Agiliti (AGTI) 8-K Agiliti Announces Financial Results for Third Quarter 2021 and Raises Full Year 2021 Guidance

AGILITI ANNOUNCES FINANCIAL RESULTS FOR THIRD QUARTER 2021
AND RAISES FULL YEAR 2021 GUIDANCE

Minneapolis, Minn.--(BUSINESS WIRE)— November 9, 2021 – 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, 2021, and raised its full-year guidance for 2021.

Third Quarter 2021 Highlights

● Revenue growth of 35 percent year-over-year to $262 million

● Net income of $9.7 million, up $19.9 million from the prior year period, and diluted income per share of $0.07, up $0.17 per share from the prior year period

● Adjusted EBITDA¹ growth of 46 percent year-over-year to $82 million, and adjusted diluted earnings per share of $0.23, up $0.10 per share from the prior year period

● Total debt of $1,044.4 million; Net debt¹ of $920.7 million; Net Leverage ratio¹ further reduced to 2.9x

● Raised full year 2021 guidance with expected revenue of $1,010-1,020 million and Adjusted EBITDA of $300-310 million²

“Our strong results from the quarter and our increased financial guidance for the year reflect the powerful fundamentals of our business” said Tom Leonard, Chief Executive Officer. “Agiliti’s nationwide maintenance and logistics infrastructure places us within the local community of the healthcare providers we serve each day.  This same operations network is now supporting our recent acquisitions, with a unique and differentiated value proposition for our customers, delivered though our local service teams.”

Third Quarter and Year-to-Date 2021 Financial Results

Total revenue for the three months ended September 30, 2021, was $262.4 million, representing a 34.8 percent increase from total revenue of $194.7 million for the same period of 2020. Total revenue for the nine months ended September 30, 2021, was $748.2 million, representing a 33.8 percent increase from total revenue of $559.1 million for the same period of 2020.

Net income for the three months ended September 30, 2021, was $9.7 million compared to a net loss of $10.2 million for the same period of 2020. Net income for the nine months ended September 30, 2021, was $14.0 million, representing a $36.0 million increase compared to a net loss of $22.0 million for the same period of 2020.

Adjusted EBITDA for the three months ended September 30, 2021, was $81.9 million, a 46.2 percent increase from Adjusted EBITDA of $56.1 million for the same period of 2020. Adjusted EBITDA for the nine months ended September 30, 2021, was $245.8 million, a 51.6 percent increase from Adjusted EBITDA of $162.2 million for same period of 2020.

Subsequent Events

On October 1, 2021, Agiliti completed its acquisition of Sizewise Rentals, Inc., (“Sizewise”), a manufacturer and distributor of specialty hospital beds, surfaces and patient handling equipment. The transaction was financed with a combination of cash on hand as well as an incremental $150M Term Loan B (fungible with the existing 0% LIBOR floor tranche). The combination enables Agiliti to broaden its portfolio and clinical expertise within the growing specialty equipment services market, expand its total addressable market opportunity and target meaningful growth and cost reduction synergies.

2021 Financial Outlook

For the full year 2021, the Company now expects revenue to be in the range of $1,010 million to $1,020 million, an increase from the prior range of $965 million to $980 million, representing growth of 31 to 32 percent. In addition, the Company now expects Adjusted EBITDA to be in the range of $300 million to $310 million, an increase from the prior range of $280 million to $290 million, representing growth of 28 to 31 percent. Finally, the Company expects capital expenditures for 2021 to be in the range of $67 million to $72 million, an increase from the prior range of $65 million to $70 million. Capex as a percentage of revenue is expected to remain in the range of 6 to 7 percent.

Conference Call Information

Agiliti will hold a conference call to discuss its 2021 third quarter results on Tuesday, November 9, at 5 p.m. Eastern Time (4 p.m. Central Time).

The conference call can be accessed live over the phone by dialing 1-877-300-8521 or for international callers, 1-412-317-6026. 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 passcode for the live call and the replay is 10160759. The replay will be available until November 16, 2021.

Interested investors and other parties may view a simultaneous webcast of the conference call by visiting the Agiliti Investor Relations site at https://investors.agilitihealth.com. The webcast 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.

CONTACT:

Kate Kaiser

Corporate Communication and Investor Relations

kate.kaiser@agilitihealth.com

Forward-Looking Statements

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Agiliti Inc., believes statements in this presentation looking forward in time, including preliminary results, 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; 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 final prospectus filed with the Securities and Exchange Commission (“SEC”), on April 26, 2021, and our quarterly reports on Form 10-Q.

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¹ Non-GAAP Measures. See further discussion below.

² With regard to the non-GAAP Adjusted EBITDA 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.

