Good afternoon, and welcome to the ATI Physical Therapy’s Third Quarter 2021 Earnings Conference Call and Webcast. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

On the call today is John Larsen, Executive Chairman and Acting Chief Executive Officer; Joseph Jordan, Chief Financial Officer; Ray Wahl, Chief Operating Officer; Ryan Wilson, Chief Commercial Officer, and Joanne Fong, Senior Vice President, Treasurer and Head of Investor Relations. I would now like to turn the call over to Miss.

Fong to read the safe harbor and forward-looking statements..

Thank you, Alexander. Good afternoon, everyone, and thank you for joining us for today's call.

Before we began, we would like to remind you that certain statements made during this call will be forward-looking statements that are subject to various risks and uncertainties and reflect their current expectations based on beliefs, assumptions and information currently available to us.

Although, we believe these expectations are reasonable, we undertake no obligation to revise any statements to changes occur after this cost.

Descriptions of some of the factors that could cause actual results to differ materially from these statements can be found on the risk factors section in the company's filings with the Securities and Exchange Commission.

In addition, please note that company will be discussing certain non-GAAP financial measures that we believe are important and evaluating performance.

Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliation focus on GAAP financial measures can be found in the press release that's posted on ATI’s website, and filed with SEC. And with that, I'd like to turn the call over to Jack..

Thanks, Joanna, and welcome to all of you joining us this afternoon. I want to begin my remarks with a few high level comments on our third quarter performance, and quickly move on to the more interesting discussion of where our business is today and the activities we have underway to advance through the balance of 2021 and beyond.

I'll then pass the call over to Joe, who provided a detailed financial review before we open the call to your questions. Now, for those of you who I haven't had a chance to meet with yet, I joined ATI’s Board in 2018 and served on the Audit Committee and nominating in Corporate Governance Committee.

I was appointed to the role of Chair in March of this year, and recently took on the role of Executive Chairman. I’ve spent the past 25 years gaining a fairly broad operating experience, and most recently at United Health Group from 2005 until 2018, so I'm very familiar with the overall healthcare landscape.

And alongside our executive team, I will help navigate ATI, while we find a permanent CEO. As we previously reported, the Board started a formal CEO search process in August. And we've assembled what I would say is an interesting slate of candidates, interviewing and assessments are currently underway.

And, of course, we will keep you advised as to our progress. Now under the third quarter. Any discussion on our performance must start with a big thank you to all of our team members for their hard work and dedication, both clinical and support. Despite the many challenges, our team continued to provide high quality care and customer service.

Patient sat ratings remained very high with our Net Promotor Score at 73. And our Google Star rating at 4.9 out of five stars in the third quarter, a real credit to our team. Furthermore, CMS recently advised us that our clinics scored in the 100th percentile for performance year 2020.

And accordingly, ATI will be receiving the highest possible bonus adjustment to the Medicare Physician Fee Schedule in 2022. Our business model and single reporting platform enable ATI providers in every clinic to report and collect the same data.

This centralization allows for reporting out to payers such as CMS and the MIPS program, turning the exceptional work that our clinicians deliver into higher reimbursement rates.

And considering the 2022 Medicare fee rate schedule for therapy, the capability to collect and report on functional outcomes and other data becomes increasingly important to our success.

Although our financial performance for 2021 is not what you expect of us or what we expect of ourselves, I believe we are laying the foundation for steady improvement going into next year.

Last quarter, we spiked out the higher levels of attrition we were experiencing with our clinic teams, and the potential for challenges in hiring both replacement roles, as well as for second-half expected growth. Since then, we revisit many of our workplace policy and compensation issues put in place during COVID.

That in hindsight, led to clinical dissatisfaction, and we quickly course corrected. Annualized clinician headcount turnover decreased from 50% in the month of July, to just over 30% in September and approximate 36% improvement from the beginning of the third quarter to the end of the third quarter.

Our total clinical FTE increased by 91 from this past July through September, as we reduced attrition and picked up our hiring with approximately two clinicians hired for every departure, both in August as well as September. These encouraging results extended through October into early November as well.

But to be clear, this is a journey and not an event. We will continue to authentically engage and support our entire workforce, both clinical as well as support the way you'd expect a world-class company would do. Now, let me move on to a discussion of patient volume.

