U.S. Physical Therapy, Inc. Conference Call Transcript

U.S. Physical Therapy, Inc.

Carey Hendrickson, Chief Financial Officer

Email: Chendrickson@usph.com

Chris Reading, Chief Executive Officer

U.S. Physical Therapy, Inc.

Conference Call Transcript

February 26, 2026 10:30 am ET

I want to remind everyone that these results, which our team feels very good about, were delivered in an environment in 2025

with continued Medicare rate reductions, and in spite of that, across every measure, we delivered progress and a very good year overall. As you might imagine, as we look ahead into this next year, we are excited to close the book on that

Medicare chapter while having some significant opportunities coming together, which we will further discuss here shortly. Fourth quarter highlights; Again, strong revenue and visit growth in our physical therapy business. Demand continued

unabated into the fourth quarter, and I believe every quarter in 2025, resulted in new records for visits per clinic per day. Demand, coupled with rate improvement and cost discipline, drove a gross profit increase for the final quarter of

2025, up over 25% compared to Q4 of 2024. Also notable, since our last quarterly report, we made several acquisitions; one great one in the Pacific Northwest with a very capable team, one home care addition, and a really great, very talented

and capable injury prevention team, which adds service offering capabilities to our growing injury prevention segment. Also notable is that it further strengthens our New York City presence, with a lot of excitement going for that market. On

that note, very recently, we announced two significant hospital arrangements. These are very long-term arrangements, which will further improve our patient reach in these important markets, and will positively impact volume, margins, growth

opportunities, along with care access as well. These strategic relationships will begin to phase-in for our 60 Metro clinics and our 10 second market facilities sometime around mid-year, with an expectation that all 70 clinics, plus what we

have scheduled to open, will be under these strategic affiliations by year-end.

As discussed in our release, those original clinics will provide an enterprise lift for these two partnerships of at least

$14 million in EBITDA in 2027, and a USPH portion after minority interest of over $7 million. I will let you know that we have added to our senior team to further strengthen this area of growth for us in the future, where there is a lot of

excitement and growth potential. Second, for 2026, we have some very clear initiatives, which will continue to build on our success in 2025. Among them, continued rollout across our facility network of ambient listening documentation support,

semi-virtualization of our front desk and intake operations, further cash-based program expansion, which gained good initial traction in 2025, a return to pressing forward with remote therapeutic monitoring after some needed and very impactful

changes implemented by CMS beginning in 2026, and the continued pursuit of large market strategic hospital alliances, which is gaining steam and traction, with the two very important recent wins in discussions in multiple markets around the

country. Of course, ongoing de novo and acquisition-related development in both PT and injury prevention segments for 2026. In closing, before turning things over to Carey, who I'd like to thank for his work with us over these past five years,

I also want to thank the tireless work of our clinicians who deliver world-class care in nearly 800 clinics around the country, as well as in the homes of those who can't get out to see us. Every day they are delivering exceptional care that

results in a world-class net promoter score from our patients, who are able to return to things that they love to do.

Our therapists, and all therapists, should be recognized as musculoskeletal experts -- the primary care providers of

musculoskeletal treatment, who every day deliver complex restorative care at an unbelievable and unmatched value. That care allows people of all ages to move again pain-free, to return to the activities that they love to do, and to return to

more complete social engagement, which is also very important to mental health, as well as overall well-being. To deliver for themselves and their families an income through work and a purpose that they can again fulfill. When we think about

the many, many challenges in the world today, we are blessed to have work and a purpose where we get to make the world a little better every day across the hundreds of communities we serve and the hundreds of thousands of patients who cross our

thresholds each year. That feels really, really good, and I just want our partners and all of our caregivers to know how very grateful all of us are for your care and service. In closing, let me say how very excited we are for the year ahead.

We've worked tirelessly these past few years with a lot of headwinds in our face, and despite that, we found a way to grow, as well as to make significant additions and improvements that will strengthen us for our future. These established, as

well as newly announced initiatives, will begin to bear fruit for us in the year to come and accelerate greatly, especially in the hospital focus area, for 2027. Thank you for your belief in our team and our vision. We appreciate your support

greatly. Carey, go ahead and give us a deeper dive on our financial performance before we open it up for questions or comments. Again, thank you.

