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Item 7. Management’s Discussion and Analysis

2023-03-01 compared with 2022-03-01 · 214 added, 202 removed, 304 unchanged (58% of the section changed)

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MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes included in this annual report on Form 10-K.

We are a leading national provider of freestanding, fixed-site outpatient diagnostic imaging services in the United States based on number of locations and annual imaging revenue.

We are a national provider of diagnostic imaging services in the United States.

At December 31, 2022, we operated directly or indirectly through joint ventures with hospitals, 357 centers located in Arizona, California, Delaware, Florida, Maryland, New Jersey, and New York.

Our operations comprise two segments for financial reporting purposes for this reporting period, Imaging Centers and Artificial Intelligence.

For further financial information about these segments, see Note 5, Segment Reporting, in the notes accompanying our consolidated financial statement included in this annual report on Form 10-K..

Our centers provide physicians with imaging capabilities to facilitate the diagnosis and treatment of diseases and disorders and may reduce unnecessary invasive procedures, often reducing the cost and amount of care for patients.

We have developed our medical imaging business through a combination of organic growth, acquisitions and joint venture formations, and derive substantially all of our revenue from fees charged for the diagnostic imaging services performed at our centers.

In addition to our imaging services, we have an AI/Software division.

Our focus on Artificial Intelligence (AI), comes through the contributions from our acquisitions of Nulogix and DeepHealth plus our investment in Whiterabbit.ai, to develop and deploy AI suites to enhance radiologic image interpretations.

Through our subsidiary eRAD, Inc., we sell computerized systems that distribute, display, store and retrieve digital images.

The discussion of our results below centers on our performance during 2021.

During the same period in 2020, due to the onset of the novel strain of the coronavirus, we began experiencing reduced procedure volumes at the end of the first quarter which intensified through mid year.

In response to the pandemic, we adjusted our business operations, inclusive of concentrating patient traffic to larger imaging centers, negotiating payment terms with vendors and landlords, initiating employee furloughs, temporary compensation reductions, and telecommuting.

By the end of 2021, our procedure volume has returned to pre-COVID-19 levels and our business has resumed normal operations.

We expect that the cost saving measures implemented in 2020 will continue to be beneficial to our financial position in 2021 and beyond.

In addition, we have continued to invest and position for future growth.

Through acquisitions, we have added 27 new radiology centers in California, Delaware, New Jersey and New York.

Integral to the imaging center business is our software arm headed by eRAD, Inc., which sells computerized systems that distribute, display, store and retrieve digital images.

Internationally, our subsidiary Heart and Lung Imaging LLC, provides teleradiology services for remote interpretation of images on behalf of providers within the framework of the United Kingdom's National Health Service.

We have also established an Artificial Intelligence (AI) division, that develops and deploys AI suites to enhance radiologist interpretations of breast, lung and prostate images.

The division is led by DeepHealth, and includes our acquisitions of Aidence Holding B.V.

and Quantib B.V., both based in The Netherlands.

The following table shows our centers in operation at year end and revenues for the years ended December 31, 2022, 2021 and 2020:

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Our service fee revenue, net of contractual allowances and discounts, implicit price concessions, and revenue under capitation arrangements for the years ended December 31, 2022, 2021 and 2020 are summarized in the following table (in thousands):

Years Ended December 31,

2021 2020 2019

In Thousands 2022 2021 2020

Commercial insurance $ 785,128 $ 743,462 $ 584,035

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Management fee revenue 22,235 19,630 11,253

Imaging on call and software 10,525 10,798 17,317

Software and teleradiology 14,238 10,525 10,798

Other 19,428 12,436 23,297

Service fee revenue 1,166,743 931,722 1,028,236

Revenue under capitation arrangements 152,045 148,334 140,118

Imaging center segment revenue 1,425,665 1,313,662 1,071,840

AI segment revenue 4,396 1,415 —

Total revenue $ 1,430,061 $ 1,315,077 $ 1,071,840

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Total equipment 2,433 2,276 2,089

Acquisitions, Dispositions, Equity Investments and Business Venture Activity

Acquisitions, Equity Investments and Joint Venture Activity

The following discussion summarizes certain details concerning our acquisition or disposition of centers, our equity investment and our joint venture transaction.

See Note 4, Acquisitions, Dispositions and Business Venture Activity and Note 2, Summary of Significant Accounting Policies to our consolidated financial statements included in this annual report on Form 10-K for further information.

Imaging Center Segment

Radiology Practice Acquisitions:

During 2022 and 2021, we completed the acquisition of certain assets of the following entities, which either engage directly in the practice of radiology or associated businesses.

The primary reason for these acquisitions was to strengthen our

presence in the Arizona, New York City, New Jersey and California markets.

The primary reason for these acquisitions was to strengthen our presence in the Delaware, Maryland, New Jersey and New York markets.

These acquisitions are reported as part of our Imaging Center segment.

We made a fair value determination of the acquired assets and assumed liabilities and the following were recorded (in thousands):

Entity Date Acquired Total Consideration Property & Equipment Right of Use Assets Goodwill Intangible Assets Other Right of Use Liabilities

IFRC LLC*^ 1/1/2022 8,200 2,910 1,703 5,271 — 19 (1,703)

IFRC LLC*^ 1/1/2022 4,800 2,103 857 2,697 — — (857)

Heart and Lung Imaging Limited+ 11/1/2022 32,000 — — 16,200 15,800 — —

Montclair Radiological Associates, P.A.*# 10/1/2022 94,877 16,414 4,665 79,690 400 (2,168) (4,124)

Chelsea Dignostic Radiology, P.C.* 12/1/2022 2,800 568 — 2,132 100 — —

North Jersey Imaging Center, LLC* 12/9/2022 104 20 — 55 25 4 —

$142,781 $22,015 $7,225 $106,045 $16,325 $(2,145) $(6,684)

*Fair Value Determination is Final

^ IFRC LLC acquisitions consisted of three subsidiaries of IFRC, one of which was purchased separately by a joint venture with Calvert Medical Imaging Centers, LLC.

# Montclair Radiological Associates includes a liability for $1.2 million in contingent consideration.

+See detailed description of the Heart and Lung Imaging Limited acquisition below.

Entity Date Acquired Total Consideration Property & Equipment Right of Use Assets Goodwill Intangible Assets Other Assets Right of Use Liabilities

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Kelly MD acquisitions consisted of various subsidiaries purchased separately.

