Q3 2021 ATI Physical Therapy Inc Earnings Call

Speaker 1: Any discussion on our performance must start with a big thank you to all of our team members for their hard work and dedication, both clinical and support. Despite the many challenges, our team continued to provide high quality care and customer service.

Good quarter.

Any discussion on our performance must start with a big Thank you to all of our team members for their hard work and dedication both clinical and support.

Despite the many challenges our team continued to provide high quality care and customer service patient sat ratings remained very high with our net promoter score at 73, and our Google Star rating at four nine out of five stars in the third quarter, a real credit to our team.

Speaker 1: PatienceAT ratings remain very high with our Net Promoter Score at 73 and our Google Star rating at 4.9 out of 5 stars in the third quarter. A real credit to our...

Speaker 1: Furthermore, CMS recently advised us that our clinics scored in the 100th percentile for performance year 2020. And accordingly, ATI will be receiving the highest possible bonus adjustment to the Medicare position fee schedule in 2022.

Furthermore, CMS recently advised us that our clinics scored in the 100 percentile for performance year 2020 and accordingly.

We will be receiving the highest possible bonus adjustment to the Medicare physician fee schedule in 2022.

Speaker 1: Our business model and single reporting platform enable ATI providers in every clinic to report and collect the same data. This centralization allows for reporting out to payers, such as CMS and the MIPS program, turning the exceptional work that our clinicians deliver into higher reimbursement.

Our business model and single reporting platform enable ATI providers in every clinic to report and collect the same data.

This centralization allows for reporting out to payers such as CMS on the Mips program, turning the exceptional work that our clinicians deliver into higher reimbursement rates.

Speaker 1: and considering the 2022 Medicare fee rate schedule for therapy, the capability to collect and report on functional outcomes and other data becomes increasingly important to us.

And considering the 2022 Medicare fee rate schedule for therapy, the capability to collect and report on functional outcomes and other data becomes increasingly important to our success.

Speaker 1: Although our financial performance for 2021 is not what you expect of us or what we expect of ourselves, I believe we are laying the foundation for steady improvement going into next year.

Although our financial performance for 2021 is not what you expect of us or what we expect of ourselves I believe we are laying the foundation for steady improvement going into next year.

Speaker 1: Last quarter, we spiked out the higher levels of attrition we were experiencing with our clinical teams. And the potential for challenges in hiring both replacement roles as well as for second half expected growth.

Last quarter, we spiked out the higher levels of attrition, we were experiencing with our clinical teams and the potential for challenges in hiring both replacement roles as well as for second half expected growth.

Speaker 1: Since then, we revisit many of our workplace policy and compensation issues put in place during COVID that in hindsight led to clinical dissatisfaction and we quickly course correct.

Since then we revisit many of our workplace policy and compensation issues put in place during COVID-19 that in hindsight led to clinical dissatisfaction and we quickly course corrected.

Speaker 1: annualized clinician headcount turnover decreased from 50% in the month of July to just over 30% in September , an approximate 36% improvement from the beginning of the third quarter to the end of the third quarter.

Annualized clinician head count turnover decreased from 50% in the month of July to just over 30% in September and approximate 36% improvement from the beginning of the third quarter to the end of the third quarter.

Speaker 1: Our total clinical FTE increased by 91 from this past July through September as we reduced attrition and picked up our hiring, with approximately two clinicians hired for every departure, both in August as well as September .

Our total clinical FTE increased by 91 from this past July through September as we reduced attrition and picked up our hiring with approximately two clinicians hired for every departure both in August as well as September.

Speaker 1: These encouraging results extended through October into early November as well.

These encouraging results extended through October into early November as well.

Speaker 1: But to be clear, this is a journey and not an event. We will continue to authentically engage and support our entire workforce, both clinical as well as support, the way you'd expect a world-class company would do.

But to be clear this is a journey and not an event, we will continue to authentically engage and support our entire workforce, both clinical as well as support the way you'd expect a world class company would do.

Speaker 1: Now let me move on to a discussion of patient volume. We mostly think about volume in terms of clinic count, visits per day, and visits per day per clinic.

Now, let me move on to a discussion of patient volume.

We mostly think about volume in terms of clinic count visits per day and visits per day per clinic.

Speaker 1: In the third quarter of 2021, our 900 clinics saw nearly 21,000 visits on average per day, or 23.1 ZPD per clinic.

In the third quarter of 2021 or 900 clinics saw nearly 21000 visits on average per day or $23, one <unk> per clinic.

Speaker 1: In 2019, we delivered approximately 30 VPD per clinic, which is about the right level of activity for the average clinic and really strikes a healthy balance between fixed cost leverage and a positive provider as well as patient experience.

In 2019, we delivered approximately 30 <unk> per clinic, which is about the right level of activity for the average clinic and really strikes a healthy balance between fixed cost leverage and a positive provider as well as patient experience.

Speaker 1: Throughout the first two quarters of this year, our visit volumes were tracking towards what appeared to be a steady recovery to a level comparable with 2019.

Throughout the first two quarters of this year, our visit volumes were tracking towards what appeared to be a steady recovery to a level comparable with 2019.

Speaker 1: During the third quarter of this year, our visit volume softened slightly to 26,674 visits per day, down from about 21,570 visits per day in the second quarter.

During the third quarter of this year, our visit volume softened slightly to 26674 visits per day down from about 21570 visits per day in the second quarter.

Speaker 1: Simply stated, we experienced declining visit volume When we forecast, we should have been growing.

Simply stated we experienced declining visit volume when we forecast we should have been growing.

Speaker 1: This volume softness is centered primarily in a few key states within both the Midwest and Northwest.

This volume softness is centered primarily in a few key states within both the Midwest and northwest.

Speaker 1: while many of our clinics in the south and northeast are actually running very close to or exceeding pre-COVID levels.

While many of our clinics in the south and northeast are actually very close to or exceeding pre COVID-19 levels.

Speaker 1: To drive more volume for all clinics across our national footprint. In addition to integrating new clinical team members, we are investing in both field based sales representatives. Here we call them practice partners in our digital marketing campaign.

To drive more volume for all clinics across our national footprint. In addition to integrating new clinical team members. We are investing in both field based sales representatives here, we call them practice partners and our digital marketing campaigns.

Speaker 1: We've identified those markets where we believe sales and marketing can rev up our referrals, and we are moving quickly to put this in place.

We have identified those markets, where we believe sales and marketing can rev up or referrals and we're moving quickly to put this in place.

Speaker 1: This function was significantly reduced during COVID, but is obviously an important contributor to accelerating volume growth, particularly as we move into next year.

This function was significantly reduced during COVID-19, but it's obviously an important contributor to accelerating volume growth, particularly as we move into next year.

Speaker 1: While we work to navigate our recovery, we are committed to being more transparent and helping you, the investment community, understand the drivers and underlying trends in our business.

While we work to navigate our recovery, we are committed to being more transparent and helping you the investment community understand the drivers and underlying trends in our business to this end. We included supplemental tables summarizing our key performance metrics in the earnings press release.

Speaker 1: To this end, we included supplemental tables summarizing our key performance metrics in the earnings press release. We believe this information will help you better understand the many key moving parts of our business.

We believe this information will help you better understand the many key moving parts of our business now I want to turn the call over to Joe to provide a detailed financial review of our third quarter results and our revised outlook for full year 2021, Joe. Thank you Jack and thanks to everyone for joining the call today in addition to <unk>.

Speaker 1: Now I want to turn the call over to Joe to provide a detailed financial review of our third quarter results and our revised outlook for full year 2021. Joe. Thank you, Jack, and thanks to everyone for joining the call today. In addition to reviewing our third quarter results and our revised 2021 guidance, I'll provide perspective on our long-term financial business model.

<unk>, our third quarter results and our revised 2021 guidance I'll provide perspective on our long term financial business model.

Speaker 1: Net operating revenue in the third quarter of 2021 was 159 million, a 7% increase year over year from 149 million in the third quarter of 2021.

