Full Press Release Details
U.S. Physical Therapy, Inc.
Carey Hendrickson, Chief Financial Officer
Email: Chendrickson@usph.com
Chris Reading, Chief Executive Officer
U.S. Physical Therapy Reports
Second Quarter 2023 Results
Reports All-Time High Quarterly Patient Volume
Houston, TX, August 8, 2023 - 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
| U.S. Physical Therapy Press Release | Page 2 |
| August 8, 2023 |
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 | % |
| U.S. Physical Therapy Press Release | Page 3 |
| August 8, 2023 |
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 | % |
| U.S. Physical Therapy Press Release | Page 4 |
| August 8, 2023 |
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 | 21.6 | % | $ | 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.
| U.S. Physical Therapy Press Release | Page 5 |
| August 8, 2023 |
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.
| U.S. Physical Therapy Press Release | Page 6 |
| August 8, 2023 |
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 | % |
| U.S. Physical Therapy Press Release | Page 7 |
| August 8, 2023 |
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 | % |
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 | ||||||||||||||||||||||
| $ | % | $ | % | $ | % | |||||||||||||||||||
| (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 | % |
| U.S. Physical Therapy Press Release | Page 8 |
| August 8, 2023 |
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.
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.
| U.S. Physical Therapy Press Release | Page 9 |
| August 8, 2023 |
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
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%.
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.