ATI Physical Therapy (ATIP) 8 May 232023 Q1 Earnings call transcript

Good afternoon and welcome to ATI Physical Therapy's First Quarter 2023 Earnings Conference Call and Webcast. [Operator Instructions] Please note, this event is being recorded.

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

I would now like to turn the call over to Ms. Fong. ahead. go Please

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

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

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

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

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

Welcome, Joanne. everyone. Thanks,

our that journey. capital milestone reported good a and XXXX we today, was to last XXXX an off quite On and toward it been announced a call, start, quarter Earlier our results we closing earnings transactions. our first has announced important achieved previously I said

organization. to result care exceptional are the quarter deliver we has high-quality we deliberate the first happy access a across customer share service and to of Now I'm of improve patient taking our excellent performance that to highlights achieved as concluded, the actions

those across country accomplishments. day quarter, in field entire our their team of providers each patients in of our their individual saw helping health services on than to our corporate in congratulate the ATI To health on This the start, visits average hundreds the must and thousands the offerings the more XX,XXX I attain goals. team in family, clinics, first

visits teams with to reaching great and strategies for providers completed of started ATI's team We to and team January, National In per adding first care was day visits held the post-pandemic our our to targets XXXX exceeded our months, each over Throughout basis high. we leadership experienced operating goals clinics. established on clinic corporate with our post-COVID. of It leaders quarter, transformation, a our last have per for structure. the management X high-performing new recently our align field together are the the back our that Leadership health which event and

As I drive reflect strong on as my to report momentum. and incredibly to CEO, have I'm we successes early our an first year pleased had foundation

ATI to Growth our Scott a ensuring who focused be Chief While future. us on the now in musculoskeletal the central is continues at new near-term achieving sector the we ATI's Gregerson, have and make position targets, today for deliver we decisions we on growth priority potential our that Officer, long-term

drivers, turning of our provider provider the pipeline, and Ps now near-term practice; our our base growth productivity. to So specifically X

quarter. at look Referrals pre-pandemic we first remained if So pipeline. above through first, the levels

to market-specific on Our relationships, strategies. and referral nice strengthen business development continues they've job done team new our a executing build relationships, existing

of XXXX productivity, highest pandemic second first the For in P, visits the began. the provider quarter since were the

an at Additionally, surpassing high, performed per all-time provider our productivity even pre-pandemic levels.

achieved what average visits quarter at the the focus they provide visits clinical to lies this and on finish per will and for details per in patients meeting demand increased day. and commitment an to impressive ahead. XXXX of continue more about March in we talk on Chris X.X this high how milestone Our to FTE day productivity X.X an to care, providers per our their

many at Officer, evaluated has environment. thoroughly ATI, overall our Chief scarcity with be to the For providers labor spent industry and and time teams landscape and competition the the at play all-time base, the listening elevated a provider Eimile, our across provider with dynamics highs. the and of continues labor current at market has P, in the third People for hearing headwind about

is aligned labor aggressively and not Our At hyper-focused our strategy with in the time, conclusion same We the many improvement immediate space. on in evolving providers. PT vital retain people an attract foresee are the do market. to we

of team new the workforce. formed of the is PT has cohort talent graduates as ATI making employer acquisition progress newly Our and choice positioned an entering for

support where is real-time The strong, our learning invest and is works ATI culture our Eimile employees, and to in members. and of to what engage tactics multitude a leading team

forward, move footprint convenience our to enhance through footprint on of is optimization. we're The review we for our optimize underperforming geographic divestiture. to review customers execute our fleet and consolidation, the continuing designed and As clinics closure and

the novo plan. In de we X X the clinics of first divested quarter We we clinics. clinics as opened XXXX, closed on and executed XX

appropriate. continuously and when swift taking are performance monitoring clinic action We

said team outcomes. on pulling a the providing and with start, is I to a and environment care XXXX customer in by So of member the by contributions encouraging highest success high. demand as the the every services of our same To friendly is exceed of good Therapy Physical expectations ATI fueled in impactful company's direction mission. before, for quality to ATI's off remains deliver

our the recent into in to improvements harness with continue momentum As we business. driving and XXXX, move urgency we're acting

I in to Now, call turn will and discuss over our the what field. seeing the he's Chris operations to

you, Sharon. Thank

workflows continuing experience. even strong to opportunities operational while start to processes our about more across as excited ahead by I'm I'm the encouraged optimize the team different functions tremendous the patient and and year, our elevating operations are

for high, increased patients. access goes labor during all-time high-quality our to physical was at the quarter hand-in-hand an Sharon therapy which with highlighted, productivity providing As

and allow patients agents. of both there In a intake, addition experience enable frontline to with to our It working starts reach the this in patient using teams level technology clinics, onboarding us in providers to are performance. the background seamless to for multiple

efficiency improvements we For and interactions. center recently and call technology new a example, already deployed customer are in seeing

patient scheduling. Next is

towards tools clarity provided with working what matching which rhythm intelligently patients of centralized scheduling looks already move predictable focus we to scheduling on toward have demonstrate are optimized excellence, an operating our that in good providers as behaviors implemented contributes clinics. like, and scheduling. We've We a several

their and Importantly, providers, to attribute important recruitment. this retention upfront and keep reduces efficient through an our more enables we coordination. on clinic organized focus planning on weeks directors and new It also stress as

take burden patient ownership patient excellence. Additionally, our and allowing care, performance administrative their centralized business reducing which on helps by directors access scheduling operational more clinic to and them focus four-wall drives clinic of and

centralized do so will to over have support this rolling We coming months. out the and scheduling been the across country continue

seen decrease QX. have the that our retention increase in notably, seen along or practices we've trends an increase, implemented, burnout. We've have in a But I these in As referenced. been we that stability productivity significant Sharon not increase engagement also in and seen in with continued

opportunity passion past had patient of And all our surprised calm a per energized the for that busier." and practices visit across of recent New the clinic patient a providers access were our I've delivering few clinics months, and directors extra to readiness. clinic our were In they all we that providers. on high-quality an The and by hundreds regions "feel seeing I'm they provided to England, in entails. given don't that visit our patient because multiple our and sense remarked and have have fact, the with of met support tools, providers they have day of per clinician increased one care

improved and in our drive reduce areas, to last call, I costs have that different enhance we On outcomes. and said customer revenue several opportunities service

management. cycle In scheduling, is addition one to intake patient these revenue and areas of

quarter, drove collections days Accordingly, during XX days outstanding we of certain the accounts for receivables aged to focused on time. first sales below the and

our EMR These wins, authorization and X and the with technology initiatives performance. to enhanced in with We believe integration with RCM function best-in-class there are an to a process automation. our larger we unlock of Additionally, we significant were quick system. and to is pre-visit transformation proceeding value investments opportunity in our workflow initial move

to innovation and to field priority of our teams. mine continues our of clinic processes A and be systems support

drive reduce more We work non-value-add consistency. and are and to building structure capabilities

actions to to new actions. to our progress. you keeping of and forward access team high-quality While begun the the to increase scratch to have allowed improve has only I look appraised surface drive ways identify these us patient care, to

like to provide I'd over to a to turn Joe the call results. discussion Now of financial

the you, to joining everyone our Thank will XXXX financial call for I TSA. brief today. quarter and provide and update on a Chris, first cover thanks results our

agreement services an Starting million, in revenue year-over-year, results. financial X.X% increase was million, first the revenue prior an million, of in $XXX being year-over-year; driver Net was with patient while increase is the other which from QX X.X% primary year-over-year increasing revenue also was million quarter with $XXX management year. $XXX $XX X.X% the Net revenue.

quarter-over-quarter per day in quarter during X.X was sequentially the XX.X It increased per year-over-year. it QX XXXX increased of and Visits from X.X XX. clinic visits visits

of before, quarter. first higher one increased during of we've experienced which As associated the will and clinic we utilization fixed be rents, such leverage the costs, discussed higher as of the clinic benefits profit, capacity

first year-over-year was in rate and the quarter year-over-year The of which visit offset the per XXXX. increase decreased $XXX.XX per XXXX from quarter fourth during commercial more of improvement, rate has in the from Medicare Rate sequentially than to primarily which $XXX.XX, quarter cuts. due was $XXX.XX was X.X% X.X% visit up

QX X.X% of of which the prior the proportion of clinicians. XXXX a year, addition from due wage and million, in quarter Salaries senior-level related increase to costs first inflation, more in higher million a year-over-year to were in $XX $XX primarily is

FTE $XX.XX year-over-year and costs improvements the the the partially improvements from from PT clinician was visits per visit QX of prior per the improving quarter in from quarter year. and X visit labor costs. during was were in fourth X.X% offset has per $XX.XX the improved salaries cost X.X XXXX and The related by year. of prior per higher $XX.XX, These due quarter during day in productivity primarily X.X% were higher in the labor XXXX per first to clinical X.X quarter, QX sequentially which as of in

labor cost of X.X% $XX the in first increase PT the driven sequential supplies, by $X approximated contract quarter from of the and rent, and million, from a was the per which Leadership annual was quarter million. and XXXX. Rent, primarily X.X% clinic million in XXXX, QX in $XX,XXX is event were the other year-over-year approximately clinic increase increase from first XXXX. in of $XX,XXX, quarter other labor in QX year-over-year increase of $XX during an National and X.X% January clinic increase supplies, $XX,XXX which The contract year-over-year quarter-over-quarter

and efforts first for Our favorable first Chris PT result RCM. revenue provision was improvements, in the focused in X.X% quarter PT compared doubtful the process the quarter of The approximately of the million of the of or performance X.X% revenue about was earlier to company's of $X prior collection million the or within talked quarter which accounts during $X year. XXXX

SG&A million partially during a fees was lower costs from approximately costs documents transaction year, the from primarily offset and $XX year-over-year prior in and non-ordinary were XXXX, professional definitive TSA in of the QX to completing first quarter the the the legal million, $XX X.X% by and quarter increase those due expenses. of

impairment year, reflecting higher first XXXX $XX $XX excluding which of from loss, quarter of million the in revenue. year-over-year was charge prior Operating improved QX in million, the

results In of early addition XXXX. in that implementing improvement of the initiatives the multi-year half we business to second started

expense million in as the the previous the increases rates the driven company's cap to primarily of our And compared which compared the credit $XX offset agreement received quarter XXXX, February higher $X by from well payments credit interest agreement, year, partially overall. as was prior those Interest interest hedge. quarter first with under rate during to higher rate interest the in were closed environment by increase million the we

the in quarter Net first million to the expense benefit for $XXX compared of prior tax million of to $XXX,XXX loss income of during quarter million quarter compared was year. the was Income XXXX. $XX the quarter in tax first $XX the

was EBITDA quarter first adjusted substantial of the $X million quarter was during margin that we adjusted an in X.X%, Our EBITDA or increase where of year-over-year the increase $X.X business I loss to million. a had the the adjusted was operating over EBITDA about and a change primarily year last combined impact year-over-year revenue, in with the due talked initiatives. to higher loss in Similar improvement earlier, from

million financing used $XX in Our operations, cash $X million with activities. $X activities and used to flow million, million fund use year-to-date was in $XX investing used

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

We the agreement. which last I'd our on keeping finalized were form in provide key outlined X-K. Subject substantially update the call. transactions close as completed just to we support terms to in Finally, documents and Form over expected like And the final report filed transaction look an SEC the mid-June, weeks forward economic you pleased and X updated. the that I'm ago drafting to definitive documents, we are to the during approval, shareholder to with

ATI the and last providing a this progress the to believe time. business, we made appropriate changes that guidance to at multitude over including KPIs Given we the our and transactions, are the made as upcoming being, have key our We providing significant has the quarter, and today's our we're of quarterly of at part update most time guidance later for the forward X-K date. look provided not

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

Thanks, Joe.

investing our in see, to our the our initiatives, up quarter care optimizing I our strategy entire for us innovation, family I and ATI operations, footprint. our look that we date allowing first am progress and on our their implementing demonstrate more So patients. as enhancement grateful to as QX, to is results continue in streamlining you and talent geographic working. keeping to focus for you forward efforts can proud

in Joe of we our stated. TSA optimistic and go Completion with progress year guidance, of financial formal will flexibility transactions to transactions support ability While to ahead creation these value remain as the close earnings I our providing on additional to to and map, confident initiatives. ATI are provide for remain our execute the looking future-facing our we future. sustain road

today. Thank you us again joining for

Now we up will line open for the Q&A.

