Q1 2020 Earnings Call
Today's Radnet incorporated first quarter 2020 financial results conference at this time.
Simply because its audience and should be starting shortly we do appreciate your patience I thought you. Please continue.
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For today's Radnet incorporated first quarter 2020 financial results conference at this time, we're still assembly to me its audience and should be starting shortly we do appreciate your patience I thought you. Please continue holding.
[music].
Good day, everyone. Welcome to today's Radnet incorporated first quarter 2020 financial results Conference Today's conference is being recorded.
Time, I'd like to turn things over to Mr., Mark Stolper, Executive Vice President and Chief Financial Officer Radnet. Please go ahead.
Thank you.
Good morning, ladies and gentlemen, thank you for joining Dr. Howard Berger, Howard Berger and me today to discuss Radnets first quarter 2020 financial results.
Before we begin today, we'd like to remind everyone of the Safe Harbor statement entered a private Securities Litigation Reform Act at 1995.
This presentation contains forward looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.
Basically statements concerning anticipated future financial and operating performance and liquidity.
Our response to and being attacked the expected future impacted Corbett 19, our ability to stabilize and continue to grow that business by generating patient referrals and contracts with radiology practices.
Fruiting in retaining radiologists and technologists.
Consummating acquisitions and joint ventures, receiving third party reimbursement for diagnostic imaging services successfully integrating acquired operations generating revenue and adjusted EBITDA for the acquired operations as estimated among others are forward looking statements within the meaning of let's say.
Barbara.
Forward looking statements are based on management's current and preliminary expectations and are subject to risks and uncertainties, which may cause radnets actual results to differ materially from the statements contained herein.
These risks and uncertainties include those risks set forth in Radnets reports filed with the FCC from time to time, including Radnets Annual report on form 10-K for the year ended December 31st 2019, and our quarterly report on form 10-Q for the quarter ended March 31st 2020.
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Undue reliance should not be placed on forward looking statements, especially guidance on future financial performance, which speaks only as of the date is made.
Radnet undertakes no obligation to update publicly any forward looking statements to reflect new information events or circumstances and after the date they were made or to reflect the occurrence of unanticipated events.
And with that I'd like to turn the call over to Dr. Berger [noise].
Thank you Mark good morning, everyone and thank you for joining us today.
On today's call Mark and I plan to provide you with highlights.
From our first quarter 2020 results give you more insight into factors, which affected this performance and discuss future strategy. After our prepared remarks, we will open the call to your questions.
I'd like to thank all of you for your interest in accompanying for dedicating a portion of your day to participate in our conference call. This morning.
Before we start I just want to send that you have to myself and title Radnet team.
Hope that always yourselves and your families are healthy and doing well no. This is been a difficult challenging time for everyone around the world and we are extremely grateful for all our stakeholders, including our employees business partners lenders and shareholders. We I wish you all the best.
Today's prepared remarks would be a busy departure from what we usually highlight during our financial.
Let's call. This morning, Mark and I will focus on giving you an understanding of what we had been facing under the coldest 19, the actions that we've taken to reduce costs and conserve cash our current and projected liquidity position.
Watson, our anticipated recovery and some discussion around the post <unk> operating opportunity.
I'd like to start off by giving you a status update on where our business stands and how it has been impacted by cold at 19.
After having strong operating results in January and February nonsense performed ahead of our original internal operating plan, we began to see our volumes dropped dramatically beginning third week of March. This is when we began to take swift and decisive decisive actions to sustain our business.
Potentially total long period of time during which we could say some material drop procedural volumes.
We analyzed all aspects of our business and focused on ways to most effectively reduce our cat spin.
Created a multi pronged plan to in past nature, its benches expenses and cash flow categories.
Specifically, we created a plan to reduce salaries and professional fees by 50% and lower facilities rental payments by close to 70%.
We investigated every local market in which we operate to identify centers, we could temporarily closed and where we start with a high degree of confidence we can direct patient volume.
Facilities that would remain open.
We also evaluated a large categories of kiss cash spend and identified vendors and work with us lower our cost or just sort of payments.
Goal was hit by early April we would have most of our cost savings and cash conservation measures Institute.
Hi, I'm pleased to report that we got its been successful in achieving this goal.
First we analyze all of our 335 locations and identified sites clustered approach that could be temporarily closed and whose business could be consolidated into nearby facilities.
Thanks temporarily closing facilities in redirecting the patient flow the other radnet sites.
Able to save on employee costs utilities repairs and maintenance and other senator level operating costs.
All while preserving the revenue we were going to recognize at the close sites.
Clustering and geographically concentrated approach to market penetration has greatly helped us during this period.
