Q4 2023 RadNet Inc Earnings Call

Operator: Ladies and gentlemen, thank you for your patience. The conference will begin shortly. Please stand by. © BF-WATCH TV 2021, ?? ?? ?? ?? ?? ??? ??? ??? ??? ??? © BF-WATCH TV 2021 Good day and welcome to the RadNet Inc. fourth quarter 2023 financial results conference call. All participants will be in a listen-only mode.

Ladies and gentlemen, thank you for your patience the conference will begin shortly please standby.

[music].

Operator: Did you need assistance? Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star key, then 1 on a touch-tone phone.

Operator: To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Mark Stolper, Executive Vice President and Chief Financial Officer at RadNet. Please go ahead.

Mark D. Stolper: Good morning, ladies and gentlemen, and thank you for joining Dr. Howard Berger and me today to discuss RadNet's fourth quarter and full year 2023 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.

Mark D. Stolper: Specifically, statements concerning anticipated future financial and operating performance, RadNet's ability to continue to grow the business by generating patient referrals and contracts with radiology practices, recruiting and retaining technologists, receiving third-party reimbursement for diagnostic imaging services, successfully integrating acquired operations, generating revenue and adjusted EBITDA for the acquired operations as estimated, among others, are forward-looking statements within the meaning of the safe harbor. Forward-looking statements are based on management's current preliminary expectations and are subject to risks and uncertainties which may cause RadNet's actual results to differ materially from the statements contained herein. These risks and uncertainties include those risks set forth in RadNet's reports filed with the FCC from time to time, including RadNet's annual report on Form 10-K for the year ended December 31st, 2023, filed yesterday. 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.

Okay.

Good day and welcome to the Radnet, Inc. Fourth quarter 2023 financial results Conference call.

All participants will be in a listen only mode.

Did you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

After todays presentation, there will be an opportunity to ask questions.

To ask a question you May press Star then one on attached unfold.

Draw. Your question. Please press Star then two.

Please note this event is being recorded.

I would now like to turn the conference over to Mark Stolper, Executive Vice President and Chief Financial Officer. Please go ahead.

Thank you.

Good morning, ladies and gentlemen, and thank you for joining Dr. Howard Berger and me today to discuss <unk> fourth quarter and full year 2023 financial results.

Mark D. Stolper: RadNet undertakes no obligation to update publicly any forward-looking statements to reflect new information, events, or circumstances after the date they were made or to reflect the occurrence of unanticipated events. And with that, I'd like now to turn the call over to Dr. Thank you, Mark. Good morning, everyone, and thank you for joining us today.

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 <unk> ability to continue to grow the business by generating patient referrals and contracts with <unk>.

Howard G. Berger: On today's call, Mark and I plan to provide you with highlights from our fourth quarter and full year 2023 results, give you more insight into the factors which affected this performance, and discuss our future strategy. After our prepared remarks, we will open the call to your questions. I'd like to thank all of you for your interest in our company and for dedicating a portion of your day to participate in our conference. Let's begin.

DRG practices.

Accruing and retaining technologists, receiving third party reimbursement for diagnostic imaging services successfully integrating acquired operations generating revenue and adjusted EBITDA for the acquired operations as estimated among others are forward looking statements within the meaning of.

Howard G. Berger: I am very pleased with the strong performance in the Imaging Center segment. The Imaging Center revenue increased 8.6% and Adjusted EBITDA increased 11% from last year's fourth quarter, resulting in RadNet quarterly records for both revenue and adjusted EBITDA. The performance was the result of a continuation of strong industry trends and execution on a multi-pronged growth strategy focused on driving same-center performance, the expansion of existing and establishment of new health system partnerships, and investments made in de novo imaging centers and newer technologies of equipment, software, and AI solutions. We experienced a 7.9% aggregate and 5.5% same-center procedural volume growth in this year's fourth quarter relative to last year's same quarter. Demand for RadNet services remains robust in virtually all core markets, as outpatient imaging continues to be shifted from more expensive hospital settings towards more cost-efficient ambulatory sites like the ones RadNet operates. Contributing to the record-adjusted EBITDA performance was also a labor market that, while still challenging, challenging to attract and retain talent, has stabilized and improved since its most challenging post-COVID period. We continue to focus on strengthening the balance sheet by managing liquidity and financial leverage.

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 Radnet Annual report on Form 10-K for the year ended December 31, 2023 filed yesterday.

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 events or circumstances. After the date they were made or to reflect the occurrence of unanticipated events.

And with that I'd like now to turn the call over to Dr. Berger.

Yeah.

Thank you Mark good morning, everyone and thank you for joining us today.

Today's call Mark and I plan to provide you with highlights from our fourth quarter and full year 2023 results give you more insight into factors, which affected this performance and discuss our future strategy. After our prepared remarks, we will open the call to your questions I'd like to thank all of you for your interest in our company and for dedicating a portion of your day.

To participate in our conference call. This morning.

Let's begin I.

I am very pleased with the strong performance in the fourth quarter.

Howard G. Berger: At the year end 2023, RadNet's cash balance was over $342 million, and the net leverage ratio was under two times adjusted even. Our day sales outstanding DSOs at December 31 2023 were 32 days, a historic low, and we believe among the lowest in the industry.

The imaging Center segment revenue increased eight 6% and adjusted EBITDA increased 11% from last year's fourth quarter, resulting in record quarterly records for both revenue and adjusted EBITDA.

The performance was the result of a continuation of strong industry trends and execution on our multi pronged growth strategy focused on driving same center performance the expansion of existing and establishment of new health system partnerships and investments made in de Novo imaging centers.

Howard G. Berger: The improvement in revenue cycle operations and collections has contributed to the ability to make important investments in the future of RadNet, particularly in the area of de novo facility development. We began a significant de novo expansion strategy in 2022, which continued throughout 2023. We are making extraordinary capital investments in developing facilities, which should improve our capacity and patient access. RadNet should begin benefiting from the financial contribution of these facility openings in 2024, during which we expect to see our first patients in about a dozen of these new centers. The Zenova Loop Centers are located in markets where we are experiencing patient backlogs, require additional capacity, or in locations where we currently lack access points to service identified patient populations. A second area of investment in Fulcrums has been in expanding joint venture and health system initiatives. We currently have 24 system joint ventures representing over 35% of our 360.

And newer technologies of equipment software and AI solutions, we experienced a seven 9% in aggregate and five 5% same center procedural volume growth.

<unk> fourth quarter relative to last year's same quarter.

Demand for Radnet services remains robust and virtually all core markets as outpatient imaging continues to be shifted for more expensive expensive hospital settings towards more cost efficient ambulatory sites like the ones Red operates contributing to the record adjusted EBITDA.

Performance was also a labor market that while still challenge chat.

Challenging to attract and retain talent has stabilized and improved since its most challenging post COVID-19 periods.

We continue to focus on strengthening the balance sheet by managing liquidity and financial leverage.

At year end 2023, we had net cash balance was over 342 million and a net leverage ratio was <unk>.

Two times adjusted EBITDA.

Our days sales outstanding Dsos are at December 31.

2023 was 32 gauge redness historic low and we believe are among the lowest in the industry.

The improvement in revenue cycle operations and collections has contributed to the ability to make important investments in the future of Radnet, particularly in the area of de Novo facility development.

Howard G. Berger: We continue to believe that we could have more than half of our centers in health system partnerships within three years. As an example, in September of 2023, we announced a significant expansion of our relationship with Cedars-Sinai Medical Health System in the Los Angeles area, establishing a new joint venture called Los Angeles Imaging Group, as well as broadening an existing three-center joint venture, Santa Monica Imaging Group, to include the contribution of seven additional centers from both RadNet and Cedars-Sinai. Forward-thinking and entrepreneurial health systems like Cedars As we look ahead to 2024, we anticipate the expansion of several health system relationships and the establishment of new joint ventures. Tuck in Acquisitions will also remain an active part of RadNet's growth, strategy, and investment.

We began a significant de novo expansion strategy in 2022, which continued through throughout 2023.

Making extraordinary capital investments in developing facilities, which should improve our capacity and patient access.

And it should begin benefiting from the financial contribution of these facility opening openings.

In 2024 during which we expect to see our first patients in about a dozen of these new centers.

As you know <unk> centers are located in markets, where we are experiencing patient backlogs require additional capacity on in locations, where we currently lack access points to service identified patient populations.

Our second area of investment and focus has been and expanding joint venture and health system initiatives. We currently have 24 system joint ventures, representing over 35% of our 366 centers.

We continue to believe that we could have more than half of our centers and health and health system partnerships within three years as an example in September of 2023, we announced a significant expansion of our relationship with Cedars Sinai Medical health system in the Los Angeles area, establishing a new joint venture.

Howard G. Berger: The diagnostic imaging industry remains fragmented, and smaller operators are unable to provide the patient access and level of care that can be facilitated today with investments in newer hardware, software, and artificial intelligence technology. Furthermore, the rising cost of capital, increased interest rates, reimbursement pressure from Medicare and other private payors, and the necessity of scale to drive efficiencies and profitability make joining the RadNet network more attractive than ever. In 2023, we completed several Tuckin acquisitions in Southern California, New York, and Delaware. Earlier this week, some of you may have seen the announcement that we signed a definitive agreement to purchase the assets of seven imaging centers in the greater Houston, Texas metropolitan area from Houston Medical. Houston represents the first new geographical market RadNet will have entered since 2020. Houston, the fourth most populous city and the second fastest growing metropolitan area in the United States, is a metropolitan marketplace encompassing about 7.3 million people.

Carlos.

Angelus imaging group as well as broadening an existing three center joint venture Santa Monica Imaging group to include the contribution of seven additional centers from both Mednet and Cedars Sinai.

Forward thinking and entrepreneurial health systems like Cedars Sinai are increasingly seeking a long term viable strategy for diagnostic imaging and Radnet represents an attractive strategic direction for these organizations as.

As we look ahead to 224, we anticipate the expansion of several health system relationships and the establishment of new joint venture relationships.

Tuck in acquisitions will also remain an active part of <unk> growth strategy and investment the diagnostic imaging industry remains fragmented and smaller operators aren't able to provide the patient access and level of care that can be facilitated today with investments are newer hardware software.

And artificial intelligence technologies.

<unk> technologies. Furthermore, the rising cost of capital increased interest rates reimbursement pressure from Medicare and other private payers and the necessity of scale to drive efficiencies and profitability may joining the Radnet network more attractive than ever in 2023, we completed several tuck in.

Howard G. Berger: Houston Medical Imaging, with its seven well-recognized facilities, approximately 142 members, and over 20 radiologists, has been a stable factor in the radiology market in Houston for over 30 years. And we believe HMI is a platform for which to grow a new core network for RadNet. We are confident of the opportunity for further acquisitions, de novo build-outs, health system partnerships, and other means of expansion, which include bringing our AI and leading-edge clinical and operating digital health solutions to the patients and referring communities of the greater Houston area. As we move further in 2024 and beyond, we will continue to have a disciplined approach to evaluating opportunities to expand outside of our core model. We continue to invest in and pursue growth opportunities in artificial intelligence and radiology software solutions. For example, the implementation of our Enhanced Breast Cancer Detection, EBCD, screening mammography service is continuing on the West Coast. We are now fully implemented in Southern California and Arizona and will begin rolling out the program in approximately 18 Central and Northern California mammography locations in March.

Acquisitions in Southern California, New York and Delaware.

Earlier. This week. Some of you may have seen the announcement that we signed a definitive agreement to purchase the assets of <unk> imaging centers in the greater Houston, Texas Metropolitan area from Houston Medical imaging juice.

Houston represents the first new geographical market Radnet will have entered since 2020.

The Houston Metropolitan marketplace, encompassing about $7 3 million people is the fourth most populous city in the second fastest growing metropolitan area in the United States.

Houston Medical imaging with its seven well recognize facilities approximately 140 team members.

Over 20 radiologist has been stable factor in the radiology market in Houston for over 30 years and we believe.

<unk> as a platform for which to grow a new core network for retina, we're confident of the opportunity for further acquisitions de novo build outs health system partnerships and other means of expansion, which includes bringing our AI and leading edge clinical and operating digital health.

<unk> to the patients and referring communities.

The greater Houston area as we move further into 2024 and beyond we will continue to have a disciplined approach to evaluating opportunities to expand outside of our core markets.

We continue to invest and pursue growth opportunities in artificial intelligence and radiology software solutions, the implementation of our enhanced breast cancer detection.

Howard G. Berger: We are pleased to report that we are experiencing higher initial adoption rates on the West Coast as a result of the learnings from our East Coast experience. We continue to work with our partners in the United Kingdom in the expansion of the Targeted Lung Health Check lung cancer screening program, where Deep Health's AIDENS division is providing the principal AI solution in the four-country rollout. We expect to see continued growth in AIDENS from this program and other similar lung screening programs in 2024. In 2023, our AI segment revenue grew 278% from these initiatives, and AI revenue in 2024 is anticipated to grow over 65% with continued adoption of artificial intelligence solutions. We further believe that RadNet's AI business will reach adjusted break-even by year-end 2024. In 2023, we announced the development of our DeepHealthOS AI-powered health informatics portfolio designed to dramatically drive efficiency and transform the role of radiology in healthcare. At the heart of that offering is a cloud-native operating system that leverages both clinical AI that improves disease detection and generative AI to efficiently orchestrate patient engagement and care delivery.

