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RadNet (RDNT +22%) is looking pretty rad to investors today. Shares of this diagnostic imaging company are surging following its Q2 report this morning. Adjusted EPS nearly doubled yr/yr to $0.31, which was much better than expected. Revenue was also impressive, growing 8.4% yr/yr to $498.2 mln, which was a good bit above analyst expectations. Adjusted EBITDA margin improved to 16.3% from 15.7% a year ago.

• Both its Imaging Center and Digital Health operating segments performed well in Q2 and they achieved record quarterly results. Its Digital Health segment was the star of the show with segment revs up 30.9% yr/yr. Growth was driven by strong increases in procedural volumes, improved reimbursement from payors, a continuing shift in volumes towards advanced imaging modalities and incremental sales and licenses of workflow software and AI.
• RadNet's focus has been driving more advanced imaging procedures (MRI, CT and PET/CT) and increasing advanced imaging capacity at imaging centers. Within MRI, RadNet posted +6.6% same center growth in Q2, which was partially from capacity created from investments made in MRI software upgrades and operating protocols which enable shorter scan times.
• Another bright spot was CT, as RadNet's programs have expanded on both coasts to offer more complex procedures, such as Cardiac CT Angiography, which is often enhanced with AI-assisted analytics. Within PET/CT, RadNet's fastest growing modality with 22.4% yr/yr growth, emphasis has been on newer diagnostic and screening offerings for prostate cancer, Alzheimer's disease and dementia and new procedures with tumor-specific radioactive tracers.
• A headwind the industry has been facing is a shortage of technologist staffing. However, RadNet says its advanced imaging offerings, particularly MRI, has been helped by the implementation of Digital Health's TechLive, its remote screening technology recently cleared by the FDA. TechLive enables remote control of advanced imaging equipment to expand hours of operation which otherwise would have been closed.
• In terms of its footprint, RadNet is already the largest provider of freestanding, fixed-site outpatient diagnostic imaging in the US, with more than 400 centers. However, it has been constructing new imaging centers to handle high demand and patient backlogs in many of its local markets. A new facility was opened during Q2 in New Jersey, and nine additional de novo facility openings are projected for the remainder of 2025.

Overall, this was an impressive quarter for RadNet, especially the growth in EPS and the top line. The industry is really moving in RadNet's direction as payors are pushing patients to use lower cost freestanding centers. Hospitals typically charge insurance companies 200-500% more than what RadNet charges. We also think its remote screening technology, TechLive, will be key in its attempt to counter industry-wide challenges like labor shortages and rising costs. A possible concern is Medicaid cuts. However, investors like what they see with RadNet's Q2 report overall.