U.S. Physical Therapy, Inc.

Good day and thank you for standing by. Welcome to the U.S. Physical Therapy Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. In order to ask a question during the session, please press the star key followed by the number one on your telephone keypad. Please be advised that today's conference is being recorded. If you require any further assistance, please press star, then zero. I'd now like to turn the call over to Chris Redding, Chairman and CEO. Please go ahead, sir.

Thank you. Good morning and welcome, everyone, to our Q3 2024 U.S. Physical Therapy earnings call. With me on the line this morning, I've got our executive team, including Carrie Hendrickson, our CFO, Eric Williams, the President and COO, Graham Reeve, Chief Operating Officer West, Rick Beanstein, our Executive Vice President, General Counsel. Also with us on the call, Jake Martinez, our Senior Vice President, Finance and Accounting. Got a lot to discuss with you this morning, but before we begin, we need to cover a brief disclosure statement. So, Jake, if you would, please.

Thank you, Chris. This 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 contains certain non-GAAP measures as defined in Regulation G, and the related reconciliations can be found in the company's earnings release and the company presentation on our website. Chris?

Thank you, Jake. So we've got a lot to unpack here, a lot of things going on in this quarter. But I want to begin by thanking our partners and all of our operations support for the focus around care, the grind in general, and what has been a little bit of a challenging market for a while now. The good news that in a number of key areas, we're making steady forward progress. First, visit volume, which directly correlates to our referrals. It ties most closely with the tremendous care that our partners and clinicians deliver every day in more than 700 locations around the country. It's continued to be very strong. We've seen solid demand all year. This Q3, our patient visits increased 6% and our visits per clinic per day, which is really our measure of local clinic demand, hit an all-time high for any third quarter with 30.1 visits. Coupled with that, our net rate continued to climb year over year to 105.65 versus 102.37 in the prior year quarter. This combination drove revenue 9.3% to 142.2 million for Q3 and adjusted EBITDA up 13.4% for the quarter. All of this during a time of sequential rate pressure from Medicare, and wage another inflation overall. On the cost side, we made some decisions this quarter, which will have an impact next year, particularly as we look ahead. We closed and will sell some of our underperforming facilities in secondary markets, which are no longer working for us, and creating a disproportionate investment in time. This is never easy, but with recent incoming investments in great markets like Wyoming, Oregon, most recently New York, we have to focus our time and attention on where we can create the greatest return. So net of closures, we are operating in an owned and managed capacity now totaling 750 locations and continuing to grow in 43 states. In order to get all this done, we had some cleaning up to do considering our current slate of opportunities and our expectations around growth and return. Other additions in the quarter beyond New York Metro included a previously announced eight-clinic practice in the Northeast. And through the end of October, we have opened or acquired 20 DeNovo or AquaNovo facilities in addition to our larger announced acquisitions, with other opportunities in the pipeline yet to come, making for some good momentum as we look ahead to 2025. Also on the highly positive side of the equation was our performance in our injury prevention business, which continues to grow at an outsized pace. Revenue this quarter grew approximately 30% compared to Q3 last year, and operating profit was up over 27% in the same period. We continue to invest in that space. I'm pleased to announce that we just started a very substantial auto manufacturing contract and a further expansion of one of our largest, longest-tenured clients, among many other organic opportunities in our development pipeline. I want to take a minute to thank both of our IAP leadership teams for their work this year and the growth they've delivered, underpinned by exceptional service and care that they provide within many of our nation's largest and most prominent employers. So let's shift gears for a minute and discuss one topic that continues to be the