Nutex Health, Inc. (NASDAQ:NUTX) Q1 2024 Earnings Call Transcript

Nutex Health, Inc. (NASDAQ:NUTX) Q1 2024 Earnings Call Transcript May 10, 2024

Nutex Health, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Greetings and welcome to the Nutex Health First Quarter 2024 Financial Results Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jennifer Rodriguez. Thank you, Jennifer. You may begin.

Jennifer Rodriguez: Hello and good morning. Welcome to the Nutex Health first quarter 2024 earnings conference call. Today’s call is being recorded. With me this morning is our Chairman and CEO, Dr. Tom Vo; CFO, Jon Bates; President, Dr. Warren Hosseinion; and COO, Josh DeTillio. 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. More information on forward-looking statements and these factors are listed on Wednesday’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 the supplemental information on adjusted EBITDA and reconciling net loss attributable to Nutex Health Inc. is included in the press release and Form 10-Q 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.

Tom Vo: Jennifer, thank you, and good morning everybody, and thank you for joining the call. The past two years have been very challenging, both from a healthcare industry standpoint as well as from a macroeconomic standpoint. However, we remain committed to our core mission of providing improved accessibility as well as exceptional concierge level patient care. In fact, all of our hospitals are open 24/7 and we are the medical safety net for the communities that we serve. While we have faced many hurdles, I’m happy to report that our team have been very diligent in overcoming many of these hurdles. We believe our effort over the past twelve months are beginning to pay off. This momentum has generated improved financial results driven by volume growth year-over-year, improved collections per visit, and solid operating margins.

In 2023, we implemented several initiatives to increase ER volume, increase inpatient volume, and increase outpatient volume. In addition, we opened four new hospitals in 2023, all of which have ramped up either faster than expectations or within expectations. System wide quarter-over-quarter from 2023 to 2024, ER volumes increased by 21%. Of this 21% increase, 5.3% are from mature hospital growth, defined as hospitals being opened by December 31, 2022 to provide one full year or more of comparable results. Most of the remaining increases are from our ramping hospitals, defined as being open for less than one year. From a revenue per patient perspective, we have also made some gains. Selection percentages have consistently increased monthly since January 1, 2022, when the No Surprises Act was implemented, and we are making great strides in understanding as well as navigating through all the nuances of the No Surprises Act.

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Q&A Session

On the population health side of the business, we are also seeing growth. In addition to our IPA in Los Angeles, which has been consistently profitable, we have recently added an IPA in South Florida as well as an IPA in Houston. As a result, the number of MA lives, or Medicare Advantage lives, have increased by 78% quarter-over-quarter. From a cost perspective, our operating costs across most categories have started to come down due mainly to our cost cutting measures, which we have announced earlier this year. As we move through the remainder of the year, we will maintain our disciplined approach of managing our cost 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 long-term, sustainable and profitable company.

With that, I will turn the call over to Jon Bates, our CFO, or Chief Financial Officer, for more financial information for the first quarter. Jon?

Jon Bates: Thanks, Tom, and good morning everyone. So we believe our first quarter performance represents a strong start to the year and we continue to combine solid operational performance with a disciplined and balanced allocation of capital to increase shareholder value over time. We had very strong top line growth in total revenue and visits for the first quarter of 2024 compared to the first quarter of 2023. Regarding total revenue, we had an increase of 20%, or $11.2 million, to $67.5 million for the first quarter of 2024 versus $56.3 million for the first quarter of 2023. Of the total revenue increase, mature hospitals, which are hospitals that were opened prior to December 31, 2021 and therefore provided one full year of comparative results, increased its revenue by 6.7% for the first quarter 2024 versus the first quarter 2023.

Additionally, the population health division revenue grew by 5.4% in the first quarter of 2024 from $7 million in the first quarter of 2023 to $7.4 million in the first quarter of 2024. With regard to those hospital division visits, we also grew, as Tom mentioned earlier, had a solid increase of 21% quarter-over-quarter, with those mature facilities growing at 5.3% for the first quarter 2024 to first quarter 2023. So in addition to that revenue improvement we have seen year-over-year, the company’s focused operating cost control efforts that were started toward the end of 2023 continued to be a focus in the first quarter of 2024 and began to see a positive impact from these initiatives during the quarter. One of those areas where we see this is in the 2024 first quarter gross profit as it grew to $10.2 million, or 15.1% of total revenue as compared to $4.8 million, or 8.6% of total revenue in the first quarter of 2023, which is a 113% increase quarter-over-quarter.

Additionally, first quarter 2024 operating income was a positive $1.4 million compared to an operating loss of a negative $4.4 million in the same quarter of 2023. So net loss attributable to Nutex Inc. [ph] improved by $4.8 million from a loss of negative $5.1 million in the first quarter of 2023 to only a very small loss of a negative $364,000 in the first quarter of 2024. Adjusted EBITDA increased $2.2 million, or 92%, from $2.4 million in the first quarter of 2023 to $4.6 million in the first quarter of 2024. With regard to cash flow, you will see that the net cash from operating activities was $3.1 million in the first quarter of 2024, which is an increase of $2.1 million from the first quarter of 2023. Finally, on our balance sheet, cash and cash equivalents at March 31 of 2024 was $30 million, up $8 million from $22 million at December 31, 2023.

And on the liability side, we have long-term debt of $26.3 million, which is a relatively reasonable amount for a company that has 21 separate hospital locations. And a majority of this debt is related to, as you would imagine, equipment loans related at our hospitals for such things as MRIs, X-rays, ultrasounds and CT machines. So with that, I will turn the call over to Jennifer to open it up for Q&A, as we look forward to your questions.

A – Jennifer Rodriguez: Thank you, John. We will now open the call to take questions. In the queue, we have Bill Sutherland from The Benchmark Company. Bill?

Bill Sutherland: Thank you. And good morning everybody. Nice work in the first quarter. I just appreciate you taking the questions. So, Tom, to date, I think you added one hospital on April 1. How are you thinking about additional growth in terms of hospital facilities?

Tom Vo: No, thank you, Bill, for the question. No, we believe in future growth. And for 2024, we do have a pipeline of four hospitals that we can open anytime after the third quarter of this year. I am sorry, during the third quarter or after the third quarter of this year. However, as previously disclosed, we have placed a delay on the opening of any further new hospitals in 2024 until certain financial metrics have been achieved. So in particular, we’re slowing down openings until we could fund new hospitals, either through internal cash collections or through alternative financing that is not prohibitively expensive nor dilutive. So on a weekly basis, we continue to evaluate our cash and potential timing for opening new hospitals this year. As far as looking forward to – oh, go ahead, Bill.

Bill Sutherland: No, you finish, sorry.

Tom Vo: And I was just going to say that beyond 2024, looking forward to 2025 and beyond that, we do get a fair number of requests from all over the country weekly to open these micro hospitals in their community. And so we’ll continue to evaluate these opportunities and balance the high cost of developing these hospitals versus the big need and demand for accessible healthcare. The good news, though, is that there is no lack of demand for our services. These micro hospitals are very popular around the country. Sorry, Bill, go ahead.

Bill Sutherland: Oh, no, I was just going to say to follow on to, you’ve also done some pruning of some underperforming hospitals. Is that process largely complete? Or is there more to go?