ATI Physical Therapy Inc, a large single-branded outpatient physical therapy provider in the United States, reports financial results for the first quarter ended March 31, 2022.

“As previously announced, Sharon Vitti stepped into the role of Chief Executive Officer for the organization and joined the Board of Directors as of April 28, 2022.  We are excited to welcome Sharon to the ATI family and continue our leadership in helping people on their path to musculoskeletal health, engaging consumers when and where they need care, while lowering healthcare costs,” said Jack Larsen, Chairman of the Board of ATI. “During the quarter, we continued to make steady progress on multiple fronts in ramping the business.”

Mr. Larsen continued, “We saw increased therapist retention, with annualized clinician turnover declining 900 basis points quarter over quarter to 28%, approaching historical levels.  Moreover, referrals and visits are trending favorably.  Visits per Day in March 2022 were approximately 22,600, the highest volume month since the COVID pandemic first began impacting visits in March 2020.”

Joe Jordan, Chief Financial Officer of ATI Physical Therapy, added, “While the impact of COVID variants in the first 6 weeks of the quarter impacted visit volumes and contributed to earnings losses for the quarter, we are confident with the momentum we are seeing in referrals and visits and we are reaffirming full year 2022 guidance.”

ATI Physical Therapy First Quarter 2022 Results

Supplemental tables of key performance metrics for the first quarter of 2019 through the first quarter of 2022 are presented after the financial statements at the end of this press release.  Commentary on performance results in the first quarter of 2022 is as follows:

  • Net operating revenue was $153.8 million compared to $155.8 million in the fourth quarter of 2021 and $149.1 million in the first quarter of 2021, a decrease of 1% quarter over quarter and an increase of 3% year over year.
    • Net patient revenue was $138.9 million compared to $140.3 million in the fourth quarter of 2021 and $132.3 million in the first quarter of 2021, a decrease of 1% quarter over quarter and an increase of 5% year over year.  See below for discussion of drivers to net patient revenue, i.e. patient visits and Rate per Visit.
    • Other revenue was $14.9 million compared to $15.5 million in the fourth quarter of 2021 and $16.8 million in the first quarter of 2021, a decrease of 4% quarter over quarter primarily due to a decline in MSA revenue and a decrease of 11% year over year primarily due to sale of the Home Health service line on October 1, 2021. 
  • Visits per Day (“VPD”) were 21,062 compared to 20,649 in the fourth quarter of 2021 and 19,520 in the first quarter of 2021, an increase of 2% quarter over quarter and 8% year over year.

    VPD per Clinic were 22.9 compared to 22.8 in the fourth quarter of 2021 and 22.2 in the first quarter of 2021, an increase of 0.1 visit quarter over quarter and 0.7 visit year over year.  The increase was muted by the Omicron wave of COVID in January and continuing into the first half of February 2022, negatively impacting visits across the Company’s platform due to an increase in patient appointment cancellations, clinical staff sick absences, and overall decline in referral volume.
  • Rate per Visit was $103.06 compared to $104.51 in the fourth quarter of 2021 and $107.56 in the first quarter of 2021, a decrease of 1% quarter over quarter and 4% year over year.  The decreases were due to the 2022 Medicare Physician Fee Schedule, which introduced a 0.75% decrease in overall rates and an additional 15% decrease in rates paid for services performed by physical therapy assistants.  The year over year decrease was additionally due to an unfavorable mix shift in payors, states and services.
  • Salaries and related costs were $87.4 million compared to $88.1 million in the fourth quarter of 2021 and $80.7 million in the first quarter of 2021, a decrease of 1% quarter over quarter primarily due to slightly fewer clinical FTE and an increase of 8% year over year due to higher number of clinical FTE and wage inflation.

    PT salaries and related costs per Visit were $55.47 compared to $55.73 in the fourth quarter of 2021 and $54.14 in the first quarter of 2021, essentially flat quarter over quarter and an increase of 2% year over year.  The year over year increase was due to wage inflation experienced in certain pockets of the country compared to the first quarter of 2021.
  • Rent, clinic supplies, contract labor and other was $51.6 million compared to $47.8 million in the fourth quarter of 2021 and $43.3 million in the first quarter of 2021, an increase of 8% quarter over quarter and 19% year over year due to more clinics and higher expenditures on a per clinic basis.

