Q2 2023 U.S. Physical Therapy Inc Earnings Call

Okay.

Yeah.

[music].

Yeah.

[music].

Hum.

[music].

Yeah.

[music].

Yes.

Please standby your program is about to begin.

Yes.

Yeah.

Good day, and thank you for standing by.

Welcome to the U S physical therapy second quarter 2023 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 the session. Please press star 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 turn to turn the call over to Chris Reading President and CEO . Please go ahead Sir.

Thank you Sir.

Good morning, and welcome everyone to U S physical therapy second quarter 2023 earnings call with me on the line.

Carey Hendrickson, our Chief Financial Officer, Eric Williams, Graham Reeve, our co Ceos.

We need our executive Vice President and General Counsel, Jay Martinez, our senior Vice President of Finance and accounting.

Before I provide a little color on the core we need to cover a brief disclosure statement. So Jacob you can take that please.

Chris.

This presentation contains forward looking statements, which involve certain risks and uncertainties. These forward looking statements are based on the Companys current views and assumptions the company's actual results may vary materially from those anticipated. Please see the company's filings with the Securities and Exchange Commission for more information.

Thanks, Jamie So this morning, I'm going to keep my commentary kind of at a high level and then I'll turn it over to Curt If you go through the financials in more detail.

I want to start by thanking our partners our operations leadership team.

Sales and marketing director of digital marketing support and development teams all of whom are working hard every day to drive patients to our door. We can affect life change your chair, allowing them to quickly return to work.

Sports, which all of those activities that support families with parts as well as communities.

It should not be possible, if not for the care connection and vacation or frontline caregivers, many therapists across our more than 115 individual partnerships.

These first six months the first two quarters of 2023 as a result of the excellent care and the outcomes you continue to provide our patients you continue to provide our patient demand has been greater than ever before in the history of our company.

Quarter, one delivered record.

Per day, the highest ever for it is normally.

Seasonally slowest quarter is 49 48.

<unk> gave us the best single month at that point 30 points.

This is for points per day.

I'm pleased and proud to say that despite challenges in the labor market. This past year, we were able to continue that quarter one momentum.

We've turned it up even more in the second quarter with new record volume in April and May 30 <unk>.

Off months overall Q2 volume was 34.

On a per day on average.

Some very good additions, both acquired and de Novo since quarter, two a year ago. We've added 48 clinics in total this year 'twenty two.

So clinics through the end of July .

As you know earlier.

Mostly the drain or overall average until we get fully up to speed with staff and overall community involvement for penetration.

Facilities of course become much more highly productive in the years to come and they will continue to grow for many years, serving patients and families. This quarter. Our mature facilities same store volume grew two 6% against a strong comparative quarter. In 2022 are same store for the year is up four 2% overall.

This is not an issue for us.

Also on the very positive side of equation was general cost improvement, especially in light of the very significant labor scarcity and general inflation is plagued every corner of our country. These past four plus months in spite of that we are seeing salary and related costs per visit as well as total cost per visit.

Declined three quarters in a row after peaking in the third quarter of 2022.

Questions can be quickly accelerated last year.

Our team has made real progress through very focused small multifaceted efforts to address cost streamline operations, where possible and innovate with new solutions some of which are still rolling out across so many partnerships, which is to say that we're not done yet.

More progress.

In the area of commercial payer contracts, we continue to make progress with rate increases.

Same time, absorbing a 2% Medicare rate reduction this year and the 1% sequester relief phased out which impacted us in this quarter. This rate area is where we continue to work on multifaceted approach and where we have more opportunity to further improve.

What we've seen over this past year was tighter than normal labor dynamics.

And extremely high growing demand.

Is that a small percentage basis, the number of license PT assistance, we have hired to fill a very strong demand has increased so wherever we've historically been that in combination with the high demand as a result in a greater percentage of Medicare visits being touched by PT assist that.

With a further 15% PTA reduction reimbursement reduction creates a negative impact on our net rate so.