We have been able to close 97 locations, representing almost 30% of our facilities.
Central schedules apartments have been effective directing all patients low to facilities that remain open.
Temporarily closings facilities has enabled us to for low about 3600 employees of our roughly 8600 in our total workflows force.
For those staff remains in place employees I ran it and we continue to fund their benefit plans and healthcare expense.
However, we have ceased paying their salaries and corresponding employee taxes and these employees are eligible to collect unemployment benefits from federal and state funded programs.
On fleet good communication with these furloughed employees and we are committed to bringing them back.
To the work in a methodical way as soon as out of volume allows us to gradually reopened our facilities.
In addition to the furloughs, we cut the salaries of the vast majority if not sooner level employees, who remain working.
Discuss were led by our executive management team and salaries physicians, who are taking 50% reductions in their salaries.
Well, the executive management level salary reductions range from 5% to 25%.
As a result of these actions we have met our goal over 50% decrease of our salaries and professional fees.
Fences and associated cash burn.
Our landlords have also greatly contributed to our cash conservation measures measures.
Most of our landlords have agreed to three to six month full or partial deferrals of rent payments and most of providing a six to 12 months to pay these deferrals as a result, our capital expenditures for rent payments in the second quarter has been reduced by almost 70%.
Additionally, all of our lessors less orders with whom we have operating leases on equipment, including Oems in third party finance companies have agreed to restructure rental payments to led us to allow us starting with the payment.
We would have made in April didnt for six payments and add these amounts to the back end by out of the leased equipment.
Additionally, we have suspended all new capital projects. The vast majority of capital expenditures, we will make during the remainder of the year O'reilly for capital equipment already delivered to the company or construction that was substantially completed prior to April which we currently old money.
In addition to the traditional fixed cost and cash outflows, which I have discussed.
Then to rent employs et cetera are variable expenses have also decreased with the lower procedural volumes the most.
Significant of these variable outflows payments, we made to a third party contracted radiology groups, which generally are a function of gross revenue and procedural volumes. We typically pay on third party rally, we algae groups in the neighborhood of 15% to 20% of our cash collections to interpret.
Our exams as result of lower payments for Radnet, a contractor groups have taken actions to manage their staffing levels and control their own costs. We have remained in close dialogue with all our contracted radiology groups and are confident that they like radnet.
Ill, all taking appropriate measures to ensure their health and survival through the cold in 19 environment. Each contractor group has a plan to reach CFO facilities as appropriate when revenues and volumes.
Again to return to normal levels.
Other variable expenses and have adjusted revenues and procedural volumes include medical and pharmacy supplies utilities equipment repair and maintenance and certain employee related expenses, such as travel meals and other employee expense reimbursement items. All these expenses emcare shelf.
<unk> has now adjusted more than proportionately to our lower procedural volume levels.
Contributing to our strong liquidity position with payments. We received subsequent to the end of the first quarter under the cares AD and for Medicare specifically, we received almost $15 million under the first 30 billion appropriation of the Columbus.
As a release and economic security asked for carriers.
It's the allocation to Radnet is calculated based upon our share of overall Medicare buildings relative to all Medicare providers during 2019.
Subject to our compliance with future reporting requirements, we do not anticipate being required to pay this money.
A second 20 billion appropriate appropriated under the care as it was announced two weeks ago.
We we were asked by CMS to submit tax returns evidencing our overall collections during 2018, and we believe there may be additional allocation to us from this 20.
$20 billion appropriation it couldn't be based on out the portion of the overall annual U.S. healthcare spend currently estimated at about 2.6 trillion dollars.
This time it is too early and stuff to estimate the amounts we never see we should add more information about this appropriation in the coming weeks.
In addition to the Green we already received on the kids yet we received on this $40 million an accelerated Medicare advance payments. This monies to be repaid two CNS getting 120 days debt from its receipt and shall be repaid through the adjudication of future Medicare services.
We provide over a three month period, we anticipate this money to be substantially repaid during the first third and fourth quarters of this year.
So how bad get our volumes get.
And where are our procedural volumes today.
As I mentioned earlier volumes began to dramatically declined by the third week of March.
It continues to decline as more state and local municipalities adopted stay at home orders and related policies a volume shipped a trough during mid April whereby we were down almost 85% <unk>.
The east coast and 65% on the West coast relative to our original operating budget.
The New York Tristate area was impacted the hardest well, California is impact was and then has been less.
We're happy to say that our volumes have materially improve over the past several weeks whereby a procedural volumes are down on a blended east and west coast basis about 40% as of today.
We expect this to improve as stay at home orders are lifted.
Already governors in several states in which we operate are allowing for non emergency medical procedures to be perform.
