# RadNet, Inc. (RDNT) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from RadNet, Inc.'s 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/790526/000079052622000006/rdnt-20211231.htm
Accession: 0000790526-22-000006
Filing date: 2022-03-01
Report date: 2021-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/RDNT/
All MD&A years: /company/RDNT/mda/
Next year: /company/RDNT/mda/fy2022/ (FY 2022)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the results of operations and financial condition of RadNet Inc. 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.

Overview

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. 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.

The following table shows our centers in operation at year end and revenues for the years ended December 31, 2021, 2020 and 2019:

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2021","","2020","","2019"],["Centers in operation","347","","","331","","","335"],["Total revenue (millions)","$","1,315","","","$","1,072","","","$","1,154"]]
[[/GREPCENT_TABLE]]

Our revenue is derived from a diverse mix of payors, including private payors, managed care capitated payors and government payors. 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 service fee revenue, net of contractual allowances and discounts, implicit price concessions, and revenue under capitation arrangements for the years ended December 31, 2021, 2020 and 2019 are summarized in the following table (in thousands):

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[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2021","","2020","","2019"],["Commercial insurance","$","743,462","","","$","584,035","","","$","642,341"],["Medicare","280,911","","","217,928","","","237,427"],["Medicaid","34,731","","","25,619","","","28,283"],["Workers' compensation/personal injury","44,235","","","33,478","","","42,792"],["Other patient revenue","19,398","","","25,314","","","23,862"],["Management fee revenue","19,630","","","11,253","","","11,659"],["Imaging on call and software","10,525","","","10,798","","","17,317"],["Other","13,851","","","23,297","","","24,555"],["Service fee revenue","1,166,743","","","931,722","","","1,028,236"],["Revenue under capitation arrangements","148,334","","","140,118","","","125,943"],["Total revenue","$","1,315,077","","","$","1,071,840","","","$","1,154,179"]]
[[/GREPCENT_TABLE]]

We typically experience some seasonality to our business. During the first quarter of each year we generally experience the lowest volumes of procedures and the lowest level of revenue for any quarter during the year. This is primarily the result of two factors. First, our volumes and revenue are typically impacted by winter weather conditions in our northeastern operations. It is common for snowstorms and other inclement weather to result in patient appointment cancellations and, in some cases, imaging center closures. Second, in recent years, we have observed greater participation in high deductible health plans by patients. As these high deductibles reset in January for most of these patients, we have observed that patients utilize medical services less during the first quarter, when securing medical care will result in significant out-of-pocket expenditures.

Our 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 following table shows the number of systems that we had in operation as of the years ended December 31, 2021, 2020 and 2019:

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2021","","2020","","2019"],["MRI","323","","","293","","","288"],["CT","192","","","175","","","168"],["PET/CT","68","","","67","","","62"],["Mammography","358","","","315","","","303"],["Ultrasound","760","","","689","","","662"],["X-ray","415","","","376","","","343"],["Nuclear Medicine","55","","","57","","","50"],["Fluoroscopy","105","","","117","","","120"],["Total equipment","2,276","","","2,089","","","1,996"]]
[[/GREPCENT_TABLE]]

Acquisitions, Dispositions, Equity Investments and Business 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.

Acquisitions

Radiology Practice Acquisitions:

During 2021 and 2020, 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

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presence in the Arizona, New York City, New Jersey and California markets. We made a fair value determination of the acquired assets and assumed liabilities and the following were recorded (in thousands):

2021:

