Q1 2026 RadNet Inc Earnings Call

May 11, 2026

Operator 2: Ladies and gentlemen, thank you for standing by. The RadNet call will begin momentarily. Please continue to hold, and thank you for your patience.

Speaker #2: Good day and welcome to the RadNet Inc. First Quarter 2026 Financial Results Earnings Conference Call. All participants will be in listen-only mode. If you require assistance, please signal a conference specialist by pressing the star key followed by zero.

Operator 3: Good day, and welcome to RadNet in Q1 2026 Financial Results Earnings Conference Call. I would now like to turn the conference over to Mark Stolper, Executive Vice President and Chief Financial Officer of RadNet. Please go ahead.

Operator: Good day, and welcome to RadNet in Q1 2026 Financial Results Earnings Conference Call. I would now like to turn the conference over to Mark Stolper, Executive Vice President and Chief Financial Officer of RadNet. Please go ahead.

Speaker #2: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one, on a touch-tone phone.

Speaker #2: To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Mark Stolper, Executive Vice President and Chief Financial Officer of RadNet, Inc. Please go ahead.

Speaker #2: Thank you. Good morning, ladies and gentlemen, and thank you for joining Dr. Howard Berger and me today to discuss RadNet's first quarter 2026 financial results.

Mark Stolper: Thank you. Good morning, ladies and gentlemen, and thank you for joining Dr. Howard Berger and me today to discuss RadNet's Q1 2026 financial results. On this call, we have also invited Kees Wesdorp, President and CEO of Digital Health, and Sham Sokka, Chief Operating and Technology Officer of Digital Health, who will share additional information about the progress of the Digital Health operating segment. 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 US Private Securities Litigation Reform Act of 1995.

Mark Stolper: Thank you. Good morning, ladies and gentlemen, and thank you for joining Dr. Howard Berger and me today to discuss RadNet's Q1 2026 financial results. On this call, we have also invited Kees Wesdorp, President and CEO of Digital Health, and Sham Sokka, Chief Operating and Technical Officer of Digital Health, who will share additional information about the progress of the Digital Health operating segment. 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 US Private Securities Litigation Reform Act of 1995.

Speaker #2: On this call, we have also invited Case Westorp, President and CEO of Digital Health, and Sham Soka, Chief Operating and Technical Officer of Digital Health, who will share additional information about the progress of the Digital Health operating segment.

Speaker #2: 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.

Speaker #2: Specifically, statements concerning anticipated future financial and operating performance, RadNet's ability 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.

Mark Stolper: Specifically, statements concerning anticipated future financial and operating performance, RadNet's ability to grow the business by generating patient referrals and contracts with radiology practices, recruiting and retaining technologists, receiving third-party reimbursement for diagnostic imaging services, successfully integrating acquired operations, generating revenue and Adjusted EBITDA for the acquired operations as estimated, among others, are forward-looking statements within the meaning of the safe harbor. Forward-looking statements are based on management's current preliminary expectations and are subject to risks and uncertainties which may cause RadNet's actual results to differ materially from the statements contained herein. These risks and uncertainties include those risks set forth in RadNet's reports filed with the SEC from time to time, including RadNet's annual report on Form 10-K for the year ended 31 December 2025.

Mark Stolper: Specifically, statements concerning anticipated future financial and operating performance, RadNet's ability to grow the business by generating patient referrals and contracts with radiology practices, recruiting and retaining technologists, receiving third-party reimbursement for diagnostic imaging services, successfully integrating acquired operations, generating revenue and adjusted EBITDA for the acquired operations as estimated, among others, are forward-looking statements within the meaning of the Safe Harbor. Forward-looking statements are based on management's current preliminary expectations and are subject to risks and uncertainties which may cause RadNet's actual results to differ materially from the statements contained herein. These risks and uncertainties include those risks set forth in RadNet's reports filed with the SEC from time to time, including RadNet's annual report on Form 10-K for the year ended 31 December 2025.

Speaker #2: 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.

Speaker #2: 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 31, 2025.

Speaker #2: 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 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. 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. With that, I'd like to turn the call over to Dr. Berger.

Speaker #2: 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.

Speaker #2: And with that, I'd like to turn the call over to Dr. Berger.

Speaker #3: Thank you, Mark. Good morning, everyone, and thank you for joining us today. On today's call, Mark, Case, Sham, and I plan to provide you with highlights from our first quarter 2026 results to give you more insight into the factors which affected this performance and discuss our future strategy.

Howard Berger: Thank you, Mark. Good morning, everyone, and thank you for joining us today. On today's call, Mark, Kees, Sham, and I plan to provide you with highlights from our Q1 2026 results, give you more insight into the factors which affected this performance, and discuss our future strategy. After our prepared remarks, we will open the call to your questions. I'd like to thank all of you for your interest in the company and for dedicating a portion of your day to participate in our conference call this morning. With that, let's begin. I'm extremely pleased with the performance of the Q1. Revenue and Adjusted EBITDA were Q1 records, despite being negatively impacted by an estimated $13 million of revenue and $9 million Adjusted EBITDA from severe weather conditions in January and February on the East Coast.

Speaker #3: After our prepared remarks, we will open the call to your questions. I'd like to thank all of you for your interest in the company and for dedicating a portion of your day to participate in our conference call this morning.

Speaker #3: With that, let's begin. I'm extremely pleased with the performance of the first quarter. Revenue and adjusted EBITDA were first quarter records, despite being negatively impacted by an estimated $13 million of revenue and $9 million of adjusted EBITDA from severe weather conditions in January and February on the East Coast.

Speaker #3: As compared with last year's first quarter, revenue increased 22.1%, and adjusted EBITDA increased 36.3%, resulting in adjusted EBITDA margin improvement of 115 basis points.

Howard Berger: As compared with last year's Q1, revenue increased 22.1% and Adjusted EBITDA increased 36.3%, resulting in Adjusted EBITDA margin improvement of 115 basis points. As you may recall, last year's Q1 was similarly impacted by weather, and we had additional impact from the Southern California wildfires. Adjusted for the weather impact on this year's Q1 and the weather and wildfire impacts in last year's Q1, our margin improved by 52 basis points. There were a number of items in the quarter worth noting. First, we continue to see a shift towards advanced imaging. During this year's Q1, 29.3% of our procedural volume was from advanced imaging, compared with 26.9% last year's Q1, a difference of 235 basis points.

Speaker #3: As you may recall, last year's first quarter was similarly impacted by weather, and we have had additional impact from the Southern California wildfires. Adjusted for the weather impact on this year's first quarter and the weather and wildfire impacts in last year's first quarter, our margin improved by 52 basis points.

Speaker #3: There were a number of items in the quarter worth noting. First, we continue to see a shift towards advanced imaging. During this year's first quarter, 29.3% of our procedural volume was from advanced imaging, compared with 26.9% in last year's first quarter, a difference of 235 basis points.

Speaker #3: This is both a function of overall industry trends, as well as the significant capital investments RadNet has made in advanced imaging equipment, which is driving faster throughput and increased capacity.

Howard Berger: This is both a function of overall industry trends as well as the significant capital investments RadNet has made in advanced imaging equipment, which is driving faster throughput and increased capacity. Additionally, the implementation of TechLive, DeepHealth's remote scanning solution for technologists, has significantly benefited RadNet's MRI utilization by substantially decreasing exam room closure hours. PET/CT procedure growth continues to be driven by studies to identify and stage prostate cancer and to detect brain plaques correlated with Alzheimer's and dementia. During the quarter, PET/CT procedures increased 35.2% in aggregate and 14.7% on same-center basis. As a result of the operating strength of March, we exceeded internal projections for the first quarter embedded in 2026 full year guidance. Additionally, the strong March performance has continued throughout April and into the first part of May.

Speaker #3: Additionally, the implementation of Tech Live Deep helps remote scanning solutions for technologists, which has significantly benefited RadNet's MRI utilization. By substantially decreasing exam room closure hours, PET/CT procedure growth continues to be driven by studies to identify and stage prostate cancer, and to detect brain plaques correlated with Alzheimer's and dementia.

Speaker #3: During the quarter, PET/CT procedures increased 35.2% in aggregate and 14.7% on a same-center basis. As a result of the operating strength of March, we exceeded internal projections for the first quarter embedded in 2026 full-year guidance.

Speaker #3: Additionally, the strong March performance has continued throughout April and into the first part of May. The combination of these factors drove our confidence to raise 2026 full-year guidance for imaging center revenue, adjusted EBITDA, and free cash flow.

Howard Berger: The combination of these factors drove our confidence to raise 2026 full year guidance for imaging center revenue, Adjusted EBITDA, and free cash flow. This quarter was an active one for acquisitions. In the imaging center segment, two significant acquisitions were completed at the beginning of January. First, Radiology Regional was purchased, the owner of 13 multimodality imaging centers in Southwest Florida. For five decades, Radiology Regional, through its approximately 400 employees and over 40 radiologists, has been a fixture in the fast-growing communities of Southwest Florida, spanning Naples to Sarasota. Second, we entered the Indiana market with the acquisition of Northwest Radiology, operator of 6 imaging centers in the greater Indianapolis area. Founded in 1967, Northwest Radiology has built a long-standing reputation for clinical excellence in central Indiana.

Speaker #3: This quarter was an active one for acquisitions. In the imaging center segment, two significant acquisitions were completed at the beginning of January. First, Radiology Regional was purchased, the owner of 13 multimodality imaging centers in Southwest Florida.

Speaker #3: For five decades, Radiology Regional, through its approximately 400 employees and over 40 radiologists, has been a fixture in the fast-growing communities of Southwest Florida, spanning Naples to Sarasota.

Speaker #3: Second, we entered the Indiana market with the acquisition of Northwest Radiology, operator of six imaging centers in the greater Indianapolis area. Founded in 1967, Northwest Radiology has built a longstanding reputation for clinical excellence in Central Indiana.

Speaker #3: We are busy integrating these two acquisitions, which includes deploying the many DeepHealth AI-powered solutions intended to improve clinical accuracy and patient outcomes, streamlining operating processes, and bettering the patient experience.

Howard Berger: We are busy integrating these two acquisitions, which includes deploying the many DeepHealth AI-powered solutions intended to improve clinical accuracy and patient outcomes, streamlining operating processes, and bettering the patient experience. It is worth repeating that RadNet is not a buy-and-hold investor and operator. Instead, we target markets where there are further opportunities for growth and expansion to bring the full capabilities of RadNet solutions to bear. This includes RadNet's evaluating acquisitions and de novo center opportunities, launching AI-powered population screening programs, and deploying best practices for operating and clinical processes. Finally, on 2 March, the Digital Health division acquired Gleamer SAS in France, a fast-growing developer of a broad portfolio of FDA-cleared and CE-marked solutions for musculoskeletal, breast, lung, and neurologic applications. In particular, Gleamer is best known for its leadership in X-ray, where the breadth and scale of its cloud-first solutions are unparalleled.

Speaker #3: It is worth repeating that RadNet is not a buy-and-hold investor and operator. Instead, we target markets where there are further opportunities for growth and expansion, bringing the full capabilities of RadNet solutions to bear.

Speaker #3: This includes RadNet's evaluating acquisitions and de novo center opportunities, launching AI-powered population screening programs, and deploying best practices for operating and clinical processes. And finally, on March 2nd, the Digital Health Division acquired Gleamer SAS in France, a fast-growing developer of a broad portfolio of FDA-cleared and CE-marked solutions for musculoskeletal, breast, lung, and neurologic applications.

Speaker #3: In particular, Gleamer is best known for its leadership in X-ray, where the breadth and scale of its cloud-first solutions are unparalleled. The integration of Gleamer into DeepHealth has begun, and we have already implemented Gleamer's clinical X-ray AI in a number of Southern California locations.

Howard Berger: The integration of Gleamer into DeepHealth has begun. We have already implemented Gleamer's clinical X-ray AI in a number of Southern California locations. Kees will discuss the Gleamer acquisition in more detail during his prepared remarks. The hospital and health joint venture business continues to grow. On 30 April, we announced the commencement of a new partnership with Trinity Health-Saint Alphonsus Health System in Boise, Idaho. The venture, currently yielding about $30 million in annual revenues, will initially operate 5 centers that include two outpatient facilities at Saint Alphonsus medical centers. RadNet purchased a 51% interest in existing partnership entity for approximately $17 million, including this newly commenced Trinity joint venture. 155 of RadNet's 444 centers, or approximately 35.2%, are held within health system partnerships.

Speaker #3: Case will discuss the Gleamer acquisition in more detail during his prepared remarks. The hospital and health joint venture business continues to grow. On April 30th, we announced the commencement of a new partnership with Trinity Health St.

Speaker #3: Alphonsus Health System in Boise, Idaho. The venture, currently yielding about $30 million in annual revenues, will initially operate five centers that include two outpatient facilities at St.

Speaker #3: Paul's St. Alphonsus Medical Centers. RadNet purchased a 51% interest in the existing partnership entity for approximately $17 million. Including this newly commenced Trinity joint venture, 155 of RadNet's 444 centers, or approximately 35.2%, are held within health system partnerships.

Speaker #3: Other opportunities to establish new health system partnerships, including ventures that could expand RadNet's geographical presence, are in the current pipeline. Health systems continue to seek long-term strategies for outpatient and inpatient imaging, and may have recognized that cost-effective freestanding centers will continue to capture market share from payers and patients seeking lower cost and high quality.

Howard Berger: Other opportunities to establish new health system partnerships, including ventures that could expand RadNet's geographical presence, are in the current pipeline. Health systems continue to seek long-term strategies for outpatient and inpatient imaging and may have recognized that cost-effective freestanding centers will continue to capture market share from payers and patients seeking lower cost and high quality. RadNet continues to be an operating partner of choice for those hospitals that recognize they cannot accomplish their outpatient imaging objectives optimally on their own. Finally, we continue to have strong liquidity and modest financial leverage. We ended the Q1 with a cash balance of $455 million and a net debt to Adjusted EBITDA ratio of slightly under 2.

Speaker #3: RadNet continues to be an operating partner of choice for those hospitals that recognize they cannot accomplish their outpatient imaging objectives optimally on their own.

