ATI Physical Therapy (ATIP) 6 May 242024 Q1 Earnings call transcript

Good afternoon, and welcome to ATI Physical Therapy's First Quarter 2024 Earnings Conference Call and Webcast. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event 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, Chief Treasurer and Head of Investor Relations. I will now turn the call over to Ms. Fong.

everyone, you off, today. joining first afternoon, and for thank us Good

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

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

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

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

you, and Thank Joanne, everyone. welcome,

of some Chris our and members Kantz, in Chief Growth Chief either person Joe our and participant on our the Oakes, CIO; Cox, Tanzey, CFO; we line. Legal call on Erik be the -- our Scott Jordan, today. our have or then they'll our Gregerson, ELT COO; and Officer, Eimile have CPO; We dialed our in Officer; and Gus

ATI by equally communities. deliver on driven good company a momentum people my really a gratifying. being be a is is each a month and exciting other, and a while X-year goals family. over ATI. our the been meaningful to patients has privilege leading our speed It who It to to on anniversary lead group are and So marks of characterize invigorating pleasure It watch tenure talented would I having my impact month. bumps of rewarding building overcome this month to as truly part a

that ATI the musculoskeletal strengthening am with improving of health access, care rehabilitative in while of I continue communities. the of goal the our in improving and affordability ultimate health will quality succeed space, to and financial confident our innovating

jump let's XXXX The major journey. step marked in and first at look So results. our Earlier quarter quarter QX. in take we a forward reported another today, our

We life. making fronts to of active with and we inspired an every many grow on what have are our by life continue purpose

platform, January staff care Our exceptional teamwork national to the inclement weather providers our patients over support in receive ensure and and navigating demonstrated the across quarter needed. they

we also today, provided discuss which Earlier guidance, financial call. later will QX on the Joe XXXX

ATI Similarly, call, the outlined for in and our that employees, drive areas our XXXX. key KPI our improving patient expanding drove are access Strengthening and I the advancing and in development provider base, focus growth growing we patients, Since performance. elevating talent excellence, the winning financial enhancing our experience growth operating last with strategies the to XXXX. creating these culture, for opportunities

XXXX, QX continue drove underserved to the for let's access working. in to patient of each compared outcomes expanded are X,XXX physical visits So year our remainder I growth say year. in is the day growth. deliver expand Focus therapy, In previous access. saw we at year-over-year We would look approximately areas. and impactful to strategies patient more the to including

strides estate the our in made initiatives. real significant also In we quarter,

consolidations. strategic our necessary which upgrades, in real on fleet refreshes, executing includes -- are We investing current our plan, current with estate

to our geographic align with resulted XX patient which refined footprint X population in clinic. divested needs, also closed and We clinics

our efforts platform, in the we to actions. deliberate to rate advance rate our visit of multitude including and front-end rates year-over-year. and increase our data fully our merit-based we the visit improving contracting cycle operations and incentive Services, Our management per growing actions to collections, XXXX, for realized payer the to year will Teams MIPS, payments Medicare striving discussions, leveraging across quarter, In in payment auto revenue comp continued system fifth ATI per receiving patient of improved personal satisfaction continue earn the bonus outcomes workers' incentive through and first a under in injury offerings took and XXXX.

about organizations, advocating In increased to reimbursement the improved influence that real for partnership patient for care other the access national continuum. therapy with Now value care of said, industry work the leaders. musculoskeletal we is are rate-setting in PT and and physical with leadership health

month, and provide of action the year We fight more. relief cuts the PT of rate value system aging years. to our past by reducing the for clear fee PT did of take is disappointed to continuing Medicare to for this action We several to need a over and the There population. the the Last our cut the care incremental by to schedule on Medicare are disconnect health X.X% Congress applaud from continue remainder X.X%.

we a and Eimile our perspective, From employees. refresh People Since her in implemented a They've XXXX, to joined Chief exceptional late refresh retention. and she have an our engage people and team therapist cultural strategies ATI resulted we life grew diligently organization's Officer position employee that culture attracting in our people programs invests Tansey worked provider and employer launched by in an retaining our active investments as And innovative labor colleagues. to the crystallized making life. purpose, Despite our the in people. every an tight base market,

takes changing work takes and all We culture corporate the time, know stamina.

