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 fees 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 the Group 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 others centers, this service fee revenue is earned through providing the use of our diagnostic imaging equipment and the provision of technical services as well as providing administration services such as clerical and administrative personnel, bookkeeping and accounting services, billing and collection, provision of medical and 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.


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024			2023
Commercial insurance	$	256,517	$	220,618	$	497,145		$	433,673
Medicare	101,719		87,787		195,186			172,757
Medicaid	11,001		9,798		21,906			19,763
Workers' compensation/personal injury	10,997		12,580		22,837			25,017
Other patient revenue	12,432		10,196		23,897			19,751
Management fee revenue	6,106		4,033		12,014			8,281
Heart and lung	3,936		2,123		7,857			3,936
Other	4,209		5,180		8,604			10,480
Revenue under capitation arrangements	36,969		39,797		71,487			77,941
Imaging Center Segment Revenue	443,886		392,112		860,933		860933000	771,599
Digital Health Segment Revenue	15,828		11,603		30,488			22,680
Total service revenue	$	459,714	$	403,715	$	891,421		$	794,279

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.

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 $4.9 million and $14.3 million at June 30, 2024 and December 31, 2023, respectively. We do not utilize factoring arrangements as an integral part of our financing for working capital and assess the party's ability to pay upfront at the inception of the notes receivable and subsequently by reviewing their financial statements annually and reassessing any insolvency risk on a periodic basis.

PROPERTY AND EQUIPMENT - Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation of property and equipment is performed using the straight-line method over the estimated useful lives of the assets acquired, which range from 3 to 15 years. Leasehold improvements are amortized at the lesser of lease term or their estimated useful lives, which range from 3 to 15 years. Maintenance and repairs are charged to expense as incurred.

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

GOODWILL - Goodwill at June 30, 2024 totaled $709.0 million. Goodwill is recorded as a result of business combinations. If we determine the carrying value of a reporting unit exceeds its fair value an impairment charge would be recognized and should not exceed the total amount of goodwill allocated to that reporting unit. We tested goodwill and indefinite lived intangibles for impairment on October 1, 2023 noting no impairment, and we have not identified any indicators of impairment through June 30, 2024.

INTANGIBLE ASSETS - Intangible assets are primarily related to our business combinations and software development. They include the estimated fair values of such items as service agreements, customer lists, covenants not to compete, acquired technologies, and trade names. The components of intangible assets, both finite and indefinite, along with annual amortization expense that will be recorded over the next five years at June 30, 2024 and December 31, 2023 are as follows (in thousands):


	2024*		2025		2026		2027		2028		Thereafter		Total		Weighted average amortization period remaining in years
Management service contracts	$	1,144	$	2,287	$	2,287	$	2,287	$	2,287	$	6,671	$	16,963	7.4
Covenant not to compete and other contracts	517		865		578		283		193		48		2,484		3.2
Customer lists	612		1,093		971		795		758		10,481		14,710		17.5
Patent and trademarks	150		301		301		301		301		180		1,534		5.5
Developed technology	3,738		7,476		7,436		6,902		6,902		6,620		39,074		6.0
Trade names amortized	39		77		77		77		63		27		360		4.8
Trade names indefinite life	—		—		—		—		—		7,100		7,100		—
IPR&D	—		—		—		—		—		1,824		1,824		—
Total annual amortization	$	6,200	$	12,099	$	11,650	$	10,645	$	10,504	$	32,951	$	84,049


	2024		2025		2026		2027		2028		Thereafter		Total		Weighted average amortization period remaining in years
Management service contracts	$	2,287	$	2,287	$	2,287	$	2,287	$	2,287	$	6,671	$	18,106	7.9
Covenant not to compete and other contracts	946		714		427		132		45		6		2,270		3.4
Customer lists	1,234		1,104		981		797		764		10,564		15,444		17.7
Patent and trademarks	316		316		316		315		300		164		1,727		5.8
Developed technology	7,785		7,785		7,745		7,210		7,046		6,117		43,688		5.7
Trade names amortized	77		77		77		77		63		27		398		5.3
Trade names indefinite life	—		—		—		—		—		7,100		7,100		—
IPR&D	—		—		—		—		—		1,882		1,882		—
Total annual amortization	$	12,645	$	12,283	$	11,833	$	10,818	$	10,505	$	32,531	$	90,615

