RadNet, Inc. (RDNT) Q3 2026 Earnings Call Transcript

Operator: This is the conference operator. Thank you for joining us today for the RadNet conference call. We will be starting the call in just a few minutes. We appreciate your patience. And please continue to hold for the RadNet conference call. We will be starting in just a few minutes. Thank you. Good morning, and welcome to the RadNet, Inc. Third Quarter 26 Financial Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mark D. Stolper, Executive Vice President and Chief Financial Officer at RadNet. Please go ahead.

Mark D. Stolper: Thank you. Good morning, everyone, and thank you for joining Doctor. Howard G. Berger and me today to discuss RadNet's Third Quarter 26 financial results. On this call, we have also invited Cornelis Wesdorp, President and CEO of Digital Health, and Shyam 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 would like to remind everyone of the safe harbor statement under the Private Securities Litigation Reform Act of 2000. This presentation contains forward looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 2000. Specifically, statements concerning anticipated future financial and operating performance, RadNet's ability to continue to grow the business by generating patient referrals and contracts with radiology practices, recruiting and retaining technologists, receiving third party reimbursement for diagnostic imaging services, successfully integrating acquired operations, generating revenue and adjusted EBITDA for the acquired operations as estimated successfully selling and licensing digital health solutions, the anticipated timing, completion, and benefits of pending acquisition of Onrad 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 from the SEC from time to time including RadNet's annual report on Form 10-Ks for the year ended 12/31/2025. 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. And with that, I would like to turn the call over to Dr. Berger.

Howard G. Berger: Thank you, Mark. Good morning, everyone. And thank you for joining us today on today's call. Mark, Kaes, Shyam, and I plan to provide you with highlights from our third quarter 26 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 would 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. Let's begin. I am very pleased with the performance in the third quarter. Total company revenue and adjusted EBITDA both quarterly records. The company revenue increased 22.1% to $683 million from $522.9 million in last year's third quarter, and total company adjusted EBITDA increased 23.8% to $105 million from $84.9 million in last year's third quarter. Total company adjusted EBITDA margin expanded 23 points to 16.5%. Growth in the quarter was broad based driven by our continuing initiatives to create and fill capacity at existing centers new center openings, and the continued shift in our business mix towards advanced imaging, tuck in acquisitions, higher reimbursement from commercial payers, the expansion of our health system joint ventures and strong revenue growth in the digital health segment. Within the imaging center operating segment, we continue to experience increasing demand in advanced imaging MRI, CT and PETCT, which is both a function of broader industry trends as well as the many initiatives and investments we have been implementing designed to expand capacity at our centers. During the third quarter, imaging volumes increased 19.9% in aggregate and 8.9% on same center basis as compared with last year's third quarter. Disproportionately higher growth in MR, CT, and PETCT relative to routine imaging contributed to a 232 basis point shift in RadNet's advanced imaging procedural volume mix increasing from 28.2% of total procedural volume in last year's third quarter to 30.6% in this year's third quarter. This favorable mix shift together with continued operational focus on controlling costs contributed to a 25.3% increase in imaging center segment adjusted EBITDA and a 511 basis point improvement in imaging center segment adjusted EBITDA margin as compared with last year. Also within imaging centers, the joint venture relationships continue to expand. At the end of the third quarter, 161 of our 39 centers or approximately 37% were held within health system partnerships. During the quarter, we expanded an existing partnership the University of Maryland Medical System which including among other things, the contribution of additional imaging centers into a newly restructured joint venture. Health systems like the University of Maryland continue to recognize that cost effective freestanding outpatient imaging centers are essential to their long term strategies. And we continue to see a healthy pipeline of additional health system partnership opportunities. In addition, health systems have grown. Growing interest in implementing digital health tools. To more effectively manage imaging volumes and provide their radiologists and administrative staffs with solutions to make them more productive and accurate. We are also particularly excited about the opportunities for growth and expansion made by our recently announced agreement to acquire Onrad. Onrad, through its more than 130 contracted radiologists, provides teleradiology final read interpretations and in hospital professional radiology staffing, including interventional radiology to more than 225 hospitals across 26 states. With hospitals and health systems accounting for more than half of US diagnostic imaging volume, and imaging demand outpacing the supply of trained radiologists Onrad gives RadNet an established platform to serve hospitals directly while expanding what we can offer our existing joint venture partners. Onrad is a capital light high margin business that has grown revenues between 10-20% over the last several years. And adjusted EBITDA margins exceeding 30% And we expected to add $190 to $200 million of revenue and $60 to $65 million of adjusted EBITDA in its first year of operation after closing. Upon closing, Onrad will become the foundation of RadNet's third reportable operating segment. Radiology professional services, combining OnRad's professional services with our DeepHealth AI enabled technology and our imaging center operating expertise will allow us to address the entire continuum of diagnostic imaging inside and outside the hospital under 1 company. The inbound interest from current joint venture partners and potential new partners and customers has exceeded our expectation and we look forward to opportunities that could result once the acquisition is closed. Given the positive trends we experienced throughout the quarter, and the strong financial performance we delivered, we elected to again increase our 26 full year guidance ranges for imaging center revenue adjusted EBITDA, and free cash flow. The imaging center segment has now all outperformed our projections in each of the first 3 quarters of this year. In the digital health segment, we are raising our adjusted EBITDA guidance as a result of effective expense management and faster than projected integration of acquired operations. Mark will review the details of our updated guidance in his remarks. Finally, we continue to maintain a strong liquidity position and modest financial leverage. We ended the third quarter with a cash balance of $750.6 million and a net debt to adjusted EBITDA ratio of 1.66x. This continued financial flexibility positions us well to continue to invest in our organic growth and to pursue attractive acquisitions across our operating segments in the coming quarters. I would now like to turn the call over to Kaes and Shyam who will do a deeper dive into the digital health performance and provide a status update on many of our AI and enterprise imaging initiatives. Case, please go ahead.

