Full Press Release Details
U.S. Physical Therapy
Fourth Quarter and Year Ended December 31, 2023 Conference Call
The past year was one of persistently high demand for our physical therapy services. Each quarter in 2023 produced a record
for volume across our growing networks of clinics, finishing the year for the first time in our history at 30 visits per clinic per day. Visits grew to more than 5 million for the year, up 11.6% in 2023. Demand remained strong throughout the year.
Helping to meet this demand, our clinical teams did an exemplary job caring for our patients, which in turn creates additional demand from happy customers, who were further colleagues, friends, and neighbors to us. Despite a rather tight labor
market, we were able to attract and hire therapists to enable us to achieve these record volumes. Our team, led by our locally strong partners around the country, helped to limit turnover at a time when demand has remained at record levels, and our
clinical cost efficiency improved in 2023, despite significant inflationary pressures.
I'm particularly proud of our ops team and their efforts to keep these many factors and forces in balance throughout the
year, all while juggling numerous initiatives, including opening or tucking in 35 clinics, and working to integrate additional groups via acquisitions in both PT as well as injury prevention. Additionally, we worked to overcome the Medicare cuts,
which made our lives more difficult these past few years, despite physical therapy saving the system significant cost when compared to more expensive, invasive, and often unnecessary musculoskeletal procedures. Our team renegotiated a significant
number of payor contracts in 2023, which is bearing fruit for us in and across our commercial contract base. We have a good work plan for 2024 to carry on that work and to impact rates further.
Finally, you saw in the release that we announced a small dividend increase for the start of this year, with the majority of
our attention focused on deploying capital through carefully vetted acquisitions in the quarter and in the year to come. The partners we added in 2023 are ahead of plan and doing terrific, including the Industrial Injury Prevention Partnership that
brought us our first software product, which is getting strong reviews, and we expect a great overall year in injury prevention. On the PT side of things, we are busy at varying stages of diligence and completion, several opportunities that we've
included in the guidance we provided in our release. While the environment isn't easy by any stretch, we have a fantastic team whom I love and respect, and I can assure you, everyone is working very hard to produce a good year ahead.
We have a lot of details to cover. Carey always does a great job with that, so I'm going to turn it over to him to dive in
before we open it up for questions.
As Chris noted, we recorded the highest patient volumes in the company's history in 2023, at 30 patients per clinic per day.
Our physical therapy revenues increased more than $50 million in 2024, which was a 10% increase, 10.6% increase over the prior year. Our physical therapy operating costs decreased by $0.55 per visit for the full year. Our industrial engine prevention
business strengthened as the year progressed with fourth quarter revenues up 9.7% over the prior year fourth quarter, and IIP fourth quarter operating income up almost 30% over the prior year.
We achieved year-over-year growth in both adjusted EBITDA and operating results. We added 46 clinics via acquisitions and de
novos in '23, 31 on a net basis after closures, and we added to our IIP business as well.
Further, we strengthened our capital structure with a secondary offering in May 2023, which was done on an accretive basis,
providing us with cash to deploy in growth opportunities. So, despite the challenges as we began the year, our team produced some very good results, and there was a lot of good work done in 2023 that positions us well as we go forward.
We reported adjusted EBITDA for the fourth quarter of $19 million, an increase of $1.1 million over the $17.9 million we
reported in the fourth quarter of the prior year. Our operating results were $0.59 per share in the fourth quarter of 2023, which is an increase over the $0.58 we reported in the fourth quarter of last year. Our total company revenues increased 9.6%
in the fourth quarter, growing from $141.2 million in the fourth quarter of '22 to $154.8 million in the fourth quarter of '23. Our total company gross profit increased $2.7 million, or 9.6%, from $27.8 million in the fourth quarter of '22 to $30.5
million in the fourth quarter of '23.
Our average visits per clinic per day in the fourth quarter were 29.9, which is the highest volume in the company's history
for a fourth quarter. October was at 29.9, November was at 30.3, and December was at 29.5. All three months were higher than the same month in the previous year.
Our net rate was $103.68 in the fourth quarter of 2023, which was a meaningful sequential increase from 102.37 that we
reported in the third quarter of '23 due to the cumulative impact of progress in our rate negotiations and some operational efforts we've been working at all year.
Our net rate was down from the 104.28 report in the fourth quarter of 2022, due to the reductions in Medicare rates, which
represent about one-third of our payor mix. All other payor categories increased 2.1% on a combined basis over the prior year.
Our physical therapy revenues were $134.6 million in the fourth quarter of '23, which was an increase of $11.8 million, or
9.6%, from the fourth quarter of '22. The increase was driven by having 45 more clinics, on average, in the fourth quarter of '23 than in the fourth quarter of '22, coupled with record fourth quarter average patient visits per clinic per day, which
was partially offset by the decrease in net rate.
Our physical therapy operating costs were $108.4 million, which was an increase of 10.3% over the fourth quarter of the
prior year, also due to having 45 more clinics on average than in the fourth quarter of '22.
On a per visit basis, our total operating costs were $84.09 in the fourth quarter, which is basically flat with the $84.05
that we had in the fourth quarter of '22.
For the full year of 2023, our operating costs were $83.34 in full year '22, and they moved down to $82.79 per visit for the
Our salaries and related costs decreased to $59.72 in the fourth quarter, down from $60.04 in the fourth quarter of 2022.
For the full year, salaries and related costs were down $0.33 per visit versus the previous year.