One thing I should mention regardless of the impact on procedural volumes and revenue from coal with 19 is that our capitation business has really been a bright spot because under our capitated arrangements. We get paid it gives them out for enrollee managed by the medical groups with whom we get the date or capitation resin in India.
So see any cash flow has remained constant during the call that 19 period, despite being required to performance fewer services for these patient populations. During this period.
Enrollment.
For these eight you're more patients with our contracted medical groups has remains intact as patients and their employees even for those with and furloughed have continued to pay healthcare premiums.
The predictability of this caffeinate capitated revenue and cash flow has benefited us more than ever before during this period.
Before I turn the call over to month and discuss the financials I'd just like to take this month to recognize a workforce.
The real heroes and that had been or several center level employees and their managers, who continue to come to work each day to service, our medical communities and patients in need to keep our patients and employee safe we instituted new operating protocols. These include.
Added.
I will waiting room capabilities, excuse me virtually any room capabilities, which allow patients to be called or texted for their exam when they see while they sit safely and their cars.
Also provided personal protective equipment for all employees and patients and have created sterile environment as possible I am certainly grateful that these employees and ran at as a company can play an important role in an unprecedented time I look forward to bringing data for workforce and real.
Opening or close facilities as increasing patient volume dictates.
At this time I'd like turn the call back over to Mark to discuss some of the highlights first quarter 2020 performance. When he's finished I will make some closing remarks.
Thank you Howard.
I'm now going to briefly review, our first quarter 2020 performance and attempt to highlight what I believed to be some material items I.
I will also get some further explanation of certain items in our financial statements as wells provide some insights into some of the metrics that drove our first quarter 2020 performance.
In my discussion I will use that term adjusted EBITDA, which is a non-GAAP financial measure the company defines adjusted EBITDA as earnings before interest taxes, depreciation and amortization and excludes losses or gains on the disposal of equipment other income or loss loss.
On debt Extinguishments and non cash equity compensation.
Adjusted EBITDA includes equity earnings in unconsolidated operations and subtracts allocations of earnings to non controlling interests in subsidiaries and is adjusted for noncash or extraordinary and one time events taking place during the period.
Full quantitative reconciliation of adjusted EBITDA to net income or loss attributable to Radnet Inc. common shareholders is included in our earnings release and our current report on form 8-K filed with the FCC.
With that said I'd now like to review our first quarter results.
For the first quarter 2020, Radnet reported revenue of $281.6 million and adjusted EBITDA of $20.4 million.
Revenue increased $10 million or 3.7% as the result, as a result at the contributions from current radiology and zilkha radiology, a slight business shift in favor of advanced modalities and increases in reimbursement from Capitated and fee for service pay yours.
The increase in aggregate revenue was net of a 3.3% decline in same center.
Alliums at 8.6% decrease decrease in aggregate volumes.
Adjusted EBITDA decreased 12.7 million or 38.5%. This was primarily due to the impact of covert 19 predict particularly on our same center performance.
We estimated that our revenue was reduced by covert 19 by an estimated $25 million during the quarter and EBITDA was reduced by approximately $14 million.
But the first quarter of 2020 as compared to the prior years first quarter and MRI volume increased 1.2%.
T T volume increased 3.4% and pet C.T. volume increased 4%.
Overall volume taking into account routine imaging exams inclusive of X Ray ultrasound mammography and all other exams decreased 2.6% from the prior years first quarter.
In the first quarter 2020, we performed 1 million 862498 total imaging procedures.
The procedures were consistent with our Multimodality approach whereby 76.5% of all the work we did by volume was from routine imaging.
Our procedures in the first quarter 2020 were as follows.
Note that the C.T. volumes for last year have been restated to account for a change we made as of January onest of this year in how we account for one of RCT CPT codes.
It can Paris, the comparative numbers that follow are on an apples to apples basis.
263055, m. arise as compared with 259912 ever eyes in the first quarter 2019.
163082, Cts as compared with 157679 Cts in the first quarter 2019.
10683, pets, Cts as compared with 10273 pets Cts in the first quarter 2019.
And 1 million 425678 routine imaging exams inclusive of X Ray ultrasound and mammography and all other exams as compared with 1 million 444425 of all of these exams in the first quarter 2019.
Yes.
Net loss for the first quarter of 2020 was $16.4 million or negative 33 cents per share compared to a net loss of $3.7 million or negative eight cents per share reported for the three month period ended March 30, Onest 2019.
This is based upon a weighted average number of shares outstanding in the first quarters of 50.3 million shares in 2020, and 49.6 million shares in 2019.
Affecting net loss in the first quarter 2020, or certain noncash expenses and nonrecurring items, including the following.