Cornelis Wesdorp: Thanks, Howard. Good morning, everyone. The third quarter was defined by a record quarter of new business for the Digital Health segment. Continued ARR growth and preparation for a very strong fourth quarter we scale our solutions across RedNet with external customers. We closed approximately $71 million of total contract value in the third quarter. Bringing us to roughly $108 million of total contract value for the first 9 months of the year. The quarter includes a long term enterprise agreement with a fast growing U. S. Tailored radiology service provider of $53 million in total contract value. Covering our enterprise informatics and clinical AI portfolio, and therefore, a strong validation of our integrated platform strategy. In addition to this $53 million contract, we booked approximately $55 million year to date, split between roughly $32 million in North America and $23 million in Europe and the rest of the world. We had a healthy mix of wins across our enterprise informatics and clinical AI business. And our funnel continues to build as well. Our clinical AI and enterprise informatics pipeline has grown from roughly a little over $100 million in total contract value at the start of the year to more than $300 million in total contract value today. Our customer base now exceeds over 3000 accounts, and total procedure volume across our AI and informatics solutions reached over 18 million for the quarter. Up more than 170% year over year. Annual recurring revenue ARR, ended the quarter at $112.6 million, up 67% from 09/30/2025 and nearly 7% versus 06/30/2026, showing solid organic growth. Excluding the Gleamer acquisition, ARR grew 21% since 09/30/2025. External ARR the ARR generated outside of RedNet more than doubled since 09/30/2025, to $73 million. And now makes up 65% of our ARR base, up from 52% end of year 2025. Digital Health revenue for the quarter was $32.9 million up 33% as compared with last year's third quarter and 1.5% versus Q2 26. Split between $16.2 million of AI revenue up 51% from last year's third quarter which 31% is Gleamer, and $16.7 million of Enterprise Imaging revenue, up 18.6% from last year's third quarter External revenue was $21.4 million up 49% from last year's same quarter and is 65% of segment revenue, versus 58% in Q3 25. This was strong performance despite some challenges we faced during the third quarter. First, seasonality. As the summer is typically a slow period for go lives and new business. Second, the migration of legacy iCAD customers from perpetual and on premise licenses cloud subscriptions, which lowers upfront revenue, but raises the quality of the revenue base as a SaaS business. And third, a degree of capacity constraint in our implementation and service organization which we have solved in Q3 as we make ourselves ready for the record Q4. Turning to profitability adjusted EBITDA for the segment was $3 million for the quarter. Up 21% from $2.5 million in the second quarter, with margin expanding from 7.6% to 9.1%. As compared with last year's third quarter, adjusted EBITDA was down from $3.5 million reflecting, as we have also mentioned in the previous calls, investment in 2026 and early 2020 in our commercial services and implementation organization and the temporary margin dilution from the Gleamer acquisition. Gleamer continues to perform ahead of plan. 8 months into the integration, the legacy Gleamer portfolio x third quarter at $31 million of ARR. 25% ahead of the year end target of more than $30 million we shared on our call. Gleamer added 63 customers in the quarter, demonstrating continued momentum. And profitability is following the same trajectory we delivered with the CAD and C Mode acquisitions. From a $4 million to $5 million negative EBITDA margin at the time of acquisition, to close to breakeven today. Even after allocating the DeepHealth team's integration cost. Accordingly, we remain on track to capture cost synergies in 2027 alongside cross and upsell revenue synergies as our team sell 1 integrated portfolio on the DeepHealth Radiology AI suite. I will now hand over to Shyam, who will talk about the impact we are with our portfolio.

Shyam Soka: Thanks, Case. Good morning, everyone. Our growth is supported by an industry leading portfolio with recent new product introductions and regulatory approvals and we expect that momentum of product releases and regulatory clearances to continue as the year progresses. For instance, in the best breast domain, we received FDA clearances for breast arterial calcification assessment in June, a way to identify early stage cardio. Cardiac disease. And breast ultrasound in July and alongside prior exam integration in our mammoDx solution. We are seeing strong interest in the unique combination we can offer with what we believe is the most comprehensive screening and diagnostic platform for breast imaging. Also note that customers can pursue reimbursement for breast ultrasound under the existing category 3 CPG code for a qualitative ultrasound tissue characterization. The same code under which we have been receiving reimbursement for a material portion our thyroid ultrasound AI since the start of the year. In September, we also received FDA clearance for our next generation chest X-ray solution, the first built on our proprietary foundation model and already used by European customers under CE Mark on more than 2.8 million examinations a year. Across the portfolio, we now hold 28 FDA clearances and 26 CE marks covering more than 100 clinical findings across routine and advanced imaging, with additional submissions pending in lung neuro, and prostate. Nearly 100% of our cleared findings are CAD E, CAD X approvals, which are more strongly regulated and can be included to create draft report. The strategic thread here is how we are transforming radiology workflow. When every study, order, or clinical history runs through our AI powered solutions, we can automate and streamline the radiology workflow. By combining our clinical AI our AI orchestrator, viewer, and reporting pro, We automate case assignment, triage, and report generation reducing reporting time, for instance, by up to 30% as these solutions are used together. In light of this, we have spoken before about our thyroid ultrasound solution, which continues to show what is possible. Over 90% of the automated draft reports are accepted by RadNet radiologists for final sign off without changes at all. We are now extending this approach to breast ultrasound, and X-ray, which brings me to our progress. With Within RadNet, we made good progress this quarter across our strategic operational Our AI powered reporting pro solution which serves as the base platform for graph reporting is now in the phase of accelerated deployment with over 30% of RadNet exams covered today. We remain on track for full deployment across RadNet by end of Q1 27. Driving radiologist productivity and cost savings as we replace more conventional reporting solutions. We are well underway to have more than 75% of RadNet studies processed by our clinical AI by Q3 27. With today over 50% coverage. In October, we began rolling out breast ultrasound AI across RadNet, We also started deploying breast arterial calcification, mammoDx, which improves mammography quality and simplifies compliance, and our Brain AI solutions. Glimmer's X-ray AI is now live across RadNet already processing more than more than 60% of our exams of our facilities with 90% coverage of eligible X rays at those sites. We have initiated the deployment of automated draft reporting for X-ray RadNet's highest volume modality with more than 2.8 million exams a year. Together with the deployment of breast ultrasound, thyroid ultrasound, automatic draft reporting, these are large stepping stones toward our goal of greater than 50% imaging volume report automation by Q3 27 across all imaging volumes. Our SMART patient registration tool within eRAD which has now completed the pilot phase and preparing for sales rollout, with close to 30 centers now live and further regions to follow. Delivering front office productivity gains, automating nearly a third of patient registrations, with higher patient satisfaction. Finally, we have started preparation with Onrad to roll out our digital health solutions further extending the same platform we are deploying at RadNet. Case, back to you.

