Q1 2025 Nutex Health Inc Earnings Call
[music].
Greetings and welcome to new Techs Health's first quarter 2025 financial results Conference call.
At this time, all participants are in listen only mode.
And the answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero from your telephone keypad.
Please note this conference is being recorded.
Speaker Change: At this time I'll turn the floor over to your host Jennifer Rodriguez Investor Relations for New tax Jennifer you may begin.
Speaker Change: Good morning, everyone and welcome to New Tech Health, Inc. First quarter 2025 earnings call I'm, Jennifer Rodriguez and I'm pleased to moderate today's discussion.
Speaker Change: Thank you for joining us as we review our performance and outline our plans for the future. This call is being recorded for future reference with me today are key leaders, Dr. Tom Barrack, Chairman and CEO, John <unk>, Chief Financial Officer, Dr. Warren Palestinian President and Josh Kelley, our Chief operating officer.
Speaker Change: We'll provide insights into our financial results operational progress and strategic direction, followed by Q&A session.
Speaker Change: Before we begin a few reminders today's discussion may include forward looking statements based on management's current expectations.
Speaker Change: Subject to risks and uncertainties that could cause actual results to differ.
For details please refer to our press release and Form 10-Q filed yesterday and our other SEC filings will often discussed non-GAAP measures like adjusted EBITDA with reconciliation available in our press release and Form 10-Q.
Dr. Kam: With that I'm pleased to turn the call over to Dr. Kam, though our founder and CEO Dr. <unk> the floor is yours.
Thank you Jennifer and good morning, everyone.
Dr. Kam: I am pleased to be starting new techs health results for the first quarter of 2025, which reflects continued progress following a strong 2024.
Dr. Kam: Our mission of delivering accessibility with high quality care in a patient first approach has driven consistent growth and operational stability.
Dr. Kam: Operationally Q1, 2025 show steady progress with total patient visit reaching 48269 patients a 25% increase from 40000 zero 68 in Q1 2024.
Dr. Kam: What's your hospitals achieved a five 3% increase in visits demonstrating sustained demand for our services.
Dr. Kam: Financially Q1, 'twenty 'twenty five delivered solid results.
Dr. Kam: Total revenue reached $211.8 million, a 214% increase from $67.5 million in Q1, 'twenty 'twenty four.
Adjusted EBITDA was $72 8 million up from a negative 400000 dollar from the same quarter last year.
Dr. Kam: Net income attributable to new assets help Inc was $14 6 million or $2.65 per basic share compared to a.
Dr. Kam: Negative 400 million dollar loss or a negative 0.8 cents per basic share in Q1, 'twenty 'twenty four.
Dr. Kam: Our balance sheet remained stable with long term debt actually slightly reduced from I'm, sorry reduced to 27 million from $22 5 million at year end 'twenty 'twenty four and cash in the bank at $87 7 million up from $43 5 million from year end.
Dr. Kam: 'twenty 'twenty four.
Dr. Kam: Our net cash flow from operating activities in the first quarter of 2025, which was 51 million compared to just $3 1 million in the same period in 'twenty 'twenty, four and surpassing the cash flow for the entire year of choice 24.
Dr. Kam: These impressive growth metrics reflect our company wide efforts to enhance patient volume.
Dr. Kam: Increased inpatient admissions.
Dr. Kam: Cost streamlining and optimization and improved revenue per patient through effective revenue cycle management, particularly V or the arbitration process.
Dr. Kam: Every month, we are gathering more data collections, and arbitration wins, which help us refine our accruals and we believe we are getting closer to a steady state.
Dr. Kam: Wow, there's a lot of work that needs to be done we are very encouraged by the positive progress.
Dr. Kam: Let me take a few moments to discuss the arbitration process that we first implemented in July of 'twenty 'twenty four.
Dr. Kam: Overall, it is a small but very important part of our operation.
In the first quarter of 2025, we submitted between 60% to 70% of billable visits through the arbitration portal.
Dr. Kam: We achieved an 80, 80% plus win rate of these submissions, resulting in facility collections, increasing by between 20 I'm sorry.
Dr. Kam: Creasing by between 200% to 300% compare to the initial insurance payments.
Dr. Kam: This means that an independent arbitrator has legally determined that the insurance companies are paying us initial payments that are much lower than fair and reasonable rates over 50% of the time.
Dr. Kam: So far even with these winning percentages, we have not seen any significant payer behavioral changes.
Dr. Kam: We are constantly monitoring legislative and legal development at both CMS and in Congress to make sure. We are on top of any potential changes.
Dr. Kam: However from all our research and discussions with subject matter experts. It appears that the no surprises act and the associated arbitration process is here to stay.
Dr. Kam: One main reason for this is the fact that very few of the charts that are eligible for arbitration actually get arbitrate it.
Dr. Kam: In fact public data shows that only about 5% of eligible charts are actually arbitrate it.
The reason for this include lower the reasons for this low level of arbitration participation include the high monetary cost as well as the extended time.
Dr. Kam: Extended length of time to get paid once a chart goes through the arbitration process.
Dr. Kam: In terms of the arbitration process itself. It is constantly getting more refined day by day.
Dr. Kam: We are seeing some improvements to the arbitration process, including more I D. R e's or arbitrators being added to the list of available arbitrators as well as new guidelines to provide safe guard to the integrity of the system.
Speaker Change: In fact, one legislative development that may be germane to our industry will be bill H R 95 to seven to being introduced by representative Greg Murphy of North Carolina that proposals a penalty of three times the difference between the insurers initial payment and the idea our award amount plus interest.
