RadNet, Inc.

Good morning, ladies and gentlemen, and welcome to the RadNet End Third Quarter 2025 Financial Results Conference Call. At this time, all participants will be in the listen-only mode. Following the presentation this morning, there will be a question-and-answer session. To ask a question, we will press star and then 1 on your touch-tone phone. To withdraw your question, we will press star and then 2. As a reminder, this call is being recorded. I now hand the conference over to Mr. Mark Stoplow, Executive VP and CFO. Thank you and over to you.

Thank you. Good morning, ladies and gentlemen, and thank you for joining Dr. Howard Berger and me today to discuss RADNET's third 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. 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, Radnett'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 31st, 2024. 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 2025 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. With that, let's begin. I am very pleased with the performance in the third quarter. Revenue and adjusted EBITDA were both quarterly records and exceeded internal budgets set at the beginning of 2025. Total company revenue increased 13.4% and adjusted EBITDA increased 15.2% relative last year's third quarter, resulting in a 26 basis point improvement in adjusted EBITDA margins. This performance is reflective of several positive and continuing trends that have been driving RadNet's strong results in recent quarters. First, same-center procedural volume continues to be robust, particularly within advanced imaging. Advanced imaging increased 13.0 percent on an aggregate basis and 9.9 percent on a same-center basis as compared with last year's third quarter. This performance resulted from, among other things, equipment and software upgrades, which have shortened scanning times and increased capacity. A reduction of exam room closures from remote scanning enabled by Deep Health's TechLive recently approved FDA software. Deployment of AI-assisted dynamic schedule devices designed to fill exam slots that would otherwise have gone unutilized. Recent de novo center openings and tuck-in acquisitions, along with the continuing shift from expensive hospital imaging towards more cost-effective ambulatory freestanding imaging. Margins continue to benefit from the continuing shift in procedure mix towards advanced imaging. In this third quarter, 28.2% of our procedures were from advanced imaging compared to 26.7% in the third quarter of last year. While the growth in advanced imaging is due in part to TechLive and the dynamic scheduling which are serving to expand our operating hours and ensure appointments are fully utilized is also the result of certain advanced imaging specialty practices we have been building. Examples of these programs include prostate PET-CT or PSMA, amyloid brain PET-CT, prostate MRI, and coronary CT angiography. Today's advanced imaging equipment is more capable than ever, and some of the faster-growing advanced imaging studies are an outgrowth of recently FDA-cleared Novell radioactive pharmaceuticals and advanced post-processing software. Furthermore, an increased focus within the healthcare delivery system on early detection of disease and population health screening is driving increased clinical indications for ordering more advanced imaging studies. RadNet's strong financial performance in the third quarter is also reflective of improvement in reimbursement rates with commercial and capitated payers who recognize the position RadNet offers as to lower-priced alternatives to hospital-based imaging. To this end, we have been successful in receiving rate increases from many of the larger commercial and capitated payers, and several capitated contracts have been converted to higher-paying fee-for-service relationships in recent quarters. The stronger operating results in the third quarter relative to our internal budget, along with trends that we are continuing into this year's fourth quarter resulted in the decision to increase 2025 full-year guidance ranges for revenue and adjusted EBITDA. Mark will discuss this in more detail in his prepared remarks. Steady progress also continues in the digital health operating segment. The EVCD deep health AI-powered breast cancer screening program continues to expand. Currently, we are experiencing a blended adoption rate nationally above 45%, with more cancers being found across RadNet centers, which otherwise might have only been detected at a later date. In the quest for reimbursement, we continue to make inroads with third-party payers. During the third quarter, several of our larger capitated medical groups agreed to add EBCD as a covered benefit for over 700,000 members. In an effort to boost compliance with annual breast cancer screening guidelines, Regal Medical Group, Lakeside Community Healthcare, ADAC Medical Group, and Desert Oasis Healthcare have agreed to reimburse RadNet for its EBCD program. On July 17th, the previously announced acquisition of ICAD, a global leader in clinically proven AI-powered breast health solutions, was completed with over 1,500 provider locations facilitating over 8 million annual mammograms in 50 countries. ICAD's profound breast health suite and RedNet's deep health AI-powered breast skin solutions together can materially expand and improve patient diagnosis and outcomes on a global basis through further enabling accuracy and early detection. We have substantially completed the integration to digital health of most of the ICADS operations with cross synergies ahead of plan and recent customer wins demonstrating the power of the newly merged entities. Also within digital health, we completed the implementation of CMODES thyroid ultrasound technology across more than 240 radnet centers. As you may recall, CMODES initial applications to detect and characterize thyroid nodules, and breast lesions in ultrasound imaging, improved diagnostic accuracy, and enhanced clinical workflows. In the most recent month, within the RadNet centers, we processed over 14,000 thyroid scans using this technology. Early deployment of CMOS FDA-approved thyroid ultrasound AI has demonstrated over 30% reduction in scan time. Furthermore, because a reimbursement code already exists that makes a portion of our over 230,000 annual thyroid ultrasounds eligible for additional reimbursement, we have been successfully billing for CMODE's AI. An initiative is ongoing to pursue FDI approval for CMODE's next application in breast AI ultrasound, which constitutes over 600,000 of radnets, approximately 2.7 million, annually thyroid exams. Some of you may have also seen last week an announcement that RadNet acquired the assets of AlphaRT. AlphaRT has been advancing several initiatives around remote technology scanning, including a vendor-agnostic staffing service capable of delivering on-demand access to highly skilled remote MRI technologists, a real-time AI-driven safety safety alert system to detect unsafe materials or circumstances within the mri suite and an mri tech aid certification program designed to strengthen the workforce in an effort to deliver high quality care this platform has implications for both operating segments of our business for digital health alpha rt will enable the sales and marketing teams of tech live to offer a more comprehensive portfolio solutions around remote scanning to now include providing remote technologists as a staffing service and a training and certification program for tech aides necessary to effectively provide onsite care in conjunction with remote scanning. For the imaging center operating segment, AlphaRT will pursue building and training remote technologists that can be used as a labor pool to scan for RADnet facilities. Furthermore, AlphaRT should become the principal training agent for RadNet's tech aides, or what we call internally, in-suite assistants, or ISIs. Before I turn the call back to Mark, I would just like to highlight our financial liquidity and leverage, which continues to be carefully managed. As of September 30th, 2025, cash balance was $804.7 million, and net debt to adjusted EBITDA ratio approximately 1.0. An attractive pipeline of acquisition opportunities is being evaluated for both the core imaging services division and for digital health, and we have confidence in our ability to invest the cash balance over time in opportunities that advance RadNet's strategic objectives. At this time, we'd like to turn the call back over to Mark to discuss some of the highlights of our third quarter 2025 performance. When it's finished, I will make some closing remarks.