For the full year of 2025, our average visits per clinic per day was 32.2, which was a record annual volume number. Our total

patient visits increased 11.2% year over year, with the full year of the Metro acquisition in New York that we made in late 2024 and other additions made in 2025, along with a 1.5% increase in visits at our mature clinics. Despite the 2.9%

Medicare rate reduction affected throughout 2025, our net rate per patient visit increased 1% from $104.71 in full year 2024 to $105.76 in full year 2025, with our net rate accelerating through the year and ending at $106.49 for the fourth

quarter, which was an increase of 1.7% from the previous year's fourth quarter. We maintained good control of our total physical therapy operating costs, which were down $0.50 per visit in the fourth quarter and up only 1.1% for the full year.

Our IIP income grew by double digits again this quarter, up 11.5%, and up 20.2% for the full year of 2025. That 11.5% is pure organic growth, and the 20.2% has some acquisition in it from the first part of the year. Finally, our adjusted EBITDA

increased $3 million from $21.8 million in the fourth quarter of 2024 to $24.8 million in the fourth quarter of 2025, while our full year adjusted EBITDA increased 16.1% from 2024 to 2025, from $81.8 million to $95 million. Turning to patient

volumes, we recorded 1,560,603 clinic visits in the fourth quarter, along with 32,733 home care visits. Our average visits per clinic per day was 32.8 in October. It was 33.5 in November, and then 31.7 in December.

Our home care visits continued to build nicely through the year, moving from 22,943 in the first quarter of 2025 to almost

33,000 home care visits in the fourth quarter. As I noted, our net rate per patient visit for the fourth quarter was $106.49 compared to $104.73 in the fourth quarter of 2024, and all three months in the fourth quarter of 2025 were above the

$106 mark. Our physical therapy revenues were $173.8 million in the fourth quarter of 2025, which was an increase of $20 million, or 13% from the previous year. Physical therapy operating costs totaled $138.6 million in the fourth quarter, an

increase of $12.9 million, or 15.3%, compared to the same quarter last year. Importantly, as I noted, we managed costs effectively. Our salaries and related costs per visit decreased by 1.1% in the fourth quarter, from $62.85 per visit in the

fourth quarter of 2024 down to $62.15 in the fourth quarter of 2025. Our total operating costs per visit decreased 0.6% in the fourth quarter, moving from just above $86.00 last year to $85.56 this year, which we view as a particularly strong

result given the inflationary environment. Our physical therapy adjusted growth margin was 20.5% in the fourth quarter, which was up almost 200 basis points from 18.6% in the fourth quarter of 2024. Our IIP team delivered another strong

performance in the fourth quarter. IIP net revenues increased $2.3 million, or 8.7%, compared to the same quarter last year, while IIP income rose $510,000, or 11.5%.

Importantly, this fourth quarter growth in injury prevention is all organic. We didn't make any IIP acquisitions between the

fourth quarter of 2024 and the fourth quarter of 2025. Our IIP margin for the fourth quarter increased from 16.7% in the fourth quarter of 2024 to 17.1% in 4Q25. Our corporate costs remained in line with expectations. Corporate expenses were

8.5% of net revenue in the fourth quarter, and they were 8.6% of net revenue for the full year. As I mentioned on the third quarter earnings call, we're in the process of implementing a new enterprise-wide financial and human resources system.

We started the implementation process in September of 2025 with a go-live on the new system targeted for January 1, 2027. During the fourth quarter, we incurred about $600,000 in implementation costs related to this project. Consistent with our

practice for similar non-recurring items, we add those costs back to our adjusted EBITDA calculation. One note on GAAP EPS., It includes the change in the revaluation of our noncontrolling interest, and this revaluation is not included in our

net income, but it is included in the calculation of GAAP EPS. It's counterintuitive. Counterintuitively, when our partnerships perform well, our redeemable non-controlling interest increases, and that change, resulting from improved

performance, reduces our GAAP EPS. The short summary is that the better we do, the worse our EPS looks. GAAP EPS is the only metric that includes that reevaluation of our non-controlling interest.

