Q4 2020 U.S. Physical Therapy Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the U S. Physical therapy Q4, 'twenty 'twenty year end earnings conference call.
All lines of currently in a listen only mode. After the speaker's presentation there'll be a question and answer session.
If you'd like to ask a question at the time you may do so by pressing star and the number one on your telephone keypad.
As a reminder, this conference is being weak.
It is now my pleasure to hand, the conference over to Mr. Chris Reading. Please go ahead Sir.
Thank you good morning, and welcome everyone in the us physical therapy fourth quarter and year end 2020 earnings call with me on the line today include Carey Hendrickson Chief Financial Officer.
Graham Reeve and Glenn Mcdowell, COO, Jon Bates, our Vice President Controller, Rick <unk>, Our general counsel before we begin our discussion. This morning, we need to cover a brief disclosure statement John Mcphee. Thanks.
Thanks, Chris the.
This presentation contains forward looking statements, which involve certain risks and uncertainties and these forward looking statements are based on the company's current views and assumptions and the company's actual results can vary materially from those anticipated. Please see the company's filings with the Securities and Exchange Commission for more information.
Thanks, Sean.
Okay I'm going to start this morning, with some prepared comments and some color around select the aspects of our year and our final quarter before turning it over to Carrie to review the financials in a little bit more detail.
First let's talk about our finish to this this crazy 2020 here.
I am very proud of our team for the way that the lead through this whole year, because we all know we needed to make a lot of adjustments in the business early on those adjustments impacted people and those are hard decisions. As a result, our goal always is to help and we felt the best way to do that was to ensure that the company could get through this pandemic in one.
<unk> in good shape of that was possible.
Our decisions were made regrets as we work the way through the year steadily picking up volume and maintaining very tight controls on the cost side of the business as we entered the final quarter of this year, we continue see of nice progression in volume recapture.
For Bruce visits per clinic per day increased $27 seven that further.
Further progressed in November of $28, two which was essentially the point.
At the point, where we were back to pre COVID-19 levels.
Early in November of country experienced the strong resurgence quote to the.
The COVID-19 virus and as a result.
Created largely out of out of work exposures.
We ended up with.
Over 300 people Inc. Foreign team just for the month of November more in that month, and then the cumulative prior six five.
Months, leading up to that.
Hi, corn team numbers continued into December which is which is in part why costs increased slightly for the quarter.
Part of this impact we had a strong operating finish to the year visits finished in December within two five of the visit per clinic.
Despite the bumping virus numbers and quarantines all in our gross profit for the fourth quarter. Excluding closure costs was $29 1 million an increase of more than 2 million compared to the 2019 fourth quarter gross profit percentage for physical therapy moving.
Closures was 24, 9% the 230 basis point improvement over prior year.
Management contract business, which included a recent acquisition completed in the third quarter also improved significantly to 22, 2%.
Up 780 basis points compared to Q4 2019.
Finally, our injury prevention business, which performed really nicely all year finished the quarter of 24, 6%.
The improvement of 660 basis points over our year end 2019 finish.
Operating income for the quarter of 2020 also improved by $2 9 million of 19, 1%.
Operating income as a percentage of net revenue increased by 300 basis points from 12, 5% in 2019 was 15, 5% in 2020, despite the challenges brought by Covid.
Other highlights for this year is finished with the completion of our second acquisition as you know we put on.
On hold at the beginning of the pandemic.
And then started back up in the third quarter of.
This is the partnership.
With the with a great Guy and a great team and the.
They have navigated this pandemic very very well the deal, which we previously announced produced approximately 54000 patient visits may of a great plan for future growth and expansion.
As a result of all of the great work and sacrifice across the entirety of the company. We finished the year with approximately $11 million of net debt as well as the revised updated and extended credit agreement with bank of America very favorable terms.
We are pleased to announce the reinstatement of our quarterly dividend of <unk> 35 per share, which is an increase of nine 4% from the previous dividend paid back in April of 2020 day.
Dates around the thing that dividend payments are included in our press release.
In closing I don't always do this but I'm going to do it today.
I know that with respect to our guidance.
We.
There is a little disappointment.
