Q2 2024 Nutex Health Inc Earnings Call
Speaker Change: Thank you so much for watching this video.
Speaker Change: i
Speaker Change: know one
Speaker Change: [music]
Speaker Change: Greetings and welcome to Nutex Health second quarter 2024 financial results conference call.
Speaker Change: At this time, all participants are on a listen-only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Jennifer Rodriguez. Thank you.
Unnamed: Nutex Health Nutex Health Nutex Health Nutex Health Nutex Health
Jennifer Rodriguez: Welcome to the Nutex Health second quarter 2024 earnings conference call. Today's call is being recorded.
Speaker Change: With me this morning is our Chairman and CEO , Dr. Tom Vo, CFO John Bates, President Dr. Warren Hosinian, and COO Josh Titilio.
Operator: Greetings and welcome to Nutex Health's second quarter 2024 financial results conference call. At this time, all participants are on a listen-only basis. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Jennifer Rodriguez. Thank you. You may begin.
Speaker Change: Our team will provide some prepared remarks and then we'll take questions.
Speaker Change: Before I turn the call over to Dr. Vo, let me remind everyone that today's call may contain forward-looking statements that are based on management's current expectations, numerous risks, uncertainties, and other factors that may cause actual results to differ materially from those that might be expressed today.
Speaker Change: More information on forward-looking statements and these factors are listed in Thursday's press release and in our various SEC filings.
Speaker Change: On this morning's call, we may reference measures such as Adjusted EBITDA, which is a non-GAAP financial measure.
Speaker Change: A table providing supplemental information on adjusted EBITDA and reconciling net loss attributable to Nutex Health, Inc. is included in the press release and Form 10-K filed earlier this week.
Jennifer Rodriguez: Welcome to the Nutex Health second quarter 2024 earnings conference call. This call is being recorded.
Jennifer Rodriguez: With me this morning is our Chairman and CEO, Dr. Tom Vo, CFO John Bates, President Dr. Warren Hosinian, and COO Josh Titillo. Our team will provide some prepared remarks, and then we'll take questions. Before I turn the call over to Dr. Vo, let me remind everyone that today's call may contain forward-looking statements that are based on management's current expectations, numerous risks, uncertainties, and other factors that may cause actual results to differ materially from those that might be expressed today.
Speaker Change: This morning's call is being recorded and a replay of the call will be available later today.
Jennifer Rodriguez: More information on forward-looking statements and these factors is listed in Thursday's press release and in our various SEC filings. On this morning's call, we may reference measures such as Adjusted EBITDA, which is a non-GAAP financial measure. A table providing supplemental information on Adjusted EBITDA and reconciling net loss attributable to Nutex Health Inc. is included in the press release and Form 10-K filed earlier this week. This morning's call is being recorded, and a replay of the call will be available later today. With that, I'll now turn the call over to Dr. Tom Vo, our Founder and Chief Executive Officer.
Speaker Change: With that, I'll now turn the call over to Dr. Tom Boe, our Founder and Chief Executive Officer.
Dr. Tom Vo: Good morning to everyone, and thank you for joining the call. We are very excited to present our second quarter financials to our esteemed investors.
Speaker Change: Jennifer, thank you.
Speaker Change: Good morning to everyone, and thank you for joining the call.
Speaker Change: We are very excited to present our second quarter financials to our esteemed investors.
Dr. Tom Vo: At Nutex, everyone in the organization believes in the business model and is fully engaged and aligned to make the company even more successful. Before we dive into the financials, I'd like to take a step back to describe what Nutex Health is, our value proposition, where we came from, as well as how we see the future of healthcare. Nutex Health was founded in 2011 in Houston, TX.
Speaker Change: At Nutex, everyone in the organization believes in the business model and is fully engaged and aligned to make the company even more successful.
Speaker Change: Before we dive into the financials, I'd like to take a step back to describe what Nutex Health is, our value proposition,
Speaker Change: where we came from, as well as how we see the future of healthcare.
Speaker Change: Nutex Health was founded in 2011 in Houston, Texas.
Dr. Tom Vo: It was founded based on the premise that Americans around the country need better accessibility to health care on a concierge level. We were one of the very first micro-hospital companies in the country to provide this service. We started out serving emergency needs in Houston and eventually expanded our footprints throughout Texas in response to popular demand from consumers across the state.
Speaker Change: It was founded based on the premise that Americans around the country need better accessibility to health care on a concierge level.
Speaker Change: We were one of the very first micro-hospital companies in the country to provide this service.
Speaker Change: We started out serving emergency needs in Houston and eventually expanded our footprints throughout Texas in response to popular demand from consumers across the state.
Dr. Tom Vo: Around 2015, we started expansion into other states with our first hospital outside of Texas in Oklahoma City. We have continued the growth. Today, we have 21 micro hospitals located in nine states. We continue to be among the leaders in the micro-hospital segments in the United States. Let me take a moment to describe to our investors what a micro-hospital is. A microhospital is essentially a small, licensed hospital with many of the ancillary capabilities of a large hospital.
Speaker Change: Around 2015, we started expansion into other states with our first hospital outside of Texas in Oklahoma City.
Speaker Change: we have continued the growth.
Speaker Change: Today we have 21 micro hospitals located in nine states.
Speaker Change: We continue to be among the leaders in the micro-hospital segments in the United States.
