Q4 2021 RadNet Inc Earnings Call
And ladies and gentlemen, and welcome to the Radnet, Inc. Fourth quarter and full year 2021 financial results call. At this time are getting additional participants since you're forgetting approximately four minutes. We appreciate your patience and ask that you. Please remain online.
[music].
Good day, ladies and gentlemen, and welcome to the Radnet, Inc. Fourth quarter and full year 2021 financial results call. Today's conference is being recorded at this time I'd like to turn the conference over to Mr. Mark Stolper Executive Vice President Chief Financial Officer of Radnet, Inc. Please go ahead.
Thank you.
Good morning, ladies and gentlemen, and thank you for joining Dr. Howard Berger and me today to discuss Rad, that's fourth quarter and full year 2021 financial results.
Before we begin today, we'd like to remind everyone of the safe Harbor statement under the private Securities Litigation Reform Act of 1995.
This presentation contains forward looking statements within the meaning of the U S. Private Securities Litigation Reform Act of 1995, specifically statements concerning anticipated future financial and operating performance right and its ability to continue to grow the business by generating patient referrals and contracts with radiology.
[noise] practices.
Recruiting and retaining technologists, receiving third party reimbursement for diagnostic imaging services successfully integrating acquired operations.
<unk> generating revenue and adjusted EBITDA for the acquired operations as estimated among others are forward looking statements within the meaning of the safe Harbor.
Forward looking statements are based on management's current preliminary expectations and are subject to risks and uncertainties, which may cause radnet actual results to differ materially from the statements contained herein.
These risks and uncertainties include those risks set forth in Radnet reports filed with the SEC from time to time, including Rodney Its annual report on Form 10-K for the year ended December 31, 2021 to be filed shortly.
Undue reliance should not be placed on forward looking statements, especially guidance on future financial performance, which speaks only as of the date. It is made.
<unk> undertakes no obligation to update publicly any forward looking statements to reflect new information.
<unk> or circumstances. After the date, they were made or to reflect the occurrence of unanticipated events.
And with that I'd like to turn the call back over to Dr. Berger.
Thank you Mark good morning, everyone and thank you for joining us today.
On today's call Mark and I plan to provide you with highlights from our fourth quarter and full year 2021 results give you more insight into factors, which affected this performance and discuss our future strategy.
After our prepared remarks, we will open the call to your questions.
Like to thank all of you for your interest in our company and for dedicating a portion of your day to participate in our conference call. This morning.
Before we start I would like to say on behalf of myself and the entire team at Red.
We hope all of you and your loved ones are healthy and staying safe.
We are extremely grateful for all of our stakeholders, including our employees business partners lenders and shareholders and wish you all well during these challenging times.
Yeah.
Let's begin.
Like being impacted by the recent omicron surge of COVID-19, particularly late in the fourth quarter I am very pleased with our performance in the fourth quarter.
We were able to increase our revenue by 8%.
Our adjusted EBITDA by seven 5% from last year's fourth quarter.
The improvement was the result of ongoing strong demand for our services and the continuing migration of patient procedures from hospitals to freestanding ambulatory outpatient imaging centers.
Strong demand for our services was enough to overcome the negative impact from the surge, which reduced our fourth quarter revenue by over $4 million or adjusted EBITDA by approximately $3 million.
The COVID-19 surge not only disrupted normal patient volumes, but also created staffing issues at our facilities at the height of the omicron surge in December we had 565 employees out on Covid, Li representing six 3% of.
Our entire workforce I am pleased to report that after peaking in the first week of January where we had eight 2% of our staff our uncoated grades or 743 employees currently the percentage of our employee days out with COVID-19 has decreased to one.
2%.
Additionally, the slowdown in Covid cases.
Asian volume returning to more normalized levels.
Give us the optimism that is embedded in our 2022 guidance levels, which Mark will review in detail in his prepared remarks.
Consistent with our efforts throughout the pandemic during the fourth quarter, we continued to focus on strengthening our balance sheet by managing our liquidity and financial leverage.
We accomplished this while still making important investments in our facilities equipment and technology.
At the year end 2021, we had a cash balance of over $134 million and a net leverage ratio of two nine times adjusted EBITDA.
Our days sales outstanding or Dsos at December 31, 2021 was 34.0 days the lowest in our company's history.
The improvement in revenues revenue cycle operations and collections has materially contributed to our ability to manage the challenges presented by COVID-19 and to make important investments for our future.