So we're in the middle of a large scale of course is tissue across our platform to retrain any and all of our front desk to better optimize scheduling to make sure that our clinical leadership is doing everything possible to ensure that we have optimal scheduling.

Clinically directed resources to not only provide exceptional patient care just to be sure that we get fully paid for providing that care.

We believe this heightened awareness, which may have been diluted a bit drilling with front office turn it over to late 'twenty 2022 and in early 2023.

For our services. This resulted in an addressable inefficiencies which flow through to on that rate.

Given the already low given the already very low cost nature of the incredible care of as we provide this becomes an all hands on deck effort to ensure that we are paid at a level that aligns with the results we're achieving.

Not there yet, but we are very focused on working hard to make the necessary adjustments.

Other positives for the quarter.

You are aware our company completed a secondary offering at the end of May which is proven to be very successful, allowing us to pay off our highest interest rate debt and further invest in remaining significant proceeds directly to further grow our partners.

Partner centric company.

We are currently busy doing just that and you will continue to see us add new partners expand to new states. While we also explore offerings in other adjacent service areas.

We believe we can further strengthen our business and physical therapy as well as our Ranger prevention.

Business services.

On the IP front this year seems to be unfolding much. The way. We expected we are seeing major increases in spend across some of our longest tenured relationships and as we discussed last quarter. We've seen some companies fearful of a pending recession pulled back from prior levels of spend and engage them.

And a defensive move for them.

We are asking that our teams have done a great job, replacing the vast majority of that pullback with exciting new business that I'm happy to.

I am happy to say, we're able to staff now with greater efficiency much less time than where we were nine months ago.

Both of our IP partnerships are working hard together cross sell expand programs. We're looking for new opportunities, we continue to explore acquisition base.

Opportunities as well as <unk>.

At our reinvigorated balance sheet will provide us with dry powder and runway to do that over the coming quarters and years.

Finally, I want to end my comments, where I started by taking those colleagues.

And many of your friends to bear with me now as they close in on my 20th anniversary here with the company.

Amazing filing.

Following the exhilarating ride with more good things to come.

Streamline glass to be working alongside so many talented including key committed team members across our home office support group as well as on many partnerships around the country.

Maybe a huge difference in the lives of millions of patients and I'm proud to say that my wife, and I think the lives of many of our partners and staff made better as a result of the work that we do as well.

We're not done.

As you've heard we always have challenges to tack on things to address that has been the way it is.

It's been the way it's been for the entirety of my 38 career, including the early chapters of treating therapists and clinicians.

And we continue to have the energy and the drive for better reimbursement.

For the life improving work that we deliver so consistently every day rules.

And regulations that make sense and increase access to the very efficient and effective treatment, we provide versus the much much more costly and often riskier interventions.

Not the position this first choice options.

Although physical therapy should be first option.

Primary care equivalent for prevention and treatment of muscular skeletal enduring disease, we will continue to fight for that rightful place in the health care continuum and for those of you who are listening from other companies. Please get down into the constant work, we're doing with <unk>.

We need you to find alongside us with us as we work towards these important goals.

Cause my prepared comments, so Kerry if you were to cover the financials in more detail. Okay, great great. Thank you, Chris and good morning, everyone.

We had an excellent second quarter in many respects, we had all time high patient volumes, we had strong growth in revenue.

Genuine downward trend in our salaries and total operating costs on a per visit basis, we had growth in our physical perrysburg therapy operating income in our physical therapy operating margin percentage and year over year growth in our total company adjusted EBITDA and in addition, as Chris noted, we completed a successful equity offering to further strengthen our capital structure providing.

Significant capital for future growth initiatives the.

The equity offering.

Provided us with approximately $164 million of net proceeds.

Issuance of one 9 million shares we used $35 million of those proceeds to pay down the debt on our revolving credit facility, which at the time was at a variable rate of about seven 2%.