Entity Date Acquired Total Consideration Property & Equipment Right of Use Assets Goodwill Intangible Assets Other Assets Right of Use Liabilities

Olney Open MRI, LLC* 1/2/2020 1,751 849 1,300 602 300 — (1,300)

MRI of Woodbridge LLC* 3/2/2020 2,608 464 1,081 1,833 300 11 (1,081)

AZ-Tech Radiology and Open MRI, LLC* 8/31/2020 5,462 2,532 7,552 2,882 — 48 (7,552)

ZP Atlantic LLC* 11/1/2020 8,871 7,931 6,181 828 50 62 (6,181)

ZP Elmhurst LLC* 11/1/2020 12,269 10,681 12,571 1,463 50 75 (12,571)

30,961 22,457 28,685 7,608 700 196 (28,685)

*Fair Value Determination is Final

Software Company Acquisitions:

On June 1, 2020, we completed our acquisition of all the equity interests of DeepHealth Inc., ("DeepHealth") an artificial intelligence and machine learning company in an all stock purchase.

As initial purchase consideration, we issued 915,132 shares at $16.93 per share (823,615 issued at execution, with up to 91,517 shares to be issued 18 months after acquisition subject to adjustment for any indemnification claims).

The transaction was accounted for as an acquisition of a business and total purchase consideration determined to be approximately $34.6 million including i) 823,615 shares issued on the date of closing with fair value of $13.9 million, ii) a liability of 91,517 shares with a fair value of $1.5 million to be issued 18 months after acquisition subject to adjustment for any indemnification claims and will be marked to market in subsequent periods, iii) replacement awards attributable to pre-combination service issued to DeepHealth option holders with allocated fair value of $2.0 million, iv) acquisition date fair value of contingent consideration of $17.0 million and v) $0.1 million in closing costs reimbursed to the seller.

The fair values of replacement awards attributable to pre-combination service and contingent consideration are recorded in additional paid in capital upon closing of the transaction.

For the contingent consideration, there are three arrangements that will be settled in a fixed number of shares upon achievement of three individual specific milestones which are mutually exclusive of each other, with 390,789, 586,184, and 195,393 shares, respectively, issuable for each milestone arrangement.

The fair value of the contingent consideration was estimated at the date of acquisition based on our share price and estimated probability of the achievement of the respective milestones.

We recorded $0.1 million in current assets, $3.5 million in deferred tax liabilities, $14.8 million in intangible assets, primarily in-process research and development ("IPR&D"'), and $23.3 million in goodwill.

The goodwill is primarily attributable to expected post-acquisition synergies from integrating DeepHealth’s assembled workforce and IPR&D technologies.

The fair values of the identifiable intangible assets related to IPR&D were determined by the income method and the assets will not be amortized until regulatory approval is obtained, but will be assessed for impairment annually, or more frequently if indicators of impairment become present.

On July 2, 2021, management determined DeepHealth had achieved its first specific milestone per the purchase contract and we issued the related fixed shares.

In addition, we released the shares retained for any indemnification adjustments in full on December 1, 2021.

On June 1, 2020 we completed our sale of certain assets of our Imaging On Call subsidiary to RadVantage P.C.

(an unrelated corporation) for approximately $1.0 thousand.

With this transaction, we have exited the teleradiology business.

Heart and Lung Imaging Limited

On November 1, 2022, we acquired a 75% controlling interest in Heart and Lung Imaging Limited (“HLI”).

HLI is a teleradiology concern which operates in the United Kingdom with the National Healthcare Service to screen high risk populations for cardiac and lung conditions.

HLI’s operations are included in our imaging center segment for reporting purposes.

The transaction was accounted for as the acquisition of a business with a total purchase consideration of approximately $31.9 million, including:

i) shares with a fair value of $6.8 million (359,002 shares issued at $19.06 per share), ii) cash of $6.3 million and iii) contingent consideration of $10.8 million ($10.2 million in contingent milestone consideration and cash holdback of $0.6 million to be issued 24 months after acquisition subject to adjustment for any indemnification claims) and iv) noncontrolling interest of $8.0 million.

We recorded $0.6 million in current assets, $15.8 million in intangible assets, $0.6 million current liabilities and $16.2 million in goodwill in connection with this transaction.

As part of the purchase price allocation, we determined the identifiable intangible assets are customer relationships and trade names.

The fair value of the intangible assets was estimated using the income approach, and the cash flow projections were discounted using a rate of 19.0%.

The cash flows were based on estimated earnings from existing customers, and the discount rate applied was benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital.

Artificial Intelligence Segment

Aidence Holding B.V.

On January 20, 2022, we completed our acquisition of all the equity interests of Aidence Holding B.V.

("Aidence") an artificial intelligence enterprise focused on lung cancer screening.

Aidence is reported as part of our artificial intelligence segment and was acquired to enhance our AI capabilities.

The transaction was accounted for as an acquisition of a business and total purchase consideration was determined to be approximately $45.2 million including i) 1,117,872 shares issued at $26.80 per share with a fair value of $30.0 million ii) cash of $1.8 million and iii) contingent consideration of $11.9 million ($7.4 million in milestones to be settled in shares or cash at our election and a share holdback of $4.5 million) and iv) a settlement of a loan from RadNet of $1.5 million.

In addition we paid certain seller closing costs through the issuance of 23,362 shares at a fair value of $0.6 million.

As a result of this transaction, we recorded $1.0 million in current assets, $0.2 million in property and equipment, $27.7 million in intangible assets (including developed technology of $21.1 million and IPR&D of $5.5 million), $3.2 million in current liabilities, a deferred tax liability of $3.5 million, and $22.9 million in goodwill.

In performing the purchase price allocation, we considered, among other factors, the intended future use of acquired assets, analysis of historical financial performance and estimates of future performance of the Aidence business.

As part of the purchase price allocation, we determined the identifiable intangible assets are developed technology, IPR&D, trade names, and customer relationships.

The fair value of the intangible assets was estimated using the income approach, and the cash flow projections were discounted using rates ranging from 15% to 17%.

The cash flows were based on estimates used to price the transaction, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital.

The developed technology consists of artificial intelligence powered applications for lung nodule management and early lung cancer diagnosis and reporting.