Speaker #3: Finally, we continue to have strong liquidity and modest financial leverage. We entered the first quarter with a cash balance of $455 million and a net debt to adjusted EBITDA ratio of slightly under 2.

Speaker #3: Though a substantial amount of cash was spent in the first quarter on the acquisitions of Regional Radiology, Northwest Radiology, and Gleamer, causing RadNet's leverage to increase, we continue to manage cash wisely.

Howard Berger: Though a substantial amount of cash was spent in Q1 on the acquisitions of Radiology Regional, Northwest Radiology, and Gleamer, causing RadNet's leverage to increase, we continue to manage cash wisely and debt balances prudently. RadNet's strong free cash flow will enable deleveraging in the coming quarters. At this time, I'd like to turn the call back over to Mark to discuss some of the highlights of our Q1 2026 performance.

Speaker #3: And debt balance is prudently managed. RadNet's strong free cash flow will enable de-leveraging in the coming quarters. At this time, I'd like to turn the call back over to Mark to discuss some of the highlights of our first quarter 2026 performance.

Speaker #1: Thank you, Howard. I'm now going to briefly review our first quarter performance and attempt to highlight what I believe to be some material items.

Mark Stolper: Thank you, Howard. I'm now going to briefly review our Q1 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 Q1 performance. I will also provide an update to 2026 financial guidance levels, which were amended in conjunction with last evening's financial results press release. In my discussion, I will use the term Adjusted EBITDA, which is a non-GAAP financial measure. The company defines Adjusted EBITDA as earnings before interest, taxes, depreciation, and amortization, and excludes losses or gains on the disposal of equipment, other income or loss on debt extinguishments, and non-cash equity compensation.

Speaker #1: 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.

Speaker #1: I will also provide an update to 2026 financial guidance levels, which were amended in conjunction with last evening's financial results press release. In my discussion, I will use the term adjusted EBITDA, which is a non-GAAP financial measure.

Speaker #1: 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.

Speaker #1: Adjusted EBITDA includes equity in earnings in unconsolidated operations and subtracts allocations of earnings to non-controlling interest in subsidiaries, and is adjusted for non-cash or extraordinary and one-time events taking place during the period.

Mark Stolper: Adjusted EBITDA includes equity and 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. A full quantitative reconciliation of Adjusted EBITDA to net income or loss attributable to RadNet, Inc. common shareholders is included in our earnings release. I will also be using a second non-GAAP measure pertaining to the Digital Health segment called annual recurring revenue, or ARR. The company defines ARR as a key subscription economic metric representing the predictable, normalized, annualized value of contracted recurring revenue generated from customers from active customer contracts. ARR includes subscription fees, recurring support fees, and contracted usage charges, and excludes one-time non-recurring fees such as implementation, hardware sales, professional fees, consulting, and one-off training. With that said, I'd now like to review our Q1 results.

Speaker #1: A full quantitative reconciliation of adjusted EBITDA to net income or loss attributable to RadNet, Inc. common shareholders is included in our earnings release. I will also be using a second non-GAAP measure pertaining to the digital health segment called annual recurring revenue, or ARR.

Speaker #1: The company defines ARR as a key subscription economy metric, representing the predictable, normalized, annualized value of contracted recurring revenue generated from customers from active customer contracts.

Speaker #1: ARR includes subscription fees, recurring support fees, and contracted usage charges, and excludes one-time, non-recurring fees such as implementation, hardware sales, professional fees, consulting, and one-off training.

Speaker #1: With that said, I'd now like to review our first quarter results. While I won't recap all the financial information that's contained in last night's earnings report, here are some of the highlights.

Mark Stolper: While I won't recap all the financial information that's contained in last night's earnings report, here are some of the highlights. We had a stronger than anticipated Q1 results when we set our financial guidance levels initially. Despite being impacted by the severe winter weather conditions in January and February, lowering revenue by an estimated $13 million and Adjusted EBITDA by an estimated $9 million, we were still able to achieve record Q1 revenue and Adjusted EBITDA. Relative to last year's Q1, total company revenue increased 22.1% and Adjusted EBITDA increased 36.3%.

Speaker #1: We had a stronger-than-anticipated first quarter result when we set our financial guidance levels initially. Despite being impacted by the severe winter weather conditions in January and February, lowering revenue by an estimated $13 million and adjusted EBITDA by an estimated $9 million, we were still able to achieve record first quarter revenue and adjusted EBITDA.

Speaker #1: Relative to last year's first quarter, total company revenue increased 22.1%, and adjusted EBITDA increased 36.3%. The increase in revenue was primarily the result of the following.

Mark Stolper: The increase in revenue was primarily the result of the following: Our ability to grow same-center advanced imaging procedure volumes by 8.2%; the contribution from acquisitions which we completed over the last year, including in Southwest Florida and Indiana during Q1; performance from de novo center openings over the last year; and the 51.5% increase in Digital Health revenue, partially driven by the acquisitions of iCAD, CMAR, and Gleamer. During Q1, imaging center segment Adjusted EBITDA margin improved by 188 basis points relative to last year's Q1. This comparison was aided by the fact that in last year's Q1, we faced similar winter weather conditions as well as the Southern California wildfires.

Speaker #1: Our ability to grow same-center advanced imaging procedure volumes by 8.2%. The contribution from acquisitions, which we completed over the last year, including in Southwest Florida and Indiana during the first quarter.

Speaker #1: Performance from de novo center openings over the last year, and the 51.5% increase in digital health revenue, partially driven by the acquisitions of iCAD CMAR and Gleamer.

Speaker #1: During the quarter, Imaging Center segment adjusted EBITDA margin improved by 188 basis points relative to last year's first quarter. This comparison was aided by the fact that in last year's first quarter, we faced similar winter weather conditions as well as the Southern California wildfires.

Speaker #1: But even when adjusting and normalizing our results for the winter weather conditions in both this year and last year's first quarter, as well as the California wildfires that impacted last year's first quarter, imaging center adjusted EBITDA margins still improved by 52 basis points.

Mark Stolper: Even when adjusting and normalizing our results for the winter weather conditions in both this year and last year's Q1, as well as the California wildfires that impacted last year's Q1, imaging center Adjusted EBITDA margins still improved by 52 basis points. Our operations teams continue to implement Digital Health technologies that increase throughput and capacity, allowing us to serve more patients and a larger part of the growing demand for advanced outpatient diagnostic imaging. With respect to the Digital Health division, I'm going to let Kees and Sham go over that in much more detail shortly. In summary, the Digital Health segment is gaining momentum.

Speaker #1: Our operations teams continue to implement digital health technologies that increase throughput and capacity, allowing us to serve more patients and a larger part of the growing demand for advanced outpatient diagnostic imaging.

Speaker #1: With respect to the Digital Health division, I’m going to let Case and Shyam go over that in much more detail shortly. But in summary, the Digital Health segment is gaining momentum.

Speaker #1: Case and Shyam, among other things, are going to outline the rapidly growing sales pipeline, discuss recent commercial successes, and provide a status update on the integration of recent digital health acquisitions and the implementation of the DeepHealth solutions across the RadNet network of centers.

Mark Stolper: Kees and Shyam, among other things, are going to outline the rapidly growing sales pipeline, discuss recent commercial successes, and provide a status update on the integration of recent Digital Health acquisitions and the implementation of the DeepHealth solutions across the RadNet network of centers. We finished the quarter with a strong cash and liquidity position. At quarter end, we had $455.3 million of cash on the balance sheet and full availability of a $282 million revolving credit facility. Continued improvements in revenue cycle, particularly in the area of patient collections, have lowered DSOs, or Days Sales Outstanding, to a RadNet record low of 29.5 days, which we believe to be one of the best in the industry.

Speaker #1: We finished the quarter with a strong cash and liquidity position. At quarter-end, we had $455.3 million of cash on the balance sheet and full availability of a $282 million revolving credit facility.

Speaker #1: Continued improvements in revenue cycle, particularly in the area of patient collections, have lowered DSOs, or days sales outstanding, to a RadNet record low of 29.5 days, which we believe to be one of the best in the industry.

Speaker #1: This continues to provide the cash we require to fund our growth and expansion in both operating segments. With regard to our financial leverage, as of March 31, 2026, unadjusted for bond and term loan discounts, we had $631 million of net debt, which is our total debt at par value less our cash balance.

Mark Stolper: This continues to provide the cash we require to fund our growth and expansion in both operating segments. With regards to our financial leverage, as of 31 March 2026, unadjusted for bond and term loan discounts, we had $631 million of net debt, which is our total debt at par value less our cash balance. Note that this debt balance includes RadNet's ownership percentage, which is 49%, of New Jersey Imaging Network's net debt of $23 million, for which RadNet is neither a borrower nor guarantor. At quarter end, our net debt to Adjusted EBITDA leverage ratio was approximately 2. Given the positive trends we experienced in March, April, and the first part of May, we elected to increase revenue, Adjusted EBITDA, and free cash flow guidance ranges for our imaging center business.

Speaker #1: Note that this debt balance includes RadNet's ownership percentage, which is 49% of New Jersey Imaging Network's net debt of $23 million, for which RadNet is neither a borrower nor guarantor.

Speaker #1: At quarter end, our net debt to adjusted EBITDA leverage ratio was approximately 2. Given the positive trends we experienced in March, April, and the first part of May, we elected to increase revenue, adjusted EBITDA, and free cash flow guidance ranges for our imaging center business.

Mark Stolper: We increased revenue by $30 million at the low and high ends of the guidance range, increased Adjusted EBITDA by $5 million at the low and high end of the range, and we increased free cash flow by $7 million at the low and high end of the guidance ranges. Otherwise, all guidance ranges for both the imaging center segment and the Digital Health segment remain unchanged. With respect to Medicare reimbursement for 2027, there's nothing to report at this time. As is typical each year, we are expecting CMS to release preliminary rates for the physician fee schedule sometime in June or July, at which time we will analyze CMS's proposal and our industry's associations and lobbying groups will provide CMS our industry's feedback.

Speaker #1: We increased revenue by $30 million at the low and high ends of the guidance range, increased adjusted EBITDA by $5 million at the low and high end of the range, and we increased free cash flow by $7 million at the low and high end of the guidance ranges.

Speaker #1: Otherwise, all guidance ranges for both the imaging center segment and the digital health segment remain unchanged. With respect to Medicare reimbursement for 2027, there is nothing to report at this time.

Speaker #1: As is typical each year, we are expecting CMS to release preliminary rates for the Physician Fee Schedule sometime in June or July. At that time, we will analyze CMS's proposal, and our industry's associations and lobbying groups will provide CMS our industry's feedback.

Mark Stolper: At the time of our Q2 financial results call in August, I will be in a position to comment on CMS's proposal and its impact, if any, upon RadNet's future results. I'd now like to turn the call back over to Dr. Berger.

Speaker #1: At the time of our second quarter financial results call in August, I will be in a position to comment on CMS's proposal and its impact, if any, upon RadNet's future results.

Speaker #1: I'd now like to turn the call back over to Dr. Berger.

Howard Berger: Thank you, Mark. At this time, we're going to depart from our normal cadence in the script reporting here, which traditionally the third segment I often comment on future trends in the industry. However, at this time, I think it's important for RadNet to establish its position in the market, which reflects the acquisitions and teams that we have put together over the last several years to substantially transform radiology workflow. This is a critical and important juncture in the history of radiology and for that matter, healthcare. The challenges that the industry faces can only be met with the opportunities that technological advances provide us. Rather than this be a point solution, I'm going to turn the conversation over to Kees and Shyam, who will do a deeper dive into the Digital Health performance and provide a status update on many of our AI initiatives.

Speaker #2: Thank you, Mark. At this time, we're going to depart from our normal cadence in the script reporting here, which traditionally in the third segment, I often comment on future trends in the industry.

Speaker #2: However, at this time, I think it's important for RadNet to establish its position in the market, which reflects the acquisitions and teams that we have put together over the last several years to substantially transform radiology workflow.

Speaker #2: This is a critical and important juncture in the history of radiology and, for that matter, healthcare. The challenges that the industry faces can only be met with the opportunities that technological advances provide us.

Speaker #2: And rather than this be a point solution, I'm going to turn the conversation over to Case and Shyam, who will do a deeper dive into the digital health performance and provide a status update on many of our AI initiatives.

Howard Berger: Kees, please go ahead.

Speaker #2: Case, please go ahead.

Kees Wesdorp: Thank you, Dr. Howard Berger, good morning, everyone. As we look back on Q1 2026, it's clear that DeepHealth's momentum is not just continuing, it's accelerating. Our strategic investments are positioning us to transforming radiology workflow. We are meeting this moment with a sense of urgency because the industry pressures we have discussed previously, radiologists burnouts, massive imaging backlogs, and staffing shortages, these continue to build. Radiology cannot continue to operate on fragmented legacy systems. The volume of imaging studies is rising globally while the supply of clinicians is stagnant. This gap can only be closed through the intelligent application of AI and cloud-native technologies. DeepHealth's vision for transforming radiology workflow is that every imaging study should and will be read by AI, automating pre-interpretation workflows and delivering an AI-curated draft report to radiologists as they start their reading.

Speaker #3: Thank you, Dr. Berger. And good morning, everyone. As we look back on the first quarter of 2026, it's clear that deep health momentum is not just continuing.

Speaker #3: It's accelerating. Our strategic investments are positioning us to transform radiology workflow. We are meeting this moment with a sense of urgency because of the industry pressures we have discussed previously.

Speaker #3: Radiologist burnouts, massive imaging backlogs, and staffing shortages—and these continue to build. Radiology cannot continue to operate on fragmented legacy systems. The volume of imaging studies is rising globally, while the supply of clinicians is stagnant.

Speaker #3: This gap can only be closed through the intelligent application of AI and cloud-native technologies. DeepHealth's vision for transforming radiology workflow is that every imaging study should—and will—be read by AI, automating pre-interpretation workflows and delivering an AI-curated draft report to radiologists as they start their reading.

