Nutex Health Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Unaudited consolidated results; comparatives are for Q1 2023. Nutex operates 21 hospital facilities in nine states and a population health management division. Financial statement share and per-share data reflect the subsequent 1-for-15 reverse stock split retroactively.
Financial performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $67.5 million | $56.3 million |
| Gross profit / margin | $10.2 million / 15.1% | $4.8 million / 8.6% |
| Operating income (loss) | $1.4 million | $(4.4) million |
| Net loss | $(0.5) million | $(6.9) million |
| Net loss attributable to Nutex / diluted loss per share | $(0.4) million / $(0.01) | $(5.1) million / $(0.12) |
| Adjusted EBITDA, non-GAAP | $4.6 million | $2.4 million |
| Cash from operating activities | $3.1 million | $1.1 million |
- Revenue increased 19.8%. Hospital division revenue rose 21.7% to $60.0 million; population health management revenue increased 5.4% to $7.4 million.
- Hospital visits grew 21.1% to 40,068, primarily reflecting four facilities opened during 2023. Management attributed higher revenue to visit growth, increased revenue per visit and improved collections. Mature hospitals accounted for 6.7% of the hospital revenue increase.
- Hospital segment operating income increased to $10.5 million from $4.8 million. Population health management moved to a $0.3 million operating loss from $0.1 million of income.
- Operating costs and expenses were $57.3 million, versus $51.5 million. Corporate and other costs decreased to $8.7 million from $9.3 million, including stock compensation expense of $0.05 million versus $1.9 million.
- Interest expense rose to $4.4 million from $3.1 million, principally due to convertible-debt discount amortization and interest. A $2.6 million noncash gain from remeasuring warrant liability reduced the reported loss; the liability was $5.1 million at quarter-end.
Financial position, cash flow and debt
- At March 31, cash and cash equivalents were $30.0 million, up from $22.0 million at year-end; the company also reported $4.1 million of restricted cash. Current assets were $100.4 million and current liabilities $59.9 million, implying working capital of $40.5 million.
- Total assets were $404.3 million; total liabilities were $324.3 million and equity $80.0 million. Accounts receivable totaled $61.5 million, plus $4.2 million due from related parties.
- Operating cash flow was $3.1 million. Investing used $0.7 million, mainly capital expenditures. Financing provided $5.7 million, including $9.2 million net proceeds from a stock-and-warrant offering; cash increased by $8.0 million overall.
- Reported borrowings totaled $40.1 million before unamortized issuance costs and classification of current amounts; $9.4 million of long-term debt was current, and lines of credit were $2.8 million. The company had $1.2 million of remaining line availability. Finance lease liabilities totaled approximately $217.2 million and operating lease liabilities approximately $16.7 million.
- The company was not in compliance with the debt-service-coverage covenant on one term loan with a $0.2 million balance; that balance was classified as current. Management said it believed cash, equivalents, marketable securities and available borrowing capacity would meet anticipated operating and growth needs for at least 12 months, while noting financing availability and terms were uncertain.
Changes, outlook and risks
- On January 22, Nutex issued 4.44 million shares and warrants to purchase the same number of shares at $2.25 per share, raising $9.2 million net. The warrants were classified as a liability. On April 26, after the reverse split, their exercise price was reduced to $0.68 under the offering terms.
- On March 26, the company amended the conversion and exercise prices of its existing convertible notes and related warrants to $3.00 per share, increasing potential shares issuable. Convertible notes had a $5.4 million face amount, with an 8% cash or 10% stock interest rate and an October 2025 maturity. The reported effective interest rate was 21.5%.
- The Yorkville pre-paid advance was paid off in January 2024 and terminated in February. The company issued 118,243 shares in a debt conversion during the quarter.
- On April 9, the company effected a 1-for-15 reverse split to address Nasdaq’s minimum bid-price requirement. As of the filing, it had not regained compliance; the stated deadline was May 20, 2024. The company said it intended to appeal a potential delisting notice and could consider another split, subject to stockholder approval.
- Management provided no specific revenue or earnings guidance. It described plans to expand through new hospitals, IPAs and acquisitions, and said it was pursuing larger financing commitments, which may not be available on favorable terms or at all.
- The No Surprises Act and related independent dispute resolution process remain significant reimbursement and collection risks. Nutex reported insurer payment reductions after the law took effect, extensive administrative burden and variable success in obtaining payments through IDR. More than 90% of net patient service revenue is paid by insurers, government agencies or other third parties; the company generally operates out of network. Q1 included $0.7 million of collections on previously provided services that had been reserved as uncollectible.
- Disclosure controls were deemed ineffective at March 31 because of previously reported material weaknesses involving IT access and change controls, vendor oversight, business-process controls and spreadsheet accuracy. Remediation was ongoing; management said the weaknesses had not caused a material misstatement in the periods presented.
- Management said ordinary-course claims and legal actions were not expected to have a material adverse effect. Related-party relationships include physician entities and real estate lessors, some owned or controlled by related parties including the CEO. The filing reported no material off-balance-sheet arrangements.
Most important facts for investors to verify
- Whether Nutex regained Nasdaq minimum bid-price compliance by the deadline and the status of any appeal or additional split.
- Whether operating cash generation and collections are sustainable, particularly given NSA/IDR outcomes, receivables and the $0.7 million recovery of previously reserved claims.
- Debt and lease obligations, near-term maturities, covenant compliance, available borrowing capacity and access to additional financing.
- Potential dilution from outstanding warrants and convertible notes, including the amended terms and the warrant exercise-price adjustment after the reverse split.
- Progress and independent validation of remediation for the disclosed material weaknesses in financial reporting controls.