Nutex Health Inc.

Greetings and welcome to the NewTexHealth 2Q and 3Q 2025 Financial Results Conference 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, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Jennifer Rodriguez of Investor Relations. Please go ahead.

Good morning, everyone, and welcome to NewTex Health's combined second and third quarter 2025 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. With me today are our key readers, Dr. Tom Vo, Chairman and CEO, John Bates, Chief Financial Officer, Dr. Warren Hosseinian, President, and we would like to formally welcome our new Chief Operating Officer, Wesley Bamberg. They will provide insights into our financial results, operational progress, and strategic direction, followed by a Q&A session. Before we begin, a few reminders. Today's discussion may include forward-looking statements based on management's current expectations. These are subject to risks and uncertainties that could cause actual results to differ. For details, please refer to our press release in Form 10-Q. and our other SEC filings. We'll also discuss non-GAAP measures, like adjusted EBITDA, with reconciliations available in our press release and form TimQ. With that, I'm pleased to turn the call over to Dr. Tom Vo, our founder and CEO. Dr. Vo, the floor is yours.

Thank you, Jen. And good morning, everyone.

I am pleased to report NewTexHealth second and third quarter 2025 results. which reflect continued momentum following a strong 2024 and first quarter of this year. Our commitment to accessible, high-quality, patient-centered care remains the foundation of our growth and operational stability. We have completed the restatement of 2024 and first quarter of 2025, with only minor adjustments that did not materially impact revenue, adjusted EBITDA, or cash positions. John will further provide details. However, with these amendments finalized, our financials now benefit from independent verification by two PCAOB audit firms. Having completed a full year audit for 2024, we expect the 2025 audit process to be significantly more efficient. Operationally, Q3 2025 shows steady progress. total patient visits reaching 46,232, an 11% increase from 41,668 in Q3 of 2014. Financially, revenue reached $267.8 million, up $240 million from Q3 2024. Adjusted EBITDA grew to $98.5 million from $9.7 million A net income was $55.4 million compared to an $8.8 million loss of last year. Our balance sheet remains strong. Cash increasing to $166 million from $40.6 million at year-end 2024 and operating cash flow through the first three quarters totaling $177.8 million versus $23 million in the prior year. Our long-term debt remains low at $25.6 million. These results reflect our focus on increasing patient volume, expanding inpatient services, optimizing cost, and improving revenue cycle management. Looking ahead, we are well positioned for 2026 and beyond. We remain on track to open three new hospitals in 2025. Red River opened last week, and Houston and St. Louis are both scheduled to be open by year end. Our 2026 pipeline includes three to four hospitals with planning already underway for new hospital openings in 2027 and 2028. To provide a little bit more context for John's discussion on the share earnouts, I'd like to give a brief history on NewTex Health. We have evolved through three distinct phases since 2011. The initial growth as a freestanding ER management company where we were instrumental in the opening of 23 freestanding ERs, of which seven were later converted into microhospitals. Note that NewTex did not have any equity ownership in these early ERs. The second phase began in 2027, when NewTex expanded into microhospitals, and where we opened 14 hospitals as a managed company, again, without any equity ownership in any of these hospitals. In 2022, we successfully consolidated 21 hospitals and hospital outpatient departments to transform into a publicly traded company through a share exchange program, where former hospital owners exchanged the hospital shares for new tech shares. In addition to the 21 facilities at merger, there were 17 additional hospitals that were under development as of 2022. These underdevelopment hospitals were given the same considerations as the open hospital and have the right to roll their local shares up to new tech shares at the conclusion of their second year anniversary. Note that all new future hospitals that began development after April 2022 will not and did not have the share exchange option. John will also explain this in more details later.

Today,

Texas Health owns and operates 25 locations across 11 states, over 15 facilities in the pipeline under development. Building micro-hospitals requires significant capital, regulatory expertise, and operational discipline, creating a very high barrier to entry. This is one reason why our model is very unique in the marketplace, why we have so much demand around the country to develop and operate these hospitals. Despite these challenges, we have maintained a strong track record of growth and profitability, physician retention exceeding 95%. Our facilities have improved the lives of hundreds of physicians, thousands of healthcare workers, and hundreds of thousands of patients. Integrity and resilience define us, and we will continue to adapt and thrive amid changing conditions. I am extremely proud of everything that we have accomplished in the past 14 years, and we look forward to building on this success for years to come. I will now turn the call over to John Bates, our CFO. John?