We mostly think about volumes in terms of clinic count, visits per day and visits per day per clinic. In the third quarter of 2021, our 900 clinics saw nearly 21,000 visits on average per day, or 23.1 VPD per clinic.

In 2019, we delivered approximately 30 VPD per clinic, which is about the right level of activity for the average clinic and really strikes a healthy balance between fixed cost leverage and a positive provider as well as patient experience.

Throughout the first two quarters of this year, our visit volumes were tracking towards what appeared to be a steady recovery to a level comparable with 2019. During the third quarter of this year, our visit volume softened slightly to 26,674 visits per day, down from about 21,570 visits per day in the second quarter.

Simply stated, we experienced declining visit volume when we forecast we should have been growing. This volume softness is centered primarily in a few key states within both the Midwest and Northwest. While many of our clinics, in the south and northeast, are actually running very close to or exceeding pre-COVID levels.

To drive more volume for all clinics across our national footprint, in addition to integrating new clinical team members, we are investing in both feel based sales representatives. Here we call them practice partners in our digital marketing campaigns.

We've identified those markets, where we believe sales and marketing can rev up our referrals, and we are moving quickly to put this in place. This function was significantly reduced during COVID, but is obviously an important contributor to accelerating volume growth, particularly as we move into next year.

While we work to navigate our recovery, we are committed to being more transparent and helping you, the investment community understand the drivers and underlying trends in our business. To this end, we included supplemental tables summarizing our key performance metrics in the earnings press release.

We believe this information will help you better understand the many key moving parts of our business. Now, I want to turn the call over to Joe to provide a detailed financial review of our third quarter results in our revised outlook for full year 2021.

Joe?.

Thank you, Jack. And thanks to everyone for joining the call today. In addition to reviewing our third quarter results, and our revised 2021 guidance, I'll provide perspective on our long term financial business model.

Net operating revenue in the third quarter of 2021 was $159 million, a 7% increase year-over-year from $149 million in the third quarter of 2020. Our net patient revenue was $142 million, which increased 6.8% year-over-year, while other revenue was $17 million, increasing 8.2% year-over-year.

As Jack mentioned, Visits per day per clinic for the quarter was 23.1, which sequentially decreased 1.2 Visits per day from 24.3 in the second quarter. Now, while the third quarter is typically lower than the second quarter, due to seasonality by approximately one Visit per day.

We were expecting the third quarter to increase as we continue to ramp our business back to normal clinic level volume. The quarter-over-quarter decline was due to a combination of factors, including physician referral volume softening, combined with lower labor productivity in the third quarter as we onboard many new hires.

Visits per day per clinic was 20.8 and 30 in the third quarter of 2020 and 2019 respectively, with 2020 significantly impacted by COVID and as mentioned 2019, representing our clinic level operations at normal capacity utilization. Rate per Visit during the second quarter was $105.56 sequentially decreasing 0.7% from $106.26 in the second quarter.

There was no notable change in payer mix in the third quarter compared to the second quarter, and in a normal year, the Rate per Visit will vary within plus or minus 1% quarter-to-quarter. Our Rate per Visit was $112.51 and $111.21 in the third quarter of 2020, and 2019, respectively.

When comparing to prior years, payer mix shifted from higher paying categories of Workers Compensation and auto personal injury to commercial and governmental. In addition, state mix shifted towards lower reimbursing states, in part driven by continued diversification of our geographic footprint.

Finally, the 2021 Medicare Physician Fee Schedule reimbursement rate for PT was approximately 3% lower than 2020 in 2019 rates. Salaries and related costs in the third quarter of 2021 was $87 million an 11.3% increase year-over-year from $78 million in Q3 of 2020.

Salaries and related costs per Visit during the quarter were $64.62 sequentially increasing 10.2% from $58.62 in the second quarter of 2021. During the third quarter, we implemented a range of actions in response to the feedback received from our clinical staff.

In addition to adding to the support structure in the clinics across our footprint, the quarter-over-quarter cost increase was also partly driven by identified wage inflation in certain pockets of the country.

