Q1 2024 RadNet Inc Earnings Call

Operator: Good morning, ladies and gentlemen. Thank you for joining the RadNet Inc. conference call this morning. The call will begin momentarily. We do thank you for dialing in and your patience. If you do have any.

Good morning, ladies and gentlemen, thank you for joining the Radnet, Inc Conference call. This morning.

Operator: The call will begin momentarily, we do thank you for dialing in and your patient.

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Operator: All activities should begin shortly. Thank you. BF-WATCH TV 2021, The Ultimate Parody Site! BF-WATCH TV 2021 Good morning, everyone, and welcome to the RadNet Inc. first quarter 2024 financial results conference call. All participants will be in a listen-only mode.

Speaker Change: Good morning, everyone and welcome to the Radnet, Inc. First quarter 2024 financial results Conference call.

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Operator: Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Mark Stolper, Executive Vice President and Chief Financial Officer. Please go ahead.

Operator: Also note todays event is being recorded.

Operator: At this time I'd like to turn the call over to Mark Stolper, Executive Vice President and Chief Financial Officer, Sir. Please go ahead.

Mark D. Stolper: Thank you.

Mark D. Stolper: Thank you. Good morning, ladies and gentlemen, and thank you for joining Dr. Howard Berger and me today to discuss RadNet's first quarter 2024 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: Good morning, ladies and gentlemen, and thank you for joining Doctor Howard Berger and me today to discuss <unk> first quarter 2024 financial results.

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.

Mark D. Stolper: Before we begin today, we'd like to remind everyone of the safe Harbor statement under the private Securities Litigation Reform Act of 1995.

Mark D. Stolper: These risks and uncertainties include those risks set forth in RadNet's reports filed with the SEC from time to time, including RadNet's annual report on Form 10-K for the year ended December 31st, 2023. 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.

Mark D. Stolper: This presentation contains forward looking statements within the meaning of the U S. Private Securities Litigation Reform Act of 1995, specifically statements concerning <unk>.

Mark D. Stolper: Anticipated future financial and operating performance Radnet, the ability to continue to grow the business by generating patient referrals and contracts with radiology practices.

Mark D. Stolper: Recruiting and retaining technologists.

Mark D. Stolper: Receiving third party reimbursement for diagnostic imaging services successfully integrating acquired operations.

Mark D. Stolper: <unk> generated revenue and adjusted EBITDA for the acquired operations as estimated among others are forward looking statements within the meaning of the safe Harbor.

Mark D. Stolper: Forward looking statements are based on management's current preliminary expectations and are subject to risks and uncertainties, which may cause radnet actual results could differ materially from the statements contained herein.

Mark D. Stolper: These risks and uncertainties include those risks set forth in Radnet reports filed from the SEC from time to time, including Radnet. The annual report on Form 10-K for the year ended December 31 2023.

Mark D. Stolper: 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.

Howard G. Berger: RadNet undertakes no obligation to update publicly any forward-looking statements to reflect new information, events, or circumstances after the date they were made or to reflect the occurrence of unanticipated events. And with that, I'd like to turn the call over to Dr. Berger. Thank you, Mark. Good morning, everyone.

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.

Howard G. Berger: And with that I'd like to turn the call over to Dr. Berger.

Howard G. Berger: Thank you Mark.

Howard G. Berger: And thank you for joining us today. On today's call, Mark and I plan to provide you with highlights from our first quarter 2024 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 participating in our conference this morning. Let's begin.

Howard G. Berger: Good morning, everyone and thank you for joining us today on today's call Mark and I plan to provide you with highlights from our first quarter 2024 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 them.

Howard G. Berger: Thank you for your interest in our company and for dedicating a portion of your day to participate.

Howard G. Berger: And our conference this morning.

Howard G. Berger: I am very pleased with our performance in the first quarter. It was the strongest first quarter in our company's history, with record revenue, adjusted EBITDA, and adjusted earnings. Relative to last year's first quarter, total company revenue increased 10.5%, imaging center revenue increased 9.9%, and the new digital health revenue segment increased 32.3%. Imaging center revenue was driven by heavy demand in virtually all of our markets, despite being adversely impacted in the quarter on the East Coast by several snowstorms and in California by unusual rainstorms and flooding.

Howard G. Berger: Let's begin.

Howard G. Berger: Very pleased with our performance in the first quarter. It was the strongest first quarter in our company's history with record revenue adjusted EBITDA and adjusted earnings.

Howard G. Berger: Relative to last year's first quarter total company revenue increased 10, 5% imaging center revenue increased nine 9% and the new digital health revenue segment increased 32, 3%.

Howard G. Berger: Imaging Center revenue was driven by heavy demand in virtually all of our markets despite being adversely impacted in the quarter on the east coast by several snowstorms, and Italy, and in California by unusual rain storms and flooding.

Howard G. Berger: Nevertheless, we continue to benefit from the increasing utilization of diagnostic imaging within healthcare, as well as the shift of procedural volumes away from the more expensive hospital alternatives to ambulatory freestanding centers like the ones we operate. Also contributing to the strong revenue performance was the positive impact of improved reimbursement from commercial and capitated payers who recognized the important role we are playing as a lower-priced alternative to hospital-based imaging. Lastly, our top line is benefiting from a continuing shift in modality mix towards advanced imaging, MRI, CT, and PET-CT, where the revenue per scan is substantially higher than for routine imaging.

Howard G. Berger: Nevertheless, we continue to benefit from the increasing utilization of diagnostic imaging within healthcare as well as the shift of procedural volumes away from the more expensive hospital alternatives to ambulatory freestanding centers like the ones we operate.

Howard G. Berger: Also contributing to the strong revenue performance was a positive impact of improved reimbursement from commercial and capitation Payors, who recognize the important role we are playing as a lower price alternative to hospital based imaging.

Howard G. Berger: Lastly, our topline is benefiting from a continuing shift in modality mix towards advanced imaging, MRI, ICT and Pepsi T where the revenue per scan is substantially higher than the routine imaging.

Howard G. Berger: This is both a function of overall industry churn, as well as the significant capital investment we have made in the last few years in advanced imaging equipment for growth and upgrade. Driving the revenue growth within digital health was the AI business, including our EBCD, Enhanced Breast Care Detection. Breast Cancer Screening AI-Powered Initiative, which grew 118.8% quarter over last year's same quarter. Adjusted EBITDA was also a first quarter record in conjunction with the strong revenue results, which I just discussed.

Howard G. Berger: This is both a function of an overall industry trend as well as the significant capital investment we have made in the last few years in advanced imaging equipment for growth and upgrades.

Howard G. Berger: Driving the revenue growth within the digital health, whereas the AI business, including our a b C D enhanced those care detection.

Howard G. Berger: Breast cancer screening AI powered initiative, which grew 118.8% quarter over last year's same quarter.

Howard G. Berger: Adjusted EBITDA was also a first quarter record in conjunction with the strong revenue results, which I just discussed.

Howard G. Berger: Our focus on operational efficiency, improved management, and utilization of labor, as well as investments in Information Technology and Effective Cost Control contributed to a total company adjusted EBITDA which increased 21.4% from last year's first quarter. Another contributing factor to adjusted EBITDA growth was the disproportionate growth in the higher profit margin digital health segment businesses. Cumulatively, these factors drove a 120 basis points increase in our adjusted EBITDA margin as compared with last year's first quarter.

Howard G. Berger: Our focus on operational efficiency improved management and utilization of labor.

Howard G. Berger: Investments in information technology, and effective cost control contributed to a total.

Howard G. Berger: Company, adjusted EBITDA, which increased 21, 4% from last year's first quarter.

Howard G. Berger: Another contributing factor to adjusted EBITDA growth was a disproportionate growth in the higher profit margin digital health segment businesses.

Howard G. Berger: Cumulatively. These factors drove a 120 point basis point increase in our adjusted EBITDA margin as compared with last year's first quarter. While we are pleased with this margin expansion I remain convinced we have further opportunity.

Howard G. Berger: While we are pleased with this margin expansion, I remain convinced we have further opportunity to improve. The strong operating results in the first quarter relative to our internal budget, combined with ongoing operating trends that have continued into the second quarter, resulted in our decision to increase our 2024 full-year guidance ranges for revenue adjusted EBITDA and free cash flow. Mark will discuss this in more detail in his prepared statement. We continue a multifaceted approach to accelerate our growth.

Howard G. Berger: To improve margins.

Howard G. Berger: The strong operating results in the first quarter relative to our internal budget combined with ongoing operating trends that have continued into the second quarter resulted in our decision to increase 2020 for full year guidance ranges for revenue adjusted EBITDA and free cash flow.

Howard G. Berger: Mark will discuss this in more detail in his prepared remarks.

Howard G. Berger: We continue a multifaceted approach to accelerate our growth with respect to acquisitions. Some of you may have seen our two recent announcements regarding our entry into the Houston, Texas market.

Howard G. Berger: With respect to acquisitions, some of you may have seen our two recent announcements regarding our entry into the Houston, Texas, market. At quarter end, we completed the acquisition of the seven imaging centers of Houston Medical Imaging. In addition, we announced a second acquisition in April of six American Health Imaging Centers to be completed in June. Texas is the first new state we have entered since 2020. The Houston metropolitan marketplace, encompassing about 7.3 million people, is the fourth most populous city and the second fastest growing metropolitan area in the United States.

Howard G. Berger: Quarter end, we completed the acquisition of the seven imaging centers of Houston Medical imaging. In addition, we announced our second acquisition in April of six American health imaging centers to be completed in June.

Howard G. Berger: Jeff. This is the first new state we have entered since 2020.

Howard G. Berger: The Houston Metropolitan marketplace, encompassing about seven 3 million people is the fourth most populous city in the second fastest growing metropolitan area in the United States.

Howard G. Berger: We are confident of the opportunity for our further acquisitions. Unknown Attendee The new de novo build outs as Desirable, Health System Partnerships, and other means of expansion, which include bringing our artificial intelligence and leading-edge clinical and operating digital health solutions to the patients and referring communities of greater Houston. Also, during the first quarter, we completed a tuck-in acquisition of four centers in the Antelope Valley, north of Los Angeles

Howard G. Berger: We are confident of the opportunities for further acquisitions.

Howard G. Berger: The new de Novo build outs as desirable health system partnerships and other maintenance of expansion, which includes bringing our artificial intelligence and leading edge clinical and operating digital health solutions to the patients and referring communities of greater Houston.

Howard G. Berger: Also during the first quarter, we completed a tuck in acquisition of four centers in the Antelope Valley North of Los Angeles.

Howard G. Berger: New market acquisitions like Houston and the in-market Tuckett acquisitions like that in Antelope Valley will be a continuing part of our growth strategy. 2024 will be a year of reinvestment in our business to accelerate future growth. We currently have 12 de novo facilities in various stages of development, which will open for operations throughout the remainder of the year. These are on top of the two De Novos which opened in the first quarter.

Howard G. Berger: New market acquisitions, like Houston, and the end market tuck in acquisitions like that nano valley will be a continuing part of our growth strategy.

Howard G. Berger: 224 will be a year of reinvestment in our business to accelerate future growth. We currently have 12 de novo facilities in various stages of development, which will open for operations throughout the remainder of the year. These are on top of that.

Howard G. Berger: Sure.

Howard G. Berger: De novo's, which opened in the first quarter. These facilities are located in markets, where we have patient backlogs require additional capacity or where we currently lack access points to service a particular patient populations. While these projects are requiring us to make capital investments.

Howard G. Berger: These facilities are located in markets where we have patient backlogs, require additional capacity, or where we currently lack access points to service particular patient populations. While these projects are requiring us to make capital investments above our normal spending, we are confident that these centers will be material contributors to our long-term performance and growth. We continue to grow our hospital and health system joint venture business. Currently, 137 of our 375 centers, or 36.5%, are held within health system partnerships, and are partners with some of the largest and most successful systems in our geography. Partners include R.W.J. Barnabas in New Jersey Memorial.

Howard G. Berger: Love our normal spending we are confident that these centers will be material contributors to our long term performance and growth.

Howard G. Berger: We continue to grow our hospital and health system joint venture businesses. Currently 137 of our 375 centers or 36, 5%.

