ATI Physical Therapy Reports Second Quarter 2024 Results

Drove Continued Growth in Visits, Rate per Visit, Revenue and Adjusted EBITDA

Advanced Company’s Capacity to Expand Patient Access to High-Quality Care

BOLINGBROOK, Ill., Aug. 5, 2024 /PRNewswire/ — ATI Physical Therapy, Inc. (NYSE: ATIP) (“ATI” or the “Company”), a nationally recognized outpatient physical therapy provider in the United States, today reported financial results for the second quarter ended June 30, 2024.

“We again experienced notable growth in the second quarter, with over 1,500 more patient visits each day compared to the same period last year,” said Sharon Vitti, Chief Executive Officer of ATI. “Demand for our services remains strong, and our growing clinical base continues to execute on providing access and quality outcomes for our patients.  Because of their hard work, we saw year-over-year growth in the business.”

Ms. Vitti added, “We also saw higher rates per visit compared to the prior year due to the dedication of our payor and revenue cycle management teams.  Equally exciting, we were recently notified by CMS that we have received an exceptional MIPS rating for the 5th consecutive year, a distinction recognizing the high-quality care we deliver every day.  The ATI family is proud of this honor.”

Joe Jordan, Chief Financial Officer of ATI, commented, “Our financial progress is a direct result of our strategic focus on people and operations.  For the third quarter, we are guiding revenue to be between $180 million and $190 million and Adjusted EBITDA1 to be between $9 to $14 million.”

Second Quarter 2024 Results

Supplemental tables of key performance metrics for the first quarter of 2022 through the second quarter of 2024 are presented after the financial statements at the end of this press release. Commentary on performance results in the second quarter of 2024 is as follows:

Net revenue was $188.1 million compared to $172.3 million in the second quarter of 2023, an increase of 9.2%.

Net patient revenue was $172.8 million compared to $156.9 million in the second quarter of 2023, an increase of 10.1%. See below for discussion of drivers to net patient revenue (i.e., patient visits and Rate per Visit).

Other revenue was $15.4 million in both the second quarter of 2024 and 2023.

Visits per Day (“VPD”) were 24,921 compared to 23,412 in the second quarter of 2023, an increase of 6.4%, driven by the Company’s increased capacity to see patients through a higher number of clinical FTE and higher productivity per clinical FTE.

VPD per Clinic was 28.4 compared to 25.7 in the second quarter of 2023, an increase of 2.7 visits, primarily driven by the Company’s continued focus on clinic operational excellence and footprint optimization.

Rate per Visit (“RPV”) was $108.32 compared to $104.74 in the second quarter of 2023, an increase of 3.4%, driven primarily by improved rates with certain key payors, operational improvements in revenue cycle management, and service mix.

Salaries and related costs were $102.5 million compared to $95.3 million in the second quarter of 2023, an increase of 7.6%, primarily due to added clinicians and support staff and wage inflation.

PT salaries and related costs per visit were $56.22 compared to $54.81 in the second quarter of 2023, an increase of 2.6%, mainly due to higher compensation per FTE, partially offset by a higher labor productivity of 9.6 VPD per clinical FTE compared to 9.5 in the second quarter of 2023.

Rent, clinic supplies, contract labor and other was $53.2 million compared to $50.4 million in the second quarter of 2023, an increase of 5.4%, primarily driven by higher spending on contract labor and third-party services, partially offset by a lower number of clinics.

PT rent and other per clinic was $59,232 compared to $53,866 in the second quarter of 2023, an increase of 10.0%, primarily due to higher contract labor usage and higher spend on third-party services.

Provision for doubtful accounts was $2.4 million in both the second quarter of 2024 and 2023. PT provision as a percentage of net patient revenue was 1.4% in the second quarter of 2024 compared to 1.5% in the second quarter of 2023.

Selling, general and administrative expenses were $23.1 million compared to $36.6 million in the second quarter of 2023, a decrease of 36.9%, primarily driven by lower transaction costs, higher legal cost insurance reimbursements and lower corporate insurance costs.

Non-cash long-lived asset impairment charges totaled $0.3 million compared to no impairment charges in the second quarter of 2023.