$6.6 million of noncash employee stock compensation expense, resulting from the vesting at certain options and restricted stock.
$218000, a severance paid in connection with head count reductions related to cost savings initiatives.
And $1.1 million have noncash amortization of deferred financing costs and loan discounts related to financing fees paid as part of our existing credit facilities.
Overall GAAP interest expense for the first quarter 2020 was $11.6 million.
This compares with GAAP interest expense in the first quarter 2019 of $12.3 million.
The lower interest expense results, mostly from a lower LIBOR rate relative to last year's first quarter.
Cash paid for interest during that period, which excludes noncash deferred financing expense and accrued interest was $9.9 million as compared with $10.3 million in the first quarter last year.
With regards to our balance sheet as of March 30, Onest 2020, unadjusted for bond and term loan discounts, we had $686.6 million of net debt, which is our total debt at par value last our cash balance.
This compares with $679.2 million of bad debt as of March 30, Onest 2019.
Note that this debt balance includes new Jersey imaging networks get approximately $57.6 million for which Radnet is neither a borrower nor a guarantor.
As of March 30, Onest 2020, we were.
Draw an $80 million on our $137.5 million revolving line of credit and had a cash balance of $94.3 million.
Since quarter end, we have repaid our revolver in fall and as of April Thirtyth had a cash balance of approximately $50 million.
As Dr. Berger mentioned in his prepared remarks, we believe we had little to no cash burn through the ended the second quarter and we believe that the cost savings and cash conservation measures. We have put in place May result, in our being undrawn on our revolver at year end and with a meaningful positive cash balance.
Although we do not believe we need to raise any additional capital at this time, we will continue to evaluate government funding options such as the main street expanded loan facility should we determine it would be in the best interests of our stakeholders so to substantially increase our cash reserves.
At March 30, Onest 2020, our accounts receivable balance was $144.2 million a decrease of $10.5 million from year end 2019.
The decrease in accounts receivable is mainly due results of the dramatic decline in or procedural volumes and revenues in the second half of March, particularly partially mitigated by the longer collection cycle, we experience in the first quarter from their resetting of patient deductibles as of January Onest.
Our days sales outstanding or D.S., So with 43.9 days at March 30, Onest 2020, lower by approximately 0.8 days as of year end 2019.
Through March 30, Onest 2020, we had total capital expenditure is net of asset dispositions and sale of imaging center assets and joint venture interest of $50.8 million.
Don't fit each year, we front load the majority of our capital decisions into the first quarter.
So capex is disproportionately higher in the first half of the year.
Most of what we paid for during the first quarter with for equipment delivered to the company or construction projects projects that were substantially completed before April 1st.
As Dr. Berger mentioned in his remarks, we had suspended all new capital projects for the remainder of the year.
With respect to Medicare reimbursement for 2020, there is nothing to report at this time.
As is typical each year.
We are expecting CMS to relief that preliminary rates schedule sometime in June or July.
At which time, we will analyze CMS proposal and our industry's lobbying group the association for quality imaging will provide CMS our industry's feedback.
[noise] at the time of our second quarter financial results call, we will be in a position to comment on CMS proposal and its impact if any upon radnets future results.
I'd now like to turn the call back to Dr., Berger, who will make some closing remarks [noise].
Thank you Mark.
From the diversity often comes opportunity.
While colder 19 has impacted us and everybody else in a very different way. We can also be the catalyst for opportunity I strongly feel this has been and we'll continue to be the case for radnet.
First gold at 19 has caused us to analyze everything we do as a company and evaluate how do we deliver our services on what we spend money, how we spend their money and how we could improve what we do through this process of identifying ways to lower expenses and conserve cash I believe.
I believe we have learned things that will change the way, we deliver our services and how we manage our business in the future.
I was getting too specific I believe that in a post cold environment. We can reduce what do we have historically been spending unemploy travel and other employees reimbursed expenses I believe that we will be able to step our centers.
And supporting general and administrative functions more efficiently.
Believed that we were able to procure medical supplies and equipment service and perform general and administrative functions at a lower cost.
I also believe our entire executive management team will benefit from the experience of managing through this very.
Trend period.
In addition to improves in the way we can manage radnet in the future I also believe that the post close environment will provide us.
Opportunities to accelerate our growth.
It's difficult as this period has been for the Red Man.
Small operators have had an even more challenging time most of our competitors are small radiologist own operators, who left the scale capital and human resources to emerge from the cold at 19 period with the same financial and operating strength then that we will.
As a result, we think that there will be more M&A opportunity for us and post covert period and multiples that will more online the prices we have paid in the past.
