Earnings call transcript Q2 2023

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Operator

Good afternoon, and welcome to Agiliti's Second Quarter 2023 Earnings Conference Call. Today's call is being recorded and we have allocated 1 hour for prepared remarks and Q&A.

At this time, I would like to turn the conference over to Matt McCabe, Senior Vice President of Finance and Investor Relations at Agiliti. Thank you and you may begin.

Matt McCabe

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

will that begin, actual consequently and results release could us detailed to and Certain in these our today's forward-looking Specific remind in we in uncertainties. subject differ statements you to our and may filings, Before from are press call, are section of SEC I'll found are those expressed recent we cause at our factors be risks forward-looking materially the be making that and corporate in during affect in Investors risk most statements. can website factors which agilitihealth.com. the future

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

that presentation You to select most the of please our in at we measures a use the To screen Presentations. can directly then of discussion, Events the a of we download agilitihealth.com, Investors section comparable and our use and a website find the description those and of facilitate visit the at today's measures these release. top will why measures to reconciliation press GAAP copy

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

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

Tom Boehning

of for us Good afternoon, our quarter today the thank and XXXX. second results joining you as we from review

consistent and forecast Investor our QX In and year. Jim McCabe; our detail with today Pekarek. and results color Vice Matt me of is revenue Relations, second call additional quarter, on more the prior Finance, our Senior provide in On our increased the Officer, outlook. Chief with our and review over will Jim performance Financial President

Solutions that see in However, mix. shift a we our in corresponding contributions increase we due to did a expected EBITDA the not

main two factors shift. driving are this There

discussed EBITDA of which post-COVID, need recent on margins. or has our weighed we've mix seen lower peak as a PNR First, quarters, in rental placements

somewhat costs. upfront PNR these require larger on result ramp our combination weigh quarter. implementations, in second of longer higher which and longer more large our profitability in contracts contraction Secondly, servicing deals of a The the in business the the volume to to a complex and profitability new due

and results. We full expect to impact continue year to trend this

will in resulted provide last rental our quarter primarily experienced we continued experiencing business equipment year by more purchases Jim the XXXX patient guidance pumps, medical of our past our slowing from additional utilization the few second a over the in discuss background, To customers we of some due during We infusion monitoring detail. demand and areas made that our the highlighted reduced ventilators of rebaselining were devices. of PNR significant that in to years. the fleet,

we're relationships strategic mix receive resulting more encouraged longer into very and beneficial mutually expect evolves, in As our mature by benefits our we to customer as the agreements. partnerships,

Over help valuable a more create the a term, long this predictable more to and business mix stream. revenue shift EBITDA will with

we in the forecast. the revenue our expect to for solid term, deliver near line year growth In with

securing on systems identifying to of look prioritizing strategic beyond, opportunity our health and second across towards XXXX remain focused As we enterprise-wide and our these half set. and the opportunities teams grow commitments

business key for our we're opportunities Now in that Agiliti's strengths discuss that showcase and trends I'll seeing growth. three

we and existing that make report expanding new to our customers. progress proud I'm engagements both First, with continue to good

this translates into customers Agiliti. opportunities our As increasingly value, new for recognize our

pleased to unique and of management, comes highly a Health medical and needed, devices, and needed and through wide alone our the standard some Trust our on Award patient-ready to are been market key value we deliver mobilization the business Performance clinical a Group's maintenance provide to the of provide we with level, IDN We Clinical our impact offerings, serve and provide continuum. differentiate service is where were the quality healthcare driving maintains as have The our testament award facing growing stands focused to solutions capabilities. ability industry Acknowledging Our customers, technology-enabled we Agiliti devices. that's in and on the the platform the medical it ground manufacturing, highest to healthcare entire scaled At when breadth addressing awarded clients in large of our our to the of sales and Supplier teams the financial, today's Year operational July. constraints when share system.

