RadNet, Inc. (RDNT) Earnings

Management highlights

### Overall Corporate Performance - Q1 2026 set first quarter records for revenue and adjusted EBITDA despite severe winter weather impacts. Year-over-year revenue grew 22.1% and adjusted EBITDA grew 36.3%, with adjusted EBITDA margin expanding 115 basis points (52 basis points after normalizing for weather and wildfire impacts). - A continuing industry shift toward advanced imaging, driven by new clinical indications and improved diagnostic technology, has been supported by large capital investments in advanced imaging equipment and digital efficiency tools. Advanced imaging now represents 29.3% of procedural volume, up 235 basis points YoY, and drives over 60% of total revenue. - The company maintains strong liquidity with $455.3 million in cash on hand, full access to a $282 million revolving credit facility, and a net debt to adjusted EBITDA ratio of ~2, with expected deleveraging over coming quarters driven by strong free cash flow. ### Acquisition & Partnership Activity - Two major imaging center acquisitions were completed in January 2026: Radiology Regional (13 multimodality centers in Southwest Florida) and Northwest Radiology (6 centers in greater Indianapolis, Indiana), expanding the company's footprint into high-growth markets. - In early March 2026, Digital Health acquired Gleamer SAS, a France-based leading developer of FDA-cleared and CE-marked musculoskeletal and x-ray AI solutions. Integration is underway, with initial deployment already completed at multiple Southern California locations. - A new 51% owned joint venture with Trinity Health St. Alphonsus Health System in Boise, Idaho was launched in late April 2026, operating 5 centers with ~$30 million in annual revenue. Approximately 35.2% (155 of 440) of RadNet's imaging centers are now held via health system partnerships, with a robust pipeline of additional partnership opportunities. ### Digital Health Operational Progress - Digital Health has shifted from selling individual point solutions to a comprehensive enterprise imaging workflow platform that unifies cloud-native AI orchestration, dynamic cross-facility case routing, AI-curated draft reporting, and remote technologist operations (TechLive) to address industry-wide radiologist burnout, staffing shortages, and growing imaging backlogs. - Internal deployments at RadNet centers have delivered measurable efficiency gains: TechLive has reduced MRI exam room closure hours, thyroid ultrasound AI cut slot times from 30 to 20 minutes (a 33% efficiency gain) across nearly 300 sites, and X-ray AI is now deployed for 20% of volume in the California region, with Reporting Pro AI draft reporting already successfully rolled out in Florida and Texas. - Commercial momentum is strong: Q1 secured $16 million in total contract value across 40 customers (split evenly between North America and EMEA), with an additional $7 million in signed ARR pending go-live that is not yet reflected in Q1 results. The total commercial pipeline stands at over $150 million in total contract value. Recent acquisitions are performing ahead of expectations, with cross-selling already underway.

Guidance

- Management raised 2026 full-year guidance for the imaging center segment, increasing the revenue range by $30 million at both the low and high ends, adjusted EBITDA by $5 million at both ends, and free cash flow by $7 million at both ends. The increase reflects stronger than expected organic same-center performance rather than new acquisitions. - Digital Health full-year 2026 guidance is reaffirmed: total revenue of $135 to $145 million, and adjusted EBITDA of $10 to $12 million. Management confirmed 2026 is the trough margin year for the digital health segment, per prior Investor Day plans, with margins expected to gradually increase after 2026 assuming no large dilutive acquisitions. - Digital Health remains on track to hit its full-year 2026 target of over $140 million in ARR, with long-term annual growth targets of over 30% through 2027 and beyond, with management noting current momentum suggests this target may be conservative. - Long-term digital health margin targets remain unchanged from Investor Day: core organic digital health operations already generate 30% to 40% adjusted EBITDA margins, with a target of 20% segment-level adjusted EBITDA by 2028, with potential upside from current strong performance.

