# RadNet, Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [RadNet, Inc.](/companies/rdnt.md) (CIK 790526)
- Form: 10-Q
- Filed: 2024-11-12
- Accepted by EDGAR: Nov 12, 2024, 17:06 ET
- Period: 2024-09-30
- Accession: 0001628280-24-047285
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/790526/000162828024047285/rdnt-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/790526/000162828024047285/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $461.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $1.35bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | $33.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | $80.1m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $4.3m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $4.9m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | $3.2m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$2.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.04 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | −$0.04 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.04 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | −$0.04 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 75,165,435 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 72,587,321 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | $190.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2024-09-30 | $748.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $1.02bn | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $3.28bn | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $470.1m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $2.16bn | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $996.3m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-09-30 | $23.4m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-09-30 | $895.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 57,602 characters.

*You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the U.S. Securities and Exchange Commission (the "SEC") on February 29, 2024.*

### Forward-Looking Statements

This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements reflect current views about future events and are based on our currently available financial, economic and competitive data and on current business plans. Actual events or results may differ materially depending on risks and uncertainties that may affect our operations, markets, services, prices and other factors.

In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” “assumption” or the negative of these terms or other comparable terminology. Forward-looking statements in this report include, among others, statements we make regarding:

- expectations concerning domestic and global economic conditions, rates of inflation, or changes in interest rates;
- anticipated trends in our revenues, operating expenses or capital expenditures, and our financial guidance;
- expected timing and potential impact of regulatory changes affecting our business;
- expected future market acceptance for our products or services, and our competitive strengths in the markets we serve;
- our ability to successfully acquire and integrate new businesses, and achieve expected benefits, synergies or operating results from those acquisitions; and
- economics and cost savings anticipated to be derived from our investments in artificial intelligence and machine learning products and solutions.

Forward-looking statements are neither historical facts nor assurances of future performance. Because forward-looking statements relate to the future, they are inherently subject to known and unknown risks, uncertainties and other factors that are difficult to predict and out of our control. Our actual results, level of activity, performance or achievements may be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Important factors that could cause our actual results to differ materially from those indicated or implied in our forward-looking statements include the factors included in “Risk Factors,” in our annual report on Form 10-K for the fiscal year ended December 31, 2023 as supplemented by the information in Part II– Item 1A below. You should consider the inherent limitations on, and risks associated with, forward-looking statements and not unduly rely on the accuracy of predictions contained in such forward-looking statements.

Any forward-looking statement in this report is based on information currently available to us and speaks only as of the date of this report. We do not undertake any responsibility to release publicly any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this report or any unanticipated events which may cause actual results to differ from those expressed or implied by the forward-looking statements contained in this report, except as required by law.

### Overview

We are a national provider of diagnostic imaging services in the United States. At September 30, 2024, we operated directly or indirectly through joint ventures with hospitals, 399 centers located in Arizona, California, Delaware, Florida, Maryland, New Jersey, New York and Texas. Our centers provide physicians with imaging capabilities to facilitate the diagnosis and treatment of diseases and disorders and may reduce unnecessary invasive procedures, often reducing the cost and amount of care for patients. Internationally, our subsidiary The HLH Imaging Group Limited fka Heart and Lung Imaging Limited, provides teleradiology services for remote interpretation of images on behalf of providers within the framework of the United Kingdom's National Health Service.

In addition to our imaging business, we have established a Digital Health business segment for our 2024 fiscal year, which combines our former Artificial Intelligence (“AI”) business segment with our eRad, Inc. business. Our digital health segment develops and delivers AI-powered health informatics solutions to drive quality, efficiency, and outcomes in imaging and radiology. The portfolio of software solutions are anchored by eRad, Inc.'s RIS/PACS, informatics designed specifically for outpatient radiology and DeepHealth OS, a cloud-native operating system that helps operate all aspects of the radiology service line from scheduling and patient preparation to technologist workflow to interpretation and referral management.

In addition we are using AI to develop solutions that employ machine learning to assist radiologists and other clinicians in interpreting images and improving radiologist efficiency and patient care, initially in the fields of screening for breast, prostate, lung and colon cancers. Our DeepHealth, Inc. subsidiary has received FDA clearance for use of its SaigeQ ”triage”/workflow product, SaigeDX advanced diagnostic product and Saige-Density breast density assessment software for screening breast mammography, which we have begun to roll out in certain markets as an Enhanced Breast Cancer Detection solution. Our Aidence Holding B.V. subsidiary is developing solutions for interpretation of chest and lung CT scans for lung cancer screening. It has received the CE mark for its solution and has existing customers in seven European countries, with its largest concentration in the United Kingdom, and plans to submit an application for FDA clearance to sell in the United States. Our Quantib B.V. subsidiary is primarily focused on interpretation of prostate MRI for widespread prostate cancer screening. Quantib’s prostate MRI post-processing software has both FDA clearances and European CE marking. Our digital health segment provides these solutions to RadNet and to over 400 customers in the United States, Europe, and Israel.

Our operations comprise two segments for financial reporting purposes for this reporting period, Imaging Centers and Digital Health. For further financial information about these segments, see Note 5, Segment Reporting, in the notes accompanying our financial statements included in this report. Prior period amounts in the financial statements included in this report have been adjusted retrospectively to reflect the change in reportable segment.

### Recent Developments

The following table shows our imaging centers in operation and revenues for the nine months ended September 30, 2024 and 2023:

|  | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| Centers in operation | 399 | 363 |
| Net revenues (millions) | $1,353 | $1,196 |

32

Our imaging services include magnetic resonance imaging (MRI), computed tomography (CT), positron emission tomography (PET), nuclear medicine, mammography, ultrasound, diagnostic radiology (X-ray), fluoroscopy and other related procedures. The vast majority of our centers offer multi-modality imaging services, a key point of differentiation from our competitors. The multi-modality offering provides a “one-stop” solution for our customers and referral sources. It also diversifies our revenue base, and reduces our exposure to changes in reimbursement rates for certain imaging modalities. The following charts summarize our procedure volumes for various imaging modalities for the three months ended September 30, 2024 and 2023:

