Q1 2024 ATI Physical Therapy Inc Earnings Call
Operator: Good afternoon, and welcome to ATI Physical Therapy's first quarter 2024 earnings conference call-in webcast. All participants will be in a listen-only mode. All lines have been placed on mute to prevent any background noise.
Good afternoon, and welcome to H T I physical therapy as first quarter 2024 earnings conference call and webcast.
All participants will be in a listen only mode.
All lines have been placed on mute to prevent any background noise.
Operator: After today's presentation, there will be an opportunity to ask questions. If you would like to ask a question at that time, simply press star followed by the number one on your telephone keypad. And if you would like to withdraw that question, again, press star one. Thank you. Please note that this event is being recorded. On the call today are Sharon Vitti, Chief Executive Officer; Joseph Jordan, Chief Financial Officer; Chris Cox, Chief Operating Officer; and Joanne Fong, Senior Vice President, Treasurer, and Head of Investor Relations. I will now turn the call over to Ms. Fong.
After todays presentation, there will be an opportunity to ask questions. If you would like to ask Jen at that time simply press star followed by the number one on your telephone keypad and if you'd like to withdraw that question again press Star one. Thank you. Please note that this event is being recorded.
On the call today is Sharon Beattie, Chief Executive Officer, Joseph Jordan, Chief Financial Officer.
Chris Cox, Chief operating officer, and Joanne <unk>, Senior Vice President Treasurer, and head of Investor Relations.
MS song: I will now turn the call over to MS song.
Joanne Fong: Good afternoon, everyone, and thank you for joining us today. Before we begin, I'd like to remind you that certain statements made during this call are forward-looking statements that are subject to various risks and uncertainties and reflect our expectations based on our beliefs, assumptions, and information currently available to us. Although we believe these expectations are reasonable, we undertake no obligation to revise any statements to reflect changes that occur after this call. Descriptions of some of the factors that cause actual results that differ materially from these forward-looking statements can be found in the risk factors section in the company's filings with the Securities and Exchange Commission.
MS song: Good afternoon, Chris So everyone and thank you for joining us today before we begin I'd like to remind you that certain statements made during this call before looking statements that are subject to various risks uncertainties reflect our expectations based on our beliefs assumptions and information currently available to us. Although we believe these expectations are reasonable we undertake no obligation.
Joanne Fong: In addition, please note that the company is discussing certain non-GAAP financial measures that we believe are important in evaluating performance. Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliation of historical non-GAAP financial measures can be found in the earnings press release as posted on ATI's website and filed with the SEC. And with that, I'd like to turn the call over to Sharon. Thank you, Joanne.
MS song: Any statements to reflect changes that occur after this call.
MS song: This description of some of the factors that can cause actual results to differ materially from these forward looking statements can be found in risk factors section in the company's filings with Securities and Exchange Commission.
MS song: In addition, please note that the companys discussing certain non-GAAP financial measures that we believe are important in evaluating performance details on the relationship between these non-GAAP measures to the most comparable GAAP measures.
MS song: Reconciliation of historical non-GAAP financial measures can be found in earnings press release as posted on <unk> website and filed with the SEC.
MS song: And with that I'd like to turn the call over to Sharon.
Sharon Vitti: Thank you, Joanne, and welcome, everyone. We have some of our ELT members on the call today, Chris Cox, our COO, Joe Jordan, our CFO. And then we have Eimile Tansey, our CPO, Scott Gregerson, our Chief Growth Officer, Gus Oaks, our CIO, and Eric Cantz, our Chief Legal Officer. And they'll be either in person or dialed in on the participant line
Thank you Joanne and welcome everyone.
Sharon Vitti: We have some of our ELT members on the call today, Chris Cox, our CFO, Joe Jordan our CFO.
Sharon: And then we have Emily Tansey, our CPO Scot Gregersen, our chief growth Officer.
Sharon: <unk>, our CIO and Eric <unk>, our chief legal Chief legal officer, and they will be either in person or dialed in on the participant line.
Sharon Vitti: So this month marks my two-year anniversary of leaving ATI. It's truly been a pleasure and a privilege to be a part of the ATI family. I would characterize my tenure at ATI as being invigorating and gratifying.
Sharon: So this month marks my two year anniversary leading ATI.
Sharon: It's truly been a pleasure and a privilege to be a part of the hei family.
Sharon: I would I would characterize my tenure has been invigorating and gratifying.
Sharon Vitti: It is really exciting to watch a good company overcome speed bumps to deliver on goals while building momentum month over month. It is equally rewarding to lead a group of talented people who are driven by having a meaningful impact on each other, our patients, and our communities. I am confident that ATI will continue to succeed in strengthening its financial health and innovating in the musculoskeletal space, with the ultimate goal of improving access, quality, and affordability of rehabilitative care while improving the health of our communities. So, let's jump in and take a look at Q1.
Sharon: It is really exciting to watch a good company overcome speed bumps to deliver on goals, while building momentum month over month.
Sharon: It is equally rewarding to lead a group of talented people, who are driven by having a meaningful impact on each other our patients and our communities.
