RadNet, Inc. Q1 FY2025 earnings call

Key Points - Severe weather in January-February negatively impacted Q1 results but business recovered in March-April. - Shift towards Advanced Imaging: 26.9% of procedural volume was from Advanced Imaging in Q1 2025 vs. 25.7% in Q1 2024. - PET/CT volumes increased 22.9% driven by growth in prostate and brain procedures. - Implemented TechLive remote technologist solution on 255 of nearly 400 MOI scanners; testing on ultrasound scanners. - EBCD digital AI powered breast cancer screening program adoption increased to over $4 million in Q1 2025 (33% increase from Q1 2024) with over 50% adoption at OB/GYN Specialists of the Palm Beaches. - Acquired iCAD Inc., a global leader in AI powered breast health solutions, expected to close in Q2 or early Q3 2025. - Grew hospital and health system joint ventures; 154 centers in system partnerships, including two de novo facilities in New Jersey. - Strong liquidity: $717 million cash balance at quarter end, net debt to adjusted EBITDA ratio slightly over 1 times.

The Digital Health segment reported revenue of $19.2 million in the first quarter of 2025, a $3.6 million or 31.1% increase compared to the first quarter of 2024. Revenue growth was driven by 33.3% growth in AI revenue (due to improved EBCD adoption) and 30.1% growth in radiology software (from intercompany revenue driven by aggregate procedure volume growth in core imaging centers). The Imaging Center segment's performance was impacted by severe weather in the first quarter, but recovered in March, April, and early May.

Guidance - Increased revenue and adjusted EBITDA guidance ranges for Imaging Center business, increasing revenue by $10 million at low and high ends and adjusted EBITDA by $3 million at both ends. - Increased capital expenditure budget guidance by $5 million. - All other guidance ranges for Imaging Center and Digital Health segments remain unchanged. - Medicare reimbursement for 2026 details to be known when CMS releases preliminary rate schedule in June/July, with analysis and feedback to be provided later.

Risks - Severe weather conditions and wildfires can negatively impact financial results. - Labor shortages and rising labor costs due to high demand for radiology technologists. - Dependence on third-party reimbursement for diagnostic imaging services. - Uncertainties related to Medicare reimbursement changes and their potential impact on future results.

Q: Good day, and welcome to the RadNet, Inc. First Quarter 2025 Financial Results Conference Call. All participants will be in listen-only mode [Operator Instructions]. Please note today's event is being recorded. I would now like to turn the conference over to Mark Stolper, Chief Financial Officer. Please go ahead, sir.

A: Thank you. Good morning, ladies and gentlemen. And thank you for joining Dr. Howard Berger and me today to discuss RadNet's first quarter 2025 financial results. Before we begin today, we'd like to remind everyone of the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995...

Q: Brian Tanquilut with Jefferies asks about growth in Advanced Imaging over next 3-5 years and drivers.

A: Howard Berger responds that trends will continue, driven by AI tools, new equipment, growth in PET/CT (up 22.9% in Q1 despite challenges), and expansion of EBCD program and iCAD acquisition. Also mentions routine imaging growth and RadNet's capability to manage it.

Q: Grayson McAlister with Truist Securities asks about technologist hiring trends and TechLive rollout.

A: Howard Berger says $45 million labor cost headwind is still on track, seeing some improvement in technologist availability. TechLive rollout at 255 locations, with positive reception, and plans to have all 400 centers on TechLive by year end. Also mentions implementation of DeepHealth operating system pilot.

Q: Andrew Mok with Barclays asks about revenue performance vs expectations and margin progression.

A: Mark Stolper says revenue was in line with internal guidance after adding back weather impact, with recovery in March-April. Howard Berger adds drivers include new centers, TechLive rollout, and PET/CT growth. Margin improvement driven by Advanced Imaging growth, EBCD adoption, and TechLive/AI programs.

Q: Larry Solow with CJS Securities asks about TechLive implementation and DeepHealth operating system timeline.

A: Howard Berger says TechLive implementation is advancing, with pilot programs in contact centers and scheduling for DeepHealth operating system, expecting most tools in place by year end but benefits to be seen in 2026.

Q: Brandon Carney with Riley asks about capitation trends and PET business.

A: Mark Stolper and Howard Berger discuss capitation trends, with shift from capitation to fee-for-service, and PET/CT growth driven by prostate and Alzheimer studies, which made up 19% of PET/CT business in Q1 2025.