# RadNet, Inc. (RDNT) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from RadNet, Inc.'s 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/790526/000079052623000003/rdnt-20221231.htm
Accession: 0000790526-23-000003
Filing date: 2023-03-01
Report date: 2022-12-31
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/
Previous year: /company/RDNT/mda/fy2021/ (FY 2021)
Next year: /company/RDNT/mda/fy2023/ (FY 2023)

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 national provider of diagnostic imaging services in the United States. At December 31, 2022, we operated directly or indirectly through joint ventures with hospitals, 357 centers located in Arizona, California, Delaware, Florida, Maryland, New Jersey, and New York. Our operations comprise two segments for financial reporting purposes for this reporting period, Imaging Centers and Artificial Intelligence. For further financial information about these segments, see Note 5, Segment Reporting, in the notes accompanying our consolidated financial statement included in this annual report on Form 10-K..

Our centers provide physicians with imaging capabilities to facilitate the diagnosis and treatment of diseases and disorders and may reduce unnecessary invasive procedures, often reducing the cost and amount of care for patients. Integral to the imaging center business is our software arm headed by eRAD, Inc., which sells computerized systems that distribute, display, store and retrieve digital images. Internationally, our subsidiary Heart and Lung Imaging LLC, provides teleradiology services for remote interpretation of images on behalf of providers within the framework of the United Kingdom's National Health Service.

We have also established an Artificial Intelligence (AI) division, that develops and deploys AI suites to enhance radiologist interpretations of breast, lung and prostate images. The division is led by DeepHealth, and includes our acquisitions of Aidence Holding B.V. and Quantib B.V., both based in The Netherlands.

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

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2022","","2021","","2020"],["Centers in operation","357","","","347","","","331"],["Total revenue (millions)","$","1,430","","","$","1,315","","","$","1,072"]]
[[/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, 2022, 2021 and 2020 are summarized in the following table (in thousands):

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[[GREPCENT_TABLE]]
[["In Thousands","2022","","2021","","2020"],["Commercial insurance","$","785,128","","","$","743,462","","","$","584,035"],["Medicare","311,124","","","280,911","","","217,928"],["Medicaid","38,279","","","34,731","","","25,619"],["Workers' compensation/personal injury","51,339","","","44,235","","","33,478"],["Other patient revenue","31,849","","","19,398","","","25,314"],["Management fee revenue","22,235","","","19,630","","","11,253"],["Software and teleradiology","14,238","","","10,525","","","10,798"],["Other","19,428","","","12,436","","","23,297"],["Revenue under capitation arrangements","152,045","","","148,334","","","140,118"],["Imaging center segment revenue","1,425,665","","","1,313,662","","","1,071,840"],["AI segment revenue","4,396","","","1,415","","","\u2014"],["Total revenue","$","1,430,061","","","$","1,315,077","","","$","1,071,840"]]
[[/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, 2022, 2021 and 2020:

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2022","","2021","","2020"],["MRI","340","","","323","","","293"],["CT","208","","","192","","","175"],["PET/CT","67","","","68","","","67"],["Mammography","387","","","358","","","315"],["Ultrasound","818","","","760","","","689"],["X-ray","440","","","415","","","376"],["Nuclear Medicine","57","","","55","","","57"],["Fluoroscopy","116","","","105","","","117"],["Total equipment","2,433","","","2,276","","","2,089"]]
[[/GREPCENT_TABLE]]

Acquisitions, Equity Investments and Joint Venture Activity

The following discussion summarizes certain details concerning our acquisition or disposition of centers, our equity investment and our joint venture transaction. See Note 4, Acquisitions, Dispositions and Business Venture Activity and Note 2, Summary of Significant Accounting Policies to our consolidated financial statements included in this annual report on Form 10-K for further information.

