RDNT Q1 Earnings Call: Severe Weather Disruptions and Ongoing Shift to Advanced Imaging Highlight Results

Diagnostic imaging company RadNet (NASDAQ:RDNT) exceeded Wall Street’s revenue expectations in Q1 CY2025, as sales rose 9.2% year on year to $471.4 million. Its non-GAAP loss of $0.35 per share was significantly below analysts’ consensus estimates.

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StockStory’s Take

RadNet's first quarter results were shaped by a combination of adverse weather events and ongoing changes in the imaging landscape. Management attributed the revenue and margin pressure primarily to severe winter storms in the Northeast and wildfires in Southern California and Houston, which disrupted patient volumes in January and February. CEO Howard Berger noted that the business rebounded in March and subsequent months, returning to growth in advanced imaging and PET/CT procedures. The company also pointed to continued investment in AI-enabled diagnostic solutions and the rollout of its TechLive remote technologist platform as factors supporting operational recovery. The adoption rates of new technologies, especially in breast cancer screening, were highlighted as bright spots despite the external challenges affecting overall first quarter performance.

Looking ahead, management expects a resumption of growth trends as the impact of weather-related disruptions subsides. CEO Howard Berger emphasized that RadNet's strategy centers on expanding advanced imaging and AI-enhanced diagnostic services. He highlighted the anticipated closure of the iCAD acquisition, which is expected to broaden RadNet's reach in AI-powered breast health solutions. Berger also discussed the potential for commercial insurance reimbursement for AI-based screening programs, stating, "Payers have begun to take notice, and based on constructive conversations, we are confident that one or more national carriers will offer reimbursement for EBCD as early as year end." The company is also focusing on operational efficiencies, including the further deployment of TechLive and the implementation of a new digital operating system, both expected to help address ongoing labor shortages and improve margins over time.

Key Insights from Management’s Remarks

Management linked the quarter’s underperformance to external disruptions but pointed to recovery in core business lines and growth in digital health technologies as key factors shaping results.

• Weather and wildfire disruptions: Severe winter storms in the Northeast and wildfires in Southern California and Houston significantly reduced patient volumes in January and February, with management estimating a $22 million revenue impact and $15 million EBITDA impact for the quarter.
• Advanced imaging growth: Despite external challenges, advanced imaging procedures increased as a percentage of total volume, reflecting both industry trends and RadNet’s capital investments in new equipment. PET/CT scan volumes grew by nearly 23%, driven by expanded use in prostate and brain studies.
• AI-enabled screening adoption: The EBCD breast cancer screening program, powered by RadNet’s DeepHealth AI, saw adoption rise 33% year over year, with over 40% national adoption and strong uptake among new third-party customers. Management noted early detection benefits and improving radiologist productivity as key outcomes.
• TechLive platform rollout: The remote technologist solution, TechLive, was deployed on over 250 scanners during the quarter. Management believes this will help address technologist shortages by enabling remote operation and multi-site coverage, potentially reducing labor costs and expanding capacity as rollout continues.
• Digital Health segment momentum: The Digital Health segment delivered 31% year-over-year revenue growth, driven by increased AI adoption and software sales. Management highlighted the significance of the iCAD acquisition, expected to expand RadNet’s commercial reach in AI-powered breast health solutions after its anticipated closure later this year.

Drivers of Future Performance

RadNet’s outlook is anchored in continued expansion of AI-driven imaging, operational improvements, and new partnerships, with management identifying reimbursement dynamics and labor trends as key variables for 2025.

• AI and advanced imaging expansion: Management expects growth in advanced imaging and AI-enhanced screening, such as EBCD and new PET/CT procedures, to drive higher-margin revenue. The pending iCAD acquisition is anticipated to accelerate market penetration in breast health and support new customer segments.
• Labor efficiency initiatives: The rollout of TechLive and implementation of a new digital operating system are expected to mitigate technologist shortages and reduce reliance on outside staffing, with broader adoption aimed at improving margins by late 2025 or 2026.
• Reimbursement landscape shifts: The company is optimistic about potential commercial insurance reimbursement for AI-powered screening programs by year end, but acknowledges uncertainty in Medicare reimbursement rates, which are subject to upcoming CMS proposals. Management noted that reimbursement changes and payer adoption will significantly influence top-line growth and profitability.

Catalysts in Upcoming Quarters

In the coming quarters, StockStory analysts will be watching (1) the pace of TechLive and digital operating system rollout across RadNet’s network, (2) the outcome and integration of the iCAD acquisition and its impact on AI adoption rates, and (3) updates on reimbursement decisions from both commercial and government payers for AI-enabled screening programs. The ramp-up of new imaging center openings and progress in labor efficiency will also be important indicators for the company’s execution.

RadNet currently trades at a forward P/E ratio of 111×. Should you double down or take your chips? See for yourself in our full research report (it’s free).

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