Dr. Kam: If the insurers do not pay in 30 days as required by the rules and the no surprises Act.
Dr. Kam: This bill will only help us get paid faster and in a more reasonable manner.
Dr. Kam: Looking ahead, we are well positioned for 2025.
Dr. Kam: We continue to expand our micro hospital motto in high demand markets.
Dr. Kam: There is no lack of demand for our innovative micro hospital model as we still received request to build these hospitals monthly from all over the country.
Dr. Kam: For 2025, we have plans to open three additional hospitals.
Dr. Kam: Our pipeline currently extends from 2025 to 228 and has 10 plus projects in various stages of development targeting markets, where our high quality care as needed.
Dr. Kam: Each facility is designed to reduce Mercury Weightroom times increase accessibility and provide tailored medical services.
Dr. Kam: Our company growth strategy emphasizes four priorities Inc.
Dr. Kam: Increasing patient volume.
Dr. Kam: Expanding services to provide care to more observation in inpatient admissions.
Dr. Kam: Optimizing revenue through efficient revenue cycle management and arbitration mainly.
Dr. Kam: Maintaining discipline cost and aggressive debt management.
We feel that as long as we receive fair and reasonable payments from either the arbitration process or from changes in payer behavior are lower cost model will be sustainable and repeatable.
Dr. Kam: Because of our experience of having been through multiple cycles.
Dr. Kam: And our ability to pivot and adapt to any market conditions.
Dr. Kam: And with our balance sheet and a clear pipeline new tax is well positioned for continued sustained growth.
So now I'll turn the call over to Jon Bates our CFO.
Dr. Kam: John.
Dr. Kam: I think.
Dr. Kam: Its financial performance for the first quarter of 2025, which reflects another solid quarter with consistent growth.
Dr. Kam: I'll compare some key financial metrics for Q1 of 2025 versus the same period in 24, highlighting percentage changes across areas such as revenue adjusted EBITDA net income EPS and other indicators as detailed in our Form 10-Q filed yesterday.
Starting off with total revenue. So total revenue for Q1 of 2004 as Tom indicated did reached $211 8, million% to 214% increase from $67 5 million in quarter one of 2024.
Dr. Kam: The Hospital Division drove most of this growth generating $203 9 million, which is up 240% from 60 million in the first quarter of 'twenty four with 105 million tied to arbitration efforts through the independent dispute resolution process.
Dr. Kam: Of that 105 million in arbitration revenue 60 million related to data service for the first quarter of 'twenty five 'twenty 6 million related to data service for the fourth quarter of 'twenty, four and $12 million related to the dates of service for the third quarter of 24, following the remaining 7 million relating to periods prior.
Dr. Kam: The third quarter.
Dr. Kam: Of the total hospital division revenue mature hospitals, which are hospitals operational before December 31, 2022, it's 186.5% revenue increase for the first quarter were 25 versus the same period in 'twenty four.
Dr. Kam: And for the Hospital Division visits we did see growth as well during the quarter as they increased by 25% or 8201 visits up to 48269 visits in the first quarter of 'twenty five versus 40068 visits in the same period in 'twenty four with mature hospitals growing at.
Tom: Five 3% as Tom indicated before in the first quarter of 'twenty five versus the same period in 'twenty four.
Tom: And Additionally, the population health Division revenue did increase by roughly $400000 or five 4% up to $7 8 million in the first quarter of 'twenty five from $7 4 million in the same period in 2024.
Tom: Now, let's discuss kind of the overall facility and corporate costs and the continued improvement in that area.
Tom: Total facility level operating costs and expenses increased $36 2 million during the period, but only represented 44.1% or $93 5 million of total revenue for the first quarter of 'twenty five versus 84, 9% or $57 3 million of total revenue for the same.
Tom: Period of 24.
Tom: Of the $36 2 million increase in Davis, and these facility operating costs and expenses $26 3 million related to arbitration costs for you for the additional arbitration revenue recorded during this period, which approximated 25% of that incremental addition of revenue I mentioned previously.
Tom: As a result of the revenue and facility cost improvements. Our 2025 first quarter gross profit was $118 3 million or 55, 9% of total revenue.
Tom: As compared to 10.22 million or only 15, 1% of total revenue in the same period of 2024, which represented a thousand and 65% improvement.
Tom: From a corporate and other costs perspective, the general and administrative expenses as a percentage of total revenue for the first quarter were 25 decrease down to four 7% compared to 12, 8% for the first quarter of 24, showing our continued focus on controlling costs, while improving revenue.
Tom: Additionally, on our first quarter 2025 income statement, you will see a line a line item for stock based compensation expense and its been there.
Tom: This year and last year and before but with the amount for the first quarter of 2025 being $36 1 million.
Tom: Most of that expense as explained in our first quarter 2025, 10-Q within note 10, but within that no. We explain that under the terms of four separate contribution agreements where hospitals that were deemed to be underdevelopment hospitals, when new techs went public back in April of 2024 at the <unk>.
Tom: Point at which each of the hospitals have been open for two full years. They are eligible to receive a one time additional issuance of common company common stock based upon the earnings of the hospital in the second year of their operations and that second year is which we didnt note to be the period of what the earn out period is.
Tom: So with four of these hospitals.
Tom: And the earn out period currently we are accruing for the potential earn out for each in the first quarter of 2025 that accrual amounted to $36 million.
Tom: That will be true it up each quarter until we get to the end of your two of each hospital.
Tom: After opening and at which time a final calculation will be done and payment will be made 100% in common stock and recorded as noncash stock compensation expense in our financials, which is how it's presented currently.
