Compass Therapeutics
C4 Therapeutics

ATI Physical Therapy Reports Fourth Quarter and Full Year 2022 Results

March 16, 2023
  • Delivered on 2022 Revenue and Adjusted EBITDA1 Updated Guidance
  • Completed Refreshment of Corporate Leadership Team with the Appointment of New Chief Operating Officer and Chief Growth Officer in the Fourth Quarter
  • Enters Into Transaction Support Agreement to Increase Liquidity and Financial Flexibility

BOLINGBROOK, Ill., March 16, 2023 /PRNewswire/ -- ATI Physical Therapy ("ATI" or the "Company") (NYSE: ATIP), a nationally recognized outpatient physical therapy provider in the United States, today reported financial results for the fourth quarter and full year ended December 31, 2022.

"2022 was an important year of transformation for ATI as we completed a full refresh of our corporate leadership team, adding four seasoned executives – including two in the fourth quarter – with extensive experience in the healthcare sector," said Sharon Vitti, Chief Executive Officer of ATI. "I am also pleased that we met our 2022 revenue and Adjusted EBITDA1 updated guidance. As we head into 2023, demand for physical therapy remains strong, underscoring the relevance of our central mission to deliver high quality care and service to our patients."

Ms. Vitti continued, "During the fourth quarter, our provider teams maintained their focus on meeting the needs of our patients, which drove a recent high for clinician productivity for the period. Importantly, this momentum has continued into the new year, with January and February 2023 patient visits per clinical FTE per day also among historical highs. We also incrementally grew our provider base in the quarter, despite a continuing tight labor market, and our referral pipeline is now back to pre-pandemic levels. We look forward to building on this favorable start to 2023 as we continue executing on our strategic initiatives and delivering value to our patients, shareholders and other stakeholders."

1 The Company did not provide guidance on a GAAP basis. Refer to "Non-GAAP Financial Measures" below.

Fourth Quarter 2022 Results

Supplemental tables of key performance metrics for the first quarter of 2020 through the fourth quarter of 2022 are presented after the financial statements at the end of this press release. Commentary on performance results in the fourth quarter of 2022 is as follows:

  • Net revenue was $161.8 million compared to $156.8 million in the third quarter of 2022 and $155.8 million in the fourth quarter of 2021, an increase of 3% quarter over quarter and 4% year over year.

    • Net patient revenue was $146.2 million compared to $142.3 million in the third quarter of 2022 and $140.3 million in the fourth quarter of 2021, an increase of 3% quarter over quarter and 4% year over year. See below for discussion of drivers to net patient revenue (i.e., patient visits and Rate per Visit).

    • Other revenue was $15.6 million compared to $14.5 million in the third quarter of 2022 and $15.5 million in the fourth quarter of 2021, an increase of 8% quarter over quarter and 1% year over year.

  • Visits per Day ("VPD") were 22,316 compared to 21,493 in the third quarter of 2022 and 20,649 in the fourth quarter of 2021, an increase of 4% quarter over quarter and 8% year over year as the business continues to ramp from the impact of COVID.

    VPD per Clinic was 24.1 compared to 23.2 in the third quarter of 2022 and 22.8 in the fourth quarter of 2021, an increase of 0.9 quarter over quarter and 1.3 year over year.
  • Rate per Visit was $103.99 compared to $103.46 in the third quarter of 2022 and $104.51 in the fourth quarter of 2021, an increase of 1% quarter over quarter and a decrease of 1% year over year.

  • Salaries and related costs were $90.7 million compared to $90.3 million in the third quarter of 2022 and $88.1 million in the fourth quarter of 2021, essentially flat quarter over quarter and an increase of 3% year over year. The increase was primarily due to wage inflation and a higher proportion of physical therapists versus physical therapy assistants in support of ATI's patient care model.

    PT salaries and related costs per visit were $54.92 compared to $56.20 in the third quarter of 2022 and $55.73 in the fourth quarter of 2021, a decrease of 2% quarter over quarter and 1% year over year. The decreases were due to higher labor productivity of 9.0 VPD per clinical FTE compared to 8.7 in the third quarter of 2022 and 8.3 in the fourth quarter of 2021. The year over year decrease was partially offset by higher labor costs per clinical FTE.
  • Rent, clinic supplies, contract labor and other was $49.1 million compared to $51.4 million in the third quarter of 2022 and $47.8 million in the fourth quarter of 2021, a decrease of 4% quarter over quarter with 3 less clinics on average and an increase of 3% year over year with 19 more clinics on average.

    PT rent, clinic supplies, contract labor and other per clinic was $51,252 compared to $53,945 in the third quarter of 2022 and $50,976 in the fourth quarter of 2021, a decrease of 5% quarter over quarter and an increase of 1% year over year. The quarter over quarter decrease was primarily driven by lower use of contract labor and the impact of cost control actions. The year over year increase was primarily due to greater use of contract labor in addition to a higher cost for contract labor.

