RadNet, Inc. Common Stock 2026 Q2 Earnings Call

Good morning, everyone, and thank you for joining Dr. Howard Berger and me today to discuss RadNet's second quarter 2026 financial results. On this call, we have also invited Kees Westdorp, 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 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, 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, 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 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 now like to turn the call over to Dr. Berger.

Thank you, Mark. Good morning, everyone, and thank you for joining us today. On today's call, Mark, Kees, Shyam, and I plan to provide you with highlights from our second quarter 2026 results, give you more insight into factors which affected this performance, and discuss our future strategy. After our prepared remarks, we will open the call to your questions. I 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 second quarter. Total company revenue and adjusted EBITDA were both quarterly records. Total company revenue increased 25% to $622.7 million from $498.2 million in last year's second quarter, and total company adjusted EBITDA increased 22.7% to $99.7 million from $81.2 million in last year's second quarter.

Growth in the quarter was broad-based, driven by strong increases in aggregate and same center procedural volumes, the contribution from recent acquisitions, a continuing shift in procedural volumes towards advanced imaging, and incremental Digital Health sales and licenses of our enterprise imaging and AI solutions. Within the imaging center operating segment, we continue to experience strong demand in advanced imaging, MRI, CT, and PET CT, which is both a function of broader industry trends as well as the many initiatives and capital investments we have been implementing designed to expand capacity at our centers. During the second quarter, advanced imaging procedural volumes increased 21.2% in aggregate, and same center advanced imaging procedural volumes increased 9.6% as compared with last year's second quarter. Aggregate MRI volume increased 21%, and same center MRI volumes increased 4%. Aggregate CT volume increased 20.9%, and same center volume increased 8.6%.

Aggregate PET CT volume increased 31.0%, and same center PET CT volume increased 8.8%. Disproportionate higher growth in MR, CT, and PET CT relative routine imaging drove a 238 basis point shift in our advanced imaging procedural volume mix, increasing from 27.5% of total procedural volume in last year's second quarter to 29.9% in this year's second quarter. This favorable mix shift, together with continued operational focus on controlling costs, contributed to a 17 basis point improvement in imaging center segment adjusted EBITDA margin, which increased to 16.1% in the second quarter of 2026. Also, within the imaging centers, the joint venture relationships continue to expand. As of the end of the second quarter, 157 of our now 442 centers, or approximately 36%, were held within health system partnerships.

During the quarter, we announced a multi-site joint venture in Boise, Idaho, with Trinity Health's Saint Alphonsus Health System, which will initially include the operation of five multimodality outpatient imaging centers. As part of the relationship, our contracted radiology group, Gem State Radiology, and the Saint Alphonsus Hospitals in Boise will be adopting a variety of DeepHealth solutions, including Diagnostic Suite, Reporting Pro, AI Studio, and various clinical AI applications. Health systems 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 growing interest in implementing Digital Health tools to more effectively manage imaging volumes and provide radiologists and administrative staff with solutions to make them more productive and accurate.

We are in discussions with new and existing partners about how we can provide more comprehensive solutions for all their imaging needs, both inpatient and outpatient. Given the positive trends we experienced throughout the second quarter and the strong financial performance we delivered, we elected to increase our 2026 full-year guidance ranges for imaging center revenue, adjusted EBITDA, and free cash flow. We are reaffirming all digital health guidance ranges. 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 quarter with a cash balance of $726.3 million and a net debt to adjusted EBITDA ratio of 1.8 times. This continued financial flexibility positions us well to continue investing in both organic growth and disciplined acquisitions across both operating segments.

I'd now like to turn the call over to Kees Westdorp and Sham Sokka, 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. Kees, please go ahead. Thanks, Howard.

Good morning, everyone. We continue to see good growth this quarter, driven by a continued strengthening of the commercial funnel with strategic deals materializing across both clinical AI and enterprise informatics in hospital and outpatient settings. Digital health revenue for the quarter was $32.4 million, up 56.5% year-over-year and 11.4% versus Q1 2026, split between $16.1 million of AI revenue, up 136% year-over-year, and $16.3 million of enterprise imaging revenue, up 17.3% year-over-year. ARR, annual recurring revenue, ended the quarter at $105.5 million, up 97% year-over-year and nearly 9% versus Q1 2026, of which a large proportion was organic growth. We remain on track to grow full year ARR by approximately 91% from 2025 to over $140 million by the end of this year, end of 2026, with our recent acquisitions now layered on top of a healthy core business.

External ARR, revenue generated outside of RadNet, now makes up 63% of our ARR base, and we expect that to grow towards 65%-70% by year-end. On new business, we closed approximately $21 million of total contract value in the second quarter, bringing us roughly to $37 million of TCV for the first half of the year, split about evenly between North America and Europe/rest of the world. Out of the $37 million TCV, $24 million comes from the hospital segment with key wins from both clinical AI and enterprise imaging. Our funnel continues to build as well. Our clinical AI and enterprise imaging TCV funnel has grown from roughly $101 million at the start of the year to more than $224 million in TCV, or the equivalent of $65 million in annual contract value.

We see a good mix across segments in our funnel with close to 50% from the hospital segment. Our customer base has also scaled meaningfully to nearly 3,000 accounts, and total procedure volume across our AI and informatics solutions reached over 17 million for the quarter, up more than 200% year-over-year, reflecting both organic growth and the scale added to recent acquisitions. Turning to profitability, adjusted EBITDA for the segment was $2.5 million for the quarter, a step up from the $1.3 million in the first quarter. On a year-over-year basis, adjusted EBITDA was down from $3.4 million in last year's second quarter, which reflects the deliberate investments we've been making to fuel growth. Continued headcount build out in our commercial team and in our service and implementation organization, and temporary margin dilution from our acquisitions, most recently Gleamer.

I am pleased to say those acquisitions are now fully integrated and performing well. Their profitability trajectory has moved from negative at the time of acquisition to profitable for legacy iCAD and See-Mode. We are on the same trajectory for Gleamer, which is very encouraging and validates the integration plan we've been running. Gleamer is a good example. Five months into the integration, organizational integration is complete. Our product roadmaps have been merged and team morale remains strong. Commercially, legacy Gleamer portfolio of solutions exited the second quarter at approximately $25 million of ARR, and is on track to exceed $30 million by year end. The Gleamer and DeepHealth teams are now cross-trained and actively cross-selling an integrated portfolio on one AI platform, the DeepHealth Radiology AI Suite.