Q3 2023 ATI Physical Therapy Inc Earnings Call
Okay.
Speaker 1: Good afternoon and welcome to API physical therapy, third quarter, twenty, twenty three earnings conference call and webcast. All participants have been placed in the listen only mode after today's presentation. There will be an opportunity to ask questions to ask a question. You can press star one on your telephone keypad. Please note this event is being recorded.
Good afternoon, and welcome to ATI physical therapy third quarter 2023 earnings conference call and webcast. All participants have been placed in a listen only mode. After today's presentation. There will be an opportunity to ask questions to ask a question you can press star one on your telephone keypad. Please note. This event is being.
Recorded.
Speaker 1: On the call today is Sharon Vitti, Chief Executive Officer, Emily Tanze, Chief People Officer, Joseph Jordan, Chief Financial Officer, and Joanne Fong, Senior Vice President, Treasurer, and Head of Investor Relations. I'll now turn it.
On the call today are Sharon Beattie, Chief Executive Officer, Emily Tansey, Chief People Officer, Joseph Jordan, Chief Financial Officer, and Joanne song Senior Vice President Treasurer, and head of Investor Relations.
I'll turn the call over to Ms. Wang.
Speaker 2: Thank you Lisa. Good afternoon everyone. Thank you for joining us today. To cover, we would like to remind you of certain circumstances made during this call before looking statements. There are subjects of various risks and uncertainties and assess their current expectations based on beliefs, assumptions, and information. It's certainly available to us. Although we believe that the expectations are reasonable, we under-cognizational advice and statements and some of the changes that occur after this call.
Thank you Lisa good afternoon, everyone. Thank you for joining us today.
So here, we would like to remind you of citizens of statements made during this call will be forward looking statements are subject to various risks uncertainties and assess their current expectations based on beliefs assumptions and information.
Only available to us, although we believe yourself expectations are reasonable we undertake no obligation to revise any statements to reflect changes that occur after this call.
Speaker 2: Descriptions of some of the factors that cause actual results of different material needs from these forward-looking statements can be found in the Risk Factors section of the company's filing for the Securities and Exchange Commission. In addition, please note that the company will be discussing certain non-GAAP financial measures that we believe are important in evaluating performance.
Descriptions of some of the factors that cause actual results to differ materially from these forward looking statements.
And the risk factors section of the company's filings with Securities and Exchange Commission.
In addition, please note that the company will be discussing certain non-GAAP financial measures that we believe are important in evaluating performance.
Speaker 3: Details on the relationship between these non-GAAP measures for the most comparable GAAP measures and reconciliation of historical non-GAAP financial measures can be found on the earnings press release that's posted on the ATI's website and filed by SEC. And with that, I'd like to turn the call over to Sharon. Thank you, Joanne. Welcome, everyone, to the ATI Q3 2023 earnings call.
Details on a relationship between these non-GAAP measures to the most comparable GAAP measures a reconciliation of historical non-GAAP financial measures can be found in the earnings press release that is posted on <unk> website and filed the S. T C L.
And with that I'd like to turn the call over to Sharon. Thank.
Thank you Joe and welcome everyone to the Hei Q3 2023 earnings call.
Speaker 3: I wanted to let folks know that in addition to the ELT members, Joanne mentioned, we also have Chris Cox, our COO on the call. Scott Gregerson, our Chief Growth Officer on the call, Gus Oaks, our Chief Information Officer, and Eric Kent, our Chief Legal Officer. And they'll be available to participate in the Q&A.
I wanted to let folks know that in addition to the ELT members. Joanne mentioned, we also have Chris Cox, our CFO on the call.
Scott Gregersen, our our chief growth officer on the call Gus Oaks, our Chief Information Officer, and Eric Katz, Our Chief legal officer, and they'll be available to participate in the Q&A.
Speaker 3: So earlier today, we reported our third quarter 2023 results and delivered strong people operating and financial gains in the quarter. We have seen continued advancement in many areas within the organization driven by our strong teamwork across the national platform.
So earlier today, we reported our third quarter 2023 results.
We delivered strong people operating and financial gains in the quarter.
We have seen continued advancement in many areas within the ATI organization, driven by our strong teamwork across the national platform.
Speaker 3: and the continued passion around our mission takes me and access to care and help people live their healthiest life.
And the continued passion around our mission to expand access to care and help people live their healthiest life.
Speaker 3: So I'm going to go through some highlights of the third quarter, and I'll start with growth.
So maybe go through some highlights of the third quarter and I'll start with growth.
Speaker 3: The demand for ATI services remains strong and was escalated in Q3.
Demand for ATI services remained strong and was escalated in Q3.
Speaker 3: Our providers are committed to ensuring all new patients get started with their care at ATI as soon as possible. As we know, that is the best for the patients and their clinical outcomes.