  • Provision for doubtful accounts was $2.5 million compared to $2.8 million in the third quarter of 2022 and $2.1 million in the fourth quarter of 2021. PT provision as a percent of net patient revenue was 1.7% compared to 2.0% in the third quarter of 2022 and 1.5% in the fourth quarter of 2021, reflecting steady collections.

  • Selling, general and administrative expenses were $27.6 million compared to $25.3 million in the third quarter of 2022 and $29.9 million in the fourth quarter of 2021, an increase of 9% quarter over quarter primarily due to higher severance costs and a decrease of 8% year over year primarily due to lower non-ordinary legal and regulatory costs and executive search fees partially offset by higher severance costs.

  • Non-cash goodwill, intangible and other asset impairment charges totaled $96.0 million. Due to an estimated increase in the industry Weighted Average Cost of Capital, revised near-term Company expectations given current labor market headwinds and lower guideline public company market multiples, it was determined that the fair value amounts of goodwill, trade name and other assets were below their respective carrying amounts.

  • Income tax benefit was $5.0 million compared to $7.2 million in the third quarter of 2022 and $5.4 million in the fourth quarter of 2021.

  • Net (loss) income was $(102.4) million compared to $(116.7) million in the third quarter of 2022 and $1.7 million in the fourth quarter of 2021. The fourth quarter 2022 net loss included significant non-cash items, notably goodwill, intangible and other asset impairment charges of $96.0 million and change in fair value of warrant liability and contingent common shares liability gain of $10.4 million.

  • Adjusted EBITDA1 was $6.4 million compared to $(0.4) million in the third quarter of 2022 and $1.6 million in the fourth quarter of 2021. The increases were predominantly driven by higher revenue.

    Adjusted EBITDA1 margin was 3.9% compared to (0.3)% in the third quarter of 2022 and 1.1% in the fourth quarter of 2021.

  • Net increase in cash and cash equivalents was $34.6 million. Excluding revolver activity, the change in cash was a net decrease of $13.6 million compared to a net decrease of $31.1 million in the third quarter of 2022 and $17.5 million in the fourth quarter of 2021.

Summary of key balance sheet items as of December 31, 2022 is as follows:

  • Cash and cash equivalents totaled $83.1 million and no revolving credit facility remaining capacity.

Full Year 2022 Results

Commentary on performance results for full year 2022 is as follows:

  • Net revenue was $635.7 million compared to $627.9 million for full year 2021, an increase of 1% year over year.

    • Net patient revenue was $575.9 million compared to $561.1 million for full year 2021, an increase of 3% year over year.

    • Other revenue was $59.7 million compared to $66.8 million for full year 2021, a decrease of 11% year over year primarily due to sale of the Home Health service line on October 1, 2021.

  • Salaries and related costs were $358.0 million compared to $336.5 million for full year 2021, an increase of 6% year over year.

  • Rent, clinic supplies, contract labor and other was $202.6 million compared to $180.9 million for full year 2021, an increase of 12% year over year.
  • Provision for doubtful accounts was $13.9 million compared to $16.4 million for full year 2021. Provision as a percent of net revenue was 2.4% compared to 2.9% for full year 2021.

  • Selling, general and administrative expenses were $114.7 million compared to $111.8 million for full year 2021, an increase of 3% year over year.

  • Non-cash goodwill, intangible and other asset impairment charges totaled $486.3 million compared to $962.3 million for full year 2021, a decrease of 49% year over year.

  • Income tax benefit was $48.5 million compared to an expense of $71.0 million for full year 2021.

  • Net loss was $493.0 million compared to $782.0 million for the full year 2021. The full year 2022 net loss included significant non-cash items, notably goodwill, intangible and other asset impairment charges of $486.3 million and change in fair value of warrant liability and contingent common shares liability gain of $46.8 million. The full year 2021 net loss included significant non-cash items, notably goodwill, intangible and other asset impairment charges of $962.3 million and change in fair value of warrant liability and contingent common shares liability gain of $197.7 million.

  • Adjusted EBITDA1 was $6.7 million compared to $39.8 million for the full year 2021, a decrease of 83% year over year.

    Adjusted EBITDA1 margin was 1.1% compared to 6.3% for full year 2021.

  • Net increase in cash and cash equivalents was $34.5 million. Excluding revolver activity and the February 2022 refinancing, the change in cash was a net decrease of $94.9 million compared to a net decrease of $93.5 million for full year 2021.

  • Opened 36 new clinics and closed 23 clinics in various states across the national footprint, bringing the total number of clinics for the year to 923.

1 Refer to "Non-GAAP Financial Measures" below.

Transaction Support Agreement to Increase Liquidity and Financial Flexibility

ATI also announced today that it entered into a Transaction Support Agreement (the "TSA") with certain of its lenders, holders of preferred equity and holders of the majority of its common stock. If the transactions contemplated in the TSA are finalized, which is expected to occur in the second quarter of 2023, ATI will obtain a $25 million delayed draw facility in the form of new second lien PIK exchangeable notes and exchange $100 million of first lien term loan into new second lien PIK exchangeable notes. The TSA also provides for an amendment to the Company's 2022 credit agreement to, among other things, reset certain financial covenant thresholds.

