U.S. Physical Therapy (NYSE:USPH) Q2 2022 Earnings Call

0:00 Good day, and thank you for standing by. Welcome to the U.S. Physical Therapy Second Quarter 2022 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 1 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 like to now turn the call over to Chris Reading, President and CEO. Please go ahead, sir. Thanks, Gretchen. Good morning and welcome, everyone, to U.S. Physical Therapy's second quarter earnings call. With me this morning include Carrie Hendrickson, our chief financial officer, Eric Williams, and Graham Reeves, our co-chief operating officers, Rick Binstein, our executive vice president and general counsel, Johnny Blanchard, our assistant controller, before we begin to review our quarter and year-to-date results.

0:59 It's Johnny to cover a brief disclosure. Johnny? Thank you, Chris. The presentation contains forward-looking statements which involve risk 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 filings with the Security and Exchange Commission for more information. Thank you, Johnny. Before I start with my prepared comments, I just want to say this. You know, I've seen the reaction this morning. I know this is a little bit of a disappointment. This is a team that's gotten us through the bulk of this pandemic in really good shape, same team that's been together for a really long time. We have some really good things happening, which I'm going to talk about. We're not, however, unfortunately immune to the to the environment that we find ourselves in from an interest rate and inflationary perspective.

1:55 But we're making our way through and I think we'll come out the other side in good shape. So let's start out this morning by thanking a very committed and talented team, partners, clinicians, Our front and back office teams and our corporate support group for the work, not only this quarter and the year, but for at least two and a half years that we've worked our way through this pandemic and the collateral effects it has generated. I'm going to try to keep my comments at a high level. to talk a little bit about where we are and what we're working on, where we're making progress, and where we're still working through adjustments. I'll let Kerry do most of the lifting this morning where I'm covering the finer details for the quarter and the year with some exceptions that I intend to cover here.

2:43 Despite the challenges presented by the current economic operating environment, overlaid with the persistence of COVID, really do think our team proved how resilient it can be to deliver what amounts to, this is the second highest earnings quarter in the history of the company. This is a quarter where we produced all-time high revenues, up 10.8% for the quarter, record PT visits, up 5.7% year-over-year, and 7.8% from the first quarter. Our industrial injury prevention revenue, which approached the doubling for the quarter, up 93.7%, and same-store injury prevention revenues up over 25% for the year. So I feel like in terms of the things that we could absolutely control, the team did an exemplary job.

3:37 So what don't we control? Clearly, we don't control interest rates or inflation. Both have risen dramatically, but anticipating at least a part of that Cary and team did a terrific job securing a new credit facility and expanding our borrowing ability up to $325 million by hedging the rate on the new facility. All of this will give us needed additional capacity to execute on our long-term growth plans. We've been very busy working on those plans with a really great group of development opportunities, which we look forward to getting over the finish line between now and year end. We also don't have control over the macro environment when it comes to inflation or availability of workers. To that end, in the second quarter, we began to feel the impact of some of those forces with rising labor and ancillary costs.

4:32 And we continue to make adjustments where and when possible with respect to dialing in our costs to the extent that we don't negatively impact our volume or hinder our ability to grow into the future. We continue to work on rate-based negotiations with payers and have invested more resources in that effort. And in that area we're getting some wins as well. We are working to accelerate those with these additional resources. We have similar investments in the work comp area along with new tools which we believe will help us in both PT and injury prevention recruiting, as well as in development of new opportunities in the form of beneficial relationships for the injury prevention group, along with helping to identify acquisition targets.

5:24 is providing to be great asset. We're very excited about what we can drive with these new tools we've invested in. So looking back over the quarter, let's talk a little bit. Let's start with the volume. Volume in the spring was solid. Although later in the quarter, we began to feel the normal seasonal ebb and flow that was decidedly missing in 2021. Concurrent with that, I think we allowed ourselves a little leeway with respect to recruiting new staff given the really tight labor market. So we saw our cost pick up a bit in the quarter as a result. And also related, I think folks, you know, our team, not only our team, but our patients, everybody's been cooped up these past two years.

