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Agiliti Announces Financial Results for First Quarter 2023 and Reaffirms 2023 Outlook

Agiliti Inc. (NYSE: AGTI) (“Agiliti”), a nationwide provider of healthcare technology management and service solutions to the United States healthcare industry, today announced its financial results for the first quarter ended March 31, 2023, and reaffirmed its financial outlook for 2023.

First Quarter 2023 Highlights

  • Revenue growth of 1.9% to $300 million
  • Net income of $3 million, down $16.9 million from the prior year period; diluted income per share of $0.02, down $0.12 per share from the prior year period
  • Adjusted EBITDA1 of $72 million, compared to $89 million in the prior year period; Adjusted Earnings Per Share1 of $0.20, down $0.09 compared to the prior year period

“Our first quarter performance met our expectations with results that reflect the importance of our value proposition,” said Tom Boehning, Chief Executive Officer. “Our customers are navigating a broad set of economic challenges, and we are proud to bring solutions that address many of the financial, clinical and operational constraints facing our healthcare system today. This critical work continues to drive the momentum in our business and gives us confidence in our outlook for the year.”

First Quarter 2023 Financial Results

Total revenue for the three months ended March 31, 2023, was $299.9 million, representing a 1.9 percent increase from total revenue of $294.4 million for the same period of 2022.

Net income for the three months ended March 31, 2023, was $3.0 million, compared to $19.9 million for the same period of 2022.

Adjusted EBITDA1 for the three months ended March 31, 2023, was $72.0 million, a 19.3 percent decrease from Adjusted EBITDA1 of $89.2 million for the same period of 2022.

2023 Financial Outlook

The company reaffirmed its guidance for 2023 as follows:

  • Revenue of $1.16 - $1.19 billion
  • Adjusted EBITDA of $295 - $305 million2
  • Adjusted earnings per share of $0.65 – $0.70 per share2
  • Capex investment expected in the range of $85 to $95 million

Conference Call Information

Agiliti will hold a conference call to discuss its first quarter 2023 results on Tuesday, May 9, at 5 p.m. Eastern Time (4 p.m. Central Time).

The conference call can be accessed live over the phone by dialing 1-877-407-0792 or for international callers, 1-201-689-8263. The passcode for the live call and the replay is 13737749. A replay will be available two hours after the call and can be accessed by dialing 1-844-512-2921, or for international callers, 1-412-317-6671. The Access ID for the replay call is 13737749. The replay will be available until May 16, 2023.

Interested investors and other parties may also listen to a simultaneous webcast of the conference call by visiting the Agiliti Investor Relations site at https://investors.agilitihealth.com. The online replay will be available for a limited time shortly following the call.

About Agiliti

Agiliti is an essential service provider to the U.S. healthcare industry with solutions that help support a more efficient, safe and sustainable healthcare delivery system. Agiliti serves more than 10,000 national, regional and local acute care and alternate site providers across the U.S. For more than eight decades, Agiliti has delivered medical equipment management and service solutions that help healthcare providers reduce costs, increase operating efficiencies and support optimal patient outcomes.

Forward-Looking Statements

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Certain statements in this press release are forward-looking in time, including financial outlook and other preliminary results, and involve risks and uncertainties. The following factors, among others, could adversely affect our business, operations and financial condition causing our actual results to differ materially from those expressed in any forward-looking statements: negative reaction of our investors, our suppliers, our customers or our employees to our leadership succession; market volatility of our common stock as a result of our leadership succession; the risk that the leadership succession may not provide the results that the company expects; our history of net losses and substantial interest expense; our need for substantial cash to operate and expand our business as planned; our substantial outstanding debt and debt service obligations; restrictions imposed by the terms of our debt; a decrease in the number of patients our customers are serving; our ability to effect change in the manner in which health care providers traditionally procure medical equipment; the absence of long-term commitments with customers; our potential inability to maintain the agreement with the U.S. Department of Health and Human Services’ (“HHS”) and Office of Assistant Secretary of Preparedness and Response (“ASPR”) (the “Agreement”) or comply with its terms and risks relating to extension, renewal or termination of the Agreement or any of our existing contacts with HHS and ASPR; our ability to renew contracts with group purchasing organizations and integrated delivery networks; changes in reimbursement rates and policies by third-party payors; the impact of health care reform initiatives; the impact of significant regulation of the health care industry and the need to comply with those regulations; the effect of prolonged negative changes in domestic and global economic conditions; difficulties or delays in our continued expansion into certain of our businesses/geographic markets and developments of new businesses/geographic markets; additional credit risks in increasing business with home care providers and nursing homes, impacts of equipment product recalls or obsolescence; increases in vendor costs that cannot be passed through to our customers; and other Risk Factors as detailed in our most recent annual report on Form 10-K.

