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
Third Quarter 2023 Results
Reports Record-High Third Quarter Patient Volume
Houston, TX, November 7,
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 nine months ended September 30, 2023.
THIRD QUARTER FINANCIAL HIGHLIGHTS
| U.S. Physical Therapy Press Release | Page 2 |
| November 7, 2023 |
MANAGEMENT'S COMMENTS
Reading, Chief Executive Officer, said, "Our team continues to produce excellent results despite the pressure from Medicare
rate reductions, inflationary impacts, and an improving but still challenging hiring environment. Our clinic volumes were once again at record levels in the third quarter and our total operating costs per visit continued to trend below
last year. We also added 19 clinics from acquisitions and de novos during the quarter, and purchased an IIP services and ergonomics software business subsequent to quarter-end that provides us an opportunity to expand the reach of our
ergonomics program. We achieved rate increases in all payor categories other than Medicare in the third quarter and will continue to focus on this initiative to drive greater progress in our net rate as we go forward."
Carey Hendrickson, Chief Financial Officer, said, "Our balance sheet is in an outstanding position with $149
million of debt fixed at a below-market rate and approximately $120 million of excess cash, mostly from our secondary offering in May, ready for deployment into growth initiatives."
2023 THIRD QUARTER VERSUS 2022 THIRD QUARTER
for the 2023 Third Quarter was $150.0 million, an increase of 7.5%, compared to $139.6 million for the 2022 Third Quarter. The following table provides a breakdown of total net revenue.
| Three Months Ended September 30, | Variance | |||||||||||||||||||
| 2023 | 2022 | $ | % | |||||||||||||||||
| Revenue related to: | (in thousands, except percentages) | |||||||||||||||||||
| Mature Clinics (1) | $ | 111,943 | $ | 111,598 | $ | 345 | 0.3 | % | ||||||||||||
| 2023 clinic additions | 3,598 | - | 3,598 | * | (2) | |||||||||||||||
| 2022 clinic additions | 11,674 | 3,899 | 7,775 | * | (2) | |||||||||||||||
| Clinics sold or closed (3) | 28 | 1,213 | (1,185 | ) | * | ( 2) | ||||||||||||||
| Net patient revenue from physical therapy operations | 127,243 | 116,710 | 10,533 | 9.0 | % | |||||||||||||||
| Other revenue | 889 | 753 | 136 | 18.1 | % | |||||||||||||||
| Physical therapy operations | 128,132 | 117,463 | 10,669 | 9.1 | % | |||||||||||||||
| Industrial injury prevention services | 19,486 | 20,155 | (669 | ) | (3.3 | )% | ||||||||||||||
| Management contracts | 2,389 | 1,984 | 405 | 20.4 | % | |||||||||||||||
| $ | 150,007 | $ | 139,602 | $ | 10,405 | 7.5 | % |
| U.S. Physical Therapy Press Release | Page 3 |
| November 7, 2023 |
Net rate per patient visit was $102.37 in the 2023 Third
Quarter as compared to $104.01 in the 2022 Third Quarter. The decrease in net rate was due to the combined Medicare rate reductions in 2022 and 2023. All other payor categories, including commercial and workers compensation, increased as
compared to the prior year. Net rate per patient visit increased sequentially in the 2023 Third Quarter from the net rate of $102.03 in the second quarter of 2023.
Operating costs were $122.1 million for the 2023 Third Quarter, or 81.4% of
net revenue, compared to $112.8 million, or 80.8% of net revenue, for the 2022 Third Quarter. Total physical therapy costs per visit were $84.49 in the 2023 Third Quarter, a decrease of 0.8% from $85.14 in the 2022 Third Quarter. Salaries
and related costs were 59.9% of net revenue for the 2023 Third Quarter versus 58.6% for the 2022 Third Quarter. On a cost per patient visit basis, physical therapy salaries and related costs per visit were $60.35 in the 2023 Third Quarter,
a decrease of 1.0% from $60.99 in the 2022 Third Quarter. Rent, supplies, contract labor and other costs as a percentage of total revenue were 20.5% for the 2023 Third Quarter versus 21.3% for the 2022 Third Quarter. The provision for
credit losses, as a percentage of total revenue, was 1.0% for both the 2023 Third Quarter and the 2022 Third Quarter. The following table provides a breakdown of operating costs.
