U.S. Physical Therapy, Inc.

Thank you. If you require any further assistance, please press star, then zero. I'd now like to turn the call over to Chris Redding, President and CEO. Please go ahead, sir.

Thanks, Shelby. Good morning and welcome, everyone, to U.S. Physical Therapy's earnings call this morning. With me on the call today include Carrie Hendrickson, our CFO, Eric Williams, our Chief Operating Officer, Rick Binstein, our Senior Vice President, General Counsel, Jake Martinez, our Senior Vice President of Finance and Accounting. Graham Reeve happens to be on a plane this morning, won't be joining us. Before we begin with some prepared remarks, I'll ask Jake to cover a brief disclosure statement. Jake, if you would, please.

Thank you, Chris. This presentation contains 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. Thanks, Jake.

I'm going to go ahead and start this morning with particular thanks to our clinical teams led by our capable partners around the country. for their efforts in delivering exceptional care, returning a record number of patients to the things that they enjoyed the most. And to our prevention partners for weathering what we expected to be a more challenging year in 23, with great continued success in keeping thousands of workers and companies that we serve healthy and injury-free. They finished the year in really strong fashion with 9.7% revenue growth in our final quarter and a 330 basis point improvement margin in what has been a seasonally slower quarter for this subset of our business, all of which sets the table for good growth year ahead in 2024. Past year was one of persistently high demand for our physical therapy services. Each quarter in 2023 produced a record for volume across our growing networks of clinics, finishing the year for the first time in our history at 30 visits per clinic per day. Visits grew to more than 5 million for the year, up 11.6% in 2023. Demand remained strong throughout the year. Helping to meet this demand, our clinical teams did an exemplary job caring for our patients, which in turn creates additional demand from happy customers who refer their colleagues, friends, and neighbors to us. Despite a rather tight labor market, we were able to attract and hire therapists to enable us to achieve these record volumes. Our team led by our locally strong partners around the country helped to limit turnover at a time when demand has remained at record levels. and our clinical cost efficiency improved in 2023, despite significant inflationary pressures. I'm particularly proud of our ops team and their efforts to keep these many factors and forces in balance throughout the year, all while juggling numerous initiatives, including opening or tucking in 35 clinics and working to integrate an additional group via acquisitions in both PT as well as injury prevention. Additionally, we worked to overcome the Medicare cuts, which made our lives more difficult these past few years, despite physical therapy saving the system significant costs when compared to more expensive, invasive, and often unnecessary musculoskeletal procedures. Our team renegotiated a significant number of payer contracts in 2023, which is bearing fruit for us in and across our commercial contract base. And we have a good work plan for 2024 to carry on that work and to impact rates further. Finally, you saw in the release that we announced a small dividend increase for the start of this year, with the majority of our attention focused on deploying capital through carefully vetted acquisitions in the quarter in years to come. The partners we added in 2023 are ahead of plan. and doing terrific, including the Industrial Injury Prevention Partnership that brought us our first software product, which is getting strong reviews and with a great overall year in injury prevention. On the PT side of things, we are busy at varying stages of diligence and completion, several opportunities that we've included in the guidance we provided in our release. While the environment isn't easy by any stretch, by a fantastic team whom I love and respect, and I can assure you everyone is working very hard to produce a good year ahead. We have a lot of detail to cover. Kerry always does a great job of that, so I'm going to turn it over to him to dive in before we open it up for questions.