Cornelis Wesdorp: Thanks, Shyam. Looking ahead to the fourth quarter, and we are very confident we are on track for more than $140 million of ARR by year end. Roughly 87% growth over 2025. We see a clear bridge from our Q3 ARR of $112.6 million driven by new external customers and RedNet go lives. We expect fourth quarter revenue to grow about 20% sequentially as those go lives come through in our seasonally strongest quarter. We are very confident in delivering this record quarter. For the full year, we are accordingly reaffirming our revenue guidance of $135 million to $145 million, and we are raising our adjusted EBITDA guidance to $10 million to $13 million We will be showcasing the full DeepHealth at RSNA in Chicago at the end of this month. And we look forward to welcoming many of you at our booth. It is very encouraging and gratifying to see the demand for demos and meetings well ahead of the show. At this time, I would like to turn the call back over to Mark who will discuss key financial highlights from the third quarter.

Mark D. Stolper: Thanks, Case. I am now going to briefly review our third quarter performance and attempt to highlight what I believe to be some material items. I will also give some further explanation for certain items in our financial statements well as provide some insights into some of the metrics that drove our third quarter 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, loss on debt extinguishments, and noncash equity compensation. Adjusted EBITDA includes equity and earnings of unconsolidated operations and subtracts allocations of earnings to noncontrolling interest in subsidiaries and is adjusted for noncash or extraordinary and onetime 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 the earnings release. I will also be using a second non GAAP measure pertaining to the digital health segment called annual recurring revenue, or ARR. We use ARR as a key operating metric to evaluate the scale, growth, and health of the recurring component of our digital health business. We define ARR as a key subscription economy metric representing the predictable normalized annualized value of contracted recurring revenue generated from active customer contracts. ARR includes subscription fees, recurring support fees, and contracted usage charges, and excludes onetime or nonrecurring fees such as implementation fees, hardware sales, professional services consulting, and onetime training. ARR is determined based on the contractual terms of active customer arrangements and not calculated by reference to revenue recognized under GAAP deferred revenue, or another GAAP financial measure. ARR is not a forecast of future revenue, which may be affected by contract start and end dates. Cancellations, renewal rates, customer usage, and other factors. With that said, I would now like to review our third quarter results. While I will not recap all the financial information that contained in last night's earnings report, here are some highlights. For the third quarter of 26, total company revenue was $638.3 million and total company adjusted EBITDA was $105 million both quarterly records. Revenue increased 22.1% and adjusted EBITDA increased 23.8% as compared with last year's third quarter. Adjusting for unusual or onetime items, adjusted diluted earnings per share was $0.30 in the third quarter as compared with $0.24 in last year's third quarter. The imaging center segment results were driven by strong aggregate and same center procedure volumes, especially in advanced imaging, which Doctor. Berger spoke about in his prepared remarks. Overall procedure volume, including routine imaging, increased 10.8% in aggregate and 3.2% on a same center basis. The upgrades we have made in the last few years to faster MRI scanners the use of TechLive remote technologists, and refinements we have made to our operations to move more patients efficiently through our centers have contributed to the capacity growth for advanced imaging. In the case of PET CT, continue to benefit from the greater utilization of prostate PSMA and brain amyloid studies, which during third quarter represented almost 26% of our PETCT volume. PETCT now represents 10.2% of our payment up from 8.8% for the full year of 2025. And MRI represents 38.6% of our payments up from 37.7% for the full year of 2025. Despite continued pressure on salaries from labor shortages, particularly with tech technologists and radiologists. Imaging center segment adjusted EBITDA increased 25.3% to $102 million and we continue. Continued our streak of quarters with increasing adjusted EBITDA margins within our imaging center segment relative to prior year periods. With respect to digital health, I will just highlight a few additional items to expand upon Case and Shyam's previous comments. Digital health revenue inclusive of Advantor segment revenue, increased 32.6% to $32.9 million $24.8 million in last year's third quarter. And segment adjusted EBITDA was $3 million as compared with $3.5 million in last year's third quarter, reflecting continued investment in commercial and implementation headcount and the temporary margin dilution from recent acquisitions. Aside from revenue, from the acquisitions of Gleamer and C-MODE, which contributed approximately $300,000 of revenue in the third quarter. Revenue from the EBCD program increased 16.9% Prostate and neuro products grew 31.7%. TechLive revenue increased 48.2% and enterprise imaging workflow revenue increased 10.4%. We remain on track to reach our full year revenue and ARR goals for the segment, which implies a ramp in both revenue and adjusted EBITDA in the fourth quarter, which is supported by newly signed contracts a pipeline of new business opportunities, and a schedule of customer implementations. The end of the year. We finished the quarter with a strong cash and liquidity position. At quarter end, we had $750.6 million cash on the balance sheet and full availability $282 million revolving credit facility. Continued improvements in revenue cycle, particularly in the area of patient in collections, have allowed us to maintain DSOs or days sales outstanding at 31 days, which we believe to be 1 of the best in the industry. This continues to provide the cash flow we require to fund our growth and expansion in both operating segments. With regards to our financial leverage, as of 09/30/2026, unadjusted for bond and term loan discounts we had $590.2 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 or 49% of New Jersey Imaging Network net debt of $1.4 million for which RadNet is neither a borrower or guarantor. At quarter end, our net debt to adjusted EBITDA leverage ratio was 1.66x. Given the strength of our third quarter