Furthermore, because a couple months hospitals have focused on colds in 19 and other very acute patients.
This will continue for some will continue for some time.
The vast majority of outpatient business that historically has been warm within the hospitals prior to close to 19 has shifted to the ambulatory providers such as Red hat.
This means that patients and the referring physicians will become accustomed to using outpatient providers and we don't believe this business will be recaptured by hospital for some period of time.
Ambulatory patients will likely feel more comfortable and safer being directed into freestanding alternatives to hospitals. This could have a material impact on our volumes in the future and could accelerate the existing trend, mostly because of the differential in cost of hospitals, losing outpatient.
Business to ambulatory freestanding providers.
The acceleration of this trend could also drive more hospitals towards joint ventures, and partnerships, which now represents over 25% all radnet facilities.
Additionally, during this closing banking period, Tele health and Tele Medicine has flourished I believe this will continue in the post colder era more patients will be availing themselves of Tele medical services in the future and I believe this will be beneficial for radnet.
Because telemedicine does not allow for the traditional physical exam I believe physicians will order more diagnostic tests and rely on their results for diagnostics and treating their pensions at a distance in particular I believe this will drive increased utilization is routine imaging specifically.
Ultrasound and X ray as tools that will be utilized earlier in the patient diagnosis staging.
Furthermore, I believe in the post closing environment artificial intelligence will have an even more important role in healthcare and population health.
Artificial intelligence will be used for identifying high risk patients for certain chronic diseases, including cancer diabetes or elements that could make them more susceptible to or at risk from future viruses like covert 19 in the post coated 19 era, there will likely be more.
As an emphasis on screen tools and wellness.
Diagnostic imaging will play a critical role in these initiatives.
So even in this challenging time, when you get close to be very optimistic about the future radnet.
Radnet weathered the storm similar to our experience with a credit crisis in recession, beginning in 2008, and we expect to emerge as a stronger and better position company in our industry and healthcare in general.
Operator, we're now ready for the question and answer portion of the Paul.
Thank you gentlemen at this time, if you can have a question that will be far one once again, oh one for questions.
We'll hear first today from Brian Tanquilut with Jefferies.
Hey, good morning, guys I.
I really feel.
Howard I guess my first question for you and you kind of that.
About 2021 year once you get past Logan like you know, we're starting to see a restart or need readmission of.
Hospital volumes.
So, let's think about getting classes and assuming that we don't see a second way.
How are you thinking about 2021, Samsung, let's say earnings power or maybe its volume trends versus where you were let's just say you know early March.
Good morning, Brian Hope, you're well and say it sounds like you are.
Thank you for the question.
As I mentioned in my closing remarks.
Thanks.
We'll all be facing new definition of normal and because of the public in the post call that period, which could easily in some respects last into 2021.
Particularly with the concern about the development of.
Vaccine I believe a lot of is really mitigation measures and safety procedures will help to be continue.
In that regard to more and more patients will look to ambulatory outpatient providers as opposed to going to hospitals for those services. So.
And that this that the initiatives often spoken about.
Bye.
Healthcare insurers are trying to direct.
Patients away from hospitals, primarily because of differential in reimbursement will now be heightened because of.
Perceived and probably realistic.
Additional safety measures I think that the other thing.
But this crisis as really indicated is the need for better population health.
And management.
The crisis has certainly focused on areas of the healthcare delivery system, which were in adequately prepared for the.
Patients that got very sick and needed to be hospitalized and had shortages.
He including ventilators and other measures along with a sufficient IC beds in isolation capabilities.
But going forward I think the ability to assess the population health and manage wellness will help reduce the burden on hospitals and make the ability to respond to crisis or even easier.
Where I think interestingly enough the.
Outpatient imaging industry fits into this is in the recovery process and reopening towards looking at 2021 and as patients begin to.
Get their toes back into the water.
Reopening the economy of live better for.
Our patients and the.
Population to feel comfortable.
And going to outpatient health care providers that both no hard and manage the safety and mitigation risks that they will see in their office.
In their offices as well as a me too.
Take advantage of what was delayed health care that can only leads to more costs in more morbidity and mortality in the future. It's interesting that just today.
Article in the prestigious journal cancer.
Identified in particular that the risks of mortality for breast cancer.
Study that was overseen by.
Lazlo to bar in Sweden, one of the most respected the novel first in the World.
So a 41% decrease in mortality from breast cancer as a result of screening mammography.
That that we have had a lot of delayed elective mammograms.
Being put off a will only meaning that the longer that goes the more likely that there will be increased after clause.
And morbidity from this.
And that's not just in breast cancer, all forms of other diseases and cancers. So I believe this heightened awareness.
