I wanna thank everyone for joining us today. It's my pleasure to be introducing Agiliti Health. Agiliti is a company that provides and manages equipment solutions to healthcare systems. Presenting today we have Tom Boehning, who's the CEO, and Jim Pekarek, who's the CFO. I don't know if, Tom, there's anything you wanna start off with before we jump into Q&A. It might be helpful just to give a 1-minute introduction to Agiliti if you don't have a background on what our business does. Our 10,000 customers, US-based, think of us as the leader in the manufacturing, management, mobilization, and maintenance of medical devices. Our business is really laid out into three core areas. one we call equipment solutions. That's where we provide device augmentation for our customers. That can be either movable medical equipment or surgical lasers and beds. We also do clinical engineering. Think of clinical engineering in the context of repair work on those medical devices, both our devices as well as our customers' devices. Finally, Onsite Managed, and that could mean a number of things, but notably within a facility or across an enterprise, we could be helping our customers optimize their medical devices so that they get more value from the capital investments that they've made. When you think about unlocking the value of Agiliti, it's when all three work together in unison. When we have the ability to use our own fleets to augment our customers' fleets, keep them repaired, keep them patient-ready, and be able to deliver it to the bedside on demand from our customers. We're doing that through 150 offices, all within 100 miles of every major acute care hospital in the country. We're also backed up, Jim and I, by over 5,000 operators that are in these facilities every single day, that have access to 1,400 vehicles to be able to provide this service directly to the customers on demand. That's a big differentiator for us, Kevin. Sure. I guess one of the things that. You guys are in a somewhat unique position because you're at the hospital, you're providing equipment, you're repairing equipment. Q1 was a quarter where it seemed like broad-based utilization kind of accelerated in a meaningful way. We'd love to kind of hear your thoughts about what you were seeing, whether you think that's durable as far as a demand perspective, how that has impacted your business. I know some of your business aren't 100% tied to utilization. Some do have a utilization component to it, we'd love to get your all of that, if you can. Sure. We did earnings yesterday, so we had a good Q1. That does coincide with the good Q1 that some of our hospital customers had. When we think of utilization, the customers own their own medical devices. During COVID, they made a fair number of acquisition of the devices that we typically can provide them on an augmented basis when they need rental. What we saw in Q1 was a baselining of the rental for what we call peak need. This is when they rent during peak periods, notably the flu season. We saw that stabilize below where it was in 2019, other parts of the rental portion of our business, the equipment solutions portion of our business, did extraordinarily well in Q1. Those areas include bed rental and the ability for us to provide surgical laser augmentation to our customers. In both of those scenarios, we either provide clinical support for the beds, or we provide technical support for the surgical lasers. When you think of a managed service surrounding rental, those areas are not as subject to peak needs, fluctuations up and down, and they did very well in Q1 for us. The peak need, that consumption of medical devices during flu season, for instance, we saw level out below pre-COVID levels, in part because of what we've talked about to our investment community, that there was a fair number of acquisitions of those devices that took place over the course of COVID. Yeah. Okay. I guess when we think about that, like, I guess part of the value add you have is that you can kind of help that mismatch of they invested in capital, maybe they've got capital tied up in things they don't need anymore. Does that create opportunity for you? It does. The next couple years? Those devices that they've purchased need to be maintained, and they need to be adequately managed across their enterprise. Our business is really about helping customers optimize their own medical devices, and then we augment as needed. When they made those acquisitions of those devices, it created a great opportunity for us to assist them in making sure they're fully purposed. Yeah. Is there a way to think about that as an opportunity? I mean, like, maybe do another angle of this. You guys have talked about accelerating EBITDA growth as the year goes on. Part of that, I guess, is comps, part of that is contracts. Is this part of an opportunity too? That, like, you know, hospitals are finding that they have too much capacity and now you can start managing that differently as the year goes on. Maybe just talk about the accelerating EBITDA growth. Yeah. Two things. One is, again, because they have the devices, those devices have to be preventatively maintained and repaired, and that does create an opportunity for us. Often the hospitals in their biomed departments aren't able to keep up with that kind of demand, and we're able to flex in resources to assist them from those sites that are in proximity of where those customers are. The second thing in the learnings that you have from the hospitals, when they see their census go up, but as importantly, their procedure volume go up, that also advantages us. We think of our business, split between two areas, the medical portion of our business and then the procedural portion. On the procedural side, we provide surgical lasers that they rent as the procedure volume goes up, and then secondarily, we provide repair work, clinical engineering work. On their surgical devices, namely endoscopes and their reusable devices. As the procedure volume increases, the opportunity for us on clinical engineering increases, the