Our revenue is derived from a diverse mix of payors, including private, managed care capitated and government payors. We believe our payor diversity mitigates our exposure to possible unfavorable reimbursement trends within any one payor class. Our total service fee revenue, net of contractual allowances and discounts, and implicit price concessions for the three and nine months ended September 30, 2024 and 2023 received from our various payors is summarized in the following table (in thousands):

| Payor | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Commercial insurance | $255,375 | $218,923 | $752,514 | $652,597 |
| Medicare | 102,852 | 89,981 | 298,001 | 262,719 |
| Medicaid | 10,894 | 10,519 | 32,804 | 30,279 |
| Workers' compensation/personal injury | 10,232 | 9,745 | 33,088 | 34,785 |
| Other patient revenue | 10,607 | 10,443 | 34,524 | 30,191 |
| Management fee revenue | 6,242 | 3,922 | 18,255 | 12,203 |
| Heart and lung | 4,696 | 2,441 | 12,553 | 6,377 |
| Other | 10,314 | 3,768 | 18,918 | 14,248 |
| Revenue under capitation arrangements | 33,563 | 40,041 | 105,050 | 117,982 |
| Imaging Center Segment Revenue | 444,775 | 389,783 | 1,305,707 | 1,161,381 |
| Digital Health Segment Revenue | 16,367 | 12,185 | 46,856 | 34,866 |
| Total service revenue | 461,142 | $401,968 | $1,352,563 | $1,196,247 |

### Acquisitions

During the nine months ended September 30, 2024, we completed the acquisition of certain assets of entities which engage directly in the practice of radiology or in associated businesses for an aggregate consideration of $54.0 million. These acquisitions include:

Antelope Valley Outpatient Imaging: 1 imaging center in California;

Providence Health System Southern California: 3 imaging centers in California;

Grossman Imaging Center of CMH, LLC: 4 imaging centers in California;

Houston Medical Imaging, LLC: 9 imaging centers in Houston, Texas;

U.S. Imaging, Inc.: 6 imaging centers in Houston, Texas;

Stanislaus Surgical Hospital: 1 imaging center in Modesto, California; and

Global Imaging LLP: 1 imaging center in Sugar Land, Texas.

The purpose of these acquisitions was to expand our imaging business into Houston, Texas a new market, and to strengthen our presence in the California market. With a population of approximately 7.3 million people, Houston is the fourth largest city in the United States. See Note 4, Business Combinations and Related Activity to the financial statements in this report for additional information, including the fair value determination of the acquired assets and assumed liabilities, associated with these acquisitions.

### Joint Venture Activity

At September 30, 2024, 38% of our imaging centers were operating as joint ventures with large health care providers. We have joint venture arrangements with 24 hospital and health system partners (inclusive of consolidated and unconsolidated joint ventures), including MemorialCare (24 centers), RWJ Barnabas (35 centers), Cedars Sinai (18 centers), Dignity Health (28 centers), and MedStar Health System (5 centers). We manage the day to day operations for these joint ventures and perform most management services in exchange for a management fee. We charged management service fees from the centers underlying these joint ventures of approximately $5.9 million and $3.9 million for the three months ended September 30, 2024 and 2023, respectively. For information on our investment in unconsolidated joint ventures, key balance sheet data and income

statement data for the unconsolidated joint ventures, see Note 2, Significant Accounting Policies – Investment in Joint Ventures

to the financial statements included in this report.

### Critical Accounting Policies

The Securities and Exchange Commission defines critical accounting estimates as those that (a) are most important to the portrayal of a company’s financial condition and results of operations and (b) require management’s most difficult, subjective or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. In Note 2 to our financial statements included in this report and in our annual report on Form 10-K for the year ended December 31, 2023, we discuss our significant accounting policies, including those that do not require management to make difficult, subjective or complex judgments or estimates. The most significant areas involving management’s judgments and estimates are described below.

### Use of Estimates

The financial statements included in this report were prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates and assumptions affect various matters, including our reported amounts of assets and liabilities in our consolidated balance sheets at the dates of the financial statements; our disclosure of contingent assets and liabilities at the dates of the financial statements; and our reported amounts of revenues and expenses in our consolidated statements of operations during the reporting periods. These estimates involve judgments with respect to numerous factors that are difficult to predict and are beyond management’s control. As a result, actual amounts could materially differ from these estimates.

### Revenues

Our revenues generally relate to net patient fees received from various payors and patients themselves under contracts in which our performance obligations are to provide diagnostic services to the patients. Revenues are recorded during the period our obligations to provide diagnostic services are satisfied, which is generally over a period of less than one day. The contractual relationships with patients, in most cases, also involve a third-party payor (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payors. The payment arrangements with third-party payors for the services we provide to the related patients typically specify payments at amounts less than our standard charges and generally provide for payments based upon predetermined rates per diagnostic services or discounted fee-for-service rates. Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations, changes in business and economic conditions, and the frequent changes in managed care contractual terms resulting from contract re-negotiations and renewals.

As it relates to the Consolidated Medical Group, this service fee revenue includes payments for both the professional medical interpretation revenue recognized by them as well as the payment for all other aspects related to our providing the imaging services, for which we earn management fees. As it relates to others centers, this service fee revenue is earned through providing the use of our diagnostic imaging equipment and the provision of technical services as well as providing administration services such as clerical and administrative personnel, bookkeeping and accounting services, billing and collection, provision of medical and office supplies, secretarial, reception and transcription services, maintenance of medical records, and advertising, marketing and promotional activities.

Our revenues are based upon our management's estimate of amounts we expect to be entitled to receive from patients and third-party payors. Estimates of contractual allowances under Medicare, Medicaid, managed care and commercial insurance plans are based upon historical collection experience of the payments received from such payors in accordance with the underlying contractual agreements. Revenues related to uninsured patients and uninsured copayment and deductible amounts for patients who have health care coverage may have price concessions applied. We also record estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record self-pay revenues at the estimated amounts we expect to collect.

Under capitation arrangements with various health plans, we earn a per-enrollee amount each month for making available diagnostic imaging services to all plan enrollees under the capitation arrangement. Revenue under capitation arrangements is recognized in the period in which we are obligated to provide services to plan enrollees under contracts with various health plans. Our estimates and assumptions related to revenue recognition did not change materially for the quarter ended September 30, 2024.

### Accounts Receivable

Substantially all of our accounts receivable are due under fee-for-service contracts from third party payors, such as insurance companies and government-sponsored healthcare programs, or directly from patients. Services are generally provided pursuant to one-year contracts with healthcare providers. Receivables generally are collected within industry norms for third-party payors. We continuously monitor collections from our payors and maintain an allowance for bad debts based upon specific payor collection issues that we have identified and our historical experience. Our estimates and assumptions for allowances on our account receivable did not change materially during the quarter ended September 30, 2024.