Salaries and related costs per visit were slightly improved from the third quarter of 2020 in 2019, which had costs of 66.12 and 65.34, respectively. In addition to market compensation levels, this expense is also correlated with labor productivity, which is measured using visits per clinical FTE per day.

Rent, clinic supplies, contract, labor and other in the third quarter was $46 million, a 16.8% increase year-over-year from $39 million in Q3 of 2020. On a per clinic basis, rent and other costs during the quarter was approximately 51,000, sequentially increasing 2.9% from approximately 50,000 in the second quarter.

The quarter-over-quarter increase was primarily due to greater use of contract labor in order to alleviate workload as we filled open positions. Rent and other cost per clinic was approximately 45,000 and 52,000 in the third quarter of 2020 and 2019, respectively.

In addition to annual inflation, variations in this category are mostly attributable to contract labor in a particular year. Provision for doubtful accounts in the third quarter of 2021 was $4 million or 2.2% of revenue, and has remained consistent with historical levels when considering the third quarter of 2020 and 2019 at 2% and 2.6% respectively.

SG&A in the third quarter 2021 was $31 million, an 18.3% increase year-over-year from $26 million in Q3 of 2020. The increase was mostly driven by higher one-time transaction costs, consulting costs, and D&O insurance costs under a public company structure.

Impairment charges recorded in the third quarter of 2021 were $300 million for goodwill, and $201 million for our trading both non-cash charges.

We recorded impairment charges equal to the difference between the estimated fair value and carrying value for these intangible assets, primarily due to the revised forecast, along with the price of our stock as of the valuation date.

Operating loss in the third quarter of 2021 was $509 million, decreasing year-over-year from income of $2 million in Q3 of 2020. Notable below the line items in the third quarter included decrease in the fair value of certain liabilities acquired in connection with our business combination, specifically warrants and contingent common shares.

The mark-to-market fair value adjustment was based on a valuation analysis as of September 30, and resulted in a gain of $162 million. Income tax benefit recorded during the quarter was $29 million, increasing year-over-year from expense of $2 million in the third quarter of 2020.

The income tax benefit in the third quarter of 2021 was primarily driven by the income tax impacts of the non-cash goodwill and intangible asset impairment charges, partially offset by an increase in valuation allowance related to federal NOLs, state NOLs and state credits.

Net loss in the third quarter of 2021 was $326 million, decreasing year-over-year from net income of $1 million in Q3 of 2020. And adjusted EBITDA in the third quarter of 2021 was $9 million or 5.4% margin, decreasing year-over-year from $17 million or 11.7% margin in Q3 of 2020 excluding CARES Act funds.

Cash use in the third quarter was $24 million, which included $5 million repayment in connection with the Medicare Advance Payment Program, compared to cash generation of $12 million in the third quarter of 2020.

Available liquidity at September 30 was $135 million, which was comprised of $66 million in cash equivalents and $69 million in available undrawn revolver capacity.

Our revolving credit facility has a springing covenant, whereby our leverage ratio as defined by the credit agreement may not exceed 6.25 times if, the revolver is greater than 30%, drawn on the last day of each quarter.

Thus, liquidity at the end of the third quarter considering revolver availability without triggering the need to test the financial covenants was $87 million, made-up of $66 million in cash, and $21 million from the revolver.

It is important to note that the leverage ratio under our credit agreement for the third quarter of 2021 was approximately 4.1 times. On October 19th, we lowered our full year revenue guidance to a range of $620 million to $630 million from the prior range of $640 million to $670 million.

At the same time, we also revised full year adjusted EBITDA guidance to a range of $40 million to $44 million from the prior range of $60 to $70 million.

The reduction in guidance was prompted by softer visit volumes experienced during the third quarter, compared to previous guidance, which anticipated continued visit growth in both the third and fourth quarters of 2021.

The revised guidance assumes visit volumes and Q4 improved marginally at the high-end of the range, and implies a marginal decline in visit volumes at the low-end of the range. As Jack mentioned, while visit volumes in some of our markets continue to lag pre-pandemic levels and have not met our expectations.

Referrals are outpacing our clinic capacity and other markets. As such, we continue to target new clinics openings between 55 to, 65 for the full year.