We are particularly pleased with our liquidity position given that we repaid over $50 million of COVID-19 related deferrals throughout 2021, which included Medicare and Blue Shield of California advanced payments.
Payroll taxes under federal assistance programs and cash flow concessions, we received from landlords of our facilities. Currently we only have $8 million of deferrals left to repay during 2022.
We are extremely appreciative of the cash flow assistance, we received from these government organization and business partners. During the global pandemic and we are gratified that we've been able to retain these deferrals so quickly.
We believe that our strong balance sheet position allows us to be aggressive in 2022 with respect to growth initiatives, which will include tuck in acquisitions de Novo centers and continued capital spending to drive same center performance.
I'd like to reflect on some of our achievements throughout 2021, which further our long term operating plan yes.
Here are some of the highlights first.
First throughout 2021, we focus on improving clinical operations to drive same center growth and to efficiently manager manage our capacity to service the recovering demand for diagnostic imaging as the country began to move past COVID-19.
We consolidated centers since July certain support functions and improve clinical protocols to drive efficiencies and capacity utilization.
We drove reimbursement increases from private capital pay yours, we also made important investments in equipment and improved throughput.
Throughput and accuracy.
We completed our system wide adoption of three D mammography and piloted technologies to make MRI scans shorter for our patients and to allow technology to remotely control equipment in multiple locations.
We also completed a number of tuck in acquisitions throughout many of our core markets and were successful in expanding several of our health.
Some joint ventures.
With respect to our deep health AI Division, we received FDA clearance of the detail Sage Q mammography workflow triage tool in April of last year.
We integrated this powerful AI tool within many of our contracted radiology groups throughout the remainder of the year.
2021 details also prepared and filed an FDA submission towards more advanced tool Sage Dx, which is submitted to the F which was submitted to the FDA in early January of this year, we expect to receive clearance sometime during the second quarter.
For this algorithm, which we believe will be integral in our population health and cancer screening strategy.
Also in 2021, we began to execute on our vision to create a suite of AI.
Enhanced diagnostic imaging screening tools for the most prevalent cancers.
We believe large scale cancer screening will be an important part of future population health management.
We formulated our interest in moving beyond the current focus of breast cancer towards securing screening algorithms for lung prostate and colon cancer.
During 2021, we identified two companies to acquire to address opportunities in lung and prostate cancer screening agents holding D V and quantify the acquisitions were completed in January of this year.
Agents.
Artificial intelligence for chess and lung <unk> scanning is currently used by customers in seven European countries and its leading product is pending FDA approval for use in the United States.
With customers in 20 countries worldwide quantitative solutions Brooks prostate and brain MRI already have FDA five 10-K clearance in the United States and CE Mark in Europe .
<unk> and Qantas have joy in detail in our AI Division led by Dr. Gregory Sorensen, who has assumed responsibility for all of Radnet initiatives.
Finally in April of 2021, we completed the refinancing of our term loan and revolving line of credit.
Based upon current leverage ratios, we are saving approximately $6 million annually and our interest expense as compared with our prior debt facilities.
Additionally, we no longer are subject to restrictive maintenance covenants with respect to our term loan and have substantially more operating and financial flexibility under the new credit agreement.
This includes lowering our annual required amortization patient payments.
Payments by over $30 million, providing us with more cash flow to invest in further growth and development.
At this time I'd like to turn the call back over to Mark to discuss some of the highlights of our fourth quarter and full year 2021 performance as well as discussed in detail our guidance levels for 2022. When he is finished I will make some closing remarks.
Thank you Howard.
I'm now going to briefly review, our fourth quarter and full year 2021 performance and attempt to highlight what I believe to be some material items.
He will also give some further explanation of certain items in our financial statements as well as provide some insights into some of the metrics that drove our fourth quarter and full year 2021 performance.
I will also provide 2022 financial guidance levels, which river, which were released in this morning's financial results press release.
In my discussion I will use the term adjusted EBITDA, which is a non-GAAP financial measure the company defines adjusted EBITDA as earnings before interest taxes, depreciation and amortization and excludes losses or gains on the disposal of equipment, either income or loss loss on debt.
Extinguishment and non equity compensation noncash equity compensation adjusted EBITDA includes earnings in unconsolidated operations, and then subtract allocations of earnings to Noncontrolling interests in subsidiaries and is adjusted for noncash or extraordinary and one.
One time events taken place during the period.
A full quantitative reconciliation of adjusted EBITDA to net income or loss attributable to Radnet, Inc. Common shareholders is included in our earnings release.