The IPR&D asset relates primarily to an in-process project for a customer relationship management offering to manage patients that are found with Incidental Pulmonary Nodules and has not reached technological feasibility as of the acquisition date.

The asset recorded relates to one project, and the Company expects to complete the project in the next twelve months.

The useful lives for the developed technology asset was set at 7 years, for customer relationships 5.4 years, and trade names was 7 years.

The calculation of the excess of the purchase price over the estimated fair value of the tangible net assets and intangible assets acquired was recorded to goodwill.

Factors contributing to the recognition of the amount of goodwill were primarily based on anticipated strategic and synergistic benefits that are expected to be realized from the acquisition.

These benefits include expanding the Company's AI capabilities to drive revenue growth.

On January 20, 2022, we completed our acquisition of all the equity interests of Quantib B.V.

("Quantib") an artificial intelligence enterprise focused on prostate cancer screening.

Quantib is reported as part of our artificial intelligence segment, and was acquired to enhance our AI capabilities.

The transaction was accounted for as an acquisition of a business and total purchase consideration was determined to be approximately $42.3 million including i) 965,058 shares issued at $26.80 per share with a fair value of $25.9 million ii) cash of $11.8 million and iii) contingent consideration consisting of 113,303 shares with a fair value at the date of close of $3.0 million and cash of $1.6 million both to be released 18 months after acquisition subject to adjustment for any indemnification claims.

As a result of this transaction, we recorded $2.4 million in current assets, $0.1 million in property and equipment, $21.3 million in intangible assets (including developed technology of $19.6 million and IPR&D of $0.7 million), $0.7 million in current liabilities, $6.7 million in long-term debt and deferred tax liabilities, and $26.4 million in goodwill.

As part of the purchase price allocation, we determined the identifiable intangible assets are developed technology, IPR&D, trade names, and customer relationships.

The fair value of the intangible assets was estimated using the income approach, and the cash flow projections were discounted using rates ranging from 50% to 55%.

The cash flows were based on

estimates used to price the transaction, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital.

The developed technology consists of artificial intelligence powered applications for neurological and prostate imaging scans and reporting.

The useful lives for the developed technology asset was set at seven years, customer relationships three years, and trade names seven years.

The calculation of the excess of the purchase price over the estimated fair value of the tangible net assets and intangible assets acquired was recorded to goodwill.

Factors contributing to the recognition of the amount of goodwill were primarily based on anticipated strategic and synergistic benefits that are expected to be realized from the acquisition.

These benefits include expanding the Company's AI capabilities to drive revenue growth.

As disclosed above, for the acquisitions of Aidence and Quantib, the Company used the income approach to determine the fair value of developed technology and IPR&D acquired in business combinations.

This approach determines fair value by estimating the after-tax cash flows attributable to the respective assets over their useful lives and then discounting these after-tax cash flows back to a present value.

The Company bases its revenue assumptions on estimates of relevant market sizes, expected market growth rates, expected trends in technology and expected product introductions by competitors.

The value of the in-process projects is based on the project's stage of completion, the complexity of the work completed as of the acquisition date, the projected costs to complete, the expected introduction date, the estimated cash flows to be generated upon commercial release and the estimated useful life of the technology.

The Company believes that the estimated developed technology and IPR&D amounts represent the fair value at the date of acquisition and do not exceed the amount a third-party would pay for the assets.

The significant assumptions used to estimate the fair value of intangible assets include discount rates and certain assumptions that form the basis of the forecasted results, specifically, revenue growth rates, EBITDA margins and obsolescence factors.

These significant assumptions are forward looking and could be affected by future economic and market conditions.

Subsidiary activity

Formation of majority owned subsidiary

Formation of majority owned subsidiaries

Frederick County Radiology, LLC

On April 1, 2022 we formed Frederick County Radiology, LLC ("FCR"), a partnership with Frederick Health Hospital, Inc.

("Hospital").

The operation offers multi-modality services out of six locations in Frederick, Maryland.

We contributed the operations of four centers to the enterprise and Hospital contributed $5.4 million in fixed assets, $3.0 million in equipment, and $11.0 million in goodwill.

As a result of the transaction, we recognized a gain of $6.6 million to additional paid in capital and retained a 65% controlling economic interest in FCR and Hospital retains an $11.1 million or 35% noncontrolling economic interest in FCR.

Advanced Radiology at Capital Region, LLC

On June 15, 2022 we entered into Advanced Radiology at Capital Region, LLC, a partnership with Dimension Health Corporation.

("Dimension"), an affiliate of the University of Maryland.

The operation will provide multi-modality services out of two yet to be determined locations in the Largo, Maryland area.

The venture was initially capitalized with nominal amounts of $5.1 thousand for a 51% economic interest from us and $4.9 thousand from Dimension for a 49% economic interest.

Simi Valley Imaging Group, LLC

On January 1, 2021 we entered into the Simi Valley Imaging Group, LLC, a partnership with Simi Valley Hospital and Health Services ("Simi Adventist").

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No observable price changes or impairment in our investment was noted for the year ended December 31, 2022.

Joint venture formations

Effective November 1, 2020, Arizona Diagnostic Radiology Group LLC ("ADRG"), an entity we formed in conjunction with CHI National Services Inc.

("CHI"), assumed operational and managerial control of our Arizona centers.

We hold a 49% economic interest and CHI holds the majority 51% economic interest, respectively in ADRG and account for the venture under the equity method .

The entity was formed in part to leverage CHI's established presence in the Phoenix, Arizona market as a major health care provider.

Joint venture investment contribution

In the month of August 2020, we made additional cash contributions to our Santa Monica Imaging Group, LLC partnership in the amount of $1.6 million in support of its expanded operations.

We maintain our 35% economic interest in the partnership.

Sale of joint venture interest:

On April 1, 2017, we formed in conjunction with Cedars Sinai Medical Center (“CSMC”) the Santa Monica Imaging Group, LLC (“SMIG”), consisting of two multi-modality imaging centers located in Santa Monica, CA with RadNet holding a 40% economic interest and CSMC holding a 60% economic interest.

RadNet accounts for our share of the venture under the equity method.

On January 1, 2019, CSMC purchased from the us an additional 5% economic interest in SMIG valued at $134,000.

As a result of the transaction, our economic interest in SMIG has been reduced to 35%.

We recorded a loss of $2,000 on the transaction.