results, and the positive trends we continue to experience, we elected again to increase our 2026 full year guidance ranges for revenue, adjusted EBITDA, and free cash flow for our Imaging Center segment. Total net revenue guidance for the Imaging Center segment increased to a range of $2.385 billion to $2.435 billion. An increase of $15 million at both the low and ends of the range as compared with the guidance we provided our second quarter results. Adjusted EBITDA guidance for the Imaging Center segment increased to a range of $350 million to $363 million an increase of $5 million at both the low and high ends of the range. We increased our capital expenditure guidance range by $5 million at both ends to $170 million to $180 million which is reflective of additional growth, investment opportunities we have been pursuing. Free cash flow guidance increased to a range of $120 million to $130 million an increase of $5 million at both the low and high ends of the range. For the digital health segment, we are reaffirming our revenue guidance range of $135 million to $145 million We increased our guidance range for adjusted EBITDA before non capitalized R&D. To $11 million to $13 million as a result of effective expense management and faster than projected integration of acquired operations. We also increased our CapEx guidance for digital health by $1 million I will now take a few minutes to give you an update on 2027 Medicare reimbursement rates. As a reminder, Medicare represents about 25% of our business mix. With respect to Medicare reimbursement, as we discussed on our second quarter call, in July, we received from CMS a matrix for proposed rates by CPT code, which is typically part of the physician fee schedule proposal that is a relief about that time every year. In the proposed rule, Medicare proposed decreasing the conversion factor in the Medicare fee schedule by about 1.68%. From $33.40 to $32.84 along with certain other changes to RVUs or relative value units of specific radiology CPT procedure codes and to the Medicare geographic practice cost indices or GPCIs. Our initial analysis at that time indicated that RadNet would be almost net-neutral for Medicare in 2027. With a negative impact of less than $1 million to revenue, has proposed increases to RVUs almost fully mitigated the decline to the conversion factor. On November 4, CMS released its final fourth rule which will govern the 2027 physician fee schedule reimbursement rates. In the final rule, CMS finalized a deeper to the conversion factor that it had proposed a decrease of approximately 2.3% from $33.40 to $32.63. We analyze the final rule CPT code by CPT code volume weighted using expected 27 procedure volumes and estimated that the impact to RadNet's 2027 revenue will be approximately $5 million. While this impact is slightly worse than the pro. Proposed rule from July, much of the decrease in the conversion factor is the result of the expiration of the temporary 2.5% increase Congress enacted for 2026. As it has done in several years prior, Congress may take action before year end to partially or fully reverse this reduction potentially as part of the broader legislative package in December. There can be no assurance that the Congress will act, Our budget at this our budget at this time for 2027 will reflect the final rule as published and we will update you if Congress takes action later on this year. On a related note, the 2027 hops or Hospital Outpatient Prospective Payment System, final rule also released on November 14, finalized the site neutrality we discussed last quarter under which CMS will reimburse hospitals at the lower Medicare physician fee schedule rate for certain non contrast imaging studies performed in off campus hospital outpatient departments. This will contribute to the already significant economic pressure that health systems are feeling within their radiology departments And we believe this financial pressure will continue to drive more health system partnership discussions. I would now like to turn the call back to Doctor. Berger who will make some closing remarks before we begin the question and answer portion of the call today.

Howard G. Berger: Thank you, Mark. I would like to take a moment to go off script and try to share with you the seminal events which have occurred over the last few months here at RadNet. RadNet has undertaken to embrace the future of health care which can actually be delivered today. Healthcare has long been mired in a pattern of behavior of diagnosing and treating ailments. With the advent of both clinical AI, agentic AI, and the tools that can drive and relieve the pressure on our system with shortage of personnel, radiologists, technologists, and others. We are endeavoring to change and bend the curve to early diagnostic tools and prevention. Technology in imaging is unique in this capability. Given the pervasive need that patients have for imaging the amount of information that can now be culled out of a routine scan for other early diagnostic testing such as breast cancer, lung cancer, heart disease, can fundamentally change the curve and allow better outcomes and better lowering cost to our system. This is the fundamental takeaway. I would hope all of you can see that by adding hospital based services, professional services along with the industry's biggest and best tools for AI are the solution. Healthcare is unique in its application of AI. it is purposeful, and meaningful And I have, as well as many of my colleagues, personal experiences where early intervention can mean the difference between life and death. This is what we need to embrace We are committed to this journey. We have invested heavily. We have built I believe, the best management team in the industry and I know we can deliver. The results will speak for themselves, but the importance of what we have undertaken should not be underestimated given any particular quarter's results. RadNet is here for the long haul. We have a mission and we intend to be that piece that helps pull it all together. It does not mean that RadNet's gonna win every contract, and I am not sure we want to win every contract. What we want are partners who understand that this journey is fundamental to the lifeline of health care and can fundamentally change our industry. And I do not believe anybody out there would suggest that it does not need substantial change. So I hope in our future quarterly reports as well as other announcements, You will get the perspective that we be. We believe will be the future of how our industry, particularly radiology and imaging, can and must be practiced. Operator, we are now ready for the question and answer portion of the call.

