Assure Holdings Corp.

Greetings and welcome to Assure Holdings' third quarter 2020 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Scott Kozak, Assure's Director of Investor and Media Relations. Thank you. You may begin.

Good morning and thank you for participating in today's conference call to discuss Assure Holdings financial results for the third quarter ended September 30th, 2020. Joining us today are Assure Holdings Executive Chairman and CEO John Farwanger, CFO Trent Carman, Assure's Founder and Director Preston Parsons, Alex Rasmussen, Executive Vice President of Operations, Sean Blosser, Vice President of Revenue Cycle Management, Stephanie Krause, Vice President, National Technologist Manager, Paul Webster, Vice President of Managed Care, Gary Bennett, Vice President of Revenue, and John Price, Assure's newly hired Vice President of Finance. Before we start, please note that remarks on this conference call may contain forward-looking statements within the meaning of applicable securities laws about Assure's current and future plans, expectations, intentions, results, levels of activity, performance, goals of achievements, or any other future events or developments. Forward-looking statements are based on information currently available to management and on estimates and assumptions made based on factors that management believes are appropriate and reasonable in the circumstances. Such forward-looking statements include but are not limited to the following, the proposed financing being led by multiple prominent U.S. institutional investors, closing of the financing and accelerating the company's business, the proposed use of proceeds, The company's plans to complete a Form S-1 and uplisting. Advancements the company is making in its three corporate objectives. The company remaining cash flow positive. The company continuing to recover payment from legacy cases from 2016, 2017, and 2018. The company recovering a portion of the claims outstanding with a private health insurance company associated with the Payors Louisiana affiliate. The company achieving 30% of its commercial insurance volume on a run rate basis supported by in-network agreements. by the end of 2020 and 50% by the end of 2021. Surgical centers and private hospitals in which 40% of the company's procedures are performed remaining insulated from elective procedures disruptions, the scheduling of the company's postponed procedures, the company's expansion plans, the company winning facility-wide contracts and such contracts generating thousands of procedures annually, the company increasing revenue through negotiating revenue share agreements. The company's plans to augment its professional revenue by bringing an off-site neurologist function within the organization by bringing such function inside the organization and ensuring the quality of service to the IONM process and enabling the company to capture a greater share of revenue and margin. The company completing 9,500 to 10,000 total procedures in 2020 and growing its total procedures by 40% in 2021. The equity offering will strengthen the company's negotiating positions with central bank. The company's education and training program will help alleviate the hiring bottleneck of trained certified IOM technologists and facilitate staffing for the company's emerging growth opportunities, the effects of the clinical research we produce, and the effect of the increased proportion of hospital contracts that cover government cases. However, because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict, and many of which are outside of our control. and there can be no assurance that such estimates and assumptions will prove to be correct. Many factors could cause actual results to differ materially from those expressed or implied by the forward-looking statements. Such factors include but are not limited to the following. The company's three corporate objectives may not be advanced. The company may not remain cash flow positive. The company may not be able to recover payments from legacy cases. The company may not be able to settle the claim against and recover from the private health insurance company. The company may not achieve the anticipated commercial insurance volume. Surgical centers and private hospitals may experience elective procedure disruptions. Postponed procedures may not be rescheduled. The company may not win any facility-wide contracts. The company may not be able to negotiate any new revenue share agreements. The company may not be able to recruit an off-site neurologist where the effect of recruiting an off-site neurologist may not be as anticipated. The company may not be able to grow its total procedures in coming years. The company may not be able to implement an education and training program, and the effects of such program may not be as anticipated, and the effects of the clinical research produced may not be as anticipated. As a result, Assure cannot guarantee that any forward-looking statements will materialize, and you are cautioned not to place undue reliance on these forward-looking statements. Except this may be required by law, Assure has no obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. During this call, we may refer to certain metrics such as adjusted EBITDA, equity method of investment in provider network entities or P&Es, managed cases and number of procedures which are non-IFRS measures and do not have any standardized meaning under IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. For a reconciliation of certain non-IFRS measures, please consult the most recently filed management discussion and analysis for the three months ended September 30, 2020, which is available on the company's CDAR profile at www.cdar.com. Berkshire believes that these measures may offer useful supplemental information but are subject to inherent uncertainties and limitations and rely on various assumptions by the company and should, therefore, not be relied upon for the purpose of making an investment decision. For additional information on these assumptions, uncertainties, and risks, please consult a cautionary statement regarding forward-looking information contained in the company's earnings release dated November 30, 2020, most recently filed quarterly financial statements for three months ended September 30, 2020, and management discussion and analysis for the same period, which are available on the company's CDAR profile at www.cdar.com. Please note that Assure reports in U.S. dollars and all dollar amounts to be expressed today are in U.S. currency. I would like to remind everyone that this call will be available for replay through December 14th at 830 p.m. Eastern Time today. A link to a webcast replay of this call was also provided in the earnings press release. Any redistribution, retransmission, or rebroadcast of this call in any way without the express written consent of Assure Holdings is strictly prohibited. Now, I would like to turn over the call to the Executive Chairman and CEO of Assure Holdings, John Farlanger. John?

