Q3 2025 RadNet Inc Earnings Call
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Good morning, ladies and gentlemen, and welcome to the rednet in third quarter, 2025 Financial results conference call.
At this time, all participants will be in the lesson only mode.
Following the presentation this morning there will be a question and answer session.
To ask a question, we press star and then 1 on your touchtone phone.
To redraw your question, we press star and then to...
As a reminder, this call is being recorded.
I now have the conference over to Mr. Mark Stolper, Executive VP and CFO. Thank you, and over to you.
Thank you.
Good morning, ladies and gentlemen, and thank you for joining Dr. Howard Berger and me today to discuss RadNet's third quarter 2025 financial results.
Before we begin today we'd like to remind everyone of the Safe Harbor statement under the private Securities. Litigation Reform, Act of 1995.
This presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.
Specifically, statements concerning anticipated future financial and operating performance rates, ability to continue to grow the business by generating patient referrals and contracts with radiology practices, and recruiting and retaining technologists.
Receiving third-party reimbursement for diagnostic imaging services, successfully integrating acquired operations, generating revenue, and adjusted EVA for the acquired operations, as estimated, among others, are forward-looking statements within the meaning of the Safe Harbor.
Forward-looking statements are based on management's current preliminary expectations and are subject to risks and uncertainties, which may cause RadNet's actual results to differ materially from the statements contained herein.
These risks and uncertainties include those risks set forth and radnet reports filed with the SEC from time to time, including radnet annual report on form, 10K for the year. Ended December 31st 2024
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
They were made or to reflect the occurrence of unanticipated events.
And with that, I'd like to turn the call over to Dr. Burger.
Thank you, Mark. Good morning, everyone. And thank you for joining us today on today's call Mark and I plan to provide you with highlights from our third quarter 2025 results give you more insight into factors which affected this performance and discuss our future strategy.
After our prepared remarks, we will open the call to your questions. I'd like to thank all of you for your interest in our company and for dedicating a portion of your day to participate in our conference call this morning.
With that. Let's begin.
I am very pleased with the performance of the third quarter.
Revenue and adjusted EBITDA were both quarterly records and exceeded internal budgets set at the beginning of 2025.
Total company Revenue, increased 13.4% and adjusted Evita increased 15.2% relative last year's third quarter resulting in a 26 basis, point Improvement in adjusted, Evita margins.
This reply, this performance is reflective of several positive and continuing trends that have been driving read in its strong results. In recent quarters,
First, same Center procedural, volume continues to be robust particularly within Advanced Imaging.
Advanced Imaging increased 13.0% on an aggregate basis and 9.9% on a same-center basis as compared with last year's third quarter.
This performance resulted from among other things equipment, and software upgrades, which have shortened scanning times, and increased capacity, a reduction of exam room closures from remote scanning, enabled by Deep, Health's Tech live recently approved, FDA software.
Deployment of AI, assisted Dynamic schedule designed to fill exam slots that would otherwise have gone unutilized recent denovo, Center openings and tuck in Acquisitions along with the continuing shift from expensive.
Hospital imaging towards more cost-effective Andy freestanding Imaging.
Margins continue to benefit from the continuing shift in procedure mix towards Advanced Imaging.
In this third quarter, 28.2% of our procedures were from Advanced Imaging, compared to 26.7% in the third quarter of last year.
While the growth in Advanced Imaging is due in part to Tech live and the dynamic scheduling which are serving to expand our operating hours and ensure appointments are fully utilized is also the result of certain Advanced Imaging specialty practices. We have been building examples of this program of these programs include prostate PET, CT or PM P. Psma analyst, brain PET, CT, prostate, MRI and coronary CT, angiography,
Today's advanced imaging equipment is more capable than ever, and some of the faster-growing advanced imaging studies are an outgrowth of recent developments. The FDA has cleared novel radioactive agents.
Pharmaceuticals and advanced post-processing software.
Furthermore an increased Focus within the healthcare delivery system on early detection of disease. And population health screening is driving increased clinical indications for ordering more advanced imaging studies.
Readiness, strong financial performance. And third quarter is also reflective of improvement in reimbursement rates with commercial and Capitol who recognize the position ran and offers as to lower priced alternative to hospital-based Imaging.
To the send we have been successful in receiving rate, increases from many of the larger commercial and capitated payers and several capitated contracts have been conduct converted to higher-paying fee for service relationships in recent quarters.
The stronger operate, operating results in the third quarter, relative to our internal budget along with trends that we are continuing into the fourth year into this year's fourth quarter resulted, in the decision to increase 2025 full year guidance, ranges for revenue and adjusted Eva. Mark will discuss this in more detail in his prepared, remarks.
The EV CD details AI powered breast cancer, screening program continues to expand.
Currently, we are expending experiencing a blended adoption rate nationally above 745% with more cancers being found across radnet centers, which otherwise might have only been detected at a later date.
In the Quest, for reimbursement. We continue to make inroads with third-party payers.
During the third quarter, several of our larger capitated medical groups agreed to add EBCD as a covered benefit for over 700,000 members in an effort to boost compliance.
With annual breast cancer. Screening guidelines Regal Medical Group. Lakeside Community Healthcare, adak Medical Group and Desert Oasis Healthcare. Have agreed to reimburse rnet for its ebcd program.
On July 17th, the previously announced acquisition of IAT a global leader in clinically proven AI, powered, breast Health Solutions was completed with over 1500. Provider locations, facil facilitating over 8 million, annual mammograms and 50 countries icad's profound breast, health suite and redness details, AI powered, breast skin. Solutions together can materially expand and improve patient, diagnosis and outcomes on a global basis.
