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Edited Transcript of USPH earnings conference call or presentation 7-Nov-19 3:30pm GMT

Q3 2019 U.S. Physical Therapy Inc Earnings Call

HOUSTON Nov 26, 2019 (Thomson StreetEvents) -- Edited Transcript of U.S. Physical Therapy Inc earnings conference call or presentation Thursday, November 7, 2019 at 3:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Christopher J. Reading

U.S. Physical Therapy, Inc. - President, CEO & Director

* Graham Reeve

U.S. Physical Therapy, Inc. - COO of East

* Jon C. Bates

U.S. Physical Therapy, Inc. - VP & Corporate Controller

* Lawrance W. McAfee

U.S. Physical Therapy, Inc. - Executive VP, CFO & Director

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Conference Call Participants

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* Brian Gil Tanquilut

Jefferies LLC, Research Division - Senior Equity/Stock Analyst

* Lalishwar Mitra Ramgopal

Sidoti & Company, LLC - Healthcare Sell Side Analyst

* Lawrence Scott Solow

CJS Securities, Inc. - MD

* Matthew Richard Larew

William Blair & Company L.L.C., Research Division - Analyst

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Presentation

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Operator [1]

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Good morning. My name is Sia, and I will be the conference operator today. At this time, I would like to welcome everyone to the U.S. Physical Therapy 2019 Third Quarter Earnings Conference. (Operator Instructions) Thank you. At this time, I would like to turn the conference over to Chris Reading, Chief Executive Officer. Please go ahead.

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Christopher J. Reading, U.S. Physical Therapy, Inc. - President, CEO & Director [2]

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Thank you, Sia. Good morning, everyone, and welcome to U.S. Physical Therapy's third quarter and year-to-date 2019 earnings call. With me here and on the line include Larry McAfee, our Executive Vice President and Chief Financial Officer; Graham Reeve and Glenn McDowell, Chief Operating Officers; Rick Binstein, our General Counsel; and Jon Bates, our Vice President and Controller.

Before we begin today's call, we need to review a brief disclosure. Jon, if you would, please.

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Jon C. Bates, U.S. Physical Therapy, Inc. - VP & Corporate Controller [3]

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Thanks, 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, and the company's actual results can vary materially from those anticipated. Please see the company's filings with the Securities and Exchange Commission for more information.

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Christopher J. Reading, U.S. Physical Therapy, Inc. - President, CEO & Director [4]

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Thank you, Jon. So before I start, I'm going to give you a quick summary of what I intend to cover before we get into the nitty-gritty.

So first, some highlights from the quarter and year-to-date periods. Next, I'll spend some time discussing some of the elements within this quarter that I think will help you better understand where we are and why for the quarter. And then we can look forward and discuss the remainder of the year before Larry covers the financials in greater detail.

Starting things off. Our company's operating results for the quarter, despite some unique elements that I'll cover here in a minute, increased 11.7% for Q3. And on a year-to-date basis, operating results are up 13.7%. One of those unique elements that we previously announced in Q2's earnings results but remains important to remember and understand here is that we sold a part of a partnership on the final day of Q2 this year. That revenue of a little less than $6 million in the quarter is no longer in our numbers. I'll also point out that sale posted a very nice nonoperating gain for us that's reported in Q2. So as we look deeper into the core PT business, our mature facilities did really well, excellent, in my view, with nice revenue growth and what I believe is one of the best, if not the best, year-to-date same-store volume numbers we have ever delivered.

Our top 20 partnerships collectively are doing a terrific job in driving volume and, together with our operations teams, have been able to continue to demonstrate some nice margin improvement this quarter: 110 basis points in our physical therapy gross profit line, 120 basis points in our managed contracts and a 70 basis point increase at our operating income line, which of course, includes all of our business segments. These gains, improvements and performance numbers are in spite of an adjustment in the third quarter for an approximate $525,000 overpayment relating to a single physical therapy partnership, the majority of which occurred over a multiyear period and discovered this summer by our team. This obviously impacted our rate for the quarter, with some modest lingering effect to rate as we look forward.

