Good day, and thank you for standing by. Welcome to the U.S. Physical Therapy Third Quarter 2025 and Full Year Earnings Conference Call. Please be advised that today's call is being recorded. I'd now like to turn the call over to Chris Reading, Chairman and CEO. Please go ahead, sir.

Thank you. Good morning, and welcome, everyone, to U.S. Physical Therapy's third quarter 2025 earnings call. We've got a few of our executive team on the line with me this morning, including Carey Hendrickson, our Chief Financial Officer; Eric Williams, our President and COO of East; Rick Binstein, our Executive VP and General Counsel; Jason Curtis, our Senior Vice President of Accounting and Treasury. Before we begin to discuss our quarter and our year-to-date performance, I know we need to cover a brief disclosure. So Jason, if you would, please.

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

Thanks, Jason. So I'm going to start out, provide a little color on the quarter, also talk about some things that we're working on and how we look at things going forward. I have some prepared comments that I'm going to touch on. I'm also going to go off script a little bit. I came out to my office this morning. I hadn't really thought about it before this morning. If I'm right, this is my 84th earnings call. So this week on my 22nd anniversary with the company, 21 years since I took over in November of 2004. I looked at our stock as the market opened. I was a little bit surprised at the reaction, frankly. I want to hit some highlights. Volume has continued to be strong for us. For the quarter, we're up 18%. A lot of that is due to Metro, which we completed that acquisition in November of last year. They're doing great. We've added a total of 84 PT facilities net. So we've actually added more than that and the number is net of closures. This last quarter, visits per clinic per day produced a new record for us for Q3 of 32.2, underscoring our ability to continue to grow. The care and the service our clinical people are making every day is impressive. Last earnings call, our net promoter score was over 90, almost mid-90s with a 95% active promoter score across our outpatient facilities. None of this is perfect at any given point, but we are making a difference in a lot of patients' lives. This quarter, gross profit grew 30%. Even if you adjust out some of the noise from a year ago, it still reflects mid-teens gross profit increase number for PT in an inflationary period. We impacted our salary and related costs per visit, which actually went down year-over-year. We're working on initiatives, including AI-driven documentation and the semi-virtualization of our front desk operations. As we look at the year, the Medicare headwind has persisted for five years. CMS produced a final rule that came out as it often does, with some incorrect tables we had to contact CMS about. They updated those tables, and it looks a little better now. This year is complicated due to significant changes in the geographic index factors. Manual therapy was slated to go down, but we challenged their assumptions. In this final rule, manual therapy will go up slightly, which is a positive. In 2024, we began rolling out remote therapeutic monitoring, which required a lot of visits and monitoring. By the end of the year, we hadn't achieved the hoped-for traction with our partnerships, but now we have a fully integrated model through an app, which integrates well with our EMR. Beginning in 2026, this could present us with some blue sky in terms of Medicare reimbursement. Our injury prevention teams are doing well this year. We have strong revenue growth and we've got opportunities in the pipeline. We continue to have high confidence in our teams. This is a team that does not give up. Despite headwinds, we find a way. If you look at the impact of Medicare cuts over the years, they aggregate to over 11%. Even with that, we continue to persevere and find positive solutions. So with that, I'm going to turn it over to Carey to cover the details, and we look forward to your questions. Thank you.

Great. Thank you, Chris. I appreciate it, and good morning, everyone. Let me highlight a few performance metrics that drove our strong results in the third quarter. Our average visits per clinic per day was 32.2, the highest third quarter volume in our company's history. Our total patient visits increased 18% year-over-year, supported by the 84 net owned clinic additions Chris mentioned. Our IIP revenue grew almost 15% and our adjusted EBITDA increased $2.8 million or 13.2% to $23.9 million. Our physical therapy revenues were $168.1 million in the third quarter of 2025, which was an increase of $25.4 million or 17.8% from a year ago. Our operating costs totaled $136.9 million, which was an increase of $18.2 million or 15.3% compared to the same quarter last year. Importantly, we managed costs effectively. Salaries and related costs per visit decreased year-over-year from $62.47 to $60.07. Our total operating cost per visit increased just 1%, moving from $86 per visit to $86.88 this year, which we view as a strong result given the inflationary environment. Our physical therapy operating margin was 18.6%. We will continue to make adjustments to our operating reports as needed to provide more clarity in the future. Corporate expenses remained in line with expectations. Operating results for the third quarter were $10.1 million, down slightly from $10.4 million a year ago. On a per share basis, operating results were $0.66 compared with $0.69 in the same quarter last year. Our balance sheet remains in excellent shape. We reaffirmed our adjusted EBITDA guidance to be in the range of $93 million to $97 million for the full year 2025. And with that, I'll turn the call back over to Chris.

