Alerislife Inc (ALR) 2011 Q3 法說會逐字稿

And ladies and gentlemen, good day and welcome to the Five Star Quality Care third quarter 2011 financial results conference call. This call is being recorded. At this time, for opening remarks and introductions I would like to turn the call over to the Vice President of Investor Relations, Mr. Tim Bonang. Please go ahead, sir.

Thank you, and good morning, everyone. Joining me on today's call are Bruce Mackey, Five Star's President and CEO, and Paul Hoagland, Five Star's CFO. The agenda for today's call includes a presentation by management followed by a question-and-answer session. I would also note that the recording and retransmission of today's conference call is strictly prohibited without prior written consent of Five Star.

Before we begin today's call, I would like to state that today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and federal securities laws. These forward-looking statements are based on Five Star's present beliefs and expectations as of today, October 27th, 2011. The Company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made at today's conference call, other than through filings with the Securities and Exchange Commission regarding this reporting period. Actual results may differ materially from those projected in any forward-looking statements. Additional information concerning factors that could cause those differences is contained in our filings with the SEC. Investors are cautioned not to place undue reliance upon any forward-looking statements.

And now I would like to turn the call over to Bruce Mackey.

Great. Thank you, Tim, and thank you everyone for joining us today.

For the three months ended September 30th, 2011 we reported our tenth consecutive quarter of profitability from net income ifrom continuing operations of $0.08 per basic and diluted share. Results for the quarter were positively impacted by $0.01 per share from a gain on available-for-sale securities, offset by acquisition costs. Taking that into account, our adjusted income from continuing operations was $0.07 per basic and diluted share. This compares with $0.17 per basic and $0.16 per diluted share that we reported for the same period a year ago.

I would note that we haven't had a full quarter's worth of activity included in our results from recent acquisitions, some of which closed on the last day of the third quarter. And we also experienced increases in certain operating expenses, mainly in health insurance, marketing, and other costs associated with bringing new properties online, all of which Paul will discuss later on the call. Five Star has continued to be profitable despite the turmoil in the healthcare industry and overall market. Over the trailing four quarters our diluted net income from continuing operations was $0.57 per share.

2011 has been a year of significant growth for Five Star, and we expect that to continue in the fourth quarter. Since the beginning of the year we have announced the addition of 37 primarily private pay communities with over 5000 units.

In total, as of September 30th Five Star owns, leases, or manages 236 communities with over 25,000 units. According to the American Seniors Housing Association, Five Star is now the sixth-largest operator of senior housing in the United States. Taking into account the 31 communities and almost 3000 units we own, Five Star is now one of the top 50 senior housing owners as well.

Let me now update you on the status of our recent acquisitions, leasing agreements, and management contracts.

First, the acquisition of six private pay senior living communities we agreed to purchase in Indiana from Basic American for $123 million, is now complete. On July 1st we acquired one community and on September 29th we acquired three communities with a total of 541 units for $82.4 million. We assumed $19 million of mortgage debt along with this acquisition.

To remind you, these are relatively new, high-end properties with all private pay residents, so we have no government-related reimbursement issues. About half of these communities have land available for expansion. We will begin to explore possible expansion opportunities at these communities in 2012.

Along with the six properties, Five Star acquired a private duty home health agency in Indiana, and we expect the licensing to be completed in the fourth quarter. We see this as a potential growth opportunity for Five Star.

Next, in mid-July we begin to lease from Senior Housing Properties Trust a senior living community in Florida with 96 units, and also begin to manage four communities. These five communities are all part of a 20-community portfolio located in the Southeast with over 2000 units, that Senior Housing is purchasing from Bell Senior Living, which was announced back in March.

To remind you, of the 20 communities, Five Star expects to be managing 15 communities and leasing five. As of September 30th, 2011 we operated 19 of the 20 communities, and we expect to begin managing the remaining community some time in 2011 or the first half of 2012.

Under the management contract with Senior Housing, Five Star is paid 3% of revenues and will also have the opportunity to earn a 35% incentive fee based on the net cash flows generated after Senior Housing has reached a priority return.

Last, in September, Senior Housing announced that it had agreed to purchase nine large senior living rental communities currently operated by Vi Classic Residence, with 2226 units located across six states. Five Star expect to manage these nine communities under management contracts similar to the ones I just mentioned.

