Assure Holdings Corp.

Greetings, and welcome to Assure Holdings' fourth quarter and full year 2021 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during today's conference, please press star zero on your telephone keypad. As a reminder, this conference call is being recorded. I would now like to turn this conference over to your host, Mr. Scott Kozak, Director of Investor Relations, Thank you. You may begin.

Hello, everyone. Thank you for participating in today's conference call to discuss Sure Holdings financial results for the fourth quarter and full year ended December 31, 2021. On the call today are Executive Chairman and CEO John Forringer and CFO John Price. Before the market opened this morning, the company issued a press release announcing its results for the fourth quarter and full year 2021. The release and investor presentation are available on the investor section of our website. Before we begin the prepared remarks, I would like to remind you that some of the statements made will be forward-looking and are made under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected or implied due to a variety of factors. We refer you to Assure's recent filings with the SEC, including our report on Form 10-K for the fourth quarter and full year for a more detailed discussion of the risk that could impact the company's future operating results and financial condition. Also on today's call, management will reference certain non-GAAP financial measures, which we believe provide useful information for investors. For reconciliation of these non-GAAP measures, please consult the most recently filed 8 associated with the filing of the earnings release for the three months ended December 31, 2021, which is available on the SEC website. Finally, I would like to remind everyone who dialed into the call by telephone, you may want to join our webcast or download our fourth quarter 2021 earnings presentation on Assure's investor relations site found at ir.assureneuromonitoring.com in order to see the slides referenced today. This call will be recorded and made available for repay via link on the company's website. Now, I would like to turn the call over to the Executive Chairman and CEO of Assure Holdings, John Farringer. John.

Thank you, Scott. Hello, everyone, and thanks for joining us today. Today, we'll provide an update on our recent performance, the progress we've made against our strategic objectives, and discuss our vision for sustained rapid growth over the next several years. I'm proud to report that Assure took a significant step forward in 2021. We successfully delivered against operational, and financial performance metrics, met long-held company objectives, and accelerate our leadership position as the partner of choice for interoperative neuromandering in hospitals, with surgeons, and with patients. Selects assure highlights from 2021 include record revenue of $29.2 million, record managed case volume of 17,436 cases, which represents a 76% increase from 2020 and a 56% increase in the number of surgeons we work with to a total of 250. Further, we are focusing or continue to focus on minimizing cash burn and generating positive EBITDA while driving rapid growth. Additional 2021 accomplishments include launching our remote neurology business, achieving a NASDAQ listing, the awarding of a three-year agreement to become the sole contracted provider of interoperative neuromonitoring services for the premier GPO network, completing two acquisitions, including our largest ever, and expanding our operational footprint into four additional states. Finally, I am pleased that we strengthened our balance sheet in 2021 through a combination of a new $11 million credit facility, a $5 million institutionally-led private placement with management and board participation, and the development of a revenue cycle management function that is far more automated and analytically driven than ever before. This enhanced financial flexibility is being used to fuel our most promising 2022 growth initiatives. Next, on slide four, I will provide context on Assure's pivot from our historical model. Until 2021, Assure was entirely focused on providing a highly trained board-certified technologist in the operating room, delivering the technical component of interoperative neuromonitoring. We paired that technologist with a third-party contractor delivering remote neurology services. This one-to-one model we established matched an Assure technologist with a surgeon in the operating room, which is illustrated in blue on the left. Assure technologists typically perform approximately 200 cases per year. This repeatable revenue structure has served as the basis for our historical success. Remote neurology services, which is featured in orange on the right, is a far more scalable one-to-many model. Physicians provide remote neurology services from an offsite location, and each provider has the capability to handle 2,500 or more cases annually. The one-to-many model based on providing remote neurology services is where Assure is pivoting its business. Starting in the second quarter of 2021, we began transitioning cases from remote neurology contractors to physicians employed by Assure subsidiaries. This transition will continue throughout 2022. To be clear, Assure is retaining our highly skilled technologists. It is their clinical excellence an outstanding client service that serves as the tip of the spear for Assure's ability to develop and maintain surgeon and hospital relationships and generate our managed case volume. Assure neurologists are simply servicing the patient volume we've already established through the managed cases our technologists perform. The focus now is simply transitioning Assure patients onto our own remote neurology platform. As you can see on slide five, one remote neurology professional working from an off-site location can review multiple screens and manage multiple surgeries simultaneously. While we continue to outsource this function to trusted partners in certain geographies as we ramp, Assurance began delivering this service ourselves in our largest markets, including Texas and Colorado. This accomplishes a number of positives for the company. Firstly, we'll be able to oversee quality of service for providing remote neurology services. This commitment to quality supports our efforts to sign newly networked agreements and facility-wide outsourcing agreements with hospitals. Secondly, by bringing the neurologist function in-house, we will be able to significantly reduce cost of delivery facilitating improvement in our profitability on every case we perform. Our objective is to cut the cost of delivery for remote neurology services by 50% going forward. Additional scale will serve as a catalyst for margin expansion in the future. Thirdly, regarding top-line benefits, for most of the cases we perform, remote neurology services represent the creation of a new revenue stream. Fourthly, our integrated offering will add significant value for each new market and every new M&A opportunity we pursue going forward. Fifthly, and finally, providing remote neurology services for interoperative neuromodernity opens the door for new opportunities in adjacent markets where similar remote neurology services can be utilized. The shift to providing remote neurology is simple and straightforward. We've already built the platform. We already maintain the patient volume. We are simply replacing third-party contractors with physicians employed by Assurum subsidiaries to absorb this volume. By providing remote neurology services ourselves, Assurum will generate higher margins as we scale, will create a new revenue stream, and turn cash over more quickly. Next on slide six, you will see how quickly Assure expanded our managed case volume in an environment where many of our peers are stagnant or even shrinking. 2022, we expect that growth to continue as we are guiding to 25,000 managed cases, an increase of more than 40% over 2021. Assure's primary catalyst in 2022 will include, number one, the ramping of our high-margin remote neurology services platform, which I just discussed, participating in business wins generated as a result of our relationship with Premier, expected organic growth in the new states, as well as extending our reach within Assure's existing operational footprint and an M&A pipeline brimming with interesting opportunities. On slide seven, we spotlight our remote neurology business. As you can see in this chart, rolling out these services is not something we are planning. This is something we are doing. We currently have a team of four full-time reading physicians, two of which began reading managed cases in the fourth quarter of 2021 and are still arriving. In our previous earnings call, we had guided to a range of 1,000 to 1,200 remote neurology managed cases in the fourth quarter of 2021. We ended slightly above that range at 1,222 with a total of 2,127 remote neurology cases for the full year 2021. In 2022, We expect to ramp our remote neurology services rapidly and anticipate performing more than 10,000 cases. I consider Assure's telehealth remote neurology offering to be one of the company's most important growth opportunities. Next, on slide eight, you will see our geographical footprint. The 12 states in green represent our current operations. Assure expanded into four new states in 2021. Missouri and Kansas via the acquisition of Sentry Neuromonitoring with Nebraska and Nevada through organic growth. Our expansion has been supported by the build-out of our distributor channel. In fact, partnerships with medical device distributors have helped Assure expand into Nevada and Nebraska. And we anticipate that they will open up new markets for the markets in 2022. The other major catalyst for Assurance expansion is the winning of system-wide hospital facilities contracts. On slide nine, we highlight our most important system-wide contract to date, that being the one with Premier, the second largest group purchasing organization, or GPO, in the United States. Over the life of the three-year agreement, Our service is a sole contracted supplier of interoperative and monitoring services to Premier's alliance of approximately 4,400 U.S. hospitals and 225,000 other providers. In the fourth quarter of 2021, we were honored to be chosen by Premier, following an RFP process that included our largest competitors in the industry. Our selection provides Assure with a hunting license to pursue opportunities within this network. It also underscores Premier's recognition that Assure has established a reputation for delivering high quality service at a competitive price with the capacity to scale and support coverage for the second largest GPO in the United States. This agreement is consistent with our strategy to build a platform that enables hospitals and medical facilities to outsource interoperable monitoring services for thousands of cases annually. We'll be devoting resources to help make sure, assure, fully harnesses the substantial premier opportunity in the current and over the course of the next two to three years. Next on slide 10, we look at the company's M&A activities in 2021 and provide some color around our expectations for 2022. First, we're very pleased with the two opportunistic acquisitions we completed at attractive valuations in 2021. We purchased Century Neuromonitoring, a Joint Commission Certified Interoperative Neuromonitoring Company, in Texas for approximately $3.5 million. As a point of reference, in closing this transaction, Assure has collected over $1.7 million in Century's old accounts receivables. reinforcing the value of this transaction. This acquisition not only helped us build out operational density and related efficiency in Texas, the country's largest market, but also helped facilitate our expansion into Kansas and Missouri. Sure also closed a separate acquisition of a Texas-based interoperable monitoring company in 2021. Elevation was a small bolt-on. Our integration of these acquisitions progressed quickly, and they are both performing as expected. Looking forward in 2022, we see a sustained buyer's market for high-quality interoperative neuromodeling assets, as many of our competitors continue to struggle with other network billing issues, weed collections, the lingering impact of COVID-19, and a general inability to raise sufficient cash. We also see acquisition opportunities among businesses focused on remote neurology services. We're continually evaluating build versus buy decisions as we look to add cost-efficient managed case volume to our platform. As always, we are focused on businesses that provide exceptional clinical care. An important part of our due diligence process is identifying businesses that we believe we can make more valuable by plugging them into our revenue cycle in managed care platforms and simply doing a better job of collecting cash. Now with a NASDAQ listing and a strong public company currency that none of our competitors can match, we are able to evaluate an increasing number of opportunities. All that said, we will remain valuation sensitive and patient until we get a price and situation that we are comfortable with when they go forward. On slide 11, we review our corporate objectives for 2022. Consistent with 2021, our 2022 objectives remain expanding scale, signing in network agreements, improving cash collections, and maintaining and expanding our clinical leadership. We've already talked quite a bit about how Azure is expanding its scale. So I will focus here on in-network contracting and cash collections. We have approximately 30% of our total commercial volume in contractual rates, either directly with payers or indirectly through third-party administrators. And we anticipate expanding this to more than 50% of our total volume by the end of 2022. While I'm sure fourth quarter collections did not meet our expectations, I'm happy to say that we've generated three consecutive months of record cash collections between December of 2021 and February of 2022 and are optimistic that we can sustain this improvement over 2022. Before handing off the call, I want to highlight a few aspects of our land. in managed cases on slide 12. The first is the seasonality in our business. In 2021, the company's managed cases followed the familiar pattern of a gradual ramp-up from the first quarter to a progressively busy second quarter with higher volumes in the third and fourth quarters. Similarly, our revenue mix reflects the seasonality. with the first quarter typically representing our highest percentage of cases with patients utilizing government insurance, and with each quarter after that, seeing the mix become progressively tilted toward more profitable commercial insurance. We anticipate more seasonality trends to continue in 2022. Before handing off to John Price, I want to reiterate, But this is the best position insurance has been in, from a capitalization perspective, from a platform perspective, and a business catalyst perspective. The opportunities ahead of us with Premier, remote urology services, organic expansion in new states, and M&A will keep us busy for the course of 2022.