Please ensure Javascript is enabled for purposes of website accessibility

US Physical Therapy, inc (USPH) Q3 2021 Earnings Call Transcript

By Motley Fool Transcribers – Nov 4, 2021 at 3:01PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

USPH earnings call for the period ending September 30, 2021.

Logo of jester cap with thought bubble.

Image source: The Motley Fool.

US Physical Therapy, inc (USPH 0.44%)
Q3 2021 Earnings Call
Nov 4, 2021, 10:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the U.S. Physical Therapy Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]

Please be advised that today's conference is being recorded. [Operator Instructions] I'd now like to turn the call over to Chris Reading, President and CEO. Please go ahead, sir.

10 stocks we like better than U.S. Physical Therapy
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.* 

They just revealed what they believe are the ten best stocks for investors to buy right now... and U.S. Physical Therapy wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of October 20, 2021

Christopher Reading -- President, Chief Executive Officer & Director

Thanks, Priscilla. Good morning, and welcome, everyone, to our U.S. Physical Therapy Third Quarter Earnings Call. With me today on the line include Carey Hendrickson, our Chief Financial Officer; Graham Reeve and Eric Williams, our Chief Operating Officers; Rick Binstein, our General Counsel; Jon Bates, our Controller.

Before we start our discussion around our earnings and operating performance this quarter and year-to-date, we need to cover a brief disclosure.

Jon, if you would, please.

Jon Bates -- Vice President & Corporate Controller

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.

Christopher Reading -- President, Chief Executive Officer & Director

Thank you, Jon. We're going to change things up a little bit from how we typically do them rather than we start out providing select point of performance and color. I'm going to ask Carey to walk through the entirety of the financials in detail. And now we have the complexities as a result of this pandemic and some of the related secondary issues where we feel like we need to spend 3 years in order for you to have the clearest possible picture, which is certainly what we want to have.

I will say, I think Carey and the team have done a wonderful job trying to present this information in a cohesive way that provides the most clarity and really in the linear continuity so that you can see how we did on a prepandemic basis in 2019 right through the current period. And then following Carey's review, I'll provide some brief comments related to our performance along with maybe a few key points of interest that I think you want to hear about.

So with that, I'm going to turn it over to Carey.

Carey Hendrickson -- Chief Financial Officer

Great. Thank you, Chris. Good morning, everyone. Our financial performance in the third quarter of 2021 and through the first 9 months of the year has been very strong, as outlined in today's earnings release. We reported third quarter 2021 operating results per share of $0.85, which was 21.4% higher than the $0.71 we reported for the pre-pandemic third quarter of 2019, and it also equaled our record high third quarter operating results per share of $0.85 in the third quarter of 2020, excluding relief funds, which, as we noted in the release, it benefited from significantly reduced costs related to the COVID-19 pandemic.

Due to the impact of the pandemic on all of our 2020 results, I'll provide comparisons of our key metrics to pre-pandemic periods in 2019 in addition to comparisons to 2020 periods. We reported adjusted EBITDA of $19.9 million for the third quarter of 2021, which was $300,000 higher than the $19.6 million, excluding relief funds that we reported in the third quarter of 2020, and it was $3 million or 17.6% higher than the pre-pandemic third quarter of 2019. Revenues in the third quarter of 2021 were $125.9 million, which was an increase of $17 million or 15.6% from the third quarter of 2020. Our third quarter 2021 revenues were $8.6 million or 7.4% higher than the third quarter of 2019.

