Nutex Health Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 14, 2025
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Operator

Greetings. Welcome to Newtek South First Quarter twenty twenty five Financial Results Conference Call. At this time, all participants are in listen only mode. A question and answer session will follow the formal presentation. Please note, conference is being recorded.

Operator

At this time, I'll turn the floor over to your host, Jennifer Rodriguez, Investor Relations for Newtek. Jennifer, you may begin.

Jennifer Rodriguez
Jennifer Rodriguez
Investor & Public Relations Manager at Nutex Health

Good morning, everyone, and welcome to Newtek Health Inc. First quarter twenty twenty five earnings call. I'm Jennifer Rodriguez, and I'm pleased to moderate today's discussion. Thank you for joining us as we review our performance and outline our plans for the future. This call is being recorded for future reference.

Jennifer Rodriguez
Jennifer Rodriguez
Investor & Public Relations Manager at Nutex Health

With me today are our key leaders, doctor Tom Bo, chairman and CEO John Bates, chief financial officer Doctor. Warren Hosseinian, President and Josh Sotilio, Chief Operating Officer. They will provide insights into our financial results, operational progress, and strategic direction, followed by a Q and A session. Before we begin, a few reminders. Today's discussion may include forward looking statements based on management's current expectations.

Jennifer Rodriguez
Jennifer Rodriguez
Investor & Public Relations Manager at Nutex Health

These are subject to risks and uncertainties that could cause actual results to differ. For details, please refer to our press release and Form 10 Q filed yesterday and our other SEC filings. We'll also discuss non GAAP measures like adjusted EBITDA with reconciliations available in our press release and Form 10 Q. With that, I'm pleased to turn the call over to doctor Tom Vo, our founder and CEO. Doctor Vo, the floor is yours.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

Thank you, Jennifer, and good morning, everyone. I am pleased to present Newtek Health results the first quarter of twenty twenty five, which reflects continued progress following a strong 2024. Our mission of delivering accessibility with high quality care and a patient first approach has driven consistent growth and operational stability. Operationally, q one twenty twenty five shows steady progress with total patient visits reaching forty eight thousand two hundred and sixty nine patients, a twenty point five percent increase from forty thousand zero sixty eight in q one twenty twenty four. Mature hospitals achieved a 5.3% increase in visits, demonstrating sustained demand for our services.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

Financially, q one twenty twenty five delivered solid results. Total revenue reached $211,800,000, a 214% increase from $67,500,000 in q one twenty twenty four. Adjusted EBITDA was 72,800,000.0, up from a negative $400,000 from the same quarter last year. Net income attributable to Lucas Health Inc. Was 14,600,000.0 or $2.65 per basic share compared to a negative $400,000,000 loss or a negative 0.8¢ per basic share in q one twenty twenty four.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

Our balance sheet remains stable with long term debt actually slightly reduced from I'm sorry. Reduced to 20,700,000.0 from twenty two point five million at year end 2024, and cash in the bank at 87,700,000.0, up from 43,500,000.0 from year end 2024. Our net cash flow from operating activities in the first quarter of twenty twenty five was was 51,000,000 compared to just 3,100,000.0 in the same period in 2024 and surpassing the cash flow for the entire year of 2024. These impressive growth metrics reflect our company wide efforts to enhance patient volume, increase inpatient admissions, cost streamlining and optimization and improved revenue per patient through effective revenue cycle management, particularly via the arbitration process. Every month, we are gathering more data collections and arbitration wins, which help us refine our accruals, and we believe we are getting closer to a steady state.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

While there is a lot of work that needs to be done, we are very encouraged by the positive progress. Let me take a few moments to discuss the arbitration process that we first implemented in July of twenty twenty four. Overall, it is a small but very important part of our operation. In the first quarter of twenty twenty five, we submitted between 60 to 70% of billable visits through the arbitration portal. We achieved an 8080% plus win rate of these submissions, resulting in facility collections increasing by between 20 I'm sorry.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

Increasing by between 200 to 300% compared to the initial insurance payments. This means that that an independent arbitrator has legally determined that the insurance companies are paying us initial payments that are much lower than fair and reasonable rates over 50% of the time. So far, even with these winning percentages, we have not seen any significant payer behavioral changes. We are constantly monitoring legislative and legal developments at both CMS and in congress to make sure we are on top of any potential changes. However, from all our research and discussions with subject matter experts, it appears that the No Surprises Act and the associated arbitration process is here to stay.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

One main reason for this is the fact that very few of the charts that are eligible for arbitration actually yet arbitrated. In fact, public data shows that only about 5% of eligible charts are actually arbitrated. The reason for this include lower the reason for this low level of arbitration participation includes the high monetary cost as well as the extended time extended length of time to get paid once HR goes through the arbitration process. In terms of the arbitration process itself, it is constantly getting more refined day by day. We are seeing some improvements to the arbitration process, including more IDREs or arbitrators being added to the list of available arbitrators as well as new guidelines to provide safeguard to the integrity of the system.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

In fact, one legislative redevelopment that may be germane to our industry will be bill h r nine five seven two being introduced by representative Greg Murphy of North Carolina that proposes a penalty of three times the difference between the insurer's initial payment and the IDR award amount plus interest if the insurers do not pay in thirty days as required by rules in the No Surprises Act. This bill will only help us get paid faster in a in in a more reasonable manner. Looking ahead, we are well positioned for 2025. We continue to expand our micro hospital model in high demand markets. There is no lack of demand for our innovative micro hospital model as we still re receive requests to build these hospitals monthly from all over the country.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

For 2025, we have plans to open three additional hospitals. Our pipeline currently extends from 2025 to 2028 and has 10 plus projects in various stages of development, targeting markets where our high quality care is needed. Each facility is designed to reduce emergency, wait room times, increase accessibility, and provide tailored medical services. Our company growth strategy emphasizes four priorities, increasing patient volume, expanding services to provide care to more observation and inpatient admissions, optimizing revenue through efficient revenue cycle management and arbitration, maintaining disciplined cost, and aggressive debt management. We feel that as long as we receive fair and reasonable payments from either the arbitration process or from changes in be in payer behavior, our lower cost model will be sustainable and repeatable.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

Because of our experience of having been through multiple cycles and our ability to pivot and adapt to any market conditions and with a balance sheet and a clear pipeline, Newtek is well positioned for continued sustained growth. So now I'll turn the call over to John Bates, our CFO. John?