As I noted earlier, our adjusted EBITDA increased by $3 million in the fourth quarter of 2025 over the previous year quarter,

and our full-year adjusted EBITDA increased $13.2 million, or16.1%, in 2025 versus 2024. Operating results for the fourth quarter were $10.2 million, an increase of $2.5 million, from $7.8 million in previous year, and on a per-share basis, our

operating results were $0.67 compared to $0.51 at the same quarter last year. Our balance sheet remains in excellent shape. We currently have $131 million on our term loan with the swap agreement in place that fixes interest rate at 4.77%

through mid-2027. In addition, we have a $175 million revolving credit facility with $30.5 million drawn at the end of the year, and we ended the quarter with $35.6 million in cash.

Looking to 2026, we currently expect adjusted EBITDA to be in the range of $102 million to $106 million for 2026. That

includes $2.5 million in incremental revenue related to the Medicare rate increase that went into effect on January 1 of 2026. We included the modest amount in our guidance related to the hospital affiliation that Chris talked about in his

remarks, given that the affiliations will begin mid-year of 2026, and then they'll phase in over the second half of the year. We're very positive about the contribution these agreements will make to our revenue, our EBITDA, and our margins when

they are fully implemented. When fully implemented, which we expect to happen by year-end 2026, these two hospital affiliation agreements are expected to contribute at least $14 million, on a combined basis, to our PT revenue and income, with

the corresponding impact to USPH at the adjusted EBITDA of at least $7.3 million reflecting our ownership interest in these two partnerships.

With that, I'll turn the call back over to you Chris.

Carey Hendrickson: Good morning,

Constantine Davides: Good

Constantine Davides: Hey, Carey.

On the hospital alliances, just a few questions. First on rate, are these the provider-based outpatient rates? Is that how we should be thinking about those? Second, is there a profit headwind in the first part of the year as you work to stand

those up by midyear? If so, can you quantify that for us? Then lastly, are these exclusive relationships? Are you the only independent outpatient provider that's going to be in their networks?

Constantine Davides: Yes. Are

Constantine Davides: And how

should we think about that rate relative to your blended average today around 106?

Constantine Davides: Got it. With

respect to IIP, in your prepared remarks, you mentioned new service offering capabilities with that recent acquisition. I'm just wondering if you can expand a bit on that.

We have in this business a mobile network of facilities that serves these infrastructure themes and projects in a variety of

testing; OSHA testing, DOT testing, various exposures, drug and alcohol testing to ensure that the work-site places, workplaces are safe and the environment overall is safe. We do physicals and physical demand and other things. That general

capability, that blood work and related testing, we haven't done before. We're in the process of knitting together and overlaying our injury prevention relationships to see where and how we might be able to cross-pollinate those a bit more. So,

we're excited. It's a great team and it's a great business. It's got, like I said, great margins, new for us in terms of this particular aspect of testing that we're excited about, but it just builds on what we've been doing over the last

seven, eight, nine years.

Constantine Davides: Do you have

a - that's interesting color on the medical front. Do you have a preference at this point for M&A between the two segments? I mean, obviously you have a lot going on rolling out the hospital partnerships, but just wondering if you could

talk about your M&A pipeline preference between the two segments and then I guess within PT, is there anything kind of chunkier out there along the lines of a Metro or should we be thinking about those opportunities as maybe single-digit

clinic type opportunities? Thanks.

In terms of the size, I'll point to two different directions that will be our company's focus. We're going to continue to

look for opportunities like a Metro particularly in markets where we may be able to then, as we've done with Metro, loop in a hospital partner and further strengthen that marketplace. There'll be this year at some point, and I don't know what

our participation will be necessarily, but we know that there are going to be a number of deals that come forward in this year. We continue to be active in both areas and then around the hospital side, in general. Think about it this way, so

we'll take New York, for instance, without the hospital affiliation and prior to the hospital affiliation, compared to smaller private practices in and around the area that we operate in New York City, we typically enjoyed anywhere from a

$20.00 to $30.00 higher net rate per visit than our smaller competitors. So, we are able, at a very efficient level, to buy smaller clinics but have them be immediately accretive and impactful. There will even be greater opportunity as we layer

in these hospital relationships and so, you're going to see pieces, parts of all of that show up in our financials.