Your Brian first comes Instructions] Jefferies. Tanquilut, [Operator today you. Thank question from

Taji today. on Brian have You for

can just it services. called that and therapy out physical look function increased I versus if the visit you some your the day I'm as clinic, patient on KPIs efficiencies call of per a had So break out of Chris curious in between operational at demand terms per that for visit of being

We're by then the capitalize you, they in demand Taji. going to able efficiencies clinics we And creating our Great the and quickly productivity. say their lot that can and I question. once. there's providers increase on Thank would moving a are on that supporting more so at

So that's level. summary the executive

Chris let me add some commentary. Let

moving difficult it tease think at I me Chris once, it's the direction. comment. because happening right in are both to is everything out But let let and

XXXX, quarter other same is, we one in thing the I in region would as add the across think productivity seen of of we country. versus I every quarter improvement key XXXX one the have look approximately

have referral of those surpluses. Some regions have those referral of starves, some regions

increase demand. improvement and So without both we're definitely I that think seeing with the patient in

you contract quick a is labor a just And Great. that percentage of you tease out Can called still follow-up, out, of spend? or a I much potential use. know had how that as this revenue quarter

Taji. it, have Joe. is roughly I It's Yes. This X%.

the to then And do that trending volumes the and foresee that sure optimizing contract I for just costs. controlling last you. a on those companies know you high Thank I out it's year? making throughout labor, question, too, also try curious between priority tease just what's balance guess, but you're that how patient

the or whole during QX, as saw rebuilt We should really strategies We up. balance, talent in a group say. sure. certainly I it's No, you acquisition see ramping our for QX,

some to traction so we're there. starting And see

hope from to retain as more able full-time, providers that, recruit continue both contractors. be would to be my the move will we ATI and our away So

first quarter, that some we a For rather certainly we progress, the provider have but the if a not given it's seeing. demand had would a provider good contract we're even than have

the provider to meet and companies to at rather same profitable important more a able Joe. it's is that we'd there Physical But that this is it expensive. is Sharon's out business as for demand services Contractors, we be contractors, a point, and full-time have to want still because Taji, Therapy ATI, demand. there's to contracting note

Deutsche from Bank. hear Pito Chickering, we'll Next,

maybe KPIs, and for Shaver if of wondering going the a Pito. just more you. some Thank could little hiring you the give around notably got You for expectations Benjamin most color labor I was on forward? turnover

Thanks for Well, Benjamin. gearing busy for the up Sure, question. we are season. the

been the certainly numbers it's that the and the have hiring of the We combination seeing a attrition board. put on

attrition stabilize And hiring. last seen we've actually the certainly of seeing months. course six the we're the So the over

of well new graduates season. which positioned we we're initiatives. at got And as the lot we've the a the learn. lot think for and we constantly a those out so this of call tactics coming looking of programs, I busy And We're adjusting

strong to We we've ourselves have ahead XX have days we and we that for fair month some some indications. look April indications get was us, share. a as positioned our

know to if work Chris, want you retention colleagues. I don't of about talk the the some doing around of we're our

Yes.

number and care, kind high-quality our access think I prepared, that it as comments, about scheduling, providing making them about it goes of prepared patient look workload. more to to, just playbooks that patient focusing we're on how showing what mentioned relates allows at their my to providers really like planning it in best practices back upfront ease one, really I and them more feel

on the That's that the engagement operations across it the cultures core plans, different various the the understanding clinics also focusing with but then of within country. market-by-market exist ATI

Looking where discrepancies at a on market there level in compensation level. the may market-by-market be

a As approach really field their coordinated leaders our with on single what's to clinicians discussion understand have every our a to country as the of mind. one across with taking well

about can and what concern and continued saying, basically taking feedback an can concerned do," your on feedback what a you doing interview currently then and be with like centrally address," focusing additional are mind we that that CEU and are the "Okay, professional on our you could talk employees and say, things education. about, our things that what development we programs We existing "What is do have, to

employees really needs our both of lot a culture say through to or and to the grads out then So recruiting really, to listening new got team are so on we're what our and lot place. strong And and retention, sides listening there, that looking looking our both I what's for deliberate and it recruitment meet on we've message certainly for, important are be a quite would think the the what to is trying of I honestly, what to in say here them. very offer and is Benjamin, getting doing our actions through equation, whether I'd of the existing

For sure.