To further enabling the accuracy and early detection.
We have substantially completed the integration of most of iCAD's operations into Digital Health, with cost synergies ahead of plan and recent customer wins demonstrating the power of the newly merged entities.
Also within digital Health. We completed the implementation of CMOS. Thyroid ultrasound technology, across more than 240 radnet centers, as you may recall, CMOS initial applications to detect and characterize thyroid, nodules and breast lesions in ultrasound imaging, improved Diagnostic and accuracy, and enhanced clinical workflows. In the most recent months within the redness centers. We processed over 14,000 thyroid scans, using this technology, early deployment of seos, FDA approved, thyroid ultrasound, AI has demonstrated over 30% reduction in scan time.
Furthermore, because a reimbursement code already exists, a portion of our over 230,000 annual thyroid ultrasounds is eligible for additional reimbursement. We have been successfully billing for CMOS AI.
An initiative is ongoing to pursue FDI approval for CMOS's next application in REST, AI ultrasound, which constitutes over 600,000 exams, approximately 2.7 million annually, for thyroid.
Some of you may have also seen last week and announcement that radnet acquired the assets of alpha RT.
LRT has been advancing several issues initiatives around remote technology scanning including a vendor agnostic, staffing service, capable of delivering on demand access to highly skilled remote MRI. Technologists, a real time. AI driven safety. Safety alert system to detect unsafe materials or circumstances within the MRI suite and an MRI tech aide certification program designed to strengthen the workforce in the deliver high-quality care.
This platform has implications for both operating segments of our business for digital Health, Alpha RT will enable the sales and marketing teams of tech live to offer. A more comprehensive portfolio of solutions around remote scanning to now include providing remote technologists as a staffing service and a training and certification program for Tech AIDS necessary to effectively provide on-site care in conjunction with remote scanning.
For the Imaging Center, operating segments, Alpha and RT will pursue building and training remote technologies that can be used as a labor pool to scan for red and facilities. Furthermore, Alpha and RT should become the principal training agent for RedNet Tech, AIDS, or what we call internally in Suite, Assistance or ISIS.
before I
to adjusted Evita ratio approximately 1.0
An attractive pipeline of acquisition opportunities is being evaluated for both the core Imaging Services Division and for digital health, and we have confidence in our ability to invest the cash balance over time in opportunities that align with our advanced strategic objectives.
At this time, we'd like to turn the call back over to Mark to discuss some of the highlights of our third quarter 2025 performance. When he has finished, I will make some closing remarks.
Thank you, Howard.
I'm now going to briefly review our third quarter 2025 performance and attempt to highlight what I believe to be some material items. I will also get some further explanation of certain items in our financial statements as well as provide some insights into some of the metrics that drove our third quarter performance.
I will also provide an update to 2025 Financial guidance levels, which were released in conjunction with our 2024 year. End results in February, and amended following our first and second quarter Financial results.
In my discussion, I will use the term adjusted EBA, which is a non-gaap financial measure. The company defines adjusted ebitda as earnings before interest taxes. Depreciation and amortization, and exclus excludes losses or gains on the disposal of equipment, other income or loss loss on debt extinguishment and non-equity non-cash Equity compensation.
Adjusted Eva includes Equity earnings and unconsolidated operations and subtracts allocations of earnings to non-controlling interests in subsidiaries and is adjusted for non-cash or extraordinary and 1-time events taking place during the period.
A full quantitative reconciliation of adjusted evaa to net income or loss attributable to radnet Inc. Common shareholders is included in our earnings release.
With that said, I'd now like to review our third quarter of 2025 results.
With Dr. Howard Berger highlighted in his remarks, our business continues to demonstrate double-digit topline growth as a result of a number of continuing and enduring industry and RadNet-specific trends.
From an operational perspective, we continue to focus on creating capacity at existing centers opening. Denovo, facilities, shifting, our business mix towards Advanced Imaging executing on tucking Acquisitions when available
negotiating reimbursement increases from commercial and capitated payers and accelerating digital Health, Revenue growth
During this year's third quarter, the 13.4% increase in total company Arielle, Revenue relative to the same period last year was highlighted by strong growth in Advanced Imaging.
Aggregate MRI volume increased 14.8%.
CT volume increased 9.4%.
And PET, CT volume increased 21.1% from last year's third quarter.
And on a same Center basis, same Center MRI volume increased 11.5%, same Center, CT volume, increase 6.7% and same Center, PET, CT volume, increased 14.9%.
As Dr. Howard Berger noted, this is a function of the combination of greater utilization of higher acuity imaging in the healthier healthcare delivery system at large RadNet, expansion of specialty programs in areas such as cardiac, neuro, prostate, and PET-CT imaging.
Investments we've made to drive capacity for advanced imaging, studies, and patient throughput, and the continued shift from hospital to ambulatory outpatient imaging.
During the quarter, we opened 1 new facility, a women's imaging center in Rolling, Oaks Ventura County region, in southern California.
With this denovo, we now have opened 5 facilities during 2025 with more to come in the fourth quarter of this year.
AI Revenue within digital Health, inclusive of icad revenue from its profound Ai and deep Health Solutions in breast, lung, prostate and neuro increased 112% from last year's, third quarter,
Also contributing to this growth was a 28.7% increase in ebcd AI Revenue as well as a small amount of external ultrasound AI revenue from our recent uh recently acquired C mode.
Business.