Tom: In the first quarter of 2025, one of these four facilities did reach the end of their earn out period, leaving the other three to complete their earn out period by the early part of the third quarter of 2025.
Tom: The good news is that after these limited number of legacy hospitals have matured there will not be a significant noncash earn outs in the future.
Tom: Yeah.
Tom: Now lets talk about operating income operating income, including the negative impact of this same $36 1 million in noncash stock based compensation expense for the first quarter twenty-five was $72 2 million compared to $1.5 million.
In Q1 of 2024.
Tom: Representing a $70.7 million improvement quarter over quarter.
Tom: Net income attributable to new Tech health was $14 6 million for the first quarter of 'twenty five again also including the negative impact of about $36 1 million noncash stock based compensation expense that we talked about previously.
Tom: And the comparative net loss attributable to new tax was 400000 for the first quarter of 'twenty four showing a 15 million dollar improvement period over period.
Tom: From an earnings per share perspective, our diluted EPS for the first quarter of 2025 was $2.56 a share compared to a loss of eight cents per share in the first quarter of 'twenty four showing at $2 64.
Tom: Sure a per share price increased period over period.
Tom: Now adjusted EBITDA attributable to new tax increased $73 2 million from a loss of 400000 in the first quarter of 2024 to $72 8 million in the first quarter of 2025.
Tom: One small change in our calculation of adjusted EBITDA This quarter, which we will continue.
Tom: Using as we go forward with that we now include in our calculation the impact of cash rents paid.
Tom: That fall under our right of use asset financing accounting treatment for.
Tom: For our building leases for all periods presented so in our previous treatment of these rent payments within our calculation the rent paid where.
The cash rent paid impact was not being reflected as a reduction in this calculation. So we felt it appropriate to include it.
Tom: Finally, our balance sheet remains very strong with cash and cash equivalents at March 31, 2025 at a record high of 87.7 million up $44 1 million or 101, 1% from $43 6 million as of as of December.
Tom: <unk> 2024.
Tom: Our continued success with the collection efforts related to the arbitration process is allowing us to get paid more fairly for the services. We provide it was obviously a big part of of this success with regard to the accounts receivable our balance at March 31, 2025 was 295 million an increase of just under $63 million.
Tom: From 232 million at the end of the year of 2024.
Tom: Give you some perspective of that 295 million, a or $199 3 million or roughly 68% relates to visits in the arbitration process, which was similar to our position at the end of 2024.
Tom: And during the first quarter of 2025, the company collected around 140.4 million in cash of which 103.7 or approximately 45% of that related to a R. As of December 31 2024.
Tom: Regarding cash flow Tom mentioned this earlier, but net cash from operating activities was very strong this quarter at $51 million.
Tom: Which was an increase of $47 3 million from the same period in 2024.
Tom: On the liability side, our total bank and equipment type debt increased by merely 1.8 million to $43 2 million at March 31 of 2025 from 41.4 million at December 31, 2024, with the majority of this debt as we've talked about before relating to equipment loans that are hospitals for such item.
Tom: As the Mris X rays ultrasound either.
Tom: So like C T machines.
Tom: Outside of this normal 40 plus million of bank <unk>.
Tom: Equipment type that the only other items of materiality that looked like that on the balance sheet or the liabilities related to financing and operating lease liabilities, which are just the future lease payments due to our landlords at our hospitals.
Tom: We've discussed this in previous periods, but I just wanted to walk through again, so that will remind people how this and what this really means because these are reflected on the balance sheet because the accounting rules require us to aggregate all lease payments that we pay the landlord for the entirety of each lease term, which might be 15 to 20 years of payments and then present value that tone.
Tom: The lease payment back for each all.
Tom: All the way from inception of that lease and recorded both a right of use asset and a corresponding right of use liability on the balance sheet for that result.
Tom: As a result on our balance sheet at March 31, 2025, the net asset balance for the operating and financial assets amounted to $243 7 million, which is about 32% of our total assets and the net liability balance for the for the operating and financing right to use liabilities amounted to $288 seven.
Tom: Which is 61, 2% of total liabilities. So just wanted to provide some perspective as most investors and analysts don't view these right of use asset.
Tom: Liabilities as real operating debt, so I wanted to kind of clarify that for you.
Tom: With all this said our balance sheet remains very solid and we continue to strengthen with our positive operating performance.
Tom: Current financial position is.
Tom: <unk> has put us in a great position to execute on all of our initiatives and our 2025 operating plan, including the opening of three new hospitals late either later this year as Tom mentioned earlier.
Warn Husseini: With that I'll now turn it over to warn husseini.
Tom: Born.
Tom: Thank you John and good morning, everyone. Thank you all for joining US today I'm pleased to provide an update on new Tech health population Health Division, which supports our commitment to value based care.
Tom: As a reminder, our overarching strategy at New Texas Health is to build an integrated health care delivery system, combining hospital and medical groups also referred to as I T E.
Tom: Alright, either comprised Theres networks with primary care physicians and specialists located around our facilities.
Tom: The ipas enroll patients from different health plans and are responsible for the total care of these patients.
Tom: By combining hospitals and IPA, we believe we'll be able to deliver care that is more coordinated cost effective and with better outcomes for our patients.
Tom: Our IPA.
Tom: And patients to our hospital and our hospital deliver more efficient and cost effective care, reducing the medical loss ratios in our I T H.
Speaker Change: This is a long term strategy that will take several years to bear fruit, but we are in this for the long run at New Tech health.
Speaker Change: We are pleased to report a strong start to the year with first quarter results that reflect the continued momentum behind our strategy. We currently have over 40000 patients enrolled in our I T.