Thank you, Tom, and good morning, everyone. I'm happy to present NewTex Health's financial performance for the periods including the full year of 2024 with the restated 10-K that we filed on Tuesday, November 18th, The first quarter of 2025 with the restated 10QA filed on Tuesday, November 18th as well. The second quarter of 2025 with the 10Q filed on Tuesday, November 18th. And then finally, the third quarter of 2025 with the 10Q that we filed on Wednesday, November 19th. With the completion of these filings bringing us into full compliance with NASDAQ. First, we will discuss the full year of 2024. The good news with this filing is that the changes from the original 2410K filed were non-cash in nature, with most of all the changes being just reclassifications within the balance sheet. To highlight those, the major balance sheet accounts that were affected by these non-cash adjustments were, number one, we corrected the reclassification of non-cash stock compensation obligations totaling $16.4 million related to under-construction and ramping hospitals from equity to liability. And we reclassified related party accounts payable balances of 3.5 million from liabilities to equity. Third, we reclassified 2.9 million of restrictive balances out of cash and cash equivalents and into short-term investments. And finally, number four, we increased accrued income taxes by half a million dollars. When compared to the previously issued financial statements, the changes resulted in an overall increase to liabilities of 13.4 million a decrease in equity of the same amount, $13.4 million, and a very nominal increase in net income of half a million dollars. These adjustments, as noted before, were non-cash in nature, had no material effect on key metrics including revenue, liquidity, short and long-term debt, operating cash flow, adjusted EBITDA, or number of patients as of and for the periods presented therein, and had an immaterial impact on net income. As we mentioned when this restatement work began, we believe there was no fundamental impact to the operations of the business, and after completing the work, we confirmed that belief. You can see that the 2024 year was a record year for the company with 93.8% revenue growth, adjusted EBITDA of $124.1 million, and a 464.4% increase in gross profit, which laid a really strong foundation for what we will discuss shortly, for each of the first three quarters of 2025. So next we'll go through the first quarter of 2025 relatively briefly as well. Like discussed previously for the 2024 period, the changes from the original 10Q that was filed were again non-cash in nature and had no fundamental impact to the operations of the business. But the major change, major balance sheet accounts that were affected by these non-cash adjustments for the first quarter of 24 excuse me, first quarter of 25 were, number one is we corrected the classification of non-cash stock compensation obligations totaling $20.7 million related to under construction and ramping hospitals from equity to liability, just like we did in 2024. Similarly, number two, we reclassified related party accounts payable of $3.5 million from liabilities to equity, which was the same exact line item in the 24 work above. We were just carrying it forward into this period. third item was the reclassification of 2.9 million of restrict balances out of cash and cash equivalents into short-term investments again same exact item in 2024 they were just carrying forward into this period and then the last item was we increased the accrued income tax expense by 2.4 million dollars so when compared to the previously issued financial statements the changes resulted in an overall net increase to liabilities of 19.6 million with a similar decrease to equity of $19.6 million and an increase in net income of $6.6 million. These adjustments were non-cash in nature, had no material effect on key metrics, including revenue, liquidity, short and long-term debt, operating cash flow, adjusted EBITDA, or number of patients as of and for the periods presented therein, and included a small positive impact on net income. As we mentioned when this restatement work began, just like in 2024, we believe there was no fundamental impact to the operations of the business, and after completing the work, we confirmed that belief. Therefore, we aren't going to spend much more time discussing the first quarter of 2025 as it was materially the same as originally reported, with a solid net income attributable to new tax of $21.2 million, a record high gross profit of 55.9% in the quarter, a record high of $51 million in net cash from operating activities, and a record high cash balance of $84.7 million at the end of the quarter. So now let's discuss the key financial metrics for the second quarter and year-to-date June 25 period versus the same period in 24, and then we'll follow that with a discussion of the third quarter and year-to-date December 25 period versus the same period in 24, highlighting percentage changes across revenue, Just a Debit on Income, EPS, and other indicators, all that were detailed in our Form 10-Q for the quarter ended June 25, filed on November 18th, and our 10-Q for the third quarter ended September 30th, 2025, filed on November 19th. So to start, we're going to start on the second quarter of June 25 and compare that to the second quarter period in 2024. So for the second quarter of 2025, total revenue grew 217.5% or $167.9 million to $244 million versus $76.1 million for the same period in 2024. Of the revenue increase, mature hospitals, which are hospitals that were open prior to December 31, 2021, and therefore provided two full years of comparative results, increased their revenue by 203%. for the second quarter of 25 versus a similar period for 24. For the hospital division visits, we saw growth as well during the quarter as they increased by 10.6% or 4,365 visits to 45,573 visits in the second quarter of 25 versus 41,208 visits in the same period in 2024. with mature hospitals growing at 0.6% in the second quarter of 2025 versus the second quarter of 2025. Additionally, population health division had a revenue reduction of 0.8 million to 7.7 million in the second quarter of 2025 from 8.5 million in a similar period in 2024 due mostly to the divestiture of one small entity within the division in the third quarter of 2024. Now, we discussed the growth of the hospital revenue and visits that we've seen in the second quarter of 2025.

Now, let's discuss the overall facility. Yes. What was that? OK.

So we discussed the growth in the hospital revenue and visits we have seen in the second quarter of 2025. Now, let's discuss the overall facility and cost structure and improvements in that area. Total facility level operating costs and expenses that only 48.8% or $119 million of total revenue for the second quarter of 2025 versus 70.3% or $53.5 million for the same period in 2024. As a result of the revenue facility cost improvement, our 2025 second quarter gross profit was $124.9 million or 51.2% of total revenue as compared to $22.6 million or 29.7% of revenue in the 2024 period. It's a 454% improvement in the second quarter of 2025 versus the second quarter of 24. From a corporate cost, corporate and other cost perspective, the general administrative expenses as a percentage of total revenue for the second quarter of 2025 decreased to 5.1% compared to 14% for the second quarter of 2024. Now, additionally, on our second quarter 2025 income statement, you will see a line item for stock-based compensation, with the amount for the second quarter of 2025 being $78.7 million.

Most of that expense is explained in our second quarter of 2015 Q within Note 11. Within that note, we explain the impact of hospitals subject to contribution agreements

As Tom indicated earlier before, in connection with the merger on April 1st of 2022, NewTex self-help co-hosts entered into certain contribution agreements with holders of equity, interest, and subsidies of securities and affiliates. These agreements for these holders agreed to contribute certain equity, interest, and subsidies to Holdco in exchange for equity, interest, and Holdco.

Are you able to hear now or not? Yes. Please continue.