Change in control of existing joint ventures

On October 6, 2014, we acquired a 49% equity interest in Garden State Radiology Network, LLC ("GSRN") for cash consideration of $2.2 million.

The venture consisted of two imaging centers located in New Jersey.

On August 1, 2019, the entity was dissolved by transferring ownership of the assets of the centers with each partner receiving full ownership of one center.

On April 12, 2018 we acquired 25% share capital in Nulogix, Inc.

for cash consideration of $2.0 million.

On August 1, 2019 we completed via the issuance of RadNet common stock valued at $1.5 million, the acquisition of the remaining 75% economic interest and we now consolidate the financial statements of Nulogix.

Joint venture investment contributions to Arizona Diagnostic Radiology Group

During the years ended December 31, 2022 and 2021, we made an additional equity contributions of $1.4 million each year to Arizona Diagnostic Radiology Group ("ADRG", our joint venture with Dignity Health).

On November 1, 2022 we contributed eight of our imaging centers to ADRG with a carrying value of $12.7 million and recorded a loss of $0.5 million which was calculated as the difference between the fair value and carrying value of such imaging centers which included equipment and other assets and an allocation of goodwill to such imaging centers.

We accounted for the transaction as an adjustment to our equity investment for the value of the assets contributed.

To maintain our 49% economic interest in ADRG, we received a distribution from the partnership of $4.5 million to reduce our overall investment to $8.3 million.

Results of Operations

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Non-cash change in fair value of interest rate hedge (2.8) % (1.6) % 0.2 %

Gain on re-measurement of pre-existing interest — % — % (0.1) %

Loss (gain) on extinguishment of debt 0.1 % 0.5 % (0.4) %

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Total other expenses 0.2 % 1.9 % 3.4 %

INCOME BEFORE INCOME TAXES 4.4 % (0.1) % 2.6 %

INCOME (LOSS) BEFORE INCOME TAXES 3.0 % 4.5 % (0.1) %

Provision for income taxes (0.7) % (1.1) % (0.1) %

NET INCOME 3.3 % (0.2) % 2.0 %

NET INCOME (LOSS) 2.3 % 3.3 % (0.2) %

Net income attributable to noncontrolling interests 1.6 % 1.5 % 1.2 %

NET (LOSS) INCOME ATTRIBUTABLE TO RADNET, INC.

NET INCOME (LOSS) ATTRIBUTABLE TO RADNET, INC.

COMMON STOCKHOLDERS 0.7 % 1.8 % (1.4) %

Imaging Center Segment

Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021

We grow through a combination of organic growth as well as acquisitions and joint ventures.

We have segregated some of our information to demonstrate which is attributable to centers that were in operation throughout the entirety of the comparison period, and which is attributable to centers that were acquired or disposed of during the period.

For the discussion below, same centers are those that were in continuous operation from January 1, 2020 through December 31, 2021.

In the discussion below same center metrics are based on imaging centers that were in operation throughout the period of January 1, 2021 through December 31, 2022.

Excluded amounts relate to imaging centers that were acquired or divested between January 1, 2021 through December 31, 2022.

Total Revenue inclusive of Provider Relief Funding for 2021

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Same Center Revenue $1,275,333 $1,239,587 $35,746 2.9%

Increased revenue reflects an overall same center 20.0% growth in total procedure volumes over the prior year as business returned to pre-COVID-19 levels.

Total Provider Relief funding used to offset lost revenue due to the pandemic and included in the above amounts was $9.1 million for the twelve months ended December 31, 2021 and $26.3 million for the twelve months ended December 31, 2020.

This comparison excludes revenue contributions from centers that were acquired or divested subsequent to January 1, 2020.

For the twelve months ended December 31, 2021, net service fee revenue from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $114.4 million.

For the twelve months ended December 31, 2020, net service fee revenue from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $44.8 million.

Excluded $150,333 $83,185 — —

Overall revenue change was driven by procedure volume growth of 2.7% compared to the same period in the prior year.

On a same center basis, the increase in revenue was largely attributable to product mix as advanced radiology procedures of MRI, PET, and CT expanded at combined 5.5% to provide the major portion of the revenue growth.

Operating Expenses

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Loss on sale and disposal of equipment 2,506 1,246

Loss on impairment — 4,170

Severance costs 926 744

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Same Center $709,525 $639,124 $70,401 11.0%

Salary expense increased as we ramped up staffing levels to address the increased procedure volumes in 2021, compared to 2020 when we implemented staff reductions and furloughs in response to decline in business precipitated by the onset of the COVID-19 pandemic.

This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2020.

For the twelve months ended December 31, 2021, salaries and professional reading fees from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $58.1 million.

For the twelve months ended December 31, 2020, salaries and professional reading fees from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was approximately $23.3 million.

Excluded $69,061 $44,648 — —

Similar to the prior year, growth in procedure volumes precipitated increases in salary expenses both to meet additional professional staffing needs and retain our skilled work force in the current tight labor market.

Stock-based compensation

Stock-based compensation increased $12.8 million, or 103.2%, to approximately $25.2 million for the twelve months ended December 31, 2021 compared to $12.4 million for the twelve months ended December 31, 2020.

Of this increase, $8.9 million was attributable to special employee bonus awards related to COVID-19 and the remaining $3.9 million was driven by the higher fair value of RSA’s awarded and vested in the year ended December 31, 2021 as compared to RSA’s awarded and vested in the same period in 2020.

Stock-based compensation decreased $2.4 million, or 10.3%, to approximately $21.0 million for the twelve months ended December 31, 2022 compared to $23.4 million for the twelve months ended December 31, 2021.

The decrease was a result of a series of pandemic related one time employee bonus stock awards amounting to $8.9 million that were awarded in the second quarter of 2021.

There were no similar one time awards granted in 2022.

Building and equipment rental

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Same Center $100,663 $104,163 ($3,500) (3.4)%

On a same center basis, the decrease in building and equipment rental mainly relates to operating expense savings from the buyout of radiology equipment lease contracts during the year.

This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2020.

For the twelve months ended December 31, 2021, building and equipment rental expenses from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $26.1 million.

For the twelve months ended December 31, 2020, building and equipment rental expenses from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was also $9.3 million.

Excluded $22,395 $17,761 — —

Overall building and rental remained flat year over year.