See the screening mammography service is continuing on the West Coast. We are now fully implemented in southern California, and Arizona, and we will begin rolling out the program in approximately 18 central and Northern California Mammography locations. In March we are pleased to report that we are experiencing higher initial was.

The option rates on the West coast as a result of learnings from our east coast experience.

We continue to work with our partners in the United Kingdom, and the expansion of the targeted lung health check lung cancer screening program, where deep helps agents division is providing the principal AI solution in the four country rollout, we expect to see continued growth in agents.

From this program and other similar lung screening programs during 2024 and 2023, our AI segment revenue grew 278% from these initiatives and AI revenue in 2024 is anticipated to grow over 65% with continued adoption of artificial intelligence.

<unk> solutions.

We further believe that redness AI business will reach adjusted EBITDA breakeven by year end 2024.

In 2023, we announced the development of our deep health.

S AI powered health.

The managed portfolio designed to dramatically drive efficiency and transform the role of radiology in health care.

At the heart of their offering as a cloud native operating system, which leverages, both clinical AI that improves disease detection and generates and generative AI to efficiently orchestrate patient engagement and care delivery.

Howard G. Berger: We will begin internal implementation during 2024 and expect that many of the DeepHealth OS tools will be incorporated into the RadNet workflow by year-end. The expectation is that external customers, including the over 200 current customers of eRED, could begin licensing the commercialized Deep Health OS solutions beginning early in 2025.

We will begin internally internal implementation during 2024 and I expect that many of the details OS tools will be incorporated into our into the radnet workflow by year end.

The expectation is that external consumers, including the over 200 current customers E. Red could begin licensing the commercialized <unk> OS solutions beginning early in 2025.

Howard G. Berger: In last evening's financial results press release, we announced the formation of the RadNet Digital Health Financial Reporting Segment, effective January 1st, 2024, which combines the current eRAD and Deep Health OS software businesses into what was our clinical AI reporting segment throughout 2023. As we have been growing our eRAD software solutions and AI businesses separately, we have increasingly recognized that these businesses are quite different from our core imaging center business in terms of their operational and financial profile and that they require a different level of focus and expertise to manage. Over the past year, we have been able to attract an executive team with experience in managing digital health businesses. The financial impact of this, of these digital health businesses, has great potential for RadNet, both as a customer of the Deep Health OS and AI solutions and, of course, as the owner of these businesses, which sell their solutions to customers outside of RadNet. Software businesses, and, in particular, SaaS-based models, can operate at significantly higher margins than RadNet's core imaging center segment and require less capital investment.

This brings me to the final point I would like to make before turning the call back to Marc and last evening's financial results Press release, we announced the formation of the Radnet Digital health financial reporting segment effective January one 2024, which combines the current <unk> and deep health.

OS software businesses into what was our clinical AI reporting segment throughout 2023.

As we have been growing our <unk> software solutions and AI businesses separately. We are increasingly recognized that these businesses are quite different than our core imaging center business in terms of their operational and financial profile and that they require a different level of focus and expertise to manage over the past year.

We have been able to attract an executive team with experience in managing digital health businesses.

The financial impact of this.

These digital health businesses has great potential for Radnet, both as a customer of the detailed OLS and AI solutions and of course as the owner of these businesses, which sell their solutions to customers outside of Radnet.

Software businesses and in particular chef based models can operate at significantly higher margin than Radnet, CT imaging center segment and require less capital investment.

Mark D. Stolper: The digital health segment is projected to be profitable in 2024 and grow in the range of approximately 20 to 40% in 2024 over 2023. 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 2023 performance, as well as discuss our 2024 guide. When he's finished, I will make some closing remarks. Thank you, Howard.

The digital health segment is projected to be profitable in 2024 and grow in the range of approximately 20% to 40% in 2024 over 2023.

Yeah.

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 2023 performance as well as discuss our 2020 for guidance.

When he is finished I will make some closing remarks.

Thank you Howard.

Mark D. Stolper: I'm now going to briefly review our fourth quarter and full year 2023 performance and attempt to highlight what I believe to be some material items. I will also give some further explanation of certain items in our financial statements as well as provide some insights into some of the metrics that drove our fourth quarter and full year 2023 performance. I will also provide 2024 financial guidance levels, which were released in this morning's finance, or I should say last night's financial press release. In my discussion, I will use the term adjusted EBITDA, which is a non-gap financial measure. The company defines adjusted EBITDA as earnings before interest, taxes, depreciation, and amortization and excludes losses or gains on the disposal of equipment, other income or loss, loss on debt extinguishments, and non-cash equity compensation. Adjusted EBITDA includes equity earnings in unconsolidated operations and subtracts allocations of earnings to non-controlling interests in subsidiaries and is adjusted for non-cash or extraordinary and one-time events taking place during the period.

I'm now going to briefly review, our fourth quarter and full year 2023 performance and attempt to highlight what I believe to be some material items.

I will also give some further explanation of certain items in our financial statements as well as provide some insights into some of the metrics that drove our fourth quarter and full year 2023 performance.

I will also provide 2024 financial guidance levels, which were released in this mornings.

I should say last night.

Financial 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 other income or loss loss on.

Debt extinguishment and noncash equity compensation.

Adjusted EBITDA includes equity earnings in unconsolidated operations and subtract allocations of earnings to Noncontrolling interest in subsidiaries and is adjusted for noncash or extraordinary and onetime events taking place during the period.

Mark D. Stolper: 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 2023 results. For the fourth quarter of 2023, RadNet reported revenue from its imaging center reporting segment of $415.3 million and adjusted EBITDA of $68.3 million. This excludes AI revenue of $5.1 million and AI-adjusted EBITDA losses of $2.5 million during the quarter.

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 2023 results.

For the fourth quarter of 2023, Radnet reported revenue from its imaging center reporting segment of $415 $3 million and adjusted EBITDA of $68 $3 million.

This excludes AI revenue of $5 $1 million and AI, adjusted EBITDA losses of $2 $5 million during the quarter.

Mark D. Stolper: As compared with last year's fourth quarter, Imaging Center segment revenue increased $32.8 million, or 8.6%, and Adjusted EBITDA increased $6.7 million, or 11%. Including our AI reporting segment, total company revenue was $420.4 million in the fourth quarter of 2023, an increase of 9.5% from $383.9 million in last year's fourth quarter, including the adjusted EBITDA losses of the AI reporting segment of $2.5 million in the fourth quarter of 2023, at $4.3 million in the fourth quarter of 2022. Total company adjusted EBITDA was $65.8 million in the fourth quarter of 2023 and $57.2 million in the fourth quarter of 2022, a growth rate of 15%. For the fourth quarter of 2023 as compared with the prior year's fourth quarter. MRI volume increased 13.2%, CT volume increased 11.3%, and PET-CT volume increased 18.5%.

As compared with the last year's fourth quarter Imaging Center segment revenue increased $32 $8 million or eight 6% and adjusted EBITDA increased $6 $7 million or 11%.

Including our AI reporting segment total company revenue was $424 million in the fourth quarter of 2023, an increase of nine 5% from $383 $9 million in last year's fourth quarter.

Including the adjusted EBITDA losses of the AIG reporting segment of $2 $5 million in the fourth quarter of 2023.

At $4 $3 million in the fourth quarter of 2022 total company adjusted EBITDA was $65 $8 million in the fourth quarter of 2023 and $57 $2 million in the fourth quarter of 2022.

Growth rate of 15%.

For the fourth quarter of 2023 as compared with the prior year's fourth quarter.

MRI volume increased 13, 2%.

<unk> volume increased 11, 3% and pet TT volume increased 18, 5%.

Mark D. Stolper: Overall volume, taking into account routine imaging exams inclusive of x-ray, ultrasound, mammography, and all other exams, increased 7.9% over the prior year's fourth quarter, on a same center basis, including only those centers which were part of RadNet for both the fourth quarters of 2023 and 2022. MRI volume increased 10.8%. CT volume increased 8.2%, and PET-CT volume increased 17.4%. Overall FAME Center volume, taking into account all routine imaging exams, increased 5.5% over the prior year's FAME course. Adjusting for a number of unusual or one-time items impacting the fourth quarter of 2023, adjusted earnings from the Imaging Center reporting segment was $13.7 million, and diluted adjusted earnings per share was 20 cents during the fourth quarter of 2023 as compared with 11 cents during the fourth quarter of 2022. The unusual or one-time items impacting the fourth quarter of 2023 excluded in calculating adjusted earnings were as follows.

Overall volume taking into account routine imaging exams inclusive of X Ray ultrasound mammography and all other exams increased seven 9% over the prior year's fourth quarter.

On a same center basis, including only those centers, which were part of Radnet for both the fourth quarters of 2023 and 2022.

<unk> volume increased 10, 8%.

<unk> volume increased eight 2% and pet Cte volume increased 17, 4%.

Overall same center volume taking into account all routine imaging exams increased five 5% over the prior year same quarter.

Adjusting for a number of unusual or onetime items impacting the fourth quarter of 2023 adjusted earnings from the imaging Center reporting segment was $13 7 million and diluted adjusted earnings per share was 20.

During the fourth quarter of 2023 as compared with 11 during the fourth quarter of 2022.

The unusual or one time items impacting the fourth quarter of 2023 excluded in calculating adjusted earnings were as follows.

Mark D. Stolper: $7.2 million of non-cash loss from an interest rate swap and $621,000 of severance paid in connection with headcount reductions related to cost savings initiatives. $880,000 of expenses related to leases for de novo facilities under construction that have yet to open their operations. $222,000 of Acquisition Transaction Costs. $429,000 Gain from Evaluation Adjustment for Contingent Consideration Related to Acquisition, $1.3 million of non-capitalized research and development investments in the Deep Health cloud-based OS and generative AI solutions, $5.1 million loss on lease abandonment, and $5 million of pre-tax losses related to our AI reporting segment. On an unadjusted basis for the 4th quarter of 2023, RadNet reported a net loss of $1.9 million as compared with a net loss of $934,000 for the 4th quarter of 2022.

$7 $2 million of noncash loss from interest rate swaps.

$621000 of severance paid in connection with headcount reductions related to cost savings initiatives.

$880000 of expenses related to leases for de Novo facilities under construction that have yet to open their operations.

$222000.

The acquisition transaction costs.

$429000 gain from the valuation adjustments for contingent consideration related to acquisitions.

One 3 million of non capitalized research and development investments and the deep health cloud based OS and generative AI solutions.

$5 $1 million loss on lease abandonment, and a $5 million of pre tax losses related to our AI reporting segment.

On an unadjusted basis for the fourth quarter of 2023, Radnet reported a net loss of $1 9 million as compared with a net loss of $934000 for the fourth quarter of 2022.

Mark D. Stolper: The net loss per share for the fourth quarter of 23 unadjusted was negative 3 cents compared with a net loss per share of negative 2 cents in the fourth quarter of 2022 based upon a weighted average number of diluted shares outstanding of 67.9 million shares in 2023 and 57 million shares in 2022. With regard to some specific income statement accounts, overall gap interest expense for the fourth quarter of 2022 was $16.6 This compares with GAAP interest expense in the fourth quarter of 2022 of $15.4 million. Cash paid for interest during the period, which excludes non-cash deferred financing expense, accrued interest, and payments to and from swap counterparties, was $5.6 million as compared with $8.9 million in the fourth quarter of last year.

Net loss per share for the fourth quarter of 'twenty, three unadjusted was negative <unk> compared with a net loss per share of negative <unk> in the fourth quarter of 2022 based upon a weighted average number of diluted shares outstanding of $67 9 million shares in 2023 and 57 million.

Dollars shares in 2022.

With regards to some specific income statement accounts overall GAAP interest expense for the fourth quarter of 2022 with $16 $6 million.

This compares with GAAP interest expense in the fourth quarter of 2022, 22, a $15 $4 million.

Cash paid for interest during the period, which excludes non cash deferred financing expense accrued interest and payments to and from swap Counterparties was $5 $6 billion as compared with $8 9 million in the fourth quarter of last year.

Mark D. Stolper: The lower cash paid for interest in this year's fourth quarter was a function of the timing of our SOFR elections on our term loan, despite higher interest rates in the fourth quarter of 2023 relative to last year's fourth quarter. For full year 2023, we reported revenue from our imaging center reporting segment of $1,604,000,000 and adjusted EBITDA excluding losses from the AI reporting segment of $245.1 million. In 2023, revenue increased $178.5 million, or 12.5%, and adjusted EBITDA increased $36.1 million, or 17.2%, as compared with 2022. For 2023, the adjusted EBITDA margin for the imaging center segment was 15.3%, an increase of 60 basis points from 2022, which had a 14.7% adjusted EBITDA margin, including our AI segment. Total company revenue of $12.5 million; total company revenue was $1,617,000,000 for full year 2023, an increase of 13% from $1,430,000,000 in 2022, including adjusted EBITDA losses from the AI segment of $12.8 million.

The lower cash paid for interest in this year's fourth quarter was a function of the timing of our sofa elections on our term loan despite higher interest rates in the fourth quarter of 2023 relative to last year's fourth quarter.

