Q4 2024 U.S. Physical Therapy Inc Earnings Call
Graham its Ben again.
[music].
Speaker Change: Good day, and thank you for standing by welcome to the U S physical therapy fourth quarter 2024, and full year 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.
Speaker Change: During that session. Please press the star key followed by the number one on your telephone keypad.
Speaker Change: Be advised that today's conference is being recorded if you require any further assistance. Please press star then zero.
Chris: I'd now like to turn the call over to Chris spreading Chairman and CEO. Please go ahead Sir.
Chris: Thanks, David Good morning, and welcome everyone towards U S physical therapy fourth quarter and year end 2024 earnings call with me on the line. This morning include Carey Hendrickson, our CFO, Eric Williams, our President and C O east bring them read or see or west Rubinstein our exec.
Jay Martinez: The Vice President General Counsel, Jay Martinez, Senior Vice President of Finance and accounting.
Jay Martinez: Before I begin this morning, with some color on the quarter and the year, we need to go ahead and cover a brief disclosure Jacobs with twist.
Speaker Change: Thank you Chris the presentation includes forward looking statements, which involve certain risks and uncertainties. These forward looking statements are based on the Companys current views and assumptions.
Jay Martinez: The company's actual results may vary materially from those anticipated.
Jay Martinez: Please see the company's filings with the Securities and Exchange Commission for more information.
Jay Martinez: Presentation also contains certain non-GAAP measures as defined in regulation G and related reconciliations can be found in the company's earnings release and the Companys presentation on our website.
Jay Martinez: Yes.
Thanks Jake.
Speaker Change: Hey, everyone I want to begin this morning by thanking our clinician partners and our leadership and support teams for their tireless work. This year on behalf of hundreds of thousands of individual patients.
Speaker Change: Lives, we've helped to positively impact how we interact in a very personal and professional life improving way with.
Speaker Change: With a physical therapy intervention cross more than 5 million patient encounters.
Speaker Change: I'm, particularly proud of all of our facilities for the so the way patients feel about them with a net promoter score across their network of 93, which as you know is outstanding.
Speaker Change: A group of care ratings of 4.9, and the demand for our services has never been higher than it has been these past 12 months in the fourth quarter, we established a new high watermark and visits per clinic per day across our portfolio of partnerships at $31 seven compared to 29.9.
Speaker Change: In the prior year's quarter.
Speaker Change: Total patient volume grew 13% year over year and despite the Medicare rate reduction, we absorb again in 2024.
Speaker Change: The needle upwards to her overall net rate.
Speaker Change: Through our re contracting efforts of our commercial plans in combination with some outsized growth of our work on boarding as well that combination lifted our rate for the quarter to 104, 73, and we expect to continue to make progress from there in the new year.
Speaker Change: Our challenge all year, which we continue to work on surrounds our costs to deliver the outstanding care that we provide due in large part to the very competitive environment. We've been in the higher enough therapists, which you can see from our daily visit numbers that we're doing.
Speaker Change: But of course, the visit continues to be something that has remained more difficult and we expect it to resume.
Speaker Change: That front, we've continued to make adjustments where needed across our portfolio of partnerships, especially in support and related roles along with our part time employee base.
Speaker Change: Additionally, we are piloting.
Speaker Change: And AI driven notes system, which should help to decrease the time spent generating a note and a patient seeing a more well helping to improve our overall clinician efficiency. We're also piloting.
Speaker Change: Technology that would allow us to staff more clinics front office, just virtually or in combination with local and virtual staff.
Speaker Change: Juice, our overhead burden that way.
Speaker Change: Please note this cost promise as a promising made and one we intend to keep the entire team is working to deliver on that.
Speaker Change: 'twenty 'twenty four proved to be a very good development year for us we completed seven acquisitions fixing P. T across a variety of states, including Wyoming, Pennsylvania, Colorado, which was a new state for us and doing exceptionally well.
Speaker Change: And over the and of course, our entry into New York with our Metro P. P deal announced in November of last year.
Speaker Change: In fact during the fourth quarter alone, we added approximately 70 clinics and a combination of acquisitions and de Novo locations, which will provide a great jump start for us in this new year.
Speaker Change: Yeah.
Speaker Change: I'm, sorry, excuse me.
Speaker Change: One of our completed acquisitions last year was in our injury prevention business with long standing well respected provider in that space.
Speaker Change: That has gone very well and our entire injury prevention business has continued to grow at a very nice clip overall.
Speaker Change: Fourth quarter revenue grew more than 32%, which was a strong finish to an equally strong year overall, where revenue grew again for the year nearly 24% to approximately 97 million with the gross profit increasing 21, 5% for the year.
Speaker Change: Much of that is organic growth.
Speaker Change: Speaking of organic growth, we continue to expand into new industry verticals.
Speaker Change: Your year end we've landed.
Speaker Change: A very large approximately 50 F T E contract with one of our nation's premier auto manufacturers that contracting impacted our margin a little bit as we ramped staffing up quickly after winning that competitive engagement.
Speaker Change: We have a lot of information to cover so I'm going to turn things over momentarily, but let me say this our industry has been in a tough wash cycle for a few years.
Speaker Change: But we're going to come out of this stronger I believe than we were found.
Speaker Change: Foundation Lee we have developed significant muscles that maybe when things were easier where underused muscles.
Speaker Change: Needed to drive exceptional volume.
Speaker Change: The ones that allow care delivery at an exceptionally high rates of patient affirmation for the appreciation of the benefit of that care.
Speaker Change: The ones that allow us to grind through challenging rate negotiations, which have lifted our rate despite cuts from the government, which we expect to sunset shortly.
Speaker Change: And if we are there we have erred on the side of people and relationships and making sure that we had the resources to do all that was necessary.
Speaker Change: For our patients and their care.
Speaker Change: Not done and we are committed to making progress in this important area.
Speaker Change: And with all the positive momentum to our development efforts for new clinics, new partnerships in territories.