Net operating revenue in the third quarter of 2021 was $159 million, a 7% increase year over year from $149 million in the third quarter of 2020.

Speaker 1: Our net patient revenue was 142 million, which increased 6.8% year over year, while other revenue was 17 million, increasing 8.2% year over year.

Our net patient revenue was $142 million, which increased six 8% year over year, while other revenue was $17 million, increasing eight 2% year over year.

Speaker 1: As Jack mentioned, visits per day per clinic for the quarter was 23.1, which sequentially decreased 1.2 visits per day from 24.3 in the second quarter.

As Jack mentioned visits per day per clinic for the quarter was $23, one which sequentially decreased 1.2 visits per day from $24 three in the second quarter.

Speaker 1: Now while the third quarter is typically lower than the second quarter due to seasonality, by approximately one visit per day we were expecting the third quarter to increase.

Now while the third quarter is typically lower than the second quarter due to seasonality by approximately one visit per day, we were expecting the third quarter to increase.

Speaker 1: as we continue to ramp our business back to normal clinic level volume.

As we continue to ramp our business back to normal clinic level volume.

Speaker 1: that quarter over quarter decline was due to a combination of factors, including physician referral volume softening, combined with lower labor productivity in the third quarter as we on boarded many new hires.

The quarter over quarter decline was due to a combination of factors, including physician referral volume softening combined with lower labor productivity in the third quarter as we on boarded many new hires.

Speaker 1: Visits per day per clinic was 20.8 and 30 in the third quarter of 2020 and 2019 respectively, with 2020 significantly impacted by COVID and as mentioned 2019 representing our clinic level operations had normal capacity utilization.

Visits per day per clinic was 28 and 30% in the third quarter of 2020 in 2019, respectively with 2020 significantly impacted by Covid and as mentioned 2019, representing our clinic level operations at normal capacity utilization.

Speaker 1: The rate per visit during the second quarter was 105.56, sequentially decreasing 0.7% from 106.26 in the second quarter. There was no notable change in pair mix in the third quarter compared to the second quarter. And in a normal year, the rate per visit will vary within plus or minus 1% quarter to quarter.

Rate per visit during the second quarter was $105 56 sequentially decreasing <unk>, 7% from $106 26 in the second quarter.

There was no notable change in payer mix in the third quarter compared to the second quarter and in a normal year the rate per visit will vary within plus or minus 1% quarter to quarter.

Speaker 1: Our rate per visit was 112.51 and 111.21 in the third quarter of 2020 and 2019 respectively.

Our rate per visit was $112 51, and 111 21 in the third quarter of 2020 in 2019, respectively.

Speaker 1: When comparing to prior years, payer mix shifted from higher paying categories of workers' compensation and auto personal injury to commercial and government.

When comparing to prior years.

They're mix shifted from higher paying categories of workers' compensation and auto personal injury to.

The commercial and governmental.

Speaker 1: In addition, state mix shifted towards lower reimbursing states, in part driven by continued diversification of our geographic footprint.

In addition.

State mix shifted towards lower reimbursing state in part driven by continued diversification of our geographic footprint.

Speaker 1: Finally, the 2021 Medicare physician fee schedule reimbursement rate for PT was approximately 3% lower than 2020 and 2019 rates.

Finally, the 2021 Medicare physician fee schedule reimbursement rate for PT was approximately 3% lower than 2020 and 2019 rates.

Speaker 1: salaries and related costs in the third quarter of 2021 was 87 million.

Salaries and related costs in the third quarter of 2021 was $87 million in it.

Speaker 1: an 11.3% increase year over year from $78 million in Q3 of 2020.

11, 3% increase year over year from $78 million in Q3 of 2020.

Speaker 1: salaries and related costs per visit during the quarter were $64.62, sequentially increasing 10.2% from $58.62 in the second quarter of 2021.

Salaries and related cost per visit during the quarter were $64 62 sequentially, increasing 10, 2% from $58 62 in the second quarter of 2021.

Speaker 1: During the third quarter, we implemented a range of actions in response to the feedback received from our clinical staff.

During the third quarter, we implemented a range of actions in response to the feedback received from our clinical staff.

Speaker 1: In addition to adding to the support structure in the clinics across our footprint, the quarter over quarter cost increase was also partly driven by identified wage inflation in certain pockets of the country.

In addition to adding to the support structure in the clinics across our footprint the COO.

Order over quarter cost increase was also partly driven by identified wage inflation in certain pockets of the country.

Speaker 1: Salaries and related costs per visit were slightly improved from the third quarter of 2020 and 2019, which had costs of $66.12 and $65.34, respectively.

Salaries and related cost per visit were slightly improved from the third quarter of 2020, and 2019, which had cost of 66, 12 and $65 34, respectively.

Speaker 1: In addition to market compensation levels, this expense is also correlated with labor productivity, which is measured using visits per clinical FTE per day.

In addition to market compensation levels. This expense is also correlated with labor productivity, which is measured using visits per clinical FTE per day.

Speaker 1: Rent, clinic supplies, contract labor, and other, in the third quarter, with 46 million, a 16.8% increase year-over-year from 39 million in Q3 of 2020.

Rent clinic supplies contract labor and other in the third quarter was 46 million, a 16, 8% increase year over year from $39 million in Q3 of 2020.

Speaker 1: On a per clinic basis, rent and other costs during the quarter was approximately $51,000, sequentially increasing 2.9% from approximately $50,000 in the second quarter.

On a per clinic basis rent and other costs during the quarter was approximately 51000 sequentially, increasing two 9% from approximately 50000 in the second quarter.

Speaker 1: The quarter over quarter increase was primarily due to greater use of contract labor in order to alleviate workload as we filled open positions.

The quarter over quarter increase was primarily due to greater use of contract labor in order to alleviate workload as we filled open position.

Speaker 1: Rent and other costs per clinic was approximately $45,000 and $52,000 in the third quarter of 2020 and 2019 respectively.

Rent and other costs per clinic was approximately 45050 2000 in the third quarter of 2020 and 2019, respectively.

Speaker 1: In addition to annual inflation, variations in this category are mostly attributable to contract labor in a particular year.

In addition to annual inflation.

<unk> in this category are mostly attributable to contract labor in a particular year.

Speaker 1: Provision for doubtful accounts in the third quarter of 2021 was 4 million or 2.2 percent of revenue and has remained consistent with historical levels when considering the third quarter of 2020 and 2019 at 2 and 2.6 percent respectively.

Provision for doubtful accounts in the third quarter of 2021 was $4 million or two 2% of revenue and has remained consistent with historical levels when considering the third quarter of 2020 and 2019 at two and two 6% respectively.

Speaker 1: SG&A in the third quarter of 2021 was 31 million, an 18.3% increase year over year from 26 million in Q3 of 2020.

SG&A in the third quarter of 2021 was $31 million.

And 18, 3% increase year over year from $26 million in Q3 of 2020.

Speaker 1: The increase was mostly driven by higher one-time transaction costs, consulting costs, and D&O insurance costs under a public company structure.

The increase was mostly driven by higher one time transaction costs consulting costs and D&O insurance costs under our public company structure.

Speaker 1: Impairment charges recorded in the third quarter of 2021 were $300 million for goodwill and $201 million for our trade name, both non-cash charges.

Impairment charges recorded in the third quarter of 2021 were 300 million for goodwill and $201 million for our trade name both noncash charges.

Speaker 1: We recorded impairment charges equal to the difference between the estimated fair value and carrying value for these intangible assets, primarily due to the revised forecast, along with the price of our stock as of the valuation.

We recorded impairment charges equal to the difference between the estimated fair value and carrying value for these intangible assets, primarily due to the revised forecast along with the price of our stock as of evaluation date.

Speaker 1: Operating loss in the third quarter of 2021 was 509 million decreasing year over year from income of 2 million and Q3 of 2020.

Operating loss in the third quarter of 2021 was 509 million decreasing year over year from income of $2 million in Q3 of 2020.