big area of focus for us operationally, and that is dealing with and responding to the increased costs for people as well as products and services that have resulted in a cost-per-visit increase on a year-over-year basis. First, let's look at where we are for the quarter before we speak about what we've done to adjust the trajectory going forward. For the quarter, our salary-related costs per visit, which includes not only our clinical costs, but all of our clinic-level salaries, including our billing and collection schemes and our front desk stack. That subset finished the quarter at $62.47 per visit, compared to $60.35 in the 2023 third quarter, a 3.5% increase. Looking at our salary and related costs as a percentage of revenue, we were able to hold our costs flat year over year at approximately 57.6%, which I feel we can continue to improve upon, especially as we get continued rate left. So let's talk about what we did to make some adjustments as we look forward. In the quarter, the ops team went back and remapped our clinics to where we were in 2021. by 2021, well, that was a fairly lean year coming out of the first year of COVID. Where possible, they've worked to use that as a template, adjusted, of course, for visit changes and wage inflation to a certain extent. That roadmap of sorts should help us as we finish the year. Excuse me one second. To better understand this and why it's taken us a little longer than normal, to be able to fully address it. The most part that we're talking about small daily cost numbers. Now with approximately 750 facilities, the difference each day of just $50 in total cost increase, that's across salary, hours, goods and services, rent, electricity, the list goes on. The difference of only $50 aggregates quickly to $9.5 million over the course of the year. So our team is down in the weeds, pruning and pulling very carefully so as not to disturb the flowers, the fruit of what we are trying to do, which is to take great care of our patients and ensure that we have the right available resources to do that on a consistent basis. So it's tedious work. But just like in a beautiful garden, it's necessary work. And once through, it won't be enough. It will have to be repeated often to ensure we maintain our clinical garden in the way that we desire, bearing great fruit in terms of continued visit and referral growth, fueled by patients and physicians alike who have a great experience as a result of our care and service, while being careful to have the right resource allocation. It's a tough balancing act for sure. So even though that took a good deal of time this past quarter to sort through, a gross profit excluding closure costs increased 14.5% from prior year's third quarter, and a gross margin for PT increased 90 basis points to 18.9%. Not yet where we want it to be, but moving in the right direction. Before I wrap up, let me speak to one thing that I think some of our investors have been concerned with since we did our capital raise late spring of last year, and that has been our pace of deployment of those funds by way of acquisitions. As many of you may remember, when we raised that money, we said we would be disciplined in deploying it with partners whom we believe would be a great long-term fit for our company, sharing our values around the importance of people delivering great patient care. I will tell you that wait has been worth it. Partnerships we have acquired this year, strengthening our core injury prevention business, and the PT partnerships we have acquired over these past 17 months have been and will be outstanding additions to our company. For the longest time, we waited on New York. That patience has paid off in a big way with our partnership with the Metro PT team. Those guys are on fire to deliver strong growth and exceptional care, and we're excited to work alongside them and all of our partners to make a difference to our patients as well as their shareholders. Sometimes it takes us a little time, but this team generally does what we say we're going to do. We appreciate your patience as we work to build a sustainable and bright future for us. our partners and staff, and certainly for all of our patients and companies who count on us to show up and deliver results for them every day. So thank you. That concludes my prepared comments, at least until we open things up for questions. So, Kerry, you always do such a good job of covering the intricate details of our overall quarter and year-to-date financial performance. So I'm handing you the ball.