Leaving approximately $129 million.

We also lowered our leverage ratio, resulting in a 25 basis point decrease in the rate on our outstanding $150 million term loan based on our leverage grid.

We've invested that cash at this point at a high yield savings account private deployment and the acquisitions.

Savings in interest expense and the interest income on the net proceeds makes it immediately accretive even with the issuance of the $1 9 million shares.

And of course, the return on those net proceeds will increase substantially when we deploy them in the acquisitions.

We reported adjusted EBITDA for the second quarter of $21 $7 million, which was the second highest quarterly EBITDA amount in our history and an increase of zero point $4 million over the $21 3 million, we reported in the second quarter of 2022.

Our operating results, which includes the impact of higher interest expense was 76 cents per share in the second quarter of 2023.

Our total company revenues increased seven 7% in the second quarter growing from $147 million in the second quarter of last year, the $151 million in the second quarter of 2003 and.

And our total company gross profit increased $1 4 million from $30 8 million in the second quarter of last year to $32 $2 million in the second quarter at 23.

As Chris noted in his remarks, our average visits per clinic per day in the second quarter was $30 four which is the highest volume for any quarter in the company's history.

April and May were both at 39 highest volumes for any month in our history and our average visits per clinic per day in June was $29, six which is a normal seasonal decline related to vacations taken in the summer months and higher than the 29 that we had in June of last year.

Our net rate with $102.03 in the second quarter of 'twenty, three which was a decrease of one 1% compared to our net rate of $103 18 in the second quarter of last year.

Our net rate for our commercial and workers compensation and benefits cost increased approximately 1%, while the net rate associated with Medicare, but that was down three 5% as.

As we noted in our release and as Chris mentioned, the Medicare rate decrease was primarily due to the 2% rate reduction from CMS that was effective at the beginning of this year coupled with the fact that the second quarter of last year included a 1% sequestration relief on Medicare rates.

As we've talked about on our last couple of earnings calls I've, either renegotiated or terminated the subset of our Medicare advantage contracts.

Reimbursable at a rate that's less than what it cost us to serve our patients.

The terminations were effected in June and July and most of the associated renegotiated rates are also now in effect. So we expect the impact of this work to begin showing up in the second half of 2023.

We also continue to focus on our renegotiations with commercial contracts and as Chris noted, we are making other necessary adjustments to adjust our net our net rates.

Physical therapy revenues or $131 million in the second quarter of 2023, which is an increase of $11 million or nine 2%.

Second quarter of 2022.

<unk> increased our same store clinics was 103.

Excuse me, one 3% with patient visits up two 6% versus the prior year.

Our physical therapy operating costs were 102, $2 1 million, an increase of 10% over the second quarter of the prior year.

On a per visit basis, our total operating costs were $80 61 in the second quarter, which was a decrease of <unk>, 6% compared to $81 nine.

And the purpose of that in the second quarter of the prior year.

And we were pleased to see our physical therapy operating cost per visit decreased for the third consecutive quarter after peaking in the third quarter of last year.

Our total operating costs were $85 14, perfect, but in third quarter of 2022 decreased $84 five for the fourth quarter. They declined further to $81 97 in the first quarter of 'twenty three and then declined again to $80 61 in the second quarter of 2023.

Our salaries and related cost per visit decreased one 2% in the second quarter of this year versus the prior year and they've also declined for three consecutive quarters from $60 99 tests in the third quarter of 2002 down to $60.04 in the fourth quarter down to $59.14 per visit in the first quarter 'twenty three and then down.

$57 59 per visit in the second quarter of 2023.

Our physical therapy margin also improved for the third consecutive quarter, increasing from 18, 7% in the third quarter of 22% to 20% in the fourth quarter, 21% in the first quarter of this year and then the 25% in second quarter of 2023 really pleased with the progression that we've seen in all of those metrics.

Our IP revenues were $19 2 million at second quarter, which is down slightly from the second quarter of 'twenty two.