On a same center basis, the decrease in building and equipment rent was reflective of savings from facilities that were abandoned in Dec 2021 and buyout of radiology equipment lease contracts during the year.

Medical supplies

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Same Center $62,274 $52,872 $9,402 17.8%

Medical supplies expense increase stems from the overall procedural volumes noted above compared to the same period in the prior year and is consistent with the percentage increase in revenue.

This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2020.

For the twelve months ended December 31, 2021, medical supplies expenses from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $4.3 million.

For the twelve months ended December 31, 2020, medical supplies expense from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $1.6 million.

Excluded $6,438 $3,551 — —

Increased medical supplies expense corresponds to the 5.5% growth in advanced radiology volumes as noted above combined with price increases for contrast agents and higher utilization of isotopes employed in PET and CT procedures.

Other operating expenses

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Same Center $224,174 $214,488 $9,684 4.5%

The increase in other operating expenses is attributable to additional professional service fees associated with our acquisitions of Aidence and Quantib, additional contractor services in support of our increased procedure volumes as well as a one time settlement.

This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2020.

For the twelve months ended December 31, 2021, other operating expense from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $23.6 million.

For the twelve months ended December 31, 2020, other operating expense from centers that were acquired or divested subsequent to January 1, 2020 was $10.4 million.

Depreciation and amortization

Excluded $25,075 $17,928 — —

The rise in other operating expenses is attributable to additional professional fees associated with our acquisition activity, contractor services, equipment and maintenance and software upgrades all in support of our expansion accompanied with increased procedure volumes.

Additional segment operating and non operating expenses:

In Thousands Year Ended December 31,

Depreciation & Amortization 2021 2020 $ Increase/(Decrease) % Change

Total $96,694 $86,795 $9,899 11.4%

Same Center $84,598 $81,821 $2,777 3.4%

The increase in same center depreciation and amortization is primarily due to additional equipment and leasehold improvements placed in service in the twelve months ending December 31, 2021 compared to the same period in 2020.

This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2020.

For the twelve months ended December 31, 2021, depreciation expense from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $12.1 million.

For the twelve months ended December 31, 2020, depreciation and amortization from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $5.0 million.

2022 2021 $ Increase/(Decrease) % Change

Depreciation and Amortization $109,524 $96,173 $13,351 13.9%

Loss on disposal of equipment and other $2,506 $1,246 $1,260 nm

Non-cash change in fair value of interest rate swaps ($39,621) ($21,670) $(17,951) nm

Other expenses* $3,467 $6,859 $(3,393) nm

Severance $926 $744 $183 24.5%

nm=not meaningful

* Other expenses in 2022 and 2021 included approximately $0.7 million and $6.0 million of debt extinguishment and restructuring charges, respectively, which related to refinancing of our credit facilities with Truist in 2022 and Barclays in 2021.

See Note 8 Credit Facilities and Notes Payable included in the notes to our consolidated financial statements.

Lease abandonment charges

After a management review of post pandemic patient traffic to centers, it was noted that although overall volumes had returned to pre-pandemic levels, the increase was not uniform across our centers.

This was due in part to lower utilization rates of commercial space from telecommuting, accompanied by the migration of those workers out of congested urban centers to residential areas.

Based on this analysis, management decided to consolidate volumes into fewer centers and reduce administrative office space in response to the demographic changes experienced.

We closely monitor patient levels at our imaging centers and occasionally divest or shut down centers in an effort to maximize utilization rates.

In the post-pandemic period of 2021, while overall procedure volumes had returned to pre-pandemic levels, we experienced lower utilization rates at imaging centers that were based in urban centers as a result of increased telecommuting and migration of the work force to spending more time in residential areas.

In response we terminated leases at some centers, consolidating procedural volumes into fewer more active imaging centers, and reduced administrative office space.

We recorded a one-time charge of approximately $19.7 million at December 31, 2021 related to leased facilities abandonment.

The lease abandonment charges include the impairment of associated right of use assets of $12.6 million and write off of related leasehold improvements of approximately $7.1 million.

Loss on sale and disposal of equipment

We recorded a loss on the sale and disposal of equipment, separate from the lease abandonment portion, of approximately $1.2 million for each of the twelve months ended December 31, 2021 and 2020, respectively.

Severance Costs

We incurred total severance expense of $0.7 million and $4.4 million for each of the twelve months ended December 31, 2021 and 2020, respectively, a decrease of $3.7 million or (84.1)%, and was related reduced severance charges as part of the recovery from the pandemic.

Impairment Charges

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Total Interest Expense $50,841 $48,830 $2,011 4.1%

Interest related to derivatives* $14,740 $6,206

Interest related to amortization** $3,254 $4,413

Adjusted Interest Expense*** $30,836 $35,263 $(4,427) (12.6)%

*Includes interest on 2016 caps and 2019 swaps.

**Includes combined noncash amortization of deferred loan costs and discount on issuance of debt

***Includes interest related to our term loans, revolving credit line,notes, finance leases and other

The reduction in interest expense solely paid on our debt and lease obligations corresponds to lowered variable LIBOR and Prime interest rates paid on our term loan and revolving debt and reduced borrowing on our revolving loan compared to the prior year.

Cash Paid for Interest $39,151 $29,042 $10,109 34.8%

The rise in adjusted interest expense is attributable to a higher overall loan balances in combination with increased variable interest rates paid on those balances compared to the same period in the prior year.

During 2002 we refinanced our Truist term loan which added an additional $108.0 million in obligations to our balance sheet in the fourth quarter.

Based on recent increases in global interests rates, we expect the effective interest rates on our senior credit facilities, and our related interest expense, to continue to rise in the near term.

See “Liquidity and Capital Resources” below for more details on our credit facilities.

To mitigate our future interest expense exposure the Company has entered into a forward interest rate agreements.

See the Derivative Instruments section of Note 2 to the consolidated financial statements included in this annual report on Form 10-K and Item 7A, Quantitative and Qualitative Disclosure About Market Risk below for more details on our derivative transactions.

Equity in earnings from unconsolidated joint ventures

For the twelve months ended December 31, 2021 we recognized equity in earnings from unconsolidated joint ventures of $11.0 million versus $7.9 million for the twelve months ended December 31, 2020, an increase of $3.1 million or 39.2%.