Thanks, Carey. Okay, operator, I know we have some questions. Let's go ahead and open up the lines.

Our first question comes from Brian Tanquilut with Jefferies.

Maybe, Chris, I'll ask first. I mean, what are you seeing in the demand environment for physiotherapy? And then how are you seeing clinician recruitment and retention? I know you guys called out the decline in salary per visit.

Yes. Demand has continued to be strong. We had a little shift between July and August. July was much better than expected. August was a little softer, but we popped back up in September. So demand has been good everywhere. On the supply side, we made several investments in our recruiting and developed relationships to expand our hiring capabilities. Our time to fill is down, and our turnover has been good. However, the market remains competitive.

Got it. That makes sense. And then Carey, can you just touch on your cash generation, how you're thinking about opportunities on the M&A side versus share buybacks? I know you mentioned IIP is a focus area for M&A.

Sure. We view the share buyback as a good tool to have at our disposal. However, acquisitions at this point are the better use of our capital, particularly in the IIP side. The growth prospects in that side of the business are currently better than PT.

Our next question comes from Benjamin Rossi with JPMorgan.

Could you discuss the competitive dynamics in the physical therapy market? Are there any pressures from newer offerings or coverage models?

Yes, it's hard to quantify. Typically, we compete with small practices, hospital-based practices, and other large providers. Since late 2022, we've seen some of the larger PE-backed companies become balance-sheet constrained, leading to lower acquisition multiples. Overall, our strong financial position allows us to make long-term investments.

Could you talk about core growth figures across your main segments like Medicare and commercial?

Yes. Commercial and Medicare were both up, with commercial up about 2.5% to 3% and Medicare up about 4.5%. Workers' comp dipped a little, but we still see overall growth.

Our next question comes from Joanna Gajuk with Bank of America.

Can you provide an update on the impact of the final Medicare rate on adjusted EBITDA?

We're not there yet. The final numbers will come out soon, but we expect to see an increase of about 1.5% as a floor. We’ll provide more information on our next call.

Our next question comes from Larry Solow with CJS Securities.

In terms of the mature clinics, can you discuss the volume trends and their impact?

We’re focused on efficiency and sometimes that results in slightly less volume. While I prefer growth, I don’t see 2.2% as flat.

Does the new ERP system provide efficiency benefits?

Yes, it will create efficiencies for finance and HR, providing quicker and more information management overall.

Could you discuss growth in the injury prevention business?

While we can’t predict exact growth rates, we've been moving in mid-teens growth, and this segment has the potential to grow faster than PT due to added cross-selling opportunities.

Our next question comes from Constantine Davides with Citizens.

Can you speak to the growth of home-care visits?

Currently, our home-care visits are primarily in the Metro asset but we are expanding into New Jersey. The Northeast has favorable reimbursement rates for home-care therapy, which allows us to generate good margins.

What are the limiting factors for de novo growth?

The limiting factor is the availability of the right leadership to run new facilities. However, we are working on strategies to accelerate opening new locations.

We'll go next to Mike Petusky with Barrington Research.

Could you clarify the sequential decline in gross margins in IIP?

We adjusted our amortization allocation, which resulted in a slight decline in IIP margins but will provide clearer financial reports going forward.

What percentage of overall revenue was from workers' comp?

It was approximately 9.7%. Overall, we saw growth in workers' comp visits and revenues on a year-to-date basis.

I will now turn the program back over to our presenters for any additional or closing remarks.

Thank you, everybody. We appreciate your time this morning. Carey and I are available later today, through the week and into next week for any follow-up. Have a great day. Thanks again. Bye-bye.

This does conclude today's program. Thank you for your participation. You may disconnect at any time.