Dr. Tom Vo: Our micro hospitals generally have an emergency room, 4 to 20 inpatient beds, an in-house pharmacy, an in-house laboratory, and an in-house radiology suite consisting of MRI, CT, ultrasound, and x-ray, all enclosed in a roughly 20,000 to 30,000 square foot facility. This is compared to a traditional large hospital, which typically has anywhere between 100 and 500 plus inpatient beds. Our much smaller footprint allows us to build new facilities quicker and more efficiently in strategic locations around the country, compared to constructing larger traditional hospitals.
Speaker Change: Let me take a moment to describe to our investors what a micro-hospital is.
Speaker Change: A microhospital is essentially a small licensed hospital with many of the ancillary capabilities of a large hospital.
Speaker Change: Our micro hospitals generally have an emergency room.
Speaker Change: between 4 to 20 inpatient beds.
Speaker Change: an in-house pharmacy, an in-house laboratory, and an in-house radiology suite consisting of MRI, CT, ultrasound, and x-ray.
Speaker Change: all which is enclosed in a roughly 20,000 to 30,000 square foot facility.
Speaker Change: This is compared to a traditional large hospital which typically has anywhere between 100 to 500 plus inpatient beds.
Speaker Change: Our much smaller footprint allows us to build new facilities quicker and more efficiently in strategic locations around the country compared to constructing larger traditional hospitals.
Dr. Tom Vo: The services that we provide in these micro hospitals include emergency services, Medical Surgical Inpatient Stays, outpatient imaging, outpatient labs, and outpatient. The vast majority of our patients come through the emergency department, which has historically been our main line of service. Out of every 100 patients that come through our ER, we can treat and discharge roughly 95% of them. Of that 95%, an average of 90% will be discharged from the ER, and 5% will be admitted to our own hospital. The remaining 5% will be transferred to a larger hospital.
Speaker Change: The services that we provide in these micro hospitals include emergency services, medical, surgical, inpatient stays.
Speaker Change: outpatient imaging, outpatient labs, and outpatient procedures.
Speaker Change: The vast majority of our patients come through the emergency room.
Speaker Change: which has historically been our main line of service.
Speaker Change: Out of every 100 patients that come through our ER, we can treat and discharge roughly 95% of those patients.
Speaker Change: Of that 95%, an average of 90% will be discharged from the ER and 5% will be admitted into our own hospital.
Speaker Change: The remaining 5% will be transferred to a larger hospital system.
Dr. Tom Vo: Another way to think about our model is the spectrum of care that we provide. As we all know, there are a lot of primary care physicians, urgent care centers, and retail clinics around the country. Walgreens, CVS, Walmart are a few national low-acuity retail clinics that come to mind.
Speaker Change: Another way to think about our model is
Speaker Change: As we all know, there are a lot of primary care physicians, urgent care centers, and retail clinics around the country.
Speaker Change: Walgreens, CVS, Walmart are a few national low-acuity retail clinics that come to mind.
Dr. Tom Vo: On the other hand of the spectrum, there are a lot of large, major hospitals around the country that provide high-acuity, intensive trauma level care. We are neither a clinic nor are we a large hospital. We position ourselves right in the middle of the acuity care spectrum between low-acuity clinics and high-acuity major hospitals. This is a very unique niche in the healthcare ecosystem that we operate in. There are very few companies around the country that provide care in the mid-acquities spectrum.
Speaker Change: On the other hand of the spectrum, there are a lot of large major hospital systems around the country that provide high acuity intensive trauma level care.
Speaker Change: We are neither a clinic nor are we a large hospital.
Speaker Change: We position ourselves right in the middle of the acuity care spectrum between the low acuity clinics and the high acuity major hospital systems.
Speaker Change: This is a very unique niche in the healthcare ecosystem that we operate in.
Speaker Change: There are very few companies around the country that provide care in the mid-acuity spectrum like we do.
Dr. Tom Vo: While our hospital may be small, our patient satisfaction is extremely high in every community that we are located in, as evidenced by our online reviews and ratings. For example, if you research every one of our hospitals online, you will see that our Google reviews are consistently 4.8 or above. This is very unusual in the health care industry.
Speaker Change: While our hospital may be small, our patient satisfaction is extremely high in every community that we are located in, as evidenced by our online review and ratings.
Speaker Change: For example, if you research every one of our hospitals online, you will see that our Google reviews are consistently 4.8 or above.
Dr. Tom Vo: In essence, our patients are very happy with our service. A primary reason for our great patient satisfaction is the culture of our physicians and staff, who partner with local physicians at every one of our hospitals and work in conjunction with them to operate the hospital. This alignment with the local community physicians and staff ensures our patients receive concierge care from a doctor with little or no wait time. Our philosophy is that if your physicians and staff are happy, then your patients will be happy.
Speaker Change: This is very unusual in health care. In essence, our patients are very happy with our service.
Speaker Change: A primary reason for our great patient satisfaction is the culture of our physicians and staff.
Speaker Change: We partner with local physicians at every one of our hospitals and work in conjunction with them to operate the hospital.
Speaker Change: This alignment with the local community physicians and staff ensures our patients receive concierge care from a doctor with little or no wait time.
Speaker Change: Our philosophy is that if your physicians and staff are happy, then your patients are happy.
Dr. Tom Vo: Across the entire company, we consistently have very low employee turnover and rarely have staffing problems. Our physicians and staff engagement are extremely high, and our team often comments that working at Nutex Health is the best job they have ever had. Once again, this is very rare among large hospitals, where staffing is a major issue among hospitals around the country today.
Speaker Change: Across the entire company, we consistently have very low employee turnover and rarely have staffing issues.
Speaker Change: Our physicians and staff engagement are extremely high, and our team often comments that working at Nutex Health is the best job they have ever had.
