RadNet, Inc. (RDNT) Earnings Call Transcript & Summary

Good morning, good afternoon, good evening, everyone, and thank you for joining us today. My name is Andra Axente. I'm the integrated communications leader at DeepHealth, a RadNet company and I have the pleasure of moderating this event. We are here together to share more insights on the transformative milestone that we announced today for the radiology industry. RadNet's acquisition of Gleamer to be integrated into DeepHealth. Today's session is an opportunity to hear insights from leaders across the 3 companies. On the strategic rationale, the shared mission and what this integration will mean for the future of health care. Please share your questions in the question box that you see on the webcast and we will address them in the Q&A section. Before we begin, please note that throughout the session, we will be discussing forward-looking topics. Therefore, we encourage you to read our forward-looking statements. Now I'm very pleased to introduce our speakers today. First of all, Greg Sorensen, Chief Strategy Officer at RadNet; Kees Wesdorp, President and CEO, DeepHealth; Christian Allouche, Co-Founder and CEO, Gleamer; Sham Sokka, Chief Operating and Technology Officer, DeepHealth; and Niccolo Stefani, Business and Product Leader, Population Health and Clinical AI. And with that, Greg, take it away.

Thanks very much, Andra. Let's go ahead to the next slide, where I'm going to introduce a little bit about RadNet for those of you who may not be familiar with us. RadNet is a national leader in outpatient radiology imaging in the United States. It is the largest outpatient imaging chain in the U.S. with over 425 imaging centers. And we partner with inpatient hospital chains. We have 26 of these joint venture partners to help broaden the portfolio of services that we can offer and the patients that we can serve. RadNet's size gives it a number of unusual features that I just wanted to sort of help set the stage for why this acquisition will be so transformative. And we're a really unique opportunity in that we vertically integrate a provider, and in fact, as you'll see a very large provider organization with a transformative technology leadership. And that combination is really unique in the industry and allows us to do things that are, I think, very impactful for human health. Part of the way we do this is there's a large team of radiologists. We have over 1,000 radiologists on contract. And what I really wanted to highlight today is we, at RadNet, do a lot of routine imaging, lots of ultrasound, a lot of plane films, lots of mammography. The things that are the bread and butter of radiology. I'm a radiologist myself and it's easy to get enamored with the very sophisticated and really groundbreaking advanced imaging tools we have. But really, the core of our business is providing routine imaging services and strengthening that core is what this acquisition is largely about. Now specifically, RadNet does about 2 million mammograms a year. We're here in France. The best data that I can see is that France, as a whole country does about 3 million mammograms a year. So this gives you a sense of the kind of innovation scale at which our teams can work. Once we innovate something just rolling it out inside RadNet forget about other customers that we'll talk about, that alone has tremendous impact and opportunity for insights and innovation. We also do, at RadNet, a ton of other advanced imaging, as you can see on the slide here, and we're very focused in the 9 states that we operate in. On Equitable care. We serve a lot of traditionally underserved minority populations. Now because RadNet is at such a scale for years now, we've been very interested in the advances in artificial intelligence to help us improve the care that we deliver. And under on the next slide, if you could advance I just wanted to highlight quickly 3 big problems that we see that we think other parts of the health care systems see throughout the world. It's difficult to connect with patients in many countries, in many markets. and building better tools so our patients can receive the care they need seamlessly is a big part of our goal. Every provider I know -- every provider organization, I know around the world is dealing with workforce shortages, labor shortages are a real problem. And there are inconsistent clinical outcomes as different providers have different levels of competence. All of these are problems that technology could help us address and all of these problems, if addressed, could lead to substantial improvements in care and in savings. And it's for this reason that we, at RadNet, have advanced into digital health and are trying to take advantage of these amazing new things in AI. On my next slide, then I just want to highlight specifically this move into routine imaging. We've done -- I've already highlighted how much routine we do in mammography and ultrasound. But that's not just important for us, that's important for the whole world, as you can see from these statistics here. And it's really the excitement that leads us here today and the opportunities that we have with Gleamer both to improve outpatient care, but also acute care and help radiologists around the world. And with that, let me turn it over to you, Kees, to talk about why DeepHealth and Gleamer.