Kees Wesdorp: This isn't just about convenience, it's the optimal, scalable way to ensure high-quality, consistent care across the globe. To achieve this, we've moved beyond selling individual AI and informatics tools and point solutions to delivering an enterprise solution that brings together clinical AI, image management, and radiologist viewing and reporting. Today, the typical radiology workflow is a series of siloed manual steps, manual case assignments, jumping between different work stations, and voice dictating every finding from scratch. We are now replacing that with a novel, connected, comprehensive enterprise solution for medical imaging that enables 4 key deliverables. Firstly, cloud-native AI analysis. Every study is automatically processed by our portfolio of native and third-party AI through our AI orchestrator, the AI Studio, which integrates both proprietary and third-party clinical AI. Secondly, dynamic case routing.

Speaker #3: And this isn't just about convenience. It's the optimal, scalable way to ensure high-quality, consistent care across the globe. To achieve this, we've moved beyond selling individual AI and informatics tools and point solutions to delivering an enterprise solution that brings together clinical AI, image management, and radiologists' viewing and reporting.

Speaker #3: Today, the typical radiology workflow is a series of siloed, manual steps: manual case assignments, jumping between different workstations, and voice dictating every finding from scratch.

Speaker #3: We are now replacing that with a novel, connected, comprehensive enterprise solution for medical imaging that enables four key deliverables. Firstly, cloud-native AI analysis. Every study is automatically processed by our portfolio of native and third-party AI through our AI orchestrator, the AI Studio.

Speaker #3: Which integrates both proprietary and third-party clinical AI. Secondly, dynamic case routing. We're breaking down the walls between hospitals' imaging centers' urgent care facilities and any other imaging location and we're connecting the entire imaging ecosystem.

Kees Wesdorp: We are breaking down the walls between hospitals, imaging centers, urgent care facilities, and any other imaging location, and we're connecting the entire imaging ecosystem. Our platform routes cases to the most qualified available specialist, regardless of where the images are acquired or where the radiologist sits. Thirdly, AI-curated drafts preliminary reports through our Reporting Pro solution. We provide radiologists with a pre-populated draft preliminary report. It shifts the radiologist's role from generator to editor, allowing he or she to append, correct, and accept findings far more efficiently. Fourthly, remote operations through our TechLive solution. We are virtualizing the technologist role, allowing expert techs to support multiple scans remotely, ensuring quality and consistency. By unifying image management, clinical AI, and reporting into one seamless experience, we're delivering a new standard of care that addresses the core challenges of the imaging enterprise.

Speaker #3: Our platform routes cases to the most qualified available specialist regardless of where the images are acquired or where the radiologist sits. Thirdly, AI-curated drafts preliminary reports to our reporting pro solution.

Speaker #3: We provide radiologists with a pre-populated draft preliminary report. This shifts the radiologist's role from generator to editor, allowing he or she to attend, correct, and accept findings far more efficiently.

Speaker #3: And fourthly, remote operations through our Tech Live solution. We are virtualizing the technologist's role, allowing expert techs to support multiple scans remotely, ensuring quality and consistency.

Speaker #3: By unifying imaging management, clinical AI, and reporting into one seamless experience, we're delivering a new standard of care that addresses the core challenges of the imaging enterprise.

Kees Wesdorp: We are actively prototyping and validating this comprehensive workflow and clinical vision at RadNet, and our internal deployments are tracking in line with plan. We're seeing a significant productivity impact at RadNet, as highlighted by some of the following examples. With TechLive, by implementing remote and assistant scanning, we've optimized technologist utilization, ensured that expert support is available for every complex scan, and maximize system capacity. This has been a key driver in maintaining high throughput despite the industry-wide technologist shortage, most notably by reducing exam room closure hours that Mark also mentioned. Clinical AI. DeepHealth's and third-party AI solutions now cover over more than 70% of our studies across mammography, MR, CT, ultrasound, and X-ray. We are capturing the benefits of that.

Speaker #3: And we are actively prototyping and validating this comprehensive workflow and clinical vision at RadNet. Our internal deployments are tracking in line with plan.

Speaker #3: We're seeing a significant productivity impact at RadNet, as highlighted by some of the following examples. With tech live, by implementing remote and assistant scanning, we've optimized technologist utilization, ensured that expert support is available for every complex scan, and maximized system capacity.

Speaker #3: This has been a key driver in maintaining high throughput despite the industry-wide technologist shortage. Most notably, by reducing exam room closure hours that Mark also mentioned.

Speaker #3: Clinical AI, deep health, and third-party AI solutions now cover more than 70% of our studies across mammography, MR, CT, ultrasound, and X-ray. And we are capturing the benefits of that.

Kees Wesdorp: For instance, we have now fully embedded thyroid ultrasound AI from our C-mode acquisition into RadNet's operations across nearly 300 sites. The results are tangible. We have successfully reduced ultrasound slot times from 30 minutes down to 20 minutes across the board. This 33% increase in efficiency allows us to reserve more patients without increasing our physical footprint. As of this call, we are live with our X-ray AI representing more than 20% of volume in our California region. Reporting Pro. We are currently in the midst of a multi-region rollout with successful deployments in Florida and Texas. Radiologists using these AI-enabled reporting tools are reporting higher productivity and faster turnaround times. Now let's have a look at the commercial results. The market response to our integrated offering has been very strong.

Speaker #3: For instance, we have now fully embedded thyroid ultrasound AI from our C mode acquisition into RadNet's operations across nearly 300 sites. And the results are tangible.

Speaker #3: We have successfully reduced ultrasound slot times from 30 minutes down to 20 minutes across the board. This 33% increase in efficiency allows us to reserve more patients without increasing our physical footprint.

Speaker #3: And as of this call, we are alive with our X-ray AI representing more than 20% of volume in our California region. And then reporting pro.

Speaker #3: We are currently in the midst of a multi-region rollout, with successful deployments in Florida and Texas. Radiologists using these AI-enabled reporting tools are reporting higher productivity and faster turnaround times.

Speaker #3: Now let's have a look at the commercial results. The market response to our integrated offering has been very strong. We ended Q1 2026 with $97 million in annual recurring revenue, ARR.

Kees Wesdorp: We ended Q1 2026 with $97 million in annual recurring revenue, ARR, representing a 95% year-over-year growth. We are on plan to reach our target of more than $140 million in ARR by year-end. This confidence is backed by strong progress, a robust sales pipeline, and also the investments we have made in our commercial, deployment, and marketing capabilities. For instance, we currently have $7 million in signed ARR that's fully secured but not yet reflected in our Q1 ARR as these sites move through the go-live process in the coming months. On top of that, we've added significant Q1 wins in terms of securing $16 million in total contract value this quarter across 40 customers, reflecting a higher closure of deals and with an even split between and across different global regions.

Speaker #3: Representing a 95% year-over-year growth. We are on plan to reach our target of more than 140 million dollars in ARR by year-end. And this confidence is backed by strong progress, a robust sales pipeline, and also the investments we have made in our commercial deployment and marketing capabilities.

Speaker #3: For instance, we currently have 7 million dollars in signed ARR that's fully secured, but not yet reflected in our Q1 ARR. As these sites move through the go-live process in the coming months.

Speaker #3: On top of that, we have added significant Q1 wins in terms of securing $16 million in total contract value this quarter across 40 customers, reflecting a higher closure of deals and with an even split between and across different global regions.

Kees Wesdorp: This includes, for instance, a one and a half million dollar total contract value Diagnostic Suite deal in North America and major lung AI contracts across the UK and EMEA. The Q1 deal flow represents a healthy mix of small, medium, and large-sized deals, which will provide more consistent and convertible ARR and revenue growth. We have a robust pipeline. Our commercial funnel is developing in line with plan with well over $150 million in commercial deal opportunities as measured in total contract value. Our acquisitions are performing ahead of expectations. Gleamer, which we closed in early March, exited Q1 in line with plan and is on track to exceed its end-of-year targets. We've begun cross-selling its portfolio into the pre-existing DeepHealth install base and vice versa.

Speaker #3: This includes, for instance, a $1.5 million total contract value diagnostic suite deal in North America and major lung AI contracts across the UK and MAI.

Speaker #3: The Q1 deal flow represents a healthy mix of small, medium, and large-sized deals which will provide more consistent and convertible ARR and revenue growth.

Speaker #3: And then we have a robust pipeline. Our commercial funnel is developing in line with plan with well over 150 million dollars in commercial deal opportunities as measured in total contract value.

Speaker #3: Our acquisitions are performing ahead of expectations. Gleamer, which we closed in early March, exited Q1 in line with plan and is on track to exceed its end-of-year targets.

Speaker #3: And we've begun cross-selling its portfolio into the pre-existing DeepHealth install base and vice versa. Furthermore, iCAD is seeing significant acceleration in cloud-based demand, with a combination of 20 existing and new customers going live in Q1 alone.

Kees Wesdorp: Furthermore, iCAD is seeing a significant acceleration in cloud-based demand with a combination of 20 existing and new customers going live in Q1 alone, validating our strategy of moving customers from one-time licenses to a repeatable high-margin ARR model. C-mode has been deployed with deep impact at RadNet across 300 sites, and we're now starting to see good commercial momentum evidenced by a recent thyroid ultrasound AI win, an external win, with a total contract value of close to $400,000. CMAR, the image exchange platform powering the lung cancer screening program in the UK, amongst others, is performing ahead of plan with a strong win in the national mammography screening space. Our innovation engine continues to deliver. We now stand at 26 FDA clearances and 22 CE marks.

Speaker #3: Validating our strategy of moving customers from one-time licenses to a repeatable, high-margin ARR model. C mode has been deployed with deep impact at RadNet across 300 sites, and we're now starting to see good commercial momentum, evidenced by a recent thyroid ultrasound AI win and an external win with a total contract value of close to $400,000.

Speaker #3: And CMAR, the image exchange platform powering the lung cancer screening program in the UK, among others, is performing ahead of plan, with a strong win in the national mammography screening space.

Speaker #3: Our innovation engine continues to deliver. We now stand at 26 FDA clearances and 22 CE marks. And before the end of this year, we would receive an additional 12 FDA clearances and 15 CE marks.

Kees Wesdorp: Before the end of this year, we would receive an additional 12 FDA clearances and 15 CE marks. The velocity of our regulatory approvals has grown by over 70% year over year, and accordingly, we will continue to fuel the most comprehensive AI and informatics portfolio in the industry for radiology. Next to expanding our scope of clinical AI solutions, we are also preparing for the launch of the next version of the DeepHealth Diagnostic Suite, which incorporates critical enterprise capabilities for the hospital and the health system segment, further expanding our total addressable market. In summary, our Q1 performance reflects a business that is hitting its strides with strong momentum on ARR growth. Compared with last year's Q1, we delivered 52% total revenue growth.

Speaker #3: The velocity of our regulatory approvals has grown by over 70% year over year. And, accordingly, we will continue to fuel the most comprehensive AI and informatics portfolio in the industry for radiology.

Speaker #3: Next to expanding our scope of clinical AI solutions, we're also preparing for the launch of the next version of the deep health diagnostic suite.

Speaker #3: Which incorporates critical enterprise capabilities for the hospital and the health system segment. Further expanding our total addressable market. In summary, our Q1 performance reflects a business that is hitting its strides with strong momentum on ARR growth.

Speaker #3: This compares with last year's first quarter; we delivered 52% total revenue growth, and our external revenue—the revenue generated outside of RadNet—reached 64%, up from 51%, from an install base of close to 3,000 global customers.

Kees Wesdorp: In our external revenue, the revenue generated outside of RadNet reached 64%, up from 51%, from an installed base of close to 3,000 global customers. This shift proves that DeepHealth is successfully transitioning into a global technology leader. Our Adjusted EBITDA margin in Q1 reflects the intentional margin impact from our recent acquisitions and continued infrastructure investments. We are exactly where we plan to be. These investments are the fuel which is enabling 2026 and future growth, and we are on plan to meet the guidance we have set out for 2026. Based on our current trajectory and the visibility provided by our signed backlog and pipeline, we are reaffirming Digital Health full-year guidance. Total revenue at $135 to $145 million. Adjusted EBITDA at $10 to $12 million.

Speaker #3: A shift proves that DeepHealth is successfully transitioning into a global technology leader. Our adjusted EBITDA margin in the first quarter reflects the intentional margin impact from our recent acquisitions and continued infrastructure investments.

Speaker #3: We are exactly where we plan to be. These investments are the fuel which is enabling 2026 and future growth. And we are on plan to meet the guidance we have set out for 2026.

Speaker #3: Based on our current trajectory and the visibility provided by our signed backlog and pipeline, we are reaffirming digital health full-year guidance. Total revenue at 135 to 145 million dollars.

Speaker #3: Adjusted EBITDA at 10 to 12 million dollars. We have the right strategy, the right technology, and the insights to deliver our solutions at scale.

Kees Wesdorp: We have the right strategy, the right technology, and the insights to deliver our solutions at scale. Thank you for your continued support as we build the future of radiology. Operator, we are now ready for the questions and answer portion of the call.

Speaker #3: Thank you for your continued support as we build the future of radiology. Operator, we are now ready for the question-and-answer portion of the call.

Operator 3: Thank you. We will now begin the question and answer session. The first question comes from Brian Tanquilut from Jefferies. Please go ahead.

Operator: Thank you. We will now begin the question and answer session. The first question comes from Brian Tanquilut from Jefferies. Please go ahead.

Speaker #2: Thank you. We will now begin the question and answer session. To ask a question, you may press star and one on your touchstone phone.

Speaker #2: If you're using a speakerphone, 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, then two.

Speaker #2: At this time, we will pause momentarily to assemble our roster. The first question comes from Brian Dankulit from Jefferies. Please go ahead.

Brian Tanquilut: Hey, good morning. Congrats on a solid quarter. Maybe Mark, as I think first about, you know, the moving pieces in the clinic business, you know, obviously some strength in volume in the quarter. One, just curious, you know, if you think of this on a normalized basis, excluding weather from both sides, I mean, how should we be thinking about that volume growth and, you know, kind of like maybe also for Dr. Berger, the sustainability of the drivers there. Then, second part of the question for you, Mark, as we think about the acquisitions that you've announced in the JVs, just curious how we should be thinking about the ramp and the opportunity for upside from those acquisitions and partnerships. Thanks.

