Acadia Healthcare Company Inc (ACHC) 2006 Q2 法說會逐字稿

Good day, ladies and gentlemen and welcome the Pioneer Behavioral Health second quarter earnings conference call. My name is [Raeka] and I will be your coordinator for today. [OPERATOR INSTRUCTIONS] I would now like to turn the call over to Mr. Matt Hayden of Hayden Communications. Please proceed, sir.

Thank you. Good morning and thank you very much for joining us today for PHC, Inc.'s fiscal 2006 second quarter earnings conference call. Earnings were released this morning and if anyone needs a copy of the release, please feel free to contact our office. That's Jennifer Heady at 843-272-4653. Our call today will be hosted by Bruce Shear, President and Chief Executive Officer, and Paula Wurts, the Company's Chief Financial Officer. Following management's discussion, there will be a formal question-and-answer session open to those participants on the call. In addition, a replay of the call will be available through February 21st and callers can access this by dialing 888-286-8010 and the passcode is 99645912.

Before we get started, I'm going to review the Safe Harbor statement. Statements in this conference call that are not descriptions of historical facts are forward-looking statements that are subject to risks and uncertainties. Words such as expect, intends, believes, plans, anticipates, approximately and likely also identify forward-looking statements. All forward-looking statements are based on current facts and analysis. Actual results may differ materially from those currently anticipated due to a number of factors including but not limited to history of operating losses, anticipated future losses, competition, future capital needs, need for market acceptance, dependence upon third parties, disruption of idle infrastructure, disruption of services and anything due to natural disaster.

All forward-looking statements are made pursuant to the Securities Litigation Reform Act of 1995 and additional information and factors that could affect the business and financial results of PHC can be found in their filings with the SEC.

At this time I'd like to turn the call over to Bruce, who will provide the highlights of the second quarter, followed by Paula who will provide a summary of the financials. Bruce, when he concludes, he will give an outlook and commentary and before the turning the call over to the floor for questions and answers. Bruce, the floor is yours.

Thanks, Matt, and good morning everyone. Thank you all for joining us. As Matt mentioned, the first half of our fiscal year has really been focused on the planning and execution on our long-term initiatives, ensuring that we are positioned to deliver on the next phase of growth for our company.

After reviewing -- after recording a record fiscal 2005 year, we were in a position where our year-over-year comparables were not going to show the type of increases we saw last year due to pure over year comparables including Pivotal. While we are pleased with the top line growth and the continued profitability achieved during the first six months of fiscal 2006, we are not satisfied with these results and expect our second half of the year to be stronger than the first, both in terms of total revenue and earnings. Again, we believe that the second half of the year will begin to show the fruits of our labor.

In reality, we are in a growth phase represented by alternating periods of breakout growth, followed by periods of consolidation. Although this could create some lumpiness in our results from any one quarter to the next, we are making the proper investments to firmly position the company to benefit over the long-term from a significant secular growth trend, which will become more apparent in our numbers as our new facilities open and current ones expand throughout the remainder of this year and well into 2007 and beyond.

Just as the Detroit Medical Center project contributed to growth in fiscal 2005, we expect the Las Vegas Hospital, the final phase of the DMC, Detroit Medical Center project, and the possible expansion of the smoking cessation programs in our Wellplace division to drive growth in 2006 and 2007. With these planned expansions we anticipate [inaudible - audio break] that expansion by 50% versus fiscal 2005, helping to drive future top line growth.

It's encouraging to note that we have been pursuing and initiating these growth strategies without jeopardizing our current profitability and our positive cash flow this year. This is a testament to the strength of our entire management team and our focus on delivering consistent profits to our shareholders. I'll discuss these various initiatives in more detail in this call.

During the last quarter we faced a technical issue related to our installed billing systems at our largest hospital, which resulted in a significant increase in our allowance to doubtful accounts. We've made great progress in resolving this issue. As a matter of fact the billing issue has been resolved, while preparing to upgrade our entire billing system to prevent a reoccurrence in the future, while also facilitating real-time accounting, which will considerably improve our financial controls.

