Earnings call transcript Q4 2022

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Operator

Good afternoon, and welcome to Agiliti's Fourth Quarter and Full Year 2022 Earnings Conference Call. Today's call is being recorded, and we have allocated one hour for prepared remarks and Q&A.

At this time, I'd like to turn the conference over to Kate Kaiser, Senior Vice President of Corporate Communications and Investor Relations at Agiliti. Thank you.

You may begin.

Kate Kaiser

hello, and operator you, everyone. Thank joining Thank we ending today's as on an you December overview XXXX. quarter for provide the of call for us Agiliti's XX, results

we'll remind consequently and subject to during begin, are uncertainties. are you and we statements that I'll today's Before call, be risks making forward-looking that

and Specific the our may from these in corporate those in could our risk are actual in future, in statements. detailed factors factors release, SEC at website the Certain can us results recent cause press expressed found forward and Agilitihealth.com. be our affect investor filings, to materially most looking differ of section which in

this be in call. calculated to referring that measures and also accordance are accepted presented generally not during We'll with certain principles accounting

those these measures our a the and You to measures, GAAP of most in use description comparable can of we a find measures press release. why directly reconciliation

that please Select to section and download the use of the and facilitate a then Agilitihealth.com. at we'll website screen, events discussion, presentation presentations. today's the the our top of copy at To investor visit

Agiliti and Finally, presentation titled slides. QX select earnings Full Year the XXXX

I'll call turn Leonard. over to our the Tom

Tom Leonard

Thank us results the reflect our quarter joining we review from year. and for you on of afternoon. XXXX the performance for fourth our full as Good

known officially Joining company. member Agiliti. role position Beginning me ability company right key Tom a of president, as the commercial I our me and announced CEO as his as plans the continue leading January our our with today my I've a March and in recent will the and is On will him of Pekarek. a our at XX. X, join on XXXX nearly of lead XX January its our full President retire both Tom to confidence to Directors. since a Jim and a as our of CEO years CFO team. Tom and our is Boehning Boehning news. recap on I colleague has friend to organization, leadership Board our have served serve take member Board beside Directors from

This began shortly Agiliti and Tom and about progress to The our the transition process ago. Board three is succession are planning I joined under Directors company's look Tom's of of future thoughtful part that excited a after forward years continued leadership.

the few Tom and HHS our continuing stockpile of highlight the successfully financial favorable renewal delivered as benefit managing quarter and devices. strong to of XXXX from term financial of We I'll flexed expectations Today, record track that our the turn the to and contract COVID call tailwinds and a on realized execution. HHS a competitive year. full met headlines the the part Jim. We capitalize then We secured deploying our from the results of for of our and fourth for medical operations long recently process,

XXXX enjoy And on the as base contracts we from resulting of build come. history. as Agiliti opportunities, we all few the customer backlog the momentum our performance new largest growing and XXXX the and extend long which our the seen our resume earnings some years of pipeline to their enters in services in last for to a a well-positioned We drive on of in contracts durable signed of strong business. priorities, term have demand focus customers shared our calls, company's over strong

to demonstrate more predictable, move lap the COVID-XX we clearly first from year's year, half and growth of results our we this benefits contract the HHS half we'll our of the expect back the prior As organic to base and renewal business.

and in proud truly not our become teams. my of essential nation's be shareholders its company or past continued Boehning's customers more privilege to I my CEO CEO. eight look been to as its years It's more time Tom infrastructure. for this a leadership. under our Agiliti part I Agiliti of supporting team the healthcare members, progress could As as our conclude, serve its forward of confident I has company,

CEO, our the Tom Boehning. turn over new now I'll call to

Tom Boehning

And more for years this to Tom. today. purpose. can't capabilities, After hello, joining us no for guidance. be exciting part can his Tom and opportunity the and our important potential, confidently in than company to team, healthcare, honored I'm leadership everyone. Thanks, our there enough can I that unique thank growth Thanks that other of or is I XX partnership say match have

