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IPC The Hospitalist Company (NASDAQ:IPCM)

Q2 2008 Earnings Call

August 12, 2008 5:00 pm ET

Executives

Stephanie Carrington - Investor Relation

Adam Singer - Chairman and Chief Executive Officer

Devra Shapiro - Chief Financial Officer

Jeff Taylor - President and Chief Operating Officer

Analysts

Bill Bonello - Wachovia

Ryan Daniels - William Blair

Sudeep Singh - Deutsche Bank

Patrick Schaefer - Chartwell

Art Henderson - Jefferies & Company

Mart Yokosawa - Oberweis Asset Management

Bryan - Jefferies & Company

Operator

Please standby we are about to begin, Good day ladies and gentlemen welcome to the IPC The Hospitalist Company’s Second Quarter 2008 Earnings Conference Call. At this time all participant lines are in a listen-only mode. Later, there will be an opportunity for questions with instructions given at that time. And now at this time I would like to turn the call over to your host Ms. Stephanie Carrington, please go ahead.

Stephanie Carrington – Investor Relations

Thank you operator. With us today from management are Adam Singer M.D., Chairman and Chief Executive Officer; Jeff Taylor, President and Chief Operating Officer; and Devra Shapiro, Chief Financial Officer. I hope you have seen the press release announcing the earnings of IPC The Hospitalist Company for the second quarter. If you have not yet received a copy, please call Robert Matthew at 646-536-7023 and he will fax or e-mail you a copy or otherwise a copy may be obtained from IPC’s website at www.hospitalists.com.

Certain statements and information in this conference call may be deemed to be forward-looking statements within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Forward-looking statements in this press release may include but are not limited to those statements regarding projected operating results, revenues, earnings, and IPC’s growth opportunities and strategy. Forward-looking statements are often characterized by terminologies such as may, anticipate, will, expect, estimate, project, positioned, strategy, and other similar expressions.

Although IPC believes that the expectations being reflected in any of its forward-looking statements are reasonable based upon existing trends and information and IPC’s judgments as of today, actual results could differ materially from those projected or assumed based upon a number of factors including those factors set forth in its annual report on Form 10-K under the headings “Risk Factors,” and in IPC’s other filings with the SEC. IPC’s future financial condition and results of operations as well as any forward-looking statements are subjected to inherent known and unknown risks and uncertainties. IPC does not intend and undertakes no obligation to update any of its forward-looking statements to reflect future events or circumstances. With that, I will now turn the call over to Adam Singer, M.D., Chairman and Chief Executive Officer.

Adam Singer – Chairman and Chief Executive Officer

Thank you Stephanie and thank you everyone for joining us today. We reported our second quarter 2008 results today after the close of market. I will start by reviewing our recent highlights and then Devra will review the financials and we can then open the call up to questions.

We are very pleased to again report top line results for the quarter, a very strong top line results. For the second quarter 2008 our hospitals reported over 660,000 patient encounters generating net revenue of approximately 59.2 million, this is up 32% from the same period in the prior year. This was driven largely by 21% same market revenue growth. We are pleased with our ability to continue to grow the top line revenue through both the same market revenue growth and through acquisitions, while at the same time demonstrating significant operating leverage.

Our recent completed follow on public offering was well received which is currently a very challenging equity market. We believe this underscores the attractiveness of our business model and of our growth opportunities. Indeed, we closed two acquisitions during the quarter and a third hospitals in America on August 1st 2008. (Inaudible) give us into the Southeast Florida market for a prudent hospitalist operation which we plan the leveraging use as we build practices in this highly fragmented market area.

In addition we also recently founded our national footprint by entering our 17 and 18 states with hospital contracts in Lebanon Pennsylvania and Toledo Ohio. With that I would like to turn over the call to Devra Shapiro who will review our financial results.

Devra Shapiro – Chief Financial Officer

Thank you Adam and good afternoon everyone. Total patient encounters increased 29% to 650,000 compared to 511,000 in the same period last year. We recorded second quarter 2008 net revenue of $59.2 million, an increase of 32% from the same period last year. Of the $14.3 million revenue increase, $9.3 million or 64% was attributable to same market area growth giving us a 21% revenue increase over the same quarter of the prior year. The increase in the same market revenue is primarily the result of the addition of new hospitalist, either hired or added through market acquisitions and higher physician productivity for existing hospitalists.

