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Item 2. Management’s Discussion and Analysis

2023-05-10 compared with 2022-11-09 · 163 added, 345 removed, 230 unchanged (69% of the section changed)

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Forward-looking statements are neither historical facts nor assurances of future performance.

Because forward-looking statements relate to the future, they are inherently subject to known and unknown risks, uncertainties and other factors that are difficult to predict and our of our control.

Our actual results, level of activity, performance or achievements may be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forwards-looking statements.

Because forward-looking statements relate to the future, they are inherently subject to known and unknown risks, uncertainties and other factors

that are difficult to predict and out of our control.

Important factors that could cause our actual results to differ materially from those indicated or implied in our forward-looking statements include the factors included in “Risk Factors,” in our annual report on Form 10-K for the fiscal year ended December 31, 2022 or supplemented by the information in Part II– Item 1A below.

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Any forward-looking statement in this quarterly report is based on information currently available to us and speaks only as of the date of this report.

We do not undertake any responsibility to release publicly any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this quarterly report or any unanticipated events which may cause actual results to differ from those expressed or implied by the forward-looking statements contained in this quarterly report, except as required by law.

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.

At September 30, 2022, we operated, directly or indirectly through joint ventures with hospitals, 349 centers located in Arizona, California, Delaware, Florida, Maryland, New Jersey, and New York.

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

At March 31, 2023, we operated directly or indirectly through joint ventures with hospitals, 363 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.

Our Imaging Center segment provides physicians with imaging capabilities to facilitate the diagnosis and treatment of diseases and disorders.

Services include magnetic resonance imaging (MRI), computed tomography (CT), positron emission tomography (PET), nuclear medicine, mammography, ultrasound, diagnostic radiology (X-ray), fluoroscopy and other related procedures.

The vast majority of our centers offer multi-modality imaging services, a strategy that diversifies revenue streams, reduces exposure to reimbursement changes and provides patients and referring physicians one location to serve the needs of multiple procedures.

Included in the segment is our eRad subsidiary, which designs the underlying critical scheduling, data storage and retrieval systems necessary for imaging center operation.

Our Artificial Intelligence ("AI") segment that has been established through our acquisitions of DeepHealth, Nulogix Aidence Holding B.V.

and Quantib B.V..

Our current AI focus is to develop solutions that employ machine learning to assist radiologists and other clinicians in interpreting images and improving patient care, initially in the fields of brain, breast, prostate, and pulmonary diagnostics.

We derive substantially all of our revenue, directly or indirectly, from fees charged for the diagnostic imaging services performed at our imaging centers.

The following table shows our centers in operation and revenues for the nine months ended September 30, 2022 and September 30, 2021:

Nine Months Ended September 30,

For further financial information about these segments, see Note 5, Segment Reporting, in the notes accompanying our consolidated financial statements included in this report.

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.

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 and revenues for the three months ended March 31, 2023 and March 31, 2022:

Three Months Ended March 31,

Centers in operation 363 346

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We believe our payor diversity mitigates our exposure to possible unfavorable reimbursement trends within any one payor class.

In addition, our experience with capitation arrangements over the last several years has provided us with the expertise to manage utilization and pricing effectively, resulting in a predictable stream of revenue.

Our total service fee revenues during the three and nine months ended September 30, 2022 and 2021 are presented in the table below.

Our imaging center revenue is displayed as the estimated service fee, broken down by classification of insurance coverage type.

Additional revenues are earned from our management services provided to joint ventures and our software and AI subsidiaries.

In Thousands Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Our total service fee revenue, net of contractual allowances and discounts, and implicit price concessions for the three months ended March 31, 2023 and 2022 is summarized in the following table (in thousands):

Three Months Ended March 31,

Commercial insurance $ 217,209 $ 188,465

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Management fee revenue 4,248 5,508

Software revenue 3,430 2,068 9,849 7,115

Teleradiology and Software revenue 4,333 3,399

Other 5,300 5,647

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Recent Developments

Through the third quarter ended September 30, 2022 our imaging business continued to expand, with procedure volumes returning to levels experienced before the COVID-19 pandemic, with year to date same center procedure volumes increasing 3.1% and overall procedure volumes increasing 6.0% over the same period in 2021.

We continued to pursue our strategy of expansion within geographic regions, with a concentration on adding new facilities in Maryland.

While imaging

volumes returned to pre-pandemic levels, our operations have experienced effects from the pandemic and related macroeconomic issues.

We are experiencing tighter labor markets, resulting in increased salaries as we seek to retain our skilled workforce.

Our acquisitions of Aidence Holding B.V.

and Quantib B.V.

have expanded our AI initiatives to encompass imaging diagnostics solutions for the most prevalent cancers.

Efforts in AI are largely in the product development stage at this time and we expect that the segment will continue to experience operating losses for the foreseeable future as we seek to secure both regulatory approvals and market acceptance for our products.

Equity Investments, Acquisitions and Dispositions, and Joint Venture Activity

We have developed our medical imaging business through a combination of organic growth, equity investments, acquisitions and joint venture formations.

As 2023 begins, we continue to have strong growth in our procedure volumes, which have increased 14% in the same period over the prior year on an overall basis, and we have opened 10 new advanced imaging centers.

In December of 2022, our subsidiary DeepHealth, Inc, received FDA clearance of its mammography density assessment software that assists radiologists in interpreting visual images.

In February of 2023, we launched our Enhanced Breast Cancer Detection service, powered by DeepHealth AI, which provides patients an advanced screening mammography service along with a life time risk assessment for breast cancer and post mammography support.

Initial locations for this service are in Florida, New Jersey and New York.

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, Business Combinations and Related Activity and Note 2, Summary of Significant Accounting Policies to our consolidated financial statements included in this quarterly report on Form 10-Q for further information.