Speaker Change: Once again, this is very rare among the large hospital systems.
Speaker Change: where staffing is a major issue among hospitals around the country today.
Dr. Tom Vo: So basically, we have a very simple formula: create a recipe of engaged, aligned, and incentivized physicians and staff to provide concierge-level patient care and experience. This leads to repeat visits and word-of-mouth advertising, which further increases patient volumes, which increases revenue, which ultimately leads to what we have now, a profitable and growing company. We believe that there are multiple indicators that the increased demand for hospitals and emergency services is not slowing down anytime soon.
Speaker Change: So basically we have a very simple formula.
Speaker Change: create a recipe of engaged, aligned, and incentivized physicians and staff to provide concierge-level patient care and experience.
Speaker Change: This leads to repeat visits and word-of-mouth advertising, which further increases patient volumes, which increases revenue, which ultimately leads to what we have now, a profitable and growing company.
Speaker Change: We believe that there are multiple indicators that the increased demand for hospitals and emergency services is not slowing down anytime soon.
Dr. Tom Vo: With the graying of the population and the so-called silver tsunami that is expected to hit healthcare, we feel that this, We feel that we are in a very good position to help meet this demand for more counselor-level accessibility for a long time. Now, to the second quarter.
Speaker Change: With the graying of the population and this so-called silver tsunami that is expected to hit healthcare, we feel that this
Speaker Change: We feel that we are
Speaker Change: in a very good position to help meet this demand for more counselors level accessibility for a long time.
Dr. Tom Vo: Overall company-wide hospital visits were up 28 percent from the prior year for all of our hospitals. Our same store mature hospital volumes were up an average of 10.3% in total billable visits over the prior year. Observation visit volumes were up 34% versus the second quarter of the prior year, and inpatient volumes were up 52% versus the prior year. On the de novo hospital grill side, we have four new hospitals that are under construction that we anticipate opening in the next 6 to 12 months, barring any unforeseen setbacks. New hospital openings include post-false Idaho and Tampa, Florida. Milwaukee, Wisconsin, in San Antonio, Texas.
Speaker Change: Now, to the second quarter.
Speaker Change: Overall, company-wide hospital visits were up 28% versus prior year for all of our hospitals.
Speaker Change: Our same store mature hospital volumes were up an average of 10.3% in total billable visits over the prior year.
Speaker Change: Observation visit volumes were up 34% versus the second quarter of the prior year.
Speaker Change: Inpatient volumes were up 52% versus
Speaker Change: On the de novo hospital grill side, we have four new hospitals that are under construction that we anticipate opening in the next 6 to 12 months, barring any unforeseen setbacks.
Speaker Change: Two hospital openings include Post Falls, Idaho.
Speaker Change: Tampa, Florida.
Speaker Change: Milwaukee, Wisconsin
Dr. Tom Vo: Beyond 2025, we have modified our annual growth projections slightly to project one to three new hospitals per year. However, we remain disciplined and only consider locations where the demand for small hospitals vastly outweighs the supply side. On the billing and collection side, we continue to see growth monthly on the revenue per patient metric. From the end of 2022 to the end of 2023, based on adjudicated date of service data, we achieved a 7% increase in revenue per patient. The 2020 numbers are still being adjudicated, and we will report the result when ready.
Speaker Change: and San Antonio, Texas.
Speaker Change: Beyond 2025, we have modified our annual growth projections slightly to project one to three new hospitals per year.
Speaker Change: We remain disciplined and only consider locations where the demand for small hospitals vastly outweighs the supply side.
Speaker Change: On the billing and collection side, we continue to see growth monthly on the revenue per patient metric.
Speaker Change: From the end of 2022 to the end of 2023, based on an adjudicated date of service data, we achieved a 7% increase in revenue per patient.
Speaker Change: 2024 numbers are still being adjudicated and we will report the results when ready.
Dr. Tom Vo: We have also already begun to engage in the arbitration process of independent dispute resolution, whereas previously we stopped at the open negotiation process. We believe that there is a lot of potential incremental value and revenue to be gained from arbitration as we believe that the insurers typically pay us very low the first time. Arbitration is a tool provided by the No Surprises Act to ensure providers receive fair treatment.
Speaker Change: We have also already begun to engage in the arbitration process of the Independent Dispute Resolution, whereas previously we had stopped at the open negotiation process.
Speaker Change: We believe that there is a lot of potential incremental value and revenue to be gained from arbitration, as we believe that the insurers typically pay us very low the first time.
Speaker Change: Arbitration is a tool provided by the No Surprises Act to ensure providers receive fair treatment.
Dr. Tom Vo: In recent articles and public data, we are seeing that providers are prevailing 70 to 80 percent of the time in Alberta. We started this process in July 2024, and we will have more data in the fourth quarter on the success rate of these arbitration claims with the insurance carrier. On the population health side, we are also making some adjustments. We have divested our MSO, California ProCare, and are in the process of selling Clinigens, our healthcare analytics and data.
Speaker Change: In recent articles and public data, we are seeing that providers are prevailing 70-80% of the time in arbitration.
Speaker Change: We started this process in July 2024 and we will have more data in the fourth quarter on the success rate of these arbitration claims with the insurance carriers.
Speaker Change: On the population health side, we are also making some adjustments.
Speaker Change: We have divested our MSO in California, ProCare, and are in the process of selling Clinigence, our healthcare analytics and data company.