### Business Combination

We evaluate all acquisitions under the framework Clarifying the Definition of a Business in the accounting guidance. Once a purchase has been determined to be the acquisition of a business, we are required to recognize the assets acquired and the liabilities assumed at their acquisition date fair values. Any portion of the purchase consideration transferred in excess of the net of the acquisition date fair values of the assets acquired and the liabilities assumed, is allocated to goodwill. The allocation requires our management to make estimates of the value of various assets acquired and liabilities assumed. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations.

### Goodwill and Indefinite Lived Intangibles

Goodwill at September 30, 2024 totaled $711.8 million. Indefinite Lived Intangible Assets at September 30, 2024 were $20.2 million and are associated with the value of certain trade name intangibles and in process research and development ("IPR&D"). Goodwill, trade name intangibles and IPR&D are recorded as a result of business combinations. When we determine the carrying value of goodwill for a reporting unit exceeds its fair value, an impairment charge would be recognized which should not exceed the total amount of goodwill allocated to that reporting unit. We determined fair values for each of the reporting units using the market approach, when available and appropriate, or the income approach, or a combination of both. We assess the valuation methodology based upon the relevance and availability of the data at the time we perform the valuation. If multiple valuation methodologies are used, the results are weighted appropriately. Our annual impairment test of goodwill and trade name noted no impairment as of October 1, 2023, and we have not identified any other indicators of impairment through September 30, 2024.

### Recent Accounting Standards

See Note 3, Recent Accounting and Reporting Standards to the financial statements included in this report for further information.

### Results of Operations

### Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023

### Imaging Center Segment

We have developed our medical imaging centers segment through a combination of organic growth, acquisitions and joint venture formations. In the discussion below same center metrics are based on imaging centers that were in operation throughout the period of July 1, 2023 through September 30, 2024. Excluded amounts relate to imaging centers that were acquired or divested between July 1, 2023 through September 30, 2024.

### Total Revenue

*In Thousands*

| Revenue | Three Months Ended September 30, 2024 | 2023 | $ Increase | % Change |
| --- | ---: | ---: | ---: | ---: |
| Total | $444,775 | $389,783 | $54,992 | 14.1% |
| Same Center | $422,881 | $381,620 | $41,261 | 10.8% |
| Excluded | $21,894 | $8,163 | — | — |

Our 10.8% increase in same center revenue over the same period last year was driven by increases in fees charged per imaging procedure and an increase in procedures volumes. Same center total procedure volume grew at an overall rate of 4.0% which was comprised of a 2.55% increase in routine imaging and an 8.6% increase in advanced modality imaging procedures. The increase in revenue was largely attributable to product mix, as advanced imaging was a greater portion of overall procedures. A significant contributor to the change in product mix was the increase in PETHC procedures related to prostate cancer and suspect Alzheimer’s studies, which are included in advanced modality imaging procedures.

### Operating Expenses

Total operating expenses for the three months ended September 30, 2024 increased approximately $57.6 million, or 16.5%, to $407.2 million for the three months ended September 30, 2024 from $349.7 million for the three months ended September 30, 2023. The following table breaks down our cost of operations and total operating expenses for the three months ended September 30, 2024 and 2023 (in thousands):

|  | Three Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| Salaries and professional reading fees, excluding stock-based compensation | $243,066 | $210,314 |
| Stock-based compensation | 4,195 | 3,937 |
| Building and equipment rental | 31,104 | 29,720 |
| Medical supplies | 26,668 | 21,285 |
| Other operating expenses \* | 69,756 | 69,324 |
| Cost of operations | 374,789 | 334,580 |
| Depreciation and amortization | 32,032 | 30,221 |
| Gain on contribution of imaging centers into joint venture | — | (16,811) |
| Loss on sale and disposal of equipment | 153 | 524 |
| Severance costs | 271 | 1,141 |
| Total operating expenses | $407,245 | $349,655 |

**\*** Includes billing fees, office supplies, repairs and maintenance, insurance, business tax and license, outside services, telecom, utilities, marketing, travel and other expenses.

The discussion below provides additional information and analysis on changes in our various operating expenses for the three months ended September 30, 2024 and 2023 (in thousands):

### Salaries and professional reading fees, excluding stock-based compensation and severance

*In Thousands*

| Salaries and Professional Fees | Three Months Ended September 30, 2024 | 2023 | $ Increase/(Decrease) | % Change |
| --- | ---: | ---: | ---: | ---: |
| Total | $243,066 | $210,314 | $32,752 | 15.6% |
| Same Center | $231,039 | $206,401 | $24,638 | 11.9% |
| Excluded | $12,027 | $3,913 | — | — |

37

Consistent with the higher procedure volumes noted above, our staffing levels were adjusted to support the influx of patients seeking radiology procedures. We are continuing to face inflation in employee wage rates as we compete for talent in a tight labor market.

### Stock-based compensation

Stock-based compensation for the three months ended September 30, 2024 increased approximately $0.3 million, or 6.6%, to $4.2 million from $3.9 million for the three months ended September 30, 2023. The increase is primarily due to higher fair value of stock awards granted in the first quarter of 2024.

### Building and equipment rental

*In Thousands*

| Building & Equipment Rental | Three Months Ended September 30, 2024 | 2023 | $ Increase/(Decrease) | % Change |
| --- | ---: | ---: | ---: | ---: |
| Total | $31,104 | $29,720 | $1,384 | 4.7% |
| Same Center | $27,763 | $27,512 | $251 | 0.9% |
| Excluded | $3,341 | $2,208 | — | — |

Building and equipment rental expense on a same center basis was relatively unchanged from the prior period.

### Medical supplies

*In Thousands*

| Medical Supplies Expense | Three Months Ended September 30, 2024 | 2023 | $ Increase/(Decrease) | % Change |
| --- | ---: | ---: | ---: | ---: |
| Total | $26,668 | $21,285 | $5,383 | 25.3% |
| Same Center | $25,213 | $20,614 | $4,599 | 22.3% |
| Excluded | $1,455 | $671 | — | — |

The increase in medical supplies expense was driven by our higher patient volume and product shift towards more advanced imaging modalities. The increase in PETHC procedures related to prostate cancer and suspected Alzheimer studies also raised medical supplies expense due to the requirement for high-cost isotope tracers.

### Other operating expenses

*In Thousands*

| Other Operating Expenses | Three Months Ended September 30, 2024 | 2023 | $ Increase/(Decrease) | % Change |
| --- | ---: | ---: | ---: | ---: |
| Total | $69,756 | $69,324 | $432 | 0.6% |
| Same Center | $66,254 | $67,584 | $(1,330) | (2.0)% |
| Excluded | $3,502 | $1,740 | — | — |

Other operating expenses was relatively unchanged compared to the same period in the prior year and lower as a percentage of overall revenues.