Our physical therapy patient volumes per day per clinic were 29.5% in the third quarter of 2021, which is the second-highest volume level in the company's history, vested only by the 30 that we reported last quarter. And it's also a record high third quarter volume level for the company. Our previous third quarter high was 27.5% in the third quarter of 2019, which we beat this year by 7.3%. Our volumes per day per clinic were 14.3% higher than our 25.8 average visits per day per clinic in the third quarter of last year. Our average visits per clinic per day exceeded 29% for the first time in the company's history in March of this year. And they have continued at that level or higher for 7 consecutive months now. And based on the activity levels we've experienced in October, we would expect that to be the case again for the eighth consecutive month. Our net rate for our physical therapy operations was $102.93 in the third quarter of 2021, which compares to $105.91 in the third quarter of 2020. Our third quarter 2021 rate reflects the 3.5% Medicare rate path that went into effect in January of this year as well as some shift in the mix of our business. We've had increases in all categories of our business from the third quarter of 2020 to the third quarter of 2021, but some have increased at a greater rate than others.

Our total visits increased 19.9% from the third quarter of 2020 to the third quarter of 2021. Notably, our workers' comp visits increased approximately 9.2%, while Medicare visits increased approximately 27.3%. So as a result, higher rate workers comp decreased as a percent of our total mix and Medicare, which was paid at a lesser rate than our overall average rate increased as a percent of our total mix and that put downward pressure on our overall net rate. Our Physical Therapy revenues were $112.3 million in the third quarter of 2021, an increase of 16.5% from $96.4 million in the third quarter of 2020, an increase of 7.6% from $104.4 million in the pre-pandemic third quarter of 2019.

Revenues for the industrial injury prevention business were at an all-time high of $10.5 million in the third quarter of 2021, which was a 4.8% increase over the third quarter of 2020, and it was a 5.5% increase over the third quarter of 2019. Our team also continues to do a good job managing our costs and keeping our cost increases aligned with our growth in revenue. Our operating costs less closure costs were $96.1 million in the third quarter of 2021 or 76.3% of net revenues. This was 40 basis points better as a percentage of revenue than our 76.7% in the pre-pandemic third quarter of 2019. Our operating costs, less closure costs as a percent of revenue were at a low point of 72.1% in the third quarter of 2020 as a result of the significant steps we took to reduce costs during the pandemic, including temporary salary reductions, furloughs and other similar measures. Our 76.3% in the third quarter of 2021 is consistent with the first quarter of 2021 when operating costs, less closure costs were 76.9% of revenues and a bit higher than our 73% in the second quarter of 2021.

Looking specifically at salaries and related costs, they were 56% of revenues in the third quarter of 2021 versus 52.8% for the third quarter of 2020, which was lower than normal due to temporary salary reductions and furloughs that are put in place as a result of COVID, as I mentioned a moment ago. Salaries and related costs in the third quarter of 2019 were 56.9%. So we were better in the third quarter of 2021 by 90 basis points as compared to the pre-pandemic third quarter of 2019. Similar to our total operating costs, our salaries as a percentage of revenue in the third quarter of 2021 at 56% was lower than the 56.8% for the first quarter of 2021 and a bit higher than our 54.3% in the second quarter of 2021. Our gross profit was $29.8 million in the third quarter of 2021, which compares to 30.0 -- $30.4 million in the third quarter of 2020, which again benefited from those lower costs due to COVID.

Our gross profit in the third quarter of 2021 was higher than the third quarter of 2019 by $2.4 million or 8.9%. Our gross profit margin in the third quarter of 2021 was 23.7%, and that compares to $27.9 million in the third quarter and 23.3% in the third quarter of 2019. Our corporate office costs were $12.9 million in the third quarter of 2021 as compared to $10.4 million in the third quarter of '20. Corporate office costs were $10.6 million in the third quarter of 2019. Our third quarter 2021 corporate office costs include $1.3 million in incremental equity compensation expense for the accelerated vesting of restricted stock previously granted to our Chief Operating Officer of the West region, who retired in July. Excluding that incremental equity compensation expense, our corporate costs were 9.2% of revenues in the third quarter of 2021, which compares to 9.6% in the third quarter of '20 and 9% in the third quarter of 2019. Our other income includes $1.2 million for the positive resolution of a payer matter in the third quarter and our interest expense and our debt was $268,000 in the third quarter of 2021, which is down from $351,000 in the third quarter of '20.