Excluding the AI revenue from the Erad Deep Health OS, Tech Live, and other workflow solutions, revenue increased 24.5% from last year's third quarter.
The overall business demonstrated margin improvement in the quarter.
Adjusted ebita margins improved by 26 basis points from 16% in the third quarter of last year to 16.2%. In this year's third quarter.
this was a, was a result of the strong Revenue performance and a focus on cost management and efficiencies,
With regards to our balance sheet and financial leverage as of September 30th 2025 unadjusted for Bond and Term Loan discounts. We had 287.3 million of net debt which is our total debt at par value, that's our cash balance.
Note that this debt balance includes RadNet's ownership percentage of New Jersey Imaging Networks. The net debt amounts to $33.7 million, for which RadNet is neither a borrower nor a guarantor.
At quarter-end, our net debt to adjusted EBITDA leverage ratio was approximately 1 time.
Contributing to our strong cash position and low. Leverage was the continued improvement in our revenue cycle where we have driven dsos or Day sales outstanding down to 31.9 days which is our lowest historical level.
Given the strong third quarter results and the positive trends we continue to experience, we elected to increase revenue and adjusted EBITDA guidance for our imaging center business.
We increased revenue by $50 million at the low end and at the high end of the guidance range, and increased adjusted EBITDA by $5 million, both at the low and high end of the range.
We also increased our capital expenditure guidance range by $500 million, which is reflective of additional growth investment opportunities. We have been pursuing.
We also lowered our range for cash interest expense by $4 million at both the high and low end of the range.
which is reflective of higher cash interest income from our cash balance than what we originally projected.
For Digital Health, we increased the revenue guidance by $5 million, predominantly to incorporate the contribution from iCAD since its consolidation in mid-July.
1 Thing worth noting.
Um, is that we did not lower the digital Health adjusted Eva, Doug guidance for 2025 despite the fact that icad and C mode were both losing ibida at the time of their purchases.
Holding the adjusted IBA, dog. Guidance unchanged for digital health is the result of achieving anticipated cost synergies ahead of schedule through faster integration of each of those businesses.
is also due in part to better-than-anticipated expense performance from the existing Digital Health operations.
I'll now take a few minutes to give you an update on 2026, anticipated, Medicare reimbursement.
as a reminder, Medicare represents between 23 and 24% of our current business mix,
With respect to Medicare reimbursement. In July, we received from CMS a matrix of proposed rates by CPT code, which is typically part of the physician fee schedule proposal that is released about that time every year.
At the time, we completed an initial analysis and compared those proposed rates to our current 2025 rates.
We volume-weighted our analysis using expected 2026 procedure volumes.
Care proposed increasing the conversion factor of the Medicare physician fee schedule by about 3.3%, from $32.35 to $33.42.
Along with certain changes to the RVUs, or relative value units, of specific radiology CPT procedure codes and to the Medicare Geographic Practice Cost Indices, or GYPSI.
Our initial analysis in July of all the V, various variables of The Proposal indicated that RadNet, on roughly $2 billion of revenue, will benefit from an approximately $4 to $5 million Medicare revenue uplift in 2026.
A couple of weeks ago. CMS released its final rule which will govern the 2026 physician fee schedule. Reimbursement rates,
We analyze the final rule CPT code by CPT code, and we are pleased to report that the impact on Medicare rates in 2026 will be consistent with the proposed rule calculation. We completed this analysis in July.
The 4 to 5 million dollars of Revenue benefit next year. Breaks a trend of about 5 years of annual cuts to the Medicare physician fee schedule.
During the last four years alone, we have absorbed over $35 million of annual cuts.
We are pleased that going into 2026, we will not have to overcome Medicare Cuts, Like We have had to do in the past, and this benefit will be reflective in our 2026 Financial guidance.
We hope that this is a recognition from CMS that it must compensate providers appropriately and that its reimbursement should be commensurate with the rising costs of providing services.
I'd now like to turn the call back over to Dr. Burger, who will make some closing remarks?
Thank you, Mark.
As many of you may be aware, Granite will be hosting its inaugural Investor Day tomorrow at the NASDAQ Market site in New York City.
I invite all those not attending in person to watch the event via live webcast or via the archived replay, which will follow.
You can get the webcast link from the investors section of the radnet corporate website, or from our recent press, releases announcing the event.
During tomorrow's Investor Day, we will have a full day's agenda that includes numerous digital health demonstrations.
Of its AI-powered portfolio of solutions and presentations from the following.
Certain positions will allow clinical leaders to discuss some of the specialty growth areas of the company, including important programs in neural imaging, prostate imaging, PET, CT cardiac imaging, and lung cancer screening.
Read its Chief Operating Executives will provide a deep dive into many of Red's critical operating initiatives that will continue to drive efficiency and growth within our Imaging Center operating segments.
Digital Health leadership will provide an update on the progress of development, commercialization, and implementation of the Deep Health portfolio of solutions, both within RadNet and the progress we are making with outside customers.
And finally, Mark will present RadNet's RadNet.
3-year plan, which will include Executive Management's view on the major operating assumptions and metrics that could drive our business through the end of 2028.
Additionally, tomorrow's Investors Day will provide attendees the opportunity to ask questions of.
and interact with the broader business and clinical leaders of the company.
To participate in tomorrow's Investors Day, three weeks from now, we will also be showcasing the digital health product portfolio at the diagnostic imaging industry's largest convention, RSNA (Radiological Society of North America) in Chicago.
We will be hosting two Deep Health Booth tours for investors interested in participating in the demonstration of Deep Health, a portfolio of solutions. And we will be walking with the floor of the convention.