Great. Thank you, Chris, and good morning, everyone. Despite challenges as we entered 2023, including the 2% Medicare rate reduction that we've talked about in a tight labor environment, our team produced strong results in 2023. As Chris noted, we recorded the highest patient volumes in the company's history in 2023 at 30 patients per clinic per day. Our physical therapy revenues increased more than $50 million in 2024, which was a 10% increase, 10.6% increase over the prior year. Our physical therapy operating costs decreased by $0.55 per visit for the full year. Our industrial injury prevention business strengthened as the year progressed with fourth quarter revenues up 9.7% over the prior year, fourth quarter, and IIP fourth quarter operating income up almost 30% over the prior year. And we achieved year-over-year growth in both adjusted EBITDA and operating results. We added 46 clinics via acquisitions and de novos in 23, 31 on a net basis after closures, and we added to our IIP business as well. Further, we strengthened our capital structure with a secondary offering in May 2023, which was done on an accretive basis, providing us with cash to deploy into growth opportunities. So despite the challenges as we began the year, our team produced some very good results, and there was a lot of good work done in 2023 that positions us well as we go forward. We reported adjusted EBITDA for the fourth quarter of $19 million, an increase of $1.1 million over the fourth quarter of the prior year. Our operating results were 59 cents per share in the fourth quarter of 2023, which is an increase over the 58 cents reported in the fourth quarter of last year. Our total company revenues increased 9.6% in the fourth quarter, growing from $141.2 million in the fourth quarter of to $154.8 million in the fourth quarter of 23. And our total company gross profit increased $2.7 million, or 9.6%, from $27.8 million in the fourth quarter of 22 to the fourth quarter of 23. Our average visits per clinic per day in the fourth quarter were 29.9, which is the highest volume in the company's history for a fourth quarter. October was at 29.9, November was at 30.3, and December was at 29.5. All three months were higher than the same month in the previous year. Our net rate was $103.68 in the fourth quarter of 2023, which was a meaningful sequential increase from 102.37 that we reported in the third quarter of 23 due to the cumulative impact of progress in our rate negotiations and some operational efforts that we've been working at all year. from the 104-28 report in the fourth quarter of 2022 due to the reductions in Medicare rates, which represent about one-third of our payer mix. All other payer categories increased 2.1% on a combined basis over the prior year. Our physical therapy revenues were $134.6 million in the fourth quarter of 23, which was an increase of $11.8 million or 9.6% in the fourth quarter of 22. The increase was driven by having 45 more clinics on average in the fourth quarter of 23 than in the fourth quarter of 22, coupled with record fourth quarter average patient visits per clinic per day, which was partially offset by the decrease in that rate. Our physical therapy operating costs were $108.4 million, which was an increase of 10.3% over the fourth quarter of the prior year, also due to having 45 more clinics on average than in the fourth quarter of 22. On a per visit basis, our total operating costs were $84.09 in the fourth quarter, which is basically flat with the $84.05 that we had in the fourth quarter of 22. For the full year of 2023, our operating costs were $83.34 in full year 22, and they moved down to $82.79 per visit for the full year of 2023. Our salaries and related costs decreased to $59.72 in the fourth quarter, down from $60.04 in the fourth quarter of 2022. For the full year, salaries and related costs were down 33 cents per visit versus the previous year. Our physical therapy margin was 19.5% in the fourth quarter of 2023. That was down slightly from the 20% we had in the fourth quarter of 22, with the change due to the decrease in our net rate versus the prior year. Even with the decline on our net rate versus last year, our PT gross profit increased 7% in the fourth quarter. As I mentioned earlier, our IP business saw nice growth in the fourth quarter. IP net revenues were up $1.8 million, or 9.7%. and our expenses were up only $800,000 or 5.3%, so that resulted in a $1 million increase in the IEP income in the fourth quarter of 23, which was an almost 30% increase over the prior year. Our IEP margin increased from 17.9% in the fourth quarter of 22 to 21.2% in the fourth quarter of 23. Our balance sheet remains in an excellent position. We have $144 million of debt on our term loan with a five-year swap agreement in place that places the rate on our debt at 4.7%, and we expect it to remain at that rate going forward. As you know, that's a very favorable rate in today's market and well below the current Fed funds rate. In the fourth quarter of 2023 alone, the swap agreement saved us $900,000 in interest expense with cumulative savings of $3.3 million for the full year of 2023. Our interest expense was $2 million in the fourth quarter of 23. In addition to the term loan, we also have a $175 million revolving credit facility that had nothing drawn on it during the fourth quarter. And we have approximately $120 million of excess cash over and above what we need for working capital ready for deployment into growth initiatives. We also noted in the release that our board raised our quarterly dividend rate by one cent per quarter in 2024 At the new rate, our full-year dividend paid would be $1.76 per share, which is a dividend yield of approximately 1.7% based on our recent stock price. As we noted in our release, we expect our EBITDA for full-year 2024 to be in the range of $80 to $85 million. The 3.5% Medicare rate reduction that went into effect on January 1 results in a $6 million reduction in revenue and a $5.3 million reduction in EBITDA net of minority interest. So the $77.7 million EBITDA that we reported in 23 becomes $72.4 million as we begin 2024 due to the Medicare rate reduction. The 2024 EBITDA range is an increase of roughly 10 to 17% from this starting point. We have tremendous confidence in our team to produce EBITDA growth in 2024. We'll benefit in 24 from the full-year impact of rate negotiations that we completed in 23, and then the partial year impact of negotiation work that we do during 2024. We also expect to continue to increase volumes at our existing clinics in 24, and we'll maintain our discipline and expense control. We'll also benefit in 24 from the full-year contribution requisitions that we completed during 2023. In addition, we have several acquisitions that we expect to close in the near term by roughly the middle of 2024, so we've included the expected EBITDA contribution from those acquisitions in our 2024 guidance. The acquisitions we're including are similar in size to those we've completed in the normal course, between $1 and $3 million of total enterprise EBITDA, with us purchasing between 50% and 90% of those companies. We expect our 2024 EBITDA by quarter to lay out a little differently than it did last year, As a reminder, we had no significant weather events in the first quarter of 2023, which resulted in the best first quarter volumes we've ever had by a sizable margin. In January of this year, we did have some significant weather events, which was more in line with our historic experience. So we'd expect our year to get off to a little slower start than it did last year, and then to gain momentum as we layer in rate increases, volume growth, and acquisitions as the year progresses, against the backdrop of our normal seasonal patterns. As a reminder, we expect our outstanding shares to be a little over 15 million shares in each quarter of 2024 and for full year 2024, which is where it has been since we issued the 1.9 million shares with our secondary offering in late May of 2023. That will impact our comparisons for our per share metrics in the first couple of quarters of 2024. In closing, we feel very... growth in 2024, and we look forward to producing strong results for all of our stakeholders in 2024. With that, I'll turn the call back to Chris.

