RadNet, Inc.

Good day, and welcome to the RadNet, Inc. Third Quarter 2024 Financial Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note that this event is being recorded. I would now like to turn the conference over to Mark Stolper, Executive Vice President and CFO of RadNet. 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 2024 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 Radnett's reports filed with the SEC from time to time, including Radnett's annual report on Form 10-K for the year ended December 31, 2023. 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 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 third quarter 2024 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. Again, I am very pleased with our performance in the third quarter. It was the strongest quarter in our company's history with record revenue and adjusted EBITDA. Relative to last year's third quarter, total company revenue increased 14.7% and our digital health revenue increased 34.3%. Imaging center revenue growth was driven by heavy demand in virtually all of our markets, benefiting from the increasing utilization of diagnostic imaging within healthcare, as well as the continuing shift of procedural volumes away from the more expensive hospital alternatives to ambulatory freestanding centers like the ones we operate. Also contributing to the strong revenue performance was the positive impact of improved reimbursement from our payors, who recognize the important role we are playing as a lower-priced alternative to hospital-based imaging. Lastly, our top line is benefiting from a continuing shift in modality mix towards advanced imaging, MRI, CT, and PET-CT, where our revenue per scan is substantially higher than with routine imaging. During the third quarter, advanced imaging represented 26.7% of our procedural volume, an increase of 142 basis points from last year's same quarter. This is both a function of the overall industry trend of more of these exams being ordered, as a result of technology advances in these modalities and the significant capital investments we have made in the last several years in the advanced imaging equipment for growth and replacement. Contributing to the strong revenue growth within digital health were the AI businesses, including our AI-powered EBCD breast cancer screening program, which grew 75.8% quarter over quarter from last year. Adjusted EBITDA was also a quarterly record. While the strong revenue results, which I just discussed, contributed to more EBITDA, our focus on operational efficiency, improved management and utilization of labor, investments in information technology and effective cost controls contributed to a 27.2% increase from last year's third quarter. Another contributing factor to adjusted EBITDA growth was the disproportionate growth in the higher profit margin digital health businesses. Cumulatively, these factors drove a 156 basis points increase in our adjusted EBITDA margin as compared with last year's third quarter. While we are pleased with this margin expansion, I remain convinced we have further opportunity to improve margins in the future. The strong operating results in the third quarter relative to our internal budget resulted in our decision to increase 2024 full-year guidance ranges for revenue, adjusted EBITDA, and free cash flow, which we also increased after reporting our first and second quarters financial results. Mark will discuss this in more detail in his prepared remarks. 2024 continues to be a year of investment in our business. Year to date, we have opened five de novo facilities and we have three additional anticipated site openings for the remainder of 2024. Moreover, we have 15 additional projects in development which we intend to open during 2025. These de novo facilities are split almost equally between wholly owned and JV centers and are located in markets where we have patient backlogs, require additional capacity, or will we currently lack access points to service identified patient populations? While these projects are requiring us to make capital investments above our normal spending, we are confident that these centers will be material contributors to our long-term performance and growth. We continue to grow our hospital and health system joint venture businesses. Currently, 152 of our 399 centers, or 38.1%, are held within health system partnerships, which includes two imaging centers that were jointly opened in the third quarter with the University of Maryland Medical System and one inside our three-way joint venture in the San Fernando Valley in Los Angeles with Cedars-Sinai and the Providence Health System system. These and other systems are seeking long-term strategies around outpatient imaging and have recognized that cost-effective and efficient freestanding centers will continue to capture market share from hospitals as payers and patients both migrate their site of care towards lower-cost, high-quality solutions. Our hospital and health system partners have been instrumental in increasing our procedural volumes with their physician relationships. We continue to gain momentum with initiatives inside the digital health segment. Some of you may have seen last week that we announced the first customer for a suite of solutions powered by the Deep Health OS. OnRAD, a full-service radiology provider to more than 120 hospitals, radiology groups, and imaging centers, will implement a variety of Deep Health OS solutions to streamline its clinical and operational workflow, Deep Health OS advanced viewer and smart reporting features. OnRAD, who is a new customer to us, meaning that it does not use any of the legacy, eRAD or Deep Health Solutions will begin implementation of the Deep Health OS solutions in the first quarter of 2025. Additionally, earlier this morning, we announced the collaboration with GE Healthcare aimed at accelerating the adoption of AI-powered workflows and clinical solutions through smart technologies. This collaboration brings together GE's healthcare legacy in bringing innovative hardware solutions to our industry with DeepHealth's leading-edge AI-powered digital solutions. Our shared objective is to make imaging hardware more capable, enriching diagnostic equipment with AI-powered workflow and clinical solutions to better service clinicians, and patients in all imaging settings. Our first offering with GE is in the area of mammography. We're bringing together Deep Health's Smart Mammal Solution and GE's CentiGraph Pristina mammography unit will improve speed, clinical accuracy, operational efficiency, and improve patient care. SmartMammal is a deep health AI-powered SAS solution designed to seamlessly integrate into existing breast cancer diagnostic workflows, enhancing diagnostic accuracy and workflow efficiency. By incorporating imaging informatics into advanced mammography systems, the SmartMammal solution can support high-volume breast center cancer screening programs. SmartMammal can prioritize cases based on suspicion level and ensure seamless integration and interoperability with existing healthcare IT infrastructure. As one of its advanced features, integration of SmartMammal with GE's CentiGraph pristine mammography unit will include SmartAlerts, a workflow solution that alerts rapid AI processing with the goal of alerting imaging sites to cases with potentially suspicious lesions in minutes. This kind of solution aims to empower earlier diagnostic examinations, follow-ups, compliance, and reduce anxiety for women with potentially suspicious findings. The GE Deep Health Collaboration Agreement will enable GE Healthcare to distribute smart MAMO and other deep health solutions to imaging providers in the United States as part of GE's healthcare's comprehensive portfolio of imaging technologies. In addition to collaborating on SmartMAMO, we and GE Healthcare intend to explore areas of further collaboration for smart technology solutions in other modalities and clinical domains, expanding the access to and impact of AI-based workflows. In our booth at the RS&A convention in Chicago, We will be demonstrating, among other things, Smart MAMO with a GE Pristina unit, Deep Health OS workflow solutions, our breast, prostate, and lung AI solutions, as well as other technologies. Deep Health solutions will also be demonstrated in the booths of GE Healthcare and Siemens, where we are demonstrating an ultrasound integration with Deep Health technology. We are meeting with dozens of potential customers and partners at the convention, and through Barclays and Jeffries, will be hosting investor presentations at our booth on December 2nd and 3rd. We encourage anyone listening today to reach out to Barclays or Jeffries should you want to join one of these investor presentations at our booth. At this time, I'd like to turn the call back over to Mark to discuss some of the highlights of our third quarter 2024 results. When he is finished, I will make some closing remarks.