[[GREPCENT_TABLE]]
[["Entity","Date Acquired","Total Consideration","Property & Equipment","Right of Use Assets","Goodwill","Intangible Assets","Other Assets","Right of Use Liabilities"],["Personal Health Imaging PLLC*","2/1/2021","2,995","576","608","2,355","50","14","(608)"],["ZP Elmont LLC*","2/1/2021","2,194","1,112","\u2014","1,005","50","27","\u2014"],["ZP Freeport LLC*","2/1/2021","6,065","4,668","\u2014","1,328","40","29","\u2014"],["Broadway Medical Imaging LLC*","2/1/2021","1,155","1,076","446","6","50","23","(446)"],["3235 Hempstead LLC*","2/1/2021","9,386","5,667","\u2014","3,649","70","\u2014","\u2014"],["SLZM Realty LLC*","2/1/2021","13,671","4,617","\u2014","8,974","80","\u2014","\u2014"],["2012 Sunrise Merrick LLC*","2/1/2021","11,428","2,741","335","8,617","70","\u2014","(335)"],["ZP Bayside LLC*","3/1/2021","3,545","3,385","2,191","40","50","70","(2,191)"],["ZP Laurelton LLC*","3/1/2021","2,658","2,530","1,418","32","50","46","(1,418)"],["ZP Smith LLC*","3/1/2021","3,978","3,581","2,214","347","50","\u2014","(2,214)"],["ZP 907 Northern LLC*","4/1/2021","562","507","1,817","5","50","\u2014","(1,817)"],["William M. Kelly MD, Inc.* ^","5/1/2021","3,750","990","1,379","2,710","50","\u2014","(1,379)"],["60th Street MRI, LLC*","5/1/2021","400","85","\u2014","290","25","\u2014","\u2014"],["ZP Parkchester LLC*","5/1/2021","263","213","311","\u2014","50","\u2014","(311)"],["ZP Eastern LLC*","6/1/2021","2,868","2,801","1,951","17","50","\u2014","(1,951)"],["Tangent Associates LLC**","8/24/2021","2,025","10","\u2014","379","1,636","\u2014","\u2014"],["Mid Delaware Imaging P.A.","12/1/2021","6,023","590","\u2014","5,260","150","23","\u2014"],["William M. Kelly MD, Inc.* ^","12/6/2021","4,404","701","\u2014","3,653","50","\u2014","\u2014"],["William M. Kelly MD, Inc.* ^","12/31/2021","2,346","99","323","2,197","50","\u2014","(323)"],["","","79,716","35,949","12,993","40,864","2,671","232","(12,993)"]]
[[/GREPCENT_TABLE]]

*Fair Value Determination is Final

** All stock purchase through issuing 67,658 shares of our common stock.

^ William M. Kelly MD acquisitions consisted of various subsidiaries purchased separately.

2020:

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[[GREPCENT_TABLE]]
[["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","\u2014","(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","\u2014","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)"]]
[[/GREPCENT_TABLE]]

*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.

Dispositions

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.

Subsidiary activity

Formation of majority owned subsidiary

On January 1, 2021 we entered into the Simi Valley Imaging Group, LLC, a partnership with Simi Valley Hospital and Health Services ("Simi Adventist"). The operation will offer multi-modality imaging services out of two locations in Ventura County, California. Total investment in the venture is $0.4 million. RadNet contributed $0.3 million in assets for a 60.0% economic interest and Simi Adventist contributed assets totaling $0.1 million for a 40.0% economic interest.

Sale of ownership interest in a majority owned subsidiary

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Effective September 1, 2021 we completed the sale of a 24.9% ownership interest in our majority owned subsidiary West Valley Imaging Group, LLC for $13.1 million to Tarzana Medical Center, LLC. After the sale, our ownership interest in the subsidiary has reduced from 75.0% to 50.1% and we retain a controlling financial interest in the subsidiary. We recognized in additional paid in capital on our consolidated balance sheets, $4.2 million excess in consideration over the carrying value of the sold economic interest. Post the sale of our ownership interest we acquired from Tarzana Medical Center, LLC, certain tangible and intangible business assets for purchase consideration of approximately $5.2 million.

Equity Investments

Medic Vision, based in Israel, specializes in software packages that provide compliant radiation dose structured reporting and enhanced images from reduced dose CT scans. On March 24, 2017, we acquired an initial 12.50% equity interest in Medic Vision - Imaging Solutions Ltd for $1.0 million. We also received an option to exercise warrants to acquire up to an additional 12.50% equity interest for $1.4 million within one year from the initial share purchase date, if exercised in full. On March 1, 2018 we exercised our warrant in part and acquired an additional 1.96% for $0.2 million. Our initial equity interest has been diluted to 12.25% and our total equity investment stands at 14.21%. In accordance with accounting guidance, as we exercise no significant influence over Medic Vision’s operations, the investment is recorded at its cost of $1.2 million, given that the fair value is not readily determinable. No observable price changes or impairment in our investment was noted as of the year ended December 31, 2021.