Overall revenue per encounter increased 2.2% largely as a result of improvement in our billing and collection. Physician practice salaries, benefits, and other expenses for the second quarter 2008 were $43.2 million or 73.1. % of net revenue compared to $32.3 million or 71.8% of net revenue for the same period last year. The increase in physician cost as a percentage of revenue is primarily attributable to practices underdevelopment.

General and administrative expenses increased $1.5 million or 17% to $10.6 million for the second quarter of 2008 compared to $9.1 million for the same period of last year. However, as a percentage of revenue general and administrative expenses decreased by 18% of revenue in the second quarter of 2008 compared to 20% for the same period last year. This demonstrates a continuing leverage of our cost structure on a larger revenue base even after factoring in the higher costs associated with the publicly traded company.

Second quarter 2008 income from operations increased to $1.6 million or 50% to $4.8 million as compared to $3.2 million for the same period of the prior year. Our operating margin or earnings before interest and taxes as a percentage of revenue increased to 8.1% for the second quarter of 2008 compared to 7.1% for the same period last year. The increase in operating margin was directly attributable to the reduction in general and administrative expenses as a percentage of revenue, again demonstrating the operating leverage we had built in accordance with structure as required of the top-line revenue.

Second quarter 2008 net income was $2.8 million or $0.18 per pro forma fully diluted share compared to $1.6 million or $0.14 per pro forma diluted share for the second quarter of 2007.

Turning to our balance sheet, we ended the second quarter of 2008 with $46 million in cash and cash equivalents. In connection with our recent file on public offering in July the company sold 1.1 million shares and received net proceeds of approximately $19 million. Combined with our variable borrowings under the credit facility of $30 million and positive cash flow from operations we have sufficient capital to fund our growth on acquisition strategy within the highly fragmented hospitalist industry.

Our day sales outstanding had decreased to 62 as of June 30, 2008 compared to 69 as of December 31, 2007. This decrease reflected (Inaudible) for the current processes and continued improvements in our growing processes and collection results.

Cash flow from operations was a positive $16.8 million which was higher than net income net income post depreciation and stock based compensation expense by approximately 9.8 million primarily reflecting decreases in prepaid expenses and increases in accrued compensation. Prepaid expenses decreased due to amortization of prepaid non practice premium, funding prepaid RDO cost from the process of our public offering and application of $2 million of taxes overpaid in 2007 against our 4.2 million current paid tax provision.

Now first time the inflation increased primarily due to timing differences in the payment of physician practice premises. Physician practices has paid one month in a year, but usually we have one accrual, because we would handle the last payment in June, but late payment was not paid until early July resulting in balance accrual.

In our earnings press release this afternoon, we updated our 2008 guidance given the fact that the additional 1.1 million shares of common stock we issued on July 21, 2008 that we can close the acquisitions and increase G&A expenses in each of the third and fourth quarters to support new agents in company.

Our guidance for full year 2008 revenues is in the range of 254 million to 257 million and the full year 2008 earnings projected pro forma diluted share to be in the range of $0.85 to $0.88. The weighted average on our diluted share outstanding for the third and fourth quarters of 2008 will be 16 million and 16.2 million respectively and for the full year will be 15.4 million.

With that, I will now turn the call back over to Adam.

Adam Singer - Chairman and Chief Executive Officer

Thank you, Devra. We'd now like to open the call up for questions, operator.

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions). We will go first go to Art Henderson with Jefferies & Company.

Bryan

Hi Devra. This is actually Bryan for Art. Just a quick question on the encounters. And the first question on a sequential basis, in the past you guys have mentioned that there is a lot of demand for hospital services, much more than the supply that’s out there. If that is the case, why weren't the number of encounters declined sequentially?

Devra Shapiro

On a quarter-over-quarter basis?

Bryan

Yes.

Devra Shapiro

I think as we have talked about before in our press releases and in our SEC filings, we do have a better seasonality in the business, and with our second quarter declining over the first quarter historically, ex an acquisition, the reason for that is the low seasonality in the hospital admissions and centers in the hospital in the second quarter of the year. It also relates to the number of hospitals that we have. Our hospitalists generally start, will also start in the third and fourth quarters of the year and we have our attrition level pretty much even across the year. So we may end up in the second, third quarters at least the second quarter with a lower number of hospitals or the set number that we started the year with and then that number goes back up in the third quarter and the fourth quarter as the hospitals come on to us.