With that said I'd now like to review, our fourth quarter and full year 2021 results.
For the fourth quarter of 2021, Radnet reported revenue of $333 $2 million and adjusted EBITDA of $54 $5 million.
Revenue increased $24 $6 million or 8% and adjusted EBITDA increased $3 $8 million or seven 5% from the fourth quarter of 2020.
Adjusted to remove $2 $8 million of provider relief funding under the cares Act adjusted EBITDA was $51 $7 million during the fourth quarter, an increase of 2% from the fourth quarter of 2020.
As Dr. Berger mentioned in his opening remarks, the strong demand for our services was enough to overcome the negative impact from the omicron surge, which reduced our revenue by over $4 million and our adjusted EBITDA by approximately $3 million in the fourth quarter.
The COVID-19 surge not only disrupted normal patient volumes, but also created staffing issues at our facilities.
For the fourth quarter of 2021 as compared with the prior year's fourth quarter MRI volume increased 13, 8% <unk> volume increased 10, 7% and Pepsi tea volume was flat.
Overall volume taking into account routine imaging exams inclusive of X Ray ultrasound mammography and all other exams increased 11, 4% over the prior year's fourth quarter.
In the fourth quarter of 2021, we performed 2 million 201920 total procedures.
Procedures were consistent with our multi modality approach whereby 76, 5% of all the work we did by volume which drove routine imaging.
Our procedures in the fourth quarter of 2021, whereas follows.
314682, mris as compared with 276482 mris in the fourth quarter of 2020.
191180, Cts as compared with 172728 Cts in the fourth quarter of 2020.
11066, pet Cts as compared with 11063 pet Cts in the fourth quarter of 2020.
And $1 million 684992 routine imaging exams.
As compared with 1 million 516813 routine imaging exams in the fourth quarter of 2020.
On a same center basis, including only those centers, which were part of Radnet for both the fourth quarters of 2021 and 2020.
<unk> volume increased 8%.
Volume increased six 6% at pet C T volume decreased <unk>, 4%.
Overall same center volume taking into account routine imaging exams increased seven 3% from the prior year same quarter.
<unk> net income, which is net income adjusted for unusual or one time items was $6 $9 million or <unk> 13 per diluted share as compared with $10 $2 million or <unk> 20 per diluted share for the same period in 2020.
The decrease in adjusted net income and adjusted earnings per share is primarily the result of an increase in depreciation and amortization expense noncash stock compensation expense and the fully diluted share count in the fourth quarter of 2021.
In addition to the $2 $8 million of provider relief funding under the cares Act affecting net income in the fourth quarter of 2021 were certain noncash expenses or nonrecurring items, including the following.
$3 $6 million of noncash employee stock compensation expense.
$29000 of severance paid in connection with headcount reductions related to cost savings initiatives.
$1 5 billion dollar loss on the disposal of certain capital equipment.
Seven $5 billion of noncash gain from interest rate swaps.
$831000 legal settlement.
One 2 million dollar transaction costs associated with completing the agents holding BV and the quantity b the acquisitions.
$646000 of amortization of deferred financing costs and loan discounts related to our existing credit facilities.
$19 $7 million loss from abandoning certain leases related to facility closures.
With regards to some specific income statement accounts overall GAAP interest expense for the fourth quarter of 2021 was 11 $8 million.
This compares with GAAP interest expense in the fourth quarter of 2020 of $12 $4 million.
Cash paid for interest during the period, which excludes non cash deferred financing expense accrued interest in payments to swap counterparties with $7 $6 million as compared with $8 $3 million in the fourth quarter of last year.
For full year 2021, Radnet reported 1 billion $315 $1 million of revenue and adjusted EBITDA of $218 $9 million.
This adjusted EBITDA includes the benefits of $9 $1 million of provider relief funding and $7 $7 million of employee retention credit under the cares provider Relief Act.
Revenue increased $243 $2 million or 22, 7% and adjusted EBITDA increased $79 5 million or 57% as compared with 2020.
Adjusting to exclude the provider relief funding and the employee retention credit adjusted EBITDA was $202 $1 million an.
An increase of 62 point.
$62 $7 million or <unk> 44, 9% as compared with 2020.
For the for the year ended December 31, 2021, as compared to 2020, MRI volume increased 26, 2% CET volume increased 21, 9% and pet <unk> volume increased eight 6%.
Overall volume taking into account all routine imaging exams increased 25, 2% for the 12 months of 2021 over 2020.
In 2021, we performed $8 million 598593 total procedures.