Sharon: I am confident that hei will continue to succeed and strengthening our financial health and innovating in the musculoskeletal space.
Sharon: With the ultimate goal of improving access quality and affordability of rehabilitative care, while improving the health of our communities.
Speaker Change: So let's jump in and take a look at Q1.
Sharon Vitti: The quarter marked another major step forward in our journey. Earlier today, we recorded our first quarter 2024 results. We continue to grow on many fronts with what we have and are inspired by our purpose of making every life an active life. Our providers and support staff demonstrated exceptional teamwork over the quarter and across our national platform. Navigating inclement weather in January to ensure patients receive the care they need. Earlier today, we also provided Q2 2024 financial guidance, which Joe will discuss later on the call.
The quarter marked another major step forward in our journey.
Speaker Change: Earlier today, we reported our first quarter 2024 results.
Speaker Change: We continue to grow on many fronts with what we have and are inspired by our purpose of making every life and active life.
Speaker Change: Our providers and support staff demonstrated exceptional teamwork over the quarter and across our national platform.
Speaker Change: Navigating inclement weather in January to ensure patients receive the care they needed.
Earlier today, we also provided Q2 2024 financial guidance, which Joe will discuss later on the call.
Sharon Vitti: Since our last call, I outlined the winning strategies that drove our growth in 2023. Similarly, we are advancing these focus areas to drive growth in 2024. Strengthening the ATI culture, growing the provider base, and enhancing talent and creating development opportunities for our employees. Expanding Access for Patients and Operating with excellence Enhancing the patient experience and improving our financial and key KPI performance. It looks like we're growing. We drove growth year-over-year and expanded patient access. In Q1 2024, we saw approximately 1,100 more patient visits each day compared to the previous year. I would say our strategies are working.
Speaker Change: Since our last call I.
Speaker Change: I outlined the winning strategies that drove our growth in 2023.
Speaker Change: Similarly, we are advancing these focus areas to drive growth in 2024.
Speaker Change: Strengthening the hei culture growing the provider base.
Speaker Change: Elevating talent and creating development opportunities for our employees.
Speaker Change: Expanding access for patients.
Speaker Change: Operating with excellence.
Speaker Change: Enhancing the patient experience and improving our financial and key Kpis performance.
It looks like a growth.
Speaker Change: We drove growth year over year and expanded patient access in Q1 2024.
Speaker Change: We saw approximately 1100 more patients visits each day compared to the previous year.
Speaker Change: I would say our strategies are working.
Sharon Vitti: The focus for the remainder of the year is to continue to deliver impactful outcomes and expand access to physical therapy, including in underserved areas. In the quarter, we also made significant strides in our real estate initiatives. We are executing on our strategic real estate plan, which includes investing in our current fleet with necessary upgrades, refreshes, and consolidations. We also refined our geographic footprint to align with patient population needs, which resulted in 11 closed clinics and one digested clinic.
Speaker Change: Focus for the remainder of the year is to continue to deliver impactful outcomes and expand access to physical therapy, including in underserved areas.
Speaker Change: In the quarter. We also made significant strides in our real estate initiatives, we are executing on our strategic real estate plan.
Speaker Change: Which includes investing in current our current fleet with necessary upgrades refreshes consolidations.
Speaker Change: We also refined our geographic footprint to align with patient population needs, which resulted in 11 closed clinics in one divested clinic.
Sharon Vitti: Our rates improved through a multitude of actions. In the first quarter, we continued to increase the rate per visit year over year. Teams took deliberate actions to advance the rate per visit across our platform, and we will continue efforts in 2024, including leveraging our ATI patient outcomes and satisfaction data in payer contracting discussions. Improving Front End Operations and Revenue Cycle Management to Fully Realize Collections.
Speaker Change: Our rates improved through a multitude of actions in the first quarter, we continued to increase the rate per visit year over year.
Teams took deliberate actions to advance the rate per visit across our platform and we will continue efforts in 2024, including leveraging our ATI patient outcomes and satisfaction data and payer contracting discussions.
Speaker Change: Improving front end operations and revenue cycle management to fully realized collections.
Sharon Vitti: Growing Our Workers Comp and Autopersonal Injury Offerings, receiving bonus payments under MIPS, the merit-based incentive payment system for Medicare services, striving to earn our fifth year of incentives in 2024. Now that said, the real work... is to influence rate-setting leadership about the value of PT in the musculoskeletal care continuum. In partnership with industry and other healthcare organizations, we are advocating for improved patient access and increased reimbursement for physical therapy with national leaders.
Speaker Change: Growing our workers comp and auto personal injury offerings.
Speaker Change: Yes.
Speaker Change: And <unk>.
Speaker Change: Receiving bonus payments under Mips, the merit based incentive payment system for Medicare services striving to earn our fifth year of incentive in 2024.
Speaker Change: Now that said the real work.
Speaker Change: As to influence rates setting leadership about the value of PT in the musculoskeletal care continuum.
Speaker Change: In partnership with industry, and other healthcare organizations, where adverse advocating for improved patient access and increased reimbursement for physical therapy with national leaders.