Thanks, Kerry. Great job. Operator, let's go ahead and open it up for questions.

At this time, if you would like to ask a question, please press the star and 1 on your touchtone phone. You may remove yourself from the queue at any time by pressing star 2. Once again, that is star and 1 to ask a question. We'll pause for a moment to allow questions to queue. And we'll take our first question from Brian TenQuillette with Jefferies. Your line is open.

Good morning, guys. Good morning. Congrats on the strong quarter. Maybe for both Chris and Kerry, as I think about the fact that you included some M&A, expected M&A contributions in the guide, just curious, you know, in terms of your visibility into the timing of the deals that you embedded in the guide, and then maybe, Chris, more broadly speaking, how are you thinking about the M&A landscape this year in terms of what you're seeing in the market in terms of competition for deals, and also, like, the deal flow that you're seeing within your own pipeline.

Yeah. In terms of the timing, I think we've tried to speak to that. I mean, one of the reasons we added it into our guidance this year is just due to the relative proximity to when we were going to do this announcement, this release. So, you know, I would say between now and because these sometimes aren't certain between now and July, you know, is kind of what we're looking at for the ones that are kind of in queue right now. In terms of the broader landscape, we're as busy as we've ever been. Competition is changed or changing some. because some folks are more sidelined than they have been for quite some time, just because of leverage and, you know, the rates that some of these companies are having to carry. And so it's a good opportunity for us. That said, we continue to be selective and we continue to look for our kinds of partners and attributes and, So that part isn't changing. We'll continue to be disciplined. But it's a good opportunity right now. We expect to be busy this year.

That's awesome. And then maybe, Kerry, as I think about the gross margin side, you highlighted your success there. And it obviously is very impressive. So just curious in terms of what you see as the remaining opportunity either to hold the gross margin line steady as you grow volumes this year, or if there are remaining opportunities to drive some margin expansion?

Yeah, you know, I think it's going to depend on how much we can do on the rate side this year. We expect to do well there. I think we'll be able to at least maintain our margins where they have been, if not grow them slightly in 2024. Yeah, but it's really going to be a function of how much we can push on the net rate side and then to the extent we're able to keep our costs in line, so either flat on a per-visit basis or slightly better than that. And if we do that, if we push both of those really well, I think we can see a little margin improvement.

