| Chris Reading: |
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, in what has been a little bit of a challenging market for a while now. The good news is, that in a number of key areas, we’re making steady forward progress.
First, visit volume which directly correlates to our referrals, and ties most closely with the tremendous care that our partners and clinicians deliver everyday in more than
700 locations around the country, has 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 3rd quarter at30.1 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 this during a time of sequential rate pressure from Medicare, and wage, and other 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, and 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 de novo or aqui novo 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 in an outsized pace. Revenue this quarter grew
approximately 30% compared to Q3 last year, and our operating profit was up over 27% in the same period. We continue to invest in that space and I’m pleased to announce that we just started a very substantial auto manufacturing contract,
and a further expansion on 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 IIP leadership teams for their work this year and the
growth they have delivered underpinned by the exceptional service and care that they provide and recognized by many of our nation’s largest and most prominent employers.
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 cost for people, as well as products and services that have resulted in our 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 cost per
visit, which includes not only our clinical cost, but all of our clinic-level salaries, including our billing and collections teams and our front desk staff, 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 cost 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 lift.
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. Why
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. To better understand this and why it’s taken us a little longer than normal to be able to fully address it, is that for the most part that we’re talking about small daily cost numbers.
Now, with approximately 750 facilities, a difference each day of just $50.00 in total cost increase, and that’s across salary, hours, goods and services, rent, electricity,
the list goes on. The difference of only $50.00 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, to 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 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 or 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, our gross profit excluding closure costs increased 14.4% from prior year’s third quarter and
our 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 the wait has been worth it. Partnerships we’ve 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. 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, Carey, 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.
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