Akumin Inc. (NASDAQ:AKU) Q4 2022 Earnings Call Transcript

So, I would say is it back to normal, but I think we would €“ I would say, we are actually returning back to normal. Rishi, one additional point I would make is exactly right on the volume beginning to return to normal. As the labor has come back, while the costs may not be where it was at the peak, it’s still higher than it had been previously. So, we have responded by like everybody in paying more sign-on bonuses, giving more than typical wage increases, particularly on the clinical labor side. So, while that’s a great trade-off for us, getting people because it’s the operating leverage, as we discussed, there is a bit of a headwind as resulting from those labor costs.

Rishi Parekh: Great. And on the contribution margin, can you just give us an idea as to what that contribution margin was prior to the increase in med tech cost? And with everything that you just said, how should we think about that margin or the contribution a year from now or 2 years from now as those costs come down? Is it going to remain where it is, or do you think that it could increase and get back to prior levels?

Riadh Zine: Yes. I think the contribution margin like we used to talk, maybe talk about even if you actually look at our €“ because the way we do the contribution margin in a conservative way, right. We assume that, as I mentioned earlier in my comments, we assume that the employee compensation is 100% variable. The employee compensation is not 100% variable, because the corporate employees, the back office employees and some front-line employees are somewhat fixed. You could add probably another $200 million of revenues, and we are not going to make any significant changes to corporate back office and front-lines or part of the front-line. So, we take that conservative approach on that is 100% variable. I think you remember when we used to do this math, we were more like in the kind of 51%, 52% margin contribution.

I think right now, it’s kind of 48%, 49%. So, it came down 3 points, but I believe as you grow again and we have the corporate office, the back office and the front-line to absorb it, you will do more than $0.50 on every new dollar of growth.

Rishi Parekh: Thank you. And then just the last question, you have talked about partnership opportunities where you are working with Alliance Healthcare partner hospitals and leveraging your legacy Akumin cluster locations. So one, can you just quantify what percentage of your Alliance Healthcare locations and Alliance Healthcare revenue overlap with these legacy Akumin facilities? I am just trying to better understand. And then if you could just frame that opportunity? I assume it’s not 100%. I don’t know if it’s 20%, 40%, 60%. Just trying to get a better understanding as to what that opportunity is? And then second, how far along are you in those opportunities, meaning that are we close to hearing any announcements, JV investments, etcetera and a follow-up? Thanks.

Riadh Zine: Sure. Thank you, Rishi. So, I think I will start with oncology, actually first before radiology. So, because we have €“ we were working on oncology, there was some pipeline earlier than on the radiology and with the new leader that pipeline was basically quickly turned into action. So, I think we will start to see new joint ventures announcements on oncology first. And then on the radiology side, it’s going to take time. But I think we will start to illustrate some examples in the next 12 months to 18 months. The good news on the radiology side though. There is only one. So, the timeline is probably more than what you expect. It’s not 12 months, it’s going to be more than 12 months. However, the overlap is not 20%.