Okay. So, as we were talking about those 17 subsidiaries considered to be under construction at the time of the merger, The under-construction hospitals are hospitals that at the time of the merger had not started accepting patients and did not have any operating results to serve as a basis for valuation. So once these hospitals have opened for two full years, which we denote as the measurement period, the equity holders of these hospitals are eligible to receive a one-time additional issuance of company common stock based upon the earnings of the hospital in the second year of their operations. So of the 17 under-construction hospitals, six hospitals had measurement periods that ended on or before June 30th of 2025. Four of those hospitals had measurement periods that end after June of 2025. And there were three hospitals with no defined measurement period as the three hospitals had not opened as of June 30th. The remaining four hospitals have no measurement period as their hospital development plans have been abandoned. So for the second quarter of 2025, the former equity holders of two hospitals are to receive an additional issuance of 602,798 common stock shares based on the trailing 12 months results of the hospitals at the end of their measurement periods. With four of these hospitals in their measurement period currently, we are accruing for the stock issuance for each in current liabilities. And in the second quarter of 2025, that accrual amounted to $24.2 million that will be trued up each quarter until we get to the end of year two for each hospital, at which time a final calculation will be done and payment will be made 100% in company stock and recorded as non-cash stock expense, comp expense. So let's talk about operating income real quick. So operating income, including the negative impact of the $78.7 million in non-cash stock-based compensation, for the second quarter of 2025 was 33.7 million compared to 5.3 million in the second quarter of 24, representing a 28.4 million improvement quarter of a quarter. Net loss attributable to new techs was 17.7 million for the second quarter of 25, which included the negative impact of the 78.7 million of non-cash stock comp expense noted previously. The comparative net loss attributable to new techs was 0.4 million for the second quarter of 24, showing a 17.3 million decrease period over period. From an earnings per share perspective, our diluted EPS for the second quarter of 2025 was a loss of $2.95 a share compared to a loss of 7 cents a share in the second quarter of 2024. Adjusted EBITDA attributable to new tax, which increased 64 million from 6.8 million in the second quarter of 2024 to $71.6 million in the second quarter of 2025. So now we finished the second quarter. Let's move to the second quarter of 2025. We'll do the six months ending June of 2025 compared to the six months of 2024. Total revenue for the first six months of 2025 grew by 218% or $312 million to $455 million versus 143.5 million for the first six months of 24. Of the total revenue increase, mature hospitals increased their revenue by 195.2% for the first six months of 25 versus the same period in 24. Hospital division visits saw similar growth as they increased by 15.5%, or 12,566 visits, to 93,842 visits in the first six months of 25, versus 81,276 visits in the same period in 24 with mature hospital visits growing at 15.5% in the six months into June versus the same period in 2024. Additionally, the population health division had a revenue decrease by 2% to 15.5 million in the first six months of 25 from 15.9 million in the first six months of 24. From a facility and corporate cost perspective, it also showed improvement for the first six months of 25 relative to the same period in 24. Total facility-level operating costs and expenses represented 46.6% or $212.5 million of total revenue for the six months into June of 25 versus 77.2% or $110.8 million for the same period in 24, which is a decrease of 30.6%. The gross profit for the six months into June of 25 was $243 million or $53.4 million of total revenue as compared to $32.7 million or 22.8% of total revenue in the same period in 24. A $210 million increase for the six months into June of 25 for the same six months of 24. From a corporate and other cost perspective, The G&A expenses as a percentage of total revenue for the six months it did 25 decreased to 4.9% or $22.5 million from 13.5% or $19.3 million for the same period in 24. Operating income for the six months ended June of 25 was $114 million compared to $6.7 million for the six months ended June of 24 And net income attributable to NewTex, Inc., improved by $4.2 million from a loss of $0.7 million for the six months of 24 to income of $3.5 million in the first six months of 25. And adjusted EBITDA attributable to NewTex increased $138 million, or 2,144%, from $6.4 million in the first six months of 24 up to $144.4 million in the first six months of 25. Now, lastly, let's go on to the results for the third quarter into September 30th of 25 and compare those results to the third quarter of 2024. For the third quarter of 2025, our total revenue grew 240% or $189 million to $267 million versus $78.8 million for the third quarter of 24. The hospital division drove most of this growth, generating $260.2 million up 262.8% from $71.1 million for the same quarter in 2024. Now, of the total revenue increase, mature hospitals, which are hospitals that are open prior to December 31st of 2021 and therefore provided two full years of comparative results, increased revenue by 28.9% for the third quarter of 2025 for the same quarter in 2024.

Excuse me, John. Sorry, John, your line is distorting again.

better or not right now? Are you okay here?

No, it's still breaking up. Okay.

All right, let's see. I mean, is that any better at this point? No. All right. Okay. So I can continue if you'd like, or would you like me to hold off so I'm not able to hear anything right now?

No, sorry, John. We still can't hear you.

Okay. So I can attempt to call back in if that's what needs to happen. Let's see.

Can you hear me any better now? Yep. Yep, you're clear now. All right. Is that better now?

Yes, it is. Can you hear me now? Okay. So I'll continue from here and tell me if you can't hear me. So we were just talking about of the total revenue increase, this is in the third quarter of two, I'll start back over for the third quarter. So for the third quarter of 2025, our total revenue grew 240% or 189 million to 267.8 million versus the 78.8 million for the third quarter of 24. The hospital division drove most of this growth, generating $260.2 million, up 262.8% from $71.7 million for the same quarter in 24. Of the total revenue increase, mature hospitals, which are hospitals that are open prior to December 31st of 2021, increased their revenue by 208.9% for the third quarter of 25 versus the third quarter of 24. Of the $260.2 million in hospital revenue, $182.1 million, or approximately 70%, related to a combination of both higher QED claims as well as accepted independent dispute resolution process.

With regard to arbitration-related revenue, due to the continual underpayment from payers, we have continued to submit between 60% to 70% of our business through the IDR process.

And we have one legal determination on over 85% of the claims submitted. Excuse me, John. Sorry. Again, it happened again. Should I just let Tom? Should I hand it back to Tom? Yeah, why don't you hand it back to Tom at this point, and we'll come from there.

Okay. Dr. Bowe? Apologize about technical difficulties. Can we be okay?

Yes.

Okay, perfect. Okay, I think John was talking about the – let's see here.

So, Tom, we were talking about the – can you hear me at all? The third quarter of 25.

Were you able to hear that at all or not?

Yeah, we heard a little bit. I don't know, John, but I'm not sure what happened there. Go ahead, John.

Yeah, I'll try to log back in. I'll try to call back in through my cell phone and see if maybe that works better.

Okay? Give me one second. I apologize, everyone. And again, ladies and gentlemen, thank you for your patience as we work through these technical difficulties. We will resume again shortly. Are we waiting for John? Okay. Are you there? Yes. Can you hear me or not? Mm-hmm. Can you hear me okay?

Yes. All right. So I'm back. I'm going to start back over again with this last piece.

Okay, thank you. Can you hear me okay? Tom, is it able to be heard? Okay. All right, I'm almost done, so we'll go through.

And if you can go over the stock, this compensation expense, because in here, and second quarter, obviously, start with that.

So, Tom, you ready for me to continue? Yes. Can you hear me okay? Okay. I'm going to continue right now. You let me know if you can hear me okay. All right.