<unk> expenses were even with prior year at $15 $3 million with IP operating income at $4 million and our margin and IFC business was 27% in the second quarter of 2003.

Our interest expense was $2 $6 million in second quarter of this year, which is an increase of $1 $6 million over the second quarter of the prior year of course that higher interest expenses due to the increase in our in our debt related acquisitions, we closed during or since the second quarter of last year and also the higher interest rates in the second quarter of this year versus last year.

Our balance sheet remains in an excellent position, we have a $150 million term loan with a five year swap agreement in place that fixes that one the one month term stouffer right on that $150 million at two 8%.

Including the applicable margin based on our leverage ratio.

All in rate on our $150 million of debt was four 9% in the second quarter, a very favorable rate in today's market and it's below the current fed funds rates.

Noted earlier, the net rate on that term loan moved down 25 basis points to $4 six 5% after the secondary offering.

In the second quarter of 2023 alone the swap agreement saved us $800000 of interest expense with cumulative savings to date related to the swap of $1 $5 million over the first 12 months.

In addition to the term loan we also have $175 million.

A $175 million revolving credit facility and had approximately $35 million drawn on it prior to the completion of the equity offering of course, we pay that down with some of the net proceeds and so theres now there is nothing drawn on the revolver.

Borrowings on the revolver for April one through May 30, or at a favorable rate just north of 7%.

In closing we've had a very solid first half of the year and we will continue to work hard to produce the best results possible for all of our stakeholders. This year the strength of our results in the second quarter give us continued confidence in the adjusted EBITDA guidance range, we provided at the beginning of year, a $75 million to $80 million.

With that I'll turn the call back to Chris Thanks, Gary I appreciate that.

Operator, let's go ahead and.

Lineup for questions.

Okay.

Yes, Sir at this time, if you would like to ask a question. Please press star one on your telephone keypad.

You may remove yourself at any time by pressing the pound key.

Once again that is star one to ask a question.

And we'll go first to Brian <unk>.

With Jefferies. Please go ahead your line is open.

Hey, Brian Hey, good morning, guys.

Good morning.

I'll ask the question it sounds like based on the metrics that Carrie shared with US This morning, whether it's productivity or the clinic.

Cost per visit and all of these kpis it looks like Youre executing very well.

Think about it.

Some of those key points right.

Productivity of the clinic and the cost to do.

To deliver care how much runway do you think there is left to drive some of those <unk>.

Metrics.

Yes, good question so.

I mean individual clinician productivity theres not a lot of elasticity there.

Individual clinic throughput you called out productivity, but just seeing the number of patients that we can get through an individual clinic.

Not as much room, as we had probably 40.

Five six years ago.

We constantly.

Just our hours, we can expand our hours most of our clinics.

On Saturdays lot of our clinics.

I hate to say, there's a lot of our products in certain markets close early on Fridays, we've got capacity on a per clinic basis to continue to have that number.

Kris so that's not that's not going to be eliminating factor and we certainly have room to move this net rate and that rate this quarter, a little bit of a disappointment.

So we've really got extremely granular with.

That issue is.

Think the fact that we had.

Turnover that we have and the scarcity we have in 'twenty, two particularly at the front desk. This caused us not to be as validating this we need to be from a scheduling perspective.

We are encouraged by the fact that I think addressable.

Team the clinical services team in conjunction with our operations group.

On top of that.

And they are rolling out some very very detailed training, let's just.

A couple of other areas that I think will help us going forward. So.

<unk>.

One hand, which was for the quarter a little better.

But we have made progress as you pointed out and all of the areas that we've been focused on I think we'll make progress there.

We know what to do.

Got it and then maybe since you mentioned right.

1% net rate growth on the commercial side being offset by some of the Medicare stuff, but as we think about maybe the number of contracts that you have.

Without going into percentages right I mean, how much opportunity is left to number one drive positive rate trend within the portfolio of contracts and maybe the second would be to push your rate increase above say a 1% number.