Operator: We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. At this time, we will pause momentarily to assemble our roster. Our first question today is from Brian Tanquilut with Jefferies. Please go ahead.

Brian Tanquilut: Congrats on the quarter. Maybe, Howard, as I think about advanced modalities here, it looks like you are you are still seeing strength CT was actually notably strong. So just curious, 1, what you think drove that strength in CT, the pickup? And then 2, just thinking through the runway left for advanced imaging as a whole, whether that is MR MRI path or CT, especially as I think about your tech live rollout, which I think began late last year. So just curious how we should be thinking about and how you are thinking about advanced imaging in terms of the runway there. Thanks.

Howard G. Berger: Thank you, Brian. Good morning. We have a very strong emphasis on advanced imaging. The demand continues to accelerate first because of just, you know, large. Enlarging population and aging population, But perhaps more importantly, many new tools that are now available with the artificial intelligence and other ways of making our equipment that much faster. Perhaps Brian, I will give you an example. We have begun raising or transitioning our PETCT scanners to the latest technology, which is almost mind blowing when the new PETCT scanners now are capable of doing a PETCT in less than 15 minutes. This used to be a 1-hour procedure. So that is driven by the demand and rather than us put another PET CT scanner in we have been able to almost double our PETCT volume which was unthinkable perhaps even 2 years ago.

Mark D. Stolper: So when we show our cap x, even though that is replacement CapEx, it is really growth CapEx. And that is 1 of the reasons why our CapEx is staying particularly high, given that the investment in our imaging centers is a critical part of our growth.

Howard G. Berger: That along with growth from things like CT coronary angiography, which is a remarkable tool not for people who are symptomatic, but people who are at potentially high risk coming in and determining the extent of their cardiovascular disease. Well before they have an incident has grown dramatically. Almost a hundredfold here since we started this program. About a year and a half ago. Part of that is that the demand for this is so great that hospitals who have traditionally performed this procedure are now incapable of getting patients in on a regular basis. Along with that, we have had a significant increase in breast MRI as a result of screening for high risk patients and that has been a very substantial change in the number of breast MRIs that we are doing. Along with that, CT growth and traditional MR growth continues to be in high demand. Both because the quality and capabilities of the equipment demonstrate more and more new applications for this. So we have I will not say double down, but we certainly have added an enormous amount of capacity and it is likely that in 2027, our growth for PETCT and advanced imaging will continue at the same rate that we are seeing right now. And the challenge is for us really adding that additional capacity. Not necessarily going out and building the business. These are, as I mentioned before in my closing remarks, Brian, these are the tools for early diagnosis, and we will continue to work on those that I believe are resonating quite substantially in our in our markets.

Mark D. Stolper: And your question about TechLive, Yes. You got Brian, the part about TechLive is, you know, we have been using Tech Live to continue to lower our exam room closure hours when we have had staffing challenges or you know, a tech calls in sick that day, we are now covering that schedule and it is. And we are still really at the infancy of rolling that out. it is been growing. We are now in the third quarter. We completed about 13% of all of our MRIs. With remote technologists, and we plan to continue to grow that and train the majority of our techs to be able to control multiple machines, you know, simultaneously. And so it is not only the building of that capacity, it is also the utilization of that capacity, you know, and dealing with staffing shortages.

Howard G. Berger: Yeah. Let me also add, Brian, that some of our technology, like TechLive, is equally beneficial inside the hospital as it is in our imaging centers. And we continue to get perhaps disproportionate interest in people using TechLive in the hospital. Hence, the benefit of the new acquisition, Onrad, giving us greater entree into the hospital's radiology department and the ability to introduce all the tools that we have honed in the outpatient center going into the hospital and creating a more end to end solution not just for the hospitals radiology department, but for their urgent cares their emergency rooms, their doctor's offices, which produce imaging whether it is PET CTs or CT or mammo or ultrasound or x-ray, all need to be connected on a system wide solution to make the availability of this vital information as readily as possible. So I encourage everyone to think broader in terms of what the Onrad acquisition allows us to do. With credibility and proven tools that I believe can be beneficial to any hospital system.

Brian Tanquilut: Appreciate that. And maybe, Case, just my follow-up question for you. When I think about the ramp in digital health revenues and EBITDA, you sound confident in that. So just curious how you are thinking about the visibility into that ramp and then the conversion of ARR which you shared in your prepared remarks into next year's revenue. Howard do we think about the cadence of that and, again, just visibility to all the moving pieces there. Thank you.

Cornelis Wesdorp: Yeah. Thanks, Brian. Maybe start with ARR first. So we have got. This is project by project in terms of deployments with external customers and with RedNet, obviously. So on the ARR side, we have got that fully underpinned to just above 140 million ARR. Because we measure paying ARR, that should be seen as a revenue number immediately into next year. Without further delays, so to say, if that makes sense. I that is the background of your question, Brian, just to check.

Brian Tanquilut: Norman. That makes sense. Yep. Yep.

Cornelis Wesdorp: And then on the revenue side, so there are really 3 buckets here. Of revenue coming in as we speak. The first is. And, obviously, we start with the Q4 run rate. Larry, the Q3 run rate going into Q4. Part of a 1 bucket is with external customers, we had already started deployments but not just not yet signed off revenue generating projects. There is a backlog of projects to be installed. that is bucket number 1. The second bucket, and these are high confidence deployments. Second bucket is with RedNet. We have got a quite a few exciting programs being deployed. So for instance, breast ultrasound. And, again, that is a significant revenue generator as well. And then last but not least, we actually have onetime perpetual license deals as well. it is the minority, as you know, of our business. And maybe not even core to our strategy as we build a SaaS business. But there is a few million of new professional licenses that we have that we have secured. So those are the 3 structural revenue drivers On top of that, with external customers, we also have what is called installation fees, that is something that you will see come through as well. And all of that brings us with a fully underpinned record quarter And if you can do the math of well above $40 million Q4.