Speaker #3: Hey, good morning. Congrats on a solid quarter. Maybe Mark, as I think first about the moving pieces in the clinic business—obviously, some strength in volume in the quarter.

Speaker #3: One, just curious, if you think of this on a normalized basis, excluding weather from both sides, I mean, how should you be thinking about that volume growth and kind of maybe also for Dr. Berger?

Speaker #3: The sustainability of the drivers there. And then, second part of the question for you, Mark—as we think about the acquisitions that you've announced and the JVs—just curious how we should be thinking about the ramp, and the opportunity for upside from those acquisitions and partnerships.

Speaker #3: Thanks.

Mark Stolper: Sure. Good morning, Brian. The performance, you know, is really being driven by a number of factors, some of which we mentioned in the script. You know, one of the, you know, really shining lights here is the performance of the advanced imaging and the growth that we're seeing there. We continue to see and experience a business shift in favor of advanced imaging. You know, we're regularly now seeing, you know, MRI volume, same center being in the high single digits. This quarter, it was 10.1%. You know, CT, we're regularly seeing kind of in the mid-single digits.

Speaker #4: Sure. Good morning, Brian. Yeah. So the performance is really being driven by a number of factors, some of which we mentioned in the script.

Speaker #4: But one of the really shining lights here is the performance of the advanced imaging and the growth that we're seeing there. We continue to see and experience a business shift in favor of advanced imaging.

Speaker #4: And we're regularly now seeing MRI volume same center being in the high single digits this quarter. It was 10.1%. CT, we're regularly seeing kind of in the mid-single digits.

Mark Stolper: PET/CT, which continues to be driven by the brain amyloid studies and the prostate PSMA tests, we're seeing growth north of 14%. As we've always said, the best and most profitable growth we can have comes from same center performance, where we can drive incremental revenue into the same fixed cost base. When we do that, there's a lot of pull-through profitability. Yes, there's a lot of moving parts on the cost side of our business.

Speaker #4: And PET/CT, which continues to be driven by the brain amyloid studies and the prostate PSMA tests we're seeing growth north of 14%. And as we've always said, the best and most profitable growth we can have comes from same center performance where we can drive incremental revenue into the same fixed cost base and when we do that, there's a lot of pull-through profitability.

Speaker #4: And yes, there's a lot of moving parts on the cost side of our business. But the continued growth of advanced imaging has certainly driven the better-than-anticipated performance that we had in the first quarter.

Mark Stolper: This is You know, the continued growth of advanced imaging has certainly driven, you know, the better than anticipated performance, you know, that we had in Q1 and the beats that we've, you know, regularly had, you know, in past quarters. We don't see anything to give us concern that this is going to change. I mean, you know, part of this is what's happening overall in the industry with respect to trends. You know, there have been a lot of advancements in the technology of the equipment that allows for better throughput and more capacity.

Speaker #4: And the beats that we've regularly had in past quarters. So, we don't see anything to give us concern that this is going to change.

Speaker #4: I mean, part of this is what's happening overall in the industry with respect to trends. There have been a lot of advancements in the technology of the equipment that allows for better throughput and more capacity.

Mark Stolper: A lot of what we're doing on the Digital Health side, which Kees mentioned in his prepared remarks, you know, is all about driving capacity, creating a more efficient workflow that can drive more patients through the existing, you know, cost basis of the centers. I think we, you know, we're feeling very positive about the trends in the business. As we mentioned, we had a very, very strong March. That performance continued into April and now through early May. We're feeling good about the business and how it's rebounded since, you know, the severe weather conditions that we faced in the Northeast in January and February. Howard, I don't know if you wanna add? Yeah. Okay.

Speaker #4: A lot of what we're doing on the digital health side, which Case mentioned in his prepared remarks, is all about driving capacity, creating a more efficient workflow that can drive more patients through the existing cost basis of the centers.

Speaker #4: And so I think we're feeling very positive about the trends in the business as we mentioned. We had a very, very strong march that performance continued into April and now through early May.

Speaker #4: And so we're feeling good about the business and how it's rebounded since the severe weather conditions that we faced in the Northeast in January and February.

Speaker #4: Howard Auden, you want to add? Yep.

Brian Tanquilut: I'm sorry.

Speaker #5: I'm sorry.

Mark Stolper: Sorry, Brian. Go ahead. You had a follow-up question?

Speaker #4: I'm sorry, Brian. Go ahead. You had a follow-up question?

Brian Tanquilut: Yeah. Yeah. No, maybe my follow-up for Kees. As I think about the wins that you've announced, I mean, Trinity here recently and maybe some of the FDA approvals that are pending, how do we think about the ramp in revenue? I know you maintained the guidance for the year, but as I think about post 2026, just thinking through the opportunities to drive revenue growth, you know, again, both on these sides, on the clinical AI side and then also on the DeepHealth, like OS side. Thanks.

Speaker #3: Yeah, yeah. Maybe my follow-up for Case—as I think about the wins that you've announced, I mean, Trinity here recently and maybe some of the FDA approvals that are pending—how do we think about the ramp in revenue?

Speaker #3: I know you maintain the guidance for the year, but as I think about the post-'26, just thinking through the opportunities to drive revenue growth, again, both on these sides—on the clinical AI side and then also on the DeepHealth kind of, like, OS side.

Speaker #3: Thanks.

Kees Wesdorp: Thank you, Brian. Look, I think the most leading indicator therefore is how the commercial funnel is developing. I mentioned a funnel that's developed now towards and above the $150 million total contract value mark. This sits across our portfolio, so that's for, let's say, what we call Diagnostic Suites as well as Operations Suite. Diagnostic Suite is more the PACS business, Operations Suite is more the risk business and clinical AI.

Speaker #2: Thank you, Brian. Look, I think the most leading indicator, therefore, is how the commercial funnel is developing. I mentioned a funnel that's developed now towards and above the $150 million total contract value mark.

Speaker #2: This sits across our portfolio. So that's for, let's say, what we call diagnostic suites, as well as enterprise operations. So diagnostic suite is more the PACS business.

Speaker #2: Enterprise operations is more the RIS business, and clinical AI. We're seeing that momentum building in the funnel, which gives us confidence, A, that for this year, we will achieve the $140 million ARR run rate.

Kees Wesdorp: We're seeing that momentum building in the funnel, which gives us confidence, A, that for this year we will achieve the $140 million ARR run rates, but also that will continue into 2027 and beyond with the growth that we had set out for ourselves during Investor Day, which is above 30%. I would say I'm cautiously optimistic, based on the confidence that we've also acquired, for instance, through Gleamer, that commercial momentum of 30% is on the lower side. Now to revenue, because I think you specifically asked about revenue. Obviously the difference between ARR and revenue is timing of deployment of these installs.

Speaker #2: But also that we’ll continue into ’27 and beyond with the growth that we had set out for ourselves also during the Investor Day, which is above 30%.

Speaker #2: I would say I'm cautiously optimistic, based on the competence that we've also acquired. For instance, through Gleamer, that commercial momentum of 30% is on the lower side.

Speaker #2: Now, then to revenue, because I think you specifically asked about revenue. Obviously, the difference between ARR and revenue is the timing of deployment of these installs.

Kees Wesdorp: One of the deliberate investments that we've made over the last months is in deployment capability, call that installation and service capability, because it's not just about winning these deals, but also making sure that we can swiftly implement those. That's where the focus is right now, as we are successfully building that commercial pipeline and now wanna see the ability and capability to do fast deployments and accordingly reach our revenue targets for the guidance of this year and ongoing growth objectives.

Speaker #2: And so, one of the deliberate investments that we've made over the last months is in deployment capability—call that installation and service capability. Because it's not just about winning these deals, but also making sure that we can swiftly implement those.

Speaker #2: That's where the focus is right now, as we have successfully been building that commercial pipeline. And now I want to see the ability and capability to do fast deployments and accordingly reach our revenue targets for the guidance of this year.

Speaker #2: And ongoing growth objectives.

Mark Stolper: Awesome. Thank you, guys. We're out of time.

Speaker #3: Awesome. Thank you, guys. Congrats again.

Operator 3: Brian, you done with your question?

Operator: Brian, you done with your question?

Speaker #4: Brian, you're done with your question?

Mark Stolper: Yes, operator, we're ready for the second question. Yep.

Speaker #3: Yes, operator, we're ready for the second question. Yep. The next.

Operator 3: Thank you. Our next question comes from the line of Andrew Mok with Barclays. Please go ahead.

Operator: Thank you. Our next question comes from the line of Andrew Mok with Barclays. Please go ahead.

Speaker #4: Thank you. Our next question comes from the line of Andrew Mock with Barclays. Please go ahead.

Andrew Mok: Hi, good morning. Just wanted to follow up on that volume conversation. The same-store advanced volumes were strong in the quarter, up 8%, but I think that implies routine volumes were close to flat. Can you help us understand the underlying dynamics on the routine side? Is this simply different demand drivers, or is there also a crowding out effect from the strong advanced volumes that's weighing on those results? Thanks.

Speaker #6: Hi, good morning. Just wanted to follow up on that volume conversation. The same-store advanced volumes were strong in the quarter, up 8%. But I think that implies routine volumes were close to flat.

Speaker #6: Can you help us understand the underlying dynamics on the routine side? Is this simply different demand drivers, or is there also a crowding-out effect from the strong advanced volumes that's weighing on those results?

Speaker #6: Thanks.

Mark Stolper: Sure. I'll start with that, Andrew, thanks for the question. Yeah, we're seeing I mean, we I mean, one quarter a trend doesn't make, and we've always cautioned investors about that. We're definitely seeing disproportionate increases in advanced imaging, and in our centers. We've focused, you know, in the last few years on upgrading equipment and capabilities to create more capacity in around advanced imaging. Because as, you know, while routine imaging still represents, you know, close to 71% of all of our procedure volume, the other 29% of which is the advanced imaging, drives over 60% of our revenue. Clearly the focus is on driving advanced imaging.

Speaker #4: Sure, I'll start with that, Andrew. Thanks for the question. Yeah, we're seeing—I mean, one quarter a trend doesn't make, and we've always cautioned investors about that.

Speaker #4: But we're definitely seeing disproportionate increases in advanced imaging and in our centers. And we've focused in the last few years on upgrading equipment and capabilities to create more capacity in around advanced imaging because as while routine imaging still represents close to 71% of all of our procedure volume, the other 29% of the which is the advanced imaging drives over 60% of our revenue.

Speaker #4: So, clearly the focus is on driving advanced imaging. And we're seeing more and more clinical indications each year as the equipment gets better, as the technology gets better for advanced imaging.

Mark Stolper: We're seeing more and more clinical indications each year as the equipment gets better, as the technology gets better for advanced imaging. There's certainly a shift in the overall industry and how healthcare is delivered in favor of advanced imaging, and that's where our focus has been. We have said in the past and continue to say that we still think the routine imaging is gonna grow, but it'll grow kind of in the way population grows. You know, and you know, likely kind of in the low single digits, and which is fine.

Speaker #4: So, there is certainly a shift in the overall industry in how healthcare is delivered, in favor of advanced imaging, and that's where our focus has been.

Speaker #4: So we have said in the past, and continue to say, that we still think the routine imaging is going to grow. But it'll grow kind of in the way population grows.

Speaker #4: And likely kind of in the low single digits, which is fine.

Andrew Mok: Got it.

Speaker #6: Got it. And then

Howard Berger: Yeah, Andrew, let me just add, perhaps a little bit more color to that. The advances in technology cannot be overstated here. The reason why there is such a increasing driver of advanced imaging is because there is a realization in all levels of healthcare that these tools are now capable of earlier and earlier diagnosis, which ultimately to better outcomes. There has not been any major changes in X-ray and some of the other routine imaging as there has been in MRI, CT, and PET/CT scanning.

Speaker #5: Yeah, Andrew, let me just add perhaps a little bit more color to that. The advances in technology cannot be overstated here. And the reason why there is such an increasing driver of advanced imaging is because there is a realization at all levels of healthcare that these tools are now capable of earlier and earlier diagnosis, which ultimately leads to better outcomes.

Speaker #5: There have not been any major changes in X-ray and some of the other routine imaging as there have been in MRI, CT, and PET/CT scanning.

Howard Berger: I think it's a credit to the management on both the East and West Coast to not only have realized that we needed to make the investment in the equipment and the technology, but also to expand the clinical capabilities that we have, which we put on full display at the Investor Day last November, to help grow these practices and make certain that we achieve best practices with these tools. I think we are following the trends and willing to deploy the resources, both human and financial capital, to take advantage of this, but to do it at an extraordinarily high level of quality for which I and the whole executive management team are enormously proud.

Speaker #5: And I think it's a credit to the management on both the East and West Coast to not only have realized that we needed to make the investment in the equipment and the technology, but also to expand the clinical capabilities that we have, which we put on full display at the Investor Day last November to help grow these practices and make certain that we achieve best practices with these tools.

Speaker #5: So, I think we are following the trends and willing to deploy the resources, both human and financial capital, to take extraordinarily high levels of quality, for which I and the whole executive management team are enormously proud.

Howard Berger: What I think the seminal event today that we're trying to really outline is that all of this can be further enhanced by the new tools that we have invested in, and which I think we have the broadest and most remarkable inventory of AI tools, both on the clinical and on the generative side, to help not only meet the demand of this growing need for imaging in general and advanced imaging in particular, but to give our radiologists the ability to focus not on the more routine, but on the part of the business which they had been trained for, and that is to identify abnormalities and act as a consultant rather than the drudgery that goes along with a lot of the routine workflows.

Speaker #5: What I think the seminal event today that we're trying to really outline is that all of this can be further enhanced by the new tools that we have invested in and which, I think, we have the broadest and most remarkable inventory of AI tools—both on the clinical and on the generative side—to help not only meet the demand of this growing need for imaging in general, and advanced imaging in particular, but to give our radiologists the ability to focus not on the more routine, but on the part of the business which they have been trained for. And that is to identify abnormalities and act as a consultant, rather than the drudgery that goes along with a lot of the routine workflows.

Howard Berger: I think you will see more and hear more about this in upcoming quarters as we not only fully roll out.