So I'm going to finish with the third quarter. We were talking about just on the revenue side. We were talking about on revenue of the $260.2 million in hospital revenue. 182.1 million were 70% related to the combination of both higher acuity claims as well as success through the IDR process. And with regard to the arbitration-related revenue, due to the continual underpayment from payers, we have continued to submit between 60% to 70% of our business through the IDR process. And we have won a legal determination on over 85% of the claims submitted. and we currently have an average collection rate of over 80% of the legal determination wins. Arbitration costs approximate between 24 to 26% of the arbitration revenue. Now for hospital division visits, we saw growth as well during the quarter as they increased 11% or 4,564 visits to 46,232 visits in the third quarter of 25. versus 41,668 visits in the same period in 24, while mature hospitals increased by 0.6% in the third quarter or decreased by 0.6% in the third quarter of 2025 versus the third quarter of 24. Additionally, the population health division had a revenue increase of half a million to 7.6 million in the third quarter of 25 from 7.1 million in a similar period in 24. So we discussed the growth in the hospital revenue visits and we've seen in the third quarter of 25. Now let's discuss the overall facility and cost structure and improvements in that area. Total facility level operating costs and expenses represented only 42.2% or $112.9 million of total revenue for the third quarter of 25 versus 72.2% or 56.9% for the same period in 24. As a result of the revenue and facility cost improvements, Our 2025 third quarter gross profit was $154.9 million, or 57.8% of total revenue, as compared to $21.9 million, or 27.8% of total revenue in 2024, which was a 606.7% improvement in the third quarter of 2025 versus the third quarter of 2024. And from a corporate and other cost perspective, the G&A expenses as a percentage of total revenue for the third quarter of 2025 decreased to 4.2% compared to 12.5% for the same period in 2024. And so similar to what we talked about in the second quarter, on the third quarter income statement, you're going to see that same stock-based comp line item with the amounts for the third quarter of 2025 being $13.2 million. And most of that expense is explained in the third quarter of 2025 10Q, again, within Note 11. So I'm not going to read through all the specifics on it, but what I wanted to highlight was, remember we talked about of the 17 under-construction hospitals that we started with, currently at the end of September, seven hospitals had measurement periods that had ended on or before September 30th of 25. Three hospitals had measurement periods that ended after September 30th of 25. And there were three hospitals with no defined measurement periods as the three hospitals have not opened yet as of September 30th, then the remaining four hospitals out of that 17 have no measurement period as their hospital development plans had been abandoned. So for the third quarter of 25, the former equity holders of one hospital are to receive an additional issuance of 307,700 shares based on the trailing 12 months results of the hospitals at the end of their measurement period. With three of these hospitals in their measurement period currently, we are accruing for the stock issuance for each in our current liabilities. And in the third quarter of 2025, that accrual amounted to $11.2 million that will be trued up each quarter until we get to the end of the year two for each hospital, at which time a final calculation will be done and payment will be made 100% in company stock and recorded as a non-cash stock comp expense. Now, related to operating income for the quarter, including the negative impact of $13.1 million of non-stock-based compensation expense for the third quarter was $130.4 million compared to $9.7 million in the third quarter of 2024, representing a $120.7 million improvement quarter over quarter. So net income attributable to NewTex Health was $55.4 million for the third quarter of 2025, including the negative impact of the $13.1 $1.2 million non-cash stock-based compensation expense noted previously. The comparative net loss attributable to NewTex Inc. was $8.8 million for the third quarter of 24, showing a $64.2 million increase period over period. From an earnings per share perspective, our diluted EPS for the third quarter was $7.76 a share compared to a loss of $1.72 per share in the third quarter of 24, which is a $9.48 per share increase period to period. And lastly, related to adjusted EBITDA attributed to new tax, it increased $88.9 million from $9.7 million in the third quarter of 24 to $98.5 million in the third quarter of 25. And now the last item to discuss is going to be the nine months of September 30, 2025, compared to the same nine months ended September 30, 2024. And total revenue for the nine months of 25 grew by 225% for $501.2 million to $723.6 million versus $222.3 million for the first nine months of 24. The hospital division drove most of this growth, generating $700.5 million, up 251.4% from $199.4 million for the same period in 24. So of the total revenue increase, mature hospitals increased their revenue by 200% for the first nine months of 25 versus the same period in 24. So of the $700 million in hospital revenue, $462.9 million or approximately 66.1% related to combination of both higher acuity as well as success to the independent dispute resolution process. And with regard to the arbitration-related costs, similar results that we discussed in the quarter, Due to the continual underpayment from payers, we have continued to submit between 60% to 70% of our visits through the IDR process. We have won legal determinations on over 85% of the claims, and we have an average collection rate of over 80% on those legal determination wins. Again, arbitration costs approximate somewhere in the 24% to 26% of that revenue. When it comes to visits, hospital division visits saw similar growth. as they increased by 13.9% or 17,130 visits to 140,074 visits in the first nine months of 25 versus 122,944 visits in the same period of 24, with mature hospital visits growing at 1.8% in the nine months ended September 2025 versus the same period in 2024. Population health. had revenue increased by 1% to $23.1 million in the first nine months of 25 from $23 million in the first nine months of 24. Facility and corporate level costs continued to show improvement in the first nine months of 25 compared to the same period in 24. And you look at total facility level operating costs represented about 45% or $325.4 million of total revenue for the nine months into September 25. versus 75.4% or $167.7 million for the same period in 2024, which was a decrease of 30.4%. The gross profit for the nine months into September of 25 was $398.1 million, or 55% of revenue, as compared to $54.6 million, or 24.6% of revenue in the same period in 24, which was a $343 million increase for the nine months of 25 versus the same period in 24. From a corporate and other cost perspective, the G&A expenses as a percentage of total revenue for the nine months into September of 25 decreased to 4.7%, or $33.8 million, from 13.1%, or 29.2%, for the same period in 24. Operating income for the nine months into September 30th of 25 was $244.7 million, compared to $16.4 million in the nine months of 24. And then income attributable to new techs, improved by $68.5 million from a loss of $9.5 million for the first nine months of 2024 to income of $59 million in the first nine months of 2025. An adjusted EBITDA attributable to new tax increased $226.9 million, or over 1,400%, from $16.1 million in the first nine months of 2024 to $243 million in the first nine months of 2025. Finally, our balance sheet remains very strong with cash and cash equivalents at September 30th, 2025 at a record high of $166 million, up $125.4 million from $40.6 million as of the end of 2024. Our continued success with the collection efforts related to the independent dispute resolution process is allowing us to get paid more fairly for the services we provide and was a big part of this process. With regard to accounts receivable, our balance at September 30th was $387.4 million, an increase of $155 million from the $232.4 million at the end of December. With regard to cash flow, net cash from operating activities was very strong at $177.7 million for the nine months of 2025, which was an increase of $154.6 million from the same period in 2024. And then on the liability side of our balance sheet, total bank or equity-type debt increased by $7.7 million to $49.1 million as of September 30th, from $41.4 million at December 31st of 2024, with the majority of this debt relating to items like equipment loans from our hospitals for MRIs, x-rays, ultrasounds, and CT machines. Outside of this $40-plus million of bank-type debt, the only other items materialized a material that looked like debt on the balance sheet of the liabilities related to financing and operating lease liabilities, which are just future lease payments due to landlords on our hospital facilities. We've discussed these in the past, so I'm not going to belabor this now, but I will say that most investors and analysts don't view these right-of-use liabilities as real operating debt, so I wanted to clarify that for you. With all of this said, our balance sheet remains very solid, and we continue to strengthen it with our positive operating performance. And our current financial position has put us in a very great spot to be able to execute on all of our initiatives in our 2025 operating plan, including the opening of the three new hospitals later this year, as Tom mentioned earlier. With that said, I apologize for any of the technical difficulties today, but I'm now going to turn it over to Warren Hussain, our president.