We look forward to potentially seeing you tomorrow at the RSNA and updating you on all our progress on the next financial results call.
Operator: We are now ready for the question-and-answer portion of the call.
Thank you.
We will now begin the question answer session to ask a question. We press star and then 1 on your touchtone phone.
If you're using a speaker-phone, please pick up your handset before pressing the keys.
If at any time your question has been addressed and you would like to withdraw your question. Please press star and then 2
At this time, we will pause momentarily to assemble a roster.
We have the first question from the line of David McDonald from truist. Please go ahead.
A quick digital health questions to start, um, can you guys talk a little bit about, um, on on Tech live? You talked about the New York Market on the 2q call, just where we are in terms of rollout with other geographic regions and then, secondly, um, just on kind of the dynamic scheduling you provide a little more detail. There is that you guys are doing predictive modeling around, you know who may cancel, or, you know, just just increasing throughput on the, on the, uh, scheduling side.
Sure, um, hey Dave, uh, thanks for thanks for the questions. Um, yeah, with respect to the tech live rollout. Uh, we should be substantially complete, uh, by the end of the year. Maybe slightly early into the first quarter with tech live. Connecting all of our Advanced Imaging equipment, MRI, CT, and PET CT. We're, we're substantially through the connection of our MRIs, uh, um, at, at this moment. Um, and we did call out, uh, both on the second quarter and the third quarter. And and this this call uh, the impact of what we're seeing in some of our markets with respect to the increased capacity uh that that's that this is created for us. And then that's 1 of the reasons why you've seen our MRI volume both on an aggregate basis, and our and same Center basis, uh, growth of so substantially relative to last year, because what the tech live has already, uh, demonstrated
For us is that it has substantially reduced uh, the exam room closures, uh, when you know, in the past, we've had Tech a shortage of Staffing for a variety of reasons or texts. Call in sick. In the morning we've had to close those exam rooms and and very similar to the airline industry or the hotel industry. When we have a an exam slot that goes unsold like a like an airplane that
Takes off that. That has a seat. That's unsold. We can never resell that that, uh, that slot. So, we, we, we did, we called out on last quarter that that we started the roll out here in, uh, in in New York. I happen to be sitting in New York right now for this call. Um, and uh, in 83 of our centers, we reduced exam closure hours by about 42% relative to, uh, to last year and and that has had a, um, a market, um, uh, benefit, you know, to to MRI scanning the other thing that that has had a benefit that I know you're not asking about it, but it's worth noting is, um, the what we call Dynamic scheduling, uh, that we have instituted in, in over the last year where um, we now have a predictive models using AI that can um identify patients who might not show up for their exams based upon
A number of different factors including them not um confirming those exams via via text or or other appointment reminders. And we've been essentially over booking the schedule and uh expecting for some of these patients not to show up and that has had a a big benefit in infilling spots. That would otherwise have gone unused. So we expect you know, next year to even have a bigger impact 1 because this impact is going to be on All 4 quarters
Of next year. And also we, we will be, um, you know, covering, uh, schedules now also for MRI and excuse me, CT and, and PET CT as well.
Reasonable, relative to kind of, you know, what they'd be looking at otherwise.
Hi, Dave. It's Dr. Burger. I'll take that one.
That's a multiple-part question here, and I'll try to remember to hit all the highlights, Dave. But, um, in terms of, uh,
Actual commercial payers, uh, adopting covering the ebcd. Uh, we are in discussions. Uh, it's a, it's a big ship and they turn, uh, slowly. But the conversations I think are are positive exactly. When we might get the first 1 to adopt, um, is harder to predict right now, but I think it's just a matter of time. Uh, perhaps driving, that is the continued growth of adoption by our patients, who are opting into, pay pay, pay it out of pocket. That's now is, uh, we mentioned in our remarks uh up to 45%. And we expect to be north of 50% uh sometime in the beginning of 2026 and the value proposition. For this AI is being uh,
Very well received by our patients because we do such a substantial or make such a substantial effort in the education of this. Not only with the patients, but with their referring Physicians, um, and we have a lot of good. Testimonials some of which we'll talk about tomorrow in the investor day of how appreciative. Uh, our patient base is of offering this um, is in regards to uh, capitated payers. Um, we have been getting increases from all of our capitated uh uh programs. Some of which when we did not get the desired result, we elected to go on fee for service and we're getting uh increased rates that were higher than what we were getting under uh converted capitation rates uh to a fee for service program. Um and lastly as uh, I believe you mentioned and um
Uh, we have gotten, uh, some of our larger capitated payers in California, to begin offering. The ebcd program as a benefit to all of their capitated patients which means we don't ask those patients if they want to enroll in ebcd because they get it as a benefit, that is paid for on a fee for service basis by the ca
Buy our capitated medical groups. And I want to highlight the importance of that because the capitated groups recognize that there are 2 benefits from this number 1, early detection leads to lowering costs and better outcomes. The other
portion of this, which they have actively encouraged us, is to get better and better compliance from patients to do their annual or by annual screening and that is a major driver for the capitated uh groups because it improves their Heist performance and allows them to get bonuses. Some of which we share in at the end of the year.
So I very uh grateful and very um delighted to report that uh there is a large segment of our patients who are now getting this as a benefit. And I believe that kind of pressure inside the industry will eventually uh filter down to the commercial payers as something that is truly a benefit that patients deserve under their health care plans. Uh, we also are doing a lot of Education directly with employers, since probably about 70% of all the patients covered by commercial payors are
Actually through uh, employer health plans. So we're we're very confident that this will continue to be successful. I will also tell you and we'll be talking about it. Next year that we plan to expand capabilities within the ebcd program, uh, to further, uh, create ability to not only detect cancers early, but also to improve risk prediction models that'll be, uh, part of our ebcd program.
