Assure Holdings Corp.

And welcome to the Azure Holdings Second Quarter 2022 earnings call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask a question. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Scott Kozak. Please go ahead.

Hello, everyone. Thank you for participating in today's conference call to discuss Assure's Holdings financial results for the second quarter 2022. On the call today are Executive Chairman and CEO John Farringer and CFO John Price. After market closed this afternoon, the company issued a press release announcing its results for the second quarter 2022. 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 quarter report on Form 10-Q for the fourth quarter and full year for a more detailed discussion of the risks 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-K associated with the filing of the earnings release for the three months ended June 30, 2022, 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 second quarter 2022 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 replay 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 Foronger.

John? Thank you, Scott. Hello, everyone, and thanks for joining us today. On slide three, you see the agenda of key topics we'll cover on today's earnings call. We're going to start with a discussion of recent corporate developments, talk about revenue cycle management, We're going to talk about the actions we've taken and continue to take to improve profitability. There will be a discussion on cash receipts. John Price will walk you through a Q2 financial summary, as well as discussing accounts receivable trends. And I'll conclude with setting expectations for the second half of 2022. I'll begin with a review of recent corporate developments. Today, we will show why Assure's second quarter and first half were strong operationally, challenging on an accounting basis, and ultimately have laid important groundwork for what we believe will be a significantly stronger, more financially stable second half of 2022 and beyond. Assure outperformed in managed case volume and cash collections during the quarter, underscoring the growth and underlying strength of our business. We also took steps to become leaner and more profitable, sure began a strategic cost reduction effort that we expect will yield over $4.5 million of annualized savings. As a result, we expect to become cash flow positive on an adjusted operating basis as our business becomes leaner and profitable in the second half of 2022. And despite this cost-cutting, Assure continues to expect to meet its guidance of performing 25,000 plus managed cases in full year 2022, an increase of more than 40% from 2021. Finally, we formalized a new accounts receivable accrual and reserve strategy. This led to a higher than anticipated reserve because we chose to take a conservative approach when reserving accounts receivable in the second quarter. The issue here is not lower reimbursement negatively impacting our accrual rates. Our accrual rates in high volume markets have remained stable. Rather, we chose to be conservative on reserving accounts receivable given our visibility on the challenges associated with collecting certain receivables before they are automatically reserved at 24 months in the third and fourth quarters of this year. The benefit of taking these reserves now and front loading the process is, number one, it provides clear visibility into future accounts receivable write-down expenses. And two, our anticipated second half exposure is forecasted to be less than $4 million. The healthcare collections disruption experienced in 2020 associated with the onset of COVID-19 was highly unusual and widespread. Legislation has extended the timeline to pursue these receivables, and we expect to recover a portion of these accounts receivable reserves in the upcoming quarters. Next, on slide five, I'll provide more detail on the current status of Assure's revenue cycle management function and our overall billing and collections efforts. As we noted on our first quarter earnings call, Assure's second quarter results were negatively impacted by an accounts receivable reserve accounting charge. Assure made the proactive decision to approach this matter conservatively with regards to our accounts receivable reserve accounting charge in the second quarter, including all volume reasonably considered at risk. This is associated with the long-standing company policy to reserve receivables that have aged 24 months, plus an estimate of what we do not expect to collect during the second half of 2022. We forecast that a potential exposure from age receivables in the second half will be less than $4 million, and potentially meaningfully lower as we continue to pursue payment on these claims during the third and fourth quarters. The context for this is that the company brought its revenue cycle management function in-house after taking over from a third-party provider in early 2020 amid the disarray of the onslaught of COVID-19. A segment of the claims in this period had data issues, and others were generally not handled quickly or effectively enough. In addition, there was a slowdown in reimbursements seen across not only the entire interoperability industry, but the healthcare industry in general. We have learned from this experience, installed new leadership in this group, and set up a tactical team to specifically work these reserve claims. The revenue cycle management team have been working hard to resurrect these files from decline status to activated. And ultimately, we expect to recover a meaningful share of cash receipts from these fully reserved receivables, with early returns anticipated in the second half of 2022 and carrying over into 2023. Recovery of these reserved and written down receivables will be reported as net new revenue and additional margin in the period collected, with almost no corresponding costs because the amounts have already been fully reserved. We expect This problem will be significantly reduced in the near term and in 2023. I'd also note that Assurance Collections have been strengthened by our greater than anticipated success engaging in independent dispute resolution processes on contested claims. Not only has this benefited Cash Collections going forward, it will also strengthen our accrual rates. Looking out into the third and fourth quarters of 2022 and into 2023, the company will have the benefit of our managed case growth, ongoing success on the dispute resolution front, and removing the cloud of material accounts receivable write-downs. On slide six, I provide additional detail on actions we've taken to drive down costs and improve long-term profitability. Given the current economic and capital markets environment, the company has substantially reduced our structural costs, including roughly 20% of our workforce, enabling Assure to realize over $4.5 million of annualized savings. In addition, key focus for Assure in the second half of 2022 will be on reducing the company's average cost of delivery in providing our services, both on the technologist's and the remote and neurology parts of our business. As a result, we expect to become adjusted operationally cash flow positive as our business becomes leaner and we will be profitable in the second half of this year. This reflects our focus on becoming self-sustaining from a cash flow perspective, as well as the investments we are making to continue collecting cash in record amounts. It also highlights our decision to prune certain markets where we were not getting the desired returns. However, even with running leaner, again, we anticipate hitting our managed case volume of 25,000 in 2022, a record number, representing an increase of more than 40% compared with our 2021 volumes. On slide seven, you will see a sure as dramatic increase in total cash collections over a trailing six, 12, and 24-month plus period. For accounts receivable generated from 100% ownership entities, the company is collecting more than 65% in the first six months after they were issued, and more than 85% in the first 12 months after they were issued. Both of these represent record rates for the company. We are collecting, but we are accruing on the front end. In fact, we think we may be able to improve those numbers beyond what we've accrued. We are driving higher participation rates, shortened cash cycles, and better collections. This will ultimately result in improved network contracting. Accelerating our cash flow reduces our need for working capital and also serves to minimize reserves in the future. To add more color to a comment I made earlier, What happened in healthcare billing in 2020, around the onset of COVID, was really a once-in-a-generation disruption. However, with a sophisticated, data-driven revenue cycle management function in-house, for sure, that disruption is now behind us and we are now collecting rapidly. Unfortunately, for many of our competitors in the neuromonitoring space, many of whom still depend on third-party billing providers, That struggle will continue for some time to come. Laws have been put into effect as a result of the COVID disruption to health care billing that will now extend the window for collecting 2020 unpaid claims. And we absolutely expect to recover some of the accounts receivable reserve during the upcoming quarters. Next, John Price will walk us through the quarterly financials.