Q3 2024 ATI Physical Therapy Inc Earnings Call
Good afternoon everyone and welcome to ATI's fiscal therapies third quarter 2024 earnings conference call and webcast.
All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions.
The Ask for Questions During This Time Simply Press Star Followed by the number one on your telephone keypad. If you would like to withdraw your question, you can press star 1 again. And please note that this event is being recorded.
Speaker Change: On the call today is Sharon Vitti, Chief Executive Officer, Emily Tansey, Chief People Officer, and Joseph Jordan, Chief Financial Officer. I will now turn the call over to Mr. Jordan.
Joseph Jordan: Good afternoon everyone and thank you for joining us today. Before we begin, I'd like to remind everyone that certain statements made during this call will be forward-looking and subject to various risks and uncertainties.
Joseph Jordan: The statements reflect our current expectations based on our beliefs, the assumptions, and information currently available to us. And while we believe these expectations are reasonable, we undertake no obligation to revise any statements to reflect changes that occur after the call.
Joseph Jordan: Descriptions of some of the factors that could cause actual results to differ materially from these four looking statements can be found in the risk factor section, the company's filing with the FCC.
Joseph Jordan: In addition, please note that we'll be discussing certain non-gap financial measures that we believe are important to evaluate in our performance.
Joseph Jordan: Details on the relationship between those non-gap financial measures to the most comparable gap measures, as well as a reconciliation between the two can be found in the earnings press release that is posted on ATI's website and filed with the SEC.
Joseph Jordan: with that I'll turn the call over to Sharon to kick us off.
Sharon: Thank you, Jo. Good afternoon, everyone.
Sharon: I appreciate you taking time to join us today.
Sharon: So I will present today along with Joe Jordan and Eimile Tansey and we also have Chris Cox.
Joseph Jordan: Eric Kantsons, Scott Ferguson on the Call today.
Joseph Jordan: Earlier today, we reported our third quarter 2020 for the results and provided financial guidance for the fourth quarter.
Joseph Jordan: I'm super excited to share that ADI delivered another strong quarter.
Joseph Jordan: Let me start by providing an overview of our key performance highlights in ongoing initiatives. Before handing in over to Joe to cover our financials in more detail and to discuss our expectations on the remainder of the year.
Joseph Jordan: To begin, we saw Robin even adjusted the detail of the girl year over year.
Joseph Jordan: We continue to see positive momentum across the business and our police to once again achieve both our revenue and adjust the diva de guidance for the third quarter.
Joseph Jordan: This demonstrates the continued strength of our business and the growing demand for APIs for the system.
Joseph Jordan: The trust we have built with referring to the vision of the patients remained a key driver of our performance.
Joseph Jordan: Our patient referrals per day in the quarter-group more than 5% year over year.
Joseph Jordan: Our clinic saw over 14 more, 1400 more patients visits per day compared to Q3 of last year.
Joseph Jordan: And this up-tick inpatient volume is truly a testament to the strength of our clinical team and that you are able to provide to the communities we serve.
Joseph Jordan: Riding access to high quality patient care.
Joseph Jordan: One of the key highlights of this quarter with the continued expansion of our clinical teams supported by our ongoing people strategies and culture refresh.
Joseph Jordan: Emily Tansey, Archie Pooble Officer. We'll share more on this later.
Joseph Jordan: So our attention remains fixed on continuous operational improvements.
Joseph Jordan: We've robust demand and more stability around our workforce. We continue to build on our insights and find to our operations.
Joseph Jordan: The mission productivity proves by more than 0.1 when compared to Q3 of last year.
Joseph Jordan: This is driven by operational enhancements such as better resource allocation and streamlined clinic work flows.
Joseph Jordan: We improved access for patients without sacrificing quality of care.
Joseph Jordan: Our clinic for Bayes Year year over year seeing over two more visits per day per clinic compared to Q3 of last year.
Joseph Jordan: The law of some clinic still have excess capacity. We strive to match the end with supply and to leverage our clinical real estate and fix costs.
Joseph Jordan: In a quarter week continue to execute on our strategic real estate plan to refine our geographic footprint aligned with patient population needs.
Joseph Jordan: We closed eight clinics and divest is one as part of that plan.
Joseph Jordan: Our strategy teams have clearly delivered resulting in the third quarter. And pleased about how our team have maintained our standards of care throughout this growth.
