Reports All-Time High Quarterly Patient
Volume
U.S. Physical Therapy, Inc. (“USPH” or the “Company”) (NYSE:
USPH), a national operator of outpatient physical therapy clinics
and provider of industrial injury prevention services, today
reported results for the three and six months ended June 30,
2023.
SECOND QUARTER FINANCIAL
HIGHLIGHTS
- Adjusted EBITDA, a non-Generally Accepted Accounting Principles
(“GAAP”) measure, was $21.7 million for the three months ended June
30, 2023 (“2023 Second Quarter”), an increase of $0.4 million from
$21.3 million for the three months ended June 30, 2022 (“2022
Second Quarter”). See pages 14 and 15 of this release for the
definition and reconciliation of Adjusted EBITDA to the most
directly comparable GAAP measure.
- Net income attributable to USPH’s shareholders, a GAAP measure,
was $10.9 million for the 2023 Second Quarter compared to $11.2
million for the 2022 Second Quarter. The decrease in net income was
primarily driven by the $1.6 million increase in interest expense
as a result of higher effective interest rates and increased
borrowings to fund acquisitions. In accordance with GAAP, the
revaluation of non-controlling interest, net of taxes, is not
included in net income but is charged directly to retained
earnings; however, this change is included in the computation of
earnings per share. Earnings per share, in accordance with GAAP,
was $0.64 for the 2023 Second Quarter as compared to $0.87 for the
2022 Second Quarter.
- Operating Results per share, a non-GAAP measure, was $0.76 per
share for the 2023 Second Quarter as compared to $0.90 for the 2022
Second Quarter. The decrease in our Operating Results was primarily
driven by the increase in interest expense previously described.
See pages 14 and 15 of this release for the definition and
reconciliation of Operating Results per share to the most directly
comparable GAAP measure.
- Net patient revenue from physical therapy operations increased
9.4% to $129.3 million for the 2023 Second Quarter from $118.2
million for the 2022 Second Quarter due to record-high average
visits per clinic per day and increased volume from the 48 net new
clinics added since the comparable prior year period, partially
offset by lower net rate per patient visit.
- Average visits per clinic per day was an all-time high of 30.4
in the 2023 Second Quarter compared to 29.5 in the 2022 Second
Quarter. Total patient visits increased 10.6% in the 2023 Second
Quarter as compared to the 2022 Second Quarter, with patient visits
at mature clinics up 2.6%.
- Net rate per patient visit was $102.03 in the 2023 Second
Quarter compared to $103.18 in the 2022 Second Quarter due to a
decrease in the net rate for Medicare visits, partially offset by
rate increases for commercial and workers compensation visits. The
decrease in the Medicare net rate is primarily due to the 2%
Medicare rate reduction beginning in January 2023 and
discontinuation of the sequestration relief on Medicare visits
effective in July 2022.
- Physical therapy total operating costs per patient visit were
$80.61 in the 2023 Second Quarter, a decrease of 0.6% from $81.09
in the 2022 Second Quarter. Physical therapy salaries and related
costs decreased 1.2% to $57.59 per visit in the 2023 Second Quarter
from $58.29 in the 2022 Second Quarter. On a sequential basis, both
salaries and related costs and total operating costs decreased for
the third consecutive quarter after peaking in the third quarter of
2022. Salaries and related costs per visit have decreased from
$60.99 in the third quarter of 2022 to $57.59 in the 2023 Second
Quarter, while total operating costs per visit have decreased from
$85.14 in the third quarter of 2022 to $80.61 in the 2023 Second
Quarter.
- The Company’s physical therapy operating margin was 21.5% in
the 2023 Second Quarter, increasing for the third consecutive
quarter -- up from 18.7% in the third quarter of 2022 to 20.0% in
the fourth quarter of 2022, to 21.0% in the first quarter of 2023
and to 21.5% in the 2023 Second Quarter.
- Industrial injury prevention (“IIP”) services revenue was $19.2
million for the 2023 Second Quarter compared to $19.4 million in
the 2022 Second Quarter. IIP services operating margin was 20.7% in
the 2023 Second Quarter as compared to 21.2% in the 2022 Second
Quarter.
- During the 2023 Second Quarter, the Company added 13 clinics
and closed four clinics, bringing its total clinic count to 656 as
of June 30, 2023 as compared to 608 clinics as of June 30, 2022.
The clinic additions included an acquisition by the Company and one
of its local partners of a 75% equity interest in a four-clinic
practice that generates approximately $2.6 million in annual
revenues and 27,000 annual visits at a purchase price of $3.1
million.
- On May 30, 2023, the Company completed a secondary offering of
1,916,667 shares of its common stock. Upon completion of the
offering, the Company received net proceeds of approximately $163.7
million, after deducting fees associated with the transaction. A
portion of the net proceeds was used to repay the $35.0 million
then outstanding under the Company’s revolving credit facility
while the remainder is expected to be used primarily for
acquisitions. While such cash is awaiting deployment, it is
currently invested in a high-yield savings account which generated
interest income of approximately $0.5 million in June 2023.
- On July 31, 2023, the Company acquired a 70% equity interest in
a five-clinic practice for a purchase price of $2.1 million, with
the current practice owners retaining a 30% equity interest. The
business currently generates approximately $2.4 million in annual
revenues.
- On August 7, 2023, the Company’s Board of Directors declared a
quarterly dividend of $0.43 per share payable on September 8, 2023,
to shareholders of record on August 18, 2023.
- Management reaffirms that it currently expects the Company’s
Adjusted EBITDA for 2023 to be in the range of $75.0 million to
$80.0 million. The earnings guidance represents projected Adjusted
EBITDA from existing operations and excludes future acquisitions.
See “Management Reaffirms 2023 Earnings Guidance” below for more
information.