Sharon Vitti: We are disappointed by the continuing Medicare fee schedule cuts for physical therapy over the past several years. There is a clear disconnect between the value of physical therapy to our health care system and the aging of our population.
Speaker Change: We are disappointed by the continuing Medicare fee.
Schedule cuts for PT over the past several years.
Speaker Change: There is a clear disconnect on the value of <unk> to our healthcare system and the aging of our population.
Sharon Vitti: Last month, Congress did take action to provide incremental relief by reducing the Medicare rate cut for the remainder of the year from 3.4% to 1.7%. We applaud this action and need to continue to fight for more. From a people perspective, our people strategies and culture refresh resulted in exceptional therapist retention. Since Eimile Tansey joined as our chief people officer in late 2022, she and her team have worked diligently to engage our employees. They've implemented a cultural refresh and crystallized the organization's purpose, making every life an active life.
Last month's Congress did take action to provide incremental relief by reducing the Medicare rate cut for the remainder of the year from three 4% to one 7%.
Speaker Change: We applaud this action and need to continue to fight more.
Speaker Change: From a people perspective are people strategies and culture refresh resulted in exceptional therapist retention.
Speaker Change: Since Emily TNT joined our Chief people officer in late 2022, she and her team have worked diligently to engage our employees.
Speaker Change: They've implemented a cultural refresh and crystallize the organization's purpose, making every life and active life.
Sharon Vitti: Despite the tight labor market, we grew our provider-employee base by investing in retaining and attracting colleagues, and we launched innovative programs to position ATI as an employer that invests in our people. We all know changing corporate culture takes time and the work takes stamina. But we are seeing results, with the clinical FT in the first quarter growing year over year. Most significant, the ATI clinician turnover rate has been trending lower.
Speaker Change: Despite the tight labor market, we grew our provider employee base by investments in retaining and attracting colleagues.
Speaker Change: And we launched innovative programs to position ATI as an employer that invest in our people.
We all know changing corporate culture takes time and the work takes stamina.
Speaker Change: We are seeing results with the clinical FTE in the first quarter growing year over year, most significant the hei clinician turnover rate has been trending lower.
Sharon Vitti: The last three quarters of 2023 saw a turnover rate in the low 20s, and we have seen further improvement in the first quarter of 2024 to an exceptional 16 percent. We continue to focus on incremental improvements in our operations. With a stable workforce, we are better equipped to build upon learnings and continuously refine our operations. It is worth pointing out that our clinics continue to be busier year over year, with visits per day per clinic growing nearly two visits each day over the prior comparative quarter. Our clinics, on average, still have excess physical capacity.
Speaker Change: Last three quarters in 2023 saw a turnover rate in the low twenties and we have seen further improvement in the first quarter of 2024 to an exceptional 16%.
We continue to focus on incremental improvements in our operations with.
Speaker Change: With a stable workforce, we are better equipped to build upon learnings and continuously refine our operations.
Speaker Change: It is worth pointing out that our clinics continue to be busier year over year with visits per day per clinic growing nearly two visits each day over the prior comparative quarter.
Speaker Change: Our clinics on average still have excess physical capacity as we grow the provider base. This year, we will leverage our clinic real estate and spread our fixed costs, Chris will provide a detailed discussion around our operational performance and activities shortly.
Sharon Vitti: As we grow the provider base this year, we will leverage our clinic real estate and spread our fixed costs. Chris will provide a detailed discussion around our operational performance and activities shortly. Revenue and adjusted EBITDA grew year over year, showing continued progress. The strong demand for ATI's services combined with our business growth is reflected in the financials, with revenue and adjusted EBITDA for the quarter growing year over year. We are focused on executing on our strategies and delivering continued growth in revenue and earnings in the remaining quarters of the year. Joe will provide a detailed walkthrough of Q1 financial results and discuss Q2 2024 guidance later in the call. With that, I will conclude.
Revenue and adjusted EBITDA grew year over year showing continued progress.
Speaker Change: The strong demand for ATI services combined with our business growth is reflected in the financials with revenue and adjusted EBITDA for the quarter growing year over year.
Speaker Change: We are focused on executing on our strategies and delivering continued growth in revenue and earnings in the remaining quarters of the year.
Speaker Change: Joe will provide a detailed walk through of Q1 financial results and discuss Q2 2024 guidance later in the call.
Sharon Vitti: We have remarkable teams making positive impacts on millions of lives. I'm inspired by the exceptional colleagues we have at ATI and value their commitment to enhancing the lives of our patients; they truly exemplify the true essence of ATI. I remain privileged to lead this fantastic care delivery organization, and I'm proud of the positive impact we are having across the musculoskeletal ecosystem. With that, I will turn the call over to Chris to discuss operations.
With that I will conclude we have remarkable teams, making positive impacts on millions of lives.
I'm inspired by the exceptional colleagues, we have at hei and value their commitment to enhancing the lives of our patients.
Speaker Change: Truly exemplify the true essence of hei.
Speaker Change: I remain privilege to lead this fantastic care delivery organization and I'm proud of the positive impact, we're having across the musculoskeletal ecosystem.
Speaker Change: With that I will turn the call over to Chris to discuss operations.
