Agiliti(AGTI) - 2022 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements (unaudited) The unaudited statements for Q2 2022 show increased revenue and net income but a decrease in cash and cash equivalents Consolidated Balance Sheets Consolidated Balance Sheet Summary (as of June 30, 2022 vs. December 31, 2021) | Balance Sheet Item | June 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :--- | :--- | :--- | | Total Assets | $2,439,337 | $2,515,747 | | Cash and cash equivalents | $16,524 | $74,325 | | Goodwill | $1,218,329 | $1,213,121 | | Total Liabilities | $1,510,627 | $1,619,675 | | Long-term debt, less current portion | $1,073,016 | $1,174,968 | | Total Equity | $928,710 | $896,072 | Consolidated Statements of Operations Statement of Operations Summary (in thousands) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $273,984 | $250,543 | $568,428 | $485,788 | | Gross margin | $98,165 | $99,108 | $221,792 | $200,430 | | Operating income | $16,044 | $18,052 | $53,533 | $50,151 | | Consolidated net income (loss) | $5,063 | ($5,171) | $24,983 | $4,412 | | Diluted income (loss) per share | $0.04 | ($0.04) | $0.18 | $0.04 | Consolidated Statements of Cash Flows Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $101,138 | $107,508 | | Net cash used in investing activities | ($36,961) | ($475,066) | | Net cash (used in) provided by financing activities | ($121,978) | $264,723 | | Net change in cash and cash equivalents | ($57,801) | ($102,835) | | Cash and cash equivalents at end of period | $16,524 | $103,670 | Condensed Notes to Consolidated Financial Statements Revenue by Service Solution (in thousands) | Service Solution | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Equipment Solutions | $106,852 | $72,140 | $228,707 | $154,611 | | Clinical Engineering | $104,412 | $101,141 | $207,211 | $176,247 | | Onsite Managed Services | $62,720 | $77,262 | $132,510 | $154,930 | | Total revenue | $273,984 | $250,543 | $568,428 | $485,788 | - In Q2 2022, the company completed several immaterial acquisitions of surgical equipment repair companies, following the 2021 acquisitions of Sizewise Rentals, LLC for ~$234.8 million and Northfield Medical, Inc. for ~$472.3 million[39][41] - During Q2 2022, the company borrowed $20.0 million under its Revolving Loan to prepay its First Lien Term Loan, contributing to a total prepayment of $119.1 million and a $1.4 million loss on extinguishment for the first half of 2022[232] - For the six months ended June 30, 2022, approximately 10.9% of total revenue was related to contracts with U.S. government health agencies, with a new 12-month agreement initiated on February 28, 2022[91] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Revenue grew due to acquisitions, but gross margin declined from contract renewals and lower equipment utilization - The company serves over 9,000 healthcare providers, government entities, and medical device manufacturers through its On-Site Managed Services, Clinical Engineering, and Equipment Solutions lines[99][100][101] Revenue Change by Service (Q2 2022 vs Q2 2021) | Service Solution | Q2 2022 Revenue (in thousands) | Q2 2021 Revenue (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Equipment Solutions | $106,852 | $72,140 | 48.1% | | Clinical Engineering | $104,412 | $101,141 | 3.2% | | Onsite Managed Services | $62,720 | $77,262 | (18.8)% | | Total revenue | $273,984 | $250,543 | 9.4% | - Gross margin for Q2 2022 was $98.2 million (35.8% of revenue), a decrease from $99.1 million (39.6% of revenue) in Q2 2021, driven by a federal contract renewal and lower equipment use[114] Reconciliation to Adjusted EBITDA (Six Months Ended June 30, in thousands) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net income attributable to Agiliti, Inc. | $24,890 | $4,355 | | Interest expense | $21,925 | $29,733 | | Income tax expense | $5,207 | $5,890 | | Depreciation and amortization | $91,542 | $91,814 | | EBITDA | $143,564 | $131,792 | | Adjustments (Share-based comp, transaction costs, etc.) | $15,145 | $27,989 | | Adjusted EBITDA | $158,709 | $163,897 | - Net cash from operating activities was $101.1 million for the first six months of 2022, a slight decrease from $107.5 million in the prior year, impacted by the timing of accounts receivable collections[136] Item 3. Quantitative and Qualitative Disclosures About Market Risk Key market risks include interest rates on variable-rate debt, fuel costs, and pension plan asset volatility - As of June 30, 2022, the company held approximately $559.2 million in variable-rate debt, where a 1.0 percentage point rate change would alter annual interest expense by about $5.6 million[144] - The company is exposed to fuel cost volatility; a hypothetical 10% increase in gasoline prices during the first half of 2022 would have raised fuel costs by approximately $0.5 million[145] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes in the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2022[147] - No material changes to internal control over financial reporting occurred during the most recently completed fiscal quarter[147] PART II - OTHER INFORMATION Item 1. Legal Proceedings Ongoing legal claims are not expected to have a material adverse effect on the company's financial results - The company is subject to liability claims in the ordinary course of business, but management believes any resolution would not have a material adverse effect on its financial position or operations[148] Item 1A. Risk Factors No material changes were reported to the risk factors disclosed in the 2021 Annual Report on Form 10-K - No material changes have been made to the risk factors disclosed in the company's 2021 Form 10-K Report[149] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - The company reports no unregistered sales of equity securities for the period[150] Item 6. Exhibits This section lists filed exhibits, including Sarbanes-Oxley certifications and Inline XBRL financial data - The exhibits filed with this report include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, along with Inline XBRL documents[152][153][154]