### Additional segment operating and non-operating expenses

*In Thousands*

|  | Three Months Ended September 30, 2024 | 2023 | $ Increase/(Decrease) | % Change |
| --- | ---: | ---: | ---: | ---: |
| Depreciation and amortization | $32,032 | $30,221 | $1,811 | 6.0% |
| Loss on disposal of equipment and other | $153 | $524 | $(371) | (70.8)% |
| Non-cash change in fair value of interest rate hedge | $6,754 | $1,014 | 5,740 | 566.1% |
| Other income | ($8,233) | ($4,673) | (3,560) | 76.2% |
| Severance | $271 | $1,141 | (870) | (76.2)% |

38

The increase in depreciation expense was the result of our higher depreciable asset base.

The fair value of the 2019 Swaps at September 30, 2024 was a net asset of $7.7 million compared to a net asset of $14.4 million June 30, 2024, resulting in a loss of $6.8 million during the three months ended September 30, 2024. This change in fair value was driven by market expectations of continued declines in interest rates over the remaining term of the 2019 Swaps.

Other income for the three months ended September 30, 2024 included money market interest income of $9.6 million, partially offset by a impairment of non-marketable securities of $1.2 million. Interest income for the three months ended September 30, 2024 increased approximately $6.0 million, or 164.9%, to $9.6 million from $3.6 million for the three months ended September 30, 2023. The increase is primarily due to higher average cash balance in our money market account for the three months ended September 30, 2023

*In Thousands*

|  | Nine Months Ended September 30, 2024 | 2023 | $ Increase/(Decrease) | % Change |
| --- | ---: | ---: | ---: | ---: |
| Interest income | (9,580) | (3,616) | $(5,964) | 164.9% |
| Debt restructuring and extinguishment expenses | 147 | 0 | $147 | nm |
| Other non-operating losses (income) | 1,200 | (1,057) | $2,257 | (213.5)% |
| Total other income | $(8,233) | $(4,673) | $(3,560) | 76.2% |

*In Thousands*

|  | Three Months Ended September 30, 2024 | 2023 | $ Increase/(Decrease) | % Change |
| --- | ---: | ---: | ---: | ---: |
| Total other income | ($8,233) | ($4,673) | (3,560) | 76.2% |

### Interest expense

*In Thousands*

| Interest Expense | Three Months Ended September 30, 2024 | 2023 | $ Increase/(Decrease) | % Change |
| --- | ---: | ---: | ---: | ---: |
| Total Interest Expense | $19,427 | $16,115 | $3,312 | 20.6% |
| Interest expense related to derivatives\* | (2,068) | (2,913) |  |  |
| Interest expense related to amortization\*\* | 795 | 746 |  |  |
| Adjusted Interest Expense\*\*\* | 20,700 | 18,282 | 2,418 | 13.2% |

\*Includes payments from 2019 Swaps

\*\*Includes noncash amortization of deferred loan costs and discount on issuance of debt

\*\*\*Includes interest related to our term loans, revolving credit line, notes, and other

The increase in interest expense was the result in of refinancing of our Barclays credit facility, which added approximately $196.3 million in additional term loan debt to the facility. The effect of the additional term loan was partially offset by lower interest rates compared to the same period in the prior year.

During the three months ended September 30, 2024, interest rates were above the arranged rates in our 2019 Swaps for most of the year and we received payment of $3.4 million in cash payments from our 2019 swap counterparties, which was reported as a component of interest expense. Also, the 2019 Swaps for $100 million of notional value matured in October 2023, so they were in effect for the third quarter of 2023, but not 2024. See the Derivative Instruments section of Note 2, Significant Accounting Policies, in the notes accompanying in our annual report on Form 10-K for the fiscal year ended December 31, 2023 and Part 1, Item 3 — "Quantitative and Qualitative Disclosure About Market Risk" below for more details on our derivative transactions.

### Equity in earnings from unconsolidated joint ventures

For the three months ended September 30, 2024 and 2023 we recognized equity in earnings from unconsolidated joint ventures in the amount of $3.6 million and $1.1 million, respectively, an increase of $2.5 million or 231.6%. The increase was mainly due to the additional contribution made to Santa Monica Imaging Group, LLC in September 2023. Santa Monica Imaging Group operated at a net income for the three months ended September 30, 2024, which positively impacted our equity in earnings from unconsolidated joint ventures during the period. Additionally, we experienced improved earnings from our interest in the Arizona Diagnostic Radiology Group joint venture, which was established in the fourth quarter of 2020.

### Net income attributable to noncontrolling interests

At September 30, 2024, our consolidated subsidiaries operated 345 imaging centers of which 98 were not wholly-owned and thus a portion of their operating results were attributable to noncontrolling interests. At September 30, 2023, our consolidated subsidiaries included 320 centers of which 83 were not wholly-owned.

For the three months ended September 30, 2024, we recognized net income attributable to noncontrolling interests of $9.0 million versus $6.5 million for the three months ended September 30, 2023, an increase of $2.6 million. The increase in net income attributable to noncontrolling interests was primarily due to the formation of a new majority owned subsidiary, Los Angeles Imaging Group, LLC in September 2023 and Tri Valley Imaging Group, LLC in March 2024. We contributed the operations of three centers to Los Angeles Group, LLC and Cedars-Sinai Medical Center contributed cash. Additionally, patient volumes for advanced modalities improved in 2024 and we closed two underperforming centers in a majority owned subsidiary, Beach Imaging Group, LLC in December 2023.

As noncontrolling interests only represent a portion of our imaging center business, and excludes our Digital Health Segment which generated losses of $3.6 million for the three months ended September 30, 2024, we do not expect changes in net income attributable to noncontrolling interests to correlate with changes in consolidated operating income or pretax income.

### Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023

In the discussion below, same center metrics are based on imaging centers that were in operation throughout the period of January 1, 2023 through September 30, 2024. Excluded amounts relate to imaging centers that were acquired or divested between January 1, 2023 through September 30, 2024.

### Total Revenue

*In Thousands*

| Revenue | Nine Months Ended September 30, 2024 | 2023 | $ Increase | % Change |
| --- | ---: | ---: | ---: | ---: |
| Total | $1,305,707 | $1,161,381 | $144,326 | 12.4% |
| Same Center | $1,224,946 | $1,107,208 | $117,738 | 10.6% |
| Excluded | $80,761 | $54,173 | — | — |

Our 10.6% increase in same center revenue over the same period last year was driven by increases in fees charged per imaging procedure and same center total procedure volume growth of 3.3% inclusive of rises in routine and advanced modality imaging procedures of 1.82% and 7.76%, respectively. The increase in revenue was largely attributable to product mix product mix, as advanced imaging was a greater portion of overall procedures. A significant contributor to the change in product mix was the increase in PETHC procedures related to prostate cancer and suspected Alzheimer studies, which are included in advanced modality imaging procedures.