it's This based and clinicians healthcare while award every to providers, day. challenging on healthcare circumstances driving as measurable empowering outcomes confront value is and meaningful for workers

more solutions new our critical component converting the of delivered help and continue surgery recent discuss with been secure and our thanks realize we conversion strategy to area customers to solid The our going growth has and This have full ambulatory significant is the is I'm notable customers. will in second our relationships of strategic is them continue our we topic and performance they value proud with quarter, to market. of especially to One center second business growth into the top of revenue. efforts work a team's business I'll for line This be the important as the in purchased. forward,

franchises pleased a increase corporate In to last the engineering, meaningful And received surgical support convert continuing from we myriad of market. surgical growing our months, and to these repair in support while improves have sites local with level rental. two cases, for have progress laser vendors our that to won of services we including Over the excited we're patient this contracts equipment provide ASC Agiliti. their with continued footprint to outcomes. few largest We're clinical very

retaining our of leveraging trend to areas platform. can business and efficiencies strengthen and optimization identifying we further by is increase ongoing structure our talent third The

work which Agiliti offers unique company Offered mission-driven and compensation from a a exceptional with a of a benefits, it's nationwide growth, opportunities path simply industry for health and that rapidly a advanced training system attracts as within just match. higher management, can't career paths to combination opportunities reach, to talent. growing

to been many onboarded retention several in last we as steady This customer-facing particularly important employee businesses, levels As endeavor job and remained acquired in a our the over of but categories we've result, has the some years, at record also it's help roles. teams our our increasing We're has leverage to the talented solutions Agiliti. that customer continuing improve business expand to skills of experience and efficiency by to of continue the of the with growth our implementation doing momentum. streamline process

ordering ordering of major accuracy by their increasing As with discussed order enabling on of while ordering, simplified existing execute the to them the have XX% order recent within to EMR via XX% requests the customers this process of order current XX% and workflow. integration due efficacy fulfilling velocity Amongst customers and we're the our channel who have last their an simplification an vendors workflow. EMR to intake approximate call, our seen now in directly EMR within of the the has each implemented ordering increase

wrap examples like unique a broad helping few highlight I'd address by to systems leveraging health I prepared remarks, Agiliti nationwide our to how Before as is footprint. and my complex challenges

a a in secured agreement on-site managed group supplier the single-source and recently category our with this a this of largest of one services. GPO area. value purchasing for new revalidation Agiliti First, This organizations for

of platform ability make progress XXXX. on-site into as It this half to scoring the year services also second our we managed and overall progress through secures our

remediation recently we'll bring engineering With their be to this secured program addition, efforts specifications. to equipment for large their services agreement, device provide back with In we clinical providing targeted a fleet. to required a equipment manufacturer

the to we we're few are continue both another existing making a as awarded dollar the government just were and Veterans customers. progress progress Finally, These make of illustrations agreement the we just our with with across growing business multimillion Administration. new

into second our understand year, move healthcare the half the of disciplined we face. challenges facilities teams strategy. We execution remain focused the on of As our the

partnerships, create to long-term value. to strong foster work We which collaborative continue hard

details call realize our I'll Our results on better through customers to improved for which operating goal measurable pass performance, financials. is help to now Jim care. our in patient savings on ultimately the

Jim Pekarek

Thank you, the offer year. our with an Tom. overview comments and on outlook some our XXXX of for QX later start financials I'll

quarter, million, contract peak total decrease affected HHS a a need lower year, QX EBITDA prior revenue revised EBITDA EBITDA For renewal company to million, new scope X% well the Adjusted X% compared a of by rental and the as was totaled number Adjusted the XX%. totaled $XXX year. as margins $XX increase of second the margins over adjusted placements. representing last were

Solutions customer In debt, per Equipment utilization year, the year-over-year. prior of increase in the earnings peak was quarter addition, customer of interest which at quarter. amounted equipment in revenue income adjusted a have a across profitability EBITDA larger up approximately to rate by adjusted driven versus to the each business, net margins million, effective of $X.XX per for $XXX offset attributable contracts, Adjusted in look tended with to an partially year. prior have service in on to onboarding which compares lower upfront were The decline rental negatively the $X.XX by onboarding impacted the our lower lines. costs. the and need fleet by service Taking $X.XX quarter share our second in quarter new the totaled higher increase primarily the our of X% share closer

more Recall, that XXXX, the we were our owned had occurred our equipment has This beginning closely need second of customers peak in slower placements our throughout with return quarter to not would year. rental this as that trend previously estimated XXXX.

in their a noted, equipment. of As customers invested also Tom higher quantity own

X% revenue for was representing quarter. million, QX Engineering. Clinical of the to $XXX increase a year-over-year Moving

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

representing quarter. million, medical solutions utilize down each driven primarily dollars Finally, QX was year-over-year. of increase growth employees for totaled the totaled up on-site a on-site equipment. X% This customer-owned show managed our X% of our $XX efficiently revenue by more where Continuing million, year-over-year P&L. to margin the services day $XX for organic an Gross increase managed in

need factors of and HHS XX% the compared margin to a SG&A in margin for XX% lower mix to year. rental due related a $X the described. decrease was primarily to gross $XX to in rate totaled business year-over-year. terms agreement peak million Our cost higher rate million, QX decline onboard of was the as costs The new placements, prior previously

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

was flow Our cash of $XX million. the operations the half year from for first

approximately of the turns. after QX ratio XXXX acquisitions, forma on QX, adjusting Our end was of leverage pro a impact X.XX late at for the the basis

forward, of Agiliti $XXX June Looking the with hand $X diligent and remain million generation. million facility. determining as under position in maintained optimal of million revolving our of available, liquidity available uses on a credit comprised will our solid cash we XXXX of cash $XXX

in million term revolving credit $XX XXXX. reminder, a April XXXX, and QX expanded agreement by to extended the As we our

QX to Further, and LIBOR key maturity loan, to rate which transitioned XXXX. May, extension and term in early our from of we benchmark a modification extended SOFR our completed underlying the

we XXXX, $XXX Finally, debt, our rate XXXX, million, swap this swapped floating entered swap swap new terms. million rate which SOFR our into the a of new the interest $X.XX June effect base rate of we the agreement has X, billion in fixed in April on an agreement maintained on effective at and of expiration our two-year July Anticipating fixing $XXX debt duration. for interest swap a X, rate X.XX% has XXXX. agreement of terms This rate and

Turning to outlook. XXXX now our

our reaffirming $X.XX in full range to of guidance are $X.XX year billion. We the billion revenue

shared year, the our fleet. need modeled peak we In rebaselining beginning last calls, our in we equipment QX prior of of a addition, as earnings of rental in utilization had

completion at million prior placements additional million this We trend to our rental initial we remain year the of will this XXXX XXXX for period. impact XXXX. placements of of $XX flu below experienced $XX to guidance Our the the peak assume level. season, estimate revenue an After need have have fleet

flow-through revenue profits. high that has to this Recall a

result current decline also to year margins, In profitability reflected we on we mix. new adjusted have which of some be in we the profits. onboard addition, from balance our relative are remain to levels for taking EBITDA earnings. more will as the continue initial at the conservative the of our Accordingly, lower which a of contracts, expect This larger lower a muted view more

$XXX between the million XXXX. Specifically, $XXX full million we for now and EBITDA adjusted expect year

our start from As will levels. contracts benefits to likely below longer-term rental the historical mix margins peak our and we will larger stabilizing see at expect remain materialize normalized but and need more post-COVID stabilize, we evolves our the levels,

per We will gives solid our in offsetting now $X.XX which range per negative to revenue, this Continuing share share margin in the A higher the and guidance. predictable $X.XX be per As expense $X.XX share. impact to reminder stream estimate of our more adjusted to per $X.XX that impact share. of range a the be of performance. in earnings of interest we us longer-term with confidence Tom expect XXXX mentioned,

related our a investments in our reinvestment our Note cash experience. That and this prepared guidance for our reflects rental specifically of year-over-year improved our into remarks. the software CapEx peak information being that including to development at business CapEx our expect improve need investments, offset projects million. and equipment partially to customer have support for to $XX We by wraps reduction fleet, made infrastructure our up technology,

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

Operator

comes [Operator Instructions] Our Matthew Capital Mishan KeyBanc from first Markets. line question the with of

Matthew Mishan

range Just the first guidance, else? if -- the impact didn't somewhere there offsetting of you It revenue on a rental and keeping of with from the kept end equipment. revenue which revenue to Or as lower Are additional the the you are pointing you it? low utilization that it revenue intact. kind is seems while -- of impact

Jim Pekarek

Gap] to million. supplemental down by the equipment driven $XX $XX [Audio placements coming down million by

discussed that Tom and B of business, can respect progress with the with customers. we're the other both our and in also existing areas the making to share script We new

So you're right.

Tom Boehning

And We benefit converting were of Matt, previously, those that's had the new number to talked the we we a seeing about realize we're and those brought conversion of as starting and of deals you're the new why deals, in. deals, offset. have

Matthew Mishan

on the revenue that's be incrementally think offsetting the lowering these the your year when our should the in about number positive to be expectations these you line that towards into Or you're and with is lower reflect incremental to it expecting is going receiving we it? changes? end change, of So from contracts revenue

Jim Pekarek

with that revenue helps. That's what with overall progressing Matt, new onboarding Yes, would the we guide. that to Matt. of well of We're the business. share, respect the Hope portion

Matthew Mishan

range? just the Okay. -- due range in us much or contracts? how was previous Would then to how for EBITDA EBITDA. million change, your of much The is rental it that to down lastly is current ramp onboarding from the slower $XX And on EBITDA And you to the the slower of mind due utilization? distinctly the profitability walking

back And I'll in jump the after queue that.

Jim Pekarek

it's No Matt. worries, Yes.

First and million, top from to $XX again, was through a to the it's placements high revenue line. has equipment due a to million line perspective, which it lower $XX which, very foremost, bottom flow

based in by that So driver we away, the reduction. is script, the upon business. for onboarding far is, as the and new biggest shared the The principally rest,

margins. the there is lower being down equipment the of It's But placements initial coming point piece most in there being reduction. at the salient first that the

Operator

Our the Citi. next question comes from with line of Jason Cassorla

Jason Cassorla

going rental Yes, to follow a changed the growth lower guess what's more of anything baseline. you're lines? those in guess Is change since longer-term off I lower 'XX? customer baseline outlook that wanted that I equipment behavior of lowered And second that it quarter I for Is kind just does you along it or the just the to business? of? grow naturally back up on baseline

entirety? Just business or to just its in start. is any would that be great Or help differences about it thinking there

Tom Boehning

Jason. Thanks, Yes.

So of ebb buying always rental to with equipment practices. it's meet and it and the and tends designed customers, PNR census on needs to supplemental business, flow customer service, equipment the our

that answer We in but Jason? expect in that they're term, guidance. time a outlook rental on our the supplemental to the taken in demand for your considered Does near assumptions conservative we've all and question, XXXX resume,

Jason Cassorla

think for anything, if this of but needs you of you done there it's out caution Do to I this? that true or no would at slowing, that to guess business be off think kind rebasing just be that's forward. sounds you can it point? you there's material the like still grow Or this like a Yes. baseline going expect pockets

Jim Pekarek

conservative guided that we've approach a we've taken believe to outlook XXXX, That's the in for here Jason. right. We

Jason Cassorla

highly it. maybe your forward. of forward. just And to this Okay. going guess visibility after your just I confidence improved commentary revenue the recurring in I you follow-up. of guess, Got to the visibility around moving what as kind business then a wanted go gives I there of back kind rebase,

the other the commentary guess any the just business of the NTP. around I margin going visibility just profile, forward,

would anything those great. lines Just on be

Tom Boehning

Jason. Thanks, Yes.

going from we a as the both previous as the well of the this call, tale two half in mentioned earnings year be season. COVID the we flu a years, -- As being first of cloudy was to little

that as converting. with is would of half business of brought the year, this that on about, be a on already second have line. revenue in view was was realize more talked the the side talked we grower queue and The about that now in to to we mid-single-digit visible and the top had starting conversion the a We're

EBITDA confidence gives a line seeing consistent that will year also that that we're on revenue expectations believe of us the this with in on conversion with we on conservative we other the And the business guidance. full new the consistent good is new right what very and like lot based view in. looks coming side the the that top grow that set And of coming current

Operator

ahead. Our of comes with line Jefferies, Tanquilut Brian please go the question from next

Brian Tanquilut

I follow-up margins. the questions have just some to around

just So foreseeable like reset Because expectations or within potentially future. should start it to the at the least about is up an of then shouldn't But ramp the a for months like as your the these next priority? thinking six up, as basically, again it that ramping this contracts earnings so? getting is be margin way sounds I'm I about we this and some PNR picking then or think up, margins hearing say,

Jim Pekarek

Yes.

in it's view. implied piece. But of hit TB the longer-term range. that term guidance you the XXXX took XX.X%-ish if true in short-term the as in the it that the full the on guidance, can XX% on year to is hit I'll range, the short midpoint So the

that as we today. where range would to same say be that it's that sit fair So in

just sure is is that which make we're of think to infrastructure, some overall, into As we opportunity growth EBITDA because biggest we includes about shared would XXXX, turn that we I leverage able rates to the advancement want our that when things the our page volume SG&A. for understand margin our

As respect demand as this, that around believe year. balance conservative script, we that view the have I with a longer this Tom is the your in it of say rental to this supplemental question and term, specifically just would relates we B to shared

forward. obviously, historical Tom, tailwind As more to of into a else? if moving for XXXX, things a turn does revert anything we us level that back represent

Tom Boehning

just would areas Solutions, modalities of wrap example good And those we services say, of that we've that opportunity I particularly to specialty us within equipment. assist Yes, a on augmentation a where for they frames as can is and other differentiated too, in nice seen med-surg beds. growth the Equipment specialty that around either beds and surfaces or the need our for piece customers

we that other while view nice gate. seeing are do much some infusion in point, out expect around taking EBITDA indeed, as and specifically a monitors So I ventilators are conservative in we rental growth contribute modalities. of supplemental don't script, rebound, just to the They pumps, at and mentioned the demand, we the the

Brian Tanquilut

And touched space? you but should one, what runway second It business? be of very kind on traction and new in you sounds the early, question, profile margin opportunities we you're the should surgery that like as centers thinking Got thinking then we be it. number in more guess my I How obviously, about gain about, there. that also

Tom Boehning

Yes.

the for maintenance to corporate the as clinical rental it demands with along the areas of still in a earned for and going both converted the we well ability augmentation where getting largest of corporate and level, the us them but of mentioned a the the support as script, in devices with facility to level engineering, I the endoscopes as like. us at provide franchises repair that's Just level commitments a and reminder,

repair Clinical being is there So device as we Rental particularly the the pretty opportunity bit because equipment Engineering around other we a see around in that overall on little but repair is marketplace, of business, have different is as consistent well with surgical side. the different the parts Engineering ASC biggest Clinical business. our reimbursement

Brian Tanquilut

Got you.

what license hunting now? So got right basically is you

Tom Boehning

Agiliti were us. getting commitment hadn't IDN to the corporate we're to Exactly is those We that's -- that, in made office where seeing corporate we're of what gotten locally. the the got provide. now decisions value get the new And the the you've can to wanting that benefits similar but on past, side,

Operator

Capital [Operator the Mishan Instructions] from of question comes Markets. Our line next KeyBanc Matthew with

Matthew Mishan

quick Just follow-ups. couple a of

Sizewise since almost like have -- the years you've owned it. guys well with over like really You done last X.X

-- step have We have expectations from utilization a the a surgical bit a the equipment step rental providers GLP-Xs. around little of Is bit of in taken the some that a little back to heard are beds? of the back bariatric of part Sizewise in bariatric surgeries

Tom Boehning

has Thank solve surfaces a allow The Matt. you not, customers. very frames been us and It specialty our for demand it's great question. And our has to for for problem waned. the No, remained that hasn't consistent. catalyst to Sizewise

Matthew Mishan

I Okay. large think And you a device a manufacturer. medical mentioned then with remediation

I a think figure lot out kind of of us is. that who can

needed demand a come the the and was much be offset it fleet you good rental demand and customers your as out that helping customer have do that from for absence you excess As pump whatever if remediation? by from potentially on in that could this was they guys, over their back of they how you like handle feel last as do couple years,

Tom Boehning

we proper I see NDA 'XX. impacting shift think to of can't really a much don't much don't demand we bring go to devices up there's that that have the detail These that I on guidance are be on of to in any this. more for the into going But we're too remediation. through under specifications. because

Operator

there over for Instructions] hand would Tom to the [Operator questions, no are closing I As Boehning conference further comments. now

Tom Boehning

continued our Thank call. you, on us operator, thank all forward we joining to and look you next progress our and today, sharing for

the you. Thank we'll here. So call close

Operator

Agiliti, has you your now of participation. concluded. conference for Thank Inc. The

You lines. may now disconnect your

Agiliti (AGTI) 8 Aug 232023 Q2 Earnings call transcript