MANAGEMENT’S COMMENTS
Chris Reading, Chief Executive Officer, said, “Considering the
challenges we have had to overcome since the middle of 2022 with
significant inflation and interest rate escalation, our team has
done an exceptional job. We completed a very successful secondary
offering, the first in our Company’s history, positioning us for
future growth; we decreased our cost per visit each quarter since
the third quarter of last year; we are running at record clinic
volumes, well ahead of anything we have ever done before; and we
are making progress with respect to contract renegotiations which
is helping to offset some of the misplaced Medicare cuts that have
been handed down from CMS. The combination of record volumes this
quarter, and an improving but still challenging hiring environment,
has created a slightly negative impact on our net rate compared to
where we expected to be at this point. As we have many times in the
past, our team is making the necessary adjustments to address this
opportunity as we work for a strong finish to this year.”
2023 SECOND QUARTER VERSUS 2022 SECOND
QUARTER
Total net revenue for 2023 Second Quarter was $151.5 million, an
increase of 7.7%, compared to $140.7 million for the 2022 Second
Quarter. The following table provides a breakdown of total net
revenue.
For the Three Months Ended
June 30,
Variance
2023
2022
$
%
(In thousands, except
percentages)
Revenue related to:
Mature Clinics (1)
$
115,053
$
113,538
$
1,515
1.3
%
2023 clinic additions
1,910
-
1,910
*
(2)
2022 clinic additions
12,271
3,201
9,070
*
(2)
Clinics sold or closed (3)
46
1,457
(1,411
)
*
(2)
Net patient revenue from physical therapy
operations
129,280
118,196
11,084
9.4
%
Other revenue
792
898
(106
)
(11.8
)%
Physical therapy operations
130,072
119,094
10,978
9.2
%
Industrial injury prevention services
19,246
19,437
(191
)
(1.0
)%
Management contracts
2,167
2,125
42
2.0
%
$
151,485
$
140,656
$
10,829
7.7
%
____________________
(1)
See Glossary of Terms – Revenue Metrics
for the definition.
(2)
Not meaningful.
(3)
Revenue from closed clinics includes
revenue from the five and 16 clinics closed during the six months
ended June 30, 2023 and the year ended December 31, 2022,
respectively.
- Revenue from physical therapy operations increased $11.0
million, or 9.2%, to $130.1 million for the 2023 Second Quarter
from $119.1 million for the 2022 Second Quarter primarily due to
record-high average visits per clinic per day (30.4 for the 2023
Second Quarter versus 29.5 for the 2022 Second Quarter) and an
increase in volume from the 48 net new clinics added since the
comparable prior year period, partially offset by a decrease in net
rate per patient visit. The number of patient visits increased
10.6% to 1,267,140 for the 2023 Second Quarter from 1,145,554 in
the 2022 Second Quarter. Patient visits at our mature clinics
increased 2.6% in the 2023 Second Quarter as compared to the 2022
Second Quarter. Net rate per patient visit was $102.03 in the 2023
Second Quarter as compared to $103.18 in the 2022 Second Quarter
due to a decrease in the net rate for Medicare visits, partially
offset by rate increases for commercial and workers compensation
visits. The decrease in the Medicare net rate is primarily due to
the 2% Medicare rate reduction beginning in January 2023 and
discontinuation of the sequestration relief on Medicare visits
effective in July 2022.
- IIP services revenue decreased slightly to $19.2 million for
the 2023 Second Quarter as compared to $19.4 million for the 2022
Second Quarter.
Operating costs were $119.3 million for the 2023 Second Quarter,
or 78.7% of net revenue, compared to $109.8 million, or 78.1% of
net revenue, for the 2022 Second Quarter. Salaries and related
costs were 57.3% of net revenue for the 2023 Second Quarter versus
56.8% for the 2022 Second Quarter. Rent, supplies, contract labor
and other costs as a percentage of total revenue were 20.4% for the
2023 Second Quarter versus 20.2% for the 2022 Second Quarter. The
provision for credit losses as a percentage of total revenue was
1.0% for 2023 Second Quarter and 1.1% for 2022 Second Quarter. The
following table provides a breakdown of operating costs.
For the Three Months Ended
June 30,
Variance
2023
2022
$
%
Operating costs related to:
(In thousands, except
percentages)
Mature Clinics (1)
$
90,965
$
89,364
$
1,601
1.8
%
2023 clinic additions
1,832
-
1,832
*
(2)
2022 clinic additions
9,192
2,713
6,479
*
(2)
Clinics sold or closed (3)
157
821
(664
)
*
(2)
Physical therapy operations
102,146
92,898
9,248
10.0
%
Industrial injury prevention services
15,261
15,315
(54
)
(0.4
)%
Management contracts
1,871
1,622
249
15.4
%
$
119,278
$
109,835
$
9,443
8.6
%
___________________
(1)
See Glossary of Terms – Revenue Metrics
for the definition.
(2)
Not meaningful.
(3)
Operating costs from closed clinics
include costs from the five and 16 clinics closed or sold during
the six months ended June 30, 2023 and the year ended December 31,
2022, respectively.
- Operating costs from physical therapy operations increased $9.2
million, or 10.0%, to $102.1 million in the 2023 Second Quarter
from $92.9 million in the 2022 Second Quarter primarily driven by
costs associated with the 48 net new clinics since the comparable
prior year period as well as increased patient visits at mature
clinics.
- Operating costs from IIP services were down slightly versus the
comparable prior year period.
Gross profit for the 2023 Second Quarter increased $1.4 million,
or 4.5%, to $32.2 million from $30.8 million for the 2022 Second
Quarter. Gross profit margin slightly decreased to 21.3% in the
2023 Second Quarter from 21.9% in the 2022 Second Quarter. The
following table provides a detailed breakdown of gross profit and
related gross profit margins.
For the Three Months Ended
June 30,
2023
2022
Variance
$
Margin %
$
Margin %
$
%
(In thousands, except
percentages)
Physical therapy operations
$
27,926
21.5
%
$
26,196
22.0
%
$
1,730
6.6
%
Industrial injury prevention services
3,985
20.7
%
4,122
21.2
%
(137
)
(3.3
)%
Management contracts
296
13.7
%
503
23.7
%
(207
)
(41.2
)%
Gross profit
$
32,207
21.3
%
$
30,821
21.9
%
$
1,386
4.5
%
Corporate office costs were $12.1 million, or 8.0% of net
revenue, for the 2023 Second Quarter compared to $10.7 million, or
7.6% of net revenue, for the 2022 Second Quarter. The increase was
primarily due to higher salaries related to merit increases and
inflationary impacts, staff additions to support a larger number of
clinics and a higher accrual for bonus expense.