Speaker Change: Along with record volume, we have a lot to be thankful for as we head into this new year.
Gary: Gary we have a lot to cover so once you take it from there.
Gary: Great. Thank you, Chris and good morning, everyone.
Gary: We reported adjusted EBITDA for the fourth quarter of 2024 of $21 $8 million, which compared to $19 million in the prior year, our adjusted EBITDA margin using minority adjusted revenues like our adjusted EBITDA was 15, 2% for both the fourth quarter of 24, and the fourth quarter of 'twenty three.
Chris: Our average visits per day as Chris noted were a record high for any quarter in our history at $31 seven or <unk>.
Chris: VIX visits per day benefited from our action to close 32 underperforming clinics in the third quarter, which had a lower average visits per day than the rest of our clinics.
Chris: On a month by month basis October visits per day were at 31.5 November was at $33, One and December 31 point in time with each month being a record high volume for that particular month.
Chris: For the full year, our average daily visits per clinic was $30 four which is the highest amount for any full year in our history.
Chris: Our net rate of $104.73 in the fourth quarter of 2024 was it $1.05 per visit are higher than the fourth quarter of last year, even with the one 8% Medicare rate reduction by CMS that went into effect as we you know at the beginning of 'twenty 'twenty four.
Chris: Excluding Medicare RAC was up $1.57 per visit or one 4% over the fourth quarter of last year.
Chris: The fourth quarter rate was a little lower than the second and third quarters in 2024, primarily to the addition of metro and the fourth quarter and their average rate.
Chris: Wondered and $2.54 was lower than our overall average rate.
Chris: Excluding Medicare and Metro our net rate was up approximately two 5% in the fourth quarter.
Chris: For the full year, our net rate in 2024 was $104 70.
Chris: 71, excuse me $1.91 increase over the net rate of $102 80 in the fourth quarter of 2023.
Chris: This includes a 1.8% Medicare rate reduction in 24, if you exclude that our full year net rate increased three 1% in 2024 as compared to 2023, we continue to benefit from our strategic priority of increasing reimbursement rates through contract negotiations with commercial and other payors and our focus on growing.
Chris: Our workers comp business.
Chris: Also focused on maximizing our cash collections to improvements in our revenue cycle management.
Chris: Right for each major category of payers other than Medicare increased year over year.
Chris: And we will remain focused on rate enhancement right enhancing initiatives in 2025.
Chris: Physical therapy revenues were $153 $8 million in the fourth quarter, 24, which was an increase of $19 2 million or 14, 2% from last year's fourth quarter. The.
Chris: The increase was driven by a higher net rate.
Chris: Three 1% increase in visits in our mature clinics and the addition of Metro in November which had.
Chris: Approximately $10 million of revenue in the months of November and December.
Chris: Our physical therapy operating cost were $124 $3 million, which was an increase of 16, 6%.
Chris: Approximately half of the dollar increase of $17 $7 million was related to metro.
Chris: Excluding acquisitions, our salaries and related cost per visit was $61.92 in the fourth quarter of 'twenty, four which compares to $59.72 in the fourth quarter of 'twenty, three which is an increase of three 5%.
Chris: If you exclude acquisitions, our total operating cost per visit increased just one 7% moving from $84 nine since the fourth quarter of 'twenty three to $85 50 in the fourth quarter of this year.
Chris: Our PBT margin was 17, 9% in the fourth quarter of 24 compared to 19, 5% in the fourth quarter of 2000 last year 23, excluding acquisitions. Our PT margin was 18, 5% in the fourth quarter of this year 'twenty being 2024.
Chris: Our IP team as Chris noted produced excellent growth in the fourth quarter and for the full year of 2020 for our IP net revenues were up 32, 1% over the fourth quarter of 'twenty three.
Chris: With IP income up 15, 6% over the prior year.
Chris: Excluding the <unk> acquisition that we made earlier this year, our anti <unk> revenues were still up 16, 5% with a gross profit up high single digits.
Speaker Change: Our op margin was 18, 5% in the fourth quarter of 24 and as Chris noted the large new auto a client that we added in the fourth quarter needed a margin a little bit in the fourth quarter for the full year. Our IP revenues were up 23, 8% with IP income up 21, 5% and a margin of 20.
Chris: 6%.
Chris: Our corporate office costs were in line for about the fourth quarter and the full year.
Chris: Eight 6% of our net revenue in the fourth quarter of 2004, and eight 7% of net revenue for the full year of 2024.
Chris: Our operating results were $7 $8 million that compares to $8 9 million in the fourth quarter and 23 in the fourth quarter of 2024, we did record a $1 million true up which increased our income tax expense.
Chris: $1 million should not be factored into our go forward effective tax rate.
Chris: Our first fourth quarter 2024 operating results were also impacted by lower interest income since we deployed our invested cash in acquisitions in the fourth quarter and higher amortization expense, which is noncash course, which increased due to the acquisitions.
Chris: Our balance sheet continues to be in an excellent position, we have $146 million of debt on our term loan with a swap agreement in place that places the rate on that term loan at four 7% and that rate will extend through the middle of 2027.
Chris: In addition to the term loan we also have $175 million revolving credit facility that had just $11 million drawn on it at December 31 2024.
Chris: Our cash balance at the end of December was $41 $4 million and in 2024, and we deployed $133 million of cash into acquisitions, and we bought back more than $9 million of interest from our existing partners.
Chris: Acquisitions will continue to be our primary focus of capital allocation and our capital structure is well positioned for it.
Chris: Also of note our board increased our quarterly dividend rate from 45 per share to <unk> 45 cents per share effective with our first quarter dividend.
Chris: Yeah.
Chris: Looking to 2025, we expect our full year 2025, EBITDA to be in the range of $88 million to $93 million, we have the Medicare rate headwind as we enter the year as we've noted a two 9% reduction, which equates to approximately $6 $4 million of revenue and $5 $7 million of EBITDA, but we'd still expect good growth in <unk>.
