RadNet, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Fourth Quarter Performance: The fourth quarter was the strongest in RadNet's history with record revenue and adjusted EBITDA. Procedural volume grew 8% aggregate and 4% same center. There was a shift in business mix toward advanced imaging, which represented 26.8% of procedural volume, up from the prior year.
• Investments and Facilities: In 2024, RadNet opened nine de novo facilities. 38.4% of its 398 centers (153 centers) are in system partnerships, an increase of 23 centers from year-end 2023.
• Digital Health Initiatives: Commercially launched OS operational and diagnostic software suites, partnered with GE and Siemens, and appointed Keith Wood Wipstorf as CEO of the digital health division. Focus is on implementing solutions to drive operational efficiencies and capacity within the RadNet network of centers.

Segment Performance

• Imaging Centers: Total company revenue for the fourth quarter was $477.1 million, a 13.5% increase from the prior year's fourth quarter. Adjusted EBITDA grew 14% to $75 million. Procedural volume saw 8% aggregate growth and 4% same center growth. Advanced imaging accounted for 26.8% of procedural volume, up 137 basis points from the prior year.
• Digital Health: Revenue increased 28.1% to $18.9 million, and adjusted EBITDA grew 61.6% to $4.5 million. Clinical AI revenues in the fourth quarter were approximately $6.5-$6.7 million.

Guidance

• 2025 Impact of Weather and Disasters: Severe winter storms in January-February 2025 and Southern California wildfires impacted Q1 2025, estimating a $22 million revenue loss and $15 million adjusted EBITDA loss. The full-year 2025 budget was modified, with Q2-Q4 projections unchanged.
• Digital Health Growth: Anticipates 30% revenue growth in 2025 driven by clinical AI solutions and smart technologies. RadNet is investing over $20 million in digital health infrastructure to support growth.

Risks

• Weather and Natural Disasters: Severe winter storms and wildfires in early 2025 impacted Q1 revenue and adjusted EBITDA.
• Labor Shortages: Continuing labor shortages in radiology and technologists, affecting operational efficiency.
• Market Competition: Competition in the outpatient imaging space, including from hospital alternatives and other providers.

Question and Answer

• Q: Follow-up on weather impact: A: The severe winter storms and wildfires impacted the first quarter, but March is expected to be normal with volumes returning to projected levels.
• Q: OS rollout learnings: A: The OS rollout is in early stages, with collaboration between services and digital health teams. Plans are in place to implement the OS system by the end of 2023.
• Q: Pipeline and Palm Beach OB GYN deal: A: The Palm Beach OB GYN reached out, and the collaboration aims to improve access to mammography and other services, with plans to ramp up the program in March.
• Q: Clinical AI revenues: A: Digital health AI revenues in the fourth quarter were approximately $6.5-$6.7 million.
• Q: Labor and inflation: A: Labor shortages are unlikely to abate, with some salary increases managed. Digital health initiatives are focused on addressing labor issues through efficiency improvements.
• Q: Digital health growth sustainability: A: Substantial investments in digital health are being made to support 30%+ growth in 2025, with long-term potential for the business to expand significantly.