And I'm wondering I wanted to address a couple of things number one and I can't state this enough.
Team that we have here starting with our partners.
Their staff.
Our executive leadership team operations team and all of our support teams.
I'll leave the find the people I've ever worked with us.
We've made a lot of sacrifices to get us through this year very uncertain year for you.
Here, where we demonstrated a lot of grit of lot of resolve.
And the city to work through.
The environment, which we had never been through before the think we did that.
Not perfectly by any stretch, but we made really good progress and I think we laid down the great year in my view at least.
Of this coming year, we're not done with the pandemic, although I think we can see light at the end of it.
Total.
We have the Medicare cut the deal with less than what was potentially earlier prescribed.
Still a meaningful cut.
<unk> is the management team is to always be transparent with the shareholders.
I feel personally that with this team while we have a bit of of hill to climb this year and we always have our challenges.
We have the group in place than us.
Is that is ready to go.
Deal with what comes.
We've had some extraordinary weather this first quarter, we had last week.
<unk> at home no power in the water for a week, we had the entire state of Texas, a lot of the state of Tennessee shut down for a whole week.
And so we have some challenges we're going to have to overcome this year, but the reason a group of people that I would rather go to battle with the team that we have right now and we're going to do everything in our power to put down another good year and so we're working hard to do that.
I hope you can hang in there with us.
And so so that concludes my prepared in my off the cuff comments with that I'd like to turn it over to Carrie to cover the financials in a little bit more detail Eric.
Great. Thank you, Chris and good morning, everyone.
Today, we reported full year 2020 operating results of the $38 $4 million of $2 99 per share as compared to $36 million for $2 82 per share for the full year of 2019. Our 2020 operating results included $13 $5 million of worth of relief funds related to the cares Act.
Which contributed $7 $8 million to our operating results on a net basis or <unk> 60 per share. If you exclude those relief funds our operating results per share for 2020.
It was $2 39.
As Chris noted our operations finished the year strong for the fourth quarter of 2020 of our operating results were $13 $9 million or $1 eight per share, which did include $5 $2 million of relief funds that we received in the fourth quarter.
The fourth quarter relief funds contributed about $3 billion of 23 per share for operating results if.
If you exclude those relief funds, our fourth quarter 2020 operating results were $10 9 million or <unk> 85 per share, which is <unk> 21 per share of greater than the 64 <unk>, we reported in the fourth quarter of 2019.
Our adjusted EBITDA, including relief funds was $23 5 million for the fourth quarter of 2020 and $70 million for full year 2020 <unk>.
Excluding relief funds in the fourth quarter, our adjusted EBITDA was $18 $3 million, which is up $3 million or 19, 4% from the adjusted EBITDA of $15 3 million, we reported in the fourth quarter of 2019.
Our full year 2020 revenues were $423 million compared to $482 million for the full year of 2019, which is the decrease of 12, 2% our revenues in the fourth quarter of 2020 for $117 $5 million of decrease of three 8% from $122 1 million in the fourth.
Quarter of 2019.
Our physical therapy patient volumes per day per clinic dropped at the onset of COVID-19, but then they continually improve from may through December our patient volumes per day per clinic were $26. Two in the first quarter of 2020, they decreased to $18 nine in the second quarter that was the trough and then they increased to $25 eight.
In the third quarter and 27 seven in the fourth quarter of 2020 debt.
The fourth quarter 2020 volume of $27 seven was really back to pre COVID-19 levels only slightly less than the volume per day per clinic of 28.0 in the fourth quarter of 2019.
Our net rate for our physical the physical therapy operations was $105 60 for the full year, which is down slightly from $105 90 for full year 2019.
Our net rate in the fourth quarter was $107 <unk>, which compares to $105 90 from the fourth quarter of 2019, the fourth quarter of 2020 included a slight adjustment to net rate for earlier 2020 periods.
Physical therapy revenues were $373 3 million for the full year of 2020, which was the decrease of 13, 8% from full year 2019.
Physical therapy revenues in the fourth quarter of 2020 were $104 $5 million, which was down 4% from $108 million $108 9 million in the fourth quarter of 2019 the for.
Fourth quarter decrease in our physical therapy revenue was primarily related to having 28 less clinics on average in the fourth quarter of 'twenty than we had in the fourth quarter of 2019 due to the sales and closures that we made earlier in the year at the onset of the pandemic.
Our industrial injury prevention business was less affected by the pandemic in 2020 with full year 2020 revenue is higher than 2019 by $1 $7 million or for 6%, including an acquisition. We made in April of 2019.
While our physical therapy volumes declined about 55% in April our industrial injury prevention business declined only about 20% to 25% initially before returning to levels slightly less than normal pretty quickly.
Some of our largest clients most notably cosco increased their business with us during the pandemic, which helped to partially offset declines that we had from other clients that pulled back due to their challenges related to COVID-19.
Revenues from the industrial injury prevention business were $9 7 million in the fourth quarter of 2020 as compared to $10 3 million in the fourth quarter of 2019.
We took significant measures to reduce our cost in 2020 to mitigate the impact of lower volumes and the revenues due to COVID-19, including furloughs, a reduction in force and tight expense management across virtually all of our cost categories. As a result of our operating cost excluding closure costs declined to $324 $6 million in 2020.
The decrease of 12, 2% from 2019 and our costs remained at 76, 7% of net revenues in both in both years.
For the fourth quarter of 2020, our operating costs, excluding the closure costs were $88 3 million down seven 2% from $95 1 million in the fourth quarter of 2019.
<unk> cost as a percentage of net revenues were lower in the fourth quarter of 2020 than in the fourth quarter of 2019, there were 75, 2% in the fourth quarter of 2020 and down from 77, 9% in the fourth quarter of 19.
So while our revenues were $4 6 million lower in the fourth quarter of 2020 than the fourth quarter. So now 19, our operating costs were $6 $8 million lower so our gross profit increased $2 2 million in the fourth quarter of 2020, when compared to the fourth quarter of the previous year.
Our gross profit margin was 24, 8% in the fourth quarter of 2020, which is up 270 basis points from our gross profit margin of 22, 1% in the fourth quarter of 2019 for.
For the full year of 2020, our gross profit excluding closure costs was $98 4 million compared to $112 5 million in 2019 with the gross profit margin of 23, 3% in 2020, which is the same as it was in 2019.
Our corporate costs were $42 million in 2020, which is down $3 million from $45 million in 2019 with the same cost reduction measures in place of our corporate office as we head of our operations.
In the fourth quarter of 2020 of our corporate costs were $800000 lower than the fourth quarter of 2019, even with $1 1 million and CFO transition costs related to the accelerated vesting of stock for our former CFO.
Excluding the CFO transition costs of our fourth quarter 2020, corporate costs were down $1 $9 million for 16, 2% from the fourth quarter of 2019.
Other income.
<unk> net of other expense was $13 1 million for the full year of 2020, which does include debt $13 $5 million and relief funds. It also is net of $1 6 million and interest expense, which is down from $2 1 million in 2019 due to the reduced borrowings we had into our credit line of <unk>.
In 'twenty and then also of lower weighted average interest rate due to the decrease in LIBOR that happened in 2020.
Our weighted average interest rate in 2020 was two 6% down of 130 basis points from the 2019 rate of three 9%.
Our non controlling interests were 16% of our gross profit, including cares funds for full year 2020, and 16, 3% for the fourth quarter of 2020 if.
If you exclude cares funds, which had a higher profit excuse me of higher prints tonnage related to the noncontrolling interest the percentage of gross profit attributable to Noncontrolling interest was 15, 3% for both the full year of 2020 and the fourth quarter 2020.
Our balance sheet is in a strong position as we begin 2021 at December 31, 2020, we had only $16 million drawn on our $125 million revolving credit facility and we had almost $33 million in cash or cash includes $14 million in Medicare advance payments that we intend to pay back in <unk>.
'twenty one we also deferred in total in 2020 about $8 $3 million in payroll taxes under the cares Act will repay half of that and balanced by the end of 2021 and then the other half is due by the end of 2022.
Speaking of our revolving credit facility, we're pleased of amended and extended our facility for an additional four years through November 32025, we were able to maintain our favorable rate structure with just a slight increase in the undrawn fee at the lowest debt coverage level. Despite the fact that the base of our agreement LIBOR as I mentioned has decreased significantly from the time.
For the previous extension.
We were also able to expand the accordion feature of the facility. So that we now have access to $150 million under the line if we need it.
We also raised the limit on dividends among a few other favorable modifications.
In our release this morning, Chris alluded to the range that we provided of $2 40 to $2 50 for operating earnings per share for 2021. There are several things that impacted our thinking all of that range first the Medicare rate reduction of three 5% that went into effect on January one of this year, which we estimate will reduce our 2000.
The 21 revenue by about $4 $5 million on a net basis debt.
That equates to about 21 per share.
Also the 2% of sequestration relief on all of Medicare payments that we've had since may of May one of 2020 that will end on March 31 of this year and we estimate that will reduce our revenue beginning in the second quarter by about $2 million, which is about <unk> <unk> per share on a net basis.
And while we always have some weather related impacts from the first quarter of each year. The weather related events, we had in our two largest states, Texas and Tennessee over the last couple of weeks were unusually significant.
We estimate that we lost about $2 $8 million of revenue from those events, which equates to <unk> 13 per share.
And then as Chris noted there is still uncertainty related to COVID-19 and the potential impacts of operations in 2021, particularly in this first part of the year, while we're confident in our ability to respond to whatever may come our way. We continued to have a high number of employees out due to quarantine and we don't know what impact if any of that the new more contagious variance of COVID-19 might have on our business.
As usual that range does not include any potential acquisitions that we might make in 2021.
One of the things Thats been strongly confirmed through the pandemic has the strength and resiliency of our employees and our operations. Our team has managed well through the pandemic and we've successfully managed through rate changes in the past and we expect to do so at this time as well all things considered we're pleased with our results in 2020 and with our strong finish to the year.
And we look forward to a successful 2021 now Chris I'll turn the call back to you.
Okay. Thanks, Kerry the job operator, let's go ahead and open the line for questions or comments.
As a reminder, today's commodity your question by pressing star and the number one on your telephone keypad.
And that of Star one.
The first question will come from the line of Brian.
The <unk> with Jefferies.
Hey, good morning, guys.
Hey, Brian.
No. Thanks for thanks for addressing the the guidance right off the bat, but I guess I'll throw at us at both of you guys. As we think about what goes into that I mean, we get the the fact that youre facing Medicare headwinds and obviously the weather has been tough in Texas in here in Tennessee as well, but.
How should we be thinking about cost offsets.
The underlying organic growth assumption of that Youre expecting obviously COVID-19 in the background.
Driving some conservatism in there.
Sort of thoughts on how we should be thinking about the moving parts.
So.
As we dissect that Brian I appreciate the question.
When we look at our budget for 2021, we get back to.
Actually a little bit ahead for the full year of.
On the visits per clinic per day basis ahead of where we were at 19 and we have a few us clinics. Obviously, we expect to have a good clinic opening here in terms of de Novo's. We also expect to have a good development year frankly, we hope we have a number of things we're working on that.
We expect to get.
But when you look at the underlying fundamentals of visits per clinic per day.
We expect to be.
Back in a little bit of ahead of where we were of pre pandemic I can tell you. We we started the year January little slow, but January picked up sequentially.
While it wasn't fully back to pre pandemic levels. It was low single digits within.
On a visit per clinic per day basis.
So the challenge for US is we took out we took out so much cost and pointing for me.
And not all of that was sustainable some of that we've had to bring back.
Quite honestly, we have people run of non less and fumes and so.
We'll see I expect that we will see some of that margin pickup as we go forward into this year, we know that 2021, it sounds like the little thing.
It has one less business day, so thats six or seven.
Our volume, we expect to get back.
And that is even considering the slow start that we've had in January of January and February were going to have the crawl out of that hole, but the Medicare impacts of real and we're going to do our best to work our way through it and the come up with some offsets but this is our.
This is our best guess right now.
On the look forward basis.
I appreciate it and then Chris I know in the past you've talked about.
Actually when you are facing the steep Medicare rate cuts you've talked about potentially ramping up M&A. This year as a way to offset right. So where do you stand of that meeting with Medicare cuts being mitigated a little bit and then I know you don't like talking about pipelines, but how does how are the conversations going with potential targets.
It's good it's good I mean, I'm pleased that we got.
Well of course.
We always we always seek out the best folks we've tried to and we've done the deals that we've closed with just with phenomenal folks the deals that we will close.
So with phenomenal people and the discussions we're having.
Really really good good opportunities and good people. So I expect this is going to be a really busy year.
We always have things in development, sometimes they don't work out some most of the US Tom They do but I expect this will be a busy year for us.
And you will you will see us.
In the not too distant future.
Tom.
Yes, Okay and then Chris last question for me I know you kind of slowed down the de Novo strategy. A few years back. We you just mentioned de novo's again, so how should we be thinking about your commitment to de novo's and the pace of development on that front.
Yeah.
Yes.
We've always been committed to de Novo as most of the de Novo's, we open.
And our top 20 of your top 30 partnerships.
And we'll get back to kind of what our average pace has been more recently, excluding the 2020 year, where we've just pressed pause on just about everything.
We've.
The de Novo opportunity, though.
I guess im a little different than some of the other companies out there.
When we got here 18 years ago, we were thrown open de novo's.
Picking picking of targets city, and just blitzing the city with openings.
Honestly it didn't work.
It's hard to work on.
And so we're selective with what we'll we'll open but I expect.
Somewhere in the mid <unk>. This year in terms of de Novo openings, which kind of gets us back to where we were before maybe it will be a little better the Matt maybe maybe a little lighter, but thats what I expect at this point.
Awesome sounds good thanks to the congrats.
Well chat soon thanks.
Thanks, Brian its Brian.
The next question will come from the line of land fill all of us to walk the floor.
Total.
Good morning, guys. Thanks for taking the question Kerry welcome the public.
Public welcome to assist clients in a couple of months of it for us public call.
Thank you Larry I know you don't yes.
I know you don't guide.
See the quarters.
And clearly the cadence was I assume we're going to start at a much lower volume with the weather impact in the <unk>.
Rising incidence of Covid, but just trying to get a better feel for the volume as you said you sort of expect it to be.
We recovered the pre pandemic level at the end of the year, but it sounds like we're going to get a little was the swoon here at least from the first half of the year.
So my first question of sort of what you did the.
Kate in the do you expect to be sort of above pre pandemic levels in the back half of the year and then as we look out over the next few years.
Can you just give us any idea of your thoughts on you know with the high unemployment rates and whatnot. How do you sort of same store volumes have been great for the last five years, how do you view that the pull.
Covid world, but relatively high unemployment do you think that will be a challenge yes.
Yes. So good questions appreciate that so I personally expect us to be back or a little ahead of pre COVID-19 levels sometime in Q2.
We're not that far off.
Of the last weeks.
No.
Apocalypse not happened here in Texas, and a few other places subzero temperatures.
The literally everything shut down we would have had a decent february but having having knowing where we are right now first quarter is certainly going to be light.
The second quarter and usually beginning of March we begin to pick up steam I expect us to happen. This year seems very very focused.
We have some some ground to make up for for <unk>.
For the weather.
And for the right and they are working very hard so, but we'll be a little bit back end loaded I won't say that we'll be fully back end loaded I think Q2.
The forward should.
Well, while we will still have the pandemic.
I think things I think things should be steadier.
Of the work force.
Look we have put up really good same store numbers for the last few years I expect to get back.
The same store positive once we get on the other side of this pandemic I think we can move market share.
In this period of time, we've been through has been hard on everybody and we've come through are really in good shape. So again I think it's about moving market share.
Certainly a full.
A full workforce in a robust economy helps everybody.
But we've been through we've been through a recession periods before we've been able to grow and I don't expect us to be in a recession I expect us to be able to move market share and growth same store.
We have been the beyond us.
Right.
Of course, I know you brought back some of your costs yet you haven't brought back all of it and you mentioned you start it feels like Youre getting pinched, a little bit you kind of have to bring back some more staffing.
So I suppose we will see of rosin costs through at least the first half of the year, but my other question is how does that interplay of sort of what I think you mentioned of 300 of some employees on what the numbers today, but it sounds like some of it.
Certainly some inefficiencies and is that causing you to at the higher more temporary help and sort of temporary elevating costs even more.
Yes, a little bit of a little bit early on and we expect as the year progresses. The these folks and quarantine number one were getting our people vaccinated.
We're in 39 states and so theres the state by state, but of a patchwork for power.
Our efficient and effective that us but early results are good and people are getting vaccinated.
Right and so.
Because of that we expect our current fee numbers to begin to decline as that number increases and people have.
Second level of vaccine.
Under our belt of greater percentage of those so.
I think we'll make progress there.
I think from a from a corporate perspective, we've got the group back that we need.
To operate the company and as we grow and add new partnership deals. We may have some some slight changes in additions there and given the.
The field, we're also pretty well staffed right now.
Other than for the redundancy that happens because of the.
Because of the people in quarantine and once that is alleviated.
Think things will settle in and then we'll be in a little better shape.
Okay, Great and then just lastly, the industrial injury prevention business.
Held up relatively well in 2020, I think it was actually flat or down a small revenue gain whats your outlook.
The 21 for that business.
We have of forward outlook I mean, we expect we expect a good year I think our rate of change one of the things will slow a little bit this year and we're going to have to rebuild our and the group has been working on it we're going to have to rebuild or are opportunities pipeline. We've just had a lot of people kind of.
Pause so to speak during a lot of 'twenty 'twenty, our sales cycle for the IP business is a bit longer it takes up to about a year and discussion with some of these companies, but it's coming back and we've made some good progress of late so I expect the group I have tremendous confidence in that group.
And it starts the year started the year well for us this year in 2021.
It's now are the largest single partnership and ranking.
The total contribution and I expect them to put down a good year this year.
But we're a little bit more flat footed maybe than we have been in the past just because of COVID-19, but they will pick it up.
Got it okay, great fair enough I appreciate it thanks guys.
Thanks for that.
The next question will come from the line of Matt <unk> with William Blair.
Hey, Good morning. This is Dan Lawler on for Matt. This morning, Thanks for taking my questions.
Sure, Matt We said congratulations on the new Berry.
We'll certainly do that but.
But just wanted to ask with the with the PT current reduced to around three 5% for 'twenty. One are you seeing any thing to maybe having the remainder of the cuts come back in 'twenty, two and then quickly on the 15% cut for Ptas and Otas in 'twenty to what levels.
Are you guys pulling in your staffing model and how should we be thinking about maybe the.
Net impact of rate in 'twenty two.
Yes. So the first part of your question is to receive the remaining part of the cut coming in 'twenty, one I'm not sure yet.
Given the total wild guess at this point, which I'm not inclined to do so I hope not.
I think they've gotten there.
Per pound of flesh, but we're going to be working hard within our <unk> Alliance as we did.
Throughout the entirety of last year.
<unk> added.
On the 15% PTA reduction we made a number of changes in staffing.
It's been a couple of years ago pre pre COVID-19, where we actually we shed.
A lot of our facilities some of our PTA.
Once that the sound bad.
Theres a good folks.
But we rebalanced, our our staffing somewhat and I think the key for US is just going to be.
Scheduling and making sure that our PTA or connecting with other non federal patients and I think we're at a level, where we can do that pretty effectively.
We may have we may have pockets, where we have to be a little bit more creative.
And we'll certainly work on that as the year progresses, but I think right now we should be generally speaking okay.
With respect to federal of patients.
Great. Thanks, a lot.
The next question will come from the line of Mitra Ram Goupil.
Sidoti.
Yes, hi, good morning, Thanks for taking the questions.
For Us Chris.
You talked about.
Being able to grow market share organically and I was just curious if you could give us some color in terms of is the result of the pandemic. What you saw this past year in terms of a lot of maybe your mom and pop competitors.
Yes, good question Mitra and good to hear your voice.
Yeah.
It's mixed.
We have on the mom and pop side from some.
Really good competitors and I think PPP money helped a lot of them.
Ones that applied for and got it and that was kind of the bridge.
The other side, but.
We've also seen a.
A huge increase in the number of small practices.
Probably going to make it or need of home.
And didn't fare so well.
I don't want to ever to go through this again, what the went through 2020, so I still think we're.
The big companies are much better resources to move market share than the smallest of the groups. So it doesn't mean there aren't a lot of really strong small groups out there a lot of.
Those are people, we ended up connecting with and talking to about deal at some point in time, but the.
The other thing Mitra I think the 2020 did was for hospitals, which is also a big competitor of ours.
Physical therapy has probably been the 51st priority of the hospital here this last year.
It's not high on the list and so I think we've been able to move some business from the hospitals I think we can keep that.
We're going to we're going to fight to do that.
We've put more emphasis.
In terms of looking for creative opportunities with hospitals and it's the.
But I think we will see that play out as the year unfolds with us.
Managing and having more creative opportunities with hospitals, because it's really amount of strong focus of ours right now.
Okay, No that's helpful and the kind of.
A related question I guess.
As it relates to the de Novo.
Do you think the pandemic us maybe accelerates or maybe change the mindset of some of the potential partners, who are now more interested in joy.
Joining with us maybe.
Pandemic.
Well.
I'm not exactly sure.
If I'm hearing your question right, but I think when you look at the partners that we've acquired the partners, we're talking to about creating a partnership together.
They are very bullish on the future and they are very bullish on growth in the very bullish on development, that's organic development as well as tuck in opportunities.
For.
Further acquisitions within the partner groups and so we have a lot of people working on those things locally.
Along with our development team.
But yes, our strong partners are are not afraid in the B C of lot of opportunity out there and so do we so we just need to make it happen.
Oh right yes.
That's the very good I was also curious if say youre seeing in terms of your de Novo pipeline.
The more interested parties as a result of realizing how difficult it is the sort of.
Deal with the environment.
Total as opposed to partnering with you yes.
I got you so.
Our de novo's are solely and exclusively satellites now of existing partnerships, we're not doing and have it for many many years I mean, one off standalone single site partnerships and so.
When we have somebody that comes to us like that in us interested most typically.
They are being referred into or tuck into an existing partnership somewhere we're not doing any.
So.
Single site, one off partnerships from the ground all of the things that we're doing the novo are all satellites at this point, Okay. Now that's great. Thanks for clearing that up.
And then I know the.
The in terms of the Medicare.
The reduction I was just curious in terms of if you might have the payer mix handy carry as it relates to maybe potentially of the business.
As Medicare exiting 2000, Germany.
You bet, yes, so in 2020 of our Medicare was 27, 2%. There are some contracts that are also kind of tied to that Medicare rates. So we estimate of about 31% of our our business is tied to the Medicare rate and in some way.
Overall, there wasn't a whole lot of change 2019 to 2020 and the payer mix.
The commercial insurance was 47, 6% in 2020, Medicare like I said it was 27 point to.
Medicaid was for 4% of workers comp was 13% and then our personal injury and self pay combined with seven 8%.
Okay, that's great.
Thanks again for taking the questions.
Thanks Mitra.
The next question will come from the line of March of Vanilla with Copeland.
Alright, thank you.
I guess my question is around the dividend great to see it reinstated and I noted.
Higher level than you had before even though earnings the payout ratio look significantly higher then you probably had.
Given the earnings at a lower level of them would have been expected last time you had the dip.
I'm curious if that says anything about.
Kind of the a recommitment of our long term commitment to dividend growth what the flexibility you've got in your credit agreement means that maybe you wouldn't have the cut outside of maybe a pandemic coming again right.
Can you speak to a little bit for the payout ratio of goals for dividend growth.
Terry you want to you want to pick a round of debt first sure you bet yeah. So.
When we look at the dividend obviously, we have a strong balance sheets that we feel great going into 2021, we feel good about the health of the business of where we're headed.
We will take some of these things and strike related the Medicare reduction those kinds of things and work hard to mitigate them, but we're very committed to the dividend. We wanted to increase it in the normal progression. So it was 32 since last time, we did it we generally increase at 9% to 10% per year and we did that with this with this increase from going from 32.
The 35, but I would say is the company, we're very committed to it and we have increased it like that really I think.
We.
We started the dividend in 2011, and we've increased it every year. Since then absent the suspension we had in the first quarter 2020, we resumed at the higher rate.
You did mention a number of headwinds the cash flow in 'twenty 'twenty, one as well as the earnings.
What type of cash flow kind of call us that do you see based on your projections what percentage of free cash.
From a dividend standpoint.
Correct Yeah.
Yeah, so well.
We really I don't want to speak too much of the cash because there is uncertainty we have this range of $2 40 to $2 52, obviously with the.
It's a higher percentage of that would have been in 2020 of 2019, but we feel very comfortable with it.
Okay. Thank you.
You bet.
Again to ask an audio question you may do so by pressing star and the number one the.
Next question will come from the line of Mike <unk> with Barrington Research.
Hey, guys.
So I wanted to ask a little bit about salaries and related line. So I think it was 59 I'm, sorry, 55, 9% of overall revs in the fourth quarter and I was just wondering with the quarantine employees and all of the rest of did you guys sort of tried to SaaS.
And maybe I missed it maybe you said this but I missed it if you did have you guys tried to assess.
Essentially what that number would have been sort of a.
Non COVID-19 environment.
Because I know youre essentially working at times with two therapy deliver care to one patients due to the quarantine stuff.
Right I haven't Mike.
We probably need to and we can probably offline, we'll let the.
I don't know that I have that at my fingertips at this point much of carrier does.
Either.
Most of those 300, they werent all clinical folks.
But a high percentage or and you are right. There is the redundancy that gets created there with having replacement staff and a lot of cases.
But.
It's going to be an estimate if we if we do it.
I don't have the ability of the pieces parts basis tell exactly.
Who we brought in and replaced or whether somebody just work more.
What the.
The iteration was of each and every example of that but we can probably do a back of the envelope estimate offline okay.
You said that there were 300 people employees quarantined in November and then I think.
Characterized as that issue continued into December do you of any sense of like currently or in January.
What the upper end of.
The quarantine employees.
It was.
Yes, it's less than it was it's going down.
I wouldn't characterize it as the law.
But it's better certainly better than November December was better than November.
Bye bye of margin.
The decent margin in January and forward.
Gradually gotten better, but it's still a high number right now I don't remember.
I just don't have it worth for me and we're coming off of a few days, where the board meetings and budget and a lot of numbers, but just don't remember what that number is.
But I can get to it. So if you want to if you wanted to check afterwards of nowhere. It is I just don't have it at the tip of my.
Tom.
Okay and then.
So where I'm going with all of this is the sort of wondering.
Are you guys, assuming sort of Covid continues to be an issue for your employees in terms of some redundancies in that sort of thing is is that sort of baked into.
The guidance.
Absolutely yes.
During the Covid environment, right now and I expect we will be.
Fully for.
Pretty good chunk of this year.
So.
No.
No I said earlier I don't expect to have as many people in corn thing as we do right now just because of vaccinations, but we know just statistically.
Growth from talking to hospital friends, and then looking at our.
Surveys of our own employees, we know theres, a certain percentage of employees, who arent going to get this vaccination.
That's true of local hospitals here in Houston as well as.
In our subgroup in the.
If you follow the science with the variance from the other things that are happening.
We're expected to kind of being the COVID-19 environment at least for the next few quarters. So it's not for the year. So yes, it's baked in.
And Mike I have the <unk> numbers in front of me for January and Chris noted they were highest in November they came down in December and they are at a pretty similar level in January slightly higher in January than they were in December can you give me give us number yes.
Yes, it's in the mid two hundreds.
Okay.
Pretty high Okay, you'll pretty high yes, no doubt, it's definitely high yeah and the.
I'm, assuming the majority of those folks are our clinical.
I don't think we have a breakout by exactly by the position, but I think the majority of those folks are clinical gas.
Yes.
Okay very good thanks, guys I really appreciate it.
Thanks, Mike.
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True.
And we're moving forward.
And the growth.
Okay.
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Okay.
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And the year.
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Yes.
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Yes.
Thank you.
Sure.
<unk>.
Yes.
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Moving on.
And then.
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