The procedures were consistent with our multi modality approach whereby 76, 3% of all the work we did by volume was fairly routine imaging.
Our procedures in 2021 are as follows.
1.232 million and 427, mris as compared with 976633 Mris in 2020.
756509, Cts as compared with 620 547 Cts in 2020.
45124, pet Cts as compared with 41567 pet Cts in 2020.
And $6 million 564533 routine imaging exams as compared with $5 million 228274 of all these exams in 2020.
Net income for 2021 was $24 $7 million or <unk> 46 cents per diluted share.
This compares to a net loss of $14 8 million or negative <unk> 29 per diluted share in 2020.
These per share values are based upon weighted average number of diluted shares outstanding of $53 4 million in 2021 at $59 million in 2021 and 2020.
In addition to the provider relief funding and employee retention credit under the cares Act affecting net income for 2021 were certain noncash expenses or nonrecurring items, including the following.
$25 2 million of noncash employee stock compensation expense.
$744000 of severance paid in connection with headcount reductions related to cost savings initiatives.
One $2 million loss on the disposal of certain capital equipment.
$6 million loss on the extinguishment of debt and related expenses in conjunction with our debt refinancing transaction in April .
$21 7 million of noncash gain from interest rate swaps.
$831000 of legal settlements.
One 2 million dollar transaction costs associated with completing the agents holding BV and the quanta b the acquisitions.
$3 $3 million of amortization of deferred financing costs and loan discount related to our existing credit facilities.
And $19 $7 million loss from abandoning certainly leases related to facilities closed.
With regards to some specific income statement accounts overall GAAP interest expense in 2021 with $48 $8 million.
Adjusting for the impacts from items, such as amortization of financing fees accrued interest and payments to swap counterparties.
Cash interest expense was $29 million in 2021.
This compares with GAAP interest expense in 2020 or $45 $9 million in cash paid for interest of $39 $5 million in 2020.
With regards to our balance sheet as of December 31, 2021, unadjusted for bond and term loan discounts, we had $633 $3 million of net debt, which is our total debt at par value less our cash balance.
Note that this debt balance includes new Jersey imaging network debt of approximately $46 $5 million for which Radnet is neither a borrower nor guarantor.
This compares with $563 $7 million of debt debt at December 31, 2020.
As of year end 2021, we were Undrawn on our 195 billion dollar revolving line of credit and had a cash balance of $134 $6 million, which was substantially up from the $102 million cash balance at year end 2020.
As Dr. Berger mentioned in his opening remarks, our liquidity position is especially gratifying as we repaid during 2021 over $50 million of deferrals. We had received from government assistance programs private payors and landlords.
At December 31, 2020, our accounts receivable balance was $135 $1 million, an increase of $5 5 million from year end 2020.
Our DSO was 34 days at December 31, 2021, lower by $2 two days when compared with the $36 two days of Dsos one year earlier.
The decrease in our DSO is mainly from improved cash collections, including additional efforts and resources dedicated to patient collections at the time of service.
Throughout 2021, we had total capital expenditures net of asset dispositions and the sale of imaging center assets and joint venture interests of 98 $8 million.
This amount excludes $12 $4 million of capital expenditures of New Jersey imaging network and the opportunistic purchase of $26 million in the fourth quarter of equipment that were on operating leases from certain OEM lessors.
Approximately all of our capital expenditures were paid for in cash and we recognized $625000 and proceeds from the sale of equipment.
Capital expenditures in 2021 were higher than what we originally budgeted as a result of the construction of certain de novo locations that are expected to be operational in 2022.
At this time I'd like to review, our 2022 financial guidance levels, which we released this morning in our financial results press release.
For total net revenue our guidance range is $1.350 billion to $1.400 billion.
Okay.
For adjusted EBITDA, which excludes anticipated losses from artificial intelligence businesses.
The guidance range is $205 million to $250 million $215 million.
For capital expenditures, our guidance range is 85 million to $90 million.
For cash paid for interest our guidance range is $27 million to $32 million.
Finally for free cash flow generation, our guidance level is $80 million to $90 million.
It is important to understand that our 2021 adjusted EBITDA results were positively impacted by $9 $1 million of provider relief proceeds and $7 $7 million of employee retention credit under the cares provider Relief Act.
Additionally, we are estimating an impact of $7 $4 million of Medicare reimbursement reductions for 2022 based upon Medicare's final rule released in November .
Adjusting 2021.