### Operating Expenses

Total operating expenses for the nine months ended September 30, 2024 increased approximately $131.7 million, or 12.1%, to $1,216.1 million for the nine months ended September 30, 2024 from $1,084.4 million for the nine months ended September 30, 2023. The following table breaks down our cost of operations and total operating expenses for the nine months ended September 30, 2024 and 2023 (in thousands):

|  | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| Salaries and professional reading fees, excluding stock-based compensation | $731,134 | $635,016 |
| Stock-based compensation | 19,614 | 19,484 |
| Building and equipment rental | 89,827 | 88,592 |
| Medical supplies | 75,146 | 63,829 |
| Other operating expenses \* | 204,821 | 201,893 |
| Cost of operations | 1,120,542 | 1,008,814 |
| Depreciation and amortization | 94,095 | 89,743 |
| Gain on contribution of imaging centers into joint venture | — | (16,808) |
| Loss on sale and disposal of equipment | 739 | 1,185 |
| Severance costs | 720 | 1,417 |
| Total operating expenses | $1,216,096 | $1,084,351 |

**\*** Includes billing fees, office supplies, repairs and maintenance, insurance, business tax and license, outside services, telecom, utilities, marketing, travel and other expenses.

### Salaries and professional reading fees, excluding stock-based compensation and severance

*In Thousands*

| Salaries and Professional Fees | Nine Months Ended September 30, 2024 | 2023 | $ Increase/(Decrease) | % Change |
| --- | ---: | ---: | ---: | ---: |
| Total | $731,134 | $635,016 | $96,118 | 15.1% |
| Same Center | $693,291 | $611,204 | $82,087 | 13.4% |
| Excluded | $37,843 | $23,812 | — | — |

Staffing levels have been adjusted to support higher patient volumes with the corresponding rise in salaries and professional fee expense. We are continuing to face inflation in employee wage rates as we compete for talent in a tight labor market.

### Stock-based compensation

Stock-based compensation was relatively unchanged at $19.6 million for the nine months ended September 30, 2024 compared to $19.5 million for nine months ended September 30, 2023.

### Building and equipment rental

*In Thousands*

| Building & Equipment Rental | Nine Months Ended September 30, 2024 | 2023 | $ Increase/(Decrease) | % Change |
| --- | ---: | ---: | ---: | ---: |
| Total | $89,827 | $88,592 | $1,235 | 1.4% |
| Same Center | $79,558 | $80,442 | $(884) | (1.1)% |
| Excluded | $10,269 | $8,150 | — | — |

The decrease in building and equipment rental expense relates to reduced equipment rental relating to operating lease contracts which ended or were bought out during 2023.

### Medical supplies

*In Thousands*

| Medical Supplies Expense | Nine Months Ended September 30, 2024 | 2023 | $ Increase/(Decrease) | % Change |
| --- | ---: | ---: | ---: | ---: |
| Total | $75,146 | $63,829 | $11,317 | 17.7% |
| Same Center | $70,494 | $60,931 | $9,563 | 15.7% |
| Excluded | $4,652 | $2,898 | — | — |

The increase in medical supplies expense was consistent with our higher patient volume and product shift towards more advanced imaging modalities. The increase in PETHC procedures related to prostate cancer and suspected Alzheimer studies also raised medical supplies expense due to the requirement for high-cost isotope tracers.

### Other operating expenses

*In Thousands*

| Other Operating Expenses | Nine Months Ended September 30, 2024 | 2023 | $ Increase/(Decrease) | % Change |
| --- | ---: | ---: | ---: | ---: |
| Total | $204,821 | $201,893 | $2,928 | 1.5% |
| Same Center | $191,345 | $193,385 | $(2,040) | (1.1)% |
| Excluded Sites | $13,476 | $8,508 | — | — |

Other operating expenses was relatively unchanged compared to the same period in the prior year and lower as a percentage of overall revenues.

### Additional segment operating and non operating expenses:

*In Thousands*

|  | Nine Months Ended September 30, 2024 | 2023 | $ Increase/(Decrease) | % Change |
| --- | ---: | ---: | ---: | ---: |
| Depreciation and amortization | $94,095 | $89,743 | $4,352 | 4.8% |
| Gain on contribution of imaging centers into joint venture | $0 | $(16,808) | $16,808 | nm |
| Loss on disposal of equipment and other | $739 | $1,185 | $(446) | (37.6)% |
| Non-cash change in fair value of interest rate hedge | $7,429 | $949 | $6,480 | 682.8% |
| Other income | $(12,753) | $(6,323) | $(6,430) | 101.7% |
| Severance | $720 | $1,417 | $(697) | (49.2)% |

42

The increase in depreciation expense was the result of our higher depreciable asset base.

The fair value of the 2019 Swaps at September 30, 2024 was a net asset of $7.7 million compared to a net asset of $15.1 million December 31, 2023, resulting in a loss of $7.4 million during the nine months ended September 30, 2024. This change in fair value was driven by market expectations of continued declines in interest rates over the remaining term of the 2019 Swaps.

Other income for the nine months ended September 30, 2024 included money market interest income of $22.7 million, partially offset by an impairment of non-marketable securities of $1.2 million and a debt extinguishment and restructuring charges of $8.9 million, which related to refinancing of our Barclays credit facility. See Note 6 Credit Facilities and Notes Payable included in the notes to our condensed consolidated financial statements. Interest income for the nine months ended September 30, 2024 increased approximately $16.4 million, or 260.2%, to $22.7 million from $6.3 million for the nine months ended September 30, 2024. The increase is primarily due to higher average cash balance in our money market account for the nine months ended September 30, 2024

*In Thousands*

|  | Nine Months Ended September 30, 2024 | 2023 | $ Increase/(Decrease) | % Change |
| --- | ---: | ---: | ---: | ---: |
| Interest income | (22,681) | (6,297) | $(16,384) | 260.2% |
| Debt restructuring and extinguishment expenses | 8,909 | 0 | $8,909 | nm |
| Other non-operating losses (income) | 1,019 | (26) | $1,045 | (4019.2)% |
| Total other income | $(12,753) | $(6,323) | $(6,430) | 101.7% |

nm= not meaningful

### Interest expense

*In Thousands*

| Interest Expense | Nine Months Ended September 30, 2024 | 2023 | $ Increase/(Decrease) | % Change |
| --- | ---: | ---: | ---: | ---: |
| Total Interest Expense | $61,776 | $47,876 | $13,900 | 29.0% |
| Interest expense related to derivatives\* | 776 | (7,138) |  |  |
| Interest expense related to amortization\*\* | 2,336 | 2,240 |  |  |
| Adjusted Interest Expense\*\*\* | 58,664 | 52,774 | 5,890 | 11.2% |

\*Includes payments from 2019 Swaps

\*\*Includes noncash amortization of deferred loan costs and discount on issuance of debt

\*\*\*Includes interest related to our term loans, revolving credit line, notes, and other

The increase in interest expense was the result in the general increase in term loan debt as a result of refinancing of our Barclays credit facility, partially offset by lower interest rates compared to the same period in the prior year.