Acquisitions

Imaging Center Segment

Radiology Practice Acquisitions:

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During 2022 and 2021, we completed the acquisition of certain assets of the following entities, which either engage directly in the practice of radiology or associated businesses. The primary reason for these acquisitions was to strengthen our presence in the Delaware, Maryland, New Jersey and New York markets. These acquisitions are reported as part of our Imaging Center segment. We made a fair value determination of the acquired assets and assumed liabilities and the following were recorded (in thousands):

2022:

[[GREPCENT_TABLE]]
[["Entity","Date Acquired","Total Consideration","Property & Equipment","Right of Use Assets","Goodwill","Intangible Assets","Other","Right of Use Liabilities"],["IFRC LLC*^","1/1/2022","8,200","2,910","1,703","5,271","\u2014","19","(1,703)"],["IFRC LLC*^","1/1/2022","4,800","2,103","857","2,697","\u2014","\u2014","(857)"],["Heart and Lung Imaging Limited+","11/1/2022","32,000","\u2014","\u2014","16,200","15,800","\u2014","\u2014"],["Montclair Radiological Associates, P.A.*#","10/1/2022","94,877","16,414","4,665","79,690","400","(2,168)","(4,124)"],["Chelsea Dignostic Radiology, P.C.*","12/1/2022","2,800","568","\u2014","2,132","100","\u2014","\u2014"],["North Jersey Imaging Center, LLC*","12/9/2022","104","20","\u2014","55","25","4","\u2014"],["","","$142,781","$22,015","$7,225","$106,045","$16,325","$(2,145)","$(6,684)"]]
[[/GREPCENT_TABLE]]

*Fair Value Determination is Final

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

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

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

2021:

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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"],["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.

Heart and Lung Imaging Limited

On November 1, 2022, we acquired a 75% controlling interest in Heart and Lung Imaging Limited (“HLI”). HLI is a teleradiology concern which operates in the United Kingdom with the National Healthcare Service to screen high risk populations for cardiac and lung conditions. HLI’s operations are included in our imaging center segment for reporting purposes. The transaction was accounted for as the acquisition of a business with a total purchase consideration of approximately $31.9 million, including: i) shares with a fair value of $6.8 million (359,002 shares issued at $19.06 per share), ii) cash of $6.3 million and iii) contingent consideration of $10.8 million ($10.2 million in contingent milestone consideration and cash holdback of $0.6 million to be issued 24 months after acquisition subject to adjustment for any indemnification claims) and iv) noncontrolling interest of $8.0 million. We recorded $0.6 million in current assets, $15.8 million in intangible assets, $0.6 million current liabilities and $16.2 million in goodwill in connection with this transaction.

As part of the purchase price allocation, we determined the identifiable intangible assets are customer relationships and trade names. The fair value of the intangible assets was estimated using the income approach, and the cash flow projections were discounted using a rate of 19.0%. The cash flows were based on estimated earnings from existing customers, and the discount rate applied was benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital.

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Artificial Intelligence Segment

Aidence Holding B.V.

On January 20, 2022, we completed our acquisition of all the equity interests of Aidence Holding B.V. ("Aidence") an artificial intelligence enterprise focused on lung cancer screening. Aidence is reported as part of our artificial intelligence segment and was acquired to enhance our AI capabilities. The transaction was accounted for as an acquisition of a business and total purchase consideration was determined to be approximately $45.2 million including i) 1,117,872 shares issued at $26.80 per share with a fair value of $30.0 million ii) cash of $1.8 million and iii) contingent consideration of $11.9 million ($7.4 million in milestones to be settled in shares or cash at our election and a share holdback of $4.5 million) and iv) a settlement of a loan from RadNet of $1.5 million. In addition we paid certain seller closing costs through the issuance of 23,362 shares at a fair value of $0.6 million. As a result of this transaction, we recorded $1.0 million in current assets, $0.2 million in property and equipment, $27.7 million in intangible assets (including developed technology of $21.1 million and IPR&D of $5.5 million), $3.2 million in current liabilities, a deferred tax liability of $3.5 million, and $22.9 million in goodwill.

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

As part of the purchase price allocation, we determined the identifiable intangible assets are developed technology, IPR&D, trade names, and customer relationships. The fair value of the intangible assets was estimated using the income approach, and the cash flow projections were discounted using rates ranging from 15% to 17%. The cash flows were based on estimates used to price the transaction, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital.

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

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

The useful lives for the developed technology asset was set at 7 years, for customer relationships 5.4 years, and trade names was 7 years. The calculation of the excess of the purchase price over the estimated fair value of the tangible net assets and intangible assets acquired was recorded to goodwill. Factors contributing to the recognition of the amount of goodwill were primarily based on anticipated strategic and synergistic benefits that are expected to be realized from the acquisition. These benefits include expanding the Company's AI capabilities to drive revenue growth.