Our providers are committed to ensuring all new patients get started with their care at ATI as soon as possible as we know that is the best for the patients and their clinical outcomes.
Speaker 3: So as our referrals convert to visits, it creates a vibrant and busy atmosphere that is palpable to our patients and our providers.
So our referrals convert to visit it creates a vibrant and busy atmosphere that is palpable to our patients and our providers.
Speaker 3: In particular, in the quarter, our sales team outperformed the expectations in generating physician referrals to our clinics. Q3 visits per day were the highest since the start of COVID. In September 2023, our referrals per day were greater than 3,000, which is an all-time high for us.
In particular in the quarter, our sales team outperformed our expectations and generating physician referrals to our clinics Q3 visits per day were the highest since the start of Covid.
In September 2023.
Referrals per day were greater than 3000, which is an all time high for us.
Speaker 3: Our visits per day per clinic was also the highest since the start of.
Our visits per day per clinic was also the highest since the start of Covid.
Speaker 3: Contributing to that favorable performance was the meaningful progress we've made in the quarter optimizing our clinical footprint.
Contributing to that favorable performance was the meaningful progress we've made in the quarter optimizing our clinical our clinic footprint. We closed 14 underperforming clinics in the quarter, bringing the year to date total of closures to 36.
Speaker 3: We closed 14 underperforming clinics in the quarter, bringing the year-to-date total of closures to 36.
Speaker 3: We also selectively open three de novo clinics in the quarter, bringing the year-to-date total of openings to 13.
We also selectively opened three de novo clinics in the quarter, bringing the year to date total of openings to 13.
Speaker 3: Lastly, we've completed a strategic review of the market and our business capabilities.
Lastly, we have completed a strategic review of the market and our business capabilities.
Speaker 3: Under Scott Gregerson's leadership, we've identified several opportunities for growth beyond clinic footprint expansion. We look forward to discussing the areas of growth that position ATI to lead in the musculoskeletal sector as we make progress in the quarters ahead.
Under Scott Gregor since leadership, we've identified several opportunities for growth beyond clinic footprint.
Spansion.
We look forward to discussing the areas of growth that position ATI to lead in the musculoskeletal sector as we make progress in the quarters ahead.
Speaker 3: It's not a key area for us. People are what differentiate us from the competition.
A key area for us our people are what differentiate us from the competition.
Speaker 3: Emily Tansy, who you'll hear from later, has done an outstanding job since joining the company just over a year ago.
Emily Kenzie, who you'll hear from later has done an outstanding job since joining the company just over a year ago.
Speaker 3: While her accomplishments are numerous, I want to call out two key areas.
While her accomplishments are numerous I want to call out two key areas.
Speaker 3: Under Emily's leadership, she's reorganized the talent acquisition team and positioned them as strategic business partners to our field leaders.
Under <unk> leadership, she has reorganized the talent acquisition team and position them as strategic business partners to our field leaders.
Speaker 3: She has also reestablished ATI's culture as people focused and is extending our refreshed ATI brand to the candidate pools.
Yeah.
She is also reestablished hei's culture as people focused and is extending our refreshed hei brands to the candidate pool.
Speaker 3: As our people, teams, and programs gain traction, our base of clinical FTEs is growing and increasing our ability to provide more patients with access to high quality care.
As our people teams and programs gain traction our base of clinical Ftes is growing and increasing our ability to provide more patients with access to high quality care.
Speaker 3: Growing clinician headcount is an important unlock for our business.
Growing clinician head count is an important unlock for our business.
Speaker 3: In the third quarter, the clinician headcount increased by an astounding 134 people, an all-time high growth number.
In the third quarter of the clinician head count increased by an astounding 134 people and all time high growth number.
Speaker 3: This was achieved through a combination of targeted hiring and wrong retention. Emily will go into details on our approach to provider access.
This was achieved through a combination of targeted hiring and strong retention.
He will go into details on our approach.
Provider acquisition and retention later in the call.
Speaker 3: From an operations lens, we're continuously working to improve operations to positively impact the patient experience, the patient journey, the clinician experience and our financial.
From an operations lens, we are continuously working to improve operations to positively impact the patient experience.
The patient journey clinician experience and our financials.
Speaker 3: In this quarter, the team notably drove rate per visit improvements and clinician productivity to favorably impact Q3 results.
In this quarter the team, notably drove rate per visit improvements and clinician productivity to favorably impact Q3 result.
Speaker 3: So as we dig into rate, our rate per visit in Q3 was $109.90.
So as we dig into rate a rate per visit in Q3 was $109 90.
Speaker 3: That increased by more than $5 from the second quarter.
That increased by more than $5 from the second quarter.
Speaker 3: Primary drivers include increases in contracted rates in operational improvements in revenue cycle management, both driving stronger revenue per visit in current and prior periods.
Primary drivers include increases in contracted rates and operational improvements in revenue cycle management.