The information below updates our activity of such matters contained in our annual report on Form 10-K for the year ended December 31, 2022.

Imaging Center

During the first quarter of 2023, 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 California 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 Assets Right of Use Liabilities

& S Services Inc.

1/1/2023 3,500 435 1,689 3,015 50 — (1,689)

Southern California Diagnostic Imaging, Inc.

1/1/2023 1,815 466 1,184 1,272 50 27 (1,184)

Inglewood Imaging Center, LLC 2/1/2023 2,600 877 1,188 1,658 50 15 (1,188)

Ramapo Radiology Associates, P.C.

2/1/2023 2,000 1,663 3,775 229 100 8 (3,775)

Total 9,915 3,441 7,836 6,174 250 50 (7,836)

Equity Investments

As of September 30, 2022, we have three equity investments for which a fair value is not readily determinable and therefore the total amounts invested are recognized at cost as follows:

As of March 31, 2023, we have three equity investments for which a fair value is not readily determinable and therefore the total amounts invested are recognized at cost as follows:

Medic Vision Imaging Solutions Ltd., based in Israel, specializes in software packages that provide compliant radiation dose structured reporting and enhanced images from reduced dose CT scans.

Our investment of $1.2 million represents a 14.21% equity interest in the company.

No observable price changes or impairment in our investment was identified during the three and nine months ended September 30, 2022.

No observable price changes or impairment in our investment was identified as of March 31, 2023.

Turner Imaging Systems, based in Utah, develops and markets portable X-ray imaging systems that provide a user the ability to acquire X-ray images wherever and whenever they are needed.

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On January 1, 2019 we funded a convertible promissory note in the amount of $0.1 million that converted into an additional 80,000 shares effective December 21, 2019.

No observable price changes or impairment in our investment was identified during the three and nine months ended September 30, 2022.

No observable price changes or impairment in our investment was identified as of March 31, 2023.

WhiteRabbit.ai Inc., based in California, is currently developing an artificial intelligence suite which aims to improve the speed and accuracy of cancer detection in radiology and improve patient care.

On November 5, 2019 we acquired an equity interest in the company for $1.0 million and also loaned the company $2.5 million in support of it operations.

No observable price changes, impairment in our investment or impairment of the loan receivable was identified during the three and nine months ended September 30, 2022.

Imaging Center

During the first quarter of 2022, 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 Maryland market.

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 Right of Use Liabilities

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

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

Total 13,000 5,013 2,560 7,968 (2,560)

*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.

Artificial Intelligence

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 centered on lung cancer screening, in an combination stock and cash purchase.

Aidence is reported as part of our AI 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) assumed liabilities of $11.9 million, $7.4 million in milestone contingent consideration and cash 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.

We recorded $1.0 million in current assets, $0.2 million in property plant and equipment, $27.7 million in intangible assets, $3.2 million in liabilities and $19.0 million in goodwill.

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

("Quantib") an artificial intelligence enterprise centered on prostate cancer screening, in a combination stock and cash purchase.

Quantib is reported as part of our AI 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) 113,303 shares with a fair value at the date of close of $3.0 million and cash holdback of $1.6 million to be issued 18 months after acquisition subject to adjustment for any indemnification claims.

We recorded $2.4 million million in current assets, $0.1 million in property plant and equipment, $21.3 million in intangible assets, $3.7 million in liabilities and $22.2 million in goodwill.

Formation of majority owned subsidiary

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 4 centers to the enterprise and Hospital contributed $5.4 million in fixed assets, $3.0 million in equipment, and $10.8 million in goodwill.

As a result of the the transaction, we retain a 65% controlling economic interest in FCR and Hospital retains a preliminary $11.1 million or 35% noncontrolling economic interest in FCR.

The initial accounting is preliminary as of September 30, 2022 for the acquired assets and liabilities as we are currently in the process of completing the assessment of valuation inputs and assumptions as well as completing the assessment of the tax attributes of the business combination.

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"), and 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.

No observable price changes, impairment in our investment or impairment of the loan receivable was identified as of March 31, 2023.

Joint Venture Activity

Acquisition by equity method investee

During the first quarter of 2022, our joint venture with Calvert Medical Imaging Center, LLC, completed the acquisition of certain assets to strengthen our presence in the Maryland market.

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 Right of Use Liabilities

IFRC LLC *^ 1/1/2022 3,922 2,121 1,295 1,801 (1,295)

*Fair Value Determination is Final

^ IFRC LLC acquisitions consisted of three subsidiaries of IFRC, two of which were purchased separately by wholly owned RadNet subsidiaries.

The following table is a summary of our investment in joint ventures during the nine months ended September 30, 2022 (in thousands):

The following table is a summary of our investment in joint ventures during the three months ended March 31, 2023 (in thousands):

Balance as of December 31, 2022 $ 57,893

Equity in earnings in these joint ventures 1,428

Equity contributions in existing joint ventures 1,441

Balance as of September 30, 2022 $ 52,020

We charged management service fees from the centers underlying these joint ventures of approximately $6.1 million and $5.3 million for the three months ended September 30, 2022 and 2021 and $17.2 million and $16.0 million for the nine months ended September 30, 2022 and 2021, respectively.

On June 24, 2022, we made an additional equity contribution to our joint venture in Arizona of $1.4 million.

Our equity ownership interest percentage in the venture did not change.

The following table is a summary of key balance sheet data for these joint ventures as of September 30, 2022 and December 31, 2021 and income statement data for the nine months ended September 30, 2022 and 2021 (in thousands):

Balance as of March 31, 2023 $ 59,321

We charged management service fees from the centers underlying these joint ventures of approximately $4.2 million and $5.5 million for the three months ended March 31, 2023 and 2022, respectively.