Speaker Change: Various risk based arrangements.
Speaker Change: Of note I am happy to report that we now have almost 1400 Medicare advantage members in our Houston physicians IPA.
Speaker Change: In Q1, our IP generated $7 $8 million in revenue.
Speaker Change: A five 4% increase from $7.4 million in Q1 2024.
Speaker Change: This is despite the fact that we divested two non core assets in mid 2024 that were generating revenues, but had operating losses.
Speaker Change: Operating income improved to zero point $1 million from 0.3 million dollar loss in Q1 2024.
Speaker Change: Margins continued to be moderated by ongoing investments in new markets, such as Houston, Phoenix and Dallas.
Josh <unk>: With that I will now turn it over to Josh <unk>, our Chief operating officer.
Josh <unk>: Thank you Warren and good morning, everyone I'm pleased to share New Tech sales operational results for Q1, 'twenty twenty-five, which demonstrate our ability to deliver high quality care, while achieving steady growth and cost discipline. Our micro hospital model centered on patient needs continues to perform very well and I'll discuss some volume trends cost management.
Josh <unk>: Patient acuity and the advantages of our approach.
Tom: Total patient visits as Tom mentioned reached 48269, 25% increase from the 40068 in quarter, one 'twenty 'twenty, four which reflects growth in both new and mature hospitals mature hospitals grew by five 6% in the first quarter. This growth reflects our leadership team's efforts and community engagement business.
Tom: Development, and adding specialists to manage more complex cases by increasing observation inpatient stays to meet the community need our capacity provide observation inpatient is a key strength observation stays help avoid unnecessary admissions while inpatient services ensure comprehensive care for appropriate cases this approach in Peru.
Tom: Outcomes and patient satisfaction by offering.
Tom: <unk> high quality care, our model reduces emergency room wait times and provides personalized services positioning new techs as a trusted provider in the communities we serve.
Tom: Cost discipline for us remains a priority excluding arbitration costs operating costs remained stable despite higher volumes and new hospitals this year.
Tom: Labor costs increased 29% from 27 million to $34 9 million, which was comprised of increased payroll and benefits for opening four new hospitals are higher E. Our volumes and an increased volume of higher acuity observation and in patients overall.
Tom: Overall labor costs continue to be a much smaller percentage of net revenue than most hospital companies at 16.4% for the first quarter, which exemplifies our lean high quality model.
Tom: Supply costs continue to be a very good story for us supply cost decreased 28% from $5 3 million $3 8 million in the quarter due to our 'twenty 'twenty four G P O and vendor realignment.
Tom: Even while we are even while we opened four new hospitals in the year we.
We will continue to see supply cost savings throughout 2025 as stated in the third quarter 2024 earnings call were continuing to explore technology investments, including AI for patient checking staffing optimization provider note, writing and coding accuracy to improve productivity and efficiency. These tools will help further streamline operations and.
Tom: In health care delivery and productivity this year and going forward.
Tom: We continue to believe our micro hustle model is the future of health care. This model provides sufficient access high quality concierge care, a lower cost structure in a more intimate and personal life setting versus the large general hospitals. We believe the micro hospital model will continue to grow rapidly over the next few years and in the industry.
John: We've seen it in our existing hospitals when patients have a choice they prefer fast high quality personalized care with our model and profitability. We are well positioned to continue to continue our growth and progress in the coming years back to you John.
John: Thank you Josh and thank you to Tom John and one for that that eight well now move to the Q&A operator, please provide injection.
Thank you.
Speaker Change: If you'd like to ask a question at this time you May press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue.
John: First start to if you like to withdraw your question from the queue.
John: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
John: One moment, please pull for questions in a star one thank you.
John: Okay.
Speaker Change: Thank you and our first question comes from the line of Bill Sutherland with Benchmark Company. Please proceed with your questions.
Bill Sutherland: Thanks, and hi, everybody and congrats on all the progress. So I guess John wanted to think about you said that you're getting a lot more clarity on the you know the arbitration.
Speaker Change: Process as far as how the cash comes in and it looks like your metrics are holding steady in terms of.
Bill Sutherland: You know the submissions and the success rate.
Bill Sutherland: So should we think about <unk> as something that is essentially repeatable in the following quarters. This year I mean, you do have the viewpoint here at the midpoint of two Q. Thanks.
Bill Sutherland: Yeah, Great question, obviously, we don't we're not we're still in the middle of the second quarter, Rutgers speak much to that but what I can tell you is.
Bill Sutherland: And this at year end when we went through this first discussion around what was going on with arbitration that was sort of early stage. When we felt like we had an understanding of the of the early on payments that were coming in the realization of of what was happening because we had a little more time to hold off as we're going through year end going into the early March.
Bill Sutherland: Im period to see.
Bill Sutherland: How the how the true realization was happening and so that's when we created the receivable we had at the end of the year and I think what you can see from this Huawei does it going to take time to get to the point of normalizing you know after one quarter, we're starting to see a little more of what we would expect I think I mentioned that I think it's really going to be two quarters too.
Bill Sutherland: It kind of really prove this out.
Bill Sutherland: But.
If you if you look at the raw numbers at you think about how we talked about at the end of last year compared to now when we're looking at where the reimbursement rates were and you saw back then at the end of 'twenty. Four if you looked at the full year was into 'twenty seven 'twenty 'twenty 700 dollar Mark but that was really only with six months of the arbitration and it's so new.
Bill Sutherland: Now we're moving forward.
Bill Sutherland: And you can kind of continue and think about okay for the quarter of 2025, where the reimbursement as you looked at it kind of per visit was a little over 4000 over $4200.