Finally, to help understand how we plan to deliver earnings as we navigate the current environment, I'd like to walk through a simplified financial model, based on the supplemental key performance metrics, presented in our third quarter 2021 earnings release.

The principal driver of our business profitability in the near-term, increasing visit volume, in order to scale the business and leverage fixed costs.

We invested in past years to establish the CHI brand, both in consumer and labor markets and to build a premier corporate platform that can support a much higher number of clinics than we currently have.

As Jack, laid out our immediate focus is to drive visit volume in order to move our overall clinics closer to fiscal year 2029, 2019 capacity utilization. To illustrate the financial impact of increasing visits, our contribution profit in the third quarter of 2021, i.e. our rate per visit, less salaries and related costs was $40.94.

With 23.1 visits per day per clinic and the third quarter, we generate an adjusted EBITDA of $9 million and adjusted EBITDA margin of 5%, where are we running at our fiscal 2019 average clinic capacity utilization of 30 visits per day.

All other unit economics being equal, we would have generated adjusted EBITDA of $29 million and an adjusted EBITDA margin of 14%. Once our operations are optimized within a local market, then the driver value becomes scaled growth, increasing density with opening nearby turnovers and entering new markets.

In the medium-to-longer-term, we're focused on increasing rate per visit, primarily through our mix of payers and the states in which we operate. Additionally, the long-term value prop for our business models to earn higher rates through CMS, MIPS, outstanding outcomes and other commercial avenues.

Rate per visit is a critical driver of earnings, as nearly 100% of the change flow straight through adjusted EBITDA.

They illustrate the financial impact of rates, if I continue under the previous example, but we assume that the rate per visit is $110, compared to our Q3 rate of $105.56, we would have we would have generated adjusted EBIT of 37 million and an adjusted EBITDA margin of 17%.

As we restore visit volume in our clinics, we intend to continue including the supplemental tables of key performance metrics in earnings releases each quarter to provide greater clarity and line-of-sight into our business. With that, I'd like to turn the call back over to Jack..

Thanks, Joe. And before we open it up to questions, I'd like to take a moment to again recognize our nationwide team across our 900 clinics and in our corporate office for their hard work, dedication to deliver on the ATI brand.

While we have a lot of blocking and tackling work ahead of us, we also have great people and a great platform to get that job done. We remain excited about our prospects in the physical therapy sector and where the company is headed. With that, we'll open the line for Q&A..

Thank you. [Operator Instructions] We have your first question from Chris Neamonitis with Jefferies. Your line is open..

Hey, guys. Thanks for the question and appreciate all the color today. I want to touch on your referral sources. Can you give us an update on what you're hearing from them? I know, last quarter you mentioned, referrals were strong, and there's inability to meet demand.

But then commentary in the pre-release and the release today kind of suggested otherwise.

So wanted to know a little more there, so has there been any change to the strength of these relationships as we think about attrition issues, potentially having more of a negative impact on patient continuity? And then, maybe if you could give us the cadence of how that evolved over the quarter and where you're at today?.

Sure. This is Jack. So let me maybe take that question in reverse order and I might dish-out some of the response to my colleagues here. So everything is at a point in time. And at the point in time where we had our last earnings call, we were looking at the KPIs now that you see in our in our supplemental materials.

Looking at our recovery rate on both visits and referrals, using 2019 as the base and through really late May and into June, overlaying our actual performance against our plan, which was a plan to be at our 2019 levels, was actually sort of a nice overlay. We really felt like we were tracking along to get back to 2019 levels.

At that point in time, we said, gee, we're experiencing some attrition, we look at our replacement needs for therapists, we looked at the prospective growth that was embedded in our second half forecast, and felt like we had to alert our shareholders and our owners that there might be a disconnect with our ability to hire to match our growth.

And that was really the initial sort of catalysts to our first earnings reduction. I think right behind that what happened, as you'll see in our numbers, our visit volumes softened over the summer. We strengthened our hiring capabilities, and feel very good about where we are with our visit run rate, and our ability to hire and retain.

Now, unfortunately, as Joe pointed out in his model, the visit volume that we currently have is not where we want to be. So that's the reason why we're really working hard to build sales capacity. And to really build back the referral model that we enjoyed back in previous years. I'd say, is the referral model broken? I don't think so.