Agiliti the of Agiliti's of model, on and working its is critical joining Underlying deliver dedication strength its ago, our durability the results to alongside to quality mission. and colleagues three reputation and business of Since nationwide pleasure had our customers the service. years our scale, I've and its

look CEO, incredible I furthering drive our shareholders. our to our strategy customer strong partnerships, forward delivering and on proven As value our team, empowering to for growth

quarter to our and results. our year. XXXX full the ranges recent for Turning expectations most our line guidance now revised We with finished in fourth for the both

Our model of move in COVID results during two as variability roughly the agreement years expected public in demonstrates company. we the performance HHS withstanding variance through related and agreement, material associated in a the transient year. impacts in and have impacts with fact COVID been results resilience primary of both transient our our underlying the our the work HHS which of our the the time in a of delays caused as drivers reported

the represented of related fleet HHS the experienced In benefits the contract. the associated lower first to the we rental than of reported quarter timing expected year, of the second renewal COVID headwinds of results delays the in term half our impacted XXXX, utilization short to device with and tailwind and they our

have the of By Jim clearly on year, consistent time, in more prior same of steady our organic lapped the before focus provide detail At the tailwinds. offer momentum later results. highlights by our XXXX. growth the demand We to into I'll stability for connected business year this few customer and QX, new driven our expect solutions. anticipate underlying a the inviting we end come the to more we business will engine

this million Human On will recent Beginning or Services, air some and was the new continue ventilators awarded with powered within Health systems inventory, to purifying respirator ongoing valued Department a XX, begins HHS. anticipated of years. and Agiliti of national long the distribution preventive manage award, news. Agiliti and current services and management use. the retrieval of and agreement overseeing Under a continue with stockpile The U.S. four to December and XXXX these is August at devices and strategic nearly for the a maintenance ready period XX, term medical to emergency contract ensure performance up half $XXX over critical on

its which of was previously year six XX, February two expire long-term contract, to scheduled to current one month this to XXXX, with term thereby Concurrent years. award, span the received Agiliti five total these a contracts a between extension on bridging

XXXX, Since term throughout the short pandemic. has needs under HHS series operated contracts with were that a response emergency Agiliti designed meet of to

provide for factors continuing covers normalized once to and more and important new multi-year have on pleased to and this our contract the forward guidance. post need contract we've earned related XXXX to The deliver We're to ongoing the in COVID into will note, Jim to HHS era. and again value expected the As economics outlined how five the align for with look important scope next and maintenance expectations work management, activities this to a years. deployment color to-date,

year uncover our continue dedicated momentum had driven the needs solve helping customers. operations see to several our selling and we organization We recently from of for teams directly opportunity bring sales growth of we positive training our ahead. as business, week the customers across to the hear event, kickoff of are together larger who and focused to our for broadly, by where for and our the of More part annual preparation commercial organic a

operational positioned providers accomplish and as near industry vendors the reminded causing term The pandemic. uncertainty In from cases, partnerships uniquely costs were their environment remains help breakeven. simply back is to emerges to them We while patient goal to are the can surrounding some both. challenges better seek continued of who the care. with many primary to is healthcare Agiliti reduce to financial the get executives facing meaningfully help enabling healthcare financial

company's is the value more a long in ever our worked work have years, new resulted a broaden last been work value The before the few solutions sizable result higher plus just and of strong of more level our our few opportunities. these business provided sizable positive last essential opportunities we've figure XX year value seven and of pipeline elevate the and the has signed to IDN evolution a portfolio, to contracts teams customers. has we quarters, In our for Agiliti. for to In new than engagements level system wide testament in history. we've and That engagements. solid annual train our our proposition, backlog customer nature This toward eight

into deals embed mentioned, value to deeply previously somewhat as complex chain. implementations we device As these and medical our customers' larger longer value unlock require we operations more in their ourselves

As quarter, results growth we our the lumpiness expect in for near of financial this term last shared the will half trend yield first that we year. some

these the visible as predictable will once expect As we history we a company. half a multiyear our typical and of more support contracts XXXX, outlook highly enter again back financial of long

the point in reiterate business to model. of we've and resilience sights our With a I'd made the like predictability extraordinary future, squarely long set our around

balance and life As operations. across of to system's medical as phase procedural sides of business health well of our the observe our medical cycle, connection can our every device you offerings you the customers' between our look as a

of specific whole are of or macro situations challenges health Regardless affecting set are our system customer, or parts an solution our in as demand. that the trends a always there facing individual

the delivery that has our of proud in and work care long system. of performed nation's our teams role support the are of We of important Agiliti health

ahead even of the and forward, in more our business about momentum Looking the enthusiastic we're us. opportunities

in beyond. For strategy our fostering remain pursue we and and our partnerships on of execution collaborative teams now, our on our XXXX strong customers goals with disciplined as focused