Bryan

Okay. And then Adam, just more I guess question on acquisitions, you guys have -- you went to market and raised $90 million, you had $46 million on the balance sheet, 30 million of debt availability. Can you just describe to us what your pipeline looks like or how should we be thinking about capital deployment given how much cash you guys have right now?

Adam Singer

I am going to defer to Jeff to go ahead and answer that.

Bryan

Okay.

Jeffrey Taylor

Hey Bryan, this is Jeff Taylor. Our acquisition pipeline at the time we were looking at our capital needs, we realized it's as robust -- more robust than it has ever been. Not only do we have more opportunities in the queue, we have a broad range of opportunities from the small groups, we have historically been buying all the way up to some significantly larger groups. When we took this extra capital, we did that in the confident hope that we would be able to deploy that money efficiently as we build out our platform.

Bryan

Jeff, you said something as larger, I mean are you seeing any -- there is about what

10 relatively large providers in your space. Are you seeing any of those come out for sale?

Jeff Taylor

Yeah.

Adam Singer

This is Adam, Brian. One of this there has been no process or option if you will for sales process really as a larger competitors that are out there, but I think that they are really for the entire existence of space there have been ongoing conversation amongst all the larger groups.

Bryan

Got you. And then Adam just from the hiring perspective any shift in hiring that we’re seeing, are we seeing more doctors decide to become hospitalist, we came across an article today saying that there is a shortage of BCPs, are we seeing just more GPs building to the hospitals practice or you’re seeing out there and that also raise to the hiring processes?

Adam Singer

There continues to be a shortage in the supply of hospital I felt there, that’s one side of the equation. The second side is, there is an increasing attractiveness towards hospital, medicine as a clear, and you are seeing increasing numbers or percentage graduating residence this morning as well as additional primary care physicians I am deciding to close their operation practices and my guess is we already read the article or at least have known the article you read. Probably part of the problem with PCP shortages. We continue to compete very well for the available pool and that available pool is not enough to really supply it with enough doctors.

Bryan

So, how would you characterize this years, this is – you know, the back half of the year, near the peak hours. How do you characterize this versus previous years for example?

Jeff Taylor

Brian, this is Jeff again. In tracking our hiring metrics we are looking at every stage of the process. We are comparing how many contacts we have had, how many people we have interviewed, how many we have extended contracts to, how many have signed them and how many have started working year-to-date and on every one of those metrics we are ahead of where we were at this time in 2007. It is indeed a competitive market but we are executing through that market and are ahead on all of our metrics.

Bryan

Okay, last question. There were anything in between now as you factored that we should think of as we model for the back half of the year quarter-over-quarter?

Devra Shapiro

Well as Jeff mentioned we have hospital to cure land up and start working. Over the next few months we expect that will come in and we immediately start getting busy after that characterize some part of an orientation process. So quarter those, the fourth quarter on an internal line starts to form out and we expected to be higher than the second quarter, and historically, truly the fourth quarter is all like very strong quarter for us and we expect this year to be same.

Bryan

What about the cost side?

Devra Shapiro

Well on the cost side what – specifically under our physician practice expenses, the percentage of revenue is correlated with our compensation plan. To the extent that the physician get busy and are covering our cost and making it better we have those numbers in July 27 to 28. Neurotization are coming on board after bringing new acquisition some time those practices physicians are starting development, so both margins can flip a little on until they get fully enough in running.

Bryan

All right thank you guys.

Operator

We will go next to Bill Bonello with Wachovia.

Bill Bonello

Great. Can you guys hear me?

Jeff Taylor

Yes that’s enough.

Bonello William

Thank you. Just couple of question, I guess the first one is on with EPS guidance, you obviously gave a pretty significant news to the revenue guidance from where you have been, but our estimates, the added share from the (Inaudible) a couple of points they are leading to 2008 and the EPS guidance went from a range of 87 and 94 to a range of 85 to 88. So I guess sort of the 87 to 85, I am not quite sure where the high end of guidance would comedown to significantly a especially given the strong revenue that you’re forecasting. So I am wondering if you can give us a little more color about what’s going on that cost side it might be differ then what you had expected when you first gave guidance?

Jeff Taylor

Okay, and Bill this is Jeff. One of the main factors flying into this is we have added this new acquisition hospitals of America on August 1st and it is a reasonably significant revenue rank as we’re able to explain previously because of the extra time is going to take to obtain synergies, in that acquisition we’re expecting minimal bottom line contribution in 2008, although we do expect solid contribution in 2009. So the portion of the increase revenues essentially are not altering the bottom line much. In addition, the second and third quarter margins I think are now much more clearly reflected in the latest research and it has been good help by you and your colleagues which sort of leads to an operating income or for net income to drive that EPS number on a slightly higher revenue base, but still delivering the bottom line number.