6:16 If you've flown recently, and that flight which probably paid double what you paid a year ago. Airlines are full to the brim. People are taking vacations that they've forced all these past couple of years. My family, we're going to take our first vacation, a real vacation in the past couple of years since COVID started. So that impacts our staff coverage as well as referrals and visits because doctors and their staff are taking time as well. Good news is that school is starting back soon, at least here in Texas. Football will be cranking up across the country with two-day sessions, and I'm hopeful that we'll see some boosts from that as we make our way through the remainder of the year. Finally, we are working hard to get our costs very finely tuned, considering the environment we're in at the moment, and we have an We have an important project, which will take a little time to complete, but ultimately will help to streamline our intake and front desk operations, which we believe will help some of the costs in that part of our PT business as we continue to move forward. So that concludes my prepared remarks.

7:28 Kerry, if you would please go ahead and walk us through the financials in more detail. Thank you, Chris. Excuse me. Good morning, everyone. All things considered, our team produced a really good result for the second quarter with operating results per share of 90 cents, which, as Chris noted, was the second highest quarterly amount in our company's history. Our reported adjusted EBITDA was $21.3 million for the second quarter, which was only down slightly from the $24 million in the second quarter of 2021, which was the second quarter high for the company. Like all companies, we're dealing with the increasing impact of macroenvironment factors, namely rising inflationary cost pressures and rapidly increasing interest rates in the U.S. Those factors are expected to continue to impact us through the remainder of this year, but volumes remain strong by historic standards, and our team is focused, as always, on finding ways to become even more efficient so we can produce the best possible results for all of our stakeholders.

8:28 Our physical therapy patient volumes per day for clinic were 29.5 in the first quarter, which is an increase from 27.9 in the seasonally low first quarter and slightly less than the company high 30.0 in the second quarter of 2021. By month, our average visits per clinic per day for all clinics were 30.0 in April, 29.7 in May, and 28.9 in June, reflecting our historical pattern entering into the summer months. We don't have final numbers for July yet, but based on trend data, we expect July volume to be similar to June. Our net rate for our physical therapy operations was $103.18 in the second quarter, which compares to the $104.46 we reported in the second quarter of 21. That rate is up slightly from $103 in the first quarter of this year. The decrease in rate versus last year is due to the Medicare rate changes that went into effect in January of this year and the 1% sequestration impact that went into effect April 1. The remaining 1% sequestration impact became effective July 1.

9:33 Our total visits increased 5.7% in the second quarter from 1,084,070 visits in the second quarter of 2021 to 1,145,554 visits in the second quarter of this year, with the addition of 41 clinics through both acquisitions and De Novo's net of a few normal course sales and closures since the second quarter of last year. Our physical therapy revenues were $119.1 million in the second quarter, an increase of $5 million or 4.3% from the second quarter of last year. Our physical therapy operating costs were $92.9 million as compared to $82.9 million in the prior year. Our physical therapy margin in the second quarter of 2022 was 22.0%, which is a healthy margin despite the increase in costs.

10:21 New clinics added $7 million in revenue and $1.3 million to the MPT operating margin dollars. Revenue at our mature clinics declined $1.5 million year-over-year due to a lower net rate on similar volumes, while expenses increased $4 million or 5%. Our physical therapy salaries and related costs at our mature clinics increased 4.6% in the second quarter of 2022 compared to last year. and our contract services and rents were also higher at amateur clinics. On a per visit basis, our total physical therapy costs were $81.09 in the second quarter of 2022, compared to $76.50 in the second quarter of 2021, which is an increase of 6%. Salaries and related costs were $58.29 in the second quarter of 2022 compared to $55.95 in the second quarter of last year, which is an increase of 4.2%.