Thank you, John, and good morning, everyone. Thank you for joining us today. I'm pleased to provide an update on Nutex Health Population Health Division, which supports our commitment to value-based care. As a reminder, our overarching strategy at Nutex Health is to build an integrated healthcare delivery system combining hospitals and medical groups also referred to as IPAs. Our IPAs are comprised of networks of primary care physicians and specialists located around our facilities. The IPAs 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 coordinated, cost-effective, and with better outcomes for our patients. Our IPAs would send patients to our hospitals, and our hospitals would 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 Nutex Health. One thing we would like to note is that the physicians in our IPAs can refer their non-IPA patients to our emergency rooms as well, and we are already starting to see this in Phoenix. We currently have over 40,000 patients enrolled in our IPAs in various risk-based arrangements. Of note, I am happy to report that we now have more than 1,900 Medicare Advantage members in our Houston Physicians IPA. In Phoenix, we now have over 30 primary care physicians and a robust specialist network. Phoenix is now currently in its first Medicare annual enrollment period, and we will find out soon how many patients we have enrolled. Our IP in Los Angeles is still very profitable. Houston is now profitable as well, and Florida continues to be profitable. Margins continue to be moderated by ongoing investments in our new markets, such as Phoenix and Dallas, and soon San Antonio. With that, I will now turn it over to Wes Bamberg, our Chief Operating Officer.

Thank you, Warren, and good morning, everyone. I'm pleased to share the company's operational results, which demonstrate our ability to deliver high-quality care while achieving steady growth and service line development. As previously reported, our overall visits increased by 13.9% in the first nine months of 2025 compared to the same period in 2024, and our mature hospital visits increased by 1.8% in the first nine months of 2025 versus the same time period in 2024. Our continued growth reflects the successful execution of our core model. Specifically, this success is powered by our leadership team's focus on our key strategic growth objectives, increasing overall volume, developing new service lines, and expanding our observation and inpatient services to safely manage more complex patient needs. By leveraging our efficient operating model, we achieve superior patient outcomes and satisfaction fueling our continued growth. Having joined Nutex Health in early October and with over 20 years of experience working across the largest publicly traded healthcare companies in the U.S., I have developed a comprehensive understanding of the critical elements required for sustained outperformance in the industry. My initial observations confirm that Nutex possesses the fundamental strengths necessary to thrive in this evolving landscape. With a sound operational model, financial discipline, and uncompromising patient-centered philosophy, NewTex is exceptionally well-positioned for the future. These positive attributes are the key elements that will allow us to navigate industry challenges, expand our market share, and continue to serve as a trusted, high-value provider for the communities we support. I am confident that our best years of strategic growth and value creation lie ahead. Thank you, and back to you, Jen.

Thank you, Wes. And thank you to Tom, John, and Warren for those updates. We'll now move to the Q&A section. Operator, please provide instructions for our callers.

Thank you. Ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove 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, while we pull for questions. And the first question comes from the line of Anthony Vendetti with Maxim Group. Please proceed.

Thank you.

Maybe just I'll start with just a high-level question and then ask you a little bit about what happened at Red River Microhospital. Why was it closed? And I saw you just recently reopened it. maybe just talk about the process there. And then just in terms of the relationships you have with the 25 facilities now that you have open in 11 states, if you could just maybe, Tom, provide like an overview of how you contract with the physicians. I know I think, you know, John mentioned on the call after the first year, you know, they get an equity stake. Are they all pretty much follow the same template in terms of how you negotiate with the physicians that staff that hospital? Are there targets they need to reach to get that equity stake? Maybe just talk about that high level and then just talk about the situation at Red River. Thanks so much.

Great. Thank you very much, Anthony, for that question. So I'll tackle the first question with Red River. So yes, You're correct. Red River was one of the 21 hospitals that came with us when we emerged. However, if you remember in 2020, it was an incredibly tough year for us with the introduction of the Crisis Act halted in a roughly 35% reduction in revenue. And because of the reduction in revenue at that time, Red River was not in a position to be profitable. In fact, it sustained operating losses and subsequently closed down the river in addition to other hospitals. So now that our reimbursement environment is better with arbitration, and on top of that, Sherman as a town has grown quite a bit in the last two years. multiple IT companies being there. So as an example, just right down the street from us, there's a company that's making chips. Well, not the chips, but they make the waffles that the chip sits on. And so lots of economic development, a lot of new employees. So a combination of that and better reimbursement, we just felt that it was time to reopen the hospital. Does that answer your question, Anthony?