Great. Thank you, Chris, and good morning, everyone. I'll start with a few highlights and notes inside of our third quarter results. Our net rate, as Chris mentioned, increased again in the third quarter to $105.65 per visit. That's the highest our net rate has been since late 2020, which was prior to the four consecutive years of Medicare rate reductions by CMS, which also at that time benefited from a 2% sequestration rate relief. Our average visits per day in the third quarter were a record high for a third quarter at 30.1%. Our contract labor costs decreased by $600,000 from the second quarter to the third quarter, and our PT margin improved by 90 basis points over the third quarter of last year. We optimized our portfolio with the closure of 32 clinics, which will improve our metrics going forward and will also allow our ops team to focus on growth initiatives and acquisition opportunities. And then our IIP business grew more than 13% in the third quarter, even before adding the acquisition that we made earlier this year. We reported adjusted EBITDA off of the third quarter of 2024 of $21.1 million compared to $18.6 million in the prior year. Our adjusted EBITDA margin was 15.5% in the third quarter of this year, which was up slightly from 15.3% in the third quarter of last year. Our operating results were $10.4 million in the third quarter of 2024, an increase of $1.2 million or 12.4% over the third quarter of 2023. On a per share basis, operating results were 69 cents in the third quarter of this year versus 62 cents in the third quarter of last year. Our average visits per clinic per day, as I mentioned, was 30.1. That was the highest volume for a third quarter in the company's history. July and August were both at 29.9, consistent with our seasonal patterns for summer months. And then September increased to 30.7. Each of those months was a record high volume for that particular month, July, August, and September. Our net rate of $105.65 in the third quarter of 2024 was $3.28 per visit, or 3.2% higher than the third quarter of last year, even with the 1.8% Medicare rate reduction by CMS that was put into effect at the beginning of 2024. If you exclude Medicare, our rate was up $4.17 per visit, or 3.9% over the third quarter of last year. The increase was largely related to our continuing strategic priority of increasing reimbursement rates through contract negotiations with commercial and other payers, and our focus on growing our workers' comp business. We were also focused on maximizing our cash collections through improvements in our revenue cycle management. Each major category of payers increased year over year. And workers' comp, which is one of our highest rate categories, continues to increase as a percentage of our revenue mix, moving from 9.6% of our revenue in the third quarter of 2023 to 10.4% in the third quarter of 2024. And it was also up on a sequential basis, increasing from 10.1% in the second quarter of 2024 to 10.4% in the third quarter of this year. These rate-enhancing initiatives remain a high priority for us. Physical therapy revenues were $142.7 million in the third quarter of 2024, an increase of $12.2 million, or 9.3%, from the third quarter of last year. The increase was driven by our higher net rate, an increase in visits in our mature clinics, as well as having 21 more clinics on average in the third quarter of 24 than we had in the third quarter of 23. Physical therapy operating costs were $119.2 million, which includes $3.4 million of closure costs related to the 32 clinics that we closed during the third quarter. Excluding closure costs, our PT expenses were $115.8 million, which was up 8.2% from prior year due to having 21 more clinics on average than in the third quarter of last year. On a per visit basis, our salaries and related costs were $62.47 in the third quarter of 24. That compares to $60.35 in the third quarter of 23, which is an increase of 3.5%. When you look at our total operating costs, they increased just 2.2%, moving from $84.47 in the third quarter of 23 to $86.37 in the third quarter of this year. Our PT margin was 18.9%, excluding closure costs in the third quarter, up from 18.0% in the third quarter last year. As Chris mentioned, our IIP team produced excellent growth in the third quarter. Our IIP net revenues were up $5.8 million, or almost 30%, over the third quarter of 2023, with IIP income up $1.2 million, or 27.1% over the prior year. Excluding the IEP acquisition that we made earlier this year, our net revenues were still up 12.9%, but our gross profit up 13.2%. And our IEP margin was a very healthy 22.2%. Our corporate office costs are in line for both the third quarter and the full year. Through the first nine months of 2024, our corporate costs were 8.7% of net revenue as compared to 8.5% in the first nine months of 2013. Our balance sheet continues to be in an excellent position. We have $140.6 million of debt on our term loan with a swap agreement in place that places the rate on our debt at 4.7%, which, as you know, is a very favorable rate in today's market and well below the current Fed funds rate. Under that swap, our one-month term SOFR is fixed at 2.8%, and that extends to the middle of 2027. In addition to the term loan, we also have a $175 million revolving credit facility that had nothing drawn on it during the third quarter. Our cash balance at the end of September was $117 million, with approximately $90 million of that cash available for acquisitions and other growth initiatives. As we've announced, we used $75 million from the Metro acquisition, which we made on October 31st, leaving us with approximately $15 million in available cash before we'd have to draw on a revolving credit facility. We have deployed so far this year $117 million of cash into acquisitions. We continue to expect our EBITDA to come within the range previously provided of $80 to $85 million. There's no update to guidance. Our volumes have continued strong in the early part of the fourth quarter with October trending similarly to September. And the recent measures we've taken to impact expenses and optimize our portfolio are important steps in keeping our cost structure in proper alignment. and focusing our efforts on areas with the greatest potential impact. And finally, we're excited about the recent acquisition of Metro Physical Therapy in New York, even beyond its initial significant contribution. They have a great team, and they're a great fit with USPH, and we expect Metro to be an excellent growth engine for us in the years ahead. And with that, Chris, I'll turn the call back to you, and we'll take questions after.