11:19 Our revenues for the industrial engine prevention business were at an all-time high $19.4 million in the second quarter of 2022, which is a $9.4 million or 93.7% increase over the second quarter of 2021. Our expenses in investor prevention increased $7.8 million, resulting in an IIP operating margin of $4.1 million, which is an increase of $1.6 million, or 62.2% over the prior year. Excluding our IIP acquisition in November of 2021, our IIP revenue still increased 25.5% in the second quarter versus last year. Our gross profit was $30.8 million in the second quarter of 2022, which compares to $34.3 million in the second quarter of 2021, and our gross profit margin was 21.9%.

12:09 Our corporate costs were $10.7 million in the second quarter of 2022, as compared to $12.1 million in the second quarter of 2021, with a decrease due primarily to lower estimated bonus expense this year. As a percent of revenue, corporate costs were 7.6% of revenues in the second quarter of 2022, which is down from 9.5% in the second quarter of 21. Our other income includes a loss of $617,000 related to revaluation of our put-right liability that's associated with the potential second purchase of the remaining portion of the IIP business that we acquired in November of 21. For the first six months of 2022, the loss is only $14,000. Our interest expense increased from $237,000 in the second quarter of last year to $987,000 in the second quarter of 2022 due to an increase in our debt, primarily related to acquisitions that we've closed since the second quarter of last year and higher interest rates in the second quarter.

13:10 Excuse me. Excuse me, higher interest rates in the second quarter this year than last year. Our net income attributable to non-controlling interest was $4.1 million in the second quarter of 22, which is less than the $5 million in the second quarter of the prior year. As a percent of profits, our non-controlling interest was 13% in the second quarter of 2022 as compared to 14.7% in the second quarter of 2021. The reduction in the non-controlling interest percentage is due to the purchase that we've done of non-controlling interest from existing partners, which results in a greater percentage of our profits being retained by USPH.

14:00 In 2021, we purchased $30.0 million of non-controlling interest from our existing partners, and we purchased another $8.6 million in the first six months of this year. Our balance sheet remains in an excellent position. We're very pleased to have successfully closed on a $325 million five-year credit facility in June, which gives us greater capacity for acquisitions and other investments. The facility includes a $150 million term loan and a $175 million revolver. We had nothing drawn on the revolver at June 30 and had cash on our balance sheet of $48.6 million. Our low leverage, coupled with our expanded facility, provides us tremendous flexibility and sufficient capacity for the right growth opportunities as we identify them.

14:45 In connection with the financing transaction, we also entered into a swap agreement in May to fix the rate associated with our $150 million term loan. The swap fixes the one-month term SOFR at 2.815% for five years. Our total rate includes an applicable margin based on our leverage ratio, which currently puts our total rate at 4.665%. The swap provides a certainty in the rising interest rate environment at a rate we believe will be favorable over the five-year period. We'll adjust the fair value of the swap each quarter through other comprehensive income, and at June 30, we had an unrealized loss of $400,000 net of tax in OCI. We issued new guidance in our earnings release today, noting that we now expect our adjusted EBITDA for the full year to be in the range of $73.5 million to $75.4 million, and for our operating results per share to be in the range of $2.65 to $2.75.

15:40 The EBITDA and operating results ranges take into consideration our outlook for cost in the second half of the year to the impact of inflation on our wages and other costs, which elevated during the second quarter. Our operating results range also takes into account the change in the interest rate environment in the U.S. since we provided our initial guidance for the year, specifically our fixed interest rate of 4.665% on our $150 million in debt from the term loan for the remainder of the year. The increase in interest expense is an impact of approximately 25 cents versus our previous guidance. Please note that our current guidance does not include the impact of any potential acquisitions we make between now and year-end, and as Chris noted, we intend to be active on that front. With that, I'll turn the call back to Chris. Yeah, thanks, Kerry. So, Gretchen, let's go ahead and open it up for questions.

16:29 At this time, if you'd like to ask a question, please press the star and one on your touchtone phone. You may remove yourself from the queue at any time by pressing the pound key. Once again, that is star and one to ask a question. We'll take our first question from Larry Sol from CJS Securities. Hey, good morning, Chris. Good morning, Carrie. Thanks for taking the question. I guess the first question, just on the, I guess, the guidance, the outlook, and, you know, also Q2 a little bit in terms of Just the volume trends. I realize last year was maybe a perfect storm or just an amazing quarter because it was a real acceleration and re-ramping back up during COVID. What are you contemplating? It does seem like you're a little bit surprised.

