RadNet, Inc. (RDNT) Q4 2022 Earnings Call Transcript

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RadNet, Inc. (NASDAQ:RDNT) Q4 2022 Earnings Conference Call February 28, 2023 10:30 AM ET

Company Participants

Mark Stolper - EVP and CFO

Howard Berger - CEO

Conference Call Participants

Brian Tanquilut - Jefferies

John Ransom - Raymond James

Mitra Ramgopal - Sidoti & Company


Greetings, and invited to nan RadNet Inc. Fourth Quarter 2022 Financial Results Call. At this time, each participants are successful a listen-only mode. A little question-and-answer convention will travel nan general presentation. [Operator Instructions] As a reminder, this convention is being recorded.

It is now my pleasance to present your host, Mark Stolper, Executive Vice President and Chief Financial Officer. Thank you. Mark, you whitethorn begin.

Mark Stolper

Thank you. Good morning, and convey you for joining Dr. Howard Berger and maine coming to talk RadNet's 4th fourth and afloat twelvemonth 2022 results. Before we statesman today, we'd for illustration to punctual everyone of nan Safe Harbor connection nether nan Private Securities Litigation Reform Act of 1995. This position contains forward-looking statements wrong nan meaning of nan U.S. Private Securities Litigation Reform Act of 1995.

Specifically, statements concerning anticipated early financial and operating performance, RadNet's expertise to proceed to turn nan business by generating diligent referrals and contracts pinch radiology practices, recruiting and retaining technologists, receiving third-party reimbursement for diagnostic imaging services, successfully integrating acquired operations, generating gross and adjusted EBITDA for nan acquired operations arsenic estimated, among others are forward-looking statements wrong nan meaning of nan Safe Harbor.

Forward-looking statements are based connected management's existent preliminary expectations and are taxable to risks and uncertainties, which whitethorn origin RadNet's existent results to disagree materially from nan statements contained herein. These risks and uncertainties, see those risks group distant successful RadNet's reports revenge pinch nan SEC from clip to time, including RadNet's Annual Report connected Form 10-K for nan twelvemonth ended December 31, 2022 to beryllium revenge shortly.

Undue reliance should not beryllium placed connected forward-looking statements, particularly guidance connected early financial performance, which speaks only arsenic of nan day it is made. RadNet undertakes nary responsibility to update publically immoderate forward-looking statements to bespeak caller information, events aliases circumstances after nan day they were made aliases to bespeak nan occurrence of unanticipated events.

And pinch that, I'd for illustration to move nan telephone complete to Dr. Berger.

Howard Berger

Thank you, Mark. Good morning, everyone, and convey you for joining america today. On today's call, Mark and I scheme to supply you pinch highlights from our 4th fourth and afloat twelvemonth 2022 results, springiness you much penetration into nan factors which affected this capacity and talk our early strategy. After our prepared remarks, we will unfastened nan telephone to your questions. I'd for illustration to convey each of you for your liking successful our institution and for dedicating a information of your time to participate successful our convention telephone this morning.

Let's begin. I'm highly pleased pinch our beardown capacity successful nan 4th quarter. We grew our gross by complete 15% and our adjusted EBITDA by complete 13% from past year's 4th quarter, resulting successful quarterly records for some gross and adjusted EBITDA. The beardown capacity was nan consequence of a operation of increasing procedural request for our services and improving conditions successful our labour markets. Demand for our services remains robust successful virtually each of nan markets arsenic outpatient imaging continues to beryllium shifted for much costly infirmary settings towards much costs businesslike ambulatory sites for illustration nan ones RadNet operates.

Contributing to our record, adjusted EBITDA capacity was besides an improving labour market. During nan 4th fourth and frankincense acold successful 2023, we person been much successful successful filling unfastened positions and retaining existing staff. Furthermore, COVID has had little of an effect connected our workforce pinch respect to taking sick days enabling america to unit our centers much efficaciously to meet dense procedural demand.

Consistent pinch our efforts passim nan pandemic, during nan 4th quarter, we proceed to attraction connected strengthening our equilibrium expanse by managing our liquidity and financial leverage. At nan year-end 2022, we had a rate equilibrium of complete $127 cardinal and a nett leverage ratio of nether 3.5 times adjusted EBITDA.

Our Days Sales Outstanding, DSOs, astatine December 31, 2022 was nether 39.0 days, adjacent to our historical low. The betterment successful gross rhythm operations and collections has materially contributed to our expertise to negociate nan challenges presented by COVID-19 and nan difficult labour market, while affording america nan expertise to make important investments successful our future.

These investments successful our early person been focused successful 4 main areas that we judge are cardinal elements to our near-term growth. First, arsenic we discussed past year, we person been successful improvement of complete a twelve de novo facilities, astir of which will unfastened for operations successful 2023. These accommodation are located successful markets wherever we person diligent backlogs, require further capacity aliases successful locations wherever we presently deficiency entree points to work this identified diligent populations. The largest of these de novo centers successful nan downtown area of Phoenix is now operational and has begun to work diligent volume.