    PT rent, clinic supplies, contract labor and other per Clinic was $54,472 compared to $50,976 in the fourth quarter of 2021 and $47,722 in the first quarter of 2021, an increase of 7% quarter over quarter and 14% year over year.  The increases were primarily driven by greater use of contract labor while the Company worked to fill open positions.
  • Provision for doubtful accounts was $5.1 million compared to $7.2 million in the first quarter of 2021.  PT provision as a percent of net patient revenue was 4% compared to 5% in the first quarter of 2021, reflecting improved collections.
  • Selling, general and administrative expenses were $30.0 million compared to $29.9 million in the fourth quarter of 2021 and $24.7 million in the first quarter of 2021, essentially flat quarter over quarter and an increase of 21% year over year.  The year over year increase was due to higher public company operating costs and non-ordinary legal and regulatory costs.
  • Non-cash goodwill impairment charge was $116.3 million, and the non-cash trade name indefinite-lived intangible asset impairment charge was $39.4 million.  Due to an increase in discount rate, driven by an increase in Treasury rates and an increase in the Company’s cost of capital, and lower public company comparative multiples, it was determined that the fair value amounts of goodwill and trade name were below their respective carrying amounts.
  • Income tax benefit was $23.3 million compared to $5.4 million in the fourth quarter of 2021 and $10.5 million in the first quarter of 2021.
  • Net (loss) income was $(138.2) million compared to $1.7 million in the fourth quarter of 2021 and $(17.8) million in the first quarter of 2021.  The first quarter 2022 net loss included significant non-cash items, notably goodwill and intangible asset impairment charges of $155.7 million and decrease in fair value of warrant liability and contingent common shares liability of $26.0 million.
  • Adjusted EBITDA1 was $(4.7) million compared to $1.6 million in the fourth quarter of 2021 and $5.6 million in the first quarter of 2021.  Quarter over quarter, the decrease was primarily driven by lower revenue and higher rent, clinic supplies, and contract labor costs and higher provision for doubtful accounts.  Year over year, the decrease was primarily due to higher cost of services and selling, general, and administrative expenses partially offset by higher revenue and lower provision for doubtful accounts.

    Adjusted EBITDA margin was (3)% compared to 1% in the fourth quarter of 2021 and 4% in the first quarter of 2021.
  • Net increase (decrease) in cash was $46.2 million compared to $(44.5) million in the first quarter of 2021.  

    Operating cash use was $26.7 million compared to $30.1 million in the first quarter of 2021.  Cash repaid in connection with the Medicare Accelerated and Advance Payment Program (“MAAPP”) under the CARES Act was $4.3 million compared to zero in the first quarter of 2021.

    Investing cash use was $8.7 million, with 12 new clinics opened, compared to $8.8 million in the first quarter of 2021 and 10 new clinics opened.

    Financing cash generation (use) was $81.6 million compared to $(5.6) million in the first quarter of 2021.  In February 2022, the Company refinanced its first lien term loan with a new credit agreement and issued Series A preferred stock with detachable warrants, adding approximately $77 million to the balance sheet after payment of transaction fees.

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

  • Cash and cash equivalents totaled $94.8 million, and the revolving credit facility was undrawn with available capacity of $48.8 million, net of usage by letters of credit, equaling $143.6 million in available liquidity.

Other notable achievements in the first quarter of 2022 were as follows:

  • Opened 12 new ATI Physical Therapy clinics in existing states, including Arizona, Georgia, and Texas; and no clinics were closed.  This brings the total number of clinics to 922.  The Company continues to capitalize on growth opportunities in individual markets, while optimizing its footprint and financial return in other local markets.
  • Net Promotor Score (“NPS”) of 74 and Google Star Rating of 4.9, reflecting continued high customer satisfaction and brand loyalty.

2022 Guidance

ATI Physical Therapy reaffirms full year 2022 guidance for net operating revenue to be in a range of $675 million to $705 million, Adjusted EBITDA2 to be in a range of $25 million to $35 million, and new clinic openings to be approximately 35.

[Source(s): ATI Physical Therapy Inc, PR Newswire]

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