Our weighted average interest rate in the third quarter of 2021 was 2.19%. Our net income attributable to non-controlling interest was $4.1 million in the third quarter of 2021. Our non-controlling interest were 13.3% of our profits, including the favorable resolution of the payer matter in the third quarter of '21. This compares to 16% in the third quarter of 2020. The reduction in the non-controlling interest percentage is primarily due to the purchase of non-controlling interest from our existing partners.

Through the first 9 months of 2021, we've purchased $16 million of non-controlling interest from our existing partners. Our balance sheet remains in an excellent position and our cash generation remains very strong. We ended the third quarter with $33 million drawn on our $125 million revolving credit facility, which includes $3.3 million drawn on September 30 to fund the acquisition of an industrial injury prevention services business. The $33 million is $5 million less than we had in our revolving line of credit at June 30. We had cash of $19.2 million at September 30, 2021.

Our net debt, at September 30, 2021, was $24.4 million, which includes the $33 million on our line of credit, $8.3 million in payroll taxes deferred in 2020 under the CARES Act and $2.3 million in notes payable net of our $19.2 million in cash. Our net debt position at December 31, 2020, was $11 million. So in the first 9 months of this year, we have funded acquisitions totaling $22.6 million, invest $6 million in fixed assets, paid back $14.1 million in Medicare Advance payments that we received last year, purchased non-controlling interest from our partners of $16 million, paid dividends of $13.9 million and paid off $4.7 million in notes payable, all of which totaled $77.3 million, but our net debt position has increased by only $13.3 million. Our leverage and our strong cash generation provides us with tremendous flexibility and sufficient capacity for the right growth opportunities as we identify them.

With that, Chris, I'll turn the call back to you for your remarks related to our operations and third quarter performance.

Christopher Reading -- President, Chief Executive Officer & Director

Thanks, Carey. Great job with that. I'm going to make some candid comments and go off script a little bit. I think you guys deserve that. I think also, I hope, some of our partners and our staff will listen to this call at some point. For those of you who followed the company for a long time, you know that we follow historically at least a pretty distinct seasonal pattern. We have winter storms. And so January with new deductibles, we started out a little slow.

Second quarter really beginning in March and continuing through early to mid-June, which I understand spans both quarters. But beginning in March, we see a rather distinct pickup as spring comes and people get outside. And that continues until about school is out and then things slow down a little bit in the summertime. People take vacations and doctors take vacations and school is out. And we, for every year that I've been here, which is 18 years, we've slowed down in the summer. This year, that didn't happen. In fact, we delivered, again, Carey mentioned for the quarter, a record third quarter for us. Even in spite in some of these markets in the summer, in fact, in some big markets like Nashville, where we had hospitals who had put off elective surgery again just because of the COVID push. Despite of that, we delivered 29.5 visits per clinic per day, which is just a fraction of a visit off our all-time record, which was Q2. And in spite of a few hurricanes that heavily affected us hitting Louisiana with our new acquisition partners there who are doing a great job, by the way, and all the way up the coast. So in spite of that, the best third quarter in our company's history.

And I just want to let our partners and our clinical staff know and they hear me say it, but I want to say in on this call, they're doing a phenomenal job. They're taking great care of patients. They're doing it under still difficult circumstances, keeping people safe as they should, as we should. But it's tough. It's tough to get through a day with mask and goggles in some cases. And to do that now -- excuse me, I have cold, to do that now for the last 1.5 years going on now 2 years, it's pretty extraordinary. And again, I just want to thank them. They're doing a terrific job. And our result this quarter is directly related to variability and they have great ability and they have great delivery in terms of how they care for our patients because that's the most important thing that we do. Everything comes from that, the continuity we have with referrals, the visits that we get, which are related to the care of our patients, we were doing a bad job. We wouldn't have that performance. And so hats off to them for that.