Howard G. Berger: Held within health system partnerships are partners of some of the largest and most successful systems in our geographies partners include R. W. J Barnabas.

Howard G. Berger: In New Jersey Memorial.

Howard G. Berger: Care, Dignity Health, LifeBridge, University of Maryland, Adventist, Cedar Sinai, and others. These and other systems are seeking solutions for long-term strategies around outpatient imaging and have recognized that cost-effective and efficient freestanding centers will continue to capture share from hospitals as payers and patients alter their site of care towards lower-cost, high-quality facilities. Our hospital and health system partners have been instrumental in increasing our procedural volumes through their physician relationships. During the first quarter, we added seven additional centers to our joint venture with Dignity Health in Arizona through the acquisition of facilities which were previously owned by Cigna's Ever North Care Group.

Howard G. Berger: Care dignity health Life Bridge University of Maryland, advantaged, Cedars Sinai and others.

Howard G. Berger: These and other systems are seeking solutions for long term strategy around the outpatient imaging and they recognize they are cost effective and efficient freestanding centers will continue to capture share from hospitals as payors and patients alter their site of care towards lower cost high quality fish.

Howard G. Berger: <unk>.

Howard G. Berger: Our hospital and health system partners have been instrumental in increasing our percent procedural volumes with their physician relationships during.

Howard G. Berger: During the first quarter, we added seven additional centers to our joint venture with dignity health in Arizona through the acquisition of facilities, which were previously owned by sickness.

Howard G. Berger: Never nor ever North care.

Howard G. Berger: And upon quarter close, we formed a new seven-center joint venture with Providence Health System in the northern and eastern San Fernando Valley of Los Angeles. Furthermore, our Dignity Joint Venture in Ventura County recently acquired four imaging centers in Oxnard and Ventura.

Howard G. Berger: In the past quarter close we formed a new seven centered joint venture with Providence Health system in the northern and Eastern San Fernando Valley of Los Angeles.

Howard G. Berger: Furthermore, our dignity joint venture in Ventura County, recently acquired four imaging centers in Oxnard and Ventura.

Howard G. Berger: Including these joint venture expansions and others upon which we are working, we expect to have close to 40% of our centers held within health system partnerships by year end 2024. We continue to make progress in the digital health segment. As some of you may remember, we announced earlier this year the formation of the RadNet Digital Health Financial Reporting Segment, effective January 1, 2024, which combines the eRAD and Deep Health operating system software businesses into what was our Clinical AI Reporting Segment in 2023.

Howard G. Berger: Including these joint venture expansion and others upon which we are working we expect to have close to 40% of our centers held within health system partnerships by year end 2024.

Howard G. Berger: We continue to make progress in the digital health segment.

Howard G. Berger: Some of you May remember, we announced earlier this year the formation of the Radnet Digital health financial reporting segment effective January one 2024, which combines the red and detailed operating system software businesses into one into what was our clinical AI ripped.

Howard G. Berger: <unk> segment in 2023.

Howard G. Berger: The financial impact 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, in particular SAS-based models, can operate at a significantly higher margin than RadNet's core imaging center segment and require less capital investment.

Howard G. Berger: The financial impact of these.

Howard G. Berger: <unk> digital health businesses has great potential for Red lobster as a customer of the deep health O S and AI solutions and of course, there is the owner of these businesses, which sell their solutions to customers outside of Radnet.

Howard G. Berger: Software businesses and particular SaaS based models can operate at significantly higher margin than Radnet, CT imaging center segment and require less capital investment.

Howard G. Berger: Within Dignity Health, we continue to sell, service, and support eRAD solutions to new and existing customers while we focus on the ongoing development of the next generation Deep Health OS cloud-based operating system and generative AI modules. We continue to believe that Deep Health OS can have a major impact on lowering costs and increasing efficiency in the areas of patient scheduling, pre-authorization, insurance verification, reporting, revenue cycle management, and analytics.

Howard G. Berger: Within dignity health, we continue to sell service.

Speaker Change: Excuse me, we then digital health.

Howard G. Berger: We continue to sell service and support he read solutions to new and existing customers. While we focus on the ongoing development of the next generation detail or cloud based operating system and generative AI modules. We continue to believe that detailed O S can have a major.

Howard G. Berger: Anthrax, and lowering cost and increasing efficiency in the areas of patient scheduling preauthorization insurance verification reporting.

Howard G. Berger: Revenue cycle management and analytics, we will begin testing some of the AI enabled automation tools, all the deep health OS in the third and fourth quarters of this year and aim to have commercially available solutions in the first half of 2025.

Howard G. Berger: We will begin testing some of the AI-enabled automation tools of the Deep Health OS in the third and fourth quarters of this year and aim to have commercially available solutions in the first half of 2025. Meanwhile, our Enhanced Breast Cancer, Diagnostic Mammography Offering continues its rollout in Central and Northern California. We expect implementation to be substantially complete as early as the end of the second quarter. Adoption rates continue to rise on the East Coast and are now approaching 40%.

Howard G. Berger: Our enhanced breast cancer.

Howard G. Berger: Diagnostic.

Howard G. Berger: Biography offering continues its rollout in central and Northern California.

Howard G. Berger: We expect implementation to be substantially complete as early as the end of the second quarter adapt.

Howard G. Berger: Adoption rates continue to rise on the east coast and are now approaching 40%, while the implementation in southern California is more recent we are encouraged from initial adoption rates, which are significantly higher than those experienced at the beginning of the east coast rollout.

Howard G. Berger: While the implementation in Southern California is more recent, we are encouraged by initial adoption rates, which are significantly higher than those experienced at the beginning of the East Coast rollout. Aidens Lung, Quantive Prostate, and Neuro-AI Solutions are also expanding their customer base, predominantly in Europe. This has been highlighted in the United Kingdom, where Aidens is the partner of choice for the four-country rollout of the NHS-targeted Lung Health Check lung cancer screening program. Finally, we continue to improve liquidity and financial leverage. We ended the first quarter with a cash balance of $527 million and a net debt-to-adjusted ratio of slightly more than one.

Howard G. Berger: Agents flown and quantitative prostate and narrow AI solutions are also expanding their customer base predominantly in Europe. This has been highlighted in the United Kingdom, where agents as the partner of choice for the four country rollout of the NHS targeted lung health check.

Howard G. Berger: Lung cancer screening program.

Howard G. Berger: Finally, we continue to improve liquidity and financial leverage we ended the first quarter with a cash balance of 527 million and a net debt to adjusted ratio of slightly more than one time included in that cash balance were approximately $219 million of net pros.

Howard G. Berger: Included in that cash balance were approximately $219 million of net proceeds from a successful stock offering we completed in March. Additionally, subsequent to the end of the first quarter, and completed on April 18th. We opportunistically refinance our debt facility. With this financing, we were able to reduce our cost of capital, extend maturities, and add an additional approximately $168 million to RadNet's cash ground. With all of this, RadNet is in the best financial condition in its history and is poised for accelerated growth.

Howard G. Berger: <unk> from a successful stock offering we completed in March.

Howard G. Berger: Additionally, subsequent to the end of the first quarter and completed on April 18.

Howard G. Berger: We opportunistically refinanced our debt facilities.

Howard G. Berger: With this financing we were able to reduce our cost of capital and extend maturities and added an additional approximately $168 million.

Howard G. Berger: To Radnet cash balance with all of this radnet is in the best financial condition in its history and is poised for accelerated growth.

Howard G. Berger: At this time, I'd like to turn the call back over to Mark to discuss some of the highlights of our first quarter 2024 performance. When he is finished, I will make some closing remarks. Thank you, Howard.

Howard G. Berger: At this time I'd like to turn the call back over to Mark to discuss some of the highlights of our first quarter 2020 for performance. When he is finished I will make some closing remarks.

Howard G. Berger: Yeah.

Mark: Thank you Howard.

Mark D. Stolper: I'm now going to briefly review our first quarter 2024 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 first quarter performance. I will also provide an update on 2024 financial guidance levels, which were released in conjunction with our 2023 year-end results in March.

Mark: I'm now going to briefly review, our first quarter 2020 for 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.

Mark D. Stolper: Well as provide some insights into some of the metrics that drove our first quarter performance.

Mark D. Stolper: I will also provide an update to 2024 financial guidance levels, which were released in conjunction with our 2023 year end results in March.

Mark D. Stolper: In my discussion, I will use the term adjusted EBITDA, which is a non-GAAP financial measure. The company defines adjusted EBITDA as earnings before interest, taxes, depreciation, and amortization and excludes losses or gains on the disposal of equipment, other income or loss, loss on debt extinguishments, and non-cash equity compensation. Adjusted EBITDA includes equity earnings in unconsolidated operations and subtracts allocations of earnings to non-controlling interests in subsidiaries and is adjusted for non-cash or extraordinary and one-time events taking place during the period.

Mark D. Stolper: In my discussion I will use the term adjusted EBITDA, which is a non-GAAP financial measure.

Mark D. Stolper: 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 non cash equity compensation.

Mark D. Stolper: Adjusted EBITDA includes earnings equity earnings in unconsolidated operations, and subtract allocations of earnings to Noncontrolling interests in subsidiaries and is adjusted for noncash or extraordinary and one time events taken place during the period.

Mark D. Stolper: A full quantitative reconciliation of adjusted EBITDA to net income or loss attributable to RadNet Inc. common stockholders is included in our earnings release. With that said, I'd now like to review our first quarter of 2024. For the first quarter of 2024, RadNet reported total company revenue of $431.7 million and adjusted EBITDA of $58.5 million.

Mark D. Stolper: A full quantitative reconciliation of adjusted EBITDA to net income or loss attributable to Radnet, Inc. Common stockholders is included in our earnings release.

Mark D. Stolper: With that said I'd now like to review, our first quarter 2024 results.

Mark D. Stolper: Yeah.

Mark D. Stolper: For the first quarter of 2020 for Radnet reported total company revenue of $431 $7 million and adjusted EBITDA of $58 $5 million.

Mark D. Stolper: Revenue increased $41.1 million, or 10.5%, and adjusted EBITDA increased $10.3 million, or 21.4%, as compared with the first quarter of 2023. Breaking this performance down to the individual operating segments, our imaging center segment reported revenue of $417 million and adjusted EBITDA of $54.9 million. This was an increase of $37.6 million, or 9.9%, in revenue and an increase of $6.8 million, or 14.1%, in adjusted EBITDA as compared with last year's first quarter.

Mark D. Stolper: Revenue increased $41 $1 million or 10, 5% and adjusted EBITDA increased $10 $3 million or 21, 4% as compared with the first quarter of 2023.

Mark D. Stolper: Breaking this performance down to the individual operating segments. Our imaging Center segment reported revenue of $417 million and adjusted EBITDA of $54 $9 million.

Mark D. Stolper: This was an increase of 37 $6 billion or nine 9% in revenue and an increase of $6 $8 million or 14, 1% and adjusted EBITDA as compared with last year's first quarter.

Mark D. Stolper: Driving this performance were strong aggregate and same center procedural volumes the impact of higher reimbursement, we are receiving from commercial and capitation payors.

Mark D. Stolper: Driving this performance were strong aggregate and same center procedure volumes, the impact of higher reimbursement we are receiving from commercial and capitated payers, the gradual movement toward advanced imaging, and Tight Expense Control. The digital health segment reported revenue of $14.7 million and adjusted EBITDA of $3.5 million during the quarter; revenue increased $3.6 million or 32.3%, and Adjusted EBITDA increased $3.5 million or 17,500% as compared with the first quarter of 2023. Digital health's significant growth was due in part to a $2.5 million or a 118.8% increase in AI revenue, which climbed to $4.7 million during the first quarter of 20

Mark D. Stolper: The gradual movement towards advanced imaging.

Mark D. Stolper: And tight expense control.

Mark D. Stolper: The digital health segment reported revenue of $14 $7 million and adjusted EBITDA of $3 $5 million during the quarter.

Mark D. Stolper: Revenue increased $3 $6 million or 32, 3%.

Mark D. Stolper: And adjusted EBITDA increased $3 $5 billion or our 17500% as compared with the first quarter of 2000 and twice right.