A 2nd area of finance and attraction will beryllium expanding our associated task initiatives. We presently person 24 wellness strategy associated ventures, representing one-third aliases 119 centers of our 357 centers. We proceed to judge that we could person much than half of our centers successful wellness strategy partnerships wrong 3 years. Forward reasoning and entrepreneurial wellness systems are progressively seeking a semipermanent viable strategy for outpatient diagnostic imaging, and RadNet represents an charismatic strategical guidance for these organizations.

During 2022, arsenic an example, we established a caller associated task successful Frederick, Maryland and expanded respective others pinch our partners, including Cedars-Sinai Medical Center successful Los Angeles area and Dignity Health CommonSpirit successful Arizona. As we look up to this year, we expect nan description of respective wellness strategy relationships and nan constitution of caller associated task relationships. As payors, patients and referring physicians proceed to displacement outpatient volumes from hospitals into ambulatory outpatient centers, we are receiving expanding liking successful nan business models we tin offer.

Third, tuck-in acquisitions will stay an important portion of our maturation strategy and investment. Our manufacture remains fragmented and consolidation will proceed arsenic unit mounts connected smaller operators. Motivated sellers are appearing arsenic a consequence of nan rising costs of capital, accrued liking rates, reimbursement unit from Medicare and backstage payers and nan necessity of standard to thrust efficiencies and profitability. Becoming portion of RadNet for nan smaller operators represents a measurement to create much information for their future. In 2022, we completed respective tuck-in acquisitions.

The largest tuck-in acquisitions we completed during 2022 was nan 4th fourth acquisition of Montclair Radiology associates by our New Jersey Imaging Network associated venture, pinch nan RWJ Barnabas infirmary system. Montclair was an entrenched and good respected usability successful bluish New Jersey, pinch six precocious performing imaging centers. Also notable during nan 4th fourth of 2022, we acquired a controlling liking successful Heart and Lung Health, HLH, a London based teleradiology web focused connected lung crab screening.

HLH has established itself arsenic nan starring supplier of lung crab screening services to nan UK National Health Service. Targeted Lung Health Check program, which mandates nan mixed usage of artificial intelligence and master radiologist mentation for wide organization wellness lung crab screening. HLH utilize a package from RadNet's AI subsidiary, Aidence and it is anticipated that nan programme could thrust complete 1 cardinal lung scans successful England alone, erstwhile nan programme becomes afloat implemented, which is targeted by nan extremity of 2026.

Finally, we proceed to put and prosecute maturation opportunities successful artificial intelligence. In November, we initiated a aviator of a caller Enhanced Breast Cancer Detection work successful Delaware called EBCD. The offering useful successful performance pinch nan patient's yearly screening -- bosom screening regimen. For an further fee, patients tin elite to enroll successful a suite of premium mammography related services, including nan usage of Deep Health SaigeDX AI, personalized life consequence appraisal and further AI driven reappraisal for definite exams and entree to a dedicated 1,800 support line.

Upon nan successful completion of nan pilot, we began to instrumentality a rollout of EBCD to our different East Coast markets during nan 4th fourth and we expect that EBCD will beryllium disposable successful each of nan RadNet's mammography centers by nan extremity of this summer. Currently, we execute astir 1.4 cardinal screening mammography exams annually. AI will proceed to beryllium an important maturation driver for our future. When Mark reviews our 2023 guidance, he will statement that we expect to constrictive our losses from AI successful 2023, arsenic a consequence of some expected gross from EBCD and maturation from nan waste and licensing of Quantib and Aidence products. We further expect that our AI conception will move a profit successful 2024.

At this time, I'd for illustration to move nan telephone backmost complete to Mark to talk immoderate of nan highlights of our 4th fourth and afloat twelvemonth 2022 performance, arsenic good arsenic talk successful item our guidance levels for 2023. When he is finished, I will make immoderate closing remarks.

Mark Stolper

Thank you, Howard. I'm now going to concisely reappraisal our 4th fourth and afloat twelvemonth 2022 capacity and effort to item what I judge to beryllium immoderate worldly items. I will besides springiness immoderate further mentation of definite items successful our financial statements, arsenic good arsenic supply immoderate insights into immoderate of nan metrics that drove our 4th fourth and afloat twelvemonth 2022 performance. I will besides supply 2023 financial guidance levels, which were released successful this morning's financial results property release.

In my discussion, I will usage nan word adjusted EBITDA, which is simply a non-GAAP financial measure. The institution defines adjusted EBITDA arsenic Earnings Before Interest, Taxes, Depreciation and Amortization and excludes losses aliases gains connected nan disposal of equipment, different income aliases loss, nonaccomplishment connected indebtedness extinguishments and non-cash equity compensation.

Adjusted EBITDA includes equity net successful unconsolidated operations and subtracts allocations of net to non-controlling liking successful subsidiaries and is adjusted for non-cash aliases bonzer and one-time events taken spot during nan period. A afloat quantitative reconciliation of adjusted EBITDA to nett income aliases nonaccomplishment attributable to RadNet income and shareholders is included successful our net release.

With that said, I'd now for illustration to reappraisal our 4th fourth and afloat twelvemonth 2022 results. For nan 4th fourth of 2022, RadNet reported gross from its imaging halfway reporting conception of $382.5 cardinal and adjusted EBITDA of $61.6 million, which excludes gross and losses from nan AI Segment. As compared pinch past year's 4th quarter, gross accrued $50.3 cardinal aliases 15.1% and adjusted EBITDA accrued $9.6 cardinal aliases 18.4%, besides excluding $2.9 cardinal of Provider Relief Funding received successful nan 4th fourth of 2021.

