ATI Physical Therapy(ATIP) - 2024 Q2 - Quarterly Results

Financial & Operational Highlights Q2 2024 Performance Summary ATI Physical Therapy reported strong Q2 2024 growth, with net revenue up 9.2% to $188.1 million and Adjusted EBITDA increasing 77.5% to $16.6 million - Demand for services remains strong, with daily patient visits increasing by over 1,500 compared to the prior year, leading to year-over-year business growth[1] - The company received an exceptional MIPS (Merit-based Incentive Payment System) rating from CMS for the 5th consecutive year, recognizing the high quality of care provided[1] Q2 2024 Key Financial Results ($) | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $188.1 million | $172.3 million | +9.2% | | Net Loss | $2.6 million | $21.7 million | +88.0% | | Adjusted EBITDA | $16.6 million | $9.3 million | +77.5% | | Adjusted EBITDA Margin | 8.8% | 5.4% | +3.4pp | Key Operating Metrics Q2 2024 operational performance improved with Visits per Day (VPD) up 6.4% and Rate per Visit (RPV) growing 3.4%, alongside ongoing footprint optimization to 878 clinics Q2 2024 Key Operating Metrics (YoY) | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Visits per Day (VPD) | 24,921 | 23,412 | +6.4% | | Rate per Visit (RPV) ($) | 108.32 | 104.74 | +3.4% | | VPD per Clinic | 28.4 | 25.7 | +10.5% | | Ending Clinic Count | 878 | 911 | -3.6% | - The increase in Visits per Day was driven by both a higher number of clinical FTEs and higher productivity per clinical FTE (9.6 VPD vs 9.5 in Q2 2023)[1][3] - During the quarter, the company closed 2 clinics and divested 4 clinics as part of its ongoing footprint optimization initiative[9] Q3 2024 Guidance ATI projects Q3 2024 revenue between $180 million and $190 million and Adjusted EBITDA between $9 million and $14 million, anticipating continued growth Q3 2024 Guidance ($ millions) | Metric | Guidance Range ($) | YoY Growth (Approx.) | | :--- | :--- | :--- | | Net Revenue | $180 million - $190 million | 1% - 7% | | Adjusted EBITDA | $9 million - $14 million | N/A | - The company anticipates continued growth in patient visits through 2024 as it executes on its commercial, people, and operations strategies[10] Detailed Financial Results (Q2 2024) Statement of Operations Analysis Q2 2024 net revenue rose 9.2% to $188.1 million, driven by patient revenue and a 36.9% reduction in SG&A, shifting from a $12.4 million operating loss to a $6.6 million operating income, significantly narrowing net loss Q2 2024 Statement of Operations Highlights ($ in thousands) | Line Item | Q2 2024 ($) | Q2 2023 ($) | YoY Change | | :--- | :--- | :--- | :--- | | Net Revenue | 188,112 | 172,337 | +9.2% | | Net Patient Revenue | 172,755 | 156,938 | +10.1% | | Total Cost of Services | 158,144 | 148,124 | +6.8% | | Salaries and related costs | 102,541 | 95,327 | +7.6% | | SG&A Expenses | 23,082 | 36,573 | -36.9% | | Operating Income (Loss) | 6,626 | (12,360) | N/A | | Net Loss | (2,552) | (21,749) | +88.3% | | Loss per Share (Diluted) | (2.43) | (17.74) | +86.3% | - The 7.6% increase in salaries and related costs was primarily due to added clinicians and support staff, as well as wage inflation[3] - The 36.9% decrease in SG&A expenses was mainly driven by lower transaction costs, higher legal cost insurance reimbursements, and lower corporate insurance costs[4] Balance Sheet and Liquidity As of June 30, 2024, ATI's liquidity was $33.0 million, with total assets at $990.5 million and liabilities at $880.2 million, reflecting a balance sheet with significant goodwill - Total liquidity as of June 30, 2024, was $33.0 million, consisting of cash and cash equivalents[9] Key Balance Sheet Items ($ in thousands) | Account | June 30, 2024 ($) | Dec 31, 2023 ($) | | :--- | :--- | :--- | | Total Current Assets | 176,878 | 168,638 | | Cash and cash equivalents | 32,963 | 36,802 | | Total Assets | 990,536 | 1,003,281 | | Goodwill, net | 289,650 | 289,650 | | Total Liabilities | 880,151 | 878,743 | | Long-term debt, net | 441,177 | 433,578 | | Total Stockholders' Equity | (121,455) | (95,855) | Cash Flow Analysis For H1 2024, net cash used in operations increased to $27.9 million, investing activities decreased to $5.2 million, and financing activities provided $29.2 million, primarily from a $25.0 million 2L note draw Six Months Ended June 30 Cash Flow Summary ($ in thousands) | Activity | 2024 ($) | 2023 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | (27,852) | (5,319) | | Net cash used in investing activities | (5,152) | (10,125) | | Net cash provided by (used in) financing activities | 29,165 | (30,016) | | Net decrease in cash | (3,839) | (45,460) | - The decrease in cash used for investing was primarily due to no new clinic openings year-to-date in 2024, compared to 10 in the first six months of 2023[8] - Financing activities in YTD 2024 included a $25.0 million draw on 2L notes and $6.2 million in net revolver proceeds[8][31] Non-GAAP Measures & Reconciliations Adjusted EBITDA Performance Q2 2024 Adjusted EBITDA increased 77.5% to $16.6 million, with margin expanding to 8.8%, driven by higher revenue and cost management, after key adjustments from net loss Adjusted EBITDA Reconciliation Summary - Q2 2024 vs Q2 2023 ($ in thousands) | Line Item | Q2 2024 ($) | Q2 2023 ($) | | :--- | :--- | :--- | | Net Loss | (2,552) | (21,749) | | Interest expense, net | 14,896 | 16,682 | | Depreciation & amortization | 8,294 | 9,211 | | Change in fair value of 2L Notes | (5,618) | (7,010) | | Share-based compensation | 1,972 | 2,755 | | Other Adjustments | (143) | 11,161 | | Adjusted EBITDA | 16,579 | 9,338 | - The company uses non-GAAP measures like Adjusted EBITDA to assist investors in comparing operating performance across periods by excluding items not indicative of core performance, such as fair value changes and transaction costs[20][21] Supplemental Information Risk Factors & Forward-Looking Statements The report highlights forward-looking statements and significant risks, including liquidity concerns raising substantial doubt about the company's going concern ability, payor dependence, and compliance with debt covenants - The company's liquidity position raises substantial doubt about its ability to continue as a going concern[14] - Key risks highlighted include: - Dependence on governmental and third-party payors for reimbursement - Inability to compete effectively and retain skilled physical therapists - Compliance with financial covenants in the credit agreement - Risks associated with public health crises and their lingering effects[14][15] Company Overview ATI Physical Therapy is a leading national outpatient physical therapy provider, operating approximately 900 locations across 24 states with standardized clinical guidelines and a virtual platform - ATI operates approximately 900 locations across 24 states[12] - The company operates the largest single-branded platform in its sector, supporting standardized clinical guidelines and leveraging outcomes from over 3 million unique patient cases[12]