Operating income was flat at $20.1 million for both the 2023
Second Quarter and 2022 Second Quarter.
Total other (expense) income was ($1.0) million in the 2023
Second Quarter compared to ($0.6) million in the 2022 Second
Quarter.
- Interest expense, net of $0.8 million savings from the interest
rate swap arrangement discussed below, was $2.6 million for the
2023 Second Quarter compared to $1.0 million in the 2022 Second
Quarter. The increase in interest expense was primarily due to a
higher effective interest rate and increased borrowings to fund
acquisitions. The effective net interest rate on the Company’s
credit facilities was 6.0% for the 2023 Second Quarter.
- The Company revalued the contingent earn-out consideration
related to an acquisition and recognized $0.7 million as income (a
reduction in the related liability).
- The revaluation of a put-right liability resulted in $0.1
million of expense (an increase in the related liability) for the
2023 Second Quarter. The put-right relates to the potential future
purchase of a company that provides physical therapy and
rehabilitation services to hospitals and other ancillary providers
in a distinct market area. The owners have the right to put this
transaction to the Company in approximately five years from
November 2021.
- Equity in earnings of the unconsolidated affiliate was $0.3
million in both the 2023 Second Quarter and 2022 Second
Quarter.
- Other and interest income for the 2023 Second Quarter included
$0.5 million of interest income earned in June 2023 from investing
the net proceeds from the secondary offering of the Company’s
common stock in a high-yield savings account while the prior year
comparable period mostly consisted of $0.6 million of gain from the
sale of certain clinics.
The provision for income tax was $4.2 million for both the 2023
Second Quarter and 2022 Second Quarter. The provision for income
tax as a percentage of income before taxes less net income
attributable to non-controlling interest (effective tax rate) was
27.9% for the 2023 Second Quarter and 27.5% for the 2022 Second
Quarter. A reconciliation of our income tax expense and effective
income tax rate is as follows:
Three Months Ended June
30,
2023
2022
(In thousands, except
percentages)
Income before taxes
$
19,095
$
19,495
Less: net loss (income) attributable to
non-controlling interest:
Redeemable non-controlling interest -
temporary equity
(2,920
)
(2,626
)
Non-controlling interest - permanent
equity
(1,025
)
(1,435
)
$
(3,945
)
$
(4,061
)
Income before taxes less net income
attributable to non-controlling interest
$
15,150
$
15,434
Provision for income taxes
$
4,231
$
4,239
Percentage
27.9
%
27.5
%
Net income attributable to non-controlling interest was $3.9
million in the 2023 Second Quarter compared to $4.1 million in the
2022 Second Quarter.
Adjusted EBITDA, a non-GAAP measure, was $21.7 million for the
2023 Second Quarter, an increase of $0.4 million as compared to
$21.3 million in 2022 Second Quarter.
Operating Results, a non-GAAP measure, was $10.4 million, or
$0.76 per share, in 2023 Second Quarter as compared to $11.7
million, or $0.90 per share, in 2022 Second Quarter.
SIX MONTHS ENDED JUNE 30, 2023 VERSUS
SIX MONTHS ENDED JUNE 30, 2022
Total net revenue for six months ended June 30, 2023 (“2023 Six
Months”) was $300.0 million, an increase of 10.1%, compared to
$272.4 million for the six months ended June 30, 2022 (“2022 Six
Months”). The table below provides a breakdown of total net
revenue.
Six Months Ended June
30,
Variance
2023
2022
$
%
Revenue related to:
(In thousands, except
percentages)
Mature Clinics (1)
$
229,072
$
221,187
$
7,885
3.6
%
2023 clinic additions
2,282
-
2,282
*
(2)
2022 clinic additions
24,291
3,395
20,896
*
(2)
Clinics sold or closed (3)
216
3,152
(2,936
)
*
(2)
Net patient revenue from physical therapy
operations
255,861
227,734
28,127
12.4
%
Other revenue
1,591
1,770
(179
)
(10.1
)%
Physical therapy operations
257,452
229,504
27,948
12.2
%
Industrial injury prevention services
38,596
38,505
91
0.2
%
Management contracts
3,946
4,351
(405
)
(9.3
)%
$
299,994
$
272,360
$
27,634
10.1
%
___________________
(1)
See Glossary of Terms - Revenue Metrics
for the definition.
(2)
Not meaningful.
(3)
Revenue from closed clinics includes
revenue from the five and 16 clinics closed or sold during the six
months ended June 30, 2023 and the year ended December 31, 2022,
respectively.
- Revenue from physical therapy operations increased $27.9
million, or 12.2%, to $257.5 million for the 2023 Six Months from
$229.5 million for the 2022 Six Months primarily due to higher
average visits per clinic per day (30.1 for the 2023 Six Months
versus 28.7 for the 2022 Six Months) and an increase in volume from
the 48 net new clinics added since the comparable prior year
period, partially offset by a decrease in net rate per visit. The
number of patient visits increased 12.9% to 2,494,630 for the 2023
Six Months from 2,209,073 for the 2022 Six Months. Patient visits
at our mature clinics increased 4.2% for the 2023 Six Months as
compared to the 2022 Six Months. Net rate per patient visit
decreased to $102.56 in the 2023 Six Months from $103.09 in the
2022 Six Months due to a decrease in the net rate for Medicare
visits, partially offset by rate increases for commercial and
workers compensation visits. The decrease in the Medicare net rate
is primarily due to the 2% Medicare rate reduction beginning in
January 2023 and discontinuation of sequestration relief on
Medicare visits effective in July 2022.
- Revenue from IIP services increased slightly to $38.6 million
for the 2023 Six Months as compared to $38.5 million for the 2022
Six Months.