So just there And metrics? any just quick a could of one follow-up, either quantify you more. is way those

and more increasing you mentioned market how increases. from those that rate mentioned down some coming just the break higher that clinicians a bit of having little are maybe had you much senior of a increases clinicians you demand wage? senior Can wage wage versus you So the also more

that, with retention. start let's on So the

about in I that right? So we've seen QX, we're at did annualized, XX% get

Turnover.

sorry, Turnover. I'm yes, turnover.

We past, have struggled that, with And it has the number from stabilize. again, seen but is so improved in we've the in improve that our continuing that's retention to what And, work been right now. we're past. what much to

our that can out, compensation, Joe, I up. know, comp we but I mean, our So if break is don't

Yes. what we'd It's roughly to X.X% is X% expect.

that versus at of attributable senior to the have as far to but non we more some is here. down much detail that breaking that granularity As level level how at hires share not

it's reward two and is out then, providers of I as attract put combination hires. clearly more knows, our mean to senior There's to there been things, everyone wanting aggressive a a new pretty Yes. that certainly for new package folks.

causing the are at a we So I this when think combination both it's look two of that increase. that

only our you productivity been what expect to probably labor the release, that around and I'd X% about cost if X.X% at say Ben, looking has beneficial. seeing, visit the you're what per KPI rest year. And modeling trying up in tables, the the out we're because thing saw the of wage think to inflation is is we for like the lower But the extent that's other you're to maybe

we're helps extent to we're the that of offset inflation the So hold that seeing. that to some to able that and

over-index where We're definitely but to possible. Yes. leading there not market, the trying we're certainly not

Petusky, Your next question from Mike Barrington. comes

for in it the the be So so mean a X,XXX? you mean have? it count basis, gone number quarters. I your facility the I right sort several what the guess item, guys with what number last on the on folks force actually you should based XXX. been And I net between the sticking down of last, is or about have that's clinician tracking around mean Thanks. I number? number X,XXX it's quarters. is labor last X assuming of clinical XX gone down Like, X,XXX, aspirational X,XXX? stayed clinics Is the

probably to Hey, X,XXX. It's Mike, between X,XXX, Joe. closer it's somewhere and X,XXX maybe

usually Mike, is of then, do the QX quarter, larger the time than where And a end year, we see attrition normally we year, the of Yes. a a do.

that a from year at us. of And of for bit so little then uphill the an beginning recovering the is

I a So April us. that good was for month will say

we we're yet. to then consistent We yet. the certainly we demand those level are seen the so And support trend that. hiring certainly watching traction to have numbers a of seen retention, haven't get but and haven't the to We

Okay.

openings, publicly made are traded seen maybe comments was of those that? you they'd curious, had comments? and guess, suggesting shorter seen to I super market, why And your retention labor you one, of strong guys dramatically really times not were around improvement and Just seeing aware two, competitor that any sense fill the high.

good You of know going I I these not sure similar the the on both approaches in level, topic. company very having USPH, at and the speak other for is national organizations to say, challenges like I over what's of pretty feel But a some hottest with conferences, national some we're attended have workforce. will this there. that And I'm can't what,

So attrition. I trying challenge would is up that only we're our I say, not mean, with to keep

number As out, trying we're that to to back we've pointed large a move pre-COVID. got you

to not that's keep challenge. up back We we with been get adding pre-COVID. so were That's the And numbers It's where our problem. biggest can significant to attrition.

in a just there's and But challenging I've any workforce. they're inflation believe situation workforce, of that competitors similar me wage very a nothing leads a from tight heard around not that our to

hand any further the And no everyone, or Sharon at Vitti call questions. Ms. for closing remarks. this to time, back there are additional I'll

you. keeping earnings folks everyone forward thank to up wanted Just next our Thank look to in joining us to call. for quarterly we today, date and

for does today's all conference. participation. conclude Thank that Once you your everyone, again,

disconnect. may You now