Quantib B.V.

On January 20, 2022, we completed our acquisition of all the equity interests of Quantib B.V. ("Quantib") an artificial intelligence enterprise focused on prostate cancer screening. Quantib is reported as part of our artificial intelligence segment, and was acquired to enhance our AI capabilities. The transaction was accounted for as an acquisition of a business and total purchase consideration was determined to be approximately $42.3 million including i) 965,058 shares issued at $26.80 per share with a fair value of $25.9 million ii) cash of $11.8 million and iii) contingent consideration consisting of 113,303 shares with a fair value at the date of close of $3.0 million and cash of $1.6 million both to be released 18 months after acquisition subject to adjustment for any indemnification claims. As a result of this transaction, we recorded $2.4 million in current assets, $0.1 million in property and equipment, $21.3 million in intangible assets (including developed technology of $19.6 million and IPR&D of $0.7 million), $0.7 million in current liabilities, $6.7 million in long-term debt and deferred tax liabilities, and $26.4 million in goodwill.

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

As part of the purchase price allocation, we determined the identifiable intangible assets are developed technology, IPR&D, trade names, and customer relationships. The fair value of the intangible assets was estimated using the income approach, and the cash flow projections were discounted using rates ranging from 50% to 55%. The cash flows were based on

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

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

The useful lives for the developed technology asset was set at seven years, customer relationships three years, and trade names seven years. The calculation of the excess of the purchase price over the estimated fair value of the tangible net assets and intangible assets acquired was recorded to goodwill. Factors contributing to the recognition of the amount of goodwill were primarily based on anticipated strategic and synergistic benefits that are expected to be realized from the acquisition. These benefits include expanding the Company's AI capabilities to drive revenue growth.

As disclosed above, for the acquisitions of Aidence and Quantib, the Company used the income approach to determine the fair value of developed technology and IPR&D acquired in business combinations. This approach determines fair value by estimating the after-tax cash flows attributable to the respective assets over their useful lives and then discounting these after-tax cash flows back to a present value. The Company bases its revenue assumptions on estimates of relevant market sizes, expected market growth rates, expected trends in technology and expected product introductions by competitors. The value of the in-process projects is based on the project's stage of completion, the complexity of the work completed as of the acquisition date, the projected costs to complete, the expected introduction date, the estimated cash flows to be generated upon commercial release and the estimated useful life of the technology. The Company believes that the estimated developed technology and IPR&D amounts represent the fair value at the date of acquisition and do not exceed the amount a third-party would pay for the assets. The significant assumptions used to estimate the fair value of intangible assets include discount rates and certain assumptions that form the basis of the forecasted results, specifically, revenue growth rates, EBITDA margins and obsolescence factors. These significant assumptions are forward looking and could be affected by future economic and market conditions.

Subsidiary activity

Formation of majority owned subsidiaries

Frederick County Radiology, LLC

On April 1, 2022 we formed Frederick County Radiology, LLC ("FCR"), a partnership with Frederick Health Hospital, Inc. ("Hospital"). The operation offers multi-modality services out of six locations in Frederick, Maryland. We contributed the operations of four centers to the enterprise and Hospital contributed $5.4 million in fixed assets, $3.0 million in equipment, and $11.0 million in goodwill. As a result of the transaction, we recognized a gain of $6.6 million to additional paid in capital and retained a 65% controlling economic interest in FCR and Hospital retains an $11.1 million or 35% noncontrolling economic interest in FCR.

Advanced Radiology at Capital Region, LLC

On June 15, 2022 we entered into Advanced Radiology at Capital Region, LLC, a partnership with Dimension Health Corporation. ("Dimension"), an affiliate of the University of Maryland. The operation will provide multi-modality services out of two yet to be determined locations in the Largo, Maryland area. The venture was initially capitalized with nominal amounts of $5.1 thousand for a 51% economic interest from us and $4.9 thousand from Dimension for a 49% economic interest.

Simi Valley Imaging Group, LLC

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

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.

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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, 2022.

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, 2022.

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, 2022.