Yes, thanks. And maybe just to follow up to that on the physicians. So the physician group that you contracted with when you reopened that hospital, is that a new group?

How did that come about? Okay. Can you hear me okay?

You cut out just a little bit, Tom, but go ahead.

Okay.

Yeah, I'm sorry about that. In any event, so yes, the physician group is a brand new group, not the old group that was running it before. And the way that we've structured this is that Dutex Health owns 70%. Physician group owns 30%. And we also structured a physician staffing service contract with the physicians to essentially run the hospital and staff the hospital with us. And so when we rolled up our hospitals, TexHealth owned an average of 80% of the hospitals. The minority shareholders owned roughly 20%. And so this model is very consistent with our previous structures that we contracted with the physicians.

Okay, so does that sort of answer my second part of the question, like is this the template for most of the other micro-hospitals, or are there some situations where that template is different depending on the state that you're in?

Excuse me.

Pardon me, Anthony, but I think Tom disconnected real quick. One

one moment uh we'll be right anthony can you hear me okay this is john john i can hear you fine yeah yeah yeah so i think the answer to your last question is the structure is very similar there's no material differences in the structure in fact so there's not a lot that you would expect to change state by state i mean certainly there's different relationships with some of the doctor groups in general but but across the board there's not really a major major change or differentiator because of a certain state when we open these up so And there's a lot that's improved and changed, as Tom indicated, at the Sherman location, both with the companies that are building in and of around it and just the whole structure and the way where NewTex is now versus where it was a couple years ago. So there's a lot of positives that support the concept for reopening it, and we're pretty excited about it being opened.

Okay. And then just lastly, John, in terms of the structure, like you said, the templates, most pretty similar across your micro hospitals. Maybe just talk about the incentives the physicians have to get the profitability. Does their equity stake depend on that? Or what metrics does it depend on after like the first year or the second year? Maybe just give a little more color on that. That'd be helpful. Thanks.

So, Anthony, are you talking about the non-earnout type ones? these ones that now are just opening up as in position without the earn-out concept? Is that what you're asking, or are you asking specifically about those?

Both. If you can talk about the earn-out ones versus the non-earns, that'd be great.

By the way, John, I'm back on. I apologize about that, Anthony. Really bad technical difficulties today. Okay. So, Tom, I answered the question.

Yeah, I answered the first part. I think he's asking now about the structure of the earn out facilities, how it's different from say one like Sherman or something that's opening up. And so, so Anthony is, I know we've talked about in the past, the earn outs, which we've described them pretty in detail in the cues. Remember those, those are, we calculate the number of shares at the end of that two year period, right. To go through and value what their position would be. You know, we, there is in this scenarios, if they have a 20% stake or 30% stake, which is normally the case somewhere in the, in that, somewhere around that amount, that on the earnouts, they ultimately resolve themselves at the end of the two-year period. And where that earning structure is at the same multiple, of course, that the original companies, when the company went public back in 2022, the same calculator and all that, that's how they get given their shares based on their defined ownership at the beginning. And so you talk about incentives, certainly they're incented to do as well as they can, not only in the first two years, That's just to get the stock. But in most scenarios, they're also operators and employees of the facility. So they benefit from working in the facility and seeing the profit from that as well and giving good outcomes, of course. So they're tied in. In some cases, they have a relationship on the asset entity, which is the private side. Then, of course, their employees and owners in the actual hospital side of it. And then they're also, in a lot of cases, tied into the doctor billing side, which the doctor billing side, which we do the billing for them, but the doctors own 100% of that. They have a benefit on that side. So that's for the earn-out ones, right? And then these others that aren't affiliated with an outrun, I think everything else we just described, I mean, they have an ownership in that facility. As it becomes profitable, they benefit from that, and they share in the ups and the downs together. Of the corporate group, which is the whole idea. We want everyone to be lockstep side by side with each other as we grow. And it takes time to do that. And I think we have a great partnership in place specifically in Sherman, along with all the other facilities as well. I think that's going pretty well. Tom, you can add that.

Yeah, Anthony. So, you know, you're right. I think John has already hit the nail on the head for most. But for the ones that that earn out and receive new tech share, in essence, their success is dependent on new tech success now so that when the ocean rises, all the boat rise. And so I think that that is a very nice privilege for physicians to have because that is very unique in healthcare. Not too many companies could offer stocks like that to healthcare employees. And then on top of that, like John said, the physician also has an equity ownership on the professional entity, which is the physician entity. And so the physician makes an hourly wage when they work, but then if the professional entity is profitable, then they will also be profitable in addition to owning new tech stock. For the physicians that did not roll up their new tech shares, then they stay at the local level. And if the facility is profitable, then they get a minority distribution quarterly on top of their potential profitability on the physician side as well as hourly work. So we treat the physicians very fairly. And as you can see on our financials, we did a fair amount of minority equity distribution in the first nine months. And then you can see on the minority profit, the physicians also did very well.

Okay, great.

No, that was very helpful. I'll jump back in the queue. Appreciate it. Thank you, Anthony.

The next question comes from the line of Bill Sutherland with the Benchmark Company.

Please proceed. Thank you. Good morning, guys. I think I'll just leave it at one question in the interest of time. I'm curious, as this process moves ahead, the IDR process, are you starting to have any different kinds of discussions with some of the payers as far as just, you know, wanting to have more productive negotiations prior to moving to the claims process?

Yeah, Bill said thank you for covering us and thanks for being on the call. But yes, the answer is yes. Over the past, I would say, three to four months, we're hearing a lot more from payers to try to negotiate better and network rate contracts. And we evaluate every single one of them and we take these very, very seriously. And if the contract is fair and reasonable, we would definitely take it.

And so we're in the process of evaluating all of them.

That's right. And in the course of doing that, as you move a payer away from, you know, realizing these claim wins, will it – really result in the same kind of financial impact in terms of the margins on that business?