Thank you, Greg. Let me start off that I'm very, very excited about the time that we operate in and the opportunity that we have at hand with the fantastic company that Christian and his team has built over the last couple of years. Our mission is to empower breakthroughs in care through imaging. And obviously, the opportunity that we have between DeepHealth and Gleamer only underline stats. In the next slide, I've quantified that a little bit more in detail. We consider ourselves a global leader in AI-powered health informatics. And I would say now we're the undisputed leader in terms of the solutions that we provide. So for instance, in terms of customer reach, we can now say that we jointly serve over 2,700 customer contracts worldwide. We have a global footprint of 550 employees and teammates. We have increased our clinically validated portfolio with 26 FDA-cleared and 22 CE marked solutions covering over 75 indications. And then obviously, over time, we've integrated capabilities that started with the journey of the company that Dr. Sorensen has found that that was originally called DeepHealth we've added to that lung prostate. We already had the risk and packs portfolio within DeepHealth. We further strengthened the mammography space with the acquisition of [indiscernible] and iCAD we've last year dipped into the opportunity of ultrasound with thyroid solutions and now also developing that for breast. And we've acquired [indiscernible], which is an image exchange platform, underlining the importance between the merits between clinical AI and IT infrastructure. And obviously, today, we're going to talk about the acquisition -- the strategic acquisition of Gleamer. And all this, obviously, is what forms DeepHealth today. Before going further in details on the specifics of the acquisition. On the next page, you'll see our unique positioning capabilities lined out. And you might have heard me talk previously about the fact that we're vertically integrated, I want to bring that home once more because the unique symbiosis and the partnership that we have with the RadNet services business allows us to very quickly validate prototype and validate and deploy solutions, learn from that. and improve them in a way that no other competitor can both in terms of time to market as well as on specificity of what these solutions can offer. We're clinically proven. And so jointly with Gleamer, we have over 3,000 health care provider locations worldwide, and we're delivering at skill. So think of over 50 million supported imaging studies per year. So we've become, from what is a technology platform delivering impact to an at-scale solutions provider across a multitude of solutions. I'm going to hand over to Christian, who's going to talk a little bit more about the fantastic company he has built and the opportunity that we have jointly had.

Thank you, Kees. So Gleamer is one of the fast-growing startup in this ecosystem. We've been going at a pace superior to 90% year-over-year growth rate of our ARR, superior to 90% that has been consistent for the past 4 years. And the roots of Gleamer are within [indiscernible] and within Europe. So it's a Paris-based startup which today has most of this installed base in Europe and in the rest of world, which make a unique opportunity by the way to combine our forces with [indiscernible] and RadNet to have a broader coverage over all the continents today. Initially, we started this journey by building strong AI solution in [indiscernible] and rapidly expanding tomography [indiscernible] MR and not a bit through several M&A acquisition. Today, we are combining our resources, and we are combining our team to make the best company in these markets and working towards building a reporting solution to make sure we can unlock new productivity gain for the [indiscernible] of the future.

Thank you, Christian. If you go to the next page, I would like to underline the 4 reasons why we have such a high conviction that the strategic combination of Gleamer and DeepHealth makes so much sense. And probably where I want to start off with is the impact it has on our portfolio. This allows us to go even deeper into routine imaging and acute care. And Nicole and Sham Sokka will further explain that in terms of scope that we'll jointly offer. The second is that this will accelerate our commercial reach and scale. And so I've already mentioned the over 2,700 combined customer contracts, but it's also the addition of a very, very strong commercial team from Gleamer with over 50 employees actively involved engaging with customers with the installed base and providing significant upsell and cross-sell opportunities. The third reason is the opportunity of driving operational efficiency across RadNet's highest-volume workflows. And so obviously, clinical AI solutions, workflow solutions will have a massive impact in terms of addressing the workforce shortages that Greg was talking about or being more specific in your diagnosis for better outcomes in care. Last but not least, the vision of Christian and team and our vision of moving towards automated road maps, not just looking at detection and diagnosis but also thinking about how you can improve case triaging and case prioritization, how you can improve automated reporting is something that is -- that we see have a very similar vision on. And so the combination will accelerate the road map towards automated diagnostics as we move forward. If you go to the next page, let me give a little bit more dimensions of the scale that we're bringing together. We're really bringing together 2 unique leaders. And so we've reported today on our 2025 results for DeepHealth. So this is without Gleamer, and EUR 93 million in revenue, EUR 75 million of that is ARR, annually recurring revenue, so a high degree of subscription within our business already, and we've shown 35-plus-percent recurring revenue growth. Now look at Gleamer and what we're projecting for 2026, we're seeing the opportunity to capture EUR 30 million of annual recurring revenue on the Gleamer perimeter. But that comes, as Christian says, with a fantastic track record of 90% annual recurring revenue growth over the last 4 years. And so if you then look at what we've guided on in 2026 as part of our earnings call today, the combination will deliver is guided to deliver EUR 135 million to EUR 145 million in revenue, EUR 120 million to EUR 140 million of ARR, and that implies an 80% to 90% ARR growth. We're now going to dive a little bit more deeply into the opportunity that we have in terms of capturing synergies and the value of the combination. I'm going to hand it over to Sham to elaborate on that.