Christopher Cox: Thank you Sharon.
Christopher Cox: In the quarter, our operations teams continue to execute, enhance workflows, and advance the patient experience. I'm inspired by the team's dedication to our purpose, and I'm excited by the continued forward advancement in the operating environment. In Q1, we generated year-over-year topline growth because of the continued progress in several important areas.
In the quarter, our operations teams continued to execute.
Christopher Cox: <unk> workflows and advanced the patient experience.
Christopher Cox: And inspired by the team's dedication to our purpose and are excited by the continued forward advancement and the operating environment.
Christopher Cox: In Q1, we generated year over year top line growth because of the continued progress in several important areas.
Christopher Cox: In addition to our providers in the clinics, there are multiple supporting teams whose work allows us to achieve this level of growth. It is our shared goal across the organization to increase patient access to high-quality physical therapy that underlies our success. As Sharon mentioned, we saw over 1,100 more patient visits each day compared to last year in Q1. This was achieved despite the challenges our clinic and patient access teams faced due to the impacts of severe weather and record low temperatures experienced across the nation in January of this year.
Christopher Cox: In addition to our providers in the clinics there are multiple supporting teams, whose work allow us to achieve this level of growth.
Christopher Cox: This is our shared goal across the organization to increase increased patient access to high quality physical therapy.
Christopher Cox: <unk> our success.
Christopher Cox: As Sharon mentioned, we saw over 1100 more patient visits each day compared to last year in Q1.
Christopher Cox: This was achieved despite the challenges our clinic and patient access teams faced from the impacts of severe weather and record low temperatures experienced across the nation in January of this year.
Christopher Cox: Our team has reacted quickly and had patients rescheduled and back on their treatment plans by the beginning of February. As our people team continues to work on increasing the clinician base and our care capacity, A notable contributor to this growth was our achievement in employee retention in the past year and particularly in the first quarter this year. Our annual national leadership event in January set the stage for this year, and we believe the event had a positive impact on both employee engagement and declining attrition.
Christopher Cox: Our Canadian reacted quickly and hesitations rescheduled and back on their treatment plans, but at the beginning of February.
Christopher Cox: As our people team continues to work on increasing the clinician base and our care capacity a notable contributor to this growth was our achievements and employee retention in the past year and particularly in the first quarter of this year.
So our annual National leadership event in January set the stage for this year and we believe the event had a positive impact on both employee engagement and declining attrition.
Christopher Cox: As we continue to capitalize on the learnings from the NLE and develop the core competencies and skill sets of our staff, we anticipate continued operational and clinical progress through the remainder of this year. Q1 was the first full quarter in which all of our clinics were on the new centralized patient access management model.
Christopher Cox: As we continue to capitalize on the learnings from the MLD and developed the core competencies and skill sets of our staff. We anticipate continue to operationally great clinical progress through the remainder of this year.
Christopher Cox: Q1 was the first full quarter in which all of our clinics were on the new centralized patient access management model.
Christopher Cox: We are already seeing a higher capture rate on our provider referrals. As we gain additional experience with the model, we will continue to find new ways to optimize and better meet demand. I'm most excited by the opportunity here to create a superior partner provider and patient onboarding experience while simultaneously reducing the administrative burden on our clinic. On the rate per visit front, the revenue rate in the first quarter was $108.42, increasing 4.5% year-over-year.
Christopher Cox: We are already seeing a higher capture rate on our provider referrals.
Christopher Cox: If we gain additional experience with the model, we will continue to find new ways to optimize and better meet demand.
Christopher Cox: I'm most excited by the opportunity here to create a superior partner provider and patient onboarding experience, while simultaneously, reducing the administrative burden on our clinicians.
Christopher Cox: On the rate per visit from.
Christopher Cox: Our revenue rate in the first quarter was $108 and 42.
Christopher Cox: Increasing four 5% year over year.
Christopher Cox: Operational improvements in our revenue cycle management function were a significant contributor to the higher rate. As I've discussed before, we are focused on leveraging technology and automation to continuously advance this area, increasing clean claim submission on the front end and collections on the back end, all at a lower cost. This work is dynamic, and we believe there is still room for advancement as we continue to move our RCM function to best-in-class performance.
Christopher Cox: Operational improvements in our revenue cycle management function were a significant contributor to the higher rate.
Christopher Cox: As I've discussed before we are focused on leveraging technology and automation to continuously advance in this area.
Christopher Cox: Creasing clean claim submission on the front end and collections on the backend.
Christopher Cox: All at a lower cost.
Christopher Cox: This work is dynamic and we believe there is room for advancements Phil as we continue to move our RCM function to best in class performance.
Christopher Cox: To close, I want to express how proud I am of how we started off the year. I want to thank all of our teams for the way they continue to show up each day and demonstrate excellence. Because of their efforts, we can say that ATI is having a powerful impact on the lives of our patients and their communities. I'm excited by the opportunities that lie ahead and look forward to sharing more updates as we progress through the year. Now I'd like to turn the call over to Joe to provide a discussion of financial results.
Christopher Cox: To close I want to express how proud I am of how we started off the year.
