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SIGNIFICANT ACCOUNTING POLICIES (Tables)

3 Months Ended

Mar. 31, 2023

Our total service revenues during the three months ended March 31, 2023 and 2022 are presented in the table below based on an allocation of the estimated transaction price with the patient between the primary patient classification of insurance coverage (in thousands):


	Three Months Ended March 31,
	2023		2022
Commercial insurance	$	217,209	$	188,465
Medicare	86,624		70,999
Medicaid	10,153		9,087
Workers' compensation/personal injury	12,675		12,449
Other patient revenue	9,745		7,123
Management fee revenue	4,248		5,508
Teleradiology and Software revenue	4,333		3,399
Other	5,300		5,647
Revenue under capitation arrangements	38,144		38,491
Imaging Center Segment Revenue	388,431		341,168
AI Segment Revenue	2,133		599
Total service revenue	$	390,564	$	341,767

Schedule of Goodwill

Activity in goodwill for the three months ended March 31, 2023 is provided below (in thousands):


	Imaging Center		Artificial Intelligence		Total
Balance as of December 31, 2022	606,483		$	71,182	$	677,665
Goodwill from acquisitions	6,174		—		6,174
Valuation adjustment	1,603		—		1,603
Currency translation	576		1,067		1,643










Balance as of March 31, 2023	$	614,836	$	72,249	$	687,085

Schedule of Annual Amortization Expense

As of March 31, 2023:


	2023*		2024		2025		2026		2027		Thereafter		Total		Weighted average amortization period remaining in years
Management Service Contracts	$	1,717	$	2,287	$	2,287	$	2,287	$	2,287	$	8,959	$	19,824	8.7
Covenant not to compete and other contracts	1,013		941		692		406		122		41		3,215		3.7
Customer Relationships	924		1,219		1,088		966		767		10,984		15,948		18.1
Patent and Trademarks	280		313		313		313		313		399		1,931		6.3
Developed Technology & Software	5,810		6,657		6,657		6,617		6,083		5,392		37,216		6.5
Trade Names amortized	208		77		77		77		77		89		605		4.6
Trade Names indefinite life	—		—		—		—		—		7,100		7,100		—
IPR&D	—		—		—		—		—		17,164		17,164		—
Total Annual Amortization	$	9,952	$	11,494	$	11,114	$	10,666	$	9,649	$	50,128	$	103,003

*Excluding the three months ended March 31, 2023

As of December 31, 2022:


	2023		2024		2025		2026		2027		Thereafter		Total		Weighted average amortization period remaining in years
Management Service Contracts	$	2,287	$	2,287	$	2,287	$	2,287	$	2,287	$	8,958	$	20,393	8.9
Covenant not to compete and other contracts	1,319		891		642		356		72		40		3,320		3.1
Customer Relationships	1,244		1,244		1,112		991		816		12,396		17,803		18.6
Patent and Trademarks	298		298		298		298		298		322		1,812		6.4
Developed Technology & Software	6,297		6,297		6,297		6,257		5,722		7,196		38,066		6.7
Trade Names amortized	305		77		77		77		77		89		702		4.5
Trade Names indefinite life	—		—		—		—		—		7,100		7,100		—
IPR&D	—		—		—		—		—		17,032		17,032		—
Total Annual Amortization	$	11,750	$	11,094	$	10,713	$	10,266	$	9,272	$	53,133	$	106,228

Schedule of Effect of Derivative Instruments on Comprehensive Loss

A tabular presentation of the effect of derivative instruments on our consolidated statement of comprehensive loss of the 2019 Swaps which remain ineffective is as follows (amounts in thousands):

For the three months ended March 31, 2023

Account

December 31, 2022 Balance

Amount of comprehensive loss recognized on derivative net of taxes

Amount of loss reclassified out of accumulated OCI into income (prior period effective portion), net of taxes

March 31, 2023 Balance

Location

Accumulated Other Comprehensive Loss, net of taxes

$(15,201)

$—

$922

$(14,279)

Equity

For the three months ended March 31, 2022

Account

December 31, 2021 Balance

Amount of comprehensive loss recognized on derivative net of taxes

Amount of loss reclassified out of accumulated OCI into income (prior period effective portion), net of taxes

March 31, 2022 Balance

Location

Accumulated Other Comprehensive Loss, net of taxes

$(18,887)

$—

$924

$(17,963)

Equity

A tabular presentation of the effect of derivative instruments on our statement of operations of the 2019 Swaps which remain ineffective is as follows (amounts in thousands):

For the three months ended March 31, 2023

Ineffective interest rate swap

Amount of loss recognized in income on derivative (current period ineffective portion)

Location of loss recognized in Income on derivative (current period ineffective portion)

Amount of loss reclassified from accumulated OCI into income (prior period effective portion)

Location of loss reclassified from accumulated OCI into income (prior period effective portion)

Interest rate contracts

(4,093)

Other income (expense)

(922)

Interest Expense

For the three months ended March 31, 2022

Ineffective interest rate swap

Amount of gain recognized in income on derivative (current period ineffective portion)

Location of gain recognized in Income on derivative (current period ineffective portion)

Amount of loss reclassified from accumulated OCI into income (prior period effective portion)

Location of loss reclassified from accumulated OCI into income (prior period effective portion)

Interest rate contracts

20,819

Other income (expense)

(923)

Interest Expense

Schedule of Business Acquisitions by Acquisition, Contingent Consideration

A tabular rollforward of contingent consideration is as follows (amounts in thousands):