Yes. Thanks, Kees. We're really quite excited about the one plus one is 5 sort of a combination. And I think as you as you look at the many synergies we have, they really group into sort of 3 areas. One is product synergies. As both Kees and Christian alluded to, we have complementary products in different modality areas. But we also have complementary clearances. Gleamer has clearances in Europe that sort of complement the clearances of DeepHealth in the U.S. and so we can address more markets as well as with more variety of products and offerings, and we'll be talking through those in the coming months. It also allows us to accelerate the road map very much, bringing the R&D teams and the product teams together getting into new areas. So expanding the portfolio beyond what we're doing currently and also getting some speed on things that are foundation model-based, things that are like automated reporting and so forth. So that's the first area. The second area is around commercial synergies. We see that there's an opportunity on the commercial side to increase the, let's say, the stand-alone of both to bring together a $7 million-plus revenue run rate increase. And we see attractive cross-selling and upselling opportunities DeepHealth products being brought into the Gleamer portfolio and Gleamer copilot combinations as well as vice versa in markets and in customers where DeepHealth is already ongoing, we can bring Gleamer products into the portfolio there. We see acceleration in some of the newer markets where we're just starting to land with distributors, both in Europe and EMEA, and there's a real opportunity for accelerating growth there. And then I think Christian and team have built a very, very strong commercial engine. It's really in terms of moving customers from trials to contracts to really outcomes at a high velocity. And so we want to bring some of that adoption focused operating model across our entire portfolio. So we're really quite excited about also integrating capabilities, not just products. And then finally, as we both operate together, we've identified various cost synergies that sort of come out of the integration, 2 million in sort of direct savings and overlapping with vendors, so we could start to streamline some of that. And then we have existing hiring plans in DeepHealth where the Gleamer team will fill some of those roles. So there's, again, additional synergies there that we can start to drive on the operating margin side as well. So we'll see that as we go through this year and into next year.

And Sham, I just -- just for the audience, -- it says on the slide: European and EMEA growth Acceleration. In all our excitement, that must be a typo. It's U.S. and EMEA growth acceleration. We see the cross-sell and upsell opportunities equally so in the U.S. as in EMEA. I just want to clarify that.

Absolutely. If you move to the next slide, Andra. So Gleamer brings to DeepHealth, really significant capabilities in R&D, in product in some of the functions as we talked about, the N-GEN, if you will, and of course, on the commercial side, about 131 employees, about a little over 70 employees in R&D, so really strengthening the R&D side. and about 40 employees in the commercial side. So really both in Europe and in the U.S., so also allows us to augment our commercial scale as we go forward and really excited about bringing these 2 teams together already had numerous discussions about how we can leverage new growth opportunities together, right? And that really speaks to where we're going, right? And I think this is the excitement and Andra started us with really transformational. If we look today, we're really at the very, very early stages of AI. If you look at all the product portfolios in the industry, we're really only covering together maybe 10% maximum of all the different types of things we could do. And what we really aim to do with this transaction is to bring a team and strengthen the team that can really move along this sort of broader landscape, right? So moving in MR, for example, in the current sort of prostate and neuro, but adding things like musculoskeletal, which has -- which is a significant expertise of Gleamer and then for us to move into other applications, body applications in MR. In CT, and again, strengthening lung being more holistic in the lung space. covering more things than just nodules, but different disease states in the lung area and then expanding into abdomen and pelvis areas, mammography, we also strengthened our downstream capability as we move toward more automated type of reporting around screening workflows. And then in the x-ray space, of course, which is traditionally not a space that DeepHealth was in, now we add a significant capability, both in musculoskeletal x-ray, but also in chest x-ray. And then we really hope to bring that through RadNet integration and Deep deployment there into a more automated draft reporting and type of workflows. So really, we're at the beginning of this. And with Gleamer now, we really want to move that journey towards much more of an automated radiology context over the next 3 to 5 years. That brings us to today. If you move to the next slide, Andra, to where we are entering the market today already with a very rich portfolio. and what we'll now start to be going to market with. And let me hand it off a little bit to Nicco who's going to talk a little bit about our product portfolio and how this really grows expansion of what we're doing in this space.