Dr. Tom Vo: John and Warren will go over these details later in the presentation. We believe that these portfolio changes... We can focus on more profitable assets and continue to perform financially and reinvest these dollars into new markets. As we move through the remainder of the year, we will maintain our disciplined approach of managing our costs while continuing to invest appropriately in our strategic growth areas, which we believe should position the company favorably to meet our long-term objective of being sustainable and profitable. With that, I will turn the call over to John Bates, Nutex's Chief Financial Officer, for more financial information on the second...
Speaker Change: John and Warren will go over these
Speaker Change: We believe that these portfolio changes, we can focus on more profitable assets and continue to perform financially and reinvest these dollars into new markets.
Speaker Change: As we move through the remainder of the year, we will maintain our disciplined approach of managing our costs while continuing to invest appropriately in our strategic growth areas, which we believe should position the company favorably to meet our long-term objectives of being a sustainable and profitable company.
John Bates: With that, I will turn the call over to John Bates, Nutex Chief Financial Officer, for more financial information for the second quarter.
John Bates: Thanks Tom and good morning everyone. Our second quarter, 2,024 results continue to trend. We saw increased success in top line growth and with our disciplined cost control effort company wide. But let's talk about the second quarter and June 30th, 2,024 first and compare those results to the same quarter of 2,023.
Speaker Change: John ?
John Bates: Thanks, Tom, and good morning, everyone.
John Bates: Our second quarter 2024 results continue to trend we saw in the first quarter with increased success in top-line growth.
John Bates: and with our disciplined cost control effort company-wide.
Speaker Change: But let's talk about the second quarter ended June 30th, 2024 first.
Speaker Change: and compare those results to the same quarter.
Speaker Change: of 2023. So for the second quarter of 2024, our total revenue grew 29%, or $17.2 million to $76.1 million versus $58.9 million for the second quarter of 2023.
Speaker Change: Of the total revenue increase, our mature hospitals, which are hospitals that were open prior to December 31 of 2021, and therefore provided two full years of comparative results, increased their revenue by 13.2% for the second quarter 2024 versus the second quarter 2023.
Speaker Change: For hospital division visits, we saw a similar growth during the quarter as they increased by 28% or 9,205 visits to 41,208 visits in the second quarter of 24 versus 32,183 visits in the same period of 23.
Speaker Change: with the mature hospitals growing at 10% in that second quarter 24 versus 23.
Speaker Change: Additionally, the Population Health Division had revenue growth of 15.9% to 8.5 million in the second quarter of 24, from 7.3 million in a similar period in 23, despite the divestiture of those two small entities within the division, as mentioned by Dr. Vo previously.
Speaker Change: In addition to the revenue and visit improvement we have seen in the second quarter of 24, we have continued to see an improvement in the overall facility and corporate cost structure.
John Bates: Total facility-level operating costs and expenses represented only 70.3% or $53.5 million of total revenue for the second quarter of 2024 versus 83.6% or $49.3 million for the same period in 2023. As a result of the revenue and facility cost improvement, our 2024 second quarter gross profit was $22.6 million, or 29.7% of revenue, as compared to only $9.6 million, or 16.4% of total revenue in 2024, a 134% increase in the second quarter of 24 over 23.
Speaker Change: Total facility level operating costs and expenses represented only 70.3% or 53.5 million of total revenue for the second quarter of 24 versus 83.6% or 49.3 million for the same period in 23.
Speaker Change: As a result of the revenue and facility cost improvement, our 2024 second quarter gross profit was $22.6 million, or 29.7% of revenue, as compared to only $9.6 million, or 16.4% of total revenue in 2024.
Speaker Change: A 134% increase in the second quarter of 2024 over 2023.
John Bates: From a corporate and other cost perspective, G&A expenses as a percentage of total revenue for the second quarter of 2024 decreased to 14%, or $10.7 million, from 16.6%, or $9.8 million, for the second quarter of 2023. Additionally, as mentioned previously, we did divest two smaller population health entities in the second quarter of 2024 that had very little impact on the operational side of the population health business as we move forward.
Speaker Change: From a corporate and other cost perspective, the G&A expenses as a percentage of total revenue for the second quarter of 2024 decreased to 14% or $10.7 million from 16.6% or $9.8 million for the second quarter of 2023.
Speaker Change: Now, additionally, as I mentioned previously, we did divest two smaller population health entities in the second quarter of 2024 that had very little impact on the operational side of the population health business as we move forward.
John Bates: But the effect of these two transactions led to a non-cash impairment of assets and a non-cash impairment of goodwill of $3.5 million and $3.2 million, respectively, during the second quarter of 2024. Operating income for the second quarter of 2024 was $5.3 million, compared to an operating loss of $400,000 in the second quarter of 2023. Net loss attributable to Nutex income improved by $3.1 million in the second quarter of 2024 from a loss of negative $3.5 million in the second quarter of 2023 to a very small loss of negative $364,000 in the second quarter of 2024, and adjusted EBITDA attributable to Nutex, which removed the effect of the two non-cash impairment items noted above, increased $8 million, or 200%, from $4 million in the second quarter of Now on to the six months into June 24, compared to six months into June 23.
Speaker Change: But the effect of these two transactions led to a non-cash impairment of assets and non-cash impairment of goodwill of $3.5 million and $3.2 million, respectively, during the second quarter of 2004.
Speaker Change: Operating income for the second quarter of 2024 was a positive $5.3 million compared to an operating loss of a negative $400,000 in the second quarter of 2023.
Speaker Change: Net loss attributable to Nutex income improved by $3.1 million in the second quarter of 2024 from a loss of a negative $3.5 million in the second quarter of 2023 to a very small loss of negative $364,000 in the second quarter of 2024.