Bill Sutherland: That's that's a guide, but I think you need to look back at more I believe I'd say the last nine months from July through.
Bill Sutherland: The first quarter, if you look at the nine month number it's in the 3800.
Bill Sutherland: Area. So I think when you're talking about normalization of revenue, it's starting to work its way down based on assuming similar acuity.
Bill Sutherland: Certainly similar level of volume, which we've had some improvement there. So I think it's starting to work itself out but to predict and say that this quarter is representative of what would happen in the next four you know the chute there theres seasonality and also I think that we're still kind of getting the complete information now that where we've been in this.
Bill Sutherland: We started in July, but really we didn't see activity until middle of the fourth quarter. So we've really only had about four four and a half months of cash coming in so I think as we see the second quarter and add another quarter to it I think will really define that but generally it's trending in that direction, but I still think we're I don't think we're at a.
Bill Sutherland: At a steady state yet so we're gonna have to watch that closely over the next quarter or so well yeah I was kind of thinking about it in terms of how it laid out.
With what you realized on in terms of claims that were actually in the first quarter and then what came in from fourth quarter, and third quarter et cetera, and whether that sort of pattern feels like it.
Bill Sutherland: It's it's it's something that is going to be you know.
Follow another worried about yeah, Yeah. This is pedro and and so and so you can't say I, obviously know was looking for.
Bill Sutherland: We understand the vagaries of all of this but that's kind of a pattern to think about in terms of the trail. If you will yeah, absolutely that's all yeah.
Bill Sutherland: I mean, it's a good point so the trending as you mentioned about the pattern. What we can say as you know we put out numbers at the end of the year just like we put out numbers here I can tell you that the numbers at the end of this year I feel like they were representative of what what was happening and what is expected to happen and we've continued that into the first quarter. So.
Bill Sutherland: You know barring major changes other than the the other independent variables that affect revenue I mean, I think the trending is is solid and I mean this engine. The process that we go through has been in place since even before we went public we set up just the regular accrual process of our revenue and all we do.
It was add on this feature and the engine is there and we're feeding as we talked about 60% to 70% of our visits are rolling through this process and it's on a consistent basis still happening and in that fashion and we're still seeing the same level of of success over 80% or more so.
Bill Sutherland: Based on that the trending has been solid and we hope to you know watch that continues to move forward.
Bill Sutherland: Great.
Bill Sutherland:
Speaker Change: And you did just to reaffirm something I've wanted to make sure I understood. The under the three remaining underdeveloped hospitals.
Bill Sutherland: Receiving.
Bill Sutherland: Come on their model.
Bill Sutherland: That is kind of run through <unk>.
Bill Sutherland: Third quarter, and then they'll be done correct Yep. That's when our remaining three are finished by the early part of the third quarter.
Bill Sutherland: And then with the cash growing the way. It is I'm just curious as you guys think about your capital deployment plans.
Bill Sutherland: And how you may be prioritizing going forward.
Speaker Change: Yeah, that's a great question and I know, Tom can speak more to that too as well, but I mean cash has been strong we actually have sort of an investment approach internally for the in the short term as we look at at the different opportunities that are out there in particular I mean, certainly we're always looking for continued growth and opening up with cities, which does take you know.
Speaker Change: He's talked about he's got several in the pipeline. So that's a big piece of potentially a opportunities for us. So we could we could increase that rate. If we wanted to we also and that was as Warren mentioned on the population health side, there's opportunities to invest in that side of the business as well as well as you know potentially even looking at other similar.
Speaker Change: Smaller hospitals that would fit our lay out to basically potentially add existing businesses that maybe aren't performing as well and then adding the features and functionality that we have to it in and getting off the ground a little bit quicker. So there's opportunities in kind of those three areas. Tom you can.
Speaker Change: Talk more about others.
Tom: Yeah no. Thank you bill. Thank you for following us and that and I think of recovering is but like John said, where we're very fortunate to be in a position to have a lot of cash in the books, obviously, we're going to be very conservative with our cash and and use it to maximize shareholder value and so we have a lot of options.
Tom: The good news, though is that opening one of these hospitals as you know is not that capital intensive.
Tom: And so even if we open these three hospitals. This year, we should still have a lot of cash left over and so were still discussing internally on.
Tom: On how to best deploy that cash.
Tom: And to maximize shareholder value.
Tom: Great.
Tom: I'll jump back in queue, let other people get in.
Speaker Change: A question thanks, guys.
Tom: Bill.
Speaker Change: Our next questions are from the line of Thomas Mcgovern with Maxim Group. Please proceed with your question.
Speaker Change: Hey, guys congrats on the quarter, another strong performance, especially underscored by our by the collections on arbitration. So that would be my first question is related to <unk> during the quarter, a little bit over 40% of the arbitration related revenue was related to dates of service prior to the first quarter right. So if we look back between.
Speaker Change: Fourth quarter and this quarter you were.
Recognize around $95 million and four accused of what I'm getting at is.
Speaker Change: How have you guys started to look at working through prior quarter dates of service revenue.
Speaker Change: Have you guys worked through most of what you recognized for the fourth quarter and can we expect the first quarter to be similar to the fourth quarter as of the end of the second quarter. So you guys recognized 50 million sorry to kind of clarify it is recognized $50 million from from <unk> would it be reasonable for us to assume you guys will be able to recognize somewhere around the $35 million.
Speaker Change: In the second quarter kind of consistent with what you did in <unk> I.
Thomas Mcgovern: I mean, it's a great question Thomas the the reality is.
