Good afternoon, and welcome to ATI Physical Therapy's First Quarter 2024 Earnings Conference Call and Webcast. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event 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, Chief Treasurer and Head of Investor Relations. I will now turn the call over to Ms. Fong.

Good afternoon, first off, 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 and uncertainties and reflect our expectations based on our beliefs, assumptions and information currently available to us. Although we believe these expectations are reasonable, we undertake no obligation to revise any statements to reflect changes that occur after this call. The descriptions of some of the factors that could cause actual results to differ materially from these forward-looking statements can be found in the Risk Factors section in the company's filings with the Securities and Exchange Commission. In addition, please note that the company is discussing certain non-GAAP financial measures that we believe are important in evaluating performance. Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliation of historical non-GAAP financial measures can be found in the earnings press release as posted on ATI's website and filed with the SEC. And with that, I'd like to turn the call over to Sharon.

Thank you, Joanne, and welcome, everyone. We have some of our ELT members on the call today. Chris Cox, our COO; Joe Jordan, our CFO; and -- and then we have Eimile Tanzey, our CPO; Scott Gregerson, our Chief Growth Officer; Gus Oakes, our CIO; and Erik Kantz, our Chief Legal Officer, and they'll be either in person or dialed in on the participant line. So this month marks my 2-year anniversary leading ATI. It has truly been a pleasure and a privilege to be a part of the ATI family. I would characterize my tenure as being invigorating and gratifying. It is really exciting to watch a good company overcome speed bumps to deliver on goals while building momentum month over month. It is equally rewarding to lead a group of talented people who are driven by having a meaningful impact on each other, our patients and our communities. I am confident that ATI will continue to succeed in strengthening our financial health and innovating in the musculoskeletal space, with the ultimate goal of improving access, quality and affordability of rehabilitative care while improving the health of our communities. So let's jump in and take a look at Q1. The quarter marked another major step forward in our journey. Earlier today, we reported our first quarter 2024 results. We continue to grow on many fronts with what we have and are inspired by our purpose of making every life an active life. Our providers and support staff demonstrated exceptional teamwork over the quarter and across our national platform, navigating inclement weather in January to ensure patients receive the care they needed. Earlier today, we also provided Q2 2024 financial guidance, which Joe will discuss later on the call. Since our last call, I outlined the winning strategies that drove our growth in 2023. Similarly, we are advancing these focus areas to drive growth in 2024. Strengthening the ATI culture, growing the provider base, elevating talent and creating development opportunities for our employees, expanding access for patients, operating with excellence, enhancing the patient experience and improving our financial and key KPI performance. So let's look at growth. We drove growth year-over-year in expanded patient access. In Q1 2024, we saw approximately 1,100 more patient visits each day compared to the previous year. I would say our strategies are working. Focus for the remainder of the year is to continue to deliver impactful outcomes and expand access to physical therapy, including in underserved areas. In the quarter, we also made significant strides in our real estate initiatives. We are executing on our strategic real estate plan, which includes investing in current -- our current fleet with necessary upgrades, refreshes, consolidations. We also refined our geographic footprint to align with patient population needs, which resulted in 11 closed clinics and 1 divested clinic. Our rates improved through a multitude of actions. In the first quarter, we continued to increase the rate per visit year-over-year. Teams took deliberate actions to advance the rate per visit across our platform, and we will continue efforts in 2024, including leveraging our ATI patient outcomes and satisfaction data in payer contracting discussions, improving front-end operations and revenue cycle management to fully realized collections, growing our workers' comp and auto personal injury offerings and receiving bonus payments under MIPS, the merit-based incentive payment system for Medicare Services, striving to earn our fifth year of incentive in 2024. Now that said, the real work is to influence rate-setting leadership about the value of PT in the musculoskeletal care continuum. In partnership with industry and other health care organizations, we are advocating for improved patient access and increased reimbursement for physical therapy with national leaders. We are disappointed by the continuing Medicare fee schedule cuts for PT over the past several years. There is a clear disconnect on the value of PT to our health care system and the aging of our population. Last month, Congress did take action to provide incremental relief by reducing the Medicare rate cut for the remainder of the year from 3.4% to 1.7%. We applaud this action and need to continue to fight more. From a people perspective, our people strategies and culture refresh resulted in an exceptional therapist retention. Since Eimile Tansey joined our Chief People Officer in late 2022, she and her team have worked diligently to engage our employees. They've implemented a cultural refresh and crystallized the organization's purpose, making every life an active life. Despite the tight labor market, we grew our provider employee base by investments in retaining and attracting colleagues. And we launched innovative programs to position ATI as an employer that invests in our people. We all know changing corporate culture takes time, and the work takes stamina. We are seeing results with the clinical FTE in the first quarter growing year-over-year. Most significant, the ATI clinician turnover rate has been trending lower. The last 3 quarters in 2023 saw a turnover rate in the low 20s, and we have seen further improvement in the first quarter of 2024 to an exceptional 16%. We continue to focus in on incremental improvements in our operations. With a stable workforce, we are better equipped to build upon learnings and continuously refine our operations. It is worth pointing out that our clinics continue to be busier year-over-year with visits per day per clinic growing nearly 2 visits each day over the prior comparative quarter. Our clinics on average still have excess physical capacity. As we grow the provider base this year, we will leverage our clinic real estate and spread our fixed costs. Chris will provide a detailed discussion around our operational performance and activity shortly. Revenue and adjusted EBITDA grew year-over-year, showing continued progress. The strong demand for ATI's services, combined with our business growth is reflected in the financials, with revenue and adjusted EBITDA for the quarter growing year-over-year. We are focused on executing on our strategies and delivering continued growth in revenue and earnings in the remaining quarters of the year. Joe will provide a detailed walk-through of Q1 financial results and discuss Q2 2024 guidance later in the call. With that, I will conclude, we have remarkable teams making positive impacts on millions of lives. I'm inspired by the exceptional colleagues we have at ATI and value their commitment to enhancing the lives of our patients. They truly exemplify the true essence of ATI. I remain privileged to lead this fantastic care delivery organization, and I'm proud of the positive impact we are having across the musculoskeletal ecosystem. With that, I will turn the call over to Chris to discuss operations.

