RadNet(RDNT) - 2019 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - RadNet reported revenue of $289.1 million for Q2 2019, an increase of $44.7 million or 18.3% compared to the same quarter last year [31] - Adjusted EBITDA for the same period was $43.1 million, reflecting a growth of $5 million or 13% year-over-year [31] - Net income for Q2 2019 was $4.9 million, a decrease of approximately $507,000 from Q2 2018, but adjusted net income was $5.8 million, an increase of $405,000 year-over-year [35] Business Line Data and Key Metrics Changes - MRI volume increased by 9.7%, CT volume by 14.1%, and PET/CT volume by 9% compared to Q2 2018 [32] - Total procedures performed in Q2 2019 reached 272,875, with routine imaging exams accounting for 75% of the volume [33] Market Data and Key Metrics Changes - The company experienced a 3.5% same-center growth, attributed to effective marketing and differentiation from competitors [9] - The disparity in pricing between hospital imaging services and outpatient centers is recognized by patients and referring physicians, contributing to increased patient volumes [11] Company Strategy and Development Direction - RadNet aims to expand its joint ventures with health systems, currently holding about 25% of its centers in such partnerships, with potential to double this number in the coming years [14] - The company is focusing on artificial intelligence to enhance operational efficiency and improve diagnostic accuracy, with plans to invest in AI technologies [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ongoing shift of patients from hospitals to outpatient centers, which is expected to continue driving growth [12] - The company anticipates significant free cash flow generation in the second half of the year, with a cash balance expected to increase substantially by year-end [25] Other Important Information - RadNet completed the acquisition of Kern Radiology, adding approximately $25 million in annual revenue and expanding its presence in Kern County, California [18] - The company is also focusing on reducing costs and improving efficiencies through technology and operational enhancements [49] Q&A Session Summary Question: What drove the robust same-store growth during the quarter? - Management attributed the growth to the migration of patients from hospitals to outpatient centers and investments in new equipment that reduced scan times, allowing for increased volume [61][62] Question: Why did margins compress despite revenue and EBITDA growth? - The margin compression was primarily due to two recent acquisitions that contributed revenue but not significant EBITDA in the short term [66][67] Question: Is the current capitation run rate sustainable? - Management confirmed that the current capitation run rate is sustainable and expected to grow, driven by new contracts and ongoing discussions with payers [69] Question: How does RadNet plan to monetize its AI capabilities? - The focus will be on improving internal efficiencies and operational effectiveness rather than significant external monetization [70][72] Question: Are there any new joint venture opportunities? - Management noted increased interest from hospitals in California for joint ventures, indicating a positive trend for future partnerships [84][85]