However, with an extensive review, this was isolated and unique to the single partnership with a payer who is not a large part of our business, affecting only clinics in one state and in one partnership. We are currently working to offset the rate adjustment with operational improvements.

Shifting gears. We again produced a very strong increase in revenue in our industrial injury prevention business, a combination of organic growth and the addition of another acquired company coming on board in the second quarter. For the third quarter, revenue increased approximately 37% compared to the prior year's quarter. And for the year, revenue has grown 47% for the first 9 months of this year compared to the prior year period. The gross profit for the industrial injury prevention business was 24% for the year thus far in 2019. And for the third quarter, gross profit percentage came in at approximately 20%.

In the quarter, we made the decision to substantially integrate the recently acquired BTE business. Entailed in that were a number of costs and investments related to that transaction, including those in relocating the BTE home office into our expanded Briotix corporate office. Both companies happen to be located in Denver. This allowed for substantially increased and improved communication/connectivity across both companies.

Additionally, we invested in further completion and refinement of the IT and operating system which powers the majority of BTE services. We upgraded and expanded a number of our Briotix corporate support service areas, including investments in our finance and billing departments and continuing investment in our technology department. The work associated with and for the rapid growth that has been created within our injury prevention business has been significant, and we made the decision not to delay these infrastructure investments and enhancements. And we still have some more work yet to do as we believe strongly in this business and the opportunity in this space and in the difference we're making in the work lives of those with whom we serve in some of the largest companies across our nation. Finally, we see continued growth opportunities and cross-selling opportunities among and across our customer base.

One area we didn't expect, however, relates to the California fires. Our founding company, which largely formed the basis of Briotix, started in California. And we have great many companies, including PG&E, which, as you know, is a large electrical utility, among numerous other companies which are California-based. A great many of these companies are now feeling the impact of fires burning throughout the state, and that is impacting current business to a degree. It colors the remaining outlook in addition to the reasons already discussed on how we expect to finish the year.

Finally, as we look forward, we continue -- we see continued growth opportunities, both organic as well as acquired, in both parts of the company. I and several of our team just got back from the Annual Private Practice Physical Therapy Convention in Orlando. And for the first time ever, I was so busy with individual meetings, I didn't attend a single lecture. Our conversations, relationship development and opportunities continue to attract great people, as evidenced by our recently announced 11-clinic deal with another group of dedicated, capable and fantastic people as our partners, in addition to other opportunities in which -- in addition to the other opportunities on which we are working. We're doing similar work and planning this week on and for injury prevention business with the National Work Comp Conference in Las Vegas, where our development operations team is working hard to lay down the plan for continued growth of this important service initiative.

I know we will have questions. But before we open for those, I'll ask Larry to cover the financials in greater detail. Larry?

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Lawrance W. McAfee, U.S. Physical Therapy, Inc. - Executive VP, CFO & Director [5]

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Thanks, Chris. I'll try not to cough. I'm fighting a cold. So I'll go over the quarterly results first.

For the third quarter, as Chris mentioned, our operating results increased 11.7% from -- to $0.71 per share from $0.64 a year ago. Revenue increased $4.1 million or 3.7% to $117 million overall due to an increase in patient revenue from physical therapy operations, internal growth, new clinic development and an acquisition as well as an increase in the revenue from the industrial injury prevention business, again, due to internal growth and an acquisition.

Despite the loss of the net patient revenue in the clinics of the sold partnership, revenue from physical therapy operations increased $1 million. Patient visits increased 1.7%, and that was offset by a slight -- slightly offset by a slight decrease in the net rate per visit of $0.68. Revenue from the industrial injury prevention business, as Chris mentioned, increased almost 37% to $9.9 million.

We were able to reduce total operating costs in the period to 76.7% of revenues overall from 76.9%. Salaries and related costs above physical therapy and industrial injury prevention line were 56.9% in the recent quarter versus 57% in the third quarter of '18. Rent, supplies, especially contract labor and other costs as a percentage of revenue were down 18.9% in the recent quarter versus a higher figure a year ago.