Speaker Change: I want to thank all of our teams for the way they continue to show up each day and demonstrate excellence.
Speaker Change: Their efforts, we can say that ATI is having a powerful impact on the lives of our patients and their communities.
Speaker Change: We're excited by the opportunities that lie ahead, and look forward to sharing more updates as we progress through the year.
Speaker Change: Now I'd like to turn the call over to Joe to provide a discussion of financial results.
Joseph Jordan: Thank you, Chris. And thanks, everyone, for joining the call today. I'll start out by talking about our first quarter 2024 financial results, and then I'll jump into our second quarter 2024 guidance. So starting with financial results, net revenue in the first quarter was $181 million, which is an 8.7% increase over the prior year, $167 million in Q1 of 2023. As we dive down deeper, net patient revenue was $165 million, which increased 9.7% year over year, while other revenue was $16 million, and that's a 0.7% increase over the prior year.
Joseph Jordan: Thank you, Chris and thanks to everyone for joining the call today.
Joseph Jordan: I'll start out by talking about our first quarter 2024 financial results and then I'll jump into our second quarter 2020 for guidance.
Joseph Jordan: So starting with financial results net revenue in the first quarter was $181 million, which is an eight 7% increase over the prior year $167 million in Q1 of 2023.
Joseph Jordan: As we dive down deeper net patient revenue was $165 million, which increased nine 7% year over year, while other revenue was $16 million and that's a 0.7% increase over the prior year.
Joseph Jordan: As Sharon mentioned, visits per day per clinic during the quarter were 26.9, and that improved by 1.9 visits year over year from 25 in the first quarter of 2023, which reflects our continued efforts to improve clinic capacity utilization. Chris talked about the rate per visit, which during the first quarter was $108.42. That's an improvement of 4.5% year-over-year from $103.76 in the first quarter of the previous year, and that increase was primarily driven by mixed changes.
Joseph Jordan: As Sharon mentioned visits per day per clinic during the quarter were $26 nine and that improved $1 nine visits year over year from 25 in the first quarter of 2023, which reflects our continued efforts to improve clinic capacity utilization.
Joseph Jordan: Chris talked about our rate per visit.
During the first quarter was $108 42.
Joseph Jordan: That's an improvement of four 5% year over year from $103 76 in the first quarter prior year.
Joseph Jordan: And that increase was primarily driven by mix changes.
Joseph Jordan: Operational improvements within the Revenue Cycle Management Function and higher reimbursement rates for certain key payers. Our salaries and related costs in the first quarter of 2024 were $99 million, which is a 9.5% increase year-over-year from $91 million in Q1 of the prior year, and this is primarily driven by wage inflation, more clinical staff, and clinician bonuses. PT salaries and related costs per visit during the quarter were $56.68, which increased 7% year-over-year from $50 to $98 in the first quarter of 2023.
Joseph Jordan: Operational improvements within the revenue cycle management function.
Joseph Jordan: And higher reimbursement rates for certain key payers.
Joseph Jordan: Okay.
Joseph Jordan: Our salaries and related costs in the first quarter of 2024 were $99 million, which is a nine 5% increase year over year from $91 million in Q1 of the prior year is primarily driven by wage inflation more clinical staff and clinician bonuses.
Joseph Jordan: PT salaries and related cost per visit during the quarter was $56 68, which.
Joseph Jordan: Which increased 7% year over year from $52 98 in the first quarter of 2023.
Joseph Jordan: The increase in cost per visit was primarily due to higher labor costs per clinician and lower labor productivity of 9.3 in the first quarter of 2024 compared to 9.4 in the first quarter of 2023. Rent, clinic supplies, contract labor, and other costs in the first quarter were $55 million, which is a four and a half percent increase year over year from $53 million in Q1 of 2023. It's primarily driven by higher spend on contract labor.
Joseph Jordan: The increase in cost per visit was primarily due to higher labor cost per condition.
Joseph Jordan: And lower labor productivity of $9 three in the first quarter of 2024 compared to $9 four in the first quarter 'twenty three.
Joseph Jordan: Rent clinic supplies contract labor and other in the first quarter was $55 million, which is a four 5% increase year over year from $53 million in Q1 of 2023, primarily driven by higher spend on contract labor.
Joseph Jordan: And on a per-clinic basis, these costs were approximately $61,000, which increased 7.9% year-over-year from $56,000 in the first quarter of 2023. Additionally, our provision for doubtful accounts during the quarter was $5 million or 3% of PT revenue compared to $4 million or 2.7% of PT revenue in the first quarter of the previous year. SG&A during the quarter was $26 million, which is a 14.4% improvement over the prior year, Q1, of $31 million. It was primarily driven by lower transaction costs, partially offset by higher labor-related costs.
Joseph Jordan: And on a per clinic basis. These costs were approximately $61000, which increased seven 9% year over year from 56000 in the first quarter of 2023.
Joseph Jordan: Our provision for doubtful accounts during the quarter was $5 million or 3% of PT revenue compared to $4 million or two 7% of PT revenue in the first quarter prior year.