Maybe, Kerry, or for Chris, actually, as I think about just the last point that Kerry made on the ability to drive rate growth from commercial payers, You know, how are you thinking about that in terms of what the discussions are and kind of like what inning are we in terms of trying to get more rate growth across the portfolio of contracts that you have in the different markets that you're in?

Yeah. So, you know, we've had really good success in these discussions. I'd say they're based around outcomes and they're based around the value that that that physical therapy provides and the fact that it's a way to actually decrease cost of the overall patient's care. And we've been successful in those conversations. We have a team that and we're We're working on our most, the ones that we concentrate on the most are the five largest carriers and at our top partnerships, and we're gonna keep at that work during 2024. So what inning would you say? Inning, I would say we're, We're probably in maybe the fifth inning or so. We've made some good progress so far in the last 18 months, I'd say. But we still have some more we can do. We definitely have work we can do. The good thing is, Brian, we've built in step increases. As we've renegotiated these contracts – We've been trying to build in one, two, I mean, like three-year step increases so that we're not having to revisit all these contracts each year because we have, as you know, like 1,700-plus contracts that we're always having to kind of come back to and renegotiate. So the three-year step increases have really helped because we get that automatically as the one-year lapses. So that's been good.

And I would say this. You know, when we get to the ninth inning, we're not done. We're going to just play a new game. That's right. You know, we're going to start over. So this is going to be a perpetual thing. And I think over time, you know, how we get paid, you know, maybe it changes and maybe we have a little bit more latitude to focus on results and not count minutes like we do right now. It's just a crazy way to do it. But, you know, I think we've got continued opportunity.

That's awesome. All right, congrats again. Thanks, guys. Thank you.

And we'll take our next question from Larry Solo with CJS Securities. Your line is open. Good morning, Larry.

Great, guys. Thanks. Good morning. Good morning, both of you. I guess just continuing just on that line of questioning, just on the commercial side, you mentioned a nice 2% increase this quarter or a 2% up the CMS impact. Do you have what it was for the full year, and do you expect a similar sort of improvement or maybe even a little bit better in 24? I think using that baseball analogy of we're in the top of the fifth, you get some of that stuff from the bottom of the fourth that wasn't

necessarily in in 2030 and maybe for sure yeah right so um for 2023 on it if you take all the categories except for medicare and combine them on a combined basis they were up about one and a half percent in 2023 so obviously accelerated in the fourth quarter being up 2.1 percent so it's been accelerating as years gone along um and you know i think i'm sorry go ahead larry no no go ahead Yeah, and I think as we looked at 24, you asked about that. I mean, I think we can, if we do somewhere between, just from a math perspective, right, if Medicare is going to be down 3.5%, if we do 1.5% to 2% of an increase in these other categories combined, that would make our rate next year flat. And I think we can do that or maybe even a little better. Got it.

Okay. And on the CMS, you know, rate cut, I guess, you know, 3.6% of times, like there'll be no relief on that. Congress probably not going to get together in a couple weeks to do anything there. But Chris, can you just remind us, I know these cuts, they're sort of related to the position fee schedule and shifts sort of more to the general practitioner while maintaining sort of budget neutrality. But what's the outlook going forward? Are we pretty much at the end of that? Do you expect more cuts potentially in 25, or how do you guys do that?

Yeah, I don't know, Larry. I mean, trying to predict what CMS does or the federal government does, a little bit of a hard job. But I think we're at the end. And, you know, I think we'll get back into a more normal pattern as we go forward with, you know, small increases every year. I think people understand that they're picking on the wrong guys and that this isn't sustainable to have three sequential years of cuts. And that's what I believe. So, you know, we'll see what happens.

Got it. Okay. Great. I appreciate the thought. Thanks. Thank you.

And we'll take our next question from Joanna Gajup with Bank of America. Your line is open.

Hi, good morning. Thank you so much for taking the questions here. Hey, so I guess a couple of things first. When it comes to these assets that you outlined, so you listed the contribution from unannounced deals, those that you expect to close, you know, later this year or this year through the first half, maybe July, I listed as one of the items, but it's one of the last items on the list. So should we wait for this as implying the, you know, kind of the assets you're talking about here versus the $5.3 million, you know, um, like I said, when you have to overcome year over year, um, that would be a contribution, you know, from those futures issues, kind of, you know, smaller items. So are you willing to quantify that or quantify some of these other things you listed there as assets?