Total intangible asset amortization expense was $3.1 million and $6.2 million for the three and six months ended June 30, 2024, respectively. Total amortization expense was $3.0 million and $6.0 million for the three and six months ended June 30, 2023, respectively. Intangible assets are amortized using the straight-line method over their useful life determined at acquisition. Management service contracts are amortized over 25 years using the straight line method. Developed technology is capitalized and amortized over the useful life of the software when placed into service. Trade names are reviewed annually for impairment.

INCOME TAXES - Income tax expense is computed using an asset and liability method and using expected annual effective tax rates. Under this method, deferred income tax assets and liabilities result from temporary differences in the financial reporting bases and the income tax reporting bases of assets and liabilities. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefit that, based on available evidence, is not expected to be realized. When it appears more likely than not that deferred taxes will not be realized, a valuation allowance is recorded to reduce the deferred tax asset to its estimated realizable value. For net deferred tax assets we consider estimates of future taxable income in determining whether our net deferred tax assets are more likely than not to be realized.

In 2021, the Organization for Economic Co-operation and Development ("OECD") announced an inclusive framework on base erosion and profit shifting including Pillar Two Model Rules defining the global minimum tax, which calls for taxation of large multinational corporations at a minimum rate of 15%. Subsequently, multiple sets of administrative guidance have been issued. Many non-US tax jurisdictions have either recently enacted legislation to support certain components of Pillar Two Model Rules beginning 2024 (including the European Union Member States) with the adoption of additional components in later years or announced their plans to enact legislation in future years. The model rules provide a framework for applying the minimum tax, countries may enact Pillar Two Model Rules slightly differently than the model rules and on different timelines and may adjust domestic tax incentives in response to Pillar Two Model Rules. On a long-term basis, we will continue to evaluate the impacts of enacted legislation and pending legislation to enact Pillar Two Model Rules in all countries applicable to us. For 2024, we expect that we will meet one or more transactional safe harbor rules, and as such, we do not believe Pillar Two model will have an impact on our annual effective tax rate for the year ending December 31, 2024.

We recorded an income tax expense of $2.5 million, or an effective tax rate of 26.1%, for the three months ended June 30, 2024 and a benefit of $0.6 million, or an effective tax rate of (4.4)% for the three months ended June 30, 2023. We recorded income tax expense of $0.6 million, or an effective tax rate of 4.6%, for the six months ended June 30, 2024 and $0.5 million, or an effective tax rate of 65.5% for the six months ended June 30, 2023. The income tax rates for the three and six months ended June 30, 2024 diverge from the federal statutory rate due to (i) effects of state income taxes ; (ii) officer's compensation limitations; (iii) partial valuation allowance on losses in foreign jurisdictions, partially offset by (iv) excess tax benefits attributable to share based compensation; and (v) noncontrolling interests from controlled partnerships.

LEASES - We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease liabilities, and long term operating lease liability in our condensed consolidated balance sheets. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. We include options to extend a lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. For a contract in which we are a lessee that contains fixed payments for both lease and non-lease components, we have

elected to account for the components as a single lease component. ROU assets are tested for impairment if circumstances suggest that the carrying amount may not be recoverable. Our ROU assets consist of facility and equipment assets on operating leases. No events have occurred such as fire, flood, or other acts which have impaired the integrity of our ROU assets as of June 30, 2024. Our facility leases require us to maintain insurance policies which would cover major damage to our facilities. We maintain business interruption insurance to cover loss of business due to a facility becoming non-operational under certain circumstances. Our equipment leases are covered by warranty and service contracts which cover repairs and provide regular maintenance to keep the equipment in functioning order.