Adjusted EBITDA for these three items, including the Medicare rate cuts as if they had existed at the beginning of 2021, the adjusted EBITA to which we compare our 2022 guidance is $194 $3 million.
The anticipated growth built into our guidance in 2022 from this value to our adjusted EBITDA guidance range of $205 million to $215 million is projected to come from same center growth.
Reimbursement increases from private and capitation payors.
New and expanded health system joint ventures, and the contribution from acquisitions completed at various times during 2021.
For conservatism, we have not included any new acquisitions or new health system Joint ventures during 2022 into our guidance and we have included approximately $15 million of additional salaries and wages in 2022 as a result of operating in a tighter.
Labor market, where it has become more expensive to attract and retain talent at all levels.
We think our guidance has room for us to outperform subject of course to the risks and uncertainties of the continuing COVID-19 environment and look forward to providing updates to this guidance as we progress throughout the year.
Also note that our adjusted EBITDA guidance for 2022 excludes the anticipated losses from our AI Division, which includes details agents and quantified.
Of roughly $12 million to $17 million of range, which is impacted by the timing of certain FDA approvals and the resulting commercialization of various product offerings.
We will endeavor to report the losses in these businesses separately each quarter throughout 2020 to providing transparency of the performance of our core imaging business and allowing our stakeholders to track our progress in AI throughout the year.
I'd now like to turn the call back to Dr. Berger, who will make some closing remarks.
Thank you Mark.
Moving into 2022, the demand for diagnostic imaging remains robust and is growing.
Our strong financial position and operating model has presented us with targeted opportunities to expand our business, particularly through the construction of new centers to meet the growing demand and utilization in strategic markets. Currently we have 15, new sites in various stages of construction.
In development with almost half of these.
Expansion occurring within existing health system Joint ventures. These new sites are focused in areas, where we currently are unable to meet the demand for services due to capacity constraints or because we simply do not have locations overlapping significant patient populations.
We are in certain cases, our hospital partners have identified.
We believe these de novo sites should be major contributors to our performance in the second half of 2022 and throughout 2023.
As we now approach the end of the first quarter of 2022, we are excited for the remainder of the year.
<unk> the construction and development of the nodes of the centers I just mentioned, we expect to make progress on a number of other fronts in 2022.
We will continue to focus on driving same center procedural and revenue growth.
While managing expenses carefully we will advance current discussions with existing and new joint venture partners versus the average the new JV and expanding existing ones.
By Division, we will focus on getting successful clearances for deep <unk> advanced mammography algorithm and agents lung <unk> technology. We will also continue to have discussions with large health plans employer groups and Kip <unk> payors about adopting large scale cancer.
Screening programs driven by artificial intelligence.
Our strong cash position cash position at the end of 2021, leading into this year along with the availability of our $195 million revolving credit facility will provide us the financial flexibility and capability to pursue accretive strategic acquisitions and execute on.
All other facets of our operating plan.
Operator, we are now ready for the question and answer portion of the call.
Ladies and gentlemen, if you'd like to ask a question you may do so by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
Again, Please press star one to ask a question, we'll pause for just a moment to give everyone an opportunity to signal for questions.
We will take our first question from Brian <unk>.
With Jefferies. Please go ahead.
Hey, guys good morning.
So I guess Howard My first question for you.
Covered you guys for 15 years now and this is the first time I think that I'm seeing you focus on de Novo. So what was the impetus for that and anything you can share with us in terms of maybe what has changed in the market.
And that whole discussion of buy versus build.
Good morning, Brian . Thank you for the question.
During the year.
Despite the challenges presented by Covid, we noticed that there was increasing demand for outpatient elective imaging procedures, which we think is finally being substantially enhance by the greater efforts.
Most of the major.
Health payers are making to direct business into lower cost outpatient imaging facilities that along with initiatives that we've undertaken particularly in mammography to improve compliance. He has led to very impressive.
Increase in volumes in our markets and where we realized yet.
The only way for us to really provide additional capacity is to build new imaging centers.
So in our particular business model, where we have.
Densely pop.
We have many centers in densely populated markets and where consolidation continues to occur. We are recognizing that we can continue to just add pieces of equipment, because we are space constrained and that some of the prospects that we have for the future.
<unk> with artificial intelligence, which we believe will create greater demand for screening tools not only in breast cancer, but.
Lung prostate and colorectal cancer, which we will be aggressively pursuing we need to prepare for the ability to manage this increased demand.