| Three Months Ended September 30, | Variance | |||||||||||||||||||
| 2023 | 2022 | $ | % | |||||||||||||||||
| Operating costs related to: | (In thousands, except percentages) | |||||||||||||||||||
| Mature Clinics (1) | $ | 91,822 | $ | 90,811 | $ | 1,011 | 1.1 | % | ||||||||||||
| 2023 Clinic additions | 3,395 | - | 3,395 | * | (2) | |||||||||||||||
| 2022 Clinic additions | 9,665 | 3,482 | 6,183 | * | (2) | |||||||||||||||
| Clinics sold or closed (3) | 137 | 1,238 | (1,101 | ) | * | (2) | ||||||||||||||
| Physical therapy operations | 105,019 | 95,531 | 9,488 | 9.9 | % | |||||||||||||||
| Industrial injury prevention services | 15,062 | 15,750 | (688 | ) | (4.4 | )% | ||||||||||||||
| Management contracts | 1,997 | 1,537 | 460 | 29.9 | % | |||||||||||||||
| $ | 122,078 | $ | 112,818 | $ | 9,260 | 8.2 | % |
| U.S. Physical Therapy Press Release | Page 4 |
| November 7, 2023 |
Gross profit for the 2023 Third Quarter increased $1.1 million, or 4.3%, to
$27.9 million from $26.8 million for the 2022 Third Quarter. Gross profit margin decreased to 18.6% in the 2023 Third Quarter from 19.2% in the 2022 Third Quarter. The following table provides a detailed breakdown of gross profit and
related gross profit margins.
| Three Months Ended September 30, | ||||||||||||||||||||||||
| 2023 | 2022 | Variance | ||||||||||||||||||||||
| $ | Margin % | $ | Margin % | $ | % | |||||||||||||||||||
| (In thousands, except percentages) | ||||||||||||||||||||||||
| Physical therapy operations | $ | 23,113 | 18.0 | % | $ | 21,932 | 18.7 | % | $ | 1,181 | 5.4 | % | ||||||||||||
| Industrial injury prevention services | 4,424 | 22.7 | % | 4,405 | 21.9 | % | 19 | 0.4 | % | |||||||||||||||
| Management contracts | 392 | 16.4 | % | 447 | 22.5 | % | (55 | ) | (12.3 | )% | ||||||||||||||
| Gross profit | $ | 27,929 | 18.6 | % | $ | 26,784 | 19.2 | % | $ | 1,145 | 4.3 | % |
Corporate office costs were $12.0 million, or 8.0% of net revenue, for the
2023 Third Quarter compared to $11.9 million, or 8.5% of net revenue, for the 2022 Third Quarter.
Operating income for the 2023 Third Quarter was $15.9 million, or 10.6% of net revenue, and $14.9
million, or 10.7% of net revenue, for the 2022 Third Quarter.
Total other (expense) income, net, was ($0.1) million in the 2023 Third Quarter compared to $1.1
million in the 2022 Third Quarter.
The provision for income taxes was $3.6 million in the 2023 Third Quarter
compared to $3.2 million during the 2022 Third Quarter. The provision for income taxes as a percentage of income before taxes less net income attributable to non-controlling interest (effective tax rate) was 27.8% for the 2023 Third Quarter
and 25.2% for the 2022 Third Quarter. A computation of our effective income tax rate is as follows:
| Three Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| (In thousands, except percentages) | ||||||||
| Income before taxes | $ | 15,779 | $ | 16,036 | ||||
| Less: Net income attributable to non-controlling interest: | ||||||||
| Redeemable non-controlling interest - temporary equity | (1,976 | ) | (2,037 | ) | ||||
| Non-controlling interest - permanent equity | (992 | ) | (1,227 | ) | ||||
| (2,968 | ) | (3,264 | ) | |||||
| Income before taxes less net income attributable to non-controlling interest | 12,811 | 12,772 | ||||||
| Provision for income taxes | $ | 3,557 | $ | 3,215 | ||||
| Effective income tax rate | 27.8 | % | 25.2 | % |
Net income attributable to non-controlling interest (temporary and permanent) was $3.0 million in the 2023 Third Quarter compared to $3.3 million in the 2022 Third
| U.S. Physical Therapy Press Release | Page 5 |
| November 7, 2023 |
Adjusted EBITDA, a non-GAAP measure, increased $1.6 million to $18.6
million for the 2023 Third Quarter from $17.0 million in the 2022 Third Quarter while Operating Results, also a non-GAAP measure, increased $1.7 million to $9.2 million, or $0.62 per share, in the 2023 Third Quarter from $7.5 million,
or $0.58 per share, in the 2022 Third Quarter. The increase in both Adjusted EBITDA and Operating Results was primarily associated with clinic additions since the comparable prior year period. See pages 15 and 16 of this release for
the definition and reconciliation of Adjusted EBITDA and Operating Results to the most directly comparable GAAP measure.
