ATI Physical Therapy(ATIP) - 2024 Q3 - Quarterly Report

Clinic Operations - As of September 30, 2024, the company operates 874 clinics across 24 states, with an additional 16 clinics under management service agreements[175]. - Total patient visits for the three months ended September 30, 2024, reached 1,591,008, an increase from 1,476,432 in the same period of 2023, representing a growth of approximately 7.8%[201]. - The average visits per day increased to 24,860 for the three months ended September 30, 2024, compared to 23,435 in the same period of 2023, reflecting a growth of about 6%[201]. - The same clinic revenue growth rate was 8.3% for the three months ended September 30, 2024, compared to 15.8% in the same period of 2023[201]. Financial Performance - Net patient revenue for the three months ended September 30, 2024 was $174.7 million, an increase of$12.5 million or 7.7% compared to $162.3 million for the same period in 2023[204]. - Other revenue for the three months ended September 30, 2024 was$15.3 million, an increase of $0.1 million or 0.4$15.2 million in 2023[206]. - Net patient revenue for the nine months ended September 30, 2024 was $512.9 million, an increase of$42.9 million or 9.1% compared to $470.0 million for the same period in 2023[221]. - Other revenue for the nine months ended September 30, 2024 was$46.7 million, a decrease of $0.1 million or 0.2$46.8 million in 2023[223]. Expenses and Costs - Salaries and related costs increased by $8.5 million or 8.7$105.6 million, representing 55.6% of net revenue for the three months ended September 30, 2024[207]. - Rent, clinic supplies, contract labor, and other costs rose by approximately $1.8 million or 3.4$54.5 million, accounting for 28.7% of net revenue[208]. - Provision for doubtful accounts increased by $1.6 million or 46.8$4.9 million, representing 2.6% of net revenue[210]. - Selling, general, and administrative expenses decreased by $1.3 million or 5.2$23.8 million, accounting for 12.5% of net revenue[211]. - Salaries and related costs increased by approximately $24.3 million or 8.6$307.4 million, remaining consistent at 54.9% of net revenue[224]. - Rent, clinic supplies, contract labor, and other costs rose by approximately $6.9 million or 4.4$162.9 million, with a decrease in percentage of net revenue from 30.2% to 29.1%[225]. - Provision for doubtful accounts increased by $2.5 million or 25.4$12.3 million, representing 2.2% of net revenue[226]. - Selling, general, and administrative expenses decreased by $19.2 million or 20.8$73.1 million, with a reduction in percentage of net revenue from 17.9% to 13.1%[227]. Net Loss and Financial Challenges - Net loss for the three months ended September 30, 2024 was $32.9 million, an increase in loss of approximately$18.3 million compared to $14.6 million in 2023[219]. - Net loss for the nine months ended September 30, 2024 was$48.9 million, a decrease of $12.6 million compared to a net loss of$61.6 million in 2023[235]. - The company is at risk of insufficient funding to meet obligations, raising substantial doubt about its ability to continue as a going concern[253]. - The company had operating cash outflows of $31.4 million during the nine months ended September 30, 2024, primarily driven by net losses and interest expense payments[249]. Debt and Financing - The company completed a debt restructuring transaction on June 15, 2023, aimed at improving liquidity[180]. - A reverse stock split of 1-for-50 was executed on June 14, 2023, to adjust the company's common stock trading[181]. - The company issued an additional$25.0 million in 2L Notes during the nine months ended September 30, 2024, as part of its financing strategy[247]. - The company completed a debt restructuring transaction in June 2023, exchanging $100.0 million of Senior Secured Term Loan for 2L Notes convertible into common stock[262]. - As of September 30, 2024, the outstanding principal amount on the Senior Secured Term Loan was$410.0 million, with $17.0 million due to related parties[268]. - The Company had$44.3 million in outstanding Revolving Loans bearing interest at a weighted average rate of 8.5%[270]. - The Revolving Loans have a maximum borrowing capacity of $50.0 million and mature on February 24, 2027[269]. Cash Flow and Liquidity - As of September 30, 2024, the company had$23.5 million in cash and cash equivalents, down from $36.8 million as of December 31, 2023[246]. - Net cash used in operating activities for the nine months ended September 30, 2024 was$31.4 million, an increase of approximately $13.6 million compared to the same period in 2023[281]. - Net cash used in investing activities decreased to$8.7 million for the nine months ended September 30, 2024, down from $14.6 million in 2023[282]. - Net cash provided by financing activities was$26.8 million for the nine months ended September 30, 2024, compared to $31.0 million used in the same period in 2023, an increase of approximately$57.8 million[283]. - Future liquidity needs may require additional sources beyond operating results, including raising debt or equity capital[257]. Market Opportunities - The population of adults aged 65 and older in the U.S. is projected to grow by 23% from 2022 to 2030, expanding the company's market opportunity[190]. - The final 2024 Medicare Physician Fee Schedule includes a 3.4% reduction in the conversion factor, impacting reimbursement rates for physical therapy services[192].