Thank you, Sham. So if now we start to put some attention on really the enlarged portfolio is that, first of all, I think, as was said before, this position us today with the Glimmer acquisition has the larger radiology AI provider worldwide. So that's, I think, of course, a great achievement that we are all excited about. And what we are more excited is really what we can bring to our customer and, of course, their patient. So if you look now where we start with population health and clinical AI, we aim really to influence a train pillar in the health care, state shift diseases. So how we, of course, like the tech disease earlier. We want to do that in an optimized diagnostic process, so how we really load the cost of diagnostic and diagnosis and as well as how we bring innovation to more and more patients. So in the population health, we were focusing on, of course, like screening mainly and some chronic disease. Now as also Greg mentioned before, we are going with the Gleamer acquisition to also include all routine imaging. And in both segments, like acute setting as well as chronic setting. So covering hospital imaging center. So a large breadth of really like patient population. So this actually will accelerate, of course, the reach we have we have our solution and as I said before, deliver the larger portfolio that we have today in the market. And if you see the indication that now we cover with the combined portfolio is more than 75 indication across multiple specialty, and that's really like what makes now today, all of us unique. So if you go to the next slide, to bring like, I think, a real life example, as Greg mentioned, of course, some number are RadNet. But today at RadNet, we do around 2.8 million x-ray, okay? So when we look what we can do right now with, of course, DeepHealth-Gleamer solution combined is that we can really bring an impact in 4 main pillar. So we can, of course, accelerate the turnaround time of the exam itself, we can announce radiology efficiency because, as we said before, it's not only about detection, but it's all about also can we optimize the workflow basically allowed some sort of triage. The AI can be used for detection, but also to flag the exam, they actually need more attention based on the funding of the eye. So can we optimize that kind of workflow even before the radiologist look at the images. And also as well, what is more important, we said that is shortened of radiologists. So you want the specialist to be really focused in the exam and maybe they are more difficult. And having all this finding and AI helping triage also towards the right person to read the examination, that, of course, made an impact for the experience of the radiologists and more important for a more, let's say, standard and a better outcome for the patient. And all of this together can bring this like automated workflow that can hopefully today and in the future, drive more automation between interpretation and reporting. And so all of these, if you combine with the fact that 2.8 million x-ray is around 25% of really what is the annual imaging volume run even if you improve some of these, let's say, workflow of 5%, 6% the impact will be, of course, like a major, okay? And so that's why we think that with that and with the implementation of the new solution in Rane can bring short-term improvement and really like deliver a better experience for our care team and for their patient. So if you go to the next slide, and I think what we are all excited is that in 2 days from now, we are launching this ECR as 1 company. So we have 2 DeepHealth booths, where we have, of course, a combined team in both boots and where we are going to showcase the combined portfolio. So again, we are looking forward to, of course, whoever want to know more. And of course, to all of our customers as 1 company today sharing the excitement for the acquisition.

Thank you so much to all the speakers for the very insightful content that you've just presented. This is clearly a very exciting new chapter for all. Now thank you also for the questions that you've shared throughout the session. And now we're opening up the Q&A where I will be reading through some of the questions and direct them to some of you. Of course, feel free to jump in and add any additional incidents that you would like. I will aim to get through as many questions that we can in the time that we have. If we don't get to your questions, we'll make sure to follow up. Now let's start with the first one. How will Gleamer products be integrated into the DeepHealth product portfolio? You've touched upon that, but maybe you can share a little bit deeper. Nicco, would you be able to -- first time.

Yes, thank you for the question. So I think, as we said, our priority is, of course, our customer, now our combined customer, okay? So the first step in priority is that we don't want to bring any disruption, okay? So he's really focused on, okay, how we make sure first that we save our customers like really nothing happened. And what's more important is that we're going to bring, we're going to really merge the best of both companies, and I really want to use the world merge as we have done also with previous acquisitions to really bring the best of the best that the combination of both companies can bring to them. So again, no disruption. We're going to get some times to make sure to define how really we match the best of both products. And again, we're not going to slow down. We're going to go straight and we're going to really deliver as many solutions to our customers as we can. And maybe, Christian, you want to add ...

Yes, exactly. I'm fully aligned. And during the transaction discussion, a lot have been discussed in a very granular way on how we can make the most of these 2 assets at a granular level per product. But the big question is, as Sham said, we just unveiled 10% of radiology. So the real question is what are we going to build together. And this is where all our intention is now focused on. So we are going to keep serving all our customers in a better way with more products to come.

Yes. And Christian, maybe if I can add a little bit. I think it's not about just even the products that we have. but the fact that it's on one stack. And so if you're now a DeepHealth customer, the access you're going to have and the speed to access of new solutions and products, and that's really what we're focused on, right?

Thank you all. Second question that we'll address. How is the acquisition advancing the path toward automated diagnostics. And maybe, Sham and -- you could maybe start and then others could add.