Thank you, Howard. I'm now going to briefly review our third quarter 2025 performance and attempt to highlight what I believe to be some material items. I will also give some further explanation of certain items in our financial statements, as well as provide some insights into some of the metrics that drove our third quarter performance. I will also provide an update to 2025 financial guidance levels, which were released in conjunction with our 2024 year-end results in February and amended following our first and second quarter financial results. In my discussion, I will use the term adjusted EBITDA, which is a non-GAAP financial measure. The company defines adjusted EBITDA as earnings before interest taxes, depreciation and amortization, and excludes losses or gains on the disposal of equipment, other income or loss, loss on debt extinguishments, and non-cash equity compensation. Adjusted EBITDA includes equity earnings in unconsolidated operations and subtracts allocations of earnings to non-controlling interests in subsidiaries and is adjusted for non-cash or extraordinary and one-time events taking place during the period. A full quantitative reconciliation of adjusted EBITDA to net income or loss attributable to RadNet Inc. common shareholders is included in our earnings release. With that said, I'd now like to review our third quarter 2025 results. As Dr. Berger highlighted in his remarks, our business continues to demonstrate double-digit top-line growth as a result of a number of continuing and enduring industry and RadNet-specific trends. From an operational perspective, we continue to focus on creating capacity at existing centers, opening de novo facilities, shifting our business mix towards advanced imaging, executing on tuck-in acquisitions when available, negotiating reimbursement increases from commercial and capitated payers, and accelerating digital health revenue growth. During this year's third quarter, the 13.4% increase in total company revenue relative to the same period last year was highlighted by strong growth in advanced imaging. Aggregate MRI volume increased 14.8%, CT volume increased 9.4%, and PET CT volume increased 21.1% from last year's third quarter. And on a same center basis, same center MRI volume increased 11.5%, same center CT volume increased 6.7%, and same center PET CT volume increased 14.9%. As Dr. Berger noted, this is a function of the combination of greater utilization of higher acuity imaging in the healthcare delivery system at large, RadNet's expansion of specialty programs in areas such as cardiac, neuro, prostate, and PET-CT imaging, investments we've made to drive capacity for advanced imaging studies and patient throughput, and the continued shift from hospital to ambulatory outpatient imaging. During the quarter, we opened one new facility, a women's imaging center in Rolling Oaks, Ventura County region in Southern California. With this de novo, we now have opened five facilities during 2025 with more to come in the fourth quarter of this year. Within our digital health operating segment, revenue increased 51.6% from last year's third quarter which was partially the result of ICAD's revenue contributions since its acquisition on July 17th. AI revenue within digital health, inclusive of ICAD revenue from its profound AI and deep health solutions in breast, lung, prostate, and neuro, increased 112% from last year's third quarter. Also contributing to this growth was a 28.7% increase in EBCD AI revenue, as well as a small amount of external ultrasound AI revenue from our recently acquired C-Mode business. Excluding the AI revenue, digital health revenue from eRAD, Deep Health OS, TechLive, and other workflow solutions increased 24.5% from last year's third quarter. The overall business demonstrated margin improvement in the quarter. Adjusted EBITDA margins improved by 26 basis points from 16% in the third quarter of last year to 16.2% in this year's third quarter. This was a result of the strong revenue performance and they focus on cost management and efficiencies. With regards to our balance sheet and financial leverage, as of September 30th, 2025, unadjusted for bond and term loan discounts, we had $287.3 million of net debt, which is our total debt at par value, that's our cash balance. Note that this debt balance includes RadNet's ownership percentage of New Jersey Imaging Network's net debt of $33.7 million, for which RadNet is neither a borrower nor guarantor. At quarter end, our net debt to adjusted EBITDA leverage ratio was approximately one times. Contributing to our strong cash position and low leverage was the continued improvement in our revenue cycle where we have driven DSOs or day sales outstanding down to 31.9 days, which is our lowest historical level. Given the strong third quarter results and the positive trends we continue to experience, we elected to increase revenue and adjusted EBITDA guidance for our imaging center business. We increased revenue by $50 million at the low end and $30 million at the high end of the guidance range and increased adjusted EBITDA by $5 million, both at the low and high ends of the range. We also increased our capital expenditure guidance range by $5 million, which is reflective of additional growth investment opportunities we have been pursuing. We also lowered our range for cash interest expense by $4 million at both the high and low ends of the ranges, which is reflective of higher cash interest income from our cash balance than what we originally projected. For digital health, we increased the revenue guidance by $5 million, predominantly to incorporate the contribution for ICAD since its consolidation in mid-July. One thing worth noting is that we did not lower the digital health adjusted EBITDA guidance for 2025 despite the fact that ICAD and CMODE were both losing EBITDA at the time of their purchases. Holding the adjusted EBITDA guidance unchanged for digital health is the result of achieving anticipated cost synergies ahead of schedule through faster integration of each of those businesses. It is also due in part to better than anticipated expense performance from the existing digital health operations. I'll now take a few minutes to give you an update on 2026 anticipated Medicare reimbursement. As a reminder, Medicare represents between 23 and 24% of our current business mix. With respect to Medicare reimbursement in July, We received from CMS a matrix of proposed rates by CPT code, which is typically part of the physician fee schedule proposal that is released about that time every year. At the time, we completed an initial analysis and compared those proposed rates to our current 2025 rates. We volume-weighted our analysis using expected 2026 procedure volumes. In the proposed rule, Medicare proposed increasing the conversion factor of the Medicare physician fee schedule by about 3.3%, from $32.35 to $33.42, along with certain changes to the RVUs, or relative value units, of specific radiology CPT procedure codes, and to the Medicare geographic practice cost indices, or GIPSIs. Our initial analysis in July of all the various variables of the proposal indicated that RadNet on roughly $2 billion of revenue will benefit from an approximately $4 to $5 million Medicare revenue uplift in 2026. A couple of weeks ago, CMS released its final rule, which will govern the 2026 physician fee schedule reimbursement rates. We analyzed the final rule CPT code by CPT code, and we are pleased to report that the impact on Medicare rates in 2026 will be consistent with the proposed rule calculation we completed in July. The $4 to $5 million of revenue benefit next year breaks a trend of about five years of annual cuts to the Medicare physician fee schedule. During the last four years alone, we have absorbed over $35 million of annual cuts. We are pleased that going into 2026, we will not have to overcome Medicare cuts like we have had to do in the past, and this benefit will be reflective in our 2026 financial guidance. We hope that this is a recognition from CMS that it must compensate providers appropriately and that its reimbursement should be commensurate with the rising costs of providing services. I'd now like to turn the call back over to Dr. Berger, who will make some closing remarks.