Yeah, Joanna, you know, you can appreciate there's a lot of puts and takes, and we've We didn't provide specifics about any of the items and their dollar amounts and impact, just to know that there are things, and some will get more on than we would anticipate, and then others we may not be quite as much on. So we didn't want to specifically talk about dollars related to each one of those items. I will say on the acquisitions, you know, I talked a little bit about that in here, just that these are ones that are in kind of our normal course, if you will, between, you know, $1 and $3 million for a total enterprise basis. And then we are going to, you know, have our ownership percentage of those which typically is somewhere around, you know, 60%, 70%, 80%. And then, you know, and so I think you can kind of get some feel for what the amounts are there related to that. But we believe we'll have ones beyond what we have put in the guidance, you know, beyond the first half of the year that will close later in the year, and those can have impact. Their impact won't be as significant, though, because the later in the year you go, you know, the less impact those have in 2024.

All right, that's helpful. And I guess on, you know, the guidance, I guess, and how should we think about, you know, what do you get some attention for volumes here? So I appreciate you highlighted that Q1 will have a tough comp. But I guess, you know, what was the same store, I guess, volume growth for 23, the full year, and then how do you think about volumes, you know, same store volumes, I guess, growing for the full year, 24th?

Yeah, I mean, we think we could, we hope to have strong volumes. Really, that's going to be, that's one of those factors that, you know, we have an amount in the plan, and it's a nice mid-single-digit kind of growth number, 3% to 5% probably growth for our existing clinics. And we think that's achievable in 2024.

Okay, thank you. And last one, following up on the discussion around pricing and good to see, you know, the commercial traction there. Can you talk about workers' comp? You know, I guess two things, you know, what rate increases you're getting there and also the mix. Are you improving or increasing the workers' comp mix? And I guess that will be helping the average rate as well, right?

Yeah, you know, the mix has stayed pretty consistent. The good news is we're growing the other categories really, you know, well, too. So workers' comp is growing. It's had really nice increases, but so has commercial, so has Medicare. You know, we've had just a lot of patient volume growth across the mix of categories. The mix hasn't changed that much. And the workers' comp rate, though, has continued to improve. It's higher than 23 than it was in 22, and And, you know, we're hoping it'll continue to be like that as we go forward. We're negotiating rate on workers' comp just like we are on others now as well, so.

If I may just squeeze the very last one, sorry about that, and thank you for taking the question. The comments around margins, so these were cross-margin, where you talked about, you know, keeping the flab or maybe even expanding. Any comments – around the corporate level costs? You know, how should we think about, you know, the number going forward? I guess, you know, it picked up a little bit in Q4. I guess maybe this is now, you know, $13.9 million corporate office costs. So how should we think about that number going forward? Thank you.

Yeah, I think that consistently we've been between 8.5% and 9% of total net revenue on that corporate level. cost number for several years. And I think that's how to think about it is as a percent of net revenue, because we do have to add some additional costs, additional clinics that we add as we go forward. So I think thinking of it in that eight and a half to 9% of net revenue, total revenue number. Joanna?

And we'll take our next question from Jared Haas with William Blair. Your line is open.

Jared. Thanks for taking the questions. Just the first one from us and maybe just sticking with sort of levers from a margin perspective and maybe thinking over the next couple of years. I was curious to think about just how you sort of the trends from a hiring and staffing perspective. I think in recent quarters you kind of talked about a little bit of a shift in mix to PT assistance. So I'm just kind of curious to kind of hear how you're thinking about that mix and sort of the availability from a staffing and labor perspective, any trends there to call out from an operating cost perspective.

Yeah, I would just say this. The market continues to be tight, but I wouldn't call it unforgiving. Recruiting team here combined with our partners locally, our ops folks, everybody's working together to do a good job to get new clinicians into the company. you know we're we're not we've always been a pt centric company more licensed therapists considerably more than pt assistants which are also a licensed position but look if we have a good You know, opportunity with a great PT assistant, we're not going to probably pass on it either. So, you know, the relationships have been reasonably steady between PT and PTA the last year. You know, if we can improve those a little bit, really where we just have to be sensitive to it is on the schedule more than anything with respect to federal patients. But markets... It's a competitive market, but we're doing okay. Eric, anything you want to add to that?