The system will also track referrals, managed care visits and days authorized, and interface with medical records to more accurately reflect our full scope of services. We expect it to drive further efficiencies and improvements in our business operations once fully deployed.

While there is still work to be done, we did reduce the bad debt allowance as an expense from $656,000 in the September quarter down to $475,000 for the December quarter. As you can see, progress is being made. The billings have gone out. And the cash is coming in, which is subsequently reducing our bad debt expenses. Paula will elaborate on our total accounts receivable and allowance for doubtful accounts when she reviews the financials.

At this time I'm going to introduce Paula Wurts, our CFO, to discuss the financial details. Take it away, Paula.

Thanks, Bruce. Here are the specific financial metrics for the second quarter. Total net revenue from operations increased 7.9% to $8.7 million for the second quarter from $8.1 million for the second quarter last year. Included in this increase was an 8.6% increase in net patient care revenues to $6.5 million from $6 million due to a 24.7% increase in patient days. The growth in patient days is primarily attributable to the 7.9% increase in patient days at the company's substance abuse facilities compared to last year and the addition of the 20 new beds at the Detroit facility. Revenue from pharmaceutical studies decreased 9.3% to $1.1 million for the quarter from $1.2 million for the second quarter last year.

Changes in revenue are due to changes in study start dates, not lower number of studies. This kind of fluctuation in revenue on a quarterly basis is expected in the pharmaceutical research business due to the timing of the study starts. But we do expect continued year-over-year revenue improvements to aggregate. Contract support services revenue provided by Wellplace increased 24.9% to $1.2 million for the three months ended December 31, 2005 from $923,000 for the three months ended December 31, 2004, due to the start-up of a new smoking cessation contract in the fall of 2005.

Patient care expenses increased by 11% to $3.3 million for the second quarter from $3 million for the second quarter last year due primarily to the increase in patient days I mentioned previously with the primary increases in expenses directly related to patient census such as payroll, food, hospital supplies and lab fees.

During the quarter we also opened the second phase of the new inpatient program Detroit Behavioral Institute at the Detroit Medical Center. And we have experienced increased patient care revenue and expected increased patient care and administrative expenses related to the start-up while the unit census is growing. Patient care expenses related to our research division increased 24% to $510,834 for the second quarter from $412,144 for the same quarter last year due to the increased number of study patients receiving stipends for participation in the studies.

Contract support services expense increased 5.2% to $587,067 for the second quarter from $558,094 for the second quarter last year primarily due to the increase in the Michigan Call Center contract and the addition of the new call center contract.

Administrative expenses increased 13.7% to $2.7 million for the quarter from $2.4 million for the second quarter of last year. These changes are a result of the increased administrative payroll and employee benefits partially related to the setup and opening of the Detroit Behavioral Institute including fees and licenses expense, due to JACO accreditation at Harbor Oaks and Highland Ridge, and the quality assurance fee assessed in Michigan. And a 103.5% increase in consultant fees, mostly related to the accounts receivable software failure at Harbor Oaks.

Administrative expenses related to the research division decreased 23.6% to $538,291 for the quarter from $704,609 for the second quarter last year, resulting mainly from a decrease in salaries expense related to the elimination of the Nevada location, and a reduction in the accrued bonuses. Total operating expenses were $8.2 million and $7.4 million for the second quarter 2005 and 2004 respectively.

Operating margins for the second quarter were 6.3% as compared to 8.4% last year and 6.7% for the first quarter of 2006 as a result of increased expenses described above. Interest expense decreased 24.1% to $174,338 for the three months ended December 31, 2005 from $229,797 for the three months ended December 31, 2004, primarily due to the booking of the interest on the Note A of the Pivotal acquisition during the quarter ended December 31, 2004. The note was contingent on profitable operations of Pivotal from the acquisition through December 31, 2004. Therefore the note was not recorded and no interest was accrued until certainty of profitability could be determined.