Thank you, Mark. As many of you may be aware, RadNet will be hosting its inaugural Investor Day tomorrow at the NASDAQ market site in New York City. I invite all those not attending in person to watch the event via live webcast or via the archived replay which will follow. You can get the webcast link from the investors section of the RadNet corporate website or from our recent press releases announcing the event. During tomorrow's investors day, we will have a full day's agenda that includes numerous digital health demonstration of its AI-powered portfolio of solutions and presentations from the following. Certain physician clinical leaders will discuss some of the specialty growth areas of the company, including important programs in neuroimaging, prostate imaging, PET-CT, cardiac imaging, and lung cancer screening. RadNet's chief operating executives will provide a deep dive into many of RadNet's critical operating initiatives that will continue to drive efficiency and growth within our imaging center operating segment. Digital health leadership will provide an update on the progress of development, commercialization, and implementation of the deep health portfolio of solutions both within RadNet and progress we are making with outside customers. And finally, Mark will present RadNet's three-year plan, which will include executive management's view on the major operating assumptions and metrics that could drive our business through the end of 2028. Additionally, tomorrow's Investors Day will provide attendees the opportunity to ask questions of and interact with the broader business and clinical leaders of the company. Whether or not you participate in tomorrow's Investors Day, three weeks from now we will also be showcasing the digital health product portfolio at the diagnostic imaging industry's largest convention, RSNA, Radiological Society of North America in Chicago. We will be hosting two deep health booth tours for investors interested in participating in demonstration of Deep Health's portfolio of solutions and in walking the floor of the convention. We look forward to potentially seeing you tomorrow or at the RSNA and or further updating you on all our progress on the next financial results call. Operator, we are now ready for the question and answer portion of the call.