Operating cost was $236.9 million for the 2023 Six Months, or
79.0% of net revenue, compared to $215.0 million, or 78.9% of net
revenue, for the 2022 Six Months. Salaries and related costs were
57.6% of net revenue for the 2023 Six Months versus 56.9% for the
2022 Six Months. Rent, supplies, contract labor and other costs as
a percentage of total revenue were 20.3% for the 2023 Six Months
versus 20.9% for the 2022 Six Months. The provision for credit
losses as a percentage of total revenue were both 1.0% for 2023 Six
Months and 2022 Six Months. See table below for a more detailed
breakdown of operating costs.
For the Six Months Ended June
30,
Variance
2023
2022
$
%
Operating costs related to:
(In thousands, except
percentages)
Mature Clinics (1)
$
181,469
$
175,717
$
5,752
3.3
%
2023 clinic additions
2,291
-
2,291
*
(2)
2022 clinic additions
18,509
3,114
15,395
*
(2)
Clinics sold or closed (3)
498
2,437
(1,939
)
*
(2)
Physical therapy operations
202,767
181,268
21,499
11.9
%
Industrial injury prevention services
30,842
30,230
612
2.0
%
Management contracts
3,321
3,453
(132
)
(3.8
)%
$
236,930
$
214,951
$
21,979
10.2
%
___________________
(1)
See Glossary of Terms - Revenue Metrics
for the definition.
(2)
Not meaningful.
(3)
Operating costs from closed clinics
include costs from the five and 16 clinics closed or sold during
the six months ended June 30, 2023 and the year ended December 31,
2022, respectively.
- Physical therapy operating costs increased $21.5 million or
11.9% to $202.8 million in the 2023 Six Months from $181.3 million
in the 2022 Six Months primarily driven by costs associated with
the 48 net new clinics added since the comparable prior year period
as well as increased patient visits at mature clinics.
- Operating costs from IIP services increased by $0.6 million, or
2.0%, to $30.8 million as compared to $30.2 million in the 2022 Six
Months.
Gross profit for the 2023 Six Months increased $5.7 million, or
9.9%, to $63.1 million from $57.4 million for the 2022 Six Months.
Gross profit margin decreased slightly to 21.0% in the 2023 Six
Months from 21.1% in the 2022 Six Months. The following table
provides a detailed breakdown of gross profit and related gross
profit margins.
For the Six Months Ended June
30,
2023
2022
Variance
$
Margin %
$
Margin %
$
%
(In thousands, except
percentages)
Physical therapy operations
$
54,685
21.2
%
$
48,236
21.0
%
$
6,449
13.4
%
Industrial injury prevention services
7,754
20.1
%
8,275
21.5
%
(521
)
(6.3
)%
Management contracts
625
15.8
%
898
20.6
%
(273
)
(30.4
)%
Gross profit
$
63,064
21.0
%
$
57,409
21.1
%
$
5,655
9.9
%
Corporate office costs were $26.0 million, or 8.7% of net
revenue, for the 2023 Six Months compared to $22.3 million, or 8.2%
of net revenue, for the 2022 Six Months. The increase was primarily
due to higher salaries related to merit increases and inflationary
impacts, staff additions to support a larger number of clinics and
a higher accrual for bonus expense.
Operating income increased 5.5%, to $37.1 million, or 12.4% of
net revenues, for the 2023 Six Months from $35.1 million, or 12.9%
of net revenues, in the 2022 Six Months.
Total other (expense) income was ($3.6) million during the 2023
Six Months compared to ($0.1) million during the 2022 Six
Months.
- Interest expense, net of $1.4 million savings from the interest
rate swap arrangement discussed below, was $5.2 million for the
2023 Six Months compared to $1.5 million in the 2022 Six Months.
The increase in interest expense was primarily due to a higher
effective interest rate and increased borrowings to fund
acquisitions. The effective interest rate on the Company’s credit
facilities was 5.7% for the 2023 Six Months.
- During the 2023 Six Months, the Company recognized $0.5 million
of income received under the Coronavirus Aid, Relief and Economic
Security Act (“Relief Funds”). The Relief Funds were received in
prior years but were subject to certain compliance requirements
which were met in the first quarter of 2023. The Company does not
expect to receive or recognize any future Relief Funds. No such
income was recognized in the prior year six months period.
- Equity in earnings of the unconsolidated affiliate was $0.6
million and $0.7 million in the 2023 Six Months and the 2022 Six
Months, respectively.
- Other and interest income for the 2023 Six Months included $0.5
million of interest income earned in June 2023 from the investment
of excess cash from the secondary offering of the Company’s common
stock in a high-yield savings account while the prior year
comparable period included $0.6 million of gain from the sale of
certain clinics.
The provision for income tax was $7.2 million for the 2023 Six
Months compared to $7.7 million for the 2022 Six Months. The
provision for income tax as a percentage of income before taxes
less net income attributable to non-controlling interest (effective
tax rate) was 28.2% for the 2023 Six Months and 27.9% for the 2022
Six Months. A reconciliation of our income tax expense and
effective income tax rate is as follows:
Six Months Ended June
30,
2023
2022
(In thousands, except
percentages)
Income before taxes
$
33,491
$
34,975
Less: net income attributable to
non-controlling interest:
Redeemable non-controlling interest -
temporary equity
(5,640
)
(5,183
)
Non-controlling interest - permanent
equity
(2,322
)
(2,061
)
$
(7,962
)
$
(7,244
)
Income before taxes less net income
attributable to non-controlling interest
$
25,529
$
27,731
Provision for income taxes
$
7,200
$
7,737
Percentage
28.2
%
27.9
%
Net income attributable to redeemable non-controlling interest
was $8.0 million for the 2023 Six Months and $7.2 million for the
2022 Six Months.
Adjusted EBITDA, a non-GAAP measure, was $40.1 million for the
2023 Six Months, an increase of $1.3 million from $38.8 million for
the 2022 Six Months.