As I said in my prepared comments around the country, there are markets, big markets, key markets where we are at or above our pre-COVID referral and visits per day volume. And then there are markets primarily in the upper Midwest that are key markets for us that we haven't kept up to speed with pre-COVID level.

So I don't think it's a question of impaired referral model system wide. I think it's more of a part of the healthcare especially kind of a local rash. And we've got to really get after those relationships again, the way we're doing that is on the consumer side, beefing up our digital marketing capability.

And then on the referring, professional side, reinvesting and building back are our field salesforce, our practice partner Mo [ph].

Got it. And then maybe it's just a follow up to that you touched on some of the bright spots and referral volumes. You can talk about your confidence and being able to drive referral link across the portfolio with your commercial team. Maybe just help us understand how you think about the therapist versus salesrep relationships and securing referrals..

Yeah. So let me let me keep this one up for Ryan, I do think there is a very strong relationship between our practice partners and therapists and clinic directors, since they're really both responsible for that, sort of wherever their geography is for their for their business volume. And Ryan wants to take rest of it....

Yeah. So, Ryan Wilson here, Chief Commercial Officer. So Chris, thanks for the question. As we -- first of all there's a very tight correlation between referral volume and visit volume when it comes from we've looked at any staffing model changes at the clinic level.

So part of rebuilding referral, is to make sure that we've got the quality clinical staff in the in the clinics to be able to perform.

And then how do we correlate that as confidence back into the referral sources? To Jack's point, we are making a very significant investment as we start to look at bringing back those sales -- folks as the model has changed. And we come off of what looks like a post-COVID where we're back to calling a live on doctors in many of the markets not all.

We're making sure we adjust our model to do that. And so yes, we do have high confidence as we do that, as we see the correlation. What we're starting to see is referral volume continuing to grow, which we know is a leading indicator on performance. So we feel very good as we do this. But we will have to continue to staffing expand that model as we go..

Yep. And your points is a great one about the calling on referring physicians in a joint way with a practice relationship partner as well, as somebody who has more clinically oriented, that's an important conversation for a referring physician to have as opposed to somebody just showing up and having a conversation.

So that's how we're gearing up our calling model..

That's very helpful. And then one more if I can. And I'll hop back in the queue. I'm interested in the changes you implement to your comp and benefit packages.

Can you pack exactly what exactly those were in your expectations to gain traction are you getting sort of any sort of initial feedback or finding out it's been a key lever and hiring efficiency..

So I think we're getting very strong, very clear, very positive feedback that the moves we have done to reverse course on some of those comp and workplace policy issues have been -- not only successful in retaining our current team, but also recruiting new as well as rerecruiting people who had left us at some point in the past to bring them back into our clinical fold.

But I think I'll turn this one over to Ray..

Yeah, I think we've done a really nice job ensuring that people are being comped appropriately and fairly. There has been a lot of movement over the past 12, 18 months and we've made adjustments. And I think the field appreciates that.

I think more importantly, along with those salary benefit changes, we've also focused and made a lot of changes on the support around the provider, ensuring that the providers have the right amount of support, so they don't have to worry about admin work, they can do and treat patients, which they're truly passionate about.

And then some of the other changes you mentioned salary, but benefits also are around the programs that we provide to our providers to make sure that they have the ability to continue to work on their skills, continuing education, and make sure they feel like that we're investing in them and giving them the right tools to do again, what they truly like and are therefore, to treat patients.

So, I think all of that combined has helped to not only make us an attractive employer, but also help with some of the attrition issues that we were talking about..

Hey, Chris, it's Joe. I'll just kind of jump in more specifically to your question on the cost piece of it. You'll see or saw in the KPIs, we've laid out our labor cost per visit going back every quarter through 2019 to today. There is a cost increase as a result of some of the actions that Ray talked about.

If we look quarter-over-quarter Q2 to Q3, you can see that cost increases about 10%. Now, there's two components. One is changes that we've made, which certainly add to the cost.

But the other piece of that line item, as I mentioned in the call script today is productivity of clinicians and you'll see as we onboard new staff in Q3 as they sort of work ramp up their caseload, the productivity has come down.

