Akumin Inc. (AKU) on Q3 2022 Results - Earnings Call Transcript
Operator: Good morning. My name is Simon and I will be your conference operator today. At this time, I would like to welcome everyone to Akumin Inc.âs 2022 Third Quarter Results Research Analyst Call. All lines have been placed on mute to prevent any background noise. After the speakersâ remarks, there will be a question-and-answer session. Thank you. Mr. Zine, you may begin your conference.
Riadh Zine: Good morning and thank you for joining us for todayâs investor presentation. My name is Riadh Zine and I am the Chairman and CEO of Akumin. I am delighted to be joined on the call today by David Kretschmer, our Interim Chief Financial Officer, who recently joined the Akumin team. Before joining Akumin, David previously worked for Surgery Partners, a multi-specialty surgical center with $2.5 billion in revenues. He was the Interim CFO, Executive Vice President of Strategy and Transformation at Surgery Partners. Prior to that, he was Senior Vice President, Treasurer, and CIO for Anthem, now Elephant Health, a health insurance provider with more than $130 billion of revenues. David obviously has extensive healthcare and organizational transformation expertise, and we are very excited to have him on board at Akumin as part of our senior management team. There is a slide deck that is meant to go with our presentation today. A copy of it is available for download from the Investor Relations section of our website at akumin.com. Before we begin, let me remind you that certain matters discussed in todayâs conference call, or answers that maybe given to questions asked, could constitute forward forward-looking statements or information that is subject to risks or uncertainties relating to Akuminâs future financial and business performance. Actual results could differ materially from those anticipated in these forward-looking statements. 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 Akuminâs periodic results and public disclosure. These documents can be accessed under our public disclosure at sec.gov and sedar.com. 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 U.S. GAAP and donât have a 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. If anyone could mute their line, please, there is a background noise. And donât have a 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, 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 statement data 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 Investors section of our website at akumin.com under Events and Presentations. Reconciliations of EBITDA and adjusted EBITDA to net loss, the most comparable GAAP measure is included in the presentation as an appendix. We have not provided a reconciliation for any forward-looking non-GAAP measures referred to in this presentation as we would not be able to produce such reconciliation without a reasonable effort. Moving to Slide 3, I am happy to be able to speak to everyone today to discuss the financial performance of our third quarter. On Slide 3, you can see the same-store volume growth on a pro forma basis in our radiology service lines and our patient starts in our oncology division. Specifically, our MRI volume was up a modest 0.2%. Our PET CT volume was up an impressive 7.8%. Our total radiology procedures were down 2.5%. Our total oncology patient starts were down slightly by 0.2%. Q3 revenue was $186.6 million and is up $78.4 million or 72.5% from $108.2 million in the third quarter of last year. This was mainly due to the Alliance Healthcare Services acquisition, which was completed on September 1, 2021. On a sequential basis, revenue decreased $5 million or 2.9% over the second quarter of 2022, impacted by Hurricane Ian, as previously noted. Adjusted EBITDA of $36.5 million was up $18.6 million or 103.3% from $18 million in the second quarter of last year. On a sequential basis, adjusted EBITDA decreased $1.7 million or 4.3% from the second quarter of 2022. However, it should also be noted that the adjusted EBITDA for this quarter excludes the gain from the sale of certain accounts receivables of $7.6 million, the details of which were announced on our August 12 press release. Adjusted EBITDA margins in the quarter were 19.6% and remained relatively stable, down only 0.3% sequentially from 19.9% in the second quarter despite the fact that procedure volumes were again negatively impacted by some of the challenges mentioned earlier. On a consolidated basis, accounts receivables at the end of the quarter were down from $127.4 million at the end of Q2 to $112.4 million. This equates to 55 days of sales outstanding, the lowest in Akuminâs history to date. Slide 4 provides some additional details about our operations in the quarter. Our integration process is well underway with the completion of Phase 1 of our integration initiatives, which were primarily related to streamlining the organization in order to remove functional duplication. In addition to the $23 million successfully achieved in Phase 1, we have identified further synergies of $25 million that we are confident we can realize on a run-rate basis during 2023 as we implement Phases 2 and 3 of our integration and transformation plan. The next two phases will focus on network consolidation, asset optimization, and procurement among many other initiatives. Turning to our Q3 results, as we have already discussed, Hurricane Ian caused a meaningful disruption to our Florida operations, where we have a large fixed site presence. Thankfully, the impact was short-lived, and we are optimistic that some of the procedure volume that was lost in Q3 will be recouped in Q4 as suggested by our strong October volumes. In addition, ongoing labor constraints â and more specifically, clinical personnel availability â resulted in suboptimal capacity utilization in some of our facilities in the quarter. While this issue is not unique to Akumin, we are taking steps to mitigate labor shortages and expect the impact of these constraints to be less pronounced in future quarters. As previously mentioned, the changes made in our oncology division also reduced the contribution from the service line in Q3. We were pleased to have completed our change of jurisdiction as well, in incorporation from Ontario to the state of Delaware during this quarter, effective September 30. Given that all of our operations are based in the U.S., and we are now considered a domestic U.S. issuer, this was a logical step and should benefit all of our shareholders in the long-term term. Moving to Slide 5, this slide outlines recent developments in our oncology business, which we are excited to be able to share with you. As we have said on many occasions, oncology will remain a core business line for Akumin, as itâs an important focus of our hospital and health system partners, and itâs very complementary to our radiology businesses. As part of our transformation initiative, we conducted a comprehensive review of this business, which resulted in the refinement of our strategic focus for this important service line. This refined focus will enable Akumin to capitalize on the market dynamics and emerging trends in oncology and more importantly, to address the growing needs of our hospital and health system partners in delivering this important service. A new leadership team led by Jim Brook, a seasoned oncology executive with extensive experience at Prisma Health and MD Anderson, recognized this significant market opportunity and joined Akumin earlier this year to execute our strategy. Akumin has a compelling value proposition in oncology and is uniquely positioned given the many challenges our hospital partners face in this service line, including growing demand, an aging fleet, and capacity constraints. Akumin has some distinct competitive advantages in oncology, including a patent-protected mobile technology that will enable us to develop new partnerships and deliver our enhanced value proposition at scale for our hospital partners. However, we did incur a $20 million impairment charge in the quarter as a result of the combined impact of multiple factors, including the review of existing hospital partnerships conducted by our new leadership team; the delay in implementing new partnerships, in part as a result of supply chain issues; and the deferral of some growth capital expenditures given the strategic review of the business. We donât anticipate taking any additional impairments in the future now that the review and the repositioning of this business is complete. We remain very excited about the future of our oncology division, and we are confident that this business will become an even more important contributor to our financial results in the future. Moving to Slide 6, this slide illustrates why the Akumin platform offers a diverse suite of services. Itâs very focused on areas of high growth and high value-add. Akumin is a clear leader in oncology. 55% of our radiology revenues come from MRI procedures. We are 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 our oncology division. Moving to Slide 7, Akumin is clearly well positioned to benefit from the ongoing shift to outpatient service delivery. As you can see, we continue to generate over 95% of our revenues from outpatient procedures. We have a balanced revenue mix between third-party payers for outpatient services and hospitals with no more than one customer representing more than 4% of our consolidated pro forma revenues. As a preferred outpatient solution provider to hospitals, approximately half of our revenues come from our hospital customers, the balance of which is for reimbursement for patient procedures paid by third-party and government payers. Over time, we expect our revenue base with hospitals to continue to grow as existing and new hospital customers or partners search for outpatient solutions in both radiology and oncology. I will now turn the call over to our Interim CFO, David Kretschmer, to go over some of the operational and financial metrics.
David Kretschmer: Thank you, Riadh. Let me start by saying how excited I am to join Riadh and the Akumin leadership team in general, and the finance team here in the specific. Thereâs a real opportunity to improve patient care while at the same time bringing value to our capital providers. I have confidence in the teamâs ability to execute and deliver on our commitments. As we noted in our last few calls, given that the new Akumin now includes hospitals and independent sites, we track actual scans by modality across our radiology platform. By providing procedure volumes and mix, together with the radiology procedures as a percent of revenues as illustrated on Slide 6, you can actively track our operating and financial performance over time. Moving to Slide 8, you can see the MRI, PET-CT, and total radiology procedure volumes and same-store changes over the last nine quarters in aggregate volumes in 2020 and 2021 as well as the trailing 12 months, including Q3 2022 on a pro forma basis to provide comparability, including the Alliance acquisition, particularly pleased with the growth of our PET-CT volumes as you can see. You can also note that our same-store total procedure volume declined slightly in Q3 2022 after six consecutive quarters of growth, due primarily to the disruption caused by hurricane and in certain of our Florida locations and ongoing labor constraints among our clinical staff. In our core modalities, we saw relatively flat same-store volumes in MRI and a favorable 7.8% growth in PET CT, where labor constraints are less of a factor given the highly specialized skill sets in clinical personnel for this modality. Despite the challenges we faced in the quarter, we continue to see growth in our core modalities with seven consecutive quarters of same-store volume growth in MRI, and six consecutive quarters of same-store volume growth in PET-CT. Trailing 12-month pro forma volumes are slightly above our 2021 levels and well ahead of the 2020 volumes, which were obviously significantly impacted by COVID. Turning to our oncology business, on Slide 9, I will start by noting that radiation therapy is an essential element of cancer care, as up to 60% of cancer patients receive radiation therapy in the course of their treatment. In the oncology segment, we track activity by patients start volume and revenue per patient start, as you can see on Slide 9. We track these particular metrics as it brings some commonality to our two types of treatments in oncology, LINAC and SRS CyberKnife despite the fact that the reimbursement regimes differ. I will note here that we are evaluating additional metrics to provide better clarity on our performance and expect to share those with you in 2023. In Q3 2022, same-store patient starts were relatively stable, down 0.2% for the quarter. In the trailing 12 months ended Q3 2022, revenue per patient start has declined slightly from 2021 levels, down approximately 3.6% as a result of our treatment mix and the trend in radiation therapy to hypofractionation. On Slide 10, you can see the Q3 2022 and trailing 12 months financial performance by segment. As you know, we report two segments, radiology and oncology. This slide illustrates the financial performance of each of these segments. Note that the Q3 2022 trailing 12-month pro forma results assume the legacy Akumin and Alliance businesses were combined for the entire period, while adjusting for the Q4 2021 divestiture of Alliance oncology of Arizona. As youâll see on the chart on the top left, the radiology segment contributed $155.1 million of revenue in Q3, representing approximately 83% of total revenues with an adjusted EBITDA margin of 20.1% for the allocation of corporate services. On a sequential basis, radiology revenues declined 3.6% from $160.9 million in Q2. As Riadh mentioned earlier, this was primarily the result of disruptions caused by Hurricane Ian to some of our floor operations as well as label constraints and clinical personnel. This, in turn, impacted adjusted EBITDA margins, which were down sequentially from 22.2% in the second quarter. The Oncology segment contributed $31.5 million of revenue or approximately 17% of the total in the quarter with an adjusted EBITDA margin of 35% before the allocation of corporate services. On a sequential basis, oncology revenues were up slightly, 0.6% from $31.3 million in Q2. Adjusted EBITDA margins were up sequentially from 33% in Q2 as well. Q3 consolidated adjusted EBITDA margins were 19.6%, down slightly from 19.9% in Q2, which as mentioned, was primarily attributable to the weaker results in the radiology segment given the challenges we faced in the quarter. Turning to Slide 11. Since we reported our second quarter results, several factors have led us to revise our expectations for full year 2022. As we discussed earlier, these included the hurricane impact, labor constraints, and our strategic shift in the oncology division. While these factors have negatively impacted our 2022 outlook, we have made significant progress toward realizing integration synergies and remain confident that we will achieve the full benefit of our Phase 1 initiatives of approximately $23 million on a run rate basis in Q4. Slide 11 sets out our revised expectations for 2022. We now expect consolidated revenues to be in the range of $740 million to $750 million, down from our previous guidance of $760 million to $780 million. We expect 2022 adjusted EBITDA to be in the range of $140 million to $150 million, down from $155 million to $170 million. Turning to CapEx, recall that throughout 2022, we have continued to refine our CapEx budget to ensure the most efficient deployment of equipment, better aligned with our strategic priorities. We continue to evaluate all of our markets and prioritize those that based on our criteria, are the greatest near-term potential for growth. We now expect total CapEx spend to be approximately $50 million, with $26 million allocated to growth CapEx for new customers and new sites. As a reminder, growth CapEx is primarily geared towards new hospital customer partner acquisition as well as capacity expansion. Our investment in new customers and sites continue to be high return, typically with a 4-year payback on growth capital. We anticipate total CapEx to be funded by approximately $11 million in cash and the balance of $39 million to be financed by a combination of OEMs, equipment finance companies, and regional banks. The table on Slide 12 highlights our free cash flow expectations given the revised guidance discussed in the previous slide. Based on the new midpoint of our adjusted EBITDA guidance, we now expect to generate approximately $20 million in free cash flow in 2022. Note that this analysis assumes no contribution from the deployment of growth CapEx in the year. Weâve also shown our exit rate free cash flow expectations, annualizing the implied midpoint of our fourth quarter adjusted EBITDA and including the $25 million in synergies that we now expect to achieve as part of our Phase 2 and Phase 3 integration plans. Again, we conservatively assume no CapEx contribution and no organic growth in this analysis. Under these assumptions, we expect to exit 2022 on track to generate over $53 million in free cash flow. You recall that we have picked the interest of the Stonepeak subordinated debt through 2022. We will of course update this analysis will provide full year guidance for 2023. Slide 13 illustrates our capital structure at the end of the third quarter. As you can see, Akuminâs secured leverage is 5.9x. In the organization, we are focused on reducing this leverage over time. The near-term drivers of leverage reduction will come from increasing EBITDA as a result of synergy capture, network rationalization, technology-driven standardization, and the streamlining of service delivery. In addition, we have an abundance of organic revenue growth levers in our purview, which we expect to meaningfully increase EBITDA given our significant operating leverage. As a result of these significant cost efficiencies or organic growth opportunities, we believe that our secured leverage will decline to below 4x adjusted EBITDA over time. Note, significant shareholders, we are highly incentivized to prudently optimize the capital structure, and we will continue to evaluate options to do so as market conditions permit. Riadh, I will now turn it over to you before we take questions.
Riadh Zine: Thank you, David. We are obviously ready for the question-and-answer period. So, we would now ask the operator to start the question-and-answer period.
Operator: We will now move to our first question over the phone, which comes from Noel Atkinson from Clarus Securities. Please go ahead.
Noel Atkinson: Good morning, Riadh, and welcome to David. Thanks for taking our questions this morning. Okay. So, first off, if we can talk a little bit about oncology, so thank you for the insight into what you want to do with the business. You talked about mobile units. Do you have any mobile units in the fleet today? Whatâs your outlook for the cost of one of these mobile units? And how many do you plan to deploy in â23?
Riadh Zine: Thank you, Noel, and thanks for the question. We have two mobile units already in the fleet. These units cost in excess of $3 million. We already have one more ordered, and we believe to be able to execute on our new partnerships. We donât need them all in one shot. But we believe our fleet, within the next 12 months to 18, months will probably go up to six mobile units from the two we have and the one we just ordered. And we believe with the six mobile units, we would be able to execute on our partnerships. I think as you could imagine, because they are mobile units, although they are not really â donât think of them like a mobile MRI. These are very heavy units. But when they are parked, they are parked for four months to six months to effect an upgrade or to enable a new hospital partner to initiate their new cancer program. And so thatâs why â so basically, if every unit could basically enable a number of partnerships in the year given that it doesnât need to be in one place for more than four months to six months, we believe the optimal fleet size we would get to is probably around six. But we already have half of that, so itâs not really a significant investment. So, with another $10 million, we will have our optimal fleet ready to address the market opportunity. I hope that answers your question. Sorry, go ahead, David.
David Kretschmer: It might be worthwhile to briefly mention the patents that we hold on this technology.
Riadh Zine: Yes. Thatâs actually â thank you, David. I think we have mentioned that in our notes in the presentation. Itâs really not something that we have talked about in the past. And I am glad, Noel, you brought up this subject, and David also thank you for focusing on the patent because as we have done our review, thatâs a significant competitive advantage. So, we were going to the patent in the U.S., as a few weeks ago in Canada as well. We expect we will also get the patents granted in overseas as well. So, we have a patent here. There are two parts of the patents, one with an OEM, another one with Akumin. It was developed internally by our physics team, which is acknowledged as one of the best in the country. And it was really â once we close the acquisition of Alliance, and as we have gone through the transformation exercise really. And thatâs why 2022 is kind of a milestone year because we really took a pause, like you are integrating and look, you are not really operating in a normal course. You are kind of looking at your assets, you are trying to optimize and looking at things like these patents and say, okay, whatâs the trend in the market, how could this could enable my growth, what partnerships are out there. So, when you go through a review like that you see where the patent on something like this is really significant. And just to give you an example, if we look at hospital partners today, the ones with aging fleet of radiation therapy. So, if itâs 15 years, 18 years old, you want to do an upgrade. Even if you have the capsule to do the upgrade, you have to go dark for four months to six months. That means you donât have a program anymore. So, this is a significant asset that we will build our growth strategy on. And again, thatâs why a change in leadership was also required and we brought significant expertise with seasoned executives to execute on the strategy.
Noel Atkinson: Okay. Should we be expecting â just based on your comments in your prepared remarks, should we be expecting the oncology business line to be a bit softer than in Q4 and then start to see some recovery as these more mobile units and your refocus kicks in, in â23?
Riadh Zine: Yes. Thatâs fair. I think you also mentioned there was delay in some partnerships in the pipeline due to supply chain issues. So, yes, some of those new partnerships that will contribute new revenues even regardless of the mobile, like we saw already things in the pipeline where we are not replacing an existing equipment. You are actually doing a brand-new partnership. Those will be executed in the end of this year, and you will not see contribution until next year. So, thatâs correct, Noel.
Noel Atkinson: Okay. Great. The free cash flow slide, it talks about free cash flows of over $50 million on a go-forward basis which is â thatâs a big leap for the company from where it was a year ago, for example. So, how should we be looking at this? Is this free cash flows of over $50 million at a given point in time, or is that like just on â if you were taking the exit run rate and as a static point in time, thatâs kind of the annualized run rate of cash flows that you would be doing, or is this something like the new baseline for â23 before you would see any impact from growth CapEx, new customer wins, or whatever? But thatâs sort of the baseline of a normalized business.
Riadh Zine: David, do you want to answer that question?
David Kretschmer: I think you articulated it well. What we have done is, as we noted, taken the midpoint of our fourth quarter range of adjusted EBITDA. And then we have included â and we annualize that. And then we have included $25 million of additional synergies and transformation benefits on which we have line of sight that we would expect to achieve early in 2023. No, it does not include when the Stonepeak note goes cash pay. But in terms of a run rate expectation that is the baseline, the 53.1%.
Noel Atkinson: Okay. If labor constraints ease, particularly on the radiology side, I presume, and you start to see a recovery to more normalized volumes. So, there is upside to that number.
David Kretschmer: Well, yes and yes. And as Riadh noted, it does not include any payoff to any of the CapEx we have made in 2022, just assumes we made investments that have no additional adjusted EBITDA. And to your point about the labor, it does assume some marginal easing. But remember, we are starting with Q4 where labor conditions are already â still somewhat tight. I think we have seen this, and you have heard this on other earnings calls. We are seeing that as a lot of the companies are beginning to announce layoffs, they are backing off on new hiring. We are starting to see both on the clinical side and the administrative side, some of those constraints starting to ease. That wasnât really factored in our Q4 range. So, I would say that there is additional upside as those labor markets ease.
Noel Atkinson: Okay. Great. One more quick one for me. So, Hurricane Ian impacted Q3, the end of Q3, quite significantly by the sounds of it. That kind of rolled into the first few days of Q4. And then now you just had landfall again, I think itâs Nicole. I donât know if I can remember the name right. So, in Florida, so whatâs your outlook on Q4 in your guidance from the impact of these hurricanes?