Speaker Change: and adjusted EBITDA attributable to Nutex, which removed the effect of the two non-cash impairment items noted above, increased $8 million, or 200%, from $4 million in the second quarter of 2023 to $12 million in the second quarter of 2024.
Speaker Change: Now on to the six months into June .
John Bates: Total revenue for the first six months of 2024 grew by 25%, or $28.2 million, to $143.5 million versus $115.3 million for the previous period. Of the total revenue increase, mature hospitals increased their revenue by 10% for the first six months of 2024 versus the same period in 23. Maternal division visits saw similar growth as they increased by 24.6% or 16,032 visits to 81,276 visits in the first six months of 24 versus 65,244 visits in the same period of 23, with mature hospital visits growing at 9.7% in the six months ended June 24 versus the same period of 23.
Speaker Change: 24 compared to six months into June of 23. Total revenue for the first six months of 2024 grew by 25% or $28.2 million to $143.5 million versus $115.3 million for the previous period.
Speaker Change: Of the total revenue increase, mature hospitals increased their revenue by 10% for the first six months of 2024 versus the same period in 23.
Speaker Change: Hospital division visits saw similar growth as they increased by 24.6% or 16,032 visits to 81,276 visits in the first six months of 24 versus 65,244 visits in the same period of 23.
Speaker Change: with mature hospital visits growing at 9.7% in the six months ended June 24 versus the same period in 23.
John Bates: Additionally, the Population Health Division had revenue growth of 10.8% to $15.9 million in the first six months of 2024, from $14.4 million in the same period of 2023, despite the divestiture of those two smaller entities within the division during the second quarter of 2024, as mentioned previously. The facility and corporate level costs continued to show improvement for the first six months of 2024 relative to the same period in 2023, and this total facility level operating costs and expenses represented 77.5% or 110 million Nutex Health of total revenue for the six months into June versus 87.4% or $100.8 million for the same period in 2023, a decrease of 9.9%.
Speaker Change: Additionally, the Population Health Division had revenue growth of 10.8% to $15.9 million in the first six months of 2024, from $14.4 million in the same period in 2023, despite the divestiture of those two smaller entities within the division during the second quarter.
Speaker Change: 24 as mentioned previously.
Speaker Change: So, facility and corporate level costs continued to show improvement for the first six months of 2024 relative to the same period in 2023, and this total facility level operating costs and expenses represented 77.5% or $110 million.
Speaker Change: of total revenue for the six months into June versus 87.4% or $100.8 million for the same period in 2023, a decrease of 9.9%.
John Bates: The gross profit for the six months into June 2024 was $32.7 million, or 22.8% of total revenue, as compared to only $14.5 million, or 12.6% of total revenue in the same period in 2023. A 126% increase for the six months into June versus the six months into December. June 24 versus the six months ended June 23.
Speaker Change: The gross profit for the six months ended June 2024 was $32.7 million, or 22.8% of total revenue, as compared to only $14.5 million, or 12% of total revenue.
Speaker Change: 12.6% of total revenue in the same period in 2023. A 126% increase for the six months into June versus the six months into June 24 versus the six months into June 23.
John Bates: So from a corporate and other cost perspective, the G&A expenses as a percentage of total revenue for the six months into June decreased to 13.5% or $19.3 million from 14.7% or $16.9 million for the same period in 2023. Operating income for the six months into June 24 was a positive $6.7 million compared to an operating loss of a negative $4.8 million for the six months into June 23. The net loss attributable to Nutex improved by $7.9 million from a loss of $8.6 million for the first six months of 2023 to a very small loss of just negative $728,000 in the first six months of 2024.
Speaker Change: And so from a corporate and other cost perspective, the G&A expenses as a percentage of total revenue for the six months into June decreased to 13.5% or $19.3 million from 14.7% or $16.9 million for the same period in 23.
Speaker Change: Operating income for the six months into June 24 was a positive $6.7 million, compared to an operating loss of a negative $4.8 million for the six months into June of 23.
Speaker Change: The net loss attributable to Nutex improved by $7.9 million from a loss of $8.6 million for the first six months of 2023 to a very small loss of just a negative $728,000 in the first six months of 2024.
John Bates: Adjusted EBITDA attributable to Nutex, which removed the effect of those two non-cash impairment items noted above, increased $10.2 million, or 159%, from $6.4 million in the first six months of 2023 to $16.6 million in the first six months of 2024. Finally, we'll talk about our balance sheet, which remains very strong with cash and cash equivalence at the end of June of 24, 40.8 million, up 18.8 million or 85.5% from 22 million as of the end of the year 2023.
Speaker Change: Adjusted EBITDA attributable to Nutex, which removed the effect of those two non-cash impairment items noted above, increased $10.2 million or 159% from $6.4 million in the first six months of 2023.
Speaker Change: to $16.6 million in the first six months of 2024.
Speaker Change: Finally, we want to talk about our balance sheet. It remains very strong with cash and cash equivalents at the end of June of 24, $40.8 million, up $18.8 million, or 85.5 percent from the $22 million as of the end of the year, 2023.
John Bates: With regard to cash flow, net cash from operating activities increased by $15.2 million for the six months into June of 24 to $16.3 million, as compared to $1.1 million for the same period in 2023. And on the liability side, our total debt, true debt, decreased by $1.5 million to $40.9 million in June 24, down from $42.4 million in December 23, with the majority of this debt related to equipment loans at our hospitals for such normal items as MRIs, X-rays, ultrasounds, and CT machines. So with that, I'll turn the call over to Josh Titilio, our Chief Operating Officer, to discuss more of our operations.