Thanks, Kerry. Okay, operator, we'll go ahead and open the line for questions.

Absolutely. At this time, if you'd like to ask a question, please press the star and one keys on your telephone keypad. Keep in mind, you can remove yourself from the question queue at any time by pressing star and two. Again, it is star and one to ask a question today. We'll take our first question from Brian Tenklet with Jefferies. Please go ahead. Your line is open.

Good morning, guys. Good morning. So maybe, Chris, I'll just ask you about these moves that you've made, exiting from markets and some of the labor initiatives that you've put in place. So how should we be thinking about you know, the flow through impact of these over the next six to 12 months, number one. And then are you thinking of any incremental moves, whether it's further evaluation of markets and clinics or anything else in the labor front that you can walk us through in terms of what those moves exactly are?

Sure. I would say give us a little time to let some of these changes kind of flow through. So I think the bigger impact is next year, um well in two areas one we won't have any of the aggregate draining of those facilities but more importantly probably than anything is that we'll have the time and attention freed up from our you know our very important ops team so they can focus on on our partnerships and our partners who are better positioned to grow so that's that's kind of the overall view in terms of will there ever is there ever could there be other markets and and times where we make adjustments and the answer to that is absolutely um you know this is this is an evolving thing and when we have to respond people business number one um people aren't like numbers you know things ebb and flow and um and sometimes they change over time Good news is with many of these facilities, we've had them for many, many years, and they've been with us for a long time, and they've done well. And at this point, you know, we see a better opportunity to carry forward with time and focus in other areas. But we'll continue to have what we think is a disciplined, you know, pruning process, if that's the right term, and But, you know, I think we've gotten the heavy lift of that done. And some of these facilities will, in fact, will sell and are in the process of doing that. And so that'll further help us just as we position ourselves for the right resources as we go forward.

That makes sense. And then maybe just on the Metro acquisition, Kerry, number one, is that going to be consolidated going forward? And then maybe, Chris, for you, Given the size of that deal, it's larger than what you've normally been doing. How should we be thinking about your appetite and capability to do chunk deals, at least for the next 12 months, as you work on the integration of this asset? Thanks.

Brian, I'll just say, yes, we do expect to be able to consolidate Metro into all of our metrics, our revenue expenses, all along our P&O. Yes.

And then, you know, the answer to the other question, Ryan, is really about what's the right fit. So I think we're going to be well positioned because the Metro team's in really good shape. They have a great team. They have a great plan on the year. We certainly are in the middle and have been in the middle of integration-related things even before, you know, the deal closed. We were on the ground, had people on the ground. working on some key things. So it really depends on what becomes available, I think. And we don't have anything today immediately that we're working on that's of the same size. But if there was something that came along that ended up like Metro will be and is, which is a great fit, then sure, we have the resources and I think the appetite to tackle it. Whether that happens in the next 12 months or not, we'll have to see. We're still working on good things. We have other things that we expect to get done this year and into the early part of next year that are kind of typical for us. Certainly, DeNovo expansions and a lot of planned expansion within the Metro partnership as well. So, you know, I don't see us changing our tact. It's just about looking for the right fit at the right time.

I understand. Thank you.

Thanks, Brian. We'll take our next question from Joanna Gushuk with Bank of America. Please go ahead. Your line is open.

Hi, good morning. Thanks so much for taking that question. So first, I guess just to make sure to confirm this, since you did not mention the guidance, should I read it as no change to your EBITDA guidance for the year?

That's right. Yeah. We still expect it to come within the range we previously provided of $80 to $85 million.

And also to confirm, this Metro acquisition, which is something about, was that already contemplated in this guidance range?

Yes, it was.

So if I do the math, so Rathmart, I guess, for EBITDA's NCI, right, so adjusted EBITDA number to this deal at maybe a million dollars or so, right, then you still have some clinics in there, but it sounds like you're including that deal. So I guess that's why... you know, no change in the guidance way. And if I may just follow up on the Metro acquisition. So you mentioned, you know, clearly better metrics. We know the margins here are higher than USPH. Can you give us a little bit of color with driving that? Is it because they are management companies, there's a cost structure, or there's something market-specific that's driving the better metrics for that asset?

I was just going to say they have larger clinics than us for the most part than the rest of our portfolio on average. So they run somewhere between 45 and 47.5 visits per day. So that will obviously have some upward pressure on our average visits per clinic per day. Their net rate is pretty similar to ours, so there won't be a whole lot of change there. Their margin, you know, they only have a full – support system at Metro with their support team from a finance perspective, their billing and collections, and all of those things. So the margin is actually pretty similar to ours from an adjusted EBITDA margin standpoint, and that will all be in our PT line. So it will be pretty similar to the rest of the margin for the group.

Okay, thank you. And I know you don't have a guidance for next year, but an obvious question would be, so now we know this acquisition is closed, so that's good to know it now. But other than that, you know, any, I guess, tailwinds and headwinds to think about as we think about next year? I guess we have the final Medicare rate update, but anything else we should be thinking about as we think about next year? Thank you.

