MINNEAPOLIS–(BUSINESS WIRE)–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 quarter ended September 30, 2022, and revised its full-year financial guidance.
Third Quarter 2022 Highlights
Revenue growth of 3 percent to $271 million
Net income of $2.0 million, down $7.7 million from the prior year period; diluted income per share of $0.01, down $0.06 per share from the prior year period
Adjusted EBITDA1 of $66.5 million, down $15.5 million compared to the prior year period; Adjusted Earnings Per Share1 of $0.19, down $0.04 compared to the prior year period
Total debt of $1.07 billion; Net debt1 of $1.04 billion; and, Net Leverage ratio1 of 3.3x
“Our results for the third quarter met our expectations and reflect our continued, organic growth momentum,” said Tom Leonard, CEO of Agiliti. “Our team continues to power our progress by focusing on our customers’ evolving needs and delivering some of the most significant new business deals in the company’s history. While we are encouraged by these positive developments, we are taking a more conservative view on the balance of the year as we manage through short-term headwinds related to the delayed HHS contract and the onboarding of a higher proportion of larger-scale contracts. Our long-term growth strategy remains intact, and we remain well positioned to weather any macro uncertainty ahead of us.”
Third Quarter 2022 Financial Results
Total revenue for the three months ended September 30, 2022, was $271.2 million, representing a 3.3 percent increase from total revenue of $262.4 million for the same period of 2021. Total revenue for the nine months ended September 30, 2022, was $839.6 million, representing a 12.2 percent increase from total revenue of $748.2 million for the same period of 2021.
Net income for the three months ended September 30, 2022, was $2.0 million, a $7.7 million decrease from the same period of 2021. Net income for the nine months ended September 30, 2022, was $26.8 million, a $12.8 million increase from net income of $14.0 million for the same period of 2021.
Adjusted EBITDA1 for the three months ended September 30, 2022, was $66.5 million, a 18.9 percent decrease from Adjusted EBITDA1 of $81.9 million for the same period of 2021. Adjusted EBITDA1 for the nine months ended September 30, 2022, was $225.2 million, a 8.4 percent decrease from Adjusted EBITDA1 of $245.8 million for the same period of 2021.
2022 Financial Guidance
The company revises its guidance for 2022 as follows:
Revenue of $1.11 – $1.12 billion
Adjusted EBITDA of $290-300 million2
Adjusted earnings per share of $0.83 – $0.88 per share2
Capex investment expected in the range of $75 to $85 million
_________________________
Non-GAAP Measures. See further discussion below.
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.
Conference Call Information
Agiliti will hold a conference call to discuss its third quarter 2022 results on Thursday, November 10, at 5 p.m. Eastern Time (4 p.m. Central Time).
The conference call can be accessed live over the phone by dialing 1-877-344-3030 or for international callers, 1-646-307-1984. A replay will be available two hours after the call and can be accessed by dialing 1-800-770-2030, or for international callers, 1-647-362-9199. The passcode for the live call and the replay is 8853057. The replay will be available until November 17, 2022.
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 9,000 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: 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 including our agreement with HHS/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 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
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Revenue
$
271,185
$
262,424
$
839,613
$
748,212
Cost of revenue
169,582
158,990
516,218
444,346
Gross margin
101,603
103,434
323,395
303,866
Selling, general and administrative expense
86,044
75,052
254,303
225,334
Operating income
15,559
28,382
69,092
78,532
Loss on extinguishment of debt
—
—
1,418
10,116
Interest expense
12,531
10,711
34,456
40,444
Tax indemnification expense
11,918
—
11,918
—
Income (loss) before income taxes and noncontrolling interest
(8,890
)
17,671
21,300
27,972
Income tax (benefit) expense
(10,879
)
7,943
(5,672
)
13,832
Consolidated net income
1,989
9,728
26,972
14,140
Net income attributable to noncontrolling interest
38
60
131
117
Net income attributable to Agiliti, Inc. and Subsidiaries
$
1,951
$
9,668
$
26,841
$
14,023
Basic income per share
$
0.01
$
0.07
$
0.20
$
0.12
Diluted income per share
$
0.01
$
0.07
$
0.19
$
0.11
Weighted-average common shares outstanding:
Basic
133,212,218
130,380,551
132,313,218
117,578,750
Diluted
139,062,813
138,490,526
138,242,880
125,515,000
Agiliti, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share and per share information)