Jon Bates
Chief Financial Officer at Nutex Health

I think financial performance for the February, which reflects another solid quarter with consistent growth. I'll compare some key financial metrics for February versus the same period in '24, highlighting percentage changes across areas such as revenue, adjusted EBITDA, net income, EPS, and other indicators as detailed in our form 10 q filed yesterday.

Jon Bates
Chief Financial Officer at Nutex Health

Starting off with total revenues. So total revenue for February, as Tom indicated, did reach 211,800,000.0, a 214% increase from 67,500,000.0 in February. The hospital division drove most of this growth generating 203,900,000.0, which is up 240% from 60,000,000 in the first quarter of twenty four with a hundred and 5 million tied to arbitration efforts through the independent dispute resolution process. Of that hundred and 5,000,000 in arbitration revenue, 60,000,000 related to date of service for the first quarter of twenty five, '20 '6 million related to date of service for the fourth quarter of twenty four, and 12,000,000 related to date of service for the third quarter of twenty four following, and up the remaining 7,000,000 relating to periods prior to the third quarter. Of the total hospital division revenue, mature hospitals, which are hospitals operational before 12/31/2022, it saw a 860.5% revenue increase for the first quarter of twenty five versus the same period in '24.

Jon Bates
Chief Financial Officer at Nutex Health

And for the hospital division business, we did see growth as well during the quarter as they increased by 20.5% or 8,201 visits up to 48,269 visits in the first quarter of twenty five versus 40,068 visits in the same period in '24 with mature hospitals growing at 5.3%, as Tom indicated before, in the first quarter of twenty five versus the same period in '24. And, additionally, the population health division revenue did increase by roughly $400,000 or 5.4%, up to 7,800,000.0 in the first quarter of twenty five from 7,400,000.0 in the same period in 02/2024. Now let's discuss the the overall facility and corporate costs and the continued improvement in that area. Total facility level operating costs and expenses increased 36,200,000.0 during the period, but only represented 44.1% or 93,500,000.0 of total revenue for the first quarter of twenty five versus 84.9% or 57,300,000.0 of total revenue for the same period of '24. Of the 36,200,000.0 increase in the in these facility operating costs and expenses, 26,300,000.0 related to arbitration costs for the for the additional arbitration revenue recorded during this period, which approximated 25% of that incremental addition of revenue I mentioned previously.

Jon Bates
Chief Financial Officer at Nutex Health

As a result of the revenue and facility cost improvements, our February gross profit was a hundred and 18,300,000.0 or 55.9% of total revenue as compared to October or only 15.1% of total revenue in the same period of 02/2024, which represented a 65% improvement. From a corporate and other cost perspective, the general and administrative expenses as a percentage of total revenue for the first quarter of twenty five decreased down to 4.7% compared to 12.8% for the first quarter of twenty four, showing our continued focus on controlling costs while improving revenue. Additionally, on our first quarter two thousand twenty five income statement, you will see a line a line item for stock based compensation expense, and it's been there this year and last year and before. So with the amount for the February being 36,100,000.0, most of that expense is explained in our first quarter two thousand twenty five ten q within note 10. But within that note, we explained that under the terms of four separate contribution agreements for hospitals that were deemed to be under development hospitals when Newtek went public back in February, at the point in which each of the hospitals have been open for two full years, they're eligible to receive a onetime additional issuance of common company common stock based upon the earnings of the hospital in the second year of their operations.

Jon Bates
Chief Financial Officer at Nutex Health

And that second year is which we denote to be the period of what the earn out period is. So with four of these hospitals in the earn out period currently, we're accruing for the potential earn out for each. And in the February, that accrual amounted to 36,000,000 that will be trued up each quarter until we get to the end of year two of each hospital after opening. And at which time, the final calculation will be done, and payment will be made 100% in common stock and recorded as noncash stock compensation expense in our financials, which is how it's presented currently. In the February, '1 of these four facilities did reach the end of the earn out period, leaving the other three to complete their earn out period by the early part of the February.

Jon Bates
Chief Financial Officer at Nutex Health

The good news is that after these limited number of legacy hospitals have matured, there will not be a significant noncash earn outs in the future. Now let's talk about operating income. Operating income, including the negative impact of this same 36,100,000.0 in noncash stock based compensation expense for the first quarter of twenty five, was 72,200,000.0 compared to 1,500,000.0 in February, representing a $70,700,000 improvement quarter over quarter. Net income attributable to Newtek's Health was 14,600,000.0 for the first quarter of twenty five, again, also including the negative impact of that 36,100,000.0 noncash stock based compensation expense that we talked about previously. And the comparative net loss attributable to new to NewTax was 400,000 for the first quarter of twenty four, showing a $15,000,000 improvement period over period.

Jon Bates
Chief Financial Officer at Nutex Health

From an earnings per share perspective, our diluted EPS for the February was $2.56 a share compared to a loss of 8¢ per share in the first quarter of twenty four, showing a $2 and 64 share per share price increase period over period. Now adjusted EBITDA attributable to Newtek increased 73,200,000.0 from a loss of 400,000 in the February to 72,800,000.0 in the February. '1 small change in our calculation of adjusted EBITDA this quarter, which we will continue using as we go forward, was that we now include in our calculation the impact of cash rents paid that fall under our right of use assets financing accounting treatment for our building leases for all periods presented. So in our previous treatment of these rent payments within our calculation, the rent paid the cash rent paid impact was not being reflected as a as a reduction in this calculation, so we felt it appropriate to include it. Finally, our balance sheet remains very strong with cash and cash equivalents at 03/31/2025 at a record high of 87,700,000.0, up 44,100,000.0 or a 1.1% from 43,600,000.0 as of as of February.