Including our AI conception -- reporting segment, gross was $383.9 cardinal successful nan 4th fourth of 2022, an summation of 15.2% from $333.1 cardinal successful past year's 4th quarter. Including nan adjusted EBITDA losses of nan AI reporting segment, adjusted EBITDA was $57.2 cardinal successful nan 4th fourth of 2022 and $51.7 cardinal successful nan 4th fourth of 2021, besides excluding nan Provider Relief Funding received successful nan 4th fourth of 2021.

For nan 4th fourth of 2022, arsenic compared pinch nan anterior year's 4th quarter, MRI measurement accrued 11.9%, CT measurement accrued 11.8% and PET/CT measurement accrued 20.7%. Overall volume, taking into relationship regular imaging exams, inclusive of x-ray, ultrasound, mammography and each different exams, accrued 8% complete nan anterior year's 4th quarter.

In nan 4th fourth of 2022, we performed 2,376,995 full procedures. The procedures were accordant pinch our multi-modality approach, whereby 75.6% of each nan activity we did by measurement was from regular imaging. Our procedures successful nan 4th fourth of 2022 were arsenic follows. 352,009 MRIs arsenic compared pinch 314,682 MRIs successful nan 4th fourth of 2021. 213,716 CTs arsenic compared pinch 191,180 CTs successful nan 4th fourth of 2021. 13,359 PET/CTs arsenic compared pinch 11,066 PET/CTs successful nan 4th fourth of 2021 and 1,797,911 regular imaging exams, compared pinch 1,684,992 of each these exams successful nan 4th fourth of 2021.

On a same-center basis, including only those centers, which were portion of RadNet for some nan 4th quarters of 2022 and 2021, MRI measurement accrued 7.5%, CT measurement accrued 6% and PET/CT measurement accrued 16.9%. Overall, same-center measurement taking into relationship each regular imaging exams accrued 3.6% complete nan anterior twelvemonth aforesaid quarter.

For nan 4th fourth of 2022, RadNet reported a nett nonaccomplishment of $934,000 arsenic compared pinch a nett nonaccomplishment of $3.8 cardinal for nan 4th fourth of 2021. Net nonaccomplishment per stock for nan 4th fourth of 2022 was antagonistic $0.02 compared pinch a nett nonaccomplishment per stock of antagonistic $0.07 successful nan 4th fourth of 2021, based upon a weighted mean number of diluted shares outstanding of 57 cardinal shares successful 2022 and 50 much 4 cardinal shares successful 2021.

There were a number of different aliases one-time items impacting nan 4th fourth of 2022, including nan following. $45,000 of non-cash summation from liking complaint swaps, which excludes nan amortization of nan accumulation of nan changes successful adjacent worth retired of Other Comprehensive Income, $450,000 of severance paid successful relationship pinch headcount reductions related to costs savings initiatives, $1.2 cardinal disbursal related to leases of our de novo accommodation nether building that person yet to beryllium opened for operation, $927,000 acquisition transaction costs chiefly related to nan acquisition of bosom and lung imaging limited, $47,000 of valuation accommodation for contingent information related to acquisitions, $731,000 expenses related to indebtedness restructuring and nonaccomplishment connected extinguishment related to nan refinancing of New Jersey Imaging Network's in installments accommodation completed successful October, and $6.1 cardinal of pre-tax losses related to our AI reporting segment.

Adjusting for nan supra items, adjusted net from nan Imaging Centers reporting conception was $6.4 cardinal and diluted adjusted net per stock was $0.11 during nan 4th fourth of 2022. This compares pinch adjusted net per stock of $0.10 during nan 4th fourth of 2021.

Also affecting nett income successful nan 4th fourth of 2022 were definite non-cash and different items, including nan following. $4.7 cardinal of non-cash worker banal compensation disbursal resulting from nan vesting of definite options and restricted stock, $1.6 cardinal nonaccomplishment connected nan disposal of definite superior instrumentality and $750,000 of non-cash amortization of deferred financing costs and indebtedness discounts related to financing fees paid arsenic portion of our existing in installments facilities.

With regards to immoderate circumstantial income connection accounts, wide GAAP liking disbursal for nan 4th fourth of 2022 was $15.4 million. This compares pinch GAAP liking disbursal successful nan 4th fourth of 2021 of $11.8 million. Cash paid for liking during nan period, which excludes non-cash deferred financing expense, accrued interest, and payments to and from switch counterparties was $8.9 cardinal arsenic compared pinch $7.6 cardinal successful nan 4th fourth of past year.

The higher liking disbursal and rate paid for liking successful this year's 4th fourth was a usability of further indebtedness connected our equilibrium sheet, resulting from nan $150 cardinal New Jersey Imaging Network refinancing transaction completed connected October 7th of 2022, arsenic good arsenic higher liking rates since past year's 4th quarter.