Thank you, Sharon. In the quarter, our operations teams continued to execute, enhance workflows and advance the patient experience. I'm inspired by the team's dedication to our purpose and I'm excited by the continued forward advancement in the operating environment. In Q1, we generated year-over-year top line growth because of the continued progress in several important areas. In addition to our providers in the clinics, there are multiple supporting teams whose work allow us to achieve this level of growth. It is our shared goal across the organization to increase patient access to high-quality physical therapy that underlies our success. As Sharon mentioned, we saw over 1,100 more patient visits each day compared to last year in Q1. This was achieved despite the challenges our clinic and patient access teams faced from the impacts of severe weather and record low temperatures experienced across the nation in January of this year. Our teams reacted quickly and had patients rescheduled and back on their treatment plans by the beginning of February. As our people team continues to work on increasing the clinician base and our care capacity, a notable contributor to this growth was our achievement in employee retention in the past year and particularly in the first quarter this year. Our annual national leadership event in January set the stage for this year, and we believe the event had a positive impact on both employee engagement and declining attrition. As we continue to capitalize on the learnings from the MLE and develop the core competencies and skill sets of our staff, we anticipate continued operational and clinical progress through the remainder of this year. Q1 was the first full quarter in which all of our clinics were on the new centralized patient access management model. We are already seeing a higher capture rate on our provider referrals. As we gain additional experience with the model, we will continue to find new ways to optimize and better meet demand. I'm most excited by the opportunity here to create a superior partner provider and patient onboarding experience while simultaneously reducing the administrative burden on our clinicians. On the rate per visit front, our revenue rate in the first quarter was $108.42, increasing 4.5% year-over-year. Operational improvements in our revenue cycle management function were a significant contributor to the higher rate. As I've discussed before, we are focused on leveraging technology and automation to continuously advance this area, increasing clean claim submission on the front end and collections on the back end, all at a lower cost. This work is dynamic, and we believe there is room for advancement still as we continue to move our RCM function to best-in-class performance. To close, I want to express how proud I am of how we started off the year. I want to thank all of our teams for the way they continue to show up each day and demonstrate excellence. Because of their efforts, we can say that ATI is having a powerful impact on the lives of our patients and their communities. I'm excited by the opportunities that lie ahead and look forward to sharing more updates as we progress through the year. Now I'd like to turn the call over to Joe to provide a discussion of financial results.