Chris: <unk> 2025, with the full year contribution from the acquisitions, we completed in 2020 for the full year impact of a payer rate increases that we completed in 2024, and then a partial year impact of the ones that we will complete in 2025.
Chris: Continued volume increases at our existing clinics and continued double digit growth in our IP business.
Chris: As we noted in the press release, we expect the first quarter to be our lowest EBITDA quarter of the year, that's consistent with previous years, just due to normal seasonal factors likely somewhere around 20% of our full year EBITDA in the first quarter.
Chris: With that I'll turn the call back to Chris and we will take questions.
Chris: Yeah, Thanks, Kevin Great job.
Chris: Operator, let's go ahead and open it up for questions.
Chris: Absolutely at this time, if you'd like to ask a question. Please press the star and <unk> on your telephone keypad keep in mind, you can remove yourself from the question queue with anytime by pressing star and two.
Speaker Change: We will take our first question from Brian <unk> with Jefferies. Please go ahead. Your line is open.
Good morning, Hey, good morning, guys.
Speaker Change: Good morning, My first question Kerry as I think about the growth assumptions that are in your guidance.
Speaker Change: I know, there's a Medicare rate cut.
Speaker Change: Curious, how youre thinking about volume growth number one and then kind of like your rate trajectory, knowing that theres, a Medicare rate cut coming in and then maybe also the impact of the 32 clinics that you closed.
Speaker Change: Yeah. So.
Chris: Sorry go ahead did you want to say something Chris.
Speaker Change: No go ahead Sir.
Speaker Change: I'll start with the closure of the clinics that closer to the clinics.
Speaker Change: Does that makes about a positive $1 $5 million impact on our 2025, they had a loss of that $1 $5 million in EBITDA in 2024 in those first nine months prior to closing them. So that'll be a positive for 2025 as far as rate.
Speaker Change: We do have the two 9% Medicare rate reduction that we're going to continue to grow all of our other payers. We are constantly looking to increase those rates based on negotiations. We're in the middle of right now we've got some.
Speaker Change: Some of the.
Speaker Change: Some of our larger states that we're in contract negotiations on right now and expect to see some increases in 2025. So we still expect our rate even with the two 9% reduction in Medicare our rate, we expect to increase in 2025, maybe not at the rate. It did and then when you.
Speaker Change: Compared to $24 23, just because we had a larger Medicare rate reduction, but we're going to we're going to increase the rate in 2025 I'm confident in that.
Speaker Change: And then as far as volume at our mature clinics I think.
Speaker Change: We go into the year of 2025 expecting to see continued growth in that we had 3% visit growth in the fourth quarter and I think we can achieve that certainly in 2025 somewhere in that 2% to 3% range at a minimum.
Chris: Chris any comments from you.
Chris: No I think that's right and.
Chris: The team continues to work on all these foundational fundamental issues.
Chris: We expect to make continued progress in all those areas.
Chris: I understand and then Chris maybe as I think about recruiting and retention and wage inflation. Obviously is still an area of focus maybe a little bit of a challenge.
Chris: Curious what do you think the dynamics are there and are we getting close to the end of that trend or just anything you could share with us on your thoughts there.
Chris: Yes, Brian I wish I knew I mean, it's difficult for us to project what demand is going to look like certainly.
Chris: Our internal and external factors the number of people that are in physical therapy school graduates. The geographic distribution of those there are a lot of factors, so a little bit difficult for me to project.
Chris: When things change I will tell you that we've made some investments this year.
Chris: In infrastructure and people we.
Chris: We hired a number of individuals', we upgraded systems on the recruiting side.
Chris: Change how we're.
Chris: Addressing the market on the recruiting side, we're seeing some definite improvement in that area significant measurable improvement.
Chris: Total improvement from our partners, they're seeing more applicants than they've seen in them.
Chris: Very very long time, but in terms of the rate the.
Speaker Change: The rate is always determined by the.
Speaker Change: The competition and your ability to differentiate yourself compared to others, we certainly have the balance sheet and the stability.
Speaker Change: Parison too.
Speaker Change: The vast majority of our competitors.
Speaker Change: So a lot of stability there, but it's a competitive market right now and if we want to continue to grow volume or you have to remain competitive and we expect to.
Speaker Change: Got it alright, thanks, guys.
Speaker Change: Thank you. Thank you.
We will take our next question from Larry Solow with P. J S. Securities. Please go ahead. Your line is open.
Speaker Change: Hey, great. Thanks, Good morning, Hey, Good morning, guys can you I guess just piggybacking on Bryan's question. So just on the on the volume outlook.
Speaker Change: For this year.
Speaker Change: 2% to 3% because I think it was a little bit less than that in 'twenty four I never sort of some.
Speaker Change: Some staffing constraints and whatnot. So I guess question is it sounds like some inflationary pressures are still there but.
Speaker Change: Dave.
Dave: Things aren't wont get fixed overnight, but I know you've.
Speaker Change: <unk> got several initiatives underway.
Dave: Do you think staffing will still be.
Dave: Constrain on that volume or or will that be more just a cost impact in terms of the staffing side.
Dave: Yeah look I mean, we always have puts and takes from a staffing perspective, when you have approaching 800 locations youre going to have.
Dave: Miami potentially or are you fully staffed.
Dave: And then others, where you're intermittently looking.
Dave: For one reason or another either volume growth is exceeding your current capacity or have somebody relocate things.
Dave: Things happen generally speaking.
Dave: We're making progress on the recruiting side, our retention has been good.
Dave: And so I expect that we're going to be able to address the volume.
Dave: As we go forward with the investments that we've made in.
Dave: Little better fashion than we did you know.
Dave: Last 12 to 18 months, having said that I don't know that I'm prepared to give you.
Dave: Radically different volume number as we start this year, let's see how it plays out.
Dave: Everybody is working very hard to deliver on that as we have.