For afloat twelvemonth 2022, RadNet reported gross from its Imaging Centers reporting conception of $1,426 cardinal and adjusted EBITDA, excluding losses from AI reporting conception of $209 million. Revenue accrued $112 cardinal aliases 8.5% and adjusted EBITDA decreased $2.9 cardinal aliases 1.4%, excluding $9.1 cardinal of Provider Relief Funding received successful 2021.

Including our AI reporting conception gross of $4.4 million, gross was $1,430 cardinal for afloat twelvemonth 2022, an summation of 8.7% from $1,315 cardinal successful 2021. Including adjusted EBITDA losses from nan AI segment, adjusted EBITDA for 2022 was $192.5 cardinal arsenic compared pinch $209.8 cardinal successful 2021, which includes a one-time $7.7 cardinal use from nan worker retention in installments and excludes $9.1 cardinal of Provider Relief Funding, some received successful 2021.

For nan twelvemonth ended December 31, 2022, arsenic compared to 2021, MRI measurement accrued 10.7%, CT measurement accrued 9.6% and PET/CT measurement accrued 12.3%. Overall volume, taking into relationship each regular imaging exams accrued 6.7% for nan 12 months of 2022 complete 2021. In 2022, we performed 9,175,804 full procedures. The procedures were accordant pinch our multi-modality approach, whereby 75.5% of each nan activity we did by measurement was from regular imaging.

Our procedures successful 2022 were arsenic follows. 1,346,303 MRIs arsenic compared pinch 1,232,427 MRIs successful 2021. 828,952 CTs arsenic compared pinch 756,509 CTs successful 2021. 50,684 PET/CTs arsenic compared pinch 45,124 PET/CTs successful 2021 and 6,931,865 regular imaging exams arsenic compared pinch 6,564,533 of each these exams successful 2021.

For 2022, RadNet reported nett income of $10.7 million, a alteration of astir $14.1 cardinal complete 2021. Per stock diluted nett income for nan afloat twelvemonth of 2022 was $0.17 per stock compared to a diluted nett income per stock of $0.46 successful 2021. This is based upon a weighted mean number of diluted shares outstanding of 57.3 cardinal shares successful 2022 and 53.4 cardinal shares successful 2021.

Affecting nett income successful 2022 were definite non-cash expenses and different items including nan following. $39.6 cardinal of non-cash summation from liking complaint swaps. $946,000 of severance paid successful relationship pinch headcount reductions related to costs savings initiatives. $4.3 cardinal disbursal related to leases for our de novo accommodation nether building that person yet to beryllium to unfastened their operations. $24.9 cardinal of pre-tax losses related to our AI reporting segment. $23.8 cardinal of non-cash worker banal compensation disbursal resulting from nan vesting of definite options and restricted stock.

$731,000 expenses related to indebtedness restructuring and nonaccomplishment connected extinguishment related to nan refinancing of our New Jersey Imaging Network's in installments facilities. $2.2 cardinal successful ineligible settlements. $2.5 cardinal nonaccomplishment connected nan disposal of definite superior equipment. $8.1 cardinal complaint successful estimate related to a refund liability and $2.7 cardinal of non-cash amortization of deferred financing costs and indebtedness discounts related to financing fees paid arsenic portion of our existing in installments facilities.

With regards to immoderate circumstantial income connection accounts, wide GAAP liking disbursal is -- successful 2022 was $50.8 million. Adjusting for nan impacts from items specified arsenic amortization of financing fees, accrued liking and payments to switch counterparties, rate liking disbursal was $39.2 cardinal successful 2021. This compares pinch GAAP liking disbursal successful 2021 of $48.8 cardinal and rate paid for liking of $29 million.

With regards to our equilibrium sheet, arsenic of December 31t, 2022, unadjusted for enslaved and word indebtedness discounts, we had $735 cardinal of nett debt, which is our full indebtedness astatine par worth little our rate balance. Note that this indebtedness equilibrium includes New Jersey Imaging Network's indebtedness of $150 million, for which, RadNet is neither a borrower nor guarantor. This compares pinch $633.3 cardinal of nett indebtedness astatine December 31, 2021.

As of year-end 2022, we were undrawn connected our $195 cardinal revolving statement of in installments and had a rate equilibrium of $127.8 million. At December 31, 2022, our accounts receivable equilibrium was $166.4 million, an summation of $31.3 cardinal from year-end 2021. Our DSO was 38.8 days astatine December 31, 2022, which continues to beryllium adjacent our all-time low.

Throughout 2022, we had full superior expenditures, nett of plus dispositions successful nan waste of imaging halfway assets and associated task interests of $109.3 million. This magnitude excludes $6.3 cardinal of superior expenditures of New Jersey Imaging Network. All of our superior expenditures were paid for successful rate and we recognized $3.9 cardinal successful proceeds from nan waste of equipment, besides excluding proceeds from nan waste of instrumentality from NJIN.

Capital expenditures successful 2022 were higher than primitively budgeted, arsenic nan consequence of nan building of definite de novo locations that became operational towards nan extremity of 2022 aliases are expected to beryllium operational successful 2023.

At this time, I'd for illustration to reappraisal our 2023 financial guidance levels, which we released this greeting successful our financial results property release. For nan Imaging Center segment, for revenue, we are projecting $1,525 cardinal to $1,575 million. For adjusted EBITDA, we're projecting $220 cardinal to $230 million. For superior expenditures, we're projecting $105 cardinal to $115 million.