And as a result, we've identified 15, new locations that we believe due to our backlogs increasing demand and migration away from hospital based outpatient business into these imaging centers will create this need that is also something.
Things that we decided to embark on as a result of the very high multiples that we see acquisitions being done generally inside the imaging center business and for Us and I think its unique to our business model and strategy it becomes substantially.
More.
Yes.
Opportunistic for us to build at this time, rather than buy as you know Brian over the years and we still try to target acquisitions in the three to six times multiple of EBITDA.
But given the fact that most of the larger acquisitions that we're seeing are for multiples substantially higher than that and that there is a decreasing number of centers in markets that are available for acquisition.
The decision to create Dino de Novo centers really satisfies both the need for demand as well as a more prudent use of our capital resources. So.
This is as I think you've noted astutely Brian .
Because you've been following us a long.
A change in his stance will change.
In I believe.
Perspective of how at least within our given markets, we need to be more judicious in our capital expenditures about creating additional capacity as an opportunity.
For growth.
The leverage if you will.
For building, a new center and having it become operationally in.
In line with our revenue projections, we will make these acquisitions.
The de novo or not.
<unk>, but the construction of these de novo centers for us less than a five times multiple of their EBITDA. So I think.
We are being careful and responsible and managing our cash flow and capital expenditures in a way that we think long term will be far more beneficial.
For the company's strategic.
Purposes.
No that makes a lot of sense Howard I guess my next question.
As we think about your AI strategy and your big push into cancer, we've heard of the cancer Moonshot being revived here just wanted to hear your thoughts about it and then I guess, taking a step further.
Am I understanding your strategy right, where you think or you believe that your AI pushing to cancer, we will open the door for topline growth as more screening is encouraged by the payers and so I guess the question. There is how are those conversations going because obviously, we've seen some of these efforts in the past whether it.
Yes.
To replace colonoscopy or Cologuard for that matter. So just curious how youre thinking the landscape will evolve where the protocol becomes imaging for cancer screening instead of the existing.
Protocols that are out there.
Thanks, Brian .
Another good question.
If we take a look down the road, which I believe now is a.
A little clearer than it might have been a couple of years ago, There's a number of initiatives, which the cancer Moonshot program has really highlighted and that is that technology has been a major driver.
In making cancer screening a reality and what I mean by that are two things number one as the.
<unk>.
Equipment itself.
Improves in both resolution and shortening scanning times and making it a more cost effective and better experience for our patients.
The ability for us to do screening for.
Breast lung prostate cancer now becomes a much more realistic.
Financial or economic aspiration, what used to take us for example.
In MRI scanning.
We're doing a prostate MRI of half hour or more.
And now with modified tools and <unk>.
Other artificial intelligence, which is embedded in the equipment itself allow us to reduce that scan and time to perhaps as little as five minutes.
Therefore, we can bring down the cost of screening for prostate.
Into something more like what there is today for breast cancer screening using mammography and therein lies really opportunity, which artificial intelligence.
On we will do two things number one.
Will help identify cancers earlier than other tools, both inside and outside imaging.
Create greater accuracy.
Not to mention that if these screening tools has the kind of adoption that we think is inevitable.
We're going to need artificial intelligence to help the demand to read and interpret all of these imaging procedures much more efficiently than currently exists and in an environment, where there's already a shortage of radio radiologic.
<unk> personnel.
Our need and responsibility and which we think if you read the white house.
Press release about revising cancer moonshot, almost looks like it could have been.
Something that we wrote about cancer screening when you talk about cancer screening, while we can talk about things like cologuard or even some of these other blood tests.
They don't identify if they do.
See a high risk or potential for cancer, where their cancer is and what's part of the body is the only way we believe to have effective cancer screening is really through imaging protocols and particularly the four cancers that I've mentioned.
Breast lung prostate and colon represent 70% of all solid tumors. So we're talking about something which could have a major impact on cancer. Both in terms of.
Screening people earlier and.
Changing the curve if you will about the.
Morbidity and costs for the system.
Our responsibility as well as bad as the government is really not just to put these tools in place but to also get.
Our patients.
Our population to come to these tools. So in regard to I think what you're talking about we see as part of our.
Our strategy here is not only bringing artificial intelligence to radnet centers, but working with other.
Providers out there are other imaging centers hospitals to brought to provide screening.
Cancer screening networks, which we believe we can be.
Instrumental in making it happen and create networks throughout the country that along with helping create new tools or even plans within the health care payers to drive more and more people for compliance so.
As we see what we call our.
Network strategy and population health initiatives.
