Exchange: NASDAQ | Sector: Healthcare | Industry: Medical Devices
Q4 2024
Published: Sep 27, 2024
Earnings Highlights
Revenue of $25.94M up 0.7% year-over-year
EPS of $0.11 decreased by 33.3% from previous year
Gross margin of 40.8%
Net income of 830.40K
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FONAR Corporation (FONR) QQ4 2024 Financial Analysis — Upright MRI Niche Delivers Modest Revenue Growth with a Robust Cash Position
Executive Summary
FONAR reported a stable Q4 2024 top line with modest sequential growth and a solid cash position that supports optionality in a fragmented U.S. MRI market. Revenue for the quarter ended June 30, 2024 was $25.94 million, up 0.88% QoQ and 0.65% YoY, while gross profit totaled $10.60 million, yielding a gross margin of 40.84%. Operating income was $1.33 million with an EBITDA of $4.01 million, and net income reached $0.83 million (EPS $0.12). Despite a stable revenue base, gross profit declined year over year by 13.4%, signaling cost mix or input pressure within the quarter, even as SG&A and other operating costs remained within manageable ranges. The company generated $4.60 million of operating cash flow and $4.17 million of free cash flow during the quarter, contributing to a cash balance of $56.34 million and a net cash position of approximately negative $14.67 million (net debt). The liquidity and capital position are solid, supporting ongoing investments in the Upright MRI ecosystem and related services, though the business faces ongoing sensitivity to reimbursement dynamics and market competition in a relatively niche segment of medical imaging.
Quarterly KPI overview (USD millions except per-share data; ratios are from the quarter-end metrics as reported):
- Revenue: 25.943; YoY +0.65%; QoQ +0.88%
- Gross Profit: 10.595; YoY -13.43%; QoQ -9.85%; Gross Margin 40.84%
- Operating Income: 1.333; YoY -46.24%; QoQ -64.41%; Operating Margin 5.14%
- Net Income: 0.830; YoY -32.86%; QoQ -55.64%; Net Margin 3.20%
- EPS (basic/diluted): 0.12 / 0.11; YoY -33.33%; QoQ -57.14%
- EBITDA: 4.008; EBITDA Margin 15.45%
- Cash Flow: Operating cash flow 4.598; Free cash flow 4.173; Net change in cash +2.359; Cash at end of period 56.341; Cash at beginning 53.982
- Balance Sheet Highlights: Total assets 214.246; Total current assets 140.324; Cash and cash equivalents 56.341; Total current liabilities 17.857; Long-term debt 37.929; Total debt 41.676; Net debt (cash negative) -14.665; Total stockholders’ equity 165.968; Current ratio 7.86; Quick ratio 7.71; DSO 277 days; Inventory days 15.92; CCC 292.92 days; Capex 0.424; Capex coverage ratio 10.85; P/BV 0.659; P/S 4.21; P/E 32.91; EV/Revenue not provided but EVM stands at 23.61x given the debt/cash mix.
Notes: The YoY and QoQ figures reflect the latest quarter’s performance relative to the same quarter a year prior and the immediately preceding quarter.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
25.94M
0.65%
0.88%
Gross Profit
10.60M
-13.43%
-9.85%
Operating Income
1.33M
-46.24%
-64.41%
Net Income
830.40K
-32.86%
-55.64%
EPS
0.12
-33.33%
-57.14%
Key Financial Ratios
currentRatio
7.86
grossProfitMargin
40.8%
operatingProfitMargin
5.14%
netProfitMargin
3.2%
returnOnAssets
0.39%
returnOnEquity
0.5%
debtEquityRatio
0.25
operatingCashFlowPerShare
$0.68
freeCashFlowPerShare
$0.62
priceToBookRatio
0.66
priceEarningsRatio
32.91
Net Income vs. Revenue
Expense Breakdown
Management Commentary
No earnings call transcript content was provided in the data set. As a result, there are no management quotes or theme-based insights to quote or summarize. The analysis below relies on published quarterly metrics and balance sheet data rather than verbatim post-report commentary.