17:14 Maybe it was that June month, which I know came down more than normally in the seasonality, but A little surprising, I guess, from our end that volumes were down a little bit. I'm sorry, your thoughts on that and, again, what are you looking at? In the back half of the year, you mentioned mostly it's mostly inflationary pressures. What are you thinking about in terms of patient volumes in the back half of the year? Yeah, so let's talk about volumes for the quarter, first of all. So April came in solid. You know, we had a really good March, really good April. That was the last time, you know, when we released, you guys heard kind of where we were. And then typically May follows April, did pretty closely.

18:02 We pulled back three-tenths of a visit in May compared to April. And then once we got into June, we pulled back a little bit more. And I don't think it was more than a normal seasonal pattern. But we, you know, if you remember last year, I think this is from memory, so give me a little latitude. But I think June was our highest visit per clinic month in the quarter in 21, which has never happened in 19 years that I've been here in 12 months. Best I can tell you, in combination, one, we still have a bunch of people in quarantine from this COVID variant that we're dealing with right now. Nobody wants to, the world doesn't want to talk about COVID anymore.

18:50 But as a healthcare company, you know, in a lot of places, we're back in masks, and our patients have masks, and in some markets... Like Tennessee and other places, patients don't like that, and that impacts our volume a little bit. We've got people in quarantine. And so Larry, I think we're back into what I would call A more normal seasonal pattern, so a little slower in the summer. God knows people have had that vacation that they put off for a while, so people are taking, including our staff, which they need to. They've done an amazing job. A little bit longer time off, a little bit more time away for doctors as well.

19:36 But I think once, I hope, I'm going to say I hope, I hope once school picks up, and many, many more. Carrie, I don't know how you... Yeah, but the pickup in the fall like we normally have, just normal seasonal patterns. You know, it's the summer pattern, then picking up usually in September, and then October through December are really strong months. And I'd say for the full year, when we look at the full year from a volume standpoint, it's probably going to be similar to last year from a volume standpoint.

20:22 Right, which is sort of flattish. And you've grown volumes, you know, pre-COVID sort of Thank you for joining us. Thank you for watching. and many more.

21:29 Just on the labor side, we've done a good job. Our clinical turnover really hasn't changed, but it's just taken a little bit longer to fill those spots. And some of those markets, we've got people that are tired, that have been working hard, and that's impacting our volume some. So I definitely think we're going to continue to grow. I don't have a perfect crystal ball for five years. And, you know, in this last two years, we haven't had two quarters that look like the quarter, you know, that rubbed up against us. So we're making our way through, but we've got great capacity in our facilities.

22:16 We've got, you know, a partner model that we, you know, we think is, is the way to go, and strong partners and a strong team. And so we just need to get through this bumpy patch. Yeah, no, absolutely. And what about on the, you know, and I know you've been sort of pounding the drum on the rates. You know, it certainly seems like you guys are, you know, it's an awful battle for you when everything is going up and you should have pricing power, but it's tough. So... It does sound like you're making some leeway, at least to some of the bigger payers, and hopefully the government will help you out, too, next year at some point. Any commentary there? Any additional commentary there? We just made a reasonably good investment, big investment, in terms of some additional horsepower on the rate negotiation side.

23:10 It's been very recent. We finally got that done. We have had some wins here lately. As you might expect, I'm not going to name names or tell you rate changes. We're making progress, and we expect to make a good deal more. I think a lot of that will be 23 impacted rather than so much in 22. But it's important, and we think that the value that not just we as a company provide but physical therapy provides in general is extraordinary, and we think it deserves higher rates, and we're going to keep banging on that until we get there. And at CMS, given that, doesn't their next year's proposal usually come out in July? I thought we were a little late this year.