Mark D. Stolper: Digital health significant growth was due in part from a $2 $5 million or 118, 8% increase in AI revenue, which climbed to $4 $7 million during the first quarter of 2024.

Mark D. Stolper: Total company net loss for the first quarter of 2024 was $2 8 million as compared with the total company net loss of $21 million for the first quarter of 2023.

Mark D. Stolper: The total company net loss for the first quarter of 2024 was $2.8 million, as compared with the total company net loss of $21 million for the first quarter of 2023. The net loss per share for the first quarter of 2024 was negative $0.04 compared with a net loss per share of negative $0.36 in the first quarter of 2023 based upon a weighted average number of diluted shares outstanding of 69.3 million shares in 2024 and 57.7 million shares in 2023. There were a number of unusual or one-time items impacting the first quarter, including the following.

Mark D. Stolper: Net loss per share for the first quarter of 2024 was negative four cents compared with a net loss per share of negative <unk> 36.

Mark D. Stolper: The first quarter of 2023 based upon a weighted average number of diluted shares outstanding of $69 3 million shares in 2024, and 57 7 million shares in 2023.

Mark D. Stolper: $1.2 million of non-cash gain from interest rate swaps and $1 million of expense related to leases for our de novo facilities under construction that have not yet opened for operation. $2 million non-cash increase in contingent consideration related to the completed acquisition, and $3.3 million of non-capitalized research and development expenses with respect to our new Deep Health Cloud OS and generative AI. Adjusting for the above items, total company adjusted earnings was $5 million for the quarter, and diluted adjusted earnings per share was $0.07 per share during the first quarter of 2024. This compares with a total company adjusted loss of $13 million and diluted adjusted loss per share of negative 22 cents during the first quarter of 2020.

Mark D. Stolper: There were a number of unusual or onetime items impacting the first quarter, including the following.

Mark D. Stolper: One $2 million or so of non cash gains from interest rate swaps.

Mark D. Stolper: $1 million expense related to leases for our de novo facilities under construction that have not yet opened for operations.

Mark D. Stolper: $2 million noncash increase to contingent consideration related to completed acquisitions.

Mark D. Stolper: And $3 $3 million of non capitalized research and development expenses with respect to our new deep health cloud OS and Jennifer has AI.

Mark D. Stolper: Adjusting for the above items total company adjusted earnings was $5 billion for the quarter and diluted adjusted earnings per share was seven cents per share during the first quarter of 2024.

Mark D. Stolper: This compares with total company adjusted loss of $13 million and diluted adjusted loss per share of negative <unk> 22 cents during the first quarter of 2023.

Mark D. Stolper: Yeah.

Mark D. Stolper: For the first quarter of 2024, as compared with the prior year's first quarter, MRI volume increased 11.7 percent, CT volume increased 9.1%, and PET-CT volume increased 17.5%. Overall volume taking into account routine imaging exams inclusive of x-ray, ultrasound, mammography, and all other exams increased 5.7% over the prior year's first quarter. On a same-center basis, including only those centers which were part of RadNet for both the first quarters of 2024 and 2023, MRI volume increased 9.9%.

Mark D. Stolper: For the first quarter of 2024 as compared with the prior year's first quarter.

Mark D. Stolper: <unk> volume increased 11, 7% <unk> volume increased nine 1% and pet C. T volume increased 17, 5%.

Mark D. Stolper: Overall volume taking into account routine imaging exams inclusive of X Ray ultrasound mammography and all other exams increased five 7% over the prior year's first quarter.

Mark D. Stolper: On a same center basis, including only those centers, which were part of Radnet for both the first quarters of 2024 and 2023.

Mark D. Stolper: MRI volume increased nine 9%.

Mark D. Stolper: CT volume increased 6.5%, and PET CT volume increased 15.3%. Overall, same center volume, taking into account all routine imaging exams, increased 3.8% over the prior year and same course. In the first quarter of 2024, we performed 2,646,951 total procedures. The numbers were consistent with our multimodality approach, whereby 74.3% of all the work we did by volume was from routine imaging.

Mark D. Stolper: <unk> volume increased six 5%.

Mark D. Stolper: Pet Cte volume increased 15, 3%.

Mark D. Stolper: Overall same center volume taking into account all routine imaging exams increased three 8% over the prior year same quarter.

Mark D. Stolper: In the first quarter of 2024, we performed 2 million 646951 total procedures.

Mark D. Stolper: The procedures were consistent with our multi modality approach whereby 74, 3% of all the work we did by volume was from routine imaging.

Mark D. Stolper: Since we now have a table of our aggregate procedure volumes broken down by modality in our earnings release, I won't go through the numbers, but I want to make the following point. In his remarks, Dr. Berger mentioned that we are experiencing a slow shift to higher acuity procedures, or what we call advanced imaging. In the first quarter of this year, 25.7% of our procedures were from MRI, CT, and PET-CT. In last year's first quarter, this metric was 24.5%, a shift of 1.2% of our procedure volumes toward advanced imaging.

Speaker Change: Since we now have a table of our aggregate procedure volumes broken down by modality in our earnings release I won't go through the numbers.

Mark D. Stolper: But want to make the following points.

Mark D. Stolper: In his remarks, Dr. Berger mentioned that we are experiencing a slow shift to higher acuity procedures are what we call advanced imaging.

Mark D. Stolper: In the first quarter of this year 25, 7% of our procedures were frightened where from MRI and.

Mark D. Stolper: And Pat C T.

Mark D. Stolper: In last year's first quarter. This metric was 24, 5% a shift of one 2% of our procedure volumes towards advanced imaging.

Mark D. Stolper: With higher pricing and better margins, more advanced imaging improves our financial results, including our operating margins. Overall gap interest expense for the first quarter of 2024 was $16.3 million, as compared with $15.7 million during last year's first quarter.

Mark D. Stolper: With higher pricing and better margins more advanced imaging improves our financial results, including our operating margins.

Mark D. Stolper: Overall GAAP interest expense for the first quarter of 2024 was $16 $3 million as compared with $15 $7 million during last year's first quarter.

Mark D. Stolper: In the first quarter of 2024, cash interest expense, which includes payments to and from counterparties on our interest rate swaps and net interest income from our cash balance, was $10.5 million. This compares with $17.5 million in the first quarter of 2023. The lower cash interest expense this quarter is primarily the result of more interest income on larger cash balances, as well as the timing of cash interest paid on our term loans.

Mark D. Stolper: In the first quarter of 2020 for cash interest expense, which includes payments to and from Counterparties on our interest rate swaps and net interest income from our cash balance was $10 $5 million.

Mark D. Stolper: This compares with $17 5 million in the first quarter of 2023.

Mark D. Stolper: The lower cash interest expense. This quarter is primarily the result of more interest income on larger cash balances as well as the timing of cash interest paid on our term loan.

Mark D. Stolper: With regard to our balance sheet, as of March 31st, 2024, unadjusted for bond and term loan discounts, we had $317.1 million of net debt, which is our total debt at par value, less our cash balance. This compares with $789.2 million of net debt at March 31, 2023. Note that this debt balance includes New Jersey Imaging Network's debt of $142.5 million, for which RadNet is neither a borrower nor a guarantor.

Mark D. Stolper: With regards to our balance sheet as of March 31, 2024, unadjusted for bond and term loan discounts, we had $317 $1 million of debt debt, which is our total debt at par value less our cash balance.

Mark D. Stolper: This compares with $789 $2 million of net debt at March 31, 2023.

Mark D. Stolper: Note that this debt balance includes new Jersey imaging network's debt of $142 5 million for which Radnet is neither a borrower nor guarantor.

Mark D. Stolper: As of March 31st, 2024, we were undrawn on our $195 million line of credit and had a cash balance of $527 million. On March 31st, 2024, our accounts receivable balance was $189.6 million, an increase of $25.9 million from year-end 2023. The increase in accounts receivable is primarily the result of some collection delays resulting from the cyber attack on changed healthcare and the normal first quarter effect of cash collections from the resetting of patient deductibles each year in January.

Mark D. Stolper: As of March 31, 2024, we were undrawn on our $195 million line of credit and had a cash balance of $527 million.

Mark D. Stolper: At March 31, 2020 for our accounts receivable balance was $189 $6 million, an increase of $25 9 million from year end 2023.

Mark D. Stolper: The increase in accounts receivable is primarily the result of some collection delays, resulting from the cyber attack on changed health care and the normal first quarter effect of cash collections from the resetting of patient deductibles each year in January.

Mark D. Stolper: Despite the impact from the change healthcare breach, our dsos or days sales outstanding was 34 nine days at March 31, 2024, near a historic low.

Mark D. Stolper: Despite the impact of the Change Healthcare breach, our DSOs, or Days Sales Outstanding, were 34.9 days at March 31st, 2024, near a historic low. Through March 31st, 2024, we had total capital expenditures net of proceeds from the sale of imaging equipment of $64.4 million. This total includes $6.9 million spent under equipment notes and the remainder spent in cash.

Mark D. Stolper: Through March 31, 2024, we had total cash capital expenditures net of proceeds from the sale of imaging equipment of $64 $4 million.

Mark D. Stolper: This total includes $6 $9 million spent under equipment notes and the remainder spent in cash.

Mark D. Stolper: Note that each year we front load the majority of our capital decisions into the first part of the year and have been spending extraordinarily on growth cap acts to fund the 12 de novo facilities in construction, which are scheduled to open before year end. At this time, I'd like to update and revise our 2024 financial year guidance levels, which we released in conjunction with our fourth quarter and year-end 2023 results. Given the positive trends we are experiencing in virtually all aspects of our business and the strong financial performance of the first quarter, which is continuing into the second quarter, we are revising upward certain guidance levels in anticipation of financial results that we believe will exceed our original expectations for 2024.

Mark D. Stolper: Note that each year, we front load the majority of our capital decisions into the first part of the year and had been spending extraordinarily on growth Capex to fund the 12 de novo facilities in construction, which are scheduled to open before year end.

Mark D. Stolper: For revenue, we increased our guidance level for the imaging center segment by $25 million, both at the low end and the top end of the range. Also, for the imaging center segment, we've increased our EBIDTA guidance by $5 million at the low end and the high end of our range. Our guidance level is now $255 to $265 million. For capital expenditures for the imaging center segment, we increased our guidance both at the low end and the high end of the range by $5 million for cash paid for interest.

Mark D. Stolper: Given the positive trends, we are experiencing in virtually all aspects of our business and the strong financial performance at the first quarter, which is continuing into the second quarter. We are revising upwards certain guidance levels in anticipation of <unk> financial results that we believe will exceed our.

Mark D. Stolper: Our original expectations for 2024.

Mark D. Stolper: Also for the imaging Center segment, we've increased our EBITDA guidance by $5 million at the low end and the high end of our range.

Mark D. Stolper: For capital expenditures for the imaging Center segment, we increased our guidance.

Mark D. Stolper: Both at the low end and the high end of the range by $5 million.

Mark D. Stolper: For cash paid for interest.

Mark D. Stolper: Due to the refinancing transaction and our much larger cash balance, we've decreased our cash paid for interest this year by $3 million, both at the low end and high end of the range, and we anticipate our cash interest expense to be $37 to $42 million. We also increased our free cash flow generation guidance level by $3 million to $68 to $78 million.

Mark D. Stolper: Due to the refinancing transaction and our much larger cash balance we decreased our cash paid for interest this year by $3 million both at the low end and high end of the range and anticipate our cash interest expense to be 37% to $40 $2 million and we increased our free cash flow generation.

Mark D. Stolper: And guidance level by $3 million to $68 million to $78 million.

Mark D. Stolper: For the digital Health segment, we increased our EBITDA guidance by $1 million, both at the low end and the high end of the range to $13 million to $15 million.

Mark D. Stolper: For the digital health segment, we increased our EBITDA guidance by $1 million, both at the low end and the high end of the range, to $13 to $15 million. We increased our non-capitalized R&D expenditures by $1 million to $12 to $14 million, and all other guidance ranges remain the same for digital health. I'll now discuss reimbursement with respect to Medicare. With respect to Medicare reimbursement for 2025, there's nothing to report at this time.

Mark D. Stolper: We increased our non capitalized R&D expenditures by weight by $1 million to $12 million to $14 million.