The Company's provision for income taxes decreased $64,600 with an effective tax rate of 15.7% compared to 15.1% in the year ago period. Net income that's applicable to common shareholders was $346,782 or $0.02 per fully diluted share based on 19.3 million shares compared to net income of $408,804 or $0.02 per fully diluted share based on 18.5 million shares for the second quarter last year. For the six-month period total net revenue was up 10.1% to $17.6 million from $16 million for the six months ended December 31, 2004.

Net patient care revenue was $13.2 million, an increase of 8.4% compared to the $12.2 million for the first six months of last year. Revenue from pharmaceutical studies increased 4.8% to $2.4 million for the six-month period from $2.3 million for the same period last year. Contract support services revenue provided by Wellplace increased 31.2% to $2.1 million for the six months from $1.6 million for the six months ended December 31, 2004, which was driven by the Michigan Call Center expansion and the revenue from a new smoking cessation contract, which began in the fall of 2005.

Patient care expenses increased by 9.1% to $6.6 million for the six months from $6 million for the six months ended December 31, 2004. Patient care expenses related to our research division increased 33.9% to $1.1 million for the six months from $802,107 for the six months ended December 31, 2004. Contract support services expense increased 10.2% to $1.2 million for the six months ended December 31, 2005 from $1.1 million for the six months ended December 31, 2004.

Administrative expenses increased 17% to $5.4 million for the six months ended December 31, 2005 from $4.6 million for the six months ended December 31, 2004, again, due to increased administrative payroll and employee benefits partially related to the set-up and the opening of Detroit Behavioral Institute. Administrative expenses related to the research division decreased 16% to $1.2 million for the six months from $1.4 million for the six months of fiscal 2005. Interest expense decreased 3.9% to $329,559 for the six months ended December 31, 2005 from $342,852 for the same period last year.

The company's provision for income taxes of $160,228 for the six-month period ended December 31, 2005 is significantly below the scheduled statutory rate of 34% primarily due the availability of net operating loss carry-forwards, which total approximately $8 million. Total income tax expense for the quarter represents state income taxes for certain subsidiaries with no available net operating loss carry-forwards.

The company has provided a significant valuation allowance against this sort of tax asset due to the volatility of the healthcare industry. Net income applicable to common shareholders for the six-month period were $730,989 or $0.04 per fully diluted share compared to net income of $1.2 million or $0.06 per fully diluted share for the same period last year. 19.3 million and 18.3 million fully diluted shares were used to calculate earnings per share for the respective periods.

I would like to take a few minutes to highlight a few of our key balance sheet metrics. The company's balance sheet reported a current ratio of 1.6-to-1 on December 31, 2005. Shareholders' equity increased 9.8% to $10 million on December 31, 2005 from $9.1 million on June 30, 2005. The company reported $1 million in cash as of December 31, 2005, up from $917,000 on June 30, 2005. Bad debt expense increased 44.8% to $475,768 for the second quarter from $328,638 last year and was down sequentially from $656,887 recorded during the first quarter of 2006.

Days outstanding, allowance for doubtful accounts, and bad debt expense all increased due to the software problems, which slowed the billing process and diverted staff's attention from collections while we re-entered the receivables into the new software. Since the Company's policy is to maintain reserves based on the age of its receivables, this delay in the billing and collection process increased the amount and age of the Company's receivable, thereby increasing the reserve required by formula and the bad debt expense. The system is now operating and we expect the reserve requirement will decrease in future quarters as collection activity has now become more normalized. We expect bad debt expense in the third quarter to be below our second quarter reported levels.

With that out of the way, I will turn the floor back to Bruce. Bruce?

Thanks, Paula. I'd like to take a few moments to briefly discuss our growth strategy and focus going forward. I think it's important to note that we started a number of initiatives during the first half of fiscal 2006, which will set the stage for strong growth in both revenue and net income during fiscal 2007. During the first fiscal quarter, which ended September 30, we received state approval and opened an additional 20 beds at the Detroit Behavioral Institute. The new unit serves and treats adolescent females between the ages of 12 and 17 who have been adjudicated by Michigan Juvenile Courts as delinquents, presenting with either a severe emotional disorder or a seriously mental ill diagnosis. The program's length of treatment will average 6 to 12 months depending on the case.