For rate paid for interest, we're projecting $35 cardinal to $40 million. And for free rate travel generation, we're anticipating $70 cardinal to $80 million. For our Artificial Intelligence segment, we're anticipating gross of betwixt $16 cardinal and $18 cardinal and we're expecting adjusted EBITDA losses to beryllium betwixt $9 cardinal and $11 million.

Our guidance anticipates beardown results successful 2023, demonstrating betterment successful each financial and operating metrics. We are projecting gross maturation from imaging halfway operations of betwixt 7% and 10%, and adjusted EBITDA maturation from imaging halfway operations of betwixt 5% and 10%. The anticipated maturation implicit successful our guidance successful 2023 is projected to consequence from aforesaid halfway growth, nan publication of various de novo centers opened successful nan 2nd half of 2022 and scheduled to unfastened passim 2023, reimbursement increases from backstage and capitated payors, caller and expanded wellness strategy associated ventures, and nan further publication from acquisitions completed astatine various times during 2022.

Our adjusted EBITDA guidance for 2023, excludes anticipated adjusted EBITDA losses of astir $10 cardinal from our AI division, which is heavy wellness Aidence and Quantib. We estimate that these losses will beryllium nett of astir $16 cardinal to $18 cardinal of anticipated gross from some nan Enhanced Breast Cancer Detection mammography programme aliases EBCD, presently being implemented and further maturation from Aidence and Quantib AI operations.

We expect nan AI operating conception to beryllium profitable successful 2024, and will proceed to study nan financial results of our AI and imaging halfway operating segments separately, each 4th passim 2023, providing transparency for our stakeholders to way our progress.

I'd now for illustration to move nan telephone backmost complete to Dr. Berger, who will make immoderate closing remarks.

Howard Berger

Thank you, Mark. As we caput into 2023, we are firing connected each cylinders. We person a halfway business that is patient and growing. As we discussed connected today's call, procedural volumes and diligent request are beardown and expanding. Payors and patients are progressively moving procedural measurement to our centers from hospital-based imaging operations that complaint prices that are unsustainable successful a wellness attraction strategy attempting to negociate cost.

While nan displacement is taking place, nan wide manufacture continues to grow, driven successful portion by advances successful technology, which thrust much indications for diagnostic imaging procedures. Additionally, nan populations we service are aging and increasing and proceed to activity non-invasive, preventative and costs effective medicine.

All these factors should proceed to use our halfway business. As such, I americium happy to study that nan grounds volumes we knowledgeable successful nan 4th fourth of 2022 person continued into nan January and February months of 2023. We judge we person nan champion and astir divers institution successful nan industry, positioning america for semipermanent occurrence and maturation successful a move marketplace play wherever nan costs of superior has risen significantly.

We stay modestly leveraged and person much liquidity and superior resources arsenic compared pinch virtually each of our different standard operators successful our industry. This places america successful nan champion position to prosecute maturation opportunities, some integrated and inorganic successful a clip wherever galore others do not person nan financial capacity aliases flexibility. This financial capacity will let america to proceed to put aggressively for semipermanent occurrence of our business.

These investments see executing a de novo strategy, completing strategical acquisitions to fortify our location networks, pursuing an industry-leading strategy and artificial intelligence, peculiarly astir organization wellness crab screening, establishing a teleradiology capability, owning our ain accusation exertion level and partnering pinch immoderate of nan largest and astir respected regional, nationalist wellness systems.

In conclusion, we person ne'er been much excited than we are coming astir what lies up for RadNet. We consciousness arsenic if we are amended positioned coming than immoderate different clip successful our history to execute connected nan multifaceted strategy that we person created. We look guardant to updating our stakeholders passim nan remainder of 2023 connected our progress.

Operator, we are now fresh for nan question-and-answer information of nan call.

Question-and-Answer Session


Thank you. We will now beryllium conducting a question-and-answer session. [Operator Instructions] Our first mobility comes from nan statement of Brian Tanquilut pinch Jefferies. Please proceed pinch your question.

Brian Tanquilut

Hey. Good morning, guys. Congrats connected a coagulated 4th and coagulated year. I guess, Mark, I'll commencement pinch guidance and your commentary connected volumes. Do you deliberation this is nan payor efforts now starting to show up successful existent numbers, their efforts to move measurement distant from nan hospitals? Just trying to fig retired what's driving nan spot successful aforesaid store?

And past possibly benignant of related to that. I cognize that location is immoderate upwind issues that you guys person faced successful California, early successful nan 4th and besides immoderate successful nan East Coast. So I cognize nan remark is that, volumes person been strong. So if not for weather, would you person moreover seen stronger capacity successful January and February?

Mark Stolper

Sure. We're -- nan first to reside nan first portion of your question, Brian. Good greeting by nan way. We surely are benefiting, and I deliberation nan full outpatient marketplace is benefiting aliases nan freestanding outpatient market, I should say. The non-hospital based is decidedly benefiting from a displacement successful procedural volumes retired of nan infirmary successful favour of little cost, much businesslike ambulatory centers, for illustration nan ones we operate. And although, you know, this inclination has been a multi-year inclination and that I'd say, has accelerated complete nan past 5 years, it's happening slowly.

