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Assure Holdings Corp. (IONM)·Q3 2022 Earnings Summary

Executive Summary

  • Q3 2022 showed operational progress (higher case volume, improved collections) but was masked by continued AR reserve impacts; net revenue was $6.20M, Adjusted EBITDA was -$1.16M, and diluted EPS was -$0.09 .
  • Management lowered FY2022 managed case guidance from 25,000+ to 21,000–22,000 to focus on profitable markets and margins, while increasing annualized cost-savings to >$5M; Q4 guide calls for 4,800–5,800 cases and gross revenue >$8.5M .
  • Collections momentum remained strong ($7.2M total collections; $5.5M from owned entities), AR reserve fell to $2.1M in Q3 with management “hoping for <$3M” in Q4 as the gross-to-net gap narrows .
  • Strategic pivot to professional billing/remote neurology and in-network negotiations (helped by arbitration outcomes) is expected to improve margin trajectory into 2023; note Texas state arbitration benchmark was reduced in October, tempering near-term reimbursement in the largest market (~60% volume) .

What Went Well and What Went Wrong

What Went Well

  • Remote neurology scaling and professional billing mix expansion, with remote neurology cases at 2,800 in Q3 (vs 1,200 y/y); management is “migrating completely away from rev share,” aiming to keep all professional revenue to lift margins .
  • Collections strength and AR reserve reduction; total cash collected was $7.2M in Q3, AR reserve fell to $2.1M from $12.0M in 1H, and DSOs improved to 343 days vs ~590 in 2020, reflecting faster cash cycles .
  • Disciplined pruning of low-margin markets driven by data warehousing analytics, with >$5M annualized cost savings vs Q1; management cited focus on geographies with above-average commercial reimbursement (e.g., New Jersey) .

What Went Wrong

  • Net revenue declined y/y due to reserves and reimbursement pressure on technical claims; Q3 net revenue was $6.20M vs $8.55M y/y, adjusted EBITDA swung to -$1.16M vs +$1.16M y/y .
  • Guidance cut: FY2022 managed cases reduced to 21,000–22,000 (from 25,000+), reflecting exit of slower markets; macro and payer “hardball” ahead of No Surprises Act also pressured technical reimbursement .
  • Texas state arbitration benchmark reset in October, reducing expected reimbursement in the largest state (~60% volume), adding near-term headwind to margins until federal arbitration pool is addressed .

Financial Results

Summary Metrics vs Prior Year and Prior Quarter

MetricQ3 2021Q2 2022Q3 2022
Gross Revenue ($USD Millions)$8.55 $9.21 $8.31
Accounts Receivable Reserve ($USD Millions)—($7.56) ($2.10)
Revenue, Net ($USD Millions)$8.55 $1.65 $6.20
Gross Profit ($USD Millions)$4.29 ($2.36) $2.52
Adjusted EBITDA ($USD Millions)$1.16 ($5.91) ($1.16)
Net Income ($USD Millions)$0.09 ($4.73) ($1.43)
Diluted EPS ($)$0.01 ($0.37) ($0.09)

Margins (computed from reported figures)

MarginQ3 2021Q2 2022Q3 2022
Gross Margin %50.2% (4.29/8.55) -143.2% (-2.36/1.65) 40.6% (2.52/6.20)
Adj. EBITDA Margin %13.6% (1.16/8.55) -359.1% (-5.91/1.65) -18.6% (-1.16/6.20)
Net Income Margin %1.1% (0.09/8.55) -287.1% (-4.73/1.65) -23.1% (-1.43/6.20)

Segment Breakdown

Revenue Segment ($USD Millions)Q3 2021Q2 2022Q3 2022
Technical Services$4.42 $0.07 $1.19
Professional Services$2.74 $0.85 $4.28
Other$1.39 $0.72 $0.74
Total Revenue, Net$8.55 $1.65 $6.20

KPIs

KPIQ3 2021Q2 2022Q3 2022
Total Managed Cases5,000 5,800 5,300
Remote Neurology Managed Cases1,200 1,900 2,800
Total Cash Collected ($USD Millions)$5.2 $7.7 $7.2
Cash Collected (Owned Entities, $USD Millions)$3.3 $6.0 $5.5
Days Sales Outstanding (days)—311 343

Note: Q3 2021 cash collected referenced as $4.4M during the call remarks vs $5.2M in the press release; we anchor on the press release and flag the discrepancy for clarity .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Managed CasesFY 202225,000+ cases; >40% y/y growth 21,000–22,000 cases; 21–26% y/y growth Lowered
Managed CasesQ4 2022—4,800–5,800 cases New
Gross RevenueQ4 2022—>$8.5M New
Accounts Receivable Reserve Expense2H 2022< $4.0M Q4 “hoping for < $3M” Lowered (quarter-specific)
Annualized Cost Savings vs Q1FY 2022~$4.5M >$5M Raised
Margin/Profit Mix StrategyFY 2022+Emphasis on remote neurology; positive 2H EBITDA target Accelerated shift to professional billing; narrower gross-to-net gap in Q4 Reinforced

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Reimbursement & No Surprises ActExpect arbitration to level field; stable accruals in key markets Payers pressuring technical claims; leveraging state/federal arbitration; haven’t lost a state case Improving arbitration leverage; technical reimbursement under strain
Shift to Professional BillingMoving away from rev-share; 65% revenue from neurology in Q1; target higher mix Aim to keep all professional revenue; margin upside as Pro share grows Accelerating
Cost Reduction & Lean OpsCut workforce; $4.5M savings; expect positive adj. operating cash flow 2H >$5M savings vs Q1; continued cost reductions in Q4; no severance burden Strengthening
Collections/AR/DSORecord collections; reserve front-loading; DSOs falling (311 in Q2) $7.2M collections; DSOs 343; AR reserve $2.1M; narrower gross-to-net ahead Sustained momentum; slight DSO uptick
In-Network ContractingAnticipate in-network enabled by arbitration outcomes Escalating negotiations; both sides know expected arbitration payments Advancing
Texas Benchmark Reset—Texas state arbitration benchmark reduced; ~60% volume exposure New near-term headwind
Geographic Strategy/M&AGPOs, new states; multiple M&A opportunities Entering NJ; opportunistic M&A in favorable buyer market Expanding where reimbursement strong

Management Commentary

  • “Assure’s third quarter results improved operationally… we utilized market intelligence and data warehousing analytics… to exit slower markets dragging down our average revenue and margin per case.”
  • “We are aligning our costs with updated managed case revenue expectations… leveraging state and federal arbitration programs… ultimately signing in-network agreements to speed up cash flow.”
  • “We haven’t lost a state arbitration case yet… conversations are changing now because they know what we’re going to get paid and we know what we’re going to get paid.”
  • “In October, we experienced a meaningful decrease in the Texas reimbursement benchmark… Texas is Assure’s largest market and represents ~60% of our patient volume.”

Q&A Highlights

  • Industry adaptation: Smaller competitors lack data/analytics and arbitration capability; management sees consolidation opportunities and expects to outperform via in-house revenue cycle analytics .
  • Margin trajectory: As mix shifts toward professional/remote neurology and away from rev-share, management sees “meaningful upside” in margins; focus on making technical side profitable and capturing Pro-side margin .
  • Regional expansion: Near-term focus on Texas/Colorado and adding New Jersey (top-5 reimbursement state) rather than broad new states in Q4; utilization improvement targeted .
  • Cost trend and DSO/reserve model: G&A trending down; reserves now recognized earlier (months 5–8) with narrower gross-to-net targeted; in-network discussions escalating .

Estimates Context

  • Wall Street consensus (S&P Global) for Q3 2022 EPS, revenue, and EBITDA was unavailable for IONM due to missing mapping; as a result, estimate comparisons could not be provided.
  • Given the structural shift in revenue mix and ongoing arbitration dynamics, sell-side models may need to reduce technical reimbursement assumptions, incorporate higher Pro-side mix, and reflect lower gross-to-net spread in Q4 based on management’s commentary .

Key Takeaways for Investors

  • Near-term headwinds from technical reimbursement pressure and Texas benchmark reset, but structural pivot to professional billing/remote neurology and in-network deals should improve margin quality into 2023 .
  • Collections velocity and AR reserve normalization are key to narrowing gross-to-net; Q3 reserve dropped to $2.1M, with “< $3M” targeted in Q4, underpinning improved reported revenue flow-through .
  • Guidance reset to 21,000–22,000 cases emphasizes profitability over volume; expect Q4 seasonality (higher commercial mix) and cost cuts (> $5M annualized) to support EBITDA trajectory .
  • Watch in-network contracting progress in Texas; arbitration success provides price discovery that can accelerate agreements and cash cycles .
  • M&A optionality in a buyer-friendly market could add scale in favorable states and enhance yield via Assure’s platform and analytics .
  • KPI cadence (remote neurology cases, collections, DSOs) is the best near-term signal amid accounting noise; sustained improvement supports the bull case on margin recovery .
  • Actionable: Position for potential narrative shift in Q4 prints (cleaner gross-to-net, stronger Pro mix). Monitor disclosures for any in-network wins and updated arbitration outcomes in Texas to gauge reimbursement stability .

Citations:

  • Q3 2022 press release and financials
  • Q3 2022 earnings call transcript (prepared remarks and Q&A)
  • Q2 2022 press release and transcript
  • Q1 2022 press release and transcript