During the nine months ended September 30, 2024, interest rates were above the arranged rates in our 2019 Swaps for most of the year and we received payment of $10.2 million in cash payments from our 2019 swap counterparties, which was reported as a component of interest expense. Also, the 2019 Swaps for $100 million of notional value matured in October 2023, so they were in effect for the third quarter of 2023, but not 2024. See the Derivative Instruments section of Note 2, Significant Accounting Policies, in the notes accompanying in our annual report on Form 10-K for the fiscal year ended December 31, 2023 and Part 1, Item 3 — "Quantitative and Qualitative Disclosure About Market Risk" below for more details on our derivative transactions.

### Equity in earnings from unconsolidated joint ventures

For the nine months ended September 30, 2024 we recognized equity in earnings from unconsolidated joint ventures in the amount of $11.3 million compared to $3.9 million for the prior period, an increase of $7.4 million or 187.4%. The increase was mainly due to the additional contribution made to SMIG in September 2023. SMIG operated at a net income for the nine months ended September 30, 2024, which positively impacted our equity in earnings from unconsolidated joint ventures during the period. Additionally, the increase was supported by improved earnings from our interest in the Arizona Diagnostic Radiology Group joint venture, which was established in the fourth quarter of 2020.

### Income tax expense

We recorded income tax expense of $4.9 million, or an effective tax rate of 16.7%, for the nine months ended September 30, 2024 and $7.7 million, or an effective tax rate of 24.1% for the nine months ended September 30, 2023. The income tax rates for the nine months ended September 30, 2024 diverge from the federal statutory rate due to (i) effects of state income taxes ; (ii) officer's compensation limitations; (iii) partial valuation allowance on losses in foreign jurisdictions, partially offset by (iv) excess tax benefits attributable to share based compensation; and (v) noncontrolling interests from controlled partnerships.

### Net income attributable to noncontrolling interests

At September 30, 2024, our consolidated subsidiaries operated 345 imaging centers of which 98 were not wholly-owned and thus a portion of their operating results were attributable to noncontrolling interests. At September 30, 2023, our consolidated subsidiaries included 320 centers of which 83 were not wholly-owned.

For the nine months ended September 30, 2024, we recognized net income attributable to noncontrolling interests of $27.2 million versus $19.4 million for the nine months ended September 30, 2024, an increase of $7.8 million. The increase in net income attributable to noncontrolling interests was primarily due to the formation of a new majority owned subsidiary, Los Angeles Imaging Group, LLC in September 2023 and Tri Valley Imaging Group, LLC in March 2024. We contributed the operations of three centers to Los Angeles Imaging Group, LLC and Cedars-Sinai Medical Center contributed cash. Net income attributable to noncontrolling interests was also impacted by an increase in patient volumes for advanced modalities in 2024 and the closure of two underperforming centers in a majority owned subsidiary, Beach Imaging Group, LLC in December 2023.

As noncontrolling interests only represent a portion of our imaging center business, and excludes our Digital Health Segment which generated losses of $9.5 million for the nine months ended September 30, 2024, we do not expect changes in net income attributable to noncontrolling interests to correlate with changes in consolidated operating income or pretax income.

### Digital Health Segment

The breakdown of revenue and expenses of the segment for the three and nine months ended September 30, 2024 and 2023 are as follows:

*In Thousands*

| Statement of Operations | Three Months Ended September 30, 2024 | 2023 | $ Change | % Change | Nine Months Ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue | **$16,367** | **$12,185** | **$4,182** | **34.3%** | **$46,856** | **$34,866** | **$11,990** | **34.4%** |
| Salaries and Wages | 7,119 | 6,022 | 1,097 | 18.2% | 18,631 | 18,710 | (79) | (0.4)% |
| Stock Compensation | 528 | 388 | 140 | 36.1% | 1,755 | 1,897 | (142) | (7.5)% |
| Other operating | 6,020 | 645 | 5,375 | 833.3% | 18,208 | 9,226 | 8,982 | 97.4% |
| Non-Capitalized R&D - DeepHealth Cloud OS & Generative AI | 3,344 | — | 3,344 | — | 9,977 | — | 9,977 | — |
| Depreciation & Amort. | 2,947 | 1,989 | 958 | 48.2% | 7,727 | 5,962 | 1,765 | 29.6% |
| (Gain) loss on sale and disposal of equipment and other | (5) | 3 | (8) | (266.7)% | (4) | (2) | (2) | 100.0% |
| Severance | 33 | 12 | 21 | 175.0% | 77 | 1,740 | (1,663) | (95.6)% |
| Total operating expenses | **$19,986** | **$9,059** | **$10,927** | **120.6%** | **$56,371** | **$37,533** | **$18,838** | **50.2%** |
| Loss from Operations | **$(3,619)** | **$3,126** | **$(6,745)** | **(215.8)%** | **$(9,515)** | **$(2,667)** | **$(6,848)** | **256.8%** |
| Other expense | **2,966** | **590** | **2,376** | **402.7%** | **5,413** | **3,715** | **1,698** | **45.7%** |
| Loss before taxes | **(6,585)** | **2,536** | **(9,121)** | **(359.7)%** | **(14,928)** | **(6,382)** | **(8,546)** | **133.9%** |
| Income taxes | **$(37)** | **$(4,472)** | **$4,435** | **(99.2)%** | **$(346)** | **$(5,829)** | **$5,483** | **(94.1)%** |
| Segment net loss | **(6,548)** | **7,008** | **(13,556)** | **(193.4)%** | **(14,582)** | **(553)** | **(14,029)** | **2536.9%** |

Revenues for the Digital Health segment increased as a result of core growth in our eRad PICS business, the rollout in 2023 of our Deephealth OS, and continued rollout of our Enhanced Breast Cancer Detection solutions across additional facilities. The increase in operating expenses was primarily related to salary expense as we increased headcount in connection with the commercialization of our initial AI products and higher non-capitalized research and development expenses with respect to our new DeepHealth cloud OS and generative AI. In the three months ended September 30, 2023, we recognized a non-recurring gain of $7.2 million from change in fair value of contingent consideration, offsetting against other operating expense. Aside from the effect of that one-time gain and increased non-capitalized research and development expenses, our net loss for the segment was consistent with the prior year. We expect that our Digital Health segment will continue to generate net losses over the next several years.