EQUITY BASED COMPENSATION – We have one long-term incentive plan that we adopted in 2006 and which we have amended and restated at various points in time: first on April 20, 2015, second on March 9, 2017, third on April 15, 2021 and fourth on April 27, 2023 (the “Restated Plan”). The Restated Plan was approved by our stockholders at our annual stockholders meeting on June 7, 2023. We have reserved 20,100,000 shares of common stock for issuance under the Restated Plan which can be issued in the form of incentive and/or nonstatutory stock options, restricted and/or unrestricted stock, stock units, and stock appreciation rights. Terms and conditions of awards can be direct grants or based on achieving a performance metric. We evaluate performance-based awards to determine if it is probable that the vesting conditions will be met. We also consider probability of achievement of performance conditions when determining expense recognition. For the awards where vesting is probable, equity-based compensation is recognized over the related vesting period. Stock options generally vest over three years to five years and expire five years to ten years from date of grant. We determine the compensation expense for each stock option award using the Black Scholes model. This model requires that our management make certain estimates concerning risk free interest rates and volatility in the trading price of our common stock. The compensation expense recognized for all equity-based awards is recognized over the awards’ service periods. Equity-based compensation is classified in operating expenses within the same line item as the majority of the cash compensation paid to employees. In connection with our acquisition of DeepHealth Inc. on June 1, 2020, we assumed the DeepHealth, Inc. 2017 Equity Incentive Plan, including outstanding options awards that can be exercised for our common stock. No additional awards will be granted under the DeepHealth, Inc. 2017 Equity Incentive Plan. See Note 7, Stock-Based Compensation, for more information.

COMPREHENSIVE INCOME (LOSS) - Accounting guidance establishes rules for reporting and displaying other comprehensive income (loss) and its components. Our foreign currency translation adjustments and the amortization of balances associated with derivatives previously classified as cash flow hedges are included in other comprehensive income (loss). The components of other comprehensive income (loss) for the three and six months ended June 30, 2024 and June 30, 2023 are included in the consolidated statements of comprehensive income (loss).

COMMITMENTS AND CONTINGENCIES - We are party to various legal proceedings, claims, and regulatory, tax or government inquiries and investigations that arise in the ordinary course of business. With respect to these matters, we evaluate the developments on a regular basis and accrue a liability when we believe a loss is probable and the amount can be reasonably estimated. Based on current information, we do not believe that reasonably possible or probable losses associated with pending legal proceedings would either individually or in the aggregate, have a material adverse effect on our business and consolidated financial statements. However, the outcome of these matters is inherently uncertain. Therefore, if one or more of these matters were resolved against us for amounts in excess of management's expectations, our results of operations and financial condition, including in a particular reporting period in which any such outcome becomes probable and estimable, could be materially adversely affected.

DERIVATIVE INSTRUMENTS - In the second quarter of 2019, we entered into four forward interest rate agreements ("2019 Swaps"). The 2019 Swaps have total notional amounts of $500.0 million, consisting of two agreements of $50.0 million each and two agreements of $200.0 million each. The 2019 Swaps will secure a constant interest rate associated with portions of our variable rate bank debt and have an effective date of October 13, 2020. They matured in October 2023 for the smaller notional and will mature in October 2025 for the larger notional. Under these arrangements, we arranged the 2019 Swaps with locked in 1 month Term SOFR rates at 1.89% for the $100.0 million notional and at 1.98% for the $400.0 million notional. As of the effective date, we are liable for premium payments if interest rates decline below arranged rates, but will receive interest payments if rates are above the arranged rates.