Exactly Dr. Berger's Point, uh, in October, uh, 1 of, we had a new capitation contract Desert Oasis Healthcare. Um, actually, they're an old capitation contract of ours, but, but they're newly, uh, now paying for the ebcd, uh, program. So, uh, you know, we, we're, we're getting more and more traction here. And, and I think that this is putting more and more, uh, pressure on the commercial insurance companies because these capitated, uh, um, patients are HMO patients that are aggregated from the various different hmos, you know, the the the the United, the the Aetna, the health Nets of the world. And so now those big insurance companies have certain of their members who are part of these capitated groups that are now getting uh ebcd paid for as as they covered benefit. And then other plans that they have that are not getting uh and members that are not getting this paid for as a
benefit. So I think we're headed in the right direction here. It's just that there's, you know, it it's a slow process and there's a lot of inertia in healthcare.
Okay, helpful. Thanks guys.
Thank you. We have the next question from the line of Brian. Tant from Jeffrey. Please go ahead.
Hey, good morning guys, and congrats on another solid quarter, um, maybe Dr. Burger, I'll start with you, you know, I remember last quarter, you talked about the outlook for joint ventures, and how you're getting excited about opportunities that you expect, uh, towards your end. So, just curious where does that stand in terms of, you know, Partnerships, uh, with health systems or physician groups?
Um hey good morning Brian. Nice to hear from you. Um,
It looks very robust. Uh, I don't have anything specific to announce today, although, uh, we hope to have those in the coming weeks or early first quarter. Uh, what I will tell you though is that we are getting more inbound calls from health systems, uh, as it relates to helping them with their radiology strategy. Um, hospitals are being impacted, just the way, uh, for their inpatient staffing issues as outpatients are meaning radiologists are in short supply and high demand. Uh, there's a turnaround time for reports that is uh, deplorable, uh, and the shortage.
Is just creating staffing issues that nobody could have predicted. So uh, while they're, perhaps our other people who provide pieces of the puzzle, that health systems are need, people are more and more looking at Red Nets comprehensive uh, Solutions both on the operating metrics, as well as uh, the Deep health and AI metrics as a way, uh, to solve some of their problems just like, it's solving for us. So, um, uh, the conversations that we're having are robust, uh, and not only with the new systems that are reaching out to us, but also, with existing systems that are looking to expand, uh, some of redness operating capabilities into their Health Systems, even if it's not part of a joint venture, but leveraging up on radnet,
Uh, strong management and operating capabilities, much of which is really, uh, being driven by the potential, uh, value proposition of uh the the digital Health segment.
I appreciate that. Then maybe just thinking back on that, Mark, as I think about 2026. I know it's too early for guidance, but as we think through the topic of desire, right? EAPTC's, just curious what your health insurance exchange exposure is or how do you view that? And then, how should we be thinking about the inflationary environment for wages as Dr. Burger talked about, radiation technologists and radiologists' costs?
Side of the business. I don't think we're going to be impacted, you know, substantially. We also don't do a lot of, uh, uh, exchange work. Um, uh, we do some on the fee for service, you know, side and that's, you know, part of our commercial book. But, uh, it's, it's relatively small here. So, uh, you know, a lot of the noise that we're hearing in Washington today, regardless of how it gets resolved, um, it doesn't feel like it's going to have a material impact on our business, 1 way or another
Um, with respect to your second question about labor, um, labor still remains, uh, you know, a challenge for our company. The healthcare industry at large, um, we have seen it, uh, stabilize a little bit, uh, in our industry with respect to, uh, radiology technologists, which is our biggest pain point. Uh, we've done a lot, uh, internally from a grassroots level to be more effective at, um, hiring and retaining talent. Um, we, uh, other than having to pay pay more, you know, we've been, uh, aggressive in establishing relationships with the tech schools, providing, uh, internship programs, training programs, and tuition reimbursement programs. We've paid bounties to our existing employees who have brought in talent, uh, you know, in...
Into our company from the outside. And we've and, and we've mentioned this in the past, we actually have started our own Tech program, uh, tech training program on the west coast in conjunction with a, uh, a non-for-profit vocational, um, program out there. So, we have seen some stabilization but it's still, it's still challenging out there. We, you know, we will build into our 26, uh, um, uh, guidance, uh, increases to our our, um, employees, you know, at at the center level and our technologists like like we have been building in over the last several years. Um, but, you know, the big Focus for us is on some of the digital solutions that we think will have a major impact in, in helping us, you know, slow this curve or, or reverse this curve, you know, Tech live is an example of that where, you know, we're, we're starting to train some of our more capable techs to be able to control multiple rooms.
Uh, simultaneously, it also Tech live also opens up the hiring pool, uh, beyond our geographies. Um, so we can fish from a, a much larger talent pool, um, and uh, the the the workflow Solutions like deep health and, and others, um, also make, you know, the ability the, you know, lowers the, um, the, you know, scanning time increases capacity, where we can do more scanning,
And the same number of work hours, which helps us leverage our workforce.
Awesome. Thank you, Mark. Thanks, Howard.