Agiliti, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except share and per share information)

(unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Revenue	$	262,424	$	194,721	$	748,212	$	559,121
Cost of revenue		158,990		120,115		444,346		359,239
Gross margin		103,434		74,606		303,866		199,882
Selling, general and administrative		75,052		71,732		225,334		180,838
Operating income		28,382		2,874		78,532		19,044
Loss on extinguishment of debt		—		—		10,116		—
Interest expense		10,711		13,560		40,444		46,532
Income (loss) before income taxes and noncontrolling interest		17,671		(10,686)		27,972		(27,488)
Income tax expense (benefit)		7,943		(573)		13,832		(5,678)
Consolidated net income (loss)		9,728		(10,113)		14,140		(21,810)
Net income attributable to noncontrolling interest		60		95		117		198
Net income (loss) attributable to Agiliti, Inc. and Subsidiaries	$	9,668	$	(10,208)	$	14,023	$	(22,008)
Basic income (loss) per share	$	0.07	$	(0.10)	$	0.12	$	(0.22)
Diluted income (loss) per share	$	0.07	$	(0.10)	$	0.11	$	(0.22)
Weighted-average common shares outstanding:
Basic		130,380,551		98,983,296		117,578,750		98,973,853
Diluted		138,490,526		98,983,296		125,515,000		98,973,853

Agiliti, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share and per share information)

(unaudited)

	September 30,		December 31,
	2021		2020
Assets
Current assets:
Cash and cash equivalents	$	123,713	$	206,505
Accounts receivable, less allowance for doubtful accounts of $2,500 at September 30, 2021 and $1,993 at December 31, 2020		200,779		154,625
Inventories		29,092		27,062
Other current assets		14,847		14,175
Total current assets		368,431		402,367
Property and equipment:
Medical equipment		301,189		285,723
Property and office equipment		140,138		112,646
Accumulated depreciation		(251,530)		(183,953)
Total property and equipment, net		189,797		214,416
Other long-term assets:
Goodwill		1,122,530		817,113
Operating lease right-of-use assets		56,692		51,214
Other intangibles, net		528,119		402,095
Other		18,884		16,151
Total assets	$	2,284,453	$	1,903,356
Liabilities and Equity
Current liabilities:
Current portion of long-term debt	$	15,849	$	16,044
Current portion of operating lease liability		15,607		14,155
Current portion of obligation under tax receivable agreement		15,691		15,572
Accounts payable		48,712		37,215
Accrued compensation		37,658		38,671
Accrued interest		2,784		6,347
Deferred revenue		6,858		8,800
Other accrued expenses		24,111		22,727
Total current liabilities		167,270		159,531
Long-term debt, less current portion		1,028,626		1,145,055
Obligation under tax receivable agreement, pension and other long-term liabilities		57,216		53,794
Operating lease liability, less current portion		45,919		40,283
Deferred income taxes, net		109,469		62,748
Commitments and contingencies (Note 11)
Equity
Common stock, $0.0001 par value; 350,000,000 shares authorized; 130,389,758 and 98,983,296 shares issued and outstanding at September 30, 2021 and December 31, 2020		13		10
Additional paid-in capital		932,867		513,902
Accumulated deficit		(54,469)		(68,492)
Accumulated other comprehensive loss		(2,581)		(3,619)
Total Agiliti, Inc. and Subsidiaries equity		875,830		441,801
Noncontrolling interest		123		144
Total equity		875,953		441,945
Total liabilities and equity	$	2,284,453	$	1,903,356

Agiliti, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Nine Months Ended
	September 30,
	2021		2020
Cash flows from operating activities:
Consolidated net income (loss)	$	14,140	$	(21,810)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		78,249		72,955
Amortization		63,482		54,536
Remeasurement of tax receivable agreement and contingent consideration		4,542		8,231
Loss on extinguishment of debt		7,716		—
Provision for doubtful accounts		1,121		1,336
Provision for inventory obsolescence		2,539		458
Non-cash share-based compensation expense		10,127		7,657
Gain on sales and disposals of equipment		(3,939)		(852)
Deferred income taxes		12,040		(5,967)
Changes in operating assets and liabilities:
Accounts receivable		(30,305)		(37,618)
Inventories		1,241		(5,534)
Other operating assets		(5,392)		(6,431)
Accounts payable		4,701		(1,138)
Other operating liabilities		(21,849)		33,903
Net cash provided by operating activities		138,413		99,726
Cash flows from investing activities:
Medical equipment purchases		(23,912)		(22,806)
Property and office equipment purchases		(15,539)		(15,465)
Proceeds from disposition of property and equipment		8,187		2,157
Acquisitions, net of cash acquired		(450,198)		(89,706)
Net cash used in investing activities		(481,462)		(125,820)
Cash flows from financing activities:
Proceeds under revolver		35,000		249,500
Payments under revolver		(35,000)		(283,000)
Proceeds under term loan		198,052		124,844
Payments under term loan		(326,770)		(5,895)
Payments of principal under finance lease liability		(6,721)		(6,312)
Payments of deferred financing costs		(229)		(199)
Payments under tax receivable agreement		(748)		—
Distributions to noncontrolling interests		(138)		(322)
Proceeds from exercise of stock options		380		—
Dividend and equity distribution payment		(926)		(1,138)
Proceeds from issuance of common stock		401,441		—
Stock issuance costs		(4,084)		—
Shares forfeited for taxes		—		(145)
Change in book overdrafts		—		(1,771)
Net cash provided by financing activities		260,257		75,562
Net change in cash and cash equivalents		(82,792)		49,468
Cash and cash equivalents at the beginning of period		206,505		—
Cash and cash equivalents at the end of period	$	123,713	$	49,468
Supplemental cash flow information:
Interest paid	$	40,991	$	41,279
Income taxes paid		2,647		1,007

Use of non-GAAP information

This press release contains non-GAAP measures, including EBITDA, Adjusted EBITDA, Adjusted EPS and Net Leverage Ratio.  We use these internally as measures of operational performance 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 EPS 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 as measures of liquidity. Since EBITDA, Adjusted EBITDA, Adjusted EPS 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 and Adjusted EBITDA 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.

Agiliti, Inc. and Subsidiaries

Adjusted EBITDA

(unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2021		2020		2021		2020
Net income (loss) attributable to Agiliti, Inc. and Subsidiaries	$	9,668	$	(10,208)	$	14,023	$	(22,008)
Interest expense		10,711		13,560		40,444		46,532
Income tax expense (benefit)		7,943		(573)		13,832		(5,678)
Depreciation and amortization		46,860		42,597		138,676		124,659
EBITDA		75,183		45,376		206,975		143,505
Non-cash share-based compensation expense		4,360		3,206		10,127		7,657
Management and other expenses (1)		—		(3,266)		7,626		(256)
Transaction costs (2)		2,189		1,137		6,440		1,699
Tax receivable agreement remeasurement		197		9,600		4,542		9,600
Loss on extinguishment of debt (3)		—		—		10,116		—
Adjusted EBITDA	$	81,929	$	56,053	$	245,826	$	162,205

(1) Management and other expenses represent (a) management fees and buyout termination fee under the Advisory Services Agreement, which was terminated in connection with the initial public offering and (b) employee related non-recurring expenses.

(2) Transaction costs represent costs associated with potential and completed mergers and acquisitions and are primarily related to the Northfield acquisition for the nine months ended September 30, 2021.

(3) Loss on extinguishment of debt 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 costs related to the amendment of our Revolving Credit Facility.

Agiliti, Inc. and Subsidiaries

Non-GAAP Financial Measure: Adjusted EPS

(unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2021		2020		2021		2020
Net income (loss) attributable to Agiliti, Inc. and Subsidiaries	$	9,668	$	(10,208)	$	14,023	$	(22,008)
Amortization		21,497		17,558		60,427		51,702
Non-cash share-based compensation expense		4,360		3,206		10,127		7,657
Management and other expenses (1)		—		(3,266)		7,626		(256)
Transaction costs (2)		2,189		1,137		6,440		1,699
Tax receivable agreement remeasurement (3)		197		9,600		4,542		9,600
Loss on extinguishment of debt (4)		—		—		10,116		—
Income tax benefit associated with pre-tax adjustments (5)		(6,724)		(4,733)		(20,452)		(15,527)
Adjusted Net Income	$	31,187	$	13,294	$	92,849	$	32,867
Weighted average shares outstanding - diluted		138,491		103,706		125,515		103,680
Adjusted EPS	$	0.23	$	0.13	$	0.74	$	0.32

(1) Management and other expenses represent (a) management fees and buyout termination fee under the Advisory Services Agreement, which was  terminated in connection with the initial public offering and (b) employee related non-recurring expenses. (2) Transaction costs represent costs associated with potential and completed mergers and acquisitions and are primarily related to the Northfield  acquisition for the nine months ended September 30, 2021. (3) Tax receivable agreement remeasurement represents the change in the fair value of the tax receivable agreement. (4) Loss on extinguishment of debt 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 costs related to the amendment of our Revolving Credit Facility. (5) Income tax benefit associated with pre-tax adjustments represents the tax benefit or provision associated with the reconciling items between net income (loss) and Adjusted Net Income.  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 Leverage Ratio

(unaudited)

		September 30,
(in millions)		2021
Term Loan B (due 2026)	$	1,035.4
Consolidated Capital Leases		26.1
Less: Deferred Financing Fees		(17.1)
Debt	$	1,044.4
Less: Cash		(123.7)
Net Debt	$	920.7
LTM Adjusted EBITDA	$	317.8
Net Leverage		2.9x