and Restated First Lien Credit and Guaranty Agreement dated April 18, 2024201 - Certifications by the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act are included as exhibits201