Operating Results, a non-GAAP measure, was $18.1 million, or
$1.36 per share, in 2023 Six Months as compared to $20.0 million,
or $1.54 per share, in 2022 Six Months.
BALANCE SHEET AND CASH
FLOW
Total cash and cash equivalents were $160.7 million as of June
30, 2023, compared to $31.6 million as of December 31, 2022.
Additionally, the Company had $146.3 million of outstanding
borrowings and $175.0 million in available credit under its
revolving credit facilities as of June 30, 2023 compared to $179.1
million of outstanding borrowings and $144.0 million in available
credit under its revolving credit facilities as of December 31,
2022. As discussed above, on May 30, 2023, the Company completed a
secondary offering of its common stock resulting in net proceeds of
$163.7 million after deducting fees associated with the
transaction. A portion of the net proceeds was used to repay the
$35.0 million then outstanding under the Company’s credit facility
while the remainder is expected to be used primarily for
acquisitions. While such cash is awaiting deployment, it is
currently invested in a high-yield savings account which generated
interest income of approximately $0.5 million in June 2023.
During the 2023 Six Months, $38.8 million of cash was provided
by operations. The major uses of cash for investing and financing
activities included: dividends paid to shareholders ($11.2
million), purchase of majority interest in businesses ($8.0
million), purchase of non-controlling interests from existing
partners ($7.8 million), purchase of fixed assets ($4.5 million),
and distributions to non-controlling interests ($8.4 million).
The Company entered into an interest rate swap effective on June
30, 2022, which will mature on June 30, 2027. It has a $150.0
million notional value adjusted concurrently with scheduled
principal payments made on the Company’s term loan. On June 30,
2023, the fair value of the interest rate swap was $6.4 million, an
increase of $0.8 million, net of tax, as compared to December 31,
2022. The fair value of the interest rate swap is included in other
assets (current and long term) in the accompanying consolidated
balance sheet while the increase in fair value is presented as
unrealized gain in the accompanying consolidated statements of
comprehensive income. The interest rate swap arrangement has
generated $1.5 million in interest savings since its inception. The
average interest rate for the term loan during the 2023 Six Months
was 4.9%.
RECENT ACQUISITIONS
On May 31, 2023, the Company, together with one of its local
partners, acquired a 75% equity interest in a four-clinic practice
for a purchase price of $3.1 million, with the current practice
owners retaining a 25% equity interest. The business currently
generates approximately $2.6 million in annual revenues and
approximately 27,000 annual visits.
On July 31, 2023, the Company acquired a 70% equity interest in
a five-clinic practice for a purchase price of $2.1 million, with
the current practice owners retaining a 30% equity interest. The
business currently generates approximately $2.4 million in annual
revenues.
The Company’s strategy is to continue acquiring multi-clinic
outpatient physical therapy practices, to develop outpatient
physical therapy clinics as satellites in existing partnerships and
to continue acquiring companies that provide industrial injury
prevention services.
QUARTERLY DIVIDEND
The Board of Directors declared a quarterly dividend of $0.43
per share payable on September 8, 2023 to shareholders of record on
August 18, 2023.
MANAGEMENT REAFFIRMS 2023 EARNINGS
GUIDANCE
Management reaffirms that it currently expects the Company’s
Adjusted EBITDA for 2023 to be in the range of $75.0 million to
$80.0 million. Please note that the earnings guidance represents
projected Adjusted EBITDA from existing operations and excludes
future acquisitions. The annual guidance figures will not be
updated unless there is a material development that causes
management to believe that Adjusted EBITDA will be significantly
outside the given range.
CONFERENCE CALL
INFORMATION
U.S. Physical Therapy's management will host a conference call
at 10:30 a.m. ET, 9:30 a.m. CT, on August 9, 2023, to discuss the
Company’s financial results for the three and six months ended June
30, 2023. Interested parties may participate in the call by dialing
(866) 952-8559 (Primary) or (785) 424-1743 (Alternate) and
conference ID of USPHQ223 approximately 10 minutes before the call
is scheduled to begin. To listen to the live call, go to the
Company's website at www.usph.com at least 15 minutes early to
register, download and install any necessary audio software. The
conference call will be archived and can be accessed until November
7, 2023, at U.S. Physical Therapy’s website.
FORWARD LOOKING
STATEMENTS
This press release contains statements that are considered to be
forward-looking within the meaning under Section 21E of the
Securities Exchange Act of 1934, as amended. These statements
contain forward-looking information relating to the financial
condition, results of operations, plans, objectives, future
performance and business of our Company. These statements (often
using words such as “believes”, “expects”, “intends”, “plans”,
“appear”, “should” and similar words) involve risks and
uncertainties that could cause actual results to differ materially
from those we expect. Included among such statements may be those
relating to new clinics, availability of personnel and the
reimbursement environment. The forward-looking statements are based
on our current views and assumptions and actual results could
differ materially from those anticipated in such forward-looking
statements as a result of certain risks, uncertainties, and
factors, which include, but are not limited to:
- the impact of future public health crises and
epidemics/pandemics, such as was the case with the novel strain of
COVID-19 and its variants;
- changes in Medicare rules and guidelines and reimbursement or
failure of our clinics to maintain their Medicare certification
and/or enrollment status;
- revenue we receive from Medicare and Medicaid being subject to
potential retroactive reduction;
- changes in reimbursement rates or payment methods from third
party payors including government agencies, and changes in the
deductibles and co-pays owed by patients;
- compliance with federal and state laws and regulations relating
to the privacy of individually identifiable patient information,
and associated fines and penalties for failure to comply;
- competitive, economic or reimbursement conditions in our
markets which may require us to reorganize or close certain clinics
and thereby incur losses and/or closure costs including the
possible write-down or write-off of goodwill and other intangible
assets;
- one of our acquisition agreements contains a Put Right related
to a future purchase of a majority interest in a separate
company;
- the impact of future vaccinations and/or testing mandates at
the federal, state and/or local level, which could have an adverse
impact on staffing, revenue, costs and the results of
operations;