The increase was mainly related to the equity in earnings from our interest in the Arizona Diagnostic Radiology Group joint venture, which was formed in the fourth quarter of 2020.

Non-cash change in fair value of interest rate hedge

We recorded income of approximately $21.7 million for the ineffective portion of our 2019 swaps for the year ended December 31, 2021 and expense of approximately $2.5 million for the twelve months ended December 31, 2020.

See the Derivative Instruments section of Note 2 to the consolidated financial statements included in this annual report on Form 10-K.

Gain on re-measurement valuation of pre-existing interest

In August of 2019 we completed step-up acquisitions of two of our then equity method joint ventures, Garden State Radiology and Nulogix.

Upon the fair value determination of our interests in both ventures, we recognized a step-up gain of $0.8 million for the year ended December 31, 2019.

Loss (gain) on extinguishment of debt and related expenses

We recorded expenses of approximately $6.0 million for the twelve months ended December 31, 2021 mainly related to our refinancing of our term loan debt.

For the twelve months ended December 31, 2022 we recognized equity in earnings from unconsolidated joint ventures of $10.4 million versus $11.0 million for the twelve months ended December 31, 2021, a decrease of $0.6 million or 5.3%.

Gain on extinguishment of debt and related expenses

During 2020, we received a loan in the amount of $4.0 million through the Paycheck Protection Program.

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See Note 8 Credit Facilities and Notes Payable included in this annual report on Form 10-K.

Other expenses

For the years ended December 31, 2021 and December 31, 2020 we recorded approximately $1.4 million and $0.1 million of other expenses respectively.

Provision for income taxes

We had a provision for income tax for the twelve months ended December 31, 2021 of $14.6 million or 24.7% of income before income taxes, compared to a tax provision for the twelve months ended December 31, 2020 of $0.9 million or 104.8% of income before income taxes.

Income tax decreased in 2020 primarily due to the economic effects of the COVID-19 pandemic on our operations.

The income tax rates for the twelve months ended December 31, 2021 diverge from the federal statutory rate due to state taxes and joint venture tax basis adjustments partially offset by noncontrolling interest in partnerships.

Our AI segment develops and deploys clinical applications to enhance interpretation of medical images and improve patient outcomes with a current emphasis on brain, breast, prostate, and pulmonary diagnostics.

We are developing our AI segment initially through acquisition activity.

The operations of Nulogix and Deephealth comprise the results for 2021.

Our 2022 results include our recent additions of Aidence and Quantib.

The breakdown of revenue and expenses of the segment for the twelve months ended December 31, 2022 and 2021 are as follows:

In Thousands Twelve Months Ended December 31,

2022 2021 $ Increase/(Decrease)

Statement of Operations

Revenue $4,396 $1,415 $2,981

Salaries and Wages $15,799 $2,938 $12,861

Stock compensation 2,782 1,796 986

Other operating 5,171 599 4,572

Depreciation & Amort.

6,353 520 5,833

Other operating loss 23 — 23

Severance 20 — 20

Total operating expenses 30,149 5,853 24,296

Loss from Operations (25,753) (4,438) (21,315)

Other (income) expense (903) 622 (1,525)

Income before taxes (24,850) (5,060) (19,790)

Income taxes (2,743) — (2,743)

Segment net loss ($22,107) ($5,060) ($17,047)

Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020

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Adjusted EBITDA is a non-GAAP financial measure used as an analytical indicator by us and the healthcare industry to assess business performance, and is a measure of leverage capacity and ability to service debt.

Adjusted EBITDA should not be considered a measure of financial performance under GAAP, and Adjusted EBITDA should not be considered in isolation or as alternatives to net income, cash flows generated by operating, investing or financing activities or other financial statement data presented in the consolidated financial statements as an indicator of financial performance or liquidity.

Adjusted EBITDA should not be considered a measure of financial performance under GAAP, and Adjusted EBITDA should not be considered in isolation or

as alternatives to net income, cash flows generated by operating, investing or financing activities or other financial statement data presented in the consolidated financial statements as an indicator of financial performance or liquidity.

Adjusted EBITDA is not a measurement determined in accordance with GAAP and is therefore susceptible to varying methods of calculation and this metric, as presented, may not be comparable to other similarly titled measures of other companies.

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Lease abandonment charges — 19,675 —

Transaction costs Aidence Holding B.V.

Non operational rent expenses 4,297 — —

Transaction costs HLH, Aidence Holding B.V.

& Quantib B.V 927 1,171 —

Gain on re-measurement of pre-existing interest — — (768)

Adjusted EBITDA $218,928 $139,461 $164,131

Free Cash Flow

Another non-GAAP measure that we use is “Free Cash Flow”.

We use free cash flow as an additional way of viewing our liquidity that, when viewed with our GAAP results, provides a more complete understanding of factors and trends affecting our cash flows, and consequently our ability to service debt and make capital expenditures.

Free cash flow is used in addition to and in conjunction with results presented in accordance with GAAP and free cash flow should not be relied upon to the exclusion of GAAP financial measures.

We define free cash flow as Adjusted EBITDA, less capital expenditures, and less the cash portion of our interest expense.

We reconcile free cash flow to “net cash flows provided by operating activities”.

We use free cash flow to conduct and evaluate our business because, although it is similar to cash flow from operations, we believe it is a more conservative measure of cash flows since purchases of fixed assets and the cash portion of our interest expense are a necessary component of our ongoing operations.

In limited circumstances in which proceeds from sales of fixed assets exceed purchases, free cash flow could exceed cash flow from operations.

However, since we do not anticipate being a net seller of fixed assets, we expect free cash flow to be less than operating cash flows.

Free cash flow has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures.

For example, free cash flow does not incorporate payments made on capital lease obligations or cash payments for business acquisitions.

Therefore, we believe it is important to view Free Cash Flow as a complement to our entire consolidated statements of cash flows.