Speaker 1: Notable below the line items in the third quarter, included decrease in the fair value of certain liabilities acquired in connection with our business combination, specifically warrants and contingent common chairs.

Notable below the line items in the third quarter include a decrease in the fair value of certain liabilities acquired in connection with our business combination.

Physically warrants and contingent common shares.

Speaker 1: The mark-to-market fair value adjustment was based on evaluation analysis of September 30th and resulted in a gain of 162 million dollars.

The Mark to market fair value adjustment was based on evaluation analysis as of September 30, and resulted in a gain of $162 million.

Speaker 1: Income CAC's benefit recorded during the quarter was 29 million, increasing year over year from expense of 2 million in the third quarter of 2020.

Income tax benefit recorded during the quarter was $29 million increasing year over year from expense of $2 million in the third quarter of 2020.

Speaker 1: The income tax benefit in the third quarter of 2021 was primarily driven by the income tax impact of the non-cash goodwill and intangible asset impairment charges.

The income tax benefit in the third quarter of 2021 was primarily driven by the income tax impact of the noncash goodwill and intangible asset impairment charges.

Speaker 1: partially offset by an increase in evaluation allowance related to federal NOLs, state NOLs, and state credit.

Partially offset by an increase in evaluation allowance related to federal Nols State Nols and state credits.

Speaker 1: Net loss in the third quarter of 2021 was $326 million, decreasing year over year from net income of $1 million in Q3 of 2020.

Net loss in the third quarter of 2021 with $326 million decreasing year over year from net income of $1 million in Q3 of 2020.

Speaker 1: And adjusted even in the third quarter of 2021 was 9 million or a 5.4 percent margin, decreasing year over year from 17 million or 11.7 percent margin in Q3 of 2020, excluding CARES Act funds.

And adjusted EBIT in the third quarter of 2001 was $9 million or five 4% margin.

Decreasing year over year from $17 million or 11, 7% margin in Q3 of 2020, excluding cares Act funds.

Speaker 1: CAST U in the third quarter was 24 million, which included five million repayment in connection with the Medicare Advanced Payment Program compared to CAST generation of 12 million in the third quarter of 2020.

Cash use in the third quarter was 24 million, which included $5 million repayment in connection with the Medicare advanced payment program compared to cash generation of $12 million in the third quarter of 2020.

Speaker 1: Available liquidity at September 30 was $135 million, which was comprised of $66 million in cash and cash equivalents and $69 million in available undrawn revolver capacity.

Available liquidity at September 30 was $135 million.

Which was comprised of $66 million in cash and cash equivalents and $69 million and a value available undrawn revolver capacity.

Speaker 1: Our revolving credit facility has a springing covenant whereby our leverage ratio, as defined by the credit agreement, may not exceed 6.25 times if the revolver is greater than 30% drawn on the last day of each quarter.

Our revolving credit facility has a springing covenant.

By our leverage ratio as defined by the credit agreement may not exceed six five times.

The revolver is greater than 30% drawn on the last day of each quarter.

Speaker 1: Thus, liquidity at the end of the third quarter considering revolver availability without triggering the need to test the financial covenant was 87 million, made up of 66 million in cash and 21 million from the revolver.

Dos liquidity at the end of the third quarter, considering our revolver availability without triggering the need to test the financial Covenant was $87 million made up of $66 million in cash and 21 million from the revolver.

Speaker 1: It is important to note that the leverage ratio under our credit agreement for the third quarter of 2021 was approximately 4.1 times.

It is important to note that the leverage ratio under our credit agreement for the third quarter of 2021 was approximately four one times.

Speaker 1: On October 19th, we moward our full year revenue guidance to a range of 620 million to 630 million from the prior range of 640 million to 670 million.

On October 19th we lowered our full year revenue guidance to a range of $620 million to $630 million from the prior range of $640 million to $670 million.

Speaker 1: At the same time, we also revised full year adjusted EBITDA guidance to a range of 40 to 44 million from the prior range of 60 to 70 million.

At the same time, we also revised full year adjusted EBIT guidance to a range of 40% to $44 million.

From the prior range of $60 million to $70 million.

Speaker 1: The reduction in guidance was prompted by softer visit volumes experienced during the third quarter, compared to previous guidance, which anticipated continued visit growth in both the third and fourth corners of 2021.

The reduction in guidance was prompted by softer visit volumes experienced during the third quarter compared to previous guidance.

Which anticipated continued visit growth in both the third and fourth quarters of 2021.

Speaker 1: The revised guidance assumes visit volumes in Q4 improve marginally at the high end of the range and implies the margin of the climb in visit volumes at the low end of the range.

The revised guidance assumes visit volumes in Q4 improved marginally at the high end of the range in.

And implies a marginal decline in visit volumes at the low end of the range.

Speaker 1: As Jack mentioned, while visit volumes in some of our markets continue to lag pre-pandemic levels and have not met our expectations,

As Jack mentioned, while visit volumes in some of our markets continue to lag pre pandemic levels and have not met our expectations.

Speaker 1: Referrals are outpeacing our clinic capacity in other markets.

Referrals are outpacing our clinic capacity in other markets.

Speaker 1: As such, we continue to target new clinic openings between 55 to 65 for the first time.

As such we continue to target new clinic openings between 55% to 65 for the full year.

Speaker 1: Finally, to help understand how we plan to deliver earnings as we navigate the current environment, I'd like to walk through a simplified financial model based on the supplemental key performance metrics presented in our third quarter 2021 earnings release.

Finally.

Help understand how we plan to deliver earnings as we navigate the current environment.

I'd like to walk through a simplified financial model based on the supplemental key performance metrics presented in our third quarter 2021 earnings release.

Speaker 1: The principal driver of our business profitability in the near term is increasing visit volume in order to scale the business and leverage fixed costs.

The principal driver of our business profitability in the near term increase in visit volume.

In order to scale, the business and leverage fixed costs.

Speaker 1: We invested in past years to establish the HCI brand, both in consumer and labor markets, and to build a premier corporate platform that can support a much higher number of clinics than we currently have.

We invested in past years to establish the ATI brand, both in consumer and labor markets and to build a premier corporate platform that can support a much higher number of clinics and we currently have.

Speaker 1: As Jack laid out, our immediate focus is to drive visit volume in order to move our overall clinics closer to fiscal year 2029 2019 capacity utilization. To illustrate the financial impact of COVID-19 on our Doors, especially those with no access to fucking water screen rooms, we adopted these two cover things at over 100 may of 2019. These includeator gelatin filters to measure the amount at hand when reckless acknowledged at this time of normal hours by Chan getting to the fuckin tip of your head. These filters were then delivery tubes storefronts they built to shift policy on thenerFatindependence58 and that cubes to see thewpestown edges at that point.

As Jack laid out our immediate focus is to drive visit volume in order to move our overall clinics closer to fiscal year 2029, 2019 capacity utilization.

To illustrate the financial impact of increasing visits.

Speaker 1: Our contribution profit in the third quarter of 2021, IE, our rate per visit, less salaries and related costs, with $40.94.

Our contribution profit in the third quarter of 2021, I E. Our rate per visit less salaries and related costs was $40 94.

Speaker 1: With 23.1 visits per day per clinic in the third quarter, we generated adjusted EVA of 9 million and adjusted EVA to margin of 5%

With $23 one visits per day per clinic in the third quarter, we generated adjusted EBITDA of $9 million and adjusted EBITDA margin of 5%.

Speaker 1: Were we running at our fiscal 2019 average clinic capacity utilization of 30 visits per day?

Where are we running at our fiscal 2019 average clinic capacity utilization of 30 visits per day.

Speaker 1: all other unit economics being equal, we would have generated an adjusted EBIT of 29 million and an adjusted EBIT of margin of 14 percent.

All other unit economics being equal we would have generated adjusted EBIT of $29 million and an adjusted EBITDA margin of 14%.

Speaker 1: Once our operations are optimized within a local market, then the driver value becomes scaled growth by increasing density with opening nearby de novos and entering new marks.

Once our operations are optimized within a local market than the driver of value becomes scaled growth by increasing density with opening nearby de novo's and entering new markets.

Speaker 1: In the medium to longer term, we're focused on increasing rate per visit, primarily through our mix of payers and the states in which we are.

In the medium to longer term, we're focused on increasing rate per visit primarily through our mix of payers and the states in which we operate.

Speaker 1: Additionally, the long-term value prop for business models to earn higher rates through CMS MIPS, outstanding outcomes, and other commercial avenues.

Additionally, the long term value prop for our business model is to earn higher rates through CMS nips outstanding outcomes and other commercial avenues.

Speaker 1: rate per visit is a critical driver of earnings, as nearly 100% of the change flows straight through to adjusted EBITDA. Deals rate Tony

Rate per visit is a critical driver of earnings is nearly 100% of the change flow straight through to adjusted EBITDA.

It illustrates the financial impact of rates.

Speaker 1: If I continue under the previous example, but we assume that the rate per visit to the $110 compared to our Q3 rate of 105 56, we would have generated a just a bit of 37 million and an adjusted even a margin of 17%.

I continue under the previous example, but we assume that the rate per visit of $110 compared to our Q3 rate of $105 56, we would have we would have generated adjusted EBIT of $37 million and an adjusted EBITDA margin of 17%.

As we restore visit volume in our clinics, we intend to continue including the supplemental tables of key performance metrics in our earnings releases each quarter to provide greater clarity and line of sight into our business.

With that I'd like to turn the call back over to Jack.

Thanks, Joe and before we open it up to questions I'd like to take a moment to again recognize our nationwide team across our 900 <unk> and in our corporate office for their hard work dedication to deliver on the ATI brand.

While we have a lot of blocking and tackling work ahead of US. We also have great people and a great platform to get that job done we remain excited about our prospects in the physical therapy sector and where the company is headed.

Speaker 2: We remain excited about our prospects in the physical therapy sector and where the company is headed. With that, we'll open the line for Q&A.

With that we'll open the line for Q&A.

Speaker 3: Thank you. At this time, I would like to remind everyone in order to ask a question, please press the star one on your telephone keypad. We have your first question from Chris Night & Night, we'll be looking at your up ? on and feet side by side.

Thank you at this time I would like to remind everyone in order to ask a question. Please press star one on your telephone keypad we.

We have your first question from <unk> <unk> with Jefferies. Your line is open.

Speaker 4: Hey guys, thanks for the questions and appreciate all the colors today. I'd like to touch on your referral sources. Can you just update on why you're hearing from them? And the last quarter you mentioned referrals were strong. And there's this inability to meet the man. But then commentary on the pre-release and the release today kind of suggested otherwise. So I want to know a little more about there. So has there been any change for the strength of these relationships as we think about nutrition issues?

Hey, guys Thankfully costs had been appreciate all the color today.

Touch on your referral sources can you give us an update on what you're hearing from them in the last quarter, you mentioned referrals were strong.

Inability to meet demand, but then commentary in the pre release in the release today kind of suggested otherwise so want to know a little more to bear. So has there been any change to the strength of these relationships as we think about attrition issue.

Speaker 4: potentially having more of a negative impact on patient continuity. And then maybe if you could give us the cadence of how that evolved over the quarter and where you're at today.

Potentially having more of a negative impact on patient continuity and then maybe if you could give us the cadence of.

How that evolved over the quarter and where youre at today.

Speaker 2: Sure, this is Jack. So let me maybe take that question in reverse order and I might dish out.

Sure.

As Jeff So let me maybe take that question in reverse order and I might.

Speaker 2: some of the response to my colleagues here. So everything is at a point in time. And at the point in time where we had our last earnings call, we were looking at the KPIs now that you see in our supplemented materials, looking at our recovery rate on both visits and referrals using 2019 as the base. And through really late May and into June ,

Out.

Some of the response to my colleagues here so.

Everything is at a point in time and at the point in time, where we had our last earnings call. We were looking at the COO.

<unk> now that you see in our in our supplemental materials looking at our recovery rates on both visits and referrals using 2019 as the base and through really late may and into June.

Speaker 2: Overlaying our actual performance against our plan, which was a plan to be at our 2019 levels, was actually sort of a nice overlay. We really felt like we were tracking along to get back to 2019 levels.

Overlaying, our actual performance against our plan, which was planned to be at our 2019 levels was actually sort of a nice overlay. We really felt like we were tracking along to get back to 2019 levels at that point in time, we said Gee.

Speaker 2: At that point in time we said, gee, we're experiencing some attrition. We look at our replacement needs for therapists. We looked at the prospective growth that was embedded in our second half forecast and felt like we had to alert our shareholders and our owners that there might be a disconnect with our ability to hire to match our growth.

We're experiencing some attrition we look at our replacement needs for therapists, we looked at the prospective growth that was embedded in our second half forecast and felt like we had to.

Alert.

Our shareholders are owners that there might be a disconnect with our ability to hire to match our growth and that was really the initial sort of catalysts to our first earnings reduction.

Speaker 2: And that was really the initial sort of catalyst to our first earnings reduction.

Speaker 2: I think right behind that what happened, as you'll see in our numbers, our visit volume softened over the summer. We strengthened our hiring capabilities and feel very good about where we are.

Right behind that what happened as Youll see in our numbers our visit volume softened over the summer we strengthened our hiring capabilities and feel very good about where we are.

Speaker 2: with our visit run rate and our ability to hire and retain. Now, unfortunately, as Joe pointed out in his model, the visit volume that we currently have is not where we wanna be. So that's the reason why we're really working hard to build sales capacity and to really build back the referral model that we enjoyed back in previous years. I'll say, is the referral model broken? I don't think so.

With our visit run rate and our ability to hire and retain now Unfortunately as Joe pointed out in his model.

Is it volume that we currently have is not where we want to be.

So that's the reason why we are really working hard to build sales capacity and to really build back the referral model that we enjoyed back in previous years I would say is the referral model broken I don't think so.

Speaker 2: As I said in my prepared comments, around the country, there are.

As I said in my prepared comments around the country. There are markets Big markets key markets, where we are at or above our pre COVID-19 referral and visits per day volume and then there are markets primarily in the upper Midwest that are key markets for us that.

Speaker 2: big markets, key markets where we are at or above our.

Speaker 2: pre-COVID referral and visits per day volume. And then there are markets primarily in the upper Midwest that are key markets for us that we haven't kept up to speed with pre-COVID levels. So I don't think it's a question of impaired referral model system-wide.

We haven't kept up to speed with pre COVID-19 levels. So I don't think it's a question of impaired referral model system wide I think it's more of a.

Speaker 2: more of a part of the healthcare, especially kind of a local rash. And we've got to really get after those relationships again. The way we're doing that is on the consumer side, beating up our digital marketing capability, and then on the referring.

If you'll pardon the health care, especially with kind of a local rash and we've got to really get after those relationships again the way we're doing that is on the consumer side beefing up our digital marketing capability and then on the referring.

Speaker 2: professional side, reinvesting and building back our field Salesforce, our practice park.

<unk> side, reinvesting and building back our our field sales force or our practice partner model.

Speaker 4: got it and then maybe it's just a follow up to that you type on some of the bright spots in referral volumes. You can talk about your confidence and being able to drive referral in across the portfolio with your commercial team. Maybe to help us understand how you think about the therapist versus sales or relationship and securing referrals.

Got it and then maybe just a follow up to that you touched on some of the bright spots in referral volume can you talk about your confidence in being able to drive referral wins across the portfolio with your commercial team maybe just help us understand how you think about the therapist versus sales rep relationships.

And securing referrals.

Speaker 2: Yeah, so let me tee this one up for Ryan. I do think there is.

Yes, So let me let me Tee this one up for Ryan I do think there is.

Speaker 2: very strong relationship between our practice partners and therapists and clinic directors since they're really both responsible.

A very strong relationship between our practice partners and therapists in clinic directors since Theyre really both responsible for that sort of wherever their geography is for their for their business volume and Ryan why don't you take the yes, So Ryan Wilson here Chief commercial officer, So Chris Thanks for that.

Speaker 2: for that sort of wherever their geography is for their business volume. Ryan, why don't you take the rest of the floor.

Speaker 2: Yeah, so Ryan Wilson here Chief Commercial Officer. So Chris, thanks for the question. As we, first of all, there's a very tight correlation between referral volume and visit volume when it comes when we've looked at any staffing model changes at the clinic level. So part of rebuilding referral is to make sure that we've got the quality of clinical staff in the clinics to be able to perform and then how we correlate that as confidence back into the referral sources. Does

<unk> is first of all there is a very tight correlation between referral volume in visit volume when it comes when we've looked at.

And the staffing model changes at the clinic level. So part of rebuilding referral is to make sure that we've got the quality.

Clinical staff in the in the clinics to be able to perform and then how do we correlate that as confidence back into the referral sources to Jack's point, we are making.

Speaker 2: We are making a very significant investment. As we start to look at bringing back those fails folks, as the model has changed and we come off of what looks like a post-COVID where we're back to calling live on doctors in many of the markets, not all. We're making sure we adjust our model to do that. And so yes, we do have high confidence as we do that as we see the correlation. What we're starting to see is referral volume continuing to grow, which we know is a leading indicator on performance. We're going to have to continue to expand that model as we go. Your point is a great one about...

A very significant investment as we start to look at bringing back those sales folks as the model has changed and we come off of what looks like a post COVID-19, where we're back to calling a live on doctors and many of the markets not all.

We're making sure we adjust our model to do that and so yes, we do have high confidence as we do that as we see the correlation what we're starting to see is referral volume continuing to grow which we know is a leading indicator on performance. So we feel very good as we do this but we will have to continue to staffing to expand that model as we go.

Your point is a great one about the.

Speaker 5: the

Speaker 1: the calling on referring physicians in a joint way with a practice relationship partner as well as somebody who is more clinically oriented. That's an important conversation for a referring physician they have as opposed to somebody just showing up and having a conversation. So that's how we're gearing up our calling up.

Calling on referring physicians in a joint way with a practice relationship partner as well as somebody who is more clinically oriented thats an important conversation for a referring physician to have as opposed to <unk>.

Somebody just showing up and having those conversations so that's how we're gearing up our are calling model.

Speaker 4: That's very helpful. And then one more if I can, and I'll hop back into Key. I'm just interested in the changes you implemented to your comp and benefits packages. Can you pack exactly what exactly those were and your expectations for that to gain traction? Are you getting sort of any sort of initial feedback or finding that it's been a key lever in hiring efficiency?

That's very helpful. And then one more if I can.

And I'll hop back in the queue, just given the changes you've implemented to your comp and benefit packages can you unpack exactly what exactly those were and your expectations for that to gain traction are you getting sort of any sort of initial feedback is finding a it's been a key lever in hiring efficiency.

Speaker 1: So I think we're getting very strong, very clear, very positive feedback that the moves we have done to reverse course on some of those complex workplace policy issues have been not only successful in retaining our current team, but also recruiting new as well as re-recruiting people who had left us.

So I think we're getting very strong very clear very positive feedback that the moves we have done to.

Reverse course on some of those comp and workplace policy issues have been.

Not only successful in retaining our current team, but also recruiting new as well as re recruiting people who had left us.

Speaker 1: at some point in the past to bring them back into our clinical full, but I think I'll turn this one over, Gure.

At some point in the past to bring them back into our clinical full but I think I'll turn this one over to Ray.

Speaker 2: Yeah, I think we've done a really nice job ensuring that people are being comped appropriately and fairly. There has been a lot of movement over the past 12, 18 months.

Yes, I think we've done a really nice job ensuring that people are being comped appropriately and fairly if there has been a lot of movement over the past 12 to 18 months.

Speaker 2: and we've made adjustments and I think the field appreciates that. I think more importantly along with those salary benefit changes, we've also focused and made a lot of changes on the support around the provider, ensuring that the providers have the right amount of support so they don't have to worry about admin work they can do and treat patients which they're truly passionate about.

And we've made adjustments and I think the field depreciates that I think more importantly, along with those salary benefit changes. We've also focused and made a lot of changes on the support around the provider ensuring that the providers have the right amount of support so they don't have to worry about admin work they can do in and treat patients.

<unk>, which they are truly passionate about and then some of the other changes you mentioned salary, but benefits also around the programs that we provide to our providers to make sure that they have the ability to.

Speaker 2: And then some of the other changes, you mentioned salary but benefits also are around the programs that we provide to our providers to make sure that they have the ability to...

Speaker 2: continue to work on their skills, continue education, and make sure they feel like that we're investing in them and giving them the right tools to do, again, what they truly like, and are there for us to treat patients. So I think all of that combines is helped not only make us an attractive employer, but also help with some of the attrition issues that we were talking about.

We will continue to work on their skills, continuing education and make sure they feel like that we're investing in them and giving them the right tools to do again, what they truly like and are therefore is to treat patients. So I think all of that combines has helped not only make us an attractive employer, but also help with some of the attrition issues that we were talking about.

Q3.

Speaker 1: Hey Chris, it's Joe. I'll just kind of jump in more specifically to your question on my cost piece of it. You'll see or saw on the KPIs we've laid out our labor cost per visit going back every quarter through 2019 to today. There is a cost increases as a result of some of the actions that Ray talked about. If we look quarter over quarter, Q2 to Q3, you can see that cost increases about 10%. Now there's two components. One is changes that we've made, which certainly add to the cost.

Chris It's Joe I'll, just kind of jumping more specifically to your question on the cost piece of it.

You see or saw in the Kpis, we've laid out our labor cost per visit going back every quarter through 2019 to today.

There is a cost increase as a result of some of the actions that ray talked about if we look quarter over quarter Q2 to Q3, you can see that cost increase is about 10% now there's two components. One is changes that we've made which certainly add to the cost but the other piece of that line item as I mentioned in the call script today is productivity of clinicians.

Speaker 1: But the other piece of that line item, as I mentioned in the call script today, is productivity of clinicians. And you'll see as we onboard new staff in Q3, as they sort of ramp up their case load, the productivity has come down. And so as those clinicians continue to onboard, continue to...

Then you'll see as we onboard new staff in Q3, as they sort of ramp up their case load the productivity has come down and so as those clinicians continue to on board continue to sort of build their case load that labor cost per visit we would expect to come down a bit as we move forward.

Speaker 1: sort of build their case load on that labor cost per visit we would expect to come down a bit as we move forward. I think the data is there.

I think the data is there that help you.

Understand that.

Speaker 4: Yeah, that's helpful. Thanks a lot guys. Next question.

Yes, that's helpful. Thanks, a lot guys.

Next question.

Speaker 3: We have your next question from Larry Solow with CJS Securities. Your line is open.

We have your next question from Larry Solow with CJS Securities. Your line is open great.

Speaker 6: great good afternoon guys thanks for taking the questions just curious you mentioned the midwest and northwest

Great. Good afternoon, guys. Thanks for taking the question just curious you mentioned the Midwest and northwest.

Speaker 6: markets were somewhat weaker for you guys. Anything typically striking there, more labor constraints, perhaps higher COVID incidence perhaps during this period that sort of stopped the momentum. And also part to that question, do you feel like you're losing market share in some of these areas?

Markets were somewhat weaker.

So you guys.

Particularly striking there more labor constraints.

Yes.

Perhaps.

Higher Covid instance, perhaps during this period.

Stop.

Mentum.

And also part of your question do you feel like Youre, losing market share in some of these areas.

Yes, so soliris Jack.

Yes.

Speaker 1: You know, the the challenges we've had in some of our Midwest markets primarily have been, I won't say intractable, but they've been with us for, for, you know, a year or two, you know, arguably a little bit longer. And, and I hate, I hate to pin things on COVID, because things like everything is all to COVID lately. But, you know, yeah, I'd say some of the markets were more locked down, and perhaps some of our southeast markets that snap back a little quicker than others.

The challenges we've had in some of our Midwest markets primarily.

Ben.

Won't say intractable, but they've been with us for for.

Our year to arguably a little bit longer and I hate I hate to pin things on Covid, because it seems like everything is Baltic Covid lately.

I would say some of the markets, where more locked down and perhaps some of our southeast markets that snapped back a little quicker than others.

Speaker 1: But I think in the Midwest, to your question about market share, I think some competitors have sort of outflanked us in certain of our market.

But I think in the in the Midwest to your question about market share I think some competitors have sort of outflanked us in certain of our markets.

Speaker 1: Some of our larger historical referral sources have gone vertical and taken in physical therapy into their own practices. So I wouldn't pin it on one thing. Wouldn't pin it on COVID. I think it's sort of a systemic thing. And that's not to say there's nothing we can do. But I think the the swab will be a little more challenging in those Midwest states. I'm pretty confident we'll be able to improve our position. But

Some of our larger historical referral sources have gone vertical and taken in physical therapy into their own practices. So I wouldn't pin it on one thing wouldn't pin it on Covid I think it's sort of a systemic thing and that's not to say there is nothing we can do but I think the slug will be a little more challenging in those Midwest.

I'm pretty confident we'll be able to improve our position but.

Speaker 1: There are some systemic things that have gone on more than just a six month in attention.

There are some systemic things that have gone on more than just a six month and attention due to COVID-19.

Speaker 6: right and you mentioned the sort of the referral model if it's not impaired um... you know hopefully you know maybe it's not currently paired but that does perhaps you know it does sound like there is some damage there and in terms of you know you'd less court you go to school that had count and now your and maybe a couple quarters behind um... but but uh... i'm just wary of the the sort of had count delay when you know and roll into your furls and once you lose a referral maybe very hard to get that back so just try to you

And you mentioned sort of the referral model, it's not impaired.

Maybe it's not permanently impair, but does perhaps it does sound like there is some damage there in terms of.

Last quarter, you guys spoke about head count and how you are and maybe a couple of quarters behind.

I'm just wondering does this.

Sort of head count delay enroll into your referrals and once you lose a referral maybe it's very hard to get that back so just shut off.

Speaker 6: Could that be really impacted in some areas of the country?

Could that be severely impacted and some areas of the country Hill's.

So.

Speaker 1: Yes, I mean, it doesn't referrals don't come back without a little bit of elbow grease. And we think we've got a good fix on what needs to be done. I think our view of what we need to do on referrals to...

Yes, I mean, it doesn't referrals.

Some back without a little bit of elbow grease, and we think we've got a good fix on what needs to be done.

I think.

Our view of what we need to do on referrals too.

Speaker 1: bring it back is really twofold. One is to make sure that when a referring will just use the simple analogy of a referring physician refers to one of our clinics that we've got the correct staff available and the kind of availability that that referring physician's patient needs.

Bringing it back is really twofold, one is to make sure that when a referring we'll just use a simple analogy of a referring physician refers to one of our clinics that we've got the COO.

Correct staff available and the kind of availability that that that referring physicians patient needs to get an appointment when it fits his or her scheduled so right you got to have got ahead capacity.

Speaker 1: to get an appointment when it fits his or her schedule. So, you gotta have capacity. And I'll ask Ray here in a minute to talk about where we're at in terms of available capacity and volumes and all that. But...

Great here in a minute to talk about where we're at in terms of available capacity and volumes and the like but it's also going out and building a relationship that is both clinical as well as support and I think that's sort of the two of the one two punch model that we're implementing like now in the field to go back and.

Speaker 1: It's also going out and building a relationship that is both clinical as well as support. And I think that's sort of the two of the one-two punch model that we're implementing like now in the field to go back and I hate to use the word repair, but get back in that referral flow if you will.

I hate to use the word.

Pair budd, but get back in that room that referral flow. If you will and I'll ask I'll ask Brian to talk about kind of what we did to ourselves during COVID-19 period, and where we are positioning our practice partner model for 2021, and certainly into 2022, So where do you want to jump on the first part of that.

Speaker 1: I'll ask Ryan to talk about kind of what we did to ourselves during COVID period and where we are positioning our practice

Speaker 1: A model for 2021 and certainly in 2022. So really you want to jump on the first part of that?

Speaker 2: Sure, so when we think about capacity at the platform level, across the board we do have capacity to see more volume currently.

Sure. So when we think about capacity at the platform level across the board, we do have capacity to see more volume currently.

Speaker 2: When you go another click down into specific markets, we have specific markets where we could see more volume with our current staff. We don't need any more staff, and we have bandwidth to see more. We also have select markets where we are actively hiring because we have really, really high demand. And we're working hard to ensure that we have the providers in the right clinics to satisfy the demand that we're seeing there. In terms of your point about staffing,

When you go another click down into specific markets, we are specific markets, where we could see.

More volume with our current staff, we don't need any more staff and we have bandwidth to see more we also have select markets, where we are actively hiring because we have really really high demand and we're working hard to ensure that we have the providers and the right clinics to satisfy the demand that we're seeing there.

In terms of your point about staffing it's been a tremendous focus of ours over the past several months and really excited about the changes that I mentioned earlier and some of the results that we're seeing and we've seen about three months of consistent growth FTE week over week. So.

Speaker 2: It's been a tremendous focus of ours over the past several months and really excited about the changes that I mentioned earlier and some of the results that we're seeing. And we've seen about three months of consistent growth FTE week over week. So, and OJAC mentioned in this formal comments, two ads for everyone exit. We continue to see really strong traction and ensuring that we have the right amount of staff, but we also have the right amount of staff in the proper mark.

And Jack mentioned in his formal comments to two ads for every one exit we continue to see really strong traction in ensuring that we have the right amount of staff, but we also have the right amount of staff and the proper markets. So that's been a focus of ours.

Speaker 2: So it's been a focus of ours.

Speaker 2: and I'll take the second point for Jack, which is really around the clinical confidence we're building with referral sources. And we do feel confident we're going down the right path as we do that. But it's a combination of race organization and mine. Number one, coming through COVID, we did reduce the sales force and we did that because most doctors offices were no longer having live conversations. And so to manage the business appropriately, we made some scale decisions around that. And coming out of that, we're moving as aggressively as possible, but not just to go back to how we cover the goal, but to make sure that we've got the right model that generates the demand that we want in our clinics. And as we continue to expand that, it's really the combination of the sales organization.

And I'll take the second point for Jack which is really around the clinical confidence we're building with referral sources and we do feel confident we're going down the right path as we do that but it's a combination of raise organization in mind.

Number one coming through Covid, we did reduce the sales force and we did that because most doctors' offices, we're no longer having live conversations and so.

To manage the business appropriately we made some scaled decisions around that and coming out of that we're moving as aggressively as possible, but not just to go back to how we cover all of that to make sure that we've got the right model that generates the demand that we that we want in our clinics and as we continue to extend that ensuring the combination of the sales organization and the local operators.

Speaker 2: and the local operators. What we've learned and it's a part of this type of business model is the confidence really comes from two levels. One is us as a brand and the 25 years we've been in business and the name that we built with ACI, which is great. But also locally how we operate and how we provide care in those.

We've learned and it's.

A part of this type of business model is the confidence really comes from two levels. One is us as a brand and the 25 years, we've been in business in the maintenance, we built ACI, which is great. But also locally how we operate and how we provide care and those those providers in our local clinics also drive a lot of that confidence and so as we are.

Speaker 2: those providers in that local clinics also drive a lot of that confident. And so as we bring new ones in, we're introducing those into doctors and we're rebuilding those new relationships. And that's just a part of the journey and we're very confident. But let me just maybe get that little conversation off.

Bring new London, we're introducing those into doctors and we're rebuilding those new relationships and Thats just a part of the journey and we're very confident with both let me just maybe kept that.

Little conversation off.

Speaker 1: Ray mentioned sequential improvement in

Ray mentioned.

Sequential improvement in retention and hiring our provider accounts have increased now fairly consistently I know you've got some data around referrals and visits sequentially, how theyre going would you would you mind, yes sure. So.

Speaker 1: retention and hiring, our provider counts have increased now fairly consistently. I know you've got some data around referrals and visits.

Speaker 1: sequentially how they're going. Would you mind? Yeah, sure. So when it as we think about coming out of Q3, we've seen consistent growth over the coming out of Q3 throughout in both visits per day and then hand in hand we've seen week-over-week growth in referrals as well. I mentioned earlier really excited about what we're seeing with

As we think about coming out of Q3, we've seen consistent growth.

Over the coming out of Q3 throughout in both visits per day, and then hand in hand, we've seen week over week growth and referrals as well I mentioned earlier really excited about what we're seeing with the clinical FTE counts.

Speaker 4: clinical FTE counts in terms of over three months of growth when you look at the amount of providers that we have. And again, that's important, but we're also excited to have the right providers in the right markets to satisfy the demand that we're seeing. So growth in FTE count, growth in referrals, which lead to growth in business visits, never fast enough. But I guess I would say not broken, maybe bent, but not broken. So still.

In terms of over three months of growth when you look at the amount of providers that we have and again that's important but we're also excited to have the right providers and the right markets to satisfy the demand that we're seeing so so growth in FTE count growth in referrals, which lead to growth in business visits.

Never fast enough, but I guess I would say not broken maybe bent, but not broken so.

Speaker 6: Fair enough, fair enough. I appreciate all the call. Thanks so much. But thank you. Next question.

Fair enough fair enough I appreciate that color. Thanks. So much. Thank you next question.

Speaker 3: We have your next question from Bill Soderland. Your line's open.

We have your next question from <unk>.

Your line is open.

Speaker 4: Thanks. Hey Jack and Joe. Hey, really appreciate the extra disclosure. Very helpful. So I'm back to the...

Hey, Jack and Joe.

I appreciate the extra disclosure.

Very helpful.

<unk>.

Back to the.

On particular out.

While some markets are doing better than others is there a urban rural split not rural but urban urban split.

Speaker 4: are doing better than others. Is there a urban, rural split, not rural, but urban, less urban split?

Speaker 1: I don't think it cleaves that way. Let me ask Ray to maybe give a little color on maybe what defines the market to be a little slower to recover, but not very what do you think?

I don't.

So I don't I don't think it cleaves.

That way.

Okay.

Let me ask Ray to maybe give a little color on <unk>.

Maybe.

What defines a market to be a little slower to recover but.

What do you think.

Speaker 2: I think about the markets and as they come back, particularly on the referral side.

As I think about the markets and as they come back, particularly on the referral side.

Speaker 2: Jack mentioned earlier, we've had markets where it's been a bit of a challenge for a period of time. And the first thing that comes to my mind is some of the vertical integration that we're seeing. Now that doesn't mean we don't call on those physicians anymore. We still want to make sure we have great relationships with them.

Jack mentioned earlier, we've had markets, where it's been a bit of a challenge for a period of time and the first thing that comes to my mind is some of the vertical integration that we are seeing now that doesn't mean, we don't call on those physicians anymore. We still want to make sure we have great relationships with them, we still want to make sure that we're in the right location that we're a solution and a resource for them so when they.

Speaker 2: So I want to make sure that we're in the right location, that we're a solution and a resource for them. So when they can't see their own patients, we're there to provide a great experience and a great outcome. But overall, I don't think it comes down to any type of urban, non-urban setting. I think it's more of every market a little bit different in terms of.

Can't see their own patients are there to provide a great experience and a great outcome, but overall I don't think it comes down to any type of urban non urban setting I think it's more of every market is a little bit different in terms of.

Speaker 2: is there a hospital system there versus a private outpatient physical therapy. So I think that's probably a little bit more and it's very granular. I mean, every single market has a different, uh, has a different new wants to it and some of the challenges that we're seeing. So it's kind of hard to put black and white. Right. I guess the broad, the broad takeaway though would be that year.

There are hospital systems, there versus private outpatient physical therapy.

So I think thats, probably a little bit more and it's very granular every every single market has a different.

A different nuance to it in some of the challenges that we're seeing so it's kind of hard to put black marks.

So I guess I guess, the broad broad takeaway, though would be that.

Year.

You may be.

Speaker 4: retrenched on field sales more than others, other competitors, and that's how to referral, that that's part of this referral issue, do you think?

Retrenched on steel sales more than others.

Other competitors and that's how the referral, but that thats part of this referral issue of Keybanc.

Speaker 1: I maybe even broaden your already broadening comment. I would say we took

Maybe even brought in and Youre already broadening comment I would say we took.

Measured.

Speaker 1: actions during the the deepest part of COVID to kind of batten down the hatches with administrative spending with sales team as as Ryan pointed out it's kind of hard to feel the sales team when they can't really you know go out and do what they're doing we temporarily

Actions during the the deepest part of Covid.

To kind of batten down the hatches with administrative spending with sales team is Ryan pointed out its kind of hard to feel the sales team when they can't really go out and do what they're doing.

We temporarily.

Speaker 1: reduced our clinical labor force. We tried to keep our point of access open with as many of our, at that time, 800 plus clinics as we could, but we reduced provider counts and keeping with fewer visits. So we did all of those things.

<unk>.

Reduced our clinical Labor force, we tried to keep our point of access open with as many of our at that time 800, plus clinics as we could but we reduced provider counts in keeping with fewer visits. So we did all of those things in order to run the best play we could not knowing exactly when a vaccine would be ready.

Speaker 1: in order to run the best play we could, not knowing exactly when a vaccine would be ready, how quickly the market would recover, when surgeries would be undertaken, and surgeries. We did all that.

How quickly the market would recover when surgeries would be undertaken and surgeries that we did all of that and I think.

Speaker 1: And I think I will second guess the decisions we made. I think the benefit of hindsight to your point.

Second guess the decisions, we made I think with the.

The benefit of hindsight to your point.

Speaker 1: perhaps there were some competitors who got off the starting line when Covid started to Unwine back in the spring and I think we were a little slower to get off that starting line and we're we're kind of playing catch up all now Okay, I would kind of say that's what we're at

Perhaps there were some competitors who got off the starting line when Covid started to unwind back in the spring and I think we were a little slow to get off that starting line and we're we're kind of playing catch up ball now, okay, I would say globally, where we're at.

Speaker 4: Do you think what was the quarantine level like for you guys as far as you're up?

Do you think.

What was the quarantine levels slide for you guys as far as your.

Speaker 4: clinicians and in the third quarter do you think it made a difference?

Clinicians and.

In the third quarter do you think you've made a difference.

Speaker 1: I'm about quarantined. Ready what? That would be...

I don't know about Korean team Ray.

Speaker 2: we had, I'm sorry, this is right. We had some pocket.

We had I'm sorry. This is rights, we had some pockets where COVID-19 played into our ability to treat but it was very small in the big scheme of things as you go all the way back to when this pandemic first started.

Speaker 2: where COVID played into our ability to treat, but it was very small. And in the big scheme of things, as you go all the way back to when this pandemic first started, pretty minute compared to us from other things that we've seen. So I wouldn't say that that really had a much of an end. Yeah, but keep in mind though, we did to this day early in COVID to this day, we've got some fairly...

Pretty.

Pretty minor compared to some other things that we've seen so I don't I wouldn't say that that really had much of an NDA.

Keep in mind, though.

This day early early in Covid to this date, we've got some fairly strict operating protocols as you might imagine with all clinical businesses masking up and.

Speaker 1: operating protocols, as you might imagine with all clinical businesses, you know, masking up and we're beginning now.

And we're beginning now to consider what the combination CMS on Osha regulations to go into effect come January 1st we'll do.

Speaker 1: consider what the combination CMS and OSHA regulations to go into effect come January .

Speaker 1: First, we'll do two are clinical teams. So that's another question Mark, we're wrestling. Can we build it? No, it's Joe. The only thing I'd add to that is while COVID certainly had some impact on the quarter, as we look at sort of month over month trends throughout the quarter and then even coming out of the quarter is where we talked about in October and in November , we see steady improvement in volume. And as we need progress,

Two our clinical teams. So that's sort of another question Mark for Wrestling, Hey, Bill It's Joe.

The only thing I'd add to that is while Covid certainly had some impact on the quarter as we look at sort of month over month trends throughout the quarter and then even coming out of the quarter as Ray talked about in October and in November we see steady improvement in volume.

And as we've made progress with.

Speaker 4: attrition right that that DPD improvement follows the same trend line. Yeah, I think there's certainly a correlation there that's not accidental.

Attrition rate that bpd improvement follows the same trend line.

There is certainly a correlation there thats not accidental.

Right.

Speaker 4: Jack, last one for me is what is the board of directors thinking relative to the open CEO position?

Jack last one for me.

What is the board of directors thinking relative to the open CEO position.

Speaker 1: Well, I can tell you it's a topic of conversation weekly. As I said in my prepare comments, we have reviewed a really interesting slate of candidates.

Well I can I can tell you, it's a topic of conversation weekly.

As I said in my prepared comments, we have reviewed a really interesting slate of candidates.

Speaker 1: We assess all of them, interview the fair fraction of them. And at least this board...

We've assessed all of them interviewed a fair fraction of them.

At least this board member.

Speaker 1: wants to make sure that we have the right back in the right person to leave this organization going forward. We think they're out there. We think there may be a winner, if you will, on the current.

Wants to make sure that we have the right spec and the right person to lead this organization going forward. We think we think they are out there. We think there may be a winner if you will on the current roster but.

Speaker 1: roster, but you know, we're working that every day. It's okay. I'm sorry. I had to cut the way during your prepare comments. And you've already touched on it. Okay. Yeah. We know we we we're we're down the road. I have to report, but you know, we're certainly working.

We're working that every day.

Okay, I'm, sorry, I had to step away during your prepared comments I know you've already touched on.

We're down the road.

We report, but we're certainly working it.

Speaker 7: Okay, thanks again. Okay, you bet. Thank you. Next question.

Okay. Thanks.

You bet. Thank you next question.

Speaker 3: Thank you. Again, if you would like to ask a question, please press star 1 on your telephone keypad. We have your next question from Mike Patevsky with Barrington Research Airlines Open.

Thank you again, if you would like to ask a question. Please press star one on your telephone keypad. We have your next question from Mike <unk> with Barrington Research. Your line is open.

Speaker 2: So the Q4 or the full year guide sort of implies a negative sequential revenue comp at the midpoint.

Alright, so the.

Q4 <unk>.

Full year guide sort of implies.

Negative sequential revenue comp at the midpoint and at worst adjusted EBITDA quarter of the year and I guess I'm trying to square that with some of the positive.

Speaker 4: Commentary that you're making around visit the PreFTE and referrals and all the hiring and and

Commentary that you're making around and visit per FTE and referrals.

The hiring.

And.

Hope that.

He may have reached a low point in terms of business per clinic.

Speaker 4: and just sort of speak to that as a conservatism, as that labor wage pressure, what's the reason for the...

Just sort of speak to that is that conservatism is that weight labor wage pressure, what what's the reason for that.

Adjusted EBITDA guide thanks.

Speaker 1: And I think this is probably Joe's warehouse. Yeah. Yeah. Hey, Mike. It's Joe. So on the revenue side of things, to your point, at the high end of the range, it implies a marginal improvement in visit volume. And at the low end of the range, it's a decline in visit volume. So to your point, the midpoint is probably a marginal decline in visit volume.

I think.

This is probably Jos wheelhouse, yet, yeah, Hey, Mike It's Joe So.

On the revenue side of things to your point at the high end of the range. It implies a marginal improvement in visit volume and at the low end of the range. It. It's a decline in visit volumes. So to your point the midpoint is probably a marginal decline in visit volume.

Speaker 1: in visit volume. As we looked at Q4 remainder of the year, we looked at

As we've looked at Q for remainder of the year, we looked at clinical FTE. Some of the key kpis clinical FTE visits referrals the visibility that we have and thought about the trends in developed overall developed a range that we were comfortable with.

Speaker 1: clinical FTE, some of the key KPIs, clinical FTE, visits, referrals, the visibility that we have and thought about the trends and developed, overall developed a range that we were comfortable with.

Speaker 1: as Jack talked about and Ryan and Ray talked about a little bit, we're making some investments in field sales and it'll take some time for those investments to pay off as those field sales members get out and reconnect with our referral sources. And...

As Jack talked about and Ryan and Ray talked about a little bit we're making some investments in field sales and it will take some time for those investments to pay off as those field sales members get out and reconnect with our referral sources and.

Speaker 1: until we see that payoff wasn't prudent for us given the situation we were in over the last two quarters to get too bullish on our overall projections.

In coal, we see that pay off wasn't prudent for us given the situation we were in over the last two quarters to get too bullish on our on our overall projections and Thats why we came up with the range that we did but but you didn't miss the optimistic.

Speaker 1: And that's why we came up with the range that we did. But you didn't miss the optimistic.

Speaker 1: view we have over the last, you know, intervening a couple of weeks or months about where our underlying KPIs are, but, you know, you adjust earnings down your whole for two if you're working to go over three. So you can read into that as well. Okay. Can you just comment, you know, the other publicly traded outpatient physical therapy company?

We have over the last intervening couple of weeks or month about where our underlying kpis are budd.

Adjusted earnings down year over to where we're going to go over three so you can read into that as well okay.

Can you just comment.

The other publicly traded.

Outpatient physical therapy company.

I think most others typically has some seasonality where theres a dip.

In Q1 versus Q4 is there any reason to believe you guys could actually show a sequential increase given sort of the.

Speaker 4: there is there any reason to believe you could you got to actually show up sequential increase given

Speaker 4: the low base or the likely you guys follow.

The low base or or is it likely you guys follow that seasonality as well.

Speaker 1: Yeah, Mike, I think at this range, it might be a little long to opine. I think we're heads down sharpening up our full year forecast for 2022. And then I'm a little reluctant to sort of leak information out on that one until we get the full picture. So great question. We certainly understand the seasonality. But if you could hold that one till we give some guidance, probably early next year, that'd be helpful.

Yes, Mike I think at this range it might be a little little long to opine I think we're we're heads down sharpening up our full year forecast for 2022, and then I'm a little reluctant to sort of leak information out on that one until we get the full picture so great question.

Help me understand the seasonality, but if you could hold that one till we give some guidance.

Early next year that it would be helpful.

Alright, Thanks, guys I appreciate it.

Speaker 3: I'm showing no further questions at this time. I would now like to turn the conference back to Mr. Jack Larson for any closing remarks.

I'm showing no further questions at this time I would now like to turn the conference back to Mr. Jack Larsen for any closing remarks.

Speaker 1: Well, the only closing remarks I have is thank you for your attention here. Thanks for continuing to follow us. I do think that we're seeing real positives in our business. I think we're navigating this company in the right direction, fixing the things that kind of came off the rails over the spring and summer. I think we've got a good fix on it. I'm confident in this team that we can do that. And

Well the only closing remarks I have is.

For your attention here, thanks for continuing to follow us.

Do think that.

We're seeing.

Real positives in our business I think we are navigating this company in the right direction fixing the things that.

Kind of came off the rails over the spring and summer I think we've got a good fix on it.

Confident in this team that we can do that.

And.

Speaker 1: I will continue the theme of transparency that we heard loud and clear after our second quarter earnings and we'll continue to dialogue as we move this business forward. So thank you so much, and we'll talk again soon.

We will continue the theme of transparency that we heard loud and clear after our second quarter earnings and we will continue to dialogue as we move this business forward. So thank you so much and we'll talk again soon.

Speaker 3: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now discuss.

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

Speaker 8: bachelor's day b university theatre.

Yes.

[music].

Okay.

Okay.