Bill Bonello

Okay so the HRA is a great reminder, I am going to just set up, but still with the top end of guidance coming on about $0.06 and if you’re not seeing that acquisition in diluting, I guess, I am still natural what’s causing such a significant drop in the top end of guidance, but I hear that we didn’t drop the seasonality rate but the total cost for the year going to end up being greater I guess than what you had initially expected?

Devra Shapiro

I think the number is more I got $0.04 drop on the top end of the range, we are taking them to attract for 1.1 million shares that we issued in July, part of that is for the dilution. But the main reason that belongs, that Jeff talked about is that the margins at the practice level are finding that more into the 27% end of the range of prior 28% that we had experienced in the past. And again, it’s a mix of the acquisition that we brought in this year for example, one that we brought in earlier in the year, we believe the different model its highly accretive, but it has not yet should reached about 27 to 28% range, it exist in our practices. But I will have to do with the practices level ago, we have a nice environment, we are not making environment.

Bill Bonello

Sure okay. And then just to followup on that, that’s very helpful. (Inaudible) practice that more acquiring is there anything happened in at your existing practices, the practices you had on board for years or more that might be causing physician cost to creep up as a percent of revenue. Are you happen to payout more or is it all due to the acquired practices?

Jeff Taylor

No change at all in the core base of our practices. This is attributable to acquisitions and a limited number of practices we didn’t startup in development phase.

Bill Bonello

Okay that's great. Thank you very much.

Jeff Taylor

Thanks Bill.

Operator

Take our next question from Ryan Daniels with William Blair.

Ryan Daniels

Yeah good evening everyone, a quick question on the revenue front line we really saw nice up tick and Devra you mentioned in your prepared comments and feed a better collection, I am curious if you look at that going forward if you softening kind of a year and half level appropriate and if you can sustain this higher level looking out over the next few quarters?

Devra Shapiro

You know, I believe that where are now again it set up a little bit higher now before we are now and when we need it in our forecast going forward. We now have the (Inaudible) from the physician paying fixed, so that wont be a negative impact on us. And I think everything else is relative with guidelines.

Ryan Daniels

Okay. And then if I kind of believed into my second question I guess net, net looking at your updated revenue guidance its still a bit stronger than I would have thought even having on the deal that you’ve done for the remainder just better organic revenue growth in your previously talk is that for comments?

Jeff Taylor

Yeah it’s true.

Ryan Daniels

Okay great. And then I was hoping if you talk a little bit more on the M&A and obviously lot of track in deals out there, and I think if we look at them you’ve recently completed one, I will consider the network model that you have in your existing private practice model and there is a slighting slight model. Are you seeing all retypes of those models out there and are you attracted to hopefully only like way to see one of those over the other in the future?

Adam Singer

Indeed to our three models I have to see practices within or has practices within all three of those models, and I don’t think that we’re going to actively choose one model the other we are pursuing all simultaneously. I think that there are lot of opportunities when you drop down a large from the larger entities out there within the private practice model, but I think those are smaller and you will continue to see those been enquired by us particularly in same markets. So I don’t know because we don’t really forecast these acquisitions and I really can tell you, but if one is going to look more than another in terms of the model that we purchase, but it won’t be as we are selecting that model, its just be because of the opportunity and became available as we call them before another job.

Ryan Daniels

Okay that’s fine. And if you look at kind of the HOA being the network model and your existing model and the stipend, which I know you currently have under business. Are any of those maybe risky or on the integration front or what has happened to be successful on the IPC-Link or is that something you also think that you can integrate effectively and manage right through both of those?

Adam Singer

Well, this is Adam, Ryan. I am not too worried about the integration risk in any of these models. The HLA acquisition we purchased and intact management team that all came with the transaction and their systems to operate it and I really don’t see much risk in terms of that integration that is self contained. We are, as Jeff implied and as in our guidance working over the next few months to do as much of what they are doing in IPC-Link is take some development on and that's part of what to timely in order to realize the synergies. That helps you that really is as a risk as much as an upside and what we are doing. All of the other models in terms of the contract hospital model companies or the private practices we believe we do well here and can easily integrate with -- there is always a simulation risk that is little simulation as we have experienced up to-date, up to this date.

Ryan Daniels

Sure. Okay, that’s helpful color. And a couple more quick ones and I will hop off. On the recent deal in Toledo, Ohio, I know the fact for pediatric hospital and I am curious if you are seeing broader demand in those sub-specialty areas, whether it's a notion home or the pediatric or psychiatric side, any color you can provide there on the closure, offering more growth the way you have anticipated will be helpful.

Jeff Taylor

I don’t think we are really seeing much movement per se, Ryan it just happened that that was an attractive opportunity for us that happened to be pediatric and practice. It also is in a slightly larger city when you look at the two contracts Lebanon and Pennsylvania were essentially in the one hospital and that were going to be in and we can manage that effectively in Delaware. Here in Toledo, although it's a short drive from Detroit, we will be managing it from there are other opportunities we will explore within that market over time.

Ryan Daniels

Okay, great. That's very helpful. And the last question I had, I guess or any of you maybe Devra just on the medicaid front, I know there has been a lot of discussion on the state budgets and holding back payments, is this something we should look and think of maybe DSOs jumping a little bit going forward both given some of the acquisitions and need to get our provider numbers, taking a little bit of IPC side as well as some delayed payments from medicaid or do you think that should be pretty stable for some nice lower level that you achieved this quarter?

Devra Shapiro

Well, on an overall basis, medicaid is a very small percentage of that and encountered vise its only 8% of our encounters and again the output contribute this medicare reimbursement and so on, we think on a longer percentage of that of our revenue. On giving the provider numbers, we aren't really experiencing any problems in that. We have got our process in place and really we think this is one of our core competencies to make sure we are always following up on those and getting those as soon possible. And obviously there is a relative way on the provider side, if it starts to start delaying payment it might have an impact for the -- you know I don’t know whether it could be a day given the relative in materiality of American business.

Ryan Daniels

Sure. Okay, thanks a lot for the color.

Operator

We will go next to Sudeep Singh with Deutsche Bank.

Sudeep Singh

Hi guys. Thanks for taking the call. I guess my first question has to go back to HLA. I understand kind of what you are saying about the integration risk or if that you are not concerned about the integration risk, but it will be helpful to me at least if you can maybe just describe what your game plan is with integration and kind of how you see that playing out over the next couple of quarters and if there is basically some sort of project plan in place where you are trying to meet certain milestones as to integrate the practice?

Jeffrey Taylor

Sudeep, this is Jeff. On the cost side, Adam already indicated that over the next several months we will transfer as many function from their current systems in the IPC-Link as we can effectively do and how we will achieve some cost synergies on the G&A front. In terms of operationally similarly and it's already a nicely functioning business with a sound management team, we will continue to explore new opportunities to build on the network molt, at the same time we are already commencing our hiring activities to start putting in place full traditional IPC practices in the areas that already have patient concentrations and we are beginning to explore other hospital contract relationships that maybe available in the market place. So over the next year I think we will see the existing network model stay in place and hopefully grow a bit, and overtime the size of our traditional fee for service private practice employed hospitals business will grow as a percentage of that overall market.

Sudeep Singh

Okay. And then can you explain -- and maybe it will be helpful, if you could just describe to us some of the other markets that have a similar pair concentration and the other do you have an appetite at this point to consider those or are you going to delay it about a year to see how it actually plays out before you tackle some of those other areas?

Adam Singer

Well, you are right, there are some other areas that have stronger managed care driven patient flow. We are already in some of those markets, they are really aren’t numerous network models that are acquirable, but you may see happen is in some of these markets we can use the expertise for acquiring in this each of the transaction to transplant into markets we are already in or acquire a new network that transfers some of the acknowledge into markets we are in and some conversations in the other Florida markets that we have pre existing practices and have already commenced.

Sudeep Singh

Okay. And then I guess last question for Devra, on going back to the revenue encounter, can you see that high end of your new revenue guidance embed that revenue in per encounter that you posted this quarter or is there some important growth?

Devra G. Shapiro

Yeah, good, that’s what -- how we take our projections going forward.

Sudeep Singh

Okay, great. Thanks very much.

Adam Singer

Thanks Sudeep.

Operator

We will go next to Patrick Schaefer with Chartwell.

Patrick Schaefer

Good afternoon. Devra, I want to make sure I understood the seasonality comments that you alluded to on answering another question related to the sequential decline in encounters. Did you in fact have fewer hospitalists in the second quarter than the first quarter?