23:59 Did I miss it? Has there been anything mentioned for next year yet or no in terms of proposals? Yeah, it came out a little bit late, but it did come out late in July. And it's slated for a 4.5% reduction for next year, which I can't hardly imagine. But... We're working on that as we have been. Yeah, it's totally stupid. I don't know how that's going to land. We'll not know until December, but we expect to do some significant work on that between here and then.

24:44 What's their rationale behind it? Is it just some convoluted equation that gets to that? Or just from a high level, from a layman's perspective, how do they cut you 5% when they're giving 9% to CPIU-based rate-getters? It's crazy. We're out of that CPIU bucket now because of some adjustments that were made some years ago. We'll be back over, I think, in that bucket. I believe it's 2025. And so I think... You know, this is the original rate reduction was nine and change, which we were able to mitigate. And so I think this is some residual from that.

25:33 Um, but we think and hope will work to mitigate it again. Okay, great. I appreciate all the thoughts and thanks. Thank you. Our next question comes from Steph Wissing from Jefferies. Hey, Stephanie. Good morning, everyone. I wanted to spend a little bit more time compartmentalizing the labor and wage rate pressure you're seeing because it does sound like there's a mix of things occurring. One might be availability of labor and just the cost of that labor, especially on the front end. But you also talked about some PTO or away time that you're also noticing among your staff. So can you just help us think through what components are the most substantial burden on the revised guidance?

26:22 And what do you expect to be more transitory and maybe related to summer vacations or holidays that you would see some of that labor availability come back into the fall? Yeah, certainly vacation is going to be the transitory part. And really, you know, I think for the most part, While there might be a little bit more cost related to that, I mean, it's banked and people are using it. To the extent that we can find, you know, replacement or temp cost for somebody's own vacation, you know, that would bump our cost a little bit. But vacation's a normal thing. We just have people that are a little bit more pent up and carried over some vacation from prior period. So that's going to normalize.

27:08 The other part, the higher labor, we've seen that particularly at the front desk on the non-clinical side. When you look at our mature facility rate changes, I think it was 4.2%. which, you know, which given this environment, honestly, you know, I think it could have been a lot higher. Some of that will take a little time to come down, but in talking with my Brothers and sisters at our APPQI facilities, I think everybody's in the same boat.

27:59 Everybody right now is taking a hard, hard look at their costs. We've made some adjustments for our remainder of the year, very surgical, very precise adjustments match very closely to volume where we're able. And then we have some projects going on right now that will impact long-term, longer-term, the efficiencies and the staffing and the labor load at our front desks. And so that's something that we're very focused on. at the moment right now as well. That actually leads to my second question, which is related to the projects. Maybe share with us a little bit more about what you're doing, if you can, without it being competitive risk and, secondarily, if there's any sort of cost embedded in the back half P&L for the projects or if it's a CapEx-related project, just help us conceptualize what that might be.

28:59 Thank you. Yes. Yes. Thank you. So the one project I referenced in my prepared comments or the one resource I think I'll call it, I don't want to name it because, man, it's an unbelievable resource for us. It's helping us on the recruiting side, identify therapists and connect with those people. It's helping us on the injury prevention side, identifiably connecting with companies that are in our sweet spot on the injury prevention side of things. And it's also helping us identify and connect with and time that connection with companies who may be interested on the development front for our acquisition pipeline which right now is very solid.

29:55 and it's it's you know it's it's it's actually doesn't it isn't a big investment but it's an important investment for us it's going to bear fruit for i think for a good while on the front desk project side that's ongoing um carrie i don't know if you want to speak to that or eric um I don't think that's a big monetary investment. That's really just people and time on our end working their way through it. Yeah, that's more of just a rollout integration and timing issue. And, Eric, do you want to talk about it some? Yes. Yeah, and it is a timing issue. And obviously, with all the different partnerships that we have out there, these systems changes do take a little time.