And I still deliberation that we're successful nan early innings of this diligent measurement moving retired of nan hospitals. I mean, there's still a batch of outpatient scheduled imaging that occurs wrong hospitals and wellness systems today, that theoretically complete clip could beryllium moved into nan little costs settings. And I think, we've seen immoderate of nan larger payers make nationalist announcements astir their intentions to move this business complete clip into nan outpatient centers. Companies for illustration Anthem, United and Aetna, person each been doing this. And they're doing it done various mechanisms.

One system is done scheme designed by offering advantageous co-pays aliases little co-pays aliases nary co-pays, you know, if patients activity their imaging extracurricular of hospitals, which drives a financial inducement for nan diligent there. And past location also, most, if not, each payors coming person immoderate shape of pre-authorization process, which arsenic portion of that process tries to nonstop nan diligent to nan little costs settings aliases a narrower web of ambulatory setting. So we deliberation we're decidedly benefiting from that and I suspect, different outpatient players should beryllium benefiting from that arsenic well.

But I deliberation it's happening slow that nan payors person to cautiously equilibrium nan truth that they surely request nan hospitals successful their networks for much of nan acute attraction services. And so, location they person to play that balancing crippled of trying to little cost, but besides make judge that they support nan hospitals successful their networks. So successful our guidance to reply your 2nd question, we person assumed astir a 3% same-center growth. And if that should beryllium stronger, for illustration it has been successful 2022, we could extremity up towards nan higher extremity of our guidance aliases hit our guidance, and we person nary logic to deliberation that we shouldn't beryllium capable to execute that baseline.

Howard Berger

Good morning, Brian.

Brian Tanquilut

Good morning, Howard.

Howard Berger

I deliberation we should telephone this a communicative of 2 coasts, who would person ever thought that we will beryllium talking astir upwind impacts connected nan West Coast during nan first 4th arsenic opposed to nan upwind impacts we usually spot connected nan East Coast. And therein lies nan story, because January was extraordinarily benignant to RadNet and for that matter, each different wellness attraction providers and our volumes, which usually get impacted by some nan opening of nan year, New Year's Eve hangover virtually and figuratively, arsenic good arsenic upwind impacts, neither of which occurred this year. So we came into January some guns blazing and had an bonzer precocious measurement unanticipated successful nan East Coast.

On nan different hand, while location person been upwind storms present successful California, different than possibly sporadic powerfulness outage, we person not seen immoderate important effect successful our volumes. Part of that is simply a reflection of nan very precocious request and backlogs that we have, and erstwhile patients are incapable aliases cancel, we do person a very robust IT infrastructure that allows america to quickly telephone different group who person asked to beryllium seen much expeditiously. So nan wide tone, some for January and now extending into February is already beyond our first expectations. And I deliberation conscionable to possibly amplify a small spot much connected Mark's results, while I -- Mark's comments, excuse me, hopefully has resolved.

Mark Stolper

Well, successful a bully quarter, you tin property nan results to me.

Howard Berger

Yeah. Okay. But successful nan -- I judge that portion of our occurrence successful attracting much measurement is not conscionable nan efforts connected nan portion of nan payors, but really nan efforts connected nan portion of our infirmary partners who admit that they request to beryllium portion of nan activity to nan much costs effective centers, that RadNet has pinch them successful associated ventures. And so, arsenic we grow those partnerships and arsenic they bring further opportunities to us, our volumes are reflective of their ain soul policies to statesman to beryllium much diligent and payor friends and move immoderate of those volumes extracurricular of nan hospital.

So I deliberation if thing else, nan occurrence of nan 4th fourth and carrying complete present into nan first 4th is simply a reflection of nan strategy that RadNet began much aggressively successful nan past 3 years, that's now paying dividends. And I deliberation it's a complement, that not only are nan hospitals looking to find these soft landings, but they're looking to RadNet to do that, fixed I deliberation nan very beardown level that we person -- not conscionable successful operating imaging centers, but artificial intelligence resonating pinch our infirmary partners, radiology, informatics pinch our IT level is 1 that is an exceedingly beardown tool.

And nan wide capabilities of RadNet to develop, excuse me, to present precocious value outpatient imaging centers successful a little costs situation has surely taken root. So I deliberation each of those factors really travel together astatine a clip wherever we've conscionable laid nan correct bricks for nan instauration present to person an highly successful 2023.

Brian Tanquilut

Now, that's awesome. And past I conjecture my 2nd question, arsenic I deliberation astir AI, it looks very promising, losses are shrinking and you will move to profitability by adjacent year. But arsenic I deliberation astir really AI is operationalizing into nan RadNet facilities, possibly you tin stock pinch us, what you're seeing successful position of nan simplification successful reference costs aliases nan simplification successful nan usage of outer radiologists? I mean, conscionable immoderate discourse that you could stock pinch us, and besides nan opportunity for incremental, I conjecture savings aliases separator description arsenic you rollout AI afloat crossed nan RadNet facilities?

Howard Berger

Good question. We person yet to really realize, I deliberation immoderate of nan artificial intelligence benefits that we expect partially, it's because radiologists and not amazingly are not comfortable, wholly adopting nan artificial intelligence and relying connected it arsenic heavy arsenic they can, fixed that it's a alternatively melodramatic alteration successful their workflow and assurance level.