Both driving stronger revenue per visit in current and prior periods.
Speaker 3: While the improvement related to prior periods is one time, the enhancements in revenue cycle management and contract rates should carry forward into 2024.
While the improvement related to prior periods is onetime the enhancements and revenue cycle management and contract rates should carry forward into 2024.
Speaking of rates.
Speaker 3: Medicare fee schedule final rules were just published.
The Medicare fee schedule final rules were just published.
Speaker 3: We're disappointed in the continuing Medicare fee schedule rate cuts for physical therapy.
We're disappointed in the continuing Medicare fee schedule rate cuts for physical therapy.
Speaker 3: It makes no sense, given the value and effectiveness of high-quality PTA to our country's physical health.
It makes no sense, given the value and effectiveness of high quality PT to our country's physical health.
Yeah.
Speaker 3: There is a bright spot on the CMS front for ATI. This is the fourth year that ATI has received an exceptional provider rating from the MIPS program, which is the merit-based incentive payment system, which is one of the CMS quality payment programs.
There is a bright spot on the CMS front for ATI. This is the fourth year that ATI Hei has received an exceptional provider ratings from the Mips program, which is the merit based incentive payment system, which is one of the CMS quality payment programs.
Speaker 3: The exceptional provider rating earned by our clinical team for high quality performance will again qualify the provider for a bonus percentage on top of the Medicare reimbursement rate and will be helpful to our 2024 financials once finalized.
The exceptional provider rating earned by our clinical team for high quality performance will again qualify the provider for a bonus percentage on top of the Medicare reimbursement rate and will be helpful to our 2020 for financials once finalized.
Speaker 3: Onto provider productivity. Our providers continue to perform at a high level sequential quarter over quarter.
On to provider productivity, our providers continue to perform at a high level of sequential quarter over quarter.
Speaker 3: While Q3 showed up with a modest point two visits per day per clinical FTE decline from Q2 to Q3.
While Q3 showed up with a modest 0.2 visits per day per clinical FTE decline from Q2 to Q3.
Speaker 3: Each established provider on average had slightly higher visits per day, quarter over quarter, on those days when in the clinic, basically accounting for higher vacation days taken during the summer months and the ramp time for all our new providers.
Each established provider on average had slightly higher visits per day quarter over quarter on those days when in the clinic basically accounting for higher vacation days taken during the summer months and the ramp time for all our new providers.
Speaker 3: Financials show consistent progress in 2023 revenue increased every quarter from the prior sequential quarter.
Financials show consistent progress in 2023 revenue increased every quarter from the prior sequential quarter.
Speaker 3: Q3 2023 marked ATI's highest revenue since the impact started, since the pandemic started in early 2020. Joe will provide detailed financial walkthrough of Q3 results later in the call.
Q3, 2023 marked hei's highest revenue since the impact started since the pandemic started in early 2020, and Joe will provide detailed financial walk through of Q3 results later in the call.
Speaker 3: We have incredible teams at ATI that are making a difference in the lives of our patients in our communities every day.
We had incredible teams at ATI, they're making a difference in the lives of our patients and our communities every day.
Speaker 3: Today starts our ATI employee appreciation week. I want to thank our talented and dedicated clinicians and leaders that emotionally invest and are passionate about enriching the lives of our colleagues, patients, and communities. You are what fuels ATI and makes us special.
Today's starts our ATI employee appreciation appreciation week.
I want to thank our talented and dedicated clinicians and leaders that emotionally invest and are passionate about enriching the lives of our colleagues patients and communities.
<unk> fuels Hei and makes us special.
Speaker 3: With that, I'll turn the call over to Emily for a discussion of our people in performance during the quarter.
With that I'll turn the call over to Emily for a discussion of our people and performance during the quarter.
Thanks Sharon.
Yes.
Speaker 1: I'd like to share what we're seeing in the current labor market and review the traction we've gained from our initiatives to higher and retain skilled providers and our programs to develop future leaders in the industry. The current labor market remains challenging.
I'd like to share what we're seeing in the current labor market and review the traction we've gained from our initiatives to hire and retain skilled providers and our programs to develop future leaders in the industry.
Current labor market remains challenging.
Speaker 4: and we anticipate the headwinds we are facing to continue for some time.
And we anticipate the headwinds we are facing to continue for some time.
Speaker 4: While each local market has its unique nuances, the national imbalance between the supply of physical therapists and the demand for PT services will take several years to reach equilibrium.
While each local market has its unique nuances the macro imbalance between the supply of physical therapist in the demand for PT services will take several years to reach equilibrium.
Speaker 4: However, we've made good progress year-to-date with growing the clinical team, and I'm confident that we can continue to grow by working on the things we can control, specifically staying on top of the market trends, listening to our employees and cultivating our culture.
However, we've made good progress year to date with growing the clinical team.
And I'm confident that we can continue to grow by working on the things we can control.