30:41 But we're trying to figure out how to improve automation in that front desk operation so we can get by with less labor. So creating patient portals that allow our patients to schedule electronic insurance verifications that would reduce the amount of time front office people are spending now verifying insurance. and we've dabbled in patient kiosks. You've probably seen these in lots of different businesses now that used to be people you talked to when you checked in and now it's more of the norm and so we're looking for electronic kiosks that would allow us to get by with less front office labor because that's really where our biggest turnover is in the company. Our clinical turnover right now is really below industry average, and we've kind of told the line. And as we've talked about on calls before, our clinical turnover is three percentage points lower than it was pre-pandemic, so we're doing pretty good. Having said that, every time somebody does walk out the door, clinical or non-clinical, the new person walking in is more than likely going to be making a little bit more money.

31:44 So our focus right now is the front office side that has the highest turnover percentages, and we believe focusing right now on our systems to get by with less labor really is a long-term way to go. Very helpful. Thank you so much. Our next question comes from Michael Katsushi from Barrington Research. Hi, Mike. Hi. Good morning, guys. So in terms of sort of the Double whammy of inflation and sort of going against you, reimbursement, at least from the government side, going against you. I guess, how do you think about M&A in terms of both how you want to approach your balance sheet and then also how do you think this impacts smaller PT companies? Because, gosh, you guys are getting squeezed, but you've Thank you.

32:56 I don't think there's any doubt about that. It's going to squeeze unequally. And it's going to squeeze larger providers as well who are more highly levered than we are and who don't have the financial parameters that Gary just outlined, which are, even though it's more expensive than we were a year ago, it's still very, very efficient. So we're going to use our balance sheet. You guys are going to see that over the coming months. Thank you for joining us. It's going to continue to provide value to the healthcare system.

33:55 There are a lot of drivers to the growth of physical therapy, and so we're going to get through this bumpy period, and I think out the other side, and there are definitely, as you point out, good catalysts that are going to come out of that. and just sort of a follow-up on the proposed rule for a reimbursement cut from CMS. I mean, do you think even at this point as you look at it that there's more of an opportunity just given the givens and given what it could do for smaller providers that there's a better chance of beating back most of this than maybe last year when you did have some success there too?

34:42 But I'm just It just feels like things have deteriorated in the last few months, and I'm just wondering if you think there's a recognition out there, if APTA thinks there is, that that 4.4 point, whatever it is, 4.5, is ridiculous. Yeah, I do think it is ridiculous, and I think, I hope, We'll get a feedback. We got most of last year's feedback. I mean, this year, unfortunately, the impact, which isn't directed at DP, it's not directed at us, most of that impact was sequester impact. You know, that sequester relief going away, I think last year was 0.75 that we felt, less than 1%.

35:27 We got most of it out last year. I'm hopeful that we can do the same or better this year. Time will tell. Obviously, that's not a certainty. Last question, and I may have missed the nuance of this. It almost sounded, Chris, like you may have said that obviously the macro is impacting staffing to a great extent, but it almost sounded like you alluded to possibly late in the quarter, maybe you guys could have done better in terms of that piece of things or did I pick up on something that really wasn't there? No, I think, you know, look, I think our team's done an incredible job. We came out of Q1 expecting, you know, kind of blow and go Q2 from a volume perspective.

36:20 I don't know that volume materialized quite the way that we expected. We also came out of Q1 with a real urgency around hiring and anticipating real strong volumes. I just think it's having now Rearview look at it very, very, very closely. I think we probably selectively onboarded not a lot of full-time people, but we probably let our part-time folks We ended up carrying a little bit more cost than we could have otherwise. And, you know, we've made and we're making those adjustments to make sure that stays very, very closely dialed in. We kind of have a handle, I think, a sense on volume here.

37:16 And so I expect the dial-in to be much tighter, you know, from here to the rest of the year. Thanks. I know it's a tough day, but thanks for standing up and answering the questions. Appreciate it. Thanks, Ryan. Thank you. Our next question comes from Mitchell Rambo from FedUp. Yes. Hi. Good morning, and thanks for the questions. Hi. Just a couple for me. Chris, on the M&A side, you sound pretty confident in terms of getting deals done. between now and year end. Just wondering what are any specific drivers there? Is it a question of valuations being a lot more attractive in this environment versus maybe a year ago? And is it a case also where maybe post-COVID you're seeing one thing in a number of years of health care, increasing retirement, et cetera, and so maybe that's also boosting your pipeline?