(unaudited)
September 30,
2022
December 31,
2021
Assets
Current assets:
Cash and cash equivalents
$
32,211
$
74,325
Accounts receivable, less allowance for credit losses of $3,496 and $2,902
203,087
209,308
Inventories
60,987
55,307
Prepaid expenses
21,503
18,549
Other current assets
13,003
395
Total current assets
330,791
357,884
Property and equipment, net
253,639
258,370
Goodwill
1,218,329
1,213,121
Operating lease right-of-use assets
82,838
80,676
Other intangibles, net
508,769
573,159
Other
23,295
32,537
Total assets
$
2,417,661
$
2,515,747
Liabilities and Equity
Current liabilities:
Current portion of long-term debt
$
17,642
$
17,534
Current portion of operating lease liability
23,438
22,826
Current portion of obligation under tax receivable agreement
29,824
29,187
Accounts payable
59,094
53,851
Accrued compensation
31,867
47,951
Accrued interest
3,889
3,473
Deferred revenue
9,279
5,808
Other accrued expenses
25,883
27,900
Total current liabilities
200,916
208,530
Long-term debt, less current portion
1,050,288
1,174,968
Obligation under tax receivable agreement, pension and other long-term liabilities
17,036
29,629
Operating lease liability, less current portion
70,259
63,241
Deferred income taxes, net
142,676
143,307
Commitments and contingencies
Equity:
Common stock, $0.0001 par value; 500,000,000 shares authorized; 133,330,184 and 130,950,061
shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively
13
13
Additional paid-in capital
944,477
938,888
Accumulated deficit
(17,645
)
(44,486
)
Accumulated other comprehensive income
9,490
1,537
Total Agiliti, Inc. and Subsidiaries equity
936,335
895,952
Noncontrolling interest
151
120
Total equity
936,486
896,072
Total liabilities and equity
$
2,417,661
$
2,515,747
Agiliti, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended
September 30,
2022
2021
Cash flows from operating activities:
Consolidated net income
$
26,972
$
14,140
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation
65,502
78,249
Amortization
71,254
63,482
Remeasurement of tax receivable agreement
—
4,542
Loss on extinguishment of debt
1,418
7,716
Provision for credit losses
801
1,121
Provision for inventory obsolescence
859
2,539
Non-cash share-based compensation expense
15,066
10,127
Gain on sales and disposals of equipment
(793
)
(3,939
)
Deferred income taxes
(3,365
)
12,040
Changes in operating assets and liabilities:
Accounts receivable
3,420
(30,305
)
Inventories
(6,539
)
1,241
Other operating assets
(7,566
)
(5,392
)
Accounts payable
13,123
4,701
Other operating liabilities
(18,251
)
(21,849
)
Net cash provided by operating activities
161,901
138,413
Cash flows from investing activities:
Medical equipment purchases
(37,494
)
(23,912
)
Property and office equipment purchases
(20,374
)
(15,539
)
Proceeds from disposition of property and equipment
2,695
8,187
Acquisitions, net of cash acquired
(3,125
)
(450,198
)
Net cash used in investing activities
(58,298
)
(481,462
)
Cash flows from financing activities:
Proceeds under debt arrangements
20,000
233,052
Payments under debt arrangements
(146,173
)
(361,770
)
Payments of principal under finance lease liability
(6,676
)
(6,721
)
Payments of deferred financing costs
—
(229
)
Payments under tax receivable agreement
—
(748
)
Distributions to noncontrolling interests
(100
)
(138
)
Proceeds from exercise of stock options
2,949
380
Dividend and equity distribution payment
(908
)
(926
)
Proceeds from issuance of common stock
—
401,441
Stock issuance costs
—
(4,084
)
Shares forfeited for taxes
(14,488
)
—
Payments of contingent consideration
(321
)
—
Net cash (used in) provided by financing activities
(145,717
)
260,257
Net change in cash and cash equivalents
(42,114
)
(82,792
)
Cash and cash equivalents at the beginning of period
74,325
206,505
Cash and cash equivalents at the end of period
$
32,211
$
123,713
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
(in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Net income attributable to Agiliti, Inc. and Subsidiaries
$
1,951
$
9,668
$
26,841
$
14,023
Interest expense
12,531
10,711
34,456
40,444
Income tax (benefit) expense (1)
(10,879
)
7,943
(5,672
)
13,832
Depreciation and amortization
42,170
46,861
133,711
138,676
EBITDA
45,773
75,183
189,336
206,975
Non-cash share-based compensation expense
4,859
4,360
15,066
10,127
Management and other expenses (2)
13,877
—
13,877
7,626
Transaction costs (3)
1,944
2,189
5,465
6,440
Tax receivable agreement remeasurement
—
197
—
4,542
Loss on extinguishment of debt (4)
—
—
1,418
10,116
Adjusted EBITDA
$
66,453
$
81,929
$
225,162
$
245,826
_____________________________
(1) Income tax (benefit) expense includes the $11.9 million tax benefit due to the release of the reserve and associated interest and penalties related to the Sizewise Acquisition.
(2) Management and other expenses represent (a) tax indemnification expense related to the Sizewise Acquisition;(b) management fees and buyout termination fee under the Advisory Services Agreement, which was terminated in connection with the initial public offering in 2021; and (c) non-recurring expenses.
(3) Transaction costs represent costs associated with potential and completed mergers and acquisitions and are primarily related to the Northfield and Sizewise acquisitions.
(4) Loss on extinguishment of debt for the nine months ended September 30, 2022 consists of the write-off of the unamortized debt discount related to the partial prepayment of the First Lien Term Loan. Loss on extinguishment of debt for the nine months ended September 30, 2021 consists of the write-off of the unamortized deferred financing costs and debt discount and an additional 1% redemption price related to the repayment of our Second Lien Term Loan and the write-off of the unamortized deferred financing cost related to the amendment of our Revolving Credit Facility.
Agiliti, Inc. and Subsidiaries
Non-GAAP Financial Measure: Adjusted Net Income and Adjusted EPS
(in thousands, except share and per share information)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Net income attributable to Agiliti, Inc. and Subsidiaries
$
1,951
$
9,668
$
26,841
$
14,023
Amortization
23,080
21,497
68,209
60,427
Non-cash share-based compensation expense
4,859
4,360
15,066
10,127
Management and other expenses (1)
13,877
—
13,877
7,626
Transaction costs (2)
1,944
2,189
5,465
6,440
Tax receivable agreement remeasurement
—
197
—
4,542
Loss on extinguishment of debt (3)
—
—
1,418
10,116
Income tax benefit associated with pre-tax adjustments (4)
(19,663
)
(6,724
)
(37,908
)
(20,452
)
Adjusted net income
$
26,048
$
31,187
$
92,968
$
92,849
Weighted average shares outstanding – diluted
139,063
138,491
138,243
125,515
Adjusted EPS
$
0.19
$
0.23
$
0.67
$
0.74
_____________________________
(1) Management and other expenses include (a) tax indemnification expense related to the Sizewise Acquisition; (b) management fees and buyout termination fee under the Advisory Services Agreement, which was terminated in connection with the initial public offering in 2021; and (c) non-recurring expenses.
(2) Transaction costs represent costs associated with potential and completed mergers and acquisitions and are primarily related to the Northfield and Sizewise acquisitions.
(3) Loss on extinguishment of debt for the nine months ended September 30, 2022 consists of the write-off of the unamortized debt discount related to the partial prepayment of the First Lien Term Loan. Loss on extinguishment of debt for the six months ended September 30, 2021 consists of the write-off of the unamortized deferred financing costs and debt discount and an additional 1% redemption price related to the repayment of our Second Lien Term Loan and the write-off of the unamortized deferred financing cost related to the amendment of our Revolving Credit Facility.
(4) 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. For the three and nine months ended September 30, 2022, the benefit includes $11.9 million due to the release of the reserve and associated interest and penalties related to the Sizewise Acquisition.
Agiliti, Inc. and Subsidiaries
Non-GAAP Financial Measure: Net Debt and Net Leverage Ratio
(in millions)
September 30,
2022
Revolving Loan, due 2026
$
—
First Lien Term Loan, due 2026
1,056.9
Finance lease liability
23.9
Less: Unamortized Deferred Financing Costs and Debt Discount
(12.8
)
Total Debt
$
1,068.0
Less: Cash
(32.2
)
Net Debt
$
1,035.8
LTM Adjusted EBITDA
$
310.0
Net Leverage
3.3x
Contacts
Kate Kaiser
Corporate Communication and Investor Relations
[email protected]