Speaker #5: So I think you will see more and hear more about this in upcoming quarters. As we not only fully roll out the AI capabilities internally but we meet the opportunities that are presented to us with our current and future hospital partners.

Howard Berger: AI capabilities internally, but we meet the opportunities that are presented to us with our current and future hospital partners.

Mark Stolper: Andrew, I would add one other thing is that some of the Digital Health technologies that we're deploying now, I think will actually serve to drive some more growth in routine imaging. You know, for example, you know, we've talked in the past about the C-mode thyroid technology that now that Kees mentioned is lowering scanning times, you know, by 50% for thyroid, which is roughly about 240,000 of our ultrasound exams. When you look at the capacity that that is creating, you are seeing some growth in ultrasound on a same center basis that grew about 2.1%.

Speaker #5: And Andrew, I would add one other thing: some of the digital health technologies that we're deploying now, I think, will actually serve to drive some more growth in routine imaging.

Speaker #5: For example, we've talked in the past about the C-mode thyroid technology that now is the case mentioned is lowering scanning times by 50% for thyroid, which is roughly about 240,000 of our ultrasound exams.

Speaker #5: And when you look at the capacity that that is creating, you are seeing some growth in ultrasound on the same center basis that grew about 2.1%.

Mark Stolper: As we get FDA approval, which we're expecting to this year on the breast ultrasound, which is another over 800,000 of our, you know, roughly 2.7, 2.8 million ultrasound exams, that's gonna further, you know, speed up the center level workflow to allow for more capacity, you know, for doing ultrasound. There are items and of course, the Gleamer technology on X-ray will allow for our radiologists to read those faster, you know, with more productivity, which will ultimately allow us to do more in the future. I think there are things that are coming and that we're implementing that will also drive some routine imaging growth.

Speaker #5: And as we get FDA approval, which we're expecting this year on the breast ultrasound—which is another over 800,000 of our roughly 2.7, 2.8 million ultrasound exams—that's going to further speed up the center-level workflow to allow for more capacity for doing ultrasound.

Speaker #5: So, there are items. And, of course, the GleamR technology on X-ray will allow for our radiologists to read those faster with more productivity, which will ultimately allow us to do more in the future.

Speaker #5: So, I think there are things that are coming and that we’re implementing that will also drive some routine imaging growth.

Andrew Mok: Great. The new and acquired centers also appear to have a meaningful impact on volumes in the quarter. Can you talk about the integration of your clinic acquisitions and how that contributed to outperformance? Thanks.

Speaker #6: Great. And then the new and acquired centers also appear to have a meaningful impact on volumes in the quarter. Can you talk about the integration of your clinic acquisitions and how that contributed to outperformance?

Speaker #6: Thanks.

Mark Stolper: With respect to the acquisitions in Florida, Southwest Florida, the 13 sites we bought from LucidHealth, as well as the sites we bought in Indiana, they contributed some to Q1, but not meaningfully. When you look at the two of those on an annual basis, they are about $117 million to $118 million of revenue. If you divide that by 4, you are talking about $30 million or so of revenue in Q1. From an EBITDA perspective, it added about a couple million dollars, slightly less than that for Q1, with all the seasonality.

Speaker #5: Yeah, so with respect to the acquisitions in Florida—Southwest Florida—the 13 sites we bought from Lucid Health, as well as the sites we bought in Indiana, they contributed some to the first quarter, but not meaningfully.

Speaker #5: When you look at the two of those on an annual basis, it's about $1,718 million of revenue. So if you divide that by four, you're talking about $430 million or so of revenue in the first quarter.

Speaker #5: From an EBITDA perspective, it added about a couple million dollars—slightly less than that—for the first quarter. With all the seasonality, we're just starting the implementation, or I should say the integration, of those.

Mark Stolper: We're just starting the implementation, or I should say, the integration of those. They're going real well. They're both actually ahead of schedule and we believe that both of those assets are on plan, if not ahead of plan, to reach their projected rate for 2026. I think we feel, we feel real good about the integrations of those and the other deals that we did in H2 of last year in mostly in the New York metropolitan area.

Speaker #5: They're going real well. They're both actually ahead of schedule. And we believe that both of those assets are on plan, if not ahead of plan, to reach their projected rate for 2026.

Speaker #5: So, I think we feel real good about the integrations of those, and the other deals that we did in the second half of last year, mostly in the New York metropolitan area.

Andrew Mok: Great. If I could sneak in one more on cash flow. You called out the record low DSOs, and it looks like there was, you know, some seasonally strong working capital in the quarter. Are these initiatives related or RCM capabilities linked to DeepHealth or anything else you can provide color on driving the strength in working capital? Thanks.

Speaker #6: Great. And if I could sneak in one more on cash flow—you called out the record low DSOs, and it looks like there's some unseasonably strong working capital in the quarter.

Speaker #6: Are these initiatives related, or are RCM capabilities linked to Deep Health, or anything else you can provide color on driving the strength and working capital?

Speaker #6: Thanks.

Mark Stolper: Yeah. No, it's really just continuing to improve in our blocking and tackling. We typically see a working capital build in the first quarter and an increase in our AR, you know, from the seasonality with respect to deductible resets, where, you know, we bill the patient insurance companies in the first quarter. We and then have to collect a patient portion responsibility. This year, I mean, we continue to see improvements. We're getting better and better at collecting the patient portion responsibility upfront, where we've also aggressively gone back into some older aging buckets of our AR and are having some success collecting some of the older AR, both from commercial payers as well as patients.

Speaker #5: Yeah. No. It's really just continuing to improve in our blocking and tackling. We typically see a working capital build in the first quarter and an increase in our AR.

Speaker #5: From the seasonality with respect to the deductible resets, where we build a patient insurance company in the first quarter, we and then have to collect a patient portion responsibility.

Speaker #5: But this year, I mean, we continue to see improvements. We're getting better and better. At collecting the patient portion responsibility, upfront, we've also aggressively gone back into some older aging buckets of our AR and are having some success collecting some of the older AR, both from commercial payers as well as patients.

Mark Stolper: I think, you know, the investments we've made in systems to, one, be able to identify upfront what the allowable amount is based upon the patient's insurance, their plan, where they are in their deductibles, and then the ability to query the insurance company in real time to be able to identify whether the patient has a co-payment or, you know, or where they are in their deductibles, has allowed us to aggressively go after that money at the time of service. We're even telling patients what their likely responsibility would be at the time of scheduling. That's had a market impact in our ability to, you know, to collect this money quickly.

Speaker #5: So I think the investments we've made in systems to, one, be able to identify upfront what the allowable amount is based upon the patient's insurance, their plan, where they are in their deductibles, and then the ability to query the insurance company in real time to be able to identify whether the patient has a copayment or where they are in their deductibles has allowed us to aggressively go after that money at the time of service.

Speaker #5: And we're even telling patients what their likely responsibility would be at the time of scheduling. And that's had a market impact in our ability to collect this money quickly.

Mark Stolper: I think our DSOs reflect that and probably are one of the best in the industry.

Speaker #5: And I think our DSOs reflect that and probably are one of the best in the industry.

Andrew Mok: Great. Thank you.

Speaker #6: Great. Thank you.

Operator 3: Thank you. Next question come from John Ransom with Raymond James. Please go ahead.

Operator: Thank you. Next question come from John Ransom with Raymond James. Please go ahead.

Speaker #7: Thank you. Next question comes from John Ramsom with Raymond James. Please go ahead.

John Ransom: Hey, good morning. Mark, if we looked at the imaging segment 2026 over 2025, what's a good number for the EBITDA contribution from M&A versus not M&A?

Speaker #5: Hey, good morning. Mark, if we looked at the imaging segment 26 over 25, what's a good number for the EBITDA contribution from M&A versus not M&A?

Mark Stolper: Yeah, I most of it is from same center performance. As I mentioned on the earlier question, about a couple million dollars of EBITDA came from the recent acquisitions in Q1.

Speaker #4: Yeah, most of it is from same-center performance, as I mentioned on the earlier question. About a couple million dollars of EBITDA came from the recent acquisitions in the first quarter.

John Ransom: No. I'm talking about the year, full year over year, over full year. If we take 2026 over-

Speaker #5: I'm talking about the I'm talking about the year, full year of a full year. If we take 26 over 25 full year, yeah, what does that look like?

Mark Stolper: Oh

John Ransom: 2025 full year, what, yeah, what does that look like?

Mark Stolper: Yeah, the majority of our EBITDA growth, the vast majority, about two-thirds of it is coming from same center performance as well as de novo performance, which I also, you know, include as organic growth. About a third, slightly less than a third is coming from the contribution of acquisitions.

Speaker #4: Yeah. The majority of our EBITDA growth—the vast majority, about two-thirds of it—is coming from same-center performance as well as de novo performance, which I also include as organic growth.

Speaker #4: And about a third, slightly less than a third, is coming from the contribution of acquisitions.

John Ransom: Okay. Then, you know, the following your Digital Health journey is busy at times. If we were to look at 2026, of all the things that you've rolled out digital, I mean, the TechLive, the SmartMammo, what 1 or 2 modalities is driving the most EBITDA today? Then if we looked out a couple of years, what are some emerging capabilities you have that aren't quite monetizing just yet? That could be either EBITDA in your, either in your imaging segment or in your Digital Health segment. What's the How do we think about the Can we also, just to sneak one else in there, can we confirm that this year is the trough margin for Digital Health?

Speaker #5: Okay. And then, following your digital health journey—it is busy at times. If we were to look at 2026, of all the things that you've rolled out digitally—I mean, the tech live, the Smart Memo—which one or two modalities are driving the most EBITDA today?

Speaker #5: And then if we looked at a couple of years, what are some emerging capabilities you have that aren't quite monetizing just yet?

Speaker #4: And that could be either EBITDA in your either in your imaging segment or in your digital health segment. What's the how do we think about the and can we also just to sneak one else in there, can we confirm that this year is the trough margin for digital health?

John Ransom: How do we think about margin versus investment over the intermediate term?

Speaker #4: And then how do we think about margin versus investment over the intermediate term?

Kees Wesdorp: Mark, do you want me to take it?

Speaker #5: Mark, do you want me to take it?

Mark Stolper: Yes, please.

Speaker #4: Yes, please.

Kees Wesdorp: Yes. Great, great question. As per the Investor Day, we have a horizon towards 2028 rolling out the various solutions that we have currently line of sight of in the Digital Health segments and deploying those at RadNet. I think both for actually across all across clinical AI, which is really a modality by modality focus, where we started in mammography, we've expanded to thyroid ultrasounds. We're gonna deliver breast ultrasounds. We are now deploying X-ray. I think you will continuously see an increasing penetration of AI and the impact thereof. We are currently covering 70% of the clinical AI solutions with DeepHealth solutions and third-party solutions, roughly 60% with DeepHealth solutions and the remainder third-party AI.

Speaker #5: Yes. Great. Great question. So as for the investor day, we have a horizon towards 2028, rolling out the various solutions that we have currently line of sight of in the digital health segment and deploying those at RadNet.

Speaker #5: And I think both for actually across all, across clinical AI, which is really a modality-by-modality focus, where we started in mammography, we've expanded to thyroid ultrasounds.

Speaker #5: We're going to deliver breast ultrasounds. We are now deploying X-ray. I think you will continuously see an increasing penetration of AI and the impact thereof.

Speaker #5: We are currently covering 70% of the clinical AI solutions with Deep Health solutions and third-party solutions, roughly 60% with Deep Health solutions and the remainder third-party AI.

Kees Wesdorp: That doesn't mean it's fully penetrated because we haven't captured the full productivity nor the full T-code reimbursement from these solutions. Think of it as if you want to use a number, a third implemented on the clinical AI roadmap and more to come. The second key area is what we call the Diagnostic Suite, where we've deployed certain capabilities such as the viewer, but we're now also rolling out, as mentioned in my prepared presentation, the Reporting Pro solution, which gives further benefits to reporting productivity and so on and so forth. Also there's more to come, and I think we're a little bit less advanced in implementation today, and we'll peak towards the end of the year into next year.

Speaker #5: But that doesn't mean it's fully penetrated because we haven't captured the full productivity nor the full T-code reimbursement from these solutions. So think of it as if you want to use a number, a third implemented on the clinical AI roadmap and more to come.

Speaker #5: Then the second key area is what we call the diagnostic suite. Where we've deployed certain capabilities such as the viewer, but we're now also rolling out, as mentioned in my prepared presentation, the reporting pro solution, which gives further benefits to reporting productivity and so on and so forth.

Speaker #5: So also there, there's more to come. And I think we're a little bit less advanced in implementation today. And we'll peak towards the end of the year into next year.

Kees Wesdorp: On the Operations Suite, which is really risk enhancements, we've made initial steps, for instance, the contact center that we previously talked about. There are all kinds of agentic AI solutions that we have in the pipeline, which will further substantiate productivity impact in line with what we presented at Investor Day. Think of it as a three-year roadmap. What's new today, which we presented, is really the header that's where we said transforming radiology workflow, which means that four elements of the solutions, four types of solutions that I just talked about actually are combined into one, which is clinical AI together with AI orchestration, together with the Diagnostic Suite, together with Reporting Pro, allow you to transform the radiology workflow and generate automated drafts, preliminary reports.

Speaker #5: And then on the operations suite, which is really risk enhancements, we've made initial steps, for instance, in the contact center that we previously talked about.

Speaker #5: But there are all kinds of agentic AI solutions that we have in the pipeline, which will further substantiate productivity impact in line with what we presented at Investor Day.

Speaker #5: So think of it as a three-year roadmap. What's new today, which we presented, is really the header that where we said transforming radiology workflow.

Speaker #5: Which means that four elements of the solutions, four types of solutions that I just talked about, actually are combined into one, which is clinical AI together with AI orchestration together with the diagnostic suite together with the reporting solution.

Speaker #5: Allow you to transform the radiology workflow and generate automated drafts preliminary reports. That's a new idea. And that is now with the acquisition of Gleamer.