And so as those clinicians continued onboard, continue to sort of build their caseloads, their labor cost per visit we would expect to come down a bit as we move forward. I think the data is there to help you understand that..

Yes, that's helpful. Thanks a lot, guys..

Yes. Next question..

We have your next question from Larry Solow with CJS Securities. Your line is open,.

Great. Good afternoon guys. Thanks for taking the questions.

Just curious you mentioned the Midwest and Northwest markets were somewhat weaker for you guys, anything tickly striking there, more labor constraints? Perhaps higher COVID instance, perhaps during this period that sort of stopped the momentum? And also parts to that question, do you feel like you're losing market share in some of these areas?.

Yes, so Larry its Jack. The challenges we've had in some of our Midwest markets primarily have been, I won't say intractable, but they've been with us for a year or two, arguably a little bit longer.

And I hate to pin things on COVID because seems like everything is faulted COVID lately, but yes, I'd say some of the markets were more lockdown and perhaps some of our Southeast markets that snapped back a little quicker than others.

But I think in the Midwest, to your question about market share, I think some competitors have sort of outflanked us in certain of our markets. Some of our larger historical referral sources have gone vertical and taking in physical therapy into their own practices. So, I wouldn't pin it on one thing, wouldn't pin it on COVID.

I think it's sort of a systemic thing and that's not to say there's nothing we can do. But I think the slog will be a little more challenging in those Midwest states. I'm pretty confident we'll be able to improve our position. But there are some systemic things that have gone on more than just a six month in attention due to COVID..

Right. And you mentioned sort of the referral model, it's not impaired, hopefully, maybe it's not permanently impaired. But that does, perhaps, it does sound like there is some damage there in terms of last quarter, you guys spoke about headcount and now you're maybe a couple quarters behind.

But I'm just wary does this sort of headcount delay enroll into referrals and once you lose a referral, maybe it's very hard to get that back.

So, just trying to -- could that be severely impacted in some areas of the country?.

So yes, I mean, it doesn't, referrals don't come back without a little bit of elbow grease and we think we've got a good fix on what needs to be done. I think our view of what we need to do on referrals to bring it back is really twofold.

One is to make sure that when a referring, we'll just use the simple analogy of a referring physician refers to one of our clinics, that we've got the correct staff available, and the kind of availability that that that referring physicians patient needs to get an appointment when it fits his or her schedule.

So right, that's -- you got to have capacity. And I'll ask Ray here in a minute to talk about where we're at in terms of available capacity and volumes and the like. But it's also, going out and building a relationship that is both clinical as well as support.

And I think that's sort of the two of the one two punch model that we're implementing, like now in the fields to go back. And I hate to use the word repair, but get back in that referral flow, if you will.

And I'll ask Ryan to talk about kind of what we did to ourselves during COVID period, and where we are positioning our practice partner model for 2021 and certainly in 2022.

So Ray, you want to jump on the first part of that?.

Sure. So, when we think about capacity at the platform level, across the board, we do have capacity to see more volume currently. When you go another click down into specific markets, we have specific markets where we could see more volume with our current staff. We don't need any more staff and we have bandwidth to see more.

We also have select markets, where we're actively hiring because we have really, really high demand and we're working hard to ensure that we have the providers in the right clinics to satisfy the demand that we're seeing there.

In terms to your point about staffing, it's been a tremendous focus of ours over the past several months and really excited about the changes that I mentioned earlier and in some of the results that we're seeing and we've seen about three months of consistent growth FTE week over week.

So I know Jack mentioned in his formal comments to two ads for every one exit, we continue to see really strong traction and ensuring that we have the right amount of staff, but we also have the right amount of staff in the proper markets. So it's been a focus of ours..

And I'll take the second point for Jack, which is really around the clinical competence, we're building with referral sources. And we do feel confident we're going down the right path as we do that, but it's a combination of race organization and mind.

Number one coming through COVID, we did reduce the Salesforce and we did that because most doctors offices were no longer having live conversations. And so to manage the business appropriately, we made some scale decisions around that.

And coming out of that, we're moving as aggressively as possible, but not just to go back to how we covered before, but to make sure that we've got the right model that generates the demand that we that we want in our clinics. And as we continue to expand that, it's really the combination of the sales organization and the local operators.