Dave: Both delivered and work on that.
Dave: Issue and you know, we'll see how the year comes through.
Dave: That's fair.
Dave: You spoke about several initiatives and yet you kind of highlighted that again.
Speaker Change: Our press release.
Speaker Change: This is a moving target it sounds like there's a lot of moving parts, maybe inflation is probably more resistant than we thought but.
Speaker Change: Maybe a few months ago, but I know last I think last quarter, you threw out like a 10.
Speaker Change: $10 million of ultimate cost savings number without an actual timeline.
Speaker Change: Again, do you still feel comfortable maybe not that $10 million exact number but that we're moving in the right direction and there there are excess things you can cut out or efficiencies that you can build in.
Speaker Change: Just takes time is that kind of fair to say.
Speaker Change: Yes, I think it's fair I think it's fair look.
Speaker Change: You know, we're not perfect we have.
Speaker Change: I think delivered almost everything we said we were going to do this is the one area that we've got to continue to work at and it is challenging.
Speaker Change: Our partners tendency is to err on the side of making sure they have enough people.
Speaker Change: Probably the right side.
Speaker Change: Generally enough people to take care of staff with.
Speaker Change: With inflation, we've got to figure out a way.
Speaker Change: Not to be moment to moment.
Speaker Change: With flat resources and it doesn't take a lot of that.
Speaker Change: Yeah.
Speaker Change: We're between 50 and $75 a day.
Speaker Change: Per clinic aggregates up to.
Speaker Change: $10 million to $15 million.
Speaker Change: Pretty quickly.
Speaker Change: So we think.
Speaker Change: A longer period of time in addition to the basic things that the operations team is working on daily with our partners to make sure that ours match.
Speaker Change: Precisely worked volume demand.
Speaker Change: We're hopeful that the.
Speaker Change: Front desk.
Speaker Change:
Speaker Change: Initiative around virtualization will give us the ability to.
Speaker Change: Scaled back there and be more efficient, particularly across smaller locations.
Speaker Change: A number of locations virtually.
Speaker Change: And then we're hopeful that the AI scribes system that we're using.
Speaker Change: For documentation helps to make our clinician today, a little bit more efficient and therefore potentially a little bit more productive and so that's going to take a little time of course.
Speaker Change: And so those are those are newer.
Speaker Change: Recent changes in addition to the day to day focus that.
Speaker Change: Oh golly.
Speaker Change: And we have more work to address so we've got we've got to deliver some results.
Speaker Change: And just lastly on the CMS cut it obviously, it's a multiyear headwind it does feel like and I know you I think you mentioned that two new releases that we again government is you never know exactly what's happened, but it sounds like it could be at the end of that four or five years of cuts.
Speaker Change: Yes, we should be.
Speaker Change: Definitely should be.
Speaker Change: Historically, you know according to the way.
Speaker Change: This original law was drafted around neutrality in the fee schedule.
Speaker Change: Beyond that we have.
Speaker Change: Now absorbed particularly with interest all of the rate cut that was prescribed at the beginning which was an onerous.
Speaker Change: Hum you know kind of wrong headed caught that wasn't supposed to be directed towards physical therapy.
Speaker Change: Or any way.
Speaker Change: We continue to be frequently in Washington, and have a lot of discussions with key members.
Speaker Change: Have a bill.
Speaker Change: That is.
Speaker Change: Entitled That's the Safe Act, which we think can be used no can be used as a favor to offset some of the potential increases in the entire physician fee schedule.
Speaker Change: <unk> is designed to reduce.
Speaker Change: False, allowing Medicare patients to get a screen without a copay physical therapy office.
Speaker Change: So we have a lot of traction with that or hoping that something that comes to pass this year. So we're making progress.
Speaker Change: Tough series of years, but we're hoping to come out.
Speaker Change: And it'll be nice to have what we hope to be neutral to forward years again.
Speaker Change: Future.
Speaker Change: Great. Thank you guys I appreciate all the color.
Speaker Change: Yeah. Thanks Hillary.
Speaker Change: We'll take our next question from Jared <unk> with William Blair. Please go ahead. Your line is open.
Jeremy: Good morning, Jeremy.
Jeremy: Good morning, and thanks for taking the questions maybe I'll ask on the <unk> segment. It looks like that accelerated on an organic basis to end the year just wanted to make sure I understand what drove that acceleration. So is that largely cross sell driven any new logos that.
Jeremy: There were material in the period and then obviously you mentioned kind of expecting that double digit growth profile to continue can you just remind us I guess what level of visibility do you have in that trend.
Jeremy: At a forward year basis.
Jeremy: Yeah visibility is really good I mean, you know barring some major change.
Jeremy: Which would be unforeseen I think we've done a pretty good job over the seven years or eight years.
Jeremy: Now going into this year that we've had.
We had one year that was flat and we had visibility into some anticipated change several years ago.
Jeremy: And beyond that we've been consistently double digits and so one of the things that our team has gotten particularly good at and I'm really proud of them, but CEO for for our largest injury prevention company was in town.
Jeremy: Weak.
Jeremy: That team has done an exceptional job.
Jeremy: In cross selling and the acquisitions that we brought in have added to our industry vertical types of industries that we serve we've also broadened our offering over time.
Jeremy: Over that same period of time, we've gotten much much better at cross selling and so.
Jeremy: Those are two significant components. In addition to the fact that more and more companies are becoming aware of the injury prevention.
Jeremy: And necessary part of preventing their massive musculoskeletal spend issues it's problem.
Jeremy: For our country.
Jeremy: Across many many industry segments and so.
Jeremy: That combination.
Jeremy: We did an acquisition earlier in the year I think it was probably April of.
Jeremy: 2020 for that acquisition.
Jeremy: Gone well the integration has gone well.
Jeremy: And again, you know over a period of time the team.
Jeremy: Added to it matured and just doing a really nice job.
Jeremy: All of those guys.