At inception, we designated our 2019 Swaps as cash flow hedges of floating-rate borrowings. In accordance with accounting guidance, derivatives that have been designated and qualify as cash flow hedging instruments are reported at fair value. The gain or loss on the effective portion of the hedge (i.e. change in fair value) is reported as a component of comprehensive gain or loss in the consolidated statement of equity. The remaining gain or loss, if any, is recognized currently in earnings. The cash flows for both our $400.0 million notional interest rate swap contract locked in at 1.98% due October 2025 and our $100.0 million notional interest rate swap contract locked in at 1.89% do not match the cash flows for our Term Loans (the “Barclays Term Loans”) under our Second Amended and Restated First Lien Credit and Guaranty Agreement with Barclays (the “Barclays Credit Agreement”), and so we have determined that they are not currently effective as cash flow

hedges. Accordingly, all changes in their fair value after April 1, 2020 for the $400.0 million notional and after July 1, 2020 for the $100.0 million notional are being recognized in earnings. As of July 1, 2020, the total change in fair value relating to swaps included in other comprehensive income was approximately $24.4 million, net of taxes. This amount was amortized to interest expense through October 2023 at approximately $0.4 million per month and continuing at approximately $0.3 million through October 2025. The effect for the release of the taxes from other comprehensive income is based on current tax rate.

For the three months ended June 30, 2024

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

(1,890)

Other income (expense)

6,517

Interest Expense

For the six months ended June 30, 2024

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

(674)

Other income (expense)

7,256

Interest Expense

On November 1, 2022, we completed our acquisition of 75% of the equity interests of Heart and Lung Imaging Limited. The purchase included up to $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, which will be adjusted to fair value in subsequent periods. The holdback had a value of approximately $0.6 million as of June 30, 2024. The contingent consideration is determined by the achievement of a specific number of physician reads. On September 20, 2023, we settled a milestone contingent liability by issuing 56,600 shares of our common stock at an ascribed value of $1.6 million and cash of $1.8 million. On December 12, 2023, we settled a milestone contingent liability by issuing 64,569 shares of our common stock at an ascribed value of $2.3 million and cash of $2.1 million. On March 27, 2024, we partially settled a milestone contingent liability by issuing 95,019 shares of our common stock at an ascribed value of $4.6 million. On April 1, 2024, we settled the remaining milestone contingent liability in cash of $3.6 million.


For the three months ended June 30, 2024
Entity	Account	March 31, 2024 Balance	Settlement of contingent consideration		Change in valuation of contingent consideration		Currency translation		June 30, 2024 Balance
Heart and Lung	Accrued expenses	4,246	$	(3,614)	$	—	$	—	$	632






For the three months ended June 30, 2023
Entity	Account	March 31, 2023 Balance	Settlement of contingent consideration		Change in valuation of contingent consideration		Currency translation		June 30, 2023 Balance
Heart and Lung	Accrued Expenses & Other Long Term Liabilities	13,130	$	—	$	867	$	361	$	14,358






For the six months ended June 30, 2024
Entity	Account	January 1, 2024 Balance	Settlement of contingent consideration		Change in valuation of contingent consideration		Currency translation		June 30, 2024 Balance
Heart and Lung	Accrued expenses	6,879	$	(8,221)	$	1,060	$	914	$	632






For the six months ended June 30, 2023
Entity	Account	January 1, 2023 Balance	Settlement of contingent consideration		Change in valuation of contingent consideration		Currency translation		June 30, 2023 Balance
Heart and Lung	Accrued Expenses & Other Long Term Liabilities	11,656	$	—	$	1,991	$	711	$	14,358

FAIR VALUE MEASUREMENTS – Assets and liabilities subject to fair value measurements are required to be disclosed within a fair value hierarchy. The fair value hierarchy ranks the quality and reliability of inputs used to determine fair value. Accordingly, assets and liabilities carried at, or permitted to be carried at, fair value are classified within the fair value hierarchy in one of the following categories based on the lowest level input that is significant to a fair value measurement:

Level 2—Fair value is determined by using inputs other than Level 1 quoted prices that are directly or indirectly observable. Inputs can include quoted prices for similar assets and liabilities in active markets or quoted prices for identical assets and liabilities in inactive markets. Related inputs can also include those used in valuation or other pricing models such as interest rates and yield curves that can be corroborated by observable market data.

