agti-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


x			Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2023


o			Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to

Commission File Number: 001-40361

AGILITI, INC.

(Exact name of registrant as specified in its charter)


Delaware	11095 Viking Drive	83-1608463
(State or other jurisdiction of	Eden Prairie, Minnesota 55344	(I.R.S. Employer
incorporation or organization)	(Address of principal executive offices, including zip code)	Identification No.)

(952) 893-3200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.0001	AGTI	The New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Number of shares of common stock outstanding as of August 1, 2023: 135,058,605

Table of Contents

Agiliti, Inc. and Subsidiaries

Table of Contents


		Page
PART I - FINANCIAL INFORMATION		1

ITEM 1.	Consolidated Financial Statements (unaudited)	1

	Consolidated Balance Sheets — June 30, 2023 and December 31, 2022	1

	Consolidated Statements of Operations—Three and six months ended June 30, 2023 and 2022	2

	Consolidated Statements of Comprehensive Income (Loss) —Three and six months ended June 30, 2023 and 2022	3

	Consolidated Statements of Equity — Three and six months ended June 30, 2023 and 2022	4

	Consolidated Statements of Cash Flows — Six months ended June 30, 2023 and 2022	6

	Condensed Notes to Consolidated Financial Statements	7

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	26

ITEM 4.	Controls and Procedures	27

PART II - OTHER INFORMATION		28

ITEM 1.	Legal Proceedings	28

ITEM 1A.	Risk Factors	28

ITEM 5.	Other Information	28

ITEM 6.	Exhibits	30

Signatures		31

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements — Unaudited

Agiliti, Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share and per share information)

(unaudited)


	June 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	9,213	$	5,577
Accounts receivable, less allowance for credit losses of $4,304 as of June 30, 2023 and $4,182 as of December 31, 2022	220,269		207,753
Inventories	79,154		70,132
Prepaid expenses	15,420		23,458
Other current assets	4,760		9,393
Total current assets	328,816		316,313
Property and equipment, net	284,132		273,958
Goodwill	1,239,432		1,239,106
Operating lease right-of-use assets	80,717		79,975
Other intangibles, net	470,420		512,020
Other	23,991		22,735
Total assets	$	2,427,508	$	2,444,107
Liabilities and Equity
Current liabilities:
Current portion of long-term debt	$	16,376	$	17,752
Current portion of operating lease liability	25,397		23,607
Current portion of obligation under tax receivable agreement	10,052		34,694
Accounts payable	70,328		59,163
Accrued compensation	20,620		25,928
Accrued interest	7,814		5,039
Other current liabilities	30,105		31,198
Total current liabilities	180,692		197,381
Long-term debt, less current portion	1,081,246		1,077,293
Obligation under tax receivable agreement, pension and other long-term liabilities	10,135		9,161
Operating lease liability, less current portion	67,046		67,332
Deferred income taxes, net	133,976		146,615
Commitments and contingencies (Note 9)
Equity:
Common stock, $0.0001 par value; 500,000,000 shares authorized; 134,987,003 and 133,608,495 shares issued and outstanding as of June 30, 2023 and December 31, 2022	13		13
Additional paid-in capital	963,965		953,046
Accumulated deficit	(15,287)		(14,274)
Accumulated other comprehensive income	5,497		7,343
Total Agiliti, Inc. and Subsidiaries equity	954,188		946,128
Noncontrolling interest	225		197
Total equity	954,413		946,325
Total liabilities and equity	$	2,427,508	$	2,444,107

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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Agiliti, Inc. and Subsidiaries

Consolidated Statements of Operations

(in thousands, except share and per share information)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenue	$	291,081	$	273,984	$	590,985	$	568,428
Cost of revenue	191,677		175,819		382,207		346,636
Gross margin	99,404		98,165		208,778		221,792
Selling, general and administrative expense	81,230		82,121		170,067		168,259
Operating income	18,174		16,044		38,711		53,533
Loss on extinguishment / modification of debt	4,445		1,418		4,445		1,418
Interest expense	20,549		11,261		36,380		21,925
Income (loss) before income taxes and noncontrolling interest	(6,820)		3,365		(2,114)		30,190
Income tax (benefit) expense	(2,892)		(1,698)		(1,236)		5,207
Consolidated net income (loss)	(3,928)		5,063		(878)		24,983
Net income attributable to noncontrolling interest	98		65		135		93
Net income (loss) attributable to Agiliti, Inc. and Subsidiaries	$	(4,026)	$	4,998	$	(1,013)	$	24,890

Basic income (loss) per share	$	(0.03)	$	0.04	$	(0.01)	$	0.19
Diluted income (loss) per share	$	(0.03)	$	0.04	$	(0.01)	$	0.18

Weighted-average common shares outstanding:
Basic	134,661,933		132,556,645		134,258,271		131,856,267
Diluted	139,744,988		138,697,206		139,373,990		137,932,546

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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Agiliti, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Consolidated net income (loss)	$	(3,928)	$	5,063	$	(878)	$	24,983
Other comprehensive income (loss):
(Loss) on minimum pension liability, net of tax of $7, $0, $19, and $0	(22)		—		(57)		—
Gain (Loss) on cash flow hedge, net of tax of $(755), $(774), $620, and $(2,641)	2,178		2,255		(1,789)		7,684
Total other comprehensive income (loss)	2,156		2,255		(1,846)		7,684
Comprehensive income (loss)	(1,772)		7,318		(2,724)		32,667
Comprehensive income attributable to noncontrolling interest	98		65		135		93
Comprehensive income (loss) attributable to Agiliti, Inc. and Subsidiaries	$	(1,870)	$	7,253	$	(2,859)	$	32,574

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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Agiliti, Inc. and Subsidiaries

Consolidated Statements of Equity

(in thousands)

(unaudited)


	Common Stock		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Agiliti, Inc. and Subsidiaries		Noncontrolling Interests		Total Equity (Deficit)
Balance as of March 31, 2023	$	13	$	954,928	$	(11,261)	$	3,341	$	947,021	$	177	$	947,198
Net income (loss)	—		—		(4,026)		—		(4,026)		98		(3,928)
Other comprehensive income	—		—		—		2,156		2,156		—		2,156
Proceeds from issuance of common stock	—		1,856		—		—		1,856		—		1,856
Acquisition consideration paid in equity	—		2,753		—		—		2,753		—		2,753
Share-based compensation expense	—		3,727		—		—		3,727		—		3,727
Stock options exercised	—		1,633		—		—		1,633		—		1,633
Shares forfeited for taxes	—		(932)		—		—		(932)		—		(932)
Cash distributions to noncontrolling interests	—		—		—		—		—		(50)		(50)
Balance as of June 30, 2023	$	13	$	963,965	$	(15,287)	$	5,497	$	954,188	$	225	$	954,413

Balance as of March 31, 2022	$	13	$	943,517	$	(24,594)	$	6,966	$	925,902	$	116	$	926,018
Net income	—		—		4,998		—		4,998		65		5,063
Other comprehensive income	—		—		—		2,255		2,255		—		2,255
Proceeds from the issuance of common stock	—		2,159		—		—		2,159		—		2,159
Share-based compensation expense	—		5,810		—		—		5,810		—		5,810
Stock options exercised	—		993		—		—		993		—		993
Shares forfeited for taxes	—		(13,575)		—		—		(13,575)		—		(13,575)
Dividend forfeited, net of payable	—		2		—		—		2		—		2
Cash distributions to noncontrolling interests	—		—		—		—		—		(15)		(15)
Balance as of June 30, 2022	$	13	$	938,906	$	(19,596)	$	9,221	$	928,544	$	166	$	928,710

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Table of Contents


	Common Stock		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Agiliti, Inc. and Subsidiaries		Noncontrolling Interests		Total Equity (Deficit)
Balance as of December 31, 2022	$	13	$	953,046	$	(14,274)	$	7,343	$	946,128	$	197	$	946,325
Net income (loss)	—		—		(1,013)		—		(1,013)		135		(878)
Other comprehensive (loss)	—		—		—		(1,846)		(1,846)		—		(1,846)
Proceeds from issuance of common stock	—		1,856		—		—		1,856		—		1,856
Acquisition consideration paid in equity	—		2,753		—		—		2,753		—		2,753
Share-based compensation expense	—		10,454		—		—		10,454		—		10,454
Stock options exercised	—		2,102		—		—		2,102		—		2,102
Shares forfeited for taxes	—		(6,246)		—		—		(6,246)		—		(6,246)
Cash distributions to noncontrolling interests	—		—		—		—		—		(107)		(107)
Balance as of June 30, 2023	$	13	$	963,965	$	(15,287)	$	5,497	$	954,188	$	225	$	954,413

Balance as of December 31, 2021	$	13	$	938,888	$	(44,486)	$	1,537	$	895,952	$	120	$	896,072
Net income	—		—		24,890		—		24,890		93		24,983
Other comprehensive income	—		—		—		7,684		7,684		—		7,684
Proceeds from the issuance of common stock	—		2,159		—		—		2,159		—		2,159
Share-based compensation expense	—		10,235		—		—		10,235		—		10,235
Stock options exercised	—		1,971		—		—		1,971		—		1,971
Shares forfeited for taxes	—		(14,367)		—		—		(14,367)		—		(14,367)
Dividend forfeited, net of payable	—		20		—		—		20		—		20
Cash distributions to noncontrolling interests	—		—		—		—		—		(47)		(47)
Balance as of June 30, 2022	$	13	$	938,906	$	(19,596)	$	9,221	$	928,544	$	166	$	928,710

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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Agiliti, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities:
Consolidated net income (loss)	$	(878)	$	24,983
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	39,158		46,412
Amortization	46,858		47,119
Loss on extinguishment / modification of debt	4,445		1,418
Provision for credit losses	341		279
Provision for inventory obsolescence	1,129		568
Non-cash share-based compensation expense	10,474		10,206
Gain on sales and disposals of equipment	(1,177)		(256)
Deferred income taxes	(12,000)		(2,567)
Changes in operating assets and liabilities:
Accounts receivable	(12,113)		(8,833)
Inventories	(10,319)		(4,398)
Other operating assets	4,345		(579)
Accounts payable	10,606		8,702
Accrued and other operating liabilities	1,550		(21,916)
Net cash provided by operating activities	82,419		101,138
Cash flows from investing activities:
Medical equipment purchases	(25,512)		(22,823)
Property and office equipment purchases	(15,704)		(12,776)
Proceeds from disposition of property and equipment	2,115		1,763
Acquisitions, net of cash acquired	—		(3,125)
Net cash used in investing activities	(39,101)		(36,961)
Cash flows from financing activities:
Proceeds under debt arrangements	1,208,937		20,000
Payments under debt arrangements	(1,205,049)		(123,824)
Payments of principal under finance lease liability	(4,687)		(4,484)
Payments of deferred financing costs	(9,489)		—
Payments under tax receivable agreement	(24,822)		—
Distributions to noncontrolling interests	(107)		(47)
Proceeds from exercise of stock options	2,102		1,971
Dividend and equity distribution payment	(321)		(906)
Shares forfeited for taxes	(6,246)		(14,367)
Payments of contingent consideration	—		(321)
Net cash used in financing activities	(39,682)		(121,978)
Net change in cash and cash equivalents	3,636		(57,801)
Cash and cash equivalents at the beginning of period	5,577		74,325
Cash and cash equivalents at the end of period	$	9,213	$	16,524

Supplemental cash flow information:
Interest paid	$	30,345	$

SEC Form 10-Q filed by Agiliti Inc.