Jim Sidoti

Jim Sidoti asked if there were any unusual factors, such as pulled-in sales, contributing to the Q4 revenue exceeding estimates and guidance. He sought confirmation that China's revenue was approximately $32 million in Q4, representing 14% of total revenue, compared to about $30 million a year ago. Sidoti also inquired about the ramp-up of detector shipments from India and the expected timeline for tube shipments from the new India factory. He questioned whether growth from India would lead to gross margin improvement or if those products are lower margin. Finally, Sidoti asked about the increase in R&D expense from the June quarter, specifically if it included non-cash expenses or was due to project timing, and if this number is expected to continue rising year-over-year.

Answer

President and CEO Sunny Sanyal clarified that there were no unusual pull-ins or push-outs, attributing the strong Q4 revenue to robust demand in both segments and the impact of cargo system shipments ($1M-$2M per system). He confirmed China's Q4 revenue was $32 million, consistent with prior periods. Sanyal stated that detector shipments from India are ramping up over FY2026, while the tubes factory is still 12-15 months away from product shipment. Regarding India's impact on gross margin, he explained that transferring legacy radiographic products from Salt Lake City to India (a small portion of revenue) would see margin improvement, but new business from India in the value/mid-tier RAD segment is expected to be at corporate average gross margins. Sanyal noted that R&D expense fluctuates due to material experiments and prototype building, and overall OpEx for the coming year is planned to be lower than the last fiscal year, around $52M-$53M per quarter.

Jim Sidoti asked if the higher-than-expected Q4 revenue included any unusual pull-ins from Q1. He also sought confirmation on China's revenue contribution ($32 million, 14% of total) and an update on the India operations, specifically the ramp-up of detector shipments and the timeline for tube shipments. Additionally, he questioned the gross margin impact of India's growing business and the drivers behind the increase in R&D expense.

Answer

President and CEO Sunny Sanyal confirmed no unusual pull-ins, attributing strong Q4 revenue to robust demand in both segments and significant cargo system shipments. He verified China's revenue at $32 million for the quarter. Sanyal stated that detector shipments from India are ramping up over FY2026, while the tubes factory is 12-15 months away from production. He explained that India's impact on gross margin is small, with legacy product transfers seeing a pickup, but new business from India is expected at corporate average margins. For R&D, Sanyal noted that expenses can fluctuate due to project timing and material costs, but overall OpEx for the coming year is planned to be lower, around $52-53 million per quarter.

Jim Sidoti of Sidoti & Company, LLC asked about the financial impact of fulfilling delayed China orders, the sales outlook for China in Q4, the involvement of medical OEMs in photon counting development, and the company's future debt reduction strategy.

Answer

CEO Sunny Sanyal confirmed that fulfilling the China orders did not result in higher-than-normal expenses. CFO Shubham Maheshwari described demand in China as stable but did not provide specific regional guidance. Sanyal clarified that the major photon counting projects are with medical OEMs. Maheshwari explained the plan is to build cash reserves for a refinancing event in approximately two years, targeting a gross debt level between $300 million and $350 million.

Jim Sidoti asked for confirmation on the number of centers, specifically if RadNet reached 406 centers after adding one in the quarter, and inquired about the projected number of centers by the end of 2025. He also sought the overall same-center volume growth, inclusive of both Advanced and Routine Imaging, and details regarding the Alpha RT acquisition, including its cost and payment method.

Answer

EVP and CFO Mark Stolper corrected the center count to 407 as of September 30, 2025, including acquisitions, new openings, and consolidations. President and CEO Howard Berger and Mark Stolper indicated the number would be higher by year-end due to pipeline acquisitions and de novo openings, though timing is uncertain. Mark Stolper reported the overall same-center procedure volume growth at 4.9%, influenced by the larger Routine Imaging mix. Regarding Alpha RT, Mark Stolper stated it was an all-stock acquisition valued around $5 million, detailing its platform for remote technologists, MRI safety technology, and tech assistant training. Howard Berger added that Alpha RT enables RadNet to provide "live tech" staffing, potentially offering higher margins.

