Agiliti(AGTI) - 2021 Q4 - Annual Report

PART I Item 1: Business Agiliti provides medical equipment management and service solutions to the U.S. healthcare industry, driven by market trends and a strategy of expansion and M&A - Agiliti provides essential medical equipment management solutions to the U.S. healthcare industry, enhancing safety and efficiency while reducing costs and waste[12][13] - The company serves over 9,000 customers including hospitals and government agencies via a nationwide network of over 150 service centers and seven Centers of Excellence[15] Revenue Breakdown by Service Line (FY 2021 & 2020) | Service Line | FY 2021 Revenue ($M) | % of Total | FY 2020 Revenue ($M) | % of Total | | :--- | :--- | :--- | :--- | :--- | | Clinical Engineering Services | $384.1M | 37% | $256.9M | 33% | | Equipment Solutions | $352.1M | 34% | $296.3M | 38% | | On-Site Managed Services | $302.4M | 29% | $220.2M | 29% | - Agiliti's growth strategy involves expanding existing customer share, securing new outsourcing contracts, and pursuing accretive M&A, having integrated nine acquisitions from 2015-2021[54][57] - In 2021, Agiliti completed two major acquisitions: Northfield Medical for $475.0 million and Sizewise Rentals for $230 million[58][59] Item 1A: Risk Factors Agiliti faces material risks from COVID-19, key customer contract reliance, substantial debt, and controlling stockholder influence - A significant risk is the potential inability to maintain contracts, especially with key customers like the U.S. Department of Health and Human Services (HHS), which accounted for approximately 17% of total revenue in 2021[117][166][489] - The company has substantial indebtedness of approximately $1.2 billion under its First Lien Term Loan Facility as of December 31, 2021, requiring significant cash flow for debt service[181] - The COVID-19 pandemic poses ongoing risks, including potential supply chain disruptions, inflation, a tightening labor market, and demand uncertainty[108][109] - As a controlled company, principal stockholder THL exerts significant influence over corporate decisions, potentially leading to conflicts of interest with other shareholders[186][190] - The company faces risks integrating recent acquisitions like Northfield Medical and Sizewise, potentially hindering the realization of anticipated benefits or synergies[140][141] Item 2: Properties Agiliti operates from leased facilities, including its Minneapolis headquarters, with a nationwide network of service centers and manufacturing facilities - The company's corporate headquarters is a 55,197 square foot leased facility in Minneapolis, Minnesota[211][591] - Agiliti's nationwide network comprises approximately 150 leased service centers, seven Centers of Excellence, and four manufacturing facilities[211] Item 3: Legal Proceedings Agiliti is subject to ordinary course liability claims, with management assessing current litigation as not materially adverse - Agiliti is subject to ordinary course liability claims related to employees and equipment, with management deeming the likelihood of a materially adverse outcome from outstanding litigation as remote[212][706] PART II Item 5: Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Agiliti's common stock began trading on the NYSE under "AGTI" on April 23, 2021, with no plans for future dividend payments - The company's common stock has been listed on the NYSE under the symbol "AGTI" since its IPO on April 23, 2021[214] - Agiliti has not historically paid dividends and does not intend to pay any in the future, with any future determination at the Board of Directors' discretion[215] Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations For FY2021, Agiliti reported $1.04 billion revenue, a 34.3% increase, with $24.2 million net income and $330.7 million Adjusted EBITDA Consolidated Statement of Operations (2021 vs. 2020) | Metric (in thousands) | 2021 (Successor, $ thousands) | 2020 (Successor, $ thousands) | Change ($ thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $1,038,690 | $773,312 | $265,378 | 34.3% | | Gross margin | $424,617 | $286,347 | $138,270 | 48.3% | | Operating income | $104,230 | $36,058 | $68,172 | 189.1% | | Interest expense | $53,514 | $61,530 | ($8,016) | (13.0%) | | Consolidated net income (loss) | $24,167 | ($22,238) | $56,521 | N/M | Revenue by Service Solution (2021 vs. 2020) | Service Line (in thousands) | 2021 (Successor, $ thousands) | 2020 (Successor, $ thousands) | Change ($ thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Equipment Solutions | $352,094 | $296,267 | $55,827 | 18.8% | | Clinical Engineering | $384,147 | $256,874 | $127,273 | 49.5% | | Onsite Managed Services | $302,449 | $220,171 | $82,278 | 37.4% | Adjusted EBITDA Reconciliation (2021 vs. 2020) | Metric (in thousands) | 2021 (Successor, $ thousands) | 2020 (Successor, $ thousands) | | :--- | :--- | :--- | | Net income (loss) | $24,006 | ($22,478) | | Interest expense | $53,514 | $61,530 | | Income tax expense (benefit) | $16,433 | ($3,234) | | Depreciation and amortization | $187,963 | $169,241 | | EBITDA | $281,916 | $205,059 | | Non-cash & Non-recurring items | $48,766 | $29,142 | | Adjusted EBITDA | $330,682 | $234,201 | - Net cash provided by operating activities increased to $210.3 million in 2021 from $137.9 million in 2020, while net cash used in investing activities significantly increased to $734.1 million due to acquisitions[262][263] Item 7A: Quantitative and Qualitative Disclosures about Market Risk Agiliti is exposed to market risks from interest rate fluctuations, fuel costs, and pension plan asset valuation - The company has significant interest rate risk exposure, with $683.1 million of its $1.21 billion total debt bearing variable rates, where a 1.0% change would alter annual interest expense by approximately $6.8 million[288] - Agiliti is exposed to fuel cost volatility for its vehicle fleet, where a 10% change in gasoline prices would impact annual fuel costs by approximately $0.6 million[289] Item 8: Consolidated Financial Statements and Supplementary Data This section presents Agiliti's audited consolidated financial statements and unaudited supplementary quarterly financial data for 2021 and 2020 Selected Quarterly Financial Data for 2021 (Unaudited, in thousands) | Quarter Ended | Total Revenue ($ thousands) | Gross Margin ($ thousands) | Consolidated Net Income (Loss) ($ thousands) | | :--- | :--- | :--- | :--- | | March 31 | $235,245 | $101,323 | $9,583 | | June 30 | $250,543 | $99,108 | ($5,171) | | September 30 | $262,424 | $103,434 | $9,728 | | December 31 | $290,478 | $120,752 | $10,027 | Item 9A: Controls and Procedures Management concluded Agiliti's disclosure controls and procedures were effective as of December 31, 2021, leveraging the SEC transition period for internal control reporting - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[296] - The company is utilizing the transition period for newly public companies, thus not including a management report or auditor attestation on internal control over financial reporting in this 10-K[297] PART III Item 10: Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the forthcoming Definitive Proxy Statement - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the forthcoming Definitive Proxy Statement[298] Item 11: Executive Compensation Information regarding executive compensation is incorporated by reference from the company's Definitive Proxy Statement - Information regarding executive compensation is incorporated by reference from the forthcoming Definitive Proxy Statement[299] Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership of beneficial owners and management is incorporated by reference from the company's Definitive Proxy Statement - Information regarding security ownership is incorporated by reference from the forthcoming Definitive Proxy Statement[299] Item 13: Certain Relationships and Related Transactions, and Director Independence Information on certain relationships, related transactions, and director independence is incorporated by reference from the company's Definitive Proxy Statement - Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the forthcoming Definitive Proxy Statement[300] Item 14: Principal Accounting Fees and Services Information on principal accounting fees and services is incorporated by reference from the company's Definitive Proxy Statement - Information regarding principal accounting fees and services is incorporated by reference from the forthcoming Definitive Proxy Statement[300] PART IV Item 15: Exhibits and Financial Statement Schedules This section lists the consolidated financial statements, financial statement schedules, and exhibits filed as part of the Annual Report on Form 10-K - This item lists all documents filed as part of the Form 10-K, including financial statements and exhibits such as credit agreements and material contracts[302][305] Consolidated Financial Statements Notes to Consolidated Financial Statements The notes provide detailed financial statement information, including accounting policies, business acquisitions, debt structure, and revenue concentration - The company completed the acquisition of Sizewise for approximately $234.8 million on October 1, 2021, and Northfield for approximately $472.3 million on March 19, 2021[379][382] - Following its IPO in April 2021, the company used proceeds to repay its $240 million Second Lien Term Loan, resulting in a loss on extinguishment of debt of $9.8 million[416] - A significant revenue concentration exists, with approximately 17% of total revenue for 2021 related to contracts with the U.S. Department of Health and Human Services (HHS) and its ASPR office[489] - Subsequent to year-end, on February 28, 2022, the company entered into a new 12-month sole source agreement with HHS/ASPR for ventilator and PAPR systems management[493] Consolidated Balance Sheet Data (as of Dec 31) | (in thousands) | 2021 ($ thousands) | 2020 ($ thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $74,325 | $206,505 | | Total current assets | $357,884 | $402,367 | | Goodwill | $1,213,121 | $817,113 | | Total assets | $2,515,747 | $1,903,356 | | Liabilities & Equity | | | | Total current liabilities | $208,530 | $159,531 | | Long-term debt, less current portion | $1,174,968 | $1,145,055 | | Total liabilities | $1,619,675 | $1,461,411 | | Total equity | $896,072 | $441,945 |