On the periodic side of the business, we're growing -- we're still making our way through this -- whatever this transition is toward, I hope, toward normal. It's still a tough employment market, not just challenging for us, which I'll address in a minute, but also for the companies that we serve. But we delivered record revenue, record earnings performance this quarter. We're beginning to see new business come in. And so I continue to have great confidence in the team. And at the end of the quarter, the last day, as Carey mentioned, we added a nice tuck-in deal to that business, which should further strengthen and actually widen our service offerings.

And then finally, I want to make a couple of comments relative to the employment environment right now because I know there's a lot of talk about that. It is, in my view, in our view, challenging. But I think there's some important color to provide. First of all, all year this year, really, if you want to look at beginning, I guess, spring and forward, which is when the market really seemed to be more difficult, we've had more inflow than we've had outflow. I would say it again, we've had more inflow than we've had outflow. Right now, our licensed clinical turnover on a percentage basis, is in line with our historical rates. And when I say historical, I factor out the 2020 period because we furloughed and we did a lot of crazy things to get through that period; so it goes back to 2019.

Our headcount is down from about 5,400 and change in 2019 to a little over 5,000 now in 2020. And I will say it is tough, particularly front desk and non-licensed positions, license positions as well. But our team has done a great job. I had a conference call the other day with our recruiting department, we've added our VP of HR and recruiting in that entire area. He's done a phenomenal job bringing in key people. The energy of that team is better than I've ever seen it. We've added some great people.

They're doing a terrific job working with our partners, our partners working very hard to make sure that we have the right clinical staff. If we didn't have the right clinical staff, we wouldn't have delivered the visit volume that we delivered this quarter. I want to give you one more stat, and then I'll be quiet here and we'll open it up for questions. Just as a point of reference are salary and related costs. If you go back to 2019, Q3, our salary and related costs was $58.3. Beginning this year, first quarter was $57.80. Second quarter, again, a record quarter for us in terms of volume in earnings, $55.20 per visit. I'm sorry, that's a per visit number. So it's $58.30 in Q3 '19, $57.80 Q1, $55.20 Q2, $56.60 Q3.

So will the fact that the labor markets tight show up in our financials at some point, yes, I think probably will. But we've held very steady through this period. And again, that's not a testament to me. That's a testament to the team, to our partners, to the staff locally who care about so much about what they do. And to our recruiter team and all of our various support functions and operations that help to make all this stuff work. And again, I just want to say thank you to all those folks.

So, that concludes my prepared and not some prepared comments. And with that, I'd like to open it up for questions.

Questions and Answers:

Operator

[Operator Instructions] And we'll take our first question from Larry Solow from CJS Securities. Your line is open.

Lawrence Solow -- CJS Securities -- Analyst

Hey, good morning guys. Thanks for taking the questions. Perhaps we'll start with the labor and the headcount. And Chris, you mentioned more inflow than outflow and, obviously, you had some big furloughs in 2020. And it looks like you haven't brought everybody back. Some of these margin gains or ability to sort of keep your margin in line where others are struggling. Are you able to -- have you learned an ability to do more with less, just be more efficient? Because I imagine some of your salaries are higher. So what do you attribute toward -- you still -- your revenue doesn't seem to have suffered at all with a little bit less headcount and your margins are obviously even higher. So just trying to get a little bit more color on that.

Christopher Reading -- President, Chief Executive Officer & Director

Yes. I think 2020 was a great learning experience for all of us. And I think our partners, particularly, but really across the board, we've learned like any other semi-crisis that you go through, you learned to focus on what's important and you get rid of the rest. And when I say get rid of the rest, I'm not talking about people. People are always important, but you learn what you can live with and what you can't live with. And we're still adjusting, Larry. We're still in some of our corporate support departments. We've added staff -- added more staff in the areas to support some of the programs and initiatives that we have that we are investing in. And so there's been some of that for sure. I think there's been a much tighter control locally in terms of managing not big FTE changes, but very small FTE changes that do add up over the course of 600-odd facilities. And so I think it's that combination. Margins were a little tighter this quarter, and our net rate was down ever so slightly from where it was previously. But a cost per visit, as I mentioned, or salary-related cost per visit, has stayed pretty steady. And so I just think it's all those things working together in small increments that have added up to where we are right now. And we're still making some adjustments. This isn't do one thing and you've done kind of a process, but we're working our way through.