Mark D. Stolper: And all other guidance ranges remain the same for the digital health platform.

Mark D. Stolper: I'll now discuss the reimbursement with respect to Medicare with respect to Medicare reimbursement for 2025, there's nothing to report at this time as is typical each year, we are expecting CMS to release, a preliminary rate schedule sometime in June or July.

Mark D. Stolper: As is typical each year, we are expecting CMS to release a preliminary rate schedule sometime in June or July, at which time we will analyze CMS's proposal and our industry's lobbying groups will provide CMS with or industry feedback. At the time of our second quarter financial results call, we will be in a position to comment on CMS's proposal and its impact, if any, upon RadNet's future results. However, we did receive some good news in March regarding 2024 Medicare rates.

Mark D. Stolper: At which time, we will analyze cms's proposal and our industry's lobbying groups will provide CMS our industry's feedback.

Mark D. Stolper: At the time of our second quarter financial results call, we will be in a position to comment on Cms's proposal and its impact if any upon radnet future results.

Mark D. Stolper: However, we did receive some good news in March regarding 2020 for Medicare rates.

Mark D. Stolper: Effective March 9th of this year, as part of the Consolidated Appropriations Act, 1.72% of the 3.4% scheduled reduction in the conversion factor of the 2024 Medicare fee schedule was eliminated on a prospective basis. The reduction of the cut applies to all of our Medicare billings from March 9th through the end of this year.

Mark D. Stolper: <unk> March 9th of this year as part of the consolidated Appropriations Act, 172% of the three 4% scheduled reduction in the conversion factor of the 2020 for Medicare fee schedule was eliminated on a prospective basis.

Mark D. Stolper: The reduction of the cut applies to all of our Medicare Billings from March nine through the end of this year.

Mark D. Stolper: As some of you may remember, the original proposed cut was going to reduce our 2024 revenue by an estimated $7 to $8 million. Thus, the mitigation gives back almost half of this amount, thereby increasing our 2024 revenue by $3.4 million relative to our original expectations and budget. At this point, I'd like to turn the call back to Dr. Berger, who will make some closing remarks.

Mark D. Stolper: As some of you may remember.

Howard G. Berger: The original proposed cut was going to reduce our 2024 revenue by an estimated $7 million to $8 million.

Howard G. Berger: Thus the mitigation gives back almost half of this amount, thereby increasing our 2024 revenue by.

Howard G. Berger: By $3 $4 million relative to our original our original expectations and budget.

Mark D. Stolper: At this point I'd like to turn the call back to Dr. Berger, who will make some closing remarks.

Mark D. Stolper: Yeah.

Howard G. Berger: Thank you, Mark. As we move towards the halfway point of 2024, we are excited about the initiatives we have for the remainder of the year. We are particularly encouraged by the progress we are making in digital health. As we continue to improve and accelerate growth in the core imaging center business, our digital health initiatives are poised to help us drive more revenue, reduce costs, and expand markets. We remain convinced that the successful future of any imaging business will be heavily dependent upon the automation and efficiency by which patients and clinical data are managed, analyzed, and processed.

Howard G. Berger: Thank you Mark.

Howard G. Berger: As we move towards the half year point of 2024, we are excited about the initiatives we have for the remainder of the year. We are particularly encouraged by the progress we're making in digital health.

Howard G. Berger: As we continue to improve and accelerate growth in the core imaging center business. Our digital health initiatives are poised to help us drive more revenue reduce cost and increase margins.

Howard G. Berger: We remain convinced that the successful future of any imaging business will be heavily dependent upon the automation and efficiency by which patients and clinical data is managed analyzed and processed.

Howard G. Berger: This is the driver for our development of the new DeepHealth OS, which will be the delivery platform for solutions that automate business processes and more effectively manage patient and clinical data. We expect Deep Health OS to further automate processes that today principally rely on human labor in the areas of patient scheduling.

Howard G. Berger: This is the driver for our development of the new detail OLS.

Howard G. Berger: Which will be the delivery platform for solutions, which automate business processes and more effectively manage patient and clinical data, we expect deep health or less to further automate processes that today, principally rely on human labor in the areas of patient scheduling.

Howard G. Berger: Clinical Reporting, Medical Coding, Sales and Marketing, Workflow Improvement, and Analytics. In this vein, we are currently making investments in foundation generative AI models. It's faster and less expensive for data scientists to use pre-trained foundation models to develop new machine learning applications, rather than train unique machine learning models from the ground up when trained on broad data sets.

Howard G. Berger: Clinical reporting medical coding sales and marketing workflow improvement and analytics.

Howard G. Berger: In this vein we are currently making investments in foundation generative AI models is faster and less expensive for a data sciences to use pre trained foundation models to develop new machinery machine learning applications, rather than train unique machine learning models from the ground up.

Howard G. Berger: Sure.

Howard G. Berger: When train and broad datasets.

Howard G. Berger: These models can support a diverse range of use cases, including tests that foundation models can perform, including language processing, visual comprehension, code generation, and human decision making. Advances in available foundation models will enable us to design and test AI solutions more quickly and at a lower cost, giving us a distinct advantage when applied to the enormous database of clinical and business information we offer. While we develop Deep Health OS, we continue to grow revenue from our clinical AI solutions for breast, lung, and prostate cancer screening.

Howard G. Berger: These models can support a diverse range of use cases test that foundation models can perform including language processing visual comprehension cogeneration and human decision, making.

Howard G. Berger: Advances in available foundation models will enable us to design and test solutions more quickly and at a lower cost, giving us a distinct advantage when applied to the enormous database of clinical and business information.

Howard G. Berger: While we develop deep health unless we continue to grow revenue from our clinical AI solutions for breast lung and prostate cancer screening. Our objective is to design and deploy these tools and others that lowered the cost and increase the accuracy of cancer diagnosis in a form that can be.

Howard G. Berger: Our objective is to design and deploy these tools and others that lower the cost and increase the accuracy of cancer diagnosis in a form that can be packaged to create widespread population health initiatives and screenings. Our Breast Cancer A.I. and the EBCD program exemplify this opportunity.

Howard G. Berger: Package to create widespread population health initiatives and screening.

Howard G. Berger: Our breast cancer AI and the ECB program exemplifies this opportunity our breast AI is improving the productivity and accuracy of our radiologists, while providing a valuable benefit to our patients for which they are willing to self pay.

Howard G. Berger: is improving the productivity and accuracy of our radiologists while providing a valuable benefit to our patients for which they are willing to self-pay. We are formulating similar screening programs for prostate, lung, and other chronic diseases for both domestic and international markets as we firmly believe that healthcare needs to shift towards prevention and early detection and not just focus on treating patients who are already sick. We look forward to updating you further on the progress of our digital health initiatives in the coming quarters.

Howard G. Berger: We are formulating similar screening programs for prostate lung and other chronic diseases for both domestic and international markets as we firmly believe that healthcare needs to shift towards prevention and early detection and not just focus on treating patients who are already sick.

Howard G. Berger: We look forward to updating you further on the progress of our digital health initiatives in the coming quarters.

Howard G. Berger: Operator, we are now ready for the question and answer portion. Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press star and then one on a touch-tone telephone. To withdraw your question, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality.

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

Operator: Once again, that is the star and then one to join the question queue, pause momentarily to assemble the roster, and our first question today comes from Brian Tranquil from Jefferies. Please go ahead with your question. Hey, good morning, guys.

Howard G. Berger: Ladies and gentlemen at this time well begin the question and answer session.

Operator: To ask a question you May press Star and then one using a touchtone telephone. So withdraw your question you May press Star two.

Brian Gil Tanquilut: If you are using a speaker phone, we do ask that you. Please pick up the handset prior to pressing the keys to ensure the best sound quality.

Brian Gil Tanquilut: Once again that is star and then one to join the question queue.

Brian Gil Tanquilut: Pause momentarily to assemble the roster.

Operator: And our first question today comes from Brian Tranquil from Jefferies. Please go ahead with your question.

Brian Gil Tanquilut: Congratulations on a really, really strong quarter. Maybe my first question, just given the strength that we're seeing here, curious, Mark or Howard, what you can or what you are seeing in terms of continued strength maybe into the quarter? I know, Mark, you alluded to that a little bit. But also, pricing seems strong. So maybe if you could share with us any color on the pricing strength as well. Good morning, Brian.

Speaker Change: Hey, good morning, guys. Congrats on a really really strong quarter.

Brian Gil Tanquilut: Maybe my first question just given the strength that we're seeing here.

Brian Gil Tanquilut: Curious mark or Howard.

Brian Gil Tanquilut: What you can do or what you are seeing in terms of the continued strength maybe into the quarter I know Mark you alluded to that a little bit but also pricing seems strong.

Brian Gil Tanquilut: Maybe if you could share with us any color.

Brian Gil Tanquilut: On the pricing trends as well.

Speaker Change: Good morning, Brian.

Howard G. Berger: Thank you for your question. In regards to pricing, we have, over the past several years, tried to transform at least RadNet from being what we have traditionally called ourselves price takers to at least the opportunity to sit down and negotiate pricing with the various payrolls other than Medicare, of course, and Medicaid. But this past year and starting out in 2024, we've taken a position, particularly given the enormous demand that we have in backlogs, that contracts as they come up for renewal need to be at pricing levels that we think are appropriate not only for maintaining and sustaining the health of our company and for the benefit of our patients and referring physicians but take into account increasing costs primarily for labor that we have been incurring now for the past couple of years.

Speaker Change: Thank you for your question.

Howard G. Berger: In regards to pricing.

Howard G. Berger: We have over the past several years.

Howard G. Berger: Tried to transform at least radnet from being what we have traditionally.

Howard G. Berger: Called ourselves price takers too.

Howard G. Berger: At least the opportunity to sit down and negotiated pricing with the various payers other than Medicare of course.

Howard G. Berger: And Medicaid but.

Howard G. Berger: This past year and starting out.

Howard G. Berger: In 2024 weeks.

Howard G. Berger: We've taken the position, particularly given the enormous demand that we have in backlogs that contracts as they come up for renewal are need to be at pricing levels that we think are appropriate not only for maintaining and sustaining that.

Howard G. Berger: Health of our company and for the benefit of our patients and referring physicians, but take into account increasing clause pri.

Howard G. Berger: Primarily for labor that we have been incurring now for the past couple of years.

Howard G. Berger: When we're not able to reach an agreement as to what we believe are fair and sustainable rates, with particular examples that I can give you with our capitation contracts, we're prepared to go to fee-for-service, which effectively did happen over the last several years, the latter part of last year and beginning of this year, where at least two of our contracts have moved to fee-for-service at rates substantially higher than what we were able to agree for renew So I think this is really a function of finally being in a position where we're not just going to accept pricing from any payor that isn't consistent with the appropriate business models and the need for us not only to cover increasing costs but, as you can see from our investment through our CapEx and building of DeNovo Centers, a significant commitment that we have to improving access and improving the state-of-the-art technology by which we pride ourselves So I think both of those have resonated well with people.

Howard G. Berger: When we're not able to reach.

Howard G. Berger: An agreement as to what we believe are fair and sustainable rates.

Howard G. Berger: With a particular example of examples that I can give you with our capitation contracts.

Howard G. Berger: We're prepared to go to fee for service and which effectively did happen over there.

Howard G. Berger: Later part of last year and beginning of this year. We're at least two of our contracts have moved to fee for service and rates substantially higher than what we were able to agree.

Howard G. Berger: For renewing the contracts if we stayed with capitation. So I think this is really a function of finally being in a position where we're not just going to accept pricing from any pay or debt.

Howard G. Berger: That isn't consistent with the appropriate business models and new for us not only to cover increasing cost, but as you can see from our investment through our Capex and building a de novo centers a significant commitment that we have to.

Howard G. Berger: Improving access and improving the state of the art technology by which we pride.

Howard G. Berger: Selves as being.

Howard G. Berger: Top of the industry. So I think both of those have Reza.

Howard G. Berger: Resonated well with our successful virtually in all of our negotiations and I think that has contributed in part to the improved margins yet.

