FONR Stock Declines After Q2 Earnings, Revenue and Net Income Fall

Shares of FONAR Corporation FONR have lost 9.5% since the company reported its earnings for the quarter ended Dec. 31, 2024. This compares to the S&P 500 Index’s 0.5% gain over the same time frame. Over the past month, the stock lost 4.5% versus the S&P 500’s 0.7% rise.

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Financial Performance

FONAR’s total revenues for the second quarter of fiscal 2025 ended Dec. 31, 2024, declined 1.7% to $24.9 million from $25.4 million in the prior-year quarter. For the six-month period ended Dec. 31, 2024, revenues decreased 2.6% to $49.9 million from $51.2 million in the year-ago period.

Income from operations dropped 50.2% to $2.4 million for the quarter from $4.9 million in the prior-year period. For the six-month period, income from operations declined 38.5% to $7 million from $11.5 million.

Net income also saw a significant drop, decreasing 52.3% to $2.2 million for the quarter from $4.6 million in the prior-year period. Over the six-month period, net income fell 37.8% to $6.2 million from $9.9 million. On a per-share basis, diluted net income per common share declined 46.3% to $0.29 for the quarter from $0.54 in the prior-year quarter and 33.9% to $0.74 for the six-month period from $1.12 a year ago.

Segment Performance

FONAR’s diagnostic imaging management subsidiary, Health Management Company of America (HMCA), remains the company’s primary revenue driver. MRI scan volume at HMCA-managed sites increased 7.4% to 79,207 scans during the six-month period from 73,776 scans for the six-month period ended Dec. 31, 2023, while scan volume at HMCA-owned sites decreased 4.4% to 26,961 scans from 28,214 scans for the six-month period ended Dec. 31, 2023.

Revenues from management and other fees, which make up the largest portion of FONAR’s revenues, were $12.2 million for the quarter, down 1% from $12.3 million a year ago. Patient fee revenues declined 3.4% year over year to $7.9 million from $8.2 million. Service and repair fees, another revenue contributor, remained nearly flat at $1.8 million.

Other Key Business Metrics

Operating expenses increased, with selling, general, and administrative (SG&A) costs rising 23.9% to $6.9 million for the quarter from $5.6 million in the year-ago period and 15.4% to $12.1 million over the six-month period from $10.5 million in the year-ago period. This increase was attributed to a significant reserve against accounts receivable related to American Transit Insurance Company, which is approaching insolvency, as well as costs associated with a new outside billing contract.

FONAR’s cash and cash equivalents and short-term investments declined 5% to $53.7 million on Dec. 31, 2024, compared with $56.5 million as of June 30, 2024. Operating cash flow for the six-month period dropped 41.7% to $3.9 million from $6.7 million a year ago.

On the liabilities side, total liabilities decreased to $49 million as of Dec. 31, 2024, from $57.5 million as of June 30, 2024, while total stockholders’ equity rose to $158.9 million from $156.8 million.

Management Commentary

FONAR’s president and CEO, Timothy Damadian, highlighted the company’s stable scan volume at HMCA-managed MRI centers, which reached 53,114 in second-quarter fiscal 2025, up 3.6% year over year from 51,246 in the year-ago period. For the six-month period, scan volume increased 4.1% to 106,168 scans from 101,990 in the comparable period in 2023. However, scan volume at HMCA-owned sites decreased 4.4% during the same period.

Management remains optimistic about scan volume growth for the remainder of fiscal 2025, citing the anticipated installation of high-field MRI scanners at two HMCA-managed centers in Nassau County, NY. These new scanners are expected to enhance service offerings and reduce appointment backlogs.
The company also continues to seek acquisitions or new locations to expand its network and increase profitability. As of Dec. 31, 2024, it currently manages 43 MRI scanners, 25 in New York and 18 in Florida.

Factors Influencing Performance

The decline in earnings and revenue was driven by increased SG&A expenses, lower patient fee revenue and a reserve taken against accounts receivables due to the financial instability of American Transit Insurance Company. The company also cited cost pressures associated with a new billing contract. Additionally, macroeconomic conditions, including inflation and reimbursement rate reductions, continue to pose challenges.

Other Developments

FONAR has been actively repurchasing its stock under its $9 million buyback plan. As of Dec. 31, 2024, the company had repurchased 343,485 shares at a total cost of $5.6 million. Additionally, the company completed the installation of a new scanner at its Naples, FL, during the first quarter of fiscal 2025.

During the quarter, FONAR sold a 0.197% interest in its subsidiary, Health Diagnostics Management, to a minority shareholder for $132,000.

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