Lumexa Imaging (LMRI) Q3 2026 Earnings Call Transcript

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DATE

Tuesday, Nov. 10, 2026

CALL PARTICIPANTS

• Head of Investor Relations - Sue Dooley
• Chief Executive Officer - Caitlin Zulla
• Chief Financial Officer - J. Anthony Martin

TAKEAWAYS

• Consolidated Revenues -- $272 million, representing 5% growth year over year driven by wholly owned outpatient sites and professional services.
• Adjusted EBITDA -- $62.6 million, increasing 11% sequentially from the second quarter of 2026 due to healthy volumes and modality mix.
• Advanced Modality Mix -- 38.2% of total system-wide volume, representing a record high and a 145 basis point increase versus last year.
• PET Volume Growth -- 19.5% year over year, reflecting a continued shift toward higher-reimbursement advanced imaging procedures.
• System-Wide Volume Growth -- 4% compared to the prior year period, the highest growth rate achieved during 2026.
• Net Income -- $7.2 million, as compared to a net loss of $3.5 million in the third quarter of 2025.
• GAAP EPS -- $0.07 per share, reflecting improved operational efficiency and reduced interest expenses.
• Adjusted EPS Guidance -- $0.86 to $0.90 per share for the full year, raised from the previous range of $0.71 to $0.77 per share due to a lower assumed effective tax rate.
• Free Cash Flow -- $20.6 million, an improvement of $22.4 million from the prior year third quarter.
• Free Cash Flow Conversion -- 30% of adjusted EBITDA at a minimum, an increase from previous 2026 expectations.
• Outpatient Net Patient Service Revenue -- $149 million, growing 5.5% year over year on same-site volume growth.
• Equity in Earnings -- $22.8 million from unconsolidated affiliates, reflecting strong performance in sites operated with health system partners.
• Interest Expense -- $15.7 million, approximately $14 million lower than the prior year following the use of IPO proceeds to reduce debt.
• Net Leverage -- 3.5 times, down from 5.6 times a year ago as the company scales its earnings.
• Capital Expenditures -- $14.2 million, focused on de novo center additions, equipment upgrades, and infrastructure.
• De Novo Openings -- 8 to 10 facilities targeted for 2026, with five centers already completed and three opening in early November.
• Total Addressable Market -- $77 billion, including a $44 billion incremental opportunity from hospital outpatient imaging centers following site-neutral rule changes.
• Adjusted EBITDA Guidance -- $236 million to $240 million for the full year, narrowed from the previous range of $235 million to $241 million.
• Cash and Cash Equivalents -- $90 million, an increase from $69.7 million at the start of the third quarter.
• Medicare Revenue Exposure -- 20% of total revenue, representing the combined share of Medicare fee-for-service and Medicare Advantage business.
• G&A Expenses -- $30 million, including $1.8 million in recurring public company costs and $12.3 million in stock-based compensation.
• System-Wide Revenue per Scan -- 3% year-over-year growth, driven by commercial rate increases and advanced modality mix.
• 2027 Reimbursement Outlook -- negative 1% for Medicare, reflecting a preliminary assessment that rates will be modestly below longstanding assumptions.
• Advanced Modality System-Wide Volumes -- 8.1% growth versus the prior year, outpacing routine modality growth rates.
• Consolidated Revenue Guidance -- $1.045 billion to $1.097 billion, which was reiterated for the full year.

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RISKS

• Martin noted that system-wide revenue per scan growth was partially offset by payer mix shifts in a few markets during the third quarter.
• Zulla stated, "Medicare reimbursement will come in modestly below our long standing rate assumptions," regarding preliminary 2027 assessments of the final physician fee schedule.

SUMMARY

Lumexa Imaging Holdings, Inc. (NASDAQ:LMRI) reported results for its fiscal third quarter, highlighting growth in advanced modality volumes and strategic expansion of its health system partnership network. Management stated that the company is executing on its de novo center development pipeline while maintaining a focus on free cash flow generation and debt reduction. The company indicated that new regulatory rules regarding site-neutral reimbursement are expected to significantly expand its total addressable market by shifting care toward lower-cost outpatient settings. Furthermore, executives discussed the integration of advanced technologies and clinical artificial intelligence to optimize radiologist workflows and improve patient scheduling efficiency.

• Management expanded its partnership with Advocate Health into Illinois, marking the 10th health system joint venture in the portfolio. CEO Zulla stated, "We are excited to grow alongside this prestigious health system partner and are now fortunate to count 10 health system joint ventures across our enterprise."
• The company appointed Dr. Ayis Pirooz as Chief Clinical AI Officer to lead the deployment of artificial intelligence tools across clinical practice. CEO Zulla noted, "Dr. Pirooz will partner with our chief technology and Chief Medical Officer to focus on transforming the radiologist's experience and improving patient outcomes."
• The FastScan technology platform, now deployed across most of the enterprise, has reduced MRI acquisition times by up to 40%.
• Management identified site-neutrality as a multiyear tailwind, with CEO Zulla stating, "The landmark site-neutral provision will reduce the reimbursement advantage associated with hospital outpatient departments and further strengthen the rationale for health systems to grow lower cost, freestanding imaging capacity."
• The company is utilizing AI-enabled reporting tools for 100% of its telerad radiologists to improve efficiency and reduce administrative burdens.
• Management expects to reach its goal of opening 8 to 10 de novo centers in 2026, with plans for the 2027 cohort already underway.

INDUSTRY GLOSSARY

• Advanced Modalities: High-tech imaging procedures such as MRI, CT, and PET scans that typically require specialized equipment and carry higher reimbursement rates.
• De Novo: A new facility or center built from the ground up rather than acquired through a merger or acquisition of an existing business.
• Site-Neutrality: A regulatory principle where Medicare pays the same rate for a medical service regardless of whether it is provided in a hospital outpatient department or a freestanding clinic.
• IDTF (Independent Diagnostic Testing Facility): A freestanding medical imaging center that is independent of a hospital or a physician's office.
• PET (Positron Emission Tomography): An advanced imaging modality used to observe metabolic processes in the body, often used in oncology.
• HOBD (Hospital Outpatient Billing Department): A department of a hospital that provides outpatient services, historically receiving higher reimbursement than independent clinics for the same services.
• MIPS (Merit-based Incentive Payment System): A Medicare program that adjusts clinician payments based on performance metrics related to quality and cost.
• Lumexa Connect: The company's proprietary technology platform used to manage clinical and operational workflows across its network.

Full Conference Call Transcript

Operator: Thank you for standing by, and welcome to the Lumexa's third Quarter 26 Earnings Call. At this time, all session. To ask a question during this session, you will need to press 11 on your telephone. If your question has been answered and you would like to remove yourself from the queue, simply press 11 again. As a reminder, today's program is being recorded. And now I would like to introduce your host for today's program, Sue Dooley, head of investor relations. Please go ahead.

Sue Dooley: Thank you, and hello, everyone. We appreciate you joining us today. Leading today's call are our Chief Executive Officer, Caitlin Zulla, and Tony Martin, our Chief Financial Officer. Before we begin, I want to note that today's discussion will include forward looking statements regarding our 2026 guidance, expected operating performance, growth initiatives, reimbursement assumptions, capital expenditures and other future events. These statements reflect our current expectations and assumptions that are subject to risk and uncertainties that could cause actual results to differ materially. Please refer to forward looking statements and risk factors described in today's earnings release and our most recent SEC filings for additional information regarding those risks and uncertainties. We undertake no obligation to update those statements.

We will also discuss certain non GAAP financial measures, definitions and reconciliations to the most directly comparable GAAP measures are included in today's earnings release. With that, I will now turn the call over to Caitlin.

Operator: Caitlin, please go ahead.

Caitlin Zulla: Thanks, Sue. Before we begin, I would like to wish everyone a happy Radiologic Technology Week. and saying a huge thank you to this valued part of our community, as well as to our entire team at Lumexa. And to our investor audience, thank you all for joining us. it is a dynamic time to be a leader in the imaging space and we look forward to sharing our results tonight. In Q3, we advanced our strategic priorities and moved closer to our ambition of building the premier platform for high quality, lower cost outpatient imaging serving patients, physicians, and health systems.

We are executing well on all of our priorities, and those efforts translated directly into favorable results this quarter, including healthy EBITDA, which grew 11% over Q2 and another quarter of strong free cash flow generation. Here are a few highlights of our Q3 performance. We saw continued strength in our core business. We drove healthy growth in system wide same center volumes, sustained momentum in advanced modalities across our enterprise, continued maturation of our De Novo cohorts, and made important progress expanding our health system partnership. Advanced modalities, an important driver of profitability for us, grew to a record high 38.2% of total volume system wide 145 basis points higher than a year ago.

PET was another particular highlight in Q3 with 19.5% year over year growth. Our advanced modality mix shift continues to be cornerstone of our growth strategy, yielding higher reimbursement and margin for the business. Our 2024 and 2025 De Novo cohort continue to track in line with our expectations. We just completed another careful review and these are layering in a healthy mix of advanced volume, while making meaningful strides towards our long term growth and profit expansion objectives. We achieved another significant milestone for our JV strategy, and expanded joint venture with our existing partner, Advocate Health, to advance our enterprise into Illinois. A new state for Lumexa.

We are excited to grow alongside this prestigious health system partner and are now fortunate to count 10 health system joint ventures across our enterprise. We are maturing our joint venture pipeline with discussions proceeding and prospective partners engaging actively around our offering. Supported by valuable references from existing JV partners. We look forward to sharing more as these discussions progress. In early November, we are opening 3 new De Novo centers in Texas, South Carolina, and North Carolina. These openings reflect our disciplined approach to expanding in attractive markets building greater density across our network, extending our runway for long term sustainable growth.

With these centers, we will have 5 De Novo openings under our belt for the year with a clear line of sight into completing our goal of 8 to 10 De Novo center openings in 2026. We are also well underway with our plans for new 2027 center openings. These highlights represent progress across our key growth initiatives. They are fueling strong, durable cash generation, reinforcing our confidence in delivering on our full year commitment. Including the updated guidance we are providing tonight. Tony will speak to this more in a moment. Our Q3 achievements demonstrate effective execution, which strengthens the foundation of our long term growth.

As we have seen with ambulatory surgery we believe shifting care to high quality, lower cost outpatient settings can improve access and create significant value across health care. We believe a substantial opportunity lies ahead in imaging and Lumexa is well positioned to help lead that shift. By expanding our network of wholly owned imaging centers, while also partnering with health systems to expand access, accelerate diagnosis, and grow their outpatient presence. While delivering better value for patients. I am proud of the progress our team is making and the energy they bring to their work anew every day. I would like to take a moment to talk about the market opportunity we are addressing.

CMS has now formalized its 2027 hospital outpatient prospective payment system rule on-site-neutrality. The landmark site-neutral provision will reduce the reimbursement advantage associated with hospital outpatient departments and further strengthen the rationale for health systems to grow lower cost, freestanding imaging capacity. We believe this site-neutral rule meaningfully expands our addressable market. We are now targeting hospital outpatient imaging centers, a $44 billion incremental opportunity that builds on our existing $33 billion market for IDTF bringing our total addressable market to roughly $77 billion. We view imaging as a critical front door to diagnosis, treatment, and specialty care. Health systems increasingly recognize the importance of that connection, and Lumexa is built to help them strengthen it.

Our value extends beyond operating imaging centers. We help our partners expand access, keep patients connected to their care networks, and improve financial performance. Our model enables health systems to scale strategically and participate in outpatient imaging growth. Through a lower cost operating structure that does not depend on hospital based reimbursement premiums. bring the operating expertise, technology, patient access capabilities, and disciplined capital deployment needed to grow and build these networks. We see the movement towards site-neutral reimbursement as a tailwind that would unfold over years, not quarters.

Our broader growth opportunity is supported by durable demand drivers across our imaging network, an aging population with increasingly complex conditions, new treatments that require advanced imaging, and expanding opportunities early detection and screening. Additionally, CMS has issued its final 2027 Medicare physician fee schedule. Medicare fee for service and Medicare Advantage together account for about 20% of our revenue. A small part of our overall business. We are still completing our analysis, but our preliminary assessment is that Medicare reimbursement will come in modestly below our long standing rate assumptions, which call for approximately flat year over year government reimbursement rates and a 1% increase in commercial payer rate.

Commercial payers represent the majority of our revenue and those contracts renew on staggered schedules. With nearly all of our 2027 commercial negotiations complete, we have good visibility into next year's rates. Taken together, we expect the final rule to have a limited impact on our overall 2027 reimbursement outlook. Our value proposition resonates strongly with patients, providers, health systems, payers. Whether through our wholly owned or JV centers, we are successfully delivering high quality imaging in more convenient settings on a timelier basis and at a lower cost than hospital outpatient department. And across our network of centers, patients love the care they receive, which is reflected in our Net Promoter Score that consistently exceed 90.

The market in front of us is promising and vast. Our growth priorities are clear. Drive same center growth, expand our advanced imaging mix, open and ramp new centers, scale strategic service lines, and enter attractive markets through disciplined, capital efficient Volume rate and mix underpin this strategy. With substantial fixed costs already supported by our existing centers additional volume, stronger reimbursement and modality mix can generate attractive incremental margins. This operating leverage allows us to grow earnings faster than revenue as we put more patients through our established network. Let me share how we are putting these priorities into action.

Our operations and commercial teams are partnering with clinical leaders to implement impactful programs to enhance care and drive engagement across our entire network of centers. Especially during the typical seasonality related to deductible resets. So we are leaning in to optimize for and serve patients. For Breast Cancer Awareness Month, we partnered with Levine Cancer Institute, and the Atrium Health Foundation on project pink, providing free screening mammograms and follow-up care to uninsured and underinsured women in the Charlotte area. Bringing early detection to patients and communities where the need is highest. We continue with our lung cancer screening initiative. Building patient engagement around 1 of the most impactful screening opportunities in our patient population.

Targeted clinical outreach efforts like this remain a strength for our company. I would like to spend a moment on technology. A key driver of clinical and operational excellence at Lumexa, and a differentiator as we partner with leading health systems and physician groups. First, I am thrilled to share that Dr. Ayis Pirooz is joining Lumexa as our new Chief Clinical AI Officer. A prominent diagnostic radiologist and clinical information specialist widely recognized for his pioneering research at the intersection of medical imaging and AI. In his new role, Dr. Pirooz will partner with our chief technology and Chief Medical Officer to focus on transforming the radiologist's experience and improving patient outcomes.

Bridging clinical practice with cutting edge technology to drive our AI strategy. Optimizing clinician workflows while producing faster, more accurate results for patients. We are advancing Lumexa Connect, our capital light best of breed technology platform, built on an ecosystem of leading technologies. It lets us rapidly adapt innovation as the landscape evolves while supporting new centers, growing joint venture partnerships, and increasing volumes across advanced imaging modalities. Lumexa Connect is already delivering results. FastScan now deployed across the majority of our enterprise shortens MRI acquisition times by up to 40% and expands capacity across our fleet. Virtual MRI provides technologists support, staffing flexibility, and operational consistency. And 100% of our telerad radiologists now use AI enabled reporting tools.

We continue integrating best in class draft reporting and EMR summarization tools that improve radiologist's efficiency and reduce administrative burden as a point of care. At Lumexa, we are digitizing the radiology workflow end-to-end to deliver greater quality, efficiency, and consistency across our network while staying positioned to capitalize on the next generation of AI enabled innovation. Wrapping up, our Q3 progress reinforced our confidence in our strategy and our ability to deliver on our full year commitment. We are focused on finishing 2026 strong while building the foundation for sustained growth. Our new centers are ramping, Advanced Imaging represents a growing share of our mix.

Our joint venture pipeline is robust, and we are expanding into new markets with exceptional health system partners. Together, these advances position us to expand access to care and deliver a compassionate patient experience while creating long term value for our shareholders. With that, I will turn the call over to Tony to review our financials, key metrics and our guidance.

Operator: Tony, please continue.

J. Anthony Martin: Thank you, Caitlin, and thank you all for joining us Tonight, I will review our financial results and speak to key drivers of our performance for the quarter. I will then provide our outlook for the full year. To add context beyond our GAAP financials, I will discuss certain system wide financial and operating metrics. That provide additional perspective on our overall performance and the breadth of our enterprise. We use these metrics in managing the business because they reflect activity across all of the centers we operate, both wholly owned as well as the centers we operate and our joint ventures with health systems. Let's begin with our volume performance in Q3.

We drove healthy growth across our enterprise with sustained momentum and advanced modalities across the company, continued maturation of our De Novo cohorts, and strong performance in our health system partnerships. Advanced modality volumes, which generally reimburse 3x to 4x higher than routine modalities, were a highlight. And grew 8.1% system wide versus prior year and 7.9% on a consolidated basis. As Caitlin noted, this quarter advanced modalities represented a record 38.2% of our volumes system wide. 145 basis points higher than the prior year period. We are encouraged that these procedures have continued to steadily grow.

Once we factor in routine scans, which grew more slowly given our emphasis on advanced volumes, total system wide volume growth in Q3 was 4% over the prior year period. Our highest growth rate so far in 2026. Now turning to our third quarter financials. Consolidated revenues, which reflect our wholly owned outpatient sites, as well as our professional service segment, came in at $272 million. An increase of 5% compared to the same period last year. System wide outpatient revenue growth which includes all sites we operate, grew 7.7% over a year ago, powered by strong growth and advanced modalities. Systemwide revenue per scan in our outpatient segment increased 3% year over year.

This metric provides useful perspective on outpatient economics by capturing both the technical scan revenue and where applicable, the associated professional read revenue. Our growing advanced modalities contributes to this metric. Together with modest increases in contracted payer rates. Partially offset by payer mix shifts in a few markets. Here's some more detail on our consolidated revenues in Q3. Outpatient net patient service revenues were $149 million and grew 5.5% year over year on healthy same site growth Professional fee net patient service revenues were $62.1 million. Reflecting growth of 2.6% year over year. In line with our model.

Finally, management fee and other revenues grew $3.6 million year over year and totaled $60.9 million Within that management fee line, roughly $26 million represents management fees we earn from operating the sites and our health system JVs, which is our core business. The remaining $35 million in this category represents 0 margin pass throughs of employee IT and site level costs we pay on behalf of a few of these joint venture sites. When you are modeling us, it is important to understand those 2 components. In terms of impact to margin. On the expense side, G&A for the quarter was $30 million up $12.9 million from the third quarter of 2025.

This increase was expected and reflects $5.8 million of higher expenses across 2 primary components that have impacted year over year comparisons throughout 2026. Those are as follows. First, ongoing expenses related to being a public company were as expected, $1.8 million in the quarter. And we continue to expect approximately $7 million of these costs for full year 2026. After which they will be embedded in the prior year base and no longer drive year over year comparisons. Second, and also similar to last quarter, is an increase in stock based compensation from $8.3 million in Q3 2025 to 12.3 million in Q3 2026. This reflects the onetime resetting of legacy equity comp plans as part of our IPO.

We expect full year stock based comp for 2026 to be approximately $50 million About half of that relates to historic M&A and will be fully amortized by the end of 2026. As a result, we continue to anticipate ongoing stock based compensation of approximately $20 million to $28 million for full year 2027. Continuing down the income statement, the next item is our equity and earnings of unconsolidated affiliates, which is our pro rata ownership share of the net income from the sites we operate with health system partners. At $22.8 million, this was $4.9 million higher than Q3 2025. Reflecting notable strength this quarter in the sites we operate with health system partners.

Further down, interest expense was $15.7 million in Q3, This new run rate is about $14 million lower than Q3 2025. Reflecting our use of IPO proceeds to pay down debt last December. That paydown freed up more than $50 million in annualized cash interest savings. And increased our flexibility to invest in growth. Our repricing of our term loan in June of this year reduced our SOFR spread by an additional 50 basis points. Pretax income was $11.8 million for Q3 compared to a pretax loss of $200,000 in Q3 2025.

After a tax provision of $4.6 million in the quarter, net income was $7.2 million in Q3 compared to a net loss of $3.5 million in Q3 of 2025. Our GAAP EPS was $0.07 per share in Q3, and adjusted EPS was $0.26 per share. I will now shift to adjusted EBITDA, which reflects strong operating performance across our entire network. Our wholly owned centers as well as our pro rata share from centers operated through health joint ventures. Adjusted EBITDA grew 11% sequentially. With $62.6 million in the quarter. Compared with $59.1 million a year ago. Underlying performance benefited from healthy overall volumes in sustained growth in advanced modalities. While reported growth absorbed incremental public company costs.

And planned investments associated with ramping our De Novo centers. Our adjusted EBITDA margin was 23.0% in Q3 2026. Compared to 22.8% in Q3 2025. And for the first quarter since going public, our margin was up year over year. Despite the incremental public company costs of $1.8 million Sequentially, adjusted EBITDA margin increased 160 basis points from Q2 to Q3. Moving to cash flows. Cash from operating activities were $34.8 million in Q3 2026. This is $23 million higher than Q3 2025. Driven by our lower senior credit facility debt and related interest payments, and our growth in earnings. We have made good progress working through the onetime impacts that weighed on free cash flow earlier in the year.

Free cash flow, which we define as cash flows from operating activities less CapEx, was $20.6 million for Q3 compared to negative $1.8 million in Q3 2025. A $22.4 million improvement that resulted in a conversion of roughly 32.9% of adjusted EBITDA. Our free cash flow conversion has improved during the year, and with 3 quarters now behind us, it is clear we can grow this metric while investing in our strategic priorities, which include De Novo center adds and select M&A, in a highly fragmented market.

Accordingly, we are confident 2026 free cash flow conversion will be above our prior full year expectations, and we now anticipate a conversion rate of free cash flow to adjusted EBITDA of at least 30%. Now a word on CapEx. it is early days on our market opportunity. We are pursuing a large, fragmented, and highly attractive market. And we are prioritizing the deployment of capital to capture it. We continue to apply careful discipline as we target meaningful returns by investing in De Novos, adding new and upgraded equipment and capabilities at our existing sites, and pursuing targeted M&A. Our $14.2 million capital spend in Q3 2026 reflects another busy quarter of investment activity.

Our underlying long term spending plan remains largely consistent with prior guidance but our strong operating cash flows support our choosing to lean in modestly more. On CapEx in the second half of 2026 to capture the opportunity in front of us. While still outpacing expectations for free cash flow. Turning to the balance sheet. Our capital position is strong. And we ended the quarter with $90 million in cash and cash equivalents. Up from $69.7 million at the start of the quarter. As of September 30, net leverage was 3.5 times compared to 5.6 times a year ago.

We are very committed to managing our capital structure strategically, while investing in our market opportunity and delevering as our business scales. Now wrapping up with our outlook. We are pleased with our accomplishments in Q3 including progress across all of our key growth initiatives. Including our free cash flow conversion improvement that I mentioned a moment ago, which puts us on track for free cash flow of at least 30% of adjusted EBITDA for the full year. And so with Q3 behind us, we are again narrowing our adjusted EBITDA guidance range. This time, to $236 million to $240 million. Versus the previous range of $235 million to $241 million. While maintaining the midpoint.

At $238 million The narrower range reflects our year to date results our current view of the business and continued confidence in the underlying assumptions supporting our guidance. Adjusted EBITDA reflects our full system wide footprint. Including pro rata share of JV performance. While our consolidated revenue guidance reflects only our majority-owned centers. That scope difference and not a change in our view of either business is why we are narrowing adjusted EBITDA guidance while our consolidated revenue guidance remains unchanged. So tonight, we are reiterating our consolidated revenue guidance. of $1.045 billion to $1.097 billion We are also raising our adjusted EPS guidance range to $0.86 to $0.90 per share.

Up from our previous range of $0.71 to $0.77 per share. This increase is driven primarily by a lowered assumed effective tax rate for the year. With no change to our underlying operating assumptions. As we continue executing on our goals, and look to finish the year strong, we are energized by the opportunities in front of us and the progress we have made so far this year. So with that, let's turn to your questions. Operator? Would you please open the call?

Operator: Certainly. And ladies and gentlemen, we ask that you please limit yourselves to 1 question each. Our the line of Brian Tanquilut from Jefferies. Your question please.

Brian Tanquilut: Hey, good afternoon and thanks for taking my question. So maybe, Caitlin, I will start first. It looks like advanced modalities are growing at a clip here. You are talking about ramping up or leaning more into CapEx If you can just share with us, I am guessing a lot of that was going towards expanding there. But if you can share more color on where the CapEx is growing, how quickly does that translate into growth in volume? And then just your views in terms of the demand dynamics in advance.

Caitlin Zulla: Yeah. Thank you so much, Brian. The question. Yeah. So we are incredibly proud of our advanced modalities. In Q3. Our system wide advanced modality grew 8.1%. And as we said in the script, you are 38.2% of total volume, the record high for the company. 145 basis points higher than a year ago. And then 80 basis points higher than we had in Q2. And so we are driving that by continued intentional investment in our machine. You know, we have talked about investment in fast scan. Both in bolt on subscriptions as well as machine upgrades.

We are also investing in upgrading our pet machines as we continue to think through both absolute machine number growth and capacity of our existing machines. And then, you know, we are excited to announce our 3 De Novos that we have opened in early November. And reiterating that we feel good about the 8 to 10 for the full year. there is a significant amount of growth CapEx going into opening up our De Novos in 2026 and then also planning as we plan into 2027 for De Novo opening. On the demand side, continue to feel really strong in the markets we are in.

Grateful for the strong partnership of our joint ventures partners as well as you know, the opportunities that are in front of us You know, there continues to be increased you know, patient demand for advanced scheduling, advanced procedures, and we look forward to continuing to meet that in our existing and our De Novo sites.

Brian Tanquilut: Awesome. Maybe my follow-up just really quickly, Tony. I saw that the number of units are down sequentially, both on the JV side and the consolidated. I know you added 3 units in November, but just curious what is happening there in terms of just closures during the quarter. Thank you.

Caitlin Zulla: Sure. Just if. You are referring to just kinda absolute site numbers? that is right. Yeah. Yeah. Yeah. So center count did go down. You know, we consolidate centers from time to time. You know, we talked through kind of what makes a great market and seeing. You know, having density to support, you know, obviously, connecting with the local referral population, and then just kind of the broader ability to serve the market. So yes, you know, we maintain a rigorous approach to center management long term expansion. So yes, just shed a couple down, and then you will see addition as we hit the 8 to 10 De Novos for the full year. Thank you.

Operator: And our next question comes from the line of Matthew Gillmor from KeyBanc. Your question please.

Matthew Gillmor: Wanted to ask about the EBITDA progression from the third quarter to the fourth quarter. Could you talk about some of the drivers? It seems like kind of normal seasonality, but curious if there were any factors to call out as we think about that progression.

J. Anthony Martin: Sure. You know, as we have talked about before, you know, we view the year kind of unfolding as 45% of our EBITDA coming in the first half. 55% in the second half. And, you know, the Q3 performance kind of supports that, you know, that sequencing. You know? We were. We increased EBITDA by 11% from Q2 to Q3. And I think we view this as you know, an important proof point to the things we have been talking about earlier in the year. About, you know, how this business is shaped and thinking in terms of in your phasing. So with, you know, Q4 coming, we, you know, we expect to that trend to continue.

And to, you know, finish the year in line with that split that we talked about.

Matthew Gillmor: that is great. And then just as a quick follow-up Tony, on the free cash flow conversion. Obviously, great to see that move higher. Can you talk about some of the drivers that led you to increase the guide there?

J. Anthony Martin: Sure. Know, I mean, the business is growing well and converting cash strongly, which is great. So that is that is the base of everything. But, you know, we are really pleased to guide through a higher number and have momentum for, you know, even higher conversion rates in the future. Because we can do that and still invest in our growth. But I guess the. To kind of speak to why it is better than what we talked about back in the spring, You know, the factors we thought would maybe weigh most heavily on cash flows at the start of the year turned out better than expected. We talked about some of these at the time.

You know, namely the JV distribution timing which has, has not been unfavorable James are better than we thought at the beginning of the year, and working capital swings have been less extreme. Than we thought back in the spring. So all of this you know, just allows the business to shine through better than we thought. And, you know, as you know from our previous calls, we do free cash flow as being, you know, on an upward trend year to year right now. And so we are, you know, we are pleased to be making that progress already in 2026.

Matthew Gillmor: Thank you.

Operator: And our next question comes from the line of Andrew Cooper from Raymond James. Your question, please.

Andrew Cooper: Hey, everybody. Thanks for the time. Maybe first, it looks like the JV or the affiliated center profitability was a nice source of upside at least versus kind of where we were. So just would love any callouts you could point to on, you know, where you are finding success there, anything sort of operationally that stands out in the quarter and what that tells us about? 4Q and beyond as well.

J. Anthony Martin: Sure. You know, we always talk about system wide primarily. Know, because the whole business is what we are we are operating, but we do get excited about talking about what the health system joint venture structure does for us because it is very strong. Very durable. And, you know, this quarter, both parts of the business performed very well. The growth in advanced modalities were very similar. In joint ventures and consolidated. But to get to your point about JVs in particular, yeah, I mean, we had 8.1% system wide advanced growth, which is, you know, pulled up by, you know, higher than that on the JVs a bit.

And we also had JV per scan revenue that was up more than 3% quarter. So between those 2 things, that drives a lot of strength and of the JV. The earnings were And, you know, as we have talked about before, these joint ventures are really designed to optimize the demand, the increasing demand for advanced modality scans. They were built with that in mind in terms of what modalities are put into the sites at a little bit, you know, higher proportion than some of our other centers. And we get strong contracting help there. With health systems.

So they will always we think, perform at the kind of top end of our portfolio Although, as we have said, it can ebb and flow a bit in an individual quarter. Thank you.

Operator: And our next question comes from the line of Clark Murphy from Truist Securities. Your question please.

Analyst: Hey. Good evening, neighbor, everyone, and thanks for the, next question here. Just wanted to start on labor. You know, you guys have a handful of initiatives recruiting and retention in place. Can you just kind of walk us through some of the benefits that you are seeing from those and also just kind of an overall update on the labor environment and kind of what you are seeing there?

J. Anthony Martin: Sure. First, you know, our labor costs continue to be manageable. They are they are not holding us up or hurting us financially. I can put a couple of numbers to it. And I think Caitlin can describe some of why that, you know, why that is the case because it is very purposeful on our part in terms of how we approach managing this part of our business. So, you know, I would just point to numbers off of our P&L. If you year over year change in equity comp that rolls through in our P&L, so you get to kind of the, you know, real cost of the business on a day to day basis.

We continue to see operating expenses increasing at about 5% a year, which is right where it is been And, you know, there is there is nothing easy about maintaining a health care workforce, but we have we feel very comfortable with you know, where we are at in terms of the numbers and how our business is able to thrive with that. Caitlin, do you have other thoughts?

Caitlin Zulla: Yeah. Sure. I think on the strategy side, you know, we talked a little bit before about kind of the power of having density in market. That certainly gives us some flexibility as we think through how do we support our staff with schedules that work for them and their families You know, we continue to invest in our radiology technicians. You know, we have highlighted the tech advancement academy before. Then virtual MRI continues to roll out across our sites and provide additional redundancy and career pathing. To support facility operations. And then on the radiologist front, we continue to recruit favorably into Connexia. We are really excited for Dr. Pirooz to join the team. James Dr.

Pirooz such a strong fit for us is that he truly knows where AI can actually fit within and make a difference in the radiologist's day because he is a practicing neuror. Neurologist neuroradiologist himself. He will actually read for us for Connexia as well. He has a proven ability to turn frontier models into tools that can still quick quickly and then create cost effective solutions. For radiologists, you know, we have Things like draft reporting, and, you know, dictation support, things of that sort. So you know, continuing to make it a place that strong and amazing clinicians want to come and work. Thank you.

Operator: And our next question comes from the line of Benjamin Rossi from JPMorgan. Your question please.

Benjamin Rossi: Hey, good afternoon. Thanks for taking my question. I want to follow-up on your comments on your addressable market expanding under site-neutral. Would the rule change mainly increase the number of JV opportunities Or do you think it also changes the structure of partnerships by maybe driving greater health system referrals? I guess just curious if you could explain the primary assumptions and timeline going into this change. Thanks.

Caitlin Zulla: Yeah. Thanks so much, Benjamin. We are very excited. That this is finalized in the rule. Obviously, it is for us campus HOBDs and noncontract only scans. it is just for context, so then Lumexa about 12% of our scans are with contrast. So the majority in the outpatient environment is without contrast. We have had many exciting conversations happening with a exceptional JV partners. And the conversations are at various stages. You know, obviously, the finalization of the statute is very recent.

We do think it will be an opportunity think about how do we support health systems and their imaging overall strategy how do they support patient access, in an environment where it is just becoming increasingly difficult to build high cost spends and a and a revenue constrained reimbursement framework. So our model, as we talk to them, helps them extend access retain patients within their network, and obviously participate economically. Without relying on that hospital outpatient reimbursement premium. So I think it will certainly be a little bit of both, Benjamin.

It will both be, you know, how do we support patients with differentiated series mechanisms, and then, you know, are there hospital outpatient departments that should be potentially recredentialed as an IDTF to, you know, better match the reimbursement landscape. And as part of that, just wanna take a moment to say how excited we are to work with ADVOCATE Certainly, that conversation happened before site-neutrality was finalized. But, you know, what it makes. what is so exciting for us is we are entering a new state, Illinois, with a partner that already knows how we work. We built a relationship with Atrium Health, which is part of Advocate through our Carolinas Imaging Services in the Charlotte region.

And now we get to build on that together. You know, when I think about what is so exciting about Advocate is certainly their scale. You know, they have 70 hospital campuses. They serve about 5.5 million patients. And so if we think about Illinois, we are entering this into. Entering a new market with a partner that is at deep roots across Chicagoland, an extensive network of hospitals and referring physicians, and that gives us just a really exciting and strong starting point to expand access to outpatient imaging and, very importantly, keeping patients connected to the to the care teams they know.

And then certainly, of course, as we think about Advocate, there is broader opportunity as they serve you know, additional states in the Mid. Midwest and Southeast. But, you know, our focus is really executing well in Illinois. And doing that gives us a strong foundation to explore other markets together. Thank you.

Operator: And our next question comes from the line of Steven Baxter from Wells Fargo. Your question please.

Stephen Baxter: Hi. Thanks. I know it is still a little bit early, but, as 2026 is coming in solidly, we would love to hear any color on how you are thinking about 2027 at this stage. Like do you think based on what you know today, we should maybe be thinking about a year that is more consistent on both an EBITDA and revenue growth perspective, maybe more consistent with your long term expectations and whether there is any kind of known headwinds and tailwinds to consider beyond the prepared remarks commentary about Medicare reimbursement? Thank you.

J. Anthony Martin: Sure, Steven. Yeah. I mean, first, I will I will I will state the probably the obvious that, you know, we will we will give formal guidance in March And so, you know, anything I talk about here is just kind of the directionality of the business. And know, some factors that drive our thinking right now. I would say the number 1 thing we talked about early in the year was that this year would have the kind of headwind of the added pubco costs. You know? Investments we had to make to create, you know, departments to do functions that are required for public company.

So, you know, we mentioned that earlier this year as something that was going to affect our growth rate. Versus 2025. And so we are, you know, we are tracking against expectations on that. But that did kind of take us away from the growth algorithm. You know, with get back to those. So as we get, you know, past that, I. You know, the way we look at it is that long term growth algorithm that we discussed is still firmly in place. You know, we view what is happened this year is validating what our plan said. And what our strategy is.

And so we are we are just glad that each quarter, we can put some proof points up about that. And accordingly, you know, focus on you know, numbers that are gonna be consistent with the way we model the business long term, which was, you know, something like a 7% adjusted EBITDA with upward mobility from that as we add capital to grow through the De Novos and some selected M&A. So kind of a long answer without getting specific, but I hope that is, in terms in terms of how we think about it.

Caitlin Zulla: And then, Steven, I can give you a little bit more on the Medicare physician fee schedule. So, you know, the additional. The initial analysis is modestly below 0 for Medicare. So think about it approximately negative 1%. And that is when you adjust for JV and our profit sharing structures. As well as the positive impact on the MIPS bonus payment result. You know, when we think about some of the commercial payer mix, as we referenced, you know, it is healthy, diverse. We have completed negotiations for nearly all of our 2027 rate. And so taken together, we expect the final rule to have a limited impact on our overall 2027 reimbursement. You know, the.

I think it is probably. Everybody knows the impact is slightly worse than the proposal from July, much of that due to a decrease in the conversion factor. that is the result of the expiration of the temporary 2.5% increase Congress enacted for 2026. As it is done in several years prior, congress may take action before end of year to partially or maybe even fully reverse the reduction and provide some sort of legislative relief that could mitigate some of that 1%, you know, impact or the, you know, the conversion factor decrease. Obviously, we will plan for this. But we could certainly keep you posted on if there is impact Thank you.

Operator: And our next question comes from the line Andrew Mok from Barclays. Your question please.

Andrew Mok: Hi, this is Thomas Walsh on for Andrew. Can you share the same center system wide revenue per scan growth in the quarter? And comment on pricing, commercial payer mix, and collections relative to your expectations?

J. Anthony Martin: Yes. Sorry. Was your second question? Just more broadly how pricing commercial payer mix and collections are coming in relative to your expectations. Yeah. Okay. Yes. Yes. I. I would say, you know, our payer mix is kind of a non event in terms of looking at our trends and year over year we are, you know, like, right at where we have been for several quarters. You got just really tiny swings here or there. So there is not a lot to report there. We do, you know, continue to have a really strong commercial book. And our you know, rate per unit increases have been consistent with or even slightly better in some cases this quarter.

Than what we modeled So that trend line is strong and you know, we are about 2.1% of per unit on the consolidated business, and we are up over 3% for the JV businesses. So that is a place we are comfortable living and think it is sustainable. Thank you.

Operator: And as a reminder, if you do have a question. Our next question comes from the line of Ryan Daniels from William Blair. Your question please.

Matthew Mardula: Yes. Hello. This is Matthew Mardula on for Ryan Daniels, Thank you much for taking all the questions. So regarding what was mentioned in the prepared remarks, about the AI-enablement tools for reporting, and summarization helping improve radiologists efficiency and kind of reducing that administrative burden. How much additional capacity or efficiency do you believe you can continue to unlock going forward with these AI tools? Especially into 2027? And then regarding the broader picture, what inning would you say you are in for having incremental capacity or just realizing operational assistance for radiologists regarding these kind of AI tools. Going forward.

Caitlin Zulla: Sure. Thank you so much, Matthew. So, yes, you know, as we think about AI, you know, we have kind of talked about. We see it in about 4 categories. right? 1, how do we improve our core operations? Bringing in more patients and serving more patients on the same machine. 2, you know, how do we create back end operational efficiencies things like our revenue cycle, our call center. And 3, how do we expand our strategic service lines, things like our breast arterial classification, and then, of course, how do we continue to support our radiologists in their overall productivity.

You know, we are in early days of, you know, thinking through how do we support our radiologists specifically. When we think about Dr. Pirooz joining the organization, you know, there have been huge advancements even in the past 18 months on frontier models and their ability to impact radiologists efficiency and effectiveness. Really excited to see Dr. Pirooz take this to the next level. Obviously, he will be focused on serving our internal operations. You know, he will focus on the best use of AI technology. To better the patient and provider experience.

And, really, when I think about the ultimate goal, I want to have radiologists that feel like they are able to do their best work, provide the highest quality care, and serve our patients. And at the end of the day, I wanna make sure that we manage a, you know, a reasonable radiologist turnaround time on the report. that is our ultimate goal. And then I think about how do we continue to earn and grow our business. It will be by providing amazing results, high quality subspecialist red reports to our referring physicians quicker than the market. And supporting our radiologists with that technology is key to realizing that vision. Thank you.

Operator: This does conclude the question and answer session of today's program. I would like to hand the program back to Caitlin for any further remarks.

Caitlin Zulla: Thank you so much. I want to close by thanking our team members, our technologists, and our radiologists whose commitment to our mission and to the patients we serve remains the foundation of everything we do. Thank you all for your questions today. We have strong momentum, a growing network of health system partners, and a deep confidence in our strategy, the strength of our team, and the opportunity we are pursuing. We look forward to keeping you updated on our progress in the future. Have a good night.

Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

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