Howard G. Berger: We are successful virtually in all of our negotiations, and I think that has contributed in part to the improved margins that Mark discussed in his remarks. I think this will be a continuing effort on our part to continually monitor not only what the appropriate rates are but also the tools by which we and everybody else in healthcare are burdened by once we do a procedure, collecting those procedures. So our revenue cycle management group, as well as the contracting groups, work hand in hand as we come up with these contract renewals to make certain that we get paid for every procedure that we do and at rates that we think are not only consistent with our needs but still remain far lower than the alternative in many of our markets for hospital-based work. And then Howard, maybe just on the volume, you know, just your expectation for the continuation of the strength you're seeing there

Howard G. Berger: Mark discussed in his remarks, I think this will be a continuing effort on our part to.

Howard G. Berger: Continually monitor not only what the appropriate rates are but also the tools by which.

Howard G. Berger: We and everybody else in healthcare are burdened by once we do a procedure collecting those procedures. So our revenue cycle management group as well as the contracting groups.

Howard G. Berger: We're hand in hand, as we come up with these contract renewals.

Howard: To make certain that.

Howard G. Berger: We get paid for every procedure that we do and at rates that we think are.

Howard G. Berger: Not only consistent with our needs, but still remain far lower than the alternatives in many of our markets for hospital based work.

Howard G. Berger: Okay.

Howard G. Berger: And then Howard maybe just on the volume just your expectation for the continuation of the strength Youre seeing there.

Howard G. Berger: Yeah.

Howard G. Berger: Well I think that's perhaps one of the hidden milestones in our reporting here Brian. There is clearly a trend towards using more advanced imaging as both the technology improves, And as the marketplace realizes the benefits and begins to adopt these, a 1.2% increase in our overall procedural volume, shifting from routine imaging to advanced imaging, has been a remarkable achievement to demonstrate this. In particular, I would like to point out the enormous increase that we've seen in which we will continue to accelerate is PET-CT. As I've discussed on previous remarks and closed calls, we are the largest providers now of PET-CT, what they call PSMA PET-CT scanning, which has been transformative for the diagnosis and treatment of prostate cancer and is a substantial component of the almost, I believe it was 15% same store increase in PET-CT scanning between 2023 and first quarter of 2024.

Howard: Well I think that's perhaps one of the hidden.

Howard G. Berger: Milestones are in our reporting here Brian.

Howard G. Berger: There is clearly.

Howard G. Berger: Trend towards using more advanced imaging as both the technology improves.

Howard G. Berger: And as the marketplace realizes the benefits and begins to adopt these.

Howard G. Berger: One 2% increase in our overall procedural volume shifting from routine imaging advanced imaging has been.

Howard G. Berger: <unk>.

Howard G. Berger: Remarkable achievement to demonstrate this in particular I would like to point out the enormous increase that we've seen and which we will continue to accelerate as pets C T.

Howard G. Berger: As I've discussed on previous remarks.

Howard G. Berger: And clothes clause.

Howard G. Berger: We are the largest providers now of let's.

Howard G. Berger: They called P. S M a pet scanning.

Howard G. Berger: Which has been transformative for the diagnosis and treatment of prostate cancer.

Howard G. Berger: <unk> is a substantial component of the almost I believe it was 15% same store increase in pet scanning between 2023 and the first quarter of 2024.

Howard G. Berger: So that we think will continue to accelerate.

Howard G. Berger: That, we think, will continue to accelerate as this becomes more and more adopted by not only the urologic community but others who oversee the treatment of prostate cancer. I also think that we may eventually, in the latter part of this year, see a similar increase in PET-CT scanning, as well as MR scanning, due to the new Alzheimer's drugs that have now been approved, but which require both PET-CT scanning and ongoing MRI scanning for monitoring. At this point, I think in the first quarter, we've done about 300 of these exams on a national scale, with backlogs and demand for far more than that.

Howard G. Berger: As this becomes more and more adopted by not only the urologic community, but others.

Howard G. Berger: Who.

Howard G. Berger: Overseas the treatment of prostate cancer.

Howard G. Berger: I also think that we may eventually.

Howard G. Berger: The latter part of this year seems similar increase in pet scanning as well as MRI scanning from the new Alzheimer's drugs. It has now been approved but which require both pet scanning and ongoing MRI scanning for monitoring.

Howard G. Berger: At this point I think in the first quarter we.

Howard G. Berger: We've done about 300 of these exams on on.

Howard G. Berger: National scale.

Howard G. Berger: With backlogs and demand for far more than that.

Howard G. Berger: As.

Howard G. Berger: More and more people will become aware of this, not only because the criteria for doing so become more adopted and accessible to make certain that the patients get reimbursed adequately or appropriately, I should say, from the various payors. So the trends that I think we're seeing in imaging, particularly advanced imaging, will continue. We hope to also continue a shift into cardiac imaging and preventative cardiovascular disease, which we will be investing more time and human resources in building up a procedure for screening for cardiac disease, which I believe will be a standard as far as population health and cardiovascular screening go, probably in the very near future, and for which imaging is the poster child for managing good care and good outcomes.

Howard G. Berger: More and more people not only become aware of this but as the criteria for doing these become more adopted and accessible to make certain that the patients get reimbursed adequately appropriately I should say from the various payers so the trends.

Howard G. Berger: So I expect advanced imaging to also benefit from the technology improvements, which are allowing us to do better throughput on our and existing systems, which we can't upgrade, or new systems where the processing time or scanning time has been reduced significantly, which allows us to facilitate and handle some of our backlog, which is another reason why we're increasing our... So I think we'll be very happy to update you on our progress in all these regards in our second and subsequent quarters of this year. It was awesome. And then maybe just a follow-up question for Mark.

Howard G. Berger: That I think we're seeing.

Howard G. Berger: In imaging, particularly advanced imaging will continue and we hope to also.

Howard G. Berger: Continue a shift into a cardiac imaging and preventative.

Howard G. Berger: Cardiovascular disease that we will be investing more time and human resources in building up for a procedure for screening for cardiac disease, which I believe.

Howard G. Berger: Standard.

Howard G. Berger: As far as population health in cardiovascular screening.

Howard G. Berger: Probably in the very near future and for which imaging is the poster child to managing them.

Speaker Change: Good care and good outcomes so.

Howard G. Berger: I expect advanced imaging.

Howard G. Berger: Also benefit from the technology improvements, which are allowing us to do better throughput on our existing systems, which we can upgrade or new systems, where the processing time or scanning time has been reduced significantly and which allows.

Speaker Change: As to.

Howard G. Berger: Facilitate and handle some of our backlog, which is another reason why were.

Speaker Change: Increasing our.

Mark: The advanced imaging business.

Howard G. Berger: I think we'll be very happy to update you on our progress in all these regards.

Howard G. Berger: In our second and subsequent quarters of this year.

Mark D. Stolper: How are you thinking about balancing the spend on CapEx between maintenance CapEx and growth CapEx? Just curious what your philosophy is there at this point. Thanks. Yeah, thanks for the question, Brian. That philosophy changes year by year depending upon what's on our plate.

Speaker Change: Awesome and then maybe it might cause a follow up question for Mark.

Mark: How are you thinking about balancing the spend on capex between maintenance Capex and growth Capex just curious what your philosophy is there at this point.

Mark: Yeah, Yeah. Thanks for the question, Brian that philosophy changes year by year, depending upon whats on our plate and but what I would tell you is that this year.

Mark: Projecting upwards of about $130 million worth up.

Mark: Our capex spend more than half of that is going to be earmarked for.

Mark D. Stolper: The construction and development of the de Novo facilities is as Dr. Berger mentioned.

Mark D. Stolper: But what I would tell you is that this year we're projecting upwards of about $130 million worth of CapEx spend. More than half of that is going to be earmarked for the construction and development of the DeNovo facilities. As Dr. Berger mentioned, we opened two facilities in the first quarter, one in Maryland and one in California, and we've got 12 other facilities that are in various stages of construction and completion that should open by year end. Most of these centers cost on average $5 million to $6 million to build.

Mark D. Stolper: We opened up two facilities in the first quarter, one in Maryland, one in California, and we've got 12 other facilities that are.

Mark D. Stolper: In various stages of construction and completion that should open up by year end.

Mark D. Stolper: So if you're talking about 12 centers at $6 million, we're talking about $70 million of CapEx spend just on those DeNovo facilities, which is more than half of our spend this year. We have shifted a fair bit of our CapEx, and we are spending extraordinarily right now to accelerate growth, which we expect to start seeing some contribution from these centers in the latter half of this year and into 2025. It's been a strategic... I'm sorry Greg, did you say something?

Mark D. Stolper: Most of the centers cost you know on average $5 million to $6 million to build so if you're talking about 12 centers at 6 million box, we're talking about $70 million of Capex spend just on those de novo facilities, which which is more than half of our spend this year. So we have shifted.

Speaker Change: A fair bit of our Capex and we are.

Speaker Change: Spending extraordinarily.

Greg: Right now too.

Mark D. Stolper: To accelerate growth, which we expect to start seeing some contribution.

Mark D. Stolper: From these centers in the latter half of this year and into 2025 so.

Greg: It's been a strategic and congrats again.

Speaker Change: I'm sorry, Brian could.

Greg: Could you say something.

Greg: Oh, sorry.

unknown: Oh, sorry. Yeah, no problem. So we have had a strategic change or strategic shift in our thinking around CapEx because of the opportunity that exists to accelerate growth due to the fact that there are just, you know, significant volumes out there, heavy volumes that today we're not able to avail ourselves of either because we've got capacity constraints in some of these markets, or we just simply don't have access points that can service patient populations that currently we're not serving. All right, got it. Thank you. Thanks, Frank.

Greg: Yeah no problem. So we have had a strategic change or a strategic shift in our our thinking around capex because of the opportunity that exists to accelerate growth due to the fact that there's just yet.

unknown: Significant volumes out there heavy volumes that today, we're not able to avail ourselves up either because we've got capacity constraints in some of these markets or.

unknown: We just simply don't have access points that can serve as patient populations that currently today, we're not servicing.

unknown: Got it thank you.

Frank: Thanks, Brian our next question or.

Operator: Our next question comes from John Ransom from Raymond James. Please go ahead with your question. Hey, good morning.

unknown: Our next question comes from John Ransom from Raymond James. Please go ahead with your question.

John Wilson Ransom: Um, just kind of an obvious question, but when you guys have a hundred basis point makeshift to higher cost, Scans, is that pretty much dropped to the bottom line? Yes, it does, John.

John Wilson Ransom: Hey, good morning.

John Wilson Ransom: Just kind of an obvious question, but when you guys have Uh huh.

John Wilson Ransom: 100 basis point mix shift to higher cost scans is that pretty much drop to the bottom line.

John Wilson Ransom: Yeah.

John Wilson Ransom: Okay.

unknown: When you talk about our margin improvement, John? Yes. Yeah.

John Wilson Ransom: Yes, it does John.

unknown: When you're talking about our margin improvement John Yes, yes.

Speaker Change: Yeah Yeah.

unknown: 120 basis points, but okay.

unknown: Yes.

unknown: Hypothetically every every 100 bps thing hypothetically every hundred versus 100 bips of DFS.

Speaker Change: Yes, I think so.

John Wilson Ransom: A substantial portion of that probably 80% of it in that range drops down to the bottom line, which is one of the reasons for that were.

unknown: [inaudible] which is one of the reasons why we're very focused on reporting that this year, more so than in previous years. And is that, you know, I know you've kind of talked about this, but I mean, it seems like that's just sort of a structural trend that will go out into the future. I think last year it was contributed by the improvement in reimbursement and the shift, you know, of higher profit margin business, advanced imaging.

unknown: Very focused on reporting.

unknown: This.

unknown: This year more so than anything.

unknown: Prior years.

unknown: And is that.

unknown: I know you've kind of talked about this but I mean, it seems like that's just sort of a structural trend that all go out into the future.

unknown: This measure leaves so given all of that.

unknown: Okay.

unknown: Yes.

unknown: Last year I think it was contributed.

unknown: By the improvement in reimbursement and shift.

unknown: Higher prop.

unknown: Profit margin business, the advanced imaging I think in subsequent quarters and years it'll be impacted by the implementation of our new detailed operating system and automation of what.

unknown: I think in subsequent quarters and years this will be impacted by the implementation of our new deep health operating system and automation of what have been, up to this point, largely manual processes. Great. And just two others for me.

unknown: Have been up to this point largely manual processes.