For full year 2023, we reported revenue from our imaging center reporting segment of $1 $604 million and adjusted EBITDA, excluding losses from the AIG reporting segment of $245 1 million.

In 2023 revenue increased $178 5 million or 12, 5% and adjusted EBITDA increased $36 $1 million or 17, 2% as compared with 2022.

For 2023, adjusted EBITDA margin for the imaging Center segment was 15, 3% an increase of 60 basis points from 2022, which had a 14, 7% adjusted EBITDA margin.

Including our AI segment.

Total company revenue of $12 $5 million total company revenue was $1.617 billion for full year 2023, an increase of 13% from $1 $430 million in 2022.

Including adjusted EBITDA losses from the AI segment of $12 $8 million.

Mark D. Stolper: Total company adjusted EBITDA for 2023 was $232.3 million, as compared with $192.5 million in 2022, an increase of 20.7%. For the year ended December 31st, 2023, as compared with 2022, MRI volume increased 13.3%. CT volume increased 11.3%, and PET-CT volume increased 18.5%. Overall volume taking into account routine imaging exams inclusive of x-ray, ultrasound, mammography, and all other exams increased 7.9% for the 12 months of 2023 over 2022. For 2023, RadNet reported net income of $3 million, a decrease of approximately $7.6 million over 2022. Per share, diluted net income for the full year of 2023 was $0.05 compared to diluted net income per share of $0.17 in 2022, based upon a weighted average number of diluted shares outstanding of $64.7 million in 2023 and $57.3 million in 2022.

Total company adjusted EBITDA for 2023 was $232 $3 million as compared with $192 $5 billion in 2022, an increase of 27%.

For the year ended December 31, 2023, as compared with 2022, MRI volume increased 13, 3%.

<unk> volume increased 11, 3% and <unk> volume increased 18, 5%.

Overall volume taking into account routine imaging exams inclusive of X Ray ultrasound mammography and all other exams increased seven 9% for the 12 months of 2023 over 2022.

For 2023, Radnet reported net income of $3 million, a decrease of approximately $7 $6 million over 2022.

Per share diluted net income for the full year of 2023 was five <unk> compared to a diluted net income per share of 17 cents in 2022.

Upon a weighted average number of diluted shares outstanding of $64 $7 million into 2023, and $57 3 million in 2022.

Mark D. Stolper: With regard to some specific income statement accounts, overall GAAP interest expense in 2023 was $64.5 million. Adjusting for the impacts of items such as amortization of deferred financing fees, accrued interest, and payments to and from swap counterparties on interest rate swaps, and net of interest earned on our cash balance, net cash interest expense was $38.3 million in 2023. With regard to our balance sheet, as of December 31, 2023, unadjusted for bond and term loan discounts, we had $465.3 million of net debt, which is our total debt at par value; that's our cash balance. Note that this debt balance includes RadNet's ownership percentage of New Jersey Imaging Network's net debt of $63.2 million, for which RadNet is neither a borrower nor a guarantor.

With regards to some specific income statement accounts overall GAAP interest expense in 2023 was $64 $5 million.

Adjusting for the impacts from items, such as amortization of further.

Deferred financing fees accrued interest in payments to and from swap Counterparties on interest rate swaps and net of interest earned on our cash balance cash interest net cash interest expense was $38 $3 million in 2023.

With regards to our balance sheet as of December 31, 2023, unadjusted for bond and term loan discounts, we had $465 $3 million of net debt, which is our total debt at par values, that's our cash balance.

Note that this debt balance includes radnet ownership percentage of New Jersey imaging networks net debt of $63 $2 million for Richard Radnet is neither a borrower nor guarantor.

Mark D. Stolper: As of year end 2023, we were undrawn on our $195 million revolving line of credit and had a cash balance of $342.6 million. At December 31, 2023, our accounts receivable balance was $163.7 million, a decrease of $2.7 million from year-end 2022, despite revenue being up 13% during 2023. This was the result of improved revenue cycle performance and collections efforts. These improved efforts caused our DSO to decrease from 38.8 days at December 31st, 2022 to 32 days at December 31st, 2023, which is an all-time low. Throughout 2023, we had total capital expenditures, net of assets, dispositions, and the sale of imaging center assets and joint venture interests of $153 million. This amount excludes $18.6 million of capital expenditures for the New Jersey Imaging Network.

As of year end 2023, we were undrawn on our $195 million revolving line of credit.

<unk> had a cash balance of $342 6 million.

At December 31, 2023, our accounts receivable balance was $163 $7 million, a decrease of $2 $7 million from year end 2022, despite revenue being up 13% during 2023.

This was the result of improved revenue cycle performance and collections efforts.

These improved efforts caused our DSO to decrease from 38 eight days at December 31, 2022 to 32 days at December 31, 2023, which is our all time low.

Throughout 2023, we had total capital expenditures net of asset dispositions and the sale of imaging center assets and joint venture interests of $153 million.

This amount excludes $18 $6 million of capital expenditures of New Jersey imaging network.

Mark D. Stolper: A one-time $19.8 million purchase on a promissory note of equipment previously leased under operating leases, and a $5 million purchase of software and other intellectual property from a vendor. Capital expenditures in 2023 were higher than we originally budgeted as a result of the construction of certain de novo facilities that became operational towards the end of 2003 or were expected to become operational within 2024. As some of you may have seen in the financial results press release we made last night, after the market closed, and as discussed by Dr. Berger in his earlier remarks, starting with our fiscal 2024, we are changing our operating and financial reporting sector. Specifically, the E-Rad software businesses and related health informatics businesses that were reported as part of our Imaging Center segment throughout 2023 will now be combined with our Artificial Intelligence segment to form a new digital health financial reportable segment starting with the first quarter of 2024.

A one time $19 $8 million purchase on a promissory note of equipment previously leased under operating leases.

And a $5 million purchase of software and other intellectual property from a vendor.

Capital expenditures in 2023 were higher than we originally budgeted as the result as is as a result of the construction of certain de novo facilities that became operational towards the end of 2003 or expected to become operational within 2024.

As some of you may have seen in the financial results press release, we made last night after market close.

And as discussed by Dr. Berger in his earlier remarks, starting with our fiscal 2024, we are changing our operating and financial reporting segments, specifically, the <unk> software businesses and related health informatics businesses that were reported as part of our imaging Center segment throughout 2023.

<unk> will now be combined with our artificial intelligence segment to form a new digital health financial reportable segment, starting with the first quarter of 2024.

Mark D. Stolper: The E-Rat and Informatics business embedded within the Imaging Center segment in 2023 were highly profitable. These businesses produced $37.1 million of revenue, had $16.4 million of operating expenses, and earned $20.7 million of adjusted EBIT. So for the purpose of understanding and evaluating our 2024 guidance and last night's financial press release, we restated our 2023 operating segment results to be presented as if the two new operating segments, meaning the imaging center segment and the digital health segment, existed as of January 1st, 2023. While I'm not going to run through all the numbers on this call, I will emphasize some important points first.

The E <unk> and informatics business embedded within the imaging Center segment in 2023, we're highly profitable.

These businesses produced $37 $1 million of revenue at $16 $4 million of operating expenses and earned $27 million of adjusted EBITDA.

So the purpose of understanding and evaluating our 2024 guidance in last nights financial press release, we state we restated our 2023 operating segment results to be presented as if the two new operating segments, meaning the imaging center segment in the digital health <unk>.

<unk> existed as of January one 2023.

While I'm not going to run through all the numbers on this call I will emphasize some important points.

First.

Mark D. Stolper: On the core imaging center segment, we are anticipating revenue growth in 2024 to be as much as 8.5%, and we expect adjusted EBITDA growth in 2024 from the imaging center segment to be 11.4% to 15.8%. While we continue to make elevated capital expenditures in 2024, the aggregate amount is anticipated to be approximately 10 to 15% less than what we spent in 2023. We are also expecting free cash flow in the imaging center segment to approximately double in 2024. For the new digital health reportable segment, we are anticipating revenue growth in 2024 of between 21 and 41 percent and adjusted EBITDA growth of between 51 and 77 percent. The majority of the revenue growth is anticipated from both the Continued Enhanced Breast Cancer Detection, or EBCD, implementation and from our lung and prostate AI licensing businesses, particularly in Europe.

On the core imaging Center segment, we are anticipating revenue growth in 2020.

Four to be as much as eight 5% and we expect adjusted EBITDA growth in 2024 from the imaging Center segment to be 11, 4% to 15, 8%.

While we continue to make elevated capital expenditures expenditures in 2024, the aggregate amount is anticipated to be approximately 10% to 15% less than what we spent in 2023.

We are also expecting free cash flow in the imaging center segment to approximately double in 2024.

On the new digital health Reportable segment, we are anticipating revenue growth in 2024 of between 21, and 41% and adjusted EBITDA growth of between 51 and 77%.

The majority of the revenue growth is anticipated from both the continued enhanced breast cancer detection, where ABCD implementation and from our lung and prostate AI licensing businesses, particularly in Europe.

Mark D. Stolper: The AI portion of our digital health business is projected to grow by over 65% and is anticipated to reach break-even by year-end 2024 from an adjusted EBITDA standpoint. Finally, our digital health segment guidance reflects the substantial investment we are making in the development of our Deep Health OS cloud-based operating system and the generative AI modules that could lower our costs and increase efficiency in the areas of patient scheduling, pre-authorization, insurance verification, and revenue cycle. We believe this research and development investment will pay dividends both in our core imaging center business and for current and future customers outside of RadNet. I'd now like to turn the call back over to Dr. Berger, who will make some closing remarks. Thank you, Mark.

The AI portion of our digital health business is projected to grow by over 65% and is anticipated to reach breakeven by year end 2024 for a minute EBIT from an adjusted EBITDA standpoint.

Finally, our digital health segment guidance reflects the substantial investment we're making in the development of our deep health OS cloud based operating system and the generative AI modules that could lower our cost and increase efficiency in the areas of patient scheduling preauthorization.

Insurance verification and revenue cycle.

We believe this research and development investment will pay dividends, both in our core imaging center business and for the current and future customers outside of Radnet.

I'd now like to turn the call back over to Dr. Berger, who will make some closing remarks.

Thank you Mark.

Howard G. Berger: As we look to 2024, we have reason to remain enthusiastic about our core energy business is healthy and growing, while procedural volumes and patient demand are strong. Payors and patients are increasingly moving procedural volumes to our centers and away from hospital-based imaging operations that charge prices that are unsustainable in a healthcare system attempting to manage costs. In addition to the site-of-care shift taking place, the overall industry continues to grow, driven in part by advances in technology that drive more medical indications for ordering diagnostic imaging procedures. Additionally, the population is aging and growing and continues to see non-invasive, preventative, and cross-infectiveness. All these factors have contributed to the existence of patient alcohol abuse.

As we look to 2024.

We have reason to remain enthusiastic about our future.

<unk> business is healthy and growing procedural volumes and patient demand are strong.

<unk> patients are increasingly moving procedural volumes to our centers and away from hospital based imaging operations that charge prices that are unsustainable and our health care system attempting to manage cost.

In addition to the site of care shifts taking place to the overall industry continues to grow.

And in part by advances in technology, which drives more medical indications for ordering diagnostic imaging procedures Adil.

Additionally, the population is aging and growing and continues to see noninvasive preventative and cost effectiveness.

I'll leave it there.

Sure.

Sure.

Howard G. Berger: Newer diagnostic tests, such as the MTP and the POTUS, are beginning to take off. RadNet is ideally positioned for long-term growth and success in this dynamic. In a period when the cost of capital has risen significantly, we remain modestly leveraged and have more liquidity and capital resources as compared with virtually all of our other scale operators in the industry. This places us in the best position to pursue growth opportunities, both organic and inorganic, in a time period when many others do not have the financial capacity or flexibility. But perhaps the most important aspect of this report is the formation of the RadNet Digital Health Division. The future of healthcare will be substantially driven by artificial intelligence, and radiology can lead the way. A successful AI initiative relies on scale, operations, and access to large data sets. RadNet has accumulated both of these components over several decades of existence.

No.

Newark.

Okay.

Sure.

Okay.

Beginning to take off.

Radnet is ideally positioned for long term growth and success in this dynamic marketplace in a period, where the cost of capital has risen significantly we remain modestly leveraged and have more liquidity and capital resources as compared with virtually all of our other scale operators in the industry.

This places us in the best position to pursue growth opportunities, both organic and inorganic in a time period, where many others do not have the financial capacity or flexibility.

But perhaps the most important aspect of this report is the formation.

Of the Radnet digital health position.

The future of health care will be substantially driven by artificial intelligence.

And radiology can lead the way.

A successful AI initiatives relies on scale operations and access to large datasets radnet has accumulated both of these components over several decades of existence.

Operator: The newly created Digital Health Division will allow our stakeholders to better recognize the growth and success of this essential component of the RadNet family of services. In conclusion, we have never been more excited than we are today about what lies ahead for RAN. We feel as if we are better positioned today than at any time in our history to execute on the multi-faceted strategy that we have created. We look forward to updating our stakeholders throughout the rest of 2024 on our progress. Operator, we are now ready for the question and answer portion. We will now begin the question and answer session. To ask a question, you may press star and then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.

