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AP

ATI Physical Therapy, Inc. (ATIP)·Q1 2024 Earnings Summary

Executive Summary

  • Net revenue rose 8.7% year over year to $181.5M; net loss narrowed to $13.5M; Adjusted EBITDA increased 35% to $6.5M (3.6% margin), driven by higher visits and improved rate per visit .
  • Q1 revenue appears to have beaten non-SPGI “Street” revenue estimate ($173.7M), while GAAP diluted EPS was -$4.61; S&P Global consensus was unavailable in our system. Bolded beat reflects third-party estimate, not SPGI. .
  • Management guided Q2 2024 revenue to $185–$195M and Adjusted EBITDA to $15–$20M (implied margin 8–11%), citing demand strength and operational execution; full-year guidance was withheld to focus on quarterly outlooks .
  • Strategic catalysts: sustained rate-per-visit gains from revenue cycle improvements and payer contracting, exceptional clinician retention (16%), and footprint optimization enhancing clinic utilization .

What Went Well and What Went Wrong

  • What Went Well

    • “We saw approximately 1,100 more patient visits each day compared to this time last year,” highlighting strong demand and capacity expansion via higher clinical FTEs .
    • Rate per visit increased 4.5% YoY to $108.42, supported by revenue cycle management improvements and better rates with key payors .
    • Clinician turnover improved to an “exceptional” 16%, reflecting culture and people strategy progress; Adjusted EBITDA +35% YoY .

  • What Went Wrong

    • Operating cash use rose to $39.1M, driven by higher accounts receivable and payout of annual incentives; total liquidity fell to $23.7M .
    • PT salaries and related costs per visit rose 7% to $56.68 on wage inflation and lower labor productivity (9.3 VPD per clinical FTE vs 9.4 YoY), pressuring unit economics .
    • Bad debt increased to $5.0M (3.0% of net patient revenue) vs $4.1M (2.7%) last year; rent/other per clinic increased 7.9% due to contract labor .

Financial Results

MetricQ1 2023Q4 2023Q1 2024
Net Revenue ($USD Millions)$166.9 $182.3 $181.5
Net Patient Revenue ($USD Millions)$150.8 $166.1 $165.4
Other Revenue ($USD Millions)$16.2 $16.1 $16.1
Adjusted EBITDA ($USD Millions)$4.8 $12.7 $6.5
Adjusted EBITDA Margin (%)2.9% 7.0% 3.6%
Net Loss ($USD Millions)$(25.2) $(4.5) $(13.5)
Diluted EPS ($USD)$(7.70) $(2.15) $(4.61)

Segment/Revenue Mix

MetricQ1 2023Q4 2023Q1 2024
Net Patient Revenue ($USD Millions)$150.8 $166.1 $165.4
Other Revenue ($USD Millions)$16.2 $16.1 $16.1

Key Operating KPIs

KPIQ1 2023Q4 2023Q1 2024
Visits per Day (VPD)22,701 24,238 23,837
VPD per Clinic25.0 27.0 26.9
Rate per Visit (RPV, $)$103.76 $108.81 $108.42
PT Salaries per Visit ($)$52.98 $56.56 $56.68
PT Rent & Other per Clinic ($)$56,338 $57,109 $60,800
PT Provision as % of PT Revenue2.7% 0.9% 3.0%
Ending Clinic Count909 896 884
Clinical FTE2,423 2,584 2,560
ATI Clinician Turnover (%)27% 21% 16%

“Vs Estimates” (availability and third-party context)

ItemQ1 2024 ActualConsensus (S&P Global)Third-Party Street Context
Revenue ($USD Millions)$181.5 N/A — SPGI consensus unavailable in our system$173.7 reported “Street est.” → Bold beat
Diluted EPS ($USD)$(4.61) N/A — SPGI consensus unavailableSome coverage cited expectations of approx. $(4.50) (non-SPGI)

Note: We were unable to retrieve S&P Global consensus via our SPGI tool mapping for ATIP; comparisons above to “Street” reflect non-SPGI sources with cited links.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q1 2024$175–$185 (provided on Q4 call) Actual $181.5 Achieved within range
Adjusted EBITDA ($USD Millions)Q1 2024$5–$10 (Q4 call) Actual $6.5 Achieved within range
Revenue ($USD Millions)Q2 2024N/A$185–$195 New quarterly outlook
Adjusted EBITDA ($USD Millions)Q2 2024N/A$15–$20 (8–11% margin implied) New quarterly outlook
FY 2024 GuidanceFY 2024Management initially planned to share full-year guidance Withheld; focus on quarterly guidance Withheld

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2023, Q4 2023)Current Period (Q1 2024)Trend
Demand/Visits & Clinic UtilizationReferrals per day all-time high; sequential VPD per clinic increases; footprint optimization ongoing +1,100 more patient visits/day YoY; VPD per clinic 26.9; maintaining excess capacity to leverage as FTE grows Positive momentum, strong demand
Rate per Visit & Payer ContractingQ3 rate up to $109.90 via RCM and contracting; Q4 $108.81, strong YoY RPV $108.42 (+4.5% YoY), RCM improvements and key payor rates noted Sustained YoY improvement; sequentially stable
Technology & RCMCentralized intake completed; EMR and automation driving rev-cycle KPIs Continued RCM automation to improve clean claims/collections at lower cost Ongoing process/tech enhancement
Labor Market & RetentionClinician headcount grew; turnover at ~21% (pre-COVID levels) Turnover “exceptional” 16%; culture refresh and people strategies highlighted Improving retention; focused hiring
Footprint OptimizationClosed 14 clinics in Q3; ongoing review and pruning; selective de novos Closed 11 and divested 1; ended quarter at 884 clinics Continued optimization; smaller fleet, higher utilization
Regulatory/Macro (Medicare)Disappointment with fee schedule cuts; MIPS exceptional rating, bonus payments Medicare cut eased (3.4%→1.7% remainder of year); continuing to advocate; aim for fifth MIPS incentive year Slight relief; ongoing quality bonuses
Cash/Liquidity & LeverageQ3 cash interest ~$14M/quarter; path to cash breakeven likely in 2025 Liquidity $23.7M; operating cash use elevated; $25M delayed draw term loan fully drawn in January Near-term liquidity tight; financing utilized

Management Commentary

  • CEO: “We grew again in the first quarter, seeing approximately 1,100 more patient visits each day compared to this time last year.” .
  • COO: “Our revenue rate in the first quarter was $108.42, increasing 4.5% year-over-year… operational improvements in our revenue cycle management… were a significant contributor.” .
  • CFO: “Adjusted EBITDA during the first quarter was $6 million… improved from $4.8 million in the first quarter of the prior year, primarily driven by higher revenue.” .
  • CEO: “ATI clinician turnover rate… first quarter of 2024 to an exceptional 16%.” .
  • CFO: “We anticipate revenue in the second quarter to be in the range of $185 million to $195 million… Adjusted EBITDA… $15 million to $20 million (8–11% margin).” .

Q&A Highlights

  • Rate per visit sustainability: Management sees fewer “easy go-gets” ahead and models relatively consistent rates; expects bad debt favorability after deductible resets as the year progresses .
  • Labor costs/productivity: Wage inflation persists; productivity had one-time issues and should improve; hiring incentives may create one-time costs as FTEs increase .
  • Payer negotiations: Mostly locked for 2024, with focus on RCM and growing workers’ comp and auto PI mix to support rate realization .
  • Guidance cadence: Company shifted to quarterly guidance (Q2 provided); full-year withheld; expects seasonality with stronger Q2/Q4 and continued YoY growth .
  • Cash/breakeven: CFO reiterated focus on moving towards cash flow breakeven (not expected in 2024), targeting progress into 2025 .

Estimates Context

  • S&P Global consensus estimates: Unavailable for ATIP via our SPGI mapping; we were unable to retrieve SPGI consensus values for revenue or EPS in Q1 2024 and Q2 2024.
  • Third-party context (non-SPGI): Q1 revenue $181.5M vs “Street est.” $173.7M suggests a beat; GAAP EPS reported at $(4.61) with some commentary indicating expectations around $(4.50). Treat these as directional only; not S&P Global consensus. .

Key Takeaways for Investors

  • Demand remains robust with capacity expansion: +1,100 daily visits YoY and VPD per clinic up to 26.9 demonstrate strong clinic utilization despite a smaller footprint .
  • Rate-per-visit uplift is sticky: RPV +4.5% YoY to $108.42 aided by RCM automation and payer contracting; management expects relatively consistent rates near term .
  • Margin expansion ahead: Q2 Adjusted EBITDA guidance $15–$20M implies 8–11% margin versus 3.6% in Q1, contingent on operational execution and visit growth .
  • Cost vigilance required: Unit cost pressures persist (PT salaries per visit +7% YoY; rent/other per clinic +7.9%), necessitating productivity gains to offset inflation .
  • Liquidity/cash flow is a watch item: Operating cash use elevated; cash/bank liquidity $23.7M; delayed draw term loan utilized—investors should monitor collections and AR trajectory .
  • Footprint optimization continues: Closing underperforming sites while leveraging existing capacity to spread fixed costs supports unit economics and cash discipline .
  • Regulatory tailwinds modest: Medicare cut reduced to 1.7% remainder of year and MIPS bonuses continue to provide partial offsets to reimbursement pressure .

Bolded beat/miss reference:

  • Revenue beat vs non-SPGI “Street” revenue estimate ($173.7M) in Q1 2024. This is a third-party estimate, not S&P Global.

Additional relevant press releases in the Q1 reporting cycle:

  • Earnings release notice (April 22, 2024) .
  • Institute for Musculoskeletal Advancement executive appointment (May 1, 2024), aligning with clinical quality and education initiatives .