The following table is a summary of key balance sheet data for these joint ventures as of March 31, 2023 and December 31, 2022 and income statement data for the three months ended March 31, 2023 and 2022 (in thousands):

Balance Sheet Data:

September 30,

2023 December 31,

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Total value of RadNet joint venture interests $ 59,321 $ 57,893

Income statement data for the nine months ended September 30,

Income statement data for the three months ended March 31,

Net revenue $ 42,086 $ 34,411

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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.

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

Our revenues are based upon our management's estimate of amounts we expect to be entitled to receive from patients and third-party payors.

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Revenue under capitation arrangements is recognized in the period in which we are obligated to provide services to plan enrollees under contracts with various health plans.

Our estimates and assumptions related to revenue recognition did not change materially for the quarter ended September 30, 2022.

Provider Relief Fund (COVID-19 Stimulus Funding)

The Provider Relief Fund offers government assistance to eligible providers throughout the healthcare system in support of certain expenses or lost revenue attributable to the coronavirus pandemic.

We have recorded provider relief funding in our condensed Consolidated Statements of Operations in the amount of $6.3 million for the nine months ended September 30, 2021.

No provider relief funding was received for the three and nine months ended September 30, 2022.

Generally, the department of Health and Human Services ("HHS") does not intend to recoup funds as long as a provider's lost revenue and increased expenses exceed the amount of provider relief funding one has received.

HHS reserves the right to audit Relief Fund recipients in the future to ensure that this requirement is met and collect any Relief Fund amounts that were made in error or exceed lost revenue or increased expenses due to the pandemic.

Failure to comply with the terms and conditions may be grounds for recoupment.

In recognizing revenue associated with provider relief funding our management is required to assess whether our operations have meet the applicable requirements for the funding received.

During the quarter ended September 30, 2022, we continued to evaluate our operating results in light of the most recent government guidance and based on our assessment, the amount of revenue recognized is appropriate.

Our estimates and assumptions related to revenue recognition did not change materially for the quarter ended March 31, 2023.

Accounts Receivable

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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.

Our estimates and assumptions for allowances on our account receivable did not change materially during the quarter ended September 30, 2022.

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.

Our estimates and assumptions for allowances on our account receivable did not change materially during the quarter ended March 31, 2023.

Business Combination

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Goodwill and Indefinite Lived Intangibles

Goodwill at September 30, 2022 totaled $575.1 million.

Indefinite Lived Intangible Assets at September 30, 2022 were $12.7 million and are associated with the value of certain trade name intangibles.

Our management reviews the fair value of our reporting units on an annual basis to determine if an event has occurred which suggest that the fair value of a reporting unit may be impaired.

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.

The review of fair value requires our management to make assessments of the business and financial prospects for a particular reporting unit.

We tested goodwill for impairment on October 1, 2021.

We also continue at regular intervals to consider the current and expected future economic and market conditions surrounding the COVID-19 pandemic and to date have not had an indication of goodwill impairment being more likely than not through September 30, 2022.

Goodwill at March 31, 2023 totaled $687.1 million.

Indefinite Lived Intangible Assets at March 31, 2023 were $24.3 million 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.

Our annual test of goodwill, trade name and IPR&D noted no impairment as of October 1, 2022, and we have not identified any indicators of impairment through March 31, 2023.

Recent Accounting Standards

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

Subsequent Events

Refinancing of SunTrust (Now Truist) Credit Facilities:

On October 7, 2022, our subsidiary, NJIN, entered into a Second Amended and Restated Credit and Term Loan Agreement which provides for a single term loan of $150.0 million and a $50.0 million revolving credit facility.

The proceeds of the term loan were used to partially fund the acquisition of Montclair Radiological Associates, refinance the outstanding $42.0 million term loan and pay fees and expenses associated with the refinancing transaction.

The key terms of the Restated Credit and Term Loan Agreement are:

• Interest Rates:

Borrowings bear interest at either the SOFR or Base Rate as defined in the agreement, plus an applicable margin.

• Maturity Dates:

The maturity date for both the term loan and revolving loans is October 7, 2027, unless accelerated in accordance with the terms of the agreement.

Beginning March 31, 2023, we will be required to make quarterly principal amortization payments on the term loan in the amount of $1.9 million, which will increase to $3.8 million, with the balance paid at maturity.

Acquisitions:

On October 1, 2022, through our NJIN subsidiary, we acquired Montclair Radiological Associates for purchase consideration of approximately $112.6 million.

Montclair consists of six multi modality radiology centers located in New Jersey.

On November 1, 2022, we acquired a 75% controlling share interest in London-based Heart & Lung Imaging Limited ("HLH").

HLH was founded to improve lung cancer outcomes through early detection and accurate diagnosis.

HLH will be integrated into our AI operations.

Total combined purchase consideration, including contingencies, consists of RadNet common stock and cash up to a potential $27.6 million.

Results of Operations

The following table sets forth, for the three and nine months ended September 30, 2022 and 2021, the percentage that certain items in the statements of operations bears to total service revenue, inclusive of revenue under capitation contracts.

The following table sets forth, for the three months ended March 31, 2023 and 2022, the percentage that certain items in the statements of operations bears to total service revenue, inclusive of revenue under capitation contracts.