Initiatives, we have.
Believe there will be opportunities to drive revenue into this company.
Our capital light, if you will and at the same time.
Help provide what is really necessary to get cancer moonshot last the ground. So.
We're looking at this as not only a great opportunity for Radnet, but more importantly, a great opportunities for the health care industry and population health management.
And we'll take our next question from Sarah James with Barclays. Please go ahead.
Hi, guys.
Steve Brown on for for Sarah.
So I just had a question.
Hey, guys just had a question going back to the priorities for capital deployment. So I think last quarter it seems like.
You had you had highlighted.
Fielding more inbound calls.
From the payers to move business away from traditional brick and mortars.
Hospitals, so I guess like can you and can you talk about how that's evolved up through the end of the year and in the beginning of the year and also update us on I guess like the view for the JV strategy.
As it relates to like where are you where you see it going as a percentage of.
Your imaging centers like do you still do you still think that it could be half of imaging centers versus I guess, it's roughly 25% or 30% in <unk>.
Yeah.
Good morning.
The.
The change that has occurred.
Really is discussions that we're having with.
The payers in our various markets as the programs. We can begin implementing that will help.
Direct patients into outpatient centers, and particularly Radnet centers. So this is the first time that we've really seen a more aggressive.
Effort on the part of the Payors to do this I believe that in large part this may actually be occurring as an outgrowth of COVID-19 because more and more people are less inclined to go into a hospital environment because of the concerns.
That they have for Covid, which is which are very likely to persist for.
For a very long time, so I believe that has provided some additional impetus to the PE ores to talk to us given that our network strategy and our markets provides us with an enormous amount of access where they can make substantial.
Strides in it so.
While I cant necessarily quantify to what extent that has happened we hope to be able to.
Facilitate that.
For the payers.
As well as our own centers here as we move into 2022, So excuse me, yes, 'twenty one 'twenty two.
So we're really having discussions that we really never had before with virtually almost every major player out there in terms of not only how we take business out, but starting conversations with them about screening technology and artificial intelligence to help.
<unk>.
Further distinguish the outpatient ambulatory imaging center marketplace.
Versus the hospitals so are we.
We think this is a very much a shift in sentiment that we've.
We've seen starting in the second half of 2021.
And with that we hope to have.
<unk> about how the.
Insurance company can actually change their plans in order to encourage.
More business being directed into outpatient centers as well as more screening tools. So.
We're very confident yet.
Yeah.
Our same store center growth, which generally leads.
Assume will be about 2% to 3% could be significantly higher than that but I think we have to wait for the remainder of this year to see how much of that.
We really can realize I will say that.
Starting last this year.
While January still had a significant impact from the <unk> surge that spread from the second half of <unk> into January .
February volumes are very impressive and I think I'm, reflecting a number of the.
<unk>.
Elements of it.
Shift because business.
Into our centers.
Particularly on the East coast here in virtually every market that we're in.
I'm not sure I answered your second question, Steve If you want to repeat that for me.
Yes, I guess I was just looking to get to see it.
The joint ventures with the hospital systems are they are they roughly flat from <unk>, 25% to 30% or have they.
Al.
Okay.
Yes, Thank you for reminding me.
Yes.
There is a slow shift where they were about 25% coming into 2021 , they're now probably closer to 30%.
We believe that a number of initiatives that we're working on.
And our goal is still to drive that number closer to 50% within the next couple of years.
That will come from both current centers that we have is that we put in with some of our current joint venture partners as well as new joint ventures that we're starting to get some inbound calls from.
About this opportunity I think that redness.
Uh huh.
Health system.
Initiatives for joint ventures has really.
Started to take route and a number of the systems that we work with are so large and have other.
<unk> and <unk> and even states that we could potentially move into as long as we can do that with our joint venture partners that we're getting are very.
Good.
Inbound calls from people that want us to look at.
Even beyond the core markets that we're currently in so we're as.
Confident that not only that.
That strategy itself is a good strategy for us, but that the opportunity to grow.
Our imaging centers into almost half of them being in joint ventures is very realistic.
Okay, great. Thank you.
Thank you Steve.
We'll take our next question from Mitra <unk> with Sidoti. Please go ahead.
Yes, hi, good morning, a couple of questions for me.
First I was just curious as it relates to the tight labor market in the.
Significantly higher costs, you're incurring if theres anything you can do to help maybe mitigate.
Some of the impact.
Good morning, Mitra, Yeah, yes, there are in there and they are initiatives that we started working on <unk>.
