RadNet's Q3 2025: Contradictions Emerge on Digital Health Revenue, iCAD Acquisition Impact, and EBCD Reimbursement

Date of Call: None provided

Financials Results

• Revenue: Total company revenue increased 13.4% YOY (quarterly record; exceeded internal budgets)

Guidance:

• Increased 2025 imaging center revenue guidance by +$50M (low end) and +$30M (high end).
• Increased 2025 adjusted EBITDA guidance by +$5M at both low and high ends.
• Increased 2025 capital expenditures guidance by $5M to fund growth initiatives.
• Lowered 2025 cash interest expense guidance by $4M at both low and high ends (reflecting higher cash interest income).
• Digital health revenue guidance increased by $5M to reflect iCAD contribution; digital health adjusted EBITDA guidance unchanged due to cost synergies achieved.
• CMS final 2026 physician fee schedule expected to add ~$4–$5M in Medicare revenue for 2026.

Business Commentary:

* Revenue and Adjusted EBITDA Growth: - RadNet reported a 13.4% increase in total company revenue and a 15.2% increase in adjusted EBITDA relative to the same period last year. - The growth was driven by strong performance in advanced imaging, increased adoption of AI-driven tools, and efficient use of capacity at existing centers.

• Advanced Imaging Expansion:
• Aggregate MRI volume increased by 14.8%, CT volume by 9.4%, and PET/CT volume by 21.1% from last year’s third quarter.

• This was attributed to equipment upgrades, AI-assisted scheduling, and an increase in specialized imaging programs like prostate PET/CT and amyloid brain PET/CT.

• Digital Health Revenue Growth:

• Revenue within the digital health operating segment increased by 51.6% from last year’s third quarter, with a 112% increase in AI revenue.

• The growth was supported by the acquisition of iCAD and the integration of its AI solutions, along with expanded adoption of AI-driven breast cancer screening programs.

• Operating Efficiency and Cost Management:

• Adjusted EBITDA margins improved by 26 basis points from 16% in the third quarter of last year to 16.2% this year.
• This improvement was due to effective cost management and efficiency gains from the implementation of AI tools and remote scanning technologies.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management: "I am very pleased with the performance in the third quarter. Revenue and adjusted EBITDA were both quarterly records." Total company revenue +13.4% and adjusted EBITDA +15.2% YOY; adjusted EBITDA margin up 26 bps (16.0% -> 16.2%). Company raised full-year 2025 guidance and highlighted improved Medicare 2026 rates adding ~$4–$5M.

Q&A:

• Question from David McDonald (Trist): A couple of quick digital health questions to start. Can you guys talk a little bit about on TechLive, you talked about the New York market on the 2Q call, just where we are in terms of rollout with other geographic regions. And then secondly, just on kind of the dynamic scheduling, can you provide a little more detail there? Is that you guys are doing predictive modeling around who may cancel or just increasing throughput on the scheduling side? ... Just one other quick follow-up, just to pay your question. Can you guys just provide a quick update? It sounds like additional progress on coverage for EBCD. Just any conversations there? Do you expect to announce additional progress there? Secondly, just on some of your capitated contracts, sequentially, it looked like you had a little bit of a bump in revenue. Are you seeing any of your capitated contracts start to circle back and kind of realize that the price increases you guys need are pretty reasonable relative to kind of what they’d be looking at otherwise?
  Response: TechLive rollout nearly complete by year-end/early Q1, substantially reducing exam-room closures (e.g., 42% fewer closures in 83 centers) and increasing MRI capacity; dynamic scheduling uses predictive AI to overbook and fill no-shows. EBCD adoption accelerating (45% patient opt-in, >50% expected early 2026) with positive payer discussions and some capitated groups now covering EBCD or converting to higher-fee-for-service arrangements.

• Question from Brian Tantilet (Jefferies): I remember last quarter, you talked about the outlook for joint ventures and how you’re getting excited about opportunities that you expect towards year-end. Just curious, where does that stand in terms of partnerships with health systems or physician groups? ... Maybe to piggyback on that, Mark, as I think about 2026, I know too early for guidance, but as we think through topic de jure, right, EAPTCs, I’m just curious what your health insurance exchange exposure is, or how do you view that? How should we be thinking about the inflationary environment for wages as Dr. Berger talked about radiation technologists and radiologist costs?
  Response: Inbound interest from health systems for JVs/partnerships is robust as they seek help with radiology staffing and strategy; exposure to Medicaid/exchange is minimal (~2.5% of revenue). Labor remains a challenge but is stabilizing; RadNet is investing in recruitment/training, pay adjustments and digital solutions (TechLive, DeepHealth) to mitigate workforce inflation.

• Question from John Ranson (Raymond James): With the iCAD acquisition and your AI capabilities that you currently just use for in-house your own centers, is there a future where RadNet develops maybe a virtual radiology capability and uses its enhanced EBCD technology to do reads just for scans, not just on the NS4 walls? ... A few months now, nine months now into this launch of DeepHealth, where are you getting traction in the market? I know it’s a modular solution, but what modular solutions are getting traction against the sea of what’s been described as pretty good point solutions? Where are clients latching on, and what’s the opportunity set?
  Response: RadNet views AI-enabled virtual reading as inevitable and complementary to radiologists (augmenting accuracy and throughput); DeepHealth has strong internal adoption, is maturing its modules for external commercialization next year, and offers a platform approach to bundle point solutions for easier implementation.

