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U.S. Physical Therapy Reports First Quarter 2023 Results

Reports Record-High First Quarter Volume and Adjusted EBITDA

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 (“IIP”) services, today reported results for the three months ended March 31, 2023 (“2023 First Quarter”).

FIRST QUARTER RESULTS SUMMARY

  • Adjusted EBITDA, a non-Generally Accepted Accounting Principles (“GAAP”) measure, increased $1.0 million to $18.5 million for the 2023 First Quarter, an all-time high first quarter amount, from $17.5 million for the three months ended March 31, 2022 (“2022 First Quarter”). See pages 11 and 12 of this release for the definition and reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure.
  • Net income attributable to USPH’s shareholders, a GAAP measure, was $7.4 million for the 2023 First Quarter compared to $8.8 million for the 2022 First Quarter. The decrease in net income is primarily due to a $2.0 million increase in interest expense as a result of a higher effective interest rate as well as increased borrowings to fund acquisitions. 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 diluted share. Earnings per diluted share, in accordance with GAAP, was $0.58 for the 2023 First Quarter as compared to $0.67 for the 2022 First Quarter.
  • Operating income increased $2.0 million, or 13.1%, to $17.0 million in the 2023 First Quarter from $15.0 million in the 2022 First Quarter.
  • Operating Results per diluted share, a non-GAAP measure, was $0.59 per diluted share for the 2023 First Quarter as compared to $0.65 for 2022 First Quarter, with the decrease primarily due to the increase in interest expense previously described. See pages 11 and 12 of this release for the definition and reconciliation of Operating Results per diluted share to the most directly comparable GAAP measure.
  • Net patient revenue from physical therapy operations increased 15.6% to $126.6 million for the 2023 First Quarter from $109.5 million for the 2022 First Quarter.
  • Average visits per clinic per day in the 2023 First Quarter was 29.8, an all-time high for the first quarter and the second highest average visits amount for any quarter in the Company’s history. Average visits per clinic per day was 27.9 in the 2022 First Quarter, which was the previous high average visits amount for a first quarter.
  • Total patient visits increased 15.4% to 1,227,490 in the 2023 First Quarter from 1,063,519 in the 2022 First Quarter. Patient visits at our mature clinics increased 6.0% in the 2023 First Quarter as compared to the 2022 First Quarter.
  • Net rate per patient visit increased to $103.12 in the 2023 First Quarter as compared to $103.00 in the 2022 First Quarter, despite a 2% reduction in Medicare rates at the beginning of 2023 and the discontinuance of 2% sequestration relief on Medicare rates which was present in the first quarter of 2022.
  • The Company’s physical therapy operating margin was 21.0% in the 2023 First Quarter as compared to 20.0% in the 2022 First Quarter. Physical therapy average operating costs per patient visit decreased 1.1% to $81.97 per visit in the 2023 First Quarter from $83.09 in the 2022 First Quarter. Physical therapy salaries and related costs were $59.14 per visit in the 2023 First Quarter, a 0.7% increase from $58.74 in the 2022 First Quarter, and have sequentially decreased from $60.99 per visit in the third quarter of 2022 and $60.04 per visit in the fourth quarter of 2022.
  • IIP services revenue was $19.4 million for the 2023 First Quarter compared to $19.1 million in the 2022 First Quarter. IIP services operating margin was 19.5% in the 2023 First Quarter as compared to 21.8% in the 2022 First Quarter.
  • On February 28, 2023, the Company acquired 80.0% of the equity interest in a one-clinic physical therapy practice with the practice’s founder and owner retaining 20.0% of the interest. The business generates approximately $3.2 million in annual revenue and has approximately 27,000 patient visits per year. In addition, the Company opened seven clinics in the 2023 First Quarter. As of March 31, 2023, the Company operated 647 clinics compared to 601 clinics on March 31, 2022.
  • The Company’s Board of Directors declared a quarterly dividend of $0.43 per share payable on June 9, 2023, to shareholders of record on May 18, 2023.
  • Management reaffirms that it currently expects the Company’s Adjusted EBITDA for 2023 to be in the range of $75.0 million to $80.0 million. The earnings guidance represents projected Adjusted EBITDA from existing operations and excludes future acquisitions. See “Management Reaffirms 2023 Earnings Guidance” below for more information.

MANAGEMENT’S COMMENTS

Chris Reading, Chief Executive Officer, said, “I am supremely proud of our team for the way they have focused on making a difference for our patients as well as our business. The inflationary environment in the second half of 2022 was extremely challenging, but our partners, staff, leadership, and support teams remained committed to making the necessary adjustments, allowing us to deliver record volumes in what is normally a slower quarter. Our staffing has improved markedly, and our turnover rate has continued to decline to better than pre-pandemic levels for licensed clinical staff. Development activity and related opportunities remain strong.”

Carey Hendrickson, Chief Financial Officer, said, “Our outstanding physical therapy volume in the first quarter, which is typically our seasonally lowest volume quarter of the year, combined with stabilizing expenses, resulted in the best Operating Results and Adjusted EBITDA for a first quarter in our history. Our physical therapy operating costs per visit declined in the first quarter from the higher levels we experienced in the third and fourth quarters of 2022 when we began to feel the effects of inflation, and were actually lower than in the first quarter of the prior year resulting in margin improvement year over year.”

FIRST QUARTER RESULTS

Total net revenue for 2023 First Quarter was $148.5 million, an increase of 12.8%, compared to $131.7 million for the 2022 First Quarter. See table below for a breakdown of total net revenue.

Three Months Ended March 31,

 

Variance

 

 

2023

 

 

 

2022

 

 

$

 

%

Revenue related to:

(In thousands, except percentages)

Mature clinics (1)

$

114,502

$

108,229

$

6,273

 

5.8

%

2023 clinic additions

 

371

 

 

-

 

 

371

 

*

(2)

2022 clinic additions

 

11,708

 

 

195

 

 

11,513

 

*

(2)

Clinics sold or closed in 2022

 

-

 

 

1,114

 

 

(1,114

)

*

(2)

Net patient revenue from physical therapy operations

 

126,581

 

 

109,538

 

 

17,043

 

15.6

%

Other revenue

 

799

 

 

872

 

 

(73

)

-8.4

%

Physical therapy operations

 

127,380

 

 

110,410

 

 

16,970

 

15.4

%

Management contracts

 

1,779

 

 

2,226

 

 

(447

)

-20.1

%

IIP services

 

19,350

 

 

19,068

 

 

282

 

1.5

%

Net revenue

$

148,509

 

$

131,704

 

$

16,805

 

12.8

%

___________________________

(1)

See Glossary of Terms - Revenue Metrics for the definition.

(2)

Not meaningful.

  • Revenue from physical therapy operations increased $17.0 million, or 15.4%, to $127.4 million for the 2023 First Quarter from $110.4 million for the 2022 First Quarter primarily due to a 15.4% increase in the number of patient visits to 1,227,490 for the 2023 First Quarter from 1,063,519 in the 2022 First Quarter. Net patient revenue per visit increased to $103.12 in the 2023 First Quarter from $103.00 in the 2022 First Quarter.
  • IIP services revenue increased to $19.4 million for the 2023 First Quarter as compared to $19.1 million for the 2022 First Quarter.

Operating cost was $117.7 million for the 2023 First Quarter, or 79.2% of net revenue, compared to $105.1 million, or 79.8% of net revenue, for the 2022 First Quarter. Salaries and related costs were 57.9% of net revenue for the 2023 First Quarter versus 57.1% for the 2022 First Quarter. Rent, supplies, contract labor and other costs as a percentage of total revenue were 20.3% for the 2023 First Quarter versus 21.8% for the 2022 First Quarter. The provision for credit losses as a percentage of total revenue was 1.0% for both 2023 First Quarter and 2022 First Quarter. See table below for a more detailed breakdown of operating costs.

Three Months Ended March 31,

 

Variance

 

2023

 

 

 

2022

 

 

$

 

%

 

(In thousands, except percentages)

 

Operating costs related to:

 

 

 

 

 

 

 

Mature clinics (1)

$

91,025

$

86,978

$

4,047

 

 

4.7

%

2023 clinic additions

 

432

 

 

 

-

 

 

 

432

 

 

*

(2)

2022 clinic additions

 

9,100

 

 

 

389

 

 

8,711

 

 

*

(2)

Clinics sold or closed in 2022

 

64

 

 

 

1,002

 

 

 

(940

)

 

*

(2)

Physical therapy operations

 

100,621

 

 

 

88,369

 

 

 

12,252

 

 

13.9

%

Management contracts

 

1,449

 

 

 

1,831

 

 

 

(382

)

 

-20.9

%

Industrial injury prevention services

 

15,582

 

 

 

14,916

 

 

 

666

 

 

4.5

%

Operating costs

$

117,652

 

 

$

105,116

 

 

$

12,536

 

 

11.9

%

___________________________

(1)

See Glossary of Terms - Revenue Metrics for the definition.

(2)

Not meaningful.

  • Physical therapy operating costs increased $12.3 million or 13.9% primarily driven by the impact of a full quarter of 2022 and 2023 clinic additions. Additionally, costs associated with mature clinics increased 4.7% primarily due to higher salaries and related costs related to a 6.0% increase in patient visits at mature clinics.
  • IIP services operating costs increased by $0.7 million, or 4.5%, to $15.6 million as compared to $14.9 million in the 2022 First Quarter.

Gross profit for the 2023 First Quarter increased $4.3 million, or 16.1%, to $30.9 million from $26.6 million for the 2022 First Quarter. Gross profit margin increased to 20.8% in the 2023 First Quarter from 20.2% in the 2022 First Quarter. The following table provides a more detailed breakdown of gross profit and related gross profit margins:

Three Months Ended March 31,

 

 

 

 

2023

 

2022

 

Variance

 

In USD

 

Margin %

 

In USD

 

Margin %

 

$

 

%

 

(In thousands, except percentages)

Physical therapy operations

$

26,759

)

 

21.0

%

 

$

22,041

)

 

20.0

%

 

$

4,718

 

 

21.4

%

Management contracts

 

330

 

 

18.5

%

 

 

395

 

 

17.7

%

 

(65

)

 

-16.5

%

Industrial injury prevention services

 

3,768

 

 

19.5

%

 

 

4,152

 

 

21.8

%

 

 

(384

)

 

-9.2

%

Gross profit

$

30,857

 

 

20.8

%

 

$

26,588

 

 

20.2

%

 

$

4,269

 

 

16.1

%

Corporate office costs were $13.9 million, or 9.3% of net revenue, for the 2023 First Quarter compared to $11.6 million, or 8.8% of net revenue, for the 2022 First Quarter.

Operating income increased $2.0 million, or 13.1%, to $17.0 million for the 2023 First Quarter from $15.0 million in the 2022 First Quarter. In both comparative periods, the operating income was 11.4% of net revenue.

For 2023 First Quarter, other expenses were $2.6 million compared to other income of $0.4 million in 2022 First Quarter.

  • During the 2023 First Quarter, the Company recognized $0.5 million of income received under the Coronavirus Aid, Relief and Economic Security Act (“Relief Funds”). The Relief Funds were received in prior years but were subject to certain compliance requirements which were met in 2023 First Quarter. The Company does not expect to receive or recognize any future Relief Funds. No such income was recognized in the comparable prior year period.
  • During the 2023 First Quarter, the Company revalued the contingent earn-out consideration related to an acquisition and recognized an increase in the related liability of $0.7 million.
  • The revaluation of the put-right liability resulted in an increase of $0.1 million to the related liability for the 2023 First Quarter. The put right relates to the potential future purchase of a company that provides physical therapy and rehabilitation services to hospitals and other ancillary providers in a distinct market area. The owners have the right to put this transaction to the Company in approximately five years from November 2021.
  • Equity in earnings of the unconsolidated affiliate was $0.3 million in both the 2023 First Quarter and the 2022 First Quarter.
  • Interest expense, net of $0.6 million savings from the interest rate swap arrangement discussed below, was $2.6 million for the 2023 First Quarter compared to $0.5 million in the 2022 First Quarter. The increase in interest expense was primarily due to a higher effective interest rate as well as increased borrowings to fund acquisitions. The overall effective interest rate on the Company’s debt was 5.5% for the 2023 First Quarter.

The provision for income tax was $3.0 million for the 2023 First Quarter compared to $3.5 million for the 2022 First 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 28.6% for the 2023 First Quarter and 28.4% for the 2022 First Quarter. A reconciliation of our income tax expense and effective income tax rate is as follows:

Three Months Ended March 31,

 

2023

 

 

 

2022

 

(In thousands, except percentages)

 

 

Income before taxes

$

14,396

 

$

15,480

 

 

Less: net loss (income) attributable to non-controlling interest:

Redeemable non-controlling interest - temporary equity

 

(2,720

)

 

(2,557

)

Non-controlling interest - permanent equity

 

(1,297

)

 

(626

)

$

(4,017

)

$

(3,183

)

 

Income before taxes less net income attributable to non-controlling interest

$

10,379

 

$

12,297

 

 

Provision for income taxes

$

2,969

 

$

3,498

 

 

Effective income tax rate

 

28.6

%

 

28.4

%

Net income attributable to redeemable non-controlling interest (temporary equity) was $2.7 million for the 2023 First Quarter and $2.6 million for the 2022 First Quarter. Net income attributable to non-controlling interest (permanent equity) was $1.3 million for the 2023 First Quarter and $0.6 million for the 2022 First Quarter.

Adjusted EBITDA, a non-GAAP measure, increased $1.0 million to $18.5 million for the 2023 First Quarter, an all-time high first quarter amount, from $17.5 million for the 2022 First Quarter.

Operating Results, excluding Relief Funds, a non-GAAP measure, was $7.7 million, or $0.59 per share, in 2023 First Quarter as compared to $8.4 million, or $0.65 per share, in 2022 First Quarter, with the decrease primarily due to the increase in interest expense previously described.

BALANCE SHEET AND CASH FLOW

As of March 31, 2023, the Company had $32.6 million in cash and cash equivalents, total net working capital of $27.0 million and $137.0 million in available credit under the Company’s Revolving Facility. During the 2023 First Quarter, $11.3 million of cash was provided by operations. The major uses of cash for investing and financing activities included: purchase of majority interest in businesses (5.8 million), purchase of non-controlling interests from existing partners ($5.2 million), purchase of fixed assets ($2.1 million), and distributions to non-controlling interests ($3.3 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 March 31, 2023, the fair value of the interest rate swap was $3.6 million, a decrease of $1.8 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 decrease in fair value is presented as unrealized loss in the accompanying consolidated statements of comprehensive income. The interest rate swap arrangement has generated $0.7 million in interest savings since its inception. The average interest rate for the term loan during the 2023 First Quarter was 4.9%.

QUARTERLY DIVIDEND

The Board of Directors declared a quarterly dividend of $0.43 per share payable on June 9, 2023, to shareholders of record on May 18, 2023.

MANAGEMENT REAFFIRMS 2023 EARNINGS GUIDANCE

Management reaffirms that it currently expects the Company’s Adjusted EBITDA for 2023 to be in the range of $75.0 million to $80.0 million. Please note that the earnings guidance represents projected Adjusted EBITDA from existing operations and excludes future acquisitions. 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 May 4, 2023, to discuss results the Company’s financial results for the quarter ended March 31, 2023. Interested parties may participate in the call by dialing (800) 895-3361 Primary or (785) 424-1062 Alternate and entering reservation number USPHQ123 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. The conference call will be archived and can be accessed until August 4, 2023, at U.S. Physical Therapy’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:

  • the multiple effects of the impact of public health crises and epidemics/pandemics, such as the novel strain of COVID-19 and its variants, for which the total financial magnitude cannot be currently estimated;
  • changes in Medicare rules and guidelines and reimbursement or failure of our clinics to maintain their Medicare certification and/or enrollment status;
  • 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 COVID-19 related vaccination 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;
  • 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 vendor 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;
  • 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, 2022, filed with the Securities and Exchange Commission (“SEC”) on February 28, 2023 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, 2021, 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 visits per day 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 647 outpatient physical therapy clinics in 40 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 35 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

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)

 

 

Three Months Ended

March 31, 2023

 

March 31, 2022

 

 

Net patient revenue

$

126,581

 

$

109,538

 

Other revenue

 

21,928

 

 

22,166

 

Net revenue

 

148,509

 

 

131,704

 

Operating cost:

Salaries and related costs

 

86,040

 

 

75,149

 

Rent, supplies, contract labor and other

 

30,100

 

 

28,662

 

Provision for credit losses

 

1,512

 

 

1,305

 

Total operating cost

 

117,652

 

 

105,116

 

 

Gross profit

 

30,857

 

 

26,588

 

 

Corporate office costs

 

13,859

 

 

11,556

 

Operating income

 

16,998

 

 

15,032

 

 

Other income and expense:

Relief Funds

 

467

 

 

-

 

Change in fair value of contingent earn-out consideration

 

(698

)

 

-

 

Equity in earnings of unconsolidated affiliate

 

274

 

 

339

 

Other and interest income

 

64

 

 

46

 

Change in revaluation of put-right liability

 

(149

)

 

603

 

Interest expense - debt and other, net

 

(2,560

)

 

(540

)

Total other income and expense

 

(2,602

)

 

448

 

Income before taxes

 

14,396

 

 

15,480

 

 

Provision for income taxes

 

2,969

 

 

3,498

 

 

Net income

 

11,427

 

 

11,982

 

 

Less: net loss (income) attributable to non-controlling interest:

Redeemable non-controlling interest - temporary equity

 

(2,720

)

 

(2,557

)

Non-controlling interest - permanent equity

 

(1,297

)

 

(626

)

 

(4,017

)

 

(3,183

)

 

Net income attributable to USPH shareholders

$

7,410

 

$

8,799

 

 

Basic and diluted earnings per share attributable to USPH shareholders

$

0.58

 

$

0.67

 

 

Shares used in computation - basic and diluted

 

13,024

 

 

12,937

 

 

Dividends declared per common share

$

0.43

 

$

0.41

 

 

U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)

 

 

Three Months Ended

March 31, 2023

 

March 31, 2022

 

 

Net income

$

11,427

 

$

11,982

 

Other comprehensive loss

Unrealized loss on cash flow hedge

 

(1,817

)

 

-

 

Tax effect at statutory rate (federal and state)

 

464

 

 

-

 

Comprehensive income

$

10,074

 

$

11,982

 

 

Comprehensive income attributable to non-controlling interest

 

(4,017

)

 

(3,183

)

Comprehensive income attributable to USPH shareholders

$

6,057

 

$

8,799

 

 

U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(IN THOUSANDS, EXCEPT PER SHARE DATA)

 

 

March 31,

2023

 

December 31,

2022

ASSETS

(unaudited)

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

32,605

 

 

$

31,594

 

Patient accounts receivable, less allowance for credit losses of $2,674 and $2,829, respectively

 

56,647

 

 

 

51,934

 

Accounts receivable – other

 

17,816

 

 

 

16,671

 

Other current assets

 

10,726

 

 

 

11,067

 

Total current assets

 

117,794

 

 

 

111,266

 

Fixed assets:

 

 

 

Furniture and equipment

 

63,139

 

 

 

62,074

 

Leasehold improvements

 

43,525

 

 

 

42,877

 

Fixed assets, gross

 

106,664

 

 

 

104,951

 

Less accumulated depreciation and amortization

 

82,026

 

 

 

80,203

 

Fixed assets, net

 

24,638

 

 

 

24,748

 

Operating lease right-of-use assets

 

100,604

 

 

 

103,004

 

Investment in unconsolidated affiliate

 

12,160

 

 

 

12,131

 

Goodwill

 

501,347

 

 

 

494,101

 

Other identifiable intangible assets, net

 

108,991

 

 

 

108,755

 

Other assets

 

2,593

 

 

 

4,149

 

Total assets

$

868,127

 

 

$

858,154

 

 

 

 

 

LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, USPH SHAREHOLDERS’ EQUITY AND NON-CONTROLLING INTEREST

 

 

 

Current liabilities:

 

 

 

Accounts payable – trade

$

4,233

 

 

$

3,300

 

Accounts payable - due to seller of acquired business

 

-

 

 

 

3,204

 

Accrued expenses

 

45,220

 

 

 

37,413

 

Current portion of operating lease liabilities

 

33,650

 

 

 

33,709

 

Current portion of term loan and notes payable

 

7,730

 

 

 

7,863

 

Total current liabilities

 

90,833

 

 

 

85,489

 

Notes payable, net of current portion

 

2,583

 

 

 

1,913

 

Revolving line of credit

 

38,000

 

 

 

31,000

 

Term loan, net of current portion and deferred financing costs

 

142,098

 

 

 

142,918

 

Deferred taxes

 

21,524

 

 

 

21,303

 

Operating lease liabilities, net of current portion

 

75,460

 

 

 

77,934

 

Other long-term liabilities

 

13,870

 

 

 

13,029

 

Total liabilities

 

348,368

 

 

 

373,586

 

 

 

 

 

Redeemable non-controlling interest - temporary equity

 

164,283

 

 

 

167,515

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

U.S. Physical Therapy, Inc. ("USPH") shareholders’ equity:

 

 

 

Preferred stock, $.01 par value, 500,000 shares authorized, no shares issued and outstanding

 

-

 

 

 

-

 

Common stock, $.01 par value, 20,000,000 shares authorized,

 

 

 

15,277,320 and 15,216,326 shares issued, respectively

 

152

 

 

 

152

 

Additional paid-in capital

 

112,123

 

 

 

110,317

 

Accumulated other comprehensive gain

 

2,651

 

 

 

4,004

 

Retained earnings

 

234,760

 

 

 

232,948

 

Treasury stock at cost, 2,214,737 shares

 

(31,628

)

 

 

(31,628

)

Total USPH shareholders’ equity

 

318,058

 

 

 

315,793

 

Non-controlling interest - permanent equity

 

1,418

 

 

 

1,260

 

Total USPH shareholders' equity and non-controlling interest - permanent equity

 

319,476

 

 

 

317,053

 

Total liabilities, redeemable non-controlling interest,

 

 

 

USPH shareholders' equity and non-controlling interest - permanent equity

$

868,127

 

 

$

858,154

 

 

U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

 

 

Three Months Ended

 

March 31,

2023

 

March 31,

2022

OPERATING ACTIVITIES

 

 

 

Net income including non-controlling interest

$

11,427

 

 

$

11,982

 

Adjustments to reconcile net income including non-controlling interest to

 

 

 

net cash provided by operating activities:

Depreciation and amortization

 

3,788

 

 

 

3,824

 

Provision for credit losses

 

1,512

 

 

 

1,305

 

Equity-based awards compensation expense

 

1,806

 

 

 

1,846

 

Deferred income taxes

 

221

 

 

 

2,132

 

Change in revaluation of put-right liability

 

149

 

 

 

(603

)

Change in fair value of contingent earn-out consideration

 

698

 

 

 

-

 

Earnings in unconsolidated affiliate

 

(274

)

 

 

(339

)

Other

 

125

 

 

 

93

 

Changes in operating assets and liabilities:

 

 

 

Increase in patient accounts receivable

 

(5,999

)

 

 

(4,676

)

Increase in accounts receivable – other

 

(796

)

 

 

(2,145

)

Increase (decrease) in other assets

 

1,897

 

 

 

(735

)

(Decrease) increase in accounts payable and accrued expenses

 

(1,846

)

 

 

1,445

 

Decrease in other long-term liabilities

 

(1,359

)

 

 

(2,480

)

Net cash provided by operating activities

 

11,349

 

 

 

11,649

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

Purchase of fixed assets

 

(2,059

)

 

 

(2,528

)

Purchase of majority interest in businesses, net of cash acquired

 

(5,796

)

 

 

(11,242

)

Purchase of redeemable non-controlling interest, temporary equity

 

(5,178

)

 

 

(2,211

)

Purchase of non-controlling interest-permanent

 

-

 

 

 

(99

)

Proceeds on sale of partnership interest - redeemable non-controlling interest

 

107

 

 

 

4

 

Distributions from unconsolidated affiliate

 

245

 

 

 

132

 

Net cash used in investing activities

 

(12,681

)

 

 

(15,944

)

 

 

 

 

FINANCING ACTIVITIES

 

 

 

Distributions to non-controlling interest, permanent and temporary equity

 

(3,297

)

 

 

(3,711

)

Proceeds from revolving line of credit

 

7,000

 

 

 

35,000

 

Proceeds from term loan

 

-

 

 

 

(31,000

)

Payments on term loan

 

(938

)

 

 

-

 

Principal payments on notes payable

 

(422

)

 

 

(332

)

Net cash provided by (used in) financing activities

 

2,343

 

 

 

(43

)

 

 

 

 

Net decrease in cash and cash equivalents

 

1,011

 

 

 

(4,338

)

Cash and cash equivalents - beginning of period

 

31,594

 

 

 

28,567

 

Cash and cash equivalents - end of period

$

32,605

 

 

$

24,229

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

 

 

 

Cash paid during the period for:

 

 

 

Income taxes

$

442

 

 

$

81

 

Interest paid

 

1,377

 

 

 

525

 

Non-cash investing and financing transactions during the period:

 

 

 

Purchase of businesses - seller financing portion

 

360

 

 

 

300

 

Notes payable related to purchase of redeemable non-controlling interest, temporary equity

 

611

 

 

 

246

 

Notes payable related to purchase of non-controlling interest, permanent equity

 

-

 

 

 

296

 

Notes receivable related to sale of partnership interest - redeemable non-controlling interest

 

532

 

 

 

-

 

Dividends payable to USPH shareholders

$

5,617

 

 

$

5,327

 

U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES

OPERATING RESULTS AND ADJUSTED EBITDA

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(unaudited)

The following tables provide details of the diluted earnings per share computation and reconcile net income attributable to USPH shareholders calculated in accordance with GAAP to Operating Results and Adjusted EBITDA. Management believes providing Operating Results and Adjusted EBITDA to investors is useful information for comparing the Company's period-to-period results.

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, and related portions for non-controlling interests. Management believes reporting Adjusted EBITDA is useful information for investors in comparing the Company’s period-to-period results as well as comparing with similar businesses which report adjusted EBITDA as defined by their company.

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

Management uses Operating Results and Adjusted EBITDA, which eliminates certain items described above that can be subject to volatility and unusual costs, as one the principal measures to evaluate and monitor financial performance period over period. Management believes that presenting Operating Results and Adjusted EBITDA is useful information for investors to use in 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.

Operating Results and Adjusted EBITDA 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

OPERATING RESULTS AND ADJUSTED EBITDA

2023 PERIODS COMPARED TO 2022 PERIODS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(unaudited)

 

 

Three Months Ended March 31,

 

 

2023

 

 

 

2022 (1)

 

Adjusted EBITDA

 

 

 

Net income attributable to USPH shareholders

$

7,410

 

$

8,799

 

Adjustments:

Depreciation and amortization

 

3,788

 

 

3,824

 

Change in fair value of contingent earn-out consideration

 

698

 

 

 

-

 

Interest income

 

(64

)

 

(46

)

Relief funds

 

(467

)

 

-

 

Change in revaluation of put-right liability

 

149

 

 

(603

)

Interest expense - debt and other, net

 

2,560

 

 

540

 

Provision for income taxes

 

2,969

 

 

3,498

 

Equity-based awards compensation expense

 

1,806

 

 

1,846

 

Allocation to non-controlling interests

 

(371

)

 

(363

)

Adjusted EBITDA (a non-GAAP measure)

 

18,478

 

 

17,495

 

 

 

 

 

 

Earnings per share

 

 

 

Computation of earnings per share - USPH shareholders:

 

 

Net income attributable to USPH shareholders

$

7,410

 

$

8,799

 

Charges to retained earnings:

Revaluation of redeemable non-controlling interest

 

119

 

 

(153

)

Tax effect at statutory rate (federal and state)

 

(30

)

 

39

 

$

7,499

 

$

8,685

 

 

Earnings per share (basic and diluted)

$

0.58

 

$

0.67

 

 

 

 

 

 

Operating Results

 

 

 

Net income attributable to USPH shareholders

$

7,410

 

 

$

8,799

 

Adjustments:

Change in fair value of contingent earn-out consideration

 

698

 

 

 

-

 

Change in revaluation of put-right liability

 

149

 

 

(603

)

Allocation to non-controlling interests

 

33

 

 

-

 

Relief Funds

 

(467

)

 

-

 

Tax effect at statutory rate (federal and state)

 

(105

)

 

154

 

Operating Results (a non-GAAP measure)

$

7,718

 

$

8,350

 

 

Basic and diluted Operating Results per share (a non-GAAP measure)

$

0.59

 

$

0.65

 

 

Shares used in computation - basic and diluted

 

13,025

 

 

12,937

 

(1)

Revised to conform to current year presentation.

 

U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES

REVENUE METRICS

 

 

Number of Clinics

 

Net Rate Per Patient Visit (1)

 

Patient Visits (1)

 

Average Visits Per Day Per Clinic (1)

2023

 

2022

 

2023

 

2022

 

2023

 

2022

 

2023

 

2022

First quarter

647

601

$

103.12

$

103.00

1,227,490

1,063,519

29.8

27.9

Second quarter

608

 

$

103.18

 

1,145,554

 

29.5

 

Third quarter

614

 

$

104.01

 

1,122,070

 

28.8

 

Fourth quarter

640

 

$

104.28

 

1,152,139

 

29.1

 

 

(1)

See definition of the metrics above in the Glossary of Terms – Revenue Metrics on page 6.

 

Contacts

U.S. Physical Therapy, Inc.

Carey Hendrickson, Chief Financial Officer

email: chendrickson@usph.com

Chris Reading, Chief Executive Officer

(713) 297-7000

Three Part Advisors

Joe Noyons

(817) 778-8424

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