Our physical therapy margin was 19.5% in the fourth quarter of 2023. That was down slightly from the 20% we had in the
fourth quarter of '22, with the change due to the decrease in our net rate versus the prior year. Even with the decline in our net rate versus last year, our PT gross profit increased 7% in the fourth quarter.
As I mentioned earlier, our IIP business saw nice growth in the fourth quarter. IIP net revenues were up $1.8 million, or
9.7%, and our expenses were up only $800,000, or 5.3%. So, that resulted in a $1 million increase in the IIP income in the fourth quarter of '23, which was an almost 30% increase over the prior year. Our IIP margin increased from 17.9% in the fourth
quarter of '22 to 21.2% in the fourth quarter of '23.
Our balance sheet remains in an excellent position. We have $144 million of debt on our term loan with a five-year swap
agreement in place that places the rate on our debt at 4.7%, and we expect it to remain at that rate going forward. As you know, that's a very favorable rate in today's market, and well below the current Fed funds rate.
In the fourth quarter of 2023 alone, the swap agreement saved us $900,000 in interest expense with cumulative savings of
$3.3 million for the full year of 2023. Our interest expense was $2 million in the fourth quarter of '23.
In addition to the term loan, we also have a $175 million revolving credit facility that had nothing drawn on it during the
fourth quarter. And we have approximately $120 million of excess cash over and above what we need for working capital, ready for deployment into growth initiatives.
We also noted in the release that our board raised our quarterly dividend rate by one cent for the first quarter in 2024. At
the new rate, our full year dividend paid would be $1.76 per share, which is a dividend yield of approximately 1.7% based on our recent stock price.
As we noted in our release, we expect our EBITDA for the full year 2024 to be in the range of $80 to $85 million. The 3.5%
Medicare rate reduction that went into effect on January 1st results in a $6 million reduction in revenue and a $5.3 million reduction in EBITDA net of minority interest.
So, the $77.7 million EBITDA reported in '23 becomes $72.4 million as we begin 2024 due to the Medicare rate reduction. The
2024 EBITDA range is an increase of roughly 10% to 17% from this starting point. We have tremendous confidence in our team to produce EBITDA growth in 2024.
We'll benefit in '24 from the full year impact of rate negotiations that we completed in '23, and then the partial year
impact of negotiation work that we do during 2024. We also expect to continue to increase volumes at our existing clinics in '24 and we'll maintain our discipline and expense control. We'll also benefit in '24 from the full year contribution or
acquisitions that we completed during 2023. In addition, we have several acquisitions that we expect to close in the near term by roughly the middle of 2024. So, we've included the expected EBITDA contribution from those acquisitions in our 2024
guidance. The acquisitions we're including are similar in size to those we've completed in the normal course between $1 and $3 million of total enterprise EBITDA, with us purchasing between 50% and 90% of those companies.
We expect our 2024 EBITDA by quarter to lay out a little differently than it did last year. As a reminder, we had no
significant weather events in the first quarter of 2023, which resulted in the best first quarter volumes we've ever had by a sizeable margin. In January of this year, we did have some significant weather events, which was more in line with our
historic experience. So, we'd expect our year to get off to a little slower start than it did last year, and then to gain momentum as we layer in rate increases, volume growth, and acquisitions as the year progresses against the backdrop of our
normal seasonal patterns.
As a reminder, we expect our outstanding shares to be a little over 15 million shares in each quarter of 2024 and for full
year 2024, which is where it has been since we issued the 1.9 million shares with our secondary offering in late May of 2023. That will impact our comparisons for our per share metrics in the first couple of quarters of 2024.
In closing, we feel very good growth in 2024, and we look forward to producing strong results for all of our stakeholders in
2024. With that, I'll turn the call back to Chris.
In terms of the broader landscape, we're as busy as we've ever been. Competition is changed or changing some because some
folks are more sidelined than they have been for quite some time just because of leverage and the rates that some of these companies are having to carry. And so, it's a good opportunity for us.
That said, we continue to be selective and we continue to look for our kinds of partners and attributes. So, that part isn't
changing. We'll continue to be disciplined. But it's a good opportunity right now, we expect to be busy this year.
Their impact won't be significant though, because the later in the year you go, the later - the less impact those have in
The mix hasn't changed that much, and the Worker's Comp rate though is continuing to improve. It's higher than 23 than it
was in 22, and we're hoping it will continue to be like that as we go forward. We're negotiating rates on Worker's Comp just like we are in others as well, so.
Carey Hendrickson: Sure, yes, for the quarter. For the quarter, it was pretty
similar. We had about 48% commercial, 9-1/2%worker's comp and then Medicare, personal injury, self-pay make up the rest.
Carey Hendrickson: Workers comp was 9-1/2%.
Carey Hendrickson: The 48% commercial, 32% Medicare, 9-1/2% for worker's comp
and then the other categories make up the rest.
So, yes, we're going to continue to beat the drum. We're going to continue to work with the APTA and APTQI and all the
constituents and all the good people that I get to work with in those two organizations to push hard, and I think we will come out the other side and be okay. But to say it's not frustrating would be an understatement. I mean, it's been a frustrating
period, but I think in everyone's heart, they know that physical therapy - and statistically, and according to a lot of good studies that are out right now, physical therapy is - should be the entry point for muscular-skeletal care. If it is, it
takes a massive amount of cost. And so, we're going to continue to beat that drum.