Lawrence Solow -- CJS Securities -- Analyst

Great. And how about on the -- just on the volume trends, really strong, even since as you mentioned, a little bit of seasonal slowness, 29.5% per day. I think like for that magic number, 30 visits per day, is that like -- I know that's sort of what everybody strives for, but could this go above that? Or do you kind of reach some -- these therapists reach sort of capacity constraints above a certain number?

Christopher Reading -- President, Chief Executive Officer & Director

Well, therapists do reach capacity constraints but clinics have generally flexibility. And so what I mean by that is there are arguable points when a therapist gets busy enough or so busy. They can't see more patients unless they add more hours, and I'm sure there's some of that happening just to cover the volume because business is good. Clinics, however, and that's that number, it's a clinic number, not a therapist number. And so the clinics can go above 30%, I think, certainly on average. Now there are some clinics that in that mix that are capped out relatively so probably. And we go through in any given year, a number of expansions and relocations that we do in order to grow those facilities just because of the chaos factor in some of our biggest facilities get to a point where it gets a little high. And so you need more footprint. But I don't think that 30% is the be all, and all. Now it's a good number and it's the highest number we've ever delivered. And so I'm not suggesting that becomes an easy number to get to or to sustain. But as Carey mentioned, we've stayed above 29 now every month this year, and I'm hoping that's the new watermark. We'll see as time goes on. But I don't think 30 is a ceiling either, and I think we can, over time, slowly grow through that. That would be my hope, at least.

Lawrence Solow -- CJS Securities -- Analyst

Right. Okay. And just last question, if I may, just on the industrial injury prevention business. You mentioned a pretty good quarter this quarter. And I don't expect to get back to the rapid growth we saw in '18 and '19. I know that was -- some of that was inorganic. But in order to drive considerable growth, I guess, my understanding is you kind of -- a lot of these new contracts are garnered at trade shows and whatnot. Is that sort of the hindering factor? And once trade shows start get going again, you can start seeing picking up some growth?

Christopher Reading -- President, Chief Executive Officer & Director

Yes. I mean, the team -- the sales team there, Bob Patterson, and the rest of the sales team, they've done a great job in what is otherwise very challenging circumstances, as you mentioned, with no trade shows to speak of this last 1.5 years. And I do think that will be a little tailwind that we haven't experienced yet, but it's not like they're not working at this point to try to create opportunities otherwise, they are, and we're seeing that happen. It's just a little harder, frankly, because it's harder to get face-to-face. And some of these companies, people are still working remotely, and so you're dealing with that as well. And so it is going to take a little time, as you mentioned earlier in 2019, for instance, we did the BTE deal. And I will mention that, that deal we brought on, it had what we thought would be a heavy kind of countercyclical program in our employment testing, post-offer testing, that business is on fire right now. And so that's helped the rest of the business kind of stabilize where some of the ergonomics testing business, which is heavily done on-site is down at the moment. But I expect it will come back as things further normalize. And so -- as we mentioned, we did a small deal at the end of the quarter. We continue to look for opportunities in that space. We expect to get more done in this space. And I expect that you'll see that play out over the coming year as well.

Lawrence Solow -- CJS Securities -- Analyst

Appreciate the call, guys. Thanks so much.

Operator

And we will go next to Stephanie Wissink from Jefferies. Your line is open.