We will help us and will I think claws, a refocus by everybody whether it tells healthcare insurers.
ER physicians.
And public health officials to look at outpatient.
Ambulatory services, and particularly imaging as a critical role and manage managing to health care of our population.
Now that makes a lot it does help.
You mentioned in your prepared remarks, it kind of piggybacking off of your promises made.
I can go.
Teleradiology and clearly there is a shift or what's happening and we'll probably stick.
From physicians opposite to tell it probably medicine in some cases right so whether that the teladoc or just ER Doc black that's using either their own platform or just using doing and baseline.
How are you or how do you have to change your marketing strategy or do you have to partner with someone like a cloud offering and well make sure you capture the volumes there and also knocking news to share the Apple your existing doctors, who are leaving their offices to go virtual.
I think that.
The role of energy will be heightened in this period, because as doctors do more tele health.
The need to perhaps get some of these are diagnostic exams sooner or since they will be unable to do typical physical examination.
It's a use their stethoscopes and other tools.
Maybe best to go ahead and send these patients to the outpatient imaging providers rather than have the patient make another visit into their offices only then to acquire the diagnostic imaging tests that along with the fact that.
Radiology has been very early adopter of tele health by using its pack systems to be able to.
Use the.
Imaging and remote Wade will be enhanced by things like artificial intelligence and other technologies that are evolving inside of imaging to provide more targeted and specific diagnostic capability.
That along with I think the emergence of.
Some of the pharmacies that we'll be looking to do some of their.
Early patient management envisages a in that pharmacies. We believe will also align us with some of these groups to help provide that kind of screening capability on a mass level had has not necessarily been part of the pattern in the past so.
I think all of these.
Changes some of which will occur as a result, as technology and some of them, which will occur just simply because of changing patterns of delivery.
We'll be as enormous benefits.
And in the future.
Brian said to.
60 add a little bit more and what Dr. Berger, saying a lot of the tele health that we're seeing today is from local physicians, who have physical practices, who are trying to service their patient base by in doing appointments biotechnology and so those are physicians.
That we already have a relationship within our local markets who are familiar with our centers are refers you know.
Have been reverse of ours in the past it will continue to be in the future and those are.
From a marketing perspective those are targets.
There are companies like a couple of the two that you mentioned so that they're aware of the services that we provide.
You know our quality in our access in the markets, where their patients you know may reside, which which are which could be very different from where the doctor is located so it will ultimately require us to have relationships with some of these larger centralized physician practices.
Now makes up less lessons when you Mark.
Yeah, you paid down your revolver after the quarter.
You know, obviously I know you where you did a good job preparing the company for the worst case scenario thinking that you had enough cash even if volumes were down.
In April levels for for a year right. So what was the mindset on paying it down.
You did given you know what could be viewed and ongoing uncertainty related to coated.
Sure sure.
Well.
Some of the benefit of living.
Through the credit crisis back in 2008, 910 timeframe was that there was there was a liquidity crunch at that time and on companies were extremely concerned.
Their banks abilities to findings.
Committed revolver is and if you remember at that time, there were a number of banks that we're unable to find are unwilling to find revolvers that we're committed at the time and that created serious liquidity problems for companies during that period of time when this when the co bid.
Periods started we were concerned with.
The stability of the banking system, we were.
Unaware at that time of.
How effective the federal government was going to be with providing liquidity in the banking institutions and backing up the banks that they needed.
For the liquidity and so we pulled down and you can see Ed at quarter end, we were $80 million drawn under revolver, not because we needed the money, but because we were concerned with our ability to access that capital if something would happen in the banking system.
Has the federal government has provided tremendous liquidity into the marketplace. Our concerns about our ability to access our revolver went away and so we decided to payback on the remaining balance on our.
On a revolving line of credit.
Partially because we didn't want to pay the negative carry on the interest expense and and.
I can start one for questions at this time.
Yes, hi, good morning, Thanks for taking the questions I just wanted to follow up on liquidity I'm clearly out of cash conservation was a primary focus as a result of cope with 19 and given the things are stabilized I know how would you have said indicated you're seeing some M&A opportunities that might not have existed before and decide to get a sense in terms of.
The thinking behind.
Cash conservation forces may be pursuing some M&A opportunities.
Well I think.
Cash conservation and keeping our liquidity is of the foremost concern and.
Based on our projections through the end of the year.
We're quite comfortable that Dennis liquidity.
I will be quite substantial and perhaps the best in the company's history part of that we'll be watching the return of our volumes and making certain that we balance our costs such as a salary and other spend.
And.
Typically expression too far over the tips of our skews, where we get concerned again about liquidity so over the next.
The balance of this quarter and going into the third quarter.
