Q1 2026 U.S. Physical Therapy Inc Earnings Call

May 7, 2026

Speaker #2: Please stand by. Your program is about to begin. Good day, and thank you for standing by. Welcome to the US Physical Therapy First Quarter 2026 Earnings Conference Call.

Operator: Good day and thank you for standing by. Welcome to the U.S. Physical Therapy Q1 2026 Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there'll be a question and answer. In order to ask a question during the session, please press star key followed by the number 1 on your telephone keypad. Please be advised this day's conference is being recorded. If you require any further assistance, please press star then 0. I'd now like to turn the call over to Chris Reading, Chairman and CEO. Please go ahead, sir.

Speaker #2: At this time, all participants are on a listen-only mode. After the speaker's presentation, there'll be a question-and-answer. In order to ask a question during the session, please press star key followed by the number 1 on your telephone keypad.

Operator 3: After the speaker's presentation, there'll be a question and answer. In order to ask a question during the session, please press star key followed by the number 1 on your telephone keypad. Please be advised this day's conference is being recorded. If you require any further assistance, please press star then 0. I'd now like to turn the call over to Chris Reading, Chairman and CEO. Please go ahead, sir.

Speaker #2: Please be advised that today's conference is being recorded. If you require any further assistance, please press star then 0. I'd now like to turn the call over to Chris Redding, Chairman and CEO.

Speaker #2: Please go ahead, sir. Thank you, good morning and welcome everyone to our 2026 First Quarter Earnings Call. With me on the line this morning include Jason Curtis, our interim CFO, Senior Vice President of Finance and Accounting.

Chris Reading: Thank you. Good morning and welcome everyone to our 2026 Q1 earnings call. With me on the line this morning include Jason Curtis, our interim CFO, Senior Vice President of Finance and Accounting. I look forward to many of you getting to meet Jason for the first time around, you know, this earnings process and call and subsequent investor calls and meetings. He's done just a tremendous job jumping in really without a lot of warning and keeping all the plates spinning in his normal job and doing a terrific job both with reporting and the board and all the many things, including, you know, the redo of our credit agreement. Very instrumental in all that. Look forward to you guys getting to know him a little bit.

Speaker #2: I look forward to many of you getting to meet Jason for the first time around this earnings process and call and subsequent investor calls and meetings.

Speaker #2: He's done just a tremendous job jumping in really without a lot of warning and keeping all the plates spinning in his normal job and doing a terrific job both with reporting in the board and all the many things including the redo of our credit agreement very instrumental in all that.

Speaker #2: So look forward to you guys getting to know him a little bit. Along with Jason, Eric Williams, our President and COO, Rick Binstein, our Executive Vice President and General Counsel, Kate Venturina, our Vice President and Controller, before we discuss the results for this past quarter, as usual, we need to cover a brief disclosure statement.

Chris Reading: Along with Jason, Eric Williams, our President and COO, Rick Binstein, our Executive Vice President and General Counsel, and Kate Venturina, our Vice President and Controller. Before we discuss the results for this past quarter, as usual, we need to cover a brief disclosure statement. Kate, if you would, please.

Speaker #2: So Kate, if you would, please.

Speaker #3: Thank you, Chris. Today's presentation includes forward-looking statements, which involve certain risks and uncertainties. These forward-looking statements are based on the company's current views and assumptions.

Kate Venturina: Thank you, Chris. Today's presentation includes forward-looking statements which involve certain risks and uncertainties. These forward-looking statements are based on the company's current views and assumptions. The company's actual results may vary materially from those anticipated. Please see the company's filings with the Securities and Exchange Commission for more information. This presentation also includes certain non-GAAP measures as defined in Regulation G, and the related reconciliations can be found on the company's earnings release and the company's presentations on our website. Chris.

Speaker #3: 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. This presentation also includes certain non-GAAP measures as defined in Regulation G, and the related reconciliations can be found on the company's earnings release and the company's presentations in our website.

Speaker #3: Chris?

Speaker #2: Thanks, Kate. So let me start out by covering some of the key objectives that we are neck deep in and working on and established as priorities part of the start of the year.

Chris Reading: Thanks, Kate. Let me start out by covering some of the key objectives that we are neck deep in and working on and established as priorities prior to the start of the year. These objectives include semi-virtualization of our front desk, which is and will produce savings in both labor as well as overall efficiency and improved authorization consistency, the latter of which ultimately has an impact on rate. AI-assisted ambient listening documentation technology, which will help our clinicians spend less head downtime on their computers and more time interfacing with our patients. Obviously, that has an impact, both potential impact on productivity and rate through unit capture, again, with direct patient interface. Reengagement with remote therapeutic monitoring for our traditional Medicare population after CMS revised the rules in late 2025, beginning 2026, this year in January.

Speaker #2: These objectives include semi-virtualization of our front desk, which is and will produce savings in both labor as well as overall efficiency and improved authorization consistency; the latter of which ultimately has an impact on rate.

Speaker #2: AI-assisted ambient listening, documentation technology, which will help our clinicians spend less head-down time on their computers and more time interfacing with our patients. Obviously, that has an impact both potential impact on productivity and rate through unit capture.

Speaker #2: Again, with direct patient interface. Re-engagement with remote therapeutic monitoring for our traditional Medicare population after CMS revised the rules in late 2025. Beginning 2026, this year in January.

Speaker #2: Expansion of our cash-based programs across the great number of our top partnerships. We initially rolled this out last year in the spring in another partner meeting again in April this year with a large swath of our top 30, top 40 partners where a significant part of our growth and income comes from surrounding that.

Chris Reading: Expansion of our cash-based programs across a great number of our top partnerships. We initially rolled this out last year in the spring. We had another partner meeting again in April this year, with a large swath of our top 30, top 40 partners, where a significant part of our growth and income comes from surrounding that were growth opportunities. One of those was cash-based program deployment. That is rolling out as we speak. Finally, a strong investment and effort directionally to create opportunity with large hospitals and systems similar to the 2 that were previously announced, including NYU and another one in the Gulf Coast region. Those efforts are going very well. In fact, we just started the NYU transition process for our initial set of clinics, and we'll be rolling facilities in over the next few months across both opportunities.

Speaker #2: We're growth opportunities, and one of those was cash-based program deployment. So that is rolling out as we speak. And finally, a strong investment and effort directionally to create opportunity with large hospitals and systems similar to the two that were previously announced.

Speaker #2: Including NYU, another one in the Gulf Coast region. Those efforts are going very well. In fact, we just started the NYU transition process for our initial set of clinics and will be rolling facilities in over the next few months.

Speaker #2: Across both opportunities. These initiatives are on track, and we believe will produce the results we have discussed as the year progresses. This in combination with continuing ramp-up of visits across the company gives us the confidence to reaffirm our original guidance.

Chris Reading: These initiatives are on track, we believe will produce the results we have discussed as the year progresses. This, in combination with continuing ramp-up of visits across the company, gives us the confidence to reaffirm our original guidance. In fact, we finished Q1 right on budget. For some of you, I know you had a different Q1 expectation, but we were where we expected to be exiting this Q1. Q1 highlights include revenue increase in physical therapy of 7.2% with a 2.5% same-store increase. This was driven from a 6.9% bump in patient volume, which for the quarter increased our visits per clinic per day to 31.8. I'll note just for some perspective that demand was strong this Q1.

Speaker #2: In fact, we finished Q1 right on budget, and for some of you, I know you had a different Q1 expectation, but we were where we expected to be exiting this first quarter.

Speaker #2: First quarter highlights include revenue increase in physical therapy of 7.2% with a 2.5% same-store increase. This was driven from a 6.9% bump in patient volume, which for the quarter increased our visits per clinic per day to 31.8.

Speaker #2: And I'll note just for some perspective that demand was strong this Q1. We lost over 31,000 visits to weather, which as you know impacts not just revenue, but the vast majority of our highest-paid people we have to pay to sit at home during these events.