Joint venture investment contributions to Arizona Diagnostic Radiology Group

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

On November 1, 2022 we contributed eight of our imaging centers to ADRG with a carrying value of $12.7 million and recorded a loss of $0.5 million which was calculated as the difference between the fair value and carrying value of such imaging centers which included equipment and other assets and an allocation of goodwill to such imaging centers. We accounted for the transaction as an adjustment to our equity investment for the value of the assets contributed. To maintain our 49% economic interest in ADRG, we received a distribution from the partnership of $4.5 million to reduce our overall investment to $8.3 million.

Results of Operations

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 2022, 2021 and 2020.

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[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2022","","2021","","2020"],["REVENUE"],["Service fee revenue","89.4","%","","88.7","%","","86.9","%"],["Revenue under capitation arrangements","10.6","%","","11.3","%","","13.1","%"],["Total Revenue","100.0","%","","100.0","%","","100.0","%"],["Provider relief funding","\u2014","%","","0.7","%","","2.5","%"],["OPERATING EXPENSES"],["Cost of operations, excluding depreciation and amortization","88.4","%","","85.4","%","","90.1","%"],["Lease abandonment charges","\u2014","%","","1.5","%","","\u2014","%"],["Depreciation and amortization","8.1","%","","7.4","%","","8.1","%"],["Loss on sale and disposal of equipment","0.2","%","","0.1","%","","0.1","%"],["Loss on impairment","\u2014","%","","\u2014","%","","0.4","%"],["Severance costs","0.1","%","","0.1","%","","0.4","%"],["Total operating expenses","96.8","%","","94.4","%","","99.1","%"],["INCOME FROM OPERATIONS","3.2","%","","6.3","%","","3.3","%"],["OTHER INCOME AND EXPENSES"],["Interest expense","3.6","%","","3.7","%","","4.3","%"],["Equity in earnings of joint ventures","(0.7)","%","","(0.8)","%","","(0.7)","%"],["Non-cash change in fair value of interest rate hedge","(2.8)","%","","(1.6)","%","","0.2","%"],["Loss (gain) on extinguishment of debt","0.1","%","","0.5","%","","(0.4)","%"],["Other expenses","0.1","%","","0.1","%","","\u2014","%"],["Total other expenses","0.2","%","","1.9","%","","3.4","%"],["INCOME (LOSS) BEFORE INCOME TAXES","3.0","%","","4.5","%","","(0.1)","%"],["Provision for income taxes","(0.7)","%","","(1.1)","%","","(0.1)","%"],["NET INCOME (LOSS)","2.3","%","","3.3","%","","(0.2)","%"],["Net income attributable to noncontrolling interests","1.6","%","","1.5","%","","1.2","%"],["NET INCOME (LOSS) ATTRIBUTABLE TO RADNET, INC."],["COMMON STOCKHOLDERS","0.7","%","","1.8","%","","(1.4)","%"]]
[[/GREPCENT_TABLE]]

Imaging Center Segment

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

We grow through a combination of organic growth as well as acquisitions and joint ventures. In the discussion below same center metrics are based on imaging centers that were in operation throughout the period of January 1, 2021 through December 31, 2022. Excluded amounts relate to imaging centers that were acquired or divested between January 1, 2021 through December 31, 2022.

Total Revenue inclusive of Provider Relief Funding for 2021                                                                

[[GREPCENT_TABLE]]
[["In Thousands","Year Ended December 31,"],["Revenue","2022","2021","$ Increase/(Decrease)","% Change"],["Total Revenue","$1,425,665","$1,322,772","$102,893","7.8%"],["Same Center Revenue","$1,275,333","$1,239,587","$35,746","2.9%"],["Excluded","$150,333","$83,185","\u2014","\u2014"]]
[[/GREPCENT_TABLE]]

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Overall revenue change was driven by procedure volume growth of 2.7% compared to the same period in the prior year. On a same center basis, the increase in revenue was largely attributable to product mix as advanced radiology procedures of MRI, PET, and CT expanded at combined 5.5% to provide the major portion of the revenue growth.