Hey, hey Brian. I want to make 1 other quick comment, uh, about uh, the labor market, um, I believe and I hope I'm correct that, uh, the, the challenge is in the labor market are at an inflection point. And somebody might say, well why do you believe that? And I'll give you 2 Reasons, number 1, uh, in general. Uh, you've seen many good-sized companies announced, uh, staff reductions, uh, and layoffs. Some of them use the excuse of, uh, AI has made them less dependent upon Labor. Uh, manual labor others. I believe are, uh, running into some of their own operating metrics that need to be, uh, right sized. But more specifically, in the health care industry, 1 of our biggest uh, issues that we've had to deal with is
The fact that reimbursement to hospitals has been so substantially greater than it is to imaging centers, uh, that the salaries that hospitals have been able to offer. Have often, you know, uh attracted people away from the outpatient Imaging, uh centers like like ours and others, I believe that's true.
Many of the federal and state programs. Uh, so that I believe some of the burden that we've been shouldering uh for the last several years will now.
Be lessened, it will not be eliminated but I think, uh, that along with our, uh, timely entrance, uh, into the digital Health Market and the programs, uh, that we are going to continue to develop, uh, will uh, help transition us into a less dependent manual, labor force. Uh, and I think you'll be hearing more about that. I, I do want to emphasize that in healthcare. AI is not a bubble. It is an existential need that the industry must and will go through in order. Not only to deal with the challenges facing, uh, the the market today from a reimbursement standpoint and from a cost standpoint, but simply to improve the quality of care and better outcomes that technology and Innovation are capable of doing. And that's why that is indeed the new moniker for Remnant. That we will be
talking about on tomorrow's uh investor day and which I like to think that the red net will be a poster child for that kind of uh transition
Yeah.
Thanks Brian.
Thank you. We have the next question from the line of John Ransom from Raymond James. Please go ahead.
Hey, good morning uh Team. Um a couple on digital Health, uh number 1 um just with the IAT acquisition and your AI.
Capabilities that you currently just use for in-house. Your own centers, is there a future where radnet develops?
Maybe a Virtua Radiology capability and uses its uh, enhanced, you know, ebcd technology to do reads. Just, you know, for scans not just on the ns4 wall.
I believe.
Good morning. John, hope you're doing well. Um, yes sir. Yeah, John, I, I believe that is an inevitability. Uh, it's not something that is designed to eliminate Radiologists. If if some people have uh, feared or have told about but rather to address the enormous challenges that Radiologists face in trying to manage all the information that is presented to them uh through breast Imaging in particular. Um, when I started
Is, uh, which was kind of in the horse and buggy days. Uh, there there might have been 2 or 3 or 4 images that you would look at to try to read a mammogram today. And I'm not exaggerating its thousands of images and to some extent breast cancer, like other cancers, particularly if you're going to attempt to diagnose them as early as possible, is it like sometimes like looking for a needle in a hay stack, uh, that being said, um, the advances in technology are creating this kind of demand in an already challenged Workforce, meaning radiologist and the ability to look at patterns which is really what uh Radiology is about what Imaging is about and what
The machine learning is about to create. These AI models is a natural Evolution to being able to at the very least give with greater certainty. And perhaps with uh, autonomous uh um, outcomes, those that are normal from those that are not normal. So I I believe that is the future. I will tell you that it's something that we and others are are, are, are working on, and it will not be limited to just
Uh, breast Imaging and cancer detection. So uh the tools that that that we're embracing and we'll continue to embrace uh and investing uh will be to assist our Radiologists and providing faster, better and more accurate outcomes.
And and it's Marketplace opportunity.
Um, well we're we're still currently in the process John of rolling out all of the modules inside radnet, and that's something that we'll be emphasizing in tomorrow's, investor day is, you know, the unique capability that rednet provides is not only a, a laboratory for development, but a, uh, opportunity to deploy these, uh, do what we call co-development or co-piloting of these products and get very quick feedback as to how they're impacting both the clinical and operating metrics here. So, um, we're getting very good adoption internally. We're uh, trying to finalize, uh, what I'll call uh some of the modules that will be uh Prime Time and ready for adoption. Uh, next year, uh which at this point is only about 7 weeks away. So
Uh, we're excited about that, uh, but things that we're doing there, there's no reason to think that anything we're doing internally won't be embraced by someone somewhere, uh, to put into their system. I I I I also want to emphasize that I think, as you have correctly pointed out, John, there's a lot of points solutions, that in fact is and we'll try to go into deeper.
Uh, take a deeper dive into tomorrow part of what the benefit of the rednet deep Health operating system is it's a platform for all of these modules or opportunities. Whether they're ones that radnet owns and develops or whether it's 1 that somebody including radnet, may want to license, can operate on a single platform and have radnet. Be responsible for the implementation and integration of it rather than somebody has to deal with perhaps as many as
100 different vendors to do, all of these Point Solutions. So, I would encourage everybody who, uh, is able to listen into the investor day, either live or, uh, subsequently to, uh, understand that what we're talking is a transformative Tool, uh, that we believe is going to Market and address the challenges that not only Radiology but Healthcare itself faces.
So, Howard, when you were reading scans, you know, back in the horse and buggy days, did you ever think you’d become a software salesman? You know, that was pretty good. Yeah. Yeah, John. I’m not even sure, up until fairly recently, I knew what the word 'software' meant.
That's funny. Um, but actually you you bring you bring up a very good point John and thank you the future of radiology. The future of Imaging is more about software than it is hardware. And I'm not trying to diminish the importance of Hardware 1 bit. It has been instrumental in evolving Imaging to where it is today, but the future is about software. We'll be talking about that tomorrow. And, you know, as opposed to what I continually hear about AI being a bubble and people being concerned about it, that's the least of our concerns inside. Healthcare in particularly in imaging. AI is here today. It has both clinical and operating implications uh, which are going to be transformative. Not just, as I said to the Radiology Community, the Imaging Community, but to Health Care.