Brian Tanquilut: Awesome. Thank you.

Operator: The next question is from Clark Murphy with Truist. Please go ahead.

Clark Murphy: Hey, good morning, guys. Thanks for taking my questions. Just wanted to start on, can you talk a little bit more about some of the operational efficiencies? And scheduling tools and things like that you are working on and kinda what sort of impacts that those could have to throughput and capacity on top of all the things that you guys are doing on the digital side?

Mark D. Stolper: Sure. The first, and I will I will bring Shyam into this answer as well. 1 of scheduling. Or excuse me. 1 of the operational implementations that are, is going on now is what we call digital patient registration, where in the past, you know, every patient who came into our facility you know, had to go up to the front desk, check-in, get a clipboard verse. A paper, fill out the paper, you know, go back to the, you know, the front desk, hand that in, and wait you know, wait for them to be called into the individual waiting rooms of the of the modalities. What we are rolling out right now is digital patient registration where a patient does not need to go to the front desk, can register on his or her Android or iOS device either, you know, when they arrive at the location or even ahead of ahead of time, which does a couple of things. 1, it is been allowing us to drive more patient volume efficiently through our centers, number 1. Number 2 is it is alleviated a lot of the labor and the backlog at the front desk which allows us to have ultimately, you know, more efficiency there with a know, running fewer, you know, fewer shifts. And drives patients into the individual rating rooms quicker. Shyam, I will let you I will let you expand on that.

Shyam Soka: Yeah. Thanks, Mark. I mean, I would really put that into 2 categories. Right? 1 is the digital scheduling itself. Right? So we can actually more and more start to do app based or web based scheduling instead of the call center, which is a significant efficiency on the contact center. So that is 1 piece. And then I would I would. I think I wanna maybe go a little bit deeper with what Mark just talked about. We have now deployed at about 30 centers in the East and West Coast with this digital registration. And, you know, on this tool, people are not only registering they are doing their payments. They are getting information on whether their insurance covers it or not, how much the insurance covers it. So the entire journey of a complex imaging scheduling imaging registering event, excuse me, is now completely done by a digital tool. In addition, the accuracy of the data and so forth are much better because we can actually, you know, record it directly from those individuals. And just to give you some sense of where this is going, in those 31 sites, about 1 in 3 right now are fully going through digital without having to touch any front desk staff. And in our best center. So when I. This is just to show you the pen. Potential because we now have done the training and so forth that are best centers. About 75% of patients are not having to see a front desk or a liaison. Right? So that is the potential of this technology. We are now rolling that out to us this quarter, and we hope to be done by. For the for the full RadNet centers volume, by essentially end of Q1/early Q2. Right? So that we anticipate will have a significant impact on the operational side of the business. As we move forward.

Clark Murphy: Great. Thanks. Thanks for that helpful color. And then just another question that we had was just on the inbound interest that you guys are getting on Onrad. Just wanted to get a little color on, is that something that you know, potentially helping accelerate JVs ahead of you know, the acquisition or any other benefits that you guys are seeing in either of your segments right now from the announced acquisition of Onrad?

Howard G. Berger: Yes. We are we have gotten more interest from our current joint venture partners who are all wrestling with the same problem, and that is the shortage of radiologists and increasing demand. But new customers of Onrad that they have been pursuing once they saw the announcement, have told the on rad leadership that they would like to talk to RadNet about a more fully integrated solution for their radiology, both inpatient and outpatient. And our discipline is that we are anxious to talk to any and all comers, but they are gonna have to adopt our program to give us the benefit of maximizing the outcome of the tools that we have now been developing, believe it or not, for over 6 years. And, many of them, if not most of them, embrace that simply because they do not have the internal expertise to implement something like this or even understand how this what we call, integrate. Fully integrated end to end solution can have such a material impact on their entire health care system. So our goal here is to find existing and new partners who embrace everything that we can do to make them deliver better health care. And so our resources, at least at this point, both from a human and a capital standpoint, need to be used for those opportunities that will give us and our future partners the maximum benefit.

Clark Murphy: Thanks, guys.

Operator: The next question is from Andrew Mock with Barclays. Please go ahead.

Andrew Mok: Hi. Good morning. 2026 seems to be a relatively clean baseline from which to grow. Are there any items we should consider, you know, puts or takes for 2027 and, a from the Onrad acquisition and Medicare rates? Thanks.

Mark D. Stolper: Yeah. I mean, there is gonna be a lot of puts and takes that are gonna be built into our 2027 guidance when we when we announce it towards the end of February. Of next year. There will be you know, obviously, the impact of same center performance as we anticipate you know, much higher, patient volumes next year, continued growth in advanced imaging. that is gonna continue to drive you know, profitability at our existing centers. We have always said the best and most profitable way we can grow is by driving more patient volume through our existing fixed cost base. So that is gonna be a big positive impact for next year. We will see positive impacts on the centers that we purchased in 2026. So continued improvement in Southwest Florida, which already the integration is going very, very well. From the centers we bought earlier this year. As well as Indiana where there is a lot of upside opportunities still to be had there as well as some other tuck in acquisitions. We have done throughout the year. Again, there is gonna be, you know, substantial growth as Case talked about and Shyam talked about, in the digital health division where we are rolling into 2027 with a 140 plus million dollars worth of ARR that converts to GAAP revenue as we have as we implement those customers, and you know, the 100 and plus million dollars of new contract value, some of that will be implemented within 2027. There will be further tuck in acquisitions that, which we are, you know, eager to, complete and announce. In the coming quarters, which will contribute to next year. There will be new joint ventures with health systems that are in our pipeline both expansions of existing partnerships as well as new partnerships. That we that we look forward to announcing. So what I would tell you, Andrew, is, you know, when we stack this up, you know, we think that, you know, we are very encouraged about how next year should look for us in terms of you know, continued growth of everything that we are doing throughout the company.