Kees Wesdorp: That's a new idea, and that is now with the acquisition of Gleamer, we're deploying that in an accelerated way for X-ray. That shows that our innovation funnel will continue to build, and we'll continue to invest in that. The way I would answer the question is we're well on track for the margin impact that we set out during Investor Day, but we're also seeing new innovation opportunities to come. We're making progress. We definitely will not have reached the end of the productivity drive this year nor next year as we continue to fuel the funnel.

Speaker #5: We're deploying that in an accelerated way for X-ray. That shows that our innovation funnel will continue to build, and we will continue to invest in that.

Speaker #5: And so the way I would answer the question is, we're well on track for the margin impact that we set out during Investor Day.

Speaker #5: But we're also seeing new innovation opportunities to come, and so we're making progress. We definitely will not have reached the end of the productivity drive this year, nor next year, as we continue to fuel the funnel.

John Ransom: All right. Lastly, there was an interesting article recently about, you know, this reporter went through, you know, the whole breast cancer AI. The point was made in the article that AI for mammo is really good at, you know, the negative reads are really tight, but it tends to overread the positive, you know. That's where you need the human intervention to override sometimes the AI gets it wrong. What are you seeing in terms of your false positives? Is that trending any particular direction, or is false positives just kind of the way this works, that it throws things out there, and then the radiologist has to play catcher to make sure that the, you know, the machine didn't hallucinate, if you will?

Speaker #5: All right. And just lastly, there's an interesting article recently about this reporter went through the whole breast cancer AI and the point was made in the article that AI for mammogram is really good at the negative reads are really tight, but it tends to overread the positives.

Speaker #5: And that's where you need the human intervention to override sometimes the AI gets it wrong. What are you seeing in terms of your false positives?

Speaker #5: And is that trending in any particular direction, or are false positives just kind of the way this works—that it throws things out there, and then the radiologist has to play catcher to make sure that the machine didn't hallucinate, if you will?

Howard Berger: I would say both are of absolute focus of us in terms of improving and learning the model. Maybe Shyam, you can elaborate a little bit more on how that's approached in practical life.

Kees Wesdorp: I would say both are of absolute focus of us in terms of improving and learning the model. Maybe Shyam, you can elaborate a little bit more on how that's approached in practical life.

Speaker #4: I would say it's both—are of absolute focus in terms of improving and learning the model, but maybe Sham, you can elaborate a little bit more on how that's approached in practical life.

Sham Sokka: Yeah. Absolutely, Kees. I think, first of all, the breast cancer detection, anything that we're doing with cancer detection isn't a generative model, it's really a task-specific model. You know, there's no concept of hallucination, if you will, there. It's much more trained on the data and adapted when we see those false positives, let's say, in the RadNet population. What we've done very well, also because of the close loop that we have with RadNet, is we're able to adjust that, you know, through, you know, results from radiologists, through incorporating things like prior studies, where we're reducing the false positive rates on a fairly regular basis. Remember, we have essentially 1.6 million to 2 million mammos that we're processing every year.

Speaker #6: Yeah, absolutely, Keith. I think, first of all, the breast cancer detection—anything that we're doing with cancer detection—isn't a generative model. It's really a task-specific model.

Speaker #6: So there's no concept of hallucination, if you will, there. But it's much more trained on the data and adapted when we see those false positives, let's say, in the RadNet population.

Speaker #6: So what we've done very well also because of the closed loop that we have with RadNet is we're able to adjust that. Through results from radiologists, through incorporating things like prior studies, where we're reducing the false positive rates on a fairly regular basis.

Speaker #6: Remember, we have essentially 1.6 million to 2 million mammograms that we're processing every year. And the, let's say, false positives from those, we're also processing every year.

Sham Sokka: The let's say false positive from those, we're also processing every year, and we're learning and we're improving that to a point where the AI system is just as good as a radiologist, if not better than the radiologist. I think, you know, we build these as candidates for eventually driving also autonomous type of detection as we go forward.

Speaker #6: And we're learning and we're improving that, to a point where the AI system is just as good as a radiologist, if not better than the radiologist.

Speaker #6: And I think we build these as candidates for eventually driving also autonomous-type of detection as we go forward.

Howard Berger: Thank you very much.

Speaker #5: Thank you very much.

Operator 3: Thank you. Next question comes from Grayson McAllister with Truist. Please go ahead.

Operator: Thank you. Next question comes from Grayson McAllister with Truist. Please go ahead.

Speaker #4: Thank you. Next question comes from Grayson McAllister with Twist. Please go ahead.

Grayson McAllister: Hey, guys, this is Grayson McAllister on for Dave. Wanted to follow up on the JV with Saint Alphonsus. You talk about it as being a blueprint for future health system partnerships. I guess could you just talk a little bit about what aspects that this JV includes that maybe previous didn't? Specifically around DeepHealth, how does this improve the, you know, the offering to systems out there, and what are you seeing in the pipeline, specifically around JVs?

Grayson McAlister: Hey, guys, this is Grayson McAllister on for Dave. Wanted to follow up on the JV with Saint Alphonsus. You talk about it as being a blueprint for future health system partnerships. I guess could you just talk a little bit about what aspects that this JV includes that maybe previous didn't? Specifically around DeepHealth, how does this improve the, you know, the offering to systems out there, and what are you seeing in the pipeline, specifically around JVs?

Speaker #7: Hey, guys. This is Grayson McAllister off for days. I wanted to follow up on the JV with St. Alphonsus. You talk about it as being a blueprint for future health system partnerships.

Speaker #7: I guess, could you just talk a little bit about what aspects that this JV includes that maybe previous didn't? And then specifically around deep health, how does this improve the offering to systems out there?

Speaker #7: And what are you seeing in the pipeline specifically around JVs?

Howard Berger: maybe I'll take that one, Mark.

Speaker #6: Maybe I'll do one more. Yep. Yeah. Great. Yeah. Yes. I think the importance of the announcement was our first opportunity to implement all of the tools that we bring right now to the table to make a more seamless experience not only for the radiologists but also for all of the stakeholders that either perform imaging or need to see imaging results.

Sham Sokka: Howard, do you wanna? Yeah.

Sham Sokka: Yeah.

Howard Berger: Great.

Howard Berger: Yeah. Yes, I think the importance of the announcement was our first opportunity to implement all of the tools that we bring right now to the table to make a more seamless experience, not only for the radiologists, but also for all of the stakeholders that either perform imaging or need to see imaging results. As a result of this, within about 120 days, when we fully implement the DeepHealth operating system, the radiologists will get the benefit of doing both their reading and reviewing studies, outpatient and inpatient, on a single platform.

Speaker #6: As a result of this, within about 120 days, when we fully implement the Deep Health operating system, the radiologists will get the benefit of doing both their reading and reviewing studies—outpatient and inpatient.

Speaker #6: On a single platform, we'll be able to use a variety of AI tools to help better manage their reading and interpretation, and we'll begin using the Reporting Pro tool that Case described, which will allow more automation in the reading material.

Howard Berger: We'll be able to use the variety of AI tools to help manage better their reading and interpretation, and we'll begin using the Reporting Pro tool that Kees described that will allow more automation in the reading material. The bigger picture is what we wanna do with this health system and others, and that is to connect all the other providers that are using or providing imaging services in the health system's platform.

Speaker #6: But the bigger picture is what we want to do with this health system and others. And that is to connect all the other providers that are using or providing imaging services in the health systems platform.

Howard Berger: That could be urgent care centers, physician offices, emergency rooms, anybody that produces imaging will be part of our cloud-native solution, that will allow not only for the implementation of reading from any site by the most qualified and most available radiologist, but getting those results faster and on a timely basis to both the physicians and the patients that require that information. The transition that we're talking about, which is a blueprint for the models, with other health systems that we currently have relationships with in joint ventures, as well as others that we're in deep conversations with, is really a transformative process of the entire radiology and imaging workflow solution, which we hope to be able to better demonstrate in Q3 of this year.

Speaker #6: That could be urgent care centers, physician offices, emergency rooms—anybody that produces imaging will be part of our cloud-native solution that will allow not only for the implementation of reading from any site by the most qualified and most available radiologists, but also for getting those results faster and on a timely basis to both the physicians and the patients that require that information.

Speaker #6: So the transition that we're talking about, which is a blueprint for the models with other health systems that we currently have relationships with in joint ventures, as well as others that we're in deep conversations with, is really a transformative process of the entire radiology and imaging workflow solution, which we hope to be able to better demonstrate in the third quarter of this year.

Grayson McAllister: Got it. Okay. Just following up on Gleamer, I believe around the announcement you guys talked about some training of the sales force that had to happen before you can really start to see the cross-sell opportunity take off. Just wanted to check on what inning, what inning you think you're in now as far as capturing that cross-sell opportunity, and where would you expect to be by the end of the year? Thanks.

Grayson McAlister: Got it. Okay. Just following up on Gleamer, I believe around the announcement you guys talked about some training of the sales force that had to happen before you can really start to see the cross-sell opportunity take off. Just wanted to check on what inning, what inning you think you're in now as far as capturing that cross-sell opportunity, and where would you expect to be by the end of the year? Thanks.

Speaker #7: Got it. Okay. And then, just following up on Gleamer, I believe around the announcement, you guys talked about some training of a Salesforce that had to happen before you can really start to see the cross-sell opportunity take off.

Speaker #7: So, just wanted to check on what—anything you think you’re in now as far as capturing that cross-sell opportunity, and where would you expect to be by the end of the year?

Speaker #7: Thanks.

Kees Wesdorp: We're deep into training, but not waiting for training, which basically means that we have the first cross-sell opportunities happening today in the US, but also outside of the US. On an ongoing basis, we're going to go deeper into roadmap training, competitive pitching, integrated portfolio offering, and so on and so forth. It's highly iterative because we don't wanna wait for something. Quite frankly, the professionalism of the Gleamer team, commercial team, but also obviously of our legacy team, they seek these opportunities. They're burning to bring these the new cross-sell opportunities in. It has momentum already.

Speaker #4: We're deep into training, but not waiting for training, which basically means that we have the first cross-sell opportunities happening today in the US, but also outside of the US.

Speaker #4: And then, on an ongoing basis, we're going to go deeper into roadmap training, competitive pitching, integrated portfolio offering, and so on and so forth. But it's highly iterative because we don't want to wait for something.

Speaker #4: And quite frankly, the professionalism of the Gleamer team, commercial team, but also obviously of our legacy team and they seek these opportunities. And so they're burning to bring these new cross-sell opportunities in.

Speaker #4: It has momentum already.

Operator 3: Got it. Thanks, Jasper.

Operator: Got it. Thanks, Jasper.

Speaker #7: Got it. Thanks, Jasmine.

Kees Wesdorp: Operator, if you allow me, I just realized that in the previous question, there were two questions about the impact on margins, and the second question was related to if for a Digital Health segment, this was a trough year in terms of margin development. I just wanna confirm, in line with what we said with the Investor Day, that's indeed the case. Driven by the previous acquisitions and also the investments that we've made out as per our plan, we see lower margins in the Q1 results and will climb up gradually towards the end of the year to increase margins again, assuming no major dilutive acquisitions which are currently not planned.

Speaker #4: Operate, if you allow me, I just realized that in the previous question, there were two questions about the impact on margins. And the second question was related to if we're digital health segment, this was a trough year in terms of margin development.

Speaker #4: I just want to confirm in line with what we said with the investor day, that's indeed the case. And so driven by the previous acquisitions, and also the investments that we've made out, as per our plan, we see lower margins in the Q1 results.

Speaker #4: And we'll climb up gradually towards the end of the year to increase margins again, assuming no major dilution of acquisitions, which are currently not planned.

Operator 3: Thank you. Our next question come from Matthew Gilmore from KeyBanc. Please go ahead.

Operator: Thank you. Our next question come from Matthew Gilmore from KeyBanc. Please go ahead.

Speaker #4: Thank you. Our next question comes from Matthew Gilmore from KeyBank. Please go ahead.

Matthew Gilmore: Thanks. Good morning, and thanks for the question. I wanted to ask about EBITDA seasonality. Mark, in prior calls you've commented about Q1 being impacted by seasonal expenses, including payroll taxes and expensing of bonuses. Can you maybe quantify some of those P&L costs that impact Q1 but then fade in subsequent quarters? If you had any broader comments about the cadence of EBITDA, that would be great.

Matthew Gillmor: Thanks. Good morning, and thanks for the question. I wanted to ask about EBITDA seasonality. Mark, in prior calls you've commented about Q1 being impacted by seasonal expenses, including payroll taxes and expensing of bonuses. Can you maybe quantify some of those P&L costs that impact Q1 but then fade in subsequent quarters? If you had any broader comments about the cadence of EBITDA, that would be great.

Speaker #8: Thanks. Good morning. And thanks for the question. I wanted to ask about EBITDA seasonality. Mark, in prior calls, you've commented about one Q being impacted by seasonal expenses, including payroll taxes and expensing of bonuses.

Speaker #8: Can you maybe quantify some of those P&L costs that impact the first quarter, but then fade in subsequent quarters? And if you had any broader comments about the cadence of EBITDA, that would be great.

Mark Stolper: EBITDA is seasonably low in Q1. It's partially due to trends within the healthcare delivery system in general, meaning that, you know, patients' deductibles reset, starting January, there just tends to be lower utilization in the early part of the year within healthcare, as patients are shouldering more of the burden of those expenses themselves. As the year goes by, we see growing utilization throughout the year. Also, with winter weather conditions and holidays in Q1, we often see some lower volume.

Speaker #9: Yeah. So EBITDA is seasonally low in the first quarter. It's partially due to trends within the healthcare delivery system in general, meaning that patients' deductibles reset starting in January, and there just tends to be lower utilization in the early part of the year within healthcare, as patients are shouldering more of the burden of those expenses themselves.

Speaker #9: And then, as the year goes by, we see growing utilization throughout the year. Also, with winter weather conditions and holidays in the first quarter, we often see some lower volume.

Mark Stolper: As you correctly suggested, the payroll taxes for certain other payroll taxes max out for the highly compensated individuals, including our radiologists, our professional fees in Q1 and are lower throughout the rest of the year. The way we pay and expense certain employee bonuses that hits all in Q1. We will see a significant jump up in our EBITDA in Q2 and beyond as planned and as is typically seen in our business in past years, and that's built into our guidance.