Chris Reading: We lost over 31,000 visits to weather, which, as you know, impacts not just revenue, but the vast majority of our high-state people we have to pay to sit at homes during these events, which has a drag on margins. All of that is now in the rearview mirror as we ramp into the busiest period of the year. The net rate for the quarter rose to $106.49, up from $105.66 prior year. The biggest positive influencers there include a nice 3.4% year-over-year increase in our commercial rates, coupled with a small Medicare pricing increase that we are ramping into as the year begins. Going against that a little bit, on a blended basis was a small drop in our Medicaid rates. We're gonna have to watch that also as the year progresses.

Speaker #2: Which has a drag on margins. All of that is now in the rearview mirror as we ramp into the busiest period of the year.

Speaker #2: And that rate for the quarter rose to 106.49, up from 105.66 prior year. The biggest positive influencers there include a nice 3.4% year-over-year increase in our commercial rates coupled with a small Medicare pricing increase that we are ramping into as the year begins.

Speaker #2: Pulling against that a little bit, on a blended basis, was a small drop in our Medicaid rate. So we're going to have to watch that also as the year progresses.

Speaker #2: Injury Prevention saw a number of good things for the quarter. Revenue increased 11.8%, which included a partial quarter contribution from our latest IIP New York-based acquisition earlier announced.

Chris Reading: Injury prevention saw a number of good things for the quarter. Revenue increased 11.8%, which included a partial quarter contribution from our latest IIP New York-based acquisition earlier announced. Same-store revenue increased 8.2%, while margin increased 180 basis points compared to our Q1 2025 numbers. On the development front, in addition to the New York City-based IIP deal we added, We added a nice 8-clinic therapy partnership in the Pacific Northwest. It's gonna do very well for us. In addition, we opened 7 de novo clinics in a quarter. We have more to come in both the hospital area as well as acquisitions.

Speaker #2: Same-store revenue increased 8.2%, while margin increased 180 basis points compared to our Q1 2025 numbers. On the development front, in addition to the New York City-based IIP deal we added and a nice eight-clinic therapy part, we added a nice eight-clinic therapy partnership in the Pacific Northwest.

Speaker #2: It's going to do very well for us. In addition, we opened seven de novo clinics in the quarter. We have more to come in both the hospital area as well as acquisitions.

Speaker #2: Recently, and we have already announced this, but I'll cover it, we completed the renegotiation of our five-year credit facility which in addition to providing even better pricing and terms compared to what we had before, which was already a very favorable facility, but we were able to expand our capacity so that we can continue to invest in growth opportunities without compromise.

Chris Reading: Recently, and we have already announced this, but I'll cover it, we completed the renegotiation of our five-year credit facility, which in addition to providing even better pricing and terms compared to what we had before, which was already a very favorable facility. We were able to expand our capacity so that we can continue to invest in growth opportunities without compromise. Finally, in the quarter, as Jason will later discuss, related to the credit facility and our borrowings, we repurchased equity in two very strong partnerships with a total spend of a little more than $14 million, where we continue to have strong founding partners who are taking some chips off the table due to their extraordinary growth over time in one case, and another at a point of planned retirement with a strong owner bench still intact.

Speaker #2: Finally, in the quarter, as Jason will later discuss, related to the credit facility and our borrowings, we repurchased equity in two very strong partnerships with a total spend of a little more than $14 million, where we continue to have strong founding partners who are taking some chips off the table due to their extraordinary growth over time.

Speaker #2: One case and another at a point of planned retirement, with a strong owner bench still intact. Our strong capital structure allows us to be flexible and take advantage of these opportunities without compromising our ability to run the company or pursue a variety of growth opportunities.

Chris Reading: Our strong capital structure allows us to be flexible and take advantage of these opportunities without compromising our ability to run the company or pursue a variety of growth opportunities. Part of the reason we feel confident in our ability to continue to grow through organic as well as acquisition-related partner-centric development is that we have a great balance sheet. As we discussed, our improved and expanded credit facility gives us the dry powder to make good decisions about our growth and provides us with the resources and capital that we need to run the company, grow and expand where it makes sense in PT and industrial injury prevention, and invest in new technologies, resources, and people to make our growth plan happen, all of which we are doing in real time.

Speaker #2: Part of the reason we feel confident in our ability to continue to grow through organic as well as acquisition-related partner-centric development is that we have a great balance sheet.

Speaker #2: As we discussed or improved and expanded credit facility gives us a dry powder to make good decisions about our growth and provides us with the resources and capital that we need to run the company.

Speaker #2: Grow and expand where it makes sense in PT and industrial injury prevention. Invest in new technologies, resources, and people to make our growth plan happen.

Speaker #2: All of which we are doing in real time. This, along with our continued high demand for our services, and our progress across key initiatives, gives us the confidence to reaffirm our guidance for 2026.

Chris Reading: This, along with our continued high demand for our services and our progress across key initiatives, gives us the confidence to reaffirm our guidance for 2026. As I wrap up my prepared comments, as I always do, it's important to do because our clinicians, our partners, they're doing such a great job around the country every day to make a difference in the lives of our patients who they are positively impacting, make a difference in the lives of our injury prevention clients and their workers, keep them safe and healthy.

Speaker #2: As I wrap up my prepared comments, as I always do, it's important to do because our clinicians are partners that are doing such a great job around the country every day to make a difference in the lives of our patients, who they are positively impacting.

Speaker #2: Make a difference in the lives of our injury prevention clients, in their workers, keep them safe and healthy. And all of that helps us to attract the kinds of new opportunities, including our hospital partners like NYU and others, which will be an accelerator of growth rate as we finish this year and look forward especially into 2027.

Chris Reading: All of that helps us to attract the kinds of new opportunities, including our hospital partners like NYU and others, which will be an accelerant to our growth rate as we finish this year and look forward, especially into 2027. Jason, please go ahead and walk through the financials in a little bit more detail before we open it up for questions. Thank you.

Speaker #2: Jason, please go ahead and walk through the financials in a little bit more detail before we open it up for questions. Thank you.

Speaker #1: Thanks, Chris. And good morning, everyone. Turning to the details of the first quarter 2026 income statement, total revenue was $198 million, a 7.9% increase versus 2025.

Jason Curtis: Thanks, Chris. Good morning, everyone. Turning to the details of the Q1 2026 income statement. Total revenue was $198 million, a 7.9% increase versus 2025. Daily visits per clinic increased to 31.8 in Q1 2026, compared to 31.2 in Q1 2025. Total patient visits in Q1 2026 were 1,543,000, a 6.9% increase versus last year. Net patient revenue per visit was $106.49 in Q1 2026, an $0.83 increase versus the prior year. This growth was driven by a 3.4% increase in commercial revenue per visit.

Speaker #1: Daily visits per clinic increased to 31.8 in the first quarter 2026 compared to 31.2 in Q1 2025. Total patient visits in the first quarter 2026 were 1,543,00, a 6.9% increase versus last year.

Speaker #1: Net patient revenue per visit was $106.49 in the first quarter 2026, an 83 cent increase versus the prior year. This growth was driven by a 3.4% increase in commercial revenue per visit.

Speaker #1: This lift is made even more meaningful by the fact that commercial payers represent nearly 50% of our total payer mix. We also benefited from the early impact of our expected 1.75% Medicare rate increase.

Jason Curtis: This lift is made even more meaningful by the fact that commercial payers represent nearly 50% of our total payer mix. We also benefited from the early impact of our expected 1.75% Medicare rate increase. As a reminder, the majority of the benefit from the hospital initiatives will impact net revenue per visit, and Q1 results do not yet include any impact from these affiliations. Total Q1 2026 physical therapy revenue was $168 million, a 7.2% increase versus prior year Q1. Mature clinic revenue increased 2.5% in Q1 2026, continuing the sequential quarter-over-quarter build from 2025. Adjusted physical therapy payroll costs per visit were $64.20 in Q1 2026, compared to $63.53 in Q1 2025.

Speaker #1: As a reminder, the majority of the benefit from the hospital initiatives will impact net revenue per visit and first quarter results do not yet include any impact from these affiliations.

Speaker #1: Total first quarter 2026 physical therapy revenue was $168 million, a 7.2% increase versus prior year first quarter. Mature clinic revenue increased 2.5% in Q1 2026, continuing the sequential quarter-over-quarter build from 2025.

Speaker #1: Adjusted physical therapy payroll cost per visit was $64.20 in the first quarter 2026 compared to $63.53 in the first quarter 2025. Adjusted physical therapy operating cost per visit was $90.31 in the first quarter 2026 compared to $88.77 in the first quarter 2025.

