Exchange: NASDAQ | Sector: Healthcare | Industry: Medical Devices
Q1 2025
Published: Nov 12, 2024
Earnings Highlights
Revenue of $24.96M up 1% year-over-year
EPS of $0.46 decreased by 64.9% from previous year
Gross margin of 40.2%
Net income of 3.14M
"N/A" -
FONAR Corporation (FONR) QQ1 2025 Earnings Analysis and Market Outlook
Executive Summary
FONAR Corporation reported QQ1 2025 revenue of $24.96 million, up 1,133.81% year-over-year, but down -3.79% quarter-over-quarter, illustrating a steep base effect from the prior-year period. Gross profit reached $10.04 million with a gross margin of 40.24%, representing a substantial YoY margin improvement of 517.76%, while QoQ margins declined by 5.21%. Operating income was $4.61 million (operating margin 18.45%), and the company generated net income of $3.14 million (net margin 12.56%), with EPS of $0.47 for QQ1 2025. EBITDA stood at $7.35 million, yielding an EBITDA margin of 29.46%, signaling healthy operating leverage despite the revenue volatility.
The balance sheet showcases strong liquidity and a net cash position, with cash and cash equivalents of $54.19 million and total debt of $41.18 million. The company reported a net debt position of $(13.02) million, implying modest net cash after accounting for debt, and a robust current ratio of 9.64x. However, working capital metrics reveal extended receivables collection cycles, with days sales outstanding around 289 days and a cash conversion cycle of about 305 days, indicating potential working capital compression risk if volumes do not sustain.
Management commentary is not captured in the provided transcript data, limiting the ability to quote specific guidance or strategic remarks. Nonetheless, the quarter’s top-line strength combined with solid margins and a strong liquidity position suggests FONAR is progressing along its niche strategy around Upright MRI platforms and related clinical/administrative services. Investors should monitor utilization of existing MRI facilities, ramp of managed services, and any changes in reimbursement or vendor arrangements that could influence profitability and cash flow in subsequent quarters.
Balance sheet and liquidity:
- Cash and Cash Equivalents: $54.19 million; Total Debt: $41.18 million; Net Debt: $(13.02) million
- Total Assets: $212.29 million; Total Stockholders’ Equity: $168.69 million
- Current ratio: 9.64; Quick ratio: 9.45; Cash ratio: 3.76
- Working capital measures: DSO 288.91 days; DIO 17.00 days; DPO 6.53 days; CCC 305.90 days
Cash flow and capex:
- Net cash provided by operating activities: $1.66 million
- Capital expenditures: $(1.81) million
- Free cash flow: $(0.15) million
Valuation and efficiency indicators:
- Price-to-Sales: 4.09; Price-to-Book: 0.60; Price-to-Earnings: 8.14; Enterprise Value Multiple: 12.11
- Return on Assets: 1.48%; Return on Equity: 1.86%; Return on Capital Employed: 2.33%
- Revenue conversion efficiency and margin discipline appear solid, but the elongated receivables cycle suggests a working capital risk if revenue accelerates without improving collections.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
24.96M
1 133.81%
-3.79%
Gross Profit
10.04M
517.76%
-5.21%
Operating Income
4.61M
-29.90%
245.44%
Net Income
3.14M
-63.97%
277.53%
EPS
0.47
-64.93%
291.67%
Key Financial Ratios
currentRatio
9.64
grossProfitMargin
40.2%
operatingProfitMargin
18.5%
netProfitMargin
12.6%
returnOnAssets
1.48%
returnOnEquity
1.86%
debtEquityRatio
0.24
operatingCashFlowPerShare
$0.26
freeCashFlowPerShare
$-0.02
priceToBookRatio
0.61
priceEarningsRatio
8.14
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Transcript highlights unavailable: No earnings call transcript data was provided with the QQ1 2025 results. As a result, no management quotes or theme-based insights from the call can be cited. Note to readers: future updates should incorporate direct quotes on guidance, utilization trends, pricing, and cost-control initiatives to enrich the narrative around milestones for Upright MRI deployment and physician management services.
N/A
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N/A
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Forward Guidance
No explicit forward guidance was disclosed in the provided materials. Given the current quarter's mix of rapid YoY revenue expansion (likely driven by a low base) and solid EBITDA margins, the near-term trajectory will hinge on: 1) utilization growth across existing Upright MRI facilities and the success of managed services in expanding the device and patient flow; 2) ongoing capex for facility expansion or upgrade plans and any potential efficiency improvements; 3) reimbursement environment and payer mix stabilization; and 4) working capital management given the extended DSO CCC. Investors should watch for management commentary on capacity expansion plans, partner onboarding timelines, and any changes in regulatory or payer policies that could influence margins and cash flow.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
FONR Focus
40.24%
18.50%
1.86%
8.14%
SERA
-5.26%
-243.42%
-8.64%
-4.72%
DRIO
57.50%
-1.39%
19.10%
73.10%
IRIX
42.50%
-1.72%
-1.98%
-2.48%
PDEX
34.60%
20.20%
7.99%
9.86%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
FONAR presents a differentiated MRI platform with Upright MRI capabilities and a growing network of imaging facilities. The QQ1 2025 results show a meaningful YoY revenue surge with expanding margins, alongside a solid liquidity cushion. The absence of formal forward guidance in the data requires a cautious stance, but the cash-rich balance sheet and EBITDA-driven profitability imply the potential for continued earnings resilience if the company can convert higher utilization into sustainable cash flow. The primary near-term watch points are improving working capital efficiency (lower DSO and CCC), disciplined capex to avoid excessive cash burn, and sustained demand for Upright MRI services in current and new markets. If management successfully accelerates utilization and expands the physician-management services without compromising margins, the investment thesis strengthens on a multi-quarter horizon; otherwise, the high working capital intensity and modest ROE could temper upside.
Key Investment Factors
Growth Potential
FONAR is positioned in a niche MRI market with Upright MRI technology that enables weight-bearing imaging, potentially differentiating services for certain diagnostic needs. The company operates 5 owned diagnostic imaging facilities and manages 39 MRI scanning facilities, including 25 in New York and 14 in Florida, suggesting a scalable network with upside from both hardware sales/rentals and managed services to a broader network of private centers and hospitals. The YoY revenue surge in QQ1 2025 indicates demand signals, and continued expansion into physician management services could broaden the revenue mix and improve utilization of installed MRI assets.
Profitability Risk
Key risks include a prolonged elevated DSO and high cash conversion cycle, which could pressure liquidity if receivables grow faster than collections. Transformation into a larger network could require additional capex and working capital, potentially impacting free cash flow. The business model is also exposed to reimbursement and pricing dynamics in the U.S. healthcare system, competition from other MRI providers, and vendor/supplier dependencies for maintenance and service agreements. Given the relatively small scale and niche product, economic downturns or payer policy changes could materially affect demand.
Financial Position
Liquidity remains robust with $54.19 million cash and equivalents and a net cash position of approximately $(13.02) million. The current ratio of 9.64x and a cash ratio of 3.76x provide a strong cushion for near-term obligations. Debt levels are modest (total debt $41.18 million; long-term debt $37.37 million), and equity remains substantial ($168.69 million). However, the company exhibits a long cash conversion cycle (CCC ~306 days) and high DSO (~289 days), which warrants ongoing management attention to receivables and working capital efficiency to sustain cash generation as the business scales.
SWOT Analysis
Strengths
Strong liquidity position with $54.19 million cash and equivalents and a net cash balance.
High gross margin around 40% supports profitability as the business scales.