Thomas Mcgovern: I say, we don't know as we watched the process I can tell you that.
Thomas Mcgovern: As I mentioned before I think the ironing out of the realization piece, assuming steady state is starting to become clearer and clearer which allows us to.
Thomas Mcgovern: In the period that we're in.
Thomas Mcgovern: Improve the accuracy of the revenue that we're recording right. So I think we've done a really really good job in and quite frankly, even prior as I mentioned before but part of the arbitration. This is the way we've captured revenue to the best the best recent historical data assuming things remain consistent for similar acuity.
Thomas Mcgovern: Similar insurance payers similar location right, we're doing it down to the granular level. So what happens is as we see things like Okay. Maybe there was an additional amount in the current quarter or current month that may be related to a previous month or previous quarter. What that does is it helps us update the model and it could be up or down in this case.
Thomas Mcgovern: There's clearly, it's it's a little bit higher but I think it is helping us to better align better identify and ends and better predict really what's going to happen I think we've done a really good job up to this point and we're continuing to get better and better but a lot of it depends on the timing of cash coming in and.
Thomas Mcgovern: Each of the different payers right has we have different situations with each one some might pay slightly quicker some slower and there's all sorts of individual situations. One by one so but on a consistent trend basis, I think that you know previous period component.
Thomas Mcgovern: Should continue to work its way down, but that's always going to be there because you're you're taking someone's walking in the door today and potentially if it goes through the arbitration process it could be five months before.
Thomas Mcgovern: Before you ultimately get final payments, so you're anticipating will Ya man you might get you get a piece of that in 30 to 45 days, which is how it works and then you go into the process and then you got to wait four months after that to potentially get paid so it'll it'll just be watching that and managing at in each of the different watching it closely with different payers in the different you know love.
Thomas Mcgovern: As of acuity and also the different locations and different states that we're in so long answer to your short question is I can't predict exactly what will be to expect say in the second and third quarter, but I can tell you that I feel like we're getting tighter and tighter on the realization based on the more data that now we're getting that we've now had a solid.
Thomas Mcgovern: If you think about the first payment coming in in August September October of last year now we've got six seven months of payments and by the time, we close out second quarter it'll be up to close to nine months of payments on this process. So I think we'll have a much better much better feel for it but I think you see the trending and I think.
Thomas Mcgovern: You have an idea of kind of where it's heading and I think you're you're on target with with your thought process.
Thomas Mcgovern: Understood I appreciate that color.
Speaker Change: How should we be looking at the addition of new eligible arbitrators do you think this could accelerate the arbitration process or any way shift your strategy for submitting claims.
Speaker Change: Question I, we believe ultimately that will only help us right because I think one of the things that we've we've been made known we've been to a couple of different seminars speaking at Selman listening to other groups, including a couple of these idea or ease in particular, a couple of the larger ones along with the government and they all indicate that the most important thing that needs to have.
Speaker Change: Captain is that they need to find some additional.
Speaker Change: Arbitrating groups that can can be certified and come in and help with some of the backlog because there's no doubt that the backlog is there and you can see it in an industry data as well we see it too. So there they have been picking that pace up a little bit several of them have done a great job. There's a couple that have lagged and there they're actually being communicated with to try.
Speaker Change: To help them get resources and improve on that plus then they've added potentially as you mentioned, adding a couple more I think adding a couple more will only help the situation and we'll have to watch their their impact and their communication are in the process as we start using them because each one is a little bit distinct and different and so we have to kind of watch there.
Speaker Change: Their approach to how they handle the information that we provide them when it comes to their resolution of who you know who wins or who loses but we think it.
Speaker Change: It will only be a positive as you move down the road as they add more and more of these in and they are getting better at it which is good in most of them are adding resources as we speak.
Speaker Change: Understood. Thanks for that and then last question then I'll hop back in queue, just looking at the acuity mix you know one of the largest drivers of mature hospital growth as well as the increased inpatient and observation visits.
Speaker Change: So you guys have added specialists to kind of facilitate this and continue to drive growth in that.
In that regard, but I'm just curious do you think that you are now operating at kind of a steady run rate in terms of acuity mix and.
Speaker Change: Inpatient volume or do you expect that to continue to ramp as we move through 2025, and if you do expect it to continue to ramp maybe just touch on some of the key points that are gonna do you expect to drive continued growth in acuity or at high level acuity inpatient and observation visits.
Speaker Change: Yeah, Hi, Thomas This is Tom first of all thank you for following us and think of recovering us. So I'll elaborate I'll elaborate a little bit on that question and then I'll pass it over to Josh, but the way to think about this is that we still have a very high capacity are in our inpatient capacity. So in other words.
Speaker Change: As we ramp up these hospitals to be able to admit more patients and that includes getting more specialists on getting the proper equipment getting.
Our software technology, so on and so forth, we feel that there's room to grow not just on the volume side on the on the ER side, but also on the inpatient side.
So Josh do you have anything else to add from that standpoint.
Josh <unk>: No not much.
As Tom said, we do have bed capacity and we are increasing our reputation.
Josh <unk>: Sure.
Josh <unk>: To take care of most patients.
Josh <unk>: But the specialist component is a big big component, adding cardiologists neurologists and other specialties has helped us take care of more patients more observation. So we expect that to grow we haven't put out guidance on that yet, but that will continue to grow over the next coming quarters.
Speaker Change: Understood I appreciate that clarity I'll hop back in queue.
Speaker Change: Thank you next question is from the line of Jean Manheimer with Freedom Capital. Please proceed with your question.
Jean Manheimer: Oh, Thanks, good morning, congratulations guys another above average quarter I appreciate it.