Joseph Jordan: Our Google Star rating remains an interest of 4.9 out of 5.
Joseph Jordan: which speaks to the high level of patient satisfaction we consistently achieve.
Joseph Jordan: Patient Experience is important and it's a heart of our purpose.
Joseph Jordan: This rating is a direct reflection of our commitment to deliver exceptional care at every visit to every patient.
Joseph Jordan: I'm very proud of the incredible people we have at HCI who are committed to enhancing the lives of our patients every day.
Joseph Jordan: They are the foundation of what we've achieved.
Joseph Jordan: A modern to be a part of this outstanding organization that continues to lead in the musculoskeletal care space and is driven by our shared purpose of making every life in active life.
Joseph Jordan: With that, I'll turn the call over to Emily.
Emily Tansey: Thanks, Sharon.
Emily Tansey: I'd like to take a moment to discuss the current labor market and highlight the progress we've made with our initiatives to attract and retain skilled providers, enabling us to expand access to high quality care.
Joseph Jordan: While the labor market remains challenging and we expect these headwinds to persist for the foreseeable future, we are navigating them with determination.
Joseph Jordan: Every local market has its own unique characteristics.
Joseph Jordan: On a macro level, the mismatch between the supply of physical therapists and the growing demand for PT services will take time to balance out.
Joseph Jordan: Pipe these challenges, we continue to make progress. In the third quarter, we grew our clinician headcount by 3% year over year, an annualized clinician nutrition helps study at 21%, which we believe is in line with the industry.
Joseph Jordan: I am confident that we will continue to grow by focusing on what we can control.
Joseph Jordan: such as staying attuned to the market trends, listening to our employees and nurturing our culture, a culture that stands for excellence and care delivery, a strong provider experience and exceptional customer service.
Joseph Jordan: These values were reflected in our recent Employee Engagement Survey, where we received overwhelmingly positive feedback, particularly in areas such as rewarding work, supportive leadership and fostering an inclusive environment.
Joseph Jordan: We also identified opportunities for improvement and were eager to use this feedback to enhance the employee experience further and solidify ACI as the employer of choice.
Joseph Jordan: These achievements show that we are doing the right things for both our providers and our patients, helping us fulfill our purpose to make every life an active life.
Joseph Jordan: I want to extend my gratitude to the entire HR team for their hard work and dedication. We have many exciting opportunities ahead of us and remain focused on improvements that allow our clinicians to operate at the top of their license.
Joseph Jordan: I'm incredibly proud of ATI's strong brand our vibrant culture and the progress we've made this year in strengthening that culture. ATI is truly defined by its people and I'm excited to continue building on the work we've done to ensure ATI remains a place where people can learn grow and thrive.
Speaker Change: Now I'd like to turn the call over to Jo to discuss our financial performance in the quarter.
Speaker Change: Thank you, Emily. As Emily mentioned, I'll talk about our third quarter 2024 financial performance and I'll also talk about Q4 guidance.
Speaker Change: Starting out with third quarter results, or net revenue in the quarter was $190 million, which is the 7.1% increase year over year from 177 million.
Speaker Change: And if we dive down deeper, our net patient revenue was $175 million.
Speaker Change: which is a 7.7% increase year over year, all the revenue was $15 million essentially flat over the prior year.
Speaker Change: This is per day per clinic which Sharon talked about a little bit earlier with 28.3 during the quarter which increased 2.4 visits year over year from 25.9 in Q3 of the prior year and that does reflect our continued efforts to improve utilization of clinic capacity.
Speaker Change: A rate per visit during quarter was $190.83, which is essentially flat year over year from 1090 in the third quarter of 2023.
Speaker Change: Salaries in Related Costs in the third quarter were $16 million, which is an 8.7% increase here over year from 97 million in the prior year. And that's primarily due to more clinical and support staff.
Joseph Jordan: Some Legion Plation and having one more paid day in Q3 at 2024 when compared to the prior year.
Joseph Jordan: P.T. salaries and related costs per visitor in the quarter were $58.29 which increased 1.4% new over year from $57.47 with the increased driven primarily by wage inflation.
Joseph Jordan: and partially offset by the higher labor productivity that Sharon touched on earlier, which moved from 9.3 and Q3 of last year to 9.4 and Q3 of this year.
Joseph Jordan: ranked clinic supplies contract labor and other in the third quarter was $50,000,000, which is a 3.4% increase year over year from $53,000,000.
Joseph Jordan: and an athletic basis, these cost-war approximately $61,000, increasing $6.7 per cent year over year from $57,000 in a third quarter of the prior year, which is due to increased contractor usage and higher spend and outside services.
Joseph Jordan: Our provisions for Balfa will account for in the quarter of us approximately $5 million, which is $2.8% of PT revenue, compared to $2.1% of PT revenue last year.
Joseph Jordan: F.C. and Aterling the quarter was approximately $24 million, and decreasing $1 million from $25 million in the prior year due to lower corporate insurance costs and lower spend on third party services.
Joseph Jordan: Non-Cast, Long Live, and Paramount Charges were 0.1 million during the quarter, and operating in the quarter was 1 million, which increased from a loss of 1 million in the prior year, and reflects higher revenue earned in the flow through to earnings.
Joseph Jordan: Notable to low-blind items during the quarter included losses, result in term an increase in fair value of second-leam picnodes, contingent comment shares and warrants totaling $19 million. These instruments are marked market of fair value each quarter with evaluation and also done as a quarter end.
Joseph Jordan: Interest Expenser in the quarter was $15 million, which decreased 4.7% in your over year. Primarily due to lower interest rates, partially offset by a higher principal offstanding balance.
Joseph Jordan: Income Tax Benefit for the quarter was .1 million compared to income tax expense in the prior year of .1.
Joseph Jordan: Met Boston in the quarter was $33 million, compared to $15 million in the third quarter, 2023.
Joseph Jordan: and adjusted even during the quarter with $12 million, which is a 6.4% margin. And that increased from $9 million or 5.3% margin the prior year. With the year of year increase in adjusted, even a primarily driven by higher revenue, and then the associated earnings are floated at the bottom line.
Joseph Jordan: Cash use here today was approximately $13 million compared to $63 million in the prior year.
Joseph Jordan: Breaking that down further, operating cash use was $31 million compared to $18 million in the prior year. The year of your increase was primarily driven by higher accounts receivedable on higher revenue, and higher payout of a crude annual incentive payments.
Joseph Jordan: Cash use an investing activities with $9 million, compared to $15 million last year with the decrease primarily due to fewer new clinic openings.
Joseph Jordan: and financing cash generated is $27 million in the current year compared to financing cash used of $31 million last year.
Joseph Jordan: The increase in 2025's primarily driven by the $25 million delayed drop term loan, which is fully drawn in January, and higher net revolver bar ons.
Joseph Jordan: As of September 30, 2024, available liquidity was approximately $23 million which consists of cash and cash equivalents.
Joseph Jordan: and with that I'll turn to 2024 Q4 guidance.
Joseph Jordan: Our outlook for Q4 includes anticipated revenue to be in the range of 182 to $192 million.
Joseph Jordan: and a Joseph Eivider to be in the range of 9 to 14 million.
Joseph Jordan: This guidance reflected an amics that we're seeing in the market and the strategy and tactics that we're employed to navigate and grow clinicals to eat and in turn, revenue and advance the overall clinical operations.
Joseph Jordan: with that I'll turn the call back over to Sharon's Reclosion remarks.
Speaker Change: Thank you, Joanne Eimile, appreciate of all your remarks.
Speaker Change: As we look toward the final quarter of 2024 and beyond, we remain focused on continuing to grow the business.
Speaker Change: Through the expansion of clinical workforce and the execution of our people and operational strategies.
Speaker Change: I want to take a moment to thank our entire team, the clinician, support teams and leadership.
Speaker Change: Your dedication and hard work have made these results possible.
Speaker Change: For confident in our ability to build on this momentum and to drive long-term value for our patients and plays and shareholder's alike.
Speaker Change: I'll now hand it back to the operator, Joanne Fong, in the call for Q&A.
Joanne Fong: Great, thank you. And at this time, as a reminder, to ask a question, please press star, followed by the number one on your telephone keypad. Again, if you do have a question at this time, please press star one on your telephone keypad. And we'll pause for just a moment to compile the Q&A roster.
Speaker Change: Thank you, your first question comes from the line of Brian Tenkewt from Jeffries. Your line is open.
Speaker Change: Hi, this is Laura Robley in For Brian. Thanks for taking my questions. Looking at the salaries and related costs line, curious if you can provide some insight into what you're seeing in terms of wage inflation, or are you guys seeing any signs of moderation or is there something?
Speaker Change: Persistence, you're seeing those elevated costs. And then relatedly, how much of the flight margin, compression, implied it's the midpoint of your Q4 guidance, boils down to elevated wage inflation. Thank you.
Speaker Change: Thanks for the question, Laura.
Speaker Change: Yeah, Jo, you can jump there. I wish we were seeing a break in the Asian place and we're not.
Speaker Change: and Jo can provide them numbers but it's a hydrogen that continues for us on a number of our.
Speaker Change: and the other PT providers. Jo, do you want to add some... Yeah, Christopher. Yeah.
Speaker Change: Yes, absolutely, maybe a little bit of color. What we've seen year over year is low to mid-single digit wage inflation. Can you to see pressure from a contract or to full time?
Speaker Change: Connition Perspective Meeting, we're still leveraging contractors and you can see that in our KPI table from the back of the trust release.
Speaker Change: We are seen throughout the year, Wage in Plation, Remaining Relatively Stable. We start on the seed year over year increases, but...
Speaker Change: Don't expect to see a big lift in.
Speaker Change: and Wages in Q4 relative to Q3.
Speaker Change: Part of the driver of Q4 guidance is having one last business day when you look you're over here. So, one last business day, same amount of paid days. That's not wage inflation per se, but obviously there is less of a flow through to a justice diva.
Speaker Change: Great, as a follow up, looking at
Speaker Change: and Revenue Curve Visit coming in roughly flat in the quarter. Here you can provide an update on the reimbursement landscape on the commercial side of the business and any expectations for remediation of the recently announced Medicare Rule.
Speaker Change: So I think on the commercial side, you know, they do have a great team that goes out, has great relationships with the commercial payers and I'd say we are seeing certain sub-progress from some of the commercial payers and then that's probably...
Speaker Change: Vellon, stop by some of the things.
Speaker Change: Commercial payers that are more likely to follow CMS guidance.
Speaker Change: I think the team has doing a fantastic job and I would say...
Speaker Change: We will continue to work with bears and try to either one, look at our rates and move those in the right direction or two, come up with a creative way that we can work with bears around.
Speaker Change: and the impact of PT as it relates to muscle to go a little care in the cost of care.
Speaker Change: I would say on the Medicare side we are hopeful and we're working with some of the larger organizations like an APT-TQI too.
Speaker Change: to certainly educate CMS and MedPAC and also to try to one in the short term. Have them revisit the upcoming cuts for scheduled decrees to payment for 2025.
Speaker Change: In subsequent years we've had good luck with that and so we are hard to push that and see if we can have a favorable response for 2025.
Speaker Change: and then I say at the ATI level, we are fortunate to have again very good scores and on myths.
Speaker Change: and on Mr. Performance with CMS. So that helps to soften the blow. It certainly doesn't combat it for it.
Speaker Change: but that's an offset that helps us as we move into 2020-25 and see why our CMS lands on their re-cuts.
Speaker Change: [inaudible]
Speaker Change: The only thing that I had is just remind her when you're comparing you over year, we were coming into this year with a Medicare race cut.
Speaker Change: So to have a flat rate year over year on the quarter, still involve some improvements elsewhere throughout the organization. We were seeing commercial rating increases. And the other thing I'd say is if you go back to Q3 of last year, it was our peak rate. We had talked about last year some one time items.
Speaker Change: I would think of the 109 that we had this year more compared to even our Q4 rate of high 108. So I would say kind of stepping back despite some Medicare cuts, slight improvement in rate if you were looking at it relative to like Q4 last year.
Speaker Change: Okay, thank you.
Speaker Change: Absolutely.
Speaker Change: And once again if you do have a question please press star 1 on your telephone keypad. Again if you do have a question please press star 1 at this time.
Speaker Change: The New Year's Day
Speaker Change: The New York Times,
Speaker Change: Okay, and with no further questions, I'd like to turn the call back over to Sharon Vitti.
Speaker Change: The End
Sharon Vitti: Alright, thanks everyone for your participation in our third quarter earnings call today. We look forward to connecting with you in the new year and wishing everyone a happy holiday season.
Speaker Change: Thank you.
Speaker Change: Thank you, once again, this does include today's conference call and you may now disconnect. Have a great day.