38:16 Yeah, so it's mixed. So we've been busy all year. A few of these just, you know, they're planes that I expect to get on the runway. It's just taken a little bit longer to land, but the timing's been a little bit different. But we're very active, very, very active right now. I think this isn't related to people retiring. I think this is It's related to where people have been the last few years. The folks that we're attracting are really, really strong, highly capable people. We have very high expectations for all of these deals. They're not ready to retire, but they have been through, like we've all been through, a rather unique period. My 37 years as a therapist, these last few have been kind of crazy, yet we've done real well and these companies have done well.

39:20 but most of them you know see the opportunity to get some support that we provide some really strong support so they can continue to grow because in their market they're maybe the big provider and they see a lot of opportunities you know among and across smaller providers to tuck those in and or to move market share and they want a partner to help do that and so I think that's what's going to continue to drive our opportunity more than anything that and the fact that Thank you for joining us. Tied in also on the M&A side, who knows how it plays out, but there's obviously talk of recession or obviously a weaker environment heading into next year.

40:18 Does that factor into how aggressive you want to be on the M&A side? And maybe you can remind us how the company has fared in periods of economic downturns or recession. Yeah, so... Yeah, everything factors, Amitra. You know, the interest rate environment factors that impacts the multiples that we and others, I think, are going to be able and willing to pay. Multiples are, you know, kind of, for me, a career high. They have been, and I expect that to pull back. It has to with the rising interest rate environment. Returns aren't as great. And that is without, you know, taking into consideration the macro environment where there's some challenges as well.

41:07 So those things certainly influence. There was another part of that that I was going to speak to, and I just lost my on the recession. So if we look at 8, 9, and 10, we grew through those years. We did some things differently. When there was a massive labor glut back then when companies were laying people off, we created The front end of this, a commission-only sales force, and we doubled our sales force in that period of time, and it helped us grow right through that recession. We continued to get deals done, you know, good multiples back then.

41:53 And so it hit our same store a little bit, certainly, you know, when there's high unemployment. I don't know that I believe, I don't believe that we'll get to a high unemployment situation like we did back in 2008 in front half probably of 2009. I think we're too employment stretched right now for that to happen, but I think we're still well positioned as we have been. We have a good balance sheet. We're making some adjustments, and I forgot to mention this too, just, and it's It's not huge, but it's going to give us an impact, I think, in next year as we're changing who we buy things from and we're moving our resources or will be to get some efficiencies there, and we have to.

42:54 But there's some embedded cost savings in terms of what we have planned there as well. So we'll see, but I don't think I think we're well positioned to deal with what comes at this point. But like we have had to do this quarter, we're going to have to make some adjustments depending on what changes. Okay. And then just finally, obviously, you always try to run a very lean and efficient company. I know on the G&A side, it's probably the lowest I've seen it in some time in terms of percentage of revenue. So obviously trying to Thank you for joining us. for guidance for this year.

44:02 And so I think that's the biggest driver. We're already lean here. Folks are working hard. And so that is something I hope that as we go forward outside of this year, you know, I would expect, you know, more normal accrual pattern to happen, you know, with more normal, predictable growth. And as we go forward, Mitchell, you know, that's typically been in the 9% to 9.5% range of revenue. I think for the second half of this year, it's probably going to be closer to an 8.5% to 9% range as a percent of revenue, and then probably back to more normal patterns in 2023. Okay, that's great. Thanks again for taking the questions.

44:47 Thank you. And once again, that is star and one. If you'd like to ask a question, we'll pause for a moment. and it appears we have no further questions at this time. Okay. Listen, thanks everyone for your time and your questions this morning. Terry and I are available if you have any follow-up and I hope you have a good day. Thank you. Thank you. Bye now. This does conclude today's program. Thank you for your participation. You may now disconnect.