Typically staying on top of the market trends listening to our employees and cultivating our culture.
Speaker 4: Last year I discussed that I would be focused on increasing clinical cannabis at the top of the funnel and on developing programs that would further advance ATI as an outstanding place for providers to start, build and accelerate their careers.
Last year I discussed that I would be focused on increasing clinical candidates at the top of the funnel and on developing programs that would further advance ATI as an outstanding place for providers to start build and accelerate their careers.
Speaker 4: This year, we are beginning to witness returns from these programs as we continue to forge a culture characterized by high-level provider experience, clinical excellence, and outstanding customer service.
This year, we are beginning to witness returns from these programs as we continue to forge a culture characterized by high level provider experience clinical excellence and outstanding customer service.
Speaker 4: This is reflected in the results of this year's employee engagement survey, where we received positive feedback, most notably around rewarding roles, respectful direct leaders, and an inclusive culture.
This is reflected in the results of this year's employee engagement survey, where we received positive feedback most notably around rewarding rolls respectful direct leaders and an inclusive culture.
Speaker 4: We also identified areas of opportunity and are motivated to take the valuable feedback to continue improving our employee's experience and make ATI the employer of choice.
We also identified areas of opportunity and are motivated to take the valuable feedback to continue improving our employee experience and make ATI the employer of choice.
Speaker 4: As a result of the work we are doing around our people strategy, we have seen significant growth in our provider base. The third quarter, as Sharon mentioned, clinician head count grew 5% sequentially quarter over quarter.
As a result of the work we are doing around our people strategy, we have seen significant growth in our provider base in.
In the third quarter as Sharon mentioned clinician head count grew 5% sequentially quarter over quarter.
Speaker 4: Furthermore, our retention metric has remained at pre-COVID levels now for two consecutive quarters.
Furthermore, our retention metric has remained at pre COVID-19 levels now for two consecutive quarters.
Speaker 4: These improvements are evidence that we are doing the right things for our providers and our patients, enabling us to achieve our mission and expanding patient access to high quality care.
These improvements are evidence that we are doing the right things for our providers and our patients enabling us to achieve our mission and expanding patient access to high quality care.
Speaker 4: I want to thank the entire HR team for all the hard work this year to get us to where we are now. We have many opportunities in front of us and have a focus on making sure we implement improvements and refinements that allow our providers to operate at the top of their license.
I wanted to thank the entire HR team for all the hard work this year to get us to where we are now we have many opportunities in front of us and have a focus on making sure we implement improvements and refinements that allow our providers to operate at the top of their license.
Speaker 4: I'm proud of ATI's outstanding brand, an amazing culture, and the progress we have made this year to further augment that culture.
I am proud of ATI, Ati's outstanding brand and amazing culture, and the progress we have made this year to further augment that culture.
Speaker 5: ATI is defined by our people and I'm excited to continue the work we are doing to ensure ATI remains a great place to learn and grow. Now I'd like to turn it over to Joe for a financial review. Thank you Emily and thank you to everyone for joining the call.
ATI is defined by our people and I am excited to continue the work we are doing to ensure ATI remains a great place to learn and grow.
Now I'd like to turn it over to Joe for a financial review. Thank you Emily and thank you to everyone for joining the call.
Speaker 5: I will cover a third quarter financial results and I'll start out with net revenue, which was $177 million for the quarter. That's a 13% increase over the prior year, which reported that revenue of $157 million.
I will cover our third quarter financial results.
And I'll start out with net revenue, which was $177 million for the quarter.
The 13% increase over the prior year with reported net revenue of $157 million.
Speaker 5: And if we break that down a little bit further, net patient revenue was $162 million, which increased 14% year for year, and other revenue was $15 million, which is a 5% increase over the prior year.
If we break that down a little bit further.
Net patient revenue was $162 million, which increased 14% year over year and other revenue was $15 million, which is a 5% increase over the prior year.
Speaker 5: As Sharon mentioned earlier, visits per day per clinic were up during the quarter at 25.9. And that's an increase of 0.2 versus the second quarter of 2023. And if we compare to the third quarter of the prior year, we increased our visits per day per clinic by 2.7.
As Sharon mentioned earlier visits per day per clinic were up during the quarter at $25 nine and Thats, an increase of <unk> two versus the second quarter of 2023, and if we compare to the third quarter of the prior year, we increased our visits per day per clinic by two seven.
Speaker 5: Now these improvements in the business per day per clinic metric reflect our continued efforts to fully utilize our clinics and ultimately to optimize profits through leveraging our fixed costs.
Now these improvements and the visits per day per clinic metric reflect our continued efforts to fully utilize our clinics and ultimately to optimize profit through leveraging our fixed costs.
Speaker 5: Our rate per visit during the quarter, as Sharon said, was $109.90, which sequentially increased from 104.74 in the second quarter of 2023, which is about 4.9%.
