Lumexa Imaging Holdings, Inc. Common Stock 2026 Q2 Earnings Call

Please go ahead, ma'am. Thank you, and hello, everyone.

We appreciate you joining us today. Leading today's call are our Chief Executive Officer, Caitlin Zulla, and Tony Martin, our Chief Financial Officer. Before we begin, I want to note that today's discussion will include forward-looking statements, including statements regarding our 2026 guidance, expected operating performance, growth initiatives, reimbursement assumptions, capital expenditures, and other future events. These statements reflect our current expectations and assumptions, which are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to the forward-looking statements and risk factors described in today's earnings release and our most recent SEC filings for additional information. We undertake no obligation to update these statements. We will also discuss certain non-GAAP financial measures, definitions, and reconciliations to the most directly comparable GAAP measures are included in today's earnings release. With that, I will now turn the call over to Caitlin.

Caitlin, please go ahead. Thanks, Sue.

Thank you all for joining us today. Q2 was a quarter of substantial progress as we continued to execute against the strategic priorities which support our ambition to build the premier platform for high quality, lower cost outpatient imaging, serving health systems, physicians, and patients. These include driving strong same center growth with an expanding mix of advanced modalities, new de novo openings, and ensuring the successful ramp of new centers, accelerating high-impact strategic service lines, and expanding our geographic footprint through disciplined capital efficient growth. I'm eager to share our progress tonight. A few highlights from the quarter. In Q2, we demonstrated continued strength of our core business. We delivered healthy growth in total same center volumes, sustained momentum in advanced modalities, continued maturation of our de novo cohort, and important progress in expanding our health system partnerships.

Advanced modalities grew to 37.4% of total volume, a record high for our company, and 111 basis points higher than a year ago. Our advanced modality mix shift continues to build, driving higher reimbursement and margin for the business. In May, we announced four new centers so far this year. We have opened two de novos against our ongoing goal of 8 to 10 annually. We also completed two acquisitions, including our first site with the UPMC joint venture. As we have previously indicated, the balance of this year's openings will be later in the year, and we remain on track to hit our full year de novo target. In June, we achieved a significant milestone, a joint venture with Hospital for Special Surgery, a globally recognized leader in musculoskeletal health, expanding our presence in the New York City metro area.

All quarter, we are actively ramping de novo centers, and our 2024 and 2025 cohorts are tracking in line with our expectations. Layering in a healthy mix of advanced volumes while making meaningful strides towards our objectives around long-term growth and profit expansion. These accomplishments provide us with a strong foundation heading into the second half of the year. Our performance through Q2, together with the continued progress across our key growth initiatives, supports our continued confidence in our ability to deliver our full year commitments and the updated guidance we are providing tonight. Tony will speak more to this in a moment. We remain inspired by our mission to expand access to high quality and lower cost imaging through elevated, compassionate care. I am proud of the progress our team is making and the energy they bring to their work at Lumexa every day.

In fact, we recently completed our annual employee engagement survey and achieved record scores. A reflection of a team that is aligned and energized by our vision to be the partner of choice for leading health systems and radiologists. That spirit of engagement and shared purpose is the foundation from which we continue to grow. It is early days for our market opportunity, and yet our value proposition resonates strongly with patients, providers, health systems, and payers. Whether through our wholly owned or joint venture centers, we are successfully delivering high quality imaging in more convenient settings on a more timely basis and at a meaningfully lower cost than hospital outpatient departments. We help health systems solve important operational challenges and achieve their patient care and market expansion goals. Patients love the care they receive, which is reflected in our net promoter scores that consistently exceed 90.

In fact, Kaufman Hall just published an article titled "Radiology Strategy Was Never About Radiology," which states, "Imaging is not simply a department. It is a critical infrastructure for health systems growth in oncology, cardiovascular, neuroscience, and orthopedics." We could not agree more. Our value proposition at Lumexa is bigger than operating imaging centers. We help health systems improve access, retain patients, and improve their bottom lines. We view imaging access as the front door to a health system's most valuable service line, and we help health systems own that front door at a lower cost in the right convenient locations for their patients and with an operating model that drives value to all stakeholders. As you know, CMS released its 2027 Hospital Outpatient Prospective Payment System proposed rule in early July. We believe the proposed OPPS rule provides further validation of the direction healthcare is moving.

High quality imaging should be delivered in the most appropriate cost effective setting. If finalized as proposed, the site neutral provisions would reduce the reimbursement advantage associated with hospital outpatient departments and further strengthen the rationale for health systems to expand lower cost freestanding imaging capacity. Lumexa is built for this environment. Our model enables health systems to improve access, expand strategically, and participate in outpatient imaging growth with a lower cost structure that does not depend on a hospital-based reimbursement premium. While the proposal remains subject to comment and finalization, we view the shift towards outpatient imaging as a structural growth driver that will benefit us across the years, not quarters. In other government matters, we reviewed CMS's 2027 Medicare Physician Fee Schedule proposed rule released in July.

As a reminder, this is relevant to our current rate assumptions of approximately flat year-over-year government reimbursement rates and a 1% increase in commercial payer rates. If finalized as proposed, we believe the CMS rule would be consistent with our planning assumption for government payer rates. Medicare Advantage and fee-for-service stand at around 20% of our revenue. Regarding our commercial payers, the majority of the mix, we're fortunate to have a diverse set of payers who renew across staggered years, and so far this year, commercial negotiations also support our assumptions as we look ahead. At Lumexa, we're addressing a large and growing market opportunity, and the market is moving towards us.

We benefit from durable long-term tailwinds that we believe are just taking shape, aging populations with more complex and chronic conditions, new treatment paradigms requiring advanced imaging, rising preventative screening rates, and a sustained shift from hospital-based to outpatient sites of care in a fragmented capacity-constrained industry. In a real highlight of Q2, we announced our ninth health system joint venture, a strategic partnership with Hospital for Special Surgery, the world-renowned leader in musculoskeletal health. I would like to speak to this prestigious partnership in a bit more detail, which we think represents a significant validation of our joint venture approach. HSS is ranked number one in orthopedics in the U.S. and is recognized globally for clinical excellence. Their decision to partner with Lumexa involved a rigorous evaluation of our clinical quality and operational capabilities.

HSS is an exciting amplifier of our vision to build a broad network of imaging centers in some of the nation's most attractive markets. Imagine New Yorkers who can visit their specialists in Manhattan and obtain timely and convenient imaging in surrounding communities. The New York metro area is one of the largest healthcare markets in the country, and we are excited to serve patients and referring providers in this strategic MSA. We are honored that HSS chose to partner with Lumexa. This partnership is our second new health system collaboration in the last 12 months, following UPMC, and reflects the growing pipeline of health systems actively seeking to expand hospital outpatient imaging access.

In fact, our recent market review identified a substantial universe of health systems, close to 100, where our model can address a demonstrated outpatient imaging need, giving us the confidence in the depth and duration of our partnership pipeline. The market in front of us is promising and vast, and our offering is compelling. In addition to the long-term market forces supporting our growth plans, our operations and commercial teams have partnered with clinical leaders to implement important programs to enhance care and drive growth. Specifically, our team was busy with programs to drive same center growth and expand access with discipline and an emphasis on advanced modalities. Here is a little more on that. PET was a particular highlight in Q2 with 23.2% growth. We continue to advance our strategy here, adding two of our three targeted new PET machines in July.