Thank you. We will now begin the question and answer session. To ask a question, you may press star and then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and then two. At this time, you will pause momentarily to assemble a roster. We have the first question on the line of David McDonald from Tourist. Please go ahead.

A couple of quick digital health questions to start. Can you guys talk a little bit about, on TechLive, you talked about the New York market on the 2Q call, just where we are in terms of rollout with other geographic regions. And then secondly, just on kind of the dynamic scheduling, can you provide a little more detail there? Is that you guys are doing predictive modeling around who may cancel or... you know, just increasing throughput on the scheduling side.

Sure.

Hey, Dave, thanks for the questions. Yeah, with respect to the tech live rollout, we should be substantially complete by the end of the year, maybe slightly early into the first quarter, with TechLive connecting all of our advanced imaging equipment, MRI CT and PET CT, we're substantially through the connection of our MRIs at this moment. And we did call out, both on the second quarter and the third quarter, and this call, the impact of what we're seeing in some of our markets with respect to the increased capacity that this has created for us. And that's one of the reasons why you've seen our MRI volume, both on an aggregate basis and same center basis, grow so substantially relative to last year. Because what the TechLive has already demonstrated for us is that it has substantially reduced the exam room closures when in the past we've had Ted Kinsman, Tech a shortage of staffing for a variety of reasons or text call in sick in the morning. We've had to close those exam rooms and very similar to Ted Kinsman, The airline industry or the hotel industry when we have a an exam slot that goes on sold like a like an airplane that takes off that that has a seat that's unsold, we can never resell that slot. So we called out on last quarter that we started the rollout here in New York. I happen to be sitting in New York right now for this call. And in 83 of our centers, we reduced exam closure hours by about 42% relative to last year. And that has had a market benefit to MRI scanning. The other thing that has had a benefit that I know you're not asking about it, but it's worth noting is what we call dynamic scheduling that we have instituted over the last year where we now have a predictive models using AI that can identify patients who might not show up for their exams based upon a number of different factors, including them not confirming those exams via text or other appointment reminders. And we've been essentially overbooking the schedule and expecting for some of these patients not to show up, and that has had a big benefit in filling spots that would otherwise have gone unused. We expect, you know, next year to even have a bigger impact. One, because this impact is going to be on all four quarters of next year. And also, we will be, you know, covering schedules now also for MRI and, excuse me, CT and PET-CT as well.

Okay. And then just one other quick follow-up, just to pay your question. Can you guys just provide a quick update? It sounds like additional progress on coverage is free BCD, just any conversations there? And do you expect to, you know, announce additional progress there? And then secondly, just on some of your capitated contracts, sequentially, it looked like you had a little bit of a bump in revenue. You seeing any of your capitated contracts start to circle back and kind of realize, you know, that the price increases you guys need are pretty reasonable relative to kind of, you know, what they'd be looking at otherwise.

Hi, Dave. It's Dr. Berger. I'll take that one. That's a multiple part question here, and I'll try to remember to hit all the highlights, Dave. But in terms of actual commercial payors adopting, covering the EBCD, we are in discussions. It's a big ship and they turn slowly, but The conversations, I think, are positive. Exactly when we might get the first one to adopt is hard to predict right now, but I think it's just a matter of time. Perhaps driving that is the continued growth of adoption by our patients who are opting in to pay out-of-pocket. That now is... We mentioned in our remarks up to 45%, and we expect to be north of 50% sometime in the beginning of 2026. And the value proposition for this AI is being very well received by our patients because we do such a substantial or make such a substantial effort in the education of this, not only with the patients, but with their referring physicians. And we have a lot of good testimonials, some of which we'll talk about tomorrow in the investor day of how appreciative our patient base is of offering this. In regards to capitated payers, we have been getting increases from all of our capitated programs some of which when we did not get the desired result, we elected to go on fee for service and we're getting increased rates that were higher than what we were getting under converted capitation rates to a fee for service program. And lastly, as I believe you mentioned, and we have gotten some of our larger capitated payers in California to begin offering the EBCD program as a benefit to all of their capitated patients, which means we don't ask those patients if they want to enroll in EBCD because they get it as a benefit that is paid for on a fee-for-service basis by our capitated medical groups. And I want to highlight the importance of that because the capitated groups recognize that there are two benefits from this. Number one, early detection leads to lowering costs and better outcomes. The other portion of this, which they have actively encouraged us, is to get better and better compliance from patients to do their annual or biannual screening. And that is a major component driver for decapitated groups because it improves their HEDIS performance and allows them to get bonuses, some of which we share at the end of the year. So I'm very grateful and very delighted to report that there is a large segment of our patients who are now getting this as a benefit. that kind of pressure inside the industry will eventually filter down to the commercial payers as something that is truly a benefit that patients deserve under their healthcare plans. We also are doing a lot of education directly with employers since probably about 70% of all the patients covered by commercial payors are actually through employer health plans. So we're very confident that this will continue to be successful. I will also tell you, and we'll be talking about it next year, that we plan to expand capabilities within the EBCD program to further create ability to not only detect cancers early, but also to improve risk prediction models that will be part of our EBCD program.