This group of properties adds nicely to Five Star's existing portfolio. They are all high-end, private pay communities containing over 2200 independent living and assisted living units, with a portion dedicated to Alzheimer's care. The communities are located in regions where Five Star already has operations, making any potential increase to our regional corporate structure minimal. The portfolio is currently 87% occupied. We expect to begin managing eight of these communities by the end of 2011, and one potentially late in 2012.

As you are all aware, the Centers for Medicare & Medicaid Services announced a major 11.1% cut in Medicare rates for skilled nursing operators starting October 1st, 2011. While this is clearly not good news for the skilled nursing industry, it does reiterate that Five Star's strategy of growing our business in the private pay senior living area has been, and will continue to be, beneficial.

We expect that the financial impact to Five Star from this ruling will be a revenue cut of between $15 million -- I'm sorry, $16 million and $17 million annually, most of which will fall to our bottom line. However, as we have been very active in growing the Company in the private pay space, the EBITDA we expect to receive from our 2011 acquisitions will help to offset the majority of the Medicare rate cut. Currently, Medicare make up 14.7% of our Senior Living revenues and it will continue to decline as we keep growing our private pay portfolio.

Now I'll review some highlights from the quarter. Occupancy during the third quarter trended positively. Senior Living occupancy was 86.0%, an 80 basis point increase from last quarter. Senior Living occupancy was 86.2% a year ago.

Looking at this by portfolio, independent and assisted living occupancy increased to 86.7% from 86.4% a year ago. This is also up 90 basis points from last quarter.

Our standalone Skilled Nursing occupancy was 81.7%, down from 85.1% last year and 82.0% last quarter. While about half of our 38 Skilled Nursing facilities did experience a drop in their occupancy, the reduction can really be attributed to about five facilities. One facility alone accounts for about 25% of our total drop from last year, and that is primarily due to shutting down a vent unit at that facility. We are in the process of putting in a high-end Medicare rehab to home recovery unit in that facility, and expect it to turn around in 2012. We also have plans to address the other decreases we saw as well.

Same-store, Senior Living occupancy was 85.6% compared with 86.2% a year ago. Occupancy as of yesterday was 86.4%. On a same-store basis in our independent and assisted living units, we had 180 more move-ins during the third quarter of 2011 compared to the third quarter of 2010.

Compared to the second quarter of 2011, we had 120 more move-ins during the third quarter of 2011. We did see decreases in our move-ins from our -- for our Skilled Nursing units during both periods. The majority of the decreases in move-ins at our Skilled Nursing units can be attributed to those same five Skilled Nursing facilities I discussed a minute ago. We are also focusing more marketing efforts, primarily on training, to address this issue as well.

Senior Living average daily rate continues to grow. Our average daily rate increased 0.6% in the third quarter compared to last year. More importantly, though, on a same-store basis, average daily rate increased 2.8% compared to last year. Over the trailing four quarters, Five Star has increased its private pay rates by an average of 3.6% on a same-store basis. Looking forward, we expect our overall private pay rates to increase on average 3% to 4% in 2012.

Moving on to other metrics. Senior Living wages and benefits as a percent of Senior Living revenues were 49.4% during the quarter, down compared to both last year and last quarter. G&A as a percentage of revenues was within our stated goal at 4.4%, which is down slightly from last year and last quarter as well. Five Star has the leanest operations in the industry.

Five Star's core Senior Living business continues to be profitable. 84% of total Company revenues come from this business. 73% of this revenue is derived from our residents' private pay sources. In the third quarter our Senior Living business produced $70.8 million of EBITDAM, what we refer to as EBITDA, excluding rent and G&A expenses. This is up from the $68.2 million of EBITDAM reported last year.

Same-store, Senior Living EBITDAM is down $1.3 million from the quarter -- for the quarter, from $68 million last year to $66.7 million this year. This decrease is primarily related to a drop in our standalone Skilled Nursing portfolio as well as increases in our health and other operating expenses. Paul will discuss these expense increases in a few minutes.

The two Rehabilitation Hospitals we operate, which account for only 8% of total revenues, made $3 million of EBITDAM during the third quarter, which is relatively flat with last quarter but up 36% compared to $2.2 million last year. Our new traumatic brain injury unit continues to perform well and is in the process of accreditation. Our Lowell inpatient satellite unit we will be moving to its brand-new location in a few short months, is relatively on-schedule.