 

Agiliti, Inc. and Subsidiaries

Consolidated Statements of Operations

(in thousands, except share and per share information)

(unaudited)

 

 

Three Months Ended

March 31,

 

 

 

2023

 

 

2022

Revenue

 

$

299,904

 

$

294,444

Cost of revenue

 

 

190,530

 

 

170,817

Gross margin

 

 

109,374

 

 

123,627

Selling, general and administrative expense

 

 

88,837

 

 

86,138

Operating income

 

 

20,537

 

 

37,489

Interest expense

 

 

15,831

 

 

10,664

Income before income taxes and noncontrolling interest

 

 

4,706

 

 

26,825

Income tax expense

 

 

1,656

 

 

6,905

Consolidated net income

 

 

3,050

 

 

19,920

Net income attributable to noncontrolling interest

 

 

37

 

 

28

Net income attributable to Agiliti, Inc. and Subsidiaries

 

$

3,013

 

$

19,892

 

 

 

 

 

Basic income per share

 

$

0.02

 

$

0.15

Diluted income per share

 

$

0.02

 

$

0.14

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

Basic

 

 

133,850,124

 

 

131,148,108

Diluted

 

 

139,293,662

 

 

139,426,334

 

Agiliti, Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share and per share information)

(unaudited)

 

 

March 31, 2023

 

December 31,

2022

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

14,453

 

$

5,577

Accounts receivable, less allowance for credit losses of 4,251 as of March 31, 2023

and $4,182 as of December 31, 2022.

 

 

222,846

 

 

207,753

Inventories

 

 

73,575

 

 

70,132

Prepaid expenses

 

 

18,827

 

 

23,458

Other current assets

 

 

3,942

 

 

9,393

Total current assets

 

 

333,643

 

 

316,313

Property and equipment, net

 

 

278,890

 

 

273,958

Goodwill

 

 

1,239,432

 

 

1,239,106

Operating lease right-of-use assets

 

 

78,289

 

 

79,975

Other intangibles, net

 

 

491,043

 

 

512,020

Other

 

 

22,112

 

 

22,735

Total assets

 

$

2,443,409

 

$

2,444,107

Liabilities and Equity

 

 

 

 

Current liabilities:

 

 

 

 

Current portion of long-term debt

 

$

17,828

 

$

17,752

Current portion of operating lease liability

 

 

24,403

 

 

23,607

Current portion of obligation under tax receivable agreement

 

 

9,872

 

 

34,694

Accounts payable

 

 

69,432

 

 

59,163

Accrued compensation

 

 

29,973

 

 

25,928

Accrued interest

 

 

5,252

 

 

5,039

Other current liabilities

 

 

40,401

 

 

31,198

Total current liabilities

 

 

197,161

 

 

197,381

Long-term debt, less current portion

 

 

1,083,572

 

 

1,077,293

Obligation under tax receivable agreement, pension and other long-term liabilities

 

 

9,505

 

 

9,161

Operating lease liability, less current portion

 

 

64,974

 

 

67,332

Deferred income taxes, net

 

 

140,999

 

 

146,615

Commitments and contingencies

 

 

 

 

Equity:

Common stock, $0.0001 par value; 500,000,000 shares authorized; 134,339,512 and

133,608,495 shares issued and outstanding as of March 31, 2023 and December 31, 2022.