Speaker #9: And then as you correctly suggested, the payroll taxes for certain of the payroll taxes max out for the highly compensated individuals. Including our radiologists, our professional fees in the first quarter.

Speaker #9: And our lower throughput through the rest of the year. And then the way we pay and expense certain employee bonuses, that hits all in the first quarter.

Speaker #9: So we will see a significant jump up in our EBITDA in the second quarter and beyond as planned, and as is typically seen in our business in past years.

Speaker #9: And that's built into our guidance. The exact numbers of what those payroll expenses are and those bonuses, I don't have at my fingertips right now.

Mark Stolper: The exact numbers of what those, you know, those payroll expenses are and those bonuses, I don't have at my fingertips right now. You'll see if you go back to 2025, and 2024 and 2023, you'll see a similar impact in the Q1 each year.

Speaker #9: But you'll see if you go back to '25, '24, and '23, you'll see a similar impact in the first quarter each year.

Matthew Gilmore: That's great. Then as a follow-up, I wanted to ask about the reimbursement side of AI. You know, you all have mentioned 70% of studies could be leveraging AI by the end of 2026. Can you give us a sense for where you're able to bill for AI solutions and just how to think about the incremental revenue opportunity over the next few years?

Matthew Gillmor: That's great. Then as a follow-up, I wanted to ask about the reimbursement side of AI. You know, you all have mentioned 70% of studies could be leveraging AI by the end of 2026. Can you give us a sense for where you're able to bill for AI solutions and just how to think about the incremental revenue opportunity over the next few years?

Speaker #8: That's great. And then as a follow-up, I wanted to ask about the reimbursement side of AI. You all have mentioned 70% of studies could be leveraging AI by the end of 2026.

Speaker #8: Can you give us a sense for where you're able to bill for AI solutions, and just how to think about the incremental revenue opportunity over the next few years?

Kees Wesdorp: Sham, do you wanna talk about that?

Speaker #9: Sham, do you want to talk about that?

Sham Sokka: Let me do that.

Speaker #4: Let me take it.

Kees Wesdorp: Yeah. Go ahead. Go ahead.

Sham Sokka: Oh, go ahead, Sham. Yeah.

Speaker #9: Go ahead. Go ahead.

Speaker #4: Oh, go ahead, Sham. Yeah. We were talking about where you see the opportunities for reimbursement for AI. Yeah.

Kees Wesdorp: We were talking about.

Sham Sokka: Yeah, so-

Kees Wesdorp: where you see opportunities for reimbursement, for AI. Yeah.

Sham Sokka: Exactly. As you saw, we've seen in ultrasound, in the ultrasound case, there are essentially in ultrasound, in MR and in CT, there are really generic T-codes in each one of those areas, right? That's for quantification and measurements related to various diseases in those modalities. In the ultrasound case, we see reimbursement now already from thyroid. As we get approval for breast ultrasound, which is actually 3 times the volume of thyroid ultrasound, we can leverage the same reimbursement code for the procedure. In CT, there are applications such as lung cancer detection, which includes characterization as well as quantification because we measure the lung nodules. Again, those can be reimbursed per the CT characterization code.

Speaker #9: Yeah, exactly. So, as you saw, we've seen in ultrasound—in the ultrasound case—there is, essentially, in ultrasound, in MR, and in CT, there are really generic key codes in each one of those areas, right?

Speaker #9: That's for quantification, and measurements, related to various diseases in those modalities. So in the ultrasound case, we see reimbursement now already from thyroid as we get approval for breast ultrasound, which is actually three times the volume of thyroid ultrasound.

Speaker #9: We can leverage the same reimbursement code for the coverage there. In CT, there are applications such as lung nodule detection, which is characterization, as well as quantification because we measure the lung nodules.

Speaker #9: Again, those can be reimbursed per the CT characterization code. And in MR, there are similar codes. We plan to do that for our neuro product, which we received FDA approval for earlier this year.

Sham Sokka: In MR, there are similar codes, and we plan to do that for our neural product, which we received FDA approval earlier this year, which has those quantification and characterization elements. Just remember, in neuro MR, there's more than 1 million studies have been done. There's significant upside on the T-code reimbursement side, which we've not, and that's what Kees was talking about earlier, that we've not fully tapped it because number one, you have to deploy the solution, implement it, then we have to start billing that. Individually, we have conversations with the different payers to cover it, and then eventually you get increasing and increasing percentage coverage.

Speaker #9: Which has both quantification and characterization elements. And just remember, in neuro MR there is more than a million studies at RadNet. So there's significant upside on the key code reimbursement side, which we've not—and that's what Case was talking about earlier—that we've not fully tapped because, number one, you have to deploy the solution, implement it, then we have to start billing that.

Speaker #9: And then, individually, we have conversations with the different payers to cover it. And then, eventually, you get increasing and increasing percent coverage. An example of that is thyroid, where essentially when we started earlier on, maybe a quarter of the insurers were covering the key code.

Sham Sokka: An example of the thyroid where essentially when we started earlier, early on, via quarter of the insurers were covering the T-code. Now we're, you know, in the 60s to 70s percentage of insurers covering it at the full rate. That's part of the cascade as we deploy these solutions and then plan out the reimbursement scenarios. Naturally, as we show that, there's tailwind also when we go commercially now because we've shown that these products can be reimbursed, that provides a natural tailwind as we then take these solutions commercially.

Speaker #9: Now we're in the 60% to 70% range of insurers covering it at the full rate. So that's part of the cascade as we deploy these solutions and then plan out the reimbursement scenarios.

Speaker #9: And naturally, as we show that, there's tailwind also when we go commercially now, because we've shown that these products can be reimbursed. That provides a natural tailwind as we then take these solutions commercially.

Operator 3: Great. Thank you. Thank you. Next question comes from Larry Solow from CJS Securities. Please go ahead.

Matthew Gillmor: Great. Thank you

Operator: . Thank you. Next question comes from Larry Solow from CJS Securities. Please go ahead.

Speaker #8: Great. Thank you.

Speaker #4: Thank you. The next question comes from Larry Solo from CJS Securities. Please go ahead.

Larry Solow: Great. Thanks. Good morning, guys, and thanks for all the good information there, Kees, and the prepared remarks. Just a follow-up on the trajectory of the profitability in Digital Health. I think that's been a concern in the market and probably exacerbated by just pressure on the AI stocks and whatnot. I know you shared with us at the Investor Day, margin targets are, I think, 20% EBITDA margin. I believe we took a little bit of a step back intentionally with the Gleamer acquisition and probably some enhanced investment. Can you just kinda give us, you know, an update on that? You know, when do you expect now to kinda get back into up to towards that 20%?

Speaker #8: Great, thanks. Good morning, guys, and thanks for all the good information there, Case, and the prepared remarks. Just a follow-up on the trajectory of the profitability in Direct Health.

Speaker #8: I think that's been a concern in the market, and probably exacerbated by just pressure on the AI stocks and whatnot. I know you shared with us that the analysts say margin targets.

Speaker #8: So, I think 20% EBITDA margin. I believe we took a little bit of a step back intentionally with the Gleamor acquisition and probably some enhanced investment.

Speaker #8: But can you just kind of give us an update on that? Where do you expect, when do you expect now, to kind of get back up towards that 20%?

Larry Solow: You know, longer term, is this still a 30%, 40% kinda margin business? Thanks.

Speaker #8: And longer term, is this still a 30, 40 percent kind of margin business? Thanks.

Kees Wesdorp: Yeah, great question. Let me dive a little bit more deeply into even what we're seeing today. When we dissect our business into the core that's organically growing, the acquisitions that we did last year, and then the investments that we do, we see actually quite a healthy picture. The core that's organically growing today is already operating at, let's say, 30% to 40%, more 40%, EBITDA margins. The acquisitions, and it's public information that you've also seen in previous announcements, they are typically loss-making. That has a short-term dilutive effect. What you should see is that we, for instance, been able to slightly ahead of plan, been able to get iCAD already profitable, so break even as we speak today.

Speaker #2: Yeah, great question. Let me dive a little bit more deeply into even what we're seeing today. So, when we dissect our business into the core that's organically growing, the acquisitions that we did last year, and then the investments that we do, we see actually quite a healthy picture.

Speaker #2: So the core that's organically growing today is already operating at, let's say, 30 to 40, more 40 percent EBITDA margins. The acquisitions, and this is public information that you've also seen in previous announcements, are typically loss-making.

Speaker #2: And so that has a short-term dilutive effect. But what you should see is that we, for instance, have been able to, slightly ahead of plan, been able to get iCAT already.

Speaker #2: Profitable, so break-even as we speak today. And we're on the same trajectory also as we set out the opportunity with Gleamor. Gleamor might take a little bit longer, but not because of quality of business—purely because of the investments that we're doing in the X-ray space.

Kees Wesdorp: We're on the same trajectory also as we set out the opportunity with Gleamer. Gleamer might take a little bit longer, but not because of quality of business, purely because of the investments that we're doing in the X-ray space. Thirdly, in line with what we said at Investor Day is, we're strengthening the business, we're investing in the core business on the condition that we have line of sight of growth. Now I walked you through the ARR growth that we foresee for the year, the momentum that we're building on the commercial funnel. Accordingly, we've prudently invested into a variety of capabilities. Think of service delivery.

Speaker #2: Then, thirdly, in line with what we said at Investor Day, we're strengthening the business. We're seeing the business. We're investing in the core business on the condition that we have line of sight of growth.

Speaker #2: Now, I walked you through the ARR growth that we foresee for the year, the momentum that we're building on the commercial funnel, and then accordingly, we've prudently invested into a variety of capabilities.

Speaker #2: Think of service delivery, implementation capability, also the commercial team. And that short-term has an impact on lowering the EBITDA margins. Again, in line with what we foresaw for Q1, but also how we want to close the year as per our guidance.

Kees Wesdorp: Implementation capability, also the commercial team. That short term has an impact on lowering the EBITDA margins. Again, in line with what we foresaw for Q1, but also how we wanna close the year as per our guidance. In a way, nothing has changed versus what we set out on Investor Day.

Speaker #2: And so, in a way, nothing has changed versus what we set out on Investor Day. We're actually seeing the core business, the organic business, performing at an EBITDA margin of 30 to 40 percent.

Larry Solow: Okay.

Kees Wesdorp: Our core business, the organic business, performing at an EBITDA margin at 30% to 40%. We are strategically investing both organically and inorganically, and that on the short term has a dilutive impact.

Speaker #2: But we are strategically investing both organically and inorganically, and that, in the short term, has a dilutive impact. Now, you might ask, therefore, is the 20% towards 2028—is there upside to that?

Larry Solow: Yeah.

Kees Wesdorp: Therefore is the 20%, towards 2028, is there upside to that? Possibly so.

Speaker #2: Possibly so. But I also want to recognize that we continue to find new opportunities to invest in, also in terms of our R&D platform.

Larry Solow: Okay.

Kees Wesdorp: That we continue to find new opportunities to invest in, also in terms of our R&D platform, and we're really building a long-term sustainable business.

Speaker #2: And we're really building a long-term, sustainable business. And that has always been the reason why we saw the opportunity to invest. And therefore, over the horizon of ’26, ’27, somewhat lower margins than you would typically expect of peers.

Kees Wesdorp: The reasons why we saw, you know, the opportunity to invest and therefore over the horizon of 2026, 2027, somewhat lower margins than you would typically expect of peers.

Larry Solow: No, no, I appreciate all that. I guess a little bit harder to measure, but on just on the internal benefits, it sounds like a lot of lots of things are happening on the good side, but it feels like we're probably still way in the early innings on the internal benefits for you guys. Is that fair to say?

Speaker #8: No, no. I appreciate all that. And I guess, a little bit harder to measure, but just on the internal benefits, it sounds like a lot of things are happening on the good side. But it feels like we're probably still way in the early innings on the internal benefits for you guys.

Speaker #8: Is that fair to say?

Kees Wesdorp: A little bit further. I mean, I watched a baseball game last week. I think, is that the first or the second inning? It's somewhere.

Speaker #2: A little bit further. I mean, I watched a baseball game last week. I think, was that the first or the second inning? I'm sorry, I'm Dutch.

Larry Solow: Yeah.

Kees Wesdorp: Somewhere I'm sorry, I'm Dutch. That's the game is.

Speaker #2: So, the game that you watched.

Larry Solow: Yeah, yeah. No, that's fair.

Kees Wesdorp: New to me. I would say, look, I used the term earlier in this call that we're at sort of one-third based on what we know today.

Speaker #8: Yeah. No, that's fair. Yeah.

Speaker #2: I would say, look, I used the term earlier in this call that we're at sort of one-third, based on what we know today. So let me explain what I mean by that.

Larry Solow: Right.

Kees Wesdorp: Let me explain what I mean by that. We've deployed quite a bit. We see tangible impacts from the solutions that we've deployed. I talked about TechLive, I talked about thyroid ultrasound. Those have meaningful gross impact into the bottom line of RadNet, offsetting, you know, some of the other headwinds that exist in the business, such as, for instance, inflation on salaries. There's a lot more to come in the coming 18 months. We've also seen that we continuously generate new ideas, new innovations that will have further impacts. You know, are we one-third there, a quarter there? I don't think we're halfway there, but we've got significant opportunities still to capture.

Speaker #2: We've deployed quite a bit. We see tangible impact from the solutions that we've deployed. I talked about TechLife. I talked about Thyroid Ultrasound. And those have meaningful growth impact into the bottom line of RadNet.

Speaker #2: Offsetting some of the other headwinds that exist in the business, such as, for instance, inflation on salary. But so, there's a lot more to come in the coming 18 months.

Speaker #2: But we've also seen that we continuously generate new ideas, new innovations that will have further impact. And so, are we one-third there, a quarter there?

Speaker #2: I don't think we're halfway there, but we've got significant opportunities still to capture.

Larry Solow: Great. Thank you. I appreciate all that.

Speaker #8: Great, thank you. I appreciate all of that.

Operator 3: Thank you. Our next question come from Yuan Zhi with B. Riley. Please go ahead.