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. On February 1, 2018, we purchased 2.1 million preferred shares in Turner Imaging Systems for $2.0 million. On January 1, 2019 we funded a convertible promissory note in the amount of $143,000 that converted to an additional 80,000 preferred shares on October 11, 2019. No observable price changes or impairment in our investment was noted for the year ended December 31, 2021.

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 its operations. No observable price changes or impairment in our investment was noted for the year ended December 31, 2021.

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.

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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.

Results of Operations

The following table sets forth, for the periods indicated, the percentage that certain items in the statements of operations bears to net revenue for the years 2021, 2020 and 2019.

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2021","","2020","","2019"],["REVENUE"],["Service fee revenue","88.7","%","","86.9","%","","89.1","%"],["Revenue under capitation arrangements","11.3","%","","13.1","%","","10.9","%"],["Total Revenue","100.0","%","","100.0","%","","100.0","%"],["Provider relief funding","0.7","%","","2.5","%","","\u2014","%"],["OPERATING EXPENSES"],["Cost of operations, excluding depreciation and amortization","85.4","%","","90.1","%","","86.6","%"],["Lease abandonment charges","1.5","%","","\u2014","%","","\u2014","%"],["Depreciation and amortization","7.4","%","","8.1","%","","7.0","%"],["Loss on sale and disposal of equipment","0.1","%","","0.1","%","","0.2","%"],["Loss on impairment","\u2014","%","","0.4","%","","\u2014","%"],["Severance costs","0.1","%","","0.4","%","","0.1","%"],["Total operating expenses","94.4","%","","99.1","%","","93.9","%"],["INCOME FROM OPERATIONS","6.3","%","","3.3","%","","6.1","%"],["OTHER INCOME AND EXPENSES"],["Interest expense","3.7","%","","4.3","%","","4.2","%"],["Equity in earnings of joint ventures","(0.8)","%","","(0.7)","%","","(0.7)","%"],["Non-cash change in fair value of interest rate hedge","(1.6)","%","","0.2","%","","\u2014","%"],["Gain on re-measurement of pre-existing interest","\u2014","%","","\u2014","%","","(0.1)","%"],["Loss (gain) on extinguishment of debt","0.5","%","","(0.4)","%","","\u2014","%"],["Other expenses","0.1","%","","\u2014","%","","0.1","%"],["Total other expenses","1.9","%","","3.4","%","","3.5","%"],["INCOME BEFORE INCOME TAXES","4.4","%","","(0.1)","%","","2.6","%"],["Provision for income taxes","(1.1)","%","","(0.1)","%","","(0.5)","%"],["NET INCOME","3.3","%","","(0.2)","%","","2.0","%"],["Net income attributable to noncontrolling interests","1.5","%","","1.2","%","","0.8","%"],["NET (LOSS) INCOME ATTRIBUTABLE TO RADNET, INC."],["COMMON STOCKHOLDERS","1.8","%","","(1.4)","%","","1.3","%"]]
[[/GREPCENT_TABLE]]

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

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.

Total Revenue inclusive of Provider Relief Funding for 2021 & 2020                                                                        

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[[GREPCENT_TABLE]]
[["In Thousands","Year Ended December 31,"],["Revenue","2021","2020","$ Increase/(Decrease)","% Change"],["Total Revenue","$1,324,187","$1,098,104","$226,083","20.6%"],["Same Center Revenue","$1,209,749","$1,053,339","$156,410","14.9%"]]
[[/GREPCENT_TABLE]]

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.