 

 

13

 

 

13

Additional paid-in capital

 

 

954,928

 

 

953,046

Accumulated deficit

 

 

(11,261)

 

 

(14,274)

Accumulated other comprehensive income

 

 

3,341

 

 

7,343

Total Agiliti, Inc. and Subsidiaries equity

 

 

947,021

 

 

946,128

Noncontrolling interest

 

 

177

 

 

197

Total equity

 

 

947,198

 

 

946,325

Total liabilities and equity

 

$

2,443,409

 

$

2,444,107

 

Agiliti, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

Three Months Ended

March 31,

 

 

 

2023

 

 

2022

Cash flows from operating activities:

 

 

 

 

Consolidated net income

 

$

3,050

 

$

19,920

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation

 

 

19,620

 

 

22,498

Amortization

 

 

23,473

 

 

23,358

Provision for credit (gains) losses

 

 

404

 

 

(27)

Provision for inventory obsolescence

 

 

789

 

 

325

Non-cash share-based compensation expense

 

 

6,889

 

 

4,637

Gain on sales and disposals of equipment

 

 

(751)

 

 

(593)

Deferred income taxes

 

 

(4,229)

 

 

4,398

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable

 

 

(15,497)

 

 

(6,212)

Inventories

 

 

(4,399)

 

 

(972)

Other operating assets

 

 

3,930

 

 

1,132

Accounts payable

 

 

7,935

 

 

5,351

Accrued and other operating liabilities

 

 

13,682

 

 

(6,691)

Net cash provided by operating activities

 

 

54,896

 

 

67,124

Cash flows from investing activities:

 

 

 

 

Medical equipment purchases

 

 

(12,128)

 

 

(10,005)

Property and office equipment purchases

 

 

(6,734)

 

 

(5,215)

Proceeds from disposition of property and equipment

 

 

1,033

 

 

644

Net cash used in investing activities

 

 

(17,829)

 

 

(14,576)

Cash flows from financing activities:

 

 

 

 

Proceeds under debt arrangements

 

 

87,000

 

 

Payments under debt arrangements

 

 

(82,849)

 

 

(71,474)

Payments of principal under finance lease liability

 

 

(2,297)

 

 

(2,223)

Payments under tax receivable agreement

 

 

(24,822)

 

 

Distributions to noncontrolling interests

 

 

(57)

 

 

(32)

Proceeds from exercise of stock options

 

 

469

 

 

978

Dividend and equity distribution payment

 

 

(321)

 

 

(906)

Shares forfeited for taxes

 

 

(5,314)

 

 

(792)

Payments of contingent consideration

 

 

 

 

(321)

Net cash used in financing activities

 

 

(28,191)

 

 

(74,770)

Net change in cash and cash equivalents

 

 

8,876

 

 

(22,222)

Cash and cash equivalents at the beginning of period

 

 

5,577

 

 

74,325

Cash and cash equivalents at the end of period

 

$

14,453

 

$

52,103

Use of non-GAAP information

This press release contains non-GAAP measures, including EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, Net Debt and Net Leverage Ratio. We use these internally as measures of operational performance, or liquidity, as applicable, and disclose them externally to assist analysts, investors and lenders in their comparisons of operational performance, valuation and debt capacity across companies with differing capital, tax and legal structures. We believe the investment community frequently uses these measures in the evaluation of similarly situated companies. Adjusted EBITDA is also used by the Company as a factor to determine the total amount of incentive compensation to be awarded to executive officers and other employees. EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, Net Debt and Net Leverage Ratio, however, are not measures of financial performance under accounting principles generally accepted in the United States of America (“GAAP”) and should not be considered as alternatives to, or more meaningful than, net income as measures of operating performance or to cash flows from operating, investing or financing activities or to total debt as measures of liquidity or debt capacity. Since EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, Net Debt and Net Leverage Ratio are not measures determined in accordance with GAAP and are thus susceptible to varying interpretations and calculations, these measures, as presented, may not be comparable to other similarly titled measures of other companies. EBITDA, Adjusted EBITDA, and Adjusted Net Income do not represent amounts of funds that are available for management’s discretionary use. EBITDA and Adjusted EBITDA presented may not be the same as EBITDA and Adjusted EBITDA calculations as defined in the First Lien Credit Facilities. EBITDA is defined as earnings attributable to Agiliti, Inc. before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA excluding non-cash share-based compensation expense, management fees and other non-recurring gains, expenses, or losses, transaction costs, remeasurement of the tax receivable agreement and loss on extinguishment of debt. LTM Adjusted EBITDA represents the last twelve months (“LTM”) of Adjusted EBITDA.

Agiliti, Inc. and Subsidiaries

Non-GAAP Financial Measure: Adjusted EBITDA

 

 

Three Months Ended

March 31,

(in thousands)

 

 

2023

 

 

2022

Net income attributable to Agiliti, Inc. and Subsidiaries

 

$

3,013

 

$

19,892

Interest expense

 

 

15,831

 

 

10,664

Income tax expense

 

 

1,656

 

 

6,905

Depreciation and amortization

 

 

42,106

 

 

44,831

EBITDA

 

 

62,606

 

 

82,292

Non-cash share-based compensation expense

 

 

6,889

 

 

4,637

Management and other expenses (1)

 

 

961

 

 

Transaction costs (2)

 

 

1,512

 

 

2,226

Adjusted EBITDA

 

$

71,968

 

$

89,155

______________________________

(1) Management and other expenses represent non-recurring expenses.

(2) Transaction costs represent costs associated with potential and completed mergers and acquisitions.

Agiliti, Inc. and Subsidiaries

Non-GAAP Financial Measure: Adjusted Net Income and Adjusted EPS

 

 

 

Three Months Ended

March 31,

(in thousands, except share and per share information)

 

 

2023

 

 

2022

Net income attributable to Agiliti, Inc. and Subsidiaries

 

$

3,013

 

$

19,892

Amortization

 

 

22,487

 

 

22,333

Non-cash share-based compensation expense

 

 

6,889

 

 

4,637

Management and other expenses (1)

 

 

961

 

 

Transaction costs (2)

 

 

1,512

 

 

2,226

Income tax benefit associated with pre-tax adjustments (3)

 

 

(7,392)

 

 

(7,969)

Adjusted net income

 

$

27,470

 

$

41,119

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - diluted

 

 

139,293,662

 

 

139,426,334

Adjusted EPS

 

$

0.20

 

$

0.29

______________________________

(1) Management and other expenses represent non-recurring expenses.

(2) Transaction costs represent costs associated with potential and completed mergers and acquisitions.

(3) Income tax benefit associated with pre-tax adjustments represents the tax benefit or provision

associated with the reconciling items between net income and Adjusted Net Income and includes both

the current and deferred income tax impact of the adjustments. To determine the aggregate tax effect

of the reconciling items, we utilized statutory income tax rates ranging from 0% to 26%, depending

upon the applicable jurisdictions of each adjustment.

Agiliti, Inc. and Subsidiaries

Non-GAAP Financial Measure: Net Debt and Net Leverage Ratio

 

(in thousands)

 

March 31, 2023

First Lien Term Loan, due 2026

 

$

1,052,198

Revolving Loan, due 2026

 

 

35,000

Finance lease liability

 

 

25,540

Less: Unamortized Deferred Financing Costs and Debt Discount

 

 

(11,338)

Total Debt

 

 

1,101,400

Less: Cash

 

 

(14,453)

Net Debt

 

$

1,086,947

 

 

 

LTM Adjusted EBITDA

 

$

279,422

 

 

 

Net Leverage

 

3.9 x

_________________________

1 Non-GAAP Measures. See further discussion on page 6

2 With regard to the non-GAAP Adjusted EBITDA guidance and adjusted earnings per share guidance provided above, a reconciliation to GAAP net income has not been provided as the quantification of certain items included in the calculation of GAAP net income cannot be calculated or predicted at this time without unreasonable efforts. For example, the non-GAAP adjustment for stock-based compensation expense requires additional inputs such as number of shares granted and market price that are not currently ascertainable, and the non-GAAP adjustment for certain reserves and expenses depends on the timing and magnitude of these expenses and cannot be accurately forecasted. For the same reasons, the Company is unable to address the probable significance of the unavailable information, which could have a potentially unpredictable, and potentially significant, impact on its future GAAP financial results. See further discussion below regarding historical Adjusted EBITDA and historical adjusted earnings per share.

 

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