And the one thing I'll add is to exactly Dr. Berger's point, in October, we had a new capitation contract, Desert Oasis Healthcare. Actually, they're an old capitation contract of ours, but they're newly now paying for the EBCD program. So, you know, we're getting more and more traction here, and I think that this is putting more and more pressure on on the commercial insurance companies because these capitated patients are HMO patients that are aggregated from the various different HMOs, you know, the United, the Aetnas, the HealthNets of the world. And so now those big insurance companies have certain of their members who are part of these capitated groups that are now getting EBCD paid for as a covered benefit. and then other plans that they have that are not getting, and members that are not getting this paid for as a benefit. So I think we're headed in the right direction here. It's just that there's, you know, it's a slow process and there's a lot of inertia in healthcare.

Okay. Helpful. Thanks, guys. Thank you.

We have the next question from the line of Brian Tantilet from Jefferies. Please go ahead.

Hey, good morning, guys, and congrats on another solid quarter. Maybe, Dr. Berger, I'll start with you. You know, I remember last quarter you talked about the outlook for joint ventures and how you're getting excited about opportunities that you expect towards your end. So, just curious, where does that stand in terms of, you know, partnerships with health systems or physician groups?

Hey, good morning, Brian. Nice to hear from you. It looks very robust. I don't have anything specific to announce today, although we hope to have those in the coming weeks or early first quarter. What I will tell you though is that we are getting more inbound calls from health systems as it relates to helping them with their radiology strategy. Hospitals are being impacted just the way for their inpatient staffing issues as outpatients are, meaning radiologists are in short supply and high demand. There's turnaround time for reports is deplorable, and the shortage is creating staffing issues that nobody could have predicted. So while they're perhaps are other people who provide pieces of the puzzle that health systems need. People are more and more looking at RadNet's comprehensive solutions, both on the operating metrics as well as the deep health and AI metrics as a way to solve some of their problems, just like it's solving for us. The conversations that we're having are robust, and not only with the new systems that are reaching out to us, but also with existing systems that are looking to expand some of RadNet's operating capabilities into their health systems, even if it's not part of a joint venture, but leveraging up on RadNet's strong management and operating capabilities, much of which is really being driven by the potential value proposition of the digital health segment.

I appreciate that. And then to piggyback on that, Mark, as I think about 2026, I know too early for guidance, As we think through top of the juror, right, EAPTC, I'm just curious what your health insurance exchange exposure is or how do you view that? And then how should we be thinking about the inflationary environment for wages as Dr. Berger talked about the radiation technologists and radiologists costs?

Sure. So on your first question with regards to the exposure we have to these Medicaid programs and the exchanges. It's a very small part of our business. About two and a half percent of our business is Medicaid fee-for-service business. It's also the lowest paying or lowest reimbursing book of business that we have. So, you know, regardless of what happens with this you know, big, beautiful bill on the Medicaid side of the business, I don't think we're going to be impacted, you know, substantially. We also don't do a lot of exchange work. We do some on the fee for service, you know, side and that's, you know, part of our commercial book, but it's relatively small here. So, you know, a lot of the noise that we're hearing in Washington today Regardless of how it gets resolved, it doesn't feel like it's going to have a material impact on our business one way or another. With respect to your second question about labor, labor still remains a challenge for our company, the industry, healthcare at large. We have seen it stabilize a little bit in our industry with respect to radiology technologists, which is our biggest pain point. We've done a lot internally from a grassroots level to be more effective at hiring and retaining talent. Other than having to pay more, we've been... aggressive in establishing relationships with the tech schools, providing internship programs, training programs, tuition reimbursement programs. We've paid bounties to our existing employees who have brought in talent into our company from the outside. And we've mentioned this in the past, we actually have started our own tech program, tech training program on the West Coast in conjunction with a a non-for-profit vocational program out there. So we have seen some stabilization, but it's still challenging out there. We, you know, we will build into our 26 guidance increases to our employees, you know, at the center level and our technologists, like we have been building in over the last several years. But, you know, the big focus for us is on some of the digital solutions that we think will have a major impact in helping us slow this curve or reverse this curve. TechLive is an example of that. We're starting to train some of our more capable techs to be able to control multiple rooms simultaneously. TechLive also opens up the hiring pool beyond our geographies so we can fish from a much larger talent pool. And the workflow solutions like Deep Health and others also lowers the scanning time, increases capacity where we can do more scanning in the same number of work hours, which helps us leverage our workforce. Awesome. Thank you very much, Howard.