What we've learned, and it's a part of this type of business model is the confidence really comes from two levels.

One is us as a brand and the 25 years we've been in business and the name that we've built with ATI, which is great, but also locally how we operate and how we provide care in those providers in that our local clinics also drive a lot of that confidence.

And so as we bring new ones in, we're introducing those into doctors, and we're rebuilding those new relationships. And that's just a part of the journey. And we're very confident with those..

Let me just maybe kept that little conversation off. Ray mentioned sequential improvement in retention and hiring, our provider accounts have increased now fairly consistently.

I know you've got some data around referrals and visits sequentially how they're going, would you mind?.

Yes, sure. So, as we think about coming out of Q3, we've seen consistent growth over the coming out of Q3 throughout in both visits per day. And then hand-in-hand, we've seen week-over-week growth in referrals as well.

I mentioned earlier, really excited about what we're seeing with the clinical FTE counts in terms of over three months of growth, when you look at the amount of providers that we have. And again, that's important. But we're also excited to have the right providers in the right markets to satisfy the demand that we're seeing..

So growth in FTE count, growth in referrals, which lead to growth in business visits, never fast enough. But I would say not broken, maybe bent, but not broken, so..

Yes. Fair enough. Fair enough. I appreciate all that color. And thanks so much. You bet. Thank you. Next question..

We have your next question from Bill Sutherland. Your line is open..

Thanks. Hey, Jack and Joe. Hey, Ray, I appreciate the extra disclosure. Very helpful. So on -- back to the trying to figure out why some markets are doing better than others.

Is there a urban rural split, not rural, but urban, less urban split?.

I don't think it cleaves that way..

Okay. Right..

But let me ask Ray to maybe give a little color, maybe what defines the market to be a little slow to recover.

But Ray, what do you think?.

It's -- I think about the markets and as they come back, particularly in the referral side, Jack mentioned earlier, we've had markets where it's been a bit of a challenge for a period of time. And the first thing that comes to my mind is some of the vertical integration that we're seeing.

Now, that doesn't mean we don't call on those physicians anymore. We still want to make sure we have great relationships with them. We still want to make sure that we're in the right location, that we're a solution and a resource for them. So when they can't see their own patients, we're there to provide a great experience and a great outcome.

But overall, I don't think it comes down to any type of urban, non-urban setting. I think it's more every markets a little bit different in terms of, is their hospital systems there versus private outpatient physical therapy? So I think that's probably a little bit more and it's very granular.

I mean, every single market has a different nuance to it and some of the challenges that we're seeing. So it's kind of hard to put black in response..

Right.

So I guess the broad takeaway, though, would be that you may be retrenched on Field Sales more than others -- other competitors? And that's how the referral -- that that's part of this referral issue, do you think?.

I maybe even brought it -- you already brought an income. And I would say, we took measured actions during the deepest part of COVID, who kind of batten down the hatches with administrative spending, with sales team as Ryan pointed out, it's kind of hard to feel the sales team when they can't really go out and do what they're doing.

We temporarily reduced our clinical labor force, we tried to keep our point of access open with as many of our at that time 800 plus clinics as we could, but we reduced provider counts in keeping with fewer visits.

So, we did all of those things in order to run the best play we could, not knowing exactly when a vaccine would be ready, how quickly the market would recover, when surgeries would be undertaken in surgery. So we did all that. And I think I won't second guess the decisions we made.

I think the benefit of hindsight to your point, perhaps there were some competitors who got off the starting line when COVID started to unwind back in the spring. And I think we were a little slow to get off that starting line and we're kind of playing catch up all now. I would kind of say globally, where we're at..

Do you think -- what was the quarantine levels like for you guys as far as your clinicians? And in the third quarter do you think it made a difference?.

I don't know about quarantine. What we -- sorry, this is Ray. We had some pockets, where COVID played into our ability to treat, but it was very small in the big scheme of things as you go all the way back to when this pandemic first started. Pretty, pretty minute compared to some other things that we've seen.

So I don't -- I wouldn't say that that really had a much of an impact..