The newly created digital Health Division will allow our stakeholders to better recognize the growth and success of this essential component of the Radnet family of services.

In conclusion, we have never been more excited than we are today about what lies ahead for red we feel as if we are better positioned today than at any.

Any other time in our history to execute under multiyear multifaceted strategy that we have created we look forward to updating our stakeholders throughout the rest of 2024 on our progress.

Operator, we are now ready for the question and answer portion of the call.

We will now begin the question and answer session.

I'll ask a question you May press Star then one on your Touchtone phone.

If youre using a speakerphone please pick up your handset before pressing the keys.

Brian Gil Tanquilut: If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Brian Tanquilut with Jeffrey. Please go ahead.

Is it any time your question has been addressed and you would like to withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

The first question today comes from Brian <unk> with Jefferies.

Please go ahead.

Howard G. Berger: Hey, good morning, guys, and congrats on a solid quarter and a solid year. Maybe Howard, I'll ask you first. Obviously, volumes have been pretty strong, and the outlook for 2024 looks like you're expecting continued strength in volumes. Just curious what you're seeing there and, you know, maybe if there's anything you can share with us in terms of the differentiation in performance between your JV centers versus the non-JV ones from a same score or from a volume perspective as well. Hi, Brian.

Hey, good morning, guys, congrats on a solid quarter and solid year.

Maybe Howard I'll ask you first obviously volumes have been pretty strong and the outlook for 2024, it looks like Youre expecting continued strength in volumes.

Just curious what you're seeing there and then maybe if there's anything you can share with us in terms of the differentiation in performance between your JV.

Centers versus the non JV was.

Same store from a volume perspective as well.

Uh huh.

Hi, Bryan Thank you.

Howard G. Berger: Thank you. We will try to answer this in two parts. As far as overall volume is concerned, we do have significant backlogs in virtually all of our markets. Part of that is driven by demand, and part of it is driven by the continued challenge that we have with labor. And while I believe that that has improved and began that turnaround in perhaps the second part of 2023 and is continuing into 2024, it still does compromise the ability for us to access all of the capacity that we've created. But we feel that this issue will continue to be dealt with both through aggressive acquisition tools that we're employing as well as programs that we're using to help provide the educational support to overcome the shortage of technologists and other administrative personnel.

Let me try to answer this in two parts as far as overall volume is concerned.

We do have significant backlogs virtually in all of our markets.

Part of that is driven by demand part of it is driven by the continued.

Challenge that we have for labor and while I believe that that has improved.

And began that turnaround and perhaps the second part of 2023 and is continuing into 2024.

Still does compromise the ability for us to access all of the capacity that we've created but we feel that this.

Issue.

We'll continue to be dealt with both.

Through aggressive.

Talent acquisition tools that we're employing as well as programs that we're using to help provide the educational support.

To overcome the shortage of.

Of technologists and other administrative personnel part of this you may have seen the announcement with the collaborative than sugar that we have with.

Howard G. Berger: Part of this, you may have seen the announcement about the collaborative venture that we have with a non-profit organization here in Southern California called JVS that we announced about two weeks ago. So this will be an ongoing initiative on our part. I should say that part of this problem will also be attended to by the development of the generative AI portion of our deep health OS solutions, which we expect to begin implementing in the second half of the... 2024 calendar year. Regarding volume, Brian, and the differential, if we want to use that, or difference between joint venture centers and whole-home centers.

Nonprofit organization here in southern California by called J D S.

We announced.

Two weeks ago.

So this will be an ongoing initiative on our part.

I would say that part of this problem will also be attended to by the development of the generative AI play a.

A portion of our deep health Oss solutions, which we expect to begin implementing.

The second half and the Radnet centers and here in the second half of the.

2020 for 2024 calendar year.

And the guys Brian to the volumes.

Differential if we want to use that or difference between joint ventured centres and wholly owned centers.

Howard G. Berger: One of the reasons that we are bullish and looking to increase the percentage of centers that are under joint venture is for the very reason that when we combine the talents of RadNet with the health system's aggressive nature of enrolling or incorporating physician delivery services, we have seen a shift from local competitors or even their hospitals into our centers, which has driven better profitability for them and for us. If it were possible, I wouldn't mind having all the soon-to-be 400 centers that we're going to have in joint ventures, simply because I think, in addition to operational efficiencies as well as volume drivers, we also have better discussions or more robust discussions with the payors for reimbursement. So that portion of our business, which I think we started to more aggressively pursue three years ago, is one of the major contributors to the company's success and which we think is a very appropriate place for us to be in the overall healthcare marketplace as well as under the current economics. I appreciate that, Howard.

One of the reasons that we are bullish and looking to increase.

The percentage of centers that are under joint venture.

Is for the very reason that when we combine the talents of Radnet as well as the health system's aggressive.

The nature of it.

Enrolling or incorporating physician delivery services.

We have seen a shift from local competitors or even their hospitals into our centers, which has driven better profitability for them and for us.

If it were possible I wouldn't mind, having all.

Soon to be 400 centers that we're gonna have into joint ventures simply because I think in addition to operational.

Efficiencies as well as volume drivers.

We also have.

Better discussions are more.

Thus discussions with the payers for reimbursement so that portion of our business, which I think we started to more aggressively pursue three years ago. I think is one of the major contributors in our company's success.

Which we think is a very appropriate place for us to be in the overall healthcare marketplace as well as under the current economic circumstances.

No I appreciate that Howard and then maybe my second question is I think about your decision to enter Houston.

Howard G. Berger: And then maybe my second question, as I think about your decision to enter Houston, obviously, a little bit of a deviation from your legacy strategy of being on the coast, right? So just curious what the thought process was, and what it is about the Houston market that attracted you there. And then maybe sort of the expansion plan, right? Because you obviously, as far as your strategy is concerned, like being deep in the market.

Obviously, a little bit of a deviation from your legacy strategy.

On the coasts right. So just curious what the thought process was and what it is about the Houston market.

Attracted you there and then maybe sort of the expansion plan right.

And if price part of your strategy like being deep in the market. So.

Howard G. Berger: So, and you've enjoyed ventures, as you said, so just curious how you're thinking about the rollout of your RadNet model into the Houston market. As I've talked about in the past, Brian, we don't necessarily have a business development team that goes knocking on doors. We're looking for motivated sellers.

And even joint ventures. So as you said, so just curious how youre thinking about the rollout of your Radnet model into the eastern market.

Yeah.

Well.

As I talked about in the past, Brian we don't necessarily have.

Business development team.

So it was knocking on doors, we're looking for motivated sellers.

Howard G. Berger: Whether those sellers are in the markets that we're currently in, or whether they're in markets that we might look to grow into, this was a situation where the operator had been looking for an exit strategy and did want to roll up into a larger operation, both for a number of the reasons that Mark mentioned in his remarks about scale and stability, as well as access to capital and new technologies. When this operator approached us, he had already looked at the landscape of other opportunities and felt that we were clearly best of breed, if you will. So over the last several months, we've had an active negotiation with him as we assess the marketplace. And perhaps one of the major drivers is the size of the Houston marketplace and perhaps a little less regulatory issues than we're used to experiencing in some of our other major metropolitan marketplaces. So Houston tends to be a more friendly, or Texas, in particular, used to be a more attractive marketplace.

And whether those sellers are in the markets that we're currently in or whether they're in markets that we might look to grow into.

This was a situation where the operator had been looking for an exit strategy and did want too.

Roll up into a larger operation both for a number of the reasons that Mark mentioned in his remarks.

About scale and stability as well as access to capital and new technologies. When this operator approached us.

He had already.

Looked at the landscape of other opportunities.

And felt that we were clearly a best of breed if you will so.

Over the last several months, we've had an active negotiation with him as we assess the marketplace.

Perhaps one of the major drivers as the size of the Houston marketplace and.

Perhaps a little less regulatory issues and were used to experiencing in some of our other major metropolitan marketplaces, So Houston tends to be a more friendly or Texas in particular Houston.

Tend to be a more attractive marketplace and we were just looking for the right entry point, we had opportunities in the past.

Howard G. Berger: And we were just looking for the right entry point. We had opportunities in the past, but never one that we felt was a good platform company. This operator has a history in that market of successful operations and growth, a very well-recognized professional group, and the desire to expand. We are working on and assessing other opportunities as we talk in that marketplace, which I think you'll hear more from us about later this year. The expression that we like to use is that we're not a buy-and-hold company; we're a buy-and-build company.

Never one that we felt was a good platform company. This operator.

<unk> has a history in that market of successful operations in growth.

Very well recognized professional group and the desire to expand.

We are working in assessing other opportunities as.

As we talk in that marketplace, which I think you'll hear more from US later about later.

In this year.

The expression that we like to use is that where we're not a buy and hold or a buy and build so.

Howard G. Berger: So in any market, new market that we want to go into, we look for a growth strategy. And given the demographics of that marketplace, given the size of the population, and similar problems that people are having in other markets where there's a lot of demand and not a lot of capacity, we felt it was a good place to raise the RadNet flag, and we have high expectations for the Houston market as part of our next core market. It was awesome. Thank you, Howard. Thanks, Brian. Thanks, Brian. The next question comes from David McDonald with SunTrust. Please go ahead.

In any market new market that we want to go into.

Look for our growth strategy and given the demographics of that marketplace given the size of the population.

And similar problems that people are having in other markets, where there is a lot of demand and out of a lot of capacity.

Felt it was a good place to raise with that flag and we have.

High expectations for the Houston market is as part of our next core marketplace.

Awesome. Thank you Howard.

Thanks, Brian and thanks, Brian.

The next question comes from David Macdonald with Suntrust. Please go ahead.

David McDonald: Thank you. Good morning, guys. Congratulations! Just a couple of quick questions. One, kind of coming back to Brian's, you know, capacity volume backlog question. I was wondering if you could spend a minute talking about some of the ongoing investments you guys have made in new equipment. You know, the benefits that that's driven in terms of freeing up capacity, shorter scan times, etc. Is there additional opportunity around technology to, you know, kind of further alleviate some of the pressure on the capacity side? Good morning, David.

Thank you good morning, guys congratulations.

Just a couple of quick questions, one kind of coming back to Brian's capacity volume backlog question. I was wondering can you just spend a minute talking about some of the ongoing investments you guys made around new equipment.

The benefits that that has driven in terms of freeing up capacity shorter scan times et cetera is there additional opportunity around technology to kind of further alleviate.

Some of the pressure on the capacity side.

Yes, good morning, David.

Absolutely we've made a number of investments.

Howard G. Berger: Absolutely, we've made a number of investments to kind of test the theory of shorter scan times and remote operational control, both of which have been very successful and which we will now continue to invest in, particularly when it comes to MRI scanning, where the history of MRI over the years has reduced scan times from 45 minutes to an hour down to 30 minutes and down to 20, and the new technology, which is a total software implementation, can reduce that scan time further, perhaps Buying this software is relatively less expensive than it is to, obviously, buy another, so the investment in the facility to cite equipment. So I believe that is one of the benefits that we're seeing from the increased volume that we had in 2023, particularly in the second half of the year. Another one, though, is the technology related to the ability to have one remote technologist control the operation of several scanners. This can be for MR and CT scanning, and we believe we can expand this into ultrasound and perhaps even mammography, which we're now looking at.

To kind of test.

The theory of shorter scan times.

<unk> remote operational control both of which have been very successful in which we will now continue to invest in <unk>.

Particularly when it comes to MRI scanning where the history of MRI over the years has reduced scan times from 45 minutes to it to an hour down to 30 minutes and down to 20, the new technology.

Is this a total software.

Is.

The limitation can reduce that scan time further perhaps down to as little as 10 minutes on certain exams.

Buying the software is relatively less expensive than it is to obviously buy another MRI.

<unk> system.

And you don't have the kind of.

Costly investment in the in.

In the facility to site equipment. So I believe that is.

One of the benefits that we're seeing from the increased volume that we had in 2023, particularly in the second half of the year.

Another one though is the technology related to the ability to have one remote technologists control. The operation of several scanners. This can be for <unk> and for <unk> scanning and we believe we can expand this into ultrasound.

And perhaps even mammography, which we're not looking at part of the initiative in our digital Health Division will be to develop some of these tools internally, where we can amortize the cost of that over all of our systems and not necessarily.

Howard G. Berger: Part of the initiative in our digital health division will be to develop some of these tools internally so that we can amortize the cost of that over all of our systems and not necessarily have it be a serial investment that we have to incur for every piece of equipment. So I think with the success that we had again in the second half of the 2023 year and with the rollout of more of these centers, it will also not only, I believe, help us with the scan time efficiencies, but also help us address the shortage of personnel, particularly technologists, that can allow us to have what we call super techs overseeing this and then tech aides at our individual centers and not necessarily fully licensed technologists.

Have it be a serial investments that we have to incur.

For every piece of equipment.

So I think we'll with the success that we had again in the second half of the.

2023, a year.

And with the rollout for more of these centers. It will also not only I believe help us with the scan time efficiencies, but help us address the shortage of personnel, particularly technologists.

Can allow us to have what we call supertax overseeing this and then 10.

Age at our individual centers are not necessarily fully licensed technologies. So.