For the three months ended March 31, 2023
Entity	Account	January 1, 2023 Balance		Issuance of contingent consideration		Change in valuation of Contingent Consideration		Currency Translation		March 31, 2023 Balance
Aidence	Other Long Term Liabilities	$	11,158	$	—	$	158	$	—	$	11,316

Quantib	Accrued Expenses & Other Long Term Liabilities	$	3,709	$	—	$	702	$	—	$	4,411

Montclair	Accrued Expenses	$	1,200	$	—	$	—	$	—	$	1,200
Heart and Lung Limited	Accrued Expenses & Other Long Term Liabilities	$	11,656	$	—	$	1,124	$	350	$	13,130

Schedule of Fair Value of Assets and Liabilities

The tables below summarize the estimated fair values of certain of our financial assets that are subject to fair value measurements, and the classification of these assets on our condensed consolidated balance sheets, as follows (in thousands):


	As of March 31, 2023
	Level 1		Level 2		Level 3		Total
Current and long term assets

2019 Swaps - Interest Rate Contracts	$	—	$	19,209	$	—	$	19,209


	As of December 31, 2022
	Level 1		Level 2		Level 3		Total
Current and long term assets

2019 Swaps - Interest Rate Contracts	$	—	$	23,302	$	—	$	23,302

The table below summarizes the estimated fair values of contingencies and holdback relating to our Aidence Holding B.V. and Quantib B.V. acquisitions on January 20, 2022, the Montclair Radiological Associates acquisition on October 1, 2022 and the Heart and Lung Imaging Limited acquisition on November 1, 2022 that are subject to fair value measurements and the classification of these liabilities on our consolidated balance sheets, as follows (in thousands):


	As of March 31, 2023
	Level 1		Level 2		Level 3		Total
Accrued expenses and other non-current liabilities
Aidence Holding B.V. milestone consideration	$	—	$	—	$	11,316	$	11,316
Quantib B.V. holdback of 113,303 shares of RadNet common stock	$	—	$	—	$	4,411	$	4,411
Montclair Radiological Associates	$	—	$	—	$	1,200	$	1,200
Heart and Lung Imaging Limited	$	—	$	—	$	13,130	$	13,130

The table below summarizes the estimated fair value compared to our face value of our long-term debt as follows (in thousands):


	As of March 31, 2023
	Level 1		Level 2		Level 3		Total Fair Value		Total Face Value
First Lien Term Loans and Truist Term Loan	$	—	$	856,876	$	—	$	856,876	$	860,438


	As of December 31, 2022
	Level 1		Level 2		Level 3		Total Fair Value		Total Face Value
First Lien Term Loans and Truist Term Loan	$	—	$	843,594	$	—	$	843,594	$	864,125

Schedule of Earnings Per Share

Earnings per share is based upon the weighted average number of shares of common stock and common stock equivalents outstanding, net of common stock held in treasury, as follows (in thousands except share and per share data):


	Three Months Ended March 31,
	2023		2022
Net income attributable to RadNet, Inc.'s common stockholders	$	(21,005)	$	3,013

BASIC NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC.'S COMMON STOCKHOLDERS
Weighted average number of common shares outstanding during the period	57,701,439		55,303,007
Basic net income per share attributable to RadNet, Inc.'s common stockholders	$	(0.36)	$	0.05

DILUTED NET INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC.'S COMMON STOCKHOLDERS
Weighted average number of common shares outstanding during the period	57,701,439		55,303,007
Add nonvested restricted stock subject only to service vesting	—		197,911
Add additional shares issuable upon exercise of stock options and contingently issuable shares	—		861,275
Weighted average number of common shares used in calculating diluted net income per share	57,701,439		56,362,193
Diluted net income per share attributable to RadNet, Inc.'s common stockholders	$	(0.36)	$	0.05

Fair value change for contingently issuable shares excluded from the computation of diluted per share amounts as its effect would be antidilutive	$	769	$	—
Stock options and non vested restricted awards excluded from the computation of diluted per share amounts as their effect would be antidilutive:
Nonvested restricted stock subject to service vesting	594,758		—
Shares issuable upon the exercise of stock options	750,075		46,912
Contingently issuable shares	273,111		—

For the three months ended March 31, 2023 we excluded all outstanding options, restricted stock awards and other requisite shares in the calculation of diluted earnings per share because their effect would be antidilutive.

Schedule of Investment in Joint Ventures

The following table is a summary of our investment in joint ventures during the three months ended March 31, 2023 (in thousands):


Balance as of December 31, 2022	$	57,893
Equity in earnings in these joint ventures	1,428





Balance as of March 31, 2023	$	59,321

Schedule of Joint Venture Investment and Financial Information

The following table is a summary of key balance sheet data for these joint ventures as of March 31, 2023 and December 31, 2022 and income statement data for the three months ended March 31, 2023 and 2022 (in thousands):


Balance Sheet Data:	March 31, 2023		December 31, 2022
Current assets	$	49,091	$	39,304
Noncurrent assets	142,144		134,694
Current liabilities	(32,995)		(29,588)
Noncurrent liabilities	(48,872)		(37,952)
Total net assets	$	109,368	$	106,458

Book value of RadNet joint venture interests	$	50,754	$	49,564
Cost in excess of book value of acquired joint venture interests and other	8,567		8,329
Total value of RadNet joint venture interests	$	59,321	$	57,893


Income statement data for the three months ended March 31,	2023		2022
Net revenue	$	42,086	$	34,411
Net income	$	2,909	$	5,035