Speaker Change: Thank you gene.
Jean Manheimer: Youre welcome.
The arbitration payments right that we've been discussing.
Jean Manheimer: When you get those in a successful dispute.
Jean Manheimer: Is there a penalty payment that you are receiving in that.
Jean Manheimer: That you would not otherwise see that it was.
Jean Manheimer: The Bill was paid right. The first time, and I guess, where I'm going with that question is.
Jean Manheimer: Overtime right arbitration revenue moderates.
Jean Manheimer: And perhaps it's offset by higher base reimbursement does that make year over year comps tougher right when we get out to say 2026.
Jean Manheimer: Yep. So gene great question on the first piece in in the arbitration concept and what how that process works right right. Now there is no quote unquote penalty for.
Jean Manheimer: For them to pay pay timely not are not pay timely I know Tom indicated one of the actually the Murphy Act and one of the components of that listed and it hasn't there somewhat punitive a penalty concept that I think is important and something that if if and when it get that that gets put in will significantly.
Jean Manheimer: Improve the timeliness of payments. So first question I answered your first question is.
Jean Manheimer: It should not have in our numbers, it's basically us providing the support forever that each component of the visit itself supporting the value of the services that we're providing.
Jean Manheimer: And that's what's going on to the arbitrator now there is the ability you'll see in the in the NSA. It specifically says. This you can include cost to collect when you because you have to go to this process and you haven't put you just have to get lawyers or or just spend time and effort. So you are able to include some.
Jean Manheimer: Type of cost component. In addition to the services that you have which in a lot of cases, you know that is included in and the.
The ultimate argument that ultimately goes to that arbitrator and part of the 80 plus percent wins that we do get but there is no quote unquote penalty as you as you asked at this point for them not paying or not paying timely. So I guess the answer based on that then you asked about how that would affect 'twenty six I don't think there would be any.
Jean Manheimer: <unk> necessarily impact say in future periods based on that changing other than certainly if they do put in place are the action for a punitive measure to the for the payers if they don't pay timely than they will that's certainly will increase the ability to have additional revenue, but at this point that is not the case in the way we do.
Jean Manheimer: Our current process.
Speaker Change: Okay. Thank you John for that color and my follow on is really more in the core business. You know you cited a five 3% increase in AR in mature hospital visits which is strong I'm. Just wondering if there was any element of outsized seasonality there and other.
Words was was the flu season worse. This Q1 than last Q1, and therefore, maybe play the bigger factor.
Speaker Change: Yeah hygiene I could answer that and maybe Josh can chime in.
Speaker Change: Jim. Thank you once again for for following us and covering US. So this year's flu season was quite interesting. So what we saw was that the flu season started later I would say mid December and they progressed through February and maybe even early March and and it was not just a flu bug.
Speaker Change: There was RSV.
Speaker Change: Obviously COVID-19 also.
And some Oh Gee I bugs that was also involved so the point is that yes. This flu season was a little bit longer than last year, but but even then if you compare it quarter to quarter year over year and not successive quarter, we still achieve a 5% increase and so that I think that that's basically to Josh is point that.
Speaker Change: The communities are more aware of our services, we still provide fence that fantastic services to the community I mean, if you take a look at any of our say Google review week, consistent four and a half to five stars, which is very unusual in health care and so as the first that we.
Speaker Change: Continue to operate in each community that the more the word gets out of a greater hospitals are so that more patients continue to come.
Speaker Change: Any more color on that.
Tom: Yeah Tom.
Tom: Well said couple of things one about a year and a half ago, we really give credit to our teams.
Tom: Really started I think business development effort, which continues to bear fruit. Our challenge really is getting the word out on our hospitals, we feel that we have the best service in the industry. So once a patient comes in they see how great. It is to get the concierge care, they're going to come back to kind of bring their family back. So we continue to try and get the word out to educate the <unk>.
Tom: And are you on all of the services, we provide and I think that's why you're seeing the continued mature household growth as well as increased observation and in patients.
Speaker Change: Yep, that's great congratulations on that progress and if I, if I could just squeeze one more in the three new hospitals plan. This year can you just share maybe the timing of when you think those will open. Thanks.
Speaker Change: Yeah hygiene, so I could elaborate on that so are all three hospitals this year will be our third and fourth quarter.
Speaker Change: All three of them aren't going to be in Texas. One of them is going to be in Houston, where where our corporate office is so it's essentially our backyard. The second hospital is gonna be in San Antonio.
Speaker Change: And the third household is going to be in Sherman, Texas, which is located in north of Dallas on the Texas and Oklahoma border. So all three are very fast growing areas with a very good job growth are.
Speaker Change: For each of our communities and we think that we could oh could make a difference by bringing our brand of medicine.
Speaker Change: Three of those areas this year.
Speaker Change: Oh, that's great thanks, everybody and congrats again.
Jean Manheimer: Thank you gene.
Speaker Change: Our next question is from the line of Joshua Cohen with Westbury Capital. Please proceed with your questions.
Joshua Cohen: Hi, good morning, Thanks for taking my questions and congrats on the strong quarter.
Joshua Cohen: Going back to the discussion around the excess cash could you talk through the options you guys are considering and whether our capital return could be in the cards.
Joshua Cohen: Yep, absolutely in addition to the things that we talked about earlier, thanks, Josh for the question.
Joshua Cohen: We're always looking at whatever is going to make sense from a shareholder perspective to add value. So we have discussions about whether there'd be.
Joshua Cohen: The share buyback could certainly happen, we've talked about things like.