Yes. As I started earlier, I think kind of the core -- let me maybe unpack this word, automated diagnostics. It means different things to different people. I think what we're really going after is just take something like x-ray, which the Gleamer team is an expert in, from some accords, there's 60, 80, 100, 200 findings on an x-ray and we're building devices that find 1, 2, 5, 6. And so when we talk about automated diagnostics, it's how do we actually look at the broader set of findings, how can we cover those findings in a report generation, how can that report generation then lead to a clinical recommendation and then make it easier, not only for the radiologist to report but for the referring physician to do their action, their next best action. And so I think a lot of the solution areas that we're working in, where, yes, we want to make the reporting easier for radiologists, but we also want to make the downstream decision-making easier, right? What we like what we do in breast cancer screening, right, breast cancer products that will not only help doctors find -- detect cancer better, but what to do with women that are in high dense breast conditions, what we might want to do with women that are at high risk, so this notion of automated diagnostics is both reporting and allowing radiologists to be more efficient, but also the outcomes and the pathways that they're in come afterwards.

Yes. And if I could just build on that a little bit, Sham, I'd like to riff on something Dr. Berger said on the earnings call this morning. people talk in other industries about AI disrupting things. And while I think Jeff Hinton's prediction back in 2015, 2016, that we should stop training radiologists is clearly been proven to not be correct. We certainly need radiologists. We also know from the work over the last decade from many groups that in certain sort of niche areas like, say, reading a mammogram or trying to detect the cancer, that the AI actually can outperform humans. And so the opportunity that we have together is to improve the quality of care and deliver it to a greater population of people and that is only going to happen if we can make it much more efficient. That's this automated part. The physician will be in the loop -- has to be in the loop, but they need to be -- if we're going to get the kind of quality of care we want to as many kind of people as need it, we do have to change things a lot. And this team working together, I think, is the best opportunity we've seen to make that happen. It's a really transformative opportunity that we're all super excited about.

That's a very nice buildup for the next question. How does this acquisition positions positions DeepHealth in the competitive landscape? Kees?

Yes. [Audio Gap] ways. Sham and Greg just talked [Audio Gap] about in terms of pursuing automation in the radiology workflow. Then you heard me today talk about a few metrics. So for instance, our recurring revenue, the combined recurring revenue into next year of, let's say, close to EUR 140 million. makes us an disputed leader in the radiology clinical AI space. Our portfolio with -- combined portfolio with FDA approvals and CE marks is by far the largest, including the point around 75-plus indications that we cover is by far the largest in the industry. And so there are multiple metrics here that I would say, set us out as an incredibly competitive and differentiated entity and obviously, the world-class team of Christian's company, the Gleamer team only adds to that. I don't know how you would see that Christian, but yes.

Exactly. We are exactly aligned on this. I really do believe that we are combining already to sub-champion to become the absolute champion of these markets. And where I'm very happy to you is that beyond merging the 2 installed base and our 2 commercial capabilities, we are thinking ahead of the standard in radiology and thinking what we can build make the future of health care arrive now today.

Yes. Maybe 1 more point and maybe, Sham, you were going to say the same thing. The proximity in the symbiosis that we have with the RadNet services business, is not just providing us access to data, which is fantastic for our engineering platforms and deep learning algorithms and so forth. It really makes fast prototyping and corporation happening, but more importantly, for everything that Greg just described in terms of the route towards more automated workflows, you need that very, very tight interplay between the clinical practice and operational practice and development. And that can only occur in settings like we have today within -- between RadNet and DeepHealth [indiscernible].

I was just going to add, I mean, sometimes these questions kind of get you into a trap. I mean, I don't really see this as a competitive landscape. I see this as an ecosystem that we want to take leadership and we want to drive, right? So it doesn't mean that we're going to not work with our partners. We are actually quite deeply working with our partners in distribution in -- on the AI, a broader AI ecosystem, we're going to be integrating to other taxes, and we have very good and we intend to keep doing that. And I think the -- and we're working on the build side with several folks that have foundation models small and large. So we're going to continue to do that. Our ambition here is to push the industry further and to do that at scale. And we're going to do that very much with partners in this space.

Yes, in a way, we're competing against disease, we're not competing against other companies. And that's what we're really focused on is beating the disease.

Correct.

And that actually brings us to the end of this event. Thank you so much to all the speakers as well as everyone that's joined us online. The recording of this session will be available in the website that you've accessed this live session, and the presentation will be accessible as well. If you are interested in follow-up conversations with other leaders, please do not hesitate to reach out to me. Again, thank you, everyone, for joining today, and we look forward to this exciting new chapter for all.