The institutional pharmacy operations, which make up only 6% of total revenues, made $422,000 on an EBITDAM basis during the third quarter. This is down $121,000 from last year and down $489,000 from last quarter. The decrease in the second quarter of 2011 is primarily related to a positive inventory adjustment that was booked during the quarter. Currently we have 12,250 customers, and expect to add over 1000 additional customers during the next several quarters.

Our balance sheet remains strong. We entered the quarter with $42 million in cash and have in excess of $350 million of book value -- not fair market value -- in net property and equipment. This includes 31 of the properties we own, 27 of which are unencumbered with debt.

The third quarter was a transitional quarter for the Company. We completed the majority of the acquisitions announced so far this year, and we will begin to realize the full benefit of them over the next several quarters. And although we've experienced tremendous growth, our balance sheet remains strong, even in the wake of the CMS Medicare cuts. We brought the Company up to speed to support managed communities, and we are prepared to take on all but one of the additional Vi-managed communities by year end, which should start fully contributing beginning in 2012.

The acquisition outlook remains strong as we continue to see opportunities for expansion. We are constant in our ability to grow the Company, increase revenues at our communities, and grow the Company's earnings over time. At current valuation and with a solid balance sheet and consistent positive earnings, Five Star is a compelling story among the senior living space.

At this point I would like to turn the call over to Paul Hoagland, our Chief Financial Officer.

Thank you, Bruce, and good morning everyone. For the third quarter, Senior Living revenues increased $15.8 million or 6.1%, to $275.6 million compared to last year's. This increase is due primarily to revenues from 13 communities we acquired or leased since last year, which contributed $10.6 million. At the communities we have operated continuously since July 1st, 2010, per diem charges to residents increased 2.8%. In addition, increases in occupancy have favorably impacted our third quarter revenues.

Our income from continuing operations for the third quarter was positively impacted by $0.01 per share basic and diluted due to a $529,000 gain on the sale of available-for-sale securities, offset by acquisition costs of $226,000.

Senior Living wages and benefit expenses increased $7.1 million or 5.5% to $136.1 million compared to last year. Although this was a 30 basis point decline from the previous year, $3.8 million of the increase was due to the 13 communities we acquired or leased since last year, and $1.9 million was from increases in health insurance expense.

We had an unusually high increase in large claims during the first two quarters of 2011. However, we are experiencing some moderation in Q3 as health insurance costs decreased 20 basis points when compared with Q2; but they are still 50 basis points higher than Q3 of 2010.

Improvements in direct labor expenses, which decreased 90 basis points from 38.4% of revenues to 37.5% of revenues, more than offset the increase in health insurance.

Other Senior Living operating expenses increased $6.2 million or 9.9% compared to last year. Senior Living operating expenses as a percentage of revenues increased 80 basis points to 24.9% compared to 24.1% during the prior year.

These increases are due primarily to the 13 communities we acquired or leased since the third quarter of 2010, which had expenses of $2.9 million, an increase of $700,000 or 20 basis points of expense associated with room turnover and the related preparation in marketing costs, that we are starting to see increased occupancy from; an increase of $700,000 or 20 basis points of insurance costs; and an increase of $600,000 from the standpoint of increases of bed provider fees, most of which have been offset by increases in Medicaid reimbursement; lastly, an increase of $300,000 or 10 basis points for one-time acquisition-related operating expenses.

Turning to our ancillary businesses, third quarter EBITDAM at our Rehabilitation Hospitals was $3 million. Hospital revenues were up $1.5 million or 6.1% compared to last year, primarily due to higher-quality patient case mix. Overall EBITDAM margins improved 250 basis points as variable spending expenses decreased and revenues increased since last year. Occupancy was down slightly from last year and finished the quarter at 54.5%.

Our pharmacy operations achieved a $442,000 margin in the quarter. Both pharmacy revenues and pharmacy expenses were down compared to last year. Revenues were down 6.7% and expenses were down 6.3%, due to fewer customers and lower occupancies at the communities, service by the pharmacies, and lower generic drug costs. We expect to start servicing 226 beds in the fourth quarter as a result of the acquired and managed communities.

During the quarter, general and administrative expenses increased $667,000 or 4.9% from last year, but as a percentage of revenues decreased 10 basis points to 4.4%. We remain very efficient as we acquire, lease, and manage additional communities. Rent expense increased $3 million or 6.3% compared to last year, mainly due to a $1.9 million increase associated with acquisitions of new communities.

Income tax expense was $186,000 for the quarter, and interest expense increased $460,000 due to the additional indebtedness we took on with recent acquisitions.

Depreciation and amortization increased by $1.8 million, mostly due to acquisitions.

Now let me review our liquidity, cash flow, and selected balance sheet items. Cash flow provided by operating activities during the third quarter was $17.7 million. During the quarter we invested $60.9 million to complete the acquisition of the Indiana communities, and $14.9 million was invested in capital within our existing communities. We sold $10.6 million of long-term capital improvements to Senior Housing. At September 30th, 2011 we had cash and cash equivalents of $41.9 million, and our $35 million revolving credit facility was undrawn, and remains so today.

Consolidated EBITDA, excluding certain items, was $10 million, compared to $10.1 million last year. Our accounts receivable management remains strong, as the number of days sales outstanding for the consolidated operations was 18.4 days as of September 30th, 2011. Five Star keeps this figure low and well controlled.

At the end of the quarter we had $353.6 million of net property and equipment, which includes the 31 properties directly owned by Five Star, 27 of which are unencumbered by debt. We had $37.3 million of convertible senior notes, $39 million of mortgage notes payable, and $48 million outstanding on our bridge loan from Senior Housing. There is currently no more borrowing capacity available under this bridge loan. We believe we are in compliance with all material terms of our credit, notes, mortgage, and bridge loan agreements.

In closing, we remain focused on increasing our occupancy and controlling our expenses as we continue to grow and transition the Company to a more private pay model. We are well-positioned to capture strong margins and flow-through as we do increase our occupancy and make profitable acquisitions. We are entering a period of more volatility, but our balance sheet is strong and we are confident in our ability to grow the Company and remain profitable.

With that, we would like to take questions. Thank you.

(Operator Instructions). Paxton Scott, Jefferies.

Hey, good morning. My first question is on the Skilled Nursing portfolio. Bruce, I think you said this -- it was a $16 million to $17 million hit. Is that -- I guess, as we look at some of the other providers that are out there, that are talking about some mitigation, are you doing anything to try to mitigate that, or is that a net mitigated number that you're providing there?

No, that's the gross number, Paxton. I think the biggest difference between us and the other providers is that Skilled Nursing is a much smaller percentage of our mix. So, you know, there is some mitigation we can do in terms of G&A and things like that, but there's not a lot. We're a pretty efficient operator. You know, our best courses of mitigation are to continue to diversify in the private pay space. We'll still grow our rates in that private pay space between 3% and 4% in 2012, as I said in the prepared remarks. And increasing occupancy. We saw that in the third quarter. As of yesterday, like I said, it still continues to trend in the right direction. That will more than offset or mitigate the majority of that cut.

And I also said in the prepared remarks, and I did say, and I've already kind of heard it once, about continuing to grow in the private pay space. Most of the activities we've taken place this year, in terms of our acquisitions of Bell, the communities we've just closed at the third quarter, the -- will offset the majority of that cut.

Any plans -- I mean, I know you've reached an agreement with SNH to divest a number of Skilled Nursing portfolios after the -- over the last few quarters. Anything on the near-term horizon there, to divest additional properties?

We have three properties right now in discontinued operations. Two are Skilled Nursing facilities that we directly own, and one is a closed facility that is owned by Senior Housing. Other than that, we've got no significant plans right now. But we do look at the portfolio from time to time. If a property is not working out and meeting expectations, we do look to, A, determine if we continue -- you know, if we can improve that property; or, if not, let's dispose of it.

And as you know, in the second quarter we sold three Skilled Nursing facilities. And again, to the extent of taking on 5000 rooms there is approximately 1.5% of those rooms, Skilled Nursing, which would reside within CCRC. So, again, we're obviously moving away from that model.

Okay. And then moving to the institutional pharmacy, Bruce, you made a comment about a positive inventory adjustment there. Can you elaborate, or maybe Paul, just about the financial impact in Q3 for that adjustment?

It was really -- the inventory adjustment was in the second quarter, Paxton, not the third quarter. If I look at our second quarter -- our third quarter results, I'd say that's the -- that is what it is. But the second quarter, we had ballpark $350,000 -- I don't know exactly the number, but it's in that range -- of an inventory adjustment that came through that positively impacted our results.

Okay, so the Q3 number is a better run rate than where you were in Q2?

That's exactly right.

And then just going back to some of your comments, I just want to make sure I got this correct. You've got -- in addition to the managed properties from SNH, I think you've got one more to go either late Q4 or early Q1, and then you've got nine more that you've agreed to manage. And did you say that eight of those are going to be coming on late in 2011, and then one more in late 2012?

That's exactly right, yes.

Okay. And then one last one here. Did you give a cash flow from ops number for the quarter?

Yes. It was $17.7 million from operations.

$17.7 million. And then your CapEx was $14.9 million, and then what was the number you sold back to SNH?

We sold $10.6 million back to -- in Senior Housing.

Okay. So, about a net $4 million CapEx number?

Correct.

Okay. I believe that's all I have. Thank you very much.

All right. Thank you, Paxton. Appreciate it.

(Operator Instructions). Jerry Doctrow, Stifel Nicolaus.

Just a couple of things. I mean, I think you went through all these numbers, Bruce, but there were sort of a lot of different numbers all jumbled in together. So, I wanted to just kind of step back, and if we think of just the private pay Senior Housing on kind of a same-store basis, Q over Q, can you just go back and talk about what happened in terms of rates, occupancy, you know, on those assets?

Sure. I think starting, most importantly, on the occupancy side, we did see some positive occupancy both year over year and quarter over quarter. On the expense side, I think Paul talked a lot of it about that. But, you know, I think the biggest drivers we saw are increase in overall operating expenses, most of [what] was tied to room turnover costs, like getting rooms ready to rent, as we (inaudible) the door. We also saw, you know, seasonality -- a significant bump in utilities quarter over quarter as well.

And just on I'd say quarter over quarter, because I think you gave the year over year -- the numbers are in the press release. But quarter over quarter, you know, occupancy and rates, same-store -- do you have just a sense, where those numbers were?

Well, I mean in this second quarter our comp Senior Living was 85.1%. That increased to 85.6% in Q3. And rate in the second quarter was, I believe, either 2.9% or 3% versus 2.8% in Q3.

And those are year over year, or Q over -- that's Q over Q?

Those were year over year numbers. Q3 to Q3, to Q2 to Q2.

And do you have a feel for how big the movement was quarter over quarter, or not something you've got?

We saw our occupancy -- I mean, it's going to be in the similar -- I think we're up about 50 basis points. Rates, quarter over quarter, on the Senior Living side were flat; maybe a little bit -- you know, I'd still say - yes, roughly flat; even perhaps a little bit down. We did see, and we continue to see, positive rate growth in our pure private IL/ALs. But on the skilled side, as you know, about 2500 roughly of our Skilled Nursing units are in CCRCs. We did see a little shift in mix and we saw a decrease in that, and that impacted our rates. We haven't yet had our [systems] break that out, but we hope to start breaking that out in the fourth quarter or perhaps the first quarter of 2012.

Right. Because I'm really only interested in the pure private pay side, so -- let me shift gears. So, just -- my sense of the portfolio now, Bruce, is there's -- you know, you're in a number of kind of concentrated markets. You've got a big chunk here in the Mid-Atlantic. You know, the Carolinas stuff, now that the Bell stuff is done. You know, Florida particularly, if we started thinking post-Vi. So, just give me a little more color on sort of where the big markets are, again, just for the pure private pay, and maybe what some of the underlying dynamics are on some of your major ones.

I think you've hit it. You know, we're very large in the Mid-Atlantic. The Carolinas. Florida is a major market force now. Texas continues to be. We haven't added anything significantly there recently, but we'll be adding -- one of the Vi properties is in Texas. California is a major market for us. So -- and I think those are the major markets for us right now.

And any -- you know, I guess everybody's asked about Florida and California maybe most of all. You know, just in terms of dynamics within those markets, any more challenging or more upside than some of the others?

They both have upside, perhaps California right now a little bit more than Florida. We've actually had a pretty good year over year in Florida. Our Florida assets have performed well. Our occupancy in Florida is above our Company average. We're probably, like, 89% to 90% occupied in Florida, and that's up probably about 100 basis points in Florida alone. So, our Florida assets are doing fairly well. California -- we have struggled a little bit in Southern California on the independent living side, and even in Northern California a little bit as well.

Let's see. Just one or two more for me, if I could. Home health hospice, you've -- you added, I think, a home health or are adding a home health in Indiana, I think you said, along with those other properties. How big are those businesses for you, and any issues there on the reimbursement side we should be thinking about?

You know, right now that business is pretty small. And in fact we're really still in the stages of licensing it. Our strategy there is to expand that to our Indiana portfolio and then expand it Company-wide. And what we're trying to really do is capture our independent living residents that right now use third party private duty home health (inaudible). There really isn't any government-related reimbursement risk associated with that, to bring those into the Five Star fold. But we've got more control over who's providing those levels of services, and also capture some of the revenue. And as our occupancy continues to increase, again, I think there'll more of a market for that overall.

But right now it's not -- neither home health hospice, rehab therapy -- none of those are particularly material and we should be worried about reimbursement issues there?

No. The biggest business of those three lines is rehab. You know, we do have -- where we (inaudible) -- I think we're about -- in about 40 or so independent assisted living facilities right now on the Five Star side. We don't do any direct hospice or home health -- for government-related home health.

Thanks. And I guess, just, last thing for me, I'm trying to think through and model kind of fourth quarter, maybe even to first quarter -- obviously, there's just a lot of moving parts because of the -- you know, the acquisitions and new types of acquisitions, and that sort of stuff. So, if we're -- and I think Paul or maybe you mentioned that some of the stuff would start kicking in maybe more in sort of first quarter. So, even ignoring transaction costs, should -- are there other things that I should be thinking about as I model, sort of, fourth quarter, first quarter, in terms of how some of this -- these moving pieces sort of affect you?

Let me start, and then I'll pass it off to Paul. You know, just looking at same-store and again, taking the acquisition noise out of it for a second, I think the biggest drivers between Q3 and Q4, you've got utilities will moderate into Q4. That will be somewhat offset but nowhere near fully offset from holiday costs that we usually -- we see a slight spike in food costs, et cetera, related with the Christmas and Thanksgiving holidays. I'd say those are probably the two biggest. As I've mentioned, our occupancy's going up a little bit, so we're at 86.4%. And, like I say, as of right now it's still trending in the direction, so that's something to take into consideration as well. Anything else, Paul, that you can think of would be a big driver, that you want to point out?

Well, not a big driver, but I tend to think that when you look at what's happened in third quarter and how the quarter's ending, I think there is more potential to pick up a tenth here and a tenth here going into Q4. I mean, again, we saw moderation in health benefit as we ended third quarter. Some of the expenses in the third quarter where room turnover could continue, but perhaps not at the same rate.

And that's only going to be a positive, because that means our occupancy's growing.

And, you know, another line which we didn't see true impact, or big impact in Q3, was our workers' compensation risk is moderating. We could see, again, a little bit of pickup. So, I think as we enter the fourth quarter, also keeping in mind that from the standpoint of the full impact of acquisition of Granite Gate and Basic American was, you know, at best, 50% in Q3 because of the timing of closing of Basic. So, again, I think we've got some -- you know, some nice tailwinds bringing us into the quarter to help ameliorate the rate cuts.

I think the other thing I want to point out, too -- and Jerry, I know you've followed us for a long time and we've said this analogy before. But transitionally, these acquisitions can be a little bit like a relay race, when two runners are running around the track and they've got to pass that baton. There's a lot of training that goes along. It's the buildings learning our Five Star systems. So, you can see a dropoff between handoff at times. I think we've done a pretty good job reducing that hit, if you will. But it -- to some extent it does still impact us a little bit. But, you know, right now we're inputting all the Five Star systems into those buildings, and that will have a positive impact as well.

And again, in terms of the acquisitions, from here the next big chunk is the rest of the Vi stuff, which is late fourth quarter, right?

That's correct, yes. And I do want to point out one other thing, too, just with the acquisitions. We're slowly ramping up our rehab and pharmacy -- remember, I did mention in the prepared remarks that we'd get about 1000 additional customers that we'll be adding over the next several quarters. Most of those are related to the Bell acquisition that we just did. We'll also be increasing our outpatient rehab clinics and our IL/AL space, again mostly in connection with the Bell portfolio, and then as we bring these Vi properties on as well. Not -- I don't think there's a huge play for our pharmacy business, but there will be for our rehab business. Most of those fall within our rehab footprint.

That's helpful. Thanks.

Great. Thank you.

(Operator Instructions). There are no further questions at this time. I'd like to turn the call back over to Mr. Bruce Mackey.

Great. Well, thank you, and thank you all for joining us on today's call. We look forward to updating you on our fourth quarter results early next year.

Ladies and gentlemen, that does conclude our conference for today. Thank you for using the AT&T Executive TeleConference Service. You may now disconnect.