NUTX - NASDAQ

Greetings. Welcome to Nutex Health's Fourth Quarter and Full Year 2025 10-K Earnings Call. [Operator Instructions] Please note this conference is being recorded. At this time, I'll now turn the conference over to Jennifer Rodriguez, Investor Relations Manager. Thank you, Jennifer. You may now begin.

Good morning, everyone, and welcome to Nutex Health, Inc. Fourth Quarter and Full Year 2025 Earnings Call. My name is Jennifer Rodriguez, and I'm happy to serve as your moderator today. We're truly grateful for your participation and your continued interest in our company as we share the highlights of another exceptional year. Please note that this call is being recorded for future reference. Joining me this morning are some of the key leaders driving Nutex Health Forward, our Chairman and CEO, Dr. Tom Vo; our Chief Financial Officer, Jon Bates; our President, Dr. Warren Hosseinion; and our Chief Operating Officer, Wes Bamburg. Together, they'll provide prepared remarks to give you a comprehensive view of our performance, strategies and vision, after which we'll open the floor for your questions. Before I turn this over to Dr. Vo, I'd like to take a moment to address a few important points. Today's discussion may include forward-looking statements, which reflect management's current expectations about our future performance. These statements are based on what we know today, but they are subject to risks, uncertainties and other factors that could cause our actual results to differ from mobile share. For a deeper dive into these forward-looking statements and the factors that might influence them, I encourage you to review the press release and Form 10-K filed earlier this week as well as our various SEC filings. You'll find all the details there. Additionally, we may reference non-GAAP financial measures such as adjusted EBITDA during the call. For those interested in how these metrics reconcile to GAAP standards. Please refer to the press release and Form 10-K, where we've included that information. With those housekeeping items out of the way, it's my pleasure to hand the call over to Dr. Tom Vo, our Founder and Chief Executive Officer. Dr. Vo, the floor is yours.

Thank you, Jennifer, and good morning, everyone. Thank you for joining us today. It's a pleasure to meet with you as we review Nutex Health's fourth quarter and full year 2025 results. This past year has been one of exceptional growth, operational discipline and continued innovation as we advance our mission of delivering high-quality, concierge level accessible health care to the communities we serve. Our organization remains deeply committed to a patient-first culture and I'm really excited to walk you through the accomplishments, strategies and opportunities that shape our year. First, let's discuss the full year 2025 financial and operational performance. Total revenue reached $875.3 million, an 82% increase from $479.9 million in 2024. Net income increased to $7.8 million to $52.1 million during '24. Note that this includes a noncash expense of $117 million for stock-based compensation for 2025 in the form of a onetime obligations of earnout shares issuable to qualifying under construction and ramping hospitals. This expense would decrease drastically in future years as most of the under construction facilities from 2022 have already vested. Adjusted EBITDA, which includes the add-back of the stock-based compensation rose $25.6 million, up 152.6% from $102.8 million in the prior year. On the volume side, our hospitals recorded a 188,300 total patient visits up 11.8% from 168,400 in 2024. 1.3% of that growth came from mature facilities, demonstrating their resilience and continued relevance in their markets. On the balance sheet, even with 3 new hospitals opening in 2025 and early 2026, the current portion of long-term debt decreased slightly to $14.4 million to $13.2 million. Net long-term debt increased from $22.5 million to $29.2 million, still very low relative to our revenue and expansion pace. Net cash from operating activities of $248.1 million for the 12 months ended December 25, 2025. And cash on hand grew dramatically to $186 million as of 12/31 2025, up from $41 million a year earlier. Next, I'd like to touch on the fourth quarter financial [indiscernible] During the fourth quarter, we did recognize a onetime $55 million revenue reduction related to the cumulative true-up of 18, 950 arbitration claims that were deemed ineligible by our traders under the IDR process. The periods involved for July 2024, and we first started through an arbitration and IDR through the end of December 2025. 18-month reconciliation resulted from a mid-2025 CMS directive instruction IDRs to resolve and clear the existing backlog of disputes. Fortunately, this process was very slow. On the inefficient side, and involve a lot other providers, including itself. This catch-up period reduced the number of active disputes compared to the same period last year and consequently lower reported net revenue for the quarter. It's important to emphasize that this was a onetime reconciliation driven by CMS mandate. So to put this number into perspective, approximately 18,950 cars deemed ineligible equate to an average of roughly 1,050 cards per month. And according to Halo MD, our IDR consultant, an ineligible rate for Nutex Health is roughly 8%, all the charts that we submit. This is significantly better than the national average of approximately 19%, indicating that our processes are performing well above industry norms. Additionally, Halo MD is continuing to challenge the ineligibility determinations for a portion of these charts. Should any of these disputes be resolved in our favor associated revenues will be added to future monthly and quarterly financial results. The good news, though, is that excluding the impact of this adjustment, our Q4 2025 adjusted revenue would be approximately $206.7 million, just consistent and in line with revenue levels from previous quarters However, even with a slight decrease in accrual revenue, operating cash flow remained very strong. Net cash provided by operating activities was $70.4 million in the fourth quarter compared to only $100,000 in the same quarter last year, demonstrating that cash collection continues to perform very well. We encourage investors seeking a deeper financial understanding of our business to focus on the full period from 2024 and through December 2026. Quarterly results can appear lumpy to the natural rate constraints of accrual-based accounting, which can shift the timing of revenue and expense recognition. Jon will provide additional insights into these dynamics later in the presentation. In terms of arbitration and IDR process performance, we continue to perform well within the IDR framework. It is now a normal part of our revenue cycle process. 50% to 60% of our claims are submitted through the IDR process. When a determination is issued eval in over 85% of those cases, demonstrating that insurers are still underpaying in 85% of the cases that we sent to arbitration. We are also currently realizing an average cash collection rate of more than 85% and our legal determination wins. We are actively monitoring the forthcoming IDR final rules from the office of management and budget and other federal agencies. At this time, we do not expect any material changes to the current process and remain optimistic that the final rule will further strengthen and streamline the IDR process with additional end dates for insurers to comply. An example of a more efficient IDR system would be avoidance such as the 18-month true-up that we just experienced for the fourth quarter in the future. On the regulatory and legislative outlook front, we are closely watching the progress of the No Surprises Act -- I'm sorry, no Surprises Enforcement Act, also known as the Murphy Act. It is designated as HR 4710 in the house and S-2420 in the Senate. These mills are currently under review in the following committees in the house, the energy and on commerce, education and workforce and ways and means. And in the Senate, it is currently being reviewed in the health, education, labor and pension it otherwise known as helped. Our 2025 financial and operational results demonstrate the strength of our model, the scalability of our platform and our disability focused on 3 core metrics: ER visit growth inpatient volume growth and revenue per patient. Many of you know, Nutex Health has operated since 2010. More than a decade as a private company, our micro hospital model built on concierge level, high-accessible care, deliver consistent and respectable profitability. After going public in 2022, we faced challenges, primarily driven by the faulty implementation of the No Surprises Act or the NSA which materially reduced reimbursement across our industry. The authors of No Surprises Act are credit anticipated that insurers might use the payment process to underpay smaller providers like us. That reason, Congress included the independent dispute resolution IDR process as an essential safeguard, giving providers a meaningful avenue challenge unfair reimbursement. Now this mechanism insurers would have the unchecked ability to dictate payments unilaterally, effectively determining winners and losers in the marketplace and undermining fair competition resulting imbalance with Stifel free trade, in small operators and distort the health care ecosystem. In many ways, this is truly a David and Goliath [indiscernible]. As we enter the next phase for our growth, we are fortunate to have strong liquidity and adequate cash on hand. This financial position allows us to remain disciplined and highly return focused. Our capital allocation strategy continues to center on 4 priority areas: number one, share repurchases. Share repurchases activity underscore our conviction in the intrinsic value of new Excel, launched a $25 million repurchase program in late 2025 and completed it in early 2026. Earlier, we authorized an additional $25 million for further repurchases. These programs reflect our commitment to delivering shareholder value, prudent accretive capital deployment. For two, growth at existing hospitals, our existing micro hospital footprint remains a powerful engine for organic growth. We are heavily investing in both the ER and inpatient volume initiatives to expand capacity on service lines and enhanced revenue quality. In terms of ER volume initiative, we are strengthening community engagement, expanding referral pathways and diversifying service offerings. Targeted investment including services such as medical detach programs favor health services, outpatient imaging or patient procedures, personal injury services. These initiatives are in addition to our normal ER volume and will help expand patient access and improve the overall revenue mix. On the inpatient volume initiative, and to capture more high acuity cases and reduce unnecessary transfers, we are enhancing specialized equipment. We are very excited because with advances such as AI, medical device, biopharma, there are more cases that we could treat at our micro hospital than ever before. We have also expanded inpatient nursing and ancillary capacity. And to top it off, we are adding a tele specialist, I'm sorry, tell a hospitalist and tell a specialist coverage for all of our hospitals in the coming year. These upgrades allow us to manage high-acuity patients within our own facilities, increased retention and strengthening contribution markets. Wes, our COO, will discuss more on this operational part later. Early expansion of our IPA and published and Health division. Our independent physician Association currently operating in Los Angeles, Phoenix, Houston and South Florida continue to be a strategic advantage, strengthen our relationship with PV physicians enhanced care coordination and support by directional referrals and to expand our IP footprint into markets surrounding our hospitals, enabling more efficient care pathways, stronger physician alignment and by direction referrals between IPAs and the Nutex Hospital. This expansion also position us more effectively within the risk-based and value-based reimbursement models and our goal will be to operate as many IPAs around our existing hospitals as possible. Warren will discuss this more in detail when he speaks later. Lastly, real estate development strategy. We are evaluating opportunities to develop micro hospitals using a capital-efficient real estate model. Will we develop and own the facilities during the stabilization period build both operational and real estate value and possibly eventually execute a sale-leaseback transaction to recycle capital into future. This approach preserves strategic control of early-stage operations while enabling accelerated expansion without over leveraging the balance sheet. Today, Nutex Health operates 27 hospital facilities across 12 states. In 2025 and early 2026, we opened new hospitals in Sherman, Texas, St. Louis, Missouri and Amble, Texas. We are actively building a pipeline of new hospitals for later in 2026, 2027, 2028, starting in 2029. Each facility is designed around the same principles. [indiscernible] level care little to no emergency wait times and tailored inpatient and outpatient services that meet the needs of the local community and remains very strong. Physicians and community leaders across the country continue to approach us weekly using new facilities in their markets. We're trying to keep up with demand. In addition, we are in ongoing communication with payers and continually reviewing their in-network contracts to evaluate whether the terms are offered are fair and reason. Good news is that we are now receiving better offers than we have in the past. In closing, it has taken approximately 2.5 years to recalibrate our operational and reimbursement strategies. I am very pleased to share that in 2025, return to the level of profitability that our model has historically produced. Over the years, we have operated 4 different administrations, navigated the complexities of the Affordable Care Act drive through COVID, overcame the challenges of the No Surprises Act and are now actively optimizing our approaches to the IDR process. While no one can predict the future, our longevity and experience across multiple health care cycle give me confidence that Nutex can continue to pivot effectively against any geopolitical or regulatory headwinds. We are very excited while the trajectory of Nutex Health as we enter 2026. We are carrying significant momentum and we believe we are very well positioned to continue our disciplined, profitable growth. So with that, I'll turn it over to Jon Bates, our CFO, walk through the financials in more detail. Jon?

Thanks, Tom. Appreciate that, and good morning, everyone. I'm very excited to break down the financials for Nutex Health's fourth quarter and full year 2025, a year where we didn't just grow, but we continue to improve our business model while delivering on a record year for the company. Tom has given you some of the big picture, and I will zoom in a little more detail, beginning with the full year of 2025 results, and then we'll discuss the fourth quarter of '25 as well. So starting with the 12 months ended December 31, '25 compared to the same period in 2024. I wanted to start by highlighting the fact that the company worked very hard in 2025 to continue to improve our overall controls environment and that effort enabled us to remediate all previously disclosed material weaknesses in internal controls over financial reporting in 2025. It's a huge accomplishment that shows our commitment to having a solid control environment that can be relied upon by our shareholder base and the investment community. Now on to some of the numbers. Total revenue for the full year of 2025, as Tom indicated earlier, increased by 82.4% or $39.5 million, up to $875.3 million versus $479.9 million for the full year of 24% with the hospital division revenue being $844.2 million in 2025. Of the $844.2 million in the hospital revenue $7.8 million or approximately 63% related to a combination of both higher acuity claims as well as success through the IDR process. For some perspective, we reduced this 7% from the third quarter of 2025 when we were closer to 70%. Regarding arbitration-related revenue, we have submitted between 50% to 60% of our claims through the RDR process, which came down approximately 10% from the third quarter as well. And when an award determination is made, we currently prevail in over 85% of those determinations, and we currently have an average collection rate of over 85% of those determination wins. From an arbitration cost perspective, it's approximately about 26% of that arbitration related revenue. And of the total revenue increase mature hospitals increased their revenue by 73.4% for the year of 25% versus the same period in '24. Hospital visits, as Tom indicated earlier, increased by 11.8% or 19,891 visits to 188,279 visits in 2025, and versus 168,388 visits in the same period in '24, with those mature hospitals growing at 1.3% over the same period. Additionally, the Population Health division had a slight revenue growth of 0.7% to $31 million for the year of 2025 versus 30.9% for the same period in '24. So in addition to the revenue and visit growth note and above, facility and corporate costs also showed improvement for the year of '25 relative to '24. Total facility level operating costs and expenses increased $147.3 million during the period but only represented 49.2% or $431 million of total revenues for 2025 versus 59.1% or $283.7 million for the same period in so effective decrease of just under 10%. Of the $147 million increase for the period, $138.3 million related to the arbitration costs for the arbitration -- additional arbitrational revenue booked during this period. Total stock compensation expense for the 12 months ended December 31, 2025, was $117 million compared to only $16.6 million in the same period of $24 million, which is $100.4 million increase in '25 and just so you know, almost all of this increase was related to the 3 hospitals that completed their earn-out periods during the third quarter of '25. Now we do have 3 more facilities currently in the earn-out period with one of them completing the earn-out period in the first quarter of '26 in the remaining 2 completing their periods earn-out periods in the fourth quarter of '26. The gross profit for the 12 months in 2025, was $444.3 million or 50.8% of total revenue as compared to $196.3 million or only 40.9% of total revenue in the same period in again, just under 10% increase for the 12-month period ended December '24 versus 2025. From a corporate and other cost perspective, general and administrative expenses as a percentage of total revenue for the 12 months ended '25 decreased to 5.9% or $51.7 million from 8.7% or $41.9 million for the same period in 2024. Operating income for the 12 months ended December 2025 was $275.6 million compared to $130.7 million for the 12 months ended 2024, which is an increase of $144.9 million. Net income attributable to new tax was $70.8 million for 2025 compared to net income of $52.1 million for the 2024 period, an increase of $18.7 million. Adjusted EBITDA attributable to Nutex increased $156.8 million or 152.6% from $102.8 million in 2024 and to $259.6 million in 2025. So now let's move on to discuss more the fourth quarter of December 2025 and compare those results to the fourth quarter in December 31, 2024. And Tom indicated some of this on his earlier discussion. But for the fourth quarter of 2025, our total revenue did technically decrease by 41.1% or $105.9 million to $151.7 million versus $257.6 million for the fourth quarter of 2024. With a little more context, the company attributes $105 million decrease primarily to 2 items that we disclosed in our press release. Number one, was the onetime $55 million cumulative true-up of 8,950 arbitration claims that arbitrator is determined to be ineligible for the in the fourth quarter of 2025 under the independent dispute resolution process. These claims were submitted for the period from July '24 through all through December '25. So cumulatively, we believe the onetime cumulative arbitration true-up resulted from a mid-2025 CMS directed instructing the certified independent dispute resolution entities to address and clear any backlog they had of their disputes. The associated kit up reduced the number of active disputes compared to the same period in '24 and contributed to lower net revenue for the quarter. Now we believe the backlog has been materially addressed, but we'll continue to watch the process very closely. The second item was arbitration revenues of $69 million, and this is for the previous year 2024, that related to submissions that were in that related to the third quarter of 2024 that were recorded in Avenue in the fourth quarter of 2024. As you probably recall, prior to September 30 of 2024, the company did not have any sufficient historical data to determine the likelihood of a prevailing determination of potential award amount or the collectibility of such awards. But after considering the impact of the adjustments above, including that $69 million, our 2025 4th quarter revenue would be $206.7 million and the 2024 4th quarter revenue would be $188.6 million, which would result in a revenue increase of $18.1 million period-to-period, primarily driven by higher patient business in the fourth quarter of 2025 compared to the fourth quarter of 2024. So I just want to take a step back on how we accrue revenue for the company for those that maybe aren't as familiar with it, which hopefully will explain some of this situation and its impact as we move forward. So if you look at it, as the company has been predominantly out of network for over a decade with the billing process. Therefore, we have to negotiate most of the claims that are sent to payers based on what we believe we should be paid using market industry payment data. In our accrual process, there were 3 key items that we use in this process, and it is all based upon the historical results we have regarding payments by 3 items, payments by each specific payer, by each specific physical location of the visit and thirdly, by the specific acuity level of that visit. And the averages of those results over the recent past, let's say, 1 to 2 years of activity. And then we take those averages at that specific detail and then they're attached to a current period visit with similar characteristics of those averages, which then sets our accrual of realizable AR and revenue in the month of the visit. And then as payments come in, we adjust the accruals up and down, up or down based upon the results with the net impact being recorded to revenue in the period when the payment is ultimately received. So these numbers and the history we're talking about here are continually updated as each payment is made and our updated averages will affect the new current period visits as we move forward. And this is exactly how we've been doing it. since inception. So in the case of the arbitration activity, we added a layer to our standard revenue accrual process that is very similar to our baseline process. But because the process has been new to us since we began the process in July of 2024, we have continued to build this additional layer as we have more and more data. And in the case of the ineligible claim write-down or claims write-down in the fourth quarter of 2025, there had been a nominal number of items like that, small, nominal that we had seen and accounted for in our normal accruals up through the third quarter of 2025. But certainly, there was nothing material in there. And so we were not aware of any material indications in this area that ultimately led to the onetime true-up of outstanding disputes in the fourth quarter of 2025 that the RDR had in backlog until the fourth quarter of 2025. So that's the first time we understood what was going on. And so we're continuing to work to better understand the overall situation as it is so recent to that process. And now we believe we have a much better understanding of this and we'll monitor it as we go forward. Now as we have gotten this recent information and continue to fine-tune our accrual process, we believe that this situation did resolve a majority of their backlog of claims that would be deemed ultimately ineligible, but anticipate this will continue to be a part of the process as we move forward, but just at a much more nominal consistent rate. Now the industry data that we have seen indicates that ineligible claims within the entire IDR process have been closer to 19% of submissions. While our current data that we have through now, Nutex shows were cumulatively showing less than an 8% ineligible claims submission rate since we started the process in July of 2025. So we realize this is part of the overall arbitration process now, and we haven't included within the way we do our accrual process as we move forward. Now we'll finish with the rest of the fourth quarter 2025 discussion. For hospital division visits, we saw an increase during the quarter of 6.1% or 2,761 visits to 48,205 visits in the fourth quarter of 2025 versus 45,444 in the same period of 24 with mature hospitals slightly decreasing 0.3% in the fourth quarter of '25 compared to 2024. Additionally, the Population Health division revenue increased by $0.1 million or 1% to $8 million in the fourth quarter of 2025 from $7.9 million in the similar period of '24. Now we discussed the growth in the hospital revenue visits that we've seen in the fourth quarter. And now let's discuss the overall facility and corporate costs. Total facility level operating costs and expenses increased $10.5 million for the fourth quarter of '25 versus the fourth quarter of '24 to $105 million from $116 million for the same period in 2024. Total stock-based compensation for the 3 months ended December 31, 2025, was a credit of $2.6 million compared to an expense of $14.6 million for the same period in '24. Operating income for the fourth quarter of 2025 was $30.9 million compared to $114 million in the fourth quarter of '24, representing a decrease of $83.4 million quarter-to-quarter. Net income attributable to new tax was $11.8 million in the fourth quarter of '25. The comparable net income attributable to new tax was $61.6 million for the fourth quarter of in showing a $49.6 million decrease quarter-to-quarter. Adjusted EBITDA attributable to Nutex decreased $70.1 million from $86.7 million in the fourth quarter of $24 million to $16.6 million in the fourth quarter of '25. But as discussed above, we believe that the fourth quarter numbers aren't necessarily representative of a typical quarter because of the effect of the onetime cumulative arbitration true-up discussed previously. We believe that looking at the year-to-date numbers represents a much better picture of the company's strength as we continue to grow in visits and volume, and our cash flow continues to be extremely strong, with over $207 million in a hospital receipts collected in the fourth quarter of 2025 alone. Looking at our balance sheet, it remains very strong with cash and cash equivalents at December 31 of '25 at $185.6 million. It's up $144.9 million or 356.6% from just $40 million -- $40.6 million at the end of December '24. The other size will increase at the end of 2025 is the accounts receivable balance, which was a $319.4 million compared to $232.4 million at the end of '24 and our consistent strong collections throughout the year provides us continued confidence in this increase. Regarding cash flow. Net cash from operating activities increased by $225 million for the 12 months ended December of 2025 to $248.1 million as compared to only $23.2 million for the same period in 2024. On the liability side, as Tom indicated, our total bank debt increased by $2.1 million to $43.5 million at December '25 from $41.4 million at December of 2024, with the majority of this debt really just relating to equipment loans at our hospitals for such items as MRIs, x-rays, ultrasound and CTs, the main equipment that runs our facilities. So this is a very slight increase in 2024 with the overall balance being a relatively small amount of true operating debt for a company of our size, especially with opening 2 new facilities in 2025 and with another one in the early part of 2026. With all this said, our balance sheet remains very solid, and we have provided our company the flexibility to execute on our growth plan in 2026 and beyond. Now on to Warren Hosseinion, our President for a population health update. Warren?

Thank you, Jon, and good morning, everyone. It's great to be with you today to discuss how Nutex Health is advancing population health management, an important piece of our mission to deliver sustainable, impactful health care. In 2025, we made strides in this area, and I'm excited to share the progress, the strategies driving it and our plans to keep pushing forward. Let's start with where we are today. Our Population Health Management division now oversees a diverse group of approximately 40,000 members across our platform including a mix of Medicare Advantage, commercial and Medicaid managed care members. That's a broad reach, and it's growing because of the trust we've built through our independent physician associations or IPA I am happy to report that each of our 4 operational IPAs were profitable in 2025. Our strategy revolves around physician networks our IPAs are comprised of networks of contracted and credentialed primary care physicians and specialists located around our facilities building strong partnerships with local doctors is critical. By forming these IPAs, we are building awareness of our hospitals among the local community doctors and their patients. Why do the physicians join our IPA. We offer these physicians ownership in our IPAs, they can also participate in the Board and committees of the ITA, we offer them to get on the staff of our hospitals so they can admit and follow patients we also incentivize the physicians to achieve high-quality metrics. We believe that over time, these relationships will not only increase the volume of patients to our hospital but also create a web of care that's seamless for patients. Our vision is that our hospitals and IP will work hand-in-hand to amplify our reach and effectiveness. We are fostering collaboration, sharing best practices and ensuring every provider is aligned with our patient-first culture. We're growing our IP strategically focusing on areas near our hospitals to leverage existing relationships and infrastructure. In 2025, we launched the new IP in Phoenix. In 2026, we plan on launching 2 IPAs, one in Dallas and one in San Antonio. Going forward, our strategy focuses on 3 areas: provider network expansion by partnering with physicians in high-value markets value-based contract growth by increasing the number of covered lives under management and technology scaling by enhancing our analytics and care management platform. With that, I'll turn it over to Wes Bamburg, our Chief Operating Officer.

Thank you, Warren, and good morning, everyone. As mentioned earlier, volume is up. For the year 2025, total patient visits were up 11.8% from 2024, with mature hospital visits growing at 1.3% over the same period. This performance highlights solid demand and the disciplined execution behind our ER and inpatient initiatives. From an operational standpoint, our focus throughout the year has been ensuring that our investments translate into consistent execution across every facility as we broaden our service offerings ranging from medical detox and behavioral health to advanced outpatient imaging and procedures, we have been building the operational infrastructure required to support higher throughput and a more diversified patient mix. That includes standardizing workflows, strengthening our intake in triage processes and enhancing staffing models to seamlessly accommodate increased ER demand while protecting the patient experience. On the inpatient side, the expansion of specialized equipment and tele specialist capabilities has allowed us to manage more complex patients safely and effectively within our hospitals. Operationally, we've paired these enhancements with stronger clinical governance, upgraded care pathways and expanded training to ensure that higher acuity care is delivered with consistency and quality across the enterprise. These efforts are already improving patient retention, reducing avoidable transfers and supporting stronger contribution margins. From a cost management perspective, 2025 was a transformative year, driven largely by the ongoing advancement of our corporate purchasing and supply chain teams. Excluding arbitration expenses, operational costs were 33.4% of total revenue for 2025, down from 47.1% in 2024. Over the past year, this function has become far more centralized disciplined and data-driven giving us greater ability to engage more effectively with key vendors. As a result, we secured significantly better pricing on major imaging equipment, including MRI and CT scanners as well as improved rates on lab instruments and reagents. These categories have historically been among our highest cost items, so the impact on margins is meaningful. Lastly, during 2025, Nutex received more than 8,700 patient reviews averaging an enterprise rating of 4.8 out of 5, a level of satisfaction that continues to set us apart in the health care industry. This performance reflects the strength of our model and mission, which are built around delivering concierge-level service, little to no ER wait times and a highly personalized patient experience. As we scale, we are advancing system-wide standardization, both in how we engage with patients and in the care we deliver, ensuring that every Nutex facility delivers consistent outcomes, service and a best-in-class experience. These foundational elements continue to differentiate Nutex in a sector where patient satisfaction and reliability are critical drivers of long-term value. Across the organization, our teams remain deeply focused on reliability, scalability and disciplined execution. As we grow, we are firmly committed to ensuring that every new tech facility delivers the same high-quality patient-centered care that defines our brand and supports our long-term growth. Thank you, everyone, for your time, and back to you, Jen.

Thank you, Wes and team for those updates. I will now turn it over to our operator, Rob, who will begin the Q&A portion of the call.

[Operator Instructions] And our first question will be coming from the line of Thomas McGovern from Maxim Group.

I want to start with some high DR-related questions, right? So historically, and on today's call, you've discussed IDR submission rates in the range of 60% to 70% with historical collection rates hovering around 80%. If we look at the press release, it actually says that the submission rates were 50% to 60% with that with an improved collection of around 85%. So I just wanted to see if you guys could help us reconcile the shift, is this a reflection of maybe higher quality, fewer submissions but higher quality and that's leading to an improved collection? And how should we look at this dynamic moving forward?

Jon, do you want to get -- yes, go ahead, Jon.

No, I was just going to say -- no, you're right, Thomas. Obviously, we've seen -- and the whole goal here in the independent dispute resolution is, ultimately, if we can get to a situation where we're able to get these claims resolved prior to it, that's a win. So of course, up through now to the third quarter, we were submitting a higher percentage. And actually, historically, it was around that 60% to 70%. But what we saw I've seen in the last quarter, now cumulatively sort of the impact is a little bit less in which we hope that will be the trend with the trend being that ultimately that would go down and we'd still be able to get what we believe to be fair and reasonable payments. And we believe that's still happening. And as we look to try to get in contracts with payers, which we're always looking to try to do, if we can find one that's reasonable, we'll continue to do that. So I think it's partly some of that going on for sure, and it's something we're going to watch real closely as we look and continue to watch reimbursement rates, which have stayed very strong throughout the year, as you've probably seen. And as you can tell, even the collection piece as you referenced was where we were kind of close on in the second and third quarter. Now we're collecting it 85-plus, continuing to have a strong legal determination wins of high -- mid- to high 80s. And so all of that, we anticipate hopefully even improving and we'll watch it as we go, but it's been a consistent pattern of an improvement there. So I think that's what we're seeing is that we're able to resolve more either with contracts or in open negotiations earlier on. It's still a smaller percentage, right, that we want there to be more of that on the front end. But for now, I think the trend is actually positive and the more watch reimbursement is affected with that. And as you know, and you and I have talked about this before, even if we are able to settle some of these earlier in the process was in open negotiations specifically open negotiations if they don't pay us well at the beginning, even if it's slightly less than even though we feel that we're getting is paid fair and reasonable, if it's slightly less than that, when you remove the cost component, from a net perspective, it ends up being similar or maybe even more positive. So we don't view it as negative at all, I just view it as kind of the opportunity as we move forward to watch this with our goal, ultimately, of getting everything resolved more timely, quickly and if we can have contracts across the board, we would do that. We just have not been able to successfully execute those and find reasonable fair payments yet from many of the payers. Tom, you might have more to add.

No, that's correct, Thomas. And in essence, as you know, health care is all about ebb and flow. Some quarters higher, some quarters lower. But to Jon's point, it is definitely moving in the right direction with less submissions, which may mean that the payers are paying better and more correctly,first time. So we will continue to monitor that progress.

It sounds like solid improvement with open negotiations. And obviously, you don't have to do a whole drawn out arbitration process. That's great for you guys. Great. So next question for me. You guys recently reopened a hospital in Texas is back in January. First part of this question is, what led to that decision? What are you seeing in that market now that leads you to believe this is the right time to do so? And then a follow-up to that is, do you believe that you're on track -- you remain on track rather to open the 5 to 6 facilities you've discussed in the past in 2026. And maybe if you could -- Tom, you mentioned a new real estate strategy at [indiscernible]. So maybe if you could touch on that and how that might impact your planned openings in the year.

Yes. No, thank you, Thomas. So the first question, our Ambo Hospital, we did have to close it. when we were going through the No Surprises Act issue. And after we established the IDR process, reimbursement get better. And so when that happened, it became a correct move to reopen it simply because we knew that there was volume there. And so the volume that we saw prior to the IDR was maybe not enough make it a profitable operation. But with the IDR process and better collection, better fair and reasonable collection that business made sense. And on top of that, as you know, we've essentially focus on more of an inpatient side. And so we became much better at it when we weren't as good at it back then. And so now that we're much better at the inpatient side, opening a slightly bigger hospital with more inpatient bed just made better sets and made a better business sense with a better projection. Does that answer the first question, Thomas?

Yes, yes. And then just a reminder, the second part of that question is, do you believe you remain on track for the 5 to 6 openings in '26 that we've discussed in the past? And then just how your new real estate strategy might influence the timing or the scope of these openings?

Yes. So the 5 to 6 locations are both for '26 and '27. So in 2026, the 3 locations that are on track to be open are Jacksonville, West Little Rock and San Antonio. And so those are the 3 for sure this year that are essentially will be finished with construction, I would say, probably by third quarter. And then on top of that, we're already working on '27 and '28 and so we protect probably another 4 hospitals to open in '27 and probably another 4 after that. And then in terms of the real estate strategy, yes, now that we're fortunate enough to have some cash in the bank, the idea is to explore ways where new tax could essentially start the development on the new hospitals. And once the hospital has stabilized and convert it to a REIT or sell it to a real estate investor and take that cash out and we invest in the 3 to 4 new projects going forward. So essentially to recycle the cash. The idea is that, that cash would essentially be accrual, and it would be essentially profitable for the company, whenever we cycle that cash again. The initial investment is that cost but hopefully, when we do a sale leaseback, we would make a small profit on it and then use that to recycle the cash to continue with the pipeline. And by the way, we have not formalized anything yet, but that is under discussion as an additional way to maximize our cash and return some investor maximal shareholder returns.

The next question is from the line of Gene Mannheimer with Freedom Capital.

So Tom, Jon, when did you -- when exactly did you learn about the true-up adjustments? And have you given any thought to preannouncing?

Yes, I can talk to that.

Go ahead, Jon.

Yes. So the earliest indication we were getting was in and that was just information we were seeing on the early ineligible information was the middle part of the fourth quarter, and it was very, very new to us trying to understand it. In fact, a lot of it is it comes to us, we look at it and say, there we might even, in a lot of cases, disagree with it being deemed ineligible and there's a process we didn't talk about here, but that we're going back on some of these and saying, hey, there's -- we disagree with that. But long story short is we were getting information in the middle part of the quarter, but it was very, very new. So then us trying to understand exactly the impact, understand exactly the legitimacy of it has taken us a couple of months to go through and analyze it. So that's the reason we -- there was nothing -- we didn't know what to report because it was new. And as quickly as we got our clarity on it, then we had to -- we started to roll it through our numbers, which was as we were finishing out the year. And then from a timing perspective, this was the best opportunity based on the data we have. to when we would communicate it because we didn't really know much sooner than this exactly that impact.

Got you. That makes sense, Jon. And when we think about those 19,000 or so claims that were deemed ineligible, you do the math on that. I think it's about $2,900 a claim. So is it safe that these were mostly confined to ER visits and not any inpatient volumes?

Yes. That's good insight. So yes, a majority of those would be more. It was a little bit of the lower we call it, tier or acuity. And so yes, most were more relative to our -- what you call more and more standard ER-type visit, maybe with blending to maybe one step forward, maybe an observation or a couple inpatient, but majority of them were EOR-related.

Got you. And one more for me. In terms of any future true-ups that might happen, should there be any -- would those also likely to be reserved in the fourth quarter like what you had yesterday? Or could they be trued up anytime?

Absolutely. I mean it's -- we don't control that, but I can tell you that as we see the information, if we see any activity that shows and there's going to be, as I mentioned, there's going to be ineligibles in this process. I think a year ago, they were talking about it being a much higher percentage even what the industry says they finished with recently, which was 19-ish percent of every claim going through is deemed to be an eligible and we're significantly less than that as we're seeing, but we just became known in a material nature of it in the fourth quarter. There were smaller ones that came to us earlier in the period, not material and we addressed those and they went through our natural accrual process. And then this sort of sprung up on us in the fourth quarter was a big surprise, but now with more knowledge and more understanding of the communication from, say, CMS to a lot of those independent dispute resolution and user arbitrators I think they were almost threatening them to say, you guys don't catch up if you're behind, then we're going to find someone else to do it. And as a result, I think they got caught up. They also have added more arbitrators, certified arbitrators at this point as well. So we believe that the backlog concept is probably something more of the past. There will be some at all times. And then more importantly, we'll find out if there is something sooner in the process, and then we certainly will account for that as soon as we know it. But also, as we talked about in that whole description of how we accrue for revenue, the more data we have like this, now we incorporate that into our model, so there will even be some level of ineligible assumption in a current day visit based on what we're finding out now based on our percentages. So -- and then we'll adjust that like everything else every single month, which is a complex process, but I think we have a really phenomenal team that has been doing this for 3 or 4 years now in [indiscernible] and many auditors and banks have spent a ton of time analyzing our process, and they've all come away saying, what you guys are doing seems very solid. So it's just new. It's a new process, and I think we're getting better at this for the IDR side and who knows what's going to be next, but this looks to be the latest, newest situation that's happened, and we feel like we've addressed it and don't feel like it will be a material issue going forward, but we'll watch it and see. And to your point, we don't wait to record it at some later point as soon as we know it or see any indication of it happening, we're going to do our best to try to reflect it within the current numbers that we have so that we're properly recording our revenue costs and keeping in line with the accrual-based approach. Good question.

At this time, I'll hand the floor back to Jennifer Rodriguez for closing comments.

Thank you all for those valuable questions and answers. For all those joining us today, if you have more questions, please email us at [email protected], and we'll get back to you promptly. On behalf of the Nutex management team, thank you all for joining us for our fourth quarter and full year 2025 earnings call. We've covered a lot, growth, strategy, challenges and our vision, and we appreciate your time and interest. A recording of this call will be available on our website for a limited time. So feel free to revisit it. Take care, everyone, and we look forward to keeping you updated on our journey.