The gross profit for the third quarter of 2019 grew by 5% to $27.4 million. The gross profit percentage was 23.3% in the most recent period compared to 23.1% a year earlier. Physical therapy operations gross margin percentage increased by 110 basis points to 23.9%. And then as Chris mentioned, the physical therapy operations margins were down, part of which was due to the integration costs from the recent acquisition. The margin dollars were up substantially.

Corporate office costs were 9% of revenue in the recent quarter as compared to 9.4%. Operating income for the quarter increased 9% to $16.8 million. And operating income as a percentage of revenue increased by 70 basis points to 14.3%. Same-store revenue for de novo and acquired clinics open for a year or more increased 4% in the recent quarter.

I'll now go over some of the 9 months' highlights. For the 9 months, the company's operating results increased 13.7% to $27.8 million or $2.18 per share as compared to $1.93 a year ago. Revenue increased $23 million or 6.9% to $359.9 million. Net patient revenue from physical therapy operations increased $14.5 million or 4.7% to $324 million.

Revenue from the industrial injury prevention business has increased 47.4% in the first 9 months to $27.1 million. Total operating costs were 76.2% of revenue in the first 9 months of 2019, an improvement of 110 basis points as compared to a year ago. Total salaries and related costs were 56.6% versus 56.9%. And rent, supplies, contract labor and other costs as a percentage of revenue were reduced to 18.7% from 19.5%.

The gross profit for the first 9 months of the year increased by 11.9% or $9.1 million to $85.5 million. The gross profit percentage increased by 110 basis points to 23.8%. The gross profit for PT operations increased 130 basis points. The gross profit for the industrial injury prevention was 24% in the first 9 months of this year as compared to 24.2% a year ago.

Corporate office costs were 9.3% of revenue year-to-date versus 9.2% a year ago. And our operating income has increased 14.6% to $52.1 million. And operating income as a percentage of revenue increased 100 basis points from 13.5% of the 2018 period to 14.5% this year. Same-store revenues for the first 9 months increased 5.8%.

In terms of other financial measures. For the third quarter of the year, the company's adjusted EBITDA increased by 8.4% to $17 million and, as a percentage of revenue, increased by 70 basis points, 13.8% to 14.5%. For the first 9 months of 2019, the company's EBITDA increased by 10.8% to $51.6 million and, as a percentage of revenues, increased by 60 basis points, 13.8% to 14.4%.

As I'm sure you're all aware, we decided that we needed to revise guidance based on the items that Chris mentioned. So we now expect lower anticipated earnings in the company's industrial injury prevention business in the fourth quarter and a slightly lower average net rate from physical therapy operations. Accordingly, we revised guidance for the year to the range of $35.6 million to $37 million or $2.80 to $2.90 per share. We also declared a quarterly dividend today, which, by the way, is 30% higher than it was a year ago. The fourth quarter dividend for 2019 of 30% will be paid on December 13.

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Christopher J. Reading, U.S. Physical Therapy, Inc. - President, CEO & Director [6]

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All right. Thanks, Larry. With that, operator, let's go ahead and open it up, and we'll take some questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question will come from Brian Tanquilut with Jefferies.

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Brian Gil Tanquilut, Jefferies LLC, Research Division - Senior Equity/Stock Analyst [2]

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My first question, the headwinds that you outlined, I understand the industrial prevention side of the business. But from the core physical therapy side, what are you seeing on the rate side? I mean what's driving that headwind or level of cautiousness? Is that just payers reducing rates? Or is there a mix shift that's happening in the business?

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Christopher J. Reading, U.S. Physical Therapy, Inc. - President, CEO & Director [3]

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No, I don't -- honestly, I want to recharacterize it. I don't think we have a headwind. I think we had a mistake at one large partnership. That was a pretty substantial adjustment to revenue in the quarter but didn't happen in the quarter. It happened over a multiyear period. And the partnership just happened to be big enough and the number big enough that it swung our number a bit. We're seeing rates not change from where we have been in the year. This particular issue has a little bit of a lingering effect, and we're making operational adjustments. In fact, we talked about it as recently as yesterday and making progress in there. So we expect over the next quarter-ish, maybe a little bit longer to have those operational adjustments work through with respect to the single partnership. But overall, we're not seeing any big rate movement outside of that.