The estimated fair value of these liabilities was determined using Level 3 inputs. For Heart Lung Imaging Limited the contingent consideration is determined by the achievement of a specific number of physician reads. The fair value is measured based upon the probability adjusted amount expected to be paid. As significant inputs for the contingent consideration of Heart Lung Imaging Limited are not observable and cannot be corroborated by observable market data they are classified as Level 3.


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024				2023
NET (LOSS) INCOME ATTRIBUTABLE TO RADNET, INC. COMMON STOCKHOLDERS	$	(2,982)	$	8,369	$	(5,761)			$	(12,636)

BASIC NET (LOSS) INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC.'S COMMON STOCKHOLDERS
Weighted average number of common shares outstanding during the period	73,419,124		59,880,803		71,795,080				59,221,453
Basic and diluted net loss per share attributable to RadNet, Inc.'s common stockholders	$	(0.04)	$	0.14	$	(0.08)			$	(0.21)

DILUTED NET (LOSS) INCOME PER SHARE ATTRIBUTABLE TO RADNET, INC.'S COMMON STOCKHOLDERS
Weighted average number of common shares outstanding during the period	73,419,124		59,880,803		71,795,080				59,221,453
Add non-vested restricted stock subject only to service vesting	—		205,413		—				—
Add additional shares issuable upon exercise of stock options and contingently issuable shares	—		830,769		—				—
Weighted average number of common shares used in calculating diluted net income per share	73,419,124		60,916,985		71,795,080				59,221,453
Changes in FV associated with contingently issuable shares	$	—	$	(934)	$	—			$	—
Net (loss) income attributable to RadNet, Inc's common stockholders for diluted share calculation	$	(2,982)	$	7,435	$	(5,761)	$	—	$	(12,636)
Diluted net (loss) income per share attributable to RadNet, Inc.'s common stockholders	$	(0.04)	$	0.12	$	(0.08)			$	(0.21)

Earnings per share disclosures:
Fair value change for contingently issuable shares excluded from the computation of diluted per share amounts as its effect would be antidilutive	$	—	$	—	$	—			$	1,696,000

Stock options and non-vested restricted awards excluded from the computation of diluted per share amounts as their effect would be antidilutive:
Non-vested restricted stock subject to service vesting	670,486		—		685,104				644,623
Shares issuable upon the exercise of stock options	799,502		82,775		831,647				759,313


Contingently issuable shares	—		—		—				193,207

INVESTMENT IN JOINT VENTURES – We have 13 unconsolidated joint ventures with ownership interests ranging from 35% to 55%. These joint ventures represent partnerships with hospitals, health systems or radiology practices and were formed for the purpose of owning and operating diagnostic imaging centers. Professional services at the joint venture diagnostic imaging centers are performed by contracted radiology practices or a radiology practice that participates in the joint venture. Our investment in these joint ventures is accounted for under the equity method, since RadNet does not have a controlling financial interest in such ventures. We evaluate our investment in joint ventures, including cost in excess of book value (equity method goodwill) for impairment whenever indicators of impairment exist. No indicators of impairment existed as of June 30, 2024.

We charged management service fees from the centers underlying these joint ventures of approximately $6.1 million and $4.0 million for the three months ended June 30, 2024 and 2023 and $12.0 million and $8.2 million for the six months ended June 30, 2024 and 2023, respectively. We eliminate any unrealized portion of our management service fees with our equity in earnings of joint ventures. As we have the ability to exercise significant influence over our joint venture entities, we consider them related parties. Amounts transacted between ourselves and the entities in the ordinary course of business are disclosed on our balance sheet in the due from/to affiliate accounts.