Jim Sidoti inquired about the number of centers added in the quarter, the current total center count, the expected total centers by the end of 2025, the overall same-center volume, and details regarding the AlphaRT acquisition.

Answer

Mark Stolper, EVP and CFO, confirmed 407 locations as of September 30, 2025, and expects the count to be higher by year-end due to pipeline acquisitions and de novo openings. He reported a total same-center procedure volume of 4.9%, inclusive of both advanced and routine imaging. He detailed the AlphaRT acquisition as approximately $5 million, paid in stock, explaining its platform for remote technologists, MRI safety technology, and training programs for tech assistants. Howard Berger, President and CEO, added that AlphaRT will enable RadNet to provide 'live tech' staffing, potentially with higher margins.

Jim Sidoti of Sidoti & Company, LLC asked about the percentage of centers currently using the DeepHealth OS, the timeline for full implementation, the overall same-center volume increase for the quarter, and the status of the iCAD sales force post-acquisition.

Answer

Howard Berger, Chairman, President & CEO, clarified that centers are using DeepHealth modules but none are on the full OS yet, with a full rollout targeted for completion in 15-18 months. He and Mark Stolper, EVP & CFO, confirmed the iCAD sales force of about 25-26 people has come on board. Mark Stolper provided a same-center volume breakdown, resulting in a blended increase of about 2.7%, driven by a 6.6% rise in advanced imaging.

Jim Sidoti of Sidoti & Company, LLC asked what percentage of centers are currently using the DeepHealth OS and the expected timeline for full implementation. He also asked for the overall same-center volume increase and the status of the iCAD sales force.

Answer

Howard Berger, Chairman, President & CEO, stated that no centers are using the full DeepHealth OS yet, but modules are being deployed. He estimated a 15-18 month timeline for full implementation by early 2026 and confirmed they plan to retain the entire iCAD sales force. Mark Stolper, EVP & CFO, provided a breakdown of same-center volume growth, which blended to a 2.7% increase overall.

Jim Sidoti asked whether the growth in the distributed revenue segment was due to one-time sales, questioned the sustainability of lower SG&A expenses, and sought clarity on the future tax rate after NOLs are utilized.

Answer

CEO Amir London confirmed that the distributed revenue growth from biosimilar launches is sustainable and not a one-time event. He attributed lower SG&A to disciplined expense management, noting H2 expenses might be slightly higher but the focus remains on improving EBITDA margins. CFO Chaime Orlev addressed the tax question, explaining the Q2 tax credit was due to currency fluctuations and projecting a future effective tax rate of 20% to 25% once NOLs are fully used in 2025.

Jim Sidoti of Sidoti & Company, LLC inquired about the sustainability of growth in the distributed revenue segment, the reasons for the significant decrease in SG&A expenses, and the factors behind the quarterly tax credit and future tax rate expectations.

Answer

CEO Amir London confirmed that growth in the distribution segment from biosimilars is sustainable and not a one-time event. He attributed lower SG&A to disciplined expense management, while noting H2 expenses may be slightly higher. CFO Chaime Orlev explained the tax credit was due to currency fluctuations and projected a future effective tax rate of 20-25% once NOLs are fully utilized.

Jim Sidoti of Sidoti & Company, LLC inquired about the allocation of the $6 million raised for Ignaton, whether the company remains on track for its 12% annual revenue growth target, and the current performance and strategic purpose of the Gaia Marketplace.

Answer

Executive Chairman Jirka Rysavy explained the Ignaton funds are for a larger launch, not primarily for production capacity. He also positioned the Marketplace as a community-building tool, not a revenue driver. CFO Ned Preston confirmed Gaia is on track for its 12% annual revenue growth target, driven by the core SVOD business. CEO Kiersten Medvedich reinforced the Marketplace's community focus, highlighting the success of sold-out travel events.

Jim Sidoti of Sidoti & Company, LLC questioned how the $6 million raised for Ignaton would be spent, whether management was still on track to meet its 12% annual revenue growth target, and asked for an update on the Gaia Marketplace's performance and strategy, including new product launches.