Yes, we have so many contracts.

Competition.

Mooney.

Just because of how our company is configured across more than 150 partnerships, but.

We've got a lot of contract negotiation left in us.

To do area I don't know if you want to come back no I agree we have lots of contracts.

It's a constant focus for us Brian we're up and we're having good success I mean, Eric we're having success in these in these negotiations.

I'd say the big payers are the ones that just takes longer to get make progress with them and so we're continuing to work at it every day, but Brian some of these contracts, we're getting increases now, but we have been going through the.

The annual increases that are yet to come even on the ones that we've completed already.

We're working to build in three year step increases for the most part.

So we got so we will have so we will have less attach each year. We know we're going to get getting those contracts for rate increases every year. So that's a long so.

Yes got it.

No.

Okay last question from me, Chris I mean, obviously, yes.

You guys did a raise you are sitting on a bunch of capital right now a lot of balance sheet flexibility and what does the market look like I know your space is obviously dominated by a bunch of PE backed players.

Your appetite has been more on the smaller side, rather than the big platforms, but what does the market today look like in terms of either competition for deals or opportunities popping up there probably are more scaled given your capital availability.

Yes, I think the opportunity is still strong I think what we're seeing right now is a lot of his piggyback companies.

Decidedly more quiet.

This year, particularly because of the number.

Either.

Some significant deals themselves or gotten to the point, where think interest rate increases where leverages design.

So that's been to a certain extent.

The reality.

Many of these individual operators have kind of missed the peak.

As said in this year.

We're not we're not in 2019 anymore.

At the height of this or even early 'twenty one of the things, we're still really really hot and I think there's a little timing we're more in the market, having said that we're busy now for us sometimes.

We're ready to go and then the partner has some things.

Things pushed it a little bit.

What has happened is on a couple of indications. This year, we will still get those things done and its just taken a little bit longer but we're.

We're looking at bigger deals too.

Opportunities not just in PC, but an injury prevention so.

Going to be lumpy, it's always been lumpy, but we're going to get good things done.

Awesome. Thank you guys.

Thank you Brian .

Thank you we'll take our next question from Joanna and catch it with Bank of America. Please go ahead.

Good morning, Joe Good morning, Hey, good morning, Thanks, so much for taking the question here.

So in terms of this commercial rate increases if I can just follow up there so the 1%.

You I guess experiencing right now are you kind of suggesting that.

Argued negotiate incremental.

Additional contracts that rate increase could actually accelerate into next year.

Joanna it's just going to depend on the timing of it kind of like.

Kind of like M&A, it's lumpy it switch once you get in the timing of those I certainly expect those commercial rates to continue to increase over time.

Working hard at that as far as the the rate of increase it's hard to say, but.

Unfortunately, yes, there should be a bell frankly these.

These contracts last and they go along.

For years and every additional one built on.

What we've done previous so yes, as we just mentioned I'll tell you. We also have step increases built and for on the ones that we've renegotiated. So those should continue to help us as we go forward. So I think I mean I feel.

Theres always a lot of work to be done at commercial rates because our somebody contracts. So we've got we still got work to do but we've.

But we've made good progress and I think we're going to continue to make good progress I know, we are and we should see those rates.

Continue to go up as we go forward to carry when you say the increases that we're seeing they're not one person increases there in some cases double digit price increases yes.

Three to five or 6% increases we're just touching the oil portfolio. Yeah. That's right, we're getting 3% to 6% increases in year, one and over a three year period, a lot of times if I could.

10% to 12% increase over that three year period that we've got built that.

And also say, we're also making progress on some of the other Medicare advantage contracts because those are those are a focus for us as well as we can impact and we've terminated.

Are those contracts I mentioned in my remarks.

But there are other ones that we can still make renegotiated and we're working on those.

Those as well.