Joe Jordan, Chief Financial Officer of ATI, said, "We are pleased to have entered into this TSA, underscoring the parties' continued support and confidence in our long-term value proposition. The transactions contemplated by this support agreement would position ATI to reset our covenants and move forward with additional financial flexibility as we focus on creating value for the business and all our stakeholders."

Fourth Quarter and Year End 2022 Earnings Conference Call

Management will host a conference call at 5:00 p.m. Eastern Time on March 16, 2023 to review fourth quarter and full year 2022 financial results. Management will offer commentary and additional insights but will not be taking questions due to its ongoing discussions to execute the transaction outlined in the Transaction Support Agreement. The conference call can be accessed via a live audio webcast. To join, please access the following web link, ATI Physical Therapy, Inc. Q4 2022 Year-End 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 passionate about potential. Every day, we restore it in our patients and activate it in our team members in our more than 900 locations in 24 states. With outcomes from more than 2.5 million unique patient cases, ATI is making strides in the industry by setting quality standards designed to deliver predictable outcomes for our patients with musculoskeletal (MSK) issues. ATI's offerings span across a broad spectrum for MSK-related issues. 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 certain financial covenants as required by our 2022 Credit Agreement, including maintaining $30.0 million of minimum liquidity;
  • 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 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, including COVID-19 (and any existing and future variants) and its direct and indirect impacts on the business, which could lead to a decline in visit volumes and referrals;
  • risks related to the impact on our workforce of mandatory COVID-19 vaccination of employees;
  • our inability to compete effectively in a competitive industry, subject to rapid technological change and cost inflation, including competition that could impact our effectiveness of strategies to improve patient referrals and our ability to identify, recruit 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, size and expected growth of our addressable markets, 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, which may use significant resources, may be unsuccessful and could expose us to unforeseen liabilities;
  • failure of third-party vendors, including customer service, technical and 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-parties 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 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;
  • 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;
  • our facilities face competition for experienced physical therapists and other clinical providers that may increase labor costs and reduce profitability;
  • risks associated with our ability to attract and retain talented executives and employees amidst the impact of unfavorable labor market dynamics and wage inflation, including potential failure of steps being taken to reduce attrition of physical therapists and increase hiring of physical therapists;
  • risk resulting from the IPO Warrants, Earnout Shares and Vesting Shares being accounted for as liabilities;
  • 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 remediate the material weaknesses in internal control over financial reporting related to income taxes and to maintain effective internal control over financial reporting;
  • costs related to operating as a public company; and
  • risks associated with our 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's amended S-1 registration statement filed with the SEC on April 12, 2022 under the heading "Risk Factors," our Form 10-K for the fiscal year ended December 31, 2022, the S-3 registration statement and amendments thereto dated August 10, 2022 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:

Investors:
Joanne Fong
SVP, Treasurer and Investor Relations
ATI Physical Therapy
This email address is being protected from spambots. You need JavaScript enabled to view it.
(630) 296-2222 x 7131

Media

Rob Manker
Director of Customer Marketing & Public Relations
ATI Physical Therapy
This email address is being protected from spambots. You need JavaScript enabled to view it. 
630-296-2222 ext. 7432

ATI Physical Therapy
Condensed Consolidated Statements of Operations
($ in thousands)
(unaudited)

 
  
 

Three Months Ended

 

Year Ended

 
 

December
31, 2022

 

December
31, 2021

 

December
31, 2022

 

December
31, 2021

 
         

Net patient revenue

$

146,196

  

$

140,275

  

$

575,940

  

$        561,080

  

Other revenue

15,568

  

15,488

  

59,731

  

66,791

  

Net revenue

161,764

  

155,763

  

635,671

  

627,871

  
         

Clinic operating costs:

   

Salaries and related costs

90,652

  

88,087

  

357,982

  

336,496

 

Rent, clinic supplies, contract labor and other

49,131

  

47,792

  

202,568

  

180,932

  

Provision for doubtful accounts

2,461

  

2,099

  

13,869

  

16,369

  

Total clinic operating costs

142,244

  

137,978

  

574,419

  

533,797

  

Selling, general and administrative expenses

27,629

  

29,897

  

114,724

  

111,809

  

Goodwill, intangible and other asset impairment charges

96,038

  

  

486,262

  

962,303

  

Operating loss

(104,147)

  

(12,112)

  

(539,734)

  

(980,038)

  

Change in fair value of warrant liability

(592)

  

(2,171)

  

(4,243)

  

(22,595)

  

Change in fair value of contingent common shares liability

(9,765)

  

(7,875)

  

(42,525)

  

(175,140)

  