Jason Curtis: Adjusted physical therapy operating costs per visit were $90.31 in Q1 2026, compared to $88.77 in Q1 2025. Adjusted physical therapy margin decreased to 16.1% in Q1 2026, compared to 16.8% in Q1 2025. IP revenue was $31 million in Q1 2026, an 11.8% increase versus the prior year. Excluding the Q1 2026 IP acquisition, IP revenue increased 8.2%. IP margin increased to 20.4% in Q1 2026, compared to 18.6% in Q1 2025. Adjusted corporate expense as a rate to revenue was 8.8% in Q1 2026, compared to 8.5% in Q1 2025.

Speaker #1: Adjusted physical therapy margin decreased to 16.1% in Q1 2026 compared to 16.8% in Q1 2025. IFP revenue was $31 million, in Q1 2026, an 11.8% increase versus the prior year.

Speaker #1: Excluding the Q1 2026 IP acquisition, IP revenue increased 8.2%. IP margin increased to 20.4% in Q1 2026 compared to 18.6% in Q1 2025. Adjusted corporate expenses or rate-to-revenue was 8.8% in Q1 2026 compared to 8.5% in Q1 2025.

Speaker #1: We continue to make progress on our workday ERP implementation and expect to go live at the beginning of 2027. We are implementing workday in both human resources and finance and are looking forward to modernizing our systems, increasing efficiency, and improving the user experience.

Jason Curtis: We continue to make progress on our Workday ERP implementation and expect to go live at the beginning of 2027. We are implementing Workday in both human resources and finance and are looking forward to modernizing our systems, increasing efficiency, and improving the user experience. Interest expense was $2.8 million in Q1 2026, compared to $2.3 million in Q1 2025. The increase was driven by cash usage associated with the 2 Q1 acquisitions, as well as $14 million in purchases of non-controlling interest, as Chris mentioned. Income tax in Q1 2026 was 32.3%, compared to 28.1% in Q1 2025. The Q1 2026 tax rate is elevated due to the negative impact of discrete tax items on comparatively lower pre-tax income.

Speaker #1: Interest expense was $2.8 million in the first quarter 2026 compared to $2.3 million in Q1 2025. The increase was driven by CAS usage associated with the two first quarter acquisitions, as well as $14 million in purchases of non-controlling interest, as Chris mentioned.

Speaker #1: Income tax in Q1 2026 was 32.3% compared to 28.1% in Q1 2025. The Q1 2026 tax rate is elevated due to the negative impact of discrete tax items on comparatively lower pre-tax income.

Speaker #1: Adjusted EBITDA in Q1 2026 was 20.2 million, a 0.7 million increase compared to Q1 2025. Operating results per share was 46 cents in the first quarter 2026 compared to 48 cents in the first quarter 2025.

Jason Curtis: Adjusted EBITDA in Q1 2026 was $20.2 million, a $0.7 million increase compared to Q1 2025. Operating results per share was $0.46 in Q1 2026, compared to $0.48 in Q1 2025. Net income attributable to USPH shareholders was $5 million in Q1 2026, compared to $9.9 million for Q1 2025. Included in pre-tax income for Q1 2026 was a loss on change in fair value for contingent earn-out considerations of $2 million versus a gain of $4.8 million in Q1 2025. The Q1 2026 loss was driven by stronger performance in recent acquisitions, which increases our earn-out liability.

Speaker #1: Net income attributable to USPH shareholders was $5 million in Q1 2026 compared to $9.9 million for Q1 2025. Included in pre-tax income for Q1 2026 was a loss on change in fair value for contingent earnout considerations of $2 million versus a gain of 4.8 million in Q1 2025.

Speaker #1: The Q1 2026 loss was driven by stronger performance in recent acquisitions, which increases our earnout liability. Gap loss per share was 12 cents in the first quarter 2026 compared to earnings per share of 80 cents in the first quarter 2025.

Jason Curtis: GAAP loss per share was $0.12 in Q1 2026, compared to earnings per share of $0.80 in Q1 2025. Earnings per share in Q1 2026 was negatively impacted by revaluation of redeemable non-controlling interest compared to a benefit in Q1 2025. Under GAAP, increases or decreases in the value of redeemable non-controlling interest are not included in net income but are included in the calculation of per share metrics. Stronger performance in Q1 2026 increased the value of these ownership interests, negatively impacting per share metrics. As Chris mentioned, we completed two significant acquisitions in Q1. At the beginning of January, we acquired a 50% interest in an 8-clinic physical therapy practice with $8 million in revenue and 66,000 visits.

Speaker #1: Earnings per share in Q1 2026 was negatively impacted by revaluation of redeemable non-controlling interest compared to a benefit in Q1 2025. Under gap increases or decreases in the value of redeemable non-controlling interest are not included in net income but are included in the calculation of per-share metrics.

Speaker #1: Stronger performance in Q1 2026 increased the value of these ownership interests negatively impacting per-share metrics. As Chris mentioned, we completed two significant acquisitions in the first quarter.

Speaker #1: At the beginning of January, we acquired a 50% interest in an eight-clinic physical therapy practice with $8 million in revenue and 66,000 visits. At the end of January, we acquired a 70% interest in an industrial injury prevention business with $7 million in business.

Jason Curtis: At the end of January, we acquired a 70% interest in an industrial injury prevention business with $7 million in business. Turning to the balance sheet, cash and cash equivalents at the end of Q1 2026 were $28 million compared to $36 million at the end of 2025. Borrowings on our credit facility were $204 million in Q1 2026, compared to $162 million at the end of 2025. As noted, the increase in borrowings was driven by our 2 first quarter acquisitions as well as the $14 million in purchases of non-controlling interest. On 15 April 2026, we announced a 5-year, $450 million credit facility with a maturity date of 14 April 2031.

Speaker #1: Turning to the balance sheet, cash and cash equivalents at the end of Q1 2026 were $28 million compared to $36 million at the end of 2025.

Speaker #1: Borrowings on our credit facility were $204 million in Q1 2026 compared to $162 million at the end of 2025. As noted, the increase in borrowings was driven by our two first quarter acquisitions as well as the $14 million in purchases of non-controlling interest.

Speaker #1: On April 15th, 2026, we announced a five-year $450 million credit facility with a maturity date of April 14th, 2031. Based on strong lender support, the facility was upsized from its initial $400 million launch amount, and we achieved improved pricing compared to our previous facility.

Jason Curtis: Based on strong lender support, the facility was upsized from its initial $400 million launch amount. We achieved improved pricing compared to our previous facility. Our lender group consists of Bank of America, Regions, JPMorgan Chase, Citizens, U.S. Bank, and BankUnited. This larger facility, compared to our previous $325 million facility, provides us with additional flexibility as we need to grow our portfolio of partnerships and return capital to shareholders. The June 2027 maturity date for our existing interest rate swap remains unchanged. Our Q1 results were in line with our expectations, and we expect the impact of the 2026 objectives, which Chris discussed, to ramp up throughout the course of the year. As such, we are reaffirming our full year 2026 adjusted EBITDA guidance of $102 million to $106 million.

Speaker #1: Our lender group consists of Bank of America, Regents, s, JPMorgan Chase, Citizens, US Bank, and Bank United. This larger facility compared to our previous $325 million facility provides us with additional flexibility as we need to grow our portfolio of partnerships and return capital to shareholders.

Speaker #1: The June 2027 maturity date for our existing interest rate swap remains unchanged. Our first quarter results were in line with our expectations, and we expect the impact of the 2026 objectives with Chris discussed to ramp up throughout the course of the year.

Speaker #1: As such, we are reaffirming our full-year 2026 adjusted EBITDA guidance of $102 million to $106 million. With that, I will turn the call back to Chris.

Jason Curtis: With that, I will turn the call back to Chris.

Speaker #2: Thanks, Jason. Great job. Operator, let's go ahead. I know I'll have questions, so let's go ahead and open up the line.

Chris Reading: Thanks, Jason. Great job. Operator, let's go ahead. I know we'll have questions, so let's go ahead and open up the line.