Thank you, Chris, and thanks to everyone for joining the call today. I'll start out by talking about our first quarter 2024 financial results, and then I'll jump into our second quarter 2024 guidance. So starting with financial results. Net revenue in the first quarter was $181 million, which is an 8.7% increase over the prior year, $167 million in Q1 of 2023. As we dive down deeper, net patient revenue was $165 million, which increased 9.7% year-over-year, while other revenue was $16 million, and that's a 0.7% increase over the prior year. As Sharon mentioned, visits per day per clinic during the quarter were 26.9, and that improved 1.9 visits year-over-year from 25 in the first quarter of 2023, which reflects our continued efforts to improve clinic capacity utilization. Chris talked about our rate per visit, which during the first quarter was $108.42. That's an improvement of 4.5% year-over-year, from $103.76 in the first quarter of prior year. And that increase was primarily driven by mix changes, operational improvements within the revenue cycle management function and higher reimbursement rates for certain key payers. Our salaries and related costs in the first quarter of 2024 were $99 million, which is a 9.5% increase year-over-year from $91 million in Q1 of the prior year and is primarily driven by wage inflation, more clinical staff and clinician bonuses. PT salaries and related costs per visit during the quarter was $56.68 which increased 7% year-over-year from $52.98 in the first quarter of 2023, and the increase in cost per visit was primarily due to higher labor cost per clinician and lower labor productivity of 9.3% in the first quarter of 2024 compared to 9.4% in the first quarter of '23. Rent, clinic supplies, contract labor and other in the first quarter was $55 million, which is a 4.5% increase year-over-year from $53 million in Q1 of 2023. It's primarily driven by higher spend on contract labor. And on a per clinic basis, these costs were approximately $61,000, which increased 7.9% year-over-year from $56,000 in the first quarter of 2023. Our provision for doubtful accounts during the quarter was $5 million, or 3% of PT revenue, compared to $4 million, or 2.7% of PT revenue, in the first quarter of prior year. SG&A during the quarter was $26 million, which is a 14.4% improvement over the prior year Q1 of $31 million, and it's primarily driven by lower transaction costs, partially offset by higher labor-related costs. Noncash impairment charges in the first quarter of 2024 were $0.5 million. Our operating loss excluding impairment charge in the first quarter of 2024 was $4 million, which improved from a loss of $11 million in the first quarter of the prior year, and that really reflects higher revenue from higher visit volume and rate, as previously discussed. Notable below-the-line items during the quarter included income resulting from a decrease in our fair value second lien PIK notes, our contingent common shares and warrants, which totaled $6 million. Those instruments are mark-to-market to fair value every quarter based on a valuation analysis as of quarter end, which in this case was March 31, 2024. Our interest expense during the quarter was $14 million, which increased 3.9% year-over-year, and that's mainly due to lower interest rate hedge benefit. It is partially offset by lower balances on our senior secured term loan and revolver. Income tax benefit for the quarter was $100,000, which compares to an income tax expense of $100,000 in the first quarter of last year. And net loss during the quarter was $14 million compared to $25 million in Q1 of 2023. Adjusted EBITDA during the first quarter was $6 million, which is a 3.6% margin and improved from $4.8 million in the first quarter of the prior year, with the year-over-year improvement in adjusted EBITDA, primarily driven by higher revenue. Cash use during the first quarter was $13 million compared to $20 million last year, with operating cash use of $39 million compared to $14 million last year, and the increase in operating cash use is driven by higher accounts receivable balance and higher payout of accrued annual incentive payments. Our cash used in investing activities was $2 million in the current year compared to $5 million last year. And financing cash generated in the first quarter was $28 million compared to cash used from financing of $1 million in the first quarter of the prior year, with the increase driven primarily by our $25 million delayed draw term loan, which was fully drawn in January. As of March 31, 2024, available liquidity was approximately $24 million, which consisted of cash and cash equivalents. And then finally, I'll move on to guidance. While we had initially planned to share full year guidance today, we decided to instead focus our expectations on the next quarter, and Sharon talked about this a little bit. We'll continue to provide a quarterly outlook as the business grows. As many of you know, our performance is sensitive to our hiring efforts, and we remain vigilant in navigating the challenging labor landscape and labor market. Despite these challenges, we've made solid progress over the last several quarters, and we do expect to keep growing over the prior year as we move through 2024. We anticipate the revenue in the second quarter to be in the range of $185 million to $195 million, and that equates to roughly a 7% and 13% growth over Q2 of the prior year. and it reflects the continued strong demand for PT at ATI. For adjusted EBITDA, we expect the second quarter to be in a range of $15 million to $20 million, which is between 60% and 114% growth over Q2 of the prior year. And it approximates an adjusted EBITDA margin of between 8% and 11%. Now I'll turn the call back over to Sharon for closing remarks.

Thanks, Joe. So as you can see, Q1 was a good start to the year, and we are energized to extend the momentum and grow the business to benefit all of our stakeholders. I remain confident in the people we have and the good work we are doing to differentiate ATI and help people live healthier lives. We have a lot of work to do to realize our full potential, and I know we have the tenacity to achieve our goals. I'll be here to share our progress as we move forward through 2024. I'll now hand it back to the operator to open the call for Q&A.

We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Brian Tanquilut from Jefferies.

Maybe, Sharon, just curious on your thoughts on the sustainability or your ability to squeeze more rate growth because obviously, pretty strong performance in the quarter and a big driver of the revenue growth for Q1. So just curious how you're viewing that as we think about the rest of the year.

Great question, Brian. Thanks for joining. I would say, as Chris and I both mentioned, we've made really good progress year-over-year. And I would say that those were the go-gets that were a little bit easier. And so we still have some room as we look at the rest of the year, but I think there's less of a predictability around how those will play out. We're certainly going to go after them on the revenue side and with the payers. But I think we're getting to things that are a little bit harder to predict the outcome of.

Yes. And the only thing, Brian, it's Joe. The only thing I'd add is from a modeling perspective for ourselves internally, we're certainly going after everything Sharon talked about. We're assuming relatively consistent rate. But similar to previous years, one place you will see a benefit as we would assume the bad debt continues to improve throughout the year. There's -- we get hit a little bit harder in Q1 with deductible resets and then tend to get favorability throughout the year. So it's not revenue rate per se, but it obviously impacts results and it's related to revenue.

I mean, we control what we can control. And I think Chris is on top of the revenue cycle piece. And then we certainly look at our mix, and I did mention our -- our increasing presence in the workers' comp and API, which is always helpful to us. Chris, do you have anything you want to add?

Sharon, you just hit the component I was going to say, which is we continue to focus on growing those areas of the business. And that will be one of our major levers as we look forward for the rest of the year. And the payer negotiations -- to go back to your comments -- are largely locked in for 2024 at this point with a few remaining negotiations ongoing, but we continue to work longer term on the influence of the industry, as you mentioned.

Then maybe my second question. You called this out in your prepared remarks, right, the productivity rate was probably a tad below where it was and then some pressure on labor rates there just a little bit. Just curious how you're thinking about -- or how we should be thinking about labor costs and productivity.

So on the productivity side, we know exactly what the year-over-year or quarter over -- the year-over-year quarter productivity was and then what changes were. And I would say there are some onetime things that caused us to have to bring that productivity down, and we have solved for those and can see us continuing to see improvements in our productivity. On the labor rate side, this is a tight market with a lot of headwinds. And so we've looked at different levers that allow us to be able to, where appropriate, be successful around recruiting. So I would say the labor rate piece is going to continue to be something -- a lever that we pull within reason in areas where we have the demand.

And maybe the only thing to add is from a pure inflation perspective, we saw roughly about 5% -- but as we hire, there could be incentives like onetime incentives that come through as we continue to hire some the more successful we are, the more we may have some onetime incentives. And then the other thing, as you know, productivity plays into your labor rate per visit. So the more that is an apples-to-apples with the prior year or better than the prior year, the more relieve some of the rate per visit pressure.

And Sharon, congrats on the 2-year mark by the way.

That concludes our answer -- question-and-answer session. I will now turn the call back to Sharon Vitti for closing remarks.

Thank you, everyone. Thanks for joining us for this call. And we look forward to getting together for our next quarterly earnings call, which will be in August. So thank you all for your participation and support, and we will be in touch soon.

This concludes today's conference call. Thank you for your participation, and you may now disconnect.