### Non-GAAP Financial Measures

We use both GAAP and non-GAAP metrics to measure our financial results. We believe that, in addition to GAAP metrics, non-GAAP metrics such as Adjusted EBITDA assist us in measuring our core operations from period to period.

### Adjusted EBITDA

Our Adjusted EBITDA metric removes non-cash and non-recurring charges that occur in the affected period and provides a basis for measuring the Company’s core financial performance against other periods.

We define Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, as adjusted to exclude losses or gains on the disposal of equipment, other income or loss, loss on debt extinguishment, bargain purchase gains, loss on de-consolidation of joint ventures, gain on contribution of imaging centers into joint ventures, 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 one-time events that take place during the period.

Adjusted EBITDA is a non-GAAP financial measure used as an analytical indicator by us and the healthcare industry to assess business performance. Adjusted EBITDA should not be considered a measure of financial performance under GAAP, and Adjusted EBITDA should not be considered in isolation or as alternatives to net income, or other financial statement data presented in the consolidated financial statements as an indicator of financial performance. Adjusted EBITDA is not a measurement determined in accordance with GAAP and is therefore susceptible to varying methods of calculation and this metric, as presented, may not be comparable to other similarly titled measures of other companies.

The following is a reconciliation of the nearest comparable GAAP financial measure, net income, to Adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023, respectively.

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net income attributable to RadNet, Inc. common stockholders | $3,209 | $17,540 | $(2,552) | $4,904 |
| Income taxes | 4,335 | 7,220 | 4,927 | 7,741 |
| Interest expense | 19,427 | 16,115 | 61,776 | 47,876 |
| Severance costs | 304 | 1,153 | 797 | 3,157 |
| Depreciation and amortization | 34,979 | 32,210 | 101,822 | 95,705 |
| Non-cash employee stock-based compensation | 4,723 | 4,325 | 21,369 | 21,381 |
| Loss (gain) on sale and disposal of equipment and other | 148 | 527 | 735 | 1,183 |
| Non-cash change in fair value of interest rate hedge | 6,755 | 1,015 | 7,429 | 949 |
| Other expenses | (5,414) | (4,081) | (16,248) | (2,609) |
| Non-Capitalized R&D - DeepHealth Cloud OS & Generative AI | 3,345 | — | 9,977 | — |
| Loss (gain) on contribution of imaging centers into joint venture | — | (16,808) | — | (16,808) |
| Loss (gain) on extinguishment of debt and related expenses | 147 | — | 8,909 | — |
| Non-cash change to contingent consideration | — | (6,276) | 1,974 | (3,646) |
| Acquisition related non-cash intangible adjustment | — | 3,950 | — | 3,950 |
| Non-operational rent expenses | 1,287 | 1,030 | 3,119 | 2,748 |
| Acquisition transaction costs | 417 | — | 417 | — |
| **Adjusted EBITDA - Total Company** | **$73,662** | **$57,920** | **$204,451** | **$166,531** |
| Adjusted EBITDA - Digital Health Segment | 3,229 | 2,279 | 10,018 | 3,689 |
| **Adjusted EBITDA - Imaging Center** | **$70,433** | **$55,641** | **$194,433** | **$162,842** |

The following table is a reconciliation of GAAP net income for our Digital Health Segment to Adjusted EBITDA for the three months ended September 30, 2024 and 2023, respectively.

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Segment net loss | $(6,550) | $7,008 | $(14,582) | $(552) |
| Stock Compensation | 528 | 388 | 1,755 | 1,897 |
| Depreciation & Amortization | 2,947 | 1,989 | 7,727 | 5,962 |
| Other operating loss | (5) | 3 | (4) | (2) |
| Other (income) expense | 2,966 | 592 | 5,414 | 3,714 |
| Severance | 34 | 12 | 77 | 1,740 |
| Income taxes | (36) | (4,472) | (346) | (5,829) |
| Non-Capitalized R&D - DeepHealth Cloud OS & Generative AI | 3,345 | — | 9,977 | — |
| Non-cash change to contingent consideration | — | (7,191) | — | (7,191) |
| Acquisition related to non-cash intangible adjustment | — | 3,950 | — | 3,950 |
| **Adjusted EBITDA - Digital Health Segment** | **$3,229** | **$2,279** | **$10,018** | **$3,689** |

### Liquidity and Capital Resources

We expect our existing capital resources, anticipated cash from operations and our borrowing capacity under our credit facilities will be sufficient to sustain our operations for the next twelve months and the foreseeable future.

Our principal capital requirements are for the development of new diagnostic imaging centers, the acquisition of existing diagnostic imaging centers and the acquisition of new diagnostic imaging equipment. On a continuing basis, we evaluate various transactions to increase shareholder value and enhance our business results, including acquisitions, divestitures and joint ventures. We expect to fund any future acquisitions primarily with cash flow from operations and borrowings, including borrowing available under our secured credit facilities or through new equity or debt issuances.

We and our subsidiaries or affiliates may from time to time, in our sole discretion, purchase, repay, redeem or retire any of our outstanding debt or equity securities in privately negotiated or open market transactions, by tender offer or otherwise.

The following table summarizes key balance sheet data related to our liquidity as of September 30, 2024 and December 31, 2023 and income statement data for the nine months ended September 30, 2024 and 2023 (in thousands):

| Balance Sheet Data: | September 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Cash and cash equivalents | $748,916 | $342,570 |
| Accounts receivable | 199,076 | 163,707 |
| Working capital (exclusive of current operating lease liabilities) | 604,874 | 197,805 |
| Stockholders' equity | 1,119,634 | 813,359 |

| Income statement data for the nine months ended September 30, | 2024 | 2023 |
| --- | ---: | ---: |
| Total net revenue | $1,352,563 | $1,196,247 |
| Net (loss) income attributable to RadNet common stockholders | (2,552) | 4,904 |

### Sources and Uses of Cash

The following table summarizes key components of our sources and uses of cash for the nine months ended September 30, 2024 and 2023 (in thousands):

| Cash Flow Data | September 30, 2024 | September 30, 2023 |
| --- | ---: | ---: |
| Cash provided by (used in) operating activities | $190,494 | $131,943 |
| Cash provided by (used in) investing activities | (184,257) | (152,823) |
| Cash provided by (used in) financing activities | 400,069 | 231,101 |

Cash provided by operating activities for the nine months ended September 30, 2024 increased by $58.6 million compared to September 30, 2023 primarily driven by a $35.7 million change in assets and liabilities, primarily due to the timing of payments for accounts payable and accrued expenses.