Hey, Brian, I want to make one other quick comment about the labor market. I believe, and I hope I'm correct, that the challenges in the labor market are at an inflection point. And somebody might say, well, why do you believe that? And I'll give you two reasons. Number one, in general, you've seen many good-sized companies announce staff reductions and layoffs. Some of them use the excuse of AI has made them less dependent upon labor, manual labor. Others, I believe, are running into some of their own operating metrics that need to be right-sized. But more specifically, in the healthcare industry, one of our biggest issues that we've had to deal with is the fact that reimbursement to hospitals has been so substantially greater than it is to imaging centers that the salaries that hospitals have been able to offer have often attracted people away from the outpatient imaging centers like ours and others. I believe that's changing. While it's not necessarily always publicly announced, I have seen many articles in the markets that we operate in of hospitals that have never in their history had layoffs, which are now because of high cost of labor as well as anticipated lower reimbursement in 2026 from many of the federal and state programs. So that I believe some of the burden that we've been shouldering for the last several years will now be lessened. It will not be eliminated. But I think that, along with our timely entrance into the digital health market and the programs that we are going to continue to develop, will help transition us into a less dependent manual labor force. And I think you'll be hearing more about that. I do want to emphasize that in healthcare, AI is not a bubble. It is an existential need that the industry must and will go through in order not only to deal with the challenges facing the market today from a reimbursement standpoint and from a cost standpoint, but simply to improve the quality of care and better outcomes that technology and innovation are capable of doing. And that's why that is indeed the new moniker for RadNet that we will be talking about on tomorrow's Investor Day, and which I like to think that RadNet will be a poster child for that kind of transition.

Thank you, guys. Thanks, Brian.

Thank you. We have the next question from the line of John Ransom. From Raymond James, please go ahead.

Hey, good morning, team. A couple on digital health. Number one, just with the ICAT acquisition and your AI capabilities that you currently just use for in-house, your own centers, is there a future where RadNet develops maybe a virtual radiology capability and uses its capabilities enhance, you know, EBCD technology to do reads just, you know, for scans, not just on the NS4 walls?

I believe, yeah. Good morning, John. Hope you're doing well. Yes, sir. I believe that is an inevitability. It's not something that is designed to eliminate radiologists, as some people have feared or have told about, but rather to address the enormously challenges that radiologists face in trying to manage all the information that is presented to them through breast imaging in particular. When I started practice, which was kind of in the horse and buggy days, there might have been two or three or four images that you would look at to try to read a mammogram. Today, and I'm not exaggerating, it's thousands of images. And To some extent, breast cancer, like other cancers, particularly if you're going to attempt to diagnose them as early as possible, is sometimes like looking for a needle in a haystack. That being said, the advances in technology are creating this kind of demand in an already challenged workforce, meaning radiologists, and the ability to look at patterns, which is really what radiology is about, what imaging is about, and what machine learning is about to create these AI models is a natural evolution to being able to, at the very least, give with greater certainty and perhaps with autonomous outcomes those that are normal from those that are not normal. So I believe that is the future. I will tell you that it's something that we and others are working on. And it will not be limited to just breast imaging and cancer detection. So the tools that we're embracing and will continue to embrace and invest in will be to assist our radiologists in providing faster, better, and more accurate outcomes.

Great. And my second question, to your credit, you all described the deep health enterprise sale as a long cycle sale and I think that's proven to be the case, but I just wonder a few months now, nine months now into this launch of Deep Health, where are you getting traction in the market? I know it's a modular solution, but what modular solutions are getting traction? It gets a sea of what's been described as pretty good point solutions. So where are clients latching on and what's the opportunity set? I don't want to steal your thunder about tomorrow, but I'm just curious where Deep Health sits today and its marketplace opportunity.

Well, we're still currently in the process, John, of rolling out all of the modules inside RadNet. And that's something that we'll be emphasizing in tomorrow's Investor Day is, you know, the unique capability that RadNet provides is not only a laboratory for development, but a opportunity to deploy these, do what we call co-development or co-piloting of these products and get very quick feedback as to how they're impacting both the clinical and operating metrics here. So we're getting very good adoption internally. We're trying to finalize what I'll call some of the modules that will be prime time and ready for adoption next year, which at this point is only about seven weeks away. So we're excited about that. But things that we're doing, there's no reason to think that anything we're doing internally won't be embraced by someone somewhere to put into their system. I also want to emphasize that I think, as you have correctly pointed out, John, there's a lot of point solutions. That, in fact, is, and we'll try to go into deeper, take a deeper dive into tomorrow, part of what the benefit of the RadNet Deep Health operating system is, it's a platform for all of these modules or opportunities, whether they're ones that RadNet owns and develops or whether It's one that somebody, including RadNet, may want to license, can operate on a single platform and have RadNet be responsible for the implementation and integration of it rather than somebody have to deal with perhaps as many as 100 different vendors to do all of these point solutions. So I would encourage everybody who is able to listen in to the Investor Day, either live or subsequently online, to understand that what we're talking is a transformative tool that we believe is going to markedly improve and address the challenges that not only radiology but healthcare itself faces.

So, Howard, when you were reading scans, you know, back in the horse and buggy days, did you ever think you'd become a software salesman? You know, that sounds pretty good.

John, I'm not even sure up until fairly recently I knew what the word software meant.

That's funny.

But actually, you bring up a very good point, John, and thank you. The future of radiology, the future of imaging is more about software than it is hardware. And I'm not trying to diminish the importance of hardware and one bit. It has been instrumental in evolving imaging to where it is today. But the future is about software. We'll be talking about that tomorrow. And, you know, as opposed to what I continually hear about AI being a bubble and people being concerned about it, that's the least of our concerns inside healthcare and particularly in imaging. AI is here today It has both clinical and operating implications, which are going to be transformative, not just, as I said, to the radiology community, the imaging community, but to healthcare. And we're excited to be leading that way.

