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Assure Holdings Corp. (IONM)·Q2 2023 Earnings Summary

Executive Summary

  • Q2 revenue pressure persisted: net revenue was $1.54M, down sequentially from $3.60M and roughly flat year-over-year; gross revenue fell to $4.01M amid continued reimbursement headwinds . Gross margin remained negative at $(1.86)M as cost of revenues exceeded net revenue .
  • Cost controls and collections execution were relative bright spots: operating expenses declined 12% YoY to $3.61M, cash collections were $5.0M, and average days to collect improved to 48 days from 61 in Q4’22 and 46 in Q1’23 .
  • Management highlighted industry consolidation and executed a small tuck-in: Assure acquired assets of Innovation Neuromonitoring for $1.2M, expected to add ~3,000 annual cases, supporting volume and scale as the firm exits revenue-share MSAs .
  • Outlook/tone: Leadership remains focused on further cost reductions (~$2M annually), exiting MSAs by year-end, and improving cash flow in 2H’23; risks include a new Texas benchmark cut and a paused federal IDR process, which could further pressure reimbursements .
  • Street estimates: S&P Global consensus estimates were unavailable for IONM this quarter; no estimate comparison could be made (S&P Global data unavailable).

What Went Well and What Went Wrong

  • What Went Well

    • Cost discipline: Operating expenses fell 12% YoY to $3.61M; year-to-date operating expenses were down nearly 20% as management “continue[s] to reduce operating costs to run leaner” .
    • Collections and RCM: Cash collections reached $5.0M and average days to collect improved to 48 days, reflecting “a sophisticated, data-driven revenue cycle management function” .
    • Strategic expansion: Acquisition of Innovation Neuromonitoring assets for $1.2M, expected to add ~3,000 annual cases; management aims to use scale and M&A to offset reimbursement pressure .

  • What Went Wrong

    • Reimbursement headwinds: Average reimbursement has fallen 67% since 2020 ($6,000 to just over $2,000 per procedure), with an additional Texas benchmark cut and a pause in the federal IDR process raising further risk to rates and timing .
    • Top-line/margins: Net revenue was $1.54M (vs $3.60M in Q1), and gross margin was negative $(1.86)M; case volumes fell to 4,900 (from 5,200 in Q1 and 5,800 in Q2’22) .
    • Credit costs: Q2 bad debt approximated $2.5M, with management anticipating a similar level in Q3 given rapid cash collection reducing aged AR and lower reimbursement impacting older receivables .

Financial Results

MetricQ2 2022Q1 2023Q2 2023
Gross Revenue ($M)$9.21 $4.80 $4.01
Revenue, net ($M)$1.65 $3.60 $1.54
Cost of Revenues ($M)$4.00 $3.40 $3.40
Gross Margin ($M)$(2.36) —$(1.86)
Operating Expenses ($M)$4.09 $3.50 $3.61
Net Loss ($M)$(4.73) $(4.30) $(5.26)
EPS, basic ($)$(7.32) —$(1.63)
Adjusted EBITDA ($M)$(5.91) $(3.10) $(4.88)
Managed Cases (Units)5,800 5,200 4,900
Cash Collections ($M)$5.8 $5.0 $5.0

KPIs and Other Items

  • Average days to collect: 46 (Q1’23) → 48 (Q2’23)
  • Bad debt/AR reserve: Q2’23 bad debt ~$2.5M; AR reserve in Q2’23 press release $(2.463)M; Q2’22 AR reserve $(7.564)M
  • Cash and liquidity: Cash at 6/30/23 was $3.15M; total debt (current + LT) ~$13.26M; shareholders’ equity $1.33M

Notes:

  • Adjusted EBITDA excludes share-based compensation and other non-recurring items; see reconciliation in the press release exhibit .
  • No reportable segments provided; business discussed as IONM technical/professional services and remote neurology .

Guidance Changes

MetricPeriodPrevious Guidance/CommentaryCurrent Guidance/CommentaryChange
Cash flow from operations2H 2023Targeting positive adjusted EBITDA and positive cash from operations in latter part of 2023 “Remain optimistic about improving cash flow from operations during the latter part of 2023” Maintained
Operating cost reductionsFY 2023 run-rateIncremental ~$2M annualized cost reduction plan initiated Feb-2023 Further cost cutting planned, targeting nearly $2M annually Maintained/Reiterated
Exit MSAs2023Plan to exit revenue-share MSAs by end of Q2’23 Majority transitioned; expect full exit by year-end 2023 Delayed
Bad debt expenseQ1–Q3 2023Forecast < $2M in Q1 Q2 actual ~ $2.5M; anticipate similar in Q3 Higher than earlier forecast
ERC (tax refund)2023Expect ~$3.3M cash refunds Expect ~$3.2M cash refunds Slightly lowered
Volume (via M&A)12-month run-rateConsidering tuck-ins; evaluating opportunities Innovation Neuromonitoring acquisition expected to add ~3,000 annual cases Raised via M&A

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2022, Q1 2023)Current Period (Q2 2023)Trend
Reimbursement/IDR processLong delays in No Surprises Act; first federal case took ~7 months; ~400 claims filed; resolution timing >90 days Federal IDR process halted due to litigation; Texas benchmark cut again; average reimbursement down ~67% since 2020 Worsening
RCM and collectionsDays to collect improved to 105 in 2022; strong cash collections ; Q1: 46 days; $5.0M collections Q2: 48 days; ~$5.0M collections; continued emphasis on data-driven RCM Stable/Improving execution
Cost structureAdditional ~$2M cost cuts initiated Feb-2023 ; Q1 opex down 26% YoY Q2 opex down 12% YoY; further ~$2M cost cuts planned Continuing
M&A/consolidationExpect selective M&A in 2023 Acquired Innovation Neuromonitoring assets for $1.2M Accelerating
MSAs (revenue-share)Plan to fully exit by end of Q2’23 Majority transitioned; full exit expected by year-end Slight delay
Litigation/ERCLawsuits in Louisiana; ERC expected ~$3.3M One trial early Oct., other in early 2024; ERC ~$3.2M Ongoing

Management Commentary

  • CEO on reimbursement and industry consolidation: “Our second quarter results reflect the continued and constant downward pressure on reimbursement from insurance payors… Over the last 3 years our average reimbursement… has fallen by nearly 67%... The industry remains extremely fragmented and poised for consolidation.”
  • CEO on IDR process risk: “Earlier this week the entire [federal IDR] process was halted because of litigation… We are hoping that the courts and federal government will intervene…”
  • CFO on bad debt and AR dynamics: “During the second quarter 2023, bad debt was approximately $2.5 million… primarily related to collecting cash more quickly… and a reduction in reimbursement rates… We anticipate a similar amount of bad debt during the third quarter.”
  • CEO on cost actions and outlook: “We’re planning a further cost cutting, targeting nearly $2 million annually… The company will benefit from higher volumes and higher margins during the second half of 2023…”
  • Strategy/M&A: “With the recent successful completion of a public offering for $6 million… We expect to be active from an M&A standpoint… to serve as a consolidator and further scale our operations…”

Q&A Highlights

  • The Q2 2023 transcript available in our source includes prepared remarks but no accessible Q&A section. Management’s prepared remarks addressed: expected Q3 bad debt (~Q2 level), progress and timeline to exit MSAs (by year-end), the potential impact from a new Texas benchmark cut, and ERC/litigation cash inflows .

Estimates Context

  • Wall Street consensus estimates (S&P Global) were unavailable for IONM this quarter; as a result, we cannot quantify beats/misses versus consensus for revenue or EPS (S&P Global data unavailable).

Key Takeaways for Investors

  • Revenue pressure persists as reimbursement rates compress and the federal IDR process stalls; monitor potential downside from the new Texas benchmark and timing of IDR restarts .
  • Cash conversion and RCM execution remain key offsets: collections steady at $5.0M with 48-day DSO; continued improvement could mitigate AR write-downs over time .
  • Cost actions are ongoing with another ~$2M in annualized reductions targeted; opex discipline is central to bridging toward adjusted EBITDA and cash flow improvement in 2H’23 .
  • Strategic consolidation is now in motion (Innovation Neuromonitoring assets), with ~3,000 incremental annual cases expected; near-term focus shifts to integration and capturing margin .
  • Credit costs remain elevated; management expects similar bad debt in Q3, suggesting near-term net revenue/gross margin headwinds persist even with strong collections .
  • Non-operating catalysts (ERC ~$3.2M and litigation recoveries) could temporarily bolster liquidity but are not substitutes for sustainable reimbursement improvement .
  • Watch for milestones: full exit from MSAs by year-end (margin/collections uplift), any in-network agreements, IDR process updates, and trends in commercial payer mix in Q3/Q4 .

Citations:

  • Q2 2023 press release and 8-K exhibit (financials, highlights, balance sheet):
  • Q2 2023 earnings call (prepared remarks): and duplicate transcript
  • Q1 2023 call (sequential comps):
  • Q4 2022 call (trend context):