Operating Expenses

Total operating expenses for the twelve months ended December 31, 2022 increased approximately $117.8 million, or 9.5%, from $1.24 billion for the twelve months ended December 31, 2021 to $1.35 billion for the twelve months ended December 31, 2022. The following table sets forth our cost of operations and total operating expenses for the twelve months ended December 31, 2022 and 2021 (in thousands):

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2022","","2021"],["Salaries and professional reading fees, excluding stock-based compensation","$","778,586","","","$","683,772"],["Stock-based compensation","20,988","","","23,407"],["Building and equipment rental","123,058","","","121,924"],["Medical supplies","68,712","","","56,423"],["Other operating expenses*","249,249","","","232,416"],["Cost of operations","1,240,593","","","1,117,942"],["Depreciation and amortization","109,524","","","96,173"],["Lease abandonment charges","\u2014","","","19,675"],["Loss on sale and disposal of equipment","2,506","","","1,246"],["Severance costs","926","","","744"],["Total operating expenses","$","1,353,549","","","$","1,235,780"]]
[[/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","2022","2021","$ Increase/(Decrease)","% Change"],["Total","$778,586","$683,772","$94,814","13.9%"],["Same Center","$709,525","$639,124","$70,401","11.0%"],["Excluded","$69,061","$44,648","\u2014","\u2014"]]
[[/GREPCENT_TABLE]]

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

    Stock-based compensation

Stock-based compensation decreased $2.4 million, or 10.3%, to approximately $21.0 million for the twelve months ended December 31, 2022 compared to $23.4 million for the twelve months ended December 31, 2021. The decrease was a result of a series of pandemic related one time employee bonus stock awards amounting to $8.9 million that were awarded in the second quarter of 2021. There were no similar one time awards granted in 2022.

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    Building and equipment rental

[[GREPCENT_TABLE]]
[["In Thousands","Year Ended December 31,"],["Building & Equipment Rental","2022","2021","$ Increase/(Decrease)","% Change"],["Total","$123,058","$121,924","$1,134","0.9%"],["Same Center","$100,663","$104,163","($3,500)","(3.4)%"],["Excluded","$22,395","$17,761","\u2014","\u2014"]]
[[/GREPCENT_TABLE]]

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

    Medical supplies

[[GREPCENT_TABLE]]
[["In Thousands","Year Ended December 31,"],["Medical Supplies Expense","2022","2021","$ Increase/(Decrease)","% Change"],["Total","$68,712","$56,423","$12,289","21.8%"],["Same Center","$62,274","$52,872","$9,402","17.8%"],["Excluded","$6,438","$3,551","\u2014","\u2014"]]
[[/GREPCENT_TABLE]]

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

    Other operating expenses

[[GREPCENT_TABLE]]
[["In Thousands","Year Ended December 31,"],["Other Operating Expenses","2022","2021","$ Increase/(Decrease)","% Change"],["Total","$249,249","$232,416","$16,833","7.2%"],["Same Center","$224,174","$214,488","$9,684","4.5%"],["Excluded","$25,075","$17,928","\u2014","","\u2014"]]
[[/GREPCENT_TABLE]]

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

Additional segment operating and non operating expenses:

[[GREPCENT_TABLE]]
[["In Thousands","Year Ended December 31,"],["","2022","2021","$ Increase/(Decrease)","% Change"],["Depreciation and Amortization","$109,524","$96,173","$13,351","13.9%"],["Loss on disposal of equipment and other","$2,506","$1,246","$1,260","nm"],["Non-cash change in fair value of interest rate swaps","($39,621)","($21,670)","$(17,951)","nm"],["Other expenses*","$3,467","$6,859","$(3,393)","nm"],["Severance","$926","$744","$183","24.5%"]]
[[/GREPCENT_TABLE]]

    nm=not meaningful

*Other expenses in 2022 and 2021 included approximately $0.7 million and $6.0 million of debt extinguishment and restructuring charges, respectively, which related to refinancing of our credit facilities with Truist in 2022 and Barclays in 2021. See Note 8 Credit Facilities and Notes Payable included in the notes to our consolidated financial statements.

41

Lease abandonment charges

We closely monitor patient levels at our imaging centers and occasionally divest or shut down centers in an effort to maximize utilization rates. In the post-pandemic period of 2021, while overall procedure volumes had returned to pre-pandemic levels, we experienced lower utilization rates at imaging centers that were based in urban centers as a result of increased telecommuting and migration of the work force to spending more time in residential areas. In response we terminated leases at some centers, consolidating procedural volumes into fewer more active imaging centers, and reduced administrative office space. We recorded a one-time charge of approximately $19.7 million at December 31, 2021 related to leased facilities abandonment. The lease abandonment charges include the impairment of associated right of use assets of $12.6 million and write off of related leasehold improvements of approximately $7.1 million.