Unidentified Participant

[Indecipherable] for Steph. I appreciate all the incremental clarity. It's definitely helpful. And congrats on the strong quarter. I wanted to touch on the strong volumes. Are you gaining those volumes from a greater pool of more referral sources? So are you seeing that contribute to kind of these elevated levels? Maybe just talk about what you're hearing from referral sources and maybe anything incremental from sales reps that are maybe suggesting that new referral sources are more heavily contributing to this mix? But really, I guess, at the end of the day, there really just a greater number of referrals from existing sources.

Christopher Reading -- President, Chief Executive Officer & Director

Yes, that's a great question. It's a little bit hard for me to answer just because of how we aggregate this information. And I'm not sure that I have the complete color or transparency around that in detail to be able to give you an absolute final answer. But we're always working on new referral sources and our sales team does a great job at that. I would tell you that I think it's a broadening of referral sources. And it's a broadening of our ability to go direct to consumer and not have to rely exclusively on referral sources. And then I think, thirdly, it's probably moving some market share from less focused, less capable, whether it's small local providers or hospitals who are focused on other things right now or don't have the resources devoted to this. And so I think it's a smattering of things. What I don't think it is -- and it's my belief is that suddenly our finite group of referral sources who've always been with us are busier than they've ever been. I think that industry-related stats around that would suggest otherwise. So I do think it's a broadening. I do think it's direct consumer and do think we're moving some market share across a growing referral base is how I report it.

Unidentified Participant

Yes, that's great color. And then I got to ask just a final one on Medicare and recognizing there's still potential for things to change, how do you think about that and the relationship between kind of Medicare rates versus kind of the pricing in your commercial book moving forward? And kind of as you look through those contracts, what's the anticipation for commercial rates to more kind of indexed toward Medicare? And then the last one on that would be anything else in your commercial contracts that can move price one way or another on an annual basis on fitting things like inflation adjustments or annual escalators.

Christopher Reading -- President, Chief Executive Officer & Director

Yes. So if -- as I answer these, if I missed something, please redirect me. So first of all, I was disappointed, but not surprised when Medicare came out with their final rule update on Tuesday. I think with CMS, it's kind of the path of least resistance. I know that they got a massive outpouring from the communities that we serve and from therapists and general practices around the country, we lead a group called APTQI, Alliance for Physical Therapy Quality and Innovation. We've been very, very active, both in messaging and directing communication to CMS as well with our congressional constituents. We represent now or 14,000. I think that's the number of facilities across the country and in virtually every state. And so we've been -- and I've been personally on a number of these and so have all of our CEO, Board members, each week, we have congressional calls. And so I think -- I still think there's opportunity as we did last year to get some congressional overrule on this. I think it's shortsighted and long-headed to deliver a cut like this to a subset of the physician fee schedule and physical therapy, which we know through studies that we've commissioned independent studies done by Beltway Analytics groups that indicate that when somebody comes to physical therapy early, for instance, for a low back pain, their entire downstream costs for their healthcare spend, not just for that issue, but for all their issues is less in its -- and the reason behind that, I believe, is because we get people moving again, and when you move, you can exercise, you can be active, you can garden, you can walk, you can do the things that cause other health issues to improve diabetes, obesity. Even mental health is significantly improved with activity and exercise. And so I think it's wrongheaded. I think our congressmen and women understand that we're not done fighting. There's a lot of fight in this group, and there's a lot of good resources. And so we're going to continue to work at that. I do think it creates a challenge for us, right? I mean, we're fully productive at this point with our labor force, but it was a challenge for us at the beginning of this year as well when we had a 3.5% cut at the beginning of 2021. And we've been able to overcome that and we're going to have to figure out how to overcome this, and we're going to have to grow through this if this is the -- this is where we end up. I'm not sure this is where we'll end up, but if it is, we'll have to grow through it. And I think this team has been there before and we'll find the way. In terms of the commercial side of the business, we have some wins recently that will kick us off for the new year. And will there be some follow along, I think not as much on the Medicare rate. We may get some follow along on the PT assistant differential payment rate. And so I think to be determined there, working our way through that right now in terms of with Eric and Graham and our HR department have done a lot of work on modeling around that for the new year. And so more work to happen there as well. But I think it's a little bit too early to tell yet whether we'll get some follow along working the contracts aggressively to see if we can create some offset right now. I have confidence our team can do that at least in part. And I will point out that although Medicare pays everybody the same, commercial payers still pay hospitals disproportionately high rate compared to what they pay out patient providers. It doesn't make any sense. And we certainly, I think, are a much better entry point to deliver care to those patients and having somebody navigate through a hospital campus logistically and probably with much lower experienced clinicians typically where new grades gravitate compared to our outpatient facilities. And so I think actually, we should get the higher rate. And so we're working on making sure that we can articulate our value proposition and make some progress there. But like anything, we've got work to do and the team is focused on it very urgently at the moment.