So nan expertise for america to use from those efficiencies, some astatine nan level of nan radiologist and diligent throughput is thing I deliberation that will return longer than we possibly primitively anticipated, but I deliberation that's a affirmative sign. Because erstwhile nan radiologists get comfortable and adopt these, much importantly, they go not only much dependent, but successful a number of cases, they will show you that it has improved their objective skills much than immoderate different azygous constituent successful their history of believe and education.

So our peculiar attack though to artificial intelligence is really for crab screening and it's not needfully meant to beryllium arsenic overmuch of nan ratio tool, but alternatively to broaden nan scope of screening -- crab screening into nan marketplace, which I deliberation has tremendous use to organization health. We person demonstrated assurance -- our assurance successful being capable to observe crab earlier and much accurately pinch nan usage of artificial intelligence.

And arsenic these get further adopted wrong imaging centers and wellness systems, and arsenic these offerings go much available, for illustration our enhanced bosom crab discovery programme to our patients. I judge that location will beryllium an description of our volumes to bespeak nan desire for each stakeholders successful wellness attraction to diagnose crab earlier, which tin only lead to amended outcomes, some from a wellness attraction standpoint of our patients, arsenic good arsenic costs to nan system.

So I deliberation this is going to beryllium an unfolding communicative complete nan adjacent mates of years. In particular, I deliberation we're getting a batch of nickname for this -- for these tools. And it's 1 of nan fewer things successful artificial intelligence that tin yet beryllium for radiology providers and wellness systems, an opportunity for gross procreation arsenic opposed to astir of nan different AI tools, which are chiefly radiology diagnostic immunodeficiency and travel astatine a cost, but not needfully amended gross generation.

So we judge we've made nan correct finance successful these 3 companies, not only because of their capabilities, but because of what they correspond for nan bigger wellness care, opportunity to really place crab earlier and supply amended outcomes. And I judge we now aft a mates of years of acquisition successful this market, person identified amended ways to commercialize and monetize this, while astatine nan aforesaid clip providing extraordinarily precocious use to each of our patients.

So I deliberation we'll beryllium talking much and much astir this each quarter, not only arsenic nan take of this -- these devices go much available, but besides to amended grow nan capabilities that we person internally to make these devices that overmuch much charismatic to everybody successful nan healthcare system. And I'm anxious to beryllium capable to talk much astir this.

We will besides beryllium looking astatine ways of expanding nan transportation and nan usage of these devices extracurricular of nan RadNet Centers, but earlier we tin get there, we want to make definite that we fine-tune these capabilities wrong RadNet connected its enormously ample level to some amended instrumentality and creation nan champion measurement to rotation this retired connected a commercialized basis. So I deliberation these are things that we will beryllium talking astir much passim nan twelvemonth and which I'm peculiarly excited to beryllium capable to bring to you arsenic these developments unfold.

Brian Tanquilut

Awesome. Thank you, guys.

Howard Berger

Thanks, Brian.

Mark Stolper

Thanks, Brian.


Thank you. Our adjacent mobility comes from nan statement of John Ransom pinch Raymond James. Please proceed pinch your question.

John Ransom

Hey. Good afternoon. I was wondering, you know, your guidance connected AI getting to breakeven successful 24. Is that -- what benignant of gross assumptions are we reasoning location and past wherever is that coming from? Thanks.

Howard Berger

That chiefly is going to beryllium driven by this -- by nan way, bully morning, John. That's chiefly driven by nan rollout that aft our successful aviator connected our earlier aliases excuse me, Enhanced Breast Cancer Detection System were now almost afloat rolled retired connected nan East Coast for this past of our regions will spell unrecorded present successful March and nan West Coast will rollout -- statesman rolling retired sometime successful nan 3rd quarter. And nan gross that we expect from that unsocial is location betwixt $11 cardinal and $13 cardinal successful 2023.

And past increasing substantially much than that successful 2024, arsenic much and much of nan markets are afloat implemented complete a longer play of time. So while we expect immoderate maturation successful our Aidence and Quantib units, which do lung screening and prostate screening for pinch AI, we are moving connected ways to besides commercialize and monetize those. But they are astir apt a small spot lagging behind, since our superior efforts successful this area were really successful bosom cancer, fixed nan tremendous number of women who get bosom cancer, 1 retired of each 8 and wherever nan magnitude of mammography done, we'll ever do our foremost immoderate different exertion of artificial intelligence. So hopefully that gives you a small spot much position there, John.

Mark Stolper

Yeah. So, John, wherever successful our guidance, we're assuming $16 cardinal to $18 cardinal of full gross successful 2023, though we're not giving multiyear guidance. If I had to estimate coming what that gross mightiness look for illustration successful 2024, successful bid for america to breakeven aliases person profitability would astir apt beryllium successful nan $25 cardinal to $30 cardinal scope based upon wherever nan expenses are successful Quantib, Aidence and heavy health.

Howard Berger

So that shows a batch of growth. And that's $25 cardinal to $30 cardinal would apt make america nan biggest AI radiology institution that we're alert of.

John Ransom

So I person to say, you guys were AI earlier it was cool. So who knew a mates aged guys from Los Angeles to beryllium that acold up of nan curve. That's each for me.