AND SUBSIDIARIES

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Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Service fee revenue 90.2 % 88.7 %

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Total service revenue 100.0 % 100.0 %

Provider relief funding — % — % — % 0.6 %

OPERATING EXPENSES

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Depreciation and amortization 8.0 % 7.9 %

(Gain) loss on sale and disposal of equipment and other (0.1) % 0.8 % 0.1 % — %

Loss on sale and disposal of equipment and other 0.1 % 0.3 %

Severance costs — % 0.1 %

Total operating expenses 98.3 % 100.5 %

INCOME FROM OPERATIONS 2.0 % 9.8 % 2.4 % 7.9 %

INCOME (LOSS) FROM OPERATIONS 1.7 % (0.5) %

OTHER INCOME AND EXPENSES

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Equity in earnings of joint ventures (0.4) % (0.7) %

Non-cash change in fair value of interest rate swaps (3.6) % (0.9) % (3.8) % (1.4) %

Debt restructuring and extinguishment expenses

— % — % — % 0.6 %

Other expenses (income) 0.5 % — % 0.2 % 0.1 %

Total other (income) expenses (0.5) % 1.8 % (1.0) % 2.3 %

INCOME BEFORE INCOME TAXES 2.5 % 8.0 % 3.4 % 5.6 %

Non-cash change in fair value of interest rate hedge 1.0 % (6.1) %

Other expenses 0.4 % — %

Total other expense (income) 5.1 % (3.4) %

(LOSS) INCOME BEFORE INCOME TAXES (3.4) % 2.9 %

Provision for income taxes (0.3) % (0.4) %

NET INCOME 1.8 % 6.4 % 2.7 % 4.3 %

NET (LOSS) INCOME (3.7) % 2.4 %

Net income attributable to noncontrolling interests 1.7 % 1.6 %

NET INCOME ATTRIBUTABLE TO RADNET, INC.

NET (LOSS) INCOME ATTRIBUTABLE TO RADNET, INC.

COMMON STOCKHOLDERS (5.4) % 0.9 %

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

The discussion below shows a breakdown and analysis of revenue and expenses for the three and nine months ended September 30, 2022 and 2021.

Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021

In the discussion below same center metrics are based on imaging centers that were in operation throughout the period of July 1, 2021 through September 30, 2022.

Excluded amounts relate to imaging centers that were acquired or divested between July 1, 2021 through September 30, 2022.

Total Revenue inclusive of Provider Relief funding where applicable for 2022 and 2021

In Thousands Three Months Ended September 30,

The discussion below shows a breakdown and analysis of revenue and expenses for the three months ended March 31, 2023 and 2022.

Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

In Thousands Three Months Ended March 31,

Revenue 2023 2022 $ Increase/(Decrease) % Change

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Excluded $27,158 $4,011 — —

Overall revenue change was driven by procedure volume growth of 3.6% 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 7.0% to provide the major portion of the revenue growth.

We experienced an overall same center total procedure volume growth of 8.4% over the same period in the prior year, which resulted in an upswing in revenue through a combination of increased capitation contract rates, a 7.9% rise in same center routine imaging procedures and same center advanced radiology procedures of CT, MRI, PET and Nuclear Medicine expanding by 10.3%.

Excluded amounts refer to revenue contributions for the three month periods ending March 31, 2023 and March 31, 2022, respectively, from centers that were acquired or divested between January 1, 2022 through March 31, 2023.

Operating Expenses

Total operating expenses for the three months ended September 30, 2022 increased approximately $36.7 million, or 12.3%, from $298.7 million for the three months ended September 30, 2021 to $335.4 million for the three months ended September 30, 2022.

The following table sets forth a breakdown of our cost of operations and total operating expenses for the three months ended September 30, 2022 and 2021 (in thousands):

Total operating expenses for the three months ended March 31, 2023 increased approximately $37.6 million, or 11.1%, from $337.3 million for the three months ended March 31, 2022 to $374.9 million for the three months ended March 31, 2023.

The following table sets forth a breakdown of our cost of operations and total operating expenses for the three months ended March 31, 2023 and 2022 (in thousands):

Three Months Ended

September 30,

Salaries and professional reading fees, excluding stock-based compensation $ 216,512 $ 196,962

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Depreciation and amortization 29,591 25,806

(Gain) loss on sale and disposal of equipment (253) 2,595

Loss on sale and disposal of equipment 577 1,154

Severance costs 122 201

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* Includes billing fees, office supplies, repairs and maintenance, insurance, business tax and license, outside services, telecom, utilities, marketing, travel and other expenses.

The discussion below provides additional information and analysis on changes in our various operating expenses for the three months ended September 30, 2022 and 2021 (in thousands):

The discussion below provides additional information and analysis on changes in our various operating expenses for the three months ended March 31, 2023 and 2022 (in thousands):

Salaries and professional reading fees, excluding stock-based compensation and severance

In Thousands Three Months Ended September 30,

In Thousands Three Months Ended March 31,

Salaries and Professional Fees 2023 2022 $ Increase/(Decrease) % Change

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Excluded $13,218 $3,768 — —

Similar to prior quarters, 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.

Stemming from the higher procedure volumes noted above, our staffing levels were adjusted to support the influx of patients seeking radiology procedures.

Similar to other businesses, we still face inflation in employee cost as we compete for talent in the marketplace.

Excluded amounts refer to salaries and professional reading fees for the three month periods ending March 31, 2023 and March 31, 2022, respectively, from centers that were acquired or divested between January 1, 2022 through March 31, 2023.

Stock-based compensation

Stock-based compensation decreased $1.4 million, or 34.5% to approximately $2.6 million for the three months ended September 30, 2022 compared to $4.0 million for three months ended September 30, 2021.

This decrease is a result of a one time pandemic related stock awards to employees that were granted in the second quarter 2021.

There was no similar one time award granted in 2022.

Stock-based compensation rose $1.2 million, or 11.3% to approximately $11.5 million for the three months ended March 31, 2023 compared to $10.4 million for three months ended March 31, 2022.

Although the fair value of stock awarded and vested in the first quarter of 2023 was lower as compared to stock awarded and vested in the prior year, the higher amount of shares granted over the same period in the prior year spurred the increase.

Building and equipment rental

In Thousands Three Months Ended September 30,

In Thousands Three Months Ended March 31,

Building & Equipment Rental 2023 2022 $ Increase/(Decrease) % Change

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Excluded Sites $3,158 $1,360 — —

The decrease in same center building and rental relates to a combination of reduced expenses for equipment operating lease contracts which ended or were bought out during 2021 and for radiology centers abandoned in the fourth quarter of 2021 due to reduced patient utilization rates post pandemic.