Yeah, I can speak to that, Tom. Yeah, go ahead, John. So the reality, well, we'll see right as we go through. It depends on where the price points land. But remember, even when you determine a fair and reasonable payment, which hopefully we will be able to get and avoid having to go through the RDR process, one of the benefits of avoiding it is the fees related to going through it. As we're early stage in some of these where we have been able to get a reasonable contract and avoid the necessity of going into the IDR process, so far the perception is that the net impact when it comes to bottom line should be nominal because of the revenue. In some cases, you'll get similar revenue, maybe slightly less, but very close, but you're removing you know, 24% to 26% of the costs. So it ends up being, I think, in a very similar position, but it's early stage. And I think as we finish out the year and walk into the first part of next year with all the other activity going on from a regulatory standpoint, I think we'll start to see movement one way or the other, and we're watching it very closely. We're very interested, as Tom indicated, in having contracts if we can because that we all would like to avoid the process of having to go through the time and effort and cost of going through the audio process if we can avoid it. Yep. Sounds good.

Thanks for all the color guys. The next question comes from the line of Carl Burns with Northland Capital Markets. Please proceed.

Thanks for the question and congratulations on your success and progress. I'm just wondering, you know, now that you've got, you know, greater history with respect to the IDR process, you know, what are you thinking in terms of budgeting relative to timeline to break even on startups going forward? And then I have one quick follow-up. Thanks.

Yeah, Carl, it's a great question. Thanks for raising it. So, yeah, no, there's no doubt that with the movement in the direction of what we feel like a requirement to have to go through the IDR process, It's been a very successful process for us. Now, it does, as we mentioned before, it takes time to get those dollars in, so it can be anywhere between, say, five to seven months to fully realize and get paid on a claim that does go through the process. You get the first payment within 30 to 60 days, and then you have to go through that process. So the long answer to your short question is the break-even process is moving up, certainly. And I think we'll continue to watch that closely. But we budget for something taking somewhere between 12 to 15 months normally to get to a break-even position. It probably shifts easily by a quarter if we continue to be successful in opening these up. But remember, it still takes from day one five to seven months for the dollars to come in at the fair and reasonable rate. So as a result, you really can't see it prior to that point if you still end up having to submit 60% to 70% of our claims through the process. But it certainly does improve. And actually what it gives us probably more is it might be a little bit of an improvement on getting to break even, but the bigger impact is on the back end in year one and year two, where you're at a more solid, more reasonable, what we would expect level of profitability a little bit sooner than on the back end, but you still have to wait probably that first nine months to a year to get to a break-even scenario. So hopefully that helps answer your question, Carl.

No, great. Excellent. That's very helpful. And then, you know, shifting gears a little bit, are you seeing other opportunities like Homer G. Phillips in St. Louis? And, you know, what might we expect over the next, you know, 12, 24 months there? Thanks.

So, yes. Yes. Carl, are you referencing our St. Louis Hospital, the former Homer H. Philip Hospital? Exactly, yeah. Yeah, so that is on the agenda to be open this year, and we hope to open either mid or late December. But the strategy is essentially the same, providing the best customer service, providing accessibility care to that population. And the location of where that hospital is is essentially very close to downtown St. Louis, which is essentially a healthcare desert. And so we hope to capitalize on that by providing the best care so that people can start using us. Does that answer your question, Carl? Yeah, yeah.

I'm wondering if there's other opportunities that you've presented with that are similar to that that could be opportunistic going forward.

Oh, yes. The problem with micro-hospitals are that they just don't exist. Or if they do exist, they are located in areas where it is very difficult to make profitable. And so that's why historically we've had to build these from the ground up. And I think we mentioned this, because if a hospital doesn't exist, then NewTex Health does not have a hospital to operate in. However, there are certain hospitals that are existing out there that we strategically look to acquire. And so, yes, we are essentially in the lookout to acquire any of those existing hospitals, assuming that they fit all of our criteria. And so, yes, there are opportunities out there, few and far between, but you just have to look.

Understood. Cool. Great. Congrats again. Thanks. Thank you, Carl.

The next question comes from the line of Bradford Seagraves with North Bank Capital Management. Please proceed.

Hi, thank you. Can you please provide an update on the buyback, how much you've bought and at what price?

Brad, I'm sorry. Were you talking about buyback of the share buyback?

Is that what you're asking?

Yes. Okay.

No, at this point, we're in the process of putting that in place.

So at this point, no shares have been bought back. Okay. Understood.

And then more broadly, can you talk about capital allocation priorities? You know, the cash is growing on the balance sheet. And I'm curious to see what your thoughts are on what the uses of that cash might be.

Yeah, I can start on that, and then Tom can add to it as well. Certainly the buyback concept that you referenced is something that we've already announced it, so it's something that we're very serious about, and we'll look at that very closely in the very short term. Certainly there's opportunities that we try to grow and add good situations when it comes to opening up hospitals. We talked about, yes, from time to time we can find existing ones, that we could potentially spend that money on. So I think that's a big one. And then we'll look at some other opportunities outside of investments for now. So we have other opportunities to look at service line improvements. There's the IPA business, which Warren talked about as well. So there's opportunities in those areas. So that's kind of the direction that we're looking right now. And we'll watch as we finish out the year to see cash continues to be strong and look for some of those situations to pop up and and make good decisions on where we spend that money.

Yeah, so to answer your question, Brad, excellent question, by the way. And this is definitely a good problem to have. But in essence, we are, well, the cash buyback program, as mentioned. And we may or may not increase that in the future. That is to be determined. But on top of that, we are looking hard for existing facilities like Carl brought up to acquire so that we don't have to go through the build-up, ground-up process. And then thirdly, as Warren mentioned, we are looking to expand our IPA business so that we can have an IPA surrounding each of the hospitals. And the reason for that really is just a very good symbiotic relationship between the hospital and the IPA business, which, once again, is very unique in the healthcare industry. And then, fourthly, we would like to invest into our current hospital to expand additional services capabilities. So, as an example, I think I mentioned behavioral health. We are investing quite a bit in upgrading our hospital so that we can see more behavioral health patients on the medical side, as an example. And so with those types of investments, we have to find specialists. We have to find the correct equipment. We have to find people that are skilled at handling behavioral health, as an example. So those are all essentially capital allocations that we have currently. I'm sure there will be more need for capital allocation in the future, but those are basically the existing ones that we have at this point.

