Full Press Release Details
RadNet Reports Third Quarter Financial
Results and Reaffirms Previously Announced 2017 Guidance Levels
LOS ANGELES, California, November 9, 2017
- RadNet, Inc. (NASDAQ: RDNT), a national leader in providing high-quality, cost-effective,
fixed-site outpatient diagnostic imaging services through a network of 298 owned and/or operated outpatient imaging centers,
today reported financial results for its third quarter of 2017.
Dr. Howard Berger, President and Chief Executive
Officer of RadNet, commented, "I am pleased with our results this quarter. We compared favorably in all metrics relative
to last year's third quarter despite having divested our Rhode Island assets in the second quarter, having one less workday
in this year's third quarter and having overcome a difficult hurricane season. We demonstrated Revenue, Adjusted EBITDA(1)
and earnings growth as well as positive same center revenue and procedural increases. Our consistently improving financial metrics
have contributed to material deleveraging since year end 2015."
Dr. Berger continued, "I believe we are
making great strides by executing on a focused multifaceted strategy. First, we are streamlining our business through divesting
non-core or lower margin operations. For instance, we exited Breastlink and our other oncology assets in California as well as
our imaging centers in Rhode Island. Second, we are continuing to invest in expanding our core markets. As an example, we doubled
the size of our Delaware operating region through acquiring our principal outpatient competitor, Diagnostic Imaging Associates.
Third, we are continuing to pursue our health system joint venture strategy. We've both expanded existing joint ventures
and established new joint ventures, most notably on the West Coast with Cedars Sinai. And finally, we continue to grow our information
technology platform, or eRAD, through acquiring more customers and purchasing or developing additional software capabilities."
"During the third quarter, on August
22nd, we completed an amendment to our senior secured first lien credit agreement and raised an additional $170 million of first
lien term loans, the proceeds of which were used to repay and retire RadNet's second lien term loan. By completing this transaction,
we were able to initially reduce our annual cash interest expense by almost $3 million. Based upon the pricing matrix in the amendment,
if we continue to deleverage our balance sheet in the future, we could save up to an additional $3 million of cash interest expense
annually. Furthermore, we were able to extend the maturities on the $168.0 million portion of term debt which was formerly our
second lien loan by over two years. Lastly, we significantly improved our financial flexibility," added Dr. Berger.
Dr. Berger continued, "What I'm
most excited about is that many of the recent trends in healthcare are supporting and validating our current operating strategy
and positioning. More and more services are leaving hospitals and being performed at lower cost ambulatory settings. This is happening
across the delivery system, not just in diagnostic imaging. This will be a continuing trend as health plans and their patients
seek lower cost alternatives to hospitals. As an example, Anthem (one of America's largest health insurers) recently announced
that it will no longer reimburse outpatient imaging performed at hospitals, except under extraordinary circumstances. We expect
others to follow. We've also noted that insurance companies in their efforts to control costs are purchasing freestanding,
ambulatory providers such as surgery centers, urgent care locations, clinical laboratories, physical therapy centers, home health
businesses, physician practices and perhaps even retail drug store locations. I'm more convinced than ever that RadNet is
well positioned to be a major force in the healthcare delivery continuum of the future."
Third Quarter Financial Results
For the third quarter of 2017, RadNet reported
Revenue of $227.6 million, Adjusted EBITDA(1) of $36.1 million and Net Income of $3.2 million, respectively. Revenue
increased $3.0 million (or 1.3%) and Adjusted EBITDA(1) increased $188,000 (or 0.5%). Adjusting for the sale of the
Rhode Island facilities taken place on April 28, 2017, Revenue increased 1.9% and Adjusted EBITDA(1) increased 1.3%
from the third quarter of 2016.
Net Income increased $1.6 million over the
third quarter of 2016. Per share Net Income for the third quarter was $0.07, compared to per share Net
Income in the third quarter of 2016 of $0.04 (based upon a weighted average number of diluted shares outstanding of 47.6 million
and 46.3 million for these periods in 2017 and 2016, respectively).
The comparison of Net Income is affected by
certain unusual items which occurred in each of the third quarters of 2017 and 2016.