Howard G. Berger: This part of the creativity aspect of RadNet is something that we think we've been good at but which now, given, I think, the investment that we're talking about, being capable of making both because of our financial liquidity, as well as in the technology side of the business, can't be underestimated. I think it's important for all of our stakeholders to recognize that, whether we're talking about artificial intelligence or the equipment itself, our business is very highly technologically driven. And all of the tools that we can use to let technology do the work will ultimately be to the benefit of our performance, both in terms of new procedures, adding capacity, and lowering overall costs. So I think there's a multifaceted approach to our investment thesis, where we're not just developing these tools so that we can sell them. But given the scale that we have and the data that we have, nobody is better at developing these tools than we are internally.

As part of the creativity.

Aspect of Radnet is something that we think we've been good at but which now given I think the investments that we're talking about being capable of making both because of our financial liquidity as well as in the technology side of the business can't be under.

I think it's important for all of our stakeholders recognize that whether we're talking about artificial intelligence or the equipment itself our businesses very highly technologically driven and all of the tools that we can use to led technology do the work.

Ultimately.

In order to the benefit of our performance both in terms of new procedures.

Adding capacity.

And lowering overall costs. So I think there is a multifaceted approach to our investment thesis, where we're not just developing these tools.

So that we can sell them, but given the scale that we have and the data that we have nobody is better at developing these tools and we are internally.

Howard G. Berger: And then I guess just two other quick questions. Look, I realize it's extremely early, but I'm just curious about the reaction, if any, that you've gotten within the Houston market. I mean, it's a huge market. There are a ton of hospital systems in that market, and I'm just kind of curious, you know, any initial reactions or inflows in terms of conversations, opportunities, etc. You know, just any general comments there.

And then I guess just two other quick questions look I realize it's extremely early but I'm just curious.

The reaction if any that you've got within the Houston market I mean, it's a huge market.

There is a ton of hospital systems in that market.

And I'm, just kind of curious any initial reactions or incoming in terms of conversations opportunities et cetera, just.

Just any general comments there.

Well I don't think we've had much reaction as yet because we got very early on and we haven't.

Howard G. Berger: Well, I don't think we've had much reaction as yet, Dave, because it's very early on, and we haven't., Unknown Attendee, Larry Bland, Lawrence Solow, Unknown Attendee, Larry Bland, Unknown, desireability of consolidating into a bigger operator. So there are active discussions right now. We expect that we'll hear from some of the hospital systems in that marketplace too, because some of the hospitals that we have joint ventures with are on a national scale and have operations in the Texas marketplace. So,

Closed the transaction, we've signed a definitive agreement we expect to close.

Transaction next month in April.

So early indications are that people are excited about us coming into the marketplace.

The tools that we are now identified with as well as other operators that may not have a perhaps assist.

The.

Desirability of consolidating into a bigger operators. So there's active discussions right now we expect that we'll hear from some of the hospital systems in that marketplace too because some of the hospitals that we have joint ventures with our on a national scale and.

We have operations in the Texas marketplace. So.

Howard G. Berger: I think this will be a, , , , , , , , , , , , , , no matter where that mark, Okay, and then just last one, I'm curious, are you servicing or have you begun to service any Alzheimer's patients at this point? And, you know, if and when that opportunity starts to ramp more meaningfully? Is there anything we should think about in terms of either, you know, disproportionate opportunities or, you know, governors? You know, as that volume starts to ramp? Yeah, another good question, Dave.

I think this will be a.

Our reaction if you will have a ripple effect not only in Texas, but maybe in other areas that we wanted to signal that we're open for business and ready to look at win win opportunities.

No matter where that market might be.

Okay, and then just last one I'm curious are you servicing or have you begun to service any Alzheimer's patients at this point.

And you know.

If and when that opportunity starts to ramp more meaningfully.

Is there anything we should think about in terms of either disproportionate opportunities or governors.

As that volume starts to ramp.

Yeah. Another good question, Dave We just recently went through the Credentialing process and making certain that the CIS.

Howard G. Berger: We just recently went through the credentialing process and made certain that the systems, the MR scanners, in particular, and the PET-CT scanners that we have, had the appropriate protocols here. So far, we have either performed or have on the books a hundred of these procedures that we will be performing. And the questions come in, or the requests come in daily for this. We expect this to be a significant opportunity for the company as we move through this. And if we make any comparison to the success that we've achieved in PET-CT scanning for prostate cancer, it should be a significant contributor in 2024, but more so probably in 2025. I'd also want to emphasize that it's not just doing the scan for Alzheimer's disease itself, which is currently done with either PET-CT or PET-MR equipment, but there is also then the requirement for follow-on MRI scanning of the brain to assess any kind of side effects, which some of these drugs have demonstrated that they're capable of doing.

Our systems the MLR scanners.

<unk>.

Pet scanners that we have has the appropriate protocols here. So far we have either performed or have on the books 100 of these procedures that we will be performing.

And the questions come in or the requests come in daily for this we expect this to be a significant opportunity for the company.

As we.

We move through this and if we make any comparison to the success that we've achieved in pet scanning.

For prostate cancer.

It should be a significant contributor.

In 2024, but more so probably in 2025 I'd also wanted to emphasize that it's not just doing the scan for the Alzheimer's disease itself, which currently is done with either Pepsi Teeter pet pet EMR equipment, but its also then the requirement for follow on MRI scanning of the brain.

To assess any kind of side effects, which are some of these drugs have demonstrated that they are capable of doing and the protocol that we're currently going to be adhering to will be that it would be.

Howard G. Berger: And the protocol that we're currently going to be adhering to will be that there would be, I think, a minimum of four MRI scans on any patient that is identified as a candidate for the new Alzheimer's drug therapy. So the ripple effect of this could be quite substantial and is another reason why we have to be very focused on capacity. Yeah, and it's pretty exciting, Dave, because our PET-CT business is already the fastest growing part of our company, albeit it's a small percentage of our volume, roughly 0.6% of our volume, but it does represent between 6% and 7% of our overall revenue. And it grew 18.5% in the fourth quarter, and over the full year from 23 to 22, it grew 18.8%.

I think a minimum of four MRI scans on any patient that has identified as a candidate for the new Alzheimer's drug therapy. So the ripple effect of this could be quite substantial is another reason why we have to be very focused on capacity issues.

And it's pretty exciting because our <unk> business is already the fastest growing part of our company, albeit it's a small percentage of our volume roughly 6% of our volume, but it does represent between 6% and 7% of our overall revenue.

And it grew 8% 18, 5% in the fourth quarter or over the full year from 23 to 22. It grew 18, 8% that's mostly not from the Alzheimers opportunity, it's mostly from the PSM a prostate scanning that has been explained.

Mark D. Stolper: That's mostly not from the Alzheimer's opportunity; it's mostly from the PSMA prostate scanning that has been exploding. And so if you layer on top this Alzheimer's opportunity, which we think is coming to fruition, having already scanned 100 patients, and by the way, those 100 plus patients we scanned have all been in the last four months or so. As these patients get qualified to get these amyloid PET-CT studies, we think that this is going to be a big growth driver, potentially in 24, but certainly beyond 24. Okay, thank you very much.

Loading and so if you layer on top this alzheimers opportunity, which we think is.

It's coming to fruition.

Having already scanned 100 patients and by the way that those 100 plus patients. We scanned has all been in the last four months or so.

As these patients get qualified.

These amyloid pet studies, we think that this is going to be a big growth driver potentially in 'twenty, four but certainly beyond 'twenty four.

Okay. Thank you very much.

Howard G. Berger: Thank you, David. The next question comes from John Ransom with Raymond James. Please go ahead. Hey, good morning.

Thank you Dave.

The next question comes from John Ransom with Raymond James. Please go ahead.

Hey, good morning, Congrats guys.

John Wilson Ransom: Congratulations, guys. So, Mark, I'm going to challenge you with a math question. I hope you've got your HP-12C all fired up and ready to go. He doesn't have it, but he has his pen, John.

So mark I'm going to challenge you with the math question Hope you're got your HVAC, Chelsea all fired up ready to go.

Yes.

He doesn't have that but he has his pen.

Mark D. Stolper: I have an abacus in front of me. That's funny. So if you think about the EBITDA in 24, how much of that is from acquisitions and de novos that did not exist in 2023? And then, to kind of pile on to that question, if we think about the run rate of that EBITDA going into 2025, how much higher is it, the run rate for the full year versus layering and then during the year? So I'm thinking about your acquisitions and de novos, 2024 over 2023, and then kind of the jumping off point for 2025. Sure.

I Havent Advacare sclerotomy.

Well, it's funny. So if you think about the EBIT in 'twenty four.

How much of that is from acquisitions and de Novo that did not exist in 'twenty three and then kind of pile on to that question. If we think about the run rate of that EBITDA going into 25, how much higher is it.

The run rate for the full year versus layering in vendor of the year. So im thinking about your acquisitions is that was 24% 23, and then kind of the jumping off point for 2005.

Sure with respect to acquisitions, it's very small, but the contribution we included the because the Houston deal was already announced we included the remaining period of this year.

Mark D. Stolper: You know, with respect to acquisitions, it's very small. The contribution we included, because the Houston deal was already announced, we included the remaining period of this year from closing that transaction. We did a small acquisition earlier this year in Antelope Valley, California.

From closing that transaction, we did a small acquisition earlier in this year in.

Antelope Valley in California.

Mark D. Stolper: So, you know, the contribution to our EBITDA for next year, the 250 to 260 number, is less than $10 million in terms of our acquisitions. You know, with respect to DeNovo facilities, I don't have that number exactly in front of me, but my recollection is that, you know, the centers that are outside of the same center due to due to de novo that we opened up in 2023 are probably in the range of, I would say, get something here. I've got a report in front of me.

So.

The contribution of <unk> in our in our EBITDA for next year.

$2 50 to $2 60 number is less than $10 million in terms of our acquisitions.

With respect to de Novo facilities.

Don't have that number exactly in front of me, but my recollection.

Is that.

The centers that are outside of the.

Same center due to de Novo that we opened up in 2023 is probably in the range.

<unk>.

I would say.

Get something here I've got a report in front of me and another.

Mark D. Stolper: Another $5 to $6 million. So between those two, I would say, you know, between $10 and $15 million, probably closer to $15 million of our $250 to $260 million of EBITDA is coming from the contribution of those acquisitions I mentioned, as well as the de novo centers that are running. And my other question is, if we look at ERAD plus AI, what's the exit rate of EBITDA as AI gets to break even, what are you contemplating in terms of the exit rate of that EBITDA versus the full year? So if we think about 25, what's, you know, bridging that to 25?

$5 million to $6 million.

So between those two between those two I would say between 10 and $15 million, probably closer to $15 million of our $250 million to $260 million of EBITDA is coming from the contribution of those acquisitions I I I mentioned as well as the de Novo.

Centers that are ramping.

And my other question is if we look at <unk> plus AI.

What's the exit rate.

EBITDA is AI gets to breakeven.

What are you contemplating in terms of the exit rate of that EBITDA versus the full year, So think about 25%.

Bridging the 25.

Mark D. Stolper: Yeah, so, the revenue that we have projected for the year is $60 to $70 million. There's going to be higher revenue in the fourth quarter due to the ramp of EBCD, which, I would say, I'm just thinking here. We might be closer. If you divided the $60 million, let's say, by four quarters, you'd be doing $15 million a quarter. I'd say by exiting that year, we'd probably be closer to $20 million a quarter. That's just a gut feel. I don't have the budget.

Yes, so the revenue that we have projected for the year is $60 million to $70 million.

But theres going to be higher revenue in the fourth quarter due to the ramp of <unk>.

Which.

I would say.

Thinking here.

<unk>.

Yeah.

We might be closer.

If you look if you divided the $60 million, let's say by four quarters, you'd be doing $15 million a quarter I'd say by exiting that year, we'd probably be closer to $20 million a quarter. That's just a gut feel I don't have to.

Mark D. Stolper: And AI being kind of break-even on the fourth quarter from a loss today. AI being break-even on an EBITDA basis by the fourth quarter, yes. Okay, so that's a look. And then lastly, if you could be Mark Adamus.

The budget.

NII being NII being kind of breakeven in the fourth quarter from a loss today.

AI being breakeven on an EBITDA basis by the fourth quarter, yes, okay.

And then lastly, if you could be market dominance.

Howard G. Berger: When would you say you get the first meaningful payer participation in your AI covering AI costs? Or do you think it's an out of pocket expense for the foreseeable future? I don't think I could predict, John, when we're likely to see that.

When would you say you'd get the first meaningful player participation in your AI.

Covering the AI costs or do you think thats an out of pocket expenses payable feature.

Yes.

I don't think I can predict John.

When we're likely to see that.

Howard G. Berger: Unfortunately, in conversations that we've had with the payors, there's always a hesitation on their part to incur additional expense when they may not intellectually be able to get themselves comfortable with what that payback is. I believe that what will happen, and it may take another year and a half to two years, is that as the adoption of AI continues on a private pay basis, the pressure will mount on the part of the commercial payors to reimburse for this once we've been doing it long enough to demonstrate that there is a significant improvement in the cancer detection rate and, at the same time, reduce the callback rate or false positives. But given that we've just started commercializing this really last year, we're going to need a little bit more time, probably another year to year and a half to collect or accumulate enough data to make that kind of compelling argument so that it isn't just about how you reduce the treatment, if you will. It's really a matter of when I say reduce the treatment for cancer.