The decrease in building and equipment rental expense relates to reduced equipment rental relating to operating lease contracts which ended or were bought out during 2022.

Excluded amounts refer to building and equipment rental for the three month periods ending March 31, 2023 and March 31, 2022, respectively, from centers that were acquired or divested between January 1, 2022 through March 31, 2023.

Medical supplies

In Thousands Three Months Ended September 30,

In Thousands Three Months Ended March 31,

Medical Supplies Expense 2023 2022 $ Increase/(Decrease) % Change

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Excluded Sites $1,320 $399 — —

Increased medical supplies expense corresponds to the 7.0% growth in advanced radiology volumes as noted above combined with price increases for the contrasting agents utilized in their administration.

The increase in medical supplies expense was driven by higher patient volume combined with price increases for contrasting agents used in advanced radiology procedures.

In addition, we had a high utilization rate of a specialty isotope PYLARIFY which is used in our PSMA study of prostate cancer, for which we are ultimately reimbursed on a cost plus margin basis that exceeds our initial expense outlay.

Excluded amounts refer to medical supplies expense for the three month periods ending March 31, 2023 and March 31, 2022, respectively, from centers that were acquired or divested between January 1, 2022 through March 31, 2023.

Other operating expenses

In Thousands Three Months Ended September 30,

In Thousands Three Months Ended March 31,

Other Operating Expenses 2023 2022 $ Increase/(Decrease) % Change

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Excluded Sites $4,843 $1,761 — —

The increase in other operating expenses was lower than overall revenue growth and relatively unchanged on a same center basis.

The rise in other operating expenses was experienced across all of our major categories to support the increase in volumes at inflated prices compared to the same period in the prior year.

Excluded amounts refer to other operating expenses for the three month periods ending March 31, 2023 and March 31, 2022, respectively, from centers that were acquired or divested between January 1, 2022 through March 31, 2023.

Additional segment operating and non operating expenses:

In Thousands Three Months Ended June 30,

In Thousands Three Months Ended March 31,

2023 2022 $ Increase/(Decrease) % Change

Depreciation and amortization $29,591 $25,806 $3,785 14.7%

Loss (gain) on disposal of equipment and other ($253) $2,595 ($2,848) nm

Non-cash change in fair value of interest rate swaps ($12,451) ($2,870) (9,581) nm

Loss on disposal of equipment and other $577 $1,154 $(577) nm

Non-cash change in fair value of interest rate hedge $4,093 ($20,819) 24,912 nm

Other expenses $730 $661 $69 nm

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Interest expense

In Thousands Three Months Ended September 30,

In Thousands Three Months Ended March 31,

Interest Expense 2023 2022 $ Increase/(Decrease) % Change

Total Interest Expense $15,722 $11,601 $4,121 35.5 %

Interest related to derivatives* $1,457 $3,700

Interest related to amortization** $647 $647

Adjusted Interest Expense*** $10,316 $7,685 $2,631 34.2 %

* Includes interest on current and prior derivative instruments not related to debt obligations.

** 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.

Excluding the effect of interest expense related to derivatives and amortization for the three months ended September 30, 2022 compared to the three months ended September 30, 2021, adjusted interest expense increased $2.6 million, or 34.2%.

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

Cash Paid for Interest $21,471 $7,448 $14,023 188.3 %

The rise in total 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.

The change in cash paid for interest relates to timing of interest rate elections, as our interest payment in the first quarter included interest charged to our term loan balances in 2022.

During 2022 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.

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To mitigate our future interest expense exposure we have entered into certain interest rate swap agreements.

During the three months ended March 31, 2023, we received cash payments from our swap agreements of approximately $3.0 million, which served to reduce our overall interest expense.

See the Derivative Instruments section of Note 2, Significant Accounting Policies, to the condensed consolidated financial statements included in this report for more details on our derivative transactions.

Equity in earnings from unconsolidated joint ventures

For the three months ended September 30, 2022 we recognized equity in earnings from unconsolidated joint ventures in the amount of $3.1 million and for three months ended September 30, 2021 we recognized equity in earnings from unconsolidated joint ventures of $2.9 million, an increase of $0.2 million or 8.1%.

Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 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 September 30, 2022.

Excluded amounts relate to imaging centers that were acquired or divested between January 1, 2021 through September 30, 2022.

Total Revenue inclusive of Provider Relief funding for 2021

In Thousands Nine Months Ended September 30,

Revenue 2022 2021 $ Increase/(Decrease) % Change

Total Revenue $1,043,129 $987,723 $55,406 5.6%

Same Center Revenue $949,101 $927,251 $21,850 2.4%

Excluded Sites $94,028 $60,472 — —%

Increased revenue reflects a 3.1% growth in overall same center procedure volumes compared with the same period in the prior year.

On a same center basis, advanced radiology procedures of MRI, PET, and CT increased at combined 5.8% to provide the major portion of the revenue growth.

Total Provider Relief funding, used to offset lost revenue due to the pandemic and included in the above amounts, was $6.3 million for the nine months ended September 30, 2021.

No Provider Relief funding was received in 2022.

Operating Expenses

Total operating expenses for the nine months ended September 30, 2022 increased approximately $92.9 million, or 10.3%, from $906.3 million for the nine months ended September 30, 2021 to $999.2 million for the nine months ended September 30, 2022.

