ATI Physical Therapy(US:ATIP)2022-11-07 16:00Company Operations - As of September 30, 2022, the company operates 929 owned clinics and 20 clinics under management service agreements across 25 states[203]. - The number of clinics owned at the end of Q3 2022 was 929, an increase from 900 at the end of Q3 2021[238]. Financial Performance - Net patient revenue for Q3 2022 was $142.3 million, a slight increase of 0.3% from $141.9 million in Q3 2021[245]. - Total patient visits increased by approximately 2.4%, reaching 1,375,567 visits in Q3 2022 compared to 1,343,799 visits in Q3 2021[246]. - Net patient revenue per visit decreased by $2.10, or 2.0%, to $103.46 in Q3 2022 from $105.56 in Q3 2021[246]. - Other revenue for Q3 2022 was $14.5 million, down 15.6% from $17.2 million in Q3 2021, primarily due to the divestiture of the Home Health service line[247]. - Net patient revenue for the nine months ended September 30, 2022 was $429.7 million, an increase of 2.1% from $420.8 million in the same period of 2021[262]. - Other revenue for the nine months ended September 30, 2022 was $44.2 million, a decrease of 13.9% from $51.3 million in the same period of 2021[264]. - Operating loss for Q3 2022 was $(119.7) million, an improvement from $(516.9) million in Q3 2021[243]. - Net loss for Q3 2022 was $(116.7) million, compared to $(326.8) million in Q3 2021, reflecting a significant reduction in losses[243]. - Net loss for the nine months ended September 30, 2022, was $390.6 million, a decrease of approximately $393.1 million compared to a net loss of $783.7 million for the same period in 2021[275]. Expenses and Costs - Salaries and related costs increased by $3.5 million, or 4.0%, to $90.3 million in Q3 2022, representing 57.6% of net operating revenue[248]. - Rent, clinic supplies, contract labor, and other costs for Q3 2022 were $51.4 million, an increase of 12.4% from $45.8 million in Q3 2021, representing 32.8% of net operating revenue[249]. - Selling, general, and administrative expenses for Q3 2022 were $25.3 million, down 18.0% from $30.8 million in Q3 2021, accounting for 16.1% of net operating revenue[251]. - Interest expense, net for Q3 2022 was $11.8 million, an increase of 59.5% from $7.4 million in Q3 2021[254]. - Salaries and related costs for the nine months ended September 30, 2022 were $267.3 million, up 7.6% from $248.4 million in the same period of 2021[265]. - Interest expense, net decreased to $31.8 million for the nine months ended September 30, 2022, from $39.1 million in 2021, representing a decrease of 18.6%[272]. Impairment Charges - The company recorded non-cash impairment charges of approximately $66.4 million related to goodwill and $40.0 million related to the trade name indefinite-lived intangible asset during the quarter ended September 30, 2022[216]. - Goodwill and intangible asset impairment charges for Q3 2022 were $106.7 million, significantly lower than $509.0 million in Q3 2021[252]. - Goodwill and intangible asset impairment charges for the nine months ended September 30, 2022 were $390.2 million, down from $962.3 million in the same period of 2021[269]. Cash Flow and Liquidity - As of September 30, 2022, the company had $48.6 million in cash and cash equivalents and $50.0 million available under its revolving credit facility[283]. - The company had zero MAAPP funds as of September 30, 2022, down from $12.3 million at the end of 2021[285]. - For the nine months ended September 30, 2022, the company reported cash flow used in operating activities of $59.1 million, an operating loss of $435.6 million, and a net loss of $390.6 million[290]. - The company experienced a net decrease in cash and cash equivalents of $47,000 for the nine months ended September 30, 2022, compared to a decrease of $76.0 million in the same period of 2021[313]. - Cash and cash equivalents at the end of the period were $48.6 million as of September 30, 2022, down from $66.1 million at the end of September 2021[313]. - The company added approximately $77.3 million of cash to its balance sheet as a result of the 2022 Debt Refinancing and the Preferred Stock Financing[311]. Management and Governance - The company appointed Sharon Vitti as CEO on April 28, 2022, bringing 30 years of healthcare experience to the role[207]. - Management concluded that the condensed consolidated financial statements present fairly the company's financial position in conformity with U.S. GAAP despite the material weaknesses[338]. - The company is in the process of implementing its remediation plan and will monitor its effectiveness[340]. - The remediation plan includes revising the tax staffing model, refining the scope of external tax advisors, and enhancing controls related to income tax provision calculations[339]. Market Conditions - The company faces a tight labor market for physical therapy providers, contributing to hiring competition and wage inflation in the industry[212]. - The U.S. population aged 65 and older is expected to grow by 30% from 2020 to 2030, expanding the company's market opportunity[225]. Legal and Compliance - The outcome of any legal proceedings cannot be predicted with certainty and could materially affect future results of operations[344]. - The company does not expect its disclosure controls and procedures to prevent all errors and instances of fraud[336]. - As of September 30, 2022, the company reported material weaknesses in internal control over financial reporting, specifically related to the income tax provision[337]. Debt and Financing - The Senior Secured Term Loan, amounting to $500.9 million, bears an interest rate of 10.8% as of September 30, 2022, with an effective interest rate of 11.4%[297]. - The company issued 165,000 shares of non-convertible preferred stock with an initial stated value of $1,000 per share, totaling $165.0 million, along with warrants to purchase common stock[303]. - The Series A Senior Preferred Stock carries an initial dividend rate of 12.0% per annum, payable quarterly in arrears, with paid-in-kind dividends of $5.3 million and $12.3 million for the three and nine months ended September 30, 2022, respectively[304]. - The company must maintain a minimum liquidity of $30.0 million through the first quarter of 2024, with a Secured Net Leverage Ratio not to exceed 7.00:1.00 starting in the second quarter of 2024[300]. - The company is at risk of violating its minimum liquidity covenant if business results do not improve in the next twelve months[291]. - The company may need to consider alternatives such as amending the liquidity covenant or raising funds from other sources if business results do not improve[292].