Akumin Inc. (AKU) on Q1 2022 Results - Earnings Call Transcript
Operator: Good morning. My name is Sergey, and I will be your conference operator today. At this time I would like to welcome everyone to Akumin's 2022 First Quarter Results Research Analyst Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question-and-answer session Thank you. Mr. Cameron you may begin your conference.
Matthew Cameron: Thank you. Good morning, everybody and thank you for joining us for today's investor presentation. My name is Matt Cameron, I'm the Chief Legal Officer and Corporate Secretary of Akumin. And joining me on the call today are Riadh Zine, our Chairman and CEO; and Bill Larkin, our CFO. There is a slide deck that's meant to accompany today's presentation. If you haven't downloaded it directly from the portal, you can also obtain a copy of it from the Investor Relations section of our website at akumin.com. Before we begin, let me remind you that certain matters discussed in today's conference call or answers that may be given to questions asked, could constitute forward-looking statements or information that are subject to risks or uncertainties relating to Akumin's future, financial and business performance. Actual results could materially differ from those anticipated in these forward-looking statements and you should not place undue reliance on these statements, particularly on future financial performance. The risk factors that may affect results and these forward-looking statements are detailed in our periodic results and public disclosure. These documents can be accessed under our public disclosure at sedar.com and sec.gov. Akumin is under no obligation to update any forward-looking statements discussed today and investors are cautioned not to place undue reliance on these statements. We may also refer to certain non-GAAP measures during this conference call, such as EBITDA, adjusted EBITDA and adjusted EBITDA margin. These non-GAAP measures are not recognized measures under United States, generally accepted accounting principles and do not have standardized meaning prescribed by GAAP. We believe in addition to GAAP measures, certain non-GAAP measures are useful for investors for a variety of reasons including that we regularly use such measures to communicate with our Board of Directors and that EBITDA and adjusted EBITDA are used as analytical indicators by us and the healthcare industry to assess business performance and are measures of leverage capacity and ability to service debt. EBITDA and adjusted EBITDA should not be considered in isolation or as alternatives to net income cash flows generated by operating investing or financing activities or other financial statements that are presented in the consolidated financial statements as indicators of financial performance or liquidity. You can find additional information regarding these non-GAAP measures on Slide 2 of our presentation, which is available in the Investor Relations section of our website under Events & Presentations. And a reconciliation of EBITDA and adjusted EBITDA to net loss, the most comparable GAAP measure is included in the Appendix to that presentation. We have not provided a reconciliation for any forward-looking non-GAAP measure referred to in this presentation, as we will not be able to produce such a reconciliation without unreasonable effort. And now, I'll turn things over to Riadh Zine. Riadh?
Riadh Zine: Thanks, Matt and good morning, everyone. My name is Riadh Zine and I'm the Chairman and CEO of Akumin. Very happy to speak to everyone today to discuss our first quarter 2022 results. As you can see in Slide 3, we are now among the top companies in the entire industry, delivering outpatient solutions of radiology and oncology to hospitals physicians and their patients. We are the number one or number two player in all of our core service lines and have a national presence operating in 48 states. We care for more than 2 million radiology patients on an annual basis and treat more than 10,000 cancer patients every year. We also serve over 1,000 hospitals and health systems, which is an important component of our growth strategy as hospitals continue to expand their operational capabilities. The new Akumin platform has the scale with the combined last 12 months revenues of $740 million in all radiology and oncology businesses. This is a very strong foundation in which we could obviously build and we have a lot of opportunities ahead. Slide 4 captures some of the key differentiators of the Akumin platform and the value proposition in particular for hospitals and health systems. Akumin's suite of services including mobile and fixed cycle patients in both radiology and oncology enables us to deliver customized solutions to virtually any customer in any geography. We are able to evaluate the needs of any community and design a solution set that is uniquely tailored to that community's outpatient radiology and oncology needs. As we can see from the chart, Akumin already has a sizable fixed site presence with 234 locations, 33 of which are dedicated to oncology. Our fixed-site platform is our largest and fastest-growing segment and it constitutes approximately two-third of our revenue stream with the remaining from mobile. Given current market dynamics, we see a significant opportunity to continue to grow our fixed-site volume and footprint in response to hospital demand, particularly as hospitals' need for outpatient solutions continue to accelerate. In fact, we are already in discussions with several potential health systems to leverage our existing footprint to accelerate that outpatient strategy for radiology services. This should bring incremental volume to existing facilities. In addition, we have a strong pipeline of potential de novo as well as service expansion opportunities in cancer care with both new and existing partners. Akumin is clearly well positioned to benefit from the ongoing shift to outpatient service delivery. As you can see on slide 5, 95% of our revenue is already derived from outpatient procedures. We have a balanced revenue mix between hospitals and third party payers with no customer accounting for more than 4% of our consolidated revenues. As the preferred outpatient solution provider to hospitals, approximately 50% of our revenues come from hospital customers. The balance is from third party commercial and government payers. Over time, we expect our revenue share with hospitals to grow as existing and new hospital customers and partners continue to search for outpatient solution. This is consistent with our vision. This is consistent with our strategy. With the acquisition of Alliance, we'll double down on the vision of outpatient. And obviously, we expect that share of the pie with hospitals and health systems to continue to grow beyond the current 50% share we have. On slide 6 the, Akumin platform offers a diverse suite of services and it's very focused on areas of high growth and high value add. Clearly, we're a leader in radiology as 55% of our radiology revenues come from MRI procedures. Akumin is also a significant player in cancer, diagnosis and treatment with 24% of our radiology revenues from PET/CT and 17% of our total revenues coming from oncology segment. These modalities are critical to the delivery of quality patient care and utilized by a variety of physician specialists across the care continuum from screening through diagnosis through treatment. The new Akumin platform is exceptionally well positioned to capitalize on the growth trends in the industry, as the shift towards outpatient service delivery continue to accelerate. This was evident in our Q1 results, and we continue to see strong support from all of our partners, including hospitals' health systems and physician groups. In the first quarter, we saw positive same-store growth volume in all of our key service lines and modalities. MRI was up 4.9%. PET/CT procedures, on the same-store basis, were up 7.1% and oncology patient starts were up 5.3%. The first quarter revenue was $186.3 million, up $122 million or 191% from $64 million in the first quarter of last year. That was obviously mainly due to the acquisition of Alliance Healthcare Services, which was completed on September 1 2021. But still, on a sequential basis, revenue increased $6.8 million or 3.8% over the fourth quarter of 2021, despite the fact that Q1 is typically the seasonally weakest quarter in our industry. Adjusted EBITDA was $32 million, up $22.8 million or 247% from last year. But on a sequential basis, adjusted EBITDA was also up $4.5 million or 16% over the fourth quarter of 2021. Building on our momentum in Q4, we generated net new hospital sales contracts in Q1, the result of which will continue to benefit the company in 2022 and beyond. The strong results were ahead of consensus estimates, notwithstanding the fact that we've experienced a significant disruption to our business in January and February, as the Omicron outbreak created many operational challenges resulting in decreased patient flow. On a consolidated basis, accounts receivables at the end of the quarter were $126 million or 61 days of sales expanding a slight improvement from Q4 of last year as well. Now I will turn the call to our CFO, Bill Larkin to go over some of the operational and financial metrics.
Bill Larkin: Thank you Riadh and good morning, everyone. We're on page eight of the presentation. As we mentioned on our last two calls, the new Akumin now includes both hospital and independent sites. Therefore, we track actual scans by modality across the entire radiology platform. By providing procedure volumes and mix, together with radiology procedure as a percentage of revenues, as illustrated in the pie chart on slide six, we believe you should have enough relevant information at your disposal to accurately track our operating and financial performance over time. On slide eight, you can see the MRI PET/CT and total radiology procedure volumes and same-store changes over the last eight quarters. And on the bottom chart the aggregate volumes in 2020 and 2021, as well as the trailing 12-month period including Q1, '22 on a pro forma basis and by comparability including the Alliance acquisition. Akumin, realized strong same-store volume growth in Q1 '22 particularly in our core modalities of MRI and PET/CT and this is despite the Omicron-related disruptions, we experienced early in the quarter. Certainly, our trailing 12-month pro forma volumes are above 2021 levels and well ahead of our 2020 volumes which were significantly impacted by COVID. Now moving on page nine. In the oncology segment we track activity level by patient start volume and revenue per patient start. Note that radiation therapy is an essential element of cancer care. And up to 60% of cancer patients receive radiation therapy in the course of their treatment. Therefore, our oncology segment saw a more muted decline in activity levels due to COVID-19 compared to the radiology segment. In the first quarter '22, same-store patient starts were up approximately 5.3%, despite the significant Omicron disruption we experienced early in the year. As you can see in the chart on the bottom left of the slide, not only has the oncology business recovered from the modest COVID-related declines in return to pre-COVID levels but this segment has also exhibited consistent same-store growth in recent quarters. While our revenue per patient start has declined slightly from the 2020 levels which declined about 2.7%. The change is probably a result of procedure mix throughout the entire business. On page 10, you can see the Q1, '22 and trailing 12 months financial performance by segments. In the bottom right-hand chart Q1, '22 TTM pro forma normalized results assume the Akumin and Alliance businesses were combined for the entire period while adjusting for the divestiture of Alliance's Interventional segments which was completed in the first half of 2021 and Alliance Oncology of Arizona which is divested in Q4 of 2021. And the Q1 '22 normalized results in the bottom left-hand chart reflects some residual activity related to the transition of the Arizona business to the buyers. We report two segments radiology and oncology. This slide illustrates the financial performance of each of these segments. You'll see in the chart on the top left that in Q1 '22 the radiology segment contributed $155.3 million of revenue which is 83% of our total revenues with an adjusted EBITDA margin of 18.4%. And this was before the allocation of corporate services. The oncology segment contributed $30.9 million of revenue or 17% of our total first quarter revenue with an adjusted EBITDA margin of 32.4% before the allocation of corporate services. Our consolidated adjusted EBITDA margins for the first quarter of '22 were 17.2%. While these margins were ahead of the fourth quarter 2021 levels, our margins were negatively impacted by Omicron volume impacts and also reflect the fact that Q1 is typically a seasonally slower period. Assuming no further unforeseen business disruptions, we expect that adjusted EBITDA margins will trend higher for the balance of the year. With that I will now turn it back over to Riadh to discuss our '22 guidance. Riadh?
Riadh Zine: Thank you, Bill. Slide 11 sets out our expectations for 2022. Our first full year as previously disclosed in our investor presentation that was filed with our Q3 results. We expect consolidated revenues to be in the range of $760 million to $780 million of revenues, which is primarily a result of same-store organic revenue growth across the entire platform, but small contribution as well from business development initiatives in our pipeline. Adjusted EBITDA is still expected to be in the range of $155 million to $170 million. As mentioned in the press release, for the first quarter of 2022, we now expect to achieve previously disclosed synergy estimates within the first 12 months post-closing, as originally anticipated, which means before September 1, 2022, we expect to achieve the full run rate. Recall that we previously disclosed or identified $23 million in synergies that we are confident, can be realized over time, specifically through the integration of back office and corporate functions, consolidation of purchasing power and equipment maintenance overhaul. As you know, we had two large organizations coming together, which is nice to have. This is a must initiative to integrate the two businesses into one common platform and one new Akumin, with one set of functions and back office in terms of running the business. Longer term, there is more opportunities. It doesn't stop at the integration. And those opportunities will come from technological deployment initiatives, which will result in further cost savings through process standardization and workflow changes. We also previously identified a number of risk factors that could impact our 2022 guidance, including slowdown in returning collections, supply chain disruptions and fuel costs. Although, we continue to closely monitor all those risk factors and how they could impact our performance, at this moment in time, we remain very confident that we will be able to achieve our 2022 financial guidance and objectives, considering our current synergy realization expectations. On CapEx, we have slightly reduced our planned CapEx budget for 2022 to $79 million from the previous guidance of $89 million. Of the $79 million in the revised CapEx, we now anticipate that $12 million will be cash and the balance to be financed through our network of equipment finance providers and local lending institutions. In addition, we have changed the CapEx composition, where we've increased our maintenance CapEx budget to $37 million from $30 million and we reduced our planned growth CapEx accordingly. This was primarily the result of a reclassification of CapEx related to contract renewals. We obviously don't view contract renewals as growth. They are viewed as maintenance CapEx, as we're not really generating new revenue with -- from those renewals. Recall that the growth CapEx is primarily geared towards new hospital customer and partner acquisition as well as capacity expansion. Our investments in new customers' insights continue to be high return and typically with less than a four-year payback on growth capital. As we continue to evaluate all of our markets and prioritizing those growth opportunities, our criteria is very simple. It's based on the ones that will have the highest return on investment, but also with the nearest-term potential in terms of impact on our performance. We anticipate that the benefits of this growth CapEx to yield results as we ended 2022 and we'll obviously see the full benefit of that in 2023. In fact, all the other trends in the industry continue to be in our favor and we continue to see positive momentum in support for all of our procedures. For example, the US Preventive Services Task Force recently recommended annual low-dose CT screening for lung cancer for adults aged 50 to 80 with a specific history of smoking. All of these will only continue to benefit same-store sales growth going forward and obviously the positive impact that's going to have on our margins. Moving to the capital structure on slide 14. The secured leverage at the end of the quarter was 5.4 times. Obviously, we're very focused on continuing to reduce the leverage. The primary driver of leverage reduction will come from EBITDA growth initiatives, including synergy capture, technology-driven initiatives and the streamlining of our service delivery. As we have discussed in the past, we have an abundance of growth levers, which we will expect to have a meaningful impact on EBITDA and reducing leverage. Our confidence comes from a very simple concept. The operating leverage in our business is unique a new dollar of revenue doesn't fall to the bottom line at the same 20 or low 20s margin. It comes down to the EBITDA at 3x the current margin. And that's how you could deleverage very quickly in a business like ours, especially when you have the scale that we have. A couple of years ago, $100 million of revenue is a big change. Today $100 million of revenue is only -- improvement is only 10% of the current scale that we have. So we expect over the long-term, our secured leverage to decline below four times as we execute on our growth -- organic growth initiatives. Also please note that, we're not just the management team of significant shareholders, but we're highly incentivized to reduce leverage as well. That concludes the prepared remarks portion of the presentation. I hope it provided an informative window into the new Akumin and the potential of the combined platform. On behalf of Bill and myself, I would like to take the opportunity to thank all of our employees, physicians, customers and partners for all of their efforts in making this quarter a success. And now, I would like to ask the operator to start the question-and-answer period.
Operator: Thank you. We'll now take our first question from from Clarus Securities. Please go ahead.
Noel Atkinson: Hi. Good morning, Riadh and Bill, really well done in Q1. Thanks for taking our questions. First off, just in terms of Q1, so you mentioned the Omicron overhang in January and February. You guys had a really strong result in Q1 versus typical seasonality. For example, your volumes, your procedures didn't really show much change from what is typically a really strong Q4. So, was March a particularly strong month? And then, what did you see for volumes as Q2 kicked in?
Riadh Zine: Sure. Thanks. Thanks Noel for the question. You're absolutely correct. And I think you know that we highlighted that in Q4 given that we already had visibility when we announced our year-end results, we had visibility on January and February. January and February was much weaker than we anticipated. They were significantly below plan. And I think we even measured that impact. At that time, our revenues as we already saw, a $6 million to $8 million impact in the first two months alone on the top line expectations. So you're absolutely correct, what happened is March was a much stronger month and that momentum continued into the second quarter from what we see right now. And let's hope that's the new norm and we will not be faced with another surge of any kind. So, we remain very -- and that's actually -- and that's a great point, because that's really where our confidence in our guidance comes from as well. And if we continue at the daily momentum that we're seeing, we are very comfortable with the top line performance.
Noel Atkinson: Okay, great. Secondly, you mentioned that you've been able to sort of handle the cost pressures that's been coming up. So you do have -- you're spending a lot of money on the field for your mobile units. And there's mention in the general media about nursing cost pressures and salary increases. So I guess, how are you guys able to manage these issues? And what are you doing to sort of protect against significant cost inflation going forward?
Riadh Zine: You're right on the inflation cost. I think that is impacting everyone in healthcare today. That's not unique to Akumin as you pointed out, Noel. I think there is more and more press. I think you know as a company, we've been talking about this a year ago. And I think now it's mainstream. It's in The Wall Street Journal. If some of you read, this week it's really impacting every provider hospitals, health systems, service providers like ourselves. The inflation has already been reflected in the numbers. We've started to see that impact even in Q4 and Q1. We're managing that long-term through -- that's why we've really been investing in -- and strategically what -- how could we run the business differently? How could we deploy technology to further control those costs? I mean, you're not going to control those costs without technology. It's just not possible. So you have to think, rethink the clinical service delivery if you were to manage those costs long-term. So long-term -- and I would say long-term I'm talking 12 months -- 18 months from now we will be in a much better position than we are right now in being able to mitigate and manage those inflation costs. And there are -- there is not also just technology there are tool that you could use in terms of workforce management, which is not something that is widely used in the healthcare services space. I think there's always improvement -- opportunities for improvement on that front as well. So I think better utilization of our personnel. Better density of our operations. That also helps. So you have -- you're not all over the place in multiple markets. And then the other thing is technology. That's the only way. But I think, I'm not going to tell you that our cost has reflected some inflation already a bit otherwise you would have already had better margins if we didn't see some inflation already in our labor cost.
Noel Atkinson: Okay. Okay. And then the last one for me before I jump back in the queue here. So the low-dose lung CT screening that you were talking about. So that's -- the changes there to coverage seems pretty substantial. I think, the New York Times article talked about 14.5 million Americans having -- now having access or reimbursement access for lung screening for cancer. So are you folks doing this today? Is this a material amount of your volume today? And how do you -- how do you ramp that up to reach physicians and patients to drive them into your centers who do this?
Bill Larkin: Yes. We definitely do that today. It's -- CT procedures are an important part of our mix. It does have an impact, but I'm not going to say it will have a significant impact on our revenues. I think what I see the significance in this -- this is not the first and the last one we're going to see more and more adoption. And I think you know I've been talking about this for a number of years. The price point of these procedures is now not just affordable it's also now becoming mainstream in the sense that when it becomes affordable it's a means to save in the healthcare space. The screening is really important to save downstream in any patient joint. We can relate to that in our personal lives. Going to something earlier save the patient in terms of quality of life, but also saves the system a lot of cost. So I think the significance of that is we expect more and more of those type of opportunities that all they're going to do more same-store growth for us. But in terms of having an impact. And just from that it is so new for -- I mean as you know government is a small part of our payer mix and that's only one of many procedures. But the only thing I want to say is that at the end of the day all these point to the same trends, which is, we're going to see more and more volume of the type of procedures that we do and that will have a huge impact.
Noel Atkinson: Okay, great. All right. Thanks very much.
Bill Larkin: Thank you.
Operator: Our next question comes from Tania Armstrong-Whitworth from CGF. Please go ahead.
Tania Armstrong-Whitworth: Good morning, gentlemen. A couple for me here. Wondering if you can talk about your CapEx spend. If you can, I guess, break it down give us a little bit more color on exactly what it's going towards this. And if I may your spend used to refresh the Alliance fleet is kind of what I'm interested in?
Riadh Zine: Sure. I think maybe Bill do you want to take that question?
Bill Larkin: Yes, sure. So it's -- we've always talked about those target maintenance and growth. Maintenance is really focused on great fixed replacing service light assets. That's both in mobile and fixed site so that means CapEx is going to replace service light assets at some of our fixed-sites. That's going to vary from year-to-year. And we've always used this metric historically when looking at where our normal spend is on maintenance CapEx. It's roughly about 5%, sort of, radiology revenues. Now we're trying to drive that percentage down, but that's typically, how we look at our business today. It's a necessity. It's – I think it's going to provide us new opportunities to grow our revenues, because now whether it's in the mobile platform whether it's a specific fixed site we've made that investment and we're incentivized to drive volumes through the sites to leverage our investment in that new asset. And as Riadh mentioned, in the prepared remarks. Our typical return on like an MRI or PET/CT is less than – our payback is less in four years. So it's – these are very attractive returns. There's a process that we go through internally in looking at each and every individual asset that we're making a commitment to make sure that it meets our targeted investment hurdles. So, and then from a growth perspective, it depends on the opportunities that are available. And so as we look at our business today, based on our updated forecast, with things kind of shift decisions get pushed. That's one of the reasons why we're seeing from our previous guidance, the current guidance, $10 million reduction in our overall CapEx. So the growth CapEx, again, we look at each and every investment opportunity what is it going to do? How is it going to drive top line growth? How is it going to drive bottom line growth? Typically, the payback period again is going to be less than four years on investment in those assets. And I think these are some exciting opportunities that we're investing in this year. And each and every year, we will continue to evaluate our investment in both maintenance CapEx as well as growth CapEx and – because we've got to be able to afford those investments within our existing cap structure. So it's a continuous evolving process and literally, every single month, we go through and evaluate, what's in the pipeline? What's changing in our business? Are there any new opportunities that we can leverage? And I said this, we look at this on a monthly basis.
Tania Armstrong-Whitworth: Okay. Excellent. Thank you. Second question, can you speak to whether there was any kind of reversal in those provisions that you took a few months ago? Did you see any of that come back into revenue in Q1? And apologies, if you said this at the beginning of your comments, I missed that part.
Bill Larkin: Well, it was – we had just a little bit and – but it was minor. It's actually kind of nice that it actually stabilized with the ARs collection rates. As we continue to refine that process and – each and every quarter. So actually Q1, I was really happy with where we were and we just had a – what I just call kind of a normal recurring, adjustment that we would expect within our AR provisions, so I would say, it was just a normal quarter that I would expect.
Tania Armstrong-Whitworth: Okay. Perfect. And then lastly here, going back to your comments on the new push to screen more patients Riadh. I'm wondering, what your capacity utilization in your centers is today? And how much of that – these initiatives like the volume coming out of these initiatives you could actually absorb?
Riadh Zine: Yeah. I think, Tania, we still have a significant additional capacity even with the operating hours of today. So we don't see an issue. We've done that capacity analysis. We could add significant revenues, and we don't have to expand the capacity, because all that we have to do is really change the operating hours, where we're seeing the volume change. And that's really our focus to drive, the higher margin. So when I've talked about organic growth earlier adding $100 million of revenues not really adding significant CapEx associated with that to actually get to that number. It's really utilizing the same assets and extending the hours. When you extend the hours, you just extend the labor cost. But again, we have a lot of operating left. I think we've explained it many times that, if your margin strategy $1 of same-stores, it is now $0.20 at least $0.30, $0.60. That's the beauty of a fixed cost structure, when we go the other way. So, that's where we get a lot of comfort that, we'd see the impact from same-stores on our numbers. And just to your question on provisions. And this is the first clean quarter, and it's not –the only thing not clean about, it is having the slow start in January and February from on the COVID surge. But other than that, it would have been the cleanest quality we could have.
Tania Armstrong-Whitworth: Yes. Okay. Perfect. Thank you so much. That’s all for me.
Riadh Zine: Thanks, Tania.
Operator: Endri Leno National Bank. Please go ahead.
Endri Leno: Hi, good morning. Thanks for taking my questions. A couple for me. I'll start with labor first, in that I mean, what we've been reading out there is more availability of labor that's been a concern for healthcare rather than wage inflation, which is also a concern. But I was wondering, if you can talk a little bit about availability of labor across your network and whether you have used any contracted labor in Q1, as some other healthcare organizations have? And how do you see contract labor use going forward?
Riadh Zine: Yes. We -- thanks Endri, for the question. I think across the healthcare service, it's really both. It's not just availability, it's also cost. Because when we don't have availability at the larger systems like ourselves who could afford to pay more, which we're to be paying talent. And for the smaller players, it becomes -- the bigger issue becomes availability. But it's both. It's both and not we haven't seen inflation -- it's not true, we haven't seen inflation. So it's not just availability. And for a company of our scale, we haven't changed our practices. Most of our clinical staff is full time and has remained that way through what we're witnessing and the pool of contractors we use they're always there for servicing capacity for servicing volume or for really kind of situations, where you have to replace someone that for some reason, they're not available. For many reasons, including being on vacation. So we -- the structure of how we deploy our clinical staff, hasn't changed. But what's changing is, if you're replacing someone the availability is not what it used to be, and the cost is not what it used to be.
Endri Leno: Okay. That's great color. And the second question for me is, if you can talk a little bit about seasonality. I know you've mentioned that Q4 and Q1 are usually the weakest. But in terms of, perhaps something a bit more concrete in terms of, what percentage of your businesses in Q1 Q2 and Q3 -- and I mean throughout the year. Just trying to kind of get a sense of what a normal Q1 would look like without any impact? And especially, what the cadence in volumes or businesses between Q1 and Q2? Thank you.
Riadh Zine: Yes. I think you . Bill, do you want to take that?
Bill Larkin: Yes. I don't think, we can get in the percentages because it does vary every single year and there's outside normal course of business other factors that could impact the business for example, with Omicron in January and February. But typically ,when we look at the seasonality of our business Q1, is typically the lowest quarter of the year. And then we would see – typically, see an increase in Q2 increase in Q3. And then in Q4, we'll see a drop-off from Q3. And that's simply because you're starting getting into the winter months, you have a lot of holidays in there during that time period. So we expect we're going to see that drop off in December. That's typically, the quarter-by-quarter cadence we see each year.
Endri Leno: Okay. I mean are you able to provide further -- just any kind of general color, like the difference 10% 15% difference or more or less?
Bill Larkin: It's going to vary year-to-year. There's so many different factors that go in our business that impacts it. It's hard to put a specific percentage on, what the quarter-over-quarter change would be.
Endri Leno: Okay. Okay, Bill. Thank you. And that’s it for me. Thank you.
Operator: Rishi Parekh from Barclays. Please go ahead.
Rishi Parekh: Thanks for taking my questions. One, I just want to go back on the reserve question. It seems like you didn't take much of a reserve in the quarter. I think last quarter you took a $5 million reserve solution, call it a couple of million, which probably implies that you're seeing some visibility in terms of collections. Can you just remind us as to, what percentage of your receivables are tied to some of those collections in Georgia? And what you're seeing in terms of those collections? And then more importantly, what is the amount that you're hoping to collect? And then I do have a follow-up on that specific question.
Bill Larkin: Yes. Rishi, with regard to your question...
Riadh Zine: Yes. Sorry, Bill let me just to put it into the context. So, one, we don't disclose what's the make between the -- we haven't disclosed in the past, the make between -- to your point Rishi between attorney collections and the rest, but that's -- it's obviously a significant part of -- given the longer cycle it's a significant part of the AR. That's number one. Number two, yes, you're correct, Rishi on, we took more than $5 million provision in Q4. We didn't take any in this quarter. So that is obviously stability, but that also doesn't mean that all the prior provisions that we took is because you actually -- you're not going to collect it. It's just basically the way the visibility or the information that you have available at that time. That is what -- we had two things. One was the fact that it was a business that we didn't have enough history on our platform which has impacted the level of provisions. But then also what has recently impacted the level of provisions with the core shut down of 18 months. But that's not -- as Q1 business is back to normal. And we don't see -- we don't see the need for any additional level of provisions.
Bill Larkin: Yeah. Rishi, I just want to add. This is not a static process. And so it's nice we get stability in the collection rate in Q1. However, we're continuing to look throughout the entire billing and collection process and looking for opportunities how to improve collections across the entire business. It doesn't matter, if it's commercial auto attorney. It's a continuous process that we're trying to look to improve our collections in each of the businesses. So hopefully, through some of these initiatives we potentially could have some pickup in the future, if we start to see some improvements in those collection rates being driven by our initiatives. And we'll be able to talk about this as.
Rishi Parekh: And is there any thought about, maybe factoring or selling those receivables and advanced -- maybe capture those advance rates today, rather than waiting a year or two to see what those collections could look like? And then, just a last question, on the inflationary aspect of it, is there any way you can maybe just quantify what the inflationary impact was in the quarter to your cost or to your expenses? Just want to better understand, how that might roll down through the year. Thank you.
Bill Larkin: Riadh.
Riadh Zine: Yeah. I think I'll take the first one Bill, and on this -- you can talk about the second one. I think on the first one, yeah, we continue to evaluate the attorney. And that's more -- that's more of a -- I think that will point now where it's not really even if we're going to do something like that it's not going to be actually Rishi to your point is not really going to have an advance on cash. If we're going to do something like that, because we think the level of provision was so conservative that it doesn't have -- it doesn't reflect the value anymore. So that's -- that would be a driver, because obviously at that point you have to make an economic decision that makes sense. But we will not be able to advance cash. That's the least of our problems right now on the attorney collections that, we don't have a -- that's not an issue for us. The business is growing. We have more opportunities to grow that business. We're actually in a much better position than other players despite the fact that the courts have shutdown for 18 months. So we -- if we're going to do that, it would be more of a strategic decision. And it's going to be done in a partnership, where we could grow the business and also it will make economic sense to all parties involved and Bill on the second question?
Bill Larkin: Sure. Yes. So Rishi, the inflationary pressures, I think, we've spent a lot of time talking really and it's our biggest costs or inputs into our business, and we're keeping a close eye on that. And the impact of wage inflation throughout -- not only us, but the entire healthcare industry and we're all dealing with that issue and trying to manage that as well as staffing across the entire organization employee retention and attracting some to the organization, because at the end the day we do -- us like any other health care providers we have a high fixed cost. And so the best solution to tap in that is driving the top line, because a larger portion of those revenues drop to the bottom line, which will ultimately drive some bottom line growth. So we're really looking at labor. The leadership team HR, we're looking at that across the entire organization. In other areas, you get insurance, it's -- there's some other inputs to a lesser extent talk about fuel. So -- but at the end of the day, it's really labor. And we'll continue to stay on top of that and look for opportunities to manage that, manage our cost structure. But again at the end of the day this has about growing the top line and leveraging our fixed cost footprint so we can drive bottom growth throughout the organization.
Operator: Thank you. This will conclude today's question-and-answer session. And now I would like to hand the call back over to Riadh for any closing or additional remarks. Over to you.
Riadh Zine: Thank you everyone for your participation on today's call. Akumin's vision continue to be centered around a patient focused innovation, service delivery standardization and providing exceptional healthcare value all in an outpatient care setting. We are today a leading outpatient healthcare service provider with significant scale, with long-standing hospital and health system relationships. On a pro forma basis, we generated in excess of $740 million of revenues. We serve patients in more than 234 fixed site radiology and oncology centers and with more than 4,000 team members across the U.S. As I've said earlier, our integration and transformative initiatives are well underway. And we'll continue to expect 2022 to be a milestone year, as we build on this solid foundation. Our company has never been better positioned to capitalize on all the trends we've discussed today and all the growth opportunities ahead in our industry. Again, I would like to take the opportunity to thank our staff, radiologists, all of our stakeholders for their efforts and ongoing support, as we continue to go through this transformation at new Akumin. This concludes our call. Thanks again to all participants for your interest.
Operator: Thank you. Ladies and gentlemen, you may now disconnect. Thank you for your participation.