Jon Bates
Chief Financial Officer at Nutex Health

Our continued success with the collection efforts related to the application process is allowing us to get paid more fairly for the services we provide and was obviously a big part of of this success. With regard to the accounts receivable, our balance at 03/31/2025 was 295,000,000, an increase of just under 63,000,000 from 232,000,000 at the end of the year of 02/2024. Give you some perspective of that 295,000,000 AR, hundred and 99,300,000.0 or roughly 68% relates to visits in the arbitration process, which was similar to our position at the end of two thousand twenty four. And during the first quarter of of two thousand twenty five, the company collected around a hundred and 40,400,000.0 in cash, of which a hundred and 3.7 or approximately 45% of that related to AR as of 12/31/2024. And regarding cash flow, Tom mentioned this earlier, but net cash from operating activities is very strong this quarter at 51,000,000, which was an increase of 47,300,000.0 from the same period in 02/2024.

Jon Bates
Chief Financial Officer at Nutex Health

On the liability side, our total bank and equipment type debt increased by merely 1,800,000.0 to 43,200,000.0 at February from 41,400,000.0 at 12/31/2024, with the majority of this debt, as we talked about before, relating to equipment loans at a hospital for such items as the MRIs, X rays, ultrasounds, and items like CT machines. Outside of this normal 40 plus million of bank equipment type debt, the only other items of materiality that look like debt on the balance sheet are the liabilities related to financing and operating lease liabilities, which are just the future lease payments due to our landlords on our hospitals. And we've discussed this in previous periods, but I just wanted to walk through again so that we'll remind people how this and what this really means. Because these are reflected on the balance sheet because the accounting rules require us to aggregate all lease payments that we pay the landlord for the entirety of each lease term, which might be fifteen to twenty years of payments. And then present value that total lease payment back for each all the way from inception of that lease and record both the right of use asset and, of course, fine right of use liability on the balance sheet for that result.

Jon Bates
Chief Financial Officer at Nutex Health

As a result, on our balance sheet at 03/31/2025, the net asset balance for the operating and financial right use assets amounted to 243,700,000.0, which is about 32% of our total assets. And the net liability balance for the for the operating and financing right of use liabilities amounted to 288,700,000.0, which is 61.2% of total liabilities. So I just wanted to provide some of this perspective as most investors and analysts don't view these right use asset liabilities as real operating debt. So I wanted to kinda clarify that for you. With all this said, our balance sheet remains very solid, and we continue to strengthen it with our positive operating performance.

Jon Bates
Chief Financial Officer at Nutex Health

Our current financial position is position has has put us in a great position to execute on all of our initiatives in our 02/2025 operating plan, including the opening of three new hospitals later later this year, as Tom mentioned earlier. With that, I'll now turn it over to Warren Husanian. Warren?

Warren Hosseinion
Warren Hosseinion
President & Director at Nutex Health

Thank you, John, and good morning, everyone. Thank you all for joining us today.

Warren Hosseinion
Warren Hosseinion
President & Director at Nutex Health

I'm pleased to provide an update on Newtek Health population health division, which supports our commitment to value based care. As a reminder, our overarching strategy at Newtek Health is to build an integrated health care delivery system combining hospitals and medical groups, also referred to as ITAs. Our ITAs are comprised of networks of primary care physicians and specialists located around our facilities. The ITAs enroll patients from different health plans and are responsible for the total care of these patients. By combining hospitals and IPAs, we believe we will be able to deliver care that is more coordinated, cost effective, and with better outcomes for our patients.

Warren Hosseinion
Warren Hosseinion
President & Director at Nutex Health

Our IPAs send patients to our hospitals, and our hospitals deliver more efficient and cost effective care, reducing the medical loss ratios in our IPAs. This is a long term strategy that will take several years to bear fruit, but we are in this for the long run at Newtek Health. We are pleased to report a strong start to the year with first quarter results that reflect the continued momentum behind our strategy. We currently have over 40,000 patients enrolled in our IPA in various risk based arrangements. Of note, I am happy to report that we now have almost 1,400 Medicare Advantage members in our Houston physicians IPA.

Warren Hosseinion
Warren Hosseinion
President & Director at Nutex Health

In q one, our IPA generated $7,800,000 in revenue, a 5.4% increase from $7,400,000 in q one twenty twenty four. This is despite the fact that we divested two noncore assets in in mid twenty twenty four that were generating revenues but had operating losses. Operating income improved to $100,000 from a $300,000 loss in Q1 twenty twenty four. Margins continued to be moderated by ongoing investments in new markets such as Houston, Phoenix and Dallas. With that, I will now turn it over to Josh D'Italia, our Chief Operating Officer.

Joshua DeTillio
Joshua DeTillio
Chief Operating Officer at Nutex Health

Thank you, Warren, and good morning, everyone. I'm pleased to share Newtek Health's operational results for q one twenty twenty five, which demonstrate our ability to deliver high quality care while achieving steady growth and cost discipline. Our micro hospital model centered on patient needs continues to perform very well. And I'll discuss the volume trends, cost management, patient acuity, and the advantages of our approach. Total patient visits, as Tom mentioned, reached forty eight thousand two hundred and sixty nine, a 20.5% increase from the 40,068 in quarter one twenty twenty four, which reflects growth in both new and mature hospitals.

Joshua DeTillio
Joshua DeTillio
Chief Operating Officer at Nutex Health

Mature hospitals grew by 5.6% in the first quarter. This growth reflects our leadership team's efforts in community engagement, business development, and adding specialists to manage more complex cases by increasing observation and inpatient stays to meet the community's need. Our capacity to provide observation and inpatient is a key strength. Observation stays help avoid unnecessary admissions while inpatient services ensure comprehensive care for appropriate cases. This approach improves outcomes and patient satisfaction by offering efficient high quality care.