- our debt and financial obligations could adversely affect our
financial condition, our ability to obtain future financing and our
ability to operate our business;
- changes as the result of government enacted national healthcare
reform;
- business and regulatory conditions including federal and state
regulations;
- governmental and other third party payor inspections, reviews,
investigations and audits, which may result in sanctions or
reputational harm and increased costs;
- revenue and earnings expectations;
- some of our acquisition agreements contain contingent
consideration, the value of which may impact future financial
results;
- legal actions, which could subject us to increased operating
costs and uninsured liabilities;
- general economic conditions, including but not limited to
inflationary and recessionary periods;
- actual or perceived events involving banking volatility or
limited liability, defaults or other adverse developments that
affect the U.S. or international financial systems, may result in
market wide liquidity problems which could have a material and
adverse impact on our available cash and results of
operations;
- our business depends on hiring, training, and retaining
qualified employees
- availability and cost of qualified physical therapists;
- competitive environment in the industrial injury prevention
services business, which could result in the termination or
non-renewal of contractual service arrangements and other adverse
financial consequences for that service line;
- acquisitions, and the successful integration of the operations
of the acquired businesses;
- impact on the business and cash reserves resulting from
retirement or resignation of key partners and resulting purchase of
their non-controlling interest (minority interests);
- maintaining our information technology systems with adequate
safeguards to protect against cyber-attacks;
- a security breach of our or our third party vendors’
information technology systems may subject us to potential legal
action and reputational harm and may result in a violation of the
Health Insurance Portability and Accountability Act of 1996 of the
Health Information Technology for Economic and Clinical Health
Act;
- maintaining clients for which we perform management, industrial
injury prevention related services, and other services, as a breach
or termination of those contractual arrangements by such clients
could cause operating results to be less than expected;
- maintaining adequate internal controls;
- maintaining necessary insurance coverage;
- availability, terms, and use of capital; and
- weather and other seasonal factors.
Many factors are beyond our control. Given these uncertainties,
you should not place undue reliance on our forward-looking
statements. For additional information regarding these and other
risks and uncertainties, that could cause actual results to differ
materially from those contained in our forward-looking statements,
please refer to "Risk Factors" in our Annual Report on Form 10-K
for the year ended December 31, 2022, filed with the Securities and
Exchange Commission (“SEC”) on February 28, 2023 and any risk
factors contained in subsequent quarterly and annual reports we
file with the SEC. Our forward-looking statements represent our
estimates and assumptions only as of the date of this report.
Except as required by law, we are under no obligation to update any
forward-looking statement as a result of new information, future
events, or otherwise, except as required by law.
GLOSSARY OF TERMS - REVENUE
METRICS
Mature clinics are clinics opened
or acquired prior to January 1, 2022, and are still operating as of
the balance sheet date.
Net rate per patient visit is net
patient revenue related to our physical therapy operations divided
by total number of patient visits (defined below) during the
periods presented.
Patient visits is the number of
unique patient visits during the periods presented.
Average visits per day per clinic
is patient visits divided by the number of days in which normal
business operations were conducted during the periods presented and
further divided by the average number of clinics in operation
during the periods presented.
ABOUT U.S. PHYSICAL THERAPY,
INC.
Founded in 1990, U.S. Physical Therapy, Inc. currently operates
662 outpatient physical therapy clinics in 41 states. The Company's
clinics provide preventative and post-operative care for a variety
of orthopedic-related disorders and sports-related injuries,
treatment for neurologically-related injuries and rehabilitation of
injured workers. In addition to owning and operating clinics, the
Company manages 43 physical therapy facilities for unaffiliated
third parties, including hospitals and physician groups. The
Company also has an industrial injury prevention services business
which provides onsite services for clients’ employees including
injury prevention and rehabilitation, performance optimization,
post-offer employment testing, functional capacity evaluations, and
ergonomic assessments.
More information about U.S. Physical Therapy, Inc. is available
at www.usph.com. The information included on that website is not
incorporated into this press release.
U. S. PHYSICAL THERAPY, INC.
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
Three Months Ended
Six Months Ended
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Net patient revenue
$
129,280
$
118,196
$
255,861
$
227,734
Other revenue
22,205
22,460
44,133
44,626
Net revenue
151,485
140,656
299,994
272,360
Operating cost:
Salaries and related costs
86,871
79,939
172,911
155,088
Rent, supplies, contract labor and
other
30,844
28,345
60,944
57,007
Provision for credit losses
1,563
1,551
3,075
2,856
Total operating cost
119,278
109,835
236,930
214,951
Gross profit
32,207
30,821
63,064
57,409
Corporate office costs
12,145
10,741
26,004
22,297
Operating income
20,062
20,080
37,060
35,112
Other (expense) income
Interest expense - debt and other, net
(2,633
)
(987
)
(5,193
)
(1,527
)
Change in fair value of contingent
earn-out consideration
708
-
10
-
Equity in earnings of unconsolidated
affiliate
326
340
600
679
Change in revaluation of put-right
liability
(50
)
(617
)
(199
)
(14
)
Relief Funds
-
-
467
-
Other and interest income
682
679
746
725
Total other (expense) income
(967
)
(585
)
(3,569
)
(137
)
Income before taxes
19,095
19,495
33,491
34,975
Provision for income taxes
4,231
4,239
7,200
7,737
Net income
14,864
15,256
26,291
27,238
Less: Net income attributable to
non-controlling interest:
Redeemable non-controlling interest -
temporary equity
(2,920
)
(2,626
)
(5,640
)
(5,183
)
Non-controlling interest - permanent
equity
(1,025
)
(1,435
)
(2,322
)
(2,061
)
(3,945
)
(4,061
)
(7,962
)
(7,244
)
Net income attributable to USPH
shareholders
$
10,919
$
11,195
$
18,329
$
19,994
Basic and diluted earnings per share
attributable to USPH
shareholders (1)
$
0.64
$
0.87
$
1.22
$
1.55
Shares used in computation - basic and
diluted
13,720
12,998
13,375
12,968
Dividends declared per common share
$
0.43
$
0.41
$
0.86
$
0.82
(1)
See page 16 for the calculation of basic
and diluted earnings per share.