Speaker #3: Thank you. If you'd like to ask a question, please press star one on your keypad. To leave the queue at any time, press star two.

Operator 4: Thank you. If you'd like to ask a question, please press star one on your keypad. To leave the queue at any time, press star two. Once again, that is star then one to ask a question. We can take our first question from Joanna Gajuk with Bank of America. Your line is open.

Operator: Thank you. If you'd like to ask a question, please press star one on your keypad. To leave the queue at any time, press star two. Once again, that is star then one to ask a question. We can take our first question from Joanna Gajuk with Bank of America. Your line is open.

Speaker #3: Once again, that is star, then one, to ask a question. And we can take our first question from Joanna Gajic with Bank of America.

Speaker #3: Your line is open.

Speaker #2: Good morning, Joanna.

Chris Reading: Morning, Joanna.

Speaker #4: Hi. Good morning. Hey, good morning. Thanks so much for taking the question. So first, I guess on the Q1, the guidance built, but so you said the weather was three to four million revenues, right?

Joanna Gajuk: Hi. Good morning. Hey, good morning. Thanks so much for taking the question. First, I guess on Q1, the guidance build. You said the weather was $3 to 4 million revenues, then you cut your cost. How should we think about the EBITDA headwind? Importantly, was this quarter sort of as you had included in your guidance? I think when you gave the guidance, kind of knew about the January weather situation. Explain to us how this quarter came versus your internal expectations, and how should we think about what was the actual, like, headwind to cost and to EBITDA really from that situation.

Speaker #4: And you cut your costs, so kind of how should we think about the EBITDA headwind and importantly, was this quarter sort of as you had included in your guidance?

Speaker #4: Because I think when you gave the guidance, kind of knew about the January weather situation, so kind of explain to us how this quarter came versus your internal expectations and how should we think about what was the actual headwind to costs and to EBITDA really from that situation.

Speaker #2: Yeah, so first of all, importantly, the quarter came in almost exactly where we had budgeted the quarter to be. Now, there were a couple of puts and takes, but at the end of the day, from an earnings perspective, we came in right where we expected to be.

Chris Reading: Yeah. First of all, importantly, the quarter came in almost exactly where we had budgeted the quarter to be. Now, there were a couple puts and takes, at the end of the day, from an earnings perspective, we came in right where we expected to be. We lost about 31,000 visits, some of those coming in some of our high net rate markets like New York, which also, by the way, impacted our injury prevention acquisition right out of the gate a little bit with weather and mobile units there. When we look at that blended average rate, it's somewhere north of $3 million, $3.3, if you use our average rate.

Speaker #2: We lost about $31,000 visits; some of those coming in, some of our high-net-rate markets like New York, which also by the way, impacted our injury prevention acquisition right out of the gate, a little bit with weather and mobile units there.

Speaker #2: And so when we look at that blended average rate, it's somewhere north of 3 million, 3.3 if you use our average rate. And understanding that we've got to pay most of our folks, maybe not everybody every dollar, with some of our hourly people, although occasionally we do that as well, depending on circumstances.

Chris Reading: Understanding that we’ve got to pay most of our folks, maybe not everybody every dollar, with some of our hourly people, although occasionally we do that as well, depending on circumstances, but our salary people get paid regardless. The demand was high for Q1. You know, it was a tough weather quarter, but that’s behind us. Demand has continued to build, meaning volumes have built, and we’re not gonna have weather anymore. You know, coming out of it in combination, we made some investments, and continue to make some investments in some of these initiatives. Those investments include both people and other, you know, other investments in products and other things.

Speaker #2: But our salaried people get paid regardless. So, demand was high for the first quarter. It was a tough weather quarter, but that's behind us.

Speaker #2: Demand has continued to build, meaning volumes have built. And we're not going to have weather anymore. And so coming out of it in combination we made some investments and continue to make some investments in some of these initiatives.

Speaker #2: Those investments include both people and other investments in products and other things. That's in the cost numbers as well, but we feel confident those are going to bear the fruit that we expect them to bear and that we've begun to see already as things ramp up.

Chris Reading: That's in the cost numbers as well, but we feel confident those are gonna bear the fruit that we expect them to bear and that we've begun to see already, as things ramp up. I don't know if that answers your question specifically.

Speaker #2: So I don't know if that answers your question specifically. Thank you, Joanna, but.

Operator 2: That's helpful.

Joanna Gajuk: That's helpful.

Chris Reading: Joanna.

Speaker #4: Okay, right. So you did kind of assume this weather headwind in your guidance originally that you gave us, and the quarter was sort of in line.

Joanna Gajuk: Okay. All right. You did kind of assume, like, this weather headwind in your, in your guidance originally that you gave us, and the quarter was sort of in line. Yeah, we want to kind of know that.

Speaker #4: So yeah, we want to kind of know that. And then from okay, good. And then from here, right, how should we think about the ramp-up the rest of the year?

Joanna Gajuk: It was.

Joanna Gajuk: From here, right, how should we think about the ramp up the rest of the year? I mean, it sounds like, yeah, you guys are kind of up a couple of things, but I don't know if there's some numbers to put around because, you know, when you do like a rough math, Q1 EBITDA was about, call it 19% of the full year guidance. The last couple of years, it was more like 20% or above 20%. I guess it was lower than typical. If you would kind of assume typical seasonality, which obviously things get skewed because there's different, like, level of acquisitions and things like that.

Speaker #4: I mean, it sounds like, yeah, you guys are kind of out a couple of things, but I don't know if there's some numbers to put around, because when you do the rough math—so Q1 EBITDA was about, call it, 19% of the full-year guidance.

Speaker #4: But the last couple of years, it was more like 20% or above 20%. So I guess it was lower than typical. And then, if you would kind of assume typical seasonality—which, obviously, things get skewed because there's a different level of acquisitions and things like that.

Speaker #4: But if we do some rough math, we can get to maybe less than $100 million for the year. Then, obviously, you have these hospital alliances.

Joanna Gajuk: If we do some rough math, you know, we could get to like maybe less than $100 million for the year. Obviously you have like these hospital alliances. If you also could maybe like quantify how much actually like in this year, because you do talk about $7 million, but that's obviously when you like fully annualize it and fully ramped up. I don't know if there's something like in this guidance included for this. Lastly, there are also these acquisitions. I wanna make sure like they were already in the guidance and how much, if anything, they add also the rest of the year. Essentially what I'm trying to bridge is from Q1, how are you gonna get to, you know, your $102 to $106 for the year?

Speaker #4: So if you also could maybe quantify how much actually in this year because you do talk about 7 million, but that's obviously when you fully annualize it and fully ramped up.

Speaker #4: So I don't know if there's something in this guidance included for this. And lastly, there are also these acquisitions. I want to make sure they were already in the guidance and how much, if anything, they add also the rest of the year.

Joanna Gajuk: I wanna make sure like they were already in the guidance and how much, if anything, they add also the rest of the year. Essentially what I'm trying to bridge is from Q1, how are you gonna get to, you know, your $102 to $106 for the year? Because I'm getting more like a, you know, couple million dollar short. I'm thinking maybe that's the hospitals and acquisitions that help explain the delta. Thank you.

Speaker #4: Because essentially, what I'm trying to bridge is from Q1, how are you going to get to your 102 to 106 for the year? Because I'm getting more like a couple million dollars short, so I'm thinking maybe that's the hospitals and acquisitions that helped explain the delta.

Operator 2: Because I'm getting more like a, you know, couple million dollar short. I'm thinking maybe that's the hospitals and acquisitions that help explain the delta. Thank you.

Speaker #4: Thank you.

Speaker #2: Yeah. A couple of things. So to try to tease that apart. So the acquisitions I believe which closed in January and the end of February, were included in our guidance numbers.

Chris Reading: Yeah. Couple of things. To try to tease that apart. The acquisitions, I believe, which closed in January and the end of February, were included in our guidance numbers. We gave our guidance, I don't remember exactly, first week of March, end of February, first week of March. Those were included in the guidance numbers. We have more activity to come. The activity to come certainly has not been included. And in terms of the hospital ramp up, Jason, I don't know if you have that at your fingertips, but we're estimating when we gave the $7 million 2027 number on the full year basis, you know, we had to estimate when these would begin to phase in. Just literally last week, we began to phase in our very first Metro facilities into the NYU deal.