Unfortunately.

The conversations that we've had with the payers.

There is always a hesitation on their part to incur additional expense when they may not.

Actually be able to.

Get themselves comfortable with what that payback is.

I believe that what will happen and it may take another year and a half to two years is that as the adoption of AI continues on a private pay basis that the pressure will mount on the part of the.

Commercial payors to reimburse for for this once we've been doing it long enough to demonstrate that there is a significant improvement.

Improvement in the cancer detection rate and at the same time reduce the callback rate or false positives, but given that we've just started commercializing. This really last year, we're going to need a little bit more time, probably another year.

Two year, and a half to collect or accumulate enough data to make that kind of a compelling argument. So that it isn't just about how you reduce the treatment if you will.

And it's really.

Matter of.

When I say reduce the treatment from cancer.

Howard G. Berger: That is detected, but how can you actually pay for this by detecting the cancer earlier and reducing the number of false positives we have, which is a significant cost to the health care system? So I wish I could be more enthusiastic, because I don't think in my history in this business that there's been anything more exciting than the earlier detection of cancer. Right now, we're primarily focused on breast cancer, but we're seeing similar benefits in the UK with our program there, where the National Health Service has now made it a reimbursable part for providers for getting all of their at-risk lung cancer patients in for annual screening. So I think there needs to be a certain amount of momentum built up for this and other tools that we need to introduce into the marketplace, which we are actively working on right Thank you very much.

It is detected but how you can actually pay for this by reduced by detecting the cancer.

Earlier, and reducing the number of false positives that we have which is a significant cost to the health care system. So I wish I could be more enthusiastic because I don't think.

And my history in this business that there has been anything more exciting then.

The earlier detection of cancer right now, we're primarily focused on.

Breast cancer, but were seeing similar benefits in the UK with our program there.

With the National Health Service has now made it a reimbursable part for providers for <unk>.

Getting all of their at risk.

Lung cancer patients in four annual screening so I think there needs to be a certain amount of momentum built up for this.

And other tools that are there.

We need to introduce into the marketplace, which we are actively working on right now.

Get the attention of a wider group of payers.

Gary Taylor: Thank you, John. The next question comes from Gary Taylor with J.P. Morgan. Please go ahead. Well, actually, it's T.D.

And regulators.

Thank you very much.

Thank you John.

The next question comes from Gary Taylor with Jpmorgan. Please go ahead.

Well actually it's TD Cowen know JP Morgan is a little bit.

Mark D. Stolper: Callan now. J.P. Morgan's a little bit stale, but nevertheless, just a couple questions. First, on the Imaging Center CapEx Guide of $130 million, Mark, we've talked a little bit, but the right way to think about that 130 is call it, you know, half, maybe a little more than half of that is kind of routine maintenance CapEx, and the other 60 million would really be development CapEx for de novo. Yeah, that's not too far off, Gary.

But nevertheless, just a couple of questions.

First on the imaging Center Capex guide of $130 million.

Mark we've talked a little bit but is the right way to think about that one third is call. It half maybe a little more than half of that is kind of routine maintenance capex and the other $60 million, which would really be development capex for de Novo.

Yeah, that's not too far off Gary we've been spending a lot of money as you saw in 'twenty two 'twenty three on the ramp of these de Novo centers, which still have it contributed materially to our.

Mark D. Stolper: You know, we've been spending a lot of money, as you saw, in 22 and 23 on the ramp of these de novo centers, which, you know, still haven't contributed materially yet to our financials. That spend on growth cap acts and de novo centers is, you know, is going to bleed here into 2024. As we've got, you know, more than a dozen of those centers still in various stages of development and construction. So, 50-50 in terms of that, you know, of our CapEx budget here in 2024 is pretty close to. Thanks.

Our financials.

That spend on growth Capex and de Novo centers is going to bleed here into 2020 for them as.

As we've got.

More than a dozen of those centers are still in various stages of development and construction. So.

50, 50 in terms of that.

Of our Capex budget here in 2024, it is pretty close to actual.

Mark D. Stolper: And then my second one, just thinking about, um.., you know, the number of competitors around AI and cancer diagnosis and AI, like a big market, a lot of different players trying to get in that game. And in theory, given that you're also an operator, you're not just an AI developer, I would think your go-to-market strategy outside of your own centers would be somewhat advantaged by your own role as an, you know, operator versus just a, you know, technology company or so forth. Could you talk about that a little bit, just kind of how you're thinking about how you'll, how you'll compete with, these other folks that have, you know, developed, you know, breast, in particular, sort of AI solutions? It's a good question, Gary.

Thanks, and then my second one just thinking about.

The number of competitors around AI and cancer diagnosis.

AI like big market, a lot of different players trying to get in that game and in theory.

Given that you're also an operator youre not just AI.

<unk> per year.

Thank your go to market strategy outside of your own centers would be.

Somewhat advantaged by your own role as an operator versus just a technology company and so forth could you talk about that a little bit just kind of how you're thinking about.

How you how you compete with with ease.

These other folks that are have developed.

Russ.

In particular sort of AI solutions.

Yeah.

It's a good question Gary.

Howard G. Berger: The problem, if you will, with artificial intelligence is who's going to pay for it? And I think... Part of the slow adoption of what I think are some very good tools is the fact that nobody wants to, at least payors, put money out for something that they don't necessarily see a value proposition for right now. And whether it's a hospital system or whether it's an outpatient provider, that question of who bears the cost is the one that I think has slowed down almost every AI developer out there from becoming a meaningful revenue stream. I expect there's going to be a lot of consolidation in the AI space here for two reasons. Number one, as I said, most of the new companies have been unable to demonstrate revenue and are therefore having difficulty attracting more venture capital. But also, higher interest rates and the need for a more visible return on investment from venture capital and private equity companies are beginning to have limitations on what they're willing to spend on some AI development. So we think that we'll see some, and there have already been some.

The problem, if you will with artificial intelligence.

Who's going to pay for it.

And I think.

Part of the <unk>.

Slow adoption of what I think there are some very good tools.

Is the fact that.

Nobody wants to.

At least paid ores.

Put money out.

Or something that they don't necessarily see a value proposition right now and whether.

Whether it's a hospital system or whether it's an outpatient provider.

That question is who bears the cost is the one that I think has slowed down almost every AI developer out there into a meaningful revenue stream.

I expect there's going to be a lot of consolidation in the AI space here.

Two reasons number one as I said most of the new.

New companies have been unable to demonstrate revenue and therefore.

Having difficulty attracting more venture capital.

But also the higher interest rates and.

The need for a more visible return on investment from venture capital private equity companies.

<unk> is beginning to have limitations on what they are willing to spend on some AI development. So we think that we will see in there already has been said.

Howard G. Berger: Groups that have come to us to talk about either being a distributor for them or potentially a target for us, and I want to emphasize the distributor part of this because, part of our platform, which is The Deep Health OS, is the ability for us to take other AI products and put them onto our platform and offer them up, whether it's internally to our own centers or externally to other customers in a far more seamless way than exists right now. So I think you're right in that we can develop a lot of this and create value for ourselves, even though it may not be on an individual case basis that much, but given the scale that we have. For example, in the breast cancer area, we do in excess of 1.5 million screening mammograms a year, and that number is growing. Right now, over a third, probably closer to 35% of all of the women getting screening mammography are electing to have our AI solution that they pay $40 for. So if you do the math.

Groups that have come to us.

Talk about either being a distributor for them or potentially.

An acquisition target for us and I want to emphasize the distributor part of this because.

Part of our platform.

Which is.

The deep health OS is the ability for us to take other.

Products and put them onto our platform and offer them, whether it's internally to our own centers or externally at other customers and are far more seamless way that exists right now so.

I think youre right in that we can develop a lot of this and create value for ourselves.

Even though it may not be on an individual case basis that much but given the scale that we have for example.

The breast cancer area, we do.

In excess of $1 5 million screening mammograms, a year and growing right now over a third probably closer to 35% of all of the women getting screening mammography are.

Our electric to have.

The our AI solution that they pay $40 for so if you do that math.

It generates by itself almost more revenue for radnet than almost any other AI radiology product so.

Howard G. Berger: It generates almost more revenue for RadNet by itself than almost any other AI radiology product. So, as I indicated in my remarks here, scale of operations and data sets are what's going to drive opportunities for AI in the future.

As I indicated in my remarks here scale of operations and datasets are what's going to drive opportunities.

For AI in the future, but make no mistake about it.

Howard G. Berger: But make no mistake about it, it is going to be the future of healthcare, and it's going to be very much an important part of what RadNet and all the other imaging providers are going to have to gravitate to if they expect to both compete in the future marketplace, as well as deal with some of the intrinsic costs. And Gary, to your question directly about our potential advantage in developing and selling these solutions, you know, we have, Dr. Berger mentioned the And secondly, as we deploy them in RadNet 366 and a growing number of centers, we can be a test bed for our own technology and our algorithms, which then makes, you know, external customers that much more comfortable that there's already an installed base, there's already an operator, you know, who is using, you know, these algorithms effectively.

It is going to be the future of health care and it's going to be a.

Very much an important part of what Radnet and all the other.

Imaging providers are going to have to gravitate to if they expect to both compete.

In the future marketplace as well as deal with some of the insurance costs and a.

Capacity issues that were confronting that we're all familiar with now and Gary to your question directly about <unk>.

Our potential advantage in developing and selling these solutions.

Dr. Berger mentioned, the dataset, where we're now north of a 100 million digital images and growing by $10 million a year given our current size, which is a huge advantage in terms of developing and training these algorithms and secondly.

As we deploy them in the Radnet is 366 and growing number of centers, we can be a test bed for our own.

Technology, and our algorithms, which then makes external customers that much more comfortable that there is already an installed base is already an operator, who is who is using.

Howard G. Berger: And I think that that's a huge advantage to selling these solutions externally once, you know, as Dr. Berger mentioned, once, you know, these solutions start being more ubiquitous, which, you know, is going to occur at such a time when there's third-party reimbursement from, you know, commercial and other payers. The interview there reminded me of one other point I want to make.

These algorithms effectively and I think that that's a huge advantage to selling these solutions externally once.

Brokered mentioned once these solutions start being more ubiquitous which is going to occur at such time, where there is third party reimbursement from commercial and other payers.

<unk>.

That little.

Was there one.

One other point I want to make.

Howard G. Berger: We do have a potential built-in marketplace for ourselves with our hospital joint venture partners, and I can't overestimate that enough in that most of these hospital systems will want to use the tools that we're developing. For hospitals that are part of our joint venture but other parts of their systems where we may not be a joint venture partner with them, perhaps in other states or in other areas, number one, and the ability to have a seamless... Unknown Attendee, the flow of data between inpatient and outpatient care, which will create the kind of efficiencies that will help reduce costs. So right now, I can't remember the number. We probably have them and others.

We do have a potential built in marketplace for ourselves with our hospital joint venture partners and I can't.

I can't overestimate.

Is that enough in that most of these hospital systems will want to use the tools that we're developing if not for hospitals.

<unk> are part of our joint venture, but other parts of their systems, where we may not be a joint venture partner with them, perhaps in other states or in other areas number one and the and the ability to have a seamless.

The flow of data between inpatient and outpatient which will create the kind of efficiencies that will help reduce costs. So.

Howard G. Berger: So, we have a lot of different health systems that are... We have 30 or more different large health systems that are... We have 24 JVs. Yeah, but... Encompassing 130 locations, okay? But those hospital systems have other hospitals that we're not necessarily JVed with. So, there's a pretty big marketplace out there where we'll have a very receptive audience that will not only want to potentially use our tools but also help unify their entire radiology platform on an outpatient and inpatient basis. Thank you. The next question comes from Larry Solow with BJS Securities. Please go ahead.

Right now I can't remember the number we probably have.

You know 30 or more different large health systems, we have 24 jb's.

Encompassing a 130 locations, okay, but those those hospital systems, who have other hospitals that were not necessarily JV with so.

There is a pretty big marketplace out there, where we will have a very receptive audience.

We will not only want to potentially use our tools, but to help unify their entire radiology platform on an outpatient and inpatient basis.

Yeah.

Thank you.

The next question comes from Larry Solow with.

J S Securities. Please go ahead.

Lawrence Scott Solow: Great. Good morning, gentlemen, and I echo the congratulations on a solid finish to a really good year. I guess the first question for me, Mark, is I think you mentioned targeting eight to eight and a half percent revenue growth in the imaging segment all in. How does that, you know, if we look at just volume growth in 2023, you know, procedure volume growth, same-scope procedure volume growth is actually above kind of that three to four percent sort of annual target every quarter? I'm not saying we're reaching an inflection point, but how do you view, you know, that growth last year?

Great Good morning, gentlemen.

Congrats on a solid finish to a really good year.

I guess I was.

For me Mark I think you mentioned.

Targeting up to eight to eight 5% revenue growth in the imaging segment segment all in how does that if you look at just volume growth.

23.

<unk> got some sort of procedure growth was actually above kind of that 3% to 4% sort of.

Annual target every quarter.

I'm, not saying, we're reaching an inflection point, but it but how do you view.

That growth last year, what are you kind of targeting this year in that sort of 8%.