opportunity for surgical laser rental increases. Yeah. Can you talk a bit about that ramp of contracts? I guess you guys talked a lot about winning bigger contracts than normal, how there's costs related to that. How do we think about, I guess, A, how long these contracts are, whether it takes to recoup those upfront costs, and why there are bigger contracts today than maybe there were on average two years ago, three years ago? I'll speak to the contracts, Jimmy, you can speak to the ramping. Emerging from COVID, it's really only been about this time last year, our customers finally came up for air from us servicing them transactionally. Help us. When they came up from there, they said, "You know, we probably haven't had enough focus on medical device management across our enterprises. Too often we've empowered individual facility-level decision-making, as an IDN, we should be thinking about this across our entire enterprise." That opened the door for new conversations that we started having with our customers beginning this time last year, where customers said, "Hey, can you service us regionally or nationally if they're large enough IDNs?" We have seen that opportunity present itself. We've won contracts that are now IDN in nature, which could be one modality. Could be just clinical engineering, could be everything that we do across their enterprises. Those contracts take a little longer to get done, but as importantly, longer to implement. Jimmy, you want to talk about the timeline on those? Yeah. I mean, the key there is when you think about the term of these contracts are typically three to five years. In year 1, we're technically over-servicing the customer to make sure that the customer is in a good place in onboarding our service. Think about it really as year two is when it's actually starting to mature. Yeah. Into full margins. That would be the best way to think about it, Kevin. Okay. Is this larger IDN kinda contract just the luck of the draw or the timing just all came together, or is this something that you kind of expect that from now on you'll be seeing a consistent amount of larger contracts kinda in that pipeline keep coming through? Yeah. During COVID, we were actually positioning to emerge from COVID with this being the phenomenon. While we had great transactional revenue flowing through the business because of the need of our rental fleet to augment our customers' fleets, we didn't rest on our laurels. We positioned the business that when we emerged from it, that we could continue to do the bread and butter deals that we've always done, but also start to talk at the C-suite level about what our capabilities were across the enterprise. We weren't surprised, but we've been extremely pleased with the appetites from our customers to actually speak at that level and to help to put together programs that we can now administer system-wide. I will say that the GPO partnerships that we have have also created runway for us. Most of these major health systems are affiliated with a GPO. The GPOs are being asked by their members to find new ways to reduce costs and improve patient care. We're an easy button for those GPOs. They are now presenting us into the C-suite saying, "Hey, I know you know Agiliti doing, you know, perhaps this at a facility level or perhaps this particular modality across the enterprise. There's much more they can do for you." We've been really pleased with the partnerships there. Is there more opportunity there? Like, how do you think about that GPO opportunity? You get access to GPO, the GPO services lots of customers. Is that something that you get a big boost in the first year or two, or is that, you know, a long-term tailwind? How do you think. Long-term. The GPOs many of them have consulting arms, where they're going in in the C-suites and the C-suite is asking them, "Hey, help us. You know, we're asking you guys to help us find new ways we can reduce costs and improve care." We provide them an opportunity to do that. There's not many opportunities the GPOs can present that can provide immediate value, and that's why we've been, I think, so attractive to the GPOs. Maybe it makes sense to talk a little about the types of savings that you can deliver for a hospital. If you're doing, you're about seven, eight digits, like let's say just a $10 million contract with an IDN, like what kind of return is the hospital seeing when you sign a contract like that? Over the life of the agreement, it's not uncommon that we can assure them of a 15%-25% savings. That's in the form of reduction in capital expenditures and reduced operating expense. When we think about, one of the questions that we've been asking a lot of companies, is that it does feel like we're heading into a recession. It feels like your business is something that should always grow if you can save 15 or 20%, but it feels like it's almost maybe more important in a, in a recessionary environment. I mean, how do you think about your ability to grow through a recession? Yeah. In recessions, typically, capital expenditures are highly scrutinized, so the less capital acquisition done by our customers, the more value we can provide. We're in the business of helping them optimize their own fleets. Very often, they're suboptimizing their fleets, so we can give them a path to reduce further capital expenditures and reduce operating expense. Okay. I guess maybe to take a step back, how do you think about your long-term growth algorithm? Like, I mean, I know you guys don't disclose it this way, but we keep trying to get you to disclose it this way. You know, we love thinking about things from like a volume, from a pricing, from a new contract perspective. I mean, you guys, I think, you know, see a high single-digit plus type opportunity. Like, how should we think about what's driving that growth algorithm? You want to take that one, Jim? Yeah. I mean, it's primarily volume driven. That's right. -Kevin. I'd say price is fairly neutral. One of the key components to the volume growth is we have 10,000 customers. Historically, we've started them off in the rental portion of our business and then grown from there.The great thing is when you look at it from a Venn diagram perspective, those customers that actually, we're providing all of our solutions to is much smaller in comparison to our overall 10,000 customers. That represents the opportunity. It's really the share of wallet opportunity. Where are you on that? You know, so you got three businesses. One is well penetrated, and the other two, like, how do you think about share of wallet and where that could go? Yeah. You know, when we think about it, a few years ago, we started based upon our math around 10%-ish share of wallet, which increased to a little bit over 20%. We feel like we're still in early innings. When you say share of wallet, is that across the industry wallet? Or is it you're saying like, when you have a customer, at a hospital level are you actually doing from what you think you can be doing? Yeah. The math is our revenue in total relative to the revenue that's been outsourced by all of the providers. Okay. That doesn't factor in, for example, those people that are insourcing, the providers that are insourcing that could turn to outsourcing to people like us. So- That represents an additional opportunity. If the total market opportunity is $15 billion in the space that we play, call it 1/3 of it is outsourced today, and that's where we typically calculate our share of wallet, that 20%. There's still that $10 billion or that 2/3 where we have an opportunity to convince a customer that is insourcing to outsourcing, so we're creating net new share, and that's another opportunity that we're building on based on the very unique service offerings that we have. When you say that, you guys have been doing acquisitions, you've been expanding the service lines that you do. Is that only the service lines that, Jim, when you quantify that? If you add into a new adjacency that would expand the TAM, or is this a way that you go from 10 to 20 to 30 is to expand your capabilities? It's both. We have a great organic growth profile, and we have an opportunity with just the assets that we have to penetrate customers that are insourcing and convince them to outsourcing to actually open up new markets that historically haven't been open to really any of our competitors. There's a great opportunity to expand there without having to do any M&A. We are always looking for tuck-ins and opportunities for us to continue to complement our current service lines. How do you think about the M&A pipeline right now? You guys have done a number of deals since going public. You just did a couple small deals recently, but it's been a little while since you've done a decent sized deal. When should we expect the next... Like, would you be surprised if you didn't do a deal in the next 12 months? We have a very robust pipeline of opportunities, but we're gonna be very thoughtful in the decisions that we make on those acquisitions. I would think more along the lines, at least through 2023 of various tuck-ins that complement what we're currently doing today, Kevin. Tuck-ins meaning largely like filling out geographies, or are there capabilities still that you would call a tuck-in? largely filling in geographic areas where we don't have penetration. There may be some complementary acquisitions that we'll do before the year's out, but none of them will be material. When you think about the deals, it sounds like you're saying tuck-ins. Is that because the larger deal valuations are out of whack? Or, I guess, have higher interest rates changed? Yeah. All of the above. This is where Tom chuckles, right? 'Cause for sure, when you look at capital allocation given where the interest rates are, we're being especially careful about the allocation. Yes. Of capital. 100%. We will be lowering our debt, through cash flow generation, and those tuck-in acquisitions are gonna be small for 2023. I guess when we think about the last year or two, I guess, has been a little bit volatile on the government contract, reprocurement. That's done. Can you just give us an update? Like when does that get reprocured again? How did that process go? Like, how competitive is it? How many people could actually even potentially dislodge you? It feels like you've got a pretty good positioning there. The market seems to be worried about reprocurement, but you don't seem to be. Maybe just some color there. Yeah. I'll talk about the contract. Jimmy can talk about, you know, the math in the contract. We had the agreement with the federal government for their stockpile pre-COVID. When it came time to actually have the government procure all those additional ventilators, it was a natural extension to have us do that, and we did it extremely rapidly, and they were really pleased with that. The contract originally was one year, and then we went through a series of three-month, six-month, one-year extensions until we got to the end game of the RFP that they wanted to submit, and then finally the award that we received that is for the next four and a half years. It's still at the government's discretion on an annual basis. They could always choose to terminate and do a reprocurement process. There's nothing that indicates that they would do that. That's not because of our agreement. That's just the way the federal government contracts. But when we competed with multiple vendors for the renewal of this particular agreement, it's our understanding that the only viable competitor actually had assembled multiple vendors to meet what we do, the warehousing, the clinical engineering, which is the preventive maintenance and support of the devices, and then, as importantly, the distribution and the retrieval of the devices. Being able to deliver that last mile of support and, in many cases, under a day was the commitment level to do that. Having the ability to do all three and leveraging our current infrastructure is really what advantaged us in that contract. If you wanna speak about the math to it, but I think you're gonna agree with me. It's consistent with what the expectations were. Yeah. Did we answer your question, Kevin? Well, I mean, I guess, no, I think that does make sense, that, you know, it feels like you're uniquely positioned to keep that contract. I think the market's-. We have no concerns on the procurement on it at all. There were protests that took place after the fact. Every one of them were overturned, the contract was finalized. There shouldn't be any concerns from anyone around the risk of a reprocurement on this. Yeah. When we think about then, like that's really the only real big contract concentration I guess that... That's exactly right. I guess in the past, part of the beauty of the story and the growth was that everything was kind of small, you know, keep hitting a bunch of singles, doubles, and so like the there's not a lot of risk for procurement. As you get to bigger contracts, if you get more seven-digit, 8-digit contracts, does the business get more lumpy, or do you think that those still feather in relatively consistently and we shouldn't expect any change in the way the business grows? I think it should be just fine. What the lumpiness piece would be, if there is any, Kevin, is more on the timing of the onboarding of the new and when that's actually coming on and how long it takes to ramp. That's more of the piece around the lumpiness. I do wanna reiterate the point, those singles and doubles you described, Kevin- Mm-hmm. We're still doing those. The larger deals are additive. They're not displacing the singles and doubles, and that's really important. That, again, is a phenomenon emerging from COVID, where the customers have come back to us and asked us, "Hey, look, you create a lot of goodwill during COVID. You helped us through this transactional crisis. Now can you help us strategically across our entire enterprise?" We're well positioned to help them realize that goal. Actually just to make sure, I understand, go back to your earlier question. You talked about these larger contracts and the ramp up there. You're saying year one's an investment year. Does that mean you're actually losing money in year one or just not really making money in year one? The latter. The latter. Okay. You're, you know, nothing's dilutive here. It's dilutive to margin, but not dilutive to earnings. Okay. All right. I guess, Tom, I mean, you're not necessarily new to Agiliti, but newer to the CEO role. Is there anything that when you came in, you're like, "Finally, now I know. Now I can do what I always wanted to do." Anything we should be thinking about differently under your stewardship? I wouldn't think that. Jim and I and the executive team, we've been fortunate to be very engaged in the overall strategic direction of the company. The direction that we're on, that Tom collaborated with the executive team on, we're gonna continue down this path. There's continuity in the way in which we're executing strategically. Some of the things that we've implemented and, you know, over the course of the last couple of years has been around software development and some of the work that we're doing to ease the way in which our customers can do business with us. We talked about yesterday in our earnings release the fact that we've got integrations with all the major EMR vendors right now. We're gonna continue on that path and continue to invest with our customers on simplifying the experience, so clinicians can actually get access to our services and devices right in workflow, not break their experience with their EMR, with their patient, go out, have to try to track things down. It can be done very seamlessly within their EMR. You'll see more of that as we move forward. Okay. 'Cause I guess part of the savings, I guess that had always been part of the savings, right? That, you know, hey, outsource it to us. Your nurse just has to call us and ask where the infusion pump is, and we'll get it to them rather than they have to go all over the place trying to track it down. How is this different than that? They were reaching out to us directly. Now it's completely seamless. They're simply seeing a patient. From that patient, they realize they need a bariatric frame and a bariatric service. They need an infusion pump to accompany that. They actually input it right into the EMR, and then the magic takes place behind the scenes, and they don't have to do anything to track the information down. Further, we've got other technology coming down the pipe that will provide timing, delivery, things of that nature, simplifying the experience and making it much, much easier for them to access the devices they need. Okay. Are there any more opportunities like that to kinda further improve the customer experience? There's a lot. We have a big roadmap of different things that we've gotten both from the customers, but we know from our vocational experience with working with the customers. We have a nice roadmap of things that will continue to provide differentiation there over that of our competitors. You don't wanna tell me now until you roll them out, is that it? You don't wanna give away the secret sauce until. Trust us. All right. I guess I think you've mentioned the past couple of calls that a lot of big contracts but also a nice backlog of contracts. Like, is there any way to size what that looks like? You're not gonna like this answer, Kevin, but no, we don't provide backlog numbers overall. No, that's my job is to ask questions you probably won't answer just in case you do. All right. Then, when you think about from a margin perspective, the business mix has changed a little bit since you went public, but like how do you think about the margin profile of the company and where you can go from where you are today? In the implicit in the guidance for this year, our EBITDA margins are in the 25+ range. Where can they go? If you kinda look at history, and history being, say, 2018, 2019, pre-COVID, the EBITDA margins were 27%-28%. For us, volume is our friend. The more volume we can put through a shared infrastructure, the better we are from an EBITDA margin perspective. Things that we're watching, you know, we had noted the impact post-COVID on the rental side of being below 2019 levels, right? As we think about that longer term and its return to more normalized levels, that would be something that would help us get back to that level. Okay. you know, there's been a big theme, not just healthcare, I guess everywhere about labor cost pressures. Mm-hmm. Your business is a little bit more insulated from that, but, like, can you just talk a little bit how you've dealt with labor? Yeah. We've created a lot of layers and spans to give people great growth trajectory within our business. For instance, on our clinical engineering side, we have biomedical engineers, of course, but we have an apprenticeship program that takes people up through an entry level that allows them to actually do clinical engineering repairs, not as a full biomed, but on a career trajectory that gets them there. That's one example of where we're able to offer to our team members various paths where they can continue to grow within the company, earn more money by taking on greater responsibility within the organization. We have job fairs that support that. It helps with retention, it helps with employee engagement, and it gives us the ability to insulate from some of the pressures that are happening. We're not completely immune to it, but that has been one of the areas that has helped us through this process. You know, going back to, like, the value proposition of the company and the savings kind of feel relatively apparent. What's the barrier to a hospital? Like when you say use us, you'll save 15%-25%, why does a hospital say no? Jim's laughing. A couple of things. One is, in some cases, they've never done it before, or at least at an IDN level, they haven't insisted that their facilities do it. They love it conceptually, then they tell us to go out and maybe sell it directly into the facilities to do it. The facilities have been doing it a certain way for a very long time. They've got muscle memory, and as a result of that, they're not quick to make the move. Again, emerging from COVID, and the fact that we had positioned the organization to be able to present these broader value stories at an IDN level, at the C-suite within an IDN level, we are getting much more interest at that level, and they're going, "Wow, we get it." We've got great testimonials to do it. We have a great customer referral program that supports all of that. We get a little frustrated when we, you know, why continue to do it the way you're doing it when we've got a great opportunity to provide you better value at a lower cost? We're pretty resilient. The good news is we're competing often with the concept, not with a competitor. It's the ability to create that incentive for them to want to participate and create that opportunity for them to realize the value that we're presenting to them so. Okay. It's often just inertia kind of. It is. Okay. They can be very inert on these things. Okay. I guess, Jim, going back to the point about M&A and, you know, today small tuck-in deals focus on deleveraging, is that because the leverage, you know, is just above your target, or is that because there's not a lot great use of capital, so otherwise you're just gonna, you know, delever? Where do you think the right leverage is on a normal basis, and where would you feel comfortable going to if the right opportunity? Yeah. I mean, we think that the right leverage is in the low to mid threes. Yeah For us. Right now, we landed Q1 on a pro forma basis at 3.7. We think we can continue, and we will continue to delever consistent with the history of the company. I mean, when we weren't public, I think we were around 4.5x. We quickly delevered per quarter, and we continue to do that. Obviously, with interest rates going up, when you think about our new term loan, our SOFR is at about 4.07%. You're talking about a 300 basis points increase to that. When you're getting up around 7%-8% interest rate. Yes, obviously, our allocation of capital is... We're more intentional about how much we allocate to M&A. We're not gonna turn down M&A that makes perfect sense for us. We're not gonna do that at all. We do see an opportunity just like we did last year where we reduced debt. Okay. I guess that, maybe just to kind of round out maybe the answer to the earlier question about cross-selling. You say you're at kind of 20% market share or share of wallet versus 10. How often are you selling all three services? Like, you know, what is the opportunity there, you know? Is that not something we should really ever expect? It's always two, and which ones make the most sense together? That is the opportunity. It typically starts with rental augmentation of devices or labor to support them from a clinical engineering perspective. We're able to provide supplemental clinical engineering support. From there, it evolves, and it provides us an opportunity. That footprint allows us to call on those customers for everything from surgical equipment repair to surgical laser rental, all the way through to onsite management. Many customers are buying individual solutions today, and the opportunity for us to build on that, both at a facility level or at a system-wide level, that is the way in which we take not only the 20% and take it to 40% or 60%, but to even expand what people have historically insourced into outsourcing, and that's how we see the opportunity. These larger contracts, is it about selling multiple services, or is it still about selling the same service largely? Both. In some cases, it's one of our solution lines across their entire enterprise, that is step one of other ones they're going to add. There have been a couple, not many, a couple where it's all in, where we're gonna take everything that you've got and implement it across our entire universe. Okay. Every large contract potentially means another large contract. Correct ... as you sell the next thing up. All right. Excellent. I think that's all we have time for. Thank you very much. Thank you, Kevin. Thank you, Kevin. Thank you, all.