U. S. PHYSICAL THERAPY, INC.
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
Three Months Ended
Six Months Ended
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Net income
$
14,864
$
15,256
$
26,291
$
27,238
Other comprehensive loss
Unrealized gain on cash flow hedge
2,881
(531
)
1,064
(531
)
Tax effect at statutory rate (federal and
state) of 25.55%
(736
)
136
(272
)
136
Comprehensive income
$
17,009
$
14,861
$
27,083
$
26,843
Comprehensive income attributable to
non-controlling interest
(3,945
)
(4,061
)
(7,962
)
(7,244
)
Comprehensive income attributable to USPH
shareholders
$
13,064
$
10,800
$
19,121
$
19,599
U. S. PHYSICAL THERAPY, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEET
(IN THOUSANDS, EXCEPT SHARES
AND PER SHARE AMOUNTS)
June 30, 2023
December 31, 2022
ASSETS
(unaudited)
Current assets:
Cash and cash equivalents
$
160,738
$
31,594
Patient accounts receivable, less
allowance for credit losses of $2,800 and $2,829, respectively
54,285
51,934
Accounts receivable - other
16,852
16,671
Other current assets
9,924
11,067
Total current assets
241,799
111,266
Fixed assets:
Furniture and equipment
63,429
62,074
Leasehold improvements
45,096
42,877
Fixed assets, gross
108,525
104,951
Less accumulated depreciation and
amortization
83,548
80,203
Fixed assets, net
24,977
24,748
Operating lease right-of-use assets
101,582
103,004
Investment in unconsolidated affiliate
12,229
12,131
Goodwill
506,703
494,101
Other identifiable intangible assets,
net
107,592
108,755
Other assets
4,699
4,149
Total assets
$
999,581
$
858,154
LIABILITIES, REDEEMABLE
NON-CONTROLLING INTEREST, USPH SHAREHOLDERS’ EQUITY AND
NON-CONTROLLING INTEREST
Current liabilities:
Accounts payable - trade
$
3,674
$
3,300
Accounts payable - due to seller of
acquired business
-
3,204
Accrued expenses
43,338
37,413
Current portion of operating lease
liabilities
31,274
33,709
Current portion of term loan and notes
payable
7,530
7,863
Total current liabilities
85,816
85,489
Notes payable, net of current portion
2,194
1,913
Revolving line of credit
-
31,000
Term loan, net of current portion and
deferred financing costs
141,266
142,918
Deferred taxes
23,102
21,303
Operating lease liabilities, net of
current portion
78,912
77,934
Other long-term liabilities
12,779
13,029
Total liabilities
344,069
373,586
Redeemable non-controlling interest -
temporary equity
165,514
167,515
Commitments and Contingencies
U.S. Physical Therapy, Inc. ("USPH")
shareholders’ equity:
Preferred stock, $.01 par value, 500,000
shares authorized, no shares issued and outstanding
-
-
Common stock, $.01 par value, 20,000,000
shares authorized,
17,202,053 and 15,216,326 shares issued,
respectively
172
152
Additional paid-in capital
277,493
110,317
Accumulated other comprehensive gain
4,796
4,004
Retained earnings
237,665
232,948
Treasury stock at cost, 2,214,737
shares
(31,628
)
(31,628
)
Total USPH shareholders’ equity
488,498
315,793
Non-controlling interest - permanent
equity
1,500
1,260
Total USPH shareholders' equity and
non-controlling interest - permanent equity
489,998
317,053
Total liabilities, redeemable
non-controlling interest,
USPH shareholders' equity and
non-controlling interest - permanent equity
$
999,581
$
858,154
U. S. PHYSICAL THERAPY, INC.
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
June 30, 2023
June 30, 2022
OPERATING ACTIVITIES
Net income including non-controlling
interest
$
26,291
$
27,238
Adjustments to reconcile net income
including non-controlling interest to net cash provided by
operating activities:
Depreciation and amortization
7,615
7,298
Provision for credit losses
3,075
2,856
Equity-based awards compensation
expense
3,592
3,660
Change in deferred income taxes
1,799
4,307
Change in revaluation of put-right
liability
199
14
Earnings in unconsolidated affiliate
(600
)
(679
)
Loss (gain) on sale of clinics and fixed
assets
63
(614
)
Changes in operating assets and
liabilities:
Increase in patient accounts
receivable
(5,341
)
(7,459
)
Increase in accounts receivable -
other
(85
)
(2,862
)
Decrease in other assets
593
230
Increase (decrease) in accounts payable
and accrued expenses
1,335
(3,891
)
Increase (decrease) in other long-term
liabilities
243
(2,587
)
Net cash provided by operating
activities
38,779
27,511
INVESTING ACTIVITIES
Purchase of fixed assets
(4,523
)
(4,569
)
Purchase of majority interest in
businesses, net of cash acquired
(8,040
)
(11,799
)
Purchase of redeemable non-controlling
interest, temporary equity
(7,804
)
(8,648
)
Purchase of non-controlling
interest-permanent equity
(39
)
(156
)
Proceeds on sale of partnership interest -
redeemable non-controlling interest
237
740
Proceeds on sales of redeemable
non-controlling interest-temporary
-
344
Distributions from unconsolidated
affiliate
502
548
Proceeds on sale of fixed assets
7
-
Net cash used in investing activities
(19,660
)
(23,540
)
FINANCING ACTIVITIES
Distributions to non-controlling interest,
permanent and temporary equity
(8,431
)
(7,202
)
Cash dividends paid to shareholders
(11,238
)
(10,659
)
Proceeds from revolving line of credit
24,000
61,000
Proceeds from term loan
-
150,000
Proceeds from issuance of common stock
pursuant to the secondary public offering,
net of issuance costs
163,655
-
Payments on revolving line of credit
(55,000
)
(175,000
)
Principal payments on notes payable
(1,086
)
(338
)
Payment on term loan
(1,875
)
(1,779
)
Other
-
12
Net cash provided by financing
activities
110,025
16,034
Net increase in cash and cash
equivalents
129,144
20,005
Cash and cash equivalents - beginning of
period
31,594
28,567
Cash and cash equivalents - end of
period
$
160,738
$
48,572
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the period for:
Income taxes
$
1,241
$
4,524
Interest paid
4,011
1,319
Non-cash investing and financing
transactions during the period:
Purchase of businesses - seller financing
portion
360
374
Notes payable related to purchase of
redeemable non-controlling interest, temporary equity
621
948
Notes payable related to purchase of
non-controlling interest, permanent equity
-
296
Notes receivable related to sale of
partnership interest - redeemable non-controlling interest
$
2,687
$
1,476
U. S. PHYSICAL THERAPY, INC. AND
SUBSIDIARIES ADJUSTED EBITDA AND OPERATING RESULTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
The following tables provide details of the diluted earnings per
share computation and reconcile net income attributable to USPH
shareholders calculated in accordance with GAAP to Operating
Results and Adjusted EBITDA. Management believes providing
Operating Results and Adjusted EBITDA to investors is useful
information for comparing the Company's period-to-period
results.