Our rate per visit during the quarter as Sharon said was one $109 90, which sequentially increased from $104 74 in the second quarter of 2023, which is about four 9%.
Speaker 5: and from 103.46 or 6.2% from the third quarter of the prior year.
And from $103 46, or six 2% from the third quarter of the prior year.
Speaker 5: If it focus on the sequential increase, the primary drivers were improvement in contracted rates, both new and existing contracts, and process improvements within the revenue cycle management function, which drove higher rate realization. Now, a portion of which is related to prior claims, but as Sharon talked about earlier, portion that will continue into the fourth quarter and really be on to the next year.
Given our focus on the sequential increase the primary drivers were improvement in contracted rates, both new and existing contracts and process improvements within the revenue cycle management function, which drove higher rate realization.
Portion of which is related to prior claims, but as Sharon talked about earlier a portion of that will continue into the fourth quarter and really beyond that into next year.
Speaker 5: Salaries and related costs in the third quarter of 2023 was $97 million, which is a 7.5% increase over 90 million in the third quarter of the prior year. And the primary driver there is more clinicians and increased support staff supporting the higher revenue. And then a little bit of wage inflation and higher incentive payments as well.
Salaries and related costs in the third quarter of 2023 was $97 million, which is a seven 5% increase over $90 million in the third quarter of the prior year and the primary driver there is more clinicians and increased support staff supporting the higher revenue and then a little bit of wage inflation and higher incentive payments as well.
Speaker 5: Our PT salaries and related costs per visit during the quarter were $57.47, which sequentially increased from 5481 in the second quarter of 2023, about 4.8%. And from 5620 or 2.3% from the third quarter of the prior year.
Our PT salaries and related cost per visit during the quarter were $57 47, which sequentially increased from $54 81 in the second quarter of 2023.
At four 8% and from 50 620, or two 3% from the third quarter of the prior year.
Speaker 5: The quarter over quarter increase was primarily due to lower labor productivity with visits per day per clinical FTE, declining by 0.2. But that's driven by seasonality when you move from Q2 to Q3, as well as onboarding new providers and Emily talked about all the new providers that were added in the third quarter.
Quarter over quarter increase was primarily due to lower labor productivity with visits per day per clinical FTE declining by point too, but that's driven by seasonality. When you move from Q2 to Q3 as well as Onboarding, new providers and Emily you talked about all the new providers that were added in the third quarter.
Speaker 5: When looking at year over year, the increase was primarily due to increase support staff and higher compensation per clinical FT, which is partially offset by higher labor productivity when looking year over year of .6.
When looking at year over year. The increase was primarily due to increased support staff and higher compensation per clinical ft, which is partially offset by higher labor productivity when looking year over year of point.
Six.
Speaker 5: Rent, clinic supplies contract labor and other was $53 million or a 2.5% increase year over year from 51 million and Q3 of the prior year and driven by increased spend on contract labor and outside services.
Rent clinic supplies contract labor and other was $53 million or two 5% increase year over year from $51 million in Q3 of the prior year and is driven by increased spend on contract labor and outside services.
Speaker 5: And on a per clinic basis, these costs were approximately $57,000, which increased from 54,000 in both the second quarter of 2023, as well as the third quarter of 2022.
And on a per clinic basis. These costs were approximately $57000, which increased from 54000 in both the second quarter of 2023 as well as the third quarter of 2022.
Speaker 5: Our provision for Dow full accounts for the quarter was $3 million, which is 2.1% in net patient revenue, compared to the third quarter prior year of $3 million in 2% of net patient revenue.
Our provision for doubtful accounts for the quarter was $3 million, which is two 1% of net patient revenue compared to the third quarter prior year $3 million, 2% of net patient revenue.
Speaker 5: And then SG&A during the quarter was approximately $25 million, which is essentially flat with the prior year.
And then SG&A during the quarter was approximately $25 million, which is essentially flat with the prior year.
Speaker 5: Our operating loss, excluding impairment charges, was a million dollars, which improved your over year from 13 million loss in the prior year. We're selecting the higher revenue generated in the current year.
Our operating loss, excluding impairment charges was $1 million, which improved year over year from $13 million loss in the prior year, reflecting the higher revenue generated in the current year.
Speaker 5: Interest expense rate in the quarter was $15 million compared to 12 million in the third quarter of 2022 with the increase primarily driven by a higher interest rate environment and a lower hedge benefit.
Interest expense during the quarter was $15 million compared to $12 million in the third quarter of 2022 with the increase primarily driven by higher interest rate environment, and a lower hedge benefit.
Speaker 5: Income tax expense for the quarter was $100,000 compared to an income tax benefit of $7 million in the third quarter of the prior year. And net loss was $15 million compared to $117 million in the third quarter of the prior year, which included $107 million in good well-emparamint charges in the prior year.
Income tax expense for the quarter was $100000 compared to an income tax benefit of $7 million in the third quarter of the prior year and net loss was $15 million compared to $117 million in the third quarter of the prior year, which included $107 million in goodwill impairment charges in the prior year.
Speaker 5: Adjusted evited during the third quarter was $9 million. And that's a 5.3% margin. It increased over the prior year when we had an adjusted even a loss in the third quarter, $400,000.
Adjusted EBIT during the third quarter was $9 million and Thats, a five 3% margin it increased over the prior year. When we had an adjusted EBITDA loss in the third quarter $400000.
Speaker 5: The year over your increase in just a bit, it was primarily driven by higher revenue and the associated earnings that come along with that higher revenue.
The year over year increase in adjusted EBITDA was primarily driven by higher revenue and the associated earnings that come along with that higher revenue.
Speaker 5: We're pleased with the progress that we made during the third quarter. Due to the hard work of our dedicated team.
We're pleased with the progress that we made during the third quarter due due to the hard work of our dedicated dedicated teams.
Speaker 5: And with the momentum that we carried into the third quarter, or through the third quarter, and really even into the beginning of the fourth quarter, we remained confident with our Adjusted Ebit of Guidance and Project to hit the high end of the guidance for revenue, which as a reminder was 680 million to 695 million, and the high end of the guidance of Adjusted Ebit of, which was 30 million to 36 million range.
And with the momentum that we carried into the third quarter and through the third quarter and really even into the beginning of the fourth quarter. We remain confident with our adjusted EBITDA guidance and project to hit the high end of the guidance for revenue, which as a reminder, was $680 million to $695 million and the high end of the guidance of adjusted EBITDA, which was 30 million to 30.
$6 million range.
Speaker 5: Our cash flow use year-to-date was $63 million dollars, with 18 million used to fund operations, 15 million used to fund investing activities, and 31 million used to fund financing activities. Important to know it as part of the financing activities was 25 million in repayments on the revolving line of credit.
Our cash flow used year to date was $63 million with 18 million used to fund operations 15 million used to fund investing activities and 31 million used to fund financing activities.
I want to note as part of the financing activities was $25 million in repayments on the revolving line of credit.
Speaker 5: And then as of September 30th, 2023, our liquidity is approximately $40 million. And that $40 million consists of cash and cash equivalence of 20 million and available revolver capacity of 20 million.
And then as of September 32023, our liquidity is approximately $40 million in that $40 million consists of cash and cash equivalents of $20 million and evolve our available revolver capacity of $20 million.
Speaker 5: In addition to the 40 million of liquidity, we do have access to 25 million in a delayed draw term loan subject to certain restricts.
In addition to the $40 million of liquidity, we do have access to $25 million and a delayed draw term loan subject to certain restrictions.
Speaker 3: That wraps up the financial update and now I'd like to turn the call back over to Sharon for closing remarks. Thanks, Joe. Thanks Emily and Joanne and everyone participating. We have momentum in our poised to lead in the Moscow-Skeletal landscape.
That wraps up the financial update and now I would like to turn the call back over to Sharon for closing remarks.
Thanks, Joe Thanks, Emily and Joanne and everyone participating we have momentum and are poised to lead in the musculoskeletal landscape.
Speaker 3: We've clearly demonstrated momentum year to date in 2023.
We've clearly demonstrated momentum year to date in 2023.
Speaker 3: We have the right team in place to deliver results and generate value for our patients, employees, communities and shareholders.
We have the right team in place to deliver results and generate value for our patients employees communities and shareholders.
Yes.
Speaker 3: We have a positive trajectory that should deliver significant growth in 2024.
We have a positive trajectory that should deliver significant growth in 2024.
Speaker 3: I remain excited for the opportunities ahead and look forward to sharing more about our growth expectations on our URN call.
I remain excited for the opportunities ahead, and look forward to sharing more about our growth expectations on our year end call.
Speaker 3: Thank you again for joining me now, open the line for Q&A.
Thank you again for joining we will now open the line for Q&A.
Speaker 1: Thank you. If you would like to ask a question on the phone lines today, you can press star one on your telephone keypad to remove yourself from the queue. It is star one again. And we'll pause for a moment.
Thank you have you would like to ask a question on the phone lines. Today, you can press star one on your telephone keypad to remove yourself from the queue. It is star one again.
Just for a moment.
Speaker 1: We'll take our first question from Brian . A tenkuet with Jeff.
We will take our first question from Brian.
<unk> <unk> with Jefferies.
Speaker 6: Hey, good afternoon, you guys. Congrats on the quarter. I guess, sharing my first question, as we think about your to date openings and closing, just as we net that out.
Hey, good afternoon, guys congrats on the quarter.
I guess sharing my first question as we think about year to date openings and closings just as we net that out.
Speaker 6: Looking into 2024, I mean, how should investors be thinking about you?
Looking into 2024, I mean, how should investors be thinking about.
Speaker 6: the footprint and how that affects the revenue base.
The footprint and how that affects the revenue base for next year.
Speaker 3: Thanks, Brian . So a few things I did mention, I think there are two ways to look at it. So one is...
Thanks, Brian.
So a few things I did mention I think there are two ways to look at it one is.
Speaker 3: There's the expansion of the footprint. And it's a little too early for us to say what we're going to do in 2024 around the expansion of the footprint.
There is the expansion of the footprint and it's a little too early for us to say, what we're going to do in 2024 around the expansion of the footprint.
Speaker 3: Only because there's a lot of moving pieces.
Only because theres a lot of moving pieces.
Speaker 3: So I would say that's one piece, but I'd say the other is we are looking at other opportunities to grow top line beyond the expansion of footprint. So as I see this, it's a combination of the two that is going to get us the top line. And I think we've got to look at this as a multi-year journey. You know, 24 is...
So I would say that's one piece, but I would say the other is we are looking at other opportunities to grow top line beyond the expansion of footprint. So as I see this as a combination of the two that is going to get us the top line.
And I think we've got to look at this as a multiyear journey.
<unk> 24 is almost upon us and we were.
Speaker 3: almost upon us and you know we will we we have some denovos in the pipeline and we're looking at should be should we increase that number but I would say the other pieces around growth and working with different new channels for referrals etc. is also going to be impactful in our you know 2425 growth of top line.
Will we have some de novo in the pipeline and we're looking at should we should we increase that number but I would say the other pieces.
Around growth and working with different <unk>.
New channels for referrals et cetera is also going to be impactful in our 'twenty four 'twenty five growth of topline.
Speaker 5: And then Brian , it's Joe, maybe just to add to that, this year in said, we'll talk more about 2024 when we do our year end. But even if we're closing a handful of clinics to optimize our fleet, we're still looking at adding clinicians. And so I think on a overall basis, we expect...
And then Brian It's Joe maybe maybe just.
To add to that as Sharon said, we'll talk more about 2000 2400, when we do our year end, but even if we're closing a handful of clinics.
To optimize our fleet, we're still looking at adding clinicians and so I think on a.
Overall basis, we expect momentum that we carried through the third quarter and expect to carry into the fourth quarter will continue into 2025, where on an overall basis, we're looking to drive improvements in revenue not not a decline in revenue even if even if there is a minor negative impact to the fleet, which we'll talk more about that as we get into the guidance for next year.
Speaker 5: Momentum that we carried through the third quarter and expect to carry into the fourth quarter will continue into 2025, where on an overall basis, we're looking to drive improvements in revenue, not a decline in revenue, even if there is a minor negative impact to the fleet, which we'll talk more about that as we get into the guidance for next year.
I know they need both.
Speaker 3: Yeah, we need both Brian , but I do think we have opportunities right in front of us that we're harvesting right now that don't require the heavy lift of a foot print expansion.
We need both Brian, but I do think we have opportunities right in front of us that we're harvesting right now.
That don't that don't require the heavy lift of a footprint expansion.
Speaker 6: Now that makes a lot sense. So revenue provision, just I know there's that sort of one time right there, but how should we be thinking about the growth rate given the contract that you guys are signing right now on that rev provision KPO?
No that makes a lot sense, Joe revenue per visit.
There is a sort of.
One time are there, but how should we be thinking about the growth rate given the contract that you guys are signing right now.
Net Rev per visit Kpis.
Speaker 5: Go forward. Yeah, and really, absolutely. And really, like I said, and like Sharon said, Brian , there's two components. It's new and existing contracts and getting some improvements and rates with those contracts. But some of the improvements in RCM that we've seen go back to prior claims, but certainly a lot of the changes.
Going forward, yes.
Absolutely and really.
Like I said in like sharing side, Brian Theres, two components at new and existing contracts and getting some improvements in rates with those contracts, but some of the improvements in RCM that we've seen go back to prior claims, but certainly a lot of the changes also impacted the current Q3 claims and we'd expect those impacts to carry forward into future quarters.
Speaker 5: The current Q3 claims and we'd expect those impacts to carry forward into future quarters. So we're pleased with not only the payer contracting rate improvements that we've seen, but also the improvements in our SAM, which will allow us to realize higher revenue rates moving forward. As far as...
So we're pleased with not only the payer contracting rate improvements that we've seen but also the improvements in our sandwich will allow us to realize higher revenue rates moving forward as far as <unk>.
Speaker 5: breaking out the one time piece versus the recurring. I'd say roughly 30 to 40% of what we saw in Q3 relative to Q2, that improvement carries forward. So that puts you somewhere in the call it mid 106s. Obviously, when you're by for kidding now, one time versus recurring, it's not going to be 100% precise, but I think that's a good...
Breaking out the one time piece versus the recurring I'd say roughly 30% to 40% of what we saw in Q3 relative to Q2 that improvement carries forward. So that puts you somewhere in the call. It mid 100, <unk>, obviously, when you bifurcate out onetime versus recurring.
Not going to be 100% precise, but I think that's a good spot to anchor to but probably important to note that we will continue to focus on driving improvements in RCM will continue to focus on driving improvements in payer contracting and so the goal would be not to stop at those mid 100, <unk> to see where we can get to beyond that.
Speaker 5: spot to anchor to, but probably important to note that we'll continue to focus on driving improvements in RCM, we'll continue to focus on driving improvements in payer contracting. So the goal would be not to stop at those mid-106s to see where we can get to beyond the
Speaker 6: All right, last question from you, Joe. As I think about interest expense, 15.5 million here, is that sort of the right baseline we should be thinking about? And then maybe just looking at the cash flow as well. Obviously there's cash burns during the quarter, so putting those together, how should we be thinking about cash generation and then what your interest coverage looks like?
Alright last question from me, Joe as I think about interest expense $15 5 million a year.
Is that sort of the right baseline we should be thinking about it and then maybe just looking at the cash flow as well.
Theres cash burn during the quarter, so just putting those together.
How should we be thinking about cash generation and then what your interest.
Cover coverage looks like going forward.
Speaker 5: Yeah, the cash in just I'm gonna break out interest expense from cash interest because I'm guessing you're Care a little bit more about cash interest piece of it. Yep, but cash
Yes, the cash and just I'm going to I'm going to break out interest expense from cash interest because I'm guessing you care a little bit more of a cash interest piece of it but cash interest probably somewhere around $14 million a quarter in cash interest based on the debt structure, assuming the <unk>.
Speaker 5: Probably somewhere around 14 million a quarter in cash interest based on the debt structure. Assuming the current interest rate environment. Now there's recent improvements in the interest rate environment, which could drive it down because our interest does have a very well component to it.
Current interest rate environment, and others recent improvements in the interest rate environment, which could drive it down because our interests does have a variable component to it.
Speaker 5: but I think 14 is a good place to ear market and so to your point that's 56 million of cash interest.
But I think <unk> is a good place to air market and so to your point, that's $56 million of cash interest.
Speaker 5: So we will be a user of cash in 2023, although we think Q4 will be generating single digit millions of cash. In 2024, we'll come out and talk more about that, obviously, when we're in 2024, but you could do the math on the cash interest plus some amount of cat-backs and realize that to be cash low positive, it's probably somewhere in the 70 plus million of adjustity of an arrange. And we like the momentum that we've
So we will be a user of cash in 2023, although we think Q4 will be.
Generating single digit millions of cash in 2024 will come out and talk more about that obviously when we were in 2024, but you can do the math on the cash interest plus some some amount of capex and realize that to be cash flow positive, it's probably somewhere in the 70 plus million dollars of adjusted EBITDA range and we like the momentum that we have.
Speaker 5: been able to gain throughout 2023 and through Q3. And as I mentioned, we think we'll continue to gain momentum in 2024. I don't foresee being cashflow positive in 2024 yet, but it's an important step towards cashflow positive. And with the 40 million of liquidity and the availability that we have on the delayed draw term loan, I think we feel that it gives us the runway to continue to grow into our capital structure.
Been able to gain throughout 2023 and through Q3 and as I mentioned, we think we'll continue to gain momentum in 2024.
Foresee being cash flow positive in 2024, yet, but it's an important step towards cash flow positive and with the $40 million of liquidity.
The availability that we have on the delayed draw term loan I think we feel that it gives us the runway to continue to grow into our capital structure.
Awesome. Thank you guys.
Thanks, Brian.
Speaker 1: or mind to everyone that is star one to ask a question. We'll pause for a moment.
Okay.
As a reminder, everyone that is star one to ask a question we'll pause.
For a moment.
Speaker 1: All right, and there are no further questions at this time. I'd like to turn the call back over to Sharon video for any additional or closing remarks.
Alright, and there are no further questions at this time I would like to turn the call back over to Sharon <unk> for any additional or closing remarks.
Speaker 3: This ends the Q and A portion of our call. Thank you to our investors, analysts and all the ATIT members for joining the ATIC Q3 quarterly earnings call. And we will look forward to seeing you in the new year.
This ends the Q&A portion of our call. Thank you to our <unk>.
<unk> analysts and all of the ATI team members for joining the ATI Q3 quarterly earnings call and we will look forward to seeing you.
In the new year.
Speaker 1: Thank you. Thank you. Thank you. That does conclude today's presentation. Thank you for your participation. You may now disconnect. Connect.
Thank you. Thank you. Thank you and that does conclude todays presentation. Thank you for your participation you may now disconnect.
Yeah.
Yeah.
In the new year.
Thank you.