Medicare advantage is becoming a bigger portion of our Medicare visits overall and so we've got and that we can we can address somewhat we can address what CMS hands down, but we can address at least certain extent does Medicare advantage contracts and how they relate to the CMS rates.

Okay. So you say on the commercial is just kind of accumulates.

Accumulates over time, because you obviously you have a three year contract. So you negotiate renegotiate it second third have you broken then you're negotiating.

Another third.

Sort of like Oh, let's say up here, you're going to have a.

That's flowing through to that book. So eventually it's going to be more reflective of what's going on in all of the contracts versus not.

Contract, so that makes sense and I'll just last comment on the M&A part of the business.

So is there a way to think I know, it's a small portion by the two appointed because they thought the Medicare.

Population, so how I guess how.

How to think about the portion of that business that already kind of you know.

Oh boy suites that question that how big is the question that kind of you're still trying to.

We negotiate or or a drop this contract.

So within Medicare or a commercial advantage here in Medicare advantage.

Hey, yeah.

Yeah, Yeah, Yeah, so right now I'd say.

Medicare advantage.

It's grown as a percentage.

Around 40, 40% to 45% of our total Medicare bucket. So if you look at all the Medicare visits it's about 40% to 45% of it.

And that's up from where it was.

Upper thirties last year at this time, so that piece, there's been a push to get people to Medicare advantage.

I'd say, we're still early innings on that thing we've done some really good work as it relates to.

<unk> some of these contracts that we just know we're not they're not.

They are not suitable and so we terminate those so we've identified the primary ones that are in that situation. We've got still others to address again, we've made progress on that as well and those are the same kinds of increases we're seeing a lot of times those are double digit right off the bat because we're going from.

B.

Were they paid 80% to 85% of Medicare and bumping that up to 100% or maybe from 80 to 90, but those are really nice sizeable increases on some of those contracts were making.

Okay, good to hear and the last piece I guess on the pricing.

Workers comp, so where do you stand now in terms of your mix and I guess.

Because that's the highest.

Right alright, with the different payers right. So what's the mix there and kind of I know you've kind of you.

The buckets, so to speak with clients.

And I guess it was there was some work being done to kind of piggy back maybe 2% to 14% pre COVID-19, so kind of any update on that front. Thank you.

Yes, so far our mix.

Go ahead, I'm sorry, Eric.

Yes, I was going to I was going to way and this is Eric Williams in terms of where we're headed on the work comp side. So yeah. We started putting in a lot of efforts second quarter over last year to rebuild some of the relationships with the networks, we brought back in.

The individual who actually built the work comp program for us years ago.

And in second quarter of this year. This is the third straight quarter, where we saw an uptick in volume still a lot of opportunity. The volume. We actually saw in Q2 was the highest volume we've seen over the course of the last six quarters. So we signed some new network agreements here beginning of the year, we've got a number of additional contracts in play right now and we feel optimistic.

Mystic in terms of our ability to continue to drive this as a higher percentage of our mix. It was just under 10% here in Q2 this year.

And I'd, just say for workers' comp to increase as a percent of the mix is really notable because as you know our volumes has been increasing pretty significantly you said they are they are increasing at a pace that is greater than our overall increase so that's that's good and they were closer to 9% in the first quarter as part of the mix in Workers' comp is about 10.

In the second quarter.

The address just kind of the mix overall.

Joanna that commercial was about 47% in the second quarter Medicare study for Workers' comp it's 10.

Medicaid was about three 5% and then there's just everything else, which is maybe 6% or so.

Great. That's super helpful. If I may just squeeze a last one on pricing and I guess the outlook into next year with the Medicare proposal calls for.

All land.

Quarter weight got us, so which that was finalized would be would be worse than 2023 way <unk>. So.

You know what.

What's your take on that proposal and how much work I guess is being darn what's your what's your visibility to Congress stepping in again and trying to lessen that card here.

So obviously those.

The proposed rule came out middle to the end of July as it does every year. So we're early in that process exam I mentioned <unk>.

