Q2 2022 US Physical Therapy Inc Earnings Call
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Good day, and thank you for standing by welcome to the U S. Physical therapy second quarter 2022 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session in order to ask a question. During this session. Please press the star keys.
Followed by the number one on your telephone keypad.
Please be advised that today's conference is being recorded if you require any further assistance. Please press star then zero I'd like to now turn the call over to Chris Reading President and CEO . Please go ahead Sir.
Thanks, Greg and good morning, and welcome everyone to U S. Physical therapy second quarter earnings call with me. This morning includes Carey Hendrickson, Chief Financial Officer, Eric Corium, and Graham Reeves co Chief operating officers, Rick Vince <unk>, our executive Vice President and General Counsel, John Blanchard, our assistant controller.
Sure.
Before we begin to review our quarter and year to date results I'll ask Jon to cover a brief disclosure Johnny. Thank you Chris. The presentation contains forward looking statements, which involve risks and uncertainties. These forward looking statements are based on the company's current views and assumptions the company's actual results may vary.
Materially from those anticipated please see the filings with the security and Exchange Commission for more information. Thank you Johnny.
Before I start with my prepared comments I just want to say this I mean I've seen the reaction. This morning I know this is a little bit of a disappointment.
We've seen that has gotten us through this.
The bulk of this pandemic in really good shape same team that's been together for a really long time, we have some really good things happening, which I'm going to talk about we're not however, unfortunately immune to the.
So the environment that we find ourselves in from an interest rate an inflationary perspective, but we're making our way through and I think we'll come out the other side in good shape.
So I'll start off this morning by thanking a very committed and talented team partners clinicians our front and back office teams and our corporate support group for the war not only this quarter in the year, but try at least two and a half years, we've worked our way through this pandemic and the collateral effects. It has generated.
I'm going to try to keep my comments at a high level.
To talk a little bit about where we are and what we're working on where we're making progress and where we're still working through adjustments ill, let Carrie do most of the lifting this morning are uncovering the finer details for the quarter in the year with some exceptions of attending that I intend to cover here.
Despite the challenges presented by the current economic operating environment.
Overlaid with the persistence of Covid really do thank our team proved how resilient it can be to deliver what amounts to.
As the second highest earnings quarter in the history of the company.
This is a quarter, where we produced all time high revenues up 10, 8% for the quarter record PT visits up five 7% year over year and seven 8% from the first quarter.
Our industrial injury prevention revenue, which approached a doubling for the quarter up 93, 7% same store injury prevention revenues up over 25% for the year. So I feel like in terms of the things that we could absolutely control team did an exemplary job.
So what do we don't what don't we control clearly, we don't control interest rates or inflation, both have risen dramatically, but anticipating at least a part of that carrying team did a terrific job securing a new credit facility, expanding our borrowing ability up to $325 million by hedging the rate.
On the new facility.
All of this will give us needed additional capacity to execute on our long term growth plans, we've been very busy working on those plans with a really great group of development opportunities.
Which we look forward to getting over the finish line between now and year end.
We also don't have control over the macro environment when it comes to inflation or availability of workers to that end in the second quarter. We began to feel the impact of some of those forces with rising labor and ancillary costs.
Continuing to make adjustments, where and when possible with respect to dialing in our costs to the extent that we don't negatively impact our volume or hinder our ability to grow into the future.
We continue to work on rate base negotiations with payers.
We have invested more resources in that effort and then in that area, we were getting some wins as well.
But we are working to accelerate those with it with these additional resources, we have similar investments in our work comp area, along with new tools, which we believe will help us in both PT and Andrew prevention recruiting as well as in development of new opportunities in the form of beneficial relationships for.
The injury Prevention group, along with helping to identify acquisition targets is providing to be great asset and we're very excited about what we can drive with these new.
New tools, we've invested in.
So looking back over the quarter, let's talk a little bit let's start with volume volume in the spring with solid.
Although later in the quarter, we began to feel the normal seasonal ebb and flow that was decidedly missing in 2021.
Concurrent with that I think we allowed ourselves a little leeway with respect to recruiting.
New staff, given the really tight labor market.
We pick up a bit in the quarter as a result.
Also.
Also related I think folks are.
Our team.
Not only our team, but our patience everybody has been cooped up these past two years.
Phone recently.
And that's flight, which probably pay double what you paid a year ago Airlines are for the brand people are taking vacations that they've forestalled. These past couple of years My family, we're going to take our first vacation.
Real vacation in the past.
In the past couple of years since Covid started.
So that impacts our staff coverage as well as referrals and visits.
His doctors and their staff are taking time as well good news is as schools starting back soon at least here in Texas football will be cranking up across the country with two day sessions and I'm hopeful that we'll see some boost from that as we make our way through the remainder of the year.
Finally, we are working hard to get our cost very finely tuned considering the environment.
And at the moment.
And we have and we have an important project, which will take a little time to complete but ultimately will help to streamline our intake and front desk operations, which we believe will help some of the cost in that part of our PT business as we continue to move forward. So that concludes my prepared remarks.
If you would please go ahead and walk us through the financials.
More detail will take.
Thank you Chris.
Excuse me good morning, everyone.
All things considered our team produced a really good result for the second quarter with operating results per share of <unk> 90.
Which as Chris noted was the second highest quarterly amount in our company's history. Our reported adjusted EBITDA was $21 3 million for the second quarter, which was only down slightly from the $24 million in the second quarter of 2021, which was the second quarter high for the company.
Like all companies, we are dealing with the increasing impact of macro environment factors, namely rising inflationary cost pressures and rapidly increasing interest rates in the U S.
These factors are expected to continue to impact us through the remainder of this year, but volumes remained strong by historic standards and our team is focused as always on finding ways to become even more efficient. So we can produce the best possible results for all of our stakeholders.
Our physical therapy patient volumes per day per clinic were $29 five in the first quarter, which was an increase from 27 nine and the seasonally low first quarter and slightly less than the company high 30.0 in the second quarter of 2021.
Our average visits per clinic per day for all clinics for 30.0 in April $29 seven in May and $28 nine and June reflecting our historical pattern entering into the summer months we.
We don't have final numbers for July yet, but based on trend data, we expect July volume to be similar to June .
Our net rate for our physical therapy operations was $103 18 for the second quarter, which compares to the $104 46, we reported in the second quarter of 'twenty one.
That rate is up slightly from $103 in the first quarter of this year.
The decrease in rate versus last year is due to the Medicare rate changes that went into effect in January of this year in the 1% sequestration impact that went into effect April one the remaining one point the remaining 1% sequestration impact became effective July one.
Our total visits increased five 7% in the second quarter from $1 84070 visits in the second quarter of 2021 to 1 million 145554 visits in the second quarter of this year with the addition of 41 clinics through both acquisitions and de Novo is net of a few normal core styles and Clos.
Since the second quarter of last year.
Our physical therapy revenues were $119 1 million in the second quarter, an increase of $5 million or four 3% from the second quarter of last year.
Our physical therapy operating cost were $92 $9 million as compared to $82 9 million in the prior year.
Our physical therapy margin in the second quarter of 2022 was 22.0%, which is a healthy margin. Despite the increase in cost.
New clinics added $7 million in revenue and $1 $3 million to the MPT operating margin dollars.
Revenue at our mature clinics declined $1 $5 million year over year due to a lower net rate on similar volumes, while expenses increased $4 million or 5%.
Our physical therapy salaries and related cost at our mature clinics increased four 6% in the second quarter of 2022 compared to last year and our contract services and rents were also higher at amateur clinics.
On a per visit basis, our total physical therapy costs were $81 nine in the second quarter 2022, compared to $76 50 in the second quarter of 2021, which is an increase of 6%.
Salaries and related costs were $58 29 in the second quarter of 2022 compared to $55 95 in the second quarter of last year, which is an increase of four 2%.
Our revenues for the industrial injury prevention business were an all time high $19 $4 million in the second quarter of 2022, which is a $9 4 million or <unk> 93, 7% increase over the second quarter of 2021, our expenses and industrial prevention increased $7 $8 million, resulting in an IP operating margin.
A $4 1 billion, which is an increase of $1 6 million or <unk> 62, 2% over the prior year exclude.
Excluding our IP acquisition in November of 2021, our IP revenue still increased 25, 5% in the second quarter versus last year.
Our gross profit was $30 $8 million in the second quarter of 2022, which compares to $33 million in the second quarter of 'twenty, one and our gross profit margin was 21, 9%.
Our corporate costs were $10 $7 million in the second quarter of 'twenty, two as compared to $12 $1 million in the second quarter of 2021 with the decrease due primarily to lower estimated bonus expense this year.
As a percent of revenue corporate costs were seven 6% of revenues in the second quarter of 2022, which is down from nine 5% in the second quarter of 'twenty one.
Our other income includes a loss of $617000 related to revaluation of our put right liability that's associated with the potential second purchase of the remaining portion of the IP business that we acquired in November of 'twenty one.
For the first six months of 2022, the loss is only $14000.
Our interest expense increased from $237000 in the second quarter of last year to $987000 in the second quarter of 2022 due to an increase in our debt primarily related acquisitions that we've closed since the second quarter of last year and higher interest rates in the second quarter.
Okay.
Excuse me.
Okay.
Okay.
Excuse me higher interest rates in the second quarter of this year than last year.
Okay.
Our net income attributable to non controlling interest was $4 $1 million in the second quarter of 'twenty two.
Which is less than the $5 million in the second quarter of the prior year.
As a percent of profits our noncontrolling interest were 13% in the second quarter of 2022 as compared to 14, 7% in the second quarter of 2021.
The reduction in the non controlling interest percentage is due to the purchase that we've done of Noncontrolling interest from existing partners, which results in a greater percentage of our profits being retained by U S. P. H.
In 2021, we've heard just $30.0 million noncontrolling interest from our existing partners.
Purchased another $8 $6 million in the first six months of this year.
Our balance sheet remains in an excellent position. We're very pleased to have successfully closed on a $325 million five year credit facility in June which gives us greater capacity for acquisitions and other investments. The facility includes a $150 million term loan and a $175 million revolver.
We had nothing drawn on our revolver at June 30, and had cash on our balance sheet of $48 $6 million or low leverage coupled with our expanded facility provides us tremendous flexibility and sufficient capacity for the right growth opportunities as we identify them.
In connection with the financing transaction. We also entered into a swap agreement in may the fixed the rates associated with our $150 million term loan.
The swap fixes the one months terms sulfur at 281, 5% for five years. Our total rate includes an applicable margin based on our leverage ratio, which currently puts our total rate at 466, 5%.
The swap provides a certainty and a revised rising interest rate environment at a rate, we believe will be favorable over the five year period.
We will adjust the fair value of the swap each quarter through other comprehensive income and at June 30, we had an unrealized loss of $400000 net of tax in OCI.
We issued new guidance in our earnings release today, noting that we now expect our adjusted EBITDA for the full year to be in the range of $73 5 million to.
The $75 $4 million and for our operating results per share to be in the range of $2 65 to $2 75.
The EBITDA and operating results ranges, taking into consideration our outlook for costs in the second half of the year to the impact of inflation on our wages and other costs, which elevated during the second quarter.
Our operating results range also takes into account the change in the interest rate environment in the U S. Since we provided our initial guidance for the year, specifically, our fixed interest rate of 466, 5% on our $150 million of debt from the term loan for the remainder of the year the.
The increase in interest expense as an impact of approximately 25 versus our previous guidance.
Please note that our current guidance does not include the impact of any potential acquisitions, we make between now and year end as Chris noted, we intend to be active on that prep with that I'll turn the call back to Chris Yes. Thanks Kerry so.
Gretchen, Let's go ahead and open it up for questions.
At this time, if you'd like to ask a question. Please press star one on your Touchtone phone you may remove yourself from the queue at any time by pressing the pound key once again that is star and wanted to ask a question. We will take our first question from Larry Solow from CJS Securities.
Alright good.
Chris Good morning, Kary. Thanks for taking the question I guess the first question just just on the I guess the guidance the outlook and also Q2, a little bit in terms of just the volume trends and I realize last year Q2 last year was.
Maybe a perfect storm or just an amazing quarter, because it's sort of a real acceleration in re ramping back up after COVID-19. So but what is your what are you sort of contemplate.
It seemed like you were a little bit surprised maybe it was at June month, which I know comes Kindle youre, not taking more than normally and the seasonality but.
A little surprising I guess from Ara and that volumes were down a little bit.
So what I'm sort of your thoughts on that and again.
What are you looking at in the back half of the year you mentioned, mostly.
Mostly inflationary pressures.
What are you thinking about in terms of patient volumes in the back half of the year.
Yes, so let's talk about volumes for the quarter first of all so.
<unk> came in solid.
We had a really good March really good April that was the last time. When we released you guys heard kind of where we are where we are and.
And then typically May fall has April been pretty closely we pulled back three tenths of a visit in may compared to April .
And then once we get into June we pulled back a little bit more and I don't think it was more than a normal seasonal pattern, but we if you remember last year I think.
This is from memory so hum.
Give me a little latitude, but I think.
Highest visit per clinic.
Month in the quarter, and 21, which has never happened in the 19 years that I've been here and okay.
Okay.
Best I can tell you in combination one we still have a bunch of people in corn team from this COVID-19 variant that we're dealing with right now nobody wants to.
The world doesn't want to talk about Covid.
But as the healthcare company.
A lot of places, where we're backing masks in our patients have masks.
Markets.
Tennessee, and other places patients don't like that and that impacts our volume a little bit we've got people in corn.
So Larry I think we're back into what I would call a more.
More normal seasonal pattern, so a little slower in the summer God knows people have pent up vacation put off for a while and so people are taken.
<unk>, our staff, which they need to they have done an amazing job a little bit longer time off a little bit more time away for doctors as well.
But I think once I hope I'm going to say I Hope I Hope one school picks up vacation seasons, largely in rearview in football two days are.
Things picked back up again, we've modeled the rest of the year.
In the vein of where the quarter was.
<unk>.
With.
Gary I don't know how you got to pick up in the fall like we normally have just normal seasonal patterns you know it's the.
The summer pattern than picking up usually in September and then October through December are really strong.
Strong months and I'd.
For the full year, when we look at the full year from a volume standpoint.
Going to be similar to last year from a from a volume standpoint.
That's right sort of flattish and does that but and you've grown volumes pre COVID-19 sort of.
<unk> three <unk> more than I think historically, it's been like a two or three but all of it always targeted <unk> grown probably three or four right maybe higher end of that four ish.
Five years into Covid, So does that do you.
Looking out over the next five years do you feel like.
Seems like there's room for volume growth, but I'm just trying to.
Certain one quarter doesn't make a trend and they're all it's still a difficult time with Theres still like you said COVID-19, maybe more fortunately in most cases.
Our new Sims as opposed to.
But not that it sounds serious but people are just so those things are not 100% efficient so.
Is that so do you still view yourself as a <unk>.
Modest grower on volumes as we look out on the <unk>.
Basis, I guess is it still kind of a tough call in the next couple of quarters. Okay. Yeah, No I definitely think I mean, Larry right now were impacted in certain markets are important markets for us just on the labor side.
We've done a good job our clinical turnover really hasnt changed.
But it's just taken a little bit longer to fill those spots in some of those markets. We've got you know we've.
We've got people that are hired that have been working hard and that's impacting our volume some so I definitely.
We think we're going to continue to grow.
I don't have a perfect crystal ball for five years.
In this last two years, we haven't.
Two quarters that looked like the quarter.
The rubbed up against us so.
We're just we're making our way through but we've got great capacity in our facilities, we've got a partner model that.
We think this.
Is the way to go in strong partners and a strong team and so we just need to get through this bumpy patch.
Yeah, no absolutely and what about on the and I know you've been sort of pounding.
The drama on the rates. It certainly seems like you guys are it's an uphill battle for you when you're when everything is going up.
You should have pricing power, but it's tough.
It does sound like Youre trying to get to know you're making some leeway at least with some of the bigger payers and hopefully the government will help you out to next year at some point, but.
Any any any commentary there or any additional commentary there.
Our.
We just we just made a reasonably good investment big investment in terms of some additional horsepower on the rate negotiation side.
It's been very recent we finally got that done we have had some wins here lately as you might expect I'm not going to name names or tell you rate changes, but.
We're making progress and we expect to make a good deal more I think a lot of that will be 23 impact is rather than so much in 'twenty two but.
It's important.
And we think that the value that not just we as a company provide but physical therapy provides in general is extraordinary.
And we think it deserves higher rates and we're going to we're going to keep banging on that until we get there.
And if CMS given that thought there it doesn't the 'twenty. There next year's proposal usually come out in July I thought maybe we were a little late this year that I Miss It has there been anything we mentioned for next year, yet or no in terms of the proposal.
Came out a little bit late but it did come out late in July .
And it's it's slated for four 5% reduction for next year, which I can't hardly imagine.
Okay.
And we're working on we're working on that as we have right.
It's totally stupid so.
I don't I don't know, how that's going to land will not know until December .
We expect to do some significant work on that.
Between here and there.
Whats the whats the rationale behind it is just some.
Convoluted equation that gets to that or.
Just from a high level from a layman's perspective, how do they caught you, 5% when theyre, giving 9% CPI based.
All right got it.
So.
So it was crazy.
We're out of that CPI you, Brian I know you are right.
This is the original rate reduction was nine and change, which we were able to mitigate and so I think this is some residual from that.
Okay, Great I appreciate all the thoughts there thanks.
Thank you.
Our next question comes from Steph Wissink from Jefferies.
Hey, Stephanie Hi, good morning, everyone I wanted to spend a little bit more time, compartmentalizing, the labor and wage rate pressure youre seeing because it does sound like that.
Our mix of things occurring one might be availability of labor and just the cost of that labor, especially on the front end, but you also talked about some.
PTO are a way time that Youre also noticing among your staff. So can you just help us think through what component of that next are the most substantial burden on the revised guidance and what do you expect to be more transitory and maybe related to summer vacations or holidays, but you would see some of that labor availability.
<unk> come back into the fall.
Yeah, certainly vacation is going to be the transitory part.
And really there.
I think for the most part.
There might be a little bit more cost related to that I mean, it's banked and people are using it to the extent that we can find.
Replacement or temp cost or somebody who is on vacation.
Bump our cost a little bit, but vacations are normal thing. We just have people that are a little bit more pent up in.
And carried over some vacation from prior periods, so that's going to normalize.
The other part the higher labor.
We see that particularly we've seen that particularly at the front desk on the non clinical side.
I mean, when you look at when you look at our.
Our mature facility rate changes I think it was I think it was four 2%.
Which.
Which.
Which given this environment.
Honestly.
I think it could have been I think it could have been a lot higher.
Some of that will take a little time to come down.
But in talking with my brothers and sisters at our <unk> facilities I think everybody's in the same everybody's in the same boat.
Body right now is taking a hard hard look.
At their cost.
We've made some adjustments for our remainder of the year very surgical very precise adjustments match very closely the volume.
We're we're able and then we have some projects going on right now that will impact long term longer term the efficiencies.
And the staffing and labor load at our front desks and so that's something that we're very focused on at the moment right now as well.
That actually leads to my second question, which is related to the projects maybe share with us a little bit more about what youre doing if you Ken without it being competitive risk.
And secondarily, if theres any sort of cost embedded in the back half P&L for the projects to work with the Capex related project just help us conceptualize what that might be thank you. Yes, yes. Thank you. So the one the one project I referenced in my prepared comments or the one resource I think.
Yes.
I don't want to name because.
Man.
Unbelievable resource for us, but it is helping us on the recruiting side.
Identify therapists.
And connect with those people, helping us on the injury prevention side.
Ben if I believe connecting with companies that are in our sweet spot on the injury prevention side of things and it's also helping us identify.
Connect with and time that connection with companies, who may be interested on the development front for our acquisition pipeline.
<unk>, which right now is very solid so.
And it's it's you know.
It's actually doesn't isn't a big investment, but it's an important investment for us it's going to bear fruit for I think for good while on the front desk project side that's ongoing.
Kerry I don't know if you want to speak to that Eric.
I don't think Thats, a big monetary investment that's really just people on time on our end working working their way through yes, that's more of a.
Just a rollout integration and timing issue and Eric do you want to talk about it some yes, yes.
Yes, and it is a timing issue and obviously with all the different partnerships that we have out there you know these systems changes do take a little time, but we're trying to figure out how to improve automation in that front desk operations. So we can get by with less labor, so creating patient quarter portals that allow our patients to test.
To schedule electronic insurance Verifications that would reduce the amount of time front office people are spending now verifying insurance and we've dabbled in patient kiosks, you probably have seen these in lots of different businesses now that it used to be people you talk to you when you check in and now it's more than <unk>.
So we're looking for electronic kiosks that would allow us to get by with less front office labor, because that's really where our biggest turnover risen accompany.
Our political turnover right now is really below industry average and we've kind of told the line and as we've talked about on calls before our clinical turnover is three percentage points lower than it was pre pandemic. So we're doing pretty good having said that every time somebody does walk out the door clinical or non clinical the new person walking in is more than <unk>.
We're going to be making a little bit more money.
Our focus right now is the front office side that has the highest turnover percentages.
And we believe focusing right now on our systems to get out with less labor really is a long term way to go.
Very helpful. Thank you so much.
Our next question comes from Michael <unk> from Barrington Research.
Hey, Mike.
Good morning, guys.
So in terms of sort of the double.
Double whammy of inflation and sort of going against you reimbursement from the guy at least from the government side going against you.
I guess, how do you think about M&A.
Terms of both you know how you want to approach your balance sheet and then also how do you see.
This impact smaller.
P T companies because gosh.
You guys are getting squeezed.
You've got significant size.
Scale advantages over some of these smaller entities and I'm just curious if a if we're going to see or consolidation just based on.
Sort of the macro yeah, I don't think theres any doubt about that it's going to squeeze on equally.
And it's going to squeeze the larger providers as well who are more highly levered than we are and who don't have the financial.
Parameters that Terry just outlined which are even though it's more expensive than we were a year ago. It's still very very efficient. So we're going to use our balance sheet you guys are going to see that over the coming.
Now short term.
We think that there will be even more opportunities as we go forward is this environment.
It's just people who are not equal sized boats so to speak.
And we think it'll be good long term for us so yeah, it's challenging on several fronts, but it's not just challenging for us in this profession.
It's going to continue to provide value.
The health care system.
A lot of.
There are a lot of drivers to the growth of physical therapy, and so we're going to get through this through this period and I think the other side and there are definitely as you pointed out good catalysts that are going to come out of that.
And just sort of a follow up on the.
The proposed rule for a reimbursement cut.
From CMS I mean, do you think even even at.
At this point as you look at it that there is a.
More of an opportunity just given the givens and given what it could do for smaller providers.
That there's a better chance of beating back most of this then maybe.
Last year when you did have some success there too, but I'm just it just feels like things have deteriorated in the last few months and then I'm. Just wondering if you think there's a recognition out there apta thinks there is that.
That $4 four point whenever it is four and a half.
Is ridiculous.
Yes, I do think it is ridiculous and I think I think I hope.
We will get a beep back we've got most of last year's feedback I mean, this year, Unfortunately, the impact which isn't directly to that.
It's not direct us most of the impact with sequester impact that.
That sequester relief going away I think last year was <unk> 75 that we fell less than 1% and so we got most of it out last year I'm hopeful that we can.
Can do the same or better this year.
I will tell you know obviously, that's not a certainty.
And just last question and I may have missed the nuance of this it almost almost sounded Chris like you may have said that obviously the macro is impacting staffing to great extent, but it almost sounded like you.
Alluded to possibly late in the quarter, maybe you guys.
Could it could have done better in terms of.
That piece of things or did I pick up pick up on something that really wasn't there.
No I think look I think I think our team has done an incredible job.
We came out of Q1 you are expecting.
Kind of blow and go Q2 from a volume perspective.
The volume of material is quite the way that we expected. We also came out of Q1.
With a real urgency around hiring.
And anticipating.
Real strong volumes.
I just think it's.
Having now rear view looked at it very very very closely.
We probably.
Selectively on boarded.
Not a lot of full time people, but we probably are.
Our part time folks.
We ended up carrying a little bit more cost than we could have otherwise and you know, we're we've made and we're making those adjustments to make sure that it stays very very closely dialed in.
We kind of have a handle I think a sense on volume here and.
So I expect that Dow and to be much tighter from here through the rest of the year.
Okay. Thanks, I know, it's a tough day, but thanks for standard up answering the questions I appreciate it.
Thanks, Helane thank you.
Yeah.
Our next question comes from mature AMCOL from set up.
Yes, Hi, yes, good morning, and thanks for taking my questions Hi, just a couple for me just on the M&A side, you sound pretty confident in terms of getting deals done.
Hum.
Between now and year end just wondering.
Any specific drivers there is a question of valuations being a lot more attractive.
Environment versus maybe a year ago and is it a case also where maybe post COVID-19 are you seeing in one thing.
What years of health care.
Increase in retirement et cetera, So maybe that's also.
<unk>.
<unk>.
Yes.
Yes, so it's mix. So we've been we've been busy all year a few of these.
But but we're very active very very active right now I think this isn't related to people retiring I think this is.
No it's related to where people have been in the last few years.
We have very high expectations for all of these deals there.
A rather.
<unk> unique period, my 37 years as a therapist. These last few.
We've done real well and these companies have done well, but most of them see the opportunity to get some support that we provide some really strong support. So they can continue to grow because then their market there may be the big provider and they see a lot of opportunities among and across smaller.
Providers to tuck those in or to move market share and they want a partner to help do that and so I think that's what's going to continue to drive our opportunity more than anything that in the fact that we're in.
Pretty much stay forever.
We've been a really good home, we don't take that for granted we work hard at it.
And then also on the M&A side, who knows how it plays out, but there's obviously talk of recession or obviously we.
A weaker environment heading into next year.
Does that factor into your how aggressive you want to be on the M&A side, and maybe you can remind us how the company has fared in periods of economic downturns a recession.
Yes so.
Yeah everything factors to meet.
The interest rate environment factors that impacts the multiples that we.
Others, I think are going to be able and willing to pay.
Multiples are at kind of for me a career high.
Have been and I expect that to pull back.
It has to with the rising interest rate environment returns aren't as great.
And that is without taking into consideration the macro environment or are there some challenges as well.
And so those things those things certainly.
Certainly influence.
There was another part of that that I was going to speak to and then just last night the recession on the recession. So yes back in so if we look at eight nine and 10.
We grew through those years, we did some things differently.
You know when there was you know.
A massive kind of labor glop back then when companies were laying people off we created.
Front end of this commission only sales force and we doubled our sales force in that period of time and it helped us grow right through that recession.
We continue to get deals done.
Good multiples back then.
And so.
It hit our same store a little bit certainly.
You know when there's high unemployment.
I don't know that I believe I don't believe that we will get to a high unemployment situation.
Like we did back in 2008.
And front half probably a 2009 I think I think we're to employment stretched right now for that to happen but.
I think we're still well positioned as we have been we have a good balance sheet.
We're making some adjustments and I forgot to mention this to just and it's it's.
It's not huge but it's going to it's going to give us an impact I think in next year as we're changing.
Who we buy things from and we're moving.
Our resources will be.
Just to get some efficiencies there and we have to.
But there's there's some embedded cost savings in terms of what we have planned there as well.
So we will see but I.
I don't think.
I think we're well positioned to deal with.
With what comes at this point, but like we have had to do this quarter, we're going to have to make some adjustments depending on what changes.
Okay and then just finally on obviously you always try to run a very lean and efficient company I know on the G&A side, it's probably the lowest I've seen it in some time in terms of a percentage of revenue. So obviously, China limit your costs in this environment just curious if you have.
More room, there or is that something we should expect to start ticking back up.
Well this quarter we made.
I wish we wouldn't have had to do it because it affects.
Each of us directly here on the exec team, but we made some bonus accrual adjustments.
In this quarter.
And we will have some lower bonus accrual just as a result of the reality of.
Our guidance for this year.
And so I think that's the biggest driver were already lean Mitra here, our folks are working hard.
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And so that is something I hope that as we go forward outside of this year.
I would expect more normal accrual pattern to happen.
With more normal predictable growth and as we go forward.
That's typically been in the nine to nine 5% range of revenue I think.
For the second half of this year, it's probably going to be closer to an eight 5% to 9% range as a percent of revenue and then probably back to more normal patterns in 2023.
Okay. That's great. Thanks, again for taking the questions.
Okay. Thank you.
And once again that is star one if you'd like to ask a question, we'll pause for a moment.
Yes.
And it appears we have no further questions at this time.
Okay listen thanks, everyone for your time and your questions. This morning, Cary and I are available. If you have any follow up and I hope you have a good day. Thank you. Thank you bye now.
This does conclude today's program. Thank you for your participation you may now disconnect have a great.
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