Mark D. Stolper: What are you kind of targeting this year in that sort of eight percent overall, eight and a half percent overall revenue growth? I realize maybe a couple percent of that is from acquisition, but whatever that, you know, net is six, seven percent. How do you view that volume versus price? Because also on price, if you look at last year, I think the average price per procedure was also up about three percent. So, how do you kind of view those two components as you look out for this year? Sure.

Overall ETF percent overall revenue growth I realized maybe called percentage of that is from acquisition, but whatever that you know.

That is six 7% how do you view that volume versus price because also on price. If you look last year I think average price.

Per procedure was also up about 3%.

So how do you kind of view those two components as you look out to this year.

Mark D. Stolper: So, on the procedure volume front, you know, typically, we've told our stakeholders that, over the long term, we felt that we could grow kind of in the low single digits on a same center basis. Obviously, that becomes harder the more efficient you get and how busy your centers are. But, you know, we've been making a lot of capital investments and investments in technology to be able to drive better throughput into our centers to continue to comp in sort of the low to mid single digits on a same center basis. And those are investments in, you know, these MRI scanners that Dr. Berger talked about that allow for shorter scanning times and remote technologists, which allows us to open up on nights and weekends and get coverage, you know, from a labor perspective.

Sure.

On the procedure volume front, you know typically we've told our stakeholders over the long term, we felt that we could grow kind of in the low single digits on a same center basis, obviously that becomes harder the more efficient you get in the busy of your centers are but we've been making a lot of cash.

Our investments and investments in technology to be able to drive better throughput into our centers to continue to comp.

In sort of the low to mid single digits on a same center basis and those are investments and you know these MRI scanners that Dr. Berger talked about that allow for shorter scanning times, the remote technologists, which allows us to open up on nights and weekends and get coverage.

From a labor perspective, we've done a bunch of things at our centers to try to get patients in and out of our centers more quickly with digital check ins and.

Mark D. Stolper: We've, you know, done a bunch of things at our centers to try to get patients in and out of our centers more quickly with, you know, digital check-ins and, you know, better clinical protocols and so on and so forth. So, embedded in next year's guidance, you know, of eight and a half plus percent growth, we are assuming, you know, mid-low single-digit same store sales performance, which, you know, if you look at 2023, we did even better than that, you know, throughout the year. We were north of, you know, 5, 6%, you know, in terms of our same center performance. And then the rest of it is the contributions of other centers that either weren't, you know, were opened or purchased, you know, weren't in the same center calculation, you know, going from 2023 to 2024. So, you know, I think, you know, is it possible that we can do better than that?

Probably a better clinical protocols.

And so on and so forth so.

Embedded in next year's guidance of.

Eight five plus percent growth.

We are assuming mid low single digit same store sales performance, which if you look at 2023.

We did even better than that in throughout throughout a year, we were north of five 5%, 6% in terms of our same center performance.

And then the rest of it are the contributions of other centers that either weren't.

Were opened or purchased that were in the same center calculation going from 2023 to 2024 so.

Thank you is it possible that we can do better than that yes, absolutely you know given off some of the you know the tailwind.

Mark D. Stolper: Yes, absolutely. You know, given all some of the, you know, the tailwinds that we talked about in the industry that are trends that are driving more and more of the patient flow out of, you know, more expensive hospitals and inpatient imaging towards, you know, ambulatory outpatient imaging, a lot of these advances in technology, the benefits that we're seeing in certain modalities like PET-CT, like the PSMA test and Alzheimer's imaging, which we So I think all of those things are contributing to, you know, a more robust than historical, you know, same center potential here for us. So we'll see how the year, you know, kind of unfolds.

That we talked about in the industry that are trends that are driving more and more of the patient flow out of more expensive hospitals in inpatient imaging towards ambulatory outpatient imaging a lot of these advances in technology the.

The benefits that we're seeing in certain modalities like Pepsi T like the PSA test in the Alzheimer's imaging, which we talked about so I think all of those things are contributing to a more robust then.

Historical same center potential here for us.

So we will see how the year kind of unfolds.

Mark D. Stolper: Okay, in terms of just pricing, are you guys, obviously on the government side, you get a little bit of a headwind there, but if I just look at for the full year, the average price per procedure was actually up 3% ish, and I realized some of that's just a mix, to these higher modalities. But are you getting actual prices on the commercial side? That more than offsets the inflationary pressures. Yes, we are. Thanks for reminding me to talk about price.

And then in terms of just pricing or you guys, obviously on the government side.

A little bit of.

The headwind there but.

And if I just look out for the full year average price per procedure was actually up 3% ish and I realize some of that is just a mix to these higher modalities, but are you getting actual price on the commercial side.

But that more than offset the inflationary pressures.

Yes, we are and thanks for reminding me to talk about price.

Mark D. Stolper: As you mentioned, we are facing a small headwind with Medicare pricing as a result of the lowering of the conversion factor of the Medicare fee schedule by 3.4%. And that's not being that's not specific to radiology; anybody who builds under the physician fee schedule, the Medicare physician fee schedule, regardless of specialty, is facing that hit. And for us, that's about a $7 to $8 million headwind.

As you mentioned, we are we are facing a small headwind with Medicare pricing as a result of the lowering of the conversion factor of the Medicare fee schedule by three 4% and that's not being that's not specific to radiology.

Body, who bills under the physician fee schedule, the Medicare physician fee schedule, regardless of specialty is facing that head and for us that's about a $7 million to $8 million headwind, but that that is dwarfed by the.

Mark D. Stolper: But that is dwarfed by the pricing increases that we're getting from our commercial book of business and from our capitated payers. You know, in our capitation contracts, although we're very effective in managing utilization, utilization of diagnostic imaging still goes up every year because of all the benefits of technology and the aging population and so on and so forth. And so as that utilization goes up, we get price escalators in these contracts. So, you know, we benefit from that each year. And then, you know, on the commercial front, I would say that the payors are more recognizing that we are their partners in trying to move this business and shift this business out of the more expensive hospitals into our freestanding centers. In most of our markets, hospitals for inpatient work are charging anywhere between 2X and 5X the prices that we're charging the payors.

Pricing increases that we're getting from our commercial book of business and from our Capitation Payors.

In our capitation contracts, although were very effective in managing utilization.

Utilization of diagnostic imaging still goes up every year because of all of the benefits of technology and.

The aging population and so on and so forth and so as that utilization goes up we get pricing escalators in these contracts. So we benefit from that each year and then.

On the commercial front I would say that the payors.

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Arden more recognizing that we are their partners in trying to move this business and shift this business out of the more expensive hospitals into our freestanding centers and in most of our markets.

Are the hospitals for the inpatient work are charging anywhere between two <unk> and five <unk>.

The prices that we're charging the pay or so the payers recognize that it's far far more beneficial to them to getting this business to.

Mark D. Stolper: The payors recognize that it's far more beneficial to them to shift the site of care, and they're less concerned about paying RadNet a couple points or 3%, 4% more to do this type of work because we've got a staff of a couple hundred plus marketing representatives whose purpose in life is to go around and call on physician practices and try to get this business into our centers and out of hospitals. We did experience pricing increases, which benefited us last year in our 2023 results. We've got a number of pricing increases going into effect in 2024 that will impact our revenue positively this year. Right? And if I could just squeeze one more in on the enhanced breast cancer detection test,

Shifting the site of care and they are less concerned about paying radnet a couple of points are 3%, 4% more.

To do this type of work because we've got a staff of a couple of hundred class marketing represented as <unk>.

Purpose in life is to go around and call lines physician practices and try to get this business into our centers and out of hospitals. So we.

We did experienced pricing increases which benefited us.

Last year in our 2023 results and we've got a number of pricing increases going into effect in 2020 for that.

It will impact our revenue positively this year.

Great and if I could just squeeze one more on just on the breast cancer question Todd could.

Mark D. Stolper: I think you mentioned that the East Coast penetrators or adoption on the East Coast centers was somewhere in the 30 ish range. Curious, has that been, I know it sort of increased during the year last year, do you expect that number to continue to increase as your marketing efforts improve and you learn more as well? West Coast, is that a similar number, you know, low 30s from the start, maybe that grows as well? Yeah, so we are approaching close to a 35% adoption rate in EBCD on the East Coast, which is more mature, obviously, than the West Coast. We started rolling out to the West Coast in the fourth quarter of last year.

Could you you mentioned.

East coast penetration or adoption on the East Coast Center was somewhere in the 30 ish range.

Curious how has that been.

Sort of increased during the year last year do you expect that number.

<unk> to increase.

Marketing efforts improve and you learn.

More as well.

West Coast is not about a similar number.

One third is from from the start and exact grows as well.

Yeah. So.

We are approaching close to 35% adoption rate in a b C. D on the east coast, which is more and more mature obviously than the west coast. We started rolling out the west coast in the fourth quarter of last year, we are.

Mark D. Stolper: We are completed with the rollout here in Southern California. We've got about 18 more centers in California, by the way; we're completed in Southern California and Arizona. We've got 18 more centers in Northern California and Central California to roll out the EBCD program. These are, obviously, MAMO centers.

<unk> completed in the rollout here in Southern California, We've got about 18 more centers.

In California by the way were completed in Southern California, and Arizona, and we've got eight more 18 more centers in northern California, and Central California to rollout the a B C. D program. These are obviously mamma centers.

And what we've seen and the rollout has been a little bit slower on the west coast that originally intended but what we are seeing is much higher initial adoption rates on the west coast or west coast adoption rates in a currently are over 30%. It took the east coast many.

Mark D. Stolper: What we've seen, and the rollout's been a little bit slower on the West Coast than originally intended, but what we are seeing is much higher initial adoption rates on the West Coast. Our West Coast adoption rates are currently over 30%. It took the East Coast many, many months to get to that level.

Many months to get to that level and part of why we're being more successful on the west coast isn't so much if there's differences in the patient population. It's just that we learned a lot.

Mark D. Stolper: Part of why we're being more successful on the West Coast isn't so much that there are differences in the patient population. It's just that we learned a lot from the East Coast rollout, and we took those learnings, and we're much more effective at communicating the program to the patients and to the referring physicians. We've done more in-market marketing, and we started off with the $40 price here on the West Coast. When we originally started on the East Coast, we were at a $60 price, which I think created some level of resistance in the adoption rates.

From the East Coast rollout and we took those learnings and we're much more effective at.

At communicating the program to the patients to the referring physicians, we've done more in in market marketing.

And we started off with the $40 price here on the West Coast and when we originally started on the East Coast, we were at a $60 price, which I didnt created some level of resistance in the adoption rate. So.

Mark D. Stolper: I think we're fairly bullish as we continue to roll out this program, which is embedded in our guidance. In other words, our revenue was close to $13 million for the EBCD program recognized by the AI division in 2023, and that should go somewhere into the low 20s in 2024. We're talking about 65%-ish growth just in that program within our digital health segment in 2024.

I think we're fairly bullish.

As we continue to rollout this program, which is embedded in our guidance in other words.

Our our revenue was close to $13 million in it.

And the a B C D program.

Recognized by the AI Division in 2023 and that should go somewhere into the low twenty's.

In 2024, so we were talking about 65% ish growth just in that program with it our digital health segment in 2020 for it.

And I'm just curious how had mentioned might take a couple of years before you actually get kind of your coverage, but is it too early to think about.

Mark D. Stolper: And I'm just curious, Howard mentioned it might take a couple of years before you actually get tenure coverage, but is it too early to think about, you know, have you gotten interest from outside centers, outside of your network, for this test? Well, I think we do have some interest. But interestingly enough, where it may be coming from are people that self-insure. And so at least two of our hospital joint venture groups are now extending the EBCD program to their employees and dependents, and in fact, in New Jersey, the Barnabas Health System, the RWJ Barnabas Health System, is rolling this out as a benefit that they're going to be paying for, I believe it's April 1st. So we have similar... For their employees. For their customers. They have about 30,000 employees and dependents. And dependents

Or have you got an interest from from outside some things up.

Part of your network for.

For the past.

Well I think we do have some interest but interestingly enough.

Where it may be coming from.

Are people that self insure and so at.

At least two of our hospital joint venture groups. There now are extending the.

A b C D program to their employees and dependents and in fact.

In New Jersey.

The Barnabas health system.

Our WJ Barnabas health is rolling this out as a benefit of.

That they're going to be paying for I believe it's April 1st so we'd have similar for their employees.

30000 employee and independent and dependent right and so right.

Howard G. Berger: Right. And so... I think this actually may be a different form of marketing before we're going to see adoption by commercial payors, but one may follow from the other because, if I use New Jersey as an example, their TPA, the third-party administrator, happens to be the Blue Cross Shield entity, Horizon, in New Jersey, and they essentially are going to be paying for these procedures as part of the RWJBarnabas benefit program

I think this actually may be a different form of marketing before we're going to see adoption by the commercial pay ores, but one may follow from the other because.

If I use New Jersey as an example, their tpa to third party administrator happens to be on the Blue Cross Blue Shield entity horizon in New Jersey, and they essentially are going to be paying the for these procedures.

As part of the our WJ Barnabas benefit program once they see the evidence of how beneficial. This is it may be easier to sell them, meaning horizon on a more a larger market.