Joshua Cohen: Dividends at some point down the road, whether that would happen anytime soon but certainly along with those we as we mentioned earlier certainly the investments in our current hospitals and maybe growing that pipeline a little bit quicker the.
Joshua Cohen: The population health side, which I think is a great opportunity there to take on some off some situations that will help us really add value quickly.
Tom: So those are a couple of different areas, Tom you can add to that.
Thomas Mcgovern: Yeah, no. Thank you Josh for following us so to.
Speaker Change: To John's point, we have a lot of options, obviously, we need to be very cautious with our cash and maximize shareholder value, but the way that I see it I mean, obviously, we could talk about dividend share buyback and all of those are on the table Oh, but a more interesting way of looking at this is maybe to increase.
Speaker Change: More in our development pipeline and increased growth and so theres several levels for that I mean, the first lever is adding more de novo hospitals.
Speaker Change: But the problem with that is that it's all development in construction, so the and by what what I mean is that.
Speaker Change: Even if you want to grow faster.
Speaker Change: <unk>.
Speaker Change: It still takes about two years to build these hospitals from ground up because these hospitals do not exist.
Speaker Change: Were the pioneer in the country and in building these hospitals.
Speaker Change: And so unless we want to build a hospital, we can't operate the hospital and so you have to build it from the ground up.
Speaker Change: You can tell are building. These developing these is a challenging not that we can't do it. It's just that there's only a certain amount that you could do even.
Speaker Change: Even if you want to start now.
Speaker Change: And so the second question is is there M&A.
Activity or is there acquisition opportunities once again from a hospital standpoint, there's just no hospitals out there to be bought so even if we wanted to buy a hospital. They don't exist unless you buy these very massive big.
Speaker Change: Traditional hospitals, but then a lot of these hospitals may have failed for some reason and are they don't have the same sort of a model that we deal with the smaller and less number of beds and more cost efficient.
Speaker Change: And so that's that's a little bit of a limitation and so the third lever is to maybe.
Speaker Change: <unk> increased our number of ipas as to what Warner was talking about but but.
Warner: And that is a possibility and currently we have four ipas and Houston and Phoenix, Los Angeles, and Miami, and we have 24 hospitals.
Warner: And so the idea is that if you could put an IPA around each of the hospital that may be doable, but once again.
Warner: We don't want to.
Warner: We need to be very.
Warner: Prudent in our spending.
Warner: And and only look at certain businesses that will have a a good correlation as well as benefit our current hospital.
Warner: And so.
Warner: But looking at all options at this point.
Warner: Okay, Yeah, thanks for that and just one additional follow up.
Warner: And I appreciate that you guys were only halfway through the quarter here, but.
Warner: On the accounts receivable curious if you could provide any additional color on both the kind of the confidence for collection and then also that the expectations for pacing there.
Warner: Yeah, I mean as I.
Warner: Good question, Josh is as I kind of talked about earlier on one of the previous questions. When I think about a R and I think about where we were at the end of the year and doing based on early information on how realize ability whats happening through then.
Warner: And then now watching it after first quarter.
Warner: Pretty confidence much more confident in it.
Warner: And what we what we had at year end, which is fantastic and that is continuing into the first quarter because I think the trending has been.
Warner: Pretty consistent and as we watch it of course payers can change their behavior or situations can happen, but I mean, I think the timelines that it takes to collect in.
Warner: In the current environment that we're in.
Warner: Somewhere on average all in you know, it's it's four months, but you get that piece of it doesn't go through arbitration coming and just like it did before and that normally would come in and 60 to 70 day Mark If you remember back in the 2023 or even to the early 2020 for most of that is that our collection time period for a lot of it.
Warner: It was in that 60 to 75, a day, but that was pre arbitration and then now the arbitration clearly has extended that because it can take from date of walking in the door.
Speaker Change: Uh huh.
Speaker Change: Up to you know five plus months for the final payment to come in and I used to get the first payment after that 30 to 45 days in and then you just have to wait from there. So long introduce short question is you know the average of that comes to you know somewhere in the 120 day Mark is what we're seeing overall blended and we'll watch it closely.
Speaker Change: With some of that coming in in that normal 60 to 75 day period, and and you know what a larger chunk of the arbitration coming on the back end you know between the four five and sometimes slightly longer than five month process to get get paid from day. One so hopefully that helps but I think what we were anticipating at the end of the.
Speaker Change: Year.
Speaker Change: We were sort of seeing that early on with limited numbers.
Speaker Change: Continued into the first quarter and I think that that's substantiated kind of where we had finished the year and I feel.
Speaker Change: Pretty confident that what we have sitting at the end of of March is continuing on that that run rate and you know.
Speaker Change: Barring any major changes that the the time period to collect all of this will.
Speaker Change: You know continue to stay on the kind of period timeline that I described.
Speaker Change: Got it thanks for that and congrats again on the <unk> shrunk order.
Speaker Change: Thanks, Josh.
Speaker Change: Josh.
Speaker Change: Thank you.
Speaker Change: This now concludes the question and answer session I'd like to turn floor back over to Jennifer to recast for closing comments.
Speaker Change: Thank you all for her valuable questions and answers.
Speaker Change: Joining us today, if you have more questions. Please email us at investor at <unk> Dot Com and we'll get back to you.
On behalf of any Tech management team. Thank you all for joining us for our first quarter 2025 earnings call. We've covered a lot ground strategy challenging and our vision and we appreciate your time okay.
Speaker Change: A recording of this call will be available on our website for a limited time cause feel free to read that.
Speaker Change: Take care, everyone and we look forward to keeping you updated on our journey.
Speaker Change: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference.