ATI Physical Therapy (ATIP) 5 Aug 242024 Q2 Earnings call transcript

Good afternoon, and welcome to ATI Physical Therapy's Second Quarter 2024 Earnings Conference Call and Webcast. [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 Treasurer and Head of Investor Relations. I will now turn the call over to Ms. Fong. Please go ahead.

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

are we'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

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

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

Thank you, Welcome, everyone. Joanne.

for results. and quarter our Q&A Cox second -- call As call, mentioned, we session. Earlier have be our and myself Joe today, reported XXXX speaking then also the Chris members have the ELT on Jordan we we'll we and the throughout our other

Our practice, active life. purpose teams by an continue life advance every of to our national making shared driven our

provided for efforts performance that our our Earlier high-quality outstanding call, guidance. our staff the to XXXX teamwork today, QX to ensure future and expectations On financial care. support strong. discuss this providers Our our receive XXXX we'll across and finish and we also by patients platform

day more visits We of in compared more over each per fueled to X,XXX the for care Demand ATI levers by X% let's patient the saw growth QX was increased Referrals XXXX. one prior than year. year-over-year. in. that jump So our day

continues a culture more ATI's which market, vigilance. the quarter we growth our strong upon in our retention headcount and labor recruitment with learnings teams physical to physical quality demand our level we in time the operations successfully the management continued and rate is change X% despite build comp and of improving stabilized with clearly, XXXX by efficiently working. payers, year-over-year. pivotal our of play to Great So taking efforts our and proud the strategies by Places second our relationships. A revenue workforce, the May success. recognizing in that and to sharing payment We're to following are underserved more consistent front-end recognize the headwinds grow efforts, We're in clinician year-over-year our the execution including second ATI areas: be that of to the cycle also services experiencing, we're and We're ATI patient to visit committed areas. In our Work indicators quarter, therapy action the to increase for expanding year offerings proud the in designation grew for clinicians to our role per than and turnover rate at access The that strategies outcomes but focus and of ongoing achieving, by continued and macro in workers' lot operations. takes our bolster strengthening clinician market. With XX%, collect and imbalance therapy, continue refine continued

footprint clinic quarter, detailed discussion the and costs. In Still work for refine a performance clinics. increased including with be our leverage and our patient clinics access provide providers, align continue our year-over-year closing we per will and excess have X activity clinics around of our to busier real growing fixed will operational day with -- X visits over capacity, clinic, to and community QX per continued year. and Chris clinics approximately estate made divesting patients visits Our with our X last we needs, and to some and progress add shortly.

the see, financial executing earnings on services, will can our call, strategies financials is dedication have I'm lead is a delivery you the that, leading provide to As the and and demand a revenue lives robust showing our all quarter of growth. Later to their for adjusted outstanding in the combined a our musculoskeletal positive We're fantastic in year-over-year with the of are families. quarters. for having discuss the foundation call comprehensive of for the in the our our with privileged and to that patients of of ATI the QX ATI. in impact and at committed have guidance Joe clearly at people obvious, tremendous their for organization achievements, gratitude turn over XXXX. I'm achievements sustaining QX performance discuss revenue operations. I ATI business results we and care to enhancing ecosystem. With and overview They proud will the upcoming and EBITDA strong to Chris

and Thank talk to to all you again. good you, Sharon,

quarter, operating This in to quarter, grew and growth. In line our experience. growth we the is every even across life year-over-year, enabling patients, doing evidence life In we scale. continue for our active success and our right the achieve the X% important clinician a that and the the purpose ongoing an to advance enhancing purpose teams achieve collaborative efforts our providers our continued about refining to our and our multiple several whose patient than We the us the progress areas. in QX, businesses inspired operations both are of our year-over-year our drove things environment. support teams team's an more to of result advancements driven by by During on clinical processes of excited headcount second providers dedication larger efforts this making top

visits demand clinic per X.X over increasing patient saw last compared and on X,XXX per additional strong year, day day each by we capitalized visits. As Sharon visits mentioned, with to

Additionally, call, first the access therapy patient of our our to success of per QX ]. year. all management day the model achievement implementing more physical our In rate cornerstone per visits last marks of new access full QX clinical provider capture continued shared the providers in our patient In across compared of last high-quality saw QX, quarter expanding of X.X FTE The that [ in clinics. our centralized referrals. I to saw improvements partner we remains

this quarter, As with of we be the we'll to year. we half more in the second discover process several new meet fact, have for remain and experience that on We being we better world-class this our will contributors model, exceptional onboarding was reducing an rate partner higher burden in clinicians. In optimize demand, this were enhancements the X.X% and and management provider, ways focused gain rate. patient increasing team launching creating function $XXX.XX year-over-year. our visit cycle improvements key per on revenue experience, in to Continuing revenue a administrative our the

express heartfelt work our want are As pride we technology and teams as a their we I've area, year. performance ample our this so make lives evolve, I dynamic thanks the emphasized commitment this my to advancement submissions me committed for we the RCM advance our continues for automation increasing unwavering at performance in patients collections back ATI on lower claim to of in time to and is to what stopped clinics to leveraging end, This front strive lives. efforts impact best-in-class my me And Their believe each to all our further there for clean closing, our cost. to tremendous a and function. In on on clinicians, patients extend tell room had in I excellence. and all and positive the their before, far the end they've our communities. I'm on visiting with impact empower

calls more As and forward our that excited this I'm in about always, lie opportunities the year. sharing look updates to later ahead

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

Thank for And you, thanks, Chris. the joining call today. everyone,

mentioned, our with detail. Starting guidance Chris quarter quarter in third results. results. As discuss I'll financial also talk I'll further second out financial about

over Net million, is that's XX.X% in revenue prior million. that revenue a the X.X% little $XXX net increase increase patient $XXX Our $XXX was and of million, Breaking second a a down year's quarter year-over-year. further. which was the revenue balance

was is which flat. essentially While other million, $XX revenue

Chris prior capacity year, the per during per quarter XX.X increased really to up of the the it our utilization. X.X As by quarter our million day mentioned, improve versus and continued clinic clinic second visits to reflects XX.X in efforts

to the Our rate per second rates heard, higher visit primary driven by with some during drivers The of adjustments rate favorable up rate key $XXX.XX were XXXX year. mix service from the costs prior increase in staff Chris or as a primarily quarter you year-over-year. of inflation. the about, related clinical payers, higher improvements wage operational $XXX.XX $XXX support of is of the quarter second favorable reimbursement certain RCM that in and quarter, more talked million, the was It's in as due changes. Salaries X.X% the and which as well and

XX% and $XX the that's a million costs to PT in primarily last year. per it clinic of in related but by X.X% of driven by was $XX,XXX, it of primarily Looking on the which was inflation, and labor quarter other XXXX of increased higher prior increase per QX same productivity due from clinics year, salaries in QX XXXX of year. Rent, of at the contract supplies, was costs year-over-year On services, $XX is of per cost partially $XX.XX, QX compared clinic and having million, from year-over-year prior is wage prior visit increase $XX.XX. in offset compared to QX by That an labor quarter, X.X spend the X.X% second partially from contract offset X.X which $XX,XXX labor in higher less were was a during these outside and year. which visit the in basis, to increase

strong in during of is quarter of for of year and continued which Provision X.X% compares revenue, X.X% PT doubtful $X PT accounts revenue which was collections. QX last reflects million, to the

to quarter, of impairment And had XXXX long-lived that, lower on reimbursements. We and year-over-year Moving certain prior down to during year to included talked notes, million, recorded contingent our due leases. onetime the those insurance bottom It common value about below-the-line XXXX. income a charge noncash XX.X% earnings in $X during prior quarter, the was and the QX loss increased earnings $XX higher didn't higher year, transaction recur million driven that legal to $XX that in of in million corporate the really addition on income by in on volume, a was which a in flowing resulting lien SG&A. is and based each decrease it's the decrease quarter $X operating shares $X prior and million. outstanding from of Chris quarter QX the income costs last from costs was is higher $XX And line. Notable was X up of of through during $XX that impairment XXXX. year, earlier year-over-year million analysis. Interest totaling $X.X $X a PIK at included come our fair a of to margin. lower the which XXXX, And Those when visit that a of of hedge higher X.X% capital from quarter in primarily through of higher which debt the loss million revenue year-over-year principal net $X.X along instruments XX.X% EBITDA $XX second QX million X.X% was million and are rate interest items asset the year-over-year quarter loss second increased our the decreased which million, adjusted lower million, over associated comparing was mark-to-market benefit was million, of compared to during rate and QX it. quarter compared offset the last the expense which the which also an is margin, to quarter to expense warrants to during as the And quarter $XX the the benefit. Income balances earnings from due in tax in year. Adjusted tax million mentioned, the due partially valuation in with a was EBITDA by year, and it's increase quarter end for second net our

use $X million to year. last $XX cash year-to-date compared Our was million approximately

to in break items driven compared operating $X lower to in within partially last million cash investing activities that used year. was the and draw revolver $X due primarily openings. million year. increase those and million in I prior receivable increase from the higher XXXX compared from higher $XX As is borrowings. delayed drawn cash a net loan, was down term net cash, decrease X million to accounts we primarily of on is in fewer incentives due The generated last further $XX X was year, And fully clinic then activities generated higher million used and compared was which January financing $XX $XX activities The are offset of used by to from million year-over-year in payout cash higher loss. Cash by revenue, million the $XX financing things: to