Segment performance

1. **Imaging Center Segment**: Total company revenue increased 22.1% year-over-year (YoY), while adjusted EBITDA increased 36.3% YoY, reaching first quarter records despite a $13 million negative revenue impact from severe East Coast winter weather. Same-center advanced imaging procedure volumes grew 8.2% YoY, with PET-CT procedures growing 35.2% aggregate and 14.7% on a same-center basis. Adjusted EBITDA margin improved 188 basis points YoY, and 52 basis points after normalizing for 2025 Q1 weather and wildfire impacts and 2026 Q1 weather impacts. This segment contributed over 60% of total revenue from advanced imaging, which accounts for just 29.3% of total procedural volume. Acquisitions completed in the quarter added approximately $30 million in Q1 revenue and a couple million dollars in adjusted EBITDA, with full year expected contribution of ~$117-118 million in revenue. Ended Q1 with a record low DSO of 29.5 days, driven by improved revenue cycle and patient collections. 2. **Digital Health Segment**: Total revenue grew 51.5% YoY, ending the quarter with $97 million in annual recurring revenue (ARR), representing 95% YoY ARR growth. External revenue (generated outside of RadNet's internal network) reached 64% of total segment revenue, up from 51% YoY, across an installed base of nearly 3,000 global customers. Adjusted EBITDA margin is lower than target in 2026 due to planned investments and recent acquisition dilution, in line with management projections. The segment has 26 FDA clearances and 22 CE marks, with 12 additional FDA clearances and 15 CE marks expected by the end of 2026, representing a 70% YoY increase in regulatory approval velocity.

Risks & headwinds

- Forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially, including: ability to grow via patient referrals and new radiology practice contracts, successful recruitment and retention of imaging technologists and radiologists, steady third-party reimbursement for services, successful integration of recent acquisitions, achievement of projected revenue and EBITDA for acquired operations, and successful execution of AI integration and commercial adoption. - Routine imaging growth is expected to remain low single-digit, aligned with population growth, as the company prioritizes investment in higher-margin advanced imaging, creating a mix shift that could impact overall volume growth if advanced imaging demand slows. - Reimbursement for AI-enabled services is still in early stages, with incremental reimbursement from T-codes dependent on payer adoption, which may proceed slower than expected and limit near-term incremental revenue gains. - Large-scale deployment of new enterprise AI workflow tools requires significant upfront investment in sales, deployment, and service capabilities, which will pressure near-term margins even as it sets up long-term growth.

Analyst Q&A

• Q: What is driving normalized same-center volume growth, how sustainable is it, and when will we see upside from recent acquisitions and joint ventures? /

  A: Growth is led by advanced imaging, with same-center MRI growth of 10.1%, mid-single-digit CT growth, and over 14% PET-CT growth driven by new clinical indications for prostate and Alzheimer's imaging. This growth is sustainable due to long-term industry trends toward earlier diagnosis with advanced imaging, and digital health tools that increase efficiency and capacity in existing centers to support higher volume with incremental profitability. The two Q1 imaging acquisitions are ahead of schedule on integration, are on track to hit full-year 2026 targets, and contributed only modest revenue and EBITDA to Q1, with most of their full-year contribution coming in later quarters.

• Q: Why is routine imaging roughly flat while advanced imaging grows strongly, and is this due to crowding out from advanced imaging? /

  A: This is not crowding out, but an intentional, industry-wide shift toward increased use of advanced imaging for earlier diagnosis, driven by major technological improvements that do not exist for routine modalities like x-ray. Routine imaging will continue to grow low single-digit in line with population growth, which is acceptable as advanced imaging generates the majority of revenue and profitability. Digital health tools that speed up routine imaging workflows (such as thyroid and upcoming breast ultrasound AI) are expected to drive incremental routine imaging capacity and growth in coming quarters.

• Q: What is the current AI penetration at RadNet, how will it impact labor costs and operations, and what is the timeline for AI reimbursement gains? /

  A: Currently, 70% of RadNet studies use AI (60% Deep Health AI, 10% third-party AI), with a target of full deployment to hit 70% fully integrated AI by end of 2026. The primary benefits are higher radiologist productivity that frees up capacity to do more studies and offsets inflationary wage pressures, plus incremental reimbursement from specialized T-codes for AI-enabled quantification. Reimbursement is in early stages: for thyroid AI, 60-70% of insurers now cover the T-code, up from 25% at launch, with similar trajectories expected for breast ultrasound AI, CT, and MR AI applications as deployments roll out.

• Q: Is 2026 the trough margin year for Digital Health, and what is the long-term margin outlook? /

  A: This is confirmed as the trough margin year, in line with prior Investor Day guidance. Core organic Digital Health operations already generate 30-40% adjusted EBITDA margins, with near-term dilution from recent acquisitions (which are typically unprofitable at purchase) and planned investments in commercial and deployment capability to support accelerated growth. ICAD is already break-even ahead of schedule, and Gleamer is on track to hit profitability per plan. Long-term targets of 20% segment EBITDA by 2028 remain on track, with potential upside from current strong performance.