Howard G. Berger: As we think about the cadence of the year for AI, ERAD, is that still on track to be? Is there any acceleration in that profitability curve, or is it still on? Is that part of your 5 million, or is it still kind of like most of the 5 million in the core imaging sector? Yeah, I think we expect some acceleration on two fronts.

unknown: Great and just two others for me.

Howard G. Berger: As we think about the cadence of the year for AI Rad.

Howard G. Berger: It's still on track to be.

Howard G. Berger: Is there any acceleration in that profitability curve or is it still on that is that part of your $5 million or is it still kind of them as most of the $5 million on the core imaging sector.

Speaker Change: Yeah, I think we.

Howard G. Berger: We expect some acceleration.

Howard G. Berger: On two fronts one is further.

Howard G. Berger: One is further implementation and adoption of our EBCD program, which we're very pleased with and which has provided some outstanding results. One of which I'll mention and that was released interestingly this morning from the Cancer Moonshot White House program is that we have detected 450 cancers so far with the use of this breast screening tool that might otherwise have gone undetected. So that the notion of enhanced or earlier breast cancer detection is a reality.

Howard G. Berger: Implementation and adoption of our a B C. D program, which we're very pleased with and I think has provided some outstanding results one of which I mentioned and that was released.

Howard G. Berger: Interestingly this morning from the.

Howard G. Berger: Cancer Moonshot Whitehouse program is at.

Howard G. Berger: We have detected 450 cancers, so far with the use of this breast screening tool that might have otherwise gone undetected and so that the notion of enhanced our earlier breast cancer detection is a reality as we get further.

Howard G. Berger: As we get further implementation on the West Coast, which is continuing to ramp up, and as we continue to improve, I think, the patient adoption of this, we could alter our guidance on that perhaps later or in subsequent quarters. Also, some other initiatives that we're starting, one of which is what we're calling EPS, or Enhanced Prostate Screening, is something that we're now rolling out as a self-pay opportunity for men to come in at a fairly nominal price, get an MRI scan with artificial intelligence, even if they're asymptomatic and are just looking for greater confidence than routine blood tests that are used primarily for prostate screening.

Howard G. Berger: <unk> on the <unk>.

Howard G. Berger: West Coast, which is continuing to ramp up.

Howard G. Berger: And as we continue to improve I think that patient adoption of this.

Howard G. Berger: We could alter.

Howard G. Berger: Our.

Howard G. Berger: Guidance on that perhaps later or.

Howard G. Berger: Or in subsequent quarters.

Howard G. Berger: Also some other initiatives that we're starting one of which is a.

Howard G. Berger: What we're calling E P S or enhanced prostate screening is something that we're now rolling out as a self pay opportunity for men to come in.

Howard G. Berger: At a fairly nominal price get an MRI scan with artificial intelligence, even if they're asymptomatic and are just looking for greater confidence than routine blood tests that are used primarily for prostate screening.

Howard G. Berger: We expect that to be something that probably will become more apparent in our financial results towards the end of the year, but we've had some very good results and some test sampling that we've done on, much like in breast screening, finding early cancers that are certainly going to lead to better outcomes for men who choose this path.

Howard G. Berger: We expect that to be something that probably will become more.

Howard G. Berger: Apparent in our financial results towards the end of the year.

Howard G. Berger: We've had some very good results in some tests sampling that we've done on much like in breast cancer.

Howard G. Berger: Breast screening finding early cancers that are certainly going to lead to better outcomes for men who choose this pathway.

Howard G. Berger: Yeah.

Howard G. Berger: And the last one for me, just on M&A, I know you don't put future M&A in your guide, but if we're... Spitballing, and we're six months down the road, what should we expect? The probability of just more tuck-in deals in existing markets, or what are the odds you think you'll wrestle one of these elephants to the ground? Thanks.

Speaker Change: Great and then the last one from me just on the M&A I know you don't put future M&A in your guide, but if were.

Howard G. Berger: Spit balling, and whereas six months down the road.

Howard G. Berger: Should we expect.

Howard G. Berger: Problems the probability of just more tuck in deals in existing markets or what are the odds you think.

Howard G. Berger: Youre Russell one of these elements to the ground.

Howard G. Berger: Okay.

Howard G. Berger: I think tuck-ins will be a continual part of our acquisition and growth opportunities. We find those to be very targeted in our existing markets, if you will, and both on the East Coast and West Coast, there's a constant pipeline of requests that we're getting for further opportunities in our existing markets. Much like we demonstrated in Houston, when we entered that market just this quarter, April 1st, if there are other markets where we can find a good platform company to build a longer-term presence in a market, we would look at those.

Howard G. Berger: I think tuck ins will be a continual.

Howard G. Berger: Part of our.

Howard G. Berger: Acquisition and growth opportunity, we find those to be very targeted in our existing markets. If you will and both on the east coast and West Coast.

Howard G. Berger: A constant pipeline of requests that we're getting are for further.

Howard G. Berger: Opportunities in our existing markets.

Howard G. Berger: Much like we demonstrated in Houston, when we enter that market.

Howard G. Berger: Just this quarter April 1st.

Howard G. Berger: If theres other markets, where we can find a good platform company to build a longer term presence in a market. We would look at those those may become.

Howard G. Berger: Those may become a little bit more expensive than the Tuckin acquisitions, but they do represent a longer-term platform to expand our reach. I think you can continue to see those, along with the DeNovos, as being a very important component of this year's growth. Great, thanks so much.

Howard G. Berger: A little bit more expensive than the tuck in acquisitions, but they do represent.

Howard G. Berger: Longer term platform too.

Howard G. Berger: Expand our reach so.

Howard G. Berger: You can continue to see those along with the de novo's as being a very important component of this year's growth.

Speaker Change: Great. Thanks, so much.

Speaker Change: Thanks, Thanks, John.

Operator: Thanks, guys. Our next question comes from Andrew Mok from Barclays; please go ahead with your question. Hi, good morning.

Howard G. Berger: Our next question comes from Andrew Mok from Barclays. Please go ahead with your question.

Andrew Mok: Hi, Good morning wanted to follow up on the digital health segment and the deep health capability. One can you help us understand what the adoption rate is for the ABCD AI option, and then would love to hear more on the cost savings and throughput efficiencies that this could drive an imaging centers.

Andrew Mok: I wanted to follow up on the digital health segment and the deep health capability. One, can you help us understand what the adoption rate is for the EBCD AI option? And then we'd love to hear more on the cost savings and throughput efficiencies that this could drive in imaging centers. Thanks.

Speaker Change: Sure Good morning, Andrew.

Andrew Mok: Sure.

Howard G. Berger: Well, as I mentioned, I think in my remarks on the East Coast, where we've had the longest experience with EBCD. Our current adoption is about 40% of all of the patients that are offered EBCD actually enroll and pay $40 for that procedure. We have found that to be consistent with our expectations and believe, though, that we can drive that number higher. We're hoping, at least on the East Coast, perhaps even by the second half of this year, that number could approach 50.

Speaker Change: Well as I mentioned I think in my remarks on the East Coast, where we've.

Howard G. Berger: Had the longest.

Howard G. Berger: Experience with a B C D. A R. Current adoption is about 40% 40% of all of the patients that are offered a b C D that actually enroll and pay $40 for that procedure.

Howard G. Berger: We have found that to be consistent with our expectations and believe though that we can drive that number higher.

Howard G. Berger: Hoping at least on the east coast, perhaps even by the second half of this year that number could it could approach 50% on the west coast the adoption rate is.

Howard G. Berger: On the West Coast, the adoption rate is in the 32, 33% range, but that's also very comforting to us because that's higher than what we started off with on the West Coast, and I'm sorry, on the East Coast, and the West Coast has learned some of the tools. But I have to caution everybody that this is an educational process; it's not something that we simply ask somebody to sign up for without giving them a lot of the So as we learn more and more about what the issues are and questions that our patients have about these procedures, the more, I think, effective we are in communicating that benefit, and the more receptive our patients are.

Howard G. Berger: The 30% to 33% range.

Howard G. Berger: But that is also a very comforting to us because that's higher than what we started off with on the west coast.

Howard G. Berger: I'm, sorry on the East coast.

Howard G. Berger: In the West Coast has learned some of the tools, but I have to.

Howard G. Berger: I caution everybody that this is an educational process, it's not something that.

Howard G. Berger: We simply ask somebody to sign up for without giving them a lot of the background and benefits of this of these tools so as.

Howard G. Berger: As we've learned more and more about what the issues are a dead and questions that our patients have for these procedures are the more I think effective we are and communicating that benefit and the more receptive.

Howard G. Berger: I would tell you it is my firm belief that artificial intelligence as it relates to breast screening and mammography is state-of-the-art and will be routine sometime in the future, and we expect there to be some form of reimbursement for it.

Howard G. Berger: Our patients are.

Howard G. Berger: I would tell you it is my firm belief that.

Howard G. Berger: At.

Howard G. Berger: Artificial intelligence as it relates to breast screening.

Howard G. Berger: And mammography.

Howard G. Berger: Is state of the art and will be the routine sometime in the future and we expect there to be some form of reimbursement for it but during this period, we want our patients to benefit from the investments that we've made and the opportunities I would also like.

Howard G. Berger: But during this period, we want our patients to benefit from the investments that we've made and the opportunities. I would also like to add that not only do we detect breast cancer more accurately and earlier, but we're also having an impact on recall rates so that fewer of our patients are recalled when some sort of... Further diagnostic work as necessary is being determined. Artificial intelligence is giving greater confidence that some of these callbacks, in fact, just need to be watched and don't need to go through further diagnostic work-ups, such as biopsies and other procedures.

Howard G. Berger: Include that not only do we detect the breast cancers are more accurately and earlier, we're also having an impact on recall right. So that fewer of our patients when some sort of.

Howard G. Berger: Further diagnostic work as necessary.

Howard G. Berger: Is being determined.

Howard G. Berger: Official intelligence is giving greater confidence that some of these call backs in fact, just needs to be watched and don't need to go through further diagnostic workup, such as biopsies and other procedures. So the benefit here is substantial.

Howard G. Berger: So the benefit here is substantial in both regards. In terms of our radiologists, I think we're comfortable feeling that our radiologists are more accurate and confident now as they get more and more use of artificial intelligence. And we think we can get perhaps as much as a 15 to 20 percent improvement in their productivity simply because the majority of the breast screening that we do is normal scans, and they have a greater confidence level when the artificial intelligence confirms their initial impression of the mammogram being normal.

Howard G. Berger: In both regards.

Howard G. Berger: In terms of a radiologist.

Howard G. Berger: We're comfortable feeling that a radiologist.

Howard G. Berger: More.

Howard G. Berger: Accurate and confident now as they get more and more uses artificial intelligence and we think we can get perhaps as much as a 15% to 20%.

Howard G. Berger: Improvement in their productivity simply because the majority of the breast screening that we do our normal scans and they have a greater confidence level when the artificial intelligence confirms their initial impression of the mammogram being normal.

Howard G. Berger: So I think there's a win-win-win for everybody in this remarkable new achievement for which we are continuing to evolve further tools not only in the breast but, as we mentioned, in the lung and prostate, where we expect similar results and benefits.

Howard G. Berger: So I think there is a.

Howard G. Berger: Win win win for everybody in this.

Howard G. Berger: Remarkable new achievement of for which we are continuing to evolve further tools not only in breast, but as we mentioned in lung and prostate where we expect similar results.

Howard G. Berger: I'd also like to again mention the fact that we're going to embark on an accelerated program for cardiovascular screening, for which artificial intelligence tools have now been approved for reimbursement that give further benefit to our patients rather than just doing the CT scan itself. So, I think all of this will be part of our... Deep Health Operating Platform, and I think you can look forward to us talking about other AI tools that we will expand into to help improve both diagnostic accuracy and productivity for our radios. Thanks for the color.

Howard G. Berger: Benefits.

Howard G. Berger: I'd also like to again mention the fact that we're going to embark on a accelerated.