Joseph Jordan: SG&A during the quarter was $26 million, which is a 14, 4% improvement over the prior year Q1 of $31 million and it's primarily driven by lower transaction costs, partially offset by higher labor related costs.
Joseph Jordan: Non-cash impairment charges in the first quarter of 2024 were $0.5 million. Our operating loss excluding impairment charges in the first quarter of 2024 was $4 million, which improved from a loss of $11 million in the first quarter of the prior year, and that really reflects higher revenue from higher visit volume and rate, as previously discussed. Notable below the line items during the quarter included income resulting from a decrease in our fair value second link pick notes, our contingent common shares, and warrants, which totaled six million dollars. Those instruments are marked to market at fair value every quarter based on evaluation analysis as of quarter end, which in this case was March 31st, 2024.
Joseph Jordan: Non cash impairment charges in the first quarter of 2024 were <unk> 5 million.
Joseph Jordan: Our operating loss, excluding impairment charges in the first quarter 2024 was $4 million, which improved from a loss of $11 million in the first quarter of the prior year and that really reflects higher revenue from higher visit volume and rate as previously discussed.
Joseph Jordan: Notable below the line items during the quarter included income, resulting from a decrease in our fair value second lien Pik notes are contingent common shares and warrants, which totaled $6 million. Those instruments are mark to market to fair value every quarter based on evaluation analysis as of quarter end, which in this case.
Was March 31 2024.
Joseph Jordan: Our interest expense during the quarter was $14 million, which increased 3.9% year over year, and that's mainly due to a lower interest rate hedge benefit. It is partially offset by lower balances on our senior secured term loan and revolver. The income tax benefit for the quarter was $100,000, which compares to an income tax expense of $100,000 in the first quarter of last year.
Joseph Jordan: Our interest expense during the quarter was $14 million, which increased three 9% year over year, and that's mainly due to lower interest rate hedge benefit. It is partially offset by lower balances on our senior secured term loan and revolver.
Joseph Jordan: Income tax benefit for the quarter was $100000, which compares to an income tax expense of $100000 in the first quarter of last year.
Joseph Jordan: And the net loss during the quarter was $14 million compared to $25 million in Q1 of 2023. Adjusted EBITDA during the first quarter was $6 million, which is a 3.6% margin and improved from $4.8 million in the first quarter of the prior year. With the year-over-year improvement in Justity, but EBITDA primarily driven by higher revenue, cash use during the first quarter was $13 million compared to $20 million last year. With an operating cash use of $39 million, compared to $14 million last year, and the increase in operating cash use is driven by a higher accounts receivable balance and higher payout of accrued annual incentive payments.
Joseph Jordan: And net loss during the quarter was $14 million compared to $25 million in Q1 of 2023.
Joseph Jordan: Adjusted EBITDA during the first quarter was $6 million, which is a three 6% margin and improved from $4 8 million in the first quarter of the prior year.
Joseph Jordan: With the year over year improvement in adjusted EBITDA, EBITDA, primarily driven by higher revenue.
Joseph Jordan: Cash used during the first quarter was $13 million compared to $20 million last year.
Joseph Jordan: With operating cash use of $39 million compared to $14 million last year and the increase in operating cash use is driven by higher accounts receivable balance and higher payout of accrued annual incentive payments.
Joseph Jordan: Our cash used in investing activities was $2 million in the current year compared to $5 million last year. And financing cash generated in the first quarter was $28 million compared to cash used for financing of $1 million in the first quarter of the prior year, with the increase driven primarily by our $25 million delay draw term loan, which was fully drawn in January. As of March 31, 2024, available liquidity was approximately $24 million, which consisted of cash and cash equivalents.
Joseph Jordan: Our cash used in investing activities was $2 million in the current year compared to $5 million last year.
Joseph Jordan: And financing cash generated in the first quarter was $28 million.
Joseph Jordan: Compared to cash used from financing of $1 million in the first quarter of the prior year with.
Joseph Jordan: With the increase driven primarily by our $25 million delayed draw term loan which was fully drawn in January.
Joseph Jordan: Okay.
Joseph Jordan: As of March 31, 2024 available liquidity was approximately $24 million, which consisted of cash and cash equivalents.
Joseph Jordan: And then finally, I'll move on to guidance. While we had initially planned to share full-year guidance today, we decided to instead focus our expectations on the next quarter, and Sharon talked about this a little bit. We'll continue to provide a quarterly outlook as the business grows. As many of you know, our performance is sensitive to our hiring efforts, and we remain vigilant in navigating the challenging labor landscape and labor market.
And then finally I'll move on to guidance, while we had initially planned to share full year guidance today, we decided instead focus our expectations on the next quarter and Sharon talked about this a little bit we will continue to provide a quarterly outlook as the business grows.
Joseph Jordan: As many of you know our performance is sensitive to our hiring efforts and we remain vigilant in navigating the challenging labor land labor landscape in labor market.
Joseph Jordan: Despite these challenges, we've made solid progress over the last several quarters, and we do expect to keep growing over the prior year as we move through 2024. We anticipate revenue in the second quarter to be in the range of $185 million to $195 million, and that equates to roughly 7 to 13 percent growth over Q2 of the prior year, and it reflects the continued strong demand for PT at ATI.
