Full Press Release Details
C O R P O R A T E P A R T I C I P A N T S
Mark Stolper, Executive Vice President
and Chief Financial Officer
Howard Berger, MD, President and Chief
C O N F E R E N C E C A L L P A R T I C I P
Brian Tanquilut, Jefferies
Mitra Ramgopal, Sidoti & Company
P R E S E N T A T I O N
Good day, and welcome to the RadNet Inc. Third
Quarter 2022 Financial Results Conference Call.
Today's call is being recorded.
At this time, I'd like to turn the call over to
Mr. Mark Stolper, Executive Vice President and Chief Financial Officer of RadNet, Inc. Please go ahead.
Thank you. Good morning, ladies and gentlemen,
and thank you for joining Dr. Howard Berger and me today to discuss RadNet's third quarter 2022 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. This presentation contains forward-looking statements
within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Specifically, statements concerning anticipated future
financial and operating performance, RadNet's ability to continue to grow the business by generating patient referrals and contracts with
radiology practices, recruiting and retaining technologists, receiving third-party reimbursement for diagnostic imaging services, successfully
integrating acquired operations, generating revenue and Adjusted EBITDA for the acquired operations as estimated, among others, 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 RadNet's actual results to differ materially
from the statements contained herein. These risks and uncertainties include those risks set forth in RadNet's reports filed with the SEC
from time to time, include RadNet's Annual Report on Form 10-K for the year ended December 31, 2021. Undue reliance should not be placed
on forward-looking statements, especially guidance on future financial performance which speaks only as of the date it is 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.
With that, I'd like to turn the call over to Dr.
Thank you, Mark. Good morning, everyone, and thank
you for joining us today.
On today's call, Mark and I plan to provide you
with highlights from our third quarter 2022 results, give you more insight into factors which affected this performance, and discuss our
future strategy. After our prepared remarks, we will open the call to your questions. I'd like to thank all of you for your interest in
our Company and for dedicating a portion of your day to participate in our conference call.
I would like to say, on behalf of myself and the
entire team at RadNet, we hope all of you and your loved ones are healthy and staying safe.
During the third quarter, revenue from imaging
centers reporting unit increased 5.2%, aggregate procedural volume increased 5.7, and same store, same center procedural volumes increased
3.9%. This performance would have been substantially better, but for staffing shortages that prevented us from both utilizing the capacity
we have in our facilities and expanding hours to service the growing demand we are experiencing. We believe the strong demand for imaging
services is being driven by increasing efforts from payors to direct procedural volumes outside hospitals into ambulatory freestanding
During the quarter, we were forced to utilize
expensive temporary labor and absorb extraordinary amounts of overtime charges, which impacted our EBITDA, profitability, and operating
margins. Although we anticipated increased salaries, benefits, and wages in our initial guidance, the labor market has been more challenging
than we originally projected.
More recently, we are seeing signs of improvement
in the labor market. In the last couple of months, we have been more effective at filling open positions. In September, our number of
open positions peaked at 850, representing almost 10% of the entire workforce. The latest support I have received in November is that
our open positions have fallen to 262 positions. Additionally, the COVID-19 impact on our work force, which previously hurt our ability
to staff our centers appropriately, has substantially abated.
Furthermore, we believe staffing shortages will
continue to improve as we are noting that many large companies, including the likes of Amazon, Walmart, Twitter, Meta, just to name a
few, and certain large hospital systems have recently announced staffing reductions.
The demand for our services is strong and growing,
we are experiencing increasing patient volumes in virtually all of our regional markets. October was the strongest revenue month we have
experienced all year, and the start to November appears to be equally robust. As a result, we are anticipating improved fourth quarter
performance, which we believe will continue as we move into 2023.
We are focused on executing key company wide initiatives.
I'm going to briefly review some of these initiatives before I turn the call back over to Mark.
First, as we have discussed throughout the year,
we have been in development of 15 de novo facilities spanning almost all of our markets. Three of these facilities are now open and another
eight facilities should be producing revenue by the end of the second quarter of next year. While de novo facilities have not been a big
part of our historical growth strategy, many of the facilities we are developing are in markets where we have backlogs, capacity constraints,
or where our current network coverage lacks access for certain patient populations.
Another one of our significant initiatives is
expansion through Hospital and Health System joint ventures. In the past, we have stated that we see a path forward towards holding as
much as 50% of our imaging centers in these partnerships. With two recent JV expansions, which I will discuss shortly, we now have 119
of our facilities, within health system partnerships, are roughly 33% of our entire network of centers.
Most hospitals have been challenged by the loss
of patient volumes to outpatient freestanding facilities who offer significantly lower pricing along with better and more convenient patient
experience. Many of these health systems recognize that creating a partnership with an outpatient operator like RadNet, gives them an
opportunity to participate in recapturing revenue that they have otherwise already lost or will likely lose in the future.
Recently, we announced that our joint venture
with RWJBarnabas Health New Jersey Imaging Network acquired the outpatient radiology assets of Montclair Radiology. For more than 75 years,
Montclair radiology has been a leading provider of diagnostic imaging in northern New Jersey. Montclair Radiology owns and operates six
multimodality centers and performs over 200,000 procedures per year. We are projecting that this acquisition will add over $40 million
of revenue on an annual basis to NJ IN and bring the total number of centers in this joint venture to 30 facilities.
In addition, we completed an expansion of our
Arizona diagnostic radiology joint venture with Dignity Health. In conjunction with the expansion, Dignity Health contributed three hospital-affiliated
outpatient imaging centers into the existing outpatient partnership with RadNet. These locations include one multimodality center and
two women's imaging facilities. In addition to these newly contributed locations by year end 2022, the joint venture will open a 30,000
square foot facility called Park Central in proximity to downtown Phoenix. With this expansion, we now have a platform of 11 centers in
the Phoenix area and look forward to executing on future opportunities to expand our capacity and footprint.
I am particularly pleased to announce that we
have initiated a pilot of our new enhanced breast cancer detection, EBCD service, in Delaware. The offering works in concert with a patient's
annual breast screening regimen. For an additional fee, patients can elect to enroll in a suite of premium mammography related services,
including the use of detailed Saige-Dx AI, personalized lifetime risk assessment, and additional AI-driven review for certain exams and
access to a dedicated 1-800 support line.
Saige-Dx analyzes each mammogram in detail and
if suspicious findings are present, the AI identifies the lesion in the exam for the radiologist and categorizes the level of suspicion.
Many of our radiologists who have been using Saige-Dx AI indicate that AI has improved their accuracy in detecting breast cancers. Accord
(phon), the name we have given to an additional AI driven review for suspicious findings, is designed to be an effective quality assurance
tool unparalleled in our industry.
I believe that the innovative EBCD program is
one of the most important endeavors the Company has pursued for our patients. Currently, we perform over 1.4 million screening mammograms
annually, and we anticipate expanding this program to all RadNet markets during the first half of next year. I invite you to read more
about EBCD at www.myebcdmammo.com.
We recently announced the acquisition of a controlling