The following table sets forth a breakdown of our cost of operations and total operating expenses for the nine months ended September 30, 2022 and 2021 (in thousands):

Nine Months Ended September 30,

Salaries and professional reading fees, excluding stock-based compensation $ 584,080 $ 513,239

Stock-based compensation 16,993 20,214

Building and equipment rental 92,250 91,253

Medical supplies 48,200 42,246

Other operating expenses *

175,806 167,992

Cost of operations 917,329 834,944

Depreciation and amortization 80,496 70,924

Loss (gain) on sale and disposal of equipment 936 (279)

Severance costs 488 715

Total operating expenses $ 999,249 $ 906,304

* Includes billing fees, office supplies, repairs and maintenance, insurance, business tax and license, outside services, telecom, utilities, marketing, travel and other expenses.

Salaries and professional reading fees, excluding stock-based compensation and severance

In Thousands Nine Months Ended September 30,

Salaries and Professional Fees 2022 2021 $ Increase/(Decrease) % Change

Total Salaries $584,080 $513,239 $70,841 13.8%

Same Center Salaries $536,480 $481,448 $55,032 11.4%

Excluded Sites $47,600 $31,791 — —%

Growth in procedure volumes accounted for a portion of the increase in salary expense.

However, we are experiencing tight labor markets and higher labor costs as we seek to retain and recruit qualified staff.

Stock-based compensation

Stock-based compensation decreased $3.2 million, or 15.9% to approximately $17.0 million for the nine months ended September 30, 2022 compared to $20.2 million for nine months ended September 30, 2021.

The decrease is a result of a one time pandemic related stock awards to employees that were granted in the second quarter 2021.

There was no similar one-time award granted in 2022.

Building and equipment rental

In Thousands Nine Months Ended September 30,

Building & Equipment Rental 2022 2021 $ Increase/(Decrease) % Change

Total $92,250 $91,253 $997 1.1%

Same Center $75,159 $76,843 $(1,684) (2.2)%

Excluded Sites $17,091 $14,410 — —%

Medical supplies

In Thousands Nine Months Ended September 30,

Medical Supplies Expense 2022 2021 $ Increase/(Decrease) % Change

Total $48,200 $42,246 $5,954 14.1%

Same Center $43,604 $39,563 $4,041 10.2%

Excluded Sites $4,596 $2,683 — —%

Increased medical supplies expense corresponds to the 5.8% growth in advanced radiology volumes as noted above combined with price increases for the contrasting agents utilized in their administration.

Other operating expenses

In Thousands Nine Months Ended September 30,

Other Operating Expenses 2022 2021 $ Increase/(Decrease) % Change

Total $175,806 $167,992 $7,814 4.7%

Same Center $158,789 $155,593 $3,196 2.1%

Excluded Sites $17,017 $12,399 — —%

The increase in other operating expenses was lower than the growth in overall revenue for the period.

Additional segment operating and non operating expenses:

In Thousands Nine Months Ended September 30,

2022 2021 $ Increase/(Decrease) % Change

Depreciation and amortization $80,496 $70,924 $9,572 13.5%

Loss (gain) on disposal of equipment and other $936 ($279) $1,215 nm

Non-cash change in fair value of interest rate swaps ($39,576) ($14,149) (25,427) nm

Other expenses* $1,892 $6,852 ($4,960) nm

Severance $488 $715 (227) (31.7)%

nm= not meaningful

*Other expenses for 2021 include $6.0 million of debt extinguishment and restructuring expenses related to to our Barclays Restated Credit Agreement.

See Note 6, Credit Facilities and Notes Payable in the notes to consolidated financials statements for more information on our secured credit facilities.

Interest expense

In Thousands Nine Months Ended September 30,

Interest Expense 2022 2021 $ Increase/(Decrease) % Change

Total Interest Expense $35,398 $37,028 $(1,630) (4.4) %

Interest related to derivatives* $8,195 $11,034

Interest related to amortization** $1,942 $2,725

Adjusted Interest Expense*** $25,261 $23,269 $1,992 8.6 %

* Includes interest on derivatives not related to debt obligations.

** 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.

Excluding interest expense for derivatives and amortization for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, adjusted interest expense increased $2.0 million, or 8.6%.

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 rise in the near term.

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

Equity in earnings from unconsolidated joint ventures

For the nine months ended September 30, 2022 we recognized equity in earnings from unconsolidated joint ventures in the amount of $8.4 million and for the nine months ended September 30, 2021 we recognized equity in earnings from unconsolidated joint ventures of $8.3 million, a decrease of $0.1 million or 1.1%.

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.

For the three months ended March 31, 2023 we recognized equity in earnings from unconsolidated joint ventures in the amount of $1.4 million and for three months ended March 31, 2022 we recognized equity in earnings from unconsolidated joint ventures of $2.5 million, an decrease of $1.1 million or 43.3%.

The decrease was mainly related to the equity in earnings received from our venture operations in Arizona.

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

We are developing our AI segment initially through acquisition activity.

Our acquisitions of Nulogix and Deephealth comprise the results for 2021.

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

The breakdown of revenue and expenses of the segment for the three and nine months ended September 30, 2022 and 2021 are as follows:

In Thousands Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 $ Increase/(Decrease) % Change 2022 2021 $ Increase/(Decrease) % Change

The breakdown of revenue and expenses of the segment for the three months ended March 31, 2023 and 2022 are as follows:

In Thousands Three Months Ended March 31,

2023 2022 $ Change % Change

Statement of Operations

Revenue $900 $496 $404 nm $3,056 $496 $2,560 nm

Salaries and Wages 3,640 706 2,934 nm $11,371 $1,988 $9,383 nm

Stock compensation 713 444 269 nm 2,119 1,353 766 nm

Other operating 1,722 96 1,626 nm 3,938 324 3,614 nm

Revenue $2,133 $599 $1,534 256.1 %

Salaries and Wages $5,131 $3,284 $1,847 56.2 %

Stock Compensation 657 745 (88) (11.8) %

Other operating 1,497 900 597 66.3 %

Depreciation & Amort.