The following table provides a reconciliation of free cash flow to “net cash flows from operations” the most directly comparable amounts reported in accordance with GAAP for the years ended December 31, 2021, 2020 and 2019 (in thousands):

Years Ended December 31,

2021 2020 2019

Adjusted EBITDA $ 218,928 $ 139,461 $ 164,131

Less cash paid for interest (29,042) (39,521) (46,254)

Less cash capital purchases (1)

Valuation adjustment for contingent consideration 47 — —

Change in estimate related to refund liability 8,089 — —

Adjusted EBITDA Including Losses from AI Segment and Provider Relief Funding $192,474 $218,928 $139,461

Provider relief funding — (9,110) (26,264)

Adjusted EBITDA including losses from AI Segment and excluding benefit from Provider Relief Funding $192,474 $209,818 $113,197

Adjusted EBITDA Losses from AI segment 16,575 2,121 1,757

Adjusted EBITDA excluding Losses from AI Segment and Provider Relief Funding $209,049 $211,939 $114,954

The following table is a reconciliation of GAAP net income for our AI Segment to Adjusted EBITDA for the years ended December 31, 2022, 2021 and 2020 respectively.

Twelve Months Ended December 31,

2022 2021 2020

Less new finance debt — (20) (51)

Plus proceeds from sale of equipment 625 828 1,160

Free cash flow $ 65,090 $ 13,990 $ 47,446

Free cash flow as a percent of

cash flow from operations 43.5 % 6.0 % 45.5 %

(1) Purchase of Property Plant & Equipment is adjusted for capital purchases of NJIN.

Segment net loss $ (22,107) $ (5,060) $ (3,463)

Stock Compensation 2,782 1,796 1,065

Depreciation & Amortization 6,353 520 400

Other operating loss 23 — —

Other expense (income) (903) 622 241

Severance 20 — —

Income taxes (2,743) — —

Adjusted EBITDA AI Segment $ (16,575) $ (2,121) $ (1,757)

Liquidity and Capital Resources

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Sources and Uses of Cash

The following table summarizes key components of our sources and uses of cash for the twelve months ended December 31,

The following table summarizes key components of our sources and uses of cash for the twelve months ended December 31, in thousands:

Cash Flow Data December 31, 2022 December 31, 2021 December 31, 2020

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Cash provided by operating activities for the period ended December 31, 2020 was benefited by the receipt of $39.5 million in CMS advances recorded as deferred revenue.

Cash used in investing activities for the twelve months ended December 31, 2021, included purchases of property and equipment for approximately $137.9 million, acquired imaging businesses and intangible assets for $77.7 million and 5.1 million respectively, and an equity contribution to a joint venture operation of $1.4 million.

Cash used in investing activities for the twelve months ended December 31, 2022, included purchases of property and equipment for approximately $119.5 million, acquired imaging businesses and other operations for $130.0 million and an equity contribution to a joint venture operation of $1.4 million.

As part of our business operations we continually evaluate investment opportunities.

The increase in cash provided by financing activities for the twelve months ended December 31, 2021 was due to refinancing of our term loan obligations with the Second Amended and Restated First Lien Credit and Guaranty Agreement on April 23, 2021.

Please see Note 5, Credit Facilities and Notes Payable in the notes to consolidated financial statements for more information.

We have entered into factoring agreements with various institutions and sold certain accounts receivable under non-recourse agreements.

Cash provided by financing activities for the twelve months ended December 31, 2022 was related mainly to the refinancing of our Truist term loan obligations with the Second Amended and Restated Revolving Credit and Term Loan Agreement on October 10, 2023.

Please see Note 8, Credit Facilities and Notes Payable in the notes to consolidated financial statements included in this annual report on Form 10-K for more information.

We have entered into factoring agreements with various institutions and sold certain accounts receivable under non-recourse agreements in exchange for notes receivables from the buyers.

These transactions are accounted for as a reduction in accounts receivable as the agreements transfer effective control over and risk related to the receivables to the buyers.

Payments on the associated notes receivables will be reflected as operating activities on our statement of cash flows and on our balance sheet as prepaid expenses and other current assets for the current portion and deposits and other for the long term portion.

At December 31, 2021 we have $17.7 million, net of discount, remaining to be collected on these agreements.

Proceeds on notes receivables are reflected as operating activities on our statement of cash flows and on our balance sheet as prepaid expenses and other current assets for the current portion and deposits and other for the long term portion.

Amounts remaining to be collected on these agreements were $15.4 million and $17.7 million at December 31, 2022 and December 31, 2021, respectively.

We do not utilize factoring arrangements as an integral part of our financing for working capital.

Senior Credit Facilities:

We maintain secured credit facilities with Barclays Bank PLC and with SunTrust Bank.

We maintain secured credit facilities with Barclays Bank PLC and with Truist.

The Barclays credit facilities are comprised of first lien term loans and a revolving credit facility of $195.0 million.

The SunTrust credit facilities are comprised of a term loan and a revolving credit facility of $30.0 million.

The Truist credit facilities are comprised of a term loan and a revolving credit facility of $50.0 million.

As of December 31, 2022, we were in compliance with all covenants under our credit facilities.

Deferred financing costs at December 31, 2021, net of accumulated amortization, was $2.1 million and is specifically related to our Barclays revolving credit facility.

Deferred financing costs on our revolving credit lines at December 31, 2022, net of accumulated amortization, totaled $2.3 million, with $1.7 million related to Barclays and $0.6 million related to Truist.

Included in our consolidated balance sheets at December 31, 2022 are $851.7 million of total term loan debt (net of unamortized discounts of $12.4 million) displayed below in thousands:

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Barclays First Lien Term Loans $ 714,125 $ (11,127) $ 702,998

SunTrust Term Loan Agreement 46,500 — 46,500

Truist Term Loan Agreement 150,000 (1,254) 148,746

Total Term Loans $ 864,125 $ (12,381) $ 851,744

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The remaining $187.4 million of our Barclays Revolving Credit Facility was available to draw upon as of December 31, 2022.

We also had no balance under our $30.0 million SunTrust Revolving Credit Facility related to our consolidated subsidiary NJIN at December 31, 2021, and with no letters of credit

reserved against the facility, the full amount was available to draw upon.

We also had no balance under our $50.0 million Truist

Revolving Credit Facility related to our consolidated subsidiary NJIN at December 31, 2022, and with no letters of credit reserved against the facility, the full amount was available to draw upon.

For more information on our secured credit facilities see Note 8 to our consolidated financial statements in this annual report.

Contractual Commitments

Our future obligations for notes payable, equipment under finance leases, lines of credit, equipment and building operating leases and other contractual obligations for the next five years and thereafter include (dollars in thousands):

Our future obligations for notes payable, lines of credit, and equipment and building operating leases for the next five years and thereafter include (dollars in thousands):

2023 2024 2025 2026 2027 Thereafter Total

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The critical areas involving management’s judgments and estimates are described below.