The Company's received strong support for the program and today we have 13 patients and expect a normalized occupancy to be above 80% of the 20 beds. We've now reached profitability in this unit during the current quarter and anticipate solid performance on a go-forward basis. The longer length of stay will also help provide improved visibility for revenues and profitability. In addition, the initial 30 beds at DBI continue to operate near full capacity and are contributing to our profitability.

Our eventual target is to operate over 100 acute and long-term psychiatric beds in this facility. The significant demand and lack of adequate facilities in this region provides increments of growth opportunities for our services. Given our solid relationships in the greater Detroit area, coupled with the need for additional capacity, we will continue to prudently expand this facility in a profitable manner.

When we first announced the DBI contract we stated expectations that would add approximately $14 million to our revenues once fully built out. With the 20 beds I just mentioned, and the next 50 beds, which are scheduled to come on line near the end of this fiscal year, we will be at our stated goal. In addition, we are extremely excited about the Seven Hills Behavioral Institute in Las Vegas, and we will be holding our groundbreaking ceremony on March 15 of this year, an event that is receiving a lot of local attention.

To remind you, Las Vegas is one of the fastest growing regions in the country with population growth and associated demographics extremely supportive for further expansion, while the area has not seen a new behavioral health facility built in nearly 20 years. As DBI contributed to our sharp increase in revenue and our consistent profitability last year, the Seven Hills Behavioral Institute will significantly benefit us in fiscal 2007.

Once online this facility will increase the total number of beds we operate to approximately 300 nationwide and diversify our operations regionally. We expect this facility to begin contributing to our revenue in the beginning of calendar 2007. And once fully built out, we expect the total annualized revenue contribution to be approximately $8.5 million with margins similar to, if not better, than our margins for existing inpatient facilities.

Another factor in our growth strategy is our research study segment. We acquired Pivotal nearly two years ago in fiscal 2005. We saw the benefit of their contribution to our research study revenues. At present, Pivotal is engaged in 48 enrolling studies up from 43 at the end of the fourth quarter, that are providing care in a total of 85 studies. We continue to see consistent growth in the number of studies, primarily in the central nervous system area. The central nervous system area is the fastest growing area for trials. As we progress towards Phase I trials in this area, our opportunities for more rapid growth and margin expansion will continue to improve.

If you've spent any time in the Phoenix metropolitan area, you are likely to hear our advertisements looking for study participants from Pivotal. This acquisition has been a success for us thus far and we remain confident in their ongoing ability to grow this segment on both the top and bottom line on a year-over-year basis in fiscal 2007.

Our Wellplace division continues to record double-digit revenue growth. And margins in this division continue to improve as we generate revenues from our Michigan Call Center contracts, which allowed us to leverage our existing infrastructure. Last quarter we announced a partnership with a major defense contractor for Wellplace to provide tobacco cessation, quick line, and Internet based cessation services.

As this project ramps, we expect it to contribute to top line growth, but more importantly to increase profitability as we move into the second half of this year and next. This contract is designed as part of a four-state research study to measure the effectiveness of a multi-faceted approach to tobacco cessation. This presents an opportunity to leverage our core competencies and existing infrastructure to provide these services while improving Wellplace's margins.

I don't want to make any bold predictions here, but we are hopeful that this trend may emerge with other companies and organizations as they embrace the positive ramifications and ROI these programs offer. The inherent healthcare and productivity costs from smoking are substantial. In addition we have targeted additional opportunities for Wellplace with typical contract sizes of $500,000 to $1 million on an annual basis.

