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Agiliti Announces Financial Results for Third Quarter 2022

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

_________________________

  1. Non-GAAP Measures. See further discussion below.
  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.

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

 

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