Lastly, for me, and not that we don't love New York and California, but you guys have raised a pile of money. It's largely been fallow from just the core imaging M&A side, so... I just wondered, you know, is there still a bid-ask spread for these larger portfolios? Is there anything cooking? What's going on with the kind of external growth model on the core imaging side? Thanks. I'll stop there.

Thanks, John. Core imaging will always be central or core to RadNet. No matter how large the deep health division gets, At the end of the day, what we do is we are a service business that has patients, which next year will do over 12 million exams coming into our offices, and which we plan to continue to invest in and grow robustly. It's important to realize, and again, it'll be part of what we hope to communicate tomorrow on Investor Day, that that the software or the deep health or the digital health part of our business will help improve operating metrics, which will apply across the entire spectrum of RadNet services. And so our investment of that in anywhere we decide to take it will only help create better operating leverage for the company, allow us to go into other markets, perhaps with less capital intensity that we have in the past, but have a reach that two or three years ago we would never have even considered, not only domestically, but perhaps internationally.

Thank you. Thanks, John. Thank you. We have the next question from the line of Andrew Moore from Barclays.

Please go ahead.

Hi, maybe just a quick follow-up on that sales cycle question. From a personnel standpoint and following the ITAD acquisition, do you have the appropriate number of salespeople in the seats to sell Deep Health, or is there more hiring needed on that front?

Thanks. Hi, Andrew. Yes and yes. Yes, we need more, but there's other ways of acquiring that that we'll be talking about. The sales force for doing this is more and more being recognized by us that cross-selling and bundling of these tools is the way to best enhance the overall penetration of deep health in the market. I think as John had just pointed out, point solutions are nice to talk about, but implementing them and maintaining them with several different companies is impractical. So what we have found and where we're particularly excited is that we gained a very substantial sales force with the ICAD acquisition. And that has, in fact, allowed us to accelerate cross-selling not only of various breast imaging suites, but starting to or our breast imaging suite, but also introduce other opportunities for them to cross-sell that they're very enthusiastic about and which would have taken us quite a bit of investment and time to achieve. So it's quite likely that as we begin to embrace other areas of AI software in imaging, that same philosophy is something that we will be looking at carefully so that we can accelerate what is a truly transitional time in imaging and that is ripe for these kind of solutions.

Great. And maybe just a follow-up on EBITDA margins in the quarter. I was a little surprised that you didn't see better flow through on very strong advanced imaging volumes. Anything to call out on the cost side or incremental margins in the quarter preventing margins from expanding more? Thanks.

Well, I think on some level, you know, we can create the capacity, but, you know, as we create that capacity and fill it, it will, in and of itself, reach certain limitations. So I think we've had a very good run of this virtually every quarter, and if you compare the quarter last year over the quarter this year, last year was actually a very good quarter for us, so I was happy to see some improvement even compared to a very good quarter last year. But I think some of the things that we talked about and that we'll go into more detail and in fact even show some slides will show that this sustainability is not just because of capacity that we're creating through the tools that we've used up to now, but how Next year will be a transition that margin improvement is more likely to come through the digital health side as we begin to implement both some of the clinical and now operating tools that we're beginning to implement inside of RAD. And so, margin expansion is certainly something that is the primary focus of the company. First, to make certain that these products are capable of delivering that on our 12 million exams that we're doing annually right now, and then honing these tools so they become that much more attractive for external use. Some of that external use, again, being in a built-in customer base that we have with our current and growing joint venture health system. I think, you know, we're hitting, if you look at, and we'll be showing this on a slide tomorrow, the actual growth of our margin over the last four years has been over 300 basis points. We think we can continue that, but not just by the more, by the tools that we've been using over the last four years and particularly in the last, you know, 18 months to 24 months. but how now the investment in artificial intelligence will continue to drive those opportunities, which by themselves have almost unlimited potential. So we're just getting started, and I think tomorrow's Investor Day will hopefully amplify kind of the handover of what has been capacity creation and investment and margin improvement over to AI and software further improvement that will happen primarily from the operating side, which are equally exciting for us.

Andrew, will that be all, or do you have any follow-up questions? All right, we'll move on to the next question.

We have the next question on the line of Juan G. from B Riley Securities. Please go ahead.

Good morning. Thank you for taking our questions and congrats for a good quarter. So, Mark, maybe can you clarify the digital health revenue for 4Q after acquisition of ICAD, which contributes about $5 million a quarter in revenue? Does it mean the digital health will be flat or even decreasing year over year for 4Q?

No, we didn't mean to imply that. I mean, we increased the revenue guidance by $5 million. ICAD this quarter contributed about $3.9 million of additional revenue. We feel comfortable with the new range for digital health that we gave, but we're really not implying that digital health itself was going to be down. With the ICAD revenue, we were up 56% this quarter over last year's third quarter. We're expecting a strong performance in the fourth quarter of digital health. We'll look at where we are at the end of the year and that will be the run rate going into next year.

