Mark Stolper Chief Financial Officer September 2019 NASDAQ: RDNT 1
Safe Harbor This presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Specifically, statements concerning RadNet’s ability to continue to grow the business by generating patient referrals and contracts with radiology practices, integrate acquired businesses, recruit and retain technologists, and receive third-party reimbursement for diagnostic imaging services, as well as RadNet's financial guidance, among others, are forward-looking statements within the meaning of the Safe Harbor. Forward-looking statements are based on management's current, preliminary expectations and are subject to risks and uncertainties which may cause RadNet's actual results to differ materially from the statements contained herein. These risks and uncertainties as well as those risks set forth in RadNet’s reports filed with the SEC, including RadNet’s annual report on Form 10-K, for the year ended December 31, 2018. Undue reliance should not be placed on forward-looking statements, especially guidance on future financial performance, which speaks only as of the date it is made. RadNet undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date they were made, or to reflect the occurrence of unanticipated events. 2
1 Introduction 2 Diagnostic Imaging Industry Overview 3 Overview of RadNet 4 Financial Information and Core Strategy 3
RadNet Summary Largest national owner and operator of fixed-site diagnostic imaging centers, with 340 locations • Founded as a one center CA operation in 1980 • Major consolidator in the highly fragmented imaging industry • 25% of RadNet centers are held within joint ventures with large health systems • Ancillary revenue opportunities (Breast Oncology, Radiology Software, In-patient Staffing, Teleradiology) Quadrupled size of company since 2006 • 2019 Revenue Guidance = $1,125mm 1 • 2019 EBITDA Guidance = $163mm 1 • 8,000+ employees in 6 states Concentrated regional networks in CA, MD/DE, NJ and NY (337 of our 340 sites) • Strategy is to be the clear leader in regional markets • Strategy provides operational efficiencies and marketing/contracting benefits with health plans 1 Represents midpoint of Company’s 2019 updated guidance levels. 4
RadNet Summary (continued) Emphasis placed on scale and “multi-modality” strategy • One-stop-shopping for referral sources • Lessens our exposure to reimbursement changes; diversifies revenue base Best positioned company to capitalize on industry consolidation and organic growth opportunities • No other fixed site imaging center company is even half the size of RadNet in terms of revenue and number of centers Only imaging center player to provide exclusive managed care capitation arrangements with prominent medical groups and Independent Physician Associations (IPAs) • Over 10% of RadNet Revenue / 35+ capitation customers / 1.7 million lives under management RadNet’s management/board own over 20% of common stock 5
How We Work Referring RadNet Physician Why RadNet? • Service • Relationships • Marketing Report Exam • Payer Networks Created Performed • Technology • Radiologist Expertise Radiologist Interpretation 6
Types of Imaging Exams: Modalities Advanced Imaging MRI CT PET Produces high-resolution cross-sectional images Produces high-resolution cross-sectional images. Determines metabolic activity. Applications: of soft tissue. Applications: Assesses brain, spinal Applications: Assesses tumors, strokes, hemorrhages Assesses tumors, epilepsy and cardiac function. cord and interior ligaments. and infections. Routine Imaging Nuclear Medicine Fluoroscopy Produces images of anatomical structures. Video viewing of organs. Applications: Applications: Assesses organ function in heart, Real-time monitoring. kidney, thyroid and bones. X-Ray Ultrasound Mammography Records images of organs and Produces visual images of internal organs. Visualizes breast tissue. Applications : Primary structures on film. Applications: Viewing soft tissue. screening tool for breast cancer. 7
1 Introduction 2 Diagnostic Imaging Industry Overview 3 Overview of RadNet 4 Financial Information and Core Strategy 8