saw quarters XXs, growing the FTE clinician with rate clinical in further improvement turnover of XXXX we have XX%. lower. and results the year-over-year. trending rate seeing turnover exceptional significant, are quarter in to an seen Most XXXX the in last has been quarter ATI first the low first a the We in The X

with growing in visits year-over-year visits busier the operations. and continue worth focus day per prior X We to our to our on equipped comparative refine are build upon day each out over quarter. a is per that we clinic to better learnings stable With improvements incremental in continuously our continue It pointing operations. clinics workforce, be nearly

average Our clinics physical capacity. on have excess still

As costs. a this Chris operational fixed shortly. our and leverage and provider provide spread detailed year, base our our grow we discussion we performance around will activity clinic the estate will real

Revenue with The the services, and strong grew showing and growth the in ATI's business revenue financials, progress. demand is year-over-year. for reflected with combined EBITDA adjusted adjusted continued year-over-year, growing our EBITDA quarter for

walk-through We the our executing guidance revenue a the QX strategies in remaining will on earnings provide are year. the XXXX results quarters delivering later focused on and in continued growth discuss detailed and QX financial call. of and of Joe in

care truly ATI. essence of delivery impact exceptional the inspired conclude, They exemplify lead patients. we commitment organization, making having across are and teams we we remarkable of that, to impacts of and by on the at remain privileged ATI their the colleagues enhancing have the proud ecosystem. will I'm our the With positive lives this positive millions to value true have lives. musculoskeletal fantastic I I'm of I

turn With that, call I to over Chris will the to operations. discuss

you, operations our the the execute, advance by Sharon. and forward I'm Thank continued workflows quarter, in operating the advancement environment. by to and inspired continued experience. teams the In I'm the patient enhance our dedication excited to purpose team's

areas. because In QX, continued of the important top year-over-year we several in growth line generated progress

high-quality the to work access underlies of us our supporting is to physical addition teams this to allow therapy level achieve our clinics, to goal organization are whose It increase providers our In success. there patient in that across growth. multiple the shared

and this saw weather Sharon visits impacts QX. more the the As compared This our patient patient record from we temperatures across mentioned, nation last was to year. January faced despite over of severe clinic of year experienced day X,XXX the teams and each in achieved in challenges access low

Our teams had reacted rescheduled patients quickly beginning treatment and the February. plans back on and their by of

year. capacity, contributor in our this retention particularly was to team As base to notable our employee people the continues clinician the a on in our in year the increasing achievement quarter work first past growth and and this care

stage Our and annual this set year, leadership a both had January on event national attrition. employee declining the and the event believe positive in engagement impact we for

competencies operational As progress we remainder and the from skill on year. learnings this the sets clinical capitalize and of through the the we develop MLE staff, to continued anticipate continue our core of and

were QX was model. patient management quarter which on our new first full all clinics of the access the centralized in

rate already are capture provider our referrals. a higher We seeing on

additional a administrative superior create with new model, I'm ways the optimize will and demand. we here to provider better burden opportunity experience find and continue onboarding As clinicians. to meet reducing the partner our to experience the we most simultaneously gain patient excited by while on

increasing in $XXX.XX, to visit first On was rate cycle improvements our were rate. management Operational in significant contributor the function X.X% quarter rate our the year-over-year. per front, higher a revenue the revenue

all end, and on advancement and our a As the there increasing I've to performance. automation believe focused end clean is is and on back collections dynamic, before, continuously we leveraging on to work we to cost. function area, lower this advance for submission RCM best-in-class continue technology discussed room front the claim are This as we still move at

and close, started express proud of want our teams day for thank each demonstrate continue on I am say up the I to excellence. show of as way our I we all their the how off To how look progress the can forward ahead powerful that opportunities updates a I'm patients excited we that to is year. of we through their efforts, lie the sharing having lives by more impact ATI and to want and to Because year. they communities. of the