During the third quarter of 2017, we had pre-tax
losses related to (i) our divested/closed oncology operations of $2.0 million; (ii) severance from our sale of Breastlink of $1.0
million; and (iii) expenses from our refinancing transaction of $235,000. Affecting the third quarter of 2016, we wrote-off $709,000
of deferred financing fees and expensed $606,000 of one-time rating agency and legal fees related to our refinancing transaction
completed on July 1, 2016. We also had a one-time $1.2 million adjustment to depreciation expense and $2.0 million of severance
related to our NY acquisitions.
Adjusting for these events on a tax affected
basis in both quarters, Adjusted Earnings Per Share was $0.12 in the third quarter of 2017 as compared with $0.11 in the third
Income in the third quarter of 2017 (excluding the items mentioned immediately above in the Adjusted Earnings Calculation) were
certain non-cash expenses or non-recurring items including: $1.5 million of non-cash employee stock compensation expense resulting
from the vesting of certain options and restricted stock; $139,000 of additional severance paid in connection with headcount
reductions related to cost savings initiatives; $420,000 loss on the sale or disposal of certain capital equipment; and $877,000
of amortization of deferred financing costs and loan discounts related to our credit facilities.
For the third quarter of 2017, as compared
with the prior year's third quarter (and excluding Rhode Island from last year's third quarter), MRI volume increased
5.1%, CT volume increased 6.3% and PET/CT volume increased 4.5%. Overall volume, taking into account routine imaging exams, inclusive
of x-ray, ultrasound, mammography and other exams, increased 2.4% over the prior year's third quarter. On a same-center basis,
including only those centers which were part of RadNet for both the third quarters of 2017 and 2016, MRI volume increased 3.3%,
CT volume increased 5.5% and PET/CT volume increased 2.8%. Overall same-center volume, taking into account routine imaging exams,
inclusive of x-ray, ultrasound, mammography and other exams, increased 1.5% compared with the prior year's same quarter.
Nine Month Financial Results
For the nine months ended September 30, 2017,
RadNet reported Revenue of $686.6 million, Adjusted EBITDA(1) of $101.8 million and Net Income of $7.3 million. Revenue
increased $27.0 million (or 4.1%), Adjusted EBITDA(1) increased $3.7 million (or 3.8%) and Net Income increased $3.5
million, respectively, over the first nine months of 2016. Net Income Per Share for the nine month period
ended September 30, 2017 was $0.16 per diluted share, compared to Net Income of $0.08 per diluted share in corresponding nine month
period of 2016 (based upon a weighted average number of fully diluted shares outstanding of 47.2 million and 46.7 million for these
periods in 2017 and 2016, respectively).
results in the nine months ended September 30, 2017 were certain non-cash expenses or non-recurring
items including: $5.8 million of non-cash employee stock compensation expense resulting from the vesting of certain options and
restricted stock; $1.6 million of severance paid in connection with headcount reductions related to cost savings initiatives;
$828,000 loss on the sale of certain capital equipment; $3.2 million of expenses related to divested or closed operations including
oncology, Breastlink and Rhode Island; $235,000 of one-time rating agency and legal fees related to
our refinancing transaction completed on August 22, 2017; $3.1 million gain on the sale of imaging and medical practice
assets including Breastlink and Rhode Island; and $2.5 million of amortization of deferred financing
costs and loan discounts related to our credit facilities.
2017 Guidance Update
RadNet reaffirms its previously announced 2017
guidance ranges as follows:
| Total Net Revenue | $895 million - $925 million | |
| Adjusted EBITDA (1) | $135 million - $145 million | |
| Capital Expenditures (a) | $55 million - $60 million | |
| Cash Interest Expense | $35 million - $40 million | |
| Free Cash Flow Generation (b) | $40 million - $50 million |
Defined by the Company as Adjusted EBITDA(1)
less total capital expenditures and cash paid for interest.
Dr. Berger added, "We are on track to
meet our guidance ranges for the year. All ranges remain unchanged from what we announced earlier in the year. Due to lower interest
expense from the refinancing transaction, we may be below our Cash Interest Expense guidance level for the year."
Conference Call for Today
Dr. Howard Berger, President and Chief Executive
Officer, and Mark Stolper, Executive Vice President and Chief Financial Officer, will host a conference call to discuss its third
quarter 2017 results on Thursday, November 9th, 2017 at 7:30 a.m. Pacific Time (10:30 a.m. Eastern Time).
Conference Call Details:
Date: Thursday, November 9, 2017