Nutex Health; Explosive Growth
We wrote the article below before preliminary Q2 figures came out but the 10Q and CC are delayed due to non-cash accounting adjustments related to the treatment of stock-based compensation obligations for certain under-construction and ramping hospitals, as disclosed in previous filings.. These preliminary Q2 figures were a blast:
Revenue grew 220.7% to $244M, beating expectations by a whopping $67.5M
Gross margin increased 2150bp to 51.2%
Patient visits were up 10.6% to 45.5K
Cash was $96.6M at the end of Q2
So the story, which was already very interesting, is getting better, but there are also negatives, like plans to issue a lot of new stock.
Nutex Health (NUTX) is an innovative healthcare provider operating 24 innovative microhospitals that gather excellent patient reviews as they have state-of-the-art facilities, short waiting times, and concierge functionality, focusing on the local community.
These are inherently profitable as they are situated in urban centers where most patients are privately insured, with commercial insurance being significantly more profitable for hospitals than Medicare and Medicaid.
It also operates three IPAs (Independent Physician Associations) through its Population Health Management division and has a real estate division that owns the land and hospital buildings, which are leased to Nutex.
The company went through some travails as the introduction of the NSA (No Surprises Act) in 2022 hobbled its growth and profitability.
However, since Nutex started using the NSA arbitration facility (the IDR or Independent Dispute Resolution), things are back up, with growth reaching spectacular dimensions in the last two quarters, which is almost all the result of the arbitration facility (preliminary Q2 isn’t yet in the graphs below):
Profitability has also come back with a bang (even in their GAAP incarnations):
Not to mention cash flow:
One might expect the stock price to be on a tear. However, despite a stellar Q1, the stock price is down considerably from the highs a couple of months ago, although it recovered at least some after an even better preliminary Q2:
While there is some uncertainty about the precise impact or even the continuation of the IDR, and how big the steady state flow of payouts will be, some investor hesitance is perhaps understandable. We'll get into these issues below. First, a little overview of the two main segments.