Cash used in investing activities for the nine months ended September 30, 2024 increased from September 30, 2023 by $31.4 million. Purchases of imaging centers during the period was $37.7 million, a $26.8 million increase from the prior period. Capital expenditures for property and equipment during the period was $145.2 million, a $8.6 million increase from the prior period.

Cash provided by financing activities for the nine months ended September 30, 2024 resulted from a secondary public offering of our common stock and a refinancing of our Barclays credit facility. In March 2024, we completed a public offering of 5,232,500 shares of our common stock, which included 682,500 shares sold pursuant to an underwriters overallotment option, at a price to the public of $44.00 per share, resulting in net proceeds after underwriting discounts, commissions, and expenses of $218.3 million. In April 2024, we refinanced our Barclays credit facility replacing the prior facility with an $875 million term loan. After paying off the balance on the prior facility, payment of accrued interest through the closing of the refinance transaction, and payment of transaction fees and expenses, we added approximately $167.9 million in cash to the balance sheet.

### Secured Credit Facilities

We maintain secured credit facilities with Barclays Bank PLC and with Truist Bank.

On April 18, 2024, we refinanced our Barclays credit facility, replacing the prior facility with an $875.0 million term loan and a $282.0 million revolving credit facility. The refinance transaction reduced our interest rates on the Barclays term loan and revolving credit facility and extended the maturity date for the term loan to April 18, 2031 and for the revolving credit facility to April 18, 2029. The new term loan calls for quarterly principal payments of $2.2 million, compared to $1.8 million under the prior credit facility.

Our condensed consolidated balance sheets at September 30, 2024 include $1,009.7 million of total term loan debt (exclusive of unamortized discounts of $15.8 million) in thousands:

|  | Face Value | Discount | Total Carrying Value |
| --- | ---: | ---: | ---: |
| Barclays Term Loan | $872,812 | $(15,234) | $857,578 |
| Truist Term Loan | 136,875 | (792) | 136,083 |
| Total Term Loans | $1,009,687 | $(16,026) | $993,661 |

At September 30, 2024, we had no borrowings under our Barclays or Truist revolving credit facilities. After reserves for outstanding letters of credit of $8.3 million, we had $273.7 million available for borrowing under our Barclays Revolving Credit Facility and $50.0 million available under our Truist Revolving Credit Facility.

Please see Note 6, Credit Facilities and Notes Payable in the notes to financial statements included in this report for more information on our secured credit facilities.

## Market risk

As filed, 3,384 characters.

### Foreign Currency Exchange Risk:

We are exposed to foreign exchange risk with respect to revenues and expenses denominated in the Pound Sterling, Euro, Canadian Dollar and Hungarian Forint. We provide radiological services in the United Kingdom, conduct Artificial Intelligence operations in the Netherlands, and maintain research and development centers in Canada, Hungary and India. We do not have any foreign currency exchange contracts to mitigate this risk. At September 30, 2024, a hypothetical 1% decline in the currency exchange rates between the U.S. dollar against these currencies, would have resulted in an annual increase of approximately $0.3 million in operating expenses.

**Interest Rate Sensitivity:**

Our debt instruments, including borrowings under our Barclays credit facility and our Truist credit facility, bear interest at variable rates. Accordingly, our interest expense and our earnings are affected by changes in short term interest rates.

To mitigate our future floating rate interest expense exposure we entered into the 2019 Swaps with locked in interest rates for one-month Term SOFR of 1.89% for $100 million of notional value and 1.98% for $400 million of notional value. We are liable for premium payments to the 2019 swap counterparties if interests rates are below the arranged rates, and receive payments from the 2019 swap counterparties if interest rates exceed the arranged rates. If interest rates were to theoretically reduce to 0%, our maximum premium payment would be the difference between the two swapped rates and 0% then multiplied by the notional value of the swaps, or $1.89 million per year for the $100 million swap and $8.0 million per year for the $400 million swap. Payments under the 2019 Swaps are settled in cash on a monthly basis. The 2019 Swaps for the $100 million of notional value matured in October 2023, so they were in effect for the third quarter of 2023, but not 2024. The 2019 Swaps for the $400 million notional amount will expire in October 2025.

We can elect SOFR or Alternative Base Rate interest options on amounts outstanding under the Barclays Term Loan. At September 30, 2024, we had $872.8 million outstanding subject to an SOFR election on the Barclays Term Loan. At September 30, 2024, our effective SOFR interest rate plus applicable margin was 7.78%. The 2019 Swaps secure a $1.98% SOFR rate for a $400 million notional amount. After giving effect to our 2019 Swaps, we had $472.8 million outstanding under the Barclays Term Loan that is unprotected by the 2019 Swaps at September 30, 2024. Consequently, a hypothetical 1% increase in the SOFR rates under the Barclay's credit facility would result in an increase of $4.7 million in annual interest expense and a corresponding decrease in income before taxes. The 2019 Swaps will mature in October 2025.

We can elect SOFR or Base Rate interest rate options on amounts outstanding under the Truist credit facility. At September 30, 2024, we had $136.9 million outstanding subject to an adjusted SOFR election on the Truist Term Loan. At September 30, 2024, our effective SOFR rate plus applicable margin was 6.20%. A hypothetical 1% increase in the adjusted Eurodollar rates under the Truist credit facility would result in an increase of approximately $1.4 million in annual interest expense and a corresponding decrease in income before taxes.

## Controls and procedures

As filed, 1,340 characters.

### Evaluation of Disclosure Controls and Procedures

Under the supervision of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, as of September 30, 2024. Based on this evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2024 to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

### Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during three months ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

## Risk factors

As filed, 482 characters.

For information about the risks and uncertainties related to our business, please see the risk factors described in our annual report on Form 10-K for the year ended December 31, 2023. The risks described in our annual report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Filed Nov 12, 2024.
Source: SEC EDGAR, the filing index for accession 0001628280-24-047285. Last ingested by Listed: Oct 26, 2026, 16:12 ET. No prices; not investment advice.