Howard Berger

Hey. We're not that old. Come on. You speak for yourself.

John Ransom

Thank you.

Howard Berger

Yeah. I for illustration to deliberation that we're not up of nan curve. We're making nan curve. I deliberation what we're doing is very unsocial wrong wellness attraction and successful particular, successful radiology. And I'm extraordinarily proud of nan companies that we person acquired present that will thief RadNet proceed to raise its visibility, and not conscionable beryllium a sanction for radiologists, but beryllium a beardown subordinate successful nan healthcare manufacture that I deliberation I'll beryllium sharing much of that communicative pinch you later this year.

John Ransom

Thank you.

Howard Berger

Thanks, John.


Thank you. Our adjacent mobility comes from nan statement of Mitra Ramgopal pinch Sidoti. Please proceed pinch your question.

Mitra Ramgopal

Yes. Hi, bully morning. Thanks for taking nan questions. Just a mates from me. First, conscionable arsenic it relates to nan de novo description , really quickly you expect locations to astatine slightest breakeven and moreover go profitable?

Howard Berger

Well, if we were building a de novo center, Mitra, it astir apt could return a twelvemonth to get to profitability here. The quality pinch our centers is that, by and large, they are each successful markets wherever we already person request and wherever we tin expect filling capacity, almost virtually nan time that were open. So successful -- our exemplary for these sometimes successful nan first 4th aliases surely by nan 2nd 4th aft they're operational, they go EBITDA affirmative generators.

But again, I deliberation that's an different circumstance, fixed that we build these centers, because we request them, not conscionable because we deliberation that location is early opportunity. So these are each responsive to nan increasing request that we person successful our markets and wherever that -- wherever we're constricted by nan beingness capabilities successful our centers to ramp up.

Mitra Ramgopal

Okay. No, that's great. And past conscionable switching to nan labour front, obviously, that was a headwind for you successful '22, some from costs broadside and besides being capable to unit your operations fully. How comfortable are you successful position of '23 and what you're seeing retired there, fixed nan description , much locations you're adding and your expertise to capable unfastened positions and beryllium capable to person capable staffing without needfully incurring importantly higher costs?

Howard Berger

Yeah. That's a awesome question. We've been very fortunate that nan labour markets successful our centers and successful nan regions that we run look to person loosened up if you will, a small bit. And while we still person a number of unfastened positions, we've made immoderate bully effect connected that. It's difficult to really put successful perspective, really important nan labour marketplace challenges were successful each of 2022, including nan 4th quarter, while our results were extraordinarily bully successful '20 successful nan 4th quarter, they would person been amended if we didn't person immoderate of those challenges that while we're turning nan corner, wherever still impacting nan 4th quarter.

I'll springiness you an example, successful New York and California, nan authorities has mandated that immoderate individual who believes they person contracted COVID tin Isolator study successful sick and nan institution is required to proceed to salary their salaries without them utilizing up immoderate sick salary aliases PTO. That's a double effect for us, because not only does it costs america double to find that capacity for coverage, but because past we person to salary much complete time, we are getting deed pinch some of those. So fortunately, successful nan first 4th of past year, excuse me, nan 4th quarter, I guess, it was nan twelvemonth before, we had adjacent to 8% of our workforce retired successful astatine one-time pinch COVID successful nan 4th fourth aliases currently, I should say, it's down to little than 1%. So that has been a immense use for us.

So it's not conscionable hiring much people, but it's getting our existent workforce backmost into normal workday, which allows america to grow our hours of operation. In addition, we person been utilizing temp agencies and [indiscernible] businesses that nan value for these staffing has doubled aliases tripled from a twelvemonth ago. And fortunately, we've been successful successful hiring much radiologists and different method staff. So we've been capable to trim that. Built into our 2023 fund is still nan usage of temp agencies. But arsenic we're much and much successful, hopefully that costs will proceed to spell down and amended our results.

But I judge this -- nan issues that we're faced pinch are faced -- are faced by virtually each healthcare supplier retired there, arsenic good arsenic different segments successful our economy. But I judge immoderate of nan changes whitethorn beryllium besides arsenic a consequence of nan economical factors that are causing layoffs successful almost each different industry, isolated from for wellness care. So I judge that, that inclination is not only sustainable, but will proceed to amended arsenic group activity alternatives aliases group person less alternatives and they mightiness person had earlier and wherever I deliberation unit connected wages will commencement coming down.

Mitra Ramgopal

Okay. That was very helpful. Thanks again for taking nan questions. That's it for me.

Howard Berger

Thanks, Mitra.


Thank you. There are nary further questions astatine this time. I would for illustration to move nan level backmost complete to guidance for closing comments.

Howard Berger

Okay. Again, I would for illustration to return nan opportunity to convey each of our shareholders for their continued support, and nan labor and guidance of RadNet for their dedication and difficult work. Management will proceed its endeavor to beryllium a marketplace leader that provides value services pinch an due return connected finance for each of our stakeholders. Thanks for your clip coming and I look guardant to our adjacent call. Thank you, operator.


This concludes today's teleconference. You whitethorn disconnect your lines astatine this time. Thank you for your information and person a awesome day.

Editor: Naga

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