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

Thank first for to talking start into everyone guidance. second financial you, our and joining I'll the and XXXX out jump today. quarter I'll by XXXX about quarter Chris, then thanks call results, our

first So over QX X.X% starting the year, million, quarter which the prior results. revenue XXXX. $XXX in an million $XXX with in was of Net financial is increase

other patient increase million, X.X% As $XX revenue the a we X.X% down prior over year. deeper, year-over-year, while dive million, which $XXX was increased was revenue and that's net

improved day clinic reflects As that Sharon quarter visits and first per clinic of which were year-over-year XXXX, the continued efforts XX capacity mentioned, improve the utilization. to visits X.X in XX.X, our per quarter during from

Chris from operational $XXX.XX. function talked $XXX.XX primarily in improvements driven the certain that improvement about and was higher our payers. which management year. cycle within the visit, revenue quarter key rates rate year-over-year, an the X.X% during mix quarter was for prior increase And first of of changes, by first That's reimbursement per

year-over-year of in compared the the to visit of primarily to first lower X.X% and from per due was $XX.XX year $XX productivity the X.X% higher related labor clinician per $XX X% costs increased a QX is were PT of by the and during which quarter X.X% salaries wage quarter first in bonuses. prior of the XXXX the and staff costs clinician salaries and inflation, driven from visit and in million, Our increase clinical 'XX. more primarily cost quarter in first per year-over-year million XXXX quarter of related increase is $XX.XX the of labor cost in was which in quarter XXXX, and first

supplies, Rent, year-over-year And primarily first higher quarter in increased were in a spend clinic first contract XXXX. on contract by $XX labor. from these increase which X.X% of and million, the on million in was is QX $XX from which X.X% costs approximately $XX,XXX, the It's XXXX. labor other basis, $XX,XXX quarter clinic year-over-year per a of driven

Our the year. first quarter provision $X or of for or quarter $X to X% PT compared million, million, of was the prior during doubtful in X.X% revenue, of accounts PT revenue,

lower SG&A by quarter million, XXXX Noncash driven prior partially were in it's during is first impairment charges offset the the $X.X million. improvement costs. was of labor-related higher quarter a $XX transaction QX of million, by year over which and XX.X% the $XX primarily costs,

discussed. XXXX charge in visit volume of and was a the revenue from impairment higher the in first quarter higher loss reflects excluding $X and the of of first million, million from rate, loss that which quarter year, prior really operating $XX previously improved as Our

income to every common value million. this which during lien valuation from in included are Notable quarter on the in mark-to-market our instruments March was resulting shares a our and which value notes, Those totaled a of based below-the-line items contingent case analysis fair as warrants, XXXX. quarter end, second decrease PIK quarter $X fair XX,

lower by $XX senior mainly increased lower benefit. Our It revolver. due on rate partially secured year-over-year, and million, which X.X% that's to during interest interest was the balances is expense and our term loan quarter offset hedge

loss quarter QX for XXXX. to quarter compares net Income $XX compared $XXX,XXX, And the was the million of quarter million during tax last $XXX,XXX in to income in $XX the benefit an tax of which was first expense of year.

the the $X during was from of year-over-year margin revenue. in the million, is with quarter prior EBITDA, X.X% improved and first in the Adjusted adjusted million by first driven primarily $X.X a year, higher which EBITDA improvement quarter

increase to use Cash higher $XX and of operating million year, compared first of the is in compared higher was annual last cash million the accrued during by receivable million payout to and incentive last quarter operating payments. year, $XX cash million $XX driven $XX use accounts balance use with

of by term the compared in our of quarter was loan, to investing year. financing in million the in last million the $X in current in year, activities $XX fully primarily used increase first from prior driven million the million to generated financing cash delayed $X with cash $XX first Our used $X was compared draw which quarter cash the drawn million And year was January.

As of to available $XX March move I'll of million, equivalents. cash guidance. XX, approximately and was And XXXX, finally, which cash liquidity consisted on then

grows. continue share full decided about next guidance a to and Sharon our provide year While as bit. quarter, a we we had expectations talked to instead planned on outlook today, initially to quarterly little business this We'll focus the the

landscape remain and performance in labor solid prior Despite market. progress as move navigating the labor is several these to know, quarters, through challenges, you challenging hiring over last efforts, we to we our of and do the we've XXXX. keep expect vigilant year many the over made growing and As sensitive our we

We $XXX over and million, QX anticipate quarter that reflects be of equates at the PT and the demand to revenue ATI. in strong second XX% a roughly year. million the range the X% it prior $XXX continued growth of the and to to for in

X% approximates margin XX%. the And to XX% a be EBITDA over For adjusted of expect between and quarter XXX% of adjusted to $XX which year. we $XX is range prior second growth million, of EBITDA, QX million and between it the an in

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

Thanks, Joe.

healthier to of help good as a we and So to to stakeholders. I remain energized the and all start QX ATI work our and we are the momentum in see, you year, the grow doing was can to people the people lives. good and confident we extend are business live the have differentiate benefit

know We achieve do of realize have our I'll we XXXX. lot tenacity through to have here to I a the move we work our as to full goals. share to be progress potential, and our forward

hand it operator back for now Q&A. the the I'll call to to open

We Your the Jefferies. Brian from Instructions] question-and-answer begin first comes will [Operator from Tanquilut now question session.

or growth for on big revenue sustainability your the Maybe, rate QX. your Sharon, on curious performance to thoughts pretty obviously, and just driver a in quarter the growth ability because squeeze strong the more of

year. rest that think as about just how curious viewing So you're we the of the

say, really Thanks were were good and as Brian. question, Great a little And I I year-over-year. for both joining. would made easier. mentioned, I that we've progress would Chris say those that the bit go-gets

have are think year, on going still payers. predictability at I there's the to predict the less And a of and them we so will outcome how rest the side go play as to We're harder room we the little to those of bit after things But the think around certainly out. we're with I of. getting look that revenue some but a

continues improve hit from talked the ourselves years, see But internally, relatively to I'd will and assuming assume a year. as certainly we modeling everything you year. after Joe. little a the debt benefit the Sharon going -- bit only a harder throughout QX would get to tend in we throughout it's with about. thing perspective rate. consistent And We're There's favorability get The then previous we're resets deductible bad is add similar place the to thing, only Yes. Brian, one for

it related So to it's obviously not se, it's impacts rate revenue. per but revenue results and

mention certainly always workers' we on helpful what our Chris, increasing to mix, add? piece. then I of API, in and Chris revenue top which anything comp you I look want at do presence we and us. you mean, And the -- can our And have is to I control think did our the control. cycle we is

areas the the is for Sharon, rest And you one continue just major as going the we which look be hit we the our to component was those of forward focus I say, to business. that growing of on will year. levers of

work to few but locked are this on -- ongoing, term the XXXX to And point longer the largely negotiations remaining a continue the in -- for industry, at to you influence go payer mentioned. negotiations as we comments your with of back

Then second question. maybe my

a remarks, productivity this on was there it just the where out rate below in your bit. labor little and rates tad You called pressure probably then prepared right, some was a

be Just curious labor how thinking should about and how or you're we productivity. thinking about -- costs

productivity So those to for say some would on our productivity. in the were. improvements the quarter see -- can down, or the then what And caused that and are there us changes that and productivity things onetime side, to we continuing year-over-year exactly we was know quarter have I bring solved and see to productivity what have over us year-over-year

a On this headwinds. market the is labor lot of tight rate side, with a

at successful we've And so that different where looked appropriate, able be us be to, around to recruiting. levers allow

the So be that we reason lever going I to areas is rate the would piece a labor have pull demand. say in to continue we where within something --

saw is we inflation And we the are, come continue as -- like have hire, only that incentives we onetime we incentives roughly thing the successful incentives. about to onetime be as may maybe from a pure perspective, more could add through more hire X% to we but some the some there

other then rate your productivity per as you visit. into And know, plays labor the thing,

the more better more So prior with an than the apples-to-apples the year some pressure. that per relieve the rate is prior the or of year, visit

the congrats And on way. mark the by Sharon, X-year

back That -- Vitti now session. closing our Sharon question-and-answer remarks. answer will to I the call concludes turn for

this for be for our everyone. earnings will August. to quarterly next call. forward Thanks together for call, getting which in you, joining us look Thank And we

soon. touch you will and participation all your for in thank support, So we be and

and now today's call. your Thank may you disconnect. participation, conference concludes This for you