Thank you, Scott, and good afternoon, everyone. I hope everyone is well and remaining healthy during this very challenging holiday season. In the third quarter, Assure continued to make progress on our business, financial, and operational strategies while keeping safety of the company's team members and patients a top priority. Today is a significant day for Assure. In addition to reporting third quarter results, we are also announcing an equity private placement of up to 10.5 billion U.S. dollars. This funding will be led by multiple prominent U.S. institutional investors. Closing this transaction is expected to accelerate all aspects of our business. We are required to file a resale registration statement on Form S-1 with the United States Securities and Exchange Commission. and they can become a reporting issuer in the United States. We also plan to evaluate uplisting for major U.S. exchange in 2021. Notwithstanding all the progress we have made in 2020 in terms of cash collections, Asani event network agreements, and adding scale to the business, we have a clear need for growth capital. This capital infusion will be deployed at an opportune moment. just as the competitive landscape in the fragmented and chronically undercapitalized interoperative neuromonitoring industry has become especially vulnerable due to the impact of COVID-19 and other factors that Preston will discuss shortly. The funds raised will help us get bigger, faster, with uses including extending our operational footprint into new states, launching our telehealth offerings, in scaling our hospital offering. With this infusion of capital, we are positioned to hit the ground running in January and are prepared to take advantage of the current environment. Further, this offering will provide sufficient working capital to complete the registration statement with the Securities and Exchange Commission and position us for an uplisting to a major U.S. exchange. One final point related to this matter. Today, John Price joined Assure as the Vice President of Finance. John has deep financial and capital markets experience, as well as proficiency in mergers and acquisitions, compliance, and reporting. He has directly led three separate S-1 filings and two exchange uplistings. At Assure, John will be leading our efforts relating to the S-1 filing and assisting the with an uplisting to a major U.S. exchange subject to market conditions during the latter part of 2021. Next, I'll transition to advancements we're making on three corporate objectives. As a reminder, they are, number one, improving the performance of our billing and collections function. Number two, developing an in-network revenue stream. And number three, scaling our platform through both organic growth and M&A activity. I'll first address the progress of our billing and collections objective. I'm extremely proud of the billing team and the success they have had in meeting their objectives in 2020. Since fully taking over this function in February of 2020, Assure has made substantial progress on revenue cycle management. We've also invested heavily in this function by hiring a seasoned leader, staffing a 20-person internal billing and collections team, and migrating to a platform that has an automated and integrated process taking over from what has historically been an entirely manual revenue cycle management system and processes. Results of these changes are already visible. The first nine months of 2020, excluding cash collections for P&Es or professional in their Operative Neuromonitoring Services, which are recorded separately, Assure collected more than 10.1 million US dollars in cash. This compares to collections of 6.7 million in the same period of 2019. In addition, in 2020, Assure and the P&E's total cash collections are averaging just under $2 million per month. compared to 1.3 million per month over the same period in 2019. This represents an increase of 48% compared with the prior year on a cash collections basis in both technical and professional recoveries. I should also point out that the company has been operationally cash flow positive since March of 2020. We expect this trend to accelerate and for sure to be cash flow positive in 2021. In part, this reflects a sure success, collecting from our significant backlog of legacy cases in which services were provided, but we had not yet been compensated. We've had success in monetizing over 1.2 million in uncollected 2016 and 2017 claims so far this year, and similarly, expect to recover a meaningful portion of 2018 claims that have already been reserved. We refiled all uncollected 2018 claims in March and April this year and expect the recoveries to be material and to occur for the balance 2020 and through 2021. When collected, these funds will be categorized as net new revenue and income, as these amounts have already and previously been written off and reserved. One additional topic I wanted to update with regard to collections was the continued reserving of claims associated with a private health insurance company that we previously disclosed and which was significantly written off as of December 31st, 2019. This reserve is mainly associated with this payor's Louisiana affiliate, which failed to reimburse the company despite Assure providing outstanding services. Negotiations with this payor are ongoing and progressing, and Assure is confident that the education we've provided to the Assure on the value of our services will ultimately result in a recovery of a portion of these claims. Our goal in this matter is to settle this dispute, receive a payment, to negotiate a new in-network contract with this payor. We are gratified by the progress we've made in revenue cycle management, but also recognize that important work still remains. We are confident that assurance-making the advances necessary to improve collections, drive accounts receivable lower, and reduce days outstanding. A catalyst Brasher's ongoing improvement is our transition away from the out-of-network billing model. We have done so by reaching contractual terms and conditions with payors on new in-network agreements that will deliver better and more predictable results with less volatility. This dovetails into our second key corporate objective, which is the development of an in-network revenue stream. In-network agreements help assure reduced risk, minimize complexity, protect our liquidity, and accelerate the timing of payments. On cases performed for patients covered by insurance with whom we have struck in-network agreements, collections on claims will be reduced from a range of several months, in some cases to more than a year on average, all the way down to 30 to 45 days. and payments will be made at specified reimbursement rates negotiated through contract. In August, Assure entered into a new network agreement with the largest