Diagnostic Imaging: A Large and Growing Market Total Medical Imaging Market Revenue Forecast US Imaging Centers (by state and region, 2013) National imaging market is estimated Industry remains highly fragmented; vast to be over $100 billion number of mom-and-pops and hospitals • Approx. 40% is non-hospital imaging • Believed to be over 6,000 imaging locations (i.e., freestanding centers – like RadNet and across the U.S. imaging completed within doctor offices). • Number peaked in 2012 and has been declining • Approx. 60% imaging occurs within hospitals. • RadNet has a meaningful, non-hospital based - More expensive for patients and market share within its geographies. their insurance companies - Inferior service - More difficult access and parking - Often no sub-specialized radiologist readers 9
Diagnostic Imaging: A Large and Growing Market Growth has resulted from . . . • Aging population—65-year-old demographic is expected to increase significantly Imaging has been • Growing population—particularly in California, our largest market shown to reduce • Technology advances—expanding cost-effective applications costs of Healthcare for diagnostic imaging Delivery System • Wider physician and payor acceptance for imaging • Greater consumer and physician awareness of and demand from: for earlier intervention and preventive diagnostic screening • Earlier and more accurate detection/diagnosis of disease and injury • Preventative screening . . . resulting in money saved during treatment phase. 10
Industry Which Has Been Under Pressure: Scale is Vital for Success Trend has been downward in reimbursement for almost a decade • Medicare pricing has decreased steadily from 2007-2014 • Private payers have also tried to lower reimbursement Volumes during the economic slowdown were challenged for the first time in decades and the participation in high deductible health insurance programs have patients rationing their own care • Visits to primary care and specialist physicians declined • Caused referrals to ancillary service providers (like imaging) to decline But, despite some recent improvement in the industry, outlook still remains uncertain • Availability of capital remains constrained • Medicare reimbursement unpredictible • Costs to operate business remain high • Requirement for ongoing investment in plant and equipment • Rising cost of employee salaries, benefits, etc. 11
Industry Consolidation and Rationalization “Mom-and-pop” lack necessary economies of scale • Not well capitalized and have a higher cost structure In 2015-2019, we • Single-modality facilities that are more impacted by completed over reimbursement changes and competition from multi- $185mm of acquisitions modality facilities • New York Radiology Partners • Unable to do network contracting or capitate with payors • California Radiology • Diagnostic Imaging Group Higher facility accreditation / quality standards • Diagnostic Imaging Associates of Delaware Fear of survival and many more sellers than buyers result in • Medical Arts attractive acquisition multiples • Kern Radiology • Marginal operators are choosing to close and others can be We have also been acquired at 3–5x EBITDA expanding through • Operators want to be consolidated into RadNet, which offers health system joint long-term stability ventures, particularly • Few other acquirers in RadNet’s core markets in CA • Cedars Sinai • MemorialCare • Dignity Health 12
1 Introduction 2 Diagnostic Imaging Industry Overview 3 Overview of RadNet 4 Financial Information and Core Strategy 13
A Sample of our Local Branding 14
Scale and Leverage Over Competitors Founded in 1980 and is the major consolidator Largest owner-operator in the highly fragmented imaging industry. of fixed-site imaging centers in the U.S. 340 Imaging Centers RadNet operates in states with ~25% of the U.S. population. NJ: 21 DE: 12 NY: 101 MD: 58 FL: 3 CA: 145 +750 +8,000 18 Radiologists with Employees Joint Ventures Subspecialties 15
Favorable Revenue Mix Mitigates Reimbursement Risk Emphasis placed on multi-modality strategy • “One-stop-shopping” for referral sources • Lessens exposure to reimbursement changes, diversifies revenue base Extensive offering of all routine imaging procedures partially insulates us from reimbursement cuts, which generally impact MRI, CT and PET/CT modalities disproportionately. Q2 2019 Scan Volume by Modality Q2 2019 Net Revenue by Modality (1) Nuclear Medicine Nuclear Medicine MRI Other 0.5% 1.1% 13.7% 5.0% CT Other 10.8% 5.2% PET / CT 5.5% MRI PET / CT X-Ray 35.8% 0.5% Mamm 8.3% o 16.8% Ultrasound 12.4% X-Ray 29.6% CT Mammo 17.1% Ultrasound 14.8% 22.9% Net Revenue by modality based upon global payments received from consolidated Imaging Centers from that period’s dates of service 16
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