No, I think it summed it up pretty well. We continue to invest in additional resources as the company grows to help us from a recruiting perspective. And our clinical turnover number this year was the lowest number we've had in five years. And it was one and a half percentage points better than 2022, which also helped us from a business per day perspective. So we continue to get better from a retention perspective, and we continue to get better in terms of our ability to source licensed staff across the organization.

Helpful. And then, you know, kind of sticking with this theme of levers for margin expansion, another area I was hoping to hear an update on was in the past you kind of talked about rolling out group purchasing across the platform. Just was hoping to hear, you know, a little bit more color in terms of just how penetrated that is across your footprint of clinics and then to what extent you see any kind of incremental leverage opportunities from continuing to consolidate purchasing opportunities.

Yeah, well, I mean, you have two, unfortunately, divergent factors. You have the rollout of group purchasing, which we've done, and it's pretty complete. And then you have overlaid on that just general inflation. And so I think it was the right thing to do. I think it was smart to do. We didn't get it done, you know, day one last year, so it rolled out across the year. So we'll see that carry forward. You saw some of that, probably a small, small part of that show up in our total cost per visit last year. But look, we were, you know, inflation's been a little challenging too. And so I'm sure that what we got, we gave some of that back in inflation. So that's not a big lever. Our big focus is driving additional volume through our facilities, which give us a little overhead coverage and help us be a little bit more efficient. And that's really what it comes down to more than anything else.

Yeah, and Jared, just to add on that, I will say that you do gain operating leverage as you increase your volumes at your existing clinics because the fixed costs remain relatively the same, right? So the incremental margin on those extra visits is higher than your overall margin. So that should help us as we go forward if we can keep those costs in line or maybe even a little bit better on a per-visit basis as we go forward, which I think we can do.

Awesome. Again, very helpful caller. Maybe we've kind of talked around some of the puts and takes to the outlook in 2024. I guess maybe just to put a fine point on, when we think about kind of the low to high end of the range for adjusted EBITDA guidance in 2024, is the biggest swing factor, in your opinion, just sort of timing related to when you complete the M&A deals that are assumed in that outlook? Is it potentially some variance in your assumptions around the rate trends for the year. Just would love to unpack a little bit about that in terms of just what kind of drives that variance from the low to the high end.

Yeah, let me give Kerry a break, and I'm going to take that. I mean, guys, when you run a company, there are things every day that happen, and you try to control as many things as you can, and you try to have a great crystal ball. And, you know, when you're running close to 700 facilities and you're delivering care, I mean, You know, it's not all one plus one equals two every day. And so we have a series of things that we're very familiar with that we have to do well. We have to drive additional volume, volume that we're projecting for July and August and September of the year ahead. We have to get contracts updated and renewed and carry those contracts forward to and bring in relatively the same mix or slightly better mix of patients than we've had. None of that is certain. All that requires an ordinate amount of work on everybody's part, clinically, locally, and operationally. And then we have the timing of acquisitions, which, as you point out, has some effect. You roll that all together, and we've given you the guidance that we've given you. We think we can do better than the bottom, and we think we'll be somewhere in that range, and we'll update as the year goes on according to how things are going if we feel like We need to guide the market in a particular direction. So that's really all I can tell you right now. We're early in the year. We're off to a reasonably good start, albeit a little weather in January, but I think we can overcome that. We plan to overcome it as the year goes on. I wish I could tell you more by bucket, but it doesn't really work that way when you're in real life.

and appreciate all the details.

And once again, if you would like to ask a question, please press star 1. We'll take our next question from Mike Petusky with Barrington Research. Your line is open.

Hey, Mike. Good morning. Could I actually get the, I don't think you guys mentioned it, the actual payer mix for the quarter?

Sure, yeah, for the quarter. For the quarter, it was pretty similar. We had about 48% commercial, 32%, half percent workers' comp, and then, you know, the other three, Medicare, personal injury, self-pay, and they got the rest.

All right, Kerry, I'm sorry. At least on my end, you broke up on workers' comp. How much was workers' comp?

workers' comp was 9.5%. So 48% commercial, 32% Medicare, 9.5% for workers' comp, and then the other categories make up the rest.