Loss on settlement of redeemable preferred stock

  

  

  

14,037

  

Interest expense, net

13,463

  

7,215

  

45,278

  

46,320

  

Interest expense on redeemable preferred stock

  

  

  

10,087

  

Other expense (income), net

152

  

(5,590)

  

3,333

  

241

  

Loss before taxes

(107,405)

  

(3,691)

  

(541,577)

  

(852,988)

  

Income tax (benefit) expense

(4,998)

  

(5,381)

  

(48,530)

  

(70,960)

  

Net (loss) income

(102,407)

  

1,690

  

(493,047)

  

(782,028)

  
                  

ATI Physical Therapy
Condensed Consolidated Balance Sheets
($ in thousands)
(unaudited)

 
 

December 31, 2022

 

December 31, 2021

Assets:

   

Current assets:

   

Cash and cash equivalents

$                     83,139

 

$                     48,616

Accounts receivable (net of allowance for doubtful accounts of $47,620 and $53,533 at December 31, 2022 and December 31, 2021, respectively)

80,673

 

82,455

Prepaid expenses

13,526

 

9,303

Other current assets

10,040

 

3,204

Assets held for sale

6,755

 

Total current assets

194,133

 

143,578

    

Property and equipment, net

123,690

 

139,730

Operating lease right-of-use assets

226,092

 

256,646

Goodwill, net

286,458

 

608,811

Trade name and other intangible assets, net

246,582

 

411,696

Other non-current assets

2,030

 

2,233

Total assets

$                1,078,985

 

$                1,562,694

    

Liabilities, Mezzanine Equity and Stockholders' Equity:

   

Current liabilities:

   

Accounts payable

$                     12,559

 

$                     15,146

Accrued expenses and other liabilities

53,672

 

64,584

Current portion of operating lease liabilities

47,676

 

49,433

Current portion of long-term debt

 

8,167

Liabilities held for sale

2,614

 

Total current liabilities

116,521

 

137,330

    

Long-term debt, net

531,600

 

543,799

Warrant liability

98

 

4,341

Contingent common shares liability

2,835

 

45,360

Deferred income tax liabilities

18,886

 

67,459

Operating lease liabilities

218,424

 

250,597

Other non-current liabilities

1,834

 

2,301

Total liabilities

890,198

 

1,051,187

Commitments and contingencies

   

Mezzanine equity:

   

Series A Senior Preferred Stock, $0.0001 par value; 1.0 million shares authorized; $1,108.34 stated value per share and 0.2 million shares issued and outstanding at December 31, 2022; none issued and outstanding at December 31, 2021

140,340

 

Stockholders' equity:

   

Class A common stock, $0.0001 par value; 470.0 million shares authorized; 207.5 million shares issued, 198.4 million shares outstanding at December 31, 2022; 207.4 million shares issued, 197.4 million shares outstanding at December 31, 2021

20

 

20

Treasury stock, at cost, 0.08 million shares and 0.03 million shares at December 31, 2022 and December 31, 2021, respectively

(146)

 

(95)

Additional paid-in capital

1,378,696

 

1,351,597

Accumulated other comprehensive income

4,899

 

28

Accumulated deficit

(1,339,511)

 

(847,132)

Total ATI Physical Therapy, Inc. equity

43,958

 

504,418

Non-controlling interests

4,489

 

7,089

Total stockholders' equity

48,447

 

511,507

Total liabilities, mezzanine equity and stockholders' equity

$                1,078,985

 

$                1,562,694

ATI Physical Therapy
Condensed Consolidated Statements of Cash Flows
($ in thousands)
(unaudited)

 
 

Year Ended

 

December 31,
2022

 

December 31,
2021

Operating activities:

   

Net loss

$   (493,047)

 

$   (782,028)

Adjustments to reconcile net loss to net cash used in operating activities:

   

Goodwill, intangible and other asset impairment charges

486,262

 

962,303

Depreciation and amortization

40,590

 

37,995

Provision for doubtful accounts

13,869

 

16,369

Deferred income tax provision

(48,573)

 

(71,088)

Amortization of right-of-use assets

48,253

 

45,536

Non-cash share-based compensation

7,374

 

5,754

Amortization of debt issuance costs and original issue discount

2,873

 

3,252

Non-cash interest expense

3,481

 

Non-cash interest expense on redeemable preferred stock

 

10,087

Loss on extinguishment of debt

2,809

 

5,534

Loss on settlement of redeemable preferred stock

 

14,037

Loss (gain) on disposal and impairment of assets

9

 

(5,189)

Change in fair value of warrant liability

(4,243)

 

(22,595)

Change in fair value of contingent common shares liability

(42,525)

 

(175,140)

Changes in:

   

Accounts receivable, net

(12,573)

 

(10,201)

Prepaid expenses and other current assets

(5,024)

 

(6,688)

Other non-current assets

39

 

(284)

Accounts payable

(48)

 