Speaker Change: With regard to cash flow, net cash from operating activities increased by $15.2 million for the six months into June of 2024 to $16.3 million, as compared to $1.1 million for the same period in 2023.
Speaker Change: And on the liability side, our total debt, true debt, decreased by $1.5 million to $40.9 million in June of 2024, down from $42.4 million in December of 2023. With the majority of this debt related to equipment loans at our hospitals.
Speaker Change: for such normal items as MRIs, X-rays, ultrasounds, and CT machines.
Speaker Change: So, with that, I'll turn the call over to Josh Titilio, our Chief Operating Officer, to discuss more about our operations.
Josh Titillo: Thanks, John. Good morning everyone.
Josh Titilio: Thanks, John . Good morning, everyone. On the operational side, we've been very focused on both volume growth and service line growth in our mature hospitals, as well as a continued focus on cost and becoming a leaner organization.
Josh Titillo: On the operational side, we've been very focused on both volume growth and service line growth in our mature hospitals, as well as a continued focus on cost and becoming a leaner organization. On the volume and revenue growth side, we've made some adjustments in our business development and marketing team, which I'm happy to say have resulted in the impressive second quarter performance that you heard about. An additional contributing factor has been the implementation of our new CRM software, HubSpot.
Speaker Change: On the volume and revenue growth side, we've made some adjustments in our business development and marketing team, which I'm happy to say have resulted in the impressive second quarter performance that you heard about. An additional contributing factor has been the implementation of our new CRM software, HubSpot.
Josh Titillo: Our business development efforts at Nutex Health continue to focus on community events, calling on local primary care and specialist physicians, schools, urgent care centers, and large local employers while simultaneously using Google Ads, social media, and billboards as our primary marketing mediums.
Speaker Change: Our business development efforts at Nutex Health continue to focus on community events, calling on local primary care and specialist physicians, schools, urgent care centers, large local employers, while simultaneously using Google Ads, social media, and billboards as our primary marketing mediums.
Josh Titillo: Ultimately, the key for our hospitals is to grow and continue to provide concierge-level access and care for our patients and to be a resource in the communities and markets in which we serve. Excellent patient care is our best marketing through word of mouth, and our reputation in our markets continues to grow. In addition to our focus on increasing ER volumes, which began towards the end of 2023, one of our major initiatives has been to shift our service mix to increase inpatient and observation volumes in our hospitals.
Speaker Change: Ultimately, the key for our hospitals is to grow and continue to provide concierge-level access and care for our patients and to be a resource in the communities and markets in which we serve. Excellent patient care is our best marketing through word of mouth and our reputation in our markets continues to grow.
Speaker Change: In addition to our focus on increasing ER volumes, which began towards the end of 2023, one of our major initiatives has been to shift our service mix to increase inpatient and observation volumes in our hospitals.
Josh Titillo: As part of this initiative, our hospitals did a lot of work locally, partnering with local hospitals and specialists to provide additional care to our existing patients versus transferring them out to other hospital systems. We're starting to see the financial benefits of this changing service mix of becoming more inpatient-centric. This shift will continue to benefit us going forward. At Nutex Health, we are also very focused on our costs, as you heard.
Speaker Change: As part of this initiative, our hospitals did a lot of work locally partnering with local hospitals and specialists to provide additional care to our existing patients versus transferring them out to other hospital systems. We're starting to see the financial benefits of this changing service mix of becoming more inpatient centric. This shift will continue to benefit us going forward.
Josh Titillo: Our largest costs are labor, supplies, and contract services, in that order. We continue to manage labor very closely with all of our hospitals. We have a new HR software, Workday, which has helped us streamline approvals and position control, and we're planning to implement a new labor management software in the coming quarters to help us staff even more efficiently.
Speaker Change: At Nutex Health, we are also very focused on our costs, as you heard.
Speaker Change: Our largest costs are labor, supplies, and contract services in that order. We continue to manage labor very closely with all of our hospitals. We have a new HR software work day, which has helped us streamline approvals and position control. And we're planning to implement a new labor management software in the coming quarters to help us staff even more efficiently.
Josh Titillo: In the medical supplies and pharmaceutical areas, over the last several months, we've gone through the process of aligning our pricing with supply vendors with our primary GPO HPG. Based on our previous purchasing history, we're projecting an annual cost savings of several million dollars over the next 12 months with these contracted pricing reductions. In contract services, we continue to renegotiate contracts and, whenever possible, eliminate overlapping contracts at both hospitals and at corporate level and negotiate larger corporate contracts with better pricing to take advantage of our size and scope.
Speaker Change: In the medical supplies and pharmaceutical areas, over the last several months, we've gone through the process of aligning our pricing with supply vendors with our primary GPO HPG. Based on our previous purchasing history, we're projecting an annual cost savings of several million dollars over the next 12 months with these contracted pricing reductions.
Speaker Change: In contract services, we continue to renegotiate contracts and whenever possible, eliminate overlapping contracts at both hospitals and at corporate, and negotiate larger corporate contracts with better pricing to take advantage of our size and scope.
Josh Titillo: For 2025, we've begun our business planning, which is going to occur in the third and fourth quarters. Our focus this year for our hospitals is really, as you've heard, an observation and inpatient focus, as well as creating some incremental service lines as well. Our focus for 2025 is to continue to grow our mature hospitals in ER volume, observation, inpatient, and outpatient, as well as to expand into new service lines that we are piloting at some hospitals now and quickly ramp up our new hospitals.