I'll to our initial guidance now for financial detail pass and the XXXX. on results Jim for call

Jim Pekarek

our Thank our start overview I'll and an of Tom. on XXXX full guidance. comments financial and some year then you, financials QX with XXXX end with

total year. company a million revenue the $XXX totaled quarter over fourth the decrease representing For prior X%

COVID of the adjusted million Excluding $XX year, and rental device were $XX utilization to EBITDA totaled the to year, margins at the compared over a new million, renewal, HHS XXXX XX% as versus revised X% as by million, the XX.X%. scope year. favorable EBITDA last totaled QX medical Adjusted prior lower quarter. the year $XX the increased contract prior in which in estimated the revenue margins well was decrease affected Adjusted QX EBITDA impact in from prior

an year per on amounted decline the net in the income the debt, in to adjusted the period, in ago by the rate earnings in which compares to and quarter. Adjusted our driven $X.XX share in $X.XX share effective quarter of increase both $X.XX a interest per

X% an over year. representing For totaled the the increase company year, full billion total revenue $X.XX prior

net the XXXX, in the of versus Excluding increased year. favorable approximately revenue for XX% full XXXX impact COVID

Adjusted EBITDA post down the a were versus Lower EBITDA maintenance year. totaled XX.X% and contract over year. of the points from rental key $XXX were decrease a XXX transition to basis drivers HHS prior for XXXX, XX% last million utilization the year driven representing device the COVID prior medical margins our focus for Adjusted pandemic decline.

addition, adjusted which margins contracts, customer have by were of upfront higher the lower impacted In a negatively onboarding during phase. a larger tend the EBITDA implementation to profitability of proportion

per with our Our the higher for expense by results share drove impacting earnings share adjusted per down share operating performance per share, per of $X.XX $X.XX year. an $X.XX interest

quarter. of year-over-year COVID XX% for revenue period, the primarily attributable A lower our utilization closer totaled year solutions each Taking driven from prior the $XX estimated fleet rental The at of fourth the across impacted decline performance QX solutions. year-over-year. of demand equipment quarter million, peak comparing approximately was look when down in primarily medical equipment we reminder a $XX to equipment to service that million our $XXX customer favorable device need million impact in which a lines

Excluding year X% impact COVID equipment up excess solutions approximately in the was XXXX. QX, prior

representing clinical Moving revenue $XXX QX the quarter. was to year-over-year increase for million a engineering. of XX%

equipment surgical the the driver as prior was versus solutions, we portions within business. continue our the primary year to New customer the for increase repair organic including advance of our growth

devices. agreement a XX% of decline managing agreement quarter. Finally, as pricing longer $XX onsite revenue for primarily stockpile the was model million, the the by the managed renewal HHS the term representing This to and driven pricing year-over-year our reset scope services totaled for of

Continuing margin down of million dollars QX $XXX decrease a the year-over-year. XX% for totaled Gross P&L.

decline was decline to for related versus to in margin agreement The year. gross million, described. in the factors primarily device incentive million totaled as due costs the a decrease $XX year-over-year. XX% was previously rate was SG&A lower due volume driven, prior The prior to to HHS of employee placements, as XX% cost $XX QX compared the rental medical rate as Our period. well year primarily margin the lower

closed QX balance Moving to net billion. sheet. debt of the We with $X.X

in driven QX, from for year strong local tuck in capabilities cash million Our by we in our a markets our results. operations surgical hand two flow footprint our and revolving combination and rental surgical investments on approximately select $XXX through repair These portions invested within and million, in acquisitions. two credit business. smaller operating equipment the the was financed These QX cash $XX facility. were transactions of added Late of in to

XXXX. X.X in ratio Our $XX the acquisitions purchase paid price as would have the times at reported approximated and ratio excluding of the million of late businesses, leverage X.X approximated of for impact December leverage our QX times associated end QX the the

million on obligations. have For utilized in $XXX the year, debt over hand to retire we cash

determining $X.XX Looking of June with reminder a terms $XXX solid term on terms. uses as view fixed floating of the forward, debt, short hedge interest remain XXXX. XXXX. in available anticipated which agreement This cash million, and our Agiliti diligent position we in swap in $XXX optimal of terms a billion increases liquidity the of A for given any rates expire rate near interest term our in partial we in rate strong will provides our the maintains macro maintain on will for of the December rate million rate market swap an debt, is generation.

environment support evaluate future we and capital growth and the We the the structure ensure of to will continue well-positioned rate are business. to interest our

Turning now guidance. XXXX our financial to

performance a key reminder, on a metrics As basis. provide guidance full for we year

is Our X% in guidance billion of revenue of representing $X.XX to XXXX the $X.XX growth billion, range top to X%. line

to be is EBITDA year to guidance guidance full Our can adjusted in range our XXXX million are calculated margins, the of the which EBITDA our from adjusted XX% range be expected in $XXX to implied And $XXX of million. XX%.

guidance the $XX cash described, CapEx reflects our $XX in million As expected investment million. net our to range of

earnings to impact guidance the estimate to adjusted expense be share. range $X.XX of share. in share per range of We Finally, $X.XX in the $X.XX is of per the per $X.XX higher interest to negative

of From shared each financial be our we perspective will as favorable a our have calls impact a QX, and results in qualitative comping $X.X million of earnings XXXX, against XXXX. in in COVID

equipment of pre-pandemic leveling utilization expected in shared we QX prior levels. year, our lower rental calls saw we fleet as XXXX out earnings addition, last as than In of below our

XXXX guidance benefit placements this at will level that Our seasonality assumes continue new XXXX. normal from baseline and to we will throughout continue

described awarded earlier, Additionally, December XX, Tom HHS. we multiyear and XXXX, as new on a were with contract

Our as contract to on $XX to year-over-year pre-pandemic models. million adjusted pricing reduction reflects $XX the a million resets EBITDA guidance

we second in digit from the is as Overall, to contributions and excluding year growth implies onboard toward continue to onetime M&A our described single mid impact guidance business. low organic revenue XXXX, above which new of the the weighted half

our Q&A. provide to turn instructions for the to our over now operator call I'll

Operator

Thank you.

be session. Bank America. Kevin Instructions] your answer first of now Our from conducting proceed Fischbeck will We with question. [Operator with a question is Please and question

Kevin Fischbeck

just thanks. pick guidance. last to about comment Maybe the that on Great, up

number in Assuming think there to like, is organic that number be decent adjusted? that you a single higher is, 'XX, low ex-COVID digit feel that the to or growth way Do like organic is growth? would about COVID a like

Tom Leonard

about think Kevin. the question. for to Yes, organic Kevin, that's way decent the Yes, a thanks growth

Kevin Fischbeck

it running, these companies, to once want type then at and bigger sounds the beginning contract. part deeper these contracts since great. they're figure like these bigger they're of that of of margin onboarding Do that's you more think for implications as the Okay, know far any bit up there's same there's you're I contracts, are likely asking story. new just of increasingly flowing And going but little I bigger as the that margin be savings the these them. a of through Thanks. or and contracts, within to out a to an costs

Tom Leonard

question. good Kevin, Yes,

You with EBITDA should be our thinking in about line overall margins. it

Kevin Fischbeck

Great.

Tom Leonard

Thanks questions. it, the Kevin. got for You

Operator

Thank you.

with question Matt Capital KeyBanc with Markets. next is from Please your Our Mishan question. proceed

Unidentified Analyst

today for going? how's the [indiscernible] thanks Brett guys, questions. Hey, taking Matt This for and is it

I piece think in little meal versus some you impacting bit moving walk a year-over-year the basis. the pieces 'XX a 'XX in of through comparisons of

you around what benefit the around year lower M&A inorganic if equipment rental specifically and full expecting wondering could Just from as the the then the see full on you're to well as from quantify headwind revenue utilization basis. HHS contract lower year a

Jim Pekarek

call we're on mid think leave and tuck-ins. first I quantify is guess, that, would the you. terms referenced all, piece, I the this strong at the They're good, a this for seeing it Brent. deals of I important question, growth tuck-ins small clearly from the would already M&A it's the of these piece and financial EBITDA. space The that this our as that I in. I would in digit on that immaterial Thanks they're overall most But from single in the statements. EBITDA share math, about it for way.

that that In in the the we range. X terms in about, COVID to asked $ million elements you other the us million last $X was QX for of benefit described year

QX. The the is to of of $XX and we levels in that into described was re as that for million range. other $XX balance But COVID thing QX below the entered again, baselining million year XXXX that we started the towards

that factored don't We HHS trying actual also line math would top the So from a the impact get that describe into derive. you're to perspective.

about that. terms I'll what consistent of guidance that at we've leave with You in overall, shared be and thinking previously should it

Unidentified Analyst

allocation what on these bring That's the just you back M&A more little strategically, to Thank can XXXX. allocation, you. you're thinking additional about capital turning of to then for the how All and on tuck give rest capital helpful. just how current And conversation add just to color and momentum, your deals right, around bit bolt and the priorities excellent. they table a ins then

Tom Boehning

Tom Brett. Boehning. Thanks, Yes. It's

profile, our tuck-in As we acquisitions our look retain our did strong just strategy offerings. to and of extend that. of acquisitions pipeline always strong growth augment a these complement current you know, that overlap organic and at M&A We

more keep intended identified out business. pipeline and complement course we'll have great our for the course certainly of the of all we acquisitions XXXX always So but acquisitions of of tuck-in are some for help the have eye and to the that over company, consider growth organic substantial

Unidentified Analyst

All right, thank you.

Tom Leonard

Thanks, Brett.

Tom Boehning

Brett. you, Thank

Operator

from is Our proceed Jason Instructions] next your Please Citigroup. question. Cassorla with question [Operator with

Jason Cassorla

Great, drove outperformance in engineering looks like thanks. quarter. line the It segment the just Good the top everyone. clinical afternoon,

growth. an consider contemplated guidance? As flagged You increase you're most of revenue kind high Or in takes kind customer from where originally we in for thinking puts how that we Was that the about of about in clinical single think year? the and should half of ‘XX and decently in XXXX? is year for growth trending then ahead digit growth back the segment's rate engineering that of of the should in

Tom Leonard

the but had solution with don't Yes, thanks I question, share the for consistent I guided what for to the of to growth, we this Jason. is was would in what would XXXX obviously guide we share is What terms math revenue that individual overall.

So way of about was terms described it the think growth. the it is historically The we've way to consistent. XXXX in

without of clinical details good would growth and the profile the be historically any at look representation Just that engineering within Jason. breaking out a

Unidentified Analyst

Okay, embedded within just got cash then wanted about And it. guidance. ask flow just to maybe the

at generation million for 'XX of like? cash about flow cash level are think of be guidance? flow cash for midpoint and about the higher would we of onetime interest 'XX a flushing about costs dynamic the cash helpful. Or operating XXXX out $XXX and Should million operating $XXX on perhaps we should be there about items did You the EBITDA. thinking in Just flow similar

Tom Leonard

about the the script. flow XXXX of Yes, no that think is to chunks to cash referenced relates the A for couple modeling had as of the interest I worries. it big in

rates consistent interest If off into as the you are rates it with Fed the reflected year-over-year think coming about would fair and be it the swaps. of we XXXX say to that model are that

our of in in basis debt. terms XXX think call costs on to a point-ish interest You about it it overall XXX can increase

this previously, second but. the about is then think piece to We've And taxes. shared

we little NOLs we to continue have our very in to terms really As XXXX. of utilize utilize NOLs, in

overall think taxes the bit. And thing cash other so for the go about That's to will XXXX. up a

Unidentified Analyst

Okay. you. Thank

Tom Leonard

Jason. it got You

Operator

Thank you.

next Our Please Kevin with question question. UBS. from with your proceed is Caliendo

Kevin Caliendo

the does it about basis math guidance Thanks. If midpoint, XXX the right, down margin points. doing I'm assume the at a step

about So that business? is. driver I'm the What as just margin. it think of it? a talking Should of it the to are we that, your think about about what EBITDA cost should understand how the or trying mix? we drivers of Is I'm just

Tom Leonard

shared the from from I Yes, the to in the perspective. $XX that million renewal thanks for question. the HHS range profitability script million the was had a in impact $XX

Q&A impact to mix that we out an on in an So this impact. as the that million say I in from well side benefit earlier obtained get would well. the pointed other was have part COVID. order to of the Obviously, had re-baselining. the I but X of of the quarter first which certainly X And XXXX, million in the we of there's, had as less impact, as an range,

Kevin Caliendo

-- And Okay. just

Speaker

To flow understand complete shared EBITDA has not thus a does in but this that impact, important high a our only through, previously impacting that to we've thought, have top dialogues, it's line margins. our but the it

Kevin Caliendo

down operating how at you of want Would take Are be anything? self about flow just end to flow my thinking flow, want leverage roughly cash the is free year debt? we think that. the cash do the should of And to about assume cash use the well? same as assume Just I ratio flow you where additional you you're should we for that leverage free used to remains in position the a generation any acquisitions? And would guess cash to to on fund question cash that the pay year the given and would free the

Tom Leonard

can way shared QX. made But is end in mid important is that to that most The high go think up about It four. out we've the I the our make these we've leverage this M&A. low Yes. there of we And acquisitions at the better terms shared to would We've target what as shared that delever. threes. as call the with as to the front of That towards that the towards the be back that think load around half, is of than in what shared half the should starting guidance you mid we've expect would we more should about be it. overall. we've back half threes being way to Back previously,

terms debt of either we'll uses allocation, In we capital or are, down the capital around Kevin. as always paying thoughtful it in be reinvesting allocation, other for all it business or considering

Kevin Caliendo

And that the out in think would XXXX assume. CapEx versus anything just Is should cost, or normal there is your XXXX to we spend? would call abnormal you what in about be you

Tom Leonard

No, all. not at

Kevin Caliendo

Okay.

Tom Leonard

Yes. Kevin. Not at all.

Kevin Caliendo

you. Thank

Tom Leonard

it. got You

Operator

you. Thank

from next Our question. Morgan question with your proceed Please is with Stanley. Ranieri Drew

Drew Ranieri

Tom to the in business and way basis growth about of questions. digit for make to sure I'm The right is the from plus just are acquisitions low today? might start, Is acquisitions organic about the single just math and or to XXX then mid that million the be $X growth for year want Maybe here, think to points doing right add right about kind here. Hi, but taking Thanks the EBITDA. the Jim. I messaging adding minus my should to we thinking

Tom Leonard

Yes.

directionally think that's I right, Drew.

Drew Ranieri

transition the better understand we just opportunities looking you. in here COVID, margin like maybe Okay, utilization. company expansion margin how about questions. the on side, of help expansion And thinking from story off of a some the thank is the for be But of us the a what ahead? XXXX bit rebates Thanks margin maybe just just of off for year should taking seems

Tom Leonard

our infrastructure. us with Yes. volume Drew. Good is The growth. question our is helps fixed leveraging cost It us key tremendously Volume for friend. always

enter half but of as to we're back organic we continue going And into year on the for Obviously, not growth guidance line going this top we us so that's going XXXX. expand XXXX. key the that is into key the as provide to XXXX,

Operator

any Tom Instructions] comments. at no over turn this [Operator questions for back Boehning like the closing to are There time. floor further to I'd

Tom Boehning

And mirror, operator. reiterate that to and teams deliver their potential we like enthusiastic in I'm updated underlying you companies but to our progress. very despite call, our Thanks, today's expand faced on XXXX to year, forward I'm growth. our look many future to in our wrap continue my for as we outlook momentum. view value our put I'd for confidence last growth customers XXXX sure like about our to keeping headwinds and strong

we'll with very you much. So close today's call. Thank that, all

Operator

conference. today's concludes This

your You this you may disconnect time. lines at participation. Thank for your

Agiliti (AGTI) 7 Mar 232022 Q4 Earnings call transcript