Speaker #2: We gave our guidance. I don't remember exactly. First week of March, end of February, first week of March. And so those were included in the guidance numbers.

Speaker #2: We have more activity to come. The activity to come certainly not been included. And in terms of the hospital ramp-up, Jason, I don't know if you have that at your fingertips, but we're estimating when we gave the 7 million dollar 2027 number on the full-year basis, we had to estimate when these would begin to phase in.

Speaker #2: And so, just literally last week, we began to phase in our very first Metro facilities into the NYU deal, and things are going well.

Chris Reading: Things are going well, but we've got a lot more to do. On the Gulf Coast opportunity, the other hospital opportunity, that, depending upon how things go over the next couple of weeks, could begin in June or it could begin in July. There's several million dollars worth of additional hospital contribution, but obviously, we're not getting a full year. We're getting, you know, a, a half year at most or part year, not even really fully a half year because we've got to layer in these facilities and that'll take a few months, particularly in Metro's case. All that was fully baked into our guidance when we did it originally. Can't give you a whole lot more granularity by quarter just because we don't do it.

Speaker #2: But we've got a lot more to do. On the Gulf Coast opportunity, the other hospital opportunity, that depending upon how things go over the next couple of weeks, could begin in June or it could begin in July.

Speaker #2: And so, there's several million dollars' worth of additional hospital contribution. But obviously, we're not getting a full year; we're getting a half year at most, or part year—not even really fully a half year—because we've got to layer in these facilities.

Speaker #2: And that'll take a few months, particularly in Metro's case. But all that was fully baked into our guidance when we did it originally. Can't give you a whole lot more granularity by quarter just because we don't do it.

Speaker #2: I mean, we have those numbers, but we haven't guided by quarter in a long time. And I understand we were a little out of sync with you guys this first quarter, but that's where we are.

Chris Reading: I mean, we have those numbers, but we haven't guided by quarter in a long time. I understand we're a little out of sync with you guys this Q1, but, you know, that's where we are. Jason, do you have the, if you don't, that's fine, we can follow up, the estimated contribution on the hospital contracts this year? I know we announced it on the last call.

Speaker #2: Jason, do you have the, and if you don't, that's fine, we can follow up, the estimated contribution on the hospital contracts this year? I know we announced it on our last call.

Speaker #5: Yeah. So we talked about there being a portion of the annualized 7 million dollar impact. And the way I would think about it, Joanna, is we are in the process right now in the second quarter of implementing these clinics, converting these clinics to the hospital affiliations.

Jason Curtis: Yeah. We talked about there being a portion of the annualized $7 million impact. The way I would think about it, Joanna, is we are in the process right now in Q2 of implementing these clinics, converting these clinics to the hospital affiliations. We expect to be, you know, materially complete by the end of Q3. In Q4, you'll begin to see, you know, something like the full impact of the Q4 impact of the $7 million. The benefit of the hospital initiatives will ramp up sequentially quarter-over-quarter as we proceed throughout 2026.

Speaker #5: We expect to be materially complete by the end of the third quarter. So in the fourth quarter, you'll begin to see something like the full impact of the fourth quarter impact of the 7 million dollars.

Speaker #5: So the benefit of the hospital initiatives will ramp up sequentially quarter over quarter as we proceed throughout 2026.

Speaker #4: All right. Thank you so much.

Joanna Gajuk: All right. Thank you so much.

Speaker #6: And we will move next to Jack Sleven with USPH. Your line is now open.

Operator 4: We will move next to Jack Slevin with USPH. Your line is now open.

Operator: We will move next to Jack Slevin with USPH. Your line is now open.

Speaker #7: Hey, thanks for taking the question. Yeah. Hey, good morning to you guys. Jack Sleven from Jefferies here. Maybe one, just to needle a little bit tightly on the numbers, the rent supply is another line.

Jack Slevin: Hey, thanks for taking the question. Yeah, hey, good morning to you guys. Jack Slevin from Jefferies here, just to needle a little bit tightly on the numbers. The rent supplies and other line, you know, ran a little bit hot to what we were expecting. I guess, you know, so did corporate expenses. Just a little curious, I know you talked about some of the things you're doing to modernize the business, on those two lines, anything to call out in terms of what's driving some of the year-over-year growth in those expense lines?

Speaker #7: Ran a little bit hot to what we were expecting. I guess so did corporate expenses. Just a little curious—I know you talked about some of the things you're doing to modernize the business.

Speaker #7: But on those two lines, anything to call out in terms of what's driving some of the year-over-year growth? In those expense lines?

Speaker #2: Yeah. Q1, again, we had a little bit worse weather impact. So a little bit lighter revenue than we expected, although in balance, it came out at the end of the day.

Chris Reading: Yeah. Q1, again, we had a little bit worse weather impact, a little bit lighter revenue than we expected, although in balance, you know, it came out at the end of the day where we thought. We did have in a few partnerships a little bit more contract labor than we expected to deal with the volume that we had in those particular partnerships. That was part of the expense carry. Jason, I don't know if you have anything else that you wanna add.

Speaker #2: Out where we thought. But we did have in a few partnerships a little bit more contract labor than we expected to deal with the volume that we had in those particular partnerships.

Speaker #2: And so that was part of the expense carry. Jason, I don't know if you have anything else that you want to add?

Speaker #5: I would just say that we are making some upfront investments in our 2026 initiatives that are going to pay off as we ramp up the benefit throughout the balance of the year.

Jason Curtis: I would just say that we are making some upfront investments in our 2026 initiatives that are, you know, going to pay off as we ramp up the benefit throughout the balance of the year. As well as the weather impact that Chris mentioned, would have a greater impact in terms of deleveraging on the fixed costs, some of the stuff you were mentioning, Jack, that will not continue as the, you know, we enter into the summer, spring and summer season, and we don't have these weather headwinds against us.

Speaker #5: As well as the weather impact that Chris mentioned, would have a greater impact in terms of deleveraging on the fixed costs, some of the stuff you were mentioning, Jack.

Speaker #5: That will not continue as the we enter into the summer, spring, and summer season, and we don't have these weather headwinds against us.

Speaker #6: Got it. Yeah. Totally appreciate that. That makes a ton of sense. And maybe one more to follow up. Chris, I think the messaging's on a very positive on your confidence in potentially more hospital partnerships and on the M&A front rolling through the year.

Jack Slevin: Got it. Yeah, totally appreciate that. That makes a ton of sense. Maybe one more to follow up. Chris, I think, you know, the messaging's sounded very positive on your confidence in potentially more hospital partnerships and on the M&A front rolling through the year. Is there any way to think about, you know, the cadence of that? If you can just give a little bit more color on sort of what's driving the level of confidence in those two things to be able to keep adding via those two avenues? Thanks.

Speaker #6: Is there any way to think about the cadence of that or if you can just give a little bit more color on sort of what's driving the level of confidence in those two things to be able to keep adding via those two avenues?

Speaker #6: Thanks.

Chris Reading: Yeah. Look, the cadence for you guys, and I'm sure for some it's frustrating, is not gonna be, you know, something that's absolutely predictable because, you know, good opportunities sometimes take a little time to bring them fully together. But I do feel confident given the number and the depth and the range of conversations that we're having, that we're gonna have more things done on the hospital side. While we don't get fully granular on what we have from, you know, an acquisition perspective, you'll see us continue to be active there as well and, you know, as we have in the past. No real deviation there. But the, you know, these hospital opportunities, they're chunky and they make a really nice difference. Do take a little while to put together.

Speaker #2: Look, the cadence for you guys and I'm sure for some it's frustrating is not going to be something that's absolutely predictable because good opportunities sometimes take a little time to bring them fully together.

Speaker #2: But I do feel confident given the number and the depth and the range of conversations that we're having that we're going to have more things done on the hospital side.

Speaker #2: And while we don't get fully granular on what we have from an acquisition perspective, you'll see us continue to be active there as well.

Speaker #2: And as we have in the past. So no real deviation there. But these hospital opportunities, they're chunky. And they make a really nice difference.

Speaker #2: And so do take a little while to put together. We're dealing with big academic in some cases, medical center institutions. With a lot of constituents and big legal teams and they do their appropriate work and it takes a little time.