Howard G. Berger: Once they see the evidence of how beneficial this is, it may be easier to sell them, meaning Horizon, on a larger market approach to the use of this. So, All of these are tools that I think we're in a unique position to do because of the way we are concentrated in markets and the kind of conversations that we can have by not just being a kind of a one-off provider in any particular. Thank you for all that calling. I appreciate it. Thanks, Larry.

Approach to the use of this so.

All of these are tools that I think we're in a unique position to do because of the way we are concentrated in markets and the kind of conversations we can have a not just being kind of a one off provider in any particular market.

Got it. Thank you for all that color I appreciate it.

Thanks Mark.

Howard G. Berger: The next question comes from Ed Kressler with Angela Gordon; please go ahead. Hey guys, congrats on the great quarter and year and always thanks for taking the time to speak with us. We appreciate it.

The next question comes from Ed Kressler with Angelo Gordon. Please go ahead.

Yeah.

Hey, guys congrats on the great quarter and year end always thanks for your time to taking the time to speak with us I appreciate it.

Edward Kressler: Can you discuss how you're funding the Houston acquisition? You know, the effect on proforma leverage and, obviously, given what we discussed here in terms of your regional density strategy. Should we be thinking about kind of next steps as more M&A, possible GEDs in that area, or will you pivot to some de novo activity there? And then, in the context of just, you know, kind of spending down some of that balance sheet cash that you derived from the equity offering, can you talk about your comfort level regarding leverage as you spend? Thanks so much.

Can you discuss how you're funding the <unk>.

<unk> acquisition and the.

The effect on pro forma leverage and obviously, given where we discussed here in terms of your regional density strategy.

Should we be thinking about kind of next steps as more M&A.

Hospital GBS in that area or would you pivot to some de novo activity there and then.

In the context of just kind of spending down some of that balance sheet cash that you.

Derived from the equity offering can you talk about your comfort level regarding leverage as you spend that down thanks, so much.

Sure. Thanks, Ed.

Mark D. Stolper: So, if you remember when we did the equity raise back in June of last year where we raised about $245 million in net proceeds, we earmarked about $100 million of that $245 million in proceeds for a potential debt paydown. And then, on October 1st of last year, we did pay down $30 million of that $100 million, and we communicated at the time we did that that we wanted to hold on to some more of that cash because we had other opportunities that we thought were very accretive for our shareholders, for all of our stakeholders, for the use of that cash. When we did that, we had the Houston deal in mind, and you'll see in our 10K that we paid about $30 million for that practice.

If you remember when we did the equity raise back in June of last year, where we raised about $245 million of net proceeds.

We earmarked about $100 million of that $245 million of proceeds to a potential debt.

Debt pay down and then in October <unk> of last year, we did pay down $30 million of that $100 million and we communicated at the time, we did that that.

We wanted to hold on.

Some more of that cash because we had other opportunities that we thought were very accretive.

For our shareholders for all of our stakeholders for the use of that cash when we did that we had the Houston deal in mind.

And you'll see in our 10-K that we paid about $30 million for that for that practice.

Mark D. Stolper: There's other things in our pipeline that we'll also discuss at www.larryweaver.com And, you know, after that, we'll still have a pretty robust cash balance that, you know, we'll continue to use not only for, you know, other investments like, like M&A but also, you know, capital investments in de novo centers, as well as. We have a lot of firepower, a lot We have $195 million undrawn upon a revolving line of credit.

There's other things in our pipeline.

We will also.

Be of use of <unk>.

Proceeds that we raised back in 2000 and that back last year in June.

So we so that deal will be paid for in cash.

And after that we'll still have a pretty robust cash balance that will continue to use not only for.

Other investments like like M&A, but also capital investments.

In de Novo centers as well as.

Some of the investments that we're making but.

Clearly we have.

A lot of firepower allows capacity not only with the $342 million of cash. We ended up ended with at year end, we have $195 million.

Unfunded.

Undrawn upon revolving line of credit.

Howard G. Berger: Our net debt leverage ratio is now below two times, and so we have a lot of debt capacity. We certainly have the capacity to continue to grow this business and execute on M&A opportunities if they should arise. Got it. And do you think you will pursue a de novo strategy in that area as well? Or are you going to kind of just immerse yourself in the market and learn it for a while first?

Our leverage our net debt leverage ratio is now below two times and so we have a lot of that capacity. So we certainly have the capacity to continue to grow this business and execute on M&A opportunities if they should arise.

Got it and do you think you will.

You know pursue a de novo strategy in that area as well or are you going to kind of just marinate in the market and learn it for a while first.

Howard G. Berger: Are you talking specifically about Houston? Yes, Yeah, I think our strategy in Houston will be similar to what it's been in other new markets that we've entered into, although we haven't done so for four years. But we're looking at other acquisition opportunities, probably a couple of de novos, and then wait to see who shows an interest, if there is any, from existing hospital operators in that market. But I would say for the next year or two, it'll be mostly acquisitions and de novos, but maybe more of an emphasis on the acquisition side of it rather than the de novo. Thank you so much for your time.

Are you talking specifically about Houston.

Yep.

Yeah.

I think our strategy in Houston will be similar to what it's been in other new markets that we've entered into although we have them for four years, but.

We're looking at other acquisition opportunities, probably a couple of de novo's.

And then wait to see who shows an interest.

If there is any from existing hospital operators in that market, but I would say for the next year or two.

It'll be mostly acquisitions and de novo, but maybe more of an emphasis on the acquisition side of it rather than the de novo side of it.

Got it. Thank you so much for your time I appreciate it.

James Philip Sidoti: Appreciate it. Transcribed by https://otter.ai. The next questioner comes from Jim Sidoti with Sidoti & Co. Please go ahead. Hi, good morning.

Thanks, Ed.

The next question comes from Jim Sidoti with Sidoti <unk> Co. Please go ahead.

Hi, Good morning, I know, it's been a long call. So I'll try and be quick. Thank you for the time, though.

Mark D. Stolper: I know it's been a long call, so I'll try and be quick. Thank you for the time, though. So, quick one. How many centers do you have operating as of today? As of today, we have 366.

So quick one how many centers do you have all have operating as of today.

As of today, we have 366.

Howard G. Berger: Actually, there may be more than that. I take that back because when you say today, do you mean in the calendar first quarter so far this year? Right. Well, we've made some other small acquisitions. We're probably, and a couple of de novos have finally opened up, if you will. But we're probably somewhere around 370 to 372 right now.

No actually that may be more than that I take that back because when you say today do you mean in the calendar first quarter. So far this year.

Right.

Yeah, well, we've made some other small acquisitions.

We're probably in a couple of de Novo's had finally opened up if you will but we're probably somewhere around $3 70 to $3 72, right now we are.

Mark D. Stolper: We expect by year end, with all the activities, some of which we've talked about, de novos and acquisitions, to be around 400. Okay, and the revenue guidance you provided last night, does that include the seven centers in Texas and, you know, additional centers you expect to come online? Yes. Well, it includes the seven centers in Texas from the point that we end up closing that deal, which will be during the second quarter. This does not include any other acquisitions that have yet to be announced.

Expect by year end with all the activities some of which we've talked about de novo and acquisitions to be around 400.

Okay and the revenue guidance you provided last night.

Does that include the seven centers in Texas and.

Additional centers you expect to come online.

Yes, when you all and well it includes the seven centers in Texas from the point that we end up closing that deal, which will be during the second quarter will close it. It does not include any other acquisitions that have yet to be announced.

Okay.

James Philip Sidoti: Okay, and can you just make a comment on reimbursement rates in Texas and how they compare to reimbursement on the coast? I can assure you it's going to be better. The coast is a challenging environment here, both in Arizona as well as in California, primarily because in Arizona there's a large Medicare population, and in Arizona, there's a large managed care population as well as a Medicare population.

And can you just make a comment on reimbursement rates in Texas, and how they compare to the reimbursement on it how it compares to reimbursement on the coast.

It's going to be I can assure you it's going to be better [laughter] coast is a challenging environment here, both in Arizona as well as California.

Primarily because in Arizona.

Large Medicare population.

And then Arizona Theres, a large managed care population as well as Medicare population. So.

Howard G. Berger: Our original due diligence showed us that we were comfortable with the reimbursement rates in Texas being significantly better than they are in Arizona, with more commercial patients and less government. Okay. All right. And then two more quick ones.

Our original due diligence.

Showed us that we were comfortable with the reimbursement rates.

In Texas being significantly better than they are in Arizona and California.

More commercial patients less government pay yes.

Okay, Alright, and then two more quick ones.

Mark D. Stolper: The guidance you gave for interest expense for 2024, is that net of any interest income you'll gain on the capital you raised in 2023, or is that just straight interest expense? Yeah, thank you for asking that. Yes, it's net of two things. One is it's net of any payments to and from our swap counterparties. And it's also net of interest income to be earned on our cast. Okay, which is how we reported our that which is how we reported our cash interest expense for this year of 38, excuse me for 2023 of 38.3 million. So it's increasing, I assume, because of the increasing rates, but you know, as you progress through the year, and generate more free cash, you know, assuming rates don't continue to go up at some point, that number should start to come down again, I guess, depending on your acquisition activity. I think in 2023, we received about $14 million on our interest rate swaps from counterparties because of the in the money nature of our Unknown Attendee.

Guidance you gave for interest expense for 2024 is that net of any interest income you'll you'll gain on the right you know.

The capital you're right.

In 2023 or was that just straight interest expense, yes. Thank you for asking that yes. It's net of two things one is it's net of.

Any payments to and from our swap Counterparties.

And it's also net of interest income to be.

Earned on our cash balance.

Okay says, how we reported our debt, which is how we've reported our cash interest expense for this year of 38 excuse me for 2023 of $38 3 million.

So.

It's increasing.

Soon because of the increase in rates, but you know as as you progress through the year generate more free cash.

Assuming rates don't continue to go up at some point that number should start to come down again, I guess, depending on your acquisition activity.

Yes.

In 2023, we received about $14 million.

On our interest rate swaps from Counterparties, because it'd be in the money nature of our swaps.

James Philip Sidoti: I'm just saying the overall interest expense, while it's going up this year, you would think at some point, because of the strong free cash flow generation you have, that that number should start to at least level off, you know, in 2025, 2026, those years. Okay. All right. And then the last one for me, on the AI business: is there any pushback at all from physicians on that product? Or are they happy to get the support, and they have plenty of other things they can do?

Mhm.

I'm, just saying the overall interest expense, while it's going up this year you would think at some point.

Because of the strong free cash flow.

Generation, you have but that number should start to at least level off in.

25, 26 of those years.

Yes.

Okay.

And then the last one for me on the AI business.

Is there any pushback at all from the <unk>.

From the physicians.

On that product or are they happy to get the support and there are plenty of other things they can do.

Howard G. Berger: Unknown Speaker, when you say physicians, are you talking about our radiologists or the referring physicians? Right. No, radiologists. Are they at all giving any kind of pushback to the AI, or are they happy to help? On the contrary, they'd be very upset if we took it away from them.

Did you say physicians are you talking about on a radiologist or the referring right.

Radiologist, a radiologist at all give me any kind of pushback.

I'm very happy to.

On the country that it would be very upset if we took it away from them.

Howard G. Berger: So I think our radiologists, and virtually all the radiologists where we introduced this, feel that they have a greater confidence level. It's almost like getting, you know, for them a second read, a second opinion, and one that helps them better analyze areas that are less visible to the human eye. So it's been an overwhelming success within our radiology community for mammography, and I assume they're not seeing any negative financial impact if this technology gets adopted.

Allergist in virtually all of the radiologist, where we introduced us to feel that they have a greater confidence level.

Almost like getting for them.

A second read a second opinion.

And one that helps them better analyze areas that are less visible to the human eye. So it's been an overwhelming success within our radiology.

Entity of mammography.

And I assume they're not seeing any negative financial impact for us.

The technology gets adopted.

Howard G. Berger: No, there's no, I mean, that's really up to the patient; the patient can elect to have this, you know, value added to their scan or not. So it's, it's their, it's their choice. Right, right. But in terms of what the radiologist's fees are, their fees are the same whether the patient adopts this or elects to do this or not.

No. There's no I mean, that's really up to the patient the patient can elect to have this.

Value added to their scan or.

We're not so it's there it's their choice.

Alright, right, but but the radiology speeds are that their therapies are the same whether the patient adoption spur.

To do this or not.

Howard G. Berger: Yeah. Okay. I just wanted to be clear on that. All right. Thank you. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Dr. Berger for any closing remarks. Thank you. Again, I would like to take this opportunity to thank all of our shareholders and stakeholders for their continued support and the employees of RadNet for 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.

Yes, yes.

Okay, just wanted to be clear on that alright. Thank you.

Thank you.

Yeah.

This concludes our question answer session I would like to turn the conference back over to Dr. Berger for any closing remark.

Thank you again I would like to take this opportunity to thank all of our shareholders.

Stakeholders for their continued support and the employees of Radnet for their dedication and hard work management management will continue its endeavor to be a market leader that provides great services with an appropriate return on investment for all stakeholders. Thank you for your time today and look forward to our next call.

Yeah.

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

Howard G. Berger: Thank you for your time today, and I look forward to our next session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. BF-WATCH TV 2021

Okay.

Yeah.

Yes.

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