Joshua DeTillio
Joshua DeTillio
Chief Operating Officer at Nutex Health

Our model reduces emergency room wait times and provides personalized services, positioning Newtek as a trusted provider in the communities we serve. Cost discipline for us remains a priority. Excluding arbitration costs, operating costs remained stable despite higher volumes and new hospitals this year. Labor costs increased 29% from $27,000,000 to $34,900,000 which was comprised of increased payroll and benefits for opening four new hospitals, our higher ER volumes and an increased volume of higher acuity observation in inpatient. Overall labor costs continue to be a much smaller percentage of net revenue than most hospital companies at 16.4% for the first quarter, which exemplifies our lean, high quality model.

Joshua DeTillio
Joshua DeTillio
Chief Operating Officer at Nutex Health

Supply costs continue to be a very good story for us. Supply costs decreased 28% from 5,300,000.0 to 3,800,000.0 in the quarter due to our 2024 GPO and vendor realignment even while we even while we opened four new hospitals in the year. We will continue to see supply cost savings throughout 2025 as stated in the third quarter twenty twenty four earnings call. We're continuing to explore technology investments, including AI for patient check ins, staffing optimization, provider note writing, and coding accuracy to improve productivity and efficiency. These tools will help further streamline operations and enhance care delivery and productivity this year and going forward.

Joshua DeTillio
Joshua DeTillio
Chief Operating Officer at Nutex Health

We continue to believe that our micro hospital model is the future of health care. This model provides efficient access, high quality concierge care, a lower cost structure in a more intimate and personalized setting versus the large general hospitals. We believe the micro hospital model will continue to grow rapidly over the next few years and in the industry. As we've seen in our existing hospitals, when patients have a choice, they prefer fast, high quality, personalized care. With our model and profitability, we are well positioned to continue our growth and progress in the coming years.

Joshua DeTillio
Joshua DeTillio
Chief Operating Officer at Nutex Health

Back to you, Jen.

Jennifer Rodriguez
Jennifer Rodriguez
Investor & Public Relations Manager at Nutex Health

Thank you, Josh, and thank you to Tom, John and Warren for those updates. We'll now move to the Q and A. Operator, please provide instructions.

Operator

You may press 2 if you'd like to withdraw your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please. We'll be poll for questions, and that's the dial one. Thank you.

Operator

And our first question comes from the line of Bill Sutherland, Benchmark Company.

Bill Sutherland
Director of Research at The Benchmark Company LLC

Congrats on all the progress. So I guess, John, I wanted to think about you said you're getting a lot more clarity on the, you know, the arbitration process as far as how the cash comes in. And it looks like your metrics are holding steady in terms of, you know, the submissions and the success rate. So should we think about 1Q as something that is essentially repeatable in the following quarters this year? I mean, you do have a viewpoint here at the midpoint of 2Q.

Bill Sutherland
Director of Research at The Benchmark Company LLC

Thanks.

Jon Bates
Chief Financial Officer at Nutex Health

Yep. No. Great question. Obviously, we don't we're not we're still in the middle of the second quarter.

Jon Bates
Chief Financial Officer at Nutex Health

We're not gonna speak much to that. But but what I can tell you is, and I mentioned this at year end when we went to this first discussion around what was going on with arbitration. It was sort of early stage. We felt like we had a an understanding of the of the early on payments that were coming in, the realization of of what was happening because we had a little more time to hold off as we're going through year end, going into the early March time period to see, you know, how the how the true realization was happening. And so that's when we created the the receivable we had at the end of the year.

Jon Bates
Chief Financial Officer at Nutex Health

And I think what you can see from this, while it is gonna take time to get to the point of normalizing, you know, after one quarter, we're starting to see a little more of what we would expect. I think I mentioned then that I think it's really gonna be two quarters till we're gonna really prove this out. But, you know, if you if you look at the raw numbers at think about how we talked about at the end of last year compared to now when we're looking at where the reimbursement rates were. And you saw back then at the end of of twenty fourth, looked at a full year within the $27.20 $2,700 mark, but that was really only with six months of of arbitration in it. So now we're moving forward, and you can kinda continue and think about, okay, for the February where the reimbursement, if you looked at it, kinda per visit was a little over 4,000 over $4,200, that's that's a guide.

Jon Bates
Chief Financial Officer at Nutex Health

But I think you need to look back at more, I believe, let's say, the last nine months from from July through the first quarter. If you look at the nine month number, it's in the 3,800 area. So I think when you're talking about normalization of revenue, it's starting to work its way down based on assuming similar acuity, certainly similar level of volume, which we've had some improvement there. So I think it's starting to work itself out, but to predict and say that this quarter is is representative of what would happen in the next four, you know, the the seasonality. And, also, I think that we're still kind of getting the complete information now that we're we've been in this.

Jon Bates
Chief Financial Officer at Nutex Health

We started in July, but, really, we didn't see activity until middle of the fourth quarter. So we've only only had about four, four and a half months of cash coming in. So I think as we see the second quarter and add another quarter to it, I think we'll really define that. But generally, it's trending in that direction, but I still think we're I don't think we're at a at a at a steady state yet. So we're gonna have to watch that closely over the next

Jon Bates
Chief Financial Officer at Nutex Health

Okay. Quarter or so.

Bill Sutherland
Director of Research at The Benchmark Company LLC

Well, I yeah. I I I was kinda thinking about it in terms of how it laid out with what you realized on terms of claims that were actually in the first quarter and then what came in from fourth quarter and third quarter, etcetera, and whether that sort of pattern feels like it's it's it's something that is gonna, you know, follow. In other words Peterbilt. Yeah. Yeah.

Bill Sutherland
Director of Research at The Benchmark Company LLC

Peterbilt. And and so and so you can't say, obviously, no one's looking for you know, we understand the vagaries and all this, but that's kind of the pattern to think about in terms of the trail, if you will.

Jon Bates
Chief Financial Officer at Nutex Health

Yeah. Absolutely. That's all yeah.

Jon Bates
Chief Financial Officer at Nutex Health

So I I mean, it's a good point. Like, you so the trending, as you mentioned about the pattern, what we can say is, you we put out numbers at the end of the year just like we put out numbers here. I can tell you that the numbers at the end of the year, I feel like they were representative of of what what was happening and what is expected to happen. And we've continued that into the first quarter. So Mhmm.

