RadNet, Inc. Common Stock M&A announcement

Thank you. Good morning, everyone, and thank you for joining Dr. Howard Berger and me today to discuss RadNet's acquisition of ONRAD. On this call, we have also invited Greg Sorensen, RadNet's Chief Strategy Officer, and Dave Engert, ONRAD's Chief Executive Officer. On today's call, we will share additional information about yesterday's announcement, the combination of RadNet's current businesses with ONRAD, as well as more about RadNet's future strategy. After the end of our prepared remarks, we will open the phone lines to your questions. Before we begin today, we would like to remind everyone of the safe harbor statement under the Private Securities Litigation Reform Act of 1995. This presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.

Specifically, statements concerning anticipated future financial and operating performance, RadNet's ability to continue to grow the business by generating patient referrals and contracts with radiology practices, retaining and recruiting technologists and radiologists, receiving third-party reimbursement for diagnostic imaging services, successfully integrating acquired operations, including ONRAD, generating revenue and adjusted EBITDA for the acquired operations as estimated, successfully selling and licensing digital health solutions, among others, are forward-looking statements within the meaning of the safe harbor. Forward-looking statements are based on management's current preliminary expectations that 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, including 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 end December 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. With that, I would like to turn the call over to Dr. Berger.

Thank you, Mark. Good morning, everyone. I'd like to go through a series of slides that discuss the transaction overview, as well as other facets of how the decision to enter the hospital radiology space was decided. RadNet has signed a definitive agreement to acquire ONRAD. The initial purchase price will be $350 million in cash and 5 million shares of RadNet common stock. Up to $210 million in an earn-out, paid in cash and/or stock at RadNet's election, based upon 2027 adjusted EBITDA will be granted. ONRAD is anticipated to add $190 million to $200 million of annual revenues and $60 million to $65 million of adjusted EBITDA in the first full year of operation. Projected future top-line growth is expected to exceed 10%. This enables RadNet to expand radiology services within hospitals and health systems.

Acquired capabilities will complement imaging services and digital health solutions, which RadNet currently provides to hospitals and health systems. ONRAD will form the foundation for RadNet's third reportable operating segment, Radiology Professional Services. Next slide, Mark. Okay. Why ONRAD? Why now? The acquisition is a response to inbound demand RadNet has received from joint venture partners and other health systems. Addressing the choke point that is concerning virtually every institution that we speak with, whether they're current joint venture partners or new ones that are approaching us, and that is the difficulty in attracting and providing enough radiology coverage for the increasing demand that we all are experiencing. This connects three complementary businesses, imaging centers, digital health, and professional radiology services to provide comprehensive solutions for customers and partners. It addresses the growing demand in the U.S. imaging market, which is outpacing the supply of trained radiologists.

Integration of AI-enabled technology with teleradiology and radiology professional staffing services can transform workflows, support case prioritization, and better match interpretation capacity to demand. ONRAD is a financially attractive platform with leading metrics in its industry. 30% plus adjusted EBITDA margins, requires little capital investments to maintain and grow revenue, and adds to RadNet a new growth engine. ONRAD at a glance. Dave?

Onrad. Yeah. Dave? Thank you, Dr. Berger, and good morning, everyone.

I'm absolutely thrilled to be part of this family and joining RadNet and the great team of leadership. Dr. Berger and I go back many, many years, and we had visions for years to figure out whether putting these two companies together would be a great solution set for the marketplace, and we're convinced it has been, and I'm just so excited and looking forward to getting going with a combination that I think will be one of a kind in the industry. Some background on ONRAD. Well, we've been around for 20 years, and we focus on doing final interpretations. We have a terrific blue-chip list of customers and physicians and radiologists, and we've been doing exceptionally well in our marketplace. I'm approaching my ninth year as CEO of the company, and we've grown extensively since when I joined.

We now have over 130 radiologists. On a good day, we can do way more than 8,000 reads a day, but generally around that many final interpretations every day. We have 225 hospital facilities, even more customers when you add in our imaging centers and outpatient clinics. The market opportunity is just astounding. We've had so much growth and opportunities facing us. As everyone is dealing with today is how do you take advantage of those opportunities with the continuing shortage of radiologists available. We've been doing very well. We've been hiring more than one a month for the last several years, and we've continued to do so. Our financial picture is really terrific. I'm not sure of any other teleradiology organization in the country or anywhere probably in the world that's doing over 30% EBITDA margin to revenue.

We've done that through extensive automation and managing our processes, which are very complicated in this space. We've really taken a lot of the fingers and eyeballs out of the entire process of getting, acquiring a raw image from a hospital customer, bringing it into our centers, enabling it to be viewed by our radiologists, who all work virtually remote from their homes, read it, and turn that around. It's just been a fantastic accomplishment. The market continues to grow extensively. If you look on the graph on the bottom in RVUs in millions of growth, it is unfortunately growing the availability curve of radiologists available to meet that demand.

Being able to choose the right solutions, the right blue-chip customers, and certainly the right partners to enhance our platform and to embrace and take advantage of artificial intelligence in this space is a key driver for us, leading us to a great partnership with RadNet considering the fact that its digital AI group we've adopted many of the products already and continue to adopt more. Kathy, would you mind going to the next slide? While we're doing that, I'll just mention the growth is being accelerated due to the aging population, advances in technology and imaging equipment, and it's just driving extensive growth. The supply continues to be challenged in keeping up with the demand. As you can see, the diagnostic radiology residency position is really not as strong as it used to be.

It's gotten a lot strained, being able to have new diagnostic radiology physicians entering the market. The practicing radiologists, the growth, so we're looking at a little over 1% growth. If you look at what's really happening in America with the supply force we have, 30% of the radiologists are over 55, 3,000 retired in 2024, more continue to retire. The attrition rate exceeds the ability to continue to resupply more radiologists to meet the demand. So we're going to be challenged on how do you make radiologists more efficient so you can get high-quality reads, more out of each radiologist, and clearly the answer to that is going to be technology enablement and AI. If you look at what we do in the market, we primarily focus on hospitals and the acute care environment. Traditionally, the teleradiology space was focused on overnight reads and weekend coverage.

It's become now 24/7 every day. We read as much in the daytime to augment radiology groups and hospitals to keep up with their demand, as would used to be just overfilling the night coverage and weekends. It's an incredible requirement for hospitals to start to embrace teleradiology. Everyone we talk to would have a struggle on being able to keep up with their demand without a teleradiology partner. We think we've proven in the marketplace that we're a tremendous asset to all of our customers. We're mission-critical. Without radiology, so many hospitals would have a hard time keeping up with their demand. I'll give you just a minute on that. Why is teleradiology so efficient, and why is it helpful?