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

[[GREPCENT_TABLE]]
[["In Thousands","Year Ended December 31,"],["Interest Expense","2022","2021","$ Increase/(Decrease)","% Change"],["Total Interest Expense","$50,841","$48,830","$2,011","4.1%"],["Cash Paid for Interest","$39,151","$29,042","$10,109","34.8%"]]
[[/GREPCENT_TABLE]]

The rise in adjusted interest expense is attributable to a higher overall loan balances in combination with increased variable interest rates paid on those balances compared to the same period in the prior year. During 2002 we refinanced our Truist term loan which added an additional $108.0 million in obligations to our balance sheet in the fourth quarter. Based on recent increases in global interests rates, we expect the effective interest rates on our senior credit facilities, and our related interest expense, to continue to rise in the near term. See “Liquidity and Capital Resources” below for more details on our credit facilities.

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

Gain on extinguishment of debt and related expenses

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

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AI Segment

Our AI segment develops and deploys clinical applications to enhance interpretation of medical images and improve patient outcomes with a current emphasis on brain, breast, prostate, and pulmonary diagnostics. We are developing our AI segment initially through acquisition activity. The operations of Nulogix and Deephealth comprise the results for 2021. Our 2022 results include our recent additions of Aidence and Quantib. The breakdown of revenue and expenses of the segment for the twelve months ended December 31, 2022 and 2021 are as follows:

[[GREPCENT_TABLE]]
[["In Thousands","Twelve Months Ended December 31,"],["","2022","2021","$ Increase/(Decrease)"],["Statement of Operations"],["Revenue","$4,396","$1,415","$2,981"],["Salaries and Wages","$15,799","$2,938","$12,861"],["Stock compensation","2,782","1,796","986"],["Other operating","5,171","599","4,572"],["Depreciation & Amort.","6,353","520","5,833"],["Other operating loss","23","\u2014","23"],["Severance","20","\u2014","20"],["Total operating expenses","30,149","5,853","24,296"],["Loss from Operations","(25,753)","(4,438)","(21,315)"],["Other (income) expense","(903)","622","(1,525)"],["Income before taxes","(24,850)","(5,060)","(19,790)"],["Income taxes","(2,743)","\u2014","(2,743)"],["Segment net loss","($22,107)","($5,060)","($17,047)"]]
[[/GREPCENT_TABLE]]

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

For the comparison of results of operations for the year ended December 31, 2021 to the year ended December 31, 2020, 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, 2021, filed with the SEC on March 1, 2022.

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

43

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, 2022, 2021, and 2020, respectively (in thousands):

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2022","","2021","","2020"],["Net income (loss) attributable to RadNet, Inc. common stockholders","$","10,650","","","$","24,727","","","$","(14,840)"],["Income Taxes","9,361","","","14,560","","","895"],["Interest Expense","50,841","","","48,830","","","45,882"],["Severance costs","946","","","744","","","4,353"],["Depreciation and amortization","115,877","","","96,694","","","86,795"],["Non-cash employee stock-based compensation","23,770","","","25,203","","","12,405"],["Loss on sale and disposal of equipment","2,529","","","1,246","","","1,200"],["Loss on impairment","\u2014","","","\u2014","","","4,170"],["Loss (gain) on extinguishment of debt and related expenses","731","","","6,044","","","(4,047)"],["Other expenses","1,833","","","1,438","","","120"],["Non-cash change in fair value of interest rate hedge","(39,621)","","","(21,670)","","","2,528"],["Other adjustment to joint venture investment","\u2014","","","(565)","","","\u2014"],["Legal settlement and related expenses","2,197","","","831","","","\u2014"],["Lease abandonment charges","\u2014","","","19,675","","","\u2014"],["Non operational rent expenses","4,297","","","\u2014","","","\u2014"],["Transaction costs HLH, Aidence Holding B.V. & Quantib B.V","927","","","1,171","","","\u2014"],["Valuation adjustment for contingent consideration","47","","","\u2014","","","\u2014"],["Change in estimate related to refund liability","8,089","","","\u2014","","","\u2014"],["Adjusted EBITDA Including Losses from AI Segment and Provider Relief Funding","$192,474","","$218,928","","$139,461"],["Provider relief funding","\u2014","","","(9,110)","","","(26,264)"],["Adjusted EBITDA including losses from AI Segment and excluding benefit from Provider Relief Funding","$192,474","","$209,818","","$113,197"],["Adjusted EBITDA Losses from AI segment","16,575","","","2,121","","","1,757"],["Adjusted EBITDA excluding Losses from AI Segment and Provider Relief Funding","$209,049","","$211,939","","$114,954"]]
[[/GREPCENT_TABLE]]