Adjusted EBITDA, a non-GAAP measure, is defined as net income
attributable to USPH shareholders before interest income, interest
expense, taxes, depreciation, amortization, change in fair value of
contingent earn-out consideration, Relief Funds, changes in
revaluation of put-right liability, equity-based awards
compensation expense, and related portions for non-controlling
interests.
Operating Results, a non-GAAP measure, equals net income
attributable to USPH diluted shareholders per the consolidated
statements of income, less changes in revaluation of put-right
liability, Relief Funds, changes in fair value of contingent
earn-out consideration, and any allocations to non-controlling
interests, all net of taxes. Operating Results per diluted share
also exclude the impact of the revaluation of redeemable
non-controlling interest and the associated tax impact.
Management uses Adjusted EBITDA and Operating Results, which
eliminates certain items described above that can be subject to
volatility and unusual costs, as the principal measures to evaluate
and monitor financial performance period over period. Management
believes that presenting Adjusted EBITDA and Operating Results are
useful information for investors to use in comparing the Company's
period-to-period results as well as for comparing with other
similar businesses since most do not have redeemable instruments
and therefore have different equity structures.
Operating Results and Adjusted EBITDA are not measures of
financial performance under GAAP. Adjusted EBITDA and Operating
Results should not be considered in isolation or as an alternative
to, or substitute for, net income attributable to USPH shareholders
presented in the consolidated financial statements.
U. S. PHYSICAL THERAPY, INC.
AND SUBSIDIARIES
ADJUSTED EBITDA, EARNINGS PER
SHARE AND OPERATING RESULTS
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
(UNAUDITED)
Three Months Ended
Six Months Ended
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022 (1)
Adjusted
EBITDA
Net income attributable to USPH
shareholders
$
10,919
$
11,195
$
18,329
$
19,994
Adjustments:
Provision for income taxes
4,231
4,240
7,200
7,737
Depreciation and amortization
3,827
3,474
7,615
7,298
Interest expense - debt and other, net
2,633
987
5,193
1,527
Equity-based awards compensation
expense
1,786
1,814
3,592
3,660
Change in fair value of contingent
earn-out consideration
(708
)
-
(10
)
-
Interest and other income
(682
)
(679
)
(746
)
(725
)
Change in revaluation of put-right
liability
50
617
199
14
Relief Funds
-
-
(467
)
-
Allocation to non-controlling
interests
(389
)
(333
)
(761
)
(697
)
Adjusted EBITDA (a non-GAAP measure)
$
21,667
$
21,315
$
40,144
$
38,808
Earnings per
share
Computation of earnings per share - USPH
shareholders:
Net income attributable to USPH
shareholders
$
10,919
$
11,195
$
18,329
$
19,994
Charges to retained earnings:
Revaluation of redeemable non-controlling
interest
(2,865
)
210
(2,746
)
57
Tax effect at statutory rate (federal and
state)
732
(54
)
700
(15
)
$
8,786
$
11,351
$
16,283
$
20,036
Earnings per share (basic and diluted)
$
0.64
$
0.87
$
1.22
$
1.55
Operating
Results
Net income attributable to USPH
shareholders
$
10,919
$
11,195
$
18,329
$
19,994
Adjustments:
Change in fair value of contingent
earn-out consideration
(708
)
-
(10
)
-
Change in revaluation of put-right
liability
50
617
199
14
Relief Funds
-
-
(467
)
-
Allocation to non-controlling interest
-
-
33
Tax effect at statutory rate (federal and
state)
168
(158
)
63
(4
)
Operating Results (a non-GAAP measure)
$
10,429
$
11,654
$
18,147
$
20,004
Operating Results per share (a non-GAAP
measure)
$
0.76
$
0.90
$
1.36
$
1.54
Shares used in computation - basic and
diluted
13,720
12,998
13,375
12,968
(1)
Revised to conform to current year
presentation.
.
U.S. PHYSICAL THERAPY, INC.
AND SUBSIDIARIES
REVENUE METRICS
Number of Clinics
Net Rate Per Patient Visit
(1)
Patient Visits (1)
Average Visits Per Day Per
Clinic (1)
2023
2022
2023
2022
2023
2022
2023
2022
First quarter
647
601
$103.12
$103.00
1,227,490
1,063,519
29.8
27.9
Second quarter
656
608
$102.03
$103.18
1,267,140
1,145,554
30.4
29.5
Third quarter
614
$104.01
1,122,070
28.8
Fourth quarter
640
$104.28
1,152,139
29.1
(1)
See definition of the metrics above in the
Glossary of Terms – Revenue Metrics on page 9
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230808894527/en/
U.S. Physical Therapy, Inc. Carey Hendrickson, Chief Financial
Officer email: chendrickson@usph.com Chris Reading, Chief Executive
Officer (713) 297-7000 Three Part Advisors Joe Noyons (817)
778-8424
US Physical Therapy (NYSE:USPH)
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