To the extent that our liquidity maintains the levels that we projected through the end of the year.
We will then be judicious in looking at.
Acquisitions at me and fit.
Help us further enhance our our strategy a in the markets that we're in.
Perhaps expand joint ventures with our hospital partners.
And maybe even if they are properly.
Player be further de leveraging for that for us.
I also want to add one other comment to mark.
Our our.
A big debt for our credit facility is a library or based borrowing.
1% floor prior to the.
But it's our subsequent to the first quarter.
That borrowing was well above the 1% floor, which cost does which call. It caused us a much higher interest payment that we made in early April since then we have elected.
LIBOR or borrowing which we believe through the balance of this year will be well below the 1% and probably will be a cash flow savings to the company has perhaps a $5 million for the balance of this year. So.
All of those will get factored into our.
Overall cash management has it always does.
More of the.
And I on making certain that the volumes, which we expect and are already seen beginning to return.
Our our used to measure our liquidity and cost conservation in so that being said.
We're always looking then are always approached about.
Acquisitions, and new joint ventures.
And we will use.
Basically out of cash liquidity as the benchmark as.
The wisdom of doing that some of these.
Acquisitions and joint ventures.
Okay, that's great Thank city Alcoa.
Well so just on the I think you'd mentioned there about.
70 locations that were temporarily closed just wanted to get a sense of stuff. When you think you might be able to reopen all of those facilities or locations or do you anticipate maybe some vietnam.
The reopened.
Actually the number of facilities nature is closer to 100 is 97 that are closed as we speak right here.
We will continue we don't anticipate at this time.
Closing permanently any of those facilities.
All those facilities were necessary before covert 19 based on access.
And based on the volumes that we produce since we expect those volumes will eventually return and access in our markets are extremely important for.
The pay orders and our physician refers.
We expect acute virtually all of those.
Centers open and bring back all of our.
Furloughed employees in a very measured way over the next 90 to 180 days, we're monitoring volumes by center and to the extent that any center any market starts happening backlog because the demand starts coming back for for these types of diagnostics.
Services will start opening.
Five adequately centers, one by one to China to fill that demand.
To the point, where there's a full recovery so.
We're going to do it.
Centered on a center by center basis, if it's based upon the volumes that were seeing in our imaging centers.
Okay, that's great.
And I believe you mentioned you on the Capitation keep service you did see some price increasing a into first quarter just wondering.
It can give us a sense of how meaningful that was for you.
Well most of these increases were already contractually provided for we had a series of renegotiations of our capitation.
Managements in 29 team and throughout this year are.
We will be seen increases as the anniversary dates as those contracts occur I am going into this year. The overall increases that we've experienced so far I, probably in the 5% to 6% range.
For the remainder of this year, we expect another perhaps two or 3%.
The increase in our capitation rates spread out through the remainder of this year.
Okay. Thanks, and then finally I'm just back on the expansion plans I mean, if you can give us an update on the where we are on the deep health acquisition and also on pulse of pro installations I assume those are probably good things on deposit photo might be delayed getting the environment.
Yes, I think as the types of projects.
Our delayed not so much because we wanted to lay them, but simply because until the <unk>.
Morning.
Non emergency work, yeah increases, particularly as it resolves to prostate cancer and the a urologists and other of specialists that that see these patients begin to ramp up clearly we will have a delayed in that but we're very in tune.
He asked about the.
The types of project and prostate cancer in general.
We believe.
In the upcoming.
Perhaps 12 to 18 months may involve into similar to.
I am Odyssey more of a screen procedure that we believe can people performed on a mass population basis, rather than rather than just waiting for individuals to have signs indicative that they must they might have prostate cancers.
A lot of our focus both in terms of artificial intelligence as well as conversations with the pay ores.
The visit.
Prostate.
As and perhaps transition into a screening tool along with other areas like colon cancer in lung cancer.
Being a major focus for us.
Going into the latter part of this year.
Okay. Thanks for taking the questions.
Thank you might you stay safe.
And from Raymond James will hear next from John Ransom.
Hi, good morning.
What are you doing if anything on your year end take it seems like a people probably don't want to be hanging around and or.
Waiting to get scanned the it can you do anything.
Do more real time pace I think what things that were not a target people sort of waiting rooms or something.
Down your list so thanks.
Sure I'm one of the things that we've instituted which is.
Something that we are contemplating continuing into the into the future.
Potentially permanently our virtual waiting rooms, so that patients are able to check in fill out the intake forms digital either on their phone or if the or we can give them an IP at and then go back to their cars and sit in their cars you know in isolation and then we're able.
The tax them or call them.
At the time of at the time of their play, but so that they're not waiting in a crowded waiting room with other patients.