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

44

[[GREPCENT_TABLE]]
[["","Twelve Months Ended December 31,"],["","2022","","2021","","2020"],["Segment net loss","$","(22,107)","","","$","(5,060)","","","$","(3,463)"],["Stock Compensation","2,782","","","1,796","","","1,065"],["Depreciation & Amortization","6,353","","","520","","","400"],["Other operating loss","23","","","\u2014","","","\u2014"],["Other expense (income)","(903)","","","622","","","241"],["Severance","20","","","\u2014","","","\u2014"],["Income taxes","(2,743)","","","\u2014","","","\u2014"],["Adjusted EBITDA AI Segment","$","(16,575)","","","$","(2,121)","","","$","(1,757)"]]
[[/GREPCENT_TABLE]]
:

Liquidity and Capital Resources

The following table is a summary of key balance sheet data as of December 31, 2022 and December 31, 2021 and income statement data for the twelve months ended December 31, 2022, 2021 and 2020 (in thousands):

[[GREPCENT_TABLE]]
[["Balance Sheet Data for the period ended December 31,","2022","","2021","","2020"],["Cash and cash equivalents","$","127,834","","","$","134,606"],["Accounts receivable","166,357","","","135,062"],["Working capital (exclusive of current operating lease liability)","(41,932)","","","14,932"],["Stockholders' equity","491,452","","","346,157"],["Income Statement data for the twelve months ended December 31,"],["Total revenue","$","1,430,061","","","$","1,315,077","","","$","1,071,840"],["Net income (loss) attributable to RadNet common stockholders","10,650","","","24,727","","","(14,840)"]]
[[/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, in thousands:

[[GREPCENT_TABLE]]
[["Cash Flow Data","December 31, 2022","","December 31, 2021","December 31, 2020"],["Cash provided by operating activities","$","146,417","","","$","149,491","","$","233,759"],["Cash used in investing activities","(246,949)","","","(221,511)","","(126,244)"],["Cash provided by (used in) financing activities","93,647","","","104,673","","(45,561)"]]
[[/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, 2022, included purchases of property and equipment for approximately $119.5 million, acquired imaging businesses and other operations for $130.0 million and an equity contribution to a joint venture operation of $1.4 million. As part of our business operations we continually evaluate investment opportunities.

Cash provided by financing activities for the twelve months ended December 31, 2022 was related mainly to the refinancing of our Truist term loan obligations with the Second Amended and Restated Revolving Credit and Term Loan Agreement on October 10, 2023. Please see Note 8, Credit Facilities and Notes Payable in the notes to consolidated financial statements included in this annual report on Form 10-K for more information.

We have entered into factoring agreements with various institutions and sold certain accounts receivable under non-recourse agreements in exchange for notes receivables from the buyers. These transactions are accounted for as a reduction in accounts receivable as the agreements transfer effective control over and risk related to the receivables to the buyers. Proceeds on notes receivables are reflected as operating activities on our statement of cash flows and on our balance sheet as prepaid expenses and other current assets for the current portion and deposits and other for the long term portion. Amounts remaining to be collected on these agreements were $15.4 million and $17.7 million at December 31, 2022 and December 31, 2021, respectively. We do not utilize factoring arrangements as an integral part of our financing for working capital.

Senior Credit Facilities:

We maintain secured credit facilities with Barclays Bank PLC and with Truist. The Barclays credit facilities are comprised of first lien term loans and a revolving credit facility of $195.0 million. The Truist credit facilities are comprised of a term loan and a revolving credit facility of $50.0 million. As of December 31, 2022, we were in compliance with all covenants under our credit facilities. Deferred financing costs on our revolving credit lines at December 31, 2022, net of accumulated amortization, totaled $2.3 million, with $1.7 million related to Barclays and $0.6 million related to Truist.

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

[[GREPCENT_TABLE]]
[["","Face Value","","Discount","","Total Carrying Value"],["Barclays First Lien Term Loans","$","714,125","","","$","(11,127)","","","$","702,998"],["Truist Term Loan Agreement","150,000","","","(1,254)","","","148,746"],["Total Term Loans","$","864,125","","","$","(12,381)","","","$","851,744"]]
[[/GREPCENT_TABLE]]

We had no outstanding balance under our $195.0 million Barclays Revolving Credit Facility at December 31, 2022 and had reserved $7.6 million for certain letters of credit. The remaining $187.4 million of our Barclays Revolving Credit Facility was available to draw upon as of December 31, 2022. We also had no balance under our $50.0 million Truist

46

Revolving Credit Facility related to our consolidated subsidiary NJIN at December 31, 2022, and with no letters of credit reserved against the facility, the full amount was available to draw upon. For more information on our secured credit facilities see Note 8 to our consolidated financial statements in this annual report.

Contractual Commitments

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

[[GREPCENT_TABLE]]
[["","2023","","2024","","2025","","2026","","2027","","Thereafter","","Total"],["Notes payable","$","14,750","","","$","14,750","","","$","18,500","","","$","18,500","","","$","119,750","","","$","677,875","","","$","864,125"],["Interest and fees on notes payable","66,767","","","65,868","","","64,575","","","63,284","","","60,359","","","16,904","","","337,757"],["Operating leases (1)","92,371","","","92,436","","","88,941","","","85,872","","","82,136","","","499,326","","","941,082"],["Total","$","173,888","","","$","173,054","","","$","172,016","","","$","167,656","","","$","262,245","","","$","1,194,105","","","$","2,142,964"]]
[[/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 $43.3 million in 2023.

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 have been prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. 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 when our obligations to provide diagnostic services are satisfied. Our performance obligations for diagnostic services are generally satisfied over a period of less than one day. The contractual relationships with patients, in most cases, also involve a third-party payor (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by Medicare and Medicaid, or negotiated with managed care health plans and commercial insurance companies. The 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 and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.

As it relates to the Group, this service fee revenue includes payments for both the professional medical interpretation revenue recognized by them as well as the payment for all other aspects related to our providing the imaging services, for which we earn management fees. As it relates to other centers, this service fee revenue is earned through providing the use of our diagnostic imaging equipment and the provision of technical services as well as providing administration services such as clerical and administrative personnel, bookkeeping and accounting services, billing and collection, provision of medical and

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 managed care and commercial insurance plans are based upon the payment terms specified in the related contractual agreements. Revenues related to uninsured patients and copayment and deductible amounts for patients who have health care coverage may have discounts applied (uninsured discounts and contractual discounts). We also record estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record self-pay revenues at the estimated amounts we expect to collect.

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. 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 – When the qualifications for business combination accounting treatment are met, it requires us to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. 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 $677.7 million and $513.8 million at December 31, 2022 and December 31, 2021, respectively. Indefinite lived intangible assets were $24.1 million at December 31, 2022 and $20.6 million at December 31, 2021 and are associated with the value of certain trade name intangibles and in process research and development (IPR&D). Goodwill, trade name intangibles and IPR&D are recorded as a result of business combinations. When we determine the carrying value of goodwill exceeds its fair value, an impairment charge would be recognized which should not exceed the total amount of goodwill allocated to that reporting unit. We determined fair values for each of the reporting units using the market approach, when available and appropriate, or the income approach, or a combination of both. We assess the valuation methodology based upon the relevance and availability of the data at the time we perform the valuation. If multiple valuation methodologies are used, the results are weighted appropriately.

We tested goodwill, trade name and IPR&D for impairment on October 1, 2022. In 2020 we ceased employing certain indefinite lived trade names with a total value of $4.2 million and they were written off in full as of December 31, 2020. Our annual impairment test as of October 1, 2022 noted no other impairment, and we have not identified any indicators of impairment through December 31, 2022.

Recent Accounting Standards

48

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

Additional Information

Additional information concerning RadNet, Inc., including our consolidated subsidiaries, for each of the years ended December 31, 2022, 2021 and 2020 is included in the consolidated financial statements and notes thereto in this annual report.