Howard G. Berger: Program for cardiovascular screening for which artificial intelligence tools have now been approved for reimbursement.

Howard G. Berger: That give further benefit to our patients rather than just doing the C. T scan itself. So I think all of this will be part of our.

Howard G. Berger: Deep health operating platform and I think you can look forward to talking about other AI tools that we will expand.

Howard G. Berger: Into to help improve both the diagnostic accuracy and productivity for our radiologists.

Andrew Mok: And then secondly, I think your other category in your payer mix ticked up about 100 basis points sequentially. Just want to clarify what that other category is and what's behind that uptick. Is that tied to the higher EBCD volumes as well? Thanks.

Speaker Change: Great. Thanks for the color and then secondly.

Speaker Change: Your other category in your payer mix ticked up about 100 basis points sequentially, just want to clarify what that other category is and what's behind that uptick is that tied to the higher.

Andrew Mok: <unk> volumes as well thanks.

Speaker Change: Yeah, it's it's everything that isn't just patient scanning so its management fees. It's.

unknown: Yeah, it's everything that isn't just patient scanning. So it's, you know, management fees; it's the category that doesn't fit into MRI, CT, X-ray, ultrasound, and mammography procedures, such as certain interventional procedures, and part of it had to do with when we, the reason why it shifted, I think about 1% over, quarter over quarter, had to do with when the Digital Health segment and moving that e-red business out of the Imaging Center segment changed But nothing fundamentally has changed with our business.

unknown:

unknown: The category that doesn't fit into MRI, ICT X ray ultrasound and mammography.

unknown: Procedures, such as certain intervention procedures.

unknown: And part of it had to do with when we the reason why it's shifted of I think of about 1%.

unknown: Over quarter over quarter, it had to do with.

unknown: When we re jigger to our operating segments between the imaging center and the.

unknown:

unknown: The digital health segment, and moving that E rate business out of the imaging Center segment changed the proportions of those.

unknown: Of those exams.

unknown: But nothing fundamentally has changed with our business I was actually talking about the other categories the payer mix Christy Germany.

unknown: I was actually talking about the other category, the pay or mix, not the procedure. Oh, I'm sorry; I thought you were talking about the procedure mix. The... Yeah, that would be from EBCD, because that's self-pay, so it's in the other category. Yeah, that's likely the case, Andrew.

Speaker Change: Oh, I'm, sorry, I thought you said about the procedure mix.

unknown: The Oh, yeah that would that would be from a b C D.

unknown: Because it's shelf.

unknown: Self pay so it's in the other category.

unknown: Yes, that's likely the case Andrew.

Speaker Change: Double check our model.

unknown: Okay.

Speaker Change: And follow up with you.

Howard G. Berger: I'll double check the reports and follow up with you. Yeah, that makes sense. And then are there any metrics you can share to give us a sense of the backlog or unmet demand? I think it's, you know, clear that there's a strong demand backdrop, and you have this patient backlog, but just curious if there's anything you can share with us to give us a sense of that unmet demand. Thanks.

Andrew Mok: Makes sense and then are there any metrics you can share to give us a sense of the backlog or unmet demand I think it's clear that there was strong demand backdrop and you have this patient backlog, but just curious if there's anything you can share with us to give us a sense of that.

Howard G. Berger: That unmet demand thanks.

Howard G. Berger:

Mark D. Stolper: I think that the backlogs are a function of, number one, more use of imaging, greater adoption of it, an aging population, and a growing population, all of which require more and more imaging, I think, greater than previously. [inaudible] as, deductibles have risen with some of the newer products. When you stop to think about how much a patient goes to the hospital, they have to pay for their co-pay segment of a scan, which is rather substantial and eats through their deductible very, very quickly.

Howard G. Berger: I think that the the backlogs are a function of.

Mark D. Stolper: Number one.

Mark D. Stolper: More use of imaging greater adoption of it.

Mark D. Stolper: Aging population.

Mark D. Stolper: Growing population all of which require more and more imaging.

Mark D. Stolper: I think a greater than previously.

Mark D. Stolper: Determined shift away from hospitals, I think theres more effort on the part of pay ores to direct the business.

Mark D. Stolper: Wade from hospitals again by education, and giving the patients an alternative that they might not have previously realized were.

Mark D. Stolper: Available to them and I think this is important and it has become more important as deductibles have risen with some of the newer products.

Mark D. Stolper: When you start to think about how much.

Mark D. Stolper: If a patient goes to a hospital they have to pay for their co pay segment.

Mark D. Stolper: Oven.

Mark D. Stolper: Excuse me other scan these numbers.

Mark D. Stolper: Rather substantial and eat through their deductible very very quickly and they are effective use of that cash to go further.

Mark D. Stolper: And their effective use of that cash could go for more health services if they elect to go to an outpatient facility where, as we've talked about in the past, the scanning differential can be 3 to 5 or even more times that in a hospital. So I think all of these are coming together. And I think perhaps the other reason is that things that were more esoteric in the past are now becoming more familiar, and patients are more comfortable with things like PET-CT scanning.

Mark D. Stolper: Further for more health care services.

Mark D. Stolper: If they elect to go to an outpatient facility, where as we've talked about in the past the scanning differential can be three to five or even more times.

Mark D. Stolper: Hospital. So I think all of these are coming together.

Mark D. Stolper: And I think perhaps the other reason is that.

Mark D. Stolper: Things that we.

Mark D. Stolper: We're more esoteric in the past that are now becoming more familiar and patients more comfortable with things like pet scanning.

Mark D. Stolper: Maybe in the past, people thought they were only done at veterinary clinics, but particularly things like prostate screening and now for Alzheimer's screening, as well as the general use of it in cancer for diagnostic staging, are now just being recognized by everybody for the enormous value that these tools are. So there's greater adoption and greater demand for this coming from all sectors.

Mark D. Stolper: Maybe in the past people thought were only done it veterinary clinics.

Mark D. Stolper: Particularly as things like prostate screening and now for Alzheimer's screening.

Mark D. Stolper: Well as the general use of it.

Mark D. Stolper: Cancer for diagnostic staging.

Mark D. Stolper: Now just being recognized by everybody.

Mark D. Stolper: The enormous value that these tools are so theres greater adoption and greater demand for this coming from.

Speaker Change: All sectors I would say that also.

Mark D. Stolper: Our experience of increased demand is not unique to RadNet. I think almost all of the... people that we talk to in the industry, other large chain operators, as well as acquisitions, when we talk about our various opportunities here, are all experiencing increasing demand. What makes RadNet a little bit different is that our ability to take advantage of this by deploying capital, either by doing acquisitions or building de novo centers, allows us to address these kinds of opportunities, which benefit not only our patients and reforming physicians but our communities as a whole.

Mark D. Stolper: Our experienced for increased demand is not unique to radnet I think almost all of the.

Mark D. Stolper: People that we talk to in the industry other large chain operators as well as acquisitions.

Mark D. Stolper: We talk to various opportunities here are all experiencing increase in demand so.

Mark D. Stolper: What makes radnet a little bit different is that our ability to take advantage of this by deploying capital either by.

Mark D. Stolper: Doing acquisitions or building de Novo centers allows us to address these kinds of opportunities, which benefit not only our patients and referring physicians, but our communities as a whole so.

Mark D. Stolper: I just think that right now imaging is enjoying a very important role in delivery of healthcare and as I've said previously, I believe it is the gateway for population health and I believe more and more people are coming to agree with that statement. Yeah, and specifically to your question, Andrew, from the standpoint of what KPIs we look at in order to determine, you know, how big our backlogs are and whether we have to invest in those centers to expand them or build new centers, you know, we particularly look at advanced imaging and how long it takes when a patient calls into our scheduling department, how long it takes them to actually come in and get their exam performed and if, you know, for advanced imaging, if, you know, someone's calling up for an MRI or a PET CT and is concerned that, you know, they have a serious injury or serious disease process, if, you know, we can't get that patient in in a matter of three or four days, we're going to end up losing some of that business and, you know, because the patient's not going to wait around, you know, a week or two to, you know, figure out if he or she has cancer.

Mark D. Stolper: I just think that the right right now imaging is enjoying a very important.

Mark D. Stolper: Important role in delivery of healthcare and as I've said previously I believe it is the gateway for population health and I believe more and more people are.

Mark D. Stolper: Coming to agree with that statement.

Mark D. Stolper: And specifically to your question Andrew from from the standpoint of what Kpis, we look at in order to determine.

Mark D. Stolper: How big our backlogs are and whether we have to invest in our centers to expand them or build new centers.

Mark D. Stolper: We particularly look at advanced imaging and how long it takes when a patient calls into our scheduling department how long it takes them to actually come in and get their exam.

Mark D. Stolper: <unk> performed and if.

Mark D. Stolper: For advanced imaging.

Mark D. Stolper: Calling up for an MRI or a pet C. T and is concerned with it that they have a serious injury or serious disease process.

Mark D. Stolper: If we can't get that patient in with a matter in a matter of three or four days, we're going to end up losing some of that business and if it gets the patient is not going to wait around.

Mark D. Stolper: A week or two to figure out if he or she has cancer. So we manage those.

Mark D. Stolper: So we manage those, you know, that scheduling. We try to, as much as we can, load balance, you know, with our scheduling departments that are centralized in that region, and we'll try to direct that patient to another center that might have a scanning slot that's open, you know, with less waiting time. But unfortunately, what we're facing right now are some real scheduling difficulties, which is why we've determined that we need to build new centers and increase capacity. The newer equipment, particularly in the areas of MRI, has faster throughput these days and better post-processing software, so we are able to do more scanning in the same amount of work hours.

Mark D. Stolper: That's scheduling we try to as much as we can load balance.

Mark D. Stolper: With our.

Mark D. Stolper: With our scheduling departments that are centralized in that region and we'll try to do.

Mark D. Stolper: Direct that patient to another center that might have a scanning flat. That's open you know.

Mark D. Stolper: With less waiting time, but unfortunately, what we're facing right now are some real scheduling difficulties, which is why we have determined that we need to build new centers and increase it.

Mark D. Stolper: Increased capacity.

Mark D. Stolper: The newer equipment, particularly in the areas of MRI have faster throughput. These days better post processing software. So we are able to do more scanning and the same amount of work hours and we've been.

Mark D. Stolper: As much as we can over the last couple of years trying to.

Mark D. Stolper: Upgrade our MRI scanners to the newer technologies, but.

Mark D. Stolper: And we've been, as much as we can over the last couple of years, trying to upgrade our MRI scanners to newer technologies, but you know, this is the highest-class problem we can have, but it's still a problem nonetheless because we don't want to lose this patient volume to our competitors, you know, and referral patterns, and physician relationships tend to be sticky. And so once you lose business to someone else, you know, it's hard to get that business back, which is why we're trying to expand our capacity so quickly. Great Thanks for all the calls. I appreciate it.

Mark D. Stolper: This is the highest class problem, we can have but it is still a problem. Nonetheless, because we don't want to lose this patient volume to our competitors and.

Mark D. Stolper: Referral patterns physician relationships tend to be sticky and so what you lose business to someone else you know, it's hard to get that business back which is why we're trying to expand.

Mark D. Stolper: Capacity so quickly.

Speaker Change: Great. Thanks for all the color I appreciate it.

Yuan Zhi: And our next question comes from Yuan Zhi from B-Riley Securities. Please go ahead with your question. All right, good morning, congratulations on a great quarter, and thank you for taking our questions. I have a couple of them.

Speaker Change: And our next question comes from one key from B Riley Securities. Please go ahead with your question.

Yuan Zhi: All right. Good morning, Congrats on a great quarter and thank you for taking our questions I have a call zone.

Yuan Zhi: Yes.

unknown: So first, if we take a step back, you have different market shares in different states. I'm curious, what was the reason for having a higher market share in some states and lower market share in others? In other words, was it because of a lack of good acquisition targets? Or do you think you've reached certain critical mass in that state, same thing here in Texas or even new states?

Yuan Zhi: So first if we take a step back you will have different market shares in different states I'm curious what was the reason to have higher market share in some states in the lower market share in honors either way well did it because of a lack of good acquisition targets or do you seeing deal reached third kind of quick or not seeing that.

unknown: Page.

unknown: Thank you you talked about or even new states expanding further.

unknown: The criteria or coal there.