1,639 170 1,469 nm 4,713 348 4,365 nm

Other operating loss 6 — 6 nm 26 — 26 nm

Severance 8 — 8 nm 8 — 8 nm

Total operating expenses 7,728 1,416 6,312 nm 22,175 4,013 18,162 nm

Loss from Operations (6,828) (920) (5,908) nm (19,119) (3,517) (15,602) nm

Other expense (income) 959 (401) 1,360 nm (329) 891 (1,220) nm

Income before taxes (7,787) (519) (7,268) nm (18,790) (4,408) (14,382) nm

Income taxes — — — nm (1,457) — (1,457) nm

Segment net loss ($7,787) ($519) ($7,268) nm ($17,333) ($4,408) ($12,925) nm

1,724 1,313 411 31.3 %

Other operating loss (gain) 2 (26) 28 (107.7) %

Severance 12 — 12 — %

Total operating expenses 9,023 6,216 2,807 45.2 %

Loss from Operations (6,890) (5,617) (1,273) 22.7 %

Other expense (income) 703 (504) 1,207 239.5 %

Income before taxes (7,593) (5,113) (2,480) 48.5 %

Income taxes — (667) 667 (100.0) %

Segment net loss (7,593) ($4,446) ($3,147) 70.8 %

Revenues for AI segment increased over the prior year as our Enhance Brest Caner Detection program powered by DeepHealth AI has been introduced in the Florida, New Jersey and New York markets.

As we ramp up this program and develop additional products for other types of cancers, our expenses have also risen accordingly.

Segment growth will seen long term through the commercialization of our AI products and expansion of our various cancer detection programs.

Adjusted EBITDA

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We believe that, in addition to GAAP metrics, certain non-GAAP metrics, such as Adjusted EBITDA assist us in measuring our business performance, cash generated from operations, leverage capacity and ability to service our debt obligations.

We believe this information is useful to investors and other interested parties because we are highly leveraged and our non-GAAP metrics remove non-cash and certain other charges that occur in the affected period and provide a basis for measuring the Company's financial condition against other quarters.

We define Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, each from continuing operations and excluding losses or gains on the disposal of equipment, other income or loss, loss on debt extinguishment, bargain purchase gains and non-cash equity compensation.

Adjusted EBITDA includes equity earnings in unconsolidated operations and subtracts allocations of earnings to noncontrolling interests in subsidiaries, and is adjusted for non-cash or extraordinary and one-time events taking place during the period.

We have not made specific adjustments to our calculation of Adjusted EBITDA in response to COVID 19.

Our net income reflected below includes the effect of revenue received under the Provider Relief Fund of $6.3 million for the nine months ended September 30, 2021.

Adjusted EBITDA should not be considered a measure of financial performance under GAAP, and the items excluded from 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.

This metric, as presented, may not be comparable to other similarly titled measures of other companies.

Adjusted EBITDA is most comparable to the GAAP financial measure net income attributable to RadNet, Inc.

common stockholders.

Our Adjusted EBITDA metric removes non-cash and non-recurring charges that occur in the affected period and provides a basis for measuring the Company’s core financial performance against other periods.

We define Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, as adjusted to exclude losses or gains on the disposal of equipment, other income or loss, loss on debt extinguishment, bargain purchase gains, loss on de-consolidation of joint ventures and non-cash equity compensation.

Adjusted EBITDA includes equity earnings in unconsolidated operations and subtracts allocations of earnings to non-controlling interests in subsidiaries, and is adjusted for non-cash or one-time events that take place during the period.

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 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.

The following is a reconciliation of GAAP net income attributable to RadNet, Inc.

common stockholders to Adjusted EBITDA for the three and nine months ended September 30, 2022 and 2021, respectively.

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Net income attributable to RadNet, Inc.

common stockholders to Adjusted EBITDA for the three months ended March 31, 2023 and 2022, respectively.

Three Months Ended March 31,

Net (loss) income income attributable to RadNet, Inc.

common stockholders $ (21,005) $ 3,013

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Non-cash employee stock-based compensation 12,185 11,102

(Gain) loss on sale and disposal of equipment and other (247) 2,595 962 (279)

Debt restructuring and loss on extinguishment expenses — — — 6,044

Non-cash change in fair value of interest rate swaps (12,451) (2,870) (39,576) (14,149)

Loss on sale and disposal of equipment and other 579 1,128

Non-cash change in fair value of interest rate hedge 4,093 (20,819)

Other adjustment to joint venture investment — —

1 unchanged sentence

Legal settlements — 2,197

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

Contingent Consideration 1,616 —

Non operational rent expenses 959 938

Adjusted EBITDA including losses from AI Segment & Provider Relief Funding $ 48,165 $ 38,132

Provider relief funding — — — (6,291)

Adjusted EBITDA including losses from AI Segment and excluding benefit from Provider Relief Funding $ 48,165 $ 38,132

Adjusted EBITDA losses from AI Segment 4,462 306 12,253 1,816

EBITDA Losses from AI Segment 4,496 3,585

Adjusted EBITDA excluding losses from AI Segment & Provider Relief Funding $ 52,661 $ 41,717

The following table is a reconciliation of GAAP net income for our AI Segment to Adjusted EBITDA for the three and nine months ended September 30, 2022 and 2021, respectively.

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

The following table is a reconciliation of GAAP net income for our AI Segment to Adjusted EBITDA for the three months ended March 31, 2023 and 2022, respectively.