Speaker Change: That's great.
Speaker Change: For color and then I'll, maybe ask a related question on the same segment I was just curious the large competitive wins that you cited in the fourth quarter I was hoping to hear any color in terms of how do you frame. The key characteristics that I guess differentiated your services, allowing you to win that larger clients.
Speaker Change: Yes, so one of our injury prevention partnerships.
Speaker Change: It has had.
Speaker Change: Really really strong success in the auto industry you know they they serve a number of the worlds biggest auto manufacturers already.
Speaker Change: This was a particular auto plant in the U S.
Speaker Change: Which was being served long standing by a large competitor it was competitive process.
Speaker Change: And I think you know these companies they talk.
Speaker Change:
Speaker Change: Certainly there are components of.
Speaker Change: Price that come into play, although I don't think we were particularly.
Speaker Change: <unk> aggressive in terms of our pricing necessarily but the service that we provide and relationships with our staff and the consistency of the teams I think has stood out over time and look we win some we lose some of this one was a great win for us.
Speaker Change: Caused us to have to staff up quickly, which compressed our margin a little bit which saw in the fourth quarter.
Speaker Change: Contracts in general little tighter margin in some other industries.
Speaker Change: But I'm proud of that team as well theyre doing a great job.
Speaker Change: They have a lot of good things in the works for this coming year.
Speaker Change: Perfect, that's great to hear and I'll hop back in queue. Thanks.
Yeah. Thank you Sharon.
Speaker Change: We'll take our next question from she didn't Shanghai with core partners. Please go ahead. Your line is open.
Speaker Change: Yeah.
Ryan Coyne: Okay Christian Kerry this is Ryan Coyne from court.
Speaker Change: Can you guys hear me okay.
Ryan Coyne: Yes.
Ryan Coyne: Good morning.
Ryan Coyne: Just trying to better understand the <unk>.
Ryan Coyne: EBITDA budget for 2025 at the midpoint of 95, given the 88% to 93.
Ryan Coyne: Guidance.
Speaker Change: It seems like full year 2024 has about two months of Metro, which you noted that was about $10 million of revenue for November and December and if I can.
Speaker Change: Kind of imply there EBITDA margin of about 19% to get me to about 2 million Bucks of EBITDA. So if I back out those two months for 2024, I kind of get to an $80 million EBITDA number and if I just.
Speaker Change: Simplistically add on 12 million Bucks of metro to that okay.
Speaker Change: You get an apples to apples comparison, I'm somewhat getting to a full year 25 implied $91.8 million of EBITDA, which is a little bit higher than your midpoint guide. So I'm just trying to better understand the puts and takes as it relates to the growth because it seems like.
Speaker Change: It seems like.
Speaker Change: <unk>.
Speaker Change: The average visits per day is record highs and it did.
Speaker Change: The demand dynamics are extremely high but we're just trying to better understand some of the cost as it relates to that that that budget.
Yeah, Let me just say this in carrier has some detail on some of the puts and takes but budgets actually a little bit higher than the midpoint of the range that we provided.
Speaker Change: These these guys you know aren't perfect and we try to frame it as best we can.
Speaker Change: You got to remember that we've got a Medicare reduction this year, which which takes out.
Speaker Change: A pretty significant chunk actually.
Speaker Change: Eliminates.
Speaker Change: A lot of the metro lift, which again, we're 50%.
Speaker Change: Remember that as well so Kerry do you want to you want to walk through the detail around that.
Speaker Change: First of all Ryan Thanks for the question, but your Metro estimate is a little high. So we do they have when we bought them. They had about they have about $12 million of EBITDA and.
Speaker Change: We haven't we own 50% of that so their EBITDA is somewhere around $6 million plus or minus a little bit. So that's so in.
Speaker Change: In the fourth quarter amount of EBITDA that you quoted was a little high to say they were probably about $1 million or so.
Speaker Change: In the fourth quarter from their contribution of those two months. So if you look at our I broke break it out into pieces. If you look at our contribution in 2025 versus where we were in 2024 from acquisitions, all our acquisitions probably somewhere around.
Speaker Change: $8 million to $9 million increase in 25 versus what we had from them in 24 IP is going to go out more than a little more than $3 million I would say.
Speaker Change: Then we have the Medicare reduction of $5 7 million and EBITDA.
Speaker Change: Corporate costs that are going to increase because we have.
Speaker Change: To support the growth as well as the initiatives from financial systems that we have in 2025, we need to upgrade we haven't upgraded our financial systems and a number of years, that's probably could be.
Speaker Change: $67 million and additional corporate costs, but still as a percent of revenue I think it will go down in 2025 years, whereas in 'twenty four and then Youre left with the core of that growing.
Speaker Change: And it's been a pretty good rate without the Medicare reduction.
Speaker Change: In 2025, it's fixed.
Speaker Change: $6 million to $10 million somewhere around there.
Speaker Change: Or I'll, just broad strokes, but that kind of gets you to where that midpoint range is.
Speaker Change: So hopefully that's helpful.
Speaker Change: I appreciate that additional color and then just one more if I may.
Speaker Change: It's obviously, it's great to see the net rate per patient the increase year over year to about 104.73, but it did take a little bit of a step down sequentially from Q2 Q3, as well just trying to understand some of the puts and takes there like.
Speaker Change: Can you help us understand that a little bit better.
Speaker Change: Yes got it.
Speaker Change: Yes, as I mentioned on the on the call.
Speaker Change: Metros average rate was lower than our overall average rate. So it's about $102 50, and thats lower than our than our rate was for instance in the third quarter of just about 105. So so when you add that and it brings that rate down a little bit, but it's still a nice increase even with that over the prior year.
Speaker Change: And we've got rating rate negotiations going on all the time and you have puts and takes it right, but we do.
Speaker Change: Still were able to increase that at a pretty nice rate in the fourth quarter, considering especially the addition of <unk>.
Speaker Change: Metro in there at a low rate it was two 5% increase in the in the fourth quarter of 24 compared to fourth quarter 23, when you exclude the Medicare impact as well as metro so looking at kind of apples to apples and everything other than the Medicare I still consider that maybe not quite as high as it was in the second and third quarters, but still up.
Speaker Change: Good increase year over year in the fourth quarter.
Speaker Change: Yeah. That's helpful. I appreciate it and then just keep going back to the budget comment for 2025.
Speaker Change: Okay.
Speaker Change: The folks here in Canada, who cover the name like.
Speaker Change: Like bridge, what the implied EBITDA margin would be for 2025 does it does it look similar to 2024, including or excluding metro or are we going to see a little bit of a step up there or maybe some a little bit.
A little bit of a decrease like how should we be thinking about that.
Speaker Change: Well when I when.
Speaker Change: When I look at our EBITDA margin as well as R. R.
Speaker Change: Well, let me just talk PT margin first P. T margin I think it's going to be relatively similar to what it was in 'twenty four and we've got we're going to have increases in.
Speaker Change: And in our cost increases in our costs that are normal and we talked about some of that is just going to depend on how much headway, we're able to make I think in our in our cost side, where that margin ends up for the year, but I think it should be somewhat similar to and hopefully growing a little bit from where it was in 2024 is what I would say IP margins going to be relatively similar.
Speaker Change: What it was in 'twenty four.
Speaker Change: I see but you guys don't disclose what the estimated actual margin would be.
Speaker Change: Okay.
Speaker Change: No. We don't we don't we don't talk specifically about that.
Speaker Change: Okay, well I appreciate the time, both you and we can follow up offline. Thank you very much appreciate the time.
Speaker Change: Youre welcome. Thank you.
Speaker Change: We'll take our next question from Constantine devotees with citizens JMP. Please go ahead. Your line is open.
Chris: Chris just on.
Speaker Change: Maybe you can just talk a little bit about your experience with metro now that you've owned that for four months.
Comment on the New York market more broadly since that's your first.
Speaker Change: Experience in there.
Speaker Change: And then just how you're thinking about opportunities to add de novo's underneath that logo in 2025.
Constantine: Yeah, I'm Gonna Constantine I'm going to kick this over Metro Let me, let me make a few comments and then I'll have Eric.
Eric Williams: Eric Williams to take that Eric.
Eric Williams: Right and center daily with Michael Metro Metro teams doing a great job, New York is going to turn out to be a really good market for us.
Eric Williams: A lot of growth opportunities not just in New York.
Eric Williams: Adjacent areas.
Eric Williams: Eric do you want to you want to touch a little bit on Metro and where we are.
Eric Williams: Yeah look we're excited about having this opportunity in New York I mean that whole northeast has really been an area that we haven't.
Eric Williams: Done a great job of penetrating them by picking up the metro business, which has a tremendous amount of density on long Island. We think we have the ability to grow not just in long island that into the other boroughs of New York and over to New Jersey, and now that we have a really strong management team at <unk>.
Eric Williams: That trial is going to open up some doors for us they have a very solid.
Eric Williams: De Novo pipeline for New York, a lot of tuck in opportunities that we're going to be evaluating as well. So I think it dramatically increases our ability to add to know, but I think we did 28 clinics last year, if I remember from a de Novo perspective.
Eric Williams: And I think metro is going to add substantially to that moving forward here in 2025.
Eric Williams: But one thing I know they do a lot of or at least some of its home based therapy and maybe you guys can just comment broadly on.
Eric Williams: How you think about that it at U S physical and.
Eric Williams: And what kind of opportunity you have to extend services beyond the four walls as a typical outpatient clinic.
Eric Williams: Okay.
Speaker Change: Good morning.
Speaker Change: Yeah, Let me, let me start and then you pick it up we definitely see home based therapy.
Speaker Change: As you know the next opportunity we've got a partner meeting coming up.
Speaker Change: Can be a big focus one of.
Speaker Change: Several focuses on service expansion.
Speaker Change: Retro spend a great job there.
Speaker Change: We have more plan go ahead there.
Speaker Change: Yes, I was going to add about I mean.
Speaker Change: The home care side.
Speaker Change: It was about 20% of their business, there and a lot of expertise.
Speaker Change: And again opens up the door with metro there not just to expand on the outpatient clinic side, but to expand on the homecare side as well. So we are excited about looking at that and looking forward to having Michael share with our other partners.
Speaker Change: We started and grew that product line. So we also think that creates opportunities for further growth at USB H.
Speaker Change: Great. Thanks for the color I guess, just one last question Kerry I apologize if I missed this but did you quote a workers comp mix for the quarter and then.
Speaker Change: Okay can you guys just talk about you know <unk> been in that market for a long time, just what's really driving some of the volume benefits.
Speaker Change: With respect to that part of the market and in terms of your ability to sort of reaccelerate.
Speaker Change: Growth in workers comp.
Eric Williams: Yes, I'm going to let Eric talk about that <unk> and he is really heading up our workers' comp initiatives, though Eric why don't you take that.
Eric Williams: Sure, yes, much like the radar initiatives. This is something we work really hard on over the course of the last two years in 2024 was was definitely a success for us.
Eric Williams: A lot of it goes back to significantly increasing the number of work top payer relationships that we had and really focusing on pull through all of those agreements. So you can take a look at eight a number of agreements that we had in place.
Three years ago was to go back to two towards the end of 2022.
Eric Williams: The number of those relationships and significantly increase pull through if you take a look at and I'll give you. Some Q4 numbers and then some some year to date numbers visits in the fourth quarter grew 11.6 year over year rate increased in that quarter of 7% and overall revenue increased 19, 5%.
Eric Williams: Quarter over quarter for work comp on a year to date basis.
Eric Williams: Similar total Robyn was a increased 15, 7% year over year.
Eric Williams: On an annualized basis visits increased 11, 6% and overall for the year. We went up about three 7% on rate. So it's about a focused effort we invested in some additional resources. We saw a lot of time with our partners.
Eric Williams: Teaching down what's a little bit different about handling a workers' compensation patient and relationship with case managers referral sources employers versus how you would do that for a traditional outpatient physical therapy patients. So is that infrastructure and training that we put in place are making a big difference for us and we have.
Eric Williams: Several more agreements still in process right now, which we expect to.
Eric Williams: Further help us grow our business in 2025.
In constant <unk> great.
Eric Williams: To your question about mix.
Eric Williams: It was.
Eric Williams: Workers comp mix was right at 10% in the fourth quarter of 2024.
Eric Williams: Yeah.
Eric Williams: It was down a little bit from the third quarter, but the reason is that metro doesn't have a significant component of workers' comp as the rest of our business does.
Eric Williams: On an apples to apples basis, our mix was 10, 4% in the fourth quarter just like it was in the third quarter of 24.
Eric Williams: Awesome, Thanks for taking the questions guys.
Eric Williams: Thank you.
Speaker Change: We'll take our next question from Mike Dusky with Barrington Research. Please go ahead your line Hey, Mike.
Mike Dusky: Hey, good morning.
Eric Williams: Lots of great information. Thank you.
Mike Dusky: So going.
Mike Dusky: Going back to Metro.
Mike Dusky: The net rate there I'm just curious did they have a decent amount of Medicare or are these contracts that you can improve as they are more fully integrated can you just speak to about that $102 54, I mean can that be can that be lifted over over over time.
Mike Dusky: It will be lifted go ahead there.
Mike Dusky: Yeah.
Speaker Change: Theres actually number one of the areas, where we bring a lot of resources that metro didn't have is on the payer contracting side and we're neck deep in terms of our rate negotiations with a number of payers in the market and.
Speaker Change: Absolutely have the ability to increase rate and our expectation is that we're going to a lot of their homecare business is Medicare.
Speaker Change: Again, the vast majority of the volume going through there.
Speaker Change: Clinics is.
Speaker Change: Two of the businesses on the outpatient clinic side itself.
Speaker Change: Depth opportunities for rate improvement.
Speaker Change: Alright, terrific and then.
Speaker Change: I am not sure I heard this clearly and I may not have Gary did you did you say essentially when you were sort of doing the puts and takes on the EBITDA and sort of the bridge to the to the Guy did did you say you were assuming a pickup of $3 million from the technology initiatives. You guys are putting in place did you say that or did I totally miss hear that.
Speaker Change: No I didn't say I was a little north of $3 million from our IP business that may be.
Speaker Change: Okay, Okay alright.
Speaker Change: In terms then of the technology initiatives I mean, Chris what are you I understand that.
Speaker Change: You are in the pilot stage, but like what do you think you can pick up I don't know how I know different places sort of handled notes differently. Some.
Speaker Change: Very heavy.
Speaker Change: Therapists sort of doing doing the notes as they're treating the patients some are.
Speaker Change: Yes.
Speaker Change: There are less relaxed about that I mean, how much pickup can you get from the AIE notes pilot and then and then from the.
Speaker Change: The other piece of it the technology virtually.
Speaker Change: Staffing.
Speaker Change: I still think.
Speaker Change: TBD to be determined.
Speaker Change: I expect we will have more cost related.
Speaker Change: Uh huh.
Speaker Change: And the virtualization part at the front desk necessarily than we will on a cost perspective.
Speaker Change: On the.
Speaker Change: Hey on notes component do think it'll help.
Speaker Change: To reduce some of the stress on our purpose I think it'll help retention I think it's going to be a welcome Ed.
Speaker Change: I think anytime you reduce stress.
Speaker Change: You free up some time you create the opportunity the no.
Two.
Speaker Change: To generate a little bit more revenue potentially but I think the big I think the bigger part on the cost side, it's going to be the front desk virtualization and how we're able to do that.
Speaker Change: So we're.
Mike Dusky: Not deep enough long enough to have a real good handle on that yet Mike but.
Speaker Change: Sure.
Speaker Change: From talking to others.
Speaker Change: I feel like we can definitely make some progress from where we are.
Speaker Change: Okay, and then just a last last question and Unfortunately, I think I know the answer to this.
Speaker Change: Given all of the activities in Washington, I'm, assuming that the thought that maybe Congress would go back post.
Speaker Change: At December 31st and look at the.
Speaker Change: Rate cut that CMS put in 425 I'm assuming.
Speaker Change: Our plans in Gaza Greenland in Canada.
Speaker Change: This may not be front and center in Turkey.
Speaker Change: Activities.
Speaker Change: Just kind of confirm that that's not something that you guys still have hope for.
Speaker Change: We don't have that built into our budget and we don't have an expectation that that's going to happen is there an outside possibility that remains.
Speaker Change: Yeah.
Speaker Change: I would tell you not to bet on it if it happens it will be.
Speaker Change: No surprise.
Speaker Change: Hum.
Speaker Change: Not predicting anything that happens in Washington. These days I think the way we've gone about it in draft form the cost is going to be prohibitive.
Speaker Change: Rather than you know propping up the left.
Speaker Change: So it's in the physician fee schedule that had been under particular dress. The last few years physical therapy, certainly one of those what kind of the proposal and I don't think well end up getting traction is that the entire physician fee schedule will get a lift.
Speaker Change: And it's just really a cost prohibitive.
Speaker Change: Item to do that because some of those physicians have gotten lifts the past few years and this would be in addition to that so when you aggregate all of that it's a really big number and so that's why I don't think it's going to happen, but could it yeah, but I'm not counting on it.
Speaker Change: We're not expecting it.
Speaker Change: Very good thanks, guys.
Speaker Change: Thanks, Mike Thank you Matt.
Speaker Change: We will take our next question from Julien I got you.
Speaker Change: Bank of America. Please go ahead your line is open.
Speaker Change: Yes, hi, thanks, so much for taking a couple hi, how are you.
Speaker Change: Thanks, a couple follow ups here I guess.
Speaker Change: Thanks for the color on the non Medicare rate, excluding that show in Q4.
Speaker Change: Oh, the average revenue per case, so what exactly do you assume for the 25 I guess on that piece of the non Medicare paid I guess, excluding Mexico, but then I guess, even with the macro comment on the lower right.
Speaker Change: Back to the Opex I think that gets to thank you for calling five flat.
Speaker Change: Thank you.
Speaker Change: So I'm sorry, the last part was weather average rate will be up or down versus 24 is that correct. Yes for the full year yeah. Okay, and then what do you like the kind of non Medicare.
Speaker Change: Sure.
Speaker Change: Yeah.
Speaker Change: Do you believe the rate will be up in 'twenty five versus 24, I think I noted earlier may not maybe not at the same rate as it was 20% to 23, because we do have the larger Medicare rate reduction in 'twenty five and we did 24, but still I do expect it to be up and $25 24.
Speaker Change: As far as non Medicare increase.
Speaker Change: It's hard to predict that exactly because it depends on what rate negotiations, we get completed and win and win those actually take effect.
But I would still expect an underlying increase.
Speaker Change: Somewhere around the 2% Mark if not hopefully a little bit better than that I think we need to achieve that in order to get to.
Speaker Change: Our rate increase in 2025, when you've got that Medicare rate reduction kind of living there.
Speaker Change: As Eric mentioned I think we will see some nice lift on metro rates I think we are.
Speaker Change: We would expect at least as much if not a little more rate increase there than we have on some of our other acquisitions, we've got some real opportunity there I think.
Speaker Change: Okay, great to hear.
Speaker Change: The last comment.
Speaker Change: So on another topic I guess.
Speaker Change: Thank you and talk about cash flow. So I guess it was down in the quarter.
Speaker Change: Concurrently issue, but also for the full year. The cash flows that may just go with us is something related to timing and such because I guess, that's a 23 cash flow grow a.
Speaker Change: A lot year over year.
Speaker Change: Yes, you know maybe talk about the history, but it was somewhat plenty of that how we should think about cash flow outlooks by 'twenty five.
Speaker Change: Yeah, I mean I think.
Speaker Change: Uh huh.
Speaker Change: We've had we've had really good cash flow more than enough to to help us pay.
Speaker Change: Pay down that term loan a little bit make acquisitions score some of that came from cash we already kind of in our balance sheet.
Speaker Change: <unk>.
Speaker Change: Year to year.
Speaker Change: There aren't I wouldn't necessarily say any big puts or takes but I expect we will have some cash flow growth in 2025, a little bit more than we had in 2024.
Speaker Change:
Speaker Change: Just for fun.
Speaker Change: Our dividend increase is not quite as significant.
Speaker Change: Any increase which is nice, but it doesn't add that much to our cash flow. So I think when we have the cash flow growth top line, there is not going to be as much taken away from that.
Speaker Change: As much of an increase in the dividend is perhaps the rest of the growth.
Speaker Change: I think we'll be in a good position for cash flow growth standpoint, I'm not worried about our cash flow growth, we have our cash flow peers.
Speaker Change: Period, I think we generate a good amount of cash it may vary a little bit year to year, but we're in a good position from that standpoint, our capital structure is really what I'm focused on and I think we're in a good position to be able to.
Speaker Change: Allocate capital to acquisitions going forward, which I do believe we will have a good amount of activity in 2025 from <unk> on the on the <unk>.
Speaker Change: <unk> front too.
Joanna: Hope that helps Joanna.
Speaker Change: No. This is helpful. Thank you I appreciate it and I guess on the acquisition front.
Speaker Change: Any inkling of a car would there theres. So many different things youre looking at I mean, I guess, you're talking about this home therapy, and then kind of you know.
Speaker Change: I guess can you service line, but is there something where you might need to buy some assets, where some keeping policies to actually do it.
Speaker Change: More on expanding the way outside of the Metro market.
Speaker Change: Or is it something that you would get a lot of internally. Thank you.
Speaker Change: Yes, I think I think on the homecare side.
Speaker Change: We're looking at both.
Speaker Change: Actually in discussions right now.
Speaker Change: Hmm.
Speaker Change: In one market.
Speaker Change: As Eric mentioned, we are a partner meeting coming up March where that is.
Speaker Change: One of the featured <unk>.
Speaker Change: Expansion elements.
Speaker Change: We will spend some time with Microsoft help and introduce to our partners and that's something that we think we can begin to do where select partnerships organically than theirs.
Speaker Change: The normal stuff and injury prevention and physical therapy that we're always working on so I think we'll have good opportunities. This year as we have.
Speaker Change: Larry mentioned compared to many many of our competitors, who do a great job.
Speaker Change: Undoubtedly but whose capital structure is.
Speaker Change: Considerably tighter in some cases.
Speaker Change: Really difficult.
Speaker Change: Beginning 2022 and forward we're in a great we're in a great spot.
Speaker Change: We have a great home for.
Speaker Change: Really good companies and we're going to continue to be active.
Speaker Change: So.
Speaker Change: You may see us cross.
Speaker Change: No that I consider homecare really could be different.
Speaker Change: A different segment.
Speaker Change: What we normally do in physical therapy, it's just site with different but youll see us continue to be active in all those areas.
Speaker Change: Right.
Speaker Change: Okay.
Speaker Change: And there are no further questions on the line at this time I'll return the program to our speakers for any closing remarks.
Speaker Change: Okay. David. Thank you look thanks, everybody for your time today. Thanks for your questions. There's a lot of great questions, Karen and I are available.
Speaker Change: As you know the day goes on in Tomorrow, and feel free to give us a call and have a great rest of your day. Thank you.
Speaker Change: Okay.
Speaker Change: This does conclude today's program. Thank you for your participation and you may now disconnect.
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