Joseph Jordan: Despite these challenges we have made solid progress over the last several quarters and we do expect to keep growing over the prior year as we move through 2024.
Joseph Jordan: We anticipate the revenue in the second quarter to be in the range of 185 million to $195 million and that equates to roughly a 7% 13% growth over Q2 of the prior year.
Joseph Jordan: And it reflects the continued strong demand for Pts at ATI.
Joseph Jordan: For adjusted EBITDA, we expect the second quarter to be in a range of $15 to $20 million, which is between 60% and 114% growth over Q2 of the prior year, and it approximates and adjusts for a margin of between 8 and 11%. Now I'll turn the call back over to Sharon for closing remarks.
Joseph Jordan: For adjusted EBITDA, we expect the second quarter to be in a range of $15 million to $20 million, which is between 60 and 114% growth over Q2 of the prior year.
Joseph Jordan: And it approximates an adjusted EBITDA margin of between eight and 11%.
Joseph Jordan: Now I will turn the call back over to Sharon for closing remarks. Thanks, Joe.
Sharon Vitti: So, as you can see, Q1 was a good start to the year, and we are energized to extend the momentum and grow the business to benefit all of our stakeholders. I remain confident in the people we have and the good work we are doing to differentiate ATI and help people live healthier lives. We have a lot of work to do to realize our full potential, and I know we have the tenacity to achieve our goals. I'm eager to share our progress as we move forward through 2024. I'll now hand it back to the operator to open the call for Q&A.
Sharon: So as you can see Q1 was a good start to the year and we are energized to extend the momentum and grow the business to benefit all of our stakeholders.
I remain confident in the people.
Sharon: We have and the good work, we're doing to differentiate ATI and help people live healthier lives.
Sharon: We have a lot of work to do to realize our full potential and I know, we have the tenacity to achieve our goals.
Sharon: I'm eager to share our progress as we move forward through 2024.
Speaker Change: I will now hand, it back to the operator to open the call for Q&A.
Operator: Thank you. We will now begin the question-and-answer session. To ask a question, please press star 1 on your telephone keypad. To withdraw your question, again press star 1. Your first question comes from Brian Tanquilut from Jeffreys. Please go ahead.
Speaker Change: Thank you we will now begin the question and answer session to ask a question. Please press star one on your telephone keypad to withdraw your question again press Star one.
Speaker Change: First question comes from Brian <unk> from Jefferies. Please go ahead.
Brian Gil Tanquilut: Hey, good afternoon. Maybe Sharon, you know, just curious about your thoughts on sustainability or your ability to squeeze more rate growth because, obviously, pretty strong performance in the quarter and a big driver of revenue growth for Q1. So just curious how you're viewing that as we think about the rest of the year.
Brian: Hey, good afternoon.
Brian: Maybe you Sharon.
Brian: Just curious on your thoughts on the sustainability of your ability to squeeze more rate growth, because obviously pretty strong performance in the quarter and a big driver of that.
Brian: Revenue growth for Q1, so just curious how youre viewing that as we think about the rest of the year.
Sharon Vitti: Great question, Brian. Thanks for joining us. I would say, as Chris and I both mentioned, we've made really good progress year over year, and I would say that those were the go guts that were a little bit easier. And so we still have some room as we look at the rest of the year, but I think there's less of a predictability around how those will play out. We're certainly going to go after them on the revenue side and with the payers, but I think we're getting to, you know, things that are a little bit harder to predict the outcome of.
Brian: Great question, Brian and thanks for joining.
Brian: I would say as Chris and I. Both mentioned, we've made really good progress year over year, and I would say that those were the.
Brian: They go gets that were a little bit easier.
So we still have some room as we look at the rest of the year, but I think there is a less there's less of the predictability around how those will play out we're certainly going to go after them on the revenue side and with the payers.
Brian: But I think where we're getting to.
Things are a little bit harder to predict the outcome of yes.
Joseph Jordan: And the only thing, Brian and Joe, the only thing I'd add is, from a modeling perspective for ourselves internally, we're certainly going after everything Sharon talked about. We're assuming a relatively consistent rate. But, similar to previous years, one place you will see a benefit is that we would assume bad debt continues to improve throughout the year. We get a little bit harder in Q1 with deductible resets and then tend to get favorable treatment throughout the year. So it's not the revenue rate per se, but it obviously impacts results, and it's related to revenue.
Brian: And the only thing Brian It's Joe the only thing I'd add is from a modeling perspective for ourselves internally.
Speaker Change: Certainly going after everything Sharon talked about we're assuming relatively consistent rate.
Speaker Change: But similar to previous years, one place you will see a benefit as we would assume that bad debt continues to improve throughout the year. We did have a little bit harder in Q1 with deductible resets and then tend to get favorability throughout the year. So it's not it's not revenue rate per se, but it obviously.
Speaker Change: So all of that is related to revenue.