And, uh, we're excited to be leading that way.
And lastly for me, and uh, not that we don't love New York and California, but you know, you guys have raised a pile of money. Uh, it's largely been from just the core Imaging M&A side. So I just wondered, you know, is there still a bit of a spread for these larger portfolios? Is there anything cooking? Uh, what's going on with the kind of external growth model on the core Imaging side? Thanks, I'll stop there.
To realize, and again, it'll be part of what we hope to communicate tomorrow on Investor Day. That.
That the software or the Deep health, or the, digital Health, part of our business will help improve operating metrics which will apply across the entire spectrum of rednet services. And so, uh, our investment of that, in anywhere we decided to take it will only help create better operating. Leverage for the company. Allow us to go into other markets, perhaps with less Capital intensity that we have in the past, but have a reach that
2 or 3 years ago, we we would never have even considered uh not only domestically but perhaps internationally.
Thank you.
Thanks John.
Thank you.
We have the next question on the line of Andrew Mo from barklay, please. Go ahead.
Hi, my name is just a quick follow-up on that sales cycle question from a personnel standpoint. Following the iPad acquisition, do you have the appropriate number of salespeople in the seats to sell Deep Health, or are more hires needed on that front? Thanks.
Uh, hi Andrew. Um
Yes, and yes, yes, yes, we need more, but, uh, there's other ways of acquiring that, that will be talking about. Um, this the sales force for doing this is more and more being recognized by us that cross-selling and bundling. Uh, of these tools is the way to Best enhance, the overall penetration of deep Health in the market. Uh, I think as uh, uh, John had just pointed out, Point Solutions are nice to talk about, but, uh, implementing them and maintaining them, uh, with several different companies is Impractical. So, what we have found, uh, and where we're particularly excited, uh, is that we gained a very substantial sales force with the icad? Uh, um,
Acquisition. Uh, and that has, in fact, uh, allowed us to accelerate, uh, cross-selling not only of various breast Imaging Suites but starting to, uh, or our breast Imaging Suite, uh, but also, uh, introduce other opportunities for them to cross out that they're very enthusiastic about and which would have taken us uh quite a bit of investment in time to achieve. So it's it's quite likely that as we begin to embrace other areas of
Of uh, AI software in imaging. Um, that same philosophy is something that we will be looking at carefully so that we can accelerate. What is a, a truly transitional time, uh, in imaging and that is, uh, uh, ripe for these kind of solutions.
Right and maybe just a follow-up on ebita. Margins in the quarter, a little surprised uh you didn't see better flow through on very strong Advanced Imaging volumes. Anything to call out on the cost side or incremental margins in the quarter preventing uh margins from expanding more thanks.
Um well I think um, some level um you know we we can create the capacity uh but you know as we create that capacity and fill it it will uh in and of itself uh reach certain limitations. So I I think we've had a a very good run of this uh uh virtually every quarter. And if you compare quarter the quarter last year over the quarter of this year, last year was actually a very good quarter for us. So I was happy to see some improvement, uh, e even compared to a very good quarter last year. But I think some of the things that we talked about and that will go into more detail. And in fact, even show some slides will show that this sustainability is not
Not just because of the capacity that we're creating through the tools that we've used up to now, but how next year will be a transition where margin improvement is more likely to come through the digital health side. As we begin to implement both some of the clinical and now operating tools that we're beginning to...
First to make certain that these products are capable of delivering that on our 12 million exams, that we're doing annually right now and then honing these tools. So they become that much more attractive for external, use some of that external use. Again, being in a built-in customer base that we have with our current and growing, uh, joint venture Health Systems. So, um, I think, you know, we're, we're hitting, if you, if you look at and we'll be showing this on a slide tomorrow, uh, the actual growth of our margin, over the last 4 years, has been over 300 basis points. We think we can continue that but not just by the more, uh, by the tools that we've been using, uh, over the last 4 years and particularly in the last, you know, 18 months to 24 months but how now the, uh, act back the, um, investment and artificial
Intelligence, will continue to drive, you know, those opportunities, which by themselves, uh, have almost unlimited potential. So, um, we're just getting started. And I think, uh, to tomorrow's investor day, we'll hopefully amplify kind of the Handover of what has been capacity, uh, creation and in and, and margin improvement over to, uh, Ai and software.
Uh further Improvement, uh that'll happen primarily from the operating side, which are uh equally exciting for us.
And will that be all or do you have any follow-up questions?
All right, we move on to the next question.
We have the next question, line of 1, G from B Riley Securities. Please go ahead.
Uh good morning. Thank you for taking our questions and congrats for a good quarter. So Mark, maybe can you clarify the digital Health revenue for 4 Cub after acquisition of I have which contributes about 5 million dollars a quarter in Revenue. Uh, does it mean the digital house will be flat or even decreasing year-over-year for 4K?
No, we didn't mean to imply that. I mean, we increase the the revenue, the guidance by 5 million dollars, uh digital uh icad this quarter. Uh um, uh contributed about 3.9 million dollars of additional Revenue. Um, we feel comfortable with the new Range, um, for digital Health that that we gave, but we're really not implying that um, that digital Health itself was, was, was going to be down. I mean, you know, with
The iPad, uh, Revenue we were up, you know, 56%, uh, this quarter over last year's third quarter and, um, uh, you know, it it's we're expecting a strong, uh, performance, uh, in the fourth quarter of, of digital health. So, um, we'll, you know, we'll look at where we are at the end of the year and then that will be the kind of run rate, uh, going into next year.
Yeah, got it. Uh, we probably will hear this more tomorrow, but within the 15 to 20% year-over-year, volume growth of tax. CT, can you comment on the growth from oncology versus Alzheimer's? And are you preparing for new agents launching in 2026?
So, um it, um, Pepsi is still be driven being driven by, you know significant growth in 2 areas the psma, prostate Imaging as well as the um, uh, the, uh, amloid brain studies. You know, for Alzheimer's and and uh, um, uh, and and dementia. And the 2 of those together are now about 20% of all of our, um, PET CT, uh, um, procedure volume, uh, psma is currently running about 12% of our, uh, uh, of our, um, Pepsi T volume with the Amoy brain studies and other 8%. Um, and and that's it's the strong.
Radioactive tracers that are in, you know, sort of the final stages of clinical trials that we think are going to be coming on the market, in, in the coming, uh, years that is going to continue to make, you know, nuclear medicine and and PET CT, uh, um, grow substantially in the future. And these are tracers that are, um, are are tumor specific? And will will be driving more and more utilization of of, of, of PET, CT in the future.
That would be all, Mr. G.
Yes, thank you.
Thank you. We have the next question, on the line of Jim sidoti from sidoti and Company. Please go ahead.
Hi, good morning, and thanks for taking the call. Um, you know, just to follow up on the core business, I believe you said you added 1 center in the quarter. So, are you up to 4,006 centers at this point?
I we're at 407 centers. Um uh.
Yeah, and that includes, you know, uh, acquisition centers in the quarter includes the new center and new centers and includes consolidation of centers. So, net net at at 9:30 2020. Um, 5 we were at 407 locations.
And where do you think you'll be by the end of 2025?
Uh, by the end of the year, we will be higher. I mean, we've got some acquisitions, you know, in the pipeline that we're hoping to, you know, be in a position to close by the end of the year. We've got other de novo centers that will open between now and the end of the year. So, um, while we don't really make those projections because it's difficult to know the timing of when acquisitions potentially close. But, yeah, we'll, we'll, we'll be, as Howard said, we'll be higher.
Okay, and you you gave us uh, same Center numbers for the Advanced Imaging procedures, but what was the overall Scene center volume?
I think you know, because.
You know, 70, uh, uh, 72% of our procedure mix is routine, Imaging that tends to, you know, from an law of averages that tends to, uh, you know, to dominate, you know, the the overall average. But, um, including and advanced. And, and and remember, Advanced Imaging is growing much faster than routine Imaging, but net net, when you put all these 2 together, I believe it was 4.9% total. Same set of procedure, volume inclusive of both Advanced Imaging and routine Imaging.
Okay. And then last one for me. Um, you talked a little bit about the Alpha RT acquisition. Can you just give us some broad?
Uh, you know what, you paid for it, how you paid for it. Um, you know, just some magnitude on on what that was.
Yeah sure. Um and we had an 8K to this effect because we paid it all in in in stock at register registered that stock. And and I believe at the at the day of announced, you know, the day of completion, it was somewhere in the range of 5 million dollars, give or take a few bucks here and there and it was, it was all stock and, and really what Alpha RT is is, it's, it's a, it's a platform that fits in really nicely with our Tech live remote scanning, um, technology where Alpha RT is a platform where they're providing remote. Technologists. Meaning, uh, you know, uh, um, technologists that are sitting either in, uh, Coral Springs Florida, where there are headquartered or elsewhere that that are available to read these scans remotely. And we can use that both internally within within radnet to cover our centers as well as provide this as a um as a service to other customers who might be looking
To grief, the patient to bring the patient out of the the the changing room into the exam room position them on the table potentially position them in, uh, in MRI coils. And so, uh, Alpha RT has a platform to train the this whole new, you know, employee base.
Yeah, I just for a moment I'll introduce a term that we're going to talk about tomorrow. So you know we sell an AI tool called uh Tech live. What the alpha? RT opportunity will allow us to do is to provide Live tech so that um, we will become, uh, for ourselves and for others. A opportunity for Staffing, not just providing AI. Uh, which in today's market, uh, could wind up being uh, a, a product of our services division and 1 that perhaps, uh, G given the demand. And uh, uh, compensation that people get for providing, uh, this uh, somewhat uh, very needed and ensure Supply Service, uh, with greater margins than than even our AI business.
All right. Well, thank you. I look forward to hearing more about it tomorrow.
Thank you. Jim. Thanks Jim.
Thank you.
This concludes the question of the session I would now like to turn the conference back to Dr. Burger for pres the president and CEO for any closing, remarks
Thank you very much, operator, and I want to thank everybody for attending. Uh, today's
Earnings call. Um, I thought it was going to be a slightly shorter but uh, apparently not earnings. Call given the uh investor day tomorrow. But uh, I I'd encourage everybody. Uh, who's interested and who will get a substantially deeper dive into the metrics that we look at every day and which, uh, up until this time, we've not had an opportunity to, perhaps as display as vividly as we will tomorrow, uh, to sign in. And uh, listen to a both a clinical and an operating uh, pre presentation, uh which uh is something that has not ever been done in our industry. So we look forward to uh seeing those of you tomorrow and otherwise uh for our fourth quarter, earnings call, uh in March of next year.
Thank you.
The conference has now concluded, thank you for attending today's presentation. You may now disconnect