1,831

Accrued expenses and other liabilities

854

 

(5,288)

Operating lease liabilities

(53,628)

 

(50,942)

Other non-current liabilities

28

 

861

Medicare Accelerated and Advance Payment Program Funds

(12,288)

 

(12,605)

Transaction-related amount due to former owners

 

(3,611)

Net cash used in operating activities

(65,508)

 

(42,100)

    

Investing activities:

   

Purchases of property and equipment

(28,147)

 

(40,293)

Purchases of intangible assets

 

(1,675)

Proceeds from sale of property and equipment

157

 

223

Proceeds from sale of clinics

77

 

248

Proceeds from sale of Home Health service line

 

6,131

Business acquisitions, net of cash acquired

 

(4,523)

Payment of holdback liabilities related to acquisitions

(135)

 

Net cash used in investing activities

(28,048)

 

(39,889)

    

Financing activities:

   

Proceeds from long-term debt

500,000

 

Deferred financing costs

(12,952)

 

Original issue discount

(10,000)

 

Principal payments on long-term debt

(555,048)

 

(456,202)

Proceeds from issuance of Series A Senior Preferred Stock

144,667

 

Proceeds from issuance of 2022 Warrants

20,333

 

Proceeds from revolving line of credit

48,200

 

Cash inflow from Business Combination

 

229,338

Payments to Series A Preferred stockholders

 

(59,000)

Proceeds from shares issued through PIPE investment

 

300,000

Equity issuance costs and original issue discount

(4,935)

 

(19,233)

Payment of contingent consideration liabilities

(203)

 

Taxes paid on behalf of employees for shares withheld

(51)

 

(128)

Distribution to non-controlling interest holders

(1,932)

 

(6,298)

Net cash provided by (used in) financing activities

128,079

 

(11,523)

    

Changes in cash and cash equivalents:

   

Net increase (decrease) in cash and cash equivalents

34,523

 

(93,512)

Cash and cash equivalents at beginning of period

48,616

 

142,128

Cash and cash equivalents at end of period

$       83,139

 

$       48,616

    

Supplemental noncash disclosures:

   

Derivative changes in fair value

$       (4,871)

 

$       (1,935)

Purchases of property and equipment in accounts payable

$         1,660

 

$         4,177

Warrant liability recognized upon the closing of the Business Combination

$              —

 

$     (26,936)

Contingent common shares liability recognized upon the closing of the Business Combination

$              —

 

$   (220,500)

Shares issued to Wilco Holdco Series A Preferred stockholders

$              —

 

$     128,453

    

Other supplemental disclosures:

   

Cash paid for interest

$       41,617

 

$       41,937

Cash received from hedging activities

$         3,497

 

$              —

Cash paid for taxes

$              84

 

$              81

ATI Physical Therapy, Inc.
Supplemental Tables of Key Performance Metrics

 
 

Financial Metrics ($ in 000's)

 
 

Net Patient
Revenue

Other

Revenue

Net Revenue

Adjusted
EBITDA (1)

Adj EBITDA
margin (1)

Q1 2020

$164,939

$17,799

$182,738

$26,487

14.5 %

Q2 2020

$95,003

$12,751

$107,754

$1,189

1.1 %

Q3 2020

$132,803

$15,852

$148,655

$17,321

11.7 %

Q4 2020

$136,840

$16,266

$153,106

$18,622

12.2 %

Q1 2021

$132,271

$16,791

$149,062

$5,590

3.8 %

Q2 2021

$146,679

$17,354

$164,033

$23,999

14.6 %

Q3 2021

$141,855

$17,158

$159,013

$8,539

5.4 %

Q4 2021

$140,275

$15,488

$155,763

$1,643

1.1 %

Q1 2022

$138,925

$14,897

$153,822

$(4,695)

(3.1) %

Q2 2022

$148,506

$14,787

$163,293

$5,436

3.3 %

Q3 2022

$142,313

$14,479

$156,792

$(392)

(0.3) %

Q4 2022

$146,196

$15,568

$161,764

$6,363

3.9 %

(1)

Excludes CARES Act Provider Relief Funds of $44.3 million in the second quarter of 2020, $23.1 million in the third quarter of 2020, and $24.1 million in the fourth quarter of 2020.

       
  

Operational Metrics

 

Visits

per Day (1)

Clinical

FTE (2)

VPD

per cFTE (3)

ATI Clinician

Headcount (4)

Contractor
Headcount (5)

ATI Clinician Headcount

Adds (6)

Turnover (7)

Q1 2020

22,855

2,841

8.0

3,113

57

11 %

19 %

Q2 2020

12,643

1,487

8.5

3,012

3

0 %

14 %

Q3 2020

18,159

2,004

9.1

2,448

3

7 %

86 %

Q4 2020

19,441

2,214

8.8

2,508

3

42 %

34 %

Q1 2021

19,520

2,284

8.5

2,558

16

41 %

31 %

Q2 2021

21,569

2,325

9.3

2,526

43

37 %

44 %

Q3 2021

20,674

2,359

8.8

2,583

108

51 %

42 %

Q4 2021

20,649

2,490

8.3

2,650

109

37 %

31 %

Q1 2022

21,062

2,466

8.5

2,658

158

25 %

23 %

Q2 2022

22,403

2,465

9.1

2,647

151

26 %

28 %

Q3 2022

21,493

2,465

8.7

2,691

151

33 %

25 %

Q4 2022

22,316

2,476

9.0

2,662

123

19 %

26 %

(1)

Equals patient visits divided by operating days.