USE OF ESTIMATES - The financial statements were prepared in accordance with U.S.

USE OF ESTIMATES - The financial statements have been prepared in accordance with U.S.

generally accepted accounting principles (GAAP), which requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

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REVENUES – Our revenues generally relate to net patient fees received from various payors and patients themselves under contracts in which our performance obligations are to provide diagnostic services to the patients.

Revenues are recorded during the period our obligations to provide diagnostic services are satisfied.

Revenues are recorded during the period when our obligations to provide diagnostic services are satisfied.

Our performance obligations for diagnostic services are generally satisfied over a period of less than one day.

The contractual relationships with patients, in most cases, also involve a third-party payor (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payors.

The contractual relationships with patients, in most cases, also involve a third-party payor (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by Medicare and Medicaid, or negotiated with managed care health plans and commercial insurance companies.

The payment arrangements with third-party payors for the services we provide to the related patients typically specify payments at amounts less than our standard charges and generally provide for payments based upon predetermined rates per diagnostic services or discounted fee-for-service rates.

Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations, changes in business and economic conditions, and the frequent changes in managed care contractual terms resulting from contract re-negotiations and renewals.

As it relates to the Group, this service fee revenue includes payments for both the professional medical interpretation revenue recognized by them as well as the payment for all other technical aspects related to our providing the imaging services, for which we earn management fees.

As it relates to others centers, this service fee revenue is earned through providing the use of our diagnostic imaging equipment and the provision of technical services as well as providing administration services such as clerical and administrative personnel, bookkeeping and accounting services, billing and collection, provision of medical and

Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.

As it relates to the Group, this service fee revenue includes payments for both the professional medical interpretation revenue recognized by them as well as the payment for all other aspects related to our providing the imaging services, for which we earn management fees.

As it relates to other centers, this service fee revenue is earned through providing the use of our diagnostic imaging equipment and the provision of technical services as well as providing administration services such as clerical and administrative personnel, bookkeeping and accounting services, billing and collection, provision of medical and

office supplies, secretarial, reception and transcription services, maintenance of medical records, and advertising, marketing and promotional activities.

Our revenues are based upon the estimated amounts we expect to be entitled to receive from patients and third-party payors.

Estimates of contractual allowances under Medicare, Medicaid, managed care and commercial insurance plans are based upon historical collection experience of the payments received from such payors in accordance with the underlying contractual agreements.

Revenues related to uninsured patients and uninsured copayment and deductible amounts for patients who have health care coverage may have price concessions applied.

Estimates of contractual allowances under managed care and commercial insurance plans are based upon the payment terms specified in the related contractual agreements.

Revenues related to uninsured patients and copayment and deductible amounts for patients who have health care coverage may have discounts applied (uninsured discounts and contractual discounts).

We also record estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record self-pay revenues at the estimated amounts we expect to collect.

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Services are generally provided pursuant to one-year contracts with healthcare providers.

Receivables generally are collected within industry norms for third-party payors.

We continuously monitor collections from our payors and maintain an allowance for bad debts based upon specific payor collection issues that we have identified and our historical experience.

BUSINESS COMBINATION – We evaluate all purchases under the framework in ASU No.

2017-01 (“ASU 2017-01”), Clarifying the Definition of a Business.

Once the purchase has been determined to be the acquisition of a business, we are required to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values.

BUSINESS COMBINATION – When the qualifications for business combination accounting treatment are met, it requires us to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values.

Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed.

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GOODWILL AND INDEFINITE LIVED INTANGIBLES – Goodwill totaled $677.7 million and $513.8 million at December 31, 2022 and December 31, 2021, respectively.

Indefinite lived intangible assets at December 31, 2021 and December 31, 2020 were $7.1 million and are associated with the value of certain trade name intangibles.

Goodwill and trade name intangibles are recorded as a result of business combinations.

When we determine the carrying value of a reporting unit exceeds its fair value an impairment charge would be recognized and should not exceed the total amount of goodwill allocated to that reporting unit.

We test for impairment annually and in addition to that test, we regularly assess if an event has occurred which would require interim impairment testing.

We considered the current and expected future economic and market conditions surrounding the novel strain of coronavirus ("COVID-19") pandemic and during the year did not identify an indication of goodwill or trade name impairment due that event.

During the year ended December 31, 2020 we ceased employing certain indefinite lived trade names with a total value of $4.2 million and they were written off in full.

Separate from this, our annual impairment test as of October 1, 2021 noted no other impairment, and we have not identified any indicators of impairment through December 31, 2021.

Indefinite lived intangible assets were $24.1 million at December 31, 2022 and $20.6 million at December 31, 2021 and are associated with the value of certain trade name intangibles and in process research and development (IPR&D).

Goodwill, trade name intangibles and IPR&D are recorded as a result of business combinations.

When we determine the carrying value of goodwill exceeds its fair value, an impairment charge would be recognized which should not exceed the total amount of goodwill allocated to that reporting unit.

We determined fair values for each of the reporting units using the market approach, when available and appropriate, or the income approach, or a combination of both.

We assess the valuation methodology based upon the relevance and availability of the data at the time we perform the valuation.

If multiple valuation methodologies are used, the results are weighted appropriately.

We tested goodwill, trade name and IPR&D for impairment on October 1, 2022.

In 2020 we ceased employing certain indefinite lived trade names with a total value of $4.2 million and they were written off in full as of December 31, 2020.

Our annual impairment test as of October 1, 2022 noted no other impairment, and we have not identified any indicators of impairment through December 31, 2022.

Recent Accounting Standards

See Note 3, Recent Accounting and Reporting Standards to the consolidated financial statements included in this report for further information.

Subsequent Events

On January 1, 2022 we acquired certain radiology practice business assets for purchase consideration of $13.0 million.

On January 20, 2022, we completed our stock acquisitions of two unrelated technology companies located in the Netherlands.

Aidence Holding B.V.

and Quantib B.V.

are AI companies with a focus on clinical solutions for lung and prostate cancer, respectively.

Total combined investment by is $95.0 million, being a combination of issuance of our common shares and cash consideration to purchase the outstanding shares of both companies.

See Note 3, Recent Accounting and Reporting Standards to the consolidated financial statements included in this annual report for further information.

Additional Information

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis