ATI Physical Therapy (ATIP) 16 Mar 232022 Q4 Earnings call transcript

Good afternoon, everyone, and welcome to ATI Physical Therapy's Fourth Quarter and Full Year 2022 Earnings Conference Call and Webcast. [Operator Instructions] Today's call is being recorded.

On the call today is Sharon Vitti, Chief Executive Officer; Joseph Jordan, Chief Financial Officer; Chris Cox, Chief Operating Officer; and Joanne Fong, Senior Vice President, Treasurer and Head of Investor Relations.

Ms. Fong, please go ahead.

Kalia. you, Thank and everyone, for us joining Good thank today. afternoon, you

are I'd Before will you that based risks on like information current that assumptions available reflect begin, uncertainties be to and and certain statements our call remind expectations this to to we us. our various during statements forward-looking and beliefs, subject currently made

Descriptions the changes Although in the Securities revise with any to that undertake no and that after actual differ we occur obligation results believe of Factors be filings these forward-looking materially expectations are in of this cause Commission. could from section Exchange call. to the company's Risk factors statements reasonable, reflect some found we to the statements can these

be we on to measures non-GAAP non-GAAP In our as addition, posted can and discussing the non-GAAP on between GAAP with please certain press measures be believe release found performance. of Details important reconciliation website note that filed in the evaluating and relationship most comparable ATI's measures these historical will financial the that earnings measures are company SEC. financial in the

that, the call over to With I'll Sharon. turn

Support XXXX Thanks, our fourth year majority the we common Joanne, today, announced our our stock. results lien TSA or published and equity welcome, a full and and holders and with quarter everyone. Transaction first Agreement preferred Earlier lenders, investors in

financial needed discuss contemplated transactions the with by are once ATI in TSA the will flexibility more finalized. TSA provide Joe additional detail To the shortly.

the achieving near-term priority ATI be at in transactions our by top a targets. continues addition contemplated So to the finalizing TSA, growth to

our across will growth today be our remarks drivers So the in X Ps on practice. our centered

the provider base are and productivity. provider If you remember, those pipeline,

highlights. cover I'll performance XXXX also

performance have share underway, the trends. and of XXXX I'll Some early initiatives our we

the services This high-quality of impressive the the Before I health is lives program to in to approximately again access and those dedication. enrich resilient, really team tenacious hard the teams need Incentive patients. clinic, I to the outcomes System all family, team and strength in high across thank our and our for and dive their practices CMS our that work committed received patients. our team, an Underscoring marks our maintained from including ATI providers corporate of improving of in, of from Merit-Based our Payment Medicare we It's care a and rating exceptional under our delivering group. X,XXX

important for to our conveyed revenue turning performance. XXXX guidance new financial had ATI fourth and promoted EBITDA year and our members, good quarter investors. we So to We delivered added team colleagues. as transformation talented on one adjusted of roles a really several Last a was and our expanded key

a and our discipline that on cash is results managing and taking we approach hold. also focus We demonstrate burn, believe our our that maintained spending

decade Eimile focused scale. more years Officer. you our just Operating new including call, us care December, over of we in the at On new today, bringing quarter the introduce end experience, are pleased a to Chief And to Chief on at care introduced of Officer. joined fourth People than operations our last we our Tansey, health health Chris XX Cox, Chris

business, and our to developing background our decades Officer, Gregerson, X early year musculoskeletal this spent Scott has position XXXX. growth in leader over us space. Another great team our initiative. addition and in in driving developing increase the revenue development long-term joined the growth an implementing is who and as is while new in strategy us Chief in the on business Growth growth January provider having further a to delivery Scott's focus Scott extensive space, care

our Ps of X So turning to the practice.

pipeline. our First, we have

at XXXX, marketing and strategy. to a develop -- brought the a reminder, the we in referral consultant beginning a targeting end of As new in of

team, development implemented and XXXX our its go-to-market business re-built, care QX. relationships value in referral props. in that took hit BD and we stride The recommendations rebuilt team we So our brand those and

referrals approximately XXXX, at levels mid-XXs started of have the way first referrals look at the by we we our for with to XX% QX. per X time. levels of So In steadily months the day and exceeded XXXX, our worked pre-pandemic first pre-COVID

plateaued the So care productivity, first In the our in the fourth providers they QX, focused of increase our and productivity seasonal our we second and looking X increased productivity. fourth prior trends. our our also and the quarter early year for XXXX, comparative to P In on the commitment to excelled at XXXX. in historical patients in quarters X provider in quarter quarters first the demand to XXXX productivity relative

footprint, national clinical that in quarter at visits X carried team fourth an FTE then of day in our per strong across saw per period. per the XXXX and X.X into FTE XXXX momentum year-to-date the visits average per As clinical XXXX our day

third and at our at headwind to P, our labor PT across practices looking So ATI. The market a be provider base. continues

they although to care acquisition We've was is XXXX, retain was in our updating TA our existing unit in new our of our and colleagues. Our has the aggressively investment throughout increased are our offerings Emily and quarter. on focused strategies, and ATI as as employer our our team and there with to and cornerstone to people of our vigilant uptick our investments grow base. to metric position delivery for modernize and FTE enhancing vital marginal tools flat ATI talent clinical culture intently choice as fourth provider She and offerings essentially an programs equally our and the CPO on We providers. remain Emily, organization. focused attract are continues working a been tactics.

finished last our while Novo on take optimization months X a XX clinics observed In XX% discussed the possible. swift opened strengthen and geographic exceeding operations Next, of clinics. call, and/or with we XXXX first clinic like our to busy of providers XXXX, performance in We divested and/or redeployed and action underperforming. our or to XXXX XXXX, our locations footprint strong footprint clinics going select update clinic reviewing efforts. to that and an we we XX off targets and are top provide will great De meeting to is kept divested On these clinics valuable the XX% start. to XX continue I'd closed we closed our clinics And then when and

actions labor our and market to we in and believe continues have the results to base, contribute we to to which We the seen ATI energized and While move last provider we growing our successes all be entire excellent is focused through And constrained, are urgency business. X on be continue providers the swift XXXX, of the care, harness over financial teams our as we acting momentum with improvement will our meaningful driving for impactful and investors. the the continue recent current family months. retaining by delivering

I field. So observation turn his over on in that, with to it Chris will operations the a our for of discussion

to here the come Sharon. to tremendous continuing but here, be highest we ATI first days excellence you, operational see to thrilled our care have I my am areas across my Thank XX short improve a active, I productive. quality been time at of while opportunity a deliver also several have very and base, to that to have and In engaging patients. strong

from hear to to our field I the and to was A priorities the our discuss of across tactics and leadership clinics. XXXX brought a about national providers country great and to leadership able teams and and meet them event, for operational our was opportunity align things their few national get our after all for addition weeks footprint and across This company, our the attend corporate to strategies I clinic we together where on joined in our director me motivate every in that know roles.

to passionate alongside this access able to I'm to team outcomes outstanding are care expectations. physical to their achieving providers patients, exceed to increase about work and high-quality Our therapy for customer and be excited patient

my several organization Senior the ability fourth enhances President country. the which field results reconfigured created Gary Field promoted drive and newly was structure now entire quarter, clinic to country. to of we Operations our the the outpatient In the across Vice footprint our position, elevated across within oversees consistent Carlson individuals

and he and physical was has by with joined ATI. field well-respected originally a also leader is seasoned Gary himself is for ATI a owned years, Gary having acquired us clinic therapist the approximately XX been who when field team dispersed valuable his history multiple from in experiences been against coordinating combining leading his execute and effectively physical in therapy, veteran plan. has a the and to military military actions a our across functions

XXXX As type is season of providing first expectations want our and and feat highs time December, and field this to better around of higher to occurs and for of increase actions. for need Sharon of seasonal the the under the experienced see we the to X no to discussed, with productivity the due snowstorms deliberate paid continuation has tactics of easy of strong year. historical time Gary's continued provider that speak XXXX reached off level holiday that finish it the And and months their now achieve so on Results this guidance in from to and been feedback their of leadership. I In was themselves, performance leadership, have my backfill work to into team expectations. performance seeing experience, with clear road rapidly them they how rest those Gary clinics. maps unique, thank priorities to clinics for expectations understanding the our that has and clear with and I this the continue we will

collecting a in respected unique but outcomes been payers have SVP of nearly also clinical One by our in were differentiate only Health widely with In from Excellence results that equally addition our to we have treatment ATI-tenured provider Services. to new data This physical our data also discussions area distinction and to therapists. than not for decade, it a strategies. we of an our allows more is Clinical currently us of deliver X.X to that care, new and high-quality employees are cases SVP contributors patient plans. and important to has for million These team functional ATI shows our we role, positions partners. patient Gary's accomplished and filled and These inform go-forward outcomes

our is cycle and processes I've priority to Another mine teams, reviewing been our systems support intake, management, innovation clinic of revenue our scheduling and and of processes. field referral and management

full enhanced across and overhauls. service outcomes. cases, and will These reduce costs, customer technology redesign, and areas drive through in process revenue opportunities enhance of results improved gained be have some We each these automation to

are these drive forward years. We of look the progress prioritization coming our of will to sizing couple next and enhanced these which I the reporting the initiatives, in value on finalizing over initiatives currently I of believe quarters.