health insurer in the state of Michigan. Overall, across all markets, we now have more than 20% of our total commercial volume in contractual rates with the payors, either directly or indirectly. I want to point out But very few of our interoperative neuromonitoring peers have the scale in terms of procedure volume, but we really have the operational expertise to strike similar deals. We anticipate that approximately 30% of Assure's commercial insurance volume on a run rate basis will be supported by in-network agreements in the very near future. Our goal is to reach 50% by the end of 2021. In-network agreements with the terms we are seeking become more attainable when we bring volume in terms of number of procedures into the negotiations. This fits with our third objective, which is expanding Assure's scale. In terms of monthly procedures, Assure returned to pre-pandemic levels in May and it remains as such through November. In fact, The company reported a 77% increase in managed case volume in the third quarter. In October, we reported our highest number of monthly procedures ever, managing nearly 1,000 procedures during the month. While our business has come back in terms of overall case count, we have seen disruption in specific markets we serve as COVID-19 cases have surged in various parts of the country. To date, we've been primarily impacted in Texas with a pullback of approximately 15% in terms of procedures, although other share markets have been impacted at various points in the spring, summer, and fall. The pandemic has undeniably slowed our growth from what we expected to deliver in 2020. While we anticipate that COVID-19 will continue impacting our procedure count in certain markets as we enter 2021 and are monitoring the situation closely, we do not at this stage anticipate a mandate to halt elective procedures, similar to what we experienced in March and April of 2020. As we did earlier in the year, I'm sure it's preparing for any potential development and we are prepared to take appropriate action. Two additional points of note on case counts. Firstly, nearly 40% of Assurance procedures are performed in surgical centers and private hospitals, which to the most part have been largely insulated from potential elective procedure disruptions. Secondly, we anticipate that the majority of Assurance procedures postponed earlier this year will ultimately be rescheduled. Thirdly, the conversations we are having with surgeons suggest that hospitals have learned a lot about treating COVID-19 since earlier this year when it first emerged. Treatments developed over the course of the year will help prevent hospitals from getting overwhelmed by the current uptick in cases. Hospitals are getting more creative on how to develop elective procedures. Hospitals are getting more creative on how to continue to support elective procedures and are prioritizing them whenever it's safe to proceed. With this context in mind, SURE is pursuing a number of opportunities to accelerate growth in 2021. These include, firstly, we'll be expanding into additional states and extending our presence within states that we already maintain a significant presence. We are close and very close to entering multiple new states and look forward to update the market when our first cases are performed. Second, we're building a platform for selling directly to hospitals. But costs and disruptions hospitals are experiencing as a result of COVID-19 are opening the door for a value proposition that assures marketing as an outsourced provider of interoperative neuromonitoring services. We anticipate winning larger facility-wide contracts that could generate thousands of procedures annually as many hospitals transition to outsourced interoperative neuromonitoring, which for them is a non-core service and a cost center. I've sure recently promoted promoted Craig Cavendish to Vice President of Corporate Development to lead this effort. We believe Assure's hospital offering will be an important growth driver in 2021 and beyond. Thirdly, Assure is driving more revenue and capturing more margin from our professional bills. The company's improving performance in this area by negotiating a larger share of the managed service fees with new surgeons we're adding to the platform. We're also having success negotiating updated revenue share agreements with existing surgeons in our network. We anticipate that our work in this area will result in a seven-figure lift in terms of annualized revenue during 2021. Given that these agreements have been made throughout 2020, the related results will really bear out and have an impact in the next year. Fourthly, In the first quarter of 2021, we intend to augment our professional revenue by bringing our current outsourced neurologist function within the organization. We are actively recruiting for these positions now. This new telehealth offering will be a straightforward transition as we simply replace an existing contract relationship with an insured employee. Bringing the function inside the organization will ensure quality of service throughout the interoperative neuromonitoring process, which is a key consideration for payors as we negotiate in-network agreements. This will also allow us to capture a greater share of revenue and margin from the professional bill, and we believe it will become a meaningful profit center for the company in the path forward. In addition, it promptly developed our telehealth neurologist services can be marketed as part of a broader outsourced interoperable model offering the hospitals that i referred to previously my conversations here the fifth and final element of our growth strategy is aimed at distributor outreach we rolled out our channel program and are now actively marketing in five states with accelerated outreach plan for 2021. we've already sign contracts with a number of medical device distributors and expect to sign numerous additional partners through this effort. Although our third quarter financial results did not meet our expectations for multiple reasons that Trent will dive into in detail, I'm proud of our greatly improved balance sheet flexibility that will be bolstered by our equity offering, as well as our cash collection improvements. we're optimistic and focused on delivering against each of our objectives in the fourth quarter of 2020. In terms of our operational outlook, notwithstanding the impact of COVID-19 and the related ongoing uncertainty, the company has forecasted 9,500 to 10,000 total managed procedures for full year 2020. If reached, this would represent a record number and an increase in volume of 48 to 56% compared with 2019. Assure expects to grow its total procedures by at least 40% in 2021. Now we'd like to pass the call to our CFO, Trent Carman, who will go through the results from the third quarter in detail. Trent.