Fair value remeasurement gains related to the 2L notes, warrant liability, and contingent common shares liability totaled $5.8 million compared to $8.0 million in the second quarter of 2023. The fair value remeasurement gains in the second quarter of 2024 were primarily driven by decreases in the Company’s share price during the period.

Interest expense during the quarter was $14.9 million compared to $16.7 million in the second quarter of 2023, a decrease of 10.7%, primarily due to lower principal balance outstanding partially offset by lower interest rate hedge benefits recognized.

Income tax (benefit) expense was $(0.0) million, compared to $0.1 million in the second quarter of 2023.

Net loss was $2.6 million compared to $21.7 million in the second quarter of 2023.

Net loss available to common stockholders was $10.6 million compared to $73.1 million in the second quarter of 2023 primarily due to lower net loss and a lower Series A Senior Preferred Stock redemption value adjustment.

Fully diluted Class A common stock loss per share was $2.43 compared to $17.74 in the second quarter of 2023.

Adjusted EBITDA2 was $16.6 million compared to $9.3 million in the second quarter of 2023, an increase of 77.5%, primarily due to higher revenue net cost of services.

Adjusted EBITDA3 margin was 8.8% compared to 5.4% in the second quarter of 2023.

Net cash used was $3.8 million year-to-date compared to $45.5 million in the first six months of 2023.

Operating cash used was $27.9 million year-to-date compared to $5.3 million in the first six months of 2023, with the increase driven primarily by changes in current assets and current liabilities related to timing of collections and payments, as well as by higher incentive compensation paid to employees, partially offset by lower net loss.

Investing cash use was $5.2 million year-to-date compared to $10.1 million in the first six months of 2023, with the decrease primarily due to fewer new clinic openings.  No clinics were opened year-to-date compared to 10 clinics in the first six months of 2023.

Financing cash generated was $29.2 million year-to-date, which included a $25.0 million 2L note draw and revolver net proceeds of $6.2 million.  Financing cash used was $30.0 million in the first six months of 2023, which included revolver net repayments of $24.8 million and financing transaction costs of $6.3 million.

As of June 30, 2024, total liquidity was $33.0 million comprised of cash and cash equivalents.

Additionally, ATI closed 2 clinics and divested 4 clinics during the quarter in connection with the Company’s ongoing footprint optimization initiative, resulting in 878 clinics at the end of the quarter.

Q3-2024 Guidance

For the third quarter of 2024, ATI expects net revenue to be in the range of $180 million to $190 million, which represents approximately 1% to 7% year-over-year growth. The Company anticipates it will continue growing patient visits through 2024 as it executes on its commercial, people, and operations strategies. ATI expects Adjusted EBITDA4 in the third quarter of 2024 to be in the range of $9 million to $14 million.

Second Quarter 2024 Earnings Conference Call

Management will host a conference call at 5 p.m. Eastern Time on August 5, 2024, to review second quarter 2024 financial results. The conference call can be accessed via a live audio webcast. To join, please access the following web link, ATI Physical Therapy, Inc. Q2 2024 Earnings Conference Call, on the Company’s Investor Relations website at https://investors.atipt.com at least 15 minutes early to register, and download and install any necessary audio software. A replay of the call will be available via webcast for on-demand listening shortly after the completion of the call, at the same web link, and will remain available for approximately 90 days.

About ATI Physical Therapy

At ATI Physical Therapy, we are committed to making every life an active life. We provide convenient access to high-quality care to prevent and treat musculoskeletal (MSK) pain. Our approximately 900 locations in 24 states and virtual practice operate under the largest single-branded platform built to support standardized clinical guidelines and operating processes. With outcomes from more than 3 million unique patient cases, ATI strives to utilize quality standards designed to deliver proven, predictable, and impactful patient outcomes.  From preventative services in the workplace and athletic training support to outpatient clinical services and online physical therapy via our online platform, CONNECT™, a complete list of our service offerings can be found at ATIpt.com. ATI is based in Bolingbrook, Illinois.

Forward-Looking Statements 

All statements other than statements of historical facts contained in this communication are forward-looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of the words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “would,” “plan,” “project,” “forecast,” “predict,” “potential,” “seem,” “seek,” “future,” “outlook,” “target” or similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding the impact of physical therapist attrition and ability to achieve and maintain clinical staffing levels and clinician productivity, anticipated visit and referral volumes and other factors on the Company’s overall profitability, and estimates and forecasts of other financial and performance metrics and projections of market opportunity. These statements are based on various assumptions, whether or not identified in this communication, and on the current expectations of the Company’s management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as and must not be relied on by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of the Company.