Andrew Mok: Great. Just wanted to follow-up on the terms of the Onrad transaction. Can you confirm the specific EBITDA target and how the earnings sliding scale will work? Thanks.

Mark D. Stolper: Sure. So, we paid 3 we will pay when the deal is closed $350 million of cash and 5 million shares of RadNet common stock. And then there is an earn out provision that looks at Onrad's 2027 EBITDA results. And for every dollar of EBITDA above $56 million, we will pay them 15x that dollar. And that can be paid at RadNet's election in either cash or stock.

Andrew Mok: Great. Thank you.

Operator: The next question is from Matthew Gillmor with KeyBanc. Please go ahead.

Matthew Gillmor: Hey, thanks. Wan to circle back on the initiatives to create capacity. You mentioned that a couple of times. Is there a way to give us some sense for you think about the growth with advanced imaging, the 8.9% how much is being contributed by the capacity initiatives that you have you have talked about. And I guess the way we think about it is scans per machine per day. But if there is any way for us to of think about the contribution from that driver, that will be great.

Mark D. Stolper: Yeah. Sure. Thanks, Matthew. Yeah. it is. A lot of our ability to grow advanced imaging is around, you know, is around expanding capacity. And there is many different ways of expanding capacity. 1 way is simply to keep your centers open longer. So in certain markets and certain you know, centers, we are able to expand hours and scan later into the evening, and you know, onto weekends. Into weekends. For instance, in Midtown Manhattan, we are regularly scanning at 10:11 o'clock at night. We have got some centers here in Los Angeles area that are open know, into the early morning hours to scan patients. Other ways are as Doctor. Berger was talking about, are some of the investments in the newer in the newer hardware, the newer technology. We have talked a lot about in the past the MRI equipment that has much more sophisticated post processing software that allows for shorter scanning times and uses software to essentially increase the resolution you know, for the radiologist. Doctor Berger mentioned what we are seeing now in terms of some of the newer PET CT technology. We are also looking, you know, the patient registration and the digital registration and the digital scheduling has been able to drive more patient volume in into our sites. We have opened sites more aggressively, and spent more of our CapEx dollars on de novo centers. We would originally intended to open 7 sites this year. I believe by the end of the year, we will actually have opened 10 sites. So several of the projects that we had started that we felt that we are gonna open in 226 will actually open in 2000 excuse me. In 2027, we will actually open in 2026. So continuing to build these de novo centers has also expanded our capacity as well. So you know, some of the things that we are doing today 5 years ago were not even on our radar screen and were not even a thought. And I and I suspect that things that we will see in the future around technology development will. That we can anticipate today will allow us to continue to build capacity in the future. The other thing we love to do is we love to, of acquire other operators who are not as efficient and have not deployed the same tools and level of technology where we can then acquire those businesses which have embedded capacity that we can that we can grow through time with implementing all of our programs. And so these tuck in acquisitions that we do are extremely important to our ability to continue to drive capacity and efficiency.

Matthew Gillmor: Okay. And then as a follow-up on the Onrad acquisition, 1 of the strategic rationales was to deploy technology and drive greater productivity with those radiologists I think you talked about 50% opportunity to improve productivity, which would be really significant. I was curious if you could give us some sense for how long it would take to capture that productivity improvement. Would we see some of that in 2027, or is that more of a longer term journey?

Howard G. Berger: it is a great question. We have already begun modeling new opportunities for on rad to accelerate their deployment. 1 of the features that we believe will help that is that through Onrad's deployment of the DeepHealth tools, we will be able to deliver to our hospitals all of the artificial intelligence reporting tools, and early detection tools. Through that platform and have that be part of the on rad cost. Because the beneficiary of that is primarily the radiologist. So as we begin to have discussions, which are ongoing almost as we sit here, explaining how we can do that within their own existing radiology group to make them more efficient and more accurate is resonating. And this is a somewhat difficult concept for them to embrace. Simply because they are just not familiar with how these tools can functionally improve their performance given how new this industry is. So when we have these opportunities to lay out our bigger vision, I am extraordinarily encouraged as to how quickly they want to embrace this and take our lead. So perhaps what I am trying to, suggest here is that for any 1 of these systems, this is a heavy, heavy list. We are talking about, you know, hundreds of thousands, if not millions of images. We are talking about broad based access to imaging throughout their entire enterprise. And the need to make certain that other facets, which we believe we can work with them together, such as cybersecurity and movement to the cloud is something that they get comfortable with. You know, protects their institution. And, I think our team in DeepHealth, as well as our own cybersecurity capabilities add a dimension to that conversation. That will give them that greater degree of comfort. So there is a new term I have coined here and rather than it be this foxhole by foxhole, recruiting. it is what I am gonna be talking about in the future. Of a land and shift. In other words, taking the existing radiology department incorporating it into Onrad and expanding its capabilities. And the people that we have begun talking about this are very excited about the potential implications of it and will allow us to, I believe, accelerate piece by piece getting them to the overall enterprise imaging system wide capabilities that they that they need to have.

Matthew Gillmor: that is great. Thank you.

Operator: The next question is from Yuan Zi with B. Riley Securities. Please go ahead.

Yuan Zi: For the EBITDA margin in Q4, it seems to be lower than Q3. In the past, 4 q tends to have the highest EBITDA margin in the year. Can you maybe talk about factors contributing to that?