An additional item I should mention, one which could be an additional growth driver for us next year, is the Mental Health Parity Act. It's been a long time coming, but we are more optimistic than ever about the chances of this becoming a reality. This federal legislation is being debated as we speak, would require insurance companies to treat mental health related claims in the same way they treat any other medical claims. This is further indication that mental health issues are coming to the forefront of public consciousness, even more so. And this will result in significant increases in insurance funding for mental health conditions and obviously, a substantial increase in the number of people able so seek care.

We are well positioned to expand both our inpatient and our Internet based services if this becomes reality. This could be a large driver next year, but we've learned not to rely on legislatures or the government, so we are treating this an embedded option for additional growth and building out our three main core businesses without relying on this wild card.

Looking forward, we continue to expect to deliver at least 15% top line growth for the remainder of fiscal 2006 compared to last year, while reporting further improvements in profitability, specifically in the second half of the year as compared to our results thus far through the first half of the year.

In addition, with a normalized bad debt expense and the lower consultants fees that were specific to the billing issue at Harbor Oaks that's now been eliminated, net income for this quarter would have been higher this year by approximately $150,000 over last year, or approximately 40%. This is a very significant point. We have got a handle on the issue in the past. And we're beginning to see the results of that being behind us.

One final note, we've received a number of inquiries from shareholders on our intentions to pursue our listing on a formal exchange. While this is a high priority for us, it is important for you to understand the requirements, which equate to a minimum $3 share price or a $50 million market cap, unless an exception is granted by the exchange. So with that being said, this initiative remains a priority for us. We will pursue the profit [shields] to facilitate this move as appropriate without affecting our efforts on a day-to-day business.

I'd like to thank you all for joining this call this morning. I hope I've clearly explained the opportunities for the future and our star step growth strategy. At this point, we can open it up to questions to the group. Thank you all for joining us. I look forward to fielding questions. And as always, if there are further follow-up calls, please feel free to call me directly in the office at 978-536-2777.

Thank you and we'll open it up to questions now, operator.

[OPERATOR INSTRUCTIONS] And your first question comes from the line of Jim Kennedy of Marathon Capital Management. Please proceed.

Hi, Bruce. How are you?

Good morning, Jim. How are you today?

I'm doing fine. Thanks for the nice forward-looking outlook. A couple of questions for you. Number one, on the balance sheet, how is the long-term debt versus your revolver structured in terms of interest rate? Are they both floating? Or is, I don't recall from the K what the long-term debt looks like.

Both of the interest rates are floating based on prime.

Is one better than the other?

Paula, I believe one is. You might want to answer that.

Yes. The revolving credit is 2.25 over prime and the term loan is 3.5 over prime.

Ouch, okay. So it pays you to use that revolver and pay down the term?

Whenever possible.

Okay. I was just going to - I was thinking just the opposite but that's fine. What would be the, once you get some of this bad debt off the books, what should we expect going forward in terms of average DSOs?

Well in terms of days outstanding receivables our average is somewhere in the 80s. We'll see minor fluctuations of that going down. I think the best-case scenario is you might see a 10-day reduction under the best-case scenario.

Okay. And now you have not to date done a whole lot with Medicare. Is that an area that we may see more of in the future, particularly with your new facility in Las Vegas?

Well, the new facility in Las Vegas will be Medicare certified from day one. As you know, we take Medicare patients only in our Harbor Oaks hospital in Michigan. And we are looking at adding that component to our hospital in Salt Lake City, Utah.

Medicare rates just went up again effective July 1st. And the Medicare -- and this has been an industry discussion everywhere -- Medicare rates now are close to $600 a day, which is approximately 15% higher than our average rate in our hospitals. So this is very productive for us. And I think I may have mentioned in the last call that we're doing more focused marketing to try to get the Medicare population because the reimbursement per day is much better.

Okay. And in terms of Wellplace and your contract services, it seemed like for a while we went through a bit of a lull, I guess, as some of the states did not follow through in terms of their tobacco spending. Now all of a sudden we seem like we've been rejuvenated. Is there something specific going on in the marketplace that gives you some confidence going forward relative to Wellplace? You mentioned a couple of contracts you've gotten as well as some other ones out there. What's driving that, Bruce?