NINE MONTHS ENDED SEPTEMBER 30, 2023 VERSUS NINE MONTHS ENDED SEPTEMBER 30, 2022
Total net revenue for nine months ended September 30, 2023 ("2023 Nine Months") was $450.0 million, an increase
of 9.2%, compared to $412.0 million for the nine months ended September 30, 2022 ("2022 Nine Months"). The table below provides a breakdown of total net revenue.
| Nine Months Ended September 30, | Variance | |||||||||||||||||||
| 2023 | 2022 | $ | % | |||||||||||||||||
| Revenue related to: | (in thousands, except percentages) | |||||||||||||||||||
| Mature Clinics (1) | $ | 340,830 | $ | 332,629 | $ | 8,201 | 2.5 | % | ||||||||||||
| 2023 clinic additions | 5,888 | - | 5,888 | * | (2) | |||||||||||||||
| 2022 clinic additions | 35,965 | 7,294 | 28,671 | * | (2) | |||||||||||||||
| Clinics sold or closed (3) | 421 | 4,521 | (4,100 | ) | * | (2) | ||||||||||||||
| Net patient revenue from physical therapy operations | 383,104 | 344,444 | 38,660 | 11.2 | % | |||||||||||||||
| Other revenue | 2,479 | 2,523 | (44 | ) | (1.7 | )% | ||||||||||||||
| Physical therapy operations | 385,583 | 346,967 | 38,616 | 11.1 | % | |||||||||||||||
| Industrial injury prevention services | 58,082 | 58,660 | (578 | ) | (1.0 | )% | ||||||||||||||
| Management contracts | 6,336 | 6,335 | 1 | 0.0 | % | |||||||||||||||
| $ | 450,001 | $ | 411,962 | $ | 38,039 | 9.2 | % |
Net rate per patient visit decreased to $102.50 in
the 2023 Nine Months from $103.40 in the 2022 Nine Months due to the combined Medicare rate reductions in 2022 and 2023, including the discontinuation of sequestration relief on Medicare visits effective in July 2022.
| U.S. Physical Therapy Press Release | Page 6 |
| November 7, 2023 |
were $359.0 million for the 2023 Nine Months, or 79.8% of net revenue, compared to $327.8 million, or 79.6% of net revenue, for the 2022 Nine Months. Salaries and related costs were 58.4% of net revenue for the 2023 Nine Months
versus 57.5% for the 2022 Nine Months. Rent, supplies, contract labor and other costs as a percentage of total revenue were 20.4% for the 2023 Nine Months versus 21.0% for the 2022 Nine Months. The provision for credit losses as a
percentage of total revenue was 1.0% in both the 2023 Nine Months and the 2022 Nine Months. On a cost per patient visit basis, physical therapy salaries and related costs per visit were $59.01 for the 2023 Nine Months, a decrease
of 0.6% from $59.34 for the 2022 Nine Months. Total physical therapy costs per visit were $82.35 for the 2023 Nine Months, a decrease of 0.9% from $83.09 for the 2022 Nine Months. The following table provides a breakdown of
| Nine Months Ended September 30, | Variance | |||||||||||||||||||
| 2023 | 2022 | $ | % | |||||||||||||||||
| Operating costs related to: | (In thousands, except percentages) | |||||||||||||||||||
| Mature Clinics (1) | $ | 273,031 | $ | 266,324 | $ | 6,707 | 2.5 | % | ||||||||||||
| 2023 Clinic additions | 5,701 | - | 5,701 | * | (2) | |||||||||||||||
| 2022 Clinic additions | 28,175 | 6,597 | 21,578 | * | (2) | |||||||||||||||
| Clinics sold or closed (3) | 880 | 3,877 | (2,997 | ) | * | (2) | ||||||||||||||
| Physical therapy operations | 307,787 | 276,798 | 30,989 | 11.2 | % | |||||||||||||||
| Industrial injury prevention services | 45,904 | 45,980 | (76 | ) | (0.2 | )% | ||||||||||||||
| Management contracts | 5,317 | 4,991 | 326 | 6.5 | % | |||||||||||||||
| $ | 359,008 | $ | 327,769 | $ | 31,239 | 9.5 | % |
Gross profit increased $6.8 million, or 8.1%, to $91.0 million for the 2023 Nine Months from $84.2 million for the 2022 Nine Months. Gross profit margin
decreased slightly to 20.2% in the 2023 Nine Months from 20.4% in the 2022 Nine Months. The following table provides a detailed breakdown of gross profit and related gross profit margins.
| Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2023 | 2022 | Variance | ||||||||||||||||||||||
| $ | Margin % | $ | Margin % | $ | % | |||||||||||||||||||
| (In thousands, except percentages) | ||||||||||||||||||||||||
| Physical therapy operations | $ | 77,796 | 20.2 | % | $ | 70,169 | 20.2 | % | $ | 7,627 | 10.9 | % | ||||||||||||
| Industrial injury prevention services | 12,178 | 21.0 | % | 12,680 | 21.6 | % | (502 | ) | (4.0 | )% | ||||||||||||||
| Management contracts | 1,019 | 16.1 | % | 1,344 | 21.2 | % | (325 | ) | (24.2 | )% | ||||||||||||||
| Gross profit | $ | 90,993 | 20.2 | % | $ | 84,193 | 20.4 | % | $ | 6,800 | 8.1 | % |
| U.S. Physical Therapy Press Release | Page 7 |
| November 7, 2023 |
Corporate office costs were $38.1 million, or 8.5% of net revenue, for the 2023 Nine Months
compared to $34.2 million, or 8.3% of net revenue, for the 2022 Nine Months. The increase of $3.9 million, or 11.3%, in corporate office costs was primarily due to higher salaries related to merit increases, staff additions to support a
larger number of clinics and inflationary and related impacts.
Operating income increased 5.9%, to $52.9 million, or 11.8% of net revenues, for the 2023 Nine
Months from $50.0 million, or 12.1% of net revenues, in the 2022 Nine Months.
Total other (expense) income, net, was ($3.7) million during the 2023 Nine Months compared to $1.0 million during
the 2022 Nine Months.
The provision for income taxes was $10.8 million for the 2023 Nine
Months compared to $11.0 million for the 2022 Nine Months. The provision for income taxes as a percentage of income before taxes less net income attributable to non-controlling interest (effective tax rate) was 28.1% for the 2023 Nine
Months and 27.0% for the 2022 Nine Months. A computation of our effective income tax rate is as follows:
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| (In thousands, except percentages) | ||||||||
| Income before taxes | $ | 49,270 | $ | 51,011 | ||||
| Less: net income attributable to non-controlling interest: | ||||||||
| Redeemable non-controlling interest - temporary equity | (7,616 | ) | (7,220 | ) | ||||
| Non-controlling interest - permanent equity | (3,314 | ) | (3,288 | ) | ||||
| (10,930 | ) | (10,508 | ) | |||||
| Income before taxes less net income attributable to non-controlling interest | 38,340 | 40,503 | ||||||
| Provision for income taxes | $ | 10,757 | $ | 10,952 | ||||
| Percentage | 28.1 | % | 27.0 | % |
Net income attributable to non-controlling interest (temporary and
permanent) was $10.9 million for the 2023 Nine Months and $10.5 million for the 2022 Nine Months.
Adjusted EBITDA, a non-GAAP measure, was $58.7 million for the 2023
Nine Months, an increase of $2.9 million from $55.8 million for the 2022 Nine Months. The increase in Adjusted EBITDA was primarily associated with clinic additions since the comparable prior year period, partially offset by higher
corporate office costs.
Operating Results, a non-GAAP measure, was $27.4 million, or $1.97 per
share, in the 2023 Nine Months as compared to $27.5 million, or $2.12 per share, in the 2022 Nine Months.
See pages 15 and 16 of this release for the definition and
reconciliation of Adjusted EBITDA and Operating Results to the most directly comparable GAAP measure.
| U.S. Physical Therapy Press Release | Page 8 |
| November 7, 2023 |
BALANCE SHEET AND CASH FLOW
Total cash and cash equivalents were $147.7 million as of
September 30, 2023, compared to $31.6 million as of December 31, 2022. Additionally, the Company had $145.3 million of outstanding borrowings and $175.0 million in available credit under its credit facilities as of September 30,
2023, compared to $179.1 million of outstanding borrowings and $144.0 million in available credit under its credit facilities as of December 31, 2022.
On May 30, 2023, the Company completed a secondary offering of
its common stock resulting in net proceeds of $163.6 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. The Company's cash is currently invested in a high-yield savings account which generated interest income of approximately $2.1 million in the 2023
During the 2023 Nine Months, $55.1 million of cash was provided
by operating activities, $36.6 million was used in investing activities, and $97.5 million was provided by financing activities. The major uses of cash for investing activities included: purchase of majority interest in businesses
($23.0 million), purchase of non-controlling interests from existing partners ($8.1 million) and purchase of fixed assets ($7.1 million), while cash provided by financing activities included: proceeds from the secondary offering