Last year, many of the equipment manufacturers have developed new tools, which shorten scan times and allow remote operation of some of our equipment. Both of these we believe will have the ability for us to improve.
Our capacity for helping manage the demand that we have while not necessarily requiring.
Labor, particularly technologists to perform them.
That is a big part of our 2022 and rolling into 2020 three initiatives and we.
That along with the artificial intelligence, which we think can.
Create additional.
Capacity, both at the scanner level as well as.
Efficiency by our professional and non professional staff, we think will help address some of the labor shortages. So I think there is a bright light on the horizon.
About addressing the labor shortage not with just.
The trying to find more and more technologists, but how to create additional capacity within our existing centers without necessarily needing to increase.
What part of that so thank you for bringing that up because it is a big initiatives that we're working directly with almost all of the Oems.
For tools that they have or tools that were trying to suggest to them in the way of equipment design that will help facilitate.
Throughput capacity.
Okay, No that's great.
And then just back on the.
AI Division I know, it's still very early days here and you're anticipating a loss of $12 million to $17 million.
This here just.
Big picture in terms of your expectation for when you might expect this division as a stand alone to start breaking even and eventually contributing.
Profits.
Okay.
This is a bold initiative.
But it's something that I think has to be done whether it would be done by radnet or somebody else. We believe we have the right mill you to create these opportunities.
Based on some of our preliminary numbers, we think that within 24 months or thereabouts that the AI division will start contributing positively to the company's profitability.
If indeed, that's the case I think whatever.
<unk> from a cash burn standpoint, it takes over the next two years will be well worth it not just for radnet, but for the industry as a whole.
All of this could be facilitated to the extent that the.
The.
President's plan to revive cancer Moon shot is taken up very seriously and a number of initiatives that we think they should be doing such as expediting FDA approval for a five 10-K clearance of some of our new algorithm.
<unk>.
Helping create screening networks and engaging.
People like Radnet, who clearly understand the outpatient world into the discussion.
The portal and hope to be part of the summit, which I hope will take place in somewhere next in the next 60 to 90 days, so that our voice not just as radnet, but as a steward for the potential opportunity to make cancer screening.
Using imaging a reality is heard and where we are engaging a number of resources inside and outside the company.
Try to jumpstart that so.
Me too.
Two year.
Hum.
<unk> <unk> to.
This.
Division.
More contributing to the company's profitability could be shortened if we are effective in having our voice heard both local levels with payors and on a national level with the central government.
Okay. Thanks.
Cala and then finally, just as it relates to omicron and I'm, assuming now has to be sort of exiting the first quarter by <unk> going forward you should be.
Anticipating back to normal levels in terms of patient volumes, but also internally with your workforce.
Not being as impacted as you saw in four Q is that fair.
Yes, it is I think.
I'm, assuming that there's not another surge.
Over the horizon and.
And who knows what impact.
Geopolitical issues may have.
We're very optimistic that not only do we see our.
Volumes returning to normal, but also a lot of the delay care.
People experience during the two years that we've been in Covid.
I believe you are starting to come together so the opening up of the cities are.
The major metropolitan cities that we predominantly.
Half Centre zone.
Sure sure.
Yeah. This kind of an impact I may note that the to the extent that people read the press release from the White House.
About cancer Moon shot there, but the headline in their press release was that the estimated at $9 2 million women.
You did not receive their normal screening mammography during this two year period and the potential for <unk>.
A large increase in the number of identified cancers was likely that same logic applies to lung cancer prostate cancer and.
Colorectal cancer given that those are all elective procedures.
People clearly did not undertake as normally as they would so the prospects for.
The opportunity to.
Really reengage, the public and to heighten that by the.
Hopefully some efforts on the part of the federal government and the pay ores.
Would have substantial implications not only for radnet, but.
All imaging providers.
Okay. Thanks, again for taking the questions.
Thank you Mitra Thanks Peter.
We have no further questions in the queue at this time I'd like to turn the conference back to Dr. Berger for any additional or closing remarks.
Okay.
Again, I would like to take the opportunity to thank all of our shareholders for their continued support and particularly plays a red and that's where their dedication and hard work management will continue its endeavor to be a market leader that provides great services with an appropriate return on investment for all shareholders. Thank you for your time today and I hope.
Forward.
Next call take care and stay safe.
Ladies and gentlemen. This concludes today's conference. We appreciate your participation you may now disconnect.
Yeah.
Okay.
Right.
Okay.
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Okay.
Yeah.
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