It's not on the state smoking cessation. I think what's driving it is what we've begun to do realizing that the state was not going to be as big as we thought. It's to look at project industry and other potential contractors to either embed smoking cessation programs in existing health prevention programs or in other government non-state related contracts. So I think that's why you're seeing this movement and why you're seeing a renewed enthusiasm about this because there's a lot of opportunities here.

Are you going through the providers? Or are you going directly to the corporations?

Both.

What's the -- wouldn't the provider -- what's been your success to date? I mean wouldn't the providers be a much larger market?

Well, the most recent contract was with a government subcontractor, which we think presents some really interesting opportunities. And we're pursuing that more in terms of -- we're also pursuing the potential of health insurance carriers directly as another option too.

Okay. Last question for you. In terms of Las Vegas, could you just frame up for us what you are thinking in terms of the balance of this calendar year in terms of what that facility is going to require in terms of a build out versus any commitments you may have gotten or may be talking about, if you can discuss them, relative to booking the beds in that facility?

Well, firstly, we don't anticipate opening for business until January of 2007. As I think I mentioned in the past, the facility is financed via a lease with an option to purchase 50% of the real estate. So there's insignificant capital expenses for the operation. And the pre-opening costs we anticipate will be capital expense. So we shouldn't have much of a P&L impact until the facility opens.

And then how about in terms of commitments? You mentioned that there has not been a facility built in 20 years. Can we assume from that that that was from lack of demand or everybody's overbooked at this point and they're dying for a facility like this. And how do we gauge -- have you gotten some early indications as to the potential demand?

The reason why we moved forward on this is because it came from our customers that there was a need for beds. They weren't happy with the services that were available and the prices that they were paying. So as a result of that, we have been working closely with all the payers in advance of building the facility to get their buy into the project. That's why we're so excited about this.

So are we reasonably confident at this point that filling this facility should not be an issue, it's just getting it built?

I'm certainly confident about the success of the facility. When it will be filled and how profitable it will be it's hard to tell. But sort of based on the demand, based on the reimbursement per day we expect to get from the payers there. Based on the commitment from our current customers -- remember we're a very large provider in Las Vegas now -- it's going to be a very successful hospital.

Good. Okay, guys.

Thank you so much, Jim.

Keep up the good work.

And your next question comes from the line of Greg Hillman of First Wilshire Security.

Yes, good morning. I had a question. Number one, what was the depreciation and amortization and CapEx in the quarter?

Do you have that in front of you?

No, I'm just looking at the press -- I have the press release. Have you released the Q?

The Q will be out sometime today.

Okay. Well, I can get it off that. And then I had a question about the individual, I guess, business units and how they fit together. What would be the synergy between the various business units?

Well, first of all, we're a behavioral health provider. That's all we do. So all of our services are behavioral health-oriented. So that's sort of the 30,000 [inaudible - audio break] view global answer. The, I'll give you an example of some of the synergies that we're seeing. We're now doing inpatient studies at our Harbor Oaks hospital in Michigan by working directly with Pivotal Research, our research company. So they've contracted with our hospital to provide the inpatient care. So we're able to sort of keep all of those services in our Company. I mean that's sort of a great example of synergies.

In terms of our Wellplace position, we utilize our call centers with our major clients. And as a result of that, those clients require inpatient services and are very comfortable with our services. So many of our call center contracts are able to use the existing Pioneer network -- another great opportunity and a great example of our synergy.

Okay. And in terms of the directions you're going strategically for the company, is -- are you just going to make opportunistic acquisitions in behavior health? Or will they just be around the segments you're already in? Do you understand my question?

Yes. We're going to be only focused on behavior health. There's not a question about that. We don't anticipate changing our focus. We're going to stick with the area that we know, the area that we know how to make money in, the area that we have the most experience in.