XX, which the equates margin. million, to million $XX June venture to anticipate cash over prior X% which guidance. the adjusted $XXX the QX, XXXX, of million. consisted about to our EBITDA like million. million QX share midpoint growth As was represents of QX to of year our the equivalents, a of range prior be joint now and I'd in The there We and The we in over approximate an range midpoint of accounts. And X% resides $XX XX% cash that to $X to of and range be growth in year liquidity approximately revenue in portion $XXX cash expect

guidance Our call employing market that volume grow seeing reflects over the to closing we're and back for now strategies the and clinic navigate Sharon operations. I'll to ultimately dynamics and the turn advanced the remarks. in clinic we're

Joe. you, Thank

and know to we see we're Q&A. have coming in stakeholders. people takes to for and our you call complete to operator I strategies our doing that momentum what our amongst our people That fruition. We're eager look help forward next to potential, showed continue business have progress benefit get pretty I to clear, it's to to ride progress can results live hand a and So lives. the have I'll there. I back full it and out and said, crowd to work to quarter, the sharing realize and open confident to remain are healthier advancing we lot the we stand the good the the QX our the it

of Tanquilut Your Jefferies. first question with Instructions] the line [Operator comes Brian from

it quarter. gaining pretty payers good, you're looks Congrats Maybe, obviously, I sounds about think on the with lines. some traction service as and like, Sharon, it growth, rate like here

how left really to is Just in remaining you are rates? rate levers to curious, the think sustain there you much drive this runway good And what do trajectory for growth?

joining Great you Thank question, for Brian. us.

tale X of a it's think I cities.

our rates. think payers, look some good responding we with I continue to a we certainly, story. are favorably have the of at work payers And they as

-- collection relates There picked our other cycle. the fruit think at as path collect, second to will the we to to and or piece we've a have decrease in is, I advancements that looking low-hanging revenue bad revenue cost while debt. continue our it to performance are continued overall refine cycle, our

On the what to all think with happens other are side see of looking it, we Medicare. I

And to a of for We out care. this of of payers. future CMS years the sort really it -- rationalize primary when year, commercial this the next but tone have we the get X-year plan is I of sets think sense many

I that's -- I'm So important very think a piece.

of set really think the the to Medicare side, we're some will offset government While the positive the cuts, continues tone. Medicare on be a MIPS us to for -- I

sense. as think margins, just rate done I is there, maybe Obviously, I about with then here. the And a you've makes well G&A is good still here but recruiting know as factor that tight right? there. a and job line That

How those So good was maybe just thinking going on mean, G&A the narrow I you are about And a further, quarter. to down remaining G&A how should forward? line. margin the be opportunity number the curious, too, about for just thinking here? really we

Brian, I it's think -- Joe.

stay expect you G&A relatively if on flat. G&A I would think line, think sticking the we I were to

activity, in we're holistic I margin, lives focused what so We're making relates for to maybe we when you'd that go and which the and best and up build now, the type the work, operations. more what better, trying way we We to P&L But their take see focus administrative on trying is changes that do they're getting the the right can more all so margins care to burden ultimately, be if able expect as be that time as if as to lives on clinicians the to on do. But business could then they substantial it up obviously, pretty the patients easy it consistent. And do think they non-clinic easier, patients could make make change. they're the future, infrastructure to I it patients, them still some of that clinic shouldn't make run if of lead have to really possible better to and we're an business, to doing. to their because that able well off they sure really

doing continue we're Yes. on levels. what And Brian, all we refine to

is ] best sale do we're of credit and as we our big make assets excellence work, leveraging Chris' [ expense how operational a our possible, including so And base. just part sure as

I work there's there. do to So more think

one then language And there's it. Joe, should in some in question, you rule? as maybe or that's assistance, think interpreting embedded proposed may. I Got if how we some rule, more I know PT the are proposed the about the know anything of language here I

Well, we of reimbursement now at have have on PTs. XX% right coming PTAs, in the we

move Some important commercial we care strategies payers be, model, had have they are of of along. our adopted an we've alterations well. to to but obviously to. make adopt continue something will that the and some as our need that part PTAs still as It's we

Chris, want anything do you add to to that?

be we're key we adopted. smart something think making PTs that sure as to be to the patient I we're the points. continues care continue leverage PTAs and in PTAs way to commercial monitoring I our them of model No, clinic about in a PTA kind to expect if each as environment versus And see a that right to team-based believe the hit that payer versus business. said, is mean then also for big continue to care. the helps And and end our has our optimize like Joe really part deploying to want directors we that where of Joe

We continue to and how we we care. schedule be more utilize the sophisticated on team-based how

question-and-answer to turn for Sharon This I call concludes the the Vitti will remarks. closing session.

time everyone, day. today. your earnings. our for a November you. And Thank forward our Everyone, Thanks, quarterly with look we'll in have great QX to discussion next

call. This We joining. for concludes conference today's you thank

may now your disconnect You lines.