Answer

Executive Chairman Jirka Rysavy explained the Ignaton funds would support a larger launch rather than production capacity, which is already sufficient. He also clarified the Marketplace's primary goal is community building, not revenue generation. CFO Ned Preston reaffirmed the 12% full-year revenue growth target, citing strong performance in the core SVOD business. President & CEO Kiersten Medvedich added that the Marketplace is foundational to community, highlighting that recent travel offerings to Peru sold out quickly.

Jim Sidoti of Sidoti & Company, LLC asked about management's top priorities post-refinancing, the performance of the GoHealthProtect product line, and for guidance on the post-transaction share count.

Answer

CEO Vijay Kotte outlined three key priorities: pursuing M&A through the new Transformation Committee, enhancing the GoHealthProtect product, and preparing for AEP. He confirmed GoHealthProtect's Q2 performance met expectations and the focus is on optimizing it rather than adding new products. The share count modeling question was deferred to one-on-one follow-ups.

Jim Sidoti from Sidoti & Company, LLC asked if 35% is a realistic ongoing SG&A target, inquired about the M&A pipeline for branded products, and questioned the potential impact of tariffs on goods from India.

Answer

CFO Mike Koempel confirmed that 35% SG&A is a reasonable target. President of Branded Products Jake Himelstein and CEO Michael Benstock stated that while they are selective, they are actively looking for accretive acquisitions again after a period of caution. Benstock also clarified that India is a minimal and non-exclusive supplier, so any new tariffs there would have a negligible impact.

Jim Sidoti from Sidoti & Company, LLC asked about the long-term gross margin trajectory as the commercial channel grows, the potential timing of a CINGAL distribution deal relative to FDA approval, the company's cash position, and whether manufacturing capacity will be sufficient by year-end.

Answer

EVP, CFO & COO Steve Griffin stated that while the growing commercial channel has a lower margin, the growth of higher-margin products like Integrity should keep overall margins in a stable range, and confirmed new products would be accretive. President & CEO Dr. Cheryl Blanchard noted that the timing for a CINGAL deal would be driven by maximizing shareholder value. Mr. Griffin added that while operating cash flow is improving, CapEx investments in manufacturing might lead to a lower cash balance, and that capacity expansion is an ongoing, multi-year investment to meet future demand.

Jim Sidoti of Sidoti & Company, LLC asked about the long-term gross margin outlook as the commercial channel grows, the potential timing of a CINGAL distribution deal, whether the current cash balance represents a low point, and if manufacturing capacity will be sufficient by year-end to meet future demand.

Answer

EVP, CFO & COO Steve Griffin stated that while the commercial channel has a lower margin, new higher-margin products like Integrity should be an offset, keeping margins in a similar range to the 2H 2025 forecast. President & CEO Dr. Cheryl Blanchard noted that the timing of any CINGAL deal would be driven by maximizing shareholder value. Mr. Griffin explained that while operating cash flow is improving, CapEx investments in the Massachusetts facility could lead to a lower cash balance. He confirmed that capacity investment is ongoing to meet future demand for all key products.

Asked about the drivers of the strong Oncology growth, the sustainability of the Device Solutions margin improvement, risks from budget cuts, the timeline for IT upgrade costs to phase out, and the reasons for the high tax rate.

Answer

Executives explained Oncology growth was a mix of volume and strong collections, with collections being less sustainable. Device Solutions margin is sustainable due to the rental business model. They see minimal risk from budget cuts due to their home care focus and low government exposure. IT costs will mostly end after 2025, with a small amount in Q1 2026. The high tax rate was a non-cash event due to non-deductible expenses and will normalize.

Sought clarification on the negative pressure business, specifically the distinction between Cork and Smith+Nephew devices, and questioned the reasons for the significant increase in medical equipment purchases in Q2 and its allocation across business segments.

Answer

Executives explained that the company is device-agnostic, and all negative pressure devices (Cork, Genadyne, Smith+Nephew) can be used for home referrals. The spike in Q2 capital expenditure was attributed to a large new rental customer and growth in pain, oncology, and wound care, and is not expected to persist at that level. The spending was spread across these various business lines.