In my prepared comments.

Liberty Partners grew.

<unk> leadership.

Thank you.

All of our individual member companies are.

Our very active in Washington.

A full court press.

We just unfortunately.

It's difficult.

When we get finalized in December on a short runway.

Change is necessary.

We've come out of it.

Overcoming some missed this a few years.

Misplaced.

These reductions.

They're pushing on.

Probably the greatest value in the health care.

Our return increased both the function from significant significant injuries.

And surgeries, which sell for physical therapy.

But it's early summer.

So we've got as we.

With the past a lot more work to do I'm hopeful we'll make progress.

Not really.

Gives you a much more than that on a crystal ball, because I don't know yet, but we're going to we offer.

So directionally.

So thank you I appreciate the color.

Thank you Josh.

Thank you we'll take our next question from Larry Solow with CJS Securities. Please go ahead.

Sure.

Great Hey, good morning, guys.

Lots of my questions answered already but could you just feel like it's just.

Topic to death here on the pricing, but it does feel like I guess just in terms of your guidance just on the shorter term.

It feels like you have a little bit of a tailwind at least going into the back half just from fixing up some of the scheduling.

It's alignments and walking away from some of these Medicare.

Granted that you just spoke to so again not us.

I'll give you.

Todd on the back half of pricing, but perhaps this is always the low watermark for the year.

We slowly work my way up in the back half.

Besides.

We do believe there is potential to move that rate up yes based on the things that we've talked about today the things that we think is addressable.

And related and related to the work we've already done.

Obviously, the negotiations as much more of a multi year thing and you touched on sort of a pause.

Not getting 1% price increase youre getting.

More than that or a lot more than that mid single digits or whatever but you have so many contracts right.

Uh huh.

Right, but you are only moving 5% of the time or whatever right. So it gets divided by 'twenty or maybe not that much but.

Have a multiplier effect.

So fair to say that you're still probably havent worked through.

A lot of our majority of contracts haven't changed.

Right.

That's helpful.

Yes, thats right not not even close we've got a lot more to date right.

Right right Okay.

Okay, Great I guess just in terms of volume.

Well good strong first half.

Back half of the year.

What do you think sort of incorporating your kind of average.

Average volume in the first half with like for 48% up we'll look at both quarters.

Do you expect those trends to continue in the back half or more I think more total it's about 2% to 3%, which is what we actually saw this quarter, but.

Any thoughts on that.

Well I mean, if you if you look back.

So last year.

The front part of last year.

Didn't have the scarcity.

Really became acute.

I would say probably in June of last year and forward.

We have a question.

All the other things and so the first half of this year actually the part that we are in our just completed.

Her comments.

Second half.

Year ago, a 22, we actually recruiting address the over volume.

We might have just because staffing or so so I can tell you.

Easy right now.

A lot better than a year ago, we've made adjustments.

The team has done a really good job.

So I'm, hoping we can expand some of those same store.

The numbers just because.

Sure.

Just continue to be strong comp is a little bit weaker in the second half.

Yes, the weekend here, though.

I'd say the first quarter was such a big jump because it was kind of I guess.

We've never experienced volume like that in January and February , particularly and so that was a really nice jump in the first part I wouldn't expect it to get back to like the 6% mature clinic growth.

No.

And the second half of the year, but.

But as Chris mentioned that comps are a little bit are not quite as strong as you go into the back half of the year.

Gotcha, and you'd probably obviously like you said more well better position that.

In the beginning I was back Kevin where last year. So in terms of your staffing.

Okay, just last question, Karen what while you're here.

You mentioned, you've got really good jobs.

Uh huh.

Per visit basis are down.

Overall costs are really hung in that overall margin over the last few years.

She had been pretty steady despite.

Rapid inflation and price pressure.

<unk> really come out of it.

Can you just explain to me.

So I just look on a year over year basis, your margin salaries as a percentage of.

Our revenue and.

It's still up is that just more of a function of the acquired clinics pricing or what's kind of driving that.

Yes.

It's a complicated because when youre looking at those percentages you're looking at.

That will impact right. There is the impact of volume and there is impact of rate and so when you I think the rates and how that influences revenue when youre looking at those costs as a percent of revenue is it really is what impacts that.

Yeah.

We agree.

It's driven off.

It's a driver so reflective of the.

Pressure.

I think we've done pretty well with the pressure on that rate.

That's why the best metric, we believe to look at it are those cost is looking at on a per visit basis.

So I totally understand why you do that for sure okay. Great I appreciate that color. Thanks, Scott. Thanks again.

Thank you as a reminder, if you would like to ask a question. Please press star one at this time.

We'll take our next question from Matt <unk> with William Blair.

Hi, this is not one moment.

Hi, guys, it's Matt on for Matt.

One on the <unk>.

Segment.

I know it was down slightly this quarter and you mentioned that.

Some contract you talked to some customers delaying contact or pushing them back they're putting pas on them with the macro environment starting to improve have you seen these customers re engaging wanting to restart contract beginning discussions for that at all.

No.

I'm going to tell you and I don't know that.

With that.

Hey, Good day close to know we have certain contracts where people were concerned.

We know that.

They are not.

I honestly I think.

I think.

Things are coming still with those few customers not a lot.

We waited on the tech side.

The business was.

Their business is heavily tech influence I still think they're there.

Same outlook that they were before.

Said that we've added new.

Customers this year.

Across both partnerships, we further diversified our.

Client base.

But to my knowledge and Eric you might speak to I don't know if youre seeing any reversals that are meaningful.

No I would agree with that I think you summed up something about perfect Chris I mean.

The IAC businesses have done a nice job of trying to diversify their portfolios.

The tech sector and the automotive sector got hurt really hard and that was business that we saw fall away.

The tail end of last year, we've seen all the customers on the retail side and distribution side actually increase so on a macro basis I think things have stabilized.

And I think there is opportunity for growth here going forward, but not near as robust as it was in 2022.

Okay.

Great. Thank you and then again on IP can you talk a little bit about what you would expect.

2023.

A more muted year, the long term growth for that segment to be I think last year same store growth was in the 20% range for the first three quarters of 2022. So just what can we expect that segment to grow overtime.

Okay.

Okay.

We haven't had IPO long growth discipline extraordinary.

So for me right now, but there's many moving parts as they're in.

Between politics and the economy.

And interest rate environment.

All of the many things influence.

<unk> and cfos to make decisions.

Uniform.

Across.

Cross the country because different sectors as Eric mentioned it.

We'll cover at different rates or get hot or cold, but at different times. So.

I expect us to be.

Head of our PT growth and to be very positive as we go forward all other macro things being relatively stable in equal we've demonstrated that we can grow this business through acquisition.

Clients generally speaking a very very sticky.

With us most clients expand particularly windows.

This client.

Numerous operations physicians around the country.

I'm not going to market and be able to peg.

Growth rate at this point because.

Don.

Thanks.

But are clear enough to do that.

Got it thank you.

Thank you at this time, we have no further questions in queue I will turn the call back to Chris reading for any additional or closing remarks.

Yes, thanks, everyone.

We know recovered.

We appreciate your time and attention this morning, and carrying out our available today and the rest.

The region mix, we've got a board meeting strong part of next week.

That will come back up for so many questions or any follow ups necessary.

The call have a great day.

Paul.

This concludes the U S physical therapy second quarter 2023 earnings conference call.

May disconnect your lines at this time and have a wonderful day.

Thanks.

Okay.

Okay.

Yes.

Yes.

Okay.

Okay.

Okay.

Yes.

Yes.

[music].

Yeah.

Uh-huh.

Okay.

Yes.

Thanks.

Okay.

[music].

Okay.

Okay.

Yes.

Okay.

Okay.