Operating Expenses

Total operating expenses for the twelve months ended December 31, 2021 increased approximately $179.2 million, or 16.9%, from $1.06 billion for the twelve months ended December 31, 2020 to $1.24 billion for the twelve months ended December 31, 2021. The following table sets forth our cost of operations and total operating expenses for the twelve months ended December 31, 2021 and 2020 (in thousands):

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2021","","2020"],["Salaries and professional reading fees, excluding stock-based compensation","$","686,710","","","$","591,338"],["Stock-based compensation","25,203","","","12,405"],["Building and equipment rental","121,955","","","108,202"],["Medical supplies","56,423","","","44,964"],["Other operating expenses*","232,983","","","208,993"],["Cost of operations","1,123,274","","","965,902"],["Depreciation and amortization","96,694","","","86,795"],["Lease abandonment charges","19,675","","","\u2014"],["Loss on sale and disposal of equipment","1,246","","","1,200"],["Loss on impairment","\u2014","","","4,170"],["Severance costs","744","","","4,353"],["Total operating expenses","$","1,241,633","","","$","1,062,420"]]
[[/GREPCENT_TABLE]]

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

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

[[GREPCENT_TABLE]]
[["In Thousands","Year Ended December 31,"],["Salaries and Professional Fees","2021","2020","$ Increase/(Decrease)","% Change"],["Total","$686,710","$591,338","$95,372","16.1%"],["Same Center","$628,577","$568,013","$60,564","10.7%"]]
[[/GREPCENT_TABLE]]

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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.

    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.

    Building and equipment rental

[[GREPCENT_TABLE]]
[["In Thousands","Year Ended December 31,"],["Building & Equipment Rental","2021","2020","$ Increase/(Decrease)","% Change"],["Total","$121,955","$108,202","$13,753","12.7%"],["Same Center","$95,856","$98,900","($3,044)","(3.1)%"]]
[[/GREPCENT_TABLE]]

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.

    Medical supplies

[[GREPCENT_TABLE]]
[["In Thousands","Year Ended December 31,"],["Medical Supplies Expense","2021","2020","$ Increase/(Decrease)","% Change"],["Total","$56,423","$44,964","$11,459","25.5%"],["Same Center","$52,157","$43,365","$8,792","20.3%"]]
[[/GREPCENT_TABLE]]

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.

    Other operating expenses

[[GREPCENT_TABLE]]
[["In Thousands","Year Ended December 31,"],["Other Operating Expenses","2021","2020","$ Increase/(Decrease)","% Change"],["Total","$232,983","$208,993","$23,990","11.5%"],["Same Center","$209,376","$202,731","$6,645","3.3%"]]
[[/GREPCENT_TABLE]]

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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

[[GREPCENT_TABLE]]
[["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%"]]
[[/GREPCENT_TABLE]]

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.

    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 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

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

Interest expense

41

[[GREPCENT_TABLE]]
[["In Thousands","Year Ended December 31,"],["Interest Expense","2021","2020","$ Increase/(Decrease)","% Change"],["Total Interest Expense","$48,830","$45,882","$2,948","6.4%"],["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)%"]]
[[/GREPCENT_TABLE]]

*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. 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.

During 2020, we received a loan in the amount of $4.0 million through the Paycheck Protection Program. The Program has provisions that if met, allow the loan to be forgiven. In December 2020, we met the eligibility requirements for forgiveness of loans and recorded a gain on extinguishment of debt of approximately $4.0 million.

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

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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.

Year Ended December 31, 2020 Compared to the Year Ended December 31, 2019

For the comparison of results of operations for the year ended December 31, 2020 to the year ended December 31, 2019, please see Item 7, Management's Discussion and Analysis of Financial Condition and Operations in our Form 10-K for the year ended December 31, 2020, filed with the SEC on March 16, 2021.

Non-GAAP Financial Measures

We use both GAAP and non-GAAP metrics to measure our financial results. We believe that, in addition to GAAP metrics, non-GAAP metrics such as Adjusted EBITDA and Free Cash Flow assist us in measuring our core operations from period to period as well as our cash generated from operations and ability to service our debt obligations.

Adjusted EBITDA

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 the nearest comparable GAAP financial measure, net income, to Adjusted EBITDA for the years ended December 31, 2021, 2020, and 2019, respectively (in thousands):

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[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2021","","2020","","2019"],["Net income (loss) attributable to RadNet, Inc. common stockholders","$","24,727","","","$","(14,840)","","","$","14,756"],["Income Taxes","14,560","","","895","","","6,229"],["Interest Expense","48,830","","","45,882","","","48,044"],["Severance costs","744","","","4,353","","","1,619"],["Depreciation and amortization","96,694","","","86,795","","","80,607"],["Non-cash employee stock-based compensation","25,203","","","12,405","","","8,730"],["Loss on sale and disposal of equipment","1,246","","","1,200","","","2,383"],["Loss on impairment","\u2014","","","4,170","","","\u2014"],["Loss (gain) on extinguishment of debt and related expenses","6,044","","","(4,047)","","","\u2014"],["Other expenses","1,438","","","120","","","1,283"],["Non-cash change in fair value of interest rate hedge","(21,670)","","","2,528","","","\u2014"],["Other adjustment to joint venture investment","(565)","","","\u2014","","","\u2014"],["Legal settlement and related expenses","831","","","\u2014","","","1,248"],["Lease abandonment charges","19,675","","","\u2014","","","\u2014"],["Transaction costs Aidence Holding B.V. & Quantib B.V","1,171"],["Gain on re-measurement of pre-existing interest","\u2014","","","\u2014","","","(768)"],["Adjusted EBITDA","$218,928","","$139,461","","$164,131"]]
[[/GREPCENT_TABLE]]

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):

44

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2021","","2020","","2019"],["Adjusted EBITDA","$","218,928","","","$","139,461","","","$","164,131"],["Less cash paid for interest","(29,042)","","","(39,521)","","","(46,254)"],["Less cash capital purchases (1)","(125,421)","","","(86,758)","","","(71,540)"],["Less new finance debt","\u2014","","","(20)","","","(51)"],["Plus proceeds from sale of equipment","625","","","828","","","1,160"],["Free cash flow","$","65,090","","","$","13,990","","","$","47,446"],["Free cash flow as a percent of"],["cash flow from operations","43.5","%","","6.0","%","","45.5","%"]]
[[/GREPCENT_TABLE]]

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

Liquidity and Capital Resources

The following table is a summary of key balance sheet data as of December 31, 2021 and December 31, 2020 and income statement data for the twelve months ended December 31, 2021, 2020 and 2019 (in thousands):

[[GREPCENT_TABLE]]
[["Balance Sheet Data for the period ended December 31,","2021","","2020","","2019"],["Cash and cash equivalents","$","134,606","","","$","102,018"],["Accounts receivable","135,062","","","129,585"],["Working capital (exclusive of current operating lease liability)","14,932","","","(61,896)"],["Stockholders' equity","346,157","","","258,303"],["Income Statement data for the twelve months ended December 31,"],["Total revenue","$","1,315,077","","","$","1,071,840","","","$","1,154,179"],["Net income (loss) attributable to RadNet common stockholders","24,727","","","(14,840)","","","14,756"]]
[[/GREPCENT_TABLE]]

We operate in a capital intensive, high fixed-cost industry that requires significant amounts of capital to fund operations. 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.

The COVID 19 pandemic initially resulted in a reduction of procedure volumes as people "sheltered in place" and deferred elective procedures, resulting in a corresponding decrease in operating revenues for the year ended December 31, 2020. For 2021 our procedural volumes returned to pre-pandemic levels. However, the COVID-19 pandemic continues to evolve and significant additional outbreaks could again result in periods where we experience decreased procedural volumes. Any suspended reduction in procedures would negatively affect our revenues, profitability and working capital position.

We have credit available from our current credit facilities and borrowing under those facilities is subject to continued compliance with lending covenants. We currently meet those requirements, but substantial and sustained operating losses could impact our ability to borrow under those facilities. If we are not able to meet such requirements, we may be required to seek additional financing and there can be no assurance that we will be able to obtain financing from other sources on terms acceptable to us, if at all.

On a continuing basis, we also consider various transactions to increase shareholder value and enhance our business results, including acquisitions, divestitures and joint ventures. These types of transactions may result in future cash proceeds or payments but the general timing, size or success of any acquisition, divestiture or joint venture effort and the related potential capital commitments cannot be predicted. We expect to fund any future acquisitions primarily with cash flow from operations and borrowings, including borrowing from amounts available under our senior secured credit facilities or through new equity or debt issuances.

45

We and our subsidiaries or affiliates may from time to time, in our sole discretion, purchase, repay, redeem or retire any of our outstanding debt or equity securities in privately negotiated or open market transactions, by tender offer or otherwise.

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,

[[GREPCENT_TABLE]]
[["Cash Flow Data","December 31, 2021","","December 31, 2020","December 31, 2019"],["Cash provided by operating activities","$","149,491","","","$","233,759","","$","104,322"],["Cash used in investing activities","(221,511)","","","(126,244)","","(99,465)"],["Cash provided by (used in) financing activities","104,673","","","(45,561)","","24,951"]]
[[/GREPCENT_TABLE]]

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. 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. 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. 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. 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 December 31, 2021, 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.

Included in our consolidated balance sheets at December 31, 2021 are $754.7 million of total term loan debt (net of unamortized discounts of $13.2 million) displayed below in thousands:

[[GREPCENT_TABLE]]
[["","Face Value","","Discount","","Total Carrying Value"],["Barclays First Lien Term Loans","$","721,375","","","$","(13,213)","","","$","708,162"],["SunTrust Term Loan Agreement","46,500","","","\u2014","","","46,500"],["Total Term Loans","$","767,875","","","$","(13,213)","","","$","754,662"]]
[[/GREPCENT_TABLE]]

We had no outstanding balance under our $195.0 million Barclays Revolving Credit Facility at December 31, 2021 and had reserved $7.8 million for certain letters of credit. The remaining $187.2 million of our Barclays Revolving Credit Facility was available to draw upon as of December 31, 2021. 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

46

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):

[[GREPCENT_TABLE]]
[["","2022","","2023","","2024","","2025","","2026","","Thereafter","","Total"],["Notes payable","$","13,250","","","$","47,750","","","$","7,250","","","$","7,250","","","$","7,250","","","$","685,125","","","$","767,875"],["Interest and fees on notes payable","29,594","","","29,031","","","28,249","","","27,899","","","26,767","","","34,119","","","175,659"],["Operating leases (1)","103,831","","","96,894","","","88,682","","","79,409","","","73,912","","","457,425","","","900,153"],["Total","$","146,675","","","$","173,675","","","$","124,181","","","$","114,558","","","$","107,929","","","$","1,176,669","","","$","1,843,687"]]
[[/GREPCENT_TABLE]]

(1)Includes interest component of operating lease obligations.

    We have service agreements with various vendors under which they have agreed to be responsible for the maintenance and repair of a majority of our equipment for a fee that is based on the type and age of the equipment. Under these agreements, we are committed to minimum payments of approximately $31.0 million in 2022.

Critical Accounting Policies

The Securities and Exchange Commission defines critical accounting estimates as those that are both most important to the portrayal of a company’s financial condition and results of operations and require management’s most difficult, subjective or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. In Note 2 to our consolidated financial statements in this annual report on Form 10-K we discuss our significant accounting policies, including those that do not require management to make difficult, subjective or complex judgments or estimates. 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. 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. These estimates and assumptions affect various matters, including our reported amounts of assets and liabilities in our consolidated balance sheets at the dates of the financial statements; our disclosure of contingent assets and liabilities at the dates of the financial statements; and our reported amounts of revenues and expenses in our consolidated statements of operations during the reporting periods. These estimates involve judgments with respect to numerous factors that are difficult to predict and are beyond management’s control. As a result, actual amounts could materially differ from these estimates.

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. 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 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

47

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. 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.

Under capitation arrangements with various health plans, we earn a per-enrollee amount each month for making available diagnostic imaging services to all plan enrollees under the capitation arrangement. 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.

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 received $9.1 million and $26.3 million in Provider Relief funding for the years ended December 31, 2021 and 2020, respectively. 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. Based on our assessment recognition of the revenue previously recognized remained appropriate.

ACCOUNTS RECEIVABLE - Substantially all of our accounts receivable are due under fee-for-service contracts from third party payors, such as insurance companies and government-sponsored healthcare programs, or directly from patients. 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. 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. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations.

GOODWILL AND INDEFINITE LIVED INTANGIBLES – Goodwill totaled $513.8 million and $472.9 million at December 31, 2021 and December 31, 2020, 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.

Recent Accounting Standards

48

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.

Additional Information

Additional information concerning RadNet, Inc., including our consolidated subsidiaries, for each of the years ended December 31, 2021, 2020 and 2019 is included in the consolidated financial statements and notes thereto in this annual report.