And.
Or not associated with any risk because of that so.
That's been the biggest operational changes that we've had.
In our waiting rooms, and it's been met with with high success and ER has been applied admire patients.
In addition to that John other measures that were taking once patients are in our facilities of course, all of our employees will be mass.
I don't have drugs were putting in shields at our from desk plastic shields.
Further separate.
The patients from our employees. In addition to the virtual waiting rooms were very much person on remote scheduling and registration. So that patients you have to spend less time and our offices.
And that I want to applaud our I T Division you add this is.
Another one of those cases, where owning our own IP infrastructure allows us to make these kind of adaptations to the way we want to run our business on a real time basis, rather than having to wait for some vendor to come up with it.
In addition to that we're also going to be scheduling our patients differently. So that there is more time in between patients for us to clean rooms, and make certain is less and less.
Interaction between other patients so I think all of the measures that.
We uniquely can do and that health care providers and particular should be doing.
They allow.
Outpatient imaging to be a very good barometer of.
Comfort level of reopening summer wire communities for patients coming out and feel comfortable that it's time to get back to more normal functioning.
Okay great.
My other question kind of shifting gears, a little bit is at what point I know you're not going to go out me good to a big deal tomorrow, but.
What point do you think you'll be able to model.
2021, if you look at let's say somebody comes to you also saw Europe lots of centers. When do you think you'd be comfortable saying, yeah. We think we'd have a handle on 21 numbers and we know what would pay for this asset.
I think we're going to be able to look at 2021, when we get deeper into the third quarter are our projections for the balance of this quarter and the.
Third quarter.
Shows some relatively conservative ramping up of patient volumes and revenue.
And that by the fourth quarter, we hope to not be all the way back, but certainly well on the way too are approaching that are more expected volumes. So I would think that if we either meet or exceed the projections that we have.
For the balance of the second quarter, and then getting deeper into the third quarter I realize.
It will help us in early preparation for our 2021 budgets. So I think from the standpoint of monitoring the company looking at our second quarter results will be extremely important as well as obviously when we can issue our third quarter results.
And and then thinking about capital.
You are you know your heavily concentrated in a couple of States, California, New York that.
We're probably going to be on a conservative end of opening up that's like as the political risk something if you think about it is that a consideration when you're looking at maybe we look at a couple of faith that.
The don't have don't have.
That type of governor that serves or not really.
Well actually California.
He is leading the way I think both on a national scale and certainly.
By our own numbers.
Not having seen the same level of decrease in volumes.
And and proceeding more rapidly in the recovery then the east coast. So I think.
The California experiences one that has been particularly gratifying and it's also the one where we have the most of the majority 90 plus percent of our capitation revenues all of the medical groups that lead capitate with are starting to reopen their offices.
Actually this month, so we expect those volumes to go up and when we talk about capitation I want to remind everybody that all of our medical groups see fee for service stations. In addition to the HMO Capitated lives and are very much.
Harbinger of where our overall volumes will be so at least in California, John we expect to have a much more rapid recovery.
And I think the effectiveness of both the governor of.
California, and they may or.
Have been successful in reducing the spread of the virus and certainly the number the number of fatalities.
New York is a little bit more New York and no Northern New Jersey are a little bit more of a wildcard.
Because of the density of the population.
The requirements for public transportation, but.
Other cuomo and Governor Murphy incentives and mergers if I'm correct.
Right have done an excellent job, bringing that down and I'm.
Very.
Happy to see that our volumes, which had dip down to almost 90% reduction in in New York.
Have begun a nice steady recovery over the last 10 to 12 days and I suspect that as the.
Shelter at home and reef in Phase one get introduced here probably the end of this week, we will expect goes.
Businesses that business in those regions to increase as far as a two other major markets, Delaware and Maryland, I'm happy to report that last week, the governor of Maryland.
Opened up.
The non emerging procedures, particularly on them onto a fee to be reinstituted. So we expect to see a fairly aggressive or increase in screening them on with the which only got further emphasized in terms of its importance with the article that came out in.
Yeah.
Journals cancer today, which was a very.
For Radnet that has over 20% of its volume in mammography and particularly gratifying.
Great. That's it for me thank you.
A giant take care say well.
And gentlemen, with no other questions I'd like turn things back to you all for any closing remarks.
Again, I would like to take this opportunity to think all of our shareholders and stakeholders for their continued support and the employees of Radnet for their dedication and hard work management will continue its endeavor to be as market leader that provides.
Great services when appropriate return on investment for all of our stakeholders taking for your time today I look forward to our next call stay well be safe.
And again that will conclude today's conference. Thank you all for joining us.
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