Speaker Change: Sure. Good morning, you on.

unknown: If you are expanding further, what would be the criteria or goal there? Sure. Good morning, Yuan.

unknown: So when we look at a market, we don't necessarily have a market share in mind.

unknown: So, when we look at a market, we don't necessarily have market share in mind. We have found in our operating history that there are tremendous benefits to operating at scale in local markets, most of which are around centralizing a lot of the business processes that we perform on behalf of our centers. For instance, we have the centralization of scheduling, pre-authorization, insurance verification, revenue cycle, marketing, among other things. When we think about building scale in a regional market, it's not necessarily driving towards a particular market share; it is really the result of how we can grow the business profitably using the benefits of scale.

unknown: <unk>.

unknown: We have found a in our operating history that there are tremendous benefits to operating at scale in local markets.

unknown: Most of which are around centralizing a lot of the business processes that we perform on behalf of our centers are for instance, we have the.

unknown: Centralization scheduling preauthorization insurance verification revenue cycle.

unknown: Among other marketing among other things.

unknown: And so when we think about building scale in a regional market, it's not necessarily a driving towards a particular.

unknown: Our market share it is really the result of.

unknown: How we can grow the business profitably using the benefits of scale.

unknown: And so when we look at all of our markets. We want to have that that benefit where we want to be able to achieve those benefits of scale.

unknown: When we look at all of our markets, we want to have that benefit, or we want to be able to achieve those benefits of scale. But there isn't necessarily a magic market share where we can do that. When you look at where our sites are today, we certainly don't have a lot of scale in the state of Florida. All four of our centers are in one particular market there, in the Treasure Coast, Port St. Lucie, and Stewart areas of Florida, but that's a state where we would love to expand, given the right opportunities. In Arizona, we feel like we're not yet getting the benefits of the scale that we could possibly have in the Phoenix area.

unknown: And there isn't necessarily a magic market share that where we can do that when you look at where our sites are today.

unknown: We certainly don't have a lot of scale in the state of Florida of all four of our centers are in one particular market there and the treasure coast Port.

unknown: St Lucie Stuart area of Florida, but that's a state where we would love to expand given given the right opportunities.

unknown: Arizona, we feel like we're not yet getting the benefits of the scale that we could possibly have.

unknown: In the Phoenix area, and we did make an acquisition there with our partner dignity health, where we acquired seven additional centers.

unknown: We did make an acquisition there with our partner, Dignity Health, where we acquired seven additional centers this quarter, as Dr. Berker mentioned in his prepared remarks. I think the short answer to your question is that we'd like scale in all of the markets that we have because of the ability to manage these business processes more efficiently and get better profitability from our assets.

unknown: This quarter.

unknown: As Dr. Berger mentioned in his.

unknown: In his prepared remarks so.

unknown: I think the short answer to your question is we'd like scale in all of the markets that we have because of it because of.

unknown: The ability to manage these business processes more efficiently and get better profitability from our assets.

unknown: Got it that's very helpful and maybe one additional housekeeping questions here great to see.

unknown: That's very helpful. And maybe one additional housekeeping question here. It is great to see the increase in PET-CT volumes related to PSMA. I'm curious, did you guys see any update or uptake on Alzheimer's-related procedures, both the PET-CT part as well as the MRI part in 1Q or recently in April? Yeah, we are starting to see more volume come in in the Alzheimer's area, both on the initial PET-CT screen for the presence of these amyloid plaques, as well as some ongoing MRI monitoring once these patients are on these therapies, although we're not seeing a lot of that because these patients are just starting to go on these therapies. There's been a delay in qualifying a lot of these patients for some of the newer drug therapies and getting the initial diagnostic imaging approved to qualify these patients.

unknown: Chris I'll Park city volumes related to <unk> I'm curious did you guys see any update.

unknown: Great.

unknown: That was kind of already hit a procedures, both the Powerpc apart Atlanta MRI apart in <unk>.

unknown: Okay.

unknown: Yes, we are starting to see more volume come in in the Alzheimer's area on both both on the initial Pepsi T screening for.

unknown: The presence of these amyloid plaque as well as some ongoing MRI.

unknown: Uh huh.

unknown: Monitoring once these these are these patients are on these therapies, although we're not seeing a lot of that because these patients are just starting to go onto onto these therapies.

unknown: Been a delay in qualifying a lot of these patients onto some of the newer drug therapies and getting the initial diagnostic imaging.

unknown: <unk>.

unknown: To qualify these patients.

unknown: The decision to do this was passed down to the individual regional Medicare administrators, or what we call the MACs, and that has caused a delay, but we are starting to see some uptake. We're talking about patients in the hundreds of patients, not the thousands or tens of thousands of patients that we would have expected to see by now. We still remain optimistic that this is going to happen. I think these therapies will prove to be efficacious in their clinical trials.

unknown: The decision for this was passed down to the individual regional Medicare.

unknown: Administrators or what we call the Max.

unknown: And that has caused the delay, but we are starting to see some uptake, but we're talking about patients in the hundreds of patients not thousands or tens of thousands of patients that you would expect that we would have expected to see by now we still remain optimistic that that this is going to happen I think.

unknown: These these therapies prove to be efficacious in their in their clinical trials there its going to lean heavily on advanced imaging. Both on the initial <unk> screen to determine whether these patients are available or eligible for these therapies as well as the ongoing MRI.

unknown: It's going to lean heavily on advanced imaging, both the initial PET-CT screen to determine whether these patients are eligible for these therapies as well as the ongoing MRIs that are indicated every three to four months for at least 18 months when these patients go on these therapies. I think this is just another example that gives us encouragement and optimism about the continued use of advanced imaging. Dr. Berger mentioned cardiac imaging, which is growing in popularity, the PSMA test on the PET-CT side, Alzheimer's, and there are others that are coming down the road, particularly in the area of PET-CT, where there is a lot of development of some of these new radioactive tracers that are targeting very specific solid tumors, cancerous tumors in the body.

unknown: That are indicated every three to four months for at least 18 months. When these patients go on these therapies. So.

unknown: I think this is just another example.

unknown: That.

unknown: It gives us encouragement and optimism about the continued use of of advanced imaging I mean, Dr. Berger mentioned cardiac imaging, which is growing in popularity.

unknown: The PSA test on the <unk> side, Alzheimers and there's others that are coming down the road, particularly in the area of <unk>, where there is a lot of development of some of these new radioactive tracers that are targeting very specific solid tumors cancer.

unknown: Their tumors in the body so I.

unknown: I think it's going to be an ongoing process that unfolds. Great, thank you. That's all from us. Thank you, Yuan. And our next question comes from Jim Sidoti from Sidoti & Company. Please go ahead with your question.

unknown: I think it's going to be an ongoing process that unfolds here.

James Philip Sidoti: Great. Thank you that's all.

unknown: Us.

James Philip Sidoti: Thank you Juan.

unknown: And our next question comes from Jim Sidoti from Sidoti <unk> Company. Please go ahead with your question.

James Philip Sidoti: Hi, thanks for taking the questions. I know it's been a long call. Just two quick ones for me.

James Philip Sidoti: Hi, Thanks for taking the questions I know, it's been a long call. Just two quick ones for me can you update us on how things are going in Texas.

unknown: Can you update us on how things are going in Texas? It's been a while since you entered a new market. You know, how do you find this market? Is it easy to get paid?

unknown: Been a while since you entered the new markets. How do you find in this market isn't easy to get paid.

unknown: And, you know, is it easy to do business there? Yeah, well, I mean, it's a little hard to say now. So, we completed the first acquisition of seven centers. We completed that on April 1st. So, we don't have a whole lot of operating experience there as yet.

unknown: Is it easy to do business there.

unknown: Yeah, well I mean, it's a little hard to say now so we completed the first acquisition of seven centers.

unknown: We completed that on April one so we don't have a whole lot of operating experience there as of yet I think the the integration of that business and what we call the <unk>.

unknown: I think, you know, the integration of that business and what we call the RadNetization is just at the very beginning stages. The other acquisition that we've announced, the American Health Imaging Centers in Houston, that's scheduled to close kind of in the June-July timeframe. And, you know, we anticipate some, you know, further integration of those two operations to create, you know, a platform from which we can grow at that point.

unknown: Just at the very beginning stages.

unknown: The other acquisition.

unknown: We've announced.

unknown: The American health imaging centers in Houston, that's scheduled to close kind of in the June July timeframe.

unknown: And we.

unknown: We anticipate some further integration of those two operations to create a platform from which we can grow.

unknown: So, I think we'll have a lot better feeling for, you know, and a better way of answering your questions in the coming quarters. But, you know, early indication is that, you know, this is a very attractive market, good demographics, you know, good, you know, payer relationships.

unknown: At that point, so I think we will have a lot better feeling of us.

unknown: And in a better way of answering your questions and in the coming quarters, but.

unknown: Early indication is that this is a very attractive market.

unknown: Good demographics I'm good good payer relationships.

unknown: We think that we've identified and partnered with, you know, an excellent group of radiologists, and they're motivated, as are we, to really grow that platform through further acquisitions, de novo centers. There are a number of hospital relationships in that market that could be interesting to us as we continue to grow there, so I think we're highly encouraged from what we see so far. All right. And second one, can you just give us an updated share count of what we should be using for Q2 and Q3 this year? Could you repeat that? Sorry, it's a little difficult to hear you.

unknown: We think that we've identified and partnered with it.

unknown: Excellent.

unknown: Group of Radiologists.

unknown: And and they were motivated as are we to really grow that platform through further acquisitions de Novo centers. There's a number of hospital relationships in that market that could be interesting to us as we continue to grow there. So I think.

unknown: We're highly.

unknown: Highly encouraged from what we see so far.

Speaker Change: Okay, Alright, and second one can you just give us.

Speaker Change: Updated share counts what needs to be used for Q2 and Q3 this year.

Speaker Change: Could you repeat that sorry, it's a little difficult to hear you sorry, There's a question on you know what.

unknown: Sorry, it is a question of, you know, what's the right share count for the rest of the year? Sure, so I think we have somewhere between 73 and 74 million outstanding shares. We typically wouldn't, you know, unless we're doing any acquisitions using our stock for the remainder of the year, we don't expect that share count to go up significantly. Generally speaking, it's the first quarter where we issue equity to our existing employee base as part of their annual compensation. So that was already completed in the first quarter.

unknown: Whats the right share count for the rest of the year.

unknown: Sure. So we have somewhere in the $73 million to $74 million.

unknown: Outstanding shares, we typically wouldn't unless we're doing any acquisitions using our stock for the remainder of the year, we don't expect that share count to go up significantly.

unknown: Generally speaking, it's the first quarter, where we issue.

unknown: Equity.

unknown: Two our existing employee base as part of their annual compensation. So that was already completed in the first quarter. So I wouldn't expect anything.

unknown: So I wouldn't expect anything to materially increase our shares materially between now and the end of the year unless there's some acquisition where we choose to use it. Great, thank you. Thanks, Jim. And ladies and gentlemen, at this time, without sharing any additional questions, I'd like to turn the floor back over to management for any closing... Thank you, operator. Again, I would like to take this opportunity to thank all of our shareholders for their continued support and the employees of RadNet for their dedication and hard work.

unknown: To increase our shares materially between now and we ended the year unless there's some acquisition.

unknown: We choose to use stock.

Speaker Change: Great. Thank you.

Speaker Change: Thanks, Jim.

unknown: And ladies and gentlemen at this time in showing no additional questions I'd like to turn the floor back over to management for any closing remarks.

unknown: Right.

Speaker Change: Thank you operator.

unknown: I would like to take this opportunity to thank all of our shareholders 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.

unknown: 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 I look forward to our next call. Ladies and gentlemen, with that, we'll be concluding today's conference call and presentation. We thank you for joining us. You may now disconnect your line.

Speaker Change: <unk> services with an appropriate return on investment for all stakeholders. Thank you for your time today and I look forward to our next call.

Speaker Change: Ladies and gentlemen, with that we'll be concluding today's conference call and presentation. We do thank you for joining you may now disconnect your lines.

unknown: Yes.

unknown: Yes.