Speaker Change: For 2025, we begin our business planning, which is going to occur in the third and fourth quarter.
Speaker Change: Our focus this year for our hospitals is really, as you've heard, an observation and inpatient focus, as well as creating some incremental service lines as well.
Speaker Change: Our focus for 2025 is to continue to grow our mature hospitals in ER volume, observation, inpatient and outpatient, as well as expand into new service lines that we are piloting at some hospitals now, and quickly ramp up our new hospitals.
Josh Titillo: We're very excited about the continued growth and future of Nutex, and we're working with our stakeholders to strategically plan out the next five years. The second quarter was great for us, returning our company to profitability, and we're expecting that trend to increase in subsequent quarters as we continue to grow organically in our existing hospitals and in our market. With that, we'll go back to Jennifer.
Speaker Change: We're very excited about the continued growth and future of Nutex, and we're working with our stakeholders to strategically plan out the next five years. The second quarter was great for us, returning our company to profitability, and we're expecting that trend to increase in subsequent quarters as we continue to grow organically in our existing hospitals and in our markets.
Jennifer Rodriguez: On the call, we have Bill Sutherland from Smart Company, who will now ask our team questions.
Speaker Change: With that, I'll go back to Jennifer.
Speaker Change: Thank you, Josh. On the call we have Bill Sutherland from Smart Company who will now ask our team questions.
Bill Sutherland: Thanks Jennifer. Hello everybody, let me start with the population health side. I was wondering what other color you could provide there. I guess this will be for Warren. Thanks.
Speaker Change: Thanks, Jennifer. Hello, everybody. Let me start with the population health side. I'm wondering what other color you can provide there. I guess this will be for Warren. Thanks.
Dr. Warren Hosinian: Hi Bill. Thank you for the question. Good morning, everyone.
Dr. Warren Hosinian: On the population health side of the business, we continue to build on our momentum this year with 10.8% year-over-year growth in the first half of 2024. Our Independent Physician Association, or IPA, in Los Angeles, California, continues to perform well and is generating significant free cash flow. Our IPA in Houston had a strong start to the year, enrolling over 1,900 Medicare Advantage patients. However, we encountered attribution issues, which we are working our way through.
Warren: Hi Bill, thank you for the question. Good morning everyone. On the population health side of the business, we continue to build on our momentum this year with 10.8% year-over-year growth in the first half of 2024.
Warren: Our Independent Physician Association, or IPA, in Los Angeles, California, continues to perform well and is generating significant free cash flow.
Warren: Our IPA in Houston had a strong start to the year, enrolling over 1,900 Medicare Advantage patients.
Speaker Change: However, we encountered attribution issues, which we are working our way through. Essentially, many of these patients were erroneously assigned to competing IPAs in Houston.
Dr. Warren Hosinian: Essentially, many of these patients were erroneously assigned to competing IPAs in Houston. A batch of these patients were reassigned back to us on July 1st, and another batch on August 1st. We hope to recuperate the remaining patients over the next two months. Meanwhile, our new ITA in Florida is growing steadily. Looking forward, we intend to start one to two new IPAs around our facilities every year. For example, we did start an IPA in Phoenix, and we are still signing up primary care physicians and specialists and are gearing up for the Medicare annual enrollment period, which begins in mid-October.
Speaker Change: A batch of these patients were reassigned back to us on July 1st and another batch on August 1st. We hope to recuperate the remaining patients over the next two months.
Speaker Change: Our new ITA in Florida is growing steadily.
Speaker Change: Um...
Speaker Change: Looking forward, we intend to start one to two new IPAs around our facilities every year. For example, we did
Speaker Change: Start an IPA in Phoenix, and we are still signing up primary care physicians and Specialists and are gearing up for the Medicare annual enrollment period which begins in mid-October
Dr. Warren Hosinian: Finally, as Tom mentioned earlier, we have divested one subsidiary already, which was burning cash. And by the end of this month, we'll have divested a second unit, which continues to burn cash. We expect that these two transactions will enhance our net income and EBITDA beginning in September.
Speaker Change: Finally, as Tom mentioned earlier,
Tom Boe: We divested one subsidiary already which was burning cash and by the end of this month we'll have divested a second unit which continues to burn cash.
Tom Boe: We expect that these two transactions will enhance our net income and EBITDA beginning in September . Thank you, Bill.
John Bates: And then maybe moving over to the balance sheet, John, could you give us a little more detail on where debt sits right now?
Tom Boe: Thanks, Warren. And then maybe moving over to the balance sheet, John , can you give us a little more detail on where debt sits right now?
John Bates: Sure, great question, Bill. As you can see on our balance sheet and as I mentioned previously in my financial update, overall bank equity-type debt, both short and long term, went from $42.4 million at December of 2023 down to $40.9 million at June of 2024. It's a slight decrease from year-end, but the overall balance is a relatively small balance of true operating debt for a company of our size. I know that we get questions on why our overall liabilities, as you look on the balance sheet, are $340 million, as that seems like a large number.
Speaker Change: Sure, great, great question Bill.
John Bates: You know, as you can see on our balance sheet, and mentioned previously in my financial update, overall bank equity type debt, both short and long term, went from $42.4 million at December of 2023.
John Bates: down to $40.9 million at June of 2024.
Speaker Change: It's a slight decrease from year-end, but the overall balance is a relatively small balance of true operating debt.