• Question from Andrew Mock (Barclays): From a personnel standpoint and following the iCAD acquisition, do you have the appropriate number of salespeople in the seats to sell DeepHealth, or is there more hiring needed on that front? ... Maybe just a follow-up on EBITDA margins in the quarter. I was a little surprised that you did not see better flow-through on very strong advanced imaging volumes. Anything to call out on the cost side or incremental margins in the quarter preventing margins from expanding more?
  Response: iCAD materially expanded the salesforce enabling accelerated cross-selling (additional hires still required); margin flow-through this quarter was modest due to mix and operational capacity limits, but management expects digital health and AI deployment to drive greater margin expansion over time.

• Question from 1G (B. Riley Securities): Maybe can you clarify the digital health revenue for 4Q after acquisition of iCAD, which contributes about $5 million a quarter in revenue? Does it mean the digital health will be flat or even decreasing year over year for 4Q? ... Within the 15%-20% year-over-year volume growth of PET/CT, can you comment on the growth from oncology versus Alzheimer’s? And are you preparing for new agent launching in 2026?
  Response: Digital health guidance was increased by $5M to include iCAD (iCAD contributed ~$3.9M in Q3) and a strong Q4 is expected. PET/CT growth is driven by PSMA (≈12% of PET/CT) and amyloid brain studies (≈8%); management expects additional novel tracers to expand PET/CT utilization in coming years.

• Question from Jim Sidotti (Sidotti & Company): You said you added one center in the quarter. Are you up to 406 centers at this point? Where do you think you’ll be by the end of 2025? Also, can you just give us some broad what you paid for AlphaRT, how you paid for it, just some magnitude on what that was?
  Response: RadNet had 407 locations as of 9/30/2025 and expects to be higher by year-end (additional de novos/acquisitions pending). AlphaRT was acquired for roughly $5M paid in stock; it provides remote technologist staffing, an AI MRI-safety camera, and a tech-assistant training/certification platform that complements TechLive.

Contradiction Point 1

Digital Health Revenue and iCAD Acquisition Impact

It involves differing expectations regarding the impact of the iCAD acquisition on digital health revenue, which is crucial for understanding the company's growth strategy in the digital health space.

Following the iCAD acquisition, will digital health revenue be flat or declining year-over-year in Q4? - 1G (B. Riley Securities)

2025Q3: Digital health revenue is not expected to be flat or decreasing, with strong performance anticipated in 4Q. The contribution from iCAD will be notably positive for the year. - Mark Stolper(CFO)

How will the incremental capacity from TechLive, See-Mode, and de novo facilities impact the leverage of your existing workforce? - David Samuel MacDonald (Truist Securities)

2025Q2: With respect to the accounting for iCAD, obviously, we're going to see a significant year-over-year increase in revenue, more than what you see in our overall results. - Howard Berger(CEO)

Contradiction Point 2

Margin Improvement from Digital Health Initiatives

It involves differing expectations regarding the margin impact of digital health initiatives, which are critical for understanding the company's ability to drive profitability through technology investments.

Why didn't higher advanced imaging volumes lead to improved margins? Were there any cost-related impacts? - Andrew Mock (Barclays)

2025Q3: Capacity creation has driven growth, but margins are expected to benefit more from digital health investments and AI tools in the future, which should enhance operational efficiencies. - Howard Berger(CEO)

How do you measure the benefits of technologies like See-Mode, and what impact will these additions have on margins? - Brian Gil Tanquilut (Jefferies LLC)

2025Q2: While there is significant opportunity to improve operating metrics, which will have a flow-through to EBITDA, this is a multi-year journey that will be reflected in our bottom line. - Mark Stolper(CFO)

Contradiction Point 3

EBCD Reimbursement and Adoption

It involves the timing and progress of EBCD reimbursement, which is crucial for the adoption and financial impact of this innovative technology.

Can you provide an update on EBCD coverage progress and traction with capitated contracts? - David McDonald (Trist)

2025Q3: Discussions with commercial payers for EBCD coverage are ongoing, with positive momentum. Capitated contracts are showing increased adoption rates, now covering over 700,000 members. EBCD is also being reimbursed by certain capitated programs, enhancing compliance and patient outcomes. - Howard Berger(CEO)

What is the status and outlook for EBCD reimbursement under Medicare? - Larry Solow (CJS Securities)

2025Q1: Adoption of EBCD for reimbursement is complex but expected from commercial payors. CMS adoption is challenging, similar to past experiences. Commercial payors and self-insurers are positive about EBCD's value. - Howard Berger(CEO)

Contradiction Point 4

Labor Cost Management and Hiring Trends

It involves the strategies and progress in managing labor costs and hiring trends, which are critical for operational efficiency and financial performance.

What is RadNet's exposure to healthcare insurance exchanges? How do you assess inflation's impact on labor costs like radiation technologists? - Brian Tantilet (Jefferies)

2025Q3: Labor remains a challenge, but efforts to stabilize and retain talent are ongoing, including providing educational opportunities and offering higher compensation. - Mark Stolper(CFO)

How are you managing tech hiring and labor costs? - Grayson McAlister (Truist Securities)

2025Q1: $45 million of additional labor costs is on track, with some improvement in hiring. TechLive has been positively received and aids in staffing. Hiring is facilitated by training programs, with technologist hiring showing improvement. Virtual modules are being implemented to improve operational efficiency. - Howard Berger(CEO)

Contradiction Point 5

Digital Health Revenue Growth

It involves differing expectations for digital health revenue growth, which is a significant strategic focus for the company.

Will digital health revenue be flat or declining YoY in Q4 following the iCAD acquisition? - 1G (B. Riley Securities)

2025Q3: Digital health revenue is not expected to be flat or decreasing, with strong performance anticipated in 4Q. - Mark Stolper(CFO)

Can you break down the components of the 2025 Digital Health revenue guidance? - John Ransom (Raymond James)

2024Q4: Total Digital Health revenue expected to be $80-90 million, with AI components contributing about $25-30 million. - Mark Stolper(CFO)