Nutex Health Inc. Common Stock 2026 Q2 Earnings Call

Please go ahead. Good morning, everyone, welcome to Nutex Health Inc.'s second quarter 2026 earnings call.

My name is Vivian Sanders, I'm happy to serve as your moderator today. We're truly grateful for your participation and your continued interest in our company as we share the highlights of another exceptional quarter. Please note that this call is being recorded for future reference. Joining me this morning are the key leaders driving Nutex Health forward: our Chairman and CEO, Dr. Tom Vo, our Chief Financial Officer, Jon Bates, our President, Dr. Warren Hosseinion, and our Chief Operating Officer, Wes Bamburg. Together, they'll provide prepared remarks to give you a comprehensive view of our performance, strategies, and vision, after which we'll open the floor for your questions. Before I turn things over to Dr. Vo, I'd like to take a moment to address a few important points.

Today's discussion may include forward-looking statements which reflect management's current expectations about our future performance. These statements are based on what we know today, they're subject to risks, uncertainties, and other factors that could cause our actual results to differ from what we'll share. For a deeper dive into these forward-looking statements and the factors that may influence them, I encourage you to review the press release and Form 10-Q filed earlier this week as well as our various SEC filings. You'll find all the details there. Additionally, we may reference non-GAAP financial measures such as adjusted EBITDA during the call. For those interested in how these metrics reconcile to GAAP standards, please refer to the press release and Form 10-Q, where that information is included.

With those housekeeping items out of the way, it's my pleasure to hand the call over to Dr. Tom Vo, our founder and Chief Executive Officer. Dr. Vo, the floor is yours.

Thank you, Vivian, and good morning, everyone. I am happy to join you today to review Nutex Health's second quarter 2026 results. It was an active quarter marked by strong financial results, important reimbursement developments, and continued progress on our growth pipeline, both internally with hospital volume and acuity, as well as new pipeline developments. Let me begin with our first six months' financial and operational performance. For the first two quarters of 2026, total revenue reached $427.2 million, a slight 6% decrease from $455.8 million for the same period in 2025. This is primarily due to timing from accrual to cash collections, as Jon will further explain. Net income attributable to Nutex increased to $112.6 million for the first two quarters of 2026, a 3,100% increase from $3.5 million for the same period in 2025.

Adjusted EBITDA increased 2% from $144.4 million to $147.5 million for the first half of 2026. On the volume side, for the first two quarters of 2026, our hospitals recorded 99,700 total patient visits, up 6.2% from 93,800 during the same period in 2025. Same hospital growth was 3.4% in the first six months of 2026. Notably, same hospital visits grew 6.3% in the second quarter of 2026, reflecting strong operational execution and the impact of our internal investment over the past year. On the balance sheet, net long-term debt increased from $29.2 million at December 31st, 2025, to $31.1 million at the end of Q2 2026. Still very low relative to our revenue and expansion pace. Cash on hand grew to $207.1 million as of June 30th, 2026, up from $185.9 million at year-end 2025.

Net cash from operating activity was $109.7 million for the first two quarters of 2026, compared to $78.2 million in 2025, a 40% increase. Our strong first half performance was driven by several factors. Continued growth in inpatient volume and acuity due to renewed internal initiatives and investments. Lower earn-out expenses as most legacy facilities that were in development as of 2022 have vested. Reduced arbitration-related costs following a catch-up reconciliation and sustained collection strength from both our internal and external revenue cycle teams. In addition, we are seeing more stabilization of revenue this year compared to this time last year. Jon will also discuss these details in his report. On the reimbursement side, the quarter was highly active, with important provider wins in federal courts, as well as a final federal ruling improving the administration of the IDR process. Let us start on the legal side.

During the first half of 2026, courts in California, Florida, Pennsylvania, Texas, Connecticut, and Georgia all issued decisions reinforcing the finality of the IDR awards and limiting insurers' ability to challenge arbitration outcomes in courts. The courts further indicated that insurers' objection to the high IDR loss rates are matters for Congress, not the federal courts. For Nutex, these rulings are important because they support the integrity of the IDR process and provide additional precedent for a fair federal dispute resolution system.

In fact, in the Georgia ruling, the judge stated, and I quote, "It is highly improbable to infer from these facts that there is a vast conspiracy of providers and IDREs that have conspired to defraud the plaintiff of millions of dollars in thousands of IDR NSA proceedings over many years." He further stated, "It is highly plausible to infer that the plaintiff engages in a consistent practice of submitting lowball offers to out-of-network providers in an effort to maximize its profits." End quote. Insurers have largely executed this low provider payment strategy very successfully, as reflected in their record profitability during the first half of 2026, where profits were in the billions. While we are very happy for the financial successes of the insurance companies, our position is very simple. Nutex seeks fair market-based reimbursement for comparable care.

Patients treated at our facilities should be reimbursed consistent with the cost of similar services delivered at comparable facilities. A functional IDR process promotes fair, free market competition, protects access to high-quality care, and reduce unnecessary disputes. If insurers paid appropriate rates at the outset, fewer claims would need to proceed through the IDR process. On the regulatory side, on May 28th of this year, CMS and other federal agencies released the final IDR rules, which focuses on improving the efficiency and transparency of the IDR process without changing the core reimbursement framework. Key improvements include better disclosures from insurers to prevent and limit future ineligible charts, a more efficient electronic portal to encourage open negotiations, lower administrative fees from $115 to $15, expanded batching for certain claims, and shorter cooling-off period. Overall, we view the final rule as constructive for providers and for Nutex.

Congress and the Centers for Medicare & Medicaid Services, or CMS, recognize that the independent dispute resolution process remains the only available meaningful mechanism through which providers may contest inadequate insurer reimbursement. In its absence, and without the IDR process, insurers would have unchecked pricing authority and a monopoly position within the market. Lastly, the final rule reflects CMS's intent to create a more streamlined, user-friendly system that providers and payers can use effectively when needed. We believe that this underscores CMS view that the IDR process will remain in place for the foreseeable future. On the vendor front, earlier this month, we announced an amendment with HaloMD that shifts the fee structure to pay on collected basis retroactive to the original agreement. This helped reduce IDR costs in the quarter and gives us more flexibility to manage dispute resolution services going forward.

Combine this with a lower CMS IDR cost, this amendment will result in lower total arbitration-related costs in the future. In addition, we now have additional options to utilize other arbitrator vendors going forward if necessary. Turning to growth, we remain very excited about our hospital development pipeline and opportunities ahead. We have started internalizing the real estate development capabilities, giving us better control over timelines, cost, and scalability. Our strategy is not to be a long-term real estate owner. We plan to develop facilities, stabilize operations, and then monetize the real estate through sale-leaseback transactions upon hospital opening or stabilization. Looking ahead, our current pipeline in 2026 includes West Little Rock, Arkansas, San Antonio, Texas, and Jacksonville, Florida. All three are expected to open in the third and fourth quarter of 2026.

For 2027, our pipeline includes new hospital developments in South and Central and East Florida, as well as Oklahoma. Notably, two of these projects are expected to be initially owned and developed by Nutex. Beyond 2027, we have already approved additional Nutex-owned and Nutex-led projects in Idaho, Florida, Pennsylvania, Ohio, and Arkansas. As a public company, we are very fortunate to have the ability to continue growing through de novo hospital developments. Because building large-scale hospitals present significant challenges and costs, larger healthcare systems are often limited to volume growth as their primary expansion strategy. Nutex, on the other hand, can grow both internally as well as de novo by advancing a focused national pipeline of smaller, scalable facilities. Together, these two projects provide a clear roadmap for long-term growth and great shareholder value creation.