care Finally, providers, remain in feel providers and our and excellent of cared team focused clinicians the hire we on organization. stay care organization, they to continue work to can patients by best patients. field so with for our recruit her supporting When both in providing Emily our they take our our new and as to the turn the want

So market, for this minimize XXXX, mid-XX% throughout XXXX. rate is to was significant labor critical versus attrition a our ATI us the which was improvement employee tough Despite the turnover. in clinical

patients. we hiring, through to add can, lines. decrease and so they ownership hours to will have leaning These supply-demand all our the we with and we specific are tactics on levels. our local work same working physical While macro continue related therapy have clinicians on our to identify team to From efforts. acquisition drive accountability we're to the will started cannot in balance on take actions with the non-value results national and the treating the continue same of the therefore, impact labor using teams At driving can increase earlier, market, new staffing reducing we all referenced improve we actions number referrals along tools to actions engagement control turnover and productivity the in talent both that we and time, the that floor we're field

care potential. full personally better to who to to their every success part about to to be teams And and helping patients ATI's achieve is support take are services success. want health our look overarching reach teams seeing the everything thank ATI health. we day. a help of I Their efforts team passionate clinic our I'm who is field do our patients of together. to to very We patients proud can forward what we return their mission our

Joe to financial Now in-depth over of review provide our I'd like call an to turn the results. to

announced results, and our earlier financial touch quarter call Support Agreement you, Thank the was our will year Transaction and Chris, cover XXXX I on for joining everyone fourth full I'll the today. and thanks today. that

Starting with results. XXXX

was XX.X increasing And $XX million, net due revenue year-over-year. X.X% the in while the $XXX revenue day year-over-year, and XX.X, in in $XXX while was per visits not fourth X.X% the increasing is per weather, million, Our lower QX the increase Net patient quarter. revenue million, other X.X% to is quarter this than prior inclement X.X from a to which year-over-year fourth flat million $XXX of a clinic the increase to year. quarter was XXXX. which was from marginally is quarter typically third the holidays quarter sequentially case was in during third the due Visits

quarter. the clinics, vibrant year-over-year X.X Visits visits on began with compared third the X-wall in quarter and more per execution are focused leadership show results optimization team clinic And plans. quarter in We and in our to KPIs. increased quarter the operational essentially flat the fourth XXXX unit fourth day the clinic of in year-over-year new being the the form in of stronger, per footprint starting to and early second

$XXX.XX, in the patient services since from downward the that was first XXXX. improvement increase which compared base. per in in we mix to experiencing an visit due around by during rate third our primarily the Our was highs rate of is $XXX.XX quarter driven the visit of to quarter X.X% shift rate per trend Moreover, COVID. of $XXX during The the were quarter stabilized the

the the $XX.XX and the from from in improving quarter costs XXXX. XXXX of PT $XX.XX, were related quarter visit costs fourth of million QX third and X.X% from a per year-over-year increase related quarter year-over-year decreasing of in year. million, quarter and salaries $XX the was in Salaries the during prior X.X% in X.X% fourth $XX.XX $XX

were tight The higher cost from in labor clinical quarter X.X in to day primarily visit per the was X.X fourth partially due as the per were visit in in clinician labor decreases due third XXXX. higher productivity X.X cost costs per market. per decreases visits to quarter, The in offset FTE improving QX labor and by of the

PT $XX,XXX contract quarter contract labor the decrease and supplies, other million, year. more other and and quarter by per to X% $XX and labor driven of the clinic increase labor X.X% in was essentially third fourth rent, fourth due less year-over-year $XX,XXX, having the $XX Rent, clinics. primarily supplies, from compared in control decreasing from a million, during clinic cost The X.X% use prior the sequential clinic increasing impact quarter was approximately to actions. contract primarily quarter the of flat, was

sequential PT trended approximately PT has doubtful or for of X.X% starting accounts QX. $X quarter at during was XXXX, in the Provision revenue in X.X% million and quarter of revenue favorably each

X.X%. For at a the compared those provision efforts in and our collection the PT remain full of by full team year, was deliberate revenue XXXX result and X.X% X.X% to improvements are full XXXX. at ongoing XXXX of year These efforts year

team. legal driven executive fees, QX X.X% cost spend in SG&A non-ordinary building during severance a higher $XX and million, year-over-year new quarter lower out by of was decrease prior the resulting offset the the $XX by million it's primarily from search leadership executive from and year, and regulatory partially

asset of impairment of million. which other were public such addition guideline multiples impairments in as factors, industry labor due capital revised given multitude And the to valuation was to intangible the $XX charge quarter headwinds. expectations inputs Noncash a and and in market near-term cost goodwill, include company the fourth company

into early connection million. contingent of decrease we results XXXX. million Operating business specifically year-over-year loss, combination certain multiyear acquired impairment $XX income the which of warrants year, that started from value in from charges totaled common we initiatives with of the fourth our the during an $X of shares, in which items liabilities and June the business loss the XXXX, was second included $XX half excluding Notable of operating prior improvement below-the-line resulting entered in QX the reflects decreasing in million, fair quarter XXXX the that quarter of in a in

The mark-to-market December value on fair of analysis was as valuation based XX, XXXX.

credit under higher was the in as quarter to consistent compared of an prior fourth driven with the as in higher the the tax in the interest at agreement fourth primarily million, the $XX Income year-end interest interest expense was for $X the by compared XXXX. quarter year-end $X increase rates million XXXX QX credit XXXX. at Our rate agreement with the quarter company's to well year benefit XXXX the environment million overall

the during million of in the $X compared loss fourth XXXX. net quarter $XXX net income quarter of Our was million to

full increase was the million, For X.X% to a year-over-year of revenue $XXX revenue year XXXX, compares $XXX million. to The $XXX from revenue $XXX million. million million guidance of $XXX

driven state year-over-year, X.X% in While favorable payer Medicare X.X% declined per by XXXX, per rate Medicare rate cuts, day and visits mostly sequestration and increased mix. reductions visit less

XXXX. adjusted year-over-year year $XX EBITDA $X the during was adjusted in million The to guidance decreasing approximately from $X of an compares EBITDA of $X full Adjusted million XXXX million range to was EBITDA million, million fund and $XX provided financing approximately XXXX $XX activities. million to broken million. $XXX used Cash down generated $XX used $XX million operations, investing in activities, during between million, by

included with employer operations in under payments security taxes in used payment of the portion Cash social deferral the and CARES accelerated of and million advanced program Medicare $XX connection in Act.

liquidity XXXX, available December equivalents comprised of with revolver capacity. As available XX, of cash approximately and cash $XX no was million,

meet agreement, which that risk XX concern conducted I Form flows our going projected there's would for our for basis accordance with liquidity months. an that to in Next, cash filed contemplating the would concern our its included analysis, the in next was And XX-K. to U.S. certain conclusions. GAAP, financial analysis our under and like speak our opinion going is covenants the current not the a of company credit In

it's strategy. and execute Sharon in financial XXXX. the and we against as also operational labor a clinics flexibility base our seeing market, have grow to As We're the cognizant need important the provider in that of we improved Chris discussed, performance tight we're in

and common the certain partnered lenders, liquidity credit of holders with our near preferred agreement to term. design terms stock holders potential in we majority our our to address such, new equity constraints the of As

we're strategy. was through to funding a we relief execute working into position, the well putting liquidity our The new capital entered should as covenant Agreement announced and as which enhance week, working for details Transaction as Support currently and place our and it agreements today, We agreements. providing amended we definitive in intended are this the purposes, need

in To a draw on that lien new second million to PIK delayed agreement $XX end, we notes. exchangeable up of the form of reached

$XXX first lien cash second debt. new we existing million Additionally, exchanging our required term increase further by PIK payments operations cash has loan, available into interest of agreed to for which lien

We credit include also financial agreed amend our to burdensome to agreement less covenants.

the Additional of and as have Form our filed XX-K. the TSA details exhibit term an sheet been to

We look of as phase forward XXXX. complete we in expect updated through to on progress these we execution second move keeping transactions, quarter which you the of our to the

to provide part plan also release. as XXXX fiscal earnings our We of year quarter first guidance for

turn now back I'll closing call to over the for Sharon remarks.

I am as forward right not look to the and the confident we today's have Transaction the call. our strategies providing I we taking On in Agreement, be make on place. that Support note, we because execute outlined to in progress. questions team of discussions will updates transaction ongoing

after an to transaction Joe We will quarter. we update is the the provide expect second finalized, which, said, in be as

Thank now you, it time. operator. to everyone's the hand Appreciate back and I'll

will today's And again, conference. that conclude

Thank us. You you for may now disconnect. joining