Speaker Change: for a company of our size. I know that we get questions on why our overall liabilities, as you look on the balance sheet, are $340 million, as that seems like a large number. The reality is that $241 million of that $340 million balance, roughly 71%,
John Bates: The reality is that $241 million of that $340 million balance, roughly 71%, relates to operating and financing right-of-use liabilities, which are just future lease payments to a landlord on our hospital facilities, and these are reflected on the balance sheet because the accounting rules require us to aggregate all lease payments that we pay to a landlord for the entirety of each lease term, which might be 15 to 20 years of payments, and then present value back that total dollar amount So that is why you see such a large amount in both the financing and operating variety-use asset accounts, in the case of the right-of-use assets under the total assets and, of course, the right-of-use liability accounts under the total liabilities on the balance sheet.
Speaker Change: relates to operating and financing right-of-use liabilities, which are just future lease payments to a landlord on our hospital facilities.
Speaker Change: And these are reflected on the balance sheet because the accounting rules require us to aggregate all lease payments that we pay to a landlord for the entirety of each lease term, which might be 15 to 20 years of payments.
Speaker Change: and present value back that total dollar amount of those lease payments to the inception of the lease and record a right of use asset and a corresponding right of use liability on the balance sheet for that result, which amounts to the $241 million at June 30th of 2024 you see in our balance sheet.
Speaker Change: So that is why you see such a large amount in both the financing and operating variety use asset accounts.
Speaker Change: in the case of the right-of-use assets under the total assets and, of course, the right-of-use liability accounts under total liabilities.
Speaker Change: on the balance sheet. So most analysts and investors don't view these writing use liabilities as real operating debt. So I wanted to clarify that to you and others who have that question.
John Bates: Yeah, appreciate that color, and then lastly, for me, I was thinking about the back half of the year, and maybe you can remind us as we try to think about it relative to the second quarter. Any cadence or seasonality we should keep in mind.
Speaker Change: Great question. Thank you. Got it.
Collar: Yeah, I appreciate that color. And then last for me, I was thinking about the back half of the year. Maybe you can remind us as we try to think about it relative to the second quarter any cadence or seasonality we should keep in mind. Thanks.
John Bates: Yeah, I can take that. Good question, Bill. So yes, our business does have a seasonality to it. Typically, as summer approaches, volume goes down because people go on vacation, kids get out of school, and so on and so forth, but as kids come back, which is right around now, this time of the year, we typically see an increase in volume from August going forward. So, in the second quarter, half of the second quarter, volume does drop, but then it picks up again around around
Collar: Yeah, I could take that. Good question, Bill. So, yes, our business does have a seasonality to it. Typically, as summer approaches, volume goes down because people go on vacation.
Speaker Change: and as kids get out of school and so on and so forth, but as kids come back, which is right around now, this time of the year, we typically see an increase in volume from August going forward.
Speaker Change: So, second quarter, half second quarter volume does drop, but then it picks up again around this time of year.
John Bates: And then looking into the fourth quarter, you would also get strength as you get into flu season, et cetera, right?
Speaker Change: And then looking into the fourth quarter, you would get also strength as you get into flu season, etc., right?
John Bates: Oh, yes, correct. Not just flu, but COVID is still around. And we're still seeing COVID even in the summertime. Unfortunately. So in addition to the flu, COVID, and whatever new strains of any pathogens that are out there this wintertime, we should be in a good position to take care of our planet. Mm-hmm.
Speaker Change: Yes, correct. Not just flu, but as you know COVID is still around and we're still seeing COVID even in the summertime unfortunately.
Speaker Change: So in addition to the flu, COVID, and you know whatever new strains of any pathogens that are out there this wintertime, we should be in a good position to take care of our patients.
Bill Sutherland: Okay. Thanks, everybody. Appreciate you taking the question.
Speaker Change: Okay, thanks everybody. Appreciate you taking the questions.
Jennifer Rodriguez: Thank you, Bill. All right, we're taking a moment to check the queue for any additional questions. Okay, if there are any additional questions, please send an email to investor@nutexhealth.com, and we will do our best to answer in a timely manner. On behalf of the Nutex management team, we appreciate everyone for dialing in and listening to our second quarter earnings report. A recording of this call will be available on our website for a limited time. Take care, everyone.
Speaker Change: Thank you, Bill. All right, we're taking a moment to check the queue for any additional questions.
Speaker Change: Okay, if there are any additional questions, please send an email to investor at NutexHealth.com and we will do our best to answer in a timely manner.
Speaker Change: On behalf of the Nutex management team, we appreciate everyone for dialing in and listening to our second quarter earnings report. A recording of this call will be available on our website for a limited time. Take care, everyone.
Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.
Speaker Change: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.
Speaker Change: Nutex Health
Speaker Change: Thank you for watching.
John Bates: So for the second quarter of 2024, our total revenue grew 29% or 17.2 million dollars to 76.1 million versus 58.9 million for the second quarter of 2023. Of the total revenue increase, our mature hospitals, which are hospitals that were open prior to December 31 of 2021 and therefore provided two full years of comparative results, increased their revenue by 13.2% for the second quarter 2024 versus the second quarter 2023. For hospital division visits, we saw similar growth during the quarter as they increased by 28% or 9,205 visits to 41,208 visits in the second quarter of 24 versus 32,183 visits in the same period of 23, with the mature hospitals growing at 10% in that second quarter of 24 versus 23.
John Bates: Additionally, the Population Health Division had revenue growth of 15.9% to $8.5 million in the second quarter of 2024 from $7.3 million in a similar period in 2023, despite the divestiture of those two small entities within the division, as mentioned by Dr. Vo previously. In addition to the revenue and visit improvement we have seen in the second quarter of 2024, we have continued to see an improvement in the overall facility and corporate cost structure.