It's We probably will hear this more tomorrow, but within the 15% to 20% year-over-year volume growth of PAC-CT, can you comment on the growth from oncology versus Alzheimer's? And are you preparing for new agent launching in 2026? Thank you.

Yeah. Yeah. So, yeah. PET CT is still being driven by significant growth in two areas, the PSMA, prostate imaging, as well as the amyloid brain studies for Alzheimer's and dementia. And the two of those together are now about 20% of all of our PET CT procedure volume PSMA is currently running about 12% of our PET-CT volume, where the amyloid brain study is another 8%. And the strong growth continues. I mean, it's pretty remarkable. And we think both of these studies are still very much underutilized within healthcare. So there's more growth to be had there. And you'll see this tomorrow. in our investor day that there are a number of newer radioactive or novel radioactive tracers that are in sort of the final stages of clinical trials that we think are going to be coming on the market in the coming years that is going to continue to make you know, nuclear medicine and PET-CT grow substantially in the future. And these are tracers that are tumor-specific and will be driving more and more utilization of PET-CT in the future.

That'll be all, Mr. G? Yes, thank you.

Thank you. We have the next question from the line of Jim Sidoti from Sidoti and Company. Please go ahead.

Hi, good morning, and thanks for taking the call. Just to follow up on the core business, I believe you said you added one center in the quarter, so are you up to 406 centers at this point?

We're at 407 centers. Yeah, and that includes, you know, acquisition centers in the corridor, includes the new centers, and it includes consolidation of centers. So, net-net, at 9-30-2025, we were at 407 locations.

And where do you think you'll be by the end of 2025?

By the end, we'll be higher. We've got some acquisitions in the pipeline that we're hoping to be in a position to close by the end of the year. We've got other de novo centers that will open between now and the end of the year. So we don't really make those projections because it's difficult to know the timing of when acquisitions potentially close. But yeah, we'll be, as Howard said, we'll be higher.

Okay, and you gave us same center numbers for the advanced imaging procedures, but what was the overall same center volume?

I think, you know, because, you know, 72% of our procedure mix is routine imaging, that tends to, you know, from a law of averages, that tends to, you know, to dominate, you know, the overall average, but And remember, advanced imaging is growing much faster than routine imaging. But net-net, when you put all these two together, I believe it was 4.9% total same-center procedure volume, inclusive of both advanced imaging and routine imaging.

Okay. And then last one for me. You talked a little bit about the AlphaRT acquisition. Can you just give us some broad... what you paid for it, how you paid for it, just some magnitude on what that was.

Yeah, sure. And we had an 8K to this effect because we paid it all in stock and registered that stock. And I believe at the day of completion, it was somewhere in the range of $5 million, give or take, a few bucks here and there. And it was all stock. And really what AlphaRT is, it's a platform that fits in really nicely with our tech live remote scanning technology where AlphaRT is a platform where they're providing remote technologists, meaning technologists that are sitting either in Coral Springs, Florida, where they're headquartered or elsewhere, that are available to read these scans remotely. And we can use that both internally within RadNet to cover our centers as well as provide this as a service to other customers who might be looking when they're buying TechLive from us or licensing TechLive, a more comprehensive offering. So we're excited about that. They also have a technology for safety within the MRI room where it's an AI-powered camera technology that can identify materials that could be brought into an MRI room that are metal, which has patient safety and equipment safety implications to it. And so we're... And they also further have a certification program and a training program for tech assistants or what we call in-suite assistants who, you know, if you remove the tech from the location and they're scanning remotely, we still need someone on site to greet the patient, to bring the patient out of the changing room. into the exam room, position them on the table, potentially position them in MRI coils. And so Alpha RT has a platform to train this whole new employee base.

Yeah, just for a moment, I'll introduce a term that we're going to talk about tomorrow. So you know we sell an AI tool called TechLive. what the Alpha RT opportunity will allow us to do is to provide live tech so that we will become, for ourselves and for others, an opportunity for staffing, not just providing AI, which in today's market could wind up being a product of our services division and one that perhaps will given the demand and compensation that people get for providing this somewhat very needed and in short supply service with greater margins than even our AI business.

All right. Well, thank you, and looking forward to hearing more about it tomorrow. All right. Thank you, Jim. Thanks, Jim.

Thank you. This concludes our question and answer session. I would now like to turn the conference back to Dr. Berger, the President and CEO, for any closing remarks.

Okay.

Thank you very much, Operator, and I want to thank everybody for attending today's earnings call. I thought it was going to be slightly shorter, but apparently not. earnings call given the investor day tomorrow, but I'd encourage everybody who's interested and who will get a substantially deeper dive into the metrics that we look at every day and which up till this time we've not had an opportunity perhaps as display as vividly as we will tomorrow to sign in and listen to both a clinical and an operating presentation, which is something that has not ever been done in our industry. So we'll look forward to seeing those of you tomorrow and otherwise for our fourth quarter earnings call in March of next year.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.