RadNet, Inc.

Good day, ladies and gentlemen, and welcome to the RadNet, Inc. Fourth Quarter and Full Year 2021 Financial Results Call. Today's conference is being recorded. At this time, I'd like to turn the conference 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 Fourth Quarter and Full Year 2021 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, including RADNET's annual report on Form 10-K for the year ended December 31st, 2021 to be filed shortly. 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. And with that, I'd like to turn the call back over to Dr. Berger.

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 fourth quarter and full year 2021 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 this morning. Before we start, 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. We are extremely grateful for all of our stakeholders, including our employees, business partners, lenders, and shareholders, and wish you all well during these challenging times. Let's begin. Despite being impacted by the recent Omicron surge of COVID-19, particularly late in the fourth quarter, I am very pleased with our performance in the fourth quarter. We were able to increase our revenue by 8% and our adjusted EBITDA by 7.5% from last year's fourth quarter. The improvement was the result of ongoing strong demand for our services and the continuing migration of patient procedures from hospitals to freestanding ambulatory outpatient imaging centers. The strong demand for our services was enough to overcome the negative impact from the surge, which reduced our fourth quarter revenue by over $4 million and our adjusted EBITDA by approximately $3 million. The COVID-19 surge not only disrupted normal patient volumes, but also created staffing issues at our facilities. At the height of the Omicron surge in December, we had 565 employees out on COVID leave, representing 6.3% of our entire workforce. I am pleased to report that after peaking in the first week of January, where we had 8.2% of our staff out on COVID leave, or 743 employees, currently the percentage of our employee base out with COVID-19 has decreased to 1.2%. Additionally, the slowdown in COVID cases has patient volume returning to more normalized levels. This gave us the optimism that is embedded in our 2022 guidance levels, which Mark will review in detail in his prepared remarks. Consistent with our efforts throughout the pandemic, during the fourth quarter, we continue to focus on strengthening our balance sheet by managing our liquidity and financial leverage. We accomplished this while still making important investments in our facilities, equipment, and technology. At the year end, 2021, we had a cash balance of over $134 million and a net leverage ratio of 2.9 times adjusted EBITDA. Our day sales outstanding, or DSOs, at December 31st, 2021, was 34.0 days, the lowest in our company's history. The improvement in revenue cycle operations and collections has materially contributed to our ability to manage the challenges presented by COVID-19 and to make important investments for our future. We are particularly pleased with our liquidity position given that we repaid over $50 million of COVID-19 related deferrals throughout 2021, which included Medicare and Blue Shield of California advance payments, payroll taxes under federal assistance programs, and cash flow concessions we received from landlords of our facilities. Currently, we only have $8 million of deferrals left to repay during 2022. We are extremely appreciative of the cash flow assistance we received from these government organizations and business partners, during the global pandemic, and we are gratified that we've been able to repay these deferrals so quickly. We believe that our strong balance sheet position allows us to be aggressive in 2022 with respect to growth initiatives, which will include tuck-in acquisitions, de novo centers, and continued capital spending to drive same center performance. I'd like to reflect on some of our achievements throughout 2021, which further our long-term operating plan. Here are some of the highlights. First, throughout 2021, we focused on improving clinical operations to drive same-center growth and to efficiently manage our capacity to service the recovery demand for diagnostic imaging as the country began to move past COVID-19. We consolidated centers, centralized certain support functions, and improved clinical protocols to drive efficiencies in capacity utilization. We drove reimbursement increases from private and capitated payors. We also made important investments in equipment that improved our throughput and accuracy. We completed our system-wide adoption of 3D mammography and piloted technologies to make MRI scans shorter for our patients and to allow technologists to remotely control equipment in multiple locations. We also completed a number of tuck-in acquisitions throughout many of our core markets and were successful in expanding several of our health system joint ventures. With respect to our Deep Health AI division, we received FDA clearance of the Deep Health Sage Q mammography workflow triage tool in April of last year. We integrated this powerful AI tool within many of our contracted radiology groups throughout the remainder of the year. In 2021, Deep Health also prepared and filed an FDA submission for its more advanced AI tool, SAGE-DX, which was submitted to the FDA in early January of this year. We expect to receive clearance sometime during the second quarter for this algorithm which we believe will be integral in our population health and cancer screening strategy. Also in 2021, we began to execute on our vision to create a suite of AI enhanced diagnostic imaging screening tools for the most prevalent cancers. We believe large-scale cancer screening will be an important part of future population health management. We formulated our interest in moving beyond Deep Health's current focus of breast cancer towards securing screening algorithms for lung, prostate, and colon cancer. During 2021, we identified two companies to acquire to address opportunities in lung and prostate cancer screening. Aiden's Holding BV and Quantum BV acquisitions were completed in January of this year. Aiden's Artificial intelligence for chest and lung CT scanning is currently used by customers in seven European countries, and its leading product is pending FDA approval for use in the United States. With customers in 20 countries worldwide, Quantiv solutions for prostate and brain MRI already have FDA 510K clearance in the United States and CE mark in Europe. Aims in Quantiv have joined Deep Health in our AI division, led by Dr. Gregory Sorensen, who has assumed responsibility for all of RadNet's AI initiatives. Finally, in April of 2021, we completed the refinancing of our term loan and revolving line of credit. Based upon current lever ratios, we are saving approximately $6 million annually in our interest expense as compared with our prior debt facilities. Additionally, we no longer are subject to restrictive maintenance covenants with respect to our term loan and have substantially more operating and financial flexibility under the new credit agreement. This includes lowering our annual required amortization payments by over $30 million, providing us with more cash flow to invest in further growth and development. At this time, I'd like to turn the call back over to Mark to discuss some of the highlights of our fourth quarter and full year 2021 performance, as well as discuss in detail our guidance levels for 2022. When he is finished, I will make some closing remarks.