Sharon Vitti: I mean, we control what we can control, and I think Chris is on top of the revenue cycle piece. And then we certainly look at our mix, and I did mention our, you know, increasing presence in workers' comp and API, which is always helpful to us. Chris, do you have anything you want to add?
Speaker Change: We control what we can control and I think Chris is on top of the revenue cycle piece and then we certainly look at our mix and I did mention our.
Speaker Change: Our.
Speaker Change: <unk> presence in the workers' comp and API, which is always helpful to us Chris.
Speaker Change: Chris do you have anything you want to add.
Christopher Cox: Erin, you just hit the component I was going to say, which is, you know, we continue to focus on growing those areas of the business, and that will be one of our major levers as we look forward to the rest of the year. And, you know, the payer negotiations, to go back to your comments, are, you know, largely locked in for 2024 at this point, with, you know, a few remaining negotiations ongoing. But we continue to work longer term on the influence of the industry, as you mentioned.
Darren you just hit the component of that was going to say, which is we continue to focus on growing those areas of the business.
Speaker Change: And that will be one of our major levers as we look forward for the rest of the year.
Speaker Change: And the payer negotiations to go back to your comments are.
Speaker Change: Largely locked in for 2024 at this point.
<unk> remaining.
Speaker Change: Negotiations ongoing.
Speaker Change: But we continue to work longer term on the influence of the industry is as you mentioned.
Speaker Change: Thanks, Craig got it Okay that makes US then maybe my second question.
Sharon Vitti: Then maybe my second question, you called this out in your prepared remarks, right? The productivity rate was probably a tad below where it was. And then, you know, some pressure on labor rates there just a little bit. Just curious how you're thinking about or how we should be thinking about labor costs and productivity.
Craig: You called this out in your prepared remarks, the productivity rate was probably a tad below where it was.
And then.
Speaker Change: Some some pressure on labor rates, there just a little bit just curious how you're thinking about or how we should be thinking about.
Speaker Change: The labor costs.
Productivity.
Sharon Vitti: So on the productivity side, you know exactly what the year-over-year, or quarter-over... The year-over-year quarter productivity was, and then what the changes were. And I would say there were some one-time things that caused us to have to bring that productivity down, and we have solved for those and can see us continuing to see improvements in our productivity. On the labor rate side, this is a tight market with a lot of headwinds, and so we've looked at different levers that allow us to be able to, where appropriate, be successful around recruiting. So I would say the labor rate piece is going to continue to be something of a lever.
Speaker Change: So on the on the productivity side.
Yes.
Speaker Change: Exactly.
Speaker Change: What the year over year or quarter over.
Alright.
Speaker Change: Year over year quarter productivity was and then what the changes were.
Speaker Change: And I would say there are some.
Speaker Change: One time things that caused us to have.
Speaker Change: To bring that productivity down and we have solved for those and I can see us continuing to see improvements in our productivity.
Speaker Change: On the labor rates side.
Speaker Change: This is a tight market with a lot of headwinds and so we've looked at different levers that allow us to be able to where appropriate be successful around recruiting.
Speaker Change: So I would say the labor rate pieces, it's going to continue to be something a lever that we pull within reason in areas, where we have the demand.
Joseph Jordan: Maybe the only thing to add is, from a pure inflation perspective, we saw roughly 5%, but as we hire, there could be incentives, like one-time incentives that come through as we continue to hire. So the more successful we are, the more we may have some one-time incentives. And then the other thing is, as you know, productivity plays into your labor rate per visit. So the more that is apples-to-apples with the prior year or better than the prior year, the more it relieves some of the rate-per-visit pressure.
Speaker Change: Maybe the only thing to add is.
Speaker Change: From a pure inflation perspective, we saw roughly about 5%.
Speaker Change: But as we hire there could be incentives like onetime incentives come through as we continue to hire some of the more successful we are them or we may have some one times incentives and then the other thing as you know productivity plays into your labor rate per visit.
Speaker Change: The more of that as an apples to apples with the prior year or better than the prior year. The more relieve some of the rate per visit pressure.
Brian Gil Tanquilut: Got it. And Sharon, congrats on the two-year mark, by the way. Thank you.
Got it and Sharon congrats on the two year Mark by the way. Thank you.
Speaker Change: Thank you.
Operator: Thanks for the questions. That concludes our question and answer session. I will now turn the call back to Sharon Vitti for her closing remarks.
Speaker Change: Thanks for taking lessons.
Speaker Change: That concludes our answer a question and answer session I will now turn the call back to Sharon <unk> for closing remarks.
Sharon Vitti: Thank you, everyone. Thank you for joining us for this call. And we look forward to getting together for our next quarterly earnings call, which will be in August. So, thank you all for your participation and support, and we will be in touch soon.
Sharon: Thank you everyone. Thanks for joining us for this call.
Sharon: And we are.
Sharon: Look forward to getting together.
Sharon: For our next quarterly earnings call, which will be in August.
Sharon: Thank you all for your participation and support and we will be in touch soon.
Operator: This concludes today's conference call. Thank you for your participation, and you may now disconnect.
Speaker Change: This concludes today's conference call. Thank you for your participation and you may now disconnect.
Speaker Change: Okay.
Yeah.