Does that answer your question, Brad? Thank you.

Yes. And last one for me. Can you talk about the inpatient utilization, you know, where it was a year ago, where it is today, and where you think it can go over the next 12 to 24 months?

Yeah, absolutely. Over the past, actually, two years, we have began a push to admit more patients into our own hospitals. And this is not an easy process or a straightforward process because in order to get more patients admitted, we need specialists. We need hospitalists. We need people that could take care of patients in the hospital. And so over the past two years, we've been relatively successful at ramping more patients into our hospital and not have to transfer them out to other hospitals. And so we're doing very well from that standpoint. And as you can see from the revenue, that partly explains why the revenue has increased substantially more than the patient visit. And so that's one variable and one factor. But for now, as of today, I would say that we're only at roughly 25% to 30% inpatient capacity. And as we increase more, that number will only get better. And we have a system-wide initiative to admit as many patients as we can to our hospital so that we don't, these patients don't need to go off to other hospitals. And in fact, patients really love to stay at our hospital. None of them want to be transferred to other big system hospitals because the care that they receive at our hospital is probably superior and second to none. But unfortunately, sometimes we just don't have the expertise and the specialists to take care of these patients. And that's why we have to transfer them out. But if we can keep them in our hospital, we will definitely do that.

Great. Thank you. Yep. Thank you, Brad.

The next question comes from one of Jean Manheimer with Freedom Capital Markets. Please proceed.

Thanks. Good morning. And a lot to digest here. Congrats on getting the numbers current. I wanted to just, I think that last question segues well into the revenue per visit being up so much. It sounds like you're not breaking out the arbitration revenue this quarter specifically. What is the reason for that? And maybe you can share at a minimum, you know, was it similar to last quarter or greater or less than Q2?

Yeah, I can speak to that. we're not breaking that specifically out because it's really part of our business now is the main reason. So comparatively, I think you've seen, you know, period to period to period, you know, an improvement there. So it's of a similar nature. I know that we talked about how, if you remember back in the first quarter, when the collection percentages play into this too, so that we only were seeing it was early in the process at the end of the year and into the first quarter where the collection percentages were new. And so we were only in the 70-ish percent range. And now we've worked our way up into the 80% range. So some of that revenue is just the natural progression of going back and realizing, okay, instead of 70% or 75%, which we were seeing kind of in the middle part of the year, now we're at 80%. So that collection percentage is a decent amount of that uptick, which is a little bit of a cumulative impact going back and addressing that as realization continues to improve. But in the revenue discussion, we talk about how much of our revenue within the quarter and a year related to the IDR process. So that's kind of the direction we plan to go with that. So outside of that, I think we'll watch it closely and see if we can get more detail. We're more than happy to provided, but I think we've been pretty transparent on that piece at least the last couple quarters now, and I think today earlier, and you saw in the releases, a discussion about the piece of our revenue that relates to that. So we'll watch that closely and continue to work it from there.

Thanks. That's helpful, John. Appreciate it. And just going back to that inpatient utilization, so I think, Tom, you're saying your occupancy is now about 25% to 30% across all your hospitals. How does that compare to, say, two years ago?

Two years ago, it was a lot less than that, Gene, unfortunately. And I think partly because of the reduction in revenue back in 2022, we started this initiative. And so now this initiative is a part of our normal operating procedure now. And we hope to grow that inpatient volume to be much higher than that over the next few years.

That's excellent. Okay. And one more statistic I want to just mention. It sounds like the mature hospital visits decreased by about half a percent. Normally, I mean, I think we'd want to see that. marginally higher? Was there anything to call out that led to a decrease year over year?

Yeah, we're scratching our head on that also, Gene. Nothing materially has changed in terms of operations. Our business development, marketing, physician outreach, physician care, everything is pretty much the same. The only thing that potentially could have occurred this year versus last year was that there was a COVID spike last year around late summer, whereas we're not seeing quite a high COVID spike this year. That may have been it. I'm not sure. But, yeah, it's a head scratcher for sure. But we're definitely going to continue to watch it and definitely going to focus on that so that we can continue the growth quarter over quarter.

Okay. That makes a lot of sense. Okay, and last question, with respect to stock-based comp, obviously a lot of discussion around that. In terms of modeling that going forward, I realize there are a number of factors to consider, but that Q3 number was relatively low. Is that the right way to think about it going forward, or could we continue to see some big swings there?

Yeah, I mean, I would say, Gene, great question. First of all, I think we're definitely through the big portion of all the earnouts. We only have a few left, as we described in the queue. And I think you're referencing in the table that we've provided in Note 11 where it talks about the three that are currently open and in the period where they can be calculated that run through kind of the deadline. And I think that... you know, the way that calculation is done, which is all we can do is use the data that we have so far with some level of a projection on that. And if they continue to move in the direction or similar to what the others have done, it should be better than that. But we didn't want to be in a position to assume that at this point. So I think the numbers you have there are certainly ones that you can use from a projection standpoint, and we are optimistic that maybe we can do better in that case, and they have a decent amount of period in all three cases left before they get to the final stage. I believe the earliest one is the end of the first quarter of next year, and so that's still another six months of going into prime time kind of maturity stage, and then the other two that are out there all the way till the end of next year. So they're very, very early stage. So I think it should improve from where you see it right now.

Okay, that's terrific. Thank you and congrats again. Yeah, thanks, Gene.

Thank you, Gene.

Thank you. This concludes the question and answer session, and I'll hand the call back over to Jennifer Rodriguez for closing remarks.

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 at newtechshealth.com, and we'll get back to you promptly. On behalf of the NewTex management team, thank you all for joining us for our second and third quarter 2025 earnings call, and we apologize for the technical difficulties. We've covered a lot, 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. Take care, everyone, and we look forward to keeping you updated on our journey.

Thank you. This concludes today's conference. You may disconnect your lines at this time. We thank you for your participation.