Jon Bates
Chief Financial Officer at Nutex Health

You know, barring major changes other than the the other independent variables that affect revenue, I mean, I think the trending is is is solid. And, I mean, this engine, the the process that we go through has been in place since, you know, even before when we went public, we set up just the regular accrual process of our revenue. And all we did was add on this feature, and the engine is is there, and we're feeding, as we talked about, 60 to 70% of our visits are rolling through this process. And it's on a consistent basis still happening in in that fashion, and we're still seeing the same level of of success over 80% or more. So based on that, the trending has has been solid, and we hope to, you know, watch that continue to move forward.

Bill Sutherland
Director of Research at The Benchmark Company LLC

Great. And you did just to reaffirm something I wanna make sure I understood. The under the the the three remaining underdeveloped hospitals receiving in income on their model, that is gonna run through third quarter, and then they'll be done?

Jon Bates
Chief Financial Officer at Nutex Health

Correct. Yeah.

Jon Bates
Chief Financial Officer at Nutex Health

Okay. That's remaining three are finished by the early part of the first quarter.

Bill Sutherland
Director of Research at The Benchmark Company LLC

Okay. And then with the cash growing the way it is, I'm just curious as you guys think about your capital deployment plans and how you may be prioritizing going forward.

Jon Bates
Chief Financial Officer at Nutex Health

Yeah.

Jon Bates
Chief Financial Officer at Nutex Health

That's a great question. And I know Tom can speak more to that too as well. But, I mean, cash has been strong. We actually have sort of an investment approach internally for in the short term as we look at at the different opportunities that that are out there in particular. I mean, certainly, we're always looking for, you know, continued growth in opening up facilities, which does take, you know and he's talked about he's got several in the in the pipeline.

Jon Bates
Chief Financial Officer at Nutex Health

So that's a big piece of potentially opportunities for us. We could we could increase that rate if we wanted to. We also I know as as Warren mentioned on the population health side, there's opportunities to invest in that side of the business as well as well as, know, potentially even looking at other similar smaller hospitals that would fit our layout to basically, you know, potentially add existing businesses that maybe aren't performing as well and then adding the the features or functionality that we have to it and getting off the ground a little bit quicker. So there's opportunities in kind of those three areas. Tom, you can talk more about others.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

Yeah. No. Thank you, Bill. Thank you for for following us, and and thank you for covering us. But like John said, we're we're we're very fortunate to be in a position to have a lot of cash in the books.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

Obviously, we're gonna be very conservative with that cash and and use it to maximize shareholder value, and so we have a lot of options. The good news, though, is that opening one of these hospitals, as you know, is not that capital intensive.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

And so even if we open these three hospitals this year, we should still have a lot of cash left over. And so we're still discussing internally on on how to best deploy that cash and to maximize shareholder value.

Bill Sutherland
Director of Research at The Benchmark Company LLC

Great.

Bill Sutherland
Director of Research at The Benchmark Company LLC

I'll jump back in queue. I have other people getting a question. Thanks, guys.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

Thanks, Bill.

Operator

The next question is from the line of Thomas McGovern with Maxim Group. Please proceed with your question.

Thomas McGovern
Equity Research Associate at Maxim Group

Hey, guys. Congrats on the quarter. Another strong performance, especially underscored by by the collections and arbitration. So my first question is related to during the quarter, a little bit over 40% of the arbitration related revenue was related to dates of service prior to the first quarter, right? So if we look back between the fourth quarter and this quarter, you were you recognized around 95,000,000 in 4Q.

Thomas McGovern
Equity Research Associate at Maxim Group

So what I'm getting at is is, you know, how have you guys started to look at working through prior quarter days of service revenue? Have you guys worked through most of what you'll recognize for the fourth quarter? And so we expect the first quarter to be similar to the fourth quarter as of the end of the second quarter? So you guys recognize $50,000,000 sorry, just kind of clarify. You guys recognized 50,000,000 from from January.

Thomas McGovern
Equity Research Associate at Maxim Group

Would it be reasonable for us to assume you guys would be able to recognize somewhere around the 35,000,000 in the second quarter, kinda consistent with what you did in April?

Jon Bates
Chief Financial Officer at Nutex Health

I mean, it's a great question, Thomas. The the reality is, I think, we don't know if we watch the process. I can tell you that, as I mentioned before, I think the ironing out of the realization keys, sending steady state, is starting to become clear and clear, which allows us to, in the period that we're in, improve kind of the accuracy of the revenue that we're recording. Right?

Jon Bates
Chief Financial Officer at Nutex Health

So I think we've done a really, really good job. And and quite frankly, even prior, as I mentioned before, before arbitration, this is the way we've captured revenue to the best the best recent historical data, assuming things remain consistent for similar acuity, similar insurance payers, similar location. Right? We're doing it down to the granular level. So what happens is as you see things like, okay, maybe there was an additional amount in a current quarter or a current month that may be related to a previous month or a previous quarter, what that does is it helps us update the model, and it could be up or down.

Jon Bates
Chief Financial Officer at Nutex Health

In this case, there's clearly, it's it's a little bit higher. But I think it's helping us to, you know, better align, better identify, and and better predict really what's gonna happen. I think we've done a really good job up to this point, and we're continuing to get better and better. But a lot of it depends on the timing of cash coming in. And each of the different payers, right, has we have different situations with each one.

Jon Bates
Chief Financial Officer at Nutex Health

Some might pay slightly quicker, some slower, and there's all sorts of individual, you know, situations one by one. So but on a consistent trend basis, I think that, you know, previous period component should continue to work its way down. But that's always gonna be there because you're you're taking someone's walking in the door today. And, potentially, if it goes through the arbitration process, it could be five months before you ultimately get final payment. So you're anticipating where you when you might get you know, you get a piece of that in thirty to forty five days, which is how it works, and then you go into the process.

Jon Bates
Chief Financial Officer at Nutex Health

And then you gotta wait, you know, four months after that to potentially get paid. So it'll it'll just be watching that and managing that and each of the different watching it closely with different payers and the different, you know, levels of acuity and also, you know, different locations and different states that we're in. So long answer to your short question is, I can't predict exactly what will be to expect, say, in the second and third quarter, but I can tell you that I feel like we're getting tighter and tighter on the realization based on the more data that now we're getting that we've now had, you know, a solid just think about the first payment coming in and out September, October of last year. Now we've got six, seven months of payments. And by the time we close out second quarter, it'll be up to close to nine months of of payments on this process.

Jon Bates
Chief Financial Officer at Nutex Health

So I think we'll have a much better much better feel for it. But I think you see the trending, and I think you have an idea of kinda where it's heading, and I think you're you're on target with with your thought process.

Thomas McGovern
Equity Research Associate at Maxim Group

Understood. I appreciate that color. And how should we be looking at the addition of new eligible arbitrators?

Thomas McGovern
Equity Research Associate at Maxim Group

Do you think this could accelerate the arbitration process or any way shift your strategy for submitting plans?

Jon Bates
Chief Financial Officer at Nutex Health

Yeah. It's a great question. I I we believe, ultimately, that will only help us. Right?

Jon Bates
Chief Financial Officer at Nutex Health

Because I think one of the things that we've we've been made known, we've been to a couple of different seminars speaking at some and listening to other groups, including a couple of these IDREs, in particular, couple of the larger ones, along with the government. And they all indicate that the most important thing that needs to happen is that they need to find some additional arbitrating groups that can can be certified and come in and help with some of the backlog. Because there's no doubt that the backlog is there, and you can see it in in industry data as well. We see it too. So they're they have been picking that pace up a little bit.

Jon Bates
Chief Financial Officer at Nutex Health

Several of them have done a great job. There's a couple that have lagged, and they're they're actually being communicated with to try to help them get resources and improve on that. Plus, then they've added, essentially, as you mentioned, adding a couple more. I think adding a couple more will only help the situation, And we'll have to watch their their impact and and their communication in the process as we start using them because each one is a little bit distinct and different. And so we have to kinda watch their their approach, how they handle the information that we provide them when it comes to their resolution of who, you know, who wins or who loses.

Jon Bates
Chief Financial Officer at Nutex Health

But we think it will only be a positive as we move down the road as they add more and more of these. And and they are getting better at it, which is good. And most of them are adding resources as we speak.

Thomas McGovern
Equity Research Associate at Maxim Group

Understood. Thanks for that.

Thomas McGovern
Equity Research Associate at Maxim Group

And then last question, then I'll I'll hop back in queue. Just looking at the acuity mix, know, one of the largest drivers of mature hospital growth as well as, you know, the increased in patient and observation visits. So you guys have added specialists to kind of facilitate this and continue to drive growth in that regard. I'm just curious, do you think that you're now operating at kind of a steady run rate in terms of acuity mix and inpatient volume, would you expect that to continue to ramp as we move through 2025? And if you do expect it to continue to ramp, maybe just touch on some of the key points that are going to that you expect to drive continued growth in acuity or in high level acuity and patient and observation business?

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

Thomas, this is Tom. First of all, thank you for following us, and thank you for covering So I'll I'll elaborate a little bit on that question, and then I'll I'll pass it over to Josh. But the way to think about this is that we still have a very high capacity in our inpatient capacity. So in other words, as we ramp up these hospitals to be able to admit more patients, and that includes getting more specialists on, getting the the proper equipment, getting the proper software technology, so on and so forth, we feel that there's room to grow, not just on the volume side, on the on the ER side, but also on the inpatient side. So, Josh, do you have anything else to add from that standpoint?

Joshua DeTillio
Joshua DeTillio
Chief Operating Officer at Nutex Health

No. Not much. Well said. I I would just add that, as Tom said, we do have bed capacity, and we are increasing our reputation in the service being prepared to take care of most patients. But the specialist component is a big big component, adding cardiologist, adding neurologists and other specialties has helped us take care of more patients, more observation and inpatient.

Joshua DeTillio
Joshua DeTillio
Chief Operating Officer at Nutex Health

So we expect that to grow. We haven't put out guidance on that yet, but that will continue to grow over the next coming quarters.

Thomas McGovern
Equity Research Associate at Maxim Group

Understood. I appreciate that clarity. I'll hop back in queue.

Operator

Thank you. Next question is from the line of Gene Mannheimer with Freedom Capital. Please proceed with your question.

Gene Mannheimer
Managing Director, Senior Research Analyst at Freedom Capital Markets

Oh, thanks. Good morning. Congratulations, Another above average quarter. Appreciate it.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

Thank you, Gene.

Jon Bates
Chief Financial Officer at Nutex Health

Thank you, Gene.

Gene Mannheimer
Managing Director, Senior Research Analyst at Freedom Capital Markets

You're welcome. The the arbitration payments, right, that we've been discussing, when you get those in a successful, you know, dispute, is there a penalty payment that you are receiving in that that you would not otherwise receive if it was if the if the bill was paid right the first time? And I guess where I'm going with that question is, over time, right, is arbitration revenue moderates and perhaps it's offset by higher base reimbursement. Does that make year over year comps tougher, right, when we get out to, say, 2026?

Jon Bates
Chief Financial Officer at Nutex Health

Yep. So, Jean, great question. On the first piece, in in the arbitration concept, you know, how that process works. Right? Right now, there is no quote unquote penalty for them to pay pay timely, not or not pay timely.

Jon Bates
Chief Financial Officer at Nutex Health

I know Tom indicated one of the acts early, the Murphy Act, and one of the components of that listed and and has in there a somewhat punitive penalty concept that I think is important and something that if if and when it get that that gets put in will significantly improve the timeliness of payments. So first question or answer to your first question is, it should not have in our numbers, it's basically us providing the support for every the each component of the visit itself supporting the the value of the services that we're providing, and that's what's going on to the arbitrator. Now there is the ability. You'll see in the in in the NSA, it specifically says this. You can include cost to collect when you because you have to go through this process.

Jon Bates
Chief Financial Officer at Nutex Health

You have to put yourself to get lawyers or or just spend time and effort. So you are able to include some type of cost component in addition to the services that you have, which in a lot of cases, you know, that is included in in the the ultimate argument that ultimately goes to that arbitrator and part of the 80 plus percent win that we do get. But there is no quote, unquote penalty as you as you ask at this point for them not paying or not not paying timely. So I guess the answer based on that, then you asked about how that would affect '26. I don't think there would be any necessarily impact in future periods based on that changing other than, certainly, if they do put in place the action for a punitive measure to the for the payers if they don't pay timely, then they will that certainly will increase the ability to have additional revenue.

Jon Bates
Chief Financial Officer at Nutex Health

But at this point, that is not the case in the way we do our current process.

Gene Mannheimer
Managing Director, Senior Research Analyst at Freedom Capital Markets

K. Thank thank you, John, for that color. And my follow on is really more in the core business. You know, you cited a 5.3% increase in in insured hospital visits, which is strong.

Gene Mannheimer
Managing Director, Senior Research Analyst at Freedom Capital Markets

I'm just wondering if there was any element of outsized seasonality there. In other words, was the flu season worse this Q1 than last Q1 and therefore maybe played a bigger factor?

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

Yeah. Hi, Gene. I could answer that and and maybe Josh could chime in.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

And by by the way, Gene, thank you once again for for following us and and covering us. So this year's flu season was quite interesting. So what we saw was that the flu season started later, I would say mid December, and it progressed through February and maybe even early March. And and it was not just the flu, but there was RSV that was obviously COVID also and some GI bugs that was also involved. So the point is that, yes, this flu season was a little bit longer than last year.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

But but even then, if you compare it quarter to quarter, like, year over year and not successive quarter, we still achieve a 5% increase. And so that I think that's, you know, that that's basically to Josh's point that the communities are more aware of our services. We still provide fantastic services to the community. I mean, if you take a look at any of our, say, Google review, we consist in four and a half to five stars, which is very unusual in health care. And so as the further we continue to operate in each community, the the the more the word gets out of how great our hospitals are so that more patients continue to come.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

Josh, any more color on that?

Joshua DeTillio
Joshua DeTillio
Chief Operating Officer at Nutex Health

Yeah, Tom. Well said. Couple things. I mean, one, about a year and a half ago, we really and I give credit to our teams, really started a big business development effort, which continues to bear fruit. Our challenge really is getting the word out on our hospitals.

Joshua DeTillio
Joshua DeTillio
Chief Operating Officer at Nutex Health

We feel that we have the the best service in the industry. So once a patient comes in, they see how great it is, they get the concierge care, they're going to come back, they're gonna bring their family back. So we continue to try and get the word out to educate the community on all the services we provide, and I think that's why you're seeing, you know, the continued mature health flow growth as well as increased observation and inpatient.

Gene Mannheimer
Managing Director, Senior Research Analyst at Freedom Capital Markets

Yep. That that's great. Congratulations on that progress. And if I if I could just squeeze one more in, the three new hospitals planned this year, can you just share maybe the timing of of when you think those will open?

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

Thanks.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

Yeah. Hi, Gene. So I could elaborate on that. So all three hospitals this year will be third and fourth quarter. All three of them are gonna be in Texas.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

One of them is gonna be in Houston where where our corporate office is. So it's essentially our backyard. The second hospital is gonna be in San Antonio. And the third hospital is going to be in Sherman, Texas, which is located North of Dallas on the Texas and Oklahoma border. So all three are very fast growing areas with very good job growth for each of the communities, and we think that we could could make a difference by bringing our brand of medicine to all three of those areas this year.

Gene Mannheimer
Managing Director, Senior Research Analyst at Freedom Capital Markets

Well, that's great. Thanks, everybody, and congrats again.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

Thank you, Gene.

Operator

Our next question is from the line of Joshua Cohen with Westbury Capital. Please proceed with your questions.

Joshua Cohen
Managing Partner at Westbury Capital Group

Congrats on the strong quarter. Going back to the discussion around the excess cash, could you talk through the options you guys are considering and whether capital return could be in the cards?

Jon Bates
Chief Financial Officer at Nutex Health

Yep. Absolutely. In addition to the things that we talked about earlier thanks, Josh, for the question.

Jon Bates
Chief Financial Officer at Nutex Health

We're always looking at whatever is gonna make sense from a shareholder perspective to add value. So we have discussions about whether there'd be a share buyback. It could certainly happen. We've talked about things like dividends at some point down the road, whether that would happen anytime soon. But, certainly, along with those, as we mentioned earlier, certainly, the investments in our current hospitals and maybe growing that pipeline a little bit quicker, the population health side, which I think is a great opportunity there to to take on some some situations that will help us really add value quickly.

Jon Bates
Chief Financial Officer at Nutex Health

So those are a couple different areas. Tom, you can add to that.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

Yeah. No. Thank you, Josh, for for following us.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

So to John's point, we have a lot of options. Obviously, we need to be very cautious with our cash and maximize shareholder value. But the way that I see it I mean, obviously, we could talk about dividend, share buyback, and all those are on the table. But a a more interesting way of looking at this is maybe to increase more in our development pipeline and increase growth. And so there's several levers for that.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

I mean, the the first lever is adding more de novo hospitals. But the problem with that is that it's all development and construction. So the the and by what what I mean is that even if you wanna grow faster today, it still takes about two years to build these hospitals from ground up because these hospitals do not exist. We're the pioneer in the country in in building these hospitals. And so unless we want to build a hospital, we can't operate the hospital.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

And so you have to build it from the ground up. And so as as you can tell, building these, developing these is challenging. Not that we can't do it. It's just that there's only a certain amount that you could do even if you wanna start now. And so the second question is, is there m and a activities or or is there acquisition opportunities?

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

Once again, from a hospital standpoint, there's just no hospitals out there to be bought. So even if you wanna buy a hospital, they don't exist. Unless you buy these very massive, big, traditional hospitals. But then a lot of these hospitals may have failed for some reason, and, they don't have the same, sort of, model that we do with the smaller less number of beds and more cost efficient. And so that's that's a little bit of a of a limitation.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

And so the third lever is to maybe increase our number of IPAs as to what Warren was talking about. But but and that is a possibility. And currently, we have, four IPAs in, Houston, Phoenix, Los Angeles, and Miami, and we have 24 hospitals. And so the idea is that if we could, put an IPA around each of the hospital, that may be doable. But but once again, we don't wanna we we need to be very, prudent in our spending and, and only look at, certain businesses that, will have a a good correlation as well as benefit our our current hospital.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

And so my point is we're looking at all options at this point.

Joshua Cohen
Managing Partner at Westbury Capital Group

Okay. Yes. Thanks for that. And and I'm just wanting additional follow-up.

Joshua Cohen
Managing Partner at Westbury Capital Group

And I appreciate that you guys are only halfway through the quarter here. But on the accounts receivable, curious if you could provide any additional color on both the confidence for collection and then also the expectations for pacing there.

Jon Bates
Chief Financial Officer at Nutex Health

Yeah. I mean, as as a good question, Josh. As as I kinda talked about earlier on one of the previous questions, when I think about AR and I think about where we were at the end of the year and doing based on early information on how realizability was happening through then.

Jon Bates
Chief Financial Officer at Nutex Health

And then now watching it after first quarter, I'm pretty confident, much more confident in in what we what we had at the year end, which is fantastic, and that it's continuing into the first quarter because I think the trending has been pretty consistent. And as we watch it, of course, payers can change their behavior or situations can happen. But, you know, I think the timelines that it takes to collect in in the current environment that we're in, it's somewhere on average all in. You know, it's it's four months, but you get the piece that doesn't go through arbitration coming in just like it did before. And that normally would come in in the sixty to seventy day mark.

Jon Bates
Chief Financial Officer at Nutex Health

If you remember back in the 02/2023 or even '2 early two thousand twenty four, most of that dollar collection time period for a lot of it was in that sixty to seventy five day, but that was pre arbitration. And then now the arbitration clearly has extended that because it can take from date of walking in the door up to, you know, five plus months for the final payment to come in. Now you still get the first payment after that thirty to forty five days, and and then you just have to wait from there. So long answer to your short question is, you know, the average of that comes to, you know, somewhere in the hundred and twenty day mark is what we're seeing overall blended. And we'll watch it closely with some of that coming in in that normal sixty to seventy five day period and and, you know, with the a larger chunk through arbitration coming on the back end, you know, between the four or five and sometimes slightly longer than five months process to get get paid from day one.

Jon Bates
Chief Financial Officer at Nutex Health

So hopefully, that helps. But I think what we were anticipating at the end of the year, which we were sort of seeing that early on with limited numbers, continued into the first quarter. And I think that that's substantiated kinda where we had finished the year, and I feel, you know, pretty confident that what we have sitting at the end of of March is, you know, continuing on that that run rate and, you know, barring any major changes that the the time period to collect all of this will, you know, continue to stay on on the kind of period timeline that I described.

Joshua Cohen
Managing Partner at Westbury Capital Group

Got it. Thanks for that, and congrats again on the strong quarter.

Tom Vo
Tom Vo
CEO & Chairman of The Board at Nutex Health

Thanks, Josh.

Jon Bates
Chief Financial Officer at Nutex Health

Thank you, Josh.

Operator

Thank you. This now concludes the question and answer session. I'd like to turn the floor back over to Jennifer Rodriguez for closing comments.

Jennifer Rodriguez
Jennifer Rodriguez
Investor & Public Relations Manager at Nutex Health

Thank you all for those valuable questions and answers. For all those joining us today, if you have more questions, please email us at investors@newtekhealth.com, and we'll get back to you promptly. On behalf of the Newtek's management team, thank you all for joining us for our first quarter twenty twenty five earnings call. We've covered a lot, growth, strategy, challenges, and our vision, and we appreciate your time and interest. A recording of this call will be available on our website for a limited time, so feel free to revisit it.

Jennifer Rodriguez
Jennifer Rodriguez
Investor & Public Relations Manager at Nutex Health

Take care, everyone, and we look forward to keeping you updated on our journey.

Operator

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference.

Executives
    • Jennifer Rodriguez
      Jennifer Rodriguez
      Investor & Public Relations Manager
    • Tom Vo
      Tom Vo
      CEO & Chairman of The Board
    • Warren Hosseinion
      Warren Hosseinion
      President & Director
    • Joshua DeTillio
      Joshua DeTillio
      Chief Operating Officer
Analysts
    • Jon Bates
      Chief Financial Officer at Nutex Health
    • Bill Sutherland
      Director of Research at The Benchmark Company LLC
    • Thomas McGovern
      Equity Research Associate at Maxim Group
    • Gene Mannheimer
      Managing Director, Senior Research Analyst at Freedom Capital Markets
    • Joshua Cohen
      Managing Partner at Westbury Capital Group
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Key Takeaways

  • Newtek Health reported a 214% increase in Q1 2025 revenue to $211.8 million and delivered an adjusted EBITDA of $72.8 million, reversing last year’s $0.4 million loss and generating net income of $14.6 million.
  • Total patient visits rose 20.5% year-over-year to 48,269 in Q1, with mature hospitals achieving a sustained 5.3% increase, reflecting strong demand for the micro-hospital model.
  • The No Surprises Act arbitration process now covers 60–70% of billable visits, yielding an >80% win rate and boosting facility collections by 200–300% over initial insurer payments.
  • Newtek’s balance sheet remains robust, with cash growing to $87.7 million (from $43.5 million), long-term debt reduced, and net operating cash flow of $51 million in Q1 surpassing full-year 2024 levels.
  • Expansion plans remain on track with three new micro hospitals slated to open in H2 2025 and a development pipeline of 10+ projects through 2028 targeting high-demand markets.
AI Generated. May Contain Errors.
Earnings Conference Call
Nutex Health Q1 2025
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