These forward-looking statements are subject to a number of risks and uncertainties, including:

our liquidity position raises substantial doubt about our ability to continue as a going concern;risks associated with liquidity and capital markets, including the Company’s ability to generate sufficient cash flows, together with cash on hand, to run its business, cover liquidity and capital requirements and resolve substantial doubt about the Company’s ability to continue as a going concern;our ability to meet financial covenants as required by our 2022 Credit Agreement, as amended;risks related to outstanding indebtedness and preferred stock, rising interest rates and potential increases in borrowing costs, compliance with associated covenants and provisions and the potential need to seek additional or alternative debt or capital financing in the future;risks related to the Company’s ability to access additional financing or alternative options when needed;our dependence upon governmental and third-party private payors for reimbursement and that decreases in reimbursement rates, renegotiation or termination of payor contracts, billing disputes with third-party payors or unfavorable changes in payor, state and service mix may adversely affect our financial results;federal and state governments’ continued efforts to contain growth in Medicaid expenditures, which could adversely affect the Company’s revenue and profitability;payments that we receive from Medicare and Medicaid being subject to potential retroactive reduction;changes in Medicare rules and guidelines and reimbursement or failure of our clinics to maintain their Medicare certification and/or enrollment status;compliance with federal and state laws and regulations relating to the privacy of individually identifiable patient information, and associated fines and penalties for failure to comply;risks associated with public health crises, epidemics and pandemics, as was the case with the novel strain of COVID-19, and their direct and indirect impacts or lingering effects on the business, which could lead to a decline in visit volumes and referrals;our inability to compete effectively in a competitive industry, subject to rapid technological change and cost inflation, including competition that could impact the effectiveness of our strategies to improve patient referrals and our ability to identify, recruit, hire and retain skilled physical therapists;our inability to maintain high levels of service and patient satisfaction;risks associated with the locations of our clinics, including the economies in which we operate and the potential need to close clinics and incur closure costs;our dependence upon the cultivation and maintenance of relationships with customers, suppliers, physicians and other referral sources;the severity of climate change or the weather and natural disasters that can occur in the regions of the U.S. in which we operate, which could cause disruption to our business;risks associated with future acquisitions, divestitures and other business initiatives, which may use significant resources, may be unsuccessful and could expose us to unforeseen liabilities;risks associated with our ability to secure renewals of current suppliers and other material agreements that the Company currently depends upon for business operations;failure of third-party vendors, including customer service, technical and information technology (“IT”) support providers and other outsourced professional service providers to adequately address customers’ requests and meet Company requirements;risks associated with our reliance on IT infrastructure in critical areas of our operations including, but not limited to, cyber and other security threats;a security breach of our IT systems or our third-party vendors’ IT systems may subject us to potential legal action and reputational harm and may result in a violation of the Health Insurance Portability and Accountability Act of 1996 or the Health Information Technology for Economic and Clinical Health Act;maintaining clients for which we perform management and other services, as a breach or termination of those contractual arrangements by such clients could cause operating results to be less than expected;our failure to maintain financial controls and processes over billing and collections or disputes with third-party private payors could have a significant negative impact on our financial condition and results of operations;our operations are subject to extensive regulation and macroeconomic uncertainty;our ability to meet revenue and earnings expectations;risks associated with applicable state laws regarding fee-splitting and professional corporation laws;inspections, reviews, audits and investigations under federal and state government programs and third-party private payor contracts that could have adverse findings that may negatively affect our business, including our results of operations, liquidity, financial condition and reputation;changes in or our failure to comply with existing federal and state laws or regulations or the inability to comply with new government regulations on a timely basis;our ability to maintain necessary insurance coverage at competitive rates;the outcome of any legal and regulatory matters, proceedings or investigations instituted against us or any of our directors or officers, and whether insurance coverage will be available and/or adequate to cover such matters or proceedings;general economic conditions, including but not limited to inflationary and recessionary periods;our facilities face competition for experienced physical therapists and other clinical providers that may increase labor costs, result in elevated levels of contract labor and reduce profitability;risks associated with our ability to attract and retain talented executives and employees amidst the impact of unfavorable labor market dynamics, wage inflation and recent reduction in value of our share-based compensation incentives, including potential failure of steps being taken to reduce attrition of physical therapists and increase hiring of physical therapists;risks resulting from the 2L Notes, IPO Warrants, Earnout Shares and Vesting Shares being accounted for as liabilities at fair value and the changes in fair value affecting our financial results;further impairments of goodwill and other intangible assets, which represent a significant portion of our total assets, especially in view of the Company’s recent market valuation;our inability to maintain effective internal control over financial reporting;risks related to dilution of Common Stock ownership interests and voting interests as a result of the issuance of 2L Notes and Series B Preferred Stock;costs related to operating as a public company; andrisks associated with our efforts and ability to regain and sustain compliance with the listing requirements of our securities on the New York Stock Exchange (“NYSE”).

If any of these risks materialize or our assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements.

Investors should also review those factors discussed in the Company’ Form 10-K and Form 10-Q for the fiscal year ended December 31, 2023, and quarter ended June 30, 2024, respectively, under the heading “Risk Factors,” and other documents filed, or to be filed, by ATI with the SEC. New risk factors emerge from time to time and it is not possible to predict all such risk factors, nor can the Company assess the impact of all such risk factors on the business of the Company or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements. Readers should not place undue reliance on forward-looking statements. The Company undertakes no obligations to publicly update or revise any forward-looking statements after the date they are made or to reflect the occurrence of unanticipated events, whether as a result of new information, future events or otherwise, except as required by law.

In addition, statements of belief and similar statements reflect the beliefs and opinions of the Company on the relevant subject. These statements are based upon information available to the Company, as applicable, as of the date of this communication, and while the Company believes such information forms a reasonable basis for such statements, such information may be limited or incomplete, and statements should not be read to indicate that the Company has conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.

Non-GAAP Financial Measures

To supplement the Company’s financial information presented in accordance with GAAP and aid understanding of the Company’s business performance, the Company uses certain non-GAAP financial measures, namely “Adjusted EBITDA” and “Adjusted EBITDA margin.” ATI believes Adjusted EBITDA and Adjusted EBITDA margin (i.e., Adjusted EBITDA divided by Net Revenue) assist investors and analysts in comparing the Company’s operating performance across reporting periods on a consistent basis by excluding items that it does not believe are indicative of ATI’s core operating performance.

Management believes these non-GAAP financial measures are useful to investors in highlighting trends in our operating performance, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which ATI operates and capital investments. Management uses these non-GAAP financial measures to supplement GAAP measures of performance in the evaluation of the effectiveness of the Company’s business strategies, to make budgeting decisions, to establish discretionary annual incentive compensation and to compare ATI’s performance against that of other peer companies using similar measures. Management supplements GAAP results with non-GAAP financial measures to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone.

Adjusted EBITDA and Adjusted EBITDA margin are not recognized terms under GAAP and should not be considered as an alternative to net income (loss) or the ratio of net income (loss) to net revenue as a measure of financial performance, cash flows provided by operating activities as a measure of liquidity, or any other performance measure derived in accordance with GAAP. Additionally, these measures are not intended to be a measure of cash available for management’s discretionary use as they do not consider certain cash requirements such as interest payments, tax payments and debt service requirements. The presentations of these measures have limitations as analytical tools and should not be considered in isolation, or as a substitute for analysis of the Company’s results as reported under GAAP. Because not all companies use identical calculations, the presentations of these measures may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company.

Please see “Reconciliation of GAAP to Non-GAAP Financial Measures” below for reconciliations of non-GAAP financial measures used in this release to their most directly comparable GAAP financial measures. We are unable to provide a reconciliation between forward-looking Adjusted EBITDA to its comparable GAAP financial measure without unreasonable effort, due to the high difficulty and impracticability of predicting certain amounts required by GAAP with a reasonable degree of accuracy by the date of this release.

Contacts:

Investor Relations
Joanne Fong
SVP, Treasurer and Head of Investor Relations
ATI Physical Therapy
[email protected]
331-273-4891

Media Inquiries
Genesa Garbarino
Garbo Communications
[email protected]
424-499-7025

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SOURCE ATI Physical Therapy