(2)

Represents clinical staff hours divided by 8 hours divided by number of paid days.

(3)

Equals patient visits divided by operating days divided by clinical full-time equivalent employees.

(4)

Represents ATI employee clinician headcount at end of period.

(5)

Represents contractor clinician headcount at end of period.

(6)

Represents ATI employee clinician headcount new hire adds divided by average headcount, multiplied by 4 to annualize.

(7)

Represents ATI employee clinician headcount separations divided by average headcount, multiplied by 4 to annualize.

  

Unit Economics: PT Clinics ($ actual)

 

Ending

Clinic Count

PT
Revenue

per Clinic (1)

VPD

per Clinic (2)

PT Rate

per Visit (3)

PT Salaries

per Visit (4)

PT Rent

and Other

per Clinic (5)

PT Provision

as % PT
Revenue (6)

Q1 2020

868

$189,658

26.3

$112.76

$55.11

$50,258

3.6 %

Q2 2020

866

$109,872

14.6

$117.41

$53.39

$43,621

4.1 %

Q3 2020

873

$152,472

20.8

$112.51

$53.83

$44,140

2.2 %

Q4 2020

875

$155,913

22.2

$109.98

$52.16

$47,168

2.4 %

Q1 2021

882

$150,536

22.2

$107.56

$54.14

$47,722

5.4 %

Q2 2021

889

$165,241

24.3

$106.26

$48.22

$47,857

2.4 %

Q3 2021

900

$158,556

23.1

$105.56

$53.70

$49,499

2.5 %

Q4 2021

910

$154,772

22.8

$104.51

$55.73

$50,976

1.5 %

Q1 2022

922

$151,225

22.9

$103.06

$55.47

$54,472

3.7 %

Q2 2022

926

$160,431

24.2

$103.57

$53.64

$53,017

2.4 %

Q3 2022

929

$153,410

23.2

$103.46

$56.20

$53,945

2.0 %

Q4 2022

923

$157,993

24.1

$103.99

$54.92

$51,252

1.7 %

(1)

Equals Net Patient Revenue divided by average clinics over the quarter.

(2)

Equals patient visits divided by operating days divided by average clinics over the quarter

(3)

Equals Net Patient Revenue divided by patient visits.

(4)

Equals estimated patient-related portion of Salaries and Related Costs divided by patient visits.

(5)

Equals estimated patient-related portion of Rent, Clinic Supplies, Contract Labor and Other divided by average clinics over the quarter.

(6)

Equals estimated patient-related portion of Provision for Doubtful Accounts divided by Net Patient Revenue.

  

Customer Satisfaction Metrics

  

Net Promoter
Score (1)

Google Star
Rating (2)

Q1 2020

 

77

4.9

Q2 2020

 

77

4.9

Q3 2020

 

78

4.6

Q4 2020

 

76

4.7

Q1 2021

 

75

4.9

Q2 2021

 

77

4.9

Q3 2021

 

73

4.9

Q4 2021

 

78

4.8

Q1 2022

 

74

4.9

Q2 2022

 

75

4.9

Q3 2022

 

76

4.8

Q4 2022

 

76

4.9

(1)

NPS measures customer experience from ATI patient survey responses. The score is calculated as the percentage of promoters less the percentage of detractors.

(2)

A Google Star rating is a five-star rating scale that ranks businesses based on customer reviews. Customers are given the opportunity to leave a business review after interacting with a business, which involves choosing from one star (poor) to five stars (excellent).

ATI Physical Therapy, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
($ in thousands)
(unaudited)

 
 

Three Months Ended

 

December 31,

September 30,

June 30,

March 31,

 

2022

2022

2022

2022

Net loss

$            (102,407)

$            (116,694)

$            (135,723)

$            (138,223)

Plus (minus):

    

Net (income) loss attributable to non-controlling interests

(358)

376

177

473

Interest expense, net

13,463

11,780

11,379

8,656

Income tax benefit 

(4,998)

(7,218)

(13,033)

(23,281)

Depreciation and amortization expense

9,979

9,907

10,055

9,900

EBITDA

$              (84,321)

$            (101,849)

$            (127,145)

$            (142,475)

Goodwill, intangible and other asset impairment charges (1)

96,038

106,663

127,820

155,741

Goodwill, intangible and other asset impairment charges attributable to non-controlling interests (1)

(364)

(457)

(654)

(940)

Changes in fair value of warrant liability and contingent common shares liability (2)

(10,357)

(7,720)

(2,680)

(26,011)

Loss on debt extinguishment (3)

2,809

Loss on legal settlement (4)

3,000

Share-based compensation

1,544

1,920

2,004

1,964

Non-ordinary legal and regulatory matters (5)

937

772

2,202

2,497

Pre-opening de novo costs (6)

101

224

286

381

Transaction and integration costs (7)

1,093

55

603

1,538

Reorganization and severance costs (8)

1,797

Business optimization costs (9)

(105)

Gain on sale of Home Health service line, net

(199)

Adjusted EBITDA

$                  6,363

$                   (392)

$                  5,436

$                (4,695)

(1)

Represents non-cash charges related to the write-down of goodwill, trade name indefinite-lived intangible and other assets.

(2)

Represents non-cash amounts related to the change in the estimated fair value of IPO Warrants, Earnout Shares and Vesting Shares.

(3)

Represents charges related to the derecognition of the unamortized deferred financing costs and original issuance discount associated with the full repayment of the 2016 first lien term loan.

(4)

Represents charge for net settlement liability related to billing dispute.

(5)

Represents non-ordinary course legal costs related to the previously disclosed ATIP stockholder class action complaints, derivative complaint and SEC inquiry.

(6)

Represents expenses associated with renovation, equipment and marketing costs relating to the start-up and launch of new locations incurred prior to opening.

(7)

Represents costs related to the Business Combination with FVAC II and non-capitalizable debt and capital transaction costs.

(8)

Represents severance, consulting and other costs related to discrete initiatives focused on reorganization and delayering of the Company's labor model, management structure and support functions.

(9)

Represents non-recurring costs to optimize our platform and ATI transformative initiatives. Costs primarily relate to duplicate costs driven by IT and Revenue Cycle Management conversions, labor related costs during the transition of key positions and other incremental costs of driving optimization initiatives.

ATI Physical Therapy, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
($ in thousands)
(unaudited)

 
 

Year Ended

 

December 31, 2022

 

December 31, 2021

Net loss

$              (493,047)

 

$          (782,028)

Plus (minus):

   

Net loss attributable to non-controlling interests

668

 

3,700

Interest expense, net

45,278

 

46,320

Interest expense on redeemable preferred stock

 

10,087

Income tax (benefit) expense

(48,530)

 

(70,960)

Depreciation and amortization expense

39,841

 

37,995

EBITDA

$          (455,790)

 

$          (754,886)

Goodwill, intangible and other asset impairment charges (1)

486,262

 

962,303

Goodwill, intangible and other asset impairment charges attributable to non-controlling interests (1)

(2,415)

 

(7,949)

Changes in fair value of warrant liability and contingent common shares liability (2)

(46,768)

 

(197,735)

Share-based compensation

7,432

 

5,769

Non-ordinary legal and regulatory matters (3)

6,408

 

2,914

Loss on legal settlement (4)

3,000

 

Loss on debt extinguishment (5)

2,809

 

5,534

Transaction and integration costs (6)

3,289

 

9,788

Reorganization and severance costs (7)

1,797

 

3,913

Pre-opening de novo costs (8)

992

 

1,929

Gain on sale of Home Health service line, net

(199)

 

(5,846)

Business optimization costs (9)

(105)

 

Loss on settlement of redeemable preferred stock (10)

 

14,037

Adjusted EBITDA

$                   6,712

 

$                   39,771

(1)

Represents non-cash charges related to the write-down of goodwill, trade name indefinite-lived intangible and other assets.

(2)

Represents non-cash amounts related to the change in the estimated fair value of IPO Warrants, Earnout Shares and Vesting Shares.

(3)

Represents non-ordinary course legal costs related to the previously disclosed ATIP stockholder class action complaints, derivative complaint and SEC inquiry.

(4)

Represents charge for net settlement liability related to billing dispute.

(5)

Represents charges related to the derecognition of the unamortized deferred financing costs and original issuance discount associated with the full repayment of the 2016 first lien term loan and the partial and full repayment of the 2016 first and second lien term loans, respectively.

(6)

Represents costs related to the Business Combination with FVAC II, non-capitalizable debt and capital transaction costs and consulting and planning costs related to preparation to operate as a public company.

(7)

Represents severance, consulting and other costs related to discrete initiatives focused on reorganization and delayering of the Company's labor model, management structure and support functions.

(8)

Represents expenses associated with renovation, equipment and marketing costs relating to the start-up and launch of new locations incurred prior to opening.

(9)

Represents non-recurring costs to optimize our platform and ATI transformative initiatives. Costs primarily relate to duplicate costs driven by IT and Revenue Cycle Management conversions, labor related costs during the transition of key positions and other incremental costs of driving optimization initiatives.

(10)

Represents loss on settlement of redeemable preferred stock based on the value of cash and equity provided to preferred stockholders in relation to the outstanding redeemable preferred stock liability at the time of the closing of the Business Combination with FVAC II.

ATI Physical Therapy, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
($ in thousands)
(unaudited)

 
 

Three Months Ended

 

December 31,

September 30,

June 30,

March 31,

 

2021

2021

2021

2021

Net income (loss)

$1,690

($326,774)

($439,126)

($17,818)

Plus (minus):

    

Net (income) loss attributable to non-controlling interests

(869)

2,109

3,769

(1,309)

Interest expense, net

7,215

7,386

15,632

16,087

Interest expense on redeemable preferred stock

4,779

5,308

Income tax benefit

(5,381)

(35,333)

(19,731)

(10,515)

Depreciation and amortization expense

10,005

9,222

9,149

9,619

EBITDA

12,660

(343,390)

(425,528)

1,372

Goodwill, intangible and other asset impairment charges (1)

508,972

453,331

Goodwill, intangible and other asset impairment charges attributable to non-controlling interest (1)

(2,928)

(5,021)

Changes in fair value of warrant liability and contingent common shares liability (2)

(10,046)

(162,202)

(25,487)

Gain on sale of Home Health service line, net

(5,846)

Reorganization and severance costs (3)

3,551

362

Transaction and integration costs (4)

955

2,335

3,580

2,918

Share-based compensation

905

1,248

3,112

504

Pre-opening de novo costs (5)

543

511

441

434

Non-ordinary legal and regulatory matters (6)

2,472

442

Loss on debt extinguishment (7)

5,534

Loss on settlement of redeemable preferred stock (8)

14,037

Adjusted EBITDA

$1,643

$8,539

$23,999

$5,590

(1)

Represents non-cash charges related to the write-down of goodwill, trade name indefinite-lived intangible and other assets.

(2)

Represents non-cash amounts related to the change in the estimated fair value of IPO Warrants, Earnout Shares and Vesting Shares.

(3)

Represents severance, consulting and other costs related to discrete initiatives focused on reorganization and delayering of the Company's labor model, management structure and support functions.

(4)

Represents costs related to the Business Combination with FVAC II, non-capitalizable debt transaction costs, clinic acquisitions and acquisition-related integration and consulting and planning costs related to preparation to operate as a public company.

(5)

Represents expenses associated with renovation, equipment and marketing costs relating to the start-up and launch of new locations incurred prior to opening.

(6)

Represents non-ordinary course legal costs related to the previously disclosed ATIP stockholder class action complaints, derivative complaint and SEC inquiry.

(7)

Represents charges related to the derecognition of the proportionate amount of remaining unamortized deferred financing costs and original issuance discount associated with the partial repayment of the first lien term loan and derecognition of the unamortized original issuance discount associated with the full repayment of the subordinated second lien term loan.

(8)

Represents loss on settlement of redeemable preferred stock based on the value of cash and equity provided to preferred stockholders in relation to the outstanding redeemable preferred stock liability at the time of the closing of the Business Combination with FVAC II.

ATI Physical Therapy, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
($ in thousands)
(unaudited)

 
 

Three Months Ended

 

December 31,

September 30,

June 30,

March 31,

 

2020

2020

2020

2020

Net income (loss)

$2,190

$1,022

$4,596

($8,106)

Plus (minus):

    

Net income attributable to non-controlling interests

(987)

(901)

(1,855)

(1,330)

Interest expense, net

16,404

17,346

17,683

17,858

Interest expense on redeemable preferred stock

5,154

4,896

4,604

4,377

Income tax (benefit) expense

(2,033)

2,322

3,568

(1,792)

Depreciation and amortization expense

10,072

9,880

9,763

9,985

EBITDA

30,800

34,565

38,359

20,992

Reorganization and severance costs (1)

679

4,436

1,255

1,142

Transaction and integration costs (2)

3,747

75

100

868

Share-based compensation

503

473

466

494

Pre-opening de novo costs (3)

335

368

268

594

Business optimization costs (4)

2,450

519

5,011

2,397

Charges related to lease terminations (5)

4,253

Adjusted EBITDA

$42,767

$40,436

$45,459

$26,487

(1)

Represents severance, consulting and other costs related to discrete initiatives focused on reorganization and delayering of the Company's labor model, management structure and support functions.

(2)

Represents costs related to the Business Combination with FVAC II, clinic acquisitions and acquisition-related integration and consulting and planning costs related to preparation to operate as a public company.

(3)

Represents expenses associated with renovation, equipment and marketing costs relating to the start-up and launch of new locations incurred prior to opening.

(4)

Represents non-recurring costs to optimize our platform and ATI transformative initiatives. Costs primarily relate to duplicate costs driven by IT and Revenue Cycle Management conversions, labor related costs during the transition of key positions and other incremental costs of driving optimization initiatives.

(5)

Represents charges related to lease terminations prior to the end of term for corporate facilities no longer in use.

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