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Lawrance W. McAfee, U.S. Physical Therapy, Inc. - Executive VP, CFO & Director [4]

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Yes. I don't think there's rate pressure. We had one entity, which, to book it, you book it as a reduction in revenue, which causes your average net rate to be lower. But there's not rate pressure from the payers.

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Brian Gil Tanquilut, Jefferies LLC, Research Division - Senior Equity/Stock Analyst [5]

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Okay. And then as I look at just a metric which is revenue per patient visit or average revenue per unit owned, is there anything that you would call out there? I mean I see revenue per visit down a little bit year-over-year and then down sequentially, your revenue per unit down as well in visits per unit. Is there anything with Q3 where we had an extra day that impacted those metrics?

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Christopher J. Reading, U.S. Physical Therapy, Inc. - President, CEO & Director [6]

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Graham, what were the units for the third quarter versus the units a year ago?

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Graham Reeve, U.S. Physical Therapy, Inc. - COO of East [7]

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I mean for the third quarter of '19, we're at 4.39. For Q3 of '18, we're at 4.41. So we're pretty much right on the...

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Christopher J. Reading, U.S. Physical Therapy, Inc. - President, CEO & Director [8]

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Yes. And when we look at visits per clinic per day, we actually had a strong summer. July, July actually went up fractionally from June, which normally doesn't happen in terms of visits per clinic per day. August held steady. And then September, as -- usually, our pattern begin to move forward, but because we didn't dip as much in the summer months, we actually came through that period in, really, what I consider to be really good shape. And when you look at our same-store numbers, I don't -- I have to go back and check. I haven't had time. But I don't think we've had a year where our same-store is as good as it is right now. So again, I think the revenue per visit number within this quarter is related primarily and potentially exclusively to that one issue.

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Lawrance W. McAfee, U.S. Physical Therapy, Inc. - Executive VP, CFO & Director [9]

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Yes. I mean if you look at our -- the metrics we normally look at, visits per day per clinic, visits per day per therapist, units per visit, average net rate per visit, excluding that one-off item, we're -- and if you look at how we've been able to control costs and the improvement in the margin percentage, I mean the PT operations are doing outstanding.

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Christopher J. Reading, U.S. Physical Therapy, Inc. - President, CEO & Director [10]

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Yes. I'm not wringing my hands and worried about PT right now.

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Brian Gil Tanquilut, Jefferies LLC, Research Division - Senior Equity/Stock Analyst [11]

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Okay. Got it. Last question for me, Chris. The final rule came out last week on the physician service or physician fee rule for Medicare. What's your interpretation for 2020? And then I know there's a pretty sizable cut that's been proposed for '21. What is the stance of the APTA at this point? And how are you guys viewing that operationally from -- within USPH?

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Christopher J. Reading, U.S. Physical Therapy, Inc. - President, CEO & Director [12]

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Yes. So I'm kind of looking at that 2021 number. I haven't had -- to be honest, I spent all last week, didn't get home until late Sunday night from this private practice conference that I was at. We've got a lot of e-mails bouncing around. And frankly, I just need to spend some more time on it. I don't expect a big change for 2020. We'll begin the year, I think, probably in similar position that we're in right now, 2021, so we've got to get ready for. And to be honest, from an alliance perspective, APTQI and APTA and others, we're focused -- even though that's the final rule, we're focused on kind of maybe -- and I don't know what the chance is, but maybe move that needle before we get into 2021.

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Operator [13]

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The next question will come from Larry Solow with CJS Securities.

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Lawrence Scott Solow, CJS Securities, Inc. - MD [14]

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Great. So just to summarize, it sounds like on the physical therapy side, it's basically just this one-timer and essentially taking $500,000 of that $800,000 charge or overcharge you took this quarter and the rest next quarter. So it's like $0.03 and $0.02 if I do the math correctly, right?

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Lawrance W. McAfee, U.S. Physical Therapy, Inc. - Executive VP, CFO & Director [15]

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We took it in the second quarter, about $300,000, and we took $500,000...

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Lawrence Scott Solow, CJS Securities, Inc. - MD [16]

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Oh, you took it in the second quarter. Okay.

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Lawrance W. McAfee, U.S. Physical Therapy, Inc. - Executive VP, CFO & Director [17]

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And then $500,000 in the third quarter. But there'll be a little bit of a lingering effect into the fourth quarter, so we'll have to make operational changes to offset, so...

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Lawrence Scott Solow, CJS Securities, Inc. - MD [18]

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Okay. And that's like $0.05 if you tax that $800,000, right? It's like a $0.05 hit or something.

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Christopher J. Reading, U.S. Physical Therapy, Inc. - President, CEO & Director [19]

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Larry, I would just tell you, this quarter, between the apparent noise around the sale of the practice, that took out a lot of revenue. And the update too was in -- while didn't have the margin contribution that we have in other places. And I want to remind everybody, we kept 3 of those partnerships out there. We sold one. But there was a fair amount of revenue, and there was a higher net rate out there. So in total, we've got some noise in the quarter that shouldn't carry forward as long as you kind of follow the dots and understand what's caused the noise.

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Lawrance W. McAfee, U.S. Physical Therapy, Inc. - Executive VP, CFO & Director [20]

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Yes. I mean there's a higher net rate in that market, but their margins were much lower than our norms and their trajectory was not going where we wanted it to. And the fact we were able to double our money on it, we just hope that.

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Lawrence Scott Solow, CJS Securities, Inc. - MD [21]

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Right. And just remind us if the margin on that is -- on that sort of revenue, very -- it was almost 0, right? Minimal.

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Lawrance W. McAfee, U.S. Physical Therapy, Inc. - Executive VP, CFO & Director [22]

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I wouldn't -- 0, but whereas we might run at 23% for the rest of the company. [They were] Jon and the teams.

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Lawrence Scott Solow, CJS Securities, Inc. - MD [23]

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Okay. And then just switching gears. On the industrial side, you mentioned -- so the -- obviously was the other reason for a little bit of a cut on the earnings. But that's all costs, right? And that the only -- and then the fire maybe hurt your volumes a little bit. Is that basically those 2 things?

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Christopher J. Reading, U.S. Physical Therapy, Inc. - President, CEO & Director [24]

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Yes. So we had -- we definitely had integration and investment-related costs. And look, if we go back, I'm happy. I'm really happy with where we've come with that business. We started with a very small company that had good infrastructure for where they were. We've added 2 almost like-sized companies to that in pretty quick succession that offered an expanded service complement. And so when you think about the different reporting, different IT structures, even billing and financial reporting all differ, we've done, I think, an immense job in getting that largely integrated. And I say largely because the most recent one was just a few months ago. And we've done what we -- I think we've always tried to do is not look at the quarter but look at what we need to do to build this thing the right way going forward. And so we made investments. We'll continue to make investments in the infrastructure of that business, so we can continue to grow and do this the right way. And so that had an effect in the quarter.

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Lawrance W. McAfee, U.S. Physical Therapy, Inc. - Executive VP, CFO & Director [25]

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When we talked about the fires in the industrial injury provision business, remember, most of that is contracted on an annual basis for x number of hours. But the power is off, which P&G&E (sic) [PG&E] is doing pretty regular now. Obviously, they don't need us in the plant. So we'll eventually do [it] -- we didn't do it last week or the week before or next week if they turn the power off again, so you don't get to bill. So you don't get the revenue.

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Christopher J. Reading, U.S. Physical Therapy, Inc. - President, CEO & Director [26]

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There is power and fire, right now. Both, actually.

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Lawrence Scott Solow, CJS Securities, Inc. - MD [27]

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Right. Yes. Okay. Just lastly, you did complete a smaller-size acquisition this quarter. Any color on that? And then how's -- I assume the Q is still pretty -- looking pretty good in terms of potentially more tuck-ins.

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Christopher J. Reading, U.S. Physical Therapy, Inc. - President, CEO & Director [28]

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Yes, we're busy right now. And I don't know that it was smaller. It was a nice-size EBITDA deal with really nice margins. So maybe the revenue wasn't as high proportionately as we see. We reported revenue now on visits. So 11 clinics in a really good state with a great capacity to grow. So I was really happy with that. And yes, we're working on a number of things right now and really good folks. So it's busy.

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Operator [29]

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The next question is from Matt Larew with William Blair.

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Matthew Richard Larew, William Blair & Company L.L.C., Research Division - Analyst [30]

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I wanted to follow up on the injury prevention business. Can you just maybe give a sense for some strip-out, some of the integration work you're doing that affected the margins? Can you just give us a sense for what the organic trajectory looked like in the quarter? And what you're seeing in terms of additional penetration with existing clients? Any interesting new client wins or anything in the pipeline? Just because the BTE -- both the revenue and the integration efforts mudding the waters a little bit. Can you give us a sense just for the underlying things like right now?

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Christopher J. Reading, U.S. Physical Therapy, Inc. - President, CEO & Director [31]

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Yes, I'll try. I don't have the complete segregation in front of me, and maybe we can get it after the call, the difference between organic and acquired. We don't have it broken out on the press release, and so we'll have to pull that. In terms of client wins, our biggest client, our large historic client, which I'd really rather not mention by name, but my guess is you shop there. They've given us a green light for a very significant expansion as we look forward. We're looking to expand both in stores and territories in a pretty meaningful way. And I -- our team just met in Las Vegas this week around the comp conference. I was here getting ready for this. But Glenn was there. They had great meetings. Our teams, led by the founder, really, of what started this company, Bob Patterson, does a great job. And so we've got to fight for everything, but the team's done a great job, and we'll continue to fight forward, and I expect we'll continue to grow.

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Lawrance W. McAfee, U.S. Physical Therapy, Inc. - Executive VP, CFO & Director [32]

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We're in a -- Briotix had -- I don't have the exact figures, but they had very nice same-store growth, excluding BTE. But we've recently won, actually, several contracts, and we're actually going over Briotix budget today. They're showing nice internal growth for 2020. So there's nothing negative there. It's just that costs are a little higher than we anticipated, so the margin percentage is lower. But the margin dollars will be up.

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Matthew Richard Larew, William Blair & Company L.L.C., Research Division - Analyst [33]

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Got it. I think I am a member. And Larry, just asking about the margins. Would you -- again, we had seen some nice margin expansion this year. And again, understanding the integration costs, would you expect, I think, kind of in 2020, continued margin expansion with the IIP business?

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Christopher J. Reading, U.S. Physical Therapy, Inc. - President, CEO & Director [34]

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I think I'm a little reticent to say right now. We continue -- these deals that we've done have been pretty significant. And as you see, 37%, 47% revenue growth. They've moved the needle markedly. We need to catch up a little bit in terms of our infrastructure. So I'm a little hesitant to say that 2020, you're going to see a lot of margin expansion. I would say probably don't model any margin expansion in the near term. I would say...

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Lawrance W. McAfee, U.S. Physical Therapy, Inc. - Executive VP, CFO & Director [35]

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Yes, margin percentage.

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Christopher J. Reading, U.S. Physical Therapy, Inc. - President, CEO & Director [36]

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Margin percentage. I don't mean we're going to grow bottom line just in terms of the percentages. I think in the near term, we contract percentage a little bit, but we continue to grow forward.

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Matthew Richard Larew, William Blair & Company L.L.C., Research Division - Analyst [37]

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And then, Chris, you mentioned you just came back from Orlando and that you're quite busy. Is there anything you think that has instigated the urgency of some of the sellers, whether it's an outlook into 2021 or anything going on in the industry? Or could you maybe -- is there a difference into the composition of these meetings? Or is it just the volume has increased?

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Christopher J. Reading, U.S. Physical Therapy, Inc. - President, CEO & Director [38]

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The volumes increased, for sure. Look, when I go to these meetings -- I've been going for a long time. I've been doing this for 35 years. There's probably a greater percentage of folks in that room that are beginning to have gray hair like me. And so they've got to figure out what the long term -- at least, a lot of these groups are multi-partner groups, and so somebody in that group has gray hair, for sure. They have to figure out what they're going to do. We're at a time in the industry where multiples are at an all-time high. There's interest in the industry, and people want to sort out the difference between what the partners are like. And we offer such a compelling difference in terms of life after, brand continuity, not laying off and synergizing, which is the antiseptic term everybody uses for letting all their valued people go because they're going to move things to a different state. We don't have that. And so our group has been working really hard to make sure that people know the difference between us and, frankly, everybody else, largely PE-backed buyers.

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Operator [39]

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The next question is from Mitra Ramgopal with Sidoti.

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Lalishwar Mitra Ramgopal, Sidoti & Company, LLC - Healthcare Sell Side Analyst [40]

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Just a couple of questions. First, on the IIP business. Chris, obviously, it's still in the early stages, and you obviously feel very good in terms of the longer-term prospects. I was just wondering, in terms of the investments you're making there as it relates to, for example, on the sales force, if you feel you need to commit more resources there. Or are you also finding it easy in terms of potential customers coming to you now as you started to brand yourself in this space?

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Christopher J. Reading, U.S. Physical Therapy, Inc. - President, CEO & Director [41]

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Even if it was easy, I wouldn't approach it as if it was easy. I don't think we approach anything that way. So we're always trying to go as hard, as fast as we can. It's not easy. Frankly, I mean the technology requirements and the cyber security requirements that these companies have, for good reason, has increased exponentially and probably isn't going to get better. We have competition in the market, just like everybody else. And we don't take even the fact that we've had really strong revenue growth and success in the past. We're not coasted on that. We're working hard every day. So we're going to continue to grow that sales group over time. It takes some time to get somebody understanding exactly how to make a sales cycle, but we've gotten good people from 3 of these companies now all working together. Really are just tip of the iceberg on cross-selling opportunities, but that's going to have to be a focus for the group, and we need to get after that. And we're in the early, early innings on that side. But we're certainly not approaching it like we've got it all figured out. We're working hard every day to make it as good as we can make it, and we'll continue to do that.

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Lalishwar Mitra Ramgopal, Sidoti & Company, LLC - Healthcare Sell Side Analyst [42]

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Okay. And again, given the tight labor market, how difficult is it for you in terms of being able to recruit on both sales or even on the therapy side in terms of maybe the cycle it's taking?

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Christopher J. Reading, U.S. Physical Therapy, Inc. - President, CEO & Director [43]

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Yes. It depends on -- it's like the same in therapy. It depends on the market. Some of these companies are positioned in places where there -- a lot of people live. A lot of these people that we're hiring are athletic trainers. Some are physical therapists. In smaller markets, it's tougher. We recently found -- and this is something I'm not as happy about. I think we need to be careful. We've done a review of all of our ads recently, then we had some jargon creep back in that I was not particularly pleased about, jargons meaningful to us but not meaningful to others, so we've stripped all that out. And there's now a heavy and hard focus on reducing the time to fill these positions because we have meaningful revenue opportunities that, unless we can staff it, don't happen. And these are kind of locked and loaded revenue opportunities. So we're not perfect. We're still working at this and trying to work across a number of different areas. But we're making progress, and I expect we'll continue to do so.

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Lalishwar Mitra Ramgopal, Sidoti & Company, LLC - Healthcare Sell Side Analyst [44]

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Okay. No, that's great. And then, Larry, just a couple of questions in terms of, for example, how should we think of the tax rate going forward. And if you have the payer mix handy, that would be great.

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Lawrance W. McAfee, U.S. Physical Therapy, Inc. - Executive VP, CFO & Director [45]

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That's right. What do we use? 26.5%? 26.5%. It will bounce around a little quarter to quarter, but on an annual basis, that's probably pretty close. And in terms of the payer mix for the third quarter, private and managed care, which is your insurance business, was 47.8%. Workers' comp was 14%. Medicare and Medicaid combined were 31.2%. And then other was 6.9%.

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Operator [46]

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And at this time, there are no further questions.

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Christopher J. Reading, U.S. Physical Therapy, Inc. - President, CEO & Director [47]

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Okay. Listen. Thanks, everybody. Larry and I are here. If you have questions offline, we're happy to take those. And thank you for your time today, and have a great rest of your week. Bye now.

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Operator [48]

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Ladies and gentlemen, thank you for participating in today's conference call. You may now disconnect.