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Forward Guidance
Formal forward guidance was not disclosed in the QQ4 2024 filing data. Given the absence of explicit targets, the outlook hinges on ongoing demand for Upright MRI services, the ability to scale the physician management and diagnostic services segment, and the company’s capacity to optimize cost structure amid reimbursement dynamics in the imaging market. Key factors to monitor include: (i) trajectory of revenue growth from Upright MRI installations and affiliated services, (ii) potential changes in reimbursement policies or private-pay mix affecting profitability, (iii) working capital management evidenced by high DSO, and (iv) capital allocation decisions that could affect the cash balance and leverage. Management’s ability to convert cash generation into sustained double-digit earnings growth would likely be a meaningful driver of multiple expansion or contraction moving forward.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
FONR Focus
40.84%
5.14%
0.50%
32.91%
SERA
-4.76%
-213.37%
-11.30%
-5.93%
DRIO
3.65%
-3.90%
-20.60%
-97.40%
IRIX
44.00%
-3.95%
-39.80%
-8.33%
PDEX
27.90%
15.60%
5.14%
9.83%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
FONAR presents a cautious but constructive investment case. The company sits on a strong liquidity cushion and a negative net debt position, with EBITDA contributing meaningful cash flow relative to earnings. The revenue base is stable with a modest YoY growth signal, and the gross margin sits around 40.8%, suggesting a defensible margin structure in a niche market. The primary investment question is execution: will FONR successfully scale its Upright MRI ecosystem, broaden its physician management and diagnostic services, and translate cash flow strength into stronger profitability and earnings growth? The absence of formal forward guidance adds uncertainty, making the stock more sensitive to quarterly cadence and reimbursement shifts. For risk-tolerant investors, FONR offers optionality tied to the expansion of a differentiated MRI modality and services platform, supported by solid liquidity. For more conservative investors, the focus should be on improving profitability metrics, reducing working capital intensity (notably DSO), and achieving clearer visibility into long-term growth trajectories.
Key Investment Factors
Growth Potential
Modest but durable growth potential from expanding the Upright MRI footprint and related physician management services. The platform can benefit from cross-selling administrative services and aftermarket support to private imaging centers and hospital networks, with potential upsell opportunities in nonclinical services and IT/data management.
Profitability Risk
Key risks include reliance on a specialized MRI technology niche with exposure to reimbursement volatility and competitive pressure in imaging services, long collection cycles indicated by a 277-day DSO, potential capex needs to scale the installed base, and sensitivity to changes in Medicare/insurance policies. The small scale of operations can amplify earnings volatility and business risk in downturns.
Financial Position
Strong liquidity with 56.34 million in cash and a net cash position of approximately -14.66 million, and low leverage (long-term debt of 37.93 million; total debt 41.68 million; debt to capitalization ~20%). The balance sheet shows ample current assets (140.32 million) and a high current ratio (7.86) and quick ratio (7.71), supporting near-term liquidity. However, profitability remains modest with a net margin of 3.2% and a YoY decline in gross margin.
SWOT Analysis
Strengths
Differentiated Upright MRI technology offering weight-bearing imaging capabilities (standing, sitting, bending), which can support higher-value services and patient throughput.
Strong liquidity with a net cash position and minimal leverage, providing financial flexibility for CapEx and strategic initiatives.
Diversified service mix including Medical Equipment and Physician Management/Diagnostic Services, enabling cross-sell across owned and managed facilities.
Healthy operating cash flow generation and positive free cash flow.
Weaknesses
Profitability remains modest with a small net income base and YoY gross margin contraction, indicating sensitivity to cost mix and pricing pressures.
Relatively long days sales outstanding (DSO ~277) signaling working capital intensity and potential collections risk.
Small scale in a capital-intensive sector; limited scale may constrain pricing power and growth velocity.
Limited public data on segment-level performance and lack of explicit management guidance.
Opportunities
Expansion of Upright MRI footprint and performance-based contracts with imaging centers and hospitals.
Growth in physician management and diagnostic services revenue through expanded relationships with private centers.
Potential improvements in operating leverage and SG&A rationalization as the installed base grows.
Possible strategic partnerships or acquisitions to accelerate facility scale and service penetration.
Threats
Reimbursement and regulatory risk in the diagnostic imaging space, which can affect utilization and pricing.
Competitive dynamics with larger imaging groups and alternative imaging modalities vying for share in a fragmented market.
Macro headwinds and potential delays in capital expenditure by target customers could slow demand for Upright MRI systems.
Currency and technology risk if suppliers or customers face supply chain disruptions.