Unidentified Participant

Yes, definitely agree with what you're saying. Really solid color, congrats again.

Operator

[Operator Instructions] We'll go next to Mike Petusky with Barrington Research. Your line is open.

Michael Petusky -- Barrington Research -- Analyst

Good morning. I think just to clarify, in terms of the final reimbursement. I know there was some initial confusion around, was it 2%, was it 3.5%? What do you all and the industry judge the final rule impact to be in '22 at this point?

Christopher Reading -- President, Chief Executive Officer & Director

We're still working through some modeling or some increases on the initial evaluation, some decreases on some other codes. Really, a lot of it comes down to code combination and selection. But we think at this point, Mike, it's around 3.75 quarters, we think, is a percent reduction?

Michael Petusky -- Barrington Research -- Analyst

And Carey, I may have missed this earlier, forgive if I did or if I missed it in the press release, but have you commented on the EPS guidance from Q2. Have you affirmed that or in any way talked about that? I may have missed it earlier, sorry.

Carey Hendrickson -- Chief Financial Officer

Yes. No, we did not mention it here. We have kept the guidance where it was at the end of the second quarter. Now Chris, you may want to add some color to that, but...

Christopher Reading -- President, Chief Executive Officer & Director

Yes. No, Mike, I think -- listen, I'm really, really happy with how the teams performed all year long. And volume has continued to be strong. through October. And so -- but I would tell you that it's been a tough year to predict exactly how we're going to go. You know where we started at the beginning of the year. I think we've outperformed at least even compared to some of our early expectations. But it's been another crazy year. And we typically don't update unless we feel like we're going to be meaningfully outside the range, one direction or another. So we think the best thing right now is for us, just given some of the uncertainties is to stay put where we are with the range that we have, and we'll see how we do.

Michael Petusky -- Barrington Research -- Analyst

And just on the really good color on the inflow versus outflow on clinicians, which was terrific. Are you seeing any difference just in terms of sort of full-time versus PRN in terms of recruiting? I would suspect maybe PRN tougher, but can you just speak to that?

Christopher Reading -- President, Chief Executive Officer & Director

Yes. I don't know if PRN is tougher. I know full time is tougher. And so in some cases, I'll make 2 specific -- or a few specific comments around the color. Number one, we're seeing and experiencing less involuntary terminations than we did. Let's go back to 2019. And so translated, that means we might have somebody who's a little bit weaker, we feel highly confident we can replace that person, and we separate from somebody. So those are down. The interpretation that I would provide for that, and I'm interpreting, but we're probably hanging on to people a little bit longer than we might normally and otherwise, more balanced labor market. And we'll see if we can add the right person later and then separate. So involuntary terminations are down. And although we're filling a good number of full-time positions, I know that even when we have full time, if we can get a part-time person, we'll take a part-time person and continue looking. The other thing I will tell you, and our recruiting department is doing a fantastic job. I was really -- we have some new people, newer people, who I didn't know as well. And I'm really impressed with the call that I had with them earlier within the last week. But we'll fill a position, which is the position that we had open, but we'll keep that hiring slot open because, number one, we're growing, and we feel like if we can get the people, we can grow; and number two, it is a tough market. And so we continue to look just in case. So they're busy, they're really busy, and it is a tough market, but they're doing a really what I think is a really good job overall, and I don't mean to minimize it in any way because it's different than it was pre-pandemic for sure, in terms of the difficulty. But I think the team has adjusted pretty well, and I think it shows up in our numbers.