But keep in mind that we -- to this day, early in COVID to this day, we've got some fairly strict operating protocols, so as you might imagine with all clinical businesses, you know, masking up and we're beginning now to consider what combination CMS and OSHA regulations to go into effect come January 1 will do to our clinical teams.

So that's sort of another question Mark we're for wrestling with..

Hey Bill, its Joe? No, I think I'd add to that is while COVID certainly had some impact on the quarter as we look at sort of month over month trends throughout the quarter and then even coming out of the quarter as Ray talked about in October and in November, we see steady improvement in volume.

And as we've made progress with attrition, right, that VPD improvement follows the same trendline. I think there's certainly a correlation there that's not accidental..

Good point. Right. Jack last one for me.

What is the Board of Directors thinking relative to the open CEO position?.

Well, I can tell you, it's a topic of conversation weekly. We -- as I said in my prepared comments, we have reviewed a really interesting slate of candidates. We've assess all of them, interviewed a fair fraction of them.

And at least this Board Member wants to make sure that we have the rights speck and the right person to lead this organization going forward. We think we think they're out there. We think there may be a winner, if you will on the current roster, but we're working that every day..

It's okay. I'm sorry. I had to step away during your prepared comments that you've already touched on..

Okay. Yeah, we were down the road, had nothing to report, but we're certainly working..

Good. Okay. Thanks again..

You bet. Thank you. Next question..

Thank you. [Operator Instructions] We have your next question from Mike Petusky with Barrington Research. Your line is open..

Hi.

So the Q4 or the full year guide sort of implies a negative sequential revenue comp at the midpoint and you're worse adjusted EBIT quarter of the year and I guess I'm trying to square that with some of the positive commentary that you're making around visits per FTE and referrals and all the hiring and the hope that you may have reached a well point in terms of visits per clinics.

Can you just sort of speak to that? Is that conservatism? Is that wage, labor wage pressure? What's the reason for the adjusted EBITDA guide? Thanks..

I think this is -- probably Joe will answer..

Yeah. Hey, Mike, it's Joe. So, on the revenue side of things, to your point, at the high end of the range, it implies a marginal improvement in business volume. And at the low end of the range, it's a decline in business volumes. So to your point, the midpoint is probably a marginal decline in business volume.

As we've looked at Q4 remainder of the year, we looked at kind of IP [ph], some of the key KPIs, clinical IP visits, referrals, the visibility that we have and thought about the trends and developed overall developed a range that we were comfortable with.

As Jack talked about, and Ryan and Ray talked about a little bit, we're making some investments in yield sales, and it'll take some time for those investments to pay off as those field sales members get out and reconnect with our referral sources.

And until we see that pay off, wasn't prudent for us, given the situation we were in over the last two quarters to get too bullish on our overall projection. And that's why we came up with a range that we did..

But you didn't miss the optimistic view we have over the last intervening couple of weeks or month about where our underlying KPIs are, but you adjusted earnings down, you're over two, if you want to go over three, so you can read into that as will..

Okay. Can you just comment, the other publicly traded outpatient, Physical Therapy Company and I think most others typically have some seasonality, where there's a dip in Q1 versus Q4.

Is there any reason to believe you guys could actually show a sequential increase given sort of the low base or likely you guys follow that seasonality as well?.

Yeah. Mike, I think at this range might be a little long to a pine. I think we're heads down sharpening up our full year forecast for 2022. And then, I'm a little reluctant to sort of leak information out on that one until we get the full picture, so great question. We understand the seasonality.

But if you could hold that one till we give some guidance probably, early next year, that'd be helpful..

Okay. All right. Thanks, guys. Appreciate it..

I'm showing no further questions at this time. I would now like to turn the conference back to Mr. Jack Larsen for any closing remarks..

Well, the only closing remarks I have is, thank you for your attention here. Thanks for continuing to follow us. I do think that we're seeing real positives in our business. I think, we're navigating this company in the right direction, fixing the things that kind of came off the rails over the spring and summer. I think we've got a good fix on it.

I'm confident that in this team that we can do that. And I will continue the theme of transparency that we heard loud and clear after our second quarter earnings. And we'll continue to dialogue as we move this business forward. So, thank you so much, and we'll talk again soon..

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect..