U.S. Physical Therapy Reports Second Quarter 2024 Results

Reports All-Time High Quarterly Patient Volume

Management Updates Guidance

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, 2024.

FINANCIAL HIGHLIGHTS

• Adjusted EBITDA ⁽¹⁾, a non-Generally Accepted Accounting Principles (“GAAP”) measure, was $22.1 million for the three months ended June 30, 2024 (“2024 Second Quarter”) compared to $21.7 million in the second quarter ended June 30, 2023 (“2023 Second Quarter”).
• Operating Results ⁽¹⁾, a non-GAAP measure, was $11.0 million in the 2024 Second Quarter compared to $10.4 million in the 2023 Second Quarter. On a per share basis, Operating Results was $0.73 in the 2024 Second Quarter compared to $0.76 in the 2023 Second Quarter, with the decrease attributable to the increase in shares outstanding associated with the Company’s secondary offering completed in May 2023.
• Net income attributable to USPH’s shareholders (“USPH Net Income”), a GAAP measure, was $7.5 million for the 2024 Second Quarter. In accordance with GAAP, the revaluation of redeemable 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 for the 2024 Second Quarter was $0.47.
• Total revenue from physical therapy operations for the 2024 Second Quarter increased $11.2 million, or 8.5%, to $143.5 million.
• Net rate per patient visit for the 2024 Second Quarter increased to $105.05 from $102.03 for the 2023 Second Quarter, an increase of 3.0%, despite the 1.8% Medicare rate reduction in effect for the 2024 Second Quarter. Excluding Medicare, the Company’s net rate increased 4.5% in the 2024 Second Quarter as compared to the 2023 Second Quarter. The increase in net rate per patient visit reflects the Company’s strategic priority of increasing reimbursement rates through contract negotiations with commercial and other payors as well as growth in workers compensation as a percent of the Company’s overall mix of business.
• Average daily visits per clinic was at an all-time high of 30.6 for the 2024 Second Quarter compared to 30.4 in the comparable prior year quarter. Total patient visits were 1,335,335 in the 2024 Second Quarter, a 5.4% increase from the 2023 Second Quarter.
• Industrial injury prevention (“IIP”) services revenue was $23.7 million for the 2024 Second Quarter, an increase of 23.2% as compared to the 2023 Second Quarter, with an increase in gross profit of 27.5% over the same periods.
• During the 2024 Second Quarter, the Company added seven new clinics and closed five clinics bringing its total clinic count to 681 as of June 30, 2024, as compared to 656 clinics as of June 30, 2023.
• On April 30, 2024, one of the Company’s primary IIP businesses, Briotix Health Limited Partnership, acquired 100% of an IIP services business for a purchase price of $24.0 million. The acquired business currently generates approximately $11.0 million in annual revenues.
• The Company’s Board of Directors declared a quarterly dividend of $0.44 per share payable on September 13, 2024, to shareholders of record on August 23, 2024.
• Management updated its guidance for Adjusted EBITDA for 2024, returning guidance to its original range of $80.0 million to $85.0 million. See “Management Updates 2024 Guidance” below for more information.

MANAGEMENT’S COMMENTS

Chris Reading, Chief Executive Officer, said, “Physical therapy volumes, net rate and injury prevention growth and profitability were all strong for the quarter and a result of our persistent focus in these areas. While our retention has been good with respect to our team members, the new employees who join our team as a result of turnover are coming in at higher rates. This is especially true of our hourly employees who are more sensitive to escalating prices elsewhere. Additionally, we have a higher than anticipated usage of contract therapists in several markets around the country. We have made significant recent and ongoing investments in people and processes on the recruiting side of our efforts with more work to be done -- especially in these more challenging markets. Our teams are working diligently to optimize our ability to address demand while maintaining a close eye on cost and related expense management.”

2024 SECOND QUARTER VERSUS 2023 SECOND QUARTER

Additional supplemental tables of financial and performance metrics are presented on page 14 of this release.

Net revenue from physical therapy operations increased $11.2 million, or 8.5%, to $143.5 million for the 2024 Second Quarter from $132.2 million for the 2023 Second Quarter. This increase was due to the increase in visits from the 25 net new clinics added since the comparable prior year period, an increase in visits at mature clinics and an increase in net rate per patient visit. The increase in net rate per patient visit was mainly driven by higher reimbursement rates from commercial and other payors as a result of contract negotiations and an increase in workers compensation as a percent of the Company’s total net patient revenues.

Operating costs from physical therapy operations increased $10.7 million, or 10.3%, to $114.7 million in the 2024 Second Quarter from $104.0 million in the 2023 Second Quarter primarily driven by costs associated with the 25 net new clinics added since the comparable prior year period. Salaries and related costs per visit increased to $59.66 in the 2024 Second Quarter from $57.59 in the 2023 Second Quarter while total operating costs per visit increased to $84.46 from $80.61 over the same periods, respectively.

Gross profit from physical therapy operations in the 2024 Second Quarter increased $0.6 million, or 2.0%, to $28.8 million from $28.2 million in the 2023 Second Quarter. The gross profit margin from physical therapy operations was 20.1% in the 2024 Second Quarter.

IIP revenues increased $4.5 million, or 23.2%, to $23.7 million for the 2024 Second Quarter as compared to $19.2 million for the 2023 Second Quarter. Excluding the Company’s IIP acquisition during the 2024 Second Quarter, IIP revenues increased 13.5%. IIP operating costs increased $3.4 million, or 22.0%, versus the comparable prior year period. Gross profit from IIP operations in the 2024 Second Quarter increased $1.1 million, or 27.5%, to $5.1 million from $4.0 million in the 2023 Second Quarter. Excluding the Company’s IIP acquisition in the 2024 Second Quarter, IIP gross profit increased 15.7%. The gross profit margin from IIP operations increased to 21.4% in the 2024 Second Quarter from 20.7% in the 2023 Second Quarter.

Corporate Office and Other Expenses

Corporate office costs were $14.2 million, or 8.5% of revenue, in the 2024 Second Quarter compared to $12.1 million, or 8.0% of revenue in the 2023 Second Quarter.

Operating income was $19.6 million for the 2024 Second Quarter compared to $20.1 million for the 2023 Second Quarter.

Interest expense decreased $0.7 million to $2.0 million for the 2024 Second Quarter compared to $2.6 million in the 2023 Second Quarter due to a lower outstanding balance on our revolver, which was paid down in May 2023. The interest rate on the Company’s credit facility was 4.7% for the 2024 Second Quarter and 5.7% for the 2023 Second Quarter, with an all-in effective interest rate, including all associated costs of 5.4% and 6.0% over the same periods, respectively.

Interest income from investing excess cash (primarily proceeds from the secondary offering sale of the Company’s stock completed in May 2023) in a high-yield savings account was $1.1 million during the 2024 Second Quarter compared to $0.5 million in the 2023 Second Quarter.

The Company revalued contingent and put-right liabilities related to certain acquisitions and recognized a net expense of $4.3 million (an increase in the related liabilities) in the 2024 Second Quarter compared to an income of $0.7 million (a decrease in the related liabilities) in the 2023 Second Quarter.

The provision for income taxes was $3.1 million in the 2024 Second Quarter compared to $4.2 million during the 2023 Second Quarter while the effective tax rates were 29.1% and 27.9% over the same periods, respectively.

USPH Net Income and Non-GAAP Measures

Net income attributable to non-controlling interest (temporary and permanent) was $4.2 million in the 2024 Second Quarter compared to $3.9 million in the 2023 Second Quarter.

USPH Net Income was $7.5 million for the 2024 Second Quarter as compared to $10.9 million for the 2023 Second Quarter. 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 for the 2024 Second Quarter was $0.47 compared to $0.64 for the 2023 Second Quarter, due in part to the increase in shares outstanding associated with the Company’s secondary offering completed in May 2023.

Non-GAAP Adjusted EBITDA was $22.1 million for the 2024 Second Quarter compared to $21.7 million for the 2023 Second Quarter. Non-GAAP Operating Results was $11.0 million, or $0.73 per share, in the 2024 Second Quarter as compared to $10.4 million, or $0.76 per share, in the 2023 Second Quarter, with the decrease in per share amounts being attributable to the increase in shares outstanding associated with the Company’s secondary offering completed in May 2023.

See pages 12 and 13 of this release for the definition and reconciliation of Adjusted EBITDA and Operating Results to the most directly comparable GAAP measure.

SIX MONTHS ENDED JUNE 30, 2024 VERSUS SIX MONTH ENDED JUNE 30, 2023

Total net revenue for the six months ended June 30, 2024 (“2024 Six Months”) increased $22.9 million, or 7.6%, to $322.9 million from $300.0 million for the six months ended June 30, 2023 (“2023 Six Months”) while operating costs increased $23.7 million, or 10.0%, to $260.6 million from $236.9 million over the same periods, respectively. Gross profit for the 2024 Six Months was $62.3 million, or 19.3% of net revenue, compared to $63.1 million for the 2023 Six Months, or 21.0% of net revenue.

Revenues from physical therapy operations increased $16.5 million, or 6.3%, to $277.9 million in the 2024 Six Months compared to $261.4 million in the 2023 Six Months. This increase was primarily due to the increase in volume from the 25 net new clinics added since the comparable prior year period as well as an increase in net rate per patient visit to $104.23 for 2024 Six Months from $102.56 for 2023 Six Months. Gross profit from physical therapy operations decreased $2.5 million, or 4.5%, to $52.8 million for the 2024 Six Months from $55.3 million for the 2023 Six Months while the gross profit margin from physical therapy operations decreased to 19.0% for 2024 Six Months from 21.2% for 2023 Six Months.

Revenues from IIP increased $6.4 million, or 16.5%, to $45.0 million for the 2024 Six Months from $38.6 million for the 2023 Six Months. Gross profit from IIP operations increased $1.7 million, or 21.4%, to $9.4 million for the 2024 Six Months from $7.8 million for the 2023 Six Months while the gross profit margin from IIP operations increased to 20.9% for the 2024 Six Months from 20.1% for the 2023 Six Months.

Corporate office costs were $28.3 million, or 8.8% of net revenue, in the 2024 Six Months, compared to $26.0 million, or 8.7% of net revenue, in the 2023 Six Months.

Operating income was $33.9 million for the 2024 Six Months compared to $37.1 million for the 2023 Six Months.

Other expenses were $4.4 million in the 2024 Six Months compared to $3.6 million in the 2023 Six Months, with the increase primarily due to increased net expense related to the fair value adjustments of certain contingent earn-out consideration and put liability partially offset by lower interest expense as a result of lower outstanding borrowings and higher interest income from investing excess cash associated with proceeds from the Company’s secondary offering completed in May 2023.

The provision for income tax was $6.2 million for the 2024 Six Months and $7.2 million for the 2023 Six Months. The effective tax rate was 28.6% and 28.2% over the same periods, respectively.

USPH Net Income was $15.6 million for the 2024 Six Months as compared to $18.3 million for the 2023 Six Months while earnings per share was $0.93 for the 2024 Six Months compared to $1.22 for the 2023 Six Months, due in part to the increase in shares outstanding associated with the Company’s secondary offering completed in May 2023.

Non-GAAP Adjusted EBITDA decreased $1.2 million to $38.9 million for the 2024 Six Months from $40.1 million in the 2023 Six Months while non-GAAP Operating Results increased $0.6 million to $18.8 million, or $1.25 per share, in the 2024 Six Months from $18.1 million, or $1.36 per share, in the 2023 Six Months, with the decrease in the per share amounts being attributable to the increase in shares outstanding associated with the Company’s secondary offering completed in May 2023.

See pages 12 and 13 of this release for the definition and reconciliation of Adjusted EBITDA and Operating Results to the most directly comparable GAAP measure.

For additional information on 2024 Six Months results, please refer to the Company’s Quarterly Report on Form 10-Q which is expected to be filed with the Securities and Exchange Commission on August 14, 2024.

BALANCE SHEET AND CASH FLOW

Total cash and cash equivalents were $112.9 million as of June 30, 2024, compared to $152.8 million at December 31, 2023. Additionally, the Company had $142.5 million of outstanding borrowings and $175.0 million in available credit under its credit facilities as of June 30, 2024, compared to $144.4 million of outstanding borrowings and $175.0 million in available credit under its credit facilities as of December 31, 2023.

RECENT ACQUISITIONS

On April 30, 2024, one of the Company’s primary IIP companies, Briotix Health Limited Partnership, acquired 100% of an IIP services business for a purchase price of $24.0 million. The business currently generates approximately $11.0 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 Company’s Board of Directors declared a quarterly dividend of $0.44 per share payable on September 13, 2024, to shareholders of record on August 23, 2024.

MANAGEMENT UPDATES 2024 EARNINGS GUIDANCE

Management returned its guidance for Adjusted EBITDA for 2024 to its original range of $80.0 million to $85.0 million. The change in guidance reflects the lingering tough employment environment for both clinical and front office staff which has resulted in greater costs than anticipated in both salaries and contract labor so far this year.

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 14, 2024, to discuss the Company’s financial results for the second quarter ended June 30, 2024. Interested parties may participate in the call by dialing (800) 245-3047 (Primary) or (203) 518-9765 (Alternate) and conference ID of USPHQ224. Please call 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. If you are unable to listen live, a playback of the conference call can be accessed until November 12, 2024, at the Company’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:

• changes in Medicare rules and guidelines and reimbursement or failure of our clinics to maintain their Medicare certification and/or enrollment status;
• 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;
• 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;
• our ability to identify and complete 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, or may interfere with our ability to file and process claims for payment which could interfere with our collection of revenues from third party payors;
• enforcing our noncompetition covenants;
• 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, 2023, filed with the Securities and Exchange Commission (“SEC”) on February 29, 2024 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, 2023, 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 daily visits 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 680 outpatient physical therapy clinics in 42 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 41 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

ADJUSTED EBITDA AND OPERATING RESULTS

The following tables provide details of the basic and diluted earnings per share computation and reconcile net income attributable to USPH shareholders calculated in accordance with GAAP to Adjusted EBITDA and Operating Results (non-GAAP measures). Management believes providing Adjusted EBITDA and Operating Results to investors is useful information for 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. Management uses Adjusted EBITDA and Operating Results, which eliminate 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.

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, clinic closure costs, other income and related portions for non-controlling interests.

Operating Results, a non-GAAP measure, equals net income attributable to USPH shareholders less, changes in revaluation of a put-right liability, Relief Funds, clinic closure costs, changes in fair value of contingent earn-out consideration, and any allocations to non-controlling interests, all net of taxes. Operating Results per share also excludes the impact of the revaluation of redeemable non-controlling interest and the associated tax impact.

Adjusted EBITDA and Operating Results 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

SUPPLEMENTAL FINANCIAL AND PERFORMANCE METRICS

View source version on businesswire.com: https://www.businesswire.com/news/home/20240813703313/en/