Operator: Thank you. Our next questio`n come from Yuan Zhi with B. Riley. Please go ahead.

Speaker #4: Thank you. Our next question comes from Yuanzi with PRLE. Please go ahead.

Yuan Zhi: Thank you for taking our questions. I may be asking about the 70% question differently. You mentioned 70% of RadNet readings or studies could be running through clinical AI by year-end 2026. Where are we now, and how do you see that impacting your labor costs and any other impact on your operation?

Speaker #9: Thank you for taking our questions. And maybe asking about the 70% question differently—you mentioned 70% of RadNet readings or studies could be running through clinical AI by year-end 2026.

Speaker #9: So, where are we now, and how do you see that impacting your labor costs and any other impact on your operation?

Kees Wesdorp: Maybe to clarify, and Sham, please confirm also, today we're at 70% of the RadNet volumes use a form of AI. Roughly 60% is DeepHealth's AI, 10% is third-party AI that's deployed at RadNet. As Sham also mentioned, we're seeing two key value levers here. One is productivity, more effective reading or more effective interpretation. The other is the onset of possible T-codes that you can get billed for. The productivity we're capturing today, the T-codes initially are set out for more in the ultrasound domain for thyroid, Sham also mentioned ultrasound breast in the future and then CT and MR to come.

Speaker #2: So maybe to clarify, and Shem, please confirm also, but today we're at 70% of the RadNet volumes use a form of AI. Roughly 60% is deep health AI.

Speaker #2: And then 10% is third-party AI that's deployed at RadNet. As Shem also mentioned, we're seeing two key value levers here. One is productivity—so, more effective reading or more effective interpretation.

Speaker #2: The other is the onset of possible T-codes that you can get built for. So the productivity capturing today, the T-codes initially are set out more in the ultrasound domain for thyroid, but Shem also mentioned ultrasound breast in the future.

Speaker #2: And then CT and MR to come. So, whilst the penetration is high, the productivity gains are being captured. The billing gains are in the early stages of being captured.

Kees Wesdorp: Whilst the penetration is high, the productivity gains are being captured, the billing gains are in early stages of being captured. Sham, anything to add?

Speaker #2: Shem, anything to add?

Sham Sokka: Yeah. Maybe just what, just to clarify a bit the comments. When we say that the target is to be applying all of our AI to about 70% of the volume by the end of the year, the reason we believe we can achieve that is almost all the AI tools that we would deploy to achieve that target, we're now currently either in early stages of deployment or in mid stages of deployment. For example, we just started the x-ray deployment. That's about 20% of our volume, if you kind of look at that as a large chunk. If we talk about neuro MR, I talked about 1 million studies out of our, you know, nearly 12 million studies that we do.

Speaker #8: Yeah. Maybe just to clarify a bit, the comments—so when we say that the target is to be applying all of our AI to about 70% of the volume by the end of the year, the reason we believe we can achieve that is almost all the AI tools that we would deploy to achieve that target are now currently either in early phases of deployment or in mid-stages of deployment.

Speaker #8: So, for example, we just started the X-ray deployment. That's about 20% of our volume. If you kind of look at that as a large chunk, if we talk about NeuroMR, I talk about a million studies out of our nearly 12 million studies that we do.

Sham Sokka: We've started these projects, but they're not fully deployed, and we anticipate that they'll be fully deployed by the end of the year. Really the primary savings are both the productivity of radiologists, as Kees just mentioned, where we can actually free up their capacity to do more studies. Then the second piece is of course, several of these have their own reimbursement elements as well.

Speaker #8: So we've started these projects, but they're not fully deployed. And we anticipate that they'll be fully deployed by the end of the year. And really, the primary savings are both the productivity of radiologists' case just mentioned, where we can actually free up their capacity to do more studies.

Speaker #8: And then the second piece is, of course, several of these have their own reimbursement elements as well.

Yuan Zhi: Got it. Maybe a question to Mark. Can you help us reconcile the updated revenue guidance? Was it mainly due to the acquisitions, or was there some contribution from the existing fleet?

Speaker #9: Got it. Maybe a question to Mark. Can you help us reconcile the updated revenue guidance? Was it mainly due to the acquisitions, or was there some contribution from the existing fleet?

Mark Stolper: Sure, yeah. When we put together the guidance, which we released originally in early March, we had already announced and incorporated the acquisitions of Northwest Radiology in Indiana, as well as the Florida, the Southwest Florida operation. When we increased the guidance levels, the low end and the high end by $30 million last night, that doesn't have to do with acquisitions. That's all about the fact that we're seeing strength in our business to the point where we think that we're gonna overachieve our original budget and projections that, you know, we have internally that we set the guidance around. We're seeing, you know, strong same center performance. The Digital Health initiatives are bringing, you know, more capacity to our centers.

Speaker #8: Sure. Yeah. So, when we put together the guidance, which we released originally in early March, we had already announced and incorporated the acquisitions of Northwest Radiology in Indiana, as well as the Southwest Florida operation.

Speaker #8: So when we increased the guidance levels, the low end and the high end, by $30 million last night, that doesn't have to do with acquisitions.

Speaker #8: That's all about the fact that we're seeing strength in our business to the point where we think that we're going to overachieve our original budget and projections that we have internally, that we set the guidance around.

Speaker #8: So we're seeing strong same-center performance. The digital health initiatives are bringing more capacity to our centers, and we feel very confident that we are going to overachieve our original guidance levels.

Mark Stolper: We're, you know, feel very confident that, you know, we were gonna overachieve our original guidance levels.

Yuan Zhi: Got it. One last question from me. In terms of capitated contracts, do you see a possibility to combine your imaging offering with others, such as oncology treatments or Alzheimer's disease treatment, to win new capitated contracts from payers?

Speaker #9: Got it. And one last question from me. In terms of capitated contracts, do you see a possibility to combine your imaging offering with others, such as oncology treatment or Alzheimer's disease treatment, to win new capitated contracts from payers?

Mark Stolper: Well, you know, we do work with other companies that do take risk for patient care in oncology and in other specialties. Today, we don't sub-capitate with any of those groups who are taking risk on the specialty side. Predominantly all of our capitation, you know, contracts are with large primary care or multi-specialty groups that are taking risk for the entire, you know, entire patient care. Then we sub-capitate for all of the imaging. There is an opportunity. There are some companies, I know you're aware of some, and I know you cover one or two companies that are in particular specialties that just take capitation risk for that specialty. You know, is there an opportunity? We do work with some of those companies right now on a fee-for-service basis.

Speaker #8: Well, we do work with other companies that do take risk for patient care in oncology and in other specialties. Today, we don't subcapitate with any of those groups who are taking risk on a specialty side.

Speaker #8: Predominantly, all of our capitation contracts are with large primary care or multispecialty groups that are taking risk for the entire patient care. And then we subcapitate for all of the imaging.

Speaker #8: But there is an opportunity. There are some companies that I know you're aware of—some, and I know you cover one or two companies that are in particular specialties that just take capitation risk for that specialty.

Speaker #8: And is there an opportunity? We do work with some of those companies right now on a fee-for-service basis, where there'd be an opportunity to capitate with them on imaging.

Mark Stolper: Would there be an opportunity to capitate with them on imaging? I think it's possible, depending upon price. I mean, it's ultimately, the financials have to work for us, and we have to make sure that the capitated rates that we get are in line with fee-for-service, you know, market-based fee-for-service rates, which is why we've actually pared down our capitation business slightly over the last couple of years, where we had situations where our reimbursement on some of those contracts were falling behind what we would otherwise be able to get on a fee-for-service basis, and we flipped them to fee-for-service relationships, and that's increasing our profitability.

Speaker #8: I think it's possible, depending upon price. I mean, ultimately the financials have to work for us. And we have to make sure that the capitated rates that we get are in line with fee-for-service, market-based fee-for-service rates, which is why we've actually pared down our capitation business slightly over the last couple of years, where we had situations where our reimbursement on some of those contracts was falling behind what we would otherwise be able to get on a fee-for-service basis.

Speaker #8: And we flipped them to fee-for-service relationships, and that's increasing our profitability. So I think the opportunity, Yuan, is there, but it ultimately depends upon what kind of rates we could get.

Mark Stolper: I think the opportunity, Yuan, is there, but, you know, it ultimately depends upon, you know, what kind of rates we could get.

Yuan Zhi: Got it. Thank you for taking our que.

Speaker #9: Got it. Thank you for taking our record.

Operator 3: Thank you. Our next question comes from Jim Sidoti from Sidoti & Co. Please go ahead.

Operator: Thank you. Our next question comes from Jim Sidoti from Sidoti & Co. Please go ahead.

Speaker #10: Thank you. And the next question comes from Jim Sidoti from Sidoti & Co. Please go ahead.

Jim Sidoti: Hi, good morning, thanks for taking all the questions. I know it's a long call. If you include the new centers in Idaho plus anything you've opened up so far this year, what is the total number of imaging centers you have?

Speaker #11: Hi, good morning, and thanks for taking all the questions. I know it's a long call. So, if you include the new centers in Idaho plus anything you've opened up so far this year, what is the total number of imaging centers you have?

Mark Stolper: If you include the 5 that we bought in Idaho, we have 440 locations.

Speaker #8: So, if you include the five that we bought in Idaho, we have 440 locations.

Jim Sidoti: Okay. You said earlier in the call that advanced imaging was now about 29% of revenue, 29% of procedures, 60% of revenue. You know, is there a target for advanced imaging over the next, let's say, 5 years? Do you think that could approach 40% of procedures?

Speaker #11: Okay. And you said earlier in the call that advanced imaging was now about 29% of procedures, 60% of revenue, I think—I'm sorry, yeah, 29% of procedures, 60% of revenue.

Speaker #11: Is there a target for advanced imaging over the next, let's say, five years? Do you think that could approach 40% of procedures?

Mark Stolper: I don't think we really know. I mean, that 40% seems a little high because we've always prided ourselves on being a multimodality provider, and we'll always be a multimodality provider. I mean, we think it's important from a marketing perspective to be able to market to our referring physician communities as a one-stop shop for all of their imaging needs. Often we will have patients sent to us for routine studies like X-rays and ultrasounds, and based upon the results of those studies, they'll be sent back to us for the more advanced imaging.

Speaker #8: I don't think we really know. I mean, that 40% seems a little high because we've always prided ourselves on being a multimodality provider. And we'll always be a multimodality provider.

Speaker #8: I mean, we think it's important, from a marketing perspective, to be able to market to our referring physician communities as a one-stop shop for all of their imaging needs.

Speaker #8: And often, we will have patients sent to us for routine studies like X-rays and ultrasounds, and based upon the results of those studies, they'll be sent back to us for the more advanced imaging.

Mark Stolper: You know, back to tying into capitation in California, where we're taking risk on, you know, about 1.5 million lives, we need to be a multimodality provider because, you know, 70-plus percent of what those patient populations need with respect to their imaging procedures are routine studies. I think we'll always be somewhat, RadNet's modality mix will always be somewhat reflective of the overall outpatient imaging marketplace with respect to our modality mix. But what we have been very effective in, you know, in more recent times, particularly with the Digital Health tools, is to help drive up the capacity of advanced imaging by lowering scan times at our centers and making our radiologists more productive on the back end so that they can read more of these studies.

Speaker #8: And then back to tying into capitation, in California, where we're taking risk on about a million and a half lives, we need to be a multimodality provider because 70-plus percent of what those patient populations need with respect to their imaging procedures are routine studies.

Speaker #8: So, I think we'll always be somewhat riding its modality mix. We'll always be somewhat reflective of the overall outpatient imaging marketplace with respect to our modality mix.

Speaker #8: And, but what we have been very effective in more recent times, particularly with the digital health tools, is to help drive up the capacity of advanced imaging by lowering scan times at our centers and making our radiologists more productive on the back end, so that they can read more of these studies.

Mark Stolper: I think that that trend is gonna continue within our business. I think we're confident and optimistic about advanced imaging continuing to play a bigger role in the healthcare delivery system and in our business. We just don't know where that tops out.

Speaker #8: And I think that that trend is going to continue within our business. So I think we're confident and optimistic about advanced imaging continuing to play a bigger role in the healthcare delivery system and in our business.

Speaker #8: We just don't know where that tops out.

Jim Sidoti: All right. All right, you think more reasonable maybe in the low thirties, you think that could level off?

Speaker #11: All right. All right. So you think more reasonable maybe in the low 30s? You think that could level off?

Mark Stolper: We don't really know, Jim, but, you know, we're approaching 30% now, and so I think it's likely that we will go north of 30%, but just I don't know where we'll max out.

Speaker #8: We don't really know, Jim, but we're approaching 30% now. And so I think it's likely that we will go north of 30%, but I don't know where we'll max out.

Jim Sidoti: Got it. All right, thank you.

Speaker #11: Got it. All right. Thank you.

Operator 3: Thank you. As there are no further question, this concludes our question and answer session. I would like to turn the conference back over to Dr. Howard Berger, President and Chief Executive Officer. For any closing remarks, over to you, sir.

Operator: Thank you. As there are no further question, this concludes our question and answer session. I would like to turn the conference back over to Dr. Howard Berger, President and Chief Executive Officer. For any closing remarks, over to you, sir.

Speaker #10: Thank you. Are there no further questions? This concludes our question-and-answer session. I would now like to turn the conference back over to Dr. Howard Berger, President and Chief Executive Officer.

Speaker #10: For any closing remarks, over to you, sir.

Howard Berger: Thank you, operator. Again, I would like to take this opportunity to thank all of our shareholders and stakeholders for their continued support and the employees of RadNet for their dedication and hard work. Management will continue its endeavor to be a market leader that provides great services with an appropriate return on investment for all the stakeholders. Thank you for your time today, and I look forward to our next call. Good day.

Speaker #11: Thank you, operator. Again, I would like to take this opportunity to thank all of our shareholders and stakeholders for their continued support, and the employees of RadNet for their dedication and hard work.

Speaker #11: Management will continue its endeavor to be a market leader that provides great services with an appropriate return on investment for all the stakeholders. Thank you for your time today, and I look forward to our next call.

Speaker #11: Good day.

Operator 3: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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