Riadh Zine: Yes. The current one is not of the same severity of Hurricane Ian. We were open for business yesterday and today. Maybe some few reduced hours in certain facilities, but itâs not even comparable to what happened with Hurricane Ian.
Noel Atkinson: Okay. Great. Okay. Thanks very much, guys.
Riadh Zine: Thank you, Noel.
Operator: We will now move on to our â apologies sir, please go ahead.
Riadh Zine: No, I was just thanking. Please go ahead if there is another question.
Operator: We will now move on to our next question over the phone, which comes from Endri Leno from National Bank. Please go ahead. Your line is open.
Unidentified Analyst: Hi. Good morning. This is Eduardo Garcia calling on behalf of Endri. So I have â thank you for taking my questions, a couple from me. The first one is, given that CMS finalized the 4.5 rate cuts, how does that impact Alliance and some of Alliance hospital costs?
Riadh Zine: Yes. The way the rate impacts, really, our government exposure in what we provide as a payer mix. The way we get paid from hospitals is per service or per procedure. So, the impact is really from what you see in the exposure to Medicare, which as you know, we donât have a significant exposure to Medicare. We did do a preliminary analysis on this, and we donât expect it to have a major impact. I think David, you probably have additional color on that.
David Kretschmer: Yes. We estimate the impact to be in the range of $2.5 million to $3.0 million. The midpoint of that is 35 basis points of this yearâs revenue. So, not meaningful, a slight headwind, but not a meaningful impact.
Unidentified Analyst: Okay. Thank you for that. And the next one is in terms of the revised CapEx for 2022, it is significantly below the initial guidance provided at the beginning of the year. So, how do we think about it? Should we transfer this differential for next year, or do you need it anymore? So, can you give me some color?
Riadh Zine: Thatâs actually a great question, and I will start on that point because this is a really important point, and David will add some color as well. Because David and I, since he joined, we spent a lot of time on this. Thatâs really part of the good news that we donât talk about. Well, we havenât gone into details on that point. So, thank you for the question. I think everyone knows that on a pro forma basis, this business had about kind of $85 million to $100 million of CapEx every year. What you donât see from the transformation and the integration is the savings we have done, the optimization of assets, the closing of certain fixed sites, moving the mobile fleet around. All those things we are doing are really kind of, yes, you could say, on a pro forma basis, itâs still the same EBITDA, yes, but itâs not the same business. So, that $50 million CapEx that you have for this year is the CapEx you need. Itâs the new level. I am really glad you asked the question. So, we havenât deferred $50 million to next year, right. Thatâs the new level. And half of it is maintenance and half of it is growth on top of that, right. So, that $50 million, as you know, in our presentation, I think we have around $4 million of maintenance CapEx to maintain the current EBITDA and $26 million of growth CapEx, which obviously will have an impact next year. So, going into next year, unless we are executing really very high growth opportunities, itâs another $50 million of CapEx. So, thatâs really what is the other byproduct, or benefit, from the transformation exercise for this milestone year. I donât know, David, if you want to add additional color on that because I know since you joined, that was a major focus for you as well.
David Kretschmer: Thank you, Riadh. It is a great question. One of the things I think Riadh touched upon is, is the company has developed the discipline to exit underperforming or unprofitable relationships. Well, by exiting unprofitable relationship that frees up equipment which now doesnât have to be purchased for a growth opportunity, but can just be transitioned and moved to the opportunity. One of the things that I have been really impressed by in the short time I have been here is the kind of the capital management committee that Riadh has instituted at Akumin. There is always the tension, which is the healthy tension, which everyone expects between operators seeking to build out their businesses and the finance and corporate teams being disciplined with capital. And one of the things I have really appreciated is the collaborative relationship among the team, and the fact that operators completely are onboard with the idea of optimizing the capital we have, being disciplined with new capital spend, and the willingness to get out of unprofitable relationships. I have experienced where people say, âWell, but itâs strategic.â And Riadh and I have talked. Itâs not strategic if you are losing money as a result of it. So, itâs a very well-run process. Itâs very disciplined and that, in fact, has been one of the reasons the company is, as Riadh said, able to continue to expect the same EBITDA with that lower new CapEx spend.
Unidentified Analyst: Okay. Thank you. Thank you for your answers. One more clarifying question on the CapEx. I noticed on your presentation, you are doing CapEx net of financing. Is there a reason for that? If you can provide me some color there.
David Kretschmer: I think what we outlined in the deck â Riadh, correct me if I am wrong, is that of our $50 million, $39 million would be finance.
Riadh Zine: It would be finance. Yes. Thatâs right. And again â I like your questions because they are actually helping us to deliver other important messages. So, the reason we have financed $39 million and the rest is cash because we did have excess cash and was optimal. Itâs not really a lack of financing opportunities. We have plenty of room to finance as much capital as we wanted. So, if we actually had a really great use for $100 million of CapEx this year, we would have executed on it and we could finance the whole thing. So, again, I think this is a good follow-up from your original question. So, your two questions should leave the audience and the investors with really two important takeaways from this quarter. I know there is a lot of noise and a lot happened in the quarter, but really, the takeaways are on the capital side. One, the $50 million of CapEx is a new level for the business we have. But also, two, we are not constrained from financing capital. So, when we took this year as a pause to optimize what we have, to put the discipline in place, to identify what we want to go after as growth opportunities, then we could finance whatever we want. But to continue business as usual, and not integrate and not take a pause after we spent $820 million on an acquisition, is not prudent operational and financial discipline. So, I know thatâs not what the market likes to see every quarter. But if you want to see long-term value creation, you have to take this path. There is no other way. And I think we did the right thing. There is a lot of pain. I totally understand, but itâs the right thing to do to create long-term shareholder value.
Unidentified Analyst: Okay. Thank you and thank you for that. I actually have a couple more, if I may. I just wanted to touch back again on Hurricane Ian and the impact on the centers. So, from the physical aspect of the assets, were they impacted? And are we expecting some CapEx to fix them or are you just getting back to operations?
Riadh Zine: So, yes, there was impact, but thatâs covered by insurance. So, itâs not an issue.
Unidentified Analyst: Okay. And in terms of the Akumin customers, were they impacted? Are they taking long to recover?
Riadh Zine: We had a pocket in and around Fort Myers that was really bad. We had employees impacted. We had customers impacted. There are people that are still not back to their homes today, but itâs not something that has a major impact. There was just a small pocket. Unfortunately, in Florida, that the impact was severe. Life is back to normal, but we will take a little bit more time to kind of go back to previous levels.
Unidentified Analyst: Okay. Thank you. And the last one for me. Could you provide some color on the $20 million impairment charge? Itâs all financial non-cash payment?
David Kretschmer: Yes. Thatâs correct.
Unidentified Analyst: Alright. Thank you. Thank you for your answers.
Riadh Zine: Thank you for your questions. Much appreciate it. Great questions. Are there any additional questions?
Operator: No, sir. I will hand back to yourself for closing remarks, sir.
Riadh Zine: Thank you everyone for your participation on todayâs call. Akuminâs vision is to drive patient-centered innovation, service delivery standardization, and exceptional healthcare value, all in an outpatient care setting. We are a leading outpatient healthcare services platform with significant scale, long-standing hospital and health system relationships, and freestanding operational expertise. On a pro forma trailing 12-month basis, we generated in excess of $740 million in revenues and served patients with more than 210 fixed sites in radiology and oncology, and more than 4,000 team members across the U.S. As mentioned earlier, our integration initiatives are well underway, and we continue to expect 2022 to be a milestone year as we build on this solid foundation. Our Akumin has never been better positioned to capitalize on the trends and growth opportunities ahead in our industry. I would like to take this opportunity to thank our staff, to thank our customers and hospital partners, and to thank all of our stakeholders for their efforts and ongoing support as we continue our transformational change at Akumin. This concludes our call. Thanks again to all participants for your interest in the Akumin story.
Operator: Thank you very much to todayâs speakers. Ladies and gentlemen, this does conclude todayâs call. Thank you very much for your participation. You may now disconnect.