Mark D. Stolper: Yeah. We. And we said this in the past. Yuan. Thank you for the question. When we when we modify our guidance or amend our guidance like we did after the first, second, and third quarters, we do not reforecast the rest of the year. We simply add to the guidance the beat that we have in that quarter, essentially. So we have always cautioned investors, analysts, to try to imply a margin, you know, for, you know, the rest of the year. So I. What I would tell you is that the trends that, you know, have driven the performance this year, the positive trends on the on the volume side, on the advanced imaging side. So far have continued into the into the fourth quarter. I mean, we are we are in early November here, and, you know, we are anticipating you know, growth in the in the in the fourth quarter. And as you correctly point out, the fourth quarter has been our strongest quarter now for several years in a row, and that is it is partly due to the seasonality of the business where, first of all, fourth quarter incorporates Breast Cancer Awareness Month, which usually drives a strong mammography and breast related imaging. In the fourth quarter. And then, of course, as many of us have gone towards a higher deductible, programs, you know, meaning the patients, we have all utilized health care much greater in the second half of the year than in the first half of the year. Before deductibles reset in January. And so we often see kind of a rush to get exams done in the fourth quarter leading into next year. So we are anticipating you know, a continuation of many of the strong trends that we have seen in the first 3 quarters.

Yuan Zi: Got it. Got it. Maybe ask this question a different way versus the prior person's If we fast forward to 3 q 27, when you have more than 50% of imaging volume going through AI applications, What would that mean to your revenue with increased capacity? And gross margin as a result of using AI?

Howard G. Berger: Well, running the every exam through AI, is primarily a benefit for our radiologists, not so much margin except to the extent that we eliminate the strong demand that there is for radiologists that are driving up our costs. So our goal is to make all of our radiologists more productive perhaps even by 50% or more as we gain more and more traction of having all of our tests eventually And I think as Sean mentioned, we expect it to be close to 60% of everything that we do. By mid quarter by second quarter of next year. And then taking the AI clinical read and putting it through our new reporting solution, which will give a radiologist a full report with findings and characterization to essentially review the report that AI has created and either accept it or and sign off on it or edit it. I can tell you from both personal experiences, as well as out in the field here, It takes a radiologist longer to dictate the findings in a report than actually interpret the exam.

Mark D. Stolper: So most radiologists will tell you the bottleneck has been in how much time they have to spend on repetitive tasks that we are essentially automating for them. And I am I am most proud to say that all of these will be done with FDA approval so that anybody that uses these knows that it has not only been created under the auspices of FDA approval, but our commitment to make certain that these tools stay on track and do not as they like to talk in the industry, hallucinate.

Howard G. Berger: So our commitment is not just to have something off the shelf, but to be a constant monitor of accuracy and performance, that will be built into the that is built into the DNA of the DeepHealth division. The early returns that we have had now that about 300 or so of our radiologists as we roll off these new reporting tools. Is that it is a game changer. And we still have a ways to go to fine tune it and make it even better. But I know we are all extraordinarily gratified that taking away this tool would be a big blow to our radiologists and they fully embrace it. So it is 1 of the strengths of RadNet is the ability to create and deploy internally, make certain that these tools perform the functionality that they are designed for. And then roll them out on larger scale. So the DeepHealth team and the services team have been working extraordinarily close together. And I dare say that the OnRad team or our professional radiology services division will have a similar benefit from this end to end solution that we are bringing to the marketplace.

Mark D. Stolper: You wanna. I will add I will add 1 thing. You know, what doctor Berger was you know, was talking to was really the efficiency and the of the radiologists and the impact that could have on our cost going forward as we continue to grow the business and not have to continue to grow the radiology component or hire as many radiologists you know, going forward, which will drive margin. Where we could see a revenue benefit from arming our radiologists with tools is in the turnaround time. So 1 of the challenges that you are seeing throughout radiology, whether you are talking about hospital based radiology or outpatient based radiology, is that because of the shortage of radiologists, you are seeing a length in lengthening of turnaround time. So. But the time at which the referring physician receives the radiology report. From whoever is interpreting it. And the ability for the radiologist to be able to turn around those reports sooner has a major service benefit that we see for referring physicians that differentiate know, our service from our competitors. And I think to the extent that we can continue to have accurate and expeditious reads for our for our referring physician community, I think, will continue to drive revenue vis a vis our competitors.

Yuan Zi: Got it. Thank you for taking our questions.

Operator: Thank The next question is from Jim Sidoti with Sidoti and Company. Please go ahead.

Jim Sidoti: Good morning. Thanks for taking the questions. Know it is been a long call, so just 1 quick 1. Gleamer, I believe you said added 63 customers in the quarter. How many of those 63 customers were existing RadNet customers?

Cornelis Wesdorp: Virtually. Thank you for your questions. Virtually none. So this is when we add new customers, we treat them. We see them as really net new. So in that sense, these were new customer generated both in The US, in Europe, and rest of world.

Jim Sidoti: And so is there potential for these 63 customers to start to use some of the other RadNet offerings? Excuse me. The other RadNet? The other the other the other digital health services.

Cornelis Wesdorp: Absolutely. Larry. I got confused for a second because of I thought there were other RedNet services. A 100%. And so every new customer win as well as any installed based customer is an up. Opportunity for us to upsell and cross sell. When we stayed, by the way, 63 new customers for Gleamer, Already today, some of those customers are then also exposed and we also deploy some of the non Gleamer portfolio. In fact, it a bit hard for me to talk about a Gleamer versus DeepHealth portfolio because those portfolios are now fully integrated. But obviously, we track the GLEAMER perimeter because we wanna make sure that we live up to the expectations of the original acquisition. But the answer is a 100% yes.

Jim Sidoti: Alright. Thank you.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Howard G. Berger for any closing remarks.

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

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