ATI Physical Therapy, Inc.

Good afternoon, everyone, and welcome to ATI Physical Therapy's fourth quarter and full year 2022 earnings conference call and webcast. All participants will be in a listen-only mode. Today's call is being recorded. On the call today is Sharon Vitti, Chief Executive Officer, Joseph Jordan, Chief Financial Officer, Chris Cox, Chief Operating Officer, and Joanne Fong, Senior Vice President, Treasurer, and Head of Investor Relations. Ms. Fong, please go ahead.

Thank you, Kellyanne. Good afternoon, everyone, and thank you for joining us today. Before we begin, I'd like to remind you that certain statements made during this call will be forward-looking statements that are subject to various risks, uncertainties, and affect our current expectations based on beliefs, assumptions, and information currently available to us. Although we believe these expectations are reasonable, we undertake no obligation to revise any statements or changes that occur after this call. Descriptions of some of the factors that could cause actual results that differ materially from these forward-looking statements can be found in the risk factor section in the company's filings with the Securities and Exchange Commission. In addition, please note that the company will be discussing certain non-GAAP financial measures that we believe that are important in evaluating performance. Details in the relationship between these non-GAAP measures, the most comparable GAAP measures, and reconciliation of historical non-GAAP financial measures can be found in the earnings press release that's posted on the ATI's website. and filed with the SEC. With that, I'll turn the call over to Sharon.

Thanks, Joanne, and welcome, everyone. Earlier today, we published our fourth quarter and full year 2022 results and announced a transaction support agreement, or TSA, with our first lien lenders, preferred equity holders, and the majority investors in our common stock to provide ATI with additional needed financial flexibility once the transactions contemplated by the TSA are finalized. Joel will discuss the TSA in more detail shortly. So in addition to finalizing the transactions contemplated by the TSA, a top priority at ATI continues to be achieving our near-term growth targets. So our remarks today will be centered on our growth drivers across the three Ps in our practice. If you remember, those are the pipeline, provider base, and provider productivity. I'll also cover 2022 performance highlights, some of the initiatives we have underway, and I'll share our early 2023 performance trends. Before I dive in, I need to thank all of our teams across the ATI family, including our providers in the clinic, those in our health services practices, and our corporate team for their hard work and dedication. This team of approximately 5,700 is resilient, tenacious, and committed to improving access to high-quality care. and delivering outcomes that enrich the lives of our patients. It's a really impressive group. Underscoring the strength of our team, we again received an exceptional rating from CMS under the Medicare Merit-Based Incentive Payment System Program and maintained high marks from our patients. So turning to our financial performance, we had a good fourth quarter and delivered on our 2022 revenue and adjusted EBITDA guidance conveyed to our investors. Last year was a really important one of transformation for ATI, as we added several new key team members, expanded roles, and promoted talented colleagues. We also maintained a disciplined focus on managing our spend and cash burn, and we believe that our recent results demonstrate that our approach is taking hold. On our last call, we introduced you to Emily Tansley, our new Chief People Officer, and today, we are pleased to introduce Chris Cox, our new Chief Operating Officer. Chris joined us just at the end of the fourth quarter in December, bringing more than 17 years of healthcare experience, including over a decade focused on healthcare operations at scale. Another great addition to our team is Scott Gregerson, our new Chief Growth Officer, who joined us in early January, 2023. Scott has an extensive background in the provider and care delivery space, having spent over two decades developing and implementing growth and business development initiatives. Scott's focus this year is on driving growth in the business while developing our long-term growth strategy to increase revenue and further position us as a leader in the musculoskeletal space. So turning to the three Ps of our practice, first we have our pipeline. As a reminder, at the end of 2021, we brought in a consultant to develop a new marketing and referral targeting strategy. So we took that in 2022 and implemented those recommendations and rebuilt our business development team. Referral relationships were rebuilt, care brand, and our go-to-market value props. The VD team hit its stride in Q4. So we look at 2022, we started with referrals per day at approximately 80% of our pre-COVID levels and worked our way steadily to the mid-90s by Q4. In the first two months of 2023, referrals have exceeded pre-pandemic levels for the first time. So looking at our second P, provider productivity, we also excelled in the fourth quarter in our productivity. In the first three quarters of 2022, productivity plateaued relative to the comparative first three quarters in the prior year, 2021. In Q4, our providers focused on our commitment to our patients and the increased demand for care, and they increased productivity in the fourth quarter and early 2023 to historical seasonal trends. Across our national footprint, Our team saw an average nine visits per day per clinical FTE in the fourth quarter of 2022, and then carried that strong momentum into 2023 at 9.3 visits per day per clinical FTE in the 2023 year-to-date period. So looking at our third P, our provider base, the labor market continues to be a headwind across PT practices and at ATI. Our clinical FTE metric was essentially flat throughout 2022, although there was a marginal uptake in the fourth quarter. Emily, our CPO, has been intently focused on enhancing our talent acquisition team and updating our tools and tactics. We've increased our investment in our TA unit and are aggressively working to grow our provider base. We remain vigilant with our strategies, investments, and offerings to attract and retain vital providers. Emily is equally as focused on our ATI people and culture as they are the cornerstone of our care delivery organization. She continues to modernize our programs and offerings to position ATI as an employer of choice for new and existing colleagues. Next, I'd like to provide an update on our geographic footprint optimization efforts. On our last call, we discussed reviewing our clinic footprint and observed the top 80% of our clinics meeting or exceeding performance targets, while 20% are underperforming. In 2022, we opened 36 de novo clinics and closed and or divested 23 clinics. And then we kept that going in the first two months of 2023, We closed and or divested 15 clinics and will continue to take swift action with select clinic locations to strengthen operations and redeploy these valuable providers to our busy clinics when possible. We finished 2022 strong, and 2023 is off to a great start. While the labor market continues to be constrained, the entire ATI family is focused on growing the provider base retaining our current providers and delivering excellent care, which we believe will contribute to meaningful financial results for our investors. And as we move through 2023, we are acting with urgency to harness our recent momentum and continue driving improvement in the business. We all continue to be energized by the swift and impactful actions of our teams and the successes we have seen over the last five months. So with that, I will turn it over to Chris for a discussion of our operations in his observations from the field.