Devra G. Shapiro

The number was actually flat which were in the two quarters.

Patrick Schaefer

Okay. And when it is flat like that aren’t you able to make up the number of encounters with the numerating workforce that you employ?

Devra Shapiro

Yes, we are with the variable workforce, however, we have to offer while you are in like over seasonality and hospital expenses at times.

Patrick Schaefer

Yeah, okay. And also you stated that same market growth was driven and apart from increase productivity in addition to additional hospitalists, can you quantify some of that change in physician productivity, besides just revenue per encounter?

Devra Shapiro

Well I mean…

Patrick Schaefer

In other words like encounters per day or other metrics like that?

Devra Shapiro

Right, we do look at encounters per day per FTE and for the existing hospitals and Q2 this year compared to Q2 of last year that number went up slightly.

Patrick Schaefer

Up slightly.

Adam Singer

Less than one full patient per day, but…

Patrick Schaefer

Great. Okay, thank you very much.

Operator

(Operator Instructions). We have a follow up from Bill Bonello with Wachovia.

Bill Bonello

It’s very late. Can you just tell us how much revenue actually this year you are expecting essentially from HRA or how much of the increase in the revenue guidance is related to that versus related to better revenue at existing practices?

Adam Singer

Yeah, it’s roughly $7 million.

Bill Bonello

That’s for 2008 not annually.

Adam Singer

Correct. For the five months of 2008.

Bill Bonello

Okay, that is all. Thank you.

Operator

We will go next Art Henderson, Jefferies & Company.

Art Henderson

Hi Devra, in the next couple of quarters what should we be factoring in to G&A or operating expense for additional leadership conferences?

Devra Shapiro

We generally have a lot of those for quarter, so you know, it was largely like the second quarter when we have one. Jerry and I have asked for that in the absolute numbers, we will take a jump off between next two quarters, because we are layering in the total operation for HI in Florida. So again we work at this as percentage of revenues and I think if you kind of think about it for the remainder of the year, you know, being the 200 basis points, but I have mentioned earlier we have got you from last year the 200 basis points improvement over the second half of the last year. We will get you about to where we are this year, will be this year.

Art Henderson

Okay, that’s helpful. And then just real quick on the leadership conferences, could you sort of explain what goes on there, what your intent of having those conferences thus far?

Adam Singer

Well, this is Adam talking, we found them to be extremely important on the cultural accumulation of the business and bringing on your physicians which are almost all internus when we hire them, they become internus for those offices where we employ them. And now the task is to convert them into professional hospitalist which has other core confidences to meet or other wise trained to have in their residencies. And so we bring these doctors to Los Angeles, they learn about the back office infrastructure that’s supporting them, they learn about the different services that are available in support, they learn about their in the hospital, they learn healthcare economics, they learn about team building, about team leadership, leadership training. It’s a pretty intense three days that they spend out here and that is supplemented with a bunch of other training localities that either go outdoor virtual office through online modules that they are required to take and then ongoing monthly projects that we provide to each of practices in the company. So it’s kind of an angling staff to the entire education program that’s ongoing throughout the IPC.

Art Henderson

Okay, that’s very helpful. And the expenses associated with that is, is that mostly flying people in or what is the bulk of the expense?

Adam Singer

It’s not the night life.

Art Henderson

Yeah, I didn’t say you are -- but I was curious, I mean it’s the hotel or it’s the travel here, I mean guessing better than there maybe some minimal drop in productivity in these office, or practice for three days, but for instance the cost is travel and hotel and food? Okay, all right. That’s helpful. Now beyond that are there any other expenses that we need to think about impacting the next couple of quarters that maybe we haven’t discussed here?

Devra Shapiro

No, none that we haven’t already discussed here that we talked about Dan, previous guidance update.

Art Henderson

Okay, that’s all I had. Thanks very much.

Adam Singer

Thanks.

Operator

We will go next to Mart Yokosawa with Oberweis Asset Management.

Mart Yokosawa

My question is just answered. So thank you.

Adam D. Singer

Okay.

Operator

And there appear to be no further questions at this time, I would like to turn the things back over to management for any additional or closing comments.

Adam Singer

We don’t have any closing comments. Thank you all very much for listening to our call. We are done.

Operator

And again that concludes today's conference call. We thank you for your participation and you may disconnect at this time. Thank you.

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