Michael Petusky -- Barrington Research -- Analyst

And just sort of on, I guess, semi-breaking news, the Biden administration, I guess, put something out today essentially saying, hey, we want large companies and healthcare workers to be vaccinated within the next month or 2. You feel like you guys have -- well, first of all, would you -- I'm assuming you guys would fall under that? And then I guess, secondly, if you do, I mean, do you feel like you have many therapists clinicians at this point aren't vaccinated.

Christopher Reading -- President, Chief Executive Officer & Director

Yes and yes. So a little color. So yes, I do feel like we will fall under that. I didn't see it specifically this morning, but I was aware that it's been coming. I think it's going to be heavily -- and look, I -- my personal belief is, I think, we should all be vaccinated. I think it's in space, I do think it's smart. Having said that, I know we have a percentage of people who push comes to shove, don't want to be vaccinated for one reason or another. And I'm not even going to go into the reasons. The reality is, I don't think that changes anything for any of us because I think we'll see because we're dealing with this on a state basis. In some cases, we have a handful of states. So it's been mandatory for a while. And what -- and whether this is -- be careful what I say, but what happens, the people who don't want to be vaccinated, many of them will lay down a religious exemption card and say it's because of their personally held religious beliefs. And when that happens, at least to date, what we have to do, document that, go through it. And then there's usually a testing element that comes into play where they have to be tested on a certain frequency pattern. And so we think that, that's probably -- again, I didn't see what came out this morning because I was preparing for this call and whether there's any nuances from where we were before, but I think that's still going to be an exemption on the religious side. And I think it's going to be hard to work around. And therefore, I think, the alternative is we're going to be testing these folks on a pretty regular basis and administratively, having to keep up with that, which I don't look forward to, but I think that's going to be everybody's reality.

Michael Petusky -- Barrington Research -- Analyst

Do you know approximately what percentage of your clinicians are in fact, like is it a third? Do you have any sense of that?

Christopher Reading -- President, Chief Executive Officer & Director

Yes. Yes, but not on -- what I feel like is completely or highly accurate basis. We have a learning management tool where we've asked people to upload first and second vaccinations in the rest. And we know that the vast majority of people have done that. We also know there's a subset that don't want to do that and don't want that to be recorded as part of the record for the company, again, for whatever reason. And so we think the vaccination rate compared to the reported rate, now it is higher. I think it's somewhere in the 20% to 30% range, if you're asking me what I think. I think the unvaccinated rate actually for the non-licensed people is the highest. And again, I think clinicians with a science background, I'm more inclined to do it for themselves and their own exposure as well as the patients. And then our non-licensed folks may be a little bit less so. But I would say, in aggregate, it's probably in the 30% range, still not vaccinated.

Operator

I'm showing that we have no further questions at this time. I'll turn the call back to management for any additional or closing remarks today.

Christopher Reading -- President, Chief Executive Officer & Director

Okay. Well, listen, thanks, everybody. Again, we appreciate your time. Carey and I are available if you have follow-up questions. I know with some of you, we've already got that scheduled. Thank you for your time and attention today. And we hope you have a great day. Stay safe, and thanks for your support. Bye now.

Operator

[Operator Closing Remarks]

Duration: 47 minutes

Call participants:

Christopher Reading -- President, Chief Executive Officer & Director

Jon Bates -- Vice President & Corporate Controller

Carey Hendrickson -- Chief Financial Officer

Lawrence Solow -- CJS Securities -- Analyst

Unidentified Participant

Michael Petusky -- Barrington Research -- Analyst

More USPH analysis

All earnings call transcripts

AlphaStreet Logo

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.