Chris Reading: You know, we're dealing with big academic, in some cases, medical center institutions with a lot of constituents and big legal teams and, you know, they do their appropriate work and takes a little time. You know, as we continue to add more of these, as you will see, I think you'll understand the impact as we go forward. It's a nice impact.

Speaker #2: But as we continue to add more of these as you will forward. It's a nice impact.

Speaker #6: Got it. Appreciate the color. Thanks, guys.

Jack Slevin: Got it. Appreciate the color. Thanks, guys.

Speaker #2: Thanks, Jack.

Chris Reading: Thanks, Jack Slevin.

Speaker #6: And we will move next to Larry Silo with CJS Securities. Your line is open.

Operator 4: We will move next to Larry Solow with CJS Securities. Your line is open.

Operator: We will move next to Larry Solow with CJS Securities. Your line is open.

Speaker #2: Hey, Larry.

Chris Reading: Hey, Larry.

Speaker #8: Hey. Good morning, Chris. Following up on that question, on the hospital alliances and I realize the cadence or the timing is impossible to predict.

Larry Solow: Hey, good morning, Chris. Just following up on that question, on the hospital alliances, and I realize the cadence or the timing is impossible to predict and especially to share. Like ultimately, you know, I think if you do the math, it's like 10% today you know, with these two initial alliances. What's the potential? How many, you know, of total clinics you think that could be, you know, using rough numbers over a 3 to 5-year period that you think you could potentially align up with the big hospital organizations? Then also the second question on that one is just on the volume growth that you can potentially drive as you join up with these hospitals.

Speaker #8: And especially at the share. But ultimately, I think if you do the math, it's like 10% today. If you do these initial alliances, what's the potential?

Speaker #8: How many of a total clinics do you think that could be using rough numbers over a three to five-year period that you think you could potentially align up with the big hospital organizations?

Speaker #8: And then also the second question on that one is just on the volume growth that you can potentially drive as you join up with these hospitals.

Speaker #8: Because I know you're EBITDA assumptions are based on just current volumes, right? But that's so if you could just give us a little bit more color on the potential volume growth as you line up with these hospital partners.

Larry Solow: I know your EBITDA assumptions are based on just current volumes, right?

Chris Reading: Right.

Larry Solow: You know, if you could just give us, you know, a little bit more color on potential volume growth, as you line up with these hospital partners.

Speaker #2: Yeah. So a little bit of a it's a little bit of a tricky question. And I have to be a little bit careful. And for one reason, that I don't know for sure.

Chris Reading: Yeah. It's a little bit of a tricky question, and I have to be a little bit careful. For one reason that, you know, I don't know for sure, but if you took what we've done just in the last year and you say, okay, with these two, you know, that represents X, and you mentioned 10%. You know, Metro was 550,000 or 600,000, you know, visits in a year. Probably be significantly more than that when we get to the end of this year. It will be the other group of clinics with, I think, a 10-clinic group, smaller number of clinics.

Speaker #2: But if you took what we've done just in the last year and you say, "Okay. With these two, that represents X." And you mentioned 10%.

Speaker #2: So Metro was 550 or 600 thousand visits in a year, probably be significantly more than that when we get to the end of this year.

Speaker #2: It will be the other group of clinics was, I think, a 10-clinic group. Smaller number of clinics. But if you blend those two together, and if you could do that level, every year over three years or five years, it's a pretty good increase.

Chris Reading: If you blend those two together, and if you could do that level every year over 3 years or 5 years, it's a pretty good increase. You know, we're looking to do these where we can or it makes sense, where we can generate interest. So far, interest has been strong. You know, I think it'll get to be a decent chunk of what we do in the foreseeable future for sure. You know, I know that doesn't help you do the model, although, you know, you sent your model around a couple of weeks ago, which I thought was, again, hypothetical, but, you know, pretty realistic overview. You know, I think you have a pretty good handle.

Speaker #2: And so we're looking to do these where we can or it makes sense where we can generate interest. And so far interest has been strong.

Speaker #2: And so I think it'll get to be a decent chunk of what we do. In the foreseeable future, for sure. I know that doesn't help you do the model although I know you sent your model around a couple of weeks ago which I thought was, again, hypothetical.

Speaker #2: But a pretty realistic overview. And so I think you have a pretty good handle.

Speaker #8: Okay. Good. Good. I appreciate the vote of confidence. Just second question, just on the I know the quarter was relatively in line with it sounds like right in line with your expectations.

Larry Solow: Okay, good. Got it. I appreciate the vote of confidence. Just second question, I know the quarter was relatively in line with or it sounds like right in line with your expectations. You don't guide for the quarter. I think the street clearly, probably led by me, kind of underestimated the impact of weather. Just curious, the pricing also, I know you kind of discussed that, but price per patient, revenue per patient was up less than 1%, and commercial was really strong.

Speaker #8: You don't guide to the quarter. I think the street clearly probably led by me kind of underestimated the impact of weather. But just curious the pricing also.

Speaker #8: I know you kind of discussed that. The price per patient with revenue per patient was up less than a percent. And commercial was really strong.

Chris Reading: Yeah.

Speaker #8: Medicare, it sounds like you got a little bit not the full benefit. But I guess the Medicaid piece which is a much smaller piece, right?

Larry Solow: Medicare, it sounds like you got a little bit, not the full benefit, but I guess the Medicaid piece, which is a much smaller piece, right? I think 5% of visits.

Speaker #8: I think 5% of visits. Is that drag are you worried about that continuing for the year? And could that impact?

Chris Reading: Right.

Larry Solow: Is that drag, are you worried about that continuing for the year, you know, could that impact-?

Chris Reading: Yeah.

Speaker #2: Yeah.

Larry Solow: the pricing outlook? Yeah.

Speaker #8: Pricing outlook. Yeah.

Speaker #2: Yeah. So again, for the first quarter, you blend it's like a vegetable soup. You blend it all together. And you get what you expected.

Chris Reading: Again, the Q1, you blend, it's like a vegetable soup. You blend it all together, and you get what you expected. The proportionality in some cases was a little bit slightly different than we thought. One of those areas was rate. It was a little bit less than we expected. Medicare was not the full benefit of the 1.75%. You know, as we look back, I think understandably, number one, our Medicare patients don't pay as quickly at the first of the year because they're trying to sort out their deductibles and there's just kind of a delay. The way we do our contractual adjustments has to do in some cases with the payment and payment timing.

Speaker #2: But the proportionality in some cases was a little bit slightly different than we thought. And one of those areas was rate. Was a little bit less than we expected.

Speaker #2: Medicair, not the full benefit of the 1.75. As we look back, I think understandably number one, our Medicare patients don't pay as quickly at the first of the year because they're trying to sort out their deductibles.

Speaker #2: And there's just kind of a delay. So the way we do our contractual adjustments has to do in some cases with our payment and payment timing.

Speaker #2: So in Q1, you're straddling care you gave in December which comes in the form of payment in January. So you have a whole host of things.

Chris Reading: In Q1, you're straddling care you gave in December, which comes in the form of payment in January. You have a whole host of things in Medicare, which takes time to upload the new fee schedule. There's a lag and a delay, and things get pushed out. We have a data point that we expect to continue to increase to around that 1.75 number as the year progresses, and we saw that last year. Then around Medicaid, you know, Medicaid was down a few percent. It was a single-digit number. Again, it's not a big part of our business.

Speaker #2: You have Medicare which takes time to upload the new fee schedule. So there's a lag and a delay. And things get pushed out. So we have a data point that we expect to continue to increase to around that 1.75 number as the year progresses.

Speaker #2: And we saw that last year. And then around Medicaid, Medicaid was down a few percent. It was a single-digit number. Again, not a big part of our business.

Speaker #2: It's one data point we'll have to watch it. So we'll have to watch in Q2 to see if it was and we'll have to do a little bit more work on it to see if it was a regional mix which changed.

Larry Solow: Right.

Chris Reading: It's one data point. We'll have to watch it. We'll have to watch in Q2. We'll have to do a little bit more work on it to see if it was a regional mix which changed, which kind of skewed the blended number or whether there's some pricing differences in there as a result of states which have made some changes. I wish I could tell you exactly at this point. We'll do more work on that.

Speaker #2: Which kind of skewed the blended number or whether there's some pricing differences in there as a result of states which have made some changes.

Speaker #2: So I wish I could tell you exactly at this point. We'll do more work on that as we have more color. We'll get with you guys.

Chris Reading: we'll get with you guys and try to give you an update. It's not gonna be a big driver, particularly as.

Speaker #2: And I’ll try to give you an update. But it’s not going to be a big driver, particularly as Medicare is fully in there, and commercial is strong.

Larry Solow: Right

Chris Reading: Medicare is fully in there and commercial is strong. More comp, frankly, continues to be, you know, strong overall in general. So, you know, the cap may move a little bit, but I don't think it'll swing our number very much.

Speaker #2: More comp, frankly, continues to be strong overall in general. And so Medicaid may move a little bit. But I don't think it'll swing our number very much.

Speaker #8: Right. And I know price moves around a little bit. And I imagine Q1, with resets on deductibles and seasonality already lower, I imagine that kind of could skew this one way or the other too.

Larry Solow: Right. I know price moves around a little bit, and I imagine Q1 with resets on deductibles and seasonality already low, I imagine that kind of skew could skew this one way or the other too.

Speaker #2: I mean, if you look at last year, we had some pricing build through the year. We budgeted pricing build through this year. We expect that we'll see that.

Chris Reading: I mean, if you look at last year, we had some pricing build through the year. We budgeted-

Larry Solow: Yep

Chris Reading: pricing build through this year.

Chris Reading: pricing build through this year. We expect that we'll see that. Again, it's tough when you have just one data point.

Chris Reading: We expect that we'll see that. Again, it's tough when you have just one data point.

Speaker #2: Again, it's tough when you have just one data point. But we fully expect we'll get to where we thought we would be.

Larry Solow: Sure

Chris Reading: We fully expect we'll get to where we thought we would be.

Speaker #8: Got it. Great. Thanks. I appreciate the call.

Larry Solow: Got it. Great. Thanks. I appreciate the call.

Speaker #2: Thanks, Larry.

Chris Reading: Thanks, Larry.

Speaker #1: We will now move to Benjamin Rossi with JPMorgan. Your line is open.

Operator 4: We will now move to Benjamin Rossi with JPMorgan. Your line is open.

Operator: We will now move to Benjamin Rossi with JPMorgan. Your line is open.

Speaker #2: Hey, Ben.

Chris Reading: Hey, Ben.

Speaker #8: Hey. Good morning. Yeah. Thanks for taking my question. I've been thinking about PT operating costs on a cost per visit basis. We're just north of call it like $90 a visit during one Q.

Benjamin Rossi: Good morning. Thanks for taking my question. I've been thinking about PT operating costs on a cost per visit basis. We're just north of, call it, like $90 a visit during Q1. As we're thinking about this back half ramp, how should we be thinking about the run rate for operating costs per visit into Q2 and into the back half? As, you know, you have your volumes presumably normalizing, and then some of your technology and hospital initiatives are scaling in there as well.

Speaker #8: As we're thinking about this back half ramp, how should we be thinking about the run rate for operating costs per visit into two Q and into the back half as you have your volumes presumably normalizing and then some of your technology and hospital initiatives are scaling in there as well?

Speaker #2: Yeah. I think you'll see that come down to what probably you guys expected it to be. And a more normal rate and basis. A little bit high.

Chris Reading: Yeah, I think you'll see that come down to what, you know, probably you guys expected it to be in a more normal, in a more normal rate and basis. A little bit high degree for Q1. We won't have any of the weather that we experienced in Q2. Visits have picked up even comparatively, you know, beyond that. I think that'll, I think that'll normalize. One of the things that we worked really hard on, the operations team, Eric Williams worked really hard on with our recruiting group is, number 1, the recruiting side of the business, but we've really focused on the retention side. I'll tell you that, you know, for Q1, and the numbers have come down being in a good direction in terms of turnover.

Speaker #2: Agree for Q1. We won't have any of the weather that we experienced in Q2 visits have picked up. Even comparatively, beyond that. And so I think that'll I think that'll normalize.

Speaker #2: One of the things that we've worked really hard on, the operations team Eric Williams worked really hard on with our recruiting group, is number one, the recruiting side of the business.

Speaker #2: But we've really focused on the retention side. And I'll tell you that for the first quarter, in the numbers have come down, down being in a good direction in terms of turnover.

Speaker #2: For the first quarter, those numbers are now sub-18%, which is as low as we've ever had since we've been measuring it in terms of turnover.

Chris Reading: For Q1, those numbers are now sub 18%, which is as low as we've ever had since we've been measuring it in terms of turnover. We're doing a better job hanging on to our people. That'll make a difference during our blow-and-go months, you know, when we're the busiest, which is, you know, currently Q2 right now is a great example. I think those cost numbers will normalize. We have invested at the corporate office in some of these initiatives in terms of both people and resources, I'll call them. While there's a little bit of a displacement between when revenue begins and when resource allocation has to come in in order to make those other good things happen downstream, those 2 will eventually catch up.

Speaker #2: And so we're doing a better job hanging onto our people. That'll make a difference during a blow-and-go month. When we're the busiest, which is currently Q2 right now is a great example.

Speaker #2: So I think those cost numbers will normalize. We have invested at the corporate office in some of these initiatives in terms of both people and resources, I'll call them.

Speaker #2: And so while there's a little bit of a displacement between when revenue begins and when resource allocation has to come in in order to make those other good things happen downstream, those two will eventually catch up.

Speaker #8: Got it. Okay. So some normalization. Gotten the turnover to impact the labor side. I suppose to flip it over to the weather-related drag. So you mentioned the 31,000 visits lost due to weather.

Benjamin Rossi: All right. Okay, so some normalization and the turnover to impact the labor side. I suppose just flipping over to the weather-related drag. You mentioned the 31,000 visits lost due to weather. Can you break that impact down by month? Did you see volumes rebound in March? Do you have any commentary on how volumes trended at exit the quarter and have started in April so far as you enter this busier season?

Speaker #8: Can you break that impact down by month? Did you see volumes rebound in March? And then do you have any commentary on how volumes trended to exit the quarter and have started in April so far as you enter this busier season?

Speaker #2: Yeah. I don't have a month-by-month breakdown, unfortunately, at my fingertips to be able to give you. But I will tell you that visits have rebounded nicely in April.

Chris Reading: Yeah, I don't have a month-by-month breakdown, unfortunately, at my fingertips to be able to give you. I will tell you that visits have rebounded nicely in April, in fact, even progressed within the month. That has been, you know, that has been really good to see. I apologize, but I don't have a month-by-month below-by-below allocation on the lost visits.

Speaker #2: In fact, even progressed within the month. And that has been that has been really good to see. So I apologize. But I don't have a month-by-month blow-by-blow allocation on the lost visits.

Speaker #8: Got it. No problem at all. Appreciate the commentary.

Benjamin Rossi: Got it. No problem at all. Appreciate the commentary.

Speaker #1: Once again, it's star than one to ask a question. We'll go next to Constantine Davidis with Citizens. Your line is now open.

Operator 4: Once again, it's star 1 to ask a question. We'll go next to Constantine Davides with Citizens. Your line is now open.

Operator: Once again, it's star 1 to ask a question. We'll go next to Constantine Davides with Citizens. Your line is now open.

Speaker #9: Hey, guys. Good morning. Chris, one more follow-up on the hospital and health system side. And I appreciate your commentary around those being chunky and hard to predict.

Constantine Davides: Hey, guys. Good morning.

Constantine Davides: Good morning.

Constantine Davides: Chris, one more follow-up on the hospital and health system side. I appreciate your commentary around those being chunky and hard to predict. When you look at the pipeline, are there other NYU-sized opportunities in there, or is the Gulf Coast deal you alluded to perhaps more representative of the scale of the partnerships that you're exploring right now?

Speaker #9: But when you look at the pipeline, are there other NYU-sized opportunities in there? Or is the Gulf Coast deal you alluded to perhaps more representative of the scale of the partnerships that you're exploring right now?

Chris Reading: Let me answer it this way. There are bigger opportunities than NYU. Part of the reason NYU in and of itself, when you look at the enterprise value of what that's gonna do, it's a big opportunity. Is that the biggest opportunity that we'll have? I don't. It won't be. Part of the reason that the impact to us is smaller, even on the big NYU opportunity, is we only own 50% of that business.

Speaker #2: Let me answer it this way. So there are bigger opportunities than NYU. Part of the reason NYU in and of itself, when you look at the enterprise value of what that's going to do, it's a big opportunity.

Speaker #2: Is that the biggest opportunity that we’ll have? It won’t be. Part of the reason that the impact to us is smaller, even on the big NYU opportunity, is we only own 50% of that business.

Speaker #2: In other parts of our company, where we own 70, 80, even 90 percent of some of these partnerships—large partnerships—if you just took and dropped in, again using NYU as an example, the NYU lift from an enterprise perspective, and you applied that to a partnership where we had an 85 or 90 percent ownership interest, obviously the impact to us is much more significant.

Chris Reading: In other parts of our company where we own 70%, 80%, even 90% of some of these partnerships, large partnerships, you know, if you took just and dropped in, again, using NYU as an example, the NYU lift from an enterprise perspective, and you apply that to a partnership where we had an 85% or a 90% ownership interest, obviously the impact to us is much more significant. To answer the question broadly, there are markets where we think that the opportunity is going to be even greater than the NYU deal, and it will not necessarily follow a typical small lift like the Gulf Coast deal.

Speaker #2: But to answer the question broadly, there are markets where we think that the opportunity is going to be even greater than the NYU deal.

Speaker #2: And it will not necessarily follow a typical small lift like the Gulf Coast deal.

Speaker #9: Great. And then in the beginning of the call, and I think you've touched on this in the past, but I just wanted to flesh out the cash-based program initiative and a little more color on what programs have been deployed and the traction there.

Constantine Davides: Great. In the beginning, Glenn, I think you've touched on this in the past, but I just wanted to flesh out the cash-based program initiative and a little more color on what programs have been deployed and the traction there. Thanks.

Speaker #9: Thanks.

Speaker #2: Yeah. I'm going to kick it, Eric, if you're able. You're front and center with this initiative. You and Graham. And so you want to go ahead and take that?

Chris Reading: Yeah. I'm gonna kick it, Eric, if you're, if you're able, you're front and center with this initiative, you and Graham Reeve. You wanna go ahead and take that?

Speaker #9: Yeah. Sure. And again, it's something we've really been pushing with all of our partners. It was the main focal point for the partner meeting that we held in April of 2025.

Eric Williams: Yeah, sure. Again, something we've really been pushing with all of our partners. It was the main focal point for the partner meeting that we held in April 2025. We just had 30 of our, you know, top, you know, 40 partnerships in Houston in April with a whole list of items that we covered, including, you know, the rollout of welcome wear, AI-assisted ambient listening documentation technology, and the other centerpiece, again, was cash-based programs. The two that people are the most excited about and the one that definitely has the most traction are laser programs. You've probably seen lasers utilized in a variety of different settings. It's a cash-based service, not reimbursed by insurance companies.

Speaker #9: And we just had 30 of our top 40 partnerships in Houston in April, with a whole list of items that we covered, including the overall lot of welcome wear and the AI documentation, and any other centerpiece. Again, was cash-based programs.

Speaker #9: The two that people are the most excited about, and the one that definitely has the most traction, are laser programs. You've probably seen lasers utilized in a variety of different settings.

Speaker #9: It's a cash-based service, not reimbursed by insurance companies. And we see a lot of patients coming in with their typical commercial insurance who have add-on services provided: laser shockwave, probably being the biggest two, and then dry needling is something we've been doing for a while.

Eric Williams: We see a lot of patients coming in with their typical commercial insurance who have add-on services provided, laser shockwave probably being the biggest two, and then dry needling is something we've been doing for a while, but we have a lot more partners being trained on that. I would tell you that those are the three biggest ones that people are latching onto right now. We've got partners who've been enormously successful on it, driving hundreds of thousands of dollars a year in cash-based services starting from zero. As much as we talk about it, when our partners hear other partners talking about it and how they've been able to implement it, and get their clinicians to buy in and get patients to have an interest really carries a lot of weight.

Speaker #9: But we have a lot more partners being trained on that. So I would tell you that those are the three biggest ones that people are latching onto right now.

Speaker #9: And we've got partners who've been enormously successful on it, driving hundreds of thousands of dollars a year in cash-based services starting from zero. And as much as we talk about it, when our partners hear other partners talking about it and how they've been able to implement it and get their clinicians to buy in and get patients to have an interest, really carries a lot of weight.

Speaker #9: And right after the partner meeting, we had a bunch of partners who'd really not launch cash-based programs. Reach out and have an interest in finding out more about the lasers, where to get them, and how to launch the program.

Eric Williams: You know, right after the partner meeting, we had a bunch of partners who'd really not launched cash-based programs reach out and have an interest in, you know, finding out more about the lasers, where to get them, and how to launch a program. It's gonna be something that we continue to push. We're certainly not the only ones in the industry that are pushing this, but I think we have a pretty good approach in terms of how we're gonna expand it.

Speaker #9: So it's going to be something that we continue to push. We're certainly not the only ones in the industry that are pushing this. But I think we have a pretty good approach in terms of how we're going to expand it.

Speaker #2: And let me just say this, and I think it's important to just get this out there and Eric believes in this as well. This isn't for you guys.

Chris Reading: Let me just say this. I think it's important to just get this out there, and Eric believes in this as well. This isn't for you guys. You're interested in what are the economics and what's the possibility. For us, the reason to do this is because it works. It works for patients. It has great patient response, as Eric, you know, reflected. It has great patient demand. They see patients, you know, on the table next to them getting treatment and talking about the difference it made from the treatment before. They wanna sign up. Like anything else, sometimes it takes a while for insurance companies to kind of, you know, get the drift. They don't wanna pay. There are technologies out there that are very, very clinically effective. That's why they're used.

Speaker #2: You're interested in what are the economics and what's the possibility for us. The reason to do this is because it works. It works for patients.

Speaker #2: It has great patient response, as Eric reflected. It has great patient demand. They see patients on the table next to them getting treatment and talking about the difference it made from the treatment before.

Speaker #2: And they want to sign up. And so it's like anything else. Sometimes it takes a while for insurance companies to kind of get the drift.

Speaker #2: They don't want to pay. There are technologies out there that are very, very clinically effective. That's why they're used. And secondarily, we're able to monetize that because it works.

Chris Reading: Secondarily, we're able to monetize that because it works, and that's the, you know, the foundational element to all of it.

Speaker #2: And that's the foundational element to all of it.

Speaker #9: Chris, that's a great call-out. I mean, the clinical efficacy behind all of these programs is well-supported and documented. And that's the first thing that's presented to our partners around the opportunity to utilize these different types of services.

Eric Williams: Chris, that's a great call-out. I mean, the clinical efficacy behind all of these programs is well supported and documented. That's the first thing that's presented to our partners around the opportunity to utilize these different types of services.

Speaker #9: Thanks, guys. Appreciate the call-out.

Constantine Davides: Thanks, guys. Appreciate the color.

Speaker #2: Thank you.

Chris Reading: Thank you.

Speaker #1: And there are no additional questions at this time. I'd like to turn the program back to Chris Redding for any other comments.

Operator 4: There are no additional questions at this time. I'd like to turn the program back to Chris Reading for any other comments.

Operator: There are no additional questions at this time. I'd like to turn the program back to Chris Reading for any other comments.

Speaker #2: Okay. Listen, thanks, everybody. I know I've got follow-up meetings. Jason and I do with a number of you over the next several days. And we're happy to spend time on the phone.

Chris Reading: Okay. Listen, thanks, everybody. I know I've got follow-up meetings Jason and I do with a number of you over the next several days and, you know, we're happy to spend time on the phone. Let us know. We thank you for your time and attention today, and we hope you have a great rest of your week. Take care. Bye now.

Speaker #2: So let us know. We thank you for your time and attention today. And we hope you have a great rest of your week. Take care.

Speaker #2: Bye now.

Operator 4: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.