Okay. And then I guess maybe for Chris or somebody else in the room, on workers' comp, I know you guys have expressed maybe over the last two to four quarters some optimism around you know possibly changing the trajectory there and and getting that back up into you know sort of the low double digit range is is that optimism still there or or is that just a tough needle to to move because at one time you did have that probably 12 14 of of overall revenue yeah it it's not dead yet mike but it's a you know it's a tough list and when you're growing and we've been able to grow the whole business

It's tough to outgrow just one category, but we've done a lot of training. We've signed a lot of new contracts that should drive additional volume. Our partners are focused on it. Eric, do you want to weigh in?

Yeah, there were a lot of new agreements that were signed, and a lot of those took place at the tail end, you know, late Q3 and Q4. So we actually did see a pickup in Q4. Last year in Q4, work comp was 9.2% of our mix, so up slightly from where we were. And I think the work and the things that we executed on late in 23 are going to pay dividends to us in 2024, and there's a handful of additional agreements that are in process. that will also get executed as we go through first quarter into second quarter that will pay dividends for us, we believe, in the back part of the year. So this is an area that we continue to really focus hard on, not just from a volume perspective, but from a rate perspective as well. And we did get a nice pickup in rate year over year for our work comp business. So opportunity there, but as Chris pointed out, when the whole business is growing, It's really hard to outkick those other categories on a significant basis, but we are making progress here, and we expect better things in 2024.

Okay. All right. Great. And then just a quick question, I guess, on the lack of action in Washington and just the CMS cut this year. I know, Chris, that you're very connected and a leader in the industry. I mean, Is there sort of an argument to go back to CMS if you look at 25 and essentially say, look, we've really sort of taken it, you know, for the last few years here, you know, and essentially make the argument that there was no relief in 24 and that this streak should end at this point? I mean, has there been any talk, I guess, within the industry that there's got to be an end to this?

Yeah, there's a lot of talk in the industry. I will tell you, CMS is a frustrating place. You know, we seem to have a lot more empathy in Congress. We're actually going to be in D.C., Nick and I. Nick, who serves as our executive director for APTQI, also works with us. And a lot of our member company CEOs will be in Washington in another month or so. And we'll meet with MedPAC to talk about some of their scoring. and their lack of ability to score true savers in the system, like, for instance, fall prevention is a saver. We know that if you can prevent a fall, we know measurably what the downstream savings look like, and they're spectacular level of savings. Based on the rules, again, we're talking about the federal government now, and everything's got a million rules associated with it. Based on the rules, MedPAC isn't able to score a saver as a saver. They have to score it as a coster. It's like it's a new ad than the prevention of a massive downstream expense. It doesn't make sense. And so there's a lot of coordination that needs to occur. between the lawmaking side and the rulemaking side of government and CMS. And, you know, so, yeah, we're going to continue to beat the drum. We're going to continue to work with the APCA and APQI and all the constituents and all the good people that I get to work with in those two organizations to push hard. And I think we will come out the other side and be okay. To say it's not frustrating would be an understatement. I mean, it's been a frustrating period. But I think in everyone's heart, they know that physical therapy, and statistically, and according to a lot of good studies that are out right now, physical therapy should be the entree point for musculoskeletal care. If it is, it saves a massive amount of costs. And so we're going to continue to beat that drum. My ability to absolutely predict what happens, I would say, is not great. But, you know, we're focused.

Did I lose you? Yeah. Oh, no, I think I lost you. Thank you. That's great. And just one quick one. On the M&A that's included in the guidance, I'm assuming that's all PT, no injury prevention. Is that correct? Don't make that assumption. Okay. Fair enough. All right. Thank you so much, and nice finish to the year. Thanks.

Now, I will say that for everybody's benefit, I mean, statistically speaking, while we've been active in injury prevention and expect to continue to be active, the majority of the deals that we get done are in the PT space. But you can expect us to be active in both. Thanks.

Thanks, Mike. Sure.

And it appears that we have no further questions at this time. I will now turn the program back over to our presenters for any additional or closing remarks.

We really, truly appreciate your time and attention this morning. Carrie and I are available later to answer questions, either today or later this week or next week. We appreciate your interest, and we hope you have a great day. Bye now. Thanks, everyone.

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