Yeah, not that I know of. I mean, the most recent thing is the Medicare final rule update, which, as you know, we know all too well has been typically on an annual basis and further modified by Congress, all of which is in motion and shifting fans as we speak right now as a result of the election last night. And so that's all going to have to shake out. Other than that, you know, I don't know of anything that is – on the horizon, you know, plus or minus that is material for next year.

Right. And of course, we'll benefit from the full year, a full year's performance of some of the acquisitions we've made. And Metro in particular, you know, we have two months this year. We'll have 12 months next year, and that's a significant acquisition. So that'll be an add to our 2025.

And let me, Joanne, let me add one thing. And Kerry made a couple of good points. One of the things that's really helped us a lot this year, and it's taken us a little time, but, you know, we've really made good progress around net rate. The team's done an excellent job. We continue to get pretty meaningful increases in key contracts that haven't started yet. And so we continue to be hopeful that we can see rate lifts The other area that's been particularly strong, and I just really want to give a shout out to the people who worked on this, and they've done an excellent job, is in our War Comp area. Carrie shared with you some of the percent change numbers, and I think in those, while those were 100% accurate, I think it gets lost in the shuffle a little bit. Our War Comp visits increased on a year-over-year basis a little more than 16.5% compared to third quarter last year. It's a pretty strong increase. Our revenue for work comp increased just under 19% on a year-over-year basis because the rate in the work comp space also increased as a result of the work that the team has done. And so we're hoping that combination, you know, obviously, is giving us some continued, giving us the lift that we've enjoyed so far and will continue to give us some continued lift as we go forward.

So if I may, a last follow-up on the last comment, because it just begs the question there. So where should we expect this workers' comp next year to get to? I guess there was a time years ago where you were maybe more like 14% workers' comp. So is that achievable, or should we just kind of continue to grow from this 10.5% going forward? maybe over time get there, but maybe not. So any caller, I guess, how do you think about where it could get to? Thank you.

I wish I had a really, really clear, great crystal ball. I don't. All I can tell you is the team has been focused on it. We've discussed it with all of you that it's a focus. We put it out there that we were going to move the needle. The needle's definitely moving. and is moving in the right direction at an outsized rate. And where we end up, I don't honestly know. I'd be making up a number, which I'm not going to do. So I think for now, you know where we are, and you know that it's changing slowly. And, you know, there are going to be things that happen in between in lots of different areas, some expected, some not. And so, you know, just kind of mix it all together and, I think the net overall is definitely more progress to be made.

Thank you.

Thank you.

We'll take our next question from Larry Salo with CJS Securities. Please go ahead. Hey, Larry.

Hey, good morning, Chris. Hey, good morning, Harry. I guess just a few follow-ups on the pricing. So the net rate this quarter, you said up three, a little over 3%, and that obviously is net of a CMS decline. As these rates continue to tick up nicely, sequentially, it feels like you're building some good momentum, right? And fair to say that, like you said, you have, I assume, annual kickers, too, in these things. So are you more comfortable that we're entering a period now where at least on the commercial side, rates should grow 2%, 3% a year? Is that like a fair multi-year outlook?

Terry, let me start with this and then you can jump in. So I would say, Larry, the rates that we've, just to be really clear, the rates, most of the rates that we've recontracted, many have been a multi-year outlook. you know, contract. So it might be 4% or 5% in year one, and then 2% or 3% for two or three years thereafter. I don't know that many of the contracts have a perpetual annual increase associated with them. They're contracted for a period of time, and then they just renew after that. And we've got to go back and you know, get after it again, you know, before these contracts expire. But for the near term, many are going to have additional boosts, not all, but many. And so, you know, that is helping us to offset the continued pressure, unfortunately, that we're feeling from Medicare, at least for this, you know, one more year.

Right. And on that Medicare, so the 2.9%, right, I think it's a 2.9% cut for you guys, right, or something like that. Is that what it works out to? Yeah, it's just under three. Right. Although it's very code-specific, so. Right. And assuming, there may or may not be some congressional action. Obviously, there's been in the last few years. I feel like there's a reasonable chance there will be. But let's just assume it could be a similar rate decline to what we're seeing this year. Any thoughts from a high level? I've heard from various sources that this should be the last year, right, on the physician fee schedule. And, you know, any thoughts as we look out at 26 and beyond that hopefully Medicare, which historically has been more of a little bit of a good guy for you guys, at least becomes neutral?

Yeah, I think so. I mean, look, trying also to predict what the government's going to do is it's been kind of a foolish business but um yeah this this should be the last year and we believe it'll be the last year and nobody we talked to in congress thinks these cuts were right to begin with in fact they were based on all the assumptions that medpac now admits you know erroneous assumptions that were unintended, we ended up, you know, with the unintended consequences. And so I can't see that they're going to perpetuate that. But, you know, we'll have to wait and see. Unfortunately, Medicare is a year to year thing and really should be probably at two or three year rolling kind of a look so that companies like ours had the opportunity to know what the landscape was going to look like. It's not that way yet, but we're expecting this to be the last year that, you know, we have a headwind for sure.

Good. Good. Let's help cross our fingers there. On the vines, Chris, up obviously at a record high, so I can't complain per se, but But up about 1%-ish in the last couple of quarters, and I think flat-ish for the year. It was a little bit of a difficult comp in the beginning of the year. But is that more like what you've had bigger volume growth? We look over the last 10 years, probably averaged more like 2% to 3%. Is that just kind of move around a little bit? I know you had some staffing challenges, too, which maybe led to some inability to meet all the demand. But just any thoughts on volume as we look forward?

Yeah, and Carrie, I don't have it at my fingertips, and it should. I'm trying to remember what same store was this quarter. I thought it was two something, but yeah, you're right. Go ahead. No, it was up about 2.2 and a half percent. You know, no question. I'd love for that to be, you know, three and a half percent. Staffing is tight right now. You know, it's tight everywhere. And at the same time, as you heard, we're trying to balance, you know, not having resources that are standing around with good patient demand and trying to hone that in because small dollars aggregate pretty quickly. And so it's a little bit tricky. But, you know, I can tell you the team's working very, very hard. to create that, to keep the demand up and to create that growth. We are where we are right now, and we've had a lot to deal with in terms of rate pressure and response on that side and cost pressure and response on that side. And I think all in all, it's imperfect. That's not perfect, but Not too bad either. It's been pretty good, you know, net-net. So we continue to work hard at it. And, you know, none of us are satisfied with where we are. We have things that we can do better, and we're working hard at it. So that will continue to be one of them. Great. Thanks. I appreciate the call. Yes, sir. Thank you.

And as a reminder, if you'd like to ask a question today, please press the star and one keys. We'll take our next question from Mike Petoskey with Barrington Research. Please go ahead. Your line is open.

Hey, Mike. Good morning. Hey, good morning, guys. Hey, could you all give just real quick on housekeeping the payer mix breakout, if you have it? Sure. Yeah. Hold on just one second. Let me get up in front of me. You know, the third quarter was pretty typical. Commercial is 47%. Medicare is 33%, which is right in line with where it has been. As I mentioned, workers' comp went up. It was 10.4%. And then, you know, there's everything else. There's Medicaid, personal injury, and self-pay. So pretty consistent. It's very consistent with the second quarter, other than, you know, workers' comp inching up a little bit. Was Medicaid somewhere around like 6%, something like that, 5%, 6%? No, it's about 3.5%. Okay, great. Yeah, 6.5% or so. Okay. So curious on the, you know, injury prevention business, Chris, this, you know, Obviously, top line's great because of M&A, but it's also great XC M&A, double-digit growth. I'm just curious. Is that new business? Are you getting deeper with earning customers? What's driving that?

Yeah, I would say yes and yes. Business and deeper with existing customers. The nice thing about this business is, and this is true of anything, it truly, truly works until It's designed to save companies money. It does that. It does that on a very consistent basis. And so typically, you know, we'll start with the company, maybe a national company, but we'll start with one or two locations. And they tend to be the hardest, worst locations in terms of injury management or injury exposure. And we start with that. And the team does a great job. And then we get embedded organic expansion kind of opportunities with that company based on, you know, the great job that the team has done. And then there are new companies, risk managers and certain industries move between companies. They've had experience and they've heard about us. And so we get brought in either. on a direct basis or through an RFP process and win those opportunities. And again, I'm really proud of it. Both teams have done a really good job this year. Our core team, our legacy team, their largest customer has decided to put us in every one of their locations around the country. And so, you know, that's been, we're already in hundreds of locations. So that's, been a fantastic relationship. And then the other team, we have a lot of auto industry business. We displaced one of the biggest providers in the injury prevention industry in, you know, in their home state with a major auto manufacturer. And, you know, that's a 50 FTE book of business where we have 50 people now on-site, full-time, or nearly so within a given footprint. And so that's a big win. That's a new win. And so it's really both. And so as you point out, we've done some very good acquisitions that have worked out really well for us that have opened and broadened not only our service delivery, the products and services that we are able to sell to industry. So it's created more cross-selling opportunities. But it's also increased our exposure in different industry verticals. So maybe that we were primarily in, you know, distribution and warehousing and now manufacturing and now auto manufacturing and now construction and transportation. And so once you get a foothold or a customer in each of those industry verticals, you open yourself up to a world of other people who think, okay, They understand my business. You know, now maybe, you know, we can talk. And so it's been great overall. Like I said, really proud of both of those teams.

Fantastic. In terms of the Metro deal, I'm just curious, is there any ability for you guys to – I think Kerry may have said that the net rate is pretty favorable for Metro, but I'm just curious if there's anything on the contracting side that you guys can bring to them where – or maybe your contracting is a little bit more favorable to certain insurers. Just curious if there's any opportunity for some uplift from your contracts. Thanks.

So I will tell you that the Metro team did a great job historically and even leading up to our acquisition in terms of what they've done with their own contract rates. Now they have some additional resources that we can that we can you know bring to bear with and for their team um some of the rates that metro has we contracted haven't really kicked in yet or just now kicking in or will kick in shortly and so yeah i think there's some additional lift and we're we're looking at that whole new york market very strategically to see how we can you know continue to add to that and you know time will tell based on our ability to execute on this but i feel pretty confidently over a period of time you know we can do really good things but i will tell you that they themselves did the heavy lift so far and uh you know we'll see if we can help them with that as they go forward Very good. Last question for me.

Just in terms of the election results last night, is there anything that came out of that last night that makes you think that the U.S. Congress would be more or less likely to sort of do their typical week before Christmas action on the proposed reduction in reimbursement?

Yeah, that's an interesting question, and I kind of expected it, and I don't really know how to answer it. You know, we'll see if both houses of Congress end up being, you know, Republican controlled. It looks like that's going to happen. Look, I'm not going to predict. I don't know. I think And this isn't a political statement by me in any way, shape, or form, so I don't want anybody to read into it. I think most of us understand that Republicans are more deficit focused and smaller government focused than their counterparts on the Democratic side of things. We've been in kind of a little bit of a more balanced relationship the last couple of years. That may change a bit as we go forward. And anytime you have change, you know, pieces get moved around. So I don't know that I can predict. We're prepared for the cut that's been announced, regardless of what happened last night. And we're going to be working to try to get that cut. that was announced here a week or so ago, mitigated as we have over the last number of years. And I feel reasonably confident that, let me say, I feel reasonably hopeful that we can get that done. But, you know, the political landscape, it's hard to predict.

Can I just ask a quick follow-up to that? Are you aware of any folks in Congress that were particularly friendly to outpatient PT that will no longer be part of Congress going forward? I mean, did you all lose anybody that's been particularly helpful in terms of your advocacy for PT and the industry in general?

I think the folks on our side through APTQI, which I'm very much part of and proud to be a part of, have done great work. Liberty Partners has done great work to help us long ago understand that we have to have, you know, broad connectivity on both houses of Congress and across both parties. And so I think we're pretty well positioned. Many of our primary advocates are key people that are very secure on both sides, both parties and both sides of Congress. And so I think we're okay there. I definitely don't think we're starting over, if that's the question. It was. Thank you.

Thanks, Mike. And once again, if you'd like to ask a question today, please press the star and one keys on your telephone keypad. We can pause for a moment to allow any further questions to queue. And there are no further questions on the line. I'll return the call to our speakers for any additional or closing remarks.

Yeah, thank you, everybody. I appreciate your time today. Again, team's working very hard. Give us a chance to finish out this year the way that we, you know, have described to you. And, you know, we're focused on delivering continued growth next year with some of the capital deployments that we made and some of the adjustments that we've made ongoing and even ones here more recently. Again, we thank you for your patience and your trust, and we hope you have a great day. Take care. Bye now.

This does conclude today's program. Thank you for your participation, and you may now disconnect.