Three Months Ended March 31,

Segment net loss $ (7,593) $ (4,446)

Stock Compensation 657 745

Depreciation & Amort 1,639 170 4,713 348

Depreciation & Amortization 1,724 1,313

Other operating loss 2 (26)

1 unchanged sentence

Severance 12 —

Interest — (7)

Income taxes — (667)

Adjusted EBITDA AI Segment $ (4,462) $ (306) $ (12,253) $ (1,816)

Adjusted EBITDA including losses from AI Segment & Provider Relief Funding $ (4,496) $ (3,585)

Liquidity and Capital Resources

The following table summarizes key balance sheet data related to our liquidity as of September 30, 2022 and December 31, 2021 and income statement data for the nine months ended September 30, 2022 and 2021 (in thousands):

The following table summarizes key balance sheet data related to our liquidity as of March 31, 2023 and December 31, 2022 and income statement data for the three months ended March 31, 2023 and 2022 (in thousands):

Balance Sheet Data:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Cash and cash equivalents $ 90,844 $ 127,834

2 unchanged sentences

Stockholders' equity 493,101 491,452

Income statement data for the nine months ended September 30,

Income statement data for the three months ended March 31,

Total net revenue $ 390,564 $ 341,767

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In addition to operations, we require a significant amount of capital for the initial start-up and development of new diagnostic imaging centers, the acquisition of additional centers and new diagnostic imaging equipment.

Because our cash flows from operations have been insufficient to fund all of these capital requirements, we have depended on the availability of financing under credit arrangements with third parties.

We have credit available from our current credit facilities and borrowing under those facilities is subject to continued compliance with lending covenants.

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Sources and Uses of Cash

The following table summarizes key components of our sources and uses of cash for the nine months ended:

Cash Flow Data September 30, 2022 September 30, 2021

The following table summarizes key components of our sources and uses of cash (in thousands) for the three months ended:

Cash Flow Data March 31, 2023 March 31, 2022

Cash provided by operating activities $ 32,616 $ 901

Cash used in investing activities (65,556) (61,564)

Cash (used in) provided by financing activities (9,938) 108,478

Cash provided by operating activities was $92.8 million and $100.3 million for the nine months ended September 30, 2022 and September 30, 2021, respectively.

Our cash provided by operating activities for the nine months ended September 30, 2022 was affected by the non-cash change in fair value of our interest rate swap of $39.6 million.

Cash used in investing activities for the nine months ended September 30, 2022, included purchases of property and equipment for approximately $98.6 million and the acquisition of imaging business and other assets for $26.0 million.

Cash used in financing activities (3,821) (3,313)

Our cash provided by operating activities for the three months ended March 31, 2022 was affected by the non-cash change in fair value of our interest rate hedge of $20.8 million.

Cash used in investing activities for the three months ended March 31, 2023, included purchases of property and equipment for approximately $55.9 million and the acquisition of imaging business and other assets for $9.6 million.

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

Cash used in financing activities of $9.9 million for the nine months ended September 30, 2022, was due to payment on our term loan obligations.

Cash provided by financing activities for the nine months ended September 30, 2021 was due to the refinancing of our term loan obligations under our secured credit facilities on April 23, 2021.

Please see Note 6, Credit Facilities and Notes Payable in the notes to consolidated financials statements for more information.

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

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 September 30, 2022 we have $15.5 million, net of discount, remaining to be collected on these agreements.

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

Cash used in financing activities of $3.8 million for the three months ended March 31, 2023, was due to payment on our term loan obligations and equipment notes.

Please see Note 6, Credit Facilities and Notes Payable in the notes to consolidated financials statements included in this report for more information.

Senior Secured 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 Bank.

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.

As of September 30, 2022, we were in compliance with all covenants under our credit facilities.

Deferred financing costs at September 30, 2022, net of accumulated amortization, was $1.8 million and is specifically related to our Barclays revolving credit facility.

Included in our condensed consolidated balance sheets at September 30, 2022 are $757.9 million of total term loan debt (exclusive of unamortized discounts of $12.2 million) in thousands:

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

As of March 31, 2023, we were in compliance with all covenants under our credit facilities.

Deferred financing costs at March 31, 2023, net of accumulated amortization, were $2.1 million and are specifically related to our revolving credit facilities.

Included in our condensed consolidated balance sheets at March 31, 2023 are $860.4 million of total term loan debt (exclusive of unamortized discounts of $11.8 million) in thousands:

Face Value Discount Total Carrying

First Lien Term Loans $ 712,313 $ (10,606) $ 701,707

SunTrust Term Loan 42,000 — 42,000

Truist Term Loan 148,125 (1,188) 146,937

Total Term Loans $ 860,438 $ (11,794) $ 848,644

At September 30, 2022, we had no borrowings under our Barclays or SunTrust revolving credit facilities.

After reserves for outstanding letters of credit of $7.6 million on our Barclays Revolving Credit Facility, we had $187.4 million available for borrowing and $30.0 million available under our SunTrust Revolving Credit Facility.

On October 7, 2022, after the period covered by this report, our consolidated subsidiary NJIN entered into a Second Amended and Restated Credit and Term Loan Agreement which provided for a $150.0 million term loan.

The proceeds of the term loan were used to partially fund the $112.6 million purchase of Montclair Radiological Associates, to refinance the outstanding $42 million term loan and to pay fees and expenses associated with refinancing transaction.

In connection with the Second Amended and Restated Credit and Term Loan Agreement, the revolving credit facility was increased from $30 million to $50 million.

At March 31, 2023, we had no borrowings under our Barclays or Truist revolving credit facilities.

After reserves for outstanding letters of credit of $7.6 million, we have $187.4 million available for borrowing under our Barclays Credit Facility and $50.0 million available under our Truist Revolving Credit Facility.

We expect our existing capital resources, anticipated cash from operations and our borrowing capacity under our credit facilities will be sufficient to sustain our operations for the next twelve months and the foreseeable future.

Please see Note 6, Credit Facilities and Notes Payable in the notes to consolidated financials statements for more information on our secured credit facilities.

Please see Note 6, Credit Facilities and Notes Payable in the notes to consolidated financials statements included in this report for more information on our secured credit facilities.

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-Q

Item 2. Management’s Discussion and Analysis