In terms of strategic acquisitions, I mean we have a lot on our plate right now. And there are a lot of opportunities out there. And I think when the opportunity's right and the price is right and the market is right, we'll take a look at it. But I can't tell you that we have something on our plate in the immediate future, other than a 50% increase in the existing bed capacity that we already have on the books.

Okay. And do you have an adequate financing to do another acquisition at this point? Or would you have to do additional financing?

Well we have no anticipation of using equity for financing at this level. We have a great relationship with our bank capital source. The balance sheet is pretty strong. So with the right opportunity we would use debt and not equity.

Okay. Thank you very much.

You're welcome. Thank you. Next question?

[OPERATOR INSTRUCTIONS] And your next question comes from the line of John Evans of Cochran Palmer.

Hey Bruce. Can you talk a little bit about, I guess, what the bad debt was for Harbor Oaks facility specifically in the December quarter? I think you broke that out for us in September. That'd be helpful.

Paula, do you have that number in front of you?

I actually do have December's. I'm not sure I have September's here with me.

No. I have September. I just need December.

Okay. December for Harbor Oaks was 292.

Of the 475?

Right. 292,625.

And can you give me what it was on a year-over-year? In other words what it was in December of '05?

I'm sorry. I don't have that with me.

Okay.

I can call you with that, John.

Okay. And then the other thing -- maybe I missed this -- but usually you give an update on the studies, like how many studies you're working with and how many you have under care. Can you give that to us?

Yes. That was in the script, I believe. I said that there were - I'm trying to come back to that. I think it was -- I think we have 48 compared to 43 of the previous quarter and we have 58 that we're providing care under. I'm trying to find it again. But it is in the script and I --

58 is currently enrolling, I believe. Is that what it was?

Yes.

And so then how many is care?

48 compared to 43.

Okay. Thanks.

Okay, thanks a lot. Are there any other questions?

Yes, you have a follow-up from the line of Greg Hillman.

Yes, Bruce. You talked about earlier how you're improving your computer system to accommodate the bigger organization. I was wondering what you're doing to improve your infrastructure in the area of human resources in terms of recruitment, retention and training of people both in the home office and the individual business units?

Are you talking about the IT part of it?

No. I'm talking about human resources. I'm talking about recruiting people, retaining people, training people and developing people across your organization to be consistent with you growing to be a much bigger company.

Well, a couple of things we've done in the last year, two years we've hired a new position called the Director of Human Resources, which is a corporate position, who coordinates all the efforts with us in the field. The other thing that we just hired was a Director of Training, working under our compliance arm. This is a gal who's based in Michigan whose primary goal is to train clinical staff, work with policies and procedures to kind of keep the staff up to speed and state of the art.

So I think those are two efforts. I mean we're always trying to do stuff. Retainment of healthcare is critical. And we're always focused on that and hopeful that - turnover is always an issue in healthcare and our goal is to just minimize.

Okay. And in terms of career path in your organization, does -- are you like sophisticated enough to have or big enough to have a career path for somebody working in your organization?

Well I think we do. We have many examples of someone starting as a mental health aide that went back to school and ended becoming an LPN or an RN. We have social workers that become and get advanced degrees that are able to progress up in the Company.

We just had an example in Michigan where we had a direct care worker that we promoted to be in charge of our admissions department. So, yes, we're very focused on that as much as possible. It certainly is much better to promote from within and grow from within. It reduces potential turnover and also certainly reduces the hiring and the recruitment costs.

Okay. Thank you.

Okay. I don't see any other questions in the queue here unless I'm missing something.

No. There are no further questions at this time.

Okay. Well, thank you very much for joining us. As I said we're excited. I think the most important points to leave this call is that the bad debt issue is back under control as evidenced by the fact that the total bad debt expenses went down in the most recent quarter compared to the last quarter. All our billing is up to date. And the cash is coming in. So that looks good. And we're excited about the latter half of this fiscal year and even more excited about seeing the new beds from our two biggest projects coming forward. So thanks for your support and have a great day.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.